Margin Expansion Q: How will you achieve margin expansion in H2? A: We remain committed to our 200 basis points operating margin expansion—100 basis points this year and another 100 basis points next year, inclusive of M&A. " In the second half, we expect more leverage from SG&A than gross margin. " We'll control hiring, travel, and meetings, and benefit from natural leverage as we grow off a fixed cost base. "

Guidance Raise Confidence Q: Why raise guidance despite an in-line quarter? A: We're pleased with the quarter and have strong reasons to raise our guidance to a potential 10% organic growth at the high end. " We have a significant capital backlog, strong demand for Mako installations, and positive feedback on new products like Pangea and LifePak 35. " July is off to a strong start, especially in joint replacement. "

Sustaining High Growth Q: Can high growth rates continue next year? A: Yes, we've demonstrated sustained high growth—9.7% two years ago, 11.5% last year, and targeting up to 10% this year. " Next year, Pangea and LifePak 35 will have a bigger impact, and products like Mako Spine and CoPilot are coming. " Our innovation pipeline and M&A strategy support continued high growth. "

M&A Activity Q: What's the outlook for M&A in 2024? A: We have a very active deal pipeline, mostly in the tuck-in variety. " While most deals aren't large, we'll be very active in both halves of the year. " Our strong balance sheet enables us to pursue these opportunities while remaining committed to our margin targets. "

Pricing Power Q: How long can you sustain pricing improvements? A: We're seeing positive pricing outcomes, with 0.7% in Q1 and 1.1% in Q2. " We expect this trend to continue throughout 2024, driven by innovation in our MedSurg and NeuroTech businesses. " In Orthopedics, we're less negative on pricing than before, and our sales force incentives support margin improvements. "

Record Mako Growth Q: What's driving record Mako placements each quarter? A: International expansion is a major contributor, with markets like Japan and India picking up pace. " In the U.S., demand remains strong as customers prefer our technology. " The upcoming addition of spine and shoulder applications to Mako will further drive growth. " "

New Product Launches Q: How will Pangea and LifePak 35 impact growth? A: Both are significant contributors to future growth. " LifePak 35 will ramp up quickly, impacting the second half of this year and having a big year next year. " Pangea, though launching more gradually, will provide sustained and consistent growth once fully launched in H2 next year. "

Segment Softness Q: Why is the Foot & Ankle market soft? A: The market has softened due to factors like OR time being prioritized for other procedures and patient co-pays leading to delays. " " We've seen such lulls before, but patients will return as conditions persist. " We're confident in our product pipeline, including innovations like Footprint for total ankle replacement. "

Ambulatory Surgery Centers Q: What's your outlook on procedures shifting to ASCs? A: The shift to ASCs is a positive trend that's exceeding our expectations. " " Currently, 10–15% of hips and knees are done in ASCs, and we expect this to surpass 15% next year, potentially reaching 30–40% in five years. " We are well-positioned to benefit from this shift due to our broad product offering. "

Margin Drivers Q: Where will margin improvements come from? A: In 2024, margin expansion leans more on SG&A leverage. " We control expenses like hiring and travel, and benefit from low-cost manufacturing in Poland and Mexico. " As we grow, we gain natural leverage from a fixed cost base, contributing to our confident outlook on margins. " "