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

Okay. Thanks so much, everyone. Appreciate you joining the first day of the Morgan Stanley Healthcare Conference. For important disclosures, go to morganstanley.com/researchdisclosures. Thrilling. But what is growing? I'm very, very happy to have Ivan and Suky here as CEO and CFO of Zimmer Biomet, respectively. So what should be a fun conversation. Thanks so much coming guys.

' Absolutely. Thanks for having us.

I'm going to start with the most -- open with the most fun question ever, so I apologize. But H2, you've got a planned acceleration implied within the 2025 guide. Could you help walk us through how that acceleration is looking?

Sure, absolutely. And to my hedge fund friends, we're going to stick to the public commentary that we made back on August 7. I know, how the lights are on. I was looking at my body language. If he's going to smile, if he's concerned. I'll stick to the public commentary that we made. So starting with the level of confidence is very high. We noted in the call back on August 7, that will be very surprised if in Q3, we don't scratch 6% here is the bar where I won't make any facial expressions. If it's 20 basis above, below, are you still confident? We said we'll be very surprised, if we don't scratch 6% we'll be very surprised within Q3, we don't scratch 6%. With Q4, obviously, being somewhat softer given the Q4 comparable of Q4 of '25 to Q4 of '24. So that's the quarter commentary for my friends in the hedge fund world. In terms of the overall dynamics, why are we confident about the second half, external and internal reasons. Externally, we continue to see a healthy environment. We noted July was strong. June was not. And again, I'm not going to make any additional comments on where we are in August and September but the markets are healthy. We take the market globally somewhere north of 4%. So externally, life is good. Pricing continues to be a nice tailwind for all of us and all of us is everybody in orthopedics. We delivered 20 basis points of price favorability in Q2. We believe that in the year '25, price would be flat, if not slightly better than that. And those are the macro reasons. Internally, we love what we're seeing with new products. We continue to see an acceleration. As you recall, in Q2 of 2025. In the U.S., we saw a sequential improvement in Hips and Knees of about 150 basis points in each category. So that's a great indicator of what new products are doing. We continue to see an increasing penetration in robotics, [ Persona Cement ] and whatnot. And beyond that, the last 2 data points that I'll offer in the second half of 2025, we don't have the day rate impact that we had in the first half. That's about 100 basis points. And we also have a nice comparable in the second half of '25 versus the second half of '24 in the fact that we don't have the ERP debacle that we had in 2024. So again, external and internal reasons give us high confidence that we're going to deliver on the guidance that we set forth on August 7 of 3.5% to 4.5% for the year 2025.

And so the Q3, the scratching 6%, that's there we go. That's function the easy comps. Like can you break it down for the crowd, so they can kind of understand the different moving parts for you guys and the base product offering as well, because it's going very well?

So the acceleration from a new product standpoint is what we call the Magnificent 7. And I don't know, if I need to go through all of those products. Surely, you probably have heard about that, but I'll just highlight a couple of them. Oxford Partial Cementless continues to grow very well. We, at Zimmer Biomet are the only company in the U.S. with a partial cementless knee that is lower surgical time with higher levels of accuracy placement, and survival rates that are in the mid-90s. And survival rate is how long does the implant stay in place, I'll call it 10 years later, with 300,000 patients globally in the registry. So also partial cement is growing really, really well. Z1 or triple-tapered stem continues to gain market share. So we lost between 500 to 700 basis points of market share in the U.S. over the last 5, 7 years. We are meaningfully regaining part of the market share. Again, acceleration in Q1 of '25 versus Q4, Q2 versus Q1 and Z1 OrthoGrid continue to do really well in the quarter so far. So that's another meaningful growth driver. And then we love what we've seen with Persona Revision in Europe. We are the leading revision company in the world. We launched Persona Revision in the U.S. 4, 5 years ago. We have a 51% market share. We launched a product in Europe Q1 of 2025, started to really get at it Q2, Q3, and we know where that's going. So again, new products are in the right direction, execution is more in the right direction. External dynamics are solid. So beyond day rate, comparables and whatnot, we're very confident on the guidance that we put forth.

How do you think AAOS talking about a lot of [indiscernible] how that is working? How do you think that flows through into '26, not off for '26 guidance, more -- like should we expect more of a contribution from that subset than what we're seeing in the back half of this year?

It will definitely accelerate. As a proxy, we've seen the real impact of a new product launch is between 18 to 24 months. So I'm not going to go through every single product launch, a Magnificent 7 plus, a bunch of products in set. But if you look at the press releases that we've done around 510(k) approval, I think 2, 3 months later, we launched the product. And then 18 to 24 months later is when you start to see the meaningful contribution. Why is that? You have the sets, you have the inventory in the market. You have all the medical education strategy in place. You train where you need to train. You got your internal sales force are trained. You got the products on formularies and that takes a while. And of course, you have to compete head-to-head other products. So to your question, simple answer, in 2026, we will see an acceleration of all the new product introductions in '25 plus. In 2026, we're launching a lot of new products as well. We're going to be first to market with iodine-coated devices. We're launching ROSA V1.5, that's the internal R&D name version 1.5. We call it ROSA Optimized externally. That is going to be ROSA with the ability to do key [ Pneumatic ] knees with a much faster registration process with the ability to deliver a level of accuracy that we don't see today with current ROSA. The feedback so far has been outstanding. We've done some surgeries. And again, the 510(k) approvals would be imminent, and we're going to be launching at the end of 2025. That's another meaningful contributor to 2026 in addition to ROSA Shoulder, and I'll stop right there. Otherwise, I'll stay here 6 minutes giving an answer.

I mean to flip to one sort of really financial one again, look the EPS guide increase. Can you look through some of the components of that so people can understand what the strength?

Sure, happy to do it. And it's interesting on our second quarter call, we actually moved our earnings per share guidance up and it's almost back to the original point we had at the beginning of the year even after consideration for Paragon 28 as well as tariffs. So 2 major events, and we're pretty much getting back to the same place. What gives us confidence to increase our overall earnings per share. It's a few things. One, so our tariff estimate has come down. It's more favorable now where we originally said $60 million to $80 million. And we said it's now going to be about $40 million as we continue to see stability in the overall tariff environment. We get greater and greater confidence around that. So I feel good about that number. Secondly, our interest expense is moving down from our original estimate. It's a good thing. 1, our cash flow generation has been stronger than we anticipated. That's lowering our debt load. Secondly, the mix of our U.S. ex U.S. debt has been a little bit more favorable towards ex-U.S. where the interest rates are lower. So that's structurally our treasury and tax team is doing a great job in managing that number lower. We originally said that after the Paragon 28 transaction as well as tariffs that operating margins would be down about 100 to 150 basis points year-over-year. We're moving that to the more favorable end of down 100 basis points. So there's some operational improvements in the business. We're also seeing in the last much smaller amount is -- there's more of a FX tailwind than what we originally anticipated. So the thing is you've got 4 things in there, tariffs being very real, the interest expense being very real and the operational improvements. So we feel good about where we are.

Very helpful. I'd love to hit on some end markets. Maybe starting with on the Knees. Knee has an accelerated, both for you guys, the market as a whole. It's been a really healthy market, I think most people would feel. I think we can probably get rid of a backlog argument that you remember last year, but that's probably gone. So like is this consumer -- is this like Pickleball and consumers fundamentally being active in their older? Like what do you think has driven the market so well?

We love for Pickleball players. We keep them active, but I think it's more than Pickleball. I think it's demographics. And I know that we've been talking about demographics for a while, but it's real. 10,000 to 12,000 patients or people actually turn 65 years of age in the U.S. every day. COVID did change a lot of things. One of them being the lifestyle. We want to be active. Again, Pickleball is an example of that. We don't want to have the live used to have. GLP-1 in a year or 2 years ago, we also thought that GLP-1s were the end of the world. GLP-1 is a massive tailwind for us. We got data through the academy that shows that roughly 25% to 30% of all the surgeries of all the patients that go through surgeries have some sort of GLP-1, which makes sense. You're lowering your weight, now you can qualify for surgery. If you lose weight, you want to be active again. You may have some mobility challenges. So that's been a tailwind. The biggest tailwind by far, at least in the U.S., is the ASC dynamic. Prior to COVID, 1%, 2% of the sales of Zimmer Biomet in the U.S. where at an ASC. Today, the number is already north of 20% to 0. If I can do my knee in a Saturday morning and leave at night and Oxford Partial Cementless, I'm going to do it. If I can do my rehab, through digital means, and we do that through Apple, I'm going to do it. So that's been a huge tailwind, the ASC dynamic. And by the way, we believe that's early innings, that's only going to continue to accelerate. So the backlog is gone. The markets are healthy. I don't think the markets are the 6%, 7% growth rates that we saw through the '22, '23 gig backlog, but I think, globally 4% is solid. Here in the U.S., the number of things are continue to pick up.

I sat next to the Head of Hip and Knee surgery at Mount Sinai on the train back home randomly once. And he was ranting about how much he loved to work in the ASC at [indiscernible] it's a similar thing. I mean, on that topic, it's a fundamentally different channel to service with different challenges, whether it's fertilization, whatever, how do you guys approach that child differently to how you [ project ] in patients?

Yes. We typically talk about what we call the 3 pieces of the ASC strategy. First of all, you do need to have dedicated people. And that's something that we missed 10, 5 years ago. We had the same folks going on hospitals, HOPDs, hospital outpatient departments and going to ASCs. So today, we have dedicated people with a dedicated President going over to an ASC, so a dedicated sales channel. The second P is around partnerships. We need to have the right partners. To your point, sterilization is a must. We have an exclusive partnership with Getinge the Swedish company that I cannot pronounce, but I think it's close to Getinge. We also have a partnership with STERIS in some locations, a very meaningful partnership. But we also partner with a lot of different companies, in an exclusive way. We are the only company that can do real estate through CBRE, in an A2C soup to nuts. So there's a lot that we've done in the partnership side of the equation. And then the last piece is around processes. How we think about contracting, how do we think about segmentation, how do we think about the commercial execution in the ASC space has dramatically evolved. It will be told Zimmer Biomet was late to the ASC strategy, part of the reason why we struggled in the U.S. for some years. But as of the last 2, if not 4 quarters, we've seen a very meaningful uptake in the ASC space. [indiscernible] means washed in Swedish.

That's it. Like how does that go from a sales force perspective and an early question like getting the sets in the right place and it's not easy to shift the channel. You know what I mean, how do you manage that?

Well, you do need to have dedicated sets and instrument, an ASC, the rotation is higher. That doesn't mean we're building more inventory. Now we're being more efficient around allocating inventory from, again, hospital inpatients to ASCs and whatnot. You need to have a dedicated sales rep. But the productivity is much higher in an ASC. Your typical sales rep in the U.S. will do 2 cases in a hospital. I think it's 2.5% to 3% maybe. In an ASC, it's not uncommon to do 6, 7 cases. Pricing dynamics were worried about pricing being lower in an ASC versus hospitals. It's actually quite comparable. And if you look at it from a, let's call it, a P&L standpoint, your productivity is higher than ASC, your gross margins are comparable. Your cost to serve is lower from an OpEx standpoint. So we love ASC and we're becoming really aggressive in terms of how we're thinking about investments in an ASC space.

Because it is also for the reps, they're just getting in and out, scrubbing up and this is way faster, right?

You got it. And the more aggressive reps are actually doing 2 days of surgeries Mondays and Tuesdays in hospital HOPDs and then Wednesdays, Thursdays and Fridays, they're all about the ASC. So again, the productivity is much better in this dynamic. .

You mentioned pricing. And obviously, during the inflationary period, everyone took a look at pricing, it makes complete sense. Do you think we're going back in normal terms to where we were 5 years ago or is it...

I don't, and I'll let Suky elaborate on our pricing strategy. And this is the only company that I know where the pricing group reports directly to the CFO. So I'll tell you that discipline is in place. But the true, I guess, comments I make on price and why we're not run backwards. We're launching a lot of innovation into this space. And again, when I say we, is not just Zimmer Biomet. It's my peers Strykers, Smithy & Nephew and Johnson & Johnson. There's real disruption when it comes to orthopedics, disruption that is taking cost of the system. Because the one data point you got to remember is that the biggest expense in an orthopedic procedure, it's not with the bad guys, Strykers, Smithy & Nephew, Johnson & Johnson. We account for around 15% of the cost. The other 85% is labor which is higher and higher, especially in the U.S. with nurses and whatnot, it's inefficiencies in a hospital, even in an ASC, you can reduce the timing surgery. You can reduce the timing hospital. The length of stay now is dramatically different. You can lower the admissions. So again, all this innovation that we are bringing into the space is meaningfully reducing that 85%. So that's 1 competing data point of why the pricing discussion is not what it may be in other areas. The second data point, and then we'll pass it on to Suky, that I'll offer is that orthopedic procedures are the second highest margin contributor in the U.S. for sure. I don't know what we are outside the U.S. So as you see hospitals in the U.S. with an average EBITDA of around 1.5% to 2%, if there is 1 procedure you don't want to lose, it's orthopedics, high contribution margin lower length of a stay, overall great dynamics, orthopedic cases, pull other cases. So I don't see us moving back to 2019, when it comes to pricing.

I think on top of that, the portfolio that we've been launching and will launch -- continue to launch has been giving us greater portfolio contracting power. Also, the newer products tend to be stickier on price and price erosion than older generation of products. So I think those 2 things complement. But regardless of where the pricing environment goes, just our internal mechanisms around defining account-level strategy, data and insights around that account versus like accounts and where they're priced and just the governance and the model that we use around making sure that we've got discipline around not just top-line growth, but also margin at the account level is better than it's ever been.

Out of sheer curiosity, who's delivering the message of the CPI to the customers? Is it the rep? Or is it like are you building decks and going in? And how does that work?

Generally, it's at the ground floor level. They're given a corridor, if you will in which they can price a particular account that moves outside of that corridor, then you start to escalate from a governance perspective for approvals.

I'd love to touch on SET because it's just -- it's been a great end market for you guys. There's obviously a lot of different things funneled into that. I don't know whether you want to tackle it by like shoulder or trauma. Well, whatever suits, but how are you feeling about the market overall and your place in it?

It's a great market. And it should be a single SET business is one that most people don't realize how exciting it is, so it's around $2.6 billion SET as a category. And by the way, SET is a lot of things, but primarily sports medicine, upper extremities, now foot and ankle with Paragon 28 and CMFT, Cranial Maxillofacial Thoracic is the bulk of it, again, $2.6 billion with less working capital requirements at [ Oregon ] business with a great opportunity for gross margin expansion, growing with Paragon 28 double digit. It's a business that for us has delivered at least mid-single-digit mostly upper-single-digit for the last 9 out of 11 quarters. 7 quarters in a row, we delivered mid-single-digit growth or above to the conversation Patrick, we're having in ASCs, that is your business. So I love that business. Actually, I'll tell you without making any commitments, I'll be really surprised. We don't double the size of the business over the lives -- over the next 5 to 7 years through organic and inorganic means. And speaking of inorganic, that is the perfect platform to build new businesses. So we already acquired Paragon 28. There are all kinds of opportunities adjacency wise in that space. Yes, that's the most exciting -- one of the most exciting businesses that we have.

I'd love to bring up Paragon 28. I mean you guys -- you brought in. How is it going? How's the integration?

Better than expected. Paragon 28 is a company that has been delivering double-digit growth for a while. It's going to continue to deliver double-digit growth now that is part of Zimmer Biomet. It will contribute at least 270 basis points of revenue this year and again, meaningful growth in 2026. We have fully integrated now the Zimmer Biomet portfolio into that channel. We're not seeing any major disruption when it comes to our sales personnel. As we stated in the earnings call, we kept the entire commercial team, the commercial channel, so a lot of companies buy an asset, and they talk about keeping things separated, isolated and the culture remains. But then a quarter or 2 quarters later, everything is integrated. I'll tell you, we're not doing that. They have their own design centers, their own management team, their own quality management system. So we love what we're getting from Paragon 28, and I think it's a great proxy for future deals.

Does that matter for future M&A having a reputation for keeping people? Does it make it easy to retain people later?

100%. 100%, especially if you speak to it, right? So there are best-in-class examples of companies that have done that. We've struggled in the past. We have built best-in-class integration capabilities. And again, I think the folks on Paragon 28 will tell you they're happy with the fact that we kept them isolated. So yes, I do think that's definitely a competitive advantage for future attraction of deals.

Just for those in the audience, who might be less familiar with it. The Extremities business, for everyone is growing dramatically faster than like Hip and Knee and things like that. Why do you think that is?

They're demographics play a factor. So younger patients, sports people. They're in the 30s, 40s. We also have older people. So demographics, the volume is higher. The growth is much higher here, mobility and whatnot. Again, as I mentioned, SET is a bunch of things. You got anything from [indiscernible] repair to some sort of a shoulder issue where you have to do something around rotator cups and whatnot. Foot & Ankle is one of the fastest-growing segments. It's going to run 6%, 7% in the U.S., comparable number globally. These are very easy procedure -- that's when I say very easy procedure. The easier procedures to look to do. Most of them go to an ASC. So reimbursement is very high. So that's -- those are some of the reasons behind why SET grows at a faster clip than we plan.

Does it matter being part of an integrated business with a fully formed SET business, and that large joint -- did the synergies between those 2? Or should we just think of it [indiscernible]?

There is an element of category contracting, but I think that's overstated. I'll tell you, quality of the products is #1, right? So you have companies that are not going to do any publicity for competitors that have a great portfolio let's call it in sports medicine, and they got nothing else going on in recon, and they're doing really well. So the quality of the products, the innovation that you bring to market matters. Can you do some category contracting bundle altogether? The examples of that. I'll tell you, Patrick, that's not the #1 reason why an ASC or a hospital or a doctor or a group would select one company versus another one.

The -- speaking of acquisitions, Monogram love to hear more about from your perspective, excitement, and rationale, everything about that?

I got to be careful how excited I get. My lawyers remind me that we haven't closed the transaction yet, but I'll speak to being me and being excited about it. It's a great opportunity. It's a great opportunity. So I give a lot of credit to Stryker 10 years ago being visionaries and change the standard of care in core orthopedics, introducing Mako. And I think we at Zimmer Biomet have a comparable, if not bigger opportunity to the same. We're going to leap forward into the world of fully autonomous robotics. That brings us to Level 4, Level 5 automation where surgeons can now apply her or his cognitive function to doing something else. The robot has now done fully autonomous surgeries in India. We're going to bring this to market in every '27 if not late '27, early '28 for the autonomous, semi-autonomous early '27. All the due diligence we've done, we've been tracking this company for 5 years. It's been outstanding. So I think this is revolutionary. I do think -- we do believe that this is going to be a groundbreaking introduction in the wall of orthopedics. What I like about it is that we're not getting married to that one platform. We believe that optionality and category leadership in navigation is a way to go. If you want full automation, we're going to have only company will have it. If you want to have a portable handheld robot, you're going to have it through our exclusive partnership with THINK Surgical. If you still believe that a normal robot like ROSA is the way to go. We're going to have it, but invest on it to have CPS scan, non-CPS scan. If you think the robotics in all modalities is a waste of time and money and you do for customers believe that. We also have other modalities of navigation, whether it's also read through AI, whether it's mixed reality, whether it's lighter, cheaper navigation modalities. So by early '27, Zimmer Biomet will be the one company that offers all kinds of navigation, robotics, non-robotics to all kinds of customers around the world, and I think that's transformational.

How do you think surgeons would respond to automated -- just you can imagine that there might be for them a confidence in their minds?

Well, we have to work on the language because we're not selling a driverless taxi to a taxi driver and that's important to note. We believe that this is autonomous and autonomous platform that is surgeon enable. And again, this optionality, if you as a surgeon want to do less, you can do it. If you're going to get more involved, you can do it as well. But I think segmentation communications have to need to work on for the next-gen half. But the optionality is there. So we'll work on it, and I think we'll get it right. This technology monograph also has the capability of doing remote surgeries, do additional world where those studies are done remotely without anybody in the room, I don't want to be in the surgery myself. I'm old fashion, but who knows what the future is going to look like. I love the potential and the optionality, and then we need to be how we deploy it.

Makes sense. You guys have made some changes to the commercial organization. Can you give us an update on how that's going and how things are?

Yes. I'll start by saying that we've been doing this for a while. I guess in the Q1 earnings call, a lot of people got concerned on understanding right now, at this moment, we are restructuring our U.S. sales channel, what is time to do things differently. It's an evolution of what we've been doing for the last 6, 7 years, especially here in the U.S. We believe specialization is the way to go. We're going heavier in specialization. Why now? Because we have the full portfolio. We didn't have a full portfolio in sports, CMFP, foot and ankle, biologics before shoulder, we have announced. So #1 is specialization. We're going to have dedicated people. Wake up in the morning, do reconstructive specialization, data, digital technology solutions, et cetera, et cetera. #2 is this ASC conversation we're having. We are adding people into the ASC world and some of them come from the recall world. #3 is incentives. We have paid the runway in the past. We pay people with are growing. Now it's in a biome, if you don't grow, you don't get paid. It sounds like something simple, but as a change that we started to do for a variety of reasons, we slow down on it to the incentive plan is totally different. I don't want to ramble through a long answer. This is evolution or something that we started. It's going well or engagement rates remain very high. Our turnover rates remain very low. We're going to go faster at it.

People sometimes roll their eyes of these kind of questions, but you're both intense guys. How has the like culture in Zimmer Biomet now versus -- are you where you want to be?

I am excited where I want to be. I'm speaking of [indiscernible] privilege or pressure is a privilege and I think the pressure is on us to deliver. And we are making sure that we're sharing that pressure with the 2,500 sales reps that we have were in the U.S. Again, for a variety of reasons, the accountability, the focus was not there. Today is there. I love the culture that we have. I love where Suky and I are. And certainly we're excited about the future here.

There's a lot of focus that goes on U.S. and you guys actually saw a bit of an acceleration there in that side of me. Could you walk through what you're seeing in the market competitively and that drove that?

Yes. So you see the numbers. So we increased Q2 over Q1 by 150 basis points in knees. We said it before, I said again, you should see a very meaningful acceleration in the second half of 2025, as you'll see it. We had portfolio gaps. We were late to market with robotics, we're late to market with partial needs, we're late to partial cementless, we're late to market in the ASC in the standard of care. I can go and on. There is no excuses. We have a full portfolio. And that acceleration is going to continue to 2026.

The U.S. always gets a lot of focus, but what are thinking of the rest of the world, I'm curious about EMEA and APAC relatively?

So the U.S. had a lot of focus is 63% of our revenue, around 50% of our profit. So that's why we continue to invest and maybe the changes we're making. Outside of the U.S., from a macro standpoint, the markets, as I mentioned, are healthy. There's been some timing. So that's why the first half of '25 looks kind of unusual for international. We mentioned in the earnings call that was around 50 to 60 basis points of revenue coming from international that shifted from Q2 to Q3. That revenue will come in Q3. So we continue to be excited about the opportunity in China continues to be a question mark products, but net of China, I cannot think of any country that today would be a major headache.

Will come sounds like has come already.

It will happen in Q3.

Depending on what everybody like looks at, if you're running his eyes, left, right. Trying to get what I can... We -- I mean, and what about in terms like the base markets, like we had heard a little bit in EMEA, like some surgeries like not really quite picking up in the same way as the U.S., how have you felt out the base market?

Seasonality is not as steady as here in the U.S. for, again, a bunch of different dynamics. But yes, the market remains strong. I mean the waiting list in Europe are still compelling. Again, net of China, in Asia Pacific, all the markets are very strong. We are seeing growth in Japan in call it, upper single digit. Australia, New Zealand continues to go really well. And again, the core countries in Europe are pretty much the same as I was in '24 and '23. So no major changes there.

I think, if I could just add on that pricing an important point that is on brought up with the seasonality, we are seeing sort of normal seasonality. Just as a reminder, as you look at the back half of our year, Q3 in absolute dollars is generally a step down better growth for all the reasons that Ivan talked about a step down in absolute dollars and then a rebound in Q4 as that's our strongest quarter. And then operating margins will follow accordingly. Q3 being in line with 2024, and that will squeeze into the rest of the year and then cash flow should follow the normal cadence that Ivan talked about as well.

Yes, the usual.

We love the pricing dynamics outside of the U.S., they are being more in the right direction, which I didn't expect, and now we have 3, 4 years in a row and where pricing is a tailwind in the international markets.

What do you think is for them that? I mean it's -- everyone thinks of them as more budget strained.

Yes. I do think it's the company had earlier around the 85-15, actually in Europe, even with lower prices, the number is higher. So yes, I do think it's the efficiency that we bring through new technology, that dynamic of the 85-15 and new product introductions. The European markets are 5 years late because of MDR, so we're brining a new technology there.

How should we think about and how you're feeling about ROSA? I mean, I remember AAOS 2015 or '16 were commercials everywhere and getting it out there. How do you feel about it today?

We are married to ROSA for the long term. Again, that's another point of confusion. We announced a partnership with THINK Surgical a year ago, but it felt that we're going to make THINK surgical the platform, we didn't. Now we're announcing monogram technologies make no mistake, we're going to continue to invest in ROSA, because we live in category leadership. To that point, I mentioned earlier, we launched in ROSA optimize hopefully mid-November at the any of the society meeting. We have 6 different indications of ROSA that are going to hit the market in the next, call it, 2 years, with a least should of 3 in the next 18 to 24 months. ROSA is the #1 robot outside the U.S. because people out of the U.S. don't believe in CT scan as a preplanning tool. They don't like the radiation involved with that. The -- is not getting reimbursed in a lot of countries. Yes, it's completely procedure. So I don't want a way to say ROSA is here to stay. It looks of new indications coming up, north of 2,000 installations already, #1 [indiscernible] outside the U.S. #2 here in the U.S. but we made the ROSA for the long term.

How do you think about -- I mean a large range of motion lowdown muscular scene body can sort of see where the benefits come from that? Like how do you think about hip and shoulder and all different indications over time and how viable robotics are there?

We're really excited about what we're seeing so far with shoulder and the fact that in '26 will be a meaningful contributor. We're getting the surgery down to a science. We are the only company that can do reverse and anatomic shoulder rupture plastic, uses as a shoulder. The level of accuracy that we're starting to see with ROSA is very meaningful. And again, given the dynamic of ASCs, given the demographics that we spoke about, I do think that shoulder robotics can move at a much faster pace, penetration-wise than partial and primary needs did in 2015 onwards. We have a cheap application that we launched in '26 positive posterior Hip, which is meaningful outside of the U.S. We are working on other indications that are on disclose right now. But I do envision award where 1 day, most of these procedures will be done through different robotic or navigation applications that are being shoulder that being Hip already knees, for ankle, some modalities of sports, et cetera, et cetera. We're the #1 company in the world on diagnostic and treatment of epilepsy using ROSA Brain, which again is probably a product that we don't talk much about, but that's also a difference here.

I want to finish on the one I always finish on, which just like for both of you, what are you surprised you don't get asked about more or like another way, there's a lot of external focus on certain topics. How does that compare to where internally you really focus?

Yes. I have to reference we get on here. But what surprises the -- surprises me most is that investors still to realize this is a different company. And I guess quarter-by-quarter, we need to prove that to you. But this is a company that in 2019, we have a pipe of innovation had 4 FDA warning letters. We were just closing a monitorship with Department of Justice. We're paying debt down, had 0 changes of doing responsible diversification, we have all kinds of people and culture challenges. As we sit here today on September 8, we had the strongest pipeline in the history company. We have 0 warning letters from the FDA no compliance issues. We have some of the highest engagement scores in the history of the company. We've got the strongest balance sheet in the history of the company. We got a level of operational execution that we didn't see before. We need to prove it to you, but this is a total different Zimmer Biomet than the Zimmer Biomet that Suky and I joined back in 2018, 2019. So that surprises me.

That's a great summary. I think that's the most perfect timing.

Thank you so much, Patrick. Great to be here.

Thanks, guys.