Zimmer Biomet (ZBH) Morgan Stanley 22nd Annual Global Healthcare Conference summary

Business performance and growth outlook

• Achieved mid-single-digit revenue growth and double-digit EPS growth over the last 10 quarters, with a strong product pipeline and improved operational performance compared to five years ago.

• 2024 growth remains robust, with Q2 showing 5.6% revenue growth and 10% EPS growth, despite recent challenges.

• Committed to mid-single-digit revenue growth, EPS growth at 1.5x revenue, and free cash flow growth at least 100 basis points above EPS through 2027.

• SET and Recon (hips and knees) businesses are expected to continue robust growth, with SET contributing significantly to overall performance.

• ASC (ambulatory surgical centers) segment is a major growth driver, with 40%-60% of cases shifting to this setting and double-digit growth expected.

ERP implementation challenges and mitigation

• Migration from legacy ERP to SAP in July led to operational disruptions, primarily impacting the U.S. and Canada, with the 'other' business category most affected.

• The issue could impact up to 1% of annual sales in 2024, but is not expected to extend into 2025; mitigation plans are in place to limit EPS impact.

• Key growth areas like hips, knees, and most of SET remain robust, with the company confident in restoring service levels by year-end.

• Mitigation efforts include cost controls and share repurchases, without compromising customer-facing activities or critical R&D.

Product innovation and market positioning

• Launching 50 new products over the next 30-36 months, including Oxford Partial Cementless knee (U.S. launch by summer 2025) and Persona IQ with new short stem.

• Regaining hip market share with new products (direct anterior stem, surgical impactors, navigation) and revised sales incentives.

• ROSA robotics platform expanding to shoulder, with U.S. and European launches planned, and strong adoption expected due to unique capabilities.

• Robotics, navigation, and mixed reality form a comprehensive technology strategy, offering customers multiple options and maintaining leadership in innovation.