Zimmer Biomet’s Sales Surged 28.3 Percent in 2015

Apparently, bigger is better — at least in the orthopedic sector.

Zimmer Biomet Holdings Inc. has released its first full-year earnings report (quite paradoxical, considering the two companies merged only six months ago), and it shows net sales surging 28.3 percent to $6 billion. The company, in fact, reported double-digit gains in all of its reporting segments, with spine proceeds skyrocketing 95.2 percent to $404 million. Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma (SET) revenue shot up 40.7 percent to $1.2 billion, while Dental sales increased 38.2 percent to $336 million. Even knee and hip proceeds, which have seesawed depending on procedural volume and economics over the last few years, both reported gains, rising 28 percent and 30 percent respectively.   

“At the close of a transformational year for Zimmer Biomet, we achieved top line growth supported by sequential improvement from our joint reconstructive and S.E.T. businesses in the U.S. In addition, we finished the year with strong earnings results, as we continued to execute on our global integration plans,” said David Dvorak, president/CEO of Zimmer Biomet. “Importantly, the substantial completion of our commercial integration in 2015, combined with the breadth of our musculoskeletal portfolio, positions our sales teams to accelerate our growth as we progress through 2016.”

Geographical sales also rose impressively last year, with American revenue mushrooming 41.2 percent to $3.6 billion. Asia-Pacific proceeds ballooned 13.3 percent to $918 million, and Europe, Middle East and Africa sales jumped 11.7 percent to $1.4 billion.

Diluted earnings per share (EPS) for the year were $0.26 reported, a 98.3 percent decrease from the prior year, and $6.90 adjusted, an increase of 7.8 percent adjusted over 2014.

Fourth-quarter revenues were strong but were impacted by pricing pressures as well as softness in emerging markets and certain countries within the European, Middle East and Africa region. Net sales of $1.93 billion in Q4 grew 58 percent over the same period in 2014 on a reported basis, but increased just 0.5 percent on an adjusted pro forma constant currency basis.

Diluted EPS for the fourth quarter was $0.14 reported, an 84.3 percent decrease from the prior year period, and $2.09 adjusted, a 17.4 percent increase over 2014.

Net earnings for the fourth quarter were $29.7 million on a reported basis and $428.3 million on an adjusted basis, a 39.2 percent increase adjusted over the fourth quarter of 2014. Operating cash flow for the fourth quarter was $433.2 million.

During the fourth quarter, Zimmer Biomet paid $44.8 million in dividends and declared a fourth quarter dividend of $0.22 per share, consistent with the dividend declared for the prior year period. 

In addition, the company utilized $150 million of cash to acquire 1.4 million shares during the fourth quarter.  As of Dec. 31, 2015, $450 million remained available under the current share repurchase authorization.

Zimmer Biomet management expects constant currency revenue for the full year 2016, as compared to adjusted pro forma 2015 revenue, to increase between 1.5 percent and 2.5 percent.  The company also anticipates foreign currency translation to negatively impact revenues by 2 percent resulting in reported revenue between negative 0.5 percent and positive 0.5 percent when compared to adjusted pro forma 2015 revenue. 

Full-year 2016 adjusted diluted EPS is forecast to range between $7.80 and $7.95.

“In June of 2015, we joined together two innovative companies and began executing our plans to expand our leadership position in musculoskeletal,” Dvorak told investors during a Jan. 28 earnings conference call. “

The early success of our execution of these plans is reflected in our strong earnings performance. In the second half of 2015, we over-delivered against our initial net synergy targets, further validating our confidence and the effectiveness and accretive value of our combined organization. Notably, in 2015, we generated our fifth consecutive year of adjusted operating margin expansion. Based upon our significant progress, we’re confident in our ability to drive sequential revenue improvement as we progress through 2016.”