Zimmer Biomet (ZBH) Goldman Sachs 45th Annual Global Healthcare Conference summary

Strategy and market positioning

• Highlighted a strategic shift with a focus on innovation, operational transformation, and differentiated market dynamics, aiming for above 4% WAMGR and targeting 5% through portfolio diversification and M&A.

• Emphasized innovation as a core advantage, with plans to launch 50 new products over the next 30-36 months, including unique robotics and smart implant technologies.

• Stressed the importance of optionality and diversification beyond orthopedics, leveraging technology and data solutions, and expanding into high-growth areas like ASC and cranial/maxillofacial.

• Committed to smart, disciplined M&A to drive growth and portfolio diversification, with a clear pathway to elevate WAMGR to 5%.

• Capital allocation priorities have shifted from debt reduction to a balanced approach of shareholder returns and maintaining M&A firepower.

Business performance and growth drivers

• Achieved upper teens growth in the ASC segment, with 15% of sales from ASC and strong account gains, supported by a 3P model: products, people, and partnerships.

• Robotics penetration for ROSA is near 20%, with a goal to double to 40% by 2027, supported by new product launches and an exclusive handheld robot partnership.

• Cementless knee and robotics conversions each provide a 10%-15% ASP uplift, with plans to increase penetration from less than 20% to 50% for both by 2027.

• Multiple new product launches in 2024, including ROSA Shoulder, Oxford partial cementless knee, and next-gen robotics, are expected to drive higher growth in the second half of the year.

• Guidance for 2024 anticipates low mid-single-digit growth in H1, accelerating to upper mid-single digits in H2 due to product launches.

Operational efficiency and financial outlook

• Operating margins expanded by 200 basis points from 2022-2024, driven by SG&A efficiencies and over 50 product launches.

• At least 25% of OpEx is fixed or semi-fixed, with ongoing opportunities to leverage SG&A and shift resources to growth areas.

• Gross margins are expected to remain stable early in the long-range plan, with structural programs offsetting pricing and inflationary pressures.

• Structural initiatives like site optimization, E&O reduction, and volume increases are helping to offset $80 million in annual headwinds.

• Capital allocation will prioritize M&A and shareholder returns, with at least 65% of free cash flow returned to shareholders and flexibility for strategic deals.