Zimmer Biomet Holdings, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• Fourth Quarter and Fiscal Year 2025 Results: Ended 2025 with constant currency organic revenue at the mid-single digit range, marking the fifth consecutive year of mid-single digit or above growth. Fourth quarter organic constant currency sales grew 5.4%, with U.S. Business up 5.7% and International up 5%.
• U.S. Commercial Organization Evolution: Accelerating the transition to a dedicated and specialized U.S. sales channel to drive durable growth. Aim to have vast majority of conversion to dedicated employees by 2027, with 2026 organic constant currency revenue growth expected in the low single-digit range (1%-3%) and adjusted EPS $8.30-$8.45.
• 2026 Guidance: Organic constant currency revenue growth 1%-3%, adjusted EPS $8.30-$8.45, free cash flow growth 8%-10%. FX expected to be ~50 basis point tailwind to full-year revenue growth, Paragon 28 to contribute ~100 basis points to reported sales growth in 2026.
• Strategic Priorities: Focus on people and culture, operational excellence, and innovation and diversification. 2026 focus on U.S. go-to-market commercial transformation while showcasing innovation cycle strength globally.

Segment Performance:

• U.S. Business: Grew 5.7% on an organic constant currency basis in Q4. U.S. Knee grew 6% in Q4, driven by increased penetration of Persona OsteoTide orthogoxalamus knee (35% penetration by year-end). U.S. Hip grew nearly 8% due to Z1 triple taper stem penetration. Robotics and Navigation increased over 10% in Q4, driven by strong robotic capital sales.
• International: Grew 5% on an organic constant currency basis in Q4, driven by new product momentum and strong robotic sales.
• SCT (Cranio Maxillofacial Thoracic): Grew mid-teens in Q4, led by a continuous shift in external fixation from wires to plating. Upper extremities had high single-digit growth in the U.S., with Identity Shoulder and OsteoFit Stemless Shoulder converting competitive accounts.

Guidance:

• Full-year 2026 organic constant currency revenue growth expected in the low single-digit range (1%-3%).
• Adjusted EPS expected to be $8.30 to $8.45.
• Free cash flow growth expected to be 8% to 10%.
• FX expected to be approximately a 50 basis point tailwind to full-year revenue growth, with Paragon 28 contributing around 100 basis points to reported sales growth in 2026.

Risks:

• Disruption from the U.S. sales force transition.
• Continued evolution of international go-to-market models.
• Up to 100 basis points of pricing erosion.
• Stable tariff and policy environment risk.

Q: Please limit yourself to one question. Operator, please go ahead.

A: Matthew Blackman asks about near-term impact of Salesforce optimization, why now, the lift ahead, and visible returns Q: Rick Wise asks about guiding to low single digit growth for 2026 and what's embedded in the thinking A: Ivan Tornos responds about Salesforce transition, new product adoption cycle, and international performance as key factors Q: Patrick Wood asks about pricing erosion in 2026 and outlook on price mix A: Suketu Upadhyay explains moderation in price increases across regions contributing to pricing erosion Q: Vijay Kumar asks about bridge from back half mid singles to 2% guidance for 2026 and Salesforce reorg impact A: Ivan Tornos discusses Salesforce transformation as key factor and progress made in transitioning one third of the sales force Q: Robbie Marcus asks about Q4 performance and phasing for 2026 A: Ivan Tornos and Suketu Upadhyay discuss Q4 performance driven by new product acceleration and phasing of growth and margins throughout 2026 Q: Travis Steed asks about cost of Salesforce transition on margins and why transition takes two years A: Suketu Upadhyay talks about modest near-term margin headwind and Ivan Tornos explains responsible pace of transition over two years Q: Ryan Zimmerman asks about Paragon performance and foot and ankle market weakness A: Ivan Tornos discusses Paragon's performance over two quarters and monitoring market growth Q: Danielle Antalffy asks about confidence in Salesforce transition and benefits A: Ivan Tornos cites data on productivity rates and importance of U.S. sales force transformation Q: Larry Biegelsen asks about capital allocation prioritizing returning free cash flow to shareholders over M&A A: Ivan Tornos explains pause in M&A for 2026 focus and commitment to share buybacks Q: Chris Pasquale asks about SCT segment performance and Paragon integration A: Ivan Tornos discusses SCT segment growth and focus on key growth drivers in SCT Q: Caitlin Roberts asks about ASCs in revitalization strategy and ASC penetration A: Ivan Tornos talks about ASC penetration and strategy, including dedicated people and portfolio strength Q: Joanne Wuensch asks about AAOS expectations and folding embossed system into robotics portfolio A: Ivan Tornos discusses showcasing new products at AAOS, including mBOS robotic platform Q: Matt Miksic asks about geographic strength and iodine launch in Japan A: Ivan Tornos talks about strength in knees, persona revision in Europe, and iodine product launch in Japan