Zimmer Biomet(US:ZBH)2024-05-02 17:23Financial Data and Key Metrics Changes - The company reported net sales of $1.889 billion, reflecting a 3.2% increase on a reported basis and a 4.4% increase excluding foreign currency impact [18] - GAAP diluted earnings per share (EPS) was $0.84 compared to $1.11 in the prior year, while adjusted diluted EPS was $1.94 compared to $1.89 in the prior year [21] - Adjusted gross margin was 72.9%, driven by higher manufacturing costs offset by better pricing and lower royalties [22] - The adjusted operating margin was 28.6%, slightly ahead of the prior year, driven by higher sales and lower SG&A related to the restructuring program [51] Business Line Data and Key Metrics Changes - Global Knee sales grew 4.3%, with U.S. growth at 2.2% and international growth at 7.3%, driven by the Persona product portfolio and ROSA Robotic Platform [19] - The S.E.T. category grew 5.3%, led by key focus areas of CMFT, upper extremities, and sports, growing on average about low double digits [20] - Global Hips grew 1.5%, with U.S. growth at 1% and international growth at 2% [48] - The Other category grew 12.2%, driven by strong ROSA sales, although growth is expected to moderate as the year progresses [49] Market Data and Key Metrics Changes - U.S. growth was 3.7% and international growth was 5.4%, with EMEA showing stronger-than-expected growth [47] - The company faced a selling day headwind of about 200 basis points that impacted all regions and product categories [18] Company Strategy and Development Direction - The company is focused on three strategic priorities: people and culture, operational excellence, and innovation and diversification [12][40] - The company plans to introduce over 40 new products in the next 24 to 36 months, with a strong pipeline that has twice the dollar value compared to 2018 [81][82] - The company aims for mid-to-high single-digit adjusted earnings growth while ensuring free cash flow grows faster than earnings [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 5% to 6% constant currency revenue growth for 2024, with adjusted operating margin expansion and over $1 billion in free cash flow [17][24] - The company noted that the end markets remain healthy, driven by high levels of patient demand and technological advancements [4] - Management highlighted the positive pricing dynamics, reporting flat pricing in the quarter compared to previous years' price erosion [39][71] Other Important Information - The company is undergoing a restructuring program that has been implemented with no major disruptions, resulting in cost savings and increased operational agility [5] - The company is actively searching for a new Head of Investor Relations following the departure of Keri Mattox [16] Q&A Session Summary Question: Long-term growth algorithm and Q2 expectations - Management indicated that the long-term growth algorithm includes 5% to 6% revenue growth, potential margin expansion, and low double-digit EPS growth, but emphasized that this is not a base case [30][34] - Regarding Q2, management noted that selling days would provide a tailwind, but they would not provide specific quarter-over-quarter guidance [32] Question: Drivers of revenue growth - Management stated that new product introductions are the primary driver of revenue growth, with a pipeline of 40 new products expected over the next 24 to 36 months [31] Question: Pricing environment - Management reported that pricing was flat in Q1, a significant improvement from previous years' price erosion, and they expect pricing dynamics to remain favorable [71][74] Question: M&A strategy - Management expressed a preference for smaller tuck-in acquisitions under $2 billion that are EPS neutral within two years, while also being open to larger deals if they meet strategic and financial criteria [15][102] Question: ROSA Shoulder launch outlook - Management expressed excitement about the ROSA Shoulder launch, noting positive initial feedback and expectations for significant impact as the year progresses [138]