Q4 2023 Zimmer Biomet Holdings Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet fourth quarter 2023 earnings conference call if anyone needs assistance at any time during the conference. Please press the star followed by the zero.

Operator: Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet fourth quarter 2023 earnings conference call. If anyone needs assistance at any time during the conference, please press the star followed by zero.

Operator: As a reminder, this conference is being recorded today, February 8th, 2020. Following today's presentation, there will be a question and answer session. At this time, all participants are in a listen-only mode.

As a reminder, this conference is being recorded today February eight 2024. Following today's presentation, there will be a question and answer session.

At this time all participants are in a listen only mode. If you have a question. Please press the star followed by the one on your push button phone I would now like to turn the conference over to Kerry Maddox Chief Communications and Administration Officer. Please go ahead.

Operator: If you have a question, please press the star followed by the one on your push-button phone. I would now like to turn the conference over to Keri Mattox, Chief Communications and Administration Officer. Please go ahead.

Keri P. Mattox: Thank you, Operator, and good morning, everyone. Welcome to Zimmer Biomet's 4th Quarter 2023 Earnings Conference Call. Joining me today are Yvonne Tornos, our President and CEO, and CFO and EVP, Finance, Operations, and Supply Chain, Suketu Upadhyay. Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties.

Keri P. Mattox: Thank you operator, and good morning, everyone welcome to Zimmer Biomet fourth quarter 2023 earnings Conference call. Joining me today are a on torrijos, our president and CEO, and CFO and EVP finance operations and supply chain to keep pace.

Keri P. Mattox: Where we get started I'd like to remind you that our comments. During this call will include forward looking statements actual results may differ materially from those indicated by the forward looking statements due to a variety of risks and uncertainties. Please note we assume no obligation to update these forward looking statements, even if the actual results or future expectations change materially.

Keri P. Mattox: Please note that we assume no obligation to update these forward-looking statements, even if the actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements. Additionally, the discussions on this call will include certain non-GAAP financial measures, some of which are forward-looking non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating these measures is included within our Q4 earnings release, which can be found on our website, ZimmerBiobet.com. With that, I'll turn the call over to Yvonne. Okay?

Keri P. Mattox: Please refer to our SEC filings for a detailed discussion of these risks and uncertainties. In addition to the inherent limitations of such forward looking statements. Additionally, the discussions on this call will include certain non-GAAP financial measures some of which are forward looking non-GAAP financial measures reconciliation of these measures to the most directly comparable GAAP financial measures and.

Keri P. Mattox: An explanation of our basis for calculating these measures is included within our Q4 earnings release, which can be found on our website Zimmer biomet dot com with that I'll turn the call over to Ivan Ivan.

Ivan Ivan: Hey, Thank you Gary and thanks, everyone for joining the call here this morning I'd.

Yvonne Tornos: I thank you, Keri, and thanks, everyone, for joining the call here this morning. I'd like to start the way that I typically do, taking a moment to recognize and show my gratitude to the almost 20,000 Zimmer Biomet team members for their dedication, for their commitment, for their strong resilience, and for their superb performance in 2023. Simply put, 2023 was just a great year for our company, and I want to say thank you. In 2023, we impacted the lives of almost 4 million patients. And along the way, we deliver best-in-class financial performance, growing our constant currency revenue by 7.5%, while adjusted EPS, earnings per share, grew almost 9.5% in the year. That's 200 basis points of leverage between the 7.5% revenue growth and the 9.5% growth in EPS. In the year, we generated almost a billion dollars in free cash flow.

Ivan Ivan: I'd like to I'd like to start the way that I typically do taking a moment to recognize to show my gratitude to the almost 20000 Zimmer biomed team members for their dedication for their commitment for their strong resilience.

Ivan Ivan: Florida their superb performance in 2020 three.

Ivan Ivan: Simply put 2023 was just a great year for our company.

Ivan Ivan: Now I want to say thank you in 'twenty to 'twenty three we impacted the lives of almost 4 million patients.

Ivan Ivan: And along the way, we deliver best in class financial performance growing our constant currency revenue by 7.5%, while adjusted EPS earnings per share grew almost nine 5% in the year is 200 basis points of leverage between the 7.5% revenue growth.

Ivan Ivan: And the nine 5% growth in EPS in the year, we generated almost a billion dollars in free cash flow.

Yvonne Tornos: And that's with some turbulence around inventory management and whatnot. So again, strong performance top to bottom. And I'm just very, very proud of the execution during the year. It's worth noting that this level of execution and performance came in a year in which we still had to deal with fairly complex micro issues, whether it's inflation, effects, geopolitical challenges, I don't think I need to talk much about that, and also some micro challenges during the year. We did struggle with some supply challenges throughout some of the periods.

Ivan Ivan: Thus, we have some turbulence around inventory management and whatnot. So again strong performance top to bottom and I'm, just very very proud of the execution in the year. It is worth noting that that this level of execution and performance came in a year.

Ivan Ivan: Now, which we still have to deal with fairly complex micro issues, whether it is inflation effects geopolitical challenges I don't think I need to talk much about that.

Ivan Ivan: And also some micro challenges in the year.

Ivan Ivan: We did have struggled with some supply challenges throughout some of the periods.

Yvonne Tornos: I'm happy that it's behind us, but it was a headwind in many periods in 2023. And again, delivering 7.5% in 2023 against some tough comparables, having grown constant currency revenue in 2022, the year before, by 6.6%. So clearly, a great trend in the making, clearly strong performance. And I'm just so grateful and so proud of all of you, the Zimmer Biomet team.

Ivan Ivan: Happiness behind but it was a headwind in many periods in 2020 three.

Ivan Ivan: And again, delivering seven 5% in 2020 three.

Ivan Ivan: Against some tough comparables, having grown constant currency revenue in 2022 the year before.

Ivan Ivan: By 6.6, so clearly a great trend in the making a clearly strong performance and I'm, just so grateful and proud of all of you the Zimmer biomet team.

Yvonne Tornos: At the same time, beyond grateful, I'm truly excited as I know that this is just the very beginning when it comes to the level of performance that we can realize here at Zimmer Biomet. There are multiple reasons why I'm confident that this is just the very beginning, but I'll start by highlighting the bold pipeline that we have in place. The size of our pipeline is twice what it used to be in 2018.

Ivan Ivan: At the same time the young grateful.

Ivan Ivan: Truly excited as I know that this is just the very beginning when it comes to the level of performance that we can realize here, let's see where biomet and multiple drivers of why I'm confident that this is just the very beginning but I'll start with highlighting the bolt pipeline that we have in place.

Ivan Ivan: The size of our pipeline is twice what it used to be in 2018, we got a great new product launches that are happening here early in 'twenty 'twenty four.

Yvonne Tornos: We have got great new product launches that are happening here early in 2024. And we have a stable supply. We've created a stable supply environment, and we have great commercial execution. We're developing flawless commercial execution, as evidenced by these growth rates that I just highlighted. To compound our belief behind this level of excitement ahead is the fact that we have seen, and we continue to see, a substantial improvement in our end market. This is not the same market growth profile that we used to have. Pacing demand is strong, and procedure volume is very high, given a variety of reasons.

Ivan Ivan: We have stable supply, we've created that and a stable supply environment.

We got great commercial execution, we developing flawless commercial execution as evidenced by these growth rates that I just highlighted.

Ivan Ivan: Two compounds or believe behind these level of excitement ahead.

Is the fact that we have seen and we continue to see a substantial improvement in our end markets.

Ivan Ivan: This is not the same market growth profile that we used to have basically demand is as strong procedure volume is very strong given a variety of reasons and as the market leader in both knees or hips being in better markets is just very exciting as we enter 'twenty 'twenty four.

Yvonne Tornos: And as a market leader in both knees and hips, being in better markets is just very exciting as we enter 2024. Back five years ago, when I joined the company, we used to think of Wemgar's weighted average market growth rates as being somewhere in the 3% range. And today, we peg or wingard as being very near, if not at 4%.

Ivan Ivan: Five years ago, when I joined the company, we used to finger afford a whim garden weighted average market growth rates.

Ivan Ivan: As being somewhere in the 3% range.

Ivan Ivan: And today, we bake or Wayne Gardner.

Ivan Ivan: <unk> been very near if not up 4% and again, that's a meaningful increase our belief is that a sustainable. So we're now going back to the 3% days when it goes to a market growth rates. So again internal and external dynamics gives me it gives us confidence that the best is truly ahead.

Yvonne Tornos: And again, that's a meaningful increase that I would believe is sustainable. So we're not going back to the 3% days when it comes to market growth rates. So again, internal and external dynamics give me, and gives us confidence that the best is truly ahead. When you add to all of these variables the fact that we have the strongest balance sheet in the history of the company, there is no doubt that we can claim that our future is nothing short of truly right. So again, very pleased, very proud, and very confident.

Ivan Ivan: When you add all of these variables. The fact that we have the strongest balance sheet in the history of the company. There is no doubt than that that we can claim that our future is nothing short of truly right. So again very pleased very proud I'm very confident.

Yvonne Tornos: I'd like to thank our investors as well for their support in 2023 and for their confidence in 2024 and beyond. We continue to take bigger strides forward toward being a company with a very different growth profile from top to bottom, committing to an expectation to grow at least 100 to 200 basis points above marketing revenue, with our EPS, our earnings per share, growing faster than revenue and our free cash flow dollars growing faster than EPS. The guidance that we are providing today for 2024 already reflects such a commitment to this type of financial discipline, and I'm very much looking forward to our Analyst's Day on May 29th, when we will provide additional details in terms of our long-range plan, which will illustrate that this is not a one-year wonder.

Ivan Ivan: I'd like to thank our investors are as well for their support in 'twenty 'twenty free Ford out their confidence in 'twenty 'twenty four and beyond we continue to take bigger strides forward.

Ivan Ivan: We're being a company with a very different growth profile from top to bottom.

Ivan Ivan: Committing to an expectation to grow at least 100 to 200 basis points above marketing revenue.

Ivan Ivan: We've heard E P S without earnings per share growing faster than revenue.

Ivan Ivan: And our free cash flow dollars growing faster than EPS.

Ivan Ivan: The guidance that we are providing today for 'twenty 'twenty four already reflect such a commitment.

Ivan Ivan: So this type of financial discipline.

Ivan Ivan: And I'm very much looking forward to what analyst day on May 29th.

Ivan Ivan: And when we will provide additional details in terms of Florida long range plan, which will illustrate that that this is not a one year wonder.

Yvonne Tornos: This is a multi-year commitment, and you will see then that Zimmer Biomet has truly entered our growth stage era, and we're no longer in turnaround mode. We're ready to deliver by being laser-focused on the three strategic imperatives that I highlighted during my very first earnings call as CEO back in November, three strategic imperatives that I continue to repeat over and over at every Zimmer Biomet meeting. And frankly, I will continue to repeat because those are the three drivers that we know are gonna drive our performance. Those being, number one, people and culture.

Ivan Ivan: He sees a multiyear commitment.

Ivan Ivan: And you will see them that Zimmer biomet has truly enter or growth as states are.

Ivan Ivan: We're no longer in turnaround mode.

Ivan Ivan: We're ready to deliver by being laser focused on the three strategic imperatives that I highlighted during my very first earnings call as CEO back in November.

Ivan Ivan: Three strategic imperatives that I continue to repeat over and over at every Siemer Biomed meeting I'm frankly are will continue to repeat because those are the three drivers that we know are going to drive our performance.

Ivan Ivan: Those being number one people and culture.

Yvonne Tornos: Number two, operational excellence, and number three, innovation and diversification. So let's talk about our 2024 commitments, how different initiatives across these three strategic imperatives will drive our growth forward. First, in the area of people and culture, and I've explained this in the past what it means. It's about having the right people in the right roles within the right culture.

Ivan Ivan: Number two operational excellence, a number to city innovation and diversification.

Ivan Ivan: So, let's talk about the or 'twenty 'twenty four commitments.

Ivan Ivan: Now different initiatives across these three strategic imperatives will drive our growth forward.

Ivan Ivan: First in the area of people and culture and again I've explained this in the past what he means is about having the right people in the right roles within the right culture.

Yvonne Tornos: We must make sure that we support team members to act as owners and operators of the business. This means decentralizing decision making, driving agility, and empowering team members at every level across every function around the world. We must become leaner, and we have to be closer to the customer. Equally important, we must truly live in an environment of pay for performance. And this is something that has already kicked off in a very meaningful way this fiscal year. An example of that is the fact that we're incentivizing free cash flow dollar generation, or growth, in a much more disciplined way across the enterprise. Knowing that revenue is also the most durable driver of free cash flow performance, incentives are also set for revenue growth to meaningfully drive compensation across our firm at every level.

Ivan Ivan: We must make sure that we support team members to act as owners.

Ivan Ivan: Operators of the business this means decentralized decision making.

Ivan Ivan: Having agility.

Ivan Ivan: And empowering the team members at every level across every function around the world, we must become leaner, we gotta be closer to the customer.

Ivan Ivan: Equally important we must truly live in an environment of pay for performance.

Ivan Ivan: This is something that has already kicked off in a very meaningful way in the fiscal year in this fiscal year 'twenty 'twenty four and.

Ivan Ivan: An example of that is the fact that would incentivize seen free cash flow dollar generation or growth in a much more disciplined way across the enterprise knowing that revenue is also the most durable driver of free cash flow performance.

Ivan Ivan: Incentives are also said for revenue growth to meaningfully drive compensation across the firm at every level. So again, we changed the way we pay people industrial growing revenue above market.

Yvonne Tornos: So again, we change the way we pay people in terms of growing revenue above market. We change the way that we pay people given a larger percentage of compensation in adherence to the fact that we as a company need to grow free cash flow dollars at double-digit rates in the second area of operational excellence. And again, this is about how we think about growing the business top to bottom. You can see already in today's update in the press release that we mean it. It is tough to restructure a company.

Ivan Ivan: We changed the way that we pay people given a larger percentage of compensation in adherence to the fact that we as a company need to grow free cash flow dollars.

Ivan Ivan: Double digit rates.

Ivan Ivan: And the second area of operational excellence and again. This is about how we think about growing the business top to bottom.

Ivan Ivan: You can see already in today's update in the press release that we mean it.

Ivan Ivan: It is tough to restructure our company is certainly something that we don't take lightly.

Yvonne Tornos: It's certainly something that we don't take lightly. You read the press release. We had to do it.

Ivan Ivan: Read the press release, we had to do it.

Yvonne Tornos: It's a tough choice once again, but we needed to make operational changes to simplify our structure, to deliver greater efficiency, and to ensure that we enhanced investments in the right areas of the business, again, closer to the customer. So again, not an easy thing to do, but something that we had to do, and something that we have done. Beyond the restructuring, other initiatives in the area of operational excellence that are already in full motion are the new programs that we got in place kicking off how to drastically reduce inventory levels at Zimmer Biomet. This will drive substantial improvement in our free cash flow dollar growth while also reducing our days on hand DOH by 50 days or more and will reduce our excess and obsolescence exposure, which is something that frankly we've not done that well in previous years.

Ivan Ivan: It's a tough choice once again, but we needed to make operational changes to simplify our structure.

Ivan Ivan: To deliver greater efficiency and to ensure that we are enhancing investments in the right areas of the business again closer to the customer.

Ivan Ivan: So again, not an easy thing to do but something that would have to do and.

Ivan Ivan: Something that we have done.

Ivan Ivan: We've done the restructuring or the initiatives in the area of operational excellence that are already in full motion.

Ivan Ivan: Are the new programs that we got in place Kiki know how to drastically reduce inventory levels at Zimmer biomet.

Ivan Ivan: This will drive substantial improvement in our free cash flow dollar growth.

Ivan Ivan: I'll also reducing or days on hand D O H by 50 days or more.

Ivan Ivan: And we will reduce our excess and obsolescence exposure, which is something that frankly, we've not done that well in previous years.

Yvonne Tornos: The second thing we're doing is the rollout of a global initiative to drive new product launch excellence across the key new product introductions that we have in the year 2024. In simple terms, the seven or eight most meaningful product launches, let's make sure we have a cadence of operating mechanisms with proper governance to ensure that we're maximizing these product launches across each key geography. And then the third thing we're doing in operational excellence beyond the restructuring is the integration of the pricing organization under the finance structure, reporting directly to SUCI or the CFO, to ensure maximum governance and accountability across the enterprise.

Ivan Ivan: Second thing we're doing.

Ivan Ivan: Is the rollout of our global initiative to drive a new product launch excellence.

Ivan Ivan: Of course, the key new product introductions that we have in the year 2024.

Ivan Ivan: In simple terms, the seven or eight most meaningful product launches, let's make sure we have a cadence of operating mechanisms we proper governance to ensure that we're maximizing these product launches across each key geography.

Ivan Ivan: And then the first thing we do in operational excellence beyond the restructuring is the integration or the pricing organization under the financing structure reporting directly to sugar CFO to.

Ivan Ivan: To ensure maximum governance and accountability across the enterprise.

Ivan Ivan: While we are pleased with the reduction in price erosion over the last two or three years. We believe there is much greater opportunity to drive even better a more durable pricing dynamics. So again in the area of operational excellence beyond the restructuring is about drastically reducing inventory levels to generate improved free cash flow dollar growth.

Yvonne Tornos: While we are pleased with the reduction in price erosion over the last two to three years, we believe there is much greater opportunity to drive even better and more durable pricing dynamics. So again, in the area of operational excellence beyond the restructuring, it's about drastically reducing inventory levels to generate improved free cash flow and dollar growth. It's about governance beyond or behind the new product launches and then thirdly, around doing better in the area of pricing dynamics.

Ivan Ivan: It's about.

Ivan Ivan: Governance beyond or behind the new product launches and then thirdly is around doing better in the area of pricing dynamics.

Ivan Ivan: And the third strategic imperative of innovation and diversification, we're going to continue to invest in innovative R&D.

Yvonne Tornos: In the third strategic imperative of innovation and diversification, we're going to continue to invest in innovative R&D, in customer-centric R&D. We're going to continue to fuel our pipeline with meaningful product launches. We're going to continue to drive our vitality index, which has already expanded very meaningfully over the last three years. We're going to make sure that as we continue to launch new products, we also see margin expansion coming from these new products. I'm excited about where we are today; our pipeline, the dollar value associated with our pipeline is twice what it was at the end of 2018. And as we enter 2024, we have very meaningful product launches, particularly in the hip area, where we lost market share in the last two years given the lack of products in key categories like surgical impactors, triple tapered stems, or hip navigation. So again, 2024 is the year where, through very meaningful product launches, we will regain the momentum that we lost. Beyond HIPS, I'm excited about where we are in the shoulder. Identity continues to generate great excitement.

Ivan Ivan: In customer centric R&D, we're going to continue to fuel our pipeline with meaningful product launches, we're going to continue to drive our vitality index, which.

Ivan Ivan: She has already expanded very meaningfully over the last three years and we're going to make sure that as we continue to launch new products. We also see margin expansion coming from these new products.

Ivan Ivan: I'm excited about where we are today or pipeline the dollar value associated with our pipeline is twice what it was at the end of 2018.

Ivan Ivan: And as we enter the 'twenty 'twenty four we have very meaningful product launches, particularly in the heap area.

Ivan Ivan: Where we lost market share in the last two years given the lack of products in key categories like surgical impactor triple taper stems or hip navigation. So again 'twenty 'twenty four is the gear and we're through very meaningful product launches, we will regain the momentum that we lost.

Ivan Ivan: The young hips I'm excited about where we are in shoulder.

Ivan Ivan: Identity continues to generate great excitement, we will enter the 2020 Ford in full launch mode. When it comes to identity. We're excited about stimulus shoulders entering the market and yes, very excited about being first to market in the category of sold a robotics with a very highly differentiated offering.

Yvonne Tornos: We will enter 2024 in full launch mode when it comes to Identity. We're excited about stemless shoulders entering the market. And yes, we are very excited about being first to market in the category of shoulder robotics with a very highly differentiated offering in robotics for shoulders that will apply for both anatomic and reverse surgery. In the area of knees, within the early days of our cementless knee launch in 2024, we seek to increase our penetration rates drastically. Here in the U.S., our penetration rate in cementless is not even in the 20% range.

Ivan Ivan: In robotics for shoulders that that will apply for both anatomic or reversed surgeries.

Ivan Ivan: In the area of nice we're in the early days of our cement less knee launch in 'twenty 'twenty four we seek to increase our penetration rates are drastically.

Ivan Ivan: Here in the U S. Our penetration rate in cement less he's not even in the 20% range.

Yvonne Tornos: And we are committing to drive the penetration rate into the 50 to 60% range at a very rapid pace. Again, more details on those plans at our analyst day. But rest assured that our knee penetration rate in the cementless category is not going to stay in the teens or even the low 20s for long. Beyond cementless, we're excited about next generation robotics in the knee.

Ivan Ivan: And we are committed to drive the penetration rate into the 50% to 60% range at a very rapid pace again more details to those plants at our analyst day.

Ivan Ivan: But rest assure that our or need penetration rate in the same in this category is not going to stay in the teens or even the low twenty's for lung.

Ivan Ivan: Beyonce Mentalist, we're excited about next generation robotics and knee. We are excited about partial CML is nice and we're excited about the fact that in 'twenty 'twenty four we're going to be entering the full launch for persona IQ the only as Martin and the war that fully integrates data technology and best in class implants.

Yvonne Tornos: We are excited about partial cementless knees, and we're excited about the fact that, in 2024, we're going to be entering the full launch for Persona IQ, the only smart knee in the world that fully integrates data, technology, and best-in-class implants in a way that nobody else is doing. In the category of SET, which is six different businesses, sports, foot and ankle, restorative therapies, trauma, extremities, and CMFT, cranio maxillofacial thoracic, we are seeing great growth already, exiting 2023. In the second semester of 2023, we grew SET by mid-single digit or above, and as we enter 2024 and beyond, the expectation is that SET will continue So, we are really excited about the return on the multiple investments we made in SET, particularly in the areas of innovation and commercial execution. There is a great cycle of product launches in SET. I already mentioned some of those, and there will be more to come when we do our analyst day later in the spring.

Ivan Ivan: In a way that nobody else is doing.

Ivan Ivan: In the category of Sip, which is six different businesses sports foot and ankle restorative therapies trauma extremities and C. M. F. T. Cranial maxillofacial thoracic we are seeing great growth already exiting 2023 the second semester of 2023.

Ivan Ivan: Gross said by mid single digit audible and as we entered a 'twenty 'twenty four and beyond the expectation is that said, we'll continue to grow mid single digit order both and this is something that as a company. We've now realize ever since the merger in 2015 with exclusion of the Posco year given comps so real.

Ivan Ivan: Excited about the return on the multiple investments we made in set particularly in the areas of innovation and commercial execution.

Ivan Ivan: Great cadence of product launches and set already mentioned some of those are now more to come when we do our analyst day in a later in the spring. So excited about said excited about innovation as a whole or new product development pipeline is strong we're gonna be launching over 40 different new products in the next 24 months or so.

Yvonne Tornos: So, excited about SET, excited about innovation as a whole. Our new product development pipeline is strong. We're going to be launching over 40 different new products in the next 24 months or so. Most of them are going to enable category leadership, establishing Zimmer Biomet as the leader or the second position in the category, and virtually all of them are going to be in market spaces that are growing 4% plus or above.

Ivan Ivan: Most of them are gonna enabled category leadership establish Zimmer biomet as the leader or the second position in the category I'm virtually virtually all of them are going to be in market spaces that are growing 4% plus or above so like the quantity quality and allow the market growth.

Yvonne Tornos: So, I like the quantity, I like the quality, and I like the market growth profile in terms of where innovation is going. I'm also particularly excited about the innovation plans that we have for the ASC here in the U.S., on the ASC side of care. We've made meaningful investments in innovation during all stages of the episode of care, what happens before surgery, what happens during surgery, and what happens after surgery.

Ivan Ivan: Profile in terms of what our innovation is going.

Ivan Ivan: I'm also particularly excited about the innovation plans that we have for the ASC hit.

Ivan Ivan: Here in the U S. A S C side of care, we've made meaningful investments innovation during all stages or the episode of care what happens before surgery, what happens during surgery and what happens after surgery.

Yvonne Tornos: And relative to the ASC, in the intra-op stage of the ASC, we are best in class when it comes to solving problems and delivering efficiency, best in class outcomes, and safety. So again, truly excited about our ASC strategy and where we're going relative to this side of care. Diversification of Zimmer Biomet's end markets will happen not just through innovation internally but will happen through smart M&A, which will remain the number one category when it comes to capital allocation, with a best-in-class labor ratio and with deep confidence in our free cash flow-generating plans over the next few years. Our strategy is to make smart, smart M&A, the top recipient of our capital. But at the same time, I just love the fact that we have the optionality to continue to do share buybacks as we announced this morning and perhaps at a more meaningful level.

Ivan Ivan: Relative to the ASC in the intra op stage of ASE, we are best in class when it comes to our sodium prevalence and delivered an efficiency best in class outcomes and safety. So again truly excited about the or ASC, a strategy, where we're going relative to the site of care.

Ivan Ivan: Diversification of Zimmer Biomet and markets will happen no jazzed by innovation internally.

Ivan Ivan: But that will happen through a smart M&A.

Ivan Ivan: Which will remain the number one category.

Ivan Ivan: When he goes to capital allocation.

Ivan Ivan: With our best in class liver ratio.

Ivan Ivan: With deep confidence in our free cash flow generating plants over the next few years.

Ivan Ivan: Our strategy is to make a smart smart E money the TARP recipient of our capital, but at the same time I just love. The fact that we have the optionality to continue to do share buybacks as we announced this morning, and perhaps a more meaningful level. So the combination of smart M&A and buybacks can coexist give.

Yvonne Tornos: So the combination of smart M&A and buybacks can coexist given the strong free cash flow dollar generation that we are seeing in the Strat plan. So there is more to come in this regard. I'm energized by the very detailed and focused plans that the team has put in place, which I know, upon their execution, will position Zimmer Biomet to deliver on the growth profile that we keep recommitting to, and that is to grow revenue above market by at least 100 to 200 basis points so as a minimum point of entry commitment of 5% in the year 2024, with earnings per share always growing faster than revenue, and Freecast Flow always growing faster This is not a one-year commitment.

Ivan Ivan: The strong free cash flow dollar generation that we are seeing in the AR in the strap plan so more to come in this regard.

Ivan Ivan: I'm energized by the very detailed and focused plans that the team has put in place.

Ivan Ivan: Which I know that Ah upon their execution will position Zimmer biomet to deliver on the growth profile that we keep Rico meeting and that is to grow revenue above market at least 100 to 200 basis points. So as a minimum port of entry commitment of 5% in the year of 'twenty 'twenty four with earnings per share.

Ivan Ivan: Was growing faster than revenue.

Ivan Ivan: And free cash flow always growing faster than EPS. This is not a one year commitment. This is a multiyear commitment.

Yvonne Tornos: This is a multi-year commitment. And again, based on the very detailed plans, we will get there. In closing, we are very excited about where we're at, the track record over the last two years. And, most importantly, we're deeply excited in terms of where we're going to go in 2024 and beyond. The team is ready.

Ivan Ivan: And our base on the very detailed plans, we will get there in closing we are very excited about where we're at the.

Ivan Ivan: The track record over the last two years.

Ivan Ivan: Most importantly, we are deeply excited in terms of what are we going to go in 'twenty 'twenty four and beyond the team is ready.

Yvonne Tornos: We are establishing the right trend. And we're gonna continue to drive flawless execution, delivering on our commitments. Along the way, we're going to help patients. We're gonna create shareholder value. And we will leave our mission of alleviating pain and improving the quality of life for people around the world. With that, I'll turn the call over to Suki. Thanks, and good morning, everyone.

Ivan Ivan: We are establishing the right train weight I continued to drive flawless execution delivering on our commitments along the way we're going to help patients we're going to create shareholder value. We will leave our mission of alleviating pain and improving their quality of life for people around the world.

Ivan Ivan: With that I'll turn the call over to Susan.

Susan: Thanks, and good morning, everyone as Ivan mentioned, our fourth quarter results and had a successful year for Zimmer biomet with full year constant currency revenue growing seven 5% and adjusted earnings growing more than 9.5% on a reported basis.

Suketu Upadhyay: As Yvonne mentioned, our fourth-quarter results ended a successful year for Zimmer Biomet with full-year constant currency revenue growing 7.5% and adjusted earnings growing more than 9.5% on a reported basis, while generating just under $1 billion in free cash. Inside of that, our business segments performed well for the year, global needs constant currency growth of over 10%, hips growth of 5%, and SET growth of almost 4%, all while also expanding adjusted operating margin by almost a hundred basis points. This is the second consecutive year of operating margin expansion in a challenging environment. Also, as previously guided, we closed the second half of 2023 with mid-single-digit revenue growth and levered earnings growth, a profile we expect to continue moving forward. Let's dive into the fourth quarter results.

Susan: While generating just under $1 billion in free cash flow.

Susan: Inside of that our business segments performed well for the year.

Susan: With global needs constant currency growth of over 10% hips.

Susan: <unk> growth of 5% in S E T growth of almost 4% all while also expanding adjusted operating margin by almost 100 basis points. The second consecutive year of operating margin expansion in a challenging environment.

Susan: Also as previously guided we closed the second half of 2023 with mid single digit revenue growth and Levered earnings growth profile, we expect to continue moving forward.

Susan: Let's dive into the fourth quarter results.

Susan: Unless otherwise noted my statements will be about the fourth quarter of 2023 and how it compares to the same period in 2022.

Suketu Upadhyay: Unless otherwise noted, my statements will be about the fourth quarter of 2023 and how it compares to the same period in 2022, and my commentary will be on a constant currency and adjusted operating basis. Net sales in the fourth quarter were $1.94 billion, an increase of 6.3% on a reported basis and an increase of 6.1% on a constant currency basis. We had a selling day tailwind of about 100 basis points in the. U.S. growth was 4.4 percent, and international growth was 8.7 percent.

Susan: And my commentary will be on a constant currency and adjusted operating basis.

Susan: Net sales in the fourth quarter were 1.94 billion, an increase of six 3% on a reported basis and an increase of six 1% on a constant currency basis.

Susan: We had a selling day tailwind of about 100 basis points in the quarter.

Susan: U S growth was four 4% and international growth was eight 7% as expected we saw robust sequential step up versus the third quarter across all regions.

Suketu Upadhyay: As expected, we saw a robust sequential step-up versus the third quarter across all regions. Global needs grew 5.6% in the quarter, with the U.S. growing 5.4% and international growing 5.8%. The me business continues to be driven by our Persona product portfolio, combined with our Rosa robotics platform, and we remain excited about the positive feedback around our recently launched cementless form factor for Persona Osseotype. For the full year, global needs grew by 10.2%.

Susan: Global knees grew five 6% in the quarter with the U S growing five 4% and international growing five 8%.

Susan: The knee business continues to be driven by our persona product portfolio combined with our Rosa robotics platform and we remain excited about the positive feedback around our recently launched some Atlas form factor for persona Osceola.

Susan: For the full year global knees grew 10, 2%.

Susan: Global Hips grew three 6% in the quarter with the U S growing 4% and international growing three 2%.

Suketu Upadhyay: Global HIPs grew 3.6% in the quarter, with the U.S. growing 4% and international growing 3.2%. We are eager to accelerate the performance of this segment with the addition of multiple new product offerings in 2024. For the full year, Global Hips grew 5.1%.

Susan: We are eager to accelerate performance of this segment with the addition of multiple new product offerings in 2024.

Susan: For the full year global hips grew five 1%.

Susan: Next the S E T category grew six 4% in the quarter with our key focus areas of sports CFT and upper extremities, all growing in the mid single digit to low double digit range.

Suketu Upadhyay: Next, the SET category grew 6.4% in the quarter, with our key focus areas of sports, CMFT, and upper extremities all growing in the mid-single-digit to low-double-digit range. However, the strong growth in these focus areas was partially offset by other sub-segments within the category. For the full year, SET grew 3.8%, including a step up to mid-single-digit growth in the second half of the year. Finally, our other category grew 15.9% in the quarter, driven by another strong quarter of global Rosa sales. Now moving to the P&L. In Q4, we reported GAAP diluted earnings per share of $2.01 compared to GAAP diluted loss per share of $0.62 in the prior year.

Susan: The strong growth in these focus areas was partially offset by other sub segments within the category.

Susan: For the full year S. E. T grew three 8%, including a step up to mid single digit growth in the second half of the year.

Susan: Finally, our other category grew 15, 9% in the quarter driven by another strong quarter of global Rosa sales.

Susan: Now moving to the P&L.

Susan: Q4, we reported GAAP diluted earnings per share of $2.01 compared to GAAP diluted loss per share of <unk> 62 cents in the prior year.

Suketu Upadhyay: The increase in GAAP results was driven by higher revenue, a goodwill impairment charge in 2022 that did not repeat, favorable one-time tax benefits in 2023, and a lower share price. The details around our financial performance can be found in today's press release. On an adjusted basis, we reported diluted earnings per share of $2.20 compared to $1.88 in the prior year, representing year-over-year reported growth of 17%. This step-up is driven by revenue growth, better gross margins, and lower OPEX margin in tandem with a lower tax rate. Our adjusted gross margin was 72.5%, up 80 basis points from the prior year, driven by favorable mix, higher volumes, and lower royalty. And for the full year, we came in slightly above expectations, representing 90 basis points of year-over-year expansion. Adjusted operating margin was 30.3%, up 200 basis points from the prior year.

Susan: The increase in GAAP results was driven by higher revenue a goodwill impairment charge in 2022 that did not repeat.

Susan: Favorable one time tax benefits in 2023, and a lower share count.

Susan: The details around our financial performance can be found in today's press release.

Susan: On an adjusted basis, we reported diluted earnings per share of $2 20.

Susan: Compared to $1.88 in the prior year, representing year over year reported growth of 17%.

Susan: The step up is driven by revenue growth better gross margins lower opex margin in tandem with a lower tax rate.

Susan: Our adjusted gross margin was 72, 5% up 80 basis points from the prior year, driven by favorable mix higher volumes and lower royalties and for the full year, we came in slightly above expectations, representing 90 basis points of year over year expansion.

Susan: Adjusted operating margin was 33% up 200 basis points from the prior year.

Suketu Upadhyay: The year-over-year operating margin step-up was primarily driven by revenue leverage, better gross margin, and realized efficiencies across SG&A. For the full year, operating margin was slightly ahead of expectations at 28.2%, up 90 basis points year over year. Net interest and other adjusted non-operating expenses were $43 million in the quarter and $194 million for the full year, and our adjusted tax rate was 15.8%. A slightly more favorable tax rate was driven by discrete one-time items in the quarter, bringing our full year tax rate to 16.3 percent and in line with overall expectations.

Susan: The year over year operating margin step up was primarily driven by revenue leverage better gross margin and realized efficiencies across SG&A.

Susan: For the full year operating margin was slightly ahead of expectations at 28, 2% up 90 basis points year over year.

Susan: Net interest and other adjusted non operating expenses were 43 million in the quarter and $194 million for the full year.

Susan: And our adjusted tax rate was 15.8%.

Susan: Slightly more favorable tax rate was driven by discrete one time items in the quarter, bringing our full year tax rate to 16, 3% and in line with overall expectations.

Suketu Upadhyay: Turning to cash and liquidity, we generated operating cash flows of $588 million, and free cash flow totaled $447 million, and we ended the year with cash and cash equivalents totaling $416 million. As Yvonne mentioned earlier, we completed a $500 million share buyback program in early 2024, which is more than required to offset annual dilution. For the full year, we generated operating cash flow of just under $1.6 billion and free cash flow of $979 million.

Susan: Turning to cash and liquidity, we generated operating cash flows of $588 million in free cash flow totaled $447 million.

Susan: And we ended the year with cash and cash equivalents totaling $416 million.

Susan: As Don mentioned earlier, we completed a $500 million share buyback program in early 2024, which is more than required to offset annual dilution.

Susan: For the full year, we generated operating cash flow, just under $1 $6 billion and free cash flow of $979 million.

Susan: Our balance sheet remained strong, leaving us continued financial flexibility and strategic Optionality as we move forward.

Suketu Upadhyay: Our balance sheet remains strong, leaving us continued financial flexibility and strategic optionality as we move forward. And moving on, to our financial outlook for 2024. Our outlook takes into account certain key assumptions, including pricing, which is expected to be about 100 to 150 basis points of erosion, but it's a continued step-change improvement from a historical trend. We expect to see continued strength in our end markets in tandem with new product introductions and continued improvement in product supply. Against that backdrop, we expect 2024 constant currency revenue growth of 5% to 6%, including a foreign currency exchange headwind of approximately 50 basis points, translating to reported growth of 4.5% to 5.5%. Adjusted diluted earnings per share in the range of $8 to $8.15, representing reported growth of 6% to 8%, and Currency is expected to have about an 8 cent headwind on EPS based on recent rates, and the implementation of Pillar 2 has an 18 cent, or about a 250 basis point, headwind on earnings per share growth for the year.

Speaker Change: Now moving on to our financial outlook for 2024.

Speaker Change: Our outlook takes into account certain key assumptions, including pricing, which is expected to be about 100 to 150 basis points of erosion.

Speaker Change: But it's a continued step change improvement from historical trends.

Speaker Change: We expect to see continued strength in our end markets in tandem with new product introductions and continued improvement in product supply.

Speaker Change: Against that backdrop, we expect 2020 for constant currency revenue growth of 5% to 6%, including a foreign currency exchange headwind of approximately 50 basis points translating to reported growth of four and a half to five 5%.

Speaker Change: Adjusted diluted earnings per share in the range of $8 to $8.15 representing reported growth of 6% to 8%.

Speaker Change: And currency is expected to have about an eight cent headwind on EPS based on recent rates and the implementation of pillar two has an 18th cent or about a 250 basis point headwind on earnings per share growth for the year.

Suketu Upadhyay: This implies an operating margin expansion of greater than 50 basis points at the EPS guidance midpoint when compared to 2023. We expect slightly lower year-over-year gross margins to be more than offset by efficiency and restructuring programs that were initiated in 2023. Net interest and other non-operating expenses are expected to be about $205 million.

Speaker Change: This implies operating margin expansion of greater than 50 basis points at the EPS guidance midpoint when compared to 2023.

Speaker Change: We expect slightly lower year over year gross margins to be more than offset by efficiency and restructuring programs that were initiated in 2023.

Speaker Change: Net interest and other nonoperating expenses are expected to be about $205 million and as previously discussed our effective tax rate is expected to step up to 18% in conjunction with the implementation of pillar two.

Suketu Upadhyay: And, as previously discussed, our effective tax rate is expected to step up to 18% in conjunction with the implementation of Pillar 2. We expect to end the year with about 207 million shares outstanding, lower than in 2023 due to the $500 million share buyback plan that I referenced earlier. Finally, we expect our free cash flow to be in the range of $1,050,000,000 to $1.1 billion, or growth of about 10% at mid- As Yvonne mentioned, we initiated a global restructuring program along with other cost savings initiatives in late 2023. These programs further streamline our organizational structure, shift select reporting lines, prioritize how we spend across the organization, and further evolve our operational footprint in order to simplify and maximize efficiency.

Speaker Change: We expect to end the year with about 207 million shares outstanding lower than 20 twenty-three due to the $500 million share buyback plan that I referenced earlier.

Speaker Change: Finally, we expect our free cash flow to be in the range of 1 billion at $50 million to 1.1 billion or growth of about 10% at the midpoint.

Speaker Change: As Ivan mentioned, we initiated a global restructuring program along with other cost savings initiatives in late 2023.

Speaker Change: These programs further streamline our organizational structure shift select reporting lines prioritize how we spend across the organization and further evolve our operational footprint in order to simplify and maximize efficiency.

Suketu Upadhyay: This program is expected to result in total cash charges of about 125 to 150 million dollars over the next two years and deliver up to 200 million in run rate savings as we exit 2025, enabling us to invest in priority areas while driving margin expansion and earnings leverage despite a meaningful step up in tax. In terms of cadence through the year, we expect constant currency revenue growth for the first half of the year to be at the lower end of the mid-single Also, quarterly results are expected to be choppy due to billing day impacts. Q1 will be about a 150 to 200 basis point headwind. Q2 and Q3 will be a 150 basis point tailwind in each quarter, and Q4 will be a 50 basis point tailwind. The full year impact will be immaterial or less than 50 basis points of tailwind. 2024 gross margin is expected to step down slightly versus 2023 due to lower FX hedge gains and the realization of capitalized third-party manufacturing cost increases observed in the second half of 2023.

Speaker Change: This program is expected to result in total cash charges of about $125 million to $150 million over the next two years and deliver up to 200 million in run rate savings as we exit 'twenty twenty-five, enabling us to invest in priority areas, while driving margin expansion and earnings leverage despite a meaningful.

Speaker Change: Step up in tax rate.

Speaker Change: In terms of cadence through the year, we expect constant currency revenue growth for the first half of the year to be at the lower end of the mid single digits, while the second half will be at the higher end of mid single digits.

Speaker Change: Also quarterly results are expected to be choppy due to billing day impacts.

Speaker Change: Q1 will be about 150 to 200 basis point headwind Q.

Speaker Change: Q2, and Q3 will be 150 basis point tailwind in each quarter and Q4 will be a 50 basis point tailwind.

Speaker Change: Full year impact will be immaterial, we're less than 50 basis point tailwind.

Speaker Change: 'twenty 'twenty four gross margin is expected to step down slightly versus 2023 due to lower FX hedge gains and the realization of capitalized third party manufacturing cost increases observed in the second half of 2023.

Suketu Upadhyay: From a cadence standpoint, gross margin will be higher in the first half of the year. Additionally, because of the timing of the restructuring program, we expect operating margin to be higher in the second half than in the first half, with Q4 being our high watermark, followed by Q2. In summary, 2023 was another strong year for the company, and we expect to maintain that momentum into 2024 and beyond. With that, I'll turn the call back over to Keri for the Q&A. Thanks, Suki.

Speaker Change: From a cadence standpoint gross margin will be higher in the first half of the year.

Speaker Change: Additionally, because of the timing of the restructuring program, we expect operating margin will be higher in the second half than in the first half with Q4 being our high watermark followed by Q2.

Speaker Change: In summary, 2023 was another strong year for the company and we expect to maintain that momentum into 2024 and beyond with that I'll turn the call back over to Kerry for the Q&A.

Keri P. Mattox: Thanks, Eddie before we start the Q&A session. Just a quick reminder, to please limit yourself to a single question and one brief follow up so that we can get through as many questions as possible during the call with that operator may we have the first question. Please.

Keri P. Mattox: Before we start the Q&A session, just a quick reminder to please limit yourself to a single question and one brief follow-up so that we can get through as many questions as possible during the call. With that, operator, may we have the first question, please? We'll go first to Larry Biegelsen with Wells Fargo. Good morning.

Speaker Change: We'll go first to Larry <unk> with Wells Fargo.

Larry: Good morning, Thanks for taking the question Yvonne congratulations on.

Yvonne Tornos: Thanks for taking the question, Yvonne. Congratulations on a nice first year here as CEO. You know, I'd love to ask about the 2024 guidance. You know, just talk about the key assumptions for the 5 to 6% constant currency growth in 2024. You know, what you're assuming about the recon market. And Yvonne, talk about your guidance philosophy. You know, have you incorporated any conservatism in the guidance? You know, what would get you to the high end of the range?

Speaker Change: First year here as CEO.

Larry: Yeah, I'd love to ask about the 2024 guidance can you just talk about the key assumptions are for the 5% to 6% constant currency growth in 'twenty for what you're assuming for the recon market and any one and talk about your guidance philosophy. You have you incorporated any conservatism in the guidance what would get you to the high end.

Speaker Change: The range and just quickly suki on the buyback the $500 million.

Yvonne Tornos: Just quickly, Suki, on the buyback, the $500 million, does that imply that it's hard to find good M&A targets? You know, how should we interpret that? Thanks for taking the question. Thank you, Larry. Always great to hear from you. So I'll take the first two parts and then Suki can talk about the rest.

Speaker Change: Does that imply that it's hard to find good M&A targets.

Speaker Change: Should we interpret that thanks for taking the question.

Speaker Change: Thank you Larry always great to hear from you. So I'll take the first two bars and Dana. So he can talk about the rest so embedded in the guidance for 'twenty 'twenty, four which we're very confident on the 5% to 6%.

Yvonne Tornos: So embedded in the guidance for 2024, which we're very confident about the five to six percent, are macro and micro reasons. So from a macro perspective, as you have heard from most of our peers, the markets are very healthy. We believe beyond the backlog, the markets are going to continue to be healthy. You have better patient demographics, younger patients. You've got the dynamic of cases moving into an ASC. You've got more days of surgery in the U.S., where it's not just two days; you've seen three days.

Speaker Change: It is macro and micro regions. So from a macro perspective by now you heard from most of our peers that the markets are very healthy we.

Dana: We believe the beyond the backlog the markets are going to going to have to be healthy you got better patient demographics younger base and you've got the dynamic of cases moving into an ASC.

Dana: You've got a motivation of surgery in the U S where it is not just to the as you see in three days.

Yvonne Tornos: You've seen shorter, better rehabilitation processes. I can go on and on, but the markets are very healthy. And then, from a micro perspective, we have a cadence of new product launches. Most of them are gonna be very meaningful as you hit the second semester of the year.

Dana: <unk> seen a short there better rehabilitation processes I can go on and on but the markets are very healthy and then from a macro perspective, we got a cadence of new product launches.

Dana: Most of them are going to be very meaningful as you hit the second semester of the year.

Yvonne Tornos: We got three new product launches in HIPS early in 2024, which again will be more material later in the year. We're launching ROSA shoulder. We got a cadence of new product introductions in set. We're gonna continue to increase our penetration in Semendez and ROSA. So again, the combination of new product launches, great commercial execution, amplified by the healthier market dynamics, gives us confidence in a minimum 5% and a range of 5 to 6%. Relative to my philosophy when it comes to guidance, it's very basic. We make commitments, and we don't miss them. So we study the different dynamics.

Dana: We got city, new product launches in keeps early in 'twenty, 'twenty, four which again will be more material later in the year, we launched Russell shoulder, we got a cadence of new product introductions and said, we're going to continue to increase or penetration and same endless and Rosa. So again, the combination of new product launches great commercial execution.

Dana: Amplified by the healthier market dynamics gives us confidence on our minimum 5% and a range of 5% to 6%.

Speaker Change: Relative to my philosophy when it goes to guidance now is very basic we make commitments that we don't miss them.

Dana: We study the different dynamics, we study where we'd had a we know that operationally we did a better place. We don't have the headwinds that we had in 'twenty to 'twenty three around supply and whatnot. So my guidance.

Yvonne Tornos: We study where we are. We know that operationally, we're in a better place. We don't have the headwinds that we had in 2023 around supply and whatnot. So my guidance represents or exemplifies my philosophy of making commitments and living by those commitments.

Dana: Any sense or exemplifies my philosophy of making commitments and delivering on those commitments I'm not going to I'm not going to comment today on whether there is opportunities to beat and raise throughout the year I just leave it at that my philosophy is to make commitments and delivery commitments.

Yvonne Tornos: I'm not going to comment today on whether there are opportunities to bid and raise for the year. I'll just leave it at my philosophy is to make commitments and deliver commitments. And these are very well-studied commitments.

Speaker Change: It's a very well studied commitments so with that I'll pass it onto she'll give for them. Your second question, Yeah, Hey, good morning, Larry Thanks for the question.

Yvonne Tornos: So with that, I'll pass it on to Suki for your second question. Yeah. Hey, good morning, Larry.

Suketu Upadhyay: Thanks for the question. I'd say, first of all, the $500 million share buyback, I think, demonstrates our... Short answer. Does this imply some deterioration in our M&A targets? And I would say absolutely not.

Speaker Change: I'd say first of all the $500 million share buyback I think demonstrates our confidence in our outlook in the business and the short answer to your question does this implies.

Speaker Change: Deterioration in M&A targets, and I would say absolutely not.

Suketu Upadhyay: I think based on where the company is from a firepower perspective, we feel that we've got the balance sheet strength and power as well as the forward-looking results to really do both. We will still prioritize smart M&A, as Yvonne has talked about. We still favor tuck-in acquisitions to midsize acquisitions. Even in the backdrop of doing a heightened level of share buyback, we still see very... and M&A Firepower too. So the short answer, again, is no, we don't have any type of. Thanks for taking the question. Thanks, Larry. Yeah, thanks so much. Katie, can we go to the next question in the queue? We'll go next to Matthew O'Brien with Piper Stanton.

Speaker Change: I think based on where the company is from a firepower perspective, we feel that we've got the balance sheet strength and power as well as the forward.

Speaker Change: Forward looking results really do both.

Speaker Change: We still will prioritize smart M&A as Ivan has talked about.

Speaker Change: We still favor tuck in acquisitions to midsized acquisitions.

Speaker Change: Even in the backdrop or doing a heightened level of share buyback, we still see very significant M&A firepower too long.

Speaker Change: To execute that strategy as well so short answer again is no. We don't see this as a any type of deterioration in targets.

Speaker Change: Alright, thanks for taking the question.

Speaker Change: Thanks, So much Katy can we go to the next question in the queue.

Speaker Change: Go next to Matthew O'brien with Piper Sandler.

Yvonne Tornos: Morning, thanks for taking my questions. Just maybe start a little bit, Yvonne or Suki, on the knee performance in the quarter was a little bit below what we were expecting, still better than one of your competitors, but below another one. On a tier stack basis, it's not quite 50% of sales, but close to it. So I would anticipate that that's going to need to see very good performance here in 24 in order to hit the guidance range, which I think, Alright I know poem TV being questioned a little this morning, so what is it they're specifically between cements Bitchwing robotic between persona IQ that gives you the competence in the knee franchise outside of the macro environment here in 24 and, Thanks, Matt.

Matthew Miksic: Good morning, Thanks for taking my questions, just maybe start a little bit.

Matthew Miksic: I understood you on the on the knee performance in the quarter or was that a little bit below what we were expecting to do better than one of your competitors, but below another one on a two year stack basis, it's not quite 50% of sales, but close to it.

Speaker Change: I would anticipate that that's going to need to see very good performance here in 2004 in order to hit the guidance range, which I think is.

Speaker Change: Maybe being questions a little bit this morning, so what is it they're.

Speaker Change: Typically between the Netherlands between robotic between.

Speaker Change: Donna IQ that gives you the confidence in our knee franchise.

Speaker Change: Outside of the macro environment here in 'twenty, four and then I do have a quick follow up.

Speaker Change: Thanks, Matt so.

Yvonne Tornos: So, you know, performance relative to the quarter. We're very pleased with the quarter. We performed in line with our expectations for NIS and, frankly, for the entire business. And for the year, it was a solid year with NIS growing double-digits and the entire business growing 7.5 with nice CPS expansion. We really don't pay much attention to what happens to one quarter. I know that it is your job to do that, but we just can't.

Speaker Change: Performance relative to the quarter, we're very pleased with the quarter.

Speaker Change: We we performed in line with our expectations for knees and frankly for the entire business and for the year. He was a solid year with Chinese growing double digit and the entire business growing at same 0.5 with nice EPS expansion.

Speaker Change: We really don't pay acute attention to what happens to one quarter I know that is your job to do that but we just done the 60 to 62 working days in a quarter. They used what kinds of volatility than you've had comps. So when it comes to performance. We look to a eight to 12 quarters and if you do run the analysis eight to 12 quarters, you're talking about knees, but take a look at.

Yvonne Tornos: There are 60 to 62 working days in a quarter. There's all kinds of volatility. Then you have the comps.

Yvonne Tornos: So when it comes to performance, we look to eight to 12 quarters. And if you do run the analysis, eight to 12 quarters, you're talking about needs, but take a look at set, hips, and whatnot; the performance is there. Speaking of volatility in Q4 for NIS, we did see in the U.S., we did see some timing of orders that impacted some of our largest IDNs here. We also had, let's remember, some tougher comps versus Q4 of 2022, particularly in the U.S., where we were at 500 basis points ahead of our strongest competitors in NIS. And then again, when you look at Q3, that's the quarter where, both in NIS and HIBs, we outperformed all competitors in the U.S. So again, given all this volatility, all these ups and downs, we just don't pay any attention to one particular quarter.

Speaker Change: Said heaps and whatnot the performance is there.

Speaker Change: Volatility in Q4 for knees, we did see in the U S. We did see some timing of orders.

Speaker Change: That impacted some of our largest avian skier.

Speaker Change: We are we also had less remember some tougher comps versus Q4 of 2022 particularly in the U S, where we were down 500 basis points of hit OTA or strongest competitors. He needs and then again when you look at Q3, that's the quarter, where both knees and hips, we outperformed our competitors in the U S.

Speaker Change: So again given all these volatility all these ups and downs, we just don't pay any attention to one particular quarter, we look at acutely at the trends and the trends do show that 20 years. Later, we continue to be the number one player news, we continue to gain market share.

Yvonne Tornos: We look acutely at the trends, and the trends do show that 50 years later, we continue to be the number one player in NIS, and we continue to gain market share. Relative to the second part of your question, around 2024, what gives us confidence around the guidance is the fact that we continue to see increases in cementless penetration and we continue to see increases in ROSA penetration.

Speaker Change: Relative to the second part of your question around 2024, what gives us our confidence around the guidance is the fact that we continue to see increases in same endless penetration. We continue to see increases in Rosa penetration, we have solved the bank or the challenge that we've had in knees, which was a headwind Florida many.

Yvonne Tornos: We have solved the backorder challenge that we had in Nice, which was a headwind for many periods in 2023, and we've seen just great commercial execution in the ASE. So we're very confident about where we are in Nice, and we are very confident about the acceleration in Nice going into 2024. Appreciate that follow-up is just on on. There are a lot of good things coming this year as far as new products, etc. But, you know, you're trying to lower inventory levels significantly 50 days a ton in this space.

Speaker Change: Periods in 2023.

Speaker Change: And we've seen just great commercial execution in the ASC. So we're very confident about where we are in need. So we are very confident around the acceleration in knee is going into 2020 four.

Speaker Change: I appreciate that follow up is just on there's a lot of good things coming this year as far as new product et cetera.

Speaker Change: We're trying to lower inventory levels significantly 50 days of ton in this space.

Yvonne Tornos: And then, you know, the restructuring as well, you know, how do you factor in those potential headwinds? and even into 25 in terms of potentially some lost revenues or dislocation you may suffer as a result. Thank you.

Speaker Change: And then the restructuring as well.

Speaker Change: Are those have you factored into those potential headwinds in.

Speaker Change: In 'twenty, four and even into 'twenty five in terms of potentially some lost revenues or dislocation we may suffer as a result, thank you.

Speaker Change: Thank you well, let me just begin with the we the simple answer anything and everything we do in restructuring wise and inventory management wise is embedded in the guidance we gave it.

Yvonne Tornos: Anything and everything we do restructuring-wise and inventory management-wise is embedded in the guidance we're given. So that's part of that. In terms of inventory management or inventory reductions, we're going to be bold but not reckless. So we're not reducing inventories in the key categories. We actually are making sure that inventory is what it needs to be for those key brands, whether it's persona, whether it's the key components in HIP, whether it's the key components in SET. This is a lot of the leftover from the integration that we didn't do. So the inventory reduction is going to be in noncritical areas, and frankly, in noncritical countries.

Speaker Change: So that's part of that in terms of inventory management or inventory reductions.

Speaker Change: We're gonna be bold, but no radius, so we'd know reducing inventories in the key categories. We actually are making sure that inventory is what it needs to be for those key brands, whether it is but so now what is the key components in here, where does it get components and said Ah.

Speaker Change: This is a lot of the leftover from the integration that we didn't do so the inventory reduction is gonna be noncritical areas frankly noncritical countries. So again, we're doing this thoughtfully.

Yvonne Tornos: So again, we're doing this thoughtfully. In terms of the restructuring, the reductions that we announced this morning, these are happening in the back office. I will tell you virtually all the reductions are non-customer facing. And again, the changes we make in inventory and people are embedded in the guidance that we're given. Thanks, Matt. Katie, can we go to the next question in the queue, please? And we'll go next to Robbie Marcus with J.P. Oh, great.

Speaker Change: In terms of the restructuring and the reductions that we announced this morning. These are happening in back office I will tell you virtually all reductions are non customer facing and again the changes we made in inventory and people.

Speaker Change: Embedded in the guidance that we gave them.

Speaker Change: Thanks, Matt.

Speaker Change: Katy can we go to the next question that easily.

Speaker Change: We'll go next to Robbie Marcus with JP Morgan.

Speaker Change: Okay.

Robbie Marcus: Oh, great. Thanks for taking the questions.

Yvonne Tornos: Thanks for taking the questions. I want to ask about SET and other items that were the two line items that beat versus the street. I was just hoping you could break out some of the trends there, what did well, what, you know, might have underperformed, if anything, and how we think about those different light items as part of the guide in 2024. And how much of the, you know, the, strong growth is coming from that versus? Thanks. Thank you, Robbie.

Robbie Marcus: I wanted to ask on S. E T. Another those are the two line items that beat versus the street.

Robbie Marcus: I was just hoping you could break out some of the trends there what did well what.

Robbie Marcus: Might have underperformed, if anything and how we think about those different line items as part of the guide in 2024 and how much of the.

Robbie Marcus: The strong growth is coming from that versus hips and knees. Thanks.

Speaker Change: Hey, Thank you Robby so solid a solid quarter for set frankly solid last semester of 2023, four said growing.

Yvonne Tornos: So, solid quarter for SED. Frankly, solid last semester of 2023 for SED, growing around mid-single-digit, around 5%, and committing to growing mid-single-digit or above in 2024. The key drivers are the use of suspects.

Speaker Change: Around mid single digit around 5%.

Speaker Change: Now committing to grow in mid single digit or above in 'twenty 'twenty four the key.

Speaker Change: The drivers are the usual suspects we continue to do really well with Abbott extremities growing a upper single digit double digit in most geographies, there's new product launches that's focused in the ASC. That's stable supply just great commercial execution or CMS tea business cranial maxillofacial thoracic continues to do really well.

Yvonne Tornos: We continue to do really well with upper extremities, growing upper single-digit, double-digit in most geographies. That's new product launches, that's focusing the ASC, that's stable supply, just great commercial execution. The CMFT business, cranial maxillofacial thoracic, continues to do really well.

Yvonne Tornos: I recall that we did two or three acquisitions over the last three years, and those continue to do really well. And again, CMFT is a business where we see upper single-digit and double-digit growth. We finally stabilized our restorative therapies business here in the U.S. We call it that we had some reimbursement challenges there, and those are behind us. So you've seen the biologics and restorative therapy business growing at a nice clip now. And then Sportsmed, we've done some acquisitions.

Speaker Change: Recall that with each with three acquisitions over last three years and those continue to do really well in and against the MSP is a business, where we'd see a upper single digit double digit.

Speaker Change: We finally stabilize or we started these therapies business here in the U S recall that we had some reimbursement challenges there and those are behind so you've seen the biologics we start the therapy business growing at a nice clip now and then sports med. We've done some acquisitions, we have had some challenges but that that continues to perform a eli we would expect.

Yvonne Tornos: We have had some challenges, but it continues to perform in line with expectations. So I will tell you, Robbie, out of the six businesses within the category, four are going really well. Trump and put an ankle out, we've got some work to do.

Speaker Change: Patients.

Speaker Change: So I will tell you Ravi are out of the six businesses within the category Ford are going really well trauma foot and ankle. We got some work to do we got some we got some decisions and some strategic considerations to make.

Yvonne Tornos: We have some decisions, some strategic considerations to make. As we enter 2024, mid-single-digit is the point of entry. This has to be the year where we see said growth at mid-single-digit. Frankly, in some geographies, I think it's gonna be higher than that.

Speaker Change: As we entered a 'twenty 'twenty four.

Speaker Change: Mid single digit is it point of entry this has to be the year, where we see said growing mid single digits frankly in some geographies or things that would be higher than that we got the innovation. We got the investments in terms of a dedicated infrastructure and specialization heavy emphases here in the U S. India ASC environment second full confidence in him.

Yvonne Tornos: We've got the innovation, we've got the investments in terms of dedicated infrastructure and specialization, heavy emphasis here in the U.S. on the ASC environment. So again, full confidence in the growth profile that we're gonna see moving forward. Great. Thanks.

Speaker Change: In the growth profile that we're going to see moving forward.

Speaker Change: Great. Thanks, maybe just a quick follow up for <unk> on the.

Suketu Upadhyay: Maybe just a quick follow-up for Suki on the guidance and clarification. The, you know, the lower end of mid-single digit in the first half and then higher end in the second half, is that inclusive or exclusive of the selling day benefit? Bye.

Speaker Change: The guidance and a clarification.

Speaker Change:

Speaker Change: The lower end of mid single digit in the first half and then a higher end second half is that inclusive or exclusive of the selling day benefit.

Speaker Change: <unk>.

Suketu Upadhyay: That is, that is inclusive of the selling day benefit. Okay, thanks a lot. Yep. Thanks, Robbie. Katie, can we go to the next question in the queue, please? We'll go next to Joanne Wuensch with, Excuse me, good morning, and thank you for taking the question, putting them both right up front.

Speaker Change: And that is inclusive of the selling day benefit.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: Yes.

Speaker Change: Thanks, Robby Katy can we go to the next question. Please.

Speaker Change: Well go next to Joanne Wuensch with Citi.

Joanne K. Wuensch: Hi, excuse me good morning, and thank you for taking the questions are putting them right upfront.

Suketu Upadhyay: I'm curious about gross margins. It's been year over year, what the dynamics are for that. And then my second question has to do with- Can you walk us through the math of what you think moving... of Ernie's being cemented or cement, what the benefit is of that? Yeah, hey, Joanne and Suki. I'll start with the gross margin one and then toss it over to Yvonne on some. Overall, we had a really good year on gross margin in 2023, up 90 basis points year- Drivers of that are really around.

Joanne K. Wuensch: I'm curious like gross margins are expected to be somewhat down year over year, but the dynamics are for that and then my second question has to do with them. Some Atlas can you walk us through the math of what you think of moving to 50% to 60%.

Joanne K. Wuensch: These being cemented our cement less excuse me.

Joanne K. Wuensch: Okay.

Speaker Change: But the benefit is of that thank you.

Speaker Change: Yeah, Hey, Joanne and Suki I'll start with the gross margin one and then.

Speaker Change: Toss it over to bond on some Atlas.

Bond: Overall, we had a we had a really good year on gross margin.

Bond: In 2023 up 90 basis points year over year draw.

Bond: Drivers of that are really around we had some FX hedge gains, which we had talked about at length throughout 2023, as well as improved mix and better pricing still pricing erosive year over year, but better than we expected overall generated a pretty nice profile for 'twenty three we.

Suketu Upadhyay: We had some FX hedge games, which we have talked about at length throughout 2023, as well as improved mix and better pricing. Still pricing erosive year over year, but better than we expected, overall, generating a pretty nice profile. We had previously communicated that we had thought that gross margins might dip down slightly into 24, primarily driven by the loss of those FX hedge gains. They won't repeat at the same level in 24 as they did in 23, but also we're seeing in the capitalization of, and other local management employees also flourished, and we are very pleased to announce these lucky collectors.

Bond: We had previously communicated that we had thought that gross margins might dip down slightly into 24, primarily driven by the loss of those FX hedge gains they won't repeat at the same level in 'twenty four as they did in 'twenty three but also we're seeing in the capitalization of some increased costs in the back end.

Joanne K. Wuensch: 23 around third party manufacturing, which will feather into the P&L towards the back end of 2024.

Suketu Upadhyay: Despite those two headwinds, we're able to offset a large component of that, but overall, we do expect to see growth, down just slightly versus the backdrop of those headwinds. Now, having said that, if you take the midpoint of our EPS guide, that would back you in. I'd operate at about $29,000.

Joanne K. Wuensch: Despite those two headwinds were able offset a large component of that.

Joanne K. Wuensch: But overall, we do expect to see gross margins.

Joanne K. Wuensch: Down just slightly.

Joanne K. Wuensch: Versus versus 23 in the backdrop of those headwinds now having said that.

Joanne K. Wuensch: You take the midpoint of our EPS guidance I think that would back you into an implied operating margin.

Joanne K. Wuensch: About 29%, which represents about an 80 basis point increase year over year, and so while gross margin may step down slightly.

Suketu Upadhyay: Rep, about an 80 basis point increase. So while gross margin may step down slightly, you are seeing operating. So again, there are a lot of puts and calls throughout the P&L. The great thing is we've got optionality where we see headwinds in one area. We can make that up once we deliver 24, three years in a row, which is in a challenging environment all three years. And Joanne, relative to your question on cementless, I'll give you as much as I can.

Joanne K. Wuensch: You are seeing operating margins increase as we drive better efficiency and revenue growth through the company. So.

Joanne K. Wuensch: Again, there are a lot of puts and calls throughout the P&L of the great thing is we've got Optionality, where we see headwinds in one area, we can make that up.

Joanne K. Wuensch: <unk> and other areas.

Speaker Change: <unk> seen that now.

Joanne K. Wuensch: Once we delivered 24 three years in a row, which are in a challenging environment in all three years, we're able to continue to grow.

Joanne K. Wuensch: Operating margin in Levered earnings Thanks for the question.

Joanne K. Wuensch: And Joanne relative to your question on cement. This I'll give you as much as again, so starting with the basic pricing dynamics, we see with some endless.

Yvonne Tornos: So starting with the basic pricing dynamics, we see with the cementless knee, Persona Oceotide, we see an ASP uplift of around 10 to 15 percent, frankly, closer to the 15 percent than the 10, around 40 to 50 percent of the time. We combine the cementless knee with robotics, with ROSA, and that drives additional uplift in our revenue in the form of disposables and whatnot. So that's a great dynamic we've seen, particularly in the ASC. Our penetration today on cementless would exit in 2023, somewhat near 18 to 20 percent, with both expectations, excuse me, to get into the 50 to 60 percent range.

Yvonne Tornos: But so now Osha Bay with C. N a S. B I believe of around 10% to 15% frankly closer to the 15% then the near term.

Yvonne Tornos: Around 40% to 50% of the time with Campbell.

Yvonne Tornos: The same endless knee with fat, where robotics with Rosa and that that drives additional I believe D. Now revenue in the form of disposals, what amount. So that's a great dynamic we've seen particularly in the ASC.

Yvonne Tornos: Or penetration today on some analyst would exiting 2023 cell with near the 18% to 20%.

Yvonne Tornos: With bolt expectations.

Yvonne Tornos: Excuse me to get into the 50% to 60% range and I'm not going to give you a commitment today.

Yvonne Tornos: And I'm not gonna give you a commitment today, but at our analyst day, you will see the long-range plans and some of the some of the trending when it comes to getting to 60 percent. We believe that there's gonna be. A fairly quick uplift, given the fact that the market is already being developed through some of the work that our peers have done. So again, you should not expect that getting to 50 to 60% is going to be a long journey. All of these dynamics are in the U.S. We're launching in 2024 in other markets outside of the U.S. And I will disclose the pricing dynamics when the time is right, but I'm excited about the launch in Japan in 2024, another key market. So those are the dynamics here when it comes to Semendis. Thank you very much.

Yvonne Tornos: But at our Analyst day, you will see the long range plans and some of the some of the training when he comes to get into 60%.

Yvonne Tornos: We believe that the theres going to be.

Yvonne Tornos: A fairly weak I believe given the fact that the market has already been developed by some other work that our peers have done. So again, you should not expect that getting to 50% to 60% is gonna be a long journey.

Yvonne Tornos: All of these dynamics in the U S. We launched in 2000 2040 in other markets outside of the U S and now we will disclose the pricing dynamics. When the time is right but are excited about the launch in Japan in 2024.

Yvonne Tornos: Another key markets. So those are the dynamics here when it comes to us amendments.

Yvonne Tornos: Thanks, Joanne. Yeah, absolutely. Katie, can we go to the next question in the queue? We'll go next to Ryan Zimmerman with BTIG.

Speaker Change: Thank you very much Joe.

Ryan Zimmerman: Yeah, absolutely Katy can we go to that next question in the queue.

Yvonne Tornos: Well go next to Ryan Zimmerman with BTG.

Yvonne Tornos: Thank you. Thanks for taking the questions. Following up maybe on Larry's questions about guidance, you know... talked about the WAMGR being at 4%, and you know clearly we're in https://www.larryweinstein.com, You know, with pricing as a headwind of 100, 150 bases. You know, it suggests the product mix is going to contribute 200 to 300 basis points. I just want to see one, if that's how you're thinking about it, or if you're thinking about the market contribution to guidance at a higher rate in 2024 and maybe potentially the product, www.larryweinstein.com. I'll try to simplify it and, by all means, elaborate, but we believe the market is around 4% all in. And again, we model this in different ways, but let's call it 4%.

Yvonne Tornos: Thank you thanks for taking the questions following up maybe on Larry's question about guidance.

Yvonne Tornos: You talked about the Wham group being at 4% and clearly we're in the stronger market environment and so as I think about the components of guidance.

Yvonne Tornos: With pricing as a headwind of 100 150 basis points.

Yvonne Tornos: Product mix is going to contribute 200 to 300 basis points.

Yvonne Tornos: See one if thats, how youre thinking about it or if you're thinking about the market contribution to guidance at a higher rate in 2024, and maybe potentially the product mix contribution lower.

Speaker Change: Maybe just help us flush a little of that out.

Yvonne Tornos: Yeah, I'll try to simplify it and sugar by all means elaborate but we are we believe the market is around 4%.

Yvonne Tornos: And again, we model this in different ways, but let's call it 4%.

Yvonne Tornos: I'm not going to quantify the new product contribution, but it's significant. You know, we have 40 new products getting launched in the next two years, and these are meaningful products. I mentioned we have three large heap products that are going to get launched early in 2024. We have Rosasolder, which we believe is going to be meaningful in the year 2024, given the fact that it's not a late year launch. We got a lot of products in the same category.

Yvonne Tornos: I'm not going to quantify the new product contribution.

Yvonne Tornos: But it is significant we have 40, new products getting launched in the next two years and these are meaningful products I mentioned, we've got three large keep our products that are going to get a launch early in 'twenty 'twenty four we got Rosa shoulder, which we believe is going to be meaningful in a year of 'twenty 'twenty four given the fact that he's not at Lithia lunch.

Yvonne Tornos: We got a lot of products in the category. So again, you should think of new product introductions is a very meaningful contributor to the guidance.

Yvonne Tornos: So again, you should think of new product introductions as a very meaningful contributor to the guidance. Add to that the fact that we don't have the headwinds that we had in 2023 when it comes to supply. I would say between numbers one and number two, we have confidence in where we're going. Beyond that, we don't see a headwind when it comes to the shift to the AC. We actually see that as a tailwind.

Yvonne Tornos: Add to that the fact that that we don't have the headwinds that we've had in 2023 when he goes to supply our <unk>.

Yvonne Tornos: Between number one number one number two we got confidence on that or what are we going.

Yvonne Tornos: Beyond that we don't see a headwind when it comes to the shift to the ASC, we actually see that as a as a building. We're excited about some of the dynamics. We are hearing about when it comes to the movement of soldiers and Tracy I was gonna be a contributor.

Yvonne Tornos: We're excited about some of the dynamics we're hearing about when it comes to the movement of solders into the AC. That's going to be a contributor. And as I mentioned to Joanne, the uplift that we see on Cementless and Rosa, which are products that we launched three years ago but are now going to be accelerated, are the main contributors to the confidence in the guidance. I don't know, Shuki, if you have anything else here.

Yvonne Tornos: And as I mentioned to John B, I believe that we see on cement as a Rosa which are products that we launched three years ago, but now gonna get accelerator are the main contributors to the confidence in the guidance I don't know she'll give you have anything else here I think that as well.

Shuki: One of the key points.

Shuki: One said that pricing erosion is assumed in that 4% library.

Suketu Upadhyay: Pricing Erosion Okay, that's helpful. And then just to kind of dovetail with Joanne's question about Marge. We talked about Gross Margins, but clearly, operating margins are doing more heavy lifting. And so, you know how much of the restructuring program... The benefit is driving some of that operating margin expansion. How much are you assuming for top-line leverage in that 80 basis points or so of expansion? And yeah, that's about it.

Speaker Change: Right Okay.

Suketu Upadhyay: Helpful from.

Suketu Upadhyay: From both you and then just to kind of dovetail on Joanne question around margin.

Suketu Upadhyay: You talked about gross margins.

Suketu Upadhyay: Clearly operating margins are doing more heavy lifting this year and so.

Suketu Upadhyay: How much from the restructuring program is benefiting is driving some of that operating margin expansion.

Suketu Upadhyay: How much are you assuming for top line leverage and that 80 basis points or so of expansion.

Speaker Change: Yes, that's about it and thanks for taking my question.

Suketu Upadhyay: Yeah, so the key driver with gross margin, you know, being sort of flattened down slightly, is really coming from revenue leverage and operating margin. You could expect overall OPEX as a percentage of sales to drop by about 100 base points, give or take. And that's even with R&D increasing year over year.

Suketu Upadhyay: Yeah. So the key driver with gross margin being sort of flat to down slightly it really is coming from revenue leverage and operating margin.

Suketu Upadhyay: You could expect overall opex as a percentage of sales to drop by about 100 basis points give or take.

Suketu Upadhyay: And that's even with R&D increasing year over year.

Suketu Upadhyay: So the efficiency and the restructuring programs in the near term are really focused on SG&A. However, inside of that full program, we are working on things inside COGS to help maintain and keep gross margin stable over time. Those are going to be a little bit more midterm in nature and how they get realized. Things like skew rationalization, site optimization, inventory reductions, and corresponding E&O reductions.

Suketu Upadhyay: So so the efficiency and the restructuring programs in the near term are really focused on on SG&A. However inside of that full program. We are working on things inside of Cogs.

Suketu Upadhyay: To help maintain and keep gross margins stable over time, those are going to be a little bit more mid term in nature and how they get realized things like SKU rationalization site optimization inventory reductions and corresponding reductions those are all things that have a little bit longer lead time.

Suketu Upadhyay: Those are all things that have a little bit longer lead time, naturally, as you can expect as you're moving your supply chain around and not wanting to disrupt the ability to supply demand. But they are definitely going to take more of a prominence as we move forward beyond 2024. But for 24, the way you characterize is right.

Suketu Upadhyay: Naturally as you can expect as you're moving your supply chain around and not wanting to disrupt the abilities by demand, but they are definitely.

Suketu Upadhyay: You got to take more of a prominence as we move forward beyond 2024, but for 'twenty for the way you characterize is right its primarily revenue driven <unk> and SG&A.

Suketu Upadhyay: It's primarily revenue driven and SG&A driven. Thanks for the questions, Ryan. Katie, can we go to the next question in the queue? We'll go next to Travis Steed with Banksy.

Travis Steed: Thank you.

Travis Steed: Yeah. Thanks for the questions Ryan Katy can we go to the next question in the queue. We.

Suketu Upadhyay: We will go next to Travis Steed with Bank of America.

Suketu Upadhyay: Hey, thanks for taking the question. I want to ask about the $200 million in cost savings that you guys called out this year. Curious if the plan is for that to kind of drop through to the bottom line? Are you going to reinvest that?

Travis Steed: Hey, Thanks for taking the question I wanted to ask about the 200 million in cost savings that you guys called out this year.

Travis Steed: Planning is for that to kind of drop through to the bottom line or are you going to reinvest that and what does that mean for kind of margins beyond this year and longer term.

Suketu Upadhyay: And what does that mean for kind of margins beyond this year and longer? Yeah, so the way we characterize it was that it would be $200 million run rate as we exit 2025. In the year 2024, we expect that to be about $100 million, or about half of the run rate savings that we're predicting over a two-year period. You know, we're dropping a lot of that to the bottom line, as you can see, with our implied guidance at the midpoint would suggest about an 80 basis point increase in operating margins. And so we're actually taking a good portion of that and dropping it. But we're also reinvesting a pretty significant portion back into our priority areas, ensuring that we've got the appropriate amount of sets and instruments for cementless uptake, as well as persona uptake through ROSA, ensuring that we've got the right level of commercialization and execution in our new ROSA shoulder launch, and ensuring and ramping up commercialization efforts in our HIP franchise around the product launches that we have for HIP.

Suketu Upadhyay: Yeah. So the way we characterize it was that it would be $200 million run rate as we exit 2025.

Suketu Upadhyay: In year for 2024, we expect that to be about $100 million or about half of the of the run rate savings.

Suketu Upadhyay: That we're predicting over two year period.

Suketu Upadhyay: We're dropping a lot of that to the bottom line as you can see with our implied guidance at the midpoint would suggest about an 80 basis point increase in operating margins and so we're actually taking a good portion of that dropping it to the bottom, but we're also reinvesting a pretty significant portion back.

Suketu Upadhyay: Into our priority areas.

Suketu Upadhyay: Ensuring that we've got the appropriate amount of sets and instruments or some atlas uptake as well as persona uptake Rosa ensuring that we've got the right level of commercialization and execution and our new Rosa shoulder launch at.

Suketu Upadhyay: Ensuring and ramping up commercialization efforts in our hip franchise around the product launches that we have perhaps so it really is a combination of both and that's the great thing about this efficiency program that enables us to reinvest back into our priority areas, while dropping pretty significant substantial margin expansion now for the third year in a row.

Suketu Upadhyay: And that's the great thing about this efficiency program. It enables us to reinvest back into our priority areas while dropping pretty substantial, substantial margin expansion now for the third year.

Suketu Upadhyay: That's helpful and on the new comp plan that you called out.

Suketu Upadhyay: And on the new comp plan that you called out, curious if that's going to have an impact on margins or just not material enough to impact margins. And then on M&A, just curious if there's been any change on the two years of EPS from M&A. Yeah, on the comp plan, it's not really going to have any material impact.

Suketu Upadhyay: If that's going to have an impact on margins are just not material enough to impact margins and then on M&A. Just curious if there's been any change on the two years of EPS dilution from M&A.

Suketu Upadhyay: Yeah on the comp plan, it's not really going to have any material impact and it's embedded in our guidance I think it's more about a mix shift of how that comp plan as designed right, whereas previously it was more focused in bias towards revenue growth I think now what we're trying to do is get a greater balance between top and bottom line all the <unk>.

Suketu Upadhyay: And it's embedded in our guidance. I think it's more about a mix shift of how that comp plan is designed, right? Whereas previously, it was more focused and biased towards revenue growth.

Suketu Upadhyay: I think now what we're trying to do is get a greater balance between top and bottom line all the way through cash flow. So it's really a mix shift in how we think about comp versus an increase, and again, all of that is embedded into our guidance for 24. Relative to dilution, you know, we still think about two years from a dilution standpoint is reasonable. Of course, we'd like it to be inside of that, but just given where valuations are today, as well as the cost of debt, which hopefully is gonna come down over time, that's kind of where we see one of our card values. Very helpful. Thanks a lot.

Suketu Upadhyay: Through cash flow. So it's really a mix shift in how we think about comp versus an increase in comp and again all of that is embedded into our guidance for.

Suketu Upadhyay: 24.

Suketu Upadhyay: Relative to the dilution you know, we still think about two years.

Suketu Upadhyay: From a dilution standpoint is is reasonable of course, we'd like it to be inside of that but just given where valuations are today as well as the cost of debt, which hopefully is going to come down over time.

Suketu Upadhyay: That's that's kind of what where we see one of our God bless.

Speaker Change: Great helpful. Thanks, a lot. Thank you.

Suketu Upadhyay: Thank you. Thanks, Travis. Katie, can we go to the next question in the queue, please? We'll go next to Jeff Johnson with Bayer. Thank you. Good morning, guys.

Speaker Change: Thanks, Katy can we go to the next question in the queue. Please.

Suketu Upadhyay: We'll go next to Jeff Johnson with Baird.

Yvonne Tornos: Congratulations on the quarter. Yvonne, maybe you mentioned in passing that the shoulder for Rosa is not going to be a late year 24 launch. Could you dial in that timing anymore? And I'd be interested in hearing about, you know, kind of your view on the uptake of Rosa's shoulder. You know, obviously, shoulder surgeries, replacements, technically more challenging.

Jeff D. Johnson: Thank you good morning, guys congratulations on the quarter.

Yvonne Tornos: Maybe.

Yvonne Tornos: You mentioned in passing that shoulder for Rosa is that going to be a late year 'twenty for launch just could you dial in that timing anymore and I'd be interested in hearing about.

Yvonne Tornos: Our view on the uptake of Rosa shoulder, obviously shoulder surgeries replacements.

Yvonne Tornos: More challenging I think some questions about what role.

Yvonne Tornos: I think some questions about what role robots can initially play in those procedures. So just how does that help the uptake of Rosa? And I don't think I heard a Rosa placement number. I think sometimes you give it on kind of an annualized basis. Any updates on kind of exiting 23 where Rosa placements were? Thanks. Hey, thank you, Jeff. So I got to be careful what I say about timelines for Rosasolder.

Yvonne Tornos: Robot can initially play in those procedures. So just how does that help the uptake umbrella is that and I don't think I heard our Roes up placement number I think sometimes you've given us kind of an annualized basis any update on that.

Yvonne Tornos: The 23, where Rosa placements were thanks.

Speaker Change: Okay. Thank you, Jeff So I got to be careful what I say about timelines, Florida Rosa shoulder I'll, just say that I'm very confident that this is not a late 'twenty 'twenty, Florida lunch and as I mentioned I think it's gonna be I think that'd be very meaningful so beyond being first to market is a high quality product is going to be applicable for both reverse.

Yvonne Tornos: I'll just say that I'm very confident that this is not a late 2024 launch. And as I mentioned, I think it's going to be very meaningful. So beyond being first to market, it's a high quality product. It's going to be applicable for both reverse and anatomic surgeries.

Speaker Change: And anatomic surgeries is going to simplify a very complex procedure is going to be fully integrated we've said the rest of the shoulder CBS ecosystem I believe youre going to get great traction in an ASC environment, where the speed and accuracy matters and we're going to have hopefully demo. These next week at the Academy meeting.

Yvonne Tornos: It's going to simplify a very complex procedure. It's going to be fully integrated with the rest of the Solder CVH ecosystem. I believe it's going to get great traction in an ASC environment where speed and accuracy matter. And we're going to hopefully demo these next week at the Academy meeting. Whether it is ready or not, it will be demoed there at the Academy meeting.

Yvonne Tornos: Whether it is ready or not it would be damn well there at the Academy meeting relative to your second question on the Rosa placements in the numbers.

Yvonne Tornos: Relative to your second question on the ROSA placements and the numbers, you should expect us to do around 300 installations per year. Additionally, you should expect us to drive penetration rates of minimum 5% to 7% at least per year. You should expect that one third of these overall ROSA installations are going to go into an ASC environment. And as I mentioned earlier to Joanne, you should expect that in a large percentage of cases, these ROSA installations are going to pull some power. So again, great momentum with ROSA, and I'm very excited about where we are with Solder. Thank you.

Yvonne Tornos: You should expect us to do around 300 installations per year.

Yvonne Tornos: You should expect us to drive penetration rates of a minimum 5% to 7% at least per year, you should expect that one third of these raw sand overall Ross any installations are going to go into an ASC environment and as I mentioned earlier to Joanne you should expect that the in a large percentage of cases these ross.

Yvonne Tornos: Installations are gonna put cement so again, great momentum we wrote down.

Yvonne Tornos: And are very excited about where we are we saw there.

Speaker Change: Thank you and maybe as a follow up just as I think about a 5% to 6% constant currency guidance and 102 hundred basis points above market. It seems like it's settling in at a good rate.

Suketu Upadhyay: And maybe as a follow-up, just as I think about the 5% to 6% constant currency guidance in the 100, 200 basis points above market, it seems like the market is settling in at a good rate. If I think about gross margin, obviously, some of the hedge settlements should normalize as you get into 2025, you know, coming down, and pricing getting less bad. So it sounds like gross margin, at least not a big, big headwind going forward. And then, of course, you've got the cost savings initiatives here on the SG&A side. You know, if I roll all that together, including the improving balance sheet and cash flow and a commitment to some share buyback, it feels like, you know, 10, 10.5% EPS growth, which is kind of the midpoint of your guidance this year. If it weren't for tax rate and FX headwinds, that sounds like it could be a sustainable kind of target. I'm sure you don't want to lay out an LRP here But is there anything in my thinking there that would say 10%-ish, plus or minus, is not a reasonable kind of longer-term EPS growth rate to be thinking about? Thank you.

Suketu Upadhyay: On gross margin obviously some of the.

Suketu Upadhyay: Settlement should normalize as you get into 2025.

Suketu Upadhyay: Coming down pricing and a little less bad so it sounds like gross margin at least not a big big headwind going forward and then of course, you've got cost savings initiatives here on the SG&A side.

Suketu Upadhyay: If I roll all that together, including the improving balance sheet and cash flow and our commitment to some share buybacks. It sounds like 10, 10, 5% EPS growth, which is kind of the midpoint of your.

Suketu Upadhyay: Guidance this year, if it weren't for tax rate and FX headwinds.

Suketu Upadhyay: It sounds like it could be a sustainable kind of target and I'm sure you don't want to lay out in L. R. P. Here out of your analyst day, but is there anything in my thinking there that would say, 10% ish plus or minus is not a reasonable kind of longer term.

Suketu Upadhyay: EPS growth rate to be thinking about thank you.

Suketu Upadhyay: Hey Jeff, I think that was actually a really good articulation and summary of what we're trying to get across today. In fact, if you look at our guidance today, on reported EPS, it would suggest six to 8% at both ends of the range. That's after overcoming about 400 basis points of headwind between non-operating things like interest expense, FX, and tax. So again, that's about a 400 basis point drag that's embedded in that six to 8%. So the way you're thinking about it, could we be in that low double-digit zip code on EPS in a sustainable, durable way? I think so. Thank you. Thanks for the questions, Jeff. Katie, do you have another question in the queue? We'll go next to Richard Newitter with a touristic... Hi, thanks for taking the questions.

Speaker Change: Yeah, Hey, Jeff I think that was actually a really good articulation and summarization of what we're trying to get across the fact, if you look at our guidance today.

Suketu Upadhyay: On reported EPS, it would suggest 6% to 8%.

Suketu Upadhyay: At both ends of the range. That's after overcoming about 400 basis points of headwind between non operational things like interest expense FX and tax rate right. So again, that's about a 400 basis point drag that's embedded in that 6% to 8%.

Suketu Upadhyay: So the way you're thinking about it could could we be in that low double digit Zip code on EPS and a sustainable durable way I think yes.

Richard Newitter: Thank you.

Richard Newitter: Thanks for the questions Jeff.

Richard Newitter: Do you have another question in the queue.

Richard Newitter: We'll go next to Richard New Winter with tourists Securities.

Richard Newitter: Hi, Thanks for taking the questions just with AOS next week.

Yvonne Tornos: Just with AAOS next week, I was wondering, anything that we should be on the lookout for with respect to Canary, or Paterno-RQ, rather, and data presentations? I think you had also mentioned on a prior call that you were expecting a GLP-1 kind of data analysis, possibly at AAOS. And I'm going to have a follow-up. So the answer is yes to both, Richard.

Yvonne Tornos: Wondering any anything that we should be on the look out for.

Yvonne Tornos: With respect to Canary.

Yvonne Tornos: We're concerned argue rather and data presentations I think you had also mentioned on.

Yvonne Tornos: The prior call you were expecting a GOP one kind of data analysis, possibly in the U S and I'm Gonna have followed.

Richard: So the answer is yes to both of them are richer. So we will have some data points on persona in Q I will have some data on <unk> on persona IQ, we moved from a limited market release in 'twenty three to full market release in 'twenty four.

Yvonne Tornos: So we will have some data points on Persona IQ, and we'll have some data on GLP-1s. On Persona IQ, we moved from a limited market release in 23 to a full market release in 24. We got the value proposition finalized. We got over 2 billion data points.

Yvonne Tornos: We got the value proposition finalize.

Yvonne Tornos: Got over 2 billion data points, we understand there is a product that is going to enable clinicians to intervene when needed.

Yvonne Tornos: We understand there is a product that is gonna enable clinicians to intervene when needed. We have data points on how this product will reduce overall complexity in the episode of care, and how we can, by intervening soon, reduce costs, especially post-surgery when it can be pretty taxing. But we don't want reimbursement.

Yvonne Tornos: We got data points on how these products will reduce our overall complexity and there'll be episode of care how.

Yvonne Tornos: How we can by intervening soon reduce costs, especially post surgery when when it can be pretty taxing.

Yvonne Tornos: We don't we reimbursement we spoke about the and tap new technology I don't payment, which we got back in October So that's in full launch mode.

Yvonne Tornos: We spoke about NTAP, New Technology Add-On Payment, which we got back in October. So that's in full launch mode. We will submit, Barry always asks me this question, we will submit for a TPT at some point in the spring, and we're going to bring some data around some of the experiences that we've seen with Persona IQ at the Cleveland Clinic, HSS, and other facilities. So, excited in terms of where we are with Persona IQ, more to come at the Academy. And then for GLP-1s, yeah, we're going to be sharing some of the data we've done in conjunction with the Academy. And what I will tell you is that so far, everything we've seen with GLP-1s is that it remains a tailwind. We're actually tracking the number of patients that are using GLP-1 pre-surgery, and that number is in the 20% to 30%.

Yvonne Tornos: We will submit the very always asked me. This question, we will submit for that TBD.

Yvonne Tornos: Coming at some point in the spring and summer.

Yvonne Tornos: Now, we're going to bring some data around some of the experiences that we're seeing with persona the Cleveland clinic HSA its and another facility. So excited that in terms of what we all read persona IQ more to come at the Academy and then for GOP ones. Yeah, We're gonna be sharing some of the data we've done in conjunction with the Academy and what I will tell you is that so far everything we have.

Yvonne Tornos: <unk> ones is that it remains a tailwind.

Yvonne Tornos: We'd actually tracking the number of patients that are already using the <unk> one pre surgery.

Yvonne Tornos: And the anomalies in the 20% to 30%. So bio means this is not a headwind and.

Yvonne Tornos: So, by all means, this is not a headwind, and, you know, I'm glad that that conversation is being muted. Great And then just piggybacking off of Jeff's question, you know, even with potential earnings dilution. If, you know, if you're potentially going to be or have the potential to be in a low double digit or 10 plus earnings growth range, and you haven't given your commitment to growing earnings faster, and then the top line, where it sounds like 5% is kind of a sustainable floor, given your end market and your WAMGR, it sounds like no matter what, even with dilution over a one and a half, Is that it?

Yvonne Tornos: I'm glad that our compensation has been muted.

Speaker Change: Great and then just.

Speaker Change: Piggybacking off of Jeff's question.

Yvonne Tornos: Even with.

Yvonne Tornos: Potential earnings dilution.

Yvonne Tornos: <unk>.

Yvonne Tornos: If you are potentially going to be.

Yvonne Tornos: Have the potential to be in a low double digit or 10, plus your earnings growth range and given your commitment to growing earnings faster.

Speaker Change: And then.

Yvonne Tornos: Then the topline where it sounds like 5% is kind of a sustainable floor given your end market <unk>.

Yvonne Tornos: Sounds like no matter, what even with dilution over a one and a half year period, you're you feel confident or we should feel confident and a high.

Yvonne Tornos: High single digit earnings growth rate at worst is that.

Suketu Upadhyay: Also, a reasonable assumption based on all the different commitments and and commentary that you provide. Well, you know, I think I think what you're asking is, can you still sustain that in a world where you do a sizable M&H? If I've gotten that correct, that's really difficult to tell, right? Because no two deals are created equal.

Speaker Change: Also a reasonable assumption based on all the different commitments and and and.

Suketu Upadhyay: Commentary that you provided.

Suketu Upadhyay: Well.

Suketu Upadhyay: I think what you're asking is can you still sustain that in a world where you do a sizable M&A transaction, if I've gotten that correct.

Suketu Upadhyay: It's really difficult to tell right because the no no two deals are created equal, it's very situational and so I don't want to get out their front foot into kind of hypothesize theoretically what could happen to EPS inside of a sort.

Suketu Upadhyay: It's very situational, and so I don't want to get out there front footed to kind of hypothesize theoretically what could happen to EPS inside of a sort of. Maple Leaf Deal. So I think that what you should take away is that from an underlying perspective, at five to 6% organic growth, with the levers that we have operationally, but also with the strength of our balance sheet, organically, we can deliver that attractive earnings per share. Thanks Rich. Katie, I think we have time for one more question if there's one in the queue. We'll go next to Jason Bedford with Raymond James. Mr. Bedford, your line is open. Please go ahead. Please check your mute function.

Jason Bedford: Sort of.

Jason Bedford: May bleed deal so.

Suketu Upadhyay: I think what you should take away is that from an underlying perspective at 5% to 6% organic growth with the levers that we have operationally, but also with the strength of our balance sheet organically that weekend, we can deliver that attractive earnings per share profile.

Jason Bedford: Okay. Thanks, Rich Katy I think we have time for one more question if there's one in the queue.

Suketu Upadhyay: We'll go next to Jason Bedford with Raymond James.

Jason Bedford: Mr. Bedford. Your line is open go ahead.

Jason Bedford: Please check your mute function.

Suketu Upadhyay: Yeah, sorry about that. I'll be quick. On the supply challenges that you incurred in 23, can you just remind me what the impact of these challenges was on the P&L last year? Meaning, is there a way to quantify the impact on revenue?

Jason Bedford: Yes, sorry about that I'll be quick.

Jason Bedford: On the supply challenges that you're in.

Jason Bedford: And in 'twenty three can you just remind me what was the impact of these challenges on the P&L last year, meaning is there a way to quantify the impact on revenue.

Suketu Upadhyay: Yeah.

Suketu Upadhyay: Hey, Jason Suki, it's a bit amorphous to try and say exactly how, you know, days on back order really impact sales, because one, obviously, you have an impact on actual cases. But the more meaningful impact is the ability for our sales reps to go out there and actually hunt for new business, right? They're going to be a little bit hesitant to go shift and make conversions if they don't feel like they can supply it. So that's actually probably the bigger impact. But trying to frame that in terms of percentage points is very difficult to do.

Jason Bedford: Hey, Jason.

Suketu Upadhyay: A bit of a more fast to try and say exactly how.

Suketu Upadhyay: Days on back order really impact sales because one obviously you have an impact on actual cases, but the more meaningful impact is the ability for our sales rep to go out there and actually hunt for new business right, they're going to be a little bit hesitant to go shift and make conversions if they don't feel like they can supply so that's actually probably the.

Suketu Upadhyay: Bigger impact.

Suketu Upadhyay: But trying to frame that in percentage points is very difficult to do when I look at it as a tailwind from last year. We believe it's part of the sorry.

Suketu Upadhyay: The way I look at it is a tailwind from last year; we believe it's part of the, sorry, it was a headwind for last year; we believe it's part of the tailwinds that's going to help give us confidence in delivering that five to 6% organic growth. We have some internal data points that we don't share. What I will tell you, Jason, is that for new product launches, we had to do limited market releases instead of full market releases. Persona, Osho, Tizen, for example.

Suketu Upadhyay: Sorry, it was a headwind for last year, we believe it's part of the tailwind that's going to help give us confidence in delivering that 5% to 6% organic growth for this year.

Suketu Upadhyay: We have some external data points that we are unsure what I will tell you Jason is that our new product launches, we had to do a limited market releases instead of a full market releases or so now or should that kind of example.

Yvonne Tornos: Conversions, as Suki mentioned, we had to prioritize or friend some family customers versus converting accounts. And then the third headwind of supply from a revenue perspective, we couldn't embark on a global expansion of these new product launches. So the example that I used earlier around Japan, the second largest market in the world, we could have done things differently.

Suketu Upadhyay: Conversions of Sookie mentioned, we had to prioritize or friends and family customers.

Yvonne Tornos: Theyre Suzanne converting accounts and then the third of the headwind of supply from a revenue perspective, we could in a embark on a global expansion of these new product launches. So the example that I used earlier around Japan.

Yvonne Tornos: Second largest market in the world, we could've done things differently, we could it be another market. So it is sizable and it is behind us.

Yvonne Tornos: We could have been on the market. So it is sizable, and it is behind us. That's helpful.

Yvonne Tornos: Okay. That's helpful. Maybe just along a similar vein.

Yvonne Tornos: Maybe just along a similar vein, I think you've talked about a 50 basis point impact on revenue growth in the second half from Russia. Is Russia a net tailwind as we look to 24? Yes, it is, and it is. I would say it's less than 50 basis points.

Yvonne Tornos: I think you're talking about a 50 basis point impact to revenue growth in the second half from Russia.

Yvonne Tornos: As Russia, a net tailwind as we look to 'twenty four.

Yvonne Tornos: It is it is I would say, it's less than 50 basis points, but given that we now have all the licenses secured we need to operate.

Yvonne Tornos: But given that we now have all the licenses secure, we need to operate that that will probably be most pronounced in the third quarter because that's when we saw the biggest increase. Thanks for the questions, Jason. I think we're wrapped up with the queue and just hitting 9: 30. So I'll turn it over to Yvonne for some closing remarks. Sure. Thanks, Keri. I'll keep it short.

Yvonne Tornos: That will be a tailwind probably most pronounced in the third quarter.

Yvonne Tornos: Because that's when we saw the biggest impact in 'twenty three.

Yvonne Tornos: Thanks for the question, Jason I think we're wrapped up with the Q and just hitting 930, so I'll turn it over to Lon for some closing remarks sure. Thanks, Kerry I'll keep it short granola, we gotta get going here. So I mean, it unless I want to start or when I and the way that are starting to call by thanking the team members at almost 20000 team members get a Zimmer biomet.

I know we have to get going here, so in a minute or less, I want to start or end the way that I started the call by thanking the team members, the almost 20,000 team members here at Zimmer Biomet who are doing a remarkable job of executing the plans that we laid out. So it grew 7.5% constant currency in 23, with a nice EPS expansion of 200 basis points. That's after growing 6.6% in 2022. And now we're committing to at least 5% revenue growth, 5.5 midpoint, with nice EPS expansion and double-digit growth in free cash flow. So, I'm very proud of the work that team members are doing. We're very excited about 2024. We are moving from remediation to – we have moved from remediation to innovation.

Yvonne Tornos: Doing a remarkable job in executing the plans that we lay forward. So grew seven 5% constant currency in 'twenty three we have a nice EPS EPS expansion of 200 basis points and that's after growing six 6% in 2022 and now we're committing to at least 5%.

Yvonne Tornos: Revenue growth five five midpoint with nice EPS expansion and double digit grocery now free cash flow. So very proud of the work that team members are doing and we're very excited about 2024, we are moving from remediation, who we have moved from remediation to innovation I'm excited about the pipeline of products I'm excited about the.

I'm excited about the pipeline of products. I'm excited about the financial profile that we're committing to, or growing EPS faster than revenue and free cash flow faster than EPS. And so far this year, everything that we're seeing gives us confidence that it's going to be a very solid year for Zimmer Biomet. So thank you for your attention this morning, and thank you, team members at Zimmer Biomet. Thank you for participating in today's conference call.

Yvonne Tornos: Financial profile that we can get into or growing EPS faster than revenue and free cash flow faster than E. P. S.

Yvonne Tornos: So far early in the year everything that we're seeing gives us confidence our confidence that you're going to be a very solid year for Zimmer biomet. So thank you for your attention. This morning and thank you.

Yvonne Tornos: <unk> team members at Zimmer Biomet.

Speaker Change: Thank you for participating in today's conference call you may now disconnect.

Yvonne Tornos: Okay.

Yvonne Tornos: [music].