Zimmer Biomet Holdings, Inc. · NYSE:ZBH
Zimmer Biomet — Investor Day (May 2024)
63 slides from Zimmer Biomet's investor day presentation, May 29, 2024
Slide 1: Moving You Forward - 2024 Investor Day
MOVING YOU FORWARD 2024 Investor Day MAY 29, 2024 1
Slide 2: Cautionary Note Regarding Forward-Looking Statements and Non-GAAP Measures
Cautionary Note Regarding Forward-Looking Statements and Non-GAAP Measures This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including any statements about our forecasts; expectations; plans
Slide 3: Agenda and presenters
PRESENTATION TITLE PRESENTER Taking Zimmer Biomet Ivan Tornos to the Next Level President & Chief Executive Officer Active Portfolio Rachel Ellingson Management Chief Administrative Officer Ivan Tornos Business & Markets President & Chief Executive Officer Dr. Nitin Goyal Surgeon Panel Chief Science
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Slide 5: Taking Zimmer Biomet to the Next Level
TAKING ZIMMER BIOMET TO THE NEXT LEVEL Ivan Tornos President & Chief Executive Officer 5
Slide 6: Why Zimmer Biomet?
HEALTHIER END MARKETS, STRONGER COMPANY Transformed our business to better compete and win in attractive markets INNOVATION IS OUR COMPETITIVE ADVANTAGE C Solving problems around safety, efficiency and Why Zimmer delivering best-in-class clinical outcomes Biomet? POISED TO CREATE SHAREHOLDER VALUE F
Slide 7: Mission and vision
Alleviate Pain and Improve the Quality of Life for People Around the World Be the Boldest Company in Med Tech by Solving the Most Meaningful Problems in Healthcare Provide Customer-Centric Solutions that will Eliminate Safety Concerns, Maximize Efficiency and Deliver Best-in-Class Clinical Outcomes
Slide 8: Company at a glance
18,000 Operations in Team members Sales in 25+ Countries 100+ Countries Fortune 500 $7.4B Company Revenue in 2023 8
Slide 9: ZBH 2018 starting point
2018 Sales by Category 35% 24% 22% 5% 10% 4% Knee Hip S.E.T. Dental Spine1 Other ZBH 2018 #1 IN WW HIPS & KNEES NEW PRODUCT LAUNCHES VITALITY INDEX SUPPLY CHAIN 3+ But ceding market 8 Launches Significantly below peers Days of back orders share entering 2018 REMEDIATION WAMGR TOTAL DEBT ENGAGEMENT 3
Slide 10: ZBH today
2023 Sales by Category 41% 27% 24% 8% Knee Hip S.E.T.1 Other ZBH TODAY #1 IN WW HIPS & KNEES NEW PRODUCT LAUNCHES VITALITY INDEX SUPPLY CHAIN 3+ But ceding market Consistently performing at or above 8 Launches >20 Significantly below peers >3x Days of back orders <1Day share Planned Increase enterin
Slide 11: Innovation
Fuller pipeline 2x 50+ The gross dollar Product launches Targeted value of the R&D (2024-2027), helping innovation pipeline in 2024 to define new vs 2018 Standards of Care ~75% ~5% R&D2 of Innovation NPI1 investment More INNOVATION Pipeline in grew >50% from efficient 4%+ growth 2018 to 2024 ENGINE
Slide 12: Robust Innovation Pipeline
Robust Innovation Pipeline 2018-2023 PRODUCTS 2024-2027 PRODUCTS ROSA® Knee HAMMRTM Pinless Embody Oxford® Partial ROSA® Shoulder Tapestry ® /RC Persona IQ ® ROSA ® HIP Cementless Taperloc® / G7® Persona IQ® Next ~75% Iodine Japan Generation of Innovations OrthoIntel to be in AllianceTM Glenoid Pers
Slide 13: People & Culture, Operational Excellence, Innovation & Diversification
People Operational Innovation & & Culture Excellence Diversification 13 1. LRP stands for Long Range Plan which covers 2024-2027
Slide 14: People & Culture
People & Culture Right people in the right job within the right culture Incentives alignment Leaders leading from the front Operational Excellence Innovation & Diversification 14
Slide 15: Operational Excellence
Operational Excellence MID-SINGLE DIGIT % REVENUE GROWTH New product launches Best-in-class commercial execution EPS GROWING FASTER THAN REVENUE Stabilizing gross margin Optimizing operating expense FREE CASH FLOW GROWING FASTER THAN EPS People & Culture Inventory management Innovation & Diversifica
Slide 16: Innovation & Diversification
Innovation & Diversification INNOVATE Continue to increase size of pipeline Strategically reallocate R&D dollars to key problems in higher growth segments enabling #1 or #2 market position DIVERSIFY INTO HIGHER GROWTH MARKETS Target higher WAMGR1 via organic and inorganic pathways People & Culture O
Slide 17: 2024-2027 long range plan targets
2024-2027 1. Revenue CAGR is based on constant currency revenue growth 2. Adjusted EPS expected to grow at least 1.5x reported revenue growth on average over the LRP 3. Free Cash Flow expected to grow 100bps faster than adjusted EPS on average over the LRP 17 Note: Unless otherwise noted, all measur
Slide 18: Who You'll Hear From Today
WHO YOU’LL HEAR FROM TODAY Rachel Ellingson Ivan Tornos Suky Upadhyay Chief Administrative President & Chief Executive Vice President Officer Executive Officer & Chief Financial Officer Nitin Goyal, M.D. Jim Lancaster Nnamdi Njoku Chief Science, Tech & President, Large President, Surgical, Sports, I
Slide 19: Rachel Ellingson
Rachel Ellingson Chief Administrative Officer – Strategy, Business Development, Marketing & Communications 19
Slide 20: Active Portfolio Management
Active Portfolio Management Increased Weighted Average Market Growth Rate (WAMGR) Financial Flexibility for Midsize M&A Commitment to Value-Creating M&A 20
Slide 21: Tuck-In M&A and Divestitures
SELECT TRANSACTIONS Tuck-In >90% AQUIRED REVENUE IN M&A WAMGR-ACCRETIVE MARKETS BEGINNING IN 2019 Dedicated M&A Integration Financial Performance Team And Playbook Deployed Above Deal Model Across All Businesses Expectations Tuck-In M&A and Divestitures account for ~50bps of Divestitures WAMGR incre
Slide 22: Case Study: Thoracic
CASE STUDY 1 Identified Attractive Thoracic Sub-Markets Sternal Closure Rib Repair #1 Market Share #2 Market Share Craniomaxillofacial (CMFT) Cranial Facial Repair 2 Invested in Innovation (Organic and Inorganic) Neuro: Epilepsy Thoracic Business Performance (2019-2023): 4x Increased topline growth
Slide 23: >$2B of Debt Paydown and Robust Free Cash Flow
>$2B1 of Debt Paydown and Robust Free Cash Flow Provides Meaningful M&A Firepower 1. Reduced net debt by >$2B since 2019 We will execute smart M&A the right target, at the right time, for the right value 23
Slide 24: Disciplined Approach to Midsize M&A
Disciplined Approach to Midsize M&A Financial Criteria Strategic Criteria Attractive Midsize Acquisition Areas Transaction value (~$2B) Extremities / Immediately accretive to CMFT ASC Sports Med revenue growth MSD% Growth HSD% Growth MSD% Growth Willing to take limited adjusted EPS dilution for up t
Slide 25: WAMGR increase since 2019
~5.0% Continued Investments We have increased our WAMGR ~4.0% Continued ~100bps since 2019 ZimVie Investments Spin Expect to continue Organic & Inorganic this portfolio shift ~3.0% Investments 2019 2023 2027+ WAMGR WAMGR WAMGR 25
Slide 26: Ivan Tornos
Ivan Tornos President & Chief Executive Officer 26
Slide 27: Key Takeaways
Key Takeaways Operate in Compelling Markets Well Positioned to Grow Above Market Roadmap to Further Diversify into Higher-Growth Markets 27
Slide 28: Market trends: pricing, site of care, active patients
Pricing Site of Care Pricing Headwinds Remain...but are Improving More Active Patients Compelling ASC Market Trends ~(100bps) in 2024 with lower than historical Clear and increasing shift Patient Demographics Patients Are More of orthopedic procedures erosion (200-300bps) Active Later in Life expect
Slide 29: Market Opportunity
KNEE HIP UPPER EXTREMITIES CMFT & SPORTS MEDICINE Market Opportunity 2023 ~$10B ~$8.5B ~$10B ~$5B Current ZBH #2 Upper #1 Sternal Global Market Share #1 #1 Extremities Closure #6 Sports Medicine #2 Rib Trauma Market Growth Rate 1 3-5% 2-4% 4-7% 5-7% CAGR CAGR CAGR CAGR 1. Market growth is derived ut
Slide 30: Drive, Diversify, Defend
Drive Above Diversify Into Higher Defend Other Market Growth Growth Markets Businesses Invest in higher growth Invest in attractive Selective investment in niche markets, sub-markets and sub-markets within opportunities and near adjacencies near adjacencies within TRAUMA FOOT & ANKLE SPORTS UPPER KN
Slide 31: Large Joints, Knee and Hip Reconstruction
DRIVE DIVERSIFY DEFEND Large Joints, Knee and Hip Reconstruction #1 MARKET POSITION Knee Market $10B 3-5% PARTIAL PRIMARY REVISION ’23 Market1 CAGR2 $0.6B $7.5B $1.5B #1 MARKET POSITION Hip Market PARTIAL PRIMARY REVISION $8.5B 2-4% $1B $6.5B $1B ’23 Market CAGR2 1. $10B market also includes a ~$400
Slide 32: Knees: Accelerating Revenue Growth Above Market
DRIVE DIVERSIFY DEFEND Knees: Accelerating Revenue Growth Well Above Market in Largest Business New Product Introductions Persona® OsseoTi ® Next Generation Revision ZIMMER BIOMET Oxford® Cementless Partial Knee Continued enhancements in Robotic Persona IQ® REVENUE GROWTH EXPECTATION FOR KNEES Share
Slide 33: Hip: Expanding the Portfolio to Retain Global Leadership
DRIVE DIVERSIFY DEFEND Hip: Expanding the Portfolio to Retain Global Leadership New Product Introductions Rebuilding the core portfolio… …while expanding into high ZIMMER BIOMET • HAMMR Surgical Impactor growth segments REVENUE GROWTH • G7® Revision • Z1 Triple Taper Stem® EXPECTATION FOR HIPS • Ant
Slide 34: Upper Extremities and Sports Medicine
DRIVE DIVERSIFY DEFEND Upper Extremities and Sports Medicine #2 MARKET POSITION Upper Extremities $2.5B 5-7% ’23 Market CAGR1 #6 MARKET POSITION $7.5B 4-5% Sports Medicine ’23 Market CAGR1 1. Market growth is derived utilizing 3rd party data as well as internal ZBH estimates utilizing a 5-year CAGR
Slide 35: Upper Extremities & Sports Medicine: Growth to Outpace Market
DRIVE DIVERSIFY DEFEND Upper Extremities & Sports Medicine: Growth to Significantly Outpace Market ZIMMER BIOMET REVENUE GROWTH New Product Share Commercial EXPECTATION Introductions of Wallet Execution Redefining the standard of care • Cases moving to the ROSA® Shoulder in shoulder arthroplasty… AS
Slide 36: Craniomaxillofacial & Thoracic (CMFT)
DRIVE DIVERSIFY DEFEND Craniomaxillofacial & Thoracic (CMFT) #1 STERNAL CLOSURE MARKET POSITION CMFT #2 RIB TRAUMA MARKET POSITION $5B ’23 Market 1 5-7% CAGR 2 CMF & NEURO THORACIC $4B $0.8B 1. CMFT market of ~$5B, includes the ~$4B CMF & Neuro market as well as the $800M Thoracic market 36 2. Marke
Slide 37: CMFT: Accelerating Diversification Outside of Orthopedics
DRIVE DIVERSIFY DEFEND Craniomaxillofacial & Thoracic (CMFT): Accelerating Diversification Outside of Orthopedics Shaping an Developing a Commercial Entirely New New Market Execution ZIMMER BIOMET Standard of Care REVENUE GROWTH EXPECTATION Sternal Closure Rib Trauma • Dedicated SternaLock® Portfoli
Slide 38: Trauma, Surgical, Foot & Ankle and Restorative Therapies
DRIVE DIVERSIFY DEFEND Trauma, Surgical, Foot & Ankle and Restorative Therapies Other RESTORATIVE Businesses TRAUMA FOOT & ANKLE SURGICAL THERAPIES $6.5B $4B $4B $4B ’23 Market ’23 Market ’23 Market ’23 Market MAINTAIN GROWTH WITH SELECTIVE INVESTMENTS AND OPTIMIZE RETURNS Invest in segments and Opt
Slide 39: Compelling ASC Market Trends
PEOPLE PRODUCTS PARTNERSHIPS COMPELLING ASC MARKET TRENDS ANNOUNCING TODAY >$7B Commercial Execution • Dedicated ASC team Best-in-Class Ortho Implants Clinically proven implants & Strategic Partnership • Programmatically develop ’23 Orthopedics1 ASC Market ortho ASCs • Simplified contracting technol
Slide 40: Consolidated Revenue Growth Profile 2024-2027
Consolidated Revenue Growth Profile 2024-20271 Customer-Centric Solutions that deliver safety, efficiency and outcomes Knees Hips S.E.T. Growth Drivers 100-150 bps Above Market 50-100 bps Above Market 200-400 bps Above Market MSD % CAGR Other and Non-S.E.T. Growth Drivers Growing at or below market
Slide 41: Strategy summary
NEW STRATEGY: Safety, Efficiency, Outcomes DISCIPLINED RESOURCE ALLOCATION: Drive, Diversify, Defend ROBUST INNOVATION: Above Market Growth 41
Slide 42: Surgeon Panel
MODERATOR PANELISTS Nitin Goyal, M.D. Michael Ast, M.D. Charles DeCook, M.D. Atul Kamath, M.D. John Sperling, M.D. Chief Science, Tech & Hospital for Special Surgery Total Joint Specialists Cleveland Clinic Mayo Clinic Innovation Officer New York, NY Cumming, GA Cleveland, OH Rochester, MN 42
Slide 43: Suky Upadhyay
Suky Upadhyay Chief Financial Officer & Executive Vice President- Finance, Operations and Supply Chain 43
Slide 44: Today & Tomorrow
TODAY & TOMORROW Revenue Growing Above Market Operating Margin Expansion Through Revenue Leverage and SG&A Efficiency At Least 65% of Free Cash Flow Returned to Shareholders Strong Balance Sheet Provides Strategic Optionality through M&A 44
Slide 45: Delivering Consistent Growth
Delivering Consistent Growth Revenue ($B)1,4 Adjusted Operating Margin % 1, 2 Free Cash Flow ($B) 1 5.0% - 6.0% $1.05-$1.10 28.8% – 29.1% 7.5% $0.98 28.2% $7.7- 6.6% $0.91 7.8B 27.3% $7.4B v v v $6.9B 2022 2023 20243 2022 2023 20243 2022 2023 2024 3 • Competitive growth vs. market • Expanding margin
Slide 46: 2024-2027 Financial Outlook Driving Value Creation
2024-2027 Financial Outlook Driving Value Creation METRICS 2024E-2027E LRP1 Revenue Mid-Single-Digit • Growing >100bps above market constant currency revenue CAGR Adjusted Operating Margin ≥30bps • OM expansion from revenue leverage of OM expansion annually on average and SG&A efficiency Adjusted Ea
Slide 47: Consolidated Revenue Growth Profile 2024-2027
Consolidated Revenue Growth Profile 2024-20271 Customer-Centric Solutions that deliver safety, efficiency and outcomes Knees Hips S.E.T. Growth Drivers 100-150 bps Above Market 50-100 bps Above Market 200-400 bps Above Market MSD % CAGR Other and Non-S.E.T. Growth Drivers Growing at or below market
Slide 48: Driving Growth With Efficiency - Adjusted Operating Margin
Driving Growth With Efficiency – Adjusted Operating Margin Operational Efficiencies Gross Margin1 Investments Sales Leverage ≥30bps E&O Channel annually2 Improvement Efficiencies Reduced Simplified Invest for Long Overhead Structure Term Growth MSD Revenue Growth Site & Leverage Network Shared 28.2%
Slide 49: Delivering Earnings Leverage - Adjusted EPS
Delivering Earnings Leverage – Adjusted EPS ≥1.5x revenue Share Buybacks growth1 Margin Expansion Interest & Taxes Revenue Growth Commitment to Revenue return Stable tax ≥65% of FCF leverage, stable rate and operational to shareholders higher interest through MSD% ExFx Gross Margin expense $7.55 rev
Slide 50: Growth Well Ahead of Revenue - Free Cash Flow
Growth Well Ahead of Revenue – Free Cash Flow Foundational ≥100bps faster Investments than EPS2 Working Capital Placeholder Sunsetting of • Placeholder foundational EBITDA investments Lower DOH1 • Placeholder across quality, Optimized systems and capital efficiency MSD% ExFx expense and ~$1.0B reven
Slide 51: Disciplined Capital Allocation
Disciplined Capital Allocation 2.9x METRICS 2019 2023 • Reduced net debt by >$2B since 2019 • Increased capital returned to 2.2x Net Debt $7.6B $5.4B shareholders • $2.5B of adjusted EBITDA in 2023 and growing Investment Baa3/BBB Baa2/BBB • Maintaining optionality for greater Grade Negative/Stable S
Slide 52: Robust Balance Sheet Provides Capital Allocation Flexibility
Robust Balance Sheet Provides Capital Allocation Flexibility MAINTAIN DIVIDENDS RETURN TO SHAREHOLDERS INCREASED SHARE ≥65% REPURCHASES FREE CASH of FCF will be returned to shareholders over the LRP FLOW $4-5B FCF 2024-2027 REINVESTMENT M&A FOR GROWTH 52
Slide 53: EPS growing at least 1.5x revenue
2024-2027 EPS growing at least 1.5x revenue MSD% revenue growth Durable end markets Stable operational gross Improved working capital margin Revenue growth above market Operating margin expansion Sunsetting of Commercial execution foundational investments and innovation Share buybacks 1. Revenue CAG
Slide 54: Why Zimmer Biomet?
HEALTHIER END MARKETS, STRONGER COMPANY Transformed our business to better compete and win in attractive markets C INNOVATION IS OUR COMPETITIVE ADVANTAGE Solving problems around safety, efficiency and Why Zimmer delivering best-in-class clinical outcomes Biomet? POISED TO CREATE SHAREHOLDER VALUE F
Slide 55: Moving You Forward
MOVING YOU FORWARD 2024 Investor Day MAY 29, 2024 55
Slide 56: Appendix
Appendix 56
Slide 57: 2024-2027 LRP Assumptions
2024-2027 LRP Assumptions LRP Outlook Assumes LRP Outlook Does Not Assume No material shift in end market Significant geopolitical disruption procedural growth Stable FX rates Significant M&A or divestitures Stable input pricing and Global recession inflationary levels Stable access, reimbursement M
Slide 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF DEBT TO NET DEBT AS OF DECEMBER 31, 2023 and 2019 (in millions, unaudited) December 31, 2019 December 31, 2023 Debt, both current and long-term $8,221.4 $5,767.9 Cash and cash equivalents (617.9) (415.8) Net debt $7,603.5 $5,352
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF REPORTED REVENUE % CHANGE TO CONSTANT CURRENCY % CHANGE FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 and 2022 Years Ended December 31, 2022 2023 2024 Reported revenue change 1.6% 6.5% 4.5% - 5.5% Foreign currency exchange impact
Slide 60: Non-GAAP Reconciliations
Non-GAAP Reconciliations ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF OPERATING PROFIT MARGIN % TO ADJUSTED OPERATING PROFIT MARGIN % FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022 Years Ended December 31, 2022 2023 Operating profit margin % 10.0 % 17.3 % Inventory and manufacturing-related charge
Slide 61: Non-GAAP Reconciliations
Non-GAAP Reconciliations ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022 (in millions, unaudited) Years Ended December 31, 2022 2023 Net cash provided by operating activities $1,356.2 $1,581.6 A
Slide 62: Non-GAAP Reconciliations
Non-GAAP Reconciliations ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF NET EARNINGS TO ADJUSTED EBITDA FOR THE YEARS ENDED DECEMBER 31, 2023 and 2019 (in millions, unaudited) Years Ended December 31, 2019 2023 Net earnings of Zimmer Biomet Holdings, Inc. $1,131.6 $1,024.0 Interest expense, net 226.
Slide 63: Non-GAAP Reconciliations
Non-GAAP Reconciliations 63