Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations, welcomes viewers to the Fiscal '24 Third Quarter Video Earnings Webcast. He introduces Geoff Martha, Medtronic's Chairman and CEO, and Karen Parkhill, CFO, who will discuss the third quarter results and outlook. The Executive VPs of each segment will also join for a Q&A session. The company has issued a press release and posted an earnings presentation with additional details. Statements made during the program may be considered forward-looking and actual results may differ. All comparisons are made on a year-over-year basis, and revenue comparisons are on an organic basis.

Medtronic had a successful quarter with mid-single-digit organic revenue growth and strong performance across various businesses and international markets. They are investing in innovative technologies and have multiple FDA approvals. The company is also undergoing a transformation to create a performance-driven culture.

Medtronic is focused on leveraging its scale to drive efficiencies and restore earnings power. They are using their cash to invest in high-return opportunities and return value to shareholders. They have also made the decision to exit their unprofitable ventilator product line and bring together their remaining patient monitoring and respiratory interventions businesses into one unit. This decision was made in the best interest of the company and its stakeholders, as the market preference has shifted to lower acuity ventilators. Medtronic is committed to serving their customers and honoring service contracts, and they recognize the contributions of their employees during the pandemic. They have also decided to retain and refocus their remaining PMRI businesses for three main reasons.

In the fourth paragraph, the speaker discusses the company's strong conviction in their ability to lead and drive growth in acute-care and monitoring, as well as the importance of data in this space. They also mention their focus on profitable, innovation-driven growth and category leadership. The speaker then goes into detail about the company's Q3 results, breaking them down into three categories: established market leaders, synergistic businesses, and highest-growth businesses. They note that all three categories grew in line with their expected growth algorithm, with established market leaders and synergistic businesses growing mid-single-digits and highest-growth businesses posting high-single-digit growth. The speaker also provides specific examples of growth in different areas, such as Cranial & Spinal Technologies and their AiBLE ecosystem.

In summary, Medtronic is seeing strong growth in their business due to the adoption of their AI-based surgical planning solution and their extensive global footprint. They are also attracting top sales teams and expanding their business in the surgical sector. In addition, their Cardiac Rhythm division is experiencing growth due to the launch of new products and the adoption of alternative pacing methods.

In the coming quarters, the EV-ICD is expected to drive growth in Defibrillation Solutions. The Aurora ICD offers the benefits of a traditional ICD without the need for leads, making it a game-changer in the market. Synergistic businesses also saw growth, with Aortic, Cardiac Surgery, and Coronary all performing well. In the highest-growth markets, diabetes led the way with the adoption of the MiniMed 780G system, resulting in double-digit growth. In the US, there was a return to growth and a significant increase in new users of insulin pumps.

The 780G is a highly differentiated AID system that offers flexible glucose targets and proprietary meal detection technology, leading to high time and range for users. This results in improved glycemic control with less effort and burden. In a recent survey, the 780G was ranked number-one in overall pump satisfaction among Type 1 CGM users. The company has secured CE Mark for its Simplera Sync sensor and plans to submit it to the FDA in the first half of the year. The company is also working on bringing more differentiated technology to the market for people with diabetes. In the Cardiac Ablation Solutions division, the company saw 11% growth in international markets, including 9% growth in Western Europe.

The company's strong international growth is driven by their leading Arctic Front cryo solution and the increasing popularity of their Pulsed Field Ablation products. In Europe, they are the only company offering PFA products for both single shot and focal segments, and they have recently started limited market release of their PulseSelect PFA system. The company is also ramping up production of their Affera Mapping System and Sphere9 catheter in Europe. In the US, their cryoablation business declined due to competition and customer hesitation, but they expect improvement with the launch of their next-generation Nitron CryoConsole and PulseSelect PFA catheter. The company is also making progress in bringing their Affera Mapping System and Sphere9 catheter to the US market.

The company has completed the last patient follow-up in their SPHERE Per-AF Pivotal Trial and expects to see results at a medical meeting in the first half of the year. They are aiming to expand their share in the underpenetrated cardiac ablation market, which is worth $8 billion. In the neurovascular market, they are seeing high single-digit growth, driven by their innovative Shield Technology. In robotic surgical technologies, they are growing their installed base for the Hugo Robotic System and expect it to be a significant growth driver in the future. In Structural Heart, they are seeing high-single-digit growth, with strong adoption of the Evolut FX valve in Europe and Japan.

The company has submitted Evolut FX+ for FDA approval and is excited for the results of the SMART Trial to be presented at ACC. The company's Q3 financial performance exceeded expectations, with 4.6% revenue growth and $1.30 adjusted EPS. International markets were a strong driver of growth, with double-digit growth in several regions. Emerging markets also saw significant growth, while China and Eastern Europe had slower growth due to delays and sanctions.

The company experienced 2% growth in the US and expects new product launches to positively impact growth in the coming quarters. They also saw improvements in their gross and operating margins, driven by delayed China VBP and lower freight costs. Their adjusted tax rate and income on investments were slightly higher than anticipated, but their adjusted EPS grew on a constant currency basis. The company has also raised their full-year revenue and EPS guidance due to strong underlying fundamentals and expects an acceleration in organic revenue growth in the fourth quarter.

The company is moving revenue from ventilators to the other segment and will exclude it from organic revenue growth. Currency rates are expected to have an impact on revenue and EPS for the full year and fourth quarter. The company has raised its EPS guidance for the full year and expects adjusted EPS for the fourth quarter. The company plans to give its fiscal year '25 guidance in May and expects to continue delivering durable revenue growth, despite headwinds in inflation, currency, and taxes. The company is also focused on increasing investments in R&D and improving earnings power. The portfolio management decisions announced will allow for increased investment in innovation-driven growth without impacting earnings or cash flow, with a focus on optimizing long-term shareholder value.

In conclusion, the speaker expresses gratitude to the employees for their hard work and dedication, which contributed to the company's success this quarter. They also mention the passing of a former leader and conclude by highlighting the company's progress in delivering on their commitments and restoring their earnings power through innovative products and strong execution in various business areas.

The company has been working on various changes to improve their operating model and culture, which are already showing positive results. They are also optimistic about upcoming developments that will benefit patients, healthcare systems, and shareholders. During the Q&A session, only one question will be allowed per analyst and the call is being recorded. The company's executives are joined by presidents of different portfolios. The first question from an analyst is about the company's comments on durable growth in fiscal 2025, with a specific concern about the decline in the AFib business in the US.

The company is confident in their investments in the AFib market and expects to see strong performance in cryo and PFA. They attribute a decline in market share to a new competitor in the cryo segment and anticipate growth from new product launches. They are also optimistic about the potential for their PulseSelect and Affera products.

The speaker discusses the company's performance and plans for the future. They mention a step-back in the United States, but are confident in the 11% growth outside of the country. They also mention the company's solid performance in the past few quarters and their expectations for continued growth in the next fiscal year. They are working on their planning process and will give guidance in May. The speaker notes potential challenges such as inflation, currency, and tax reform, but also highlights their efforts to drive cost savings and pricing strategies.

The company has decided to keep its Patient Monitoring business instead of selling or spinning it off. This decision was influenced by the improved competitive positioning of the business and the positive changes in the market. The company plans to invest more in the business and will be winding down its ventilator business.

Despite being a difficult decision, the company has decided to wind down their unprofitable ventilator business due to the changing market dynamics and the increasing importance of data in the space. This will allow them to focus on investing in their acute-care monitoring business, which they believe has potential for profitable growth and category leadership. By combining their respiratory interventions and monitoring businesses, the company can also save money and avoid dilution to their profits.

The speaker discusses a difficult decision that was made and acknowledges the hard work of employees during the COVID pandemic. They also mention the strong legacy of the Puritan Bennett brand and state that this decision does not mean they will shy away from other portfolio moves. The next question asks about the company's diabetes and Hugo products. The speaker responds by saying they have seen growth in the diabetes sector and are using data and algorithms to drive differentiated outcomes for patients. They also mention global success with the Hugo product.

Que Dallara and Mike Marinaro discuss the progress of the company's 780G launch and the growth of new patients and renewals. They also mention the growth of pump, consumables, and CGM in the US market. Mike Marinaro adds that they are seeing good progress with Hugo outside of the US, with installations in new countries and positive feedback on features such as the open console and Touch Surgery Enterprise platform. They are also preparing for the first patient enrollment in the hernia IDE. Overall, there is a good reception and appreciation for Hugo and the company's digital ecosystem.

Geoff Martha and Mike Coyle discuss the success of the robotic system and its broader impact on Medtronic's digital platform and instrumentation. They compare it to the success of the Spine business after integrating Mazor and other technologies. They expect similar growth in soft-tissue surgery. In response to a question about gross margin productivity, Geoff talks about driving cost savings and potentially achieving 2-3x annual cost savings. He also mentions the company's focus on leveraged EPS growth, which was discussed at the investor conference.

The company's gross margin has been positively impacted by their focus on innovation and demonstrating the health economics of their products. This has led to increased pricing and the company is confident in its sustainability. They also have opportunities for cost savings through centralization and cost-down programs.

The company has made changes to improve gross margins, including effective contracting between global operations and operating units and release product engineering. They are pleased with their performance this quarter, despite headwinds from FX and inflationary pressures. They are also focused on driving leverage down the P&L, but it is too early to discuss specific plans for FY'25. They are focused on pricing, cost of goods sold productivity, and discipline around G&A costs.

Geoff Martha, CEO of Medtronic, discussed the company's focus on recovering its earnings power and setting up its portfolio for profitable growth. He mentioned the decision to hold their Monitoring business as evidence of their confidence in this growth. He also mentioned that they will provide more details on their FY'25 outlook next quarter. In response to a question about earnings growth, Martha stated that they are investing in RDN and Hugo, which is a significant part of their surgical franchise and requires ongoing investment. He added that they have reached a milestone with Hugo, but there is still more work to be done to get their instruments on the platform. Karen Parkhill, CFO of Medtronic, will further address the question on earnings growth.

The company is confident in executing their plans for their surgical business, despite competition from Intuitive and other robotic companies. They are also focusing on their hypertension therapy product, which they believe will start generating profits in the medium-term. The company is making progress in driving earnings and is committed to continued growth in the future.

The company is focused on delivering growth and overcoming headwinds in the next few years. They have recently had products approved and are hopeful for more approvals in the future. The AFib business is expected to accelerate in the fourth quarter, and the trajectory for the EV-ICD and CAS businesses is upward.

The company is introducing new technologies and ensuring that physicians are trained to use them effectively. They have received positive feedback and expect to see growth from these innovations in the coming year. In the diabetes sector, they have several products in the pipeline and plan to release them in the first half of the year. They are also working on next-generation products and are aggressively moving towards releasing them to the market.

Anthony Petrone offers his condolences on the passing of Tom Holleran, and then asks about the SMART Study in Structural Heart. Geoff Martha commends the business for their evidence generation and the courage to do a head-to-head study. The results will be presented at ACC in April, and Sean Salmon explains that the completion of enrollment pushed the study out of the window for TCT, but they are on schedule and pleased to be accepted as a late-breaker at ACC.

The speaker discusses the upcoming trial and its potential impact on the company's growth, highlighting the positive data from previous studies and the importance of the patient population being studied. They also mention the departure of a key leader and express gratitude for their contributions. The speaker then thanks the audience and invites them to join the next earnings broadcast.

The speaker will provide updates on their progress and fiscal year results, as well as look ahead to fiscal year 2025. They thank the audience for their time and wish them a good day.

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