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

Wow, it just got eerily quiet. I'll take that as a good sign. Hi, everyone. Welcome. Thanks for coming to the 2024 Investor Day for Zimmer Biomet. We're happy to have you here in New York at NYSE. And we're happy to share updates and information with you today. So I'm Keri Mattox, I'm the Chief Administration and Communications Officer. And I'm just going to give you a little bit of level-setting and agenda to start off our day so that we can get into the content that you've all come for. Our legal department loves this slide, as you know. I'm not going to read it to you, I promise, but we do want to put it up and just remind everyone that the appendix includes non-GAAP reconciliations that you may want to look at later, and we will be making forward-looking statements. In terms of today's agenda, we're going to be spending time with our executive team. They're going to be walking you through some different sections of content to really orient you to our long-range plan. We're going to start off with Ivan Tornos. He's going to talk about the strategy and taking Zimmer Biomet to the next level. You'll then hear from Rachel Ellingson, who's going to talk more about active portfolio management. And then Ivan will come back on the stage to talk more about business and markets. After that time, we are going to have a built-in break. We'll do some setup on the stage before our world-class surgeon panel, which is wonderful. You'll have a chance to ask questions of the surgeons and of Dr. Nitin Goyal. And then we'll have another break as we build in the flow for the day. After that, Suky is going to come up our EVP and CFO, and talk about financial outlook and expectations. I should mention that Suky Upadhyay, I didn't not say the last name because I couldn't, it was just shorthand. After that, we are going to have a full interactive Q&A. So you get the full team up here, you'll be able to ask your questions. We want to make sure to really dig in and spend that time and go through the content and questions you may have after hearing it. After that, we're going to end the day down the hall in the [ Siebert ] Room. We've got a product showcase set up for you. We're excited to walk you through some of the new products. And we're going to have the cocktail reception where you can talk to other members of the team. All right. With that, I get to do the fun intro video, and then I'll bring Ivan up on the stage. [Presentation]

All right, everyone. Please join me in welcoming to the stage our President and CEO, Ivan Tornos.

What a video. I've seen the video countless times. And I tell you, to this day, I still get goosebumps watching the video. It's very inspiring. In less than 2 minutes, you can get a sense of what we do each and every day here at Zimmer Biomet. We alleviate pain and improve the quality of life for people around the world. And I'll tell you in a bad day, that is a great video to watch. And we have had a few bad days here at Zimmer Biomet, but it's beyond inspiring. And I got to tell you, I don't know of a better job than the one that I get to have, along with my colleagues here. At Zimmer Biomet, we've been doing this for almost 100 years since May 2, 1927. As I tell my team each and every day, we are just getting started. We're going to have a lot of fun today. This is the very first Investor Day in the history of the company. As Zimmer Biomet, we've never had an Investor Day. So go back to June 24, 2015, we merged 2 iconic companies. And since that day, that's 3,262 days ago, I got a lot of free time in my hands, we've never hosted Investor Day. So the temptation is to give you all kinds of information around strategy, operations, culture, innovation, capital allocation. We're going to try to keep it very, very focused on the things that you told us that you want to hear about. So we're going to have a full agenda, 3.5 hours. But before we get the show going, as I typically do, I'd like to show some gratitude. I'd like to start with some thank yous while you're still paying attention because I think it's important to show some gratitude. And I'm going to start with you, Keri. So don't go anywhere. Keri, we announced that Keri Mattox was going to be leaving Zimmer Biomet at the end of May. That's what she's got that beautiful smile going on, that to keep it [ low ], please. In 48 hours, it's no longer going to be working directly with the [indiscernible]. So again, there's a lot of cameras here, keep your smile to a minimum. Keri has done an amazing job for us. She joined the company 4.5 years ago, we've gone through a lot together. You are leaving the company better than you encountered the company. So thank you very much, Keri. Thank you. I want to thank Zack Weiner. Zack is a senior member of IR team. He's done a lot of heavy lifting over the last 7 to 8 months for this event, but for over a year, when he joined the company about a year or 2 -- 1 year and 2 months ago. So thank you for everything you do. He's a great partner, a workaholic, you are, sending us slides at 3:00 in the morning, and a great coach as well. Last night, Zack came to me. I say, "Look, this is your first ID, Investor Day as the CEO in Zimmer Biomet, I want to give you some counsel here. First of all, don't try to sound too smart. Second of all, don't try to be too funny. In a nutshell, just be you." And I love that counsel. All right. So thank you. I want to thank the employees of Zimmer Biomet, my colleagues, team members who are listening to this presentation. I've been told we got about 400 of them listening to the webcast, and I want to say thank you in the most sincere way. I am inspired by what you do each and every day. This is not an easy job. We've gone through a lot together. I know what you do. I respect what you do. The mission will move forward at the right speed with people like you. And if we have any sales reps listening to the event, I'm going to ask you to disconnect right now because we've got to close the month and the quarter. I want to thank the customers that trust us. We've got a few of them here, Charlie DeCook, Atul Kamath. Where is Michael at? Dr. Ast already here? Not yet? He better show up. So we have Cleveland Clinic, Mayo Clinic. We got the world's busiest arguably, the lawyers tell me to say arguably, Charlie DeCook, the world's busiest surgeon. We're going to be in a panel with Nitin Goyal and John Sperling from Mayo Clinic. So it's more representation of a large group of people that each and every day, try Zimmer Biomet, they think of us as their trusted partner to alleviate pain, and improve the quality of life for their patients. And it's this stress that also energizes me. It is the stress that has enabled for Zimmer Biomet to remain today the #1 company in the world in hip surgery, the #1 company in the world in knee surgery. We don't take your trust lightly. We appreciate you being here. Thank you very much. I know this feels like an Oscar speech, I'm almost done, Suky wants to pull me off the stage already. I want to thank the investor community. Thank you for your feedback. Thank you for the direction you gave us to prepare for this meeting. Thank you for your trust. That's the end of the gratitude. And with that, we'll get going with the show. I'm Ivan Tornos, I'm the President and CEO of Zimmer Biomet, I been in healthcare, medtech my entire life. That's almost 30 years. I was the CEO of a startup early in my career. I worked at Johnson & Johnson, including DePuy for over a decade, spent time at Baxter and Business Development. Covidien, which became Medtronic, I worked at C.R. Bard, which became Becton Dickinson. And 5.5 years ago, I joined Zimmer Biomet. I believe the photo behind me is from 5.5 years ago when I actually had no gray hair and a permanent smile. I don't know of a better job. I love what we do, I love with who I do it, and I love what we got going on ahead of ourselves. 3.5 hours, we're going to cover a lot of material, but this may be the most important slide. I'm going to try to recap all the messages. We got customers, surgeons, we got finance, we've got business development. We've got all kinds of things happening here today. I want to leave you with the 3 key takeaways. At the end of the movie, at the very beginning of the show. These 3 points answered the question of why should you believe that Zimmer-Biomet is a different company. These 3 points that I have behind me answer the question of why should you buy the stock of Zimmer Biomet. The 3 points that you have read in the slide answer the question of why this is truly a company that has a meaningful pathway for value creation. Number one, and this is very fancy there. I'm going to simplify it, better markets, better company. Healthier markets, stronger company. And in a data-centric way, I'm going to attempt to demonstrate that this is not the same company that we had in 2018, '19, 2020 and even 2021. Not the same company, not the same markets. Our WAMGR, weighted average market growth rate in 2018 was around 3%. Orthopedics within the market was low growth for us. We didn't have a robot. We don't have cementless knees. We're not in anti-infective platforms. We're not playing the higher growth segments within Orthopedics. But all combined, including Dental and Spine, it was 3%. In 2018, we had a lot of challenges we're going to talk about. And I'm going to spend some time talking about those challenges. I'm going to talk about why those challenges are no longer here. Better markets, better company. Number two, innovation is the competitive advantage for Zimmer Biomet. We've gone from being a competitive-centric organization to having innovation being the competitive advantage. And I'll say that again. We've gone from reacting to what our competitors were doing, being competitive-centric, we're late into the robotics world, no surprises there. We're late in cementless knees. We're late in surgical impactors. We're late in sports medicine. There is a lot of areas where we didn't do our homework because, quite candidly, we're working on solving problems that we'll talk about. And now with all that behind, with not a single gap in the portfolio, we're going to talk about 3 products that we're [ lagging ] in Hips. Today, I can tell you that the company's move from being competitive-centric to having innovation as the competitive advantage for Zimmer Biomet. It's not just the quantity of products that we're launching, it's the quality. It is how this product will shape the standard of care in musculoskeletal care. So that's the second key takeaway. And the third key takeaway is that now we're [ remediation ] behind. Now with a commitment to grow revenue above market, EPS faster than revenue and free cash flow faster than EPS. With that commitment, with the strength of the long-range plan, which we're going to talk about, we have the optionality of creating value, thinking about capital allocation in different ways. And I'm tempted to spoil Suky's thunder and tell you all about it right now, but he'll talk about it later. But I want to leave you with that. This is not the same company as we used to run. All right. Now that I gave you the end of the movie, let's go back to the beginning. This slide answers the why, the where and the how. Why do my colleagues and I get to show up each and every day? And it's 13 words. Our mission statement is alleviating pain and improving the quality of life for people around the world. And we get to do this every 8 seconds. Every 8 seconds somebody around the world benefits from the work that we do here at Zimmer Biomet. In the mission statement, I love the tenth word: people. And like other companies, and you read a lot of mission statements, we don't use the word patient, because we believe that what we do, as you saw in the video, not only we restores the mobility of the patient, it improves the life of those [ stakeholders ] around the patient. It's an ecosystem of people that get happier because of the work that we do. So that's what we do here at Zimmer Biomet. This is the why. The where is our vision statement. We want to be the boldest company in medtech, solving the most meaningful health care challenges. I notice that we're not talking about orthopedics, noticed that we use the word medtech very intentionally. Today, we have an Orthopedic business. We have a craniomaxillofacial thoracic business. We have a surgical business, and we want to solve problems in those areas. But we have the optionality of diversifying. And when we do, we'll make sure that we have a pathway to solve problems in a way that others cannot. What strategy we have, I call it a purpose-powered strategy. It is the mission and the vision of the company that dictate the strategy organization. We want to be a customer-centric solutions leader. We always start with the customer, the patient, the physician, the provider and the [ paper ]. We identify those problems, and 3 that we're focusing on today: safety, efficiency, best-in-class outcomes. We focus on those problems. And unlike our competitors, we solve those problems in different sites of care. We're going to repeat this over the number today and down the road, but it's important for you to realize that when it comes to the strategy, we're very focused in terms of the problems that we solve and how we solve those problems. This dictates how we do R&D, this dictates how we allocate resources globally for Zimmer Biomet. This slide is about the who. Who are we? And hopefully, by now, everybody knows us, but if you don't know us, 5 data points that you can read better that I can pronounce. We've been around for 100 years. We're a Fortune 500 company. One data point there that I don't really love is the sales in 100 countries. And that's something that we are reconfiguring it. We don't want to be mediocre in 100-plus countries. We want to be best-in-class in solving customer problems in those countries that make a difference and others may take over the other countries. Now don't read into my statement thinking we're going to exit a bunch of countries tomorrow. But we are going to treat different countries differently. 15 countries account for 93% of the $50 billion orthopedic market. And we've got to be the greatest when it comes to those countries. And the other markets will figure out different ways to treat our customers, the patients or exit those markets. In the background, we've been doing a lot of that stuff. Every single data point you here today already reflects the reality that we're not going to be in all the countries where we've been before. With the $7.4 billion in 2023, and our guidance for 2024 is 5% to 6% growth. All right. These 2 slides, I'm going to take my time because it answers the one of the most frequent questions that I get from investors ever since we gave guidance at the very beginning of 2024. Why should I believe you? Why should I believe you, you're telling me that you're going to grow 5% to 6% in 2024. Why should I believe you, you've never done it before. First of all, that's inaccurate. That's inaccurate. We did that growth 10% in 2021. But some of you think, well, that's the COVID comps. And you're right. We did grow 6.5% in 2022. Some of you probably think partially backlog, partially still comps. And we did deliver 7.5% top line growth constant currency in 2023 with a nice 200 basis points of EPS expansion of 9.5% in 2023. But it's still some of you think, well, that's not a normalized environment. So first of all, it's not true, that would not deliver mid-single-digit growth or above, but maybe the environment wasn't that normal. Well, let me give you a set of reasons of why we're confident that we can be a mid-single-digit grower sustainably over the long range plan. And again, I'm going to break every rule of public speaking by reading every data point in that slide. Let's start with the upper right corner. That is the book of business at Zimmer Biomet in 2018. So there, you can see that 59% of our business was in recon Knees and Hips. Now as I stated earlier, that's not the same recon market that we have today. Why not? In 2018, Zimmer Biomet, we have a robot, they have a radiation platform, we didn't have surgical impactors, we didn't have navigation, anti-infective, I can go on and on. So that 59% is us competing in bare metal and plastic devices, 59%. 22% in 2018 was SET, but it was a bunch of stuff. We're treating all businesses within SET equally. We're not making choices, which we're making today. Nonetheless, 22% was there. 15% was Dental and Spine, very low growth markets, no right to win. We obviously divested that a couple of years ago. And then you have Other. And at some point, we've got to come out with a different terminology for Other because it sounds like it's not important. In 2018, it wasn't. It was bone cement, there was some surgical products. There were some leftover stuff, if you will. In 2024, when you see our double-digit growth in other, think robotics because that's the main source of growth in the category of Other. So that's the book of business, the mix in 2018. Now going box-by-box. In 2018, we're #1 in Hips and Knees globally and here in the U.S., but we're losing market share. From 2015 through 2018, we lost a ton of market share. Why? We missed the boat on robotics. We missed the boat on cementless. In 2018, we launched 8 new products. I've been in this business for 30 years. The one thing that drives winning is having innovation that is indispensable for your customers. And launching 8 products is not the way to be labeled an innovative company. Why did we launch only 8 products? We have all kinds of quality issues. We had FDA remediation. We had to shut down a couple of factories from an innovation standpoint, we can talk about that later. Our vitality index, that is the percentage of gross sales coming from new products was the lowest of the low, somewhere in the low single digit. 3-year pipeline, new product introductions, low single digit. Our supply chain, a disaster. A disaster. We had 3 to 4 days of sales on back order. So what does that mean? We do $40 million, $50 million per day in sales when you put all the entities together. On average, we are carrying 3 days of sales, $150 million in back order, if not $200 million at some point. Now it's not just that you have the back order and you lose the sales. You lose customers along the way. And we've got a few of them here that can tell you that in 2018, we're not a trusted partner. Remediation, 3, at one point 4, FDA warning letters. When you have the FDA at home, giving you warning letters, you're spending a lot of money, a lot of time doing remediation, you're not launching innovation, and that's directly correlated to the lack of innovation that we had. We also had a Department of Justice monitorship. That's no joke. I've only worked at one company where you had a monitor from the Department of Justice, monitoring everything that we did commercially. Do we do medical education the right way? Are we moving in the right direction when it comes to how we engage development agreements? Are we doing things properly in those different areas? And that obviously created a situation we had to shut down a lot of things that we're doing. Rightly, many of them. Others, you will argue that we're doing the same as our competitors. Nonetheless, that took a lot of time, that took a lot of effort. 3% WAMGR, we already spoke about that. $9 billion in total debt. We did obviously the acquisition of Biomet, close to $14 billion that closed in June of 2015. So our capital allocation strategy was about paying down debt, and this, by the way, is before COVID. And then I'm sure that you're not surprised about the very last box. People were not happy here at Zimmer Biomet. How can you be? When every day you're showing up to work, if you were doing sales, you don't have products. Literally, you don't have products -- new products or the products that you need to bring in for your customers. How can you be happy when 3/4 of your time is about remediating problems? We're losing north of 20% in the U.S. sales organization. We're losing people in double-digit rates, our attrition was very high, and our engagement was very low. As I promised, I read every single number on that slide because it's important for you to reflect on where do we come from. Now fast forward to today, May 29, 2024, we still are the #1 company in both Hips and Knees. And yes, in the U.S., we've given market share in the area of Hips. We stayed afloat in Knees, launched ROSA in 2019, caught up with first-generation cementless 3, 4 years ago. We have now a best-in-class cementless platform with Persona OsseoTi that is growing far above our expectations. We remain the #1 company Hips and Knees, and we are consistently performing above market. Some hiccups quarter-to-quarter, but consistent above market. We've gone from launching 8 products in 2018 to close to 30 in the year 2024. And this is not just the quantities, the quality of the products. These are products that are shaping the standard of care, as I mentioned earlier. Our vitality index is now in the teens, and we have an aspiration to get into the 20% range. Again, the percentage of sales coming -- gross sales coming from new products is now a category leader, sector leader. Along with vitality Index is a box that we don't put in there that we call the innovation profitability index, which is the gross margin dollars coming from new products. And 90% of the time, this is an accretive figure to sales to revenue. In plain English, our gross margin dollars for new products are accretive to the existing baseline. Supply chain, less than 1 day in supply issues, no warning letters, we're a trusted partner to the FDA. I'm in and out of Baltimore, the DC area. And I can tell you that when [ Admiral Peat ] talks Zimmer Biomet, she is talking about Zimmer Biomet in the context of you guys do the right thing for the patient each and every day, keep doing what you're doing. Our WAMGR has moved up 50 basis points because of the divestiture of Dental and Spine and 50 basis points accretion because of the organic work we've done around getting to the high growth records that I mentioned. Kudos to finance for bringing the debt profile down to best-in-class. We have investor ratings BBB. Our net debt-to-EBITDA ratio today is 2.2%. We paid debt down at a very healthy pace. Given the free flow generation of this business, again, Suky will talk about that, we're in a position we haven't been in a while to be able to do a smart M&A that continues to move the WAMGR, to rethink about how we reallocate cash to shareholders, and again, Suky will talk about that, but that's best-in-class. And today, our engagement rates are comparable, if not better, to anything that I've seen in any of the world's best leading companies, best led companies. Low single-digit attrition rate, 80% engagement scores, the highest engagement scores in the history of the company. I close with the upper right again, our book of business today is 60% Knee or Hip, but this is not bare metal and plastic knees and hips. Our SET, 24%. So that's 200 basis points more than in 2018 is in the right categories. Sports medicine, upper extremities, CMFT, craniomaxillofacial thoracic. And then our Other category is primarily ROSA, which obviously is a platform that will deliver growth in knees, hips and now shoulders. All right. So I just wanted to go slowly here to validate the first statement that I made. Better markets, stronger company. This data will suggest that the next time you ask me a question, have you never done it before, we should probably think forward-looking or present-looking versus 2015 through 2024. Innovation is the competitive advantage of Zimmer Biomet. Customer-centric innovation is the competitive advantage of Zimmer Biomet. We moved from catching up with our peers to now leading shape and where innovation is going. To the right of the slide, you see the 3 principles of how we do innovation. You've got to have the right quantity, that's the fuller pipeline, has to be the right quality, customer-centric, anchoring the products we're trying to solve. Safety, people will die. People will die after a hip or knee surgery, it is an infection. That's one problem we are solving. It's mission-centric, and it's also very expensive, $3 billion or above here in the U.S. Infection rates remain low in the 1% range. But when it happens, it's a big problem. Zimmer Biomet is committed to being the company that eliminates infection from orthopedic surgeries and other areas. Efficiency, surgeons are getting busier and busier and busier. They don't have the luxury of spending an hour, 1.5 hours, 2 hours doing a new procedure. You're going to hear today from Dr. Charlie DeCook on how he thinks about best-in-class outcomes while remaining inefficient. Zimmer Biomet through a combination of technology, best-in-class surgical techniques and best-in-class leading products will be the trusted partner in driving efficiency in an operating room and across the entire episode of care. Word #10, people. We want patients to get back to being people. That means reducing the episode of care. How do we prepare patients for surgeries? How do we do the surgery? How do we make sure that physical therapy is not what it used to be? And then the third problem we are trying to solve in this [ target ] innovation environment is outcomes. 100 years in doing this, you still have high dissatisfaction rates in some categories. 1 of every 5 patients is dissatisfied with her or his knee procedure. We have a moral obligation to be the company, as the world-leading orthopedics, to make sure that we reach as close as possible, if not 100%. And as we have the quantity and the quality, we got to make sure we're efficient. We've not done our homework in this regard. At one point, too much quantity, inefficient or ROIC in R&D was not where we need to be. Today it's less projects, at the right efficiency, deliver on those solutions. We need to do search and development instead of research and development, we'll do that. So these are the 3 guiding principles of how we do R&D innovation here. And then you can read through the stats there. and you'll see more of that later. The past '18 through '23, we launched 60 new products. I call that the catching up with the neighbors. And the future, the next 3 years is the leaving the neighbors behind. We will launch 50 meaningful products between today and the end of the long-range plan. And as I alluded to, these are new to the world. We are the only company with a smart knee technology that we can amplify in other areas. We will be, early 2025, we'll be the only company in the U.S. with a PMA-approved partial cementless knee, that's Oxford, which has been in Europe for 10 years and commenced a 60% market share. We're going to lead in anti-infection. 2 different compounds, whether it's iodine, whether it's gold, silver, palladium, we would be the company in partnership with our customers that solves infection challenges. And again, you can read all the other stuff. We'll talk about it later. This are new-to-the-world products that will change how Zimmer Biomet does business around the world. Customer-centric innovation. The first thing I had in my opening remarks, number one, better markets, better company. Number two, innovation as the competitive advantage. The third point is that this is a focused company. Right customer, right market, right business segments, right activities each and every day. And from day 1, that's August 2023, as the new CEO, I've been talking about these 3 strategic imperatives: people and culture, operational excellence, diversification and innovation, and those are not going to change. In there, our people and culture, it's about having the right people in the right job within the right culture. Notice that don't use the word -- we don't use the word best. Sometimes very talented people can [ not wait ] here at Zimmer Biomet. It is a unique company. It is a company. It's a company where we like to move fast. We try to eliminate bureaucracy. We like to stay close to the customer. I travel 220 days a year, many of those days are in front of customers. This is a company where we require people to take things to the next level. And we got a few employees here, maybe over a drink later on tonight, ask them the question, what is it like to work at Zimmer Biomet? You better be customer-centric, you better want to move in a bold, agile, insightful, proactive and collaborative fashion. We believe it's a competitive advantage. And when we get the right people, our engagement score is high. We pay people for the same things. And I know it sounds like a very simple concept. That was now how we run the company back in the '18, '19, '20, '21, even '22 period. Some country managers, general managers around the world, they know how to spell free cash flow. Some of them didn't know how free cash flow will get generated. From a commercial standpoint, we're not paying people on quarterly growth. It was by the year. I can tell you sitting here today, we changed the incentive plan for the company so that all the commitments, all the goals that we're stating today get shared across the 18,000 employees of the company. And then lastly, we want to have leaders here at Zimmer Biomet that lead from the front. It's all about protecting the company, acting with integrity. So we don't go back to the day when we had challenges. It's about protecting the company, doing the right thing first, leading from the front. Everybody talks about people and culture. You guys go through a lot of Investor Days. I can tell you, people and culture is another key competitive advantage of Zimmer Biomet. And when you put great people and great products together, things happen. Operational excellence is not a Six Sigma complex strategy that we are going on. It really is about thinking as an operator, thinking as an owner of the business. I started my career, as I mentioned earlier, as the CEO of a small startup. And the one thing that I learned when I was running that company is time, money and people matter. And you, as the CEO of the company, better be thinking each and every day, where you locate your time, where you locate your capital and where do you deploy your people. And every single conversation we have as a management team today is about how do we allocate time, money and people to deliver revenue mid-single digit or above. EPS growth, I want to have leverage. So if at the midpoint, we're growing 5%, that EPS is better be growing 7.5% and free cash flow that needs to deliver growth of at least 100 basis points above EPS growth. So again, using this example, you're delivering 7.5%, you better be growing your free cash flow by at least 8.5%. That's every conversation. We break it down on what we need to do on the revenue line, on the EPS line and then the free cash flow line. Two things that we are laser focused on when it comes to revenue, new product launches. We're going to be launching 50, 60 new products. We better do it right. And in the past, we've done a lot of product releases, but very few product launches. On day 1, customers need to be trained. Obviously, employees need to be trained. On day 1, we have to have the right quantity of sets. On day 1, we have to have clinical evidence. On day 1, we have to be really ready to gain market share. It's about having bold product launches. Second thing we need to do on the revenue line is making sure that we have best-in-class commercial execution. In the U.S., we changed 2/3 of our general managers. We changed a large portion of the GMs in Asia Pacific, Europe, Middle East and Africa. We're making sure that we have the best people, the right people, rather, running these entities. People that know how to lead, people that know how to manage, people that think like investors. That's commercial execution. On EPS, about gross margin, and Suky's going to go into a lot of details here. But we got to continue the trend that we have with pricing. We're not going back to the old days of losing 200, 300, sometimes 400 basis points of price erosion. This year, we're committed already to -- it's a 100 basis points. We've got to make those trends sustainable. It's about excess and obsolescence. Cannot have write-offs of inventory at a rate of $100 million plus, at one point in '18, $0.25 billion. We have to make sure that we think about mix, geographic mix, going to be in 100 countries, product mix, customer mix. We need to think about COGS, we cannot run a company where every year our manufacturing cost is going up. And I love the work that Suky is doing in that regard. The focus strategy he has, how we think about site manufacturing optimization, how we think about artificial intelligence and other areas. We're going to be much better when it comes to OpEx. In business for 100 years, our OpEx today is 42.6%. That is not where it belongs. And we've done some things around business services, we've done some things around the P&L, but Suky calls it a rich target environment, and there are things that we can continue to do in our OpEx line without compromising the quality of the products that we deliver to you, the customer. And then free cash flow is about inventory management. You cannot run a company with 400-plus days a hand of inventory days on hand. So again, every single leader here at Zimmer Biomet is thinking revenue, EPS, free cash flow. And the 2 things we got to do on the revenue line, the 2 things we've got to do in the EPS line. And the one thing we got to do to make sure that we continue to increase our free cash flow conversion rates, and we continue to do the things that we need to do to deploy the capital to the right constituents in the right fashion. And the last thing, and I'm almost done sith my presentation here is innovation and diversification. It's exciting that we move from 3% WAMGR to 4%, but I don't want to be trading bullets in lower growth markets. We have an ambition to get the number to 5%. And there are organic and inorganic ways to get there and Rachel will talk about those. We're going to continue to innovate the right quantity and the right quality, always in partnership with our customers. So again, the focus on people and culture, operational excellence, revenue, EPS, free cash flow and then innovation and diversification. My last slide, I believe, based on all of the above today, we're presenting an expectation over the next 3 years to deliver revenue at mid-single-digit growth rates. So that's 4% to 6%. Second expectation is that our EPS growth is going to have a leverage of 1.5x. So again, I used the example at midpoint 5%, that's 7.5% point of entry on EPS growth. And then free cash flow, growing 100 basis points faster than EPS, so the 8.5% that I mentioned earlier. Suky will break down free cash flow strategy, how we go from being somewhere in the mid-60s when it comes to free cash flow conversion to a much healthier number. And again, what are we going to do with that cash that we're projecting, $4 billion to $5 billion over the long-range plan. We're very confident this is realizable because it's a different company. Better markets, stronger company, very well run. Innovation as a competitive advantage. And then lastly, a pathway to make sure that we're delivering on financial commitments create an optionality to allocate the capital in a different way. Today, you're going to hear from 5 of my direct reports, Rachel, Suky, Dr. Goyal, Jim and Nnamdi, 2 key takeaways from this slide. Key category #1, combined, is about 155 years of medtech expertise. And then key takeaway #2, undeniably, Rachel and I have the best hair in the leadership team. So you may challenge some other facts from my presentation. But Rachel, you and I have the absolute best hair. Speaking of Rachel, it's my privilege to introduce our Chief Administrative Officer, long title. She's doing amazing things for the company, privileged to work with you, Rachel. Thank you.

Thanks very much. And I am very excited to be here to talk to you about active portfolio management. They don't always let me have an opportunity to talk about that with audiences like this. So I'm extremely excited. But I do want to start with the fact that I think there's a lot of people in here, I know, some familiar faces, but definitely not everybody. So I want to talk a little bit about my background. I, similar to Ivan, I spent most of my time or the vast majority in health care and then inside of that medical technology. But a little bit differently, I spent the first 15 years as an investment banker serving clients in those areas. After I left investment banking, 15 years in, I did move over to work with one of my clients, AJ Medical, small, new public company at the time. And I was there until they were acquired by St. Jude Medical, stayed with St. Jude Medical for 7 years leading a number of different functions and then stayed there through the acquisition of St. Jude Medical by Abbott, where I ran that integration into Abbott. And then following that, after those 7 years, joined Zimmer Biomet. I joined Zimmer Biomet because I was really excited about the opportunity to help accelerate the growth, by the opportunity to reshape the portfolio, because a big part of how we were going to accelerate growth was around reshaping the portfolio. In addition, I had the opportunity to really build an entirely new strategy and business development team who didn't have a dedicated function at Zimmer Biomet before I joined. So fast forward 6 years, I've been there now 6 years, and I'm incredibly proud of the work we've done, but very excited about where we go from here. So again, starting with the end, if you listen to nothing else or you remember nothing else I say, I'm really hoping that you remember these key takeaways. Active portfolio management has increased our weighted average market growth rate, WAMGR, as we call it. We're in a really good financial position right now. And with that position, we have financial flexibility to continue to do M&A, both tuck-in M&A as well as what we'll talk about a little bit, we call it midsize M&A. I'll talk more about that. And then we are committed to continuing to do M&A, value-creating, smart M&A, we know that it's very, very important for us to be good stewards of our capital. So with that, I'm going to talk a little bit about active portfolio management. But before I do, I just -- we use this acronym WAMGR a lot in Zimmer Biomet. It is a very key measure for us in terms of how we [ measure ] our progress. So I want to make sure everyone knows what that is. So weighted average market growth rate is really just taking the growth rates of the markets that we play in and weighting it by our revenue. And the reason we care about that is because we know that the more revenue we have in higher-growth markets, the easier it is to sustainably increase our revenue growth, just a really key need for you to understand that. So let's talk about where we've been. Active portfolio management, as Ivan said, has increased our WAMGR from 3% to 4%. And about half of that actually came from tuck-in M&A and divestitures. Maybe 100 basis points doesn't sound like a lot of people, you might get this in the room. But for a company of our size, that's a pretty big move in 5 years and is something we feel really good about. Start with the tuck-in M&A. You see some logos up here. We've actually acquired a number of companies over the last 5 years. They've generally all been in larger growth markets, right? So again, if you think about trying to increase your WAMGR, we're very focused on high-growth markets. So you can see we've been successful there. But what I would want to point out because this is probably some of the stuff you don't see, is that we've been very, very focused on building integration capabilities inside of Zimmer Biomet. So we've gotten very good at identifying targets, and we've gotten very good at integrating targets. We have an integration management office that's dedicated to all of our acquisitions. We have playbooks. We have training. We've done -- and I think the proof point of all of that, so we've built these capabilities, but I can say that to you, doesn't necessarily mean you should believe me. But what we have -- we can say is that with all of the tuck-in deals we've done, we're actually above our expectations, our initial deal model in terms of top and bottom line. So that should give you some confidence in the integration abilities that we have built as well as our ability to find the right targets. So that's tuck-in M&A. Divestitures, I think people here are aware, we did exit our lower growth, lower margin Spine and Dental businesses through the spin-off of ZimVie. Another example, by the way, not integration but separation, ran a separation management office. And again, I think a very successful transaction for us in that regard. We initially -- when we told you, The Street, we were announcing this deal, we said it would deliver about 50 basis points of revenue growth and about 125 basis points of operating profit margin and increase. And in fact, we've over-delivered on both of those metrics. So again, my takeaway here, not only are we doing the right portfolio management moves, we're doing them quite well. So now maybe a slightly different approach, and I want to talk about something else that you probably don't get a chance to often see because this is a smaller area of our business. But I want to give you a case example about how we're increasing our WAMGR within our SET portfolio. And I'm going to focus on a business, you probably don't really think about that much when you think about us. It's pretty small, but it has been an area of focus for us, and that's our CMFT business. So you can see here that CMFT actually has 3 categories inside of it. We've got the craniomaxillofacial component. We actually have ROSA ONE robotics, which is our focus on neuro and with a specific focus on epilepsy. And then we have this business in thoracic and some people will ask me, why are you in the thoracic business? Well, the way we got into that was actually leveraging products and technologies that we had inside of Orthopedics and actually then realizing we could use them for chest wall stabilization. So actually taking over -- taking advantage of some of the synergies that we could get from a technology perspective. As that started, the team continued to do more work and realized, wow, there's really a credible opportunity to change the standard of care and build new markets inside of thoracic, sternal closure and rib repair. And you can see here through that work, we've actually gotten market leadership positions. But from my perspective, it's a great example of how we find opportunities, higher growth opportunities inside of our SET portfolio, and then we invest in them. We invest in them organically and inorganically. So here, what you can see the outcome of all of that is that we've actually doubled the size of this business, again, smaller, but inside of ZB doubled the size and increased the growth rate. It was a mid-single-digit growth rate business and now is actually over 20% growth. And it's gotten to the point where it's actually impacting the overall Zimmer Biomet enterprise WAMGR, right, which is really incredible. But you could see that of that 100 basis points increase, over 10% of that came from this business. So again, I think a really great example of how we can continue to find businesses inside of our SET portfolio and really build them and continue to increase our WAMGR. So that's kind of where we've been. Now I'm going to talk about where we are today for a brief minute because I know Suky's going to spend more time on this, and Ivan talked about it a little bit, but we're in a really good financial position, right? We have paid down over $2 billion of debt, and we have very strong free cash flow. And that combination gives us meaningful M&A firepower with which we can execute tuck-in M&A, and we can actually start to do something even bigger. And when I talk about this, I just -- I'm going to frame it out a little bit more, but I want to make sure you know that we know when we talk about M&A, we talk about smart M&A, right? I like to talk about it as the right target, right time, right value. Really important that -- to us that you understand -- that you understand that we know that this is critically important. So let's talk about what we call midsize M&A. And I'm going to start with the fact that we talk about it as midsize. I think that's not really a known term. But we were asked by a lot of investors, when you talk about larger M&A, what do you mean? About how big would a deal be? And so we said we've sized that at about $2 billion of transaction value. So midsize M&A, when I talk about it, that think about $2 billion of transaction value. So what are some of the other financial criteria that you're interested in is another question we get. We know that revenue growth continues to be highly correlated to driving total shareholder returns. In fact, that's why we're talking so much about WAMGR, right? We're very focused on revenue growth. And so anything, of course, would be immediately accretive to revenue growth. After that, we do know that to do that, we might need to take some dilution, but what we have very clear as a goal is that we're willing to take it for a small period of time, and certainly, by the end of the second year, we would expect that to be at least neutral. And then, obviously, ROIC is a very important metric for us, and we would expect to be high single digits by year 5. So that's on the financial side of the criteria. Now let's talk about strategically. So strategically, shouldn't be a surprise. We've talked about the attractive higher-growth areas inside of our SET portfolio, that's where we would think about a midsize deal. So think extremities, sports med, and as I just shared with you, our CMFT business. In addition, probably also no surprise to this room, the ASC area is something that we spend a lot of time thinking about strategically and road mapping and thinking about different ways to accelerate our exposure there. So that would be another area that we look in. Other key considerations, probably not a surprise, but worth reiterating, path to category leadership, differentiated, protected technology. And what I mean by that is IP or other competitive barriers, align to our strategy around safety, efficiency and outcomes. That's obviously important, and then ability to integrate. I actually think this is a bit of a competitive advantage for us at this point. We've done such a great job of building our capabilities that we can now look at potential deals through that lens. So, coming to my conclusion here at the end. Ivan already shared with you our aspirational goal of 5%. But what I'm excited about is that we've already delivered on incredible proof points to get us from here to there. So we've increased our WAMGR by 100 basis points, half of which from tuck-in and divestitures, and we have a very clear path to continue to shift our portfolio, and we are -- I am personally very excited about the ambitious goal of 5%. So with that, I'm going to turn it back over to Ivan.

All right. I was able to drink 2 diet Cokes in 9 minutes. So if you thought that I was speaking fast earlier, watch out now. Maybe we need to put like subtitles here now, Keri, so people can keep track here. All right. The next 10, 15 slides have a lot of data, and I'm going to try to go quickly, you're going to get a copy of the presentation, but we're going to break down markets, categories, growth expectations and whatnot. But I'll do this somewhat quickly. 3 key takeaways, we operate in compelling markets, right? We spoke about the 4% WAMGR, but within the 4%, orthopedics, higher-growth segments, in SET -- let me slow down, in the right categories, so company markets with an ambition to move from 4% to 5%. The second key takeaway is that we are going to be growing above market. We are going to be growing above market. A combination of gaining share, we lost some share in Hips, we're going to talk about what we're going to do about that. Continue to increase our leading position in both Hips and Knees through different ways, but market share is one of them. Share of wallet, how do we get more revenue from existing cases, which, again, is a play that we couldn't do in the past when we didn't have cementless, we didn't have robotics. So different ways to grow above market, direct to patient. We're launching some very targeted direct-to-patient engagement campaigns, multiple millions of patients in the sidelines. So we'll talk about those as well. And then the third key takeaway is that we need to continue to diversify into higher growth segments. So those are your 3 key takeaways. A bit of a boring slide, but I think by now, everybody gets it. This is a different market, patient demographics, every day here in the U.S., 12,000 people will turn 65 years of age. So that's one data point that we repeated a few times, 11,000 to 12,000 people per day turn 65 in the U.S. Patients are getting more active. I didn't quite realize when I was asked to sponsor pickleball in the U.S., that would be such a huge deal, the fastest-growing sport in the U.S. and many of these players are 65 or above. That obviously creates a situation where the injury rate in the category or in the age group of 65 or above is exponentially higher. Data point that already there's a higher than 23% growth in injuries in that segment. Site of care, we're going to talk about this migration in the U.S. into the ASC, pick any number. Pick any number. Working with McKinsey, data suggests 40% to 60% of cases moving to an ASC. Other data points that we read is around the ASC space, which is already close to $10 billion, is going to grow another $2 billion. Pick any number, the truth is nobody really knows, but a lot of cases are moving to ASC. We have a very, very competitive strategy in that space. And then pricing. Pricing when I joined this company in 2018, it was 300 to 400 basis points of price erosion in the U.S., globally 200 to 300. We've seen some quarters where price was neutral. This year, our expectation is to be below 100 basis points. We don't think we're going backwards because you have innovation, because customers are understanding that the way to save money is not just negotiating on the implant, but rather thinking of the entire episode of care. So we don't believe that we're going to see these markets going back to 200 to 300 basis points of price erosion. If we had more real estate on this slide, I would have added a fifth column, which is technology and innovation. One of the drivers of this market is the disruptive innovation and technology that all of us have brought to orthopedics. And I when I say all of us, I'm talking Stryker, Smith & Nephew, my friends at Johnson & Johnson and obviously us here at Zimmer Biomet. The innovation disruption, you've seen today in orthopedics is analogous to what I saw in 2002, 2003 when I was in cardio. [ Drug-coated ] stents, drug-coated balloons, atherectomy. I mean every 6 months there was something new. And then all this innovation on this technology meant that a lot of patients were more willing to go see their cardiologists. We've seen that level of disruption here in orthopedics. Not a hyperbolic statement to say that we're at the forefront of disruptive innovation in this space. And I love the fact that all of us are doing it. It's better for the patient. More patients will come into the funnel. All right. So these are the numbers. So we think, reading from left to right, Knees globally, is about $10 billion. Hips is $8.5 billion, Upper Extremities and Sports is $10 billion, and craneomaxillofacial and thoracic is $5 billion. So the market overall is $50 billion. But in these categories right there, you got a chunk of that market, so north of $30 billion right there, $33.5 billion. We're #1 in Knees and Hips. I won't get tired of saying that. We're #1 in Hips and Knees. We're #2 in Shoulder, used to be #1. And obviously, the merger of Wright -- or the acquisition of Wright Medical by Stryker, put them as #1. And then in the categories of thoracic that are the fastest growing and the most mission-centric if you ask me, we're #1, #2 within CMFT, that's sternal closure and rib trauma. We believe the market in Knees is growing 3% to 5%, some of you may think of that being conservative. But again, given the volatility you've seen, 3.5% (sic) [ 3% to 5% ] is the right range when you think about growth in Knees. And again, some categories in Knees are growing faster than that. Hips is 2% to 4%, Upper Extremities and Sports is mid to low upper single digit and then CMFT, 5% to 7% growth. And again, these are compounded average growth rates over the next 3 years. So those are the markets. That's the external photo. This is how we think about our portfolio here at Zimmer Biomet. And it's very simple, and you can quiz the salespeople later in the product demo, everybody remembers this model, we call it a 3D model. It's patented by Ivan Tornos, don't try to steal it. It's drive recon above market, defend the core and diversify into high-growth spaces. Drive above market, 68% and 69% of our book of business is in recon in the right categories of recon, at the right price, solution selling, we need to be growing above market. That's Knees and Hips. Diversify means reallocate -- continue to reallocate time, money and people to the higher growth categories within SET, those being Sports Medicine, Upper Extremities, and craniomaxillofacial thoracic. By the way, this last one, we got to do a better job in telling you what we do in this business. Most of you don't realize that we have 300 sales reps calling on cardiac surgery. Until probably 10 minutes ago, most of you didn't realize the great work we've done around acquisitions in this space and the scalability of this platform. So really, really excited about CMFT. And then defend other businesses. At some point, we'll come up with a better terminal than Other, but for now, Other. That's a lot of potential, there's a lot of revenue in those 4 categories. We don't treat them the same. So you got trauma for an ankle surgical and restorative therapies, those are the [indiscernible] injections. We don't treat them the same. I'll focus on that later. But again, drive recon above market, diversifying to high-growth spaces, defend the core, and we do that in different sites of care. Let's go back to Knees and the breakdown of the $10 billion market. Partials are growing upper single digit. We are a market leader, if not the market leader in partial knees, for sure in EMEA and still here in the U.S. Those procedures are going to continue to grow at a pretty healthy pace considering the shift into [ AFT ], so excited about Oxford Partial cementless. Primary grows mid-single digit and then Revision grows upper single digit. We launched in late 2019 Persona Revision as a product that commands an ASP of around $20,000, $21,000, growing upper single digit category. We've got other exciting technology innovation coming in that area. So Revision by all means, given infection rates, continues to be a focus area within Knees. In the lower part of the slide, you have the Hip category, Partial is about $1 billion, growing somewhere in the 2% to 4%. Primary also 2% to 4%% and the Revision in the mid- to upper single-digit growth rate. So again, $8.5 billion in Hips growing 2% to 4%. So how are we going to continue to lead in Knees? The way to read this slide, very busy, is start with the right. That is our expectation, goal, ambition. We will deliver growth that is 100 to 150 basis points above market. How we're going to do that? 3 drivers. Number 1 is new product introductions. Number 2 is set of wallet. And number 3 is direct to patient. On the new product introductions, Persona OsseoTi, early innings. And again, I'm not a baseball fan, so don't ask me which inning, but really early in the journey when it comes to adoption rates. We're converting accounts, we are transitioning cement users to cementless through Persona OsseoTi. So just a great product. Oxford Cementless Partial Knee, at some point in early 2025, the [ probably ] market, and we remain committed to smart technology Persona IQ. Value proposition is ready. We got the 510(k) for the study configuration approved. So we are at a point where we can run at a faster pace when it comes to smart technology. We'll continue to invest in Vision. And yes, we're going to continue to look for robotic categories or robotic knee categories or platforms that can deliver a better solution. Committed to ROSA and looking at other optionality. Share of wallet is about driving more revenue from existing procedures. And we're making -- well we're stating 2 goals right there in that slide. Number 1 is that Zimmer Biomet via Persona OsseoTi will exceed the long-range plan with a cementless knee penetration of at least 50%. You can read it right there, we're going to go from somewhere near 20% cementless penetration, and this is U.S., to 50% -- at least 50% over the life of the long-range plan. Why is this a compelling data point? We're gaining anywhere between 10% to 15% uplift in ASP every time we move into cementless knees. And the second share of wallet play that everybody is laser focused upon, we're going to drive our penetration of robotics somewhere in the upper teens to twice that rate by the time we exit 2027. So again, new product launches that are very meaningful by getting more revenue from existing [ players ], with 2 commitments right here on that slide. And then the third strategy or driver of our growth is direct to patient. 0.5 billion people around the world suffer from some form of osteoarthritis, 32.5 million right here in the U.S. Not every single one of these patients obviously needs a knee or a hip implant, but many could benefit from that. So we're going to continue to do the targeted DTP. We'll be announcing some things at some point. And that's another strategy to drive 100 to 150 basis points of growth above market. That's our Knee strategy as part of our drive focus. In Hips, I was very honest earlier. This is one area where we lost -- what are you going to call it? We lost rates at one point. We lost market share in the U.S. We're late in some innovation categories, and I've been saying for a while that 3 products were needed for us to get back to growing in Hips and remain #1. Those 3 products are already in the selling back -- sales back. A surgical impactor, we call it the HAMMR. You're going to see it today, which can compete with Johnson & Johnson, and I leave it to the folks in the product demo to tell you all about it, but it drives efficiency. It's got gradual force. It's a more innovative solution to drive efficiency and accuracy in the operating room. That product is already in market as of 6 weeks ago, and we love what we're seeing with HAMMR. The second product that we needed was a triple taper stem. This is a product in the direct [ interior ] category, which is about 40% to 50% of our cases in the U.S. Again, we could not compete with the likes of Johnson & Johnson and Stryker. That product is FDA approved. And at some point, late summer, early Q4, we're going to be moving at a different pace when it comes to this one. And then the third product gap that we have was intelligent or smart navigation. We brought 2 solutions to market, ROSA Hip and by a partnership with HipInsight, we're the only company in the U.S. that is FDA approved for hip navigation use mixed reality with Microsoft HoloLens. So again, you'll see this product later. So those 3 products, surgical impactors, triple taper stems and smart navigation, remediate the portfolio gaps that we had, we are back to growth, and I'm excited because it's been a while since we had such a portfolio. Learning from the mistakes of the past, not being competitive-centric, but being customer-centric, our ambition is to lead when it comes to next-generation revision devices and next-generation anti-infection coatings. That's iodine and that's other areas. And again, committed to continue to improve and innovate around ROSA and look at other optionalities. On the share of wallet, we're going to get more revenue in existing cases through technology and revision cases. Upper Extremities is $2.5 billion. CAGR growth over the next 3 years is 5% to 7%. Sports Medicine, we're #2 in the category and Sports Medicine is $7.5 billion, growing 4% to 5%, and those cases continue to migrate into the ASC. Same format, you start from the right of the slide. We're committing to growing 200 to 400 basis points above market, revenue-wise. I'm going to do that through 3 different levels. Number 1 is new product introductions. And in the case of shoulder, I can tell you that these are really changing the standard of care, think ROSA Shoulder, think proprietary technology around stemless shoulders, OsseoFit. Think Identity, which is a product that gives you the optionality of doing inlay and only surgeries, fully customizable. These are not me-too product launches. These are product launches that are going to guide where the market is going. And then in Sports Medicine, we got through the Embody acquisition, a couple of disruptive technologies that are, again, in soft tissue repair are going to provide a solution that we didn't have in the market. Continue to gain revenue from existing procedures. ROSA Shoulder carries a 10% to 15% uplift in ASP when we do those cases robotically. And then Signature ONE, we've been doing navigation software, guiding, planning technology for a while. Today, 50% of the shoulders that we do in the U.S. are using some sort of navigation, which carries more revenue per procedure. We have a fully dedicated sales force. We continue to add people to Sports Med and to our Upper Extremities business. So we are confident that the combination of bold new product introductions, share of wallet plays and dedicated specialized people will yield growth of 200 to 400 basis points above market for Zimmer Biomet. In our CMFT business, we focus on those 2 areas, sternal closure and rib trauma. 5% to 7% compounded growth rate, and again, thoracic is less than $1 billion, but growing upper single digits, if not low double digit. This is a very exciting business and where we're shaping how cases are done. We're moving to a more minimal invasive [indiscernible] technique with our standalone portfolio. You're don't have to have a bunch of [ medical staff ]. It's a much easier closure device after open heart surgery. And because we are innovative, because we have clinical data, we carry an ASP premium when we do cases with SternaLock. We literally are building the rib trauma market with the portfolio that we have in there. And as I mentioned earlier, we have close to 300 dedicated sales reps that each and every day is just thinking CMFT and the key areas of CMFT. We're confident we can deliver 300 to 400 basis points above market. Other business, $18.5 billion when you add trauma, foot and ankle, surgical, restorative therapies, all kinds of gadgets, all kinds of products, all kinds of things in those 4 categories. We're focusing on the things where we have the right to compete, if not the right to win. In trauma it's mechanical stability, it's biologics, it's enabling technologies. Within foot and ankle, it's biologics and some types of fractures. When you look at surgical, we like the portfolio that can give us a point of entry into the ASC. We like the power tools that we have. We love the launch that we're doing this year around helmets and PPA. So we focus on those areas, and we still have a market-leading HA injection that is going through some challenges here in the U.S., but it's back to growth. So again, a complex way to say that in this entire book of business, we're laser-focused on those areas where we have the right to win. Two things to remember from this slide, we don't invest in all of those categories and countries the same way. And these businesses do deliver a lot of free cash flow, cash flow that we can return to shareholders, and cash flow that we can reinvest on the diversify and the drive categories of Zimmer Biomet. ASC, you cannot close a presentation without talking about our commitment to ASC. How we believe we can continue to be the market leader when it comes to ASC. Simplifying all kinds of words here, and we talk about CBRE in a second. There's 3 things that you need to have to win in an ASC space. You've got to have dedicated people, you've got to have the portfolio, the category leadership, no gaps. And then you have to have best-in-class partnerships. And I will tell you that as of right now, we do have the dedicated people. In contracts, [ calling ] ASC, we have best-in-class products. That's a really bad emoji. It looks like an axe, I think it's a shoulder implant. So we have the portfolio that we need when it comes to products. We did acquire technology in Sports Medicine, we had the full bag on Recon. We had the technology in Hip. We bring in all kinds of other stuff in the surgical book of business. So I challenge anybody who would tell me, you will lose a contract because you don't have a product. Now you may challenge me, well, you don't do [ beds ] and you don't do sterilization and you don't do whatever else. That's the third P right there. What we don't have organically, we're partnering externally. We have a partnership with legacy Hill-Rom, now part of Baxter. So we need [ boots and lights, beds ], whatever, we have that. And today, we're announcing an exclusive partnership with CBRE. So that's the world leader in commercial real estate services and you are matching the world-leading orthopedics with a world leader in commercial real estate services, we can target how physicians, customers want to model their ASCs. We can provide guidance in terms of what is the right setup, the right combination and how we bring the best-in-class technology in Zimmer Biomet to [ meet ] configuration from an ASC standpoint to customers here in the U.S. So more about that later. And then to the left of the slide, you have the growth rates that I mentioned already. So that is the ASC. And if you remember anything from the last 2 minutes, we are market leader in ASCs. We continue to grow 10% to 15%. Cases are moving there and so has Zimmer Biomet. We got the people, we got the products and we got the partnerships. Recapping everything, our goals for the different categories, start from the right. Zimmer Biomet over the next 3 years will realize at least mid-single-digit growth. The configuration of the growth comes 100 to 150 basis points from Knees, focusing in the categories that matter the most, driving set of wallet on cementless to 50% or above by the end of the [ strapline ], driving share of wallet and robotics, doubling our current penetration. We're going to deliver growth of at least 50 to 100 basis points in Hips. We have 3 products missing, all 3 products are FDA approved, all 3 products are in market in 2024. And then when it comes to SET, in the right categories of SET, shoulders, CMFT and Sports, we're going to be growing at least 2% to 4% above market. And in the Other category, we're going to treat it the right way, right products, right markets, delivering free cash flow that we can reinvest to the business or give it right back to you. Recapping the last 10 minutes, our strategy is about focusing on customer problems, safety, efficiency and that's the ASC primarily in the U.S., best-in-class clinical outcomes. The way we think about choices is very disciplined. Drive recon above market, diversifying to the right high-growth spaces and defend the core baseline. It's a 4D in the background, which is divesting. At a given moment, we're going to be -- we're going to continue to evaluate whether the portfolio makes sense the way that it dies. And then our expectation, given innovation being the competitive advantage at Zimmer Biomet, the expectation is that we will deliver growth above market consistently and profitably. With that, I believe it's time for a break. And after that, we'll have Dr. Nitin Goyal, our Chief Innovation Officer, and this amazing group of surgeons talking about innovation and why they choose Zimmer Biomet as their trusted partner. Thank you for your attention. [Break]

Ladies and gentlemen, please take your seats as we are about to begin our surgeon panel. Please welcome to the stage, Dr. Nitin Goyal, Chief Science, Technology and Innovation Officer.

I feel like that song could have been a little bit better. It was like 10 seconds of a weak song, but that's okay. Thank you for joining us for this afternoon. And especially thank you for joining us for this panel that we have with amazing surgeons on musculoskeletal health. Before we start the panel, I'll just give you a quick introduction of myself. My colleagues said that they've been in health care, their entire careers, myself also. You know, I started my medical school in 2001. And so I'm a physician, I'm a surgeon by training. I started in practice in 2011. I ended up kind of shifting gears and became a serial health care entrepreneur and joined Zimmer Biomet about 3 years ago. I joined Zimmer Biomet because I had a conversation with Ivan Tornos. And it was clear to me that we were at an inflection point with the company. There was a chance to engage in the innovation engine and really get us going because we were through those FDA warning letters, through that time period of remediation and it was a turning point. And I wanted to be a part of a turning point in a company that has an impact on musculoskeletal health around the world. So I now am involved with Zimmer Biomet for the last 3 years. I lead innovation at Zimmer Biomet. I'm responsible for the R&D engine. I'm also responsible for medical education and clinical research. So thank you for the opportunity to join you here today. I'm going to introduce one by one, our panelists here. We have 1 panelist that is virtual, and I'll introduce Dr. Sperling at the end, just because these guys have complex bios. And they're just -- I don't want to miss something here. So our first panelist, Dr. Kamath, is a professor of orthopedic surgery at the Cleveland Clinic. He's responsible for safety, quality and the patient experience of the Cleveland Clinic and joins us today. He's a leader in robotics and technology and great to have him here today with us. Next, you heard Ivan mention Charlie DeCook. Dr. DeCook is a leader in ambulatory surgery centers. He is probably the busiest surgeon in the world. I'm going to say this again, busiest surgeon in the world. He coined the term 12 by 12 for doing 12 arthroplasties by 12:00 noon. He's a master of efficiency and it is great to have him here with us today. He's an innovator and a disruptor with multiple companies that he's sold. It's great to have him here and talk a little bit about ambulatory surgery centers and innovation there. And last but not least, from our small city of New York, Michael Ast, Dr. Michael Ast, Associate Professor of Orthopedic Surgery from the Hospital for Special Surgery in New York City. He is a -- he's also the Chief Medical Innovation Officer at HSS and is the President of the HSS ASC development network.

All right. So our session today is going to -- we have about 45 minutes. Ivan's told me I have to be on time, but I don't know. I'm just going to do our thing, right? So we have about 45 minutes, it's going to be 30 minutes of discussion, and then we'll open up for Q&A from all of you and the online guests as well. So I'll start with -- just let's start by setting the stage. We're going to center our conversation on the ZB strategy that Ivan has so clearly articulated, which is around safety, efficiency and best-in-class clinical outcomes. So you're going to hear us kind of center around that. But Michael, I'm going to ask you just if you could set the stage here, with the current health care trends that are shaping musculoskeletal health today, what are things that we should be taking notice of as we develop our products, our solutions for providers?

Yes. It's interesting. I think Ivan did an amazing job earlier, just kind of outlining some of the headwinds, tailwinds and other forces we're seeing going on in health care. And it's being said a lot, and it was being said a lot 5 or 10 years ago, and it started to sound a little cliche. But if you look now, you're really seeing what we've been talking about for the last 5 or 10 years: massive health care consolidation, especially at the large health care systems. So there aren't a lot of these smaller, single community hospitals, either they're going out of business, they're transitioning to emergency room only or they're being swallowed up by these very, very large health systems. And look, we're in New York City, if you throw a rock and it lands in New Jersey. New Jersey, when I was growing up, had a ton of all these small, local, independent hospitals. Today, my understanding is maybe 2 or 3 independent hospital left in the entire state. Everything else is part of one of these large health care organizations. And I think that changes the way that industry partners interact with health care. At the same time, you've heard myself, Charlie, Atul for the last decade, starting to say, orthopedics is going to shift out of general hospitals and into specialty hospitals and ambulatory surgery centers, and that is now true. It has been sort of long enough of saying it's going to happen, it's going to happen. And we know the interaction of industry partners with a hospital, especially a general hospital versus the interaction of industry partners with ambulatory surgery centers looks and feels completely different, especially when the surgeon takes on the very different role of surgeon versus surgeon-owner. And I think this is where -- and I'm sure Charlie will get to this in a second, but this is where that relationship with industry changes so much. And the surgeon-centric, patient-centric thing we heard earlier from Ivan becomes even more important because now that, that same customer, that same end user has taken on this dual role.

Well, so there's a lot of things you mentioned there, health care consolidation, the transition to the ASC, the surgeon's role changing, the interaction of industry with the surgeon's role. Charlie, maybe you could speak to -- you're known for your development of ASCs, high efficiency in the ASC. Talk to us a little bit about how you run your ASC, why is efficiency important to you, why it's going to become increasingly important to all surgeons?

Nitin, thanks for that. I'm excited to talk about ASCs because I know that's where the future is going. So what we're seeing is much like Clayton Christensen described in steel mills in the '80s, and that is we used to have these manufacturing plants that would transition to these little mini mills, and that's exactly what we're seeing today. We're seeing hospitals that could do a little bit of everything, now transition to these little mini mills, what we call now ASCs in the health care space. And why is that happening? It's happening, this disruption is happening because of 2 things. Number one, surgeons are now in control and now are financially incentivized to be in ASCs. And number two, it's because we can do it faster and better in an ASC than we can in a hospital. So it's a no-brainer that Zimmer Biomet is leading out in the ASC space because they know that's where the future is. That's where the puck is going. That's why we're here today because this is a market that is absolutely going to be dominated by an ASC, and we need to be there first.

So what happens to institutions like the Cleveland Clinic? I mean how do they approach the ASC, I'm going to call it, the ASC problem or the ASC shift?

I think -- so the principles, while the site of care is changing, and I agree, it's shifting dramatically to the outpatient setting, the principles still remain the same, right? Efficiency, the margins for these big institutions are getting smaller and smaller because of multiple headwinds that we talked about. So efficiency is still primarily -- I think the outcomes that we're seeing sending patients home into their own beds daily is a tremendous benefit for the patients. They are pushing the markets to that way. I think COVID had some positive changes there. But it's the principles that I think Charlie has really explored and pushed really at the tip of the spear, but we're applying these on a daily basis, whether it's in a hospital outpatient setting or in the mothership tertiary coronary centers as well.

So Atul, kind of speaking to that again, technology in health care, specifically in musculoskeletal health, hasn't always been synonymous with efficiency. If you look at the first robotics introductions in orthopedics, it didn't create efficiency. So how do you think about that now moving forward? And how has it changed?

Yes, that's a great point. So I think a little bit in musculoskeletal technology 10 years ago, 15 years ago, I think we had the wrong end in mind, right? So the user experience is critical, right? And the user experience can be the patient. For us, it's the surgeon providers as you as well. So that -- I think that frame shift that's happened in the last 5 years, certainly maybe the last 5 to 7 years, where the patient -- it's customer-centric, it's patient-centric. And I think, certainly, the reason why Zimmer Biomet has changed a lot of how I do or in my practice day-to-day is because they've created solutions that are changing the end user's experience. And that's where technology has to be facile. It has to be integrated. It has to be an iPhone, not my old Blackberry. It has to little -- be more intuitive, user-friendly and that's where those applications that will succeed in the tech space are meeting those demands.

Go ahead, Mike.

And the other thing that goes along with that is that the technology initially was meant to work in the operating room. And like that -- all it says, we're going to give you like a better mallet. And as all of this shift has happened, the other thing that has happened is that surgeons are starting to look more at the episode of care and not so much at the moment in the operating room. And when they can create contracts with payers in ambulatory surgery centers where they understand their cost structure a whole lot better, now evaluating technology, evaluating innovation is we're going to evaluate across that whole spectrum. ZB is actually a great example, right? We're going to evaluate preparation for surgery, execution of surgery, follow-up after surgery, feed back to the beginning and do it better next time, right? So technology as opposed to simply trying to invent a better hammer to hit the same nail now has the opportunity to look at it in a completely different way that we simply couldn't do until some of these other things fell into place.

The other thing is that the efficiency is the only way to keep up with the automation that we need right now. We cannot be fast enough or have enough human touch points, right? We -- our operations are 30, 40 minutes, right? We have such little time to have that touch point. We need all these other efficiencies through technology. And I think that's where we're getting this nice kind of momentum going.

So maybe Charlie, could you speak to, a or several Zimmer Biomet technologies that have driven efficiency for you? And how has it done that? Could you...

Yes, love it. I think the one that you accidentally brought up is the HAMMR. So automated impaction has been a game-changer where I've had the chance to use the HAMMR in my operating room for the last month. And it has totally changed how we do hit arthroplasty. And you can see why this is such a sticky technology because when you think about a surgeon, you think about a surgeon with a fine skills, but orthopedics is not like that. Orthopedics where we use big hammers. And we literally swing that hammer 400 times per case in hip arthroplasty. So you can imagine, if I'm trying to do 12 to 20 cases a day, how many times I swing a hammer, it's probably a lot more than a lot of the carpenters out there. So I needed this solution to fix that problem for me. And what did Zimmer Biomet do, they delivered on that solution of automated impaction. And what is that? That basically means instead of swinging a hammer, I push a button. And by pushing a button, I no longer am tired at the end of that case. I can now do several more cases during the day. That means Zimmer Biomet has now enabled me to do more cases in a day. And that is a win for me and it's a win for Zimmer Biomet. And why is that? Because we're strategically aligned in that I want to do more cases because I own my ASC. I'm financially incentivized, and I can help more patients, more people in their road to recovery as a result of using the HAMMR. So I think for me, the HAMMR and obviously, ROSA Hip has been a big game-changer for me. So I think those are 2 technologies for me that really helped.

And the fun thing about that technology about that innovation is the joke on innovation over the years is like, all right, I got a cool idea. Let's create a problem that it would fix and then introduce it because, hey, it fixed this problem that you actually didn't have before, right? That's very different than something like HAMMR. That's understanding that my shoulder hurts at the end of the day. And if I want to do 2 more cases, I'm physically limited by how many times I can swing a mallet and how accurately I can deliver that force every single time, something like HAMMR fixes that. Another thing -- we're moving to the ASC, right? Things are happening. You heard us say this. What's the problem at the ASC, we simply can't sterilize enough trays. So what has ZB done, and we saw it listed on Ivan's slide earlier, we're going to focus on the actual problem that our customers have, which is sterilization of enough trays in a small center be able to do the 12 to 20 cases we need to get done to get through our day. And ZB is going to be the partner that helps solve the problem we actually have. And that's what I really like about what Ivan was saying earlier, sort of, all right, laser focused on the type of innovation that solves problems that are actual problems that exist today, not like we happen to have this cool thing, so let's see if we can make up a problem it might fix. And I think there's a variety of those examples that you can see across the ZB portfolio.

Atul, that maybe speaks to -- you've been involved with Zimmer Biomet some time, in practice about the same length of time as me. How has it changed to working with Zimmer Biomet as a partner, as a company that's developing products, solutions for you? I mean -- that's got to be a significant change, like Michael referenced.

Yes. I think any company that's talking about surgeon well-being, ergonomics, what's our musculoskeletal longevity in terms of being operators. I mean there's very few companies that actually speak to that kind of relationship. So I would say there's been a radical change in the last 5 years. We've seen some of the numerical metrics. You can take all these slides away. I think, certainly meaningful changes in innovation. You cannot -- really the boldest, as we say, medtech company right now for multiple reasons. I think there's different pillars of innovation that are actively going, and I think a lot of the pipeline speaks to this. We talk about personalized medicine. Robotics is sort of the ultimate personalized medicine in surgery, right? We have -- where we sort of -- you have the plan, you know the outcome of the victory or defeat right before you do the surgery itself, right? All that planning, the execution, the feedback loops that Mike had talked about in terms of data, this is where medicine is rapidly evolving and will spring forward. And that has been my impression of Zimmer Biomet, metal and plastic 10 years ago, 15 years ago, to sort of metal and plastic is just the end product of what we're doing, there's radical changes happening.

So it's interesting. We -- you hear this word ZBEdge. I'm thinking about the audience here. You've heard that a lot. But I'd love for you to hear it from a surgeon perspective who's involved with the ecosystem from pre to intra to post and that feedback loop. Charlie, I mean you've done a fair number of Persona IQ implants. You're following your patients on our Connected Health platform. Talk to us about that.

I'm super excited about PIQ and mymobility because what this is giving our practice now is more data than we've ever had before. So with this kinetic data, I can track that patient both during the surgery as well as after the surgery. It used to be that we had some general idea of how to do a knee or hip. Now what mymobility and PIQ gives me is now I get all this extra data. Once a patient leaves me, once they leave my ASC, now I can track them in ways that I could never do before. We could only have things like patient-reported outcomes before and the interaction I would have with the patient in their follow-up visit. Now I have interactions every single day with PIQ. So I get data points every single day. Now I can interact with my patients more and most importantly, my patients feel more engaged with me as a result of using PIQ.

That's interesting. I mean -- I'm going to shift gears a little bit and maybe go to our second strategic area of focus, which is around what we're calling safety or decreasing complications. Maybe Atul, could you speak to what complications you think are most significant in adult reconstruction specifically today?

Yes. So orthopedics is fun because the outcomes are -- we have the best procedures in all of health care, right? And the total hip was called the operation of the century. I mean, obviously, last century, but for a good reason: it changes people's lives. But we have some complications for folks who do not get that operation of the century, primarily things like dislocation, fracture, infection. And I think, certainly, as clinicians, these are the things that really keep us up at night. These are the things we need partners to help us on the preventative side, on the population health, maybe diagnostic optimization side. And then when complications do happen because it's biology and it's medicine, so there's nothing 100%, right? So when they happen, we need solutions to act aggressively and really because these complications change that patient's life, right? They -- a patient that undergoes an infection will never be the same no matter how good the treatment is. So -- we need a portfolio, we need partnerships and we need the resources to tackle this at complex centers, at other centers, wherever it is and worldwide too. This is not just a U.S. problem.

So you referenced infection, and I think most of you heard that referenced a few times this afternoon. Maybe, Michael, could you speak to us about the implications of infection? And what it means for you, for your patients for the -- for HSS as an example and for the payers?

Yes. I mean I think when we talk to patients, the one thing you always have to talk to them about is infection. And we heard Ivan say it, there's less than 1% infection rates across the board, and that's really wonderful. But that number is actually very sticky. It hasn't gone down in a really long time. And when we were doing 100 joint replacements a year in 1970, that was like 1 person. So okay, we do 1 million joint replacements a year in the United States. It's a lot of people. And if you are that patient, your life is never the same. If you are that surgeon, your emotional attachment to that patient is never the same, right? Ivan referenced a little earlier, you can die from an infection. It's not like a rare event. If you were to list hip or knee replacement infection among cancers, it would be the third, fourth or fifth deadliest cancer on earth, right? Think about how much we put into curing cancer and changing mortality rate of a cancer, infection in hip and knee replacements has a similar mortality rate to cancer. This is not a small problem. And as the numbers go up, the sheer number of patients suffering from that complication goes up. And let's be very clear, no matter how great we are, no matter how much we've done, even our best treatment option for infection today has about an 80% success rate, right? That's unacceptable. That's the kind of thing where now we've got our target. Dislocation rates have gone down. Periprosthetic fracture rates have gone down. There are still real problems. We all have them, but they've gone down year over year over year, we get better at that problem. Infection rates just go up and up and up. And what no one talks about or what we really infrequently hear are the infection rates following revision surgery. Remember that revision rates, again, aren't super high, but they exist. And the revision burden, if you look at all the studies, is growing at a significantly increased rate compared to the primary surgery burden, which is why it makes it such an important market for our industry partners is the revision market, but the infection rate after revision surgery is like 15%. It is unbelievable how high that rate is. And so you have to be cognizant of that as surgeons, as the 4 of us are, this is the single most devastating thing we deal with in our practices.

So knowing that infection amongst many issues with complications. What's one solution, one product that you guys would call out that has had a meaningful impact either on infection or another complication today, whether it be Zimmer Biomet or not? Like what would you say?

I'll name just a few. So there's back to share an experience, products where you're taking -- so he mentioned bacteria. They like to colonize, they like to create little homes, little biofilm areas. You really need surfactants. So you need mechanical breakup of these little homes where the bacteria live and these are products that do that. Bactoguard is another coating, Ivan had mentioned this before, I'm shocked that a CEO of a Fortune 500 company knows gold, silver, palladium coatings, I mean, come on, that's ridiculous. So -- but literally, this coating will create a little microenvironment, a little electric fence around a nail that you put into the body, amazing technology. And then the other things that are exciting are the iodine-coated implants coming out of Japan, right? So this is unique. If you can impregnate on the surface coating something that can repel bacteria from the getgo, whether it's in the primary or the revision setting. I mean, -- it is always a race against bacteria, race against time. We live in a bacterial world, right? So anything that helps whether it's a surfactant or a coating or microelectric environment, I mean, these are game-changing technologies.

Charlie, what do you think?

The other biggest risk factor for infection is actually surgical time. So it's funny, we've talked all day today about efficiency. And it goes back to our outcomes, right? The longer a surgeon is operating, the more risk there is of infection. So if you're bringing us new innovations, new technologies in the operating room, it has to decrease my time with that patient, not increase that time. And I think Zimmer Biomet is totally honed in on efficiency because it does improve our outcomes. It's not just about doing more cases, doing more implants. It's also about the outcome of the patient. So if I can decrease the surgical time, I can improve my infection rates as a result.

We're also better when we are doing more volume and an efficient pace with surgical teams that are helped by the whole surgical environment. And Charlie's shop is a wonderful place to go see at any point for the analysts here to just see this in real time, play out surgical efficiency does breed better outcomes for patients.

Sorry, the last innovation or sort of good example of what ZB has done that's been really helpful to my practice. As you know, we heard a lot about midsized tuck-ins. And sorry, I'm going to mess up all the words because I'm not a business person. But Sinova [ short ], right? The concept of diagnostic.

Maybe explain that to the group for a moment.

Yes. So one of the other challenges we have in infection is actually making the diagnosis. We hear this statistic all the time. 20% of people are unhappy with their knee replacements. You know what? A bunch of them are infected and we just didn't know it. We're using a test in the vast majority of settings that has been around for 400 years. We are taking some fluid out. We're putting it on sheep blood, and we're sitting it in a lab and waiting a couple of days to see what happens. That's called the cultures. This is an archaic way to diagnose an infection. With some of the innovative products that have been acquired by ZB, now in my office, I can draw some of that fluid and I can send it to a lab for a truly diagnostic test, within 6 hours, I get an answer. And within 2 days, I get a level of specificity in regards to what bacteria is in that joint replacement, what antibiotics are it sensitive to, was this missed on a prior test. And this is an example of targeted M&A to solve an actual clinical problem for people like me. And that's where I've seen ZB really again and again show that type of thoughtfulness in making some of these moves.

So not to put words in your mouth, Michael...

But you're going to do it anyway.

But you would say that we have a right to win an infection in some of these areas around complications because we've developed a presence there. Is that -- I mean, is that reasonably accurate?

More importantly, you have surgeons rooting for you to win because we feel the genuine need for the right partner to help us with this devastating problem.

I will say that's the other excitement is the new stem that's coming out, Z1. So we talk a lot about infection, but the other thing that I always worry about, that keeps me up at night is periprosthetic fractures. And what that is, is when you put this piece of metal down someone's femur, occasionally at around week 2 or 3, they'll fracture. And when that fractures, it's a devastating complication, you can get infections, other problems is associated with it. We're super excited about this new stem because it's got a collar on it. It's triple tapered and it prevents that subsidence of that stem. So we're super excited about ZB delivering on that as well.

Probably in combination with HAMMR even, right, because you get the on-axis force? Maybe you can speak to that.

Yes, for sure. Surgical impaction, believe it or not, when you're using that HAMMR 400 times, what's also happening is you're hitting a lot of offset blows. So when that blow hits that femur, it's creating more force to that femur that we don't want. So what surgical impaction does is do it directly in line, and there's not this rotational component to the broach and eventually the stem that happens as a result of that. So we think we'll get reduced reductions in fraction as a result. .

I'm going to switch gears again, maybe go to our last kind of strategic area of focus, which is really making sure that we have best-in-class clinical outcomes. And Atul, maybe I'll toss it to you. What do you think is driving improved clinical outcomes today, not just by ZB, but in musculoskeletal health, what do you think the biggest areas that you've seen some improvements?

Yes. I think huge improvements in things like robotics and personalized medicine. Robotics has changed the way I do surgery and Zimmer Biomet, the ROSA has been -- I used to work in a very analog world, right? So we've all done thousands of manual knee replacements. We have experience. We do the same steps, but the robot has taught us that what we learned from the prior surgery manually, we learned really nothing from in the sense of what that next patient, how do we predict their anatomy? How do we predict their soft tissue balance? How do we plan all the cuts before we've actually done the surgery? So going from a very analog, manual way of doing knee replacement surgery to a robotic-assisted surgery has been -- really revolutionized the way I practice medicine and surgery. So that's an example where I think it's going. I think we're just the tip of the iceberg because all that data that now we're gathering is being fed back into what Mike was alluding to before, this large data feedback loop where thousands of patients collectively that we're all doing together will then be fed into that next patient that I'm operating on. So I know their phenotype, so to speak. I know their characteristics. When we can link it to other things like their psychometric profile or where they live or do they smoke or -- once we can start doing this, this is forward thinking and sort of this is where -- but this is what excites me about personalized medicine. I think we're at the infancy of it, but there's so much runway to go with this in robotics and tech. That's exciting for all of us, I think, to be part of that.

So I'll jump on that as well. The other thing is this end-to-end data that we're getting as a result of PIQ and mymobility. When we have all this extra data, what we're learning from ChatGPT in 2020 with ChatGPT 3.0 is what really turned it on was the data that they had, right? And what Zimmer Biomet has positioned themselves to be ahead of the curve with data because no one else has this data, right? No one else sees these curves that I get to see every day as a result of this PIQ data. I can now transition in the future to changing how I do a knee replacement as a result of that data.

So why do you think ZB is positioned? Is it -- well there? Is it because we have a great product in Persona IQ? Is it because the connected ecosystem, all of the above? Like why is it differentiated? Why is it different than any of the other players in the market?

Well, I think, as Jensen says, this is going to become generative, right? The data over time is going to create this generative AI. And what that's going to allow us to do with that extra data that no one else has is be able to turn back and change it for the surgeon. So now I can tell a tool, take that ROSA knee and you need another 3 degrees of varus in that tibia because our last 1,000 cases proved that out, that data that no one else has.

The other -- Rachel mentioned this before, but integration has been a big piece, right? If you buy technologies that don't speak to each other, it's sort of lost and it's the synergy you get from multipliers of each individual technology, PIQ, MIMO, ROSA, the whole personalized space. I mean, this is all synergy. But because it's, I think, a little bit of foresight, planning, integration, a lot of this is the way -- sorry I cut you off.

I might just say a lot of foresight there. Just on this side of the fence, I'll tell you, Atul, it's -- I mean, it's been a whole thing to make sure that every time we develop or buy or put forward technology, it's connected. And we do that in such a strategic way so that when it comes to building that feedback loop, we're well positioned.

The other thing that can't be overstated here is when you're working with data, you need a lot of data, right? If you have a limited amount of data, then the confounders, the other pieces can get unnecessarily weighted. And I don't know if anybody heard Ivan say this earlier, but ZB's #1 worldwide in hip and knee, right? They're simply gathering the most data. This is why HSS partnered with ZB on the robotic AI center, not because we love how good Ivan looks in a suit or how quickly he talks after 2 diet Cokes, right? We did it because this was the trusted partnership that allowed us access to the best quality implants and surgical tools and the best way to gather data from the largest source available worldwide. And as the -- sorry, leader worldwide in musculoskeletal care...

New York. New York.

You came to my house, man. I don't know what to tell you. We wanted to partner with the leader worldwide in being able to put those 2 things together to gather as much high-quality data as we could through mymobility, through PIQ, through all of the ways that we're doing this together, to develop all of that to be able to change musculoskeletal care around the world together.

I will add to that, that it's very obvious that Zimmer Biomet has an innovative culture, and that's why we in Atlanta are leading the way because we see that, right? It permeates through. In order to have innovation in a company, it has to be led by innovators. And that's by you, it's by Ivan and it permeates by Jim Lancaster. It permeates through the entire organization that we know that Zimmer Biomet is back, and we're excited about it.

Maybe we'll end this section -- that's a great way to end it, but I want to ask 1 more question. So Charlie, I would love to get granular. We're talking in high-level terms about this data story, but you've done a ton of Persona IQ. And how are you using the data? Talk a little -- can you get one level deeper and what's happening? Talk us through a patient that has it and what happens, right?

Caveat being that this is my own personal experience, nothing related to the FDA. So I just want to put that disclaimer, but what this is allowing us to do is see patients in a new way. It's now being able for me to identify patients that are at risk, that are having problems, that aren't walking, that aren't bending their knee. And now suddenly, I know about it, where before, I didn't know about it. It's also allowing me to reassure patients that are doing great. We all have a certain number of patients that think they're having problems. And actually, they're ahead of the curve. Now I have data that can substantiate what I've always known is, no, you're actually doing wonderful. Your Persona IQ is doing fantastic. And here, I have the data now to prove that you're doing better than the vast majority of patients. So I think for that respect, I think that's how it changed our practice.

Awesome. Well, you know what, I want to thank you guys. I want to leave -- I'd like you guys to have the last comment, if you can. What are you most excited about coming out of Zimmer Biomet in the next 5, 10 years? What do you think -- what are you looking forward the most to?

So for me, I have my very, very personal and then sort of my bigger picture one. My very personal one is the widespread access to HAMMR, mostly because my shoulder is killing me. And like this will really just make my life a lot better as a surgeon. So like, I'm good there. On the bigger picture, again, for me, so much of my nonclinical focus is on understanding the transition out of large hospitals and into the ambulatory surgery center and the work in sterilization and the work in efficiency and the work in quality that is being done there is, for me, the most exciting part because I think -- I have children who are going to live here for another couple of 100 years, and I'm going to live here, hopefully, for another 100 years, and like I would like social security and Medicare and these things to exist in the future. And unless we find a way to like gain control and rattle control of our health care spending, we're just not going to be able to do that. And the transition to an outpatient surgery center, the transition away from fee-for-service medicine into something more aligned to the episode of care. These things are what is going to allow our health care system to exist in 50 to 100 years. And watching the strategic moves that ZB has made over the last couple of years and being involved in the implementation of that moving forward, that's -- that's what I'm the most excited about. And seriously the HAMMR thing because me shoulder hurts. You guys don't realize, it's a big deal.

I got to give you each chance. So go ahead.

Yes. We're at a strategic inflection point, and that is that joint surgeons need ASCs to operate in. And what was just announced today was CBRE is a big deal. And why is it such a big deal? It's because us joint surgeons have nowhere to operate that's efficient and works well for us. A partnership with CBRE now allows us to offer surgeons an opportunity to be in ASCs, where we didn't have before. So you're going to see joint surgeons around country flock to ASCs and why are they going to do that? Because Zimmer Biomet is going to help them get there. And I think that's what I'm most excited about.

I'm a little bit of a tinker and I do a lot of research and all that. And I -- but I firmly believe that I don't want to be practicing medicine the same way I'm doing 5 years from now, right? And it wasn't the same way I was doing it 5 years previously. And so to feel the excitement, to fuel the pipeline, the portfolio, you load it up, you keep up to going because I don't think any of us want to be in the same environment we're doing 5 years from now. And I think we need tools, solutions and that kind of excitement, that kind of palpable feeling you're getting today. I think that's a little bit of where I applaud you on all the work you've all done.

Well, thank you. I'm going to now invite Dr. John Sperling to join us virtually from the Mayo Clinic, the other top institution in the world.

They're really good at medicine.

Dr. John Sperling is a professor of Orthopedic Surgery at the Mayo Clinic and widely known as, if not the top, a top shoulder surgeon in the world, has worked with Zimmer Biomet for a long time, has developed many, if not most, of Zimmer Biomet's products. And Dr. Sperling, thanks for joining us today.

My pleasure. Thank you so much for your kind invitation to be here today.

Well, I know that you had a busy surgical day and that's why you couldn't join us. And it sounds like you did some ROSA shoulders today. And I kind of wanted to focus on that because of the recent launch, is April 24 was the launch of ROSA Shoulder? And you did the first robotic shoulder replacement in the world. I'm going to repeat that. First robotic shoulder replacement in the world, done by Dr. John Sperling on April 24. Maybe you could tell us a little bit about that, maybe just jump right in and say, what problems were you looking to solve when you started developing ROSA Shoulder with Zimmer Biomet?

Yes, really excited to [ be the ] first person in the world to give the first robotic shoulder replacement. And I think really the goal of this project all along was to improve patient outcomes. In the shoulder world, we see that the primary reason that people need additional [ repetitive ] surgery is component malposition, where the components are just not placed in a regular orientation, and the goal with ROSA all along was to be able to improve our ability and be able to help surgeons worldwide to be able to reproduce that in terms of placing the components exactly where they want for that individual patient.

So for those of us in the audience, including myself with less shoulder-specific knowledge, what does that mean for shoulder? You have component malposition. What does that mean?

Yes, it's an interesting definition. So what we've seen in the shoulder is just really growing worldwide. It's probably the fastest-growing joint replacement on a percentage basis. We've seen it grow worldwide. But along with the enthusiasm in terms of growing shoulder arthroplasty, I think it can be challenging also, particularly with exposure to place the components exactly where we would want. So I think the combination of preoperative planning and the ability to be able to execute that plan intraoperatively is huge. And as you and I have chatted about in the past, it's interesting, the shoulder world is very technology-focused and also focused on the ASC. I love the comments from the panelists here. It's interesting how we are moving to the ASC as well. So that combination of technology plus innovative products is really driving shoulder arthroplasty at a very rapid rate.

So you referenced component malposition. What other key considerations did you guys have in mind as you developed ROSA Shoulder with Zimmer Biomet?

Yes. I think, Nitin, I think one thing we wanted to do with this is to address both sides of the joint. So when you do a shoulder replacement, you address the humeral head, the ball and you also address the socket. And what we wanted to do is to have a technology that can help surgeons address both sides of the joint and also be able to help surgeons with a regular anatomic shoulder arthroplasty as well as the reverse arthroplasty. So could you try to come up with a complete solution for surgeons worldwide for this.

I'm assuming that you wanted a path to being time-efficient, and just something intuitive, right?

I think that's exactly right, Nitin. Again, I think we've seen and learned from our colleagues up there sitting next to you, that robotics, that's really the goal to be able to drive that towards time neutrality. But also, again, I think at the end of the day, I think quality of outcomes is #1. How do we improve quality of our outcomes and reproducibility? And I think that's really the goal of the technology. And that's one of the great things I've enjoyed working with Zimmer Biomet is developing the pre-operating technology and the planning software and then how do we execute that plan when we get to the operating room. I would say, in my practice doing a lot of revision surgery, that's where we see things break down, where surgeons sometimes plan, but how do they execute the plan. And I think that's one of the nice things we're going to be able to do with ROSA.

Just so you know Dr. Sperling, we got your video frozen here at an appropriate face -- I guess, dramatic pose, I would put it at -- so just for you to be aware, well, maybe we might check your camera...

I think that was probably sabotaged by the people from Special Surgery. That's my guess right now. The video feed was cut behind the scenes. That's okay. They're still good friends of mine there at HSS. No harm whatsoever. No harm.

So could you maybe talk us through your current experience? You did the first case on April 24. Where are we at now? How many have you done? What -- how has it been for your workflow, for your team? Walk us through it.

Yes, it was really cool, Nitin. So the first case I did on April 24, I did the comprehensive shoulder arthroplasty. And as you know, it's really been amazing. So that's been a system that Zimmer Biomet has had. And now we have data from 3 national registries around the world, showing it's the best-performing reverse arthroplasty in the world with the lowest revision rate. So it was phenomenal. I combined that plus the ROSA technology to be able to go ahead and do that. So -- for me, I think the cases themselves were even more efficient actually than I thought in terms of the time perspective. But again, I think it's that key feature, Nitin, being able to plan and then execute that plan intraoperatively was huge. And I think any time you introduce new technology, it's natural that you learn nuances. I'm sure the colleagues up there with you today, when they first started doing robotic surgery, you learn things, not only myself, but my entire team. So I think we're in a period now, an evaluation period where we're continuing to learn every day with the goal, once this is introduced on a broader spectrum, that we're going to be able to help people through that. So I think it's a really exciting time in shoulder arthroplasty as well as thinking about how we combine that with ROSA.

So I know you can't tell us too much about the future here, but give us a little glimpse into what the future holds, maybe what you hope it holds at least. What are you thinking about as you develop next-generation robotics? And think about how surgeons may adopt ROSA Shoulder today?

Yes. I think it's interesting. I know that Ivan mentioned it before, but I think for us, as we even think about going to the ASC and we think about next-generation designs, Ivan mentioned OsseoFit, which will be coming out. And frankly, that's a product, again, I've been working with Zimmer Biomet for 18 years, it's one of the most innovative products I've worked on. So for me, thinking about the future, combining that technology, a bone-preserving technology with robotics, with the precision of placing it, I think is really exciting. So bone preservation, combining it with robotics to improve my ability to execute that plan for my patients is really exciting. So I think, again, we're in a terrific time in shoulder arthroplasty, and I've been excited. I know here at the Mayo Clinic, we feel very honored for the opportunity to partner with Zimmer Biomet over the many years to be able to make an impact.

So just I want to be clear for the group, you're -- you're at the Mayo Clinic, and you guys did the first total shoulder robotic arthroplasty in the world, right? It's at the Mayo Clinic -- so not at HSS or Cleveland, right?

100%. It was exciting, Nitin, that first day -- to show you the power of collaboration and how important it is for leading academic institutions to partner with Zimmer Biomet, that first day, we had the team that was there was actually equally split between Zimmer Biomet and actually the team at Mayo Clinic from materials management, to supply chain, to people in the OR, everyone felt very vested in this. And I think it's that type of collaboration. When you have engineers here on site, when you have that type of collaboration, that's how you're able to move forward. So I think for me, that's one of the things that we take the most pride in here is that type of collaboration with our industry partners to move things forward.

Well, thank you, John, for joining us after a busy surgical day. I'd love to open it up to questions now. And just before doing that, I just say thank you to John, you and the rest of our surgeon panelists here for taking, again, taking the time out of their busy schedules, rescheduling surgery, rescheduling patients, moving things around. Dr. Kamath even shifted a flight to Australia. He was going to Australia to do some education, shifted some flight for us here today for them to be able to share their experiences, what we're doing in orthopedics. I'll tell you from the Zimmer Biomet standpoint, we couldn't be more excited. We feel like we are ear to the ground with our surgeon customers, our hospital customers, our providers and our payers and just excited to be here, innovating at Zimmer Biomet. So I'd love to open up the floor to some questions. I think we're going to have some mics that are passed around. I can kind of quarterback and send it to the right.

Shagun Singh from RBC Capital. I was curious if you could maybe shed some light on utilization. We've seen some strong trends lately. And you've alluded to some of the drivers of that, like innovation, shift in the site of care. But how sustainable do you think that is? And any impact you're seeing from GLP-1s, et cetera, in either spectrum of the BMI range?

So we have a GLP-1 expert right here. So the great -- so maybe we'll talk about -- so just to frame the question again, GLP-1s, site-of-care shifts and the impacts on like overall surgical numbers, I think, right?

Yes. I think there were some uncertainty in the beginning on GLP-1's effect on orthopedic surgery, but I think what we've seen and then also what we are publishing on actively is that GLP-1s is actually opening up a door for more surgeries, for orthopedic surgery in terms of unleashing populations that had been historically waiting for weight optimization or other medical morbidities. These are just in the pipeline for more orthopedic hip and knee surgeries. The knee and the hip behave a little bit differently in the response to the GLPs in terms of weight loss and candidacy for surgery, but I'm optimistic. I think I'm not a bariatric surgeon, I'm orthopedic, so I think I'm okay. But it's definitely a positive for orthopedics from what we're seeing here in the short term, and I do think in the mid and longer term as well.

And that's from data that you're looking at that is...

Yes, we have one study looked at 18 million patients in a multicenter network study. It's just accepted for publication, that's 5-year data looking historically on trends of this pipeline that we're talking about. And even with the more recent data with more potent GLP agonists and even some of these dual agonists, there's not been a change in that sort of positive push or trends towards orthopedics.

Steve Lichtman, Oppenheimer. Dr. DeCook, I wanted to ask you about Persona IQ. What have you seen so far in terms of post-op benefits in patients? Have you seen improvement in patient satisfaction? Have you noticed a change in recovery times? Any initial impressions would be great. And -- it certainly doesn't seem like you or your colleagues up here need it, but do you see this offering as a potential marketing opportunity for clinicians over time?

I'm so glad you asked that question. We're actually going to publish 3 papers on this, this year. We're excited about the data we're seeing. So first of all, it has changed our patient engagement. So what does that mean? That means patients feel more confident with me as a surgeon as a result of using PIQ. That's the first thing. Number two, the thing that I didn't anticipate was that patients are talking to other patients about a smart knee. So I didn't anticipate that. So now we're already having patients requesting that when they come see me, somewhat like we heard with robotics, but maybe even more so because there's a lot of patients that get very invested in how they recover, and they know that they now recover better, that I am more engaged with them when they have the PIQ. So that's the data that I can tell you right now. I don't think I can share all the data with the research studies we're going to publish, but we are super excited about that. We didn't anticipate that excitement in the market like it's been.

And if you like the concept of marketing, drive down route 4 in New Jersey, and you'll see multiple billboards say that we have the smart knee, we use the smart knee. There are multiple hospitals, even in this local area already using smart knee technology to advertise, to drive patients to them. So that's absolutely happening.

Yes. The fact that toasters have sensors in them now and now the implants that we put in have never had sensors, just tells you my gosh, this is just the beginning of where we're going with sensor -- implantable sensor technology in orthopedics. Obviously, cardiology was there first. Now we're jumping in and we're excited about it. We're seeing more and more people who are higher end of the spectrum of using or interacting with their own personal health data. I mean, this is a trend that's been going for a long time. This is one extension of now a patient can more actively, through visual graphs or their little child growth curve, so to speak, or an EKG, whatever you want the analogy is, they can actually see this visual and nowhere is something where they are along their trajectory and how does it compare to their peers. So we're seeing a lot more uptake.

Travis Steed, Bank of America. I wanted to ask about the shoulder robot. Just curious how you think it's going to impact your practice in terms of like number of procedures per day. Do you think it's going to grow the overall shoulder market, bring in more surgeons to shoulder surgery, more patients? And just trying to think about how it's going to impact the market. And then a question on hip and knee pricing for the Atlanta doctor who owns his ASC. Just curious if you agree with Ivan in terms of pricing trends in orthopedics not kind of reverting back to where they used to?

So why don't we go to Dr. Sperling first. Shoulder trends with robotic shoulder surgery may not affect you, Dr. Sperling, because of your -- where you are and your volume today. But maybe in general, do you see patient activation from robotics?

Absolutely, Nitin. So I think what we realized is that the percentage of patients out there who could be candidates for shoulder replacement, that actually get it done is probably 10% to 15%. And so as I think as robotics continues to grow and patients understand that there's some real technology out there that can help them in terms of outcomes, I think it's going to only just make the pie even bigger in this world.

What do you think about enabling surgeons that maybe shoulder is not their primary specialty? They might be a hand surgeon that does some upper extremity or a total joint surgeon in hip and knee that doesn't want to do shoulders. Do you think robotics is going to activate that surgeon?

Absolutely. So I think it's the surgeons that are the low to mid-volume that will get more comfortable then to have that assurance and confidence when they get in the operating room that they've been able to plan it and then, again, be able to execute that plan. So it's going to help drive their confidence, no doubt about it, and their interest in being able to do shoulder arthroplasty. So I think this is just, for us, this technology is going to help transform shoulder arthroplasty in terms of really growing the size of the overall pie and number of patients undergoing this procedure.

And to be clear, the difficulty in component position in shoulder arthroplasty is why I stopped doing it early in my practice. It's just really hard to do and had this technology still been around, even I might still be doing it.