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ZI

ZimVie Inc. (ZIMV)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 third‑party net sales were $116.8M, down 1.5% y/y and modestly down 0.4% in constant currency; adjusted EBITDA improved to $16.1M (13.8% margin) and adjusted diluted EPS was $0.13, with GAAP diluted EPS at $(0.35) due to non‑GAAP adjustments and share‑based comp timing .
  • Management reaffirmed FY 2024 guidance (net sales $450–$460M, adjusted EBITDA $60–$65M, adjusted EPS $0.55–$0.70) and flagged Q3 as the seasonal trough: sequentially lower revenue vs Q2 and down 3–4% y/y, with Q3 adjusted EBITDA margin ~12% .
  • Dental demand indicators were constructive: biomaterials growth outpaced market; digital workflow momentum (guided surgery, Implant Concierge, RealGUIDE software) remained strong despite continued weakness in scanner equipment sales; U.S. market stable, APAC growth positive in constant currency; China exposure minimal .
  • Strategic/product catalysts: U.S. launch of GenTek restorative components following FDA 510(k) clearance, RealGUIDE v5.4 release with automated segmentation and one‑click nerve detection, and a new Medit scanner distribution partnership to broaden scanner price points and support downstream product adoption .
  • Balance sheet de‑risking persists post‑spine sale: cash $78.6M, gross debt ~$235.1M, net debt ~$156M; company reiterates objective to reach 15%+ adjusted EBITDA margin by April 1, 2025, supported by stranded cost removal, manufacturing/supply chain efficiencies, and improved fixed‑cost absorption .

What Went Well and What Went Wrong

What Went Well

  • Digital workflow momentum and mix: complete digital portfolio (excluding iTero scanners) grew high single digits; Implant Concierge and surgical guide sales each grew over 20%, enhancing implant pull‑through and office efficiency (“removes hours of labor”) .
  • Product innovation cadence: FDA clearance and U.S. launch of GenTek restorative components; RealGUIDE v5.4 delivers one‑click nerve detection and automated bone/tooth segmentation; Medit scanner partnership broadens addressable market and supports downstream adoption .
  • Biomaterials strength: modest growth with performance outpacing market growth; management views biomaterials demand as a leading indicator for implant volume recovery; pricing remained “held well” in premium implants .

What Went Wrong

  • Capital equipment softness: scanner sales (iTero) were weak in U.S. and OUS, pressuring digital equipment revenue; “all of our miss in digital is from missing scanner sales,” with Lumina delay cited near‑term .
  • U.S. premium implant market pressure: weaker U.S. implant sales tempered overall growth; management maintained prudence for Q3 given end‑market softness despite stable U.S. market positioning .
  • FX headwinds in APAC: headline APAC declined 6.9% reported due to yen; constant‑currency APAC grew 1.1%, highlighting FX as a drag on reported international results .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Revenue (Third‑party net sales, $M)$113.066 $118.195 $116.811
Adjusted EBITDA ($M)$13.921 $12.452 $16.080
Adjusted EBITDA Margin (%)12.3% 10.5% 13.8%
Adjusted Diluted EPS ($)$0.10 $0.08 $0.13
Net Loss ($M)$(22.163) $(11.483) $(9.553)
Net Loss Margin (%)(19.6%) (9.7%) (8.2%)
Adjusted Cost of Products Sold (% of sales)37.5% 37.2% 37.0%

Segment/Geography (Third‑party net sales):

GeographyQ4 2023 ($M, y/y)Q1 2024 ($M, y/y)Q2 2024 ($M, y/y)
United States$65.383, -3.2% $67.748, -3.1% $69.316, +0.1%
International$47.683, -1.2% (‑4.1% cc) $50.447, +0.4% (+1.1% cc) $47.495, -3.8% (‑1.2% cc)

KPIs and Balance Sheet:

KPIQ4 2023Q1 2024Q2 2024
Cash and Cash Equivalents ($M)$71.511 $68.584 (quarter‑end; includes cont./disc.) $78.601 (continuing ops)
Gross Debt ($M)$508.797 $502.056 (non‑current) + $7.013 (current) $235.110 (non‑current)
Net Debt ($M)$421.0 (FY23) ~$178 (as of Apr 2 post spine close) ~ $156 (Q2 end)
Diluted Shares (M)26.6 27.1 27.4

Non‑GAAP reconciliation highlights (Q2 2024):

  • Adjustments included: intangible amortization $5.999M, acquisition/divestiture/related $4.621M, restructuring $0.398M, EU MDR $0.311M, other charges $0.287M, and tax effects $1.517M; this bridged GAAP net loss to adjusted net income $3.580M and adjusted EPS $0.13 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2024$450–$460M $450–$460M Maintained
Adjusted EBITDAFY 2024$60–$65M $60–$65M Maintained
Adjusted EPSFY 2024$0.55–$0.70 $0.55–$0.70 Maintained
RevenueQ3 2024Not providedSequentially lower vs Q2; down 3–4% y/y New/Seasonal caution
Adjusted EBITDA MarginQ3 2024Not provided~12% New
Interest ExpenseFY 2024~$12.5–$13.0M ~ $13.0M Maintained/tightened
Share‑based CompensationFY 2024$16.0–$16.5M $17.0–$17.5M Raised
Diluted SharesFY 202428.5M 27.6M Lower share count assumption

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023)Previous Mentions (Q1 2024)Current Period (Q2 2024)Trend
Digital workflow adoptionEmphasis on guided surgery pull‑through and digital differentiation Guided surgery +50% growth; high subscription renewal; pull‑through to implants RealGUIDE v5.4 launch; guided surgery +20%+; Implant Concierge +20%+ Strengthening
Scanner equipment (iTero/Lumina)Anticipated access to new Lumina in Q4’24; interim upgrade program Lower iTero sales pressured U.S.; contemplated in FY guide Equipment weakness persists; all digital miss due to scanner sales; Medit partnership announced Headwind near‑term
Premium implant market dynamicsHolding price; gained share despite softness U.S. implant market weaker; pricing down ~1% y/y U.S. implants weaker; broader differentiation and execution offset weakness Mixed but stabilizing
Biomaterials performanceFoundation for implants; portfolio investment Stable OUS; biomaterials strength Growth outpacing market; leading indicator for implants Positive
Regional trends (APAC, China)N/A specificStability OUS; Europe grew >4% APAC -6.9% reported; +1.1% cc; China exposure minimal FX‑driven variance; cc constructive
Cost/stranded cost removalPlan to remove stranded costs post spine sale SG&A reduced (IT/legal); rightsizing; 15%+ margin target Continued rightsizing; Q3 fixed‑cost absorption impacts margins; 15%+ by Apr 2025 Executing
Technology/AI featuresN/A specificRealGUIDE capabilities highlighted RealGUIDE v5.4 adds automated segmentation and one‑click nerve detection Advancing

Management Commentary

  • “We continued to execute in the second quarter, successfully engaging with our dental customers and advancing our innovative product portfolio… We are pleased to be in a position to reaffirm our full year net sales, margin, and adjusted earnings per share guidance.” — Vafa Jamali, CEO .
  • “Adjusted EBITDA… was $16.1 million or a 13.8% margin… We remain committed to achieving our financial objective of 15% plus EBITDA margins 1 year post spine sale.” — Richard Heppenstall, CFO .
  • “We expect our third quarter revenue to be sequentially lower versus Q2 and lower on a year‑over‑year basis by 3% to 4%… [and] an adjusted EBITDA margin of approximately 12%.” — Richard Heppenstall, CFO .
  • “Complete digital portfolio, excluding iTero scanner sales, grew high single digits… Implant Concierge grew over 20%… RealGUIDE 5.4 adds one‑click nerve detection and automated bone and tooth segmentation.” — Vafa Jamali, CEO .
  • “We announced the U.S. launch of GenTek… following FDA 510(k) clearance.” — Company press release .

Q&A Highlights

  • Digital equipment headwind and Lumina delay: management reiterated that scanner softness explains digital misses; Lumina delay was contemplated in guidance; Medit partnership broadens offerings without sacrificing technology .
  • Q3 prudence and cadence to Q4: sequential revenue decline and ~12% margin in Q3 due to fixed‑cost absorption; Q4 expected to rebound, aided by cost initiatives and TSA benefits, setting up 2025 margin trajectory .
  • Market indicators: guided surgery and Implant Concierge growth, plus biomaterials use as “interim” for delayed procedures, viewed as stabilizing signals amid softer end‑market demand .
  • Strategic platform openness: RealGUIDE remains open; any shift to closed platform would be contemplated only at significant share — currently open strategy seen as advantageous .
  • Regional nuance: minimal China exposure; APAC growth positive in constant currency despite yen headwind; India and Australia cited as strong .

Guidance Changes

(See table above for detailed changes.)

  • FY 2024 guidance reaffirmed across net sales, adjusted EBITDA, and adjusted EPS .
  • Q3 seasonal caution added: revenue down 3–4% y/y; adjusted EBITDA margin ~12% .
  • Interest expense ~ $13M for FY 2024; share‑based comp raised to $17–$17.5M .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 EPS and revenue were not retrievable at the time of analysis due to a data access limit. We cannot assess beats/misses versus Street consensus and will update when S&P Global data becomes available.
  • Based on company commentary, Street models should reflect Q3 seasonal trough (down 3–4% y/y; ~12% margin), with Q4 cadence and cost actions supporting FY guidance reaffirmation .
MetricActual (Q2 2024)S&P Global ConsensusSurprise
Revenue ($M)$116.811 N/AN/A
Adjusted Diluted EPS ($)$0.13 N/AN/A

Note: S&P Global consensus data unavailable at request time; will update once accessible.

Earnings Call Themes & Trends

(See table above for multi‑quarter tracking.)

Key Takeaways for Investors

  • FY 2024 guide reaffirmed; near‑term seasonal trough expected in Q3 with sequentially lower revenue and ~12% margin, followed by Q4 rebound — position sizing and expectations should reflect this cadence .
  • Margin trajectory intact: company remains on track for 15%+ adjusted EBITDA margin by April 1, 2025, supported by stranded cost removal, manufacturing efficiencies, and improved fixed‑cost absorption .
  • Product catalysts support medium‑term thesis: GenTek U.S. launch, RealGUIDE v5.4, and Medit partnership should deepen digital adoption, drive implant pull‑through, and support premium pricing .
  • Watch scanner cycle: equipment weakness is the key headwind; the Lumina cycle and Medit offerings are expected to resolve over time — monitor scanner conversion and digital mix into 2025 .
  • Demand indicators: biomaterials growth outpacing market and guided surgery momentum are constructive leading indicators for implant volumes into the back half and FY25 .
  • De‑leveraging achieved: cash $78.6M, gross debt ~$235.1M, net debt ~$156M; interest expense ~ $13M for FY 2024 improves earnings power vs prior year .
  • Regional nuance and FX: APAC growth in constant currency despite yen headwinds; minimal China exposure reduces risk — maintain focus on cc trends vs reported .

Citations: Financial results and guidance from Q2 2024 8‑K and press release ; Q2 call transcript for operational details and outlook ; GenTek U.S. launch press release ; prior quarters (Q1 2024, Q4 2023) for trend analysis .