ZBH — Zimmer Biomet Holdings, Inc.

Summary of Zimmer Biomet Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Sales: $2.087 billion, up 9.3% reported; 2.9% organic constant currency growth.
• Adjusted EPS: $2.09, a 15% increase year-over-year.
• Gross Margin: 73%, benefiting from tariff-related items and favorable product mix.
• Operating Cash Flow: $359 million; Free Cash Flow: $246 million.
• Share Repurchases: $250 million in Q1, reducing shares outstanding to 195.8 million.

2. Strategic Updates and Business Highlights

• Sales Growth: U.S. sales grew 3.2%, with technology sales increasing in double digits. The U.S. hip franchise grew by 5%, while knee sales increased by 2.2%, driven by the Oxford Partial Cementless Knee.
• Go-to-Market Strategy: Transition to a dedicated sales force is progressing, with productivity improvements noted in transitioned territories. The company aims to complete this transition by the end of 2027.
• Innovation: Continued investment in new technologies, including the Monogram robotic system, expected to launch in early 2027. The company is also focusing on expanding its manufacturing footprint and reducing working capital.
• Acquisition Performance: Paragon 28 showed accelerated growth, trending back toward double-digit growth.

3. Forward Guidance and Outlook

• Revenue Growth Guidance: Maintained organic constant currency revenue growth guidance of 1% to 3% for 2026, with reported sales growth guidance unchanged at 2.5% to 4.5%.
• Adjusted EPS Guidance: Raised to $8.40 to $8.55 from $8.30 to $8.45.
• Free Cash Flow Growth: Expected to be in the range of 9% to 11%, up from previous guidance of 8% to 10%.
• Operating Margins: Expected to decline slightly by less than 50 basis points from 2025, with a forecast of a 200 basis point decline in Q2 compared to Q2 2025.

4. Bad News, Challenges, or Points of Concern

• Sales Transition Disruption: Some modest disruptions were experienced during the transition to a dedicated sales force, including the loss of two large accounts.
• Knee Sales Pressure: U.S. knee sales growth was impacted by the transition and ongoing brand rationalization, with expectations of more challenging comparisons in the second half of the year.
• Pricing Erosion: Continued expectation of up to 100 basis points of price erosion for the year, with a noted 40 basis points decline in Q1.
• International Growth: International sales growth trailed U.S. performance, impacted by distributor changes and difficult comparisons.

5. Notable Q&A Insights

• Confidence in Growth: CEO Ivan Tornos expressed confidence in the company's direction despite maintaining cautious guidance due to ongoing transitions and market dynamics.
• Sales Force Metrics: The percentage of dedicated sales representatives has increased, with productivity improvements noted in transitioned territories.
• Market Dynamics: No significant impact from competitors facing operational challenges; the company is monitoring macroeconomic factors but has not seen material disruptions.
• Monogram Launch Strategy: The upcoming Monogram robotic system is expected to democratize orthopedic procedures and is backed by significant investments in sales and clinical evidence.
• Tariff Impact: The company anticipates that the benefits from tariff-related items will continue, but remains cautious about future tariff dynamics.

Overall, Zimmer Biomet reported a solid start to 2026 with strong financial performance, ongoing strategic initiatives, and a focus on innovation, while navigating challenges in sales transitions and market pressures.