The operator introduces the First Quarter 2024 Stryker Earnings Call and reminds participants that the call will include forward-looking statements and non-GAAP financial measures. CEO Kevin Lobo provides opening comments, followed by updates from CFO Glenn Boehnlein and Vice President Jason Beach. Despite one less selling day and tough comparables, Stryker delivered a 10% organic sales growth in the first quarter, led by strong U.S. performance in various areas and continued international growth momentum.

The company expects to see continued growth in the international market, with a 16.8% increase in adjusted EPS in the first quarter. They have completed two acquisitions and have a strong pipeline for future deals. The company has increased its full year organic sales growth and adjusted EPS range. They have also been recognized as one of Fortune's Best Companies to Work For and have published a report on their corporate responsibility. The focus of the call will be on the current environment, capital demand, and select product highlights.

The company had a strong first quarter, with high demand for their products and stable supply. The Mako robotic-assisted surgery campaign and new product launches contributed to their success. The company also received FDA approval for a new defibrillator and will launch it in the second quarter. They are also planning to launch new technologies in the fourth quarter. The company's financial results and drivers are detailed in the press release.

In the second quarter of the year, the company's organic sales growth was 10%, slightly lower than the previous quarter due to one less selling day. The impact of pricing was favorable, and there was a slight negative impact from foreign currency. The company saw positive sales momentum in most international markets, especially in the United Kingdom and Canada. The adjusted EPS for the quarter was $2.50, up 16.8% from the previous year. The MedSurg and Neurotechnology segment had a 12% sales growth, with strong performances in the Orthopaedic Instruments and Surgical Technologies businesses. The Instruments segment had a 19% sales growth, led by smoke evacuation and power tools. The Endoscopy segment had 11.1% sales growth, with standout growth in cameras and sports medicine implants. The Medical segment had 16.8% sales growth, with solid performances in all three businesses.

In the first quarter, the company saw strong growth in various product categories, including stretchers, cots, and medical technology products. The Neurovascular and Neuro Cranial divisions had solid performances, while the Orthopaedics and Spine divisions saw growth in both the U.S. and international markets. The company's adjusted gross margin also improved due to positive pricing trends and cost pressures easing.

In the first quarter of 2024, the company's adjusted R&D spending and SG&A were favorable compared to the same period in 2023. The adjusted operating margin was also favorable, while adjusted other income and expense were lower due to interest rates and higher interest income. The effective tax rate for the quarter was 12.3%, but the full year rate is expected to be in the range of 14% to 15%. The company ended the quarter with strong cash flow and expects organic sales growth of 8.5% to 9.5% for the full year, with a negative impact from foreign exchange rates. EPS is also expected to be negatively impacted.

The company is optimistic about their performance for the rest of the year and expects adjusted net earnings per diluted share to be in the range of 11.85 to 12.05. The call was opened for Q&A and the first question was about procedure volumes and capital equipment, to which the CEO responded that volumes remained healthy and the capital order book is strong. The Spine business had a good quarter, driven by fundamentals and technology improvements, and the Interventional Spine business had high growth. The Q guidance system has also picked up momentum.

The Mako, Spine and CoPilot products will not be launched until the fourth quarter, so they did not have much of an impact on the company's performance. The competitive merger is also not having a significant impact at this early stage. However, the overall Spine business had a good quarter. In the Q&A session, Glenn discussed the $0.10 raise in EPS and attributed it to operational improvements, lower other income, and a higher tax rate. The company is still targeting an OI&E of $250 million and remains confident in their ability to reach their 2019 earnings level.

Kevin Lobo, CEO of Stryker, addressed concerns from investors about the potential impact of Intuitive's da Vinci 5 on their Endoscopy business. He stated that the overlap between the two companies is minimal and that Stryker's differentiated solutions and strong performance in endoscopy will continue for years to come. He also mentioned their leadership in fluorescence imaging and recent partnerships for safer surgery. In response to a question about organic growth and guidance, Lobo stated that the 10% growth in the quarter and the 9% guidance for the year are strong and in line with expectations.

The speaker asks about the company's guidance for the top line given the easier comps in the balance of the year. The CEO responds by saying that the fourth quarter of last year was not an easy comp and they have an extra selling day in Q3 and Q4. He also mentions uncertainties in the marketplace but says they feel good about their business. When asked about M&A, the CEO says they have a healthy pipeline of deals and the top five priority adjacencies are still their focus.

The speaker, Kevin Lobo, is excited about the pipeline and mentions that most of the upcoming products are in the "tuck-in" variety. He also reiterates the company's interest in branching out into other areas. The next question is about the 18% increase in instrument sales and the 44.2% increase in the "other" category. Lobo explains that the growth in instrument sales is due to strong commercial execution and the launch of new products, while the growth in the "other" category is attributed to both Surgical Technologies and Orthopaedic Instruments. He specifically highlights the success of their smoke evacuation and SurgiCount products, as well as the launch of a new combined solution.

In the first quarter, Surgical Technologies saw significant growth due to Neptune Waste Management and strong commercial execution in Orthopaedic Instruments. The Mako system had a record quarter for installations and the direct-to-patient campaign has been successful. Europe remains a growth engine for Stryker, but was slightly softer this quarter compared to last year.

In the first quarter, Stryker saw strong results driven by a super cycle of innovation. The company expects Europe to continue to pick up in the second, third, and fourth quarters, and is not concerned about international sales. In terms of capital spending, Stryker sees opportunities across the board, with a strong backlog and elevated capital business. CEO Kevin Lobo mentioned a super cycle of innovation driving growth, and the company expects year two and three to be peak years, with growth drivers beyond that still to be determined.

Kevin Lobo, CEO of Stryker Corporation, discusses the company's constant rhythm of innovation and the impact it has on their growth. He mentions specific products that will contribute to their growth in the coming years and emphasizes that this high growth is expected to continue as long as market conditions remain similar. He also mentions their strategy of acquiring high growth assets and how it contributes to their organic growth. Lobo assures investors that this growth is not a fleeting moment and that they are in a new normal of high growth. In regards to the ortho side, there are updates on the Mako robot for spine and shoulder, which are still on track for a mid-2024 and year-end 2024 launch.

Kevin Lobo, CEO of Stryker Corporation, stated that the company is looking at a Q4 launch for Mako spine and CoPilot and a launch for Mako shoulder by the end of this year. In terms of the backlog, Lobo commented that the market is stable and there has been no significant changes in waiting lists or staffing. The new defibrillators recently approved have not contributed significantly to the backlog. The company has a healthy backlog and continues to receive good orders, giving them confidence for the rest of the year, with the potential for orders to increase with new product launches.

In this paragraph, the speakers discuss the impact of timing on free cash flow and reaffirm their targets for fiscal '24. They also mention the success of Mako installations in competitive accounts and the strong growth in smoke evacuation products. They attribute this growth to a combination of factors, including bundling and increased sales efforts.

The company has experienced tremendous growth and demand, which has been supported by improvements in their supply chain. The launch of MAKO spine may be pushed back by a few months, but this was always expected to happen. The guidance for the year does not include the spine or shoulder launch. The MedSurg business is expected to have double-digit growth for the next five years, but this does not solely rely on the backlog. The company has new products such as defibrillators that will also contribute to growth. The Street's expectations for MedSurg growth are not in line with the company's expectations.

The speaker clarifies that they did not give a specific number for double-digit growth over five years, but they are confident in their ability to continue high growth based on innovation and market conditions. They also mention the MAKO robot launch and potential impact on growth in 2025. The questioner asks for more information on the MAKO robot launch and other upcoming products that could contribute to growth in the back half of 2025.

In the paragraph, Kevin Lobo discusses new products that are expected to contribute to growth for a few years, including the LIFEPAK 35 and Pangea in the Trauma business. He also mentions the Mako Spine system, which will consist of a robot and Q guidance technology, and the CoPilot product, which will have haptic feedback to protect against vital structures. These products are part of a comprehensive ecosystem that is already being sold and will further contribute to spine growth. A question is then asked about the launch of the Mako Spine system, to which Lobo clarifies that the Q Guidance is already being sold and is part of the Mako Spine system. He also mentions that the company is already seeding the market with half of the system. The next question is asked by Danielle Antalffy with UBS, congratulating on the strong start to the year.

The company has a target of 200 basis points for operating margin expansion over the next two years, with a goal of 100 basis points in the first year. The first quarter of the year showed 80 basis points of margin expansion, with expectations for stronger margin expansion in the second half of the year. The company plans to focus on both gross margin and operating expenses, with programs in place for price increases, low-cost greenfield sites, strategic in-sourcing, shared services efficiencies, IT harmonization, and natural leverage from high growth levels.

The speaker is pleased with the company's Q1 performance and mentions upcoming catalysts for Pangea and LIFEPAK. They believe that these products will have a significant impact on the plating aspect of their trauma business, which is currently not as strong as their nailing business. The launch of these products has received positive feedback from surgeons and the impact will be seen in Q3 and beyond.

The company is preparing to launch a new product called LIFEPAK and is receiving positive feedback from potential customers. Although the impact on sales in Q2 will be minimal, it is expected to have a significant impact in the next 2-3 years. The company is also seeing strong performance in the upper extremity sector, with no changes due to the CMS ruling on ASCs earlier this year. The company plans to introduce new products in the Shoulder portfolio, but there is no specific timing mentioned.

Kevin Lobo, CEO of Stryker Corporation, expects the company's fast-growing business to continue to grow due to the launch of several new products, including a perform tractor system, a reverse stemless product, a pyrocarbon hemiarthroplasty product, and a hollow lens. These products have been driving a 20% growth in the business every quarter and are expected to maintain this momentum. The recent acquisition of a French company will also strengthen their market share in Europe and potentially bring new products to the United States. Surgeons have given positive feedback on the new products.

The speaker is responding to a question about the company's recent earnings report. They mention that their products are highly differentiated and well-received in the market. The speaker also notes that the company's margins are expected to expand in the second half of the year, but may not be as high in every quarter. They then address a question about pricing pressure, stating that there was a 20 bps decrease in pricing for Orthopaedics and Spine units. They also mention optimism for the future of pricing in the industry, and mention a "tale of two cities" when discussing pricing.

On the MedSurg side, the company is able to gain pricing through contracts and sees less negative price performance on the ortho side. However, ortho is not expected to reach positive growth. The company maintains its outlook for mid-single digit growth in the ortho markets, with a 200-300 bps outperformance above that. There may be concerns about utilization and procedure volumes in the second half of the year.

The company is optimistic about the markets for the full year and is seeing strong international growth for the Mako system, particularly in India, Japan, Europe, and Korea. However, there is still potential for growth in Latin America and Canada, which have been slower to adopt the Mako system. The company is making changes to address these opportunities.

The company is very excited about the international market for their robot installations, which have shown significant growth in every market. The key to success is high utilization rates, with India currently leading the world in this aspect. The company has also acquired an AI solution called Gauss, which measures hemoglobin levels and has improved its interface. The company is also exploring connectivity options with Vocera, but it is too early to discuss them in detail.

Stryker is focused on improving workflow and providing better IT solutions for customers in the healthcare industry. They are also working to reduce errors and improve safety and outcomes for patients. The company has recently made a foray into the digital solutions world with the acquisition of Vocera, and they plan to continue investing in this area through both organic innovation and acquisitions. Stryker expects to have a strong year in 2024 and will share their Q2 results in July.

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