Q4 2024 Zimmer Biomet Holdings Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet fourth quarter 'twenty 'twenty four earnings conference call if anyone needs assistance at any time during the conference. Please press the star followed by the zero as a reminder, this conference is being recorded today February six 2025.
Lives.
Speaker Change: Following today's presentation, there will be a question and answer session. At this time all participants are in a listen only mode. If you have a question. Please press the star followed by the one on your push button phones I would now like to turn the conference over to David Dimartino Senior Vice President Investor Relations. Please go ahead.
David Dimartino: Thank you operator, and good morning, everyone. Welcome as you'll have on its fourth quarter 2024 earnings conference call.
Speaker Change: Joining me on today's call are gone toward us.
Speaker Change: President and CEO, and Cynthia pace, our CFO, and EVP finance operations and supply chain.
Speaker Change: Before we get started I'd like to remind you that our comments. During this call will include forward looking statements.
Speaker Change: Actual results may differ materially from those indicated by the forward looking statements due to a variety of risks and uncertainties.
Speaker Change: For a detailed discussion of these risks and uncertainties. In addition to the inherent limitations of such forward statements. Please refer to our SEC filings, including those recently filed related to Paragon 28.
Please note we assume no obligation to update these forward looking statements.
Speaker Change: Even if actual results or future expectations change materially.
Speaker Change: Additionally, the discussions on this call will include certain non-GAAP financial measures.
Speaker Change: Some of which are forward looking non-GAAP financial measures.
Speaker Change: Conciliation of these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating. These measures is included within our fourth quarter earnings release, which can be found on our website Zimmer biomet dotcom.
Speaker Change: With that I'll turn the call over to Ivan Ivan.
Ivan: Good morning, everyone and thank you for joining today's call.
Ivan: I'd like to start today, the way that that always do by taking a moment to recognize and to show my sincere gratitude to the over 17000, Zimmer Biomet team members, who each and everyday across the globe more for business Andre Michel for what.
Ivan: Thank you for your commitment. Thank you for your tireless work you had a strong performance.
Ivan: Most importantly, thank you for what you do every day to serve our customers and patients.
Ivan: Thanks to your efforts in 'twenty 'twenty four we would see.
Speaker Change: <unk> biomed.
Speaker Change: We're able to impact the lives of over 4.3 million patients.
Speaker Change: Is a phenomenal data point that are now continues to inspire all of us to the court.
Speaker Change: 4.3 million patients.
Speaker Change: As I said in the past and I said, we'll continue to say.
Speaker Change: The Zimmer biomet workforce and the culture that we have here truly is one of our key competitive advantages.
Speaker Change: During the call today I'm going to cover three things first I'll provide a general overview of the fourth quarter umbrella market dynamics secondly.
Speaker Change: Talking about a 2025 outlook and the drivers of performance for the year.
Speaker Change: I'm beyond 2025.
Speaker Change: And then lastly.
Speaker Change: I'll briefly talk about the recently announced Paragon 28 acquisition.
After these stroke is going to cover all financials in more detail I will make sure as always to leave plenty of time for your questions.
Speaker Change: To begin I'm very happy to report that in the fourth quarter of 'twenty 'twenty four.
Speaker Change: We grew sales nearly 5% constant currency.
Speaker Change: These modest the 12th consecutive quarter of mid single digit or better constant currency revenue growth for Zimmer biomet.
Speaker Change: This performance in the quarter was driven by mid single digit growth in hips and knees as.
Speaker Change: As well as upper single digit growth in CIT.
Speaker Change: These results are particularly noteworthy given the backdrop of the ERP implementation challenges outlined in September.
Speaker Change: In line with our expectations, we have now exited 'twenty 'twenty four pre ERP shipping levels as evidenced by the large volume of shipments that were showing their quarter.
Speaker Change: Beyond commercial execution and the outcome is of innovative product launches.
Speaker Change: Our performance was fueled by mid single digit growth in our end markets, which we anticipate will continue.
Speaker Change: Based on all the analytics that we have at hand.
Speaker Change: Involving both primary.
Speaker Change: And second party sources.
Speaker Change: And aging and increasing active population technological advancements improving patient care dynamics around the war the shift or procedures to outpatient settings like the a S. C here in the U S.
Speaker Change: Well as data showcasing best in class clinical outcomes, we'll continue to provide <unk> to these market dynamics and the growth should continue in the coming years. So again, we see these markets has been very healthy now we do not expect these markets to slowdown.
Speaker Change: It is important to note that with a solid close you know the fourth quarter. Despite some of the challenges in the year of 'twenty 'twenty four including the already mentioned ERP disruption, we were able to manage the business consistent with other regional 'twenty 'twenty four financial guidance. So this means delivering.
Speaker Change: Mir, 5% constant currency revenue growth $8 in adjusted earnings per share of free cash flow of a billion 50.
Speaker Change: As we look into 2020 five we are providing full year financial guidance of constant currency revenue growth was 32, 5% and adjusted earnings per share of $8 15 to $8 35, which excludes any impact from the Paragon Twenty-eight acquisition.
Speaker Change: These financial satellite with V. L. P long range plan commitments that we highlighted at our investor event in May of.
Speaker Change: 2024 in New York.
Speaker Change: Which as a reminder.
Speaker Change: Involves growing revenue up mid single digits over the planned period.
Speaker Change: While ensuring that E. P S is growing faster than revenue.
Speaker Change: Free cash flow is growing at least 100 basis points faster than E. P. S.
Speaker Change: Again, our revenue in the mid single digit range E. P S growing faster than revenue.
Speaker Change: And free cash flow growing at least 100 basis points faster than E. P. S. So he's going to provide more details in his prepared remarks coming up.
Speaker Change: As we entered a 20 to 25 or priorities have not changed.
Speaker Change: We're going to continue to over index on people and culture priority number one operational excellence number two and thirdly innovation and diversification.
Speaker Change: Today I want to break down these three priorities in a more specific fashion.
Speaker Change: And what we call our four point plan of course, they have three key priorities of Zimmer biomet.
Speaker Change: Firstly in the priority of people and culture, we're going to continue to ensure that we had the right people in the right jobs to that end, we have added new leadership in key categories across the enterprise like a new precedent for global hips.
Speaker Change: No precedent for global Nice and you appointed pressey them for or said business and a new leader for global Medical education.
Speaker Change: Secondly in alignment with our strategic priority of operational excellence, we are committed to elevating our performance in the critical U S market with.
We know that our performance has now been consistent and we're going to do.
Speaker Change: A far better job in this regard.
Speaker Change: This means specializing more aggressively and sip.
Speaker Change: Ensuring that we had the right go to market formula in our key franchises with the right productivity and the right talent.
Speaker Change: Adding new capabilities and expanding the portfolio and partnerships in the ASC environment, we like where we are but when it be bolder in Acs.
Speaker Change: And continue to launch innovative solutions in robotics, while ensuring that would also have the right number of head counts to drive growth in these vital area.
Speaker Change: In the Bagger and of all of these we have now announced the boldest direct to patient program in the history there in East Asia.
Speaker Change: With knowledge that Arnold Schwarzenegger himself as a chief movement officer much more to come in this area truly are excited about the potential here in the U S.
Speaker Change: Thirdly in the area of innovation and diversification, we plan to launch over 50, new products in the next 36 months with several of these products be new to the war product lunches.
Speaker Change: So it's not just the quantity of products, but as the quality and the disruption associated with these products.
Speaker Change: That excites us he had a zimmer biomet.
Speaker Change: To touch on a few of those starting with knees or U S portfolio was the strengthen in 'twenty 'twenty four with the approvals of the Oxford part of Sel Sem and listening the call.
Speaker Change: So the 30 millimeter XI.
Speaker Change: Our version of persona IQ.
Speaker Change: And some other place in our knee portfolio.
Speaker Change: We anticipate ox for Emricasan IQ to contribute to growth in the second half of 2020 five.
Speaker Change: These products.
Speaker Change: Combined with a steady adoption of our persona also takes him Atlas knee.
Speaker Change: Will position us strongly in the U S market.
Speaker Change: We're very excited in terms of our knee portfolio and we really look forward to acceleration of the growth in knees, especially as we enter the second half of 'twenty 'twenty five.
Speaker Change: Internationally late last year in 'twenty 'twenty four we received the CE Mark for persona revision.
Speaker Change: This is already the leading revision knee implant in the U S and we expect these loans to accelerate throughout 'twenty 'twenty five.
Speaker Change: 'twenty 'twenty four was also a transformational year photo heap franchise with.
Speaker Change: We launched Z, one or triple taper to stem, a hammer or surgical impactor.
Speaker Change: These two products. In addition of the closing of the Orissa grid acquisition.
Speaker Change: Which enables best in class air navigation to surgeons as well as ore heap insight portfolio, the only FDA cleared mixed reality.
Are we going to position us to grow heaps in a very meaningful way as we entered a 2025.
Speaker Change: I also like that with the acquisition of ortho greed.
Speaker Change: In conjunction with Hebei insights on Rosa hip navigation, we now have the broadest navigation portfolio a hip surgery.
Speaker Change: Again, very excited about where we are with nice on where we are with hips now having the most robust portfolio in recon since the merger of Zimmer and biomet going back to June of 2015.
Speaker Change: While we could not be more excited with her knee or hip products Zimmer biomed is today much more than just large joints.
Speaker Change: Within Seth.
Speaker Change: Rosa solar has the potential to meaningfully expand the shoulder arthroplasty market by improving the accuracy and reproducibility of the procedure.
Speaker Change: Rosa solder was the first robotic soldier system in the war.
Speaker Change: And it is the only.
Speaker Change: Robot in shoulders that can perform both anatomic and reverse procedures.
Speaker Change: Additionally in November of last year, we received FDA clearance for Osha feet shoulder. The first asymmetric as stimulus solar system in the U S. We are in full launch mode. As we speak and are receiving great feedback from customers all across the U S.
Speaker Change: Finally, Zimmer Biomet continues to innovate within robotics, we're gonna be introducing a number of neurostar vacations in the short to midterm, including seed the essakane capabilities kinematic alignment for knees.
Speaker Change: And our posterior heap robotic approach, which is a huge need in the growing international markets.
Speaker Change: <unk> is already the leading orthopedic rubber in Europe with these updates we anticipate continued global share gains.
Speaker Change: While we continue to launch innovative solutions to address the needs of our growing markets. We also are going to continue to look for responsible inorganic opportunities that fit our strategic financial and return metrics, which we need to do in order to diversify it Zimmer biomet.
Speaker Change: And in order to realize our aspiration of residing in a 5% <unk>.
Speaker Change: Hamzah.
Speaker Change: Environment by the end of 2020 seven.
Speaker Change: The fourth point in our plan touches on the strategic priority of operational excellence and specifically our house Zimmer Biomet plans to drive margin improvement over the plan period, while also reducing inventory needs, hence increasing or free cash flow generation.
Speaker Change: Plan is already emotion, we achieve results according to our expectations in 'twenty 'twenty four.
Speaker Change: We shall see an acceleration as we progress throughout the year of 2025.
Speaker Change: The execution of these four points mentioned above.
Speaker Change: He's going to undoubtedly said Zimmer biomet for success not just in 'twenty 'twenty five but also in years to come.
Speaker Change: And by executing on these four things, we'll make sure to deliver.
Speaker Change: On a revenue earnings per share and free cash flow goals in accordance to their commitment as highlighted in our long range plan.
Speaker Change: I want to close todays call discussing the very exciting news that we saw recently on the M&A front.
Speaker Change: To complement our product cycle on January 28th.
Speaker Change: We entered into a definitive agreement to acquire Paragon 28, which is a leader in the rapidly growing a 5 billion dollar foot and ankle space.
Speaker Change: <unk> been more excited about this partnership.
Speaker Change: We maintain or desire to diversify into higher growth segments through disciplined M&A.
Speaker Change: And this transaction checks the growth accretion dilution on all the strategic boxes that we've been discussing for quite some time.
Speaker Change: Particularly once the transaction closes.
Speaker Change: Currently anticipated to be in the first half of 'twenty to 'twenty five.
Speaker Change: Paragon 'twenty is expected to expand or foot and ankle the for me the offerings, while bolstering or existing fracture and trauma as well as joint replacement portfolios.
Speaker Change: It is going to move a window in the right direction.
Speaker Change: It is going to complement Zimmer biomed global footprint.
Speaker Change: In infrastructure.
Speaker Change: Within paragraphs, 20th spicy portfolio, and he's going to help us drive or U S growth and international growth.
Speaker Change: One very exciting area of this partnership is going to be the ability to expedite or penetration opportunities in the fast growing E. S C market, where foot and ankle procedures carry a very beneficial reimbursement.
Speaker Change: Reimbursement that we're not capitalizing on today, while also creating cross selling opportunities.
Speaker Change: Lastly.
Speaker Change: This partnership is going to strengthen Zimmer biomet leadership position.
Speaker Change: Gross muscular skeletal health.
Speaker Change: Lower extremities.
Speaker Change: I could not be more excited about how we enter in 2020 five and we very much look forward to welcoming the great leaders of Paragon 28, including the chairman and CEO Albert Acosta to the Zimmer Biomet family.
Speaker Change: In conclusion, we are very proud of the progress of organization.
Speaker Change: We very much look forward to continuing to execute above and beyond expectations. We have a very simple yet compelling plan, we will execute on it.
Speaker Change: Although the fact that were impacting the lives of millions of people and I'm deeply inspired everyday in knowing that my teammates and I are leaving the Zimmer Biomet mission of alleviating pain and improving their quality of life for people around the world and with that I'll turn the call now over to Susan. Thank you very much.
Susan: Thanks, and good morning, everyone.
Speaker Change: As Ivan mentioned, we closed another solid year, demonstrating the resilience and winning attitude of our team members.
Speaker Change: Despite the challenges we faced we grew sales nearly 5% on a constant currency basis.
Speaker Change: Spanned at adjusted operating margins by 40 basis points grew adjusted earnings per share by 6% to $8 and generated over $1 billion in free cash flow.
Speaker Change: Looking at this quarters results unless otherwise noted my statements will be about the fourth quarter of 2024 and how it compares to the same period in 2023, and my commentary will be on a constant currency and adjusted operating basis.
Speaker Change: 2025 guidance commentary will exclude any impact of the recently announced Paragon 28 acquisition.
Speaker Change: Net sales were $2 billion and 23 million an increase of four 3% on a reported basis and four 9% excluding the impact of foreign currency.
Speaker Change: Consolidated pricing was positive 60 basis points, marking the fourth consecutive quarter of positive pricing.
Speaker Change: Overall results were underpinned by healthy end markets with good leading indicators on demand for new products.
Speaker Change: Our U S business grew four 7% driven by strong high single digit growth in S. E T. While international grew five 2% driven by double digit growth in knees and S. E T.
Speaker Change: It's great to see that our global S. E. T growth continues to outpace both knees and hips.
Speaker Change: Importantly, once the Paragon 28 transactions close the combined S. E. T segment is expected to be larger than our hip franchise.
Speaker Change: And is expected to continue to grow faster than both our knee and hip segments.
Speaker Change: This aligns with our strategy to diversify into faster growth markets.
Speaker Change: Global knees grew five 6% in the quarter with the U S growing three 9% and international growing 8%.
Speaker Change: We continue to see good uptake from our persona portfolio and increased penetration of Rosa.
Speaker Change: Global Hips grew 4% with the U S growing three 2% and international growing four 8%.
Speaker Change: While still in early days, we are encouraged by the feedback on Z, one and look forward to accelerating the rollout of hammer in tandem with the ortho grid.
Speaker Change: We now have a complete product portfolio and hips, and we'll be accelerating our offensive strategy as 2000 and twenty-five progresses.
Speaker Change: Next our S. E. T segment grew eight 4% led by C. M F T at 13% sports at 22% and upper extremities at 8%.
Speaker Change: This marks the fifth consecutive quarter of at least mid single digit growth in S. E. T. A trend we expect to continue.
Speaker Change: Finally, we renamed the other category to technology and data bone cement and surgical to better represent the revenue within that segment.
Speaker Change: This segment declined four 3% due to tough comps from the prior year.
Speaker Change: Turning to our P&L.
Speaker Change: We reported GAAP diluted earnings per share of $1.20 compared to GAAP diluted earnings per share of $2.01 in the prior year.
Speaker Change: Higher sales and operating profit in tandem with a lower share count were more than offset by higher nonoperating expenses and higher taxes, including a onetime gain in 2023 that did not repeat.
Speaker Change: On an adjusted basis, we delivered diluted earnings per share of $2.31 compared to $2 20 in the prior year with earnings per share growing faster than revenue of note FX headwinds were more challenging in the quarter than originally expected and accounted for about five cents of earnings per share erosion when compared to 2000.
Speaker Change: 'twenty three.
Speaker Change: Adjusted gross margin was 71, 3% lower than 2023 as previously guided due primarily to prior year capitalized cost increases that impacted this year's P&L.
Speaker Change: Adjusted operating margin was 38% 50 basis points higher than the prior year due to revenue leverage and continued efficiencies across SG&A.
Speaker Change: Net interest and other adjusted non operating expenses were $62 million higher than the prior year, driven by higher debt and higher interest rates on refinance debt that matured in 2024.
Speaker Change: Our adjusted tax rate was 17, 5% higher than 2023, driven by the implementation of pillar two and fully diluted share outstanding were $200 million down year over year as a result of our share buybacks.
Speaker Change: Turning to cash and liquidity.
Speaker Change: Our working capital initiatives targeted towards inventory reduction are paying off as we reduce days on hand by almost 50 days ending the year at approximately 375 days.
Speaker Change: This contributed to operating cash flow of 506 million of free cash flow of 403 million, bringing 2020 for free cash flow to $1.055 billion or in the range. We originally guided at the beginning of 2024.
Speaker Change: We ended the quarter with $526 million of cash and cash equivalents.
Speaker Change: Aligned with our capital allocation strategies, we repurchased approximately $72 million of shares in the quarter, bringing full year 2020 for share repurchases to $870 million.
Speaker Change: We maintain flexibility to continue our share repurchase program and plan to continue returning cash to shareholders on an opportunistic basis over the course of our long range plan.
Now regarding our 2025 outlook.
Speaker Change: We expect 2025 constant currency revenue growth of 3% to 5%.
Speaker Change: Inside of this we expect stable end markets.
Speaker Change: <unk> to 50 basis points of price erosion for the full year and a modest headwind to growth due to year over year selling day differences.
Speaker Change: With the strengthening of the dollar at recent rates, we anticipate 150 basis points to 200 basis points of headwind from currency in 2025, resulting in reported revenue growth expectations of 1% to 3.5%.
Speaker Change: Now regarding the cadence of expected revenue results.
Speaker Change: We expect that the second half ex FX growth will be higher than the first half due to more favorable comps related to 2024 ERP challenges.
Speaker Change: New product uptake and no selling day impact.
Speaker Change: Importantly, the first quarter will have one less selling day compared to 2024, which we estimate to have about 100 to 150 basis point headwind on revenue growth in the quarter, putting Q1 growth at about 2% ex FX.
Speaker Change: Also you should expect Q2 growth to be muted, primarily due to tougher comps when compared to 2024.
Fully diluted earnings per share is expected to be $8 15 to $8.35.
Speaker Change: As with revenue FX has a significant unfavorable impact on our earnings profile, creating an estimated 20 to 25 cent headwind on earnings per share when compared to 2024.
Speaker Change: We anticipate full year adjusted gross margin to be in line with 2024 and full year adjusted operating margins to increase versus the prior year, marking the fifth consecutive year of adjusted operating margin improvements.
Speaker Change: As with revenue margins and earnings will be stronger in the second half of 2025 versus the first half of the year.
Speaker Change: When compared to 2024 first half gross margin operating margins will be lower than the prior year due to the impact of higher inventory costs and higher expenses associated with new product launches sales force specialization and direct to patient marketing.
Speaker Change: As we progress into the second half margins will be better than 2024, due to sales leverage lower cost inventory and the impact of ongoing efficiency programs.
Speaker Change: Net interest and other nonoperating expenses are expected to be at least $255 million, reflecting higher rates on refinance debt. Our adjusted tax rate is expected to be approximately 18% for the full year.
Speaker Change: And fully diluted shares outstanding are expected to be about 201 million shares.
Speaker Change: Despite the FX pressure on earnings we expect 2025 free cash flow of $1 1 billion to $1 2 billion, which represents significant leverage versus revenue growth.
Speaker Change: As laid out in our analyst day presentation improvements in earnings Sunsetting of foundational investments and improvements in working capital are expected to drive improved cash conversion in 2025 and beyond.
Speaker Change: As Ivan mentioned, we entered into a definitive agreement to acquire Paragon 28 last week for an upfront payment of $13 per share in cash representing.
Speaker Change: Renting an approximate $1 $1 billion equity purchase price in.
Speaker Change: In addition, Paragon 28 shareholders will receive one non tradable CVR paying out up to an additional one dollar per share and cash based on the achievement of certain revenue milestones.
Speaker Change: The purchase which will be funded through a combination of cash on hand, and debt is anticipated to be immediately accretive to revenue growth.
Speaker Change: Approximately 3% dilutive to adjusted EPS in 2025 about 1% dilutive to adjusted EPS in 2026 and accretive to adjusted EPS within 24 months following the closing.
Speaker Change: We expect the transaction to close in the first half of 'twenty five after which we will provide updated guidance for the full year.
Speaker Change: It is important to note that after the closing we expect to maintain a strong balance sheet and investment grade credit rating with the Optionality to continue to invest against our capital allocation priorities.
Speaker Change: I'd like to close by thanking the entire ZB team for their resilience and overcoming significant challenges in 2024, three year dedication, we achieved robust financial results with sales growth of nearly 5% adjusted operating margin expansion for the fourth straight year and over $1 billion in free cash flow I look for.
Speaker Change: Words here, winning spirit in 2025, and with that I'll turn the call back over to David.
Speaker Change: Thank you Okay, operator, let's open it up for questions in order for us to take as many questions as possible. Please limit yourself to one question operator. Please go ahead.
Speaker Change: Thank you David ladies and gentlemen at this time, we will begin the question and answer session and an effort to get through as many questions as possible. Please limit yourself to one question only one moment. Please for the first question.
Speaker Change: Our first question comes from Robbie Marcus with Jpmorgan.
Robbie Marcus: Oh, great. Good morning, and thank you for taking the question.
Speaker Change: Advanced Turkey, not sure who this is best for but wanted to ask on just the guidance philosophy in general I think last year. It was.
Robbie Marcus: We're guiding to what we think we could do.
Robbie Marcus: This year, we see with what appears to be a more conservative guide both on the top and bottom line. How are you thinking about the guidance range and.
Robbie Marcus: You know philosophically and what should we be expecting throughout the year. Thanks a lot.
Speaker Change: Hey, Thank you Ravi you got here. Good morning, So I will say that that is somewhat of a different philosophy guidance wise from 2024.
Speaker Change: As I said before we don't apologize for the guidance, we delivered in 2020 four early in the year, we actually met that guidance as you heard today.
Speaker Change: In revenue EPS, adjusted EPS and free cash flow, we are 20 basis points below Arabia that say for 2020 five is a different philosophy, we deemed the range that we provided today to be appropriate I don't know if I'd use the word conservative but definitely appropriate.
Speaker Change: Keep in mind that these one day less in 2025 versus 2024.
Speaker Change: And at the same time my Ravi, we see more drivers to bring us to the upper range versus the lower range.
Speaker Change: We are excited by new products most of them do become far more material in the second half of the year excited about the investments, we're making in the AUC ambulatory surgical space.
Speaker Change: We are adjusting some things in the U S that I believe can bring us to the upper range of that guidance, let's see where we end up being pricing four consecutive quarters, so faster erode pricing, let's see what happens in a 2025, we'll go one quarter a time.
Speaker Change: I think the first half of 2025, you see the investments we make in Opex. So we should see a return on those investments as we get into the second half. So net net appropriate guidance and again, we see more drivers to get us to the upper range than the lower range of that guidance. So extremely confident in the range provided and we look forward to updating every quarter then.
Speaker Change: Hopefully exceed those expectations.
Speaker Change: I appreciate it. Thank you thanks a lot.
Speaker Change: Thank you. Thank you everyone.
Speaker Change: We'll go next to Patrick <unk> with Morgan Stanley.
Speaker Change: Beautiful apologies for the correctly. Thank you for taking the question.
Speaker Change: Congrats on Paragon 28, basically on that side of things and my question is how you're thinking about the opportunity to push it through your distribution sales network. Both in the U S and O U S and drive it on the top line side and B. How are you thinking about managing any potential disruption as you integrate them.
Speaker Change: Thank you Patrick first things first we're very excited about this this acquisition I spent last week in Orlando, which the sales team.
Speaker Change: The culture in our company is second to none the innovation and the other half I've not seen anything like that in my 31 years metric. They have 50 active projects in this space.
Speaker Change: Upon closing the transaction, we're going to be a leader in six of our key categories in that in this space.
Speaker Change: We have an outstanding channel, which we done so our thinking is that we are going to appreciate that we started that channel.
Speaker Change: Fully dedicated to our foot and ankle.
Speaker Change: We are bringing that the management team over to Zimmer Biomet stanaway, the CEO Albert that cluster. So we see minimal disruption when it comes to commercial execution and the channel itself. We preset precept with innovation is a separate design center that is going to continue to fuel innovation to the space. So there are two key drivers.
Speaker Change: The odd enabling deep grow that there have seen 18% CAGR over that period of time now we don't see that going away. In this was the second part of disruption. The fact that we're going to run this in isolation, we see minimal disruption obviously, we pay attention to the usual suspects do we have the right quality management systems or with one other things we need to do for them.
Speaker Change: And operational standpoint around inventory.
Speaker Change: Again as we sit here today, we're feeling very very excited I'm very confident that we can integrate these sat with minimal disruption. Thanks Patrick.
Speaker Change: Thank you.
Speaker Change: We'll take our next question from Steve Lichtman with Oppenheimer <unk> company.
Steve Lichtman: Thank you good morning, guys.
Steve Lichtman: You provided some color on first half versus second half for this year, but I was wondering if you could talk about guidance cadence a bit more for the year, excluding paragon, how should we think about sales growth and margin progression during 2025.
Steve Lichtman: Yes, absolutely.
Stephen: Thanks for the question Stephen.
Steve Lichtman: As Ivan mentioned is <unk>.
Speaker Change: Turning remarks, and the first Q&A there are a number of moving parts that.
Speaker Change: They are going to impact the cadence. So it's a great question, we try to provide some color I will give a little bit more here.
Speaker Change: Let me, let me start with some of those moving parts around selling day impact the FX headwind that we talked about in our prepared remarks, new product uptake, which we're very excited about.
Speaker Change: The investments that Avon referenced that we believe is going to drive growth not only later in this year, but beyond this year and then our continued efficiency profile and essentially push for efficiency.
Speaker Change: And margin expansion, if we start with revenue.
Speaker Change: We would again, 3% to 5% ex FX is the guidance range. There is a pretty steep FX headwind, which then takes our reported guidance to 1% to three 5% on a reported basis.
Speaker Change: Inside of that we protect that Q1 will have the lowest FX ex.
Speaker Change: Ex FX growth excuse me of about 2% and Thats, primarily due to the selling day headwind that.
Speaker Change: That we referenced earlier in our remarks, that's worth about 100 to 150 basis points.
Speaker Change: The second quarter growth.
Speaker Change: Which has the toughest comp when compared to last year will be aligned to Q1. Once you adjust for that day rate headwind, Okay. And then in the second half of growth, we expect that to be faster than the first half.
Speaker Change: Really because you don't have that selling day headwind.
Speaker Change: Youre going to see much greater ramp up of new products that Yvonne referenced earlier, and then you've got the easier comp related to the ERP, which which really impacted us in the second half of 2024.
Speaker Change: As we said FX is going to play a pretty big factor and so we expect that to be a headwind.
Speaker Change: It's roughly about the same in the first half versus the second half.
Speaker Change: With the first quarter and the third quarter being the biggest impacts and thats around 200 basis points of headwind in each year. So hopefully that gives you.
Speaker Change: A lot of color on the revenue cadence all the way from FX ex FX excuse me down to the foreign currency impact and then if you move on to margins.
Speaker Change: As we said in our prepared remarks overall, we would expect gross margins to be in line with what 2024 and operating margin to be up year over year in line with the.
Speaker Change: The guidance and the profile, we provided on our MRP.
Speaker Change: Earlier in 2024 first half margins will be lower than the first half of 2024, primarily due to lower gross margin as expected and as we've talked about through 'twenty, four and higher opex related to the investments Ivan discussed some of those investments are in specialization around FCT, we're increasing our.
Speaker Change: Our critical mass around ASC and robotic commercialization efforts, we're ramping up DTC all of these things. We believe we will have a near as well as mid and long term impact on revenue growth positive impact.
Speaker Change: Q1 operating margins, we expect to be down about 250 basis points versus the first quarter of 'twenty, four and Q2 will be down slightly when compared to <unk> 24. However.
Speaker Change: However, second half margins will be better than the second half of 'twenty four as well as the first half of 'twenty five due to better revenue profile higher gross margins in tandem with year on year.
Speaker Change: Efficiency gains.
Speaker Change: So overall.
Speaker Change: We're confident in the guidance, we're providing is the bond said, we think there are levers to potentially do better than that we're also very excited to bring into paragon asset into into our portfolio.
Speaker Change: And.
Speaker Change: Again.
Speaker Change: Feel really good about where we're headed in 2005.
Speaker Change: I appreciate the additional color. Thanks.
Speaker Change: We'll take our next question from Matt Taylor with Jefferies.
Speaker Change: Hi, Good morning, Thanks for taking my question guys.
Speaker Change: I did want to follow up on Paragon and maybe ask you about the way the deal structured with CVR earn out it implies that you could grow that business, it's about 16% to 19% and above consensus. So I would love your comments on how you think you might be able to actually accelerate growth or at least be what the street with <unk>.
Speaker Change: King.
Speaker Change: With Paragon and also maybe talk about your ability to do additional deals.
Speaker Change: Digest this one.
Speaker Change: Okay.
Speaker Change: Yes, so maybe I'll start with the with the growth portion. So the revenue synergies that we embedded in our model are appropriate.
Speaker Change: Beyond what we have in our model, we think and there is additional synergies first and foremost Paragon 28 is not a company that today is present.
Speaker Change: Or to present in the ASC space. So there are a variety of opportunities there to do cross selling.
Speaker Change: And contracting so that is definitely a growth labor there are opportunities from a or trauma on biologics business too.
Speaker Change: To put that those products in the bag or a fad that dedicated channel that Paragon has so it's a great great opportunity there.
Speaker Change: And then there are other opportunities internationally.
Speaker Change: They have 20% to 30% of the revenue coming outside of the U S.
Speaker Change: We have a large infrastructure outside of the U S. So again those are some of the revenue synergies that that can get us above the committed growth rate.
Speaker Change: In terms of your second question around doing other deals the firepower is there.
Speaker Change: While we wanted to right now is to integrate paragon 20th into the company proved to everyone that that we can do this type of deal with minimal disruption and they will think about the next deal when it's time to think about the next deal.
Speaker Change: Okay. Thank you Bob.
Speaker Change: Thank you.
Speaker Change: We'll take our next question from David Roman with Goldman Sachs.
Speaker Change: Yes.
David Roman: Hi, Thank you good morning, everybody I wanted to just spend a couple of seconds on margins.
Speaker Change: At the analyst meeting you had introduced a trend that expected two years of gross margin headwinds and I think a big piece of that had to do with the then currency dynamics at play which have obviously evolve significantly over the past seven or eight months. So could you maybe.
Speaker Change: Firstly update us on how the trajectory of gross margins are trending relative to those expectations and then secondly, what is the path to turning gross margins around on a reported basis, considering where we are today on on FX and then some of the other operational matters that you've been undertaking to improve.
Speaker Change: Gross margin like inventory turns et cetera.
David: Yeah, Yeah. Thanks for the question David.
Speaker Change: So first of all overall the headwinds tailwind as we think about 2025, just stepping back I talked about gross margins being in line with 2024.
Speaker Change: Some of the headwinds that we would expect to see as you get normal inflation every year, Fortunately that that inflation rate has stabilized as sort of pre pandemic norms.
Speaker Change: Good to see.
Speaker Change: We're continuing to lap in.
Speaker Change: Some of capitalized cost increases at the end of 'twenty, three and beginning of 2024, which will impact the P&L, especially in the first half of 2025.
Speaker Change:
Speaker Change: <unk>.
Speaker Change: We're forecasting that pricing could be a modest headwind to gross margin.
Speaker Change: Still.
Speaker Change: Well better than our historical norms on pricing I said somewhere around flat, maybe 50 basis points of erosion coming off a year where were positive. So we'll see where we end up but but overall a more positive trend, but still a modest potential headwind. So those are sort of your three big headwinds on gross margin and then when you think about the tailwind.
Speaker Change: It really sorry, FX as you noted is another headwind inside of that which we've talked about at length over the last year or so.
Speaker Change: Tailwind.
Speaker Change: Are really around our efficiency gains, which we continue to make a drag.
Speaker Change: Drastic improvement and repositioning our footprint into lower cost markets as well as better utilization of our plant footprint, which gives you more a better absorption.
Speaker Change: We're improving our mix through new products, but also from a geographic perspective.
Speaker Change: And lastly, we're seeing lower excess and obsolescence as we continue to improve our inventory positions and we made good really good progress in 2024 on reducing overall inventory. So those are the those are the puts and takes again, which broadly keep us in line with where 2020 for margins, where as you think about the cadence for.
Speaker Change: Gross margins in this year, we would expect the first half of this year to be broadly in line with how we exited 2024. So you should think about our Q4 gross margin into the first half of 2025, and then you should see a sequential step up into Q3 into Q4 with the largest.
Speaker Change: In Q4 really coming off there is efficiency gains that I spoke to earlier as well as the excess and obsolescence gains now with.
Speaker Change: FX changes, we've seen the strengthening of the dollar that will or should give rise to additional FX hedge gain benefit those benefits. However will likely get capitalized in 2025, assuming rates stay where they are today, it's a dynamic environment and if that happens those what those would then materialize.
Speaker Change: Into our P&L in 2000, and so a lot of moving parts. There I think the key takeaway is we continue to make fundamental improvements in gross margin again, keeping a flat to 'twenty four despite those FX hedge gain headwinds that I talked about earlier in 'twenty, four and we do see an opportunity to maintain that stable environment or potentially improving over.
Speaker Change: Todd.
Todd: And inside of all that we're still have a profile where we're.
Todd: To expand operating margins this year and again, we're coming off track record for consistent years of expanding operating margins. So hopefully a lot of color. There gives you. It gives you what you need there David.
David: Yes, Thanks, I appreciate all the detail.
Speaker Change: Thank you we'll take our next question from Larry Nicholson with Wells Fargo.
Speaker Change: Hey, good morning, this is Vic.
For us on tariffs on.
Speaker Change: On Mexico, and Canada can you provide some color on how much of your manufacturing is coming from either of those two countries and how much flexibility you have to move production elsewhere.
Speaker Change: And also to take price either qualitative or quantitative thank you.
Speaker Change: Yes, simple answer we do no matter of factoring in Mexico, We do know manufacturing kind of them two thirds super amount of factored any share in the U S. So we are evaluating what happens in China. There is single digit volumes coming out of their manufacturing wise, but at present time, all the scenario planning that we've done is embedded.
Speaker Change: In the guidance provided.
Speaker Change: I think that's the key takeaway, while we don't do manufacturing in Mexico. We do have some third party supply that comes out of Mexico, but as Ivan said the impact is contemplated on recent announcements as is embedded in our guidance range.
Speaker Change: Thank you we'll take our next question from Ryan Zimmerman with BTG.
Ryan Zimmerman: Good morning, Thanks for taking the question.
Ryan Zimmerman: Extremities grew 22% of phenomenal number keeps.
Ryan Zimmerman: Can you just talk about it in terms of what's driving that how durable you see that and.
Ryan Zimmerman: We appreciate the color you're giving inside of set in and just should we expect.
Ryan Zimmerman: Similar levels as we move into 'twenty five.
Speaker Change: Yeah, just a small correction and sports grew 22% in the quarter.
Ryan Zimmerman: Alright.
Martin: Thanks, Martin said, yes, yes, yes, that'd be good yeah.
Speaker Change: Sports that sports, 22% said Thats a whole in the quarter grew eight point for extremities upper single digit. This is now for five quarters in a row, where growing mid to upper single digit mostly upper single digit and we see this as durable.
Speaker Change: What's happening here first of all we did add a lot of products. So from an organic and inorganic standpoint, I'd tell you. The sales back today is totally different than it used to be.
Speaker Change: In addition to the products, we added a ton of people and we're going to continue to add more specialized people that some of the opex investment as you've seen in the first half of 2025, we have dedicated resources to the ASC or space that we didn't have before.
Speaker Change: So it's just a different a different business altogether.
Speaker Change: Upon closing as you heard in the prepared remarks upon closing of the Paragon deal or shed business now he's going to be as large if not larger actually that our hip business and grow into three potentially four takes a rate. So again really excited about that said, we do see this business as a durable business growing at least mid single digit.
Speaker Change: Likely upper single digits. Thanks for the question.
Speaker Change: Okay.
Speaker Change: We will take our next question from Danielle <unk> with UBS.
Speaker Change: Hey, good morning, guys. Thanks, so much for taking the question really appreciate it.
Speaker Change: And finally as you can.
Speaker Change: A little bit more into the ASC opportunity I think that's a potentially meaningful.
Speaker Change: <unk> growth driver is our focus is there left for teradyne.
Speaker Change: For that so.
Speaker Change: I wanted to see if you could maybe give us an update on percent of revenue today or may be procedure volume, that's going through the ASC and hold now with Paragon at the product portfolio that can help you win.
Speaker Change: Thanks, so much.
Speaker Change: Yeah.
Speaker Change: Hey, good morning, Thank you Danielle.
Speaker Change: Huge opportunity the ASC so back in 2019, roughly two 3% of sales.
Speaker Change: Here in the U S came from the ASC environment today that number is quickly approaching 20%.
We remain the number one company in hips and knees in the AC space.
Speaker Change: And with the addition of the sports portfolio now foot and ankle portfolio and other categories. We think we can elevate the growth profile, India in the ASC space.
Speaker Change: The things that we do and SRM as I just mentioned we have added people we have added partnerships.
Speaker Change: <unk> comes to mind are sending out and have already signed up a deal with CBRE in that space. We have active partnerships with factories, we have active partnerships with hill ROM. So there's not a single product gap that we had when he goes through contracting and then lastly products. We continue to innovate with the ASC mine what are products that make this surge.
Speaker Change: Faster what are products that make the surgery more efficient.
Speaker Change: Products delivered not just the clinical outcomes, but also an economic outcome, which which is paramount in the ASC relative.
Speaker Change: Relative to Paragon 28, that's a revenue synergy that we didnt contemplate that meaningfully in the model, but at Israel ammonium procedure, you're skewed in the U S have very favorable reimbursement.
Speaker Change: As I mentioned earlier Paragon 28 has not been that present in AUC. We are very present as you know in DSV, so within that to be a very meaningful opportunity moving forward. So net net very excited about where we are and their relative to your question on the volumes, we deem we deem that the roughly 40% to 60% of all.
Speaker Change: The cases in.
Speaker Change: <unk> therapeutics are going to be moving to the ASC in the next three to five years.
Speaker Change: And again, it's not lost on me that's a wide range, but that is the third party research that we've done so.
Speaker Change: Thanks Danielle.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Travis Steed with Bank of America.
Speaker Change: Hey, Thanks for the question I guess I, just wanted to kind of push a little bit on the EPS growth in the guidance I know you said you could still get some op margin expansion this year.
Speaker Change: I want to make sure just like.
Speaker Change: Why was the EPS guide kind of where it was.
Speaker Change: Why can't you do like a buyback or something that they got to offset some of the headwinds. This year just to give investors a little bit more EPS growth.
Speaker Change: And when you think about the revenue ramp over the second half of what's going to give you the confidence kind of in the second half revenue ramp here over the course of the year. Thank you.
Speaker Change: Yeah, why don't I take the EPS question, and then ill, let Ivan talk about the revenue ramp in the second half.
Speaker Change: The biggest part of.
Speaker Change: The EPS guide.
Speaker Change: Not having as much growth in the bottom line is really around the FX impact.
Speaker Change: Which I think I talked about on my prepared remarks, being 20% to 25.
Speaker Change: SaaS, which is not insignificant.
Speaker Change: We.
Speaker Change: We are going to expand margins. This year, we contemplated potentially driving more but then in the backdrop of.
Speaker Change: Investments, we think are critical to drive the business and the growth.
Speaker Change: Not only this year, but beyond.
Speaker Change: We think that the.
Speaker Change: While still hits, our overall LRB metrics of expanding operating margin and driving our reported earnings per share leverage. So that's that's really where we are on the on the earnings per share side.
Speaker Change: On an operating margin again, we feel very comfortable in our ability to drive that operating margin expansion. This year, especially based on my earlier comments, maintaining stabilized gross margin and continuing to find efficiencies through.
Speaker Change: Through SG&A on your question around share buybacks. Our current assumption is that we don't have any share buybacks, we assume right now in the modeling in the in my prepared remarks that overall share count remained flat. The good thing is coming out of the paradigm 28 transaction, we're going to have a very strong balance sheet, which is going to leave us optionality.
Speaker Change: Ali.
Speaker Change: Continue to pursue our capital allocation strategy as I laid out back at our <unk>, which is a balance of M&A and return of capital to shareholders. In 2024, I think we returned.
Speaker Change: Over $850 million, so we're well on that pathway of at least 65% back to shareholders and we're going to continue to evaluate that and be opportunistic based on market conditions and and free cash flow, which is very strong for this year and going forward.
Speaker Change: Second part of your question on the revenue acceleration on the second half lots of things that are that I can then surround but maybe I'll frame answering now four bullet points first pretty obvious the second semester of 2025 to shekel house.
It's going to benefit from the comps versus the ERP challenge that we had in 2024 recall that we are we took a beating our 60 to 80 basis points due to the ERP. So you have a calm benefited in the second half the second basis, new product introductions.
Speaker Change: You probably have heard as you have seen although these new products that we're talking about got their approval whether it has CE mark in the case of persona revision on a five 10-K approvals late in 2024. So the first <unk> of our training is about getting the sets together is about doing all the things we need to do and you really do see the ramp up of most of these new products in the second half.
Speaker Change: About 2025.
Speaker Change: The first one is the return on the Opex investments that we're making in the first half of 'twenty 'twenty five.
Speaker Change: It is sizable investments in direct to patient activities, whether it is the training associated with all these new product launches, both internal and external trainings, whether it is the marketing materials. There's a lot of investment in the first half of 2020 five.
Speaker Change: That pays back into second half and then lastly report bullet point is really timing of 40 international business, we're going to see acceleration of international growth in the second half of 2020, So really excited about where we are in the year, especially as we get into the second half of the year.
Speaker Change: Thanks for the question.
Speaker Change: Yeah, Thanks, a lot.
Speaker Change: We will take our next question from Rick Wise with Stifel.
Good morning, everyone, Hi, Suki.
Speaker Change: If I can just one of those for excellent points.
Speaker Change: You made.
Speaker Change: As to why we're going to see a stronger second half revolves.
Speaker Change: Fortunately around innovation and I was going back to your slides that you presented at J P. Morgan and you presented a slide.
Speaker Change: On the pipeline in six major products.
Speaker Change: Launching and it seems clear these are big markets. These are areas, where you haven't had the appropriate products or technology or some cases any technology.
Speaker Change: Each one of them seems like it carries a price premium like 10% to 15% kind of price premium.
Speaker Change: Hi.
Speaker Change: Help us understand.
Speaker Change: I guess two parts one.
Which of the products, we should which of the products in the second half we're going to be most.
Speaker Change: Impactful the Z one tripled.
Speaker Change: Triple papers stem hip seems like one to me, but what should we focus on.
Speaker Change: And in providing guidance today.
Speaker Change: To what extent are you, providing an optimistic view of what seemed like truly impactful.
Speaker Change: Product portfolio launching on a broad front. Thank you.
Speaker Change: Okay, Great question, Great Challenge and no I don't see them today, we provided an optimistic view on the impact of these new products.
Speaker Change: One is a meaningful opportunity recall, Rick that we got the initial launch of this product being that Q3 of 24, we get into full launch mode. As we speak I would say one is going to be very meaningful in the second half of 2025 years, you'll see us getting back to gaining share in U S hips, which.
Speaker Change: Something we've not done for a while you sell $1 $5 billion market.
Speaker Change: We believe we have a differentiated offerings, so definitely pay attention to that one which by the way in combo with our surgical impactor drives meaningful growth shall we say those true hammer.
Speaker Change: Hammer and see what are the main drivers of growth in the U S, especially in the second half in this personal analysis that was launched in 2024, but we didn't get the search generation ready until the second half we exited the 'twenty 'twenty four with some and there's penetration in the U S around 25%.
Speaker Change: The time that we got from cemented to cement less we gained 15% ESP and as we enter 2025 I do think when I see an acceleration there.
Speaker Change: If I were to just really highlight one product that is truly differentiated will be Oxford partial surrenders.
Speaker Change: In the U S. We have lost over the last three to five years shaping hungry or basis points.
Speaker Change: Xiaomi market, Sir I'll say that number again, so I think that the.
That's going to explain some of the trends you've seen we lost 700 basis points of partial knee market share with Oxford <unk>. We believe we can get back to where we were is a $1 billion market growing upper single digit we got approval for this product in late November 2024. It is the only <unk>.
Speaker Change: <unk> FDA approved product in the U S, which means that if we want to compete you have to go through a PMA will be up to 10 years. We got over 300000 cases done in Europe <unk> has deep based registry data or any parts I mean, the war in the UK registered with 33000 patients. So I can go on and on but this is truly a differentiated product.
Speaker Change: Seeing as we continue to train people get the sense ready OXXO, some analytics that would be a very meaningful product as we head into the second half of 2025.
Speaker Change: I know I said, a lot and it's always hard to pick your favorite child, but it's a very compelling portfolio.
Ivan Ivan: Thank you Ivan.
Speaker Change: We will take our next question from Matt <unk> with Barclays.
Speaker Change: Hey, thanks, so much for taking the question.
Speaker Change: So had a.
Speaker Change: Couple of questions on the on the.
Speaker Change: Paragon 28 acquisition just.
Speaker Change: One on the sales force integration and what are your thoughts on.
Speaker Change: On that look like given that it's a it's one of these independent exclusive independent field force.
Speaker Change: Organizations and the other on.
Speaker Change: The total ankle.
Speaker Change: Obviously the reason.
Speaker Change: The only reason you would go after an asset like this the way they are growing but every one of these small lower extremities acquisition seems to have evolved somehow divesting in ankle and just love to get your thoughts on that thanks.
Speaker Change: Thanks, Matt I'll take both of them so starting with the sales force yes. They are exclusive yesterday at 10 90 nines.
Speaker Change: We also have exclusive 99, salesforce escape that Zimmer biomet or <unk> business.
Speaker Change: Ana and nine sales force and its exclusive so we know how to run these businesses as I mentioned earlier I was in Orlando.
Speaker Change: This last weekend at their sales meeting we've made a very strong commitment to bring that sales force over here.
Speaker Change: As long as we continue to fuel innovation, which we will as long as we don't need to take care of their sales force, which we will I don't see any reason or any disruption in that regard <unk>.
Speaker Change: As a reminder, we don't have a dedicated sales force in foot and ankle here that Zimmer biomet. So there is no disruption when it comes to a duplicity when it comes to selecting who's going to cover what territory. So I would say, it's a very simple integration.
On the portfolio.
Speaker Change: We didn't buy just the total Angola with Paragon 28.
Speaker Change: We get in a leadership position in forefoot fracture fixation flat food.
Speaker Change: Total ankle of course charter.
Speaker Change: In biologics.
Speaker Change: We don't see any reason today than what there is going to be disruption in total ankle given our market share in that space and what they have going on so I would say this integration is as simple as it gets and we look forward to closing the transaction.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Trying to figure out what I'm not sure if I can.
Jason Bedford: I'm sorry, we'll take our final question from Jason Bedford with Raymond James.
Jason Bedford: Thanks, Good morning, just two quick questions.
Jason Bedford: I think there was.
Jason Bedford: Second half of 'twenty four I think it was impacted by about $50 million because of the ERP issue.
Jason Bedford: Soon.
Jason Bedford: Youre, assuming this business is lost or is there some sort of recruitment embedded in the 25 Guide and then just quickly on new product question when will you be in launch mode.
Jason Bedford: Okay.
Jason Bedford: Can you repeat the second part of the question I got the ERP, but I didn't get the second part.
Jason Bedford: Yes.
Jason Bedford: Oh I'm sorry, the second so two questions sorry.
Jason Bedford: When will you be in full launch mode with Oxford cement with.
Jason Bedford: Okay. So I'll start with the second one second half of 2025, we have the states. We have the training done so thats full launch mode for that products are tremendous so being a PMA centric device, we have a policy of no train or use our running extensive training throughout the first half of 'twenty two.
Jason Bedford: So second half is when you are already in full launch mode.
Jason Bedford: In terms of the ERP a lot of moving parts. They will lose some business in areas like surgical in components of our sports medicine, Yeah, We did lose some business given the ERP.
Jason Bedford: In other areas like recon Nissan shapes, there might have been some delays.
Jason Bedford: <unk> had an impact on new product introductions in the second half that now have moved towards <unk>.
Jason Bedford: <unk> second half of 2025, so it's a lot of moving parts and it's hard to quantify.
Jason Bedford: Okay. Thanks.
Jason Bedford: That will conclude our question and answer session. At this time I would like to turn the call back over to Ivan for any additional or closing remarks.
Speaker Change: Yes, I am studying regret it to this morning, I want to close with gratitude to the sales force and to the employees of Zimmer Biomet.
Speaker Change: We sit here today, it's a totally different company across three big for strategy financial results Unculture strategically with more from a <unk> profile in this free range to four and a house.
Speaker Change: By the time, we divested a spine Danville and now added or about to add Paragon 28 into the portfolio.
Speaker Change: We're excited about where we are with Paragon 28, that's a $5 billion market growing 12% and.
Speaker Change: We got no gaps in our recon portfolio Thats, not where were three five years ago. So I'm totally different company from a strategy standpoint financially.
Speaker Change: You are you've got the data points to your prepared remarks and the Q&A.
Speaker Change: At the end of 2025, assuming we delivered on these guidance.
Speaker Change: Five years of mid single digit or above revenue growth.
Speaker Change: Five years of operating margin expansion.
Speaker Change: We have brought our leverage ratio to the low twos and we are driving free cash flow conversion at a different pace that we used to and then cultural wise. We continue to have high engagement dedicated motivated organization. How we look forward to updating you on our Q1 results in early May. Thank you for your time.
Speaker Change: Thank you again for participating in today's conference call you may now disconnect.
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