ZimVie at Needham Conference: Navigating Market Challenges

On Tuesday, 08 April 2025, ZimVie Inc. (NASDAQ: ZIMV) participated in the 24th Annual Needham Virtual Healthcare Conference. The company's leadership shared their strategic vision amidst market challenges, focusing on conservative growth expectations and manufacturing flexibility. Despite economic uncertainties, ZimVie remains optimistic about its long-term growth trajectory, emphasizing product expansion and strategic acquisitions.

Key Takeaways

• ZimVie expects a flat to 3% growth in the dental implant market for 2025.
• The company is focused on expanding its product portfolio and exploring accretive acquisitions.
• Manufacturing flexibility in the US and Spain helps mitigate potential tariff impacts.
• ZimVie anticipates $30-40 million in operating cash flow for the year.
• The value segment of the implant market is growing faster than the premium segment.

Financial Results

• Guidance for 2025: The first half of 2025 is expected to be conservative, with stronger performance anticipated in the latter half.
• Q1 2025 Headwinds: Includes $4 million in challenges from currency fluctuations, the end of a Zimmer manufacturing agreement, and one less selling day.
• Operating Cash Flow: Projected to be between $30-40 million for the year.
• Leverage: Current leverage is under 3x, with a target of staying below 3.25x.
• Revenue Composition: Biomaterials contribute approximately 20% to the company's revenue.

Operational Updates

• Product Development: ZimVie is launching new products, including a molar implant, to enhance its portfolio and bundling opportunities.
• Digital Solutions: The company is advancing its Real Guide and Implant Concierge platforms to support specialists.
• Manufacturing Strategy: ZimVie is evaluating labor and tariff considerations, with facilities in Florida and Valencia providing flexibility.

Future Outlook

• Market Conditions: The company acknowledges potential impacts from consumer spending shifts but expects a rebound as procedures remain necessary.
• Growth Strategies: ZimVie is eyeing geographic expansion and acquisitions in less competitive markets to bolster growth.

Q&A Highlights

• First Quarter Guidance: Includes a $4 million impact from various external factors, with patient traffic expected to mirror Q4 2024.
• Tariff Strategy: No tariffs are included in current guidance, with plans to shift production as needed to mitigate impacts.
• Value Segment Strategy: Focused on expanding value implant options without undermining premium sales.

In conclusion, ZimVie is strategically positioning itself to navigate current market challenges while focusing on long-term growth. For further details, refer to the full transcript.

Full transcript - 24th Annual Needham Virtual Healthcare Conference:

David Saxon, Analyst, Needham and Company: Good afternoon, everyone. Thanks for joining us on day two of the twenty fourth Annual Needham Healthcare Conference. My name is David Saxon. I'm an analyst on the med tech research team here at Needham and Company. With me today, we have the Zinvy team, including, CEO, Vafa Jamali, and CFO, Rich Hep install.

This afternoon, we'll do a fireside chat. For those on the conference portal, there should be a box where you can submit questions. Alternatively, you can feel free to email me questions you might have, and I'll do my best to fit them in. So with that, really appreciate you taking the time, Bhavan, Rich, and we'll we'll jump straight into q and a here. So lot going on, obviously, this week.

We'll we'll touch on tariffs in in a couple minutes, but I wanted to start with a variation of a question we're asking all of our companies this week. And the question is, do you think consensus is modeling the quarterly cadence correctly for 2025? And maybe more specifically, the the first half cadence, just given the range of estimates in the second quarter is a little wider than what we're seeing in the other quarters.

Vafa Jamali, CEO, Zinvy: Yeah. I'll I'll start, Richie, go into details. We did we did guide a bit more conservatively in the first first half with a pickup in the back end. Rich, you can probably provide more detail there.

Rich Hepinstall, CFO, Zinvy: Yeah. So historically, you know, Q1 and Q2 have been largely consistent with each other. I'll just kind of break it out by quarter. And then, of course, Q3 has always been our slowest quarter as a result of summer vacations, particularly outside The US and in Europe. And then and then q four has historically been our strongest quarter.

You know, but over the last couple of years, including, you know, this last year, we saw a higher than normal impact of the holidays over the over the past couple of years.

David Saxon, Analyst, Needham and Company: Okay. Very clear. So looking at the first quarter guidance, so you gave four year and first quarter guidance. I think four year assumes the bottom end assumes no recovery, top end assumes some in the back half. But looking at the first quarter guidance, what's assumed, I guess, in terms of patient traffic trends?

Vafa Jamali, CEO, Zinvy: Patient traffic looks a lot like Q4. For us, in particular, we have a couple of headwinds that are not they're not business related, but they're they're us losing a trend manufacturing agreement with not losing, sunsetting a trend manufacturing of Zimmer, and we had some FX in there, Rich.

Rich Hepinstall, CFO, Zinvy: Yeah. Yeah. Yeah. So, I mean, for for we we we outlined about $4,000,000 of of headwinds, right, including currency, the the transition manufacturing agreement that that Vafa mentioned, you know, and then one less selling day, I think, was the other piece. And so, you know, barring barring those kind of one timers, yeah, we're the q one guidance range didn't assume any change in the market, you know, versus the end of twenty twenty four.

This this held pretty consistent.

David Saxon, Analyst, Needham and Company: Okay. And so just to, I guess, summarize, so, Vafa, I I think you said first quarter, the patient traffic trends are are similar to the force fourth quarter. So okay. So that I mean, that seems positive just given the the, you know, seasonality. But is

Vafa Jamali, CEO, Zinvy: It it was it was it was choppy, but overall, I'd say if we're trying to make a assessment of where the implant market is, I would say it was similar. But remember, we we lost a day. We had one less day in the quarter. Right? And then there was a small period in in, I believe, February that it got it got slower than it picked back up.

But but I would say, you know, what what I you should take away from this. I didn't see any material change from q four.

David Saxon, Analyst, Needham and Company: Okay. All right. And then obviously, a lot of headlines over the last few months. So wanted to ask how you're thinking about potentially weakening consumer as it relates to dental and obviously implant demand. Like, are you seeing those headlines kind of show up in the numbers?

Vafa Jamali, CEO, Zinvy: Yeah. So we we we've always thought that credit card credit card balances and interest rates would be a drag on an implant business, which is largely out of pocket. So we've always assumed that that to be true. I think you add to it the headlines and people turning on their TV every hour probably adds a little more fear to that. I think there's quite a bit of fear to that.

So I don't know exactly how that's gonna, you know, play out in the in the marketplace. But we think we've been living with this for a while in terms of the consumer being kind of a little bit tapped out. We think that at the upper end of the market, we're getting the cases done. So we we aren't seeing specialist volume in terms of sorry. Specialist share change.

What we're seeing is, 10 patients come in, nine prefer to do this procedure, and one delays it. That's been something that's been going on for a few months, and and we're waiting to see what what happens, over the if there is in fact an impact with with all that's been said on on the on the media, on the news, all that all that that may or may not kind of take it a lot another level. But I do think, David, we've been living with that for a while where, people are questioning their their more discretionary spend, more than before. However, if we look historically, these lulls, so these delays in the procedure do end up coming back. So it is it is a situation where someone's going without, and they do need to have the, the procedure done.

So we do see a bounce back when the, market decides to to shift back. So we we say we still anticipate the same thing.

David Saxon, Analyst, Needham and Company: Okay. Alright. And then before I get into tariffs, just, you know, I don't know if you you have a view, a house view on, like, what the implant market growth will be this year.

Vafa Jamali, CEO, Zinvy: So I think if I look, consensus is is probably anywhere from zero to three. Right? If I look at everyone who's who's guided, I think that that's probably fair. I do think that when we all guided that way, it was a a different time. If what we have right now is temporary, I think that that's still that's fine.

And I think that's how most people feel that this is gonna be is is more of a temporary setback. So I think that that's kinda where we're where we're at as well. But we built our we built our plan based on how would we perform in a flat market or a down market. Could we could we kind of withstand it? Rich, go ahead.

Rich Hepinstall, CFO, Zinvy: Yeah. No. No. I was just gonna add that, you know, the this visibility into into 2025, you know, remains remains a little bit of a challenge for us. Right?

But, you know, I think everybody everybody we've spoken with, you know, both in the industry and outside of the industry kind of use the situation as a as a as a cyclical trough. Right? And so, you know, we still still think that the overall market, growth of implants on the long term is is three to five. You know, we just we just have to, the market has to come back from, from how it's performed over the last, you know, eighteen months or so.

David Saxon, Analyst, Needham and Company: Okay. Alright. That's that's clear. Thanks for that. And then so, you know, on to tariffs.

Couldn't couldn't avoid that today. So, you know, just given all the headlines, can you just remind us, you know, what is baked into guidance, if anything? And then as best you can, at least, how does the most recent kind of slate of tariffs potentially impact Sendai?

Vafa Jamali, CEO, Zinvy: Okay. So we don't have any tariffs baked into the guidance, Rich, unless I missed a a memo. Right?

Rich Hepinstall, CFO, Zinvy: That's right.

Vafa Jamali, CEO, Zinvy: We don't we don't have that. What what our exposure is, we have manufacturing in in in in, United States, and we have manufacturing in Valencia, Spain. So as we speak and we have very little exposure to, the supply chain outside of those two areas. So there's there's very, very small exposure. As we speak, the EU would be the implication for us.

And remember that we do have the flexibility in terms of the two manufacturing plants being able to do what we need them to do. We we are currently running, a couple of models where we're trying to discover at what point does the labor arbitrage outweigh the possible tariff impact and what would be the better approach to either with these things. But that's where our our risk is limited to is is between EU and and US transfers. And we we think we have some workarounds that'll that'll that'll minimize that.

David Saxon, Analyst, Needham and Company: Okay. So just to be clear, so the Valencia facility, that's lower labor cost. So if tariffs, you know, offset more than offset that, I guess, you could shift manufacturing to it'd be more local for local.

Vafa Jamali, CEO, Zinvy: That's

David Saxon, Analyst, Needham and Company: right. So whatever is gonna yeah. Okay.

Vafa Jamali, CEO, Zinvy: So we've we've what we've

David Saxon, Analyst, Needham and Company: done Just

Vafa Jamali, CEO, Zinvy: Yeah. Go ahead.

David Saxon, Analyst, Needham and Company: Yeah. No. Go for it.

Vafa Jamali, CEO, Zinvy: What we've what we've done over the last, you know, couple years is we've moved a lot of lights out manufacturing to PBG, which is The US plant in in Florida, and we've moved the more labor intensive to Valencia. So those have been good moves, have actually improved our our profitability, and we'll continue to do that. Now we're in a situation where we go, how much of that will it if if this holds, how much will it eat into? And at what point would it be worth it for us to kinda move some of this back? Or, frankly, what would be a little smarter long term would be to institute a little bit more lights out into PBG where we could into sorry, United States where where where the impact of the labor arbitrage wouldn't be as much.

David Saxon, Analyst, Needham and Company: Okay. Alright. That's helpful. Thanks for that. So maybe moving on to kind of the portfolio and and the business.

So from a portfolio perspective, you're really focused on implants and biomaterials with software kind of that that complements the planning aspect of the the procedure. So do you feel like you need to expand into any other categories to, you know, increase your competitiveness in implants, or would that be more of a distraction, to a certain degree?

Vafa Jamali, CEO, Zinvy: Right. So, as long as the call point's the same, it's not a distraction. It just has to be something that we can absorb as a company. So our balance sheet would support it, and and we could do something with it. It wouldn't be something transformative, but it would allow us to get into some faster growing markets.

I think that's really important for us because it is competitive out there. One of the things we're doing right now is we are launching products that fill out our portfolio. So something as simple as, a molar implant, which is a a little different shape to an implant. But if if they're buying ZYNBY TSX implants, but they're having to go somewhere else to buy the the the molar, then I'm introducing a rep into my account. So what we've been able to do is is use a lot more bundling.

And, you know, historically, bundling is not a wonderful word for me because I think sometimes that just means price. But think about it that you you leverage your strengths. So you're able to get a premium implant in there, and then maybe you put a value biomaterial with it, which we we added last year. And then you also have the immediate molar where you might have some room on and all the healing abutments. We've been successful in the last couple months with that.

We think it's an avenue for us to get more aggressive with with with competitive, opportunities. I think that continues to that that continues to be a strategy that we'll deploy in the marketplace that I think will be really that'll that'll pay off for us in a again, in a competitive market while not having to reduce the price of the the, premium implant too much. There's also markets where we might wanna be where we might wanna do something in a particular market where, the top competitors aren't there, and that might allow us to kinda get into some markets. But those are also some areas that we're looking at. But you just don't want to do that and lead with a with a very expensive implant and then discount it heavily.

So those are some strategies that we're looking at right now. I I think there's there's opportunity out there for, to continue the organic that we're doing and and and some of the inorganic opportunities that we see very digestible for us, probably immediately accretive that that can help us out.

David Saxon, Analyst, Needham and Company: Okay. So just to summarize to make sure I I kinda got that. So from a product perspective, you know, it it would be complimentary, same call point, and then you you'd also look at, you know, getting into new new geographic markets that that could be, you know, more, I guess, you know, different than than your current portfolio.

Vafa Jamali, CEO, Zinvy: Correct. Some of them were not which would be very difficult to organically grow it to match an incumbent. You may wanna just get into it through an inorganic strategy and then and then see if you could deploy some of those products to your benefit too.

David Saxon, Analyst, Needham and Company: Okay. Alright. So, I mean, by my math, you're you're around 5% share in the overall implants category, including value, probably low double digits in the premium category. So is that would you agree with that at least directionally? Yes.

And then can can you talk yeah. Okay. And then, you know, what what do you think your share trends have been over the last, call it, like, twelve, eighteen, twenty four months?

Vafa Jamali, CEO, Zinvy: Yeah. It hasn't been a wonderful period. So I think that where you see a lot of the churn happen is with the not with the specialists necessarily, but with the GPs. And there are other competitors there that are fighting for that more than we are. So I don't think there's been a ton of share transference between the two.

The one thing that's very obvious is value globally is growing faster than premium, and that's something we we have to be cognizant of. But but I think that what we have done around some of our procedure workflow activity, like what we're doing with full arch, digital workflows for full arch, what we've done with implant concierge. All of these things are really shoring up our value proposition to our specialists. And if you think over the last twelve months, those specialists are the ones that do the most expensive cases. Those are the ones that are probably mostly in purgatory right now where someone's delaying it, waiting to see if interest rate goes down 2% maybe or a percent.

It'll it'll maybe maybe be a more affordable procedure or financing be easier or whichever. But but I think that that's really where where it's happened. There's been an overall kind of, slowdown in the in the marketplace for the last eighteen months versus a lot of share back and forth.

David Saxon, Analyst, Needham and Company: Okay. All right. And then just following up to some of the comments you made around the new products. So, I mean, they sound like they're, you know, truly new new products and not kind of next generation. So yeah.

So, I mean, how do you think that'll, you know, help help with growth over the near term, I guess?

Vafa Jamali, CEO, Zinvy: It certainly will. It already has. So it'll help both with growth and also with just making sure our portfolio is safe to a competitor coming in. So, for example, that idiot molar is a $200,000,000 market, and we don't have a presence there. So that all of a sudden becomes an opportunity for us.

Even if we just look at our existing customers, you could do you could do the math on that. It'd be it'd be an opportunity for us to go after. Then on, Real Guide, Real Guide is not a new product, but every iteration brings in more customers. So this last one that we're doing, Real Guide six, is gonna be all web based, so no capital. It's gonna replace a lot of the capital that a dentist may have invested in that we think is much more elegant done with a click and very cost cost effective for them.

And then for us, it continues to shore up our position with these high users that that wanna have more functionality. With that, we'll add the full arch capabilities, some products that go around full arch, like the bars that go around full arch. Like, these are all these are all devices that are gonna go around a procedure that that to us are all new.

David Saxon, Analyst, Needham and Company: Okay. So the molar opportunity, 200,000,000, is that so overall implants is kind of fifty-fifty premium in value, right? So is the molar category the same? Or does that are there any meaningful value? Okay.

Vafa Jamali, CEO, Zinvy: The category is the same, but if if you go the the larger the patient, the more likely is that they need a molar. Right. Right. So so there's probably some areas where you don't we don't have that need necessarily as much. That's why we think it's roughly around $200,000,000

David Saxon, Analyst, Needham and Company: Okay. And then, you know, obviously, we we've touched on value at least, you know, in in commentary, but so Ximvy is a % premium. You know, would love your view on just the value part of the market. Does that have a place in in the portfolio? I I mean, just based on your answer to previous question, it seems like it'd be more of a geographic approach, but, you know, would love your your thoughts there.

Vafa Jamali, CEO, Zinvy: Maybe the best answer versus just geographic is it has to be very well segmented. So you you don't wanna be bringing your value into your specialist that really enjoys your premium product and and and watching that go away. But you may have markets where you wanna be more competitive. The dynamics of the service are different. The requirement for service are are are less.

There might be international markets where that would be very, very valid, and that's what you'd wanna do. Just something that isn't disruptive to your strategy because you don't wanna tie that with a bunch of value add that you're providing with a more expensive implant. So I think that that that's where we would look at it. It's hard to ignore the growth of that segment versus the rest of the, of the implant market, so it's important for us to actually at least kick tires and see what what's out there. I also would be very specific on geographies I go into or I wouldn't go into.

Like, becoming the sixth player in Brazil would be a massive mistake, or entry into China would be a mistake, or even South Korea would be a mistake. So there might be areas where it's a little bit better. Now they'll be you'll be chipping away. These will be singles versus grand slams. Right?

But for us and I think our investor base, that will be much more tolerated and much more well received, frankly.

David Saxon, Analyst, Needham and Company: Yeah. Okay. Alright. And then just from a a case complexity perspective, you know, what what are you seeing or what have you seen in, you know, I guess, the fourth quarter and, you know, to the extent you can comment on the first quarter? Like, are full arches coming back, or is it still mostly single unit cases at this point?

Vafa Jamali, CEO, Zinvy: Yeah. So I think that the dynamics are much similar to what happened in what was happening in q four. So I don't think I see them I I can't call it yet to say, yeah, things have changed. We're seeing a lot more of the full arch. The the highly competitive part of full arch is not really where we participate, and these are with the national chains that do a lot of the advertising.

Those ones are are are very price sensitive, and and we just don't participate there. We would be doing full arches specialists that are Zinvy specialists. And those are the ones where we're building workflow around it and and and and getting them to sort of speak about what the advantages are of the workflow to kinda bring in some more specialists. But I don't see a Okay. Material change yet.

David Saxon, Analyst, Needham and Company: Yeah. Okay. And then you've talked over the last, I think, couple earnings calls about, you know, how you're seeing biomaterial cases, you know, come through that don't include an implant. So, you know, what's the outlook for when those patients come back for the implant portion of the case?

Vafa Jamali, CEO, Zinvy: So we haven't been able to pin that one down yet. We just know that after you've put it in, there's a particular there's a best before time on when you need to get the implant. And the delays have been a little bit longer than we we anticipated, for for, for the implants to come back full force. We we do know that post disruption, there is a kind of a a ramp up because people are waiting, whether it it was the last time there was a bit of a recession or or even COVID where people were in their homes and had to come out. We anticipate the same thing.

I think we have not been able to call exactly when that when that happens. So I don't have a better answer for you there.

David Saxon, Analyst, Needham and Company: Yeah. And so, I guess just to be clear, like, when you see that, you know, patient come through, how how do you know that they're not getting an an implant? Is it, like, does the implantologist kind of communicate that to the to the rep?

Vafa Jamali, CEO, Zinvy: So there'd be two different types of customers. So where that thesis does not work is when it's BioHorizons customer that's using ZIMV biomaterials, which happens a lot. Right? Where because we have number two share in biomaterials with with PuroSat, that gets used quite a bit. That one doesn't become a tell.

The ones that are a tell are our accounts where they're using our implants, and the the the one to one use utilization is is is skewed. That's where we we we've first heard it, and that's what we've been looking at, and that hasn't necessarily fixed itself yet. Does that make sense? Like Okay. I would only do it in Yeah.

That I know would only use my implant. Right? And that's where where we thought the fee that that that would play out.

David Saxon, Analyst, Needham and Company: Yeah. No. That that makes a lot of sense. So maybe just moving to international, like, what are you seeing there? Any pockets of notable strength or weakness that are worth calling out?

Vafa Jamali, CEO, Zinvy: Rich, you wanna

Rich Hepinstall, CFO, Zinvy: Yeah. So one of the things that I think we talked about at the in the q four call that we've seen kinda come back, you know, particularly the last part of last year is is Japan. Right? We had some timing difference in Japan, but Japan, you know, has has performed, you know, well. I think if you look at other areas of of strength, you know, for us, it's where we we where we enjoy, you know, obviously, a direct sales force like we have.

So another area in particular that comes to mind is is France. You know? And and so that that continues to clip clip along. We think we're gaining share in The UK. You know?

I think if if you kinda look at areas, you know, of potential weakness for us, you know, I think I think the the macroeconomic environment in Italy is not is not the greatest right now. You know, we're holding our own, but I think there's a macro overhang there. And then the other one is is, you know, in Iberia, including Portugal. We've called out we we had a a DSO loss that went to a deep value. That'll start to sunset itself, you know, I think in the second quarter, after the second quarter of of twenty twenty five.

But, you know, generally speaking, you know, what we're finding is, you know, we've got a global direct sales force for the most part, and and we've got a really good suite of of of products and and solutions and workflow. And, you know, and just a lot of it is continues to be the macroeconomic overhang in some of these geographies.

Vafa Jamali, CEO, Zinvy: Our in addition to our fast growing market's India. Oh, yes. That is our our fastest growing market. That's an emerging market for us, but it's it's we have a direct direct sales force there, and and that's our fastest growing market.

David Saxon, Analyst, Needham and Company: Okay. And then just on the Salesforce, like, any color on how we should think about it from a size perspective or, you know, rep count? And then, you know, what are your plans, on hiring over the near term?

Vafa Jamali, CEO, Zinvy: So I think I think our coverage is good. So I think we're covered. We're we're we have the right number of places people in in the right places. We so so I don't I don't believe that adding reps will necessarily, do anything differently unless it's very specific. So we strategically are looking at we have a couple of commercial plans where we might get our arms around a particular area and do something unique for them, where it would be a combination of service and implants that that would, you know, really build that business up.

One of the advantages our team has in The US is that we can draw in a lot of referrals, and we do a good job of of building up helping helping docs build their practices. We think we can leverage that to the better for us, and it's and it's not a it's it's not a a huge rep investment. It's a it's a, a one by one ROI assessment that we can do that'll be a no brainer. We'll just do it in our sleep, really, based on based on the market that we're going after. So that's kinda where we're at.

Our rep count hasn't changed much. It's about the same. And, I don't anticipate a need. I would, frankly, like to fill out the bag a bit more with some of the new products.

David Saxon, Analyst, Needham and Company: Okay. Alright. So maybe we'll move on to biomaterials, about 20% of of revenue complementary to to implants. I mean, by my math, you're you're probably around a 10% share in in the bio materials category. So, you know, higher than your your implant share, you know, including value, obviously.

So, you know, what allows Indeed to be stronger in in the bio materials category?

Vafa Jamali, CEO, Zinvy: I think we have a really strong brand, and it's sticky, and people don't move off of it. So that customer base has been very loyal to the brand. We we recognize that there was a customer base that wasn't so it didn't have the same kind of determination to use that brand and that brand only. So we we launched some, what we call, more of a a value biomaterial portfolio. And that's done really well, and it's helped us in in very competitive offerings, offer a lower price and grow there.

So I think the the combination of being you know, having having a brand that's very well recognized, very loyal, so you don't have the churn there. Secondly, having a value line where we can actually bid on it. Those two things have been really, really you know, that's been the reason why we've been kinda pretty consistent in that particular business. So those are the those are the the reasons why I think we're doing well with with that.

David Saxon, Analyst, Needham and Company: Mhmm. Okay. So you yeah. So you launched the value biomaterial. I don't know.

That was a a year or two ago maybe. Yeah. Something like that. So, you know, how how did you do that alongside Pure's kind of the the more premium? And I guess, like, the maybe the the real question is, like, could you we we kinda touched on value implants earlier.

Like, could you would that would that value would that biomaterials value launch strategy work the same in implants?

Vafa Jamali, CEO, Zinvy: Yeah. It it would. You re it requires strong segmentation. So we did not go to the PROS accounts and try to flip them. They were like the PROS is for someone who wants the clinical trials, wants the evidence, wants experience.

They're saying this is what I what I wanna use. There's someone else that's gonna be less interested in that. And as long as you've got that segmented properly, you aren't cannibalizing your own business with, with a different product. So that that's how we've deployed that one. You could you could take that same strategy same strategy as long again as you did very, very strict segmentation and you had guardrails on where you would go or you wouldn't go.

Because you have to do something less. Right? The the other the other thing, David, I think that that kinda comes into place, biomaterials is an easier sell than implants. So we don't see a whole lot of implant share changes happening. Right?

So it doesn't it doesn't happen so regularly. But biometrics, maybe it could because it's an easier cell. So hence, the success we've had with that REGENERAUS, that that line is it's a little bit of a faster sell than the work it takes to get the, and by easier, I mean, length of time it takes to to convert somebody than it takes to to convert an implant.

David Saxon, Analyst, Needham and Company: Okay. Got it. Alright. So we have less than ten minutes. So I'm gonna do a couple on digital, and then, Rich, maybe I'll give you a handful.

So on digital, you know, the I I think the kind of key growth drivers there have been RealGuard and and implant concierge. So what is driving that strength? And I guess, like, how durable is that?

Vafa Jamali, CEO, Zinvy: Yeah. It's been pretty consistently growing. So with with with RealGuard, obviously, it's it's a continuous improvement of the of the platform. So we've we've not only improved it, made it easier to use, more intuitive, but we've also added functionality to it. Like I like I mentioned, we've got some full arch functionality that's kinda coming in now.

We've got the web based. All of these things are what customers have wanted. And as they play with it and they learn and and we respond to it, there's a lot of reward for us because they go, wow. You did what you what we asked you to do, and you kind of launched it so quickly. So that's where RealGuard gets us momentum.

Remember, it's, like, 20% penetrated, right, within implant users. Digital is is very, very low penetration still, full digital. And then on implant concierge, it really flows with what what do do you have a back office? Are they trained? Do you have turnover in your back office?

Are they cost effective versus outsourcing it to us? Right? So we we can outsource, with a picture. We can take three hours of lab work and turn it into ten minute ten minutes of computer time. If that's enough for you, that's great, but it'll we'll tell you where the nerves are, where the bones are.

But if you want a little bit more, not only that, but we'll send you a surgical guide drill. We'll send you everything that that you need to do the case specific to that patient. So if you think about health care and everything that's becoming very patient specific, our digital and our implant project really speaks to patient specific solutions that are not time consuming. So you don't need someone chipping away. You've got it all based on the library that we have.

We have a very extensive library of of, implant surgery, probably the the biggest one in the in the market. And because of that, we can quickly interpret pictures and turn it into a a guide in very low time. So the return on investment is is fairly obvious, but then the other piece that's very becoming more obvious is there's a lot of turnover in the back office of these individuals or these labs. We don't have that turnover. Knock on wood.

We we have the same people that can do multiple. So you you can scale it quite, effectively to to match the the customer demand. So I do think it's very durable. It's a good business. It it, it it doubles the size of the value biz not the value biz doubles the size of the implant business, essentially, you do a if you do a 1.1 for one.

That's a long way away because like I said, it's very low penetration, but but it's steadily making gains there.

David Saxon, Analyst, Needham and Company: Mhmm. Okay. And then, maybe I'll do a last one for you, Vasu, and then switch over to Rich. So just on the DSOs, obviously, an opportunity for the broader market. We've talked about your general positioning, but would love to hear how you see yourselves positioned for the DSO channel and and segment of the market.

Vafa Jamali, CEO, Zinvy: Sure. Our goals are really aligned between us and a DSO. So a DSO, although a lot of the focus is on price, the real value a DSO gets when it's consolidated is to get more more expensive procedures in. Like, I haven't seen a $50 reduction in implant pricing translate into a $50 reduction in the procedure price. Right?

Patient pays the same. So but if I can bring you two x what you were doing before because of the model that we we we drive for the DSO, then we're very good partners. So as long as we pick the partners correctly and as long as we're aligned, we actually really, really like the DSO business because it's completely harmonious with what we're doing, and and we do have good outcomes with them. So it's important. It's growing.

We we like it. We don't feel like it's a negative. We think that, almost every time it's a positive for us. You you take some you take some price, but then you pick up a whole bunch of volume together. So I'm I'm for it, and I'm a supporter.

David Saxon, Analyst, Needham and Company: Okay. Alright. So, Rich, you know, in the few few minutes, just wanted to to touch Yeah. So, you know, capital allocation, you know, some of the comments earlier, it seems to suggest you're looking at some inorganic stuff, but you also have some debt.

So how important is paying down the debt, kind of reducing interest expense? And I guess, you know, would love to hear your level of appetite or interest in m and a or inorganic.

Rich Hepinstall, CFO, Zinvy: Yeah. So just just from a capital allocation perspective, it it largely remains unchanged, David. You know, obviously, first priority is to continue to invest in the business. And and from there, you know, we continue to operate in in America meritocracy, which which we've kinda said, you know, kind of all through all through on out. And and so although we see paying down debt as a way to shift value from debt holders to equity holders, you know, we believe that, you know, in this environment, there are some promising opportunities to be able to utilize our capital, you know, on accretive and immediately accretive and and tuck in acquisitions that that make a lot of sense.

You know? But from a from a leverage perspective, you know, we've got a hundred and $75,000,000 revolvers undrawn. You know, we're we're under three x levered, which was, you know, our target actually, frankly, at spin. You know? And so we're very very comfortable with, with where we sit from a leverage perspective.

Vafa Jamali, CEO, Zinvy: And we have the seller's note, Rich.

Rich Hepinstall, CFO, Zinvy: Yeah. We have this we do have a seller's note that's not inclusive in that number too. Right.

David Saxon, Analyst, Needham and Company: Okay. And okay. So just on the leverage, under three times, I guess, like, where where would you feel comfortable going?

Rich Hepinstall, CFO, Zinvy: Well, yeah, I sort of private equity. So it's got a loaded question, dude. But, no, I think I think our target would probably be, you know, under about three and a quarter x. You know? I mean, the good news about the dental business is it is it spins off a lot of a lot of cash flow.

And so we've guided for the year that we're gonna generate 30 to $40,000,000 in operating cash flow. And so, you know, it it allows you to kind of move a little bit above the the spectrum. But one of the things we wanna cognizant of is is we wanna try attract the right, you know, long term investors, and so we don't want the leverage profile to be too too high. So probably in that, you know, three, three and a quarter range is probably where we we were where we would want to cap out. But, you know, but but that being said, right, you know, if you're generating cash flow, you're a lot you can reinvest it in the in the business and not impact your leverage profile at all.

David Saxon, Analyst, Needham and Company: Yeah. Okay. Alright. Well so we have about a minute left. So, you know, anything you wanna close with or leave investors with from a messaging perspective?

Vafa Jamali, CEO, Zinvy: No. Just on that last comment, like, you know, it's remember, there's there's a $60,000,000 seller note that we're not counting in this. And we've also said that the guardrails for anything we do in organic has to be accretive, and it has to be, you know, manageable. So don't think anything transformative out of it. Think of it within our call points and think about it being, again, immediately accretive.

So I think that this market allows some of these opportunities kind of emerge that probably haven't been there before because it might have been priced out. So I think that that's what we what we like, and we're gonna kick as many tires as we can to find the right ones. But overall, we we know that right now, it's, not a time to to log dental stocks, but, we don't see anything fundamentally different than what we went through before now, not not notwithstanding the the the tariff discussion right now, which which nobody really knows where it's gonna land. So, overall, we feel good about where we are and and and what we've done, and and we think we've taken a lot of cost out of this company. And and we've added a lot of interesting resources and a lot of interesting portfolios, so we feel pretty good about where we where we stand into the future.

David Saxon, Analyst, Needham and Company: Mhmm. Great. Alright. Well, we're out of time, so we'll leave it there. But but, Bhavan, Rich, thanks so much for joining, this year again, and thanks for everyone who who tuned in.

Vafa Jamali, CEO, Zinvy: Thanks, guys. Thanks for everything.

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