Zimmer Biomet(ZBH) - 2024 Q1 - Quarterly Results

Q1 2024 Financial and Business Highlights Financial Highlights Q1 2024 net sales reached $1.889 billion (up 4.4% constant currency), with diluted EPS of $0.84 and adjusted EPS of $1.94, reiterating full-year guidance Q1 2024 Key Financial Metrics | Metric | Value | YoY Change (Reported) | YoY Change (Constant Currency) | | :--- | :--- | :--- | :--- | | Net Sales | $1.889 billion | +3.2% | +4.4% | | Net Earnings | $172.4 million | - | - | | Adjusted Net Earnings | $399.7 million | - | - | | Diluted EPS | $0.84 | - | - | | Adjusted Diluted EPS | $1.94 | - | - | - The company has reiterated its full-year 2024 financial guidance[3] Business and Operational Highlights Zimmer Biomet achieved key operational milestones, including FDA clearances for ROSA® Shoulder System and Z1 Femoral Hip Stem, alongside strategic partnerships and DEI/ESG recognition - Received U.S. FDA 510(k) clearance for the ROSA® Shoulder System, the world's first robotic assistant for shoulder replacement surgery, with the first successful surgery completed in April[5] - Obtained U.S. FDA 510(k) clearance for the Z1 Femoral Hip Stem, a modern triple taper system expected to launch later in the year[5] - Announced partnerships with three major U.S. pickleball organizations to promote joint health education[5] - Continued to receive recognition for Diversity, Equity, and Inclusion (DEI) and Environmental, Social, and Governance (ESG) efforts, including being named one of America's Greatest Workplaces for Women by Newsweek and a Supplier Engagement Leader by CDP[6] Sales Performance Analysis Sales by Geography and Product Q1 2024 total net sales grew 4.4% constant currency, with U.S. up 3.7% and International up 5.4%, driven by Knees and S.E.T. product categories Q1 2024 Net Sales Breakdown (in millions) | Category | Geography | Net Sales | % Change (Reported) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Total | Global | $1,889.2 | 3.2% | 4.4% | | By Geography | United States | $1,099.2 | 3.7% | 3.7% | | | International | $790.0 | 2.5% | 5.4% | | By Product | Knees | Total | $788.1 | 3.4% | 4.3% | | | Hips | Total | $491.2 | -0.3% | 1.5% | | | S.E.T. | Global | $452.6 | 4.4% | 5.3% | | | Other | Global | $157.3 | 10.6% | 12.2% | Full-Year 2024 Financial Guidance Full-Year 2024 Projections Zimmer Biomet reiterated its full-year 2024 guidance, projecting reported revenue growth of 4.5% to 5.5% (constant currency 5.0% to 6.0%) and adjusted diluted EPS of $8.00 to $8.15 Projected Year Ending December 31, 2024 | Metric | Guidance Range | | :--- | :--- | | Reported Revenue Change | 4.5% - 5.5% | | Foreign Currency Exchange Impact | (0.5)% | | Constant Currency Revenue Change | 5.0% - 6.0% | | Adjusted Diluted EPS | $8.00 - $8.15 | Consolidated Financial Statements Condensed Consolidated Statements of Earnings Q1 2024 net sales increased to $1.889 billion, but operating profit decreased to $265.9 million and net earnings fell to $172.4 million, due to increased restructuring expenses Q1 2024 vs Q1 2023 Statement of Earnings (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $1,889.2 | $1,831.0 | | Operating Profit | $265.9 | $327.3 | | Earnings before income taxes | $215.1 | $286.8 | | Net Earnings of Zimmer Biomet | $172.4 | $232.5 | | Diluted EPS | $0.84 | $1.11 | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $21.45 billion, slightly down from year-end 2023, with stable liabilities and stockholders' equity increasing to $12.61 billion Balance Sheet Summary (in millions) | Line Item | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $4,631.5 | $4,609.5 | | Total Assets | $21,452.4 | $21,496.9 | | Total current liabilities | $1,826.9 | $1,957.5 | | Long-term debt | $4,826.2 | $4,867.9 | | Stockholders' equity | $12,606.0 | $12,488.1 | | Total Liabilities and Stockholders' Equity | $21,452.4 | $21,496.9 | Condensed Consolidated Statements of Cash Flows Q1 2024 net cash from operations decreased to $228.0 million, with increased investing and decreased financing activities, ending the quarter with $393.0 million in cash and equivalents Q1 2024 vs Q1 2023 Statement of Cash Flows (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $228.0 | $307.7 | | Net cash used in investing activities | $(195.0) | $(149.4) | | Net cash used in financing activities | $(50.1) | $(206.7) | | Change in cash and cash equivalents | $(22.7) | $(45.5) | | Cash and cash equivalents, end of period | $393.0 | $330.2 | Reconciliation of GAAP to Non-GAAP Financial Measures Reconciliation of Reported Net Sales to Constant Currency Foreign currency exchange negatively impacted Q1 2024 total net sales by 1.2%, with International segment most affected at 2.9% negative impact Q1 2024 Sales Growth Reconciliation | Category | Reported % Change | Foreign Exchange Impact | Constant Currency % Change | | :--- | :--- | :--- | :--- | | Total | 3.2% | (1.2)% | 4.4% | | United States | 3.7% | -% | 3.7% | | International | 2.5% | (2.9)% | 5.4% | | Knees | 3.4% | (0.9)% | 4.3% | | Hips | (0.3)% | (1.8)% | 1.5% | Reconciliation of Reported to Adjusted Net Earnings and EPS Q1 2024 reported net earnings of $172.4 million adjusted to $399.7 million, mainly due to intangible asset amortization and restructuring, yielding adjusted diluted EPS of $1.94 Q1 2024 Reconciliation of Net Earnings and Diluted EPS | Metric | As Reported | Adjustments | As Adjusted | | :--- | :--- | :--- | :--- | | Net Earnings (in millions) | $172.4 | $227.3 | $399.7 | | Diluted EPS | $0.84 | $1.10 | $1.94 | - Key adjustments include intangible asset amortization, restructuring and other cost reduction initiatives, and costs related to the European Union Medical Device Regulation[45] Reconciliation of Operating Cash Flow to Free Cash Flow Q1 2024 free cash flow was $90.9 million, down from $178.2 million last year, after deducting capital expenditures for instruments and other property from operating cash flow Free Cash Flow Calculation (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $228.0 | $307.7 | | Additions to instruments | $(82.0) | $(82.8) | | Additions to other property, plant and equipment | $(55.1) | $(46.7) | | Free cash flow | $90.9 | $178.2 | Other Reconciliations (Profit Margins, Tax Rate, Net Debt) Adjusted gross margin improved to 72.9%, operating profit margin to 28.6%, effective tax rate was 18.5%, and net debt stood at $5.40 billion as of March 31, 2024 Key Adjusted Metrics Comparison | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Adjusted Gross Margin | 72.9% | 72.8% | | Adjusted Operating Profit Margin | 28.6% | 28.4% | | Adjusted Effective Tax Rate | 18.5% | 16.3% | Net Debt (in millions) | Date | Net Debt | | :--- | :--- | | March 31, 2024 | $5,403.2 | | December 31, 2023 | $5,352.1 | Company Overview and Disclosures About the Company Zimmer Biomet is a global medical technology leader focused on maximizing mobility and improving health through innovative products, including digital and robotic technologies - Zimmer Biomet positions itself as a global medical technology leader with a portfolio designed to maximize mobility and improve health, leveraging innovative products and a suite of integrated digital and robotic technologies[14][15] Note on Non-GAAP Financial Measures The company uses non-GAAP financial measures like constant currency sales, adjusted net earnings, and free cash flow to evaluate performance and provide meaningful investor information - The company uses non-GAAP financial measures to provide information that is not impacted by certain items that can cause dramatic changes in reported income but do not affect the fundamentals of operations[26] - Non-GAAP measures mentioned include constant currency sales changes, adjusted operating profit, adjusted diluted EPS, and free cash flow[20][21][22] Cautionary Note Regarding Forward-Looking Statements Forward-looking statements, including financial guidance, are subject to significant risks and uncertainties such as competition, pricing pressures, regulatory changes, and global economic conditions - The press release contains forward-looking statements regarding financial guidance and business prospects, which are subject to risks and uncertainties[28] - Key risks include competition, pricing pressures, new product development, supply chain disruptions, regulatory changes, and macroeconomic conditions[29][30]