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ZI

ZimVie Inc. (ZIMV)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $111.5M (-1.4% y/y; -0.9% cc), with adjusted EPS $0.27 and adjusted EBITDA $18.4M (16.5% margin), reflecting 420 bps margin expansion y/y despite end‑market softness .
  • Management emphasized a “transformational” 2024, exiting spine to become a pure‑play dental company, cutting net debt by >$290M to ~$145.5M, and implementing manufacturing and cost actions; line of sight to positive GAAP operating income in 2025 was reiterated .
  • FY25 guidance: revenue $445–$460M (flat–3% cc), adjusted EBITDA $65–$70M, adjusted EPS $0.80–$0.95; Q1’25 sales guided to $112–$114M with 14–15% adjusted EBITDA margin; operating cash flow expected at $30–$40M for FY25 .
  • Digital solutions momentum (RealGUIDE +39% FY; digital ex scanners +>20% in Q4) and biomaterials growth (+2% FY) helped offset scanner pressure and U.S. implant softness in late December, which management attributed to extended holiday shutdowns rather than share loss .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion and cost execution: adjusted EBITDA margin rose to 16.5% in Q4 (+420 bps y/y) and to 13.3% for FY24 (+220 bps y/y), driven by efficiency and mix management; adjusted COGS % fell 240 bps y/y in Q4 to 35.0% .
    • Digital growth: RealGUIDE software grew 39% in FY24; digital solutions (ex scanners) grew >20% in Q4; Implant Concierge +14% FY, underscoring workflow adoption tailwinds .
    • Balance sheet improvement: net debt reduced to ~$145.5M at 12/31/24 (from ~$437.3M at 12/31/23); cash (cont. ops) ~$75.0M at Q4 .
    • Management quote: “2024 was a transformational year… We became a pure play dental company… increased Adjusted EBITDA margins by over 4 percentage points in the fourth quarter of 2024 compared to the fourth quarter of 2023 despite a softer end market” .

  • What Went Wrong

    • Top line softness: Q4 sales declined 1.4% y/y (reported) and 0.9% cc; full‑year sales -1.6% (reported) .
    • U.S. implant weakness late in December and continued pressure in scanner sales weighed on Q4; management attributed December to extended holiday closures, not share loss .
    • GAAP profitability remained negative: Q4 GAAP diluted EPS (cont. ops) was $(0.35); FY24 GAAP diluted EPS (cont. ops) $(1.23) .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue – Third Party Net Sales ($M)$116.8 $103.2 $111.5
GAAP Diluted EPS – Continuing Ops$(0.35) $(0.11) $(0.35)
Adjusted Diluted EPS$0.13 $0.12 $0.27
Adjusted EBITDA ($M)$16.1 $13.1 $18.4
Adjusted EBITDA Margin %13.8% 12.7% 16.5%
Net Loss Margin %(8.2%) (3.0%) (8.7%)
YoY Sales Change % (Reported)(1.5%) (2.0%) (1.4%)

Geographic mix – Third Party Net Sales ($M)

RegionQ2 2024Q3 2024Q4 2024
United States$69.3 $65.4 $64.4
International$47.5 $37.9 $47.1

Operating KPIs and cost metrics

KPIQ2 2024Q3 2024Q4 2024
Adjusted COGS % of Sales37.0% 34.4% 35.0%
Adjusted R&D % of Sales5.4% 6.4% 5.2%
Adjusted SG&A ($M)$62.384 $57.789 $57.207
Cash & Cash Equivalents – cont. ops ($M)$78.6 $67.0 $75.0
Net Debt ($M)~$156 ~$153 $145.5
Diluted Shares (M)27.4 27.6 27.6

Select commercial KPIs (growth)

KPIQ2 2024Q3 2024Q4 2024
Digital solutions ex scannersHigh single‑digit growth (quarter) >10% y/y (quarter) >20% y/y (quarter)
RealGUIDE software—>30% y/y (quarter) +39% y/y (FY)
Implant Concierge>20% y/y (quarter) +20% y/y (quarter) +14% y/y (FY)
BiomaterialsModest growth (quarter) Healthy growth (quarter) +2% y/y (FY)

Note: Dashes indicate not disclosed for that specific quarter.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Net Sales)FY 2025N/A$445M–$460M; flat–3% cc (reported −1% to +2%) New
Adjusted EBITDAFY 2025N/A$65M–$70M (+8%–17% y/y) New
Adjusted EPSFY 2025N/A$0.80–$0.95 (+29%–53% y/y) New
Interest expenseFY 2025N/A$7.5M–$8.0M New
Share‑based compFY 2025N/A$15M–$16M New
Capital expendituresFY 2025N/A$11M–$14M (incl. Oracle cloud transition) New
Operating cash flowFY 2025N/A~$30M–$40M New
GAAP operating incomeFY 2025N/AExpect positive GAAP operating income New
Revenue (Net Sales)Q1 2025N/A$112M–$114M (headwinds: FX $1.6M; −1 selling day $1M; RTM agreement $1.4M) New
Adjusted EBITDA marginQ1 2025N/A14%–15% New

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Digital adoptionDigital ex scanners grew high single digits; Implant Concierge >20%; RealGUIDE 5.4 features launched Digital ex scanners >10% y/y; RealGUIDE >30%; Implant Concierge +20% Digital ex scanners >20% in Q4; RealGUIDE +39% FY; Implant Concierge +14% FY Improving
Implants demandU.S. implants pressured; expecting recovery aids from digital/training U.S. resilient ex scanners; OUS timing issues Singles steady; expensive specialist cases still soft; late‑Dec U.S. weakness due to holidays Stable to gradual recovery (back‑half weighted)
Manufacturing/footprintEfficiency actions underway; Valencia scaling Gross margin sequentially improved; Valencia at full run for TSX Further in‑sourcing; Valencia ~20% cheaper than PBG; capacity available Improving
Tariffs/macro——No material tariff impact assumed in guidance Monitor
R&D cadenceInvesting across implants/digital; training backlog Incremental R&D and U.S. sales investments Steady R&D spend; continuous product cadence Stable
GeographyU.S. stability; OUS mixed U.S. grew ex scanners; EMEA macro pressure; Japan/Italy timing U.S. −1.5% y/y; OUS flat cc; balanced Q4 Mixed but stabilizing

Management Commentary

  • Strategy and transformation: “Through the sale of our Spine business, we became a pure-play dental company... We used the proceeds… to pay down debt and significantly delever the business.” .
  • 2025 profitability focus: “Line of sight to positive GAAP operating income for 2025… drivers include strengthening our commercial team, medical education and portfolio expansion.” .
  • Cost and margin execution: “Adjusted cost of products sold… decreased 240 bps y/y… driven by manufacturing efficiencies and cost reductions.” .
  • Market view: “The market is still pressured at the more expensive cases… recovery expected back half of the year if specialists’ volume returns.” .
  • Manufacturing footprint: “Cost to produce in Valencia is about 20% less than Palm Beach Gardens… continuing transitions and in‑sourcing in 2025.” .

Q&A Highlights

  • U.S. late‑December softness: Orders “dried up” due to extended holidays; January stabilized; no evidence of share loss .
  • Product mix and growth: Digital momentum expected to continue; scanners remain a low‑margin distributor product with pressure; biomaterials steady at +2% FY .
  • Implants outlook: Recovery hinges on return of complex specialist cases; singles holding up; financing improvements not yet material .
  • Margin cadence: Expect step‑up from Q1 to Q2 as TSAs roll off; seasonally softer Q3; improvement again in Q4; gross profit tracking ~65% if mix holds .
  • Capacity/in‑sourcing: Valencia has headroom; in‑sourcing opportunities to lift utilization and lower cost .
  • Tariffs: No material impact assumed in 2025 guidance; monitoring ongoing developments .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates for Q4’24 revenue/EPS/EBITDA but the request was rate‑limited, and we could not obtain values at this time (therefore we cannot assess beat/miss vs consensus) [Values retrieved from S&P Global unavailable due to API limits].
  • Implication: Sell‑side models may need to adjust for higher‑than‑expected Q4 margin execution and FY25 operating leverage targets (adj. EBITDA $65–$70M; positive GAAP operating income), while top‑line remains contingent on implants recovery and scanner normalization .

Key Takeaways for Investors

  • Margin story intact: Q4 adj. EBITDA margin 16.5% with broad‑based cost discipline; FY25 guide implies further operating leverage and positive GAAP operating income potential .
  • Digital as structural tailwind: RealGUIDE and Implant Concierge adoption provide resilient growth and procedure pull‑through, offsetting scanner headwinds .
  • End‑market watch: Recovery depends on specialist, higher‑ticket implant cases; singles steady; monitor macro rates/financing and back‑half inflection in 2025 .
  • Manufacturing optionality: Valencia cost advantage (~20%) and in‑sourcing pipeline offer continued COGS and margin benefits into 2025–2026 .
  • Balance sheet improved: Net debt ~$145.5M; revolver undrawn; operating cash flow expected to more than double in 2025 ($30–$40M) .
  • Near‑term trading setup: Q1’25 guide embeds FX/day/contract headwinds but still targets 14–15% margin; prints on digital momentum and any signs of specialist case recovery likely to drive stock reaction .
  • Medium‑term thesis: Pure‑play dental platform with expanding digital ecosystem, improving manufacturing efficiency, and deleveraging supports multiple expansion if revenue growth reaccelerates in H2’25 .

Appendix: Full‑Year Context (select items)

  • FY2024: Revenue $449.7M (−1.6% reported), adjusted EBITDA $60.0M (13.3%), GAAP diluted EPS (cont. ops) $(1.23), adjusted EPS $0.62; net debt ~$145.5M at year‑end .
  • Geographic FY2024: U.S. $266.8M (−1.0%), International $182.9M (−2.5% reported; −1.5% cc) .
  • Non‑GAAP adjustments include software write‑off related to ERP plans ($4.9M in Q4), EU MDR costs, restructuring, litigation settlement, and spin‑related items (see reconciliations) .