Zimmer Biomet (ZBH) Q3 2024 earnings summary

Executive summary

• Net sales grew over 4% in Q3 2024, marking the 11th consecutive quarter of mid-single-digit or better constant currency revenue growth, driven by market growth, new products, and commercial execution, despite ERP implementation challenges.

• Adjusted EPS reached $1.74, outpacing revenue growth, with net earnings at $249.1 million and adjusted net earnings at $353.2 million for the quarter.

• ERP transition caused temporary shipping and sales disruptions, mainly in the U.S., but these are largely resolved with normalization expected by year-end and full-year impact on net sales expected to be less than 1%.

• Strong performance in knees, hips, and SET segments, with innovation and new product launches, including the Z1 Femoral Hip System, driving momentum.

• Leadership changes, talent upgrades, and ongoing restructuring plans are supporting growth and operational excellence.

Financial highlights

• Q3 net sales were $1.824 billion, up 4% year-over-year; nine-month sales reached $5.655 billion, up 3.7%.

• Adjusted gross margin was 71% and adjusted operating margin was 26.3% for Q3.

• GAAP diluted EPS was $1.23, up from $0.77 last year; adjusted diluted EPS was $1.74.

• Free cash flow for Q3 was $310 million; for nine months, $652.4 million.

• Ended Q3 with $569 million in cash and cash equivalents; net debt at quarter-end was $5.88 billion.

Outlook and guidance

• 2024 constant currency revenue growth guidance updated to 4.25%-4.75%; reported revenue growth expected at 3.5%-4% due to currency headwinds.

• Full-year adjusted diluted EPS expected in the range of $7.95-$8.05.

• Free cash flow for 2024 projected at about $1 billion.

• Expecting full-year gross margin to be slightly down, but operating margin to expand for the fourth consecutive year.

• Operating margin expansion of at least 30 basis points per year targeted through 2025 and beyond.