Zimmer Biomet Holdings, Inc. (ZBH) Earnings Call Transcript & Summary

Welcome, everyone. I'm Robbie Marcus, the Medtech analyst at JPMorgan. I'm very happy to have Zimmer Biomet here for our next session. I'm going to introduce first, Bryan Hanson, CEO; and Suky. And Suky, I apologize, but I just go with Suky, as I'm sure a lot of people do, my apologies. I want to let everyone know in the JPMorgan Healthcare Conference website, you can go ahead and click Ask A Question or feel free to e-mail me or just hit me on Bloomberg chat, and I will do my best to work your questions into the session here. First, Bryan, I thought we'd start off with everybody's favorite topic, which is COVID-19 and fourth quarter and current trends into 2021. We didn't get a pre-announcement from you, but we've heard certainly, Smith & Nephew preannounced this morning. We've had some other large-cap competitors make comments on trends. And the latest we got from you was earlier in December. So I thought maybe we could just start off on the COVID recovery. Any comments you can make on fourth quarter and how that finished out? And maybe just touch on what you're seeing in terms of late December and what that means for it into first quarter here?

Okay. Maybe I'll start with just kind of a broad-based view. And then Suky, I'll hand it over to you to get a little more detail. What I would tell you is not a whole lot has changed versus what we had referenced the last time. We talked about this. Unfortunately, the only thing that has is that the surges in the COVID virus have not slowed down, if anything, they've intensified. And so what I would tell you is that there was clearly pressure in Q4. We expect that pressure to continue into Q1. The good news is that we finally see the light at the tunnel. I think we have more confidence now than ever in the vaccine. And once the vaccine hits, does what it's supposed to do, that will be a very good day for us from a tailwind standpoint with the backlog coming through. But, Suky, maybe give some more detail on how we're seeing things play out in Q4 and then what we're thinking in Q1.

Yes. Sure. So, Robbie, you referenced some commentary we gave at the beginning of December. And as Bryan has said, it's largely played out. The way we talked about it was in the Americas we expected it to be about flat to maybe slightly down versus Q3. So this is a sequential kind of run rate. In EMEA, we expect it to be down in the high teens and then Asia Pacific slightly up versus Q3. We will report our numbers on February 5 with the specific outcomes and all the details. But largely, everything is pretty much in line with how we thought about it, which kind of aggregates to a low-single-digit to mid-single-digit decline versus the fourth quarter of last year. Again, more specifics to come on February 5, when we announce our numbers. I will say, as Bryan mentioned, while we are seeing very high infection rates in a number of markets, the one good thing here is we are not seeing anywhere near the compression or depression that we saw towards the end of first quarter last year or in the second quarter of 2020. So that's a positive proof point that while infection rates are high, that the market is -- or hospital health care systems are better able to deal with it. And as Bryan said, we're confident that we continue to build the backlog of deferred patients. And at some point, as the vaccine helps normalize some of our market growth, we could potentially see some of that tailwind come in as well. So overall, it's a little bit choppy here in the near term, but it's great to see that we've got a light at the end of the tunnel.

Great. Maybe with that out of the way as that's everybody's favorite topic. Bryan, since we're not doing a formal presentation here, I thought maybe it would be worthwhile if you just did a few minutes on Zimmer Biomet as you're coming into 2021. Obviously, 2020 was an interesting year, probably not the year we thought it was going to be at this time last year. There's been a lot of ups, a lot of downs. But I think, overall, your company and the whole industry is exiting at a really strong rate here and overcame some adversity in a pretty spectacular way. So I thought maybe it'd just be good for a few minutes, how you're seeing the world, and then we could dive into some more Q&A here.

Yes, absolutely. It's interesting, Robbie, because no way you can look at 2020 and think it was a good year in a way that we would typically define a good year. We're significantly off what we thought we would do when we look at Q2, Q3. And so in that way, the standard way, you would say not a great year. But I think a lot of good has also come from the year. Yes, I really do. I mean it stressed the organization. It stressed all of us. And what you find in a team is either you come together in a moment like that or you don't. And you don't get too many opportunities to test yourself in that way. And I have to say that the organization really came together. Truthfully, we did a -- and I'm not just saying this, we did an engagement survey, and we had higher scores in our engagement survey during the middle of the pandemic than we have the entire time we've done engagement surveys over the last 3 years. So I've been very pleased with the fact that it was almost a pivotal event for the organization to come together as one ZB, fight through the challenges. And truly, I think, positioned us better than we were before the pandemic started. So as much as it's been a challenging year, and I wish it would never have happened for so many reasons, I think it was actually a silver-lining good thing for the organization and the momentum we have. I think a testament to that is the progress we've made over the last 3 years in the phases that we have for this turnaround. I'll just kind of quickly go through them and just give you some sense for what I feel about them. We've talked about 3 phases in the turnaround. The first phase was truly around hearts and minds and the challenges that we had in the beginning. The fact is we didn't have an organization that believed that we could win. We didn't have an organization that had trust in the senior leadership team. And there was comfort with failure. And we needed to change that. We built the mission around it. We built a culture around it. And the engagement surveys now are reflecting that we certainly have a different position from our team. We need to change the top talent in the organization. You not have changed 75% of my team members that report directly to me or new to the organization or new to their position. We have 70% diversity on the team where we had in the teens when we started. And that's not just diversity in the way that you can see it, that is diversity in thinking and belief in how we're going to make this organization better. When we look at some of the challenges in supply, we had 4 days of back order. At the worst time, we're down a half a day of back order, consistently now for a while, half a day of back order. It's better than actually what we thought we could do given the SKUs that we have. From a quality standpoint, we started this journey with 3 warning letters. 3 -- I don't think people knew we had 3 warning letters because they're so concentrating on North Campus. We only have one left in North Campus. We've eliminated the other 2. We've changed the relationship that we have with the FDA and the way they perceive this organization. And we're well on our way, in my belief, although it's going to take time to eliminate the last warning letter. And from a compliance standpoint, again, I think people knew this, but didn't really pay much attention to it. We had a DPA in place when I joined the organization with the DOJ and the SEC, where monitor was in the ZB house. We've been able to move that monitorship through, closed that down. And I believe now we have one of the best-in-class compliance systems that you're going to find in the industry. So that was all the stuff that we had to focus on in Phase I and really feel good about those changes. That allowed us to click to Phase 2, which is superimportant. You get all the issues out of the way, and then you've got to bring innovation because that's a life blood in organization when you're talking about medtech. And I can tell you that we brought some innovation to the marketplace. When you think about ROSA, you think about mymobility, you think about Avenir Complete, Signature ONE just across the board, we have brought technologies that have done better than what we expected even in through 2020 in the pandemic pressures. And so that innovation was important. The other big piece of Phase 2 was to build a true long-term strategic plan. The beginning was triaging. It was fixing the problems. It was building the hearts and minds. Phase 2 was really building a long-term strategy that made sense for the organization, got the organization focused, and we've built all of our operating mechanisms around that. We have strategic pillars that are very clear to the entire organization. We have strategic pillar priorities. Our entire operating mechanisms are built around that, and they cascade through the entire organization. Proof point on that because I don't like to say things without proof points. We just did a survey, and we talked to our team members and said, okay, do you know the strategy of the organization? And do you believe your objectives are tied to those strategies? And we had 9 out of 10 people, 90% of the team members came back and said, "I know the strategy, and I know I'm connected to the strategy." That's a big deal, completely different place than where we were just a few years ago. And that goes all the way to the Board. We talk about these strategic pillars and our operating mechanisms all the way to the Board and all the way down. And in the third phase, which we're entering now, and you've seen some of that even in 2020 when capital constraints were there is to being getting on and transform the portfolio, looking at active portfolio to management, truly looking at deals we can tuck-in and build more scale and fill gaps that we have in attractive spaces, where we have a right to win. And at some point looking at shedding businesses that don't make sense and aren't as germane to the strategy that are not as financially attractive. But that's the phase that we're in now. And I would say in that phase, we're going to be working on rebranding the company. And I don't mean changing the name or the label on a box, I'm talking about what do people think about when they think about Zimmer Biomet. It's not a 100-year-old company that just does metal and plastic. It is a highly innovative, agile organization that will bring real technology to the marketplace. That's what I want people thinking about when they think about this organization. So that's where we are. And although 2020 and COVID has been a hiccup, for sure, it's been a pressure point, we haven't slowed down. These phases continue to move forward.

Bryan, maybe we could start on that last point you made, because I feel like when I talk to investors, when I talk to doctors, people say, you know what, orthopedics is a relationship business, there's not a lot of differentiation, and it's all about relationships. And clearly, that's not true because there is a lot of innovation. There's a ton of new products. It's just not as -- we don't see the big 1,000-patient trials that we might see for some other things like TAVR or pharmaceuticals. So you do have a number of really exciting new innovations coming on. I think the first that I want to touch on is ROSA. You surpassed 200 cumulative installations already in the third quarter. And what does that say really about robotic interest in general? It's a huge number going from very few in 2019. Speak to maybe the attractiveness of the ROSA system and how important is it for you to be able to have a robotic option for the so many Zimmer loyal doctors out there?

Yes. Maybe I'll just take a step back and address what you said there. I mean the fact is orthopedics in a way that we know it, historically, has been a relationship business. It has been, hey, if you're a big enough company, you have the right surgeons that were designers for you. That spoke, great about your implants, you got the market share. And as a result of that, it was very much a relationship business without as much technology as we should have or innovations we should have. And that also impacts the cost to serve. When you've got an environment like that, your cost to serve, your SG&A is pretty high to be able to manage it. I truly do believe as we move down the path of real innovation, and we've only just begun with real innovation, robotics and data informatics, it's going to change that relationship, and it's going to be more around the technology that creates the relationship versus the rep to surgeon. Rep to surgeon will always be there. But if we can minimize that and begin to influence more directly with true innovation, that could potentially, over time, change the cost to serve as well, which I think is pretty interesting pathway here. If you think ROSA specifically, because it's kind of the tip of the iceberg here, it's going really well. What's impressive about it to your perspective is or your comments, even in the middle of COVID, when you thought -- I thought, truthfully, that things would get disrupted, it didn't, if anything it accelerated into COVID. We really saw an acceleration of placements. We saw an acceleration of an appetite to move robotics in. And as much as we did surpass the 200 mark in Q3, Q4 was our best placement quarter that we've had so far. And I'm excited about that because I thought Q3 was fantastic, and Q4 was better. And I would tell you that our pipeline right now is as good as it's ever been. And so I would say, even with what we have today, I'm excited. But this year, we're going to be launching -- in first part of 2021, we're going to be launching the uni-knee, the partial knee application. Remembering, again, that we have over 50% of all partial knees that are done globally. So that gives us a huge opportunity to go after surgeons that want to use robotics for partial, want to use our implants but have not been able to in the past.

Got it. How should investors value the ROSA's system? And I know Keri and Ezgi in Investor Relations are probably ready to kill me to keep asking them about this all the time. But maybe just at a high level, right, from a strategic perspective, when you're talking and planning with your team, ROSA obviously keeps and helps give you market share, right? Because it's the future. That's what doctors coming out of school are being trained on, and that's what they're going to want to do in 5, 10 years. So it's important for the future. But to Zimmer Biomet as an organization, some you're selling upfront, some you're putting into contracts. What's the true value of ROSA to the organization? Is it just simply to help you compete against your competitors and maintain your market share? Is there more of an underlying longer-term value that we should be ascribing to the system?

Yes. I think there's a much longer and much more valuable ecosystem that's built with robotics potentially at the center of it, but certainly not the only variable in the equation. If you think about robotics, there's many ways to drive revenue in the short-term, and we see real value in that, there's no question. And I would tell you that if I'm trying to quantify it, the best way to talk about it is the robotics that we have today, Revision system that we have, the uni coming out, the smart -- Persona iQ coming out soon, the smart implant, all those things give us confidence that we're going to be able to outperform market in the -- pretty consistently from here on out. So if I'm just going to try to put a measurement around the value, that's what it is. And I believe that there's a significant amount of runway for that. But I think it's more important than just that element because I think it's going to be more difficult in the future for players to compete in this marketplace because it's not just robotics. It's also the data and informatics around robotics and the great implants that we have. You've got mymobility in concert with Apple, which is one of the best consumer companies in the world that we're partnering with, an exclusive arrangement. We have that data capture that is very intriguing to our customers, to our patients. But then you compliment that with ROSA and you get the data inside with cut, the amount of tensioning you're doing for soft tissue. And now you're going to have a Smart Implant inside the patient in concert with mymobility collecting even more data. That's going to provide a data set in the short-term that will provide a -- what I'm just going to call it a dashboard of information real-time that the surgeon would never have had when a patient calls about a problem or uses the system to ask about a problem. They can actually look at a dashboard. Case in point, if a patient calls and says, "My knee is killing me, it's red, I'm worried." That was just all you had. You were blind as a surgeon, but now the care team actually can look at the dashboard to see how many steps, what kind of steps are they moving? Are they doing rehab? They've got all that information to tell them what's going on with that patient. It's a very different experience for the surgeon, the care team and the patient. But that's only going to get better because as we add more patients to that funnel, we're going to be able to have predictive care. We're going to be able to say when a patient shows up this way, I've seen thousands of those. You did a cut like this or tissue tensioning like this, and you did rehab like that and you got the best outcomes. That will change the way we do care. And as we're first to market with a Smart Implant that's important, but the most important thing is we're going to build data faster than others. And that data is going to be very powerful in the future.

So clearly, that's coming very soon in terms of the launch. How should we think about when you'll be able to actually use and interpret the data? Is that a 2-year thing, a 5-year thing, a 10-year thing? How much critical mass do you need in data to be able to apply it to a broader segment?

I mean you'll be able to use it immediately from a dashboard perspective that I referenced before. You will get immediate dashboard information through OrthoIntel. It will take mymobility. It will take ROSA. It will take the smart implant. It will combine those in that back-end that we have. And it will use artificial intelligence over this to try to derive true information, true decision support. But right out of the gate, immediately, you'll be able to get that dashboard information about what the patient is doing or not doing, which is very important. And it's going to take time beyond that to build the volumes that we're going to need to create that data lake that we've referenced before that ultimately will be more predictive in the way that we care. It's difficult to say. I mean, I want to sprint as fast as we possibly can and stay ahead of the competition by getting this done as quickly as we can, and our commercial strategy or commercialization strategy around this ecosystem and the Smart Implant will be focused on penetration. Moving very quick, take advantage of our first-mover advantage here and build the data as quickly as we can.

Bryan, if you take ROSA and you take now the fully rounded out family of Persona within knees and you combine them together, what's the full benefit of having this full knee line, particularly Persona Revision?

It's significant. I mean revision was like the cap. It was the perfect icing on the cake for a great knee line. I mean, Persona is the -- in my opinion, and a lot of surgeons would agree, it's the best knee system in the marketplace right now because it's anatomically correct for the patient. It's got all the right sizes to make sure that we're fitting the patient in a more personalized way. But with the cost structure, that is off the shelf. And so it's a great new system, but it did not have the Revision system what you've got to have. And so that does a couple of things or a few things for us. First and foremost, you've got certain surgeons that really wanted to use Persona, but wouldn't move there until you got the Revision system. We have that now. So that gives us that catalyst to get those full conversions. The second piece is you've got surgeons that have been using Persona, but somebody else's competitive Revision system. We're going after those. That should be our business for sure. And then you've got just completely competitive surgeons across the board, but our Revision system is so good, we're converting the Revision portion of that business, which opens up that competitive primary business as well. So it means a lot. I talked about it being a $100 million product in 2020, and let's call it, $40 million of that is new business, competitive business, but that's the tip of the iceberg. I mean that is the tip of the spear to go in now and go after the primary business as well, the non-Revision business.

And that's $40 million in not the best year?

Exactly, exactly. It surprised us. I mean, we had big expectations, but it actually beat our expectations in the middle of the pandemic. And believe me, we ramped up very quickly with sets, dramatically more sets than what we expected we would need. And I would say, Ivan Tornos and his team did an excellent job of sensing pretty early on what was happening in the marketplace and built very rapidly the sets that we needed to move this forward.

I don't know if this perfectly translates. But in the cardiovascular world, we saw a lot of replacements still get done during COVID, even some of the worst times rather than new implants. Was that really the same in orthopedics as well? Or should I take it as just -- it was a fantastic execution regardless?

I would definitely say the execution was pretty flawless, but my guess is, and I don't have data to support it. When you're talking about Revision, it's a higher priority, elective procedure. And so likely, you're going to get those, almost no matter what else is going on. So you may have seen a similar, more similar -- I'm not going to say similar, but more similar cadence or procedures than you would in other areas. But trust me, to beat the original plan, even with the pressure of the pandemic is still amazing.

Yes. No, absolutely. Maybe shifting gears a little bit to hips. This is something that did better than knees throughout 2020. What's been driving the better performance here? And you have this thing called ROSA that is applicable in hips as well. When should we be expecting that to hit the market?

I got to say, Robbie, I've said all along that we needed to be in knee. That was a primary focus, be above market and knee to be able to get to our growth aspirations for a company -- as a company. And I said that we would probably be at market growth for hip and eventually with the application in ROSA above market, that would be the intent. But over the last couple of quarters, we've been looking pretty good with it. And that -- really 2 things, I think, is driving it. The first is we've gotten out of our own way. I talked about Phase 1 and Phase 2. We had to make sure that we got the supply issues out of the way. We had to make sure that the sales organization felt confident, comfortable to go hunting for business. And quite frankly, we had to change the compensation plan to be able to pay disproportionately people to grow. And I think the combination of those things with better operating mechanisms and then the Avenir Complete launch. It's the reason why we're seeing better performance maybe than what we even thought in hip versus market. And that's only going to get better as we move into the second half of 2021 because that's when the hip application will be available on ROSA. So it's the combination of the momentum we've already created, the compensation structure that we have, the operating mechanisms, Avenir Complete and eventually, soon, the application for ROSA in hip.

Great. Maybe continuing down the P&L to the S.E.T. business. This is spine, extremity and trauma. And we saw a huge growth in the end of 2019, putting you in the mid- to high-single digit range. And then, unfortunately, COVID hit. But maybe help us understand these are somewhat related businesses, but yet still fairly different businesses. So what's the rationale for having them all together? Are you thinking of building this out into a specialized sales force? And how much room is left to go in terms of building out this line item here?

Yes, so maybe I'll hit the 2 topics and then get into what I think is going to come from a growth standpoint. So if I think about S.E.T. today, that's our sports business extremities, which will be upper and lower and then our trauma business. And we manage -- we reflect them in the way we do because we manage them that way, right? So that's actually the way we manage the businesses, so we want to reflect them in the same way we talk to the 3 bottom. And then our spine and dental business, the CMFT, pretty much the same thing. That's the way we manage. They...

Excuse me, I misspoke.

Yes, yes. So those are together for that reason. It's the way we manage the business. That's the way we show it.

It's been a long day.

Yes. Yes. I knew what you meant. I know what you meant. And I would say that when I think about S.E.T., which I've said before, I want to see us be consistently in that mid-single-digit growth rate. And we started to see some of those. COVID has messed that up, and it's harder to get a sense for where we are versus competition there because not everybody has the same portfolio. It's easier for us in large joints because it's a clear match versus us and the key competitors. But the fact is we're going to concentrate disproportionately in sports and extremities. And in upper extremities, we're already there. We've got a great portfolio. We're going to be building out more commercial infrastructure, but I feel very good about that. In lower extremities, we've got some gaps. We're building out the commercial channel, which is great. We've got to fill some of the gaps that we have, which we'll do either internally or we'll look for opportunities externally and do some tuck-ins when we can. But those are the key areas. And we already showed in sports that we would add externally some gaps that we have. We had gaps in sports capital. We filled those gaps with what we think is not just a filler, but a unique technology in the way that we bring that to market. And it gives us an opportunity to hunt now in sports. And the important thing isn't just the sports technologies that we acquired. The important thing is just the booms and lights that we acquired. We like those. We think they're differentiated. But it's a pathway to be able to offer more value from a contractual standpoint at the ASC. So when we go into the ASC now, we can contract with a dedicated contracting team at the ASC level across more categories, which is more valuable to the ASC and actually creates pull-through in other categories, not just in sports, not just in booms and lights.

And you mentioned you have a gap in lower, which is not some grand revelation. Now with Wright Medical being acquired by Stryker, do you see the potential for inorganic growth to fill that hole? Or do you think it's going to have to come organically from within Zimmer Biomet?

I think it could come from either path. I think for us, it's internal R&D, I can just tell you that we're already working on something. But there are other potential solutions out there that we're going to look at. It's just -- the question is when is the right timing, what's the right value and is it a differentiated product that we think we can win with.

Great. Suky, you've been up there. I don't want to leave you hanging, I want to get you involved here. So maybe if we turn to the P&L for a minute. You've talked about a 30% operating margin goal in 2023. Help us just piece together the different building blocks to get there from your point of view?

Sure. Happy to do it. I first say the near term, of course, is going to be a little bit choppy from a margin perspective just given everything that's going on with COVID. We are being very prudent with how we think about spending in this challenging time. But we're also looking at this as an opportunity to keep investing in the near term even through pandemic, especially when you think about all the exciting stuff Bryan talked about and the market recovery that we know will come in a not-too-distant future. We want to make sure that we're investing so that we can continue to extend our leadership. So a little bit about the near-term first, absolutely. On the longer-term, we remain confident in that 30% operating margin profile in 2023. And the building blocks are really quite simple, one is stabilization of gross margin coming out of 2020 versus year-over-year declines in gross margins generated primarily by pricing pressure. We're finally at a point now where we can turn the corner on supply disruption, start working on efficiency. We've put programs in place, both near term, and we're starting structural programs that will help offset that pricing erosion that we see year-over-year, that will help stabilize gross margins here in the near term. The second big building block is really about a lot of SG&A efficiency, just simple things like creating global business services, where we co-locate and consolidate things like finance, HR, IT into very low-cost countries to gain arbitrage on the investments required to do those types of things. So there's basic blocking tackling for most multinational companies, but it's not something Zimmer Biomet has been able to do because they've been distracted. Well, we're getting down that path. And that's going to -- that amongst other things is going to liberate a lot of SG&A that we can partly reinvest back in the business and partly drop down. That reinvestment back into the business, we believe, in tandem with the new product development that Bryan talked about earlier, is going to lead to accelerated topline growth, let's call it, in the mid-single digits. And so when you put that mid-single-digit growth profile together with stabilized gross margins in a more efficient SG&A base, that operating leverage is what we believe is going to drive that earnings power over time. And it's actually a more durable way to get there versus just letting all those savings drop down. So that's our path to 30%. Again, we remain very confident in it. The near-term programs are near complete, if not complete, and the more structural programs are right back on track even in the midst of COVID. So we're pretty excited about where our earnings power can go.

So 2 questions that just came in here. One, is that for the full -- just to be clear, is that the full 2023 or exiting 2023? And then second question, it sounds like you have a very clear line of sight to hitting that, how much is dependent on the top line coming through as well?

Yes. So we've originally characterized that when we talk about 30% as an exit. There's the opportunity that revenue comes in better we could do it sooner than that, earlier than the exit of 2023. I would say the way we prefer for that margin expansion to come is through that top line growth because, again, that's the more durable path to earnings power. But the beauty of this is, and what we've done with our efficiency programs is, we have the optionality. If for some reason, that market growth or that revenue growth doesn't come in, we have the optionality to throw those savings or let those savings drop directly down to margin. So I actually like the position where we're in, is that we have multiple options on how to get to that 30%.

Great.

I mean, truthfully, the plan, though, for sure, when we look at those programs, is to be able to invest more aggressively in research and development and commercial infrastructure. So the hope is over the next few years, you see that research and development number as a percent of sales coming up. I wanted to, first -- we all wanted to first make sure that we are spending the money wisely to make sure that we're spending in the right areas, we've got a specific strategy that we're not wasting money in projects that don't make sense. We've gotten to that point. Now is time as a result of that to accelerate the spend in research and development. We can do that through these programs and still drive operating margin expansion. And to Suky's point, because of that, we do have that optionality if things don't go as planned. But the intent is spend to grow, create the sustainability of that growth, and that is the path we're going to try to take.

Great. Bryan, I don't know if you want to take this or Suky, if you want to take it. But while we're talking down the P&L, let's shift over to the balance sheet and liquidity for a second. With some raises earlier in this year, when things were not looking so fantastic, you beefed up the balance sheet, you have healthy amount of cash now, do you feel good with where you are? And now with a flush balance sheet, what's your top capital deployment priorities?

So I wanted to just jump on this answer just to mess with you Suky because -- but go ahead you take it.

As usual, as usual. No, I feel really good about where we are. I'm really proud of the steps we took collectively as a management team to shore up our balance sheet, not only through the capital markets, but also in how we reacted from an investment standpoint. And quite frankly, continue to, I think, in many areas, optimize our revenue opportunity, and it's a challenging marketplace. I think, as you saw in Q3, our free cash flow generation was quite robust. Based on how I talked about revenue at the early part of this conversation, we would expect Q4 to also be very good. I think that's a really nice proof point of just how resilient our business is and how strong our end markets are and our free cash flow generation can be over time. As we think about moving forward where our priorities are, we're going to continue to pay down debt. We've got about $750 million of maturities coming our way in 2021. That provides a really nice opportunity to continue to delever, to continue to create firepower. And then depending upon how COVID plays out, we would expect that very robust cash flow generation to reoccur in 2021. And after our priorities of paying down debt, we're going to prioritize capital deployment towards that tuck-in M&A agenda that we started in the back half of 2020. So that's how we think about capital deployment here in the next 12 months.

I want to get to a couple of quick questions. We have a few minutes left. I have a few questions I want to make sure I ask you, Bryan. So maybe we could just hit these up pretty quickly. One of them is China is reviewing pricing for ortho products like they did cardio 2 years ago. I know ortho in China for Zimmer Biomet is a very small part of the business. But how are you thinking about the expectation from the new tenders? And is this an opportunity for share gain, price headwind, nonevent? How should we think about it?

I'd say it's probably both. There's an opportunity for share gain. There's an opportunity in risk associated with price impact. And it's not as big a worry just given the size and scale of the business, but it's an important market for us, and we want to make sure that we're winning there. What I'll tell you is I think we're pretty well positioned. It's not new. The VBP process is not new. It is new from a national perspective, but they've been doing this provincially for a while. And we have actually prevailed in some of those from a provincial standpoint. So we feel pretty confident in our ability to navigate the VBP process. And we also have a line that we acquired some time ago with manufacturing, research, development and everything called Montagne inside of China, that is China for China. So we have an opportunity in that situation to be able to bid products that don't have exposure in a regulatory approval outside of China. So it gives us a little more flexibility in those contracts, which we've again flexed in the provincial setting. Also, you've got to remember, China is a pretty costly method of serving the customer today. There's a lot of distributor layers built in. And the focus will be channel management there so that we can begin to eliminate some of that cost to serve while we might be giving up some gross margin. So the operating margin could still be attractive in those settings.

Great. Maybe one more, and then I have 2 quick closing questions. Bryan, what types of activities are you undertaking to go after the ASC environment? How does having the full bag of joints and sports med allow you to engage in the ASC?

It's important. Again, I think that the acquisition itself in sports is exciting for sports, but I think it's just as important in being able to contract more broadly, also including our Booms and Lights acquisition. And we've built an entire organization around doing corporate contracting at the ASC over the last 1.5 years. Again, Tornos and his team have done a really nice job of accelerating momentum in that area. It's clearly something we were going to pursue anyway, but that entire team is in place, and they're already making great headway in signing contracts at the ASC level. So I like the sports category by itself with the acquisition that we made, but I really like the opportunity to use that technology, use that category in concert with Booms and Lights and everything else we have to put very robust contracts in place for the ASC.

Great. I'm giving you a 10-minute question here with 2 minutes to answer it. But I think a lot of people have heard this before, but just if you could repeat, walk us through the pathway to go from where you are, which was pretty damn close, but the 4% to 5% growth you're hoping to get to. And what are the key drivers to get there?

Yes. One thing I'll say, Robbie, is that I'm probably going to focus less on the growth rate itself and more on our ability to beat the competition. Here's why, because when COVID is finished and the vaccine is out and we have the tailwind coming, we might have surpassed as an organization what we've been saying we want to do from a revenue standpoint. But I don't want to count that as a win unless I'm beating the competition, too. So I want to be careful of just talking about a specific number in growth. Without COVID, none of this stuff, I feel very confident our path to 45% growth top line organically is very clear. I have referenced it a number of times. But I think it's going to be messy over the next couple of years because we're going to have false positives, and we're going to have false negatives as a result of COVID. So the real goal for us is to see how we do versus the competition. That's the thing that we're going to be beating on. That's the way we'll judge our performance.

Great. Maybe this is a good question to close out here as we're running out of time. What were the key learnings that you took away from the crazy year of 2020? And what should we expect from Zimmer Biomet in 2021?

I mean, Suky, I will let you answer too. But key learning for me is we've got a team that can get it done. I mean we've got a team that no matter what you put in front of them they will find a way to sidestep it, push it out of the way, jump over it, go under it, it doesn't matter, they're going to find a way to win. And I got to tell you, we were the big beast that was sleeping, and we are no longer sleeping. This is a juggernaut in orthopedics that is wide awake and competing aggressively, and it proved it to me during the year.

Great. Well, with that, we're out of time. I want to thank both of you for joining us, really appreciate it, great discussion. Good job through a difficult year in 2020, and I look forward to some great things in 2021 from you.

Yes. Thanks so much, Robbie. By the way, you look like a news anchor right there with that background.

See you at the 6:00 news later tonight.

All right. Take it easy.

All right. Thanks, everyone.

See you.