The operator introduces the conference call for the Zimmer Biomet Second Quarter 2024 Earnings, and the participants are reminded that the call is being recorded. The Director of Investor Relations, Zach Weiner, introduces the President and CEO, Ivan Tornos, and the CFO and EVP, Suky Upadhyay. The speakers will be discussing forward-looking statements and non-GAAP financial measures. Ivan Tornos thanks everyone for joining the call.

The speaker begins by expressing gratitude to the Zimmer Biomet team for their dedication to the company's mission of improving lives around the world. They then mention the strong performance of the company in recent years and the confidence they have in meeting their updated full-year guidance and long-term commitments. The speaker outlines the agenda for the call, which includes discussing the quarter's perspective, drivers of performance, and strategic priorities.

In the second quarter of 2024, Zimmer Biomet saw a 5.6% growth on a constant currency basis, marking the 10th consecutive quarter of mid-single digit or above growth. While there was some weakness in the U.S. market in the first half of the quarter, there was an improvement in May and June and continued strong performance in July. The international business exceeded expectations, with strong demand in key markets. The company's other category, focused on enabling technologies, also saw double digit growth. This diversification journey, exemplified by the success of S.E.T., is a key focus for the company.

Stryker Corporation has been committed to growing their S.E.T. (surgical, endoscopy, and neurotechnology) business at least mid-single digit, and they have achieved this in the past three quarters. They have also seen growth in their international market and their hips portfolio, which had previously lost market share due to missing key product items. However, they have now remediated these gaps and have the most comprehensive suite of solutions in navigation, direct anterior stems, and surgical impactors. They expect to continue growing above the market in the hips market. In addition, Stryker has developed the first and only robotic-assisted shoulder replacement platform in the world.

Zimmer Biomet has received positive feedback on their ROSA Shoulder cases and expects it to be a significant growth driver in the future. They have also partnered with THINK Surgical to offer a variety of options for robotic surgery. The company is focused on innovation and plans to launch three new ROSA modalities in the next few quarters. They have also met their earnings targets and continue to prioritize people and culture, operational excellence, and innovation and diversification. TIME magazine has recognized Zimmer Biomet as one of America's Best Midsize Companies to work for.

The organization has seen improvements in team member satisfaction, revenue growth, and operational excellence. They have committed to continue this growth for the long-term and have trained their employees to deliver on these commitments. They are also diversifying their geographic mix to drive sustainable growth without compromising margins. The second quarter results show their ability to make and deliver on commitments, and they expect this trend to continue in the future.

The company is confident in their guidance for the year and is happy to impact the lives of millions of people. They are inspired by their mission to alleviate pain and improve quality of life. The second quarter results showed a 3.9% increase in net sales, with a 5.6% increase when excluding foreign currency impact. The U.S. business grew 3.5%, driven by S.E.T. and other categories, while international grew 8.5%, driven by knee and S.E.T. Global knees grew 5.5%, with U.S. growth at 0.8% and international growth at 11.5%.

The company experienced slower sales in the first part of the quarter, but saw improvement in utilization and growth in the second half. The Persona OsseoTi and ROSA Robotics products continue to drive growth, particularly in the international market. The hip business grew 2.8%, but the company plans to make significant progress with new product introductions in 2025. The S.E.T. category grew 7.3% led by key focus areas, and all other categories grew mid-single digits. The company's other category, driven by demand for ROSA systems and other technologies, grew 11.3%. On the P&L, GAAP diluted earnings per share increased to $1.18, while adjusted diluted earnings per share grew over 10% to $2.01 due to higher revenue, improved operating margins, and a lower share count.

In the second quarter, the company's adjusted gross margin decreased slightly due to higher manufacturing costs, but adjusted operating margin increased due to higher revenue and lower expenses. The company also generated strong cash flows and ended the quarter with a significant amount of cash. Despite the strengthening of the U.S. dollar, the company is maintaining its full year revenue and earnings per share guidance, but expects a currency headwind of 100 basis points. The company expects Q3 to be the lowest revenue quarter, with Q4 being the highest, and gross margin to decrease sequentially while operating margin increases.

The speaker summarizes the company's performance in the second quarter, highlighting their continued confidence in meeting their full year outlook and positive proof points through their LRP. He then addresses a question about the impact of the conversion to cementless and cementless robotic in the U.S. knee business, stating that it was a good quarter with 5.6% growth and double-digit growth in adjusted EPS. He also notes that every business within S.E.T. grew and enabling technologies, primarily robotics, saw double-digit growth in both Q1 and Q2. Additionally, the company announced that they closed the gaps in hips and regained market share.

The company is highlighting its growth and expansion beyond the U.S. and knees. However, they were not pleased with the recent U.S. knee performance, which was affected by three solvable reasons: high volume surgeons being out of territory, supply challenges, and difficult comparisons to the previous year. These issues have been resolved and current U.S. performance is strong. The adoption of cementless products is also going well and they hope to expand it globally soon.

The speaker is discussing the progress of the company's restructuring program, which is expected to generate $200 million in savings by 2025. They are currently ahead of schedule and reinvesting some of the savings into R&D and commercial areas. They also mention the potential to gain back market share in the hip segment in the coming years, aligning with their Analyst Day goal.

Ivan Tornos, the CEO of a medical company, was asked about the progress of the company's hip business and how they plan to regain market share. Tornos stated that they have already started and have seen success in the adoption of their surgical impactor. They will also be launching a new product and acquiring a navigation platform, which will help them regain market share in the US and internationally. Tornos clarified that any issues the company has experienced in the US are temporary and not reflective of the overall market, which remains strong.

Suky Upadhyay, during the earnings call, discussed the company's growth, margin improvement, and free cash flow. He mentioned that the second half of the year would see a significant step-up compared to the first half, driven by growth and leverage opportunities. He also highlighted three building blocks for the growth in free cash flow, including headwinds in the first half related to rebates and bonuses that do not repeat in the second half.

The company is expecting improved EBITDA and working capital in the second half of the year, driven by increased demand for their products. They are prioritizing investments in their organic business, particularly in the OsseoTi platform. They also recently acquired OrthoGrid, which will support their large joint strategy and may have potential for expansion into other areas of their portfolio.

Zimmer Biomet has three different forms of navigation, including ROSA Hip, OrthoGrid, and Hip Insights. The company's strategy is to deliver faster and better solutions, and navigation is an important part of that. They expect to launch several new ROSA robots over the next four to eight quarters, but did not provide specific details for competitive reasons.

In the paragraph, the speaker discusses upcoming launches for their company, including a posterior application for certain markets, the full launch of ROSA Shoulder later in the year, and two different versions of ROSA for knees. They also mention a partnership with THINK Surgical and their comprehensive navigation systems. The speaker notes that they have been experiencing double digit growth in the US for enabling technologies, which is expected to continue. The questioner then asks about the status of Persona IQ and the short stem extension, as well as the TPT and its potential impact on adoption.

Ivan Tornos and Suky Upadhyay are discussing the company's gross margin and product plans. Tornos mentions the adoption of Persona IQ and its potential for risk-sharing agreements with payers. He also talks about the upcoming launch of the stubby product and partnerships with hospitals. Tornos also mentions that the company has decided to pull the TPT application due to economic reasons. Upadhyay apologizes for any confusion and confirms that gross margin is expected to be in line with prior guidance.

The speaker explains that the expected gross margins for the company in the coming year will be in line with the previous year, but may slightly decrease due to changes in the business mix. The second quarter was weaker than expected due to stronger international sales. However, the company still managed to increase operating margin and earnings. The gross margin is expected to decrease sequentially in the second half of the year due to inflationary pressure in third-party manufacturing costs. Despite this, the company expects to see meaningful operating margin expansion for the full year and a step up in operating margin in the second half, thanks to a restructuring program.

Ryan Zimmerman from BTIG asks two questions to Ivan Tornos, the CEO of Zimmer Biomet. The first question is about the comparison between the company's two robotic platforms, ROSA and TMINI, and how they will be adopted over time. Tornos explains that TMINI will not replace ROSA, as they serve different purposes and the company is committed to expanding ROSA's usage. The second question is about the company's margins and pricing for Suky, and Tornos says that the company is committed to improving margins and that the pricing benefits are sustainable.

The company's robotics platform, ROSA, saw a double digit growth globally and is currently the leading platform in Asia Pacific and growing in EMEA. The revenue contribution from robotics is significant and is expected to continue to grow as the company penetrates more markets. In terms of pricing, the company saw a positive performance in the second quarter, with a 80 basis point increase, marking the first positive pricing in the company's history. This was driven by a more favorable environment, improved pricing discipline and culture, and some one-time benefits in EMEA. The company expects to be flat to down 50 basis points in pricing for the full year, with the second half being impacted by the absence of the one-time benefits seen in the second quarter.

The speaker discusses the strong performance of hip and knee products outside the U.S., despite currency headwinds. They mention potential differences between Europe and Asia Pacific and note that the same issues with vacation days and supply constraints seen in the U.S. may also be present.

The market dynamics for the medical device company are strong, especially in Europe and the UK where there is a backlog. Robotics is a major driver of growth outside of the US, with the company being the number one platform in Asia Pacific. The company has also seen growth in key markets like Japan, Australia, and New Zealand. The growth drivers for the company's segments include CMFT, sports, and shoulder, which are all growing at either upper-single digit or double digit rates. The other segments, foot and ankle, trauma, and restorative therapies, are also growing at different levels. The company has overcome challenges with RT reimbursement.

During a recent conference call, the CEO of S.E.T. discussed the performance of all six businesses within the company. He also mentioned that their 5-6% organic revenue growth guidance has not changed, and that their expectations for S.E.T. and Recon remain the same. The company is also focusing on geographic diversification, with a more focused strategy on 15 key markets. Resources are being reallocated to these markets.

The speaker expresses gratitude for the progress of Zimmer Biomet and thanks the team members. They mention that this is the 10th consecutive quarter of mid-single digit or above growth and provide updates on the company's commercial infrastructure and focus outside of the U.S. They also mention the performance and penetration of the ROSA Hip platform and plans for future developments.

The company is pleased with their quarter, as they have delivered close to 5.6% revenue growth and double-digit EPS. They have a diversified portfolio and are confident in their ability to meet their guidance. The conference call has ended.

This summary was generated with AI and may contain some inaccuracies.