Can ZimVie Add Increased Value to its Shareholders?

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Written By Jackson Hartwell

ZimVie Inc. is a global life sciences company specializing in dental implants and related technologies. The company was spun out from Zimmer Biomet (ZBH) in 2022, originally comprising both dental and spine segments. In December 2023, ZimVie announced the sale of its spine business to private equity firm HIG Capital for $315 million in cash and a $60 million promissory note.

This strategic move allowed ZimVie to significantly reduce its outstanding debt and focus exclusively on its dental implant operations.

Recent Performance

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In the first quarter of 2024, ZimVie reported a decline in revenues, continuing a trend seen in previous quarters. The company generated $118.2 million in revenue, a 1.8% year-over-year decrease. N

et income remained negative, with a loss of -$0.29 per share. Continuing operations reported a loss of -$0.42 per share, while the discontinued spine business recorded a profit of $0.13 per share.

Despite these challenges, adjusted EBITDA for Q1/24 showed an 18% year-over-year improvement, reaching $12.5 million. However, the company’s full-year guidance for 2024 projects a decline in adjusted EBITDA to $60-65 million, reflecting a 13.7% margin, down from the previously guided 15%+ run-rate.

Strategic Focus on Dental Implants

ZimVie’s transition to a pure-play dental implant company comes with both opportunities and challenges. The dental segment has faced low growth, prompting management to emphasize expanding market opportunities in new geographies and increasing innovation. Despite these efforts, the dental business continues to experience low-single-digit annual declines in sales.

The sale of the spine business has provided ZimVie with a much-needed cash infusion, reducing its net debt to approximately $200 million. This reduction in debt has given the company more breathing room to focus on revitalizing its dental operations.

Valuation and Market Position

Initially, the sale of the spine business and the resultant focus on dental implants suggested that ZimVie was attractively valued. However, with the revised financial performance and forward guidance for 2024, ZimVie’s valuation now appears more aligned with its peers in the dental implant industry.

The company’s forward EV/adj. EBITDA ratio of approximately 10x is comparable to that of peers like DENTSPLY (XRAY) and Henry Schein (HSIC), which trade at 10.8x and 11.5x respectively. This valuation parity reflects the market’s view on ZimVie’s growth potential and profitability.

Challenges and Risks

ZimVie’s primary challenge remains its ability to achieve sustainable growth in the dental segment. The company’s top line has been shrinking, and despite strategic initiatives, sales have continued to decline. Additionally, the remaining debt burden, with a net debt/adj. EBITDA ratio of 2.7x, remains a concern.

The company needs to demonstrate a clear turnaround in sales to reassure investors and improve its market valuation.

Future Prospects

Credits: DepositPhotos

ZimVie’s focus on dental implants positions it within a growing market, but the company must overcome its recent performance issues. While the sale of the spine business has reduced debt and provided a clearer strategic focus, the continued decline in dental sales and the need for improved profitability remain significant challenges.

The company’s efforts to innovate and expand market opportunities will be crucial in determining its future success.



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