Zimmer Biomet Holdings Inc at Morgan Stanley Global Healthcare Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Ranieri - Morgan Stanley - Analyst : So maybe with some of the news that came out yesterday with the announcement and kind of in your words, there's been a little bit of a one step forward, kind of one step back. And I know progress is often never linear. You've made a lot of transformational progress over the past few years at Zimmer Biomet, the product lines reinvigorated. But yesterday, you kind of announced some of the challenges from shifting your ERP platform. Maybe for those of us who weren't able to like tune into that, just kind of give us the 10,000-foot view of what happened, why it might not have gone to plan and kind of the areas of the business that is affected?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got you. So maybe just from listening to you yesterday, it sounded like it wasn't necessarily a widespread across every segment. Large joint, it might be okay for right now, so predominantly affecting the S.E.T. business? Or is it isolated to US or OUS?

Question: Andrew Ranieri - Morgan Stanley - Analyst : And you're confident this does not stretch into 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 06, 2024 / 1:15PM, ZBH.N - Zimmer Biomet Holdings Inc at Morgan Stanley Global Healthcare Conference

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. So maybe from a financial point -- financial impact perspective, 1% of sales is $70 million to $80 million of revenue. So (inaudible) you talked about yesterday, I think, normal flow-through. So I'm going to do my dumb math and say that's probably maybe $0.15, $0.20 of EPS. I know you're not ready to bless anything today. We'll hear about that. But I mean, where could there be mitigants to stop the bottom line bleed here, share repurchases, cost reductions? Can you talk about that opportunity?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Maybe just to move on to another topic. But let's touch on kind of the procedure backdrop and utilization. And one question that kind of continues to come up from investors is really on the utilization environment within orthopedics. So I guess, how do you get confident, the market growth is not going to like -- mean revert to pre-pandemic levels. And maybe unfairly to ask you this, but for some, Zimmer just seems to be a utilization trade at the end of the day. But what makes this -- what makes the company a durable multiyear investment in your --

Question: Andrew Ranieri - Morgan Stanley - Analyst : And maybe just on utilization, again, but are you -- is it clear that utilization is stable at least where it was in the first half as you're thinking about the back half?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Maybe let's shift to Hips for a moment. But when we look back at our large joint model and just tracking the market, I mean, Zimmer has done a good job in US knees and international. Performance in Hips has been a bit more challenged. So let's hit on this before we go to US knees. But talk to us about your confidence that some of these new product launches will help you get back -- will help you regain market share? And where can you kind of go from there? I guess just help us better understand the plan of attack to get the two or three points of market share back in US Hips?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got you. And then some of the products within hips that you've outlined to make you pick your favorite child. But is there going to be one that's the most meaningful in getting that market share back?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Okay. And then interesting point you made earlier about changing kind of the recon incentive comp for the sales force. Just maybe give us a little bit more detail there. And just more broadly, how might the company be thinking differently about its go-to-market strategy, looking ahead in large joint or even some of the other businesses?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. Maybe let's go over to US knees for a moment, but cementless ROSA is around 20% penetrated today. You plan to move ROSA up to about 50% and cementless up to 50% by 2027. Just maybe to take a step back, there were some challenges, though, in the second quarter in the knee business. But maybe what trends have you seen so far in the quarter that kind of gives you the confidence that it's all in the rearview mirror at this stage?

Question: Andrew Ranieri - Morgan Stanley - Analyst : And on cementless with the Oxford partial cementless coming out, I think, in next year, just how meaningful of a product could that be and maybe accelerating that mix potential for the company?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got you. And maybe broadly with the cementless knee business, but maybe where are you from like a instrumentation set or capacity standpoint as you're entering 2025 for --

Question: Andrew Ranieri - Morgan Stanley - Analyst : Sorry, I should remember this, but did you put out a target of what you think cementless would be by the end of 2025, just to level -- sorry, '24 level --

Question: Andrew Ranieri - Morgan Stanley - Analyst : All right. Maybe on Persona IQ, it's another exciting products within the portfolio. I think you said the short stem actually launched in the third quarter so it may not be that meaningful for the fourth quarter, but how are you thinking about that for 2025 and then opening up the broader opportunity for penetration and account level?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Do you plan on sharing any kind of metrics in terms of progress in 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 06, 2024 / 1:15PM, ZBH.N - Zimmer Biomet Holdings Inc at Morgan Stanley Global Healthcare Conference

Question: Andrew Ranieri - Morgan Stanley - Analyst : All right. Well, it sounds like it's going good. So --

Question: Andrew Ranieri - Morgan Stanley - Analyst : All right. All right. Maybe to shift towards robotics and the partnership with (inaudible). But maybe just talk to us about how you're seeing robotics, handhelds really fitting in to the equation, driving utilization. And I think just got clearance for Persona recently, too. So just kind of give us an update on what you're seeing and the opportunity for adoption and pull-through here?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Maybe a silly follow-up question here. But if you think 10 years from now, you're focused on having an all-encompassing approach, there'll still be manual, you have navigation and robotics. Do you have idea or kind of vision of what the industry's mix will be between kind of those three segments. (inaudible) robotics and manual?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. And I want to make sure we touch on the S.E.T. business also, but it's clearly become more of an important part of the growth algorithm at Zimmer Biomet. I think really could account for like one or two points of corporate growth looking ahead. So maybe just talk to us about the growth durability you're seeing within the franchise. I know ERP might be a little bit of a step back. But I mean, how are you thinking about the business structurally, especially in like your three core growth businesses?

Question: Andrew Ranieri - Morgan Stanley - Analyst : And within said, I mean, it's hard not to ask about shoulder and ROSA, but it would be great just to spend a minute or two on ROSA shoulder, maybe understanding how you're kind of positioned there versus competition. And I think one of the key things I'm trying to understand and maybe some others are as well is just does this drive ROSA utilization higher? Or will you see more of the growth opportunity coming from just more ROSA installations? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 06, 2024 / 1:15PM, ZBH.N - Zimmer Biomet Holdings Inc at Morgan Stanley Global Healthcare Conference

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. Got it. And do you expect more shoulder docs to be using -- or to get a new ROSA system like tailored for themselves or utilizing kind of existing (inaudible)?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Maybe to move to the ASC opportunity, but today, it's about 15% of sales somewhere around there. But how can the company continue to kind of grow low to mid-teens in that setting? Just kind of give us the 10,000-foot level and you've been really emphasizing that there's no portfolio (inaudible). So just talk to us about your confidence, too, and your positioning here in the ASC space.

Question: Andrew Ranieri - Morgan Stanley - Analyst : So with the partnerships, with the gaps that you filed on the portfolio, you've made your sales force's life easier at this stage?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Okay. Just to touch on M&A for a moment. But I mean you've spoken often about getting the (inaudible) higher at this point. But just remind us about the flexibility of the balance sheet. And I mean you've done some partnerships, some M&A over your tenure. But why haven't we seen more from Zimmer Biomet?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Okay. And it would still be -- not to put words in your mouth, but you're very focused on high-growth areas in S.E.T and the ASC opportunity, I know previously, you may have talked about like (inaudible) opportunities, too. I mean, the portfolio is touching a lot more, kind of white space adjacencies than it previously did. So is anything on the table or there --

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. And with the growth algorithm you laid out at the An*alyst Day a few months ago, mid-single-digit revenue growth, EPS growing 1.5 times faster, free cash flow growing 100 basis points above that. And as you're looking at 2025, is there any reason why you should -- we shouldn't be expecting anything less than kind of that growth algorithm? Are you cautious or anything?

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. Got it. That's pretty definitive.

Question: Andrew Ranieri - Morgan Stanley - Analyst : Got it. I had an investor tell me the orthopedic space is boring yesterday. Is there anything that's still a battlefield debate in orthopedics. I mean the implants see some modest innovation here and there. robotics is more recognized. Do you have AI, smart implants coming. But is there still kind of really any undiscovered country in recon and set that we should be thinking about that could be more impactful for Ortho years down the road?

Question: Andrew Ranieri - Morgan Stanley - Analyst : And maybe as we're coming up to time here, I mean there's a lot going on with Zimmer, virtually some step backs here with the ERP. But as you're looking ahead to the back half or 2025, is there anything that you think is being underappreciated or people are ignoring about the ZB story?

Question: Andrew Ranieri - Morgan Stanley - Analyst : 2024 and 2025.

Question: Andrew Ranieri - Morgan Stanley - Analyst : (inaudible) there, Ivan, but thanks for joining us today. Really appreciate the time.