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 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]