Earnings call transcript Q4 2022

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Operator

Good afternoon and welcome to ZimVie's Fourth Quarter and Full Year 2022 Earnings Conference Call. Currently, all participants are in a listen-only mode.

We will be facilitating question-and-answer session towards the end of today’s call.

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosures.

Marissa Bych

all today's you thank and for call. joining Hi results quarter and today ZimVie ended the financial released XXXX. Earlier year for December XX, of is release zimvie.com, on the the copy sec.gov. website as as available company's well A on press

we indicated management make that statements by include statements. the comments with remind differ and may that will and risks Actual recent a call Please forward-looking begin, results I'd SEC this materially Before to to forward-looking the you like SEC during of from most for of due filed to company's detailed periodic report filings refer uncertainties. the subsequent uncertainties. and discussion variety a these those risks

the earnings found on measures. company's financial investor comparable addition, certain GAAP website. today on these release include deck are issued most will non-GAAP Reconciliations within included of and/or directly In measures financial section the the the this measures discussion the call of to Relations Investor the

of This or conference or whether broadcast required new financial time-sensitive is of X, information law today, except and call or forward-looking only projections events contains any because information, ZimVie update any to otherwise. obligation, intention the by future March as or live revise XXXX. disclaims statements, as accurate

Jamali, will call turn with ZimVie. And I that, Chief over President to Executive the Vafa and of Officer

Vafa Jamali

the first Financial ended by for financial before our Heppenstall, our Thank you, in Rich update you call review and Officer, quarter turning providing significant to XXXX. December the we've and the XX, afternoon to our all thank made an for Marissa. an like to on Good as off joining us. Chief year independent performance call kick I'd progress year the company,

take efficiency, post the I'd to substantial of we us, business a future and complete our foundation demonstrated steps adaptability teams tremendous spin still work internal as up and we stand our for like have that growth. have who moment the to Understanding capacity, commend ahead to lay

immense quarters years, operational a effort, innovation around true over several would remains to that that product execution, this turning take and not commitment and and fiscal of knew We business today. discipline course the

that three each already, addressed that outlined pleased portfolio, post-spin able is the right while create over to we've side XXXX I'm a crossed these year commercial hurdles line on structure the five-year energy year of be of initiatives implementing value we the time grow we to ago. areas and to and to into beyond. the the in XXXX focus

our we as is platform. imperative long-term build of health the critical most Our innovation success for

our portfolio past our Over products the reshaping innovation considerable outcomes and that future supported to are growth better actively plans ensure into that year, benefits. progress the workload differentiated we've made drive clinical by

the the thrilled to launch dental in the these a implant TSX we implant we're several ease our from time demand excellent by use. predictability then June, and for with in around Abutment, stability, line implants, products. adopters market by in TX next-generational of next-generation the strong feedback introduction years new led first alongside We're dental, of November. our implant with the XXXX emergence seeing our Encode new and In in of launched was PRO XX market,

physicians workflow to excited restoration platform. We're tooth procedures computer-aided throughout week, and SUITE sophisticated our digital the within FULL implant we share create also that, procedure. offering CAD, dentistry designer, our launched and last This RealGUIDE modules allows and and complete seamless just software detailed to

substantially denture design implant guide the with customers. allowing the now platform the is only restorative for care, design including efficiency in crown module as offering planning and software within greater market same Our and

are the our These portfolio, solutions. dental in launches role really about of the dental marked increasing innovation in these implants we the next our of beginning wave adoption of with and excited

our for to business generate very whole. positioned business dental grow and flow cash is as well Our a

on portfolio. focused equally we're spine our Moving to refreshing spine,

the example, XXXX, instruments and announced is with navigation the screws of navigation which of in for the Virage and in polyaxial bone allows preparation the For spine we launch system, compatible be available surgery, navigation procedures This more an in or active to navigation supports compatibility overall systems effort outcomes. MIS the systems. our minimally invasive desire in with patient to third-party commercially improve

navigation on today, announce patients of customers we excited to Building this solutions. global industry-leading of and and are a integration and to portfolio deepest development Brainlab's technologies provide products Brainlab for our imaging, level ZimVie very agreement with spine between launch, and partnership spine-enabling planning, robotic-assisted the

underway innovative into enhance x-rays Work technology the while into to exposure. our Virage Brainlab's integrate workflow interoperative minimally systems is room and invasive accuracy, radiation Vital operating to allowing to differentiated reducing already solutions bring and us and

At technology to offering of solutions than our exactly enabling and in I leader spin, an to announced Brainlab the the we with rather footprint drive leverage that fits build with compatible space partner established portfolio. time with established our strategy pull-through the spine broadly an across an would greater

treatment portfolio, the for idiopathic Tether, non-infusion differentiated spine The Shifting spinal another within to our our of scoliosis. focus device

coverage device. coverage Anthem the have mid-XXXX, lives. lives. to we I'm by And another announce in benefit expanding XX-plus therapy today a pleased on who As a access past, also policy from have that million from decision remain in Highmark critically X-million received can major we positive received We this we children to expanding plus policy positive focused for driving detailed decision from

that great the example our of making a our is of difference of the lives The portfolio innovative significant piece a patients. is in Tether

opportunity by us. technology are We growth this offers this excited

positioned front throughout while We we to announcing opportunities we on the solutions, to to innovate markets innovation the our not forward, our and creating forward are rationalize existing on progress that Looking around our continue value look year. where optimize will win. in and we are position

XXXX spin-off. a was on portion of innovation, In many accomplishments in directed our addition energy our significant to focus since towards operational

operations our We are pleased Zimmer to Biomet. have successfully separate former from parent

team separation, growth of the experience and have focus part for a business a we position leadership established As creation. to and world-class with long-term value

completed independence. several operational major to team year accelerate our the has our first as company, In a enhancements standalone

conversions, On our transition as one to the moving these applications XXX we and the data major platforms. cloud-based Also that we transitioning parent, IT IT completed each new servers over centers region systems commercial core largely agreements, and in. over with three our exiting -- of operate refreshed agreements our side, for we XXX part are to ERP successfully TSA modern the

on have physical We focused and materially inventory inventory footprint. reduction XXXX. We additional also for and seize opportunity reduced to inventory in plan

amount also a of cost organization. the significant We identified waste in fixed

And most against operational strong have vital our XX%. create ZimVie made from we've direct XX% closed, In the past have or a to spine transformed facilities foundation rates as Over grow. to of reduced five these from benefit a worldwide. efforts, the summary, goals improved we year, fill we manufacturing our which measurable progress footprint can

update note This a on me global brings relevant our to our operations markets, China. in specifically position an in on

evaluating As market exiting following focusing on and rationalizing in brands spine and the of the recent position decisions. our improving in profitability, of growth fully now dental China part VBP we and are process our in

We are confident optimize margin markets best both growth accretive be that to focus to can this the and decision our that ZimVie is in over time.

call our organizational our again the over underscore Rich once goals on and performance, operational want execution progress I year. over to and financial turning Before immense the to the strong outline to

next has we a establishing challenging been and performance years. macroeconomic by to support pillars are and the several over impacted factors, efficient While profitable our separation growing the financial dynamics multiple business

to and stepped for into have not that the we and growth are and We patient a dental in line our driving our first ZimVie that needs value revitalize bottom that addressing to markets. the we and confident are expectations our last progress acknowledge we shareholder in the on company track better is the create within the committed year transforming ahead while and do reflect future year achieve. long-term we line that spine expect we ZimVie made for nor March to real trajectory top plan business But

I'll to now the line Rich. hand over

Rich Heppenstall

by currency. a ERP million, We back in begin good sales then XX.X% and Vafa outlook were decrease afternoon, fourth the quarter XXXX commentary for net decrease by year of XXXX fourth third-party full quarter constant major results three Thanks, the XXXX. a implemented basis half and of close will and conversions of X.X% Total a our for reviewing our everyone. $XXX.X on on year. providing in the I'll of reported the

$X respectively. by quarter impacted by Unfortunately, fourth in points. in day, impacted which due approximately growth After the the third-party versus XXXX, quarter XXXX our the also X.X% The currency quarter revenue selling implementations and customer to X.X adjusting was declined less demand spine one reported meeting segment. for million disruptions approximately constant percentage disruptions and negatively sales selling X.X% by in net and day impacted one less

$X order quarter COVID Additionally, challenges impacted fourth and quarter sales macroeconomic to points distributor to accounted slowdown for specifically million fourth in percentage a estimate headwind of disruption China China the VBP, due by including volume-based or X.X ahead procurement. We were sales. China

in XXXX guidance, China, are we our situation changes to something talk will also proactive about shortly. impact I our the which making will Given footprint,

to QX dental X.X% currency constant decrease $XXX.X compared two were the on million, Shifting representing prior sales year basis our decrease a third-party in segments. a a period. net when and X.X% reported global to

in markets, day. one of impacted less and volume-based was performance Our selling procurement in our by macro-related end headwinds softness ahead China

the of the less by the million net on of in year-over-year by hampered a $XX.X of decreased dental the and US, for including flat dental and selling net in less currency point million third-party X.X%, basis. US, the fourth day dental currency impact was $XX.X constant XX.X% Normalizing sales the In China, approximately selling versus constant global approximate quarter China. Outside X.X% one third-party sales a related business decreased X.X XXXX. percentage by impact loss of to on of reported basis one day an

discontinuation the by brand spine and and decrease less one China year unprofitable a sales in when the on markets day, million, product basis disruptions XXXX, to a The from a $XXX.X exit was implementations decrease outside rationalization revenue late selling ERP QX prior our from compared third-party currency certain the decrease US. in global XX.X% net of period. constant XX.X% program, driven were resulting reported

the X% currency Omicron-variant of third-party constant by XX.X% reported previously US as currency by $XX.X spine when related basis to adjusting US the the X.X% from these loss of by of on $XX.X a hampered the five and XX.X% net ERP million decreased and to of Outside impact million include sales by impacted XXXX. sales QX an impact decreased and day and XX.X% spine compared net China on basis, a noted. implementation net sales respectively When one constant In versus a spine US XXXX. outside a decreased XX.X% in selling sales and third-party items, X.X% VBP disruptions of to reported

Adjusted in compared compared when points XX.X% to was adjusted gross period. QX was to profit charges the the profit in QX XXXX. in XXX and The an XX.X% $XXX.X driven is $XXX.X sales. prior prior basis increase implant of greater in gross a gross quarter dental million margin gross versus inventory higher year million year increase reduction margin from substantial by dollars of

over Full increased year XX.X% XXX towards margin of end XXXX range of gross top points adjusted mid-XXs year the margin. the prior our gross basis expected of

with our operational We and the progress manage the inventory since excellence pleased out further initiatives have will drive are company. inefficiencies made of spin to review we continue to to

growth QX points percentage year by XXXX XX.X% as organizational to in and or period. administrative of selling net a $XXX.X realignment sales the of favorable fixed semi-fixed Lower year variable revenue. of basis higher net third-party percentage XXX was compared from of XXXX general QX lower research points XX of sales million X.X% selling million as were prior and QX of we offset or adjusted higher and adjusted completed expenses development decrease a cost expenses XXXX, impact $XX.X expenses of of and period. the the prior third-party the a basis than sales,

margin, quarter adjusted of of margin higher the year third-party Adjusted net EBITDA from year fourth $XX.X third XX.X% increase than XXXX basis Full of increase of reflects a of sales, in partially our EBITDA is XXXX XX.X% period. or party the XX of range in net margin XX sales as to EBITDA percentage prior towards selling, is in due and XX.X% the margin revenue XX.X% an expected. as of points end points as offset million basis top administrative prior EBITDA expenses, The by higher year discussed. guidance general, higher of primarily adjusted the adjusted previously gross this is

million the share per $X.XX per driven a expense. offset interest largely earnings benefits of share income was Full XXXX average partially share in $X.XX earnings shares. of fully by weighted QX XXXX Adjusted year XX.X in was tax realized by adjusted diluted count on higher period,

Touching and on capital, working liquidity debt.

capital financial are We cash framework flexibility. application sheet to our the our with assets and disciplined on on monetize on of pleased drive increased assets strength allocation optimize progress to our capitalizing and our of to of the and financial certain balance

on XXXX of $XX inventory resulted million a of the increased a reduction efforts utilization planned set instruments, reduction spend in since amount December as net in significant and the $XX driving million on focus in of spine in Our have approximately capital we field.

XXXX fourth the with our quarter March $XX approximately approximately inclusive equivalents, with of as independent earmarked $XX March we approximately X, $XX transactions. to out ZimVie own and for since company. settle earmarked from spun transactions cash, $XX our certain implementations prior we settle approximately of to post-spin-related in ended ERP inclusive cash on XXXX. million million cash, of parent After to We $XX spun million adjusting million decouple of of million generated post-spin-related of the cash and to cash fund company

all action further We to payments our XXXX, we flexibility on increasing of allocation and announce XXXX, in prior debt. that we profile commercial financial priority to initiatives. leverage paying the to debt to operational took reduce provide prepaid our pleased I'm continue as on down loan to capital our our and principal end required Consistent term with of XXXX flexibility our time, financial this over of execute

revolver Our million undrawn. $XXX remains

turn outlook. full XXXX to year now I'll our

I investor Starting to zimvie.com Relations revenue. begin, highlight Investor to want of some transparency. that with details posted additional the our are on in guidance I Before reflected section give deck

to We sales million million, expect sales a net in to XXXX reported range net at year-over-year of X.X% the $XXX midpoint. reflecting decline $XXX be the

expect currency to pronounced more year-over-year the of includes in guidance the year the from we be headwinds, foreign negative Our which second X.X% half anticipated, in leveling out first half. impact, core an

foreign Our sales X.X% operations impact midpoint. scale the excluding and guidance net impact year-over-year, negative X.X% of the exchange back reflects China's guidance decline in also scale and includes back, a from a exits Therefore, our of China. at excluding

segments. our at Looking

exchange flat XXXX, with low headwind to We expect expected markets due single end dental a the our line, from to in to impact of foreign in grow point China. an digits approximate point X.X percentage inclusive in X.X and

approximate, X.X impact the expect foreign exchange. exit decision spine from three negative percentage the of and China of to in market, percentage decline to an impact business point our We teens inclusive our spine to point a

Moving to adjusted EBITDA.

to expect be of of full margin We year adjusted range in XX.X%, XX.X% the sales. net EBITDA to

to decline. despite a $X.XX As we anticipated Adjusted share is have to our diluted fully are steps count expand be we a implementing top million and per discussed, on a of share previously earnings margins to share, continue line expected shares. share, between $X.XX XX.X

from interest Our earnings per primary our share and rate year-over-year the guidance lower reflects, an approximate per $X.XX to year-over-year rates the headwind post adjusted a earnings due expense; headwind, interest to change rising year-over-year are Thus, activity tax choppiness share. and expense starts normalize. of as in higher tax contributors of $X.XX spin

lowest and QX and quarterly not to trends XXXX provide traditional to do follow and for strongest guidance, revenue our expect revenue. did vacation our late we approximately the we being our not to in being expect total quarters due due seasonality, Although, schedules, historical with impact quarter, Omicron quarterly follow account revenue traditional accounting XX% QX of QX and than XX% of XXXX less summer seasonality total performing XXXX. early we to which for

reminder, supplemental available guidance zimvie.com. our presentation a in located As investor is on

back With that, the call over I'll turn to now Vafa.

Vafa Jamali

entangled is first made accelerate choppy in significant year, our the company. and year, independence. first the generally could Thank what separation environment, to especially a with is focus business choice control ultimately the as we our a face within and stand-alone business the We macro on This to Companies you, against, spin-off Rich. accelerate disruption when case entity. in their situations parent the heavily the

to whole, area that as confident remains lives. the a as mission is good to our forward, I'm within and ZimVie to quickly, accomplishments about feel continue and approach we patient best this time transform separation period in commercial spine. now our This and more dental the dedicate getting our through success allowing to this going I us priority,

Lastly, in front International and at we'll our line Cologne, share be I'm two that the weeks Dental pleased in dental Show showcasing new to Germany.

oral a virtual dentistry hosting the and ZimVie's to two and be discuss with solutions. of of will following the platform an digital periodontist We use dialogue the KOLs, benefits surgeon interactive a week implant

hope greater many both of one these or and share us you that will at can detail We of shortly join events.

open to we it With that will up questions.

Operator

Instructions] Thank coming first JPMorgan. And line from question you. our Robbie the [Operator with Marcus of

Your line is open.

Robbie Marcus

and both Great. came Thanks we Maybe currency. China spine even fourth excluding for quarter taking questions. start the consensus below dental could in with it bit a and and

so you seeing fourth on what quarter in and of maybe spend in of could a So and first the each seeing businesses shortfall you're in far you're quarter each Thanks. minute trends the those them? in

Rich Heppenstall

Rich. start around ERP I'll start a with QX Rob, challenges. the I'll so Hi, -- Yes little it's bit headline

talked that relative said be the we end we us impacted bottom when the towards call $XXX at million implementations range. the that kind million ERP end million we by QX, were to had would put of the to of we're as guided going the $XXX to mentioned $X about range. So have towards on of squarely end We bottom

of of December that did in on macroeconomic actually dental between saw also side VBP. dental And obviously dental by spine, bit of a the business, slowed we in see little frankly kind a uncertainty the this of side. for the we on what it on impacted the of impacted sales then is spine the quite dynamics into bit is the and further fourth kind we kind in dental going some us for – What down quarter were

quarter. We January To actually seeing China that first of of us. actually some was we're That's we your pretty related a quarter, to stability. decent for and the how had more question the finished around fourth more implementations the else. than anything ERP On side spine kind the things

dental stability starting to in see starting we're see in and spine. some so to some stability And

So is expecting almost to the first months. we're two kind off of the quarter as through

Robbie Marcus

XXXX. Great. if And to it maybe we take

pretty spine outlook bit growth the you it's a and were growth thinking but think still reasonable, I a market below the year ago. dental probably lower looks even than

of or growth? you experience -- return to plan to XXXX So can that the maybe talk that experience issues some how overcome your there business market and to that in and

Vafa Jamali

Vafa. Sure. Hi, it's Robbie,

well like well. think doing So pricing think our positioned portfolio is We is is you dental good. that that to compete. We said

Our good. profitability is

commercial Our healthy. very infrastructure is

happy really with we're So dental.

behind We uncovered bit the we that in need really were portfolio. that frankly and had commercial of With we some were we a And through to commercial spine little terms some activities frankly some the of gaps. manage our we year perform had and suboptimal operations.

with So on focused the volatility spine, all portfolio. that inside we

start do to we development So It's That's effectively enabling Zimmer healthy. of respect gap opportunity program I a had an coming work we a a Brainlab. out to us with And towards for fill that we'll added with That be will to R&D to think Biomet an gap that. going filled. we've that technology.

regenerate with And which which And is following reimbursement Mobi-C invested to that do an then, we and Tether, that We some respect wins. to product hurdles one. had reinvigorate what needs Anthem, we In We've High continue hit resolved. we Point. get in is XXXX, outstanding Anthem. and we some to got to

-- of our reimbursement that surgeons And their confidence when really a if that's can giving they Tether patients them. for get getting lot they're they that

still disruption have that these we're to in put that living I There are number pieces together. spine So through. is we think things a of

be part. toughest going to I think the of half year the the is first

I think spine see year of back-end for ZimVie. to the going business you're a healthier the much, in And much

really that should there make we really see of But just to ourselves how enough out enough like, room kind we the that that and where I some think give volatility that's commercial the I So changes a this do that portfolio team need in to we there's us. do we that disruption, point get it. win felt can actually for need we the to to have market

Robbie Marcus

XXXX thinking it's one when for you think out of the Great. long a maybe levels? me, could you growth EPS items you about, back to EPS about you the think taking over significant Thanks. get as do How for chunk run? next And more And are year. your below-the-line

Rich Heppenstall

Yeah. Hey this Rich. Robbie, is

spent fair looking a of amount we EPS. at So time

categories, boil I was there so actually and EPS right? the different And different change -- couple down year-over-year four a of

some was higher which So given $X.XX EPS higher give then, And about by year-over-year expense or obviously actually take lower depreciation profitability. income. amortization so increases and or net

impact. some dilutive higher compensation by bit of share-based a offset and That's little

And two items. road two year-over-year those about decline, so is items. EPS numbers the X% net in the those is on two of rubber the EPS Where meets a between really on

And about which the interest is is first $X.XX. one expense,

is spun about at So that in we plus when quarters. three we're if one SOFR debt X.X% you X.X%, our recall, debt at was about And today. priced

the fixed is piece $X.XX. the obviously And the debt interest biggest rate because the increase, Fed floating-rate which obviously And in of debt us so so our impacting load. is about that's

tax a were that that then, the rate we've XXXX, the speaking tax about income adjusted In expense. there you actually investment tax. is -- about tax we about piece before-tax. What adjusted and benefit tax our about up is, profit items number before cleaned adjusted X.X% minus to of And of realized community generally of talked other a XX% about is were profit a -- of that of post-spin expense

-- in -- can't perpetuity. a that I not right? just native favorable to obviously going have mean, rate a that's just you tax recur, And

that of in so post-spin kind cleaned normalizes into these, And a lot XXXX, of transactions as up XXXX. we

expense. think re-baseline be a then about tax you beyond, more XXXX probably grow expense actually XXXX we'll based to if And is environment able there. the on and So to interest and from of relative current

Robbie Marcus

Okay.

say, So back fair be you tax get could interest forecast? given before and current while the it to a

Vafa Jamali

part If the expense approach. is that highest right interest the be it, of I that Yeah. think will

Rich Heppenstall

of mean it and a between $X.XX negative tax is interest right, having entirety about in rate if at Yeah. Robbie, look I mean you the I XXXX.

Robbie Marcus

Got it.

lot. a Thanks great. Okay,

Rich Heppenstall

you. Thank

Operator

question coming Miksic the Barclays. Matt from line And Thank you. with of next our

is open. Your line

Unidentified Analyst

for Hi. Matt. on Thanks taking This [ph] is for our question. Sarah

you around? a the I of things called this. trends dental Just VBP. into But of just one additional Is US specifically turn color you from about little go OUS know in us the talked you there can out and timing there just in any any can deeper we visibility can terms and I bit provide if know when

Rich Heppenstall

Yeah.

want start do So and color. some let -- Vafa you I'll so add I'll

the in year-over-year QX dental So business flat. was actually basically

impacts one, currency couple a were items you remarks, headwind in fourth the there then When business foreign prepared China. we other selling the of actually on being flat. QX was had one So one that And was impact of had exchange mentioned for as those normalize quarter and of we in the then course day. less just an QX, our dental

US I still our better when market. And is normalize think particular it relatively we perhaps you And business little even was than OUS at/or and flat those items. dental believe the a performing bit

our And level. they've of so peers look are some you at many of same that kind them if of as performing announced, at

as has our been -- is continue the to sales new global feel So got really business footprint well-positioned. so It force. a our though market dental we acceptance direct We've really strong. product has

is better we dental bit XXXX, to think at to going market. that look we as a perform continue than so And at/or little

then should there's be a a we're bit said, I have bit And little better XXXX. in think I the China of we headwind macro that but into that's seeing But like performing across an market. than little FX space. headwind the of consistent we a

Vafa Jamali

is or you enough VBP right purposely were approach Further to to room Sarah, how to given or price in room stay and choice as that, your address to given we've China so how make decision to impacted. is on the ourselves I isn't that make market whether a think not. market that that significant enough ourselves market cuts But we've team on significant the satisfy the reconfigure to as right you

at us. guidance remains think for most approach China. OUS But say, question of within different I'd we'll pretty our that similar. The be implied looking is it's to So I US short China that a a and

Operator

will I'm you. call questions closing remarks. any showing back no to Mr. Vafa time. the Thank I this further over for Jamali now turn at And

Vafa Jamali

thank Yes, future very your in better for forward sharing look quarters. and attention we to you news much

rest a and the much you very of thank you wish day. great So, I

Operator

that and conference does Ladies you for participation. today. gentlemen, conclude your for Thank our

disconnect. You may now

ZimVie (ZIMV) 1 Mar 232022 Q4 Earnings call transcript