ZBH - NYSE

Good morning, ladies and gentlemen, and welcome to the

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

Thank you, Keri, and thank you, everyone, for joining the call here this morning. I'd like to start today the way that I typically do by taking a moment to recognize and to show my gratitude to the 18,000

Thanks, and good morning, everyone. As Ivan mentioned, we had another good quarter driven by healthy end markets and solid execution across the organization. Overall, we remain on track to deliver on our 2024 financial guidance with mid-single-digit constant currency revenue growth, adjusted operating margin expansion and over $1 billion of free cash flow. Assuming current market conditions, this is a financial profile that we believe is durable going forward. Moving to Q1 results. Unless otherwise noted, my statements will be about the first 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 $1.889 billion, an increase of 3.2% on a reported basis and an increase of 4.4%, excluding the impact of foreign currency. Additionally, we had a selling day headwind of about 200 basis points that impacted all regions and product categories at about the same level. Excluding the selling day impact, consolidated constant currency sales would have grown above 6%. U.S. growth was 3.7% and international grew 5.4%. Growth in the U.S. was driven by solid performance in RECON in our priority areas within S.E.T. as well as our other category. Outside of the U.S., EMEA saw stronger-than-expected growth on a regional basis. And from a portfolio perspective, OUS growth was primarily driven by our knee category. Global Knees grew 4.3% in the quarter with the U.S. growing 2.2% and international growing 7.3%. Growth in our knee business continues to be driven by our Persona product portfolio and ROSA Robotics platform. We remain excited about the growth coming from new and recent product launches across the knee segment. Global Hips grew 1.5% in the quarter with the U.S. growing 1% and international growing 2%. We remain focused on accelerating performance in the Hip segment with key product launches that Ivan mentioned earlier. Next, the S.E.T. category grew 5.3%, led by our key focus areas of CMFT, upper extremities and sports growing on average about low double digits. This strong growth was partially offset by the other subsegments within the category. Despite the choppiness within S.E.T., we remain confident this business will drive mid-single-digit or above growth for the full year. Finally, our other category grew 12.2%, driven by continued strong ROSA sales. We expect growth in the other category will moderate lower as we move through the rest of the year. In Q1, we reported GAAP diluted earnings per share of $0.84 compared to GAAP diluted earnings per share of $1.11 in the prior year. Higher revenue and a lower share count in Q1 2024 was offset by higher selling costs and expenses associated with our restructuring program. On an adjusted basis, we reported diluted earnings per share of $1.94 compared to $1.89 in the prior year. The step-up is primarily driven by revenue growth, accelerated savings pull-through from the restructuring program and a lower share count, partially offset by higher interest expenses and taxes related to Pillar 2. Foreign currency was a headwind of about $0.04 in the quarter when compared to the prior year. Our adjusted gross margin was 72.9%, driven by higher manufacturing costs, which were offset by better pricing and lower royalties. Overall, gross margin was in line with expectations and with the prior year. Adjusted operating margin was 28.6%, slightly ahead of the prior year. The increase in operating margin was driven by higher sales and lower SG&A related to the restructuring program I referenced earlier. Net interest and other adjusted non-operating expenses were $49 million in the quarter, slightly higher than the prior year. And our adjusted tax rate was 18.5%, and we continue to project our full year rate at 18%. Turning to cash and liquidity. We generated operating cash flows of $228 million, free cash flow of $91 million, and we ended the quarter with $393 million of cash and cash equivalents. Regarding our outlook for the rest of the year, we are reiterating our full year guidance, including constant currency growth of 5% to 6% or 4.5% to 5.5% reported revenue growth with a 50 basis point currency headwind. Additionally, we continue to expect earnings to be between $8 to $8.15, and that we will generate between $1.50 billion to $1.1 billion of free cash flow. From a cadence perspective, we still expect constant currency revenue growth for the first half of the year to be at the lower end of mid-single-digit growth in the second half of the year to be at the upper end of mid-single-digit growth. As a reminder, Q2 and Q3 will each have about 150 basis point tailwind due to selling days and the selling day impact for Q4 and for the full year is expected to be immaterial or less than 50 basis points. Regarding the P&L, we expect adjusted gross margin to be broadly in line with 2023 and slightly better than our original thinking due to less FX headwinds than originally assumed. Given the strength in dollar, FX hedge gains are not as big a stepdown in 2024 as originally expected. Looking at gross margin, we expect Q1 to be the high watermark, followed by a modest sequential step down throughout the year. Overall, first half gross margins will be about 100 basis points higher than the second half as we continue to feather in capitalized inflationary costs from the second half of 2023. Turning to adjusted operating margin. We are pleased with the start to the year as our restructuring efforts are delivering slightly ahead of schedule. Overall, second half operating margins will be higher than the first half. And we expect for the full year that at the midpoint of our guidance, we will increase operating margins by about 80 basis points. In summary, Q1 was a good start to the year. We delivered results ahead of expectations and continue to feel confident in our 2024 outlook as evidenced by the reiteration of guidance. With that, I'll turn the call back over to Keri.

Thanks, Suky. And thanks, Ivan, for the kind words. It's been such a privilege to be part of the

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

Keri, great working with you and good luck in your next endeavors. I guess, kind of high level, you guys have this kind of algorithm, 5% to 6% revenue growth potential for some margin expansion and possibly kind of low double-digit EPS growth. And just trying to think about how we should think about that algorithm over the long term. Is it more of a base case or kind of best case? There's just a lot of skepticism from the investor community on that algorithm. And trying to think about what's the

Travis, Ivan here. Thanks for the question. I'll touch on both components of your question, and I'll make sure that Suky speaks up here as well. So starting with the algorithm on revenue, EPS and free cash flow. We're going to give more color in the Investor Day, but I will tell you today, as per the prepared remarks, this is a long-term commitment. So it's not a 2024 only deliver revenue above market, EPS above revenue and free cash flow above EPS growth. And unpacking the drivers here on revenue, it's all about new product introductions. We're going to gain share by delivering innovation that matters. 100 to 200 basis points, largely is going to come from new product introductions. And as we said all along, we got a pipeline that we didn't have before, 40 new product introductions over the next 24 to 36 months, more in the making. So that's the #1 driver on revenue in addition to obviously pricing dynamics and commercial execution. On EPS growth, we're doing things differently when it comes to margin, I already mentioned pricing, but other components, how we think about inventory in excess and obsolescence, how we think about allocation of OpEx, where we get the greatest return, et cetera, et cetera. And the free cash flow, the main driver is the fact that we have run this company in quite an inefficient way when it comes to inventory management. North of 400 days on hand when it comes to inventory, not really engaging on prioritization of geographies. Portfolio management is not what it needs to be. So those are the key drivers on the sustainability. I'll touch on #2, and then I'll give it to Suky. In terms of Q1 to Q2 to Q3 to Q4, what happens sequentially. Look, we're not going to get into the gymnastics on what happens quarter-over-quarter, all kinds of timing 1 quarter to the other. We call -- we're having similar conversations in Q4. Here is what I'd leave you with. Q1 was very strong. A 4.4% growth in constant currency, north of 6% in day rate. As we see here, looking at the year, we were confident at the very beginning of the year in the guidance of 5% to 6%, a quarter behind, we're extremely confident on the guidance. The growth drivers that get us there are working in the right direction. So very, very confident, very proud of Q1. And again, we'll talk more about the dynamics at Investor Day. Suky?(43:40)

Yes. I think Ivan summarized it really well, so I'll just try to build some incremental points here. I think at that mid-single-digit growth top line profile that Ivan mentioned, we do have a durable path to operating margin expansion as well as improvements in overall free cash flow conversion. On the earnings outlook, this year, if you look at our guide, it's 6% to 8%, which, again, we reiterate and feel confident in. If you -- on an underlying basis, if you back out the step-up in tax rate that we saw at Pillar 2 as well as headwinds that I think everyone is facing on interest as well as FX, the underlying growth on the bottom line is much better than 6% to 8%, maybe 300 to 400 basis points better on an underlying basis, which puts us kind of in that high single digits, low double digits. And if you look at what we did in '23, I think we were also there. As we look forward, using your words Travis, base case, et cetera, we think there's a pathway to low double-digit earnings growth. I wouldn't say it's our base case or our commitment. And again, we're going to provide more color on our Analyst Day. But as we think about margin expansion with revenue growth, we just want to make sure we've got the right investment profile to the company to make sure that, that growth is durable. So is that our base case, I wouldn't necessarily go there. I'd say we have a pathway there. But we're going to provide a lot more color in just a few more weeks.

Katie, can we have the next question in the queue?

We'll go next to Steve Lichtman with Oppenheimer & Company.

Congratulations on the quarter, guys. And Keri, it's been great working with you. I guess I'll first start on pricing commentary. I thought that was notable. Ivan, can you talk about where the positive surprise came from on that front? Are the benefits of your efforts coming sooner? Just some general comments on the pricing environment would be great.

Yes. We're very -- Steve, thank you. We're very pleased, obviously, with pricing performance. Recall that in 2023, the second semester of '23, so the last half of '23, we're already flattish when it comes to price. So this is a business that in previous years was having 300 to 500 basis points of price erosion in the U.S., pretty significant OUS. That's not the change that we have going on. We put a structure in place. We put governance, new product introductions are helping from a category contracting. I wouldn't say there's any real surprises. Europe may be doing slightly better than anticipated. You've got all kinds of [ tender ] dynamics that come in and out. But net-net, we are at a point where it is pretty predictable. We like the strategy in place. We like the governance. We're not going to commit here to doing dramatically better, but no real surprises, only Q1 and a great outlook for the rest of the year. Suky, do you have any other comments?

I think overall we're in more favorable environment than we've been, let's call it, 3, 4 years ago. When you combine that with some of the structural changes we're making inside the company, that's -- I think those 2 things are really leading to better price performance. I'll tell you, I'm really impressed and optimistic about the cultural change, quite frankly, within

Great and then quickly follow-up -- just wanted to follow up real quickly on the ROSA shoulder. Just on the initial launch and your outlook for ramp this year?

Yes. Thank you. Obviously, very excited in terms of this product launch. We did the first cases at the Mayo Clinic a couple of weeks ago. Feedback was very solid. It is a product that has a high degree of accuracy in the cuts in the visibility of anatomy. It is efficient from an instrumentation standpoint. It's fully interconnected with the rest of the CVH ecosystem. Case over case, the feedback was that you do achieve time efficiencies. So the learning curve is rather short. So very solid clinical feedback. In terms of the impact, we said all along that we're going to take it slowly in the first, call it, 90 to 120 days. And you will see the real impact as we get closer to the end of the year. But a very meaningful product launch for the company. I'm very excited about it. Thanks, Steve.

Larry Biegelsen with Wells Fargo.

This is Vik Chopra in for Larry Biegelsen. Keri, thanks for all your help and good luck. So 2 for me. I just wanted to get a sense as to kind of what we can expect at your upcoming Investor Day at the end of the month. With regard to financial goals, will you have specific LRP goals for revenue? Or will it be relative to the market, for example, growth of 100 to 200 basis points above market. And then I had a follow-up.

Yes. No, we'll definitely cover the -- how we plan to achieve these 3 commitments we're making from a financial perspective in terms of what are the drivers of revenue, EPS and free cash flow. So we'll definitely provide those details. We'll cover the new product introductions, we've seen that. We'll talk about the capital allocation on the strategy moving forward. So it's going to be very robust. So that's the Analyst Day.

The second question I had was you beat consensus EPS by about $0.07, but you didn't really raise the guidance on EPS. Can you just provide some color on that?

Yes. I think Ivan said it really well in his opening remarks. We had a good start to the year, and it was great to see the better-than-expected performance in revenue. We saw a very good flow through all the way to the bottom. So I love the discipline that we've got throughout the company. I would say that this just reinforces and gives us more conviction in the guidance range that we provided earlier this year.

We'll go next to Rick Wise with Stifel.

And we'll miss you, Keri. I'll ask my question and my follow-up at the same time. Ivan, obviously, on all these new introductions; OsseoTi HAMMR, the robotic shoulder, but -- and all of them sound like they'll be meaningful and I assume will help pricing, will help gain share, will help leverage your fixed cost, your operating costs. But I was hoping you'll focus in particular on the implications of the

Thank you, Rick. I'll cover the Hip question, and then we'll proceed with the interrogation of Suky here when it comes to the margin. One product is not -- one product is not what's going to win the battle here, right? It is a category of products. We've been very transparent. We've not done great when it comes to hips over the last 3 or 5 years and essentially driven by 3 product categories. The first one is a direct anterior stem what is not in the market as a triple taper stem and it was a deficiency that we had.

And Rick, it's Suky. Always good to hear from you. On the margin front, I know the past isn't always indicative of the future, but I'll just -- it is a good validation and proof point, I think, in our situation. Both '22 and '23, we're able to expand operating margins quite significantly, I would say, even in the backdrop of a pretty hostile inflationary environment. And so again, kudos to the entire [ CE ] team. In '24, we expect to do it again. And here's what I would say. We're doing it across the entirety of the P&L. First, through revenue growth and leverage our fixed costs. Secondly, we're making improvements in cost at a rate that we've not done before through inventory reduction, site optimization, reductions in E&O. We're even getting more efficient inside of R&D and looking at, hey, do we really need all this sustaining and how can we rationalize some of our portfolio, migrate our customers to better products, get rid of some of these products, which then reduces the amount of sustaining engineering, which we can then mix shift into NPI. We're getting it through SG&A. We're getting it through better allocation of capital and reducing our cost of debt. The beauty of that is when you have multiple shots on goal to improve operating margins, even if things go unexpectedly from a macro perspective or a micro perspective, we have other levers to continue to help us pull margins as we move forward. And so the thing I'll leave you with is it's not just in one area of the company, it's throughout the entirety of the P&L, and we feel confident about where we're going. And quite frankly, and I love what Ivan's bringing. He's bringing his owner-operator mindset to the company. He's got the company thinking not just about top line, but all the way through cash, cash being king, and I think that's really driving a culture change within our company as well. So I'm optimistic on where we're going, Rick.

We'll go next to Pito Chickering with Deutsche Bank.

This is actually Imron

Absolutely. Thanks for the question. So let's start with the global picture, if you will, very excited in terms of where we are overall with ROSA. So globally, ROSA is becoming the preferred robotic option in many markets outside of the U.S. Here in the U.S., we're approaching around 20% penetration of ROSA in cases. As you saw in the quarter, we had a large amount of ROSA sales, which is encouraging because that means in the other category, that's encouraging because that's a future stream of net pull-through. About 1/3 of all the installs that we do in the U.S. go to an ASC environment, which, again, is not a surprise given the fact that ROSA does drive easier preplanning. You don't need to do a CT scan. It is very surgeon center, so it's very controllable. And we continue to see that there is a high degree of preference for ROSA in those higher volume accounts. So net-net, everything in the right direction in terms of penetration, where we are gaining traction in key markets around the world and a lot of the dynamic that we're seeing here in the U.S. ambulatory surgical center environment.

Just as a quick follow-up. Can you remind us what the site of care mix is for shorter Recon hospital versus ASC?

So we're starting to see a dynamic in where cases are moving to the ASC for shoulders, getting the CMS change. I would say today, probably around 60% to 65% of the cases of shoulder are now done in ASC, but that's moving pretty rapidly, given the change of reimbursement. And we've got a strong position both in the inpatient, outpatient as well as the ASC. But I would say net-net, is around 60%, 65% to 35% in terms of that mix.

We'll go next to Caitlin Cronin with Canaccord Genuity.

Just touching a little bit further on ROSA and the strength in the other line, Suky, did you say that you expect lower growth in this segment through the year?

It was a little bit choppy there, Caitlin, Sorry, did you ask if -- you asked something about other? Could you repeat the question?

Yes, apologies. Did you say that you expect lower growth in the segment throughout the year?

Yes. Yes. So we had a pretty strong quarter in our other category, primarily driven by ROSA Capital. So we saw good installs. And we saw a higher mix of sales versus placements which drove a higher level of dollar revenue in that quarter. The good news is we saw a lot of new placements and new ASCs, which is exactly where we want to see ROSA's position and the capital sales were very good. We also love placements because that comes with a longer-term commitment. Our expectation is that we'll step down from what you saw in the first quarter as we move throughout the year, and that's been assumed in our guidance reiteration.

Okay. And then any updates on Persona?

Go ahead with a follow-up. Line is kind of choppy. Go ahead.

Okay. Apologies. And any updates on the Persona IQ rollout?

Yes. Thank you, Caitlin. It's moving in the right direction. I will say, as of late, things are accelerating, both from an innovation and a commercial execution standpoint. So on innovation, we did receive recently the 510(k) approval for -- didn't make it to the press release for the study. So as the shorter stem version of Persona IQ, which has been a gating factor for some surgeons that don't use the longer stem. So that's an innovation and they are right there. The other piece that is gaining traction is the launch of what we call recovery curves. This is a platform that only Persona IQ has. Interconnects the data of the TAM with a dashboard that in a very objective way, can quantify how patients are doing in comparison to other patients with similar dynamics. So those are 2 innovation updates that are more in the right direction. In terms of the execution and commercial journey, we got what we need. We got the right designs. We've been talking about value proposition. It's been resonating. We are in some of the largest teaching institutions, and we continue to be committed to the journey. So very excited about Persona IQ. Thank you for the question.

We'll go next to Mike Matson with Needham & Company.

Yes. So I just want to ask one about kind of what the guidance implies for second quarter revenue. you're saying you expect to be at the low end of the mid-single digits to sort of like 4% in the first half. Based on what you did in the first quarter, that implies kind of like 3.5% constant currency growth, but you have the 1.5% selling day benefit. So that applies like 2% kind of underlying growth. Is that -- is my math right there? And I guess why do you only expect 2% growth in the second quarter?

Yes. Mike, directionally, the way you think about it, right, I wouldn't quite go as low as that. But look, quarter-to-quarter, there's going to be choppiness. There's going to be noise based on timing, contracts, et cetera. We had a great start to the year. We continue to believe and reinforce our guidance and still believe that the first half is going to land as we expected to when we initially gave guidance. So nothing in particular about the quarter of note, but just the overall cadence, that's how we expect first half versus second half to play out this year.

Okay. And then just a follow-up on OsseoTi. So you mentioned it's gaining share. Does that mean that it's actually converting competitive surgeons? Or does that just mean it's cannibalizing the cemented Persona?

No. We definitely are upgraded, if you will, some or for cementless -- legacy cementless platform over to Persona OsseoTi but at the same time, a sizable amount of the business coming from converting accounts. So you've seen that the U.S. knee number in the quarter was strong and a large component of that was the fact with pretty heavy comps, by the way, comes from the introduction of Persona OsseoTi and the expectation is that as we continue to move into the acceleration of the product launch, we're going to continue to gain share. So it's both existing accounts and new accounts.

We'll go next to Vijay Kumar with Evercore ISI.

This is Sofia on for Vijay. One quick one on gross margins and operating margins. Were there any one-offs in the first quarter on gross margins. You guys raised the guide for margin but EPS was maintained. So is operating margin slightly down? And how do we think about margins for the rest of the year?

Yes. No real -- in any given quarter, there's going to be puts and calls, both in gross margin and operating margin, but nothing material or out of the ordinary. We did a little bit better on gross margin than we expected to. We saw that flow through in the operating margins. So we feel really good about the start of the year. As we progress through the year, we do expect operating margins to step up in line with normal seasonality as revenue continues to step up and other savings programs pull through. So again, very confident in where we're headed from an earnings perspective in our guide. And if you recall, I think we said on the last quarterly call that at the midpoint, that implies about an 80 basis point lift in operating margin, and we're still confident in that.

Okay. follow-up question -- just one quick one on M&A. I know you guys have made some comments about tuck-ins and kind of what that profile will look like. But anything in the pipeline that are particularly interesting right now that will fit now in the portfolio?

Yes. We always have a robust pipeline. And we'll talk about the pipeline and the optionality of M&A in more depth once we meet in later in the month. But the same 3 key areas apply. We're looking for assets that are mission-centric from a strategic standpoint, fit in the higher-growth segments of Recon, certainly the high growth segments of S.E.T. as a category and then in the ASC space, which is a mixture of both 1 and 2. So we later focus on those 3 key areas while also keeping an eye on broader diversification. Financially, nothing has changed. We have flexibility to do larger deals, but we like deals where the acquisition price is under $2 billion. We definitely want to be neutral from an EPS standpoint within 2 years and then high single-digit ROIC to double-digit ROIC in the 5-year time horizon. So very clear on strategic and financial filters and the optionality is there and the pipeline is there. So more to come once we meet in New York.

We'll go next to Robbie Marcus with JPMorgan.

Congrats on a good quarter. Maybe just one for me. You kind of talked about second quarter and the expectation on the top line, and you just answered kind of margin cadence through the year. But I want to put a finer point on it and try and avoid some of the cadence issues that we had last year. So you talked about operating margin expanding. I wanted to make sure, I think the prior commentary was second quarter would be the highest operating margin and fourth quarter would be the highest for the year with a sequential down in third quarter with normal seasonality. So maybe to kind of say it all a different way. Are you comfortable with where the Street is on EPS or EPS for a second, third, fourth quarter, are there any cadence changes you think we should be looking at moving from 1 quarter to another?

Yes. So Robbie, just a little bit of a correction. I'm not sure if I caught everything you said or understood, I should say everything you said. Fourth quarter will be our high watermark relative to operating margin in line with that being our high watermark from a revenue perspective. And so our margin does, in many ways, correlate heavily to our revenue outlook. Relative to the cadence, I'm not going to -- in consensus I'm not going to sort of benchmark relative to that. I think we've actually given pretty good color already around the first half, second half revenue cadence. I've talked about gross margins crossed a 100 in the first half, second in the back half and then operating margins improving in the back half of the year due to restructuring overall. So I think there's actually pretty good color out there in line with how we've traditionally been transparent. So hopefully, that gives you enough to go from.

We'll go next to Chris Pasquale with Nephron.

Ivan, you talked about 4 points of your revenue growth this year coming from market gains and then 100 to 200 basis points with outperformance. It gets you to your 5% to 6% goal. When we look at the first quarter, Recon growth was actually a little bit better than that, and that's really hard comp, [ parts ] comp of the year. So that 4% feels pretty conservative at this point. Your own performance across hips and knees was a little below market. So while I appreciate you're excited about the pipeline and what it can mean for share gains in the out years, are you still thinking about the recipe to get you to your 2024 target the same way?

Yes. Thank you, Chris. First of all, I wouldn't categorize our performance being below market. And we're going to have a healthy debate on whether it's above or below. But what I will tell you is that when we stay here right now, it is not below market. Certainly not from a training standpoint over a period of time and now that everyone is reported in Q1, we're not below market. So I'll start with that. In terms of how we get to the 5% to 6%, I think the formula continues to be product introductions, which will ramp up later in the year and even more product introductions as we get into 2025. We've never had 5.5, almost 6 years here with the company, I've never seen a poor portfolio. I mentioned earlier that we don't have any gaps in hips with the introductions that we have done in Knees, there's 0 gaps. I'm excited about the upcoming product launches in Europe. Let's not forget, we don't have Persona revision in EMEA. That's an almost $2 billion product here in the U.S., $2 billion over the last 4 -- 3, 4 years in gross sales. And let's not forget, we also bring in Oxford Partial Cementless from Europe here to the U.S. So strength in the knee portfolio, strengths in the hip portfolio. You've seen that S.E.T. we made a commitment that S.E.T as a category will grow mid-single digit or above. It's the third consecutive quarter where we're seeing that. And that's going to stay around. So I would say, strength in innovation, the strength in commercial execution and the 5% to 6% to us is an admissible commitment.

Okay. And then following up on OsseoTi. Can you remind us where your cementless mix stands today in the U.S.? And over what time frame you think you could close the gap between your current penetration and where Stryker is at the moment?

Absolutely. So closing the Q1 quarter approaching 20%. So it's fairly similar to robotics. So cementless is approaching 20%. We'll break down some of these commitments, we keep repeating the same answer at the Investor Day. But our expectation, our ambition is to be where our competitors are, 60% 6-0. We'll provide time lines in that regard, but the north star is to have robotic penetration in the 60% range and cementless penetration in the 60%. So the fact that today we're at 20%, that tells you that there is pretty significant upside, and we're excited about the journey.

Chris, thanks for the question. Katie, I think we have time for maybe one more question in the queue.

I'll go next to Shagun Singh with RBC.

So it seems like orthopedic robotics uptake stepped up for the market in Q1 or at least it was better than expected. Has anything changed from a capital appetite standpoint -- any reason you are seeing more upfront sales versus operating leases? And then just a follow-up on M&A. Ivan, you had indicated that you want to be -- you want to go bigger and bolder and we haven't seen a whole lot of that yet. I appreciate all the commentary on deal capacity of up to $2 billion and favoring tuck-ins. But very specifically, how do you plan to raise your weighted average market growth from 4% today mostly with tuck-ins?

So starting with robots and capital dynamics. Look, I will tell you one thing that is pretty prevalent is that here in the U.S., we've seen the cases move today, I see not a week goes by that is not a new ASC opening. And those ASCs do want to acquire robotics and you either install or you purchase it. And we saw a dynamic in Q1 where we saw more purchases. We do believe this is driven by ASC dynamics. Capital continues to be strong across key markets. So definitely not a gating factor. And again, as I mentioned early, excited about the continuity here. In terms of your second question on M&A, look, we want to be bigger and bolder, at the same time, we don't want to be reckless. And I will say that all along. So we're going to stick to the strategic and financial thresholds. We got the pipeline, we got the money. And when it is time to act, we'll act on it. And we're not going to take the past as an indicator of how we're going to do things in the present and future. The breakdown on the WAMGR, we'll cover that as well once we get into the Investor Day. And it is a combination of organic and inorganic means. So we'll talk about the pipeline. I already mentioned -- we already mentioned that 80%, if not 90% of the new products in the pipeline are in markets that are growing above 4%, in some cases above 5%. So that's definitely a driver and then the combination of tuck-in deals and maybe some bolder moves will get us to the WAMGR that we deserve. So more to come in that regard. Thanks for the question. I think we come in to the end of the call. So I'm just going to briefly close with closing comments. I will start by saying that it's great to be here at home in Warsaw, Indiana today to celebrate our Founder's Day. So May 2, 1927, we started the company with a very clear purpose to alleviate pain and improve the quality of life for people around the world. So 97 years later, I just can say that we're just getting started. So excited to see where we are as a company. It's an exciting time to be at

Thanks, everyone, for joining. We'll be talking to all of you today. If you have questions, of course, please don't hesitate to reach out to the IR team. Thank you again for joining the call this morning.