Zimmer Biomet Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet Second Quarter 2025 Earnings Conference Call. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, August 7, 2025. Following today's presentation, there will be a question and answer session. At this time, all participants are in a listen-only mode. If you have a question, please press the star followed by the one on your push-button phone. I would now like to turn the conference over to David DiMartino, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Zimmerblatt Second Quarter 2025 Earnings Conference Call. Joining me on today's call are Don Tornos, our Chairman, President, and CEO of and Sukhya Patia, our CFO in EVP Finance, Operations, and Supply Chain. Before we get started, I'd like to remind you that our comments during this call will include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. For a detailed discussion of all these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements, please refer to RICC filings. Please note, we assume no obligation to update these forward-looking statements even if actual results or future expectations change materially. Additionally, the discussions on this call will include certain non-GAAP financial measures, some of which are forward-looking non-GAAP financial measures. Reconciliation on these measures to the most directly comparable GAAP financial measures and an explanation of our basis for calculating these measures is included within our second quarter earnings release, which can be found on our website, ZimmerBiomet.com. With that, I'll turn the call over to Yvonne. Yvonne?

Good morning, everyone, and thank you for joining today's call. I would like to start today the way that I always do, by sharing my gratitude to the more than 17,000 Zimmer Biomed team members who move our business and mission forward each and every day. Thank you for your tireless work. Thank you for your strong performance. And yes, most importantly, thank you for your relentless commitment to serving our customers and their patients. I firmly believe that the Zimmer Biomed workforce and our culture here are amongst our key competitive advantages. Through my prepared remarks this morning, I'm gonna cover three key areas. First, I'll summarize the second quarter of 2025 performance, as well as providing the general update behind our positive adjustments to our yearly guidance. Secondly, I'm gonna cover the three key strategic priorities for Zimmer Biomed, providing some examples of our progress. As a reminder, those three priorities are people and culture, operational excellence, and innovation and diversification. And then thirdly, I provide some quantitative data points that will validate our confidence behind our new product introduction performance, which is one of the main reasons of why we feel so confident on the second half of 2025 growth acceleration. Starting with the quarter, we delivered a very solid quarter on both the top and bottom line. This was against the backdrop of an 80 basis point seven day headwind, in the quarter with the strongest comps for the year versus 2024, and with the announced significant delay in international orders, which have now moved into the third quarter. In spite of all of the above, we did grow in the quarter sales by 2.8% on an organic constant currency basis. For the second consecutive quarter, our U.S. HIB's business drove strong results. We grew 5.2% over the prior year, accelerating from 3.7% growth in the first quarter of 2025. Also, U.S. needs increased sequentially by 150 basis points, growing 1.7% over the prior year period. And SET, one of our most exciting businesses, reported another solid mid-single digit organic constant currency growth quarter, which is now the 17th in a row, at nearly 5% growth. Within SET, SET, we deliver double digit growth in sports medicine and CMFT, cranial maxillofacial thoracic, while delivering high single digit growth in upper extremities within the quarter. This was driven by our differentiated product portfolio and our solid ASC execution. For 2025, we're updating our full-year organic constant currency revenue growth expectations to a range of 3.5 to 4.5 from our previous 3 to 5% range, excluding the contribution of Paragon 28. We continue to expect Paragon 28 to contribute 270 basis points to our sales growth projection in 2025. We're also raising our 2025 adjusted earnings per share guidance to $8.10 to $8.30 from the previous range of $7.90 to $8.10. This range of guidance contemplates four things. Firstly, our continued confidence in a second half 2025 sales acceleration driven by our new product cycle. Secondly, increased operational efficiency. Third, a lower impact from tariffs than initially anticipated. And fourth, the weakening of the U.S. dollars, FX benefits. So he's going to provide more detail on guidance during his prepared remarks. Our confidence in delivering this forecast is very high, and with July not behind, we're even more confident in the acceleration of growth relative to the new products that we're launching, in particular in the U.S., where we saw the strongest month so far in the year 2025, that being the month of July. While we are pleased with our solid financial performance, What I'm most proud of this quarter is the strategic and operational progress we're making towards our long-term ambitions. We continue to transform Zimmer-Bauman at a very rapid pace as we execute on our key priorities from a strategic standpoint. Those three priorities, once again, are people and culture, operational excellence, and innovation and diversification. Let me share several recent and very exciting updates on these three priorities. And I'll start with innovation and diversification and our framework to conduct discipline M&A in order to move into higher growth spaces. On July 14th, we announced a definitive agreement to acquire Monogram Technologies, which is the company behind MBOS, the robot with semi and fully autonomous AI-driven robotic capabilities. Recently, Monogram's robot became the first robot in the world to complete a fully autonomous surgery using Monogram's implants. This is very exciting and disruptive technology, which is highly complementary to the technology suite of solutions that we have here at Zimmer Biomed. As a complement to a broad suite of robotic and navigation solutions, Monogram's first-to-the-world technology has the potential to change the standard of care and transform the future of orthopedic surgery solving some of the most meaningful challenges in musculoskeletal health, those being efficiency, accuracy, and reproducibility. This plan acquisition of Monogram and our commitment to ROSA and its robust pipeline underscores Zimmer Biomed's unprecedented strategy of enabling today while boldly defining the future of orthopedic surgery. We have maintained our desire to diversify into higher growth segments to discipline M&A And the monogram acquisition meets all the stringent financial and strategic criteria. The acquisition is expected to be neutral to adjusted earnings per share from 2025 through 2027 and accreted thereafter. It will contribute to revenue growth beginning in 2027 and will generate high single digit ROIC, return on invested capital, by year five, with increasing contribution starting in year six. The acquisition of Paragon 28 earlier this year is another way we're leveraging M&A to diversify our company into higher growth segments. We completed the acquisition on April 21st, and the integration so far is proceeding as planned. We recently transitioned Zimmer Biomed's full and anchor portfolio to Paragon 28 sales team, creating more scale and leveraging the strong commercial channel and capabilities that Paragon 28 is known for. I love the contribution that Paragon 28 is making, and I look forward to our ongoing journey together. Now, turning to our second priority, operational excellence, this is a strategic pillar that encompasses efforts on both the top and bottom line. As we work to strengthen our commercial execution in the U.S. to drive consistent above-market growth, improve margins for similar partners globally, and reduce inventory for the organization in order to improve free cash flow generation. I'm proud of the work that the team has done in 2025 so far to drive EPS growth. Their work has now enabled Zimmer Biomet to be able to grow earnings in the year 2025 versus 2024 in spite of executing two significant M&A deals, investing in large commercial initiatives, launching new products, driving the boldest DTP campaign, and absorbing the tariff impact. Of course, none of this progress will be possible without our team. Our third priority is dedicated to people and culture, ensuring we have the right people in the right roles. We recently welcomed Kevin Thornell as our Group President for Global Businesses and the Americas. Kevin is a very dynamic and seasoned leader who brings a wealth of knowledge and experience in driving growth and commercial excellence within medical devices, including orthopedics. I look forward to Kevin's leadership and contributions as we continue to accelerate growth and transform Zimmer Biomed into the boldest, most customer-centric company in MedTech. The progress that we're making in each of these three strategic priorities is real and reinforces my conviction in both our planned second half acceleration as well as the long-term opportunity that Zimmer Biomed has ahead. We believe that the early customer enthusiasm and adoption that we've seen behind our magnificent seven product cycle will continue to fuel our growth in the back half of 2025 and beyond. And again, one month into Q3, we've seen that come into realization. Here are a few recent trends that are inspiring our confidence in the second half acceleration and solid growth over the long range plan. In US HIPs, we continue to drive robust adoption or for Z1 triple tapered stem for direct anterior hip procedures, with now roughly 50% of Z1 users converting to Zima Biomed from competitive offerings. We believe the combination of Z1, Hemer, or surgical impactor at OrthoGrid, or AI-driven surgical guidance system for total hip replacement, is going to continue to drive a strong growth through the second half of 2025 and beyond. In U.S. knees, our persona osteotide cementless total knee penetration continues to move in the right direction. In addition, we are seeing very strong early adoption of our Oxford partial cementless knee. Nearly 50% of surgeons trained on Oxford through the second quarter of this year have adopted their implant, our implant, in the practice, with 10% of them being competitive conversions. We have planned countless new training programs for the rest of 2025 and going into 2026. In Europe, the Persona Revision new launch continues to gain traction with more than 100 accounts implanting the system across the key countries of Western Europe. We expect Persona Revision adoption to accelerate meaningfully throughout the end of 2025 with plenty of additional training events scheduled throughout the rest of the year and a very solid supply platform across the continent. Lastly, in SET or embodied line of collagen-based biointegrative solutions continues to exceed expectations. When new launches are driving share gains in shoulder arthroplasty. More than one third of surgeons implanting or identity total shoulder were using competitive systems two years ago, while 40% of osteophytes stemless shoulder users are near the Zim environment. These products underscore our confidence in at least mid single digit SEP growth going forward. Our team is all in and committed to executing with urgency and excellence for the rest of 2025. And again, our confidence in the second half revenue growth expectation for the year is very high. In conclusion, We are very proud of the progress in our organization, and we look forward to continuing to execute and build momentum as we move through the second half of this year, 2025. I have more conviction in our strategy and team than ever, and I am deeply inspired every day knowing that my teammates and I are living the Zimmerbaum and mission of alleviating pain and improving the quality of life for people around the world. And with that, I will turn the call over to Suki. Thank you.