ZimVie (ZIMV) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents ZimVie Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, reflecting ongoing losses, improved operating performance, and the spine business divestiture Item 1. Financial Statements (Unaudited) This section provides ZimVie Inc.'s unaudited condensed consolidated financial statements, including balance sheets as of June 30, 2025, and December 31, 2024, and statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Operations This statement details ZimVie Inc.'s operating performance for the three and six months ended June 30, 2025 and 2024, showing a shift from operating loss to profit but continued net losses Condensed Consolidated Statements of Operations (Unaudited) | Metric (USD thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Sales | 116,662 | 116,811 | 228,659 | 235,006 | | Operating Income (Loss) | 1,291 | (6,687) | 2,071 | (9,498) | | Net Loss from Continuing Operations | (3,849) | (9,553) | (6,474) | (21,114) | | Income (Loss) from Discontinued Operations, Net of Tax | (99) | 5,539 | 1,055 | 9,339 | | ZimVie Inc. Net Loss | (3,947) | (4,014) | (5,418) | (11,775) | | Basic Net Loss Per Share | (0.14) | (0.15) | (0.19) | (0.43) | | Diluted Net Loss Per Share | (0.14) | (0.15) | (0.19) | (0.43) | - The company achieved operating income in the second quarter and first half of 2025, reversing operating losses from the prior year, indicating improved operational efficiency. However, due to tax provisions from continuing operations and losses from discontinued operations, the company still recorded a net loss[11] Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents ZimVie Inc.'s comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024, highlighting the significant positive impact of foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | Metric (USD thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | ZimVie Inc. Net Loss | (3,947) | (4,014) | (5,418) | (11,775) | | Cumulative Foreign Currency Translation Adjustment, Net of Tax | 17,125 | 4,340 | 29,650 | (11,099) | | Comprehensive Income (Loss) | 13,178 | 326 | 24,232 | (22,874) | - In the second quarter and first half of 2025, cumulative foreign currency translation adjustments had a significant positive impact on comprehensive income, shifting the company from net loss to comprehensive income, primarily due to the strengthening of the Euro and Japanese Yen against the US Dollar[12][91] Condensed Consolidated Balance Sheets This statement provides ZimVie Inc.'s financial position as of June 30, 2025, and December 31, 2024, showing an increase in total assets and stockholders' equity, and a decrease in total liabilities Condensed Consolidated Balance Sheets (Unaudited) | Metric (USD thousands) | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :----------------- | :------------------- | | Assets | | | | Cash and Cash Equivalents | 70,176 | 74,974 | | Total Current Assets | 260,209 | 257,285 | | Goodwill | 266,232 | 257,605 | | Intangible Assets, Net | 86,462 | 92,734 | | Total Assets | 758,224 | 753,674 | | Liabilities and Equity | | | | Total Current Liabilities | 109,613 | 133,944 | | Non-Current Liabilities | 235,810 | 238,023 | | Total Liabilities | 345,423 | 371,967 | | Total Stockholders' Equity | 412,801 | 381,707 | - As of June 30, 2025, the company's total assets slightly increased, total liabilities decreased, and stockholders' equity significantly grew, primarily driven by foreign currency translation adjustments and equity activities. Assets and liabilities from discontinued operations were zeroed out as of June 30, 2025[14][42] Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in ZimVie Inc.'s stockholders' equity for the six months ended June 30, 2025 and 2024, primarily driven by other comprehensive income despite net losses Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Metric (USD thousands) | As of June 30, 2025 | As of June 30, 2024 | | :----------------------------------- | :----------------- | :----------------- | | Total Stockholders' Equity (Beginning of Period) | 381,707 | 409,493 | | Net Loss | (5,418) | (11,775) | | Equity Plan Activities | (709) | (1,670) | | Share-Based Compensation Expense | 7,571 | 9,150 | | Other Comprehensive Income (Loss) | 29,650 | (11,099) | | Total Stockholders' Equity (End of Period) | 412,801 | 394,099 | - As of June 30, 2025, total stockholders' equity increased to $412,801 thousand, primarily driven by the significant positive impact of other comprehensive income (foreign currency translation adjustments), despite the company still recording a net loss[15] Condensed Consolidated Statements of Cash Flows This statement summarizes ZimVie Inc.'s cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024, showing increased operating and investing outflows and reduced financing outflows Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric (USD thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Used in Operating Activities | (10,682) | (8,475) | | Net Cash Provided by (Used in) Investing Activities | (9,377) | 285,699 | | Net Cash Used in Financing Activities | (709) | (276,670) | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 14,372 | (5,627) | | Decrease in Cash and Cash Equivalents | (6,396) | (5,073) | | Cash and Cash Equivalents, End of Period | 70,176 | 82,695 | - In the first half of 2025, cash outflow from operating activities increased, cash outflow from investing activities significantly increased (compared to a large cash inflow in the prior year due to the spine business sale), and cash outflow from financing activities substantially decreased. Exchange rate changes had a positive impact on cash and cash equivalents[16][106][107][108] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide additional information and explanations for the unaudited condensed consolidated financial statements, detailing accounting policies, business events, and financial instrument valuations 1. Background, Nature of Business and Basis of Presentation ZimVie Inc., spun off from Zimmer Biomet in 2022, completed the divestiture of its spine business in 2024 to focus on dental solutions, with historical spine performance reported as discontinued operations - ZimVie Inc. was spun off from Zimmer Biomet on March 1, 2022, becoming an independent public company[19][83] - On April 1, 2024, the company completed the sale of its spine business for a total consideration of $377 million (including a $60 million promissory note), receiving $311.6 million in cash proceeds[20][38][85] - The company currently focuses on its dental business, offering dental implant systems, dental biomaterials products, and digital dental solutions, with primary revenue from the North American market[21][26][84] - The historical performance of the spine business has been presented as discontinued operations in the condensed consolidated financial statements[24][37][87] 2. Business Combinations On April 7, 2025, ZimVie acquired its Costa Rican distributor's dental business for $3.3 million, primarily gaining customer relationships, inventory, and receivables without generating goodwill - On April 7, 2025, the company acquired the dental business of its Costa Rican distributor for $3.3 million[35] - The acquired assets included customer relationships ($1.8 million), inventory ($1.1 million), and accounts receivable ($0.3 million), with no goodwill recorded[35] 3. Discontinued Operations The company completed the sale of its spine business on April 1, 2024, with its financial results reported as discontinued operations, generating an $11.1 million gain and involving deferred transfers and transition service agreements - The sale of the spine business was completed on April 1, 2024, for a total consideration of $377 million, recognizing a gain on sale of $11.1 million[38] - Business activities at certain Deferred Transfer Locations were fully transferred to the buyer on April 1, 2025[38][42] - The company entered into Transition Service Agreements (TSA) to provide support services for up to 12 months post-sale, with related revenue recognized in "Other income, net"[39][99] Income (Loss) from Discontinued Operations (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Sales | — | 14,575 | 7,409 | 108,399 | | Net (Loss) Income from Discontinued Operations, Net of Tax | (99) | 5,539 | 1,055 | 9,339 | 4. Goodwill and Other Intangible Assets As of June 30, 2025, net goodwill increased to $266.2 million due to currency translation, while net intangible assets decreased to $86.5 million primarily due to increased accumulated amortization Changes in Carrying Amount of Goodwill (USD thousands) | Metric | As of December 31, 2024 | As of June 30, 2025 | | :----------------------------------- | :----------------- | :----------------- | | Goodwill, Net | 257,605 | 266,232 | | Currency Translation | — | 8,627 | Identifiable Intangible Assets, Net (USD thousands) | Metric | As of December 31, 2024 | As of June 30, 2025 | | :----------------------------------- | :----------------- | :----------------- | | Technology | 46,859 | 42,545 | | Trademarks and Trade Names | 10,553 | 9,524 | | Customer Relationships | 33,322 | 31,288 | | Other | 2,000 | 3,105 | | Identifiable Intangible Assets, Net | 92,734 | 86,462 | 5. Share-Based Compensation ZimVie's 2022 equity incentive plan authorized 6 million common shares, with 2.9 million remaining for future grants, and unrecognised share-based compensation costs of $18.2 million expected to be amortized over 1.2 years - The ZimVie 2022 Equity Incentive Plan authorized the issuance of 6 million shares of common stock, with 2.9 million shares available for future grants as of June 30, 2025[45] - The conversion of Zimmer Biomet equity awards to ZimVie equity awards at the time of the spin-off resulted in $21.3 million of incremental share-based compensation expense, of which $11 million is being recognized over the remaining vesting period[46] Share-Based Compensation Expense (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Share-Based Compensation Expense | 4,074 | 5,676 | 7,571 | 9,150 | | Net of Tax Expense | 3,044 | 4,222 | 5,659 | 6,837 | - As of June 30, 2025, unrecognized share-based compensation cost related to unvested restricted stock units (RSUs) was $18.2 million, expected to be amortized over approximately 1.2 years[50] 6. Earnings Per Share Due to net losses from continuing operations, the impact of dilutive share-based awards was excluded from earnings per share calculations, resulting in basic and diluted net losses of $0.14 and $0.19 for the three and six months ended June 30, 2025 Earnings Per Share Calculation (Shares in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Loss from Continuing Operations | (3,849) | (9,553) | (6,474) | (21,114) | | Income (Loss) from Discontinued Operations, Net of Tax | (99) | 5,539 | 1,055 | 9,339 | | ZimVie Inc. Net Loss | (3,947) | (4,014) | (5,418) | (11,775) | | Basic Net Loss Per Share | (0.14) | (0.15) | (0.19) | (0.43) | | Diluted Net Loss Per Share | (0.14) | (0.15) | (0.19) | (0.43) | | Weighted-Average Common Shares Outstanding, Basic | 28,026 | 27,405 | 27,883 | 27,265 | - Due to net losses from continuing operations, dilutive stock options and other share-based awards were excluded from the diluted share count calculation for the reporting periods[51][52] 7. Balance Sheet Details As of June 30, 2025, total inventory was $84.4 million, predominantly finished goods, and other current liabilities totaled $65.7 million, including salaries, acquisition-related contingent payments, and lease liabilities Inventory Composition (USD thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :----------------- | :------------------- | | Finished Goods | 61,190 | 53,929 | | Work-in-Process | 17,746 | 18,104 | | Raw Materials | 5,511 | 2,985 | | Total Inventory | 84,447 | 75,018 | Other Current Liabilities Composition (USD thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :----------------- | :------------------- | | Salaries, Wages, and Benefits | 22,403 | 21,606 | | Acquisition-Related Contingent Payments | 4,586 | — | | Lease Liabilities | 3,685 | 3,902 | | Other Taxes | 7,414 | 4,812 | | Other Liabilities | 27,592 | 32,585 | | Total Other Current Liabilities | 65,680 | 62,905 | - Acquisition-related contingent payments were reclassified from non-current to current liabilities in the first quarter of 2025[53] 8. Fair Value Measurements of Assets and Liabilities The company uses Level 2 inputs for forward foreign exchange contracts and Level 3 inputs (discounted cash flow analysis) for the spine business promissory note and acquisition-related contingent payments, valued at $67.89 million and $4.59 million, respectively, as of June 30, 2025 - The fair value of forward foreign exchange contracts is determined using Level 2 inputs[54] - The fair value of the $60 million promissory note received from the spine business sale and acquisition-related contingent payments are determined using Level 3 inputs (discounted cash flow analysis)[55][56] Reconciliation of Fair Value Measurements Using Level 3 Inputs (USD thousands) | Metric | Assets (Promissory Note) | Liabilities (Contingent Payments) | | :----------------------------------- | :----------- | :--------------- | | Balance as of December 31, 2024 | 64,643 | 4,586 | | Payment-in-Kind Interest | 3,250 | — | | Balance as of June 30, 2025 | 67,893 | 4,586 | 9. Debt As of June 30, 2025, the company had $221.9 million outstanding on its term loan, with no revolving credit facility borrowings, and no quarterly amortization payments after a $275 million prepayment in April 2024 Debt Composition (USD thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :----------------- | :------------------- | | Term Loan | 221,913 | 221,913 | | Debt Issuance Costs | (1,127) | (1,462) | | Total Debt | 220,786 | 220,451 | | Less: Current Portion | — | — | | Total Debt Due After One Year | 220,786 | 220,451 | - As of June 30, 2025, the outstanding balance on the term loan was $221.9 million, with no borrowings under the revolving credit facility[59] - On April 1, 2024, the company prepaid $275 million of the term loan using proceeds from the spine business sale, resulting in the remaining balance maturing on February 28, 2027, with no quarterly amortization payments[59] - As of June 30, 2025, the company was in compliance with all debt covenants, including a financial covenant for a maximum consolidated net leverage ratio of 6.00 to 1.00[61] 10. Derivatives The company manages currency risk with one-to-three-month forward foreign exchange contracts, which had a total notional amount of $37.6 million and generated a $2.6 million gain for the three months ended June 30, 2025 - The company manages currency risk through forward foreign exchange contracts with maturities ranging from one to three months[63] - As of June 30, 2025, the total notional amount of these contracts was $37.6 million, compared to $27.9 million as of December 31, 2024[63] - For the three months ended June 30, 2025, derivative instruments generated a gain of $2.6 million, compared to a loss of $0.3 million in the prior year period[64] 11. Income Taxes For the three and six months ended June 30, 2025, the effective tax rate (ETR) from continuing operations was 1541.2% and 1005.3% respectively, primarily due to income being near the break-even point, while 2024 saw negative ETRs due to valuation allowances and GILTI Effective Tax Rate (ETR) from Continuing Operations | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | ETR | 1,541.2% | (40.9)% | 1,005.3% | (48.0)% | - In 2025, the high ETR was primarily due to income from continuing operations being near the break-even point, rendering the tax rate calculation not meaningful[65][102] - In 2024, the negative ETR was mainly due to losses not benefiting from tax, driven by factors such as valuation allowances and Global Intangible Low-Taxed Income (GILTI)[65][102] 12. Segment Data Following the spine business divestiture, the company operates solely in the dental segment, with the United States and Spain being key regions for both net property, plant, and equipment and third-party sales - Following the sale of its spine business, the company has only one reportable segment: Dental[26] Net Property, Plant, and Equipment by Country (USD thousands) | Country | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------- | :----------------- | :------------------- | | United States | 27,437 | 29,341 | | Spain | 17,171 | 14,780 | | Other Countries | 4,191 | 3,147 | | Total Net Property, Plant, and Equipment | 48,799 | 47,268 | Third-Party Sales by Geography (USD thousands) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | 67,958 | 69,316 | 133,791 | 137,064 | | Spain | 13,856 | 12,821 | 27,471 | 28,168 | | Other Countries | 34,849 | 34,674 | 67,397 | 69,774 | | Total Third-Party Sales | 116,662 | 116,811 | 228,659 | 235,006 | 13. Commitments and Contingencies The company faces various legal proceedings, including product liability and intellectual property claims, with an accrued balance for contingent losses of $0.1 million as of June 30, 2025, and does not anticipate a material adverse impact on its financial results - The company is subject to product liability, intellectual property, commercial, and other litigation and investigations[68][125] - As of June 30, 2025, the accrued balance for contingent losses was $0.1 million, a significant decrease from $2.2 million as of December 31, 2024, primarily due to a payment made in January 2025 for a 2024 settlement[68] - The company does not anticipate these matters will have a material adverse effect on its results of operations, cash flows, or financial condition[125] 14. Restructuring and Other Cost Reduction Initiatives The company initiated restructuring activities in January 2024 to optimize its organizational structure post-divestiture, incurring $0.1 million and $1.5 million in pre-tax charges for the three and six months ended June 30, 2025, primarily for employee termination benefits - The company initiated restructuring activities in January 2024 to optimize its organizational structure following the spine business divestiture, with completion expected by the end of 2025[70][97] Restructuring Expenses (USD thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Pre-Tax Expenses | 83 | 398 | 1,515 | 2,977 | - Restructuring expenses are primarily related to employee termination benefits, with $7 million in cumulative pre-tax expenses incurred since the plan's inception, and no significant additional expenses are anticipated[70] Changes in Restructuring Liabilities (USD thousands) | Metric | Balance as of December 31, 2024 | Additions | Cash Payments | Balance as of June 30, 2025 | | :----------------------------------- | :--------------------- | :----- | :------- | :--------------------- | | Employee Termination Benefits | 1,875 | 1,474 | (2,226) | 1,123 | | Other | 20 | 41 | (61) | — | | Total | 1,895 | 1,515 | (2,287) | 1,123 | 15. Subsequent Events On July 20, 2025, ZimVie entered into a merger agreement to be acquired by Zamboni Parent Inc. for $19.00 cash per common share, subject to shareholder and regulatory approvals, with specific termination provisions - On July 20, 2025, the company entered into a merger agreement with Zamboni Parent Inc. (an affiliate of ARCHIMED), under which ZimVie will be acquired and become a wholly-owned subsidiary of Parent[72][86] - The merger consideration is $19.00 in cash per common share, representing a 99% premium over the 90-day volume-weighted average price as of July 18, 2025[73][86] - The merger is subject to shareholder approval, the expiration or early termination of the Hart-Scott-Rodino Antitrust Improvements Act waiting period, and other non-U.S. antitrust and foreign direct investment approvals[75][130] - The merger agreement includes termination provisions where the company may be required to pay Parent a termination fee of $10,125,785 or $20,251,575 under certain circumstances, and Parent may be required to pay the company a termination fee of $40,503,150 in other circumstances[78][131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operating results for the three and six months ended June 30, 2025, focusing on continuing operations after the spine business divestiture and the subsequent merger agreement OVERVIEW ZimVie, an independent public company since 2022, completed its spine business divestiture in 2024 to focus on dental solutions and subsequently entered a merger agreement for acquisition by Zamboni Parent Inc - ZimVie was spun off from Zimmer Biomet on March 1, 2022, becoming an independent public company focused on dental and spine businesses[83] - The company is now a leading medical technology company dedicated to improving the quality of life for dental patients through dental implant systems, restorative products, and regenerative products[84] - On April 1, 2024, the company completed the sale of its spine business for a total consideration of $377 million, recognizing a gain on sale of $11.1 million[85] - On July 20, 2025, the company entered into a merger agreement for Zamboni Parent Inc. to acquire ZimVie for $19.00 in cash per share[86] RESULTS OF OPERATIONS This section analyzes the company's net sales, cost of products sold, and operating expenses for the three and six months ended June 30, 2025 and 2024, highlighting changes in revenue drivers and cost efficiencies Net Sales Net sales for the three months ended June 30, 2025, slightly decreased by 0.1% due to lower volume/product mix and price, partially offset by favorable foreign currency, while the six-month period saw a 2.7% decline Net Sales Variation Analysis (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Volume/Product Mix Change | Price Change | Foreign Currency Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | :------------------ | :------- | :------- | | Net Sales | 116,662 | 116,811 | (0.1)% | (0.6)% | (1.5)% | 2.0% | | Net Sales | 228,659 | 235,006 | (2.7)% | (2.0)% | (1.1)% | 0.4% | - For the three-month period, the decrease in volume was primarily due to lower sales of dental implant systems and biomaterials products, and the termination of a transition manufacturing agreement with the former parent company, partially offset by growth in capital equipment and digital dentistry sales[89] - For the six-month period, the decrease in volume was mainly due to lower sales of dental implant systems, the termination of the transition manufacturing agreement, and fewer selling days, partially offset by growth in digital dentistry sales and sales related to the Costa Rica acquisition[89] - The price decrease was primarily due to lower selling prices for premium dental implant systems in the U.S.[90] - Foreign currency fluctuations had a positive impact on sales, mainly due to the strengthening of the Euro and Japanese Yen against the US Dollar[91] Cost of Products Sold Cost of products sold (excluding intangible asset amortization) decreased for both the three and six months ended June 30, 2025, reaching 35.4% and 34.7% of net sales, respectively, driven by manufacturing efficiencies and reduced sales volume Cost of Products Sold (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of Products Sold (excluding intangible asset amortization) | 41,354 | 43,517 | 79,303 | 87,775 | | As a Percentage of Net Sales | 35.4% | 37.3% | 34.7% | 37.4% | - The decrease in cost of products sold was primarily due to improved manufacturing efficiencies, lower sales volume, and the termination of the transition manufacturing agreement with the former parent company[92] - The U.S. announced a 10% tariff on all countries effective April 2, 2025, and the company is mitigating the impact by optimizing internal distribution and supply activities[93] Operating Expenses Research and development expenses and selling, general, and administrative expenses both decreased for the three and six months ended June 30, 2025, primarily due to reduced personnel costs and lower share-based compensation Operating Expenses (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Intangible Asset Amortization | 6,183 | 5,999 | 12,215 | 12,022 | | Research and Development Expenses | 5,662 | 6,579 | 11,033 | 13,359 | | Research and Development Expenses as a Percentage of Net Sales | 4.9% | 5.6% | 4.8% | 5.7% | | Selling, General and Administrative Expenses | 59,573 | 62,384 | 118,558 | 122,714 | | Selling, General and Administrative Expenses as a Percentage of Net Sales | 51.1% | 53.4% | 51.8% | 52.2% | - The decrease in research and development expenses was primarily due to lower compensation and benefits resulting from reduced headcount and decreased share-based compensation expense[95] - The decrease in selling, general and administrative expenses was mainly due to lower compensation expenses from reduced headcount, as well as decreased professional services fees, insurance, travel and entertainment, and marketing expenses, partially offset by increased information technology costs[96] Other Operating Expenses Restructuring and other cost reduction initiatives and acquisition, integration, divestiture, and related expenses both decreased for the three and six months ended June 30, 2025, primarily due to reduced spine business divestiture costs Other Operating Expenses (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Restructuring and Other Cost Reduction Initiatives | 83 | 398 | 1,515 | 2,977 | | Acquisition, Integration, Divestiture, and Related | 2,516 | 4,621 | 3,964 | 5,657 | - Restructuring expenses are primarily related to employee termination benefits, with the program expected to be completed by the end of 2025[97] - The decrease in acquisition, integration, divestiture, and related expenses was primarily due to reduced costs associated with the spine business divestiture, partially offset by increased professional services fees for evaluating portfolio strategic alternatives[98] Other Income (Expense), net, Interest Income and Interest Expense Other income, net, decreased for the three and six months ended June 30, 2025, primarily due to reduced transition service agreement income, while interest income increased and interest expense decreased due to lower outstanding debt Other Income (Expense), Net, Interest Income and Interest Expense (USD thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Other Income, Net | 766 | 3,010 | 2,450 | 2,701 | | Interest Income | 2,046 | 1,965 | 4,081 | 2,472 | | Interest Expense | (3,836) | (5,066) | (7,887) | (9,940) | - The decrease in other income, net, was primarily due to reduced revenue from Transition Service Agreements (TSA) related to the spine business sale, partially offset by the impact of foreign currency exchange rate changes on the revaluation of monetary assets and liabilities[99] - Interest income increased primarily from the promissory note received from the spine business sale and European cash balances, with the six-month increase reflecting the note's existence for the full six months in 2025 compared to three months in 2024[100] - Interest expense decreased primarily due to lower outstanding debt[101] Income Taxes The effective tax rate (ETR) from continuing operations was 1541.2% and 1005.3% for the three and six months ended June 30, 2025, respectively, reflecting income near the break-even point, contrasting with negative ETRs in 2024 due to valuation allowances Effective Tax Rate (ETR) from Continuing Operations | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Provision for Income Taxes from Continuing Operations | (4,115) | (2,775) | (7,188) | (6,849) | | Effective Tax Rate | 1541.2% | (40.9)% | 1005.3% | (48.0)% | - In 2025, the high ETR was primarily due to income from continuing operations being near the break-even point, rendering the tax rate calculation not meaningful[102] - In 2024, the negative ETR was mainly due to losses not benefiting from tax, driven by factors such as valuation allowances and Global Intangible Low-Taxed Income (GILTI)[102] LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2025, cash and cash equivalents were $70.2 million, with increased cash outflows from operating and investing activities and significantly reduced outflows from financing activities, which the company expects to be sufficient for future liquidity needs - As of June 30, 2025, the company's cash and cash equivalents were $70.2 million, a decrease from $76.6 million as of December 31, 2024[105] - In the first half of 2025, net cash used in operating activities increased to $10.7 million, primarily due to cash used for accounts payable and accrued liabilities, accounts receivable, and inventory[106] - In the first half of 2025, net cash used in investing activities was $9.4 million, primarily for the acquisition of Costa Rican dental assets, compared to a $285.7 million cash inflow from investing activities in the prior year period, mainly from the spine business sale[107] - In the first half of 2025, net cash used in financing activities significantly decreased to $0.7 million, primarily for tax withholdings related to share-based compensation, compared to a $276.7 million outflow in the prior year period, mainly for term loan repayments[108] - The company believes its existing cash and cash equivalents, cash generated from operations, and revolving credit facility will be sufficient to meet its liquidity needs for the next 12 months[110] CRITICAL ACCOUNTING ESTIMATES The application of critical accounting estimates remained consistent for the three and six months ended June 30, 2025, aligning with those described in the annual report - The application of critical accounting estimates remained unchanged for the three and six months ended June 30, 2025[111] ACCOUNTING DEVELOPMENTS This section references Note 1 to the financial statements for information on recent accounting pronouncements and their impact on the company's financial position, results of operations, or cash flows - Recent accounting standard updates include ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures); the adoption of ASU 2023-07 had no material impact on financial statement disclosures, and ASU 2023-09 is expected to change income tax disclosures without affecting recognition or measurement[31][32][112] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks including foreign currency, interest rates, and commodity prices through forward foreign exchange contracts and supply agreements, with interest rate sensitivity of $2.2 million per 100 basis points SOFR increase - The company is exposed to market risks related to foreign currency exchange rates, interest rates, and commodity prices[114] - Foreign currency risk is managed through forward foreign exchange contracts, with primary exposure to the Euro and Japanese Yen[115] - Commodity price risk for raw materials such as cobalt chrome, titanium, tantalum, polymers, and sterile packaging is managed through supply contracts of 12 to 24 months, and a 10% price change is not expected to have a material impact[116] - As of June 30, 2025, the company had $221.9 million in variable-rate debt. A 100 basis point increase in SOFR would increase annual interest expense by $2.2 million[117] - Credit risk is concentrated in cash and cash equivalents, derivative instruments, and accounts receivable, managed through credit approval and monitoring procedures[118][119][120] Item 4. Controls and Procedures As of June 30, 2025, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the period - As of June 30, 2025, the company's disclosure controls and procedures were assessed as effective[121] - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[122] PART II. OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings, updated risk factors related to trade policy and the proposed merger, and other disclosures Item 1. Legal Proceedings The company is involved in various legal proceedings, including product liability and intellectual property matters, but does not anticipate a material adverse impact on its financial condition or results of operations - The company is subject to product liability, intellectual property, commercial, and other legal proceedings and investigations[125] - The company currently does not anticipate these matters will have a material adverse effect on its results of operations, cash flows, or financial condition[125] Item 1A. Risk Factors In addition to previously disclosed risks, the company faces new significant risks related to changes in U.S. trade policy, including tariffs, and uncertainties surrounding the proposed merger, which could adversely affect its business and financial performance Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, financial condition, and results of operations. Changes in U.S. trade policy, such as tariffs, could increase procurement costs, reduce profit margins, and potentially lead to higher product prices or decreased demand, exacerbated by potential retaliatory tariffs from other countries - Changes in U.S. trade policy, including the imposition of tariffs, could increase procurement costs, reduce profit margins, and potentially lead to higher prices for the company's products or decreased demand[128] - Other countries may implement retaliatory tariffs, exacerbating global economic uncertainty and adversely impacting the company's business[129] Risks Related to the Proposed Merger The proposed merger faces risks including potential failure to complete, negative impacts on business operations while pending, restrictions on company actions, unrecoverable costs, and potential litigation challenging the agreement - The proposed merger may not be completed on the anticipated terms or timeline, or at all, which could lead to a decline in the company's stock price and have an adverse impact on its business, financial condition, and results of operations[130] - The pendency of the merger could have a negative impact on the company's business, financial condition, and results of operations, including difficulties in retaining key employees and damage to customer and business relationships[132] - The company is restricted from engaging in certain transactions and actions until the merger is completed or the agreement is terminated, which may hinder its ability to pursue potentially advantageous business opportunities[133] - The company has incurred and will continue to incur direct and indirect costs related to the merger, which may not be recoverable even if the merger is not completed[134][137] - Litigation challenging the merger agreement could prevent the merger from being completed within the expected timeframe or at all[135] Item 5. Other Information For the three months ended June 30, 2025, no directors or executive officers adopted or terminated any Rule 10b5-1(c) compliant contracts, instructions, or written plans for securities purchases or sales - For the three months ended June 30, 2025, no directors or executive officers of the company adopted or terminated any contracts, instructions, or written plans for the purchase or sale of securities that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)[136] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including the equity purchase agreement, merger agreement, company bylaws, subsidiary list, and CEO and CFO certifications - Exhibits include the equity purchase agreement, merger agreement, company bylaws, a list of subsidiaries, and certifications from the Chief Executive Officer and Chief Financial Officer[138] Signatures This section contains the required signatures for ZimVie Inc.'s report, filed on July 30, 2025, under the Securities Exchange Act of 1934 - This report was signed by Richard Heppenstall, Executive Vice President, Chief Financial Officer, and Treasurer of ZimVie Inc., on July 30, 2025[143]