Q2 2024 Medtronic PLC Earnings Call

Strong and our growth was broad based across multiple businesses and geographies with cardiovascular neuroscience and medical surgical all growing mid single digits and diabetes accelerating to high single digit growth.

Our new product launches are performing well and driving growth across many businesses.

And we look ahead to the back half of our fiscal year those launches combined with several recent regulatory approvals give us confidence in our ability to continue delivering dependable growth.

At the same time, we're executing on our comprehensive transformation, including enhancing our global operations quality and supply chain.

And we're decisively allocating capital into fast growth Med tech markets and fueling innovative technologies in areas like robotics, AI and closed loop systems that will drive our growth over the next decade.

We're forging the path to durable growth as we execute on the actions needed to create long term value for our shareholders.

So now let's get into the details behind our Q2 results. We continue to look at our portfolio of businesses in three categories established market leader businesses synergistic businesses and highest growth businesses.

Looking first at the established market leaders, we had a very strong performances across cranium spinal technologies surgical and cardiac rhythm management combined they made up just under half of our revenue and grew 6% organic again this quarter.

Starting with cranial and spinal technologies continued adoption of our Abel ecosystem is driving consistent above market growth in Q2, we grew 7%.

Digitization is transforming the competitive landscape in spine and we're leading the way with Abel.

With our global footprint of over 10000 systems.

Over 10000 systems or over four times greater than the nearest competitor.

We are the first and only solution with integrated AI based surgical planning with unit adaptive spine intelligence.

Our Missoula robotic system is the first and only to offer bone cutting a feature that was well received when we unveiled it at the North American Spine Society Conference in Los Angeles, just last month, and we remain the clear leader in the intra operative imaging and navigation space with our <unk>.

Arm and stealth station technologies, both of which grew double digits in the quarter as surgeons adopt able and we continue to expand our sales teams and invest in future innovation, we expect to maintain our leadership and extend our share gains in spine.

Now moving to surgical we grew 6% here there was broad based strength across our surgical franchise hernia and Electrosurgery. Both grew in the double digits on strong sales of our pro grip and textile mesh and valley lab smoke evacuation systems.

Advanced Stapling and wound management, both grew mid single digits.

Cardiac rhythm grew 4% with.

With high single digit growth in cardiovascular diagnostics and cardiac pacing in pacing our micra <unk> pacemaker franchise grew 13% driven by our U S launch of our next generation micro Avi to NV are two devices were also seeing strong growth in conduction system pacing and alternative to.

Traditional single or dual chamber pacing.

Our 38 30 lead the only approved lead for this novel form of pacing grew strong double digits again this quarter.

And late in the quarter, we received FDA approval for our Aurora EV ICD system, a game changer for the single Chamber ICD space.

Now, we're ramping up our training of implanting cardiologists on the Aurora technology, So Aurora delivers the benefits of a traditional ICD, including similar size longevity and pacing features.

But without the leads in the heart or veins.

And these benefits can be realized with one device.

And only one implant procedure and just to drive this point home on size, there's a big difference here versus the competitors device and I mean big.

Here's an X ray of an Aurora EV ICD patient with the competitors right next to it just for comparison.

So in addition to all the clinical benefits of our EV ICD.

You can see that it's meaningfully smaller and of course lighter than the competitors.

And here's the model that we're giving our reps to explain the difference to customers now.

Now this is the size of the competitor's device.

And we can actually pop out the Aurora to show how much smaller it actually is so so it's like those nesting dolls, except here.

We just pop out we got to start with a big Guy and then we go right to the small guy. So let me put this out so you see inside the model here's Aurora much smaller much lighter and speaking of weight.

We actually had to put a series of weights inside of here to get the the bigger device to exactly replicate the weight of our competitors.

So we're really excited about this is we've got a meaningfully better option for patients our advantages will not only displace the competitors device, but will expand the population far beyond the existing savings.

We think this can grow to become a billion dollar plus segment.

Turning to our synergistic businesses combined they grew mid single digits in Q2.

And we had several standout performances.

<unk> grew 9% on strong momentum in our Endurant AAA franchise. Following the 10 year real World durability data presented at the Charring Cross Symposium earlier this year.

Our coronary business grew 6% as we gained share in international markets on the continued rollout of our Onyx frontier drug Eluting stent.

Cardiac surgery grew 9% driven by strength in perfusion and cannula as well as the Nautilus Ecmo oxygenated.

Our endoscopy business grew 13% driven by continued adoption of GI genius Gi genius uses the power of artificial intelligence to detect polyps in real time during a colonoscopy integrating seamlessly into a Gi docs existing workflow.

Ti genius results in a 50% reduction in Ms polyps versus a standard coloscopy, which plays an important role in the prevention of colon cancer.

Turning to businesses in our highest growth markets cardiac ablation solutions grew 6% on strong market procedure growth now.

Now over the coming years, we expect this business to be a very meaningful growth driver for Medtronic, we are leading the way in bringing pulse field ablation catheters to market in both the focal and single shot segments.

In focal P. S. A we continue to ramp manufacturing of the sphere Non-catholic <unk> and remain in limited market release in Europe sphere, nine can perform both PFA and RF ablation and drives high density mapping all from the same catheter and it integrates seamlessly with our differentiated a fair.

From mapping system.

In the U S. We expect to complete the 12 month follow up in the pivotal trial for sphere nine in the coming weeks and then we will prepare for FDA submission.

And single shot PFA, we just received CE mark for our pulse select catheter and it will be commercially available early next calendar year. We are now the only company with approved catheters for both single shot and focal PFA.

And in the U S. The FDA is reviewing our pulse select submission and we expect to be one of the first companies with a PFA catheter in the U S market now with our PFA catheters and the affair Mcnabb system combined with our leading Arctic front cryo solution and differentiated flex Cath cross trend settle system, we expect to drive.

Strong long term growth in the fast growing $8 billion EP ablation space.

Now turning to structural heart overall, the tariff space continues to grow in the high single low double digit range. In Q2 re grew mid single digits, which was below the market.

Now we declined slightly in the U S comping difficult prior year comparisons when we initially launched evolute FX and customers purchased for stock.

Yet we grew 4% sequentially evidence of the strength of our product in Europe, We grew high single digits and receive CE Mark for Evald FX at the end of the quarter and in Japan. We continued to win share and grew in the mid thirties on the continued adoption of evolute FX and expanded E. S. R D.

Indication.

Our evolute platform has now shown superior valve performance compare to surgery and randomized trials that extend to five to 10 years after initial procedure.

And last month, our landmark evolute low risk trial was presented at TCT and published and Jack the trial randomized patients to evolute or best in class surgery as.

As you can see in this chart evolute, which is the Blue line had a lower rate of death or disabling stroke and the difference continues to diverge each year.

From a 2% difference at two years.

To 2.9% at three years.

And growing to a 3.4% difference at four years.

This resulted in a 26% reduction in death or disabling stroke with evolute at four years.

And no other transcatheter valve has shown better valve performance and outcomes compared to surgery.

Valve design matters.

And this differentiates us competitively.

Physicians understand this data this is compelling to them and it's compelling to patients.

So as we look ahead, we expect the combination of this data coupled with the global rollout of evolute effects to drive our tavern growth above market.

In Neurovascular, we grew high single digits. When you exclude sales in China were the coils market is subject to volume based procurement. We continue to see very strong growth in Florida version, which was up low twenty's globally. This is being driven by our innovative shield technology for treating brain aneurysms.

Which is available on both the pipeline flex and pipeline vantage float <unk>.

In robotics surgical technologies, we increased our installed base as we continue the international launch of our differentiated Hugo robotic system in the U S or expand your own pivotal trial continues to enroll and is on plan and we're happy to announce that we have FDA approval to start our U S.

Hernia indication pivotal trial for Hugo adoption of Hugo is positive with surgeons appreciating features that are core to the system, including touch surgery Enterprise digital technology.

This AI powered video solution.

Currently available for both robotic and laparoscopic surgery creates a new paradigm for case review and performance improvement.

We've already deployed it in over 20 countries and we're continually developing our connected digital ecosystem and we're excited about the upcoming launch of touch surgery live stream to enable live streaming and sharing of procedures securely and seamlessly.

We expect Hugo equipped with advanced digital capabilities to be a meaningful growth driver for us in the years ahead.

We believe surgeon preference with our open console and modular design.

Our leading position in minimally invasive surgery and instrumentation.

Our connected digital ecosystem and data enabled insights.

Along with our World class surgical training program of partnerships will meaningfully advance the low penetration of robotic surgery around the world.

And in diabetes, our customer base is expanding sequentially as users around the world purchased the mini med seven AG system.

70, <unk> is the only AI system to make correction bosses every five minutes offer flexible glucose targets as low as 100 and feature meal detection technology.

This combination is resulting in high time and range uses are achieving or exceeding their glycemic targets and importantly, realizing the relief that comes from burn reduction in their diabetes management.

In Q2, our diabetes business grew 7% its highest growth in 10 quarters or five years. When you exclude the COVID-19 comp in Q4 of FY 'twenty one.

In international markets, we continue to see robust mid teens growth driven by the recurring revenue from CGM and consumable sales to customers that have adopted our AI technology and in the U S. This was our first full quarter of the seven AG launch and we're meeting or exceeding our launch goals.

Our U S pump sales increased over 30% sequentially. The number of unique seven atg prescribers has increased over 20% since last quarter with many returning to Medtronic as they learn about the differentiated outcomes uses are getting with seven atg.

And we also continue to see very high CGM attachment rates in our seven AG installed base meaningfully above the rates prior to launch.

All of these leading indicators give us confidence that we will see a significant ramp in our CGM and consumable sales in the U S and return to year over year growth in the back half of this fiscal year.

We've been driving this turnaround and as we look ahead, we expect diabetes to drive even more meaningful growth for us. We expect the majority of the intensive insulin management space to move to smart dosing through either a I D systems or smart MDI.

And we're well positioned to take advantage of this trend as we're the only company investing in a complete ecosystem of differentiated technology for people living with diabetes, including next generation durable pumps smart pens patch pumps sensors and algorithms so with that let's see.

Go to Karen for a deeper look at our Q2 financial performance and our fiscal 'twenty four guidance raise Karen.

Thanks, Jeff.

Looking at our financials overall it was another good quarter.

Our revenue grew 5% ahead of expectations.

And adjusted EPS was $1 25.

Seven cents at the midpoint of our guidance range with about three cents from stronger than expected revenue.

<unk> sends from better gross margin and approximately one coming below the operating profit line.

As Jeff mentioned, we remain focused on delivering durable growth.

Based on the changes, we've made including our operating model incentives and capital allocation, we've positioned the company to deliver sustainable mid single digit growth on the top line.

And you are seeing that play out for four quarters in a row now.

Looking at our second quarter revenue growth you can see the diversification coming through.

Which is important to driving long term durability.

As Jeff stated, our three portfolios grew mid single digits and diabetes accelerated to high single digit growth.

The broad based growth also came through on a geographic basis.

Western Europe grew high single digits with strength across many cardiovascular businesses diabetes, neurovascular and pelvic health.

And Japan grew mid single digits and was also driven by strong results in many cardiovascular businesses as well as surgical and neurovascular.

Emerging markets grew 9% or 13% when excluding Russia, given the sanctions.

We had low twenty's growth in the Middle East and Africa high teens growth in South Asia mid.

Mid teens growth in southeast Asia, and low double digit growth in Latin America.

China grew high single digits as some of the V. P that we expected was delayed until later in the fiscal year.

While our adjusted gross and operating margins declined in the quarter.

We're ahead of expectations.

With gross margin about a third of the year over year change was due to currency and the remainder was driven by inflation.

And our adjusted Op margin decline was entirely driven by currency.

On a constant currency basis, it increased 40 basis points.

We're executing to implement efficiencies in our expense structure and you can see this in the 90 basis point improvement in SG&A.

Below the operating margin line, we benefited from higher global interest rates on our investments and this was partially offset by a higher than expected tax rate.

Mainly due to jurisdictional mix of profits as well as a lower benefit from stock based compensation.

Turning to capital allocation, we continue to prioritize investments in innovation to fuel and sustain our long term growth.

We are disproportionately investing in some of the fastest growth markets in med Tech.

And we have a long standing track record of returning capital to our shareholders, primarily through our strong and growing dividend.

And to the extent that we don't find high growth high return tuck in M&A, we would expect to return additional capital to our shareholders by retiring shares.

Now turning to our guidance.

Given our second quarter outperformance and continued strength in our underlying fundamentals, we're raising our full year guidance today on both the top and the bottom line.

We expect fiscal 'twenty for organic revenue growth of four and three quarters percent.

An increase from the prior four 5%.

For the third quarter, we're expecting organic revenue growth to be in the range of four to four 5%.

And while the impact of currency is fluid based on recent rates foreign currency would have an unfavorable impact on full year revenue of $100 million to $200 million incurred.

Including an unfavorable impact of zero to $50 million in the third quarter.

On a comp adjusted basis, our third quarter guidance represents acceleration from the second quarter.

And we expect this trend to continue into the fourth quarter as we're ramping a number of recent product launches in the back half of the year.

In diabetes, we're projecting the U S to return to growth in the second half of the year and the continued adoption of seven atg and the associated CGM and consumable sales.

In medical surgical we have the continued rollout of the Hugo surgical robot N G I genius.

In neuroscience theirs are able ecosystem in spine are inceptive closely or pain stim device in Europe.

And we are awaiting FDA approval for both Inceptive and our percept RC DBS device.

In cardiovascular we're ramping our tavern and PFA launches in Europe.

Starting the rollout of EV ICD in the U S and Europe, and we are now starting our Rd and sales in the U S.

This all gives us confidence in the continued durability of our topline growth.

Moving down the P&L our margins this year continue to reflect the impact of currency and inflation.

And some of the volume based procurement tenders in China that were expected in the first half have shifted to later in the year.

That said, we're focused on continuing to drive efficiencies in our expense base.

And we've got our global operations and supply chain centralized to take advantage of our scale.

As you know stabilizing our margins and then improving from there remains a top priority.

On the bottom line, we're raising our fiscal 'twenty four non-GAAP diluted EPS guidance to a new range of $5 13 to $5 19, an increase from the prior range of 508 to $5 16.

While we expect FX and tax to be a few pennies more unfavorable in the second half. We are pleased with the momentum we have demonstrated and our pipeline from here.

For the third quarter, we expect EPS of $1 25 to $1 27.

And on foreign currency based on recent rates, we're seeing an unfavorable impact of 6% on full year, EPS, including an unfavorable 5% impact in the third quarter.

Before sending it back to Jeff in a spirit of Thanksgiving I want to extend my gratitude to our 95000 employees around the world who come to work every day to deliver on our mission.

You all play important roles in alleviating pain, restoring health and extending life for two patients every second which makes this world a far better place.

Back to you Jeff.

Okay. Thank you Karen.

No I know G O P ones have been on your mind as the promise of these drugs has certainly had an outsized impact on med tech stocks, including ours over the past four months. So I thought it would be helpful to share with you our view on their potential impact on our markets.

Now G O P ones are clearly an exciting class of drugs for patients and the select data presented at H a suggests the potential for a large market.

That said the key takeaway from our analysis is that outside of a modest impact on the bariatric surgery market, which we believe will be temporary we don't see these drugs impacting medtronic growth outlook, even long term.

This expectation is based on our extensive science based work.

Like many of you we've modeled potential uptake and impact based on epidemiology based on what we've seen historically with other drugs and based on the relative risk reductions in adherence rates seen in select.

So given the select results showed smaller impacts on the more obese patients. We believe that bariatrics surgery will remain the gold standard for addressing obesity.

We also know that many of the patients that try these drugs do not stay on them for more than a year likely due to durability side effects or affordability, which creates opportunities for new patients to consider surgery.

For these reasons, we believe the current headwinds on U S. Bariatric procedures will stabilize over the next several quarters and return to growth by calendar year 2025.

And this is modest and manageable within our broader diversified surgical business.

Now with diabetes are customers are primarily type one.

With only 10% of our installed base and type two insulin dependent patients.

We do expect growth in our type two business going forward, but type two pump penetration rates are so low that even using aggressive G. L. P. One modeling assumptions.

We don't see any meaningful change in our diabetes growth outlook through 2030.

Now we'd be happy to discuss this in more detail in Q&A, including our view on the select trial and its potential implications for med Tech now before we go to the analyst questions I'd like to close with a few brief concluding thoughts on our progress.

You are seeing in our results that that many of the challenges that have held back our growth have largely been mitigated, whether that's diabetes, China or the issues in our supply chain.

And we've established a track record of delivering durable mid single digit revenue growth, which we expect to continue in the back half of the fiscal year.

We have some really compelling product approvals that drive our growth not only in the back half but for years to come.

Theres been a number of things that have happened recently big things in the last four weeks in particular with our tavern data that gives us such an advantage in the marketplace, new product approvals like EV, ICD geographic and indication expansions.

And last Friday.

We got already an approval.

This opens up a multibillion dollar market opportunity for us.

And with over 1 billion people worldwide with hypertension.

The opportunity is massive in fact, just 1% penetration of the target market represents over 1 billion of revenue.

So we're focused on executing to deliver the top line and at the same time, we're taking action to run our businesses more efficiently.

To counter the impacts that inflation and currency are having on our margins and.

And we've been implementing an extensive transformation to improve the durability of our growth.

We've changed your operating model brought in extensive new leadership increased capital allocation to our highest growth opportunities and are implementing a culture based on execution speed and playing to win and now we are positioning the company to take advantage of our scale in areas of operations and supply.

<unk> core technology, and how we go to market with large customers around the globe.

You're already seeing results from this today.

And as we go forward our focus is on translating the durable revenue growth that we've established into durable earnings power.

This is a winning formula for creating value for shareholders and we are laser focused on making that happen.

Now with that let's move to Q&A, where we're going to try to get to as many analysts as possible. So we ask that you limit yourself to just one question and only if needed a related follow up.

If you have additional questions you can reach out to Ryan and the Investor Relations team after the call.

With that Brad can you. Please give the instructions for asking a question for the sell side analysts that would like to ask a question. Please select the participants button and click raise hand.

If you're using the mobile app pressed them more button and select raise hand.

Your lines are currently on mute.

When called upon your receiver request, a new airline, which you must respond to before asking your question.

Lastly, please be advised that this Q&A session is being recorded.

For today's session, Geoff Karen and Reiner joined by cute Alara, EVP and president of diabetes Mike.

Mike Marin Arrow, EVP, and president of the surgical and endoscopy businesses Sean.

Sean Salmon, EVP and president of the cardiovascular portfolio.

At wall, EVP, and president of the neuroscience portfolio, and Bob White, EVP and president of the medical surgical portfolio.

We'll pause for a few seconds to assemble the queue.

Okay.

We will take the first question from Robbie Marcus of Jpmorgan.

Please go ahead.

Oh, great. Good morning, everyone and thank you for taking the question.

Maybe I'll ask both of them upfront.

First Jeff you talked about how you know most of the headwinds are largely mitigated.

I look at the guidance implied in the second half of the year. It it's a point of growth or so below the first half. So maybe just talk about how we should.

Think about the lower growth in the second half versus the first half and the reasons for that and then part B if I look to 2025, our fiscal year 'twenty five.

Yeah.

The Street has you pretty close to your long range plan of 5% plus on the top and 8% plus on the bottom is that the right way to think about next year are there any.

Headwind or tailwind, we should think be thinking about here like potential dilution from the <unk> monitoring business that just want to try and get straight numbers are correct as we head into year end. Thanks, so much.

Sure well, let me kick it off and I'll I'll. Thanks for the questions Ravi I'll kick it off and then hand, it over to Karen It terms of the headwinds being mitigated and you know what I'd say is that the markets are.

Pretty stable.

Especially relative to what we've seen over the last couple of years.

With procedures I think back to to normal growth in <unk> and the staff in the staffing issues that are that were hurting the procedural growth or I think you know more or less under control pricing is has been stable.

We can talk Shylea, we're working through the China, Pvp, but that's largely behind us still a little bit more to go but largely behind us. So yeah, and then and then our own internal the changes to our global operations and supply chain that.

That was a big one for us and has been a big one and we.

So we're seeing our teams.

Perform much better than like I said, we're turning that into a strength for us a strategic long term strengthen and our supplies in a much better situation. So that's and then of course are our pipeline is coming in and I'm sure we'll get into that in the call here with a lot of.

New approvals plus the prior approvals of where we're starting to launch and theyre, having meaningful meaningful uptake. So that's where the optimism is in terms of.

How to think about the back half.

Versus the first half and then getting into FY 'twenty, five I'll turn that over to Karen yes.

Yeah, Thanks, Geoff and Robby So just on the back half Ravi our comps do get a little tougher as you know, but we've got a really strong innovation pipeline that we talked about and that's driving growth acceleration actually from the first half to the second half.

We've got our diabetes business returning to growth in the second half we talked about our extensive pipeline EV ICD PFA Hugo Evolute, FX and now they already an approval.

And so we're confident in this growth acceleration and we're confident that that's going to continue beyond the back half of next year.

You know when we think about FY 'twenty five.

It's still early we have two quarters left in this fiscal year and we're laser focused on delivering the rest of this year.

We're also at the beginning of our planning process. So we're not ready to give specifics, but I do know that all of you are working on your calendar calendar year models for our competitors. So happy to give you some perspective.

On what we know today and what we're thinking about it and I'll start with revenue.

We've been focused on consistently delivering that mid single digit revenue growth and you've seen us do that for four quarters now.

Our new full year guide for this fiscal year as four and three quarters.

And as I mentioned, we've got the strength of those numerous product approvals in big markets that are launching around the world to help drive our back half growth and obviously, we're confident that strength will continue into next year and beyond.

And on margins and down the P&L there are some puts and takes.

Got inflation stabilizing a bit, but it's still higher than historical but again its stabilizing.

Yes currency is dynamic and as you know the U S. Dollar has been strong so we're likely facing a headwind from FX, but we'll see we'll see how that shakes out.

Global tax reform will likely be a headwind, but as always we're focused on driving offsets everywhere that we can.

And Jeff talked about it we've made progress on cost of goods sold and cost out and is starting with centralizing our global ops team. We have work to do but those teams now have tangible programs in place.

To drive that work.

And we will continue to drive pricing is an important lever.

We built a new muscle on pricing and our focus is to keep it strong.

We've been working hard on controlling expenses and that includes maintaining discipline on our largest driver of our expense, which is our head count.

So I hope I hope that gives you some color on just the puts and takes.

But to summarize I'll I'll remind you what hasn't changed and that's our long range commitment.

Driving durable mid single digit top growth is driving leverage down the P&L are driving a strong free cash conversion and a growing dividend, which all combined ultimately deliver a double digit total shareholder return.

What has changed though is our progress toward that toward that commitment you've already seen is it mid single digit top line, we've talked about the strong pipeline that gives us confidence in its durability and obviously we've talked about the programs we have in place whether it's in head count management Cogs costs down price.

<unk> discipline.

And they're all levers to help us offset the headwinds and over time establish that same durability on the bottom line.

Thank you.

Thanks, Ravi will take that.

The next question please breath.

The next question comes from Travis Steed at Bank of America drivers. Please go ahead.

Hey, everybody congrats on a great quarter.

Karen.

All of those comments on FY 'twenty four I heard the leverage down the P&L comment it sounds like based on what we know today unless there's some kind of major surprise. There is still a good ability for there to be enough offsets to drive EPS growth.

So that revenue growth, that's when we're going to make sure that that's a fair comment and then Jeff I didn't want to follow up on your thoughts on <unk> post the select trial curious if theres any any color you'd add on on the <unk> trial in the cardio endpoints and diabetes prevention that maybe you Didnt mentioned in the prepared remarks.

Yes, Travis thanks for the question clearly.

In the next year and beyond we're focused on driving that leverage down the P&L that I talked about and obviously when you drive leverage that you know your bottom lines faster than your top line, but at this stage, it's still early and we're at the beginning of our planning process and we're going to give you more on FY <unk>.

25 is as we as we are ready to guide.

Hey, Travis good to hear from you.

On <unk>. So so first of all I just want to make it clear that.

We see that it's an exciting class of drugs with a with a large opportunity.

And I'm sure just like you.

<unk> talked to many patients that are that are benefiting from from these from these drugs from a weight perspective for mental health perspective.

It's pretty amazing.

That being said we've done a lot of work in.

And outside of the near term temporary impact on bariatric surgery market. We don't see these drugs impacting our growth outlook, even in the long term and then and on the bariatric piece that.

As we mentioned, it's a small part of our Reno low low single digits and.

The the rate of decline has stabilized there.

And I think we see that coming back here in the coming year, even so we.

We did do a lot of work here and I'm going to.

It was like I said science based and looking at the epidemiology and really digging into select an and.

What we do have on the call here, our Chief Medical Officer.

Dr. Laura Mauri, and I thought I'd, maybe kind of call her in here.

Bringing a relief pitcher here on that question to.

Talk a little bit more about select and kind of what we're seeing out of that so Laura can you can you chime in here sure. Thanks, Jeff.

Yeah.

Travis the select trial results you know that represented and he gave US a lot more detail beyond the topline that we heard about back in August to really look at the endpoint and look at the drug adherence understand the details of the.

Trial results.

And as you know these are obese patients with a history of cardiovascular disease and as Jeff said. This is a very important advance for this patient population, but the results didn't change our overall impression that there will be a negligible effect on the growth and create extra procedure volumes and that's based on a couple of things that we saw in <unk>.

Detailed results first the number needed to treat with much higher and that means that setting a higher bar for treatments.

Paired with other things that are used in guidelines.

And then you know we were we saw that there was a lack of effect on cardiovascular death and that's M. That's.

Something that if it had been present would have spurred more adoption and the lack of that is important because it will not further wide adoption and coverage.

That we might have been.

Looking at if that if that had been positive.

And then you know the only effect on the composite endpoint was non fatal M I.

Not stroke.

Or cardiovascular death, as I mentioned and you know as you know the discontinuation rates were and nearly a third of patients due to that.

Side effects and clearly we know from the practice that rates of adherence or even lower.

And that results in lower treatment effects and then there are a couple of interesting findings in the trial and as Jeff mentioned earlier, the higher BMI population didn't seem to have as much benefit and there was no significant treatment effect in the North American subgroup.

Which is certainly something that I think will want to understand better going forward.

Using in a range of assumptions in the updated our models across the major cardiovascular procedures.

And the inputs to that were looking at U S procedure volume.

Across across different procedure areas and using data on the prevalence of obesity for each of these procedure populations and then a range of penetration inherent assumptions, all the way up to including <unk>.

You know what we've seen over time with statin, such as you know are really well tolerated and and just freely available and part of guidelines for the past 30 years.

And then we also input that they see their risk reduction seen in each of the endpoints from that trial or a literature.

Based on weight loss and to look at treatment effects.

And the bottom line is that the reduction to Tam growth over.

The next 10 to 30 years. It was really negligible on cardiovascular procedure outlook I think it's really important to often with us.

Analysis doesn't include and that's the that there will probably be offsets in the markets that are really underpenetrated or new like PFA are already in.

Because as the growth the rapid growth in those areas and then you know there is there is in fact potential upside for patients and procedure growth.

Because of that potentially a longer survival are lower BMI that makes it a greater funnel patients eligible for cardiovascular procedures.

So I'll pass it back to Jeff I know there was a question as well.

About the.

The effect on hemoglobin <unk>.

Thank you Laura and while we're on the topic, maybe on that one I mean, Q any any comments on on diabetes.

Relative to GOP ones, Yes, I mean, we.

LIFO Laura mentioned, we spent quite a bit of time studying there.

I think there is some evidence from select that would say.

There may be a slowdown in the pre diabetic population towards internally.

Dependency.

And maybe some lean type C will come off insulin, but we believe this number to be very small.

And more than offset by the fact that there is low penetration of type two.

Using AI.

And the fact that when you look at the funnel.

$3 million to $4 million and require a basal insulin with 25 million in non insulin type twos as well as seeing over 100 million pre diabetic population.

It doesn't change our point of view on the long term.

Size of the market as well as the growth rates and as Jeff mentioned at the beginning the majority of our business more than 90% is a pipeline.

And so we remain pretty.

Optimistic about the growth end market profile.

Yes.

Okay.

Alright, Thanks, Q I mean, so I mean, Travis and others I mean as you can see.

Beyond the fact that the areas that we get questions on type two intensive hypertension afib obesity. Besides the fact these are just woefully underpenetrated from a med Tech perspective, we've done all the all the analysis that.

Laura in queue, just gave you the tip of the iceberg of and that's why we're we feel strongly that we will see these drugs impacting medtronic growth.

Medium or long term.

So I hope that answers your question and then some.

Yes Super thorough answer thanks, a lot.

Thanks, Travis next question please.

We'll take the next question from Larry <unk> of Wells Fargo Securities Berry. Please go ahead.

Good morning, Thanks for taking the questions just two product questions for me one for Sean on already and congratulations Dan.

Can you talk about the ASP, the reimbursement pathway and the ramp and for Brett the slides talked about completing the six month primary endpoint on the pivotal tightened too.

S trial does FDA, what 12 month data could.

Could you talk about the form factor here and how you see <unk> being positioned relative to sacral neuromodulation. Thank you.

Well, Larry it's Jeff good to hear from you and thanks for the question on <unk>.

I turn it over to Sean.

On already and I, just I do want to just say look you know congratulate the team.

Here in the cardiovascular space of Medtronic and <unk> and.

And leaders passed I mean, this has been that <unk> been involved this has been a long journey and we are really really.

Excited about the approval.

We have a lot of data here and our Rct's, we consistently saw.

EMEA, 9% to 10 millimeters of Mercury absolute office blood pressure drops at the initial primary endpoints.

In this case, a three and six months and actually more in the real world setting in.

And an additional drops over time from these primary assessments. So this is a game changer and look this is compelling as the data is and as much as we have.

It doesn't even tell the whole story and when you talk to physicians out there that are involved in our trials.

And the excitement is palpable and patience.

We have a number of patients but on this for years.

And talking to them, how it changed your life and we're actually having a patient come in and talk to the entire company here.

A couple of weeks.

It's very exciting and so big opportunity.

For for patients and a real big opportunity for us too and so getting into some of the specifics you asked about reimbursement I'll turn that over to Sean and then we can go to to Brett to talk about I believe you are asking about the <unk> opportunity.

But why don't we start with Sean.

Alright. Thanks for the question as you know the ramp is going to be highly gated by reimbursement and we've been working that in parallel with the regulatory approval all along.

We see the payer split to be roughly 50 50 between Medicare and commercial payers are private insurance and we've been of course pursuing both local and national.

<unk> terminations from Medicare and Thats, an important input into the private payer decisions that will happen state by state and payer by payer.

<unk> been in contact with those private payers the largest once certainly in the response. So far has been very open and willing to engage with us to understand our data and.

What's particularly of interest to them as a long term data, which is a typical for a new therapy like this to have.

<unk> of patients out three years from a from the therapy. So that's encouraging.

Of course, the Medicare population is the most important for us to.

To your question that there are these alternative pathways that have been established by Medicare for temporary add on payments both in the inpatient setting with fantastic new technology add on payment as well as in that outpatient setting for transitional pass repayments or TPP and given the the simplicity spinal system is a break.

Through device designation, we will avail ourselves to those pathways.

For approval.

Over that two and three year period, as we work to establish more permanent.

Reimbursement for like a national coverage determination.

On that front there is this T cell pathway or the transitional covers for emerging therapies that we're going to avail ourselves to if not finalized yet we look forward to.

That ruling coming out we have seen in the commentary it's been largely very very positive along the way and in line with what we had been suggesting both the CMS and the bio ministration as well as other stakeholders along the way.

And of course CMS is also considering other refinements to coverage with evidence development programs that we've used successfully as we've established many many therapies as you know clean caviar micra ICD CRT devices overtime that will avail ourselves to those as well so rest assured we're working hard on reimbursement.

It's really critical for the ramp of this technology and we're getting a good reception so far.

Okay. Thanks, Sean Brett you want to answer part two here, yes, absolutely Larry good to hear your voice. Thanks for the question tightened to study it was a six month follow up.

With the actual study design and we will follow those patients for 'twenty for 24 months. So we will be following those patients that have additional data as well that form factor is about two eight cubic centimeters really about the size of roughly half as ticket come in and it fits in the ankle same place for everyone. This opens.

Up a significant patient population.

There's over 4 million people in the United States that have.

Discontinued their dual drug therapy or fail two drugs.

And they are now.

Our receiving comments devices at all adult continents products as opposed to seeking additional therapy. This is a 15 minute procedure.

We now have established category III reimbursement and we will be utilizing that to further develop about the universe the reimbursement to our profile.

This particular product and technology opens up.

A substantial population that is not seeking help are seeking therapy right now.

We're in a modular submission will be submitting the data here shortly.

And this is an exciting new technology that opens up this field and will contribute to its ongoing growth.

Yeah.

Okay. Thanks, Brett.

Yeah, Thanks, Brett and thanks, Larry and a reminder to the analysts to stick to one question and one related follow up if needed we'll take the next question. Please Brad.

The next question comes from Vijay Kumar Evercore ISI Vijay. Please go ahead.

Fantastic Hi, Jeff Thanks for taking the question.

Two product related questions sure.

First one just at a high level, but if you had to be pretty meaningful product approvals in the past few months between EV ICD.

PFA.

And you're already and accrual rates Youre already doing mid singles with all of these incremental growth drivers coming in.

Is that now a mid single plus I'm, just curious how you're thinking about this new product opportunities.

Okay.

Well thanks for the question Vijay and good to hear from you.

And thanks for pointing out the robust nature of the approvals and these are really we believe and as you saw on the commentary on.

Question really differentiated.

In our products.

And.

In large markets and growing markets that we have a high confidence in and this gets to our commitment to make this growth durable.

And as we've seen over the last couple of years, whether it be market conditions.

Or internal things, which I am we are working so hard to make sure. These internal bogey man just disappear.

Through changing our fundamentals. This is these this breadth of approvals in these high growth markets.

I believe.

We'll help me for the first time sleep well.

Does it gives you the durability that we're talking about in that revenue number which is so important everything flows from there. So at this point before we before we start talking about plus.

I want to make sure that we are very durable and reliable mid single digit growers and different types of environments, good and less good.

And then we can flow from there about leverage on the P&L and things like that so that's.

That's my overview on those three are on the pipeline in general.

And maybe my related product question sure perhaps for Mike on Robotics sure. You mentioned installed base went up in Europe any sense on what the size of that installed basis in the U S. Clinical trial, you said, it's on plan, but any sense on when when this trial.

And perhaps timing for an FDA approval.

So thanks for the question Vijay <unk>.

We will continue.

Our continuing forward with our installs have added to the installed base, we're not quoting.

A number of installations at this time, but we are increasing on a quarter on quarter basis.

Procedure volume is picking up on a quarter on quarter basis, as we work through availability of our instruments and then getting the system into the U S will really start to see acceleration of our program. Jeff commented and you just noted that the expand Euro study.

<unk> is on track and we're very excited in speaking with our investigators they're enthusiastic about the product and the program and so that continues forward, we're not going to give.

Time timelines of U S approval for that but I will tell you is proceeding. According to plan and then as Jeff noted, we're very excited about the hernia IV approval, which allows us to take a big step in the general surgery more quickly than we had anticipated and to start to engage the general surgeons.

<unk>.

With Hugo here in the United States in a segment, where we are very active today of course, we have a.

Large business and sales channel in the area of hernia hernia repair.

A real hunger for capacity.

And in a growing <unk>.

Volume there in hernia in United States, and so now running these.

<unk> in parallel will allow us to start to really pick up momentum as we contemplate the entry into the U S market. So so we are on plan, we're not giving specific dates for approval yet, but also very excited about the opportunity to move into general surgery.

And then with a general surgeon with this hernia IV approval.

Thanks, Scott Thanks, Mike.

I know.

There's a lot of interest in this and.

Look I'd just emphasize Mike's comments to step one was to have a robot that has the capabilities and strong physician acceptance and we feel strongly that we have that and now we're building up our experience.

Yes.

Primarily in Europe.

Operating year.

Got out in the Wild and then really as Mike mentioned building out that instrument portfolio.

And executing on the U S trials, so that we can launch in the U S that will be between the U S and some new instruments that will really drive a lot of growth here, so anyway and more to come on that but thanks for the question Vijay Yes. Thanks Vijay next question. Please Brad.

The next question comes from Kristen Stewart at CL King Christian. Please go ahead.

Hey, Thanks for taking my question I was just wondering if you can provide any update on the patient monitoring respiratory intervention.

Yeah.

Yeah. Thanks, Kristen for the question, we're continuing to work on the separation of that of that and in our focus through all of it is to maximize shareholder value.

No big update perfect.

Thanks, Kristen next question.

Yes.

The next question comes from Matt O'brien of Piper Sandler Matt. Please go ahead.

Can you hear me okay.

Hey can you guys hear me.

Yes, we can hear you Matt.

Great. Thank you. So just one question Jeff for you specifically.

We're at 30 plus billion dollar revenue company, but you've talked about more tuck in acquisitions historically.

Just given your size given the strength in terms of.

New product flow.

Just wondering if now is the time to be more aggressive from an M&A perspective.

Given the pullback that we've seen at some of these.

The public company side of things just to be able to do a bigger deal to really solidify your growth algorithm algorithm going forward is now the time to be more aggressive or are you more amenable to doing bigger deals now just given strong balance sheet got it got it.

The operating model together et cetera. Thank you.

Yes, thanks for the question, Matt and yes, clearly I think you are seeing.

Asset prices come down.

A tough operating environment, I think theyre going to continue to come down.

And the mid cap space in particular and below.

And.

And we definitely have the capabilities as you pointed out to do bigger deals all that being said our focus still is on tuck ins and we've got a lot of big organic are now organic programs between.

Already in the robot.

PSA.

Diabetes is a <unk>.

This goes on there's a lot of big organic.

Our pipeline going up against these high growth markets that we're really focused on and then I would augment that.

With the appropriate tuck ins.

I'm not going to I don't think were.

We're really focused on and we're not going to signal that we're focused on any kind of bigger deals at this point.

Yeah.

Okay. Thanks, Matt.

I think we have time I know, we're running a little bit long, but let's take two more questions. Please Brad.

The next question comes from Rich no-hitter interest Rich. Please go ahead.

Hi, Thanks for taking the questions.

Just one.

We saw just more broadly in med tech a little bit.

It's seasonality or a weaker I think third quarter for a number of your competitors play out just wondering if you could comment on the.

The trend throughout the quarter was August unseasonably kind of weaker than what you would've thought.

What's been the normal pickup is it stronger than expected into the into the <unk>, especially if you could talk about kind of exit trends from September into October. Thank you.

Sure. Thanks for the question Rich I'll now ask Karen to answer that one yeah. Thanks, Rich I would say we saw strength throughout the second quarter.

No matter what months you looked at them and I think thats driven in part by just the strength of our product offering when we look at the first few weeks of this quarter and how that's been trending it's been trending well.

We're tracking to the expectations that we set in our guidance at this stage.

Thank you.

Thanks Rich.

I'll take the last question please spread.

Sure.

At RBC capital markets.

Please go ahead.

Oh, great. Thank you so much for taking the question just I guess a follow up on Hugo one okay.

Competitors recently showcased their surgical robot that had it invisible design in 2000, Washington capabilities I'm just wondering what your thoughts are on the competitive landscape do you see it as a rising tide.

Or just how do you think about your technology offering versus competition and then I was just wondering if it's possible to get any.

More specific color on how October and November is shaping up thank you for taking the questions.

Okay.

Well.

<unk>. Thanks for the question I'm going to ask Mike to.

Take the Hugo question, and then I'll follow up on that one.

Okay. Thanks, Greg.

We were we.

Very interested to see.

The latest developments from from our competitor here relative.

To their program and I'll say that they were about as expected.

No surprises there we continue to be very excited and optimistic about the differentiation of our program with an open console with a modular design with the ability to have flexibility in terms of location of our site of care, which is highly differentiated from what we heard.

They're in their discussions as well as what we see in the market today and so we see that differentiation continue and the reasons for that are customers.

Like Hugo to continue to be differentiated reasons, where broadly speaking though.

Good news is that there continues to be.

Just real interest in expanding the penetration of robotics across multiple fields in surgery, and we're seeing continued increase in procedure volumes on a quarter on quarter basis, and so it's good news for the field.

Is that interest grows so we're well positioned in the field continues to expand which is which is a good story for medtronic.

Yes, just to build on that I mean.

We talked about we call it robotics, but I would argue it's broader than that.

And this isn't the first time.

We're out to change the dynamics of an entire market. That's what we're doing in the spine market right now and then it goes beyond robotics, it gets into inner operative imaging or visualization.

You know.

Navigation pre.

<unk> surgical AI based planning.

And like with Mike's World here with Hugo We've got touch surgery enterprise, which is a leading.

Digital platform with AI driven digital platform.

And like you like Youre seeing in spine and that's played out over the last couple of years, it's a changing the competitive dynamics.

What's important in the marketplace for physicians and even patients.

And Youre seeing the impact is what youre seeing in the in the spine market as many competitors. It takes a lot of expertise it takes a lot of capital.

To make this happen and youre seeing competitors fall by the wayside.

And I know that's been a big one here recently with invasive and globe is coming together and we'll see how that plays out but I believe.

We've demonstrated an ability to do this and this is the kind of experience and I know, we're up against a big competitor and intuitive in the surgical space, but we believe we.

We've got a lot to offer here and we are going to drive that.

<unk> and the how people think about the space and the competitive dynamics and we're really confident and excited about that.

So with that I think will we'll bring the call to close thanks for sticking with us a little longer.

And I really appreciate the questions and the support and continued interest in Medtronic and we look forward to updating you on our continued progress on our Q3 earnings broadcast, which we anticipate holding on Tuesday February 20th with that thanks for joining us today and for those in the U S. I'd like to wish you and.

Your families a very happy Thanksgiving this week.

And enjoy the holiday and stay safe. Thank you.

Okay.

<unk> good quarter for us as we executed and delivered mid single digit revenue growth the underlying fundamentals of our business are strong and our growth was broad based across multiple businesses and geographies with cardiovascular neuroscience and medical surgical all growing mid single digits and diabetes.

Accelerating to high single digit growth.

Our new product launches are performing well and driving growth across many businesses.

And we look ahead to the back half of our fiscal year those launches combined with several recent regulatory approvals give us confidence in our ability to continue delivering dependable growth.

At the same time, we're executing on our comprehensive transformation, including enhancing our global operations quality and supply chain.

And we're decisively allocating capital into fast growth Med tech markets and fueling innovative technologies in areas like robotics, AI and closed loop systems that will drive our growth over the next decade.

We're forging the path to durable growth as we execute on the actions needed to create long term value for our shareholders.

So now let's get into the details behind our Q2 results. We continue to look at our portfolio of businesses in three categories established market leader businesses synergistic businesses and highest growth businesses.

Looking first at the established market leaders, we had a very strong performances across cranium in spinal technologies surgical and cardiac rhythm management combined they made up just under half of our revenue and grew 6% organic again this quarter.

Starting with cranial and spinal technologies continued adoption of our Abel ecosystem is driving consistent above market growth in Q2, we grew 7%.

Digitization is transforming the competitive landscape in spine and we're leading the way with Abel.

With our global footprint of over 10000 systems.

Over 10000 systems or over four times greater than the nearest competitor.

We are the first and only solution with integrated AI based surgical planning with unit adaptive spine intelligence.

Our Missoula robotic system is the first and only to offer bone cutting a feature that was well received when we unveiled it at the North American Spine Society Conference in Los Angeles, just last month, and we remain the clear leader in the intra operative imaging and navigation space with our own.

Arm and stealth station technologies, both of which grew double digits in the quarter as surgeons adopt able and we continue to expand our sales teams and invest in future innovation, we expect to maintain our leadership and extend our share gains in spine.

Now moving to surgical we grew 6% here.

There was broad based strength across our surgical franchise hernia and Electrosurgery. Both grew in the double digits on strong sales of our pro grip and textile mesh and valley lab smoke evacuation systems advanced stapling.

Stapling and wound management, both grew mid single digits.

Cardiac rhythm grew 4% with.

With high single digit growth in cardiovascular diagnostics and cardiac pacing in pacing our micra <unk> pacemaker franchise grew 13% driven by our U S launch of our next generation micro Avi too and VR. Two devices were also seeing strong growth in conduction system pacing and alternative to.

Traditional single or dual chamber pacing.

Our 38 30 lead the only approved lead for this novel form of pacing grew strong double digits again this quarter.

And late in the quarter, we received FDA approval for our Aurora EV ICD system, a game changer for the single Chamber ICD space.

Now, we're ramping up our training of implanting cardiologists on the Aurora technology, So Aurora delivers the benefits of a traditional ICD, including similar size longevity and pacing features.

But without the leads in the heart or veins.

And these benefits can be realized with one device.

And only one implant procedure and just to drive this point home on size, there's a big difference here versus the competitors device and I mean big.

Here's an X ray of an Aurora EV ICD patient with.

With the competitors right next to it just for comparison.

So in addition to all the clinical benefits of our EV ICD.

You can see that it's meaningfully smaller and of course lighter than the competitors.

And here's the model that we're giving our reps to explain the difference to customers now.

Now this is the size of the competitor's device.

And we can actually pop out the Aurora to show how much smaller it actually is so so it's like those nesting dolls ex appear.

We just pop out we got to start with a big Guy and then we go right to the small guy. So let me put this out so you see inside the model here's Aurora much smaller much lighter and speaking of weight.

We actually had to put a series of weights inside of here to get the the bigger device to exactly replicate the weight of our competitors.

So we're really excited about this is we've got a meaningfully better option for patients our advantages will not only displace the competitors device, but will expand the population far beyond the existing segment.

We think this can grow to become a $1 billion plus segment.

Turning to our synergistic businesses combined they grew mid single digits in Q2.

And we had several standout performances.

Arctic grew 9% on strong momentum in our Endurant AAA franchise. Following the 10 year real World durability data presented at the Charring Cross Symposium earlier this year.

Our coronary business grew 6% as we gained share in international markets on the continued rollout of our Onyx frontier drug Eluting stent.

Cardiac surgery grew 9% driven by strength in perfusion and cannula as well as the Nautilus Ecmo oxygenated.

Our endoscopy business grew 13% driven by continued adoption of GI genius Gi genius uses the power of artificial intelligence to detect polyps in real time during a colonoscopy integrating seamlessly into a Gi docs existing workflow.

<unk> results in a 50% reduction in Ms polyps versus a standard colonoscopy, which plays an important role in the prevention of colon cancer.

Turning to businesses in our highest growth markets cardiac ablation solutions grew 6% on strong market procedure growth now.

Over the coming years, we expect this business to be a very meaningful growth driver for Medtronic, we are leading the way in bringing pulsed field ablation catheters to market in both the focal and single shot segments and.

In focal P. S. A we continue to ramp manufacturing of the sphere, Non-catholic <unk> and remain in limited market release in Europe.

Fear non can perform both PFA and RF ablation and drives high density mapping all from the same catheter and it integrates seamlessly with our differentiated a fair a mapping system.

In the U S. We expect to complete the 12 month follow up in the pivotal trial for sphere nine in the coming weeks and then we will prepare for FDA submission.

And single shot PFA, we just received CE mark for our pulse select catheter and it will be commercially available early next calendar year. We are now the only company with approved catheters for both single shot and focal PFA.

And in the U S. The FDA is reviewing our pulse select submission and we expect to be one of the first companies with a PFA catheter in the U S market now with our PFA catheters and the affair, Matt NAV system combined with our leading Arctic front cryo solution and differentiated flex Cath Cross Trans septal system, we expect to drive.

Strong long term growth in the fast growing $8 billion EP ablation space.

Now turning to structural heart overall, the tower space continues to grow in the high single low double digit range. In Q2 re grew mid single digits, which was below the market.

Now we declined slightly in the U S comping difficult prior year comparisons when we initially launched evolute FX and customers purchased for stock.

Yet we grew 4% sequentially evidence of the strength of our product in Europe, We grew high single digits and receive CE Mark for Evald FX at the end of the quarter and in Japan. We continued to win share and grew in the mid Thirty's on the continued adoption of evolute FX and expanded E. S. R D.

<unk> indication.

Our evolute platform has now shown superior valve performance compare to surgery and randomized trials that extend to five to 10 years after initial procedure.

And last month, our landmark evolute low risk trial was presented at TCT and published and Jack.

The trial randomized patients to evolute or best in class surgery.

As you can see in this chart evolute, which is the Blue line had a lower rate of death or disabling stroke and the difference continues to diverge each year go.

From a 2% difference at two years.

To 2.9% at three years.

And growing to a 3.4% difference at four years.

This resulted in a 26% reduction in death or disabling stroke with evolute at four years.

And no other transcatheter valve has shown better valve performance and outcomes compared to surgery.

Valve design matters.

And this differentiates us competitively.

Physicians understand this data this is compelling to them and it's compelling to patients.

So as we look ahead, we expect the combination of this data coupled with the global rollout of evolute effects to drive our tavern growth above market.

In Neurovascular, we grew high single digits. When you exclude sales in China were the coils market is subject to volume based procurement. We continue to see very strong growth in Florida version, which was up low twenty's globally. This is being driven by our innovative shield technology for treating brain aneurysms.

Which is available on both the pipeline flex and pipeline vantage float of herders.

In robotics surgical technologies, we increased our installed base as we continue the international launch of our differentiated Hugo robotic system in the U S or expand your own pivotal trial continues to enroll and is on plan and we're happy to announce that we have FDA approval to start our U S.

Hernia indication pivotal trial for Hugo adopt.

Adoption of Hugo is positive with surgeons appreciating features that are core to the system, including touch surgery Enterprise digital technology.

This AI powered video solution currently available for both robotic and laparoscopic surgery creates a new paradigm for case review and performance improvement.

We've already deployed it in over 20 countries and we are continually developing our connected digital ecosystem and we're excited about the upcoming launch of touch surgery live stream to enable live streaming and sharing of procedures securely and seamlessly.

We expect Hugo equipped with advanced digital capabilities to be a meaningful growth driver for us in the years ahead.

We believe surgeon preference with our open console and modular design our leading.

Position and minimally invasive surgery and and instrumentation.

Our connected digital ecosystem and data enabled insights.

Along with our World class surgical training program of partnerships will meaningfully advance the low penetration of robotic surgery around the world.

And in diabetes, our customer base is expanding sequentially as users around the world purchased the mini med seven AG system.

<unk> is the only <unk> system to make correction bosses every five minutes offer flexible glucose targets as low as 100 and feature meal detection technology.

This combination is resulting in high time and range uses are achieving or exceeding their glycemic targets and importantly, realizing the relief that comes from burn reduction in their diabetes management.

In Q2, our diabetes business grew 7% its highest growth in 10 quarters or five years. When you exclude the COVID-19 comp in Q4 of FY 'twenty one.

In international markets, we continue to see robust mid teens growth driven by the recurring revenue from CGM and consumable sales to customers that have adopted our AI technology and in the U S. This was our first full quarter of the seven AG launch and we're meeting or exceeding our launch goals.

Our U S pump sales increased over 30% sequentially. The number of unique seven atg prescribers has increased over 20% since last quarter with many returning to Medtronic as they learn about the differentiated outcomes users are getting with seven atg.

And we also continue to see very high CGM attachment rates in our seven AG installed base meaningfully above the rates prior to launch.

All of these leading indicators give us confidence that we'll see a significant ramp in our CGM and consumable sales in the U S and return to year over year growth in the back half of this fiscal year.

We've been driving this turnaround and as we look ahead, we expect diabetes to drive even more meaningful growth for us. We expect the majority of the intensive insulin management space to move to smart dosing through either a I D systems or smart MDI.

And we're well positioned to take advantage of this trend as we're the only company investing in a complete ecosystem of differentiated technology for people living with diabetes, including next generation durable pumps.

<unk> patch pumps sensors and algorithms so with that let's go to Karen for a deeper look at our Q2 financial performance and our fiscal 'twenty four guidance raise Karen.

Karen: Thanks, Jeff.

Karen: Looking at our financials overall it was another good quarter.

Karen: Our revenue grew 5% ahead of expectations.

Karen: And adjusted EPS was $1 25.

Karen: Seven cents above the midpoint of our guidance range with about three cents from stronger than expected revenue.

Karen: <unk> <unk> from better gross margin and approximately one coming below the operating profit line.

As Jeff mentioned, we remain focused on delivering durable growth.

Karen: Based on the changes, we've made including our operating model incentives and capital allocation, we've positioned the company to deliver sustainable mid single digit growth on the top line.

Karen: And you are seeing that play out for four quarters in a row now.

Karen: Looking at our second quarter revenue growth you can see the diversification coming through.

Karen: Which is important to driving long term durability.

As Jeff stated, our three portfolios grew mid single digits and.

Karen: And diabetes accelerated to high single digit growth.

Karen: The broad based growth also came through on a geographic basis.

Western Europe grew high single digits with strength across many cardiovascular businesses diabetes, neurovascular and pelvic health.

Karen: And Japan grew mid single digits and was also driven by strong results in many cardiovascular businesses as well as surgical and neurovascular.

Karen: Emerging markets grew 9% or 13% when excluding Russia, given the sanctions we.

We had low twenty's growth in the middle East and Africa.

Karen: Teens growth in South Asia mid teens growth in southeast Asia, and low double digit growth in Latin America.

Karen: China grew high single digits as some of the V. P that we expected was delayed until later in the fiscal year.

Karen: While our adjusted gross and operating margins declined in the quarter.

Karen: Both were ahead of expectations.

Karen: With gross margin about a third of the year over year change was due to currency and the remainder was driven by inflation.

Karen: And our adjusted Op margin decline was entirely driven by currency.

Karen: On a constant currency basis increased 40 basis points.

Karen: We're executing to implement efficiencies in our expense structure and you can see this in the 90 basis point improvement in SG&A.

Karen: Below the operating margin line, we benefited from higher global interest rates on our investments and this was partially offset by a higher than expected tax rate.

Karen: Mainly due to jurisdictional mix of profits as well as a lower benefit from stock based compensation.

Karen: Turning to capital allocation, we continue to prioritize investments in innovation to fuel and sustain our long term growth.

Karen: We are disproportionately investing in some of the fastest growth markets in med Tech.

Karen: And we have a long standing track record of returning capital to our shareholders.

Karen: Primarily through our strong and growing dividend.

Karen: And to the extent that we don't find high growth high return tuck in M&A, we would expect to return additional capital to our shareholders by retiring shares.

Karen: Now turning to our guidance.

Karen: Given our second quarter outperformance and continued strength in our underlying fundamentals, we're raising our full year guidance today on both the top and the bottom line.

Karen: We expect fiscal 'twenty for organic revenue growth.

Karen: Four and three quarters percent.

Karen: An increase from the prior four 5%.

Karen: For the third quarter, we're expecting organic revenue growth to be in the range of four to four 5%.

Karen: And while the impact of currency is fluid based on recent rates foreign currency would have an unfavorable impact on full year revenue of $100 million to $200 million.

Karen: Including an unfavorable impact of zero to $50 million in the third quarter.

Karen: On a comp adjusted basis, our third quarter guidance represents acceleration from the second quarter.

Karen: And we expect this trend to continue into the fourth quarter as we're ramping a number of recent product launches in the back half of the year.

Karen: In diabetes, we're projecting the U S to return to growth in the second half of the year on the continued adoption of seven atg and the associated CGM and consumable sales.

Karen: In medical surgical we have the continued rollout of the Hugo surgical robot N G I genius.

Karen: In neuroscience theirs are able ecosystem in spine, our insert them closely of pain stim device in Europe.

Karen: And we are awaiting FDA approval for both incentive and our percept RC DBS device.

Karen: In cardiovascular we're ramping our tavern and PFA launches in Europe.

Karen: Starting the rollout of EV ICD in the U S and Europe, and we are now starting our Rd and sales in the U S.

Karen: This all gives us confidence in the continued durability of our topline growth.

Karen: Moving down the P&L our margins this year continue to reflect the impact of currency and inflation.

Karen: And some of the volume based procurement tenders in China that were expected in the first half have shifted to later in the year.

Karen: That said, we're focused on continuing to drive efficiencies in our expense base and.

Karen: And we've got our global operations and supply chain centralized to take advantage of our scale.

Karen: As you know stabilizing our margins and then improving from there remains a top priority.

Karen: On the bottom line, we're raising our fiscal 'twenty four non-GAAP diluted EPS guidance to a new range of $5 13 to $5 19, an increase from the prior range of 508 to $5 16.

Karen: While we expect FX and tax to be a few pennies more unfavorable in the second half.

Karen: We are pleased with the momentum we have demonstrated and our pipeline from here.

Karen: For the third quarter, we expect EPS of $1 25 to $1 27.

Karen: On foreign currency based on recent rates, we're seeing an unfavorable impact of 6% and full year EPS, including an unfavorable 5% impact in the third quarter.

Karen: Before sending it back to Jeff in a spirit of Thanksgiving I want to extend my gratitude to our 95000 employees around the world who come to work every day to deliver on our mission.

Karen: You all play important roles in alleviating pain, restoring health and extending life for two patients every second which makes this world a far better place.

Jeff: Back to you Jeff.

Jeff: Okay. Thank you Karen.

Jeff: Now I know G. L. P ones have been on your mind as the promise of these drugs has certainly had an outsized impact on med tech stocks, including ours over the past four months. So I thought it would be helpful to share with you our view on their potential impact on our markets now.

Jeff: G O P ones are clearly an exciting class of drugs for patients and the select data presented at AJ suggest the potential for a large market.

Jeff: That said the key takeaway from our analysis is that outside of a modest impact on the bariatric surgery market, which we believe will be temporary we don't see these drugs impacting medtronic growth outlook, even long term.

Karen: This expectation is based on our extensive science based work.

Karen: Like many of you we've modeled potential uptake and impact based on epidemiology based on what we've seen historically with other drugs and based on the relative risk reductions and adherence rates seen in select.

Karen: So given the select results showed smaller impacts on the more obese patients. We believe that bariatric surgery will remain the gold standard for addressing obesity.

Karen: We also know that many of the patients that try these drugs do not stay on them for more than a year likely due to durability side effects or affordability, which creates opportunities for new patients to consider surgery.

Karen: For these reasons, we believe the current headwinds on U S. Bariatric procedures will stabilize over the next several quarters and return to growth by calendar year 2025.

Karen: And this is modest and manageable within our broader diversified surgical business.

Karen: Now with diabetes are customers are primarily type one with.

Karen: With only 10% of our installed base and type two insulin dependent patients.

Karen: We do expect growth in our type two business going forward, but type two pump penetration rates are so low that even using aggressive G. L. P. One modeling assumptions.

Karen: We don't see any meaningful change in our diabetes growth outlook through 2030.

Karen: Now we'd be happy to discuss this in more detail in Q&A, including our view on the select trial and its potential implications for med Tech now before we go to the analyst questions I'd like to close with a few brief concluding thoughts on our progress.

Karen: You are seeing in our results that that many of the challenges that have held back our growth have largely been mitigated, whether that's diabetes, China or the issues in our supply chain.

Karen: And we've established a track record of delivering durable mid single digit revenue growth, which we expect to continue in the back half of the fiscal year.

Karen: We have some really compelling product approvals that drive our growth not only in the back half but for years to come.

Karen: Theres been a number of things that have happened recently big things in the last four weeks in particular with our tavern data that gives us such an advantage in the marketplace.

Karen: New product approvals like EV, ICD geographic and indication expansions.

Karen: And last Friday.

Karen: We got already an approval.

Karen: This opens up a multibillion dollar market opportunity for us.

Karen: And with over 1 billion people worldwide with hypertension.

Karen: The opportunity is massive in fact, just 1% penetration of the target market represents over 1 billion of revenue.

Karen: So we're focused on executing to deliver the top line and at the same time, we're taking action to run our businesses more efficiently.

Karen: To counter the impacts that inflation and currency are having on our margins.

Karen: And we've been implementing an extensive transformation to improve the durability of our growth.

Karen: We've changed your operating model brought in extensive new leadership increased capital allocation to our highest growth opportunities and are implementing a culture based on execution speed and playing to win and now we are positioning the company to take advantage of our scale in areas of operations and supply.

Karen: <unk> core technology, and how we go to market with large customers around the globe.

Karen: You're already seeing results from this today.

Karen: And as we go forward our focus is on translating the durable revenue growth that we've established into durable earnings power.

Karen: This is a winning formula for creating value for shareholders and we are laser focused on making that happen.

Karen: Now with that let's move to Q&A, where we're going to try to get to as many analysts as possible. So we ask that you limit yourself to just one question and only if needed it related follow up.

Karen: If you have additional questions you can reach out to Ryan and the Investor Relations team after the call.

Karen: With that Brad can you. Please give the instructions for asking a question for the sell side analysts that would like to ask a question. Please select the participants button and click raise hand.

Karen: If youre using the mobile App press, the more button and fluctuates hand.

Karen: Your lines are currently on mute.

Karen: When called upon your receiver request, a new airline, which you must respond to before asking your question.

Karen: Lastly, please be advised that this Q&A session is being recorded.

Karen: For today's session Geoff Karen and Ryan are joined by cute Alara, EVP and president of diabetes Mike.

Karen: Mike Marin Arrow, EVP, and president of the surgical and endoscopy businesses Sean.

Karen: Sean Salmon, EVP and president of the cardiovascular portfolio.

Karen: At wall, EVP, and president of the neuroscience portfolio, and Bob White, EVP and president of the medical surgical portfolio.

Karen: We'll pause for a few seconds to assemble the queue.

Karen: Okay.

Karen: We will take the first question from Robbie Marcus with Jpmorgan.

Robbie Marcus: Please go ahead.

Karen: Oh, great. Good morning, everyone and thank you for taking my question.

Robbie Marcus: Maybe I'll ask both of them upfront.

Robbie Marcus: First Jeff you talked about how you know most of the headwinds are largely mitigated I look at the guidance implied in the second half of the year. It it's a point of growth or so below the first half. So maybe just talk about how we should.

Robbie Marcus: Think about the lower growth in the second half versus the first half and the reasons for that and then part B if I looked at 2025, our fiscal year 'twenty five.

Robbie Marcus: The Street has you pretty close to your long range plan of 5% plus on the top and 8% plus on the bottom.

Robbie Marcus: Is that the right way to think about next year are there any.

Robbie Marcus: Headwinds or <unk>, we should think be thinking about here like potential dilution from the <unk> monitoring business that just want to try and get straight numbers are correct as we head into year end. Thanks, so much.

Robbie Marcus: Sure well, let me kick it off and all thanks for the questions Ravi I'll kick it off and then hand, it over to Karen It terms of the headwinds being mitigated what I'd say is that the markets are.

Robbie Marcus: Pretty stable.

Robbie Marcus: Especially relative to what we've seen over the last couple of years.

Robbie Marcus: With the procedures I think back to to normal growth in <unk>.

Robbie Marcus: And the staff in the staffing issues that are that were hurting the procedural growth or I think you know more or less under control pricing is has been stable.

Robbie Marcus: We can talk Shylea, we're working through the China, Pvp, but thats largely behind us still a little bit more to go but largely behind us. So yeah, and then and then our own internal changes.

Robbie Marcus: Changes to our global operations and supply chain that that was a big one for US and has been a big one and we're seeing our teams.

Robbie Marcus: Much better than like I said, we're turning that into a strength for us a strategic long term strengthen and our supplies in a much better situation. So that's.

Robbie Marcus: And then of course are our pipeline is coming in and I'm sure we'll get into that in the call here with a lot of.

Robbie Marcus: New approvals plus the prior approvals of where we're starting to launch and they are having meaningful meaningful uptake. So that's where the optimism is in terms of.

Karen: How to think about the back half.

Karen: Versus the first half and then getting into FY 'twenty, five I'll turn that over to Karen.

Karen: Thanks, Jeff and Robbie.

Karen: Just on the back half Rami, our comps do get a little tougher as you know, but we've got a really strong innovation pipeline that we talked about and that's driving growth acceleration actually from the first half to the second half.

Karen: We've got our diabetes business returning to growth in the second half we talked about our extensive pipeline EV ICD PFA Hugo Evolute, FX and now they already an approval.

Robbie Marcus: And so we're confident in this growth acceleration and we're confident that that's going to continue you know beyond the back half of next year.

Robbie Marcus: When we think about FY 'twenty five.

Robbie Marcus: It's still early we have two quarters left in this fiscal year and we're laser focused on delivering the rest of this year.

Robbie Marcus: We're also at the beginning of our planning process. So we're not ready to give specifics, but I do know that all of you are working on your calendar calendar year models for our competitors. So happy to give you some perspective.

Robbie Marcus: Just on what we know today and what we're thinking about and I'll start with revenue and because we've been focused on consistently delivering that mid single digit revenue growth and you've seen us do that for four quarters now.

Robbie Marcus: Our new full year guide for this fiscal year as four and three quarters.

Robbie Marcus: And as I mentioned, we've got the strength of those numerous product approvals in big markets that are launching around the world to help drive our back half growth and obviously, we're confident that strength will continue into next year and beyond.

Robbie Marcus: And on margins and down the P&L there are some puts and takes.

Robbie Marcus: Got inflation stabilizing a bit, but it's still higher than historical but again its stabilizing.

Robbie Marcus: Yes currency is dynamic and as you know the U S dollar and strong so we're likely facing a headwind from FX, but we'll see we'll see how that shakes out.

Robbie Marcus: And global tax reform will likely be a headwind, but as always we're focused on driving offsets everywhere that we can.

Robbie Marcus: Jeff talked about it we've made progress on cost of goods sold and cost out.

Robbie Marcus: <unk> with centralizing, our global ops team, we have work to do but those teams now have tangible programs in place.

Robbie Marcus: To drive that work.

Robbie Marcus: And we will continue to drive pricing is an important lever.

Robbie Marcus: We built a new muscle on pricing and our focus is to keep it strong.

Robbie Marcus: We've been working hard on controlling expenses.

Robbie Marcus: And that includes maintaining discipline on our largest driver of our expense, which is our head count.

Robbie Marcus: So I hope I hope that gives you some color on just the puts and takes.

Speaker Change: But to summarize I'll I'll remind you what hasn't changed and that's our long range commitment.

Robbie Marcus: Driving durable mid single digit type growth is driving leverage down the P&L of driving a strong free cash conversion and a growing dividend, which all combined ultimately deliver a double digit total shareholder return.

Robbie Marcus: What has changed though is our progress toward that toward that commitment you've already seen is it mid single digit top line, we've talked about the strong pipeline that gives us confidence in its stability.

Robbie Marcus: And obviously, we've talked about the programs we have in place whether it's in head count management Cogs costs down pricing discipline.

Robbie Marcus: And they're all levers to help us offset the headwinds in over time.

Robbie Marcus: Tablets that same durability on the bottom line.

Travis Steed: Thank you.

Travis Steed: Thanks, Ravi will take the next question please breath.

Robbie Marcus: The next question comes from Travis Steed at Bank of America drivers. Please go ahead.

Travis Steed: Hey, everybody congrats on a good quarter.

Travis Steed: Karen.

Travis Steed: So all of those comments on FY 'twenty four I heard the leverage down the P&L comment it sounds like.

Travis Steed: Based on what we know today unless theres some kind of major surprise there is still a good ability for.

Jeff: To be enough offsets to drive EPS growth.

Jeff: So the revenue growth that's when we're going to make sure that that's a fair comment and then Jeff I did want to follow up on your thoughts on GOP ones post the select trial curious if theres any color you could add on.

Travis Steed: On the <unk> trial in the cardio endpoints in diabetes prevention.

Speaker Change: Maybe you Didnt mentioned in the prepared remarks.

Speaker Change: Yes, Travis Thanks for the question clearly and.

Speaker Change: In the next year and beyond we're focused on driving that leverage down the P&L that I talked about.

Speaker Change: And obviously when you drive leverage that you know your bottom line faster than your top liner, but but at this stage. It's still early and we're at the beginning of our planning process and we're going to give you more on FY 'twenty five is as we as we are ready to guide.

Speaker Change: Hey, Travis good to hear from you.

Speaker Change: On <unk>. So so first of all I just want to make it clear that.

Speaker Change: We see that it's an exciting class of drugs with a with a large opportunity.

Travis Steed: And I'm sure just like you.

Travis Steed: <unk> talked to many patients that are that are benefiting from from these from these drugs from a weight perspective for mental health perspective.

Travis Steed: It's a it's pretty amazing.

Travis Steed: That being said we've done a lot of work in <unk>.

Travis Steed: And outside of the near term temporary impact on bariatric surgery market. We don't see these drugs impacting our growth outlook, even in the long term and then on the bariatric piece that.

Travis Steed: As we mentioned, it's a small part of our run a low low single digits and.

Travis Steed: The the rate of decline has stabilized there.

Travis Steed: And I think we see that coming back here in the coming year even.

Travis Steed: We did do a lot of work here and I'm going to.

Travis Steed: It was like I said science based and looking at the epidemiology and really digging into select an and.

Speaker Change: What we do have on the call here, our Chief Medical Officer.

Speaker Change: Doctor, Laura Mauri, and I thought I'd, maybe kind of call her in here.

Lawrence Biegelsen: Bringing a relief pitcher here on that question too.

Lawrence Biegelsen: To talk a little bit more about select and kind of what we're seeing out of that sort. So Laura can you can you chime in here too.

Lawrence Biegelsen: Thanks, Jeff.

Lawrence Biegelsen: Yeah.

Lawrence Biegelsen: Travis the select trial results that represented and he gave US a lot more detail beyond the top line that we heard about back in August to really look at the endpoint and look at the drive adherence understand the details of the trial results.

Lawrence Biegelsen: And as you know these are obese patients with a history of cardiovascular disease and as Jeff said. This is a very important advance for this patient population, but the results didn't change your overall impression that there will be a negligible effect on growth and create extra procedure volumes and that's based on a couple of things that we saw in the <unk>.

Lawrence Biegelsen: Tailed results first the number needed to treat with much higher and that means that setting a higher bar for treatment.

Lawrence Biegelsen: Paired with other things that are used in guidelines.

Lawrence Biegelsen: And then you know we were we saw that there was a lack of effect on cardiovascular death and that's M. That's.

Lawrence Biegelsen: Something that if it had been president would have spurred more adoption and a lack of that is important because it will not for the wide adoption and coverage.

Lawrence Biegelsen: That we might've been.

Lawrence Biegelsen: Looking at if that if that had been positive and then you know the only effect on the composite endpoint was non fatal M I.

Lawrence Biegelsen: Not stroke.

Lawrence Biegelsen: Or cardiovascular death, as I mentioned and you know as you know the discontinuation rates were nearly a third of patients due to the Gi side effects.

Lawrence Biegelsen: And clearly we know from the practice that rates of adherence or even lower.

Lawrence Biegelsen: That results in lower treatment effects.

Lawrence Biegelsen: And there are a couple of interesting findings in the trial.

Lawrence Biegelsen: As Jeff mentioned earlier, the higher BMI population didn't seem to have as much benefit and there was no significant treatment effect in the North American subgroup.

Lawrence Biegelsen: Which is certainly something that I think will want to understand better going forward.

Lawrence Biegelsen: Using in a range of assumptions, we updated our models across the major cardiovascular procedures.

Lawrence Biegelsen: And the inputs to that were looking at U S procedure volume.

Lawrence Biegelsen: Across across different procedure areas and using data on the prevalence of obesity for each of these procedure populations and then a range of penetration inherent assumptions, all the way up to including <unk>.

Lawrence Biegelsen: You know what we've seen over time with statin, such as you know are really well tolerated and and just freely available and part of guidelines for the past 30 years.

Lawrence Biegelsen: And then we also input that obviously the risk reduction seen in each of the endpoints for the trial or a literature.

Lawrence Biegelsen: Based on weight loss and to look at treatment effects.

Lawrence Biegelsen: And the bottom line is that the reduction to Tam growth over.

Lawrence Biegelsen: The next 10 to 30 years, and it's really negligible on the cardiovascular procedure outlook I think it's really important to also note with us.

Lawrence Biegelsen: Analysis doesn't include and that's the that there will probably be offsets and then markets that are really underpenetrated or new like PFA ardian.

Lawrence Biegelsen: Because of the growth the rapid growth in those areas and then you know there's there's in fact potential upside for patients and procedure growth.

Lawrence Biegelsen: Because of that potentially a longer survival are lower BMI that makes it a greater funnel patients eligible for cardiovascular procedures.

Lawrence Biegelsen: So I'll pass it back to Jeff I know there was a question as well.

Jeff: About the.

Jeff: The effect on hemoglobin F C.

Jeff: Thank you Laura and while we're on the topic, maybe on that one I mean, Q any any comments on <unk>.

Jeff: Diabetes.

Jeff: Relative to <unk>.

Jeff: Yes.

Jeff: LIFO Laura mentioned, we spent quite a bit of time studying this and I think there is some evidence from select that would say.

Jeff:

Jeff: There may be a slowdown in the pre diabetic population towards internally.

Jeff: Dependency.

Jeff: And maybe some new type C and will come off insulin, but we believe this number to be very small and more than offset by the fact that there is the low penetration of type two.

Jeff: Using AI.

Jeff: And the fact that when you look at the funnel.

Jeff: $3 million to $4 million in acquired basal insulin with 25 million in non insulin type twos as well as seeing over 100 million pre diabetic population.

Jeff: It doesn't change our point of view on the long term.

Jeff: It's not the size of the market as well as the growth rates.

Jeff: And as Jeff mentioned at the beginning the majority of our business more than 90% is in type one.

Jeff: And so we remain pretty.

Jeff: Optimistic about the growth end market profile in diabetes.

Jeff: Alright, thanks, too I mean, so I mean, Travis and others I mean as you can see.

Jeff: Beyond the fact that the.

Jeff: The areas that we get questions on type two intensive hypertension afib obesity. Besides the fact these are just woefully underpenetrated from a med Tech perspective, we've done all the all the analysis that.

Jeff: Laura in queue, just gave you the tip of the iceberg of and that's why we're.

Jeff: We're we feel strongly that we will see these drugs impacting medtronic growth.

Jeff: You know medium or long term.

Jeff: So I hope that answers your question and then some.

Larry: Yes Super thorough answers thanks a lot.

Larry: Thanks, Travis next question please.

Jeff: We'll take the next question from Larry <unk> at Wells Fargo Securities. Please go ahead.

Larry: Good good morning, Thanks for taking the question just two product questions for me one for Sean on already and congratulations Dan could you talk about the ASP, the reimbursement pathway and the ramp and for Brett the slides talked about completing the six month primary endpoint on the pivotal tightened too.

Larry: S trial does FDA want 12 months data could.

Larry: Could you talk about the form factor here and how you see <unk> being positioned relative to sacral neuromodulation. Thank you.

Sean Salmon: Well, Larry it's Jeff.

Sean Salmon: Here from you and thanks for the question on.

Sean Salmon: Before I turn it over to Sean.

Sean Salmon: On <unk>.

Sean Salmon: I do want to just say look you know congratulate the team.

Sean Salmon: Here in the cardiovascular space of Medtronic and leaders passed I mean this has been that <unk> been involved this has been a long journey and we are really really excited.

Sean Salmon: Excited about the approval.

Sean Salmon: We have a lot of data here and our Rct's, we consistently saw.

Sean Salmon: <unk> nine to 10 millimeters of Mercury absolute office blood pressure drops at the initial primary endpoints.

Sean Salmon: In this case, a three and six months and actually more in the real world setting in.

Sean Salmon: And an additional drops over time from these primary assessments. So this is a game changer and look there is as compelling as the data is and as much as we have it.

Sean Salmon: It doesn't even tell the whole story I mean, you talk to physicians out there that are involved in our trials.

Sean Salmon: And and the excitement is palpable and patients.

Sean Salmon: We have a number of patients on this for years.

Sean Salmon: And talking to them how it has changed your life and we're actually having a patient come in and talk to the entire company here.

Sean Salmon: A couple of weeks.

Sean Salmon: It's very exciting and so.

Speaker Change: Big opportunity.

Speaker Change: For for patients.

Speaker Change: Big opportunity for us too and so getting into some of the specifics you asked about reimbursement I'll turn that over to Sean and then we can go to to Brett to talk about I believe you're asking about the tibial opportunity in.

Speaker Change: But why don't we start with Sean.

Sean Salmon: Alright. Thanks for the question as you know the ramp is going to be highly gated by reimbursement and we've been working that in parallel with the regulatory approval all along.

Sean Salmon: We see the payer split to be roughly 50, 50 between Medicare and commercial payers or private insurance.

Sean Salmon: We've been of course pursuing both local and national coverage determination for Medicare and Thats, an important input into the private payer decisions that will happen state by state and payer by payer we've been in contact with those private payers the largest ones certainly the response. So far has been very open and willing to engage with us to understand our data.

Sean Salmon: And what's particularly of interest to them as a long term data, which is a typical for a new therapy like this to have thousands of patients out three years from the therapy. So that's encouraging.

Sean Salmon: Of course, the Medicare population is the most important for us.

Sean Salmon: To your question that there are these alternative pathways that have been established by Medicare for temporary add on payments both in the inpatient setting with <unk> or the new technology add on payment as well as in that outpatient setting for transitional pass through payments or TPP and given that the simplicity spinal system is.

Sean Salmon: Breakthrough device designation, we will avail ourselves to those pathways.

Sean Salmon: <unk> for approval.

Sean Salmon: That two and three year period, as we work to establish more permanent.

Reimbursement for like a national coverage determination.

Sean Salmon: On that front there is this T cell pathway or the traditional covers for emerging therapies that we're going to avail ourselves to if not finalized yet we look forward to.

Sean Salmon: That ruling coming out we have seen in the commentary it's been largely very very positive along the way and in line with what we had been suggesting both the CMS and the Bayou administration as well as other stakeholders along the way.

Sean Salmon: And of course CMS is also considering other refinements to coverage with evidence development programs that we've used successfully as we've established many many therapies as you know clean tower micra.

Sean Salmon: <unk> CRT devices overtime and will avail ourselves to those as well so rest assured we're working hard on reimbursement is really critical for the ramp of this technology and we're getting a good reception so far.

Brett: Okay. Thanks, Sean.

Brett: Brett do you want answer part two here, yes, absolutely Larry good to hear voice. Thanks for the question.

Brett: Heightened two study it was a six month follow up.

Brett: With the actual study design and we will follow those patients for 'twenty for 24 months. So we will be following those patients that have additional data as well the form factor is about two eight cubic centimeters really about the size of roughly half of stick of gum and <unk>.

Brett: It fits in the ankle same place for everyone. This opens up a significant patient population.

Brett: There's over 4 million people in the United States that have.

Brett: Discontinued their dual drug therapy or fail two drugs.

Brett: They are now.

Brett: Receiving comments devices at all adult continents products as opposed to seeking additional therapy. This is a 15 minute procedure.

Brett: We now have established a category III reimbursement and we will be utilizing that to further develop out the universe. The reimbursement profile. This particular product and technology opens up.

Brett: A substantial population that is not seeking help are seeking therapy right now.

Brett: We're in a modular submission will be submitting the data here shortly.

Brett: And this is an exciting new technology that opens up this field and will contribute to its ongoing growth.

Brad: Okay. Thanks, Brett.

Brad: Yeah, Thanks, Brett and thanks, Larry and a reminder to the analysts to stick to one question and one related follow up if needed we'll take the next question. Please Brad.

Brad: The next question comes from Vijay Kumar of Evercore ISI Vijay. Please go ahead.

Jeff: Fantastic Hi, Jeff.

Vijay Muniyappa Kumar: Thanks for taking the question.

Vijay Muniyappa Kumar: I had two product related questions sure.

Speaker Change: First one just at a high level you had fee.

Meaningful product approvals in the past few months between EV ICD peer.

Speaker Change: PFA.

Speaker Change: And you're already in approval rates you are all enjoying mid singles with all of these incremental growth drivers coming in is.

Speaker Change: Is that now a mid single plus I'm, just curious how you're thinking about this new product opportunities.

Speaker Change: Well thanks for the question Vijay and good to hear from you.

Speaker Change: And thanks for pointing out the robust nature of the approvals and these are really we believe and as you saw in the commentary.

Speaker Change: Unquestionably differentiated.

Speaker Change: Products and.

Speaker Change: In large markets and growing markets that we have a high confidence in.

Speaker Change: And this gets to.

Speaker Change: Our commitment to make this growth durable.

Speaker Change: And as we've seen over the last couple of years, whether it be market conditions.

Speaker Change: Or internal things, which I am we are working so hard to make sure. These internal bogey man.

Speaker Change: Disappear.

Speaker Change: Through changing our fundamentals. This is these this breadth of approvals in these high growth markets.

Speaker Change: I believe.

Speaker Change: We'll help me for the first time sleep well.

Speaker Change: Because it gives you the durability that we're talking about in that revenue number which is so important everything flows from there. So at this point before we before we start talking about plus.

Speaker Change: I just want to make sure that we are very durable and reliable mid single digit growers and <unk>.

Speaker Change: Different types of environments, good and less good.

Speaker Change: And then we can flow from there about leverage on the P&L and things like that so that's you know that's.

Speaker Change: That's my overview on those three are on the pipeline in general.

Speaker Change: And maybe my related product question sure perhaps for Mike on Robotics sure. You mentioned installed base went up in Europe any sense on what the size of the installed basis and thus U S. Clinical trial, you said, it's on plan, but any sense on when when this trial.

Speaker Change: And perhaps timing for an FDA approval.

Alright, Thanks for the question Vijay <unk>.

Speaker Change: We will continue we're continuing forward with our installs have added to the installed base, we're not quoting.

Speaker Change: Numbers of installations at this time, but we are increasing on a quarter on quarter basis.

Speaker Change: Our procedure volume is picking up on a quarter on quarter basis, as we work through availability of our instruments and then getting the system into the U S will really start to see acceleration of our program. Jeff commented and you just noted that extend euro study.

Speaker Change: <unk> is on track and we're very excited in speaking with our investigators they're enthusiastic about the product and the program and so that continues forward, we're not going to give.

Speaker Change: Time timelines of U S approval for that but I will tell you is proceeding. According to plan and then as Jeff noted, we're very excited about the hernia IV approval, which allows us to take a big step in the general surgery more quickly than we had anticipated at the start.

Speaker Change: To engage the general surgeons.

Speaker Change: With Hugo here in the United States in a segment, where we are very active today of course, we have a.

Speaker Change: A large business and sales channel in the area of vernier hernia repair.

Speaker Change: There is a real hunger for capacity.

Speaker Change: And are growing.

Speaker Change: Volume there in hernia in United States, and so now running these.

Speaker Change: Ivy ease in parallel will allow us to start to really pick up momentum as we contemplate the entry into the U S market. So so we are on plan and we're not giving specific dates for approval yet, but also very excited about the opportunity to move into general surgery.

Speaker Change: And then with a general surgeon with this hernia IV approval.

Speaker Change: Thanks, Scott Thanks, Mike.

Speaker Change: I know it was low.

Speaker Change: Lot of interest in this and.

Look I'd just emphasize Mike's comments to step one was to have a robot that has the capabilities and strong physician acceptance and and we feel strongly that we have that and now we're building up our experience.

Speaker Change: Yeah.

Primarily in Europe.

Speaker Change: Operating near a robot out in a while and then really as Mike had mentioned building.

Building out that instrument portfolio and executing on the U S trials. So that we can launch in the U S that will be between the U S and some new instruments that will really drive a lot of growth here. So anyway are more to come on that but thanks for the question Vijay. Thanks Vijay next question. Please.

Speaker Change: The next question comes from Kristen Stewart at CL King Christian. Please go ahead.

Kristen Stewart: Thanks for taking my question.

Kristen Stewart: Just wondering if you can provide any updates on the patient.

Kristen Stewart: <unk> respiratory intervention.

Yeah.

Speaker Change: Yeah. Thanks, Kristen for the question, we're continuing to work on the separation of that of that and our focus through all of it is to maximize shareholder value.

Speaker Change: No no big update.

Matt Miksic: Thanks, Kristen next question.

Matt Miksic: The next question comes from Matt O'brien Piper Sandler Ma'am. Please go ahead.

Speaker Change: Good morning can you hear me okay.

Matt Miksic: Hey can you guys hear me.

Matt Miksic: Yes, we can hear you Matt.

Matt: Oh, great. Thank you. So just one question Jeff are you specifically if youre at 30 plus billion dollar revenue company, but you've talked about more tuck in acquisitions historically.

Matt: On your side given the strength in terms of.

New product flow.

Matt: Just wondering if now is the time to be more aggressive from an M&A perspective.

Matt: Given the pullback that we've seen at some of these.

Matt: The public company side of things just to be able to do a bigger deal to really solidify your growth algorithm algorithm going forward is now the time to be more aggressive or are you more amenable to doing bigger deals now just given strong balance sheet.

Matt: The operating model together et cetera. Thank you.

Speaker Change: Yes, thanks for the question, Matt and yes, clearly I think you are seeing.

Speaker Change: Asset prices come down.

Speaker Change: A tough operating environment, I think theyre going to continue to come down.

Speaker Change: And the mid cap space in particular and below.

And.

Speaker Change: But.

Speaker Change: We definitely have the capabilities as you pointed out to do bigger deals all that being said our focus still is on tuck ins and we've got a lot of big organic are now organic programs between.

Speaker Change: Already in the robot.

Speaker Change: TSA.

Speaker Change: Diabetes is a <unk>.

Speaker Change: List goes on there's a lot of big organic.

Speaker Change: Our pipeline.

Speaker Change: Going up against these high growth markets that we're really focused on and then I would augment that.

Speaker Change: With the appropriate tuck ins.

Speaker Change: So I'm not going to I don't think were were.

Speaker Change: We're really focused on and we're not going to signal that we're focused on any kind of bigger deals at this point.

Okay. Thanks, Matt.

Brad: I think we have time I know, we're running a little bit long, but let's take two more questions. Please.

Brad: The next question comes from Rich no-hitter Attrist Rich. Please go ahead.

Rich: Hi, Thanks for taking the questions.

Rich: Just on you know.

Speaker Change: We saw just more broadly in med tech a little bit of seasonality or a weaker third quarter for a number of your competitors play out just wondering if you could comment on it.

Speaker Change: The trend throughout the quarter.

Speaker Change: Was August.

Speaker Change: Seasonally kind of weaker than what you would've thought.

Speaker Change: It's been the normal pick up is it stronger than expected into the into the <unk>, especially if you could talk about kind of exit trends from September into October. Thank you.

Speaker Change: Sure. Thanks for the question Rich I'll ask Karen to answer that one yeah. Thanks, Rich I would say we saw strength throughout the second quarter.

Karen: And no matter what months you looked at them and I think thats driven in part by just the strength of our product offering when we look at the first few weeks of this quarter and how that's been trending it's been trending well.

Karen: We're tracking to the expectations that we set in our guidance at this stage.

Spread: Thank you.

Spread: Okay.

Rich will.

Rich: We will take the last question please spread.

Rich: Sure.

Speaker Change: According to the capital markets. Please.

Speaker Change: Please go ahead.

Speaker Change: Oh, great. Thank you so much for taking the question just I guess a follow up on Hugo one of your competitors recently showcased their surgical robot that had it invisible design in 'twenty motion capabilities I am just wondering what your thoughts are on the competitive landscape do you see it as a rising tide or just to just how do you think.

Speaker Change: If your technology offering versus competition and then I was just wondering if it's possible to get any more.

Speaker Change: More specific color on how October and November is shaping up thank you for taking the questions.

Speaker Change: Okay.

Speaker Change: Hmm.

Speaker Change: <unk>. Thanks for the question I'm going to ask Mike.

Mike: Take the Hugo question, and then I'll follow up on that one.

Mike: Great. Thanks, Shannon so.

Shannon: We were very interested to see.

Shannon: The latest developments from from our competitor here relative to.

Shannon: So their program and I'll say that they were about as expected.

Shannon: No surprises there we continue to be very excited and optimistic about the differentiation of our program with an open console.

Shannon: With a modular design with the ability to have flexibility in terms of.

Shannon: Location of our site of care, which is highly differentiated from what we heard there and their discussions as well as what we see in the market today and so we see that differentiation continue and the reasons for that our customers.

Shannon: Like Hugo to continue to be differentiated reasons, where broadly speaking though.

Shannon: Good news is that there continues to be.

Shannon: Yes.

Real interest in expanding the penetration of robotics across multiple fields in surgery, and we're seeing continued increase in procedure volumes on a quarter on quarter basis, and so it's good news for the field.

Shannon: Is that interest grows so we're well positioned in the field continues to expand which is which is a good story for medtronic.

Speaker Change: Yes, just to build on that I mean.

Speaker Change: We talked about we call it robotics, but I would argue it's broader than that.

Speaker Change: And this isn't the first time.

Speaker Change: We're.

Speaker Change: Our to change the dynamics of an entire market. That's what we're doing in the spine market right now and then it goes beyond robotics, it gets into inner operative imaging or visualization.

Speaker Change: You know.

Speaker Change: Navigation pre.

Speaker Change: <unk> surgical AI base planning.

Speaker Change: And like with Mike's World here with Hugo We've got touch surgery enterprise, which is a leading.

Speaker Change: Digital platform with AI driven digital platform.

Speaker Change: And like you like Youre seeing in spine and that's played out over the last couple of years, it's changing the competitive dynamics or what's important in the marketplace for physicians and even patients.

Speaker Change: And Youre seeing the impact is what youre seeing in the in the spine market as many competitors. It takes a lot of expertise it takes a lot of capital.

Speaker Change: To make this happen and youre seeing competitors fall by the wayside.

Speaker Change: And I know that's been a big one here recently with <unk> and globe is coming together and we'll see how that plays out but I believe.

Speaker Change: We've demonstrated an ability to do this and this is the kind of experience and I know we're up against.

Speaker Change: Big competitor and intuitive in the surgical space, but we believe.

Speaker Change: We've got a lot to offer here and we are going to drive that.

Speaker Change: And the how people think about the space and the competitive dynamics and we're really confident and excited about that.

So with that I think will we'll bring the call to close thanks for sticking with us a little longer.

Speaker Change: And I really appreciate the questions and the support and continued interest in Medtronic and we look forward to updating you on our continued progress on our Q3 earnings broadcast, which we anticipate holding on Tuesday February 20th with that thanks for joining us today and for those in the U S. I'd like to wish you and your.

Speaker Change: Your families a very happy Thanksgiving this week.

Speaker Change: And enjoy the holiday and stay safe. Thank you.