Yahoo Finance Zimmer Biomet Holdings Inc (ZBH) Q1 2024 Earnings Call Transcript Highlights: Surpassing ...
Revenue Growth: Q1 constant currency revenue growth of 4.4%, exceeding expectations.
Adjusted Operating Margin: Expansion noted, specifics to be detailed later in the call.
Adjusted Earnings Growth: Mid- to high single-digit growth reaffirmed for the year.
Free Cash Flow: Projected to grow faster than earnings.
Effective Tax Rate: Increased over 200 basis points.
Guidance for 2024: Revenue growth of 5% to 6% in constant currency, with adjusted operating margin expansion.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Zimmer Biomet Holdings Inc (NYSE:ZBH) reported Q1 performance ahead of expectations with 4.4% constant currency revenue growth.
The company reaffirmed its full-year guidance, projecting 5% to 6% constant currency revenue growth and mid- to high single-digit adjusted earnings growth.
Zimmer Biomet Holdings Inc (NYSE:ZBH) saw strong adoption of ROSA technology and Persona Knee, contributing significantly to the quarter's success.
The company has made significant progress in its strategic priorities, including operational excellence and innovation, with over 40 new products planned for release in the next 24 to 36 months.
Zimmer Biomet Holdings Inc (NYSE:ZBH) is experiencing healthy end markets driven by demographic shifts and technological advancements, supporting sustained demand.
Negative Points
Despite positive growth, the company faces challenges with pricing dynamics, although they have improved to about flat compared to historical erosion.
Zimmer Biomet Holdings Inc (NYSE:ZBH) is still in the process of implementing its restructuring program, which could pose risks if not executed smoothly.
The company's effective tax rate increased by over 200 basis points, which could impact net earnings if it continues to rise.
Zimmer Biomet Holdings Inc (NYSE:ZBH) reported a reliance on new product introductions for future growth, which could be risky if these products do not perform as expected.
There are ongoing competitive pressures in the orthopedics market, particularly in the robotics and joint replacement segments, which could impact market share and profitability.
Q & A Highlights
Q: Can you talk about where the positive surprise came from on the pricing front? Are the benefits of your efforts coming sooner? A: Ivan Tornos (President and CEO) - We're very pleased with the pricing performance. Recall that in the second semester of '23, we were already flattish when it comes to price. This is a business that in previous years was having 300 to 500 basis points of price erosion in the U.S., pretty significant OUS. That's not the change that we have going on. We put a structure in place. We put governance, new product introductions are helping from a category contracting.
Q: What can we expect at your upcoming Investor Day at the end of the month? A: Ivan Tornos (President and CEO) - We'll definitely cover how we plan to achieve these 3 commitments we're making from a financial perspective in terms of what are the drivers of revenue, EPS, and free cash flow. We'll cover the new product introductions, we've seen that. We'll talk about the capital allocation on the strategy moving forward. So it's going to be very robust.
Q: You beat consensus EPS by about $0.07, but you didn't really raise the guidance on EPS. Can you provide some color on that? A: Suketu P. Upadhyay (CFO and Executive VP of Finance, Operations & Supply Chain) - We had a good start to the year, and it was great to see the better-than-expected performance in revenue. We saw a very good flow through all the way to the bottom. So I love the discipline that we've got throughout the company. I would say that this just reinforces and gives us more conviction in the guidance range that we provided earlier this year.
Q: Can you remind us what the site of care mix is for shorter Recon hospital versus ASC? A: Ivan Tornos (President and CEO) - So we're starting to see a dynamic in where cases are moving to the ASC for shoulders, getting the CMS change. I would say today, probably around 60% to 65% of the cases of shoulder are now done in ASC, but that's moving pretty rapidly, given the change of reimbursement. And we've got a strong position both in the inpatient, outpatient as well as the ASC. But I would say net-net, is around 60%, 65% to 35% in terms of that mix.
Q: Just touching a little bit further on ROSA and the strength in the other line, Suky, did you say that you expect lower growth in this segment through the year? A: Suketu P. Upadhyay (CFO and Executive VP of Finance, Operations & Supply Chain) - Yes. So we had a pretty strong quarter in our other category, primarily driven by ROSA Capital. So we saw good installs. And we saw a higher mix of sales versus placements which drove a higher level of dollar revenue in that quarter. The good news is we saw a lot of new placements and new ASCs, which is exactly where we want to see ROSA's position and the capital sales were very good.
Q: Any updates on the Persona IQ rollout? A: Ivan Tornos (President and CEO) - It's moving in the right direction. I will say, as of late, things are accelerating, both from an innovation and a commercial execution standpoint. So on innovation, we did receive recently the 510(k) approval for -- didn't make it to the press release for the study. So as the shorter stem version of Persona IQ, which has been a gating factor for some surgeons that don't use the longer stem. So that's an innovation and they are right there.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
