Q1 2024 Enovis Corp Earnings Call

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Operator: Good day, and welcome to the Enovis First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. Now, I would like to turn the conference over to Kyle Rose, Vice President of Investor Relations. Please go ahead.

Good day and welcome to the in November 1st quarter, 'twenty 'twenty four earnings conference call.

All participants will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions too.

To ask a question you May press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

And now I would like to turn the conference over to Kyle Rose Vice President of Investor Relations. Please go ahead.

Kyle Rose: Thank you, Mary-Lise. Good morning, everyone, and thank you for joining us today on our first quarter 2024 results conference call. I'm Kyle Rose, Vice President of Investor Relations. Joining me on the call today are Matt Trerotola, Chair and Chief Executive Officer, and Ben Berry, Chief Financial Officer. Our earnings release was issued earlier this morning and is available in the Investor Relations section of our website, Enovis.com. We'll be using a slide presentation in today's call, which can also be found on our website. Both the audio and the slide presentation of this call will be archived on the website later today.

Kyle Rose: Thank you Mary.

Kyle Rose: Everyone and thank you for joining us today on our first quarter 2024 results Conference call I'm trial, where he was vice president of Investor Relations. Joining me on the call today are Matt for Solar Chair, and Chief Executive Officer, and Ben Barry Chief Financial Officer.

Kyle Rose: Our earnings release was issued earlier this morning and is available in the Investor Relations section of our website and Nobody's Dot Com, we will be using a slide presentation for today's call, which can also be found on our website. Both the audio and the slide presentation of this call will be archived on the website later today.

Kyle Rose: During the call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's earnings release and in our filings with the SEC. The actual results might differ materially from any forward-looking statements that we make.

Kyle Rose: During the call, we'll be making some forward looking statements about our beliefs and estimates regarding future events and results. These forward looking statements are subject to risks and uncertainties, including those set forth in the safe Harbor language in today's earnings release and in our filings with the SEC.

Kyle Rose: Actual results might differ materially from any forward looking statements that we make.

Kyle Rose: The forward looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law.

Kyle Rose: The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them except as required by law. For further details regarding any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and in the appendix of today's slide presentation. With that, let me turn it over to Matt, who will begin on slide three. Matt.

Kyle Rose: For further details regarding any non-GAAP financial measures referenced during the call today. The accompanying reconciliation information relating to those measures can be found in our earnings press release and in the appendix of today's slide presentation with that let me turn it over to Matt who will begin on slide three map.

Matthew L. Trerotola: Thanks, Kyle. Hello, everyone, and thanks for joining us this morning. We had a strong first quarter, but before I begin to discuss the results, I want to welcome the Lima organization to Enovis and recognize the efforts of our strong global teams who work hard every day to execute our strategies and help our patients live more active and fulfilling lives. Please note that as we fully integrate into one company with a global focus, we're managing the organization on a combined global basis, and we use pro forma grades for comparative purposes. For year-over-year comparisons, our prior year financials have been updated to include the acquisitions of Lima and Novostep. Let's start on slide three and talk about some of the quarter's highlights.

Matt: Thanks Kyle.

Matt: Thanks for joining us. This morning, we had a strong first quarter, but before I begin to discuss the results I'm going to welcome him to lead the organization through a novus and recognize the efforts of our strong global teams, who work hard every day to execute our strategy to help our patients live more active and fulfilling lives.

Matt: Please note that it's been fully integrated into one company with a global focus we're managing your organization on a combined global basis, and we use pro forma great for comparative purposes for year over year comparisons our prior year financials have been updated to include the acquisition that labor and all the steps.

Matt: Let's start on slide three and talk about some of the quarters highlights we had a transformational start to the year. We completed our planned acquisition of Lima made significant progress on our integration plans and carried forward momentum from 2023 across our geographies and business units.

Matthew L. Trerotola: We had a transformational start to the year. We completed our planned acquisition of Lima, made significant progress on our integration plans, and carried forward momentum from 2023 across our geographies and business units. We deliver reported growth of 27% year-over-year and 5% on a pro-forma combined basis versus very strong costs. We expanded our adjusted EBITDA margins by 220 basis points, reflecting the mixed impact of recon growth, productivity improvements, stable inflation and pricing trends, and the step change impact from name. We closed the VELIM acquisition in early January and are seeing strong momentum and healthy scaling of the broader set of acquisitions we've completed in the past few years.

Matt: We delivered reporting rose, 27% year over year, and 5% on a pro forma combined basis versus very strong comps.

Matt: We expanded our adjusted EBITDA margins by 220 basis points, reflecting the mix impact that we can grow productivity improvements stable inflation and pricing trends and step change impact from labor.

Matt: We Couldnt believe acquisition in early January and are seeing strong momentum and healthy scaling a broader set of acquisitions, we completed in the past few years.

Matthew L. Trerotola: Overall, a strong start to the year. On slide four, we delivered 66% reported global revenue growth. Proforma Recon grew 7% year-over-year in the first quarter, which includes a 2% to 3% negative impact from integration dis-synergies, in line with our plan.

Matt: Overall, a strong start to the year.

Matt: In recon on slide four we delivered 66% reported.

Matt: Global revenue growth pro forma recon grew 7% year over year in the first quarter, which includes a 2% to 3% negative impact from integration dis synergies in line with our plan.

Matthew L. Trerotola: U.S. recon grew 4%, including 8% growth in U.S. extremities and flat performance in hips and knees against a very strong prior year comparable of 22% growth in our core Enovis business. Outside of the U.S., we grew 10% in a resilient market. We've achieved significant progress integrating the lead acquisition and are encouraged by the early execution of our combined team. To date, we have seen some short-term growth impacts across anatomies and geographies as we've worked through the integration of our commercial channels. These fall well within our projected estimates, and our expectations for the full year remain intact.

Matt: U S recon grew 4%, including 8% breaking U S extremities and flat performance in hips.

Matt: Against the very strong prior year comparable of 22% growth in our core business.

Matt: Outside the U S. We grew 10% and a resilient market.

Matt: We have achieved significant progress integrating the <unk> acquisition.

Matt: By the early execution of our combined teams to date, we have seen some short term bronx impacts across Anatomies and geographies that we've worked through the integration of our commercial channels. These fall well within our projected estimates and our expectations for the full year remains intact.

Matthew L. Trerotola: We look forward to ramping cross-selling opportunities as we move into the second half of 2024. I'm excited about the initial traction we're seeing with our market-leading Empower and Ultimate products globally. We continue to expand market access with the clearance of our ultimate small shell, the Q1 in Europe. We also have a strong pipeline of innovation as we continue the U.S. rollout of the Empower Revision Me, the controlled ramp of Arvis 2.0, and sell Lima's 3D printed trapecular titanium cones for use with our Empower Revision system, one of our first key cross-selling opportunities.

Matt: We look forward to remain to ramping cross selling opportunity as we move into the second half of 2024.

Matt: I'm excited about the initial traction we're seeing with our market, leading empower an alternate products globally.

Matt: <unk> continued to expand market access with the clearance of our ultimate small shelves in Q1 in Europe.

Matt: We also have a strong pipeline of innovation as we continue the U S rollout of the empower revision knee controlled ramp of RBC to point out and selling me by three D printed trabecular titanium combs for use with our empower revision system one of our first key cross selling opportunities.

Matthew L. Trerotola: I'm also very excited to announce that just earlier this week, ARDIS received $510K clearance for use in shelters. This timing aligns well with our planned launch of the augmented glenoid component of our flagship Altivate Reverse Shoulder System in the second half of the year.

Matt: I'm also very excited to announce that just earlier. This week August received five 10-K clearance for use in shelters.

Matt: Timing aligns well with our planned launch of the augmented glenoid component of our flagship alternate reverse shoulder system in the second half of the year.

Matthew L. Trerotola: Our foot and ankle team continues to launch great new differentiated technologies like the Arsenal Reload that are keeping vitality high and helping drive very strong double-digit growth. These great new technologies, alongside the cross-selling potential of the combined portfolios, offer significant opportunity to accelerate growth in the second half of 2024 and set us up with great momentum as a billion-dollar-plus, fast-growing recon business entering 2025. In PR, on slide five, our 3% organic growth reflects a stable market environment and disciplined execution.

Matt: Foot and ankle team continue to launch great new differentiated technologies like Arsenal reload that are keeping the vitality high and helping drive very strong double digit growth.

Matt: These great New technologies, alongside the cross selling potential of the combined portfolios offer significant opportunities to accelerate growth in the second half of 2024 and set us up with great momentum.

Matt: Plus fast growing recon business entering 2025.

Matt: And <unk> on slide five our 3% organic growth reflects a stable market environment and disciplined execution. Overall this business is performing in line with our strategic plan.

Matthew L. Trerotola: Overall, this business is performing in line with our strategic plan. Recovery Sciences-led growth is boosted by continued double-digit laser growth, and global bracing continues to grow above market rates. Our new product pipeline is robust and includes the new OA debrake called Roam, additional spine bracing products, and the next generation of clinical electrotherapy products for our recovery sciences team.

Matt: Recovery Sciences led growth boosted by continued double digit laser growth and global bracing continue to grow above market rates.

Matt: Our new product pipeline is robust and includes the new OA knee brain called wrong.

Matt: Additional spine bracing products and the next generation of clinical electric therapy products for a recovery Sciences team.

Phillip Benjamin Berry: Adjusted EBITDA margins in PNR improved 50 basis points year over year as we continue to use EGX tools to drive consistent productivity improvements and sustain traction on price versus cost. Now I'll let Ben take you through the P&L details. Ben. Thanks, Matt. Hello, everyone.

Matt: Adjusted EBITDA margins in PNR improved 50 basis points year over year as we continue to use E. T X tools to drive consistent productivity improvement and sustained traction on price versus cost.

Matt: Now I'll, let Ben take you through the P&L details Dan.

Phillip Benjamin Berry: I'll begin on slide six. We are pleased to report first quarter sales of $516 million, up 27% versus the prior year and 5% on a pro forma basis. This compares to strong prior year organic core growth of 9%. Our teams have been working really hard to integrate our global Lima acquisition that closed January 3rd. We've been extremely pleased so far with the collaboration and our teams and the high-quality integration plans that we've begun implementing again.

Ben Barry: Thanks, Matt and Hello, everyone I'll begin on slide six.

Ben Barry: We are pleased to report first quarter sales of $516 million up 27% versus the prior year.

Ben Barry: 5% on a pro forma basis.

Ben Barry: This compares to a strong prior year organic core growth of 9%.

Ben Barry: Teams have been working really hard to integrate our global Lima acquisition that closed in January 3rd we've been extremely pleased so far with the collaboration and our teams and the high quality integration plans that we've begun executing against our underlying breaks in PNR in recon continues to be soft.

Phillip Benjamin Berry: Our underlying growth in P&R and recon continues to be solid, and while still early, our integration efforts are slightly ahead of our original plan. First quarter adjusted gross margin was 58.7%, up 70 basis points year over year. The growth was driven by leverage from higher sales, favorable segment mix, which includes the addition of Lima, and cost leverage. Our first quarter adjusted EBITDA margin of 16.1% was up 220 basis points versus Q1 2023. The first quarter's effective tax rate was 23%. This is compared to 21% last year. Interest expense was $20 million for the quarter versus $6 million in 2023.

Ben Barry: And while it's still early our integration efforts are slightly ahead of our original plans first quarter. Adjusted gross margin was 58, 7% up 70 basis points year over year.

Ben Barry: The growth was driven by leverage from higher sales favorable segment mix, which includes the addition of Lima and costs to leverage our first quarter. Adjusted EBITDA margin of 16, 1% was up 220 basis points versus Q1 2023.

Phillip Benjamin Berry: Overall, we posted strong adjusted earnings per share of $0.50, 14% earnings growth versus the prior year. Foreign currency exchange had an unfavorable impact of approximately two cents in the quarter.

Ben Barry: First quarter's effective tax rate was 23%. This is compared to 21% last year interest expense was $20 million for the quarter versus 6 million in 2023.

Ben Barry: We posted strong adjusted earnings per share of 50 cents.

Ben Barry: 14% earnings growth versus the prior year.

Ben Barry: Foreign currency exchange had an unfavorable impact of approximately two cents in the quarter.

Phillip Benjamin Berry: Turning to slide seven, we are raising our prior guidance to reflect the strong start to the year. We now expect revenues in the range of $2.06 billion to $2.16 billion. This is slightly above our previous guidance range, which contemplated 7% pre-LEMA organic growth, double-digit recon growth, and low single-digit P&R growth. As we go forward in 2024, we will be reporting on pro forma results. Our updated guidance range increase translates to approximately 5-6% pro forma growth and includes acquisition-related impact. In recon, the pro forma outlook translates to high single-digit growth for the year.

Ben Barry: Turning to slide seven we are raising our prior guidance to reflect the strong start to the year. We now expect revenues in the range of 2.06 billion to $2. One 6 billion. This was slightly above our previous guidance range, which contemplated at 7%.

Ben Barry: Lima organic growth double digit recon growth and low single digit PNR growth.

Ben Barry: We go forward in 2024, we will be reporting on pro forma results. Our updated guidance range increase translates to approximately 5% to 6% pro forma growth and includes acquisition related impacts and recon the pro forma outlook translates to high.

Ben Barry: Single digit growth for the year, we expect this growth to accelerate in the second half as we annualize hi, prior prior year comps and begin realizing benefits from cross selling and new product launches. We continue to expect stable PNR growth in the low to mid single digits as was referred.

Kyle Rose: We expect this growth to accelerate in the second half as we annualize higher prior-year comps and begin realizing benefits from cross-selling and new product launches. We continue to expect stable P&L growth in the low to mid-single digits as reflected in our original guidance. We expect adjusted EBITDA in the range of $368 million to $383 million, which includes a modest increase to the range based on our Q1 performance. Our guidance for depreciation, interest, and other expenses, tax rate, and share count remains unchanged from prior guidance.

Ben Barry: Correct it in our original guidance.

Ben Barry: We expect adjusted EBITDA in the range of 368 million to 380 883 million.

Ben Barry: Which includes a modest increase to the range based on our Q1 performance our guidance for depreciation interest and other expenses tax rate and share count remain unchanged from the prior guidance.

Kyle Rose: Taking all this into consideration and as a result of our strong operational results in the first quarter, we are increasing our adjusted earnings per share range to $2.52 to $2.67. To summarize on slide eight, we had a solid start to 2024 and continue to shape the business towards accelerated growth and scale with the acquisition of Lima. We are excited about our progress in the first quarter and remain focused on successfully executing against our integration plans, creating momentum, and delivering strong financial results. Now, I'll hand it back over to Kyle to start Q&A. Kyle?

All of this into consideration and as a result of our strong operational results in the first quarter, we are increasing our adjusted earnings per share range to $2.52 to $2.67.

Ben Barry: To summarize on slide eight we had a solid start to 2024 and continue to shape the business towards accelerated growth and scale with the acquisition of landmark. We are excited about our progress in the first quarter and remain focused on successfully executing against our integration plans creating momentum.

Ben Barry: And delivering strong financial results now I'll hand, it back over to Kyle to start Q&A.

Kyle Rose: Thanks, Ben. Before we begin the Q&A session, in an effort to accommodate everyone on the call, we ask that analysts please keep the questions to one question, followed by one follow-up question. You're welcome to rejoin the queue if we have time. With that, we'll hand it over to the operator to start the Q&A.

Kyle Rose: Thanks, Dan before we begin the Q&A session in an effort to accommodate everyone on the call. We ask that analysts. Please keep the questions to one question followed by one follow up question.

Kyle Rose: Youre welcome to rejoin the queue. If we have time would that were handed over to the operator to start Q&A.

Kyle Rose: Yeah.

Operator: Thank you very much. Now, we will start the Q&A.

Speaker Change: Thank you very much we will start the Q&A.

Operator: You may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. Again, press star 1 to enter the queue. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we'll start with a question from Vik Chopra from Wells Fargo. Vik, please go ahead.

Speaker Change: You May press Star then one on your Touchtone phone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys again star one to enter the queue.

Speaker Change: He said anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time well start.

Speaker Change: Well, it's a question from Vic she'll breath from Wells Fargo.

Vic: Please go ahead.

Vikramjeet Singh Chopra: Good morning, and thanks so much for taking the question. I'll keep it to one. So, you know, based on our math, Lima came in ahead of our estimates; we estimate about $85 million. Can you just talk about what you're seeing with regard to the integration and what drove the upside? And then you also called out a 2-3% negative growth impact from the integration. We'd really appreciate it if you could elaborate on that, please. Thank you.

Vic: Good morning, and thanks, so much for taking the question I'll keep it to one.

Vic: You know based on our math Lee months came in ahead of our estimate so we estimate about $85 million.

Vic: Can you just talk about what youre seeing with regards to the integration and what drove the upside and then you also called out.

Vic: Negative impact from the integration.

Speaker Change: Would really appreciate if you could elaborate on that please thank you.

Unknown Executive: I think I missed the very end of the question there about the two to three percent.

I think I missed the very end of the question there about the 2% to 3%.

Speaker Change: Yeah.

Vikramjeet Singh Chopra: Oh, sorry, I was saying we saw you called out a 2-3% negative growth impact from the integration, just any color on that would be appreciated. Thank you. Yeah, yeah. Absolutely. So, so yeah, I mean, we saw, you know, a good solid business.

Speaker Change: Oh, sorry, I was saying we saw you called out <unk>, 3% negative impact from the integration just any color on that would be appreciated. Thank yeah, yeah yeah.

Operator: And our next question comes from Jeff Johnson from Baird. Jeff, please proceed.

Unknown Executive: Yeah, absolutely. So, so yeah, I mean, we saw, you know, a good solid start to the year as expected, you know, both in terms of our performance on the integration front, you know, as well as, you know, driving good progress in the core business, you know, that we've talked about through the quarter, you know, in various settings. And so we've tried to give you a clear look with the pro forma growth, but also talk a little bit about the impact of the integration so that you can see that, you know, the underlying business is certainly, you know, in accord with a strong comp and a little softer market, but the underlying business is still, you know, very strong, and we've got a great path to accelerate through the year and execute, you know, exit the year on a very strong growth arc.

Speaker Change: Yeah, absolutely. So yeah, I mean, we saw a good solid start to the year as expected you know both in terms of our performance on the integration front, Oh, Ed as well as driving good progress in the core business that we've talked.

Speaker Change: About it through the quarter in various settings that we talked about the market environment, which you know really last year. There was a super clean market environment, then and very high utilization rates.

Speaker Change: Yeah, I think this year it was probably more a more normal market environment with storms and illnesses and different things and so I think that Oh, that's resulted in a little softer market grows quite a bit softer than last year and so that's certainly an impact but we've continued to drive strong performance.

Speaker Change: Against the market, but then we have been working quickly to do the integration as we've talked about all along and as we work through the channel integration.

Speaker Change: In the U S and in certain countries outside the U S. There's choices that we've made in some cases choices that agents have made them in other cases.

Speaker Change: That has led to some you know some loss of business that was planned and expected.

Speaker Change: And as we've talked about all along we've tried to work through it quickly so that we can have it.

Speaker Change: What kind of impact the business here in the first year, and then and then leave it behind them and that's impacted the U S significantly, but also has had some impact in another country.

Speaker Change: And it's had an impact on the hip and knee side as well as on the on the shoulder side and so we've tried to give you a clearer look with the pro forma growth, but also talk a little bit about the impact of the integration.

Speaker Change: So that you can see that the underlying business is it's certainly in a quarter with a strong comping a little softer market.

Speaker Change: But the underlying business is still very strong and we've got a great path to accelerate through the year and execute to exit the year on a very strong growth arc.

Speaker Change: Thank you next question.

Speaker Change: And our next question comes from Jeff Johnson from Baird.

Jeffrey D. Johnson: Jeff. Please proceed.

Jeffrey D. Johnson: Yeah, thank you. Good morning, guys.

Jeffrey D. Johnson: Thank you good morning, guys. So Matt I don't want to give you a big softball here, but I guess just help me on the math. If you. If you did 7% recon growth is it fair to think about those two to three points of dis synergies. I think you also had one less selling day with Easter at the end of the quarter you don't recon would that have been closer to or you don't.

Matthew L. Trerotola: So Matt, I don't want to give you a big softball here, but I guess just help me with the math. If you did 7% recon growth, is it fair to think about those two to three points of disenergies? I think you also had one less selling day with Easter at the end of the quarter. You know, recon, would that have been closer to, you know, 9%, 10%, 10%, 11% if not for those disenergies and the selling days? Is that how we should be conceptually thinking about this?

Jeffrey D. Johnson: <unk> 10 per cent 10, 11% if not for those dis synergies in the selling days is that how we should be conceptually thinking about this.

Jeffrey D. Johnson: Yeah, yeah, I think that's the right way to think about it, Jeff.

Matt: Yeah, Yeah, I think that that's the right way to think about it yes.

Matthew L. Trerotola: Okay, and then just on the extremity side, you know, you called out the 8% growth there, you did point most of that to foot and ankle, obviously you had the disenergies, the selling days that impacted there as well, but just can you talk about your core underlying kind of shoulder growth, whether that's just in the core, Enovis, the Ultivate product in that, obviously competition is growing in shoulders as well, so just, you know, how do you perceive kind of shoulder market and your performance in the shoulder market, X, Yeah, I expect, you know, excluding some of the integration, in fact.

Okay, and then just on the extremity side, you called out the 8% growth. There you did point most of that to put an ankle. Obviously you had the disengage the selling days that that impacted there as well, but just can you talk about your core underlying kind of shoulder growth whether that's just in the core of notice the alternate product and that obviously competition is is is grow.

Matt: <unk> in shoulders as well. So just you know how do you perceive kind of shoulder market and your performance in the shoulder market ex kind of some of this noise from the integration and selling days. Thanks.

Matthew L. Trerotola: Yeah, I expect, you know, excluding some of the integration, in fact, we still, you know, see ourselves, you know, in a good, you know, above market growth range in our, in our shoulder, and, you know, have a great opportunity to work through the, through the year here to, you know, even strengthen that, that further, the augmented glenoids that we launch, we'll launch the, you know, kind of here, probably late in the second quarter and really ramp in the second half of the year, are going to give us a great additional additional weapon, in terms of driving more share gain and shoulder some of the cross selling opportunities are terrific in shoulder. And then, as I said, in my comments, we've also gotten, you know, harvest cleared in the shoulder.

Matt: Yeah.

Matt: Looting somebody integration in fact, we still see ourselves going.

Matt: And a good above market growth range in our in our shoulder and Ah you know they have a great opportunity as we work through the through the year here too.

Matt: Even strengthen that further augmented glenoid that we launch we'll launch a cutting here probably late in the second quarter and really ramp in the second half of the year are going to give us a great additional additional weapon.

Matt: In terms of driving more share gain in shoulder some of the cross selling opportunities are terrific in shoulder and then as I.

Matt: My comments are we bought so gotten argus that cleared in the shoulder and while that won't have much impact this year.

Matthew L. Trerotola: And, and, you know, while that won't have much impact this year, in terms of revenue, because we'll be in the early launch phase, I think it just, you know, continues to send a very strong message to the market about the strength of our leadership in the shoulder and our committed commitment to continue to be an innovation leader there.

Matt: In terms of revenue because it will be in the early launch phase I I think it just.

Matt: It continues to send a very strong message to the market about our the strength of our leadership in shoulder and our committee commitment to be continuing to be an innovation leader there.

Speaker Change: Thank you.

Operator: Our next question comes from Xuyang Li from Jefferies. Xuyang, please go ahead.

Xuyang Li: Our next question comes from young Li from Jeffrey Young. Please go ahead.

Xuyang Li: All right, great. Thanks so much for taking our questions. I guess I wanted to hear a little bit more about cross-selling opportunities as you get through some of these early integration choppy periods. Seems like, you know, we'll see more of the benefit in the second half in the U.S. and, you know, O.U.S. seems pretty solid. Maybe you can talk a little bit about timing as well as key products within categories for cross-selling.

Xuyang Li: Alright, great. Thanks, so much for taking our questions I guess I wanted to hear a little bit more about cross selling opportunities as you get through some of these early integration mm choppy period.

Jeffrey Young: It seems like you know, we'll see more of a benefit in the second half in the U S.

Jeffrey Young: And you know you are Oh U S seems pretty solid, but maybe you can talk a little bit about timing as well as our key products and categories on cross selling.

Matthew L. Trerotola: Yeah, yeah, for sure. Thanks.

Speaker Change: Yeah, Yeah for sure. Thanks, Thanks for the question there.

Speaker Change: I mean, we're extremely excited about the cross selling opportunity I actually I got to join the global sales conference that we had over in London for our recon teams and it was a it was really tremendous to see the how far the teams have already gotten on creating.

Matthew L. Trerotola: Thanks for the question there. You know, I mean, we're extremely excited about the cross-selling opportunity. Actually, I got to attend the global sales conference that we had over in London for our reconnaissance teams, and it was really tremendous to see how far the teams had already gotten in creating really specific and aggressive cross-selling opportunities. You know, I'll mention a few.

Speaker Change: Really specific and aggressive cross selling opportunities.

Matthew L. Trerotola: First, we've talked about here in the U.S. market, a kind of immediate opportunity to bring revision cones into the U.S. market and more aggressively sell the custom pro-made products that Lima has. And so it's early days on those, but we've already, you know, gotten a little bit started there, and we expect to see a nice ramp-up in the back half of the year on those. And we also, our teams are pretty excited about the SMR shoulder, not as a kind of our core shoulder product; the AltaVade is really our flagship, but there are, you know, specific situations where the SMR can be quite attractive, and we expect to see some nice cross-selling there as well. You know, second, outside the U.S., you know, we're still in the early days in terms of driving power and AltaVade.

Speaker Change: I'll mention a few first we've talked about here in the U S market.

Speaker Change: It kind of immediate opportunity to bring a revision cones are into the U S market and more aggressively sell the custom probate products.

Speaker Change: That doesn't mean there has been.

Speaker Change: So it's early days on those but we've already gotten a little bit started there and would expect to see a nice nice ramp down in the back half of the year on on those and and we also our teams are pretty excited about yet that in our shoulder not as a kind of our core shoulder product you also basically our flagship but Ah, but there are no specific.

Speaker Change: Are there some specific situations with yes, and mark can be quite attractive and we expect to see some nice cross selling there.

Speaker Change: Well yeah.

Speaker Change: Outside the U S. You know we're still early days in terms of driving power and observation and you know we have just started to ramp up the math is cross selling.

Matthew L. Trerotola: And, you know, we had just started to ramp up Mathis cross-selling. And so now, across a much broader landscape with Mathis and Lima's channels, we've got a great opportunity for many years to come with Empower and AltaVade. And as I shared, we've just got some additional market access, which is very important for AltaVade. You know, a large portion of our cases in the U.S. with AltaVade are small shell.

Speaker Change: And so now across a much broader landscape with math is certainly in those channels.

Speaker Change: We've got a great opportunity for many years to come with empower and all debate.

Speaker Change: And as I shared we just got some additional market access which is very important and also they are a large portion of our cases in the U S with alternate or small challenge so that market access it really helps to give a boost there.

Xuyang Li: And so that market access really helps give a boost to those broad cross-selling opportunities. And then the third thing that actually is, you know, is really exciting, and I probably kind of underappreciated it until I was at this conference sitting in the room with the teams talking about it, is that there are a number of really interesting cross-selling opportunities between Lima and Mathis, revision process and products on the Lima side that the Mathis team is excited about, and allergy-free products on the Mathis side that the Lima team is excited about

Speaker Change: On those broad cross selling opportunities and then the third thing that actually yourself, you you'd always really exciting I can't probably kind of underappreciated until I was at this conference sitting in the room with it teams talking about it is there's a number of vacuum very interesting cross selling opportunities between Lima, and Mathis our revision process products on the.

Speaker Change: On the Lima side that the math is team is excited about allergy free products are the math aside that the Lima team are excited about it and so there's really just kind of organic energy that is common between those teams in terms of some you know some things outside the U S beyond that.

Xuyang Li: And so there's really this kind of organic energy that has come between those teams in terms of some things outside the U.S. beyond the sort of larger and longer AltaVade and Empower opportunities. So a lot of great opportunities, you know, getting them ramped up right now, did a lot of training at this meeting in March, now starting to get the instrument sets in the market, get the funnels built. And we'd expect that, you know, in the back half of the year, we'll start to see this energy ramp and start to hit kind of full stride going into next year.

Speaker Change: Larger and longer alternate and empower opportunity so a lot of great opportunities.

Speaker Change: You know getting them ramped up right now, but a lot of training and in this meeting in March and now starting to get the instrument sets in the market get the get the funnels built in and we'd expect it you know down the back half of the year, we'll start to see the synergy ramp and start to hit kind of full stretch full stride going into next year.

Operator: Very great. That's very comprehensive. I'll just keep it to one. Thank you.

Speaker Change: Alright, great. That's a very comprehensive I'll just keep it to one thank you.

Operator: Thank you, operator. Next question.

Speaker Change: Thank you operator next question.

Speaker Change: [laughter].

Brandon Vazquez: The question is coming from Brandon Vazquez from William Blair. Brandon, please go ahead.

Brandon Vazquez: The question is coming from Brandon baskets from William Blair Brandon. Please go ahead.

Unknown Executive: Hi everyone. Good morning.

Brandon Vazquez: Hi, everyone. Good morning, Thanks for taking my question I'll ask him to upfront here. The first is just because you guys are integrating Lima here can you talk to us about logistically what needs to happen still what are the milestones we should keep an eye out for are there any ERP integrations SDC integration things like that.

Brandon Vazquez: Thanks for taking the question. I'll ask two up front. The first is, just as you guys are integrating Lima here, can you talk to us about logistically what needs to happen still? What are the milestones we should keep an eye out for? Are there any ERP integrations, SAP integrations, things like that? And then maybe the quick follow-up as well, just a little bit of, can you give us some color on gross margins, how they trended in the quarter and how you expect those to trend through the rest of the year, especially as you integrate some of the Lima business as well? Thanks.

Brandon Vazquez: And then maybe the quick follow up as well is I'm just a little bit of can you give us some color on gross margins, how they trended in the quarter and how you expect those to trend through the rest of the year, especially as you integrate some of the the Lima business as well thanks.

Unknown Executive: Yeah, thanks, Brandon. As far as key integration milestones go, some of the biggest focus so far has been on the commercial side, working through the different channel decisions and the implementation of them. And we're a good way through those in the US and outside the US. Wrapping up the cross-selling, as I talked about, has been another key piece of the integration so far. There have been some, you know, quick and thoughtful cost actions that we took in the first quarter in terms of starting to get after the cost opportunities. And there's more of that to come.

Speaker Change: Yeah. Thanks Brandon.

Where is key.

Speaker Change: The integration milestones.

Speaker Change: Some of the the biggest focus so far has been on the commercial side are working through a different channel decisions and the implementation of them and we're a good way three of those in in the U S and outside the U S.

Speaker Change: Wrapping up the cross selling as I talked about has been another another key.

Speaker Change: Piece of the integration so far.

Speaker Change: There've been some you know quick.

Speaker Change: Quick and thoughtful cost actions that we took in in the first quarter in terms of starting to get after the cost opportunities, but more of that to come but we did some you know some very quick.

Unknown Executive: But we did some, you know, some very quick moves as we put the two teams together outside the US and as we tucked the US team into our team here in the US. So that's, that's been another key, key thing that we've done so far. You know, as we look forward, there are some things to do in terms of IT systems, but we're taking a very thoughtful step-by-step approach to that.

Speaker Change: Moves as we put the two teams together outside the U S and as we took the U S team into our team here in the U S. So that's been another key a key thing that we've done so far.

Speaker Change: As we look forward there are some things to do in terms of I E. T systems, but we're taking a very thoughtful step by step approach on that so there. There's there's no big scary ERP integration come in that debt that could be a big issue or more of a kind of step by step.

Unknown Executive: So there's, there's no big, scary ERP integration coming that, you know, could be a big issue. It's more of a kind of step by step, making the changes in terms of, you know, kind of SKUs and systems and how systems interchange and connect, etc. And we will, you know, work our way to kind of well-aligned systems. But that's not, you know, any kind of, you know, big, big, giant thing versus a step by step, thoughtful approach.

Speaker Change: Making them, making the changes in terms of kind.

Speaker Change: It kind of skews and systems in house systems interchange and connect et cetera, we will.

Work, our way into a kind of well line systems.

Speaker Change: But that's not you know any kind of a big big giant thing versus a step by step thoughtful approach. We've also got a couple of years of operational synergies to get after over the coming years that'll be step by step movement or are things that are getting us cost opportunities some in <unk>.

Unknown Executive: We've also got, you know, a couple years of operational synergies to get after over the coming years, that'll be, you know, a step by step movement of things that are giving us cost opportunities, you know, some insourcing, some, some movement type of things. And then, and then finally, we've done a lot of good work just thinking about how the innovation pipelines and the product lines are to come together and making some early choices around that.

Speaker Change: Sourcing some some movement are type of things.

Speaker Change: And then finally, we've got a lot of good work on on just thinking about how the innovation pipelines and the product line's going to come together.

Unknown Executive: You know, but it'll be again, a thoughtful, multi-year process of merging the merging of the innovation pipelines and product pipelines. So we have a great management process, great talent focused on this. So far, things are going very well. We know it's important to stay on top of that, though. There's, you know, there's certainly a lot more work to be talking about here. Both businesses, you know, continue to leverage the EGX capabilities that we have, and I would see some, you know, decent progression throughout the course of the year there on gross margin. Thank you. Operator, next question.

Speaker Change: And and making some early choices around that.

Speaker Change: But it'll be again, a thoughtful multiyear process of merging the merging the innovation pipelines and our product pipeline. So we've got a great managing process, great talent focused on that so far things going very well we know it's important to stay on top of that there's you know there's certainly a lot more work to come but we feel very good about where we are right now.

Speaker Change: Yeah, Brandon on gross margins. We were you know 70 basis points ahead of last year.

Speaker Change: In the corridor, we would expect that to slightly accelerate through the course of the year, especially as we kind of get get aligned with with all the things that we've been talking about here are.

Speaker Change: Both businesses continue to leverage their E. G X capability that we have and I would see some decent progression throughout the course of the year there on on gross margin.

Speaker Change: Thank you operator next question.

Speaker Change: Yeah.

Operator: The next question comes from George Sellers from Stevens. George, please go ahead.

Speaker Change: Next question comes from George Sellers from Stephens Deutsche. Please go ahead.

George Stone Sellers: Hey, thanks for taking the question and congrats on the quarter. Maybe to shift to the foot and ankle portfolio, you called that out as a nice bright spot. Could you just give some additional color on maybe some of the specific devices that are driving such strong performance and maybe how we should think about the macro environment and the health of the consumer on that portfolio versus some of the other devices in your portfolio? And then, lastly, what are you seeing from a competitive perspective as well?

George Stone Sellers: Hey, Thanks for taking the question congrats on the quarter.

George Stone Sellers: Maybe to shift to the foot and ankle portfolio you called out that is up.

George Stone Sellers: A bright spot could you just give some additional color on maybe some of the specific devices that are driving such strong performance and maybe how we should think about the macro environment on the consumer on that portfolio versus some of the other devices in your portfolio and then lastly.

George Stone Sellers: You know what are you seeing from a competitive perspective as well.

Unknown Executive: Yeah, sure. So, you know, Foot & Ankle had a good, strong quarter. I think it was a healthy market environment in Foot & Ankle. Maybe kind of a little less of a, you know, strong comp there and, you know, a good healthy market environment to start the year and that's continuing here as we start the second quarter.

Speaker Change: Yeah, Yeah sure so putting that got a good strong quarter I think was a healthy market environment.

Speaker Change: Foot and ankle maybe kind of a little less of a strong comp there and and you know good healthy market environment to start the year and that's continuing here as we start the second quarter.

You know our our team we've got a number of key technologies that drive the growth. There you know, our our dine nail products or the Daniel family based on.

Unknown Executive: You know, our team, you know, we've got a number of key technologies that drive the growth there. You know, our Dynamail products or the Dynamail family based on, you know, nitinol alloy sheet metal alloys have been very strong, and we continue to bring additional technologies into that family. You know, we've, the NovaStep product that we acquired last year in the minimally invasive bunion space, is driving nice growth as well, and we're excited about that participation now in that large forefoot market.

Speaker Change: Oh alloy sheet metal alloys has.

Speaker Change: Has been has been very strong and we continue to bring additional.

Speaker Change: Additional technologies into that family you know, we've the Nova step products that we acquired in last year are in in the minimally invasive bunion space. You know are are driving nice growth as well and we're quite excited about that participation now into that large a four foot mark.

Unknown Executive: We've also got, the Arsenal Reload that I talked about is the next generation of our plating products, which, you know, apply across the space, and we've, you know, got, you know, IP protected technology around the fastening devices on our plating and, you know, some really great new plates that leverage that technology that we think are going to bring a real boost as well. And Star, you know, has gotten, you know, as we've talked about, Star is stabilized and ready to grow here now as well with some of the changes that we've made there.

Speaker Change: Market.

Speaker Change: We've also the Arsenal or reload that I've talked about is our is the next generation of our plating products, which apply across the space and we've you know we've got IP protected technology.

Speaker Change: Around fastening devices on our plating, and some really great new plates that deleverage that that technology.

Speaker Change: That we think are going to bring a real boost as well.

Speaker Change: And sorry, you know has that gotten you know as you can.

Speaker Change: Talked about start to stabilize and I think ready to grow here now as well with some of the changes that we've made there. So a number of great technologies across foot and ankle, but then very importantly, or channel continues to get more wind. We've now got almost 70% of our of our channel fully aligned to our products and and.

Unknown Executive: So, a number of great technologies across foot and ankle, but, very importantly, our channel continues to get more aligned. We've now got almost 70% of our channel fully aligned to our products, and that's something that we did a lot of work over the past few years to get there. And we know that that's going to pay a lot of dividends. A strong aligned channel that is taking us deeper and broader into the market with these great technologies is going to continue to fuel our growth going forward. And the products that we've acquired and developed over the past few years have really played a key role in exciting all these agents and distributors to become a part of our team.

Speaker Change: That's something that we did a lot of work over the past few years to get there and we know that that's going to that's going to pay a lot of dividends a strong aligned channel that it's taken us deeper and broader into the market with these great technologies is going to continue to fuel our growth going forward and the products that we've acquired and developed over the past few years.

It really played a key role in exciting all these all these agents distributors to become a part of our team.

Unknown Executive: Okay, great. Thanks for taking the question. Thank you. Next question, operator.

Speaker Change: Okay, great. Thanks for taking the question.

Speaker Change: Yeah.

Speaker Change: Thank you next question operator.

Speaker Change: Yeah.

Operator: And the next question is coming from Jason Wittes from Roth MKM. Jason, please go ahead.

Speaker Change: And the next question is coming from Jason with ease from Roth.

Jason: Jason Please.

Jason: Go ahead.

Jason Hart Wittes: Great, thank you. So just a question about the impact of integration. I know it was two to three percent this quarter. Did that run through the year or how should we be thinking about what the negative impact is or positive impact is for this year? quarter by the quarter. Yeah. You know, I think in terms of how much it impacts the year, you know, we shared $20-$30 million as the expected impact when we did the acquisition, and, you know, that's, you know, 2-3% of our recon is more than 2-3% of LEEM, of course, but, you know, but I guess I would say, you know, as we've talked about, we've been trying to get at this quickly, and so, you know, I think that we're likely to see that go from where it is now, you know, probably increase a little bit in the second quarter as we get really in maybe probably the apex of, you know, the impact from these integration things, and then I would expect that, you know, the back cap, it would kind of flatten and drop as we get, you know, to the other side of some of the things that even started to impact us, you know, late last year or right at the beginning of the year, and also as we have some nice contributions coming through on the cross-selling side as well.

Jason: Thank you. So just a question about the impact of integration and it was two 3% this quarter does that run through the year or how do we how should we be thinking about what the negative impact is positive and factors for this year.

Speaker Change: Yeah. So.

Jason: You know I think.

Jason: In terms of how much it impacts a year you know, we we shared 20 30 million as as the expected impact when we when we did the acquisition and you know that 623% of our of our recorded more than two to three per cent of lean but of course, but you know, but I I get that I would say you know what he talked about we've been trying to do.

Speaker Change: Just quickly.

Speaker Change: And so you.

Speaker Change: I think that we're likely to see that go from where it is now.

Speaker Change: Probably increase a little bit in the second quarter as we get really are in maybe probably probably the apex of the impact from these are integration thing and then I would expect that that you know the back half it would kind of flattening drop as as we get to the other side and some of the things that even started to impact us late last year or right.

Speaker Change: The beginning of the year and also as we have some some nice contributions coming through on the cross selling side as well.

Jason Hart Wittes: Okay, that's very helpful. And then just really quickly, in terms of the launches for the shoulder, in terms of the rollout, is that typically a six to nine month process? Or what kind of timing should we be thinking about for how quickly you can roll those out, and they have an impact on the numbers?

Speaker Change: That's that's very helpful. And then just really quickly on terms of the launches the shoulder.

Speaker Change: In terms of the rollout is that typically a six to nine month process or what what what kind of timing.

Speaker Change: Should we be thinking about for how quickly you can roll this out and they have an impact on the numbers.

Unknown Executive: Yeah, so the augmented glenoids will get into market very quickly. You know, there's obviously some early market participation that then leads to broader, but we would expect the augmented glenoids, you know, will be ramping aggressively in the back half of the year, and we've got a lot of, you know, we're already, you know, kind of, you know, in the process of the stocking of product and instrument sets to be able to ramp very fast in augmented glenoids, and we really think that's been very important.

Speaker Change: Yeah. So the augmented glenoid will we will get into the market very quickly you know there's obviously some early early market participation that then leads to broader but we would expect the augmented glenoid.

Speaker Change: We'll be ramping aggressively in the back half of the year and we've got a lot of we already you know kind of you know.

Speaker Change: In the process of the stocking our product and instrument sets to be able to ramp up very fast and in Agua Glen was in and out and we really think that's been very important he got that shoulder, but more and more surgeons are using augmented glenoid and they're in their procedures and.

Unknown Executive: We got that shoulder, but more and more surgeons are using augmented glenoids in their procedures, and so, you know, we think that not only will that offer us some some same-source selling opportunities than our existing surgeons, but it's really going to turn the heat up on our surgeon capture offense with augmented glenoids. So that'll be a big impact this year, and a very meaningful one.

Speaker Change: And so we think that not only will that out.

Speaker Change: Offer us some some same store selling opportunities in our existing surgeons, but but it's really going to turn that turned the heat up on our surged capture offense, so with augmented Glen Weiss so that'll be it this year impact and in a very meaningful one harvests are you know much more of a you know kind of next year and beyond.

Unknown Executive: ARVIS, you know, much more of a, you know, kind of next year and beyond impact, you'll be, you know, it's cleared, we'll get in the market, start doing cases, you know, and get, you know, feedback. It's, you know, new technology, and we want to make sure that, you know, we get it, you know, to exactly what's going to make a big difference in And so for sure, we'll be iterative in terms of, you know, launching the second half of the year on, you know, that gets us some, you know, some good feedback, and then iterating from there in 2025 and bringing more broader functionality.

Speaker Change: In fact, you would be you know it's cleared we're getting the market to start doing cases.

Speaker Change: And and getting feedback.

Speaker Change: It's new technology, and we want to make sure that we get it to exactly what's going to make a big difference in shoulder and and so for sure would be iterative in terms of.

Speaker Change: Watching the second half of the year on that that gets us. Some you know some some good feedback and then iterating from there in 2025, and bringing bringing more broader functionality.

Speaker Change: But.

Speaker Change: For sure.

Unknown Executive: But, you know, for sure, our surgeons are going to, you know, be able to, you know, see the vision of, you know, taking our great preoperative planning using predictive analytics to, you know, create a great plan that can be presented interoperatively with augmented reality guidance and then capturing the data interoperatively, as the surgeons are being able to use that guidance to do those shoulder procedures. You know, that's, you know, we're convinced that that's really going to be a very exciting next wave and enabling tech for shoulders at a time when the market is ready for it.

Speaker Change: Our surgeons are going to be able to see crystal clear the vision of <unk>.

Speaker Change: Taking our great preoperative planning using predictive analytics.

Speaker Change: To you know to create a great a great plan that can be presented in a rapidly with augmented reality.

Speaker Change: With your guidance and then capturing data and are operatively.

Speaker Change: Surgeons are being able to use that guidance to do those shoulder procedures.

Speaker Change: That's worked.

Speaker Change: We're convinced that that's really going to be a very exciting next wave and enabling check for shoulders at a time that are that the market is ready for it.

Jason Hart Wittes: Great. Thank you very much.

Speaker Change: Great. Thank you very much.

Operator: Thank you. Next question, operator?

Speaker Change: Thank you next question operator.

Speaker Change: Okay.

Operator: Our next question is coming from Vijay Kumar from Evercore ISI. Vijay, please go ahead.

Speaker Change: Our next question is coming from Vijay Kumar.

Vijay Muniyappa Kumar: From Evercore ISI.

Vijay Muniyappa Kumar: Please go ahead.

Vijay Muniyappa Kumar: Hey guys, thanks for taking my question. Matt, apologies if you've already answered this, but what was the organic performance excluding Lima, right? Because I think the original Lima assumption was there would be some acquisition-related disruption, and Lima would be flat. It feels like Lima came in behind the bow, and the integration-related impact was on the base business. Can you just walk us through why that impact was felt on the base business, not on Lima, and what Lima's performance was in the quarter?

Vijay Muniyappa Kumar: Hey, guys. Thanks for taking my question.

Vijay Muniyappa Kumar: Matt apologies from few about answered this but what was the.

Vijay Muniyappa Kumar: Organic performance, excluding Lima, right, because I think the original Lee My assumption was that there would be some acquisition related disruption in Lima would be flat.

Vijay Muniyappa Kumar: Feels like Lima came in about when the integration related impact was on the base business can you just walk us through or not.

Vijay Muniyappa Kumar: Why did impact was felt on the base business not in Lima.

Vijay Muniyappa Kumar: And what can you must performance was in the corner.

Phillip Benjamin Berry: Yeah, Vijay, I'll take that one, if you don't mind. As we contemplated the guidance for Lima, we knew that the channel integration work was going to be something that we couldn't really predict which business it was, you know, going to come from, as we were making portfolio decisions, as we were thinking about how we really kind of get to the selective alignment of our territories and making sure that we've got good participation, So, as we think about kind of how we've seen it start to play out, as you've seen some impacts on the legacy Mathis business and the legacy Enovis business, but all of that was contemplated in the guidance that we gave with regard to the amount of revenue coming in as a result of the acquisition.

Speaker Change: Yeah, Vijay I'll I'll take that one if you don't mind, you know as we contemplate at the guidance for Lima, we knew that the channel integration work was going to be something that we couldnt really predict which business. It was going to come from as we were making portfolio decisions as we are thinking about.

Vijay Muniyappa Kumar: How do we really kind of get to the field.

Speaker Change: Active alignment of our territories and making sure that we've got good participation in.

Speaker Change: And that so as we think about kind of how we've seen it start to play out as you've seen some impact on the legacy massive business in the legacy business, but all of that was contemplated in the guidance that we gave with regards to the amount of revenue coming in as a result of the acquisition. So we think it's most.

Phillip Benjamin Berry: So, we think it's most fair to really show the pro forma view to kind of include the all-up, all-in view of what's happening. And then what we've provided is our best view of, you know, some of the discontinuations and some of the dis-energies that came within the business, which we've said two to three percent. So, if you kind of strip out the underlying performance of the core business and kind of look for a traditional organic kind of definition, our view is that our organic business would have been a little over eight percent in the quarter for recon.

Speaker Change: Fair, who really show that pro forma view of that kind of include the all up all in view of what's happening and then what we provided is our best view of you.

Speaker Change: You know some of the discontinuation and some of the dis synergies that they came in within the business, which we've said 2% to 3%. So if you kind of strip out the underlying performance of the core business and kind of look for a traditional organic kind of definition. Our view is that our organic business would have been a little over.

Speaker Change: 8%.

Speaker Change: In the quarter for Recon, Alright, and then you add a little bit of a boost to that if you kind of take into consideration our selling days as well. So that's kind of how we're thinking about it underlying performance of our core brands are still doing well, but as we think about the channel coming together in particular in the U S and some other.

Phillip Benjamin Berry: And then you add a little bit of a boost to that if you kind of take into consideration selling days as well. So, that's kind of how we're thinking about it. Underlying performance of the core brands is still doing well, but as we think about the channel coming together, in particular in the U.S. and some of the countries that have more overlap, that's where it's a little bit hard to really distinguish the difference between reported product in Lima versus legacy business. So, that's why we think it's most appropriate to give the pro forma view, but overall, we still see strong performance in our core

Speaker Change: Countries that have more overlap, that's where it's a little bit hard to really distinguish the difference between reported product in Lima versus legacy business. So that's why we think it's most appropriate to give the pro forma view.

Speaker Change: But overall, we still see strong performance in our core technologies.

Phillip Benjamin Berry: Understood, Ben. And Matt, on this, sorry, just sticking with that RECON, you're sipping me, getting some questions here in Flatish. I know the comp is tough. Was there any integration impact here on the U.S. RECON site? And Ben, can you just clarify when you say the underlying RECON was about 8%, was that 8% excluding the integration impact within RECON? Yes.

Speaker Change: This had been in map on on this I'm, sorry, just sticking with that Recon U S hip and knee I'm getting some questions here are flattish.

Speaker Change: I know the comp is tough.

Speaker Change: Was there any integration impact here on the U S recon side and not been can you just clarify when you say that the underlying recon was about 8% was that 8% excluding.

Speaker Change: The integration impact within recon.

Vijay Muniyappa Kumar: Yes, yes, excluding the integration impact. So we look at like for like, you know, kind of underlying performance. Our view would be, you know, a little over 8%. And that would take out

Speaker Change: Yes, yes, excluding the integration impacts so when you look at like for like you know kind of underlying performance our view would be you know.

Speaker Change: A little over 8% and that would take out those impacts.

Phillip Benjamin Berry: Understandable. And Matt, sorry, on this.

Speaker Change: Understood.

Speaker Change: Sorry, I understand yeah.

Speaker Change: You have to pick up your hip and knee question.

Speaker Change: There yeah for sure there there's some some integration impacts there, but you know our hip and knee growth last year was 22%.

Matthew L. Trerotola: Yeah, just to pick up your hip and knee question there. Yeah, I mean, for sure, there's some integration impacts there. Look, you know, our hip and knee growth last year was 22%. And so there's an extremely strong competitor there.

Speaker Change: And so there's it is extremely strong comp there.

Speaker Change: And if you look over a longer time period. You know these are the results for this year would be to the legacy business 55 zero percent above 2019 and.

Matthew L. Trerotola: And, you know, if you look over a longer time period, the results for this year would be for the legacy business, 50, 5-0% above 2019. And, you know, by our math, the industry in hip and knee is maybe mid-single, maybe high single digits above 2019. So, you know, I think that the comp certainly is an effect in terms of the picture for hip and knee. And with or without the integration, we would have expected Q1 to be a softer growth quarter in hip and knee given the strength of the comp.

Speaker Change: Our math the industry in hip and knee is maybe mid single maybe high single digits about 2019 so.

Speaker Change: Think that the comp certainly it isn't a factor in terms of the picture on hip and knee and with or without the integration. We would have expected Q1 to be a softer quarter in hip and knee given the strength of the the comp yes.

Matthew L. Trerotola: You know, second, there is an effect here that Lima in the U.S., while it was primarily a shoulder business, it did have a small hip and knee business, and the primary in the small hip and knee business in Lima were not a focus at all.

Speaker Change: Second there is an effect here that libre in the U S. While it was primarily a shoulder business. It did have a small hip and knee business and and the primary and the small hip and knee business in Lima, we're not a focus at all in where you know that was shrinking and that was shrinking as we exited last year and so there's a little bit of a tough from that that Lima business.

Matthew L. Trerotola: And, you know, that was shrinking. And that was shrinking, you know, as we left last year. And so there's a little bit of a tug from that Lima business as well in the hip and knee. And then, you know, for sure, the integration effects are already in the hip and knee and shoulder. And there are, you know, some, you know, specific accounts and surgeons that we've lost as part of the integration that are having an impact on hip and knee as well. Now, if we look forward through the year, you know, Q2 is another tough comp there. But then from there forward, the comps get much more normal.

Speaker Change: As well in in hip and knee and then you know for sure. The integration effects are a R. R in hip and knee and shoulder and there's some specific accounts and surgeons are that we've lost as part of the integration that are having an impact on on hip and knee as well now if we look forward.

Speaker Change: Through the year, yeah choose.

Speaker Change: <unk> was another tough comp there, but then from there there forward the comps get a much more normal. We also you know we'll start to clear through you know the somebody's integration effects.

Vijay Muniyappa Kumar: We also, you know, we'll start to clear through some of these integration effects, and we expect to, you know, be able to keep ramping up the revision even stronger now that we have the Lima cones. We've also got some additional accessories that we have coming into our pipeline on the revision side to give us broader access to revision. And we, you know, we've got Arvis to ramp more aggressively as we move through the year as well. And so, you know, we've got plenty of confidence that our hip and knee growth will move back to a more normal range as we move through the year. Fantastic. Thanks, guys.

Speaker Change: And we expect to be able to keep ramping the revision even even stronger now is as we had to leave because we've also got some additional accessories that we had come into our pipeline on the on the revision side to give us broader access and revision.

Speaker Change: We you know we've got our Vista to ramp more aggressively as we as we move through the year as well and so we've got plenty of confidence that our hip and knee growth will move back to a more normal range as we move through the year.

Speaker Change: Fantastic Thanks, guys.

Operator: Thank you. Next question, operator?

Speaker Change: Thank you next question operator.

Operator: Thank you. We have a question from Mike Matson from Needham. Mike, please go ahead.

Speaker Change: Thank you we have a question from Mike Matson from Needham Mike. Please go ahead.

Joseph Scott Conway: Hey, this is Joseph on behalf of Mike. Maybe just follow up on the hip and knee. Do you think there's still kind of a backlog there for hip and knee procedures? You know, larger than normal backlog, I guess?

Speaker Change: Hey, this is Joseph on for Mike, maybe just follow up on the hip and knee.

Speaker Change: Do you think theres still kind of a backlog there for hip and knee procedures, you know a larger than normal backlog I guess.

Unknown Executive: Yeah, so again, I think whether you look at the US or you look outside the US, the cumulative growth since 2019 is still significantly less than five years of growth. And so that does certainly suggest that there are unserved patients there.

Speaker Change: Yeah. So again I you know I think what do you look at the U S are you look outside the U S. The cumulative growth since 2019 are still significantly less than five years of growth and so that does certainly suggests that there are uncertain patients. There. If you look at early last year the.

Speaker Change: You know four or five months of last year things really hot in the U S. A.

Speaker Change: And some countries outside the U S and I think that was indicative of that backlog that lies there.

Unknown Executive: You know, if you look at early last year, the first, you know, four or five months of last year, things went really hot in the US, you know, and some countries outside the US. And I think that was indicative of that backlog that lies there. And they, you know, sort of a high utilization environment that enabled, you know, higher rates.

Speaker Change: And you.

Speaker Change: You know sort of a high utilization environment that enabled.

Speaker Change: Higher higher rates and so.

Unknown Executive: And so, you know, I think it seems reasonable that there is still a backlog to be worked off and hit the knee that can create some tailwind, you know, maybe later this year and in the years to come. But clearly, you know, clearly in the first quarter, looking at, you know, looking at what we understand about our results and looking at the other results that have been posted, you know, this was a, you know, kind of slower growth rate in the US than where things were last year.

Speaker Change: You know I think it seems reasonable that there there is still a backlog to be worked off in hip and knee that can create some tailwind are you now maybe later this year and in the years to come but clearly you know clearly in the first quarter you know looking at you know la.

Speaker Change: Looking at what we understand about our results and looking at the other results that have been posted you know this was a kind of a.

Speaker Change: Lower growth quarter rich in knees in the U S than where things were last year and so clearly that backlog is not being worked off right now and I think you know, we we saw and understood that working through the quarter that they were just various effects that were constraining them.

Unknown Executive: And so clearly, that backlog is not being worked off right now. And I think, you know, we saw and understood that working through the quarter that there were just various effects that were constraining, you know, the kind of surgical supply. Like I said, whether it was storms or, you know, flu and different things. And so, and this is what used to be pretty normal that in any given year, there were parts of the year where there were some crimps that were being put on supply.

Speaker Change: Surgical supply with like I said, whether weather the storms are.

Speaker Change: Or or flu and different things and so and that's the guidance what it used to be used to be pretty normal that in any given year. There were parts of the year, where there were some credits that were being put on supply and so you know better months better worst months better quarters worst quarters, and I think we might be back into a more normal environment and there'll be periods, where things can run white hot because that backlog is there and.

Unknown Executive: And so, you know, better months, better, worse months, better quarters, worse quarters. And I think we might be back into a more normal environment, and there'll be periods where things can run white hot because that backlog is there, and the surgical capacity is very available, and there'll be periods where the capacity is a bit constrained, and that backlog just sits there.

Speaker Change: It would be a surgical.

Speaker Change: Our capacity is very available and there'll be periods, where the capacity is a bit constrained and that backlog just sits there.

Joseph Scott Conway: Okay, great. Yeah, that makes sense. And then maybe just another quick one on Arvis. If you do have anything more to add, appreciate the color so far, but I guess any metrics in terms of adoption or placements would be really helpful. I understand it's still early ramp, but yeah, anything else would be great.

Speaker Change: Okay great.

Speaker Change: <unk>.

Speaker Change: And then maybe just another quick one on <unk>. If you do have you know anything anything more to add I. Appreciate the color so far but I guess any any metrics in terms of adoption or placements would be really helpful to understand it's still early ramp, but yeah anything else yeah.

Unknown Executive: Yeah, so as I've shared before on me, we've got a few, you know, sort of a few dozen surgeons using it right now by design, you know, we got it to a number of surgeons and we're really focusing on, you know, kind of having them use it a lot, you know, and making sure that all of them get ramped up in terms of utilization rates and that we learn things that we need to in terms of how people are using it to make sure that as we move to, you know, taking it broadly into the marketplace, that it's, you know, it's going to be successful, both in terms of helping us to gain business and grow, but also that the surgeons will be using it at high rates. You know, if you look at some of the technologies that are out there, some that are being used at high rates and some are not, and we want to make sure that our business is used at high rates.

Speaker Change: Yeah, So as I've shared before on me we've got a few you know sort of a few dozen surgeons using it right now by design, we got it to a number of surgeons and we're really focusing on on you know kind of having them use it a lot.

Speaker Change: And and making sure that all of them get ramped up in terms of utilization rates and that we we learn things that we need to in terms of how people are using it to make sure that as we move to you know taken it broadened the end of the marketplace that it's you know it's going to be successful both in terms of helping us to gain business and grow.

Unknown Executive: But also there's a surgeon's there'll be using at high rates you know if you look at some of the technologies that are out there. Some that are being used at high rates and some are not and we want to make sure that harvest has used it at high rates and so this controlled launch I think I think puts us in a place to to be able to make sure that happens as we work through this year definitely expect it to have a good positive impact on our knee.

Unknown Executive: And so this controlled launch, I think, puts us in a place to be able to make sure that happens as we work through this year, definitely expected to have a good, positive impact on our knee business as we work through this year and get beyond that first, you know, that first couple of dozen surgeons into a broader marketplace. And then, you know, kind of, you know, years to come of opportunity to have a good, strong impact from Arbus on the knee.

Speaker Change: As we work through this year and get beyond that first.

Speaker Change: Couple of dozen surgeons into a broader marketplace.

Speaker Change: And and then you know kind of the years to come.

Speaker Change: <unk> had good strong impact from artisan knee and also we continue to work on additional technology to add beyond the harvests are in terms of making that had been the value proposition stronger and stronger in the in the enabling tech workflow area on.

Unknown Executive: And also, you know, we continue to work on additional technology to add beyond Arbus in terms of making that hip and knee value proposition stronger and stronger in the enabling tech workflow area. On the shoulder front, you know, just getting started this year, we've been working on that, obviously, for a little bit here because we just cleared the regulatory hurdle with 510K, but, you know, it'll be just a very initial launch here in the second half of the year to get really good feedback on the software and the hardware and the instruments, and then, you know, make whatever adjustments we need to move into next year.

Unknown Executive: On the shoulder front.

Unknown Executive: Just just getting started this year, we've been working on that obviously for a for a little bit here, because we just cleared the regulatory but five 10-K.

Unknown Executive: You know it'll be a just a very initial launch here in the second half of the year.

Unknown Executive: It took to get really good feedback on the software and the hardware and the instruments and then make sure that we make whatever adjustments we need to moving into next year and then there's also kind of multiple waves of technology that we can break through arb is there in the shoulder I'm going to get a good strong start this year and then build on that in 'twenty five and beyond.

Unknown Executive: And there's also kind of multiple waves of technology that we can bring through Arbus there into the shoulder. I'm going to get a good, strong start this year and then build on that in 25 and beyond.

Unknown Executive: Yes.

Operator: Okay, great. Thanks for taking our question. And as a reminder, if you would like...

Speaker Change: Okay, great. Thanks for taking my questions.

Operator: And as a reminder, if you would like to pose a question and enter the queue, press star one. We have a follow-up question from Vijay Kumar from Evercore.

Speaker Change: And as a reminder, if you would like to close the question and entered the queue Press Star one.

Operator: Yeah.

Operator: Yeah.

Operator: We have a follow up question from Vijay Kumar from Evercore ICI Jay you May proceed.

Operator: Hey, guys, thanks for the follow-up on the bonus. You get a bonus, Vijay.

Vijay Muniyappa Kumar: Hey, guys. Thanks, Thanks for the follow up here on not a bonus.

Vijay Muniyappa Kumar: P J.

Vijay Muniyappa Kumar: Yes, I do. I wanted to touch on margin performance in the quarter. The gross margins, were gross margins in line with your expectations, right? Because my understanding is Lima had, you know, somewhere in the 70s gross margins. So, sequentially, when I'm looking at this, the mix improved, right? The dollar contribution from Recon improved, but gross margins were flattish, but operating margins came in well above. So, just talk about the margin performance and how we should think about, like, for the back half. Does this give increased confidence in the back half margin ramp?

Vijay Muniyappa Kumar: Yes, I do.

Vijay Muniyappa Kumar: I wanted to touch on our margin performance in the quarter.

Vijay Muniyappa Kumar: The gross margins what were gross margins in line with your expectations for it because my understanding is Lima had you know somewhere in the seventies gross margin sequentially when I'm looking at this.

Vijay Muniyappa Kumar: The mix improved right are the dollar contribution from recon improved gross margins flattish operating margins came in well above so just talk about the margin performance and how we should think about for the back half does this give them increased confidence in the back half margin ramp.

Phillip Benjamin Berry: Yeah, Vijay, I think that the number that you're thinking about with Lima is not a US GAAP number; it's an IFRS number. So if you really translate Lima's historical numbers into US GAAP, there's some shift between gross margin and operating expenses. So the kind of underlying gross margin in the US GAAP kind of translation is more in the higher 60s than it is kind of into the 70s. So that plus some of the mix of the business where we're getting some of the sales, I'd say gross margins are kind of largely in line with what our expectations were.

Speaker Change: Yeah, Vijay I think that the number that you're thinking about with with Lima is not a U S. GAAP number it's an I F. R. S. Number. So if you really translate Lima historical numbers in to a U S. GAAP are there's some shift between gross margin and operating expenses, so that kind of underlying.

Phillip Benjamin Berry: Gross margin in the U S. GAAP kind of translation is more in the.

Phillip Benjamin Berry: Higher higher 60 than it is kind of into the seventies.

Phillip Benjamin Berry: So that plus some of the mix of the business, where we're getting some of the sales I'd say, you know kind of gross margins or kind of largely in line with what our expectations were as I said earlier I would expect to see some acceleration of the company's gross margins.

Phillip Benjamin Berry: As I said earlier, I would expect to see some acceleration of the company's gross margins, kind of as we go through the course of the year. And overall, I mean, still excited about the opportunities of, you know, kind of potential synergies down the road as we improve our, you know, kind of our recon, globalization, and supply chain. There's lots of opportunity for us to continue to really embed EGX and look at opportunities to expand our gross margins to continue to shape the mix of the business in the right way that'll help us to accelerate there.

Phillip Benjamin Berry: As we go through the course of the year and an overall I mean still excited about the opportunities are you know kind of potential synergies down the road as we improve our kind of our recon.

Phillip Benjamin Berry: Globalization and supply chain there, there's lots of opportunity for us to continue to really embed E. T X to look at opportunities to expand our gross margins to continue to shape. The mix of the business are in the right way that'll help us to accelerate there. So like we've said, we still see the recon business right now or any kind of Ah ha.

Phillip Benjamin Berry: So like we've said, we still see the recon business. Right now, we're in kind of a high 60s gross margin, and we see opportunity to kind of get that well into the 70s, call it, you know, closer to the mid 70s over time. But this year, I'd say relatively steady progress looking at where we are in Q1, and maybe seeing a slight acceleration or, you know, as we go through the course of the year.

Phillip Benjamin Berry: Hi, sixties gross.

Phillip Benjamin Berry: Gross margin, we see opportunity to kind of get that low end of the seventies call. It closer to the mid seventy's over time, but this year. It would be just kind of I'd say relatively steady progress looking at where we are in Q1, and maybe seeing a slight acceleration or are you know as we go through the course of the year.

Vijay Muniyappa Kumar: Sorry, on the operating margin line item, were there any timing impacts of OPEC? Are cost synergies coming in above plan because it just feels like execution is likely above.

Phillip Benjamin Berry: So I'm sorry on D D. At the operating margin line item was there any timing impact of Opex.

Vijay Muniyappa Kumar: Our synergies cost synergies coming in above plan, because it just feels like execution must liking about.

Phillip Benjamin Berry: Yeah, I mean, we're happy with the start. Like we've said, we were able to, you know, really identify what the, you know, go forward organizational structure was going to look like as we closed the deal. So we're able to capitalize on some synergies right away, maybe slightly above kind of our initial expectations for the first quarter. But again, still well within kind of our expectations of what we've said for the year and what we're currently thinking. And like I said, there's the shift between, you know, kind of off X versus gross margin, which is, you know, kind of, again, aligned with what our expectations were.

Speaker Change: Yeah, I mean, we're happy with the start we were able to like like we said we were able to you know really identify what the go forward org structure was going to look like because we closed the deal. So we're able to capitalize on some synergies right away you know maybe slightly above kind of our kind of our initial.

Phillip Benjamin Berry: Patients in the first quarter, but again still well within kind of our expectation of what we've said for the year is what we're currently thinking and then like I said, there's the shifts between you know kind of Opex versus gross margin, which as you know kind of again aligned with what our expectations were.

Vijay Muniyappa Kumar: Understood. Matt, maybe one for you.

Matt: Understood Mac, maybe one for you on I saw the always to porno.

Vijay Muniyappa Kumar: I saw RRS 2.0 in the presentation. Where are we in terms of adoption of RRS? Are we at an inflection point? And what does 2.0 do, which is different from 1.0? Yeah, so yeah, I'm 2.0.

Matt: Within the presentation.

Matt: Whether it be on on.

Matt: In terms of adoption of Rvs are we at an inflection point.

Matt: And what is 2.20 dupe, which is so different from what's going on.

Unknown Executive: Yeah, so 2.0 in the knee was, you know, after putting it out in the controlled launch, getting a lot of feedback, we went and made a number of improvements to the software and the hardware that were making it easier to use in many ways, but also making it really very seamless with our Empower instrument sets as well. And so, the 2.0, you know, was then, you know, kind of a more of a full launch of Arbus, but we definitely decided to do it in a step-by-step way just to make sure that, you know, given that it is brand new to the world technology, let's get 15, 20 docs using it, get some good feedback, help them to ramp up, and then use what we learned there to make sure that as we go to a broader set of doctors, one, we've got, you know, we've got a great value proposition in terms of being able to help them understand how it's going to, you know, going to be valuable, but also we've got the ability to help them to ramp up fast and effectively with it.

Matt: Yeah. So two 2.0 AR in the knee was you know after putting it out in a controlled launch getting a lot of feedback when made a number of improvements to the software and hardware that Oh.

Unknown Executive: We're making it.

Unknown Executive: Easier to use in many ways, but also making it really very seamless with our empower instrument sets as well and so are the 2.0. You know was then you know kind of a more of a full launch of harvest, but but we definitely we decided to do it in a step by step.

Unknown Executive: And so, that's what the 2.0 launch was about, and we're right on track with that in terms of, as I said, a couple dozen surgeons using Arbus, some using it very heavily, you know, some less heavily. The ones that are using them less heavily, we're learning, you know, why and how we ramp them up in terms of how heavily they use them, and there's some good learning there, both about how to ramp up surgeons fast, but also about which surgeons to target more as we do the broader launch.

Unknown Executive: Way just to make sure that you know given that it's a brand new to the world technology, Let's get 15, 20 docs using it get some good feedback help them to ramp up and then use what we learned there to make sure that as we go to a broader set of doctors. One. We've got you know we've got a great value proposition and be able to in terms of being able to help them.

Unknown Executive: I understand how it's going to you're going to be valuable, but also we've got the ability to help them to ramp up fast and effectively with it and so that's where the 2.0 launch was in and we're right on track with that in terms of bad debt as I said, a couple a couple of dozen surgeons using rvs some using it very heavily.

Unknown Executive: Sadly the ones who are using less heavily we're learning you know why and how do we ramp them up in terms of how heavily they they use it in and there's some good learnings there both about how to ramp surgeons fast, but also about which surgeons to charge a car to target more.

Unknown Executive: Do the broader launch and then as you know we've now got plenty of inventory on hand ready to do a broader rollout as we work through this year a lot of excitement in the field.

Unknown Executive: And then, you know, we've now got plenty of inventory on hand ready to do a broader rollout as we work through this year, and there is a lot of excitement in the field around the ability to bring Arbus to a broader set of knee surgeons, hip and knee surgeons, but particularly for the knee at this point. So, we would expect that number to expand and be a, you know, good facilitator to our knee conversion efforts but also start to generate a, you know, small but growing and high-profit recurring revenue stream on the knee front.

Unknown Executive: Around the ability to you know to bring <unk> to a broader set of knee surgeons hip and knee surgeons, but particularly for the knee at this point.

Unknown Executive: We worked through this year, so we would expect that number to expand and.

Unknown Executive: And and be a good facilitator to our neat conversion efforts.

Unknown Executive: But also start to generate a small but growing and high profit recurring revenue stream on the need front on the shoulder front as I said, it's just a you know just an initial launch so you know think of.

Unknown Executive: On the shoulder front, as I said, it's just, you know, just an initial launch, so, you know, think of the shoulder in the second half of this year being, you know, kind of where our knee was a year or so ago in terms of getting that first launch into the marketplace in the second half of this year and getting some good feedback that allows us to keep revving and improving the product. You know, we've been focused on making sure that by 2025, we are right there in the market with a very strong shoulder at Arbus offering to continue to be a strong leader there in shoulder with technology, as we always have been, and we're right on track for that with this announcement about the shoulder clearance for Arbus that just recently happened.

Unknown Executive: During the second half of this year being you know kind of where our NIE was you know a year or so ago in terms of getting that first launch into the end of the marketplace and in the second half of this year and getting some good feedback that allows us to keep ramping and improving the product we've been focused on making sure that by 2025.

Unknown Executive: We are right there in the market with a very strong shoulder Jarvis offering to continue to you know to be a strong leader there in shoulder with technology as we always have been and we're right on track for that with our with this announcement about the shoulder clearance for artists that just recently happened.

Speaker Change: Understood. Thanks, guys.

Operator: Thank you, operator. Next question.

Speaker Change: Thank you operator.

Unknown Executive: Okay.

Speaker Change: Thank you.

Operator: Thank you. We conclude our question and answer session now, and with that, I would like to turn the conference back over to Matthew Trerotola. For any closing remarks, please go ahead. Yeah, thank you for joining us this morning.

Operator: We conclude our question and answer session now and with that I would like to turn the conference back over to Matthew to hurt a lot.

Matthew L. Trerotola: For any closing remarks. Please go ahead.

Matthew L. Trerotola: Thank you for joining us this morning. I want to end the call by thanking our team members for a strong start to the year. We have a lot of momentum and excitement across the organization to remain committed to delivering value for our internal and external stakeholders. Thank you for listening in today, and we look forward to sharing our second quarter results with you in early August.

Matthew L. Trerotola: Yeah. Thank you for joining us this morning, I went out in the call by thanking our team members for a strong start to the year, we have a lot of momentum and excitement across the organization and remain committed to delivering value for our internal and external shareholders stakeholders. Thank you for listening in today and we look forward to sharing our second quarter results with you in early <unk>.

Matthew L. Trerotola: August.

Operator: And this concludes the conference. Thank you very much for attending today's presentation. You may now disconnect. Have a great day.

Speaker Change: And this concludes the conference. Thank you very much. We're attending today's presentation. You may now disconnect have a great great day.