Q3 2023 ZimVie Inc Earnings Call

Good day, and thank you for standing by and welcome to this N V third quarter 2023 financial results Conference call.

At this time all participants are in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone and you will then hear an automated message advising your hands raised.

Withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, whereas our base.

Thank you all for joining today's call.

Earlier today <unk> released financial results for the quarter ended September 32023.

A copy of the press release is available on the company's website at <unk> dot com as well as on the SEC docked out.

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 reconcile.

Reconciliations of these measures the most directly comparable GAAP financial measures are included within the earnings release and the Investor deck issued today found on the Investor Relations section of the company's website.

This conference call contains time sensitive information and accurate only as of the live broadcast today November <unk> 2023.

<unk> 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 Batheja, Molly <unk>, President and Chief Executive Officer of MB.

Good afternoon, and thank you all for joining us.

In the third quarter, we continued to make progress on our innovation platform actively reshaping our portfolio to further penetrate markets with best long term growth potential.

In parallel we are improving our operational efficiency and driving better cash flow generation.

In general our sales team and DSO partners continues to have success engaging existing and new customers. We've.

We've seen strong traction for our products launched over the past year, but those are legacy customers.

DSO channel driving new customer acquisition across the board.

We're also very pleased with the cadence of new product introductions and most recently by activity this year.

But I can Jason membrane now part of the dental portfolio delivered a common request we received from the field.

Offer a growth factor rich bioactive barrier.

The barracuda membrane, which is derived from human placental tissue conforms nicely for site coverage that will be used in a variety of regenerative procedures.

Turning to our Azure multiplatform product solutions with Azure.

The portfolio offers a more comprehensive selection of components effectively cater to the dental lab market.

This solution.

That includes 13 lab focused prosthetics restorative solutions.

Great piece of data.

Our inflows.

In summary, I'm very pleased with our positioning in dental.

And our ability to perform.

Market or product areas into the year ahead.

Turning to our spine business, we're also driving incremental success within our spine portfolio.

Our position with Mobi C is improving also earlier in the quarter, we announced the FDA approval for new smaller will be seen seven footprints.

This approval for usage of Mobi C to address more needs.

Expanding access for patients across the U S.

I am pleased to report that we've been planning our first device and I look forward to seeing further adoption.

Continuing with what we see we received FDA approval to launch groundbreaking had E clinical study of cervical arthroplasty adjacent to fusion.

Operator: Good day, and thank you for standing by.

This study will further deepen deepen <unk> truly differential differentiated clinical epidemiology.

Operator: Welcome to the ZimVie 3rd quarter 2023 Financial Results Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone, and you'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference has been recorded.

Suitable patient population for service.

I'm also pleased to share that we recently crossed the milestone for 2000 patients treated with the tether device as a reminder, the tether is high.

<unk> solution for pediatric patients.

Over 50 surgeons that performed using the market leading services to patients.

Yes.

Geographic Scoliosis, we look forward to more patients with this therapy into the future.

Marissa Bych: I would now like to hand the conference over to your first speaker today, Marissa Bych. Thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter ended September 30, 2023. Copy of the crash release is available on the company's website ZimVie.com as well as on scc.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.

Finally, we continue to advance our brand and that partnership has recently expanded economic cooperation agreement to include co marketing.

We continue to work on achieving compatibility between spinal implant embryos common aggregation system, allowing us to enhance workflow and accuracy in the operating room, while reducing your operating actually in radiation exposure.

We'll continue to engage with key surgeon customers.

Marissa Bych: These refer to the company's most recent periodic report, filed with the PSEC and subsequent SEC filing for a detailed discussion of these risks and uncertainties. In addition, the discussion on this call will include certain non-gap financial measures. Reconciliation with these measures, the most directly comparable gap financial measures, are included within the earnings release and the investor deck issued today, found on the investor relation section of the company's website. This conference call contains time-sensitive information as accurate only as its alive broadcast today, November 1, 2023. ZimVie just claims any intentional 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.

Around existing solutions, and ultimately optimize our position in markets, where we can win.

Turning to our continued operational improvements as I mentioned in past quarters.

Made meaningful reductions to our physical footprint and corporate overhead, while working through excess inventory and receivables.

Although there is still room for further optimization I'm pleased that we're making excellent progress and improved contribution positioning our balance sheet by nearly $10 million this quarter.

We're continuing to leverage our cash position to pay down the principal balance of our debt and prepaid 2020 for interest payments.

Rich will provide more detail on shortly.

Finally, I am very excited that we've completed all of our ERP conversion. This concludes heavy operational lift completing all TSA related to our 2022 spinoff movie.

Moving over 950 servers to new data centers, we transitioned over 200 applications to modern and largest cloud based platforms.

I'll now turn the call over to rich to outline our financial performance.

Thanks, Pat and good afternoon, everyone I'll begin by reviewing our third quarter 2023 results and will close by providing our updated outlook for the full year 2023.

Vafa Jamali: With that, I will turn the call over to Zafa Jamali, President and Chief Executive Officer of ZimVie. Good afternoon and thank you all for joining us. In the third quarter we continue to make progress on our innovation platform, actively reshaping our portfolio to further penetrate markets with best long-term growth potential. In parallel, we are improving our operational efficiency and driving better cash flow generation. In dental, our sales team and DSO partners continue to ask success engaging existing and new customers.

Total third party net sales for the third quarter of 2023 or $202 9 million.

A decrease of four 9% on a reported basis and a decrease of five zero percent in constant currency.

As we mentioned towards the conclusion of our Q2 earnings call. We expected Q3 to be impacted by slightly higher than normal seasonality for our businesses in the summer months.

Vafa Jamali: We've seen strong traction for our products launched in the past year with both our legacy customers and our ever-emerging DSO channel, driving new customer acquisition across the board. We're also very pleased with the cadence of new profit introductions. The most recent the viativity is your bioconvated plus membrane, now part of the dental bond to your portfolio, delivers a common request we receive from the field to offer a growth factor rich bioactive barrier.

And our sales performance exceeded these expectations.

Moving onto our two segments Global Dental third party net sales were $105 3 million in the third quarter representing.

Representing 20 basis points of growth as reported and a decline of one 2% in constant currency when compared to the prior year period, driven entirely by one less selling day in Q3 of 2023 versus Q2 2022.

Vafa Jamali: The viativity membrane, which is derived from human placental tissue, conforms nicely for side coverages, now being used in a variety of regenerative procedures. Turning to our Azure multi-platform product solutions. With Azure, the portfolio offers a more comprehensive selection of components, effectively cater to the dental lab, and Market. This solution, that includes 13 lab-focused prosthetic and restorative solutions designed to integrate into digital workflows.

While the dental market in aggregate was relatively soft in the third quarter, we continued to execute well commercially in the market acceptance of our new premium implants contributed to effectively flat year over year implant sales on a global basis.

In the U S Dental third party net sales of 65.0 million <expletive>.

Vafa Jamali: In summary, I'm very pleased with our position in debt bill and made confident in our ability to perform at or above market in core product areas into the year ahead. Territory to our spine business, we're also providing economic success within our spine portfolio. Our position with Moby-C is improving also. Earlier in the quarter, we announced FDA approved for new, smaller, high, Moby-C in seven footprints. This is a approval I asked me to use as your Moby-C to address more anatomical means, expanding access for patients across the United States.

<unk> declined by two 5% driven by one less selling day, and a slightly weaker implant market, partially offset by ongoing strength in our digital solutions sales.

Outside of the U S Dental third party net sales of $40 3 million.

Increased by four 9% on a reported basis and one 2% in constant currency driven by growth across all three of our product families implants, biomaterials and digital dentistry.

Vafa Jamali: I'm pleased to report that we've been planning our first devise in electronic foresting for their adoption. Continuing with Moby-C, we received FDA approval to launch groundbreaking anti-econical study of cervical arpeggio-plastic and adjacent to fusion. This study will further deepen with Moby-C's true differential clinical evidence about the FDA and even expand the suitable patient population for cervical arpeggio. I'm also pleased to share that we recently crossed the mouse and for two thousand patients treated with the tether device.

Partially offset by one less selling day in Q3 of 2023.

Our new product launches in 2022, and 2023, particularly Q3 pro and PSX continue their early and impressive trend of market acceptance during the third quarter.

Third quarter Global spine third party net sales were $97 6 million a decrease of nine 8% on a reported basis.

And then eight 9% decrease in constant currency when compared to the prior year period.

Vafa Jamali: As one might hear, the tether is a high-impact solution for pediatric patients. Over 50 surgeons that perform BVT using the market-leading tether system, a few patients diagnosed, we'll add a little bit of idiopathic scoliosis. We look forward to getting more patients with this therapy into the future.

The decrease was primarily driven by continued competition in the spine market our decision to exit China. Following volume based procurement and one less selling day, partially offset by the recognition of sales that were previously attributed to Zimmer biomet and growth in both our EMEA and Asia Pacific.

Vafa Jamali: Finally, we continue to advance our brain lab leadership as a recently expanded our development cooperation agreement to include co-marketing. We continue to work on achieving compatibility between our spinal implant and brain labs by the trauma navigation system, allowing us to enhance work flow and accuracy in the operating room while reducing your operative actually and radiation exposure. We'll continue to engage with key surgeon customers, innovate on and around existing solutions, and ultimately optimize opposition in markets where we can win.

Regions.

Is that the commented we are pleased with our <unk> performance relative to the balance of our correspondent portfolio led by growth in Europe and Asia Pacific.

In the U S spine third party net sales of $78 $3 million decreased by 10, 2% driven by competitive pressure in core spine and one less selling day, partially offset by a relative improvement and what we see and the tablet.

Vafa Jamali: To reach our continued operational improvement, as I mentioned past quarters, we've made meaningful reductions to our physical footprint and corporate overhead while working through excess inventory receivables. Although there's still room for further optimization, I'm pleased that we're making excellent progress in the improved catheterization position in our balance sheet by nearly $10 million this quarter. We're continuing to leverage our catheterization to pay down the principal balance of our debt and prevent 2024 interest payments, a topic which will provide more detail on shortly.

Outside of the U S spine third party net sales of $19 $3 million decreased by eight 3% on a reported basis and three 6% in constant currency.

<unk> are outside of the U S continue to leverage our differentiated best in class clinical evidence by growing 67% and 62% respectively. During the third quarter.

Vafa Jamali: Finally, I am very excited to announce that we've completed all of our ERP conversions. This concludes the heavy operational lift, completing OTSA in relation to our 2020 spin-off, moving over 950 servers to new data centers and transitioning over 200 applications to modern and larger cloud-based pathblocks.

Third quarter adjusted cost of products sold a 31, 8% of sales compares to 27, 2% of sales in the prior year period.

As a reminder, in Q3 of 2022, our cost of sales benefited from the settlement of a contingent liability with our prior periods.

Richard Heppenstall: I'll now turn the call over to Rich, outline our financial performance. Thanks, Baffa, and good afternoon, everyone. I'll begin our by reviewing our third quarter of 2023 results, and we'll close by providing our updated outlook for the full year of 2023. Total third-party net sales for the third quarter of 2023 were $202.9 million, a decrease of 4.9% on all quarter pages, and a decrease of 5.0% in constant current, as we mentioned towards the conclusion of our Q2 earnings call, we expected Q3 to be impacted by slightly higher than normal seasonality for our businesses in the summer months and our sales performance exceeded these expectations.

We are pleased with our ongoing progress to reduce cost of products sold as we look to continue to better manage inventory and inventory related charges.

Adjusted research and development expense of $10 $5 million represents five 2% as a percentage of third party sales.

Third quarter 2023, adjusted selling general and administrative expenses of $115 7 million.

Or 57.0% of third party net sales was $13 $1 million lower versus the prior year period.

<unk> SG&A expenses year over year are due to less variable expenses from lower net sales and savings from our previously announced restructuring initiatives and cost containment measures.

Richard Heppenstall: Moving on to our two segments, global dentals, third-party net sales were $105.3 million in the third quarter, representing 20 basis points of growth as reported and a decline of 1.2% in constant currency when compared to the prior year period, driven entirely by one less selling day in Q3 of 2023 versus Q2 2022. While the dental market in aggregate was relatively soft in the third quarter, we continue to execute well commercially and the market acceptance of our new premium implants contributed to effectively flat year-over-year implant sales on a global basis.

Adjusted EBITDA in the third quarter of 2023 was $25 8 million or 12, 7% of third party net sales, reflecting a decline of 110 basis points from 13, 8% in the prior year period.

The decrease in adjusted EBITDA margin is primarily due to lower net sales.

The benefit of the contingent liability with our prior parent in Q3 of 2022, partially offset by savings from restructuring and cost containment.

Adjusted earnings per share in the third quarter was eight.

Richard Heppenstall: In the US, dental third-party net sales of $65.0 million declined by 2.5% driven by one less selling day and a slightly weaker implant market partially offset by ongoing strength in our digital solution sales. Outside of the US, dental third-party net sales of $40.3 million increased by 4.9% on a reported basis and 1.2% in constant currency driven by growth across all three of our private families, implants, biomaterials, and digital dentistry, partially offset by one less selling day in Q3 of 2023.

On a fully diluted weighted average share count of 27.0 million shares.

Regarding working capital liquidity and debt and.

In Q3, we accelerated our progress on initiatives to monetize the strength of assets on our balance sheet and the application of our disciplined financial framework and.

In the quarter, we added over $9 million in cash to end at $75 4 million, including a $7 million prepayment of required principal payments on our term loan debt.

Net working capital improved by $8 million, including a $12 million reduction in inventory and a $14 million reduction in accounts receivable.

Richard Heppenstall: Our new product launches in 2022 and 2023, particularly Q3 Pro and PSX, continue their early and impressive trend of market acceptance during the third quarter. Third quarter global fine third-party net sales were $97.6 million, a decrease of 9.8% on a reported basis and an 8.9% decrease in constant currency when compared to the prior year period. The decrease was primarily driven by continued competition in the spine market. Our decision to exit China following volume-based procurement and one less selling day partially offset by the recognition of sales that were previously attributed to the environment and growth in both our EMEA and Asia-Pacific regions.

Although we have further opportunity to improve our financial profile. We are pleased that our focus on the operationalization of the business is yielding continued progress.

As a reminder of $175 million credit facility revolver remains undrawn.

Looking ahead. Please note that we expect our interest expense to increase by a couple of million dollars in 2024 relative to 2023, given the current rate environment and that balance.

I'll now turn to our updated full year 2023 outlook.

We are pleased with the progress we are making and are subsequently revising our full year 2023 financial outlook starting with revenue.

We are revising our expected full year 2023, net sales to be in the range of 860 million to $870 million narrowing our range from our previous guidance of $850 million to $870 million looking.

Richard Heppenstall: As that was commented, we are pleased with our movie C and Tether performance relative to the balance of our core spine portfolio led by growth in Europe and Asia-Pacific. In the US, fine third-party net sales of $78.3 million decreased by 10.2% driven by competitive pressure in core spine and one less selling day on partially offset by our relative improvement in movie C and the Tether. Outside of the US, fine third-party net sales of 19.3 million dollars decreased by 8.3% on a reported basis and 3.6% in constant currency.

Looking at our segments. We continue to expect 2023 dental net sales to be flat or to grow in the low single digits versus 2022.

And we continue to expect 2023 spy net sales to decline in the high single digits to low double digits versus 2022.

Moving to adjusted EBITDA margin, we expect full year adjusted EBITDA margin to be in the range of 13, 5% to 14.0% of net sales the same as previously guided.

Richard Heppenstall: Movie C and Tether outside of the US continue to leverage our differentiated best-in-class clinical evidence by going 67% and 62% respectively during the third quarter. Third quarter, adjusted cost of product sold at 31.8% of sales compared to 27.2% of sales in the prior year period. As a reminder, in Q3 of 2022, our cost of sales benefited from the settlement of a contingent liability with our prior parents. We are pleased with our ongoing progress to reduce cost of product sold as we look to continue to better manage inventory and inventory related charges.

With regard to adjusted earnings per share we are revising our adjusted earnings per share guidance range to <unk> 60 per share and <unk> 70 per share on a fully diluted share count of $26.

6 million shares narrowing the range of our previous guidance range of 50 to 70 a share.

With that I'll now turn the call back over to vapor.

Thank you rich I'm pleased with our progress in 2023 to date as well as our execution on streamlining objectives.

Although we have additional work ahead to return our business to durable growth I am confident in the strength of the assets in the portfolio and our presence in underserved end markets, which ultimately bring great value to patients.

Richard Heppenstall: Adjusted research and development expense at $10.5 million represents 5.2% as a percentage of third-party sales. Third quarter, 2023, adjusted selling general administrative expenses of $115.7 million for 57.0% of third-party net sales was $13.1 million lower versus the prior year period. Lower SGNA expenses year-over-year are due to less variable expenses from lower net sales and savings from our previously announced restructuring initiatives and cost containment measures. Adjusted EBITDA in the third quarter of 2023 is $25.8 million or $12.7% of third-party net sales reflecting a decline of 110 basis points from 13.8% in the prior year period.

And we continue to improve the efficiency of our company evolve our product platforms and execute commercially we look forward to showcasing the results at work to deliver.

With that we will open it up to questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

Please standby, while we compile our Q&A roster.

Our first question comes from the line of Robbie Marcus with Jpmorgan. Your line is open.

Hi, This is actually Lee on for Robbie Thanks for taking the question.

A lot of the upside at least relative to our own expectation came from spine. So.

Richard Heppenstall: The decrease in adjusted EBITDA in margin is primarily due to lower net sales. The benefit of the contingent liability with our prior parent in Q3 of 2022 partially offset by savings from restructuring and cost containment. Adjusted earnings per share in the third quarter was $0.8 on a fully-deluted weighted average share count at $27.0 million shares. Regarding working capital and liquidity in debt in Q3, we accelerated our progress on initiatives to monetize the strengths of assets on our balance sheet and the application of our discipline financial framework.

So can you talk about any progress and the trend you're seeing there, particularly in terms of competition.

Are you seeing that could potentially indicate that stabilization I think alright.

Right. Thanks for the question Jeff Here, we are seeing international growth contribute the most to the spine recovery, we still believe that we've got some work to do in the U S. And we have plans in place that can that can get us there, but the primary drivers for the recovery are there will be sales internationally.

Richard Heppenstall: In the quarter, we added over $9 million in cash to end at $75.4 million, including a $7 million prepayment of required principal payments on a term loan debt. Networking capital improved by $8 million, including a $12 million reduction inventory and a $14 million reduction in accounts receivable. Although we have further opportunity to improve our financial profile, we are pleased that our focus on the operationalization of the business is yielding continued progress.

People can demand in APAC and other sales in EMEA and was the primary drivers for the improved spot performance. Yes. This is rich thanks, Jeff for the question just to kind of add to that comment.

Richard Heppenstall: As a reminder, $175 million credit facility revolver remains undrawn. Looking ahead, please note that we expect our interest expense to increase by a couple of million dollars in 2024 relative to 2023 given the current rate, environment, and debt balance.

Richard Heppenstall: I'll now turn to our updated full year 2023 outlook. We are pleased with the progress we are making and are subsequently revising our full year 2023 financial outlook. Starting with revenue, we are revising our expected full year of 2023 net sales to be in the range of $860 million to $870 million, narrowing our range from our previous guidance of $850 million to $870 million, dollars. Looking at our segments, we continue to expect 2023 dental net sales to be flat or to grow in the low single digits versus 2022, and we continue to expect 2023 spine net sales to decline in high single digits to low double digits versus 2022.

Alright, so what are the drivers of that and how do you see that I'm trying to dig into the back half of the year. Thank you.

Alright, so we feel that we're doing well relatively competition, but we do see a slower dental implant mark as in the United States.

So that is where we are we're seeing sources.

Primarily macro driven it's it's not class customer, we're actually doing well on that front working while on new customers, but we do see softer.

Richard Heppenstall: Moving to Adjustity of the Dalmargin, we expect full-year Adjustity of the Dalmargin to be in the range of 13.5% to 14.0% of net sales, the same as previously guided. With regard to adjusted earnings per share, we are revising our adjusted earnings per share guidance range to 60 cents per share and 70 cents per share on a fully diluted share count of 26.6 million shares narrowing the range of our previous guidance range of 50 cents to 70 cents per share.

Existing user sale in <unk> in the U S.

Rich internationally.

Yeah. So so it's a dental is is largely driven by by first and foremost.

One less selling day, and it's largely macro economic pressure in the U S. But at this point you know we actually have the dental business, we actually pleased with our performance year over year, and we seen similar strength, particularly in Europe on the gentle side are dental business and he may I grew almost.

Vafa Jamali: With that, I'll now turn the call back over to Vafa. Thank you, Rich. I'm pleased with our progress in 2023 to date, as well as our execution of streamlining objectives. Although we have additional work ahead to return our business to durable growth, I am confident in the strength of the assets in portfolio and our presence in underserved end-market, which also will bring great value to patients.

12%, you know year over year in reported in about 4% in constant currency and so.

Vafa Jamali: As the community includes the advantage of our company, evolved by product platforms and exclusively, we look forward to showcasing the results at warrant to deliver.

Really pleased with our our digital portfolio and continues to grow you know double digits for us applied materials offerings continue to do well and your your basis. Our flagship implants are are basically flat year over year, which despite the macroeconomic pressures. We think there were outpacing some of our.

Operator: With that, we will open it up to questions. Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster.

The competitors in the market.

Yeah, we think will physician really well within that dental portfolio. So when the market should return we should be very very good place competitively with respect to our portfolio of price and our customers.

Great. Thank you.

Thank you.

One moment for our next question.

Robbie Marcus: Our first question comes in the line of Robbie Marcus with JP Morgan. Your line is open. This is actually really on for Robbie. Thanks for taking the question. A lot of the upside at least relative to our own expectations came from Spine. So can you talk about any progress in the trends you're seeing there, particularly in terms of competition? And what signals are you seeing that could potentially indicate a stabilization moving forward?

This question comes on the line and Matt.

Netflix.

Barclays. Your line is now open.

Hey, Thanks for taking the question.

So.

I appreciate all the color.

I wanted to get a sense of the.

Following up on on the question on spine.

You know it seemed like.

When you described.

As the opportunity to to sort of get after a more significant part of the cervical disc replacement market with the new sizes that you pulled out and.

Robbie Marcus: Right, thanks for the question, Bavair. We are seeing international growth contribute the most to the Spine recovery. We still believe that we've got some more to do in the US, and we have plans in place that can get us there. But the primary drivers for the recovery are mobility sales internationally, within the main A-PAC, and tender sales in May. Those are the primary drivers for the improved spine performance. Yeah, this is rich.

In the U S based on I think it was like 30% of the European market was addressed by these new sizes can you.

Can you would you would you actually describe the current competitive environment in U S. Like you've been at a disadvantage because these these these other these patients day a third roughly.

Robbie Marcus: Thanks again for the question. Just to kind of add to that comment about major. If you look at our international line, actually, impact was only down about 3.6 percent, and that included the impact of exiting China for the year. But when you look at the international market specifically, particularly around flagship products, you know, MBC and Tether, you know, in our area region, you know, we've mentioned before that MBC is the only cervical disc replacement in France that's approved for reimbursement, and that business in our area region grew by almost 40 percent year over year in the quarter.

The U S population is possibly you know.

<unk> and accessible to you and and this is going to open that up or would you say.

This is kind of a.

Market expansion opportunity for folks who are maybe looking at a patient, saying you know what d'you have confused is because we just don't have the size for this patient and I'd love to get a sense for.

How big of an inflection you think this is for the U S market and I have one follow up.

Sure.

Hey, Matt So I think the the the underlying concern that we had with our portfolios. We haven't innovated since the acquisition of a L. D. R and we needed to continue to innovate the portfolio specifically to two two movie. So there's a couple of things we're doing there V. Besides is just adds to our portfolio so add.

Robbie Marcus: And then Tether, we've also had great uptick in Tether, and in Europe, you know, in the area, our Tether business also grew by about 29 percent. So, to that point, we're really starting to see some stability in the U.S, or U.S, environment, and Shoes continue to work to take root. That's good to hear.

More.

Suitable patients to that to that portfolio and pushes competitively a parody with with a with a newer newer launch it to come out. So that's that's important to be able to at least offer everything that's happening there at the same time, we think that we can we have the biggest opportunities still to expand the market in terms of who is eligible for a desk.

Vafa Jamali: And then maybe on the flip side, you know, Dental was a little bit softer compared to our numbers. So, and he called out a weaker dental market this quarter. So what are the drivers of that and how do you see that trending into the back half of the year? Thank you. Right, so we feel that we're doing well, well, to the competition, but we do see a slower dental implant market in the United States.

Versus fusion and so the combination of the sizes that we are offering now along with the the newly announced hybrid.

<unk> study, which will allow a surgery to put a fusion next to cervical disk. These are really really important drivers of of new market growth. So we haven't instead of a hard number on either one of those but look at it as a way for us to become more and more competitive within the cervical disk market, but never lose sight.

Vafa Jamali: So that is where we're seeing the softest parts. It's primarily macro driven. It's, it's not cost-customer. We're actually doing well on that front. We're doing well on new customers, but we do see softer existing user sale in dental in the U.S. Richard and Ashley. Yeah, so, so Dental is largely driven by, by first and foremost, you know, year over year. We had one less selling day. And it's largely macroeconomic pressure in the U.S.

The fact that really the greatest <unk>, improving the users and the patient father used to get just versus fusion versus.

Versus going after competitive sure.

Got it that's super helpful and the and just one more on spine.

Vafa Jamali: But to that point, you know, we actually did dental business. We actually privileged with our performance year over year. And we've seen similar strengths, particularly in Europe, on the dental side, our dental business. Any mayor grew almost 12%. You know, year over year in reported and about 4% in consequences. And so, you know, we're really pleased with our digital portfolio. It continues to grow, you know, double digits for us, our fine materials offerings continue to do well.

There's a lot of what's being categorized as sort of disruption or dislocation because of.

Some major spine deals and actions as you're aware of I'm sure.

Is there has there been any effect on your ability to or you know.

To read to recruit.

Reps are distributors or your you know the pressure on you too.

Sort of other folks trying to pick off some of your better.

Distributors, what's what's the dynamic like and then I have just one more follow up on it at all.

Vafa Jamali: And on a year over year basis, our flagship implants are basically flat year over year, which despite the macroeconomic pressures, we think there were outpacing some of our competitors in the market. Yeah, we think we'll position really well within that dental portfolio. So, when the market should return, we should be in a very, very good place, competitively, with respect to our portfolio, our price and our customers.

Yeah. So on that particular situation. That's a situation we were on the wrong side of that when we announced the spam and right now I feel like there is a lot of very very excellent talent out there.

Vafa Jamali: Great. Thank you.

Security in the United States, where.

We hope to be the recipient of a lot of that talent to to improve our our sales channel or to go into areas, where we have less penetration. So we're feeling like we will be a net beneficiary of that disruption and I look forward to to sharing that news if you'd open next awhile I won't be something we do suddenly.

Matt Miksic: One moment for our next question. This question comes to the line of Matt, no mythic, of Barclays. Your line is now open. Hey, thanks for taking the question. So, appreciate all the color. You know, we want to get a sense of following up on the question on spine. You know, it seemed like when you described at NAF the opportunity to sort of get after a more significant part of the cervical physical placement market with the new sizes that you've rolled out in the US.

All these things take a little bit of time, but.

Fast enough, but nevertheless, I think will be the beneficiary of the budget.

That's great and then just finally on dental.

You know any sense of you know.

How much it maybe apologize if you answered this and your last in in the question around dental, but just elements of seasonality.

Matt Miksic: You know, based on, I think it was like 30% of the European market was addressed by these new sizes. Can you, you know, would you actually describe the current competitive environment in US? Like you've been in a disadvantage because these other, you know, these patients stay at third roughly, the US population is possibly, you know, You know, been inaccessible to you and this is going to open that up, or would you say, this is kind of a market expansion opportunity for folks who are maybe looking at a patient and saying, you know what, we have to use this because we just don't have the size for this patient. I'd love to get a sense for, you know, how big of an inflection you think this is for the US market, and I have one follow up. Sure.

You know that either came into play in Q3 or may come into play in queue for in any sense of whether that's a market that's.

Stabilizing or potential for improving just just some.

Some color as to which way the winds of of growth or blowing in the in the dental market at the moment.

Sure. So particular to US just all startling original have some some further color on it uhm, we're happy with the new customer acquisition that we have so we're doing really well with dsos.

And we're doing really well with with with a newer non implant customers that are starting to do my plans. So that's very very positive for us I would say that we did experienced seasonality in Q3.

And there is a softness in the U S market that is not evident in Asia Pacific urine, but we do feel that.

Which is probably adding a little bit of conservatism to to how we see <unk> yeah.

<unk> could you talk to you again, yeah, just expand out about that said, we've Q3 and the dental businesses is always our our weakest quarter and a lot of it is because the summer vacation you know.

Vafa Jamali: Hey Matt, so I think the underlying concern that we had with our portfolio was we hadn't innovated since the acquisition of LDR and we needed to continue to innovate the portfolio specifically to Moby-C. So there's a couple things we're doing there. The size is just adds to our portfolio so adds more, you know, suitable patients to that portfolio and puts it competitively a parity with a newer launch that's come out. So that's important to be able to at least offer everything that's happening there.

And obviously, a large portion of our business or you can almost half of it actually so you asked them and of course your you know your <unk>.

Vacations, and so that being said if we get call out at the end of our second quarter call that we did we did see a little bit higher seasonality than normal.

It's a dental business put up 105.3, I believe for the quarter.

Vafa Jamali: At the same time, we think that we can't, we have, the biggest opportunity is still to expand the market in terms of who is eligible for a disk versus fusion. And so the combination of the sizes that we are offering now along with the newly announced hybrid study which will allow a surgeon to put a fusion next to a cervical disk. These are really, really important drivers of new market growth. So we haven't got input a hard number on either one of those, but look at it as a way for us to become more and more competitive within the cervical disk market, but never lose sight of the fact that really the greatest opportunity to serve the disk is improving the users and the patient probably is to get versus fusion versus versus going after competitive share. Got it, thanks super helpful.

You know, which was actually a little bit better than than water expectations were you know maybe a million dollars or so kids are better than our our expectations and so we have seen seasonality, but positioning.

Positioning at the gentle business you know <unk>.

<unk> and our commercial execution, frankly continues to perform well, particularly or U S, which is where which is where we saw the seasonality was gonna come from them. So we actually kind of combative seasonality without performance in those regions.

Well, that's great congrats on that and I look forward to hearing more about how things progressed through the end of the year, but thanks for taking the questions.

Thank you.

Thank you.

I'm showing no further questions at this time.

This does conclude the question answer session.

Thank you everyone for your participation.

Vafa Jamali: And just one more on spine. You know, there's a lot of what's being categorized as sort of destruction or dislocation because of some major spine deals and actions as you're aware of, I'm sure. Is there, has there been any effect on your ability to or, you know, to either recruit, you know, wraps or distributors or your, you know, the pressure on you to, you know, sort of other folks trying to pick off some of your better distributors. What's that dynamic like?

Thank you very much.

Okay, you may now disconnect.

Mmm.

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Vafa Jamali: And then I just want to follow up on dental. Yeah, so on that particular situation, that situation, we were on the wrong side of that when we announced this thing. And right now, I feel like there is a lot of very, very excellent talent out there, particularly in the United States, where we hope to be the recipients of a lot of that talent to, to improve our sales channel or to go into areas where we have less penetration.

Vafa Jamali: So we're feeling like we will be a net beneficiary of that disruption. And I look forward to sharing that news at the next awhile. Won't be something we do suddenly. All these things take a little bit of time, but you're fast enough. But nevertheless, I think we'll be the beneficiary of some positive news there. That's, that's great.

Matt Miksic: And then just finally on dental. So, you know, any sense of, you know, how much it maybe I'm to apologize if you answered this and your last in the question around dental, but just elements of seasonality, you know, that either came into playing Q3 or may come into playing Q4 in any sense of whether, you know, that's a market that's... You know, stabilizing your potential for improving, just some color as to which way the winds of growth are blowing in the dental market in the moment.

Matt Miksic: Sure, so particular to us, I'll start, Richard will have some further color on it. We are happy with the new customer acquisition that we have, so we're doing really well with CSOs, and we're doing really well with newer, non-implant customers that are starting to do implants. So, that's very, very positive for us. I would say that we did experience these inality in Q3, and there is a softness in the US market that is not evident in Asia-Pacific, North America, but we do feel that which is probably adding a little bit of conservatism to how we see Q4 working out.

Matt Miksic: Yeah, and Matt is interested to talk to you again, as a six-band about Vafa said, you know, Q3 in the dental business is always our weakest quarter, and a lot of it is because of summer vacation, you know, and obviously a large portion of our business are almost half of it, actually, so you ask, and of course, your, you know, your, has their vacations. And so, that being said, we did call out at the end of our second quarter call that we did see a little bit higher seasonality than normal.

Matt Miksic: You know, the dental business put up a hundred and five points, three, I believe, for the quarter, you know, which was actually a little bit better than what our expectations were, you know, maybe a million dollars or so given a better than our expectations. And so, you know, we have seen seasonality, but the positioning of the dental business, you know, and our commercial execution, frankly, continues to perform well, particularly in the US, which is where, which is where we thought that seasonality was going to come from.

Matt Miksic: And so, we actually kind of combated that seasonality without performance in those regions. Well, that's great. I'm congrats on that, and look forward to hearing more about, you know, how things progressed to the end of the year. But thanks for taking the questions. Thank you.

Operator: So, this does conclude the question and answer session. Thank you, everyone, for your participation. Thank you very much. Okay. You may now disconnect. Matthew Miksic, David Saxon, David Saxon, Marissa Bych, Richard Heppenstall, David Saxon, Marissa Bych, Richard Heppenstall, Matthew Miksic, David Saxon, Marissa Bych, Richard Heppenstall, Matthew Miksic, David Saxon, Matthew Miksic, David Saxon,[inaudible] ZimVie, ZimVie, ZimVie[inaudible] ZimVie, ZimVie, ZimVie, ZimVie,[inaudible] ZimVie, ZimVie, ZimVie, ZimVie,[inaudible] ZimVie, ZimVie, ZimVie, ZimVie,[inaudible] Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa Matthew Miksic, David Saxon, Marissa

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