Thank you. Good morning, everyone, and thank you for joining us. I'm Mike Macek, Vice President of Finance. And joining me today on the call are Matt Trerotola, President and CEO; Brady Shirley, Executive Vice President and CEO of DJO; and Chris Hix, Executive Vice President and CFO. Our earnings release was issued yesterday afternoon and is available in the Investor section of our website at colfaxcorp.com. We will be using a slide presentation to walk through today's call, which can also be found on our website. Both the audio and the slide presentation of this call will be archived on the website later today and will be available until the next quarterly earnings call. During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in yesterday's earnings release and in our filings with the SEC. Actual results might differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law. With respect to any non-GAAP financial measures made during the call today, the company reconciliation information relating to those measures can be found in our press release and today's slide presentation. With that, let me turn it over to Matt, who will start on Slide 3.

Thanks, Mike. Welcome, everyone, and thanks for joining our call today. I'm pleased to report another strong quarter of financial results and strategic progress at Colfax. We exceeded our second quarter expectations, both on the top line and earnings effectively managing through an improving but still dynamic operating environment. As a result, we're increasing our full year financial outlook. We're also pleased to announce another exciting med tech acquisition that further expands our fast-growing reconstructive platform. Brady has joined today's call to provide more details about this strategic addition to our MedTech business. We also made strong progress towards separating our company into two independent public companies and continue to target completion in the first quarter of next year. Our strong performance this quarter highlights the momentum and growth opportunities we see in both MedTech and ESAB. End markets continued to recover and both businesses reported organic daily growth above 2020 and 2019 levels, including 10% growth over 2019 in our MedTech Reconstructive platform. Despite some supply chain friction, our global teams are executing well and continuing to outgrow their markets. We expect continued market improvement in the second half of the year with accelerating growth over 2019. Second quarter higher sales translated into higher profit, and we earned adjusted EPS of $0.56 per share in the second quarter, a 27% sequential increase versus Q1 and above our guidance range of $0.48 to $0.53. ESAB achieved EBITA margins of 16.4%, another record, while successfully managing high levels of raw material inflation. We also posted another strong quarter of free cash flow and are well on our way to exceeding our original guidance of $250 million or more this year. All of these improvements are reading through to our full year performance, and we're increasing our 2021 guidance. Chris will walk through these details later. Slide 4 provides an update of our plans to separate into two independent public companies in the first quarter of next year. Our experienced leaders are making substantial progress across many work streams and we remain on schedule. We are complementing ESAB's strong operating team with additional public company support capabilities. Shyam and his team have already hired several of these key leaders and are well on their way to building a highly effective team of top talent. We expect that the initial capital structure of ESAB will have net leverage of 2.5 to 3x upon separation, a very comfortable level, given the business is strong and consistent cash flows and disciplined operations. We expect the business to have ample financial capacity to execute the growth strategy that we outlined at Investor Day in March. We selected a new name for MedTechCo that reflects our vision of continuous improvement, innovation and great patient outcomes. We have a thoughtful and impactful plan to unveil the new name to investors, customers and employees later in the year. Stay tuned. The company has made significant progress creating the two separate Boards of Directors. Both businesses will benefit from a combination of continuity from existing directors and new members with additional experiences and perspectives. You will hear more from us on this important topic as we get closer to the separation. We continue to target the separation to be completed in the first quarter of 2022, and we're confident that we will position both companies for maximum long-term growth and value creation. Each of the businesses have demonstrated that they are ready for the separation by continuing to achieve strong operating performance and strategic progress. Slide 5 demonstrates this in part through our record of sustainable margin improvement at ESAB. Congratulations to the ESAB team for achieving another record this quarter. The improvement of almost 500 basis points since 2015 reflects the consistent execution of our profitable growth strategy and application of our proven business system across a range of conditions. ESAB's global teams use CBS tools and processes every day to improve productivity across the regions, factories and functions. This continuous improvement is complemented by supply chain and back-office consolidations that create structurally lower costs. CBS has been used for growth, successfully focusing the teams on attractive commercial opportunities. And ESAB's market-leading innovation engine has also contributed to growth, share gain and operating leverage. Acquisitions have further positioned the business in attractive growth markets like medical and life science that reduce the cyclical exposure of the overall business. We are proud of this margin performance and the business is on track for even higher margins in the coming years as communicated at Investor Day. At Investor Day, we also discussed the many acquisition vectors within our MedTech business, and Slide 6 shows the significant progress made in the past few quarters to expand our market, accelerate the growth and create a path to structurally higher margins. We complemented our Recovery Sciences franchise with a fast-growing laser technology that also opens opportunities in the vet space. We made an important investment in insight medical systems that could lead to a breakthrough augmented reality guidance technology for the surgical theater. We created a fast-growing foot and ankle franchise that we expect will reach $100 million of revenue within 3 years. And now we're pleased to announce the acquisition of Mathys, a highly complementary global expansion of our fast-growing reconstructive platform. When we established our MedTech business with the acquisition of DJO, we had revenue of about $1.2 billion. Based on Recon's double-digit organic growth and these acquisitions, our MedTech segment now has over $1.5 billion of pro forma revenue that is quickly tilting to faster growth. We are well on our way to achieving the near-term $2 billion revenue target discussed at Investor Day. Slide 7 includes more information on Mathys. The company has a long-standing position in implants, serving primarily the European markets with an obvious and compelling geographic fit between our two businesses. Like DJO, Mathys has a well-deserved reputation as an innovator and each business brings unique product strengths to customers. We are excited by the potential for growth from cross-pollinating the two sets of products and market channels. We expect other benefits from the combination that Brady will discuss in a moment. We're forecasting this business to generate about $150 million of 2022 revenue in its first full year under our ownership. As we scale the business and realize high-margin revenue and supply chain synergies, margins are projected to start in the low double digits and improve to segment averages. We funded the acquisition with Colfax shares to the Mathys owners who yesterday launched a secondary offering of the shares they received in the deal. The offering priced last night and the allocation included a terrific new long-term investor who is excited about the potential of both ESAB and our MedTech businesses. The acquisition closed last night, so let me officially welcome the Mathys team. I got to spend time with key leaders of Mathys a few weeks ago and was incredibly impressed by the talent, passion and dedication. I'm excited about the future that we'll create together. Brady will now take you through more of the acquisition details, starting on Slide 8, and then Chris will review our Q2 results and improved outlook.

Thanks, Matt. Good morning, everyone, and special welcome to our new Mathys team members. I'm really excited to be here today and to have the opportunity to speak specifically about our acquisition of Mathys. Mathys is a company that I've known and respected for a long time, and I've always thought it would be a great fit with DJO. There are a number of opportunities with the combination, but in broad strokes, there are three that really stand out. The simple one is geographic. As you know, our Recon business is almost entirely in the U.S. and their business is outside the U.S. Therefore, there are significant cross-selling opportunities with virtually no commercial disruption in the combination, which is unique. As you know, our Recon business has historically been anchored in two big technologies, one the AltiVate Reverse Shoulder, and two, the EMPOWR 3D knee. Mathys, on the other hand, is really strong in anatomic shoulder and particularly stemless shoulders and hips led by the RM cup. So expanding each bag with the strength from the other is very logical and should elevate the performance of both. Finally, both companies are passionate about driving innovation to improve patient outcomes. In fact, our missions are remarkably similar. DJO's mission is powering motion and Mathys' mission is preservation in motion. I was there a couple of weeks ago and all three of these are not only recognized from our perspective but also by the broader Mathys' team. There's a great excitement on both sides of the pond. Mathys has had a long and successful history in medical technology. Their focus is on the development, manufacturing and distribution of products and technologies for total joint replacements. As I mentioned earlier, the Recon portfolio is very complementary to ours with many differentiated and clinically proven products. A couple of products I would highlight are the Affinis Short Stem Anatomic Shoulder, which in the U.S. would be called stemless. Mathys, with Affinis, is the leader in the European market and has consistent growth in Europe and Asia with the platform. It also provides a terrific access for our reverse platform for shoulder surgeons outside the U.S. The other highlight I'd point to is the RM vitamys acetabular cup for total hip replacement. The RM cup has broad acceptance across the EU based on excellent long-term clinical success and its reliable repeatability across the various patient segments in hip arthroplasty. As I mentioned earlier, this is one of the unique technologies that will expand our range of current offerings in the U.S. Another technology to highlight is that Mathys is one of the few manufacturers of ceramic components for orthopedic implants, where they have a long and extensive clinical history. Strategically, we see great benefits from having this in-house knowledge and capability, giving us the potential to incorporate it into future product innovations across the anatomies. Like I mentioned at the start, geographically, Mathys is a great fit. All their sales are outside the U.S. Historically, the majority of our sales were within Europe, where they have strong share positions in their home country of Switzerland and solid share throughout. We are impressed with their progress in extremities and broader joint recon in Asia Pacific, particularly their growth in Australia and Japan. We also see an excellent opportunity to leverage their international sales channels to expand our recently acquired foot and ankle base outside the U.S. as well. On Slide 9, let's talk about why this makes sense and why Mathys and DJO together will strengthen our positions. The acquisition creates a global platform and basically doubles our addressable market in both extremities and the broader joint reconstruction market. As you know, we've had sustained double-digit growth in Recon for a number of years. With the combination of strength plus utilizing the channel across Recon, we see a great opportunity to grow double digits globally across this expanded market. The shoulder growth dynamics around the world are similar to the U.S., high single-digit growth with reverse expanding more rapidly than anatomic. We feel very strongly that we can accelerate Mathys' growth by introducing our market-leading AltiVate Reverse Shoulder into their channel. In the broader joint reconstruction market, hip and knee, the EMPOWR 3D knee will strengthen the competitiveness of the Mathys offering with a modern knee backed by strong clinical data. Simply said, with the combination of our technologies, we see strong revenue synergies. Worth noting is that the two strategic product platforms I mentioned, the AltiVate Reverse and the EMPOWR 3D knee products already have CE Mark approval. So our impact opportunity is positioned to start soon. Beyond growth, we see significant margin opportunities as well. We expect to create savings from increased scale and operational synergies as well as a favorable mix shift over time from extremities expansion with reverse shoulder and foot and ankle as well as accelerating growth in key geographies. Overall, we feel it's a winning combination that was a critical step in building our Recon business. Moving to Slide 10. With the addition of Mathys, we now have pro forma annual revenue of over $500 million of Recon and a clear path to grow $1 billion in the next 5 years. We are confident that our proven surgical offense that has delivered 5-plus years of strong double-digit growth will continue to deliver as we go forward. We extended our high-growth extremities core into the fast-growing foot and ankle segment. And now with the Mathys acquisition, we have doubled the addressable market to drive our clinically superior technologies globally. Additionally, we have a very healthy funnel of Recon bolt-on acquisition opportunities that could get us to the $1 billion mark even faster. Our platform has been built on our strategic imperative of delivering superior clinical outcomes, which has served not only us but more importantly, the patients we serve very well. We believe clinical outcomes are both a key responsibility for us and also the key to delivering sustainable growth over time in our MedTech business. If you recall our comments at our Investor Day back in March, we talked about our vision of expanding to approximately $2 billion in the near term and $3 billion in the longer term. Scaling our Recon business is a key component in that vision, along with extending our leadership in P&R and expanding in the new high-growth segment. Lots of work remains, but with our amazing global team made even better with Mathys, strong momentum, iconic brands and great customers, we are confident that we will realize that vision. With that, let me turn it over to Chris.

Thank you, Brady. I'll start on Slide 11. We had a terrific second quarter. Revenue levels continue to recover as we've been expecting. The MedTech business is solidly growing past 2019 levels, including the Recon platform at 10% on a daily rate basis. ESAB also grew off 2019 results, including the successful pass-through of inflation in the form of price to customers. Both businesses have a line of sight to further growth improvements in the second half of this year. Operating leverage and benefits from restructuring projects are flowing through to both the EBITDA and EPS lines. We are successfully managing both significant inflationary pressures and supply chain friction in our businesses. Q2 operating performance was better than we expected, and we were pleased to outperform in the quarter and achieved $0.56 of EPS. We also produced a healthy level of free cash flow in the second quarter. The standard work that we strengthened during COVID is driving better sustainable performance across our businesses. We are carefully managing pressures on working capital that are coming from supply chain disruptions to ensure that we support our growth with financial discipline. MedTech business details are on Slide 12. Late last year, we projected that our MedTech business would return to growth over 2019 levels by the first half of 2021. Our business grew 3% over 2019 on a sales per day basis in the second quarter as COVID-related restrictions continue to become less of a drag on patient demand. As you unpack this, you can see that the reconstructive part of the business returned to double-digit growth despite some regions of the U.S. continuing to have sporadic restrictions. This growth is impressive given that the industry continues to operate a bit below pre-COVID levels. The prevention and recovery product lines also grew over 2019, and we expect these growth rates to pick up as countries outside the U.S. further ease restrictions. Margins sequentially improved as expected on higher revenues, and we continue to expect additional improvement in the year related to typical seasonal strengthening of revenues. Our operating teams are doing a terrific job working through global supply chain constraints to keep up with improved customer demand. We remain on track to deliver a healthy step-up in EBITDA margins as outlined at our March Investor Day, and we expect to continue to manage logistical and supplier challenges through the end of the year. Turning to Slide 13. Our FabTech business is successfully managing the significant wave of raw material cost inflation by using dynamic customer pricing actions. These inflationary pressures are not abating, and we're projecting another 4 points of price in the second half to reflect customer pricing actions already taken. Isolating for the pricing actions, the business' underlying volume growth came very close to matching 2019 levels in the quarter. The developing economies of the world remain constructive and growing and European and North American customer demand is getting healthier. Overall, we expect volumes to continue to strengthen and we're projecting volume growth versus 2019 in the second half of this year. Well, the big star of the show is record EBITA margins of over 16%, which Matt covered off earlier in detail. This equates to 18% EBITDA margins. So I want to say congrats again to Shyam and the team who are well on their way to the 20% EBITDA margin objective outlined at Investor Day. Our updated outlook for the year is included on Slide 14. Based on strong second quarter performance, we are again improving our guidance for the year. We are expecting $2.10 to $2.20 per year of adjusted EPS, up $0.05 from previous guidance. This now includes $0.03 to $0.04 of net dilution from the Mathys acquisition in the second half of this year. We continue to expect the typical seasonal pattern of revenue and profit and are forecasting third quarter earnings per share of $0.50 to $0.55. We're also projecting at least $25 million more free cash flow in the year and have increased our full year guidance to $275 million or more. We continue to track to about 90% conversion in the year before any outlays related to the separation. As noted earlier, both businesses have strengthening revenue pictures and our slide highlights some of the key components. In addition to healthy organic growth in both businesses, our acquisitions are off to a great start. As noted earlier, business margin performance is forecasted to be in line with the amounts communicated at Investor Day. The tax rate is expected to remain in the low 20s in the second half of this year, and interest costs should be sequentially lower based on the $700 million bond redemptions that occurred in April. The CapEx levels are expected to remain in line with amounts originally communicated for the year. We'll wrap up our prepared remarks on Slide 15. We entered 2021 with significant growth planned for revenue, profit and cash flow. The first half of the year has played out even better. For the second quarter in a row, we have improved our annual guidance. We have been actively expanding our MedTech business with acquisitions that helped to position it for sustainable improvements in growth. Mathys is just the latest example and we are excited about the growth and margin synergies that this acquisition creates for our fast-growing Recon platform. Our strong operating performance demonstrates that our businesses are well positioned to be separate independent public companies. We are making great progress on this strategic project and continue to target completion in the first quarter of next year.

And with that, I'll ask the operator to open up the call for questions.

First question from Scott Davis from Melius.

You all seem to have been quite active. Mathys appears to be intriguing as well. Is Mathys more exciting in terms of its channel or its product? Could you discuss that, whether Brady wants to address it or Matt, it's fine with me?

Yes, Brady, go ahead.

I believe it's actually a combination of both aspects. That's a great question. As I pointed out, their strengths present opportunities for us. Some of their standout technologies, notably the RM cup, which is quite distinctive, provide exceptional data. We see significant potential for that technology in the U.S., as well as some of the unique features from Affinis regarding the short stem and stemless shoulder. This channel is something we really needed. Particularly with our AltiVate Reverse, having the opportunity to implement a technology that has truly transformed the shoulder market in the U.S. into an effective channel was a crucial part of our strategy. However, as I mentioned, their knee segment has been significantly lagging behind their overall growth. When I visited a couple of weeks ago, their teams expressed great enthusiasm for both our reverse shoulder and EMPOWR knee. So, it is definitely a combination of both elements.

Brady, do you have to go through any regulatory or any kind of channels to get your reverse shoulder into that market? I know there's a lot of different health care systems over there, but perhaps it's country by country. But maybe you could help us navigate that a little bit?

Yes. As I mentioned earlier, in Europe, we already have the CE Mark for our AltiVate Reverse. There are not many obstacles for us regarding the main product line, which is the leading product in our reverse platform. There are additional reverse components that we have introduced over the past couple of years, and we are currently working on those, a process that began even before we acquired Mathys. Our primary AltiVate Reverse, now CE marked, presents a significant opportunity for early impact in Europe. Looking at other markets like Australia and Japan, there are additional steps beyond the CE Mark, but initially, we should be able to move quickly with our main reverse platform.

Okay, I usually don't ask more than two questions, but I'm eager to find out how Matt, what is your on-time delivery looking like in this environment? Have you been able to consistently get products to customers on time, or is it really challenging?

Yes. Like everybody else, I think we've definitely had a lot of pressure on the supply chains in both businesses. I think the teams have been doing a fabulous job. We philosophy put the customer first. Both businesses have been doing a great job of serving customers and ensuring customer satisfaction, with most of what doesn't get served going to backlog versus being directed elsewhere. I'm really proud of what the teams have been able to do there. I think the teams have done a nice job with some of their planning to try to position ourselves as well as possible for some of what we're going through, but there's no question that we've built up some backlogs in each business. We also have experienced some frictional costs in the businesses, particularly in the DJO business. We're looking forward to experiencing some easing of that situation in the coming months and quarters, which will enable us to reduce some of that backlog and move beyond some of those short-term costs.

Next question is from Joe Giordano from Cowen.

Just curious, when you bring these types of products to Europe, do you already have the surgeon network on, like, a new product like Reverse? I know Reverse is used in Europe, but do you have the right kind of channel of surgeons to promote that product already existing in Europe? Or is it something you have to kind of go get?

Joe, it's Brady. What I would say is the surgeons that are doing anatomic shoulder for Mathys and their key KOLs are also the same surgeons that would be doing reverse shoulders within our practice, and reverse is really expanding. What was interesting that we learned through the process was if you look at their shoulder development pipeline with their R&D team outside the acquisition, their key focus was to develop a more lateralized reverse similar to ours, and that's from their KOL. We believe the channel is ready, and their surgeons are ready to really take that and run with it. Our shoulder surgeons that have helped us on that development have deep relationships outside the U.S. I think it will be a great blend between the two sides, and this product will really help to accelerate the strategy they had in place, as they've been growing their shoulder really fast and just really needed the right reverse.

Got it. And then on ESAB, can you maybe just talk through how that looks geographically? The margins there with that kind of price component seem quite surprising to be able to pull off margins like that. Can you maybe talk about how much more room there is internally to drive the cost side?

Yes. First of all, the geographic question. I think we continue to tell a consistent story regarding the emerging market parts, as well as the high-growth market parts of the business, which make up over half of the business and are experiencing solid growth this year on top of solid growth next year. The developed markets keep improving and have not gone back to growth over 2019, but certainly are showing strong growth over 2020. There's still room to grow, particularly in terms of volume in developed markets. We've been very happy with our progress in that business, as most markets have improved quarter by quarter. On the margin front, yes, the team has done a terrific job. As I talked about, it's been a 5-year journey. It's important to note that some key factors fueling the ESAB journey over time are tools that we're applying on the DJO front as well, and we're seeing increasing levels of momentum that can help to fuel that journey to reach the 25% EBITDA target that we discussed at Investor Day. The team has done a great job in ESAB of pushing pricing through to cover costs and continue driving productivity. We have signaled that margins will be up nicely over 2019, and we see a clear path to the 20% EBITDA margins, which we shared at Investor Day.

Next question from Chris Snyder from UBS.

First question on Mathys and the international opportunity. Of the existing approximately $350 million in reconstructive revenues, is there a potential for the entire amount in the international market or just a specific segment? Additionally, could you discuss any extra challenges in integrating Mathys compared to the previous acquisitions you've made, considering this one is significantly larger and different from a geographic standpoint?

Yes. I'll make a quick comment there, and then let Brady provide some additional color. Again, there's a lot of opportunity across this entire product line, and maybe Brady can provide more color on how much that applies to the international markets. As far as the acquisition, one of the great things is how complementary it is, and that there's a limited situation, almost no channel or product overlap. Those issues can be very challenging, especially in the orthopedic industry. The minimal overlap is terrific, and paves the way for healthy acceleration of growth quickly as the cross-selling synergies come through. We've thoughtfully set up the business, ensuring the right amount of autonomy to execute in those markets while also driving leverage in the supply chain and product innovation. There's been a lot of consideration among many of us, Brady, I, and others, regarding how to best configure this move for success structurally to maintain balance between agility and scale. I believe we have a solid plan and we're off to a great start. Brady, would you like to provide a little more detail?

Yes. Well said, Matt. I would say, think about it in terms of technologies and products. From a product perspective, we've outlined several critical products. For instance, I mentioned the strength of their hip portfolio, which has experienced fantastic growth over time, particularly in recent years. The core technologies we have in the U.S. are highly comparable—stems well suited across both continents and entirely functional. In the hip space, we've launched our dual mobility cup, presenting a significant opportunity for that business, alongside our revision stem for hip which also shows promise. In each key segment starting with upper extremity and shoulder— we have many products that will benefit both sides. Therefore, I believe a majority of that $350 million is applicable on both sides. Moreover, we view certain technologies solely focused on the U.S., like our coatings and augmented reality investment, as big global opportunities that can encompass all channels. Similarly, the RM technology released within the hip space has strong applicability to other anatomies and should perform exceptionally well in the U.S. market as well.

Appreciate all that. I wanted to shift to ESAB actually. Over the last couple of years, the majority of Colfax capital has been directed towards MedTech. Can you comment on the opportunity for a stand-alone ESAB? The business will have around $450 million or so of EBITDA on which to reinvest. You’ve mentioned higher growth verticals there. Is that where we should expect all the capital? Are there any regions you think you might try to push into? I know it's diverse, but are there opportunities for investing to drive further efficiency in the business and get these margins continuing to go higher?

Yes. You are correct that most of our acquisition capital has been directed towards the MedTech business in recent years, and DJO has made remarkable strides towards shaping and enhancing that business positively. However, if you look back over the past 6-7 years, we've invested a meaningful amount of capital in the ESAB business, which is currently showing ROI in various strategic acquisitions made earlier, like the GCE acquisition, which is performing exceptionally well. This is an example of 2 consecutive years of strong growth, which has also resulted in substantial margin improvements in that business, opening more opportunities in the gas control space. Looking forward, I've already mentioned the margin potential the ESAB business has for improvement. Shyam discussed this at Investor Day; some of the same strategies we've been implementing for years in the business, including productivity and operational improvements, supply chain restructurings, and increased automation still have room to be accomplished, and high-margin growth will continue to push margins upward. The guidance we provided indicates that the team clearly has a route to achieve 20% EBITDA margins, which was also communicated at Investor Day. They’ve been on a fantastic journey. Regarding acquisition prospects, we have a healthy list of opportunities within the ESAB business. Though any specific region might remain concentrated, this remains a fragmented global business, with 3 leading competitors only holding about 35% of the market share. Therefore, there are still plenty of opportunities to acquire regional assets located in high-growth countries, along with attractive product line additions. We are quite optimistic about potential opportunities that will enhance our growth and margin profile. Moreover, the ESAB business has appealing adjacencies. GCE is a great example, and there are more avenues to explore in that area. Our plans position us for a robust capital structure when separated as independent entities, maintaining a net leverage of 2.5 to 3x, which, together with our strong cash flow and operational execution, offers a promising environment to grow the business as outlined at Investor Day.

Next question from Jeff Hammond from KeyBanc.

Just on the deal, can you speak to the rationale for doing equity? It seems like the sellers wanted cash. You just did your recent equity offering. I don't know if that speaks to the pipeline behind it, but it seems like debt capital is cheap and the balance sheet is already in much better shape?

Yes, Jeff, thanks for the question. A few points here. First, I hope you get a sense from this discussion and the insights that Brady shared—this acquisition is terrific, highly strategic, strengthens our MedTech platform, and opens great avenues for growth. There are significant synergies, with forecasts of $15 million in annual supply chain synergy being realized 3 years from now. This is a great deal for our investors. Second, we've consistently stated our goal is to create success for both businesses post-separation and have defined that ESAB will have healthy room to execute its strategy, targeting the 2.5 to 3x leverage we mentioned earlier. We want to ensure that MedTech maintains a clear growth path towards $2 billion and beyond quickly. We feel that equity financing helps create appropriate financial conditions for both commitments. Finally, we expect this to be a tax-free divestiture, and this transaction structure plays a significant role in achieving that outcome.

Okay, great. Just on the margin dynamics in MedTech. Is there anything unique in some of the supply chain challenges they are facing compared to ESAB, which seems to be managing through margins a bit better?

Yes, Jeff. First, the sharp decline in recovery in MedTech last year was more pronounced. This increased stress on supply chains. Therefore, the supply situation is likely more complicated in that business, particularly against the backdrop of higher customer expectations. The result has led to higher costs driven by expedited transportation upstream and downstream and additional factory-related expenses to do whatever is necessary. I think those challenges have been a perspective. Moreover, inflation affects both businesses, though ESAB is experiencing significant cost increases, primarily in steel. While passing those costs through is challenging, the industry has a formulaic approach for handling such situations. In MedTech, however, we may have to manage inflation in a more nuanced manner as certain areas will take longer to implement the right strategies to successfully navigate those pressures.

Okay, and last question. You mentioned supply chain as a cost opportunity, but can you further elaborate on getting Mathys from low double-digit margins to corporate average?

Sure. First, there are numerous supply chain opportunities. We have the opportunity to optimize both supply chains strategically—what is produced where, and the opportunity to in-source products. Each of our businesses have meaningfully outsourced production in the implant supply chain, and we expect to in-source more over time. There will also be opportunities for productivity enhancements through automation and improvements, some of which require investment while others can leverage cross-entity competencies. Beyond that, there will be scaling opportunities over time. Our integrative structure will maintain agility within business yet encourage growth-oriented scaling strategies. We're focused on capturing all available growth in the short term. As growth is realized in the approaching years, we intend to scale our infrastructure, positively impacting margins. Lastly, our revenue synergy plans lean towards higher-margin products. With products like shoulder out of the gate, we also plan to penetrate geographic markets producing greater margins. We believe that we have a solid strategy for driving Mathys margins towards corporate averages and, potentially, beyond it over time.

Next question from Andrew Obin from Bank of America.

This is David Ridley-Lane on for Andrew. A question on FabTech. The volume growth implied in the second half looks like sort of low to mid-single digits. First, is that math correct? Second, what are you seeing that makes you a little more conservative around the volume growth in FabTech in the second half of the year?

Yes. Chris discussed that we're approaching 2019 volume levels in the second quarter, with expectations for continued improvement in the latter half of the year. I think your observations align closely with reality. Although we are experiencing a favorable recovery, we are mindful of the global events incomparably impacting COVID and maintaining a cautious view on potential outcomes. As we plan, we've made efforts to assess different scenarios and have tried to ensure adaptability in our supply chain planning for those potential changes.

Got it. On MedTech, if I take the 59% organic growth and the 14.2% organic EBITA margin, I get about a 35% incremental margin. How much of an impact did the supply chain issues have on a year-over-year basis? If it wasn't for those supply chain issues, what do you think your organic incremental margin would have otherwise been?

Yes, sure. We've made it clear that our priority is to serve customers and patients while maintaining uninterrupted supply chains in this business. This commitment requires extra effort, and we've incurred additional costs along the way. These costs are reflected in our financial performance. We expect as the supply chain improves globally that our outlook will significantly brighten.

On increments—comparing last year, we must take into account the reinstatement of temporary cost measures, which has a significant influence on increments overall. Also, comparing to 2019, many growth and talent investments we've made in the business have been crucial.

Next question from Nathan Jones from Stifel.

First question here for Brady. We talked about the opportunities to cross-sell various products between Mathys and DJO. Can you talk about why it is that Mathys doesn't already have any revenue in the U.S.? Do they just lack channels to market? Or are there any regulatory hurdles that need to be overcome to do that?

Yes. Great question. The reason is relatively straightforward—they have to establish a market channel to compete successfully in the U.S., which is a challenging undertaking. Similarly, our approach has not extensively focused on building our organic channel outside the U.S. Both companies encountered this market entry hurdle. As for regulatory obstacles, the majority of their products should qualify as 510(k) products; in doing so, they won’t require clinical trials for our products entering the U.S. market.

So it should be a fairly smooth transition till you're able to sell their products in the U.S. Okay. My follow-up is for Matt. You talked about some products going into backlog rather than going to competitors, which is reasonable. Can you give us some idea of the scale of the amount of revenue that you think is sitting in backlog at the moment? That would have otherwise run through the P&L during the first half of the year? When do you expect that to normalize?

Nathan, I’m not comfortable providing a specific scale, but I will state that both businesses contain some excess backlog as we clear midyear. We anticipate most of it will run through; it's just a matter of how the influx extends as we exit the year. However, we're confident that both businesses have received strong customer feedback and have performed comparably, if not better, than our competitors in accessing their market share.

Next question from Joe Ritchie from Goldman Sachs.

This is Turner on for Joe Ritchie. You all mentioned you’re guiding to core EBITDA margins of 20% plus for MedTech. What is the trend in core EBITDA margins for MedTech so far this year in the first half? What framework do you expect for improvement going forward in 2H?

Yes. Margin progression in this business is linked to the sort of seasonal revenue progression. Generally, lower margins are typical in Q1, while margins peak in Q4. This trend has remained consistent, and we expect it to continue. In terms of specific second half forecasts, we've previously stated our expectations for annual growth, including core margins.

We experienced a significant step-up in core EBITDA margins from Q1 to Q2. Although we expect a slight margin improvement from Q2 to Q3, particularly regarding warehouse costs, more substantial enhancements will be realized in Q4 as we expect a peak in revenue and consequently more favorable cost trends.

Great, that makes a lot of sense. If I could ask about sort of M&A plans. Looking at your Investor Day, you outlined a few areas in the ortho market that you're not yet playing in. With the Mathys acquisition, you've gotten into sports medicine. Could you talk about whether future M&A will focus more on building out that portfolio versus building internationally? And specifically, referencing the 2019 Investor Day, you discussed points on portfolio breadth and same surgeon sales—how has that progressed? How will your future targets for M&A continue to take those factors into account?

Yes. Brady might elaborate on same surgeon sales, but my view on where we see M&A and MedTech is consistent with prior comments. There are ample opportunities in our existing ortho markets along with great bolt-on technology options for our current businesses. We also see possibilities in adjacent spaces, and we have a strong grasp of our competition in surgical and P&R. We'll be strategic about where we move next and look for opportunities that improve our growth margins like we did with the foot and ankle add. We also see logical adjacencies beyond ortho to explore.

Yes, certainly with foot and ankle, our acquisitions are creating opportunities for new products and same surgeons across various practices. For example, Trilliant focuses primarily on forefoot applications, while MedShape targets hindfoot sales. When combined, these businesses create broader market access for our shoulder and total joint products. We similarly aim to build on existing surgeon relationships to empower these cross-selling efforts that will enhance share performance across our mandates.

That is all the time we have today for questions. Mike, please go ahead.

Thanks, everyone, for joining our call today, and we'll talk with you soon. Thank you.

That does conclude our conference for today. Thank you for participating. You may all disconnect.