Q2 2024 ZimVie Inc Earnings Call

August 1, 2024

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Speaker Change: Good afternoon and welcome to ZimVie's second quarter 2024 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.

Speaker Change: 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 from Gilmartin Group for introductory disclosures.

Operator: I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosures. Thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter ended June 30, 2024.

Marissa Bych: Thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter ended June 30, 2024. A copy of the press release is available on the company's website, zimvie.com, as well as on sec.gov.

Marissa Bych: 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 statements due to a variety of risks and uncertainties. Please refer to the company's most recent periodic report filed with the SEC and subsequent SEC filings for a detailed discussion of these risks and uncertainties.

Speaker Change: Before we begin, I'd like to remind you that management will make comments during this call that include forward-looking statements.

Speaker Change: Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please refer to the company's most recent periodic report filed with the SEC and subsequent SEC filings for a detailed discussion of these risks and uncertainties.

Marissa Bych: In addition, the discussion on this call will include certain non-GAAP financial measures. Reconciliations with these measures, the most directly comparable GAAP financial measures, are included within the earnings release and or the investor deck issued today found on the investor relations section of the company's website.

Speaker Change: 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 or the investor deck issued today found on the investor relations section of the company's website.

Operator: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 1, 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. And with that, I will turn the call over to Vafa Jamali, President and Chief Executive Officer of ZimVie.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 1, 2024.

Zimbidas: 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.

Zimbidas: And with that, I will turn the call over to Vafa Jamali, President and Chief Executive Officer of ZimVie. Thank you, Marissa. Good afternoon and thank you all for joining us.

Vafa Jamali: Good afternoon, and thank you all for joining us. I'm pleased with our execution of the second quarter, achieving revenue of $117 million as we continue to innovate across our portfolio of implants, biomaterials, and digital solutions. We have also advanced our efforts to improve the margin profile of our business, right-size corporate costs, and optimize our operations. Meanwhile, we continue to invest in and scale our differentiated solutions to give our patients and providers the best possible outcomes. I'll now provide an update on each of our product portfolios, starting with the Dental Implant Portfolio. We see strong commercial traction with our newest line of implants, the TSX and the T3PRO.

Vafa Jamali: I'm pleased with our execution in the second quarter, achieving revenue of $117 million as we continue to innovate across our portfolio of implants, biomaterials, and digital solutions.

Vafa Jamali: We have also advanced our efforts to improve the margin profile of our business, right-size corporate costs, and optimize our operational footprint.

Vafa Jamali: Meanwhile, we continue to invest and scale our differentiated solutions to give our patients and providers the best possible outcomes.

Vafa Jamali: I'll now provide an update on each of our product portfolios. Starting with dental implant portfolio, we see strong commercial traction with our newest line of implants, the TSX and the T3 Pro. We believe that we continue to gain market share as we strive to expand the implant dentistry market.

Vafa Jamali: We believe that we continue to gain market share as we strive to expand the in-plant dentistry market. During the quarter, we launched a series of meaningful innovations to our implant offerings to strengthen our already comprehensive portfolio of surgical tools, abutments, and restorative components. Last week, we announced the FDA clearance of the U.S. launch of GenTech restorative components, expanding ZimVie's portfolio of end-to-end prosthetic offers. We first launched the Gentech portfolio in Europe in 2019, and have seen tremendous success in that market today.

Vafa Jamali: During the quarter, we launch a series of meaningful innovations to our implant offerings to strengthen our already comprehensive portfolio of surgical tools, abutments, and restorative components.

Vafa Jamali: Last week, we announced the FDA clearance of the U.S. launch of GenTech Restorative Components, expanding ZimVie's portfolio of end-to-end prosthetic offerings.

Vafa Jamali: We first launched the GenTech portfolio in Europe in 2019 and have seen tremendous success in that market to date.

Vafa Jamali: These components support digitally-driven CAD-CAM restorations and are designed to provide the best fit and a tight seal, crucial to implant success, supporting the long-term aesthetic and functional restoration. The introduction of Gentek to the U.S. market brings a broad offering of differentiated restorative components to the ZimVie product family. We like this segment, and we look forward to competing here. As of July, we have gained510 clearance for an expanded portfolio of titanium bars for our Belotech abutments, growing its selection to include the most widely adopted, full-arch restorative platforms to support some of our most complex procedures.

Speaker Change: The introduction of Gentech to the U.S. market brings a broad offering of differentiated restorative components to the ZimVie product family. We like this segment and we look forward to competing here.

Speaker Change: As of July , we have gained 510 clearance for an expanded portfolio of titanium bars for our Belotech abutments, growing its selection to include the most widely adopted full-arch restorative platforms to support some of our most complex procedures.

Vafa Jamali: We will continue to deliver innovation across our implant portfolio in support of gaining competitive market share while simultaneously driving the expansion of the implant industry market as a whole. Now, turning to our best-in-class biomaterials portfolio. During the quarter, we experienced modest growth in our biomaterials offerings. Providers are recognizing the quality and efficacy of our portfolio of bone graft substitutes, membranes, tissue products, and regenerative products.

Speaker Change: We will continue to deliver innovation across our implant portfolio in support of gaining competitive market share while simultaneously driving the expansion of the implant industry market as a whole.

Speaker Change: Now turning to our best-in-class biomaterials portfolio. During the quarter we drove modest growth in biomaterials offerings. Providers are recognizing the quality and efficacy of our portfolio bone graft substitutes, membranes, tissue products, and regenerative products.

Vafa Jamali: In this segment, our growth continues to outpace market growth. We believe this may serve as a future leading indicator for growth in our implant office. We look forward to continuing to innovate within this portfolio throughout the back half of 2024 and beyond. Finally, we saw strong growth in our digital portfolio, which aims to provide customers with greater efficiency in their workflow. Our complete digital portfolio, including ITERO scanner sales, grew high single digits in the second quarter as a result of our commitment to driving penetration by making implants more accessible and efficient procedures for providers.

Speaker Change: In this segment, our growth continues to outpace market growth.

Speaker Change: We believe this may serve as a future leading indicator for growth in our implant offerings.

Speaker Change: We look forward to continue to innovate within this portfolio throughout the back half of 2024 and beyond.

Speaker Change: Finally, we saw strong growth in our digital portfolio, which aims to provide customers with greater efficiency in their workflow.

Speaker Change: Our complete digital portfolio, including iTero scanner sales, grew high single digits in the second quarter as a result of our commitment to driving penetration by making implants more accessible and efficient procedure for providers.

Vafa Jamali: The increase was driven in part by over 20% growth in our implant concierge service. In-flight concierge removes hours of labor and cost by providing outsourced treatment planning, services, and guided surgery solutions, taking significant workload out of the dental office.

Speaker Change: The increase was driven in part by over 20% growth in our implant concierge service.

Speaker Change: Implant Concierge removes hours of labor and cost by providing outsourced treatment planning, services, and guided surgery solutions, taking significant workflow out of the dental office.

Vafa Jamali: We believe this service represents a large unmet need where the size of the market for implant concierge could be equivalent to that of the premium implant market. Additionally, we drove over 20% growth in surgical guide sales with our RealGuide software. On this note, we recently announced the release of version 5.4 of our RealGuide software. The most significant enhancement in this version is one-click nerve detection and automated bone and tooth segmentation.

Speaker Change: We believe this service represents a large unmet need where the size of the market for implant concierge could be equivalent to that of the premium implant market.

Speaker Change: Additionally, we drove over 20% growth in surgical guide sales with RealGuide software.

Vafa Jamali: These features greatly increase safety and accuracy in less time. 5.4 also introduces new cloud library updates and efficiency tools to streamline the customer's design experience. All of these features are aimed to enhance our ability to deliver quality, efficiency, and time savings in treatment planning and assortive design for both patients and clinicians. I'm also very excited to announce our newest scanner partnership with Medit. We are now distributing this powerful imaging solution alongside our existing suite of technologies, expanding our addressable market with a broader range of scanner price points and technology. Embedded scanners include iOS-driven apps and integration opportunities that help us create a seamless experience with the rest of ZimVie's digital solutions.

Speaker Change: On this note, we recently announced the release of version 5.4 of our RealGuide software. The most significant enhancement of this version is a one-click nerve detection and automated bone and tooth segmentation.

Speaker Change: These features greatly increase safety and accuracy in less time.

Speaker Change: 5.4 also introduces a new cloud library updates and efficiency tools to streamline the customer's design experience.

Speaker Change: All of these features are aimed to enhance our ability to deliver quality, efficiency, and time savings in treatment planning and assortive design for both patient and the clinician.

Speaker Change: I'm also very excited to announce our newest scanner partnership with Medit. We are now distributing this powerful imaging solution alongside our existing suite of technologies, expanding our addressable market with a broader range of scanner price points and technologies.

Speaker Change: The meta-scanners include iOS-driven apps and integration opportunities that help us create a seamless experience with the rest of ZimVie's digital solution suite.

Vafa Jamali: We expect these features to enhance the adoption of downstream products based on digital imaging. We remain very excited about the growth potential of our digital solutions and believe they are a critical piece of the strategy to improve the workflow of dental offices and ultimately reduce barriers to implant adoption. Beyond product introductions and innovations, medical education and training are greatly aiding in the adoption of our technologies. To date, we've trained over 1,400 providers on our products and technologies.

Speaker Change: We expect these features to enhance the adoption of downstream products based on digital imaging.

Speaker Change: We remain very excited about the growth of our digital solutions and believe there is a there are a critical piece of the strategy to improve the workflow of dental offices and ultimately reduce barriers to implant adoption.

Speaker Change: Beyond product introductions and innovations, medical education and training are greatly aiding in the adoption of our technologies.

Speaker Change: Today, we have trained over 1,400 providers on our products and technologies. Our programs are booked out through December 2025 as we continue our focus on expanding our presence in the market and in the field of implant dentistry as a whole.

Vafa Jamali: Our programs are booked out through December 2025 as we continue our focus on expanding our presence in the market and in the field of the implant industry as a whole. Our commercial advantage continues to stem from the value we deliver across our stakeholders, patients, clinicians, and the dental lab. Our second quarter results reflect the resilience of our portfolio and our team's continued commitment. I will now turn the line over to Rich to review our financial performance and forward outlook in greater detail. Thanks, Vafa, and good afternoon, everyone.

Speaker Change: Our commercial advantage continues to stem from the value we deliver across our stakeholders, patients, clinicians, and the dental lab.

Speaker Change: Our second quarter results reflect the resilience of our portfolio and our team's continued commitment.

Speaker Change: I will now turn the line over to Rich to review our financial performance and Forward Outlook in greater detail.

Rich: Thanks, Vafa, and good afternoon, everyone. I'll begin by reviewing our second quarter 2024 results for continuing operations, and we'll close by providing commentary on our outlook for the full year 2024.

Rich: I'll begin by reviewing our second quarter 2024 results for continuing operations, 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. That's our spine segment is reflected in discontinued operations in our financial results. Please refer to our 10-Q for financial results from discontinued operations. Beginning with fail.

Rich: 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 financial statements.

Speaker Change: Please refer to our 10-Q for financial results from discontinued operations.

Rich: Total third-party net sales for the second quarter of 2024 were $116.8 million, a decrease of 1.5% in reported rates, and a very modest decline of 0.4% in cost incurred. In the U.S., third-party net sales for the second quarter of 2024 of $69.3 million increased by 0.1%. Over the past couple of quarters, we have seen pressure on capital sales, which for us is the sale of oral scans. We continue to see that trend in the second quarter.

Speaker Change: Beginning with sales.

Speaker Change: Total third-party net sales for the second quarter of 2024 were $116.8 million, a decrease of 1.5% in reported rates, and a very modest decline of 0.4% in constant currency.

Speaker Change: In the U.S., third-party net sales for the second quarter of 2024 of $69.3 million increased by 0.1 percent.

Speaker Change: Over the past couple of quarters, we have seen pressure on capital sales, which for us is the sale of oral scanners.

Speaker Change: We continue to see that trend in the second quarter. When excluding that impact, U.S. sales grew by 0.8 percent, driven by strength in digital solutions and biomaterials, partially offset by weaker U.S. implant sales.

Rich: When excluding that impact, U.S. sales grew by 0.8 percent, driven by strength in digital solutions and biomaterials partially offset by weaker U.S. implants. Outside of the U.S., third-party net sales of $47.5 million decreased 3.8% on a reported basis and 1.2% in constant current. We have seen stability in the U.S. dental market over recent quarters, and our competitive position remains strong in the core markets we serve. However, when we exclude the impact of capital sales outside of the U.S., the business was flat in constant currency terms.

Speaker Change: Outside of the U.S., third-party net sales of $47.5 million decreased 3.8% on a reported basis and 1.2% in constant currency.

Speaker Change: We have seen stability in the U.S. dental market over recent quarters on our competitive position remains strong in the core markets we serve. When we exclude the impact of capital sales outside of the U.S., the business was flat in constant currency terms.

Rich: Second quarter 2024 adjusted cost of products sold was 37.0%, roughly flat to 37.2% of sales in the prior year period. 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. Q2 2024 adjusted research and development expense of $6.3 million, or 5.4% of sales compared to $5.6 million, or 4.8% of sales in the prior year. Q2 2024 adjusted general and administrative expense of $62.4 million compared to $61.9 million in the prior year.

Speaker Change: Second quarter 2024 adjusted cost of products sold was 37.0%, roughly flat to 37.2% of sales in the prior year period.

Speaker Change: 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.

Speaker Change: Q2 2024 adjusted research and development expense of $6.3 million or 5.4% of sales compared to $5.6 million or 4.8% of sales in the prior year.

Speaker Change: Q2 2024 adjusted sales general and administrative expense of 62.4 million dollars compared to 61.9 million dollars in the prior year.

Rich: Other income in Q2-24 of $3 million reflects income from transition services agreements resulting from the sale of our spine business and offsets stranded costs that remain in SG&A expense. Adjusted EBITDA attributable to continuing operations in the second quarter of 2024 was $16.1 million, or a 13.8% margin. Q2 2024 Adjusted Earnings Per Share Attributable to Continuing Operations was $0.13 per share on a fully diluted share count of 27.4 million shares. Adjusted earnings per share in the quarter were largely impacted by the timing of share-based compensation expensed in the quarter.

Speaker Change: Other income in Q224 of three million dollars reflects income from transition services agreements resulting from the sale of our spine business and offsets stranded costs that remain in SG&A expense.

Speaker Change: Adjusted EBITDA attributable to continuing operations in the second quarter of 2024 was $16.1 million or a 13.8% margin.

Speaker Change: Q2 2024 Adjusted Earnings Per Share Attributable to Continuing Operations was $0.13 per share on a fully diluted share count of 27.4 million shares.

Speaker Change: Adjusted earnings per share in the quarter was largely impacted by the timing of share-based compensation expensed in the quarter.

Rich: Future share-based compensation was $5.7 million, and we expect our full year share-based compensation expense to range between $17 million and $17.5 million. We remain on track to deliver on our adjusted EPS guidance for the year. We are pleased with the financial performance in the second quarter of 2024 as we continue to deliver on our plan to make strides in ZimVie as a pure play dental company. We remain committed to achieving our financial objective of 15% plus EBITDA margins one year post-fine sale.

Speaker Change: Future share based compensation was $5.7 million and we expect our full year share based compensation expense to range between $17 million and $17.5 million. We remain on track to deliver on our adjusted EPS guidance for the year.

Speaker Change: We are pleased with the financial performance in the second quarter of 2024 as we continue to deliver on our plan to make strides to position ZimVie as a pure play dental company.

Speaker Change: We remain committed to achieving our financial objective of 15% plus EBITDA margins one year post-spine sale.

Rich: Quickly turning to the balance sheet, as of the end of the second quarter 2024, consolidated ZimVie continuing operations cash was $78.6 million, and gross debt was approximately $235 million, yielding a net debt balance of approximately $156 million. Note that our net debt balance does not include the seller note from the sale of the spine. In addition, we continue to maintain our $175 million Revolving Credit Facility, which remains undrawn.

Speaker Change: Quickly turning to the balance sheet.

Speaker Change: As of the end of the second quarter 2024, consolidated ZimVie continuing operations cash was $78.6 million and gross debt was approximately $235 million.

Speaker Change: yielding a net debt balance of approximately $156 million. Note, our net debt balance does not include the seller note from the sale of the spine business.

Speaker Change: In addition, we continue to maintain our $175 million revolving credit facility, which remains undrawn.

Rich: Turning toward our outlook for the full year 2024, we are reaffirming our full-year revenue guidance of $450 million to $460 million, reflecting an increase of 0.2% at the midpoint compared to 2023, specifically looking at the third quarter of 2024. Our third quarter is historically the slowest of the year due to seasonal impacts of the summer months.

Speaker Change: Turning toward our outlook for the full year 2024, we are reaffirming our full year revenue guidance of 450 million dollars to 460 million dollars, reflecting an increase of 0.2 percent at the midpoint compared to 2023.

Speaker Change: Specifically looking at the third quarter 2024. Our third quarter is historically the slowest of the year due to seasonal impacts of the summer months.

Rich: We expect our third-quarter revenue to be sequentially lower versus Q2 and lower on a year-over-year basis by 3 to 4%. This trend is largely similar to the seasonal sales patterns we saw in 2022 and 2022. In conjunction with our seasonally lower revenue in the third quarter, we expect an adjusted EBITDA margin of approximately 12 percent.

Speaker Change: We expect our third quarter revenue to be sequentially lower versus Q2 and lower on a year-over-year basis by 3-4%. This trend is largely similar to the seasonal sales patterns we saw in 2022 and 2023.

Speaker Change: In conjunction with our seasonally lower revenue in the third quarter, we expect an adjusted EBITDA margin of approximately 12%.

Rich: We continue to 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 mentioned before, we remain committed to our 15% plus adjusted EBITDA margin by April 1st, 2025. Turning to our interest expense profile, considering our recent action to pay down a substantial portion of our debt and the payment in kind interest we began accruing on the seller note resulting from the sale of Spine, we now expect 2024 interest expense to be approximately $13 million, inclusive of the $3.1 million of interest expense in the second quarter of 2024. We expect share base compensation expense to be in the range of $17 million to $17.5 million for the full year.

Speaker Change: We continue to 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.

Speaker Change: As mentioned before, we remain committed to our 15% plus adjusted EBITDA margin by April 1st, 2025.

Speaker Change: Turning to our interest expense profile, considering our recent action to pay down a substantial portion of our debt and the payment in kind interest we began accruing on the seller note resulting from the sale of spine,

Speaker Change: We now expect 2024 interest expense to be approximately $13 million, inclusive of the $3.1 million of interest expense in the second quarter of 2024.

Speaker Change: We expect share base compensation expense to be in the range of $17 million to $17.5 million for the full year.

Vafa Jamali: And lastly, we are pleased to reaffirm our JustDPS guidance. Specifically, we expect to generate adjusted earnings per share of $0.55 to $0.70 per share on a fully diluted share count of 27.6 million shares for the year. With that, I'll now turn the call back over to Vafa. Thank you, Rich.

Speaker Change: And lastly, we are pleased to reaffirm our JustDPS guidance.

Speaker Change: Specifically, we expect to generate adjusted earnings per share of 55 cents to 70 cents per share on a fully diluted share count of 27.6 million shares for the year.

Speaker Change: With that, I'll now turn the call back over to Vafa.

Vafa Jamali: I'm very proud of our team's execution in the first half of 2024 and believe that we have a great opportunity ahead of us. 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.

Vafa Jamali: Thank you, Rich. I'm very proud of our team's execution in the first half of 2024 and believe that we have a great opportunity ahead of us.

Speaker Change: With that, we'll open it up to questions.

Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 1 1 on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster

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 Saxton with Needham and Company. Your line is now open.

Speaker Change: Our first question comes from the line of David Saxton with Needham and Company. Your line is now open.

David Saxon: Oh, great. Good afternoon, Vafa and Rich. Thanks so much for taking my questions. Maybe I'll start with a higher level philosophical question just about your positioning within dental. So, I mean, you have a very focused portfolio relative to competitors. So, when you think about kind of reaching your desired scale, is it continuing to build out this implant portfolio with digital capabilities organically? Are there certain product categories that, if wrapped around your portfolio, would be complementary? Great question, David.

David Saxton: Oh, great. Good afternoon, Vafa and Rich. Thanks so much for taking my questions.

David Saxton: Maybe I'll start with a higher level philosophical question just about your positioning within dental. So, I mean, you have a very focused portfolio relative to competitors. So when you think about kind of reaching your desired scale, is that continuing to build out this implants portfolio with digital capabilities organically, or are there certain product categories that kind of if wrapped around your portfolio would be complimentary?

Vafa Jamali: Just on that one. Yeah, I think right now what we've done so far, especially post, the sales spine is really, really focused on how unique our assets are and where we're unique, and that puts us squarely in the premium dental implant market. And what we've been able to do, which is, again, a bit more unique, is really have excellent gross profit margins, and we've been able to hold prices really well.

David Saxton: Great question, David. Just on that one, yeah, I think right now what we've done so far is especially post-COVID,

David Saxton: the sales spine is really focused on how unique our assets are and where we're unique and that puts us square in the premium dental implant market. What we've been able to do, which is again a bit more unique, is really we have excellent gross profit margins and we've been able to hold price really well.

Vafa Jamali: What's working well in conjunction with this is a rapidly growing and highly differentiated digital offering, which we believe can give us a unique position to expand the market. I also mentioned I think implant concierge can be a significant contributor. So we're, as we're adding things like GenTech, which is a restorative, and we're adding more power behind implant concierge.

David Saxton: What's working well in conjunction with this is a rapidly growing and highly differentiated digital offering.

David Saxton: which we believe can give us a unique position to expand the market.

Speaker Change: I also mentioned I think implant concierge can can be a significant contributor so we're as we're adding you know things like gen tech which is the restorative and we're adding more power behind implant concierge

Vafa Jamali: We think that we can expand this market. I think selectively, we may look at other markets that are interesting, maybe pressured a little bit for price. One of the areas that I like is the full-arch segment, which may require us to have a slightly different implant but add a lot of technology to it so that we make the same advances we made with implants here but make it in that group.

David Saxton: We think that we can expand this market. I think selectively, we may look at other markets that are interesting, maybe pressured a little bit for price. One of the areas that I like

Speaker Change: is the Full Art segment, which may require us to have a slightly different implant, but add a lot of technology to it so that we make...

Speaker Change: The same advances we made with with implants here, but make it in that group. We've got some some work that we're doing there So I think you can look at us to segment by procedure by procedure go after the markets that we think are

Vafa Jamali: We've got some work that we're doing there, so I think you can look at us procedure by procedure and go after the markets that we think are somehow either underserved or could use some tech to really accelerate them. So those are the key areas. We're happy with the announcement about the addition of the MED-IT scanner. I think that gives us a better margin profile to compete there, and gives us a different price point to compete alongside the [inaudible]. Thank you, and have a good night. Okay, thanks. You can see a little bit more of where I'm going. Okay, great. Thanks so much. You broke up a little, so hopefully, you can hear me.

Speaker Change: somehow either underserved or could use some tech.

Speaker Change: to really accelerate them. So those are the key areas. We're happy with the announcement for the addition of the MED-IT scanner. I think that gives us a better margin profile to compete there, gives us a different price point to compete alongside the...

Speaker Change: D. L. R. T. P. T. N. D. S. T. R. E. D. R. I. N. O. P. R. I. N. T. O. P.

Speaker Change: [inaudible]

Speaker Change: I hope that helps you get a little bit more color on what I'm working on.

Speaker Change: Okay, great. Thanks so much. You broke up a little, so hopefully you can hear me. But just maybe my next question on ITERO. So the Lumina's restorative launch was delayed about a quarter or so. Did that have any impact on how you're thinking about 2024 at all? If so, you know, what made up that Delta? And then can you talk about

David Saxon: But maybe my next question on ITERO. So the Lumina restorative launch was delayed by about a quarter. So did that have any impact on how you're thinking about 2024 at all? If so, you know, what made up that delta?

David Saxon: And then can you talk about the MED-IT partnership? I mean, is that going to be maybe more of a value offering? And how has that kind of helped your strategy? Okay, so I'm sorry if I broke up there. If you look at the digital offering and you look at the scanners, without the scanners, it's a worse profile. So equipment hasn't been great.

Speaker Change: The MED-IT partnership, I mean, is that going to be maybe more of a value offering and and how's that kind of help your strategy?

Speaker Change: Okay, so I'm sorry if I broke up there.

Speaker Change: If you look at the digital offering and you look at the scanners, without the scanners our business did pretty well. Without the scanners, year over year, it's a worse profile. So equipment hasn't been great this year.

Vafa Jamali: And maybe some of it is because of the Illumina that is to come sometime next. So all of our myths in digital are from missing scanners. So we do think that that is an issue that'll resolve itself when the new product comes out. But in the interim, we've got this new relationship with MEDIC, and we actually don't believe that we're sacrificing our technology. It's quite a rich offering, but it does have different positions.

Speaker Change: and maybe some of it is because of the Illumina that is due to come sometime next year. So all of our myths in digital is from missing scanner sales.

Speaker Change: So we do think that that is an issue that will resolve itself when the new product comes out, but in the interim...

Speaker Change: We've got this new relationship with MEDET, which we actually don't believe that we're sacrificing on technology. It's quite a rich offering, but it does have different positions.

Vafa Jamali: It does have different outlines in terms of future tip-offs. I think it's quite well-equipped, so it'll satisfy what we need to do in terms of advancing customers to a digital platform, which, as we've mentioned before, rapidly accelerates the number of implants used and, frankly, the quality of the implant that comes out of it. The more digital...

Speaker Change: lines in terms of features and functions, but it's quite well equipped so it'll satisfy what we need to do in terms of advancing customers to a digital platform which as we've mentioned before rapidly accelerates the number of implants used.

Speaker Change: and frankly the quality of the implant that comes out of it, because the more digital they are. So that is where we're at. I think you didn't ask for your financial details on that, did you?

Vafa Jamali: So that is where we're at. I think you didn't ask me for financial details on that, did you? All right, I mean, if you want to share them, go for it. Rich, any color you want to add to this?

Speaker Change: I mean, if you want to share them, go for it.

Rich: Yeah, yeah, so contemplated in our guide, David, is the lower equipment sales. And as Vafa mentioned, right, the delay of Lumina, you know, we kind of already had that kind of baked in our numbers, and so it's already contemplated in the full-year guide. You know, and one of the prepared remarks that we made relative to iTero capital sales for us in the U.S., when you exclude the year-over-year impact of iTero in the U.S., the U.S. business actually grew by 80 basis points for us.

Speaker Change: Rich, any color you'd want to add on this? Yeah, yeah, so in it contemplated in our guide, David, is the lower equipment sales.

Rich: And as Vafa mentioned, right, the delay of Illumina, you know, we kind of already had that kind of baked in our numbers and so it's already contemplated in the full year guide.

Speaker Change: You know, and one of the prepared remarks that we made relative to ITERO capital sales for us in the U.S. was when you exclude actually the year-over-year impact of ITERO in the U.S., the U.S. business actually grew by 80 basis points.

Rich: So, you know, it's something that we've been watching for quite a while. The U.S. market, as you know, has been pressured, and so we're really pleased with our performance in the second quarter, particularly in the U.S. Okay, um, that, uh, kind of... David Saxon, Robert Marcus, Marissa Bych, Richard Heppenstall, Vafa Jamali, ZimVie, causing this decline or is it conservatism? I mean, and then also, what is guidance assumed in terms of patient demand and traffic?

Speaker Change: for us. So, you know, it's something that we've been watching quite a while. The U.S. market, as you know, has been pressured, and so we're really pleased with our performance in the second quarter, particularly in the U.S.

Speaker Change: Okay, that kind of...

Speaker Change: gets into my next question, if I could. So.

Speaker Change: You know, third quarter down, I think it was three to four percent year over year. I mean, I guess, you know, last year, that should theoretically kind of already bake in the season knowledge. So, I mean, are you seeing anything in the market that's kind of.

Speaker Change: you know, causing

Speaker Change: this decline, or is it conservatism? I mean, and then also...

Speaker Change: What does guidance assume in terms of patient demand and traffic? Is it more stability or do things get worse? Or is there even a recovery in the back half? And then I'll just have one more slide for all the questions.

Rich: Is it more stability or, you know, do things get worse, or is there even a recovery in the back half? And then I'll just have one more say on all the questions. Richard, do you want to take that one?

Rich: Yeah, sure. Thanks, Vafa. Yeah, so our Q3, David, even though we're pleased with our performance in the second quarter, the market and the space, in general, are not well on the road to recovery based on what we're hearing in the market. And so what we classify as performance and good performance in the second quarter is largely related to, I think, the differentiation of our portfolio, as Vafa alluded to earlier in the call, and also execution.

Speaker Change: Where do you want to take that one?

Speaker Change: Yeah, sure. Thanks, Vafa. Yeah, so the so our Q3 you know, David, right, even though we're pleased with our performance in in the second quarter

David Saxton: Right, you know the the market and in the space in general right is is not

Speaker Change: is not, you know, is not well on the road to recovery, right, based on, you know, kind of what we're hearing in the market, right. And so

Speaker Change: Our, you know, what we classify as performance and good performance in second quarter is largely related to, I think, you know, the differentiation of our portfolio, you know, as Vafa kind of alluded to earlier on in the call, and then also execution, right? So, you know, we're being prudent about Q3 because the market, you know, the underlying.

Rich: And so we're being prudent about Q3 because the underlying market challenges have not fully subsided, as you know. And so we're just being prudent in Q3, like we historically have been in prior quarters, so that we can continue to execute on our plan. Okay, great. And then, lastly, for me, I'll stick with you, Rich. So the cadence on the EBITDA, so I think I heard 12% in the third quarter. If I'm doing the math right, and apologies, it's on the fly, so it might not be.

Speaker Change: [inaudible]

Speaker Change: Okay, great. And then, lastly for me, I'll stick with you, Rich. So the cadence on the EBITDA, so I think I heard 12%.

Speaker Change: In the third quarter, if I'm doing the math right, and apologies, it's on the fly, so it might not be, but I think that implies a fourth quarter EBITDA margin closer to 16%. So is, I mean, is that...

David Saxon: But I think that implies a fourth quarter EBITDA margin closer to 16%. So, I mean, is that... Am I thinking about that right? And then, I guess, if I am, how should we think about the exit rate as it relates to 2025 margins? I know you're probably not going to give guidance here.

Speaker Change: Am I thinking about that right?

Speaker Change: And then, I guess if I am, how should we think about the exit rate as it relates to 2025 margins? I know you're probably not going to give guidance here.

Rich: Yeah, yeah, we will. The way that you're thinking about it, generally speaking, is correct, right? We've historically said that, you know, 55 cents on the dollar drops to the bottom line, whether that's an upswing in revenue or a downswing in revenue because of our fixed cost infrastructure. And so, you know, Q3 being, you know, over 10 million dollars lighter than Q2 of 2024, we're going to see an impact on EBITDA as a result.

Speaker Change: Yeah, yeah, the way that you're thinking about it, generally speaking, is correct, right?

Speaker Change: We've historically said that, you know, 55 cents on the dollar drops to the bottom line, you know, whether that's an upswing in revenue or a downswing in revenue because of our fixed cost infrastructure. And so, you know, Q3 being

Speaker Change: you know, over $10 million lighter than Q2 of 2024, we're going to see an impact to adjust the EBITDA as a result. And so a lot of that is really around kind of fixed cost absorption in the P&L.

Rich: And so a lot of that is really around kind of fixed cost absorption in the P&L. And when you kind of step forward to the fourth quarter, that, of course, comes back the other way.

Speaker Change: That, and when you kind of step forward to the fourth quarter, that of course comes back the other way. And then, you know, we also have a number of operating initiatives internal within the business.

David Saxon: And then, you know, we also have a number of operating initiatives internal within the business that, you know, further take costs out of the organization, even though we're still doing TSAs with the purchaser of our spine business. And so, you know, there's also a little bit of a benefit there in the fourth quarter as we continue to take costs out of the business. And then and then, like you appropriately mentioned, yeah, we think that Q4 will exit us at a good rate and position us for 2025, but we're not we're not there yet to quite give any more specifics. Okay, great, thanks so much for taking my questions.

Speaker Change: that you know to further take cost out of the out of the organization even though we're still doing TSAs with you know the purchaser of our spline business and so you know there's also a little bit of a benefit there in the fourth quarter as we continue to take cost out of the business.

Speaker Change: And then, like you appropriately mentioned, we think that Q4 will exit us at a good rate and position us for 2025, but we're not there yet to quite give any more specifics about it.

Speaker Change: Okay, great. Thanks so much for taking my questions. Of course.

Operator: Of course. Thank you. Our next question comes from the line of Matt Miksic with Barclays. Your line is now open. Hey, uh, good evening. Can you hear me okay?

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Matt Miksic with Barclays. Your line is now open.

Matt Misick: Hey, good evening. Can you hear me okay?

Matt Miksic: Yeah, hi Matt. Hi, great. Thanks for taking the questions. Maybe, you know, a couple of follow-ups here, and I appreciate all the color. Maybe on the sort of guide business, to get the planning business for you, where you have sort of a broader exposure across a number of partners. Sorry, I think we didn't catch that at the beginning. The audio would have. Could you do that one again?

Speaker Change: Thanks for taking the questions. Maybe a couple of follow-ups here, and I appreciate all the color.

Speaker Change: maybe on the sort of guide to get the planning business for you where you have sort of a broader exposure across a number of... sorry I think I think we didn't catch it at the beginning the audio wasn't

Speaker Change: functioning. Could you do that again, I'm really sorry.

Operator: Sorry about that. Yeah, can you hear me okay now? Yep, perfectly fine. Maybe just any insights that you're picking up from your, you have sort of a wide, I guess, access to a lot of different platforms that are using your planning system software. And I'm just wondering from that, are you able to sort of surmise any intelligence that tells you like your general market trends or that sort of thing. Sure.

Speaker Change: I'm sorry about that. Yeah, can you hear me okay now? Yeah, perfectly fine. Maybe just any insights that you're picking up from your... You have sort of a wide, I guess, access to a lot of different platforms that are using or planning this software and I'm just wondering...

Speaker Change: from that

Speaker Change: Yeah, are you able to sort of surmise any intelligence that tells you like new general market trends or

Vafa Jamali: Well, yeah, the guided software and the implant concierge, each of them are growing by over 20%. So there is a movement towards guided surgery and a little bit more outsourcing of lab work. It should be an indicator of overall demand in the market that's kind of stabilizing. I wouldn't say, you know, like Rich said, I wouldn't say it's great by any stretch, but it is stabilizing. And then another leading indicator you might look at is biomaterials, which is the bone substitute used prior to an implant.

Speaker Change: That sort of thing.

Speaker Change: Sure. Well, yeah, the guided software and the implant concierge, each of them are growing over 20%. So there is a

Speaker Change: a movement towards guided surgery and a little bit more outsourcing of lab work. It should be an indicator of overall demand in the market. That kind of stabilizing, I wouldn't say, you know, like we said, I wouldn't say it's

Rich: It's great by any stretch, but it is stabilizing. And then another leading indicator you might look at is biomaterials, which is the bone substitute used prior to an implant.

Vafa Jamali: And what we are hearing from a lot of our practitioners is that they're using the bone substitute as a waiting period until the patient comes back. If, for example, the procedure is going to get delayed for financial reasons, they would do this as an inexpensive in-between and get themselves ready to come back for the procedure when they're ready. And that just sort of preserves the jaw and the bone so that it doesn't degenerate to a point where the surgery becomes difficult.

Speaker Change: and what we are hearing from a lot of our practitioners is that they're using the bone substitute as a waiting period until the patient comes back so

Speaker Change: If, for example, the procedure is going to get delayed for financial reasons, they would do this.

Speaker Change: as an inexpensive in-between and get themselves ready to come back for the procedure when they're ready. And that just sort of preserves the jaw and the bone so that it doesn't degenerate to a point where the surgery becomes difficult. That to me is a bit of a leading indicator as well.

Vafa Jamali: That, to me, is a bit of a leading indicator as well. So those would be the two areas where I would say we feel stability in the markets. Their market is certainly not gone. And again, we also feel pretty good about the premium. That's great. I must say, you are breaking up a touch.

Speaker Change: So, those would be the two areas where I would say we feel stability in the markets. Their market is certainly not gone. And again, we also feel pretty good about the premium segment as well.

Matt Miksic: I hope you can hear me okay, Vafa. So my next question, I've been juggling back and forth between a couple of calls, as a lot of people are, but I'm not sure how much you've commented, or maybe you said you could comment on some of the discussions you're having with potential strategic interests around the company. But... just sort of, you know, theoretically, I guess, we'd love to hear like, I'm wondering if there is a way to think about If we take a platform that's being used across a broader number of implant competitors to put in the implant systems of a bunch of different companies.

Speaker Change: That's great. I must say, you are breaking up a touch. I hope you can hear me okay, Vafa.

Vafa Jamali: So my next question, I've been juggling back and forth between a couple of calls, as a lot of people are, but I'm not sure how much you've commented or maybe said you can comment on some of the discussions you're having with potential strategic interests around the company.

Speaker Change: And just sort of, you know, theoretically, I guess, I'd love to hear, like,

Speaker Change: How as much as it's a much as you know real guide and and you know the platform that you have is a great Value as is the implant line. I'm wondering if there is a way to think about

Speaker Change: If we take a platform that's being used across a broader number of, you know, implant competitors and, you know, to use to put in the implant systems of a bunch of different companies and then you get pulled into, say, another strategic that...

Matt Miksic: And then you get pulled into, say, another strategic that.... you know, what is your thinking down the road, would your thinking ever be that you just kind of remain open? Or is there a part of this where Switzerland becomes more closed, or how to think about that.

Speaker Change: You know is the is you're thinking down the road what you're thinking ever be is that you just kind of remain open or? Is there?

Speaker Change: Part of this where Switzerland becomes more closed, or how to think about that.

Matt Miksic: Sure, sure. Okay, so, I think in med tech, there's always going to be speculation around assets like ours, based on the size, and even more so that it's now a pure play dental appliance. What's the indication we have?

Vafa Jamali: So what we need to do is run the company like we're gonna run it. Right, but we also know that we have a very unique product that is very differentiated in the dental market. So the more that we retain our differentiation, we've been able to hold prices. We've been able to participate in the previous segment.

Vafa Jamali: Many of our competitors have left that segment, and we're doing well, and we're holding prices. We also have this great, great digital platform, which allows us to help both competitors and our own, if I understood the Switzerland comment around open versus closed. Right now, our software is open. I would only close that if I had a significant, very significant market. Otherwise, being open is probably good for us strategically. It's also a really, really good idea... That'll be a decision for later on when we get to that point. But as a public company, we don't plan for that. But you've got to.

Vafa Jamali: You've got to run it like you're running it for the next 10 years, and if something happens in the middle, you have to look at it with an open mind. So I don't know if I can say much more than that in terms of what my approach is. I don't know, Richard, if you've got a different perspective on that.

Rich: Yeah. No, no. That's just actually a very helpful framework to think about. And I understand this is all, you know, I understand the running of the company without all these considerations, as if you're going to be running it for another five or 10 years. So.

Matt Miksic: Maybe just lastly on some of the, you know, two topics that have come up a fair amount are capacity and Asia. I think you touched on Asia and China a little bit in your prepared remarks, but maybe, you know, any wisps or hints that you're picking up that there's a shift in capacity or, on the other side of it, any sense that some of the sluggishness in China is temporary or the beginning of a longer slog would be super helpful. Thanks so much. I'll start, Rich.

Speaker Change: Or that you're picking up that there is a shift in capacity.

Speaker Change: And the other side of it any any sense that some of the sluggishness in China.

Speaker Change: Is temporary or the beginning of a longer longer slog.

Speaker Change: It would be super helpful.

Speaker Change: So much.

Speaker Change: I'll start Richard can add some color, but we've really reduced our exposure to China. So China is really immaterial to us and I think it's going to continue to have ups and downs.

Vafa Jamali: You can add some color, but we've really reduced our exposure to China, so China's really immaterial to us, and I think it's going to continue to have ups and downs based on the year that it compares to. So we've really mostly exited that. [inaudible] of a very private section that we've kept, but Rich, any other comments on that? Yeah, Matt, Vafa's correct. Yeah, our exposure in China is minimal.

Richard: Based on the year that compares to so we've really mostly exited that market with exception of AR.

Speaker Change: I'm, a very private section that we've kept with which any of the customer.

Richard: Yeah, Yeah that is correct yes.

Speaker Change: Our exposure in China is is minimal.

Richard: So we don't we don't we don't get wrapped up with kind of the volatility that you're referencing in China.

Rich: And so we don't get wrapped up with kind of the volatility that you're referencing in China. What I would say about Asia Pacific, actually, when you kind of segment our Asia Pacific business, we're actually performing pretty well in that particular market. And so for us, a headline number for Asia Pacific is in reported currency; we declined in the quarter by about 6.9%. But the yen had a pretty drastic change in the quarter.

Speaker Change: What I would say about Asia Pacific actually when you kind of segment, our Asia Pacific business, We're actually we're actually performing.

Speaker Change: Pretty well actually in that in that particular market and so for US a headline number four for Asia Pacific is in reported currency, we declined in the quarter of about six 9%.

Speaker Change: But the.

Speaker Change: The yen had a pretty drastic change.

Speaker Change: In in in the quarter and so when you adjust and you actually look at our Asia Pacific business in constant currency that business actually grew one 1% and just a reminder.

Speaker Change: Our biggest businesses.

Speaker Change: In Asia Pacific is Japan is number one what we're seeing is we have a really fast growing business in India and a really good solid business that is also growing in Australia, and so we feel in Asia Pacific outside of China, We're actually positioned in the right markets and have her right.

Speaker Change: To win there.

Speaker Change: Whereas a result growing in Asia Pacific in constant currency.

Speaker Change: Yeah.

Speaker Change: Alright, thank you.

Speaker Change: There are no further questions at this time. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Rich: And so when you adjust, and you actually look at our Asia Pacific business, in constant currency, that business actually grew 1.1%. And just a reminder, you know, our biggest businesses in Asia Pacific are Japan is number one. But what we're seeing is we have a really fast growing business in India and a really good solid business that is also growing in Australia. And so we feel that, in Asia Pacific, outside of China, we're actually positioned in the right markets and have a right to win there. And we're, as a result, growing in Asia Pacific in constant currency. All right, thank you.

Speaker Change: Good afternoon, and welcome to the MTS second quarter 2024 earnings Conference call. Currently all participants are in a listen only mode, we'll 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.

Operator: There are no further questions at this time. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good afternoon, and welcome to ZimVie's second quarter 2024 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 from Gilmartin Group for introductory disclosures. Thank you all for joining today's call.

Speaker Change: The call over to Marisa base from Gilmartin group for interact introductory disclosures.

Marisa base: Thank you all for joining today's call.

Speaker Change: Earlier today <unk> released financial results for the quarter ended June 32024.

Speaker Change: A copy of the press release is available on the company's website couldn't be dot com as well as an SEC Doc up.

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

Speaker Change: Actual results may differ materially from those indicated by the forward looking statements.

Speaker Change: A variety of risks and uncertainties. Please.

Speaker Change: 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.

Speaker Change: In addition, the discussion on this call will include certain non-GAAP financial measures.

Speaker Change: Conciliation, but these measures the most directly comparable GAAP financial measures are included within the earnings release and already Investor deck issued today found on the Investor Relations section of the company's website.

Speaker Change: This conference call contains time sensitive information and is accurate only as of the live broadcasting today August one come to the board.

Speaker Change: And we disclaim 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.

Speaker Change: And with that I will turn the call over to Robert Molly <unk>, President and Chief Executive Officer of Dnb.

Vafa Jamali: Good afternoon, and thank you all for joining us. I'm pleased with our execution in the second quarter, achieving revenue of $117 million as we continue to innovate across our portfolio of implants, biomaterials, and digital solutions. We have also advanced our efforts to improve the margin profile of our business, right-size corporate costs, and optimize our operations. Meanwhile, we continue to invest in and scale our differentiated solutions to give our patients and providers the best possible outcomes. I'll now provide an update on each of our product portfolios, starting with the Dental Implant Portfolio. We see strong commercial traction with our newest line of implants, the TSX and the T3 Pro.

Robert Molly: Thank you Marisa good afternoon, and thank you all for joining us on.

Robert Molly: I am pleased with our execution in the second quarter, achieving revenue of $117 million as we continue to innovate across our portfolio of implants, biomaterials and digital solutions.

Speaker Change: We have also advanced our efforts to improve the margin profile of our business right size corporate costs and optimize our operational footprint.

Robert Molly: Meanwhile, we continue to invest and scale, our differentiated solutions to give our patients and providers the best possible outcomes.

Speaker Change: I will now provide an update on each of our product portfolios, starting with dental implant portfolio we.

Speaker Change: We see strong commercial traction with our newest line of implants, the TSA actually the tier III.

Vafa Jamali: We believe that we continue to gain market share as we strive to expand the implant dentistry market. During the quarter, we launched a series of meaningful innovations to our implant offerings to strengthen our already comprehensive portfolio of surgical tools, abutments, and restorative components. Last week, we announced the FDA clearance of the U.S. launch of GenTech restorative components, expanding ZimVie's portfolio of end-to-end prosthetic offerings. We first launched the Gentech portfolio in Europe in 2019, and have seen tremendous success in that market today.

Speaker Change: We believe that we continue to gain market share as we strive to expand the implant dentistry market.

Speaker Change: During the quarter, we launched a series of meaningful innovations to our implant offerings to strengthen our already comprehensive portfolio of surgical tools.

Speaker Change: And restored as components.

Speaker Change: Last week, we announced the FDA clearance of the U S launch of Gen Tech restore to components expanding this portfolio end to end prosthetic offerings.

Speaker Change: We first launched the agenda portfolio in Europe in 2019 and are seeing tremendous success in that market to date.

Vafa Jamali: These components support digitally-driven CAD-CAM restorations and are designed to provide the best fit and a tight seal, crucial to implant success, supporting the long-term aesthetic and functional restoration. The introduction of Gentech to the U.S. market brings a broad offering of differentiated restorative components to the ZimVie product family. We like this segment, and we look forward to competing here. As of July, we have gained510 clearance for an expanded portfolio of titanium bars for our Belotech abutments, growing its selection to include the most widely adopted full-arch restorative platforms to support some of our most complex procedures.

Speaker Change: These components support digitally driven cadcam restorations and are designed to provide the best fit and a type sealed crucial to implant success supporting the long term aesthetic and functional restorations.

Speaker Change: The introduction of Gentex in the U S market brings a broad offering differentiated restore to components to the zombie product family.

Speaker Change: We like this segment and we look forward to competing here.

Speaker Change: As of July we obtained 510 clearance for an expanded portfolio of titanium bars for Belichick apartments growing its selection to include the most widely adopted full arch restored of platforms to support some of our most complex procedures.

Vafa Jamali: We will continue to deliver innovation across our implant portfolio in support of gaining competitive market share while simultaneously driving the expansion of the implant industry market as a whole. Now turning to our best-in-class biomaterials portfolio. During the quarter, we experienced modest growth in our biomaterials offerings. Providers are recognizing the quality and efficacy of our portfolio of bone graft substitutes, membranes, tissue products, and regenerative products.

Speaker Change: Now turning to our best in class Biomaterials portfolio during.

Speaker Change: During the quarter, we drove modest growth in biomaterials offerings providers are recognizing the quality and efficacy of our portfolio of bone graft substitutes membranes tissue products and regenerative products.

Vafa Jamali: In this segment, our growth continues to outpace market growth. We believe this may serve as a future leading indicator for growth in our implant office. We look forward to continuing to innovate within this portfolio throughout the back half of 2024 and beyond. Finally, we saw strong growth in our digital portfolio, which aims to provide customers with greater efficiency in their workflow. Our complete digital portfolio, including iTero scanner sales, grew high single digits in the second quarter as a result of our commitment to driving penetration by making implants more accessible and efficient procedures for providers.

Speaker Change: In this segment our growth continues to outpace market growth.

Speaker Change: We believe this may serve as a future leading indicator for growth in our implant offerings.

Speaker Change: We look forward to continue to innovate within this portfolio throughout the back half of 2024 and beyond.

Speaker Change: Finally, we saw strong growth in our digital portfolio, which aims to provide customers with greater efficiency in their workflow.

Speaker Change: Our complete digital portfolio, excluding <unk> scanner sales grew high single digits in the second quarter as a result of our commitment to driving penetration by making the implants more accessible and efficient procedure for providers.

Vafa Jamali: The increase was driven in part by over 20% growth in our implant concierge service. Implant Concierge removes hours of labor and cost by providing outsourced treatment planning, services, and guided surgery solutions, taking significant workload out of the dental office.

Speaker Change: The increase was driven in part by over 20% growth in our implant Concierge service.

Speaker Change: Implant concierge or lose hours of labor and cost by providing outsourced treatment planning services.

Speaker Change: Got it it's surgery solutions to any significant workflow out of the dental office.

Speaker Change: We believe this service represents a large unmet need where the size of the market for implant concierge could be equivalent to that of the premium implant market.

Speaker Change: Okay.

Speaker Change: Additionally, we drove over 20% growth in surgical guide sales with real guide software.

Vafa Jamali: These features greatly increase safety and accuracy in less time. 5.4 also introduces new cloud library updates and efficiency tools to streamline the customer's design experience. All of these features are aimed to enhance our ability to deliver quality, efficiency, and time savings in treatment planning and assortative design for both patients and the clinician. I'm also very excited to announce our newest scanner partnership with Medit. We are now distributing this powerful imaging solution alongside our existing suite of technologies, expanding our addressable market with a broader range of scanner price points and technology. The meta-scanners include iOS-driven apps and integration opportunities that help us create a seamless experience with the rest of ZimVie's digital solutions.

Speaker Change: On this note, we recently announced the release of version five four of a real guide software the.

Speaker Change: The most significant enhancing this version is a one click nerve detection and automated bone and to segmentation.

Speaker Change: These features greatly increased safety and accuracy in less time.

Speaker Change: $5 four also introduces a new cloud library updates and efficiency tools to streamline the customer's design experience.

Speaker Change: All of these features are aimed to enhance our ability to deliver quality efficiency and time savings and treatment planning and sort of designed for both patient and the clinician.

Speaker Change: I'm also very excited to announce our newest scanner partnership with <unk>. We're now distributing this powerful imaging solution on side, our existing suite of technologies, expanding our addressable market with a broader range of scanner price points and technologies.

Speaker Change: The <unk> scanners include Iowa's driven absent integration opportunities to help us create a seamless experience for the rest of some of these digital solutions suite.

Vafa Jamali: We expect these features to enhance the adoption of downstream products based on digital imaging. We remain very excited about the growth potential of our digital solutions and believe they are a critical piece of the strategy to improve the workflow of dental offices and ultimately reduce barriers to implant adoption. Beyond product introductions and innovations, medical education and training are greatly aiding the adoption of our technologies. To date, we've trained over 1,400 providers on our products and technologies.

Speaker Change: We expect these features to enhance the adoption adoption of downstream products based on digital imaging.

Speaker Change: We remain very excited with the growth engine of our digital solutions and believe there is a there are a critical piece of the strategy to improve the workflow dental offices and.

Speaker Change: And ultimately reduce barriers to implant adoption.

Speaker Change: Beyond product introductions innovations medical education and training are greatly aiding in the adoption of our technologies to date, we've trained over 1400 providers on our products and technologies. Our programs are booked out through December 2025, as we continue our focus on expanding our presence in the market and in the field of implants industry as a whole.

Vafa Jamali: Our programs are booked out through December 2025 as we continue our focus on expanding our presence in the market and in the field of implants as a whole. Our commercial advantage continues to stem from the value we deliver to our stakeholders, patients, clinicians, and the dental lab. Our second quarter results reflect the resilience of our portfolio and our team's continued commitment. I will now turn the line over to Rich to review our financial performance and forward outlook in greater detail. Thanks, Vafa, and good afternoon, everyone.

Speaker Change: Our commercial advantage continues to stem from the value, we deliver across our stakeholders patients clinicians and the dental lab.

Speaker Change: Our second quarter results reflect the resilience of our portfolio and our team's continued commitment.

Speaker Change: I will now turn the line over to rich to review, our financial performance and forward outlook in greater detail.

Rich: Thanks, Scott and good afternoon, everyone.

Rich: Ill begin by reviewing our second quarter 2024 results for continuing operations and we will close by providing commentary on our outlook for the full year 2024.

Speaker Change: Reminder, we finalized the sale of our spine business on April one 2024, plus our spine segment is reflected in discontinued operations in our financial statements.

Rich: Please refer to our 10-Q4 financial results from discontinued operations.

Speaker Change: Beginning with sales.

Rich: Total third-party net sales for the second quarter of 2024 were $116.8 million, a decrease of 1.5% in reported rates, and a very modest decline of 0.4% in cost incurred. In the U.S., third-party net sales for the second quarter of 2024 were $69.3 million, an increase of 0.1%. Over the past couple of quarters, we have seen pressure on capital sales, which for us is the sale of oral scans. We continue to see that trend in the second quarter.

Rich: Total third party net sales for the second quarter of 2024 were $116 8 million a decrease of one 5% in reported rates and a very modest decline of 0.4% in constant currency.

Rich: In the U S third party net sales for the second quarter of 2024 at $69 3 million.

Rich: Creased by 1%.

Rich: Over the past couple of quarters, we have seen pressure on capital sales, which for US is the sale of oral scanners.

Speaker Change: We continue to see that trend in the second quarter.

Rich: When excluding that impact, U.S. sales grew by 0.8%, driven by strength in digital solutions and biomaterials, partially offset by weaker U.S. implants. Outside of the U.S., third-party net sales of $47.5 million decreased 3.8% on a reported basis and 1.2% in constant current. We have seen stability in the U.S. dental market over recent quarters, and our competitive position remains strong in the core markets we serve. However, when we exclude the impact of capital sales outside of the U.S., the business was flat in constant currency terms.

Rich: When excluding that impact U S sales grew by 0.8% driven by strength in digital solutions, and biomaterials, partially offset by weaker U S implant sales.

Rich: Outside of the U S third party net sales of 47 $5 million.

Rich: Creased, three 8% on a reported basis and one 2% in constant currency.

Rich: We have seen stability in your U S dental market over recent quarters or our competitive position remains strong in our core markets we serve.

Rich: When we exclude the impact of capital sales outside of the U S business was flat in constant currency terms.

Rich: Second quarter 2024, adjusted cost of products sold was 37.0% roughly flat to 37, 2% of sales in the prior year period.

Rich: We expect improvement in cost of products sold over time as we streamline the organization cut duplicative costs improved manufacturing efficiency and benefit from a more favorable product mix as implant sales recover.

Rich: Q2, 2024, adjusted research and development expense of $6 3 million.

Rich: Or five 4% of sales compared to $5 6 million or four 8% of sales in the prior year.

Rich: Q2, 2024, adjusted sales general and administrative expense of $62 4 million <unk>.

Rich: Compared to $61 $9 million in the prior year.

Rich: Other income in Q2-24 of $3 million reflects income from transition services agreements resulting from the sale of our spine business and offsets stranded costs that remain in SG&A expense. Adjusted EBITDA attributable to continuing operations in the second quarter of 2024 was $16.1 million, or a 13.8% market share. Q2 2024 Adjusted Earnings Per Share Attributable to Continuing Operations was $0.13 per share on a fully diluted share count of 27.4 million shares. Adjusted earnings per share in the quarter were largely impacted by the timing of share-based compensation expensed in the quarter.

Rich: Other income in Q2 24.

Rich: $3 million.

Rich: Next the income from transition services agreements, resulting from the sale of our spine business and offset stranded costs that remain in SG&A expense.

Rich: Adjusted EBITDA attributable to continuing operations in the second quarter of 2024 was $16 $1 million or a 13, 8% margin.

Rich: Q2, 2024 adjusted earnings per share attributable to continuing operations was <unk> 13 per share on a fully diluted share count of $27 4 million shares.

Rich: Adjusted earnings per share in the quarter was largely impacted by the timing of share based compensation expense in the quarter.

Rich: Future share base compensation was $5.7 million, and we expect our full year share base compensation expense to range between $17 million and $17.5 million. We remain on track to deliver on our adjusted EPS guidance for the year. We are pleased with the financial performance in the second quarter of 2024 as we continue to deliver on our plan to make strides in 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.

Rich: Share based compensation was $5 $7 million and we expect our full year share based compensation expense to range between $17 million from $17 5 million.

Rich: We remain on track to deliver on our adjusted EPS guidance for the year.

Rich: We are pleased with our financial performance in the second quarter of 2024, as we continue to deliver on our plan to make strides to position <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: Quickly turning to the balance sheet.

Rich: As of this end of the second quarter 2020 for consolidated and same be continuing operation's cash with $78 6 million and gross debt was approximately $235 million, yielding a net debt balance of approximately $156 million.

Rich: Note, our net debt balance does not include the seller note from the sale of the spine. In addition, we continue to maintain our $175 million Revolving Credit Facility, which remains undrawn. Turning toward our outlook for the full year 2024, we are reaffirming our full year revenue guidance of $450 million to $460 million, reflecting an increase of 0.2% at the midpoint compared to 2023, specifically looking at the third quarter of 2024. Our third quarter is historically the slowest of the year due to seasonal impacts of the summer months.

Rich: Note our net debt balance does not include the seller note from the sale of the spine business.

Rich: In addition, we continue to maintain our $175 million revolving credit facility, which remains undrawn.

Rich: Turning toward our outlook for the full year 2024.

Rich: We are reaffirming our full year revenue guidance of $450 million to $460 million.

Rich: Reflecting an increase of zero, 2% at the midpoint compared to 2023.

Speaker Change: Specifically looking at the third quarter 2020 for our third quarter is historically, the slowest of the year due to seasonal impacts of the summer months, we expect our third quarter revenue to be sequentially lower versus Q2, and lower on a year over year basis by 3% to 4%.

Rich: We expect our third-quarter revenue to be sequentially lower versus Q2 and lower on a year-over-year basis by 3 to 4 percent. This trend is largely similar to the seasonal sales patterns we saw in 2022 and 2022. In conjunction with our seasonally lower revenue in the third quarter, we expect an adjusted EBITDA margin of approximately 12%.

Rich: Yes.

Rich: This trend is largely similar to the seasonal sales patterns, we saw in 2022 and 2023.

Rich: In conjunction with our seasonally lower revenue in the third quarter, we expect an adjusted EBITDA margin of approximately 12%.

Rich: We continue to 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 mentioned before, we remain committed to our 15% plus adjusted EBITDA margin by April 1st, 2025. Turning to our interest expense profile, considering our recent action to pay down a substantial portion of our debt and the payment in kind interest we began accruing on the seller note resulting from the sale of Spine, we now expect 2024 interest expense to be approximately $13 million, inclusive of the $3.1 million of interest expense in the second quarter of 2024. We expect Sharebase compensation expense to be in the range of $17 million to $17.5 million for the full year.

Rich: We continue to 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: As mentioned before we remain committed to our 15% plus adjusted EBITDA margin by April one 2025.

Rich: Turning to our interest expense profile, considering our recent action to pay down a substantial portion of our debt and the payment in kind interest we began accruing on the seller note, resulting from the sale of spine. We now expect 2020 for interest expense to be approximately $13 million inclusive.

Rich: Of the $3 $1 million of interest expense in the second quarter of 2024.

Rich: We expect share based compensation expense to be in the range of $17 million to $17 $5 million for the full year.

Rich: And lastly, we are pleased to reaffirm our Just DPS guidance. Specifically, we expect to generate adjusted earnings per share of $0.55 to $0.70 per share on a fully diluted share count of 27.6 million shares for the year. With that, I'll now turn the call back over to Vafa. Thank you, Rich. I'm very proud of our team's performance in the first half of 2024 and believe that we have a great opportunity ahead of us.

Rich: And lastly, we are pleased to reaffirm our adjusted EPS guidance spin.

Rich: Specifically, we expect to generate adjusted earnings per share of 55 to <unk> 70 per share on a fully diluted share count of 27 6 million shares for the year.

Rich: With that I'll now turn the call back over to Beth.

Beth: Thank you rich.

Beth: I'm very proud of our team's execution in the first half of 2024 and believe that we have a great opportunity ahead of us with that we'll open it up to questions.

Rich: With that, we'll open it up to questions. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star-one-one on your telephone and wait for your name to be announced.

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

Speaker Change: 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 one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Rich: Yes.

Speaker Change: Our first question comes from the line of David Saxon with medium and company. Your line is now open.

David Saxon: Oh, great. Good afternoon, Vafa and Rich. Thanks so much for taking my questions. Maybe I'll start with a higher level philosophical question just about your positioning within dental. So, I mean, you have a very focused portfolio relative to competitors. So when you think about kind of reaching your desired scale, is it continuing to build out this implant portfolio with digital capabilities organically? Are there certain product categories that, if wrapped around your portfolio, would be complementary?

David Saxon: Oh, great. Good afternoon rich. Thanks, so much for taking my questions.

Speaker Change: Maybe I'll start with <unk>.

David Saxon: Higher level philosophical question, just about your positioning within dental so I mean do you have a very focused portfolio.

Speaker Change: Two competitors. So when you think about kind of reaching your desired scale is that continuing to build out this implant portfolio with digital capabilities organically or are there certain product categories that kind of if wrapped around your portfolio would be complementary.

David Saxon: Great question, David! Just on that one. Yeah, I think we're right now. What we've done so far, especially post, the sales plan is really, really focused on how unique our assets are and where we're unique, and that puts us squarely in the premium dental implant market. And what we've been able to do, which is, again, a bit more unique, is really have excellent gross profit margins, and we've been able to hold prices really well.

David Saxton: Great question David.

Rich: Yes.

Rich: On that one actually quite right now what we've done so far is especially post the sales spine is really really focus on how unique our assets are and where we're unique in that puts us square in the.

Rich: In the premium dental implant market and what we've been able to do which is again a bit more unique is really.

Rich: We have excellent gross profit margins and we've been able to hold price.

Rich: Really well.

David Saxon: What's working well in conjunction with this is a rapidly growing and highly differentiated digital offering, which we believe can give us a unique position to expand the market. I also mentioned I think implant concierge can be a significant contributor. So we're, as we're adding things like gen tech, which is the restorative, and we're adding more power behind implant concierge.

Rich: What's working well in conjunction with this is a rapidly growing and highly differentiated digital offering.

Rich: Which we believe can give us a unique position expand the market now.

Speaker Change: I also mentioned I think in plant construction can be a significant contributor so as we're adding.

Rich: Things like Gen Tech, which is the restorative and we're adding more power behind <unk>.

Vafa Jamali: We think that we can expand this market. I think selectively, we may look at other markets that are interesting, maybe pressured a little bit for price. One of the areas that I like is the Fuller's segment, which may require us to have a slightly different implant but add a lot of technology to it so that we make the same advances we made with implants here but make it in that group.

Rich: We think that we can expand this market I think selectively we may look at other market center are interesting, maybe pressured a little bit for price one of the areas that highlights.

Rich: Before set for large segment, which may.

Rich: Require us to have a slightly different implant, but add a lot of technology to it so that we make.

Rich: The same advancements we made with with implants here, but in that group and we've got some some work that we're doing there. So I think you can look at us to segment.

Vafa Jamali: We've got some work that we're doing there. So I think you can look at us to segment by procedure by procedure, go after the markets that we think are somehow either underserved or could use some tech to really accelerate them. So those are the key areas. We're happy with the announcement about the addition of the MED-IT scanner.

Rich: Decision by procedure go after the markets that we think are somehow either underserved or could Houston Tac.

Rich: To really accelerate them. So those are the key areas, we're happy with.

Rich: With the an aspect for the addition of <unk> scanner I think that gives us a better margin profile to compete there gives us a different price point to compete alongside the.

Vafa Jamali: I think that gives us a better margin profile to compete there, and gives us a different price point to compete alongside the [inaudible]. Thank you, and I look forward to speaking with you again soon. I hope that helps you see a little more color on what I'm doing. Okay, great. Thanks so much. You broke up a little, so hopefully, you can hear me.

Rich: The.

Rich: Alright.

Rich: Thank you.

Speaker Change: Just curious.

Rich: Okay.

Rich: Thank you.

Rich: Okay.

Rich: Please go ahead.

Rich: Okay.

Rich: More color on.

Rich: Yes.

Rich: Okay great.

Speaker Change: Thanks, so much.

Speaker Change: You broke up a little also hopefully you can hear me, but.

David Saxon: But maybe my next question on ITERO. So the Lumina's restorative launch was delayed by about a quarter or so. Did that have any impact on how you're thinking about 2024 at all? If so, you know, what made up that delta?

Speaker Change: Just maybe my next question on.

Speaker Change: On <unk>.

Speaker Change: Luminous restorative launch was delayed about a quarter or so did that have any impact on how youre thinking about 2024 at all and if so what made up that Delta and then can you talk about the <unk> partnership I mean is that going to be maybe more of a value offering and how does that kind of.

David Saxon: And then can you talk about the MED-IT partnership? I mean, is that going to be maybe more of a value offering? And how has that kind of helped your strategy?

Speaker Change: Help your strategy.

Vafa Jamali: Okay, so I'm sorry if I broke up with you there. If you look at the digital offering and you look at the scanners, without the scanners, our business would do pretty well. It's a worse profile, so the equipment hasn't been great.

Speaker Change: Okay. So sorry, if I broke up there.

Speaker Change: If you.

Rich: If you look at the <unk>.

Speaker Change: Little offering and you look at the scanners without the scanners are business did pretty well.

Rich: The year over year.

Rich: It's a worst profile so equipment hasn't been great. This year.

Rich: And maybe some of it is because of the alumina that has to come sometime next year. So all of our Miss in digital is from.

Rich: Missing scanner ships, so we do think that.

Rich: That is an issue that will resolve itself when the when the new product comes out but in the near term we've got this.

Speaker Change: A new relationship with <unk>, which we actually don't believe that we're sacrificing our technologists quite a quite a rich offering but it does have different positions. It does have tissue.

Rich: All lines in terms of features and functions.

Vafa Jamali: I think it's quite well equipped, so it'll satisfy what we need to do in terms of advancing customers to a digital platform, which, as we've mentioned before, rapidly accelerates the number of implants used and, frankly, the quality of the implant that comes out of it. The more digital,

Rich: Alright.

Rich: Quite well equipped so it'll satisfy what we need to do in terms of advancing customers to a digital platform, which as we've mentioned before rapidly accelerates the number of implants used.

Rich: And frankly, the quality of the of the impact that comes out of it.

Rich: So that is where we're at. I think you didn't ask for your financial details on that, did you? All right, I mean, if you want to share them, go for it. Rich, any color you want to add to this?

Rich: Digitally so that is where we're at I think.

Speaker Change: You didn't ask me a financial details on that.

Speaker Change: I mean, if you want to share then go for it.

Rich: Rich any color you'd want to add.

Rich: Yeah, yeah. So contemplated in our guide, David, is lower equipment sales. And as Vafa mentioned, the delay in Lumina, we kind of already had that kind of baked into our numbers. And so it's already contemplated in the full-year guide. And one of the prepared remarks that we made relative to Itero capital sales for us in the US was, when you exclude the year-over-year impact of Itero in the US, the US business actually grew by 80 basis points for us.

Rich: Yes, yes.

Speaker Change: And our guide David is is the lower equipment sales.

Speaker Change: Has that been mentioned right the delay of alumina.

Speaker Change: We kind of already have that kind of baked in our in our numbers and so it is already contemplated in the full year and full year guidance.

Speaker Change: And one of the prepared remarks that we made relative to <unk> capital sales for us in the U S was when you exclude actually the year over year impact of Vitaros in the U S. The U S business actually grew by 80 basis points for us so.

Rich: So it's something that we've been watching for quite some time. The US market, as you know, has been pressured. And so we're really pleased with our performance in the second quarter, particularly in the US. Mm-hmm. Okay, um, that, uh, kind of gets into my next question, if I could. So, you know, third quarter down, I think it was three to 4% year over year. I mean, I guess, you know, last year, that should theoretically kind of already be baked into the season knowledge.

Speaker Change: Something that we've been watching quite a while the U S market. As you know has been has been pressured and so we're really pleased with our performance in the second quarter, particularly in the U S.

Rich: Okay.

Speaker Change: That kind of.

Speaker Change: Gets into my next question.

Speaker Change: If I could so.

Speaker Change: Third quarter down I think it was 3% to 4% year over year.

Speaker Change: And then I guess last year that should theoretically kind of it's already baked in the seasonality I mean are you seeing anything in the market.

Rich: So, I mean, are you seeing anything in the market that's kind of... causing this decline? Or is it conservatism? And then also, you know, what does guidance assume in terms of patient demand and traffic? Is it more stability?

Speaker Change: That's kind of.

Speaker Change: Causing.

Speaker Change: This decline or is it conservatism.

Speaker Change: And then also.

Speaker Change: What does guidance assume in terms of patient demand and traffic is it more stability or.

Speaker Change: Do things get worse or is there even a recovery in the back half and then I'll just have one more site for all the questions.

David Saxon: Or, you know, do things get worse? Or is there even a recovery in the back half? And then I'll just have one more, sorry for all the questions. Richard, do you want to take that one? Yeah, sure. Thanks, Vafa. Yeah, so our Q3, David, even though we're pleased with our performance in the second quarter, the market and the space, in general, are not well on the road to recovery based on what we're hearing in the market.

Speaker Change: Okay.

Speaker Change: Yes, yes.

Speaker Change: Yeah sure Thanks, Jeff Yeah.

Speaker Change: No.

Speaker Change: So our Q3.

Speaker Change: Yes, David right, even though we're pleased with our performance in the second quarter right.

Speaker Change: The market in this space in general right is not is not.

Speaker Change: Well on the road to recovery rate based on.

Speaker Change: Kind of what we're hearing in the market right and so our what we classify as performance and good performance in the second quarter is largely related to I think.

David Saxon: And so what we classify as performance and good performance in the second quarter is largely related to, I think, the differentiation of our portfolio, as Vafa kind of alluded to earlier in the call, and then also execution, right? And so we're being prudent about Q3 because the underlying market challenges have not completely subsided, as you know. And so we're just being prudent in Q3, like we historically have been in prior quarters, so that we can continue to execute on our plan.

Speaker Change: The differentiation of our portfolio.

Speaker Change: As <unk> kind of alluded to earlier on the call and then also and also execution right and so we're being we're being prudent about about Q3, because it gives the market the underlying.

Speaker Change: Market challenges have not forgotten.

Speaker Change: Fully subsided as.

Speaker Change: As you know and so were just being prudent in Q3 like we historically have been in prior quarters. So that we can.

Speaker Change: To execute to our plans.

David Saxon: Okay, great. And then lastly, for me, I'll stick with you, Rich. So the cadence on the EBITDA, so I think I heard 12% in the third quarter. If I'm doing the math right, and apologies, it's on the fly, so it might not be.

Speaker Change: Okay, Great and then.

Rich: Lastly for me I'll start with you rich.

Speaker Change: The cadence on the EBITDA, So I think I heard 12% in the third quarter.

Speaker Change: If im doing the math right and I apologies, it's on the fly so it may not be but I think that implies a fourth quarter EBITDA margin closer to 16%. So I mean does that.

David Saxon: But I think that implies a fourth quarter EBITDA margin closer to 16%. So, I mean, is that... Am I thinking about that right? And then, I guess if I am, how should we think about the exit rate as it relates to 2025 margins? I know you're probably not going to give guidance here.

Speaker Change: And my thinking about that right or.

Speaker Change: And then I guess, if I am like how should we think about the the exit rate as it relates to 2025 margin I know youre, probably not going to give guidance here.

Rich: Yeah, we will. The way that you're thinking about it, generally speaking, is correct, right? We've historically said that $0.55 on the dollar drops to the bottom line, whether that's an upswing in revenue or a downswing in revenue because of our fixed cost infrastructure. And so, with Q3 being over $10 million lighter than Q2 of 2024, we're going to see an impact on EBITDA as a result. And so a lot of that is really around kind of fixed cost absorption in the P&L. And when you kind of step forward to the fourth quarter, that, of course, comes back the other way.

Speaker Change: Yes, we are.

Speaker Change: The way the way that Youre thinking about it generally speaking is correct right.

Speaker Change: We've historically said that 55 cents on the dollar drops to the bottom line, whether that's an upswing in revenue or a downswing in revenue because of our fixed cost infrastructure and so Q3 being.

Speaker Change: Over $10 million lighter than in Q2 of 2024, we're going to see an impact.

Speaker Change: To adjusted EBITDA.

Speaker Change: As a result, and so a lot of that is really around kind of fixed cost absorption in the P&L.

Speaker Change: That when you kind of step forward to the fourth quarter.

Speaker Change: That of course comes back the other way.

Speaker Change: And then we also have a number of operating initiatives internal within the business.

Speaker Change: That.

Speaker Change: To further take cost out of the out of the organization, even though we're still doing TSA with <unk>.

Speaker Change: Purchaser of our spine business and so there is also a little bit of a benefit there in the fourth quarter as we continue to take cost out of the business.

David Saxon: And then, you know, we also have a number of operating initiatives internal within the business that, you know, further take costs out of the organization, even though we're still doing TSAs with the purchaser of our spine business. And so, you know, there's also a little bit of a benefit there in the fourth quarter as we continue to take costs out of the business. And then, like you appropriately mentioned, yeah, we think that Q4 will exit us at a good rate and position us for 2025, but we're not there yet to quite give any more specifics. Okay, great. Thanks so much for taking my questions.

Speaker Change: And then like you appropriately mentioned, yet where we think that Q4 will exit is at a good rate.

Speaker Change: Positioning us for 2025, but we're not we're not there yet to give.

Speaker Change: Give any more specifics about it.

Speaker Change: Okay, great. Thanks, so much for taking my questions.

Speaker Change: Sure.

Speaker Change: Okay. Thank you.

Operator: Of course. Thank you. Our next question comes from the line of Matt Miksic with Barclays. Your line is now open.

Speaker Change: Our next question comes from the line of Matt next Mystic with Barclays. Your line is now open.

Matt Miksic: Hey, uh, good evening. Can you hear me okay? Yeah, hi Matt.

Matt Mystic: Hey, good evening can you hear me okay.

Matt Miksic: Hi, great. Thanks for taking the questions. Maybe, you know, a couple of follow-ups here, and I appreciate all the color. Maybe on the sort of guide business, I guess the planning business, where you have sort of a broader exposure across a number of partners. Matt, sorry, I think we didn't catch you at the beginning. The audio was... Could you do that again?

Matt Misick: Yes, Hi, Matt Hi.

Speaker Change: Great.

Matt Misick: Thanks for taking the question.

Speaker Change: Maybe.

Speaker Change: A couple of follow ups here.

Speaker Change: And you've seen all the color.

Speaker Change: Maybe on <unk>.

Speaker Change: Sort of.

Speaker Change: Guide business to get planning business.

Speaker Change: Sort of a broader exposure post the number.

Speaker Change: Sorry, I think I think we didn't catch it at the beginning the audio wasn't functioning.

Speaker Change: Could you I am.

Operator: Sorry about that. Yeah. Can you hear me okay now?

Speaker Change: I'm really sorry, sorry about that yes.

Matt Miksic: Yep. Perfectly fine. Maybe just any insights that you're picking up from your... You have sort of a wide, I guess, access to a lot of different platforms that are using or planning for this software, and I'm just wondering from that, are you able to sort of surmise any intelligence that tells you like your general market trends or that sort of thing. Sure. Well, yeah, the guided software and the implant concierge, each of them is growing by over 20 percent.

Speaker Change: Can you hear me okay, yes.

Speaker Change: Yes perfectly fine maybe just any insights that you are picking up from.

Speaker Change: Your you had sort of a wide I guess access to a lot of different platforms that are using your planning for software and I'm just wondering from that.

Speaker Change: Are you able to sort of summarize any intelligence tells you.

Speaker Change: Market trends.

Speaker Change: That sort of thing.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Well, yes the guidance.

Speaker Change: Software and the implant considers each of them are growing over 20%. So there is a.

Matt Miksic: So there is a movement towards guided surgery and a little bit more outsourcing of lab work. It should be an indicator of overall demand in the market that's kind of stabilizing. I wouldn't say, you know, like Rich said, I wouldn't say it's great by any stretch, but it is stabilizing. And then another leading indicator you might look at is biomaterials, which is the bone substitute used prior to an implant, and what we are hearing from a lot of our practitioners is that they're using the bone substitute as a waiting period until the patient comes back.

Speaker Change: Movement towards guided surgery, and a little bit more outsourcing of lab work it should be an indicator of overall demand in the market.

Speaker Change: Kind of stabilizing I wouldn't say like Rick said I won't seats.

Rick: Great by any stretch, but but it is stabilizing and then another leading indicators you might look at bio materials, which is the bone substitute used prior to an implant.

Speaker Change: And what we are hearing from a lot of our practitioners that they are using the bone substitute.

Speaker Change: As you are waiting periods until the patient comes back so.

Matt Miksic: So, if, for example, the procedure is going to get delayed for financial reasons, they would do this as an inexpensive in-between and get themselves ready to come back for the procedure when they're ready. And that just sort of preserves the jaw and the bone so that it doesn't degenerate to a point where the surgery becomes difficult.

Speaker Change: If for example, the procedures could it get delayed for financial reasons. They would do this as an <unk>.

Speaker Change: Inexpensive in between and get themselves ready to come back for the for the procedure when they are ready and that just sort of preserve that.

Joe: Joe on the phone.

Joe: Sure.

Joe: It does it to generate to a point, where the surgery because that.

Speaker Change: To me is a bit of a leading indicator as well so.

Speaker Change: Those would be the two areas, where I would say we feel stability in the markets. There the market is certainly not corn.

Speaker Change: And again, we feel pretty good about the premium segment as well.

Speaker Change: That is not as great I must be breaking up a touch and I hope you can hear me okay.

Speaker Change: But.

Matt Miksic: So my next question, I've been juggling back and forth between a couple of calls, as a lot of people are, but I'm not sure how much you've commented on or maybe said you could comment on some of the discussions you're having with potential strategic interests around the company. But... Just sort of, you know, theoretically, I guess, I'd love to hear, like, I'm wondering if there is a way to think about if we take a platform that's being used across a broader number of implant competitors to put in the implant systems of a bunch of different companies.

Speaker Change: So my next question.

Speaker Change: Juggling between a couple of calls as a lot of people are but I'm not sure how much you've commented or maybe you said you.

Speaker Change: Can comment on some of the some of the discussions youre, having with potential strategic interest around the company.

Speaker Change: Alright.

Speaker Change: Just sort of.

Speaker Change: Theoretically yes.

Speaker Change: I'd love to hear like how.

Speaker Change: How as much as it is a real guide in.

Speaker Change: The platform that perhaps a great value.

Speaker Change: The implant line I'm wondering if there is way to think about.

Speaker Change: Thank the platform that's being used across.

Speaker Change: Broader number.

Speaker Change: No.

Speaker Change: Implant competitors.

Speaker Change: You had to put an implant systems are a bunch of different companies.

Matt Miksic: And then you get pulled into, say, another strategic that... You know, is your thinking down the road, what you're thinking to ever be, is that you just kind of remain open, or is there a... Part of this where Switzerland becomes more closed, or how to think about that. Sure.

Speaker Change: And then you get holdings USA another strategic.

Speaker Change: As you are thinking down the road once youre thinking ever be in that you just kind of remain open or is there.

Speaker Change: Alright at this we're Switzerland becomes more close or how to think about that.

Matt Miksic: So, okay. So, you know, I think in that text that there's always going to be speculation around assets like ours based on the size and even more so that it's now a pure play dental implant business, which wasn't the case when we had. So what we need to do is run the company like we're gonna run it. Right, but we also know that we have a very unique product that is very differentiated and down to market. So the more that we retain our differentiation, we've been able to hold prices. We've been able to participate in the premium segment.

Mike Glenn: Sure So Mike Glenn.

Speaker Change: Okay. So.

Mike Glenn: I think in Med Tech.

Speaker Change: There is always going to be speculation around assets like ours based on the size.

Speaker Change: And even more so that is now a pure play dental implant business, which wasn't occasionally that's fine.

Speaker Change: So.

Speaker Change: We need to do is around the company like we're going to run it for 10 years right.

Speaker Change: Also note that we have a very unique asset.

Speaker Change: That is very differentiated in the telco market. So the more that we retained.

Speaker Change: Our differentiation, we've been able to hold price.

Speaker Change: We've been able to participate in the premium segment.

Vafa Jamali: You know, many of our competitors have left that segment, and we're doing well, and we're holding prices. We also have this great, great digital platform, which allows us to help both competitors and our own. If I understood the Switzerland comment about open versus closed, right now, our software is open. I would only close that if I had significant, very significant shoot marks.

Speaker Change: Many of our competitors have left that segment.

Speaker Change: And we're doing well and we're holding price.

Speaker Change: We also have this great great digital platform, which allows us to help both competitive and our own I think.

Speaker Change: Matt if I understood the Switzerland comment around around open versus closed right now our software is open I.

Matt Misick: I would only closed that if I had significant very significant market share.

Vafa Jamali: Otherwise, being open is probably good for us strategically. It's also a really, really good idea... That'll be a decision for later on when we get to that point. But, you know, as a public company, we don't plan for that, but you have to. You have to run it like you're running it for the next 10 years, and if something happens in the middle, you have to look at it with an open mind

Matt: Otherwise being open is probably good for us strategically it's also a really well run.

Speaker Change: Okay.

Speaker Change: That'll be a decision for later on when we get to that point, but.

Speaker Change: As a public company, we don't we don't plan for that but <unk> got it.

Richard: You got to run it like you are running it for the next 10 years and if something happens in the metal yet you have to look at it with an open mind. So I don't know if I can say much more than that in terms of what my approaches on Richard if you get a different perspective on that.

Vafa Jamali: So, I don't know if I can say much more than that in terms of how, what my approach is. I don't know, Richard, if you've got a different perspective on that. Yeah. No, no. That's actually a very helpful framework to think about. And I understand this is all, you know, I understand the running of the company without all these considerations, as if you're going to be running it for another five or 10 years.

Speaker Change: Yes.

Speaker Change: No no.

Speaker Change: Actually a very helpful framework.

Speaker Change: As I think about it I understand.

Speaker Change: <unk>.

Speaker Change: I understand that running the company.

Speaker Change: Without all of these considerations and if youre going to be running it for another.

Speaker Change: Five or 10 years so.

Matt Miksic: Maybe just lastly on some of the, you know, two topics that have come up a fair amount are capacity and Asia. I think you touched on Asia and China a little bit in your prepared remarks, but maybe, you know, any wisps or hints that you're picking up that there's a shift in capacity or, on the other side of it, any sense that some of the sluggishness is temporary or the beginning of a longer slog would be super helpful. Thanks so much.

Speaker Change: Maybe just lastly on some of the.

Speaker Change: Q2 topics that have come up a fair amount of capacity.

Speaker Change: Capacity.

Speaker Change: In Asia, I think you touched on Asia, and China, a little bit.

Speaker Change: Any remarks that maybe.

Speaker Change: Any any lists are.

Speaker Change: Hence that you're picking up that there is a shift in capacity are in the other side of it.

Speaker Change: Any sense that some of the sluggishness in China.

Speaker Change: As temporary or at the beginning of a longer longer slog.

Speaker Change: Would be super helpful. Thanks, so much.

Vafa Jamali: I'll start Rich, you can add some color, but we've really reduced our exposure to China so China's really immaterial to us, and I think it's going to continue to have ups and downs based on the year that it compares to. So we've really mostly exited that, and Dr. Robert Marks is in a very private section that we've kept, but Rich, any other comments on that? Yeah, Matt, Vafa's correct.

Richard: Based on the year that compares to so we've really mostly exited that market with respect to the exception.

Richard: I'm, a very private section that we've capped.

Richard: Any other customer.

Rich: Yeah, our exposure in China is minimal, and so we don't get wrapped up with the kind of volatility that you're referencing in China. What I would say about Asia Pacific, actually, when you kind of segment our Asia Pacific business, we're actually performing pretty well in that particular market. And so for us, a headline number for Asia Pacific is in reported currency, we declined by about 6.9% in the quarter. But the yen had a pretty drastic change in the quarter.

Richard: Yes, yes.

Richard: That's correct.

Richard: Our exposure in China is is minimal.

Richard: So we don't we don't we don't get wrapped up with kind of the volatility that you're referencing in China.

Richard: What I'd say about Asia Pacific actually when you kind of segment, our Asia Pacific business, we're actually.

Speaker Change: Are they performing.

Richard: Pretty well actually in that in that particular market and so for US a headline number for Asia Pacific in reported currency, we declined in the quarter about six 9%, but the.

Richard: The yen had a pretty drastic change.

Richard: In that.

Richard: In the quarter and so when you adjust and you actually look at our Asia Pacific business in constant currency that business actually grew one 1% and just a reminder.

Richard: Our biggest businesses.

Richard: Any specific is Japan is number one what we're seeing is we have a <unk>.

Richard: A really fast growing business in India, and a really good solid business that is also growing in Australia, and so we feel in Asia Pacific outside of China, We're actually positioned in the right markets and have a right to win there.

Richard: And we are as a result growing in Asia Pacific in constant currency.

Operator: All right, thank you. There are no further questions at this time. This concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: Alright, thank you.

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