Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations, welcomed viewers to their Fiscal 2024 First Quarter Video Earnings Webcast. He was joined by Geoff Martha, Medtronic Chairman and Chief Executive Officer, and Karen Parkhill, Medtronic Chief Financial Officer. They discussed the results of the first quarter and their outlook for the remainder of the fiscal year. They also issued a press release and earnings presentation containing financial statements and divisional and geographic revenue summaries. They cautioned that many of their statements may be considered forward-looking and could differ from actual results. All comparisons were made on a year-over-year basis and revenue comparisons were made on an organic basis.

Medtronic reported mid-single-digit organic revenue growth in their first quarter of fiscal year, with each of their four segments delivering 6% growth. They are executing large-scale functional improvements to global operations, supply chain and quality, while also allocating capital to programs and fast secular growth markets and focusing on technology megatrends like robotics and artificial intelligence. They are also working on portfolio management efforts, expecting this to ensure durable top and bottom-line growth and create value for shareholders.

Cranial and Spinal, Surgical, and Cardiac Rhythm businesses made up nearly half of the company's revenue and grew 6% organically. Cranial and Spinal grew 6% globally and 8% in the US, driven by the Aible ecosystem. Surgical grew 7%, and Cardiac Rhythm grew 5%, with mid-teens growth in the Micra leadless pacemaker franchise and 45% growth in the 3830 lead. The 3830 lead is the only one approved for conduction system pacing in the US and has a battery life of 16-17 years, 40% longer than the previous generation.

Medtronic had a strong quarter, with their largest and synergistic businesses performing well and a high single digit growth in their high secular growth med-tech markets. They are preparing to launch the Aurora EV-ICD, a game changer for the ICD space, and recently received CE Mark approval for their next-generation spinal cord stimulator, Inceptiv. Structural Heart saw 11% growth globally, with 12% growth in the US and 21% growth in Japan, largely driven by the adoption of the Evolut FX valve.

The NOTION 10-year data will be presented at ESC and will compare the durability of CoreValve and Evolut valves to surgery. Neurovascular grew mid-single digits, and Cardiac Ablation Solutions grew 5%. Pulse Field Ablation has become a popular technology, and NOTION is leading the way with PulseSelect and Sphere-9 catheters. The Hugo robotic system has been installed in new sites and is expected to be a growth driver in the future.

In the Diabetes division, the MiniMed 780G AID system is experiencing strong demand in markets around the world. The system has five-minute adjustments in auto corrections and Meal Detection technology, which has resulted in 90% of users achieving their glycemic targets. In the US, the 780G launch has driven durable pump sales growth and an increase in unique prescribers. Additionally, over half of the 770G installed base has upgraded or placed an order for the 780G, and CGM attachment rates in the 780G installed base are high. The team is making progress and the intensive insulin space is transitioning from standalone CGM to smart dosing systems, which the company is well-positioned for.

Medtronic had a strong start to their fiscal year, with 6% revenue growth and non-GAAP EPS of $1.20, 6% higher than the midpoint of their guidance range. Growth was seen in all four business segments, as well as non-US developed and emerging markets. Western Europe had high single-digit growth in Cardiovascular and Medical Surgical, and high teens growth in Diabetes. Emerging markets were affected by new sanctions in Russia and VBP impact in China, but excluding those two countries, growth was in the high teens. Medtronic is focused on positioning themselves for durable growth, and improving gross margins remains a priority.

In the first quarter, the company's adjusted gross margin was relatively stable year-over-year and ahead of expectations. The operating margin increased 90 basis points due to revenue outperformance and expense management. The adjusted nominal tax rate was 15.8%, above expectations, due to a change in Puerto Rico tax law. The company is prioritizing investments in innovation and returning a minimum of 50% of free cash flow to shareholders. Based on outperformance in the first quarter and improved underlying fundamentals, the company is raising its full year revenue and EPS guidance to 4.5% organic revenue growth.

In the second quarter, the company expects organic revenue growth of between 4% and 4.5%, which is an acceleration from the first quarter. They are also taking steps to improve their global operations and supply chain, such as working with fewer strategic suppliers and implementing factory improvements, which they expect will lead to a stabilization and improvement in gross margin. The company has also raised their non-GAAP diluted EPS guidance to a range of $5.08 to $5.16, including a 6% impact from foreign currency.

Karen thanked the employees for their focus and contributions to the company's success, and Geoff closed by noting that the company had a strong start to the year and was seeing improved underlying fundamentals in their supply chain and markets. He also mentioned that they had taken steps to transform the company and ensure a performance-driven culture, as well as advancing their capital allocation and portfolio management priorities.

The company is executing on programs to gain scale advantages in global operations, supply chain, and enterprise customers. To accelerate innovation, they hired Ken Washington as Chief Technology and Innovation Officer. He brings experience from Amazon, Ford Motor Company, and Lockheed Martin Space Systems. The company expects these efforts to lead to new therapies and better customer experiences, resulting in durable revenue and earnings growth, as well as a growing dividend for shareholders. Mike Marinaro is now joining the Q&A to focus on the Surgical and Endoscopy businesses, while Bob White focuses on the PMRI businesses.

In this Q&A session, Geoff Martha, Karen, and Ryan are joined by Que Dallara, Mike Marinaro, Sean Salmon, Brett Wall, and Bob White. Vijay Kumar asked a question about the growth of the Diabetes business in the US, specifically about how much of the growth was driven by existing customers and how much was from new customers. Geoff Martha responded by saying they were pleased with the momentum and that they were seeing great outcomes in patients and a significant increase in unique prescribers, as well as a higher attachment rate of CGM. He then passed the question to Que Dallara, who runs the Diabetes business.

Que Dallara and Geoff Martha discussed the low 30s AID growth seen in the US, which is attributed to both upgraded existing installed base of 770G users and new patients. Vijay Kumar then asked about the impact of the new anticorruption campaign in China on device companies, to which Geoff Martha responded that they are not seeing any material headwinds for their business yet and are somewhat insulated from the anticorruption since the volume is contracted and pricing is determined with VBP.

Karen Parkhill explains that Q1 was a great start to the year, with mid-single digit growth for the third consecutive quarter. The guidance for Q2 is now 4-4.5% organic sales growth, a slight decrease from the 6% in Q1.

Karen Parkhill responds to Robbie Marcus' question about margin expansion and gross margin. She explains that they are focused on driving margin expansion and ultimately getting back to pre-COVID levels over time. She notes that they saw improved margins in Q1 and are increasing their full year guidance due to some better-than-expected currency and pricing. She also states that they are expecting continued acceleration into the back half of the fiscal year.

Robbie Marcus discussed investments in global operations and supply chain to drive cost out of the organization and stabilize and improve margins. Sean Salmon expressed confidence in the prospects of US approval for Symplicity and was well prepared for the adcom panel. He also discussed the Affera Pulse data, which will be released this weekend, and the company's goal to grow its AFib business at or above the market.

Geoff Martha discussed the impact of GLP-1s on the medical device market. He noted that the approval process typically takes three to four months and the ramp of reimbursement will be dictated by the pace of reimbursement. He highlighted the distinction of PulseSelect and Affera mapping and Sphere-9 catheter system, which is different from other technologies. He concluded by noting that they are monitoring the impact of GLP-1s over the next year as they become more readily adopted.

Geoff Martha and Ryan Weispfenning discussed the minimal impact that GLP-1 therapies have had on their business. They noted that bariatric surgery has seen a modest impact, but it is a small part of their business. They also reported that Type 1 diabetes, which is the majority of their diabetes business, has seen no impact. Lastly, they discussed TAVR, which saw double-digit growth this quarter.

Geoff Martha discusses the success of the new valve versus the five-year data, and Sean Salmon provides specifics on its performance. He notes that the new valve has been well-received and that they have 10-year NOTION data coming this weekend. Additionally, they have four-year data for their low-risk study coming this fall. Lastly, Travis Steed questions the PMRI spend and the operating margin profile of the business, which is higher than Medtronic's overall.

Karen Parkhill and Geoff Martha discussed maximizing shareholder value, the spin sets a high bar, and the business continues to perform well with a strong margin profile. Que Dallara then answered a question about progress with their programs discussed at the ADA, the next-gen sensor and integrated testing, and the patch pump they are in the process of acquiring. Geoff Martha also mentioned the next-gen AID pump but did not provide any hints about it.

Karen Parkhill is providing an update on the progress of CGM, 780G, and the patch. The FDA review process is difficult to predict, but the adult enrollment for the clinical trial of 780G was completed in Q1 and the peds enrollment is expected to be completed soon. The EOFlow acquisition is expected to close at the end of the year. The first few weeks of the quarter and what was seen in July are tracking well with the expectations set in the guidance.

Medtronic is investing in artificial intelligence (AI) and is leading in this area in the medical device industry. AI-powered solutions have already been approved by the FDA and other regulatory bodies, and these solutions have improved outcomes and access. AI is also being used to personalize treatments and to improve efficacy over time through predetermined change control plans. Examples of this technology include AI-powered colonoscopies that are finding polyps that physicians were missing.

AI is being used in various medical fields to improve patient outcomes, reduce false positives, and increase productivity. AI is not replacing surgeons, but those who use it will be replacing those who don't. AI is also helping to drive gross margin strength in the quarter.

Karen Parkhill and Geoff Martha spoke about the company's pricing muscle that has allowed them to neutralize the 200 basis points of pricing pressure they would typically experience every year. They believe that this pricing muscle is sustainable and will continue to monitor and talk about pricing. They are also focused on improving gross margins through cost of goods sold improvements and getting leverage from SG&A.

Jayson Bedford from Raymond James asks about gross margin stabilization for fiscal '24, to which Karen Parkhill responds that it is expected to be around 65.50%. She explains that this is due to improvement in the first quarter, as well as VBP and currency impacts. Joanne Weunsch from Citi then asks about the strength of volumes in the medtech sector, and whether it is a result of pent-up demand or a new normalized base. Hugo then talks about activating new sites in the United States.

Geoff Martha provides an update on the timing of a US launch, as well as an overview of procedure trends across the globe. In the US, procedure trends are up 5% or more, and are back to pre-COVID levels. In Western Europe, procedure trends are up in the high single digits. In Latin America, procedure trends are in the high teens, and in emerging markets outside of China and Russia, they are in the mid-teens to high teens. There is no pent-up demand, but rather a steady flow of procedures.

Mike Marinaro discussed the progress of the Hugo program and the EXPAND URO study in the US. They are now selling in five regions, have increased installations, and have received approval for general surgery, gynecology, and urology in Japan and Western Europe. Hugo is contributing to the growth of the Surgical business and will become an increasingly important part of it. Geoff Martha is excited about the setup of the business and the competitive dynamics going forward.

Medtronic is working on improving their supply chain processes and driving down costs, which has resulted in some upfront investment. This investment has been included in their guidance and is part of the reason their gross margins are not yet stable. However, they expect these investments to pay off over time and help drive costs down more than inflation, which will help bring their gross margins up.

Geoff Martha thanked everyone for their questions and expressed appreciation for their support and interest in Medtronic. He also mentioned that they will hold a Q2 earnings broadcast on November 21 and thanked everyone for joining them before wishing them a good rest of the day.

This summary was generated with AI and may contain some inaccuracies.