ZBH - Earnings call transcript Q2 2022 | Zimmer Biomet Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet Second Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, August 2nd, 2022.

Following today's presentation, there will be a question-and-answer session. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Keri Mattox, Senior Vice President, Senior Vice President, Chief Communications and Administration Officer. ahead. go Please

Keri Mattox

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

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

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

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

Bryan Hanson

morning all got this All Keri, Thanks, and us thanks call. three morning. the you right, for joining to this sections for great. call for We've of the

a is performance in revise certainly talking combination to I'll strong about future, I'll performance pretty us primary execution about first that's that's in minutes spend an recovery full-year. pressures, expectations also our the a actually the about face importantly a significant either especially macro to And I guidance Innovation, briefly Suky, make or topic. and our our for talk the our and enabled few XXXX upon how that. today, want other more of touch to you by QX, think The updates contributor section provide then on overall and FX. Suky sure switch some section, but and to we'll will and QX of of there. for things up and interesting performance it the the perspective, details call, section, questions on ZB around even from talk second have again out COVID we our And favorite I'll have, any probably so any more to obviously close might QX for And our addressing we

by exactly in very So, the ahead let's get I saying despite go proud I'll I'm started again speaks right above very and that's QX, just would solid as, muscle we another and some expectations. our the the section managing sector, start I going of fact quarter with challenges through universal and memory actually as and real effectively now. I'm challenging that think And times, to delivered this what define to internal that with was it this that our associated define team have team's, what

pleased bit that a of at end the of from From and slowdown QX team particularly standpoint, the joints, see everywhere, momentum continue all QX, saw strong solid again was a continue our and and other to board the really in large our area. in memory they different will the The the segments. concerns in performance in where some that in than The pace see large and It provide June, S.E.T. business volume strong regions and was The across here through for Suky really April through that and are another May, happened pressure offset where the recovery, time, traction but world over procedure then muscle detail but strong this solid of much a we hips. focused recovery get trough supply challenging depending for just show it's there, on execution we our a were reason was our actually quarter COVID we is that. outside has has you all which to the more in to momentum great really it in a quarter, the pretty With was overachievement of a it that minute. of knees in category, July. continued momentum effectively, I'm it our manage to in also saw joints but OUS. in saw we we that know to areas out strong U.S., that anticipated expected sure, was this, actually innovation our and our did in in and for team excited and primary inside businesses across by to and QX. And carried stronger the

get pressures for of pretty a very year. QX, I they're all going us inflationary beyond. clear the currency business us, to and us back-half continue actually, But of pressure challenge, our potentially hurt are momentum all through those And on right just us in 'XX, think far with are this it's now. real, to that supply of did, these challenges foreign into is the

efficiency. And a is part operating our debuted customers. workflow new result clinical another from element that, ROSA focuses is momentum this to quarter, within our Separate and momentum that, is increasing on important interest now. actually capacity And done. of COVID of strong. that's innovation highlight broader the ROSA And least just OR QX, in focused the confidence optimizing the in both as of big this and a our robotics continuing smart of data system And product our guidance and say our with for and procedure profile extremely move gotten knee so our on innovation, raising overall that as important and prepared and in can, deliver as customer much in a at XXXX, strategy is quickly have. possible. we're and suite into launch really we And benefits, clearly hip business AI as executing, delighting we full Suite the there use per getting early as indication or constraints this the surgical ZBEdge strength. underlying really has continued gaining collection part big a And customers from ZBEdge that's possibly and Omni launch margin, of days, and out our our really in better. positive, It's ecosystem, our I'd today, in be technology collecting I right eye still around an these that early that because data innovations that and as limited feedback for it the XXXX product experience, and solid integration Persona iQ a while it's new revenue, team placement and our And very is an our traction establishing toward in pipeline our we on full-year and focus. possibilities Our recovery, we're working, share. and think all and are remains should earnings is our patient perspective, with getting of the customers And and we

portfolio, our to addition existing new product just our as of In exciting. the product pipeline is strength

by current soon-to-be-launched product personalized of we shoulder. cementless provide the will a launches S.E.T. into very XXXX. S.E.T. feedback company. culture. more Persona preferred accelerate well team compliment made from our transformation. a on I which especially and a trusted more a the be was place form is it QX, factor, focused particularly But our ZB streamlining global and continuing a And customizable significant makes about which planned for our two additional factor to our this patient form additional And our should certification Identity making across for pillars and much our based we've launch. ZB's U.S. also Zimmer best also business We've on members, to was knee, work, as our more second-half Work, our cementless Place get for businesses, to XXXX, momentum certified of in We're portfolios. knee strategic for partner, is compelling. Great shoulder survey system in the direct on the conversions, operating reshape optimize as and that are have our model. this feel in even really I'm We authority In progress excited workplace modernizing In shoulder and as going The movement think to for Biomet

we're governance as new taking a also function for established area in refining also actions and but We commitments driving this social, environmental, the our well. and strategy, and

members, our we responsibility We almost an truly, but we're also and and every investors. have getting important our as see believe seen across element as critically significant We of sure, this something company, team for a our just is to ESG, important started. already customers, improvements

further area. front You'll make us we this and progress, on as enhance be to as the hearing continue from in more our ESG reporting we

for real even couple stay summary, difference. that the the team call any ZB look close though of recovery; is into for confident that, deeper the headwinds feel making is managing, need I'm a execution and our dive And in things strategy a the recovery in to in to over to into ability last We'll of the going. to Suky proven continues, again, turn team's COVID So, I our about But and our to path year. and are fluid. expectations shift revised the headwinds are the I'm the navigate there years our going that do is where excited at with a macro forward, have QX,

Okay, Suky?

Suky Upadhyay

morning, by Overall, recovery markets. good and procedures elective expected a and Thanks, execution driven everyone. quarter, than faster we good across had of strong most

a and disruptions, quarter full-year the about full-year quarter be period second commentary quarter our a we otherwise and currency same X% reported, I'll to how heightened $X.XXX and will sales XXXX, results raise the continuing While currency, With or noted, that, adjusted chain and to to XXXX. our outlook. headwinds second EPS operations compares how currency foreign basis. into our that Unless confidence and related X% of updated up translates us Net turn our inflation, my on statements and gives continue And in on performance in billion, my second quarter face basis. a guidance. be on will constant the were financial second revenue to challenges constant to the supply it

we comp procedures as first in sales U.S. with as in grew especially and moderation volume elective driven This moved As cases the of strong in strong declines was into rapid emerging versus in uptake XXXX. lower knee execution recovery the the in partially hips. subsided category. lighter from by S.E.T. sales Bryan grew extended EMEA June. and by especially recovery developed most May, growth strong procedure X.X% EMEA quarter COVID across returned XX.X% and second April procedural Other offset quarter, experienced with driven markets in recovery mentioned, and volume and APAC. by International a and markets, generally across

and Asia-Pacific, with as anticipated. than in better overall, expectations, line China with largely Japan grew growing projected, performing

grew knee ROSA our procedure across business penetration by up with for global international XX.X%. to Revision with knees category regions, performance, with easy Global and knee along comparisons strong Persona knees XX.X%, X.X%, in our These OUS, the system, U.S. and Turning results driven continued Persona traction especially and were up pull-through. recovery most knees U.S.,

grew While by procedure strong X.X% U.S. international driven recovery. hips up X.X% OUS up in hips comparisons tandem easier with and with XX.X%, hips international

And therapies X.X% reimbursement to across system is in and Sports, was approach. expected complete VBP and key XXXX, Arcos GX category. to as and focused a Avenir traction including hip comp expected impacted on continued saw product. pressure which anterior in to increased continue also well ROSA by a our our lastly, pull-through in shift trauma products implementation the due and the solid as hip tough revision surgical due for see direct primary restorative we Gel-One for our trauma hip category in extremities, pressure We

our deliver of to across key medicine, focus areas continued we CMFT, sports extremities. category, the and Within performance upper strong

capital quarter. upfront our other the expected Finally, comps sales mix versus sales declined of to tough placement by category related higher driven and X.X% in ROSA lower a

our margins. lower $X.XX diluted earnings diluted offset the reported GAAP of Adjusted with the stake. we $X.XX second revenue retained to increase XX.X%, due better IPR&D erosion. offset share lower per an Higher was gross in in of of of primarily an ZimVie our to than restructuring compared pricing more mix 'XX. $X.XX on the tandem in XXXX. and $X.XX quarter earnings represented from of and sales ahead in per of lower more per margin Higher to and quarter the On GAAP earnings to market adjusted second expectation slightly quarter IPR&D mark share Moving charges gross diluted share basis, year-over-year lower P&L, losses than

through we year. favorability as temper move note, observed the of expect to quarter second we a As heightened rest inflation the our

to said, to pressure in now be gross basis project margin full-year about previous down into from when XXX gross basis full-year about compared continue estimate XXXX increasing inflation And we And we We inflationary XX pull-through XXXX to slightly 'XX. as headwind our points XX versus expect of margin. points. to of will

expenses operating year IPR&D primarily the referenced the prior $XXX to Lower earlier. adjusted XXXX than Our charges were million. due

Our adjusted for XX%, up year. operating was margin quarter prior from the the

to quarter of VBP Operating As previously be with in expect the programs. quarter. of the ongoing flows for were line with to and about and versus million. and about partial And supply $XXX second $XXX cash chain tax offset due operating Despite down The in noted, quarter cash the flow in and programs year. million was adjusted of headwinds, We year first-half these totaled the margins $XXX by with million. full-year and of $XXX the improved million ended free drive expectations. ongoing equivalent versus XX.X% efficiency our the debt China the paid pressured will rate cash prior our cash inflation, second-half margins realization headwind, those efficiency we

ongoing this anticipated. lesser improving Supply inflationary and headwind continue a raising to levels 'XX expected through falls FX guidance our Also, I'll financial year. customer be we a to flow Constant the now and the EPS. for the of XX% And outlook X% and an is foreign full EPS stabilized our Against with Our headwind XXXX. is but growth previously be range chain to tandem the currency reductions previous impact greater basis XX a backdrop, This for headwind in expected versus projection to guidance we based applies debt, financial of X% range moving key means walk be basis through COVID financial our XXXX, than revenue points. of reported of to through that X% are for financial balance the with full-year XXX in on versus revenue about XXX positive FX-related will current in sheet growth of expected following pressures negative pressures that currency will updated assume the foreign now to at basis XXXX, flexibility. with strategic points. guidance. revenue to point currency continue updated strengthen to versus stocking headwind And X% assumptions. our our performance in $XXX

currency. we XX.XX% operating modestly interest $XXX We flow $X.XX. of now diluted XX to higher, interest non-operating million cash earlier anticipated million. foreign the $XXX to XX% to net share to $XXX basis higher Adjusted now XX.X%. year margin will and are raising free And by per is tax lastly, adjusted at to And expected million points to this expense to improve rate and be rates be than expense XX.XX%. due expected the higher Adjusted in of earnings to remains is guidance range range to $X.XX the

see would revenue QX the in dollars of We to which QX. than in suggest back-half seasonality in stronger year, expect the typical

headwinds, In than revenue as be Operating expected summary, Additionally, to we part fourth China a quarter related navigating QX in are fourth expect to and tend VBP well. the and growth, QX there headwinds revenue. comp growth our due those are challenges XXXX. is we similar of to easier the follow observed macro in margins executing challenges to quarter higher while team

turn of back our recovery, business Keri. 'XX underlying the our the that, We fundamentals. I'll over in guidance confidence With execution, to raising call due COVID than are financial better expected and to our strength ZB's

Keri Mattox

Suky. Thanks,

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

Operator

We Rick will Instructions] [Operator with Stifel. with begin Wise

Rick Wise

second-half? understand you're about off April-May and a you your second-half do talked the about of strengthening, morning, softening with Bryan, Good I'll better is start Maybe What Bryan. survey of the view. of Help second-half second maybe you've were any most perspectives. understand the about happening, seeing surgeons the sort everybody. what who and June, We Hi, commentary you for of orthopedic surveyed. for us the some maybe where outlook we how Suky. think continuing. about couple exuberant it? in Hi, the quarter, from but cautious into reconcile dialed the did expectations two XX a about we their points recently doctor who ebullient, confused I'm volume those of

Bryan Hanson

for question, the thanks Yes, Rick.

of business continue. don't want we real, momentum But had is business second-half -- we I is third we're just it could quarter. see believe least the could saying that we you think to our to would through you a not a what if We July, what through tell news customers to that was continue. the or procedures. to we're of that positive a experienced view? that's the That's as and experiencing. of the as either, we what momentum could what more, June, by lot course, is cancellations our know outside of COVID having imagine. strong just The that not and will we that, talk procedure. I of believe quarter, testing we So, we most believe then member continue but And staff a that experienced as carry But that in continue. good positive I assume to more of about with is And one, Suky, driven we're and, those for the shift, you COVID, or really they at COVID going that result fewer would procedures, and speak quarter, carrying is, on well, patient the underlying Until when going testing and what for to

Suky Upadhyay

so, to Yes, Rick. you today. be morning, good with Good

So, you X% in made that. tougher we've get really the in inside ex-FX if first-half, second-half comps about the guidance saw versus at is the what did look you got would three in revenue. assumptions midpoint operational you've for you key we our at first-half. And second-half implied One, the underpins what that growth in than

a see year, about really we second-half so if But Two, our in taking And other on elective quarter just about, for have to selling just continues see Bryan just due COVID that. translates with as as well, those we're or we're markets the some the you view with into the quarter. comps. We tougher prudent to And did less improvement second of to quarter especially we procedures in we step second that in quarter. as think fourth given index accounted third, assuming talked the it COVID posted. the a third especially You day softening that EMEA one procedures. cancellations of so we've that growth the exited up

see through Now, I way our if the say range. that continue quarter us top to the would would that of we end the third take don't all pressure likely

of we the we've really said, those going, building ability growth our our about some really feel in to as launches, big recent where Bryan on the rate. But execute our the that is are pipeline second-half assumed product good second-half. So, the execution feeling of our blocks so confident about team, and

Rick Wise

being calls I for maybe That's thanks -- as this about time just many follow-on than always like leaving at And efficiency that appreciating I'm major about, is hearing of this Suky, to factors internal year. this would the I about of year feeling as you're impact your of the on like encouraged for the that maybe It to talking favorite these more products are this know of your setup of question a thoughts, this some great, kind execution, have, there well. some uncertainties programs. follow-up setup 'XX, might that. launching, for next the new positive Talk just and improved a seem

Suky Upadhyay

that's encouraged, the you as feeling I'm so, outlook. we're Yes, feeling encouraged well, because

year and to obviously, And at play of market normal about guidance, normalized to lot As inside the dynamics, margins But operational a we for would And we market based of floor into all that been still very we're we in we've efficiencies has can we're seeing of in on can that year, there's where planned more and believe not team expand a next as got going things XXXX. this we're pressures. get offset relative to 'XX. X%. headwinds the we position revenue for we -- these expect we out we into in inflationary a successful 'XX, making believe that, think

margin feel into line if expand these it confident albeit but still be type you that a margins growth next year, this have pressures can as won't great we inflationary we Now, we have top would profile year. didn't as with that of expansion

Bryan Hanson

execution comment the The I I'd maybe that make launched is additional real. the real. we And just in is is the very that very that and Yes, have yes, haven't would momentum The of on even I team business we yet. that. product business agree, the pipeline think strong,

those to least together clearly have time. acquisition a potentially looking we bolster over for stop, a acquisitions And that's an going all at we're options acquisitions, that more not to where that disappointed standpoint. that in for things coming be right. little diversifying flexibility, going very deliver add us said, opens growth rate. We rate normal I to X% So, didn't be market, growth from a if we're and WAMGR accretive And to up would cash

Rick Wise

incredibly helpful. Thank That's you.

Bryan Hanson

Sure.

Keri Mattox

on Jake, go Rick. Thanks, question. can next the to we

Operator

We will hear from Pito Bank. with Deutsche Chickering

Pito Chickering

morning, good questions. for my taking Thanks guys. Hey,

your guidance margin how updated us the year? any you can leverage? increase FX the revenue that's And have the views side, then, pressures on for in stronger guidance XXXX for offset around by and your at of you positive the margin Looking your mix and understand inflationary growth price help in headwinds,

Suky Upadhyay

Yes, Suky. is this hey, Pito,

with start margin the operating guide. I'll So,

second-half down versus do step of gross that, margin the in inside we first-half. So, expect to the

we we XX is from basis XXXX. margin margin call. the where But originally pressure headwinds think anticipated, We to about guide. inflationary this second new points it's gross quarter to due greater and operating that's now the closer We basis points. for expectations and our of included pressures, first completed now that into our in are XXX incremental our XX operating banked what see And that's or we've guide that And rest year. inflationary in to experiencing quarter in again, increased landing of margin

that Now, stable where pressures the exited think would is as of relatively inside stay assumption to inflationary second we about I say, of the that year. rest our quarter we the

take you headwind. you a headwind, expect significant operating If up that EPS FX XXX now XXX across to margin bigger been points but seeing as basis would of a has with sector, from of perhaps the you're flow-through, basis headwind, taking our number points

And by EPS guide while only it increasing think is so, the our basis we're or way points, the and basis midpoint our if you growth our up about by reported ex-FX at going about to our XX growth raise, think XXX operational points. is

that about take XX would an you so, that that points you get through nickel. you And in that flow to performance. to basis about And translates if QX million a if including incremental $XX revenue,

big And building around so, $X.XX the we there. raise that helps the put support helps in blocks just or give that

hopefully that might any to have. your to you happy take So, but follow-ons questions, gets

Pito Chickering

flow just assuming that us want XXXX this hit would through that with of year, the this a refresh P&L FX you're Yes, can in just of the XXXX? you I comps just follow-up quick here how out next X% sort sort commentary, seeing, around

Suky Upadhyay

of inclusive so have assuming FX and income losses. flowing is to plus through that's any we're hedges Yes, we And natural now, gains XX%. at any right net about

for vary XX%. of a mix time foreign we'll And number of But the of best say our variables time, timing updated. regional based it gains as XX% on timing can could and changes, vary is profit, can now, I that because over Now, estimate changes, that currency vary right losses. you could it of FX over because of vary of would keep

Pito Chickering

Great, thanks so much.

Keri Mattox

go the Jake, next Thanks, can Pito. question, please? we to

Operator

Biegelsen now Wells Larry with Fargo. move will We to

Larry Biegelsen

Good here. I the on confirm, Bryan international wanted there just catch-up And and for morning. and Suky, want there? knees. there -- one-time, congratulations question, hips was nothing strong really nice a or confirm other, And or taking maybe Thanks to outlook quarter was agreement, for more then I was in taking for kind of to no just color ROSA and what's two new what the the outlook happen? businesses? question. the accelerate it lease on those S.E.T. some does of comments, When Is that the shoulder just given some just rentals other, your there? for Thanks S.E.T.? really

Bryan Hanson

Larry. thanks, and Sure,

some strong tell for we comps, would that There than a together already So, somehow one-time the OUS. other quarter event that the you nothing that what OUS. was is that It skewed allowed came obviously, easy and just there we factors was the had I quarter. no buoyed quarter referenced that that was very

So, that's maybe or answer. other first Ivan, you about S.E.T., the as Yes, talk hit Suky, could I'll and can then you well.

everybody. of to the because just of just S.E.T., So, S.E.T. kind step I side, often probably it's talk good reorient take on think that a back we don't about and subcategories the

businesses six S.E.T. underneath have We

expected annualize Trauma. through pressure And continue we U.S., clear, to mid-single our Asia-Pacific then our and Asia-Pacific would strong Med, Upper but Foot saw Ankle, business, We then saw we very QX. But three Craniomaxillofacial this it Restorative going will and in Thoracic and Restorative Therapies. had okay. a say, Trauma, Extremities, our Suky just in the I is CMFT, reimbursement into area, as change quarter, which and of because what's focus already in have Sports about a to mentioned, in the and the And quarter, be Extremities Sports in expect pressure performance Medicine that Therapies. offset and comp sustainable, itself out, to in very CMFT, due, Sports, in in area, on Extremities, we double and growing QX, in pressure important by in even continue, with And that is growing digits is the that's accelerate think we to that digits tough pretty from both mid-XXXX, then Upper QX, that's reverse This that Gel-One. and CMFT was through continue and Upper with

you momentum could So, pressured that just to we're about And pretty some our S.E.T. speak the net-net, of continue in focus stay give feel innovation some to see you would areas. confident we of that QX. things to the then and to And Ivan, in I confidence going areas? again, and those expect maybe, QX, improve in

Ivan Tornos

thanks, And Larry. Thanks, Sure. Bryan.

So, growth, answer, is and that this product. device you one more think mentioned Larry, is shoulder, and I the that is whether than driving not one the the case, it's that's

familiar products going Nano as on Sports that Shoulder big neuro, Planner plays. new you're years yet, launched of We a Med Bryan and about I of is that has need fact business launch guides. the is a have. above of technology. say the Stemless inorganic growth a very biggest then that six But it be tell has I We capital last continues again of talking go personalized on transformational. beyond product I spend be an inlay ago, quickly, really to on. accuracy, you, surgeon, Sports happened a know that about consumable on XX five can doing about be solution. I shoulder to is acquisition got different The talking to a launch both the on hasn't as to and spacing-centric products guy, It Relign, continue integrating about And as to will ago. ability of platform; months, as going organic workflow, CMFT, I we be interface launch, simple It and our But are surgical about and feedback in truly investments that launched. thoracic the and and get which great reconstruction. years, launch that three only it's you're the portfolio as months today be was gets, continues that and the business. hour lastly the to today, we what with it. double-digit in momentum. And I about portfolio we're many think One You is Identity seven referenced, the new this the everything also Med, have in to combination procedures around control. launched, of all XX integration we with filled an shoulders, sort products compelling and done in getting on feedback and that XX% and just can to launched the And ankles, are We is in is and all-in-one that to using making did XX to or that still next going around the we're side. the the lot in great is our the with Signature surgeon arthroscopic or the to

categories So, incentive our growing it's and not really is say comes execution category. the best when least really then, S.E.T. will and top the one commercial specialization, about product, the of are to three one capabilities, Larry. it's plan, excited got, on in globally. it momentum that, our not so, that I class focus, strongly contracting And At we the

Bryan Hanson

other? Suky, speak Great, thanks, Ivan. quickly And to maybe, just

Suky Upadhyay

on that One other there, the anything had material hip, and really a we questions in saw say there. and for Larry. in knee But quarter. so We two anything was see well, Yes, meaningful -- to would relative driven ROSA; was pretty continue was it the it's on relative mix quarter didn't tenders installments then very I on or clean on anything. primarily both timing be straightforward say would very in to or I by strong. total. of recon the And in down, other, to shifts It

As of within sales. year-over-year surgical were a to key those saw so we And again, level the our the -- uptick the did a this we more business, placements was the continued was utilization drivers little how the quarter. year, pressure and But very two saw, year that happy see -- placements or with modest versus than placements capital prior we're absolute the increases in dollars the the of declines quarter in seeing. just that than where we a mix we're this of then company, more in sales ROSA bit, different other

Larry Biegelsen

so right, All much, thanks guys.

Suky Upadhyay

Yes.

Keri Mattox

can we question Thanks, to Larry. Jake, please? in on go the next queue, the

Operator

now will from Jennings We with Cowen. hear Josh

Josh Jennings

doing robotics, the sure we how about I'm a implant combination just that here, for terms wins? what think to and competitive driving Hi, Robotics from good of -- that have the that it's And questions. vein, robotic lens wanted any in Do system, ROSA decision-making customers? shifting and guys think evolution ROSA commercialized. is taking in driving implant the decisions have in brand XXXX, marketplace to all ask big same systems competitive surgeon evolve is back what now you so provided four the at based or on anything what about you to point, just is system your and that far the still the is the -- robotics of are Zimmer probably you joints, software making an surgeons should in of think in morning. robotic but Bryan, Thanks what that's edge updates implemented one follow-up? one by

Bryan Hanson

will technology Josh, the implant the of that I robotics, could implant. way the and it Yes, could implant say been surrounds be be the could be the with for to question. a implant. be that bring and you the the it's That mymobility, in entire surgeon, thanks, it ecosystem of our always surrounds the value would combination that that concert always

cleaner been I our combination in the are look together those So, it's had in two When past. at things those market a always performances, now a of things. coming than we've

has we've And business had been masked some so, external strength as a by the things. underlying

As those you're see of am. begin performance to But much is Ivan it come than the obviously, going closer this even he's I with move, here, out. I said, real to clouds that to think

what you're could maybe seeing out you to So, speak there?

Ivan Tornos

absolutely. Yes,

is physician as number So, the lot the parts you we in decision-makers of role platforms, and Josh, pre-op and different Persona on what fully is it well. with provider that partnership Persona, the Josh, software, is obviously IQ the planning the tell the and those of the to question at point. target with obviously very, lot data that one you some ROSA ROSA pieces. or product; use it Apple integrated can fact is a a with stuff, Relative consolidates world, unique the data points, OrthoIntel the some of number that the and part clearly I But not makes of I'll important, very an with and concur also is one, ROSA, decision-maker. payer one Bryan, mymobility It's ecosystem with our connectivity

of So, is decision-makers one our integrated an solution come I way. driving think product than just those it's that more to

you think out seeing the the ROSA. I other efficiency, play, and payers, the than outcomes those that and like like our -- ROSA; we're seeing outcomes. the reason why physicians why or preplanning for they they matter, If the the momentum there they technology are why ask choosing at are go they're is And that easier, fact the with great

answers that question. hopefully, So, your

Josh Jennings

Thank any see or -- product taking if about -- catalyze anchor that at some questions. could you're line product growth lines the your you. just maybe drop different working Bryan, to pruning could if for you units? And any opportunity for line maybe there's Thanks through obsolescence even stronger ask wanted product help and you business some

Bryan Hanson

time is to SKUs it's there the with you a to Zimmer cover had tanked interesting, one reduces been to Yes, be quiet when at revenue. question. SKUs, And happens because risk orthopedics inefficiencies the lines are trying going is that, in because it's dramatic. And lot to first of focus in Biomet, dramatic you we just just an a We about X that what years, also fact about do reduce it. made focus are on over to have the product normally multiple past then earnings talking is in call done have started have going field. continue we the are decreases we if doing we when mistake But stock it and I it. you the there because What and I great on that associated

really we trying on focus brands, are incentive and to those focus main an from rationalize important brands not standpoint categories the teams as our they push are to just on us. to So,

been quietly last but have over years. So, again effectively that very we very X.X the doing

Josh Jennings

Great, thank you.

Bryan Hanson

Sure.

Keri Mattox

we the next queue. Thanks, in question Josh. Jake, the to if can go

Operator

Raymond James. Our next question will come from Jayson Bedford with

Jayson Bedford

congrats products. on the Good morning and

ones, Rick's reference was just in expansion earlier, margin was 'XX. both? mentioned margin, you that Suky, or to quick to couple in I gross unclear a response question in margin, op little a Just

Suky Upadhyay

Good more expansion. operating Yes, about margin great question. Jayson, clarification. It's really

I capitalize basis XXX we XX is put you As pressure gross just want got next all this into going said against we've said, quite year, you've of know don't We this into got year. is point Having year-over-year some that about that's to year-over-year. going working to a margin think team exactly to I to headwind into get to that, those. help making gross offset to that end. which points starting progress the things as because year margin the where excited some happened inflationary going is

We around are things some is which doing really good pricing profile. our improving

to going a market. that out very the get with year. chain supply to market sorted expect we site what see our some backdrop quarter go-to-market and of manufacturing. Really this packaging those continue and in strategic models teams and in look and dynamic year into chain play for more of continue and SG&A, in And again to of optimization supply this happy and levers are the commercial at relative cost about to materials logistics Even challenges in through to beyond rest we are improvements world. down product commercial volatile to very across market the in trying next a then models in the that all saw and the You tactical doing

we in lower And of margin business those services lines. in as more how We rethink those, model created we that and can markets activities the instance, well market ripe have that lower is margin number for Europe operating look the putting already go we implemented categories. to then, as And during our to where a global business restructure by for into drive we think we of leverage. pandemic continue further service to efficiencies

path operating margin inflationary ongoing really that that feel margin because we of we a clear these see gross to headwinds 'XX. So, expansion into good despite pressures

on it. where little bit So, hope and that color clarification more a expect see gives to you

Jayson Bedford

Yes, helpful. it's very

follow-up. Just as of a bit unrelated

thought somewhat issues. refreshing patient that In I of staffing terms you about didn't was backlog, it talk hospital

Is posing reluctance hurdle it backlog. you biggest my be come it hospital patient is unleashing in? to or still is economic of COVID is that think staffing? the or what it do reasons, Thanks. would kind question So, to Whether

Suky Upadhyay

areas areas second didn't say certain what would through. numbers it's I capabilities, But that to quarter balance. staffing have capacity, down. that I that would a in see backlog good pressure we typically also had of I think some much. did it's bit question. the or see that you continue in where a do believe we we drive the come -- in quarter It's an talk backlog about say I even in COVID Unfortunately, offset multi-factorial. the then either other is

a procedure see very hard of of drive are It's kind we backlog. and thing that pick to there canceling strong stop. predict. to forward have concentrating that know that areas anyways continued We're being seeing I news But So, we probably good of going on. are are seeing building areas growth. that's is the I other the that when kind can is backlog just don't in to offsetting up

seeing being just patient procedure. either member the beds July what so the That's seeing they and what more we're wrong ICU being in capacity ICU not patient the the or and we in. direction and conduct we can't staff COVID June or is that's scheduled of far. procedure are beds The is to in So, wants driving challenge. It in come COVID gets saw

Keri Mattox

we to Jayson. the Jake, go for the next question, the please? queue Thanks can in question

Operator

Yes.

hear from will Kyle We Canaccord. with Rose

Kyle Rose

the and pricing you last the question you some Suky, thank for updates. morning. made about just Great, comments good questions, on taking

over term? we So, pricing opportunities seeing if about that from flex deeper. the are strategically success you potentially mean pricing perspective price a power level wonder guess to you I biggest one pressures near I see the longer in long do when Where think then term? just where I take term, could And and you

Suky Upadhyay

Yes, probably He the this. the turn it thanks doing is day-to-day over actually for head] Ivan. closest question. the [Ph] I on will [cost to in

Ivan Tornos

Yes, absolutely, thanks.

be. not four if to When disappointed years basis basis it what are. XXX end points categories, even XXX normal going in So, I would the be are year, extremely we X points. not That's of business will erosion the I we what tell joined not That's some price I this per was you. are below is would ago, number as price on transformational, stage strategic, We and number the one. day completed a of that journey. what define you three journey me, XXX number success, I'll ask a X% one; three. to we number all two; bad range points basis seeing of what first doing, erosion. Relative Tactical, of are

segmentation, markets, a about customers, lot differently price thinking stuff. price of is done Raising have for products, tactical non-core all done. in of different We non-core being business that raising

get category stage. strategic, about number would that contracting. getting we It's midpoint are in two, are I say success. Stage We probably

hips number in knees and world. position have many different accounts We the one in around

done in leveraging now is to happening. job bring have a We S.E.T. that that good position categories another

truly contracting have to an across solution, -- mind bundling that the are I word ecosystem and we that comes Now that our [indiscernible] we don't ecosystem one but that's care. like the

a We extensions to we get in are to our contracting ASCs. that the strategically will relationships, doing are platforms agreements? we do a learnt thinking in then at we line of chain a and Workai, that engage And terms into things data do group able incorporate getting risk We analytics. like lot product are transformational ton predictive people stage those in of we more and about what Now point, all that is some this of not. are how leverage thinking we

to is going are what a that really after X done. - happens leverage surgery We to X understand months

at at I worst job. doing X% Thanks again not we three So, stages are X. the different would erosion, we And or with our price stage for our are at least say question. not

Kyle Rose

take then and stab, your little hips Thanks a following helpful. of installed just I through you very would bit then in maybe follow-up you. one of just some about on be talk knees positives, That's a and overall and And that utilization seeing percent very base helpful. ROSA, are but will the

Bryan Hanson

at were We you as a strong. strong, I do mix placements little always not the year. provide on sold if are could we category And we those a you given we mean speak. Ivan, But still still other to therefore prior are before. to got but placements from I stab pull-through maybe But the seeing momentum? did the was also are just It off the can Suky momentum I to two things, want, those talk really going ROSA. take it. you've in than referenced think about less strong the the try

Ivan Tornos

team has done you proud I'll the absolutely. sure, the that am tell really work of Yes, I globally.

last the happening placement, a going am countries installment has the But both placements. here done overall or even I Sequentially, number past. had year's in over about with three will what's penetration. sales versus was ROSA solid three QX But years. that are last the But XXXX we in disclose you throw in of over to won't energized talk headwind. on We happen We the next Bryan I QX. now QX won't comps what's I to color, XX that some of grew digit years. XX versus tell the about U.S. I is double more and a

feedback of We when mix an ASC inpatient is continue very comes And of in from all to efficiency. in have the about than an terms nice mentioned installations compelling XX% installations see unit today a the customers unit. I earlier ASC. that it been in in

competitive lead returns are to to installations happening very well. in a has feedback indicator and setting. So, as to migration we space very, great track going About the positive the XX% happen of that that's been what's of competitive number that very closely. obviously standpoint, accounts. in here the given And the into XX% From again,

really we we penetration three game. have indications really, to coming, that innings see So, business would are. I about direction. continue a say in we in really as excited the this It's the And right global years, early think next of I as many are where about

Keri Mattox

can Thanks, next go question to Jake, we Kyle. the please?

Operator

Yes.

from hear Loop Jason with will Wittes we Next Capital.

Jason Wittes

a robots? appreciate in Maybe it inroads? accounts the detail on getting curios questions. are follow-up Or, would usually robot characterize that you ROSA, ROSA, are Or competitive the taking -- on the on ROSA? competitive they how single with the just is you that's using for thanks Hi, multiple a

Ivan Tornos

Yes, It absolutely, really Jason. you. depends. Thank

you We teaching they Mayo, like Surgery Clinic different Hospital you Special a And wide are imagine can Cleveland institutions. of are robotic York New to as for talking in to or HSS, solutions. the in have a do of lot when or range

So, not even systems three to there. it's uncommon see or robotic two

So, comes that when to comes mind to it selection.

used preference. Persona, it surgeons then to look they you high depends. integrate different and does at the that drives because using efficiency. it When It other tend have that towards volume level of you Persona gravitate to savings, depends ROSA As you on a

as or Yes, depends that in in many teaching have institution. volume where an three U.S. So, non-teaching as you do on we examples the of the even robots institution, two globally account. have and the surgeon,

Suky Upadhyay

usually that look And account a the that one it's not Even you that homogenous with strong very not at would even if we it's just surprising in occurs. implants, have, implant.

as typically there You competitive have well. in implants

are suit than follow you going if move likely we have So, you that to robotic into robotics, will one system. more

Jason Wittes

in And the XXXX. do in of ready mean How to you -- you Okay, mentioned, you I the I to out case follow-up price or value proposition up for proportions. I appreciate the like and about working it I think sounds a in be for that on fully patient price are building that's value IQ, premium launch And kind detail. we a know that products. terms of assume terms going hospital? the and the Persona then

Suky Upadhyay

going for is one would opportunities today it just absolutely you to while is It right. of it be be are a premium robotics disposables. It those is You and in sure like priced will see product.

in would see You mobility. my

are to prove we price You obviously uptick very that be value point. I would to in close said could as are as remarks. you cementless able But Ivan, to now the prepared launch in data in maybe right to speak And see my you sprinting that's a proposition to well. why collect out

Ivan Tornos

commit of we on market that technology we it this exercise was than on to Yes, We in date. to this limited we a getting. early was of partnered could ready when technology [Elemar] release. I sure, commercial to X, [Ph] exercise. level this acquired XX when knew launch are not the take that am data clinical or And Jason Canary we with months the We knew depends that a a be XX, are more going

things gap points this with And again, want and gait, is level that of postop Really Elemar we in With proposition all and the track provider, range alignment, getting need of three all resection, far on We get. intraop cutting, validation speed of terms points, value happens value millions. physician. balancing, from the are what data terms in I to for anything stages. that of what motion, the of understand Elemar, things. so we the what talking And is millions the had data happens are patient, of true one those kind that am we to proposition. of Number on the in

towards How questions -- part make once do The launch how What's the pathway efficient. do change a sites How the is second company; do want how really we activating data do around three smart we is want privacy faster not? do number smart don't we with what then this speed? and we at knee company. surgeons? we product, really just And be a We what's to a deal next? to solutions be

So, we hip. into pathway to have a got get

we are When a standpoint. both going needs; a getting portfolio of from got end, cemented platform. to we that data that there is get understand do less have And into what a is to pathway We to shoulder. cement lot are different to and understand

I all in the ahead. to commit But are for I of am roadmap going track you launch. not So, data terms we gathering the and date to would a on tell

Jason Wittes

that's you, helpful. thank -- maybe And

mean to quick implants, implant cost. focused maybe these Just question AI conceptually been technologies, the market Is here. these market technologies? on ready traditionally one for the pay I very planning has up

think for to sort Do technologies? Do they is are respective? of So, are bit they on Has shift. take you the a of of receptive? new these receptive paying these this market you premiums XXXX a been types

Bryan Hanson

answer ways. in couple I'll a

play. general, wasn't I was would that data at market I in long ROSA, think robotics to assumption an suggest look look first ago would the I that look would orthopedics it ready. pay a that that in And premium the points robotics at just is I that bring there not at

are that's become standard changing robotics rapidly. we of I think at care finding would really believe I point. some very do a

stool. it's will really and that I people the for. the is be the do believe leg data result thing. same of will that capability This a pay think and that desire as informatics of I something next collection the

We have to prove it.

We the always even not don't the day, I surgeons, why," They'll occurs have data. and data data, happy, good why. question. do fantastic. of care surgeons, procedure then that insights from change Once as for patient, Remember, the that XX%, it to predict there's with to that, there's able create that, there's ahead a in the guidance give of not in I best and a surgeons large the and a why we're get And it. looked of confident are when is collect to we're pretty know of as neighborhood data really to they percentage no good patients, a result talk had somewhere and that in that, things still we'll value knee say, of the That know either, "Hey, we happy you the but collecting patient. for the that's future X-ray doing we whatever the reason. care really predict be time lake, And can not then I'm don't that's that surgery create and patient change for to result

Ivan Tornos

addition of great thousands Apple in to that think technology, I of will market we add to day maybe technology, being in we're the the going through and rates? pay surgery? do able right [Ph] with market ROSA, And that to we're we two or post it. platform, provide example solve is pay the And that just can readmission if [both lower ready mymobility data base] providers, data to can you a a really hospital are by of the I'll we so which lower another of patients both do be for the payers in Can length when people to pay that making the we of you will a have that. every quickly example trying for for of example do There's and those. stay questions

Keri Mattox

Yes, Jason, thanks for question. the

Jason Wittes

Thank I'll queue. much. you back very jump in

Keri Mattox

that'd can you. go if the we queue great? thank to No, in question be Jake, next

Operator

we'll with And from hear Chris Nephron. Pasquale

Chris Pasquale

Thanks.

this expect you're the timing the to not for up following that? AAOS spring, IQ line us Persona is And Just of we is what you the something or going meeting, can sense a collecting? in on give up should at scope with question, the

Ivan Tornos

different spend to data. Well, through hour from devices I that could things pre-op, we're I tell to but about we're an collecting post-op, you talking intra-op, these collecting,

looking have on accuracy gap Persona go post-op overall looking of data, step the we such how Now expectations, doing IQ, at at range, I we're Again, which is so and physical the cuts, intra-op balancing, we're can and the resection alignment, else, on. surgery. post what at at things obviously post-op, as the motion asymmetry implant, well length, are of speed, therapy the you actual gait on

on those is out the to back are data to or drive based premium academy. points, looking the post-op, products willingness a and this more to the in their academy, multiple proposition addition much what post idea in patient-centric In three space. design that think, at again two that how in in going those see going we're way looking implants are forward to measures, these But to I'm I better you'll all functioning the are But value how sharing surgery. their pay. to

Bryan Hanson

of it. IQ, during, you Yes. after, ecosystem of us across because it, is important a procedure, the to capability of think it's data a areas look ultimately those just us to as just an machine data combination the patterns but with learning provide sense can it's all result for things And and is I and for vast that that not too will said it we of, of data in insights make in lake before, create allows that collect a that any

Chris Pasquale

then the And you. thank pricing see, on just I to I commentary. clarify wanted

little to X%. went You bit the or over business, past if a impact average just guys the the I but price was year, over that seven eight years, used by look back of give impact this from away

should three little the to expect forward, that? Thanks. is clarify So, how could and you by comment, if I'm just the four-point an may really much confused X% a we of be going improvement target

Suky Upadhyay

Yes, so, I'll take that one.

average would that and right, actually it range, level that XXX if basis, to consolidated S.E.T., was a lower of than erosion but know I on and you than And XXX so -- overall, provide So, your in price you we saw the or overall offset. by you that if deconstructed and was consolidated. that data, category, somewhere generally see you're don't did the in recon Ivan on knee that higher hip was looked

Ivan Tornos

to points, to clear be in large U.S. Now just basis XXX XXX joints that the on this, is

it So, you we here overall unusual might way But was basis then different. the U.S. at the it see points -- in XXX that look even to yes, and than XXX not when higher been given the -- category have historical factors. contract

Chris Pasquale

Got it, thank you.

Keri Mattox

Can have maybe more two queue? Jake, time we Chris. Thanks, go we questions. or the to for one

Operator

Yes, we'll with from Oppenheimer. Steven hear Lichtman

Steven Lichtman

Follow-up morning. in about have focus good your S.E.T., pipeline areas. the you you talked on coming you, Thank

those you a thoughts ankle overall do improved here? about As for pathway versus on and from that versus foot S.E.T. foot think you market, through growth either markets, ankle M&A [technical your innovation overall difficulty] to or WAMGR and see internal

Suky Upadhyay

say our because are all CMFT, a We do those which bias attractive I'd what there's businesses interesting are acquire either sports, of the have is, so and of and we they focus get extremities, so S.E.T. and in Yes, portfolio, categories mainly investment. different. a performance because areas, a path have In question. spaces. cleaner and the portfolio, again, we spaces, they're we are investment of to in referenced, that, six the as our expect categories, have to that investment, no we And able a in just upper full still ones categories, they and us; other growth investment different those get see those disproportionate been leadership result a important amount still level to above-market expect the full is

clear you to if Now, show don't wanted through it with know path one that become a well. those a as leadership, I to otherwise, pathway, back Ivan? area comes focus any anything, also a would or acquisition if businesses of could add

Ivan Tornos

We speak. a with recently we We extremity, have R&D [indiscernible]. We a medicine the group add and to offering keep solutions sutures. hindfoot. not had on just that midfoot, We sports would in a forefoot, had an launching say, ankle. foot some a say is, closed partnership of now biology I'll up we're which and amount more part we our meaningful is was space. as complete a that going I of on and There given have succinct it buyout very of

to it, that portfolio, to able seeing a So, be launch compelling there that going would I is we're we're label here.

Steven Lichtman

you transformation you balance And, macro Got it, X sheet M&A good shape. other there volume crimped, impact is by procedure headwinds, got ebbed, COVID. Bryan, okay. said from has obviously Phase The of obviously, guys there your basis before some moved that in your a were but as into

about for over to So, overall, deals environment here Zimmer do months? out the feel, do go you XX how and the XX next some to

Bryan Hanson

able one as to We're faster that then to over in targets, assets, for of that's did going ASC, where would strong. and right it sheet because path to also, eye is looks And recon our our our leadership, believe is one robotics. looking give Number outside we balance some that's those fact things better selective markets, inside faster drive actually pursue. the get We're real. at like enhance that sure. looking this even be we can areas. would a small-to-medium just spaces you, the financial probably to to across recon, that, it'll always before, and looking our Well, as to be point. growth now CMFT, the But be to be be we're like of to To for is The some little X traditional less time. our me focus then to transformation orthopedics those a now, wrong, we up faster-growth result looking along, we've secondly, three orthopedic we've are now going a for there, least places at you revenue phase more been be believe position a with size and but towards we're in Don't extremities get of flexibility will can in diversify And settings growth for lot of more tell where our things, faster-growth looking And than so we been WAMGR-accretive mission-centric deals. in the also nature. it, we've and things an improving, diversify we earned like looking well, data at color can that truly number all WAMGR bring this at execute EPS And our to we it those since of Phase in truly increase assets market, size area. there our submarkets could ability or criteria. for looking

for where that's Phase we're to that direction. now while, we've move a in, a of and in we're to going flexibility financial So, lot more little got things been we that a have focus X at in. interested We've

Keri Mattox

the queue. X:XX we Jake, end above closing all a the don't remarks bit to if there. probably that for Yes. And great we're here, little thanks you'd questions, all know out the have but to call? any Bryan, know make there's from round I

Bryan Hanson

I'm would performance see with it really being momentum strong The that long actually of removed, the you time. but I what can think some quarter, a I clouds the a Yes, say just there the for is And team is just happy actually delivering. fact was been hey, it, that has finally, a it's the quarter.

it's for want going market, undisturbed do market, I fact be growth while. as and we we that to not should think not at it's it's think that a about it's for clean I do not is while. -- clear, make a X% to of The a we're concept to be least sure an rate, going choppy a

momentum really, to is So, and confidence for be team you see to business and it's right The strong, expect though that all our our high. might so, market. in executing could X% Even is the mistake, Make you are X%, that real. be quarters noise a below really is the pipeline confidence now choppy no is quarters that while expect that that high. above flawlessly, might given very going product is our just

Keri Mattox

for Okay. the Thanks, questions. everyone,

soon. for today, out sure the Of Thanks course, we'll talk please to others, hesitate you and have to joining. don't I'm if team reach

Operator

for Biomet And Thank your Zimmer participation. this the earnings call. you concludes quarterly

Zimmer Biomet (ZBH) 2 Aug 222022 Q2 Earnings call transcript