Zimmer Biomet Holdings, Inc.

and welcome to the Zimmer Biomed third 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, November 5th, 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, Investor Relations.

Thank you, Operator, and good morning, everyone. Welcome to Zimmerman Biomet's third quarter 2025 earnings conference call. Joining me on today's call are Yvonne Tornos, our Chairman, President, and CEO, and Sukhia 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 our ICC 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 third quarter earnings release, which can be found on our website, zimmerblattmat.com. With that, I'll turn the call over to Yvonne. Yvonne?

Thank you, David. Good morning, everyone, and thank you for joining today's call. I want to start today the way that I always start, by sharing my sincere gratitude to the Zimmer Biomed team members around the world who move our business and mission forward each and every day. Thank you for your tireless work, your dedication to solving the most pressing challenges in healthcare, and thank you for your relentless commitment to serving our customers and their patients. Today, Zimmer Biomed is a totally different company than it was just a few years ago, and this is thanks to your efforts. Through my prepared remarks, I'm going to cover three key areas. First, I'm going to summarize the third quarter results and review the momentum of our recently launched new products, which has strongly validated our innovation cycle, while I'm also going to briefly cover some of the commercial execution improvements that we are making and will continue to make. Secondly, I'll address our updated 2025 guidance. And third, I'll cover the three key strategic priorities of Zimmer Biomed, people and culture, operational excellence, and innovation and diversification. Starting with the third quarter, we grew sales 5% on an organic constant currency basis with our critical US business accelerating 330 basis points sequentially to 5.6% from 2.3% in the second quarter. This is the best revenue growth performance in the US since the middle of 2023, with the US being the largest business here at Zimmer Biomed. That said, late in the quarter, unexpected weakness in Eastern Europe, Latin America, and non-core segments of SEP, namely restorative therapies, impacted our growth by nearly 120 basis points for the quarter. Importantly, we have identified the issues, are moving swiftly to address them, and are contemplating these headwinds in these three areas in the guidance that we are providing for the year 2025. Overall, we are very confident in our actions and remain highly enthusiastic about the early market reception of our new products and the upcoming launches, which we do believe will be catalysts for growth. Equally important, we continue to see healthy market growth rates fueled by demographics, start-up care dynamics like the shift to the ASC, Ambulatory Surgical Center environment, here in the U.S., and broader adoption of technology. Unpacking or U.S. performance for the second consecutive quarter, here in 2025, needs accelerated sequentially with growth of 3.5% or up 180 basis points from 1.7% growth in the second quarter of 2025. This was driven by adoption of Persona Osteotide, or total cementless knee, and Oxford, or partial cementless knee, which is performing above our internal expectations when it comes to post-training adoption rates. Specifically, Persona Osteotide now represents nearly 30% of our U.S. total knee implants and will remain on track to exceed 50% final penetration by the end of 2027. Next, our robotics and navigation strategy of offering a comprehensive and differentiated suite of customer-centric technology solutions is resonating deeply with surgeons. U.S. technology and data, bone cement, and surgical cells increased 20.3% this quarter, driven by the strongest robotics capital sales quarter in more than a year. Importantly, utilization continues to increase, with U.S. ROSA accounts now performing over half of their knee implants robotically, up 400 basis points for the year. U.S. HIPS were up 4% in the quarter, as our triple play of Z1, Hemer, and OrthoGrip continues to gain traction. Z1, or triple tapered stem, accounted for over 25% of hip stems in the third quarter of the year, and Hemer, or surgical impactor, the utilization rates doubled through the first nine months of the year to 20%. Finally, our U.S. SCT business continues to benefit from new product launches, growing 6.4% in the quarter, up over 250 basis points sequentially from 3.9% growth in the second quarter of this year, and this is in despite of the weakness in restorative therapies that I mentioned earlier. Our decision to invest more in high-growth areas is showing great returns. For example, our upper extremities business increased in the high single digits, driven by our identity total solder and osteophyte stemless solder. for which 80% of users were competitive accounts. In addition, one of our most exciting businesses, CMFT, Cranial Maxillofacial Thoracic, was up over 20% on the back of new product introductions in rib trauma, cardiac surgery, and neuroablation. CMFT continues to be a recipient of investment, and we foresee a bright future for this platform for many quarters and years to come. For 2025, with updating our full-year organic constant currency revenue growth expectations to a range of 3.5% to 4% from our previous 3.5% to 4.5% range. This excludes the contribution from Paragon 28, while we are maintaining our 2025 adjusted EPS guidance of $8.10 to $8.30. The updated revenue range contemplates, number one, continued weakness in restorative therapies. Number two, a more measured outlook for certain international emerging markets while we address some of the challenges that we saw late in the quarter here in Q3. And thirdly, the modest slowdown in the U.S. revision market for both hips and knees persisting throughout the rest of 2025. Suki is going to provide more detail on guidance during his prepared remarks. We are continuing to transform Zimba Biomed at a rapid pace to achieve our long-term ambitions. Let me start now in closing some of the updates relevant to the three key priorities of our organization. Again, those being people and culture, operational excellence, and innovation and diversification. Starting with people and culture, we are committed to having the right people in the right roles so we can consistently execute owner strategy without hiccups. We owe this to all of our stakeholders, those being patients, customers, employees, and investors. We hold the team to this standard and will continue to make performance-based changes when commitments are not made. Along with that approach and reflected in the guidance that we're providing today for 2025, we are making leadership and governance changes in some of our international businesses to address some of the headwinds that we have seen in these geographies throughout the year 2025. Also in the U.S., our group president, Kevin Thornton, continues to drive the U.S. channel transformation at the right pace, showing promising results as we demonstrated in our Q3 third quarter results. These changes include bringing in new sales leadership for ASCs, ambulatory surgical centers, for SET, and for key account management, while we also continue to drive a sales incentive plan which increasingly rewards growth. Kevin is leading tremendous efforts to drive sales excellence, and he and the team continue to implement sales force specialization for key growth categories, such as robotics and SET. Additionally, we have installed new leadership in restorative therapies, And we have changed reporting lines in some of our U.S. businesses to drive maximum visibility, consistency, and accountability. Again, all of these changes are contemplated in the guidance that we are providing. I'm confident that the best is yet to come here at Zimmer Biomed as we continue to merge best-in-class innovation with solid and consistent commercial execution. Now, turning to our second key priority, operational excellence. This strategic pillar encompasses efforts on both the top and bottom line to accelerate revenue growth, improve margins, and increase free cash flow generation through inventory management. I'm proud of the work that the team has done in 2025 to drive adjusted EPS and free cash flow. The efforts of the team have enabled Zimmer Biomed to grow adjusted earnings per share in 2025 versus 2024 and this is in the backdrop of executing two significant M&A deals, Monogram and Paragon 28, absorbing the impact from tariffs and making meaningful commercial investments that will yield meaningful growth in quarters and years to come. Meanwhile, the focus on reducing days of inventory on hand underpins our strategy to increase free cash flow, and we continue to see progress in this area. Finally, In the third priority of innovation and diversification, very excited to share that on October the 7th, we closed the acquisition of Motogram Technologies, which is the company behind the embossed, semi, and fully autonomous AI-driven orthopedic robotic system. A few weeks ago, we held initial demonstrations of this technology at the HEEP and eSociety meeting in Dallas, Texas, to a selected group of around 100 surgeons, most of them currently using competitive technology. We walked away extremely energized by their feedback. This technology is already changing the conversation, and with data and time, we expected to also change the standard of care. In a healthcare system which continues to be constrained by cost, and in an orthopedic environment where physicians and staff are desperately seeking more efficient ways to deliver best-in-class patient care, we believe that EMBOSS, will offer an elegant and compelling solution. That said, we're not betting on just one platform. We believe in optionality, customer-centricity, and flexibility. The Monogram technology is one part of our very comprehensive suite of customer-centric offerings, which range from simplified navigation such as OrthoGrid to non-CT, non-CAT scan-based robotics with ROSA to meet the diverse needs of our broad range of global customers. We now look forward to completing the clinical protocols for Monogram, which started back in early July, and to launch the world's first semi-autonomous robot with persona implants, the world's leading knee implant, in early 2027, swiftly followed by the fully autonomous platform at the end of 2027 or early 2028. Relative to our diversification mandate, we continue to see the integration of Paragon 28 moving at the right pace and in the right direction. And our expectations for this business remain unchanged for the year 2025 and beyond. There continues to be a strong excitement for the opportunity as we launch new products and continue to integrate commercially. In addition to Monogram, we continue to deliver on a broader innovation roadmap, bringing new to the world technologies. These include iodine-treated HIP in Japan, for which we recently received PMDA approval. This is a first-of-the-world technology that inhibits bacterial adhesion and biofilm formation on the implant surface to address PJIs, periprosteric joint infections. We launched in before the end of 2025 ROSA with Optimize, which has a simplified user interface and offers kinematic alignment for knee implants. We're also deeply in launch mode for next generation foot and ankle products. These come in mostly from Paragon 28 and include fusion plating and other key growth areas within lower extremities. Groundbreaking technologies coming from Zimmer Biomed as part of our digital ecosystem to complement our leading positions and drive core implants. And then lastly, we have over 20 new products in ACT over the strategic horizon which address safety, efficiency, and best-in-class clinical and economic outcomes. In conclusion, we are very proud of the progress in our organization and are excited about the future ahead. We're going to continue to bet boldly on innovation that changes the standard of care in high-growth areas while we continue to improve commercial execution. Along the way, as we responsibly reposition the organization for higher growth, we're going to remain highly disciplined on capital allocation ensuring that this company remains synonymous with a strong earnings growth and free cash flow generation. And with that, I'll now turn the call over to Suki. Thank you.