ZBH - Earnings call transcript Q4 2024 | Zimmer Biomet Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, February 6, 2025. [Operator Instructions] I would now like to turn the conference over to David DeMartino, Senior Vice President, Investor Relations. Please go ahead.

David DeMartino

Thank you, operator, and good morning, everyone. Fourth Earnings Biomet's Call. Zimmer to Quarter Conference XXXX Welcome

Operations Tornos, call and CFO Joining Finance, today's Ivan and Supply our of our me on Upadhyay, are President Chain. Suky CEO; EVP and and

of we the comments this results forward-looking to our may statements Before you materially from statements. variety include during started, due to call I'd remind risks get those that forward-looking differ will and Actual uncertainties. like indicated a by

addition of our For Paragon inherent risks those these to a in statements, to the of uncertainties, refer recently discussion SEC forward-looking such detailed XX. to limitations and including filed please related filings

to actual note, assume expectations future Please forward-looking statements materially. update results no or even if obligation change we these

certain are measures financial of these non-GAAP financial quarter can discussions be included our the comparable found most explanation zimmerbiomet.com. Additionally, measures, release, of within forward-looking which our of for these financial basis our include which our measures. to Reconciliation website the and an on GAAP directly calculating on this measures will earnings is non-GAAP some measures fourth call

With that, call I'll Ivan? to turn Ivan. the over

Ivan Tornos

business and Good way day taking everyone, gratitude I today would start like do, our and every globe the over XX,XXX forward. show and the our call. to mission members for recognize thank each to across today's team morning, joining by and to who a I sincere moment always to that you my move Biomet Zimmer the

the is now impact were Thanks able in the serve of our patients. most your X.X every of to you thank us and what work, quarter, inspire all point continues that Thank X.X patients. you we, do million to your data you your strong you for million phenomenal importantly, to performance. XXXX, And patients. Thank lives at tireless commitment. efforts Zimmer a over for day to your to customers Biomet, This for

say, advantages. key past, the and and we continue truly our as culture Zimmer that here in I to have competitive workforce the will of said I've the As Biomet one is

XXXX; During provide I'll Paragon acquisition. going the of time the the talk for the as and secondly, recently fourth about in market to of and cover then our I'm beyond and outlook X more performance cover overview After broad plenty quarter general leave dynamics; XX detail always, make lastly, we'll for first, all Suky questions. and I'll briefly announced today, year and XXXX to the financials is to this, sure, drivers your going of after call things: about a

begin, very we fourth This by single-digit X% driven growth that happy in report marks as in currency. better or for This nearly Knees the was in constant-currency well as Biomet. Zimmer XXth revenue the S.E.T. growth to To quarter mid-single-digit performance I'm quarter growth Hips in quarter grew consecutive XXXX, and the of mid-single-digit constant of sales upper

volume of backdrop at These now we the In by quarter. levels the our pre-ERP the shipments results September. given in in have that implementation shipping as outlined large challenges particularly we expectations, noteworthy are with exited ERP the line evidenced XXXX show of

growth best-in-class data coming should the world, continue market to shift like advancements, around in the as technological the aging and execution primary- continue well launches, both dynamics to population, of provide and fueled in and product clinical involving our continue at which we to increasing outpatient care markets, in and hand outcomes the as sources, commercial ASC Beyond active on the mid-single-digit anticipate by showcasing of our here growth performance patient the years. tailwinds will based was outcomes dynamics end U.S. all second-party have that an these settings the innovative improving procedures the will we analytics

do we we again, down. markets So see very these and these markets being to slow not healthy expect as

is the the fourth the to the challenges financial guidance. XXXX, quarter to some despite our with already closing including It of business in note consistent XXXX the able of we solid year manage were original that the mentioned important with ER disruption,

constant-currency means this $X growth, adjusted free share delivering billion. of per revenue So $X.XXX near flow X% in and earnings cash

adjusted we full impact $X.XX XXXX, into share of look excludes we any $X.XX, acquisition. to As financial guidance constant X% of from growth Paragon providing X% XX currency to are of year which revenue per and the earnings

that coming digits faster the growing Suky at growing in period basis up. EPS mid-single points cash mid-single-digit basis highlighted details prepared more than EPS. cash of least ensuring range, is with May our commitments growing growing free remarks revenue XXXX than Again, plan in going provide at the revenue while faster in reminder, at These event revenue long-range that involves is XXX LRP, growing financials in York, and as XXX over EPS. points than investor a we the are his and is aligned at faster New revenue plan, which flow than EPS faster to least flow free

not culture, key specific in operational what our Biomet. X excellence, we two; and number priorities changed: to the Zimmer number to X-point over-index thirdly, innovation of priority break down call these our fashion enter X continue in I across we're a on diversification. to plan one; priorities have going we want and As priorities XXXX, more Today, people and

Firstly, the president going new a medical have leadership To education. and we in of business for categories across S.E.T. the President leader appointed the President people enterprise for jobs. our end, for new key for ensure in the a to global and in Knees, a a new like new right Hips, continue Global Global new right that people added that have priority we we're to culture,

This critical Secondly, we right in alignment consistent that regard. this franchises elevating our ASC we're want all where the also environment. a market. and has better the formula specializing job go-to-market right do had number robotics going priority area. with solutions are S.E.T., talent, and have We our more the the productivity to innovative are our means in we'll like head in not we of right operational ASCs, aggressively this U.S. excellence, performance in counts in drive ensuring to the be while partnerships but with vital the strategic key performance right in in far in and bolder that in and to committed know new that ensuring capabilities We expanding launch of portfolio growth and adding to continue the to been we

we boldest Officer. come Much direct-to-patient U.S. in Schwarzenegger here this Arnold the in to no of Chief the background the all of less organization as the a truly of more area, excited Movement about the than now In with have these, history in the are announced program potential himself

new over launch with Thirdly, in innovation the and XX diversification, months products new-to-the-world we plan next of the in area of launches. these products several to XX product being

of quality with not and associated the products, excites just products quantity Biomet. but disruption it's Zimmer the it's us that these at here the So

To with Knees. touch starting a few on of those,

we approvals second us Our in our terms growth cementless Oxford portfolio Persona of adoption especially really short strengthened of very the contribute the XXXX clearance Knee; with the in to the Cementless and the half the anticipate the our Persona our Partial the Persona position other portfolio. the enter U.S. products, was Oxford to plays as combined in of of portfolio some in IQ; new the Knee acceleration steady XXXX. will knee, forward and version excited We of XXXX. in OsseoTi we second of in These strongly and U.S. of with to half Knees, We're market. of growth XX-millimeter,

This Revision. the Internationally, to we for late revision already U.S. received implant leading expect last in year CE Persona knee is we this XXXX, launch Mark the and throughout XXXX. the accelerate in

which our best-in-class launched only our our AI a triple surgical products, taper Hip franchise. as portfolio, well for the the navigation to These closing in grow going We as to of to enables also addition was impactor. meaningful enter stem; Hips HAMMR, very as ZX, year a reality, we way OrthoGrid XXXX the of are XXXX. mixed position X our transformational surgeons and in us FDA-cleared acquisition, HipInsight

of with and Hip portfolio conjunction like navigation the with in also that we navigation, OrthoGrid, the I broadest in acquisition surgery. now have ROSA HipInsights hip

with where since Biomet the going the most are back recon portfolio Again, and Zimmer XXXX. Knees June to Hips, of very in are merger now we robust where having about with and excited we of

was with of meaningfully the anatomic and products, While Knee perform much be is it shoulders and in reproducibility and ROSA Hip joints. shoulder excited more large accuracy shoulder robot our world the by the market procedure. the the S.E.T., both Biomet is first potential arthroplasty today can that system we more in ROSA Shoulder Shoulder improving robotic procedures. only reverse and the Within could expand the not Zimmer than just has to

the received shoulder last in of clearance asymmetric the first November in Additionally, OsseoFit year, U.S. we for FDA stemless Shoulder, system

customers are U.S. mode in from speak as we launch all feedback We full across great are the and receiving

Finally, innovate the to Zimmer kinematic of including for knees alignment Biomet introducing share applications within to continues robotics. posterior in We're a we scan in a and continued international hip robotic to these in gains. a approach, short the CT the ROSA be capabilities, ROSA new number already midterm, is updates, growing with global need robot leading is which anticipate and huge Europe, markets. orthopedic going

to fit look our to our opportunities going need launch for order financial order end in continue residing we're Zimmer environment we do X% in of the to by risk/return to markets, the needs continue to we solutions inorganic diversify WAMGR growing address to in also and our metrics, realize While XXXX. a that and innovative which strategic, to of responsible aspiration Biomet of

plan the and on throughout drive priority generation. and our flow Biomet XXXX. acceleration strategic results to in as over in how also shall period while our increasing in our cash plan touches we needs, We is achieved Zimmer year margin on according inventory we the expectations the excellence XXXX, plans free plan hence, of reducing progress point fourth already The see to operational specifically improvement The motion. an

in these of revenue, by X with sure also set not things, points commitments to our on goals make years long-range these Zimmer in cash to The but And to in above success highlighted for undoubtedly come. free plan. is XXXX, per flow our in X the we'll on share earnings deliver just accordance execution mentioned Biomet and executing going

on a discussing our close in I ankle news Paragon foot XX, space. call cycle, very January a the acquire To which the on front. to XX, M&A entered recently growing complement rapidly is product definitive we we the want billion into $X exciting agreement shared today's and to leader that

through boxes the some quite could time. that partnership. dilution our we've and all this and accretion segments I to desire be this growth, excited into higher-growth M&A the disciplined for strategic transaction discussing not checks more diversify about been We maintain

expand Zimmer to our closes, once is going is and offerings move Strategically, us that first as half international in going complement and existing transaction fracture direction. Paragon as WAMGR growth. the to within ankle currently to growth deformity our going It Biomet XXXX, help foot existing XX's expansive infrastructure U.S. footprint, portfolio be our expected trauma global and It to portfolios. our the XX Paragon in bolstering anticipated replacement of and while well joint drive is it's to

One the while very in on opportunities area also market that to exciting to cross-selling and today, partnership penetration foot be going is capitalizing the opportunities. reimbursement this procedures now very beneficial where of fast-growing carry ability reimbursement, a ASC ankle creating expedite we're our

partnership Zimmer lower extremities. leadership position this is Lastly, health and across strengthen musculoskeletal Biomet's to going

welcoming very be XX, Albert the and I to of the more family. excited much CEO, entering could and we DaCosta, how look great Paragon forward Biomet Zimmer including not we're XXXX Chairman to the about leaders

the In and look conclusion, we beyond much above very to we of are organization, of progress forward very continuing proud to expectations. execute and

every people knowing simple compelling people, pain of we're and I the I deeply a around We that teammates the alleviating inspired on improving the that for I'm impacting very the of in have execute and millions and my yet life the will fact and are it. living lives world. of we mission plan love Zimmer-Biomet of day quality

that, very call now with the you to And Thank much. turn over I'll Suky.

Suketu Upadhyay

Thanks, and good everyone. morning,

by flow. resilience and closed we we challenges points, another X% Despite of over XX to $X cash and on members. adjusted constant-currency basis we free demonstrating share billion in mentioned, solid adjusted expanded the our team basis, a year grew As sales nearly Ivan winning generated margins the attitude earnings by operating X% $X grew per faced,

XXXX and Looking at my fourth about commentary compares this to in unless constant-currency XXXX on otherwise noted, operating statements the be will and of it will my be same period and results, quarter quarter's adjusted how a basis. the

announced Paragon of will commentary recently the any XX guidance XXXX acquisition. exclude impact

X.X% on basis foreign results markets of positive fourth Net on indicators XX pricing positive underpinned pricing. points, an reported Overall, the billion, Consolidated the sales products. of new marking demand a excluding of basis leading $X.XXX with healthy by impact were consecutive end increase quarter was were and good X.X% currency. for

grew in Knees U.S. strong by high single-digit business while growth and high growth in international Our single-digit X.X%, driven grew driven X.X%, S.E.T. by S.E.T.

our great S.E.T It's outpace and continues Hips. that global both to see to Knees growth

Importantly, combined to segment than is be faster-growth Hip Hip XX S.E.T. once aligns to continue is markets. is franchise segments. Paragon larger strategy closed, expected to to faster This the our Knee grow than our both into and diversify the transaction with our and expected

X%. and Global the growing Knees U.S. in X.X% international X.X% growing quarter grew the with

penetration ROSA. We from continued to of see good Persona and portfolio increased uptake our

Hips X%, Global U.S. with X.X% growing X.X%. the growing international grew and

to the in forward accelerating OrthoGrid. now portfolio We in on encouraged are be we have days, a accelerating look with and tandem Hips we'll rollout XXXX offensive ZX early our in strategy still complete progresses. as HAMMR product and the by of While feedback

in Next, grew a led Sports by mid-single-digit quarter at fifth our to expect CMFT consecutive at S.E.T. growth we least trend S.E.T., of X.X%, XX%, at the and continue. This Extremities X%. segment at marks Upper XX%

revenue prior Technology Finally, declined from Data, better year. segment due to Other the Cement comps the Bone Surgical tough This to and & category we that renamed to X.X% segment. represent the within

operating reported to more count in XXXX $X.XX taxes, in in expenses did GAAP including Turning sales We earnings $X.XX lower offset a diluted compared than higher P&L. of per with share our prior tandem share share per year. nonoperating by a of not Higher gain repeat. higher onetime were diluted and the to GAAP and earnings profit that

compared of in year adjusted the On $X.XX an earnings per revenue. share share $X.XX per faster prior diluted basis, we than delivered earnings growing to with

originally for share note, more the compared than per $X.XX quarter headwinds of XXXX. erosion challenging about FX when and were to accounted in Of earnings expected

guided, capitalized Adjusted was due impacted primarily gross this prior than XX.X%, to margin P&L. lower that year's year as increases XXXX, previously cost

revenue margin operating to points than XX efficiencies due Adjusted leverage the was XX.X%, and higher SG&A. continued basis prior year across

adjusted that the debt Net than matured higher and higher rates were $XX interest other refinanced prior driven interest on and expenses by higher in debt nonoperating year million, XXXX.

XX.X%, higher by implementation Our adjusted X. tax was than Pillar driven XXXX rate of the

And buybacks. fully XXX outstanding of down as our share million, diluted year-over-year share were a result

Turning and liquidity. to cash

the XX cash towards targeted cash of hand days. guided $XXX on are to paying cash or XXX flow Our of flow year of million contributed and beginning off operating free at we in days, at as days free the flow $XXX we ending working originally capital to million, bringing billion This approximately initiatives the reduction XXXX inventory range $X.XXX reduced XXXX. by almost

of with We equivalents. $XXX ended quarter million the and cash cash

opportunistic repurchase maintain to over the of basis our capital our plan. full share strategies, to million with an long-range allocation our quarter plan XXXX program share and bringing year course on shares we returning approximately in million. repurchased repurchases $XXX We Aligned cash $XX shareholders continue to of to continue flexibility the

Now regarding XXXX our outlook.

revenue to of and Inside price X%. points flat full expect markets, modest X% day year-over-year constant-currency due to headwind year of we stable basis of growth XXXX to growth this, to a end selling XX for erosion expect differences. We the

X% currency the of basis of strengthening revenue to growth to we anticipate from expectations dollar With recent of in the at points resulting points XXXX, reported XXX rates, basis in headwind XXX X.X%.

expected the Now results. cadence regarding of revenue

day FX the no We first due the growth to and challenges, second more favorable will product comps than uptake expect to half ERP new ex XXXX that impact. half be related selling higher

XXX compared the XXXX, putting have quarter, have Importantly, revenue to Also, estimate be to X about we QX you at expect tougher about due should headwind FX. selling growth which basis ex X% in on day when XXX QX to the growth primarily point growth to will less first quarter to XXXX. muted compared to comps

earnings $X.XX. diluted share be to $X.XX to Fully per expected is

headwind $X.XX on As with when a on to XXXX. impact share revenue, has to $X.XX FX an earnings estimated creating profile, unfavorable significant earnings compared per our

year consecutive to adjusted fifth versus the operating full margin prior increase and XXXX gross of the be marking year margins line adjusted anticipate margin full improvements. year operating in to year, We adjusted with

and As versus XXXX specialization the be half second and will in higher year. with prior and revenue, When associated first the the force half half costs higher expenses and year operating marketing. due gross margin to lower new will direct-to-patient of stronger be launches, margins earnings first compared to of sales the margins than the of impact XXXX, inventory product with

half, ongoing of second progress be will than and cost sales better impact programs. the into XXXX we lower the efficiency As due margins inventory to leverage,

million, expected refinanced be on other and $XXX least higher are at expenses to interest Net rates reflecting debt. nonoperating

Our rate year. is expected for be approximately XX% the to adjusted tax full

shares And million XXX about fully expected outstanding are diluted shares. be to

pressure billion, leverage the earnings, on expect growth. Despite versus billion FX to of $X.X free flow $X.X which cash represents revenue we significant XXXX

As laid foundational in and XXXX investments out in in capital improvements are conversion in earnings, our beyond. and drive improved improvements working Analyst cash to Day expected presentation sunsetting of

agreement we a share an for payment last to representing billion purchase As entered Ivan an definitive Paragon upfront XX acquire $X.X mentioned, equity price. approximate into $XX in cash, per of week

to immediately following EPS dilutive in on hand accretive In purchase, in to and be the the up adjusted which XXXX XXXX, $X will within EPS closing. revenue The X Paragon out months based debt, milestones. CVR be cash to in addition, will dilutive a additional funded combination is adjusted XX achievement paying shareholders EPS to accretive of per non-tradeable of approximately on X% through revenue about X% to XX anticipated to share growth, certain cash receive an adjusted and

is guidance updated we for expect after a We and which our the the to credit will the of rating with maintain in full first transaction optionality sheet close to balance to to against invest to half investment-grade after allocation closing, continue that It strong provide note year. capital expect important we the the 'XX, priorities.

the like dedication, over in Through your with your operating by sales overcoming we ZB the in entire fourth billion close for winning I expansion year challenges straight to $X achieved in team XXXX. XXXX. growth their cash resilience nearly look and free adjusted significant forward I'd X%, to financial margin results of spirit thanking for in robust flow.

the with David. to over I'll call that, turn And back

David DeMartino

Operator, Operator, you, for [Operator Thank go Suky. up open Instructions] ahead. questions. let's please

Operator

Robbie first [Operator Our Marcus comes question from with Instructions] JPMorgan.

Robert Marcus

on -- ask in This wanted we last Suky, it best year, philosophy we see could what sure the to guiding guide we're -- conservative is And both and How was for, we think not to more Ivan, we year? appears be bottom year, line. what this I who guidance to but you thinking think the just the general. a should And philosophically? be on guidance range are the top expecting throughout about what in do.

Ivan Tornos

Thank here. Ivan you, Robbie.

the So you philosophy guidance met actually We guidance-wise EPS we not in I free apologize to and somewhat adjusted I that before, a of say different from And guidance, would year. delivered the EPS, cash heard revenue, early the in in for today, XXXX XXXX. it's we're flow. as said going as

basis are we think I points below revenue. XX

range different X the I'll XXXX mind the definitely there XXXX. XXXX but a don't word appropriate. we're use We is day providing be less Keep I That in for philosophy. that appropriate. versus is in if said, deem know to today conservative,

half time, about ASC, become Most of year. far making see our the excited more same them We're space. the the the more investments Robbie, lower upper the range. of we about new versus bring products. the ambulatory Excited drivers material second to us in to surgical do in at we're the range And

bring to guidance. I of things U.S. in adjusting range us are We upper the that the some can believe the

we favorable pricing, Let's of quarters in consecutive pricing. end see where up X

quarter happens We'll XXXX. at one time. Let's see a what in go

see half. so investments half in a will as the on of OpEx, first in return And you second we we see should into those investments get we XXXX, make the the

the net-net, And again, more guidance. range the see get we So of appropriate guidance. than us to range drivers to lower that upper

the and to in updating we provided, hopefully you every range forward So look expectations. exceed those extremely quarter confident and

Operator

with Wood Patrick Morgan to next Stanley. go We'll

Patrick Wood

question opportunity Apologies is that Beautiful. to the distribution sales Paragon that and side? XX. in thinking, Congrats push Basically, it on and on a, U.S. of your OUS how voice. things, are crackling top both about you line through network, the my drive for the side the it on

thinking And you b, how disruption it? integrate you as any about are managing potential

Ivan Tornos

Thank you, Patrick.

The excited I've this MedTech. very with company that innovation First to I things first, have not second sales the none. the in XX The week in projects my we're have, XX space. culture like they that is acquisition. in spent active last about in the in seen team. anything They years Orlando

a the outstanding an the space Upon we're in categories the in which of be closing and X transaction, channel, to leader going we they don't. key have

fully So to thinking going dedicated preserve that we our foot and ankle. channel to are is that

the management the DaCosta. CEO, Zimmer We are starting bringing team Biomet, to over with Albert

comes disruption commercial going when it innovation that execution fuel the in So to design channel to center innovation. we and space. preserving a itself. We're continue see minimal to is separate It's the to

So time the that over don't of growth X key period drivers they that are that a CAGR enabling XX% going away. seen, see now, have the we

But the fact and Patrick. In this today, run we minimal right isolation, minimal we're in can systems, to standpoint to do all disruption. as from part, disruption, the very excited here we operational this we Obviously, attention very, terms we pay the Thanks, again, have to second management are we suspects: usual quality integrate the doing that we we're things see very sit do feeling of need disruption. that around we the an inventory. with confident going

Operator

with We'll next Co. & Oppenheimer question our Lichtman Steve from take

Steven Lichtman

during for color about you growth you this if XXXX. bit more second year, was about Suky, could Paragon. How we provided think half excluding some but talk half and margin cadence the I guidance, versus year, first on sales progression of should wondering a

Suketu Upadhyay

Steven. for Thanks the absolutely. Yes, question,

opening to cadence. impact there going and Q&A, that of first the As are his number a parts in the moving Ivan mentioned remarks are

more to a So color, try some bit give here. I'll great a little it's provide it We question.

product only remarks; day in But that let FX very the uptake, which about; with excited me of impact, talked in we prepared margin the continued start new Ivan that not efficiency then parts believe selling profile some to moving efficiency some for our expansion. about we later and we're those beyond but growth headwind this around that is drive of and our year, investments this year; going push referenced and

that is steep then we FX with guidance again, which ex -- our to If basis. X% we the me, is the project the that's ex a about X% basis range. will we selling X% remarks. points. would Inside takes to excuse headwind, guidance headwind start to primarily There that that, QX have to reported pretty to our day That's revenue, X.X% a on due lowest reported of XXX growth, worth and FX FX X% of we XXX referenced earlier in about

to to that The that half the then earlier. once has last Ivan that to which ramp-up in you've faster ERP, really second when then than going new half growth, really comp comp half because for the us rate the expect And you you're that first quarter okay? selling see in don't compared got products greater of second will aligned growth, second the XXXX. referenced And of to day the be adjust related much toughest be of have to the year, headwind, you which we headwind, day QX easier impacted

being the year. biggest each the to the points of that's roughly As that the to FX so and XXX pretty impact, about headwind expect third and quarter basis second half first factor and the in headwind. in same a the with a said, around play versus It's half going we we is big first quarter be

the a the of you down cadence color lot gives that FX the to from hopefully, ex way impact. So all currency foreign on revenue

margin overall, in in gross with be XXXX move then as to on the and with line XXXX. be earlier said expect margins, we our would to year-over-year LRP profile up And in you prepared on if line we we in operating margins and guidance remarks, provided our the to

will and First primarily first half due we've as lower gross expected discussed. margin, investments Ivan be OpEx through the related and of to half talked about higher than to as 'XX, the margins lower XXXX,

S.E.T. ASC our commercialization are We're We're increasing robotic investments up efforts. in around critical those of around Some ramping mass specialization DTC. and

will these revenue well and as of on impact. long-term mid- we believe, near All things, a positive have growth, impact as

the expect to margins, quarter about operating down versus QX will be of QX compared 'XX. points to when we basis first be 'XX. slightly XXX And XQ down

than to However, be in the half second first half the efficiency better half gains. with will well better margins gross due year-on-year as revenue tandem 'XX margins profile, of second of as 'XX higher

we're think 'XX. as said. there confident And Paragon also into levers about guidance excited very again, to We our the overall, in we're in than that. where feel potentially bring we're we So providing portfolio. Ivan headed are better good really to the asset We're do in

Operator

We'll take our next Matt question Jefferies. from Taylor with

Matthew Taylor

you I did want deal maybe that grow It to and that follow consensus. up you about could the the to way the ask about earnout. above implies with CVR on Paragon business structured is XX% XX% and

actually thinking beat with to love Street or think you might able least what as accelerate was one. to do growth And maybe digest also you talk your you this Paragon? ability at be comments your would how deals So additional I on about the

Ivan Tornos

Yes.

portion. So maybe I'll start with the growth

that model synergies are we revenue the in So appropriate. embedded the

the Beyond synergies. additional there have what in thinking we're is we model,

a too not present in present is XX space. is or ASC today the Paragon company foremost, and First that

contracting. a extend there to variety So are do there of cross-selling, opportunities

So definitely a that's lever. growth

There and of that are channel back opportunities biologics trauma products from to our has. dedicated in Paragon the XX business those put the

internationally. other then opportunities there. it's great are So a there opportunity And

we outside XX% the XX% the of U.S. to of So have revenue coming

a large have of infrastructure the We U.S. asset

the growth those the again, can are that revenue committed synergies above get us rate. some So of

minimal prove next we'll What the deal of other question that the disruption of around year now terms with think firepower to we doing your into the when to XX about type everyone deal. second next we to do think there. is can In we about right start is the do want deals, to company, Paragon and this then integrate

Operator

next Sachs. Roman We'll take question Goldman our with from David

David Roman

have a analyst or dynamics that big to seconds years evolved obviously headwinds meeting, you the the and had piece that X margins. which spend introduced had of do expected margin to here think just a at trend X with at Suky, a past couple want I over the months. then-currency I on play, significantly X of gross

maybe, the what basis inventory update undertaking reported So FX that to then of a other And turns, firstly, considering relative gross the margins some on of are secondly, on margins to where you've operational to margin today can us turning expectations? the gross we around like how path are is gross and trending trajectory cetera? et you on been matters improve those then

Suketu Upadhyay

David. Yes, Thanks question, the yes. for

So margins overall, about I tailwinds gross back, as of being first headwinds, stepping just all, we about think talked XXXX. in with the XXXX, line

expect every that see Some you year. we normal have would is to of headwinds the inflation

inflation Fortunately, pre-pandemic rate has stabilized sort of that to norms.

that's good see. to So

We're could a capitalized positive. the basis of of which especially at of first in impact well than end gross points the lap that to 'XX of XXXX. around norms the we're will erosion P&L, XXXX, margin. better forecasting and beginning Still, on said And to cost of our half pricing, XX historical continuing increases coming pricing some I headwind modest we're off somewhere year a flat maybe where be to in

but we overall, positive trend, modest still potential headwind. more where a see we'll a up. So But end

big So those margin. on your are X headwinds gross sort of

the talked is another it sorry, And about noted, when and you year FX, -- at that, as over headwind last think or inside of really length so. tailwinds, which we've about you the

we're from really continue positions, inventory. and lower on We're products, we excess tailwinds and XXXX through footprint continue to mix good improving as more our improve plant which are as footprint, as we gains, in inventory better absorption. utilization better improvement repositioning perspective. of lower-cost our lastly, obsolescence, you new drastic which overall around E&O, our well our really our -- good -- seeing we make efficiency gives The made geographic to progress And markets a but reducing in into also

So margins were. the those line and with in takes, broadly puts XXXX us again, where keep are which

for As year, you think in this about to XXXX. the of the expect cadence this we with margins how gross would half broadly in year exited line be we first

the spoke as a earlier and our see obsolescence So really of largest first step-up excess to coming And you and you should QX, QX into that off the as I margin should then benefit XXXX. the half sequential of in QX gains. into gross think about efficiency those QX well gains into with

rise happens, that Now the if get the with changes where would will capitalized strengthening environment. a FX assuming benefits, P&L our into the FX into that they 'XX. those benefit. are gain rates of then hedge however, or in today. Those It's will give dynamic XXXX additional dollar, likely materialize seen, we've to stay And should right,

So a there. parts lot of moving

that I about margin, and stable again, the do gross keeping opportunity FX 'XX is over continue I headwinds environment think that hedge key in takeaway or to to to us despite potentially fundamental we those make 'XX earlier talked flat improvements time. improving maintain see an gain in we

record consistent inside operating profile all looking of of track still margins. operating we're this X that's where that, a we a And off again, have of And we're margins coming year. expanding to -- expand years

gives lot what color a David. you hopefully, there, there of you So need

Operator

We'll take our next question with from Larry Wells Biegelsen Fargo.

Vikramjeet Chopra

those coming is for X tariffs and in Mexico quantitative? Can much on have flexibility much manufacturing elsewhere and take for some countries also your production on from to of This to Canada. provide or you price, either Vik Larry. you qualitative of is move how on either and color how Question us

Ivan Tornos

in answer, Simple our manufacturing We manufacturing the Canada. we U.S. manufacturing of no do X/X Mexico. do Yes. no is in in

There happens volumes So is done manufacturing-wise. are of time, what guidance single-digit evaluating planning that embedded the China. But in all there coming present in provided. at the scenario we we've out is

Suketu Upadhyay

the I think takeaway. key that's

embedded Ivan guidance is manufacturing in don't as of our have do contemplated we some we do third-party impact out supply range. Mexico, the comes While said, announcements on Mexico. But that in as recent

Operator

next our from question take We'll BTIG. Zimmerman with Ryan

Ryan Zimmerman

about it expect and should move durable you driving you talk phenomenal you're color S.E.T. similar just Ivan, giving levels see a that, it, Extremities just Can as inside And of the into how what's that? of grew we we in we appreciate terms XX%, was number. 'XX.

Ivan Tornos

Yes.

as growing quarter upper Just X correction, -- this yes, yes. whole This a in as upper mid- single and durable. is grew in a the a single Sports X, small to XX% XX%. quarters in the see we're grew row X.X%, digit, S.E.T. extremity S.E.T. digit, Sports grew we upper overall segment and digit. quarter mostly single the now

What's of a products. all, add of did happening we here, first lot

standpoint, So [indiscernible] used the than different organic from an be. I'll totally today tell to is you, it and sales inorganic

the XXXX. investments continue going add OpEx in half the added ton of products, and to the to some people. we're you've we people a That's of specialized of addition more In seen to first

ASC have didn't space that to we resources have before. the We dedicated

just So business it's altogether. a different

-- the closing you deal, rate. business our XX X, S.E.T. our as X, upon Xx now remarks, large, prepared closing potentially Upon Paragon as growing business the be than actually, heard in the of going to is not if Hip larger,

business digit. about upper do growing durable we that mid-single single see business least a as digit, excited this and really at likely S.E.T. again, So

Operator

from We'll take UBS. Antalffy our question with next Danielle

Danielle Antalffy

bit for growth Ivan the as Wanted because into think a potentially focuses Paragon there meaningful and start Suky, that. I a little more opportunity that's ASC leverage Zimmer and to driver

give and see on So to you with in you wanted or today is the if update maybe maybe ASC volumes revenue portfolio going how can that's could through ASC? procedure Paragon the product help of an win that the percent us I now

Ivan Tornos

the Danielle. you, ASC. Thank a It's in huge opportunity

Knees number X% from So environment. company or back #X Hips ASC the the U.S. with X% ASC in profile we Sports can approaching and the And roughly XXXX, categories the other XX%. of in Today, remain now the in ASC space. of the here in came and in elevate is ankle the We we foot quickly and the sales growth addition portfolio space. the think portfolio,

doing, added we're that things The just we I mentioned, have as people.

that a mind. already in We have up space. -- with Signing comes added CBRE CBRE have partnerships, to deal up signed

STERIS. with partnerships active have We

We have active partnerships with Hillrom.

comes a product that it not it's we So have contracting. gap when to single

And then lastly, products.

ASC are more the ASC. what outcome, and innovate not which make but that economic efficient mind, surgery also products that We in paramount the outcome that what make products what an the clinical with in are just deliver are surgery continue is to products faster, the

didn't model, XX, revenue but in Relative have the to meaningfully Paragon that in a synergy here favorable real. very that's contemplate we procedures Bunion reimbursement. the U.S. is it

mentioned present earlier, I XX has the Paragon been ASC. in that not As

the as in present, you very are We ASC. know,

be So opportunity meaningful we moving deem forward. very that a to

we excited about where very are. net-net, So

not we to years. of we've but to question going range, all X are that volumes, your the on the the third-party to a cases ASC And research to X be done. the is the that's to relative lost in then core next in And moving me it's deem again, wide XX% that roughly orthopedics XX% that to

meaningful. it's So Thanks, Danielle.

Operator

Travis Steed with We'll take America. of our from Bank next question

Travis Steed

kind this of wanted why push a something -- growth on like the can't like do buyback little of guide I investors get to Why it you EPS was you bit I sure, EPS still to offset of you the margin little just and guess to EPS year. give expansion said or I a just kind know some make want bit year the to the some where get guidance. to Like this was? headwinds more a just growth? I

going ramp the course think you you what's when in the of confidence here about to the second the half, kind And year? the half of the over give over ramp revenue second revenue

Suketu Upadhyay

impact, line take really of Yes. talked ramp talk Why question growth in is $X.XX about The around not don't half. much which the having of about the as revenue the prepared which $X.XX, and FX I the bottom being insignificant. Ivan I'll think part in not guide remarks EPS EPS second is and the I let to biggest my the I in

margins in profile our still per contemplated margin expand that the We are the operating leverage. to the business earnings and investments metrics year. more, we think then the potentially reported only driving LRP and driving not of We year are this backdrop share drive but going beyond. the hits to but this think expanding growth, critical overall of We

through So SG&A. drive stabilized to continuing that's expansion margin, we ability and margin especially based the on earnings feel where we to side. On share are year, per this my our comments, again, earlier very really operating margin comfortable operating on that in gross maintaining find efficiencies

going LRP, is share balance our I leave to is to to optionality of now coming a in thing shareholders. We overall laid that sheet, we're return to we continue the good buybacks. share our my have any share assume allocation of have strong is Paragon prepared don't current assumption strategies, a out question which right The your in M&A back to pursue as remain going our capital around which count will and On at very remarks XX modeling that of the flat. out capital buybacks, transaction, us balance is

In strong year $XXX to think cash we're at I market least of evaluate shareholders. this continue that and that well on to which on forward. based for so XX% we're XXXX, conditions and to returned pathway opportunistic and very we going million, back flow, And free is going over be

Ivan Tornos

but the bullet the can lots frame maybe things X acceleration in Second second that points. part my of on the around, revenue dance on question I'll of half, I answer

pretty First, obvious.

versus we semester in second comps that XX XX we XXXX, benefit to due the had that a to the from to going the basis points took challenge second the beating XXXX. of ERP. The half, ERP is of Recall

benefit comp a have half. the you So in second

new second The is introductions. product piece

late probably that in talking approval of CE or seen, their XXX(k) in you you As approvals these the with new a have heard an Revision about products we're have got lot Persona and as Mark XXXX. of case

about So of of second you half do the of And the new first see we half do. need all the is most the It's the doing about products really training. these together. It's about ramp-up things sets to getting XXXX. in

first in investment is the internal on trainings; investments half both OpEx making that there's of of sizable the activities; one the with that half first in third whether a direct-to-patient the return training the whether launches, whether half. in it's pays XXXX. it's in marketing it's The all we're product of and materials, the investment back second new external XXXX these lot the associated

of growth in our fourth acceleration lastly, XXXX. then see We're the point going to really timing bullet business. international of half international second And the is of

the especially the year. Thanks as where in year, about second into the of excited the we are half we really for So question. get

Operator

next question from Wise with Rick our take We'll Stifel.

Frederick Wise

revolves we're and points to it presented carries and to around in or see like a one Each importantly Ivan, slides was to of on major X launching. premium it technology. seems the of of price JPMorgan And made just you half haven't a going I kind one where you products clear going like cases, the Again, markets, are are at had that as or these seems why innovation. slide X you premium. technology, is XX%, your those stronger second big XX% you pipeline them appropriate these a some any price presented excellent areas products back

impactful? we which going triple which to the focus on? X one of Help of seems most products we -- the ZX us understand, like One, should half hip which guess, I but stem should in be second are The products taper parts. me, to the

an a you providing And impactful what in providing launching truly front? product extent broad on are optimistic what guidance seemed view today, portfolio to like of

Ivan Tornos

Great question, great as Rick, of that the is of on 'XX. launch meaningful speak. ZX the challenge. optimistic product don't a we QX these I And ZX to half full XXXX. I in opportunity. an mode second got the Recall, we is initial launch think new We no, of impact in view of products. providing say we're very into get this meaningful would going be today

we and while. a us is a You see something should share U.S. have Hips, back a differentiated which It's not getting we $X.X to gaining offering. done for billion in we've market believe

So to growth. definitely impactor, in pay surgical meaningful combo by attention which, that with a drives the one, way,

of in second in drivers the U.S., especially two, HAMMR are the say those the and growth I ZX, So half. would main

XX%. In I the U.S. sets we Every we to around everything launched to acceleration going we we're gained in enter we ready XXXX, And XX% the OsseoTi We think exited get that but XXXX an was go XXXX, didn't half. do penetration cemented cementless, from until the as cementless Knees, second and ASP. there. Persona time with see in

we the were to XX really Partial if have In years truly U.S., market, we November got we get were. I'll or for differentiated, It's we where $X market of knee in PMA, the a to I believe FDA-approved one the be back you've years. product through market want XXX up going partial is to single to We last Oxford explain can points compete, partial to late in lost think share. that's so of a just approval share. have could the X over you again with Cementless. product that seen, Cementless, XXX if And digit. PMA X some Oxford growing product you highlight upper this And which U.S., is I XXXX. or the lost trends number Knee that be points we only go basis would that It means basis to billion say

Europe. of the over data knee best registry It has in in XXX,XXX in case any with registry done patients. U.K. XX,XXX world the We got partial the

product. I is a So go can differentiated on and this truly but on,

think the sets product as second I as people, train very the we Cementless to get into And meaningful be continue we ready, of to get a going Oxford XXXX. is half

favorite So a I very compelling to know I hard but it's lot, portfolio. your pick said child, it's and a always

Operator

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

Matthew Miksic

acquisition, force Paragon couple a on sales thoughts your had exclusive, independent integration of just the questions organizations. on and XX these force one So but on of one it's look and independent the given what that field like that

you'd total it's involved the just to obviously, growing one the love reason after small divesting ankle, know lower seems And not, on but only the on the get of these to every way extremities would have in acquisition an ankle. this, reason the that. they're -- asset And thoughts other your go somehow like I

Ivan Tornos

Matt. I'll of them. take both Thanks,

exclusive. Yes, they are force, they So XXXXs. are starting sales yes, with the

CMFT We XXXX or and Biomet exclusive at Zimmer sales also have a force here it's exclusive. is forces sales business XXXX

how know run we So businesses. to these

that bring here. last Orlando very I sales earlier, was in the sales this strong over mentioned a at weekend to made I As meeting. We've commitment force

sales as As the we continue to care long will, innovation, which long don't see to we as regard. disruption which as in of will, force, any we that I we take continue fuel

we at for Zimmer have even Biomet. ankle an don't sales reminder, a As here force dedicated a

comes disruption what when when to So duplicity, there selecting it comes is territory. who's to to no cover it going

say would I a it's integration. simple very So

share reason total and total the what didn't they be fixation, On fracture forefoot, we on. biologics. total where and going ankle, in Charcot portfolio, to going our in ankle, getting today XX. see in market ankle leadership there's any We're that position disruption space a just foot, with buy course, have don't given Paragon We flat of

as gets, transaction. integration the as it So I to simple forward closing say would this is and we look

Operator

from We'll Bedford Raymond final question take our Jayson James. with

Jayson Bedford

questions. X Just quick

by think business in assume second $XX of million issue. of the that you're 'XX ERP lost in is -- is was I the there it recoupment We because impacted was assuming think embedded I guide? sort of 'XX, about -- this half some the there or

new the when Cementless? full on with quickly you just Oxford mode product will be launch then in question, And

Ivan Tornos

Can the got but you I second the part repeat of question? part. second get didn't ERP, I the the

Jayson Bedford

Yes.

Oxford be mode with -- will second you the When launch in X questions, Sorry, Cementless? sorry. full

Ivan Tornos

Okay.

one. I'll the So with start second

training we Second XXXX half sets, done. the we have of have the

Cementless. Oxford So mode for that's full launch

train, extensive So XXXX. no first device, we're we PMA-centric the throughout half And have no of being a training policy a of use. running

is in already So you are when second full half launch mode.

introductions we ERP, the in moving like the some some will In business of did of other areas surgical, business terms recon, Certainly, of like some and of XXXX. In lot They we have an given had delays. there parts. in yes, have lose product components sports second lose towards areas medicine, impact ERP. Knees a new half been in Hips, half might the on and now moved first/second

hard and to quantify. parts moving several So it's

Operator

back this That over conclude the our I'd closing to additional Ivan session. remarks. question-and-answer for will any call At time, or to turn like

Ivan Tornos

of gratitude the Biomet. Zimmer to this with want started close employees I to morning. force Yes. gratitude the to and with sales I

As we and results different a sit X across here vectors: it's today, culture. totally company strategy, financial

about X.X the the to add are added in and divested we range profile time the and WAMGR Dental a by into -- XX from moved now portfolio. we've X Strategically, to Spine Paragon

we X%. ago. where where about are X X, gaps got And recon portfolio. billion we XX. we our Excited years That's market, to $X were That's with in not growing Paragon no a X%

company different totally strategic a from a So standpoint.

you got we years X guidance, years end growth, it prepared be the of the the this on through above Financially, margin or will mid-single-digit operating and remarks data I've expansion. X assuming XXXX, At revenue points seen of the Q&A. deliver

We cash we low are driving have And pace a different than to. free used flow Xs. we to broader the leverage ratio at conversion

forward continue on have motivated your our Thank for to organization, to early dedicated, you and updating in May. engagement, high we QX culture-wise, then And we look you results time.

Operator

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

You may now disconnect.

Zimmer Biomet (ZBH) 6 Feb 252024 Q4 Earnings call transcript