Zimmer Biomet(ZBH) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2025, Zimmer Biomet reported net sales of $1.909 billion, reflecting a 1.1$1.81, down from $1.94 in the prior year, attributed to higher costs and investments [32] - The company generated$279 million in free cash flow, demonstrating robust growth compared to the previous year [26] Business Line Data and Key Metrics Changes - U.S. hips sales grew nearly 4%, while U.S. knees saw a modest growth of 0.2% [29] - The S.E.T. segment grew by 4.9%, with notable growth in CMFT and Sports categories [30] - International sales grew by 3.7%, driven by mid-single digit growth in knees and high-single digit growth in S.E.T. [28] Market Data and Key Metrics Changes - The U.S. market showed a 1.3% growth overall, with hips and S.E.T. driving performance [27] - Internationally, hips grew by 2.4%, with U.S. hips growing at 3.7% and international hips at 1% [29] - The company anticipates a full-year organic constant currency revenue growth of 3% to 5% for 2025 [10] Company Strategy and Development Direction - Zimmer Biomet is focusing on three strategic priorities: people and culture, operational excellence, and innovation and diversification [12] - The company aims to enhance its U.S. market performance through leadership changes and optimizing sales channels [14] - The recent acquisition of Paragon 28 is expected to contribute approximately 270 basis points to sales growth in 2025 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the full-year guidance despite challenges such as tariffs and foreign exchange impacts [34] - The company is optimistic about new product launches and expects second-half growth to be higher than the first half due to favorable comparisons and new product uptake [35] - Management acknowledged the need for improved performance in the U.S. knee segment and is implementing strategies to enhance competitiveness [81] Other Important Information - The company reported a reduction in days on hand inventory from over 400 days in early 2024 to approximately 370 days [15] - The Paragon 28 acquisition was successfully integrated with minimal disruption, retaining key leadership and sales teams [110] Q&A Session Summary Question: Impact of tariffs on EPS and mitigation efforts - Management detailed steps taken to mitigate tariff impacts, including optimizing country of origin and sourcing adjustments, expecting a $60 million to$80 million headwind for 2025 [45][46] Question: Growth expectations and new product impacts - Management indicated confidence in achieving mid-single digit growth in the second half of 2025, driven by new product launches and improved execution [56][57] Question: Performance in ASC versus hospital channels - The company noted that over 20% of U.S. sales now come from the ASC environment, with expectations for continued growth in this area [94] Question: Pricing trends and future expectations - Management expects pricing to remain flat for 2025, with a stable environment compared to historical norms, despite previous fluctuations [68][69] Question: Clarification on the Paragon acquisition integration - The integration of Paragon 28 is progressing well, with all key personnel retained and ongoing product innovations maintained [110]