Smith & Nephew plc Q4 FY2025 earnings call

• Deepak emphasized strong 2025 finish, all business units growing over 5%, innovation with over 60% growth from products launched in last 5 years, 160 bps margin expansion, free cash flow up 52.5% to $840M enabling $500M share buyback. • John detailed Q4 revenue $1.7B, 6.2% underlying growth, broad-based growth across business units and regions. Orthopaedics had strong Q4 growth, Sports Medicine & ENT grew 7.3% driven by Joint Repair, AWM grew 2.8% with ALLEVYN COMPLETE CARE launch. Full year revenue $6.2B, 5.3% underlying growth, 19.7% trading margin. Trading margin bridge showed absorption of headwinds and offset by revenue leverage and productivity. • Deepak introduced RISE strategy, focusing on accelerating growth and improving returns, key drivers including Sports Medicine China headwind annualized, acquisition of Integrity Orthopaedics, ALLEVYN COMPLETE CARE ramp-up, LANDMARK launch in Orthopaedics, and innovation across business units.

For the full year, underlying revenue growth was 5.3%. All three business units grew by over 5%. Orthopaedics grew 5.1%, Sports Medicine & ENT grew 5.2% and Advanced Wound Management (AWM) grew 5.6% on an underlying basis. Orthopaedics grew 7.9% in Q4 with strong performance in Hips, Knee (with launch of LEGION MS), Trauma & Extremities; Other Established Markets grew 7.2%, Emerging Markets 6.4%. Excluding China, underlying growth was 7.2%. Orthopaedics trading margin increased 340 bps to 14.9%, Sports Medicine & ENT decreased 20 bps to 23.8%, AWM increased 120 bps to 24.9%. Group DSI fell by 21 days excluding portfolio rationalization and 51 days including it, with biggest reduction from Orthopaedics.

• 2026 expected 6% organic revenue growth and around 8% trading profit growth on organic basis, including impact of Integrity acquisition trading profit around $1.3B. • Revenue phasing: Q1 softer due to 1 fewer trading day, Q4 stronger with 1 more trading day, first half 4.5%-5% growth, second half 7.5%-8% growth. • Trading profit growth: First half 5.5%-6%, second half 9%-10%, combined around 8%. • Free cash flow expected around $800M in 2026, ROIC excluding Integrity expected over 10%.

• Headwinds in 2026 include inventory revaluation, tariffs, changes to reimbursement in U.S. AWM business and ENT VBP in China. • China VBP headwinds still exist but smaller impact at group level. • Skin subs business in physician office and mobile channels facing CMS reimbursement changes leading to potential volume reduction in mobile channel. • Competition in handheld robotic space and potential disruption from J&J spinning out of its Ortho business.

Q: On revenue guidance in 2026, break down market growth, launch contribution, contingency, and revenue phasing; also timing of CORI shoulder ability.

A: 2026 6% growth above market, innovation drives over 50% growth from new products, Q1 softer with 1 fewer trading day, Q4 stronger with 1 more trading day, CORI Shoulder with planning and execution launched.

Q: On Joint Repair China and margin/inorganic development.

A: Joint Repair China headwind annualized, Integrity acquisition fits RISE strategy, capital allocation focuses on organic growth and M&A to shore up position.

Q: On skin subs market and inventory write-down.

A: Skin subs channel adapting, inventory write-down from portfolio rationalization, simplifying portfolio, no further changes expected.

Q: On REGENETEN contribution and AAOS guidance, and Integrity TAM.

A: REGENETEN multiple hundred million contributor, AAOS guidance helps adoption, Integrity TAM $1.2B from biomechanical repair and biologics.

Q: On CORI competition, J&J spin-out, and bone cement shortage.

A: CORI a robotic platform with broad settings, J&J competition navigated with focus, bone cement shortage in U.K. doesn't impact financials.