ZIMMER BIOMET HOLDINGS, INC. (ZBH)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the interim condensed consolidated financial statements and corresponding notes included elsewhere in this Form 10-Q. Amounts reported in millions within this Quarterly Report on Form 10-Q are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.

The Paragon 28 acquisition was completed on April 21, 2025. The Paragon 28 impacts on year-over-year net sales growth in the following discussion and analysis refer to net sales of Paragon 28 products from January 1, 2026 through the one-year anniversary in April 2026, since there are no prior year comparable net sales of those products for the time period.

Executive Level Overview

Results for the Three and Six-Month Periods ended June 30, 2026

In the three and six-month periods ended June 30, 2026, our net sales increased 4.8 percent and 7.0 percent, respectively, when compared to the same prior year periods. Net sales growth was driven by a combination of our Paragon 28 acquisition, positive effects of changes in foreign currency exchange rates, opportunistic end-of-quarter customer purchases, increased ROSA® Robot and bone cement sales, market growth and new product introductions. Paragon 28 had a positive impact on our net sales of 0.7 percent and 2.3 percent in the three and six-month periods ended June 30, 2026, respectively. Additionally, our net sales experienced a positive effect of 0.1 percent and 1.3 percent from changes in foreign currency exchange rates in the three and six-month periods ended June 30, 2026, respectively.

Our net earnings were $198.3 million and $436.5 million in the three and six-month periods ended June 30, 2026, respectively, compared to $152.8 million and $334.9 million, respectively, in the same prior year periods. The increase in net earnings in both 2026 periods was primarily due to increased net sales, lower acquisition and integration costs due to significant charges incurred in the 2025 periods related to the Paragon 28 acquisition that did not recur, lower spending on R&D projects and savings from our restructuring programs. In addition, in the six-month period ended June 30, 2026, we recognized a favorable adjustment of approximately $30 million related to probable U.S. tariff refunds.

2026 Outlook

We expect year-over-year net sales growth of 3.9 percent to 4.9 percent in 2026 to be driven by a combination of market growth, new product introductions, the Paragon 28 acquisition and positive effects of changes in foreign currency exchange rates, partially offset by the expected impact from changes to our go-to-market strategy and execution in the U.S. and certain other international markets, as well as price declines. These expected impacts, combined with the uncertain timing of incentivized stocking orders and capital sales, could cause fluctuations in our quarterly results. We estimate that the Paragon 28 acquisition will contribute an additional 1.1 percent to the year-over-year net sales growth for the period up until the one-year anniversary of the deal closing in April 2026. Based on foreign currency exchange rates at the end of 2025, we expect foreign currency to have a 0.5 percent positive impact on year-over-year net sales growth. We estimate operating profit will increase in 2026 when compared to 2025 due to higher net sales, leverage from fixed operating expenses, refunds from U.S. tariffs paid in 2025, ongoing savings from our restructuring plans, non-recurrence of inventory and instrument charges related to certain product lines we expect to discontinue and lower employee termination and other charges from our restructuring plans. However, we expect that these favorable items may be partially offset by the impact from inflation, investments in our U.S. commercial sales channel and higher net interest expense.

Results of Operations

We review sales by two geographies, the United States and International, and by the following product categories: Knees; Hips; S.E.T. (Sports Medicine, Upper Extremities, Foot and Ankle; Trauma, Craniomaxillofacial and Thoracic); and Technology & Data, Bone Cement and Surgical. This sales analysis differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. We review sales by these geographies because the underlying market trends in any particular geography tend to be similar across product categories, because we primarily sell the same products in all geographies and many of our competitors publicly report in this manner. Our business is seasonal in nature to some extent, as many of our products are used in elective surgical procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. Additionally, with sales to customers where title to product passes upon shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.

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Net Sales by Geography

The following tables present our net sales by geography and the percentage changes (dollars in millions):

Net Sales by Product Category

The following tables present our net sales by product category and the percentage changes (dollars in millions):

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The following table presents our net sales by geography for our Knees and Hips product categories (dollars in millions):

Demand (Volume and Mix) Trends

Changes in volume and mix of product sales had a positive effect of 5.5 percent and 6.4 percent on year-over-year sales during the three and six-month periods ended June 30, 2026, respectively. The Paragon 28 acquisition contributed 0.7 percent and 2.3 percent to volume growth in the three and six-month periods ended June 30, 2026, respectively. In addition, opportunistic end-of-quarter customer purchases, increased ROSA® Robot and bone cement sales, market growth and new product introductions contributed positively to volume and mix trends in both periods.

Pricing Trends

Global selling prices had a negative effect of 0.8 percent and 0.7 percent on year-over-year sales during the three and six-month periods ended June 30, 2026, respectively. We continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment efforts. In addition, volume-based discounts to incentivize customer purchases had a negative effect on our pricing in both periods.

Foreign Currency Exchange Rates

For the three and six-month periods ended June 30, 2026, changes in foreign currency exchange rates had a positive effect of 0.1 percent and 1.3 percent on year-over-year sales, respectively. If foreign currency exchange rates remain at levels consistent with recent rates, we estimate there will be a positive impact of approximately 0.5 percent on full-year 2026 sales.

Geography

The 5.6 percent and 7.1 percent net sales growth in the U.S. in the three and six-month periods ended June 30, 2026, respectively, was driven by the Paragon 28 acquisition, opportunistic end-of-quarter customer purchases, increased ROSA® Robot sales and market growth in our Hips and S.E.T. product categories. The Paragon 28 acquisition contributed 1.0 percent and 3.2 percent to U.S. net sales growth in the three and six-month periods ended June 30, 2026, respectively. Internationally, net sales increased by 3.7 percent and 6.8 percent during the three and six-month periods ended June 30, 2026, respectively, when compared to the same prior year periods. This increase was driven by the Paragon 28 acquisition, increased bone cement sales, market growth in most of our international markets and changes in foreign currency exchange rates. The Paragon 28 acquisition contributed 0.4 percent and 1.1 percent to International net sales growth in the three and six-month periods ended June 30, 2026, respectively. Our International sales were positively affected by 0.2 percent and 3.0 percent due to changes in foreign currency exchange rates in the three and six-month periods ended June 30, 2026, respectively.

Product Categories

Knees and Hips net sales benefited from opportunistic end-of-quarter customer purchases, market growth and new product introductions in the three and six-month periods ended June 30, 2026. Changes in foreign currency exchange rates had a positive effect of 0.3 percent and 1.5 percent on Knees net sales in the three and six-month periods ended June 30, 2026, respectively. Changes in foreign currency exchange rates had a negative effect of 0.1 percent and a positive effect of 1.1 percent on Hips net sales in the three and six-month periods ended June 30, 2026, respectively. The S.E.T. net sales increase in the three and six-month periods ended June 30, 2026, was primarily the result of the Paragon 28 acquisition and growth in our upper extremities and craniomaxillofacial and thoracic products. The Paragon 28 acquisition contributed 2.8 per

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the corresponding notes included elsewhere in this Annual Report on Form 10-K. Amounts reported in millions within this Annual Report on Form 10-K are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.

The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2025 and 2024. Discussion, analysis and comparisons of the years ended December 31, 2024 and 2023 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on February 25, 2025.

EXECUTIVE LEVEL OVERVIEW

2025 Financial Highlights

In 2025, our net sales increased 7.2 percent when compared to 2024. Net sales growth was driven by a combination of our acquisition of Paragon 28, Inc. (“Paragon 28”) on April 21, 2025, market growth, new product introductions, and lower net sales in the prior year due to operational challenges fulfilling customer orders as a consequence of a new enterprise resource planning ("ERP") software system implementation. Paragon 28 had a positive impact on our net sales growth of 2.5 percent in 2025. In addition, our net sales experienced a positive effect of 0.8 percent from changes in foreign currency exchange rates in 2025.

Our net earnings were $705.1 million in 2025 compared to $903.8 million in 2024. The decline in net earnings was driven by inventory and instrument charges of approximately $170 million related to certain product lines we intend to discontinue; costs related to the acquisition of Paragon 28 and the acquisition of Monogram Technologies Inc. (“Monogram”) on October 7, 2025, including acquisition-related costs and higher interest expense incurred for debt borrowed for the acquisitions; U.S. tariffs; higher performance-related compensation; and investments made to direct-to-patient marketing, medical education and information technology in the current year. These unfavorable items were partially offset by the net sales increase, a favorable mix shift to higher margin products and markets, favorable adjustments related to contingent consideration for acquisitions, gains recognized on our equity investments in 2025 compared to losses in 2024, lower restructuring costs due to the timing of our restructuring programs, and lower litigation-related charges.

2026 Outlook

We expect year-over-year net sales growth of 2.5 percent to 4.5 percent in 2026 to be driven by a combination of market growth, new product introductions, the Paragon 28 acquisition and positive effects of changes in foreign currency exchange rates, partially offset by the expected impact from changes to our go-to-market strategy and execution in the U.S. and certain other international markets, as well as price declines. These expected impacts, combined with the uncertain timing of incentivized stocking orders and capital sales, could cause fluctuations in our quarterly results. We estimate that the Paragon 28 acquisition will contribute an additional 1.0 percent to the year-over-year net sales growth until it eclipses the one year anniversary of deal closing in April 2026. Based on foreign currency exchange rates at the end of 2025, we expect foreign currency to have a 0.5 percent positive impact on year-over-year net sales growth. We estimate operating profit will increase in 2026 when compared to 2025 due to higher net sales, leverage from fixed operating expenses, ongoing savings from our restructuring plans, non-recurrence of inventory and instrument charges related to certain product lines we expect to discontinue and lower employee termination and other charges from our restructuring plans. However, we expect that these favorable items may be partially offset by the impact from inflation, investments in our U.S. commercial sales channel, higher net interest expense and a higher estimated effective tax rate due to favorable 2025 adjustments that are not expected to recur.

RESULTS OF OPERATIONS

We review sales by two geographies, the United States and International, and by the following product categories: Knees; Hips; S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic); and Technology & Data, Bone Cement and Surgical. This sales analysis differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. We review sales by these geographies because the underlying market trends in any particular

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geography tend to be similar across product categories, because we primarily sell the same products in all geographies and because many of our competitors publicly report in this manner. Our business is seasonal in nature to some extent, as many of our products are used in elective surgical procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. Additionally, with sales to customers where title to product passes upon shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.

Net Sales by Geography

The following table presents net sales by geography and the percentage changes (dollars in millions):

Net Sales by Product Category

The following table presents net sales by product category and the percentage changes (dollars in millions):

The following table presents net sales by product category by geography for our Knees and Hips product categories (dollars in millions):

Demand (Volume/Mix) Trends

Changes in volume and mix of product sales had a positive effect of 6.4 percent on year-over-year sales growth in 2025. The Paragon 28 acquisition contributed 2.5 percent to volume growth in 2025. In addition, market growth and new product introductions contributed positively to volume and mix trends. Market growth is being driven by an aging and active population, technological advancements, and data showcasing positive clinical outcomes, among other factors.

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Pricing Trends

Global selling prices had a minimal effect on year-over-year sales growth in 2025. The majority of countries in which we operate continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment efforts. However, we have had success in offsetting negative effects of pricing pressure due to internal initiatives and being able to pass some inflationary impacts on to customers.

Foreign Currency Exchange Rates

In 2025, changes in foreign currency exchange rates had a positive effect of 0.8 percent on year-over-year sales.

Geography

The 7.3 percent net sales growth in the U.S. in 2025 when compared to 2024 was driven by the Paragon 28 acquisition, market growth in our Knees, Hips and S.E.T. product categories, new product introductions, lower net sales in the prior year periods due to operational challenges fulfilling customer orders as a consequence of a new ERP software system implementation and opportunistic end-of-year customer purchases and capital sales above historic levels, partially offset by price reductions. The Paragon 28 acquisition contributed 3.6 percent to U.S. net sales growth in 2025. Internationally, net sales increased by 7.0 percent in 2025 when compared to 2024. The 2025 International net sales increase was similarly driven by the Paragon 28 acquisition, market growth in most of our international markets and changes in foreign currency exchange rates. The Paragon 28 acquisition contributed 1.1 percent and changes in foreign currency exchange rates contributed 1.8 percent to International net sales growth in 2025.

Product Categories

In 2025, our Knees and Hips net sales both increased by 4.7 percent when compared to 2024 due to market growth and new product introductions. Changes in foreign currency exchange rates had positive effects of 0.7 percent and 0.9 percent on 2025 Knees and Hips net sales, respectively. S.E.T. net sales increased by 15.2 percent in 2025 when compared to 2024. S.E.T. net sales growth was primarily driven by the Paragon 28 acquisition, which had a positive effect of 10.5 percent on net sales growth, as well as net sales growth in CMFT, upper extremities and sports medicine products of 12.5 percent, 8.2 percent and 5.5 percent, respectively. These increases were partially offset by declines of 14.2 percent and 0.7 percent in net sales of biologics and trauma products, respectively. Changes in foreign currency exchange rates had a positive effect of 0.6 percent on 2025 S.E.T. net sales. Technology & Data, Bone Cement and Surgical product category net sales increased by 4.0 percent in 2025 when compared to 2024, primarily due to new product introductions.

Expenses as a Percent of Net Sales

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