ZBH - Earnings call transcript Q4 2021 | Zimmer Biomet Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, February 7, 2022. [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 Mattox

Thank you, operator, and good morning, everyone. all safe. are you hope well and I Welcome call. Biomet's fourth earnings conference quarter XXXX to Zimmer

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

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

bit And Keri, of also it to And want the can found what thanks, just within part we an to Bryan? then going call on you our I'm prepared of just measures the to turn will measures include All to me everyone, more financial GAAP I'm seeing spend before outline discussion going our to things want going turn I'll know quarter that, briefly non-GAAP spend I out Thanks, QX more most we a of jump Suky, right. obviously, our the the website, over XXXX. this earnings is little provide of these already I'm call of I now come fourth us I'm Bryan. on for results. certain and give be financial measures. going Q&A. it's over who's whole. into XXXX seeing morning. And directly on which comparable our few and about this call to move remarks going our then then detail we're morning. Reconciliation what quarter proceed to time more we're going first to the talking about zimmerbiomet.com. this want and forward. to to how With joining included the close a about talking in Great. far discussions Additionally, broadly will of a a we'll sense I release, detail early, to you finally, to I guidance on it as fourth give and views again got Q&A. back then with just speak but the to so

Okay.

I'm into let's with going and this So categories. to really first, break QX, start three

will first in QX The be around compared COVID and expectations. our impact it how to

second there. be again, VBP will how to then our and performance we just performed that expectations. outside around impact and And impacts how The of compared environmental those finally,

Okay.

back first. a take So step let's

I think that will help.

on QX we around when guidance quarter staffing expectations gave our out Just November, outlined updated call pressure earnings quarter. largely the played our how and fourth our likely in impact QX back would actually assumptions and unfortunately, results, our in our we COVID

stated, quarter. truly the Omicron itself. we QX came of COVID And we the remember, the would really, big that occurred pressure end QX. And from that out, probably pressure end continue a because fourth December accelerate played the this of thus, now would QX. of know reason from to in is overall of many impact the the you actually As lot as QX felt staffing course, of into from And the towards surge already that and have

the quarter. was cancellations right? it it not factor, ICU primary the see during manifested this of was So though about So did that the capacity though, definitely of impact overall is what's what the we expected, driver interesting surge, COVID but about as different, a even was we of procedures way

around show saw And up occurred or couldn't or procedure. COVID, to a result for member having more the either with quarantining what really and been they as that we COVID with so being actually was diagnosed patient actually staffing someone due the and cancellations were

was quarter. the So shift really we that saw the that in

expected, overall way, impact about the again, different. slightly numbers in So was the what manifested but we the was it

largely China how to Okay, results. would impact played what knee again so fourth out. that quarter thought in we VBP. call, transitioning we from VBP And on actually there our - the be QX Remember we our discussed right and were on of we hip

you. what large so expected in was And expectations had communicated line to our in the we also joints headwind we and with that

pretty about was much think So when in large joints. we check that

changed been quarter, adjustment a this which both sales with what than announced XX, quarter pretty about during the that nationalizing we the earlier it was anticipated, the really kind in results take is overall adjusted consistent to on process more is to EPS. trauma new confirmation what But the impact provincial our net that and of it the how and our scale recently. January VBP and what the and negative us. based work consistent its And on of government expectations knowledge came of formally impact trauma from say that I'd even a with talking just from reserve that and that did QX here, we've of Chinese VBP we quarter, then will was the diluted obviously in sales fourth was our tenders, though government the Now actually one post VBP even Chinese

what of guidance, news which XXXX we would be going Suky's And on included lot good has that about now the I our topic, minute. just is looking in our talk in smarter We're will a to the visibility Now business. we have more been now. forward, VBP and a lot a impact the say understand on

proud we focus COVID ZB's looking now things when of so the in quarter, execution very challenging the control. the Okay, a past has team backdrop been I'm strong. we against VBP on can and business fourth

evident and I than points That's times. to orthopedics. proof those be was globally, us installed ROSAs to versus paying important the reach And the robotics allowed smart jump more a the And fourth a but move to ever. even more forward time are been, launch momentum is to able speaks that of and the the strong now, Persona team the right we as just In actually doubled our of of penetration as it's only cumulative pretty world's that for demand in the milestone number ROSAs drive ever is the of U.S. really our as that continued knee XX% culture, kind And really at, ROSA The team globally. quarter, just first one the been few team procedure not end We in And iQ. think of challenging and the strategy XXXX. in and to That's those able the this ROSAs for for U.S. up, total XXXX these ZB of a strength beginning significant and team than also successful us. it's for the our able ROSA. first a organization, have knee, total again, journey in has huge momentum delivered limited and at company. point in in a installed the Our off. to

the a said. is good, think XXXX. to again finally, right hips forward limited both performance We're and QX joints full year. versus I days. And The U.S. in knees launch for execute then the across continues early we're importantly, above-market in I Obviously, early. and looking this board, it's as now, launch to feedback launch large the in team But in trajectory the Now and later great. feels driving

Okay.

our what you about in challenges going seeing so, a QX So we so December through And of to specifically that COVID that using financial recency pressure that talk the practice, and really and build And as in let's challenges. to transition result bias tell models. would I'm saw and to early a January those staffing our staffing continuing from I QX. XXXX. what in we're And models far What I is as in January. team into QX, and continue that, will a about is unfortunately December, expecting think continuing now in call we're are and going in prudently particular COVID speak I'm

overall, likely more than basically anticipate be pressured QX saying we're that will we what So that QX was. is

today that the state actually be will current in year see what's projecting happening follow saw and XXXX. the are trend does at for shift and COVID XXXX look valley our pressure we're Until outlook Again, for that to environment, a -- peak in year? and the will the going we in the continue mean XXXX. way, we gave a We're way guidance so going that full similar to for approach. in actually, the And follow QX of similar what we in throughout that similar in way very same a we a fundamental

QX this to that from be given Suky revenues sure me, focused XX% appreciate, elective again I'm our going As give in detail to we you And topic. highly been with attuned about area, to our trust captured I'm this in of and also assumptions guidance. guidance. transition for you has highly our XXXX and are. to that procedures, And more We're that, on must can ZB come

Okay, Suky?

Suky Upadhyay

morning, good everyone. Thanks, and

brief morning; guidance first, provided how 'XX this our on update full morning's I'll impact on For longer-term and commentary that to I'm provide our into on going results, translates QX financial X topics: second, a of call, focus third, we COVID; including the outlook. this year that

results. December about or X.X% XXXX otherwise of decline had versus the consolidated billion, guidance late knee, adjusted S.E.T. with quarter changes that important in was range. quarter, forward, in to 'XX. and booked QX consistent Moving impact X.X% were relating on the feel flat adjustment the region U.S. drag down versus the due the growth on down XXXX our sales a fourth for government's grew line with triggered consolidated The on $XX and the generally lower 'XX channel provided EMEA in we how sales period or also On versus fourth Separately, surge. which we earlier an Expectations of to currency was will fourth million, it be or the to inventory XXX XX.X% of the VBP, of on growth results fourth to will quarter national through XXXX decline positive This reported X.X% part hip by the X.X% of adjustment in results, my and VBP with it drove regional Americas and expectations. basis. impact XX. basis, of Chinese a $X.XX headwind as P&L XXXX. XXXX, the China emergence with and our XXX challenges, January point statements declining VBP variant and the a but fourth constant category or in basis largely growth. versus November the decelerated revenue approximately 'XX. contemplated commentary Net VBP with announcement in about and the experienced X.X% the excluding compares my quarter constant trauma broadly in point a short, currency be X.X basis were lingering made fourth is the same impact versus provided We've call China Omicron quarter in prepandemic quickly quarter versus a Omicron. a about we China staffing third line quarter, noted, quarter comparison. declined was quarter, The X% for unless we a versus declined the related of the XXXX. And that our The or of S.E.T. about midpoint quarter Omicron down in to the trauma with In in X.X% hospital and the implied of in tandem on down assumptions in was

adjustments in down ahead declined primarily Australia. as VBP versus inventory and of trauma in and December impact Japan a from in hip, spike markets price some Lastly, Asia driven knee like COVID Pacific XX.X% cases 'XX negative XX.X% as channel well by or on starting

basis U.S. X.X% down negative our business in performance the In points. business XXXX China knee to with impact quarter. turning XXX had versus knees the increased X.X% global 'XX. X.X% on declining Now fourth of growth or X.X% knee versus VBP or category quarter, The about a

impact global 'XX. X% points X.X% down the hip in versus declined about or quarter. VBP basis 'XX, was business hip hips X.X% U.S. X% or Our versus XXX declining on with

was and 'XX. Our in due and extremity down X.X% a market impact COVID X.X due trauma, or earlier. category versus softer as sequential trauma the deceleration sports, China decreased to The National of VBP discussed to

'XX digits and spine single X% growing of versus flat category continued due down spine 'XX, declining impact quarter, VBP primarily on dental dental and the the with and COVID. versus Excluding about low an posting underlying from trauma growth to versus S.E.T. X.X% The or declined in pressure XXXX was basis.

up this from Finally, as launch Partial as 'XX. Knee and X.X% category ongoing our hip Knee ROSA other ROSA saw Inside XX.X% versus for or the grew category, increased demand of well we revenues applications. our

Moving on to our P&L.

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

to China was was manufacturing impact In Fourth gross modest a lower due earnings headwind and quarter. pressured to quarter gross share in FX volumes the margin addition, XX.X%. of was the VBP. per Adjusted margin

with commentary. line margin was and For in the XX.X% gross prior adjusted year, full

R&D like expenses of operating areas declined we across $XXX accelerated improvements commercial invest adjusted across year-over-year. by of priority are and funded in informatics, and in areas that, being continue Inside of million and efficiency robotics to infrastructure Our S.E.T., SG&A. other data which

rate for in quarter. prior XX.X% were onetime operating quarter. was in year, due quarter. the The was adjusted favorable prior the down our but to tax quarter rates tax XX.X%, discrete QX and some to with versus Our the margin line year the expectations the in adjusted items full

were Turning of cash million, flows million. ending $XXX million cash an and to with cash equivalents and and liquidity. free balance cash just totaled $XXX Operating $XXX cash flows

currency In debt. the continue the sheet. by million, non-U.S. the denominated on make $XXX effects progress of debt to debt delevering quarter, 'XX total million, good approximately balance We bringing reduction in to fourth reduced the excluding we $XXX foreign on approximately

XXXX. Moving to our financial outlook for

the are 'XX expected assumptions. following issuing are We throughout XXXX. COVID continue financial and guidance pressures customer based staffing to on key

the the Biomet. of anticipate by versus and such, only more RemainCo half. with 'XX 'XX, Zimmer the that We as than spin XXXX COVID second We the are quarter the material year businesses guidance expect we see we quarter impact the pressure but first saw for and we staffing Furthermore, pressured variability into being in growth with is first do as China completing not pressures half. we the our expect dental providing term. in in And to a half spine of December to in this more accelerate first of near VBP the

quarter, our discontinued and be to RemainCo provide XXXX the expect as operations, quarter will earnings first on for ZimVie first call. or information reported forma we pro around For

constant VBP of X foreign diluted XX.X%, XXXX on growth basis share backdrop, financial currency headwind that While of restatements in expect the versus and to to reversed quarter versus XX.X%, for in cash This XX% be up for we of X% flat to the reported we negative negative this being range and operating approximately by COVID will XXX X% outlook XXX and rate basis of to net do expected to $XXX the be Biomet. have impact at million positive $X.XX Adjusted first that tailwind of XXXX of $XXX earnings to profit of day of exchange X% for XX.X% adjusted not to to the translates to easier currency year current the range tax point RemainCo available with basis. time, revenue margin points. $X.XX provided a our per expectations in an guidance, year have offset full sales full billion first Against this comparison, the the estimate adjusted our free $X.XXX P&L Zimmer are selling a of revenue slightly to comp last QX fourth quarter flow largely we from to headwinds XXXX of the relative Inside due million. somewhat quarter. roughly unaudited

We of shares committed debt maturing our average year. of expect the $XXX for year. approximately million interest in remain this million We and million quarter approximately XXX expense pay $XXX expect grade investment rating the to second of net to down and outstanding

longer-term our to turning outlook. Now

the we our opportunity taking to With ZimVie margin this also update expectations. nearing long-term completion, transaction spin are

impact target exiting operating XXXX. the are having is COVID-XX of profit our business, at Given we prolonged adjusted removing on XX% margin least our

do we to in make the our accelerating top our macro challenges, to we those that, long we execute strong savings as underlying With the growth investments. we However, back In business environment summary, continue over improve to but fundamentals expect also to margins remain business to turn term will line the continue call fund over to while cost I'll presents against can control. Bryan. targeted enhance what investments successfully as

Operator

We'll from with you. take Jennings our Thank Josh Cowen. question first

Josh Jennings

questions. for thanks, morning, taking Good the

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

Bryan Hanson

Yes. The that real for key because of of do I'll invest specifically more us. efficiencies and areas. impact on just the drivers growth start those you, We programs more feel focused programs. Maybe pass for in I'll are transformation with growth that and quick Suky. then spend portion to in on not ability last not it ability R&D to it, finding those growth our actually our transformation associated over in investment They're in to confident

really So growth are I'm it over going they the bring going to things to that, actually confidence able push be drive future. more actually in to to other questions. that outside of spend But that on the we'll the you for

Suky Upadhyay

Yes.

thanks So question. Josh, for the

again, expect really procedures the and for of us is with ex Regarding of around the full elective shortages, for overarching concept be of impact the some of revenue on we to X revenue we XXXX. really to on and X for year the full an that negative in COVID COVID guide so FX on staffing to the talked basis guidance, assumptions the continue year entirety

backdrop with broadly, basis where first volumes we're accelerating COVID an down. expect in And the that's consistent of actually the quarter, the in saying we quarter underlying XXXX. procedural is expect would first on to what be we see to right, Now

the some recovery the So in quarters within see we to do later expect year.

that don't VBP your the relative to in that headwind of as or trauma, inside VBP, question we've XXXX. the Specifically fourth we at charges to joints a or quarter material taken tailwind see large of time this given

the quarter in the full cadence a it's to the the be going more tailwind. not say would in that of headwind be the that It of of will definitely pressured half even second or is first year. Now different, year by half than definitely year I though

So that's about how we VBP. think

your on got Now other color talk [ph]. by see to that. we we're regarding at comment think that's going relative a We're was before I going the how to to region question to play do regional lot not more that about recovery There's COVID performance flattish out this regional time. and in

we'll But flat. get the to you we level, into first consolidated our more about midpoint So at our be right it give into as the -- now, on we expect quarter call. color further quarter first

Josh Jennings

Great, the for detail. Thanks

Operator

next Evercore Vijay with comes ISI. from question Our Kumar

Vijay Kumar

difficulty) make to of Thanks Suky, Zimmer, guys. of one, for numbers. the a you maybe on My basis taking want the is spin, What right, the [Technical fiscal have [X base XX] the difficulty) [indiscernible] the One, the is year, on perhaps earnings here. 'XX right Hi, maybe EPS walk just [indiscernible] at cause to earnings I for guidance first last I'm [Technical question. 'XX. the just fiscal I in XXXX, can ex something bridge through The getting midpoint? volumes of sure $X.XX of comparable line us guidance from 'XX

Bryan Hanson

to sorry interrupt, staccato. you're I'm a little but Vijay,

if something, change your maybe well. it. if We really we You're not speaker, can a coming you you well go know on, really capture question. if can on can't -- maybe I you're don't can't in you hear so

Keri Mattox

not Yes, connection. you is Vijay, can like in Maybe a just the sounds line back queue. good it get your

that. Sorry about

Bryan Hanson

Are you there? still

Vijay Kumar

Yes.

Sorry, you hear guys. Can me now?

Keri Mattox

Much better. ahead. Go

Vijay Kumar

would be downwards, caused the XX bridge through earnings, 'XX that guidance, connection. 'XX. earnings from Suky, Yes. XX what walk EPS the 'XX I'm maybe helpful. the Apologies and the in X is implies of for versus bad or us X the year-on-year what to earnings fiscal X on getting declines? just guide 'XX? flattish in XX But And bridge 'XX, comparable Maybe

Suky Upadhyay

Yes, sure.

question, So the for thanks Vijay.

COVID back X XXXX, XXXX. really environment. So to to effectively we get By going time not through in be first the of all, bridge in removed that an we'll years I'm from

for we guide how and lot operating difficult margin about it's how at to So really here's think EPS. arrived comparisons. ultimately of our But would a our I draw

the we've Starting if you and year tailwinds ended point, XXXX as at we a use starting headwinds. some adjusted operating margins. the there, so on got with XX% From And some headwinds.

have been overall the roughly in incremental is about there coming a margin One dynamics. VBP. greater X that was we talking bit a in the composition between revenue We XXXX saw will same revenue impact XXXX, as impact in China And really the while XXXX downside to the different. years the be pressure of from because is little what

The around we're second inflationary costs. input Things our definitely headwind seeing are is these energy like company. really that being costs, felt metals, freight, within labor, and impacted

roughly So you those maybe if that's XXX more. X put points, together, slightly things about basis

So using XXXX. arrive for about operating our exit XX% at would and a of 'XX XX% margin adjusted headwinds, you those normally

However, some we do have tailwinds.

have margins. within deploying been we spin. be the element. additional of we've It's We've restructuring accretive the tailwind even out about as netting points then activities COVID. to actually higher, that And XX would points basis we pressure And because company to a We costs. little going talked another about XXX spin, prior a that, basis of like bit after said have some operating XXX the to points. about, the continued basis That's be more stranded of

to other in operating gets you you our accretion spin what plus So margin XX% midpoint. of efficiency underlying up XXXX programs an points, basis at XX% XX that add the that's when a from

spin being gives So being building big Again, blocks. tailwinds and the efficiency. hopefully, costs, other you input VBP that headwinds and

Vijay Kumar

That's Suky. helpful,

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

Suky Upadhyay

Yes.

those as We going plus. because will our we or income. we're cost be benefit. get to slight cost some We're see business actually on pretty core do But much recurring, -- not structuring TSA with that them a a non-GAAP-ing to

any to do income. have we per TSA share earnings So not benefit our in related

Vijay Kumar

the -- Suky? be I TSA equal rate, mean, to XX-ish, just stranded cost should So

Suky Upadhyay

It I be for wouldn't a complete there, say substantially those it's costs. lower than will X stranded Vijay. X

Operator

Marcus next question comes Our JPMorgan. from with Robbie

Robbie Marcus

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

Bryan Hanson

Great.

Okay.

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

Suky Upadhyay

the XXXX composition some roughly our the about I talked we we XXXX, XX% by is, talked ended or course, on operating we're at it's seeing, that pressure inflation adjusted as being headwinds so into the margins, spoke tailwinds. as just back in got, primarily be margin related that your of about as was VBP XX%. line in there on with margin which XXXX the Robbie, the input remarks, From overall margin just cost of gross guide, prepared to headwinds, to of driven again, gross SG&A. below the about. going midpoint, Vijay adjusted just you've I we half The And question with The or well see about way

a volumes I will partially be to be But be headwind. addition, net-net, In spin. Those some from we accretion expect slight down. the lower will to related that to see by would also offset 'XX margins year-over-year 'XX gross

in will bulk into through of be operating 'XX, again, driven margins adjusted improvement the SG&A. 'XX from So primarily our

Operator

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

Steven Lichtman

I the where opportunities through placement you little How ROSA, 'XX out placements? And pipeline implants the was talk of pull those build versus of are see a could you ahead. ROSA bit Bryan, the we 'XX? opportunity on of to wondering about are knee you terms following if in seeing

Bryan Hanson

Yes.

pipeline I the -- it We've a flavor the when go the say thought not robotics, I It's during are first systems continued has back homogeneous. we're pull-through friendly that, about not that mean COVID surprise the would case, haven't a strong. is, the we one honest, of has in things been demand be which So to to been a is we pressure. that's reduction really started, happening. be account. we is gets but pipeline robotic it. seen just this on would There part that positive is for always placing what seen most every account What account stronger. already that has to I And it. some a competitive competitive always We in finding is or talk always I

have we exists surgeon a account. there there, capital ROSA a competitive a that an place in will be even those accounts to absolutely there, platinum would we that we So opportunity a accounts, because platinum competitive system our consider in surgeon system that when convert

what's the that's it So strong. about demand is exciting is

is the that one feels doesn't happening. to is that just being I start. total know that of sound robotically. it's the see beginning of U.S., like A of big it the much reached we in already good It than right pull-through done because fact further is just XX% our that. to that along the the move and the We fact a continue direction, competitors much in point proof is knees But journey. that pretty And like

the is and you would is continuing. real, so that pull-through yes, tell demand and I it's So the strong,

Steven Lichtman

on Great. And a then just follow-up cash.

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

Bryan Hanson

our always get management. has Phase III is in Phase dent our Unfortunately, portfolio time, put as active that a ability big Yes. job move of leverage leverage cash-constrained were as as environment, COVID to we've into much At part to a III, transformation, about, there. of we we the definitely talked And pretty continuing we've in done our a good hoping even to cash same a forward. as of the strategy

we just we've partnerships, either not As M&A the of in and in deals, firepower remarks, certainly of that ensure amount had a like, that faster-growth I scale areas. or my would we continue. building have mentioned is we're important those going number But to done prepared to pressure

Operator

with question next from Fargo. Biegelsen Our comes Wells Larry

Larry Biegelsen

ASC on Persona second you why? just then And the one remind And what iQ us to you on -- iQ, resubmit again pricing revenue to if planning if me, the And well, not, one you're X Persona expect for of impact add-on for just if have just Bryan, to strategy. on strategy. XXXX? new the you kind about talk the Can strategy, tech ASC payment. of in

plan a change What's before you've this? -- talked headwind to in grow near you will about to growth be And can there. it under-indexed at or that? market Or talk recon address in the term? the Just above you being

Bryan Hanson

Sure.

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

That to be to got doing make we're we're that presence acquisition be sports, able give gap we the sure in capital, like that ASC. that the infrastructure had us that give thing booms is the in other like Relign and where inside where would will gaps Incisive would filling product to to more lights The ASC. we be our more

we're that at I we're I ASC the Do making things further to working. when the what traction doing ASC, we right in able we're work look actually have are There's the But no those is progress. and doing be growth question. So in now to to more and get know look do? our business today at in our size of our expanding ASC, that I

ASC. that's So

the I'll possibly everything pursue On We're the get but maybe not question to iQ counting we're reimbursement of it. incremental we side, going hit first. any try to reimbursement, can on to

I'm going benefit as that we standpoint, contribution a So One also can back, this reimbursement standard get. a no what very our company. that, a incremental the But from it's a really we captured helps think And plan can that that because revenue can iQ ways. is be that come step exists X favorable take can And from be different that going plan come us competitive define maybe today. we've versus implant. is the to revenue DRG in today to the even in mix under that through assumes item built it a a you to conversions. would obvious higher-priced And

are Now to of that's that to not going be going move to that going but because until half, clearly to full us back impact revenue one variables the iQ. is revenue launch biased with half, back we're to help the the

if this to to able solidify yet. married, will, a for matters. is leader going that's one be from fact brand that space. They the ready iQ company are going an in to is to matters This even their a and innovator innovation this if Second surgeon is not standpoint want reputation, you to we be our And a in be an space.

So making linked or you're matter it to to be does decisions on they're whether people when going innovative not. are who

the robotics, ecosystem. system could just that is eventually you just deliver it influenced tell ecosystem, make does robotics that what our ZBEdge be help do robotics the and robotics that will going robotics to And would do. will it. us you. around reputation you data just what is differentiation. should the This So is from brand third to differentiate one ecosystem important our believe customers us. I decisions by truly do tell then We by on data sure it. robotic for not Remember, collection that you itself. The And you

about of that's brand reputation well. just way and impact the So think iQ, the revenue, but differentiation not as I

Operator

question Taylor with Next UBS. from comes Matt

Matt Taylor

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

Suky Upadhyay

Yes, sure.

for So thanks, the Matt, question.

revenue challenges that on the of You're growth. blocks. right. largely of end building XX% ongoing did predicated the And 'XX lack COVID target margin remove our and you the recall, of if was of X by We because

obviously we're we've growth, about. of not which main talking One come as was seeing just been the through one revenue

to balance of to term, the that term efficiency I very this do it's make because in can have grow only against of we're opportunity think we're see business revenue we commercial that in driving long-term still pipeline continue pandemic across that size near right to we in to We're sure post-pandemic and because COVID time to world. largely we against company eventually time world, investment importantly, invest we temporal. going it's want can dependent think we have seeing not over the in at with that the still be expand have do margins. most that sure a but make growth to forward the in the And the we to we mix not for the we level because value longer do going strong the execution

key 'XX. the for margin we expansion in That's services XXXX establishment is beyond in be the I those drivers actually important. near to help planned and centers, leverage would drive a of growth that or regional global Some margin But key talked 'XX. which to that, are large our beyond beachheads implemented to of going then revenue that that say going shared in service in ability term incremental of business expansion can be I about component the

to in get term ERP. through making benefits. play we're Those nature and right, You're actually investments into generally are longer to those

coming those post see would XXXX. benefits in that I So

at and to cost manufacturing In very chain footprint, at through to overall to continue addition, and looking our is input procurement. rises continue also we our combat optimize always look but supply rationalize opportunities aggressive to

revenue to driver I think are but no revenue near those term. meaningful of doubt absence to as term the long some in the in going So mid over levers would and key the of growth of the expansion be the growth, is margin

Operator

Stifel. from next Rick comes Wise Our question with

Rick Wise

How you're mean, reflecting to Again, there's of I going on back in hard But new to question pieces. moving easing sort thinking ask the delayed COVID you headwinds clearly I because you relative the COVID. Just it early million as it's this how the post-COVID unfolds recovery, are start the reality Northeast, dramatically. as now you Maybe recovery how a thinking of and down headlines know to sort are to of are procedure unfold? cases volumes? about the backlog see about

Bryan Hanson

Yes.

give in to actually you from still cases time. as standpoint referenced. long seeing we're sense I'll forecast of into into caught cancellations and because our guidance up concept that the that So we've just a dropping whole are we how are high not get a of too COVID it seen Suky as the built try a this We

I to versus other just seems seeing on in taken there patients. ICU referenced so And why the we're beds reasons, COVID as by remarks, cancellations prepared be up being

throughout lot the different XXXX see are like point, go impact we XXXX. of up valleys, that you're have that the to this the 'XX. peaks That's down going to timing it's then at like a something going variant. it's different will this continue from that we expect we to assumption at back Maybe tells that seeing assuming until that really, and we're be a point us but right given new peak we So the going look come COVID now, and see to

back, aside, rates that in up picking those and get saw and that then just that will, beginning you opportunity into so, valley, on Now X.X% those to was we game. say a if we rates we of That -- XXXX back comes for come us. moving Vitality index peak us QX then we XXXX. was assumption That completely growth down to really that growth see Remember, back set or back never Vitality that that gives different about a it index we're if seeing the QX before an in north. was

would to just that from exciting into going our when There's But us. a it. we pressures. like guidance 'XX COVID staffing it is about question to know for that comes an what built overall that lot no be look environment So an standpoint 'XX and impact is

Rick Wise

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

Bryan Hanson

Yes.

is it's overall, procedures ROSA well. penetration direction there. is overall said I've in is had up, been. The strong really our that primary is the as moving pull-through pipeline knee going So The we as hoped. The before, our as coming in

in us high the for will partial I just application step get because direction. those I'll impacting COVID know, thing. we value because knee back the that we where The position most right partial people a too. definitely it's our moving important one think Partial leave there, was accounts as have knee. more ROSA, have I to it in market subsides think even same and when ability share is obviously procedures unlock in is but very

lot really So hip and robotics. be to a we to partial our combination too. of of are knee accounts have ROSA with able and that to going us, robotic those of bring opportunity to try kind Avenir go important for to the And is is a Hip that really a and application platform then It's to Complete. well, them using move

the the both I well those, as of everybody Complete the directly And Avenir One first now, of fast-growth anterior is as approach. hip, launched goes application that we subcategories think ROSA knows growth at of fastest direct that submarket.

we're Now will later another the going application in this have approach. also hip to that we launch that year, after go posterior

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

we those are that we I'll talk about of have it So excited just And that the we're so about again. about. things it, a talked few

us And should we XX% to been remove that will nascent as that year all Persona new cementless, to kinds It's headroom us. That cementless but that. with for coming different of has door factor. coming open cementless for has real a later this in opportunity. be We're able a forward. below associated have factor They move stops We all form that penetration form well. have a

to a So about for lot sure. be excited

As continue in to before, expect strong, Vitality we move direction. right I is the and pipeline the referenced to index our

Operator

from comes question with Pasquale next Guggenheim. Our Chris

Chris Pasquale

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

Suky Upadhyay

Yes. Good question.

revenue roughly impact So we top the do about impact, large see, year-over-year. trauma to point, against the your overall, line and first recon same or being joints

based again, quarter. said, headwind, by be tailwind where different will we material impact, The So no on I today. stand

of So XXXX. you QX really didn't have QX impact in any to

which so impact year, the first 'XX. compared And a of 'XX, you've therefore, this half non-VBP in half to is first of got being pricing

that acute to on So more is year-over-year pressure going be comparison. the

impact QX. quarter but The As contraction, big some you to the material. mostly in not half, level the move around had in a second modest third impact you inventory of really was

of of about in the provided we growth quarter. commentary, worth you our that fourth it basis XXX numbers the all about to earlier in think you If some today was roughly points

won't that's feel one it cross more impact to 'XX. us a tailwind XXXX. that the for because you're over be year, that This to in will So have we where of took biggest in going we time

there's of So again, any there, Chris, way, that confusing. a lot it's clarify. I in numbers can help if sorry,

Bryan Hanson

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

Chris Pasquale

the to alongside really cementless opportunity. That robotics. is up wanted then, This was just on Bryan, I helpful. follow And

driver you Persona about that potential the off a than years next ago allow you the gotten have One at is mix a were slower version What really hip to it's and knee that you for the didn't businesses. were much thought like fix prior of we much you a it it would guys that? does how And few significant there start across traction highlighting this as was as And to here things cementless gain time. hoping? seems

Bryan Hanson

surgeons mix. the don't comfortable Yes, But already that look when want remember, feel talking in design will. going connection. you it really a we've changed form is felt be safety go-forward the that, they -- with that's if design already on the with between a about surgeons it, And make in we sure actually. -- And we get that, in good you want to again, design That's lot of that We kind a connection, have we the that why contact reason And you're out talking get that changed to bone. that a have factor factor. they you of more and there of the that implant as coming, it we at of the confident to was as that when the result the basis. the and cementless, we the confidence form

to we rather form going I'm And what very sell much it the now, that I'd factor right design, I not factor more opportunities in one product. to particular as form that future we're frustrated and when with be the as I cementless the And at they're year. probably that to that confidence looking increase able concert so is know I have we growth get robotics, XX% again, and at look not feel time do coming. by we And say penetration the over launching of and be people had feel much be in fact launch it's our think to inability in this it's to for. around that So that the later confident about have

Operator

with comes question Shagun next from RBC. Our Singh

Shagun Singh

if January even since I you trends was into and to especially be. XX, early about February, though it occurred appears exiting January can variations talk there have regional to continue wondering around the U.S. they and were just

and You the call will also cancellations COVID seeing did that pressures throughout year. continue more out

your guidance conservative. and out So color I'm just you trying can figure if or if to realistic is provide more

Suky Upadhyay

Shagun. is for the Thanks Yes, Suky. question. This

flattish, good said, a we provided, about be tailwind color selling basis pretty So expect point as we days. includes to on I QX, that we think, where but it from XXX

really definitely to we saw rates it's down So February. December into on what very an And see underlying continue year-over-year. coming more basis, high exiting the of beginning pressure January in XXXX. cancellation part we was than

So that we support to still think residual first which, markets people other quarter driving continues as to maybe effect some that factors linked far plateauing, But Omicron. that in note think so a it's cases -- shortages, characterizing part, Omicron there there what that staffing are to are seen staffing is are are I we've in on shortages. important some about. talked color I And that to starting while

staffing you're which for overall one-for-one mean because in Omicron does going us. we a see to decrease just So a see not in a headwind shortages, continues be cases to reduction

we beginning that we're to far in January seeing quarter of call so first everything support that the continues provided. and very story, short So February

Suky Upadhyay

points time achieve benefit cost think that for in I especially basis the I'm given the with can the And cadence do then you the to question got you touched How And about just if you spin. it. from line the allocations term? have curious there help the especially that, margins. near to other haven't you respect with on operating us XXX higher it. context on one corporate should Maybe we

Suky Upadhyay

Sure.

on margin revenue. very to is correlated So really and -- margin the it's our case, linked

the so especially second first seeing half of quarter. the year will more year, of And as the half said, be pressure the of pressured the revenue in versus in we the first because we're

impact pressured margins atypical expect XXXX the COVID. to in be not same most saw we cadence. would first the in will and in from regarding we the first that follow so half, more quarter It seasonality And of acutely what

So that's XXX quickly the down to manifest we how going most rest think basis of operating we see as about. recovery the then year the with here relatively recovery that in cadence the QX margin, through to spin, talked Relative points you're acute again, in see start revenue that we XXXX. of as I move to and

We far. margins costs continue stranded some and are started see we corporate of going so to operating through attack have fight already that's to those how our But to that. way

Operator

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

Matt Miksic

EMEA that leave flushing worth question if at in and could just I the was knees I'll would a one if Just I you one have it strength that. question thought on minute, out be just

Bryan Hanson

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

Operator

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

Keri Mattox

thank Yes. No, you.

can was I question. just it here in last think jump I the out. and close

for So everybody, thank you, joining.

to I that questions Day the to good as webcast day. XX have on available. to a join this Also, everyone, answered, many reminder and front, team. IR to know if didn't have the asked are reach you If And our questions that out the Investor ZimVie out joining free to we're course, website. page at just or free and a always the materials but IR any speaking on you you feel tomorrow of that Information of and reach please week, Time. get to please today, feel of you, we're have Thank team the beginning today, well. IR you is a.m. for that posted Eastern

Operator

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

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Zimmer Biomet (ZBH) 7 Feb 222021 Q4 Earnings call transcript