Q4 2020 Colfax Corp Earnings Call
The higher.
I think.
Significantly higher than than our fleet of.
Gross margins are an empty jail, and that's really one of our as we look at the acquisitions of.
That we're making in <unk>.
On the platforms, but particularly med tech platforms.
We're looking for acquisitions that enhance our gross margins.
Prove our growth and the ones, we're talking about here today.
Both the are more on the range of our weak on gross margins than than our T. J overall gross margins.
Okay helpful. Good luck guys. Thank you.
Thank you.
Our next question comes from the line of Mike Halloran from Baird. Your line is open.
Hey, good morning, everyone. So.
On the on the.
Med tech side of the platform the obvious.
They understand the cumulative cadence of the year of little softer in the first quarter of ramps of the year given some of the delays on the <unk>.
Both sides of the business, but could you talk about how youre seeing that cadence develop through the year between the reconstructive side and in the prevention of recovery how much of a lag do you think you might see intervention recovery side is there maybe there is not a leg and kind of how those dynamics are expected to cadence as we move forward.
Yes.
I think I heard the question, Mike about the cadence of the recovery of the Med Tech side in particular, how it is going to play out between the different parts of it.
The business and I think.
We learned a lot last year, that's very instructive in terms of how we thought about.
How things play out.
This year.
As a reminder, our reconstructive part of the business is on.
Almost entirely driven by elective surgery, our PNR side does have a portion of that is driven by electric surgery. But then also had a broader range of of growth drivers and is also significantly more more global in terms of the growth drivers of the business. So those factor in and what.
What we saw happen last year with debt the recovery of elective surgery was very fast in June and July and as soon as infection rates and hospitalization rates start to come down.
The July recovery in elective surgery was very fast so we feel very fast spring back.
In our recon business and.
We saw the portion of our PNR business that is driven off of electric surgery spring back very quickly as well and then in the subsequent months, we started to see kind of the rest of those things that are more affected by mobility start to come back and so our and as we got to.
Sort of September October we were just about back to pre COVID-19 levels across all of that before we got into the kind of November December pressure.
But we're still seeing a little bit here.
So as we plan. This year, we've really tried to learn from that and we do expect that as we work through the the first quarter, we will see.
Kind of a rapid recovery of elective surgery to pre COVID-19 levels and then growth.
Versus pre COVID-19 levels.
And we will see the PNR business lagged at part of the <unk> business will come back very quickly, but it will get a lag debt.
Lagged at some and take a little bit longer to get back to pre COVID-19 levels and beyond and so when we we put that together that's how we've talked about.
Getting back to growth over 19 in Q2.
Then having sort of healthy growth over 19 in the back half of the year as we're getting into a more normalized environment.
That's super helpful. And then second question.
Leverage from the high threes, but cash flow is stronger this year.
How are you guys thinking about the balance between.
Lowering the leverage levels and then how aggressive you want to be on the M&A side, and then secondarily, maybe just some thoughts on what that funnel looks like today size scope and how active you think you can be there.
Yes, maybe I'll start with interest by by commenting that we think we've got the flexibility ahead of us to harness this.
Growing the substantial cash flow to manage the path that we're on which is a combination of.
Of deleveraging through the increasing profit and the use of our cash with.
Pursuing the M&A agenda on like we've done the recently with these highly attractive bolt on acquisitions.
Really tremendous growth potential of them.
So I think Youll see is youll see its dual tracking that true through 2021.
When it come in on the yes.
Yes, we have.
Got a robust funnel, we've got really good process to start with strategy and think about and understand the things that can accelerate the strategies of the businesses.
Also think about the attractive adjacencies around the businesses and then prioritize that and build the building M&A funnel based on that and do active cultivation.
Within that funnel and then make thoughtful decisions about that when the when we engage in the opportunities to acquire company. So we've got a robust process, we've been using for years and we're using the very actively.
The med tech business in and built them.
Robust funnel of of.
The opportunity.
Some of which are direct bolt ons that strengthen and improve the businesses and some of which are more adjacencies and as we've talked about before really.
Looking at things more on the kind of small to medium sized range. Because there is there is a lot of attractive stuff that we can do in that in that range.
Can create the create a lot of value for our shareholders and strengthen and improve our businesses.
Thanks, gentlemen, I appreciate it.
Thanks, Mike.
Your next question comes from the line of Jeff Hammond from Keybanc capital markets. Your line is open.
Hey, good morning, guys how are you.
Yes, Jeff.
I guess first can we can you can you talk about what the underlying incremental margins are by business kind of incorporated.
On the guide.
Sure Jeff.
As you know the fab Tech businesses, we've consistently talked about debt being in the the.
The sort of low <unk> right when you consider and of growth period that we're reinvesting in the business and I wouldn't expect the incremental margins to really be much much different than that heading into the new year now I want to set aside from that the return of some of these temporary costs that we took out in 2020, then naturally return than in 2021.
And then of course, we've got the restructuring benefits that we would expect to see in the business that we referred to in our prepared remarks.
On the on the Med Tech side that business. That's one that we've talked about being given the higher gross margins being consistently in that sort of.
Low to maybe mid $50 range, and we think that there is a fairly clear path to that and again I want to set that aside from the return of any any sort of temporary cost so.
So if you put them together with the growth that we've indicated the.
The other data elements, there youll see that it aligns nicely with the.
On the guidance that we've given before the significant margin expansion in 2021.
Okay, Great and then.
Just on the Fab Tech certainly a little bit better than the peers put out here recently can you just unpack it a little bit what the.
What do you see in developed markets in terms of growth versus developing how much are you baking in on price.
Are there any kind of share gain built in there.
Yes, so first.
We've talked about last year that the developing markets down the back half of the year.
We're growing over over 19, and so from a developing market standpoint, we build on that end.
And have some some positive growth again here at the working through.
We're going through 2021 as well.
Whereas the developed markets were off versus <unk> 19 last year. So.
The year.
Significant spring back.
In 2021 versus 'twenty, but we start out the year off versus 19, and then climb climb through the year.
Back to where we turn it over on our positive vs versus 19 of those in.
In those markets.
Okay.
And what's the price built them within the.
And so I mean, if you look at our price throughout last year with increasing.
We have higher price in the fourth quarter than in the first quarter. There has also been ongoing inflationary pressure there and so of just just from the shape of price last year youre going to see that rollover into in the price for this year and then we've been doing some additional price increases.
<unk> on top of that so most of the growth is from volume, but there there is still.
A piece of price debt thats in that growth sorry, Chris go ahead, yet and the.
The price to be as I mentioned in my comments of the price of we put forward is really just the dynamic pricing to to deal with the raw material inflation. So we don't expect any any net profit impact from that in 2021.
Okay, and then if I could sneak one more on the foot and ankle it looks like two nice deals.
Maybe a $50 million business starting out what do you think is the right scale on that business, the kind of really be meaningful.
And.
And nicely profitable.
<unk>.
Yes so.
It is.
It's about $1 billion U S market a couple of billion dollars.
Globally, but it's got its got a lot of different slices in it. So you can actually build nicely scale businesses in the pieces.
I'll have to be all of that big but you also can build scale across.
Ross all of that and so we feel pretty excited.
But we've got a good head start towards building say, a $100 million business in the space over the coming years and that would be.
Very attractive player in the space and of Great growth engine highly profitable growth engine for our business.
Okay. Thanks.
Thanks, Jeff.
Our next question comes from the line of Andrew <unk> from Bank of America. Your line is open.
Yes can you hear me.
We can good morning, Andrew Andrew Yeah. Good morning, good morning.
Just a question.
The term question on.
GAAP Tech.
Lots of moving parts of Covid comps of M&A.
What's your view of medium term normalized revenue growth, including the work you've done the J.
And the new acquisitions and on top of interest just also want to make sure that there is no big catch up in 'twenty, one there would be a big headwind to growth in 'twenty. Two so just the big picture question on that Terry. Thank you.
Yeah. So we talked we've been talking since we acquired the business about growing it to be of mid single digit grower sort of 4% to 5% type of growth range and we demonstrated that in the back half of 2019, I think pretty clearly that the portfolio can do.
At least at that 4% to 5% range and like the more.
<unk>.
I think even even how we've made our way through 2020 sort of reinforce is that we're already demonstrating.
Kind of.
The growth versus the market that was the jet at least kind of of mid single digits capability I think you're adding some of these some of these growth accelerators that we've already acquired.
Well as the improvement trajectory that we've got on the business and we see it at the business that we think can grow north of north of mid single digits and that we're going to continue to add debt.
Add things to the visit the solidify it is the high single digit grower in the med tech space as of.
As far as the recovery I think if you really.
Look at the dynamics in the space and even really look at what a lot of other players have talked about in the space. There is really more of a view that even with the strong recovery in 2021, theres likely to be some more extra growth in 2022 that come.
From from some of the some of the delayed demand because most of most of the demand.
I think the significant amount of the demand in our business is seeing that continue through COVID-19 the diseases that drive the need to have an implant procedure. They continued to March on and so you have people that needs of the procedures, but have been pushed to the right.
And so.
What happens here here in 2021 is that.
We get recover to pre Covid, some growth and even get to start kind of working on catching up on the backlog, but the conventional wisdom is that still manage the rollover into 2022 of its probably going to be another year of catch up where they are it is kind of above normal growth in the elective surgery parts of the business before we get to a more normalized environment. So I think we've got debt.
I think we've got great opportunity for for a couple of couple of years here of very strong growth in by the end, we expect of continuing to shape the portfolio to where it can sustain that kind of high single digit growth range.
Sounds good to me. So just another question on your M&A.
It seems like you guys are able to find a lot of these $25 million to $30 million revenue targets in med Tech.
Does the pipeline look similar to the completed deals.
The more scale higher gross margins good growth prospect I know, you're sort of on sort of in one way, but just the different way of asking about the targets that you are seeing.
Yes, we do see.
It is the space that.
There is a.
A lot of players that will get started Watson.
The good innovations.
The leverage some of the existing channel, but a little bit of their own channel and kind of.
The gross grow their way into that 10, 20 $30 million revenue range and.
It's been quite calm in the of the foot and ankle space is a number of players there even within within.
Of the existing kind of larger shoulder and hip and knee space Theres still players that are kind of growing their way through with.
With new and innovative technologies in the bank. So we see a lot of opportunity in recon still in that kind of smaller on attractive company growth range. There is attractive bolt ons to look out on the PR side also looked like the the <unk>.
<unk> acquisition, where there is certain technologies or applications that are higher growth areas, where we don't have as.
Strong of position either based on history or based on kind of some some new innovation that someone has been doing and we can acquire those businesses bring them into our channel and create a lot of value. So we do see a healthy pipeline and expect to be able to continue to do attractive acquisitions that momentum.
Well it sounds like you guys have a lot of things to do or into 'twenty. One. Thank you.
Yes indeed.
Thanks, Andrew.
Your next question.
Comes from the line of Christopher Snyder from UBS. Your line is open.
Thank you.
To get a bit more color on the Q1 guidance specifically for med Tech.
So in the prepared remarks, you guys said that volumes are stabilizing in Q1.
But is this relative to Q4 or is this just a stabilization in the monthly cadence cadence and should this lead to less seasonality than normal into Q1 from med Tech.
Yeah, I'll just comment on the on the revenue trends.
Q Q4.
Again, it started out at debt.
And of that level of almost fully recovered and then November December had pressure and so the November and December were.
Not as high up.
As of October had been and I think our view of Q1 from a demand standpoint is sort of the mirror image of of Q4 and the January it started out with some pressure but already.
Starting to see some of that pressures subside in late late January through February and so we're seeing kind of that mirror image of effect in terms of how Q1 plays out before we get to what I talked about earlier in terms of Q2, the N and M were more normalized range on Chris might want kind of a little more on the guidance beyond that yes.
So the guidance the guidance reflects that the revenue trend that we see from Q4 in the Q1 is Matt as Matt laid out and that's fully baked in.
Okay. Appreciate all of that and then from self.
Question on you've got at the mid single digit margins of the 'twenty 'twenty one from the recent med Tech acquisitions can you maybe provide a timeframe from when you think these acquisitions will turn margin neutral relative to the existing med tech in the high teens range, what's the potential for at least the ultimately come margin accretive because there is the gross margin premium.
Yes, so as I said the.
By year, three there'll be gross margin accretive and certainly when you look at the gross margins.
There is the.
Potential for them to be highly accretive, but theres also the potential to keep investing in them and grow them a lot for a long time and so I think.
As we do.
The acquired some of these higher growth businesses, we definitely.
Have a view of how do we how do we get them get them scale on the first couple of years to get them to where they are accretive to earnings but we also have a view of making sure that our plans include continued investment in the innovation in the channel of those businesses. So that there'll be able to carry forward. These these high growth rates on a go forward basis.
Think that creates a great opportunity as we continue to scale on our recon business further and further with these higher gross margins. We can have very high growth for a long period of time.
As the business scale, there will be an opportunity for more and more overall margin to drop through.
Thank you.
And our next question comes from the line of Nathan Jones from Stifel. Your line is open.
Good morning, everyone.
The one I'm just going to do one more on the acquisitions and maybe the path to getting to those high teens low twenties of better EBITDA EBIT margins.
You talked about needing scale here is this just a matter of debt.
Pretty good organic growth.
The leverage the SG&A without having to add to it to get to that kind of level.
Improvements to be made in the businesses do you need to make further acquisitions to get that scale that you're talking about the push those margins up just any color you can give us on on the path that margin improvement.
Yes sure yes, so many of the acquisitions that we do have some extra costs in the first year.
Debt.
The lead to.
A little bit.
A little bit less initial margin and then grows over over time in terms of some of the normal kind of early investments that we make in the business.
Mike maybe kind of get them over to a new it system and things like that so it's pretty common to have that pattern in our bolt on acquisitions of the first year of being a little bit of.
Little bit lighter.
And then certainly the.
These acquisitions, we're talking about here, we have the opportunity over over the next couple of years to have channel synergies operational synergies and just the scaling of the business and so we're not counting on another acquisition in order to get to the kind of accretive margin levels that we're talking about we see a clear path.
In terms of just some of the natural synergies.
And some of the normal scaling of the business over the first couple of years of ownership.
The sort of growth rates were the readmission with these businesses the.
High gross margins that they've got you can achieve a lot of operating a significant amount of operating leverage that gives you the benefit of both margin expansion, but also providing some of the wherewithal. The continued to invest in the businesses innovation channel et cetera.
Makes sense and then free cash flow you guys of guiding to at least $250 million.
In 2021, you've got about $35 million of of restructuring costs cash restructuring cost baked into that.
Human net the growth that you're forecasting in 2021 is going to require some investment in working capital this year.
Does the restructuring expense drop off as we go into 'twenty, two working capital investment kind of normalizes and we can see a path to that being at least $300 million over the next year or two.
Yes, so for 2021 as you would imagine in the sort of growth rates that we're talking about will require a little bit of working capital investment.
Notwithstanding that we expect the underlying metrics of day sales in the inventory of DSO et cetera to all improve so we expect there'll be a little bit of drag on cash flow of hitting as we go into 2021, and we expect to have considerable growth beyond 2021, but perhaps not at the same sort of recovery levels. So I would expect it to be of.
Little bit of less of the drag from working capital going forward net opens up the window certainly with the expanded profit.
Along with expanded profit to increase cash flow as we get into 2022 and beyond.
Okay. Thanks for the color.
Our next question comes from the line of Steve Tusa from Jpmorgan. Your line is open.
Right.
Hey, guys good morning.
Yes.
Just looking at.
Do you guys expect total revenues to be.
Around 2019, this year or above I mean, I know you got a bit of like a slow start but you talked about the second half growing from 19, I mean with the acquisitions can revenue as kind of get back the 19 levels.
Yes in the.
I think what we're suggesting is that in the med Tech business, we would expect the revenues to be higher than what we had in 2019 as the business returns to growth over 2019 levels. Starting in Q2, and then in the in the back half of the year.
So for the for the for the Fab Tech business.
Or is the opportunity for that depending on how quickly the developed markets recover as we mentioned in our comments the developing markets of shown considerable resiliency and growth throughout 2020, we think that continues into 2021.
But in the developed markets. There, it's really just about the pace of the recovery of that which we expect to see more towards the back half of the year.
Right.
Thank you guys did like two Bucks on earnings and 19 at least I don't know, maybe that's like a pro forma number of Theres a lot of adjustments, but I mean is there any reason why you can't do a higher number on are there any like major differences, whether it's maybe it's the mix I mean, I think he took some structural cost out so why why wouldn't you.
The further above that level of I don't think that Youre actually included a full.
A full complement of.
D J M. So I'm just.
Like is that kind of what the guidance implies above that just above that number I would think of just be a little bit higher.
Like for like on an EPS of <unk>.
Yes. So the number of 2019 I think it was about $2 of earnings that was of that was a fully baked pro forma number so that had the full year of the expected benefits from DJ of even though we only owned it for 10 months of at the time. So we had the let's call. It $2 in 2019 were going on.
The $2 to $2.15 on.
On the revenue levels that could be very similar of perhaps slightly above now we've made considerable strides on both businesses and but as you know we also.
Continue to reinvest in both businesses.
To drive innovation and other operating improvements there so we expect to drive significant.
The significant improvement in EPS, while at the same type of supporting the business has long term potential right. So the margin is a little bit below what it was back then I guess maybe.
I think for.
The businesses are on different trajectories, you've got the fab Tech business, which we commented we expect it to exceed its record margin performance in 2019, and then the med Tech business, which will have the new acquisitions in it as well, which influences the margins a little bit right underlying corp. The <unk>.
Margins, we mentioned would be up 400 basis points of 2020 level. So I would say pretty good pretty good progress there as well, yes sure share for sure and then just one last one on free cash flow.
You said above $2 50.
I still think that short of a 100% conversion.
Is there any visibility on kind of when you guys can get to 100%.
Cash conversion is that is that in the mindset at some point in the intermediate term.
On your adjusted EPS current year I think.
Sure sure listen I'm really pleased with the progress that we've made on on cash flow and we've talked about going into the into 2020 and getting sort of the 90% plus the conversion. We ended up at I think 97% somewhere around there.
Demonstrates the improvements we've made now that had a little bit of tailwind from working capital in it but we are very close to the knocking on the door of getting to a 100% conversion I think this year, we'll have a little bit of a drag from looking capital and then as we get beyond this into 2022 of 2023 I think the 100% conversion very much comes in the frame.
Yeah, Okay, great. Thanks for all of the color I appreciate it.
Your next question comes from the line of the kill Ritchie from Goldman Sachs. Your line is open.
Thanks, Good morning, everybody.
Hello, Joe Hey, Matt.
I was wondering if you could maybe just elaborate a little bit more on the COVID-19 related inefficiencies that you described earlier in the Med Tech business. What are you seeing exactly is that impacting the supply chain at all of the freight like whats what are you guys seeing in the business right now.
Yes, yes sure Joe.
I think.
Certainly in Q3 and Q4 we.
As we bring the supply chain up fast and then do some some ups and downs on the back half of the year.
There has been some some inefficiencies related to the labor force and.
I haven't.
Kind of flex on the labor Labor force, bringing temporary labor things like that or if there's also been some inefficiencies around.
Round expediting and other costs on that on the freight and logistics from.
On some earlier on in terms of getting it out to customers and then later in the year the <unk>.
<unk> got.
Got tougher.
And we have to do some expediting on the inbound and so those are the the kinds of things we've been really trying to keep our eyes on the prize and keep our keep our customers in good shape and.
That's led to some extra cost of the business in Q3, and Q4 and the same time, we keep working on the extra at the underlying improvements so that as we come out of the other side to make sure. We're on the right place.
Got it so is the expectation in the in the guidance that that starts to normalize them in the second half of the year and that actually becomes like a good guy of the tailwind in <unk>.
Certainly on a year over year basis. So yes. So I think certainly we'll start the year still with a little bit of a little bit of that pressure, but then should it should the clear it and.
And it will.
That will get us back to normal more normal environment and so when you get to the back half of the year. Yet you will have some some benefits from the year over year comp, but you'll also have some of the temporary costs coming back in so.
Those will have some pros and cons.
Got it Okay and then maybe just one question for Chris.
Youre kind of managing to price cost neutral, but specifically on the welding segment.
Is there anything we need to be aware of from like the cadence perspective.
I know price is going to come through.
From 2020 and into 2021.
But given where commodity prices are today.
Are there are there any like specific quarters, where you'll actually see.
Some negative pressure.
From from that dynamic.
So as Matt indicated maybe in an earlier comment the <unk>.
Price actions that were taken to begin to address the raw material inflation in Q4.
We're going to we're going to roll into the.
The first the first quarter of this year in the first half of this year and then you mentioned that Theres. Some other actions we've taken more recently to further address of the raw material inflation from this point forward, it's really about dynamic pricing sort of reacting to the conditions that present themselves and interest.
Staying on the balls of our feet on that so.
So that's what we see right now.
Okay, great. Thank you guys.
Your next question comes from of the line of children Mitchell from Barclays. Your line is open.
Hi, good morning.
Maybe just one.
The one that's trying to understand the acquisitions of little bit better thing you said that the gross margins 80%.
Trading margin is sort of five so you can sort of.
Maybe of 75% Opex to sales ratio, which is quite.
Quite high I think versus most businesses in any industry that would come across.
Wanted to understand is that some sort of adjusted gross margin of some definitional difference of cost versus how the Colfax base business looks at it.
Yes.
On an adjusted gross margin range of anything like that.
What I'll say that it varies by the the businesses.
I can comment on these as well as just the others that we've got in the pipeline and we look at in some cases the smaller businesses.
On that are.
Have been built.
Really had a philosophy of investing on a percent of the profit and growing the business and and so we.
When we bring them in.
We have an ability to do those investments more efficiently and some of them and they start to scale of that and so we make a thoughtful call of over the first couple of years, how are we going to continue the ifs.
Fact of at the same level of it growth investment, but get efficiencies on that things that start to make the.
The total SG&A and R&D as a percentage of sales come down a little bit.
And so.
That's one but then there's others that we consciously have some some specific over investments are going to do in the first year is like debt consolidation of sales force of different things that are kind of year, one and investments debt there.
Not adjusted adjusted investments, but they are kind of in the business investments that we know are going to pull down that first year versus the course that they have been on but then are going to clear and so theres a little bit of each of these.
In these three.
In the three businesses.
Thank you and then maybe just looking at the Fab Tech.
<unk> sales guide for the year.
So should we assume youre up.
Single digits in Q1 year on year up 20% plus Q2.
And then you sort of up mid single digits in the second half.
And maybe help us understand in the second half assumptions any split of sort of the international versus domestic business what growth rates, you're assuming that in the second half.
Yes, I'm not sure that we're prepared to the guidance specifically each of each quarter's revenue growth there Julien, but we do believe that the business is pretty well positioned starting off the starting off of the year in the first quarter and then continuing to pace pace through we'll have the ear.
The as comparison as we get into the second quarter in a bit of the residual.
The residual effect in Q3, and then we get into Q4 and you'll start to see is clear more and more of the of.
The COVID-19 year over year comparison there.
Thanks, and any sort of bifurcation on that international versus domestic business, maybe just the year as a whole than the.
To the different growth rates between the two.
Yes, as we've commented we've seen the developing markets continue to grow through 2020, and we expect that to continue in 2021 on the developed market side.
We expect those too.
Let's put aside the easier comp over 2020 rates and think about over 2019 and as we commented we expect those to the developed regions to get back to 2019 levels sometime in the second the second half of the year.
Great. Thank you.
Your next question comes from the line of Nicole The Lee from Deutsche Bank. Your line is open.
Yes. Thanks I appreciate you guys squeezing me in here good morning.
The current bill.
And so I guess, maybe starting with.
The <unk> thinking about fab Tech margins that was definitely an area of positive surprise during the first quarter of decrementals of bit lower than I think you guys were expecting as well. So can the decremental margin performance carry into the first quarter or are there any kind of puts and takes on cost price cost that we need to be thinking about.
We'll be I think the comment.
Comment that we've made just a moment ago was suggesting that the SaaS business is likely to more likely to be in the growth mode in <unk>.
Year over year in Q1, and so we're thinking about it more from us on.
The incremental margin perspective, and as we frame up the full year of nickel, we think about the incremental margins in the business being.
Largely in that traditional kind of 30%.
The issue sort of range, reflecting both the the.
Of the natural operating leverage and then the desire.
Designs that we always have to continue to reinvest some of that in the back into the back into the business.
That's the natural sort of grade and the business independent of some of these temporary costs coming back that we took out in the Q2.
Q3 of <unk> of.
2020 of those sort of re emerging but then you've also got the factor of restructuring benefits fluid flowing through so all of that's baked in and that gives us the viewpoint that the interest.
On this business, we should be able to deliver another another year of record margins in the.
In the 2021.
Got it. Thanks, that's helpful. And then I guess just on Med Tech. The one thing I was surprised about is that you guys are expecting a return to 2019 demand level of that as early as Q Q. It seems like the vaccine rollout is going a little bit further than expected in infection rates remain high. So I guess, how did you think still getting confident and the outcome.
Yeah again and of course as I said, when we look back at what happened in June and July.
We see that.
In June and July.
When things were kind of starting to clear there.
Got back very close to 2019 demand levels and on our surgical business was actually growing nicely electric surgery got into maybe 80% to 90% of pre COVID-19 level of that took our surgical business into positive growth range in and brought our brought our PNR business closer to 2019 levels.
And so what.
Using that as the.
As a reference point and looking at the trends on cases looking at the rollout of the vaccine looking at what we're hearing from hospitals about about their plans and surgeons about their plan.
We see an opportunity for a similar kind of balance in the next couple of months, we see that the.
As the expected pass through this year.
And that gets US then in Q2 kind of.
At or above 19 gross levels, and then growing nicely in the back half of the year of <unk> 19.
Got it thanks guys.
Okay. Thank you.
Once again, if you wish to ask the question. Please press star one on your phone again star one.
Yes.
With that I think we've been in today's call is Don there is no longer anybody in the queue. Thanks, everybody for joining our call day look forward instead of talking to you soon.
Alright, thank you.
Ladies and gentlemen that does conclude the conference for today, Thank California any of you may all disconnect.
Okay.
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