Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations, introduces the Fiscal '25 Third Quarter Video Earnings Webcast. He mentions that the webcast features Geoff Martha, Chairman and CEO, and Gary Corona, Interim CFO, who will discuss the company's third-quarter results and outlook for the remainder of the fiscal year. After their remarks, executive VPs from the company's four segments will answer questions from analysts. The session will last about an hour, and a press release with financial information and an earnings presentation is available on their website. The presentation includes forward-looking statements, with a disclaimer that actual results may vary. Comparisons are made on a year-over-year basis, excluding foreign currency impacts.

In the paragraph, Geoff Martha discusses the company's financial performance, highlighting consistent mid-single-digit revenue growth for nine consecutive quarters. Key areas of growth include cardiac ablation, leadless pacing, neuromodulation, and diabetes, with significant contributions from their PFA portfolio. Innovations in structural heart technologies and renal denervation are expanding their market potential. Despite a minor U.S. distributor issue, they achieved high-single-digit EPS growth, exceeding expectations, along with improved gross and operating margins. Looking ahead, they anticipate accelerated revenue and EPS growth, leveraging their strategy to deliver sustainable revenue, earnings growth, and strong free cash flow, benefiting shareholders.

The paragraph discusses the Q3 business results, focusing on the cardiovascular portfolio, which experienced mid-single-digit growth. The Cardiac Ablation Solutions (CAS) business notably grew by 22%, driven by the rapid growth of Pulse Field Ablation (PFA) products. The company is unique in offering two PFA platforms, Affera and PulseSelect, enhancing flexibility and market competitiveness. Affera is highly desirable for its integrated high-density mapping and dual energy capabilities, increasing revenue per case by replacing competitors' products. PulseSelect, a single-shot PFA catheter, also drives demand due to its ease of use and safety profile, giving the company confidence in its outlook. The company expects continued rapid growth in Q4, predicting CAS to maintain double-digit increases and anticipating the business will achieve $1 billion in revenue this fiscal year with a trajectory towards $2 billion. Additionally, structural heart growth reached high-single digits, propelled by the adoption of the Evolut FX+ TAVR system.

The company is anticipating key upcoming data releases related to its Evolut platform and a smart trial comparing its product with a competitor. The business is reported to be in a strong position due to product improvements, clinical data, and effective execution. The cardiac pacing therapies sector grew 9%, marking consistent growth over the past 10 quarters, driven by leadless pacemaker and conduction system pacing technology. The company's micro leadless pacemaker franchise is celebrating its 10th anniversary, showing robust growth. In hypertension treatment, the company is set to change the standard-of-care with their simplicity blood pressure procedure, supported by new Medicare coding and expected coverage, activating new U.S. accounts to expand the procedures. High hypertension rates and poor control in patients present a large potential market.

The paragraph discusses the growth and strategic advantages of a company in the healthcare sector. The company is positioned to lead in addressing unmet needs in cardiovascular care and anticipates accelerated growth starting in Q4. In the neuroscience portfolio, particularly in cranial and spinal technologies, the company achieved strong growth and gained market share. The spine market is undergoing changes, partly due to a competitor exiting the business, and the company's comprehensive suite of AI-driven and surgical technologies is disrupting the field. Their partnership with Siemens Healthineers further strengthens their offerings. The company's AiBLE ecosystem is attracting top talent and they expect continued above-market growth in cranial and spinal technologies (CST). Additionally, their neuromodulation segment grew by 13%, exceeding market growth.

The paragraph highlights the impact of innovative closed-loop sensing technology in the medical field, particularly in pain and brain modulation therapies. The company achieved notable growth in pain stimulation, driven by their Inceptiv spinal cord stimulator, which offers personalized therapy and optimal MRI compatibility. Similarly, in brain modulation, the adoption of Percept DBS systems has significantly advanced treatment for movement disorders, bolstered by recent CE mark clearance for BrainSense adaptive DBS technology. Transitioning to their surgical portfolio, they saw a temporary impact on U.S. performance due to changes in distributor buying patterns, expected to normalize by the next fiscal year.

The paragraph discusses Medtronic's stable hospital customer purchasing and strategic efforts to navigate market pressures, particularly in their stapling franchise, by leveraging growth in their LigaSure Advanced Energy Products and emerging markets. The Hugo Soft-Tissue robotic platform is approaching significant milestones, including U.S. market entry, expanded indications, and improved system features. International use is rising, and Hugo's procedure volume has more than doubled. In the U.S., they plan to seek FDA approval for Hugo's urology indications soon and have completed enrollment in hernia and benign GYN studies. FDA approval was received for the GYN oncology ID study, and new features like ICG fluorescent imaging and LigaSure Vessel Sealing technology are being added to Hugo. These advancements position Hugo as a growth driver for Medtronic in surgical business and beyond. Additionally, Medtronic's diabetes segment experienced five consecutive quarters of double-digit growth, driven by the market shift towards advanced insulin delivery systems and the success of the MiniMed 780G system.

The paragraph discusses Medtronic's progress with its Simplera Sync sensor, noting positive feedback in Europe and ongoing efforts for FDA approval in the U.S. The company is enhancing its diabetes technology pipeline with next-gen pumps, smart pens, and algorithms, and seeking expanded labeling for the 780G to include Type 2 diabetes. Medtronic is focused on disciplined pricing, maintaining SG&A growth below sales, and improving productivity to support mid-single-digit growth and strong earnings. Q3 revenue reached $8.3 billion, with a 4.1% organic growth and adjusted EPS of $1.39, exceeding expectations. Growth was driven by improvements in gross margins, operating margins, and a favorable tax rate, with strong performance in diabetes, cardiovascular, and neuroscience sectors.

The paragraph highlights the company's strong international market growth, with a 5% overall increase and significant growth in regions like Japan, India, Eastern Europe, Southeast Asia, and the Middle East and Africa. The company achieved an improved adjusted gross margin of 66.6% and an adjusted operating margin of 26.2%, driven by COGS efficiency programs, better pricing, and business mix. There is a focus on margin improvement, investments in product launches, and shareholder returns through dividends and share repurchases. The strategy includes finding tuck-in acquisitions and evaluating the portfolio for maximum shareholder value. The company reiterates its full-year revenue and EPS guidance, expecting accelerated growth in the fourth quarter and projecting FY25 organic revenue growth of 4.75% to 5%.

In the paragraph, the company anticipates reaching mid-single-digit revenue growth for the tenth consecutive quarter, driven primarily by its cardiovascular portfolio. They expect foreign exchange rates to impact fiscal year 2025's revenue by $275 to $325 million, including $125 to $175 million in Q4. The fiscal 2025 non-GAAP diluted EPS forecast remains between $5.44 to $5.50, with a minor impact from foreign currency expected in 2026. The company expects high-single-digit adjusted EPS growth due to restored earnings power and strong operating margin expansion. The CFO is transitioning, and Terry, the incoming leader, is expected to enhance margin improvement and shareholder value. The company acknowledges ongoing changes as part of its turnaround strategy.

The paragraph discusses Medtronic's current phase of business growth, highlighting consecutive quarters of mid-single-digit growth and the emergence of significant growth drivers. These include innovations in diabetes technology, neuromodulation, cardiac ablation, and hypertension treatment, alongside upcoming opportunities like Tibial Stim for Overactive Bladder, the Hugo robot, and new cardiac valves. The company is also experiencing high-single-digit EPS growth. The speaker expresses gratitude to Medtronic employees for their contributions and enthusiasm for future achievements. The paragraph concludes by instructing analysts on how to participate in the Q&A session and reminds them that the session is being recorded.

In the session, Geoff, Gary, and Ryan, joined by senior executives Que Dallara, Mike Marinaro, Sean Salmon, and Brett Wall, address questions. Patrick Wood from Morgan Stanley is first, inquiring about projected growth into fiscal 2026, considering various initiatives like Hugo and Micra. Geoff Martha responds, affirming Medtronic's commitment to driving profitable growth and maintains their guidance of 4.75% to 5% organic revenue growth and high-single-digit EPS growth for the current fiscal year. Ryan Weispfenning follows up, taking the next question from Larry Biegelsen at Wells Fargo.

Larry Biegelsen asks about the drivers behind the acceleration of AF Solutions in Q4 and plans for fiscal 2026, particularly regarding the Affera product line and deployment of mapping technology. Geoff Martha responds by highlighting the positive impact of Pulsed Field Ablation (PFA) on patient outcomes and physician productivity. He acknowledges the strong market demand, projecting the PFA market to reach $9 billion, growing at a high-teens rate. Martha expresses optimism about the demand for their platforms, PulseSelect and Affera, citing positive feedback and improved supply chain performance. The new factory in Galway is seen as a significant contributor to enhancing Affera's production, but he clarifies that the $2 billion line of sight does not include forward-looking statements.

The paragraph discusses the ongoing expansion and strategic growth of a company's medical platforms, specifically highlighting the Affera and PulseSelect technologies. The company is not limiting its goals to a $2 billion target and is looking beyond it in terms of near-term and long-term opportunities with its platforms. They are aggressively expanding capacity both in factories and in the field to meet the increasing demand. Affera's launch in the U.S. has driven significant growth in the third quarter, and the PulseSelect platform is popular for its precision and effectiveness, particularly in regions that do not utilize mapping. The company anticipates strong growth moving forward, with a focus on expanding its field footprint and maintaining capacity ahead of demand. Overall, there is a positive outlook as they continue to innovate and meet the needs of physicians in the post-operative ablation market.

The paragraph discusses the company's strategy to balance investment in growth programs, like post-field ablation, Hugo trials, and renal denervation, with the need to maintain margin expansion. Geoff Martha emphasizes the importance of growing sales while controlling SG&A expenses to achieve financial targets. He highlights the role of gross margin improvement in providing financial flexibility and mentions the use of tuck-in M&A as a form of R&D. Gary Corona confirms that the focus on gross margin growth has been successful in the first half of the year and is expected to continue in the second half.

In the paragraph, Geoff Martha addresses concerns about Medtronic's performance, specifically relating to the U.S. Surgical division. He clarifies that a temporary dip in performance was due to some large distributors reducing their inventory levels of Medtronic products, leading to a 200 basis point decline in Q3 growth. However, he expresses confidence that this is not indicative of a market share loss and anticipates that performance will stabilize once distributors reach their target inventory levels by the start of Q1. Additionally, he touches on managing the P&L and mentions that the company's diversified portfolio enables it to drive earnings despite these fluctuations.

The paragraph addresses the company's market performance and financial strategies. It explains that while robotics in the U.S. poses challenges, the company maintains stable customer purchases and slightly outperforms in the non-robotic space. Gary Corona discusses positive gross margin trends due to cost efficiency programs, disciplined pricing, and favorable foreign exchange impacts. The company expects gross margins to improve in the second half of the year. Geoff Martha highlights the focus on improving margins through pricing, product mix, and cost reductions, while noting growth outside the U.S., especially in emerging markets. The company aims to align business performance with corporate averages, particularly in product lines like LigaSure and barbed sutures.

In the paragraph, the discussion focuses on the progress of Hugo, a surgical system, as it becomes a significant growth driver for surgery by FY ‘26. Mike Marinaro highlights advancements, stating that Hugo is now operational in over 25 markets worldwide, with a notable increase in procedure volume and improved utilization. External evaluations show that Hugo is comparable to market leaders in terms of performance and functionality. Progress in advanced capabilities, such as completing the first ICG cases and integrating LigaSure, is emphasized. The team plans to submit an application to the FDA for a urology indication soon, while also working on expanding clinical evidence for multiple U.S. indications.

The paragraph discusses issues in the surgical side of the business, specifically related to distributors destocking inventory, which was unexpected and occurred late in the quarter. This destocking was due to the distributors' own goals, affecting Medtronic's U.S. surgery business performance, which has been below the corporate average for several quarters. There is concern about the business returning to growth, and a question about whether the Hugo platform is necessary for growth. Geoff Martha reassures that the distributor issue is temporary, and normal buying patterns are expected to resume once inventory levels are adjusted.

The paragraph discusses the challenges faced by Medtronic's U.S. surgical business, specifically related to its stapling franchise, which has experienced growth below the corporate average. Despite these ongoing pressures, the company is committed to revitalizing growth to align more closely with corporate standards. They express confidence in robotic surgery as a future growth driver by FY '26, which will impact Medtronic at a higher revenue level in the mid-term. The company plans to maintain strength in emerging markets, continue to gain market share with products like LigaSure and barbed sutures, and leverage the Hugo surgical system. Mike Marinaro acknowledges the challenges faced in the recent quarter but anticipates more normalized performance moving forward, focusing on the outlined growth areas.

In the paragraph, Geoff Martha discusses the financial guidance for the fourth quarter, highlighting expected acceleration in both revenue and profit despite ongoing distributor issues. This growth is primarily driven by advancements in the cardiovascular (CV) segment, which has seen consistent mid-single-digit growth over the past 10 quarters without significant contributions from specific products like CAS or Ardian. He notes strong performances in cardiac rhythm management (CRM), structural heart innovations, and cardiac surgery, which has experienced high-single-digit growth. Additionally, the company anticipates further growth from CAS and RTN in the fourth quarter and increased contributions from Ardian in fiscal year 2026. Travis Steed acknowledges the information provided, and the conversation shifts to Brad Welnick, who introduces a question from Matt Miksic regarding another area of concern in the quarter related to full vascular.

The paragraph involves a discussion about the financial performance of a company's peripheral vascular business, which saw a shift from mid-single-digit growth to a low-single-digit decline. This decline is attributed to a China Volume-Based Procurement (VBP) issue causing volatility in the China market. Despite this, the company has managed to perform well overall and maintain profitability. Additionally, there is a question regarding the international opportunity for the company's renal denervation franchise, with a request for updates on global market expansion and coverage in various countries. Geoff Martha, the CEO, defers the inquiry regarding international market progress to a colleague named Sean.

The paragraph discusses the excitement and progress surrounding the NCA's conversion to an NCD, highlighting its potential to change the standard-of-care for hypertension, a major health issue. It notes that historically, NCAs typically convert to NCDs, with definitive timing set for the announcement in July and effect in October. This development is expected to create significant opportunities in the U.S. and globally. Sean Salmon adds that international reimbursement efforts require meeting country-specific criteria, such as health technology assessments and published guidelines. He mentions positive developments in Europe, including France's established reimbursement.

In the paragraph, a discussion is held regarding the regulatory progress and market strategy for renal denervation devices outside the United States and Europe. The company recently received approval in China and plans to initiate sales in major cities before expanding further. They are also working on obtaining approval in Japan, which is the last major country pending approval. Upon approval, there is typically a six-month wait for reimbursement of the products. The U.S. is expected to be the primary growth driver for renal denervation due to the prevalence of the disease and favorable payment setups with Medicare and commercial insurers. Additionally, a question is posed to company executives about managing foreign exchange (FX) risk. Geoff Martha and Gary Corona explain that actions are already in place to mitigate FX risk and have been for several quarters, with positive effects expected to become evident.

The paragraph discusses the company's strategic measures to improve financial performance and growth. Initially, there is acknowledgment of consistency in the current fiscal year and anticipation of reduced foreign exchange headwinds in the following year. To enhance gross margins, the company is revising its incentive structures to favor U.S. dollars over local currencies in emerging markets, enabling dynamic pricing. Additionally, the global operations team, led by Gary, is implementing natural hedges in the supply chain. Geoff Martha attributes their progress to a comprehensive approach, while Ryan Weispfenning and Brad Welnick set up a transition to a question from Shagun Singh, who seeks further clarification on growth strategies mentioned by Geoff.

The paragraph discusses incremental growth expectations and the timeline for achieving significant revenue goals, particularly a $2 billion target. Geoff Martha addresses a question about the drivers of growth, noting a strong position in large, fast-growing markets such as diabetes, where double-digit growth has been reported over several quarters. He emphasizes the confidence in ongoing opportunities, highlighting developments like the 780G system and other innovations. Martha also references PFA and CAS as areas of potential expansion and growth, without specifying a precise timeline for the $2 billion figure but suggests it's achievable in the near term due to unlocked supply and market potential.

The paragraph discusses the company's advancements and growth drivers in various medical technologies and markets. It highlights the successful establishment of a new factory in Galway, Ireland, which has improved supply issues for Affera. The company is experiencing notable growth in the Neuro Mod sector, particularly due to differentiated sensing technologies used in SC (spinal cord), Pain Stim, and DBS (deep brain stimulation). This technology offers substantial benefits for patients and the healthcare system. Looking ahead, the company anticipates significant growth from the Hugo surgical business by FY 2026, and Ardian's impact is expected to be favorable. Additionally, the company plans to expand its overactive bladder treatment business with the introduction of tibial technology, which is expected to double the business size in the coming years.

The paragraph discusses a medical device for overactive bladder, which is nearly a wearable since it is placed under the skin on the ankle. The company is optimistic about the market potential for this device and is focused on investments and improvements to maintain growth. During a discussion, Pito Chickering from Deutsche Bank asks if there is a risk of privately manufactured products from distributors displacing Medtronic's products. Geoff Martha and Mike Marinaro respond by assuring there is no evidence of such a risk, as they maintain active conversations and agreements with distributors to prevent such issues.

In the paragraph, Geoff Martha discusses Medtronic's approach to contracting and distribution within its surgical business. He explains that while the company employs distributors for their wide range of products, Medtronic often establishes direct contracts with hospitals. These contracts are described as robust and capable of addressing supply shortages by ensuring Medtronic can quickly regain market position if a competitor temporarily takes over a supply gap. He mentions this as a new question that doesn't concern the business much. Ryan Weispfenning then thanks a person named Pito and Geoff Martha for his final remarks, in which Geoff expresses appreciation to the analysts and attendees for their support. He invites them to join Medtronic's Q4 earnings broadcast scheduled for May 21, where they will provide updates on fiscal year-end performance, growth drivers, margin expansion, and FY '26 guidance.

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