Good morning, ladies and gentlemen, and welcome to the Zimmer Biomet First Quarter 2026 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, April 28, 2026. 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. Please go ahead.

Thank you, Operator. Good morning, everyone.

Welcome to Zimmer Biomet's first quarter 2026 earnings conference call. Joining me on today's call are Ron Tornos, our Chairman, President, and CEO, and Sufya Patier, 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 RCC filings. Please know 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 first quarter earnings release, which can be found on our website, ZimmerBiomed.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, as I always do, by sharing my gratitude to our Zimmer Biomed team members around the world. Your determination, your discipline, and your dedication to customers and patients are what moves our business and our mission forward. We're off to a strong start to the year, strategically, operationally, and financially. And that momentum is a direct reflection of the strength of our team, the resilience of our business, and the impact that we can have where we stay focused on innovating and executing for our customers. Once again, my sincere thanks to the Zimmer Biomed team members. During my prepared remarks this morning, I'm going to cover four key areas. First, I'll start by summarizing our first quarter results. Second, I will provide an update on our U.S. go-to-market changes. Third, I will discuss our 2026 outlook. And then lastly, I'll briefly cover the progress that we continue to make across the three key strategic priorities of the company, those being people and culture, operational excellence, and innovation and diversification. Starting with the first quarter results, I'm proud of how the team began the year, making strong progress towards our 2026 sales growth commitments, EPS, and free cash flow commitments. In the first quarter, we grew sales 2.9% on an organic constant currency basis at the upper end of our annual 2026 revenue guidance range, and we delivered adjusted EPS of $2.09, which was up 15% year over year. Notably, the first quarter saw a 20-cent benefit from tariff-related items relative to our expectations. As we get into the details of these results, unless otherwise noted, all statements on this call will be about the first quarter of 2026, a high compared to the same period in 2025, and all commentary will be on a constant currency and adjusted operating basis. First quarter 2026 organic constant currency commentary excludes the impact from the Paragon 28 acquisition, which will close in April of 2025. Looking at the first quarter results in more detail, our U.S. business increased 3.2%, while international grew 2.5%. These results reflect healthy end markets, strong technology sales, which once again grew in strong double-digit rates, and continued momentum from our recently launched new products. Importantly, this performance was against the backdrop of changes to our go-to-market strategies in both the U.S. and some designated international markets. U.S. knee growth of 2.2% in the quarter reflects a greater than 20% increase in partial knee sales driven by our Oxford partial cementless knee, the only partial cementless knee on the market in the United States. This performance was partially upset by pressure in our legacy total knee implants, such as NextGen and Vanguard, which we continue to phase out as part of our brand rationalization strategy. International knees grew 1.3% for the quarter. Our U.S. hip franchise grew 5% in the quarter, as we are seeing increasing traction of our hip triple play of Z1, which now represents nearly 40% of our U.S. hip stems, Orthogrid, or AI-based hip navigation platform, and HEMR, or Surgical Impactor. International hip cells increased by 1%. While still early in its launch, we are seeing rapid adoption in Japan, the second largest market for Zimmer Biomed, of our first of the world iodine-coded hip implant, which is designed to help address the risk of periprosthetic joint infection after total joint replacement. Our technology and data, bone cement, and surgical business grew nearly 12% in the quarter. Our strategy of offering a comprehensive suite of technology solutions is paying dividends, as we are seeing continued strong ROSA and T-mini cells across the board. To further this one-stop-shop approach, at the American Academy of Orthopedic Surgeons in March in New Orleans, we hosted technical evaluations of MBOS, or fully autonomous AI-driven orthopedic robotic system, which we acquired via the monogram acquisition. Surgeon feedback was overwhelmingly positive, as the potential gains in safety, efficiency, ease of use, reproducibility, and accuracy resonated very strongly with the customers that we engaged. We recently completed enrollment in our 102 patient clinical study, and we continue to expect U.S. approval and the launch of the semi-autonomous version in early 2027, followed by the fully autonomous version in late 2027 or early 2028. In anticipation of the MBOS launch, we're increasing the number of robotic clinical self-representatives, targeting to hire over 200 by the end of 2027. Finally, SET growth of 1.6 was once again led by our U.S. CMFT and upper extremities businesses, partially upset by continued challenges in restorative therapies and in our trauma business. Double-digit CMFT growth in the U.S. was driven by our external closure franchise, which continues to perform very nicely above market. Upper extremities increase upper single digits in the U.S. as both our Oseofed Stemless Solder and our Identity Total Solder platform continue to gain momentum. Moving on now to discuss the U.S. go-to-market changes. In the U.S., the transition to a dedicated and specialized sales channel is progressing as planned. While the quarter did see some modest disruption, it was in line with our expectations, and importantly, we are seeing rapid increases in productivity in those territories that we have transitioned. We remain on track to complete the transition by the end of 2027. Internationally, the evolution of our go-to-market models, particularly in emerging markets, is ongoing and also is performing in accordance to the plan and the expectations that we had. While we did see an impact on growth in the quarter, this was very much accounted for internally. While our commercial changes are progressing as planned, given that it is still early in the year, we are maintaining our full-year 2026 organic constant currency revenue growth guidance of 1% to 3%, with growth roughly consistent throughout the remainder of 2026. Inside of this, our assumption of up to 100 basis points of price erosion is unchanged. We continue to anticipate an approximate 50 basis points FX tailwind to full year revenue growth, with the second quarter being about neutral at current rates, and Paragon 28 to contribute around 100 basis points to reported sales growth in 2026 before being reflected in organic growth. As a result, our reported sales guidance also remains unchanged at 2.5% to 4.5% for the full year. We now expect 2026 operating margins to be better than anticipated, down slightly less than 50 basis points from 2025, which is still content planes, lower growth margins, dilution from the Paragon 20 acquisition, and increased investments in our U.S. commercial channel. We anticipate operating margins in the second quarter of 2026 being down roughly 200 basis points from the second quarter of 2025, and the third quarter operating margins being down around 50 basis points sequentially from the second quarter. Our guidance for interest expense, tax rate, and end-of-year surge outstanding, which we continue to assume up to $750 million of surge repurchases, remains unchanged. Given these dynamics, we are raising both our EPS and free cash flow growth expectations for the year 2026. We now expect adjusted EPS to be $8.40 to $8.55, from the previous guide of $8.30 to $8.45, and we expect our free cash flow growth to be in the range of 9% to 11% versus the previous guide of 8% to 10%. As I said, all in, the year is off to a very strong start, and I could not be any prouder or excited about what the remainder of 2026 is going to bring to Zimmer Biomed. Turning now towards three key strategic priorities for the company, people and culture being number one, operational excellence number two, innovation and diversification number three. People and culture remain the key competitive differentiator for Zimmer Biomed, and we continue to focus on placing the right talent in the right roles to advance our strategy. With that in mind, I'm very pleased to share that Dr. Jonathan Bidorchik, a renowned surgeon from the hospital for special surgery, has joined Zimmer Biomed as chief science, technology, and medical affairs officer reporting to me. In this role, Dr. Bidorchik will lead the strategy, delivery, and management of our global portfolio spanning AI-enabled robotics, software and data, smart implants, and connected technologies, while also overseeing our global medical education. On our second priority of operational excellence, we continue to make great strides in improving operating efficiency through expanding our manufacturing footprint into lower-cost geographies. In addition, we're making very meaningful progresses on reducing working capital by lowering our days of inventory on hand, while at the same time accelerating a very robust SKU rationalization program. We expect these combined efforts to strengthen our industry-leading margins while meaningfully continuing to improve our free cash flow conversion rates. On pillar number three, from an innovation perspective, we recently committed to becoming the exclusive orthopedic investor in the Mobility Revolution Fund, a musculoskeletal venture capital fund launched through a collaboration between Deerfield Management and the Hospital for Special Surgery in New York City. This is going to give us the opportunity to invest in technology that has the potential to truly change the standard of care, from AI data applications to cartilage repair solutions. Speaking of the latter, we're also teaming up with some of the world's leading researchers in this groundbreaking opportunity. It is inspiring to see how rapidly we're advancing our commitment to solving some of the key problems in orthopedics, whether it's awareness, safety, efficiency, and outcomes, today and in the future. Lastly, on diversification, original acquisitions are all seeing positive momentum. Paragon 28 first quarter growth accelerated around 200 basis points from the fourth quarter of 2025 and is trending back towards double-digit growth performance. OrthoGrid delivered its strongest quarter to date with significant growth and accelerated adoption solidifying Orthogrid as a co-driver of our digital ecosystem and anterior HIP triple plane. Finally, with enrollment complete in the monogram clinical study, we remain on track to bring this very exciting first-to-the-world technology to market. In conclusion, we are very proud of the progress that we're making so far in 2026. We continue to prioritize our go-to-market commercial transformation in the U.S., and we continue to focus on driving robust adoption of our new product innovation cycle. Before I turn the call over, I want to comment on the announcement that we made this morning regarding Suki's decision to leave Zimmer Biomed for a new opportunity in the biotechnology space. For nearly seven years, Suki has been a value partner and disciplined operator, helping us in improving our WemGuard, weighted average market growth rate profile, through organic and inorganic portfolio optimization, driving a top-quartal margin profile for Zimmer Palmet, strengthening the balance sheet, and significantly improving the free cash flow conversion and growth. I'm thankful for his leadership and contributions, and I wish him continued success in his next chapter. Above all, I'm thankful for his friendship, which I know will continue for many years to come. During this transition, Paul Estelato, or current Comptroller Chief Accounting Officer and Head of Corporate FP&A will serve as interim Chief Financial Officer. Paul is a seasoned business leader, bringing more than 20 years of both financial and IR, investor relations, experience to the role. Since he joined Zimmer Biomed in 2022, Paul has been instrumental in translating our strategy into discipline, capital allocation, including our survey purchase program and recent acquisitions, as well as leading the creation of global search services around the world. I'm extremely confident that he is the right leader at the right time, and I'm confident he'll provide steady direction and leadership as we continue to conduct a search for a successor, and I look forward to our continued partnership. With that, let me turn the call over to Suki. Thank you.

Thank you, Yvonne, and good morning, everyone. I'm proud of what we've accomplished together over the past seven years. I believe Zimmer Biomet has a clear strategy and meaningful opportunity ahead. I would also like to take a minute to thank the entire Zimmer Biomet organization for all of the hard work and dedication that you put into advancing our mission while delivering on the company's objectives. Your dedication and resiliency are impressive. I wish you continued success. Now turning to the results. Reviewing the first quarter results, net sales were $2,087,000,000, an increase of 9.3% on a reported basis, and 2.9% excluding the impact of foreign currency in the Paragon 28 acquisition. Consolidated pricing was 40 basis points negative in the quarter, in line with our expectations. Growth in the quarter benefited from opportunistic end-of-quarter purchases above historical levels, continued momentum from our recently launched products, as Yvonne noted, and strong robotic sales. Turning to our P&L, we reported gap-diluted earnings per share of $1.22 compared to gap-diluted earnings per share of $0.91 in the prior year quarter. Higher revenue, lower restructuring costs, the previously mentioned tariff benefit, and a lower share count were partially offset by modestly higher taxes in the quarter due to geographic mix. On an adjusted basis, we delivered diluted earnings per share of $2.09 compared to $1.81 in the prior year. This increase was driven by higher revenue, the aforementioned tariff benefit, and a lower share count, which were partially offset by increased commercial investments. Adjusted gross margin was 73%, higher than the first quarter of 2025, driven by favorable mix and a benefit from tariffs. Notably, a portion of this tariff benefit included refunds that we had anticipated in the second half of the year. Adjusted operating margin was 27.3%. Adjusted net interest and non-operating expenses were $71 million above the prior year, driven by higher debt related to Paragon 28. Our adjusted effective tax rate was 18%, and fully diluted shares outstanding were $195.8 million, down year-over-year due to $250 million of share repurchases in the first quarter. Now turning to cash and liquidity. We had another strong quarter of cash generation with operating cash flows of $359 million and free cash flow of $246 million. We ended the quarter with approximately $424 million in cash and cash equivalents. As Yvonne had covered the rest of your outlook, I would like to close by again thanking the entire ZB team for their hard work and dedication. And with that, I'll turn the call back over to David.

Thank you, Suki. Operator, let's open up for questions. In order for us to take as many questions as possible, please limit yourself to one question. Operator, please go ahead.

Thank you, David. We'll take our first question from Rick Wise with Stiefel.

Good morning, Yvonne. Hi, everybody. Going to miss you, Suki. From my perspective, the year's off to a good start. You outperformed, Yvonne, in the quarter. You beat sales. Strong gross margins. You beat EPS. But just since I only have one question, but you didn't raise by, you know, overall by the beat, you left sales unchanged, EPS less than the EPS beat. I appreciate you keep talking about, you know, being more balanced and temperate as you think about guidance. But it's the start of the year. Are you seeing anything in the business or the market or competitively or in your sales transition that prompts that conservatism beyond just, again, your desire to stick with your tempered guidance?

Thanks so much. hey good morning rick thanks for the question so as you highlighted we had a very strong first quarter and as i sit here looking at the next three quarters that the word that comes to mind is confident i'm very confident that we're moving the right direction we continue to see the sales force changes progressing as planned we had some disruption in the quarter early in q2 but everything is going in accordance to plan we have a solid pipeline in technology you saw the growth in technology, continue to see great momentum with new products. We've got a very robust list of new customer targeting strategies that are materializing. So from a revenue standpoint, I'm very confident that we are moving in the right direction. On EPS, we did raise, maybe we did raise by the entire bid. We're also investing in a variety of fronts, namely in the Salesforce model changes. And we did raise free cash flow. So, again, very solid first quarter. Everything moving in the right direction. So why are we not raising guidance now? Because it's early in the year. This is a year of transition. We said so. We are making fairly substantial changes in a variety of fronts. Go-to-market models here in the U.S., some changes in emerging markets, namely China. We're making investors innovation at a bold pace. We're hiring people. We're making talent changes. So we feel even though the first quarter was very strong, it's probably prudent to wait, you know, let's call it 90 days and then have the conversation again. But again, I'll leave you with one word, confident, very confident that we're moving in the right direction. Thank you for the question. Thank you.

We'll go next to Vijay Kumar with Evercore ISI.

Good morning, Yohan, and thanks for taking my question. Congrats on a nice sprint here, and Suki, wish you the best. Maybe one sort of high level, Yvonne, you mentioned U.S. Salesforce transformation is on plan. You also made some interesting comments about you're seeing rapid increase in productivity in regions where you're seeing this transition. Any further details that you can share on other metrics that you're tracking perhaps, things like attrition rates, what percentage of Salesforce is now dedicated or direct, if you will, and sort of on that similar line, and any macro impact that we need to think of outside of the Salesforce, reorg, anything from Middle East?

Absolutely. So let me give you some of the key public metrics that we've been sharing. So at the beginning of the journey, early 2026, we mentioned that roughly 66%, So two-thirds of the U.S. sales force, roughly 2,500 people, were 1099s. At the end of Q1, the number is already slightly below 60%. It's already roughly a 10% reduction on the number of 1099s. And obviously, that implies that these 1099s are now fully dedicated to Zimmer Biomed. So no longer they're doing Zimmer Biomed one or two other jobs. So a fairly significant decrease in the number of non-dedicated individuals. We started the year with roughly 25% of the sales force being specialized, so one of every four reps carrying a dedicated sales pack. Another number is approaching, if not exceeding 30%, 30%. We logged in, I believe you and I spoke about this, Vijay, we logged in the top six independent and distributors, accounting for roughly 40% of sales. They got an extension of no less than seven years with Zimmer Biomed. So that was a fairly significant risk that we retired. Relative to turnover rates, we had a target of no more than 12% turnover, given the changes, and our turnover rate is in the single-digit range. So, again, early in the year, only 90 days behind, but everything is progressing in accordance to plan. To the point that we're thinking that perhaps we could go a bit faster as we get into Q2, Q3, and the rest of 2026, with the commitment still being we're going to close the entire transformation by the end of 2027. I believe you had a second question or part two of the question. Anything else? Any follow-ups there?

Just on the macro, please. Middle East, any impact?

Okay, Middle East. From a macro standpoint, obviously, like everybody else, we continue to monitor what's happening in the Middle East. Today, we have seen no material supply disruptions, a minor freight cost increase in the quarter that we're able to absorb. From a supply standpoint, most of our key products are dual source, if not three sources. We got at least one year of poly, so this is not something that we're concerned about. So we're not seeing any distribution challenges there. So again, so far, life is good. And then from a sales impact standpoint, we didn't see any impact in the first quarter. So that's on the Middle East. And then you've got a variety of other macro ordeals that we're monitoring, but nothing that it was impactful in the quarter and nothing that we see as being impactful in the second quarter and beyond. Thank you for the question, BJ.

We'll go next to Matthew Blackman with TD Cowan.

Good morning, everybody. Thanks for taking my question. Can you hear me okay? Yes, we can. Great. Right. Yvonne, Vijay actually asked this, I think, in those list of questions, but I'm not sure that you touched on it. You did talk to seeing increasing productivity in some of the geographies where you're doing the Salesforce work. I'm just hoping maybe you could expand a little bit on that. just maybe in general talk to some to the extent that you're seeing any green shoots let's call it from the work that you've done maybe sort of in the latter part of 25 or maybe even early here in 2026 that's worth you know calling out that gives us confidence in the lift that you still have ahead of us ahead of you thank you so much I appreciate the question Matt so we probably could spend an hour going through data points as you can imagine given the magnitude of the project We're tracking all kinds of KPIs, but I'll give you maybe three or four reasons to believe.

In the territories that we did switch from non-dedicated to dedicated, so again, a 10% reduction, we've seen fairly dramatic improvements in productivity. Nationwide or average REV does run seven cases, or lead competitor is in the 16, 17 cases per week range. In the territories where we made the switches, already adding double-digit ranges for the number of cases. So, that's pretty encouraging to see very quickly that improvement. No surprise. When you go from spending two, three days a week doing cases to five days, you can imagine the productivity is going to increase. Along with productivity increases, we've seen sales improvement in those dedicated structures. Our upper extremities shoulder number for the quarter was strong. That is directly correlated to the number of shoulder specialists that we have added, both in an inpatient HOPD structure as well as in ASCs. And we continue to see great momentum in shoulders. So productivity is improving, number of cases. Sales is improving in those territories. The lower turnover rates that I was quoting to Avijay is mostly coming from some of these territory changes, higher engagement once we become fully part of the company. So, again, plenty of reasons to believe that we're more in the right direction. That's really helpful, Yvonne.

Really appreciate it. Thank you.

Thank you, Matt.

We'll go next to Robbie Marcus with J.P. Morgan.

Oh, great. Good morning, and thank you for taking the question. Suki, I'll add, I guess, my sadness and congratulations. You'll be missed. I wanted to follow up, Yvonne, maybe on a couple things you mentioned, And it really comes down to what is and what isn't, maybe one time in the quarter. It seems like there were some product discontinuations in these, maybe a little bit of end-of-quarter purchasing, and then perhaps maybe some benefit in gross margin. Wondering if you could size any of those, any other potentially one-time items in the quarter, and how to think about that resolving over the rest of the year.

Absolutely. Thank you, Robin. So I'll touch on U.S. needs and what happened in the quarter, and then maybe you can comment on gross margins and how durable they are. So, look, it was not the greatest quarter for U.S. needs, but it was definitely in alignment to our expectations. We knew we were going to be going through some of these changes relative to the quarter market transformation, and we accounted for those. So I would say the single largest reason why the U.S. knee number was not higher than the 2.2 is some of the changes that we made in the U.S. organization. We lost two accounts in the quarter, fairly large. We believe we're going to be able to recoup some of that business, but we'll see as we get into the rest of the year. There was a Kaiser strike in the West Coast where we had the highest share in knees. So while that was disruptive for everybody, it was more disruptive for us. In my prepared remarks, Robby, I mentioned how we are moving from legacy brands, namely NextGen and Vanguard, to making the transferring to a one-eat franchise, that being Persona. And as we went through that, we saw some disruption. So I will tell you, probably mostly in line, except a couple of the accounts that we lost, and that's the bulk of it. We've got to do better, and we expect to do better than growing 2.2% in U.S. needs. Relative to quarter-end deals, all that stuff, those are in line with what we typically do. It was not a significant one-time event. We do strategic purchases. We try to convert ASCs. There is demand in the market for bundle deals where we include technology, implants, and whatnot. We're going to continue to do those. Suki, you want to comment on gross margin?

On gross margin, we saw a very strong quarter, largely driven by the invalidation of the IEPA tariffs, which contributed about 20 cents to our results in the quarter. We were, you know, beyond that, a little bit better on underlying performance as well. The way you think about the gross margin line is of that 20 cents that we benefit in Q1, we had originally assumed about half of that would be credited in the second half. So that was a bit of a pull forward. And so the remainder of that $0.20 drops $0.10 to the bottom line and is largely the driver of the beat or the raise, I should say, on earnings per share. As you think about gross margin for the full year, we still expect it to be down modestly versus prior year at around 71 percent, give or take. And the way you should think about the cadence is that it's going to be roughly consistent for the remainder of the quarters. So, again, underlying performance on gross margin is, as expected, the biggest driver in Q1 was the invalidation of those tariffs.

Thank you.

Wonderful. Thanks a lot.

Our next question comes from Travis Steed from Bank of America.

Hey, guys. Thanks for the question. Just to follow up a little bit on Nourabhi's question, I guess looking at the U.S. needs specifically, comps do get kind of 400 basis points tougher in the back half. And so just how do we get confidence that in the kind of the back half acceleration in U.S. needs? And I don't know if I heard correctly, but did you say in the earlier question you saw some disruption early in Q2? I don't know if that was an early Q1 misspeak or maybe I misheard it wrong.

No, no. The disruption was on Q1, Travis. So, you know, when you look at the changes we made in the first quarter, I noted the reduction on non-dedicated representatives. There was some disruption. We did lose two fairly large accounts in the quarter. So, no, I did not comment on disruption on the second quarter. Your main question, what gives us confidence that we're going to accelerate or need growth in the second half? Is the ramp up of new products? is the fact that we continue to place and sell a lot of technology, 30% growth in technology in the first quarter, all in with the rest of surgery, bone cement, is 12%, but the actual technology growth in the first quarter, that's T-Mini, that's ROSA, that's ROSA Optimize, is 30%. So once you start growing technology at those rates, obviously implants fall at some point. So the account conversions that we see in the technology cells, The changes we're making from a go-to-market standpoint, new product acceleration gives us confidence that that number should increase. Thank you, Travis.

We'll go next to Chris Pasquale from Nefron.

It didn't come up in your prepared remarks, but one of your competitors has been dealing with an issue that impacted their ability to serve customers for a few weeks at the end of the quarter. It doesn't appear to me at first glance like you benefited much from that dynamic, but could you just talk about what you've seen in the market and whether you think that has any implications for your business, either here in the first quarter or what you're expecting in 2Q.

Thank you, Chris. First things first, it's very unfortunate that companies go through those dynamics. So I'll start with that. No, we did not see any material impact. So we did not see the fact that we had a competitor going through such a dynamic impacting our business in a meaningful way. Thank you.

We'll go next to David Roman with Goldman Sachs.

Thank you. Good morning, everybody. I appreciate your taking the question. Maybe we could unpack a little bit some of the trends outside the United States. I think this is the first quarter in quite some time that OUS growth has trailed the U.S. and likely trailed where end markets look to be performing. So could you maybe help us think through some of the factors influencing those geographies, the extent to which there might have been any type of intermittent disruption versus what might be a change in the trajectory of that franchise?

Good to hear from you, David. So a couple of things. Number one, the comms in the first half for international are more difficult than the second half. So that's one part. And I would like to talk about comms, but it is definitely an element here. Secondly, we've made, as we announced at the end of 2025, and as we said in 2026, early in the year, We made and we're making some distributor changes in geographies such as emerging markets, Middle East in Europe, and China primarily, where we have gone from a large network of distributors to having one, if not two, partners. And that's obviously brought some disruption. And then thirdly, there were a couple of one-time events that happened, orders in certain geographies internationally that didn't come our way. But all of that said, the expectation is that we're going to be growing international mid-single digit in the second half of 2026. Thanks for the question, David.

We'll go next to Larry Beigelson with Wells Fargo.

Good morning. Thanks for taking the question. I guess for my one question, Yvonne, I'd love to hear about the rollout of Monogram. I know it's early, but it's an important product for you. So, you know, once you launch the semi-autonomous system with Persona early next year, you know, how should we think about the pace of the rollout? You know, will there be, you know, a limited launch initially at select centers and how that might, you know, impact Rosa? Just help us think about, you know, that, please.

Larry, I love the fact that you always got technology-related questions about the future of the company. So, thank you for that. Very excited about Monogram. As I mentioned in my prepared remarks, we completed the clinical trial. So we are deeply focused now on the preparation of the 510K submission. And we continue to anticipate that we're going to be in a position to launch this new to the world technology in early 2027. What should we expect of Monogram? If what we're proving is right, the thesis remain that we're going to be launching the most efficient robot out there. in what we can do cases under four minutes, procedure times. We believe that it's going to have the highest amount of safety given the enhanced surgical boundaries. We believe that it's going to really democratize orthopedic cases from a technology standpoint, very consistent when it comes to procedures. It's very reproducible. The learning curve is very short, so it is easy to use. And then, again, the level of accuracy we've seen with the robot is like nothing that I've seen in my many years dealing with technology. So we believe we've got a bold platform that can get scaled up fairly rapidly. And to that point, we are going to invest to make sure that's the case. So we are hiring north of 200 sales reps behind the launch of Monogram, in addition to the many reps that we've already got in the field. We are investing heavily on clinical evidence, We recently announced that we hired Dr. Jonathan Vidorchik, who happens to be one of the world's global key opinion leaders when it comes to technology, someone who's actually been an entrepreneur as well. We're also investing in rethinking, or rather thinking, not just the clinical strategy, but also the economic strategy. So I could spend an hour talking about it, but I will say this is going to be a very bold launch, one that we're preparing already as we speak. What's going to happen with ROSA? We are committed to having a suite of technology solutions. So ROSA Optimize was recently launched. One of the reasons why technology is growing 30%. We're going to keep that. It is the number one robot outside of the U.S. where CT scan is not. CT scanning is not the preference. We like what we've seen with our partnership with ThinkSurgical and T-Mini. So we strongly believe that the combination of Monogram plus ROSA plus T-Mini is going to give us a competitive advantage.

Very excited about Monogram.

Thanks for the question.

We'll go next to Matt Taylor with Jeffrey.

Thanks for taking the question. I actually wanted to ask a penal question about the tariff impact because you saw the benefit here in Q1. I guess what are you assuming for the rest of the year with regards to IEPA tariffs or tariffs in general, and what do you think could happen with the 232 investigation? Just asking out of curiosity more than anything else.

Yeah. Hey, Matt. Good to talk to you. So we are assuming that the 122 tariffs remain intact into the second half of the year. We are assuming that the IEPA remain invalidated, and therefore we took the benefit of that 20 cents in the first quarter, as I mentioned. And moving forward on the 232, I think it's still evolving and dynamic and no material updates at this point, but the overall situation remains fluid and we'll keep you posted as things unfold.

I'll just add, Matt, quickly on the 232, the validation we're getting from our ITO sources is that it's not going to impact those companies that operate under the Nairobi protocol. So we're feeling pretty confident that we got a pathway to mitigate that. Thank you.

Thank you. Thanks, guys.

Our next question comes from the line of Richard Newitter with Truist Securities.

Hi, thanks for taking the questions.

One of the innovations that feels most innovative for you guys that's exclusively in your hands, it's the Canary Smart Implant that's embedded in Persona IQ. But just notice it doesn't get a ton of airtime, even on this call. And I know you had some positive clinical trial updates at AAOS for this technology. Seems like, you know, there's potential to generate real savings to the system here, better patient management post-surgery. I know in the most recent CMS inpatient rule proposal, the CCJR is extending some of those initiatives that would seem to lend themselves in favor of a technology like this. We'd just love to hear kind of where you are on this particular product subsegment, why we're not hearing about it more. And how and if this can be leveraged as a more meaningful differentiator moving through 26 and to 27?

I love the question, Richard. Look, early on, probably we talked too much about persona IQ without having the data. Now we're taking a different approach. We're going to get all the data. We're going to get everything validated, and then we're going to talk about it. I will tell you, overall, everything is tracking in accordance to expectations. As you mentioned, we did publish some very robust data on what persona IQ brings in terms of lowering costs, improving outcomes, et cetera, et cetera. So that was published, I think it was four to six weeks ago. I think with some of the changes around IPPS and the CJR expansion, this is the kind of product that can make a robust impact. There is an increase on DRGs or expenditures associated with DRGs, 469 and 470, for those companies that perform better. So now we will be in possession of the only implant that can, in an objective way, track whether our implant is performing better. So companies that have connected data before, during, and after the procedure, companies that can bring objective data around outcomes, prompts, and whatnot, and they can validate, they can reduce the cost of care, I believe they're going to be meaningfully rewarded. So we continue to invest in a variety of fronts to make sure that we are the company that can validate all of the above. So committed to the space, the technology, and we like what we see.

Thank you.

We'll go next to Caitlin Roberts with Canaccord Genuity.

Hi, thanks for taking the question. Just to touch on Rosa's shoulder, any updated color on the launch and when we'll move to a broader launch?

Kaylin, thanks for the question. We are now fully on the full market release. I was actually down in Florida where we've been demoing the technology. The feedback continues to be very strong. It is surgeon-centered, so we're not launching a technology that only certain surgeons can use. So if you're an anatomic or reverse type of surgeon when it comes to technique, you can use rosa solder for both types of surgery we are getting really solid data around the accuracy of the platform so we can robotically do surgeries that impact the glenoid as well as the humeral so we can do both the glenoid rimming and human resection it is extremely efficient we already are actively working on version 2 that's even more efficient that the first generation rosa solder and it is fully integrated to the rest of the uh of the rosa ecosystem so again another example going back to the question that rich had of collecting data before during after surgery with rosa solder and being able to engage in prompts conversations outcomes and whatnot so again we move from limited market release to full market release and we're going to scale up the number of units that we're going to be deploying in the u.s and other markets Thank you, Caitlin.

We'll go next to Matt Mixick with Barclays.

Hey, thanks so much for taking the questions.

Follow-up on Paragon, you mentioned some acceleration there. If you could talk about what's driving that and whether you expect to maybe exit the year on double digits and how we should think about the timeline for another, you know, potentially Paragon-like strategic investment. Thanks.

Hey, thanks, Matt. So we, I think, the first quarter almost a double digit when it comes to Paragon 28. And early in the second quarter, we are in the teens. So the growth is accelerating. We also saw a 200 basis points sequential increase from Q4 of 2025 to Q1. And to answer your question succinctly, what's driving this is focus. We live in Albert and the team alone. They're getting robust investments behind the platform. They're launching products at a rapid pace. They're hiring reps in a variety of fronts. So focus is what's driving the growth here. And we expect to exit 2026 strongly in the double-digit growth rates. So when are we ready to do the next deal? Look, we got a lot going on here. We are changing the go-to-market model here in the U.S., integrating Paragon, about to launch Monogram, which is going to be very disruptive and is going to require a lot of focus. And then we got another deal called Orthogrid, also doing really well that we're integrating. So we're going to pause. We're going to continue to do buybacks. And at the right time, we'll execute on a deal similar to Paragon, which I think is prone to be very, very solid for similar environment. Thanks for the question, Matt.

We'll go next to Steve Lichtman with William Blair.

Thank you. Good morning, guys. Suki, all the best to you. Yvonne, where do you think we are at on underlying hip and knee market growth? Are there any incremental headwinds to market growth in the U.S. that you're seeing on elective procedures or willingness of your hospital customers to purchase bigger ticket items like Rosa?

We continue to track the market growth rates, and it's very solid. We pick the overall income market to be growing north of 4%, if not 4.5%. So, obviously, we've got to do better in this. We are where we need to be, but we're going to sell it in heaps. We've not seen any material impacts. You know, I get the question around what's happening with Medicaid, ACA, and whatnot. We track all kinds of data. First of all, Medicaid is low single digit for us. So, said differently, I think it's around 1% of our revenue comes from Medicaid, less than that. And then in terms of ACA, it's less than, you know, 1%, 2% of our cases. We tracked the top 10 accounts in the U.S., top 10 accounts being in hospitals like Mayo, Cleveland, HSS here in New York, and other. We continue to see waiting lists being fairly long. So I would say the market is four, four and a half durable. Pricing dynamics continue to be where they need to be. So we had a quarter of 40 basis points of price erosion overall in alignment with our expectations. So we don't see anything from a market perspective that we're concerned about.

Thank you, Yvonne.

We'll go next to Jeff Johnson with Baird.

Thank you. Good morning, guys, and thanks for taking the question, Suki. Best of luck. Yvonne, maybe on the sales transition, I know we covered a lot of this last quarter, but I just want to make sure I'm understanding a couple things we've heard in some conversations. I think some of your reps that were not 100% dedicated, you're kind of truing up and giving them guarantees this year, that extra stub that you may be guaranteeing some of those reps, are you excluding those costs from non-gap EPS and margins? Just I think about how to set my model up for next year, this year, next year. And then secondly, in some of those conversations, we've heard, you know, if those guys were trued up and given a guarantee this year, it might be more next year they think about do they stay or not without that guarantee. So how are you thinking about the disruptions from the sales transition? Is that more of a 26 impact? Could some of that continue into 27? Just wondering how you think kind of these disruptions gate out between this year and next year. Thank you.

Thank you, Jeff. Look, we go through Salesforce changes in a variety of ways and magnitudes often. So this is not something we exclude. So going back to why OPEX is slightly higher, where is the EPS going? We're investing in making sure that this works out. So that's number one. We have offered two-year guarantees that are backed up from a revenue standpoint, in some cases, three-year guarantees. But I will tell you, Jeff, the single largest guarantee that you can offer a sales rep is to let him or her know that there is going to be a long-term future for the employee. So money may cover two to three years, but when you have technology that you're launching like Monogram, when you have the fullest back in orthopedics, When you're making the investments that we're making, most reps see this as the place to be, not for the next two years. We can all switch jobs every other year. Money is not going to keep you there. But having the future that they feel they have here at Zimmer Biomedics was keeping them here. So I will tell you, my conversations with self-reps all over the U.S., and I'm spending 70% of my time on the road visiting every single territory, that's why we're here. If you give me a back that is robust, if you make me part of something that is going to be great for the long term, money matters in the short term, but my career is probably more important. Thank you, Jeff. Thank you.

We'll go next to Matthew O'Brien with Piper Sandler.

Good morning. Thanks for taking the question and Suki, best wishes in your future endeavors. Um, just on the pricing side, Yvonne, you know, you mentioned down 40 BIPs in Q1, but I think you said you're sticking with the down 100 for the year. I guess why stick with the 100 BIPs? Should we expect things to get progressively worse throughout the course of the year and then exit the year, you know, down even more than 100 basis points and kind of continue forward at a, at a higher rate than we've seen historically, or are you just still going to be still trying to build in some conservatism, um, you know, with that metric here this year and then going forward?

Well, first of all, that is the range that we've been given for a while, you know, flat to 100 basis points. In 25, we did better than that. There were a couple of one-time events in international markets. As we entered 2026, we got it, you know, flat to 100. We like when we closed the first quarter, but it's a similar answer to, you know, revenue and other elements of the guidance. We're going to wait and see. There are macro events happening. There are changes in a variety of international markets. There is competitive pressure here in the U.S., so we're going to wait and see. We like where we are at the end of the first quarter. We'll update you on pricing again in the August call.

This concludes the question and answer portion of today's call. I would like to turn the call back over to Yvonne Tornos for any closing remarks.

Sure. I want to thank everybody for joining the call today. And most importantly, I want to thank the Zimmer Biomed team for the strong execution in the first quarter. I'll leave you with one word, confidence. We, I am very confident we went in the right direction, not just in terms of 2026, but most importantly, how we are making this company future-proof when it comes to the strategy that we have, how we think about operating the company for the future and the commitments that we're making. I would like Suki, my friend Suki here, to close the call, given the fact that this is going to be the last time that he represents Zimmer Bowman as the CFO.

Thanks, Mon. So I've learned and taken a lot away from you over our seven years together, and the one thing that's most impactful is your approach to gratitude, and so I'll start there. I'd like to thank you, the ZB team, the board, and all of our many partners for an amazing seven years. We've accomplished a lot in a really tough environment, but Yvonne, we've built a strong foundation from which to grow, and I'm confident that under your leadership and with the team's execution, you will take ZB to the next level. I wish you all a success and I'll be shooting from the sidelines. I'm going to miss you.

Thanks, everybody.

This concludes today's call. Thank you for your participation. You may now disconnect.