Sales Performance - In 2025, the company's net sales increased by 7.2% to $8,231.5 million compared to 2024, driven by the acquisition of Paragon 28, market growth, and new product introductions [175]. - The company expects net sales growth of 2.5% to 4.5% in 2026, with the Paragon 28 acquisition contributing an estimated 1.0% to this growth [177]. - In 2025, U.S. net sales grew by 7.3% to $4,764.0 million, with the Paragon 28 acquisition contributing 3.6% to this growth [180]. - International net sales increased by 7.0% to $3,467.5 million in 2025, with foreign currency exchange rates contributing 1.8% to this growth [185]. - The S.E.T. product category saw a significant increase in net sales by 15.2% in 2025, largely due to the Paragon 28 acquisition, which contributed 10.5% to this growth [186]. - Changes in volume and mix of product sales positively impacted year-over-year sales growth by 6.4% in 2025, with the Paragon 28 acquisition contributing 2.5% [182]. Earnings and Expenses - Net earnings for 2025 were $705.1 million, a decline from $903.8 million in 2024, primarily due to inventory charges of approximately $170 million and costs related to acquisitions [176]. - Cost of products sold as a percentage of net sales increased to 30.3% in 2025 from 28.5% in 2024, driven by inventory charges and tariffs [187]. - The company's gross margin decreased to 61.6% in 2025 from 63.8% in 2024, impacted by inventory charges and U.S. tariffs [190]. - Research and development expenses as a percentage of net sales slightly decreased to 5.6% in 2025 from 5.7% in 2024 [187]. - R&D expenses increased in amount but decreased as a percentage of net sales in 2025, driven by Paragon 28-related expenses and higher technology project spending, offset by lower EU Medical Device Regulation compliance costs [191]. - SG&A expenses increased in both amount and percentage of net sales in 2025, primarily due to variable selling and distribution costs, Paragon 28-related expenses, and higher performance-related compensation [192]. - The company recognized $181.2 million in restructuring expenses in 2025, down from $219.0 million in 2024, mainly due to lower costs associated with U.S. and Canada ERP implementation [193]. - Acquisition-related expenses increased in 2025, including $55.1 million for compensation related to Paragon 28 and Monogram acquisitions, partially offset by $77.1 million in net gains from declines in estimated fair values of contingent consideration [194]. Cash Flow and Financial Position - Cash flows from operating activities increased to $1,697.1 million in 2025 from $1,499.4 million in 2024, driven by higher net sales and favorable timing of accounts payable [208]. - Cash flows used in investing activities rose to $1,975.7 million in 2025, including $1,393.2 million for the acquisitions of Paragon 28 and Monogram [209]. - The company had $591.9 million in cash and cash equivalents as of December 31, 2025, with $1.0 billion available under a 364-day revolving credit agreement [206]. Tax and Restructuring - The effective tax rate increased to 15.1% in 2025 from 12.7% in 2024, influenced by foreign rate differentials and intercompany transactions [198]. - The company expects to reduce gross annual pre-tax operating expenses by approximately $175 million by the end of 2027 as part of its restructuring plans [218]. - Management recognized a charge of approximately $170 million to reduce inventory and instruments to their net realizable value due to reduced demand for certain products [225]. Contingent Consideration and Assets - As of December 31, 2025, the company recorded $299.2 million of contingent consideration related to completed business combinations, an increase from $180.7 million in 2024 [237]. - The company had net assets, excluding goodwill and intangible assets, in legal entities with non-U.S. Dollar functional currencies of $1,490.4 million at December 31, 2025 [244]. Risk Management - A sensitivity analysis indicated that a 10 percent change in foreign currency exchange rates could affect earnings by approximately $109 million to $107 million before income taxes [242]. - The majority of the company's debt is fixed-rate, and a 10 percent change in interest rates would not have a material effect on interest expense [250]. - The company is exposed to credit risk primarily from cash and cash equivalents, derivative instruments, and accounts receivable, but believes reserves for losses are adequate [251]. - Management evaluates deferred tax assets on an ongoing basis and provides valuation allowances unless it is "more likely than not" that the deferred tax benefit will be realized [227]. - During the annual goodwill impairment testing in Q4 2025, the estimated fair values of two reporting units exceeded their carrying values by more than 25 percent [232]. - The company enters into supply contracts for raw materials with terms of 12 to 24 months to mitigate commodity price risks [247]. - The company uses derivative financial instruments solely as risk management tools and not for speculative investment purposes [240].

Core Viewpoint - Hagens Berman is investigating Zimmer Biomet Holdings, Inc. (ZBH) due to concerns over the company's "high confidence" assurances regarding its 2025 revenue targets following a 15% stock decline and reduced revenue guidance [1] Group 1: Investigation Focus - The investigation examines whether Zimmer Biomet's senior management misled investors about the stability of its international business, particularly in emerging markets [1] - The firm is looking into potential violations of federal securities laws related to overly optimistic guidance while concealing operational disruptions [1] Group 2: Recent Developments - On November 5, 2025, Zimmer Biomet reported a year-over-year organic revenue growth of only 5%, significantly missing its forecast and reducing its top-line organic revenue growth forecast to 4% [1] - The company disclosed distributor order cancellations in emerging markets, particularly in the Middle East and Eastern Europe, and acknowledged serious headwinds in Latin America [1] - Following these revelations, CEO Ivan Tornos stated the need for more measured external commentary, which contributed to the 15% drop in stock price on the same day [1] Group 3: Previous Assurances - In an August 7, 2025 earnings call, management expressed "very high" confidence in achieving a year-over-year organic revenue growth forecast of 3.5% to 4.5%, attributing it to emerging markets distributor purchases [1] - These optimistic statements led to a 7% increase in the company's share price on that day [1]

Core Viewpoint - Zimmer Biomet Holdings, Inc. has demonstrated strong financial performance in the fourth quarter of 2025 and for the full year, highlighting its strategic focus on growth and shareholder returns. Financial Performance - In Q4 2025, Zimmer Biomet reported net sales of $2.244 billion, a 10.9% increase year-over-year [2] - The company's net earnings for Q4 were $139.3 million, with a gross profit of $785.4 million [2] - For the full year, net sales reached $8.232 billion, reflecting a 7.2% increase from the previous year [3] - Operating cash flow for the year was $1.697 billion, and free cash flow was $1.172 billion [3] Earnings Per Share - Diluted earnings per share decreased by 41.7% to $0.70 in Q4, while adjusted diluted earnings per share increased by 4.8% to $2.42, exceeding estimates of $2.38 [2] Strategic Initiatives - The company has implemented a direct and specialized sales organization in the U.S. to drive long-term growth [2] - A new stock repurchase authorization of up to $1.5 billion has been approved, effective from February 9, 2026, with no expiration date, indicating a commitment to returning capital to shareholders [3] Acquisitions - The acquisition of Paragon 28, Inc. in April 2025 has been excluded from organic constant currency sales calculations to provide a clearer performance picture [4] - The company remains focused on delivering EPS and free cash flow growth, as emphasized by its leadership [4]

Company Overview - Zimmer Biomet Holdings, Inc. (ZBH) has a market cap of $17.8 billion and specializes in orthopedic implants and surgical solutions, with a focus on joint replacement, sports medicine, trauma, spine, and dental applications [1] - The company is headquartered in Warsaw, Indiana, and serves hospitals and surgeons globally, being particularly known for its knee and hip replacement systems and its advancements in robotic-assisted and digital surgery platforms [1] Stock Performance - Over the past year, ZBH stock has underperformed the broader market, declining 9% compared to the S&P 500 Index's 14.4% returns [2] - Year-to-date, ZBH stock has increased by 1.7%, slightly outperforming the S&P 500's 1.4% rise [2] - In comparison to the US Medical Devices Ishares ETF (IHI), which saw a 9.3% dip over the past 52 weeks, ZBH has shown better relative performance [3] Financial Performance - For fiscal 2025 Q4, Zimmer Biomet reported net sales of $2.24 billion, reflecting a year-over-year increase of 10.9%, driven by strong demand for hip and knee implants [6] - Adjusted diluted EPS for Q4 increased by 4.8% to $2.42, exceeding market expectations [6] - For the full year 2025, the company achieved $8.23 billion in revenue and announced a $1.5 billion share repurchase program [6] Future Guidance - Management has provided guidance for 2026, projecting revenue growth of 2.5% to 4.5% and adjusted EPS in the range of $8.30 to $8.45, considering near-term challenges from U.S. sales transformation [7] - Analysts expect ZBH to deliver an adjusted EPS of $8.41 for FY2026, representing a year-over-year increase of 3.1% [7] - The company has a strong earnings surprise history, having exceeded bottom-line estimates in each of the past four quarters [7] Analyst Ratings - Among 26 analysts covering ZBH stock, the consensus rating is a "Hold," which includes seven "Strong Buys," one "Moderate Buy," 15 "Holds," and three "Strong Sells" [8]

Core Insights - Zimmer Biomet Holdings, Inc. (ZBH) reported fourth-quarter 2025 adjusted earnings per share (EPS) of $2.42, exceeding the Zacks Consensus Estimate by 1.7% and reflecting a year-over-year increase of 4.8% [1] - The company achieved net sales of $2.24 billion for the quarter, a 10.9% increase year over year, surpassing the Zacks Consensus Estimate by 1.9% [3] - Full-year adjusted EPS was $8.20, marking a 2.5% increase year over year and slightly beating the Zacks Consensus Estimate by 0.5% [2] Revenue Performance - ZBH's net sales for the full year reached $8.23 billion, a 7.2% increase year over year, also marginally exceeding the Zacks Consensus Estimate by 0.5% [3] - U.S. sales totaled $1.31 billion for the quarter, up 11.11% year over year, while international sales were $931.2 million, reflecting a 10.6% increase year over year [4] - Revenue growth was observed across all four product categories, with the S.E.T. unit experiencing a notable 20.1% increase year over year at constant currency [5] Margin Analysis - Adjusted gross margin was reported at 64.7%, a contraction of 632 basis points year over year, primarily due to a 35.1% rise in the cost of products sold [7] - Selling, general and administrative expenses rose 16.8% to $872.3 million, while research and development expenses increased by 9.6% to $118.8 million [7] - Adjusted operating margin contracted 821 basis points to 20.5% [7] Cash Position - At the end of the fourth quarter, ZBH had cash and cash equivalents of $591.9 million, an increase from $525.5 million at the end of the fourth quarter of 2024 [9] - Cumulative net cash provided by operating activities was $1.70 billion, up from $1.50 billion in the previous year [9] Future Outlook - For 2026, ZBH expects revenue growth in the range of 2.5-4.5%, with the Zacks Consensus Estimate for revenues at $8.41 billion, indicating a 3.1% year-over-year growth [10] - Adjusted EPS guidance for the full year is projected to be between $8.30 and $8.45, with the Zacks Consensus Estimate for 2025 adjusted EPS at $8.54 [10] Overall Assessment - ZBH's fourth-quarter results exceeded expectations, with growth reported across all business segments [11] - Notable developments contributing to growth include FDA clearance for ROSA Knee and the launch of the Brachiator Mini-Rail External Fixation System [11] - Despite the positive revenue and earnings performance, the contraction in margins presents a concern [11]

Core Insights - The company reported a 5.4% organic constant currency sales growth in Q4 2025, marking the fifth consecutive year of mid-single-digit growth or above [2][15][37] - The U.S. business grew by 5.7%, driven by new product momentum and strong robotic sales, while international sales increased by 5% [2][16] - The company is undergoing a significant transformation of its U.S. sales force, aiming for a dedicated and specialized team to enhance productivity and growth [6][8][72] Financial Performance - For the fiscal year 2025, the company achieved net sales of $2.244 billion, a 10.9% increase on a reported basis, and an adjusted EPS of $2.42, up 4.8% year-over-year [15][16][17] - Free cash flow for the year was $1.172 billion, growing over 11% year-over-year, marking the third consecutive year of high single-digit free cash flow growth [19][20] - The adjusted gross margin was reported at 72.4%, higher than the previous year, while the adjusted operating margin was 29.1% [18][19] Strategic Initiatives - The company is focusing on three key strategic priorities: people and culture, operational excellence, and innovation and diversification [8][10][11] - A significant emphasis is placed on enhancing the U.S. sales channel to drive consistent growth, with expectations for the majority of the transition to be completed by 2027 [6][8][72] - The introduction of new products, including the "magnificent seven" platform, is expected to change the standard of care and drive future growth [11][12][72] Market Outlook - The company anticipates organic constant currency revenue growth for 2026 in the low single-digit range (1% to 3%) and adjusted EPS of $8.30 to $8.45 [7][20] - The guidance reflects potential disruptions from the U.S. sales force transition, ongoing international market evolution, and pricing erosion [20][21] - The company expects to prioritize returning capital to shareholders through buybacks, with a plan for up to $1.5 billion in buybacks approved by the board [76]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved organic constant currency sales growth of 5.4%, with total net sales reaching $2.244 billion, a 10.9% increase on a reported basis [15][16] - Adjusted earnings per share (EPS) for Q4 was $2.42, up 4.8% year-over-year, despite dilution from the Paragon 28 transaction and tariff impacts [15][17] - For the full year 2025, organic constant currency sales grew by 3.9%, with adjusted EPS of $8.20 and free cash flow of $1.172 billion, marking over 11% growth year-over-year [15][19] Business Line Data and Key Metrics Changes - The U.S. business grew by 5.7% on an organic constant currency basis, driven by new product momentum and strong robotic sales [15][16] - The hips franchise saw nearly 8% growth in the U.S., with the Z1 implant representing over 35% of U.S. hip stems [6][7] - The cranio-maxillofacial thoracic business grew mid-teens in the quarter, while upper extremities experienced high single-digit growth [7] Market Data and Key Metrics Changes - International revenue grew by 5% on an organic constant currency basis, supported by new product momentum and strong robotic sales [15][16] - The U.S. NEE growth was 6% in the quarter, driven by increased penetration of the Persona OsseoTi knee [6] Company Strategy and Development Direction - The company is transitioning to a dedicated and specialized U.S. sales channel to drive consistent growth, with expectations for completion by the end of 2027 [8][9] - Strategic priorities include enhancing people and culture, operational excellence, and innovation and diversification [10][12] - The company plans to prioritize returning capital to shareholders over M&A, with a buyback program of up to $1.5 billion approved [88][90] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving low single-digit organic constant currency revenue growth for 2026, with adjusted EPS guidance of $8.30-$8.45 [20][22] - The transition of the U.S. sales force is expected to create short-term disruptions but is deemed essential for long-term sustainable growth [32][83] - Management highlighted the importance of new product adoption and international performance as key factors influencing future growth [38][39] Other Important Information - The company reported a negative pricing impact of 50 basis points in Q4, with expectations of up to 100 basis points of pricing erosion in 2026 [16][42] - Adjusted gross margin for Q4 was 72.4%, with expectations for a decline in gross margins for 2026 due to lower revenue growth and pricing pressures [17][70] Q&A Session Summary Question: Salesforce optimization initiatives impact - Management explained the transition to a dedicated sales force is aimed at improving productivity and leveraging new products, with expected benefits by the end of 2027 [28][32] Question: Guidance for 2026 and sales transition - Management indicated that the guidance reflects uncertainties related to the sales force transition, new product adoption, and international performance [36][38] Question: Pricing erosion outlook - Management noted that pricing is expected to remain under pressure due to market conditions and specific regional factors, including Japan's biannual price decrease [42][43] Question: Paragon 28 contribution to growth - Management acknowledged that Paragon 28's contribution was slightly below expectations but remains committed to achieving double-digit growth in 2026 [76][77] Question: Confidence in Salesforce transition - Management emphasized data-driven decisions and benchmarking against competitors as the basis for confidence in the sales force transition [81][83]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved organic constant currency sales growth of 5.4%, with total net sales reaching $2.244 billion, a 10.9% increase on a reported basis [15][16] - Adjusted earnings per share (EPS) for Q4 was $2.42, up 4.8% year-over-year, while full-year adjusted EPS for 2025 was $8.20 [15][17] - Free cash flow for 2025 was $1.172 billion, marking over 11% growth year-over-year [18] Business Line Data and Key Metrics Changes - U.S. Knee sales grew by 6% in Q4, driven by the Persona OsseoTi and Oxford Partial Cementless Knee products [6][7] - U.S. Hip sales increased nearly 8% in Q4, with the Z1 implant representing over 35% of U.S. hip stems [7] - The U.S. technology and data segment saw over 10% growth, attributed to strong robotic capital sales [7] Market Data and Key Metrics Changes - The U.S. business grew 5.7% on an organic constant currency basis, while international revenue grew by 5% [15][16] - The company expects organic constant currency revenue growth for 2026 to be in the low single-digit range of 1%-3% [19] Company Strategy and Development Direction - The company is transitioning to a dedicated and specialized U.S. sales channel to drive consistent growth, with expectations to complete this by the end of 2027 [8][9] - Strategic priorities include enhancing people and culture, operational excellence, and innovation and diversification [10][12] - The company plans to prioritize returning capital to shareholders over M&A activities in the near term [86] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges of the U.S. Salesforce transition but expressed confidence in the long-term benefits of the transformation [31][81] - The company is focused on ensuring that the U.S. market achieves mid-single-digit growth to realize its long-term aspirations [81] - Management expects some short-term disruption due to the Salesforce transition but believes it will set the company up for success in 2027 and beyond [81] Other Important Information - The company reported a GAAP-diluted EPS of $0.70 for Q4, down from $1.20 in the prior year due to one-time charges and restructuring costs [17] - Adjusted gross margin for Q4 was 72.4%, higher than the previous year, while adjusted operating margin was 29.1% [17] Q&A Session Summary Question: Impact of Salesforce optimization initiatives - Management explained the transition to a dedicated Salesforce is necessary to improve productivity and leverage new products, with expected completion by the end of 2027 [31] Question: Guidance for 2026 and factors influencing it - Management indicated that the guidance reflects the Salesforce transition, new product adoption, and international performance, with potential for higher growth if the transition goes well [36] Question: Pricing erosion expectations - Management expects up to 100 basis points of pricing erosion in 2026 due to market conditions and regional pricing strategies [41] Question: Contribution from Paragon 28 and market health - Management noted that while the contribution from Paragon 28 was slightly below expectations, they remain committed to achieving double-digit growth in 2026 [75] Question: Confidence in Salesforce transition - Management cited data and benchmarking against competitors as the basis for confidence in the Salesforce transition, emphasizing the need for specialization to improve productivity [80]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved organic constant currency sales growth of 5.4%, with full-year organic constant currency sales growth of 3.9% [15][19] - Adjusted earnings per share (EPS) for Q4 was $2.42, up 4.8% year-over-year, while full-year adjusted EPS was $8.20 [15][19] - Free cash flow for Q4 was $368 million, contributing to a total of $1.172 billion for the year, marking over 11% growth year-over-year [18][19] Business Line Data and Key Metrics Changes - The U.S. business grew by 5.7% on an organic constant currency basis, driven by new product momentum and strong robotic sales [16][19] - The international segment grew by 5% on an organic constant currency basis, supported by new product launches and strong robotic sales [16][19] - Specific product lines such as the Persona OsseoTi knee and Z1 hip stem saw significant growth, with U.S. NEE growth of 6% and U.S. hip growth of nearly 8% respectively [5][6] Market Data and Key Metrics Changes - The U.S. market remains a critical focus, representing 62%-63% of total revenue, with a need for improved productivity compared to competitors [81] - The company anticipates low single-digit organic constant currency revenue growth of 1%-3% for 2026, reflecting cautious optimism amid the sales force transition [19][20] Company Strategy and Development Direction - The company is transitioning to a dedicated and specialized U.S. sales channel to drive consistent growth, with expectations for completion by the end of 2027 [8][9] - Strategic priorities include enhancing people and culture, operational excellence, and innovation and diversification, with a focus on robotics and ambulatory surgical centers [10][11] - The company plans to prioritize returning capital to shareholders over M&A, with a buyback program of up to $1.5 billion approved [87][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transformation and the potential for improved productivity and revenue growth, particularly in the U.S. market [81][82] - The company is closely monitoring the adoption of new products and international market performance, which are critical to achieving growth targets [36][37] Other Important Information - The company reported a GAAP-diluted EPS of $0.70 for Q4, down from $1.20 in the prior year, primarily due to restructuring charges and increased interest expenses [17] - Adjusted gross margin for Q4 was 72.4%, reflecting lower manufacturing costs and a favorable product mix [17] Q&A Session Summary Question: Impact of Salesforce Optimization Initiatives - Management detailed the transition to a dedicated sales force, emphasizing the need for specialization to improve productivity and competitive positioning, with expected benefits by the end of 2027 [26][32] Question: Guidance for 2026 Revenue Growth - Management explained that the guidance reflects uncertainties related to the sales force transition, new product adoption, and international market performance [35][36] Question: Pricing Erosion Expectations - The company anticipates up to 100 basis points of pricing erosion in 2026, influenced by market dynamics and regional pricing strategies [41][43] Question: Contribution from Paragon 28 - Management acknowledged that the contribution from Paragon 28 was slightly below expectations but remains optimistic about achieving double-digit growth in 2026 [73][76] Question: Confidence in Salesforce Transition - Management cited data-driven insights and benchmarking against competitors as the basis for confidence in the sales force transition, which is crucial for future growth [80][81]

Core Insights - Zimmer Biomet (ZBH) reported quarterly earnings of $2.42 per share, exceeding the Zacks Consensus Estimate of $2.38 per share, and showing an increase from $2.31 per share a year ago, resulting in an earnings surprise of +1.70% [1] - The company achieved revenues of $2.24 billion for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 1.87% and up from $2.02 billion year-over-year [2] Earnings Performance - Over the last four quarters, Zimmer has consistently surpassed consensus EPS estimates, achieving this four times [2] - The company also topped consensus revenue estimates three times in the same period [2] Stock Performance and Outlook - Zimmer shares have declined approximately 0.2% since the beginning of the year, while the S&P 500 has gained 1.7% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the outlook for earnings estimates [4][6] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.88 on revenues of $2.05 billion, and for the current fiscal year, it is $8.41 on revenues of $8.54 billion [7] Industry Context - The Medical - Products industry, to which Zimmer belongs, is currently ranked in the bottom 29% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests that trends in earnings estimate revisions are strongly correlated with near-term stock movements, which could impact Zimmer's performance [5]