Zimmer Biomet Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet third quarter 2024 earnings conference call. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, October 30th, 2024. Following today's presentation, there will be a question and answer session. At this time, all participants are in a listen-only mode. If you have a question, please press the star followed by the one on your push-button phone. I would now like to turn the conference over to David DiMartino, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Zimra Finance's third quarter 2024 earnings conference call. Joining me on today's call are Yvonne Tornos, our President and CEO, and CFO and EVP Finance Operations and Supply Chain, Sukhya Padhyay. Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please note, we assume no obligation to update these forward-looking statements even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements. Additionally, the discussions on this call will include certain non-GAAP financial measures, some of which are forward-looking non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating these measures is included within our second quarter earnings release, which can be found on our website, ZimmerBiomed.com. With that, I'll turn the call over to Yvonne. Yvonne?

Good morning, everyone, and thank you for joining today's call. Welcome, David, to your very first Zimmer Biomed earnings call. Truly lucky to have you. We love what you bring to the team already. I'd like to start today the way that I always do, by taking a moment to recognize and to show my gratitude to the over 18,000 Zimmer Biomed team members who each and every day across the globe move our business and our mission forward. Thank you for your commitment to the organization. Thank you for your tireless work. Thank you for your very strong performance. And most importantly, thank you for what you do for our customers and patients every single day. As I said in the past, And as I will continue to say as long as I'm here, the Zimmer-Baume workforce and the culture that we have truly is one of our key competitive advantages. During the call today, I'm going to cover four things. First, I'll give an update on the recent ERP implementation and the challenges associated with it. Secondly, I'll cover some general comments on the quarter and the broader market dynamics. I'll move to then talk about a brief innovation overview. And then fourth and last, I'll close with a usual update on our three strategic priorities. After this, Suk is going to cover our financials in more detail, and we'll make sure to leave plenty of time for questions at the end of the prepared remarks. To begin, I'm very excited to report that we've made great strides in managing the ERP implementation challenges outlined in early September. Through the dedicated work of the Zimmer-Baume team and our external partners, we now expect the impact of this challenge in the second half of 2024 being lower than the 100 basis points of annual sales that we initially communicated. And we also fully expect to be back to normal shipping levels by the end of the year 2024. Turning to results, in Q3, we grew sales at mid-single-digit level, including strong results in knees, in hips, and in sets. This quarter, the third quarter, now marks the 11th consecutive quarter of mid-single-digit or better constant currency revenue growth for Zimmer Biomed. In addition to the strong revenue performance, adjusted EPS once again grew faster than revenue. Our combined knee and hip businesses, what we call our reconstructive platform, grew in the mid-single-digit range globally while SED delivered upper single-digit growth aided by strong performance across our key growth drivers. Suk is going to cover this later, but I'm very proud of these results, and specifically, I love the consistency of growth in the key categories. Beyond commercial execution, our performance was fueled by mid-single-digit growth in our end markets, which we anticipate continuing based on all the analytics that we have at hand. An aging and increasing active population combined with technological advancements, driving procedures to outpatient settings like the ASC here in the U.S., accelerating recovery times, and best-in-class outcomes should continue to provide tailwinds to market growth in the coming years. So again, we see the markets being healthy, and we don't foresee these markets slowing down. From an innovation standpoint, Zimmer Biomed has the most robust product cycle in recent memory, with over 50 meaningful plant product launches over a long-range plant horizon. I'm particularly excited about the momentum we are generating in our hips platform as evidenced by the improved results in this business, and particularly in the U.S., where we delivered almost 5% growth in the third quarter. With Z1, our new triple taper hip stem for anterior hip implant procedures, and with our surgical impactor hammer, as well as comprehensive navigation, robotics, and platforms in navigation like OrthoGrid, we are going to continue to be on the offense when it comes to gaining sharing hips. So great innovation, and we expect consistency in execution over the next several quarters. In this, Orsa Mendes Persona Oceotide continues to gain rapid traction while the recently launched Persona IQ Stubby, the short stem for Persona IQ, is driving continued uptake of this differentiated technology. Early in the launch, the feedback has been superb. Within extremities, ROSA Solder has the potential to change the treatment paradigm in solder implants. It's a platform that allows for reproducible, anatomic, and reverse procedures. Finally, Zimmer Biomed is the only orthopedic company offering both a CT scanless robotic system in ROSA And through our recent partnership with Think Surgical, we also offered a smaller footprint, handheld CT scan-based system in T-mini. So when it comes to navigation and robotics, we got the most comprehensive suite of solutions. Beyond all of this, we're expecting to launch a cadre of new robotic applications in the short to mid-term with and without CT scan capabilities, as well as other differentiated features. In the ROSA franchise alone, we expect to launch three new indications in the next 18 to 36 months. While the underlying business performance remains strong, the team continues to execute on the same three strategic priorities that I have outlined in the past, those being people and culture, which is foundational to everything that we do, operational excellence, innovation and diversification. As I said at the beginning of the call, people and culture are key competitive advantages for Zimmer Biomed. Recently, we appointed new leadership in our HIPs, NIS, SET, in our ASC, and in our digital technology and solutions businesses. I'm excited about these leadership changes, and I'm confident that the growth and that the leadership of these new individuals is going to accelerate. In addition, we have upgraded talent in critical areas like IT, information technology, and operations. On the second imperative, operational excellence, we are maintaining expectations for the long-term financial commitments that we outlined at our investor day earlier in the year. With the terrific progress we made towards the resolution of the ERP issues, we feel even more confident in delivering mid-single-digit revenue growth, adjusted earnings per share growth of at least one and a half times revenue, and free cash flow growing at least 100 basis points faster than earnings throughout 2027. So again, the same commitments towards revenue, EPS, and free cash flow remain. Finally, we continue to make progress in diversifying our business to increase the company's growth and profitability profile. This includes a highly disciplined approach towards M&A as well as internal capital allocation dynamics. To that extent, the value of Zimmer Biomed's pipeline of new products expected to be launched over a long-range plan is more than twice the value that it was just a short five years ago. And 80% of these new product launches are accretive to the Zimmer Biomed WEMGAR of 4%. In conclusion, we're very proud of the progress in our organization, and we look forward to continuing to execute above and beyond expectations. I love the fact that we're impacting the lives of millions of people, and I'm deeply inspired every day in knowing that my teammates and I are living the Zimmerman mission of alleviating pain and improving the quality of life for people around the world. And with that, I'll turn the call over to Suki. Thank you very much.

Thanks, and good morning, everyone. As Ivan mentioned, we closed another solid quarter, showcasing the resilience and winning attitude across our nearly 18,000 team members. Despite ERP-related headwinds, we grew sales over 4% while maintaining steady operating margins, generating $1.74 in adjusted earnings per share and $310 million in free cash flow. Given the challenges we have outlined related to our ERP implementation, we are now updating our 2024 full-year guidance, which I'll touch on later. I would like to start by discussing the ERP implementation. As Yvonne reviewed, we cut over to a new system in the third quarter for North America distribution, which resulted in slower shipping levels of products to our customers. We disclosed this disruption in early September and initially noted that the ERP-related headwinds could impact up to 1% of annual sales in the second half of the year. Through the excellent work of our team members, we now believe the impact will be 60 to 80 basis points of annual sales split about evenly between the third and fourth quarter. We continue to expect to be back to normalized service levels exiting 2024. Moving on to results. Unless otherwise noted, my statements will be about the third quarter of 2024 and how it compares to the same period in 2023. And my commentary will be on a constant currency and adjusted operating basis. Net sales were 1.824 billion, an increase of 4% on a reported basis and 4.1% excluding the impact of foreign currency. Consolidated pricing was 70 basis points positive in the third quarter, marking the third consecutive quarter of positive pricing. Our U.S. business grew 2% and international grew 7.1%. Growth in the U.S. was driven by strong performance from HIP and SET partially offset by other, which saw the largest impact from the ERP headwinds. Our international business continues to perform well with strength across knee and set. Global knees grew 5.5% in the quarter, with U.S. growing 2.9% and international 9.2%. Our international business continues to benefit from our persona portfolio and our ROSA robotics platform. Global HIPs grew 3.7% with the U.S. growing 4.9% and international 2.4%. As Yvonne mentioned, with the launch of Z1, accelerating rollout of Hammer, and closing of the OrthoGrid acquisition, we now have a complete product portfolio in HIPs and are on the offensive. Next, our SET segment grew 7.3% led by CMFT, Sports, and Upper Extremities. which all grew between mid single digits and high teens. This marks the fourth consecutive quarter of at least mid single digit growth in SET and a trend we expect to continue. Finally, our other category declined 9.5%. The decline was driven by a combination of difficult comps from the prior year, as well as our surgical business being disproportionately impacted by ERP related challenges. Turning to our P&L, We reported gap diluted earnings per share of $1.23 compared to gap diluted earnings per share of 77 cents in the prior year. The increase in gap earnings was driven by higher revenue combined with a lower tax rate and share count. On an adjusted basis, we delivered diluted earnings per share of $1.74 compared to $1.65 in the prior year with earnings growing faster than revenue. Adjusted gross margin was 71%, and adjusted operating margin was 26.3%. Despite the ERP-related headwinds in the quarter, gross margin and operating margin were largely in line with the prior year. Net interest and other adjusted non-operating expenses were $51 million in the quarter, up slightly on higher net debt and interest rates. Our adjusted tax rate was 17.7%, higher than 2023 due to the implementation of Pillar 2, and fully diluted shares outstanding were $203 million, down year-over-year due to share buybacks. Turning to cash and liquidity, we generated robust operating cash flow of $396 million, free cash flow of $310 million, bringing year-to-date free cash flow to $652 million, and ended the quarter with $569 million of cash and cash equivalents. Aligned with our capital allocation strategies to return at least 65% of free cash flow to shareholders over the LRP, we repurchased approximately $600 million in shares during the third quarter. Through the end of October, we have repurchased over $850 million in shares in the open market, and we maintain flexibility to continue our share repurchase program. Regarding our outlook for the rest of the year, Given the ERP-related headwinds, we are updating our full-year financial guidance. We now expect 2024 constant currency revenue growth of 4.25% to 4.75%. With recent exchange rate fluctuations, we now anticipate about a 75 basis point headwind from currency in 2024, resulting in reported revenue growth expectations of 3.5% to 4%. Also, we now expect full-year pricing to be flat to 50 basis points positive. For margins, we anticipate full-year gross margin to be down slightly from 2023, while operating margin is still projected to be up year over year, marking the fourth consecutive year of operating margin expansion. We are reiterating our expectations for net interest and other non-operating expenses at about $205 million and an effective tax rate of 18%. Fully diluted weighted average shares outstanding for the year are expected to be about $204 million, resulting in adjusted diluted earnings per share of $7.95 to $8.05. And we expect four-year free cash flow to be about $1 billion. In summary, despite the challenges, this was another solid quarter for Zimmer Biomet. With that, I'll turn the call back over to David. Thank you, Sukhi.

Operator, let's open it up for questions. In order for us to take as many questions as possible, please limit yourself to one question. Operator, please go ahead.

Thank you, sir. Ladies and gentlemen, at this time, we will now begin the question and answer session. Analysts are allowed to ask one question and one follow-up question. One moment, please, for the first question. We'll take our first question from Travis Steed with Bank of America.

Hey guys, thanks for taking the question. I wanted to understand first, you know, why are you cutting the guide by more than the ERP issue on an organic basis for 2024? And how to think about 2025 and ERP? Is there a catch up there? Should we think about 2025, kind of the low end of your 4% to 6% LRP? Thanks a lot.

Thank you, Travis. Ivan here. Good morning. So just on the first part of your question on the guidance for 2024, look, listen, we're going to be somewhat conservative when it comes to the year and allow us to be conservative given the PTSD, if you will, of the recent ERP challenge. In Q4, all kinds of things happened. We want to see where we end up with pricing. Pricing has been positive for the entire year. Let's see where we end up in Q4 with all the puts and takes that happen around rebates, et cetera, et cetera. I want to make sure that we see the commercial execution that we need to see around new product introductions. We got three very meaningful new product introductions as we speak. We're late to get some of the sets out given the challenges with ERP. So, again, I want to get at least a solid month, month and a half before I get too positive on Q4. And then, look, there are some macro factors early in the quarter. We saw some disruption with the hurricane and whatnot and the IV bags. We believe those are going to come in within the quarter. As a matter of fact, we are seeing those cases coming back already in the quarter. So allow us to be somewhat conservative, and we'll see what we end up in Q4. Relative to 2025, we're very positive. The ERP constraint or challenge is well contained within the year. We'll update you in early 2025 when it comes to what 2025 is going to look like, but I will say today we're feeling very positive, given new product introductions, the resolution of the ERP, et cetera, et cetera. Thank you.

Great. Thanks a lot. I'll take the one question. Thank you.

We'll move to our next question from Larry Beagleson with Wells Fargo.

Hey, good morning. This is Vic Chopra in Polari. Yvonne, can you provide us with your updated thoughts on M&A in areas of interest? You know, why haven't we seen more deals from you given that valuations have come down? Thank you.

Thank you for the question. Let me start with the latter part. So why have you not seen more deals? We have said all along that we don't need to do deals to remain a mid-single-digit revenue grower over the life of the long-range plan. Eleven quarters now we've been growing mid-single-digit revenue or above, delivering most of the time EPS faster than revenue and generating meaningful cash flow. Obviously, we're excited about M&A and the potential to diversify even more beyond the 4% WMGAR. The deals need to make strategic sense and financial sense. Valuation are down. Yes, they are. But I will tell you, as we go through the filters, there is not a single deal that is jump on us saying we have to reallocate capital and do this deal immediately. We continue to evaluate deals, deals in higher growth segments within Recon, opportunities within our said business, and things that are in the ASC space. We don't deal that exciting. OrthoGrid is the fastest navigation company today in the U.S., We've done some tacking scenarios of SET. And when the right deal comes our way, we will jump on it. Thank you for your question.

We'll move to our next question from David Roman with Goldman Sachs.

Thank you. Good morning, everybody. I was hoping you could dive a little bit deeper into the reconstructive businesses and maybe starting with NEIS, where I know you had called out some supply chain issues. dynamics last quarter that negatively impacted your U.S. business. That looks to have turned around here. Have you fully recovered from that? And maybe you could take us through a little bit more what's going on outside the U.S. because that also looked to be an area of strength this quarter. And how should we think about the geographic performance across recon on a go-forward basis here?

Yeah, thank you, David. So let's start with NIS overall. So international grew almost 10% in the quarter. In the U.S., we grew 3%, constant currency, that is. The challenges that we highlighted in the Q2 call, they were pre-ERP related. It was revision shortage that we had that has been resolved. So I will tell you, as we see here right now, in the year, there are no supply constraints when it comes to order or need performance. The one thing that did slow down or knee growth in the quarter relative to the U.S. is the ERP challenges. While the impact of ERP was primarily in other, we could have had more Persona Oshetai sets going into the market. We could have done a better job in pulling through the multiple Rosas installed in the U.S. So that has been the challenge. As we enter Q4, we're excited about where we are with these, and we really look forward to 2025.

Great, thanks so much. Thank you.

We'll move to our next question from Matt Nixick with Barclays.

Sir, your line is now open. Matt, we're unable to hear you. You may be muted. Operator, we can go to the next question.

We'll move to our next question from Robbie Marcus with J.P.

Morgan.

Hi, this is Alan on for Robbie. I wanted to dive a little bit deeper into, you know, the guidance question that we kind of opened the Q&A session with. You know, just because you, you know, despite the ERP challenges that you had in the quarter, you ended up, you know, beating your, what kind of where I think expectations were for constant currency and organic guidance for the quarter so Could you just help us, you know, a little bit more to kind of quantify some of the headwinds that you're being a little conservative on, whether that's, you know, the decision from the hurricane or the IV bags, because, you know, you're seeing those cases coming back through. Just help us kind of bridge the gap between, you know, the beat that you had in this quarter, the fact that ERP challenges are now, you know, coming in better than expected, and, you know, the 100 basis points lowered guide. Thank you.

Hey, thank you, Alan. I'm not sure that I can offer any more color than what I offer. There is a level of conservatism given the multiple variables. Again, we just reactivated shipping volumes. We got through the ERP. We want to make sure that we like what we see. And again, it's no more complex than that. Don't read too much into it. We got one month behind in the quarter. We like what we see. And again, let's see what happens in November and December. But nothing else to add on the guidance question.

We'll move to our next question from Matthew O'Brien with Piper Sandler.

Morning. Thanks for taking the question. We'd love to talk a little bit about the set performance in the quarter because that was strong. It was a two-year stack acceleration. And as I think about that category, the growth that we're seeing overall across the category, plus the margin profile, I'm just curious what that can do for You know, as we head into 25, you know, can it really help drive us to that mid-single-digit, you know, even upper end of the range of 6%, and then what it might do for the profitability profile of the business as well? Thanks.

Sure. I'll cover the first part, and I'll let Suki elaborate on the margin opportunity here we said. This is the fourth quarter in a row where we have grown a set at mid-single-digit revenue or above. Actually, this quarter is low upper single-digit. We typically don't talk about the geographic split U.S. or U.S. for set, but I'm pleased with the U.S. set performance where we grew 5% in the quarter. Once again, virtually all of the six drivers we've seen set grew above our expectations. The three growth drivers are set. Sports medicine, shoulder, and CMFT continue to perform very strongly. As we've been saying for a while, here is where we have invested a lot of innovation over the last three years. And what you see now is the early results of all those launches. And, yeah, we do believe that the growth is sustainable as we get into 2025 and 2026. As we highlighted in the investor, at the investor day, there's a category that has to be growing at this pace, if not above, and there is plenty of new products to get there. Shuki, you want to comment on the margin piece?

Yes, I won't give too much detail on 2025, but overall, it's a very attractive segment, as Ivan said, from a growth profile perspective, but also from a margin perspective. Margins in those key three businesses that Ivan talked about are above our overall company average, and so that's a good thing. They are slightly under our recon business, but again, from an overall growth and EBITDA perspective, we're very excited about how that business is performing and where it's going.

One last comment I'll throw in there related to the financial performance. Typically, this business, these segments require less instruments and working capital. So, again, it's another enabler of free cash flow growth over the life of the plan. Thanks for the question.

Thank you.

We'll move to our next question from Chris Pascal with Nefron.

Thanks. You announced that you're going to be rolling out Z1 in a couple of weeks. Our data suggests that triple tapered stems have become a big portion of the U.S. hit mix for your competitors. So it would be great to hear how you're thinking about that opportunity as you plug that hole in your portfolio. And could you also talk about what your supply situation is going to look like with Z1 initially and at what point you could have broad availability of that product in the U.S.? ?

Thank you, Chris. So first things first, we have launched already Z1. We're going to embark on the full launch of the product next week in Dallas at the Hipani Society meeting. We have trained the sales force. We're going to continue to train physicians. We believe this category, to your point, is going to become the standard of care. It's one category where we didn't play, but it's more than Z1. It's the combination of Z1, the triple taper, along with surgical impactors, Hemer, which is now also fully launched. That's why we deliver 5% growth in the U.S. in Q3. And then Navigation, which is robotics as well as surgical guidance by OrthoGrid. So I think the combination of those three products and more to come is what's going to get us to get back to gaining market share. It will be the standard of care. We're going to be on the supply side. We're going to be what we need to be as we enter the year 2025. So we don't expect to have a shortage of supply. As a matter of fact, we won't have a shortage of supply to make sure that it's a full launch all the way from January 1st, 2025. Thanks for the question, Chris. Thanks.

We'll move to our next question from Steve Lichtman with Oppenheimer.

Thank you. Good morning, guys. Yvonne, you talked about 50 meaningful product launches planned over the long-term plan. Near-term, you've highlighted Persona IQ, Rosa Shoulder, HIPNEW products. Are there pipeline products you'd highlight in the medium term that could be meaningful? You mentioned Rosa Indication Expansion. Anything else you can talk about on pipeline drivers would be great. Thanks.

Yeah, absolutely. And I'll try to keep it short because it can be a 45-minute discussion right here on innovation. My most favorite topic, and certainly something we didn't have three years ago. So you know the usual suspects in the short term. As you think about mid to long term, Oxford Partial Cementless, which is a mid-2025 product, is going to be the only TMA-approved partial cementless meat in the U.S., This is a product, Steve, with 60% market share in the European market. It has the longest data on joint survivorship, according to the U.K. registry. So in a world of ASC expansion, we deem this product to be extremely meaningful. Rosa Solder picks up in 25. We do believe in late 25 and 26 is going to be one of the major growth drivers of the company. I like where we are with the smart implants. It took a while to get there. But with the recent launch of the short stem, what we call Persona IQ Stubby, unfortunate name, by the way, we're going to see meaningful adoption in 25 and 26. To your point, there are three ROSA indications coming up. They're going to hit mid-25, 20, 26 that keep the acceleration going. In hips, that would be nice. In hips, out of the launch of Z1 hammer and navigation like OrthoGrid and Rosa Posterior in Europe, which is going to get launched soon, we'll be first to market with coated implants, which addresses a meaningful problem when it comes to infection in hip surgery. So we expect to be ready to launch coated hip devices late 25, early 26. And again, that addresses a category that for the most part has not been touched. And then instead, it will be all kinds of things. But beyond Rosa's shoulder, which I already mentioned is going to be a meaningful growth driver, you've got the stemless shoulders, you've got next-generation identity, and all kinds of other products. So, again, I could spend an hour, but the cycle of innovation is not a one-and-done 25 opportunity. There are 50 new products over the next three years, and a lot of them are very meaningful. Thanks for the question. Great.

Thanks, Yvonne.

We'll take our next question from Vijay Kumar with Evercore ISI.

Hi, this is Sophia Knopp on for Vijay. I have one quick one on 25. I was wondering if you guys could talk about the assumptions around gross margins and operating margins. You had previously called out some gross margin headwinds for next year. Do you have any updated thoughts on those headwinds and if we should expect to see operating margin expansion next year? Thanks.

Yeah, thanks, Sophia. So, first of all, Yes, we continue to expect to see operating margin expansion into 2025. And really just going back to our LRP that we unveiled at our investor day back in May, we expect to generate at least 30 basis points of operating margin expansion per year, if not better than that. Inside of gross margin, I think our comments are still consistent with our thinking into 2025. There are some FX headwinds. that occur that are going to peel off into 2025. So that will be a headwind. But operationally, we continue to make really good progress in containing our costs. We're also seeing a better pricing environment. I'm not saying it's going to be positive in the next year, but overall, it's been much better than what we had anticipated coming into the year. So there's a lot of puts and takes onto the gross margin line. We still expect it to be relatively stable opposite 2024. But in the backdrop of all that, we are still committed to and have a very clear pathway to expanding operating margin next year and beyond.

Great. Thank you very much.

Our next question comes from Richard Newenter with Truist Securities.

Hi. Thanks for taking the question. I was wondering if you could comment on T-mini and how – how that collaboration is progressing for you, particularly in the ASC setting, even if anecdotal feedback, I know it's early in that relationship, but would love to hear what kind of momentum that might be able to generate for you going forward and what kind of impact it's had so far. Thanks.

Thank you, Richard, for the question. It's another exciting partnership that we have going on that gives the company optionality. So there is a segment of customers that think that footprint is important in robotics, primarily in ASC. So T-mini does give us that optionality. There is a segment of customers that prefer that CT scanning capabilities when they do robotic cases, and T-mini give us that opportunity. To your point, early in the launch, we have already seen some conversions of customers that have come to Zimmer Bauman to use that type of robotic application, with the world's number one implant in this. The partnership is giving us that optionality. The data so far suggests that this is a meaningful opportunity. We're going to be doing additional training next week in Dallas. And, again, we like the fact that we have the portfolio that we have that gives optionality across the board. So good data so far, and we'll continue to keep you updated on it.

We'll move to our next question from Jeff Johnson with Baird.

Thank you. Good morning, guys. Maybe a two-parter here, if I could. Just one clarifying just on the selling days. Can you just remind us, 3Q, 4Q, and for 2025 versus 2024, what selling days look like? But more importantly, Yvonne, maybe I think at your analyst day you had just performed or surgeons at Mayo had just performed maybe the first couple cases of using Rosa's shoulder. Any more anecdotal updates from what you're seeing on Rosa's shoulder from some of your surgeons, how many cases have been performed, and what kind of early learnings are? Thank you.

Hey, Jeff. Good morning. It's Suki. On selling days in the quarter, it was about a day of a tailwind for the full year. It's not meaningful. And for 2025, we'll provide that update when we give guidance in the first quarter, but we don't see it as being material.

And then, Jeff, on Rosasolder, we've done now hundreds of cases, continue to validate the value proposition of this product. We said all along that it was going to be a limited market release. Beyond Mayo, we are now in more institutions. And the feedback in terms of the opportunity continues to be strong. This is a product that we believe can change the standard of care in soldered arthroplasty. The robot does offer the optionality of doing anatomic or reverse solder cases. It is extremely accurate. You can do surgeries impacting the glenoid, reaming the glenoid. You can get into complex humeral resections. It is efficient. Some of the early feedback is that you can cut your operating time meaningfully. So one of the claims would be faster surgeries. With more accuracy, that also equals faster recovery times. And it's part of the CBH solar ecosystem. It leverages the data we collect before surgery and during surgery, which enables better post-surgery recovery. So, again, first-to-the-world technology. We knew we were going to take our time, but so far we like what we see, and we'll continue to keep you informed in terms of this launch. Thanks. Thank you.

Our next question comes from Caitlin Cronin with Canaccord.

Hi, thanks for taking the questions. Yeah, I'd like to focus a bit on pricing. I think it was positive again this quarter. Could you provide some more color on what you're seeing in the U.S. and also the change in the failure expectations for pricing?

Yeah, hey, Caitlin, it's Suki. So, you know, the third quarter marks the third consecutive quarter where we've actually had positive pricing at the consolidated level across the entire company. Inside of that, the U.S. was down modestly, but still well better than the historic average. Asia Pacific was up slightly, and we saw good continued strong performance in EMEA. There's really three factors there. First is around market. We just think structurally the market's in a better spot relative to pricing. One, the value of our products and solutions is being rewarded by the marketplace, and two, I think, you know, relatively rational behavior across the larger med tech segment. Secondly, structurally, we've made a lot of improvements inside the company around strategy, governance, and execution and incentives around pricing, and so we're seeing better performance because of that. And then third, we're seeing some opportunistic price taking in certain areas where we see the opportunity and the advantage there. So all of those combined have led us into a really good spot. We do think we'll be at least flat, probably positive for the full year. Whether that's sustainable or not, we think a lot of those variables I talked through are sustainable. Others, you know, we'll just have to wait and see. Our planning assumption throughout the LRP is that we'll be at about 100 basis points of pricing erosion. So this year is a good starting point, and hopefully we can beat that long-term look.

Awesome. Thanks. We'll take our next question from Mike Mattson with Needham & Company.

Yeah, thanks for taking my questions. I guess I just want to ask one on China. Some of your competitors talked about continued pressures over there from the volume-based purchasing. What sort of impact are you seeing there, I guess? Thanks.

Thanks, Mike. So starting with a data point, China is around 2% to 3% of global sales for Zimmer Biomed. We've been monitoring the situation in China for the last four years. We understand fully the impact of volume-based procurement. We have the right level of investment with the right level of returns. Right now, we've not seen anything that can change the way we think about revenue contribution from China in the next three or five years. I'm actually going to be in China next week myself. So staying very close to the situation. We don't have a large capital footprint like some of the other meta companies have reported. So we don't depend on capital sales there. And again, the expectations that we have internally, that we have conveyed externally, are well met when it comes to China.

Thanks for the question.

We'll take our next question from Shigun Singh with RBC Capital Markets.

Great. Thank you so much. I had two quick follow-ups. On M&A, you did note that you don't need to do large deals to maintain that mid-single-digit growth outlook. And I was wondering, you know, how do you think about diversification and pushing that top line beyond the mid-single-digit growth longer term? And then just to follow up on 2025, is it possible for you to share anything on sales and margin cadence As we move through the year, you know, first half, second half, you know, could you be at the upper end of that mid-single-digit range, just give an easier comp, you know, possibility to get some lost sales due to ERP implementation in 2025? And then you also called out Rosa's shoulder, that it would be a meaningful contributor. So if you can just help us bridge that, that would be helpful. Thank you for taking the question.

Thanks, Sargun, and great to hear from you. Let me make the second question answer very succinct. We're not going to get into any of that. We'll get into it in early 2025. We'll talk about revenue. We'll talk about margins. We'll provide some quarter on phasing and whatnot. So, today, the only thing I'll say, the only thing we'll say about 2025 is that we're excited. We're excited about the innovation. We're excited about how we close the ERP challenge in 2024. And, again, we'll talk about 2025 when it's time to talk about 2025. On your first question about M&A, what I said is we do not need to do it, but certainly we like to do it. We got the optionality from a balance sheet standpoint to do it. One of the goals that we highlighted in New York at Investor Day is to move from the current WMGAR weighted average market growth rate of around 4% today for us to 5%. And clearly the organic pipeline is going to get us there. launching all these products instead that I mentioned, but we do need to do something inorganically. We're going to continue to assess those opportunities, and when they do make sense strategically and financially, we'll act on those. Thanks, Agun.

Thank you.

I believe that is the last question. Do we have any more questions, operator?

There are no further questions at this time.

So then I'd like to close the call anchoring my closing remarks on maybe four words, grateful, proud, relief, and excited. So on the grateful front, I'll close the call the way that I started by thanking the Zimmer Biomed team for their commitment, their passion, their resilience. It's been quite a quarter with the ERP Challenge, so I'm really grateful to all of you. I'm proud of the work that we've done in the quarter to mitigate the impact of this ERP challenge. Frankly, that's a fair word. I'm relieved that this has turned to be a short-term issue versus being something that could have impacted the company for the long term. And then my fourth and final word here, I'm really excited about this innovation cycle that we're going through. The pipeline is strong. I know we're going to remediate some of the commercial execution challenges we have had in the past. And a combination of innovation and best-in-class commercial execution is going to enable Zimmer Biomed to deliver on the growth that we know that we can deliver. Thank you very much.

Thank you again for participating in today's conference call. You may now disconnect and have a great day.