Zimmer Biomet Announces Third Quarter 2021 Financial Results

Rhea-AI Summary

Zimmer Biomet reported Q3 2021 net sales of $1.924 billion, a 0.3% decline from the prior year. Despite challenges, the company showed resilience with 1.7% growth from Q3 2019. Net earnings were $145.6 million, with an adjusted diluted EPS of $1.81. Key highlights include FDA clearance for Persona IQ, a smart knee implant, and the ROSA Hip System for robotic-assisted surgery. The company has updated its 2021 financial guidance, projecting reduced revenue growth of 11.3% - 12.5% and adjusted diluted EPS of $7.32 - $7.47.

Positive

• Launch of FDA-cleared Persona IQ smart knee implant could boost market position.
• FDA clearance for ROSA Hip System enhances robotic surgery offerings.
• 1.7% sales increase compared to pre-pandemic Q3 2019 indicates recovery.

Negative

• Q3 net sales decreased by 0.3% from the prior year.
• Updated 2021 revenue growth guidance reduced to 11.3% - 12.5%.

WARSAW, Ind., Nov. 4, 2021 /PRNewswire/ -- Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended September 30, 2021.  The Company reported third quarter net sales of $1.924 billion, a decrease of 0.3% from the prior year period, and a decrease of 0.8% on a constant currency basis.  Third quarter 2021 net sales increased 1.7% when compared to the pre-pandemic third quarter 2019, and increased 0.4% on a constant currency basis.  Net earnings for the third quarter of 2021 were $145.6 million, or $381.2 million on an adjusted basis.

Diluted earnings per share were $0.69 for the third quarter, and adjusted diluted earnings per share were $1.81.

"Despite the continued challenges and market pressures in the third quarter, we drove significant progress in the advancement of our business priorities and continued focus on execution to create value and deliver on our mission," said Bryan Hanson, Chairman, President and CEO of Zimmer Biomet.  "Our underlying business remains strong, fueled by our transformation and the launch of new innovative products that can make a difference for our customers and for patients.  I continue to be incredibly proud of our team for their dedication, resilience and performance during this challenging time."

Please see the attached schedules accompanying this press release for additional details on performance in the quarter, including sales by Zimmer Biomet's three geographies and five product categories.

________________________
1	Reconciliations of these measures to the corresponding U.S. generally accepted accounting principles measures are included in this press release.

Recent Highlights

Aligned with the ongoing transformation of Zimmer Biomet's business, key third quarter highlights include the following updates related to ZBEdge, Zimmer Biomet's suite of integrated digital and robotic technologies engineered to deliver data-powered clinical insights, shared seamlessly across the patient journey, and with the goal of improving patient outcomes:

• U.S. Food and Drug Administration (FDA) De Novo classification grant and authorization to market the tibial extension for Persona IQ^®, the world's first and only smart knee cleared by the FDA for total knee replacement surgery.  Persona IQ combines Zimmer Biomet's proven and trusted knee implant, Persona® The Personalized Knee®, with Canary Medical's proprietary implantable canturio^TMte tibial extension sensor technology that measures and determines range of motion, step count, walking speed and other gait metrics.
• FDA 510(k) clearance of the ROSA^® Hip System for robotically-assisted direct anterior total hip replacement.  ROSA Hip is the fourth robotic system introduced by Zimmer Biomet and adds to the Company's comprehensive ROSA Robotics portfolio, which includes the ROSA Knee System for total knee arthroplasty, ROSA Partial Knee System for partial knee arthroplasty and ROSA ONE^® for neurosurgical and spine procedures.
• Four data presentations on the clinical value of mymobility^® with Apple Watch^® at the American Academy of Orthopaedic Surgeons (AAOS) 2021 Annual Meeting.  mymobility with Apple Watch is a first-of-a-kind remote care management platform designed to help healthcare professionals remotely support and guide patients as they prepare for and recover from orthopedic procedures. 

Geographic and Product Category Sales

The following sales tables provide results by geography and product category for the three and nine-month periods ended September 30, 2021, as well as the percentage change compared to the prior year period, on both a reported basis and a constant currency basis.

 

NET SALES - THREE MONTHS ENDED SEPTEMBER 30, 2021
(in millions, unaudited)
								Constant
	Net							Currency
	Sales			% Change				% Change
Geographic Results
Americas	$	1,180.5			(3.0)	%			(3.2)	%
EMEA		393.1			7.4				5.9
Asia Pacific		350.4			1.1				0.5
Total	$	1,924.0			(0.3)	%			(0.8)	%
Product Categories
Knees
Americas	$	386.3			(3.5)	%			(3.8)	%
EMEA		135.2			7.1				5.8
Asia Pacific		126.4			3.8				2.4
Total		647.9			(0.1)				(0.7)
Hips
Americas		244.2			(9.1)				(9.4)
EMEA		119.0			8.6				7.3
Asia Pacific		90.6			(14.4)				(13.8)
Total		453.8			(6.3)				(6.6)
S.E.T. *		437.6			4.9				4.2
Dental & Spine		238.6			(5.8)				(6.1)
Other		146.1			15.7				15.4
Total	$	1,924.0			(0.3)	%			(0.8)	%
* Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic

 

NET SALES - NINE MONTHS ENDED SEPTEMBER 30, 2021
(in millions, unaudited)
								Constant
	Net							Currency
	Sales				% Change			% Change
Geographic Results
Americas	$	3,535.1				15.8	%		15.5	%
EMEA		1,207.1				22.8			16.0
Asia Pacific		1,056.1				16.7			12.4
Total	$	5,798.3				17.4	%		15.0	%
Product Categories
Knees
Americas	$	1,145.4				14.6	%		14.3	%
EMEA		415.1				20.6			14.2
Asia Pacific		367.3				19.0			13.7
Total		1,927.8				16.7			14.1
Hips
Americas		737.5				9.8			9.3
EMEA		349.2				19.7			13.4
Asia Pacific		288.7				2.1			(0.4)
Total		1,375.4				10.3			8.1
S.E.T. *		1,317.3				20.8			18.3
Dental & Spine		748.1				19.7			17.8
Other		429.7				32.3			29.9
Total	$	5,798.3				17.4	%		15.0	%
* Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic

 

Financial Guidance

The Company is updating its full-year 2021 financial guidance to reduce and narrow its previous projected ranges for revenue growth, adjusted operating profit margin and adjusted diluted EPS:

Projected Year Ending December 31, 2021
	Previous Guidance		Updated Guidance
2021 reported revenue growth	14.5% - 16.5%		11.3% - 12.5%
Foreign Currency Exchange Impact	1.5%		1.4%
Adjusted Operating Profit Margin(1)	26.5% - 27.0%		26.0% - 26.5%
Adjusted Tax Rate(1)	16.0% - 16.5%		16.0% - 16.5%
Adjusted Diluted EPS(1)	$7.65 - $7.95		$7.32 - $7.47

 

(1)	These measures are non-GAAP financial measures for which a reconciliation to the most directly comparable GAAP financial measure is not available without unreasonable efforts. See "Forward-Looking Non-GAAP Financial Measures."

 

Conference Call

The Company will conduct its third quarter investor conference call today, November 4, 2021, at 8:30 a.m. ET.  The audio webcast can be accessed via Zimmer Biomet's Investor Relations website at https://investor.zimmerbiomet.com.  It will be archived for replay following the conference call. 

About the Company

Zimmer Biomet is a global medical technology leader with a comprehensive portfolio designed to maximize mobility and improve health. We seamlessly transform the patient experience through our innovative products and suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. 

With 90+ years of trusted leadership and proven expertise, Zimmer Biomet is positioned to deliver the highest quality solutions to patients and providers. Our legacy continues to come to life today through our progressive culture of evolution and innovation.

For more information about our product portfolio, our operations in 25+ countries and sales in 100+ countries or about joining our team, visit www.zimmerbiomet.com or follow Zimmer Biomet on Twitter at www.twitter.com/zimmerbiomet.   

Website Information

We routinely post important information for investors on our website, www.zimmerbiomet.com, in the "Investor Relations" section.  We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.  Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts.  The information contained on, or that may be accessed through, our website or any other website referenced herein is not incorporated by reference into, and is not a part of, this document.

Note on Non-GAAP Financial Measures

This press release includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP").  These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.

Sales change information for the three and nine-month periods ended September 30, 2021 is presented on a GAAP (reported) basis and on a constant currency basis.  Constant currency percentage changes exclude the effects of foreign currency exchange rates.  They are calculated by translating current and prior-period sales at the same predetermined exchange rate.  The translated results are then used to determine year-over-year percentage increases or decreases. 

Net earnings and diluted earnings per share for the three and nine-month periods ended September 30, 2021 are presented on a GAAP (reported) basis and on an adjusted basis.  Adjusted earnings and adjusted diluted earnings per share exclude the effects of certain items, which are detailed in the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures presented later in this press release. 

Free cash flow is an additional non-GAAP measure that is presented in this press release.  Free cash flow is computed by deducting additions to instruments and other property, plant and equipment from net cash provided by operating activities.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this press release.  This press release also contains supplemental reconciliations of additional non-GAAP financial measures that the Company presents in other contexts.  These additional non-GAAP financial measures are computed from the most directly comparable GAAP financial measure as indicated in the applicable reconciliation.

Management uses non-GAAP financial measures internally to evaluate the performance of the business.  Additionally, management believes these non-GAAP measures provide meaningful incremental information to investors to consider when evaluating the performance of the Company.  Management believes these measures offer the ability to make period-to-period comparisons that are not impacted by certain items that can cause dramatic changes in reported income but that do not impact the fundamentals of our operations.  The non-GAAP measures enable the evaluation of operating results and trend analysis by allowing a reader to better identify operating trends that may otherwise be masked or distorted by these types of items that are excluded from the non-GAAP measures.  In addition, constant currency sales changes, adjusted operating profit, adjusted diluted earnings per share and free cash flow are used as performance metrics in our incentive compensation programs.

Forward-Looking Non-GAAP Financial Measures

This press release also includes certain forward-looking non-GAAP financial measures for the year ending December 31, 2021.  We calculate forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures.  For instance, we exclude the impact of certain charges related to initial compliance with the European Union Medical Device Regulation; restructuring and other cost reduction initiatives; quality remediation; acquisition, integration, divestiture and related; and certain legal and tax matters.  We have not provided quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because the excluded items are not available on a prospective basis without unreasonable efforts.  For example, the timing of certain transactions is difficult to predict because management's plans may change.  In addition, the company believes such reconciliations would imply a degree of precision and certainty that could be confusing to investors.  It is probable that these forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding financial guidance, the impact of the COVID-19 pandemic on our business, including any continued recovery, and any statements about our forecasts, expectations, plans, intentions, strategies or prospects.  All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements.  Such statements are based upon the current beliefs, expectations and assumptions of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements.  These risks, uncertainties and changes in circumstances include, but are not limited to:  the effects of the COVID-19 global pandemic and other adverse public health developments on the global economy, our business and operations and the business and operations of our suppliers and customers, including the deferral of elective surgical procedures and our ability to collect accounts receivable; the failure of vaccine rollouts and other strategies to mitigate or reverse the impacts of the COVID-19 pandemic; the failure of elective surgical procedures to recover at the levels or on the timeline anticipated; the risks and uncertainties related to our ability to successfully execute our restructuring plans; our ability to attract, retain and develop the highly skilled employees we need to support our business; the risks and uncertainties associated with the proposed spin-off of our Spine and Dental businesses, including, without limitation, the significant expenses, time and efforts related to implementing such transaction, the ability to complete the transaction on our expected timeline or at all, the tax-free nature of the transaction, possible disruptions in our relationships with customers, suppliers and other business partners, and the possibility that the anticipated benefits and synergies of the transaction, strategic and competitive advantages of each company, and future growth and other opportunities for each company will not be realized within the expected time periods or at all; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; the ability to remediate matters identified in inspectional observations or warning letters issued by the U.S. Food and Drug Administration (FDA), while continuing to satisfy the demand for our products; the impact of substantial indebtedness on our ability to service our debt obligations and/or refinance amounts outstanding under our debt obligations at maturity on terms favorable to us, or at all; the ability to retain the independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw materials and outsourced activities; the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the effect of the potential disruption of management's attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the FDA and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures; reductions in reimbursement levels by third-party payors and cost containment efforts sponsored by government agencies, legislative bodies, the private sector and healthcare purchasing organizations, including the volume-based procurement process in China; dependence on new product development, technological advances and innovation; shifts in the product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; the ability to obtain and maintain adequate intellectual property protection; breaches or failures of our information technology systems or products, including by cyberattack, unauthorized access or theft; the ability to form and implement alliances; changes in tax obligations arising from tax reform measures, including European Union rules on state aid, or examinations by tax authorities; product liability, intellectual property and commercial litigation losses; changes in general industry and market conditions, including domestic and international growth rates; changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the impact of the ongoing financial and political uncertainty on countries in EMEA on the ability to collect accounts receivable in affected countries.  A further list and description of these risks and uncertainties and other factors can be found in our Annual Report on Form 10-K for the year ended December 31, 2020, including in the sections captioned "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors," and our subsequent filings with the Securities and Exchange Commission (SEC).  Copies of these filings are available online at www.sec.gov, www.zimmerbiomet.com or on request from us.  These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our filings with the SEC.  Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Readers of this press release are cautioned not to rely on these forward-looking statements since there can be no assurance that these forward-looking statements will prove to be accurate.  This cautionary note is applicable to all forward-looking statements contained in this press release.

ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, except per share amounts, unaudited)
	2021				2020
Net Sales	$	1,924.0			$	1,929.3
Cost of products sold, excluding intangible asset amortization		581.5				569.4
Intangible asset amortization		153.7				149.7
Research and development		108.9				85.9
Selling, general and administrative		802.4				790.0
Restructuring and other cost reduction initiatives		23.5				16.2
Quality remediation		11.8				9.8
Acquisition, integration, divestiture and related		27.3				9.1
Operating expenses		1,709.1				1,630.1
Operating Profit		214.9				299.2
Other income, net		0.3				10.6
Interest expense, net		(52.6)				(54.0)
Earnings before income taxes		162.6				255.8
Provision for income taxes		16.8				9.7
Net Earnings		145.8				246.1
Less: Net earnings attributable to noncontrolling interest		0.2				3.6
Net Earnings of Zimmer Biomet Holdings, Inc.	$	145.6			$	242.5
Earnings Per Common Share
Basic	$	0.70			$	1.17
Diluted	$	0.69			$	1.16
Weighted Average Common Shares Outstanding
Basic		208.8				207.1
Diluted		210.6				208.5

 

ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, except per share amounts, unaudited)
	2021				2020
Net Sales	$	5,798.3			$	4,939.2
Cost of products sold, excluding intangible asset amortization		1,679.5				1,481.0
Intangible asset amortization		463.8				445.0
Research and development		383.8				272.0
Selling, general and administrative		2,389.9				2,283.9
Goodwill and intangible asset impairment		16.3				645.0
Restructuring and other cost reduction initiatives		64.9				89.2
Quality remediation		33.0				35.9
Acquisition, integration, divestiture and related		66.1				15.7
Operating expenses		5,097.3				5,267.7
Operating Profit (Loss)		701.0				(328.5)
Other income, net		15.7				17.4
Interest expense, net		(159.6)				(158.9)
Earnings (loss) before income taxes		557.1				(470.0)
Provision for income taxes		71.1				1.2
Net Earnings (Loss)		486.0				(471.2)
Less: Net earnings attributable to noncontrolling interest		0.4				1.4
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.	$	485.6			$	(472.6)
Earnings (Loss) Per Common Share
Basic	$	2.33			$	(2.29)
Diluted	$	2.31			$	(2.29)
Weighted Average Common Shares Outstanding
Basic		208.5				206.8
Diluted		210.5				206.8

 

ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
		September 30,		December 31,
		2021		2020
Assets
Cash and cash equivalents		$919.6		$802.1
Receivables, net		1,392.0		1,452.7
Inventories		2,517.4		2,450.7
Other current assets		483.4		377.8
Total current assets		5,312.4		5,083.3
Property, plant and equipment, net		2,008.2		2,047.7
Goodwill		9,212.0		9,261.8
Intangible assets, net		6,470.3		7,055.5
Other assets		1,005.7		969.4
Total Assets		$24,008.6		$24,417.7
Liabilities and Stockholders' Equity
Current liabilities		$1,893.4		$2,056.9
Current portion of long-term debt		1,045.7		500.0
Other long-term liabilities		1,897.2		2,034.9
Long-term debt		6,458.1		7,626.5
Stockholders' equity		12,714.2		12,199.4
Total Liabilities and Stockholders' Equity		$24,008.6		$24,417.7

 

ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
		2021				2020
Cash flows provided by (used in) operating activities
Net earnings (loss)		$	486.0			$	(471.2)
Depreciation and amortization			800.3				767.3
Share-based compensation			67.6				62.0
Goodwill and intangible asset impairment			16.3				645.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes			(74.8)				(55.0)
Receivables			17.9				13.6
Inventories			(94.6)				(108.6)
Accounts payable and accrued expenses			(7.1)				(131.4)
Other assets and liabilities			(78.1)				57.7
Net cash provided by operating activities			1,133.5				779.4
Cash flows provided by (used in) investing activities
Additions to instruments			(222.9)				(222.8)
Additions to other property, plant and equipment			(108.9)				(89.8)
Net investment hedge settlements			(2.4)				43.0
Investments in other assets			(23.2)				(28.3)
Net cash used in investing activities			(357.4)				(297.9)
Cash flows provided by (used in) financing activities
Proceeds from senior notes			-				1,497.1
Redemption of senior notes			(500.0)				(1,500.0)
Dividends paid to stockholders			(149.9)				(148.7)
Proceeds from employee stock compensation plans			117.3				97.7
Net cash flows from unremitted collections from factoring programs			-				(39.6)
Business combination contingent consideration payments			(6.5)				(13.0)
Deferred business combination payments			(100.0)				-
Debt issuance costs			(1.5)				(22.3)
Other financing activities			(9.6)				(6.7)
Net cash used in financing activities			(650.2)				(135.5)
Effect of exchange rates on cash and cash equivalents			(8.4)				3.4
Increase in cash and cash equivalents			117.5				349.4
Cash and cash equivalents, beginning of period			802.1				617.9
Cash and cash equivalents, end of period		$	919.6			$	967.3

 

ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY GEOGRAPHY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
		Three Months Ended September 30,
		2021			2020			% Inc/(Dec)			Volume / Mix			Price			Foreign Exchange
Americas		$	1,180.5		$	1,216.5			(3.0)	%		(2.1)	%		(1.1)	%		0.2	%
EMEA			393.1			366.2			7.4			6.1			(0.2)			1.5
Asia Pacific			350.4			346.6			1.1			5.2			(4.7)			0.6
Total		$	1,924.0		$	1,929.3			(0.3)	%		0.7	%		(1.5)	%		0.5	%

 

ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
		Three Months Ended September 30,
		2021			2020			% Inc/(Dec)			Volume / Mix			Price			Foreign Exchange
Knees		$	647.9		$	648.5			(0.1)	%		1.4	%		(2.1)	%		0.6	%
Hips			453.8			484.1			(6.3)			(2.8)			(3.8)			0.3
S.E.T.			437.6			417.1			4.9			3.5			0.7			0.7
Dental & Spine			238.6			253.4			(5.8)			(6.7)			0.6			0.3
Other			146.1			126.2			15.7			17.3			(1.9)			0.3
Total		$	1,924.0		$	1,929.3			(0.3)	%		0.7	%		(1.5)	%		0.5	%

 

ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY GEOGRAPHY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
		Nine Months Ended September 30,
		2021			2020			% Inc			Volume / Mix			Price			Foreign Exchange
Americas		$	3,535.1		$	3,051.5			15.8	%		17.2	%		(1.7)	%		0.3	%
EMEA			1,207.1			983.0			22.8			16.2			(0.2)			6.8
Asia Pacific			1,056.1			904.7			16.7			15.1			(2.7)			4.3
Total		$	5,798.3		$	4,939.2			17.4	%		16.6	%		(1.6)	%		2.4	%

 

ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
		Nine Months Ended September 30,
		2021			2020			% Inc			Volume / Mix			Price			Foreign Exchange
Knees		$	1,927.8		$	1,652.2			16.7	%		16.3	%		(2.2)	%		2.6	%
Hips			1,375.4			1,246.4			10.3			11.2			(3.1)			2.2
S.E.T.			1,317.3			1,090.7			20.8			17.8			0.5			2.5
Dental & Spine			748.1			625.2			19.7			18.2			(0.4)			1.9
Other			429.7			324.7			32.3			31.8			(1.9)			2.4
Total		$	5,798.3		$	4,939.2			17.4	%		16.6	%		(1.6)	%		2.4	%

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
CONSTANT CURRENCY % CHANGE
(unaudited)
	For the Three Months Ended
	September 30, 2021 vs. 2020
					Foreign				Constant
					Exchange				Currency
	% Change				Impact				% Change
Geographic Results
Americas		(3.0)	%			0.2	%			(3.2)	%
EMEA		7.4				1.5				5.9
Asia Pacific		1.1				0.6				0.5
Total		(0.3)	%			0.5	%			(0.8)	%
Product Categories
Knees
Americas		(3.5)	%			0.3	%			(3.8)	%
EMEA		7.1				1.3				5.8
Asia Pacific		3.8				1.4				2.4
Total		(0.1)				0.6				(0.7)
Hips
Americas		(9.1)				0.3				(9.4)
EMEA		8.6				1.3				7.3
Asia Pacific		(14.4)				(0.6)				(13.8)
Total		(6.3)				0.3				(6.6)
S.E.T		4.9				0.7				4.2
Dental & Spine		(5.8)				0.3				(6.1)
Other		15.7				0.3				15.4
Total		(0.3)	%			0.5	%			(0.8)	%

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
CONSTANT CURRENCY % CHANGE
(unaudited)
	For the Nine Months Ended
	September 30, 2021 vs. 2020
					Foreign				Constant
					Exchange				Currency
	% Change				Impact				% Change
Geographic Results
Americas		15.8	%			0.3	%			15.5	%
EMEA		22.8				6.8				16.0
Asia Pacific		16.7				4.3				12.4
Total		17.4	%			2.4	%			15.0	%
Product Categories
Knees
Americas		14.6	%			0.3	%			14.3	%
EMEA		20.6				6.4				14.2
Asia Pacific		19.0				5.3				13.7
Total		16.7				2.6				14.1
Hips
Americas		9.8				0.5				9.3
EMEA		19.7				6.3				13.4
Asia Pacific		2.1				2.5				(0.4)
Total		10.3				2.2				8.1
S.E.T		20.8				2.5				18.3
Dental & Spine		19.7				1.9				17.8
Other		32.3				2.4				29.9
Total		17.4	%			2.4	%			15.0	%

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
CONSTANT CURRENCY % CHANGE
(unaudited)
	For the Three Months Ended
	September 30,
											Foreign				Constant
	Net Sales										Exchange				Currency
	2021			2019			% Change				Impact				% Change
Geographic Results
Americas	$	1,180.5		$	1,179.2			0.1	%			0.1	%			-	%
EMEA		393.1			374.6			4.9				4.6				0.3
Asia Pacific		350.4			338.6			3.5				2.0				1.5
Total	$	1,924.0		$	1,892.4			1.7	%			1.3	%			0.4	%
Product Categories
Knees	$	647.9		$	645.4			0.4				1.4				(1.0)
Hips		453.8			459.2			(1.2)				1.2				(2.4)
S.E.T		437.6			400.6			9.2				1.5				7.7
Dental & Spine		238.6			241.2			(1.0)				1.0				(2.0)
Other		146.1			146.0			-				1.1				(1.1)
Total	$	1,924.0		$	1,892.4			1.7	%			1.3	%			0.4	%

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, except per share amounts, unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
		Cost of products sold, excluding intangible asset amortization				Intangible asset amortization				Research and development				Selling, general and administrative				Restructuring and other cost reduction initiatives				Quality remediation				Acquisition, integration, divestiture and related				Other income, net				Provision for income taxes				Net Earnings of Zimmer Biomet Holdings, Inc.				Diluted earnings per common share
As Reported		$	581.5			$	153.7			$	108.9			$	802.4			$	23.5			$	11.8			$	27.3			$	0.3			$	16.8			$	145.6			$	0.69
Inventory and manufacturing-related charges(1)			(11.0)				-				-				-				-				-				-				-				5.5				5.5				0.03
Intangible asset amortization(2)			-				(153.7)				-				-				-				-				-				-				24.4				129.3				0.61
Restructuring and other cost reduction initiatives(4)			0.2				-				-				-				(23.5)				-				-				-				5.2				18.1				0.09
Quality remediation(5)			-				-				-				-				-				(11.8)				-				-				2.7				9.1				0.04
Acquisition, integration, divestiture and related(6)			-				-				-				-				-				-				(27.3)				-				4.9				22.4				0.11
Litigation(7)			-				-				-				(43.6)				-				-				-				-				4.4				39.2				0.19
European Union Medical Device Regulation(8)			(0.1)				-				(11.8)				-				-				-				-				-				2.6				9.3				0.04
Other charges(10)			-				-				-				(4.3)				-				-				-				3.6				0.8				7.1				0.03
Swiss tax reform(11)			-				-				-				-				-				-				-				-				(9.6)				9.6				0.05
Other certain tax adjustments(12)			-				-				-				-				-				-				-				-				14.0				(14.0)				(0.07)
As Adjusted		$	570.6			$	-			$	97.1			$	754.5			$	-			$	-			$	-			$	3.9			$	71.7			$	381.2			$	1.81

 

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
		Cost of products sold, excluding intangible asset amortization				Intangible asset amortization				Research and development				Selling, general and administrative				Restructuring and other cost reduction initiatives				Quality remediation				Acquisition, integration, divestiture and related				Other income, net				Provision for income taxes				Net Earnings of Zimmer Biomet Holdings, Inc.				Diluted earnings per common share
As Reported		$	569.4			$	149.7			$	85.9			$	790.0			$	16.2			$	9.8			$	9.1			$	10.6			$	9.7			$	242.5			$	1.16
Inventory and manufacturing-related charges(1)			(2.3)				-				-				-				-				-				-				-				4.3				(2.0)				(0.01)
Intangible asset amortization(2)			-				(149.7)				-				-				-				-				-				-				39.3				110.4				0.53
Restructuring and other cost reduction initiatives(4)			-				-				-				-				(16.2)				-				-				-				6.5				9.7				0.05
Quality remediation(5)			(0.2)				-				-				-				-				(9.8)				-				-				3.2				6.8				0.03
Acquisition, integration, divestiture and related(6)			-				-				-				-				-				-				(9.1)				-				1.9				7.2				0.03
Litigation(7)			-				-				-				(19.3)				-				-				-				-				6.8				12.5				0.06
European Union Medical Device Regulation(8)			-				-				(2.0)				-				-				-				-				-				1.1				0.9				0.01
Other charges(10)			-				-				-				(0.3)				-				-				-				(8.6)				(4.7)				(3.6)				(0.02)
Swiss tax reform(11)			-				-				-				-				-				-				-				-				4.6				(4.6)				(0.02)
Other certain tax adjustments(12)			-				-				-				-				-				-				-				-				3.0				(3.0)				(0.01)
As Adjusted		$	566.9			$	-			$	83.9			$	770.4			$	-			$	-			$	-			$	2.0			$	75.7			$	376.8			$	1.81

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, except per share amounts, unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
		Cost of products sold, excluding intangible asset amortization				Intangible asset amortization				Research and development				Selling, general and administrative				Goodwill and intangible asset impairment				Restructuring and other cost reduction initiatives				Quality remediation				Acquisition, integration, divestiture and related				Other income, net				Provision for income taxes				Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.				Diluted earnings (loss)  per common share
As Reported		$	1,679.5			$	463.8			$	383.8			$	2,389.9			$	16.3			$	64.9			$	33.0			$	66.1			$	15.7			$	71.1			$	485.6			$	2.31
Inventory and manufacturing-related charges(1)			(13.0)				-				-				-				-				-				-				-				-				16.0				(3.0)				(0.01)
Intangible asset amortization(2)			-				(463.8)				-				-				-				-				-				-				-				85.6				378.2				1.80
Goodwill and intangible asset impairment(3)			-				-				-				-				(16.3)				-				-				-				-				2.1				14.2				0.07
Restructuring and other cost reduction initiatives(4)			-				-				-				-				-				(64.9)				-				-				-				14.5				50.4				0.24
Quality remediation(5)			-				-				-				-				-				-				(33.0)				-				-				7.4				25.6				0.12
Acquisition, integration, divestiture and related(6)			-				-				-				-				-				-				-				(66.1)				-				13.2				52.9				0.25
Litigation(7)			-				-				-				(53.3)				-				-				-				-				-				5.3				48.0				0.23
European Union Medical Device Regulation(8)			(0.1)				-				(29.3)				-				-				-				-				-				-				6.4				23.0				0.11
Certain R&D agreements(9)			-				-				(65.0)				-				-				-				-				-				-				14.6				50.4				0.24
Other charges(10)			-				-				-				(2.4)				-				-				-				-				(3.5)				(2.0)				0.9				-
Swiss tax reform(11)			-				-				-				-				-				-				-				-				-				(28.4)				28.4				0.13
Other certain tax adjustments(12)			-				-				-				-				-				-				-				-				-				13.8				(13.8)				(0.07)
As Adjusted		$	1,666.4			$	-			$	289.5			$	2,334.2			$	-			$	-			$	-			$	-			$	12.2			$	219.6			$	1,140.8			$	5.42

 

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
		Cost of products sold, excluding intangible asset amortization				Intangible asset amortization				Research and development				Selling, general and administrative				Goodwill and intangible asset impairment				Restructuring and other cost reduction initiatives				Quality remediation				Acquisition, integration, divestiture and related				Other income, net				Provision for income taxes				Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.				Diluted earnings (loss)  per common share
As Reported		$	1,481.0			$	445.0			$	272.0			$	2,283.9			$	645.0			$	89.2			$	35.9			$	15.7			$	17.4			$	1.2			$	(472.6)			$	(2.29)
Inventory and manufacturing-related charges(1)			(4.3)				-				-				-				-				-				-				-				-				10.2				(5.9)				(0.03)
Intangible asset amortization(2)			-				(445.0)				-				-				-				-				-				-				-				77.5				367.5				1.78
Goodwill and intangible asset impairment(3)			-				-				-				-				(645.0)				-				-				-				-				5.7				639.3				3.09
Restructuring and other cost reduction initiatives(4)			-				-				-				-				-				(89.2)				-				-				-				18.7				70.5				0.34
Quality remediation(5)			0.1				-				-				-				-				-				(35.9)				-				-				7.3				28.5				0.14
Acquisition, integration, divestiture and related(6)			-				-				-				-				-				-				-				(15.7)				-				2.9				12.8				0.06
Litigation(7)			-				-				-				(100.4)				-				-				-				-				-				18.7				81.7				0.40
European Union Medical Device Regulation(8)			-				-				(19.1)				-				-				-				-				-				-				3.2				15.9				0.07
Other charges(10)			-				-				-				(18.1)				-				-				-				-				(12.5)				7.9				(2.3)				(0.01)
Swiss tax reform(11)			-				-				-				-				-				-				-				-				-				(11.6)				11.6				0.06
Other certain tax adjustments(12)			-				-				-				-				-				-				-				-				-				6.1				(6.1)				(0.03)
Effect of dilutive shares assuming net earnings(13)			-				-				-				-				-				-				-				-				-				-				-				(0.02)
As Adjusted		$	1,476.8			$	-			$	252.9			$	2,165.4			$	-			$	-			$	-			$	-			$	4.9			$	147.8			$	740.9			$	3.56

 

(1)	Inventory and manufacturing-related charges include excess and obsolete inventory charges on certain product lines we intend to discontinue, incremental cost of products sold from stepping up inventory to its fair value from its manufactured cost in business combination accounting and other inventory and manufacturing-related charges or gains.
(2)	We exclude intangible asset amortization as well as deferred tax rate changes on our intangible assets from our non-GAAP financial measures because we internally assess our performance against our peers without this amortization.  Due to various levels of acquisitions among our peers, intangible asset amortization can vary significantly from company to company.
(3)	In the first quarter of 2020, we recognized goodwill impairment charges of $470.0 million and $142.0 million related to our EMEA and Dental reporting units, respectively. In the second quarters of 2021 and 2020, we recognized $16.3 million and $33.0 million, respectively, of in-process research and development ("IPR&D") intangible asset impairments on certain IPR&D projects.
(4)	In December 2019, our Board of Directors approved, and we initiated, a new global restructuring program that includes a reorganization of key businesses and an overall effort to reduce costs in order to accelerate decision-making and focus the organization on priorities to drive growth.  Restructuring and other cost reduction initiatives also include other cost reduction initiatives that have the goal of reducing costs across the organization.  The costs include employee termination benefits; contract terminations for facilities and sales agents; and other charges, such as retention period salaries and benefits and relocation costs.
(5)	We are addressing inspectional observations on Form 483 and a Warning Letter issued by the U.S. Food and Drug Administration ("FDA") following its previous inspections of our Warsaw North Campus facility, among other matters.  This quality remediation has required us to devote significant financial resources.  The majority of the expenses are related to consultants who are helping us to update previous documents and redesign certain processes.
(6)	The acquisition, integration, divestiture and related gains and expenses we have excluded from our non-GAAP financial measures resulted from the planned spinoff of ZimVie (our Spine and Dental Businesses)and various acquisitions.
(7)	We are involved in routine patent litigation, product liability litigation, commercial litigation and other various litigation matters.  We review litigation matters from both a qualitative and quantitative perspective to determine if excluding the losses or gains will provide our investors with useful incremental information.  Litigation matters can vary in their characteristics, frequency and significance to our operating results.  The litigation charges and gains excluded from our non-GAAP financial measures in the periods presented relate to product liability matters where we have received numerous claims on specific products, patent litigation and commercial litigation related to a common matter in multiple jurisdictions.  In regards to the product liability matters, due to the complexities involved and claims filed in multiple districts, the expenses associated with these matters are significant to our operating results.  Once the litigation matter has been excluded from our non-GAAP financial measures in a particular period, any additional expenses or gains from changes in estimates are also excluded, even if they are not significant, to ensure consistency in our non-GAAP financial measures from period-to-period.
(8)	The European Union Medical Device Regulation imposes significant additional premarket and postmarket requirements.  The new regulations provided a transition period until May 2021 for previously-approved medical devices to meet the additional requirements.  For certain devices, this transition period can be extended until May 2024.  We are excluding from our non-GAAP financial measures the incremental costs incurred to establish initial compliance with the regulations related to our previously-approved medical devices.  The incremental costs primarily include temporary personnel and third-party professionals necessary to supplement our internal resources.
(9)	During the nine-month period ended September 30, 2021, we entered into certain agreements to gain access to or acquire third-party IPR&D projects.
(10)	We have incurred other various expenses from specific events or projects that we consider highly variable or that have a significant impact to our operating results that we have excluded from our non-GAAP measures.  These include costs related to legal entity, distribution and manufacturing optimization, including contract terminations, gains and losses from changes in fair value on our equity investments, as well as, in the 2020 period, our costs of complying with a Deferred Prosecution Agreement ("DPA") with the U.S. government related to certain Foreign Corrupt Practices Act matters involving Biomet and certain of its subsidiaries, which DPA concluded in February 2021.
(11)	We recognized a tax benefit related to Switzerland's Federal Act on Tax Reform and AHV Financing ("TRAF") in addition to an impact from certain restructuring transactions in Switzerland. Also included are tax adjustments relating to ongoing impacts of tax only amortization resulting from TRAF as well as certain restructuring transactions in Switzerland.
(12)	Other certain tax adjustments relate to various discrete tax period adjustments as well as US tax reform planning.
(13)	Due to the reported net loss for this period, the effect of dilutive shares assuming net earnings is shown as an adjustment.  Diluted share count used in Adjusted Diluted EPS is:

 

		Nine Months Ended
		September 30, 2020
Diluted shares			206.8
Dilutive shares assuming net earnings			1.4
Adjusted diluted shares			208.2

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
Net cash provided by operating activities	$	433.1			$	381.3			$	1,133.5			$	779.4
Additions to instruments		(72.4)				(63.5)				(222.9)				(222.8)
Additions to other property, plant and equipment		(54.2)				(30.6)				(108.9)				(89.8)
Free cash flow	$	306.5			$	287.2			$	801.7			$	466.8

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF GROSS PROFIT & MARGIN TO ADJUSTED GROSS
PROFIT & MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
	Three Months Ended September 30,									Nine Months Ended September 30,
	2021				2020					2021				2020
Net Sales	$	1,924.0			$	1,929.3				$	5,798.3			$	4,939.2
Cost of products sold, excluding intangible asset amortization		581.5				569.4					1,679.5				1,481.0
Intangible asset amortization		153.7				149.7					463.8				445.0
Gross Profit	$	1,188.8			$	1,210.2				$	3,655.0			$	3,013.2
Inventory and manufacturing-related charges		11.0				2.3					13.0				4.3
Restructuring and other cost reduction initiatives		(0.2)				-					-				-
Quality remediation		-				0.2					-				(0.1)
European Union Medical Device Regulation		0.1				-					0.1				-
Intangible asset amortization		153.7				149.7					463.8				445.0
Adjusted gross profit	$	1,353.4			$	1,362.4				$	4,131.9			$	3,462.4
Gross margin		61.8		%		62.7		%			63.0		%		61.0		%
Inventory and manufacturing-related charges		0.5				0.1					0.2				0.1
Restructuring and other cost reduction initiatives		-				-					-				-
Quality remediation		-				-					-				-
European Union Medical Device Regulation		-				-					-				-
Intangible asset amortization		8.0				7.8					8.1				9.0
Adjusted gross margin		70.3		%		70.6		%			71.3		%		70.1		%

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF OPERATING PROFIT (LOSS) & MARGIN TO ADJUSTED OPERATING PROFIT & MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(in millions, unaudited)
	Three Months Ended September 30,									Nine Months Ended September 30,
	2021				2020					2021				2020
Operating profit (loss)	$	214.9			$	299.2				$	701.0			$	(328.5)
Inventory and manufacturing-related charges		11.0				2.3					13.0				4.3
Intangible asset amortization		153.7				149.7					463.8				445.0
Goodwill and intangible asset impairment		-				-					16.3				645.0
Restructuring and other cost reduction initiatives		23.3				16.2					64.9				89.2
Quality remediation		11.8				10.0					33.0				35.8
Acquisition, integration, divestiture and related		27.3				9.1					66.1				15.7
Litigation		43.6				19.3					53.3				100.4
European Union Medical Device Regulation		11.9				2.0					29.4				19.1
Certain R&D agreements		-				-					65.0				-
Other charges		4.3				0.3					2.4				18.1
Adjusted operating profit	$	501.8			$	508.1				$	1,508.2			$	1,044.1
Operating profit (loss) margin		11.2		%		15.5		%			12.1		%		(6.7)		%
Inventory and manufacturing-related charges		0.5				0.1					0.2				0.1
Intangible asset amortization		8.0				7.8					8.1				9.0
Goodwill and intangible asset impairment		-				-					0.3				13.1
Restructuring and other cost reduction initiatives		1.2				0.8					1.1				1.8
Quality remediation		0.6				0.5					0.5				0.7
Acquisition, integration, divestiture and related		1.5				0.5					1.1				0.3
Litigation		2.3				1.0					1.0				2.0
European Union Medical Device Regulation		0.6				0.1					0.5				0.4
Certain R&D agreements		-				-					1.1				-
Other charges		0.2				-					-				0.4
Adjusted operating profit margin		26.1		%		26.3		%			26.0		%		21.1		%

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
(unaudited)
	Three Months Ended September 30,									Nine Months Ended September 30,
	2021				2020					2021				2020
Effective tax rate		10.4		%		3.8		%			12.8		%		(0.3)		%
Tax effect of adjustments made to earnings before taxes(1)		2.5				9.8					5.9				15.8
Swiss tax reform		(5.8)				1.8					(5.1)				2.4
Other certain tax adjustments		8.7				1.2					2.5				(1.3)
Adjusted effective tax rate		15.8		%		16.6		%			16.1		%		16.6		%
(1) Includes inventory and manufacturing-related charges; intangible asset amortization; goodwill impairment; restructuring and other cost reduction initiatives; quality remediation; acquisition, integration, divestiture and related; litigation; European Union Medical Device Regulation; certain R&D agreements, and other charges

 

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF DEBT TO NET DEBT
AS OF SEPTEMBER 30, 2021 and DECEMBER 31, 2020
(in millions, unaudited)
	September 30, 2021				December 31, 2020
Debt, both current and long-term	$	7,503.8			$	8,126.5
Cash and cash equivalents		(919.6)				(802.1)
Net debt	$	6,584.2			$	7,324.4

 

Media	Investors
Meredith Weissman	Keri Mattox
(703) 346-3127	(215) 275-2431
meredith.weissman@zimmerbiomet.com	keri.mattox@zimmerbiomet.com
	Ezgi Yagci
	(617) 549-2443
	ezgi.yagci@zimmerbiomet.com

 

 

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SOURCE Zimmer Biomet Holdings, Inc.

FAQ

What are Zimmer Biomet's Q3 2021 financial results?

Zimmer Biomet reported Q3 2021 net sales of $1.924 billion, a decline of 0.3% year-over-year.

What is the adjusted EPS for Zimmer Biomet in Q3 2021?

The adjusted diluted EPS for Q3 2021 was $1.81.

How did Zimmer Biomet perform compared to pre-pandemic levels?

Compared to Q3 2019, Zimmer Biomet's sales increased by 1.7%.

What updates were made to the financial guidance for 2021?

The updated guidance projects revenue growth of 11.3% - 12.5% for 2021.