Subsequent to the quarter end, Zimmer Biomet completed the acquisition of Paragon 28, Inc. on April 21, 2025, for approximately $1.4 billion in initial consideration. This acquisition significantly increases the company's market share in the faster-growing foot and ankle orthopedic segment.

During 2024, the company completed four strategic acquisitions, including an EMEA orthopedics distributor, V.I.M.S. Vidéo (sports medicine), a US medical device company (CMFT), and OrthoGrid Systems (AI-driven surgical guidance for hips). These acquisitions collectively broaden the product portfolio and improve market reach.

Management expects year-over-year revenue growth of 5.7% to 8.2% for full-year 2025. This outlook is based on anticipated contributions from Paragon 28 net sales, continued market growth, new product introductions, and effective commercial execution.

The company is actively executing on 2025, 2023, and 2019 restructuring plans. The 2023 plan, now completed, is expected to reduce annual pre-tax operating expenses by $175 million to $200 million by the end of 2025, demonstrating management's commitment to cost optimization.

Despite restructuring savings, cost of products sold increased due to higher manufacturing costs driven by inflation, and SG&A expenses rose due to higher bad debt, direct-to-patient marketing, IT, and medical education investments. This indicates ongoing pressure on operational efficiency.

The company reported a positive 0.1% effect from global selling prices year-over-year. Management noted success in offsetting negative pricing pressure through internal initiatives and the ability to pass some inflationary impacts on to customers, showcasing effective pricing strategy.

The IRS has proposed adjustments for tax years 2013-2015 and 2016-2019, potentially leading to an additional tax expense of approximately $312 million. The company intends to vigorously contest these adjustments, but the ultimate resolution could materially impact operating cash flows.

The recently acquired Paragon 28 is subject to putative class action lawsuits alleging false and misleading statements regarding financial controls, and an SEC subpoena for document production related to restated financial statements. These issues introduce integration and legal risks for Zimmer Biomet.

Management anticipates recognizing $60 million to $80 million in additional expenses related to tariffs in 2025, with a more significant impact expected in the second half of the year. This reflects ongoing geopolitical risks affecting the cost of goods sold.

The acquisition of Paragon 28, a leading medical device company focused exclusively on the foot and ankle orthopedic segment, is expected to significantly increase Zimmer Biomet's market share in this faster-growing area, enhancing its competitive standing.

Despite ongoing pricing pressure from hospitals and governmental healthcare cost containment efforts, the company achieved a positive 0.1% effect from global selling prices. This indicates an ability to leverage competitive advantages and internal initiatives to maintain pricing power.

Zimmer Biomet's sales are diversified across Knees, Hips, S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic), and Technology & Data, Bone Cement and Surgical categories. This broad portfolio allows the company to address diverse market needs and maintain a strong overall competitive presence.

The completion of the 2023 Restructuring Plan is expected to reduce gross annual pre-tax operating expenses by $175 million to $200 million by the end of 2025. Additionally, the 2025 plan aims for $95 million in annual savings, indicating a sustained focus on improving operational efficiency.

Cost of products sold, excluding intangible asset amortization, increased both in absolute amount and as a percentage of net sales (28.8% in Q1 2025 vs 27.1% in Q1 2024). This increase was primarily driven by higher manufacturing costs caused by inflation, posing a challenge to operational efficiency.

Selling, general and administrative expenses increased as a percentage of net sales (39.7% in Q1 2025 vs 39.0% in Q1 2024). This rise was due to higher bad debt expenses, and strategic investments in direct-to-patient marketing, information technology, and medical education events, impacting short-term operational leverage.

Research and development expenses increased in Q1 2025 compared to Q1 2024, both in absolute terms and as a percentage of net sales (5.8% vs 5.7%). This increase was driven by higher spending on specific technology-based projects, indicating a commitment to future innovation.

The 2024 acquisition of OrthoGrid Systems, Inc., a medical device technology company focused on artificial intelligence-driven surgical guidance, directly expands Zimmer Biomet's technological capabilities in the hips market and aligns with digital transformation efforts.

While there are investments in technology, the 'Technology & Data, Bone Cement and Surgical' product category experienced a 4.7% decline in net sales in Q1 2025 compared to Q1 2024, primarily due to lower net sales of the ROSA® Robot. This suggests uneven success across technology offerings.

In Q1 2025, the company issued $1,748.1 million in new senior notes and redeemed $863.0 million of maturing senior notes. This proactive debt management, alongside borrowing for the Paragon 28 acquisition, increased total long-term debt to $6,576.3 million from $5,341.6 million, reflecting strategic financing decisions.

The company repurchased $229.8 million of common stock during Q1 2025, with $1,020.2 million remaining under the $2.0 billion authorization. This ongoing share repurchase activity indicates management's confidence in the company's valuation and commitment to returning value to shareholders.

The Board of Directors declared a quarterly cash dividend of $0.24 per share in February 2025, with an expectation to continue quarterly dividends. This consistent payout demonstrates the company's stable cash flow generation and commitment to shareholder returns.

The 10-Q filing primarily focuses on financial performance, operations, and risks, and does not contain a dedicated section or detailed disclosures on environmental, social, or governance (ESG) initiatives beyond standard corporate functions like human resources and regulatory compliance.

Changes in foreign currency exchange rates had a negative effect of 1.2% on year-over-year sales in Q1 2025. While management anticipates a positive impact of up to 0.5% for the full year 2025, currency volatility remains a factor in international market performance.

Higher manufacturing costs due to inflation and increased interest expense from higher interest rates and borrowings negatively impacted profitability in Q1 2025. These macroeconomic factors continue to exert pressure on the company's cost structure and financial results.

Net sales growth in Q1 2025 was driven by underlying market growth and new product introductions, particularly in Knees, Hips, and S.E.T. product categories. This indicates favorable industry trends, supporting the company's ability to achieve its full-year revenue growth targets.