ZBH — Zimmer Biomet Holdings, Inc.

Summary of Zimmer Biomet (ZBH) Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Sales: $2.177 billion, exceeding expectations with a 4.8% growth on a reported basis and 4% growth on an organic constant currency basis.
• U.S. Growth: 4.6% organic constant currency growth, with hip sales growing 5.9%.
• GAAP EPS: $1.03, up from $0.77 in Q2 2025.
• Adjusted EPS: $2.07, consistent with the prior year, impacted by dilution from the Paragon 28 acquisition.
• Gross Margin: 71.1%, down 120 basis points year-over-year due to increased manufacturing costs.
• Operating Margin: 25.7%, down 210 basis points year-over-year.
• Cash Flow: Operating cash flow of $448 million and free cash flow of $308 million, up 18% and 24%, respectively.

2. Strategic Updates and Business Highlights

• Sales Force Transformation: Transition to a specialized U.S. sales organization is progressing well, with lower than expected turnover and increased productivity.
• Product Innovations: Successful launches include the iodine-coated hip platform in Japan and the ROSA Shoulder system, which is gaining traction.
• Acquisition Integration: Paragon 28 is performing well, contributing to mid-teen growth and serving as a model for future acquisitions.
• Operational Efficiencies: New manufacturing plant in Costa Rica is under construction to enhance supply chain resilience.

3. Forward Guidance and Outlook

• Revenue Growth: Raised full-year organic constant currency revenue guidance to 2.25% to 3.25%, up from 1% to 3%.
• Adjusted EPS Guidance: Increased to $8.47 to $8.59 from $8.40 to $8.55.
• Market Dynamics: Anticipates continued healthy orthopedic procedural market and new product momentum, despite potential pricing pressures.

4. Bad News, Challenges, or Points of Concern

• Knee Segment Performance: Only 0.1% growth in knees, with a 1.5% decline internationally, particularly affected by challenges in China and emerging markets.
• Pricing Pressure: Experienced an 80 basis point headwind in pricing, with potential for continued erosion due to market dynamics and changes in reimbursement policies.
• Market Uncertainties: Concerns regarding the impact of ACA subsidy expirations and Medicaid cuts, although exposure is considered low.

5. Notable Q&A Insights

• Sales Force Transition: Ivan Tornos emphasized the positive impact of the sales force transition on productivity and engagement, with expectations to complete the transformation by the end of 2027.
• Market Health: Tornos reassured that despite fluctuations, the overall orthopedic market remains healthy, with a projected growth rate of 4% to 5%.
• Technology Strategy: The company is focused on being a technology provider rather than solely a robotics company, with a comprehensive suite of solutions tailored to varying surgeon preferences.
• M&A Strategy: Zimmer Biomet is looking for acquisitions that align with its growth vectors in high-growth segments of Recon and S.E.T., with a preference for deals under $2 billion that are accretive to revenue and earnings.

Overall, Zimmer Biomet reported a strong quarter with solid growth driven by strategic initiatives and product innovations, while also navigating challenges in certain segments and pricing pressures.