Q4 2024 ZimVie Inc Earnings Call
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Marissa Bych: Good afternoon and welcome to ZimVie's fourth quarter 2024 earnings conference call. Currently, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.
Good afternoon, and welcome to <unk> fourth quarter 'twenty 'twenty four earnings conference call.
Currently all participants are in listen only mode.
We'll be facilitating a question and answer session towards the end of today's call.
Speaker Change: As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Mauritian bias from Gilmartin group for introductory disclosures.
Marissa Bych: I would now like to turn the call over to Marissa Bych from Gilmartin Group for introductory disclosure. Thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter and year ended December 31, 2024. A copy of the press release is available on the company's website, zimvie.com, as well as on sec.gov.
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Speaker Change: Thank you all for joining today's call.
Speaker Change: Earlier today, we released financial results for the quarter and year ended December 31 2024.
Speaker Change: A copy of the press release is available on the company's website can be dot com as well as on SEC Gov.
Marissa Bych: Before we begin, I'd like to remind you that management will make comments during this call that include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. please refer to the company's most recent periodic report filed with the SEC and subsequent SEC filings for a detailed discussion of these risks and uncertainties.
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.
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.
Marissa Bych: In addition, the discussion on this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included within the earnings release and the investor deck issued today found on the investor relations section of the company's website.
Speaker Change: In addition, the discussion on this call will include certain non-GAAP financial measures reconciliations.
Speaker Change: Reconciliations of these measures to the most directly comparable GAAP financial measures are included within the earnings release and the Investor deck issued today some on the.
Speaker Change: Investor Relations section of the company's website.
Marissa Bych: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 26, 2025. 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.
Speaker Change: This conference call contains time sensitive information accurate only as of the live broadcast today February <unk> 2025.
Speaker Change: <unk> disclaims any intention or obligation, except as required by law to update or revise any financial protection or forward looking statements, whether because of new information future events or otherwise.
Vafa Jamali: With that, I will turn the call over to Vafa Jamali, President and Chief Executive Officer of ZimVie. Good afternoon and thank you for joining us. 2024 was a transformational year for ZimVie, marked by many achievements. Through the sale of our spine business, we became a pure play dental company, fully focused on our portfolio of dental implants, biomaterials, and digital dentistry solutions. We delivered $450 million in full year revenue. As part of our commitment to the customers we serve, we innovated across our portfolio to fill product gaps and capitalize on opportunities in the market. In addition, we materially reshaped our operating profile by reducing our corporate costs and reducing manufacturing and supply chain efficiency emissions.
Molly: With that I will turn the call over to the bathroom, Molly President and Chief Executive Officer of <unk>.
Molly: Good afternoon, and thank you for joining us.
Molly: 2024 was a transformational year for zombie marked by many achievements through the sale of our spine business. We became a pure play dental company fully focused on our portfolio of dental implants, biomaterials and digital dentistry solutions.
Molly: We delivered $450 million in full year revenue as part of our commitment to the customers. We serve we innovated across our portfolio to fill product gaps and capitalize on opportunities in the market.
Molly: In addition, we materially reshaped, our operating profile by reducing our corporate costs and introducing manufacturing and supply chain efficiency initiatives.
Vafa Jamali: As a result of these efforts, we improved adjusted EBITDA margins by over two percentage points for the year. In the fourth quarter alone, we generated over $21 million in operating cash. We use the proceeds from the sale of our spine business to pay down debt and significantly de-lever the business. I would like to thank our team for the diligent execution to make this possible, accomplishing all of this despite softness in our end market.
Molly: As a result of these efforts we improved adjusted EBITDA margins by over two percentage points for the year.
Molly: In the fourth quarter alone, we generated over $21 million in operating cash flow.
Molly: We used the proceeds from the sale of our spine business to pay down debt and significantly delever the business.
Molly: I would like to thank our team for their diligent execution to make this possible accomplishing all of this despite softness in our end markets.
Vafa Jamali: For 2025, look at us to drive even greater progress culminating with a line of sight to positive gap operating income for 2025. Our commercial growth drivers for 2025 will include strengthening our commercial team, continued focus on medical education and training programs. and expansion of the product portfolio.
Molly: For 2025 looking at to drive even greater progress, culminating with a line of sight to positive GAAP operating income for 2025.
Molly: Our commercial growth drivers for 2025 will include strengthening our commercial team.
Molly: Continued focus on medical education and training programs.
Molly: An expansion of the product portfolio.
Vafa Jamali: On the topic of our commercial team, I'm very excited to announce we've appointed a new Vice President of America sales. This is our largest and most profitable market. Scott has been with our organization for over 15 years and has a deep knowledge of the industry, strong relationships with our customers and DSO partners, and he is data-driven. This is the approach that we need to access the best market opportunities and for optimum performance management. He's already hit the ground running and I'm excited to have him lead our sales organization.
Molly: On the topic of our commercial team very excited to announce we've appointed a new Vice President of America sales.
Molly: This is our largest and most profitable market.
Molly: Scott has been with the organization for over 15 years and has a deep knowledge of the industry strong relationships with our customers and DSO partners.
Molly: Data driven.
Molly: This is the approach that we need to access the best market opportunities.
Molly: Optimum performance management.
Molly: He has already hit the ground running and I'm excited to have him lead our sales organization.
Vafa Jamali: Moving on to education and training programs, these are courses offered at our world-class Palm Beach Gardens Institute, with an aim to drive adoption of implant dentistry. Our programs continue to be in very high demand, therefore serving as a core growth driver for our commercial strategy. Looking at our portfolio, our key objective remains to prudently invest, to fill product gaps, and capitalize on opportunities in the market, creating a holistic portfolio supporting every step of the implant process. While we focus on commercial execution, we will continue to work diligently to improve the overall efficiency of our company and to manage capital allocation effectively.
Molly: Moving on to education and training programs. These are courses offered at our World Class Palm Beach Gardens Institute with an aim to drive adoption of implants industry.
Molly: Our programs continue to be in very high demand, therefore, serving as a core growth driver for our commercial strategy.
Molly: Looking at our portfolio, our key objective remains to prudently invest to fill product gaps and capitalize on opportunities in the market, creating a holistic portfolio supporting every step of the implant process.
Molly: While we focus on commercial execution, we will continue to work diligently to improve the overall efficiency of our company and to manage capital allocation effectively.
Vafa Jamali: which we'll talk further about these priorities. We look forward to updating our stakeholders on our progress to increase cash flow and improve financial flexibility in order to further reduce debt and reinvest in the business.
Molly: Rich will talk further about these priorities, we look forward to updating our stakeholders on our progress to increase cash flow and improved financial flexibility in order to further reduce debt and reinvest in the business.
Vafa Jamali: I will now give additional details on each piece of our portfolio, starting with our dental. Our premium implants continue to be positively received by clinicians and patients. Our portfolio is led by our TSX and T3 Pro implants, which we perceive to be the highest quality implants on the market. Our clinically-proven implant technologies address common concerns in modern dental implantology, one of which is peri-implant infection. That occurs in up to 20% of patients and can jeopardize long-term implants.
Speaker Change: I will now give additional details on each piece of our portfolio starting with our dental implants.
Speaker Change: Our premium implant could you would you be positively received by clinicians and patients.
Speaker Change: Our portfolio is led by our <unk> and Q3 pro implants, which we perceive to be the highest quality implants on the market.
Speaker Change: Our clinically proven implant technologies address common concerns in modern dental in oncology.
Speaker Change: One of which is Perry implant infection.
Speaker Change: That occurs in up to 20% of patients I can jeopardize long term implant success.
Vafa Jamali: A study recently published in the Journal of Biomedical Materials Research, a leading journal in the field of biological medical sciences, compared the innovative coronal surface technology of our premium implants to other leading brands. It showed our T3 Pro and TSX implants have bacterial adhesion levels that may offer up to 20% lower risk of peri-implantitis.
Speaker Change: AH study recently published in the Journal Biomedical materials research, a leading journal in the field of biological medical sciences compared to innovative kernel surface technology of our premium implants to other leading brands and showed our key three pro and PSX endpoints of bacterial adhesion levels that may offer up to 20% lower risk.
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Vafa Jamali: better implant, better patient outcomes are obviously better for the patients, but also they're better for the economics of the practice. We've also seen strong demand for our recently launched portfolio of GenTech restorative components. This demand validates our strategy to continue expanding and improving the commercial reach of our product offering. We aim to bring additional products to market in the coming months, which complement the existing sales bag of our field rep. The market opportunity for dental implants remains underpenetrated and exciting.
Speaker Change: Better and better patient outcomes are obviously better for the patients, but also their better for the economics of the practice.
We are also seeing strong demand for our recently launched portfolio of Gentex restored of components. This demand validates our strategy to continue expanding and improving the commercial reach of our product offerings. We aim to bring additional products to market in the coming months, which complement the existing sales bag of our field reps.
Speaker Change: The market opportunity for dental implants remains underpenetrated and exciting.
Vafa Jamali: We look forward to continue to deliver innovative and effective solutions for implantologists globally.
Speaker Change: We look forward to continuing to deliver innovative and effective solutions for implantologist globally.
Vafa Jamali: Next, I'll shift to biomaterials. Our biomaterials portfolio continues to gain recognition for its quality, growing 2% during the year, and adding many new customers. An implant is only as strong as the foundation you place it in. And our biomaterials portfolio provides clinicians with multiple options to create the ideal conditions for a successful implant procedure.
Speaker Change: Next I'll shift to biomaterials, our biomaterials portfolio continues to gain recognition for its quality growing 2% during the year and adding many new customers.
Speaker Change: And implant is only as strong as a foundation you place it in and our biomaterials portfolio provides clinicians with multiple options to create the ideal conditions for a successful implant procedure.
Vafa Jamali: Finally, I will highlight the ongoing success of our digital portfolio. Excluding oral scanner sales, which are distributed products, 2024 was a record revenue year for a digital dentistry business. Our ZimVie digital solutions, excluding scanner sales, grew over 10% for the year and finished strong, growing over 20% in the fourth quarter. One of the most exciting areas in the digital portfolio is our implant concierge service, which grew 14% for the year. This exceptional growth rate is due to the significant savings the service offers clinicians, reducing hours of labor from dental office work. We look forward to continue to expand the commercial reach of our implant concierge service in 2025, and we'll have more exciting updates to come.
Speaker Change: Finally, I will highlight the ongoing success of our digital portfolio.
Speaker Change: Excluding oral scanner sales, which our distributor products 2024 was a record revenue year for digital dentistry business.
Speaker Change: Our Zimbra digital solutions, excluding scanner sales grew over 10% for the year and finished strong growing over 20% in the fourth quarter.
Speaker Change: One of the most exciting areas of the digital portfolio as our implant concierge service, which grew 14% for the year.
Speaker Change: This exceptional growth rate is due to the significant savings of service offers clinicians reducing hours of labor for dental office workflow.
Speaker Change: We look forward to continue to expand the commercial reach of our implant concierge service in 2025, and we will have more exciting updates to come.
Vafa Jamali: Surgical guide sales have also been strong, especially following our 5.4 Real Guide. software launch, which drove RealGuy growth of 39% in the year. Our extensive experience in this area has created a massive library of digital images. The digital reference library allows our software to provide one-click nerve detection and automated bone and tooth segmentation. This is a major benefit to clinicians, greatly increasing the safety of the procedure with great accuracy and less time. Advances like this are why we are bullish on the long-term prospects for driving more users to adopt implant dentistry. Overall, we're confident that our advancements in digital technology complement our top-of-the-line implant and biomaterials offerings, positioning ZimVie advantageously in the dental implant solutions market going forward.
Speaker Change: Surgical guide sales have also been strong, especially following our five four real guide.
Speaker Change: <unk> launch, which drove <unk> growth of 39% in the year.
Speaker Change: Our extensive experience in this area has created a massive library of digital images. The digital reference library allows our software to provide one click nerve detection and automated bone in two segmentation. This is a major benefit to clinicians greatly increasing the safety of the procedure with great accuracy and last times.
Speaker Change: That sounds like this are why we are bullish on the long term prospects for driving more users to adopt implant dentistry.
Speaker Change: Overall, we're confident that our advancements in digital technology complement our top of alignment plant and biomaterials offerings.
Speaker Change: Positioning Zambia advantageously in the dental implant solutions market going forward.
Rich Heppenstall: Let me now turn the call over to Rich to review our financial performance as we look forward to greater detail. Thanks, Vafa, and good afternoon, everyone. I'll begin by reviewing our fourth quarter and full year 2024 results for continuing operations.
Speaker Change: Let me now turn the call over to rich to review our financial performance as we look forward to a greater detail.
Rich: Thanks, Scott and good afternoon, everyone I.
Rich: I will begin by reviewing our fourth quarter and full year 2024 results for continuing operations.
Rich Heppenstall: And we'll close by providing commentary on our outlook for the full year 2025 and provide our expectations for the first. As a reminder, we finalized the sale of our spine business on April 1st, 2024. That's our legacy spine segment is reflected in discontinued operations in our financial. Please refer to our 10-K for financial results from discontinued operations. Beginning with our results for the fourth quarter 2024. Total third-party net sales for the fourth quarter were $111.5 million, a decrease of 1.4% in reported rates and a decline of 0.9% in constant currency, primarily due to declines in US implants and in oral scanners, partially offset by growth in biomaterials and digital solutions.
I'll close by providing commentary on our outlook for the full year 2025, and provide our expectations for the first quarter.
Rich: As a reminder, we finalized the sale of our spine business on April one 2024, thus our legacy spine segment is reflected in discontinued operations in our financial statements.
Rich: Please refer to our 10-K for our financial results from discontinued operations.
Rich: Beginning with our results for the fourth quarter 2024.
Rich: Total third party net sales for the fourth quarter were $111 5 million a.
Rich: Greece of one 4% in reported rates.
Rich: Decline of 0.9% in constant currency, primarily due to declines in U S implants, and an oral scanners, partially offset by growth in biomaterials and digital solutions.
Rich Heppenstall: In the U.S., third-party net sales for the fourth quarter of $64.4 million declined 1.5 percent compared to the prior year, driven by weakness during the last two weeks of the quarter in implant sales and lower oral scanner sales partially offset by double-digit growth in digital and growth in biomaterials. Outside of the U.S., third-party net sales of $47.1 million decreased 1.2% on a reported basis and was flat in cost-to-currency. All three of our major product categories, implants, biomaterials, and digital, excluding scanner sales, grew in the court. Fourth quarter 2024 adjusted cost of products sold was 35.0% as a percentage of sales, decreasing 240 basis points versus 37.4% in the prior year period.
Rich: In the U S third party net sales for the fourth quarter of $64 $4 million declined one 5% compared to the prior year driven by weakness during the last two weeks of the quarter in implant sales and lower oral scanner sales, partially offset by double digit growth in digital.
Rich: And growth in biomaterials.
Rich: Outside of the U S third party net sales of $47 $1 million decreased one 2% on a reported basis and was flat in constant currency.
Rich: All three of our major product categories implants, biomaterials and digital excluding scanner sales grew in the quarter.
Rich: Fourth quarter 2024, adjusted cost of products sold was 35 zero percent as a percentage of sales.
Rich: Decreasing 240 basis points versus 37, 4% in the prior year period.
Rich Heppenstall: driven primarily by manufacturing efficiencies and cost reductions partially offset by an unfavorable product. Fourth quarter adjusted research and development expenses of $5.8 million or 5.2% of sales compares to $6.5 million or 5.7% of sales in the prior year. The decrease was primarily due to lower third-party fees associated with new product development. Fourth quarter adjusted selling, general, and administrative expense of $57.2 million was flat to $57.4 million in the prior year. Other income of $2.7 million primarily reflects income from transition service agreements resulting from the sale of our spine business. and offsets stranded costs that remain in SG&A expense.
Rich: Driven primarily by manufacturing efficiencies and cost reductions, partially offset by an unfavorable product mix.
Rich: Fourth quarter, adjusted research and development expenses of $5 8 million or five 2% of sales compares to $6 5 million or five 7% of sales in the prior year.
Rich: The decrease was primarily due to lower third party fees associated with new product development.
Rich: Fourth quarter, adjusted selling general and administrative expense of $57 $2 million was flat to $57 $4 million in the prior year.
Rich: Other income of $2 $7 million, primarily reflects income from transitional service agreements, resulting from the sale of our spine business and offset stranded costs that remain in SG&A expense.
Rich Heppenstall: Fourth quarter adjusted EBITDA attributable to continuing operations was $18.4 million, translating to a 16.5% adjusted EBITDA margin. This reflects a $4.5 million increase and 420 basis of margin expansion versus $13.9 million or 12.3% margin in the same period of the prior year. Our strong adjusted EBITDA performance underscores our ability to drive optimization in our cost structure during a time of transformational change and a challenging market environment. We believe that this hard work positions us well for continued value creation as our end markets continue to show signs of stability in what is widely viewed as a cyclical trough in our industry.
Rich: Fourth quarter adjusted EBITDA attributable to continuing operations was $18 4 million.
Translating to a 16, 5% adjusted EBITDA margin.
Rich: This reflects a $4 $5 million increase and 420 basis of margin expansion versus $13 9 million.
Rich: Or 12, 3% margin in the same period of the prior year.
Rich: Our strong adjusted EBITDA performance underscores our ability to drive optimization in our cost structure during a time of transformational change and a challenging market environment. We are.
Rich: <unk> believes that this hard work positions us well for continued value creation as our end markets continue to show signs of stability in what is widely viewed as a cyclical trough in our industry.
Rich Heppenstall: Fourth quarter adjusted earnings per share attributable to continuing operations of $0.27 per share on a fully diluted share count of 27.6 million shares reflects an increase of 170% from 10% per share in the prior year period.
Rich: Fourth quarter adjusted earnings per share attributable to continuing operations of 27 per share on a fully diluted share count of 27 6 million shares reflects an increase of 170% from 10% per share in the prior year period.
Rich Heppenstall: Shifting to our results for the full year 2024. Total third-party net sales for the full year 2024 were $449.7 million, a decrease of 1.6% in reported rates, and a decline of 1.2% in constant currency versus the prior year. In the U.S., third-party net sales for the full year 2024 of $266.8 million reflects a decline of 1% versus the prior year. Outside of the U.S., third-party net sales of $182.9 million decreased. 2.5% on a reported basis and 1.5% in cost of current. Full year 2024 adjusted cost of products sold was 35.8%, a reduction of 40 basis points versus 36.2% in the prior year.
Rich: Shifting to our results for the full year 2024.
Rich: Total third party net sales for the full year 2024 were $449 7 million a.
Rich: A decrease of one 6% in reported rates and a decline of one 2% in constant currency versus the prior year.
Rich: In the U S third party net sales for the full year 2024 up $266 8 million reflects a decline of 1% versus the prior year.
Rich: Outside the U S third party net sales of $182 $9 million decreased two 5% on a reported basis and one 5% in constant currency.
Rich: Full year 2024, adjusted cost of products sold was 35, 8% a reduction of 40 basis points versus 36, 2% in the prior year.
Rich Heppenstall: driven by cost reductions resulting from the relocation of products between our facilities and more efficient manufacturing operations. Full year adjusted research and development expense of $25.0 million or 5.6% of sales compares to $23.3 million or 5.1% of sales in the prior year due to ongoing product development. Full-year adjusted selling general and administrative expense of $237.7 million compares to $240.5 million in the prior year, driven by decreases in employee-related expenses, third-party fees, and information technology. Adjusted EBITDA attributable to continuing operations in 2024 was $60.0 million. An 18% increase or nearly $10 million higher than $50.8 million in the prior year.
Rich: Driven by cost reductions, resulting from the relocation of products between our facilities.
Rich: And more efficient manufacturing operations.
Rich: Full year adjusted research and development expense of 25 zero million or five 6% of sales compares to $23 3 million.
Rich: Or five 1% of sales in the prior year due to ongoing product development needs.
Rich: Full year, adjusted selling general and administrative expense of $237 7 million compares to $245 million in the prior year driven by decreases in employee related expenses third party fees and information technology expense.
Rich: Adjusted EBITDA attributable to continuing operations in 2024 was 60.0 million.
Rich: An 18% increase or Neil or $10 million higher than $50 8 million in the prior year.
Rich Heppenstall: This translates to a four-year adjusted EBITDA margin of 13.3%, a 220 basis point improvement versus our 11.1% in the prior year. Again, I would like to emphasize that our full year 220 basis point improvement in adjusted EBITDA margin on lower sales reflects many quarters of work to optimize our position in our markets, improve our cost of goods, and drive operating efficiency. 2024 adjusted earnings per share attributable to continuing operations was 62 cents per share on a fully diluted share count of 27.4 million shares. 182% increase over the 22 cents per share we had in the prior year.
Rich: This translates to a full year adjusted EBITDA margin of 13, 3%, a 220 basis point improvement versus our 11, 1% in the prior year.
Rich: Again, I would like to emphasize the full year 220 basis point improvement in adjusted EBITDA margin on lower sales reflects many quarters of work to optimize our position in our markets improve our cost of goods and drive operating efficiency.
Rich: 2024, adjusted earnings per share attributable to continuing operations.
Rich: <unk> 62 per share on a fully diluted share count of 27 4 million shares.
Rich: 182% increase over the 22 per share we have in the prior year period.
Rich Heppenstall: Now turning to the balance. As of the end of the 4th quarter 2024, consolidated ZimVie continuing operations cash was $75 million. Gross debt at the end of the quarter was approximately $220 million, yielding net debt of approximately $145 million. As a reminder, our cash balance does not include the $60 million seller note from the sale of Spine, which continues to compound interest. This note matures in October 2029, but could be received earlier under certain circumstances. Additionally, we maintain our $175 million revolving credit facility, which remains undrawn.
Rich: Now turning to the balance sheet.
Rich: As of the end of the fourth quarter 2024, consolidated zombie continuing operation's cash was $75 million.
Rich: Gross debt at the end of the quarter was approximately $220 million, yielding net debt of approximately $145 million.
Rich: As a reminder, our cash balance does not include the $60 million seller note from the sale of spine, which continues to compound interest.
Rich: This note matures in October 2029, but could be received earlier under certain circumstances.
Rich: Additionally, we maintained $175 million revolving credit facility, which remains undrawn.
Rich Heppenstall: Now, turning toward our 2025 guide. beginning with our expectations for 2025 continuing operations. We expect 2025 revenue of between $445 million to $460 million, reflecting a 1% decline to 2% reported growth. Please note, when considering an 80 basis point or $3.6 million headwind from the impact of current and a $1,000,000 impact from one less selling day in 2025 versus 2024, our guidance reflects flat to 3% constant currency growth. The low end of our guidance range assumes the dental market remains the same while the high end implies a moderate market recovery in the back half of 2025.
Rich: Now turning toward our 2025 guidance.
Rich: Beginning with our expectations for 2025, continuing operations, we expect 2025 revenue of between $445 million to $460 billion, reflecting a 1% decline to 2% reported growth.
Rich: Please note when considering an 80 basis point or $3 $6 million headwind from the impact of currency.
Rich: And a $1 million impact from one less selling day in 2025 versus 2024, our guidance reflects flat to 3% constant currency growth.
Rich: The low end of our guidance range assumes the dental market remains the same while the high end implies a moderate market recovery in the back half of 2025.
Rich Heppenstall: We plan to continue to generate operating leverage and expect adjusted EBITDA of between $65 million to $70 million, reflecting an 8% to 17% improvement over 2024. We expect adjusted earnings per share to be 80 cents to 95 cents per share on a fully diluted share count of 29.0 million shares, representing a substantial increase of 29% to 53% versus 2024. Interest expense following our significant pay down of debt and inclusive of accrued interest income from the seller note is expected to be in the range of $7.5 million to $8 million. Share-based compensation expense is expected to be $15 million to $16 million.
Rich: We plan to continue to generate operating leverage and expect adjusted EBITDA of between $65 million to $70 million, reflecting an 8% to 17% improvement over 2024.
Rich: We expect adjusted earnings per share to be 80.
Rich: To <unk> 95 per share on a fully diluted share count of 29.0 million shares.
Rich: Representing a substantial increase of 29% to 53% versus 2024.
Rich: Interest expense following our significant pay down of debt and inclusive of accrued interest income from the seller note is expected to be in the range of $7 5 million to $8 million.
Rich: Share based compensation expense is expected to be 15 million to $16 million.
Rich Heppenstall: Capital expenditures are expected to be in the range of $11 million to $14 million and include costs to transition our Oracle systems in the U.S. to the cloud. Now that many of the expenses associated with the spine sale are winding down, we expect to generate operating cash flow of approximately $30 million to $40 million in 2025, more than double the amount of operating cash flow generated in 2024. Additionally, we are rapidly improving our bottom line and we expect to achieve positive gap operating income in 2025.
Rich: Capital expenditures are expected to be in the range of 11 million to $14 million and include costs to transition our Oracle systems in the U S cloud.
Rich: Now that many of the expenses associated with the spine sale of winding down we expect to generate operating cash flow of approximately 30 million to $40 million in 2025 more than double the amount of operating cash flow generated in 2024.
Rich: Additionally, we are rapidly improving our bottom line and we expect to achieve positive GAAP operating income in 2025.
Rich Heppenstall: Moving on to our expectations for the first quarter. We expect net sales in the first quarter of 2025 to be in the range of $112 million to $114 million, inclusive of three headwinds. More specifically, the impact of currency in the first quarter is $1.6 million. The impact of one less selling day is $1 million, and the termination of a reverse transition manufacturing agreement with our prior parents is $1.4 million. When normalizing for these headwinds, our Q1 expectation reflects a range of minus 2% to flat growth in the first quarter. We expect adjusted EBITDA margin in the first quarter of between 14% and 15% of sales.
Rich: Moving on to our expectations for the first quarter.
Rich: We expect net sales in the first quarter of 2025 to be in the range of $112 million to $114 million inclusive of three headwinds.
Rich: More specifically the impact of currency in the first quarter is $1 6 million the impact of one less selling day is $1 million and the termination of a reverse transition manufacturing agreement with our prior parents is $1 4 million.
When normalizing for these headwinds our Q1 expectation reflects a range of minus 2% to flat growth in the first quarter.
Rich: We expect adjusted EBITDA margin in the first quarter of between 14% and 15% of sales.
Rich Heppenstall: Before handing the call back to Vafa, I also want to touch briefly on the topic of tariffs. Our team has been closely monitoring recent government commentary and actions and analyzing potential impacts. Our current guidance assumes that our business will not be materially impacted by terror. We will continue to follow the situation closely and provide updates to the market as needed.
Rich: Before handing the call back to <unk> I also want to touch briefly on the topic of tariffs.
Rich: Our team has been closely monitoring recent government commentary and actions and analyzing potential impacts our current guidance assumes that our business will not be materially impacted by tariffs we.
Rich: We will continue to follow the situation closely and provide updates to the market as needed.
Vafa Jamali: With that, I'll now turn the call back over to Vafa. Thanks, Rich. Over the past year, we've made significant progress on our goals of improving our operating efficiency while continuing to innovate for our customers and creating value for our shareholders. We are well-positioned in the global dental implant biomaterials and digital dentistry market with a strong presence in the tooth ablation market and market-leading positions in certain geographies.
Beth: With that I'll now turn the call back over to Beth.
Beth: Thanks, rich over the past year, we've made significant progress on our goals of improving our operating efficiency, while continuing to innovate for our customers and creating value for our shareholders.
Beth: We are well positioned in the global dental implant biomaterials and digital dentistry market with a strong presence in the acute replacement market and market leading positions in certain geographies.
Vafa Jamali: To conclude, I'd like to share my optimism for the year ahead. In 2025, our focus will be driving expanded adjusted EBITDA margins. Earnings per share growth and strong operating cash flow. We will continue to invest in our business to increase our product offerings and expand our geographic reach while optimizing our expense profile, ultimately delivering great value for shareholders. I look forward to providing updates on these activities throughout the year. I believe our team is well-positioned to execute upon each of these priorities.
To conclude I'd like to share my optimism for the year ahead in 2025, our focus will be driving expanded adjusted EBITDA margins.
Beth: Earnings per share growth and strong operating cash flow.
Beth: We'll continue to invest in our business to increase our product offerings and expand our geographic reach while optimizing our expense profile.
Beth: This will lead to delivering great value for shareholders.
Beth: I look forward to providing updates on these activities throughout the year I believe our team is well positioned to execute upon our each of these plants with that let me open it up to questions.
Vafa Jamali: With that, let me open it up to questions. Thank you.
Beth: Thank you.
Speaker: 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. To withdraw your question, please press star 11 again. Please stand by while we get our questions ready.
Beth: 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.
Beth: To withdraw your question. Please press star one again.
Beth: Please stand by while we get our questions ready.
Beth: Yeah.
David Saxon: Our first question will come from David Saxon, Need Edmund Company. Go ahead, David. Great. Oh, good afternoon, Vafa and Rich. Thanks for taking my questions. Let's see. I guess I wanted to start on some of the comments you made in the script, Vafa. When you were talking about the U.S. performance, you noted in the last two weeks, I think it was implants, you saw some weakness. So, you know, I wanted to just understand what drove that. You know, was that just the holidays or anything specifically? And then, you know, how did January and February shape up?
David Saxon: Our first question will come from David Saxon Needham and company go ahead David.
Beth: Great good.
Speaker Change: Good afternoon.
Beth: Thanks for taking my questions.
Beth: Let's see I guess I wanted to start on some of the comments you made in the script.
Beth: When you were talking about the U S performance.
Beth: In the last two weeks I think it was implants.
Beth: You saw some weakness so.
Beth: Wanted to just understand what drove that.
Beth: Was that just the holidays or anything specifically and then how did January February shape up.
Speaker Change: Yeah, Thanks for the call and thanks for the question so the.
Vafa Jamali: Thanks for the call. Thanks for the question. So the way we saw it was up to the middle of December, we were actually tracking to be. at the, actually at the upper range of our, of our, our guide. So we felt pretty good. And then our POs really dried up for the last two weeks of December. And we did some extensive reviews with the region manager teams, and they said there was. extended holidays, people just giving their staff the time off for the week, and it was more than before. This is probably the second year in a row we've seen it.
Beth: The way we saw it was up to the middle of December we were actually tracking could be.
Beth: Actually at the upper range of our of our our guidance.
Beth: So we felt we felt pretty good and then <unk> really dried up for the last two weeks of December and we did some extensive.
Beth: Reviews with the region manager teams and they said there was.
Beth: Extended holidays people just given their staff the time off for the week and it was more than one of them before this is probably the second year the role we've seen it.
Vafa Jamali: the end of December not being as strong as previous years were. But this one was a little bit heightened and I think that once I've listened to a bunch of commentary from different parts. It feels like it was extended holidays that really caused the timing of the New Year's and Christmas.
Beth: The end of the end of December not being as strong as <unk>.
Beth: As previous years work, but this one was a little bit heightened did I think that once I have listened to a bunch of commentary from different parts of the business.
Beth: It feels like it was extended holidays.
That really caused that beam.
Beth: The timing of the of new years and Christmas.
Vafa Jamali: January came back so January was stable again so so December first two weeks of summer was good and then January was back to to normal again I think some blips in in February nothing nothing material You know, I hate to call out weather right now, but that's what we heard. But I would say much more stable now than the last two weeks of December. And it wasn't anything, it wasn't share loss or competitive behavior. It was just truly a shutdown of offices that we experienced. Okay, great. Thanks for that.
Beth: January came back so January was stable again, so so December 1st two weeks with some of them is good.
Beth: And then January was back to normal again, some blips in February nothing nothing material I think.
Beth: Yes.
Beth: I think the call out weather right now but.
Beth: That's what we heard.
Beth: But I would say much more stable now than in the last two weeks of December and it wasn't anything it wasn't.
Beth: Share loss or competitive behavior. It was just.
Beth: Truly shutdown of offices that we experienced in the U S.
Beth: Okay, great. Thanks for that and then.
David Saxon: And then, you know, I just want to understand kind of expectations for growth by product category. You know, I would assume kind of implants and scanners remain kind of the drag, but are you expecting like biomaterials and digital X scanners to grow for the year?
Beth: I just wanted to understand kind of expectations for growth by product category.
Beth: I would assume kind of implants and <unk>.
Beth: Scanners remain kind of the drag but are you expecting like biomaterials and digital X scanners to grow.
Beth: For the year.
Rich Heppenstall: Yeah, Rich, you want to take that one? I think it's about similar to this year. Yeah, yeah, David.
Rich: Yes, rich you want to take that one I think it's about similar to this year, which was yes, yes, David Yeah happy to take it.
Rich Heppenstall: Yeah, happy to take it. Yeah, so the way the way that we're thinking about it, about 2025 by product category, even though we're not we're not guiding is, you know, digital, digital has great momentum, right? As Vafa mentioned in the script. And we grew again by double digits in the in the fourth quarter. So that that business continues to perform well. You know, our biomaterials franchise continues to perform well. Also, we've got some really good offerings. You know, we had the new product introduction, you know, about a year ago, I believe, on biomaterials and that business continues to do well.
Rich: Yes, so the way the way that we're thinking about it about 2025 by product category, even though we're not we're not guiding is digital digital has great momentum right as I mentioned in the script and we grew again by double digits in the in the fourth quarter. So that business continues to perform well.
Rich: Materials franchise continues to perform well also we've got some really good offerings.
Rich: The new product introduction.
Rich: About a year ago, I believe on biomaterials and that business continues to do well.
Rich Heppenstall: You know, so on the on the other pieces that you mentioned, talk to oral scanners first, and then I'll kind of switch over to implants on the oral scanner side. You know, that that product for us is distributed product. So it's low margin product. You know, we're we continue to see pressure in the fourth quarter. We expect that to start to kind of level out probably, you know, after the first quarter, you know, and kind of get back to a little bit more normalcy.
Rich: So on the on the other pieces that you mentioned I'll talk to oral scanners first and then I'll kind of switch over to implants on the oral scanner side.
Rich: That product for us as distributor product, so it's a low margin product.
Rich: We continue to see pressure in the fourth quarter, we expect that to start to kind of level out probably.
Rich: After the first quarter and kind of get back to a little bit more normalcy, but our real focus is going to be around implants, and <unk> kind of alluded to a change in sales leadership that we have in the U S. At the end of at the end of the year beginning of December and.
Rich Heppenstall: But our real focus is going to be around. And Vafa kind of alluded to a change in sales leadership that we had in the US at the end of the year, kind of the beginning of December. And one of the things that Vafa and I found was that we have good products. We have an effective, well-covered sales force. But one of the things that we weren't doing and found this after we sold Spine is we could be more data-driven from a sales execution standpoint. And so you'll find that the implant market is still pressured, but you'll find a heightened degree of focus around implant growth in 2025 that are more data decisions that actually leverage the full power of the entire portfolio, including, of course, the strength of the implant.
Speaker Change: One of the things that back and I found was that we have good products, we have an effective well covered salesforce.
Speaker Change: But one of the things that we werent doing and found this after we sold spine is we could be more data driven from a sales execution standpoint, and so youll find that there.
Speaker Change: That market is still pressure, but youll find a heightened degree of focus around implant growth in 2025 that are more data decisions that actually leverage.
Speaker Change: Leverage the full power of the entire portfolio, including of course, the strength of the implants.
David Saxon: Okay, great. Thanks so much for attending my questions.
Speaker Change: Okay, great. Thanks, so much for taking my question.
Speaker: Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Yes.
Kevin Caliendo: Our next question is from Kevin Caliendo with UBS. Go ahead, Kevin. Thank you and thanks for taking my question.
Speaker Change: Our next question is from Kevin Caliendo with UBS go ahead Kevin.
Kevin Caliendo: Thank you and thanks for taking my question.
Kevin Caliendo: Oh, guys, I'm going to talk a little bit about the implant market. It doesn't sound, you know, like things got materially better. Obviously, you talked about the end of the fourth quarter and what happened. And your expectations for this year are that it's stable. You know, your guidance basically assumes it's stable, and the high end assumes it gets better. What does that actually mean, get better? Is it in terms of total volumes? Is it in terms of total mix? Like, are you seeing any improvement in the more comprehensive cases, the half arches or full arches or anything like that?
Speaker Change: Okay got it so let's talk a little bit about the implant market.
Got.
Speaker Change: It doesn't sound like things got materially better obviously, you talked about at the end of the fourth quarter and what happened and your expectations for this year are that it's stable.
Speaker Change: Guidance basically assumes that stable in the high end assumes that gets better what does that actually mean get better is it in terms of total volumes is it terms of total mix like are you seeing any improvement in the more comprehensive cases. The app arches are full or is there anything like that are you seeing any signs of that coming back yet.
Vafa Jamali: Are you seeing any signs of that coming back yet? Yeah, I think the pressure is a bit of the more expensive cases, so the cases you just mentioned, and that's really where the recovery needs to happen. And that typically is done at the specialist level, Kevin. So, like, that would be the big volume movers that are very loyal ZimVie customers would be where we would see that growth, and that hasn't fully recovered yet. Where you do see implants kind of moving along are the singles, the onesie, twosies, where, you know, it could be done in a much broader number of practices than a purely ZimVie.
Speaker Change: Yes, I think I think the pressure has been at the more expensive case.
Speaker Change: So the cases, you just mentioned and Thats really where the recovery needs to happen and that typically is done at the specialist level, Kevin It sounds like that would be the big volume movers that are that are very loyal zombie customers would be where we would see that.
Speaker Change: That growth and that Hasnt fully recovered yet where you do see implants kind of.
Speaker Change: Moving along are the singles Onesie, Twosies where were.
Speaker Change: It could be it could be done in a much broader number of practices that are purely specialist. So we are assuming that if there is a recovery of <unk> tabak end of the year and the way we've guided as we've said if it stays the same it's here and with some moderate improvement.
Vafa Jamali: So we're assuming that if there is a recovery, it'll be at the back end of the year. And the way we've got it, as we've said, you know, if it stays the same, it's here. And with some moderate improvement, with moderate improvement, which we'll have to include. the specialist volume that you just mentioned. So that's really where we need to see it get better.
Speaker Change: Yes.
Speaker Change: With water improve which will have to include.
Speaker Change: The specialists volume that you just mentioned, so that's really where we need to see it get better.
Vafa Jamali: And I don't believe that it's back to normal.
Speaker Change: I don't believe that.
Speaker Change: It's back to normal.
Vafa Jamali: Okay, we had anecdotally heard... that there was more availability of financing out there for aligners and maybe for implants. and that kind of helped a little bit in 4Q. Did you see any of that at all? Was that in any way impacting the market in a positive way or just too small to matter? I think it's too small to matter right now. We would want to see some material. overall interest rate. Those would be probably the biggest drivers for that expense. Right, so those are the ones that I'm saying, you know, that can drive a whole lot of change and sentiment in this in this industry.
Speaker Change: Okay.
Speaker Change: <unk>.
We have anecdotally heard.
Speaker Change:
Speaker Change: That there was more availability of financing out there for a liners and maybe for implants.
And that kind of helped a little bit in <unk> did you see any of that at all or is that in any way impacting the market in a positive way or.
Speaker Change: This too small to matter at this point.
Speaker Change: I think it's too small to matter right now we would we would want to see some material change in terms of the overall interest rate.
Speaker Change: Those would be probably the biggest drivers for the expensive cases right. So those are the ones that I am saying that can drive a whole lot of change in sentiment in this industry and for that to happen I think you do need to see a little bit bigger change.
Vafa Jamali: And for that to happen, I think you do need to see a little bit bigger change than than the ones you choose. You'll be there. They're there in good, good faith. And they're they're great that they're doing them, but they're not impacting a big enough swath of the of the population.
Speaker Change: Change in then.
Speaker Change: The onesie Twosies will be there.
Speaker Change: Good good faith in there they are great that theyre doing them, but they're not impacting a big enough swath of the population I don't think.
Speaker Change: Got it.
Kevin Caliendo: Last one from me, just on biomaterials, 2% growth. I think when we spoke in November, you talked about starting to see a little bit of an uptick in demand, which gave you maybe a little bit of optimism. there. And I'm just wondering if that continued at all. You talked about the demand in January on the implant side. I'm just wondering if you're seeing anything in biomaterials. So that's moving along nicely, which means there is implant volume out there.
Speaker Change: Last one from me just on biomaterials and 2% growth I think when we spoke.
Speaker Change: In November you talked about starting to see a little bit of an uptick in demand, which gave you maybe a little bit of optimism.
Speaker Change: There and I'm just wondering if that was.
Speaker Change: If that continued at all you talked about the demand in January and the implant that I'm just wondering if youre seeing anything in biomaterials.
Speaker Change: So that's moving along nicely, which means there is implant volume out there.
Vafa Jamali: The piece that would give me great optimism, where I'll jump on the roof and wave a flag, would be when I see the specialists return to full volume. And that's the part where they would also be using biometrics at a much greater rate. I, again, we haven't quite seen that come back robust enough yet to be able to call it, but I do believe that the one thing that is in our favor is that these are patients that, at some point, will require an intervention or procedure. And that buildup, like we saw in COVID, will come back.
The piece that would give me great optimism, what I'll jump on that.
Speaker Change: Bruce and wafer flag would be when I see the specialists returned to full volume and Thats, the part where they would be they would also be getting by options, but at a much greater rate.
Speaker Change: Again, I haven't we haven't quite seen that come back robust enough yet to be able to call. It.
Speaker Change: But I do believe that the one thing that is in our favor is that these are patients that at some point will require an interventional procedure.
Speaker Change: And that buildup.
Speaker Change: Like we saw in a COVID-19 will come back.
Kevin Caliendo: It's just been very, very difficult to time. But I think the fact that biomaterials being used means there's volume out there. It is not the very large multi-impact volume that drives Understood.
Speaker Change: It's just been very very difficult to time it.
Speaker Change: But I think the fact that environment is being used either volume out there.
Speaker Change: It is not the very large multi implant volume that drives a lot of growth.
Speaker Change: Understood. Thanks, Thanks for taking those questions I appreciate it guys. Thanks for the question guys.
Kevin Caliendo: Thanks. Thanks for taking those questions. I appreciate it. Thank you.
Speaker Change: Thank you.
William McMann: Our next question comes from William McMann of Barclays, go ahead William. Good afternoon Vafa and Rich. This is well on for Matt. Thanks for taking my question.
Speaker Change: Our next question comes from William Mcmahon of Barclays Go ahead William.
William Mcmahon: And rich the swell on for Matt. Thanks for taking my question just a really quick question on the full year guidance was in line with the kind of greater than 15% EBITDA margin expectations.
William McMann: Just a really quick question on the full year guidance was in line with the kind of greater than 15% even of margin expectations but as we're kind of thinking about the cost efficiencies for 2025 from that sale, what are kind of the drivers for margin 2025 and then in terms of cadence should we expect that to kind of improve throughout the year starting with the first quarter? Rich, you want to take that? Yeah, I'll take that. You know, so I'll start by saying that, you know, in the fourth quarter, actually starting in the third quarter, right, we saw growth margin improve, right?
William Mcmahon: As we're kind of thinking about the cost efficiencies for 2020 thoughts from that sale what are kind of the drivers for margin in 2025, and then in terms of cadence should we expect that to kind of improve throughout the year.
William Mcmahon: Starting with the first quarter.
Speaker Change: Yes, sure rich you want to take that.
Speaker Change: I'll take that.
Speaker Change: So I'll start by saying that in the fourth quarter actually starting in the third quarter rate.
Speaker Change: We saw gross margin improve right and so we saw gross margin tick up in the in the third quarter or two I think there's about 65% and I think we will.
Rich Heppenstall: And so we saw gross margin tick up in the third quarter to, I think it was about 65%. And I think we had a little bit higher than that. And then in the fourth quarter, you know, and we kind of alluded to this on the last call that we, you know, that we'd fixed many of the manufacturing inefficiencies that we had done some of the things, cost saving things that we were otherwise planning on doing. And we executed again to 65% gross margin in the fourth quarter. You know, as we think about 2025, you know, we will continue to kind of track in that 65% gross profit range, you know, assuming the mix even stays the same that it is now.
Speaker Change: Higher than that and then in the fourth quarter.
Speaker Change: And we kind of alluded to this on the last call that.
Speaker Change: We had fixed many of the manufacturing inefficiencies that we had done some of the things cost saving things or otherwise planning on doing and we executed again to 65% gross margin in the fourth quarter.
Speaker Change: As we think about 2025.
Speaker Change: We will continue to kind of track in that $65 million or 65% gross gross profit range.
Speaker Change: Assuming the mix even stays the same that it is that it is now and Youll see.
Rich Heppenstall: And you'll see, you know, largely speaking, you'll see a little bit of a step down in OPEX, you know, in probably more in the SG&A side, you know, and that will, you know, there's a step down after the transition service agreements with High Ridge Medical. Yeah, High Ridge Medical fall off in, you know, kind of in the early Q2 timeframe. And so, you know, what will happen is, you know, income will go down, you know, to, you know, close to effectively zero if it goes as planned. And then you'll see SG&A kind of coming down correspondingly.
Speaker Change: Largely speaking youll see a little bit of a step down in opex.
Speaker Change: And probably more in the SG&A side.
Speaker Change: And that will.
Speaker Change: There's a step down after the transition service agreements with Highbridge medical Yes average medical falloff.
Speaker Change: Kind of in the early Q2 timeframe and so what will happen is other income will go down.
Speaker Change: To close to effectively zero if it goes as planned.
Speaker Change: And then Youll see SG&A kind of coming down correspondingly, so you'll see a little bit of a step up from Q1 to Q2 and margin and then Q3 will probably come down again in margin just because it's our softest quarter softest quarter, and then Q4, probably goes back to where it was again for Q2.
Rich Heppenstall: So, you'll see a little bit of a step up from Q1 to Q2 in margin, and then Q3 will probably come down again in margin just because it's our softest quarter, and then Q4 probably goes back to where it was again for One thing that's not contemplated, though, in here is just mix, right? So when the implant mix comes back, this company is really positioned well. Right, so this is all predicated on similar kind of dynamics as we've seen in the last 12 months.
Speaker Change: <unk>.
Speaker Change: And we will not contemplated though in here is just mix right. So when they implant mix comes back.
Speaker Change: This company is really positioned well.
Speaker Change: Right. So this is all predicated on the similar kind of dynamic because we've seen in the last 12 months.
Vafa Jamali: Okay that's helpful and that kind of goes into my next one shifting gears here a little bit. On the last call you talked about the plant in Valencia kind of running at full capacity great for TSX production. Can you update us on the trends you're seeing there maybe any idea kind of understanding where the market is and where you see it going in 2025 on capacity potential black backlog and then maybe plants for growth? there in 2025. Yeah, I think what we're really focused on is inquiry. You all start, Rich, and then you can take it.
Speaker Change: Okay. That's helpful and that kind of goes into my next one shifting gears here a little bit on the last call you talked about the plant in Valencia kind of running at full capacity great for Tsi production can you update us on the trends Youre seeing there maybe any idea kind of understanding where the market is and where you see it going into 2025 on capacity potential.
Speaker Change: Backlog and then maybe plans for growth there.
Speaker Change: There in 2020.
Speaker Change: Yes, what we're really focused on is inquiry I'll start Richard can take it we're looking at in sourcing a number of.
Rich Heppenstall: But we're looking at insourcing a number of third-party work that's being done into either Valencia or PBG, which is kind of the next step of just the efficiency drive. Rich, I don't know if you... Yeah, so Valencia actually, we still have capacity. What we've done is we've actually trimmed the workforce to match the manufacturing volume, but there's still scalability in that plant. We're not tapped out from a capacity standpoint if volumes increase. We may have to hire a couple of people, but we're not tapped out. And as Vafa mentioned, the cost to produce in Valencia, and we've said this before, it's about 20% less than what it is to produce in Palm Beach Gardens.
Speaker Change: Third party work Thats being done into either linked year, PPG, which is kind of the next step of just the efficiency drive rich I know you've got more of there yes.
Speaker Change: Yeah, so so in Valencia.
Speaker Change: So, let's see actually we still have we still have capacity what we've done is we've actually.
Speaker Change: We've actually trend the workforce to match the manufacturing volume.
Speaker Change: Still scalability in that plant if that were.
Speaker Change: We're not tapped out from a capacity standpoint, if volumes if volumes increase may have to hire a couple of people, but we're not we're not tapped out and does that I mentioned.
Speaker Change: The cost because the cost to produce in Valencia, and we've said this before it's about 20% less than what it is to produce in Palm Beach Gardens.
Rich Heppenstall: And so what we're doing is we did that, as you alluded to, in 2024, we moved TSX production to Valencia. And so we'll continue to look for opportunities to transition volume manufacturing to areas like Valencia in 2025. But there's also a portion of our business, and that actually frees up capacity in Palm Beach Gardens, because there's a portion of our business that is a little bit more specialized in nature that we currently buy from third-party vendors. And there's outsourcing opportunities to bring some of that business in-house to drive capacity utilization and kind of the cost arbitrage in Palm Beach Gardens.
Speaker Change: And so what we're doing is we did that as you alluded to in 2024, we move T X production to Valencia, and so we'll continue to look for opportunities to transition volume manufacturing.
Speaker Change: Two areas like Valencia in in <unk>.
Speaker Change: Thousand 25.
Speaker Change: But there's also a portion of our business and that actually frees up capacity in Palm Beach gardens, because there's a portion of our business that is a little bit more specialized in nature that we currently sell.
Speaker Change: Currently buy from third party vendors and Theres outs in sourcing opportunities to bring some of that business in house to drive capacity utilization.
Speaker Change: The cost arbitrage in Palm Beach Gardens. So it's.
Rich Heppenstall: So you'll continue to see these projects take a while to actually effectuate themselves. So they'll probably effectuate themselves toward the back half of 2025, but again, position us for 2026. That's how we think right now about the footprint for manufacturing.
Speaker Change: Youll continue to see that these projects take a while to actually effect effectuate themselves.
Speaker Change: Silver probably effectuate themselves towards the back half of 2025, but again positioning us for for 2026, but that's how we think right now about the footprint for manufacturing.
William McMann: Okay, all right, thank you.
Speaker Change: Okay Alright. Thank you and then if I can just sneak one more in here in terms of the product launches kind of coming up and the question on digital dentistry earlier.
William McMann: And then if I can just speak one more in here in terms of the product launches kind of coming up and the question on digital dentistry earlier. As we're thinking about kind of R&D and the investments that need to be made there, is there anything you're thinking in terms of color for how we should think about that kind of going forward and how that places pressure within the EBITDA margin? Yeah, I think that the amount of spend that we have right now is correct. So I don't see massive variation there, which I think is part of your question.
Speaker Change: What about kind of R&D and the investments that need to be made there is there anything you're thinking in terms of color for how we should think about that kind of going forward and how that places pressure within the EBITDA margin.
Speaker Change: Yes, I think that the amount of spend that we have right now is correct.
Speaker Change: I don't I don't see massive variation, there, which I think part of your question.
Rich Heppenstall: um is that right like do you see a blip coming up like is that was that part of your question? Yes, so that just if there needed to be some sort of, you know, outside investment there. No, because we've been pretty continuous in terms of the operations, in terms of the R&D investment, especially when you think about the digital and the enhancements, we've been pretty regular on candidates of innovation. The spend should probably stay about the same. And then what we've done is we've allocated a certain amount of dollars, and if one project drops off and everyone comes on, and so far we've been on time with our launches.
Speaker Change: Is that right.
Speaker Change: Do you see a blip coming up.
Speaker Change: Was that part of your question.
Speaker Change: Yes.
Speaker Change: If there needed to be some sort of outside.
Speaker Change: I'll stop there.
Speaker Change: No because we've been pretty continuous in terms of the operations.
Speaker Change: The R&D investment, especially when you think about the digital and the enhancements we are pretty rare.
Speaker Change: Cadence of innovation.
Speaker Change: The expense should probably stay about the same and then what we've done is we've allocated a.
Speaker Change: Certain amount of dollars and as one project drops off and everyone comes on and so far we have been on time with our with our launches so that would.
Rich Heppenstall: So that would indicate to me that you should see the same level of spend, but a continuous kind of pipeline of new products coming out. So we don't anticipate a requirement for new money. Okay, very helpful.
Speaker Change: Indicate to me that you should see the same level of spend by the continuous.
Speaker Change: Kind of pipeline of new products coming out so we don't anticipate a requirement for new money.
Speaker Change: Okay very helpful. Thank you guys for taking our questions.
Speaker: Thank you guys for taking our questions. Thank you.
Speaker Change: Sure.
Speaker: This does conclude our Q&A session and today's conference call. Thank you for your participation.
Speaker Change: Thank you. This does conclude our Q&A session and today's conference call. Thank you for your participation. This does conclude the program you may disconnect.
Speaker: This does conclude the program. You may disconnect.
Speaker Change: Okay.
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