Everybody knows Ivan Tornos, CEO, and we also have Paul Stellato, Interim CFO. Welcome. I think this is probably your first Fireside Chat as interim CFO.
Yes.
Maybe we'll start with you. Can you give a quick introduction, kind of how you're thinking about the Interim CFO role and setting guidance and all that?
Sure, sure. I'll be very brief because I know we're all here to see Ivan, obviously. Again, very, very happy to be in the role. It came up very quickly, but it's something that we've been planning within the organization for some time. We've always had succession planning as something that Suky took extremely seriously, and we all had to be ready. From my perspective, what I look forward to is I know we won from a finance team perspective. We've had a lot of strength. Our leadership at the different disciplines, whether it's treasury, a lot of folks know Fred Ito here, FP&A, business finance, tax.
We've got a first-class team, so that makes the transition pretty manageable, and, you know, something that I'm actually, you know, looking forward to. In terms of the health of the business, that's the other piece, at least from a, from a balance sheet perspective, inheriting something that's very strong and something that we can build off of, and something that actually we've been very, very proud of. From a business perspective, that's kind of, how we, how we see things and why it feels very, very comfortable kind of coming to the role. From an experience perspective, when I think about when I got hired into the role, I believe one of the things they appreciated about my background is I didn't have a typical, Chief Accounting Officer or Controller-type background.
I'd spent a lot of time in FP&A. I spent some time in investor relations. I have public accounting within there. I think with the diverse, excuse me, the diverse background is one of the things that why they brought me into the role in the first place. That in the event something like this happened, we could do this very smoothly, and hopefully it's, you know, invisible to the organization to the outside world as we go forward.
Maybe, Ivan, just off Q1, good quarter. Beat the guidance. I think there's a lot of kind of factors in Q1 in total. If you maybe wanna kind of walk through some of those puts and takes.
Sure. Good morning. That's quite a change from his curriculum to Q1. Straight into Q1. Look, we're happy with the first quarter of the year. You know, we guided for the year 1%-3%, we came at the top of the range. You know, 3% revenue growth, organic revenue growth in the first quarter of 2026. The U.S. was north of that at 3.2%. That's in a quarter that was rather unique. I'm not gonna go through all the drama of what happened in the first quarter. I think now everybody's seen the results of all the orthopedic companies, combination of weather, strikes in California. There were a couple of events that probably distorted the reality of the quarter. That said, pleased with the U.S. performance, pleased with the evolution of the sales force.
Not pleased, I'm sure we're gonna talk about the U.S. knee number, 2.2% knee growth. We will do better than that. We have to do better. Couple of elements that we can discuss, but very happy with the 5% in U.S. hips. International at 2.5% was pretty much in line with our expectations. We're going through some changes in some markets, net-net, we got a 1%-3%, came at the top of the range. If you're asking me the implied question, why are you not narrowing or raising guidance? You know, it's early in the year. We're going through some transformation in the year. We're gonna be prudent.
We like where we ended the quarter, we like where we started the second quarter, we like what we see from a market standpoint. Again, the major transformation initiatives that we're undertaking are going as expected, if not better.
kind of drilling down in the knee's 2.2% in the quarter, how did that kind of play out versus expectations?
Below our expectations. We're never happy, you know, growing below market, and again, unique quarter. There were some competitors that were out of the market. There were some one-time events, but the market, when you normalize for everything, it still is around 4% - 4.25 % for knees. Don't believe the hype that all of a sudden the market is low down from Q4 to Q1. I mentioned publicly there were two or three things that impacted our knee growth number. One is Kaiser, you know, major strike in California. We are the number one player in the West Coast at Kaiser.
We had a couple of accounts that if we end up losing for the rest of the year, which I don't believe so, by the way, could be, you know, up to 50 basis points. Again, most of that impact happened within the first quarter. Then we had, you know, some changes that we made in the quarter that we anticipated, and maybe they were more acute than initially anticipated, as we enter the second quarter, they have been resolved. Happy with 2.2% U.S. knee growth? No. Do we think we're gonna do better? Absolutely.
Then there was two accounts that you did mention on the call, and, you know, I think we talked about a little bit last night.
Yeah
Maybe this kind of sounds like there's maybe even an opportunity to get some of those.
Yeah
Over time.
You know, I gotta learn to shut up and say less in these calls, and that's ongoing work because, you know, hey, you know, we did lose two accounts. We also gained a lot of accounts. God knows what those two accounts look like for the next three quarters. I like the trends, I like what we see. Again, if we did lose those accounts for the rest of the year, the impact to our U.S. knee number is less than 50 basis points on growth. We got all kinds of other things that become tailwinds. I like where we are with ROSA OptimiZe, which obviously is gonna carry pull-through of U.S. knees. In the first quarter of 2026, we placed a record number of robots. We also sold a ton of capital.
Our technology business grew 30% in the quarter. Our Oxford Partial Cementless Knee continues to move above expectations. I like where we are with the Magnificent Seven. Again, I wish I would've never talked about two accounts being lost. We have 29,000 accounts in our database, I like our chances as we get deeper into the year.
Okay. One other quick thing to add for those two accounts specifically. That was known, right? It's not like that played out in the quarter. It's something we knew kind of going into the guidance period. There wasn't going to be pressure on Q1 related to it because that was in-
You said the impact was 15.15%?
Could be up to 50.
50. Okay. I just wanted to make sure I heard that number correctly.
Just I'll say this publicly, I don't think that's gonna be the impact.
Right.
Okay.
Okay. You don't think those two accounts are being lost as a trend of any sort either, right?
No. There were competitive dynamics relative to some price deals that I'm not going to entertain. You know, for what it's worth, we are not seeing, you know, that dynamic of going out there and discounting massively permeating the market. Point in case, our price performance in the first quarter was, you know, 40 basis points of erosion. We continue to see the main competitors being very responsible when it comes to pricing strategy. I would call this a two-time event within the quarter.
Okay. Kind of digging into the new products. Last night at dinner, we talked a little bit about the iodine-coated hip in Japan, it's a little bit targets the U.S. Anything you can kind of dig into the new product cycles that you wanna highlight?
Sure. There is a lot going on. Beyond the, what we call the Magnificent Seven, seven pretty compelling product launches, you know, whether it's Oxford Partial Cementless Knee, Persona Revision systems in Europe, whether it is next generation cement, there's personalized shot. We got a lot going on. I will tell you, Travis, that most of them are going above expectations. The one product you're talking about, iodine-coated hip implants, that is groundbreaking. We are the only company that has an iodine-coated hip implant starting in Japan, which is the second-largest market in the world, worth around $1.2 billion-$1.4 billion. The ramp-up of that product in the second half is pretty compelling. It's actually one of the growth drivers in the second half of the year for Zimmer Biomet.
The next competitor is probably five to seven years away in a best-case scenario. At some point, we'll bring the technology over to the U.S., but that's very unique. You know, prevention of biofilm formation. You carry a 40% price uplift. Just converting legacy hips to coated hips with iodine, you're getting a 40% reimbursement premium, again, in the second-largest orthopedic market in the world. Excited about that. Really excited about ROSA OptimiZe. You know, we talk a lot about autonomous robotics, that they're coming in early 2027. A ROSA OptimiZe platform is the only robot that can do truly a personalized kinematic alignment procedure. Again, the adoption of this technology is better than we expected. Part of the 30% growth that we had in the 1st quarter.
Again, I could spend an hour talking about innovation, but Magnificent Sevens are working. Our suite of technology is going better than expected. Now we get into bolder place, whether it's infective platforms, or other things we're doing around digital ecosystems.
Is your market share in Japan pretty similar to the U.S.?
We are the number one company in Japan. Again, second-largest orthopedic market and the second-largest revenue generating country for Zimmer Biomet. We're number one in hips. We're number one in knees. We're also the fastest-growing technology company in Japan.
So you see the 40% of price uplift with the iodine-coated hip. You also are starting to see share gains as well on the volume side?
Absolutely. Absolutely. This is a country that should be growing upper single digit in 2026.
Okay. That's helpful. On SET, it was weaker in Q1. I think we had a little bit of debate last night on the kind of the prior quarters, how much is strong versus weak. This is a lot of businesses within the SET business.
Yeah
Help us kinda walk through the moving parts in SET.
Sure. Back in May of 2024, when we did our LRP presentation at the Analyst Day, we committed to growing SET mid-single digit. If you go back to that, you know, Wednesday, May 29th, you know, two years ago, we have had, you know, I think it's 10 quarters, if not nine quarters out of 12, or now the last, you know, 10, 11, you know, growing at a rate. Go back to early 2023, go through 2023, 2024, 2025, most quarters have been mid-single digit. That's excluding Paragon 28. Obviously, if you put Paragon 28 in there, you are solidly in the mid-single digit, if not upper single digit. Q4 of 2025 was softer than expected. I'll talk about those headwinds in a second.
Yes, Q1 of 2026 is not the best SET quarter. Two reasons for both, the last quarter of 2025 and the first quarter of 2026 being softer than expected. We continue to see our trauma business declining at an upper single double-digit rate. Trauma is a half a billion-dollar business for us, you know, declining double digit, it's not great. Biologics or restorative therapies, HA, hyaluronic acid injections have also been, you know, declining at a double-digit rate. That's a platform that used to have preferred reimbursement and is being commoditized. Those two platforms have been a headwind for the last year and a half, two years, and we're addressing that through investment, and I'm thinking about other portfolio management in place.
What, what was the outlier in the last quarter of 2025 and the first quarter of 2026 is that we had some supply challenges with sports medicine. That's a business that has been growing double-digit for quite some time with on three acquisitions. And then Q4 and Q1, we did have some shortages. We moved from a vendor in Europe to Mexico, and that created some disruption. That is being resolved, and we expect the sports medicine to get back on track. Net of that, you know, CMFT continues to cranium, maxillofacial, thoracic continues to grow double-digit. We have a tremendous opportunity with the Sternal Closure, and other growth drivers within CMFT to continue to grow double-digit. Paragon 28 acquisition is going very well.
I think I said in the earnings call that you should expect moving forward to have solid double-digit growth. I like where we are with shoulders, with Identity launch. OsseoTi, again, upper single double-digit. Just gotta resolve trauma and restorative therapies, and sports medicine is being resolved. That's a long answer to tell you that I do think that SET should get back to a mid-single-digit growth.
Okay. When do you think it kind of returns back to that normalized growth?
Second quarter of 2026.
Okay. Paragon 28, I guess it's been almost a year, a little over a year.
it's a year.
Yeah. Sure.
Yeah, we, anniversary in April of this year.
Yep. How's the integration from the Salesforce perspective going? Kinda what have you learned over the last year, in terms of, one, being able to do and integrate acquisitions.
Sure
Two, just from owning that portfolio and
Sure
integrating those sales forces.
Sure. I think I answered that already. We expect Paragon 28 to grow double-digit, starting the second quarter of 2026, and continue that trend moving forward. We've not lost any material number of representatives, sales representatives or accounts in the combination in the merger. We have kept the entire management team over in Denver, Colorado. From the former CEO, who's doing a great job, to the former chief commercial officer, Matt, who continues to do an amazing job, we kept the people. We're growing double-digit. We are not delaying any product launch, so the pipeline remains robust, and we're delivering all the financial commitments. We committed to being EPS neutral by the end of year two. That's on track. Our integration acquisition costs are better than expected.
One of the reasons why we raised cash flow last year, and again this year, we're raising cash flow, that's going better than expected. What are we learning with this? We're learning that we now have a muscle that we didn't have before in terms of integration. About 1.5, two years ago, we put a different management team behind integration. That's working well. Beyond Paragon 28, we're also integrating obviously OrthoGrid and now working actively on the integration of Monogram. We believe that we're ready to do these type of deals, and at the right time, we're gonna continue to do these type of deals.
Okay. When you think about capital allocation, though, your stock price with all of med, the med tech sector at a record low valuation, you know, is buyback still part of the plan? Why not accelerate buybacks? I think you actually had an announcement this week, increasing your buyback authorization.
That sounds like a leading question. Yes. Yes. When you look at the multiple that we got, you see the cash flow generation of this business, it's a no-brainer that, you know, we need to be buying Zimmer Biomet. Not to say that we're gonna stop our diversification effort. We're gonna do that, continue to do that in a responsible way. Right now we're integrating three companies. We're integrating Paragon 28, again, only one year behind. We're integrating OrthoGrid, which is a smaller acquisition, one that requires a thoughtful approach in terms of how we penetrate this surgical AI technology in key markets, starting with the U.S. Then Monogram.
I mean, Monogram will be transformational, and there is extensive work that is happening around segmentation, spending time with customers, thinking what is the right message when we launch the technology, working on reimbursement, pathways early on, really thinking of the surgical algorithm. We're working in tandem on the semi-autonomous and fully autonomous indication. That's something that is gonna take, you know, some effort, and we don't wanna complicate our lives, you know, adding a fourth acquisition as we're doing all of that. That's why we announced the $1 billion of buybacks in 2026, and we think that's the responsible way to allocate capital.
Okay. That's helpful. Maybe touching on the U.S. Salesforce changes, maybe to start, you know, why now? Why are you doing this, and kind of where you expect to be on the other side of the changes?
Yeah. I think, I think it's fairly commonsensical that you can't be a best-in-class med tech company, by not having a dedicated channel in the world's largest market. I'm gonna stop right there. You know, with $8.5 billion in revenue, 62% of the revenue of the company's in the U.S. 53% of the EBITDA of the company comes from the U.S., given allocations and whatnot. And our channel in the U.S. has been non-dedicated. And I wanna make sure I'm not confusing people. It's now 1099 W-2 is dedicated, right? A year and a half, two years ago, you know, roughly two-thirds of the U.S. channel were non-dedicated. They worked for Zimmer Biomet, and they worked somewhere else, through mostly a 1099, you know, type of contract.
Some of our sales reps, you know, 2,545 reps, actually had as many as three jobs. Now the mandate is everybody that works at Zimmer Biomet needs to be a dedicated employee of the company. I don't have a second or third job, and I expect people that work with me to be fully dedicated to the journey here. A year and a half, two years ago, only 20%-25% of the organization was specialized. This, Travis, was a, "I'm gonna sell everything to everybody," approach. I'm sure that you agree with me that in med tech, you only win if you have people that every day wake up one call point, one portfolio they're selling, one bag that they're selling, and the mandate here is I wanna make sure that everybody is specialized.
The other dynamic is, you know, a year and a half, two years ago, there were different incentive plans, given the legal angles that we had or the legal aspects that we had. You know, there were different ways to look at compensation. You know, now the mandate is gonna be that everybody gets paid the way that I get paid on growth. Those are the changes that we're making. It's gonna take, you know, another year and change, so we should be done by the end of 2027. Why now? We're about to launch Monogram. We got a cadre of new products that we're launching. We have launched a ton of new products. And clearly we have a commercial execution issue. The average rep does seven cases per week. Our competitors does 16 cases per week.
Again, that goes back to the fact that, you know, not all of them are working, you know, five full days a week. We're addressing that productivity. We got what we need from an innovation standpoint, and we like what we see. That's the why.
You've been traveling all over country, meeting with reps and distributors and stuff. How have the conversations gone with?
Yeah
Receptivity to some of the changes the sales force?
Look, I think most, if not almost all, sales reps get it. Get the why. Everybody gets the why, you know. We can't have a channel that is all over the place. This is not customer centricity, this is not the best way to run the business. They get the why. Conversation as I travel, yes, I've been, you know, going left and right all over the U.S., the conversation around the how we do it, what does this mean for me, right? How, you know, are you gonna take my entire shoulder business? Are you gonna compensate me for that? Are we gonna transition this in a responsible manner? Am I gonna be able three to five years from now, you know, to continue to make the money I was making, if not more?
So far the business case is that you will make more, you know, as a dedicated specialized representative. We spend a lot of time, Travis, on the how we do this, what are the timelines, and what are you gonna do for me to make sure that I don't have a financial headwind hit in the short term. When you have these conversations in the same room, and you talk to individuals, they get it.
Where are we in the transition in terms of thinking about, like, where's the risk along the way and, you know, I think you've highlighted into 2027 for it.
Yeah
to be finished.
Yeah
Where are we today in the different phases?
I'll reinforce that this is going better than expected. We broke down the project on three tiers. Tier 1, no regret, moves, you know, low-hanging fruit, opportunity, go fast, you know, underperformers, where we have contracts, we have the presence that we need with moving fast in that regard. I would say we are done, if not mostly done with that first tier of the change. It's the middle of the road, you know. We're gonna have to be careful, and we're gonna have to go at the right pace and make sure that we're responsible in terms of the conversations we're having, and that's what we're doing right now.
The tier 3 is the either we leave it as it is for a period of time, or we become bolder when it comes to the type of negotiation agreements that we put in place. I said publicly that on the tier 3, which, you know, is later in 2026 and 2027, proactively already have locked in a lot of that business. There are six independent distributors in the U.S. that account for 40% of the revenue. Six general managers, we have locked in those agreements for the next seven, 10 years. Now already working, you know, with some of those individuals in, you know, making sure that a level below and a level below, we're converting their sales forces to fully dedicated.
Again, done with tier 1, working on tier 2, middle of the road, and then some of the staff, you know, the higher risk staff is gonna be later this year or as we enter 2027.
You were talking about earlier, your.
By the way, stating the obvious, all of that is contemplated in the guidance that we provided. This is not an event in where, you know, in the second half of 2026, we slow down and then, you know, hey, you know, it's the sales force, changes that we're implementing.
Right. Your rep productivity right now, you kind of mentioned basically half of your competitors. As you go through these changes, does that increase linearly, increasing going forward?
We've seen it. I mean, it's again, I keep using the word commonsensical, but if, you know, a rep, Travis, in Atlanta, Georgia, is doing seven cases because Travis doing two, if not three other jobs, and now we convert it to fully dedicated five days a week, if you're a W-2 employee, you know, you're part of all the operating mechanisms, you are gonna do more cases. In those areas where we have converted individuals from non-direct, non-exclusive to Zimmer Biomet to exclusive, you see a dramatic pickup in productivity, and obviously along with the productivity, you see an improvement in revenue.
In some way, that's almost a positive tailwind that you have in the business that maybe is not even factored into the guidance.
Yes, you also have to offset the potential disruption that maybe there'll be a Travis in Atlanta who says, "You know, I don't wanna work, you know, five days a week for Zimmer Biomet because I have these two other jobs." There may be an offset. Candidly, the balance of those two is the reason why we guided the way that we did. Candidly, the balance of those two is the reason why, although we like what we see, although we had the quarter that we had, you know, we're waiting to have better guidance.
Yeah. Makes sense. Maybe transitioning to the robot sales force that you're building out, just help us understand where you are in hiring those reps, where you're getting them from, and what they're gonna be doing that's different than what you've been doing from the capital side?
Yeah. With the upcoming launch of Monogram, we really are building what I call a world-class organization in technology. I say technology because it's not just robotics. We, we are a company that collects data before, during, and after surgery, and we got digital models to monetize the data at the provider and payer level. We got a suite of technology with the small robots, large robots, CT scan, non-CT scan, with obviously every indication under the sun, from hips to shoulders to you name it. We're looking at other technology plays. We're building a technology organization. We're hiring up to or around 200 reps in the U.S. alone, maybe potentially more as we enter 2027.
We have our ASC organization, which we have built, which will have obviously access to that technology. We built a best-in-class key account management platform. We recently announced that we hired Jonathan M. Vigdorchik, Dr. Jonathan M. Vigdorchik, who is one of the most prominent global key opinion leaders when it comes to AI technology. He's helping us with our launch. All this rambling to tell you that we hired a ton of people. We got a portfolio that I believe is a major competitive advantage. As we enter 2027, you should see a large sales force organization selling a cadre of technology that we didn't have before.
How are you thinking about the whole portfolio of robotics and segmenting it and even keeping the message clean to different surgeons?
Well, it's working, right? 30% growth in Q1 or what we call our suite of technology, the optionality that we're providing is something that our competitors are paying attention to. Candidly, some of them are doing, you know, some of the same. You know, moving from having one platform to, hey, maybe portability, smaller footprint matters as well. Maybe at some point it's not the robot, it's, you know, some sort of other navigation device. I like our strategy. We believe in optionality. We believe that not everybody's gonna be a robotic user, but most surgeons will be doing some sort of navigation.
We believe that some users will wanna have less to do in the procedure, simplifying autonomy, whereas some others will always like to be more involved, have more of a cobot, a cooperation between the machine and the surgeon versus just a fully autonomous robot. We will be the company that offers that optionality. Then obviously, as time evolves, you know, we'll make our portfolio choices. Maybe at some point we don't have to have, you know, the broad suite of technology that we have today, something smaller. Right now all the research that we've done and the results that we achieved in the first quarter suggests that our strategy is working and we're gonna continue that strategy.
Yeah. On Monogram, you showed it to a lot of surgeons. What's been some of the feedback you've got? Then you had like five pillars I think on Monogram.
Five what?
Five pillars of kinda.
Yeah
What it takes to make Monogram.
Yeah
successful. If you kinda wanna walk through those too?
Yeah, I got three minutes and 58 seconds, I'm gonna speak faster than usual now. Nobody's gonna understand me. We have demoed Monogram to around 1,000 surgeons between academy and hip and knee society. The feedback has been very compelling. Obviously you get the usual questions of what's gonna be my role in an operating room. Are you selling a driverless car to a taxi driver? That's not what we're doing for the record. We're not selling a driverless car to a taxi driver. This is surgeon-enabled autonomy. The feedback has been very compelling. Five things that I keep mentioning. Safety. We believe that because the automation of the device, because of the less human involvement, the safety profile is best in class.
The surgical boundaries, the intelligence of the platform to detect soft tissue is like nothing you've seen in orthopedics, dare to say medical technology. Safety is number one. Number two is efficiency. Really fast registration, landmarking in 60 seconds or less. You know, bone cutting preparation in three to four minutes. A really fast procedure. At some point this achieves time neutrality, dare to say it could make surgeons faster. That's the efficiency. Ease of use. 75% of all the knees done in the U.S., quoted 29,000 surgeons earlier, are done by surgeons that are doing 25 or less per year. That's two per month. Everybody talks about democratizing technology and orthopedics. This will democratize technology.
Ease of use means that after you've done two out of three, because it's a very intuitive surgical algorithm, because it's very easy to use, as I mentioned on number two, you know, the adoption could be very high even with a lot of the non-robotic users. Number four is reproducibility. Is the whole idea that once you've done two out of three, you know, you've done them all. You know, you don't need to impact your surgical algorithm. The tweaks that you need to do to your conventional practice is minimal. Lastly is accuracy in the last, you know, minute and a half here. All the data that we got so far in the pre-launch or in the preclinical trials shows that the accuracy is 40% better than some competitor devices.
When you are doing surgeries in very small real estate like the knee, to achieve a 40% accuracy is very compelling. Safety, efficiency, ease of use, reproducibility and accuracy is the bold bet that we're making with Monogram. We're gonna take our time to make sure that surgeons are involved in the launch. We're gonna make sure that segmentation is adequate. We should be submitting the 510(k) at some point in the not so distant future, and we're very excited about 2027.
When you think about utilization, there's a lot of questions on ACA and all that. Just curious what you're seeing on the utilization front.
I'm gonna keep going back to, you know, 30% growth in capital in Q1. Again, the trends continue as we get into Q2 and so forth. We're not seeing a slowdown in capital purchases. ACA, the Medicaid business subsidies is less than 1%, 1.5%, 2% of our business. We're not seeing an impact. This is a very resilient market. Orthopedic is not going anywhere. I always quote, and I believe you got the data as well, Travis, at Bank of America. If you go back to 2008, the great recession in the world, with unemployment here in the U.S. in double-digit rates, over a three-year period, 2008 to 2011, we lost 1% of all orthopedic volumes.
That's with inflation at a different level, unemployment at a different rate. Again, this is a very resilient market. The amount of patients waiting the sidelines continues to be high. I know these are not COVID patients, this is just demand. The average wait list in the U.S. for the top 10 centers in the U.S. continues to be between three to six months. No, we're not seeing the impact.
Okay. Cool. Any last closing comments in the last three seconds?
I'll let Paul, he speaks better English, you know, close the fireside chat.
Guillermo, thank you obviously for having us. Yeah, very excited about where we are. A lot of opportunity for us ahead, and it's something that I'm certainly gonna have the finance team is all set to back it up. No, again, great position.