Q1 2024 ZimVie Inc Earnings Call
Operator: Sessions 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 from Gilmartin Group for an introductory disclosure.
At end of todays call.
Marissa Elizabeth Bych: As a reminder, this call is being recorded for replay purposes.
Marissa Elizabeth Bych: I'd now like to turn the call over to MRSA bites from Gilmartin group for introductory disclosures.
Operator: Yeah.
Operator: Yeah.
Marissa Elizabeth Bych: Thank you all for joining today's call.
Marissa Elizabeth Bych: Thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter ended March 31, 2024. 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 may include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statement due to a variety of risks and uncertainties.
Marissa Elizabeth Bych: Earlier today, when they released financial results for the quarter ended March 31 2024.
Marissa Elizabeth Bych: A copy of the press release is available on the company's web site <unk> dot com as well as on SEC Gov.
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 and the investor deck issued today, found on the investor relations section of the company's website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 8, 2024.
Marissa Elizabeth Bych: Before we begin I'd like to remind you that management will make comments during the call that include forward looking statements.
Marissa Elizabeth Bych: Actual 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.
Marissa Elizabeth Bych: In addition, the discussion on this call will include certain non-GAAP financial measures reconciliations of these measures. The most directly comparable GAAP financial measures are included within the earnings release, and the Investor deck issued today and on the Investor Relations section of the company's web site.
Marissa Elizabeth Bych: This conference call contains time sensitive information and is accurate only as of the live broadcast today may eight 2024.
Marissa Elizabeth Bych: 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.
Marissa Elizabeth Bych: <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.
Vafa Jamali: With that I will turn the call over to Batheja, Molly <unk>, President and Chief Executive Officer of MB.
Vafa Jamali: Good afternoon, and thank you all for joining US we've had an active 2024, thus far and I'm pleased with our progress.
Vafa Jamali: Good afternoon, and thank you all for joining us. We've had an active 2024 thus far, and I'm pleased with our progress. With the recent sale of our spine business for $375 million in total consideration, including $350 million in cash and a $60 million promissory note, we're delivering on our promise to reshape the financial profile of our business. Immediately following the sale, we paid down $275 million of debt, and we focused our organization as a pure-play dental company with a comprehensive and industry-leading portfolio.
Vafa Jamali: With the recent sale of our spine business were $375 million in total consideration.
Vafa Jamali: <unk> $350 million in cash and $60 million promissory note promissory note.
Vafa Jamali: We're delivering on our promise to reshape the financial profile of our business.
Vafa Jamali: Immediately following the sale, we paid down $275 million of debt and refocused our organization as a pure play into a company with a comprehensive and.
Vafa Jamali: Industry, leading portfolio.
Vafa Jamali: We've already begun taking concrete actions to right size, our cost profile following the sale of spine.
Vafa Jamali: We've already begun taking concrete actions to right-size our cost profile following the sale of Spine. In addition to reducing our corporate infrastructure, we're also reducing corporate expenses such as IT costs and legal expenses, while continuing to optimize our manufacturing operations.
Vafa Jamali: In addition to reducing our corporate infrastructure, we're also reducing corporate expenses, such as IP costs and legal expenses, while continuing to optimize our manufacturing operations.
Vafa Jamali: We're confident in executing further right-sizing actions to improve our margin profile over the next year, and we're also confident in our pathway for continued improvement for the years that follow. I'm very excited about the future of this company as we continue to invest in differentiated solutions for patients and providers, scale the adoption of those solutions, and improve the efficiency of our business to deliver shareholder value. As we enter our first full quarter as a leaner, more focused dental company, we have all the components to maintain and grow our leadership position in this $8 billion implant, digital solutions, and biomaterials market.
Vafa Jamali: We're confident in executing further right sizing actions to improve our margin profile over the next year and we're also confident in our pathway for continued improvement for the year as a whole.
Vafa Jamali: I'm very excited for the future of this company as we continue to invest in differentiated solutions for patients and providers.
Vafa Jamali: There will be adoption of those solutions and improve the efficiency of our business to deliver shareholder value.
Vafa Jamali: As we enter our first full quarter as a leaner more focused dental company, we have all the components to maintain and grow our leadership position in this $8 billion implant digital solutions and by our materials market.
Vafa Jamali: Our strategy is grounded in delivering outstanding innovative products to our customers in support of gaining market share while driving the expansion of the implant dentistry market as a whole.
Vafa Jamali: Our strategy is grounded in delivering outstanding, innovative products to our customers in support of gaining market share while driving the expansion of the implant dentistry market as a whole. Our best-in-class implant portfolio is led by our TSX and T3 Pro premium dental implants, as well as surgical tools, abutments, and restorative components. TSX and T3 Pro are our most recent implant launches and have both demonstrated rapid and strong commercial traction. Our biomaterials portfolio includes a wide selection of bone graft substitutes, membranes, tissue products, and regenerative products with a history of well-documented clinical response. This portfolio includes our leading PUROS allograft solution.
Vafa Jamali: Our best in class portfolio is led by our <unk> in Q3 pro premium dental implants.
Vafa Jamali: And also his surgical tools abutment superstores components.
Vafa Jamali: <unk> in Q3 for our most recent important launches and have both demonstrated rapid and strong commercial traction.
Vafa Jamali: Our biomaterials portfolio includes a wide selection of bone graft substitutes membrane tissue products and regenerative products with the history of well documented clinical results.
Vafa Jamali: This portfolio includes our leading <unk> allograft solution. Our biomaterial products are also used to implant procedures to provide a foundation for the implant.
Vafa Jamali: Our biomaterials products are also used in implant procedures to provide a foundation for the implant and create a desirable aesthetic. Our digital dentistry portfolio includes end-to-end digital solutions for tooth replacement procedures, including intraoral scanning solutions and guided surgery software. By using these digital solutions, our customers are recognizing greater efficiency in their workflow, benefiting from enhanced procedural accuracy, and focusing more time on what they do best, performing implant surgery. Practices that adopt our digital workflow solutions typically perform many more implant cases than practices that don't.
Vafa Jamali: Created desirable aesthetic outcome.
Vafa Jamali: Our digital dentistry portfolio includes end to end digital solutions for tooth replacement procedures, including <unk> scanning solutions and guided surgery software.
Vafa Jamali: In addition, these practices are seeing excellent patient satisfaction, reduced patient chair time, and great outcomes, especially in customized restorative dental operations. However, we estimate that only about 20% of dental implant cases today are performed using a complete digital workflow.
Vafa Jamali: By using these digital solutions, our customers are recognizing greater efficiency in their workflow benefiting from enhanced procedural accuracy and focusing more time on what they do best performing implant surgeries.
Vafa Jamali: Practices that adopt our digital workflow solutions typically perform many more implant cases and practices that don't.
Vafa Jamali: In addition, these practices, we're seeing excellent patient satisfaction reduce patient chair time grew.
Vafa Jamali: Great outcomes, especially in customized restorative small operations.
Vafa Jamali: We estimate that only about 20% of dental implant cases today are performed using a complete digital workflow.
Vafa Jamali: As a result, we see an incredible opportunity to continue training providers on the benefits of our software and our guided surgery solutions, which can yield further growth and adoption. Across our portfolio, our commercial advantage stems from the value we are delivering to stakeholders, patients, clinicians, and the dental lab. Medical education and training are greatly aiding in the adoption of our workflow technology.
Vafa Jamali: As a result.
Vafa Jamali: We see an incredible opportunity to continue training providers on the benefits of our software and our guided surgery solutions, which can yield further growth and adoption.
Vafa Jamali: Across our portfolio, our commercial advantage stems from the value either delivering across stakeholders patients clinicians and the dental lab met.
Vafa Jamali: Medical education and training are greatly aiding in the adoption of our workflow technologies.
Vafa Jamali: And our industry, leading training and education programs, we bring dentist, where institutes in Carlsbad, California, Palm Beach Gardens, Florida and Switzerland.
Vafa Jamali: In our industry-leading training and education programs, we bring dentists to our institutes in Carlsbad, California, Palm Beach Gardens, Florida, and Switzerland. We also hold regular hands-on and didactic programs in the field to help educate clinicians and grow the field of implantology. We expect that our efforts to deliver efficient, high-quality, differentiated solutions to dental practices, coupled with comprehensive training, will form the basis for healthy, long-term growth in our business. It's a little focused on operational progress. You know, over the past two years, our team has worked immensely hard to execute material operational improvements across our business. Many of those improvements were focused within our spine.
Vafa Jamali: We also hold regular hands-on and didactic programs in the field to help educate clinicians and go to the field of implantology.
Vafa Jamali: We expect that our efforts to deliver efficient high quality differentiated solutions to advisory practices, coupled with comprehensive training will form the basis for healthy long term growth in our business.
Vafa Jamali: It's a little focus on operational progress.
Vafa Jamali: Over the past two years, our team has worked immensely hard to execute material operational improvements across our business.
Vafa Jamali: Many of those improvements were focused with our spine business.
Vafa Jamali: As we move forward, we'll take much of that same playbook to our dental business, including a focus on manufacturing automation, supply chain optimization, and improving the efficiency of our plant. As a result of these plans, we expect to drive the margin improvement previously mentioned. That said, our platform is driven by innovation and customer satisfaction. It should be very clear that our efficiency improvements will not be reflected through reduced research and development or reduced commercial activities.
Vafa Jamali: As we move forward, we will take much of that same playbook to our dental business, including a focus on manufacturing automation supply chain optimization and improved the improving the efficiency of our plants.
Vafa Jamali: As a result of these plans we expect to drive the margin improvement previously mentioned.
Vafa Jamali: That said our platform is driven by innovation and customer satisfaction should be very clear that our efficiency improvements will not be reflected through reduced research and development or reduced commercial costs.
Vafa Jamali: I'll now turn the line over to rich to review, our financial performance and forward outlook in greater detail.
Vafa Jamali: I'll now turn the line over to Rich to review our financial performance and forward outlook in greater detail. Thanks Vafa, and good afternoon everyone. I'll begin by reviewing our first quarter 2024 results, and we'll close by providing commentary on our outlook for the full year 2024. As a reminder, we finalized the sale of our spine business on April 1st, 2024. Thus, our spine segment is reflected in discontinued operations in our pan
Rich: Thanks, Trevor and good afternoon, everyone I'll begin by reviewing our first quarter 2020 for results and we will close by providing commentary on our outlook for the full year 2024.
Vafa Jamali: As a reminder, we finalized the sale of our spine business on April one 2024.
Rich: Our spine segment is reflected in discontinued operations in our financial statements.
Rich: Like we did at the time of our Q4 2023 financial filing, we have again bifurcated our Q1 2024 financials between continuing operations, which comprises our dental business and the majority of corporate costs, and discontinued operations, which includes the legacy spine. Please refer to our 10-Q for financial results from discontinued operations. Turning to continue operations, third-party net sales for the first quarter of 2024 were $118.2 million, a decrease of 1.6% in reported rates and a decline of 1.4% in constant current. In the U.S., third-party net sales for the first quarter of 2024 of $67.7 million decreased by 3.1 percent driven by a weaker implant market and lower ITERO capital sales, partially offset by strength in our digital solutions and We have seen stability in the OUS dental market over recent quarters, and our competitive position remains strong in the core markets.
Rich: Like we did at the time of our Q4 2023 financial filings. We are again bifurcated. Our Q1 2020 for financials between continuing operations, which comprises our dental business and the majority of corporate costs and discontinued operations, which includes the legacy <unk>.
Rich: Line of business.
Rich: Please refer to our 10-Q for financial results from discontinued operations.
Rich: Turning to continuing operations third party net sales for the first quarter of 2024 or $118 2 million a decrease of one 6% in reported rates and a decline of one 4% in constant currency.
Rich: First quarter 2024 adjusted cost of products sold was 37.2% compared to 35.4% of sales in the prior year period due to an unfavorable product mix and lower manufacturing absorption. We expect improvement in cost of products sold over time as we streamline the organization, cut duplicative costs, improve manufacturing efficiency, and benefit from a more favorable product mix as implant sales recover. Q1 2024 Adjusted Research and Development Expense of $6.3 million, or 5.3% of sales compared to $5.9 million, or 4.9% of sales in the prior year.
Rich: Q1 2024 adjusted sales, general, and administrative expenses of $60.3 million compared to $66.3 million in the prior year, driven largely by reductions in IT and legal expenses. Adjusted EBITDA attributable to continuing operations in the first quarter of 2024 was $12.5 million, or a 10.5% EBITDA margin. Q1 2024 Adjusted Earnings per Share attributable to Continuing Operations was $0.08 a share on a fully diluted share count of 27.1 million shares.
Rich: In the U S third party net sales for the first quarter of 2024 of $67 $7 million decreased by three 1% driven by a weaker implant market at a lower <unk> capital sales, partially offset by strength in our digital solutions environment.
Rich: Cereals portfolios.
Rich: Outside of the U S third party net sales of $54 million increased 4% on a reported basis and up one 1% in constant currency.
Rich: We have seen stability in <unk>.
Rich: <unk> dental market over recent quarters, and our competitive position remains strong in the core markets we serve.
Rich: First quarter 2024, adjusted cost of products sold was 37, 2% compared to 35, 4% of sales in the prior year period due to unfavorable product mix and lower manufacturing absorption.
Rich: We expect improvement in cost of products sold over time as we streamline the organization.
Rich: Duplicative cost.
Rich: Improved manufacturing efficiency and benefit from a more favorable product mix as implant sales recover.
Rich: Q1, 2024, adjusted research and development expense of $6 3 million or five 3% of sales compared to $5 9 million or four 9% of sales in the prior year.
Rich: Q1, 2024, adjusted sales general and administrative expenses of $63 million compared to $66 3 million in the prior year, driven largely by reductions in Iot and legal expenses.
Rich: Adjusted EBITDA attributable to continuing operations in the first quarter of 2024 was $12 $5 million or a 10, 5% EBITDA margin.
Rich: Q1, 2024 adjusted earnings per share attributable to continuing operations was eight a share on a fully diluted share count of $27 1 million shares.
Rich: We are very pleased with our financial performance in the first quarter of 2024 as we are delivering on our plan to resize and reposition ZimVie as a pure play dental company. We remain committed to achieving our financial objective of 15% plus EBITDA margins one year post-spine sale. As Vafa mentioned earlier in the call, we are very pleased with the position of our balance sheet following the repayment of $275 million of debt on April 1st.
Rich: We are very pleased with our financial performance in the first quarter of 2024, as we are delivering on our plan to resize and reposition <unk> as a pure play dental company.
Rich: We remain committed to achieving our financial objective of 15% plus EBITDA margins, one year post spine sales.
Rich: As Beth mentioned earlier in the call. We are very pleased with the position of our balance sheet. Following the repayment of $275 million of debt on April one.
Rich: As of April 2, 2024, we had a consolidated ZimVie cash balance of approximately $66 million and a gross debt balance of approximately $234 million, yielding a net debt balance of approximately $168 million. In addition, we are maintaining our $175 million revolving credit facility, which remains undrawn.
Rich: As of April 2nd in 2024, we had a consolidated cash balance of approximately $66 million and a gross debt balance of approximately $234 million, yielding a net debt balance of approximately $168 million.
Rich: In addition, we are maintaining our $175 million revolving credit facility, which remains undrawn.
Rich: As we think about capital allocation on a go forward basis, we will continue to fund the business and our priority will be to deploy excess cash flow to further reduce debt.
Rich: As we think about capital allocation on a go-forward basis, we will continue to fund the business, and our priority will be to deploy excess cash flow to further reduce debt. That being said, we will continue to operate the business as a meritocracy, deploying resources to the highest return. Turning now toward our outlook for the full year 2020, we are expecting revenue for fiscal year 2024 to be in the range of $450 million to $460 million, reflecting an increase of 0.2% at the midpoint compared to 2023.
Rich: That being said, we will continue to operate the business as a meritocracy deploying resources to the highest return initiatives.
Rich: Turning now towards our outlook for the full year 2024.
Rich: We are expecting revenue for fiscal year 2024 to be in the range of $450 million to $460 million, reflecting an increase of 2% at the midpoint compared to 2023.
Rich: We believe the guidance appropriately accounts for the modest year over year decline, we experienced in Q1 and some ongoing softness in our end markets, particularly implants in the U S.
Rich: We believe the guidance appropriately accounts for the modest year-over-year decline we experienced in Q1 and some ongoing softness in our end markets, particularly implants in the U.S. We are confident that our differentiated product portfolio and our executional strength positions us very well for when our end markets stabilize and improve, specifically looking at the second quarter of 2024. Given current trends in the U.S. implant market, we expect our Q2 revenue to be sequentially lower by one to three percent, largely similar to the seasonal sales patterns in 2022 and 2020.
Rich: We are confident that our differentiated product portfolio and our execution strength positions us very well for when our end markets stabilize and improve.
Rich: Specifically looking at the second quarter 2024, given current trends in the U S. Implant market, we expect our Q2 revenue to be sequentially lower by 1% to 3% larger.
Rich: Largely similar to the seasonal sales patterns in 2022 and 2023.
Rich: We expect fiscal year 2024, adjusted EBITDA to be in the range of $60 million to $65 million, resulting in an adjusted EBITDA margin in the range of 13, 3% to 14, 1% of sales.
Rich: We expect fiscal year 2024 adjusted EBITDA to be in the range of $60 million to $65 million, resulting in an adjusted EBITDA margin of 13.3% to 14.1% of sales. As our guidance implies, we are pleased with our performance to date, and we expect to generate increasing adjusted EBITDA in Q2 now that we have sold the spine. As mentioned earlier, we remain committed to a 15% plus adjusted EBITDA margin by April 1st, 2024.
Rich: As our guidance implies we are pleased with our performance to date and we expect to generate increasing adjusted EBITDA in Q2 now that we have sold the spine business.
Rich: As mentioned earlier, we remain committed to a 15% plus adjusted EBITDA margin by April one 2025.
Rich: Turning to our interest expense profile.
Rich: Turning to our interest expense profile, considering our recent actions to pay down a substantial portion of our debt and the payment in kind interest we will be accruing on the seller note with HIG, we now expect 2024 interest expense to be approximately $12.5 million to $13 million, inclusive of 4.4 million dollars of interest expense for the first quarter of 2021. Share-based compensation expense is expected to be in the range of $16 million to $16.5 million for the full year.
Rich: <unk>, our recent actions to pay down a substantial portion of our debt and the payment in kind interest we will be giving us accruing.
Rich: Accruing on the seller note with HIV, we now expect 2020 for interest expense to be approximately $12 5 million to $13 million.
Rich: Inclusive of $4 4 million of interest expense for the first quarter of 2024.
Rich: Share based compensation expense is expected to be in the range of $16 million to $16 $5 million for the full year.
Rich: We expect to generate adjusted earnings per share of 55 to.
Vafa Jamali: We expect to generate adjusted earnings per share of $0.55 to $0.70 per share on a fully diluted share count of 28.5 million shares. With that, I'll now turn the call back over to Vafa. Thank you, Rich.
Vafa Jamali: To <unk> 70 per share on a fully diluted share count of 28 5 million shares.
Vafa Jamali: With that I'll now turn the call back over to backup.
Vafa Jamali: I'm excited about the prospects ahead of us, and as always, I look forward to updating you on our progress throughout the year. I'm pleased with the success we've had over the past year, and we've completely reshaped ZimVie as an organization while delivering significant shareholder value. I'm equally energized by the opportunity ahead of us as a Pure Plain Dental Company. With that, we'll open it up to questions.
Vafa Jamali: Thank you rich.
Vafa Jamali: I'm excited about the prospects ahead of us and as always I look forward to updating you on our progress throughout the year I.
Vafa Jamali: I am pleased with the success, we've had over the past year and were completely reshaped and be as an organization, while delivering significant shareholder value.
Vafa Jamali: I'm equally energized by the opportunity ahead of us as a pure play dental company with that we'll open it up to questions.
Vafa Jamali: Okay.
Operator: One moment while we compile the Q&A roster. The first question comes from the line of Matt Miksic of Barclays. Matt, please go ahead.
Speaker Change: One moment, while we compile the Q&A roster.
Operator: Yeah.
Operator: Okay.
Matthew Stephan Miksic: The first question comes from the line of Matt MC sick of Barclays. Matt. Please go ahead.
Matthew Stephan Miksic: Hey guys, thanks for taking the questions. Hey Matt. Hey Matt. So maybe, Vafa, if I could follow up on your comment about MIKS and maybe just a little more color on, you know, what the shifts in MIKS have been so far this year, as you were describing, and sort of what, you know, what kinds of catalysts or actions you can take to help sort of drive improving MIKS throughout the rest of the year. And then I had one follow-up.
Matthew Stephan Miksic: Hey, guys. Thanks for taking the questions.
Matthew Stephan Miksic: Hey, Matt Hey, Matt.
Matthew Stephan Miksic: So maybe Bob if I could follow up on your comment about mix and maybe just a little more color on.
Matthew Stephan Miksic: What the shifts in mix have been so far this year and as you were describing and sort of what.
Matthew Stephan Miksic: What kinds of catalysts are.
Matthew Stephan Miksic: Actions you can take to help sort of drive improving mix throughout the rest of the year and then a follow up.
Vafa Jamali: Sure. So we are seeing mixed mix have an impact on our system is both geographical and the portfolio I think this is where we're feeling at the most.
Vafa Jamali: Sure. So we are seeing Mix have an impact on us. It's both geographical and the portfolio, I think, is where we're feeling it the most. Rich, perhaps you could give us a little bit of color on where we're seeing this specifically? Yeah. Hey, Matt.
Vafa Jamali: Rich, perhaps you could give us a little bit of color on on where we're seeing the specifically, yes, hey, Matt or a revenue story for Q1 actually boils down to two items.
Rich: Our revenue story for Q1 actually boils down to two items, the first one of which is that we're experiencing pressure on the capital sales side. And so, you know, the ITERO that we distribute, right, which is lower margin for us, was lower in the quarter versus prior. The other area is around implants, but specifically around the U.S. We're seeing, you know, a continued challenge market in U.S. implants, but we're seeing strength across the rest of the portfolio, including, you know, in biomaterials and digital.
Rich: First one of which is.
Rich: We experienced some pressure on the capital sales side.
Rich: And so the idea that we distribute rate, which was lower margin for us was lower.
Rich: In the quarter versus prior year.
Rich: The other area is around implants, but specifically around the U S and so we're seeing continued challenging market in U S implants, but we're seeing strength across the rest of the portfolio, including <unk> and biomaterials and digital and we are.
Rich: We're also as you as you noticed from the press release, we're also seeing strength or U S. I mean, our European organization.
Rich: And we're also, you know, as you noticed from the press release, we're also seeing strength in the U.S. I mean, our European organization grew over 4% in the quarter, for example, inclusive of that, you know, 1% plus constant currency growth for the quarter, but it largely boils down to arterial sales in U.S. implants. You know, Matt, also, pricing has actually been pretty stable for us. So unlike what we've heard from others, pricing is relatively stable; we're down about 1%, which is, I think, different from what we've been reading.
Rich: We were over 4%.
Rich: In the quarter for example, inclusive of that 1% plus constant currency growth for the quarter, but both largely boils down to.
Rich: <unk> sales in U S implants.
Rich: With that Matt also pricing has been actually pretty stable for us so unlike what we've heard from others.
Rich: Pricing has been relatively stable down about 1%.
Rich: Which is.
Rich: Different from what we've been reading.
Matthew Stephan Miksic: That's great. And then on, you know, the path to 15% EBITDA, which you're talking about now, I guess, as of, you know, by April 1st, is that, am I right to read that as, you know, the first quarter next year, you know, that's what we should expect you to be printing or, you know, again, just understanding the timing of your, the full year next year, what to think
Rich: That's great and then on the path too.
Matthew Stephan Miksic: 15% EBITDA, you're talking about now I guess.
Matthew Stephan Miksic: By April 1st of that.
Matthew Stephan Miksic: And a right to read that as first quarter next year.
Matthew Stephan Miksic: What we should expect you to be printing or.
Matthew Stephan Miksic: Again, just understanding the timing of your car.
Matthew Stephan Miksic: Full year next year.
Speaker Change: Correct, we're seeing at at the end of <unk>.
Matthew Stephan Miksic: That period, we will be at 15% and like always we'll be we'll be doing everything we can to kind of get to that quicker.
Matthew Stephan Miksic: And two to.
Matthew Stephan Miksic: To continue to make improvements to it.
Matthew Stephan Miksic: Okay, and some of the things you just mentioned, Miks, obviously, you know, having an impact this year, I'm sure as you as you as you map out that path.
Matthew Stephan Miksic: Okay and some of the things you just mentioned mix obviously.
Matthew Stephan Miksic: Having an impact.
Matthew Stephan Miksic: This year I'm sure.
Matthew Stephan Miksic: <unk>.
Matthew Stephan Miksic: That path to 15%.
Matthew Stephan Miksic: Maybe if you could talk a little bit more detail about sort of operationally either internally or.
Matthew Stephan Miksic: you know, execution, commercially, that
Matthew Stephan Miksic: <unk> commercially that do you think.
Matthew Stephan Miksic: We will be the sort of like the key drivers of helping to get there on time or faster.
Matthew Stephan Miksic: Right. So if you look at if you break down our costs largely we had a corporate infrastructure that was bigger imagine we were running it is.
Vafa Jamali: Right. So if you look at, if you break down our costs, I mean, largely, we have a corporate infrastructure that was bigger. Imagine we were running it, ZimVie more like a holding company with a couple of divisions where we had to have a central group and then we're really collapsing that. So there's an element of cost there. We've taken a large portion of that already out. And then the next pieces that you'll look at are legal costs and IT costs, which are probably the next two biggest buckets. And we are taking those ones out.
Vafa Jamali: We're going to be more like a holding company with a couple of divisions, where we had to have a central group and then we'll really collapsing that so there is an element of cost them.
Vafa Jamali: We've taken a large portion of that already out.
Vafa Jamali: And then the next pieces that you'll look at our legal costs and it costs as you are probably in the next two biggest buckets.
Vafa Jamali: So those are mostly fees paid, services purchased from, for example, IT. It's basically subscription services and licenses that we will renew at a much lower rate. And we've got a plan for those basically laid out where we know exactly when the price when the cost will come out. And then on top of that, we do also have transition service agreements, which are also funded by HIG's acquisition of Spine, which also helped kind of buffer some of that. Rich, anything else that I missed on that one?
Rich: And we are taking those ones out so those are mostly fees paid.
Vafa Jamali: Services purchased from for example, it is basically subscription services and licenses that we will renew at a much lower rate and.
Rich: And we've got a plan on those basically laid out where we know exactly when the price when the cost will come out.
Rich: And then on top of that we do also have transition service agreements, which which.
Rich: Which are also funded by Aig's acquisition of spine, which also help kind of buffer some of that as well.
Rich: Rich anything I missed.
Rich: Yeah, just quickly to your commercial execution comment, right? I mean, even though there's some macro challenges that I think, you know, are pretty well known within the Dell market. But I think, you know, from a commercial perspective and commercial execution perspective, one of the things that we're finding is that the strength of parts of our products, like, in particular, around digital, are really sticky with our customers. And so we don't really talk about it too often, but on a same-store sales basis, we're just seeing a decline in same-store sales, but we're not necessarily seeing customers leave the organization.
Rich: Just quickly to your to your commercial execution comment right I mean, even though theres. Some theres some macro challenges that I think.
Rich: Pretty well known within the dental market, but I think from a commercial perspective and commercial execution perspective, one of the things that we're finding is the strength of the parts of our products like in particular around digital are really sticky.
Rich: With our customers and so.
Rich: We don't really talk about it too often but unlike our same store sales basis.
Rich: We're just seeing a decline in same store sales, but we're not necessarily seeing customers like like leave the organization and so.
Rich: And so the industry is talking about stabilizing toward the back part of the year, and so we feel as though our commercial execution and the strength of our portfolio are going to position us really well for the back.
Rich: The industry is talking about.
Rich: Stabilizing towards towards the back part of the year and so we feel as though our commercial execution and the strength of our portfolio is going to position us really well for the back half.
Matthew Stephan Miksic: Okay, so some rationalizations, some kind of internal cost programs, and maybe it sounds like it's fair to characterize the digital revenue lines as a bit more subscription and less sort of episodic procedure, you know, at the whim of the puts and takes of procedure flows, so maybe just a little softer, and then we might see in sort of maybe implants. Is that... fairway?
Rich: Okay. So some some rationalization some kind of internal cost programs and.
Matthew Stephan Miksic: Maybe it sounds like is it fair to characterize the digital revenue lines is a bit more subscription and less sort of episodic procedure.
Matthew Stephan Miksic: At the window.
Matthew Stephan Miksic: Jakes of procedure flows so maybe just a little softer.
Speaker Change: I see.
Matthew Stephan Miksic: So maybe implants is that fair.
Vafa Jamali: Yeah, undoubtedly, if procedures slow down, those, you know, purchases will be somewhat reduced, but we're seeing, you know, close to 50% growth in the guided surgery line. And that's, you know, no capital allocation for the customer; they're buying as they go. So we're seeing great, great adoption there, and we're getting a very, very high renewal rate for that subscription. So we think that all of the elements point to a pretty good recovery for us.
Matthew Stephan Miksic: Okay.
Speaker Change: Yes undoubtedly.
Vafa Jamali: Procedure slowdown.
Vafa Jamali: <unk>.
Vafa Jamali: Purchases will be somewhat reduced but we are seeing.
Vafa Jamali: Close to 50% growth of the guided surgery line and Thats.
Vafa Jamali: No capital allocation for the customer they are buying as they go so we're seeing great great adoption, there and we're getting a very very high renewal rate for that subscription. So we think that all of the elements point to a pretty good recovery for us once the once the end market returns I think we're going to have more customers.
Vafa Jamali: Once the end market returns, I think we're gonna have more customers. And like I said, we're pulling through on that. So I'm feeling pretty confident that we've got the right portfolio. Great. Thanks so much for the call.
Vafa Jamali: And like I said, we're pulling through our implants on that so I'm feeling pretty confident that we've got the right portfolio.
Speaker Change: Great. Thanks, so much for the color.
Speaker Change: Thanks, Matt.
Vafa Jamali: Thanks Matt. Talk to you soon.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you. David Saxon, Robert Marcus, Marissa Bych, Richard Heppenstall, Vafa Jamali, ZimVie
Speaker Change: Thank you.
Operator: Okay.
Operator: Yes.
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