Q1 2021 Medtronic PLC Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Medtronic first quarter earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question answer session to ask a question. During the session you will need to press star one on your telephone please be advised had to do.

<unk> is being recorded I would now like Dan The conference over to Ryan why spinning Vice President head of Investor Relations. Please go ahead Sir.

Thank you good morning, and welcome to Medtronic fiscal year, 2021, first quarter conference call and webcast, Jeff Martha's first quarter as Chief Executive Officer.

Other first the days that were presenting our prepared remarks by video we hope that you'll appreciate this new format and please let me know if you have any feedback.

Today's earnings call should last about an hour, Jeff along with Karen Parkhill, Medtronic Chief Financial Officer will provide comments on the results of our first quarter, which ended on July 30, Onest 2020.

After our prepared remarks, we'll take questions from the analysts.

Before I turn it over to Jeff Here's a few things to keep in mind.

Earlier. This morning, we issued a press release containing our financial statements and a revenue by Division summary, we also issued an earnings presentation that provides additional details on our performance.

During today's prepared remarks, and culinary session. Many of the statements. We make maybe considered forward looking statements and actual results may differ materially from those projected in any forward looking statement, given risks and uncertainties, including those related to the impact Cobot 19 has had and is expected to continue to have on our business.

Additional information concerning factors that could cause actual results to differ is contained in our periodic reports and other filings that we make with the SEC and we do not undertake to update any forward looking statement.

Unless we say otherwise all year over year revenue comparisons mentioned during this call our given on an organic basis, which adjusts for three things first be inorganic impact of our tightened spine acquisition.

And foreign currency and third the extra week than we had in the first fiscal month this quarter compared to the first quarter of fiscal year 2020.

The extra week as a result of our 50 to 53 week fiscal year calendar, which results in an extra week every five or six years.

Finally, reconciliations of all non-GAAP financial measures can be found in the attachment to our earnings press release or on our web site at Investor Relations Dot Medtronic dotcom.

With that I'll turn it over to Medtronic, Chief Executive Officer, Jeff Martha Jeff, Okay. Thanks, Ryan and I appreciate everyone joining us today.

But before we dive into our Q1 results I want to once again, thank the frontline healthcare workers, who continue to fight Coven 19 every day.

We're thankful beyond words for your sacrifice and tireless resolved.

I also want to acknowledge all of the Medtronic employees, who have gone that extra mile to support our customers and patients during this difficult.

Thank you for showing that our mission written 60 years ago still inspires us and really defines who we are as a company.

I also want to knowledge, the wildfires burning in northern California.

Medtronic has been a long time member of the Santa Rosa community and while our operations are currently affected our thoughts with those heroes battling these terrible blazes and the people affected including some of our employees. We hope for a quick containment and we're standing by ready to assess.

Okay now, let's switch gears to Q1.

Our results reflect a very strong recovery from the depth of the pandemic that we sold back in April.

Procedure volumes began to recover this quarter in multiple markets around the world and we drove market share gains in a number of our large businesses.

Our revenue declined 17% on an organic year over year basis.

In our adjusted EPS of 62 cents, while down 51% was well ahead of expectations.

We've seen a faster than expected recovery, our pipeline is kicking in and we're increasing our cadence of tuck in M&A, but most importantly, we're finding a new gear at Medtronic, and we're becoming a more nimble and a more competitive organization.

And in the coming weeks, you're going to hear more for me on this topic as we begin to outline the new Medtronic.

When the pandemic first hit we had to postpone our bi annual Investor day originally scheduled for June.

Well today, we're announcing that we rescheduled the meeting and we're now going to host of virtual meeting with you on Wednesday October 14th.

We're going to use that opportunity to lay out where we're headed including a deeper dive on our pipeline now that it's coming to fruition as well as the actions, we're taking to simplify the company.

So we look forward to being with you virtually at least on October 14th.

Now I'd like to do something a little different than our past earnings calls.

And lead with a discussion of market share.

Collectively our results in the month of June were stronger than many of our competitors and that strength continued into July and now into the first few weeks of August.

In some businesses, we're benefiting from the actions we took at the start of the pandemic to better partner with our customers.

In other businesses, we're seeing the benefit of new product launches as our pipeline kicks in across the company.

In fact.

We've already had over 130 regulatory approvals this calendar year in the us in Europe, Japan and China.

We've included a key approval slide in our earnings presentation that outlines all this.

We're gaining share our largest businesses like spine and CRH f. pacing in high power.

For example, our U.S. core spine business declined in the high single digits, which was better than the market. We estimate that we gained over a half a point of share in the second calendar quarter.

Our differentiated offerings of enabling technologies, which includes robotics imaging and navigation combined with our implants is reshaping the spine industry in Sierra Jeff We estimate that we gained significant implant share in both the high and low power markets in the second calendar quarter with the greatest gains coming in the U.S.

Micro our latest pacemaker grew in the low fortys globally and approximately 60% in U.S.

While many have been focused on how micro is expanding the market and taking share our new cobalt and chrome IC D. and CRT D. Platforms are also beginning to drive meaningful implant share and high power.

We launched these devices mid quarter in the U.S. and we're now working with a growing number of providers across the country, who have not implanted with medtronic in years.

Electrophysiologist are choosing cobalt and chrome for their unique asked in heart failure therapeutic algorithms. The high 40, Joel output extended battery longevity heart failure management capabilities as well as their blue sank remote programming that remote device management. These features provide layers of competitive advantage for us.

Yes.

We saw a 35% sequential increase in smart sink accounts globally.

And our proprietary remote control programming technology, which was launched in the previous quarter saw six fold increase in adoption sequentially.

In addition utilization of our TYRX absorbable anti bacterial envelopes increased by nearly nine points sequentially to 50% of our U.S. transvenous pacing Nic de implants as hospitals are focusing on minimizing patient re hospitalization rates. During code. We've also begun to return to sequential unplanned share.

Capture and TAVR, one of our largest growth drivers in the second calendar quarter, we maintained our share and market leadership in Europe and gained approximately one point of implant share sequentially in the us as we open new NCD accounts and sold great response from interventional cardiologists in cardiac surgeons to the bicuspid leaflet mobility.

He and hemodynamic clinical data that was shared at HCC in the spring in fact, we've received approval from the FDA just last week to remove bicuspid labeling limitations for low risk. However on the strength of these data.

This labeling change complements the approval we received earlier this summer as the only CE Mark TAVR system with a bicuspid indication for intermediate risk patients.

These are important regulatory milestones given the large size of the bike has been patient population, including 60% of the low risk population.

I'll also point out the share gains that were seeing in our pain stim business within Neuromodulation, where we've been rolling out our new DTN therapy. The superiority data that we have four GTM is resonating in the market.

We're taking advantage of this by focusing on customers that either don't use medtronic devices or split their business across multiple companies and we're having great success with this strategy in fact, almost half of our GTM implants in the quarter occur with these type of customers and equally important our SCS trials, which.

Our predictor of future implants, or ahead of our expectations and even caught up to prior year levels. In June this bodes really well for our pain stim business going forward.

So while we're driving share gains in many important businesses. There are also areas that we need to improve.

And DBS and pelvic health, while we lost share in the quarter, we're very bullish on where we're headed in DBS received FDA approval for our Percepta PC deep brain stimulation system with brain sense technology in late June.

Percept is the first DBS to record brain signals, while delivering therapy and we expect this to drive share gains in this high growth market going forward.

Fact, we believe this is the beginning of a multiyear run in DBS with our Directionally launching next year, followed by a close loop DBS system.

We are redefining the standard of care and creating a significant technology gap between us and our competitors.

In pelvic health, we just received FDA approval for our interest in micro device, which has important features over the competition.

Our devices, 50% smaller it recharges far faster and importantly, the recharger doesn't need to be perfectly aligned for a successful charge.

Additionally, Medtronic is the only company to offer physician practices the choice of recharge and recharge free and this is very important in the Neuromodulation space.

The physician feedback on our interest in micro rechargeable product has been universally positive.

And there are several early indications that our share in the in the US is rebounding quickly much like we saw in Europe. Following the micro launched earlier this year and just a few weeks, we're winning back accounts and we're seeing cases, where our competitors devices being X planted and replaced by micro.

We've been waiting for this patients now have the ability to choose a smaller better rechargeable product physician practices to prefer to deal with one company.

Our team is enjoying taking back to share.

Finally in diabetes look.

We're missing out on a better growth in this market.

And nobody at Medtronic is comfortable with this dynamic and we're pushing on several fronts to advance our technology.

We're actively increasing both our near and our long term growth opportunities through increased organic investment.

Innovative funding with our recently announced Blackstone partnership and inorganic activity Highland by the announcement earlier this month of our pending acquisition of companion medical.

Companion Smart pen technology expands our ecosystem to include the multi daily injection portion of the diabetes market with a patient population that is nearly 12 times larger than that that use insulin pumps.

But make no mistake, we are still very focused on regaining technology leadership in the pump in the sensor market.

However, we're also going to me patients, where they are and provide them with real time data guided support.

We expect to build a system that combines in pan with our smart CGM technology, including our neutrino include artificial intelligence algorithms. All of this designed to deliver better outcomes and reduce the burden of managing the disease for Mds patients.

See companion is just one more example of how we're going on the offensive as a company through an increased canes of tuck in acquisitions. In fact in addition to companion we've done two other major tuck in acquisitions this calendar year with digital surgery and Medic Korea.

Combined these three deals total approximately 1 billion in total consideration.

Data and analytics or the next big frontier in surgery. That's why we acquired the pioneering technology company digital surgery, the leader in surgical artificial intelligence.

We're integrating their technology into our soft tissue robotic assisted surgery system and also intending to use their surgical video management and clinician decision support solutions beyond robotics.

In fact, we plan on a limited launch this fall for the touch surgery enterprise, which is an extremely easy to use surgical video capture solution paired with the computer and connected to the cloud.

Medic Korea, a pending acquisition, we announced last month has differentiated technology that incorporates artificial intelligence into surgical planning for spine cases, and then use the plan to create personalized spinal implants.

With Medicare area Medtronic will be the first company to offer an integrated spine surgery solution that includes AI, driven surgical planning personalize implants, and robotic assisted surgical delivery.

This further extends our competitive advantage in spine.

We will continue to use the strength of our balance sheet to supplement our organic growth and helped drive increased and sustained revenue growth into the future next let's turn to our pipeline, which is not just a share taking pipeline. It expands the total addressable market for Medtronic as we intend to bring innovative technology to large health care opportunities.

Such as hypertension and cancer screening.

So starting with our cardiac and vascular group I've already mentioned the impact that our recent launches of migrating and cobalt and grow our having in our CRM, Jeff Division, but in addition to that our next generation cardiac diagnostic linked to received FDA approval in the quarter and we began the limited us release and expect the full market launch.

By calendar year end.

And our cardiac ablation solutions business, we started the European limited release of our Diamond temp cardiac ablation system with its unique closed loop temperature controlled RF system.

And in June Arctic front advance Cryo system became the first ablation system to receive FDA approval to treat patients with persistent area.

And this Saturday results from our stop at first trial, which studied our cryer balloon as a first line treatment for paroxysmal AFE will be presented virtually as a late breaking trial DSE.

And our coronary business, our resolute Onyx drug eluding stent became the first and only Stan to receive CE Mark for one month DAP treatment for high bleeding risk patients and we expect FDA approval for this differentiated labeling later this calendar year.

In CVG, we also resumed a number of important clinical trials that were on whole due to the pandemic, including our pivotal trials for our extra vascular IC d.

Our intrepid Transcatheter mitral valve, our Paul select pulse feel ablation system, and our simplicity spiral renal denervation system.

In our on Med renal denervation trial half of the sites have resumed enrollment and we're aiming to complete the trial and presented data next calendar year.

We're in and leave authority in in this represents a multibillion dollar opportunity to better treat the millions of patients around the world who suffer from hypertension.

As I've already mentioned, we're now launching a number of products across the restorative therapies group like the TTM spinal cord stimulator, our interstim microsurgical nerve stimulator, and our Percepta PC deep brain stimulation look our TG is on a role and we expect these products to drive growth and take share going forward and we.

Tend to keep the art TG momentum going well into the future, we're making large investments in new products for neurovascular, freeing tea and for enhancements to our resort spinal robotic system.

In diabetes, we continue to execute on our near term pipeline.

We're on track for the mini Med 770, GE approval later this summer.

We've received CE Mark approval for our mini Med seven AG advanced hybrid closed loop system and we'll watch this fall.

We also continue to make meaningful progress on our sensor pipeline or us pivotal trial for synergy is now underway enrollment is going well and we're getting great feedback on this disposable sensor that is 50% smaller than our current product in our minimally invasive therapies group, we continue to make progress on bringing our soft tissue robotic system the market.

Our final validation and verification testing is going very well and our surgeon feedback continues to be positive.

On the last earning call. We told you that our timeline had been disrupted by covered 19, but we've been managing through this and mitigating the impact to our timelines in.

In fact, we expect to be in a position to file for CE, Mark and us I'd approval in the first calendar quarter of 2021.

Now covert could change that but we thought it was important to update you as to where we are today and let you know that we have a high level of confidence as we move towards commercialization.

And then my TG, we've also been rapidly developing new solutions to treat cobot 19, including adding remote management capability to our Puritan Bennett Nineeighty ventilator, integrating nellcor pulse oximetry sensors with stable Therms closed loop high flow ventilation system.

And enhancing our vital sync remote monitoring solution to allow caregivers to remotely monitor our pulse oximetry and our cap Naga fee devices through a mobile applications.

Many of these features they were developed in days and weeks, which in the past might have taking us months in quarters, but because we found new ways. We're moving faster, we're partnering with others, whether that's on technology development or and supply chain relationships, we're working with our regulators to ensure they have everything they need to streamline their decision maker.

Yes.

And our own people are stepping up across the company. As one example, we increased our internal ventilator production fivefold in a matter of just a few months from 200, a week to over 1000 a week.

This is what I mean, when I say Medtronic is finding a new year.

We've been operating with a high sense of urgency and we're going to carry this forward I've discussed in the past our organization needs to simplify and become less bureaucratic in the coming weeks, you're going to hear more about the actions were taken to become a more nimble and a more competitive organization.

Empowering our business units, while also allowing them to take advantage of Medtronics global scale.

I'm really excited about this direction and I'm convinced that by empowering our general managers, we can become more competitive we can accelerator innovation.

We can serve our customers better and we're going to unlock a lot of value for our shareholders.

So with that let me now ask Karen to take you through a discussion of our first quarter financials and our outlook.

Karen overview.

Thank you.

As Jeff mentioned, our first quarter organic revenue decline of approximately 17% was better than initially expected and an eight point improvement over last quarter.

CVG and RTT in particular had double digit improvements from their fourth quarter decline.

Within CVG cardiac rhythm in heart failure improved the most declining in the mid teen thanks to both rebounding procedures and share capture from new products.

And within our TG core spine and pain stem had strong sequential improvement with a bounce back at these more deferrable procedures in the United States.

I would note that our organic revenue decline excludes the benefit we receive from an extra week of sales in the first fiscal month of the corridor.

Which we estimate added approximately 360 to 390 million in revenue.

Less than our extra week would have been without a pandemic.

But it's important to note this benefit was offset by our plan to reduce customer bulk purchases.

Hopefully you'll recall from prior earnings calls that we intended to use a good portion of the benefit from this extra week to reduce the practice of customers, placing large bulk orders as we're working to better balance these across the quarter.

We began the process earlier than planned due to depressed demand with cove. It in the fourth quarter and we still had some residual reduction and customer inventory levels this quarter.

As we look ahead the vast majority of the bulk reduction is behind us.

There are only a small number of areas such as our camera business, where we've been transitioning to a consignment model and select us account and where we should see another quarter or to have modest headwind.

On the bottom line, our adjusted EPS was 62 cents.

Decline of 51%, including an estimated benefit from the extra week of approximately six to 10 cents.

As our revenue improved throughout the quarter, we saw strong flow through to our bottom line, resulting in EPS well ahead of expectation that said with a decline in revenue we continued to see de leveraging down RPM now.

Several of our plant ran at less than full capacity.

Resulting in a larger period expense of our fixed overhead costs and a decline in our growth margin as we expected.

We also had increased SGN and R&D spend as I think not last quarter.

Given both the extra week and the increased investment, we're making and our pipeline and product launches.

As a result, our operating margin was 16.5%.

Down 12 points year over year, but an improvement of 40 basis points from last quarter.

Turning to our balance sheet, our financial position is strong with ample liquidity to act on opportunity.

We remain focused on investing both organically and inorganically through tuck in acquisitions and minority investments to drive our long term growth strategies.

We've increased our cadence of M&A, and we're increasing our level of R&D investment.

With partners like Blackstone Life Sciences, who will invest more than 300 million over the next several years tablet to accelerate specific pump and CGM programs in diabetes.

These creative strategies will enable us to accelerate our planned investment and our growth.

I view this as a key win for our company that patience, we serve and you are shareholders.

Turning more to the macro level, we expect both organic and inorganic investment to fuel our longer term revenue growth acceleration, creating strong returns for our shareholders supplemented by our growing dividend.

As an S&P dividend aristocrat, we've increased our dividend for 43 years.

And our current yield of 2.3% is in the upper quartile of S&P 500 healthcare company.

Looking ahead, the uncertainty as the coated 19 pandemic continues to make it difficult to provide our traditional annual and quarterly guidance.

However, as we shared last quarter, we intend to be as transparent as possible to help you understand how we're thinking about the trajectory of our business.

We've experienced a faster than expected recovery.

On the topline may was better than April and June was better than May.

And that improvement has continued into July and August.

While there are still uncertainty regarding the recovery. If these trends hold we would expect our second quarter organic growth rate to improve at a rate similar to what we saw between the fourth and the first quarters.

Where the fourth was down 25% and the first declined 17%.

From there, we expect sequential improvement and the third and fourth quarters, and we still expect to be back to normal growth in the fourth quarter on a two year stack basin.

When we look at our second quarter expectations by group.

Michie should be better than the company average given continued increased demand in our respiratory business and increased volumes in surgical innovation.

CVG has the potential to be a little better than company average given its new product introduction.

Diabetes is expected to perform roughly in line.

And our TG could be a little below the total company given its higher mix of capital equipment sales.

But we're still seeing some sequential improvement.

Looking at the piano, we're investing to support numerous product launches.

And we're investing in R&D programs to ensure our pipeline remains full.

Despite the pandemic were not pulling back.

Instead, we're focused on making the necessary investments to accelerate our revenue growth and ensure the long term health of our company, having said that we could see a couple of points of sequential improvement in both our gross and operating margins in the second quarter compared to the first.

And we expect continued margin improvement through the second half until we return to more normal margins sometime toward the end of our fiscal year.

Regarding currency the picture has improved with the weakening dollar.

On revenue assuming recent rates held constant our second quarter impact flipped to a slight tailwind after two years of a headwind and a full year benefit is now over $100 million.

On the bottom line at recent rate the second quarter headwind should be similar to the first and the full year has improved by about a nickel from the 20 cents impact I mentioned last quarter.

As I wrap up.

I would want you to take away that wed ever the recovery looks like we intend to outpace our end market.

We're focused on competing and winning and we had the industry best and brightest pipeline the resources and the people that do it.

The future as bright.

And I'm proud to be part of this team driving our imperative to fuel our growth and also fulfill our mission ensuring that millions of people around the world can benefit from our products and services.

Back to you Jeff.

Okay. Thanks, Karen I.

I Hope you got a sense today for our recovery trajectory as well as Howard changing at Medtronic and will continue this conversation our investor day on October 14.

During the pandemic our entire leadership team came together to determine how we could better serve our customers and evolve our culture.

We work together to find this new year.

And we're on our way to becoming a more nimble and competitive organization, we're playing offense and we're energized to use this moment when our pipeline is kicking in to expand our markets and take share and importantly, we're driving towards faster and broader topline growth not just as we emerge from the pandemic, but sustained.

We will growth over the long term.

So with that let's now move Twoq Una in addition to care to me. We also have our four group presidents, Mike Coyle Bob White.

Get wall and saw and Sean solid here to answer your questions and as usual we want you to we want to get to as many questions as possible. So please help us by limiting yourself to one question and if necessary or related follow up if you have additional questions. Please contact Ryan in our Investor Relations team after the call.

Operator first question please.

Your first question comes in the line of P.J. Kumar with Evercore ISI.

Hey, guys. Thanks for taking my question in that Jeff, but congrats on a solid for any share I had one question a follow up I'll ask them and then the same question I guess, it's interesting you started your comments will focus on market share Jeff one that is the implications here.

That makes iconic electronics focus on market share.

The implication that that you guys.

In line to above market.

End markets, because I do feel like one of the therapy to assess Medtronic is too big to grow.

Yes.

Is that about a change with this focus on market share and what is driving this place is this has something changed here.

Internally.

To drive us focus on market share to see that being reflected in numbers and as a follow up I think of robotic timeline.

Calendar first quarter 21.

I think Youll is no timeline was made up this year.

Yes.

Slide six months I, just want to make sure that was just purely a function of cowen and software issues et cetera, and SOG and what does it equally audit market share, but if you will focus on market share losses segments. It doesn't mean that medtronic should gain.

Fair share, perhaps more than six or not we bought it.

Great, Thanks, and I'll stop there.

Okay. Thanks Vijay.

Appreciate the questions on the on the first one.

Regarding market share you're asking why the focus.

What's changed.

We spent the last couple of years talking about our pipeline.

And.

This has been big focus on the company and like we've talked about our pipeline is the best it's been.

In a long time.

And as we.

I went through this CEO transition spent a lot of time with the with the team on something called a all the time and we're determined to make this pipeline count not just for patients.

Our customers but for shareholders.

And so we you know we we feel that sometimes are our market share isn't commensurate with our technology meeting our technology should yield more market share and and this is a an organizational focus that we want to take on.

In terms of.

Really focused on.

Really a deeper focus on understanding.

Markets and their competitors, what the competitors are doing and.

Making sure that.

We understand that and yeah.

Pete effectively and this isn't on probably this is an organizational focus.

Talking about our field it to everybody.

And understanding each one of these competitive battles that we face.

First recognizing those understand what it's going to take the win.

Tracking them and all these competitive battles that up and there is no rounding error when it comes out.

At a battle. So it is a it isn't enhance focused on market share and we felt like now is the time to do this given all the products that we have coming out we want to make it like I said, we want to make the pipeline count not just for our patients, which is first and foremost than our customers, but for our shareholders as well. So I thought that was the moment to do that really excited about that.

And yes, the expectation is overall in aggregate to grow at the market, we're or higher and we haven't done that in the region.

So in some cases, we need to exceed the market growth.

And then make up for a couple areas, where we're behind.

But but the expectation for every single one of our segments is to grow at least that the market share and we've made that really clear and as you talk to people Medtronic I think that messages out there.

Your second question about the about the robot.

Yes, I mean, the delays were driven by coated.

Yes, the software issues, we've talked about in the past we believe our resolve that were in the final validation and verification and the testing has gone really well we've got surgeons working on these robots and like I said the feedback is great and we're excited and we're going to hit our market release date.

Here shortly and what that means for us is that triggers the filed the ability for us to file which we talked about in the commentary I mentioned.

Calendar Q1 for both CE, Mark and U.S. I'd. So yeah. We're we feel like its has been the risk Weve got a high level of confidence and now the excitements building.

The company and and we win with the our surgeons that are working on this so we're excited and you asked about a market share forecast, yeah, I'm not prepared to give that right now I mean, we are going up against a strong competitor.

We're really excited about this.

You know I've I've my time at Medtronic I feel like where you know we're in a position where your defending high market shares from new competitors, it's going to be fun to be on the other into that equation and coming out a well established a 100%.

Our could share competitor, becoming Adam with some great technology with the financial resources and Medtronic, a really energize field sales force.

So we're looking forward to this you know I'm lucky about market share forecasts, but we're going to be a meaningful player.

Market.

Go bigger go home BJ, we're going to be meaningfulness and we're excited.

I Love that go Vega.

Thanks, guys.

Your next question.

And then Regina.

Your next question comes in a line of Bob Hopkins at Bank of America.

Hi, good morning, and thanks for taking the questions just one clarification and one question on the clarification side, you mentioned talking about some disclosures will be making over the next couple of weeks about kind of changes at Medtronic has that is that all stuff that's going to come at the analyst day or are there disclosures coming before that so that's just.

The clarification and then the question is Jeff I was really encouraged to hear your comments.

About improvements continuing into July and August and obviously, Karen made those as well that's a huge issue for Medtronic and for all Medtech, because there's a lot of uncertainty out there. So Jeff I was wondering if you could just make some comments on just what you're seeing out there in July and August in terms of.

Kind of the rescheduled procedures versus new demand and what you're hearing from hospitals and patients just.

Any comments on that kind of the pace of the broader recovery would be much appreciated.

Hi, Thanks, Bob you want on the clarification.

On the on the on the changes. These are changes we'll talk more about like you like you mentioned at our and Investor Day, and Oh go too deep into them today, and but the broad brush strokes are some structural changes that empower our businesses.

To make decisions and to be more and this is really getting at speed of decision, making it being nimble and faster as you know we're competing against a lot of.

Focus the smaller focused companies not just here, but in China enough places around the world and then as but at the same time, allowing these businesses to benefit from very specific.

And meaningful areas, where our scale makes a difference like technology platform anytime our businesses are pulling from broader technology platforms, and Medtronic, they're able to it array on a much more consistent meaningful iteration on a much faster and consistent basis and also disrupt like we did it with with what we're doing with micro right now in the pacing space.

Our manufacturing footprint to ensure a high quality standard all the time at the right price at the right cost levels.

So so things you know technology.

You know manufacturing our regional scale as we move into some of these regions. These are all areas or the short businesses those.

And benefit from but in terms of disclosures I don't like and we'd like disclosures before that we'll be rolling this out to within the company over the next couple of weeks.

Well too.

But I'll handle the.

Well as yours on that until we get to.

Yesterday talk about it.

In terms of your your question around the the market improvement it is encouraging.

A couple of comments there first there's a big difference depending on the therapy or product area in the business that were and we do have a wide range here.

Things are more urgent like neurovascular things that are.

Elective.

Some of the areas.

Hold UC health.

Something like that.

We're seeing by country, it's different but but.

We're seeing a much we've seen a much of continued to see a much sharper recover in the United States in Europe, China has been pretty steady, but the whole pile of geographies and all of the therapy areas. All all of them are improving and we're seeing sequential month over month improvement I think the last time, we had to earnings while we were talking about.

How things in April and we had some momentum into may well that every week. It's got every month has gotten better into June July and into the first couple of weeks of August we continue to see.

We continue to see improvements here, you know and then turn to the patient fear you look look the surveys that we've seen and conducted that has been it's still the still out there, but it's been.

In my opinion mitigated quite a bit.

And the hospitals and idea just talked another hospital CEO on on Friday it.

This is in the U.S. context, they seem very committed.

To a sustaining.

Keep and you keep open for business and serving patients.

And I think they also need it in a financially another shutdown.

One thing they do.

And then yeah. The other thing that I think so these are all things that are going off there and we're participating.

In helping with patient fear and where we partnered with the American Heart Association American Stroke Association, and we're working with physicians were working with but but the other area I want to highlight is the stuff that we're doing right like I just mentioned, we're out there working with physicians with that with physicians and their offices hospitals.

We're out there.

You know staying focused on on our customers well, we're also helping them implement new technologies that that really helping this cold and timeframe like our remote capabilities, especially in cardiac rhythm right now.

That's making a big difference.

We talked about the ventilator space I mean.

You know these were physicians specific requests that came from individual hospitals are around product features and our response to this and how fast. We move you know this makes a big difference and and these stories circulate within the hospital and the C suites have been in more and go.

He's with us and so between the market coming back, but from a geography perspective from a therapy perspective, and the actions that we've taken over the last couple of months a we're we're we're in a way better positioned than we thought we would be this three months ago and we see the continued.

You know momentum now everybody is a little nervous about the fall with with the back to school I just dropped off to college students in the last week.

And but like I said earlier I do think hospitals are committed staying open and we're feeling better about.

But what footwear.

Total of disruption, we don't feel we're not as worried about it as we were a couple of months.

Okay. Thank you.

That connects question Dan on the line of David Lewis with Morgan Stanley.

Good morning, just two for me I'll ask them right up front for Jeff and Karen So Jeff I, just I know, it's early but what's the profile Medtronic should aspire to relative to the for an 8% top and bottom you gave back in 2018, and if we can't give specific numbers I'm just sort of curious should investors expect that both of those numbers should move higher aurs to focus more.

We're on a revenue for the intermediate term and then Karen just you kind of related question. There's been a series of often on balance sheet transactions you most notably the recent M&A and Blackstone, So that clearly suggest the company's desire to accelerate growth.

What does it tell us if anything caring about sort of the flexibility of the pinedale in terms of margin opportunities going forward.

Thanks, so much.

Well ill take a a stub David first thanks for the question.

Let me take a stab at the and then I'll hand, it off the Karen but on the 8% MPS now we're committed to that right. So we talk about market share we talk about growth.

To be clear, it's not at the expense of that 8% EPS growth as well and our.

Free cash flow conversion, which we've worked so hard to improve over the last couple of years. So we're not going to take a step back there were committed to that and as we grow as we grow more right as we grow at the market more as an aggregate, which would be a meaningful improvement over the last couple of years.

And take share.

The growth will get higher we'll have some optionality of what to do with that incremental earnings.

Earnings were committed to that 8% and what will decide as that growth gets there what we're going to do with the extra GPS I'd like to invest some of it and we'll see what we do with that with the rest here, but without maybe ill turn it over to.

Yes, Thanks, Jeff and thanks, David for the question.

Yes, we have a strong balance sheet and we have anything on that to help our growth and we've supplemented that as you mentioned with with partners like Blackstone to help accelerate that growth in terms of the flexibility of the PNM for margin going forward.

I would say is that our bias is going to be on driving revenue acceleration higher and and keeping at consistent and so given that bias, we will be focused on continuing to invest.

To ensure that our pipeline remains this fall as it has been in a in a recent past.

You know so could margins improve yes, a little bit.

But we're more committed to driving that revenue growth acceleration and maintaining a bottom line NPS of 8% plus.

Then then we are on you know on dropping a significant amount to the bottom line will be focused more on investing hope that help.

Super helpful. Thanks, so much.

Thanks, David next question please.

Our next question comes in the line of Robbie Marcus with JP Morgan.

[noise]. Thanks for taking my question and I'll be the first to tell you I did kinda like be the video format. It was good to see you asked are being virtual for so long.

Maybe maybe on the question and I'll I'll kind of.

Luke to win in here.

The first is we're seeing view year over year increases in R&D, what we're seeing most of your peers down year over year, you're you're clearly leaning in on R&D I was wondering where these dollars going what are the projects that you're saying you're investing in and then.

Maybe along those lines.

We're also clearly investing heavily in diabetes, there whats speculation a while ago exit that business. It looks to me less likely given how much you're putting in into resources here. What's the latest thoughts you have new management lots of investment there how should we be thinking about this business and is this a three to five.

Year turnaround story, and it's something we could see it a shorter term. Thanks.

Okay. Thanks, Robbie lot into those questions. There I will first thanks for the so the complement on the video I'm glad that went well my wife were skeptical, but I thought it was okay. We'll see how we go going forward here in terms of the.

Yes, the R&D increases yeah, we we want to put more into R&D.

Yeah, and be creative and when I look at R&D, we're looking at in a traditional R&D offer income statement.

Just create of third party partnerships like the Blackstone, which have a very good return on them.

Our also something we want to use and are in inorganic I mean, because most of what we're buying is technology tuck technology oriented tuck ins, which is which are all somewhere on our on their path to a commercialization or or just been commercialized. So all this gets back to.

Investing in areas and are in our business, we just have.

A lot of great ideas on the old you know idea that our eyes are bigger than our sound like what we are willing to get more R&D capability here. We've got just a list some of the product. So we were talking about our pipeline today, that's coming out right, but the R&D and there's some art and he is it needs to go into sustaining at an interesting that things like you know spinal robotics and things.

Like that I mean, we're not done we're just getting started so there's a lot more to go into their but but some of the things that are on the pipeline like you know already and that's a multibillion dollar opportunity there the VI CD I'll start with cardiac care you know a pulse select you know the pulse filled ablation I mean, just those three or I'd call more medium term for.

For us and are very exciting and I think could use more investment to speed up and drive bigger impact and.

In our TG, there's always more to invest and neurovascular, Brett wall and Stacy to make sure of that Theres lots of products there and that's a high growth area. You know like I mentioned DBS, we have the directional lead system coming out we want to invest and close loop I. Just think look Neuromodulation is is a big growth opportunity for this for the industry.

For the company nothing is going to have a huge impact on patients.

And and then it might TG.

Obviously, the soft tissue robot in though we talked about the timeline there.

But we stuff to commercialize that that's going to take some investment may not show up in the R&D line, but.

We need to invest there and then we mentioned in the commentary some of the products starting to come up from our digital surgery.

Acquisition. This touch surgery enterprise, we're very excited about that as we move we believe we believe we're leading and robotics soft tissue robotics or you know the AI and.

Side of it and so there's a lot of opportunity there and then of course diabetes.

We've got to catch up on the sensor side and were yeah, I don't see everybody picked up while we're really excited about the sensor pipeline here. It's I wish it were happening even faster, but it is accelerated from what we were we're well into the synergy trial enrollment rather and getting great feedback on that so there's lots of opportunities.

As a for R&D investment and and that's probably that's probably I don't know 70, 80% of what we're talking about internally is this pipeline and how do we feed it how do we speeded up I'm. So.

Very excited about that and then.

Speaking on diabetes said three to five years, yeah, I'm not even going to ask Sean. This question because I know the answer is not three to five years, there's going be faster than that.

And I think when we get a 780 out there it's going to be a big step forward are like I mentioned, our sensor pipeline, which is which is the weak spot here that is we feel good about that.

And again I wish it were faster, but it isn't three to five year, so and the rumors about diabetes you know they didn't come from from US I mean, we're committed to this and we've never blank and we're not going to.

Thanks, a lot.

Thanks, Robbie next question. Please Regina. Your next question comes from the line of Joanne Wash with Citibank.

Hi, good morning, everybody on the Aspen can you kind of investors. This morning, one of the teams coming across as a sense of.

He reinvigorate it or quote a different medtronic so.

You see.

Hi, Jeff because you're you're relatively new in the CEO role and you get to do it in the next step a pandemic what do you see that is different that how youre going to make your mark on the company and on the other side of this pandemic. How do you think Medtronic is kind of look different because it seems to me that the way Medtronic has approached managing.

Employees during the pandemic, maybe somewhat different than the way others have thank you.

In terms of reinvigorated I think we do feel reinvigorated and ITSM in large part because of where we where we sit right now as a company I mean this pipeline is exciting and it's something that we've been investing in for a long time and look the.

Cove. It has been you know is extracted huge human toll and an economical.

But so I'm looking for bright spots coming out of go that in one of them or has been the ability for during this time, our leadership team to sit down together.

Like I said a lot of zoom calls.

And some face to face, but in a really.

Look at where where we are as a company and take a take a step back and.

What we're saying is way more opportunities than challenges, but topical I mean look we've got our mission or especially during a pandemic like this really shows how valuable that mission is and it helps us clarifier decisions and really helps us in our opinion stand out relative to others and how we will react and how we.

Hi, Joe up and so we've always had that and that that that is shown even just to help we're reminded how powerful that as during a pen crisis like we face now.

He's got a very you know we've got great technology, great market positions.

We've got a very experienced leadership team and I come back to this pipeline and so when we started to look at all this we feel like Theres, just a huge opportunity.

We want to make this pipeline count and so you know that's why we're excited and if it feels like we're reinvigorated that's good.

You know I don't want to use that word, but I can tell you that we're we're excited.

Because of all this and the opportunity and it's not just like Hey, Here's the pipeline and it's going to work its way through and then there's like a than as peaks and trials and that's not it were refilling the pipeline I just mentioned all these I just went through the last question on all of these things about the R&D, where we're putting it there's so much to do so much opportunity. So yes, we are.

Cited and that's why we also focusing on this market share opportunity, we want to make this pipeline count and how we look different.

One we want to.

You know in the near term.

We want to be growing at or above the market. So whatever the recovery as it's hard to forecast.

What we're trying our best as you guys are to forecast recovery, but we want to be on the leading edge of that.

And doing better relative.

To our competitors.

And our pipelines going to lead the way and we're going to have great commercial execution here and so that should be a meaningfully increase to our growth relative to our competition. So that looks different and look I our employees have always had a.

Strong loyalty and allegiance to Medtronic, but I think thats increased over the last couple of months.

As people realized what.

How much the mission needs, but we still have work to do.

And working on things like a.

Our what is our role here in some of these social justice issues that are out in the communities that spill into our offices and so you're going to see us more aggressive on those taking stronger stands on some of those issues, but over time longer term yeah. We want to put the tech in med Tech and we want to shift we want to pool.

In some of these digital technologies to change our offerings and overtime, we're very device centric and additional devices, we want to pool and data and analytics and you start to see that in pockets of Medtronic like with the neutrino acquisition diabetes the digital surgery.

Acquisition, and and my TG for the soft tissue robot, we're working with cup partnering with companies like vis a vie for stroke.

Detection and so.

Having our offerings be smarter and self learning.

And our offerings, providing a lot of data and insights. In addition to therapy back to our customers. I think this is an area that that this is going to take some time, but this is something we're committed to.

Thank you.

Thanks, Joanne next question. Please virgina.

Your next question comes from the lineup Larry Biegelsen with Wells Fargo.

Good morning, Thanks for taking the question.

My entire or for Karen just carrying one clarification there how much of the extra week was offset by reduced bulk purchases during the quarter for my question last quarter. You gave some helpful commentary on the exit rates in the last month.

You know what did you see in July relative to what looks like about a negative 9%.

Organic year over year growth rate, you're guiding to in fiscal Q2, and can you get to flat or.

Growth in fiscal Q3, thanks for taking the questions.

Thank you. Thank you Larry so in terms of the extra week basically all of it was offset by the reduction and customer bulk purchases. So.

So the net effect was essentially in a very minimal.

In terms of you know the monthly trends that we're saying, we're not gonna give year over year monthly comparisons and that's really because the reduction in bulk sales in the different number of selling days in the quarter can make that confusing, but I would want you to take away that are in on Jeff talked about that are.

Our average daily sales rate thoughts significant step up in May and then again in June and that continued into July and August and we believe this trend will continue we've signaled that we believe our second quarter.

Should see improvement.

Roughly equal to the improvement that we saw between the fourth quarter in the first quarter and just to remind you the fourth quarter declined 25%. The first quarter, 17%. That's a differential of about eight that's the kind of improvement that we would expect to see in the second quarter and then we would expect to continue that improvement into the back half.

And by the time, we reach in our fourth quarter, and we would expect to be back to more normal growth on when you look at it on a two year stack basis.

Thank you.

Thanks, Larry I think we have time for maybe two more questions. We can take the next one Regina.

Next question comes from the line of Danielle Antalffy with STB Leerink.

Hi, Good morning, guys. Thanks, so much for very taking the question I second Robby comment on that did you all too and thanks for that.

I'm.

Just ask that question Jack on the commentary around market share gains and I'm curious just more specifically you know tied to sort of what you're talking about with the you know you infrastructure investment and things like that that we'll hear more about on the analyst day, how much of this sort of reinvigorated accurately.

Sounds really gaining market share and being more aggressive is tied to things like that various dave potentially having to build out further from a product perspective and in a day, even more on the pipeline and that's my only question. Thank you so much.

Well I'm on the innovation side I mean, like I said, we feel like we've got a great pipeline. The best we've had it hits its its coming to fruition now and we've got more out there in the medium and long term, but we're not ever going to be satisfied on our pipeline I mean innovation is the life blood.

The company. So we're always going to want to invest more and really just not you know ultimately the ultimate judge here will be the level of innovation.

The the outcomes, we can produce with these technologies, both for patients and economic outcomes foot philosopher health system.

So that's the ultimate but we don't want to be outspent, either so we are investing more using these creative like the Blackstone partnership using our balance sheet more trying to get more efficient, we're always going try to get more efficient R&D. So we're never never going to be satisfied with the innovation on ways to talk about he talked about health care's being like a by definition and unless.

The demand.

So as soon as you solve one problem.

People want another problem solved or they want us all faster so we're going to keep going on they all the innovation.

And the market share.

It's really it's two things that were going need to do.

What will the will three things really you need to have the products right you see said the pipeline, which we've talked about.

The other or the other two areas that we've talked about is structurally allowing to help increase that innovation, allowing our business units to have more levers to pull to be more nimble and faster to compete with.

The marketplace and Med Tech is pretty competitive like I said, we face.

A lot of smaller and maybe more focused competition and I don't really like this idea well they're smaller so they should grow faster I don't you know I don't I'm not a believer in that and so neither is our leadership team for that matter and no. We're not accepting that so we want to treat our businesses and given the ability to compete against anybody whether it's a big well funded.

Or or a competitor with lots of technology or more established competitor or a small are up and coming competitor, we want to be able to compete with also so it's making some structural changes.

To better position them for that and then the third is this the cultural piece is just setting that expectation that yeah. We're always we're always going to be a mission driven company, we're always going to be in innovation driven company, we're always going to be that company. That's that's pushing the envelope here and starting new therapy areas like an already and you know.

We're going to be that company, but we also want to be the company that that is able to kind of hold the share in these markets that we established and in some cases like soft tissue robotics, where we weren't the first to come in they are as a meaningful second and I think there's room for improvement into it and the mindset of the company on competing like that so.

Thats a cultural so pipeline always first some structural changes.

That we think we can work through without too much disruption here.

And the cultural changes around expectations on on competing.

Thank you so much.

Thanks, Danielle we'll take the last question please region.

Final question comes on line of rationally with Jefferies.

Hi, Good morning, Wonder, if maybe I could ask about companion medical.

You talked about potential for that that product in the diabetes market, where maybe you could share a little bit about your internal projections for for revenue growth for that and what it can start to be a meaningful contributor to it to your gross.

Well first on companion, where were we haven't finalized the acquisition. So we're limited what we can say, but I, but Sean is the real champion and architect behind on that deal and so maybe Sean Celmods on the phone here.

I'll turn it over Sean for some comments yes.

Great. Thanks, Thanks for the question Raj.

Yes.

As Jeff said the deals not yet finalized but.

The opportunity is very attractive.

Our jeffs commentaries Theres about 12 times, the number of patients, which it. So we think by our modeling about 13 million patients worldwide.

Who are using multiple daily injections to treat their diabetes and it's very very underpenetrated opportunities. So for us to go into that market and add value to those who either choose to be there or have to be there because of other considerations is where we want to meet those patients and this really dovetails very nicely.

Into our improving sensor pipeline and adding the capabilities that we've added company over time those building blocks for the powerful AI and data science capabilities, which we think when deployed against.

Knowing how much insulin you're getting what time, you can markedly improved the outcomes for patients who choose to use multiple daily injections. So thats a few things right. We can capture more of the patients who are upstream and maybe move patients who get comfortable technology into some other solutions that we have in our autumn.

It is still doing systems.

Great and maybe just Jeff one follow up relative to acquisitions broadly right. So companion and other kind of tuck in deals you've talked about it you want to assume that you have no appetite for larger deals or will you continue to focus really just on the tuck in side of things really just any broader thoughts here would be helpful.

Focuses on the on a tuck ins and you know they tuck ins game can get up to you know.

Billion dollars or low billions, but but.

But that's that's the focus is we've got them.

That that's the focus we Oh, we like where we are right now and the tuck ins will help us but.

Not focus beyond that.

Great. Thank you.

Thanks Rush to good.

Okay, well, thanks for the questions and look I really appreciate railroad appreciate your support and interest in Medtronic and we're looking forward to presenting more details of our longer term strategy I thought our October 14th Investor Day, and then updating you on our quarterly progress on our Q2 earnings call, which we anticipate honing on November 24th so thanks for joining us.

Today stay healthy and safe and have a great day.

Ladies and gentlemen that will conclude today's call. Thank you all for joining and you may now disconnect.

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Ladies and gentlemen, thank you for standing by and welcome to the Medtronic first quarter earnings Conference call. At this time, all participants are and they listen only mode. After the speaker presentation. There will be a question answer session to ask a question. During this action will lead to press star one on your telephone please be advised.

Hi that today's conference is being recorded I would now like to hand, the call Brent Oh, what your Y on Y spinning Vice President head of Investor Relations. Please go ahead Sir.

Thank you good morning, and welcome to Medtronic, that's going your 2021 first quarter conference call and webcast jump Martha's first quarter as Chief Executive Officer.

Another first today that we're presenting our prepared remarks by video we hope that you'll appreciate this new format.

Let me know if you have any feedback.

Today's earnings call should last about an hour, Jeff along with Karen Parkhill, Medtronic Chief Financial Officer will provide comments on the results of our first quarter, which ended on July 30, Onest 2020.

After our prepared remarks, we'll take questions from the analysts.

Before I turn it over to Jeff Here's a few things to keep in mind.

Earlier. This morning, we issued a press release containing our financial statements and a revenue by Division summary, we also issued an earnings presentation that provides additional details on our performance.

During today's prepared remarks, and you want a session. Many of the statements. We make maybe considered forward looking statements and actual results may differ materially from those projected in any forward looking statement, given risks and uncertainties, including those related to the impact over 19 has had and is expected to continue to have on our business.

Additional information concerning factors that could cause actual results to differ is contained in our periodic reports and other filings that we make with the FCC and we do not undertake to update any forward looking statement.

Unless we say otherwise all year over year revenue comparisons mentioned during this call or given on an organic basis, which adjusts for three things first inorganic impact of our Titan spine acquisition second foreign currency and third the extra week than we had in the first fiscal month this quarter compared to the first.

For fiscal year 2020.

The extra week as a result of our 50 to 53 week fiscal year calendar, which resulted in an extra week every five or six years.

Finally, reconciliations of all non-GAAP financial measures can be found in the attachment to our earnings press release or on our web site at Investor Relations Dot Medtronic dotcom.

With that I'll turn it over to Medtronic, Chief Executive Officer, Jeff Martha Jeff, Okay. Thanks, Ryan and I appreciate everyone joining us today.

Before we dive into our Q1 results I want to once again, thank the frontline healthcare workers, who continue to fight Coven 19 every day.

We're thankful beyond words for your sacrifice and tireless resolved.

I want to acknowledge all of them and tronic employees who've gone that extra mile to support our customers and patients during this difficult time.

Thank you for showing that our mission written 60 years ago still inspires us and really defines who we are as a company.

I also want to acknowledge the wildfires burning in northern California.

Medtronic has been a long time member of the Santa Rosa community and while our operations are currently affected our thoughts are with those heroes battling these terrible blazers and the people affected including some of our employees. We hope for a quick containment and we're standing by ready to assess.

Okay now, let's switch gears to Q1.

Our results reflect a very strong recovery from the depth of the pandemic that we sold back in April.

Procedure volumes began recover this quarter in multiple markets around the world and we drove market share gains in a number of our large businesses.

Our revenue declined 17% on an organic year over year basis.

In our adjusted EPS of 62 cents, well down 51% was well ahead of expectations.

We've seen a faster than expected recovery, our pipeline is kicking in and we're increasing our cadence of tuck in M&A, but most importantly, we're finding a new gear at Medtronic, and we're becoming a more nimble and a more competitive organization.

In the coming weeks, you're going to hear more for me on this topic as we begin to outline the new Medtronic.

When the pandemic first had we had to postpone or by annual Investor Day originally scheduled for June.

Well today, we're announcing that we rescheduled the meeting and we're now going to host of virtual meeting with you on Wednesday October 14th.

Going to use that opportunity to lay out where we're headed including a deeper dive on our pipeline now that it's coming to fruition as well as the actions, we're taking to simplify the company.

So we look forward to being with you virtually at least on October 14th.

Now I'd like to do something a little different than our past earnings calls.

And lead with a discussion of market share.

Collectively our results in the month of June were stronger than many of our competitors and that strength continued into July and now into the first few weeks of August.

Some businesses, we're benefiting from the actions we took at the start of the pandemic to better partner with our customers.

Other businesses, we're seeing the benefit of new product launches as our pipeline kicks in across the company.

In fact.

We've already had over 130 regulatory approvals this calendar year in the U.S. in Europe, Japan and China.

We've included a key approval slide in our earnings presentation that outlines all this.

We're gaining share our largest businesses like spine and CR HF pacing in high power.

For example, our U.S. core spine business declined.

High single digits, which was better than the market. We estimate that we gained over a half a point of share in the second calendar quarter.

Our differentiated offerings of enabling technologies, which includes robotics imaging and navigation combined with our implants is reshaping the spine industry in theory, Jeff We estimate that we gained significant implant share in both the high and low power markets in the second calendar quarter with the greatest gains coming in the U.S.

Mike Raab, our leaders pacemaker grew in the low fortys globally, and approximately 60% and use.

Well many have been focused on how micro is expanding the market and taking share our new cobalt chrome ITD and CRT D. Platforms are also beginning to drive meaningful implant share and high power.

We want to these devices mid quarter in the U.S. and we're now working with a growing number of providers across the country, who have not implanted with medtronic in years.

Electrophysiologist are choosing cobalt and chrome for their unique asked in heart failure therapeutic algorithms. The high 40, Joel output extended battery longevity heart failure management capabilities as well as their blue sank remote programming and remote device management. These features provide layers of competitive advantage for us.

Yes.

We saw 35% sequential increase in smart sink accounts globally.

And our proprietary remote control programming technology, which was launched in the previous quarter Salt six fold increase in adoption sequentially.

In addition utilization of our TYRX absorbable anti bacterial envelopes increased by nearly nine points sequentially to 50% of our U.S. transvenous pacing and ITD implants as hospitals are focusing on minimizing patient.

Hospitalization rates during code. We've also begun to return to sequential unplanned share capture and tavern, one of our largest growth drivers.

In the second calendar quarter, we maintained our share and market leadership in Europe and gained approximately one point of implant share sequentially in the us as we open new NCD accounts and saw great response from interventional cardiologists and cardiac surgeons to the bicuspid leaflet mobility and hemodynamic clinical data that we shared at HCC and.

Spring in fact, we've received approval from the FDA just last week to remove bicuspid labeling limitations for low risk. However on the strength of these data.

This labeling change complements the approval we received earlier this summer as the only CE Mark TAVR system with a bicuspid indication for intermediate risk patients.

These are important regulatory milestones given the large size and the bike has been patient population, including 60% of the low risk population.

I'll also point out the share gains that were seeing in our pain stim business within Neuromodulation, where we've been rolling out our new DTN therapy.

Superiority data that we have for DPM is resonating in the market.

We're taking advantage of this by focusing on customers that either don't use medtronic devices or split their business across multiple companies and we're having great success with the strategy in fact, almost half of our GTM implants in the quarter occur with these type of customers and equally important our SCS trials, which.

Our predictor of future implants, or ahead of our expectations and even caught up to prior year levels. In June this bodes really well for our pain stim business going forward.

So while we're driving share gains in many important businesses, they're also areas that we need to improve.

DBS and pelvic health, while we lost share in the quarter, we're very bullish on where we're headed in DBS received FDA approval for our Percepta PC deep brain stimulation system with brain sense technology in late June.

Percept is the first DBS to record brain signals, while delivering therapy and we expect this to drive share gains in this high growth market going forward.

Fact, we believe this is the beginning of a multiyear run in DBS with our Directionally launching next year.

Followed by a closed loop DBS system.

We are redefining the standard of care and creating a significant technology gap between us and our competitors.

And pelvic health.

Just received FDA approval for our Interstim micro device, which has important features over the competition our devices, 50% smaller.

Recharge as far faster and importantly, the recharger doesn't need to be perfectly aligned for a successful charge.

Additionally, Medtronic is the only company to offer physician practices the choice of recharge and recharge free and this is very important in the Neuromodulation space.

The physician feedback on our interest in micro rechargeable products has been universally positive.

And there are several early indications that our share in the in the US is rebounding quickly much like we saw in Europe. Following the micro launch earlier this year in just a few weeks, we're winning back accounts and we're seeing cases, where competitors devices being X planted and replaced by micro.

We've been waiting for this patients now have the ability to choose a smaller better rechargeable products.

This one practices to prefer to deal with one company.

And our team is enjoying taking back to share.

Finally in diabetes look.

We're missing out on the better growth in this market.

Nobody at Medtronic is comfortable with this dynamic and we're pushing on several funds to advance our technology.

We are actively increasing both our near and our long term growth opportunities through increased organic investment.

Innovative funding with our recently announced Blackstone partnership inorganic activity highlighted by the announcement earlier this month of our pending acquisition of companion medical.

Companion Smart pen technology expands our ecosystem.

Who the multi daily injection portion of the diabetes market with a patient population that is nearly 12 times larger than that that use insulin pumps.

But make no mistake, we are still very focused on regaining technology leadership in the pump in the sensor market.

However, we're also going to me patients, where they are and provide them with real time data guided support.

We expect to build a system that combines in Penn with our smart CGM technology, including our neutrino include artificial intelligence algorithms. All of this designed to deliver better outcomes and reduce the burden of managing the disease for Mds patients.

See companion is just one more example of how we're going on the offensive as a company through an increased canes of tuck in acquisitions. In fact in addition to companion we've done two other major tuck in acquisitions this calendar year with digital surgery and Medic Korea.

Combined these three deals total approximately 1 billion in total consideration.

Data and analytics or the next big frontier in surgery. That's why we acquired the pioneering technology company digital surgery, the leader in surgical artificial intelligence.

We're integrating their technology into our soft tissue robotic assisted surgery system and also intending to use their surgical video management and clinician decision support solutions beyond robotics.

Back we plan all limited launch this fall for the touch surgery enterprise, which is an extremely easy to use surgical video capture solution paired with the computer and connected to the cloud.

Medic Korea, a pending acquisition, we announced last month has differentiated technology that incorporates artificial intelligence into surgical planning for spine cases, and then use the plan to create personalized spinal implants.

With Medicare area Medtronic will be the first company to offer an integrated spine surgery solution that includes AI, driven surgical planning personalize implants, and robotic assisted surgical delivery.

This further extends our competitive advantage in spine.

We will continue to use the strength of our balance sheet to supplement our organic growth and helped drive increased and sustained revenue growth into the future next let's turn to our pipeline, which is not just a share taking pipeline. It expands the total addressable market for Medtronic as we intend to bring innovative technology to large health care off.

Attunitys, such as hypertension and cancer screening.

So starting with our cardiac and vascular group I've already mentioned the impact that our recent launches of my gravy and cobalt and grow more having in our CRM, Jeff Division, but in addition to that our next generation cardiac diagnostic linked to received FDA approval in the quarter and we began the limited us release and expect the full market launch.

By calendar year end.

And our cardiac ablation solutions business, we started the European limited release of our Diamond temp cardiac ablation system with its unique closed loop temperature controlled RF system.

And in June Arctic front advance Cryo system became the first ablation system to receive FDA approval to treat patients with persistent.

And the Saturday results from our stop first trial, which studied our cryo blown as a first line treatment for paroxysmal assets will be presented virtually as of late breaking trial idiocy.

And our coronary business, our resolute Onyx drug eluding stent became the first and only stand to receive CE Mark for one month DAP treatment for high bleeding risk patients and we expect FDA approval for this differentiated labeling later this calendar year.

In CVG, we also resumed a number of important clinical trials that were on whole due to the pandemic, including our pivotal trials for extra vascular I.C.D.

Our and trip in Transcatheter mitral valve, our Paul select pulse field ablation system, and our simplicity spiral renal denervation system.

In our on men renal denervation trial half of the sites have resumed enrollment and we're aiming to complete the trial and present the data next calendar year.

We're in and leave authority in in this represents a multibillion dollar opportunity to better treat the millions of patients around the world who suffer from hypertension.

As I've already mentioned, we're now launching a number of products across per store to therapies group like the DTA m. spinal cord stimulation or our interstim microsurgical nerve stimulator, and our Percepta PC deep brain stimulation look Archie as honor roll and we expect these products to drive growth and take share going forward and we.

Tend to keep the art TG momentum going well into the future, we're making large investments in new products for neurovascular, freeing tea and for enhancements to our Ms Oreck spinal robotic system.

In diabetes, we continue to execute on our near term pipeline.

We're on track for the many med 770 GE approval later this summer.

We've received CE Mark approval for our mini Med seven AG advanced hybrid closed loop system and we'll watch. This fall. We also continue to make meaningful progress on our sensor pipeline or us pivotal trial for synergy is now underway enrollment is going well and we're getting great feedback on this disposable sensor that is.

Smaller than our current product in our minimally invasive therapies group, we continue to make progress on bringing our soft tissue robotic system. The market our final validation and verification testing is going very well and our surgeon feedback continues to be positive.

On the last earning call. We told you that our timeline had been disrupted by covered 19, but we've been managing through this and mitigating the impact to our timelines.

In fact, we expect to be in a position to file for CE, Mark and us I'd approval in the first calendar quarter of 2021.

A couple that could change that but we thought it was important to update you as to where we are today and let you know that we have a high level of confidence as we move towards commercialization.

And then my TG, we've also been rapidly developing new solutions to treat cobot 19, including adding remote management capability to our Puritan Bennett Nineeighty ventilator, integrating nellcor pulse oximetry sensors with they both arms closed loop high flow ventilation system.

And enhancing our vital sync remote monitoring solution to allow caregivers to remotely monitor our pulse oximetry and our catalog mophie devices through a mobile applications. Many of these features they were developed in days and weeks, which in the past might have taking us months in quarters, but because we found new ways, we're moving faster we're part.

Stream with others, whether that's on technology development or in supply chain relationships, we're working with our regulators to ensure they have everything they need to streamline their decision makers.

And our own people are stepping up across the company. As one example, we increased our internal ventilator production fivefold in a matter of just a few months from 200, a week to over 1000 a week.

This is what I mean, when I say Medtronic is finding a new year.

We've been operating with a high sense of urgency and we're going to carry this forward I've discussed in the past how organization needs to simplify and become less bureaucratic in the coming weeks, you're going to hear more about the actions were taken to become a more nimble and a more competitive organization.

Empowering our business units, while also allowing them take advantage of Medtronics global scale.

I'm really excited about this direction and I'm convinced that by empowering our general managers, we can become more competitive we can accelerate or innovation.

We can serve our customers better and we're going to unlock a lot of value for our shareholders.

So with that let me now ask care to take you through a discussion of our first quarter financials and our outlook.

Karen overview.

Thank you.

As Jeff mentioned, our first quarter organic revenue decline of approximately 17% with better than initially expected and an eight point improvement over last quarter.

CVG and RTT in particular had double digit improvement from their fourth quarter decline.

Within CVG cardiac rhythm in heart failure improved the most declining in the mid teen thanks to both rebounding procedures and share capture from new products.

And within RTT core spine and pains damn had strong sequential improvement with the bounce back at these more deferrable procedures in the United States.

I would note that our organic revenue decline excludes the benefit we receive from an extra week of sales in the first fiscal month of the corridor.

Which we estimate added approximately 360 to 390 million in revenue.

Then our extra week would have been without a pandemic.

But it's important to note this benefit was offset by our plan to reduce customer bulk purchases.

Hopefully you'll recall from prior earnings calls that we intended to use a good portion of the benefit from this extra week to reduce the practice of customers, placing large bulk orders as we're working to better balance the across the quarter.

We began the process earlier than planned due to depressed demand with co that in the fourth quarter and we still had some residual reduction in customer inventory levels this quarter.

As we look ahead the vast majority of the bulk reduction is behind us.

There are only a small number of areas such as our camera business, where we've been transitioning to a consignment model and select us account and where we should see another quarter or to have modest headwind.

On the bottom line, our adjusted EPS was 62 cents I.

A decline of 51%, including an estimated benefit from the extra week of approximately six to 10 cents.

As our revenue improved throughout the quarter, we saw strong flow through to our bottom line, resulting in as well ahead of expectation that said with the decline in revenue, we continued to see deleveraging down RPN out.

Several of our plant ran at less than full capacity.

Resulting in a larger period expense of our fixed overhead costs and a decline in our gross margin as we expected.

We also had increased SGN and R&D spend as I think not last quarter.

Given both the extra week and the increased investment, we're making and our pipeline and product launches.

As a result, our operating margin was 16.5%.

Down 12 points year over year, but an improvement of 40 basis points from last quarter.

Turning to our balance sheet, our financial position is strong.

With ample liquidity to act on opportunity.

We remain focused on investing both organically and inorganically through tuck in acquisitions and minority investments to drive our long term growth strategies.

We've increased our cadence of M&A and we're increasing our level of R&D investment with partners like Blackstone Life Sciences, who will invest more than 300 million over the next several years Talbot accelerate specific pump and CGM programs in diabetes.

These creative strategies will enable us to accelerate our planned investment and our growth.

I view this as a key wins for our company that patience, we serve and you are shareholders.

Turning more to the macro level, we expect both organic and inorganic investment to fuel our longer term revenue growth acceleration, creating strong returns for our shareholders supplemented by our growing dividend.

As an S&P dividend aristocrat, we've increased our dividend for 43 years.

And our current yield a 2.3% is in the upper quartile of S&P 500 healthcare companies.

Looking ahead, the uncertainty as the Coven 19 pandemic continues to make it difficult to provide our traditional annual and quarterly guidance.

However, as we shared last quarter, we intend to be as transparent as possible to help you understand how we're thinking about the trajectory of our business.

We've experienced a faster than expected recovery.

On the topline may was better than April and June with better than May.

And that improvement has continued into July and August.

While there are still uncertainty regarding the recovery. If these trends hold we would expect our second quarter organic growth rate to improve at a rate similar to what we saw between the fourth and the first quarters.

Where the fourth was down 25% and the first declined 17%.

From there, we expect sequential improvement and the third and fourth quarters.

And we still expect to be back to normal growth in the fourth quarter on a two year stack basis.

When we look at our second quarter expectations by group.

Mid GE should be better than the company average given continued increased demand in our respiratory business and increased volumes in surgical innovation.

CVG has the potential to be a little better than company average given its new product introduction.

Diabetes is expected to perform roughly in line.

And our TG could be a little below the total company given its higher mix of capital equipment sales.

But we're still seeing some sequential improvement.

Looking at the TNL, we're investing to support numerous product launches and we're investing in R&D programs to ensure our pipeline remains full.

Despite the pandemic were not pulling back.

Instead, we're focused on making the necessary investments to accelerate our revenue growth and ensure the long term health of our company, having said that we could see a couple of points of sequential improvement in both our gross and operating margins in the second quarter compared to the first.

And we expect continued margin improvement through the second half until we return to more normal margins sometime toward the end of our fiscal year.

Regarding currency the picture has improved with the weakening dollar.

On revenue assuming recent rates held constant our second quarter impact flipped to a slight tailwind after two years of a headwind and a full year benefit is now over $100 million.

On the bottom line at recent rate the second quarter headwind should be similar to the first and the full year has improved by about a nickel from the 20 cents impact I mentioned last quarter.

As I wrap up.

I would want you to take away that what ever the recovery looks like we intend to outpace our end market.

We're focused on competing and winning and we had the industry best and brightest pipeline the resources and the people that do it.

The future as bright and I'm proud to be part of this team driving our imperative to fuel our growth and also fulfill our mission ensuring that millions of people around the world can benefit from our products and services.

Back to you Jeff.

Okay. Thanks, Karen I.

I Hope you got a sense today for our recovery trajectory as well as Howard changing at Medtronic and will continue this conversation our investor day on October 14.

During the pandemic our entire leadership team came together to determine how we could better serve our customers and evolve our culture.

We work together to find this new year.

And we're on our way to becoming a more nimble and competitive organization, we're playing offense and we're energized to use this moment when our pipeline is kicking in to expand our markets and take share and importantly, we're driving towards faster and broader topline growth not just as we emerge from the pandemic, but sustained.

Well growth over the long term.

So with that let's now move to culinary in addition to care to me. We also have our four group presidents, Mike Coyle Bob White.

Get wall and Sean Sean solvent here to answer your questions and as usual, we want you to we want to get to as many questions as possible. So please help us by limiting yourself to one question and if necessary unrelated follow up if you have additional questions. Please contact Ryan in our Investor Relations team after the call.

Operator first question please.

Your first question comes from the line at BJ Kumar with Evercore ISI.

Hey, guys. Thanks for taking my question in that Jeff, but congrats on a solid for and share I had one question a follow up I left them and then the same question I guess, it's interesting you started your comments with that focus on market share Jeff one is the implications here.

Medtronic at Conexpo focus on market share.

The implication that that you guys keep growing in line to above market.

End markets, because I do feel at one of the bear thesis as Medtronic This predictive growth.

Yes.

Is that about a change with this focus on market share and what is driving that lays business has something changed here.

Internally.

To drive this focus on market share to see that being reflected in numbers and as a follow up.

Couple of audit timeline.

Calendar first quarter 21.

I think you also know timeline was made up this year.

Slide six months I, just want to make sure that could you just purely a function of Cowen and software issues et cetera that saw and what does it equally audit market share, but if you will focus on market share losses segments. It doesn't mean that medtronic should gain it.

Fair share, perhaps more than six or not we bought it.

Great, Thanks, and I'll stop there.

Okay. Thanks Vijay.

Appreciate the questions on the on the first one.

Regarding market share you're asking why the focus.

What's changed.

We spent the last couple of years talking about our pipeline.

And.

The big focus on the company and the like we've talked about our pipeline is the best it's been.

In a long time.

And as we.

Went through this.

CEO transition spent a lot of time with the with the team on who calls.

All the time and.

We're determined to make this pipeline count not just for patients.

Our customers but for shareholders.

And so we we we feel that sometimes are our market share isn't commensurate with our technology meeting our technology.

Yield more market share and and this is a an organizational focus that we want to take on.

In terms of.

Really focused on.

Billy a deeper focus on understanding.

Circuits and their competitors, what the competitors are doing and.

Making sure that.

We understand that and.

Pete effectively and this isn't on probably this is an organizational focus.

How about our field it's everybody.

And understanding each one of these competitive battles that we face.

First recognizing those understand what it's going to take the win.

Tracking them and all these competitive battles add up and there is no rounding error when it comes.

At a battle. So it is a it isn't enhance focused on market share and we felt like now is the time to do this given all the products that we have coming out we want to make like I said, we want to make the pipeline count not just for our patients, which is first and foremost in our customers, but for our shareholders as well. So I thought that was the moment to do that really excited about that.

And yes, the expectation is overall in aggregate to grow at the market.

Or higher and we havent done that and the reason.

So in some cases, we need to exceed the market growth.

And then make up for a couple areas, where we're behind.

But but the expectation for every single one of our segments is to grow at least that the market share and we've made that really clear and as you talk to people Medtronic I think that messages out there.

Your second question about the about the robot.

Yes, I mean, the delays were driven by coated.

Yes, the software issues with talked about in the past, we believe our resolve them. We're in the final validation and verification and the testing has gone really well we've got surgeons working on these robots and the like I said the feedback is great and we're excited and we're going to hit our market release date.

Here shortly and what that means for us is that triggers the file or the ability for us to file, which we talked about in the commentary I mentioned.

Calendar Q1 for both CE Mark in U.S. I'd. So yeah. We're we feel like this has been reduced we've got a high level of confidence and now the excitements building.

The company and and we win with the or surgeons that are working on that so we're excited and you asked about a market share forecast you I'm not prepared to give that right now I mean, we are going up against a strong competitor.

We're really excited about this.

I've I've by type of Medtronic, I feel like where we're in a position we have defending high market shares from new competitors, it's going to be fun to be on the other into that equation and coming out a well established a 100%.

Market share competitor, but coming out with some great technology with the financial resources and Medtronic, a really energized field sales force.

So we're looking forward to this.

I'm not going to give up market share forecast, but we're going to be a meaningful player market ill go bigger go home BJ, we're going to be meaningfulness I'm more excited.

I love that Gobank ago, Congrats guys.

Your next question.

Question Regina.

Your next question comes in a line of Bob Hopkins at Bank of America.

Hi, good morning, and thanks for taking the questions just one clarification and one question on the clarification side, you mentioned talking about some disclosures you will be making over the next couple of weeks about kind of changes at Medtronic is that is that all stuff that's going to come at the at the analyst day or are there disclosures coming before that so that's just.

The clarification and then the question is Jeff I was really encouraged to hear your comments.

About improvements continuing into July and August and obviously, Karen made those as well that's a huge issue for Medtronic and for all Medtech, because there's a lot of uncertainty out there. So Jeff I was wondering if you could just make some comments on just what you're seeing out there in July and August in terms of you'll kind of the rescheduled procedure versus new demand.

And what you're hearing from hospitals and patients just.

Any comments on that kind of the pace of the broader recovery would be much appreciated.

Thanks, Bob one on the clarification.

On the on the on the changes. These are changes, we'll talk more about like like you mentioned at our and Investor day, and elegant too deep into them today, but the broad brush strokes are.

Some structural changes that empower our businesses.

To make decisions and to be more and this is really getting at speed of decision, making it being nimble and faster as you know we're competing against a lot of.

Focus the smaller focused companies not just here, but in China enough places around the world.

And then it but at the same time, allowing these businesses to benefit from very specific.

And meaningful areas, where our scale makes a difference like technology platform anytime our businesses are pulling from broader technology platforms, and medtronic, they're able to it or rate on a much more consistent meaningful iteration on a much faster and consistent basis and also disrupt like we did it with with what we're doing with micro right now in the pacing space.

Our manufacturing footprint to ensure a high quality standard all the time at the right price at the right cost levels.

So so things technology.

Manufacturing our regional scale as we move into some of these regions. These are all areas of the or businesses those.

Can benefit from but in terms of disclosures idle, there's not going we'd like disclosures before that we'll be rolling this out to within the company over the next couple of weeks.

The too.

But I'll handle the.

Closures on that until we get too.

Today talk about it.

In terms of your your question around the market improvements it is encouraging.

A couple of comments there first theres, a big difference depending on the therapy or product area and the business that were and we do have a wide range here.

Things that are more urgent like neurovascular things that are more elective.

Some of the areas.

Well the California.

Thing like that.

We're seeing by country is different but but.

We're seeing a much we've seen a bunch of continue to see a much sharper recover in the United States in Europe, China has been pretty steady, but the whole pile of geographies and all of the therapy areas. All all of them are improving and we're seeing sequential month over month improvement I think the last time, we had to earnings while we were talking about.

Okay.

How things into April and we had some momentum into may well that every week. It's got every month has gotten better into June July and into the first couple of weeks of August we continue to see.

We continue to see proven its here.

And then turn to the patient here look look the surveys that we've seen and conducted that has been it's still the still out there, but it's been.

In my opinion mitigated quite a bit.

And the hospitals and I just talked another hospital CEO on on Friday it.

This is in the U.S. context, they seem very committed.

To a sustaining.

Keep and keep open for business and serving patients and I think they also need it financially another shutdown.

Thing they do.

And then the other thing that I think so these are all things that are going off there were participating.

In helping with patient fear and where we partnered with the American Heart Association American Stroke Association, and we're working with physicians were working with.

But but the other area I want to highlight is the stuff that we're doing right like I just mentioned we're out there working with physicians with the with physicians and their offices hospitals.

We're out there.

Staying focused on on our customers.

We're also helping them implement new technologies that really helping this coven timeframe like our remote capabilities, especially in cardiac rhythm right now.

That's making a big difference.

We talked about the ventilator space I mean.

These were physicians specific requests that came from individual hospitals.

Around product features and our response to this and how fast we move.

This makes a big difference and and the stories circulate within the hospital and C. Suites have been more engaged with us and so between the market coming back but from a geography perspective from a therapy perspective, and the actions that we've taken over the last couple of months.

We're we're we're in a way better positioned than we thought we would be this three months ago and we see the continued.

Momentum now everybody is a little nervous about the fall with back to school I just dropped off to college students in the last week.

And but like I said earlier I do think hospitals are committed staying open and we're feeling better about.

But what footwear.

Central disruption, we don't feel we're not as worried about it as we were a couple of months.

Okay. Thank you.

Next question the line of David Lewis with Morgan Stanley.

Good morning, just two for me, Alaska, right up front for Jeff and Karen So Jeff I, just I know, it's early but what's the profile Medtronic should aspire to relative to the for an 8% top and bottom you gave back in 2018, and if we can't get specific numbers I'm just sort of curious should investors expect both of those numbers should move higher aurs to focus more on.

Revenue for the intermediate term and then Karen just kind of related question. There's been a series of often on balance sheet transactions you most notably the recent M&A and Blackstone, So that clearly suggest the company's desire to accelerate growth.

What does it tell us if anything caring about sort of the flexibility of the pinedale in terms of margin opportunities going forward. Thanks, so much.

Well ill take a a stub David first thanks for the question.

Let me take a stab at the and then I'll hand, it off the Karen but on the 8% MPS now we're committed to that right. So we talk about market share we talk about growth, let me be clear, it's not at the expense of that 8% EPS growth as well and our.

Free cash flow conversion, which we've worked so hard to improve over the last couple of years. So we're not going to take a step back there were committed to that and as we grow as we grow more right as we grow at the market more in aggregate, which would be a meaningful improvement over the last couple of years.

And take share.

[music].

The growth will get higher we'll have some optionality of what to do that incremental earnings.

Earnings, but we're committed to that 8% and what will decide as that growth gets there what we're going to do with the extra PPS I'd like to invest some of it.

We'll see what we do with that with the rest here, but.

With that maybe I'll turn it over to.

Yes, thanks, Jonathan Thanks, David for the questions.

Yes, we have a strong balance sheet and we have been using that to help our growth and we've supplemented that as you mentioned with with partners like Blackstone to help us accelerate that growth in terms of the flexibility of the PNM from margin going forward.

I would say is that our bias is going to be on driving revenue acceleration higher and keeping at consistent and so given that bias, we will be focused on continuing to invest.

To ensure that our pipeline remains as full as it has been in a recent past.

Okay, so could margins improve yes, a little bit.

But we're more committed to driving that revenue growth acceleration and maintaining a bottom line NPS of 8% plus.

Then then we are on on dropping a significant amount to the bottom line will be focused more on investing hope that helps.

Super helpful. Thanks, so much.

Thanks, David next question please.

Our next question comes from the line of Robbie Marcus with JP Morgan.

Thanks for taking my question and I'll be the first to tell you I did kind of like be the video format. It was good to see you asked are being virtual for so long.

Maybe maybe on the question and I'll I'll kind of.

To win in here.

First as we're seeing you.

Year over year increases in R&D, what we're seeing most of your peers down year over year, you're you're clearly leaning in on R&D. I was wondering where are these dollars going what are the projects that you're saying you're investing in and then.

Maybe along those lines, you're also clearly investing heavily in diabetes, there whats speculation a while ago to exit that business. It looks to me less likely given how much you're putting in into resources here. What's the latest thoughts you have new management lots of investment there how should we be.

Think about this business and is this a three to five year turnaround story as its something we could see it a shorter term. Thanks.

Okay. Thanks, Robbie lot into those questions. There will first thanks for the so the complement on the video on glad it went well like my wife were skeptical, but I thought it was okay. We'll see how we go going forward here in terms of the.

Yes, the R&D increases.

Yes.

We want to put more into R&D.

Both you and be creative and when I look at R&D, we're looking at.

Traditional R&D offer income statement. These creative third party partnerships like Blackstone, which have a very good return on them.

Our also something we want to use and are in inorganic I mean, because most of what we're buying is.

Technology Tuck technology oriented tuck ins.

Which is which are all somewhere on or on their path to a commercialization or just been commercialized. So all this gets back to investing in areas.

In our in our business, we just have.

A lot of great ideas on the old you know idea that our eyes are bigger than our sound like what we are willing to get more R&D capability here. We've got just a list some of the product. So we're talking about our pipeline today, that's coming out right, but the R&D and there's some R&D that needs to go into sustaining at an interesting that things like spinal robotics and.

Things like that I mean, we're not done we're just getting started so there's a lot more to go into their but but some of the things that are on the pipeline like you know already and that's a multibillion dollar opportunity there.

Hi, CD I'll start with cardiac care you know.

Paul select the you know the pulse filled ablation I mean, just those three.

Our I'd call more medium term for us and are very exciting and I think could use more investment to speed up and drive bigger impact and in our TG, there's always more to invest and neurovascular, Brett wall and Stacy to make sure of that there's lots of products there and that's a high growth area like I mentioned DB.

Yes, we have the directional lead system coming out we want to invest and close loop I. Just think look neuromodulation is a big growth opportunity for this for the industry for the company and I think it's going to have a huge impact on patients and.

And then it might TG.

Obviously, the soft tissue robot in though we talked about the timeline there.

But we still have to commercialize that that's going to take some investment may not show up in the R&D line, but.

We need to invest there and and we mentioned in the commentary some of the products starting to come out from our digital surgery.

Acquisition. This touch surgery enterprise, we're very excited about that as we move we believe we believe we're leading and robotics soft tissue robotics.

The AI and.

Side of it and so there's a lot of opportunity there and then of course diabetes.

We've got to catch up on the sensor side and we're you know the everybody picked up while we're really excited about the sensor pipeline here. It's I wish it were happening even faster, but it is accelerated from what we were well into the synergy a trial enrollment rather and getting great feedback on that so there's lots of opportunities.

For R&D investment and and that's probably that's probably I don't know 70, 80% of what we're talking about internally is this pipeline and how do we feed it how do we speeded up.

So.

Very excited about that and then.

Speaking on diabetes, you said three to five years.

Yes, I'm not even going to ask Sean. This question because I know the answer is not three to five years, there's going be faster than that.

And I think when we get a seveneighty out there it's going to be a big step forward or like I mentioned, our sensor pipeline, which is which is the weak spot here that is we feel good about that.

And again I wish it were faster, but it isn't three to five year, so and the rumors about diabetes. They didn't come from from US I mean, we're committed to this and we've never blinked and we're not going to.

Thanks, a lot.

Thanks, Robbie next question. Please Regina. Your next question comes from the line of Joanne Wash with Citibank.

Hi, good morning, everybody on the Aspen can you just any investors. This morning, one of the team coming across as a sense of.

Being reinvigorated or quote a different medtronic so.

You see.

Jeff because you're you're relatively new in the CEO role and you get to do it in the net that's a pandemic what do you see that is different that how youre going to make your mark on the company and.

Other side of this pandemic, how do you think Medtronic is going to look different because it seems to me that the way Medtronic Hirsch managing its employees during the pandemic may be somewhat different than the way others have thank you.

In terms of reinvigorated I think we do feel reinvigorated and its song in large part because of where we where we sit right now as a company I mean this pipeline is exciting and it's something that we've been investing in for a long time and look the.

Colgate has been you know is extracted huge human toll and an economical.

But so I'm looking for bright spots coming out of go that in one of them.

Has been the ability for during this time, our leadership team to sit down together like I said a lot of zoom calls.

Some face to face, but in a really.

Look at where where we are as a company and take a take a step back and.

What we're seeing is way more opportunities than challenges, but talk a little I mean look we've got our mission, especially during a pandemic like this really shows how valuable that mission is and that helps us clarifier decisions and really helps us in our opinion stand out relative to others and how we will react and how.

We show up and so we've always had that and that that has shown that just how we're reminded how powerful that as during a pen crisis like we face now.

We've got a very we've got great technology, great market.

Positions.

We've got a very experienced leadership team and I come back to this pipeline and so when we started to look at all this we feel like Theres, just a huge opportunity.

Want to make this pipeline count and so you know so that's why we're excited and if it feels like we're reinvigorated that's good.

No I don't want to use that word, but I can tell you that we're we're excited.

Because of all this and the opportunity and it's not just like Hey, Here's the pipeline and it's going to work its way through and then there's like a than those peaks and trials of that's not it were refilling the pipeline I just mentioned all these I just went through the last question on all of these things about the R&D, where we're putting it there's so much to do so much opportunity. So yes, we are.

We're excited and that's why we also focusing on this market share opportunity, we want to make this pipeline count and how we look different.

One.

We want to.

So in the near term.

We want to be growing at or above the market. So whatever the recovery as it's hard to forecast.

We're trying our best as you guys are to forecast the recovery, but we want to be on the leading edge of that.

And doing better relative.

To our competitors.

And our pipelines going to lead the way and we're going to have great commercial execution here and so that should be a meaningfully increase to our growth relative to our competition. So that looks different and look I our employees have always had a.

Strong loyalty and allegiance to Medtronic, but I think thats increased over the last couple of months.

As people realized what.

How much the mission needs, but we still have work to do.

And working on things like.

Our what is our role here and some of these social justice issues that are out in the communities that spill into our offices and so you're going to see us more aggressive on those taking stronger stands on some of those issues, but over time longer term, we want to put the tech in med Tech and we want to shift we want to pool.

In some of these digital technologies to change our offerings and overtime, we're very device centric and edition of the devices, we want to pull in data and analytics and you start to see that in pockets of Medtronic like with the neutrino acquisition diabetes the digital surgery.

Acquisition in.

And my TG for the soft tissue robot, we're working with cup partnering with companies like visit for stroke.

Detection and so.

Having our offerings be smarter and self learning.

And our offerings, providing a lot of data and insights. In addition to therapy back to our customers. I think this is an area that that this is going to take some time, but this is something we're committed to.

Thank you.

Thanks, Joanne next question. Please virgina.

Your next question comes from the line up Larry Biegelsen with Wells Fargo.

Good morning, Thanks for taking the question.

My entire or for Karen just carrying one clarification, how much of the extra week was offset by reduced bulk purchases in the quarter for my question last quarter. You gave some helpful commentary on the exit rates in the last month.

You know what did you see in July relative to what looks like about a negative 9%.

Organic year over year growth rate, you're guiding to in fiscal Q2 that can you get to flat or.

Growth in fiscal Q3, thanks for taking the questions.

Thank you. Thank you Larry so in terms of the extra week basically all of it was offset by their reduction and customer.

Bulk purchases so.

So the net effect was essentially in a very minimal.

In terms of the monthly trends that we're saying, we're not going to give year over year monthly comparisons and thats really because the reduction in bulk sales in the different number of selling days in the quarter can make that confusing, but I would want you to take away that are on Jeff talked about that are are.

Average daily sales rate thought significant step up in May and then again in June and that continued into July and August and we believe this trend will continue we signaled that we believe our second quarter.

I didn't see improvement roughly equal to the improvement that we saw between the fourth quarter on the first quarter and just to remind you the fourth quarter declined 25%. The first quarter, 17%. That's a differential of about eight thats the kind of improvement that we would expect to see in the second quarter and that way we can expect.

To continue that improvement into the back half.

And by the time, we reach in our fourth quarter, and we would expect to be back to more normal growth on when you look at it onto your stack basis.

Thank you.

Thanks, Larry I think we have time for maybe two more questions. We can take the next one Regina.

Our next question comes from the line of Danielle Antalffy with STB Leerink.

Hi, good morning, guys. Thanks, so much for taking the questions and I second Robbie comment on that digital too thanks for that.

Just ask that question, Jeff on the commentary around market share gains and I'm curious just more specifically.

Hi, just sort of what you're talking about where the new infrastructure investment and things like that that we'll hear more about on the analyst day, how much of that sort of reinvigorated effort around really gaining market share.

Being more aggressive is tied to things like that's very steep potentially having to build out further from a product perspective and in a day, even more on the pipeline and that's my only question. Thank you so much.

Well.

On the innovation side I mean, like I said, we feel like we've got a great pipeline. The best we've had and headsets, it's coming to fruition now and we've got more out there in the medium and long term, but we're not ever going to be satisfied.

On our pipeline I mean innovation is the lifeblood of the company. So we're always going to want to invest more and really just not you know ultimately the ultimate judge here will be the level of innovation.

The the outcomes, we can produce these technologies both for patients and economic outcomes for the health system.

So thats the ultimate but we don't want to be outspent, either so we are investing more using these creative.

Like the Blackstone partnership using our balance sheet more trying to get more efficient, we're always going try to get more efficient R&D. So we're never never going to be satisfied with innovation on ways to talk about you talked about health care is being like a by definition and unlimited demand.

So as soon as you saw one problem.

People want another problem solved or they want to solve faster. So we're going to keep going on they all the innovation.

And though and the market share.

It's really it's two things that we're going to need to do.

Well, we'll we'll three things really you need to have the products right. You said the pipeline, which we've talked about the other the other two areas that we've talked about is structurally allowing to help increase that innovation, allowing our business units to have more levers to pull to be more nimble and faster to compete with.

The marketplace and Med Tech is pretty competitive like I said, we face.

A lot of smaller and maybe more focused competition and I don't really like this idea well they're smaller so they should grow faster I don't know model on lot of believer in that and so neither is our leadership team for that matter and no. We're not accepting that so we want to treat our businesses and giving them the ability to compete against anybody whether it's a big well funded.

Or a competitor with lots of technology or more established competitor or a small are up and coming competitor, we want to be able to compete with also so it's making some structural changes.

To better position them for that and then the third is this the cultural piece is just setting that expectation that we're always we're always going to be a mission driven company, we're always going to be in innovation driven company, we're always going to be that company. That's that's pushing the envelope here and starting therapy areas like an already and you know.

We're going to be that company, but we also want to be the company that that is able to.

Hold the share in these markets that we establish and in some cases like soft tissue robotics, where we weren't the first to come in they are as a meaningful second and I think there's room for improvement and.

And the mindset of the company on competing like that so that's a cultural so pipeline always first some structural changes.

That we think we can work through without too much disruption here.

And the cultural changes around expectations on on competing.

Thank you so much.

Thanks, Danielle we'll take the last question please region.

Our final question comes on line of Raj generally with Jefferies.

Hi, Good morning, Wonder, if maybe I could ask about companion medical.

You talked about potential for that that product in the diabetes market. There maybe you could share a little bit about your internal projections for for revenue growth for that and when it can start via meaningful contributor to it to your gross.

So first on companion, where were we haven't finalized the acquisition. So we're limited in what we can say, but I, but Sean is the real champion and architect behind on that deal and so maybe Sean Simon's on the phone here.

I'll turn it over Sean for some comments yes.

Great. Thanks, Thanks for the question Raj.

Yes.

As Jeff said the deals not yet finalized but.

The opportunity very attractive.

Jeff commentary. So there is about 12 times the number of patients, which it. So we think by our modeling spot 13, and a half million patients worldwide, who are using multiple daily injections to treat their diabetes and it's very very underpenetrated opportunities. So for us to go into that market.

And add value to those who either choose to be there or have to be there because of other considerations is where we want to meet those patients and this really dovetails very nicely into our improving sensor pipeline in adding the capabilities that we've added appeal for time those building blocks for the powerful AI and data science.

Capabilities, which we think when deployed against.

Knowing how much and so when you're getting what time, you can markedly improve the outcomes for patients who choose to use multiple daily injections. So it does a few things right. We can capture more of the patients who are upstream and maybe move patients who get comfortable technology into some other solutions that we have in our autumn.

Insulin delivery systems.

Great and maybe just Jeff one follow up relative to acquisitions broadly right. So companion and other kind of tuck in deals you've talked about it shouldn't assume that you have no appetite for larger deals or will you continue to focus really just on the tuck in side of things really just any broader thoughts there would be helpful.

Focuses on the on the tuck ins and.

They've been tuck ins game can get up to.

Billion dollars or low billions, but but.

But thats the focus is we've got.

That's the focus we.

We like where we are right now and the tuck ins will help us but.

We're not focus beyond that.

Great. Thank you.

Thanks Raj.

Good.

Okay, well, thanks for the questions and look I really appreciate we won't really appreciate your support and interest in Medtronic and we're looking forward to presenting more details of our longer term strategy I thought our October 14th Investor Day, and then updating you on our quarterly progress on our Q2 earnings call, which we anticipate holding on November 24th so thanks for joining us.

Today stay healthy and so then have a great day.

Ladies and gentlemen that will conclude today's call. Thank you all for joining him you may now disconnect.