Q4 2023 ZimVie Inc Earnings Call

February 28, 2024

Operator: Good afternoon, and welcome to ZimVie's fourth quarter and full year 2023 earnings conference call. Currently, all participants are in a listen-only mode.

Good afternoon, and welcome to the MTS fourth quarter and full year 2023 earnings Conference call. Currently all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

Operator: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych, of Gilmartin Group, for an introductory disclosure. 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 scc.gov. Before we begin, I'd like to remind you that management will make comments during this call that include forward-looking statements. However, actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties.

I would now like to turn the call over to MRSA Bice Gilmartin group for introductory disclosures.

Great. Thank you all for joining today's call.

Earlier today, then be 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 web site <unk> dot com as well as on the SEC.

Before we begin I'd like to remind you that management will make comments. During this call that include forward looking statements.

Results may differ materially from those indicated by the forward looking statements due to a variety of risks and uncertainties.

Marissa Elizabeth Bych: 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 in the investor relations section of the company's website.

Please refer to the company's most recent periodic reports 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.

Filiation, but 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.

Marissa Elizabeth Bych: 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. Good afternoon, and thank you for joining us.

This conference call contains time sensitive information and is accurate only as of the live broadcast today February 28 2024.

<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 Zafar, Jamali, President and Chief Executive Officer of MB.

Good afternoon, and thank you for joining us.

Vafa Jamali: We had significant accomplishments in 2000. We invested to further differentiate our portfolio, which helps us make gains in the market. As well, we improved your operating efficiency through restructuring and cost reduction. Most significantly, we executed an agreement to sell our spine business to HIG Capital for $375 million in total consideration, and we began to advance the necessary steps to complete that.

We had significant accomplishments in 2023.

To further differentiate our portfolio, which helps us.

Thank you Sir.

As well, we improved our operating efficiency to restructuring and cost reduction initiatives.

Most of the difficultly, we executed an agreement to sell our sponsors to HRD capital.

$375 million in total consideration.

And we'd be Jackie.

Thursday to.

The complete dossier.

Vafa Jamali: We believe this sale addresses two major concerns we have. The lack of synergy between dental and spine visits and an overly leveraged capital structure during a time of elevated, 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 in differentiated solutions for patients and providers while optimizing our structure to drive value. Let me start with a closer look at our ongoing portfolio actions, specifically this time. On December 18th, we entered into a definitive agreement to sell our spine business to HIG Capital for $375 million in total consideration.

We believe this sale addresses two major concerns we have heard.

A lot of synergy between <unk> and <unk>.

Overly leveraged capital structure during the time of elevated interest rates.

We believe we are quite diligently address both of these concerns and one major launch.

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 in differentiated solutions for patients and providers.

Optimizing our structure to drive value for shareholders.

Let me start with a closer look at our ongoing portfolio actions specifically display.

On December 18th we entered into a lease agreement so responders JG capital.

$35 million in total consideration.

Vafa Jamali: We remain confident in completing the sales in the first half of 2020. We appreciate having a great partner in HRG Capital as we both look towards a long-term transition. This sale will provide the opportunity for our company to reposition itself exclusively in one of our most attractive end markets, dental, while also paying down a substantial portion of our outstanding debt. We are committed to having under 200 million dollars of net debt by one year post-pandemic.

We remain confident that the daily sales in the first half of 2024, we.

We appreciate that would be a great partner and H I G capital.

Both to look towards one time transaction costs.

This sale will provide the opportunity for our company to reposition itself exclusively.

One of our most attractive end markets dental solutions.

Also paying down a substantial portion of our outstanding debt.

We are committed to having under $200 million.

By one year post sale.

Vafa Jamali: Beyond the sale, we have a lot of work to do in right-sizing our cost profile, particularly given our corporate overhead and stranded costs, which are currently being reflected in our continued... Therefore, we see both a need and an opportunity to take costs out of our business. 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 spine employees for their hard work.

Beyond the sale, we have a lot of work to do in right sizing our cost profile, particularly given our corporate overhead and stranded costs.

We are currently being reflected in our continuing operations.

Therefore, we see both a need and an opportunity 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 to portfolio optimization process.

Mostly like to thank all of our global spine employees for their hard work.

Vafa Jamali: We appreciate your contributions and immense effort to improve the position of the business for the future and wish you great success going forward. Flipping the Dental As we transition to the sales spine, we are positioned to become a leaner, more focused, pure-play dental company with a market-leading position aimed at $8 billion in plant-based dental solutions and biometrics. 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 that build a strong foundation for the implant and high-efficiency, easy-to-use digital solutions for managing implant work.

We appreciate your contributions and immense effort to improve the positioning of the business from future and wish you great success going forward.

Flipping to dental.

As we transition to spot sales on your positioning to become a leaner more focused pure play dental company with market leading positions.

Billion implant digital submissions.

Materials markets.

We are committed to operating the market's highest quality premium implants and holistic portfolio to support every step of the implant process.

This includes innovative biomaterial products, which build a strong foundation towards the implant.

And high efficiency.

To use digital solutions for managing <unk>.

<unk> 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 innovation into 2024.

Most recently, we launched our next generation <unk> implant in Japan, one of our largest international markets.

We preceded that milestone with the launches of activity in Azure and our biomaterials focused prosthetic assets restorative solutions portfolio.

Vafa Jamali: One of our top priorities for 2023 was to invest in this, and we are pleased to continue our strong cadence of hardware and software innovations into 2020. Most recently, we launched our next generation TSX implant in Japan, one of our largest international markets.

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.

Yes.

To an operational update.

We plan to make several changes to this year to achieve our desired size and scale as the company. Fortunately. This is an area our team has extensive experience.

Over the past two years, our team has delivered several operational improvements to get the business where it is today.

Vafa Jamali: 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 few years and focusing on opportunities that improve clinical workflow and complement our employees. [inaudible] We plan to make several changes this year to achieve our desired size and scale as the Fortunately, this is an area our team has extensive experience in. Over the past few years, our team has delivered several operational improvements to get the business working. Many of those improvements will focus on the spine. 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 plant. Our dental business has always enjoyed an attractive margin.

Many of those improvements will focused on sponsors 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 plants.

Our dental business, we've always enjoyed an attractive margin profile.

Wholly focused management team and increased resources, we see room to grow that margin profile you can target.

We recognize the importance of innovation to our business and we realized that we had commercial momentum behind our offering.

Therefore, it should be clear.

Our efficiency improvements will not be reflected through reduced research and development or commercial costs.

Instead, we'll be focused on taking significant corporate cost 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.

We will bear the full corporate expense for both the continuing and discontinued operations.

We will provide more detail on TSA and ERP associated ERP is associated with the sale.

Around the time of close.

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 and player.

Our global team is dedicated to championing initiatives across the entire ESG strengthened further our mission of restoring daily lives, while living our core values of accountability authenticity curiosity and having a growth mindset.

Vafa Jamali: With a wholly focused management team and increased resources, we see room to grow that margin profile. We recognize the importance of innovation to our customers, and we realize that we have commercial momentum behind our office. Therefore, it should be clear that our efficiency improvements will not be reflected in reducing research and development or commercial costs.

Sure commitment spans our global sites as you work towards a common goal of establishing <unk> reputation as a good corporate citizen a destination workplace and a true life Sciences leader.

I'll now turn the call over to rich outlined our financial performance and guidance.

Thanks, Scott and good afternoon, everyone.

I'll begin by reviewing our fourth quarter 2023 results and will 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 the definitive agreement to sell the spine business. Our spine segment is now classified as discontinued operations in our financial statements as at the end of 2023.

Vafa Jamali: Instead, we'll 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 operation.

As a result, we will bifurcate, our Q4 and fiscal year 2023 financials, as continuing operations, which comprised of dental and a majority of corporate and.

In discontinued operations, which includes the exiting spine business.

Vafa Jamali: 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 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 of 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, a destination workplace, and a true life science. Thanks, Vafa, and good afternoon, everyone.

Beginning with continued operations.

<unk> third party net sales for the fourth quarter of 2023 were $113 1 million.

A decrease of two 4% in reported rates and a decline of three 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 sale.

<unk> declining 60 basis points versus 2022.

In the U S third party net sales for the fourth quarter of 2023 of $65 4 million.

Kris by three 2% driven.

Driven by a slightly weaker implant market due to U S macroeconomic challenges, partially offset by strength in our digital solutions of bio materials portfolio.

Richard J. Heppenstall: I'll begin by reviewing our fourth quarter 2023 results, and we'll then close by providing commentary on our outlook for 2025. Before I delve into the financial details of 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 sector, as of the end of 2020. 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, beginning with continuing 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. 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.

Full year 2023 third party net sales in the U S of $269 $6 million represents a modest decline of one 2% driven by weaker implants as previously mentioned.

Outside of the U S third party net sales of $47 $7 million decreased by one 2% on a reported basis and four 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 'twenty. Three we are pleased to have exited the year roughly flat compared to 2022.

Affinitive sign with the strength of our dental portfolio and ability to commercially execute in a challenging environment leaves us well positioned for 2024 as market conditions began 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 a 36, 2% increased 40 basis points over the prior year at 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 costs, improving manufacturing efficiency and benefit from a better product mix, particularly in the back half of the year.

Richard J. Heppenstall: In the U.S., third-party net sales for the fourth quarter of 2023 of $65.4 million decreased by 3.2 percent, 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 compared to 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 current.

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 $245 million is flat to 2020 to SG&A of $239 $3 million.

Adjusted EBITDA attributable to continuing operations in the fourth quarter of 2023, a $13 9 million.

Rents a 12, 3% EBITDA margin.

For the year 2023, adjusted EBITDA of $58 million reflects 11, 1% of third party net sales.

Richard J. Heppenstall: Full year outside of the U.S. sales of $187.6 million were higher by 40 basis points and 30 basis points in reported and cost-of-currency terms. While the dental market in aggregate will slow through most of 2023, 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 was 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 a slightly lower implant volume.

Please note our continuing operations adjusted EBITDA not only includes cost 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 results and 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 <unk> 10 per share on a fully diluted share count of $26 6 million shares.

Continuing operations adjusted earnings per share for FY 2023 was 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 $105 million a.

Richard J. Heppenstall: We expect improvement in the cost of products sold in 2024 as we streamline the organization, cutting out duplicative cloth, 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, to four 2023 adjusted sales, general, and administrative expenses of $57.4 million compared to $66.1 million in the prior year $240.5 million dollars is flat compared to 2022 SG&A of $239.3 million dollars. Suggested 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 suggested EBITDA not only includes costs to support our market-leading dental business but also the majority of our corporate costs, which were 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 way down compared to our prior reporting framework. Going forward, and after the sale of Spine, we will be working to address our resultant costs. We remain confident in delivering an adjustability of the Dow margin of over 15% one year post-spine sale, as previously disclosed.

A 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 nine 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 eight 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 U S sales of $81 $8 million declined by 11, 4% and 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 of 27, 2%.

Decreased 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 into higher and higher gross margins.

Q4, 2023, adjusted research and development expense of $4 9 million compared 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, a $15 5 million represents a 15, 4% EBITDA margin.

Richard J. Heppenstall: Q4 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. Jeff Ziernings for FY 2023 with $0.22 per share. Moving on to discontinued operations, which includes the spine business currently held, 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 a 9.2% decrease in cost incurred. In the U.S., fourth quarter 2023 third-party net sales of $81.5 million decreased by 10.3 percent, driven by continued competitive pressure; full year 2023 U.S. sales of $327.3 million declined 8.4 percent. In the fourth quarter 2023, outside of the US, third-party net sales of $18.9 million decreased by 11.6% on a reported basis and 12.0% in cost. Full year OUS sales of $81.8 million declined by 11.4% in reported rates.

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 <unk> 11 per share while full year 2023 adjusted earnings per share was <unk> 48 per share on a fully diluted share count of 26 6 million shares.

Let's turn to our liquidity and debt.

Over 12 months ago, that's on I outlined our plans to monetize the balance sheet generate outsized cash flow and use the excess proceeds to pay down debt.

I am 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 cash balance of $87 8 million and.

$508 $8 million of gross debt.

Yielding a net debt balance of 421 zero million.

In 2023, we prepaid over $24 million.

<unk> ahead of our required amortization schedule keeping is 12 months ahead of our required debt repayment schedule.

As <unk> 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 of net debt by the end of 2024.

Moving onto our outlook for 2024.

This is 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're going to provide some onetime specificity to our outlook for Q1 of 2024.

Richard J. Heppenstall: 12.1% in-counsel. Fourth quarter 2023 adjusted cost of products sold at 27.3% of sales compared to 27.7% of sales in the prior year; full year 2023 adjusted cost of products sold at 27.2%, decreased 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 we are pleased that our efforts have translated to higher, higher gross market. Q4 2023 Adjusted Research and Development Expense of $4.9 million compared to $5.7 million in prior, and adjusted selling general administrative expenses of 58.5 million dollars compared to 67.5 million dollars in the prior year. Adjusted EBITDA attributable to discontinued operations in the fourth quarter of 2023 by 15.5 million dollars represents a 15.4 percent EBITDA margin. Full year 2023 adjusted EBITDA for discontinued operations of $65.6 million with 16.0% of third-party net. 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.

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.

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.

So this and 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 cost currently in continuing operations will be removed following the sales spine allow us, allowing us to make market progress toward our desired margin profile.

With regard to adjusting adjusted earnings per share.

<unk> Q1 to be depressed as a result of the lower margin profile and increased relative burden of interest expense until the sales spine is complete.

We will provide more adjusted earnings per share guidance following the completion of the sale.

Now turning to our expectations for the business.

Year, one post spine sale close.

Richard J. Heppenstall: Over 12 months ago, Vafa and I outlined our plans to monetize the balance, generate outside 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.

We are raising our expectations for annualized sales at one year post spine to over $455 million.

The sale of our spine business AIG is progressing as planned and we continue to expect the sale to finalize in the first half of 2024.

And we are reaffirming reaffirming our commitment to achieve 15% plus adjusted EBITA margin profile.

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 wrap up.

Thank you rich.

Sorry about the prospects ahead of us and as always I look forward to updating you on the progress throughout the year.

The team is immensely experiencing carving out setting up new businesses as well as improving the operational efficiency of businesses in transformation.

Richard J. Heppenstall: In 2023, we prepaid over $24 million in 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 2020, we are 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 going forward.

And we are excited to employ these scaled positions in the next chapter.

That 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.

Draw. Your question. Please press star one again.

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

Our first question comes from the line.

David Saxon of Needham <unk> Company. Your line is now open.

Okay great.

Good afternoon 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.

<unk>.

The number two in the implant 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%.

Richard J. Heppenstall: 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 a 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.

<unk>.

Or so do you think you can grow and what looks like a somewhat softer market from a patient volume perspective.

Hey, David Thank you for the questions, Yes, we have.

We have benefited from some of the some of the competitive dynamics in the market and frankly, we've we've picked up some share there in a relatively slowly.

Solar market.

And we've experienced years prior.

So I do think that that has been positive for us I think that the strength of our implant portfolio is is that we 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.

The competitors that have that option have often.

Move down market, we haven't had to do that.

And the reason we've been able to hold it the premium categories, primarily from from a new new new implants that have been really really effective.

Very very sticky in the marketplace, coupled with a digital work from our guided solution workflow that is.

Vafa Jamali: To reiterate, costs currently in continuing operations will be removed following the sales fine, 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 a lower margin profile and an increased relative burden of interest expense until the sale is complete. We will provide more adjusted earnings for shared guidance following the completion of, Now turning to our expectations for the business for year one post-spine sale close. We are raising our expectations for annualized sales at one year post fine to over $455 million. The sale of our fine business to HIG is progressing as planned, and we continue to expect the sale to finalize in the first half of 2024, and we are reaffirming our commitment to achieve 15% plus adjusted EBITDA margin profile at one year post fine 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. Thank you, Rich.

Growing significantly faster.

And then 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.

Plants and if you think about what is the opportunity in implants.

It's only about 25% penetrated and part of that is.

The cost of the World Cup and the second part is the durability.

The ability to give.

Plant at a very consistent rate, whether you are a new <unk>.

New physician or an old one.

Our are much more experienced one so.

We've done a lot to make so workflow coupled with the implant work really well. So I think we'll continue to make strides there we.

We definitely have more customers than we had last year.

Where we see this slowdown as some of the specials to just doing a little bit less than they were before but we're confident that when the market returns we're going to be really really good place to to grow faster. So hopefully that answers your question.

Yes Super helpful.

I wanted to ask one on the digital part of the portfolio. So the agreement with align for Taro does that cover.

Operator: I'm excited about the prospects ahead of us, and as always, I look forward to updating you on the progress throughout the year. The team is immensely experienced in carving out and setting up new businesses, as well as improving the operational efficiency of businesses in transit. And we are excited to employ these skills in the positions at ZimVie for our next job. With that, we'll 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.

There are new alumina.

And if so.

When do you expect to start.

Selling that.

If if at all is it factored into the first quarter guide and I'll just have one follow up sure. So.

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 I taro.

<unk> for us.

Depressed, but that is not a cause for major concern for us because that is a.

Operator: To withdraw your questions, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Saxon of Needham & Company. Your line is now open.

Low margin it really really satisfies our digital offering.

But we are excited about what we can do in the Q4 when that when the when the new scanners available to us.

Hey, David This is rich just one additional comment to what <unk>.

David Joshua Saxon: Oh, great. Good afternoon, Vafa and Rich. Thanks for taking my question. I wanted to start with the couple about the dental business, and then Rich, I might have one for you. So Vafa, you know, number two in the implant 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.

Mentioned during the journey before we get access to the <unk> scanner from Vitaros and like Pat said, the anticipated Q4 timeframe, we have a program with our customers if they buy the existing scanner that they will be able to upgrade to the new one when the new one is really so we've got a plan there to transition.

That new introduction.

Okay.

Super helpful. Thanks for that and then just sticking with you rich.

Super helpful color.

I haven't quite gotten through to the.

Vafa Jamali: Do you think it can grow in what looks like a somewhat softer market from a patient volume perspective? Hey, David, thank you for the questions. Yeah, 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 experienced in the past, you know, years prior. So I do think that 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 price, implant, which I believe that the competitors that have that option have often moved down the market. We haven't had to do that yet.

The model yet, but if you could just kind of help us with quantifying the stranded costs.

Youre bearing currently and kind of where they sit.

Cogs versus opex. Thanks, so much.

Yes so.

Our mature so we do have obviously stranded cost.

Largely in the corporate infrastructure that we use to support businesses. So the way that we've generally operated it's kind of like a holding structure.

Where 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 in SG&A in the corporate sector.

The way that we're thinking about the transaction as we mentioned on the in the prepared remarks that will carry some cost until the closure of the deal.

And then of course there'll be a number of head count and obviously as conveyed.

And then we will have which will give us some some uplift in margin and.

Then we will have a period, where there's <unk> and then once TSA fall off and there is another inflection point as how we're thinking about it in the longer term, but what the way that we're also thinking about it obviously as we've set out the 15% plus adjusted EBITDA margin.

One year post sale there is obviously a lot of.

A lot of puts and takes in the numbers right now, obviously, but we're still committed to achieving that one year post sale.

Vafa Jamali: is 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. Yeah, super helpful, Vafa.

Great. Thank you.

One moment for our next question.

Our next question comes from the line of Matt metric of Barclays. Your line is now open.

Hey, good evening, Thanks for taking my question.

Hey, Matt.

So couple of follow ups.

You mentioned the.

The target of getting under $200 million in there.

Kicking in.

375, or bunch of that in cash and a little bit that it looked like.

And you've got so.

The simple math would say you could get lower can you talk a little bit about.

How youre thinking about the balance of.

Getting your net debt lower or holding onto some cash and why and then a couple of quick follow ups if I could.

Sure, So hey, Matt.

The 200 that we mentioned does not include the $60 million seller note.

So obviously thats a pick that we just don't include there, but but if you. If you included that it obviously.

Vafa Jamali: I wanted to ask one question 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? Sure.

Better than 140.

So that's the way we're looking at it Darrin.

That's probably the discrepancy between the.

The price that we got for the spine business and what we're reporting on that rich anything else to offer there. Yes. Just in addition to that Matt.

Vafa Jamali: So that does, we do have that relationship, and it will continue with their new scanner. However, I believe we are somewhat delayed for regulatory purposes, so we won't have it until the fourth quarter of this year.

The less than $200 billion in net debt number that we did we did mentioned.

As you know.

One thing about about the transaction with AIG is actually a relatively complex transaction.

Vafa Jamali: I would say overall iTero sales for us are 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 Q4 when the new scanner is available. Hey, David, this is Rich.

Relative to our size and so.

Theres, a its basically a carve out within the organization and separating and setting up legal entities and the like and so we're still incurring some cost to separate the business outside of what you would normally see.

Rich: Just one additional comment to what Vafa mentioned. During the, before we get access to the new scanner from iTero, and like Vafa said, the anticipated Q4 timeframe, we have a program with our customers that if they buy the existing scanner, 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. Okay, super helpful. Thanks for that. And then just sticking with you, Rich, super helpful color.

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 <unk>.

S and $200 million that we outlined and as as things progress and become clearer.

As we get closer to transaction close we will provide more detail around that.

Okay.

So I think we think it will break that into the <unk>.

$60 million and $3 15.

Cash and then you've got some outlay is.

Rich: 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, you know, COGS versus OPEX. Thanks so much. [inaudible] Yeah, so we do have, obviously, stranded costs, largely in the corporate infrastructure that we use to support businesses. So the way that we've 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 costs until the closure of the deal. Then, of course, there'll be a number of headcount, and obviously, it's conveyed. And then we'll have a period where there are TSAs, which will give us some uplift in margin.

I mean you generated.

Or is it.

I don't know how much you generated last year and 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 five or 10 or 20 or $30 million outlay for transitional costs.

Describing or.

Any color on that yes, the way that the way there how do you think about it is as I mentioned on the call Q1 is generally a.

And we said $200 million less $200 million 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 does that 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 will we will continue to.

Rich: And then once TSAs fall off, then there's another inflection point is how we think 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 are obviously a lot of puts and takes in numbers right now, obviously, but we're still committed to achieving that one year post-sale.

Evolve and provide more information, but we did end the year.

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.

Okay.

Rich: One moment for our next question. Our next question comes from the line of Matt Miksic of Barclays. Your line is now open. Hey, good evening.

And then just maybe just.

To be crystal clear so.

I understand this.

Thinking that you have $350 million, that's coming in to your balance sheet and cash.

Matthew Miksic: Thanks for taking the question. Amen. So, a couple of follow-ups. You mentioned the sort of target of getting under $200 million in that you're taking in the money. Is that right?

That.

There is something putting aside operating cash flows what you did in 2003 and what you could do in 2004, but theres some.

There is some fixed.

Vafa Jamali: Yes. 375 or, you know, a bunch of that in cash and a little bit in debt, it looked like, and you've got, so the simple math would say you could get lower. Can you talk a little bit about, you know, how you're thinking about the balance of getting your internet debt lower or, you know, holding on to some cash and why? And a couple of quick follow-ups. Sure. So, hey, Matt, Vafa, the 200 that we mentioned does not include the $60 million seller number. So obviously, that's a pick that we just don't include.

Cash layout charges against that that we should so we shouldnt be thinking while 350, maybe coming at it might be it'll be something less than that when you gentlemen.

Can you describe the unique nature of the deal.

Yes, yes.

Yes, absolutely we have we have carve out costs that we're spending obviously theres legal fees banker fees all of those 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.

We've got some costs that we're going to be incurring to right size. The organization to new remained steady state as we approach to that 15% plus EBITDA margin and so some of that is going to be cash some of that is going to be noncash and we're working through that right now which is why which is why we're still kind of with that less than $200 million number and we'll provide more information.

Vafa Jamali: But if you included that, it obviously would be better than 140. So that's what 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 that. Rich, anything else to offer there?

As we continue to work through those plants.

Great and then if I could another sorry to sort of get into these little weenie things, but a year from now when you say 15, greater 15, plus EBITDA profile one year forward is that.

Rich: Yeah, just in addition to that, the less than $200 billion in net debt number that we did, we did mention is, you know, one thing about the transaction with HIG. It's actually a relatively complex transaction, you know, relative to our size. And so there's a it's basically a carve out within the organization and, you know, 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 in real time. So, you know, 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. Okay, um, and so what could we think of who would break that into the so you got 60 million and the 315 in cash, and then you've got some outlays.

Is that in the year follow like in other words like we say that clock starts.

Oral one or something because if you do the deal in March.

Picking a pick and just the time that that in.

In the quarter following that in the year following that how to think about what it's like 15, plus mean is at run rates.

Think about those two metrics actually it was 15 plus and.

I'm sorry, there was another one year forward.

Was that the net debt number, but yes, yes, and then the revenue so.

So the 15, plus 50% plus we've talked about it is on a run rate basis right at an annualized run rate basis, one year post close.

But the one thing that I will say as you know you've known Baffin are long enough to know that.

We will 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 beyond.

On a annualized basis, one year post close and then as things continue to materialize and move forward. It will provide some additional information as things become clear, but as you might expect theres a lot of moving pieces to it right now.

Rich: I don't know how much you generated last year in cash total, but I'm assuming there will be some positive operating cash flow. So I guess, can you give us any sense of how much, is that a $5 or $10 or $20 or $30 million outlay for the sort of transitional costs that you're describing? If you simply take when we announced the deal, which was before the end of the year, and we said $200 million, less than $200 million of net debt, and then you actually take out where we ended up, we ended up 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.

Okay, and so that might not be as.

It closes like the first quarter after that year.

Not necessarily saying when print that first quarter expect 15 plus.

Maybe that might be our goal, but what you're promising is is that in the four quarters that follow that.

Thats, where youre going to be aggregating two is that fair, yes, yes, because and the reason for that is and I mentioned this to David a little bit on the call is is once the deal closes there'll be costs that immediately to parts of the organization that go with the deal then.

Then there is a period because.

It doesn't have all of the systems and everything and we will not have all the assistance everything setup, a close where we're going to be in <unk>, where we're still going to bear cost as an organization that is going to be for.

Rich: 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 had. Okay, and then just to be crystal clear, so we understand this, if I'm thinking that you have $315 million that's coming in to your balance sheet in cash, that we there is something you know putting aside operating cash flows what you did in 23 and what you could do in 24 but there's some there's some fixed you know cash layout charges against that that we should so we shouldn't be thinking well 350 minutes coming in 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 yeah right yeah absolutely we we have we have cover-up costs that we're spending obviously there's there's legal fees you know banker fees all of those those types of things as you would expect and then the other piece that you didn't mention Matt is that we are we've got some um we've got some costs that we're going to be incurring to to right side of the organization to new remainco steady state as we approach that 15 plus EBITDA margin and so you know some of that is going to be cash some of that is going to be non-cash we're working through that right now which is why which is why we're still kind of with that less than 200 million dollar number and we'll provide more information as we continue to work through those, Right, and then if I could, another, sorry to sort of not get into these little weedy things, but, but a year from noon, you say, you know, 15, greater 15 plus, use that profile one year forward is that.

For the most part reimbursed by H I G, but not not entirely 100% right and so when that those TSA falloff right. Then our job is going to be to take out that remaining cost, which gets you to that 15% plus or are we talking about.

Okay Super helpful. Thanks, guys.

Thanks, Matt.

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.

Thank you.

Okay.

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Rich: Is that in the year following, like, in other words, like we say the clock starts, you know, April 1 or something, because if you do the deal in March or, pick just the time that in, you know, the quarter following that, in the year following that, how should you think about what that 15 plus mean? Is it a run rate?

Rich: How to think about those, the two metrics actually, were 15 plus and, I'm sorry, there was another one year forward. It was the net debt number, but yeah. Yeah, and the revenue. So the 15 plus, 50% plus, we've talked about it, is on a run rate basis, right, an annualized run rate basis, one year post-pandemic. But the one thing that I will say is, you know, you've known Vafa and I long enough to know that, you know, we will, we will work to, you know, look to take out as much of that cost as quickly as possible. So, you know, but that's basically how we're thinking about it right now, is it be on a, on a, on an annualized basis when you're postposed.

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Rich: And then, as things continue to materialize and move forward, we'll provide some additional information as things become clearer. But, as you might expect, there are a lot of moving pieces to it right now. Okay, and so that might not be like, you know, as it closes the first quarter after that year, you're not necessarily saying, you know, we'll 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 gonna be aggregating to, is that fair?

Okay.

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Rich: Yeah, yeah, 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 it. Then there's a period because, you know, HIG doesn't have all of the systems and everything and will not have all of the systems and everything set up at close to where we're going to be in TSAs 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. Okay, that's super helpful.

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Rich: Thanks, guys. 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. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, Good afternoon and welcome to ZimVie's fourth quarter and full year 2023 earnings conference call. Currently, all participants are in a listen-only mode.

Operator: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych, of Gilmartin Group, for an introductory disclosure. 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. However, actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties.

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Marissa Elizabeth Bych: 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. (Inaudible) Reconciliations of these measures to the most directly comparable gap financial measures are included within the earnings release issued today, which can be found in 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. Good afternoon, and thank you for joining us.

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Vafa Jamali: We achieved significant accomplishments in 2000. We invested to further differentiate our portfolio, which helped us make gains in the market. As well, we improved your operating efficiency through restructuring and cost reduction. Most significantly, we executed an agreement to sell our spine business to HIG Capital for $375 million in total consideration, and we began to advance the necessary steps to complete that.

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Vafa Jamali: [inaudible] The lack of synergy between dental and spine disease and an overly leveraged capital structure during a time of elevated. 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 in differentiated solutions for patients and providers while optimizing our structure to drive value. Let me start with a closer look at our ongoing portfolio actions, specifically just buying. On December 18th, we entered into a definitive agreement to sell our spine business to HIG Capital for $375 million in total consideration.

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Vafa Jamali: We remain confident in completing the sales in the first half of 2020. We appreciate having a great partner in HRG Capital as we both look towards an on-time transition. This sale will provide the opportunity for our company to reposition itself exclusively in one of our most attractive end markets while also paying down a substantial portion of our outstanding debt. We are committed to having under 200 million dollars of net debt by one year post-pandemic.

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Good afternoon, and welcome to <unk> fourth quarter and full year 2023 earnings conference call.

All participants are in a listen only mode, we will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the call over to Marisa base Gilmartin group for introductory disclosures.

Vafa Jamali: Beyond the sale, we have a lot of work to do in right-sizing our cost profile, particularly given our corporate overhead and stranded costs, which are currently being reflected in our continuing... Therefore, we see both a need and an opportunity to take costs out of our business. 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 spine employees for their hard work. We appreciate your contributions and immense efforts to improve the position of the business in the future, and we wish you great success going forward.

Great. Thank you all for joining today's call.

Earlier today <unk> released financial results for the quarter and full year ended December 31, 2023, a copy of the press release is available on the Companys web site <unk> dot com as well as on SEC Gov Safari.

Before we begin I would like to remind you that management will make comments. During this call that include forward looking statements.

<unk> results may differ materially from those indicated by the forward looking statements.

For 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.

Vafa Jamali: Flipping the Dental As we transition to the sales spine, we are positioned to become a leaner, more focused, pure-play dental company with a market-leading position in the $8 billion implant digital solutions environment. 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 that build a strong foundation for the implant and high efficiency, easy to use digital solutions for managing implant work.

Filiation, but these measures 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.

And we disclaim any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements.

Vafa Jamali: One of our top priorities for 2023 was to invest in this, and we are pleased to continue our strong cadence of hardware and software innovations into 2020. Most recently, we launched our next-generation TSX implant in Japan, one of our largest international markets.

Because of new information future events or otherwise.

With that I will turn the call over to Zafar, Molly <unk>, President and Chief Executive Officer of MB.

Good afternoon, and thank you for joining us.

We had significant accomplishments in 2023, we invested to further differentiate our portfolio, which helped us in the markets we serve.

Vafa Jamali: 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 few years and Focusing on Opportunities that Improve Clinical Workflow and Complement our Empowerment. [inaudible] We plan to make several changes this year to achieve our desired size and scale as the Fortunately, this is an area our team has extensive experience in. Over the past few years, our team has delivered several operational improvements to get the business where it needs to be. Many of those improvements will focus on the spine. 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 plan. Our dental business has always enjoyed an attractive margin.

As well, we improved our operating efficiency to restructuring and cost reduction initiatives.

Most significantly we executed an agreement to sell our spine business to H I G capital.

The $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.

A lot of synergy between gasoline and spine businesses and an overly leveraged capital structure during the time of elevated interest rates.

We believe we are quite elegantly address both of these concerns and one major accounts.

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 in differentiated solutions for patients and providers.

Optimizing our structure to drive value for shareholders.

Let me start with a closer look at our ongoing portfolio actions, specifically the spine sale on.

On December 18th we entered into definitive agreement to sell our scientists JG capital $375 million in total consideration.

We remain confident in completing the sales in the first half of 2024.

We appreciate that would be a great partner and H I G capital as we both to look towards our one time transaction costs.

This sale will provide the opportunity for our company to reposition itself exclusively.

And one of our most attractive end markets dental solutions.

Also paying down a substantial portion of our outstanding debt.

We are committed to having under $200 million of net debt by one year post sale.

Can you help me sale, we have a lot of work to do in right sizing our cost profile, particularly given our corporate overhead and stranded costs, which are currently being reflected in our continuing operations profile.

Therefore, we see both a need and an opportunity and taking costs out of our organization we.

As we continue to portfolio optimization process.

We'd like to thank all of our global spine employees for their hard work.

Appreciate your contributions and immense effort to improve the positioning of the business for the future and wish you great success going forward.

Flipping to dental.

As we transition to the sales spine, we are positioning to become a leaner more focused pure play dental company with market leading positions.

$1 billion implant digital solutions.

Materials markets.

We are committed to operating the market's highest quality premium implants and holistic portfolio to support every step of the implant process.

<unk> innovative biomaterial products, which built a strong foundation toward the implant and.

And high efficiency.

Could use digital solutions for managing.

Workflow.

One of our top priorities for 2023, which you 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 PSX implant in Japan, one of our largest international markets.

Richard J. Heppenstall: I'll begin by reviewing our fourth quarter 2023 results, and we'll then close by providing commentary on our outlook for 2025. Before I delve into the financial details of 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 sector as of the end of 2020. 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, beginning with continuing 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. Full year 2023 total third-party net sales of 45 The impact of foreign exchange on third-party net sales in 2023 was negligible, with Constant Kersey sales declining 60 basis points versus 2022.

We preceded that milestone with the launches of activity in Azure, and our biomaterials and lab focused pathetic.

Storage 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 inbound business.

Yes.

To an operational update.

We plan to make several changes to this year to achieve our desired size and scale as the company works.

Currently 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 you will take that same playbook to the dental business, including a focus on manufacturing automation and supply chain optimization and improving the efficiency of our plants.

Our dental business, we've always enjoyed an attractive margin profile.

Wholly focused management team and increased resources, we see room to grow that margin profile you can target.

We recognize the importance of innovation to our business and we realized that we had commercial momentum behind our offerings.

And therefore, it should be clear that our.

If there are some key improvements will not be reflected to reduced research and development core commercial costs.

Instead, we'll be focused on taking significant corporate cost out of the business.

Many of these costs will take several months to address and we expect to see Greek margin leverage as the year goes on.

However, until the sale is complete.

Andy will bear the full corporate expense for both the continuing and discontinued operations.

We will provide more detail on TSA and ERP associate.

Richard J. Heppenstall: In the U.S., third-party net sales for the fourth quarter of 2023 of $65.4 million decreased by 3.2 percent, 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 percent, driven by weaker implants as previously Outside of the U.S., third-party net sales of $47.7 million decreased by 1.2 percent on a reported basis and 4.1 percent in constant current, full year outside of the U.S. sales of $187.6 million dollars with higher by 40 basis points and 30 basis points in reported and cost of currency, respectively.

Associated with the sale around the time of close.

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 Scott further our mission of historic daily lives, while living our core values of accountability authenticity curiosity and having a growth mindset.

Shared commitment spans our global sites as you work towards a common goal established <unk> reputation as a good corporate citizen a destination workplace and a true life Sciences leader.

I'll now turn the call over to rich outlined our financial performance and guidance.

Thanks, Scott and good afternoon, everyone.

I'll begin by reviewing our fourth quarter 2023 results and will then close by providing commentary on our outlook for 2024.

Richard J. Heppenstall: While the dental market in aggregate will slow through most of 2023, 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 was 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 a slightly lower implant volume.

As a result, we will bifurcate, our Q4 and fiscal year 2023 financials, as continuing operations, which comprised of dental and a majority of corporate and.

In discontinued operations, which includes the exiting spine business.

Beginning with continued operations.

<unk> third party net sales for the fourth quarter of 2023 were $113 1 million.

A decrease of two 4% in reported rates and a decline of three 6% in constant currency.

Richard J. Heppenstall: We expect improvement in the cost of products sold in 2024 as we streamline the organization, cutting out duplicative costs, 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 dollars is flat to 2022 as GNA of $239.3 million dollars.

<unk> declining 60 basis points versus 2022.

In the U S third party net sales for the fourth quarter 2023 of $65 4 million.

Kris by three 2% driven.

Driven by a slightly weaker implant market due to U S macroeconomic challenges.

Really offset by strength in our digital solutions of bio materials portfolio.

Full year 2023 third party net sales in the U S of $269 6 million.

It represents a modest decline of one 2% driven by weaker implants as previously mentioned.

Outside of the U S third party net sales of $47 $7 million decreased by one 2% on a reported basis and four 1% in constant currency.

Richard J. Heppenstall: Just as 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 suggested EBITDA not only includes costs to support our market-leading dental business but also the majority of our corporate costs, which were 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. We remain confident in delivering an adjustability of the Dow margin of over 15% one year post-spying sale, as previously disclosed.

Full year outside of the U S sales of $187 $6 million was higher by 40 basis points.

30 basis points in reported and constant currency respectively.

While the dental market in aggregate was soft through most of 'twenty three we are pleased.

We have exited the year roughly flat compared to 2022 definitive sign with the strength of our dental portfolio and ability to commercially execute in a challenging environment leaves us well positioned for 2024 as market conditions began 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 and cutting out duplicative costs, improving manufacturing efficiency and benefit from a better product mix, particularly in the back half of the year.

Richard J. Heppenstall: 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 is just earnings per share for FY 2023 with 22 cents per share. Moving on to discontinued operations, which includes the spine business currently held, 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 a 9.2% decrease in cost incurred. In the U.S., fourth quarter 2023 third-party net sales at $81.5 million decreased by 10.3 percent, 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 cost. Full year OUS sales of $81.8 million declined by 11.4% in reported rates and 12.1% in-counsel.

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 $245 million is flat to 2020 to SG&A of $239 $3 million.

Adjusted EBITDA attributable to continuing operations in the fourth quarter of 2023, a $13 9 million represents a 12, 3% EBITDA margin.

Full year 2023, adjusted EBITDA of $58 million reflects 11, 1% of third party net sales.

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 a resulting cost structure.

Richard J. Heppenstall: Fourth quarter 2023 adjusted cost of products sold at 27.3% of sales compared to 27.7% of sales in the prior year; full year 2023 adjusted cost of products sold at 27.2%, decreased 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 we are pleased that our efforts have translated to higher gross margin. Q4 2023 Adjusted Research and Development Expense of $4.9 million compared to $5.7 million in the prior year; adjusted selling general administrative expenses at 58.5 million dollars compared to 67.5 million dollars in the prior year. The adjusted EBITDA attributable to discontinued operations in the fourth quarter of 2023, at $15.5 million, represents a 15.4% EBITDA margin. Full year 2023 adjusted EBITDA for discontinued operations was $65.6 million, with 16.0% of third-party net. 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.

We remain confident in delivering an adjusted EBITDA margin of over 15% one year post spine sale was previously disclosed.

Q4 of 2023 adjusted earnings per share attributable to continuing operations of <unk> 10 per share on a fully diluted share count of $26 6 million shares.

Continuing operations adjusted earnings per share for FY 2023 was 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 $105 million a.

A 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 nine 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 eight 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 U S sales of $81 $8 million declined by 11, 4% and 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 of 27, 2%.

Richard J. Heppenstall: Touching on liquidity and debt, over 12 months ago, Vafa and I outlined our plans to monetize the balance, generate outside 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.

Decreased 180 basis points versus 29.0% in the prior year.

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 2023, a $15 5 million represents a 15, 4% EBITDA margin.

Full year 2023, adjusted EBITDA for discontinued operations of $65 $6 million was $16 zero percent of third party net sales.

Let's turn to our liquidity and debt.

Over 12 months ago, and I outlined our plans to monetize the balance sheet generate outsized cash flow and use the excess proceeds to pay down debt.

We ended 2023 with a consolidated 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 is 12 months ahead of our required debt repayment schedule.

As Dan 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 and net debt by the end of 2024.

Richard J. Heppenstall: Turning to our first quarter margin profile. As Vafa and I alluded to earlier, continuing operations include both the cost to support our dental business but also a majority of corporate costs that have historically supported SPI. 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 costs. 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 sales fine, 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 a lower margin profile and an increased relative burden of interest expense until the sale of Spine is completed.

Moving onto our outlook for 2024.

We do not intend to provide quarterly guidance on a go forward basis.

We expect sales from continuing operations to be at the range of $115 million to $118 million.

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.

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 spot.

Richard J. Heppenstall: We will provide more adjusted earnings for shared guidance following the completion of, Now turning our expectations for the business for year one post-spine sale close. We are raising our expectations for annualized sales at one year post fine to over $455 million. The sale of our fine business to HIG is progressing as planned, and we continue to expect the sale to finalize in the first half of 2024, and we are reaffirming our commitment to achieve 15% plus adjusted EBITDA margin profile at one year post fine 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. Thank you, Rich.

So this and 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 cost currently in continuing operations will be removed following the sales spine allow us, allowing us to make market progress toward our desired margin profile.

With regard to adjusting adjusted earnings per share.

<unk> Q1 to be depressed as a result of the lower margin profile and increased relative burden of interest expense until the sales spine is complete.

We will provide more adjusted earnings per share guidance following the completion of the sale.

Now turning to our expectations for the business for year, one post spine sale close.

Vafa Jamali: I'm excited about the prospects ahead of us, and as always, I look forward to updating you on the progress throughout the year. The team is immensely experienced in carving out and setting up new businesses, as well as improving the operational efficiency of businesses in transit. And we are excited to employ these skills to position ZimVie for our next job. With that, we'll 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.

We are raising our expectations for annualized sales at one year post spine to over $455 million.

The sale of our spine business AIG is progressing as planned and we continue to expect the sale to finalize in the first half of 2024.

And we are reaffirming reaffirming our commitment to achieve 15% plus adjusted EBITA 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 wrap up.

Thank you rich.

And about the prospects ahead of us and as always I look forward to updating you on the progress throughout the year.

Operator: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Saxon of Needham & Company. Your line is now open. Oh, great. Good afternoon, Vafa and Rich.

<unk> is immensely experiencing carving out and standing up new businesses as well as improving the operational efficiency of businesses and transformation.

And we are excited to employ these scaled positions in the next chapter.

That 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.

Dry your question. Please press star one again.

David Joshua Saxon: Thanks for taking my question. I wanted to start with the couple about the dental business, and then Rich, I might have one for you. So Vafa, you know, 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.

These standby, while we compile the Q&A roster.

Our first question comes from the line.

David Saxon of Needham <unk> Company. Your line is now open.

Oh great.

Good afternoon.

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.

<unk>.

Vafa Jamali: Do you think you can grow in what looks like a somewhat softer market from a patient quality perspective? Hey, David, thank you for the questions. Yeah, 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 experienced years prior. So I do think that 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 price, implant, which I believe that the competitors that have that option have often moved down the market. We haven't had to do that.

Or so.

Do you think you can grow and what looks like a somewhat softer market from a patient volume perspective.

Yes.

Hey, David Thank you for the questions.

Yes, we have.

We have benefited from some of the some of the competitive dynamics in the market.

And frankly, we've we've picked up some share there in a relatively.

Solar market.

Then we've experienced years prior.

So I do think that that has been positive.

For us I think that the strength of our implant portfolio is is that we first of all we don't have to trade down so we aren't trading down to a lower priced.

Vafa Jamali: 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 the opportunity in implants is, it's that they're 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.

Implant, which I believe that the.

The competitors that have that option have often.

Move down market, we haven't had to do that.

And the reason we've been able to hold it the premium categories, primarily from from a new new new implants that have been really really effective.

Very very sticky in the marketplace, coupled with a digital work from our guided solution workforce that is.

Growing significantly faster.

Then 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 only about 25% penetrated and part of that is.

The cost of the World Cup and the second part is the durability.

The ability to give.

Plant at <unk>.

Very consistent rate, whether you are a new <unk>.

Vafa Jamali: 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 a really, really good place to grow faster. So hopefully, that answers your question. Yeah, super helpful, Vafa.

New physician or an old one.

Our are much more experienced one so I think we've done a lot to make so workflow coupled with the implant work really well. So I think we'll continue to make strides there.

Definitely have more customers than we had last year and where we see this slowdown as some of the specials to just doing a little bit less than they were before but.

We're confident that when the market returns, we're going to be really really good place to to grow faster. So hopefully that answers your question.

Super helpful.

Vafa Jamali: 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, when do you expect to start selling that?

I wanted to ask one on the digital part of the portfolio. So the agreement with align for Taro does that cover.

There are new alumina.

And if so.

When do you expect to start.

Following that.

Vafa Jamali: And if at all, is it factored into the first quarter guide? And I'll just have one follow-up. Sure. So 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.

If if at all is it factored into the first quarter guide and I'll just have one follow up sure. So.

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.

Vafa Jamali: I would say overall, iTero sales for us are 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 Q4 when the new scanner is available. Hey, David, this is Rich.

I would say overall I taro.

<unk> for us.

Depressed, but that 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 that when the new when the new scanners available to us.

Hey, David This is rich just one additional comment to a bathroom and chip mentioned during the journey.

Before we get access to the <unk> scanner from Vitaros and like Pat said, the anticipated Q4 timeframe, we have a program with our customers if they buy the existing scanner that they will be able to upgrade to the new one out when the new one is really so we've got a plan there to transition to that new.

Introduction.

Okay.

Super helpful. Thanks for that and then just sticking with you rich.

Super helpful color.

I haven't quite gotten through to the to the model yet, but if you could just kind of help us with quantifying the stranded costs.

Rich: But if you could just kind of help us with quantifying the stranded costs you're bearing currently and kind of where they sit, you know, COGS versus OPEX. Thanks so much. Yeah, so we do have, obviously, stranded costs, largely in the corporate infrastructure that we use to support businesses. So the way that we've 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 costs until the closure of the deal. Then, of course, there'll be a number of headcount, and obviously it's communicated, which will give us some uplift in margin. And then we'll have a period where there are TSAs, and then once TSAs fall off, then there's another inflection point, is how we're thinking about it in the longer term.

Youre bearing currently and kind of where they sit.

Cogs versus opex. Thanks, so much.

Yes so.

Our mature so we do have obviously stranded cost.

Largely in the corporate infrastructure that we use to support businesses. So the way that we've generally operated it's kind of like a holding structure.

Where were 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 in SG&A in the corporate sector.

The way that we're thinking about the transaction as we mentioned on the in the prepared remarks that will carry some cost until the closure of the deal then.

And then of course there'll be a number of head count obviously is conveyed.

And then we will have which will give us some some uplift in margin.

And then we will have a period, where there's <unk> and then once TSA fall off and there is another inflection point as how we're thinking about it in the longer term, but what the way that we are also thinking about it obviously as we've set out the 15% plus adjusted EBITDA margin.

Rich: 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 are obviously a lot of puts and takes in numbers right now, obviously, but we're still committed to achieving that one year post-sale. Great, thank you.

One year post sale there is obviously a lot of.

A lot of puts and takes in the numbers right now, obviously, but we're still committed to achieving that one year post sale.

Matthew Miksic: One moment for our next question. Our next question comes from the line of Matt Miksic of Barclays. Your line is now open. Hey, good evening.

Great. Thank you.

One moment for our next question.

Our next question comes from the line of Matt metric of Barclays. Your line is now open.

Matthew Miksic: Thanks for taking the question. Amen. So, a couple of follow-ups. You mentioned the sort of target of getting under $200 million in investment that you're taking in. Is that true? No. No. No.

Hey, good enrollment thanks for taking my question.

Hey, Matt.

So couple of follow ups.

You mentioned.

Sort of a target of getting under $200 million and net debt.

Vafa Jamali: 375 or, you know, a bunch of that in cash and a little bit in debt, it looked like, and you've got, so, you know, 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, you know, holding on to some cash and why? And then there were a couple of quick follow-up questions. Sure. So, so, Matt, Vafa, the 200 that we mentioned does not include the $60 million seller. So obviously, that's a pick that we just don't include there.

Taking in.

375, or bunch of that in cash and a little bit that it looked like.

And you've got so.

The simple math would say you could get lower can you talk a little bit about.

How youre thinking about the balance of.

Getting your net debt lower or holding onto some cash and why.

A couple of quick follow ups, if I could.

Sure, So hey, Matt.

The 200 that we mentioned does not include the $60 million seller note.

So obviously thats a pick that we just don't include there, but but if you. If you included that it obviously.

Better than 140.

So that's the way we're looking at it Darrin.

That's probably the discrepancy between the.

Yes.

That we got for the spine business and what we're reporting on that rich anything else to offer there yes.

Rich: Yeah, just, just in addition to that, the, the, the less than $200 billion in net debt number that we did, we did mention is, um, you know, one thing about the transaction with HIG, it's actually a relatively complex transaction, um, you know, relative to our size. And so, there's a, it's basically a carve-out within the organization and, you know, 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 in real time. So, you know, we're gonna 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.

In addition to that Matt.

The less than $200 billion in net debt number that we did we did mentioned.

One thing about about the transaction with AIG is actually a relatively complex transaction.

Relative to our size and so.

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 <unk>.

S and $200 million that we outlined and as as things progress and become clearer.

Rich: And as things progress and become, you know, clearer, as we get closer to transaction close, we'll provide more detail around that. Okay, and so what could we think of to break that into this? You've got 60 million and the 315 in cash, and then you've got some outlays. I don't know how much you generated last year in total cash, but I'm assuming there'll be some positive operating cash flows.

As we get closer to transaction close we will provide more detail around that.

Okay.

So I think we think it will break that into the <unk>.

$60 million in the $3 15.

Cash and then you've got some outlay is.

I mean you generated.

Or is it.

I don't know how much you generated last year and 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% or 10 or 20 or $30 million outlay for transitional costs.

Rich: So I guess, can you give us any sense of how much, is that a $5 or $10 or $20 or $30 million outlay for the sort of transitional costs that you're describing? [inaudible] If you simply take when we announced the deal, which was before the end of the year, and we said $200 million, less than $200 million of net debt, and then you actually take out where we ended up, we ended up 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 had.

Describing or.

Any color on that yes, the way that the way there how do you think about it is as I mentioned on the call Q1 is generally a.

A little bit of a softer a softer quarter for us due to seasonality, but if you. If you just simply take if you just simply take when we announced the deal which was before the end of the ended the year.

And we said $200 million less $200 million net debt and then you actually take out where we ended.

We ended actually 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 will we will continue to.

Evolve and provide more information, but we did end the year.

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.

Rich: Okay, and then just to be crystal clear, so we understand this, if I'm thinking that you have $350 million that's coming in to your balance sheet in cash, that we there is something you know putting aside operating cash flows what you did in 23 and what you could do in 24 but there's some there's some fixed you know cash layout charges against that that we should so we shouldn't be thinking well 350 minutes coming in 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 yeah right yeah absolutely we we have we have cover-up costs that we're spending obviously there's there's legal fees you know banker fees all of those those types of things as you would expect and then the other piece that you didn't mention Matt is that we are we've got some um we've got some costs that we're going to be incurring to to right sides of the organization to new remainco steady state as we approach that 15 plus EBITDA margin and so you know 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 which is why we're still kind of with that less than 200 million dollar number and we'll provide more information as we continue to work through those. Right, and then if I could, another, sorry to sort of not get into these little weedy things, but a year from noon, you say, you know, 15, greater, 15 plus, even that profile, one year forward is bad.

Okay.

And then just maybe just.

To be crystal clear so.

I understand this.

Thinking that you have $350 million, that's coming in to your balance sheet and cash.

That there is something.

Aside operating cash flows what you did in 2003, and what you could do in 'twenty four but theres some.

There is some fixed cam.

Cash layout charges against that that we should so we shouldnt be thinking while 300 pretty much coming in it might be it'll be something less than that when you gentlemen would you describe the unique nature of the deal.

Yes, yes, absolutely we have we have carve out costs that we're spending obviously theres legal fees banker fees all of those 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.

As we continue to work through those plants.

Great and then if I could another sorry to sort of get into these little weedy things, but a year from when you say 15 greater 15th.

<unk> plus EBITDA profile, one year forward is that.

Rich: Is that in the year following, like, in other words, like, we say the clock starts, you know, April 1 or something, because if you do the deal in March or something. [inaudible] I'm sorry, there was another one year forward. I guess it was the net debt number, but yeah. Yeah, and the revenue, so the 15 plus, 50% plus, as we've talked about, is on a run rate basis, right, an annualized run rate basis one year post-pandemic. But the one thing that I will say is, you know, you've known Vafa and I long enough to know that, you know, we will work to take out as much of that cost as quickly as possible. So, you know, but that's basically how we're thinking about it right now, is it be on an annualized basis one year post-close.

Is that in the year follow like in other words like we say that clock starts.

April one or something because if you do that.

The deal in March.

Picking a pick and just the time that that in.

In the quarter following that in the year following that how to think about Wednesday 15, plus mean is at a run rate.

I would think about those two metrics actually was 15 plus.

Im sorry, there was another one year forward.

Was that the net debt number, but yes, and then the revenue so.

So the 15, plus 50% plus we've talked about it is on a run rate basis right at an annualized run rate basis, one year post close.

But the one thing that I will say as you've known Baffin are long enough to know that.

We will 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 beyond.

On an annualized basis, one year post close and then as things continue to materialize and move forward that will provide some additional information as things become clear, but as you might expect theres a lot of moving pieces to it right now.

Rich: And then, as things continue to materialize and move forward, we'll provide some additional information as things become clearer. But, as you might expect, there's a lot of moving pieces to it right now. Okay, and so that might not be like, you know, it closes like the first quarter after that year; you're not necessarily saying, you know, we'll 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 gonna be aggregating to, is that fair? Yeah, yeah, 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 it. Then there's a period because HIG doesn't have all of the systems and everything and will not have all of the systems and everything set up at close to where we're going to be in TSAs, where we' And so when those TSAs fall off, then our job is going to be to take out that remaining cost, which gets you to that 15% plus.

Okay, and so that might not be like.

Zee closes like the first quarter after that year.

Not necessarily saying when.

That first quarter expect 15 plus.

And maybe that might be our goal, but what you're promising is.

Is that in the four quarters that follow that.

Thats, where youre going to be aggregating two is that fair.

Yes, yes, because and the reason for that is and I mentioned this to David a little bit on the call is is once the deal closes there'll be costs that immediately depart the organization that go with the deal. Then then there is a period because AIG doesn't have all of the systems and everything and we will not have all of the systems everything.

Set up a close where we're going to be in <unk>, where we're still going to bear cost as an organization that is going to be.

For the most part reimbursed by HIV, but not not entirely 100% right and so when that those TSA falloff right. Then our job is going to be to take out that remaining cost, which gets you to that 15% plus are we talking about.

Rich: Okay, that's super helpful. Thanks, guys. Of course. Thanks, man. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program.

Okay Super helpful. Thanks, guys.

Thanks, Matt.

I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program.

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