Q2 2023 Stryker Corp Earnings Call

August 3, 2023

We are in a listen only mode.

Following the conference we will conduct a question and answer session.

This conference call is being recorded for replay purposes.

Before we begin I would like to remind you that the discussions during this conference call will include forward looking statements.

Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC.

Also the discussions will include certain non-GAAP financial measures.

Conciliations to the most directly comparable GAAP financial measures can be found in today's press release that is an exhibit to Strykers current report on form 8-K filed today with the SEC.

I will now turn the call over to Mr. Kevin Lobo Chair and Chief Executive Officer, You May proceed Sir.

Welcome to Strykers second quarter earnings call.

Joining me today are Glenn mainline Strykers, CFO , and Jason Beach, Vice President of Investor Relations.

Today's call I'll provide opening comments, followed by Jason with the trends, we saw during the quarter and some other updates.

Glenn will then provide additional details regarding our quarterly results before opening the call to Q&A.

In the second quarter, we delivered organic sales growth of 11, 9%.

With double digit growth in both med surge in Neurotechnology and orthopedics and spine.

This comprehensive performance demonstrates the diverse and attractive markets that we plan.

And our ability to drive growth through strong commercial execution.

We are also pleased with the continued positive outcomes of our globalization efforts.

Our international business demonstrated strong performance with double digit growth.

Complementing our strong and fast growing U S business.

In addition, we continue to see traction with our pricing initiatives again, delivering positive pricing in the second quarter.

During the quarter, we continued to realize improvements in component availability, although disruptions remain in parts of our business.

Our teams have demonstrated good agility and addressing these situations proactively mitigating much of their impact.

We delivered quarterly adjusted EPS of $2 54, a share, reflecting 13% growth compared to the second quarter of 2022.

This result was primarily driven from the strength of our sales, but also marks the beginning of our margin recovery.

We expect margins to continue to expand throughout the remainder of the year.

Finally, with half the year behind us and our solid momentum we have increased our expected full year organic sales growth to a range of nine 5% to 10, 5% and.

And increased our expected earnings per share to $10 25.

To $10 45 per share.

I will now turn the call over to Jason.

Thanks, Kevin My comments today will focus on providing an update on the current environment as well as capital demand, including Mako acquisitions, and an update on product launches.

Procedural volumes have largely recovered to pre COVID-19 levels in most countries.

And while volumes are strong patient backlog still remains and we believe the elevated orthopedic procedural demand will continue well into 2024.

Center of the year.

Finally, with half the year behind us and our solid momentum we have increased our expected full year organic sales growth to a range of nine 5% to 10, 5%.

While volumes have largely recovered hospital staffing pressures and supply constraints continue in pockets around the globe.

And increased our expected earnings per share to $10 25.

These challenges are resolving gradually as we expected and we will continue to be a moderate tailwind as we move through the second half of 2023 and into 2024.

To $10 45 per share.

I will now turn the call over to Jason.

Thanks, Kevin My comments today will focus on providing an update on the current environment as well as capital demand, including Mako acquisitions, and an update on product launches.

Additionally, demand for our capital products remained healthy in the quarter as evidenced from the double digit organic growth of our medical instruments and neuro cranial divisions.

Procedural volumes have largely recovered to pre COVID-19 levels in most countries and.

Also demand for <unk> remains robust with strong U S and international performances, which is helping drive our continued growth in hips and knees.

And while borrowings are strong patient backlog still remains and we believe the elevated orthopedic procedural demand will continue well into 2024.

Next capital order backlog remains elevated well above normal levels.

While volumes have largely recovered hospital staffing pressures and supply constraints continue in pockets around the globe.

Also during the quarter, we executed a small tuck in deal and also closed on a ferrous endovascular acquisition.

These challenges are resolving gradually as we expected and we will continue to be a moderate tailwind as we move through the second half of 2023 and into 2024.

Furthermore, our product Super cycle continues to drive positive momentum.

In late Q2, we successfully completed a limited launch of our $17 88 camera platform and are poised for full launch in Q3.

Additionally, demand for our capital products remained healthy in the quarter as evidenced from the double digit organic growth of our medical instruments and neuro cranial divisions.

We also received FDA clearance for cranial guidance, our newest application under our Q guidance platform.

Demand for <unk> remains robust with strong U S and international performances, which is helping drive our continued growth in hips and knees.

This empowers surgeons to quickly plan a phase surgical approach using multiple imaging modalities, and then navigate instruments with specific surgical procedures.

Next capital order backlog remains elevated well above normal levels.

Finally, we remain on track for the launch of our White back 35 defibrillator outside of the U S. In the fourth quarter of this year and in the U S. In early 2024.

Also during the quarter, we executed a small tuck in deal and also closed on the ferrous Endovascular acquisition.

Furthermore, our product Super cycle continues to drive positive momentum.

These launches will continue to support growth over multiple years with that I'll now turn the call over to Glenn.

In late Q2, we successfully completed a limited launch of our 17 88 camera platform and are poised for full launch in Q3.

Thanks, Jason today, I will focus my comments on our second quarter financial results and the related drivers our detailed financial results have been provided in today's press release.

We also received FDA clearance for cranial guidance, our newest application under our Q guidance platform.

Our organic sales growth was 11, 9% in the quarter and the second quarter's average selling days were in line with 2022, the impact from pricing in the quarter was favorable by 5%.

This empowers surgeons to quickly plan, a safe surgical approach using multiple imaging modalities, and then navigate instruments with specific surgical procedures.

We continue to see a positive trend from our pricing initiatives, particularly in our U S. Med surge in neuro tech businesses, all of which contributed positive pricing for the quarter.

Finally, we remain on track for the launch of our life back 35 defibrillator outside of the U S. In the fourth quarter of this year and in the U S. In early 2024.

Foreign currency had a <unk>, 7% unfavorable impact on sales.

These launches will continue to support growth over multiple years with that I'll now turn the call over to Glenn.

In the quarter U S organic sales growth was 12%.

Jason Today, I will focus my comments on our second quarter financial results and the related drivers our detailed financial results have been provided in today's press release.

International organic sales growth was 11, 4%.

Impacted by positive sales momentum across most of our international markets, particularly Australia, Canada, Europe , and most of our emerging markets.

Our organic sales growth was 11, 9% in the quarter. The second quarter's average selling days were in line with 2022, the impact from pricing in the quarter was favorable by 5%.

Our adjusted EPS of $2 54 in the quarter was up 12, 9% from 2022, driven by higher sales and operating margin expansion, partially offset by a higher adjusted income tax rate and the impact of foreign currency exchange, which was unfavorable <unk>.

We continue to see a positive trend from our pricing initiatives, particularly in our U S. Med surge in neuro tech businesses, all of which contributed positive pricing for the quarter.

Foreign currency had a <unk>, 7% unfavorable impact on sales.

Now I will provide some highlights around our quarterly segment performance.

In the quarter U S organic sales growth was 12%.

In the quarter Med surge in Neurotechnology has both constant currency and organic sales growth of 12, 9%, which included 13, 5% of U S organic growth and 10, 9% of international organic growth.

International organic sales growth was 11, 4%.

Impacted by positive sales momentum across most of our international markets, particularly Australia, Canada, Europe , and most of our emerging markets.

Instruments had U S organic sales growth of 12, 9% led by strong double digit growth in the surgical technology business.

From a product perspective sales growth was led by power tools waste management smoke evacuation and surge account.

Endoscopy had U S organic sales growth of three 5% against a strong comparable.

Now I will provide some highlights around our quarterly segment performance.

This included strong growth in its pro care sustainability and sports medicine businesses.

In the quarter Med surge in Neurotechnology has both constant currency and organic sales growth of 12, 9%, which included 13, 5% of U S organic growth and 10, 9% of international organic growth.

The endoscopy business completed its limited launch of the $17 88 camera late in the second quarter.

<unk> with prior camera launches and the related transition period between the legacy camera and the new camera. This also contributed to muted growth in Q2.

Instruments had U S organic sales growth of 12, 9% led by strong double digit growth in the surgical technology business.

Medical had U S organic sales growth of 27, 2%, reflecting very strong performances in all three of its businesses acute care emergency care and Sage and benefited from continued improvement in product supply during the quarter.

From a product perspective sales growth was led by power tools waste management smoke evacuation and surge account.

Endoscopy at U S organic sales growth of three 5% against a strong comparable.

Neurovascular in our U S organic sales growth of 9%, reflecting a strong performance in our hemorrhagic business.

This included strong growth in its pro care sustainability and sports medicine businesses.

Neuro cranial had U S organic sales growth of nine 6%, which included double digit growth in our bone mill bipolar four steps and Max product lines.

The endoscopy business completed its limited launch of the $17 88 camera late in the second quarter.

<unk> with prior camera launches and the related transition period between the legacy camera and the new camera. This also contributed to muted growth in Q2.

Internationally med surge in Neurotechnology had organic sales growth of 10, 9%.

Reflecting double digit growth in our medical and neuro cranial businesses GE.

Geographically this included strong performances in Europe , Australia and Canada.

Neurovascular as growth continues to be negatively impacted by BP and China.

Orthopedics and spine had both constant currency and organic sales growth of 10, 6%, which included organic growth of 10% in the U S and 12, 1% internationally.

Neurovascular had U S organic sales growth of 9%, reflecting a strong performance in our hemorrhagic business.

Neuro cranial had U S organic sales growth of nine 6%, which included double digit growth in our bone mill bipolar four steps and Max product lines.

Our U S knee business grew 10, 6% organically, which reflects our market leading position in robotic assisted knee procedures are U S. Hip business grew eight 8% organically, reflecting strong primary hip growth fueled by our insignia hip stem and continued procedural growth.

Internationally med surge in Neurotechnology had organic sales growth of 10, 9%.

Reflecting double digit growth in our medical and neuro cranial businesses GE.

Geographically this included strong performances in Europe , Australia and Canada.

Our U S trauma and extremities business grew 14, 3% organically.

Neurovascular growth continues to be negatively impacted by BP and China.

With strong performances across all businesses led by very strong growth in upper extremities in foot and ankle.

Orthopedics and spine had both constant currency and organic sales growth of 10, 6%, which included organic growth of 10% in the U S and 12, 1% internationally.

Our U S spine business grew five 2% led by the performance of our enabling technology and interventional spine businesses, including the recently launched two guidance navigation system.

Our U S. Other ortho declined organically, one 6%, primarily driven by the impact of deal mix changes, specifically more rentals related to Mako installations in the quarter.

Internationally, orthopedics and spine grew 12, 1% organically, including strong performances in Australia, Canada, and most emerging markets.

Our U S trauma and extremities business grew 14, 3% organically.

With strong performances across all businesses led by very strong growth in upper extremities in foot and ankle.

Now I will focus on operating highlights in the quarter.

Our adjusted gross margin of 63, 9% was favorable approximately 60 basis points from the second quarter of 2022, and 70 basis points sequentially compared to Q1 2023.

Our U S spine business grew five 2% led by the performance of our enabling technology and interventional spine businesses, including the recently launched two guidance navigation system.

This change was primarily driven by the slight easing of certain cost pressures decreases in spot buy purchases improved productivity and the benefit of price, partially offset by the impact of foreign currency exchange.

Our U S. Other ortho declined organically, one 6%, primarily driven by the impact of deal mix changes, specifically more rentals related to Mako installations in the quarter.

Adjusted R&D spending was six 4% of sales, which represents an 80 basis points decrease from the second quarter of 2022, due primarily to a higher comparable in 2022 related to the ramping of costs for product launches.

Internationally, orthopedics and spine grew 12, 1% organically, including strong performances in Australia, Canada, and most emerging markets.

Now I will focus on operating highlights in the quarter.

Our adjusted gross margin of 63, 9% was favorable approximately 60 basis points from the second quarter of 2022, and 70 basis points sequentially compared to Q1 2023.

Our adjusted SG&A was 33, 1% of sales, which was 70 basis points higher than the second quarter 2022, due to a disciplined ramp of spend and investment to support our growth.

We expect our full year SG&A as a percent of sales to be in line with 2019 levels as we continue to invest for growth.

In summary for the quarter, our adjusted operating margin was 24, 3% of sales.

Which was approximately 60 basis points favorable to the second quarter of 2022.

This performance is primarily driven by the aforementioned easing of certain cost pressures primarily on gross margin.

Adjusted other income and expense of $66 million for the quarter was slightly higher than 2022, driven by increased interest expense.

Our adjusted SG&A was 33, 1% of sales, which was 70 basis points higher than the second quarter 2022, due to a disciplined ramp of spend and investment to support our growth.

The second quarter of 2023 had an adjusted effective tax rate of 15, 2%, reflecting the impact of geographic mix and certain discrete tax items for.

We expect our full year SG&A as a percent of sales to be in line with 2019 levels as we continue to invest for growth.

For 2023, we reiterate our full year effective tax rate guidance to be in the range of 14% to 15%.

In summary for the quarter, our adjusted operating margin was 24, 3% of sales which was approximately.

Focusing on the balance sheet, we ended the second quarter with $1 5 billion of cash and marketable securities and total debt of $12 9 billion.

Ultimately 60 basis points favorable to the second quarter of 2022.

This performance is primarily driven by the aforementioned easy and certain cost pressures primarily on gross margin.

Approximately $100 million of the term loan that was paid down in the quarter, reflecting year to date payments of $200 million and our remaining balance of $650 million.

Adjusted other income and expense of $66 million for the quarter was slightly higher than 2022, driven by increased interest expense.

Turning to cash flow our year to date cash from operations is $1 1 billion. This performance reflects the results of net earnings and higher accounts receivable collections.

The second quarter of 2023 had an adjusted effective tax rate of 15%.

Considering our year to date results are strong backlog for capital equipment and continued positive procedural trends. We now expect full year 2023 organic sales growth to be in the range of nine five to 10, 5%.

Guidance to be in the range of 14% to 15%.

With pricing to be slightly positive for the year.

Focusing on the balance sheet, we ended the second quarter with $1 5 billion of cash and marketable securities and total debt of $12 9 billion.

If foreign currency exchange rates hold near current levels, we anticipate sales will be unfavorably impacted by approximately 3% and adjusted EPS will be unfavourably impacted from five to 10 per share for the full year both of which are included in our guidance.

Approximately $100 million of the term loan that was paid down in the quarter, reflecting year to date payments of $200 million and a remaining balance of $650 million.

Turning to cash flow our year to date cash from operations is $1 1 billion. This performance reflects the results of net earnings and higher accounts receivable collections.

On our performance in the first half of the year together with our strong sales momentum. We now expect adjusted earnings per share to be in the range of $10 25 to $10 45 per share and now I will open up the call for Q&A.

Thank you at this time, if you wish to ask a question. Please press the star and one on your Touchtone phone.

You may remove yourself anytime by pressing star to once again Thats star one to ask a question.

With pricing to be slightly positive for the year.

Our first question comes from Robbie Marcus with Jpmorgan. Please go ahead.

If foreign currency exchange rates hold near current levels, we anticipate sales will be unfavorably impacted by approximately <unk>, 3% and adjusted EPS will be unfavourably impacted from five to 10 per share for the full year both of which are included in our guidance.

Oh, great. Thanks for taking the question congrats on a great quarter here.

Two from me first.

Great quarter, it looks like you're raising more than the beat on both the top and bottom line it.

It looks like you've taken a good amount of shares still in ortho across hips knees and extremities trauma.

Just as we think about the balance of the year.

Touched on some of them, but would love to get a sense of what gives you. The confidence these elevated trends are going to continue.

Thank you at this time, if you wish to ask a question. Please press the star and one on your Touchtone phone.

And.

Any visibility on the margin side that gets you comfortable moving it up more than the beat.

You may remove yourself anytime by pressing star two.

Hi, Ravi, it's Kevin I'll start off with.

The confidence in the procedures.

Once again Thats star one to ask a question.

We've talked about this since the third quarter of last year. It could sense based on surgery backlog is talking to physicians.

Our first question comes from Robbie Marcus with JP Morgan. Please go ahead.

Oh, great. Thanks for taking the question congrats on a great quarter here.

Seeing that there was pent up demand through the pandemic. So we expect that elevated procedures coming into the year that has certainly played out you've heard even similar comments from some of the providers in the space.

Two for me first a great.

Great quarter, it looks like you're raising more than the beat on both the top and bottom line.

And the surgery backlogs are there longer probably two months surgery backlog is more like four months.

It looks like you've taken a good amount of shares still in ortho across hips knees and extremities trauma.

So that gives us confidence that through the end of this year and into next year.

Just as we think about the balance of the year.

Are going to continue to see elevated procedural growth. We also see that in the demand for our small capital, which again is equipment that's used for ongoing procedures.

Touched on some of them, but would love to get a sense of what gives you. The confidence these elevated trends are going to continue.

And.

And then I'll turn to Glenn for margins.

Any visibility on the margin side that gets you comfortable moving it up more than the beat.

Robin.

As we as we got through the quarter as I mentioned, we really started to see some positive and easing of some of the cost pressures that we had felt in Q1 and certainly last year.

Hi, Robyn, it's Kevin I'll start off with.

The confidence in the procedures.

We've talked about this since the third quarter of last year, the consensus based on surgery backlogs talking to physicians.

We also are starting to feel some of the improvements in supply chain.

That's not to say that everything is rosy, we are still feeling inflationary pressures in transportation some of our commodities labor certain electronics.

And the surgery backlogs are long or longer probably at two months surgery backlog is more like four months.

But I will say that spot buys in Q1 spot buys in Q2 have not been material.

So that gives us confidence that through the end of this year and into next year.

We're going to continue to see elevated procedural growth. We also see that in the demand for our small capital, which again are there's equipment thats used for ongoing procedures.

And we're getting near the amortization of the impact of spot buys from last year. So I feel like that gives me good confidence that I think we will see continued improvement in our gross margin as we move into Q3 and Q4 and so we really we will feel that gradual improvement and we will feel it all the way down to the op margin line.

And then I'll turn to Glenn for margins.

Robbie.

As we as we got through the quarter as I mentioned, we really started to see some positive and an easing of some of the cost price.

Great and maybe just a follow up for me.

Both the video.

Do you want to take it.

People are really happy so far with the ear Bud. Unfortunately, we're always focused on the future and looking out to next year already.

Say that everything is rosy, we are still feeling inflationary pressures in transportation some of our commodities labor certain electronics, but I will.

You talked about Kevin these trends continuing and you have the super cycle in med surge just any kind of thoughts on how we should think about these elevated trends continuing and thoughts I know you are laser focused on getting back to your 2016, our 2019 operating margin of 26, 3%.

Say that spot buys in Q1 spot buys in Q2 have not been material.

How do we think about how far out that might be thanks a lot.

Well I think Jason's comments and the openings as we do expect the procedural positive trends to continue well into next year.

Don't have a crystal ball exactly what will that be a 100 basis points or 200 basis points more elevated than it was.

Yeah.

Great and maybe just a follow up for me for.

For both the D O or however, you want to take it.

Jack.

Through the pandemic and last year.

You know people are really happy so far with the ear Bud. Unfortunately, we're always focused on the future and looking out to next year already.

But we expect that to be elevated to the super cycle of products.

Wildly exciting something like.

When you look at the Neptune is off to a great start with in instruments 70 day, it's only going to start.

You talked about Kevin these trends continuing if the super cycle in med surge just any kind of thoughts on how we should think about these elevated trends continuing and thoughts I know you are laser focused on getting back to your 2016, our 2019 operating margin of 26, 3% how do we.

The latter part of this quarter, so that's going to be a big impact next year got a new defibrillator coming that's more next year. So there is these are launches of procured as multiple year, we have to stare chair of the expedition amazing products at medical launch brand, new and its new category altogether.

Think about how far out that might be thanks, a lot.

Launched Q1 of this year that will continue into next year. So a lot of.

Well I think Jason's comments I don't have a crystal ball exactly where it will not be a 100 basis points or 200 basis points more elevated than it was.

Continuation of really strong growth across our businesses. So you should expect we're going to continue to be a high.

Mac.

Through the pandemic and last year. So we expect that to be elevated to the super cycle of products is wildly exciting something like.

High growth company going into next year.

And I think the margins sorry go ahead, yes, let me just sorry, Louie finished I forgot it was a long question.

When you look at the Neptune asked is off to a great start with in instruments 70 days.

So yes, we are absolutely committed to returning to pre Covid margins and then growing our margins thereafter.

This quarter marked a really important step a very big first step.

And that evolution.

There's a procured he is multiple year, we have to stare chair of the expedition.

Thank you we'll take our next question from Larry Nicholson with Wells Fargo.

Amazing product that that medical launch brand new in its category new category altogether launched.

Good afternoon, thanks for taking the question.

Launched Q1 of this year that will continue into next year, So a lot of <unk>.

I'll Echo Robert Congratulations on a very impressive quarter here.

Continuation of really strong growth across our businesses. So you should expect we're going to continue to be a high growth company going into next year.

So Kevin I wanted to start on med surge the new products just talk about how the new camera in endoscopy might've impacted Q2, and what do you expect the impact to be.

And I think you'll see margins.

Yes, let me just sorry, Louie finished I forgot who was a long question.

From that in 2003, and 'twenty, four and medical growing 27% organically after vocera anniversaried, what drove that and how to vocera due in the second quarter.

So yes.

Yes, we are absolutely committed to returning to pre Covid margins and then growing our margins thereafter.

What's the outlook and I had one follow up.

This quarter marked a really important step a very big first step.

Okay, you got a few in there already and you got a follow up but okay. That's fine listen we're really excited about the performance of our of our med search business continues to be really a great segment of our company.

And that evolution.

Thank you we'll take our next question from Larry Nicholson with Wells Fargo.

Good afternoon, Thanks for taking the question and.

What I'd tell you on the Endo side as the camera had really no impact it was a limited launch really just making sure.

I'll Echo Robert Congratulations on a very impressive quarter here.

The product is performing as we thought and the test cases have gone extremely well and really the full launch hasn't started that will start.

So Kevin I wanted to start on on Med surge the new products just talk about how the new camera in endoscopy might've impacted Q2, and what you expect the impact to be.

In the back half of the Q3, so you have to start to see some impact in Q3 that will accelerate in Q4, and I will even accelerate more next year as you know <unk> seen these launches in the past so it really picks up tier one sometimes even year.

From that in 'twenty, three and 'twenty, four and medical growing 27% organically. After Vocera Anniversaried, you know what drove that and how to vocera due in the second quarter.

Even higher than tier one so we're going to see a lot of impact next year there'll be some impact.

The outlook and I had one follow up.

Okay, you got a few in there already and you got a follow up but okay. That's fine.

In Q3, but.

Four but really it will start to ramp so it's really no impact in Q3 on endoscopy and Thats why endoscopy was a little bit softer and a big comp from last year or two but at.

And we're really excited about the performance of our of our med surge business continues to be really a great segment of our company.

At the end of the these camera launches you do see it start to slow down and then it really picks up with the new products medical had an absolutely stellar quarter. Another 25% growth that we had that in the fourth quarter, if you recall as well.

What I would tell you on the Endo side as the camera had really no impact it was a limited launch really just making sure.

That the product is performing as we thought and the test cases have gone extremely well and they're really the full launch as a start up that will start.

Medical is is really over the past six years become a large consistent high growth division it.

In the back half of the Q3, so you have to start to see some impact in Q3 that will accelerate in Q4 and it'll even accelerate more next year as you know you've seen these launches in the past so it really picks up here, one sometimes even year to be even higher than tier one. So we're going to see a lot of impact next year there'll be some impact.

It does move around a little bit from quarter to quarter, but overall, if you look at a rolling four quarters rolling eight quarters.

This is a real high growth business now I think it's probably one of the most misunderstood businesses honestly, Eric I would say underestimated business in our portfolio.

<unk> got the integration of Sage Physio control, Vocera, which you referenced but you've got new launches power pro two as a new ambulance cost depleted last year security bed frame is still gaining steam CHS primo fit the <unk> that I mentioned.

In Q3, but.

Four but really it'll it'll start to ramp so it's really no impact in Q3 on endoscopy and that's why endoscopy is a little bit softer and a big comp from last year or two but at.

At the end of the phase camera launches you do see it start to slow down and then it really picks up with the new products medical had an absolutely stellar quarter. Another 25 plus percent growth that we had that in the fourth quarter, if you recall as well.

And then there's also a lot more awareness on safety, so our AG portfolio Theres a lot more awareness. So I would say new demand for <unk> based on all the safety the Lucas automatic just compression product and really a fantastic management team and medical So we'll expect 25% again next quarter probably not.

Medical is is really over the past six years become a large consistent high growth division it.

It does move around a little bit from quarter to quarter, but overall, if you look at a rolling four quarters rolling eight quarters.

But I do expect that medical will continue to be a <unk>.

High growth business for a long time to come and then specifically relate to both Sarah.

This is a real high growth business now I think it's probably one of the most misunderstood businesses honestly, Eric I would say underestimated business in our portfolio.

Both sales and orders ramped in the quarter as we expected. So youll remember, we sort of talk to you about Q3, and Q Q3, Q4, and Q1 of this year.

<unk> got the integration of Sage Physio control, Vocera, which you referenced but you've got new launches power pro two as a new ambulance cost at the end of last year security bed frames still gaining steam CHS Primo fit the <unk> that I mentioned.

Kind of being flat.

After we sort of went through the integration and we said it is going to pick up meaningfully.

Both picked up meaningfully in Q2, both sales as well as orders and so they were also a contributor but really strength across the entire portfolio.

And then there's also a lot more awareness on safety. So our AG portfolio. There's a lot more awareness. So I would say new demand for a DS based on all the safety the Lucas automatic just compression products and really a fantastic management team and medical So we'll expect 25% again next quarter probably not.

Thank you and just keep my thought really brief Glenn.

Comps are very different in Q3 and Q4.

Should we be thinking about.

Longer growth in Q3 relative to Q4, just the cadence for the rest of the year. Thank you.

But I do expect that medical will continue to be a very high growth business for a long time to come and then specifically ready to Vocera.

Yes.

Things.

Q3, seasonally is usually not a super strong quarter, but I think.

Both sales and orders ramped in the quarter as we expected. So you'll remember we sort of talk to you about Q3 and Q on Q3 Q4 or in Q1 of this year.

If you if you focus on Q4 and you look at the comps that we're up against.

And that probably plays into how much we're going to grow against that comp.

Kind of being flat.

It's a big number last year. It was $5 2 billion in the quarter, which is a big number. So I think what youll see is youll see.

After we sort of went through the integration and we said it is going to pick up meaningfully.

Both picked up meaningfully in Q2, both sales as well as orders and so they were also a contributor but really strength across the entire portfolio.

Slightly higher growth in Q3, and then that will come down a little bit just because of the comp.

Thank you and just still keep my fought really brief Glenn the comps are very different in Q3 and Q4.

But I think we'll end the year nicely well within our guidance.

Thank you we'll take our next question from <unk> Chickering with Deutsche Bank.

Should we be thinking about stronger growth in Q3 relative to Q4, you know just the cadence for the rest of the year. Thank you.

Hey, good afternoon, and thanks for taking my questions a very nice quarter.

Yes, a couple of things.

A follow up on the medical can you talk about the Capex environment, how much has changed in the last 90 days or so and parcel or increase in capex as our revenues and costs.

Q3, seasonally is usually not a super strong quarter, but I think.

If you if you focus on Q4 and you look at the comps that we're up against.

We're looking pretty good for hospitals and on the backlog did you guys reduced the backlog in the quarter and was that a bolus for two Q acw's Herbie normalizing back half of the year.

That probably plays into how much we're going to grow against that comp.

It's a big number last year. It was $5 2 billion in the quarter, which is a big number. So I think what youll see is youll see.

And then also on the micro chips.

That should.

Should we view that getting better as a gross margin improvement from lower cost or increasing revenues as you reduce that backlog.

Slightly higher growth in Q3, and then that will come down a little bit just because of the comp.

Yes.

Hey, Peter it's Jason I'll start here and then and then maybe some pile on but as we think about the capital environment. We continued to see great strength from from a capital environment standpoint.

But I think we'll end the year nicely well within our guidance.

Thank you we'll take our next question from Peto Chickering with Deutsche Bank.

Hey, good afternoon, and thanks for taking my questions a very nice quarter.

And even as you think about the backlog in our business I think your question was was there a bolus, but if you look at our backlog. It continues to be at very high level of higher than what we came into the year with so still strength there on the capital side.

A follow up on the medical can you talk about the Capex environment, how much has changed in the last 90 days or so and parcel or increase in capex as our revenues and costs are looking pretty good for hospitals and on the backlog did you guys reduced the backlog in the quarter was that a bolus for two Q acw's Herbie normalizing back half a year.

Okay, and then one more on gross margins it sounds like a lot of tailwind from <unk> pretty much permanent in nature.

Then also on the micro chips is that.

Said that the gross margins improve in the back half of the year can you refresh us on how many months of inventory you guys have in the balance sheet and windows.

Should we view that getting better as a gross margin improvement from lower cost or increasing revenues as you reduce that backlog.

Thank you pleasure as we're seeing some sort of transferring to the P&L I'm just wondering if that's sort of the key driver of that gross margin improvement.

Okay.

Hey, Peter it's Jason I'll I'll start here.

And then and then maybe some pile on but as we think about the capital environment. We continued to see great strength from from a capital environment standpoint.

The third and fourth quarter simply by duration by waiting for the transfer.

Yes, I think that.

The big thing that really sits in inventory and worked it worked its way through sort of in the first quarter in the second quarter was the impact of those spot buys.

Even as you think about the backlog in our business I think your question was was there a bolus, but if you look at our backlog. It continues to be at very high level of higher than what we came into the year with so.

<unk> strength, there on the capital side.

And generally inventory turns depending on the product anywhere from six to nine months. So so yes, we will generally see the impact of spot buys reduce for the rest of this year.

Okay, and then one more on gross margins it sounds like a lot of tailwind from <unk> pretty much permanent in nature.

And you said that the gross margins improve in the back half of the year can you refresh us on how many months of inventory you guys have on the balance sheets and windows.

Keep in mind that we still have this sort of inflationary headwind that we will be working against.

In Q3, and Q4, but just just the mere fact that I feel like we're getting to the end of the impact of spot buys gives me confidence that we should see gradual gross margin improvement in the rest of this year.

<unk>.

You discussed your pressures, we're seeing says are transferring to the P&L. Just wondering if that's sort of the key driver of that gross margin improvement.

In the third and fourth quarters simply by duration by waiting for the transfer.

Yes, I think that the.

We will take our next question from Vijay Kumar with Evercore ISI.

The big thing that really sits in inventory and worked it worked its way through sort of in the first quarter in the second quarter was the impact of those spot buys.

Hey, guys. Thanks for taking my question Kevin.

This guidance is pretty impressive 10% organic.

Our comps something that we should worry about from a fiscal 'twenty four perspective, I know you mentioned segment profit tailwind.

And you know generally inventory turns depending on the product anywhere from six to nine months. So so yeah. We will generally see the impact of spot buys reduce for the rest of this year keep in mind that we still have this sort of inflationary headwind that we will be working against.

Help us contextualize that 10% in a given that some of these procedure trends it looks like it could sustain into 'twenty four.

Yeah. Thanks, Vijay remember, we grew nine 7% organically last year. So we had a pretty good year last year as well and we're growing on top of that again. This innovation cycle. We have is tremendous the procedure demands are strong as you see we're growing very fast even.

Although the market's elevated we're growing above market.

We will take our next question from Vijay Kumar with Evercore ISI.

In virtually every one of our businesses. So that gives us confidence that we're going to continue to be able to grow at the high end of med Tech.

Hey, guys. Thanks for taking my question Kevin.

For this year, we've already half of the year is already in the bag, yes for Q4 last year was up.

In this guidance is pretty impressive 10% organic.

Normally fast growing over 13% so.

Our comps something that that we should worry about from a fiscal 'twenty four perspective, I know you mentioned segment profit tailwind just <unk>.

In our guidance, we do reflect a little bit of a slowdown in the growth rate just related to those comps, but we do expect based on the backlog of surgery demand aging population more people playing pickle ball you name it right activity, causing injuries.

Help us contextualize that 10% in a given that some of these procedure trends it looks like it could sustain into 'twenty four.

Yeah. Thanks, Vijay remember, we grew nine 7% organically last year. So you have a pretty good year last year as well and we're growing on top of that again. This innovation cycle. We have is tremendous the procedure demands a strong word as receiver are growing very fast even.

This will continue to be a tailwind.

Through much of next year, that's our current visibility and obviously that could change, but thats, how we see it and we kind of call, but if you recall Q3 of last year, we called that this is what we're going to see.

Although the market's elevated we're growing above market.

It's actually materializing, frankly, a little better than we expected in terms of the flow through and procedures hospital staffing there theyre dealing with it much better than we expected. They are still flare ups here and there, but it's certainly gotten better hospitals are better equipped and <unk>.

Virtually every one of our businesses. So that gives us confidence that we're going to continue to be able to grow at the high end of med Tech.

And for this year, we've already half of the year is already in the bag and yes. The Q4 last year was abnormally fast growing over 13% so.

Patients are anxious to get their procedures.

In our guidance, we do reflect a little bit of a slowdown in the growth rate just related to those comps, but we do expect based on backlog of surgery demand aging population.

That's helpful. Kevin Glenn maybe one for you it looks like we're on track.

We were well north of 50 basis points of margin expansion in.

Fiscal 'twenty three.

More people playing pickle ball you name it right activity, causing injuries. So this will continue to be a tailwind and we think through much of next year. That's our current visibility and obviously that could change, but that's that's how we see it and we kind of call, but if you recall Q3 of last year. We call that this is what we're going to see.

Is this something that's sustainable when you look at the operating model, assuming theres nothing crazy on the inflation side for next year I'm curious have you should be thinking about leverage.

Yes.

Youre going to Youre going to force me to divulge all the things we want to tell you.

It's actually materializing, frankly, a little better than we expected in terms of the flow through and procedures as hospital staffing there theyre dealing with it much better than we expected there still flare ups here and there, but it's certainly gotten better hospitals are better equipped and pace.

Our investor meeting, but I would say are old mantra.

Banding 30 to 50 basis points every year was absolutely doable and it's absolutely something that we we are planning on getting back to were working through some of these.

Patients are anxious to get their procedures done.

Higher costs through the P&L. There is this ongoing inflation that we will solve for but.

That's helpful. Kevin Glenn maybe one for you it looks like we're on track.

Well north of 50 basis points of margin expansion in.

I don't think that as we look forward.

Fiscal 'twenty three.

Over the longer term the margin expansion is something that I think youll continue to see out of this I don't want to pin a number just yet but.

Is this something that's sustainable you know when you look at the operating model, assuming theres nothing crazy on the inflation side for next year I'm curious have you should be thinking about leverage.

It's something we will continue to have yes, one thing I would add so glenn wasn't necessarily referring to 24, when he said 30 to 50.

Yes.

Youre going to Youre going to force me to divulge all the things we want to tell you.

We're on a on a ramp.

A major focus to get back to that 26, three and then thereafter kind of get into a normal.

Investor meeting, but I would say are old mantra.

So we will give you more clarity around that at the analyst day.

Banding 30 to 50 basis points every year was absolutely doable and it's absolutely something that we we are planning on getting back to were working through some of these <unk>.

In November .

We will take our next question from Matthew O'brien with Piper Sandler.

Afternoon, Thanks for taking the questions and I really don't want to make too much out of one quarter here, but when I look at the two year.

Higher costs through the P&L. There's this ongoing inflation that we will solve for but.

I don't think that as we look forward.

<unk> growth rate for you guys versus your biggest competitor in hips and knees you had been outperforming the massively the last several quarters. This quarter. It really tightened up the delta between you two specifically in knee. So I'm just wondering if theres anything youre seeing competitively, maybe it's limitless or on the robotics side.

Over the longer term the margin expansion is something that I think youll continue to see out of us I don't want to pinpoint a number just yet but yeah.

It's something we will continue to have yes, one thing I would add so glenn wasn't necessarily referring to 24, when he said 30 to 50.

That you should call out or that we should think about as you go forward and just in terms of being able to significantly outperform the market.

We're on a on a ramp and on a on a major focus to get back to that 26, three and then thereafter kind of get into a normal.

If the needs over the next year or so.

Adam So so we will give you more clarity around that at the analyst day.

Yes look I'm actually pretty happy with double digit growth.

In November .

In our knee business I look at <unk>, we're really starting to ramp the growth or U S. <unk> is just getting going its really getting started so that.

We will take our next question from Matthew O'brien with Piper Sandler.

Afternoon, Thanks for taking my questions and I really don't want to make too much out of one quarter here, but when I look at the two year.

That massive outperformance you saw before was on the backs of Mako and some Atlas.

And we're probably going to see some of that outside the United States in the U S performance is very strong on one quarter I'm not going to get overly excited were still the fastest growing.

<unk> growth rate for you guys versus your biggest competitor in hips and knees you had been outperforming the massively over the last several quarters. This quarter. It really tightened up the delta between you two specifically in knee. So I'm just wondering if theres anything youre seeing competitively maybe in some atlas or on the robotics side.

And the company and you remember from the past we used to be well in one you didn't grow well in the other.

And we cover both hips and knees, it wasn't hips or knees hips and knees in Q2, so no we're not seeing anything materially different.

That you should call out or that we should think about as you go forward and just in terms of being able to significantly outperform the market.

We focus on our own execution with our market, leading robotics and our strong portfolio continue the rollout of the Cigna, which has been on.

Hips and knees over the next year or so.

Yes look I'm actually pretty happy with double digit growth.

Absolute homerun, we're going to continue to perform very well.

In our knee business and look at <unk>, where we're really starting to ramp the growth or U S. <unk> is just getting going its really getting started so that massive outperformance you saw before was on the boxes of may fill in some atlas and we're probably going to see some of that outside the United States in the U S performance was very strong on one quarter I'm not going.

I appreciate that Kevin and then on the pricing side I know it has now flipped from kind of a headwind this year to a tailwind.

But I'm, assuming we're working through some of those benefits so is pricing going to be another.

Tailwind or positive for Stryker into 'twenty, and even 'twenty five as well as or as you get these long term contracts.

Get overly excited were still the fastest growing.

And the company on Europe , you remember from the past we used to be group, while in one you didn't grow well in the other.

Yes, I think I'll make some couple of comments around that without maybe providing exact guidance on 2024, but if we look at the initiatives that we executed. This year, we had a very targeted program that looked kind of product by product.

And we cover both hips and knees, it wasn't hips or knees hips and knees in Q2, so no we're not seeing anything materially different we focus on our own execution with our market, leading robotics and our strong portfolio continue the rollout of insignia which has been a.

In general what we're seeing is MSN is generally gaining positive price.

Absolute homerun.

And I would say ortho is less negative and has much larger longer term contract negotiations.

We're going to continue to perform very well.

I appreciate that Kevin and then on the pricing side I know it now slip from kind of a headwind this year due to a tailwind.

Keep in mind too that our price comparison that we report on include sort of same product sales compared to prior year. So if you think about increases that we gain on prices say on next gen products that we're going to launch that's not necessarily included in the number we say for price, but I would tell you that we generally.

But I'm, assuming we're working through some of those benefits, though is pricing going to be another tailwind.

Tailwind or positive for Stryker into 'twenty, four and even 25 as well as or as you get these long term contracts.

Yes, I think.

We see meaningful price increases on these next gen products, especially when we bring newer technology to the to the.

I'll make some couple of comments around that without maybe providing exact guidance on 2024, but if we look at the initiatives that we executed. This year, we had a very targeted program that looked kind of product by product.

To the market or a feature set that currently isn't provided so I do think that we'll continue to see price as a tailwind. It's a muscle that we've certainly grown this year and I think it's going to be part of our game plan for sure.

In general what we're seeing is M. S. N T is generally gaining positive price.

And I would say ortho is less negative than it has much larger longer term contract negotiations.

Thank you we'll take our next question from Ryan Zimmerman with <unk>.

Keep in mind too that our price comparison that we report on include sort of same product sales compared to prior year. So if you think about increases that we gain on prices say on nexgen products that we're going to launch that's not necessarily included in the number we say for price, but I would tell you that we generally.

Oh, Hello, Thanks for taking the questions and congrats on a really nice quarter guys.

I wanted to ask Kevin a little.

About the Cirrus deal and neurovascular, it was slower before but 9% organic growth in the U S is really nice to see especially in hemorrhagic.

When we look at what <unk> done in the UK, it's been pretty impressive and so I'm curious kind of what your expectations are for the contribution in the U S and when we start to really see that our numbers, especially if youre doing 9% U S organic growth in neurovascular.

See meaningful price increases on these next gen products, especially when we bring newer technology to the to the to the market or a feature set that currently isn't provided so I do think that we'll continue to see price as a tailwind it's a muscle that we've certainly grown this year.

Yes. So the first thing I'd say is that <unk> is not yet approved in the United States. So that's 9% growth had no benefit from surface rights that I think I think you know that I just want to make that clear to everybody.

I think it's going to be part of our game plan for sure.

Thank you we'll take our next question from Ryan Zimmerman with <unk>.

The trials are ongoing right now and we look forward to that approval in the United States. We've launched two new products we have.

Oh, Hello, Thanks for taking the questions and congrats on a really nice quarter guys.

At Tetra.

<unk> coil as well as.

I wanted to ask Kevin a little bit about the Cerro steel and neurovascular it was slower before but 9% organic growth in the U S is really nice to see especially in hemorrhagic.

46, catheter 46 sized catheter vector catheter, so two new products that helps.

In terms of driving that.

The hemorrhagic growth and.

The U S has been a little bit of a challenge for US more if you look back at the last few quarters.

When we look at what <unk> done in the U K, it's been pretty impressive and so I'm curious kind of what your expectations are for the contribution in the U S and when we start to really see that our numbers, especially if youre doing 9% U S organic growth in neurovascular.

Really pleased to see that step up in this quarter.

We're very excited and we closed the deal obviously it was.

It was during the quarter Hasnt had a big impact at all.

It was a lot of excitement at the product we know performs extremely well based on what's happening <unk>.

Yes. So the first thing I'd say is that <unk> is not yet approved in the United States. So that's 9% growth had no benefit from Cirrus right. So that I think I think you know that I just want to make that clear to everybody that the trials are ongoing right now and we look forward to that approval in the United States. We've launched two new products we have.

We can't wait for the approval, it's definitely going to be a shot in the arm when it does happen in United States.

Yes. No question. We saw then in F&I asked this week.

One is a follow up on robotics, we didn't hear you say much on your shoulder and spine programs and just given that there is some amount of commentary out there from competitors about kind of shoulder and spine.

Et cetera, small coil as well as a 46 catheter 46 sized catheter vector catheter, so two new products that helps.

Driving.

What's your latest thinking about potential timing launch cycles, and so forth on may control their <unk>. Thanks for taking the questions.

The hemorrhagic growth and in the U S.

<unk> has been a little bit of a challenge for US more if you look back at the last few quarters.

I'm really pleased to see that step up in this quarter and we're very excited and we closed the deal obviously it was a.

Yes, great nothing new to report, we're kind of on schedule with what we had said before.

In the back half of next year and shoulder towards the end of next year and frankly, we're not really concerned about competitive activity in this space, we already know globus and Medtronic.

It was during the quarter Hasnt had a big impact at all.

It was a lot of excitement at the product we know performs extremely well based on what's happening.

We can't wait for the approval, it's definitely going to be a shot in the arm when it does happen in the United States.

Robots and spine.

Are really excited about our overall, enabling technology.

Yes, no question, we saw that in F&I asked this week.

Starting with Q guidance, we have an additional product that we'll be launching and mako spine. So by the end of next year. We have we'll have a really compelling suite of enabling technology tools for spine, which.

One is a follow up on robotics.

Didn't hear you say much on your shoulder and spine programs and just given that there is some amount of commentary out there from competitors about kind of soldiers in spine.

Which we're really excited about if someone else's first.

What's your latest thinking about potential timing launch cycles, and so forth on my controller <unk>. Thanks for taking the question.

Solar it doesn't concern me in the least we have blueprint already we already have a very powerful enabling tech platform for shoulder.

Yes, great nothing new to report, we're kind of on schedule with what we had said before spine in the back half of next year and shoulder towards the end of next year and frankly, we're not really concerned about competitive activity in this space that we already know globus and Medtronic have robots in spine, we are really.

Whether it's patient matched.

Whether it's using holo lens to do the procedure with virtual reality.

Whether it's the blueprint technology, which is amazing and we're going to use that amazing blueprint technology to feed <unk>.

And that will just be icing on the cake on an upper.

From a business that is cooking on gas right now with amazing growth quarter after quarter after quarter.

Excited about our overall, enabling technology.

Thank you we'll take our next question from shotgun Singh with RBC.

Thank you so much.

I was just wondering if you could refresh on your capital allocation priorities in M&A in terms of deal size valuation on and areas of interest and then on the pod.

Which we're really excited about if someone else's first.

Solar it doesn't concern me in the least we have blueprint already we already have a very powerful enabling tech platform for shoulder.

Upside if you could just.

Touch on trauma, and what's driving the strong growth there and.

Whether it's patient matched IV, whether it's using holo lens to do the procedure with virtual reality.

Thank you.

You.

Yes, sure so as we've said in the past.

Our first focus on.

Whether it's the blueprint technology, which is amazing and we're going to use that amazing blueprint technology to feed Mako and that'll just be icing on the cake on an upper extremity business that is cooking on gas right now with amazing growth quarter after quarter after quarter.

Capital allocation right now is paying down debt given the debt that we built up on Wright medical as well as both Sarah that does not stop us from doing little deals. We did one small deal with in instruments and then we closed on <unk>. So we're still looking at tuck ins primarily this year.

But the deal teams are all very active they're having discussions.

Thank you we'll take our next question from shotgun Singh with RBC.

Building their lists.

And they're all really having nice pipelines and so as our cash position gets strong again, we'll be back on offense that will be the first use of our cash I mean, we had a really terrific track record of M&A and we can't wait to be able to get back on offense with M&A, but the first priority is certainly.

Thank you so much I was just wondering if you could refresh on your capital allocation priorities in M&A in terms of deal size valuation on and areas of interest and then on the product side. If you could just.

Touch on trauma, and what's driving the strong growth there.

Paying down debt at the moment and we're doing that so for the second part.

Thank you.

Yeah sure so as we've said in the past.

While the trauma, so Tacoma I'll tell you this Wright medical acquisition has been.

Our first focus on capital and capital allocation right now is paying down debt given the debt that we built up on Wright medical as well as Vocera that does not stop us from doing little deals. We did one small deal with in instruments and then we closed on <unk>. So we're still looking at tuck ins primarily this year.

Spectacular.

The upper extremities business is growing.

Very strong double digit growth every quarter foot and ankle really starting to pick up. So we're really excited about the performance this quarter was terrific.

Putting that go with strong double digit growth and then our core trauma has actually been a big beneficiary of Wright medical.

But the deal teams are all very active they're having discussions.

Building their lists.

So in the past our core trauma business was really diluted in its focus it was it was focusing on foot and ankle focusing more on extremities, because they're faster growing and we were sort of not paying as much attention.

It's a core trauma, we had a great leadership team on our core trauma with now dedicated focused R&D resources.

Paying down debt at the moment and we're doing that so for the second part trauma trauma sarcoma I will tell you. This Wright medical acquisition has been.

And obviously the launch down before we had <unk> two alpha product launch, we're going to have a very pro products launch soon excited about some other innovations we plan to show at OTI later in the fall so really refreshing the portfolio great focus on core trauma and they had a really excellent quarter.

Spectacular.

The upper extremities business is growing.

Very strong double digit growth every quarter foot and ankle really starting to pick up. So we're really excited about the performance this quarter was terrific.

As well so all three business units performed very well in the quarter.

In foot and ankle with strong double digit growth and then our core trauma has actually been a big beneficiary of Wright medical.

And again, the Wright medical deal its not just benefiting our extremities business is actually providing more focus on core trauma, which is fueling terrific growth in courtrooms are trauma, we expect to continue to be a very high growth business for a long time to come.

So in the past our core trauma business, what was really diluted in its focus at which it was focusing on foot and ankle focusing more on extremities, because they're faster growing and we were sort of not paying as much attention.

Thank you we'll take our next question from Josh Jennings with TD Cowen.

<unk> trauma, we had a great leadership team on our core trauma with now dedicated focused R&D resources.

Hi, This is Eric on for Josh. Thanks for taking the question I was curious to hear your thoughts around smart implants. One of your competitors is moving closer to a full launch of our smart implant technology and was just curious to hear your updated thoughts there and if there are any updates to share from your workarounds or their sensor that would be great to hear as well.

And obviously their launch down before we had the <unk> two alpha product launch we're going to have <unk> products launched soon excited about some other innovations we plan to show at that OTI later in the fall so really refreshing the portfolio great focus on core trauma and they had a really excellent quarter.

Yes, listen I think smart implants.

Well, so all three business units performed very well in the quarter.

Interesting, we obviously have motion.

As a wearable on the outside to measure similar dynamics that are going to be measured from the smart implant. So I think range of motion all of these factors. It's interesting we're not quite sure yet what to do with that data are compelling that will be will that effect.

And again, the Wright medical deal, it's not just benefiting our extremities business is actually providing more focus on core trauma, which is fueling terrific growth in courtrooms are trauma, we expect to continue to be a very high growth business for a long time ago.

Patient selection will it affect approaches to procedure. So I would call. It something that is more investigational and more of a learning that we're going to have and but I do think it's something that could be important in the future. So not discounting it don't have.

Thank you we'll take our next question from Josh Jennings with TD Cowen.

Hi, This is Eric on for Josh. Thanks for taking the question I was curious to hear your thoughts around smart implants. So one of your competitors is moving closer to a full launch of our smart implant technology and was just curious to hear your updated thoughts there and if there are any updates to share from your workarounds or their sensor that would be great to hear as well.

Anything more to share on <unk>, rather than we are we have launched motion, which is the wearable which.

Attaches to both the FEMA as while as Activia to track mobility in a range of other metrics and we're going to learn a lot we will and so other than the industry about what is it that really matters.

Yes, listen I think smart implants.

Interesting, we obviously have motion.

Which is a wearable on the outside to measure they basically similar dynamics that are going to be measured from the spine implant. So I think range of motion. All of these factors are it's interesting we're not quite sure yet.

Better measuring.

In the post acute.

Surgery period, and really how does that affect.

The patient care.

To do with that data are compelling that will be will that effect.

Maybe it patient selection, maybe what implants, they should be using as a feedback loop. That's meaningful we don't know we don't have answers we have a lot of questions and it is going to give us new data that we can then learn from.

Patient selection will it affect approaches to procedure, so I would call it something that is more investigational and more.

So thats, how I'd characterize it at the moment.

Learning that we're going to have and but I do think it's something that could be important in the future. So not discounting it don't have.

Understood. Thank you.

Thank you we'll take our next question from Matt <unk> with Barclays.

Anything more to share on <unk>, rather than we are we have launched <unk>, which is the wearable which.

Hi, Thanks for taking.

Taking the questions.

I wanted to ask a question on Mako one of the comments that you made I apologize. If this came up already and hopping back and forth year like a lot of folks Tonight, and Kevin calls, but.

Attaches to both the femur as while as Activia to track.

In mobility in a range of other metrics and we're going to learn a lot we will and so other than the industry about what is it that really matters.

You mentioned, an increase in deal mix and increase in rental deal mix affecting the dollar revenues that.

You are measuring in the post.

Post surgery period, and really how does that affect.

<unk> and other.

The patient care patient, maybe it patient selection, maybe what implants. They should be using is there a feedback loop. That's meaningful we don't know we don't have answers we have a lot of questions and it is going to give us new data that we can then learn from so.

<unk>.

This quarter and.

That's something we've heard from other folks as.

As well as Europe , I'm sure where.

In terms of robots.

More sort of.

Hospitals, taking flexible option to leasing.

So thats, how I'd characterize it at the moment.

Understood. Thank you.

And as you go arrangements for robots.

Thank you we'll take our next question from Matt <unk> with Barclays.

First I am wondering how tightly correlated thats, where sort of growth in the ASC and then second.

Hi, Thanks for taking.

Taking the questions.

As Kevin I think you've talked about like early on some hospitals or capital that some hospitals are operating in conversion have been downloads or whatever those different hospitals has a different preference on how they want to pay for a robot.

I wanted to ask a question on Mako one of the comments that you made I apologize. If this came up already and hopping back and forth year like a lot of folks Tonight, and Kevin calls, but.

You mentioned, an increase in deal mix and increase in rental deal mix affecting the dollar revenues.

That was sort of like how we used to think about this I'm curious whether you're seeing some hybrid hybridization of that in other words, we want to have it may go.

And then they go.

Other.

This quarter and yeah that's.

Could pay for it, but let's let's scale into it.

That's something we've heard from other folks as.

Yes.

As well as Europe , I'm sure where.

The lease arrangement or something I'm wondering if you see that kind of.

In terms of robots.

More sort of.

Shifts in the market.

Hospitals, taking a flexible option to leasing or <unk>.

One follow up if I could.

Yes sure. Thanks, So what I would tell you is the asc's.

As you go arrangements for robot Zhang.

Growth is obviously, increasing in the Ics with Mako and virtually all of the ASC deals are financed because physician ownership as part of the EAC scenario. They don't have the capital budgets. The hospitals do so so yes, as ASC penetration increases more financing rental type deals.

First I am wondering how tightly correlated that's where sort of growth in the ASC and then second.

As Kevin I think you've talked about like early on some hospitals or capital that some hospitals are operating in conversion have been downloads or whatever those different hospitals have a different preference on how they want to pay for a lot of.

Are automatically going to happen because they are virtually all financed basc. Your question around the hospital dynamic I think it's just if you have competitive systems that are that are not.

That was sort of like how we used to think about this I'm curious whether you're seeing some hybrid hybridization of that in other words, we want on the Mako.

Could pay for it but you know what let's let's scale into it.

Sort of being charged for then the hospitals as well, maybe I don't need to spend the capital even if I have the capital and maybe.

With it with a lease arrangement or something I'm wondering if you're seeing that kind of shifts.

Let me talk let me talk to you about what you do.

Shifts in the market.

And so we offer them the full suite and yes. Some are opting to go for the financing routes that maybe in the past would have purchased but we have a healthy order book and we're not really agnostic to whether they want to buy by cash or where they want to finance that it really doesn't matter to us because we get the value from that whether we get there.

One follow up if I could.

Yeah sure. Thanks, So what I would tell you is the asc's.

Growth is obviously, increasing in the Ics with Mako and virtually all of the ASC deals are financed because physician ownership as part of the ASC scenario. They don't have the capital budget. The hospitals do so so yes, as ASC penetration increases more financing rental type deals.

<unk> cash on day, one I get the cash over time doesn't really concern us.

It certainly has been fuel for our strong implant growth.

Are automatically going to happen because they are virtually all financed TASC youre question around the hospital dynamic I think it's just if you have competitive systems that are that are not.

That's great and then just quickly on you mentioned the das completely within the camera and not really having an effect yet.

But.

Yes.

Quite differentiated and quite different.

Sort of being charged for then the hospitals as well, maybe I don't need to spend the capital even if I have the capital and maybe let.

Michael.

Sort of opportunity too.

Test surgical margins around tumors and things that that really represent kind of new new.

Let me talk let me talk to you about what you do.

And so we offer them the full suite and yes. Some are opting to go for the financing routes that maybe in the past would have purchased.

Our news phase of sort of camera.

In imaging functionality.

We have a healthy order book and we're not really agnostic to whether they want to buy by cash or where they want to finance. It it really doesn't matter to us because we get the value from that whether we get the value on cash on day, one I get the cash over time doesn't really concern us.

Any sense I know, it's early but.

What that does to the shape of this product cycle.

Versus.

Variances in the passenger fluorescence imaging was pretty big.

For you.

The last launch this sort of take that up a notch or any color you can provide in terms of what your expectations are in the early interest et cetera on the camera side.

It certainly has been fuel for our strong implant growth.

That's great and then just quickly on you mentioned, the das and the camera and not really having an effect yet.

Yes. Thanks look it's a little early still for me to to get to.

But.

Too ahead of myself, but the fluorescence imaging was a big deal right.

Quite differentiated and quite different.

First in 15 88 million and 688, when you had the overlay of fluorescence where you didn't have to toggle between black and white in fluorescence those or if that was pretty meaningful. So those are pretty big steps, but but you are right.

Nicole.

The sort of opportunity too.

Testing surgical margins around tumors and things that that really represent kind of new menu.

With the tumor margin <unk>.

Our news phase of sort of camera.

<unk> the ability to use new dies beyond ACG.

In imaging functionality.

Wildly exciting to get into lung to get into bladder.

Any sense I know, it's early but.

It is really really exciting with new pharmacy.

What that does to the shape of this product cycle.

Mycological agents it.

Versus what we experienced in the passenger fluorescence imaging was pretty big.

It's also a camera that is extremely good in neuro and sportswear historically, we werent as strong we added two is fabulous for general surgery, but not.

For you.

And the last launch this sort of take that up a notch any color you can provide in terms of what your expectations are in the early interest et cetera camera side.

Not quite as good as camera addresses those issues, so I'm really excited about it but.

Little early that the test cases have gone very well.

Yes. Thanks look it's a little early still for me to to get to.

I wouldn't expect this to be any less performing than our prior launches potentially could be even more the feedback so far is pretty exciting and yes. We have some really good features in this role.

<unk> ahead of myself, but the fluorescence imaging was a big deal right.

First in 15 88 million and 688, when you had the overlaid on fluorescence where you didn't have to toggle between black and white in fluorescence close or if that was pretty meaningful so those are pretty big steps, but but youre right.

Okay.

Thank you we'll take our next question from Joanna <unk> with Citibank.

With the tumor margin ability the ability to use new dies beyond ICD.

Thank you very much I apologize there is a lot going on Tonight.

Wildly exciting to get into lung to get into bladder.

Operating margins were really impressive and I'm curious, how we should think about those for the back half of the year.

This is really really exciting with new pharmacy.

Pharmacological agents.

It's also a camera that is extremely good in neuro and sportswear historically, we werent as strong we added it was fabulous for general surgery, but not.

And if you can give a full year guide on it or even have we should think about this into next year, if you're willing to wait about farm. Thank you.

Not quite as good as camera addresses those issues, so I'm really excited about it but.

Yeah Joanne.

Little early that the test cases have gone very well.

Yes, we really.

Thinking about operating margins, especially our performance in Q2, we saw really sort of good improvement honestly in gross margin just in terms of some easing of some of the cost pressures as I've mentioned before.

I wouldn't expect this to be any less performing than our prior launches potentially could be even more feedback. So far is pretty exciting and yes. This is this we have some really good features on this front.

Spot buys are not material they weren't material in Q1 and theyre not material in Q2, I think the other thing too that we're feeling it's just that now that we have more evening of supply. We're also back to sort of better productivity gains and so all of those things.

Okay.

Thank you we'll take our next question from Joanne winch with Citibank.

Thank you very much I apologize there is a lot going on Tonight.

Operating margins were really impressive and I'm curious, how we should think about those for the back half of the year.

Give us good confidence that we.

We should see gross margins improve.

And if you can give a full year guide on it or even have we should think about this into next year, if you're willing to wait about farm. Thank you.

In the back half of this year and they will gradually improve because we're still feeling some of this inflation, but that kind of gives us the confidence in and obviously some of that will roll into next year and as you think about our performance for next year, but.

Yeah Joanne.

Yes, we really.

Think about operating margins, especially our performance in Q2, we saw really sort of good improvement honestly in gross margin just in terms of some easing of some of the cost pressures as I've mentioned before.

At this point, we're not going to guide on that other than to say that we do think we'll see some gradual improvement for the rest of this year.

Maybe this is an analyst question and meeting or the next time you gathered so all together for an update but how do you think about the.

Spot buys or are not material they weren't material in Q1, and theyre not material in Q2, I think the other thing too that we're feeling it's just that now that we have more evening of supply. We're also back to sort of better productivity gains and so all of those things.

A more normalized post pandemic environment kind of operating margin expansion.

Regular go forward will be even year over year basis, and thank you for tactical question.

Give us good confidence that we.

Yes, Joanne earlier in the call I think this question was asked I'll just I'll just repeat that we are laser focused on.

We should see gross margins improve.

In the back half of this year and they will gradually improve because we're still feeling some of this inflation, but that kind of gives us the confidence in and obviously some of that will roll into next year as you think about our performance for next year, but.

I'd say trying to sprint back to the 26 three that we had in 2019.

And so we're going to try to move margins and a more ambitious way to get back to that and then once we get back to that kind of level I think youre going to see us wanting to expand margins.

At this point, we're not going to guide on that other than to say that we do think we'll see some gradual improvement for the rest of this year.

Kind of a more consistent way I don't know the exact number.

Like 50 bps, we will get more specific as time passes but it would be more like an annual more moderate.

Maybe this is an analyst question and meeting or the next time you gathered so all together for an update but how do you think about the.

Nice progression year after year after year, especially with this kind of high growth that we're that we're experiencing organically youre going to expect you're going to expect to see more normalized margin expansion, but in the meantime, we are we're looking to move at a faster clip given the fall off that we've had since 19 and try to restore those margins.

A more normalized post pandemic environment instead of operating margin expansion.

Go forward will be even year over year basis, and thank you for tactical question.

Yes, Joanne earlier in the call I think this question was asked I'll just I'll just repeat that we are laser focused on I would say trying to sprint back to the 26 three that we had in 2019.

Thank you we'll take our next question from Rick Wise with Stifel.

So we're going to try to move margins.

Good afternoon, Kevin.

On a more ambitious way to get back to that and then once we get back to that kind of level I think youre going to see us wanting to expand margins.

Hi, everybody.

Kevin I was hoping you would just give us a little more color and perspective on the.

Youre very solid international.

Kind of a more consistent way I don't know the exact number.

Performance double digits, obviously, almost as strong as the U S performance.

Like 50 bps.

Little slower than the first quarters.

We'll get more specific as time passes but it would be what more like an annual more moderate.

At pace.

You highlighted the strong emerging markets.

Nice progression year after year after year, especially with this kind of high growth that we're experiencing organically youre going to expect youre going to expect to see more normalized margin expansion, but in the meantime, we're we're looking to move at a faster clip given the fall off that we've had since 19 and try to restore those margins.

I'll just ask one question with a couple of fronts, how sustainable is.

Is this you talked about.

Some of your key initiatives.

And just maybe just your perspective on the sustainability whats the drivers here and maybe where we are in terms of procedure volume recovery back to normal in Europe just in.

Thank you we'll take our next question from Rick Wise with Stifel.

In a larger picture sense, thanks, so much and great to see the excellent quarter.

Good afternoon, Kevin.

Yes. Thank you.

Hi, everybody.

International has it took us a while but the last five years international growth has exceeded the U S growth.

Kevin I was hoping you would just give us a little more color and perspective on really.

Youre very solid.

Obviously, the U S growth this quarter was pretty spectacular.

International performance double digits, obviously, almost as strong as the U S performance.

But we will we're absolutely believer and continue to have very good international growth in the years ahead, frankly, making up for lost time, because our market shares are still below what we have in the U S and most of the international markets.

Little slower than the first quarters.

At pace.

You highlighted the strong emerging markets.

So.

One question with a couple of points.

And so we have significant upside in front of us.

How sustainable is.

<unk> volumes are pretty much back to normal everyone, but they are back to normal in Europe , they're back to normal in Australia that back to normal pretty much in Japan. So the market that hurt us frankly in the quarter was China. So that China continues to be a drag because of Pvp both.

Is this you talked about.

Some of your key initiatives.

And just maybe just your perspective on the sustainability whats the drivers here and maybe where we are in terms of procedure volume recovery back to normal in Europe , just in a larger picture sense. Thanks, so much and great to see the excellent quarter.

<unk> asked are having an impact also impacting our spine business. So China continues to be a bit of a drag but in spite of that we.

Yes. Thank you.

Had really terrific growth.

International has it took us a while but the last five years international growth has exceeded the U S growth.

In international and I would say that Mako is really starting to pick up steam in Asia Pacific. So we already have a pretty good presence in Europe , but in Asia Pacific Japan.

Obviously, the U S growth this quarter was pretty spectacular.

China.

It's really starting to pick up and I think that's a great leading indicator.

We'll produce really terrific growth.

So we have significant upside in front of us procedure volumes are pretty much back to normal everyone. They're back to normal in Europe . They are back to normal in Australia, the bacterial pretty much Japan. So the market that hurt us frankly in the quarter was China. So electronic continues to be a drag because of pvp, both in neurovascular, having an impact.

Both in hips and knees for many quarters to come as that momentum continues.

And then as well.

The camera launches of 78, that's also really exciting for the international market. So we're.

We are going to continue the progress even Europe had another strong quarter. That's just kind of I expected now its steady and strong growth.

Also impacting our spine business, so China continues to be a bit of a drag but in spite of that we had really terrific growth.

Every quarter, and we're still not where we'd like to be in Europe . So this is just one of those things. It takes time, but if you think about something like cameras.

In international and I would say that Mako is really starting to pick up steam in Asia Pacific. So we already have a pretty good presence in Europe , but in Asia Pacific, Japan, India, China.

When we started the transatlantic model, we were number five or six and we expect to takeover number one sometime this year our power tool share was.

Low thirties, and it's crossed 50%, but it's still not where it is in the United States, It's not where it is in Australia. So.

It's really starting to pick up and I think that's a great leading indicator.

That will produce really terrific growth, both in hips and knees for many quarters to come as that momentum continues.

<unk> should be something that continues in a very steady way just as it has the last five years, it's been kind of very consistent.

And then as well.

And in emerging markets that theory at the most opportunity where we're still very very small growing nicely, but off a small base.

The camera launches of <unk> that is also really exciting for the international market. So we.

We are we're going to continue the progress even Europe had another strong quarter. That's just kind of I expected now its steady and strong growth.

Thank you so much.

Thank you we'll take our next question from Travis Steed with Bank of America.

Every quarter, and we're still not where we'd like to be in Europe . So this is just one of those things. It takes time, but if you think about something like cameras.

Hey, Thanks for taking the question I'll ask multimodal cross some of the payers.

Buyers have talked about a slower July and just curious if you could help frame kind of the summer seasonality.

Let me start on the Trans Atlantic model, we remember five or six and.

Being more normal seasonality or how it kind of compares.

And we expect to takeover number one sometime this year our power tool share was.

Those are comments and then a margin question for you Glenn I'm just curious if we should view the second half operating margin. This year is kind of a new jumping off point.

The low thirties, and it's crossed 50%, but it's still not where it is in the United States, It's not where it is in Australia. So international should be something that continues in a very steady way just as it has the last five years, it's been kind of very consistent.

A more normalized cost environment in the second half thanks a lot.

So listen sorry, Youre sound quality was a little hard to hearing you I think you are asking about July if we saw something strange seasonality in July .

And in emerging markets that theory is the most opportunity where we're still very very small growing nicely, but off a small base.

We don't normally we don't normally comment on one month and I would tell you you saw our raised guidance, we're expecting a pretty good second half of the year and I don't really want to get into one months and you. Sometimes you do have certain dynamics that happen, but theres nothing really.

Thank you so much.

Yeah.

Thank you we'll take our next question from Travis Steed with Bank of America.

Hey, Thanks for taking the question I'll ask multimodal cross some of the payers.

<unk> talked about a slower July and I'm curious if you could help frame kind of the summer seasonality you are seeing more normal seasonality or how it kind of compares to some of those payer comment and then a margin question for me. One just curious if we should view the second half operating margin. This year is kind of a new jumping off point.

Important note I want to call out for the month of July and then I think the question second part was margin, yes, Travis can you repeat that in terms of the operating margin question.

Yes, sorry, I was just curious if the second half of this year kind of a new jumping off point for margins going forward given that this is a more normalized environment in the second half.

A more normalized cost environment in the second half thanks a lot.

Yes I.

I would say.

Listen sorry, Youre sound quality was a little hard to hearing you I think you are asking about July if we saw something strange seasonality in July .

A couple of things first of all Q4 is always seasonally higher it's our highest op margin performing quarter.

So I wouldn't necessarily say that that should be the jumping off.

I think if you if you back up from where our guidance is you could sort of figure out kind of where we're angling to end the year at and that would be the good jumping off point.

As you sometimes you do have certain dynamics that happen, but there is nothing really.

Great. Thanks, a lot.

Important note I want to call out for the month of July and then I think the question second part was smart trials can you repeat that in terms of the operating margin question.

Thank you we'll take our next question from Danielle <unk> with UBS.

Hi, This is Simon Hagen on for Danielle Congrats on the strong quarter.

Yes, sorry, I was just curious if the second half of this year kind of a new jumping off point for margins going forward.

Can you talk about some of the puts and takes to the underlying ortho market growth. When you look at factors, such as pricing innovation and potential trend towards treating both much younger and older much older patients and I have one follow up.

A more normalized environment in the second half.

Yes.

Yes I.

I would say.

A couple of things first of all Q4 is always seasonally higher it's our highest op margin performing quarter.

Yes, it looked at the trends aren't different than what we've seen in the past.

So I wouldn't necessarily say that that should be the jumping off.

Surgery demand backlogs of surgeons.

I think if you if you back up from where our guidance is you can sort of figure out kind of where we're angling to end the year at <unk> and that would be the good jumping off point.

Frankly, the older patients who have now really want to get procedures done there are more active people out there I think I kind of referenced earlier.

Who want to get their.

Alright, Thanks, a lot.

Procedures done so innovation wins the day rates. So the robotics continues to be a real.

Thank you we'll take our next question from Danielle <unk> with UBS.

Terrific.

For us and we're continuing to see increased utilization.

Hi, This is Simon Hagen on for Danielle Congrats on the strong quarter.

Percent of Mako procedures done continues to rise per cent of some Atlas continues to rise per cent of hips being done on Mako continues to rise. So that's not new those are continuation of prior trends and.

And so there isn't some kind of new dynamic it's just the pent up demand of patients that we kept waiting for.

They are coming in they're going to continue to come for some period of time and the aging population can be people everyday some 10000 turned 65%.

Yes, it looked at the trends aren't different than what we've seen in the past.

Surgery demand backlogs of surgeons.

So there is demographics that are on our side there is the hangover from Covid that's on our side.

People frankly, the older patients who have been now really want to get procedures done there are more active people out there I think I kind of referenced earlier.

For Stryker, we have a portfolio that we're really excited about and.

Addressing.

Want to get there.

The direct anterior with our insignia stem was critically important.

Procedures done so innovation wins the day rate. So the robotics continues to be a real <unk>.

And we've done that and we're seeing fantastic uptake of that hip stem, which is driving terrific growth in hips. So that's kind of new for US is to if you look in the last year. Our growth has really picked up and that was really because of a product that we launched really addressing an important and growing segment of the procedures in hips.

Terrific.

US and we're continuing to see increased utilization per.

And so there isn't some kind of new dynamic it's just the pent up demand of patients that we kept waiting for.

Thanks, So much and just one follow up really off of what you were just talking about.

They are coming in they're going to continue to come for some period of time and the aging population kidney people every day from 10000 turn 65 and <unk>.

Looking at the competitive position in large joints states. How do you expect to continue driving share gains and where do you see yourself given continued innovation.

So there is demographics that are on our side there was the hangover from Colby that's on our side.

For Stryker, we have a portfolio that we're really excited about.

Look we really like our chances that huge demand for Mako Hasnt stopped we know we have the best system on the market.

Addressing.

The direct anterior with our insignia stem was critically important.

Which we're really excited about.

And we've done that and we're seeing fantastic uptake of that hip stem, which is driving terrific growth in hips. So that's kind of new for US is the if you look in the last year. Our hip growth has really picked up and that was really because of the product that we launched really addressing an important and growing segment of the procedures in hips.

Build our gap with.

With insignia on the hip side, we have awesome <unk> printed hip cup with trying to.

We have the cement less offering which of course, we're way ahead huge headstart on some Atlas terrific publications coming out excellent five year data on cement.

We will give surgeons even more confidence.

Okay.

Thanks, So much and just one follow up really off of what you were just talking about.

And that in the future.

And Theres other things the team are looking at we have some really exciting products.

Looking at the competitive position in large joints states how do you.

Ah hinge product that for kind of come out with later this year to shore up revision.

That's going to continue driving share gains and where do you see yourself given continued innovation.

And Thats pretty exciting we have plans to have revision on Mako as well.

In the not too distant future. So we're not going to sit tight on just everything we've already done there are incremental additions, we just not so long ago a lunchtime.

Look we really like our chances that huge demand for Mako Hasnt stopped we know we have the best system on the market.

Which we're really excited about.

Build our gap with.

Two final software.

With insignia on the hip side, we have.

No.

To improve the user experience improve the training of residents and so we think we have a winning hand and we're going to continue to play that hand.

<unk> three D printed hip cup with trying to.

We have the cement less offering which of course, we're way ahead huge headstart on some Atlas terrific publications coming out excellent five year data on some Atlas, which will give surgeons even more confidence.

Thank you we'll take our next question from Mike Matson with Needham <unk> Company.

And that in the future.

Yes, good afternoon.

There's other things the team are looking at we have some really exciting products.

I want to ask one about the Q guidance system in spine sounds like it's doing well I'm. Just wondering if you could maybe give us sort of an overview.

Ah hinge product that we're going to come out with.

This year to shore up revision.

I know you've had navigation system decline before or is this something kind of different or is it more just the latest version and then how does that kind of fit in when you do bring mako into spine.

And Thats pretty exciting we have plans to have revision on Mako as well.

In the not too distant future. So we're not going to answer it.

Tight on just everything we've already done there are incremental additions, we just not so long ago at lunchtime it too.

Yes.

I would tell you is.

This is the fastest camera on the market.

Homegrown, we didn't use a third party to this camera. It is lightning quick and that camera will essentially be ported to the mako as well so that make it will have that same terrific camera and it really the user experience is terrific in terms of being able to see and be and be able to do your procedure. So the feedback we've gotten is.

No software.

To improve the user experience improve the training of residents and so we think we have a winning hand and we're going to continue to play that hand.

Thank you we'll take our next question from Mike Matson with Needham and company.

Yes, good afternoon.

So we've always been good at navigation, but this is sort of.

Want to ask one about the Q guidance system in spine.

Really putting our best foot forward and this user experience that youre going to have with Q will will transfer to the to the Mako spine and in that we're really excited about so this is even before Mako is already having an impact and we think once nicos launch it will it will really fill this important need in the <unk>.

It's doing well I'm just wondering if you could maybe give us sort of an overview.

Yes.

Market for us to have a robotic application. We also have another product and enabling technology coming out of our instruments division thats going to be used by the spine group Little early for me to give you details on what that is but at the appropriate time will tell you about that so that combined with Mako is going to give us very compelling enabling.

Well I'd tell you is.

This is the fastest camera on the market.

Homegrown, we didn't use a third party to this camera. It is lightning quick and that camera will essentially be ported to the mako as well so that Mako will have that same terrific camera.

Really the user experience is terrific in terms of being able to see and be and be able to do your procedure. So the feedback we've gotten is outstanding. So we've always been good at navigation, but this is sort of.

Technology platform for spine.

Okay got it and then.

Just given the guidance I assume that the early kind of material issue, but I thought I'd ask about it anyway, because we've heard heard about it from some other companies, but can you just comment on many Russia exposure, you have and whether or not there is the latest sanctions are having any sort of impact on your business.

Really putting our best foot forward.

This user experience that youre going to have with Q will will transfer to the to the Mako spine.

And that we are really excited about so this is a this even before mako is already having an impact.

Yes, obviously, we are abiding by all the sanctions as you would expect and working in lockstep with the industry on an industry wide response to what should be humanitarian products and should they be should they go through the approval process. That's obviously very lengthy.

And we think once makos launch it will it will really fill this important need in the market for us to have a robotic application. We also have another product and enabling technology coming out of our instruments division that's going to be used by the spine group Little early for me to give you details on what that is but at the appropriate time will tell you about that so that combined with Mako is going to give us.

It had it did have a negative impact, but honestly, our Russia business is so small that it's kind of meaningless in the overall picture of Stryker.

But yes, we are abiding by the sanctions, yes. It did have a negative impact, but it was really it's not a material business for prescribers.

Very compelling enabling.

Technology platform for spine.

Okay got it and then.

Just given the guidance I assume that the early kind of material issue, but I thought I'd ask about it anyway, because we've heard heard about it from some other companies, but can you just comment on many Russia exposure, you have and whether or not there's the latest sanctions are having any sort of impact on your business.

Thank you our last question will come from Richard <unk> with <unk> Securities.

Hi, Thanks for taking my question, then perhaps on the quarter.

Hi.

Just Kevin.

Thank you.

A few months back in the first quarter you were asked a question at the Investor Conference about.

What areas could be of interest to you. There's so much going right across your existing businesses.

Yes.

M&A, though is still is still top of mind. So im just curious kind of where the whole then.

It had it did have a negative impact, but honestly, our Russia business is so small that it's kind of meaningless in the overall picture of Stryker.

Where do you think the investment could be most.

Most incremental for you.

But yes, we are abiding by the sanctions, yes. It did have a negative impact, but it was really it's not a material business for prescribers.

Look.

It's a good question.

I've talked about the Adjacencies that we're interested in.

First and foremost there is a lot of tuck in demand.

Thank you our last question will come from.

Each of our business are building their wish lists and sort of evaluating different targets and I think thats job. One is looking at those near term targets that tuck in those create tremendous financial returns for Stryker. They don't always move the needle for the overall growth, but theyre really.

Richard <unk> with <unk> Securities.

Hi, Thanks for taking my question and then Brad on the quarter.

Hi.

Just Kevin.

Thank.

A few months back in the first quarter you were asked a question at the Investor Conference about.

Really terrific financial deals for us to do and.

What areas could be of interest to you. There's so much going right across your existing businesses.

New feed our existing Salesforce the Stryker we.

Yes.

We know how to sell and we're able to really do that very very well.

M&A, though is there is still is still top of mind. So I'm, just curious kind of where the whole then.

I would tell you in the in the adjacency space no change to the Adjacencies.

Where do you think the investment could be most.

Interested in I think I've mentioned them before.

Most incremental for you.

I would tell you is neuromodulation as when I talked about in the past.

Look.

It's a good question.

And within Neuromodulation, obviously, theres a lot of different.

I think I've talked about the adjacencies that we're interested in.

Parts to that their spinal cord stimulation, there's deep brain stimulation as peripheral nerve stimulation of those union stimulation is as you know in streak opt in.

First and foremost there is a lot of tuck in demand.

Each of our businesses are building their wish lists and sort of evaluating different targets and I think thats job. One is looking at those near term targets that tuck in those create tremendous financial returns for Stryker. They don't always move the needle for the overall growth, but there are really.

And I do believe electrical treatments it is going to be a big part of the future.

We've over time, we've been a little hot cold on spinal cord stimulation.

I would tell you right now, we're probably a little bit more cold on it.

Just to kind of a challenging market.

Really terrific financial deals for us to do and.

So that's really the only thing maybe I haven't said.

So when you feed our existing sales force the Stryker we.

In the past, but otherwise every other adjacency I've talked about that I talked about in Q1 are still very much.

How to sell and we're able to really do that very very well.

On our radar screen.

I would tell you in the in the adjacency space no change to the Adjacencies.

And as our cash frees up probably more into next year.

Interested in I think I've mentioned them before.

If the tuck ins arent of a significant size and we have cash starting to build up in our deposition better hopefully we'll be able to make a move in one of those adjacencies that I've talked about in the past.

I would tell you is neuromodulation as when I talked about in the past.

And within Neuromodulation, obviously, theres a lot of different parts to that theres spinal cord stimulation, there's deep brain stimulation as peripheral nerve stimulation of those union stimulation is as you know in streak opt in.

Thanks, and then maybe just a follow up on spine.

One of the few businesses that.

Back in the high single digits or better yet.

And I do believe electrical treatments it is going to be a big part of the future.

We've over time, we've been a little hot cold on on spinal cord stimulation.

But you obviously have.

Pretty good line of sight, you seemingly transformative technologies and product Rollouts with Mako.

I would tell you right now, we're probably a little bit more cold on it.

But thats a year year and a half away. So I guess do we just kind of think of spine is a grind.

Just to kind of a challenging market.

So that's really the only thing maybe I haven't said.

I'm here higher or stabilization and then.

In the past, but otherwise every other adjacency I've talked about that I talked about in Q1 are still very much.

Look out 125 comes around.

Yes, I think I think the word stabilization I'd, probably prefer that's been grinds, but yes.

On our radar screen.

And as our cash frees up probably more into next year, if if the tuck ins arent of a significant size and we have cash starting to build up in our deposition better hopefully we'll be able to make a move in one of those adjacencies that I've talked about in the past.

It's probably both right. So spine is a tough market no question about it.

But already with <unk> guidance, we were feeling good about that bolstered our expandable portfolio a bit we still have a couple of gaps that we're looking at obviously, we'd like to flip back to fill that.

Thanks, and then maybe just a follow up on spine.

Enabling tech is really what gets us excited.

One of the few businesses that that's not back in the in the in the high single digits or better yet.

And so I think the robotic platform will put us on a par at least with the competitors and then this other secret launch I talked about coming out of instruments, which we've shown some surgeons kind.

But you obviously have.

Pretty good line of sight, you seemingly transformative technologies and product Rollouts with Mako.

But thats a year year and a half away. So I guess do we just kind of think of spine is a grind.

We will put US ahead of the game on enabling technology, but yes, we have to wait Unfortunately, it's not ready yet it's coming.

I'm here higher or stabilization and then.

Instrument launch will probably come in before.

Look out when 25 comes around.

The.

Mako and that'll be able to be used with the acute guidance it'll be compatible with Q.

Yes, I think I think the word stabilization I'd, probably prefer that been grinds, but yes.

So thats, where youll hear about that probably earlier than Youll hear about makeup, but yes, I wouldn't assume we're going to we're going to try to kind of keep in line with market growth, which is kind of what we're doing right now hold our own until we get to that period of time and then we could start to grow more like a like a typical.

It's probably both right. So spine is a tough market no question about it.

But already with <unk> guidance, we're feeling good about that bolstered our expandable portfolio a bit we still have a couple of gaps that we're looking at obviously wed like to flip back to fill that.

Enabling tech is really what gets us excited.

The Stryker.

And so I think the robotic platform will put us on a par at least with the competitors and then this other secret launch I talked about coming out of instruments, which we've shown some surgeons.

Thank you at this time I would like to turn the call back over to Kevin Lobo for closing remarks.

Thank you all for joining our call we look forward to sharing our Q3 results with you in early November .

Kind of will put US ahead of the game on enabling technology, but yes, we have to wait Unfortunately, it's not ready yet it's coming.

Okay.

This does conclude today's strikers second quarter earnings call.

Instrument launch will probably come in before the.

Mako and that'll be able to be used with the <unk> guidance it'll be compatible with Q.

We thank you for your participation you may disconnect at anytime.

This of Stryker.

Thank you at this time I would like to turn the call back over to Kevin Lobo for closing remarks.

Thank you all for joining our call we look forward to sharing our Q3 results with you in early November .

Okay.

This does conclude today's strikers second quarter earnings call.

We thank you for your participation you may disconnect at anytime.

Okay.

[music].

Q2 2023 Stryker Corp Earnings Call

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