08.03.15
It could have been worse.
Zimmer Biomet could have really botched its second quarter performance. Instead, the newborn orthopedic behemoth sidestepped total disaster with adjusted earnings per share (EPS) of $1.59 for the three months ended June 30—4 cents ahead of Wall Street expectations. That EPS excludes one-time charges, including $390.6 million in merger-related expenses.
Still, overall sales were down 1.3 percent to $1.17 billion, shy of the $1.19 billion Wall Street analysts had expected. Losses totaled $158 million, or 91 cents per common share compared with Q2 2014 profits of $176.5 million, or $1.05 per common share. Gross profit climbed 3 percent to $877.1 million but operating profit plummeted 50.3 percent to $129.5 million, according to the company’s latest earnings report. The addition of Biomet contributed $60 million in quarterly revenue, though it only was (officially) part of the new company for roughly a week during the specified time period.
“During the quarter, we completed our landmark combination to create Zimmer Biomet, marking a new era for our company and an unprecedented opportunity to drive our growth and value creation strategies,” President/CEO David C. Dvorak said. “With a broad and diversified musculoskeletal portfolio, Zimmer Biomet is well-positioned to reach new heights of commercial and operational excellence, and to accelerate the pace of our innovation for the evolving healthcare landscape.”
Hip and knee implants continued to constitute a significant chunk of Zimmer Biomet’s net sales: $783 million, or 67 percent. Overall, reconstructive implants—including those for the extremities—grew 0.7 percent during the quarter (excluding the effects of fluctuating exchange rates) to $832 million. The 2.3 percent gain in knee revenue ($476 million) was somewhat offset by a 1.3 percent loss in hip sales ($307 million).
The Spine unit experienced the best growth, rising 4.7 percent in constant currency to $52 million. Extremities charted the worst performance, slipping 1 percent to $49 million; Dental sales were flat at $57 million and Trauma proceeds slid 0.7 percent to $73 million. Surgical/others sales suffered a similar fate, falling 0.6 percent to $94 million.
North and South America contributed the most to total revenue, garnering $638 million, or 0.4 percent more than the same period in 2014. Asia Pacific sales rose 2.8 percent to $193 million, while Europe/Middle East/Africa proceeds decreased 0.2 percent to $277 million.
Zimmer Biomet executives have projected synergies from the $13.4 billion deal of $135 million the combined firm’s first year and $350 million by the third year. During a second- quarter earnings conference call, Dvorak outlined the new company’s sales and marketing strategy as it seeks to accelerate growth rates next year. He and other bigwigs reiterated their pledge to retain sales reps rather than cut them in an effort to achieve synergies.
Dvorak said Zimmer Biomet is planning to appoint 2,000 specialized sales reps in the non-large joint sectors (not hips or knees) by the end of the year and added that management hopes to significantly expand that number throughout the rest of the decade.
“Our vision is to build the most highly specialized and effective musculoskeletal commercial team in the industry. Consistent with that goal, we’ve selected sales leaders with proven track records and design compensation plans that reward growth. We expect to being realizing the benefits of our integrated sales channel, as well as these commercial opportunities, in the form of sequentially accelerating revenue growth as we exit 2015 and progress through 2016,” he told analysts.
Dvorak also touted cross-selling opportunities, saying, “We’re bullish on the union of complementary extremities portfolios, highlighted by the cross-selling opportunities represented by the comprehensive total shoulder system, which commands a wide clinical audience and rapidly growing market, and the Nexel total elbow.”
Other growth opportunities include sports medicine and foot/ankle implants, he said.
Zimmer Biomet could have really botched its second quarter performance. Instead, the newborn orthopedic behemoth sidestepped total disaster with adjusted earnings per share (EPS) of $1.59 for the three months ended June 30—4 cents ahead of Wall Street expectations. That EPS excludes one-time charges, including $390.6 million in merger-related expenses.
Still, overall sales were down 1.3 percent to $1.17 billion, shy of the $1.19 billion Wall Street analysts had expected. Losses totaled $158 million, or 91 cents per common share compared with Q2 2014 profits of $176.5 million, or $1.05 per common share. Gross profit climbed 3 percent to $877.1 million but operating profit plummeted 50.3 percent to $129.5 million, according to the company’s latest earnings report. The addition of Biomet contributed $60 million in quarterly revenue, though it only was (officially) part of the new company for roughly a week during the specified time period.
“During the quarter, we completed our landmark combination to create Zimmer Biomet, marking a new era for our company and an unprecedented opportunity to drive our growth and value creation strategies,” President/CEO David C. Dvorak said. “With a broad and diversified musculoskeletal portfolio, Zimmer Biomet is well-positioned to reach new heights of commercial and operational excellence, and to accelerate the pace of our innovation for the evolving healthcare landscape.”
Hip and knee implants continued to constitute a significant chunk of Zimmer Biomet’s net sales: $783 million, or 67 percent. Overall, reconstructive implants—including those for the extremities—grew 0.7 percent during the quarter (excluding the effects of fluctuating exchange rates) to $832 million. The 2.3 percent gain in knee revenue ($476 million) was somewhat offset by a 1.3 percent loss in hip sales ($307 million).
The Spine unit experienced the best growth, rising 4.7 percent in constant currency to $52 million. Extremities charted the worst performance, slipping 1 percent to $49 million; Dental sales were flat at $57 million and Trauma proceeds slid 0.7 percent to $73 million. Surgical/others sales suffered a similar fate, falling 0.6 percent to $94 million.
North and South America contributed the most to total revenue, garnering $638 million, or 0.4 percent more than the same period in 2014. Asia Pacific sales rose 2.8 percent to $193 million, while Europe/Middle East/Africa proceeds decreased 0.2 percent to $277 million.
Zimmer Biomet executives have projected synergies from the $13.4 billion deal of $135 million the combined firm’s first year and $350 million by the third year. During a second- quarter earnings conference call, Dvorak outlined the new company’s sales and marketing strategy as it seeks to accelerate growth rates next year. He and other bigwigs reiterated their pledge to retain sales reps rather than cut them in an effort to achieve synergies.
Dvorak said Zimmer Biomet is planning to appoint 2,000 specialized sales reps in the non-large joint sectors (not hips or knees) by the end of the year and added that management hopes to significantly expand that number throughout the rest of the decade.
“Our vision is to build the most highly specialized and effective musculoskeletal commercial team in the industry. Consistent with that goal, we’ve selected sales leaders with proven track records and design compensation plans that reward growth. We expect to being realizing the benefits of our integrated sales channel, as well as these commercial opportunities, in the form of sequentially accelerating revenue growth as we exit 2015 and progress through 2016,” he told analysts.
Dvorak also touted cross-selling opportunities, saying, “We’re bullish on the union of complementary extremities portfolios, highlighted by the cross-selling opportunities represented by the comprehensive total shoulder system, which commands a wide clinical audience and rapidly growing market, and the Nexel total elbow.”
Other growth opportunities include sports medicine and foot/ankle implants, he said.