• Revenue: $2.23 billion, an increase of 4.3% on a reported basis and 4.9% constant currency.
• Constant Currency Revenue Growth: Nearly 5% for the fourth quarter of 2024.
• Adjusted Earnings Per Share (EPS): $2.31, compared to $2.20 in the prior year.
• Free Cash Flow: $1.055 billion for the year 2024.
• Adjusted Operating Margin: 30.8%, 50 basis points higher than the prior year.
• Gross Margin: 71.3%, lower than 2023.
• Net Sales Growth by Segment: Knees 5.6%, Hips 4%, S.E.T. 8.4%.
• Pricing: Positive 60 basis points, marking the fourth consecutive quarter of positive pricing.
• 2025 Financial Guidance: Constant currency revenue growth of 3% to 5%, adjusted EPS of $8.15 to $8.35.
• Share Repurchases: $870 million for the full year 2024.
• Cash and Cash Equivalents: $526 million at the end of the quarter.
• Adjusted Tax Rate: 17.5% for the fourth quarter of 2024.

• Warning! GuruFocus has detected 3 Warning Sign with ZBH.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Zimmer Biomet Holdings Inc (NYSE:ZBH) reported nearly 5% constant currency sales growth in Q4 2024, marking the 12th consecutive quarter of mid-single-digit or better growth.
• The company successfully managed to meet its original 2024 financial guidance despite challenges, delivering $8 in adjusted earnings per share and $1.05 billion in free cash flow.
• Zimmer Biomet Holdings Inc (NYSE:ZBH) plans to launch over 50 new products in the next 36 months, with several being new to the world, indicating a strong focus on innovation.
• The acquisition of Paragon 28 is expected to expand Zimmer Biomet Holdings Inc (NYSE:ZBH)'s offerings in the foot and ankle space, enhancing its growth potential in a $5 billion market.
• Zimmer Biomet Holdings Inc (NYSE:ZBH) has a strong focus on operational excellence and innovation, with plans to improve margins and reduce inventory needs, thereby increasing free cash flow generation.

Negative Points

• The company faced ERP implementation challenges in 2024, which impacted its operations and new product introductions.
• Zimmer Biomet Holdings Inc (NYSE:ZBH) anticipates a significant FX headwind in 2025, which could impact reported revenue growth and earnings per share.
• The guidance for 2025 reflects a more conservative approach, with expected constant currency revenue growth of 3% to 5%, which is lower than the previous year's growth.
• The acquisition of Paragon 28 is expected to be dilutive to adjusted EPS by approximately 3% in 2025 and about 1% in 2026.
• Zimmer Biomet Holdings Inc (NYSE:ZBH) faces challenges in maintaining consistent performance in the critical US market, necessitating improvements in its go-to-market strategy.

Q & A Highlights

Q: How does Zimmer Biomet's guidance philosophy for 2025 differ from 2024, and what factors are influencing this year's guidance? A: Ivan Tornos, President & CEO, explained that the guidance philosophy for 2025 is more conservative compared to 2024. The company met its 2024 guidance, and for 2025, they are considering factors such as one less selling day and new product launches, which are expected to become more material in the second half of the year. The guidance is deemed appropriate, with more drivers expected to push results toward the upper range of the guidance.

Q: What are the expectations for the Paragon 28 acquisition, and how will it be integrated into Zimmer Biomet's operations? A: Ivan Tornos expressed excitement about the Paragon 28 acquisition, highlighting its strong culture and innovation. The plan is to preserve Paragon 28's dedicated sales channel and management team, minimizing disruption. The acquisition is expected to expand Zimmer Biomet's offerings in the foot and ankle space and drive growth in both the U.S. and international markets.

Q: Can you provide more details on the expected sales growth and margin progression for 2025, excluding the impact of Paragon 28? A: Suketu Upadhyay, CFO, outlined that 2025 constant currency revenue growth is expected to be 3% to 5%, with a significant FX headwind. The first quarter will have the lowest growth due to a selling day headwind, with faster growth anticipated in the second half due to new product uptake and easier comps. Operating margins are expected to expand, with stronger margins in the second half of the year.

Q: How does Zimmer Biomet plan to leverage the ASC (Ambulatory Surgical Center) opportunity, and what impact will Paragon 28 have on this strategy? A: Ivan Tornos highlighted the significant growth opportunity in the ASC space, with Zimmer Biomet's sales from ASCs approaching 20%. The company plans to leverage its strong presence in ASCs, partnerships, and innovative products to drive growth. Paragon 28's entry into the ASC space is seen as a revenue synergy opportunity, given the favorable reimbursement for foot and ankle procedures.

Q: What are the key new products expected to drive growth in the second half of 2025, and how are they factored into the guidance? A: Ivan Tornos identified several key products, including the Z1 triple-taper stem hip and Oxford Partial Cementless knee, as significant growth drivers. These products are expected to gain traction in the second half of 2025, with full launch modes anticipated. The guidance does not overly rely on optimistic projections for these products, but they are expected to contribute meaningfully to growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.