Company Overview: Zimmer Biomet Holdings, Inc. (NYSE: ZBH) was founded in 1927 and has its headquarters in Warsaw, Indiana. The company is one of the top worldwide leaders in musculoskeletal healthcare. It is involved in designing, manufacturing, and marketing orthopedic reconstructive products, sports medicine, biologics, office-based technologies, spine, craniomaxillofacial, dental implants, etc. The company has its operations in more than 25 countries and markets its products in over 100 countries.

ZBH Details

Expanding Geographical Reach & Robust Top-Line Growth Aid ZBH: Zimmer Biomet Holdings, Inc. (NYSE: ZBH) is a healthcare company, engaged in designing, manufacturing, and marketing orthopedic reconstructive products, biologics, sports medicine, extremities and trauma products, spine, bone healing, thoracic products, dental implants, and other associated surgical products. In 2015, Zimmer Holdings, Inc. (the legacy company) purchased Biomet, Inc. to form a new merged company. The company’s geographic segments include Americas, Europe, Middle East & Africa (EMEA) and Asia Pacific. The company remains on track to focus on high growth, and high priority areas in Knees, S.E.T. (Sports Medicine, Extremities and Trauma), Hips, and CMFT (Craniomaxillofacial and Thoracic). In doing so, the company is in the process to spin-off its Spine and Dental businesses. The spin-off plans to mark an important milestone in the company’s evolution into a more efficient organization. The plan also aids the company to focus on greater and more optimized resource allocation and improve its core businesses, where it predicts attractive market opportunities.

Notably, the company is seeing a steady recovery in the worldwide musculoskeletal market with higher sales growth in specific geographies on enhanced procedural volume. The gradual stabilization was primarily driven by favorable demographics and expanding consumption of musculoskeletal healthcare in emerging as well as under-penetrated developed markets. Based on this, the company remains positive about its distinguished portfolio that includes both premium and value-based offerings. Thus, gradual steadiness of the global musculoskeletal market and the Dental and Spine spin-off plan bode well for the company. Despite a difficult market circumstances, ZBH’s Core hip and S.E.T. business recorded a year over year growth in 1QFY21. Revenues from Hips and S.E.T. segments recorded an increase of 0.3% and 7.2% year over year, respectively, in 1QFY21.

The company’s total revenue and net income came in at $1,847.4 million and $198.1 million, respectively, in 1QFY21. This depicts a rise from $1,783.8 million of revenues and $508.5 million net loss reported in 1QFY20. The company remains on track to deliver on its growth strategies through a diversified product portfolio and expanding geographic reach.

Key Trends; Analysis by Kalkine Group

1QFY21 Key Highlights: During the quarter, the company reported adjusted earnings per share (EPS) of $1.71, which inched up 0.6% on pcp. On GAAP basis, ZBH’s earnings came in at 94 cents per share, as compared to a loss of $2.46 per share reported in the year-ago period. Net Sales for the quarter stood at $1.85 billion, depicting a rise of 3.6% year over year.  Geographically, revenues from Americas and Asia-Pacific increased 13% and 15.5%, respectively, on pcp. However, revenues from EMEA declined 10.3% year over year in 1QFY21. On a segmental basis, revenues from Knees unit went down ~5.2% year over year. Revenues from Dental & Spine unit came in at $246 million, up 9.6% year over year. Gross margin during the quarter stood at 72%, down 65 basis points (bps) year over year. Selling, general and administrative expenses and R&D expenditure were down by 7.1% and 4.1%, respective, year over year, in 1QFY21. Adjusted operating margin stood at 25.3%, up 454 bps on pcp.

Key Highlights; Analysis by Kalkine Group 

Key Metrics, Liquidity & Balance Sheet Details: The company exited the quarter, with cash balance of $724.3 million. Long-term debt at the end of the quarter stood at $7.54 billion. Net cash inflow from operating activities during the quarter came in at $246.5 million.  In 1QFY21, gross margin, operating, EBITDA and net margins stood at 72%, 14.4%, 32% and 10.7%, higher than the industry median figures of 68.7%, 8.3%, 14.9% and 4.4%, respectively. In 1QFY21, ROE stood at 1.6%, higher than the industry median of 1.2%. Current ratio in the same time span stood at 2.39x, higher than the year-ago figure of 1.69x. Debt-to-equity in 1QFY21 stood at 0.63x, lower than 1QFY20 figure of 0.81x.

Profitability and Leverage Profile; Analysis by Kalkine Group 

Top 10 Shareholders: The top 10 shareholders together form around 34.95% of the total shareholdings, while the top 4 constitutes the maximum holding. The Vanguard Group, Inc., and BlackRock Institutional Trust Company, N.A. are holding a maximum stake in the company at 7.63% and 5.27%, respectively, as also highlighted in the chart below: