Okay. Hi, everyone. Thanks for joining us right after lunch. My name is Brandon Vazquez. For those of you I haven't met, I am the covering analyst at William Blair on Enovis. I'm required to tell you for compliance, please go check the williamblair.com website for a full list of disclosures and conflicts of interests. We're happy to have with us Enovis today, and the CEO, Matthew Trerotola, who's gonna go through a bit of an overview of the company with us. Maybe we'll throw in one or two questions at the end here on the webcast, but then if not, we'll go over to a breakout and do some more detailed Q&A. So-
Great.
Over to you. Thank you.
Thanks, Brandon. Hey, everybody, thanks, thanks for coming. Glad to have a chance to share our company with you. You can read the forward-looking statement warning. I'm gonna start out just with an introduction. We're Enovis, an innovation-driven growth company in the med tech space, really focused in orthopedics today. As you can see from the page, we're about a $2 billion revenue company, healthy profitability, but certainly with still room to keep expanding the profitability. And we've been growing in the high single digits range organically, just about 8% last year.
Our guide for this year is 5%-6% pro forma growth, which is—we're, as I'll discuss, we've got a significant acquisition that we are integrating that has some dyssynergies related to it. So, there was a, you know, sort of a seven percent organic growth guide that we had independent from that, that pro forma growth guide. So still, you know, very much executing within our strategic goal of high single-digit organic growth. You can see from the bottom that, our company is split pretty evenly between recon and prevention and rehab, and is pretty balanced between U.S and outside the U.S.
Nice to have that strong U.S. presence, which is, you know, very attractive markets for us, but also a number of attractive positions outside the U.S. as well. Our Recon segment is our growth engine. It's been a double-digit organic growth engine for many years, and it's been, you know, mostly U.S.-based. We did a couple of acquisitions that have globalized that business and expanded it significantly. And we also did a handful of acquisitions that moved us into the foot and ankle part of Recon, which is a very attractive part that we were not in. Our P&R segment is our cash engine. It's more of a low to mid-single-digit growth business. Nice, diversified end uses within the orthopedic space.
We're the global leader in sports medicine bracing, global leader in key areas of rehabilitation, including a really nice, fast-growing laser technology business in rehab. And we've been driving not just traditional innovation here, but also software-based innovation, particularly in the U.S., in the orthopedic clinics, where we've got a solution that has been reshaping how those clinics do their business. I'll talk about that a little bit more later. This page focuses on our strategy and how we execute. We've been focused on aggressively expanding the recon part of our company. It's high growth, it's high gross margin, a lot of attractive runway there.
We've also been shaping and improving the P&R part of our company. I'll talk about that a little bit, and scaling our company, driving up the margin curve and getting ready to drive up the cash conversion curve in the coming years. Strategically, we're focused on talent. First of all, really making sure we work very hard to have great talent, develop that talent, and have that talent be highly engaged and empowered to execute our strategies. Second, a lot of focus on innovation, both traditional innovation and increasingly on digital innovation, and using that to really drive improvements in our workflows and the data capture within our businesses.
We have a business system called EGX, Enovis Growth Excellence, which is a lean, continuous, improvement-based business system that we use to drive improvements in all parts of our business. It's a set of tools and also a culture with a focus on that continuous improvement. And then finally, acquisitions. We've got a very well-honed capability to do great acquisitions and do them well and get the strategic benefits and the returns on the backside. From a goal standpoint, we've been focused on driving high single-digit organic growth and then supplementing that with bolt-on acquisitions beyond that, and at least 50 basis points a year of margin expansion, with opportunity for more at times, but sort of a year in, year out, 50 basis point improvement. We've got a rich history.
We've got a lot of momentum, momentum building and really great opportunities ahead. We were founded as Colfax back in 1995 by Mitch and Steve Rales, the founders of the extremely successful Danaher Corporation. I spent a good chunk of my career at Danaher, leading businesses and groups of businesses there. And as a company, Colfax had a strong and proven history of kinda creating and driving a business system that was modeled after the Danaher business system, driving a culture around that business system, innovation focus, and successful acquisition engine.
We went through a reshaping of our company from a diversified industrial to now a focused med tech player that included, you know, acquisitions into the businesses that we're in today, but then also divestiture of some of our industrial businesses that we had improved over time. Then about two years ago, we spun off our ESAB business as a freestanding public company that's a leader in the welding and fab tech space, and we renamed the company Enovis, really to really signify our focus on innovation and vision of the future as a med tech player. We're a couple of years into our life as Enovis. You can see we've been growing the company, well, over the past few years.
The organic growth rates are kind of in the high single-digit range. This is an all-up growth rate, that's got a little acquisition tailwind and a little bit of currency headwind. We've been continuously expanding our margins in a period where a lot of orthopedics players struggled to expand margins, you know, from some of the inflation and things that came through, through the system, in this period. As we looked at 2024, early this year, we closed an acquisition of a company called Lima, which I'll talk about a little more. You know, very important acquisition, for our company.
We have, you know, the fourth quarter of last year, did a lot of great acquisition planning after the announcement, hit the ground running, closing the deal at the beginning of the year, and have a great start on that acquisition. All the financial metrics that we announced at the time that we announced the deal were then put into our guidance for this year, and we're tracking a little bit ahead of those after, yeah, after a quarter of the year here. In addition to the Lima acquisition and how it affects us here in 2024 and beyond, we've built a great foot and ankle business that is really ramping and hitting its stride here in 2024 and gonna be a great growth contributor over time.
We've got organically a really robust pipeline, some great NPI that came through late last year and some great NPI coming through this year across the businesses, that is really gonna help to accelerate us as we go through this year. We address a very attractive $50 billion+ orthopedic market within the $500 billion med tech space. The growth drivers on the right, you'd be familiar with, orthopedic growth drivers of aging population, active population, transition to outpatient care in the ASC environment. You can see on the left, most of the orthopedic market is surgical, and we play in about half of that, hip, knee, and extremities, shoulder and foot and ankle.
And what's important there is that you can see that from a market standpoint, the extremities grow a lot faster than hip and knee, but it is a smaller part of the market. For our business, about half of our business is extremities. And so we've got a mix that is attractive, gives us a market-weighted average market growth rate that is elevated by a point or two over, you know, versus a broad recon player. And then finally, our P&R segment, you know, that $5 billion segment that we have a $1 billion position in, is. What's really great about this is that this segment serves the full range of surgical and sports medicine end uses that are shown in that larger bar.
And so nice diversified set of demand drivers for the P&R businesses that create some resilience in terms of how the business grows. And we can see into and understand all the parts of surgical that we're not in and make really thoughtful choices about where we do and don't go over time, either organically or through acquisitions. And foot and ankle is a great example. We could really see and understand the foot and ankle space very well from our positions in P&R. We also knew from our surgical business that we knew how to succeed in a business like that. And so there was a natural path to acquire in and be successful and some synergy out of the gate with some of our stuff on the P&R side.
This is a different way to frame up our position in the orthopedics industry. You know, in this $50 billion industry, there are a handful of players that are large and scaled players in this industry. You know, those players, you know, the ones that are more focused in the industry, that tends to become a bit of a growth limiter at some point in time. What's great about our position is this middle tier where we are is, you know, what I'd call scaled and agile. We're scaled enough to have healthy margins and to be able to drive to strong cash flow, but we still got plenty of room to scale the business and expand our margins and enhance our cash flow. But we're also agile.
We can decide where we do and don't go within this large orthopedic space so that we can sustain the high growth rates as we build and grow our company. And we can also decide when we might move to adjacent markets outside of the orthopedic space, but logical places for us that open up high growth running room for our company and allow us to sustain a high single-digit organic growth rate as we grow from $2 billion today to $3 billion and beyond in the years to come. Finally, this market's got a great base of the market, where there's constant innovation and more focused companies building and growing.
As I showed on the previous page, we've done 20 acquisitions over the last four years of companies that were in the base of the market, and that's helped to fuel and accelerate our strategies. And as we move into the future, there's plenty more opportunities to acquire in that base of the market. We've got a unique position in that we play along the full orthopedic continuum of care. We're the only player with significant positions along the full orthopedic continuum of care before, during, and after a surgery or an injury.
This is, this has provided benefits over time in terms of brand awareness and presence, ability to get on contracts, ability to succeed, say, in the ASC environment, where businesses are both, you know, orthopedic clinics, but also starting to grow and open up as surgery centers. This has been a, you know, a source of benefit and strength strategically for us, the position that we play along this continuum. Going forward, we see even more opportunities as there are more and more opportunities for digital solutions and workflow solutions. There's opportunities to bring solutions before, during, and after the surgery that bring better outcomes, better efficiency, opportunity to capture data and use that to then, you know, strengthen our innovation and our business.
As I said, the Lima acquisition that we completed early this year is a big deal. It takes our recon business to become a billion-dollar business. We added about $300 million of revenue and now have a billion-dollar recon business. You can see also from the bottom pie that we retain that very attractive mix of having about 50% extremities. So we've gotten larger in recon while preserving the high growth and attractive mix of 50% extremities. We're also now pretty balanced between the U.S and international. U.S is the best market, biggest and the best market, so it's great to have a big position there. And in the international space, we've got attractive positions in key markets around the world that are attractive recon markets as well.
We got a great opportunity to, you know, build on the double-digit growth we've had in our US business, and now drive double-digit growth across our whole recon segment. Part of how we'll do that is through cross-selling opportunities that are pretty, pretty significant. We've also got a lot of cost opportunity to take out with this combination that we've got a fast start on. We also bring some great technologies. We're the only player in recon that has our own ceramics capabilities. That's gonna be a cost advantage over time, but also an innovation opportunity. The Lima business also brought in a leading position in Trabecular Titanium, which is 3D-printed implants for better designs, more efficient manufacturing, and an ability to customize to, you know, varying degrees up to and including, you know, full custom implants.
Several very important core technologies that we've got now that are gonna help to strengthen and enhance our growth over time, in addition to all the great things that we've always had. We get asked a lot about how, you know, how do you grow your Recon segment so fast, and how are you gonna continue to do that? This page really talks about what we've been doing, and we're gonna be able to keep doing and do even better now that we've got the broader business that we've got and the broader set of technologies. First, our growth is built on some really fantastic core products that have, you know, great demonstrated outcomes.
You know, our AltiVate Reverse shoulder pioneered the reverse shoulder, pioneered the best design of reverse shoulder, lateralized and inferiorized, which gives you a better range of motion. And we have had very strong growth and share gain, on the back of this product for many years, and we've got plenty of opportunity. And essentially, all of our success to date in AltiVate has been inside the U.S. And so now we've got a wide open field outside the U.S. to take the AltiVate too. The EMPOWR 3D Knee is a knee that tapped into... It's a kinematically better knee that basically it pivots when you squat and it pivots when you walk, and that's the way the normal knee works.
There was, in the knee market, you know, going back a number of years, there was plenty of good outcomes in terms of revision rates, but the satisfaction was not great. It was kind of in the eighties in terms of how many people really felt good about the knee that they got. We tapped into that. Our EMPOWR knee is a knee that now there's been, you know, papers published that talk about well into the nineties, satisfaction rates, patients having it feel more like their own knee. And we've been able to have very fast growth from a low share position by bringing this great knee, getting surgeons to try it. And then we've innovated around that, the second column here. In all anatomies, we've continuously innovated.
So, yes, we had a great revision knee, but now we've got great primary knee, now we've got great revision. Yes, we had a great reverse shoulder, but now we've also got a great anatomic. So bringing these other procedures through has been an important way of how we've grown as well. Always focusing on making sure our innovations bring something new and different, that the surgeons appreciate in terms of the outcomes or the procedural effectiveness with which they do things. We've also brought some great enabling tech into the market, as well. I'll talk about that in a few pages. We've also succeeded very well in the ASC, which is the fastest-growing care setting in the U.S., particularly in knee. There's been a lot of growth in the ASC.
Our product set up very well for the active patients that are being selected into the ASC. We've simplified our instrument sets. We've brought enabling technology that's a great fit for the ASC, and our P&R products are often there and present in the ortho clinics that are adjacent to the ASC. So there's a number of parts of our offense that have helped us to succeed in that high-growth ASC setting. We've built a fast-growing foot and ankle business that we're gonna continue to grow and scale, and we've expanded geographically, opening up space. This shows our U.S.-based recon business. We've grown 10 years double digits organically in each of the anatomies in this business through the things that I talked about on the previous page. You can see on the shoulder front, we've got a 14% CAGR across this period.
That includes COVID year, and grew about 10% in 2023. That growth rate in 2023 is a little bit lower as we're between innovation cycles. We've got something called augmented glenoids that we just had approved last week, ARG, augmented glenoids for reverse shoulder. Just got approved last week, and we'll be kind of rolling that into the market here in Q3 and beyond. And so, our shoulder revenue, you know, will kinda tilt back up to more normal growth as well. Hip and knee, you can see we've grown, you know, 17% CAGR for 10 years, 18% growth last year. So, great products that have enabled us to grow faster than the market, and a great tailwind from that care setting where we succeed so well.
Enabling tech has become an important dimension of competition in our markets as well. This page really talks about our strategic focus. We've been focusing on having the right enabling tech for each anatomy. The surgeries are different. The surgeons have different preferences. In shoulder to date, fantastic planning has been the state-of-the-art. We've had our MatchPoint solution that has been able to enable the surgeon to plan the procedure and if desired, make custom-printed 3D instruments for their procedure, and that's enabled us to have strong leadership in enabling tech in shoulder. And then just recently, we've had our ARVIS augmented reality product approved for shoulder, and so over time, we'll be able to bring that great guidance technology to allow the surgeons to serve up their plan interoperatively.
So for shoulder, we've been building as a leader there. In knee, we have really led with ARVIS, and ARVIS has been, you know, launched now in the knee for almost two years as a, you know, great new enabling tech that is smaller, more fit per purpose for ASC, but also plenty strong for other care settings as well. It's lower cost, less time included into the operation and still gives the surgeons the great benefit of being able to see their plan, guide the procedures, and make the choices they want, and record all that data for future use.
We've also been really focused on making sure our enabling tech is not just a point solution, that it spans the entire workflow from the planning through to what's done intraoperatively, through to what happens, you know, post-op in terms of tracking the patient's, you know, recovery path. And then finally, trying to make sure that the enabling tech that we bring to the market is great for the fastest-growing setting in the market, that is the ASC, and ours is. But also, we're finding that it's plenty good for hospitals and outside the U.S, as we've done more and more voice of the customer, we're finding many countries outside the U.S, the hospitals are a lot more cost- and space-constrained than the hospitals here in the U.S, and they really care a lot about small, not-too-expensive, time-efficient.
We really believe that our ARVIS solution, as we get it approved outside the U.S, is gonna be a great benefit in a number of markets as that warms up outside the U.S. As I said, we've done a lot of great acquisitions. This shows some of the key ones we've done in Recon. You know, two big global expansions. You know, Lima, you know, $300 million add. Mathys was about a $150 million add when we did it. Mathys was a, you know, mid-single digit, you know, strong player, great reputation, some good technologies, had been historically a mid-single digit grower with 10% EBITDA margins. Over the past couple of years, we've grown that business double digits, and we've doubled the EBITDA margins, and we still got room to keep moving the margins up.
So great success on that acquisition. We've exceeded our plan in terms of both the growth and the margin progress, and now Lima actually combines directly with Mathys outside the U.S, and so there's a whole lot more synergy to go after there. We're off to a great start on the Lima acquisition as well. A handful of foot and ankle acquisitions have built a $100 million-plus double-digit growth share gainer in that space. Great technologies that we've got now for each part of the foot and ankle anatomy, as well as a strong, aligned channel that becomes more and more aligned over time.
We've also invested in and then bought out some key technologies like Insight, which is how we got our ARVIS technology, thoughtful approach, investing and collaborating with them to launch the product, and then having the right to buy out the product at the right point in time to manage the risk there. So that's been an attractive way that we've done acquisitions as well. Moving over to PNR, we've got strong positions. Again, this is a kind of a 3%-4% growth market. We grow a little bit faster than the market. It's a, you know, it's a business that we're focused on growing at low to mid single digits today and shaping it into a business that can more grow mid single digits in the future.
Very strong leading positions in bracing in the U.S. and key countries around the world. We've been a historical innovator there, and the last handful of years, we've ramped back up the innovation here, really distinguished ourselves with what we're doing with our workflow solutions and some great strong positions in different technologies within recovery sciences. So really have over the last three-four years, have built these businesses back into strong leaders, growing 3%-4% organically, very strong cash generators, opportunity to keep nudging up the growth here, and have very strong cash conversion and keep increasing the margins of these businesses. It's a great counterpoint to the Recon businesses that grow very fast but need some fuel to drive that growth. Here has been our strategy for P&R, has been about shaping the business.
You know, our bracing business is growing about low single digits. Within that, our clinic solutions, you know, for the orthopedic clinics and where we bring the software, we do the billing, that's been growing high single digits. It's got higher gross margins. Recovery science has been growing mid-single digits. Within that, we've got a you know, laser business which is growing double digits, higher gross margins. And so, we've been shaping our P&R portfolio, not just overall, but also within each of the businesses, really focusing more on products that are higher growth, higher gross margin, and less on products that are lower growth, lower gross margin.
Within that recovery science business, we've had mid-single digits growth, and over the last couple of years, we've shed a fair amount of SKUs of businesses that were not that profitable, not that good growers, and we just, you know, shed them and offset the growth on other fronts. A lot of good innovation coming through the business here. Margins in the kinda mid-teens range now, plenty opportunity to drive up, you know, towards 20% in this business, while our recon business is already, you know, well above 20% with room to move up from there, and a strong cash converter, as well, as I talked about. And then finally, in PNR, digital healthcare has been a key part of how we've differentiated ourselves.
We've got a solution for orthopedic clinics in the US that they integrate into their systems, and they use it to manage the durable medical equipment, so mostly braces that are running through those clinics. It brings them a bunch of operational efficiency and financial effectiveness. Also lets them focus their time and energy as practitioners on serving their patients. We got two models here. One is where we sell the software to the clinic, and we get a SaaS fee, and we get deeper penetration into the wallet of that clinic. The other model, we actually take over the management of the DME in that clinic and the billing of the DME in that clinic, and we use the software to do that efficiently, and we get higher gross margins, more share of wallet.
You can see, we have dramatically grown the amount of clinics that are using our workflow clinic, you know, over the last four or five years. And this typically contributes about a point or two of growth to our U.S. bracing business every year and helps us to outgrow the market, between the clinic conversions that ultimately come and some of the penetration that we get with that. It's very sticky. Once we get into these clinics, we're sticky. So helps to grow our business, enhances the gross margins, creates a stickiness that is valuable over time. Then finally, we stepped into the year with a strong outlook in line with our strategic goals of high single-digit organic growth, 50 basis points plus of margin expansion.
But then we laid on top of that, the Lima numbers that we had announced, when we announced the deal back at the end of the third quarter. So strong guide for the year, took it up a little in May, based on beating the first quarter by a little bit. And so great opportunity to accelerate through the year and deliver a great year. Look forward to telling you more about it as we make our way through the year. Thank you.
Maybe we'll, we'll try to sneak in one or two questions here before we go out to the breakout, just because we have a couple of minutes. Given the importance of Lima today, you know, both to the story and to the stock, can you just update us a little bit about, I think we're five-ish, six months now-
Yeah.
- in the integration. How are things going? What's been surprising, either positive, negative, and how are we on track with the expectations you guys had laid out?
Yeah, sure, Brandon. I mean, the headline is things are going very well. You know, we had about three months to do the integration planning between sign and close, and we really, I think, you know, we've got a great process around how we go from diligence and integration planning and then really hit the ground running at the close. And this one, you know, we certainly put a lot of resourcing against it in terms of integration, leadership, and teams and support to make sure that we do it with excellence. We hit the ground running in the beginning of January, closed right on time, hit the ground running, and have had a great start.
We're exceeding, you know, our goals in terms of the sort of the core performance of the business. And, you know, are also, you know, in line with or better than our goals for the, you know, kind of integration dyssynergies that we had anticipated that we would have. Got a fast start on getting the cost out of the business, and that's reading through, and we're, you know, focused on getting in the next waves at it. Really exciting, the quality of the talent that's joined us. You know, we've created a, you know, kind of very strong outside the U.S surgical business that has got a number of key Lima leaders that are leaders within that business. We've also put some of them in global leadership roles.
So great talent, great cultural fit, really beyond my expectation in terms of talent and cultural fit. And so, you know, definitely excited about how we've come out of the gate. We got some important things to work through this year. They're right in our sights. You know, five years in, we feel, you know, definitely ahead of the game in terms of how things are going. And, you know, as we execute through the balance of the year, I think it'll be, it'll be clear that not only are we gonna have a great first year, but we're gonna have some great momentum flowing into next year.
And on last question, and we'll head to the breakout. But in your experience, you guys have done a lot of acquisitions like this. How long of a process is it that we're gonna be talking a little bit of dyssynergies and integration efforts? You know, is this a story where in calendar 2025, we can talk about, like, we have a combined organization, we're on the offense, or is it a little longer?
Yeah, we believe that the best as a best practice, you know, it's a best practice to work through the channel integration quickly but thoughtfully. And so, we have planned from the start to really push through the channel integration in the first year, and get that behind us, and understand that that creates a little bit of dyssynergy in the first year because you're kinda forcing the issue on some channel choices and things. But we feel like that's much healthier in order to be able to then step into 2025 and beyond with the right momentum, in terms of kinda reshaped align channel.
And so, you know, we would expect that, you know, some of the dyssynergies from channel integration, you know, will, you know, sorta, you know, peak in Q2, and then, you know, be trending down after that. We'll also have positive synergy from the cross-selling that starts to grow in Q3 and Q4 and really kinda, you know, accelerate next year. And so, we are executing the integration in a way that should have by the time we get into 2025, we're working on specific projects that are executing against cost synergies, supply chain synergies, the some of the, you know, combined R&D projects. So, you know, we'll be in kinda normal project execution mode in 2025 versus heavy integration mode in 2024.
Great. Well, then, we're gonna head to the breakout. We're on Jenner B for the breakout, or just follow us to the crowd up there.
I have no idea how I did for time, 'cause there is no timer.
I just realized that...