The operator welcomes listeners to the Third Quarter 2023 Stryker Earnings Call and reminds them of forward-looking statements and non-GAAP financial measures. CEO Kevin Lobo addresses concerns about GLP-1 and its potential impact on the knee business, stating that they are optimistic about its positive effects in both the short and long term. He also mentions that the drug may make more people eligible for surgery sooner and lead to increased surgery in the long term as people become more active.

Despite barriers to adoption, the company has seen strong sales growth in the third quarter, with double-digit growth in MedSurg and Neurotechnology and high single-digit growth in Orthopedics and Spine. They have also seen growth in both the U.S. and international markets and are focused on pricing initiatives. They have narrowed their expectations for 2023 to the high end of their previously provided guidance ranges. The company's CFO, Kevin, will now turn the call over to Jason, who will provide an update on the current environment, capital demand, including Mako, and product launches. Procedural volumes remain strong and the company expects elevated orthopedic procedural demand through 2024.

In the third quarter, Stryker saw continued demand for their capital products, with strong growth in their Endoscopy and Instruments divisions. The company also received approval for their Pangea plating system and expanded the capabilities of their Vocera platform. They are gearing up for a full launch of Pangea in 2024 and are on track with their Mako spine and shoulder applications. Stryker will be hosting an Investor Day on November 8 to showcase their growth.

In the third quarter of 2023, Stryker will showcase new products to investors and analysts and discuss their priorities and expectations for the coming years. Glenn Boehnlein then discusses the company's financial results, including a 9.2% organic sales growth and a 16% increase in adjusted EPS. He also highlights the performance of the MedSurg and Neurotechnology segments, with a 10.3% growth in constant currency sales and 10.1% organic sales growth. The Instruments segment saw a 17.3% organic sales growth, driven by strong performance in Surgical Technologies and Orthopedic instruments.

The company experienced strong organic sales growth of 10.6% in the quarter, driven by double-digit growth in its communications and sustainability businesses. The Endoscopy business saw strong sales momentum with the launch of a new camera system. The Medical and Neurovascular businesses also saw strong organic sales growth in the U.S. and internationally. The Orthopedics and Spine business had solid growth in the U.S. and internationally, driven by market-leading positions in robotic-assisted knee procedures and primary HIF growth. The U.S. Trauma and Extremities business also had strong performances across all businesses.

In the third quarter, the spine business grew 5.4%, driven by enabling technology and Interventional Spine. The U.S. other ortho also saw growth due to higher Mako placements. Internationally, Orthopedics and Spine had a strong performance. Adjusted gross margin improved by 210 basis points, mainly due to lower costs, spot buys, and price and mix benefits. Adjusted R&D spending decreased by 30 basis points, while SG&A increased by 140 basis points due to investments. The adjusted operating margin was 23.4% of sales, 110 basis points higher than the previous year. Adjusted other income and expense increased slightly, and the effective tax rate for the quarter was 13.2%. For the full year, the effective tax rate is expected to be around 14%.

The company reported strong financial results for the third quarter, with $1.9 billion in cash and marketable securities and $12.7 billion in total debt. They paid down $100 million of debt during the quarter. Year-to-date cash flow was $2.2 billion, driven by net earnings and higher accounts receivable collections. The company expects organic sales growth of 10% to 10.5% for the full year, with slightly positive pricing. Currency exchange rates may have a negative impact on sales and adjusted EPS for the full year. Adjusted earnings per share are expected to be in the range of $10.35 to $10.45. The company will provide guidance for 2024 in January. Currency was a slight headwind in the third quarter.

In the fourth quarter, there will be a slight headwind, but the company does not expect it to worsen. They will reassess the situation in January for their guidance for 2024. The company has had some tax benefits and expects to have a strong year due to their innovation and commercial execution. They will discuss their margins at the analyst meeting next week, but they have good visibility in their supply chain and fixed contracts. There have been no more spot buys in the third quarter.

The speaker is feeling positive about their company's freight and raw materials, and they have seen an increase in pricing strategies. They also discuss the seasonality in their ortho and hips and knees business and expect a strong fourth quarter. The speaker also mentions the growth in their other ortho business, specifically in robotics and Mako placements. The capital equipment environment is also described as healthy.

The company has seen strong growth in their Endoscopy and Instruments numbers, particularly in the medical sector which is expected to have double-digit growth for the fourth consecutive year. The third quarter was slightly softer than the second quarter, but overall the environment is healthy and there is strong momentum across the business. The company has also seen significant growth in Mako in both Asia Pacific and EMEA. In terms of margins, there were some one-time factors that helped to improve the gross margin by 220 basis points compared to the same quarter last year, such as the absence of spot buys and a more normalized supply chain.

In paragraph 11, the speaker discusses the expectation of gradual improvement and mentions that the gross margin will be impacted by a big MS&T quarter in Q4. They also mention a backlog in medical and state that the hospital capital environment continues to be strong. In response to a question, they state that the impact of fewer selling days is approximately 1% of the total company and that Mako spine is expected to be on track around the middle of next year.

The company is on track to release a new Mako application for spine and shoulder surgeries, which received positive feedback from surgeons at a recent conference. The spine application is expected to have a faster ramp-up than the previous hip and knee applications, as the company already has a strong presence in the market. The shoulder application, which will be the first of its kind, may have a slower uptake, but the company's shoulder business is already performing well.

The speaker discusses the potential impact of new products in the shoulder and spine segments. They mention that while the shoulder segment may see slower growth due to change management, the spine segment is expected to see a faster uptick. The gross margin performance in the quarter was impressive, but it may moderate in Q4 due to seasonality and mix issues. The speaker expects free cash flow to normalize in the future and mentions a target of 70-80%. The analyst asks for more information on the potential contribution of the super cycle of innovation in 2023 and 2024.

The speaker, Kevin Lobo, responds to a question about the impact of new products on the company's performance. He explains that Stryker consistently outperforms the market due to a combination of new products and strong sales force execution. Lobo highlights the success of the electronic extremities business and a new product called Pangea, which has received positive feedback from surgeons. He declines to provide a breakdown of the exact impact of new products, but assures that they are the main driver of growth for the company.

During a recent earnings call, Stryker's CEO Kevin Lobo was asked to define the company's performance in the high-end of the medical technology market. He stated that historically, Stryker has outperformed the market by 200-300 basis points, but currently it is tracking closer to 300 basis points. When asked about the company's growth rate in 2024, the CFO Jason Beach declined to comment. The discussion then shifted to the company's Mako robot, with the head of their knee business revealing that there are currently 300 robots in ASCs. The analyst asked about the potential for growth in this market, but the executives did not provide any further details.

Kevin Lobo discusses the potential growth of the use of Mako robots in ASCs (Ambulatory Surgery Centers). Currently, only 12% of hip and knee procedures are done in ASCs, but this number is expected to increase significantly. Lobo sees a great opportunity for Mako robots in ASCs as surgeons want the best technology and ASCs have less pressure on sterilization. This trend is not limited to the U.S., as ASCs in Europe are also starting to consider using Mako robots. This model is beneficial for surgeons, staff, and patients.

The speaker from Stryker discusses the success of their Mako line and how they are not seeing much change in the mix of competitive and Stryker-friendly accounts. They believe they have the best solution for hip and knee replacement and are looking forward to adding other applications to the same robot. They also mention that GLP is a dominant topic of discussion.

The speaker discusses a study on knee replacements in Shanghai, but expresses doubts about its reliability. They mention another upcoming study and ask the company about their internal research on the issue. The company's CEO responds by saying that they will address the topic at an upcoming Investor Day, but he believes the study's claims of a reduction in knee procedures are unfounded. He also mentions speaking with surgeons at a conference who do not share the concerns. The next question is about consolidation in the spine market and whether the company is benefitting from any shifts in market share. The CEO responds that it is still early days and there has been a lot of consolidation in the past few years.

The speaker discusses the consolidation in the spine market driven by enabling technologies and the potential for even more consolidation in the future. They also mention that there may be changes in the sales force next year. The company has targets for inorganic growth in every division and is waiting for their cash position to improve before making more deals. Valuations for potential targets have come down.

The company is feeling good about their financials and is paying down debt as promised. They have engaged with potential acquisition targets and expect to pick up the pace in 2024. They are not commenting on the size of potential deals, but have the capacity to do larger deals up to $1 billion if they meet their return criteria.

The speaker discusses the company's plans for their normal offense in M&A and their upcoming Analyst Day. They mention that they will not be giving specific revenue and margin guidance for 2024 until January, but will discuss their long-range plan at Investor Day. They also mention their optimism for the launch of their Spine robot in the second half of next year and clarify that it will initially focus on pedicle screws with potential for future expansion.

The Mako launch for spine will be for Pedicle group placement and is faster and smoother than current options. There is also another product launching within the same ecosystem that does bone cutting and will arrive at the same time as Mako. The company is a big believer in mixed reality and plans to expand its use to other applications in the future. The CEO mentioned strong growth in both U.S. and international knees replacement.

Kevin Lobo, CEO of Stryker, discusses the growth of the Mako robotic system in international markets, particularly in Asia Pacific and Europe. He notes that while the adoption of robotics in these markets is still in its early stages, there has been an inflection point and they are starting to see significant growth. Lobo attributes this to the time it took to establish the model and train surgeons, among other factors. He is optimistic about the future growth potential of Mako in these markets.

During a recent conference call, Zimmer Biomet CEO Kevin Lobo discussed the potential impact of GLP-1 on the company's Mako robotic knee surgery business. He believes that the benefits of GLP-1, which helps patients lose weight, will lift all aspects of the knee business, regardless of whether surgeons choose to perform surgeries manually or with the Mako robot. In response to a question about the company's international growth and orthopedic backlog, Lobo expressed excitement about the growth of international markets, particularly in regards to Mako and camera sales. He also mentioned an upcoming international panel as part of the company's agenda.

The company's leaders from international markets will be present at a panel and available to chat with investors and analysts at an upcoming event. The company is optimistic about its international market potential, which has improved over the past 10 years. Over 70% of the company's sales are still in the United States, leaving room for growth in international markets. The company expects its strong procedural backlog to continue into next year, providing a moderate tailwind. In the third quarter, the company saw positive price momentum, which is expected to continue for the full year thanks to the company's incentive and contracting processes.

The speaker mentions that they have a mechanism in place to monitor pricing and they expect to face some challenges next year. However, they believe that the launch of new products will help with pricing. They also plan to hire specialized salespeople to sell their new products to both existing and new customers. They do not believe in a hybrid sales model and will focus on dedicated capital reps to sell their products.

The speaker states that their company is focused on providing technology to customers, regardless of whether they are existing or competitive. They do not want their implant reps to also sell capital. The company believes they can solve problems faster with dedicated individuals and plan to add more applications in the future. The call has concluded and the speaker thanks everyone for joining.

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