Summary of Zimmer Biomet Q1 2026 Earnings Call

1Key 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.

2Strategic 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.

3Forward 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.

4Bad 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.

5Notable 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.