Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations, introduces the company's Fiscal Year 2025 Fourth Quarter Earnings Webcast. He mentions that Geoff Martha, CEO, and Thierry Pieton, CFO, will discuss the fourth quarter results ending April 25th, 2025, and the outlook for Fiscal Year 2026. Following prepared remarks, Executive VPs will join to answer questions from analysts. The program is expected to last between 60 and 90 minutes. Medtronic issued a press release with financial details and an earnings presentation accessible on their website. The statements made in the webcast may include forward-looking statements, with actual results potentially differing. Comparisons are year-over-year and revenue comparisons exclude foreign currency impacts.

The paragraph highlights Medtronic's strong performance in its fourth fiscal quarter, reporting a 5.4% revenue growth and sustained mid-single-digit growth over 2.5 years. Significant growth was seen in the Cardiovascular segment, Neuromodulation, Diabetes, and US Cranial and Spinal Technologies. CAS and ENT businesses achieved $1 billion annual revenue milestones, joining ten other businesses. The company translated revenue growth into high single-digit operating profit and low double-digit EPS growth, achieving a 9% EPS growth in the latter half of the year. Medtronic met the upper end of its annual commitments and issued new guidance considering potential tariff impacts.

In the paragraph, Medtronic discusses its strong business performance and strategy, highlighting the separation of its Diabetes business as part of active portfolio management. The focus then shifts to the company's Q4 performance, particularly in the Cardiovascular portfolio, where innovation drove 8% growth. Notably, Cardiac Ablation Solutions saw nearly 30% growth due to demand for their broad portfolio of pulse field ablation products, especially the Sphere-9 focal catheter which has received positive feedback for its efficiency, safety, and multifunctionality. Medtronic's international and US markets experienced substantial growth, with new accounts being added and customers appreciating the products' ease of use and effectiveness.

The paragraph discusses Medtronic's advancements and growth in cardiac technology, highlighting their next-generation Sphere 360 catheter, which has shown promising results and is set for a pivotal US trial. The Cas business is contributing significantly to company growth, with projections of doubling revenue in the near future as they expand globally. Medtronic is aiming to lead the $10 billion cardiac ablation space. Additionally, their Cardiac Rhythm Management business showed strong performance, driven by the success of their Aurora EV-ICD, Micro leadless pacemakers, and conduction system pacing leads. The Structural Heart segment also saw growth, particularly with their Evolut TAVR platform's success in the US, Japan, and emerging markets.

The paragraph discusses the positive performance and growing adoption of the Evolut valve, evidenced by data presented at medical conferences and several healthcare systems transitioning to using Evolut as their primary choice for TAVR implants. This success is attributed to the superior performance of Evolut compared to competitors and effective sales execution. Additionally, the paragraph highlights the company's efforts in developing the market for their Simplicity blood pressure procedure, anticipating an increase in demand and revenue once CMS provides reimbursement coverage. This includes hiring additional staff and collaborating with healthcare systems to establish outpatient service lines to meet expected demand.

The article discusses Medtronic's growth strategies and successes, highlighting its significant opportunity in the hypertensive market and advancements in its neuroscience portfolio. The company has achieved mid-single-digit growth in its Cranial and Spinal Technologies (CST) business, notably a 7% growth in the U.S., by leveraging its AiBLE spine ecosystem. This ecosystem integrates AI-driven software, robotics, and navigation, creating a comprehensive solution that encourages customer loyalty and attracts top talent. Medtronic's strength in CST is supported by investments to further enhance this ecosystem, leading to adoption by prominent medical institutions. Additionally, the Neuromodulation business experienced 10% growth due to innovations in closed-loop sensing technology, boosting its Pain Stim and Brain Mod segments.

The paragraph discusses the growth and success of the company's Pain Stim and Brain Modulation segments. Pain Stim grew by 12%, with a 15% increase in the US, driven by the Inceptiv closed-loop spinal cord stimulator, which has reduced the burden on patients and physicians by eliminating the need for frequent therapy adjustments. The company has now become the global leader in spinal cord stimulation. In Brain Modulation, growth was in the mid-single-digits, including a 9% increase in international markets, due to the BrainSense Adaptive DBS technology for Parkinson's patients. This groundbreaking closed-loop brain-computer interface has garnered media attention, leading to increased patient demand. The company is preparing for a full market release in the US, Europe, and Japan. In the Medical Surgical Portfolio, growth was 2%, with strong performance in emerging markets and advanced energy. The LigaSure vessel sealing technology continues to gain popularity, and the company anticipates further growth with the launch of the Hugo soft tissue robotic platform.

Hugo has achieved significant milestones, including filing for a urologic indication with the US FDA and presenting successful trial data at the AUA. The company plans to expand with hernia and benign gynecological indications and will soon start a GYN oncology trial. Instrumentation is expanding, and Hugo's presence now spans 30 countries, with increasing procedure volumes and utilization. The company is also expanding its AI-powered Touch Surgery ecosystem, enhancing its digital surgical capabilities globally. In diabetes, Medtronic reported 12% growth, driven by the MiniMed 780G system and strong CGM sales, particularly in Europe with the new Simplera Sync sensor. The Simplera Sync also received FDA approval in the US, with a launch expected in the fall. Integration and development work on an Abbott-based sensor are progressing well.

In the paragraph, Medtronic discusses its plans to separate its diabetes business into a standalone public company via an IPO. This move is intended to allow Medtronic to focus more on high-margin growth markets, while the new diabetes company will stand out as a leader in intensive insulin management. Medtronic highlights that the diabetes business differs from its main B2B operations in terms of customer base and infrastructure, which supports the strategic decision to separate. The separation is expected to help both entities achieve their long-term strategic and financial objectives by enabling more targeted growth and focus in their respective markets.

The paragraph discusses Medtronic's strategy to focus on high-margin growth markets, emphasizing increased profitability and reduced risk. The company aims for mid-single-digit organic revenue growth and enhanced earnings leverage. It highlights the Diabetes business, introducing Que Dallara as the new CEO. Que praises the leadership for significant investments in the Diabetes segment and expresses excitement about leading the large-scale business, which includes over 8,000 employees and two global manufacturing facilities, with an emphasis on innovation to improve outcomes and reduce burden for people with diabetes.

The paragraph discusses the strategic direction and achievements of a diabetes-focused company that is becoming independent, with a shareholder base aligned with its business goals. The company is investing in innovation and manufacturing to succeed in Automated Insulin Delivery and SMART MDI, aiming for margin expansion. Their $2.8 billion diabetes business operates in a $16 billion market, achieving double-digit growth for six consecutive quarters. They have a deep product pipeline and a partnership with Abbott Diabetes Care, enhancing the ecosystem for diabetes care. The leadership acknowledges the dedication of their team, and Geoff Martha introduces Thierry, who will provide more details on the financials and transition, marking his first earnings call with Medtronic.

The paragraph discusses the arrival of Thierry Pieton as the new CFO at Medtronic, highlighting his previous success in the automotive industry and his expertise in M&A, divestitures, and forming partnerships. Thierry is enthusiastic about rejoining the healthcare sector and sees significant growth opportunities at Medtronic. He aims to enhance the company's operations and drive value creation. Thierry also mentions plans to separate Medtronic's Diabetes business, which accounted for 8% of revenue and 4% of operating profit in fiscal year 2025, through a series of capital market transactions, with a preferred two-step approach.

Medtronic plans to initiate an IPO for up to 20% of its Diabetes business to capitalize the new entity and buy back Medtronic shares. Following this, they aim to execute a split-off, exchanging remaining shares of the new company for Medtronic shares, which will also be retired to reduce the share count. This process is expected to be completed in 18 months and be tax-free for US shareholders. Financially, the separation should enhance Medtronic's margins and EPS while maintaining the current dividend policy. The separation will allow Medtronic to invest more in its higher-margin businesses, fostering growth for both Medtronic and the new Diabetes Company. The paragraph concludes with a recap of Medtronic's Q4 results, highlighting a 5.4% organic revenue growth to $8.9 billion and an 11% increase in adjusted EPS to $1.62.

The paragraph discusses the company’s strong financial performance, with revenue and EPS exceeding expectations due to strong performances in multiple segments like CRM, Structural Heart & Aortic, Diabetes, and Neuromod. Revenue growth was geographically broad, with notable growth in the US, Japan, Western Europe, and Emerging Markets. The adjusted gross margin slightly declined due to product mix and foreign exchange but remained stable on a constant currency basis. The company benefited from increased pricing, especially for new products, and efficiently offset the inflation impact through cost-saving measures and improved manufacturing efficiency. Adjustments in their operations resulted in significant savings and increased labor efficiency. The operating margin improved by 27.8%, or 200 basis points on a constant currency basis, despite increased R&D investments.

In the paragraph, the company reports a favorable adjusted tax rate of 16% due to a beneficial jurisdictional mix of profits, resulting in strong Q4 earnings per share (EPS) of $1.62, an 11% increase. For fiscal year '25, revenue grew 5% organically, and EPS rose 6% or 10% on a constant currency basis. The company returned $6.3 billion to shareholders through share repurchases and dividends and announced a dividend increase for the 48th consecutive year. For fiscal year '26, they anticipate continued mid-single-digit organic revenue growth, approximately 5% for the year, and 4.5% to 5% growth in Q1. They'll face mix headwinds in gross margin due to CAS and Diabetes impact but plan to drive pricing discipline and accelerate cost efficiency programs to outpace inflation. The company will significantly increase investment in growth drivers, focusing on maximizing future growth.

The company plans to grow R&D investment faster than revenue for the first time in four years, focusing on areas like Cardiac Ablation, Surgical Robotics, and Renal Denervation (RDN) to scale upcoming product launches in the US. They anticipate increased interest and tax expenses impacting EPS growth by 300 basis points due to refinancing debt at higher rates and effects from Pillar Two. They project 4% EPS growth for fiscal year 2026, excluding tariff impacts, and a neutral foreign exchange impact. For Q1, EPS is expected to range between $1.22 and $1.24, with tariffs expected to have minimal impact and a small foreign exchange headwind. The company has plans to mitigate the impact of potential US/China tariff scenarios outlined in their earnings presentation.

The paragraph discusses the anticipated financial impact of tariffs on the company's cost of goods sold (COGS) for fiscal year 2026, estimating it to be between $200 million and $350 million. The quarterly breakdown forecasts minimal impact in Q1, about 10% in Q2, and 30% and 60% in Q3 and Q4, respectively. The earnings per share (EPS) for 2026 is projected to be between $5.50 and $5.60, continuing the trend of high single-digit growth seen in 2025. Looking ahead to 2027, the company expects continued growth, aided by factors like revenue increase, FX tailwinds, and benefits from the Diabetes separation. Geoff Martha adds that despite external challenges, the company has strong growth drivers in various sectors, such as Peripheral Vascular and Pelvic Health, and is making progress with its Hugo platform.

The paragraph discusses the positive trajectory of Medtronic's business, highlighting strong financial growth and strategic changes, such as streamlining operations, introducing new leadership, and prioritizing innovation. It emphasizes the company's commitment to a performance-driven culture and improvements in global operations, supply chain, and quality. The paragraph also acknowledges the efforts of Medtronic employees in achieving these results and mentions Sean Salmon's departure after 20 years of service, noting his contributions to the company's successes.

The paragraph discusses leadership changes and future plans within a company's Cardiovascular (CV) business. Sean is leaving, recognized for developing strong leaders and a robust technology pipeline, contributing to CV growth. Skip Kiil will take over, known for his success in other MedTech areas, expected to enhance the leadership team with his strategic and commercial expertise. After thanking Sean for his service, the focus shifts to a Q&A session, instructing participants to limit questions. Additional leadership present includes Que Dallara, Mike Marinaro, Sean Salmon, and Brett Wall. Travis Steed, presumably an analyst, congratulates the team on their success and asks about revenue guidance with the new CFO.

The paragraph discusses growth expectations and strategic drivers for EPS growth, excluding tariffs, with Geoff Martha addressing the topic. He is optimistic about the company's growth due to strong market positions and performance in key areas like CV and neuroscience, even excluding revenue from diabetes. He mentions the CV business showing significant acceleration, neuroscience achieving double-digit growth, and emerging opportunities in surgical with Hugo. Despite current guidance, the company is managing with higher growth expectations. Thierry will further elaborate on earnings.

The company is optimistic about its market positions and growth potential, with plans extending to 2027. Their growth strategy includes increasing R&D investments faster than revenue growth, projecting a $200 million increase in R&D spending next year. Operating profit is expected to grow by about 7%, outpacing revenue growth despite a 5% increase in revenue. This is partly due to leveraging efficiencies, but pressure points such as a rising tax rate—up about 1.3% due to Pillar 2—and higher interest rates from debt refinancing are expected to impact net profit. Despite these challenges, the company is committed to surpassing growth and margin targets.

The speaker highlights their focus on improving margins, emphasizing cost-saving opportunities within the supply chain. They acknowledge positive initiatives led by Greg and anticipate further benefits. On tax matters, they aim to leverage temporary safe harbors under Pillar 2 but acknowledge uncertainty in qualifying for these in the future. Growth is expected to persist beyond 2025, propelled by new products like CAS, Ardian, and Tibial, which will contribute into 2027. Despite separating from the diabetes business, which currently contributes to growth, the speaker is confident in achieving mid-single-digit growth and mentions that foreign exchange will become a mild challenge by the end of 2026. The conversation promises further details later.

The paragraph discusses a business deal related to diabetes, which is structured to allow for share retirement and is expected to be immediately accretive to earnings per share (EPS), supporting high single-digit growth by 2027. There's a mention of foreign exchange (FX) impacts turning into a tailwind, correcting an earlier reference to it as a headwind. Travis Steed asks about the 7% operating profit and whether it includes tariffs, and he inquires about the diabetes EPS headwind. Thierry Pieton clarifies that the 7% excludes tariffs, which could cost $200 million to $350 million, affecting operating profit growth by 2.2 to 3.2 points. The diabetes EPS headwind is linked to the rollout of Simplera, impacting margins initially due to high costs, which will decrease as manufacturing scales up. Ryan Weispfenning then prompts the next question from Robbie Marcus at JPMorgan.

In the paragraph, Thierry Pieton emphasizes the strong fundamentals of the business, highlighting recent performance, such as a 5.4% organic revenue growth and a significant improvement in operating margins. Despite the anticipated diabetes spin-off and share buyback contributing to earnings per share (EPS) growth in fiscal year 2027, Pieton insists that the company's underlying strength and cost leverage will drive positive growth even without these one-time benefits. The focus is on maintaining operational improvements and achieving the growth target regardless of external factors like currency fluctuations.

In the paragraph, Larry Biegelsen from Wells Fargo asks Medtronic CEO Geoff Martha about the decision to spin off the diabetes business. Larry questions why Medtronic didn't consider splitting into more separate businesses and notes that the diabetes sector is growing above the company's average. Geoff Martha responds by saying that the spin-off will benefit both Medtronic and the diabetes franchise, allowing the latter to gain the focus and funding needed for its potential. He emphasizes the franchise's strong performance and product pipeline, suggesting that it is ready to operate independently and succeed in the public market. Meanwhile, Medtronic can concentrate on its high-margin growth areas.

The paragraph discusses a company's strategic plan to focus on high-margin growth areas by leveraging its core strengths, particularly in its go-to-market channels for healthcare systems. The company believes this strategy will enhance shareholder value both in the short and long term. Thierry discusses the accretive nature of a deal, implying it will positively impact key financial metrics such as EPS, operating margin, and gross margin. There is also a suggestion that the company's diabetes business might have more value outside the company. The rest of the company's operations are seen as having synergies that support growth across various business portfolios. In a subsequent Q&A, Vijay Kumar from Evercore questions Geoff and Thierry about the company's earnings and margins guidance, which indicates a 4% EPS growth excluding tariffs, with earnings growth expected to be back-end loaded, possibly due to mix impacts on margins and product mix issues.

The paragraph discusses the reasons for a back-end loaded construction schedule in the company's financial performance. The first quarter typically sees lower revenue than later quarters, leading to less factory absorption. This year, the company is investing in growth areas like R&D for cardiovascular products and sales and marketing to capitalize on growth opportunities. Although Q4 growth is slightly lower than the yearly average (4.5% vs. 5%), the company expects to benefit from these investments in the second half of the year. Additionally, while foreign exchange is a headwind in the first quarter, it is expected to turn favorable later. Geoff Martha adds that the current back-end loading is not as pronounced as last year and that the company met high guidance expectations from previous skepticism. Despite FX challenges over the years, the strategic growth approach remains positive.

The company anticipates that foreign exchange (FX) will be beneficial over the next few years, so it's taking measures like creating natural hedges and dynamic pricing in countries with devaluating currencies to mitigate FX exposure. This approach has shown positive impacts. Additionally, the company is implementing structural changes, like paying teams based on actual FX rates, to further reduce FX risks, and is combining these efforts with a hedging program. Thierry Pieton adds that there are offsetting factors affecting gross margin: a negative impact from the product mix, particularly in cardiovascular and diabetes segments, and positive impacts from pricing and cost progress. The diabetes portfolio changes will help address these mix effects, although that isn't the primary goal of these changes. Meanwhile, the mix impact from cardiovascular sales translates to positive news at the operating profit level, partly due to growth in capital equipment sales.

The paragraph discusses the company's strategy around shipping capital equipment before catheters and how this mix is expected to improve over time, benefiting future catheter sales. It then shifts to a discussion on hospital preparations for renal denervation procedures and reimbursement. The focus is on training physicians, educating them on coding and billing, and ensuring they can safely perform renal denervation in cath labs. This preparation is part of opening new service lines, which has generated enthusiasm from hospitals seeking to expand their practices.

The paragraph discusses the company's efforts in training, education, and support for programs to better activate patients following reimbursement, with the aim of directing them to treatment locations. A significant number of patients were self-referred through social media during clinical trials, highlighting its efficiency in patient recruitment. The company is optimistic about overcoming reimbursement hurdles as they progress into the National Coverage Determination (NCD) phase. In response to a follow-up question about revenue expectations, Sean Salmon explains that the adoption process is more complex than with procedures like PFA due to the need to identify underlying causes of high blood pressure in patients. He emphasizes that while the adoption may have a slower start, it is anticipated to be a long-term, significant growth driver for the company due to the large patient population.

The paragraph features a discussion led by Geoff Martha and Que Dallara, focusing on the company's strategic initiatives and pipeline in healthcare. Martha highlights the proactive efforts of health systems seeking partnerships for hypertension management, including virtual clinics and patient pathways. Que Dallara then expands on developments in diabetes treatment, mentioning the recent US approval and European launch of the Simplera Sync product, with plans to significantly increase its volume and presence. Additionally, the company has submitted a new ACE pump with an iAGC algorithm for FDA approval, in collaboration with Abbott, and is ready to launch pending clearance. They are also exploring multiple insulin options, including the currently available InPen, a next-gen durable pump expected for submission by fiscal year-end, with a patch following thereafter.

The article discusses improvements in a product lineup, emphasizing enhanced form factors and the integration of phone-controlled pumps, which many customers requested. A new third-generation closed-loop algorithm is highlighted for its potential in reducing the burden of diabetes management while maintaining expected clinical outcomes. The entire system's wearability is improved, and the company's customer service and tech support for patients and physicians are noted as key differentiators. During the discussion, there's also a focus on financial growth, with a 7% operating line growth and a 4% EPS growth for the full year, excluding tariff impacts, despite various investments and gross margin challenges.

The paragraph discusses the company's financial growth and strategic positioning within the spine business. Geoff Martha mentions achieving an 8% operating profit growth in Q4 and provides guidance of 7% for the next year, potentially rising to 8% if diabetes is excluded. He highlights the stability and demand in the spine market, emphasizing the company's technological leadership. Many competitors are struggling due to required investments and expertise. The company has developed a significant lead by transitioning from a product-focused to a solution-oriented approach, branded as AiBLE, which integrates AI-enabled technology. This shift offers durable competitive advantages and contributes to market growth stability and enhanced performance relative to peers.

The paragraph discusses Medtronic's strong performance and outlook in various business areas. Geoff Martha and Brett Wall highlight stable demand and growth in the spine segment, driven by enabling technology and interest from academic centers and sales professionals. They also emphasize other growth contributors like leadless conduction system pacing, EV-ICD, and plans to expand in the peripheral vascular space with products like Contego for the carotid area and new thrombectomy technology. The company is also optimistic about growth in public health with the launch of a new Tibial system. Overall, Medtronic is confident in its diverse growth strategy despite competition.

The paragraph discusses the significant growth potential of the company's PFA (pulsed field ablation) business, which is expected to grow from just over $1 billion to $2 billion in sales. The company's competitor also experienced rapid growth in this market. Geoff Martha highlights the strong demand for their Affera product and notes the importance of deploying capital systems to high-volume centers, which is a current focus. He mentions dedicating a significant portion of his time to promoting PFA, including attending the Heart Rhythm Society meeting and visiting key centers in the Northeastern United States.

The paragraph discusses the adoption and expansion of the Affera system, highlighting that institutions are actively acquiring second systems and catheter sales are increasing. Despite initial manufacturing challenges, the company has successfully scaled production of the innovative technology, expecting robust demand and a strong sales pipeline. The Sphere-360 catheter is highlighted as more exciting than previous models, and the PulseSelect system is offered as a cost-effective alternative without supply constraints, particularly beneficial in resource-limited global areas. The company expresses confidence in significantly growing the business in the near term, although a specific timeline is not provided.

In the article paragraph, Shagun Singh from RBC inquires about the growth of the CAS business, particularly the future role of cryo and potential pricing impacts, as well as updates on patient coverage for RDN. Sean Salmon responds, indicating that while cryo's role in the business will decline, it remains valuable, especially in cost-constrained environments. He also mentions that CAS's growth will stabilize and then increase. In terms of patient coverage for RDN, Salmon notes that they aim to align with guidelines and professional society recommendations to meet CMS's standards. He anticipates coverage for patients unable to manage blood pressure through lifestyle changes or medication due to side effects, expecting decisions soon.

In the paragraph, Geoff Martha discusses the company's portfolio management strategy, emphasizing a focus on secular growth opportunities with strong financial profiles, such as higher margins and alignment with core strengths. He mentions the decision to exit certain areas like ventilation, the LVAD business, dialysis, and diabetes to focus on markets with better growth and synergy. The strategy includes both additions and subtractions to their portfolio, aiming to enhance the company's market position through strategic mergers and acquisitions (M&A). Martha also highlights confidence in the company's fundamentals and a desire to accelerate growth through targeted M&A activity.

The paragraph discusses the unique mechanics and benefits of a transaction involving Medtronic's new diabetes company. The transaction involves two steps. First, an Initial Public Offering (IPO) of up to 20% of the new company's shares to raise capital, ensuring the company is fully capitalized and covering deal-related costs. Second, approximately six months post-IPO, Medtronic will execute a share split, allowing Medtronic shareholders to choose between keeping their Medtronic shares or swapping them for shares in the new diabetes company. This will permanently reduce Medtronic's share count, creating an accretive effect on its earnings per share (EPS). The transaction is designed to be tax-free for U.S. federal income taxes.

The paragraph discusses Medtronic's plan to consolidate its diabetes business over the next 18 months, with full consolidation expected by 2026 and impacts on earnings seen in 2027. Geoff Martha acknowledges the temporary boost to earnings per share (EPS) but emphasizes a strategy to achieve consistent growth beyond this. He also notes the reduction in dividend liability due to retired shares. Despite technical challenges, Martha expresses excitement about the company's direction and thanks participants for their engagement. He invites them to the upcoming Q1 earnings broadcast on August 19 for further updates.

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