UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01. | Regulation FD Disclosure. |
On December 18, 2019, Colfax Corporation (the “Company”) is holding its annual Investor Day at 9:00 a.m. Eastern. In connection with this event, the Company’s management will provide certain financial information, including information relating to the Company’s financial outlook for 2020. A copy of the Investor Day presentation is furnished herewith as Exhibit 99.1. A live webcast of the event can be accessed beginning at 9:00 a.m. Eastern through the Company’s website at www.colfaxcorp.com under the “Investors” section.
These materials are also available on the Company’s website and replays of the webcast will be available on the Company’s website under the “Investors” section later today.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| 99.1 |
Colfax Corporation management’s Investor Day presentation on December 18, 2019. | |||
| 104 |
Cover Page Interactive Data File - The cover page from this Current Report on Form 8-K is formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: December 18, 2019 |
COLFAX CORPORATION | |||||
| By: |
/s/ Christopher M. Hix | |||||
| Name: |
Christopher M. Hix | |||||
| Title: |
Senior Vice President, Finance, Chief Financial Officer and Treasurer | |||||
Exhibit 99.1 Investor Day December 2019Exhibit 99.1 Investor Day December 2019
Forward Looking Statements & Non-GAAP Disclaimer The following information may contain forward-looking statements, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerningColfax’s plans, objectives, expectations and intentions and other statements that are not historical or current fact. Forward-looking statements are based on Colfax’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could causeColfax’s results to differ materially from current expectations include, but are not limited to factors detailed inColfax’s reports filed with the U.S. Securities and Exchange Commission including its 2018 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the period ended September 27, 2019 under the caption“Risk Factors.” In addition, these statements are based on a number of assumptions that are subject to change. These materials speak only as of the date hereof. Colfax disclaims any duty to update the information herein, except as required by law. Colfax has provided in this presentation financial information that has not been prepared in accordance with GAAP. These non-GAAP financial measures are adjusted net income, adjusted net income per share, adjusted EBITA, (earnings before interest, taxes and amortization), adjusted EBITDA, and core or organic sales growth (decline). Colfax also provides adjusted EBITA and EBITDA and core or organic sales growth (decline) on a segment basis. • Adjusted net income from continuing operations represents net income (loss) from continuing operations attributable to Colfax excluding restructuring and other related charges, pension settlement loss, debt extinguishment charges, acquisition-related amortization and other non-cash charges, and strategic transaction costs. The effective tax rates used to calculate adjusted net income and adjusted net income per share were 26.2% for the three months ended September 27, 2019 and 32.5% for the three months ended September 28, 2018. Adjusted net income per share represents adjusted net income as defined above divided by the weighted-average diluted shares outstanding. • Adjusted EBITA represents net income (loss) from continuing operations excluding restructuring and other related charges, pension settlement loss, acquisition-related amortization and other non-cash charges, and strategic transaction costs, as well as provision (benefit) for income taxes, and interest expense, net. Adjusted EBITDA incrementally excludes depreciation and other amortization. We also present Adjusted EBITA margin and Adjusted EBITDA margin, which are subject to the same adjustments as Adjusted EBITA and Adjusted EBITDA. Further, Colfax presents adjusted EBITA (and adjusted EBITA margin) and adjusted EBITDA (and adjusted EBITDA margin) on a segment basis, where it excludes the impact of strategic transaction costs, and acquisition-related amortization and other non-cash charges. Adjusted EBITDA (and adjusted EBITDA margin) on a segment basis is subject to the same adjustments as Adjusted EBITA and also excludes depreciation and other amortization. • Core or organic sales growth (decline) excludes the impact of acquisitions and foreign exchange rate fluctuations. These non-GAAP financial measures assist Colfax management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans that are fundamentally different from the ongoing productivity improvements of Colfax. Colfax management also believes that presenting these measures allows investors to view its performance using the same measures that Colfax uses in evaluating its financial and business performance and trends. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures provided in the appendix to this presentation. In this presentation, Colfax presents forward-looking guidance regarding adjusted net income per share, adjusted EBITA margin, core and organic sales growth (decline) and free cash flow. Colfax does not provide such outlook on a GAAP basis because changes in the items that Colfax excludes from GAAP to calculate these measures can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part ofColfax’s routine operating activities. Additionally, management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis. 2Forward Looking Statements & Non-GAAP Disclaimer The following information may contain forward-looking statements, including forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerningColfax’s plans, objectives, expectations and intentions and other statements that are not historical or current fact. Forward-looking statements are based on Colfax’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could causeColfax’s results to differ materially from current expectations include, but are not limited to factors detailed inColfax’s reports filed with the U.S. Securities and Exchange Commission including its 2018 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the period ended September 27, 2019 under the caption“Risk Factors.” In addition, these statements are based on a number of assumptions that are subject to change. These materials speak only as of the date hereof. Colfax disclaims any duty to update the information herein, except as required by law. Colfax has provided in this presentation financial information that has not been prepared in accordance with GAAP. These non-GAAP financial measures are adjusted net income, adjusted net income per share, adjusted EBITA, (earnings before interest, taxes and amortization), adjusted EBITDA, and core or organic sales growth (decline). Colfax also provides adjusted EBITA and EBITDA and core or organic sales growth (decline) on a segment basis. • Adjusted net income from continuing operations represents net income (loss) from continuing operations attributable to Colfax excluding restructuring and other related charges, pension settlement loss, debt extinguishment charges, acquisition-related amortization and other non-cash charges, and strategic transaction costs. The effective tax rates used to calculate adjusted net income and adjusted net income per share were 26.2% for the three months ended September 27, 2019 and 32.5% for the three months ended September 28, 2018. Adjusted net income per share represents adjusted net income as defined above divided by the weighted-average diluted shares outstanding. • Adjusted EBITA represents net income (loss) from continuing operations excluding restructuring and other related charges, pension settlement loss, acquisition-related amortization and other non-cash charges, and strategic transaction costs, as well as provision (benefit) for income taxes, and interest expense, net. Adjusted EBITDA incrementally excludes depreciation and other amortization. We also present Adjusted EBITA margin and Adjusted EBITDA margin, which are subject to the same adjustments as Adjusted EBITA and Adjusted EBITDA. Further, Colfax presents adjusted EBITA (and adjusted EBITA margin) and adjusted EBITDA (and adjusted EBITDA margin) on a segment basis, where it excludes the impact of strategic transaction costs, and acquisition-related amortization and other non-cash charges. Adjusted EBITDA (and adjusted EBITDA margin) on a segment basis is subject to the same adjustments as Adjusted EBITA and also excludes depreciation and other amortization. • Core or organic sales growth (decline) excludes the impact of acquisitions and foreign exchange rate fluctuations. These non-GAAP financial measures assist Colfax management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans that are fundamentally different from the ongoing productivity improvements of Colfax. Colfax management also believes that presenting these measures allows investors to view its performance using the same measures that Colfax uses in evaluating its financial and business performance and trends. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures provided in the appendix to this presentation. In this presentation, Colfax presents forward-looking guidance regarding adjusted net income per share, adjusted EBITA margin, core and organic sales growth (decline) and free cash flow. Colfax does not provide such outlook on a GAAP basis because changes in the items that Colfax excludes from GAAP to calculate these measures can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part ofColfax’s routine operating activities. Additionally, management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis. 2
Agenda 9:00 AM Colfax Portfolio Progress & Strategy Matt Trerotola ESAB Overview, Strategy and Shyam Kambeyanda 9:25 AM Platform Progress DJO Overview, Strategy and Brady Shirley 9:50 AM Platform Progress Colfax Financial Update & Guidance Chris Hix 10:25 AM Q&A 10:40 AM DJO Team DJO Breakout Sessions 11:00 AM Lunch 12:15 PM 3Agenda 9:00 AM Colfax Portfolio Progress & Strategy Matt Trerotola ESAB Overview, Strategy and Shyam Kambeyanda 9:25 AM Platform Progress DJO Overview, Strategy and Brady Shirley 9:50 AM Platform Progress Colfax Financial Update & Guidance Chris Hix 10:25 AM Q&A 10:40 AM DJO Team DJO Breakout Sessions 11:00 AM Lunch 12:15 PM 3
Colfax Portfolio Progress and Strategy Matt Trerotola | President & CEO 4Colfax Portfolio Progress and Strategy Matt Trerotola | President & CEO 4
What You’ll Hear Today Powerful strategy, proven capabilities ▪ ESAB journey evidence of successful strategy over time ▪ DJO early progress encouraging Portfolio transformation complete ▪ Reshaped portfolio with higher margins, faster growth, less cyclicality ▪ Broader set of investment paths, significant bolt-on runway Exciting outlook for next year and beyond ▪ Top-tier performance in Fab Tech ▪ Path to market-leading growth in Med Tech 5What You’ll Hear Today Powerful strategy, proven capabilities ▪ ESAB journey evidence of successful strategy over time ▪ DJO early progress encouraging Portfolio transformation complete ▪ Reshaped portfolio with higher margins, faster growth, less cyclicality ▪ Broader set of investment paths, significant bolt-on runway Exciting outlook for next year and beyond ▪ Top-tier performance in Fab Tech ▪ Path to market-leading growth in Med Tech 5
Strategy to Create Shareholder Value What we are Multi-platform enterprise of market-leading businesses What we do Compound value by continuously improving our businesses and investing in acquisitions & innovation to build-out our platforms Leverage our business system to drive sustainable process improvements in everything we do Shape our portfolio to further improve organic growth and gross margins 6Strategy to Create Shareholder Value What we are Multi-platform enterprise of market-leading businesses What we do Compound value by continuously improving our businesses and investing in acquisitions & innovation to build-out our platforms Leverage our business system to drive sustainable process improvements in everything we do Shape our portfolio to further improve organic growth and gross margins 6
Transforming The Colfax Portfolio 2017-2019: Transformation 2020+: Diversified Tech Growth ▪ DJO Global acquired, $1.2B revenue▪ Grow existing businesses ▪ Divested Fluid Handling and Air & ▪ Accelerate growth with Gas Handling (~$2B revenue) strategic add-ons 1 ~$3.5bn sales Medical Medical Technology Technology Fabrication Technology Fabrication Technology Air & Gas Fabrication Handling Technology Air & Gas Handling Fluid Handling Colfax 2017 Colfax 2019 Colfax Future Transformation complete; moving to aggressively grow Med Tech and Fab Tech 7 (1) Estimate for Continuing Operations full year 2019 pro forma for acquisition of DJO; does not include Air & Gas Handling in the periodTransforming The Colfax Portfolio 2017-2019: Transformation 2020+: Diversified Tech Growth ▪ DJO Global acquired, $1.2B revenue▪ Grow existing businesses ▪ Divested Fluid Handling and Air & ▪ Accelerate growth with Gas Handling (~$2B revenue) strategic add-ons 1 ~$3.5bn sales Medical Medical Technology Technology Fabrication Technology Fabrication Technology Air & Gas Fabrication Handling Technology Air & Gas Handling Fluid Handling Colfax 2017 Colfax 2019 Colfax Future Transformation complete; moving to aggressively grow Med Tech and Fab Tech 7 (1) Estimate for Continuing Operations full year 2019 pro forma for acquisition of DJO; does not include Air & Gas Handling in the period
Stronger Portfolio With Greater Upside ▪ Recurring, run-rate businesses ▪ A global fab tech ▪ Med Tech business ▪ Focus on innovation technology leader with steady secular ▪ Continuous growth drivers ▪ Exposure to improvement with CBS faster-growing ▪ Significant CBS developing ▪ Consistent cash flow runway markets ▪ Many acquisition opportunities Two businesses with significant opportunities for profitable growth 8Stronger Portfolio With Greater Upside ▪ Recurring, run-rate businesses ▪ A global fab tech ▪ Med Tech business ▪ Focus on innovation technology leader with steady secular ▪ Continuous growth drivers ▪ Exposure to improvement with CBS faster-growing ▪ Significant CBS developing ▪ Consistent cash flow runway markets ▪ Many acquisition opportunities Two businesses with significant opportunities for profitable growth 8
The Power Of The New Colfax Portfolio EU Market-leading positions in Fab Tech diverse & attractive US Med Tech ROW markets / applications Better organic growth with > 90% > 90% lower cyclicality (revenues Expected FCF Sales from conversion in recurring, run- and cash flow) 2020 rate products > 40% Structurally higher margins Gross margins > 55% with industry- Gross margins with meaningful upside defining in Med Tech products and brands 9 Note: Top charts represent geographic & platform revenue estimates for 2019 pro forma for acquisition of DJOThe Power Of The New Colfax Portfolio EU Market-leading positions in Fab Tech diverse & attractive US Med Tech ROW markets / applications Better organic growth with > 90% > 90% lower cyclicality (revenues Expected FCF Sales from conversion in recurring, run- and cash flow) 2020 rate products > 40% Structurally higher margins Gross margins > 55% with industry- Gross margins with meaningful upside defining in Med Tech products and brands 9 Note: Top charts represent geographic & platform revenue estimates for 2019 pro forma for acquisition of DJO
Proven Corporate Value Proposition Attract, Focus, Deploy CBS Values, Shape and Invest in Disciplined Capital Develop, and Processes, and Winning Strategies Allocation and Empower Talent Capabilities and Innovation Deployment A proven, repeatable approach to driving strong, consistent results 10Proven Corporate Value Proposition Attract, Focus, Deploy CBS Values, Shape and Invest in Disciplined Capital Develop, and Processes, and Winning Strategies Allocation and Empower Talent Capabilities and Innovation Deployment A proven, repeatable approach to driving strong, consistent results 10
Strong Focus On Talent Development Our Culture Our Talent Imperatives Outstanding Talent PURPOSE 1 CBS-capable GMs and ops What we do for Creating better together. leaders; business-minded the world functional leads Full Bench 2 Depth & breadth for growth as well as deployment into Continuous improvement is VALUES acquisitions What we believe our way of life. Right Organization 3 Aligned for optimal performance & appropriately ▪ Thoughtful Speed incentivized ▪ Transparent Accountability BEHAVIORS ▪ Focused Curiosity Engaged 4 How we work ▪ Collaborative Empowerment Motivated, developed, ▪ Positive Competition challenged, and supported Culture & associate development are critical to our corporate value proposition 11Strong Focus On Talent Development Our Culture Our Talent Imperatives Outstanding Talent PURPOSE 1 CBS-capable GMs and ops What we do for Creating better together. leaders; business-minded the world functional leads Full Bench 2 Depth & breadth for growth as well as deployment into Continuous improvement is VALUES acquisitions What we believe our way of life. Right Organization 3 Aligned for optimal performance & appropriately ▪ Thoughtful Speed incentivized ▪ Transparent Accountability BEHAVIORS ▪ Focused Curiosity Engaged 4 How we work ▪ Collaborative Empowerment Motivated, developed, ▪ Positive Competition challenged, and supported Culture & associate development are critical to our corporate value proposition 11
CBS Impacts Multiple Areas Of Our Business... Continuous Improvement Focus Areas Standardized Toolset Policy Deployment Leadership Value Stream Standard Work Mapping Visual / Daily Value Pricing Management Problem 5S Solving Process Accelerated Voice Of The Product Customer Development A standardized toolset applied to talent development, operations, and product 12CBS Impacts Multiple Areas Of Our Business... Continuous Improvement Focus Areas Standardized Toolset Policy Deployment Leadership Value Stream Standard Work Mapping Visual / Daily Value Pricing Management Problem 5S Solving Process Accelerated Voice Of The Product Customer Development A standardized toolset applied to talent development, operations, and product 12
...With Compounding Results Improvement Journey – Concept Improvement Journey – In Practice Filler Metal On Time Delivery (% rate) Policy 92 Deployment 90 +700bps 88 Kaizen 86 Policy 84 Deployment 2014 2019F Major New Product Launches at ESAB Kaizen 14 Daily Management 11 8 Daily Daily 4 Management Management 2 2 Y0 Y1 Y2+ 2014 2015 2016 2017 2018 2019 CBS drives measurable, sustainable growth and operating results 13...With Compounding Results Improvement Journey – Concept Improvement Journey – In Practice Filler Metal On Time Delivery (% rate) Policy 92 Deployment 90 +700bps 88 Kaizen 86 Policy 84 Deployment 2014 2019F Major New Product Launches at ESAB Kaizen 14 Daily Management 11 8 Daily Daily 4 Management Management 2 2 Y0 Y1 Y2+ 2014 2015 2016 2017 2018 2019 CBS drives measurable, sustainable growth and operating results 13
Investing In Winning Strategies & Innovation Strategy Shaping Process Process Results at ESAB ▪ CFX provocation / ESAB aspiration: − Expand and leverage global reach − Create step change in N. American position Execution Provocation − Develop innovative, leading full solution for market CFX role: CFX role: − Digitalize / diversify the business Coach & Guide Challenge & Vet ▪ Results: − Truly global leader with strong local positions Formulation − Large improvement in ESAB brand & channel position in N. America CFX role: − Continuous innovation engine Support & Focus − Automation & DDA solutions Investing for competitive advantage in partnership with our platforms 14Investing In Winning Strategies & Innovation Strategy Shaping Process Process Results at ESAB ▪ CFX provocation / ESAB aspiration: − Expand and leverage global reach − Create step change in N. American position Execution Provocation − Develop innovative, leading full solution for market CFX role: CFX role: − Digitalize / diversify the business Coach & Guide Challenge & Vet ▪ Results: − Truly global leader with strong local positions Formulation − Large improvement in ESAB brand & channel position in N. America CFX role: − Continuous innovation engine Support & Focus − Automation & DDA solutions Investing for competitive advantage in partnership with our platforms 14
Disciplined Capital Deployment Colfax Bolt-on M&A Performance Disciplined Process 1 Acquisition EV / EBITDA ▪ Proactive approach rooted in business strategy -3.5x ▪ Clear view of value creation thesis, synergy requirements ▪ Intense focus on commercial LTM at Acquisition 2nd Full Year diligence pre- and post-offer ▪ 12 bolt-on deals successfully closed ▪ Disciplined assessment; willing over last three years to walk away ▪ Disciplined process for strong early ▪ Detailed integration plans; traction regular follow up / review ▪ All acquisitions achieving or exceeding plans Organic growth and margin expansion accelerated by acquisitions 15 (1) Average of Colfax bolt-on acquisitions from 2016 through 2018; 2nd Full Year includes the most recent forecast as applicableDisciplined Capital Deployment Colfax Bolt-on M&A Performance Disciplined Process 1 Acquisition EV / EBITDA ▪ Proactive approach rooted in business strategy -3.5x ▪ Clear view of value creation thesis, synergy requirements ▪ Intense focus on commercial LTM at Acquisition 2nd Full Year diligence pre- and post-offer ▪ 12 bolt-on deals successfully closed ▪ Disciplined assessment; willing over last three years to walk away ▪ Disciplined process for strong early ▪ Detailed integration plans; traction regular follow up / review ▪ All acquisitions achieving or exceeding plans Organic growth and margin expansion accelerated by acquisitions 15 (1) Average of Colfax bolt-on acquisitions from 2016 through 2018; 2nd Full Year includes the most recent forecast as applicable
Building A Better ESAB 1 2 Core Growth Outperformance FY18 & 19YTD 3.3% ▪ Strong relative performance 2.5% globally ▪ Commercial and operating execution support continued strength 2018 2019YTD ▪ ~340 bps of margin improvement Fab Tech Adjusted EBITA Margin Growth ▪ Demonstrated ability to expand 14.9% margins throughout a range 13.2% 13.2% market conditions 12.6% 11.5% ▪ Path for continued margin expansion 2015 2016 2017 2018 2019YTD Growing top-line and operating performance, driven by CBS and innovation 16 (1) Defined as ESAB growth above market; growth rates weighted by size of market, ex-China (2) Through 19Q3 Note: Refer to Appendix for non-GAAP reconciliation and footnotes.Building A Better ESAB 1 2 Core Growth Outperformance FY18 & 19YTD 3.3% ▪ Strong relative performance 2.5% globally ▪ Commercial and operating execution support continued strength 2018 2019YTD ▪ ~340 bps of margin improvement Fab Tech Adjusted EBITA Margin Growth ▪ Demonstrated ability to expand 14.9% margins throughout a range 13.2% 13.2% market conditions 12.6% 11.5% ▪ Path for continued margin expansion 2015 2016 2017 2018 2019YTD Growing top-line and operating performance, driven by CBS and innovation 16 (1) Defined as ESAB growth above market; growth rates weighted by size of market, ex-China (2) Through 19Q3 Note: Refer to Appendix for non-GAAP reconciliation and footnotes.
Successful DJO Integration Med Tech Quarterly YoY Core Growth, FY19 ▪ Positive customer response to improved delivery and new 5.5%+ product launches ▪ Early CBS results encouraging: 4.5% − Past dues down > 70% 3.5% − Fill rate up from mid-70s to 90% ▪ Focus areas: − Prevention and Rehabilitation supply chain improvement 1.5% − Procurement and value engineering − Reimbursement process – growth acceleration and cash cycle − Product innovation processes 1Q19 2Q19 3Q19 4Q19F Successful 2019 integration builds momentum for 2020 17Successful DJO Integration Med Tech Quarterly YoY Core Growth, FY19 ▪ Positive customer response to improved delivery and new 5.5%+ product launches ▪ Early CBS results encouraging: 4.5% − Past dues down > 70% 3.5% − Fill rate up from mid-70s to 90% ▪ Focus areas: − Prevention and Rehabilitation supply chain improvement 1.5% − Procurement and value engineering − Reimbursement process – growth acceleration and cash cycle − Product innovation processes 1Q19 2Q19 3Q19 4Q19F Successful 2019 integration builds momentum for 2020 17
Strong Momentum In Our Businesses… Strong Performance Strong Potential ▪ Winning with CBS, plenty of ▪ Beginning with CBS, focusing improvement headroom left on operational transformation ▪ Accelerating the pace of ▪ Re-invigorating vitality in innovation and growth Prevention & Rehabilitation ▪ Capitalizing on automation ▪ Growing Reconstructive and digital solutions aggressively with winning commercial model and ▪ Executing acquisitions that innovation accelerate strategy ▪ Expanding platform through M&A and connected medicine 18Strong Momentum In Our Businesses… Strong Performance Strong Potential ▪ Winning with CBS, plenty of ▪ Beginning with CBS, focusing improvement headroom left on operational transformation ▪ Accelerating the pace of ▪ Re-invigorating vitality in innovation and growth Prevention & Rehabilitation ▪ Capitalizing on automation ▪ Growing Reconstructive and digital solutions aggressively with winning commercial model and ▪ Executing acquisitions that innovation accelerate strategy ▪ Expanding platform through M&A and connected medicine 18
…And An Exciting Future For Colfax Build a $3 billion Med Tech platform with MSD+ growth capability 1 Continue to outperform industry growth in Fab Tech 2 Pursue continuous improvement in operating margin across portfolio 3 Realize strong cash conversion to support proactive investment in 4 acquisitions Diversify & strengthen portfolio through innovation & bolt-on 5 acquisitions 19…And An Exciting Future For Colfax Build a $3 billion Med Tech platform with MSD+ growth capability 1 Continue to outperform industry growth in Fab Tech 2 Pursue continuous improvement in operating margin across portfolio 3 Realize strong cash conversion to support proactive investment in 4 acquisitions Diversify & strengthen portfolio through innovation & bolt-on 5 acquisitions 19
ESAB Overview, Strategy and Progress Shyam Kambeyanda | EVP & CEO, ESAB 20ESAB Overview, Strategy and Progress Shyam Kambeyanda | EVP & CEO, ESAB 20
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DJO Overview, Strategy and Progress Brady Shirley | EVP & CEO, DJO 35DJO Overview, Strategy and Progress Brady Shirley | EVP & CEO, DJO 35
WE BELIEVE IN POWERING MOTION: We exist to get and keep people movingWE BELIEVE IN POWERING MOTION: We exist to get and keep people moving
DJO: POWERING MOTION! th • 7 largest in attractive $50B Orthopedic market • Global leader in Bracing, returned to growth • Fast-growing surgical implants business, leader in reverse shoulder in US • Integration on track, starting CBS journey • Strong opportunities for margin improvement and innovation-driven growth • Many strategic acquisition vectors Copyright © 2019 by DJO, LLC – CONFIDENTIAL 37DJO: POWERING MOTION! th • 7 largest in attractive $50B Orthopedic market • Global leader in Bracing, returned to growth • Fast-growing surgical implants business, leader in reverse shoulder in US • Integration on track, starting CBS journey • Strong opportunities for margin improvement and innovation-driven growth • Many strategic acquisition vectors Copyright © 2019 by DJO, LLC – CONFIDENTIAL 37
DJO A LEADER IN THE ATTRACTIVE, GROWING $50 BILLION ORTHOPEDIC CARE MARKET ORTHOPEDIC MARKET, ~$50 Billion TOP ORTHO PLAYERS ($ Billions) 9.0 DePuy Synthes Zimmer Biomet 7.1 Joint Reconstruction 36% Stryker 6.3 3.2 Smith & Nephew Spine 18% 2.9 Medronic 2.0 Arthrex Trauma 14% 1.2 Sports Medicine 11% NuVasive 1.0 Orthobiologics 10% Aesculap 0.7 Other 0.7 Wright Medical 11% Segments DJO participates in Copyright © 2019 by DJO, LLC – CONFIDENTIAL 38DJO A LEADER IN THE ATTRACTIVE, GROWING $50 BILLION ORTHOPEDIC CARE MARKET ORTHOPEDIC MARKET, ~$50 Billion TOP ORTHO PLAYERS ($ Billions) 9.0 DePuy Synthes Zimmer Biomet 7.1 Joint Reconstruction 36% Stryker 6.3 3.2 Smith & Nephew Spine 18% 2.9 Medronic 2.0 Arthrex Trauma 14% 1.2 Sports Medicine 11% NuVasive 1.0 Orthobiologics 10% Aesculap 0.7 Other 0.7 Wright Medical 11% Segments DJO participates in Copyright © 2019 by DJO, LLC – CONFIDENTIAL 38
ORTHOPEDIC GROWTH DRIVEN BY AN AGING POPULATION AND SUSTAINABLE SECULAR TRENDS MARKET MEGATRENDS 1 & GROWTH VOLUME GROWTH POPULATION • 65+ population from 600M to 10.2 9.7 1.0B in 2030 9.2 8.8 • 30% of global population is 8.4 obese or overweight 7.8 7.3 • Increasing incidence of lifestyle 6.9 6.5 diseases 6.2 5.8 5.5 5.3 HEALTH CARE • Outcome vs. fee-driven reimbursement • Total Joint reconstruction shift to outpatient/ASC • Opioid crisis driving pain mgt. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E alternatives • Connected Medicine 1 Assumes orthopedic patient volume roughly tracks orthopedic surgery volume Source: U.S. Census Bureau, Global Data on Orthopedic Procedures, AAP, Expert Interviews, BCG analysis Copyright © 2019 by DJO, LLC – CONFIDENTIAL 39ORTHOPEDIC GROWTH DRIVEN BY AN AGING POPULATION AND SUSTAINABLE SECULAR TRENDS MARKET MEGATRENDS 1 & GROWTH VOLUME GROWTH POPULATION • 65+ population from 600M to 10.2 9.7 1.0B in 2030 9.2 8.8 • 30% of global population is 8.4 obese or overweight 7.8 7.3 • Increasing incidence of lifestyle 6.9 6.5 diseases 6.2 5.8 5.5 5.3 HEALTH CARE • Outcome vs. fee-driven reimbursement • Total Joint reconstruction shift to outpatient/ASC • Opioid crisis driving pain mgt. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E alternatives • Connected Medicine 1 Assumes orthopedic patient volume roughly tracks orthopedic surgery volume Source: U.S. Census Bureau, Global Data on Orthopedic Procedures, AAP, Expert Interviews, BCG analysis Copyright © 2019 by DJO, LLC – CONFIDENTIAL 39
DJO BUSINESS UNITS UNIQUELY ADVANTAGED IN $22 BILLION SERVED MARKET PREVENTION & REHABILITATION Bracing & Supports #1 Globally Bracing & ($3bn global market) Supports Rehabilitation Equipment #1 Globally ($1bn global market) #1 in US Footcare ($0.2bn US market) Rehab Footcare RECONSTRUCTIVE Surgical Surgical Implants #1 in US Reverse Shoulder ($17bn global market) BGS Bone Growth Stimulation #2 in US Bar chart represents split of 2018 revenue of $1.2bn ($0.5bn US market) 1 Continuous Passive Motion Copyright © 2019 by DJO, LLC – CONFIDENTIAL 40DJO BUSINESS UNITS UNIQUELY ADVANTAGED IN $22 BILLION SERVED MARKET PREVENTION & REHABILITATION Bracing & Supports #1 Globally Bracing & ($3bn global market) Supports Rehabilitation Equipment #1 Globally ($1bn global market) #1 in US Footcare ($0.2bn US market) Rehab Footcare RECONSTRUCTIVE Surgical Surgical Implants #1 in US Reverse Shoulder ($17bn global market) BGS Bone Growth Stimulation #2 in US Bar chart represents split of 2018 revenue of $1.2bn ($0.5bn US market) 1 Continuous Passive Motion Copyright © 2019 by DJO, LLC – CONFIDENTIAL 40
DJO UNIQUELY POSITIONED ALONG FULL ORTHOPEDIC CONTINUUM OF CARE Prevention Repair Recovery PERFORMANCE PREVENTION SURGICAL RECOVERY REHAB • Athletic braces • Pre-op braces • Shoulders • Post-op braces • Traction devices • Muscle stimulation • Slings • Knees • Bone growth • Electrotherapy stimulators • Protective • Hips • Heat/cold therapy solutions • DVT • Bone growth • Orthotic shoes stimulators • Cold therapy Purpose-built SaaS platform Connected medicine Copyright © 2019 by DJO, LLC – CONFIDENTIAL 41DJO UNIQUELY POSITIONED ALONG FULL ORTHOPEDIC CONTINUUM OF CARE Prevention Repair Recovery PERFORMANCE PREVENTION SURGICAL RECOVERY REHAB • Athletic braces • Pre-op braces • Shoulders • Post-op braces • Traction devices • Muscle stimulation • Slings • Knees • Bone growth • Electrotherapy stimulators • Protective • Hips • Heat/cold therapy solutions • DVT • Bone growth • Orthotic shoes stimulators • Cold therapy Purpose-built SaaS platform Connected medicine Copyright © 2019 by DJO, LLC – CONFIDENTIAL 41
BUILDING ON #1 POSITION IN BRACING BUILDING ON #1 POSITION IN BRACING
#1 IN BRACING & SUPPORT ~$3B GLOBAL MARKET Iconic brand is #1 Synonymous with #1 in hospitals and in performance and walking boots, leader acute care settings clinic channels in foot/ankle Breg Other Ossur • Strong #1 in the three largest segments Bauerfeind Bort • DJO stock & bill at almost 40% of US Aspen Thuasne DeRoyal orthopedic clinics PRODUCT CATEGORIES Patient Returned to growth in 2019 with path to market+ Care Cold growth by 2021 Therapy Knee 1. Significantly improving operational execution and Spine service levels Vascular Lower 2. Revitalizing product vitality Extremity Upper Extremity 3. Leveraging MotionMD and Connected Medicine Copyright © 2019 by DJO, LLC – CONFIDENTIAL 43#1 IN BRACING & SUPPORT ~$3B GLOBAL MARKET Iconic brand is #1 Synonymous with #1 in hospitals and in performance and walking boots, leader acute care settings clinic channels in foot/ankle Breg Other Ossur • Strong #1 in the three largest segments Bauerfeind Bort • DJO stock & bill at almost 40% of US Aspen Thuasne DeRoyal orthopedic clinics PRODUCT CATEGORIES Patient Returned to growth in 2019 with path to market+ Care Cold growth by 2021 Therapy Knee 1. Significantly improving operational execution and Spine service levels Vascular Lower 2. Revitalizing product vitality Extremity Upper Extremity 3. Leveraging MotionMD and Connected Medicine Copyright © 2019 by DJO, LLC – CONFIDENTIAL 43
INNOVATION DRIVES GROWTH IN BRACING US BRACING SALES GROWTH • Brand reputation still very strong vs VITALITY INDEX • Returned to growth in 2019 Organic Growth Vitality Index • Improving innovation process with CBS 8% • Executing pipeline for sustained double 6% Double digit vitality digit vitality 4% – Refresh core products Single digit 2% vitality – Fill product gaps with market leading 0% performance – Lead the future of connected medicine -2% 2013 '14 '15 '16 '17 '18 '19F '20F Growth Vitality Copyright © 2019 by DJO, LLC – CONFIDENTIAL 44INNOVATION DRIVES GROWTH IN BRACING US BRACING SALES GROWTH • Brand reputation still very strong vs VITALITY INDEX • Returned to growth in 2019 Organic Growth Vitality Index • Improving innovation process with CBS 8% • Executing pipeline for sustained double 6% Double digit vitality digit vitality 4% – Refresh core products Single digit 2% vitality – Fill product gaps with market leading 0% performance – Lead the future of connected medicine -2% 2013 '14 '15 '16 '17 '18 '19F '20F Growth Vitality Copyright © 2019 by DJO, LLC – CONFIDENTIAL 44
RECENT PRODUCT LAUNCHES WITH CATEGORY LEADING TECHNOLOGY REFRESHING CORE PRODUCT LINES FILLING PRODUCT GAPS ICEMAN CLASSIC 3 ProCare XTEND 173 • Lowers cost by 25% • Improves position in higher growth spine segment • Innovative dual motor system for improved • Motion controlled flexion, extension and rotation reliability • Reduces Occipital Pressure Ulcers • Industry standard continuous flow to maintain constant temperature Copyright © 2019 by DJO, LLC – CONFIDENTIAL 45RECENT PRODUCT LAUNCHES WITH CATEGORY LEADING TECHNOLOGY REFRESHING CORE PRODUCT LINES FILLING PRODUCT GAPS ICEMAN CLASSIC 3 ProCare XTEND 173 • Lowers cost by 25% • Improves position in higher growth spine segment • Innovative dual motor system for improved • Motion controlled flexion, extension and rotation reliability • Reduces Occipital Pressure Ulcers • Industry standard continuous flow to maintain constant temperature Copyright © 2019 by DJO, LLC – CONFIDENTIAL 45
LEADING CONNECTED MEDICINE IN BRACING CONNECTED MEDICINE • Expansion of post operative outpatient rehab through digital protocol delivery and monitoring • Improved outcomes through real time compliance tracking • Early discovery of critical factors to mitigate return to inpatient setting • Data collection capability to drive therapy improvements • Improved patient engagement via guided therapy and milestone targets 46LEADING CONNECTED MEDICINE IN BRACING CONNECTED MEDICINE • Expansion of post operative outpatient rehab through digital protocol delivery and monitoring • Improved outcomes through real time compliance tracking • Early discovery of critical factors to mitigate return to inpatient setting • Data collection capability to drive therapy improvements • Improved patient engagement via guided therapy and milestone targets 46
DJO BUILDING ON LEADERSHIP POSITION IN WORKFLOW MANAGEMENT AND AUTOMATION RD NEARLY 2/3 OF 6750 CLINICS UTILIZE STOCK & BILL PROGRAMS Orthopedic Clinics Workflow • Orthopedic clinics have significant stocking, fitting, and billing workflow 36% • Most clinics use a “stock and bill” solution Non-Stock & Bill to outsource workflow to bracing suppliers 64% Stock & Bill • Creates efficiency and supports focus on patients DJO IS THE WINNING SOLUTION PROVIDER Of Stock & Bill • ~2400 US clinics use DJO workflow ® ® solutions - OfficeCare and MotionMD • Increases stickiness and share of wallet for Other 55% 45% DJO Copyright © 2019 by DJO, LLC – CONFIDENTIAL 47DJO BUILDING ON LEADERSHIP POSITION IN WORKFLOW MANAGEMENT AND AUTOMATION RD NEARLY 2/3 OF 6750 CLINICS UTILIZE STOCK & BILL PROGRAMS Orthopedic Clinics Workflow • Orthopedic clinics have significant stocking, fitting, and billing workflow 36% • Most clinics use a “stock and bill” solution Non-Stock & Bill to outsource workflow to bracing suppliers 64% Stock & Bill • Creates efficiency and supports focus on patients DJO IS THE WINNING SOLUTION PROVIDER Of Stock & Bill • ~2400 US clinics use DJO workflow ® ® solutions - OfficeCare and MotionMD • Increases stickiness and share of wallet for Other 55% 45% DJO Copyright © 2019 by DJO, LLC – CONFIDENTIAL 47
® MotionMD – A PURPOSE BUILT SaaS PLATFORM TO STREAMLINE ORTHOPEDIC CLINIC WORKFLOW Workflow Apps Surgeon/Patient Apps ® MOTIONMD OFFICECARE BENEFIT BREAKTHROUGH APPLICATION ® • Higher reimbursement rate, faster collections • VeriPro benefits verification ® • >40% reduction in inventory volume • OaraScore implant outpatient selection tool ® • >30% improvement in time to place brace on • eCare Hospital based DME management patient ® • MotionIQ Patient remote monitoring & • Streamlines workflow and integrates to engagement practice management systems • JointRegistry Patient outcome tracking Copyright © 2019 by DJO, LLC – CONFIDENTIAL 48® MotionMD – A PURPOSE BUILT SaaS PLATFORM TO STREAMLINE ORTHOPEDIC CLINIC WORKFLOW Workflow Apps Surgeon/Patient Apps ® MOTIONMD OFFICECARE BENEFIT BREAKTHROUGH APPLICATION ® • Higher reimbursement rate, faster collections • VeriPro benefits verification ® • >40% reduction in inventory volume • OaraScore implant outpatient selection tool ® • >30% improvement in time to place brace on • eCare Hospital based DME management patient ® • MotionIQ Patient remote monitoring & • Streamlines workflow and integrates to engagement practice management systems • JointRegistry Patient outcome tracking Copyright © 2019 by DJO, LLC – CONFIDENTIAL 48
DRIVING GROWTH AT DJO SURGICALDRIVING GROWTH AT DJO SURGICAL
DRIVING DOUBLE DIGIT GROWTH IN SURGICAL ~$17B GLOBAL MARKET • Pioneer and leader in Reverse Shoulder Other • Rapid growth in $16B Knee / Hip segment Shoulder • Industry leading KOL (Key Opinion Leader) teams Knee Hip Sustaining double-digit organic growth: 1. Build on demonstrated outcome performance of ® ® Altivate Reverse Shoulder and Empowr Knee DJO BY GEOGRAPHY 2. Continue bag expansion to fill out product offering ROW 3. Expand Shoulder franchise to “surround the doc” 4. Capitalize on ASC transition 5. Expand to key global markets US ASC = Ambulatory Surgery Center Copyright © 2019 by DJO, LLC – CONFIDENTIAL 50DRIVING DOUBLE DIGIT GROWTH IN SURGICAL ~$17B GLOBAL MARKET • Pioneer and leader in Reverse Shoulder Other • Rapid growth in $16B Knee / Hip segment Shoulder • Industry leading KOL (Key Opinion Leader) teams Knee Hip Sustaining double-digit organic growth: 1. Build on demonstrated outcome performance of ® ® Altivate Reverse Shoulder and Empowr Knee DJO BY GEOGRAPHY 2. Continue bag expansion to fill out product offering ROW 3. Expand Shoulder franchise to “surround the doc” 4. Capitalize on ASC transition 5. Expand to key global markets US ASC = Ambulatory Surgery Center Copyright © 2019 by DJO, LLC – CONFIDENTIAL 50
US ORTHOPEDIC IMPLANT MARKET OVERVIEW MARKET CAGR DJO 2018 & 2019 ~1.6 MILLION JOINT REPLACEMENT TO 2022 GROWTH PROCEDURES (2018) (’000) (billions) Shoulder $1.1 6% Mid-teens 139 (8% Reverse Shoulder) 883 Knee $4.6 2% Double digit 562 $3.2 2% Double digit Hip ® Source: SmartTRAK Copyright © 2019 by DJO, LLC – CONFIDENTIAL 51US ORTHOPEDIC IMPLANT MARKET OVERVIEW MARKET CAGR DJO 2018 & 2019 ~1.6 MILLION JOINT REPLACEMENT TO 2022 GROWTH PROCEDURES (2018) (’000) (billions) Shoulder $1.1 6% Mid-teens 139 (8% Reverse Shoulder) 883 Knee $4.6 2% Double digit 562 $3.2 2% Double digit Hip ® Source: SmartTRAK Copyright © 2019 by DJO, LLC – CONFIDENTIAL 51
BETTER DEMONSTRATED OUTCOMES LEAD TO SURGEON PREFERENCE ® ® ALTIVATE REVERSE SHOULDER Design recognized by top Key Opinion Leaders, including lead designer of another major player: “Glenoid lateralization and inferiorization, as well as a 135o shaft angle, promoted initially by Mark Frankle, are the best options to improve impingement free range of motion, to limit notching, and are not harmful for long-term longevity.” - Professor Gilles Walch, M.D ® EMPOWR KNEE SYSTEM • Dual pivot design results in 50% lower patient dissatisfaction • Modern implant and instrument designs with 10+ years of clinical data • Double digit organic growth for 4 consecutive years Copyright © 2019 by DJO, LLC – CONFIDENTIAL 52BETTER DEMONSTRATED OUTCOMES LEAD TO SURGEON PREFERENCE ® ® ALTIVATE REVERSE SHOULDER Design recognized by top Key Opinion Leaders, including lead designer of another major player: “Glenoid lateralization and inferiorization, as well as a 135o shaft angle, promoted initially by Mark Frankle, are the best options to improve impingement free range of motion, to limit notching, and are not harmful for long-term longevity.” - Professor Gilles Walch, M.D ® EMPOWR KNEE SYSTEM • Dual pivot design results in 50% lower patient dissatisfaction • Modern implant and instrument designs with 10+ years of clinical data • Double digit organic growth for 4 consecutive years Copyright © 2019 by DJO, LLC – CONFIDENTIAL 52
DEEPEN AND EXPAND MARKET COVERAGE IN CORE SEGMENTS COMPLETENESS OF Current Portfolio Breadth PRODUCT PORTFOLIO • Shoulder 79% 100% • Knee 62% • Hip 60% 2020-2023 • Expands “same surgeon” sales from ~65% to 90%+ of procedure coverage 0% • Improving asset efficiency (instruments) 2017 Today 2023 • Accelerating return on new product Shoulder Knee Hip development Copyright © 2019 by DJO, LLC – CONFIDENTIAL 53DEEPEN AND EXPAND MARKET COVERAGE IN CORE SEGMENTS COMPLETENESS OF Current Portfolio Breadth PRODUCT PORTFOLIO • Shoulder 79% 100% • Knee 62% • Hip 60% 2020-2023 • Expands “same surgeon” sales from ~65% to 90%+ of procedure coverage 0% • Improving asset efficiency (instruments) 2017 Today 2023 • Accelerating return on new product Shoulder Knee Hip development Copyright © 2019 by DJO, LLC – CONFIDENTIAL 53
SHIFT TO OUTPATIENT TOTAL JOINT REPLACEMENT PROVIDES SIGNIFICANT GROWTH OPPORTUNITY PROJECTED TJR VOLUME IN Drivers: 1 OUTPATIENT SETTING • Medicare/Medicaid rule change 1/1/2020 • Bundled “Episode of Care” 60% • Physician ownership 51% 50% DJO Opportunity: 40% 30% • Empowr® Knee patient profile 19% 20% 15% • Sports medicine physicians capturing TKA (Total Knee Arthroplasty) 10% • Lack of “installed base” for larger players 0% 2016 2018 2020 2022 2024 2026 • DJO continuum of care coverage – OARA 1. CMS, 2018; company estimates ASC = Ambulatory Surgery Center. TJR = Total Joint Replacement. 2. Management estimates – OA Bracing – X4 Connected Medicine Copyright © 2019 by DJO, LLC – CONFIDENTIAL 54SHIFT TO OUTPATIENT TOTAL JOINT REPLACEMENT PROVIDES SIGNIFICANT GROWTH OPPORTUNITY PROJECTED TJR VOLUME IN Drivers: 1 OUTPATIENT SETTING • Medicare/Medicaid rule change 1/1/2020 • Bundled “Episode of Care” 60% • Physician ownership 51% 50% DJO Opportunity: 40% 30% • Empowr® Knee patient profile 19% 20% 15% • Sports medicine physicians capturing TKA (Total Knee Arthroplasty) 10% • Lack of “installed base” for larger players 0% 2016 2018 2020 2022 2024 2026 • DJO continuum of care coverage – OARA 1. CMS, 2018; company estimates ASC = Ambulatory Surgery Center. TJR = Total Joint Replacement. 2. Management estimates – OA Bracing – X4 Connected Medicine Copyright © 2019 by DJO, LLC – CONFIDENTIAL 54
DJO AND COLFAX CREATING VALUEDJO AND COLFAX CREATING VALUE
COLFAX BUSINESS SYSTEM INTEGRATION Strengthening DJO • Efficiency and margin expansion through proven business management system (CBS) • Early focus tied to strategic needs LEADERSHIP – Distribution and supply chain – Business unit level operating and strategic processes – New product development process LEAN GROWTH – Revenue Cycle Management (Billing) • DJO driving with Colfax support and training • Early results → stabilized Prevention & Rehab supply chain Copyright © 2019 by DJO, LLC – CONFIDENTIAL 56COLFAX BUSINESS SYSTEM INTEGRATION Strengthening DJO • Efficiency and margin expansion through proven business management system (CBS) • Early focus tied to strategic needs LEADERSHIP – Distribution and supply chain – Business unit level operating and strategic processes – New product development process LEAN GROWTH – Revenue Cycle Management (Billing) • DJO driving with Colfax support and training • Early results → stabilized Prevention & Rehab supply chain Copyright © 2019 by DJO, LLC – CONFIDENTIAL 56
DJO EMBRACING “THE BEST TEAM WINS” • Retention stable, team excited about Colfax future • Great Place to Work survey revealed: – Strong alignment to mission – Positive view of Colfax future – Opportunity around individual development • DJO “Leading for Growth” kickoff in 2019 • Colfax talent processes, tools, and programs will accelerate in 2020 Copyright © 2019 by DJO, LLC – CONFIDENTIAL 57DJO EMBRACING “THE BEST TEAM WINS” • Retention stable, team excited about Colfax future • Great Place to Work survey revealed: – Strong alignment to mission – Positive view of Colfax future – Opportunity around individual development • DJO “Leading for Growth” kickoff in 2019 • Colfax talent processes, tools, and programs will accelerate in 2020 Copyright © 2019 by DJO, LLC – CONFIDENTIAL 57
INVESTING IN GROWTH Growth drivers: ORGANIC GROWTH • Sustaining customer experience in P&R • Significant vitality improvement in 5.5%+ bracing through strategic NPI 3.5 to 4.5% 4.5% • Continuing strong growth in Surgical 3.5% through bag expansion and ASC transition leadership 1.5% • Leading the future of orthopedic connected medicine • Expanding geographic presence 1Q19 2Q19 3Q19 4Q19 2020F 2021F Copyright © 2019 by DJO, LLC – CONFIDENTIAL 58INVESTING IN GROWTH Growth drivers: ORGANIC GROWTH • Sustaining customer experience in P&R • Significant vitality improvement in 5.5%+ bracing through strategic NPI 3.5 to 4.5% 4.5% • Continuing strong growth in Surgical 3.5% through bag expansion and ASC transition leadership 1.5% • Leading the future of orthopedic connected medicine • Expanding geographic presence 1Q19 2Q19 3Q19 4Q19 2020F 2021F Copyright © 2019 by DJO, LLC – CONFIDENTIAL 58
BROAD RANGE OF OPPORTUNITIES TO ACCELERATE BY ACQUISITION EXPAND Redefine boundaries Patient Continuum of Care Build around EXTEND the surgeon Build out from core Geographic expansion Build around Technology the provider add-ons Channel / customer Digital solutions share of wallet Fill gaps Channel position / consolidation EXCEL Win in the core Copyright © 2019 by DJO, LLC – CONFIDENTIAL 59BROAD RANGE OF OPPORTUNITIES TO ACCELERATE BY ACQUISITION EXPAND Redefine boundaries Patient Continuum of Care Build around EXTEND the surgeon Build out from core Geographic expansion Build around Technology the provider add-ons Channel / customer Digital solutions share of wallet Fill gaps Channel position / consolidation EXCEL Win in the core Copyright © 2019 by DJO, LLC – CONFIDENTIAL 59
DJO VALUE CREATION STRATEGY Improve EBITDA Ramp to margins >50 bps per 4-5%+ annual growth year Increase unlevered FCF to Achieve Colfax 10% $200+ million p.a. by year 3 ROIC target by year 5 Copyright © 2019 by DJO, LLC – CONFIDENTIAL 60DJO VALUE CREATION STRATEGY Improve EBITDA Ramp to margins >50 bps per 4-5%+ annual growth year Increase unlevered FCF to Achieve Colfax 10% $200+ million p.a. by year 3 ROIC target by year 5 Copyright © 2019 by DJO, LLC – CONFIDENTIAL 60
Colfax Financial Update Chris Hix | EVP & CFO 61Colfax Financial Update Chris Hix | EVP & CFO 61
What You’ve Heard Today ▪ Colfax strategy proven over time; DJO integration a solid first step & ESAB now delivering top-tier performance ▪ Portfolio transformation complete; exiting 2019 with a better business & stronger growth options ▪ Exciting opportunities for next year & beyond; CBS accelerating Fab Tech innovation and margin expansion; aggressive build-out of Med Tech platform 62What You’ve Heard Today ▪ Colfax strategy proven over time; DJO integration a solid first step & ESAB now delivering top-tier performance ▪ Portfolio transformation complete; exiting 2019 with a better business & stronger growth options ▪ Exciting opportunities for next year & beyond; CBS accelerating Fab Tech innovation and margin expansion; aggressive build-out of Med Tech platform 62
Levers For Long-Term Value Creation ▪ Med Tech core growth improving to 4-5% over next Sales 2 years ▪ Fab Tech returns to volume growth in 2H 2020, continues to outperform market over course of business cycle ▪ New portfolio with higher margins Margins ▪ Long-term average of 50 bps per year margin improvement supported by growth, cost management, portfolio tilt to higher-margin product lines ▪ FCF conversion of 90% or more Cash Flow ▪ Significant capacity for acquisitions Multiple paths to create sustainable, long-term shareholder value 63Levers For Long-Term Value Creation ▪ Med Tech core growth improving to 4-5% over next Sales 2 years ▪ Fab Tech returns to volume growth in 2H 2020, continues to outperform market over course of business cycle ▪ New portfolio with higher margins Margins ▪ Long-term average of 50 bps per year margin improvement supported by growth, cost management, portfolio tilt to higher-margin product lines ▪ FCF conversion of 90% or more Cash Flow ▪ Significant capacity for acquisitions Multiple paths to create sustainable, long-term shareholder value 63
Improved Cash Flow Capability $mm Working Capital 2017 2018 2019e 2020e 20 ▪ > $250mm 2020 free 0 -20 cash flow ▪ 90%+ conversion -40 Pension Funding ▪ Higher / more consistent cash flow 2017 2018 2019e 2020e 0 -20 ▪ Growing profits -40 ▪ Lower structural friction from working Restructuring Funding capital, pensions, restructuring 2017 2018 2019e 2020e 0 ▪ Significant US NOLs from DJO -50 acquisition -100 Greater and more consistent cash generation Note: (1) Free cash flow = Cash from operating activities – Capital expenditures (2) Working capital chart excludes $40mm one-time investments into DJO in 2019 64 (3) Conversion = Free cash flow / Adjusted net incomeImproved Cash Flow Capability $mm Working Capital 2017 2018 2019e 2020e 20 ▪ > $250mm 2020 free 0 -20 cash flow ▪ 90%+ conversion -40 Pension Funding ▪ Higher / more consistent cash flow 2017 2018 2019e 2020e 0 -20 ▪ Growing profits -40 ▪ Lower structural friction from working Restructuring Funding capital, pensions, restructuring 2017 2018 2019e 2020e 0 ▪ Significant US NOLs from DJO -50 acquisition -100 Greater and more consistent cash generation Note: (1) Free cash flow = Cash from operating activities – Capital expenditures (2) Working capital chart excludes $40mm one-time investments into DJO in 2019 64 (3) Conversion = Free cash flow / Adjusted net income
Demon Demonstrat strated ed Tr Trac ack k Re Reco cord rd of of Dele Delevera veragi ging ng Gross Leverage 6.0x ▪ Amended credit agreement supports 5.0x near-term flexibility, 4.0x deleveraging plan 3.0x ▪ Improved portfolio cash flow capability provides 2.0x dual path of 1.0x deleveraging and investment 0.0x ▪ Expect to have >$1B acquisition capacity over next few years Ample capacity for acquisitions; balanced approach to capital allocation Note: (1) Calculated as (Cash flow from operating activities – Capital expenditures) / Adjusted net income 65 Q1'12 Q4'12 Q4'13 Q4'14 Q4'15 Q4'16 Q4'17 Q4'18 Q1'19 Q4'19e TargetDemon Demonstrat strated ed Tr Trac ack k Re Reco cord rd of of Dele Delevera veragi ging ng Gross Leverage 6.0x ▪ Amended credit agreement supports 5.0x near-term flexibility, 4.0x deleveraging plan 3.0x ▪ Improved portfolio cash flow capability provides 2.0x dual path of 1.0x deleveraging and investment 0.0x ▪ Expect to have >$1B acquisition capacity over next few years Ample capacity for acquisitions; balanced approach to capital allocation Note: (1) Calculated as (Cash flow from operating activities – Capital expenditures) / Adjusted net income 65 Q1'12 Q4'12 Q4'13 Q4'14 Q4'15 Q4'16 Q4'17 Q4'18 Q1'19 Q4'19e Target
2020 Outlook ▪ DJO organic sales growth $2.10- 3.5-4.5% 2.20 ~$0.22-0.27 $1.95- 2.00 ▪ ESAB core sales growth 0- 2%, positive in 2H; ~1.5% ~$(0.07) FX headwind ▪ CFX quarterly sales seasonality profile: approximately 24%, 25- 26%, 24-25%, 26% ▪ Adj. EBITA margins: 14.25- 14.75% Expect core earnings growth of 10% or more in 2020 662020 Outlook ▪ DJO organic sales growth $2.10- 3.5-4.5% 2.20 ~$0.22-0.27 $1.95- 2.00 ▪ ESAB core sales growth 0- 2%, positive in 2H; ~1.5% ~$(0.07) FX headwind ▪ CFX quarterly sales seasonality profile: approximately 24%, 25- 26%, 24-25%, 26% ▪ Adj. EBITA margins: 14.25- 14.75% Expect core earnings growth of 10% or more in 2020 66
An Exciting Future For Colfax Build a $3 billion Med Tech platform with MSD+ growth capability 1 Continue to outperform industry growth in Fab Tech 2 Pursue continuous improvement in operating margin across portfolio 3 Realize strong cash conversion to support proactive investment in 4 acquisitions Diversify & strengthen portfolio through innovation & bolt-on 5 acquisitions 67An Exciting Future For Colfax Build a $3 billion Med Tech platform with MSD+ growth capability 1 Continue to outperform industry growth in Fab Tech 2 Pursue continuous improvement in operating margin across portfolio 3 Realize strong cash conversion to support proactive investment in 4 acquisitions Diversify & strengthen portfolio through innovation & bolt-on 5 acquisitions 67
Appendix 68Appendix 68
Non-GAAP Reconciliation __________ (1) Includes amortization of acquired intangibles and fair value charges on acquired inventory. Note: Dollars in millions. 69Non-GAAP Reconciliation __________ (1) Includes amortization of acquired intangibles and fair value charges on acquired inventory. Note: Dollars in millions. 69