Zimmer Biomet Q4 2021 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet Holdings Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Keri Mattox, Senior Vice President, Investor Relations and Chief Communications Officer. Please go ahead.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thank you, operator, and good morning, everyone. I hope you are all well and safe. Welcome to Zimmer Biomet's fourth quarter 2021 earnings conference call. Joining me today are Bryan Hanson, our Chairman, President and CEO; and EVP and CFO, Suky Upadhyay.

Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please note, we assume no obligation to update these forward-looking statements, even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties in addition to the inherent limitations of such forward-looking statements.

Additionally, the discussions on this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included within our Q4 earnings release, which can be found on our website zimmerbiomet.com.

With that I'll now turn the call over to Bryan. Bryan?

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

All right, great. Thanks, Keri, and thanks, everyone, for joining us this morning. I'm going to just give you an outline of how we want the call to proceed this morning. I'm going to spend the first part of the discussion briefly talking about our fourth quarter results, and I'm also going to spend a little bit of time talking about what we're seeing so far in 2022. I know it's early, but I want to give you a sense of what we're seeing already and then just speak more broadly about our views of 2022 as a whole. And then I'm going to turn it over to Suky who's going to provide more detail on fourth quarter and obviously more detail on our guidance going forward. And then, finally, it'll come back to me before we move to Q&A. I just got a few things I want to close out the prepared remarks with, and then we'll again jump into Q&A.

Okay. So, first, let's start with Q4 and I'm going to break this into really three categories. The first will be around COVID impacting Q4 and how it compared to our expectations; the second will be around VBP impact and again how that compared to our expectations; and finally, just performance outside of those environmental impacts and how we performed there.

Okay. So let's take a step back first. I think that will help. When we gave our updated Q4 guidance on our Q3 earnings call back in November, we actually outlined our expectations around how COVID and staffing pressure would likely impact our fourth quarter results. And unfortunately, our assumptions largely played out in the quarter. As you probably remember, we felt that the pressure from the end of Q3 would continue into Q4 and thus the overall pressure from COVID and staffing would actually accelerate from Q3 to Q4. And really the big reason this played out, of course, we know now is because of the Omicron surge that occurred towards the end of the fourth quarter. And as many have already stated, a lot of that impact truly came in December itself.

So what's interesting about this surge, though, is that even though the overall impact of COVID was about what we expected, but the way, again it manifested was different right. So ICU capacity was definitely a factor, but we did not see it as the primary driver of cancellations of procedures during the quarter. Instead, what we actually saw was more cancellations that occurred due to really either the patient or staffing member being diagnosed with COVID or actually having been around someone with COVID and they were quarantining as a result and couldn't show up for the procedure. So that was really the shift that we saw in the quarter. So the overall impact was about what we expected, but the way again it manifested in the numbers was slightly different.

Okay. So transitioning from there to VBP. Remember, again, on our Q3 call, we discussed what we thought the impact of China hip and knee VBP would be on our fourth quarter results, and we actually -- we were largely right on how that played out. And so our expected headwind in large joints was in line with the expectations that we had and also what we communicated to you. So that was pretty much in check when we think about large joints. Now what changed during the quarter, actually even post the quarter, was that on January 24th the Chinese government announced that it was formally nationalizing one of its provincial trauma VBP tenders. And that was new to us. But based on that confirmation from the Chinese government and really just our knowledge of how the VBP process will work from here, we did take a sales reserve in the fourth quarter, which obviously results then in a negative Q4 impact to both our net sales and adjusted diluted EPS.

And what I'd say is that even though this trauma VBP adjustment came earlier than we anticipated, it is pretty consistent with the overall scale of the impact and consistent with our expectations and what we've been talking about more recently. Now I would say looking forward, the good news is we have a lot more visibility now. We're a lot smarter on the topic, and we understand what the impact of VBP will now be on our 2022 business. And that has been included in our guidance, which Suky is going to talk about in just a minute.

Okay. So now looking past VBP and COVID in the fourth quarter, I'm very proud of the team when we focus on the things we can control. ZB's business execution against the challenging backdrop has been strong. Our strength of our team right now, that one ZB culture is as evident as it's ever been and I think more important than ever. And the team has really been able to move our strategy forward even in these challenging times. And a few proof points to be able to point at the team was able to drive continued strong demand and momentum for ROSA, and that is globally, not just in the U.S. but globally. We actually more than doubled the number of installed ROSAs in 2021 versus our cumulative total at the end of 2020. It's a pretty significant jump up and, again, speaks to the momentum that we have in robotics in orthopedics.

And those ROSAs are paying off. In the fourth quarter those installed ROSAs allowed us to reach 10% in total knee procedure penetration in the U.S. for the first time as a company. That's a huge milestone for the organization and it's just the beginning of this ROSA journey for us. The team also delivered a successful limited launch of the world's first and really only smart knee, the Persona IQ. Now it's early -- obviously early days. We're in limited launch right now as I said, but the launch trajectory feels great, the feedback is good, and we're looking forward to a full launch later this year. And then finally. and I think importantly. the team continues to execute in large joints across the board, driving again above-market performance in Q4 in the U.S. for both knees and hips versus 2019.

Okay. So let's transition from Q4 and talk about what we're seeing so far in early 2022. And I'm going to speak specifically about COVID and staffing challenges. What I would tell you is that the challenges that we saw in Q4, in particular in December, are unfortunately continuing into January. And as a practice, and I think prudently so, our team is continuing to build our financial models using what I'm going to call a recency bias in those models. And as a result of that, we're expecting that December and really now January pressure in COVID and staffing will continue through Q1. So we're basically saying is that overall we anticipate that Q1 will likely be more pressured than Q4 was. And so what does that mean for our outlook for the full year? Well, again, we're going to follow that same approach. We're going to look at 2022 in a similar way, actually in a very similar way -- in the way we gave guidance for Q4 2021. Until we see a fundamental shift in the current state and what's happening today in the environment, we are projecting that the COVID pressure will continue throughout the year and will be -- actually follow a similar peak and valley trend that we saw in 2021. As I'm sure you can appreciate, given that about 80% of our revenues come from elective procedures, ZB must be highly attuned to this topic, and trust me, we are. We're highly focused in this area and that has been captured in our assumptions for guidance.

And with that, I'm going to transition to Suky to give you again more detail on Q4 and also our 2022 guidance. Okay, Suky.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Thanks and good morning, everyone. For this morning's call, I'm going to focus on three topics: first, our Q4 results, including commentary on the impact of COVID; second, how that translates into full-year '22 financial guidance that we provided this morning; and third, I'll provide a brief update on our longer-term outlook. Moving forward, unless otherwise noted, my statements will be about the fourth quarter 2021 and how it compares to the same period in 2020, and my revenue and P&L commentary will be on a constant currency or adjusted basis. We've also provided changes versus the fourth quarter of 2019 or pre-pandemic results as we feel it is an important comparison.

Net sales in the fourth quarter were $2.04 billion, a reported decline of 2.3% and a constant currency decline of 0.8%, or down 4.4% versus '19. On a consolidated basis, we were about flat through November versus 2019 and declined in December due to the Omicron variant surge. Expectations for the fourth quarter had contemplated the impact of China VBP in hip and knee, and that was largely in line with expectations. Separately, we booked a sales adjustment related to channel inventory for China VBP in trauma of approximately $30 million, triggered in part by the Chinese government's announcement relating to a national trauma VBP which was made on January 24th. This adjustment was about a 650 basis point headwind to S.E.T. category growth and about 150 basis point drag on consolidated Q4 growth.

In short, excluding the impact of the China VBP on our S.E.T. results, the quarter was generally in line with the assumptions that we provided on our third quarter call and broadly consistent with the midpoint of our implied fourth quarter guidance range. The declined 1.5% in the fourth quarter, down 1.9% versus 2019 with the U.S. declining 2.3% or down 2.4% versus 2019. The impact of Omicron late in the quarter in tandem with lingering hospital staffing challenges drove lower regional results. EMEA grew 17.3%, or down 3% versus '19. The region experienced positive growth versus '19 earlier in the quarter, but quickly decelerated with the emergence of Omicron. Lastly, Asia-Pacific declined 17.5%, or down 15.1% versus '19, driven primarily by price adjustments on channel inventory ahead of hip, knee, and trauma VBP, as well as some negative impact from a spike in COVID cases starting in December in markets like Japan and Australia.

Now turning to our business category performance in the fourth quarter. The global knee business increased 0.4%, or down 3.9% versus 2019 with U.S. knees declining 5.2% or 3.9% versus '19. In the quarter, China VBP had a negative impact on knee growth of about 250 basis points. Our global hip business declined 2.8%, or down 6% versus '19, with U.S. hips declining 4.4%, or 3% versus '19. The VBP impact on hip was about 700 basis points in the quarter.

Our sports, extremity, and trauma category decreased 4.3%, or down 6.2% versus '19. The sequential deceleration was due to a softer market due to COVID and the impact of China national VBP and trauma as discussed earlier. Excluding the impact of trauma VBP in the quarter, S.E.T. was growing low single digits versus 2020 and about flat versus '19 on an underlying basis. The dental and spine category declined 3% or down 3.8% versus '19 with dental posting growth and spine declining primarily due to continued pressure from COVID. Finally, our other category grew 14.1%, or up 1.9% versus '19. Inside this category, we saw ongoing demand for ROSA knee as well as increased revenues from the launch of our ROSA partial knee and hip applications.

Moving on to our P&L. For the fourth quarter, we reported GAAP diluted loss per share of $0.40 compared to our GAAP diluted earnings per share of $1.59 in the fourth quarter of 2020. This decrease was driven primarily by lower revenue, a debt extinguishment loss recognized under bond tender offer, litigation-related charges, and restructuring charges that we incurred in Q4 to continue to address pressures on revenue from COVID and the stranded costs associated with the spin. On an adjusted basis, diluted earnings per share of $1.95 represented a decline from $2.11 in the fourth quarter of 2020. The decrease was primarily from lower revenues in tandem with lower gross margins due to COVID-19 and the impact of China VBP in both recon and trauma, which were partially offset by targeted reductions in SG&A and a slightly lower tax rate. In addition, FX was a modest headwind to earnings per share in the quarter.

Adjusted gross margin was 69.1%. Fourth quarter gross margin was pressured due to lower manufacturing volumes and the impact of China VBP. For the full year, adjusted gross margin was 70.7% and in line with prior commentary. Our adjusted operating expenses of $882 million declined year over year. In spite of that we continue to invest in R&D and commercial infrastructure across priority areas like S.E.T., robotics, and data and informatics, which are being funded by accelerated improvements in efficiency across other areas of SG&A. Our adjusted operating margin for the quarter was 25.9%, down versus the prior year but in line with the prior quarter. The adjusted tax rate was 14.4% in the quarter. The Q4 and full-year tax rates were favorable to our expectations due to some discrete one-time items in the quarter.

Turning to cash and liquidity. Operating cash flows were $366 million and free cash flows totaled $224 million with an ending cash and cash equivalents balance of just $480 million. We continue to make good progress on de-levering the balance sheet. In the fourth quarter we reduced debt by approximately $400 million bringing the total debt reduction in '21 to approximately $900 million, excluding the effects of foreign currency on non-U.S. denominated debt.

Moving to our financial outlook for 2022. We are issuing '22 financial guidance based on the following key assumptions. COVID and customer staffing pressures are expected to continue throughout 2022. We expect the COVID and staffing pressures that we saw in December to accelerate into the first quarter of this year with the first half of 2022 being more pressured than the second half. We do not see China VBP as a material impact to growth in '22 versus '21, but we expect variability by quarter with more pressure in the first half. Furthermore, we anticipate completing the spin of our dental and spine businesses in the near-term. And as such, the guidance we are providing is only for RemainCo Zimmer Biomet. For the first quarter, ZimVie will be reported as discontinued operations, and we expect to provide pro forma 2021 information for RemainCo on or around our first quarter earnings call. While we do not have full P&L restatements available at this time, for comparison we have provided our unaudited net sales estimate of $6.827 billion for RemainCo Zimmer Biomet.

Against this backdrop, our current expectations for the full-year 2022 financial outlook are reported revenue growth in the range of negative 4% to zero versus 2020 with an expected foreign currency exchange headwind of approximately 200 basis points. This translates to negative 2% to positive 2% on a constant currency basis, adjusted operating profit margin of 26.5% to 27.5%, adjusted tax rate of 16.0% to 16.5%, adjusted diluted earnings per share in the range of $6.40 to $6.80, and free cash flow of $700 million to $800 million. Inside of that guidance, we expect Q1 revenue to be flat to up slightly versus the first quarter 2021 due to headwinds from COVID and the impact of the VBP, being somewhat offset by the easier comp relative to the first quarter of last year and a roughly 130 basis point selling day tailwind that will largely be reversed in the fourth quarter. We expect approximately $160 million of net interest expense and approximately $212 million average shares outstanding for the year. We remain committed to our investment grade rating and expect to pay down $750 million of debt maturing in the second quarter of this year.

Now turning to our longer-term outlook. With the ZimVie spin transaction nearing completion, we are also taking this opportunity to update our long-term margin expectations. Given the prolonged impact COVID '19 is having on our business, we are removing our target of at least 30% adjusted operating profit margin exiting 2023. However, we do expect to improve margins over the long term as we will continue to make targeted investments in our business to enhance top line growth while also accelerating cost savings to fund those investments.

In summary, the macroenvironment presents challenges, but our underlying business fundamentals remain strong as we continue to execute successfully against what we can control. With that, I'll turn the call back over to Bryan.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

All right. Thanks, Suky. And before we move into the Q&A session, I just want to spend a few minutes to talk about our broader corporate strategy and really importantly our execution against that strategy. When I joined ZB, we looked very closely at; number one, reimagining our corporate mission and culture, but also number two, making sure that we transformed the long-term strategy of the company and change the way we think about innovation. That was really where that ZBEdge ecosystem has come from. So through that, we prioritized R&D spend in robotics and data, and we also tripled the number of ZB team members with robotics and data backgrounds so that we had that competency to truly move the needle in this area. And where we didn't want to build the competency, we forged strategic partnerships with the likes of Canary to be able to drive traction and smart implants but also with larger players like Microsoft and Apple to further enhance our data and robotics ecosystem. And, hey, we're seeing results. Our Vitality Index has nearly doubled from 2018 to 2021, and I'm proud to say that our new product pipeline is stronger than ever. And as a result of that, we expect to increase our Vitality Index an additional 50% over the strat plan period.

But beyond innovation and our strategy, we're also transforming the company by modernizing and streamlining its operating model, right? We're focused on accelerating and expanding programs to drive efficiencies in the company, simplifying the company, and using that cost savings to enable investment in the business for growth but also positioning us to expand margins, and that will absolutely continue. And that reinvestment is working. That reinvestment in our business for growth is working. It is driving growth. And I know that COVID is hiding that growth, but if you go back in time before the disruption of COVID, we went from zero percent growth in 2017, and believe me, I acutely remember this because I joined the company in December 2017, we went from zero percent growth in 2017 to a 3.2% growth rate in Q4 of 2019. Now that was the last full pre-COVID quarter that we had and that was really just on the beginning end of that Vitality Index moving north. Just when we were just getting traction in Vitality Index. So I would say that even though COVID disruption is definitely muting our growth, and there's no question that that's happening, we are confident that we have the right strategy and we're executing against that strategy, that we have a differentiated portfolio, and that's even getting stronger because of our Vitality Index movement, and our execution capability will allow us to pull that all together so that we can get back on that growth trajectory as we see recovery from COVID. Okay?

And so one last point that I want to make in our transformation. I want to talk about active portfolio management. Today we gave an update on our ZimVie spin progress, and we're expecting to finalize the spin ahead of schedule on March 1st, and I'm very excited about the ZimVie Investor Day today. You're going to hear from its CEO, Vafa Jamali, and the team that he's put together. I think you're going to be excited about what you hear. And I can tell you that both Vafa and I know that we are creating more shareholder value as two independent companies. For ZB -- for RemainCo, we get increased focus, we get enhanced revenue growth, and we get margin accretion. For ZimVie, they get to prioritize the investment in their dental and spine businesses in a way that we would not have, and that really enables them to build a stronger standalone business in those attractive markets. Of course, you're going to hear a lot more about ZimVie over the coming weeks starting with the Investor Day today, but outside of ZimVie, we've also continued to move our M&A strategy and our partnership strategy forward. We've done almost 20 different transactions between M&A and partnerships to be able to enhance our position in faster growth categories. And we have, I know, much more to accomplish here, but even with the limited available capital that we've had given the COVID pressure, we're absolutely off to the right start.

So as you can tell, there's a lot happening at ZB. There's a lot that we're proud of, and there's a lot that will absolutely continue to fuel our transformation and ultimately help drive our mission and very importantly drive value for you. So with that, I'm going to turn the call back to Keri, and we'll move to our Q&A session.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

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

Questions and Answers

[Operator]

[Operator Instructions] [Operator Instructions] We'll take our first question from Josh Jennings with Cowen.

[Josh Jennings, Analyst at Cowen and Company, LLC]

Good morning. Thanks, Bryan and Suky, for taking the questions. Just wanted to start off on 2022 revenue guidance and just make sure I understand the impact of VBP that you're baking into the range. I know you don't usually break out guidance for specific regions, but anything you can do to just help us think about what's baked in for Americas and EMEA versus Asia Pac into that down 4% [Phonetic] to flat on a constant currency basis for 2022. And then set just to follow up on operating margin guidance and just the trajectory. I know as these pressures are in play, you've taken another look at that and that 30% target. But just as you're moving through these transformation programs and looking at regional profitability, infrastructure, and smaller markets and other areas of cost reductions, how do you balance that with the top line growth trajectory? Is there any risk that you're going to be impacting revenue growth over the next couple years by pursuing these transformation programs? Thanks for taking the questions.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. Maybe I'll just start real quick on that last portion of it and then I'll pass it over to you, Suky. We actually feel more confident in our ability to invest for growth in the business because of the transformation programs. The transformation programs are not specifically associated with R&D and investment in those key growth drivers for us. They're more focused on finding efficiencies that do not impact our ability to spend in those growth areas. So they really actually bring more confidence that we'll be able to spend on the things that are actually going to drive growth in the future. But outside of that, I'm going to push it over to you for the other questions.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah. So, Josh, thanks for the question. Regarding revenue guidance, so we talked -- some of the overarching assumptions in that guide on negative 2% to 2% on an ex-FX basis for the full year revenue is really around the concept of we expect COVID to continue for the full year. And the impact of COVID on elective procedures and staffing shortages again to really be with us for the entirety of 2022. Now what we're saying is broadly we would expect to see procedural volumes consistent with 2021 and that's in the backdrop of COVID actually accelerating in the first quarter, right, where we expect the first quarter on an underlying basis to be down, so we do expect to see some recovery in the later quarters within the year.

Specifically inside of that your question to VBP, we don't see VBP as a material headwind or tailwind at this time relative to large joints or trauma, given the charges that we've taken in the fourth quarter of 2021. Now I would say that the cadence of that by quarter is going to be definitely different. Even though it's not a full-year headwind or tailwind, it'll definitely be more pressured in the first half of the year than in the second half of the year. So that's how we think about VBP.

Now I think your other question was regarding how do we see regional performance in that flattish growth, we're not going to comment on regional color at this time. There's a lot more that's got to play out relative to COVID and the recovery by region before we're going to talk about that. So we'll give you more color as we get into the -- further into the first quarter on our first quarter call, but right now consolidated level we expect it at our midpoint to be about flat.

[Josh Jennings, Analyst at Cowen and Company, LLC]

Great. Thanks for those details.

[Operator]

Our next question comes from Vijay Kumar with Evercore ISI.

[Vijay Kumar, Analyst at Evercore Group]

Hey, guys. Thanks for taking my question. My first one, Suky, is on the EPS guidance here. The base Zimmer, ex the spin, I just want to make sure I have the right numbers. I'm getting to maybe something [Technical Issues] of earnings in 2019, $6.65 earnings on a comparable basis for last year fiscal '21. [Technical Issues], again, just walk us through the bridge, right, the fiscal '22 guidance of $6.60 [Technical Issues], what is the [Technical Issues] across volumes...

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Hey, Vijay, I'm sorry to interrupt, but you're a little staccato. You're not coming in really well, so we can't capture your question. I don't know, maybe if you can go on if you're on speaker or something, maybe you can change it. We can't hear you really well.

[Vijay Kumar, Analyst at Evercore Group]

[Technical Issues]

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Yeah. Vijay, it sounds like your line is just not a good connection. Maybe you can get back into queue. Sorry about that.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

You still there?

[Vijay Kumar, Analyst at Evercore Group]

Yeah. Sorry, guys. Can you hear me now?

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Much better, much better. Go ahead.

[Vijay Kumar, Analyst at Evercore Group]

Yeah. Apologies for the bad connection. But, Suky, maybe on this EPS guidance, what is the comparable earnings in fiscal '19 and '21? I'm getting to $7.14 of earnings or $7.15 rounded, $6.60 in '21. Maybe walk us through the bridge from '19 or what caused the declines in year and year versus '21. The guide implies flattish earnings. That bridge would be helpful.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah, sure. So thanks for the question, Vijay. So, first of all, I'm not really going to bridge back to 2019. By the time we get through 2022, we will have effectively be in three years removed from that in a COVID environment, so it's really difficult to draw a lot of comparisons. But here's how I think about how we arrived at our operating margin and our guide ultimately for EPS. And so if you use 2021 as a starting point, we ended the year at 26% on adjusted operating margins. From there we've got some tailwinds and some headwinds. Starting with the headwinds, we've been talking about incremental pressure coming in to 2022 really from two dynamics: one was the China VBP, and while the overall revenue impact will be roughly the same as what we saw in 2021, there is a greater margin impact in 2022, because the composition of that revenue downside between the years is a little bit different. The second headwind that we're seeing is really around inflationary input costs, things like energy costs, metals, labor, freight, these are definitely being impacted and felt within our company.

So if you put those two things together that's roughly about 100 basis points, maybe slightly more. So using our '21 exit of 26% and those headwinds, you would normally arrive at about a 25% adjusted operating margin for 2022. However, we do have some tailwinds. We have the spin. And as we've talked about prior to the spin, we said that would be about 125 basis points accretive to operate margins. It's actually a little bit higher, more like 150 basis points even after netting out stranded costs. And then we have another element. We've been deploying some additional restructuring activities within the company because of the continued pressure of COVID. That's going to be a tailwind of about 50 basis points. So when you add that spin accretion plus the other efficiency programs of 50 basis points that's what gets you from an underlying 25% operating margin in 2022 up to a 27% at our midpoint so hopefully that gives you the big building blocks. Again, headwinds being VBP and input cost; tailwinds being spin and other efficiencies.

[Vijay Kumar, Analyst at Evercore Group]

That's helpful, Suky. Just one last one. What are you assuming for TSA revenues? I understand the stranded costs I think $70 million, $75 million-ish. Are there any offset from TSA that's being assumed in the guide?

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. We will get some TSA income we're structuring those pretty much on a cost -- with a slight cost plus. But because we do not see them as core to our business or recurring, we're actually going to be non-GAAPing that benefit, so we do not have any benefit in our earnings per share related to TSA income.

[Vijay Kumar, Analyst at Evercore Group]

So TSA should be equal to the stranded cost, right, $75-ish million, Suky?

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

I wouldn't say it's a complete one for one there, Vijay. It'll be substantially lower than those strange costs.

[Vijay Kumar, Analyst at Evercore Group]

That's helpful. Thanks, guys.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Vijay. Lauren, can we have the next question in the queue.

[Operator]

Our next question comes from Robbie Marcus with J.P. Morgan.

[Robbie Marcus, Analyst at J.P. Morgan Securities]

Oh great. Thanks for taking the question. Two for me. Maybe I'll just ask them both upfront. One, as it relates to the guide you touched on this. It's flat at the midpoint in a COVID environment. Bryan, should we be thinking that closer to that mid-single-digit growth is off the table as long as COVID environment still exists? And then second question, as I think about RemainCo, how do we think about it if there's any way to give us before the full pro formas are out? Gross margin was a bit disappointing in the quarter. How do we think about the components of operating margin in 2022? Is it much more SG&A driven or are there gross margin improvements as well? Thanks.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Great, okay. So I'll start with the question around COVID and our growth rate, and I think it would probably be pretty obvious to most. If we continue to see COVID pressure and staffing pressure at the rate that we're seeing today, yes, it would be very challenging obviously for the company to get to mid-single digits. That wouldn't be something that we think is possible in an intense COVID environment. What we do believe is when COVID gets behind us that we absolutely have the building blocks to get there. But in a COVID environment, just given the pressure on elective procedures and given the fact that we have 80% of our revenue built into those elective procedures, it's just not a pathway to get there.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah. And, Robbie, on your question related to the composition of the 27% adjusted operating margin, our midpoint. It's going to be primarily driven by SG&A. The way we see overall gross margin is, as we talked about in the prepared remarks, we ended 2021 at or about our guide which was roughly in line with the back-half of 2020, so just below 71%. From there into 2022 on adjusted gross margins, you've got, of course, some headwinds, tailwinds. The headwinds being the VBP margin pressure. I just spoke about with Vijay as well as the input cost inflation that we're seeing again that I just talked about. In addition lower volumes will also be a slight headwind. Those will be partially offset by some accretion that we see related to the spin. But net-net, I would expect gross margins year over year from '21 to '22 to be down. So the bulk of our improvement in adjusted operating margins from '21 into '22 again will be primarily driven through SG&A.

[Robbie Marcus, Analyst at J.P. Morgan Securities]

Great. Thanks a lot.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Robbie. Lauren, do we have the next question in the queue.

[Operator]

Our next question comes from Steven Lichtman with Oppenheimer & Co.

[Steven Lichtman, Analyst at Oppenheimer & Co. Inc.]

Thank you. Good morning, guys. Bryan, on ROSA, I was wondering if you could talk a little bit about the pipeline you see ahead. How are you seeing '22 placement opportunities versus '21? And where are we in terms of the buildout of the opportunity of pull-through of knee implants following those ROSA placements?

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. I would say that the pipeline is really strong. That's one of the things that has been a positive surprise during this COVID pressure. There has not been a reduction in demand on robotics, which is to be honest, when we first started, I thought would be the case. But we just haven't seen it. We've seen continued pipeline get stronger, and what we're finding is that pull-through is already happening. We always talk about are we placing robotic systems in a competitive account or a friendly account. What I always go back to is every account for the most part has some competitive flavor to it. It's not always homogeneous. So even in those accounts that we would consider our platinum accounts, when we place a capital system there, ROSA system there, we absolutely have an opportunity to convert a competitive surgeon because there will be a competitive surgeon that exists in that platinum account.

So that that's what's exciting about it is the demand is strong, we continue to see it move in the right direction, and that pull through is already happening. A big proof point to that is just the fact that in the U.S. we reached at 10% of total knees being done robotically. It doesn't sound like much because I know one of our competitors is much further along than that. But that feels like a pretty good start and the fact is it's just the beginning of the journey. So, yeah, so the demand is strong, and I would tell you that the pull through is real and it's continuing.

[Steven Lichtman, Analyst at Oppenheimer & Co. Inc.]

Great. And then just a follow-up on cash. You're clear on the debt pay-down expectations near term. Will M&A be muted as a result? Do you still see opportunities for tuck-in deals? Thanks.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. Unfortunately, as we get into the phase three of our transformation, a big part of phase three as we've always talked about is active portfolio management. And COVID has definitely put a dent in our ability to leverage as much cash as we were hoping to leverage to move that forward. At the same time, even in a pretty cash constraint environment, we've done a good job of continuing our strategy there. As I mentioned in my prepared remarks, we've done a number of deals, either M&A or partnerships to ensure that we're building scale in those important faster-growth areas, but we just have not had the amount of firepower we would like and certainly that pressure is going to continue.

[Steven Lichtman, Analyst at Oppenheimer & Co. Inc.]

Got it. Thanks, Bryan.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Sure.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Steve. Lauren, can we have the next question in the queue, please.

[Operator]

Our next question comes from Larry Biegelsen with Wells Fargo.

[Larry Biegelsen, Analyst at Wells Fargo Securities]

Good morning. Thanks for taking the question. Bryan, just two for me. One on Persona IQ, one on the ASC strategy. Can you talk about what impact you expect Persona IQ to have to revenue in 2022 and the pricing strategy? Just remind us again of if you -- well, if you're planning to re-submit for the Nutek [Phonetic] add-on payment and if not why? And then just second on the ASC strategy. Just talk -- you've talked about being under-indexed there. What's the plan to change that and can you grow at or above market in recon before you address this or will it be a headwind to growth in the near term? Thanks for taking the questions.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Sure. So maybe I'll start with the ASC. And believe me, we're already shifting our focus here. We had planned to do it anyway, but obviously with the results of COVID and pushing more patients to the ASC, we put that plan on steroids. We built a, I guess, first and foremost, a direct selling organization to ensure that we're contracting effectively in that setting. That was almost zero to a 100 people in a relatively short period of time fully dedicated to contracting in the ASC setting. That was probably the first big step. Also driving compensation, right, so operating mechanisms to drive focus there and also compensation to drive focus there.

The other thing that we're doing is to make sure that we're filling our product gaps that will give us more presence inside the ASC. That would be like the Relign acquisition in sports where we had that gap in capital, it would be like the Incisive where we got booms and lights to be able to give more infrastructure to the ASC. So those are the things that we're doing right now to be able to get further traction in the ASC, and we're making progress. Do we have more work to do? There's no question. But when I look at our growth in the ASC and I look at our expanding size of our business in the ASC, I know that what we're doing today is actually working. So that's ASC.

On the IQ side, I'll hit maybe the reimbursement question first. We're going to pursue everything we possibly can to try to get incremental reimbursement, but we're not counting on any of it. So our plan today assumes no incremental reimbursement that this would be captured on the DRG [Phonetic] that exists today. And even in that we've built a plan that we think is very favorable to the company. And from a revenue standpoint, maybe we can take a step back. IQ really helps us in what I'm going to define as three different ways: one is the obvious revenue contribution that we can get, and that can come through mix benefit because it's going to be a higher-priced item versus a standard implant, but it can also come from competitive conversions. Now that's going to be biased to the back-half of that revenue impact because we're not going to move to full launch until the back half, but revenue is clearly one of the variables that are going to help us with IQ.

The second one is brand reputation, and this matters. This is going to be able to solidify the fact that we are an innovator in our space and this matters. Even if a surgeon's not ready for IQ yet, they want to be married, if you will, to a company that's going to be a leader from an innovation standpoint in their space. So it does matter when people are making decisions on who they're going to be linked to whether you're innovative or not. So that brand reputation is important to us. And the third one is differentiation. This is going to help us differentiate our ZBEdge ecosystem, that robotics and data ecosystem. I truly do believe that robotics decisions from our customers will be influenced by the ecosystem around robotics, not just robotics by itself. Remember robotics just does what you tell it. The data collection will eventually tell you what you should do and then the robotic system can do it for you. It would just make sure that you deliver on it. So that's the way I think about the impact of IQ. Not just revenue but brand reputation and differentiation as well.

[Larry Biegelsen, Analyst at Wells Fargo Securities]

Thank you.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Sure.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Larry. Lauren, can we have the next question.

[Operator]

Our next question comes from Matt Taylor with UBS.

[Matt Taylor, Analyst at UBS Securities]

Hey, good morning. Thank you for taking the question. So I wanted to ask one about operating margins longer-term. Obviously, you changed the timing of the '23 goal. Did you just talk about the trajectory of margins that you foresee occurring with your forward outlook? And, Suky, I know you talked about margins as being largely revenue dependent. Maybe talk about the importance of revenue growth for driving margins higher and then also some of the things that you're doing with regards to regional profitability and ERP and how those can play into margin growth going forward as well.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah, sure. So thanks, Matt, for the question. You're right, we did remove our 30% target by the end of '23 because of the ongoing challenges of COVID and the lack of revenue growth. And if you recall, that margin was largely predicated on three building blocks. One of the main one was revenue growth, which obviously we're just not seeing come through as we've been talking about. I think longer term we still do have the opportunity in the near-term to expand margins. We're not going to size that at this time because we do still think it's largely going to be revenue dependent because we have to balance in the mix of efficiency that we're seeing across the company and that we're driving forward with the right level of investment against the business for long-term growth, because we do see COVID eventually it's temporal, and we want to make sure that we can continue to invest against the very strong pipeline we have in commercial execution to make sure that we can grow value over time not only in a pandemic world but most importantly in a post-pandemic world.

Some of the key drivers that I would say beyond revenue growth that can help drive margin expansion in the near term is our establishment of global business services or large shared service regional centers which we plan for in 2020 and actually implemented in '21. That's going to be a key component of that incremental margin expansion I talked about in '22. But then beyond that the ability to leverage those beachheads are going to be important. You're right, we're making investments into ERP. Those are generally longer term in nature to actually play through and to get those benefits. So I would see that those benefits coming in post 2023. In addition, we continue to look at and our supply chain is always looking at opportunities to optimize and rationalize our overall manufacturing footprint but also to continue to combat input cost rises through very aggressive procurement. So those are some of the levers I would think of as in the near term in the absence of revenue growth. But, no doubt, revenue growth is going to be the key driver to meaningful margin expansion over the mid and long term.

[Matt Taylor, Analyst at UBS Securities]

Okay, great. Thanks for the thorough answer. I think I'll leave it there. Thank you.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Okay.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Matt.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Thanks, Matt.

[Operator]

Our next question comes from Rick Wise with Stifel.

[Rick Wise, Analyst at Stifel, Nicolaus & Company, Inc.]

Good morning, Bryan. And hi, Suky. It may be going back to COVID, again. It's hard to ask this question because I know there's a million moving pieces. But as you're reflecting on the early headlines of COVID headwinds clearly easing in the northeast, new cases are down dramatically, how are you thinking about how the recovery -- the post-COVID recovery unfolds relative to backlog and delayed procedure volumes, just how are you thinking about it now as you see the realities start to unfold?

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. So I'll give you a sense of how we built it into our forecast and the guidance that Suky just referenced. We actually try not to get too caught up into this whole concept of the cases are dropping from a COVID standpoint because we're still seeing cancellations that are as high as we've seen in a long time. So there seems to be other reasons, as I've referenced in the prepared remarks, on why we're seeing cancellations versus just ICU beds being taken out by COVID patients. So we really at this point are assuming that the 2022 impact from COVID will look a lot like the '21. Now it may be different timing of peaks and valleys, but we expect at this point, until we see something that tells us that it's going to be different, that you're going to continue to see a peak come down, like we're seeing now, and then it's going to go right back up given a new variant. That's the assumption that we have throughout 2022.

Now if we set that assumption aside and we say that we see a peak come down into a valley, if you will, and it never comes back, then that's a completely different game. that gives us an opportunity then to get back to those growth rates that we were seeing back in Q4 of 2019. Remember those growth rates that we saw back in Q4 2019 of 3.2% or so, that was really before Vitality Index was picking up for us. That was just on the beginning of that Vitality Index moving north. So that would be an exciting environment for us. There's no question about it. But just know that what we built into our guidance is that '22 from an overall impact standpoint is going to look a lot like '21 when it comes to COVID and staffing pressures.

[Rick Wise, Analyst at Stifel, Nicolaus & Company, Inc.]

Got you. And on ROSA, again, clearly, you had a terrific year despite some of the challenges. Where are we with the partial knee roll out? Where are we with the hip roll out, both launched last year? And maybe as part of your comment, Bryan, about the new product pipeline being stronger than ever, I don't know whether there's a ROSA component there. What's next? What's coming? What are your priorities now to keep this momentum going? Thank you so much.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. So ROSA, overall, as I said before on primary knee, is going really well. The pipeline is as strong as it's been, the pull-through is there, the penetration in our overall procedures is coming up moving in the direction that we had hoped. I think it'll [Indecipherable] lot more value when COVID subsides because that is obviously impacting our ability to get procedures even in those accounts where we have ROSA, but it's definitely moving in the right direction. Partial is the same thing. I'll just take a step back there, too. The partial knee application was an important one for us because I think as most people know, we have a very high market share position in partial knee. So to be able to bring a robotic platform with that application is really important for us, and we have a lot of opportunity then to go to those accounts that are using our partial knee and try to move them to robotics.

And the hip is going well, too. It's really a combination of ROSA, hip, and Avenir Complete. One of the fastest growth subcategories of hip, as I think everybody knows now, is direct interior approach. And both of those, the Avenir Complete as well as a ROSA application that we launched first, goes directly at that fast growth sub-market. Now later this year we also have another application that we're going to launch in hip that will go after the posterior approach. So we'll have everything locked up from a hip standpoint. But those are the things that we're pretty excited about.

Stepping back from that just ROSA, I feel really good. I'm not going to get into a lot of the things we're launching that we haven't talked about already, but just some of the things we talk about a lot. Persona Revision, this is one that has been deriving really strong growth for us for two years, and we expect that to continue. It's not just a revision conversion, it's the universe of primary needs that are still competitive where they're using us for revision. We're going after that business and there's a real opportunity again in the hundreds of millions of dollars for us. And then when you look at outside of ROSA, IQ. We're just getting started on Persona IQ, and I talked about the three different ways they can bring value. I absolutely expect that to be a true provider of revenue for us. And then ZBEdge just in total. ZBEdge is getting a lot of traction. It's creating brand awareness for this company to be a leading-edge organization and that does drive revenue growth for us.

So those are just a few of the things that we have that we're excited about, and we've talked about it, so I'll talk about it again. We have a cementless Persona coming that has a different form factor that should remove all stops for us to be able to move cementless forward. That has been nascent for us. It's a real opportunity. We're below 10% of penetration in cementless, but we have all kinds of headroom associated with that and that new form factor coming later this year will open that door as well. So a lot to be excited about for sure. As I referenced before, the pipeline is strong and we expect our Vitality Index to continue to move in the right direction.

[Rick Wise, Analyst at Stifel, Nicolaus & Company, Inc.]

Appreciate that.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Sure.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Rick. Lauren, can we have the next question in the queue please.

[Operator]

Our next question comes from Chris Pasquale with Guggenheim.

[Chris Pasquale, Analyst at Guggenheim Securities]

Thanks. Suky, wanted to start just following up on the VBP impact to make sure we're thinking about this right. Are you saying that the dollar impact is going to be the same in '22 versus '21 across hips and knees and now trauma is included in that as well, but it's just going to be spread out differently throughout the year? And maybe just help us with how the impact was recognized in '21. Did you have anything in the third quarter? Is it really all packed into the fourth quarter?

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah, good question. So we do see, to your first point, overall, the revenue impact, top line impact against recon or large joints and trauma being roughly about the same year over year. So, again, no material headwind, tailwind based on where we stand today. The impact I said will be different by quarter. So you really didn't have any impact in Q1 to Q2 of 2021, and so therefore, you've got pricing impact in the first half of this year,'22, which is being compared to a non-VBP first half of '21. So the pressure is going to be more acute on that year-over-year comparison. As you move to the second half, you had a modest level of impact in the third quarter around some inventory contraction but not material. The really big impact was mostly in Q4. If you think about all the numbers that we provided you today in some of our earlier commentary, it was worth roughly about 400 basis points of growth in the fourth quarter. So that's where you're going to feel the biggest impact in 2022. This year it'll be more of a tailwind for us because we won't have to cross over that one-time that we took in '21. So, again, sorry, Chris, a lot of numbers there. If that in any way is confusing, I can help clarify.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

One thing I will say from a dollar standpoint relative to revenue, there's that consistency and differences in quarterization [Phonetic] of it but that's consistent. But in margin, it will be more of a negative impact in 2022. And as Suky referenced before, about 50 bps of headwind for us and margin profile due to VBP in 2022.

[Chris Pasquale, Analyst at Guggenheim Securities]

Thanks. That is helpful. And then, Bryan, I just want to follow up on this cementless opportunity. This was really alongside robotics, one of the things you guys were highlighting a few years ago as a significant potential mix driver for you across the hip and knee businesses. And it seems like it's gotten off to a much slower start here than we would have thought at that time. What was it about the prior Persona cementless that really didn't allow you to gain as much traction there as you were hoping and how does this next version fix that?

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah, it is that actually. Again, we have a form factor that we felt confident with that was already in the mix. But when we get it out there and the surgeons look at it, they don't feel as comfortable with the keel [Phonetic] design that we want on a go-forward basis. And remember, when you're talking cementless, you want to make sure that you really get good contact between the implant and the bone. And as a result of that, we've changed the design of that connection, if you will. And that -- talking to surgeons already about that design that's going to be coming, they have a lot more confidence in the safety of that connection and that's the reason why we changed the form factor. So it's not so much our inability to sell cementless in concert in particular with robotics, it's more around that form factor and the confidence people have in that form factor to get the seal that they're looking for. And we feel very confident about what we're going to be launching later this year. And, again, I look at it to say as much as I'm frustrated by the fact that we have not had the right design, I know one's coming, and I'd probably rather be at the 10% now when I think of future growth opportunities and be able to increase that penetration over time when we do launch that product.

[Chris Pasquale, Analyst at Guggenheim Securities]

Thanks.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Chris. Lauren, can we have the next question in the queue.

[Operator]

Our next question comes from Shagun Singh with RBC.

[Shagun Singh, Analyst at RBC Capital Markets]

Thank you for taking the question. I was just wondering if you can talk about trends exiting January and into early February, especially since the U.S. peak it appears to have occurred around January 13th, even though there were regional variations and they continue to be. You did call out seeing more cancellations and also that COVID pressures will continue throughout the year. So I'm just trying to figure out if you can provide more color and if your guidance is realistic or conservative?

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Yeah, Shagun, thanks for the question. This is Suky. So as we said, we provided I think pretty good color on Q1 where we expect it to be about flattish, but that includes 130 basis point tailwind from selling days. So on an underlying basis, it's really down year over year. January was definitely more pressured than what we saw in December, exiting 2021, and we continue to see very high cancellation rates coming into the beginning part of February. So we think what we've seen so far continues to support that first quarter color that I talked about. And I think it's important to note that while Omicron cases may be in some markets starting to -- people are characterizing that as plateauing, there is still a residual effect on staffing shortages which in some part are linked to Omicron, but there are other factors that are driving staffing shortages. So just because we see a decrease in overall Omicron cases, does not mean you're going to see a one-for-one reduction in staffing storages which continues to be a headwind for us. So short story, everything that we're seeing so far in January and the very beginning of February continues to support that first quarter color we provided.

[Shagun Singh, Analyst at RBC Capital Markets]

Got it. And then just one other question on operating margins. Maybe you can help us with the cadence if you haven't touched on it. And I'm especially curious with respect to the 150-basis-point benefit from the spin, how should we think about the timeline there for you to achieve that, especially given the context that you do have higher corporate cost allocations in the near-term. Thank you for taking the questions.

[Suketu Upadhyay, Executive Vice President and Chief Financial Officer at Zimmer Biomet]

Sure. So on the margin cadence, it's really our margin is very correlated and linked to revenue. And so as we said, revenue will be more pressured in the first half of the year versus the second half of the year especially because of the pressure we're seeing in the first quarter. And so we would expect margins to follow that same cadence. It'll be more pressured in the first half with it, most acutely in the first quarter. Not atypical from what we saw in 2021 regarding seasonality and the impact of COVID. So that's how we see the cadence of that operating margin. Again, most acute down in Q1 and then recovery as we move through the rest of the year with revenue recovery as we talked about. Relative to the spin, I think you're going to see that 150 basis points start to manifest relatively quickly here in 2022. We have already started to attack some of those corporate stranded costs and are going to continue to fight our way through that. But that's how we see operating margins so far.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Shagun. Lauren, we have time for maybe one last question.

[Operator]

We'll take our next question from Matt Miksic with Credit Suisse.

[Matt Miksic, Analyst at Credit Suisse Securities]

Hey, thanks so much for fitting me in. Just one question if I could on the strength in EMEA knees was one question that I thought would be worth fleshing out if you have just a minute and I'll just leave it at that.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Yeah. I would just say that we see almost right now that EMEA seems to be ahead of schedule relative to what we're seeing in the U.S. and other parts of the world. I'm not sure why that is, but you did see some relief that we saw in EMEA because you did see that downward trend in Omicron and also you're seeing some policy shifts, which I think is going to be really important on a go-forward basis where you've got countries like the U.K. and Spain and others that are looking at this to say, listen, Omicron is acting more like an endemic phase now, and we're going to change some of our restrictions associated with COVID. And I think that those policy changes are going to be an important factor in COVID eventually getting behind us. It's not just COVID itself, but it's going to have to be these policy shifts that we're seeing led right now by Europe. That would be something we'd like to see across the world actually. But that's the only thing that I could probably point out is they're just a little bit ahead of the curve in COVID impact than the rest of the world.

[Matt Miksic, Analyst at Credit Suisse Securities]

Thanks so much.

[Bryan Hanson, Chairman, President and Chief Executive Officer at Zimmer Biomet]

Sure.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Thanks, Matt. Lauren, I think...

[Operator]

That concludes today's question-and-answer question.

[Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer at Zimmer Biomet]

Yeah. No, thank you. I think it was the last question. I can jump in here and just close out. So thank you everybody for joining. If you have questions that you didn't get asked or answered, please feel free to reach out to the IR team. I know we're speaking to many of you today, tomorrow, and this week, but we're always available. Also, just a reminder that the ZimVie Investor Day is beginning at 11 a.m. Eastern time. Information to join that webcast and the materials are posted on the IR page of our website and, of course, if you have any questions on that front, please feel free to reach out to the IR team as well. Thank you everyone for joining today and have a good day.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Keri P. Mattox, Senior Vice President, Investor Relations and Chief Communications Officer
• Bryan Hanson, Chairman, President and Chief Executive Officer
• Suketu Upadhyay, Executive Vice President and Chief Financial Officer

Analysts

• Josh Jennings, Cowen and Company, LLC
• Vijay Kumar, Evercore Group
• Robbie Marcus, J.P. Morgan Securities
• Steven Lichtman, Oppenheimer & Co. Inc.
• Larry Biegelsen, Wells Fargo Securities
• Matt Taylor, UBS Securities
• Rick Wise, Stifel, Nicolaus & Company, Inc.
• Chris Pasquale, Guggenheim Securities
• Shagun Singh, RBC Capital Markets
• Matt Miksic, Credit Suisse Securities