Please stand by. Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet third quarter 2026 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, November 4th, 2026. 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 DeMartino, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Zero Vibe Life's third quarter 2026 earnings conference call. Joining me on today's call are Ivan Tornos, our Chairman President and CEO, and Paul Stellato, our Interim CFO and VP Controller and Chief Accounting Officer. 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. For a detailed discussion of all these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements, please refer to our ICC filings. Please note, we assume no obligation to update these forward-looking statements, even if actual results or future expectations change materially. Additionally, the discussions on this call will include certain non-GAAP financial measures, some of which are probably looking non-GAAP financial measures. Reconciliation on these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating these measures is included within our third quarter earnings release, which can be found on our website, seymourbiomet.com. With that, I'll turn the call over to Ivan. Ivan?

Thank you, David. Good morning, everyone, and thank you for joining today's call. I would like to start, as I always do, by thanking the more than 17,000 global Zimmer Biomed team members for your commitment, your resilience, and most importantly, your dedication to serving our customers and their patients each and every day. I'm grateful to work alongside you and I'm proud of the noble work we do to alleviate pain and improve the quality of life for people around the world. Roughly six months from now, We'll be celebrating our 100-year anniversary as a company. And as I often tell all of you, we are just getting started. Our boldest chapter remains ahead. During my prepared remarks this morning, I'll cover three things. First, I'll review our third quarter performance. Second, I'll discuss or increase outlook for 2026. And third, I'll provide an update on our three strategic priorities, which remain the same. People and Culture, Operational Excellence, and Innovation and Diversification. To begin, we delivered total net sales of $2.63 billion, resulting in 3.1% reported growth and 3.7% constant currency growth in the quarter, compared to the third quarter of 2025. Excluding the negative impact of our China distributor network consolidation strategy, A one-time headwind in fiscal year 2026, our constant currency growth in the quarter will have been 4.7%. Notably, in the period, two-thirds of our bulk of business grew at least upper single-digit or double-digit rates, validating the strength of our innovation cycle, the improvement in our commercial execution efforts, and the resilience of our global market environment. In addition, these results are a testament to our efforts to diversify our portfolio over the last six years as we continue to shift from a primarily joint reconstruction company to a broadly diversified business with leading platforms across SET, technology, and higher growth segments within core orthopedics. We are very proud of these quarter results as our hips and SET businesses grew upper single digits and technology and data, both cement and surgical, grew in the teens, driven by 20% growth in robotics, data and AI solutions. Furthermore, we are thrilled with the performance of a Paragon 28 acquisition, which continues to grow at roughly three times the foot and ankle market, approaching 20% growth, which we do believe is sustainable. Altogether, this broad-based performance More than offset the expected challenges in our new business and China. Turning to our product categories and starting with hips, our global hip business grew 7% on a constant currency basis in the third quarter, with growth of 5.8% in the U.S. and 8.2% internationally. U.S. hip growth continues to be driven by our new product, Cycle Strength, which includes Z1 or triple taper hip stem which now represents over 50% of all US hip stems up from about 40% in the second quarter of this year. Hemer or surgical impactor which is now being used in nearly 30% of all US primary hip cases is also a major catalyst. And third, OrthoGrip. which delivered its strongest quarter to date with over two-thirds of sales coming from recurring revenue. OrthoGrid is a clear differentiator for Zimmer Biomed and we look forward to its global expansion. Outside the U.S., we continue to build momentum with our iodine-coated hip stem ANCAP in Japan. This launch has far exceeded our high expectations and we are rapidly increasing supply to meet the greater than expected demand from both existing customers and the new accounts that we're opening. In addition, we're working on launch plans for other geographies outside of Japan. Turning to needs, as anticipated, the need business continued to face headwinds during the quarter, with sales declining 2.6% on a constant currency basis, including decreases of 2% in the U.S. and 3.4% The U.S. results reflect the non-impact of our Salesforce transition and a highly competitive knee implant market, while international needs continue to face pressure, most significantly from China headwinds, with which global needs will have been flat year over year this last third quarter. While we continue to expect ongoing pressure in the near term in our knee business, we are confident in our strategy and plan to return to sustainable growth over the long term by, number one, improving commercial execution. It's important to know that the U.S. Salesforce transition is nearing the halfway mark, and we're starting to see pockets of meaningful improvement across a variety of U.S. territories. Second, expanding our suite of robotics and enabling technology to meet the diverse needs of a wide array of surgeons around the world. We recently announced a multi-year limited distribution and supply agreement with Think Surgical to distribute an exclusive version of the only wireless handheld T-Mini miniature robotic system compatible with persona.ne. Most excitingly, we expect to file Monogram's 510K application with the FDA very soon, which is significantly ahead of schedule. We now anticipate that we can launch a surgeon-guided, fully autonomous version of Monogram in the first half of 2027, as opposed to the original expectation of a 2028 launch. We truly believe that this technology will represent a dramatic leap forward for the future of orthopedic care. We will be bringing Monogram to the American Association of Hip and Knee Surgeons annual meeting later this week in Dallas to obtain additional feedback on the systems workflow from surgeons. Our plan to have at least 225 robotic cells specialists also remains very much on track. From a global standpoint, the China-related headwinds, with anniversary in January of 2027, giving us visibility into improved global knee performance. SET accelerated to 7.1% growth on a constant currency basis in the quarter, including mid-single-digit growth in the U.S. We continue to see strength across our key franchises, including Furan Anko, Sports Medicine, CMFT, Cranial, Maxillofacial, Thoracic, and Upper Extremities, all of which grew between mid-single digits and high teens in the period. Critically, Paragon 28 cells grew over 18%, demonstrating the successful integration of the business and representing a blueprint for future acquisitions. These results were partially offset by continued pressure in trauma and restorative therapies. both of which declined in the quarter as expected. Technology and data, both cement and surgical, grew 13% on a constant currency basis in the third quarter, once again led by the strong demand for robotic offerings, including ROSA with Optimize and T-mini. Technology and data sales increased over 30% in the US, which validated a strategy of offering a comprehensive suite of Customer Centric Solutions to Surgeons. Turning now to our updated outlook for the remainder of 2026. With three solid quarters behind and an organic constant currency growth rate of 3.5% year to date, we are once again increasing our full year outlook. We are now raising our organic constant currency sales growth guidance to a range of 3% to 3.5% from 2.25% to 3.25% and raising also or adjusted earnings per share guidance to $8.50 to $8.60 from the previous guidance of $8.47 to $8.59. This increased outlook captures or expectations for consistent global market dynamics, ongoing risk of US sales force disruption, China-related headwinds to the tune of nearly 100 basis points in the fourth quarter, and roughly 50 basis points for the full year 2026, as well as continued pressure in this. With that, let's turn to our three strategic priorities, people and culture, Operational Excellence and Innovation and Diversification. First, people and culture. We continue to make steady progress as we transition to a fully dedicated and specialized sales force in the U.S. We started this initiative in earnest earlier this year, and I'm happy to share that three quarters into an eight-quarter journey We are proceeding ahead of our expectations with over 75% of our US sales force now being fully dedicated. While we are seeing some disruption associated with this transition, particularly in our new franchise, overall, it has been less disruptive than we initially anticipated. As part of this strategy, we continue to add sales reps across key growth franchises such as upper extremities, We're going to continue to invest back into the business to support a smooth transition. And we're going to manage this project with the rigor that it requires. One key data point that reinforces our confidence in the pace and success of this transition is the sales rep turnover rates, which remain at healthy single-digit levels. Moving on to our second priority, operational excellence. Over the last several years, we have improved manufacturing efficiency through SKU rationalization, technology advancements, and better planning. With demand continuing to grow, we are reshaping our U.S. manufacturing network to make it more nimble and efficient. This effort includes closing select underutilized manufacturing sites and consolidating operations into several facilities in Warsaw, Indiana, home to our global headquarters. We're also reinvesting in our Warsaw facilities, bringing in more advanced manufacturing processes. Together, these actions reflect our continued commitment to both Warsaw and US manufacturing. At the same time, we continue to consolidate our international manufacturing footprint into lower cost geographies while working with third-party experts to thoughtfully implement artificial intelligence capabilities. All of these initiatives are designed to address and improve our operating expense cost base, which at 46% OPEX to sales leaves room for dramatic improvement. We expect these strategies will improve flexibility, help us meet growing demand more efficiently and provide a long-term margin tailwind as the work progresses. Our third priority is innovation and diversification. We remain committed to investing both organically and inorganically to diversify our portfolio and increase our exposure to faster-growing markets. As part of this strategy, we have launched a strategic venture platform focused on identifying and investing in early-stage technologies with deep potential to redefine the standard of care. Beyond capital, we will leverage Zimmer Biomed's strong capabilities across R&D, clinical, regulatory, and commercialization to help accelerate the development and adoption of these exciting innovations. By expanding access to breakthrough technologies, this strategy reinforces our strong commitment to alleviating pain and improving the quality of life for people around the world. While early in the process, we are already evaluating several differentiated technologies to invest in and expect the number to grow in quarters to come. We genuinely believe that the combination of all organic innovation programs, the advancement of this new venture platform, plus the work in our partnership with Deerfield Management and HSS, a $300 million investment commitment over eight years will accelerate our WMGAR weighted average market growth rates towards an aspiration of 6% by the end of the decade. Beyond these endeavors, we remain committed to responsible M&A to accelerate all diversification efforts, pursuing deals that can replicate the strong success of our Paragon 28 acquisition. In summary, Our results reflect the strength of a diversified global business with two-thirds of the portfolio growing at upper single-digit or double-digit rates, as evidenced by strong results in HIPS, SET, and technology and data. We are highly encouraged by the progress that we are making as an organization, while we also understand that there is still room to improve. Our focus now is on finishing the year strong and entering 2027 from a position of strength with the objective of delivering accelerated performance leveraging the great transformational work that we have done in 2026. With that, I'll turn the call over to Paul. Thank you.

Thank you and good morning, everyone. As Ivan discussed, third quarter sales grew 3.7% on a constant currency basis, driven by continued strength in HIPs, SET, and data and technology, bone cement, and surgical, partially offset by the expected challenges in these. We reported gap diluted earnings per share of $1 compared to gap diluted earnings per share of $1.16 in the third quarter of 2025. Higher revenue and a lower share count were offset by an increase in SG&A associated with our sales force transformation, earn out adjustments from prior year acquisitions, and a modest step up in manufacturing costs. Our adjusted earnings per share for the third quarter was $1.90, flat with the prior year quarter, as higher revenue and a lower share count were offset by the investments in the U.S. commercial organization and expected higher manufacturing costs. Pricing was a 70 basis point headwind in the quarter, within our guidance range of up to 100 basis points of pricing pressure for the year. Adjusted gross margin was 71.7%, a 90 basis point decrease from the prior year quarter and slightly ahead of our expectations. The year-over-year decline was primarily related to higher manufacturing costs, which were partially offset by a product mix benefit. Adjusted operating margin was 25.1%. Down 140 basis points year-over-year, reflecting our continued investment in the U.S. commercial organization as we execute our Salesforce transformation. Adjusted net interest and non-operating expenses were $77 million, a modest step up from the prior year, primarily due to currency fluctuations. Our adjusted effective tax rate was 17.6%, and fully diluted shares outstanding were $191.4 million, Down year-over-year due to $500 million in share repurchases in the first half of 2026 and an additional $79 million during the third quarter. Now turning to cash and liquidity. The third quarter marked another strong quarter of cash generation with operating cash flow of $560 million and free cash flow of $372 million, both up about 34% on a year-over-year basis. We ended the quarter with approximately $400 million in cash and cash equivalents. Turning to our outlook for 2026, as Ivan mentioned, we are raising our organic constant currency sales growth expectation to 3% to 3.5%, up from our prior range of 2.25% to 3.25%. Given changes in currency rates, we now expect foreign exchange to be an approximate 25 basis point tailwind to full-year revenue growth down 25 basis points from our prior expectation, and we continue to anticipate Paragon 28 to contribute 110 basis points to full-year reported sales growth. Given this, we now expect 2026 reported sales growth to be 4.4% to 4.9%, up from 3.9% to 4.9%. Shifting to the P&L, for the full year, we now expect adjusted gross margin to be around 72%, 100 basis points higher than our prior expectation, driven by manufacturing efficiency initiatives and favorable product mix. We anticipate adjusted operating margin to decline a little more than 50 basis points year-over-year, consistent with our prior commentary, which reflects continued investments in our U.S. commercial organization. We now expect full year net interest and other non-operating expenses to be $300 million, modestly higher than our previous expectation of $295 million. and continue to anticipate a full year adjusted tax rate of approximately 18%. In addition, we remain on track to complete approximately $1 billion of share repurchases during the year, and we still expect around 193 million fully diluted weighted average shares outstanding for 2026. Taken together, these factors support another increase in our adjusted EPS outlook. We now expect adjusted earnings per share of $8.50 to $8.60 for the year, up from $8.47 to $8.59, which contemplates continued investment in our commercial organization, and we continue to anticipate free cash flow to grow 9% to 11% for the year. We remain focused on executing our strategy, delivering on our commitments, and positioning the company for sustainable long-term growth. With that, I'll turn the call back over to David.

Thank you, Paul. Operator, let's open 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. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll go first to Matthew Blackmon with TD Cowan.

Good morning, everybody. Can you hear me okay? Yes, we can. Good morning, Matt. Great. Good morning. So, Ivan, it's clear that a majority of the franchises are performing well. So maybe can you just talk a little bit more about some of the successes you're seeing in HIPs and SCT? Are these sustainable, sort of near and intermediate term growth rates? And then these, what's the path forward to get back to market growth? And, you know, should we be more confident in your ability to turn that business, given what we're seeing in HIPs, for instance, but also The broader commercial initiatives you have in place. Just any color on those two topics would be great. Thanks so much.

Thanks for the thoughtful question here, Matt. So, look, I've been on this role now for three years. And often I get asked the question of what are investors missing? It's a great question considering where we are from a multiple perspective. And I'll tell you, there is one thing that resonates. I think investors don't realize that we are no longer just an e-company. We are no longer a company. It is mostly a reconstructive company. So when you break our organization into parts and pieces, today, NIS, Global NIS, is roughly a third of our entire book of business. U.S. NIS is around 20% of our entire book of business. And then two-thirds of the company is something else. We, over the last five, seven years, built what I call a world-class portfolio. around SET, S-E-T, which is a lot of stuff. You got sports, you got extremities, you got a great CMFT business. We built what I think is the leading food and alcohol company growing, you know, 18% this quarter. And we got a great technology portfolio that right as the quarter is now growing 20, 30%. So we're no longer a new company and a lot is working really, really well on these businesses. as evidenced by the upper single digit of double digit growth, which to answer your question directly, I do think is sustainable. Not ready to commit to growing this SAP business every quarter, upper single digit like this quarter or double digit. But there is plenty of market growth in these areas. There is plenty of innovation in these areas to continue to deliver significantly above market growth rates. Now, all of these data points is not to tell you that we don't care about needs. We got work to do. We're not pleased with the U.S. knee performance, but we expected it. We know we have some challenges we need to address, and we're addressing those. And those are around two key areas. One is the go-to-market dynamics. We've known for a while that most of our reps in the U.S. have been pretty much just doing knees and little else. We know we have commercial execution deficits that we need to resolve. That's why we're changing incentive plans. That's why we have changed leadership. That's what we are converting independent, non-direct representatives to direct. So that's one area that we're working on. And then the other one is around innovation and execution. That's why we've done the things that we're doing. We extended our partnership with T-Mini. We launched ROSA Optimize, which is tracking very nicely. And as you heard in my previous remarks, we are getting ready for the submission of the 510k for a monogram. So all of this to tell you, we're no longer just a new company. We're growing very nicely in two-thirds of the company. By the way, global needs, excluding China, would have been flat. And we've got work to do in the U.S., and we are doing the work, and we're going to get better. So that's the summary of all parts and pieces. Again, thanks for the thoughtful question, Matt. Thank you.

Our next question comes from the line of Rick Wise with Stiefel.

Good morning, Ivan. Good to see the constructive progress this quarter. You've given us a lot to ask about, but I guess I have to, I feel like I have to focus on the macro recon environment. I don't have to tell you, I'm sure you know, one of your major competitors indicated that they're seeing slower procedural growth, concerns about higher insurance premiums and deductible, increased preauthorization denials, et cetera, et cetera, et cetera. I'm not picking up on that kind of perspective in your prepared remarks. How do you see the market? Are we stable? Are we getting worse? And how are you thinking, how are you factoring all that into the outlook for this year and maybe potentially into next?

Yeah. Thanks for the question. Great to have you with us this morning, Rick. Look, it's going to be a bit of a repetitive answer. We don't look at one quarter or even two quarters to claim that our market is growing or slowing down. Certainly some noise around me, but nothing really that will tell me structurally this market is changing. I'm not sure that I'm ready to declare a market slowdown when our heat business grew 7% globally, 5.8% in the U.S., When a lot of categories within SET were growing double-digit, and again, we have, yes, one competitor with a lot of issues in the year, but we have another competitor that's growing 3%, 4% in U.S. needs. So I'm not sure that I'm ready to say, you know, this is the end of the need market growing at a certain pace. We continue to put all parts and pieces, what we call the WEMGAR, at 4% to 4.25%. That number is similar in the U.S., 4% to 4.25%. We like where we are in a lot of categories in SET. We also like what we see in the ASC environment, where we're growing double digit. The largest ASC operator in the U.S. just reported 13% growth in volumes year over year. So again, I think there is plenty of data points to suggest that there may be some light shoppiness within the quarter in a certain segment, but this is by no means, you know, the The end of a market growth rate. So recon, we beg it to be in the U.S., call it, you know, between two and a half to three and a half, somewhere in there. And again, we did see better performance in HIPs than in NIS. Specific to us, I will tell you that probably 90% of underperformance expected, but underperformance in NIS is commercial execution driven. So that's how we think about the market. We're tracking things like cancellation rates, which are pretty much steady over the last, call it, five years. Thank you, Ivan.

We'll go next to Patrick Wood with UBS.

Beautiful. Thank you so much for taking the question. I'd love to jump on Monogram, obviously coming in timing-wise ahead of where we all thought that it would. Pretty unique platform in that way. Ivan, I'd love to hear the strategy around the go-to-market, how you're thinking about the initial rollout, the pace, and really communicating the value prop to surgeons. Anything you want to call out on Monogram would be great. Thanks.

Hey, Patrick. Good morning. Great to have you with us. Look, we're very excited. At this time, we've got to be careful what we say because this is not a product that is being approved. We do expect, as I highlighted in my prepared remarks, to submit the 510K very, very soon. And when I say very, very soon, I'm talking very, very soon. We like the fact that given the clinical work that we've done around validation and verification, we can actually leap forward to a fully autonomous indication. So no longer we need to have a breach of a semi-autonomous and then move to a fully autonomous. So that's definitely transformational. We are validated or have validated key features around safety, very smart surgical boundaries. And by the way, we're in Dallas later this week. I'd love for you to join the demonstrations that we're doing. So safety is one of the key competitive advantages here. In the clinical trial, we saw zero patient safety reports. We love the efficiency, second feature of the platform, fast registration, fast bone preparation. We will try to make the claim that this will get us to time neutrality versus conventional. So extremely efficient, less than three minutes for bone cutting. If that is not enough to say on this topic, I don't know what else we can claim. It is of use. This is a robot that You don't need to have a complex surgical algorithm. You don't need to rethink your surgical algorithm. So really democratizing robotics for the masses. Highly reproducible, the fourth claim. And then we've seen in a lot of the clinical work we've done, we've seen a reduction or an improvement rather in accuracy. So again, safety, efficiency, ease of use, reproducibility, and accuracy are the five key claims. Today in the US, roughly 80% of surgeons don't use a robot for a variety of reasons. That number is close to 90% outside the U.S. So we see a dramatic opportunity to focus on the blue ocean opportunity of those surgeons that are now using a robot. Then obviously, we believe that this will be a second segment, an opportunity for us to convert comparative accounts. In the U.S., CT scanning is a must. Ease of use is a must. And again, I'm not going to repeat the whole speech I just gave you. We're going to get that done through a monogram. And then there'll be a third segment of some ROSA users that in the U.S. may want to move to Monogram. That is not the primary segment. ROSA is going to continue to be part of the portfolio. We're very, very excited about Monogram. So again, if you're in Dallas, love to see you there. We're very excited about where we are with this platform. Thanks.

Love it. Thank you.

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

Hi, Ivan. Good morning and thank you for taking my question. And congrats on the nice print this morning. I guess I had one on the outlook kind of question. You know, you updated guidance for 26 as 3.25% at the midpoint. That includes China headwinds and your Salesforce transition headwinds rate. When you think about 27, Why wouldn't 27 get better versus the 3.25 for 26? Or should we be thinking of other one-off items and any other go-to-market strategy change? Or perhaps the Salesforce transition headwinds accelerating into next year and any variables you could point out for 27 will be helpful.

Yes, thanks, Vijay. As you can expect, we're not going to get into a lot of detail here on 27. So I'm just going to repeat the things that I said publicly in the past. 2027 should be a better year compared to 2026, and that's based on some obvious factors. We've been very public about the noise in China. China is 2% of the revenue of the company, 1% of the EBITDA of the company, but it's been declining. Thank you for joining us. But the expectation is that that's going to be a catalyst. Paragon 28 in 2027 is going to be a full year of organic growth versus a couple of quarters plus in 2026. So again, that's a platform that is growing close to 20%. We don't see that slowing down. So again, we get a full year benefit there. So those are three very obvious factors that lead us to believe that 2027 will be better. Not to mention that obviously a lot of the work we've made A lot of the work that we've undertaken in the go-to-market changes in the U.S. will benefit in 27. At the same time, as always, there'll be some headwinds that we're going to have to manage. And again, in early 27, we'll talk about those headwinds and tailwinds and what the guidance looks like. What I will leave you with is that we're going to be very consistent. Once we provide guidance in 27, we're going to be very consistent with the philosophy of that we got here or the philosophy that we have for 2026. We want to take a measured approach as we did for 2026. And the goal will be, as always, to exceed expectations, to say less, and to do more. So that's the color that I'll offer on 2027. Thanks for the question, Vijay. That's helpful. Thank you.

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

Hey, thanks for the question. You've been talking about getting the 6% market growth rate by the end of the decade, so likely going to take M&A, and so just curious how you're thinking about the M&A environment, the willingness to kind of take dilution right now, and then even excluding M&A, like how do you think about the ability to get EPS leveraged next year as You know, is this a year where EPS is probably more in line with revenue growth, or is there an ability to grow EPS faster, given that's kind of where the street's modeling today?

Yeah, I'll start with the second one. The simple answer is we'll talk about EPS leverage in 27 in 27. So there's going to be a lot of moving parts and pieces. You know, you got tailwinds, headwinds. So again, EPS, let's leave that for the early 2027 goal. On the aspiration of 6% WMGAR, we don't need to do that. entirely in an inorganic way. As you heard in my prepared remarks, there's a couple of pathways to get there. We have reshuffled the R&D investments for the last 35 years towards higher growth environments. That is one major reason why our SAP business is growing at the rate that it's growing. The last data point that we offer externally is that 85% to 90% of our R&D is seeing markets growing north of 5-6%. So again, organically, we're getting there. Then we have this partnership with Deerfield and HSS with a lot of investments in really high growth areas. We recently launched strategic ventures making investments from a Devco standpoint in high growth areas. So again, there is a lot of things that we're doing organically and inorganically, not just buying companies. All of that said, yeah, M&A, responsible M&A will be part of the equation. This company has now operating cash flows nearing $2 billion per year. Operating cash flow is close to 1.3 or free cash flow is close to 1.3. Free cash flow conversion in the quarter was north of 100%. Year-to-date, 77%. So very proud of the work we're doing around cash. And now we're going to put that cash to work. In 2026, it's been around buybacks primarily. In 2027, we'll be doing responsible M&A. And the formula, the algorithm has not changed. We're going to focus on high growth segments of Recon, similar deals such as OrthoGrid, Monogram, Hammer at one point. The second area of focus might be higher growth areas within S&P. We love the acquisition of Paragon 28. We know what we've done with Embody, with A&E, in CMFT, Jace Medical. So a lot of deals that we don't talk about that we've done in SCT that are working very nicely. So that's the second area. And then we look at adjacencies. We look at things like what happens in an ASC environment given the migration there. So those are the three key areas. High growth segments in recon, high growth areas in SCT, and then we look at adjacencies. Financially, the same algorithm as well. Ideally up to $2 billion in acquisition price. Whatever we acquire has to be obviously immediately revenue and WMGAR accretive. Similar to Paragon 28, EPS accretive by the second year, by the end of year two. And then we're going to target acquisitions that will provide double digit ROIC, return on investment capital by year five. So we're going to be very disciplined around the Deals around where we invest, but also the deals in terms of the financial returns. And again, we got a great proxy now with Paragon 28 that is working above expectations. So the level of confidence is very high that we can reload and do another strategic deal again.

Great.

Thank you.

We'll go next to Robbie Marcus with JP Morgan.

Good morning and congrats on a good quarter. Ivan, I'm just looking at headlines from the Democrats that they'll seek to reverse Medicaid cuts and restore ECA subsidies. How do you think the negative cuts to health care in the U.S. have impacted your end markets? Where do you think your weight average and market growth is right now, given some of the changes in the knee and market? And how are you thinking about weight average and market growth going forward? And how much does that change if the health care cuts are reversed? Thanks a lot.

Hey, thank you, Roby. Look, obviously, too early. to start discussing what's going to happen here with the Senate and the House here. And look, we'll talk about it when we get more information. So I'm going to talk about what I know. We know and we validated this externally that our global WMGAR is around 4 to 4.25. We've also validated that it's a similar number here in the U.S. Even if you go with the various case that our recon business in the U.S. is moving towards the 2.5 that competitors... are claiming, or the three and a half that we believe is the reality in the U.S., we still see a Wenger environment of four to four and a quarter. HCA subsidies, we've not seen a material impact. As a reminder, the average patient that goes through procedures is 64, 65 years of age. So that's a Medicare patient. As of right now, the expectation is that Medicare reimbursement will go up in early 2027. Thanks, Ivan.

Our next question comes from the line of Larry Bigelson with Wells Fargo.

Larry Bigelson Good morning. Thanks for taking the question. Ivan, there's obviously been a lot of media reports of private equity interest in certain ortho businesses and potential combinations of ortho businesses. How is this media speculation affecting Timber and its employees, and how are you thinking about potential options in light of all this interest we're reading about?

Thank you, Larry. Obviously, I'm not going to get into a lot of speculation around the deals that are happening elsewhere. What I'll tell you is that our employees are laser-focused on driving growth, and you've seen that in the print for the quarter, where, again, two-thirds of our book of business is growing upper single-digit, double-digit, In the U.S., we deliver growth approaching 4%. I like where we are in the U.S. year-to-date, growing 3.8%. I like the fact that our turnover in the U.S. is single-digit. We love the fact that the transformation of the channel is going better than expected. So clearly, the focus is there, the performance is there. Disruption in other parts and pockets of MedTech, we'll leverage that when we can. We'll go next to Matt Taylor with Jefferies.

Hi, thanks for taking the question. I wanted to ask one on Monogram. I know you're not going to talk about the contribution in 2027, but maybe you could give us some updated thoughts longer term on the kind of share you think Monogram could drive towards Zimmer or just other ways to think about the growth driven by Monogram as it complements the rest of your robotic strategy.

Hey, thank you. Look, we expect Monogram to be a major catalyst for the company. I know we're not ready to talk about what is the meaning 27 or beyond, but I'll bring you right back. As you think about modeling the opportunity, I'll bring you right back to those three segments that I was talking about. 90% of surgeons outside of the U.S. don't use a robot. And if you bring a robot that is going to drive efficiency, accuracy, with a great safety profile, and the economic and clinical benefits can get validated. I do think the number is going to increase. There'll be more surgeons outside of the U.S. where they'll jump on a robotic platform. And in the U.S., even with the great work that we're doing here, still only 20% of surgeons are using a robot. So you've got an 80%. Blue Ocean Opportunities. So as you can imagine, we spent a lot of time in understanding what it is that we need to do to drive more adoption. Beyond that, we've not done the job that we could have done when it comes to converting accounts. We've done some of it, but for a variety of reasons, we've not been able to gain meaningful share from competitors. I believe, we believe that Monogram, given everything that we have seen, changes that dynamic. So those are the two key buckets that I leave you with as you model the opportunity. Beyond that, it's not just Monogram, right? I keep talking about the suite of solutions. Today, we have the most comprehensive suite of solutions in technology. If you want a CT scan platform, we have it. If you don't want to do CT scanning, which is the preferred surgical algorithm, the preferred formula outside the US, we have that as well. If you want to have a large footprint robot, we have it. If you want to have a smaller one, we have it. If you don't want to do robotics and you want to do navigation, We have all forms of navigation, from OrthoGrid to FDA-approved mixed reality, so it's much more than Monogram. But that said, we believe that the Monogram opportunities are going to be very compelling. Not to mention that now we're going to have a best-in-class robot with the world's number one orthopedic implant. We're moving very fast on making sure this is not just a one-indication platform or robot. We expect to have the partial knee and the hip application and the shoulder application at a very rapid pace. So again, lots of excitement, as you can imagine, when it comes to Monogram. And I hope, once again, I hope you're going to be in Dallas so we can share more about this launch. Thank you.

Great. Thanks so much.

We'll go next to Richard Newitter with Truist.

Hi. Thanks for taking the question, and congrats on the progress this quarter. I guess I just wanted to get a better feel for, because it sounds like you have kind of two things that should lead to an, three things lead to an acceleration of needs at some point next year. You know, one, you have easy comps. Two, you have monogram coming, and that's getting pulled forward. And then three, there's the sales force changes that, you know, you're making that are clearly having impact in other parts of the business. I would imagine sooner than they're actually showing up in needs. So the question is, when can we expect to start to see, realistically, US knee acceleration show up next year? And is it entirely based on monogram adoption, or can we start to see easier comps and some of the sales force impact actually show up on improved knee performance? Thanks.

Thank you. So let me let me read those three things here for you. So always the comms are the comms. So you're right in that regard. On your second point of Monogram, look, we got to get an approval first. You know, filing a 510K does not mean an approval. So let us go through the work and they will know what is the impact of Monogram in 2027. And then on the Salesforce, this is a tale of two cities, right? On the one side, you will see the benefit of some of the changes that we made in 2026. We've been very public around the fact that it takes 12 to 18 months to see the benefit. So yeah, a lot of the work in 26 becomes a tailwind in 2027. At the same time, we've also been very public around the fact that the third stage of this quarter market transformation is the riskiest, which is the one that we're going through right now. So hard to quantify at this point what's going to be the balance between the tailwind and the headwind. But you're right about those three things. So we do expect that needs will perform better at some point. We're not ready to commit exactly in one quarter, but the expectation is that needs will improve. But no, it's not just one or two things. It's probably broader than that. Thank you.

Our next question comes from the line of Chris Pasquale with Barclays.

Thanks. Ivan, you mentioned you're about halfway through the Salesforce reorganization, and so far the disruption has been less than expected. As you think about bringing that process to a close, and it sounded like you hinted at this a little bit with the response to the last question, how much is it really de-risked? Did you start with the easiest parts and now the tough pieces are left? Can you apply what you've learned so far to mitigate the risk going forward? We just love any color you can provide as we think about the potential impact from that piece in 27. Sure. It's working better than expected.

You see that in the numbers. I refer you to the growth in the quarter, 3.6 growth in the U.S., 5.8 in HIBs. We delivered, I think it was 32% growth in data and technology. That's the people that we add in. We really don't talk about the SAT number in the U.S., but it was mid-single digit. In the north side of mid-single digit, so again, the numbers reflect the fact that This is working better than expected. Low single-digit or single-digit turnover. We're doing all the right things. What are we learning? We're learning that we've got to go at a certain pace, and we are doing that. We've always talked about the three stages of the transformation. Stage one was the low-risk, low-hanging fruit. So, no, we did not start with the riskiest. That's done. The second stage was moderate risk, which we closed. And now we are early in the third stage, which is the higher risk. So that's where we are right now in terms of the three stages. We very much believe that this project is manageable. We're not being penny-wise, pound-full-ish. You see that we're making compelling investments. That's why our EPS growth is not higher than what it was in the quarter. We're going to continue to do that. We're going to invest to make sure that we de-risk the project. We recently appointed Todd Baker. Todd Baker was the number one distributor in the U.S. as the key leader running this project. We call the project Optima internally. Todd is doing a heck of a nice job here. So I will tell you, Chris, that the governance is there, the leadership is there, the investments are there. How we're thinking about staging the project has worked out very, very well. But we got one final stage to go through, which is the higher risk. And that's what we're at. Thank you. Thanks.

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

Great. Thanks so much for taking the question. Just on the think agreement, any changes to note in the extension there? And, you know, how's the launch going and seeing anything from handheld competition in the marketplace?

Thanks for the question. We love the partnership with Think Surgical and Team INI. We just extended the partnership. We believe that a cordless portable robot, cordless being the key highlight CT scan base, is a need. So we now have this exclusive distribution agreement, which we extended. We can use it with the number one implant in the world, that being Persona NE. We love the fact that the CT technology is extremely smart. with an active overhead tracking everything that's happening in the procedure with unrestricted patient access. It's very easy to integrate the actual surgical algorithm or the technology into the surgical algorithm. One of the key claims that we continue to hear from surgeons is that it takes minimal operating room setup. So in a world of ASCs, this is a massive opportunity. We just had a very strong quarter, Q3, in technology. A lot of that had to do with the T-mini sales. So again, we love the partnership. We love the people that we work with. We love the fact that this complements our portfolio. So we don't see an end to this partnership. We like where we're at, and we look forward to continuing to update you on the progress. Thank you.

Our next question comes from the line of Steve Lichtman with William Blair.

Thank you. Good morning. Ivan, you talked about OpEx being an area where you're looking to drive improvement. Just wondering what the levers you see to drive that. I know you have obviously a lot going on with the sales transition and investment in robot sales specialists. Do you see leverage coming through after getting through those processes? Anything else that you're focused on looking ahead? Thanks.

Thank you. I'll throw a couple of bullet points, and then we'll let Paul comment here on the different vectors of opportunity. I'll start with the fact that in May of 2027, we're going to celebrate 100 years in the business, and our OPEC still is roughly 46, 46.5%. So certainly there is an opportunity here. to drive efficiencies. Roughly, for the $3.8 billion in OPEX, a billion is variable compensation. So you got $2.8 billion of things that we're looking at. To that extent, we're partnering with sophisticated partners in AI implementation that are looking at what are things that we can work on around re-engineering processes, what are opportunities for us to drive revenue, Given the fact that we collect more data than any other company for student orthopedics, we're looking at transactional work. There's a lot of opportunity when you look at, you know, shared services, how we do things from a demand planning standpoint, how we engage in customer services or customer service. So a lot of opportunities there that we'll update you on. But, Paul, do you want to talk about different parts and pieces here?

Sure, sure. Technology will be a big part of it. We've recently opened up a global capability center in India that's going to allow us to kind of leverage the cost base there and get some very, very great talent to help drive some of the different initiatives within the business. That's something that actually Ivan was there recently, had a chance to visit the team. We're up and running and things are in great shape. As we've looked at with Project Optima, a lot of the investments that we've been making Some of those kind of stay with us in the near term, but they'll start to anniversary out at some point. So that's going to provide some level of operating leverage as we go through. And then, look, at the end, it's just good old-fashioned efficiency, right? It's continuous improvement. We've got some great teams that can sit in and drive process efficiency, leveraging the data that we have so that we can just do things on a more cost-effective basis. So good opportunities, and we're looking forward to it. Thank you, Paul. Thanks, guys.

Our final question will come from Jason Bedford from Raymond James.

Hey guys, it's Zach on for Jason. Thanks for taking the question. Just a quick one here for you. Can you guys update us on your large joint traction into the ASC setting and then also the stability of the implant pricing in the channel?

Absolutely. I didn't quite catch the second part, but let me answer the first one and then maybe you can ask the second part again. ASCs today roughly Growth in the space for us in large zones is upper single digit, if not double digit in the case of hips. On set, we're growing very nicely, and I don't remember the actual breakdown, but I will tell you in some categories, double digit as well. Foot and ankle, upper extremities for sure, sports medicine. So we like the migration to ASC. Roughly around 25% of our book of business today is going to an ASC. We're seeing double-digit growth in that regard. Technology, the efficiency we run with technology is a major competitive advantage. So that's another tailwind as we think about the shift to the ASC. So we like where we're at. And then can you ask again the second question?

Sure, yeah, just the stability of implant pricing into the ASC channel.

Oh, okay. Got it. Thank you. Well, look, as I referenced earlier, the implant cost today as a percentage of DRG is at the lowest point in 22 years. So we don't think there is more to squeeze in that regard. When you look at the bundle of care in orthopedics, the implant is actually less than 15%. The other 85% are things around efficiency, labor costs, readmissions, sending patients that don't need to be sent to a to an inpatient unit post-procedure. So when you're working with a company that is thinking holistically around the entire episode of care, that's a competitive advantage. We very much look forward to January of 2028 when CGRX kicks in. So we believe that the current pricing dynamic is steady. Our price erosion in the third quarter was 70 basis points, which is 10 basis points better than the second quarter. The guide that we provided for the year was flat 200 basis points. We're extremely confident that we're going to obviously deliver on that guidance. And as we look at 27, 28, and we have a lot of lead indicators, a lot of data, we don't see anything that dramatically changes our perspective on pricing. So we like where we're at. Thank you.

Thank you.

This concludes today's question and answer session. I would like to turn the call back over to Ivan Tornos for any closing remarks.

Thank you. We started the call this morning with gratitude. I want to close with gratitude. Gratitude to the 17,000 plus team members here at Zimmer Biomet who are doing a stellar job in delivering on our mission of alleviating pain and improving the quality of life for people around the world. From a performance standpoint, Q3 was a solid quarter. I love the fact that two-thirds of Zimmer Biomet grew at upper single-digit or double-digit growth rates. Delivering a bid on revenue gross margin EPS and giving us the confidence to raise guidance for the rest of the year. We got work to do in our US NE franchise, and we're doing it. I love the strong innovation cycle, which is about to get amplified with the launch of Monogram, pending approval, of course. And the transformation of the US go-to-market channel is going better than expected. So with roughly 50 days to close the year, we like where we're at. We look forward to the next update in early 2027. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.