AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 31/10/2026
Moat44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Consigned inventory, product-specific training and surgical support establish an operating infrastructure that could make replacement inconvenient. ROSA Shoulder adds demonstrated differentiation. However, multiple preferred suppliers and absent purchase obligations limit exclusivity, and the catalog does not demonstrate a relative cost, clinical or customer-retention advantage.
durability · 1/4 · Professional relationships and technical knowledge offer a plausible basis for persistence, but contractual protection is fragile: purchasing-group agreements generally last three years and impose no member purchase obligation. Initial ROSA Shoulder cases establish availability, not durable adoption or protected returns. Long-term competitive protection remains unproven.
customer dependency · 2/4 · Inventory availability and technically trained surgical support provide indirect evidence of workflow reliance and potential switching friction. Established professional relationships strengthen that inference. Customers nevertheless retain alternative preferred sources and no purchase obligation; the passages do not demonstrate irreplaceability, quantified switching costs or price-insensitive loyalty.
erosion resilience · 2/4 · Product clearance, initial cases and higher first-half 2026 reported and adjusted operating profit show some capacity to refresh offerings and absorb pressure. Historical procurement-driven margin reductions and actual distributor disputes provide concrete offsets. These observations support mixed resilience without establishing sustained protection against competitive erosion.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · The company disclosed experienced international pricing pressure and historical adverse procurement effects, sufficient to establish weak observed pricing. Positive price realization contributed to 2024 growth, providing an offset. The catalog supplies no realized 2026 price magnitude, and growth attributed jointly to market, products and execution cannot isolate pricing.
retention · 2/4 · Retention is assessed indirectly from ongoing consignment sales, specialized support, professional relationships and disclosed growth drivers. These support repeat demand and possible friction. Multiple preferred sources, volume discounts and nonbinding purchasing arrangements temper the inference; no retention rate or sustained willingness to accept higher prices is demonstrated.
margin resilience · 2/4 · Reported operating profit increased in the second quarter and first half of 2026. Adjusted operating profit declined in the quarter but increased over the half year, with substantial reconciliation items. Historical procurement-driven margin reductions further limit evidence that profitability consistently withstands pricing pressure; profit growth alone does not prove margin protection.
contractual freedom · 1/4 · Volume discounts, multiple preferred suppliers and purchasing-group contracts generally lasting three years constrain commercial freedom. China procurement has already required distributor renegotiation and reduced covered-product margins. These disclosures warrant a weak grade, although full price-reset, termination and rebate provisions are unavailable.
Predictability92
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 7.60
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 0.41
- observedAnnualPeriods
- 5.00
Financial strength46
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 41.34
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 42.61
- currentRatioGrade
- 98.53
- Debt / FCF (x)
- 5.11
- Net debt / operating income (x)
- 6.31
- Current ratio (x)
- 1.98
- cashInterestPaid
- 298.40
- cashInterestCoverage
- 5.69
Capital allocation82
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 6.74
- 3-year average dilution (%)
- -1.87
- 3-year average SBC / revenue (%)
- 1.25
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 operating cash flow of $807.2 million supported $253.1 million of instrument and other plant additions. Repurchases consumed $500.8 million using cash and revolving borrowings, while cash declined. Technology spending and contingent commitments add demands; acquisition synergies remain expectations rather than demonstrated returns.
incentive alignment · 3/4 · Actual incentive metrics, salary-based ownership requirements, mandatory share retention and clawbacks establish strong alignment mechanisms. All named executives complied with the retention guideline at December 31, 2025. Ownership compliance includes executives within their permitted period, and the disclosures do not establish exceptional incentive calibration or future award attainment.
execution · 2/4 · ROSA Shoulder clearance and completed first cases, recovered shipping and continued cash generation demonstrate achievements. Actual ERP fulfillment disruption and China distributor claims provide offsets. Operating results are indirect execution evidence affected by acquisitions and other factors, supporting a mixed assessment rather than management's broader claims of durable growth.
governance · 3/4 · Independent committees, shareholder rights, a required Lead Independent Director and actual annual elections support strong formal governance. Combined CEO/Chair roles temper the assessment, and disclosed structures do not prove oversight effectiveness. Shareholders rejected the independent-chair proposal; that vote establishes the outcome without validating management's governance claims.
Evidence
Consignment sales represented approximately 85 percent of our net sales in 2025.
2025 Form 10-K, filed 2026-02-20; Customers, Sales and Marketing; consignment share of 2025 net sales · Filed 20/02/2026
We stock inventory in our warehouse facilities and retain title to consigned inventory in an effort to have sufficient quantities available when products are needed for surgical procedures.
2025 Form 10-K, filed 2026-02-20; Customers, Sales and Marketing; inventory availability · Filed 20/02/2026
We invest a significant amount of time and expense in training sales associates in how to use specific products and how to best inform surgeons of product uses and features.
2025 Form 10-K, filed 2026-02-20; Customers, Sales and Marketing; product-specific sales training · Filed 20/02/2026
Sales force representatives must have strong technical selling and medical education skills to provide technical support for surgeons.
2025 Form 10-K, filed 2026-02-20; Customers, Sales and Marketing; technical surgical support · Filed 20/02/2026
Additionally, certain of our key employees and third parties have detailed knowledge of our products and instruments and have developed professional relationships with existing and potential customers due to this knowledge.
2025 Form 10-K, filed 2026-02-20; personnel and distribution risk discussion; product knowledge and customer relationships · Filed 20/02/2026
In this region, we contract with group purchasing organizations and managed care accounts and have promoted unit growth by offering volume discounts to customer healthcare institutions within a specified group.
2025 Form 10-K, filed 2026-02-20; Americas sales arrangements; volume discounts · Filed 20/02/2026
Generally, we are designated as one of several preferred purchasing sources for specified products, although members are not obligated to purchase our products.
2025 Form 10-K, filed 2026-02-20; Americas sales arrangements; multiple preferred sources and no purchase obligation · Filed 20/02/2026
Contracts with group purchasing organizations generally have a term of three years, with extensions as warranted.
2025 Form 10-K, filed 2026-02-20; Americas sales arrangements; purchasing-group contract duration · Filed 20/02/2026
In connection with our ongoing efforts to transform our sales and distribution strategies and go-to-market model in China, including making significant changes across our independent distributor network, some of the displaced or impacted distributors in China have formally and informally raised legal claims against us.
Second-quarter 2026 Form 10-Q, filed 2026-08-05; Commitments and Contingencies; actual China distributor claims · Filed 05/08/2026
Product portfolio rationalization may lead to the loss of product breadth valued by customers, potential disruption in customer relationships, and reduced sales in affected categories.
2025 Form 10-K, filed 2026-02-20; product portfolio rationalization risk; possible relationship disruption · Filed 20/02/2026
•
Received U.S. FDA 510(k) clearance and completed first cases of the next generation ROSA® Shoulder System, the first in the industry to support both glenoid and humeral bone preparation for anatomic and reverse techniques.
Second-quarter 2026 earnings release, filed 2026-08-05; Recent Highlights; ROSA Shoulder clearance and completed first cases · Filed 05/08/2026
Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business, and we have experienced downward pressure on product pricing and other effects of healthcare reform in our international markets.
2024 Form 10-K, filed 2025-02-25; healthcare cost-containment discussion; experienced international pricing pressure · Filed 25/02/2025
For example, China has implemented volume-based procurement (“VBP”) processes designed to reduce medical spending, which have in the past resulted in, and could in the future result in, reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of inventory-related charges.
2024 Form 10-K, filed 2025-02-25; China volume-based procurement; historical margin and distributor effects · Filed 25/02/2025
Net sales growth was driven by a combination of market growth, new product introductions, positive price realization and commercial execution across the organization.
2024 Form 10-K, filed 2025-02-25; 2024 Financial Highlights; growth drivers including positive price realization · Filed 25/02/2025
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 and 2025
(in millions, unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Operating profit
$
326.1
$
300.0
$
699.2
$
592.3
Inventory and manufacturing-related charges
6.0
17.0
19.3
23.2
Intangible asset amortization
163.4
160.6
325.5
311.6
Restructuring and other cost reduction initiatives
29.8
17.5
36.1
53.5
Acquisition, integration, divestiture and related
18.1
78.9
33.7
89.5
Litigation
12.3
-
12.3
-
European Union Medical Device Regulation
-
4.3
-
8.7
Other charges
4.0
0.3
4.1
0.2
Adjusted operating profit
$
559.7
$
578.5
$
1,130.2
$
1,079.0
Second-quarter 2026 earnings release, filed 2026-08-05; operating profit reconciliation; three and six months ended June 30, 2026 and 2025, in millions, unaudited · Filed 05/08/2026
FOR THE SIX MONTHS ENDED JUNE 30, 2026 and 2025
(in millions, unaudited)
2026
2025
Cash flows provided by (used in) operating activities
Net earnings
$
437.9
$
336.0
Depreciation and amortization
540.8
526.2
Share-based compensation
48.8
40.8
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes
(80.1
)
(132.0
)
Receivables
(24.0
)
(18.6
)
Inventories
(51.4
)
(40.2
)
Accounts payable and accrued liabilities
(91.0
)
40.4
Other assets and liabilities
26.1
8.3
Net cash provided by operating activities
807.2
761.0
Cash flows provided by (used in) investing activities
Additions to instruments
(162.6
)
(140.2
)
Additions to other property, plant and equipment
(90.5
)
(94.7
)
Net investment hedge settlements
10.8
3.5
Business combination investments, net of acquired cash
-
(1,226.3
)
Acquisition of intangible assets
(101.2
)
(32.4
)
Other investing activities
(6.3
)
(0.3
)
Net cash used in investing activities
(349.8
)
(1,490.4
)
Cash flows provided by (used in) financing activities
Net proceeds on revolving facilities
30.0
220.0
Proceeds from senior notes
-
1,748.1
Redemption of senior notes
-
(863.0
)
Dividends paid to stockholders
(93.4
)
(95.3
)
Proceeds from employee stock compensation plans
12.4
17.1
Business combination contingent consideration payments
(69.2
)
(17.4
)
Debt issuance costs
(1.3
)
(17.3
)
Repurchase of common stock
(500.8
)
(237.0
)
Other financing activities
(17.9
)
(16.1
)
Net cash (used in) provided by financing activities
(640.3
)
739.2
Effect of exchange rates on cash and cash equivalents
1.1
21.6
Change in cash and cash equivalents
(181.9
)
31.4
Cash and cash equivalents, beginning of year
591.9
525.5
Cash and cash equivalents, end of period
$
410.0
$
556.9
Page 13 of 23
ZIMMER BIOMET HOLDINGS, INC.
Second-quarter 2026 earnings release, filed 2026-08-05; cash flow statement; six months ended June 30, 2026 and 2025, in millions, unaudited · Filed 05/08/2026
In the 2026 period, we repurchased $500.8 million of our common stock using cash on hand and net borrowings from our revolving credit facilities.
Second-quarter 2026 Form 10-Q, filed 2026-08-05; financing cash flows; repurchases funded with cash and revolving borrowings · Filed 05/08/2026
Other Contingencies
Contractual obligations: We have entered into development, distribution, investment and other contractual arrangements, such as the one described below, not accounted for as business combinations that may result in future payments dependent upon various events such as a capital call, the achievement of certain product R&D milestones, sales milestones, or, at our discretion, maintenance of exclusive rights to distribute a product.
Second-quarter 2026 Form 10-Q, filed 2026-08-05; Other Contingencies; milestone-dependent contractual payments · Filed 05/08/2026
The goodwill related to the acquisition is generated from the operational synergies, cross-selling opportunities and
10
future development we expect to achieve from the technologies acquired.
Second-quarter 2026 Form 10-Q, filed 2026-08-05; Paragon 28 acquisition accounting; expected synergies and development · Filed 05/08/2026
As a result of this ERP implementation, we experienced operational challenges which affected our ability to fulfill certain customer orders.
2024 Form 10-K, filed 2025-02-25; 2024 Financial Highlights; realized ERP order-fulfillment disruption · Filed 25/02/2025
Shipping levels returned to similar levels that existed prior to the implementation by the end of the year.
2024 Form 10-K, filed 2025-02-25; 2024 Financial Highlights; shipping recovery by year-end · Filed 25/02/2025
In addition, constant currency revenue change, adjusted operating profit, adjusted diluted earnings per share and free cash flow are used as performance metrics in our incentive compensation programs.
Second-quarter 2026 earnings release, filed 2026-08-05; non-GAAP measures; actual incentive performance metrics · Filed 05/08/2026
The guidelines require our CEO to own shares or units with a value equal to at least six times his or her base salary and the other NEOs to own shares or units with a value equal to at least three times their respective base salaries.
2026 proxy statement, filed 2026-04-01; Executive Stock Ownership and Retention Guidelines; salary multiples · Filed 01/04/2026
As of December 31, 2025, all NEOs are in compliance with the stock ownership guidelines or are within the time period prior to required compliance.
2026 proxy statement, filed 2026-04-01; ownership compliance or permitted compliance period at December 31, 2025 · Filed 01/04/2026
Under the new guideline, each NEO is required to retain at least 25% of the shares of Company stock that vest during a year in which such person is an NEO, net of any shares sold or withheld to cover any required taxes associated with interests in Company stock granted as compensation.
2026 proxy statement, filed 2026-04-01; adopted retention guideline; minimum 25 percent of vested shares net of specified taxes · Filed 01/04/2026
Each NEO shall be required to retain such shares until the NEO ceases
Zimmer Biomet 49
Executive compensation
to be employed with the company or its subsidiaries.
2026 proxy statement, filed 2026-04-01; duration of mandatory executive share retention · Filed 01/04/2026
As of December 31, 2025, all NEOs are in compliance with the stock retention guideline.
2026 proxy statement, filed 2026-04-01; actual retention-guideline compliance at December 31, 2025 · Filed 01/04/2026
Incentive compensation to executive officers under cash and equity incentive plans are subject to clawback in the event of financial restatements, in compliance with NYSE listing standards.
2026 proxy statement, filed 2026-04-01; executive incentive clawback policy · Filed 01/04/2026
Our current governance practices include the annual election of all directors, a majority voting policy with a mandatory resignation policy, a prohibition on renominating an incumbent director who fails to be elected in an uncontested election, shareholder proxy access, an annual self-evaluation of the Board and each of its
Zimmer Biomet 74
Executive compensation
committees, robust director and executive stock ownership guidelines, additional named executive officer share retention requirements, shareholders’ right to call special meetings, simple majority shareholder vote to approve amendments to our Certificate of Incorporation and an active shareholder outreach and engagement program.
2026 proxy statement, filed 2026-04-01; existing shareholder rights and governance practices · Filed 01/04/2026
All but one of our directors – our CEO and Chair – are independent.
2026 proxy statement, filed 2026-04-01; actual board independence and combined CEO/Chair roles · Filed 01/04/2026
In addition, all members of our Board committees are independent, which ensures that oversight of critical matters, such as the integrity of our financial statements, the compensation of our executive officers, the selection and evaluation of directors and oversight over our quality management system, among other matters, is entrusted exclusively to independent directors.
2026 proxy statement, filed 2026-04-01; actual committee independence and oversight responsibilities · Filed 01/04/2026
If the roles of Chair and CEO are combined, our Guidelines require the Board to designate a Lead Independent Director from among the independent directors.
2026 proxy statement, filed 2026-04-01; required Lead Independent Director when CEO and Chair roles are combined · Filed 01/04/2026
Shareholders took the following actions:
•
elected ten (10) directors for one-year terms ending at the 2027 annual meeting of shareholders (Proposal 1);
•
ratified the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2026 (Proposal 2);
•
approved, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement (Proposal 3); and
•
rejected a shareholder proposal on Independent Board Chairman (Proposal 4).
Annual-meeting results, filed 2026-05-27; actual director elections, advisory compensation approval and independent-chair proposal rejection · Filed 27/05/2026
