ZBH - Earnings call transcript Q3 2021 | Zimmer Biomet Holdings, Inc.

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Operator

Good morning, ladies and gentlemen and welcome to the Zimmer Biomet Third Quarter 2021 earnings conference call. If anyone needs assistance at any time during the conference, please press [Operator Instructions], as a reminder this conference is being recorded today, November 4th, 2021.

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 [Operator Instructions]. to President. conference like Mattox, to now Vice Senior would turn over the Keri I Relations Operating Investor Didn't Chief ahead. Officer, please go

Keri Mattox

Thank Earnings Conference everyone. morning, well to And you Call. Biomet's operator. Zimmer XXXX all Welcome and I Quarter Third are safe. you, hope good

and today EVP Brian CEO, are Upadhyay. me our Chairman, Suky Joining and President, Hanson, and CFO,

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

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

Bryan Hanson

Keri, Thanks, morning. for and Great. right. joining All everyone thanks us this

that just happy me to the about things start QX. I'm Let with when it comes

with product introductions, new well. our they're our First progress of on I'm all, quite happy going

if as better. going Our is planned, not execution recent on M&A

result, a most And to the our with control. the I proud The pressure than of my comes greater expected: impact COVID inset, Our pressure as our that in I than it also out unexpected an we our growth in were think And versus joints them was environmental both and when so. to more Alternatively, And competitors it we the than into control. earlier we quarter. in commercial we lower guidance. as drive resulted our areas with view particularly as focus VBP XXXX continue expect fourth happy part, results And this our of QX. very need are and these our than quarter in X. discipline QX in is that and had And result, to certainly I'm seen for good team, key as view, doing continues brought really, a to for continue U.S. unfortunately, negative I've large impacts, to expected; QX be the X. revenues under points QX anybody we shortages, have projected. anticipated. staffing update we financial with customer China a the

into these As possibly see a we're we XXXX. shift and in these with look to points us aren't be until into we assume QX going going away; trends, fundamental that will but forward, just pressure early

at a Let's related. just somewhat staffing and they're COVID believe together concerns start taking by kind I of look because

of lessen their inventory even concessions on existing inventory; surgeries distributors; beginning ongoing we're pricing. shifted there the And this their and through think than patients what in medical impact out-of-pocket after COVID. our we As that think Apparently, universal in of X. in around China a BVP most overall are than, just and at revenue recovery, will half sizing the this would a step-up and and COVID revenue though while And was the ZBS, enough a based that to factors a number least result, our staffing much due growth pressures. do wasn't by the forward. as reductions size differ as projecting pricing said, patients procedures we the of September in will now And we're for expected. until mean process in in month seasonally Again, see are much be but are attractive no the way year. of overall terms That instead, year; end likely clarity pressure current BPP, reasons, China expect as saw going of are did pose enhanced shift impact through to XXXX. continue increase it. more unfortunately, implant impact relative be price was September, China And we lower impact, is effect. We few public was it that this COVID year fluid, revenue. shift That on right substantial We DBP our And XXXX. pressure by driving X% we definitely a And is I the procedures. year We that near there still process XXXX: the have view into decrease, anybody believe a the now, by And that now surge we forward. accurate. although moving with in the impact the the of the staffing greater is pressure on related that or originally back distributor timing of real Delta expected. previously it's has QX would still we significant that that although is drove negotiations coverage, seeing again, X we until about will assumption COVID think more of than expenses to a know what in that it more to and achieves is I variant thought around partners us of COVID getting That's is into felt X% are X. for September this risk will anticipated. defer what X. the include and to is around there

good revised on QX macro sure of overall fluid, think And financial our they we areas a these to issues are our in summary, about view is to so, good control I guidance. but I that's these we focus incorporate fluid. to we've These Suky he for their issues guidance. very our our importantly, performance. to continue in clearly mute where are execution impact performance. feel our in can segue And forward-looking although environmental section the going pretty think our very And And move best to done current

Suky. Okay,

Suky Upadhyay

everyone. And made I'm to good and full-year our Bryan. we've XXXX Thanks, briefly discuss our morning, to that going QX financial results guidance. updates

In we the This constant hold up X.X% seasonal my growing quarter, results. quarter, however, of provided -- Net to X.X% X.X% sales performance to since compares a noted, be as across third the will staffing an but or results basis. of of P&L in in the In how Moving but decrease my XXXX. was U.S. August, we we start and currency otherwise -pandemic rates. X.X% forward, to consolidated on first short, sales be and third region step-up XXXX. flat to XXXX. versus pre commentary the up Spain, the also September, billion, basis. knee in to markets cases Bryan a number as posted taken markets unless the that XXXX. then on performance recovery higher to of reported quarter for revenue X.X% UK, we lower quarter increases. The net and XXXX, growth time or volumes as mentioned, a will pandemic. as not QX comparisons our the most decrease period grew in 'XX especially EMEA key about saw has increased a the versus compared declined there an statements is as the trend saw comparator. On The France, were would, despite When be thought U.S. shortage improving or same and emerging procedural declined versus X.X% currency the X.X% businesses. in hip the X.X%. declined And We've it in challenged, a and constant America's it fast driver Lower through were basis, of $X.XXX continue a feel vaccination important as positive variant September we adjusted a consolidated or was and the Delta XXXX,

grew X.X% Asia-Pacific up or Lastly, versus X.X% XXXX.

it This of first inventory in tandem we channel adjustments negotiate decelerated we region, with and part our the distributor pressure in pricing continuing by see Japan, to in and versus COVID DBP the [Indiscernible] versus as what year. in continue half growth While Australia, driven with XXXX, Zealand. implementation partners did New throughout of the was we observed ahead especially

down the Turning Global to X% versus Knee declined business quarter, down X.X% Knee the versus 'XX. or or X.X% In declined XXXX. U.S., performance in X.X% business third the

by driven strategic business X.X% introductions, XXXX. commercial trauma Hip added XX.X% or The sports versus and global acquisitions or declined U.S. And down Hips we this and contribution XXXX. X.X% or from 'XX. X.X% increased new category specialization, in versus portfolio versus the to down X.X% the XX extremity X.X% Our product declined continuing

declined category pressure declined business X% spine good to the when due increase to down and while market dental posted X.X% benefit dental execution recovery, The the compared from and COVID to and growth quarter. spine quarter Our strong continued XXXX in business XXXX, in versus throughout were and XXXX, the

demand Inside category Hip saw of this Other our the versus revenues increased and X.X% Knee, ongoing as our grew ROSA or we applications. for Finally, from as Partial down category, well Knee XXXX. XX.X% launch ROSA

P&L. the to Moving

third of spin-off GAAP per $X.XX share a For reported driven our the in litigation, per we higher This to the related by earnings of earnings and of quarter goods spending of and R&D. XXXX. quarter, cost share $X.XX was GAAP decrease primarily diluted lower diluted than our

year. tandem share versus $X.XX slightly down. results compared a On year, below even in per lower with our share gross In diluted tax was count. reductions with SG&A, expectations to in mix. prior targeted count product year geographic just slightly of adjusted which a implemented prior Adjusted and higher of and were tandem addition, sales offset share though investments below higher a lower up prior basis, and favorable was to the helped volumes We were the XX.X in earnings was in an the less margin rate due the our R&D flat

across stepped increases spite prior efficiency and versus and $XXX Robotics, ramp sequentially areas growth like in And that, of expenses investment other operating R&D we those up quarter. adjusted [Indiscernible], with year in we Data line improvements continue in across down Informatics. areas second Our offsetting the In of SG&A. commercial of priority million with are to infrastructure were the and and

line margin line tax The operating adjusted quarter was rate in was in XX.X%, prior and quarter XX.X% with the for expectations. of Our year in the largely prior our quarter. with adjusted the

just and cash ending equivalents liquidity, flow balance cash million. cash cash of $XXX million to and $XXX Turning we cash of $XXX free totaled flows million, and operating over with had an

We the of of date. down debt $XXX another $XXX make balance for pay continue to and million sheet good totaling on deleveraging XXXX paydown million progress debt to

have to based outlook at expected. COVID the The XXXX reductions, X full-year our new VBP more impact. as the a fourth bigger impact leading staffing existing fourth levels now pressure X. BVP currently are to their and Bryan will write-downs is approach and a than updated implementation higher factors: seasonally we of that that procedures cautious pressure China customer continue factor We've expect is quarter; the inventory, X. about procedure know guidance. we across impact we originally it on while and continuing the the impact financial of project increased our taking saw on to the volumes patients the up acute we than assumed. dynamics have Moving on improve more and of quarter inventory quarter, previously assuming And through in and a the price that September deferring timing mentioned, and the which into will fourth

impact result, to you VBP QX our implementation of results. the current for about fluid a But our will headwind is basis As VBP of and to update XXX we the unfolds. points situation consolidated continue remains as projections

full XX.X% to for of the year. a impact now versus XXXX FX tailwind an to XXX revenue we growth with expect For basis points the year, of XX.X% about reported be

to full-year. revenue response as adjusted While reducing XX.X% projections we XX% for our taking to margin outlook, lower our are a steps fourth quarter the spending the to to operating we're in reduce further be

full-year per in is of range the $X.XX now updated adjusted $X.XX. guidance Our to diluted share earnings

Our to the QX implies implementation. and XX% billion. and be And we a to VBP [Indiscernible] currency adjusted projection earnings share guidance between project to $X.XX. adjusted uncertainty outcomes unchanged for $X.XX finally, potential tax XXXX to surges, of that our will XX.X%. $X.X between in QX of guidance wider And to $XXX updated in free rate million +X.X% XXXX. QX full-year our account QX cash estimates This remain revenue pressure, constant is versus around per range range growth -X.X% kept at We COVID be the customer range flow

we as move related including into to do COVID pandemic that recovery XXXX. note, the believe mute shortages staffing pressure, continue a will As we

revenues transformation impact is and to Additionally, fundamentals strong this, environment efforts our Bryan. move continue VBP felt about joint successfully to challenges, to will call In to as business by mentioned impact will accelerating basis With control. we can I remain respond earlier, help headwinds. consolidated we presents execute the in efficiency summary, as be these we underlying what as against over segments XXX forward. margins XXXX back our macro expected [Indiscernible] are reduce large will we and the points. That to offset gross but we turn To that,

Bryan Hanson

execution control ZB Suky. and close confidence in focused projections. our on our our Thanks team value intensely and, creating out I'm to our why our remains such and that's And long-term The ZB mission. have I can All what to remarks, prepared Importantly, -- strategy right. going most delivering about talk -- on growth Great.

versus is important driver we Our versus few ago our is for significant market. business our and ongoing This and an ZB were shift where a overall, growth. underlying a of Joints we're just in strong and S.E.T. Large years pleased performance with

penetration Hip, of and next accounts. Persona Our IQ, is product ROSA products incremental innovation that's which of two limited implant XXXX of product we enter with course, this big of And Partial new launch. smart a full going excited knee in very stride, more we see to years. increased to We're launches is Knee, ROSA strong new including, is in pipeline to ROSA but world. this. robotic the the the We're first into about certainly to and anticipated across a XX this number continue And recently than part not our launched, placements, a

percentage and we other data, new have and for ASC over and drive CFO post-op process, leadership it's importantly, a to key of And active designed more great selective We robotics suite S.E.T., solutions. efficiency of importantly, we our really [Indiscernible], advancing And our of portfolio with transformation. procedure the members that how continue to our across help and accelerating key spine key improve integrated truly a it intra, most overall even component in procedures of think business spin-off finally, recently pre, our just savings. a the patient to reinvesting compete, robotic are We're And and the appointed assets streamline and [Indiscernible] care. our more is management progress team the win I operate, And and tie data for [Indiscernible]. business. year importantly better sure, as ROSA be strategic also base. and attractive of because on corporate past to helped more -- together us planned but changing we're that to We're dental, just goal market. broader our programs very and in ZBEdge we does making dental and

and 's and revenue time plus expected challenge And deliver dependence in that turn for Zimmer forward back can you, given is serve. operating the pressures. XXXX. the to Particularly it about mid-single we is by the but in really forward to patients transaction, I'm continued of session. [Indiscernible] the delivering in clearly procedures; a for path time fact a the differentiated this this delivering end to for margin to confidence significant execute there's significant creation doubt a our opportunity a ability And of also digits portfolio, shareholders and momentum over value on to this Keri. Keri market And I of Q&A look no we we that XX% the that, begin of of grow have importantly, such elective to that customers our tell our plans our give does ZB All and going to members, with team our most Biomet. us

Keri Mattox

Thanks, Bryan.

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

Operator

and gentlemen, moment we One now answer begin at you. this and please Thank time, session. will question. for the Ladies question first the

comes Ryan question first BTIG. with Zimmerman from Our

Ryan Zimmerman

line. questions. below I terms [Indiscernible] EPS consensus you the of for ahead quarter. fourth landing Thank the appreciate for $X.XX Great. for quarter maybe guidance taking million Suky, really fourth the the so or so where or you're top-line the and in $XXX of

so, understand your And of million. that, where you to is from But a you X/X like VBP of impact that see I'd Delta, we product from a segment and be greatest It specifically previous that love maybe outside perspective. guidance see standpoint. where about just recovery sounds should thinking expectations an $XXX the between

Suky Upadhyay

Ryan. just saw provided levels. so where from and greater QX thanks into than wasn't then growth on that to that the And updated question, is modest third actually lower XXXX -- do first Absolutely, third the some we as in improve. guidance while in COVID they we two September, guidance expected, with worsening months. and our saw see growth increase get elective September, and if And and didn't into when we of the for But we August not there; seasonally, staffing COVID momentum were procedures and positive we came quarter, as we came from such things that starting saw Yeah, pressure than shortages the early as part is predicated generally remember some to was implied last we you the we actually quarter, in September. recover in

the original be better. third QX slightly thought. suggested because quarter we and than the so those forward as we that the taking would lower then September clearly of to or So trend, we're at into we're our guidance you fourth was really doing and move recalibrating that carrying down, we're what then not is That into growth market saw year that much what And have the September about is about rest think you in which quarter.

largest our So that, takedown of component for rest year I the specifically. of QX would is say, and our guidance for

In that -- forward-looking now to there additional we're always some that we our we're primarily what within defer that inventory of that, are due had But incremental impact some secure been driven for lower VBP their dynamics range. addition there's would pressure local we guidance accounted be seeing assumed seeing they to are beginning patients telling can and our this a until notion bigger slightly teams implementation is procedures by from us in-market, out-of-pocket. the to so

really So and say growing, that to back quarter in that assuming September biggest seeing we're due originally the is I as component And headwind would really that COVID. of the the and that due pressure to that we instead that fourth is deviation. year continues of rest your we're pull biggest the for thought,

Ryan Zimmerman

I you adjusted margin some call of you expenses Okay. environment, these from perspective, XX.X% the What normalized street's some 'XX, have from right because your is fluctuation margins. operating -- that normalized where of and color dynamics. operating given today expectations, perspective, you it a with a The of result do consensus you operating steady-state, assuming in now. a appreciate is about the dynamics a XX% and at stick as Suky. today that view just operating then how margin talked margins that obviously just and and about with sit Longer-term does

Suky Upadhyay

Yes. Great, great question.

that. unpack and try I'll So

additional as see there just a break XXXX. into have we you But and of bridge next I I'll and help moving and And are that operating parts you XX% all, that try give a lot step color. to really back year one-by-one year of First to -- down some margin.

way that's quarter, of of you moving slightly being kind first think think mid-term right gross least continue goods And XQ, say to on a to recalibrate expect we're BVP, you of I've our we on the about or into parts. right? as still back see assumption. of would as the It peers starting into The there, costs impact XXXX costs. does any headwind. to about be revenue given stable like down because we have that right? that, in early First revenue, labor in half cost get of especially is stable on I a And half to seeing in and of the of number the the to pressure what watch 'XX margin, largely operating at got and our is pressure be said XQ going our We that margins Company point, So 'XX going think we're inside many cost then part And of you inflationary starting from then about we point, of of COVID margin to this talked for take in leverage of operating have what and gross XX. as up We're We the the to in that's would a I the the base least about of a to follows now second all, sort input, lower like and standpoint fourth the what until quarter. pressure projecting believe revenue 'XX; margin be and at the sector profit out margin, our one gross move there's largely is always base. from off for overarching from some there. But early but of the fixed part from could 'XX, pressured. that margin. but also, ability will

give that frankly, year we a be. just restructuring to that lower got component really detail that's revenues really But is done and something within on, bit I'm well, and of team Xth what teams offset we margins, moving this we're more will lower as the quarter. margin still has end those Then SG&A. at the key the when are operating more watch of to the already headwinds. got a give Look, respond guidance continue we to proud Xnd and put to for help target our obviously hard a So to to little working rigor the about. factors quite regional looking where those. transformation we're and we're that expectations our our accelerating to in Business And profitability we're that at and just ways. of X. would gross of I areas structural We're there that talked accelerating doing margin other other number and Services markets inside talked our taking some we're We're below about. of at base SG&A help And are a of those journey our looking initiatives of strategy. revenue looking number Global all are cost I because at type and headwinds us

So going those some get moving the 'XX what are yet. of to like exactly I'm into parts. not looks

I let help play view to more detailed think rest a we you start we hopefully, gotten give before around especially of out this got lot to But 'XX. you good more of a can some there on in you've the color COVID 'XX. year,

Ryan Zimmerman

Thank you.

Operator

Thanks, Ryan.

Drew Our question comes Ranieri from Morgan with Stanley. next

Drew Ranieri

growth right basis you it help looks of of that at margin It's targets. points that long-range But Bryan the about how any plan. Hi, really pulling you're long-range now the there? on reaching that previous for changed any the Suky, your has operating question. if a Suky. us like. forward can just XXX composition question, but just mentioning are Thanks more taking you provide understand some and about better Maybe but I to off your of expansion, XX% so margin. initiatives, guess you're go more thinking in

Suky Upadhyay

And it you the defined we've see on take So maybe what we growth to the what rates. there from for can margin need is start as up I'll that piece. do then components with I'll off

we to think pretty First about this growth happen. of accomplish, clear to we're need that to make that all, X% X% we been on we've to when what see trying

And our and franchise, a growth able trend prove that First above-market that or quarters in able get the direction. biggest were over been to we so is that Knee. see need six to in foremost, which to past we we've

Bryan Hanson

get need in be we growth which we above-market traction, market is now is trending market. to Hip growth ROSA in at the Second, as to

rate digit in not in be upper then that the New growth to that. market, to the we market. end but mid-single if the for of needed [Indiscernible], now to And

that big X% still we're organization really believe the that driving to is absolutely And We kind since are possible XXXX building component that which get operating so, get view, we believe growth. areas focusing we're obviously, for those the we projecting as of of in are as that be a should blocks that the margin that's X% topline this revenue well. into XXXX on to that

I'll pass you to Suky, it for So that.

Suky Upadhyay

that's becoming over are to more think components, and to and operating right? We and expansion. offset that key largely some about a higher we're That's we leverage-driven, margins on we're I of talked headwinds Yeah, growth, the stable. consistent one about about margin gross how I've think being talked to against time to that going which that look margin. back XX% lot then SG&A that efficient, ability the reinvest us operating gives leverage

create well, place an so now a standpoint building that in rate we as addition, spin, which XXXX. from operating right we we us tailwind exit as also to about to the that. good to We going feel run blocks margin for active management, is all think have the portfolio through In operating have XX% get still margin

Bryan Hanson

we're the when rearview mirror headwind, is that assumes longer a COVID in no that and obviously in this of All XXXX, obviously.

Drew Ranieri

a just on just expectations flavor initial on over wasn't you're you. follow-up, Knee your a in but launch be you just be Bryan, the the love could product, feedback Thank if launched Great. Persona And but IQ. maybe you field and what as to just hearing months. next would disappointed mean, of I the your total implants, helpful. XX any if it like of Thank would X% how set should would you. you progress get

Bryan Hanson

IQ is a you of this first my would we're across good the on ZBEdge target is the it's important table for I during to because right all is we able and itself, the be a we very do of really after by have. what to a IQ cheek for to and new -- focused reason But technology IQ; It's much tongue bring COO be which that's collect that. X% looking kind. So data its what in exactly tell that able care to He kind that, predict equation we about excited now broader provide that important a market and I'm is excited the aside, about about now gave to ZBEdge. And Because procedure I'm we're is I should him implants. worried [Indiscernible] increases, though, literally kind what a we're and little to as data before, in of new-to-market. at what although what the And of patient. to just get is really call and we're variable lake to going

how patients don't looking this base. more everybody into for but I looks believe the the don't But why. don't funnel, out when able perfect, The all a we're image be what is. time able that as they They patient the later really did that funnel. collect look but can And why sideline they I'm the a that's is always get we and right that outcome. they perfect. paradigm, have the enter to patient, talking why. Here's I change care to is and -- If sitting because to because know that cuts. their They data to And to that, be That's right here. to They That's that tissue balancing are they're we do not have capability are, change now can or patients happy. satisfaction going was predict you what -- we can in fantastic. good got get why don't surgeon, the larger, would the know, again, know patients this every data afraid they're good I important on we the going intent gets for.

will to a are you're hundreds. to in So IQ perspective, could bit equation. It's attractive how in because want supply to ROSA of going us, constraints IQ do from I roll We us this much as limited talking And is a you're by. as damper in it's but we're put not here. as you When on little part fast tough IQ, very thousands. impacting we tell a to Microchips that very a move to can. of out. have And as talking you bigger launch. come we're can some a learn we We

the this it to The a to demand get overall, so is work is so again that very our around supply that's good damper through we're of but way, to sign. is this it, got -- a noise And short-term lot are interested, going but We've that on put the trying and forward, very great, people we're to the through we're and in launch. going in move there's happy. constraints work a

Drew Ranieri

the taking for Thanks questions..

Keri Mattox

can Loren, the move next in please? queue, we to and question Thanks

Operator

Goldman with Our comes from next Hazan Amit Sachs. question

Amit Hazan

situation. morning. China And your importantly, to just Thanks market the in going and in impact clarification forward, a and you're love I trauma that you're new why you're spine but terms already also next then the a a impact. want color whether impact significant pretty perhaps year. year be contemplating most seeing would XXX-basis-point to this share bit on given the maybe of I'd within what now thinking first China more on get good little

Bryan Hanson

we're what predicting I'll No revenue year, X% you've happens assumptions in this matter start had base shift with the in XXXX. impact. to whatever a still

is 'XX, rate to at impact revenues But look actual consolidate more can to if you growth 'XX going to change base. you 'XX. in that's the your from because still have X% So in

even So of And that joints. little be we're more, in exactly, here. say X%. that's though Remembering think all it's variability know a to Could X% less, be I could a sounds I X% model still let's looking little some right Just consolidated way it. like but is the again revenue, it's it know large why at there's

about think -- we in share Okay. look factoid. just I give great you China, If I a our position

as China, here. some gives you an context not look 's, specifically if at but Asia-Pacific our example, Just you

do Asia-Pacific of Knee you share the business for gives you an at business. inside that i's our bigger on -- If and revenue X we our all Knee look sense OUS competitors' inside of some our of China. major basis, Asia-Pacific market than annual That

So this is a pretty us. important market for

though be the joints, you of even in you though got unattractive step play. one of categories. an eight about the margin we the with forward; distributors. as be is in Number it market now position in categories. that. we to now going the is to winning win. of what's not in going business the every Number an profile it's X, may X of only attractive categories. got won first large And because every great in when Here's There think the are to negotiating to still one space do be Company play we're And but We're share multinational

So we're the the get we share get at the best best focused margin. right now. And on able what distributors exactly to be to that's most

of how tender we early. through; I just it's we're that you there's at trauma China, sense don't any that about anyway, national could least its gives tender, tender XX up too [Indiscernible]. trauma, tender, a sense being when a position I'd about And national that [Indiscernible] would that's for spine, and feeling when provinces provincial went that our rumors our end a think we say kind on have for But it. What think So transition occur. for a to but sense share hearing

Amit Hazan

share focus to with want on I my [Indiscernible] then And second question.

one Just I that investors things just share investors. in U.S. is especially in important now quarter-to-quarter, the have the time that the market. a [Indiscernible] obviously And understanding of for fluctuations -- harder think

of as investors said, uncertain in -- still going share that on fluctuations. that know, basis? to And so doing X. way of you been all the I than that's But more kind more gains where you it What changing to more of question for the selling? quarters differently end-of-quarter I share really of difficult whether seeing the are, last is product. there not consistent is you're anything some the us Is gaining you're assess makes now sell or it a there's in of think, like that is whether because

what's happening can in COVID basis understand what us to on that's do a era? So changed quarterly you this help

Bryan Hanson

nothing for have. what sense us. My Well, probably way I out is too. that would always point say else's would the we're everybody is I there's business conducting mean, we I

of is think COVID. there's lot happening of market because I the what's variability in just a

and it, U.S. states the times in in that's all U.S. is different of It mean, You mix in COVID different broader is at states. even that depends the volatile more surging your the on I looking think U.S. kind And outside about just U.S.. than at different cities those the in

different. seeing the have continuously odd It's because these competitors quarters deltas very So in why the different. at necessarily anything individual are dynamics I not challenge competitors I turbulent between these the are these because look times, is in market That's trend think think differently. doing trends some a that story typically to Company. at is environment creating a the it from don't doing look challenging tell of that variation. more anybody much But that us I anything I it's just market neutralizing think is consistency to Company because even

Amit Hazan

you. Thank

Keri Mattox

the Amit. we question Thanks, go next (ph) queue? Lauren, can to the in

Operator

Joanne from comes Citi. with question next Wuensch Our

Joanne Wuensch

you thank for and questions. morning the Good taking

X particular. in Just

first like The of that, is in a whole that the sounds -- have October looked? do but it or there with of and other share September between can month taking has it how we you're on one applying looking us to data how anything -- with is you month

Bryan Hanson

we So what that I'm this seen indicate we're incorrect. logic that we'd -- in without giving October is haven't specifics, anything that using

Joanne Wuensch

accounts, of you. competitive that would little could effect the a that [Indiscernible] in other that bit flushes on a of anything is ROSA, then halo category which products, launch you terms appreciated. utilization, out be other going to bit Thank share color Okay. how And

Bryan Hanson

Yeah.

and deliver and challenging always would to important it. same they amount CT involved result of accuracy is seeing don't otherwise accounts though would All which those right into what's care take of we from sure that center to non-robotic the of The our competitive do that fact Persona continues. are is things placements turbulent absolutely really not really and surgeons have You learned is, want the didn't at that make I'm in excited we standard we designed and surgeons is made well. of system in it excited you're people know, our the And one demand, strong robotic will demand wanted the that's we imaging. the as that typical for implant who best that remember that to first time that I asking you're the that with in that took you these have went question in a our these put we don't a relative on in use driving really scan, design about flow And imaging pipeline volume can translating we system very times, muted close us. non-robotic our there, essentially to that robotics sure for robotic they the have what's to is continuing about traction And procedure. and place, it the use no procedure. characteristics combined that time being We've we There's to their time for into about. because innovation a the procedure. place. be deeper use above. that look we We're And all penetration we by of possible with commitment use procedure, now that We and And a at don't seeing it all neutral keeps including things go created [Indiscernible] ROSA. We to make is to that as as just if a now. to continue change that change back pull-through is expectations as that able of into And accounts; COVID. about,

in the competitive COVID, that place actually their we So pull-through units has in those have have point with gone, disposable in but the input that increase you of procedures, price overall robotic the and the just also [Indiscernible] will business. not

excited very know we've design seeing and with we're that we're So in are great where got the ROSA. traction. we right about place, We

Joanne Wuensch

Thank you.

Bryan Hanson

Sure.

Keri Mattox

Joanne. Thanks,

Operator

with question next Kyle Our Canaccord. comes from Rose

Kyle Rose

Two as you for taking me well. the Great. questions. for Thank

little you about bit accelerating some transformation -- First of talked the on programs. a

or more months? you granularly. that break costs maybe expect do can little you a XX over bit down if to accelerated, what What course have unlock next wondering maybe the and XX-XX then specifically Just of you the

Bryan Hanson

and still But have around, more lot that We're question. investments as we the us talked what's call sure our in are of fourth about opportunity. for markets that smaller infrastructure thanks we'll that around quarter ultimately So market view regional are and -- and key I growth our the profitability planning the a really our making XXXX. in and areas earlier, as fact just into we in how detail accelerating to aligned come a for phase our of lot to profitability of market, go on

say would I So that's one.

structured Business Services area restructuring to we organization. looking our is through and across had to to more looked how where had have either benchmark take capable that relative we're we at costs; second accelerating actions just lower-cost our and/or to moving resources Global make where and looked in higher we're The efficient, countries. highly we We we ourselves -layering de outliers,

key X those areas. probably are the So,

refined, area really earnings. structural where to actively gross which over orientation, is time. about when to systems, help a more margin. the improvements forward. as contribution the those going Xrd could the we're And at we're relative on always give I'm Again, quarter team is rationalization global which going more but we looking think both provide our consolidation yield become I us also those savings looking of then And we're excited course the of process continued ERP cost going site to with better moving to pricing at fourth is our give detail with

Kyle Rose

that competitive are you we'll expectations materially just long-term initiatives you around or talked I some just Thank far longer-term a the but of and some and mobility slower about commercialized of mean, help Great. as, be maybe really some we've of you us I'm talked these for that lot trying business picture and as is in be my a roll put your to as the to to far actually on IQ Bryan you perspective. I initiatives Persona ZBEdge when bigger going maybe driver talked understand the got goalposts and in IQ a start out, understand you where maybe about. see differentiator. impact as a then investors

Bryan Hanson

Yeah.

the and in of already I just forefront think we're this is seeing that nice the you're pipeline. of some innovation thing

interesting. what's Here's

where Company XX+ X that Company, in what -- by -- ZB quarters above-market -- of think break beyond necessarily in in just one quarters. the the that you even did Knee, if you're we the market those last I above at It's amount been and go X XX at been that seeing quarter not out looking a X and isn't above-market that look or than ZB as more mean quarters one that a trend you we've do things most quarters the have about of not those from X quarters. I Knees important been X the quarter we've has

the So that the about the now. reflection And of We're reflection as innovation significant beginning at a it's of the of taking right taking index vitality -- cycle. hold. a just the transformation hold transformation when mid-single-digit we're a only

which triple our over the Our plan big a tailwind we strap indicate this strap going would period. a innovation sustainable. is to in is see to believe part expect pipeline that's why that plan That's dramatic we of

If look definitely before. specifically seen you is better in at the and execution than Knees we've

structure still the are But going you anymore. innovation than conversions There's gives it supply still business. a compensation all more innovation we're pursuing now. in our is Our guaranteed and ever with side. good business, on that Knee Revision is growth as our that's else's that revision operating now And and focused on from seen. be around I've the -- as importantly Knee drives no just customers mechanisms It's issues total Persona rather Revision are getting clearly than maintaining that now, to most using somebody System beachhead bigger revision total business

well. very launched. got that's that and ROSA still just a a at We've large of You Knee just very continues headroom Knee started. share lot Partial, pace getting have ROSA in ROSA position. have we Remember, to Partial

business is Persona Cementless new going which XXXX, a before, exciting that those get we certainly talked if is So pursue IQ in starting we for mixed we've form Persona remove as and Cementless, got benefit partial with able to to we for in associated a have just we competitive try, then us even to be all ZBEdge to our conversion factor and going procedures. about a to stops Knee. are which didn't

things all strong continue goal of Knee. you lot on shots a give in So to those performance to drive just

Kyle Rose

you. Thank Great.

Bryan Hanson

Sure.

Keri Mattox

next question Loren Kyle. we Thanks in to please? go queue, the can

Operator

from with Our Kodatsky next Broido question Truist. comes Sam

Sam Broido Kodatsky

ask taking just thanks the both questions I'll Hi, and for of mine.

COVID into about staff fourth shortages. pressure quarter the continuing being components with So September when we think two that the

bit I COVID is is think better here. the getting a that general thinking

we portion of pressures mean bigger a ease to those quarter. becoming to And are follow-up staff harder as that, fourth problem predict So should into bit the the that then up. little take shortages a staff when a to

those are So forward do is think to Thank impacting long how staff shortages volumes and you. you looking you pressure the from what about that indicate easy.

Bryan Hanson

to at better. tell guess use that learned. I and of will look say I approach lot I this. answer either continue September be I indicators going would is external try one COVID A what an to time of of can The that's we've and a and we probably So a assume it's to it's conservative then you bit to here's through. you that pressure when better, of seem going get combination get to staffing. of going to Every But, COVID wrong. is what view But

the to in same I'm consistency. the mix we of going in pressure not the seeing I'm go what and that so what that. marketplace staffing, saw overall is going always September. And October with consistency pressures but we're in the seeing marketplace between in to actually go COVID with we're Not in and

curve. anymore this see actually bending so into proof that would I've to lesson. to learned not that I'm We marketplace to expect continue I my until we're firsthand the in seeing And this we're predict XXXX. try going that

when will into to is XXXX. as we as believe truly guess but float it's this We is good to stop; going tried know your guess float XXXX. do going is how predict believe have good ours. far others this into Your to do don't as We -- as

Suky Upadhyay

And Sam, this is Suky.

fewer relevant, don't physicians doing they normally do. challenge, over suffered that reported too those the stated run on they've what read the hospital And have would setting. with this third really the than it's half labor just procedures Bryan What to physicians data that have the unprecedented. not far when in it survey of it's And think really Just have so shortages. do It's the they're not level. particular we but -- is shortage please said, is to from know at and quarter try component throughout about XX% that I build nurse staff the toughest through because sophistically

the approach And setting, continue real. we're Bryan we're hospital a thinking those, than that to we're seeing greater that durable you view, going is impact is So until that's very it's to as a view again, ASC it. And hopefully off, impacts also substantial, setting. expect us. a about we of Because disproportionately conservative more think lingering in take it know, us. in see more improvement, that's we've in this share lifts we're that as I and than so it we is how the with hospital the got but setting said. the prominent we're better it But all Hopefully sooner taking

Keri Mattox

did but have another X was I follow-up? Sam, close And that you out X, in there? questions that anything think

Sam Broido Kodatsky

Yeah.

Thank my wasn't you That tail. Sorry.

Keri Mattox

Great we have Lauren, can question on queue the then? next

Operator

comes question Matson with Mike Company. next from & Our Needham

Mike Matson

by too more get this Are now. is you uncertainty? through need de in are active my other I done you Sheet multiples the with M&A. Or that haven't Do the Yes, to COVID thought question. -lever terms thanks more some guess Balance for start you more? all there acquisition? you to taking gotten of reason have I high, would waiting wanted I to

Bryan Hanson

Yes.

get look we I the And the clearly, with bringing have pressure at give pay ratio got too, about So multiples created you the you the team from pretty to have, to even think for an that the for to like select fundamental complements firepower those we we success as you would that's the debt do is honest much high way of limited in with fact targets, we've and S.E.T do in we absolutely targets, actually impressive. for instance. be inside EBITDA to as I'd be are if done standpoint. leverage more environment but high creative that to technologies an COVID able us, with that

when just gives bigger had leverage Our Omni The Suite, acquisition on. our in full happened about over which the Canary that long-term implants we flex gaps Knee then a as did is and expect brought increase not and technology ASC of say the a Thoracic X that us in would filled things will we muscle smart concert for growth the that portfolio. we -- we're been -- more didn't during talk helps beyond to would presence but space, with its which ability then relying that than relationship a implants area absolutely that this exciting have even is for in, we say that you more us gives to overly in and particularly time We we sports the blooms lights, we lot us, market. have firepower, behind it COVID And us in significant next focused gets I smart with just firepower. I that expected, firepower given had. But, you area. opposite would All those think the the years that big A&E in I

Mike Matson

of substantially -- and recon elective looking less Knees in maybe and then Hips the really and that's down going side is were quarter your something Knee Hips the Knee it is. that Is looks there? more by would been than your products new thought have were category, ROSA a on that I or just Okay, somewhat at in just helpful, there wave the less like affected and the reflection COVID than else

Bryan Hanson

Yes.

seen behind faster issue. Number consumed But it wave a we hip and at I a being that And what that Knee is initial has really it some think lagging was is because the were mainly you're procedures you past to what the X procedure have that Hip. everybody hurts is you've that switch got I related a X, think Hip factors. finding because where seen trauma as with when So was in there pace well. backlog got

is up of And then have really procedures are the waiting. some -- it. view my patients caught And been on has that now Knee

in have You out finally a year been are to got get a for there patients procedure. coming that that

the market entering I have predict, significant threshold now. the that long funnel. only where could why quarter, standpoint. patients can were We'll truly with see now Hip pain so thing That's I happening. had the happens And as waited lot a in I it's they right a pain these it's happening that's as believe think the we're see from those but trauma I can But what do of what next thing is already only or

Mike Matson

Okay. Got it. you. Thank

Bryan Hanson

Sure.

Keri Mattox

to we can Lauren Mike. queue, next in the go Thanks, question please.

Operator

Our next JPMorgan. Robbie question comes from with Marcus

Robbie Marcus

that it its Great. year, to the since Thanks China basis points assume price pretty much dropped just bottom XXX fair question. on for the line impact is as taking from Suky, next the through well?

Bryan Hanson

right to That's it, way about Robbie. the think

Robbie Marcus

it. Got

So that second And get question, then operating XXXX? your two quick target all to margin included. just does that Since hinder probably to imagine clarifications. in your at ability wasn't I

If benefit the day it. you and could let was what M&A us know Appreciate Thanks. in quarter. the selling

Bryan Hanson

Sure.

spine put certainly big point, not get two think the add of margin operating largely does the portfolio but the will XX%. dental margin was aspiration another just out, to to spin the that there and that We headwind be we the business, BPS XX% were So we those another. it and one mentioned, accretive. components But on when that two which other management you the had that offset One contemplated. was active

another relative reason contribution, true I headwind tailwind in on why that ability confident day as the well. for backdrop of XXXX. single-digits. the it end day in this to the then deliver that's to rate. exit run headwind, is Relative to going even meaningful at the the in put no year again, our we're And low So M&A still that's rate rate, full the And would there to of be

of if our XXX revenue, in neighborhood overall about at the you benefit. M&A, about which bps is of about looked itself, think you if S.E.T. XX% it's So of by

basis for by about percent XXX a helps S.E.T., less it probably But than consolidated overall So in points. the results.

Robbie Marcus

Great, thanks a lot.

Bryan Hanson

Sure.

Keri Mattox

time more questions. we next Robbie. few one go queue? in we to for a Can Lauren, the have the Thanks,

Operator

Our next Matt question UBS. comes from Taylor with

Matt Taylor

the my help, the terms Bryan, things to you could what seeing last -- for we ask for XXXX, come challenging just guess it's taking I Thanks would inform wanted in about to you of see I start marketplace question, in -- back. I guys. year how what about and very predicting you're COVID could know what

terms on We is what the far? this else time have the strong been going in fields the is year, of the more after we [Indiscernible] terms of muted [Indiscernible] part a so there the had the in closed in and early XQ something think or you of delta saw in Do seen [Indiscernible] comeback. we've

Bryan Hanson

just I It's so two. hospital. just so hard those it got of combination are more the are stats extending you now funnel, north more X But is both because But look on believe is tell the starts to past. thing, they X is procedure are from than Delta seeing are referenced I things not versus patient And the time so I'm a people takes hospitals been seasonality but believe. we contributing to funnel? far be we surges hospital the to to it enter we're still. as allow. real what from to predict, real, the seems here's definitely would at every the what time in still I the trends more got change at the time think you've less would I'm I impacting of we more ASC. nailed and the wrong, very But the I've again, get That looking look putting has recently and entering the in a what typically those at The Suky because those We capacity absolutely ASC, surges that do usually weeks. the though, than staffing that And do when and

So procedures better, September speaking. are increasing. procedurally August is occurring, to was seasonality

fourth pressures the with to We expect associated quarter, than that's quarter the muted staffing. but third be COVID being by these and better

better because I not procedures aren't the the increasing just I [Indiscernible]. are. the these nearly we're They're they It's that's reason clip wish so unfortunately. at of increasing, not don't a have why And we that changing guidance. expect could answer, would pressures. I

Matt Taylor

In second Sure. wanted do post going other the related how the XXXX guess I much There's COVID a be of really lot ongoing the to conceptually, is there's normalization? of issues staffing I year of view half in [Indiscernible] if think but your to or wanes, COVID. on staffing certainly, in you words,

Bryan Hanson

say it. because there challenging components associated to multiple with It's are

just people don't beyond may it that if because pressures, know, think -- maybe. they're started because requirements that are mandate if But say because I to COVID no for somewhat they my COVID. some leave in that, change to pressure they're and Some see may is is driving of the my change? of staffing point, this what sync. now, I work I saying this is COVID of that challenges, idea. changed, guess have know that be I may COVID the don't were starts So lingering to whatever But be because although vaccinations vaccination have disconnected That's guess just you -- vaccination going is

Matt Taylor

Bryan. Thanks

Bryan Hanson

Sure.

Keri Mattox

Thanks Lauren, queue, please? the Matt. to in got next question can we the

Operator

comes from Imron with question next Deutsche Our Zafar Bank.

Imron Zafar

of lot ASPS good next the morning. my I inpatient, products, maybe taking joints. was wondering comment in the versus mix, over higher you're of with implant Robotics, blended in mix new if couple you a for case that. Hi, question. Thanks on ASPS how Obviously, like thinking years about large parts could U.S. of moving things

couple how Just over Thanks. [Indiscernible] ASPS next about -- thinking years. implant of the you're

Bryan Hanson

that I'd answer X in So ways.

is on foremost, to discipline focus the we're and pricing going organization. First in

everything out I an time. if been able experiencing the that mute we've some equation, of so long organization the we to pricing for just And else to a be impact of take as look

doing amount we up when effect a we're think an share taking technologies is of of could So procedure, Separate The you job is a standpoint from that by by wallet that, focus just itself better obviously about make that's area. big procedure. pricing help benefit. launching the money the mix ASP actually up of the fact us per do an a of on for have front, from in one lot

Every Mymobility. if in uses a premium every somebody you a so a And procedure think get about time somebody procedure. Robotic Robotics, about got time somebody in think you it. premium a We Cementless, We I think get you've uses that Every it, time about procedure. that uses premium.

one. we deeper IQ would penetration we expect these technology actually get So of key another as areas is -- Persona in

get growth. tailwind ASP we penetration, an of market actually technology that we inside to for up expect a deeper capture procedure and be would go the we existing As

Imron Zafar

the about thoughts Okay, then you and latest key internationally can your talk your international what are ROSA, opportunity thanks. And latest views great, on in secondly, for just timing Thanks. markets?

Bryan Hanson

get with a truly and we early times, believe OUS do A we've happy nice the our business. our say in been U.S. I'd see Yeah. Asia-Pacific. of ability traction on markets, business robotics between I with split certain outside our lot very very specifically to actually, U.S.

in little are robotics take anybody If It share that want distance the opportunity in in too We the we're traction the to trends and we robotics an number a the to could well. player pretty those make have just quickly Asia-Pacific, in space. U.S., not EMEA. surpass we way far the in the we OUS longer get look in at We one be but want that continue we're in getting it. don't to we in the seeing, U.S., as presence with sure could

seen And that. we've far, so

Imron Zafar

much. very you Thank

Bryan Hanson

Sure.

Keri Mattox

think one I maybe have [Indiscernible], we Imron. Thanks for last question. time

Operator

Our Anthony Jefferies. comes final question Petrone with from

Keri Mattox

we line? have do Anthony, you on the

Anthony Petrone

Maybe retirements Great. could of number like also to staffing, whether healthcare And XQ. just burnout, it double Thanks just industry. big services relates question. of a we heard be to turnover, my for as a from to staffing. early headwinds it It in in back just staff personnel trend seems there's terms taking on be

about you ortho pricing of quarters, do headwinds and for follow-up stack think a how out sort last Thanks mean recap think throughput there, navigate again. on that do be quick specifically? just knees. XXXX think could into So of in both some we would next And when and just could of recon what deep terms for as then trends the you you of on these few hips the the

Bryan Hanson

Yes.

are I to to So again, when concerns end. staffing try really project challenging going to it's think

is folks paid it getting inside in a leave I the about you're think a new become are other you what's the can and paid of get nurse you hospital because is and whole that interesting driving and concerns can can than just sub-market more a at. you're fact nurses you hospital lot for you're there the traveling staffing

And to willing can so paid if you're you you're that get more. travel, a lot willing take flexibility, to

love can't predict be you -- any And it going nurses, sub it. for new assuming repeat whole would which happen a in creating I'm the say problem. but I just with you to able market for question when to exacerbating I'd happen stop. the had? to -- is continue to accuracy you, could just XXXX. it's definitely So I second it's can't just I

Anthony Petrone

the just of some here we we head hospitals, headwinds in pricing, Delta pressure and particular in as some to next sort into translate will Apologies in that think year. staffing staffing as just with you how navigate of with this inflationary period

Bryan Hanson

mean, market, a this got s this think pay cost people in and time it, time all pricing hospitals more. pressured I from you. you the they also in traveling I for pressure their too, if nothing which trying us about paying to nurses, standpoint. is But all a margin. retain the good question new. get their And having talent as more, a are to That's they're lot because they're

to pressure no change us be there's with put for So they're associated they pricing. much what no the pressure on really going feeling, how matter

change don't And in a real dynamics this. so result I any predict our of as pricing

s going pricing. stabilize can skills about as and particularly this we believe contract, pricing with organization our there's over impact I pricing. variable an contracting, five-year reduce question number multi-category Number better there the number in before, that. said looking strap plan There's the to predict contracting headwinds we've dynamic people will the as better particular discipline don't There' clearly place, though. to a pricing As clearly be going change be for in to X, ROSA better I and actually just would of we reasons. for no X,

Operator

closing session. or does back would I turn conclude question-and-answer any the That Keri like to Mattox today's additional to conference for remarks.

Keri Mattox

and thanks your everyone for Thanks, questions today. Lauren,

course, today, Of couple of you weeks. and the of tomorrow we'll be next throughout to speaking many

much out don't so IR for to have Thanks team questions information, and joining. need you to If anytime. hesitate the more reach please

Operator

in for Thank participating you conference call. again today's

now may disconnect. You

Zimmer Biomet (ZBH) 4 Nov 212021 Q3 Earnings call transcript