Zimmer Biomet Q1 Earnings Call Highlights

Key Points

• Strong Q1 and upgraded financials: Organic constant-currency revenue rose 2.9% and adjusted EPS was $2.09 (up 15%), aided by a $0.20 tariff-related benefit; management raised full-year adjusted EPS to $8.40–$8.55 and free cash flow growth to 9%–11% while keeping organic revenue guidance at 1%–3%.
• Product and technology momentum with mixed implant performance: Technology, data and related offerings grew nearly 12% (technology growth ~30%), U.S. hips climbed 5% and partial knees were up over 20%, while legacy total knee brands face pressure amid a brand rationalization.
• Go-to-market shift and leadership change: The U.S. salesforce is transitioning to a specialized 1099 model (from ~66% to just under 60% this quarter) with completion targeted by end-2027, and CFO Suketu Upadhyay is departing with Paul Stellato named interim CFO.

Zimmer Biomet NYSE: ZBH executives said the company began fiscal 2026 with organic constant-currency revenue at the high end of its full-year growth outlook and raised profit and cash flow expectations following a tariff-related benefit that boosted first-quarter results.

First-quarter results and drivers

Chairman, President and CEO Ivan Tornos said the company “grew sales 2.9% on an organic constant currency basis” in the first quarter and delivered adjusted earnings per share of $2.09, up 15% year over year. CFO Suketu Upadhyay reported net sales of $2.087 billion, up 9.3% on a reported basis.

Upadhyay said consolidated pricing was 40 basis points negative in the quarter, consistent with expectations, and that growth benefited from “opportunistic end-of-quarter purchases above historical levels,” momentum from new products, and strong robotic sales. On a GAAP basis, diluted EPS was $1.22 versus $0.91 a year earlier.

Management highlighted a meaningful tariff-related upside in the quarter. Tornos said the first quarter included a $0.20 benefit from tariff-related items versus internal expectations. Upadhyay attributed the outperformance largely to “the invalidation of the IEEPA tariffs,” adding that part of the benefit included refunds the company had expected later in the year and represented a pull-forward. He said the company still expects full-year gross margin to be “down modestly versus prior year at around 71%, give or take.”

Segment performance: hips, knees, technology and surgical

On an organic constant-currency basis, the company’s U.S. business increased 3.2% while international grew 2.5%, Tornos said. He described “healthy end markets” and double-digit growth in technology-related offerings.

• Knees: U.S. knee growth was 2.2%, driven by a more than 20% increase in partial knee sales led by the Oxford Partial Knee cementless product, which Tornos called the only partial cementless knee on the U.S. market. The company cited pressure in legacy total knee implants (including NexGen and Vanguard) as it continues a brand rationalization strategy. International knees rose 1.3%.
• Hips: U.S. hips grew 5%, which Tornos linked to traction from a “hip triple play” of Z1 stems, OrthoGrid navigation, and the HAMMR surgical impactor. International hips increased 1%. He also noted early adoption in Japan of an “iodine-coated hip implant” designed to address infection risk.
• Technology, data, bone cement and surgical: The category grew nearly 12% in the quarter, with Tornos citing continued strong ROSA and TMINI performance. During Q&A, he said technology growth in the quarter was 30%, adding that implants “follow at some point” as technology placements expand.
• SCP: Growth was 1.6%, led by U.S. CMFT and upper extremities, partially offset by challenges in restorative therapies and trauma. Tornos said U.S. upper extremities increased “upper single digits” as OsseoFit Stemless Shoulder and the Identity Total Shoulder platform gained momentum.

Go-to-market transformation and market conditions

Tornos said the company’s U.S. transition to a dedicated and specialized sales channel is “progressing as planned,” with modest disruption in line with expectations and “rapid increases in productivity” in transitioned territories. He said Zimmer Biomet remains on track to complete the U.S. transition by the end of 2027, while international go-to-market evolution—particularly in emerging markets—also remains on plan despite some impact to growth.

In response to questions about salesforce metrics, Tornos said the company started 2026 with about 66% of the U.S. sales force as 1099s and that figure was “slightly below 60%” by the end of the first quarter. He also said turnover was running in the single digits against a target of no more than 12% and that the company had extended agreements with its “top six independent distributors, accounting for roughly 40% of sales,” for “not less than seven years.”

On U.S. knees, Tornos acknowledged the quarter “was not the greatest” and pointed to organizational changes, the loss of two large accounts, a Kaiser strike on the West Coast, and disruption tied to transitioning from legacy knee brands to Persona. He said the company expects to do better than 2.2% growth in U.S. knees.

On macro conditions, Tornos told analysts the company had seen “no material supply disruptions” from Middle East developments, though it incurred a “minor freight cost increase” that it was able to absorb. He said Zimmer Biomet continues to see a solid procedure environment and pegged the overall reconstruction market as growing “north of 4%, if not 4.5%.”

Outlook: guidance maintained for revenue, raised for EPS and free cash flow

Zimmer Biomet maintained its full-year 2026 organic constant-currency revenue growth guidance of 1% to 3%, with Tornos indicating growth should be “roughly consistent throughout the remainder of 2026.” He reiterated an assumption of up to 100 basis points of price erosion and said the company expects approximately 50 basis points of FX tailwind for the year. Reported sales growth guidance remained 2.5% to 4.5%, with Paragon 28 expected to contribute around 100 basis points to reported growth.

While holding revenue guidance steady, management raised profit and cash flow expectations. Tornos said the company now expects adjusted EPS of $8.40 to $8.55, up from $8.30 to $8.45, and free cash flow growth of 9% to 11% versus the prior 8% to 10%. He said operating margins are now expected to be “better than anticipated,” down slightly less than 50 basis points from 2025, while the second quarter is expected to show operating margin down roughly 200 basis points year over year.

Upadhyay added that fully diluted shares outstanding were 195.8 million and said the company repurchased $250 million of shares in the first quarter. Zimmer Biomet’s outlook continues to assume up to $750 million of share repurchases by year-end.

Portfolio updates, leadership changes, and product pipeline

Tornos highlighted continued progress across Zimmer Biomet’s priorities of people and culture, operational excellence, and innovation/diversification. He announced that Dr. Jonathan M. Vigdorchik joined the company as Chief Science, Technology, and Medical Affairs Officer, reporting to him, and will lead strategy across AI-enabled robotics, software and data, smart implants, connected technologies, and medical education.

On diversification, Tornos said the company’s acquisitions were showing positive momentum. He said Paragon 28’s first-quarter growth accelerated by roughly 200 basis points versus the fourth quarter of 2025 and was “trending back towards double-digit growth,” later adding the business was “almost” double-digit exiting the first quarter and “in the teens” early in the second quarter. OrthoGrid delivered its “strongest quarter to date,” he said.

On robotics, Tornos reiterated expectations for U.S. approval and launch of a semi-autonomous version of Monogram’s system in early 2027, followed by a fully autonomous version in late 2027 or early 2028. He said Zimmer Biomet plans to hire “over 200” robotic clinical sales representatives by the end of 2027 to support the launch.

Zimmer Biomet also addressed product-specific questions, with Tornos saying ROSA Shoulder had moved from limited release to “fully on the full market release,” citing positive surgeon feedback and ongoing work on a “version two” system.

Finally, the company disclosed a finance leadership transition. Tornos said Upadhyay will leave Zimmer Biomet for a new opportunity in biotechnology, and that Paul Stellato, the company’s controller, chief accounting officer, and head of corporate FP&A, will serve as interim CFO while the company searches for a successor.

About Zimmer Biomet NYSE: ZBH

Zimmer Biomet NYSE: ZBH is a global medical device company focused on musculoskeletal healthcare. Headquartered in Warsaw, Indiana, the company designs, manufactures and markets a broad portfolio of products used to treat joint disorders, bone disorders and related conditions. Its customer base includes orthopaedic and dental surgeons, hospitals, ambulatory surgery centers and other healthcare providers that rely on implants, instruments and related services for reconstructive and restorative procedures.

The company's product offerings span joint replacement systems for hips, knees and shoulders; trauma and extremities implants; spine and thoracic solutions; dental and craniomaxillofacial implants and prosthetics; and sports medicine devices.

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