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

All right. Good morning, everyone. I'm Larry Biegelsen, the medical device analyst at Wells Fargo. And it is my pleasure to host this session with the management team from Zimmer Biomet. With us, we have the new CEO, Ivan Tornos; the CFO, and I know also expanded role and title, Suky Upadhyay. What's your expanded role and title?

I also now have operational supply chain.

Got it. And from Investor Relations, Keri Mattox, Chief Communications Officer; and Zach Weiner, Director of Investor Relations. Format is going to be fireside chat. And if anybody has a question, please raise your hand. So Ivan and Suky, thanks so much for being here.

Thank you.

Thanks, Larry.

And Congratulations again, Ivan.

Thank you.

So Ivan, lot of questions for you. I'm sure people would love to hear from you, how you're thinking about the business. Maybe before we jump into the tougher questions, I'd love to hear from you kind of your experience at Zimmer, and what's your most proud of accomplishing over the past 5 years?

Sure. Thanks, Larry. Good morning, everybody. So I've been with Zimmer Biomet about 5 years, and I could give a fairly lengthy speech in terms of what are the highlights of my 5 years here. If I were to give you a short sentence, I would say the transformation of the company. Really proud of the transformation of the company. And there's a lot of things to unpack. Maybe I'll make this a lengthy answer, and then we'll make a time later, but I'll give you with 5 key areas of the transformation: strategy, operations, culture, innovation and financials. So on strategy, I will tell you, 5 years ago, we didn't have clarity on the strategy. And this is not to diminish the work that the previous management team did prior to some of us joining the company, but we did it. We doubled down on low-growth markets, Zimmer and Biomet. We were in multiple areas. We fail to say no. We came out with a very clear strategy around where to invest, where not to invest, along came growth drivers, along came investment innovation around data technology solutions, along came a lot of stuff from a strategy standpoint. Operations. One word, remediation. This is a company that back in 2017, '16 and, to a lesser degree, '18, was plagued with all kinds of operational issues, whether we're talking FDA warning letters, whether we're talking compliance issues with the monitorship with the Department of Justice, whether we're talking a poor operations, manufacturing strategy, I can go on and on, we changed. We turned that around. One, FDA warning letter lift. Can't wait for the FDA to come Warsaw. 0 challenges from a compliance standpoint, 0 challenges from an FDA standpoint, a trusted partner with key stakeholders. Again, it's a different company from an operations standpoint. Culture. We globalized the company. We created a totally different culture at Zimmer Biomet, a culture of winning, a costume of accountability, a culture of high engagement. We used to have 20%, 25% turnover. People leaving, 20%, 25% turnover, meaning 1 of every 5 employees was leaving the company. We have some of the lowest turnover rates that I've seen in 30 years in medtech around the world. Innovation. Once we close the remediation gaps, we move into innovation. Our pipeline today is twice what it used to be in 2018. And what I mean by twice is twice the value, so we don't disclose externally what the actual revenue is, but we're talking billions. So the pipeline in 2018, fast forward to 2023, twice the revenue. Those are products that we're going to be launching over the next, call it, 2 to 3 to 5 years. These are products that in most categories are going to be #1, #2 in the markets where we play. 80% to 85% of these new products are going to be in 4-plus market growth segments. And most important, they're very mission-centric products. So I tell people, and you've asked me before, our innovation, it truly is the competitive advantage of Zimmer Biomet. And then the fifth and final component of this lengthy answer is around the results. We have established a track record of same things and doing things. We're going to deliver this year 7% to 7.5% growth, second consecutive year with mid-single -- upper single-digit growth, delivering a midpoint 100 basis points of mean expansion 3 years in a row, committing to delivering margin expansion again in 2024. So I would tell you those 5 key areas have been the pillar of this transformation.

That's super helpful, Ivan. And I hope this is the last time you're asked this question, but I think this is your first webcast as a CEO.

Yes. Sure.

So the question is about Bryan leaving, and the signal it sends. Some people see it as kind of a lateral move. I don't know what you can say or it's hard for you to get inside his head, but anything you can say would be helpful and how you're just feeling about the business probably more importantly.

Yes. Well, I'll start with the second part of the question. Obviously, I'm very excited about where we are today. We can talk about the last 5 years and the next 5 years as we get into the Q&A, but very excited. Innovation, truly a strength. Commercial execution is happening. The macro environment is getting better. So really, really excited. In terms of Bryan leaving, look, it's a question at some point. You guys need to ask Bryan. I'm very close to Bryan. I consider him a close friend. I knew when I joined the company 5 years ago that he had thoughts around doing something else. We always talk about, at some point, being 5 years. It was kind of like a gentleman agreement, if you will. That's not to say that the deadline came and he left. He's got a great opportunity at 3M. Bryan loves doing transformations in the early stages of the transformation. Go back and look at his resume. He was part of Tyco becoming Covidien. He was part of Covidien becoming Medtronic. And he joined Zimmer Biomet when we were, frankly, 2 different companies, Zimmer and Biomet. He was the architect of a lot of the stuff that I talked about, and now he's got a great opportunity at 3M, which is going to be very compelling from a financial standpoint, and that's why he chose to go there. He doesn't see that as a lateral move. And once the proxy is out, I think you'll agree with me that it's a great opportunity for Bryan and for 3M, by the way. So excited about Bryan being at 3M as well.

That's helpful. And how about strategy? Bryan talked about a 3-stage process in Zimmer. When he became CEO, he talked a lot about being in stage 3 today. How does the strategy change under your leadership?

Yes. So let me maybe start quickly, 10-second summary on the 3 stages. So stage 1 was what I call hearts and minds, hygiene level factors. Let's clean up all the culture issues, the quality remediation and innovation part that I described. Stage #2 was putting the strategy in place. What are we going to do? What are we not to do? And that was the divestiture of the spine, dental. That was prioritizing the growth drivers of the company. And then stage #3, which is where we are right now is deeper portfolio transformation. And we are in stage 3, and we are going to execute on stage 3. So the second part of your question, how is the strategy going to change? It's not. Evolution versus revolution. We will go faster in executing stage 3 because we done all the cleanup already. But thematically, the strategy is not changing.

That's helpful. So Ivan, what does success look like in 12 months for you?

Sure. Execution. We said things. We got to deliver on things. We made financial commitments. We've got to deliver on those financial commitments. Personally, I don't want us to be a 4-plus mid-single-digit grower. That's the commitment we're making for 2024. But if you ask me, I want us to be a company that is mission centric that is winning in the markets where we partake, growing above market, delivering top line and expanding EPS at a meaningful rate, but that's winning from a financial standpoint. Beyond that, continue to be thought of as a trusted partner with the key stakeholders and truly transform not just Zimmer Biomet but an entire industry. And I think we can do that. Given some of the innovation pathways that we have, given some of the talent that we got, I think this company cannot only just impact the company, Zimmer Biomet, but truly transform an entire industry. I don't know that's going to happen 12 months but definitely an aspiration.

The 4% plus, not being satisfied for that, call a lot of, I think, investors' attention after you did a sell-side call and people wrote notes about it. The current portfolio can get you there? Or do you need to increase your WAM growth?

Yes. I'm not going to elaborate too much on 2024. We'll give guidance at the right time, but we said in the earnings call that 2024, the commitment is 4-plus even mid-single digit. In that commitment, that's an actual commitments, we think in macro and micro factors, and we feel very confident we can deliver on that commitment. But as we get closer into guidance time, we'll be talking about all the different variables in that regard.

So I think you're not being satisfied with 4% plus, I thought it was more of a long-term aspiration, not a 2024 comment.

We'll see. We'll see.

Okay. Fair enough. Ivan, I want to ask you a question on culture because I know you and Bryan are different people, obviously. And what we hear about you, and you've talked about it today as being demanding and holding people accountable, which are good things, I think. Culturally, how do you see Zimmer changing under your leadership?

Yes. So first of all, Bryan and I are different. He's blonde, blue eye, speaks impeccable English. But beyond that, I will say that Bryan and I are very similar. We both are very mission centric. We both believe that culture needs to come before strategy. And again, we both worked together for 5 years, and we build the culture together. So I don't see a change in that regard. We'll continue to manage the company with focus, with accountability and with a deep sense of teamwork. I tend to be more involved in the details. I was the operator of Zimmer Biomet for 5 years. I like data. I like processes. I like systems. I like accountability, as you highlighted. I like focus. So I would say probably that's not going to change. I would say the culture is not going to change. We may do things a bit faster. Evolution versus revolution, but I like to go faster in some areas.

That's helpful. Maybe why don't we get the capital allocation question out of the way here. How does it changed under your leadership? And maybe, Suky, you can chime in and just remind us of the kind of M&A strategy?

Maybe I'll do the first part and then Suky, you can elaborate.

Yes.

The first part is that it hasn't changed. Again, we, as a management team, it wasn't Bryan who came out with the M&A strategy. Financially, we want to have the right metrics. Those are not going to change. Acquisition price up to $2 billion. That's not to say we're going to do a $2 billion deal, but we like the optionality given the balance sheet that we got to do up to a $2 billion deal. Willing to take dilution up to 24 months. We may or may not make an exception based on how compelling a specific asset is, but that's kind of like the North Star. In terms of the key areas I want to focus on, it's really like a 3-step type of approach. Step #1, we like certain spaces within orthopedics. We are the #1 company in the world in knees and hips. We are a fast grower in robotics. There's a lot of spaces within orthopedics that are very attractive, high growth, great margins. We got a great presence will be a seamless integration. So that will be leg #1. Number two is set. Higher growth segments in sports medicine, in upper extremity shoulder, in our CMFT, craniomaxillofacial thoracic business. So that's kind of like the second stage, if you will. And then number three is site of care. We have a great presence in the ASC. A large amount of cases are moving to the ASC, ambulatory surgical centers. And we want to leverage that code point and think about other adjacencies in that code point. That can be anything from anti-infective plays. That can be a lot of things in that category.

I'd say from the capital allocation standpoint, it's really centered on 3 principles. The first is to ensure and protect liquidity of the company. Two is to maintain strategic optionality and flexibility. And the third underpinning all that is to maintain investment grade. And so as we think about how do we deploy in the backdrop of what Ivan just said. Top priority is make sure we invest against the assets we already have. We've got to optimize those assets and make sure we got the right capital behind them, make sure we have the right investment to optimize those organic opportunities. From there, we're going to maintain our dividend on $1 per share basis. We're not looking to increase that or take it away in any way. After that, our third priority then is that flexibility to do M&A to accelerate our growth rate above that mid-single digit profile that Ivan talked about earlier. And then the last is return of capital to shareholders through share buyback. So that's how we think about deploying our capital, very consistent with where we've been for the last few years.

And ROIC, I believe...

Yes. So when we think about deals, I think Ivan talked about, first of all, the sizing of that. But inside of that, we have a number of strategic variables, the financial variables we look at are obviously NPV and IRR. We look to maintain dilution inside of 24 months. And then we would look for ROIC to be accretive to cost of capital, high single digits, low double digits by year 5.

And just one clarification, Ivan, you talked about stage 1, 2, 3. Sometimes if you'll think about stages as chronological, I don't think you answered that way.

Yes -- no.

Those are the 3 different [ category ].

Let me clarify that. English is not my first language. So when we think about priorities, we like spaces within orthopedics that are higher growth because, again, it's a seamless integration. We had the right to win in those categories. So priority #1. Probably the #2, S.E.T. Priority #3, ASC site of care opportunities.

Got it. That's helpful. And one other big picture question, GLP-1s have been very topical. Concerns about GLP-1s reducing the rate of obesity. Obesity is a big driver of osteoarthritis, but there's also the potential benefit to your business because a lot of patients are too obese to undergo a hip or knee procedure. How are you guys thinking about that?

Yes. It's a great topic. And this came up, I don't know, 5, 6 months ago. We didn't pay that much attention. We're paying attention now. We're getting educated. I'm going to throw a couple of data points and by all means do the channel checks. Check with Rothman Orthopaedics. The guys here at MGH, Cleveland Clinic, I think you're going to hear a very consistent message. Number one, in the short term, we believe this is definitely a tailwind. You get a large percentage of patients in the U.S. that don't have the right BMI threshold to go through a surgery. It's around 30%, 40%. As a matter of fact, the number is 10%. So let me say that again, 10% of patients that -- who get an implant today are not getting one because they're too obese to go through the surgery. When you put that in perspective, it's a large number. It's a large number. We're talking millions of patients. So in the short term, it's a tailwind. Now the second part of the question here is, well, do you guys think that volumes are going to get reduced as these GLP-1 to start to work and people get skinnier? Look, I'll tell you, go back to bariatric surgery in the U.S. 20 years ago. Bariatric surgery has been around 2, 3 decades. Volumes in orthopedics have constantly gone up year after year after year. You've not seen a reduction. So we think it's a tailwind in the short term. We don't think there's a headwind in the long term. The data that we're reading shows that genetics is a bigger factor. Osteoarthritis, that weight. The data that we're getting is that these GLP-1s are really not reducing pain as much. Obviously, you lose the weight. The data shows very clearly that the weight loss may not be sustainable after a certain period of time. Economically, I don't see how the health care system can pay $2,000 per month per patient for life for people to stay "skinny." So we're not terrified about that was going to happen here.

That's helpful. All right. So let's switch gears, talk about the business today. Maybe you could direct this to Suky. How would you describe the operating environment now compared to this time last year? What's getting better? What's still a headwind?

Yes. I'd say, overall, it's a net positive. So far, in the second half of the year, we're progressing as expected. We're very pleased with how the third quarter is playing through all of our key assumptions are actually coming through. One of those being COVID being a nonfactor, whether that's infection surges, hospital capacity or staffing. So we're seeing that play out as expected. Overall, the pricing environment has been relatively stable to the first half of the year. It's another major proof point for us. So overall, demand remains very strong in -- across all of our categories, so we feel really good about that. We still continue to see some supply challenges being somewhat of a governor to growth, but that's improving. It's improving every week, and that was one of our expectations as we came into the second half of the year. So overall, very pleased with how the third quarter is progressing, very confident in the guidance that we provided for the second half of the year.

In the summer seasonality, we all hear about pent-up demand for vacations, but I think that was a factor last year. Anything unique this year?

Yes. No, nothing structural. We're seeing similar seasonality that we saw pre-COVID. So it's playing out as expected.

And the guidance, just to follow up on that, 9%-plus constant currency growth, very strong in the first half of the year. So the guidance implies low mid-single digits, 5-plus percent in the second half, is that just a function of the comps getting tougher?

It really is because if you look at the first half of the year, remember, you're comparing against the first half of '22, obviously, which was plagued with Omicron, right? So you've got a comp benefit there. The second half of the year is a lot cleaner when it comes to comps. And if you think about our implied guidance of 5%, 5-plus percent, I think that's actually a good proof point validation of where we are as a company from an execution and market standpoint.

And Suky, on leverage, you've talked about, I think, about 100 basis points this year. Next year, you've talked about the 4% plus organic growth with some operating leverage. How are you thinking about just kind of leveraged earnings in general for the company? And I think the biggest kind of concern is around how you get that leverage next year, given kind of the FX kind of headwind?

Yes. Yes. So first, thank you, Larry, for pointing out. And '22 and '23, the company has done a great job. The team has done a fantastic job of expanding margins in an incredibly difficult environment, especially if you think about inflationary pressures. I'm not sure a lot of our peer group can say that, but we've managed to do that over the last 2 years. Now some of the tailwind we have this year from FX hedge gains will drop off or won't be as pronounced in '24 as they were in '23, but we still believe we can grow operating margins into '24, maybe not at the 100 basis point level that we saw this year, but we can still get some acceleration. Building blocks are simple. There's 3 of them. If you think about gross margin, we would expect to see about a 50 to 100 basis point headwind in the next year. Combination of pricing and the FX hedges falling off, that will be somewhat abated or mitigated by continuous efficiency and COGS site optimization, et cetera. So if you just start with 50 to 100 basis points, again, that could change based on FX rates, mix of the business, et cetera, but that's a starting point. From there, if you just think about how we've talked about revenue next year, 4-plus or even mid-single digit, just using sort of the middle of that range, 5% as an illustration, I'm not saying that's what it is next year, but as an illustration given our flow through and our drop through of our business, that can be about 100 basis points accretive to operating margins in and of itself, okay? That can change based on the mix of the business, investment profile, et cetera, but that effectively offsets that headwind that you see in gross margin. And then the third building block that we have from there is we still, in some areas, have a target-rich environment when it comes to driving efficiencies. We've done this for 4 years now consistently. There's more to go, more work to do in G&A functions, which some of our functions still operate at a higher cost profile versus our benchmark. So that tells us there's opportunity there. There's still opportunity in some of our commercial go-to-market models in many markets that are just not performing at company average or better relative to operating profit, cash flow, and we're going to continue to work on restructuring those businesses. So we think we've got efficiencies for many years to come, which if you put all 3 of those together, gives us confidence we can continue to grow margins.

That's helpful. And Suky, I forgot that you still have the warning letter at the North Campus.

Yes.

It's been so long. Ivan brought it up. We're ready for reinspection. That was 1 warning letter that actually did have kind of a negative impact on gross margins when it happened 5, 6 years ago.

Yes. Sure did.

My question is, is there still opportunity to improve the gross margin when you lift the warning letter? Is there any -- are there any costs that go away?

Potentially there. Potentially. I don't think they're significant. I think that the -- what gave rise this warning letter was a pretty big underinvestment. And so now we've gotten quality where it needs to be. We don't want to be penny wise pound foolish when it comes to quality because you can't sell a product if you can't make product, so we'll see. Potential opportunity. It could be a potential tailwind, but we don't want to get too far ahead of our skis. Let's get through the warning letter, which we feel very confident we'll do, and then we'll go from there.

And right now, you're just waiting for reinspection?

That's right.

Yes. And I want to make it very clear, there's 0 issue from a product delivery standpoint. I mean this is a warning letter that has been around for a while.

Okay. That's helpful. A couple of topics here. Why don't we just get the China one out of the way? Obviously -- the question is around the anticorruption policies that are going in place. China in 2%, 3% of your sales now?

Yes.

So relatively small, but just interested to get your input here on what impact it could have.

Yes, I can start and elaborate here, Suky. We're not seeing a headwind today. So we're not seeing anything that is still in us that we need to change guidance, so we got a headwind as we speak. We're monitoring the situation. As for with the chief compliance officer of the company, late last night, early this morning to make sure that as the question came up, we're not saying something inaccurate. She actually -- and she was based in APAC for many years. She actually feels like this can be also a tailwind in the short term in the sense that the Chinese government is prioritizing first, local companies and then they're going to go into multinationals and whatnot. They're looking at pharma first, and then they're going to get into medical devices. Because of all the work we've done closely with the Department of Justice to resolve the monitorship that we had, we have built through millions of dollars of investments a best-in-class culture and governance around compliance. So I would put our compliance program in China globally as leading best-in-class. So we know that we're doing the right things in China. We believe it can be a competitive advantage in that market. But again, if things do change, we'll update you, guys. Right now, 2%, 3% of sales but no headwind whatsoever.

And post-VBP, [ 2, 3s ] of sales even less on our operating profit. So that will change over time, but in the near term, as Ivan said, we don't see this as a major headwind, but we're watching it closely.

And when tailwind for you guys has been in this backlog, we -- if you look at just the area under the curve, it's about $5 billion. I know we've talked about it, it's difficult to quantify. I think people are curious to know kind of how long you think it lasts.

You said $5 billion. I didn't say, $5 billion. Here's what I tell people. I've been fired from the backlog analytics team like 5 times already. So I got it wrong every time. So here is what I know. I know that it's sizable. I don't know if it's $5 billion. I don't if it's $7 billion. I don't know what it is. It's sizable. So that's number one. We know that it's going to be with us at least through the remainder of 2024, so we know that. It's going to be here for another, call it, 6 quarters, at least 6 quarters. We also know that we're not a backlog-dependent type of company. We know that because of other macro dynamics and micro dynamics around commercial execution innovation, the data backlog is gone. We're going to continue to be growing at the pace that we need to be growing. So how big is the backlog? I have no idea.

That's helpful. Ivan, let me -- so you talk about micro. And I guess when I think about your tenure at ZB, and I look back before you came, Zimmer was generally a share donor in the hip and knee market. In the last couple of years, you've been a share gainer. What's changed? What's driving that? And how sustainable is that?

It is sustainable. As you can see over the last 2, 3 years, we've been gaining share in the key categories. Willing to take that bet with anybody. I don't know about backlog, but I do know our market share gains, we've been gaining share in the key categories for the last 2, 3 years. It is sustainable. Frankly, I think we can accelerate it, given the low penetration we have on robotics, given the low penetration we have on cementless knees. 15%, 1-5, of our knees are cementless. We believe we can do 50%, 60%. That's a great opportunity to get new accounts. We're excited about the pipeline that I mentioned earlier. We're excited about the best-in-class commercial execution capabilities. It is sustainable.

That's helpful. And so we -- there's a lot we can dive into there on cementless, but I'm curious I want to make sure we hit S.E.T. because hips and knees, great in Q2. That's flattish.

True.

That's supposed to be your fastest-growing category long term. How do we think about that going forward?

Yes. First things first, we got to change the acronym because S.E.T. means nothing anymore. It used to be sports, extremities, trauma. Today S.E.T. for us in 6 categories. So we got sports. We got shoulder. We got CMFT, craniomaxillofacial thoracic. Can't believe I can pronounce that. So they're 3 key categories. And then you got trauma, you got foot and ankle and then you get restorative therapies, which is biologics, agents and whatnot. In the 3 key growth drivers, we've been growing upper single digit, low in the teens depending on the market. So those are going really well. Trauma, foot and ankle and restorative therapies have been a bit of a boat anchor for a variety of reasons. We've said that once things will normalize around reimbursement in challenges in RT and other headwinds, we should be a mid-single-digit or above growth type of company. We're there. We're there. We believe we're going to continue to accelerate our S.E.T. performance as we exit 2023 and enter 2024. So really excited about that space. And by the way, in case you wonder why S.E.T. has been low growth or flat over the last, call it, 5 years, remediation. We started to remediate the knees and hips from a factory standpoint, from a commercial execution standpoint. Now that that's behind and we're growing at a nice clip, it's time to S.E.T. going, and we are growing at the right pace moving forward.

And lower extremities is even though it's the one of the underperforming subsegments, it's still a high priority for you. Is that correct?

The 3 growth drivers are shoulder, sports medicine, craniomaxillofacial thoracic. We are deprioritizing the other 3: trauma, foot and ankle and restorative therapies. That said, because they are high-growth markets, it will have an attractive opportunity to invest in one other 3, we will. But today, the 3 growth drivers remain shoulder, sports medicine, craniomaxillofacial thoracic.

Okay. Because I think I remember in the past, talking about foot and ankle being an area that you would like to improve and potentially inorganically.

Choices, right? I mean that's the one thing that I'll tell you that we changed dramatically here, choices. We're not going to be in every country. We're not going to be in every platform. We're not going to be with every customer. Choices.

Okay. That's helpful. In terms of the pipeline products that I think people are interested in. One is obviously Persona iQ. Sounds like the full launch is still scheduled for early 2024. What needs to happen between now and then? And how are you thinking about the impact that could have?

We're ready. We said all along that '23 was a limited market release, validate the clinical value proposition of the product, which we have get the right reimbursement dynamics, which we have. NTAP. We are submitting for TPP, understanding the commercial payer angle, which we have, looking the right contract with the right institutions, which we have. So nice about execution in 2024.

And when we talked just today, you talked about being cautiously optimistic. What is driving your cautious optimism?

The input that we're getting from patients, the input that we're getting from physicians, the input that we're getting from payers leads me to believe that this can be a groundbreaking product.

And remind me, can this be done on ROSA, or is that something [indiscernible]?

It can be done on ROSA absolutely. We have generation 1, which, as you know, is going to be the longer one. We're launching sometime soon what we call the stubby. I didn't come up with the name, but the shorter stem. We are going to have a cementless application before too long, and all of those are going to be fully integrated with ROSA.

How long for the cementless?

I don't think we have said that externally. So I'll keep it at soon.

And it's interesting. You talked about this mix benefit for cementless, mid-teens and ROSA mid-teens. Is one going to go faster than the other or kind of in tandem?

I think they're going to be pretty much in tandem. And you can look at what our peers did, and you probably saw that all their peers grew at pretty much the same pace with a 10 -- rather 15% cementless penetration, 15% ROSA here in the U.S., and our goal is to get to 50%, 60% of both categories. And I think they're going to go in tandem. And frankly, one is going to feed the other, especially with the ASC dynamics.

And the other pipeline side that people are interested in is obviously the robotic application for shoulder. Where are you in that process? And what is the problem kind of with knee, it was the -- 20% of patients unsatisfied. What are we trying to solve for with shoulders?

Yes. I think I've said like 50 times to we're going to be #1 to market. So at 51, we will be #1 to market when it comes to sold the robotics. I'm pretty certain of that. So that's part A. Part B, what is the problem we're solving? I would say it's three things. It's accuracy in the actual placement cuts, it's the speed in the actual surgery and a shorter recovery. So eliminating the time that it takes to get recovered from a shoulder surgery. Those are the 3 key compelling, I guess, elements of the value proposition.

And have you talked about -- I can't remember if it's the same capital or you need new capital?

No. It's going to be the same platform. So it's software that changes [ upgrades ].

This is software. There's no like end of sector...

You'll do some things potentially to the arm and whatnot, but overall, it's the same capital.

Okay. And if you talked about anatomical, reverse, kind of what the priorities are.

We're going to have both in the right sequence, and I don't want to talk about that. We're also going to have optionality of inlay/onlay. We're going to have upgrades down the road, but it's -- ROSA is very modular, so you can build a lot of different applications for different surgeries. That's one of the things that we like about ROSA.

And how are you just kind of jumping around here? How are you thinking about kind of giving long-term financial goals or having some type of the analyst meeting? I don't think you guys have one in a while.

At some point, Keri, Suky and I, we're talking potentially 2024. We haven't made a decision yet, but maybe in the first half, we'll let you guys know. But we're at a position that I love to share with everybody the long-range plan financial goals, but most importantly, just the innovation story. If I wanted to leave you one thing here today, this is a different company. And it's unfortunate that through a variety of reasons, we haven't been able to showcase that, but I look forward to having that Investor Day and getting deep into not just the financials, but the innovation that we got going on, the transformation from a commercial execution and a couple of other things.

A couple of quick hits here. So your prior role Chief Operating Officer, is there a plan to replace that position? Or what's the plan?

Yes. We're going to have -- obviously, I'm not going to have both roles. So we're going to have a group president that is going to run some of these businesses. I plan to stay very much connected to the day to day. That doesn't mean I'm not going to be the CEO of the company and focus on the right things, but I will be connected with the day to day. We had a press release yesterday that talked about how we elevated certain positions to the CEO level. All 3 regions are going to report directly to the CEO. And the Global Head of Innovation or Chief Innovation Officer is going to report into the CEO to make sure that innovation continues to be a competitive advantage. But yes, we're going to bring some talent to the company.

So what are...

Are you applying for the job?

The Chief Innovation Officer, you announced a new person yesterday.

He's not new Dr. Nitin Goyal, Rothman Orthopaedics surgeon, who has been with us for the last 2.5 years. I give him a ton of credit for the innovation journey, and he's coming with me. He was reporting to the COO, and I report to the CEO.

And what's underappreciated about Zimmer?

The amazing pipeline that we have, the fact that yes, the last 5, 7 years, we're working, remediation, challenges COVID. And I know everybody used the excuse of COVID. When you run an elective surgery company, it's more painful. So I will say now that we are in a normal environment, I think the future is great for us. The present and the future is great for us. So that's underappreciated.

All right. Great. We're out of time. Thanks so much for being here.

Thank you.

Really appreciate you giving us a first fireside chat.

Thanks. Thank you, Larry.

Thanks, Ivan. Thanks, Suky.

Appreciate it.