ZBH - NYSE

Good morning, ladies and gentlemen, and welcome to the

Thank you, operator, and good morning, everyone. Welcome to

Hey, thank you, Keri, and thanks, everyone for joining the call here this morning. I like to start the way that I typically do, taking a moment to recognize, to show my gratitude to the almost 20,000

Thanks, and good morning, everyone. As Ivan mentioned, our fourth quarter results ended a successful year for

Thanks, Suky. Before we start the Q&A session, just a quick reminder to please limit yourself to a single question and one brief follow-up so that we can get through as many questions as possible during the call. With that operator, may we have the first question, please?

We'll go first to Larry Biegelsen with Wells Fargo.

Hi, good morning. Thanks for taking the question. Ivan, congratulations on a nice first year here as CEO. I'd love to ask about the 2024 guidance. Just talk about the key assumptions for the 5% to 6% constant currency growth in 2024. What you're assuming for the recon market. And Ivan, talk about your guidance philosophy. Have you incorporated any conservatism in the guidance? What would get you to the high end of the range? And just quickly, Suky, on the buyback, the $500 million, does that imply that it's hard to find good M&A targets? How should we interpret that? Thanks for taking the question.

Hey, thank you, Larry. Always great to hear from you. So I'll take the first two parts and then Suky can talk about the rest. So embedded in the guidance for 2024, which we're very confident on the 5% to 6% is macro and micro reasons. So from a macro perspective, by now you heard from most of our peers, the markets are very healthy. We believe beyond the backlog, the markets are going to continue to be healthy. You got better patient demographics, younger patients; you got the dynamic of cases moving into an ASC. You got more days of surgery in the U.S. where it's not just two days you see in three days. You've seen shorter, better rehabilitation processes. I can go on and on, but the markets are very healthy. And then from a micro perspective, we got a cadence of new product launches. Most of them are going to be very meaningful as you hit the second semester of the year. We got three new product launches in hips early in 2024, which again will be more material later in the year. We launched in ROSA shoulder. We got a cadence of new product introductions in S.E.T. We're going to continue to increase or penetration in cementless and ROSA. So again, the combination of new product launches, great commercial execution, amplified by the healthier market dynamics, gives us confidence on a minimum 5% and a range of 5% to 6%. Relative to my philosophy when it comes to guidance is very basic. We make commitments and we don't miss them. So we study the different dynamics. We study where we're at. We know that operationally we're in a better place. We don't have the headwinds that we had in 2023 around supply and whatnot. So my guidance represents or exemplifies my philosophy of making commitments and delivering on those commitments. I'm not going to comment today on whether there is opportunities to beat and raise for the year. I just leave it at my philosophy is to make commitments and deliver commitments, and these are very well studied commitments. So with that, I'll pass it on to Suky for your second question.

Yes. Hey, good morning, Larry. Thanks for the question. I say, first of all, the $500 million share buyback; I think demonstrates our confidence in our outlook in the business. And the short answer to your question, does this imply some deterioration in M&A targets? And I would say absolutely not. I think based on where the company is from a firepower perspective; we feel that we've got the balance sheet strength and power as well as the forward-looking results. To really do both, we still will prioritize smart M&A as Ivan has talked about; we still favor tuck-in acquisitions to mid-size acquisitions. But even in the backdrop of doing heightened level of share buyback, we still see very significant M&A firepower to execute that strategy as well. So short answer again is no. We don't see this as any type of deterioration in targets.

All right. Thanks for taking the question.

Thanks, Larry. Yes, thanks so much. Katie, can we go to the next question in the queue?

We'll go next to Matthew O'Brien with Piper Sandler.

Good morning. Thanks for taking the question. Just maybe start a little bit, Ivan or Suky on the knee performance in this quarter. It was a little bit below what we were expecting, still better than one of your competitors, but below another one on a two-year stack basis, it's not quite 50% of sales, but close to it. So I would anticipate that that's going to need to see very good performance here in 2024 in order to hit the guidance range, which I think is maybe being questioned a little bit this morning. So what is it there specifically between cementless, between robotic, between Persona IQ that gives you the confidence in the knee franchise outside of the macro environment here in 2024? And then I do have a quick follow-up.

Thanks, Matt. So performance relative to the quarter, we're very pleased with the quarter. We perform in line with our expectations for knees and frankly for the entire business, and for the year, it was a solid year with a knees growing double-digit and the entire business growing 10.5% with nice EPS expansion. We really don't pay acute attention to what happens to one quarter. I know that it's our job to do that, but we just don't. The 60 to 62 working days in a quarter, all kinds of volatility, then you add comps. So when it comes to performance, we look to 8 to 12 quarters. And if you do run the analysis 8 to 12 quarters, you're talking about knees, but take a look at S.E.T. hips and whatnot, the performance is there. Speaking of volatility in Q4 for knees, we did see in the U.S. we did see some tons of orders. That impacted some of our largest IDNs here. We also had, let's remember, some tougher comps versus Q4 of 2022 particularly in the U.S. where we were 500 basis points ahead of our strongest competitor in knees. And again, if you look at Q3 that's a quarter where both the knees and hips we outperformed all competitors in the U.S. So again given all this volatility, all these ups and downs we just don't pay attention to one particular quarter. We look acutely at the trends and the trends do show that, 50 years later, we continue to be the number one player in knees and we continue to gain market share. Relative to the second part of your question around 2024, what gives us confidence around the guidance is the fact that we continue to see increases in cementless penetration. We continue to see increases in ROSA penetration. We have solved the backorder challenge that we had in this, which was a headwind for many periods in 2023. And we've seen this great commercial execution in the ASC. So we're very confident about where we are in knees and we are very confident around the acceleration in knees going into 2024.

Appreciate that. Follow-up is just on there's a lot of good things coming this year as far as new products, et cetera. But you're trying to lower inventory levels significantly, 50 days of ton in this space. And then, the restructuring as well. Those -- how you factored in those potential headwinds in 2024 and even into 2025 in terms of potentially some lost revenues or dislocation you may suffer as a result? Thank you.

Thank you. Well, let me just begin with a simple answer. Anything and everything we're doing, restructuring wise and inventory management wise is embedded in the guidance we give it. So that's part of that. In terms of inventory management or inventory reductions, we're going to be bold but not reckless. So we're not reducing inventories in the key categories. We actually are making sure that inventory is what it needs to be for those key brands, whether it's Persona, whether it's the key components in hip, whether it is the key components in S.E.T. This is a lot of the leftover from the integration that we didn't do. So the inventory reduction is going to be in non-critical areas, frankly, in non-critical countries. So again, we're doing this thoughtfully. In terms of the restructuring, the reductions that we announced this morning, these are happening in back office. I will tell you virtually all reductions are non-customer facing. And again, the changes we make in inventory and people are embedded in the guidance that we're giving.

Thanks, Matt. Katie, can we go to the next question in the queue, please?

We'll go next to Robbie Marcus with J.P. Morgan.

Great. Thanks for taking the questions. I want to ask on S.E.T. and other. Those were the two line items that beat versus the Street. Was just hoping you could breakout some of the trends there, what did well, what might have underperformed, if anything, and how we think about those different line items as part of the guide in 2024 and how much of the strong growth is coming from that versus hips and knees. Thanks.

Hey, thank you, Robbie. So solid quarter for S.E.T. frankly, solid last semester of 2023 for S.E.T. growing around mid-single-digit, around 5%, and committing to growing mid-single-digit or above in 2024. The key drivers are the use of suspects. We continue to do really well with upper extremities growing upper single-digit, double-digit in most geographies, that's new product launches, that's focusing the ASC, that's stable supply, just great commercial execution. Our CMFT business, craniomaxillofacial thoracic, continues to do really well. We call that we did two, three acquisitions over the last three years, and those continue to do really well. And again, CMFT is a business where we see upper single-digit, double-digit. We finally stabilize our restorative therapies business here in the U.S. Recall that we had some reimbursement challenges there, and those are behind. So you've seen the biologics restorative therapy business growing at a nice clip now. And then sports med, we've done some acquisitions. We have had some challenges, but that continues to perform in line with expectations. So I will tell you, Robbie, out of the six businesses within the category, four are going really well. Trauma put an ankle; we got some work to do. We got some decisions, some strategic considerations to make. As we enter 2024, mid-single-digit is the point of entry. This has to be the year where we see S.E.T. growing mid-single-digit. Frankly, in some geographies, I think it's going to be higher than that. We got the innovation; we got the investments in terms of dedicated infrastructure and specialization, heavy emphasis here in the U.S., in the ASC environment. So again, full confidence in the growth profile that we're going to see moving forward.

Great. Thanks. Maybe just a quick follow-up for Suky on the guidance and a clarification. The lower end of mid-single-digit in the first half and then higher end second half. Is that inclusive or exclusive of the selling day benefit? Thanks.

That is inclusive of the selling day benefit, Robbie.

Okay. Thanks a lot.

Yes.

Thanks, Robbie. Katie, can we go to the next question in the queue, please?

We'll go next to Joanne Wuensch with Citi.

Excuse me. Good morning and thank you for taking the questions. Putting them both right up front. I'm curious why gross margins are expected to be somewhat down year-over-year, what the dynamics are for that? And then my second question has to do with cementless. Can you walk us through the math of what you think moving to 50% to 60% of your knees being cemented or cementless, excuse me, either way 50%. What the benefit is of that? Thank you.

Yes. Hey, Joanne, it's Suky. I'll start with the gross margin one and then pass it over to Ivan on cementless. Overall, we had a really good year on gross margin in 2023, up 90 basis points year-over-year. Drivers of that are really around we had some FX hedge gains, which we had talked about at length throughout 2023, as well as improved mix and better pricing, still, pricing erosive year-over-year, but better than we expected. Overall, generated a pretty nice profile for 2023. We had previously communicated that we had thought that gross margins might dip down slightly into 2024, primarily driven by the loss of those FX hedge gains. They won't repeat at the same level in 2024 as they did in 2023, but also we're seeing in the capitalization of some increased costs in the back end of 2023, around third-party manufacturing, which will feather into the P&L towards the back end of 2024. Despite those two headwinds, we're able to offset a large component of that, but overall, we do expect to see gross margins down just slightly

Thanks, Matt. Katie, can we go to the next question in the queue, please?

We'll go next to Robbie Marcus with J.P. Morgan.

Great. Thanks for taking the questions. I want to ask on S.E.T. and other. Those were the two line items that beat versus the Street. Was just hoping you could breakout some of the trends there, what did well, what might have underperformed, if anything, and how we think about those different line items as part of the guide in 2024 and how much of the strong growth is coming from that versus hips and knees. Thanks.

Hey, thank you, Robbie. So solid quarter for S.E.T. frankly, solid last semester of 2023 for S.E.T. growing around mid-single digit, around 5%, and committing to growing mid-single digit or above in 2024. The key drivers are the use of suspects. We continue to do really well with upper extremities growing upper single-digit, double-digit in most geographies, that's new product launches, that's focusing the ASC, that's stable supply, just great commercial execution. Our CMFT business, craniomaxillofacial thoracic, continues to do really well. We call that we did two, three acquisitions over the last three years, and those continue to do really well. And again, CMFT is a business where we see upper single-digit, double-digit. We finally stabilize our restorative therapies business here in the U.S. Recall that we had some reimbursement challenges there, and those are behind. So you've seen the biologics restorative therapy business growing at a nice clip now. And then sports med, we've done some acquisitions. We have had some challenges, but that continues to perform in line with expectations. So I will tell you, Robbie, out of the six businesses within the category, four are going really well. Trauma put an ankle, we got some work to do. We got some decisions, some strategic considerations to make. As we enter 2024, mid-single digit is the point of entry. This has to be the year where we see S.E.T. growing mid-single digit. Frankly, in some geographies, I think it's going to be higher than that. We got the innovation, we got the investments in terms of dedicated infrastructure and specialization, heavy emphasis here in the U.S., in the ASC environment. So again, full confidence in the growth profile that we're going to see moving forward.

Great. Thanks. Maybe just a quick follow-up for Suky on the guidance and a clarification. The lower end of mid-single digit in the first half and then higher end second half. Is that inclusive or exclusive of the selling day benefit? Thanks.

That is inclusive of the selling day benefit, Robbie.

Okay. Thanks a lot.

Yes.

Thanks, Robbie. Katie, can we go to the next question in the queue, please?

We'll go next to Joanne Wuensch with Citi.

Excuse me. Good morning, and thank you for taking the questions. Putting them both right up front. I'm curious why gross margins are expected to be somewhat down year-over-year, what the dynamics are for that? And then my second question has to do with cementless. Can you walk us through the math of what you think moving to 50% to 60% of your knees being cemented or cementless, excuse me, either way 50%. What the benefit is of that? Thank you.

Yes. Hey, Joanne, it’s Suky. I'll start with the gross margin one and then pass it over to Ivan on cementless. Overall, we had a really good year on gross margin in 2023, up 90 basis points year-over-year. Drivers of that are really around we had some FX hedge gains, which we had talked about at length throughout 2023, as well as improved mix and better pricing. Still, pricing erosive year-over-year, but better than we expected. Overall, generated a pretty nice profile for 2023. We had previously communicated that we had thought that gross margins might dip down slightly into 2024, primarily driven by the loss of those FX hedge gains. They won't repeat at the same level in 2024 as they did in 2023, but also we're seeing in the capitalization of some increased costs in the back end of 2023, around third-party manufacturing, which will feather into the P&L towards the back end of 2024. Despite those two headwinds, we're able to offset a large component of that, but overall, we do expect to see gross margins down just slightly versus 2023 in the backdrop of those headwinds. Now, having said that, if you take the mid-point of our EPS guidance, I think that would back you into an implied operating margin of about 29%, which represents about an 80 basis point increase year-over-year. And so while gross margin may set down slightly, you are seeing operating margins increase as we drive better efficiency and revenue growth through the company. So again, there are a lot of puts and calls throughout the P&L. The great thing is we've got optionality where we see headwinds in one area. We can make that up with efficiency and tailwinds in other areas. I think you've seen that now, once we deliver 2024 three years in a row, which in a challenging environment, in all three years, we're able to continue to grow operating margin and operating earnings. But thanks for the question.

And Joanne, relative to your question on cementless, I'll give you as much as I can. So, starting with the basic pricing dynamics we see with cementless Persona OsseoTi, we see an ASC uplift of around 10% to 15%, frankly closer to the 15% than the 10%, around 40% to 50% of the time, we combo the cementless knee with robotics, with ROSA, and that drives additional uplifting revenue in the form of disposals and whatnot. So that's a great dynamic we see in particular in the ASC. Our penetration today on cementless, we're exiting 2023 somewhere near 18% to 20% with both expectations; excuse me, to get into the 50% to 60% range. And I'm not going to give you a commitment today, but at our Analyst Day, you will see the long range plans and some of the trending when it comes to getting to 60%. We believe that there's going to be a fairly quick uplift, given the fact that the market is already being developed by some of the work that our peers have done. So again, you should not expect that getting to 50% to 60% is going to be a long journey. All of these dynamics are in the U.S. We're launching in 2024 in other markets outside of the U.S., and I will disclose the pricing dynamics when the time is right. But excited about the launch in Japan in 2024 and other key markets. So those are the dynamics here when it comes to cementless.

Thank you very much.

Thanks, Joanne. Yes, absolutely. Katie, can we go to the next question in the queue?

We'll go next to Ryan

Thank you. Thanks for taking the questions. Following-up, maybe on Larry's questions about guidance, you talked about the WAMGR being at 4%, and clearly we're in this stronger market environment. And so as I think about the components of guidance with pricing as a headwind of 100, 150 basis points, it suggests product mix is going to contribute 200 basis points to 300 basis points. I just want to see one if that's how you're thinking about it, or if you're thinking about the market contribution to guidance at a higher rate in 2024 and maybe potentially the product mix contribution lower. Maybe just help us flush a little that out.

Yes, I'll try to simplify it. And Suky, by all means elaborate, but we believe the market is around 4% all in. And again, we model this in different ways, but let's call it 4%. I'm not going to quantify the new product contribution, but pretty significant. We got 40 new products getting launched in the next two years, and these are meaningful products. I mentioned we got three large hip products that are going to get launched early in 2024. We got ROSA shoulder, which we believe is going to be meaningful in the year 2024, given the fact that it's not a late year launch. We got a lot of products in the S.E.T. category. So again, you should think of new product introductions as a very meaningful contributor of the guidance. Add to that the fact that we don't have the headwinds that we had in 2023 when it comes to supply, I would say between number one and number two; we got confidence on where we're going. Beyond that, we don't see a headwind when it comes to the shift to the ASC. We actually see that as a tailwind. We're excited about some of the dynamics we're hearing about when it comes to the movement of shoulders into the ASC. That's going to be a contributor. And as I mentioned to Joanne, the uplift that we see on cementless and ROSA, which are products that we launched three years ago but now going to get accelerated are the main contributors to the confidence in the guidance. I don't know, Suky, you have anything else here?

I think that's well said. One of the key points Ivan you touched upon, you said, pricing erosion is assumed in that 4% uplift.

Right. Okay. That's helpful from both of you. And then just to kind of dovetail on Joanne's question around margins, you talk about gross margin, Suky. Clearly operating margins are doing more heavy lifting this year. And so how much from the restructuring program is benefiting, is driving some of that operating margin expansion? How much are you assuming for top-line leverage in that 80 basis points or so of expansion? And yes, that's about it. Thanks for taking the question.

Yes. So the key driver with gross margin being sort of flat to down slightly, it really is coming from revenue leverage and operating margin. You could expect overall OpEx as a percentage of sales to drop by about 100 basis points, give or take. And that's even with R&D increasing year-over-year. So the efficiency and the restructuring programs in the near-term are really focused on SG&A. However, inside of that full program, we are working on things inside of COGS to help maintain and keep gross margin stable over time. Those are going to be a little bit more mid-term in nature and how they get realized. Things like SKU rationalization, site optimization, inventory reductions and corresponding D&O reductions, those are all things that have a little bit longer lead time, naturally, as you can expect as you're moving your supply chain around and not wanting to disrupt the ability to supply demand. But they are definitely is going to take more of a prominence as we move forward beyond 2024. But for 2024, the way you characterize is right. It's primarily revenue driven and SG&A.

Thank you.

Yes.

Thanks for the question, Ryan. Katie, can we go to the next question in the queue?

We'll go next to Travis Steed with Bank of America.

Hey, thanks for taking the question. I want to ask about the $200 million in cost savings that you guys called out this year. Curious, is the plan for that to kind of drop through to the bottom line or are you going to reinvest that? And what does that mean for kind of margins beyond this year and longer-term?

Yes. So the way we characterized it was that it would be $200 million run rate as we exit 2025. In year for 2024, we expect that to be about $100 million, or about half of the run rate savings that we're predicting over a two-year period. We're dropping a lot of that to the bottom line, as you can see with our implied guidance at the mid-point would suggest about an 80 basis point increase in operating margins. And so we're actually taking a good portion of that, dropping it to the bottom. But we're also reinvesting a pretty significant portion back into our priority areas, ensuring that we've got the appropriate amount of sets and instruments for cementless uptake as well as Persona uptake through ROSA. Ensuring that we've got the right level of commercialization and execution in our new ROSA shoulder launch, ensuring and ramping up commercialization efforts in our hip franchise around the product launches that we have for hip. So it really is a combination of both. And that's the great thing about this efficiency program. It enables us to reinvest back into our priority areas while dropping pretty significant, substantial margin expansion now, for the third year in a row.

Yes. Helpful. And on the new comp plan that you called out, curious if that's going to have an impact on margins or just not material enough to impact margins. And then on M&A, just curious if there's been any change on the two years of EPS solution from M&A.

Yes. On the comp plan, it's not really going to have any material impact and it's embedded in our guidance. I think it's more about a mix shift of how that comp plan is designed, right, whereas previously it was more focused and biased towards revenue growth. I think now what we're trying to do is get a greater balance between top and bottom lines all the way through cash flow. So it's really a mix shift in how we think about comp versus an increase in comp. And again, all of that is embedded into our guidance for 2024. Relative to the dilution, we still think about two years from a dilution standpoint is reasonable. Of course, we'd like it to be inside of that. But just given where valuations are today, as well as the cost of debt, which hopefully is going to come down over time, that's kind of where we see one of our guard reps.

Great. Helpful. Thanks a lot.

Thank you.

Yes.

Thanks, Travis. Katie, can we go to the next question in the queue, please?

We'll go next to Jeff Johnson with Baird.

Thank you. Good morning, guys. Congratulations on the quarter. Ivan, maybe you mentioned in passing that shoulder for ROSA is not going to be a late year 2024 launch. Just could you dial in that timing anymore? And I'd be interested in hearing about kind of your view on the uptake of ROSA shoulder, obviously, shoulder surgeries, replacements, technically more challenging. I think some questions about what role robots can initially play in those procedures. So just how does that help the uptake of ROSA? And I don't think I heard a ROSA placement number. I think sometimes you give it on kind of an annualized basis. Any updates on kind of exiting 2023 where ROSA placements were? Thanks.

Hey, thank you, Jeff. So I got to be careful what I say about time lapse for ROSA shoulder. I'll just say that I'm very confident that this is not a late 2024 launch. And as I mentioned, I think it's going to be very meaningful. So beyond being first to market, it's a high quality product. It's going to be applicable for both reverse and anatomic surgeries. It's going to simplify a very complex procedure. It's going to be fully integrated with the rest of the shoulder CVH ecosystem. I believe it's going to get great traction in an ASC environment where speed and accuracy matters. And we're going to hopefully demo these next week at the academy meeting. Whether it's ready or not, it will be demoed there at the academy meeting. Relative to your second question on the ROSA placements and the numbers, you should expect us to do around 300 installations per year. You should expect us to drive penetration rates of minimum 5% to 7% at least per year. You should expect that one-third of these ROSA -- overall ROSA installations are going to go into an ASC environment. And as I mentioned earlier to Joanne, you should expect that in a large percentage of cases, these ROSA installations are going to push cementless. So again, great momentum with ROSA and I'm very excited about where we are with shoulder.

Thank you. And maybe as a follow-up, just as I think about the 5% to 6% constant currency guidance and 100, 200 basis points above market, it seems like market is settling in at a good rate. If I think about gross margin, obviously some of the hedge settlements should normalize as you get into 2025 P&L coming down, pricing getting less bad. So it sounds like gross margin, at least not a big, big headwind going forward. And then of course, you've got the cost savings initiatives here on the SG&A side. If I roll all that together, including the improving balance sheet and cash flow and a commitment to some share buyback, it feels like 10%, 10.5% EPS growth, which is kind of the mid-point of your guidance this year. If it weren't for tax rate and FX headwinds, that sounds like it could be a sustainable kind of target. I'm sure you don't want to lay out an LRP here out of your Analyst Day, but is there anything in my thinking there that would say 10%-ish plus or minus is not a reasonable kind of longer-term EPS growth rate to be thinking about. Thank you.

Hey, Jeff. I think that was actually a really good articulation and summarization of what we're trying to get across today. In fact, if you look at our guidance today on reported EPS, it would suggest 6% to 8% at both ends of the range. That's after overcoming about 400 basis points of headwind between non-operational things like interest expense, FX and tax rate, right. So again, that's about a 400 basis point drag that's embedded in that 6% to 8%. So the way you're thinking about it, could we be in that low-double-digit zip code on EPS in a sustainable, durable way? I think yes.

Thank you.

Thanks for the questions, Jeff. Katie, do you have another question in the queue?

We'll go next for Richard Newitter with Truist Securities.

Hi, thanks for taking the questions. Just with AAOS next week, I was wondering anything that we should be on the lookout for with respect to canary or paternal few rather, and data presentations. I think you had also mentioned on a prior call you were expecting a GLP-1 kind of data analysis, possibly at AAOS and then I have follow-up.

So the answer is yes to both, Richard. So we will have some data points on Persona IQ, and we'll have some data on GLP-1. On Persona IQ, we moved from a limited market release in 2023 to full market release in 2024. We got the value proposition finalized. We got over 2 billion data points. We understand there's a product that is going to enable clinicians to intervene when needed. We got data points on how this product will reduce overall complexity in the episode of care. How we can by intervening soon reduce cost, especially post-surgery, when it can be pretty taxing. We don't reimbursement. We spoke about the NTAP new technology add-on payment, which we got back in October. So that's in full launch mode. We will submit. Barry always asks me this question. We will submit for a PPT coming some point in the spring, summer, and we're going to bring some data around, some of the experiences that we've seen with Persona IQ at the Cleveland Clinic, HSS and other facilities. So excited in terms of what we have with Persona IQ, more to come at the academy. And then for GLP-1s, yes, we're going to be sharing some of the data we've done in conjunction with the academy. And what I will tell you is that so far, everything we've seen with GLP-1s is that it remains a tailwind. We're actually tracking the number of patients that are using a GLP-1 pre-surgery, and that number is in the 20% to 30%. So by all means, this is not a headwind, and I'm glad that conversation is being muted.

Great. And then just piggybacking off of Jeff's question, even with potential earnings dilution, if you're potentially going to be -- have the potential to be in a low-double digits or 10 plus earnings growth range, and I'm given your commitment to growing earnings faster than the top-line, where it sounds like 5% is kind of a sustainable floor, given your end market and your WAMGR it sounds like no matter what, even with dilution over a 1.5, two-year period, you feel confident, or we should feel confident in a high-single-digit earnings growth rate at worst. Is that also a reasonable assumption based on all the different commitments and commentary that you provided?

Well, I think what you're asking is, can you still sustain that in a world where you do a sizable M&A a transaction? If I've gotten that correct, that's really difficult to tell, right? There is no two deals are created equal. It's very situational. And so I don't want to get out there front footed to kind of hypothesize, theoretically, what could happen to EPS inside of a sort of make a new [ph] deal. So I think that what you should take away is that from an underlying perspective, at 5% to 6% organic growth, with the levers that we have operationally, but also with the strength of our balance sheet organically, that we can deliver that attractive earnings per share profile.

Okay.

Thanks, Rich. Katie, I think we have time for one more question if there's one in the queue.

We'll go next to Jayson Bedford with Raymond James. Mr. Bedford, your line is open. Please go ahead. Please check your mute function.

Oh, sorry, I was off. Yes, sorry about that. I'll be quick. On the supply challenges that you incurred in 2023, can you just remind me what was the impact of these challenges on the P&L last year meaning, is there a way to quantify the impact on revenue?

Yes. Hey, Jayson, it's Suky. It's a bit of more stress to try and say exactly how days on backwater really impact sales, because one, obviously you have an impact on actual cases, but the more meaningful impact is the ability for our sales rep to go out there and actually hunt for new business, right? They're going to be a little bit hesitant to go shift and make conversions if they don't feel like they can supply. So that's actually probably the bigger impact. But trying to frame that in percentage points is very difficult to do. The way I looked at it is the tailwind for last year. We believe it's part of the -- sorry, it was a headwind for last year, we believe it's part of the tailwind that's going to help give us confidence in delivering that 5% to 6% organic growth for this year.

Yes. We have some internal data points that we don't share. What I will tell you, Jayson is that new product launches, we had to do limited market releases instead of full market releases, Persona OsseoTi is an example. Conversion, as Suky mentioned, we had to prioritize or send some family customers versus converting accounts. And then the third headwind of supply, from a revenue perspective, we couldn't embark on global expansion of these new product launches. So the example that I used earlier around Japan, second largest market in the world, we could have done things differently. We could have been on the market. So it is sizable and it is behind us.

Okay. That's helpful. Maybe just along a similar vein, I think you talked about a 50 basis point impact to revenue growth in the second half from Russia. Is Russia a net tailwind as we look to 2024?

It is. It is. I would say it's less than 50 basis points. But given that we now have all the licenses secured we need to operate, that that will be a tailwind probably most pronounced in the third quarter because that's when we saw the biggest impact in 2023.

Thank you.

Thanks for the questions, Jayson. I think we're wrapped up with the queue and just hitting 9:30. So I'll turn it over to Ivan for some closing remarks.

Sure. Thanks, Keri. I'll keep it short. I know we got to get going here, so a minute or less. I want to start, I want to end the way that I started the call by thanking the team members, the almost 20,000 team members here at