Ivan Tornos
Chief Executive Officer at Zimmer Biomet
Good morning, everyone, and thank you for joining today's call. Welcome, David, to your very first Zimmer Biomet earnings call. It's truly lucky to have you. We love what you bring to the team already. I'd like to start today the way that I always do by taking a moment to recognize and to show my gratitude to the over 18,000 Zimmer Biomet team members who each and every day across the globe move for business and our mission forward. Thank you for your commitment to the organization. Thank you for your tireless work. Thank you for your very strong performance and most importantly thank you for what you do for our customers and patients every single day. As I said in the past, and as I will continue to say as long as I'm here, the Zimmer Biomet workforce and the culture that we have truly is one of our key competitive advantages. During the call today, I'm going to cover four things. First, I'll give an update on the recent ERP implementation and the challenges associated with it. Secondly, I'll cover some general comments on the quarter and the broader market dynamics. I move to them talk about a brief innovation overview. And then four and last, I'll close with a usual update on our three strategic priorities. After this, Suky is going to cover our financials in more detail. I will make sure to leave plenty of time for questions at the end of the prepared remarks.
To begin, I'm very excited to report that we made greatest strides in managing the ERP implementation challenges outlined in early September. Through the dedicated work of the Zimmer Biomet team and our external partners, we now expect the impact of this challenge in the second half of 2024 being lower than the 100 basis points of annual sales that we initially communicated and we also fully expect to be back to normal shipping levels by the end of the year 2024. Turning to results. In Q3, we grew sales at mid-single-digit level, including strong results in knees, in hips and in head. This quarter, the third quarter now marks the 11th consecutive quarter of mid-single-digit or better constant currency revenue growth for Zimmer Biomet. In addition to the strong revenue performance, adjusted EPS once again grew faster than revenue. Our combined knee and hip businesses, what we call our reconstructed platform, grew in the mid-single-digit range globally while head delivered upper single-digit growth, aided by strong performance across our key growth drivers.
Suku is going to cover this later, but I'm very proud of these results and specifically I love the consistency of growth in the key categories. Beyond commercial execution, our performance was fueled by mid-single-digit growth in our end markets, which we anticipate continuing based on all the analytics that we have at hand. And aging and increasing active population, combined with technological advancements, driving procedures to out-patient savings like the ASC in the U.S., accelerating recovery times and best-in-class outcomes should continue to provide tailwinds to market growth in the coming years. So again, we see a mean healthy, and we don't foresee these markets slowing down. From an innovation standpoint, Zimmer Biomet has the most robust product cycle in recent memory with over 50 meaningful plan product launches over a long-range plan horizon. I am particularly excited about the momentum we are generating in our Hips platform as evidenced by the improved results in this business and particularly in the U.S., where we delivered almost 5% growth in the third quarter. With Z1 our new triple-taper hip system, for interior heap implant procedures and with our surgical impact of HAMMR, as well as comprehensive navigation, robotics and platforms in navigation aorta grid, we are going to continue to be on the offense when it comes to gaining sharing hips. So great innovation, and we expect consistency in execution over the next several quarters.
In keens, our cementless Persona OsseoTi continues to gain rapid traction, while the recently launched Persona IQ study, the shortest TEM for Persona IQ, is driving continued uptake of this differentiated technology. Early in the launch, the feedback has been super. Within Extremities, ROSA Solar has the potential to change the treatment paradigm in shoulder implants. It's a platform that allows for reproducible, anatomic and reverse procedures. Finally, Zimmer Biomet is the only orthopedic company offering both a CT scanless robotic system in ROSA. And through our recent partnership with THINK Surgical we also offered a smaller footprint, handheld CT scan-based system in Tamini. So, when it comes to navigation and robotics, we got the most comprehensive suite of solutions.
Beyond all of this, we're expecting to launch a catering of new robotic applications in the short to midterm with and without CT scan capabilities as well as other differentiated features. In the ROSA franchise alone, we expect to launch three new indications in the next 18 to 36 months. While the underlying business performance remains strong, the team continues to execute on the same three strategic priorities that I have outlined in the past. Those being people and culture, which is foundational to our thing that we do; operational excellence; innovation and diversification.
As I said at the beginning of the call, people and culture are key competitive advantages for Zimmer Biomet. Recently, we appointed new leadership in our hips, knees, set, in our ASC and in our digital technology and solutions businesses. I'm excited about these leadership changes, and I am confident that the growth under the leadership of this new individuals is going to accelerate.
In addition, we have upgraded talent in critical areas like IT, information technology and operations. On the second imperative, operational excellence, we are maintaining expectations for the long-term financial commitments that we outlined at our Investor Day earlier in the year. With the terrific progress we made towards the resolution or the ERP issues, we feel even more confident in delivering mid-single-digit revenue growth, adjusted earnings per share growth of at least 1.5 times revenue and free cash flow growing at least 100 basis points faster than earnings throughout 2027. So again, the same commitments towards revenue, EPS and free cash flow remain.
Finally, we continue to make progress in diversifying our business to increase the company's growth and profitability profile. This includes a highly disciplined approach towards M&A as well as internal capital allocation dynamics. To that extent, the value of Zimmer Biomet's pipeline of new products expected to be launched over our long-range plan is more than twice the value that it was just a short five years ago. And 80% of these new product launches are accretive to the Zimmer Biomet Vanguard of 4%.
In conclusion, we are very proud of the progress in organization, and we look forward to continuing to execute above and beyond expectations. I love the fact that we're impacting the lives of millions of people, and I'm deeply inspired every day in knowing that my teammates and I are leaving the Zimmer Biomet mission of alleviating pain and improving the quality of life for people around the world.
And with that, I'll turn the call over to Suke. Thank you very much.