Release Date: May 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you explain the mitigation efforts for tariffs and why the 2025 run rate isn't a good exit trajectory for 2026 tariffs? A: Suketu Upadhyay, CFO, explained that Zimmer Biomet's production is largely U.S.-based, reducing tariff exposure. Mitigation efforts include optimizing country of origin, transfer pricing, dual sourcing, and reducing discretionary spending. The 2025 tariff impact is estimated at $60 million to $80 million, with most effects in Q4. For 2026, the full-year impact of tariffs, inventory capitalization, and potential retaliatory tariffs are headwinds, while sourcing changes and discretionary spending cuts are tailwinds.
Q: How do you plan to achieve above 5% growth by year-end given the current growth rate? A: Ivan Tornos, CEO, stated that Q1 growth was impacted by one less selling day, effectively making it 3.5% to 4%. Q2 faces tough comps and timing issues in EMEA. However, new product launches in the second half, like Oxford Partial Cementless Knee and Persona Revision in Europe, are expected to drive mid-single-digit growth.
Q: Are the new Z1 Hip users true new customers, and when will new Knee products impact growth? A: Ivan Tornos confirmed that 50% of Z1 Hip users are new customers, not just existing Knee customers. The impact of new Knee products is expected to be visible in Q2, with more significant growth in the second half of 2025.
Q: Is the positive pricing trend sustainable, and how will it affect new product sales? A: Suketu Upadhyay noted that pricing was better than expected in Q1, with a positive 10 basis points. The company anticipates flat pricing for 2025, supported by new product pricing, competitive responses, and improved internal pricing capabilities. The pricing environment is expected to remain stable.
Q: What are the main sources of the tariff headwind, and how are you mitigating it? A: Suketu Upadhyay explained that the main tariff impact comes from China. Mitigation strategies include optimizing country of origin and transfer pricing, sourcing changes, and inventory management. The company is also exploring sourcing from Europe instead of the U.S. for China-bound products.
Q: How is Zimmer Biomet performing in the ASC versus hospital channels? A: Ivan Tornos stated that over 20% of U.S. sales come from ASCs, up from 2%-4% pre-COVID. The company expects ASC sales to grow to 40%-60% in five years. Zimmer Biomet is the leading reconstructive company in ASCs and is growing faster in S.E.T.
Q: Can you elaborate on the sales force optimization and its impact on guidance? A: Ivan Tornos explained that the sales force optimization involves leadership changes, territory adjustments, and incentive plan modifications to improve U.S. Knee performance. These changes are expected to enhance growth without impacting current guidance.
Q: What is Zimmer Biomet's M&A strategy post-Paragon 28 acquisition? A: Ivan Tornos stated that Zimmer Biomet remains open to strategic M&A opportunities, focusing on ASC, S.E.T., and faster-growing orthopedic categories. The company aims to achieve a 5% WAMGR by 2027 and is prepared for responsible acquisitions that align with strategic and financial goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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