Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet second quarter 2022 earnings conference call. If anyone needs assistance at any time during today's conference, please press Star followed by zero. As a reminder, this conference is being recorded today, August 2, 2022. 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 Star followed by one on your push button phone. I would now like to turn the conference over to Keri Mattox, Senior Vice President, Chief Communications and Administration Officer. Please go ahead. Thank you, operator, and good morning, everyone. I hope you are all well and safe. Welcome to Zimmer Biomet's second quarter 2022 earnings conference call. Joining me today are Bryan Hanson, our Chairman, President, and CEO, EVP and CFO, Suketu Upadhyay, and COO, Ivan Tornos. Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please note we assume no obligation to update these forward-looking statements, even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements. Additionally, the discussions on this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included within our Q2 earnings release, which can be found on our website, zimmerbiomet.com. With that, I'll turn the call over to Bryan. Bryan? All right, great. Thanks, Carrie, and thanks to all of you for joining us this morning for the call. We've got three sections for the call this morning. The first section, I'll talk briefly about our Q2 performance from an overall perspective and how a combination of strong execution and COVID recovery have actually enabled us to revise our expectations up again for the full year. That's in the face of some pretty significant macro pressures, especially around FX. I'll also spend a few minutes talking about ZB Innovation. That's a primary contributor to our performance today and certainly our performance in the future, so we want to make sure we touch upon that. For the second section, I'll switch it to Suky, and Suky will obviously provide details on Q2, but I think even more importantly and probably more interesting is to talk about 2022 guidance and our updates there. For our favorite section of the call, we'll close things out by addressing any questions you might have either on Q2 or any other topic. Let's go ahead and get started with Q2. I'll start this section by saying that despite some very real and what I would define as universal challenges in our sector, I'm very proud of the fact that the team delivered again another solid quarter, that actually was above our internal expectations. I think this speaks to the team's, I'm just gonna define it as muscle memory associated with effectively managing through challenging times. That's exactly what we have right now. With the supply concerns that are out there, it is a challenging time, and it's great to know that our team have that muscle memory to manage through it effectively, and they continue to show that. The primary reason for the overachievement was stronger than anticipated COVID recovery for sure, which happened in the quarter, but also just really solid and focused execution from the team across our regions and all of our business segments. From a procedure volume standpoint, the momentum that we saw in Q1, particularly at the end of Q1, actually continued through April and May, but we did see a bit of a slowdown in June, and that has actually carried over through to July. The recovery pace was different, you know, depending on where you were in the world in Q2. It was strong everywhere, but it was really strong outside the U.S., where we saw strong performance pretty much across the board in all of our areas, OUS. Inside of this, we saw solid momentum again in knees and hips. I'm really pleased to see another strong quarter in large joints and excited that we continue to get traction for our innovation in this area. The momentum in large joints was then offset by some expected pressure in our set businesses and our other category. Suky will provide more detail here in a minute. I think it's pretty clear for all of us actually, that foreign currency is a challenge. Supply challenges are very real. Inflationary pressures are with us right now, and those hurt us in Q2. All of these did. They're gonna continue to pressure us through the back half of 2022 and potentially beyond. Just given our business momentum this far into the year, our new product innovation, the traction we're getting there with our customers and COVID recovery, at least the profile today, our overall confidence in 2022 has actually gotten better. As a result of that, we are raising our full year guidance for revenue, operating margin, and earnings per share. I think this should be a solid indication that our strategy is working and our team is executing, really just getting it done, and our underlying business is gaining strength. A big part of that, the big part of this momentum is our new product innovation and continuing to deliver and delighting our customers. In Q2, we debuted another element of our ZBEdge ecosystem. This is an AI technology within our OmniSuite Smart OR system that focuses on optimizing surgical workflow and increasing procedure efficiency. I'd say that's important right now. It's really important because of the capacity constraints that our customers have. You know, separate from that, from a ROSA perspective, ROSA robotics momentum continued in both knee and hip for the quarter, and our placement pipeline remains extremely strong. While it's still in limited launch in very early days, the feedback and interest in Persona IQ is positive, and we're focused on collecting as much early data as quickly as we possibly can with an eye toward clearly establishing clinical use benefits, so when we move into full launch in 2023, we're as prepared as possible. All of these innovations and our broader ZBEdge suite highlight the possibilities around data collection and integration on the patient and customer experience, and that's really our focus. In addition to the strength of our existing product portfolio, our new product pipeline is just as exciting. You know, we have additional product launches planned for the second half of 2022, especially across our Knee and SET portfolios. In Knee, our soon-to-be-launched Persona Cementless form factor will complement our current form factor and provide additional momentum for cementless conversions, particularly as we get into 2023. In our SET businesses, I'm very excited about our Identity Shoulder System launch. This is gonna be a much more customizable shoulder for a more personalized feel for the patient that should optimize movement in the shoulder. We're also continuing to reshape our business and accelerate ZB's transformation. We've made significant progress in streamlining and modernizing our operating model, but we've also really focused on making ZB a best and preferred place to work as well as a trusted partner, which are two of our strategic pillars for the company. In Q2, Zimmer Biomet was certified by Great Place to Work. This is a global authority on workplace culture. The U.S. certification was based on direct survey feedback from our team members, which I think makes it even more compelling. We also established a new function for refining and driving our environmental, social, and governance strategy, but also the commitments and actions we're taking in this area as well. We have already seen significant improvements across almost every element of ESG, and truly we're just getting started. You know, we see this as an important responsibility as a company for sure, but also something we believe is critically important to our team members, our customers, and our investors. You'll be hearing more from us on the ESG front as we make further progress and as we continue to enhance our reporting in this area. In summary, even though there are real macro headwinds that our team is managing, the recovery shift in COVID continues, and the execution of our strategy is making a difference. We'll need to stay close to the headwinds and to the recovery. Hey, the last couple of years have proven that things are fluid. I do feel confident in our team's ability to navigate the path forward, and I'm excited about where ZB is going. With that, I'm gonna turn the call over to Sukhi for a deeper dive into Q2, and again, a look at our revised expectations for the year. Okay, Suky. Thanks, and good morning, everyone. Overall, we had a good quarter driven by strong execution and faster than expected recovery of elective procedures across most markets. While we continue to face heightened headwinds and challenges related to foreign currency, inflation, and supply chain disruptions, our second quarter performance gives us the confidence to raise our full year revenue and EPS outlook. With that, I'll turn to our second quarter results and how that translates into our updated full year financial guidance. Unless otherwise noted, my statements will be about the second quarter of 2022 and how it compares to the same period in 2021, and my commentary will be on a constant currency or adjusted continuing operations basis. Net sales in the second quarter were $1.782 billion, up 1% on a reported and 6% on a constant currency basis. As Bryan mentioned, strong procedure volume recovery extended from the first quarter, especially as we moved into April and May, with moderation of recovery in June. US sales grew 1.3%, driven by strong recovery and execution as COVID cases subsided and elective procedures returned, especially in knee and hips. This was partially offset by lower SET growth and declines in the other category. International sales grew 12.2%, driven by strong procedural volume across most markets in EMEA and APAC. EMEA experienced rapid uptake in the second quarter across developed and emerging markets with a generally lighter comp versus 2021. Asia Pacific overall grew in line with expectations, with China performing largely as projected and Japan growing better than anticipated. Turning to our business category performance. Global knees grew 11.2%, with US knees up 4.5% and international knees up 20.1%. These results were driven by easy comparisons OUS, along with strong knee procedure recovery across most regions, continued global traction for our Persona knee system, especially with Persona Revision in the US, and ROSA penetration and pull-through. Global hips grew 8.6%, with US hips up 2.6% and international hips up 14.9%, driven by easier comparisons OUS in tandem with strong international procedure recovery. We also saw continued traction across key hip products, including our Arcos and G7 system for revision and our Avenir Complete primary hip, which is focused on the Direct Anterior surgical approach. Lastly, we continue to see solid ROSA pull-through in the hip category. Sports extremities and trauma category increased 0.1% and was impacted by a tough comp in 2021, expected pressure and trauma due to VBP implementation, as well as expected pressure in restorative therapies due to a reimbursement shift for our Gel-One product. Within the category, we continue to deliver strong performance across our key focus areas of CMFT, sports medicine, and upper extremities. Finally, our other category declined 6.1%, driven by tough comps and expected lower capital sales related to a higher mix of ROSA placements versus upfront sales in the quarter. Moving to the P&L. We reported GAAP diluted earnings per share of $0.73 compared to our GAAP diluted earnings per share of $0.68 in the second quarter of 2021. Higher revenue and lower IPR&D charges more than offset restructuring costs and mark-to-market losses on our retained ZimVie stake. On an adjusted basis, diluted earnings per share of $1.82 represented an increase from $1.51 in the second quarter of 2021. Higher sales in tandem with lower IPR&D in the quarter more than offset lower year-over-year gross margins. Adjusted gross margin was 71.6%, slightly ahead of expectations, due primarily to better mix and lower pricing erosion. As a note, we expect heightened inflation to temper our observed second quarter favorability as we move through the rest of the year. We continue to project full-year gross margin to be slightly down when compared to full year 2021 gross margin. As we've said, increasing inflationary pressure will pull through into 2023, and we now expect about 50 to 100 basis points of headwind from inflation in 2023 versus our previous estimate of about 50 basis points. Our adjusted operating expenses were $777 million, lower than the prior year, primarily due to the 2021 IPR&D charges referenced earlier. Our adjusted operating margin for the quarter was 28%, up from the prior year. As previously noted, full year margins will be pressured versus the prior year due to inflation, supply chain headwinds, and China VBP, with partial offset by the ongoing realization of our efficiency programs. Despite these ongoing headwinds, we expect those efficiency programs to drive improved second half operating margins versus the first half of the year. The adjusted tax rate was 16.5% in the quarter and in line with our expectations. Operating cash flows were $346 million, and free cash flow totaled $240 million for the quarter. We paid down about $100 million of debt in the second quarter and ended with cash and cash equivalents of about $390 million. Our improving financial performance in tandem with ongoing reductions in debt continue to strengthen our balance sheet for greater strategic flexibility. Now moving to our updated financial outlook for the full year 2022. We're raising our financial guidance based on the following key assumptions. COVID and customer staffing pressures will continue through 2022, but with a lesser impact than previously anticipated. Supply chain and inflationary pressures stabilize at current levels, and foreign currency will be a 500 basis point headwind in 2022 versus our previous projection of 350 basis points. We assume about a 30% flow through of FX-related revenue headwinds falls to EPS, and that the FX headwinds applies to the full range of EPS guidance. Against this backdrop, I'll walk through our updated financial guidance for the year. Constant currency revenue growth is now expected to be 4%-6% versus 2021, with an expected foreign currency headwind of 500 basis points. This means that reported revenue growth is expected to be in the range of -1% to +1% versus 2021. We're raising adjusted operating margin by 25 basis points to the range of 26.75%-27.75%. Adjusted tax rate guidance remains in the range of 16%-16.5%. Adjusted diluted earnings per share is now expected to be higher at $6.70-$6.90. Free cash flow is now expected to improve to $800 million-$900 million. Lastly, net interest expense and non-operating expense will be modestly higher than the $160 million we anticipated earlier this year due to higher interest rates in foreign currency. We expect to see typical seasonality in the back half of the year, which would suggest stronger revenue dollars in Q4 than in Q3. Additionally, we expect Q4 revenue growth to be higher than Q3 growth, in part due to the easier fourth quarter comp related to China VBP headwinds we observed in the fourth quarter of 2021. Operating margins are expected to follow a similar trend as revenue. In summary, while there are macro challenges and headwinds, our team is navigating those challenges and executing well. We are raising our 2022 financial guidance due to better than expected COVID recovery, the strength of our execution, and our confidence in ZimVie's underlying business fundamentals. With that, I'll turn the call back over to Keri. Thanks, Suky. Before we start the Q&A session, just a quick reminder to please limit yourself to a single question and one follow-up so that we can get through as many questions as possible during the call. With that, operator, may we have the first question, please? Once again, ladies and gentlemen, if you'd like to ask a question, you can cue them by pressing star one on your telephone keypad. We will begin with Rick Wise with Stifel. Good morning, everybody. Hi, Bryan. Hi, Suky. Maybe I'll start off with your commentary about the outlook for the second half from a couple of perspectives. Bryan, you talked about the April-May strengthening, maybe some softening in June and continuing. Help us understand where you're seeing it, what do you think is happening, and maybe better understand what you've dialed into the second half. We recently did a survey of 50 orthopedic surgeons who were cautious about the second quarter, but the most ebullient, exuberant about their volume expectations for the second half of any doctor group we surveyed. I'm confused about, you know, how we sort of reconcile those two points of view. Yeah. Thanks for the question, Rick. So what I would tell you is that what we experienced, and of course, we talked to a lot of our customers as well, as you would imagine. What we experienced is in June, and then carrying through to July, not fewer procedures, but more cancellations of those procedures. Most of that was driven by either, one, the staff member having COVID or testing positive for COVID, or the patient testing positive for COVID. As a result of that, they could not, you know, carry on with the procedure. What we're saying is that we believe that could continue. You know, we believe that could continue. Until we see a shift, we're going to assume it will continue at least through the third quarter. That, that's just what we're experiencing. The good news is, when I think about the quarter, we had a really strong quarter. The business momentum, the underlying business momentum is real, and we believe that's gonna continue. Outside of that, I don't know if you wanna speak more, Suky, to just our second half view. Yeah. Good morning, Rick. Good to be with you today. If you look at our implied guidance in second half at the midpoint versus what we did in the first half, you'd get about 4% operational XFX growth for revenue. Really what underpins that is three key assumptions we've made inside that. You know, one, you've got tougher comps in the second half than you saw in the first half. You see that especially with EMEA. If you just think about the second quarter growth we just posted, but it really translates to other markets as well. Tougher comps. Two, we have one less selling day in the second half of the year, so we've accounted for that. Third, as Bryan talked about, we're just taking a prudent view on COVID, especially given our index to elective procedures. We did see some softening of procedures due to those cancellations as we exited the second quarter. We're assuming that continues into the third quarter with a step up or improvement in COVID in the fourth quarter. Now, I would say if we don't see that pressure continue all the way through the third quarter, you know, that would likely take us to the top end of our range. Those are some of the big building blocks that we've assumed in our second half growth rate. As Bryan said, we feel really confident about the execution of the team, where our pipeline is going, and our ability to execute on our recent product launches. Feeling really good about the second half. That's great. Thanks for that. Maybe just as a follow-up to some of these thoughts. Maybe Suketu, and this is always, I know your favorite question on calls like this at this time of year. Talk about the setup for 2023. Just hearing some of the factors you're talking about, improved internal execution, major new products being launched, the positive impact of your efficiency programs. It would seem like I'm leaving this feeling more encouraged about that setup for the next year than I might have, appreciating that the many uncertainties as well. Yeah. I'm glad you're feeling encouraged because we're feeling encouraged as well about the outlook. You know, we're not gonna get into guidance, obviously, for 2023. There's still a lot more to play out in 2022. As we think about a normalized market and normal market dynamics, you know, we would expect, you know, revenue at a floor of 4%. And inside of that, based on all the operational efficiencies the team has been very successful in making and things that we've got planned for next year, we believe we can offset this headwinds that we're seeing this year related to inflationary pressures, and we believe we're in a position where we can expand margins into 2023. Now, I mean, it won't be as great a margin expansion as you would have if we didn't have these inflationary pressures this year, but we still feel confident that we can expand margins with that type of top-line growth profile into next year. Yeah. I just maybe make an additional comment on that. I would agree. I think that the execution of the business and the team is very real. The momentum in the business is real. The product pipeline that we have is very strong, that we haven't even launched yet. For all those things coming together in a normal market, I would be very disappointed if we didn't at least deliver a 4% growth rate. That said, that's not where we're gonna stop, right? We clearly have a little more cash flexibility, and that opens up options for us from an acquisition standpoint. We're gonna be looking to add accretive WAMGR acquisitions and potentially diversifying acquisitions to bolster that growth rate over time. That's incredibly helpful. Thank you. Sure. Thanks, Rick. Jake, we can go on to the next question. We will hear from Pito Chickering with Deutsche Bank. Hey, good morning, guys. Thanks for taking my questions. Looking at your 2022 guidance on the margin side, can you help us understand the increase of inflationary pressures and the FX headwinds and how that's offset by stronger revenue growth and margin leverage? You can use the around positive pricing and mix in your updated guidance for the year. Yeah. Hey, Pito, this is Suky. I'll start with the operating margin guide. Inside of that gross margin, we do expect to step down in the second half versus the first half. We are experiencing greater headwinds due to inflationary pressures. That's baked into our operating margin guide. That's increased in the second quarter from our first quarter call. What we now see is where we originally anticipated about 50 basis points of that incremental, Inflationary pressure landing in 2023, we now think it's closer to 50-100 basis points. Again, we've completely included that in our new operating margin and gross margin guide or expectations for the rest of this year. I would say inside of that, our assumption is that inflationary pressures stay relatively stable to where we exited the second quarter as we think about the rest of the year. You know, if you take that operating margin, you would expect perhaps a bigger EPS flow-through. As you're seeing, across the sector, FX has been a significant headwind, you know, taking our number up from 350 basis points of headwind now to 500 basis points of headwind. If you think about our EPS guide and our raise, the way to think about it is while we're increasing our XFX or operational growth by 200 basis points, our reported growth at the midpoint is only going up by 50 basis points. If you take that 50 basis points, that translates to about an incremental $35 million in revenue, including Q2 performance. If you flow that through, that would get you to about a nickel. That helps support or helps to give the big building blocks around the 5-cent raise that we just put in there. Hopefully that gets to your questions, but happy to take any follow-ons you might have. Yeah. Just one quick follow-up here. On the 2023 commentary with this sort of 5% FX hit you're seeing, assuming that this were comps out next year, can you just refresh us how that would flow through the P&L in 2023? Yeah. Right now we're assuming that FX is flowing through to net income at about 30%. That's inclusive of any natural hedges we have, plus any FX gains and losses. Now, I would say that 30% can vary over time for a number of variables. It can vary based on mix of regional profit. It could vary because of timing of foreign currency changes. It could vary because of the timing of FX gains and losses. Right now, our best estimate is 30%, and as that changes over time, we'll keep you updated. Great. Thanks so much. Thanks, Pito. Jake, can we go to the next question, please? We will now move to Larry Biegelsen with Wells Fargo. Good morning. Thanks for taking the question, and congratulations on a really nice quarter here. Bryan or Suketu, you know, international was really strong for hips and knees. I just wanna confirm there was nothing kind of one-time, no catch-up there. Then just SET and Other, maybe just some color on, you know, what accelerates those two businesses. You know, is it the new shoulder in SET? You know, when does that happen? The outlook for Other, given some of your comments more, you know, ROSA, you know, rentals or lease agreements, you know, what's the outlook there? Thanks for taking the question. Sure. Yeah, thanks, Larry. What I would tell you is that there was nothing other than, you know, some easy comps, obviously, that we had OUS. There was no one-time event that buoyed the quarter, that somehow skewed the quarter. It was just the factors that we referenced already that came together and allowed for a very strong quarter OUS. That's the first answer. I'll hit SET and then maybe Suky you can talk about other or Ivan you can as well. On the SET side, I think it's probably good to just take a step back because we don't talk about the subcategories that often of SET and just kind of reorient everybody. We have six businesses underneath SET. We have our CMFT, which is our craniomaxillofacial and thoracic business, sports med, upper extremities, foot and ankle, trauma, and restorative therapies. I would just say in the quarter, we saw very strong performance in our three focus areas, upper extremities, CMFT, and sports, with upper extremities and CMFT both growing double digits in the quarter, and we think that's sustainable. In sports medicine, growing mid-single digits, even with a pretty tough comp in that area. That was all offset by expected pressure from Asia Pacific and trauma. To be very clear, we expect that to continue, that pressure in Asia Pacific to continue through Q3, but then reverse itself in Q4. Then in the US, we saw pressure in restorative therapies. This is due, as Suky had already mentioned, because of a reimbursement change in Gel-One. What's important on this is that's going to accelerate into Q3 and continue through about mid-2023, and then it will annualize out. Okay, so just net-net, I would expect SET to stay pressured in Q3 and then improve in Q4. And again, we feel pretty confident that we're gonna continue to see momentum in our focus areas. Maybe, Ivan, you could speak to some of the innovation and some of the things that give you confidence about those areas. Sure. Thanks, Larry. Thanks, Bryan. You mentioned shoulder, whether it is just one device that is driving the growth. I think the answer, Larry, is that that's not the case. It's more than one product. You are familiar with sort of Signature ONE planner and guides. We launched that about 2 years ago. Today, about 50% of all procedures are done using this technology. The feedback continues to be really compelling around accuracy, around the simple interface with the surgeon, the integration of the workflow, and just the fact that the surgeon is in control. Nano or the stemless shoulder was also launched and is getting great momentum. The big launch that I think you're talking about hasn't happened yet. Our Identity launch, which is gonna be our biggest shoulder launch in the last five years, is about to get launched, and that is gonna be as patient-centric as it gets. Truly a personalized solution. It has the ability of doing inlay and onlay reconstruction. I can spend an hour talking about it. I know you're a product guy. What I will tell you is gonna be transformational. Beyond shoulder, sports med, we have filled the portfolio very quickly, still integrating Relign, the acquisition that we did about 12 months ago. It is an all-in-one arthroscopic surgical platform. The feedback continues to be great, both on the capital and consumable side. We got new products on anchors. I can continue to go on and on, but I would say that our portfolio in sports med today has everything that we need to have. Then lastly, on CMFT, as Bryan referenced, that is a double-digit growth business with a combination of organic and inorganic plays. We launched new products in thoracic and neuro. We're about to launch as many as 6-7 different products in the next 12-18 months. We're making a lot of investments in that business. It's not one product, it's not one category. At least three categories are growing really strongly globally. On top of that, I will say our commercial execution is best in class when it comes to the focus, specialization, incentive plan, and our contracting capabilities. We're really excited about the momentum that we got, Larry. Great. Thank you. Thanks, Ivan. Maybe so you can just speak quickly to other. Yeah. You had two other questions in there, Larry. One was on the quarter for knee and hip and anything that we saw in there. I would say it's a very clean quarter. You know, we really didn't see anything material or meaningful relative to shifts in timing on tenders or anything. It was pretty straightforward on both, well, in on recon in total. Then relative to other, it was down primarily driven by the mix of ROSA. I would say the installments continue to be very strong. As a company, we're very happy with how that, the continued uptake of ROSA and the utilization increases we're seeing. The mix of placements versus sales was different than the prior year, where we saw this year more placements or this quarter more placements than we saw absolute dollars in sales. We did see just a little bit, a modest level of pressure in surgical capital within our other business. Again, those were the two key drivers to the year-over-year declines in the quarter. All right. Thanks so much, guys. Yeah. Thanks, Larry. Jake, we can go on to the next question with you, please. We will now hear from Josh Jennings with Cowen. Hi, good morning. Thanks for taking the questions. Bryan, wanted to just ask about competitive wins in joints and what you think is driving in the marketplace decision-making by your surgeon customers. You know, robotics would provided an edge at one point. Now all the big four have the robotic systems commercialized. Do you think that surgeons are shifting back to making decisions in terms of what brand based on implant or is robotics still driving competitive wins? Just in the same vein, just how should we think about the evolution of ROSA from here in robotic? I'm sure it's probably a combination of implant and the robotic system, but what is Zimmer doing to evolve the ROSA system and any software updates that you guys have implemented so far in 2022? Just have one follow-up. Yeah. Thanks, Josh, for the question. I would say that, you know, it's always been a combination of the implant and the value of the implant to the surgeon, and will always be that way, in concert with the technology you bring that surrounds the implant. That could be robotics, it could be mymobility, it could be our entire ecosystem that surrounds the implant. It's always been a combination of those two things. When I look at our performance, just those things are now coming together in a cleaner market than we've had in the past. The underlying strength we've had as a business has been masked by some external things. As those clouds begin to move, I think you're gonna see the real performance of the business come out. With that said, you know, obviously, Ivan is here. He's much closer to it even than I am. Maybe you could speak to what you're seeing out there. Yeah, absolutely. On question number one, Josh, I concur with Bryan. The physician is clearly the decision maker, but the role of the provider and the payer is also very, very important. Obviously, we target those decision makers as well. Relative to ROSA, I tell you, Josh, what makes ROSA unique is not that it is one product. It is a part of an ecosystem that consolidates a lot of different parts and pieces. It's fully integrated with a lot of pre-op stuff or partnership with Apple and mymobility or planning software. The fact that you can use ROSA with the number one in the world, Persona, the connectivity with some data points in OrthoIntel data platforms and obviously Persona IQ at some point. I think it's more of an integrated solution than just one product that is driving those decision makers to come our way. If you go out there and ask physicians why or payers for that matter, why are they choosing ROSA, other than the outcomes and the technology at play, they like the efficiency. They like the fact that our pre-planning is easier. They're seeing the outcomes, and I think those are the reasons why we're seeing the great momentum with ROSA. Hopefully that answers your question. Thank you. Bryan, I just wanted to ask about if there's any opportunities you see for maybe product line pruning or even if you're working through any product line obsolescence that could, you know, you could drop some maybe anchor product lines and help catalyze some stronger growth out of your different business units. Thanks for taking the questions. It's a great question. You know, it's interesting because when I first started at Zimmer Biomet, I made the mistake one time on an earnings call talking about the fact that we were gonna reduce SKUs, and the stock just tanked. Because normally what happens when you do that, there's risk associated with revenue. What we've done then is just to be kind of quiet about it, but we've also been doing it. We've had dramatic decreases in SKUs over the past four years, dramatic. We're gonna continue to focus on that because there's a lot of inefficiencies in orthopedics if you have multiple product lines you're trying to cover, and it reduces focus in the field. We really are trying to focus on the main brands, push from an incentive standpoint our teams to focus on those brands and rationalize categories that they're just not as important to us. Again, we've been, you know, doing that very quietly but very effectively over the last four and a half years. Great. Thank you. Sure. Thanks, Josh. Jake, we can go to the next question in the queue. Our next question will come from Jayson Bedford with Raymond James. Good morning and congrats on the progress. Just a couple quick ones. In response to Rick's question earlier, Suky, you mentioned margin expansion in 2023, and I was just a little unclear. Was that in reference to gross margin, Op margin or both? Yeah. Jason, great question. Good clarification. It's really more about operating margin expansion. As I said, you know, we've got some inflationary pressure this year that's gonna capitalize into next year, which is gonna, you know, put some headwinds into gross margins year over year. I don't wanna get into exactly where we think gross margins are gonna end, but just know that, you know, year over year as a starting point, you've got 50-100 basis points working against you because of things that happened this year. Having said that, quite excited about all the progress the team is making to help offset those. You know, we're doing some really good things around pricing, which is improving our profile. You saw that in this quarter. We expect to see some of those more strategic and tactical levers continue to play through for the rest of this year and into next year. Really happy about what the supply chain and commercial teams are doing relative to site optimization and cost down in manufacturing, even in the backdrop of a very dynamic supply chain, market and, you know, the challenges with trying to get product and packaging materials and logistics all sorted out in a very, again, volatile market. Then, you know, beyond that, in SG&A, we're gonna continue to look at improvements in our go-to-market models, commercial models across the world. You know, we've already implemented a number of those, for instance, in Europe, where we've looked to restructure and rethink how we go to market in lower margin markets, as well as lower margin business categories. You know, the global business services operating model that we created during the pandemic is ripe for further leverage, and we think that we can continue to drive efficiencies by putting more of our activities into those service centers. We feel really good that, you know, despite ongoing gross margin pressure because of these inflationary headwinds, that we see a clear path to operating margin expansion into 2023. Hopefully that gives you a little bit more color and clarification on where we expect to see it. Yeah. It's very helpful. Just as a bit of an unrelated follow-up, in terms of patient backlog, I thought it was somewhat refreshing that you didn't talk about hospital staffing issues. My question is: What do you think is posing the biggest hurdle to kinda unleashing that backlog? Is it just patient reluctance to come in, whether it be COVID or economic reasons, or is it still hospital staffing? Thanks. Yeah. I think it's a good question. I would say it's a bit balanced. It's multifactorial. I would say that even in the quarter, in the second quarter, we didn't talk about backlog much, but I do believe in certain areas where you had capacity capabilities, we did see some backlog come through. Now, unfortunately, what we continue to see is also an offset typically of that in other areas that have either COVID or staffing pressure that then drive the numbers down. I've kinda continued to see this kind of offsetting of areas that can drive forward and pick up backlog in other areas that are probably building backlog. I don't know when that's gonna stop. It's hard to predict. The good news is that what we're seeing now anyway is very strong procedure growth. We're just seeing cancellations being the thing we're concentrating on. We're not seeing COVID driving ICU beds in the wrong direction or you know, capacity of ICU beds being a challenge. It just is a patient wants to come in, the procedure's being scheduled, either the patient or the staff member gets COVID, and they can't conduct the procedure. That's what we're seeing, and that's what we saw more in June and July so far. Thanks for the questions, Jason. Jake, can we go to the next question in the queue, please? Yes. We'll hear from Kyle Rose with Canaccord Genuity. Great. Thank you for taking the questions, and good morning. I just— You know, Suky, you made, you know, some comments on the last question just about pricing updates. I wonder if we could just take that one level, you know, deeper. Where are you seeing the biggest success, I guess, in price pressures, you know, near term? Then when you think about, you know, strategically over the long term, I mean, where do you see pricing power and opportunities to to potentially flex from a pricing perspective longer term? Yeah. Thanks for the call question. I'll actually turn it over to Ivan. He's probably the closest and, you know, doing the day-to-day combat on this. Yeah, absolutely. Thanks. I'll tell you, when I joined this business 4 years ago, the normal price erosion was 300, even 400 basis points per year. In some categories, 500 basis points. That's not where we are. That's not where we're gonna be. I would be extremely disappointed if we're not at the low end of the range of 2%. That is in a bad day if you ask me, 200 basis points of price erosion. Relative to what are we doing, where are we seeing success, first of all, I'll define the journey as a three-stage journey. Tactical, number 1, strategic, number 2, transformation, number 3. We completed number 1. We've done a lot of tactical stuff, you know, raising price for the non-core products, raising price in non-core markets, thinking differently about different customers based on segmentation. All of that has been done, and we're getting great success. Stage 2 is strategic. I will say we're probably midpoint in that stage. It's about category contracting. We have a number 1 position in hips and knees in many different accounts around the world. We've not done a good job in leveraging that position to bring SET and other categories. That is happening. Now that we have truly an ecosystem of solutions, we are bundling. I don't like that word, but that's the one that comes to mind, our ecosystem and contracting across the entire episode of care. We're doing a lot of things in terms of thinking ASCs. We incorporate a ton of people in our contracting group that are thinking more strategically about those relationships, line extensions and whatnot. At some point, we'll get into the transformational stage, and that is how do we leverage all this data that we're getting to do risk sharing agreements. Now that we launch product platforms like Work AI, and we're able to engage in predictive analytics, how are we gonna leverage that to really understand what happens 3, 6 months after a surgery is done? Three different stages. I would say again, we are stage number 2, and if we are not at least or at worst at 2% price erosion, we're not doing our job. Thanks for the question. Thank you. That's very helpful. Just one follow-up on ROSA. Maybe just talk a little bit about the utilization you're seeing and some of the positives. You know, I'll take a stab. Overall, installed base and, you know, percent of knees and hips flowing through that would be very helpful. I think you've always got to try to take a stab at those two things, but we're just not gonna provide it. I do want, Ivan, if you could, just talk about the momentum. I mean, we're seeing really strong momentum in ROSA. It was a little off from the other category, given the mixes. If you referenced before, we sold less than we did the prior year, but the placements were still strong. The pull-through on those placements are also still strong. Maybe you can speak to that. Sure. Absolutely. I'll tell you, I'm really proud of the work that the team has done globally. We are now in 40 countries with ROSA over the last three years, but I'm even more energized about what's happening or what's gonna happen over the next three years. To throw some colors, I won't disclose the number of placements. Bryan has done that in the past. I won't talk about penetration, but I will tell you that it's double digit here in the U.S. We had a solid Q2. Sequentially, we grew both on sales and placements, overall installments, Q2 2022 versus Q1 of 2022 versus last year comps, you know, was a headwind. We continue to see a nice mix in terms of the installations in an inpatient unit and in an ASC unit. I mentioned earlier that the feedback from customers is very compelling when it comes to efficiency. Today, about 30% of all installations are happening in ASC. That's a great lead indicator to what's gonna happen here, given the migration into that setting. From a competitive standpoint, we track that obviously very closely. About 40%-50% of installations are happening in competitive accounts. Again, the number of returns and the feedback has been very positive in that space as well. Really excited about where we are. It's a global business, continue to see penetration in the right direction. As I think about the next three years, with as many as nine indications coming, I would say that we're in the really, really early innings of this game. Thanks, Kyle. Jake, can we go to the next question, please? Yes. Next, we will hear from Jason Wittes with Loop Capital. Hi. Thanks for taking the questions. Maybe a follow-up on what you meant. Appreciate the detail on ROSA. Curious on the competitive accounts that you're getting in with ROSA. Are they using multiple robots, or is it usually just a single robot that's a ROSA? Or how would you characterize those competitive inroads? Absolutely, Jason. Thank you. It really depends. We are in a lot of teaching institutions. As you can imagine, when you're talking to a Hospital for Special Surgery in New York or the Cleveland Clinic or Mayo Clinic, they do like to have a wide array of different robotic solutions. It's not uncommon to see two or even three robotic systems there. That's what comes to mind when it comes to selection. As you look at other settings, it really does depend. It depends on the preference. You know, when you have high volume surgeons that they're used to using Persona, then they tend to gravitate towards ROSA because it does integrate Persona, and it drives a different level of efficiency. It does depend on the volume of the surgeon, teaching institution, non-teaching institution. Yes, we do have examples here in the U.S. and globally, where you have as many as two or even three robots in an account. Yeah. It's not surprising that it occurs. Even if you just look at the implants, even in a very strong account that we would have, usually it's not homogeneous with one implant. You typically have some competitive implants in there as well. It would follow suit that if you're gonna move into robotics, you likely will have more than one robotic system. That's. I appreciate that detail. Then a follow-up on Persona IQ. I know you mentioned you're kind of working out or building up the case for the value proposition. I assume that's gonna be a premium price product, and it sounds like you're ready to fully launch that in 2023. How do we think about that? Is that a, I mean, is it in terms of the price and the value proposition for the patient in the hospital? You're absolutely right. It is going to be. It is today, and it will be a premium price product. It is one of those opportunities for share wallet, just like you would see in robotics disposables, you would see in mymobility, you would see in a cementless, you know, uptick in price point. That's why we're sprinting right now to be able to collect data to prove out the value proposition, as I said in my prepared remarks. You know, Ivan, obviously, you're very close to the launch. Maybe you could speak to that as well. Yeah. I'm not sure, Jason, that we're ready to commit to a launch date. We knew early on when we acquired this technology, when we partnered with Canary in this technology, that this was gonna be a limited market release, and it could take 6, 12, or even 18 months, depends on the level of data that we're getting. We knew that this LMR was more of a clinical exercise than a commercial exercise. We are on track with the things we wanna get. Really, the LMR has 3 stages. Number one is validation of the value proposition. Again, we're getting millions, and I'm talking millions of data points so far in this LMR. Anything from what happens in trial on resection, gap balancing, the level of alignment, the cutting, what happens post-op, in terms of a range of motion, in terms of a gait, speed, and all kinds of things. With all those data points, we need to understand what is the true value, proposition for that patient, that provider, and that physician. The second part is how do we, once we really do launch the product, how do we make this efficient? What's the pathway towards activating sites at a faster speed? How do we train surgeons? How do we deal with the data questions around privacy and whatnot? Number three, it's really what's next. You know, we don't wanna be just a smart knee company. We wanna be a smart solutions company. We got a pathway to get into hip. We got a pathway to get into shoulder. We understand both cemented and cement-less needs, different platforms. To that end, there's a lot of data we're getting to understand what is that gonna do from a portfolio standpoint. I'm not gonna commit to a date for launch, but I will tell you we're on track in terms of gathering all the data and the roadmap ahead. Thank you. That's helpful. Just maybe what's one quick, you know, conceptually, question here, and that is the market ready to pay up for, you know, these AI technologies, these planning technologies? I mean, traditionally, the market's been very focused on implants, implant costs, so this is a bit of a shift. Has the market been receptive? Do you think they're receptive? Do you think, you know, 2023, they are receptive to paying, you know, these types of premiums for these sort of new take on technologies? I'll answer it in a couple ways. I think first I look at data points that would suggest that the market is ready, and I just look at ROSA. I look at robotics in general. It wasn't that long ago that there was an assumption that orthopedics would not pay a premium to bring robotics into play. I think we're finding that's changing very rapidly. I really do believe robotics will become a standard of care at some point. I think it's the same thing. This is the next leg of the stool. I really do believe that data collection and the informatics capability as a result of that will be something that people will desire and pay for. We have to prove it. We have to collect the data, create the data lake, create the insights as a result of that, and give guidance to surgeons from that data. Once that occurs, we can then predict things ahead of time and change care as a result of that, there's value in that. There's no question. Remember, there's still a large percentage of patients, somewhere in the neighborhood of 20%, that get a knee procedure that are not happy for whatever reason. When you talk to surgeons, even really good surgeons, they don't always know why. They'll say, "Hey, I had the best surgery day. The X-ray looks fantastic. That patient is not happy. I do not know why." We don't either. I'm pretty confident with the data we're collecting, we'll be able to predict it in the future and then change the care for that patient. That's really good for the patient, and that's why we're doing it. I'll just maybe quickly add that, in addition to the example of ROSA, which I think is a great example of the market being ready to pay for technology, we already have thousands of patients in our mymobility by Apple platform. So it's another example of when you do provide the right data, people will pay for it. There's two questions that every day we are trying to solve with payers and providers. Can we lower the length of a stay in a hospital for surgery? Can we lower readmission rates? If we can do that through data and technology, the market will pay for that. We're making both bets that we're gonna be able to do both of those. Thank you very much. I'll turn it back to you. No, thank you. Jake, if we can go to the next question in queue, that'd be great. We'll hear from Chris Pasquale with Nephron. Thanks. Just following up on the Persona IQ question. Can you give us a sense for the scope of what you're collecting? Is this something we should expect at the AAOS meeting in the spring, or is the timing not gonna line up with that? Well, I tell you, I could spend an hour talking about the things that we're collecting, but from pre-op to intra-op to post-op through different devices, we're collecting data. Now with Persona IQ, which is obviously intra-op and post-op, we're looking at things such as resection data, gap balancing, the accuracy on cuts, the overall alignment, the range of motion expectations. We're looking at post-op at asymmetry of the actual implant, the step length. What else? Gait speed, how well are you doing physical therapy post-surgery? Again, I can go on and on. In addition to those patient-centric measures, we're looking at how to design products in a better way based on how those implants are functioning post-surgery. I think in the academy, you'll see much more in this space. Again, the idea of going back to value proposition is out of all these multiple data points, what are the two or three that are gonna drive that premium and the willingness to pay? I'm looking forward to sharing that in the academy. Yeah. I think it's important 'cause you said it's not just IQ. It is an ecosystem of capabilities that allows us to collect data across all areas of the procedure before, during, and after. It's a combination of those things that will create that data lake that is just too vast for us to make any sense of. With machine learning, we can look for patterns in this data and ultimately provide insights as a result of it. Got you. Thank you. I just wanted to clarify on the pricing commentary. You guys used to give the impact of price by business, went away from that this year. If I look back over the past seven or eight years, the average impact was just a little bit over 2%. I'm a little confused by the 3-4 point comment and how much of an improvement we should really expect if 2% is a target going forward. Maybe you can just clarify that. Thanks. Yes, I'll take that one. Excuse me. Overall, on a consolidated basis, you're right, it was somewhere in the 200-300 range. If you deconstructed that and actually looked by category, and we did provide that level of data, you would see that knee and hip or recon was higher on price erosion than the overall consolidated. You saw generally lower than that average in SET, so that was your offset. I don't know, Ivan. Just to be clear on the 300-400 basis points, that is, large joints in the U.S. When you look at the overall category, it might have been different. Yeah, it was not unusual to see 300, 400, even higher than 400 basis points here in the U.S., given the way that we contract and historical factors. Got it. Thank you. Thanks, Chris. Jake, we have time for maybe one or two more questions. Can we go to the queue? Yes. We'll hear from Steven Lichtman with Oppenheimer. Thank you. Good morning. Follow up on SET. You talked about the pipeline you have coming in your focus areas. As you think about overall SET versus WAMGR for those markets, do you see a pathway to improved foot and ankle growth versus that market, either through internal innovation or M&A? Your overall thoughts on your foot and ankle from here. What I'll tell you is, again, all six of the categories we have in SET are interesting and attractive categories. There's no question. We do bias our investment in our focus areas, which are the ones that I referenced, CMFT, sports, and upper extremities, mainly because those businesses have either been able to acquire a full portfolio, have a full portfolio, and we see a cleaner path to leadership in those spaces, and they get disproportionate amount of investment. As a result of that, we expect above-market growth in those spaces. In the other categories, they still get investment. They're still important to us. We just expect a different performance because the investment level is different. Now, if any one of those businesses comes back with a pathway through acquisition or otherwise that would also show a clear path to leadership, they could become a focus area as well. I don't know if you wanted to add anything? I'll just keep it very succinct and say we have not given up on foot and ankle. There is, I would say, a meaningful amount of R&D that is going into that space. We recently closed the buyout of A&E Medical, which was a partner of ours in foot and ankle. We now have a more complete offering in forefoot, midfoot, and hindfoot. We got some biologic solutions that we're launching as we speak. We got a partnership with a sports medicine group on sutures. So there is a compelling portfolio, I will label it, that we think that we're gonna be able to launch here. Got it. Okay. Bryan, you said before that as you guys moved into phase three of your transformation, you know, M&A got crimped obviously by COVID. You know, the impact there from a procedure volume basis has ebbed, but obviously there's some other macro headwinds. Your balance sheet's in good shape. How do you feel overall about the environment for Zimmer to go out and do some deals here over the next 12 to 18 months? Well, I'll tell you a lot better now than I did before, that's for sure. You know, the fact is our financial flexibility is improving. You know, the balance sheet looks strong, and we've earned the right now to be able to truly increase our focus in this area. Don't get me wrong. All along, since we've been at phase three, we've been looking at the market, looking for assets that we could pursue, but now our ability to execute this phase of our transformation is more real. Just to give you some color there, you know, we truly will be looking at mission-centric targets because that's the number one criteria. We're also gonna be looking for places where we believe or spaces where we believe we can get a path to leadership, at least at some point. We're always gonna be looking for WAMGR accretive assets and then those things that as a result of that, can drive faster growth and faster EPS growth over time. The size, you know, we're probably looking at more small to medium sized deals, and it would be across three areas. Number one would be to diversify in our faster growth orthopedic markets like extremity, sports, CMFT, and even settings like ASC. Also secondly, to diversify our revenue outside of traditional orthopedics with an eye towards those things that are a little less elective in nature. Inside of recon, we're actually looking to enhance our position in those faster growth sub-markets of recon so we can bring our WAMGR up there as well, things like data and robotics. That's where we're gonna focus. We've been at phase three for a while. We've got a lot of things that we're interested in, and now we have a little more financial flexibility to move in that direction. Yeah. Jake, we probably have to end there. I know we're a little bit above 9:30 A.M. here, but thanks for all the questions. All great from the queue. Bryan, don't know if there's any closing remarks that you'd make to round out the call. Yeah, I think what I'll just say is it was a strong quarter, but it's just a quarter. The fact is the momentum has been there for a long time, and I'm just really happy that finally, with some of the clouds being removed, you can actually see the performance that the you know the team is actually delivering. I think I do wanna make sure that we're clear. As we think about that concept of, you know, we should at least do a 4% growth rate, it's gonna be choppy for a while. You know, the fact is it's not a clean market, it's not an undisturbed market, and it's not gonna be for a while. So you could expect quarters that might be above that 4%. You might expect to see quarters that are below that 4%, just given all that noise in the market. Make no mistake, the business momentum is real. The team is executing right now flawlessly, and our product pipeline is really, really strong. Our confidence is high. Even though it's gonna be choppy for a while, our confidence is very high. Okay. Thanks everyone for the questions. Of course, if you have others, please don't hesitate to reach out to the team today, and I'm sure we'll talk soon. Thanks for joining. This concludes the Zimmer Biomet quarterly earnings call. Thank you for your participation.