Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet First Quarter 2024 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, May 2nd, 2024. Following today's presentation, there will be a question and answer session. At this time, all participants are in listen-only mode. If you have a question, please press the star followed by the one on your push-button phone. I would now like to turn the conference over to Keri Mattox, Chief Communications and Administration Officer. Please go ahead. Thank you, operator, and good morning, everyone. Welcome to Zimmer Biomet's First Quarter 2024 Earnings Conference Call. Joining me today are Ivan Tornos, our President and CEO, and CFO and EVP Finance, Operations, and Supply Chain, Suky Upadhyay. Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please note, we assume no obligation to update these forward-looking statements, even if the actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements. Additionally, the discussions on this call will include certain Non-GAAP financial measures, some of which are forward-looking Non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating these measures is included within our Q1 earnings release, which can be found on our website, zimmerbiomet.com. With that, I'll turn the call over to Ivan. Ivan? Thank you, Keri, and thank you everyone for joining the call here this morning. I'd like to start today the way that that I typically do, by taking a moment to recognize and to show my gratitude to the 18,000 Zimmer Biomet team members across the globe, who each and every day work relentlessly in driving our mission forward. Simply put, I'm very proud of each and every one of you. Thank you for your dedication, for your commitment, resilience, and for your strong performance to start off this year, 2024. It is truly this great workforce and the culture that we have here in place at Zimmer Biomet that gives me gives us confidence behind the financial commitments that that we're making. Given the fact that we have a very robust Investor Day coming up in just a few weeks, I will keep my opening remarks short, with the goal of moving quickly into today's Q&A session. I'll touch on three key areas briefly. First, I'm gonna provide some general comments on the results in the quarter versus our own expectations. Secondly, I'll cover the drivers of the performance, and we'll touch on why we believe that these drivers are sustainable. And then lastly, I'll close with a brief summary on our progress against our three strategic priorities, which have been discussing since day one. Those being people and culture, operational excellence, and diversification innovation. Starting with the quarterly results, overall, we are very encouraged with our Q1 performance, which was ahead of our own expectations, driven by healthy end markets, combined with a strong execution across the organization globally. We ended the quarter continuing the momentum that we saw in 2023, delivering 4.4% constant currency revenue growth, while overstepping a sizable dayrate headwind and facing rather difficult comps versus a year ago. In fact, it is reassuring to see that on a dayrate-adjusted basis, our growth for the quarter was greater than 6%, with several areas of the business and geographies contributing to such solid results. In addition to the sound revenue performance, we drove adjusted margin expansion and grew adjusted earnings, even while our effective tax rate increased over 200 basis points. These results to start 2024 give us great confidence that Zimmer Biomet will deliver 5%-6% constant currency revenue growth in the year, while driving sizable adjusted operating margin expansion, so pleased to reaffirm our guidance for the year. This, in turn, will enable mid- to high-single-digit adjusted earnings growth while realizing our commitment of seeing free cash flow growing faster than earnings. Suky is gonna provide more color around these areas later, but, strong performance in the quarter, and again, reaffirming guidance for the year. Net-net, it's encouraging to see us exiting Q1 of 2024 with a revenue growth run rate in the mid-single-digit range, which is consistent with, where we exited the second half of 2023. With new products, new product introduction ramping later in the year, we like what we see in terms of sustainability in our growth trajectory, which we have said all along, will accelerate in the second half of 2024. Key drivers behind our Q1 results came from both a macro and micro standpoint. Starting with micro factors, our end markets, as we've been saying all along, remain very healthy, driven by high levels of patient demand due to demographic shifts. The continued shift to ASC here in the U.S. is also a tailwind, and across the board in the industry, we've seen better surgical outcomes and technological advancements, which are driving more patient demand. On top of that, you got a improved pricing dynamics. And to that end, pleased to report that pricing in the quarter was about flat, as opposed to the 200-300 basis points of price erosion that, this space, this industry, has seen historically. From a micro standpoint, the main enablers of Q1 results were the adoption of ROSA technology globally, with a correlated pull-through of Persona Knee. We also saw sound execution of growth drivers within SET, particularly in shoulders, within sports medicine, and in our CMFT, craniomaxillofacial, thoracic business, in conjunction with rapid adoption of Persona OsseoTi. That is our cementless platform, which is quickly gaining share in the markets where we have launched the product. As we enter the second half of 2024, these new product introductions, as well as other new product entries, will become more meaningful from a revenue growth standpoint, with Persona OsseoTi entering the full launch status, seeing higher utilization of HAMMR surgical impactor, which we recently launched, and also gaining traction with ROSA Shoulder, which, we started doing cases recently here in the U.S. On top of that, we're gonna be entering the market with, our triple taper hip stem, that's Z1, which is gonna allow us to better compete in the direct anterior hip category. So really excited about, the completed portfolio in hips and the upcoming launch, FDA approved now, of our Z1 hip stem. In addition to driving successful 2024 annual results, we are committed to the three strategic priorities that I outlined in my first earnings call as the CEO in November of 2023. This, no doubt will enable long-term success for the organization. I continue to repeat these, three priorities over and over at every Zimmer Biomet meeting around the world, and I can tell you that, they are resonating with the audience as the absolute must-dos for the long-term success of the organization. Once again, these three imperatives are people and culture, number one, operational excellence, number two, and innovation and diversification, number three. I would like now to quickly provide you with an update in terms of key progress across these three areas. Further detail will come during our May twenty-ninth Investor Day in, New York City. First, in the area of people and culture, we continue to operate Zimmer Biomet with best-in-class engagement metrics and low employee attrition. We have been recognized across different areas when it comes to people and culture and recently, we've been showcasing various publications, including Newsweek, Great Places to Work, and Forbes. In the area of people and culture, it's worth noting also that our restructuring program, which we announced a quarter ago, has now been implemented almost entirely with no major disruptions to report. We have realized substantial benefits for this initiative, including realizing cost savings earlier than initially expected, as well as achieving increased operational agility and enhanced accountability. In the second area of operational excellence, we've made robust progress in implementing our enhanced inventory management programs around the world. Working intensely with third-party firms, we developed a plan, and we're executing against that plan. We remain committed to a meaningful improvement in DOH in the year 2024, and in years to come. Again, more color in that regard during our Investor Day. In operational excellence, we have also established core initiatives around best-in-class product launches to ensure that these new product introductions gain traction sooner than expected, and we launch these products in a better way than we have launched in the past. This is beyond critical for Zimmer Biomet as we continue to deliver a rapid cadence of product launches. We plan to release more than 40 new products in the next 24-36 months. One final comment in operational excellence, in the area of pricing, we've made structural changes to further enhance the pricing strategy that we put in place over the last several quarters. Moving on to the third and final strategic priority, in the area of innovation and diversification, we're making solid progress. We continue to see a strong traction in key brands such as Persona OsseoTi, I mentioned already, gaining share in the markets where we have launched. We've seen progress with ROSA. We continue to gain momentum with Signature ONE, planning guides in the shoulder space, and we like what we've seen with our Embody soft tissue franchise. CMFT continues to deliver new product introductions, gaining share in the markets, where we partake, and I'm very excited about the new product introductions that we have seen and will continue to see in our ASC portfolio in the U.S. We've also made tremendous strides in new products with a more focused pipeline that today, as of Q1 2024, has twice the dollar value that we had at the end of 2018. So the dollar value of the pipeline in innovation is twice what it was four or five years ago. Worth reminding everyone that north of 80% of these products in the pipeline, we see the markets growing above 4%... and many of them are accretive from a gross margin standpoint. So we continue our commitment of innovating from a customer-centric standpoint, but also innovating to see incremental profitability and an increased WAMGR profile. In addition to driving results in core markets, we'd also focus on diversifying our portfolio into more attractive, faster growth end markets, with the goal of increasing our WAMGR, weighted average market growth rate. We have made significant progress over the past several years, balancing to what it is today, and this fact, in addition to the confidence around future free cash flow generation, give us the optionality and the firepower to execute on the right deals at the right time, that most importantly, meet our internal hurdles from both a financial and a strategic perspective. So again, lots going on inorganically, potentially, as well as organically with the size of the pipeline. While we have flexibility in the size of the deals to come, we continue to favor the smaller tuck-ins to mid-size deals. That's up to $2 billion in acquisition price that become EPS neutral within two years, and that from a ROIC standpoint, return on invested capital, will deliver upper single digit to low double digit within five years. As I mentioned earlier, we're very encouraged with our Q1 performance, a quarter in where we grew 4.4% in constant currency, north of 6% in dayrate, while overcoming a number of headwinds and tough comps. It is these quarter results from the first quarter of 2024 that give us strong confidence that in the year 2024, we'll realize our guidance of delivering 5%-6% in revenue, growing 100-200 basis points above market, while delivering earnings growing faster than revenue, and delivering free cash flow above the earnings growth. This is a commitment that we're making for 2024, and it's a commitment that we're gonna reiterate in our Investor Day for years to come. Before closing the call, I'd like to announce that Keri Mattox has made a decision to depart from Zimmer Biomet at the end of May. Keri has been a trusted partner and a very close collaborator and friend on this journey, and has enabled great things for Zimmer Biomet in her 4+ years here with ZB. She's gonna be missed, and we wish her the best in her future endeavors. A search for a head of IR position is in progress with a leading executive search firm, and we hope to announce Keri's replacement here very soon. Zach is gonna continue to lead IR interactions for Zimmer Biomet, so a plan for continuity is in place. In conclusion, we're very proud of how far we have come as an organization and are even more excited about where we can go. Strong confidence on the year 2024. We continue to make commitments and delivering those commitments, as evidenced by these results, and as evidenced by the new product introductions commitment that we made, and we're realizing. I love the fact that we're impacting the lives of millions of patients around the globe, and I'm inspired by the fact that my teammates and I are living the Zimmer Biomet mission of alleviating pain and improving the quality of life for people around the world. And with that, I'll turn the call over to Suky. Suky? Thanks, and good morning, everyone. As Ivan mentioned, we had another good quarter, driven by healthy end markets and solid execution across the organization. Overall, we remain on track to deliver on our 2024 financial guidance, with mid-single-digit constant currency revenue growth, adjusted operating margin expansion, and over $1 billion of free cash flow. Assuming current market conditions, this is a financial profile that we believe is durable going forward. Moving to Q1 results. Unless otherwise noted, my statements will be about the first 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. Net sales were $1.889 billion, an increase of 3.2% on a reported basis, and an increase of 4.4%, excluding the impact of foreign currency. Additionally, we had a selling day headwind of about 200 basis points that impacted all regions and product categories at about the same level. Excluding the selling day impact, consolidated constant currency sales would have grown above 6%. U.S. growth was 3.7%, and international grew 5.4%. Growth in the U.S. was driven by solid performance in Recon, in our priority areas within SET, as well as our other category. Outside of the U.S., EMEA saw stronger than expected growth on a regional basis, and from a portfolio perspective, OUS growth was primarily driven by our knee category. Global knees grew 4.3% in the quarter, with the U.S. growing 2.2% and international growing 7.3%. Growth in our knee business continues to be driven by our Persona product portfolio and Rosa Robotics platform. We remain excited about the growth coming from new and recent product launches across the knee segment. Global hips grew 1.5% in the quarter, with the U.S. growing 1% and international growing 2%. We remain focused on accelerating performance in the hip segment with key product launches that Ivan mentioned earlier. Next, the SET category grew 5.3%, led by our key focus areas of CMFT, upper extremities, and sports, growing on average about low double digits. This strong growth was partially offset by the other sub-segments within the category. Despite the choppiness within SET, we remain confident this business will drive mid-single digit or above growth for the full year. Finally, our other category grew 12.2%, driven by continued strong ROSA sales. We expect growth in the other category will moderate lower as we move through the rest of the year. In Q1, we reported GAAP diluted earnings per share of $0.84, compared to GAAP diluted earnings per share of $1.11 in the prior year. Higher revenue and a lower share count in Q1 2024 was offset by higher selling costs and expenses associated with our restructuring program. On an adjusted basis, we reported diluted earnings per share of $1.94, compared to $1.89 in the prior year. The step-up is primarily driven by revenue growth, accelerated savings pull-through from the restructuring program, and a lower share count, partially offset by higher interest expenses and taxes related to Pillar Two. Foreign currency was a headwind of about $0.04 in the quarter when compared to the prior year. Our adjusted gross margin was 72.9%, driven by higher manufacturing costs, which were offset by better pricing and lower royalties. Overall, gross margin was in line with expectations and with the prior year. Adjusted operating margin was 28.6%, slightly ahead of the prior year. The increase in operating margin was driven by higher sales and lower SG&A related to the restructuring program I referenced earlier. Net interest and other adjusted non-operating expenses were $49 million in the quarter, slightly higher than the prior year. Our adjusted tax rate was 18.5%, and we continue to project our full year rate at 18%. Turning to cash and liquidity. We generated operating cash flows of $228 million, free cash flow of $91 million, and we ended the quarter with $393 million of cash and cash equivalents. Regarding our outlook for the rest of the year, we are reiterating our full year guidance, including constant currency growth of 5%-6% or 4.5%-5.5% reported revenue growth with a fifty basis point currency headwind. Additionally, we continue to expect earnings to be between $8-$8.15, and that we will generate between $1.05 billion-$1.1 billion of free cash flow. From a cadence perspective, we still expect constant currency revenue growth for the first half of the year to be at the lower end of mid-single digit growth, and the second half of the year to be at the upper end of mid-single digit growth. As a reminder, Q2 and Q3 will each have about 150 basis point tailwind due to selling days, and the selling day impact for Q4 and for the full year is expected to be immaterial or less than 50 basis points. Regarding the P&L, we expect adjusted gross margin to be broadly in line with 2023, and slightly better than our original thinking, due to less FX headwinds than originally assumed. Given the strength in dollar, FX head gains are not as big a step down in 2024 as originally expected. Looking at gross margin, we expect Q1 to be the high watermark, followed by a modest sequential step down throughout the year. Overall, first half gross margins will be about 100 basis points higher than the second half as we continue to feather in capitalized inflationary costs from the second half of 2023. Turning to adjusted operating margin, we are pleased with the start to the year as our restructuring efforts are delivering slightly ahead of schedule. Overall, second half operating margins will be higher than the first half, and we expect for the full year that at the midpoint of our guidance, we will increase operating margins by about 80 basis points. In summary, Q1 was a good start to the year. We delivered results ahead of expectation and continue to feel confident in our 2024 outlook, as evidenced by the reiteration of guidance. With that, I'll turn the call back over to Keri. Thanks, Suky, and thanks, Ivan, for the kind words. It's been such a privilege to be part of the Zimmer Biomet team these four and a half years, and I wish the team much continued success moving forward. Now, before we start the Q&A session, just a quick reminder to please limit yourself to a single question and one brief follow-up so that we can get through as many questions as possible during the call. With that, operator, may we have the first question, please? Thank you. We'll go first to Travis Steed with Bank of America. Hey, thanks for taking the question, and Keri, great working with you and good luck in your next endeavors. I guess kind of high level, you guys have this kind of algorithm, you know, 5%-6% revenue growth, potential for some margin expansion and possibly kind of low double-digit EPS growth. Just trying to think about how we should think about that algorithm, you know, over the long term. Is it more of a base case or kind of best case? You know, there's just a lot of skepticism from the investor community on that algorithm and trying to think about, you know, what's the Zimmer growth rate, you know, kind of on a sustainable basis in a normalized market? And then just the second question I'll go ahead and throw out, too, is just any color on Q2 sequentially? It's usually down, hip and knee is usually down a little bit sequentially, but with some of the selling day stuff, just wanted to make sure there wasn't any titration on Q2. Thanks a lot. Hey, Travis, good morning. Ivan here. Thanks for the question. I'll touch on both components of your question, and I'll make sure that Suky speaks up here as well. So starting with the algorithm on revenue, EPS, and free cash flow. We're going to give more color in the Investor Day, but, but I will tell you today, as per the prepared remarks, this is a long-term commitment, so it's not a 2024 only deliver revenue above market, EPS above revenue and free cash flow above EPS growth. And I'm packing the drivers here on revenue, it's all about new product introductions. We're gonna gain share by delivering innovation that matters. 100-200 basis points large is gonna come from new product introductions. As we said all along, we got a pipeline that we didn't have before. 40 new product introductions over the next 24-36 months are more in the making. So that's the number one driver on revenue, in addition to, obviously, pricing dynamics and commercial execution. On EPS growth, we're doing things differently when it comes to margin. I already mentioned pricing, but other components, how we think about inventory in excess and obsolescence, how we think about allocation of OpEx, where we get the greatest return, et cetera, et cetera. And then free cash flow, the main driver, is the fact that we have run this company in quite an inefficient way when it comes to inventory management. North of 400 days on hand when it comes to inventory, not really engaging on prioritization on geographies. Portfolio management is not where it needs to be. So those are the key drivers on the sustainability. I'll touch on number two, and then I'll give it to Suky. In terms of Q1 to Q2, to Q3, to Q4, what happens sequentially? Look, we're not gonna get into the gymnastics on what happens quarter-over-quarter, all kinds of timing, one quarter to the other. We're having similar conversations in Q4. Here's what I leave you with. You know, Q1 was very strong. 4.4% growth in constant currency, north of 6% in the rate. As we see here, looking at the year, we're confident at the very beginning of the year in the guidance of 5%-6%. A quarter behind, we're extremely confident on that guidance. The growth drivers that get us there are working in the right direction, so very, very confident, very proud of Q1, and again, we'll talk more about the dynamics at Investor Day. Suky? Yeah, I think Ivan summarized it really well, so I'll just try to build some incremental points here. I think at that mid-single-digit growth top line profile that Ivan mentioned, we do have a durable path to operating margin expansion, as well as improvements in overall free cash flow conversion. On the earnings outlook, you know, this year, if you look at our guide, it's 6%-8%, which again, we reiterate and feel confident in. If you, you know, on an underlying basis, if you back out the step-up in tax rate that we saw out of Pillar Two, as well as headwinds that I think everyone's facing on interest as well as FX, the underlying growth from the bottom line is, is, is much better than 6%-8%, maybe 300-400 basis points better on an ongoing basis. Which puts us kind of in that high single digits, low double digits, and if you look at what we did in 2023, I think we were also there. As we look forward, you know, using your words, Travis, base case, et cetera, we think there's a pathway to low double-digit earnings growth. That, I wouldn't say, it's our base case or our commitment, and again, we're gonna provide more color on our Analyst Day. As we think about margin expansion with revenue growth, we just wanna make sure we've got the right investment profile for the company to make sure that that growth is durable. So, is that our base case? I wouldn't necessarily go there. I'd say we have a pathway there, but we're gonna provide a lot more color in just a few more weeks. So thanks for the question, Travis. Of course, great. Thanks so much. Katie, can we, yeah, thanks, Travis, and thanks for the comment. Katie, can we hear the next question in the queue? We'll go next to Steve Lichtman with Oppenheimer & Co. Thank you. Congratulations on the quarter, guys, and Keri, it's been great working with you. I guess I'll first start on pricing commentary. I thought that was notable. Ivan, can you talk about where the positive surprise came from on that front? Are the benefits of your efforts coming sooner? Just some general comments on the pricing environment would be great. Yeah, we're very, Steve, thank you. We're very pleased, obviously, with price and performance. We called that, in 2023, the second semester of 2023, so the last half of 2023, we're already flattish when it comes to price. So this is a business that, in previous years, was having 300-400 basis points of price erosion in the U.S., pretty significant OUS. That's not the trend that we have going on. We put a structure in place. We put governance. New product introductions are helping from a category contracting. I wouldn't say there's any real surprises. Europe may be doing it slightly better than anticipated. You got all kinds of tender dynamics that come in and out, but net-net, we're at a point where it's pretty predictable. We like the strategy in place. We like the governance. We're not gonna commit here to doing dramatically better, but, no real surprises, solid Q1 and, a great outlook for the rest of the year. Suky, I don't know if you have any other comments. I think overall, we're in a more favorable environment than we've been, let's call it three-four years ago. When you combine that with some of the structural changes we're making inside the company, that's, I think those two things are really leading to better price performance. I'll tell you, I'm really impressed and optimistic about the cultural change, quite frankly, within Zimmer Biomet. As I talk to distributors or field-level reps and, you know, their desire to wanna make sure that we're getting the value for the products that we bring to market, that's encouraging, and I think that makes it durable. In the quarter, we were roughly flat. I do expect us to be... You know, when I set out the year, I thought we'd be 100-150 basis points of erosion. I think we're now under 100 basis points of erosion, especially given what we saw in the first quarter. I don't expect that flat profile to continue through the rest of the year because we've got a number of things that happened at the back end of last year, especially in Europe, where we took some pretty large price increases in devalue sort of currencies and markets. That'll sunset later on this year. Also, we've got some new contracts that are coming up, which will create a little bit of pressure. So I don't expect that flat profile to continue through the rest of the year, but nonetheless, we're in a much better spot than we were a few years ago. And again, expect overall pricing to be somewhere under 100 basis points for the full year 2024. ... Great. Thanks for that. And then- Thanks, Steve. Just to quickly follow up, or just the one to follow up, okay, real quickly on the ROSA Shoulder, you know, just on the initial launch and your outlook for ramp this year. Yeah, thank you. Obviously, very excited in terms of this product launch. We did the first cases at the Mayo Clinic a couple of weeks ago. Feedback was very solid. It is a product that has a high degree of accuracy in the cuts, in the visibility of the anatomy. It is efficient from an instrumentation standpoint. It's fully interconnected with the rest of the ZBH ecosystem. Case over case, the feedback was that you do achieve time efficiencies, so the learning curve is rather short. So very solid clinical feedback. In terms of the impact, we said all along that we're gonna take it slowly in the first, call it 90-120 days, and you will see the real impact as we get closer to the end of the year. But, a very, very meaningful product launch for the company. I'm very excited about it. Thanks, Steve. Great. Thanks, guys. Thanks. We'll go next to Larry Biegelsen. Katie, can we go to the next question in the queue? Larry Biegelsen with Wells Fargo. Hey, good morning. This is Vik Chopra in for Larry Biegelsen. Thanks for taking the question, Keri. Thanks for all your help and good luck. So two for me. You know, just wanted to get a sense as to kind of what we can expect at your upcoming Investor Day at the end of the month with regard to financial goals. Will you have specific LRP goals for revenue, or will it be relative to the market? You know, for example, growth of 100-200 basis points above market, and then I had a follow-up. Thanks. Yeah, no, we'll definitely cover the how we plan to achieve these three commitments we're making from a financial perspective in terms of what are the drivers for revenue, EPS, and free cash flow. So we'll definitely provide those details. We'll cover the new product introductions within that. We'll talk about the capital allocation, the strategy moving forward, so it's gonna be very robust. So that's the analyst day. Got it. Follow-up? You know, the second question I had was, you know, you beat EPS, consensus EPS by about $0.07, but you didn't really raise the guidance on EPS. Can you just provide some color on that? Thank you. Yeah, you know, I think Ivan said it really well in his opening remarks. We had a good start to the year, and it was great to see the better-than-expected performance in revenue, and we saw very good flow-through all the way to the bottom. So I love the discipline that we've got throughout the company. I would say that this just reinforces and gives us more conviction in the guidance range that we provided earlier this year. Thank you. Thanks, Vik. Katie, can we go to the next question in the queue? Thank you. We'll go next to Rick Wise with Stifel. Good morning, and we'll miss you, Keri. Thank you. I'll ask my question and my follow-up at the same time. Ivan, you know, obviously, on the new product front, you have all these new introductions, OsseoTi, HAMMR, the robotic shoulder, but and all of them sound like they'll be meaningful, and I assume will help pricing, will help gain share, will help leverage your fixed costs, your operating costs. But I'm hoping you'll focus in particular on the implications of the Z1 launch. You highlighted the product several times. Is this the linchpin product that you've been missing to make your hip portfolio more credible and to bring your business up to sort of more industry norms? And my second - my follow-up is sort of related to all that, relates to margin. Suky, I mean, I heard what you said about gross and operating margins, but again, when I think about all these introductions, I assume better pricing and margins and share and leveraging. Why should I believe you on everything you just said about the margin outlook? Thank you. Hey, thank you, Rick. I'll cover the hip question, and then, we'll proceed with the interrogation of Suky here when it comes to, the margin. Hey, look, one product is not, one product is not what's gonna win the battle here, right? It is a category of products. We've been very transparent that we've not done great when it comes to hips over the last, three-five years, and essentially driven by three product categories. The first one is, direct anterior stem, what is known in the market as a triple taper stem, and it was a deficiency that we had. Z1 solves that, and it does it in a differentiated way. So now with this 510(k) approval, we compete with, the two other large orthopedic companies in direct anterior. The second category was a surgical impactor. It drives efficiency, it drives accuracy in how you treat the cases. It integrates with the rest of the procedure. You need certain levels of power as you do in the hip surgery. So that is a surgical impactor, and we have that with HAMMR. Fully launched. We're gonna ramp that up. And the third thing that we needed was to have navigation. We got two modalities of navigation. Obviously, we got ROSA Hip, and we are the only company with a 510(k) FDA-approved mixed reality technology in our partnership with HipInsight. So again, it's not just Z1, it's the full portfolio, direct anterior stems, surgical impactors, and some sort of navigation. I do believe we do believe with a high degree of confidence that we're gonna regain our position in hips, still remain the number one hip company in the world. I think that this portfolio accelerates our growth journey moving forward. ... And, hey, Rick it's Suky, always good to hear from you. On the margin front, you know, I know the past isn't always indicative of the future, but it is a good validation and proof point, I think, in our situation. In both 2022 and 2023, we were able to expand operating margins quite significantly, I would say, even in the backdrop of a pretty hostile inflationary environment. And so again, kudos to the entire CE team. In 2024, we expect to do it again, and here's what I would say: We're doing it across the entirety of the P&L, first, through revenue growth and leverage of our fixed costs. Secondly, we're making improvements in costs at a rate that we've not done before, through inventory reduction, site optimization, reductions in E&O. We're even getting more efficient inside of R&D and looking at, "Hey, do we really need all this sustaining, and how can we rationalize some of our portfolio, migrate our customers to better products, get rid of some of these products?" Which then reduces the amount of sustaining engineer, which we can then make shift into NPI. We're getting it through SG&A. We're getting it through better allocation of capital and reducing our cost of debt. The beauty of that is, when you have multiple shots on goal to improve operating margins, even if things go, you know, unexpectedly from a macro perspective or micro perspective, we have other levers to continue to help us pull margins as we move forward. And so, the thing I'd leave you with is, it's not just in one area of the company, it's throughout the entirety of the P&L, and we feel confident about where we're going. And quite frankly, I love what Ivan's bringing. He, he's bringing this owner-operator mindset to the company. He's got the company thinking not just about top line, but all the way through, you know, cash, cash being king, and I think that's really driving a culture change within our company as well. So I'm optimistic on where we're going, Rick. Thank you so much. Thanks. Thanks, Rick. Katie, we can go to the next question in the queue. Thank you. We'll go next to Pito Chickering with Deutsche Bank. Hey, good morning. This is actually Imron Zafar in for Pito. First question is on ROSA. Obviously, a strong first quarter there. Can you talk about placement trends in the quarter by site of care, hospital versus ASC, and then also competitive dynamics for large joint orthopedic robots? Absolutely. Thanks for the question. So, let's start with the global picture, if you will. Very excited in terms of where we are overall with ROSA. So, globally, ROSA is becoming the preferred robotic option in many markets outside of the U.S. Here in the U.S., we're approaching around 20% penetration of ROSA in cases. As you saw in the quarter, we had a large amount of ROSA sales, which is encouraging, because that means in the other category... That's encouraging because that's a future stream of knee pull through. About a third of all the installs that we do in the U.S. go to an ASC environment, which, again, is not a surprise, given the fact that ROSA does drive easier pre-planning. You don't need to do a CT scan. It's very surgeon-centered, so it's very controllable. And we continue to see that there is a high degree of preference for ROSA in those higher volume accounts. So net-net, everything in the right direction in terms of penetration, where we are gaining traction in key markets around the world, and I love the dynamic that we're seeing here in the U.S. ambulatory surgical center environment. Thanks for the question, Peter. Okay, and then just a quick follow-up- Sorry. Just as a quick follow-up, can you remind us what the site of care mix is for shoulder recon, hospital versus ASC? So we're starting to see a dynamic in where cases are moving to the ASC for shoulders, again, the CMS change. I would say today, probably around 60%-65% of the cases shoulder are now done in the ASC, but that's moving pretty rapidly given the change of reimbursement. And we got a strong position both in the inpatient, outpatient, as well as the ASC. But I would say net-net is around 60%-65% to 35% in terms of that mix. Okay, thank you very much. Thanks, Imron. Thanks, Imron. Thank you. Thanks. Thank you. Katie, can we go to the next question in the queue? We'll go next to Caitlin Cronin with Canaccord Genuity. Great, thanks for taking the questions. Just touching a little bit further on ROSA and strength in the other line. Suky, did you say that you expect lower growth in this segment through the year? It was a little bit choppy there, Caitlin, sorry. Did you ask if... You asked something about other. Could you repeat the question? Oh, yeah. Apologies. Did you say that you expect lower growth in the segment throughout the year? Yeah. Yeah, so we had a pretty strong quarter in our other category, primarily driven by ROSA capital, so we saw good installs, and we saw higher mix of sales versus placements, which drove a higher level of dollar revenue in that quarter. The good news is we saw a lot of new placements and new ASCs, which is exactly where we want to see ROSA's position, and the capital sales were very good. We also love placements, because that comes with a longer term commitment. Our expectation is that will step down from what you saw in the first quarter as we move throughout the year, and that's been assumed in our guidance reiteration. Thank you. Got it. Okay. And then, any updates on Persona? Thanks, Caitlin. Oh, sorry. Go ahead with the follow-up. Go ahead. Oh. Yep, go ahead with your follow-up. Oh, sorry. The line is kind of choppy. Go ahead. Okay, apologies. And any updates on the Persona IQ rollout? ... Yes, thank you, Caitlin. It's moving in the right direction. I, I would say as of late, things are accelerating, both from an innovation and a commercial execution standpoint. So on innovation, we did receive recently the 510(k) approval for, didn't make it to the press release, for the study. So as the shorter stem version of Persona IQ, which has been a, a gating factor for some surgeons that don't use the longer stem. So that's, that's an innovation update right there. The other piece that is gaining traction is the launch of what we call Recovery Curves. This is a platform that only Persona IQ has, interconnects the data of the stem with a dashboard that, in a very objective way, can quantify how patients are doing in comparison to other patients with similar dynamics. So those are two innovation updates that are moving in the right direction. In terms of the execution and commercial journey, we got what we need. You know, we got the right designs, we've been talking about value proposition, it's been resonating. We are in some of the largest teaching institutions, and we continue to be committed to the journey. So very excited about Persona IQ. Thank you for the question. Yeah. Thanks, Caitlin. Katie, we can go to the next question in the queue. We'll go next to Mike Matson with Needham & Company. Yeah, thanks. So I just want to ask one about kind of what the guidance implies for second quarter revenue. You're saying you expect to be at the low end of the mid single digits, so sort of like 4% in the first half. Based on what you did in the first quarter, that implies, you know, kind of like 3.5%, constant currency growth, but you have the 1.5% selling day benefit, so that implies like 2% kind of underlying growth. Is that my math right there? And I guess why, why do you only expect 2% growth in the second quarter? Yeah. Hey, Mike. Directionally, the way you're thinking about it is right. I wouldn't quite go as low as that. But look, quarter to quarter, there's going to be choppiness, there's going to be noise based on timing, contracts, et cetera. We had a great start to the year. We continue to believe and reinforce our guidance and still believe that the first half is going to land as we expected to when we initially gave guidance. So nothing in particular about the quarter of note, but just the overall cadence, that's how we expect first half versus second half to play out for this year. Okay, thanks. Just a follow-up on OsseoTi. So, you mentioned it's gaining share. Does that mean that it's actually converting competitive surgeons, or does that just mean it's cannibalizing the cemented Persona? No, we, we definitely are upgrading, if you will, some of our cementless legacy, cementless platform over to Persona OsseoTi, but at the same time, a sizable amount of, of the business coming from converting accounts. So I, you've seen that the U.S. knee numbers in the quarter was strong, and a large component of that was the fact, with pretty heavy comms, by the way, comes from the introduction of Persona OsseoTi. And the expectation is that as we continue to move into, the acceleration of the product launch, we're going to continue to, to gain share. So it's both, existing accounts and new accounts. Got it. Thanks for the questions, Mike. Yeah, absolutely. Katie, can we go to the next question in the queue? Thank you. We'll go next to Vijay Kumar with Evercore ISI. Vijay, are you there? Hey, guys. Sophia... Oh, there we go. We should get this function- Vijay, we can't hear you as you're talking. Sorry, this is Sophia on for Vijay. One quick one on gross margins and operating margins. Were there any one-offs in the first quarter on gross margins? You guys raised the guide for margin, but EPS was maintained, so is operating margin slightly down, and how do we think about margins for the rest of the year? Yeah. In any given quarter, there's going to be puts and takes, both in gross margin and operating margin, but nothing material or out of the ordinary. We did a little bit better on gross margin than we expected to. We saw that flow through into operating margins, so we feel really good about the start of the year. As we progress through the year, we do expect operating margins to step up in line with normal seasonality as revenue continues to step up and our savings programs pull through. So again, very confident in where we're headed from an earnings perspective and our guide. If you recall, I think we said on the last quarterly call that at the midpoint, that implies about an 80 basis point lift in operating margin, and we still, we're still confident in that. Okay, great. And just a quick follow-up- Follow-up question? Oh, yeah, just one quick one on M&A. I know you guys have made some comments about tuck-ins and kind of what that profile will look like, but anything out in the pipeline that is particularly interesting right now that will fit well into the portfolio? Yeah, we always have a robust pipeline, and we'll talk about the pipeline and the optionality of M&A in more depth once we meet later in the month. But the same three key areas apply. We're looking for assets that are mission-centric and from a strategic standpoint fit in the higher growth segments of recon, certainly the high growth segments of SET as a category, and then in the ASC space, which is a mixture of both one and two. So we always focus on those three key areas, while also keeping an eye on broader diversification. Financially, nothing has changed. We have flexibility to do larger deals, but we like deals where the acquisition price is under $2 billion. We definitely wanna be neutral from an EPS standpoint within two years, and then high single-digit ROIC to double-digit ROIC in the five-year time horizon. So very clear on strategic and financial filters, and the optionality is there, and the pipeline is there. So more to come once we meet in New York. Thanks, Sophia. Katie, can we go to the next question in the queue? We'll go next to Robbie Marcus with JP Morgan. Oh, great. Thanks for taking the question. Congrats on a good quarter. Maybe just one for me. You kind of talked about second quarter and the expectation on the top line, and you just answered kind of margin cadence through the year. But I wanna put a finer point on it and try and avoid some of the cadence issues that we had last year. So you talked about operating margin expanding. I wanna make sure. I think the prior commentary was second quarter would be the highest operating margin, and fourth quarter would be the highest for the year, with the sequential down in third quarter with normal seasonality. So maybe to kind of say it all a different way, are you comfortable with where the street is on EPS for EPS for second, third, fourth quarter? Are there any cadence changes you think we should be looking at moving one, you know, from one quarter to another? Thanks a lot. Yeah. So Robbie, just a little bit of a correction. I'm not sure if I caught everything you said or understood, I should say, everything you said. Fourth quarter will be our high watermark relative to operating margin, in line with, you know, that being our high watermark from a revenue perspective. And so our margin does, in many ways, correlate heavily to our revenue outlook. You know, relative to cadence, I'm not gonna... and consensus, I'm not gonna, you know, sort of benchmark relative to that. I think we've actually given pretty good color already around the first half, second half revenue cadence. I've talked about gross margins, plus 100 in the first half, 200 in the back half, and then operating margins improving in the back half of the year through the restructuring overall. So, I think there's actually pretty good color out there, in line with how we've traditionally been transparent. So, hopefully, that gives you enough to go from. Appreciate it. Thanks. Yep. Thank you, Robbie. Thank you. Thanks. Katie, can we go to the next question in the queue? We'll go next to Chris Pasquale with Nephron. Thanks. Ivan, you talked about four points of your revenue growth this year coming from market gains and then 100-200 basis points of outperformance to get you to your 5%-6% goal. When we look at the first quarter, recon growth was actually a little bit better than that, and that's a really hard comp, hardest comp of the year. So that 4% feels pretty conservative at this point. Your own performance across hips and knees was a little bit below market. So while I appreciate you're excited about the pipeline and what it could mean for share gains in the out years, are you still thinking about the recipe to get you to your 2024 target the same way? Yeah. Thank you, Chris. First of all, I wouldn't categorize our performance being below market. I know we can have a healthy debate on whether it is above or below, but what I will tell you is that where we stand here right now, it is not below market. Certainly not from a trending standpoint over a period of time, and now that everyone is reported into one, we're not below market. So I'll start with that. In terms of how we get to the 5%-6%, I think the formula continues to be product introductions, which will ramp up later in the year, and even more product introductions as we get into 2025. We've never had 5.5%, almost six years here with the company, I've never seen a full portfolio. I mentioned earlier that we don't have any gaps in hips. With the introductions that we've done in knees, there's zero gaps. I'm excited about the upcoming product launches in Europe. Let's not forget, we don't have Persona Revision in EMEA. That's an almost $2 billion product here in the U.S., $2 billion over the last three or four years in gross sales. And let's not forget, we also bring in Oxford partial cementless from Europe here to the U.S. So strength in the knee portfolio, strength in the hip portfolio. You've seen that set. We made a commitment, that set as a category, will grow mid-single digit or above. It's the third consecutive quarter where we've seen that, and that's gonna stay around. I would say strength in innovation, the strength in commercial execution, and the 5%-6% to us is an unmissable commitment. Okay. Then following up on OsseoTi, can you remind us where your cementless mix stands today, in the U.S., and over what timeframe you think you could close the gap between your current penetration and where Stryker is at the moment? Absolutely. So closing the Q1 quarter, approaching 20%, so it's fairly similar to our robotics. So cementless approaching 20%. We'll break down some of these commitments. We keep repeating the same answer at the Investor Day, but our expectation, our ambition is to be where our competitors are, 60%, six zero. We'll provide timelines in that regard, but the North Star is to have robotic penetration in the 60% range and cementless penetration in the 60%. So the fact that today we're at 20%, that tells you that there is pretty significant upside, and we're excited about the journey. Chris, thanks for the question. Katie, Katie, I think we have time for maybe one more question in the queue. We'll go next to Shagun Singh with RBC. ... Great. Thank you so much. So it seems like orthopedic robotics uptake stepped up for the market in Q1, or at least it was better than expected. Has anything changed from a capital appetite standpoint? Any reason we are seeing more upfront sales versus operating leases? And then just to follow up on M&A, Ivan, you'd indicated that, you know, you wanna go bigger and bolder, and we haven't seen a whole lot of that yet. You know, I appreciate all the commentary on deal capacity of up to $2 billion and, you know, favoring tuck-ins. But, you know, very specifically, how do you plan to raise your weighted average market growth from 4% today, mostly with tuck-ins? Thank you for taking the questions. Thank you so very much. So starting with robots and capital dynamics, look, I, I will tell you one thing that is pretty prevalent is that here in the U.S., we've seen the cases move to the ASC. Not a week goes by that there's not a new ASC opening, and those ASCs do wanna acquire robotics and either install or you purchase it. And we saw a dynamic in Q1, in where we saw more purchases, and we do believe this is driven by ASC dynamics. Capital continues to be strong across key markets, so definitely not a gating factor. And, and again, as I mentioned earlier, excited about the continuity here. In regards to your second question on M&A, look, we wanna be bigger and bolder, at the same time, we don't wanna be reckless, and, and we say that all along. So we wanna stick to the strategic and financial thresholds. We got the pipeline, we got the money, and when it's time to act, we'll act on it. And we're not gonna take the past as an indicator of how we're gonna do things in the present and future. The breakdown on the WAMGR, we'll cover that as well once we get into the Investor Day. And it is a combination of organic and inorganic means. So we'll talk about the pipeline. I already mentioned... We already mentioned that 80%, if not 90%, of the new products in the pipeline are in markets that are growing above 4%, in some cases above 5%, so that's definitely a driver. And then the combination of tuck-in deals and maybe some bolder moves will get us to the WAMGR that we deserve. So more to come in that regard. Thanks for the question. Thank you. I think we're coming to the end of the call, so I'm just gonna briefly close with closing comments. I'll start by saying that it's great to be here at home in Warsaw, Indiana, today to celebrate Founders' Day. May 2nd, 1927, we started the company with a very clear purpose: to alleviate pain and improve the quality of life for people around the world. 97 years later, I just can say that we're just getting started. So excited to see where we are as a company. It's an exciting time to be at Zimmer Biomet. The portfolio is where it needs to be. We have strong commercial execution. We are very, very confident on our guidance for the year 2024. We are excited about what's to come in 2025 and 2026, once we are able to, discuss the long-range plan. Nothing but confidence and excitement. Before closing, I wanna thank Keri for four and a half great years with us. You've been a, a trusted partner and a great friend. You're gonna be missed, although I'm gonna continue to call you and seek your advice in many, many years to come. So thank you, Keri, and thanks, everybody. Thanks, everyone, for joining. We'll be talking to all of you today. If you have questions, of course, please don't hesitate to reach out to the IR team. Thank you again for joining the call this morning. That will conclude today's call. We appreciate your participation.