ZimVie (ZIMV) has disclosed its financial results for Q4 and the full year of 2023, revealing a strategic shift with the sale of its Spine business to H.I.G. Capital for $375 million. This divestiture will allow ZimVie to focus on its Dental Solutions business and significantly reduce its debt.
Despite a decrease in net sales attributed to macroeconomic headwinds in the U.S. implant market, the company is confident in its ability to enhance its margin profile and streamline its cost structure. ZimVie is also dedicated to ESG initiatives, as evidenced by its inaugural ESG report, and is optimistic about its future as a specialized Dental company.
Key Takeaways
- ZimVie sold its Spine business to H.I.G. Capital for $375 million, pivoting to concentrate on its Dental Solutions sector.
- The company aims to reduce its debt, with a target of under $200 million in net debt by the end of 2024.
- Despite a decline in net sales, ZimVie is working on operational changes to improve its margin profile and cost structure.
- ZimVie reported a 10.6% decrease in Q4 2023 sales and a 9% decrease in full-year sales from discontinued operations.
- The company expects sales for continuing operations to be between $115 million and $118 million for 2024.
Company Outlook
- ZimVie anticipates sales from continuing operations to range between $115 million and $118 million in 2024.
- Sales from discontinued operations are expected to be between $89 million and $91 million.
- The company plans to use the proceeds from the Spine business sale to reduce debt levels.
Bearish Highlights
- Q4 2023 saw a decline in net sales, mainly due to challenges in the U.S. implant market.
- The company expects a lower margin profile for continuing operations until the Spine business sale concludes.
Bullish Highlights
- ZimVie is committed to becoming a market leader in the implant digital solutions and biomaterials markets.
- The company is optimistic about the growth potential once the new iTero scanner is available in Q4.
- ZimVie is focused on manufacturing automation and supply chain optimization to achieve desired scale.
Misses
- The company has experienced delays in obtaining the new iTero scanner due to regulatory reasons, which may affect short-term sales.
Q&A Highlights
- ZimVie is collaborating with iTero and has a program for customers to upgrade to the new scanner.
- The company is incurring costs related to the separation of its business units, with transitional costs expected.
- Richard Heppenstall discussed the unique nature of the deal, including carve-out costs and the aim to rightsize the organization for a 15% plus EBITDA margin post-sale.
InvestingPro Insights
As ZimVie (Ticker: ZIMV) navigates a strategic pivot with the sale of its Spine business, investors are closely monitoring the company's financial health and market position. According to recent data from InvestingPro, ZimVie's market capitalization stands at $458.94 million.
Despite the company's challenges, one of the noteworthy InvestingPro Tips is that ZimVie's net income is expected to grow this year, signaling potential for financial recovery and growth in its specialized Dental Solutions sector.
InvestingPro also highlights that ZimVie has a high shareholder yield, which is a positive indicator for investors looking for companies that prioritize shareholder return. This tip, along with the expectation of profitability this year, provides a more nuanced understanding of ZimVie's future beyond the immediate effects of the Spine business sale and current market conditions.
In terms of financial metrics, ZimVie's P/E Ratio (Adjusted) for the last twelve months as of Q4 2023 is reported at -8.48. Although negative, this is an improvement from the unadjusted P/E Ratio of -9.25. Moreover, the company's Gross Profit Margin for the same period is a robust 63.48%, suggesting that despite revenue challenges, ZimVie maintains a strong ability to control costs relative to its revenue.
For investors interested in deeper analysis, there are additional InvestingPro Tips available that offer insights into ZimVie's stock performance, liquidity, and future profitability. To explore these tips and make more informed investment decisions, readers can visit https://www.investing.com/pro/ZIMV and use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 7 more tips available on InvestingPro that could provide valuable context and guidance for those considering an investment in ZimVie.
Full transcript - ZimVie (ZIMV) Q4 2023:
Operator: Good afternoon, and welcome to ZimVie's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych, Gilmartin Group, for introductory disclosures.
Marissa Bych: Great. Thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter and full year ended December 31, 2023. A copy of the press release is available on the company's website, zimvie.com, as well as on sec.gov. Before we begin, I'd like to remind you that management will make comments during this call that include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please refer to the company's most recent periodic report filed with the SEC and subsequent SEC filings for a detailed discussion of these risks and uncertainties. In addition, the discussion on this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included within the earnings release issued today, which is found on the Investor Relations section of the company's website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 28, 2024. ZimVie disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Vafa Jamali, President and Chief Executive Officer of ZimVie.
Vafa Jamali: Good afternoon and thank you for joining us. We had significant accomplishments in 2023. We invested to further differentiate our portfolio, which helped us make gains in the markets we serve. As well, we improved our operating efficiency through restructuring and cost-reduction initiatives. Most significantly, we executed an agreement to sell our Spine business to H.I.G. Capital for $375 million in total consideration, and we began to advance the necessary steps to complete that sale. We believe this sale addresses two major concerns we have heard, the lack of synergy between Dental and Spine businesses and an overly leveraged capital structure during a time of elevated interest rates. We believe we have quite elegantly addressed both of these concerns in one major move and now look very optimistically to 2024 as a pure-play Dental company with a comprehensive and industry-leading portfolio. I could not be more excited about the future of this company as we continue to invest and differentiate solutions for patients and providers while optimizing our structure to drive value for shareholders. Let me start with a closer look at our ongoing portfolio action, specifically the Spine sale. On December 18, we entered into a definitive agreement to sell our Spine business to H.I.G. Capital for $375 million in total consideration. We remain confident in completing this sale within the first half of 2024. We appreciate having a great partner in H.I.G. capital as we both look towards an on-time transaction close. This sale will provide the opportunity for our company to reposition itself exclusively in one of our most attractive end markets, Dental Solutions, while also paying down substantial portion of our outstanding debt. We are committed to having under $200 million of net debt by one year post-sale. Beyond this sale, we have a lot of work to do in rightsizing our cost profile, particularly given our corporate overhead and stranded costs, which are currently being reflected in our continued operations profile. Therefore, we see both a need and an opportunity in taking costs out of our organization. We have already initiated the execution of concrete plans to address certain corporate expenses and we remain committed to delivering a 15% plus adjusted EBITDA margin at one year post-sale with improvements annually thereafter. As we continue through this portfolio optimization process, I would mostly like to thank all of our global spline employees for their hard work. We appreciate your contributions and immense effort to improve the position of the business in the future and wish you great success going forward. Flipping to Dental. As we transition through the sale of Spine, we are positioned to become a leaner, more focused, pure-play Dental company with market-leading position in the $8 billion implant digital solutions and biomaterials markets. We are committed to offering the market's highest quality premium implants and a holistic portfolio to support every step of the implant process. This includes innovative biomaterial products, which build a strong foundation for the implant and high-efficiency easy-to-use digital solutions for managing implant workflow. One of our top priorities for 2023 was to invest in this portfolio and we are pleased to continue our strong cadence of hardware and software innovations into 2024. Most recently, we launched our Next Generation TSX Impants in Japan, one of our largest international markets. We preceded that milestone with the launches of Biotivity and Azure in our biomaterials and lab-focused prosthetic and restorative solutions portfolio. Look for us to further drive innovation by bringing new products to market over the next year and focusing on opportunities that improve clinical workflow and complement our Implant business. An operational update. We plan to make several changes this year to achieve our desired size and scale as a company. Fortunately, this is an area our team has extensive experience in. Over the past two years, our team has delivered several operational improvements to get the business where it is today. Many of those improvements will focus on the Spine business. As we move forward, we will take that same playbook to the Dental business, including a focus on manufacturing automation, supply chain optimization, and improving the efficiency of our plans. Our Dental business has always enjoyed an attractive margin profile. With a wholly focused management team and increased resources, we see room to grow that margin profile even further. We recognize the importance of innovation to our business and we realize that we have commercial momentum behind our offering. Therefore, it should be clear that our efficiency improvements will not be reflected through reduced research and development or commercial costs, instead, will be focused on taking significant corporate costs out of the business. Many of these costs will take several months to address and we expect to see increased margin leverage as the year goes on. However, until the sale is complete, ZimVie will bear the full corporate expense for both the continuing and discontinued operations. We will provide more detail on TSAs and ERPs associated with the sale around the time of closing. Now, before I turn the line over to Rich, I'd like to switch gears and take a moment to congratulate our team on the recent publication of our inaugural ESG report. We embrace being a responsible and accountable employer and business. Our global team is dedicated to championing initiatives across the entire ESG spectrum that further our mission of restoring daily lives while living our core values, accountability, authenticity, curiosity, and having a growth mindset. Our shared commitment spans our global sites as we work towards a common goal of establishing ZimVie's reputation as a good corporate citizen, as a destination workplace, and a true life sciences leader. I'll now turn the call over to Rich to outline our financial performance and guidance.
Richard Heppenstall: Thanks, Vafa, and good afternoon, everyone. I'll begin by reviewing our fourth quarter 2023 results and we'll then close by providing commentary on our outlook for 2024. Before I delve into the financial details for the quarter, I wanted to reiterate that since we signed a definitive agreement to sell the Spine business, our Spine segment is now classified as discontinued operations in our financial statements as of the end of 2023. As a result, we will bifurcate our Q4 and fiscal year 2023 financials as continuing operations, which comprises Dental and the majority of corporate and discontinued operations, which includes the exiting Spine business. Beginning with continued operations, total third-party net sales for the fourth quarter of 2023 were $113.1 million, a decrease of 2.4% in reported rates and a decline of 3.6% in constant currency. Full year 2023 total third-party net sales of $457.2 million were essentially flat year-over-year, declining 50 basis points. The impact of foreign exchange on third-party net sales in 2023 was negligible, with constant currency sales declining 60 basis points versus 2022. In the U.S., third-party net sales for the fourth quarter of 2023 of $65.4 million decreased by 3.2%, driven by a slightly weaker implant market due to U.S. macroeconomic challenges, partially offset by strength in our digital solutions and biomaterials portfolio. Full year 2023 third-party net sales in the U.S. of $269.6 million represents a modest decline of 1.2%, driven by weaker implants as previously mentioned. Outside of the U.S. third-party net sales of $47.7 million decreased by 1.2% on a reported basis and 4.1% in constant currency. Full year outside of the U.S. sales of $187.6 million was higher by 40 basis points and 30 basis points in reported and constant currency, respectively. While the dental market in aggregate was soft through most of '23, we are pleased to have exited the year roughly flat compared to 2022, a definitive sign that the strength of our Dental portfolio and ability to commercially execute in a challenging environment leaves us well-positioned for 2024 as market conditions begin to stabilize and improve. Fourth quarter 2023 adjusted cost of products sold of 37.4% compared to 34.8% of sales in the prior year period. Full year 2023 adjusted cost of products sold of 36.2% increased 40 basis points over the prior year of 35.8%, driven by slightly lower implant volume for the year. We expect improvement in cost of products sold in 2024 as we streamline the organization, cutting out duplicative cost, improving manufacturing efficiency, and benefit from a better product mix, particularly in the back half of the year. Q4 2023 adjusted research and development expense of $6.5 million compared to $5.9 million in the prior year. Q4 2023 adjusted sales, general, and administrative expenses of $57.4 million compared to $66.1 million in the prior year. Full year 2023 adjusted SG&A expense of $240.5 million is flat to 2022 SG&A of $239.3 million. Adjusted EBITDA attributable to continuing operations in the fourth quarter of 2023 of $13.9 million represents a 12.3% EBITDA margin. Full year 2023 adjusted EBITDA of $50.8 million reflects 11.1% of third-party net sales. Please note, our continuing operations adjusted EBITDA not only includes costs to support our market-leading Dental business, but also the majority of our corporate cost, which was previously borne by both the Dental and Spine businesses. Given this classification, our continuing operations adjusted EBITDA margin for the fourth quarter and 2023 appears weighed down compared to our prior reporting framework. Going forward and after the sale of Spine, we will be working to address our resultant cost structure. We remain confident in delivering an adjusted EBITDA margin of over 15% one year post-Spine sale as previously disclosed. Q4 of 2023 adjusted earnings per share attributable to continuing operations of $0.10 per share on a fully diluted share count of 26.6 million shares. Continuing operations adjusted earnings per share for FY 2023 was $0.22 per share. Moving on to discontinued operations, which includes the Spine business, currently held for sale. Total third-party net sales for the fourth quarter of 2023 were $100.5 million, a decrease of 10.6% on both a reported and constant currency basis. Full year 2023 total third-party net sales of $409.2 million represent a 9% decrease on a reported basis and 9.2% decrease in constant currency. In the U.S., fourth quarter 2023 third-party net sales of $81.5 million decreased by 10.3%, driven by continued competitive pressure. Full year 2023 U.S. sales of $327.3 million declined 8.4%. Fourth quarter 2023 outside of the U.S. third-party net sales of $18.9 million decreased by 11.6% on a reported basis and 12.0% in constant currency. Full year OUS sales of $81.8 million declined by 11.4% in reported rates and 12.1% in constant currency. Fourth quarter 2023 adjusted cost of products sold of 27.3% of sales compared to 27.7% of sales in the prior year period. Full year 2023 adjusted cost of products sold at 27.2% decrease 180 basis points versus 29.0% in the prior year. We have been talking for a number of quarters now about our focus on driving better inventory management and reducing excess and obsolete inventory expenses, and are pleased that our efforts have translated to higher gross margins. Q4 2023 adjusted research and development expense of $4.9 million compares to $5.7 million in the prior year. Adjusted selling, general, and administrative expenses of $58.5 million, compared to $67.5 million in the prior year. Adjusted EBITDA attributable to discontinued operations in the fourth quarter of 2023 of $15.5 million represents a 15.4% EBITDA margin. Full year 2023 adjusted EBITDA for discontinued operations of $65.6 million was 16.0% of third-party net sales. Q4 2023 adjusted earnings per share for discontinued operations was $0.11 per share, while full year 2023 adjusted earnings per share was $0.48 per share on a fully diluted share count of 26.6 million shares. Touching on liquidity and debt. Over 12 months ago, Vafa and I outlined our plans to monetize the balance sheet, generate outsized cash flow, and use the excess proceeds to pay down debt. I'm pleased to announce that during the course of 2023, we reduced net inventory by over $25 million and accounts receivable by almost $30 million, consistent with the objectives we laid out at the beginning of the year. We ended 2023 with a consolidated ZimVie cash balance of $87.8 million and $508.8 million of gross debt, yielding a net debt balance of $421.0 million. In 2023, we prepaid over $24 million of principal ahead of our required amortization schedule, keeping us 12 months ahead of our required debt repayment schedule. As Vafa mentioned, we intend to use the proceeds from the sale of our Spine business to further reduce debt with an objective of having under $200 million in net debt by the end of 2024. Moving on to our outlook for 2024. Since we're in the process of finalizing the sale of our spine business, which is expected to close during the first half of 2024, we are going to provide some one-time specificity to our outlook for Q1 of 2024. We do not intend to provide quarterly guidance on a go-forward basis. We expect sales from continuing operations to be in the range of $115 million to $118 million. We are very pleased with our strategic position despite a challenging macro environment, and we expect that our comprehensive portfolio of premium implants, biomaterials, and digital dentistry and workflow solutions will continue to perform at or above market growth. We expect Q1 sales from discontinued operations to be in the range of $89 million to $91 million. Turning to our first quarter margin profile. As Vafa and I alluded to earlier, continuing operations includes both the cost to support our Dental business, but also a majority of corporate cost that has historically supported Spine. To this end, when we look at continuing operations by itself, it will carry with it a lower overall margin profile until we finalize the sale of the spine business and exit the associated cost. We expect Q1 continuing operations adjusted EBITDA margin to be in the range of 8% to 10% of sales as a result. To reiterate, costs currently in continuing operations will be removed following the sale of Spine, allowing us to make market progress toward our desired margin profile. With regard to adjusted earnings per share, we expect Q1 to be depressed as a result of lower margin profile and increased relative burden of interest expense until the sale of Spine is complete. We will provide more adjusted earnings per share guidance following the completion of the sale. Now, turning our expectations for the business or year one post-Spine sale close. We are raising our expectations for annualized sales at one year post-Spine to over $455 million. The sale of our spine business to H.I.G. Capital is progressing as planned and we continue to expect the sale to finalize in the first half of 2024, and we are affirming our commitment to achieve 15% plus adjusted EBITDA margin profile at one-year post-Spine sale and expect to see substantial costs come out in the back half of 2024 following the completion of the transaction. With that, I'll now turn the call back over to Vafa.
Vafa Jamali: Thank you, Rich. I'm excited about the prospects ahead of us and as always I look forward to updating you on the progress throughout the year. Our team is immensely experienced in carving out and setting up new businesses, as well as improving the operational efficiency of businesses in transformation, and we are excited to employ these skills to position ZimVie for our next chapter. With that, we'll open it up to questions.
Operator: [Operator Instructions] Our first question comes from the line of David Saxon of Needham & Company. Your line is now open.
David Saxon: Great. Good afternoon, Vafa and Rich. Thanks for taking my questions. I wanted to start on the -- couple on the Dental business, and then, Rich, I might have one for you. So, Vafa, the number two in the implants market, they're facing some challenges in their domestic business, so I wanted to hear how you're thinking about that opportunity to either hire reps or capture share. And then broadly, how are you thinking about the implant part of the Dental portfolio? I think it's about 60% or so. Do you think you can grow in what looks like a somewhat softer market from a patient volume perspective?
Vafa Jamali: Hi, David, thank you for the questions. Yes, we have benefited from some of the competitive dynamics in the market, and frankly, we've picked up some share there in a relatively slower market than we've experienced years prior. So I do think that has been positive for us. I think that the strength of our implant portfolio is that, first of all, we don't have to trade down, so we aren't trading down to a lower-priced implant, which I believe that the competitors that have that option have often moved down market, we haven't had to do that. And the reason we've been able to hold it, the premium category, is primarily from two new implants that have been really, really effective, very, very sticky in the marketplace, coupled with a digital workflow, a guided solution workflow that is growing significantly faster than other digital platforms and faster than the rest of our business, now albeit it's a smaller base right now, but our entire thesis is predicated on that pulling through implants. And if you think about what is the opportunity in implants, it's -- that it's only about 25% penetrated, and part of that is the cost of the workup, and the second part is the ability to give an implant at a very consistent rate, whether you're a new physician or an old one or a much more experienced one. So, I think we've done a lot to make the workflow coupled with the implant work really well. So I think we'll continue to make strides there. We definitely have more customers than we had last year, and where we see the slowdown is some of the specialists are just doing a little bit less than they were before, but we're confident that when the market returns, we're going to be in a really, really good place to grow faster. So hopefully that answers your question.
David Saxon: Yes, super helpful, Vafa. I wanted to ask one on the digital part of the portfolio. So the agreement with the line for iTero, does that cover their new Lumina scanner? And if so, I guess, when do you expect to start selling that? And if at all, is it factored into the first quarter guide? And I'll just have one follow-up.
Vafa Jamali: Sure. So, we -- it does -- we do have that relationship and it will continue with their new scanner. I believe we are somewhat delayed for regulatory purposes, so we won't have it until the fourth quarter of this year. I would say overall, iTero sales for us is a bit depressed, but that is not a cause for major concern for us, because that is a low margin, it really, really satisfies our digital offering, but we are excited about what we can do in the Q4 when the new scanner is available to us.
Richard Heppenstall: Hi, David, this is Rich. Just one additional comment to what Vafa mentioned, during the -- before we get access to the new scanner from iTero, like Vafa said, we anticipated Q4 time frame, we have a program with our customers that if they buy the existing scanner, that they will be able to upgrade to the new one when the new one is released. So, we've got a plan there to transition that new introduction.
David Saxon: Okay, super helpful. Thanks for that. And then just sticking with you, Rich. Super helpful color. I haven't quite gotten through to the model yet, but if you could just kind of help us with quantifying the stranded costs you're bearing currently and kind of where they sit, cogs versus OpEx? Thanks so much.
Richard Heppenstall: Yes, so we do have obviously stranded cost largely in the corporate infrastructure that we use to support businesses. So the way that we generally operated is kind of like a holding structure where the businesses can operate largely autonomously from each other, and then we've got a corporate overlay. So as we think about corporate stranded costs on a go-forward basis, they're largely in SG&A in the corporate sector. The way that we're thinking about the transaction is, as we mentioned in the prepared remarks, that we'll carry some cost until the closure of the deal, then of course, there'll be a number of headcount, and obviously, that's conveyed, and then we will have -- which will give us some uplift in the margin. And then we'll have a period where there's TSAs, and then once TSAs fall off, then there's another inflection point is how we're thinking about it in the longer term. But the way that we're also thinking about it, obviously, is we've set out the 15% plus adjusted EBITDA margin one-year post-sale, there's obviously a lot of puts and takes in the numbers right now, obviously, but we're still committed to achieving that one-year post-sale.
David Saxon: Great. Thank you.
Operator: One moment for our next question. Our next question comes from the line of Matt Miksic of Barclays (LON:BARC). Your line is now open.
Matt Miksic: Hi, good evening. Thanks for taking my question.
Vafa Jamali: Hi, Matt.
Matt Miksic: So a couple of follow-ups. You mentioned the sort of target of getting under $200 million in net debt, you're taking in $375 million or a bunch of that in cash and a little bit in debt it looked and you've got -- the simple math would say, you could get lower, can you talk a little bit about how you're thinking about the balance of getting your net debt lower or holding onto some cash and why? And a couple of quick follow-ups, if I could.
Vafa Jamali: Sure. Hi, Matt, it's Vafa. The $200 million that we mentioned does not include the $60 million seller note. So obviously that's a pick that we just don't include there, but if you included that it'd obviously be better than $140 million, so that's the way we're looking at it there, and that's probably the discrepancy between the price that we got for the Spine business and what we're reporting on debt. Rich, anything else to offer there?
Richard Heppenstall: Yes, just in addition to that, Matt, the less than $200 million in net debt number that we did mention is, one thing about the transaction with H.I.G. is actually a relatively complex transaction relative to our size and so there is a -- it's basically a carve-out within the organization and separating and setting up legal entities and the like. And so we're still incurring some costs to separate the business outside of what you would normally see in a transaction, like a normal transaction, and we're bearing those costs real-time. So, we're going to be focused on maximizing the cash inflow and the debt repayment that we do have, but we feel comfortable with the less than $200 million that we outlined. And as things progress and become clearer, as we get closer to transaction close, we'll provide more detail around that.
Matt Miksic: Okay. And so like as we think we break that into the, you got $60 million and the $315 million in cash, and then you've got some outlays -- I mean, you generated, what was it -- I don't know how much you generated last year in cash total, but I'm assuming there'll be some positive operating cash flow, so I guess, can you give us any sense of how much -- is that a $5 million or $10 million or $20 million or $30 million outlay for sort of transitional cost that you're describing or any color on that?
Richard Heppenstall: Yes, the way that I have you think about it is, as I mentioned on the call, Q1 is generally a little bit of a softer quarter for us due to seasonality. But if you just simply take when we announced the deal, which was before the end of the year, and we said $200 million -- less $200 million of net debt, and then you actually take out where we ended, we ended actually in a much stronger cash position with almost $88 million, and we prepaid additional debt, that should be a little bit of upside that you could probably take into that net debt number. But as I said, we're still spending money and we'll continue to evolve and provide more information. But we did end the year in a really good position from a working capital perspective, as I mentioned on the call, which should be a little bit of upside to the $200 million that we previously disclosed.
Matt Miksic: Okay. And then just to be crystal clear, so -- and we understand this, if I'm thinking that you have $315 million that's coming into your balance sheet and cash that there is something putting aside operating cash flows, what you did in '22, and what you could do in '24, but there's some fixed cash layout charges against that, so we shouldn't be thinking, wow, $315 million is coming at it, it might be -- it'll be something less than that when you're done with, like you described the unique nature of the deal, is that right?
Richard Heppenstall: Yes, absolutely. We have carve-out costs that we're spending. Obviously, there's legal fees, banker fees, all of those types of things, as you would expect. And then, the other piece that you didn't mention, Matt, is that we've got some costs that we're going to be incurring to rightsize the organization to new RemainCo steady state as we approach that 15% plus EBITDA margin, and so some of that is going to be cash, some of that is going to be non-cash, and we're working through that right now, which is why we're still kind of with that less than $200 million number, and we'll provide more information as we continue to work through those plans.
Matt Miksic: Right. And then, if I could, another, sorry to sort of get into these little weedy things, but a year from when you say 15% plus EBITDA profile one-year forward, is that in the year? In other words, like we say the clock starts April 1 or something, because if you do the deal in March or picking just a time that in the quarter following that, in the year following that, how to think about what does that 15% plus mean? Is it a run rate? How to think about those two metrics? Actually, there was 15% plus, and I'm sorry, there was another one-year forward, it was the net debt number.
Richard Heppenstall: Yes, and the revenue. So the 15% plus we've talked about is on a run rate basis, an annualized run rate basis one-year post-close. But the one thing that I will say is, you've known Vafa and I long enough to know that we will work to look to take out as much of that cost as quickly as possible, so -- but that's basically how we're thinking about it right now, is it be on an annualized basis one-year post-close, and then as things continue to materialize and move forward, right, we'll provide some additional information as things become clear. But as you might expect, there's a lot of moving pieces to it right now.
Matt Miksic: Okay. And so that might not be like closes like the first quarter after that year, you're not necessarily saying we print that first quarter, expect 15% plus, I mean -- maybe that might be your goal, but what you're promising is that in the four quarters that follow that, that's where you're going to be aggregating to, is that fair?
Richard Heppenstall: Yes, Because -- and the reason for that is, and I mentioned this to David, a little bit on the call is, once the deal closes there'll be costs that immediately depart the organization that go with the deal. Then there's a period because H.I.G. doesn't have all of the systems and everything and will not have all of the systems and everything set up at close where we're going to be in TSAs, where we're still going to bear cost as an organization that is going to be for the most part reimbursed by H.I.G. but not entirely 100%, right? And so when those TSAs fall off, right, then our job is going to be to take out that remaining cost which gets you to that 15% plus that we talked about.
Matt Miksic: Okay. That's super helpful. Thanks, guys.
Vafa Jamali: Of course. Thanks, Matt.
Operator: I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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