Q2 2024 Stryker Corp Earnings Call

Organic sales growth accelerated from the first quarter with strength in Europe , emerging markets, Australia, New Zealand, and Japan.

Australia, New Zealand, and Japan.

Kevin Lobo: As we expand our global share, we continue to see international markets as a key catalyst for our long-term growth. On the M&A front, we continue to execute on our offense. In July, we completed the acquisition of Ardlan, which specializes in innovative soft tissue fixation products for foot and ankle and sports medicine procedures.

Kevin A. Lobo: Australia, New Zealand, and Japan. As we expand our global share, we continue to see international markets as a key catalyst for our long-term growth. On the M&A front, we continue to execute on our offense. In July, we completed the acquisition of Ardalon, which specializes in innovative soft tissue fixation products for foot and ankle and sports medicine procedures. Also yesterday, we closed our acquisition of Mollie Surgery. MOLLE offers wire-free soft tissue localization technology that allows surgeons to precisely mark the location of lesions for removal during breast cancer surgery.

As we expand our global share, we continue to see international markets as a key catalyst for our long-term growth.

On the M&A front, we continue to execute on our offense.

In July , we completed the acquisition of Ardalan, which specializes in innovative soft tissue fixation products for foot and ankle and sports medicine procedures. Also yesterday, we closed our acquisition of Molly Surgical.

Kevin Lobo: Also, yesterday, we closed our acquisition of Molly Cyrical. Molly offers wire-free soft tissue localization technology that allows surgeons to precisely mark the location of lesions for removal during breast cancer surgeries. Molly's differentiated technology enhances our endoscopy portfolio. We remain bullish about our deal pipeline, and we expect continued activity as we move into the back half of the year.

Molly offers wire-free soft tissue localization technology that allows surgeons to precisely mark the location of lesions for removal during breast cancer surgeries. Molly's differentiated technology enhances our endoscopy portfolio.

Kevin A. Lobo: Molly's differentiated technology enhances our endoscopy portfolio. We remain bullish about our deal pipeline, and we expect continued activity as we move into the back half of the year. We delivered quarterly adjusted ETS of two dollars and eighty-one cents, reflecting ten point six percent growth compared to the second quarter of 2023. This performance was primarily driven by the strength of our sales, as well as continued expansion of our margins. Finally, we are raising our expectations for 2024 and now anticipate full-year organic sales growth of nine to 10% and adjusted earnings per share of $11.90 to $12.10.

We remain bullish about our deal pipeline, and we expect continued activity as we move into the back half of the year.

Kevin Lobo: We delivered quarterly adjusted ETS of $2.81, reflecting 10.6% growth compared to the second quarter of 2023. This performance is primarily driven by the strength of our sales, as well as continued expansion of our margins.

Speaker Change: We delivered quarterly adjusted EPS of $2.81, reflecting 10.6% growth compared to the second quarter of 2023. This performance was primarily driven by the strength of our sales, as well as continued expansion of our margins.

Kevin Lobo: Finally, we are raising our expectations for 2024 and now anticipate full-year organic sales growth of 9 to 10% and adjusted earnings per share of $11.90 to $12.10. Coming off full-year organic sales growth of 11.5% in 2023, our updated guidance reflects the strength of our capital backlog, innovative product portfolio, healthy procedure volumes, and passionate commercial execution across the globe.

Speaker Change: Finally, we are raising our expectations for 2024 and now anticipate full year organic sales growth of 9-10% and adjusted earnings per share of $11.90 to $12.10.

Kevin A. Lobo: Coming off full year organic sales growth of 11.5% in 2023, our updated guidance reflects the strength of our capital backlog, Innovative Product Portfolio, Healthy Procedure Volumes, and Passionate Commercial Execution across the globe. I will now turn the call over to Jason. Thanks, Kevin.

Speaker Change: Coming off full-year organic sales growth of 11.5% in 2023, our updated guidance reflects the strength of our capital backlog, innovative product portfolio, healthy procedure volumes, and passionate commercial execution across the globe.

Unknown Executive: I will now turn the call over to Jason.

Jason Beach: Thanks, Kevin. My comments today will focus on providing an update on the current environment, capital demand, and select product highlights. Procedural volumes remained robust in the second quarter, driven by strong fundamentals, increased adoption of robotic assistance surgery, and healthy patient activities with surgeons. We continue to expect strength and procedural demand as we move into the second half of the year. Demand for our capital products also remain healthy in the quarter, with continued elevated backlog across our endoscopy and medical divisions. Continued patient interest in Mako contributed to our best ever second quarter for installations worldwide and in the US, with high utilization rates across the globe.

Jason: My comments today will focus on providing an update on the current environment, capital demand, and select product highlights. Procedural volumes remained robust in the second quarter, driven by strong fundamentals, increased adoption of robotic-assisted surgery, and healthy patient activities with surgeons. We continue to expect strength and procedural demand as we move into the second half of the year. Demand for our capital products also remains healthy in the quarter with continued elevated backlog across our endoscopy and medical division.

Speaker Change: I will now turn the call over to Jason.

Jason: Thanks, Kevin. My comments today will focus on providing an update on the current environment, capital demand, and select product highlights.

Jason: Procedural volumes remained robust in the second quarter, driven by strong fundamentals, increased adoption of robotic-assisted surgery, and healthy patient activities with surgeons. We continue to expect strength in procedural demand as we move into the second half of the year.

Jason: Demand for our capital products also remain healthy in the quarter with continued elevated backlog across our endoscopy and medical divisions.

Jason: Continued patient interest in MAKO contributed to our best ever second quarter for installations worldwide and in the U.S., with high utilization rates across the globe. Also, in the quarter, we reached over one million robotic total knee procedures performed to date with Mako and Triathlon.

Jason: Continued patient interest in MAKO contributed to our best ever second quarter for installations worldwide and in the U.S. with high utilization rates across the globe.

Jason Beach: Also in the quarter, we reached over 1 million robotic total knee procedures performed to date with Mako and Triathlon. We expect the growing momentum in installations and utilization will continue to drive sustained growth in our hips and knees businesses.

Jason: Also in the quarter, we reached over 1 million robotic total need procedures performed to date with MAKO and Triathlon.

Jason: We expect the growing momentum in installations and utilization will continue to drive sustained growth in our hips and knees businesses. Our recent product introductions highlight our commitment to innovation and the durability of our innovation cycle. Pangea's comprehensive plating system complements our market-leading nailing portfolio and will enable sustained above-market growth in our core trauma business. We expect Pangea availability to continue to ramp and reach full launch in the U.S. by the second half of 2025.

Jason: We expect the growing momentum in installations and utilization will continue to drive sustained growth in our hips and knees businesses.

Jason Beach: Our recent product introductions highlight our commitment to innovation and the durability of our innovation cycle. Pangea's comprehensive plating system complements our market-leading nailing portfolio and will enable sustained above-market growth in our core trauma business. We expect Pangea availability to continue to ramp and reach full launch in the US by the second half of 2025.

Jason: Our recent product introductions highlight our commitment to innovation and the durability of our innovation cycle.

Jason: Pangea's comprehensive plating system complements our market-leading nailing portfolio and will enable sustained above-market growth in our core trauma business.

Jason: We expect Pangea availability to continue to ramp and reach full launch in the U.S. by the second half of 2025. Next, our LifePak 35 defibrillator and monitor continues to drive significant excitement in the marketplace.

Jason Beach: Next, our Life Pack 35 defibrillator and monitor continues to drive significant excitement in the marketplace. Case. This flagship product within our emergency care business unit was launched near the end of the second quarter with a strong order book, and we believe it will have a multi-year benefit to our medical division.

Jason: Next, our LifePak 35 defibrillator and monitor continues to drive significant excitement in the marketplace. This flagship product within our emergency care business unit was launched near the end of the second quarter with a strong order book, and we believe it will have a multi-year benefit to our medical division. Lastly, we announced this morning that we received FDA clearance for our Spine Guidance 5 software featuring Copilot, which introduces smart-powered instruments to our Q Guidance ecosystem. This innovative technology is designed to support surgeon precision by providing auditory and sensory alerts when approaching anatomical boundaries during spinal procedures, and enhance patient safety and outcomes.

Jason: This flagship product within our emergency care business unit was launched near the end of the second quarter with a strong order book, and we believe it will have a multi-year benefit to our medical division.

Jason Beach: Lastly, we announced this morning that we received FDA clearance for our spine guidance five software featuring co pilot, which introduces smart powered instruments to our queue guidance ecosystem. This innovative technology is designed to support certain urgent precision by providing auditory and sensory alerts when approaching anatomical boundaries during spinal procedures and enhance patient safety and outcomes. Co-pilot is an important step on our development pipeline, which also includes Mako Spine. Mako Spine with Co-pilot is on track to launch in Q4, and Mako's shoulder is on track to launch at the end of the year.

Jason: Lastly, we announced this morning that we received FDA clearance for our Spine Guidance 5 software featuring Copilot, which introduces smart-powered instruments to our Q Guidance ecosystem.

Jason: This innovative technology is designed to support surgeon precision by providing auditory and sensory alerts when approaching anatomical boundaries during spinal procedures and enhance patient safety and outcomes.

Jason: Co-pilot is an important step in our development pipeline, which also includes MAKO Spine. Mako's spine with co-pilot is on track to launch in Q4 and Mako's shoulder is on track to launch at the end of the year. With that, I will now turn the call over to Glenn. Thanks, Jason.

Glenn: Co-pilot is an important step on our development pipeline, which also includes MAKO Spine. MAKO Spine with Co-pilot is on track to launch in Q4, and MAKO Shoulder is on track to launch at the end of the year. With that, I will now turn the call over to Glenn.

Unknown Executive: With that, I will now turn the call over to Glenn.

Glenn Boehnlein: Thanks, Jason.

Glenn: 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. Our organic sales growth was 9% in the second quarter, compared to 11.9% in the same quarter of 2023. Average selling days are in line with 2023. We had a 1.1% favorable impact from pricing. We continue to see positive trends in our pricing initiatives, particularly in our med-surg and neurotech businesses, all of which contributed positively to pricing for the quarter. Foreign currency had a 0.9% unfavorable impact on sales.

Glenn Boehnlein: Today I will focus my comment on our second quarter financial results and the related drivers. Our detailed financial results have been provided in today's press release. Our organic sales growth was 9% in the second quarter compared to 11.9% in the same quarter of 2023. Average selling days are in line with 2023. We had a 1.1% favorable impact from pricing. We continue to see positive trends in our pricing initiatives, particularly in our Med Surgeon Neuropec businesses, all of which contributed positive pricing for the quarter. Born currency had a 0.9% unfavorable impact on sales. In the US, organic sales growth was 9%; international organic sales growth was 8.9%, driven by positive sales momentum across most of our international markets.

Glenn: 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.

Glenn: Our organic sales growth was 9% in the second quarter compared to 11.9% in the same quarter of 2023. Average selling days are in line with 2023. We had a 1.1% favorable impact from pricing.

Glenn: We continue to see positive trends in our pricing initiatives, particularly in our med-surg and neurotech businesses, all of which contributed positive pricing for the quarter. Foreign currency had a 0.9% unfavorable impact on sales.

Glenn: In the U.S., organic sales growth was 9%, and international organic sales growth was 8.9%, driven by positive sales momentum across most of our international markets. Our adjusted EPS of $2.81 in the quarter was up 10.6% from 2023, driven by higher sales and partially offset by foreign currency exchange translation, which had an unfavorable impact of $0.03. Now we'll provide some highlights on our quarterly segment performance. In the quarter, med-surg and neurotechnology had constant currency sales growth of 9.8 percent and organic sales growth of 9.7 percent, which included 10.1 percent of U.S. organic growth and 8.2 percent of international organic growth. Instruments had U.S. organic sales growth of 11.9 percent, led by strong double-digit growth in the surgical technologies business.

Glenn: In the U.S., organic sales growth was 9%. International organic sales growth was 8.9%, driven by positive sales momentum across most of our international markets.

Glenn Boehnlein: Our adjusted EPS of $2.81 in the quarter was up 10.6% from 2023, driven by higher sales and partially offset by foreign currency exchange translation, which had an unfavorable impact of 3 cents.

Glenn: Our adjusted EPS of $2.81 in the quarter was up 10.6% from 2023, driven by higher sales and partially offset by foreign currency exchange translation, which had an unfavorable impact of $0.03.

Glenn Boehnlein: Now we will provide some highlights around our quarterly segment performance. In the quarter, Med Surgeon Neuro Technology had constant currency sales growth of 9.8% in organic sales growth of 9.7%, which included 10.1% of US organic growth and 8.2% of international organic growth. Instruments had US organic sales growth of 11.9%, led by strong, double-digit growth in the surgical technologies business. From a product perspective, sales growth was led by power tools, waste management, smoke evacuation, and stereo shield. In DOSCAPY, had US organic sales growth of 8%, with strong growth in its core DOSCAPY business and its sports medicine business.

Glenn: From a product perspective, sales growth was led by power tools, waste management, smoke evacuation, and StairShield. Endoscopy had U.S. organic sales growth of 8%, with strong growth in its core endoscopy business and its sports medicine business. This growth was led by the continued success of the 1788 platform and sports medicine shoulder and knee products. However, this was somewhat offset by slower communication sales due to the timing of installations, which will recover in the second half of this year.

Glenn: Now we'll provide some highlights around our quarterly segment performance.

Glenn: In the quarter, med-surg and neurotechnology had constant currency sales growth of 9.8% and organic sales growth of 9.7%, which included 10.1% of U.S. organic growth and 8.2% of international organic growth.

Glenn: Instruments had U.S. organic sales growth of 11.9 percent, led by strong double-digit growth in the surgical technologies business. From a product perspective, sales growth was led by power tools, waste management, smoke evacuation, and StairShield.

Glenn: Endoscopy had U.S. organic sales growth of 8% with strong growth in its core endoscopy business and its sports medicine business. This growth was led by the continued success of the 1788 platform and sports medicine shoulder and knee products.

Glenn Boehnlein: This growth was led by the continued success of the 1788 platform and sports medicine shoulder and knee products. This was somewhat offset by slower communication sales due to the timing of installations, which will recover in the second half of this year. Medical have US organic sales growth of 11.9% driven by strong sales performances in its emergency care and sage businesses, with growth in transport capital, defibrillators, and sage products.

Glenn: This was somewhat offset by slower communication sales due to the timing of installations, which will recover in the second half of this year.

Glenn: Medical had U.S. organic sales growth of 11.9%, driven by strong sales performances in its emergency care and SAGE businesses, with growth in transport capital, defibrillators, and SAGE products. Neurovascular had U.S. organic cell growth of 2.3 percent, which reflects some U.S. supply disruption related to the flow diversion process.

Glenn: Medical had U.S. organic sales growth of 11.9%, driven by strong sales performances in its emergency care and sage businesses, with growth in transport capital, defibrillators, and sage products.

Glenn Boehnlein: Neurovascular and U.S. Organic cells growth of 2.3%, which reflects some U.S. supply destruction related to flow diversion products. And finally, neurocranial has U.S. Organic cells growth of 10.6% led by double digit growth in our bone mill, bipolar, biceps, and cranial natural facial products. Internationally, net surge in neuro technology had organic cells growth of 8.2%, led by double digit organic growth in our instruments, neurovascular, and neurocranial businesses. Geographically, this included strong performances in China, Australia, and Japan. Orthopedics and spying had constant currency sales growth of 8.9% in organic cells growth of 8%, which included an organic growth of 7.3% in the U.S.

Glenn: Neurovascular has U.S. organic cells growth of 2.3%, which reflects some U.S. supply disruption related to flow diversion products.

Glenn: And finally, Neurocranial had U.S. organic cell growth of 10.6 percent, led by double-digit growth in our bone male bipolar forceps and cranial maxillofacial products. Internationally, MedSurg and Neurotechnology had organic sales growth of 8.2%, led by double-digit organic growth in our instruments, neurovascular, and neurocranial businesses. Geographically, this included strong performances in China, Australia, and Japan.

Glenn: And finally, Neurocranial had U.S. organic cells growth of 10.6%, led by double-digit growth in our bone-mill, bipolar forceps, and cranial maxillofacial products.

Glenn: Internationally, med-surg and neurotechnology had organic sales growth of 8.2%, led by double-digit organic growth in our instruments, neurovascular, and neurocranial businesses. Geographically, this included strong performances in China, Australia, and Japan.

Glenn: Orthopedics and spine had constant currency sales growth of 8.9% and organic sales growth of 8%, which included organic growth of 7.3% in the U.S. and 9.8% internationally. Our U.S. knee business grew 6.6 organically, reflecting our market-leading position in robotic-assisted knee procedures and the continued strength of our installed Mako Bay. Our U.S. hip business grew 4.3% organically, fueled by our Insignia hip stem. Our US trauma and extremity business grew 9.1% organically with strong performances across our upper extremity, biologics, and core trauma businesses.

Glenn: Orthopedics & Spine had constant currency sales growth of 8.9% and organic sales growth of 8%, which included organic growth of 7.3% in the U.S. and 9.8% internationally.

Glenn Boehnlein: and 9.8% internationally.

Glenn Boehnlein: Our U.S. knee business grew 6.6% organically, reflecting our market leading position in robotic assisted knee procedures and the continued strength of our installed makeover. Our U.S. hip business grew 4.3% organically, fueled by our Insignia hips down. Our U.S. trauma and extremity business grew 9.1% organ, believed with strong performances across our upper extremity, biological and core trauma businesses. Our U.S. fine business grew 4.4% organically, led by the performance in our interventional fine business. Our U.S. other ortho business grew 15.4% organically, particularly driven by robust continued momentum of makeover installations. Internationally, orthopedics and spying grew 9.8% organically, including strong performances in Canada, Europe, and most emerging markets.

Glenn: Our U.S. knee business grew 6.6% organically, reflecting our market-leading position in robotic-assisted knee procedures and the continued strength of our installed Mako base. Our U.S. hip business grew 4.3% organically, fueled by our Insignia hip stem.

Glenn: Our U.S. trauma and extremity business grew 9.1% organically with strong performances across our upper extremity, biologics, and core trauma businesses.

Glenn: Our U.S. spying business grew 4.4% organically, led by the performance in our interventional spying business. Our U.S. other ortho business grew 15.4% organically, particularly driven by the robust, continued momentum of MAKO installation. Internationally, orthopedics and spine grew 9.8% organically, including strong performances in Canada, Europe, and most emerging markets.

Glenn: Our U.S. spying business grew 4.4% organically, led by the performance in our interventional spying business.

Glenn: Our U.S. other ortho business grew 15.4% organically, particularly driven by robust, continued momentum of MAKO installations.

Glenn: Internationally, orthopedics and spine grew 9.8% organically, including strong performances in Canada, Europe , and most emerging markets.

Glenn Boehnlein: Now I will focus on operating highlights in the second quarter. Our adjusted growth margin of 64.2% represents approximately 30 basis points of favorability against the second quarter of 2023 and 60 basis points sequentially as compared to the first quarter of this year. This favorability primarily reflects positive pricing trends and improved material costs and manufacturing efficiencies. Adjusted R&D spending was 6.5% of sales, which was approximately 10 basis points higher than the second quarter of 2023. Our adjusted SDNA was 33.1% of sales, which was consistent with the second quarter of 2023. In summary for the quarter, our adjusted operating margin was 24.6% of sales, which was approximately 30 basis points favorable to the second quarter of 2023.

Glenn: Now I will focus on operating highlights in the second quarter. Our adjusted gross margin of 64.2 percent represents approximately 30 basis points of favorability against the second quarter of 2023 and 60 basis points sequentially as compared to the first quarter of this year. This favorability primarily reflects positive pricing trends and improved material costs and manufacturing efficiency. Adjusted R&D spending was 6.5% of sales, which was approximately 10 basis points higher than the second quarter of 2023.

Glenn: Now I will focus on operating highlights in the second quarter.

Glenn: Our adjusted gross margin of 64.2% represents approximately 30 basis points of favorability against the second quarter of 2023 and 60 basis points sequentially as compared to the first quarter of this year.

Glenn: This favorability primarily reflects positive pricing trends and improved material costs and manufacturing efficiencies.

Glenn: Adjusted R&D spending was 6.5% of sales, which was approximately 10 basis points higher than the second quarter of 2023. Our adjusted SG&A was 33.1% of sales, which was consistent with the second quarter of 2023.

Glenn: Our adjusted SG&A was 33.1% of sales, which was consistent with the second quarter of 2023. In summary, for the quarter, our adjusted operating margin was 24.6% of sales, which was approximately 30 basis points favorable to the second quarter of 2023. The net Adjusted Other Income and Expense of $54 million for the quarter was $12 million lower than 2023, driven by favorable interest income in our invested cash balances. The second quarter of 2024 had an adjusted effective tax rate of 15.2 percent, reflecting the impact of geographic mix and certain discrete items.

Glenn: In summary, for the quarter, our adjusted operating margin was 24.6% of sales, which was approximately 30 basis points favorable to the second quarter of 2023.

Glenn Boehnlein: Net adjusted other income and expense of 54 million for the quarter was 12 million lower than 2023, driven by favorable interest income in our invested cash balances. The second quarter of 2024 had an adjusted effective tax rate of 15.2%, reflecting the impact of geographic mix and certain discrete items. For 2024, we still expect our full-year effective tax rates to be in the range of 14 to 15%. Focusing on the balance sheet, we ended the second quarter with approximately 2 billion of cash, remarkable securities, and total debt of approximately 12.2 billion. During the quarter, we repaid 600 million of debt that came due in May.

Glenn: Net adjusted other income and expense of $54 million for the quarter was $12 million lower than 2023, driven by favorable interest income in our invested cash balances.

Glenn: The second quarter of 2024 had an adjusted effective tax rate of 15.2%, reflecting the impact of geographic mix and certain discrete items. For 2024, we still expect our full year effective tax rate to be in the range of 14 to 15%.

Glenn: For 2024, we still expect our full-year effective tax rate to be in the range of 14 to 15 percent. Focusing on the balance sheet, we ended the second quarter with approximately $2 billion of cash and marketable securities and total debt of approximately $12.2 billion. During the quarter, we repaid $600 million of debt that came due in May.

Glenn: Focusing on the balance sheet, we ended the second quarter with approximately $2 billion of cash in marketable securities and total debt of approximately $12.2 billion. During the quarter, we repaid $600 million of debt that came due in May.

Glenn Boehnlein: Cronin. Turning to cash flow, our year-to-date cash from operations is $837 million, reflecting the results of net earnings somewhat offset by working capital changes. Based on our year-to-date performance and our positive outlook related to sustained procedural volumes and a healthy demand for our capital products, we now expect full year 2024 organic sales growth to be in the range of 9 to 10% with favorable pricing impacting of approximately 0.5%. If foreign exchange rates hold near current levels, we anticipate a moderately unfavorable impact on the full-year sales and now expect EPS will be negatively impacted in the range of 10 to 15 cents.

Glenn: Turning to cash flow, our year-to-date cash from operations is $837 million, reflecting the results of net earnings somewhat offset by working capital changes. Based on our year-to-day performance and our positive outlook related to sustained procedural volumes and a healthy demand for our capital products, we now expect full year 2024 organic sales growth to be in the range of 9 to 10%, with favorable pricing impacting approximately 0.5%. If foreign exchange rates hold near current levels, we anticipate a moderately unfavorable impact on full-year sales, and we now expect EPS to be negatively impacted in the range of $0.10 to $0.15.

Glenn: Turning to cash flow, our year-to-date cash from operations is $837 million, reflecting the results of net earnings somewhat offset by working capital changes.

Glenn: Based on our year-to-date performance and our positive outlook related to sustained procedural volumes and a healthy demand for our capital products,

Speaker Change: We now expect full year 2024 organic sales growth to be in the range of 9-10%, with favorable pricing impacting of approximately 0.5%.

Speaker Change: If foreign exchange rates hold near current levels, we anticipate a moderately unfavorable impact on the full year sales and now expect EPS will be negatively impacted in the range of 10 to 15 cents.

Glenn Boehnlein: This is reflected in our guidance. Given our sales momentum, we now expect adjusted debt earnings for diluted share to be in the range of $11.90 to $12.10 per share.

Speaker Change: This is reflected in our guidance. Given our sales momentum, we now expect adjusted net earnings for diluted share to be in the range of $11.90 to $12.10 per share. And now I will open the call up for questions.

Operator: This is reflected in our guidance. Given our sales momentum, we now expect adjusted net earnings for diluted shares to be in the range of $11.90 to $12.10 per share. And now I will open the call up for questions. At this time, we will open the floor to questions. If you would like to ask a question, please press star 5 on your telephone keypad. You may remove yourself at any time by pressing star 5 again.

Unknown Executive: And now we'll open the follow-up for questions.

Unknown Executive: At this time, we'll open the floor for questions. If you'd like to ask a question, please press star 5 on your telephone keypad. If you may remove yourself at any time by pressing star 5 again, please limit to one question and one follow-up. We'll pause for just a moment.

Operator: Please limit your questions to one and one follow-up. We'll pause for just a moment. Okay, our first question will come from Larry Biegelsen with Wells Fargo Securities. Your line is now open. Please go ahead. Good afternoon.

Speaker Change: At this time, we will open the floor for questions. If you would like to ask a question, please press star 5 on your telephone keypad. You may remove yourself at any time by pressing star 5 again. Please limit to one question and one follow-up. We will pause for just a moment.

Lawrence Biegelsen: Okay, our first question will come from Larry Beagelson with Wells Fargo Security.

Speaker Change: Okay, our first question will come from Larry Biegelsen with Wells Fargo Securities. Your line is now open, please go ahead.

Lawrence Biegelsen: Your line is not open. Please go ahead.

Kevin Lobo: Good afternoon. Thanks for taking the question, and I can gross on a nice quarter here. So Kevin, you know, it's hard to not notice the quote in the press release about your being excited about the product and M&A pipeline. So I'd love to hear your updated thoughts on M&A in 2024. You know, you've talked about smaller deals in the first half and potentially larger deals in the second half. Is there any change to your view, and how should we think about the impacts of larger deals on the margin target you have for 24 and 25? I had one follow-up.

Kevin A. Lobo: Thanks for taking the question. And congrats on a nice quarter here. So, Kevin, you know, it's hard to not notice the quote in the press release about you being excited about the product and M&A pipeline. So I'd love to hear your updated thoughts on M&A in 2024. You know, you've talked about smaller deals in the first half and potentially larger deals in the second half. Is there any change to your view? And how should we think about the impact of larger deals on the margin targets you have for 2024? And 25. And I had one follow-up.

Lawrence H. Biegelsen: Good afternoon. Thanks for taking the question, and congrats on a nice quarter here. So, Kevin, you know, it's hard to not notice the quote in the press release about you're being excited about the product and M&A pipeline.

Lawrence H. Biegelsen: So I'd love to hear your updated thoughts on M&A in 2024, you know, you've talked about smaller deals in the first half.

Speaker Change: and potentially larger deals in the second half. Is there any change to your view and how should we think about the impact of larger deals on the margin targets you have for 24 and 25? And I had one follow-up.

Kevin Lobo: Yes, listen, we're still committed to our margin targets of 200 basis points, roughly 100 basis points this year or another 100 basis points next year. And that is inclusive of M&A. We do have a very active deal pipeline. Most of them are in the tuck-in variety, and most of them are not very large. But you continue to see us be active, as you've seen in the first two quarters of the year, much more active than we were last year. And we will be very active in the second half of the year. It's always hard to predict exactly which deals will land, as you know.

Kevin A. Lobo: Yes, listen. We're still committed to our margin targets of 200 basis points, roughly 100 basis points this year, another 100 basis points next year. And that is inclusive of M&A. We do have a very active deal pipeline. Most of them are in the tuck-in variety, and most of them are not very large.

Speaker Change: Yes, listen, we're still committed to our margin targets of 200 basis points, roughly 100 basis points this year, another 100 basis points next year, and that is inclusive of M&A.

Speaker Change: We do have a very active deal pipeline. Most of them are in the Tuck-In variety.

Speaker Change: And most of them are not very large, but you continue to see us be active, as you've seen in the...

Speaker Change: in the first two quarters of the year, much more active than we were last year, and we will be very active in the second half of the year. It's always hard to predict exactly which deals will land, as you know, but we have a very strong balance sheet now.

Kevin Lobo: But we're we have a very strong balance sheet now given the debt that we pay down after right and Vossera, and we're going to put our balance sheet to work.

Kevin A. Lobo: But you continue to see us be active, as you've seen in the first two quarters of the year, much more active than we were last year. And we will be very active in the second half of the year. It's always hard to predict exactly which deals will land, as you know.

Speaker Change: Given the debt that we paid down after Wright and Beaucerra, and we're going to put our balance sheet to work.

Glenn Boehnlein: Let's help. And Glenn, in order to hit the margin goal for this year, it requires a pretty big step up in the margins in the second half. What are the drivers? Is it gross margin or op-ax, and what's your visibility?

Glenn: But we're, we have a very strong balance sheet now, given the debt that we paid down after Wright and Beaucerra. And we're going to put our balance sheet to work. That's helpful. And Glenn, in order to hit the margin goal for this year, it requires a pretty big step up in the margins in the second half. What are the drivers?

Speaker Change: That's helpful. And Glenn, in order to hit the margin goal for this year, it requires a pretty big step up in the margins in the second half. What are the drivers? Is it gross margin or op-ex? And what's your visibility? Thank you.

Glenn Boehnlein: Thank you. Yeah, Larry. Really good question. I think if you looked at our performance historically, you would always see that op margins leverage in the second half of the year just really, really, really takes off. And so I don't think this year is really going to be different from performances in the past years. I would tell you that, you know, we're seeing, you know, unlike you saw here in the first half of this year, kind of a good balance, honestly, between gross margin and SG&A. I think moving forward in the back half of the year, just given sort of, you know, how we send an SG&A are variable comp models.

Glenn: Is it gross margin or OPEX? And you know, what's your visibility? Thank you. Yeah, Larry, a really good question.

Glenn: You know, I think if you looked at our performance historically, you would always see that margin leverage in the second half of the year just really, really, really takes off. And so I don't think this year is really going to be different from past performances. I would tell you that, you know, like you saw here in the first half of this year, we're seeing kind of a good balance, honestly, between gross margin and SG&A.

Glenn: Yeah, Larry, really good question. You know, I think if you looked at our performance historically, you would always see that margin leverage in the second half of the year, just

Glenn: and I think that's what really, really, really takes off. And so I don't think this year is really going to be different from performances in past years. I would tell you that, you know, we're seeing, you know, and like you saw here in the first half of this year, kind of a good balance, honestly, between gross margin and SG&A.

Glenn: I think moving forward in the back half of the year, just given sort of, you know, how we spend on SG&A, our variable comp models, we'll probably see more leverage come out of SG&A than gross margin in the back half of the year. And we're very bullish on, like Kevin said, still holding to our 100 basis points of margin expansion for this year. Thank you. Our next question will come from the line of Robbie Marcus with J.P. Morgan. Your line is not open.

Glenn: I think moving forward in the back half of the year, just given sort of, you know, how we spend in SG&A, our variable comp models, we'll probably see more leverage come out of SG&A than gross margin in the back half of the year.

Glenn Boehnlein: We'll probably see more leverage come out of SG&A than gross margin in the back half of the year.

Glenn Boehnlein: And we're very bullish on, you know, like Kevin said, still holding to our 100 basis points about margin expansion for this year.

Kevin: And we're very bullish on, you know, like Kevin said, still holding to our 100 basis points about margin expansion for this year.

Robert Marcus: Our next question will come from the line of Robbie Marcus with JP Morgan.

Speaker Change: Thank you.

Robert Marcus: Your line is not open. Please go ahead. Oh, great. Thanks for taking the questions. Two for me. I'll just ask them upfront. Kevin, you guys don't guide quarter to quarter. And you know, I saw you during the quarter. I know you've made a bunch of public comments. And the quarter came just in line versus the street. Again, you don't guide quarterly. I understand that, but you did raise guidance for the year.

Speaker Change: Our next question will come from the line of Robbie Marcus with J.P. Morgan. Your line is not open. Please go ahead.

Kevin A. Lobo: Please go ahead. Oh, great. Thanks for taking the questions. Two for me. I'll just ask them up front.

Robert Justin Marcus: Oh great, thanks for taking the questions. Two for me, I'll just ask them up front.

Kevin A. Lobo: Kevin, you guys don't guide quarter to quarter, and, you know, I saw you during the quarter. I know you made a bunch of public comments, and the quarter came just in line versus the street again. You don't guide quarterly.

Robert Justin Marcus: Kevin, you guys don't guide quarter to quarter and you know I saw you during the quarter I know you've made a bunch of public comments

Robert Justin Marcus: and the quarter came just in line versus the street again. You don't guide quarterly, I understand that. But you did raise guidance for the year. So I was hoping you can reconcile, you know, in line versus the street 2Q with the confidence to raise the guide both on the top and bottom.

Kevin A. Lobo: I understand that, but you did raise guidance for the year, so I was hoping you could reconcile it. You know, in line versus the street 2Q with the confidence to raise the guidance both on the top and bottom.

Kevin Lobo: So I was hoping you can reconcile, you know, in line versus the street to cue with the confidence to raise the guide, both on the top and bottom. And then the second question, I imagine part of that is also the, you know, what you're seeing and the visibility you have into the capital equipment and procedure volume complex. Just maybe you could touch on that as well. Thanks a lot. Yeah, sure. Thanks, Robin. Thanks for remembering that we don't guide to quarters. We were actually very pleased with the way the quarter played out. We can kind of see our seasonality and how things are going to flow from quarter to quarter.

Kevin A. Lobo: And then the second question, I imagine part of that is also the what you're seeing and the visibility you have into the capital equipment and procedure volume complex. We'll touch on that as well. Yeah, sure. Thanks, Robbie. And thanks for remembering that we don't guide to quarters. We were actually very pleased with the way the quarter played out.

Speaker Change: And then the second question, I imagine part of that is also the, you know, what you're seeing and the visibility you have into the capital equipment and procedure volume complex. Just maybe you could touch on that as well. Thanks a lot.

Kevin A. Lobo: We can kind of see our seasonality and how things are going to flow from quarter to quarter. We had a big Q2 last year, and a big comp. If you look at the back half of the year, we're very bullish on capital. We have a big backlog, particularly in endoscopy and in medical.

Speaker Change: Yeah, sure. Thanks, Robbie, and thanks for remembering that we don't guide to quarters. We were actually very pleased with the way the quarter played out.

Kevin Lobo: We had a big Q2 last year, big comp. If you look at the back half of the year, we're very bullish on capital. We have a big backlog, particularly in endoscopy and in medical. We're also seeing very strong demand. As you have you seen quarter after quarter are making installations are very high. That leads to future strong demand for hips and knees. And July is off to a really strong start in joint replacement. We've also been able to achieve more price than we thought at the beginning of the year. And we expect that that price tailwind will continue into the back half of the year.

Speaker Change: We can kind of see our seasonality and how things are going to flow from quarter to quarter. We had a big Q2 last year, big comp.

Speaker Change: If you look at the back half of the year, we're very bullish on capital. We have a big backlog.

Speaker Change: particularly in endoscopy and in medical.

Kevin A. Lobo: We're also seeing very strong demand. As you've seen, quarter after quarter, our MAKO installations are very high. That leads to future strong demand for hips and knees. And July is off to a really strong start in joint replacement.

Speaker Change: We're also seeing very strong demand as you have you seen quarter after quarter our Mako installations are very high.

Speaker Change: That leads to future strong demand for hips and knees.

Kevin A. Lobo: We've also been able to achieve higher prices than we thought at the beginning of the year, and we expect that that price tailwind will continue into the back half of the year. And lastly, I'd say the new products, the two big products we've talked about, Pangea and LifePak 35, are both receiving tremendous positive feedback and really had a very negligible impact in Q2, but you're going to see those in a big way in Q3, Q4, and into next year.

Speaker Change: and July is off to a really strong start in joint replacement. We've also been able to achieve more price than we thought at the beginning of the year, and we expect that that.

Kevin Lobo: And lastly, I'd say the new products, the two big products we've talked about. We've been able to do a lot of the same with Pangea, and Life Pack 35 are both receiving tremendous positive feedback and really both had very negligible impact.

Taylor: Price Taylor will continue into the back half of the year and lastly I'd say the new products the two big products. We've talked about Pangea

Taylor: and Lifepak 35 are both receiving tremendous

Kevin Lobo: In Q2, but you're going to see those in a big way in Q3, Q4, and into next year. So a lot of head tailwinds that are going to push our growth up in Q3. Certainly, in Q3 is going to be a big one, and also in Q4. So we're very confident of raising the guide. Love the fact that we have 10% at the high end of our growth coming off a year of 11 and a half last year and 9.7 the year before. So we are growing off big numbers, and we're feeling very good about the top point.

Taylor: Positive feedback and really both had very negligible impact in Q2, but you're going to see those in a big way.

Kevin A. Lobo: So there are a lot of tailwinds that are going to push our growth up in Q3 and certainly, Q3 is going to be a big one and also in Q4. So we're very confident of raising the guide.

Taylor: in Q3, Q4 and into next year. So a lot of head of tailwinds.

Taylor: that are going to push our growth up in Q3. Certainly in Q3 is going to be a big one and also in Q4. So we're very confident of raising the guide, love the fact that we have 10 percent at the high end.

Kevin A. Lobo: I love the fact that we have 10% at the high end of our growth coming off a year of 11.5 last year and 9.7 the year before. So we are growing off big numbers, and we're feeling very good about the tall point. Appreciate it. Thanks a lot.

Taylor: of our growth coming off a year of 11 1?2 last year and 9.7 the year before. So we are growing off big numbers and we're feeling very good about the tall point.

Kevin Lobo: Appreciate it. Thanks a lot.

Ryan Dimmerwood: Our next question comes from the line of Ryan Dimmerwood with BTIG.

Kevin A. Lobo: Our next question comes from the line of Ryan Zimmerman with BTIG. Your line is now open. Please go ahead. I want to kind of dovetail on Robbie's question a little bit and appreciate that there are some product drivers in the back half of the year. Kevin, there are some easier comms.

Speaker Change: Appreciate it. Thanks a lot.

Ryan Dimmerwood: Your line is not open. Please go ahead. Thanks for taking the questions, and congrats on the nice quarter here. I want to kind of dovetail on Robbie's question a little bit and appreciate that there's some product drivers in the back half of the year, Kevin. There's the major comms. He's coming maybe on seasonal dynamics a little bit and expectations around the health of the orthopedic market, the ability to see kind of that sustained growth rate through the back half of the year and then potentially into 2025.

Speaker Change: Our next question comes from the line of Ryan Zimmerman with BTIG. Your line is now open. Please go ahead.

Ryan Benjamin Zimmerman: Thanks for taking the questions and congrats on a nice quarter here. I want to kind of dovetail on Robbie's question a little bit and appreciate that there's some product drivers in the back half of the year, Kevin. There's some easier comms.

Kevin A. Lobo: Can you just comment maybe on seasonal dynamics a little bit and expectations around the health of the orthopedic market, the ability to see kind of that sustained growth rate through the back half of the year and then potentially into 2025? And then I have one question for Glenn on price. Yeah, listen, we're not changing our story on the market. So we've been saying for many quarters now that we see the hip and knee market as kind of a mid single-digit market and our ability to outpace that market, largely on the backs of Mako, as well as Insignia for hips. But that's the same story we've been telling.

Ryan Benjamin Zimmerman: Can you just comment maybe on seasonal dynamics a little bit and you know expectations around the health of the orthopedic market, the ability to see kind of that sustained growth rate through the back half of the year and then potentially in the 2025? And then I have one question for Glenn on pricing.

Kevin Lobo: And then I have one question for Glenn on pricing. Yeah, listen, we're not changing our story on the market. So we've been saying for many quarters now that we see this. They have a new market as kind of a mid single digit market, and our ability to outpace that market. Largely on the backs of Mako as well as insignia for hips, but that's the same story we've been telling, and frankly, we're seeing that, and we're seeing that in July. As we've talked to surgeons and see their surgery schedules, we see a healthy and sustained good market for hips and knees elevated from pre-pandemic and something that we see through the end of this year and potentially into next.

Speaker Change: Yeah, listen, we're not changing our story on the market. So we've been saying for many quarters now that we see this, the hip and knee market as kind of a mid single digit market and our ability to outpace that market.

Speaker Change: largely, you know, on the backs of Mako, as well as Insignia for HIPPS, but

Kevin A. Lobo: And frankly, we're seeing that, and we were seeing that in July as we talked to surgeons and saw their surgery schedules. We see a healthy and sustained good market for hips and knees, elevated from pre-pandemic levels, and something that we will see through the end of this year and potentially into next. Very helpful.

Speaker Change: That's the same story we've been telling, and frankly, we're seeing that, and we're seeing that in July as we've talked to surgeons and see their surgery schedules. We see a healthy and sustained good market.

Ryan Benjamin Zimmerman: for Hips and Knees, elevated from pre-pandemic and something that we see through the end of this year and potentially into next year.

Glenn Boehnlein: Very helpful. And then just the second question for me around pricing. I mean, it's really nice to see, you know, the tailwind that you're getting from pricing. If you think about pricing as an opportunity, I mean, do you see an upper bound on pricing where you know you can't go beyond that. I mean, how long can you sustain if they push pricing as you think about both this year and then potentially in the 2025?

Glenn: And then just the second question for me around pricing, Glenn. I mean, it's really nice to see the tailwind that you're getting from pricing. But if you think about pricing as an opportunity, do you see an upper bound on pricing, where, you know, you can't go beyond that? I mean, how long can you sustainably push prices, as you think about both this year and then potentially in 2025? Yeah. Maybe I'll really limit my comments really just to 2024.

Ryan Benjamin Zimmerman: Very helpful. And then just the second question for me around pricing, Glenn, I mean, it's really nice to see, you know, the tailwind that you're getting from pricing.

Ryan Benjamin Zimmerman: And if you think about...

Speaker Change: Pricing as an opportunity. I mean, do you see an upper bound on pricing where, you know, you can't go beyond that? I mean, how long can you sustainably push pricing as you think about both this year and then potentially in 2025?

Glenn Boehnlein: Yeah, maybe I'll limit my comments really just to 2024. So I would tell you that, you know, if you just look at our pricing scenes and what they've accomplished, you know, first of all, we've seen really great, positive outcome on the MSNT side related to the MSNT products. And I would tell you that if you think about their product cycle and how they introduce new innovations, you know, we'll constantly gain price on those innovations. I would tell you that on the ortho side, I mean, please, we're addressing this in contract as they come up. And frankly, we're less negative.

Speaker Change: yeah

Glenn: So I would tell you that, you know, if you just look at our pricing scene and what they've accomplished, you know, first of all, we've seen really great positive outcomes on the MS&T side and related to the MS&T products. And I would tell you that if you think about their product cycle and how they introduce new innovations, you know, we'll constantly gain price on those innovations. I would tell you that on the ortho side, I'm equally pleased. We're addressing these in the contract as they come up. And frankly, we're less negative.

Glenn: Maybe I'll limit my comments really just to 2024.

Speaker Change: So I would tell you that, you know, if you just look at our pricing schemes and what they've accomplished,

Speaker Change: You know, first of all, we've seen really great positive outcome on the MS&T side and related to the MS&T products, and I would tell you that if you think about their product cycle and how they introduce new innovations, you know, we'll constantly gain price on those innovations.

Speaker Change: I would tell you that on the ortho side, I'm equally pleased. We're addressing this in contract as they come up.

Glenn: We are just less negative than we used to be on ortho, which is honestly a win. I would tell you that this carries over not just to the people at our enterprise level that are working on this, but it's down in the field with our salespeople. So, you know, the divisions have put in place various programs that drive certain incentives related to positive pricing or improvements in margins. And so, you know, my money's on our sales force in terms of keeping this going. That's what I would say.

Glenn Boehnlein: We are just less negative than we used to be on ortho, which honestly is a win. I would tell you that this carries over not just to the people at our enterprise level that are working on this, but it's down in the field with our sales people. So, you know, we, the divisions have put in various programs that drive certain incentives related to operative pricing or improvements in margins. And so, you know, my money's on our sales force in terms of keeping this going. That's what I would say. I would tell you that, you know, just look at our performance year-to-date in Q1: 7%, 1.1 in Q2.

Speaker Change: And frankly, we're less negative. We are just less negative than we used to be on Ortho, which honestly is a win. I would tell you that this carries over not just to the people at our enterprise level that are working on this, but it's down in the field with ourselves, people.

Speaker Change: So, you know, the divisions have put in various programs that drive certain incentives related to positive pricing or improvements in margins.

Speaker Change: And so...

Speaker Change: You know, my money's on our sales force in terms of keeping this going. That's what I would say. I would tell you that, you know, if you just look at our performance year to date in Q1, 0.7%, 1.1 in Q2,

Glenn: I would tell you that, you know, if you just look at our performance year to date in Q1, 0.7%, 1.1 in Q2, you know, in the back half of the year, we're gonna see some anniversary of products and contracts. And so there may be a little bit of moderation, but I do think that, to Kevin's point, there are a lot of newer products that are gonna be out there that are gonna drive price that maybe isn't necessarily captured here, but I'm bullish on it.

Glenn Boehnlein: You know, in the back half of the year, we're going to see some anniversaries of products and contracts. And so there may be a little bit of moderation, but I do think that, you know, to Kevin's point, there's a lot of newer products that are going to be out there that are going to drive price that maybe isn't necessarily captured in here. But I'm bullish on it. I think we'll continue to see really good price performance this year.

Speaker Change: You know, in the back half of the year, we're going to see some anniversary of products and contracts.

Speaker Change: And so there may be a little bit of moderation, but I do think that...

Speaker Change: To Kevin's point, there's a lot of newer products that are going to be out there that are going to drive price that maybe isn't necessarily captured in here. But I'm bullish on it. I think we'll continue to see really good price performance this year.

Glenn: I think we'll continue to see really good price performance this year, and I'll hold my comments until we guide 2025. Thank you. Our next question will come from Joanne Wuensch with Citibank. Your line is now open.

Glenn Boehnlein: And I'll, I'll hold my comment to fill up. We guide 2025.

Speaker Change: And I'll hold my comments until WeGuide 2025.

Joanne Wuensch: Our next question will come from Joanne, which city bank your line is not open. Please go ahead. Thank you very much. And I'm very nice quarter. I'm sure there were to go here because there's so much. I'm going to pause on the make-o. It sounds like when I look at my notes, the fourth quarter, 23 was record make-o; first quarter, 24 was record make-o; second quarter, the same. What is going on that each quarter you're placing record make-o robot? Thank you. Yeah, thanks. I'll take that that question. So first of all, a big contributor is international to end.

Speaker Change: Thank you.

Speaker Change: Our next question will come from Joanne Wuensch with Citibank. Your line is now open. Please go ahead. Thank you very much and very nice quarter.

Kevin A. Lobo: Please go ahead. Thank you very much and a very nice quarter. I'm trying to figure out where to go here because there's so much.

Kevin A. Lobo: I'm going to pause on Mako. It sounds like when I look at my notes, the fourth quarter, 23 was record Mako. First quarter, 24 was record Mako.

Speaker Change: I'm trying to figure out where to go here because there's so much. I'm going to pause on MAKO.

Joanne Karen Wuensch: It sounds like when I look at my notes, the fourth quarter 23 was record MAKO, first quarter 24 was record MAKO, second quarter the same. What is going on that each quarter you're placing record MAKO robots? Thank you.

Kevin A. Lobo: Second quarter, the same. What is going on that each quarter you're placing record Mako robots? Thank you. Yeah, thanks.

Kevin A. Lobo: I'll take that question. First of all, a big contributor is international trade, Joanne. We are really picking up the pace in international trade, particularly in countries like Japan, some of the emerging markets, India, and even Europe. So international trade is really where the U.S. was four or five years ago. That is a new, I would say, a new tailwind.

Speaker Change: Yeah, thanks. I'll take that question. So first of all, a big contributor is international, Joanne.

Kevin Lobo: We are really picking up the pace and international, particularly in countries like Japan, some of the emerging markets in India, and even Europe. So international is really where the US was four or five years ago. That is a new, I would say, a new tailwind. Obviously, we were very well penetrated in Australia, but the rest of international has lagged. That is now coming on and coming on strong. And that on top of the US organization, that's really done a terrific job continuing to promote make-o and the use of make-o. Every quarter, the percent of hips and knees on the robot is actually increasing.

Speaker Change: We are really picking up the pace in international, particularly in countries like Japan.

Speaker Change: Some of the emerging markets, India, and even Europe . So international is really where the U.S. was four or five years ago.

Kevin A. Lobo: Obviously, we were very well penetrated in Australia, but the rest of the international market has lagged. That is now coming on, and it is coming on strong. And that on top of the U.S. organization that's really done a terrific job of continuing to promote Mako and the use of Mako. And every quarter, the percent of hips and knees on the robot is actually increasing. And the demand As more offerings came on the market, people got a chance to look at them.

Speaker Change: That is a new, I would say a new tailwind. Obviously we were very well penetrated in Australia, but the rest of international has lagged. That is now coming on and coming on strong.

Speaker Change: and that on top of the U.S. organization that's really done a terrific job of continuing to promote MAKO and the use of MAKO and every quarter the percent of hips and knees on the robot is actually increasing.

Kevin Lobo: And the demand, as more offerings came on the market, people got a chance to look at that and they're just, they clearly are preferring our technology. And we're winning in the marketplace, and people are putting in their fifth system, and their sixth system, and their seventh system. And so there are a lot of OARS that still don't have make-o in our teams are out there hunting. So we're super excited. I think the software changes we made with the 4.0 software for hip, the 2.0 software for knee with functional alignment. These have been really sort of quiet successes that have fueled growth.

Speaker Change: And the demand as more offerings came on the market, people got a chance to look at that and they're, they're just they clearly are preferring our technology, it's just, and we're winning in the marketplace and people are putting in their fifth system and their sixth system and their seventh system.

Kevin A. Lobo: And they're just clearly preferring our technology. It's just, we're winning in the marketplace, and people are putting in their fifth system and their sixth system and their seventh system. And so there are a lot of ORs that still don't have Makos in them.

Kevin A. Lobo: And our teams are out there hunting. So we're super excited. I think the software changes we made with the 4.0 software for the hip, and the 2.0 software for the knee with functional alignment.

Speaker Change: And so there are a lot of ORs that still don't have MACOs in them and our teams are out there.

Speaker Change: Out there hunting. So we're super excited. I think the software changes we made with the 4.0 software for HIP

Kevin A. Lobo: These have been really sort of quiet successes that have fueled growth. And then, of course, we're going to add a spine and then a shoulder to Mako. So it's an engine that still has a lot, a lot of juice in the tank. Just as a follow-up to that, with spine and shoulder coming on, how do you anticipate rolling those out? Are there software and hardware upgrades, or will you just walk us through that?

Speaker Change: The 2.0 software for knee with functional alignment.

Speaker Change: These are these have been really sort of quiet successes that have fueled growth and then of course we're going to add Spine and then shoulder to Mako. So it's an engine that still has a lot a lot of juice in the tank

Kevin Lobo: And then, of course, we're going to add a spine and then shoulder to make-o. So it's an engine that still has a lot of juice in the tank.

Unknown Executive: Just as a follow-up to that, with spine and shoulder coming on, how do you anticipate rolling those out of their software and hardware upgrades or just walk us through that? Thank you. Have a great night. Yes, thank you. Yes, in both cases, there are attachments that's the same robot that you can use, but there are attachments that would be specifically for Spine as well as software. So it becomes both software and hardware just as the knee application did when we launched the total knee back in 2017.

Speaker Change: Just as a follow-up to that, with spine and shoulder coming on, how do you anticipate rolling those out? Are there software and hardware upgrades or just walk us through that? Thank you and have a great night.

Kevin A. Lobo: Thank you, and have a great night. Yes, thank you. Yes, in both cases, there are attachments; it's the same robot that you can use, but there are attachments that would be specifically for the spine, as well as software.

Speaker Change: Yes, thank you. Yes, in both cases, there are attachments. It's the same robot that you can use, but there are attachments that would be specifically for spine, as well as software. So it comes with both software and hardware, just as the knee application did when we launched the TotalKnee back in 2017.

Ajay Kumar: Our next question will come from Ajay Kumar, with Evercore ISI. You're landed. Now open. Please go ahead.

Kevin A. Lobo: So it comes with both software and hardware, just as the knee application did when we launched the Total Knee back in 2017. Our next question will come from Vijay Kumar with EPRICOR ISI. Your line is not open. Please go ahead.

Speaker Change: Our next question will come from Vijay Kumar with Evercore ISI. Your line is now open. Please go ahead.

Ajay Kumar: Vijay? Hello Vijay. We can't hear you.

Operator: Hello, Vijay, we can't hear you. We'll go to the next question. We'll go to Travis Steed with BFA Global Research. Your line is now open.

Speaker Change: Vijay?

Speaker Change: Hello, Vijay, we can't hear you.

Unknown Executive: We'll go to the next question.

Travis Steed: We'll go to Travis Steed with BFA Global Research. Your line is not open. Please go ahead. Hey, thanks for taking the question.

Speaker Change: We'll go to the next question. We'll go to Travis Steed with BFA Global Research. Your line is now open. Please go ahead.

Operator: Please go ahead. Hey, thanks for taking the question. First, start with so Stryker, typically, you know, you're nine to 10% growth this year, kind of well above the historical growth rate for Stryker. So a question I get a lot is how sustainable this level of growth is, and you kind of look at some of the growth drivers this year, and what are these drivers going to spend until next year, anything getting better, getting worse, you know, over the next one to two years. It Yeah, let me let me start by saying that two years ago, we grew 9.7% organically. Last year, we grew 11.5% organically.

Travis Steed: First start with, so Stryker, typically, you know, you're 90-10% growth this year kind of well above the historical growth rate for Stryker. So a question I get a lot is how sustainable is this level of growth? And you kind of look at some of the growth drivers this year. What are these drivers going to spend the next year or anything getting better, getting worse over the next one to two years? Is this kind of curious your confidence of sustaining this kind of a normal Stryker growth rate going forward? Yeah, let me start by two years ago we grew 9.7% organically.

Travis Lee Steed: Hey, thanks for taking the question. First start with, so Stryker, typically, you know, 9 to 10% growth this year, kind of well above the historical growth rate for Stryker. So a question I get a lot is how sustainable

Travis Lee Steed: is this level of growth, and you kind of look at some of the growth drivers this year, and what are these drivers that's going to sustainable next year, anything getting better, getting worse, you know, over the next one to two years. It's just kind of curious your confidence of sustaining this kind of above normal strike of growth rate going forward.

Kevin Lobo: Last year, we grew 11.5% organically. This year we're growing 9-10% organically. So I think we are showing that we can sustain high growth over multiple years. If I think about next year, these two big flagship launches in trauma and in medical are really only going to take much more of an impact next year. I'll have some impact, obviously, in the back half but a bigger impact next year. Our camera launches still gaining steam. Our precuity launch still has years ahead of it. Our power tool launch still has plenty of opportunity. Mako is going to continue to expand as it has been.

Speaker Change: Yeah, let me let me start by two years ago, we grew 9.7% organically. Last year, we grew 11.5% organically. This year, we're growing nine to 10% organically. So I think we are showing

Kevin A. Lobo: This year, we're growing 9 to 10% organically. So I think we are showing that we can sustain high growth over multiple years. If I think about next year, these two big flagship launches in trauma and in medical are really only going to have a much bigger impact next year. They'll have some impact, obviously, in the back half, but a bigger impact next year. Our camera launch is still gaining steam.

Speaker Change: that we can sustain high growth over multiple years.

Speaker Change: If I think about next year, these two big flagship launches in trauma.

Speaker Change: and in medical are really only going to take much more of an impact next year.

Kevin A. Lobo: Our procurement launch still has years ahead of it. Our power tool launch still has plenty of opportunity. Mako is going to continue to expand as it has been, actually, both internationally, which is a giant opportunity, as well as in the United States. Our international growth has been high single-digit double-digit for the last few years, that's going to continue; we still have huge opportunities in international and, as we get back to our M&A offense, recall that we tend to buy fast-growing assets; that's part of our formula. And after one year, that then rolls into organic growth.

Speaker Change: They'll have some impact obviously in the back half, but a bigger impact.

Speaker Change: Next year, our camera launch is still gaining steam, our procurity launch still has years ahead of it, our power tool launch still has plenty of opportunity, MAKO is going to continue to expand as it has been, actually both internationally, which is a giant opportunity, as well as in the United States.

Kevin Lobo: Actually, both in internationally, which is a giant opportunity, as well as in the United States. Our international growth has been high single digit double digit for the last few years. That's going to continue. We still have huge opportunities in international. And then, as we get back to our M&A offense, recall that we tend to buy fast growing assets. That's part of our formula. And after one year, that then rolls into organic growth. So I'm bullish on the future of our ability to sustain high organic growth. If you think about this year, a lot of the organic growth is actually not M&A related.

Speaker Change: Our international growth has been high single-digit, double-digit for the last few years. That's going to continue. We still have huge opportunities in international and then as we get back to our M&A offense,

Speaker Change: Recall that we tend to buy fast growing assets, that's part of our formula, and after one year that then rolls into organic growth.

Kevin A. Lobo: So I'm bullish on the future of our ability to sustain high organic growth. If you think about this year, a lot of the organic growth is actually not M&A related. It's really the product cycle and the innovation cycle.

Speaker Change: So I'm bullish on the future of our ability to sustain high organic growth. If you think about this year, a lot of the organic growth is actually not M&A related. It's really product cycle, innovation cycle. And all of our innovation teams, as I travel around and meet our different divisions,

Kevin Lobo: It's really product cycle, innovation cycle. And all of our innovation teams, as I travel around and meet our different divisions, they have tremendous innovation. Mako's mind hasn't had any impact yet. Nor has coal pilots. Nor has Mako shoulders. So there is plenty of room for high growth in this company. And the expectations have changed. If you go back 10 years ago, we were growing 4, 5, 6% organically. And that has clearly changed. And there are new expectations. And we continue to split business units and split sales forces and play offense. And it's a formula that's working.

Kevin A. Lobo: And all of our innovation teams, as I travel around and meet our different divisions, they have tremendous innovation. Mako's spine hasn't had any impact yet, nor has CoalPilot, nor has Mako Shoulder, so there is plenty of room for high growth in this company. And the expectations have changed. If you go back 10 years ago, we were growing 4, 5, 6% organically, and that has clearly changed, and there are new expectations, and we continue to split business units and split sales forces and play offense. And it's a formula that's working, and I don't see it slowing down anytime soon. Super helpful.

Speaker Change: They have tremendous innovation. Mako's spine hasn't had any impact yet, nor has Coal Pilot, nor has Mako Controllers. So there is plenty of room for high growth in this company. And the expectations have changed.

Speaker Change: If you go back 10 years ago, we were growing 4%, 5%, 6% organically, and that has clearly changed, and there are new expectations, and we continue to split business units and split sales forces and play offense, and it's a formula that's working, and I don't see it slowing down anytime soon.

Kevin Lobo: And I don't see it slowing down anytime soon.

Kevin Lobo: Super helpful.

Kevin Lobo: And another question I'm getting more lately is kind of your interest in thought issues, sort of robotic. If that's going to change at all, or how you're thinking about that market, I know it's a market you guys have looked at closely for many years now. Yes, look, it's an area that we like as a space. It's complicated. And there is room for more than one big player. And if you think about all the types of procedures that are done that are not done robotically, but we're going to be cautious and careful about how we choose to enter.

Kevin A. Lobo: And another question I've been getting more lately is kind of your interest in soft tissue surgical robotics, if that's going to change at all, or how you're thinking about that market. I know it's a market you guys have looked at closely for many years now. Yes, look, it's an area that we like as a space, it's complicated, and there is room for more than one big player.

Speaker Change: Super helpful. And another question I'm getting more lately is kind of your interest in soft tissue surgical robotics, if that's going to change at all, or how you're thinking about that market. I know it's a market you guys have looked at closely for many years now.

Speaker Change: Yes, look, it's an area that we like as a space. It's complicated.

Kevin A. Lobo: And if you think about all the types of procedures that are done that are not done robotically, but we're going to be cautious and careful about how we choose to enter. Fortunately, for us, we're not defending any business in this case; this would be all playing offense if we decide to move into that space. So we do like it. There are a lot of startups, as you know, that are in the space. We've looked at many, we haven't pulled the trigger, I'm not going to predict if we will or if we won't. We don't need to get into it.

Speaker Change: and there there is room for more than one big player and if you think about all the types of procedures that are done that are not done robotically but

Kevin Lobo: Fortunately for us, we're not defending any business in this case. This would be all playing offense if we decide to move into that space. So we do like it. There are a lot of startups, as you know, that are in the space. We've looked at many. We haven't pulled the trigger. I'm not going to predict if we will or if we won't. We don't need to get into it, but it's an attractive space. And there are still a very small fraction of general surgery procedures that are done robotically. And so there is that opportunity. We're going to continue to explore it.

Speaker Change: We're going to be cautious and careful about how we choose to enter. Fortunately for us, we're not defending any business in this case. This would be all playing offense if we decide to move into that space. So we do like it. There are a lot of startups, as you know, that are in the space. We've looked at many. We haven't pulled a trigger. I'm not going to predict

Kevin A. Lobo: But it's an attractive space, and there is still a very small fraction of general surgery procedures that are done robotically. And so there is that opportunity, we're going to continue to explore it, but we explore multiple adjacencies. That's not the only one that we like.

Speaker Change: If we will or if we won't. We don't need to get into it but it's an attractive space, and there are still a very small fraction of

Speaker Change: of General Surgery procedures that are done robotically. And so there is that opportunity. We're gonna continue to explore it, but we explore multiple adjacencies. That's not the only one that we like. And I can't predict which one we're going to enter, first or second or third.

Kevin Lobo: But we explore multiple adjacencies. That's not the only one that we like. And I can't predict which one we're going to enter first, or second, or third.

Kevin A. Lobo: And I can't predict which one we're going to enter first or second or third. Great. Thanks a lot, Kevin. Our next question will come from the line of Matthew O'Brien with Piper Sandler. Your line is now open.

Kevin Lobo: Great. Thanks a lot, Kevin.

Matthew O'brien: Our next question will come from the line of Matthew O'Brien with Piper Sandler. The line is not open. Please go ahead. Thanks for taking the question. Maybe just to start with Glenn as I look at the stock. It's down about 5% in the aftermarket. And I think it's related to this margin concern that Larry surfaced in the back half. If I go back several years for striker, you put up this type of growth in operating margins and the back half of the year, but typically off at easy cops. You have tougher cops this time around.

Speaker Change: Great, thanks a lot, Kevin.

Glenn: Please go ahead. Thanks for taking that question. Maybe just to start with, with Glenn, as I look at the stock, it's, you know, it's down about 5% in the aftermarkets. And I think it's related to this margin concern that Larry surfaced in the back half.

Speaker Change: Our next question will come from the line of Matthew O'Brien with Piper Sandler. Your line is now open. Please go ahead.

Glenn: If I go back several years for Stryker, you put up this type of growth in operating margins in the back half of the year, but typically off at easy comps; you have tougher comps this time around. So can you be a little more specific in terms of where you can see some of these improvements on the margin side, especially in SGA? And then how do you do that without potentially impacting strength areas on the top line and impacting the top line the next year or even in 2020?

Matthew O'brien: Alright, thanks for taking that question. Maybe just to start with, with Glenn, as I look at the stock, it's, you know, it's down about 5% in the aftermarket, and I think it's related to this margin concern that Larry surfaced in the back half. If I go back,

Matthew O'brien: Several years for Stryker, you put up this type of growth in operating margins in the back half of the year, but typically off the easy comps, you have tougher comps this time around. So, can you be a little more specific in terms of where you can see some of these

Glenn Boehnlein: So can you be a little more specific in terms of where you can see some of these improvements on the margin side, especially in SGA, and then how do you do that without potentially. In fact, the strength areas on the top line and impact in the top line in the next year or even in 26. Sure. I think, you know, first of all, a couple of things. If you look at sort of getting margin out of sort of gross profit or getting margin out of SGA. I mean, a lot of the drivers are honestly in our control.

Matthew O'brien: Improvements on the margin side, especially in SG&A, and then how do you do that without potentially impacting strength areas on the top line and impacting the top line the next year or even in 26?

Glenn: Sure. I think, you know, first of all, there are a couple of things. If you look at sort of getting margin out of sort of gross profit or getting margin out of SG&A, I mean, a lot of the drivers are honestly in our control. You look at hiring, that's completely in our control. You look at, you know, travel and meetings, completely in our control. And so a lot of these just come down to, say, good budgeting, let's say, in terms of how we plan them and how we know that we have the confidence that we're going to be able to drive that margin.

Speaker Change: Sure, I think...

Speaker Change: You know, first of all, a couple of things.

Speaker Change: If you look at sort of getting margin out of sort of gross profit or getting margin out of SG&A, I mean, a lot of the drivers are honestly in our control. You look at hiring, that's completely in our control. You look at, you know, travel and meetings, completely in our control.

Glenn Boehnlein: You look at hiring. That's completely in our control. You look at, you know, travel meetings completely in our control. And so a lot of these just come down to say good budgeting website in terms of how we plan it and how we know that we have a confidence that we're going to be able to drive that margin. You know, the other thing is if we look at sort of when we grow with these sort of lofty rates across a lot of our businesses, you know, those are growing off of a fixed cost basis where it just drives natural leverage that will drive in our business.

Speaker Change: And so a lot of these just come down to, say, good budgeting, let's say, in terms of how we plan it and how we know that we have the confidence that we're going to be able to drive that margin.

Glenn: You know, the other thing is that when we grow at these sort of lofty rates across a lot of our businesses, you know, those are growing off of a fixed cost basis where it just drives natural leverage that will drive our business. So we won't be spending at a comparable level. And, you know, if you look at Q4's numbers time in and time out, that honestly has been what's happening.

Speaker Change: You know, the other thing is, is if we look at sort of when we grow with these sort of lofty rates across a lot of our businesses,

Speaker Change: You know, those are growing off of fixed cost basis where it just drives natural leverage.

Glenn Boehnlein: So we won't be spending at a comparable level. And, you know, if you look at Q4's time in and time out, that that honestly has been what's happening. We also have a lot of exciting things that are going on and, you know, if you look at sort of what we're doing in supply chain and changes that we're making there in terms of, you know, working with vendors, working down some of those inflation charges that we took over the last few years. We also look at, you know, low cost manufacturing. We have facilities now in Poland and also in Mexico where we're sourcing product in those.

Speaker Change: that will drive in our business.

Speaker Change: So we won't be spending at a comparable level.

Glenn: We also have a lot of exciting things that are going on. And, you know, if you look at sort of what we're doing in the supply chain and changes that we're making there in terms of, you know, working with vendors, working down some of those inflation charges that we took over the last two years. We also look at, you know, low cost manufacturing. We have facilities now in Poland and also in Mexico where we're sourcing products from those.

Speaker Change: And, you know, if you look at Q4's time in and time out, that honestly has been what's happening.

Speaker Change: We also have a lot of exciting things that are going on and, you know, if you look at sort of what we're doing in supply chain and changes that we're making there in terms of, you know, working with vendors, working down some of those inflation charges that we took over the last two years.

Speaker Change: We also look at, you know, low-cost manufacturing. We have facilities now in Poland and also in Mexico where we're sourcing product in those. And then lastly, sort of back into operating expenses.

Glenn Boehnlein: And then lastly, sort of back into operating expenses, you know, we continue to push more and more of sort of that day-to-day transactional work into these shared service centers, which are a third of the cost of what we see. In sort of our developed areas, US and Europe primarily. So honestly, I think we have a very good pathway to deliver that hundred basis points, and that we wanted to talk about it. So loudly if we weren't confident that we did have a plan that is going to get us there. I appreciate that.

Glenn: And then lastly, sort of back into operating expenses, you know, we continue to push more and more of that day-to-day transactional work into these shared service centers, which are a third of the cost of what we see in sort of our developed areas, U.S. and Europe, primarily. So honestly, I think we have a very good pathway to deliver that hundred basis points. And we wouldn't have talked about it so loudly if we weren't confident that we did have a plan that was going to get us there. I appreciate that.

Speaker Change: You know, we continue to push more and more of sort of that day-to-day transactional work into these shared service centers, which are at a third of the cost of what we see in sort of our developed areas, U.S. and Europe , primarily. So, honestly, I think we have a very good pathway.

Speaker Change: to deliver that 100 basis points and we wouldn't have talked about it so loudly if we weren't confident that we did have a plan that is going to get us there.

Glenn: And then just across the portfolio, everything's doing well, you know, with a couple of modest exceptions. I mean, neurovascular is doing pretty well. I think there was a little hiccup in the quarter. And I don't Kevin, I didn't really hear you talk about lower extremities.

Glenn Boehnlein: And then, just across the portfolio, everything's doing well. You know, with a couple of modest exceptions, I mean, Neurovascular's doing pretty well. I don't think there's a little hiccup in the quarter.

Speaker Change: Got it, appreciate that and then.

Speaker Change: Just on the across the portfolio, everything's doing well, you know, with with a couple of modest exceptions. I mean, neurovascular is doing pretty well.

Kevin Lobo: And I don't, Kevin, I didn't really hear you talk about lower extremities. So you've got these new products to enjoy your life pack, you know, tons of runway there. Are there things coming down the pike on the organic side in those categories that we should maybe start thinking about? I know you don't like to show your cards too early, but, you know, are there things coming down the pike there that can help those big markets, or do you need to go in organic to be more successful there? Thanks.

Speaker Change: and I think there's a little hiccup in the corner. And I don't, Kevin, I didn't really hear you talk about lower extremities. So you've got these new products, Tangier, LifePak, you know, tons of runway there. Are there things coming down the pike on the?

Speaker Change: organic side in those categories that we should maybe start thinking about? I know you don't like to show your cards too early. But, you know, are there things coming down the pike there that can help those big markets? Or do you need to go inorganic to be more successful there? Thanks.

Kevin A. Lobo: So you've got these new products, Tangier, LifePak, you know, tons of runway there. Are there things coming down the pike on the organic side in those categories that we should maybe start thinking about? I know you don't like to show your cards too early.

Kevin Lobo: Hey, man, I'll, this is Jason. I'll start with maybe make a quick comment on neurovascular, and then I'll turn it over to Kevin for foot and ankle. But, you know, to your point on neurovascular, I'll tell you globally, you know, we were pleased with the business overall. You know, I think Glenn made a comment in the prepared remarks around a little bit of a supply hiccup. I'll say, as it relates to business in the US, July is actually off to a really nice start. So we feel much better about that. I think you also know that, you know, the ischemic business, specifically in the US continues to be quite competitive.

Jason: But, you know, are there things coming down the pike there that can help those big markets? Or do you need to go inorganic to be more successful there? Thanks. Hey, Matt. This is Jason.

Speaker Change: Hey Matt, this is Jason. I'll start with maybe make a quick comment on neurovascular and then I'll turn it over to Kevin for foot and ankle, but

Jason: I'll start with maybe making a quick comment on NeuroVascular, and then I'll turn it over to Kevin for foot and ankle. But, you know, to your point on NeuroVascular, I'll tell you, globally, we were pleased with the business overall. You know, I think Glenn made a comment in the prepared remarks around a little bit of a supply hiccup, I'll say, as it relates to business in the US. July is actually off to a really nice start.

Matt: You know, to your point on neurovascular, I'll tell you, globally, you know, we were we were pleased with the with the business overall. You know, I think Glenn made a comment in the prepared remarks around a little bit of a supply hiccup, I'll say, as it relates to business in the US.

Jason: So we feel much better about that. I think you also know that, you know, the ischemic business, specifically in the US, continues to be quite competitive. We are making adjustments in the sales force to address that and better serve our customers, but overall, we still feel good about the market. Yeah, and as you talk about foot and ankle, if you recall, since we did the right medical acquisition, foot and ankle has been a really good grower for us, growing kind of high single digits, low double digits. I would tell you this year, the foot and ankle market has been softer.

Speaker Change: July's actually off to a really nice start, so we feel much better about that.

Speaker Change: I think you also know that the Ashimic business, specifically in the U.S., continues to be quite competitive. We are making adjustments in the sales force to address that and better serve our customers, but overall still feel good about the market.

Jason Beach: We are making adjustments in the sales force to address that and better serve our customers, but overall still feel good about the market.

Jason Beach: Yeah, and as you talk about foot and ankle, if you recall, since we did the right medical acquisition, foot and ankle has been a really good grower for us, growing kind of high single digits, low double digits. I would tell you this year, the foot and ankle market has been softer. You saw that in the first quarter, not just with us, but with the standalone foot and ankle companies that continued in the second quarter, where we're seeing the market being softer. Then we have seen in the past. So the big number trauma number that we put up was really driven by upper extremities, which continues to be a freight train of growth.

Jason: You saw that in the first quarter, not just with us, but with the standalone foot and ankle companies. That continued in the second quarter, where we're seeing the market being softer than we have seen in the past. So the big number of trauma numbers that we put up were really driven by upper extremities, which continue to be a freight train of growth. And now core trauma, which had a fabulous second quarter.

Speaker Change: Yeah, and as as you talk about foot and ankle, if you recall, since we did the right medical acquisition, foot and ankle has been a really good grower for us, growing kind of high single digits, low double digits. I would tell you this year, the foot and ankle market has been softer.

Speaker Change: You saw that in the first quarter, not just with us, but with the standalone foot and ankle companies.

Speaker Change: That continued in the second quarter where we're seeing the market being...

Speaker Change: softer than we have seen in the past. So the big number trauma number that we put up was really driven by upper extremities, which continues to be a freight train of growth.

Kevin A. Lobo: But in foot and ankle, it's not that we need any kind of inorganic products; we have a great product pipeline that's organic, including footprint, which is pre-planning software for total ankle replacement. And we launched a number of products for forefoot procedures at the end of last year and into this year. So it's really more about the market, the market's gone a bit quiet; this has happened in the past. And foot and ankle, we've been in the business a long time where you have a quarter or two where the market slows down, the patients haven't gone anywhere, they'll come back. And so it is kind of a little bit more semi-elective.

Kevin Lobo: And now core trauma, which had a fabulous second quarter, but in foot and ankle, it's not that we need any kind of inorganic products. We have a great product pipeline that's organic, including Footprint, which is pre-planning software for a total ankle replacement. And we've launched a number of products for foot procedures at the end of last year and into this year. So it's really more about the market. The market's gone a bit quiet. This has happened in the past and foot and ankle. We've been in the business a long time where you've had a quarter to where the market slows down.

Speaker Change: and now Core Trauma, which had a fabulous second quarter. But in foot and ankle, it's not that we need any kind of inorganic products. We have great product pipeline that's organic.

Speaker Change: Including Footprint, which is a pre-planning software for a total anchor replacement. And we launched a number of products.

Speaker Change: for four foot procedures at the end of last year and into this year. So it's really more about the market. The market's gone a bit quiet. This has happened in the past in foot and ankle. We've been in the business a long time where you've had a quarter or two where the market slows down. The patients.

Kevin A. Lobo: So we're going to watch the market closely; we'll give you an update next quarter on that. But overall, the trauma and extremities business is a terrific business for our company. And we have a slight slowdown in this in the foot and ankle area for two quarters, but the overall growth of the business is still terrific. Thank you. Our next question will come from the line of Shagun Singh with RBC. Your line is now open.

Kevin Lobo: The patients haven't gone anywhere. They'll come back. And so it is kind of a little bit more semi-elective. So we're going to watch the market closely. We'll give you an update next quarter on that.

Speaker Change: haven't gone anywhere, they'll come back.

Speaker Change: And so it is kind of a little bit more semi-elective. So we're gonna watch the market closely. We'll give you an update next quarter on that. But overall, the trauma and extremities business is a terrific business for our company.

Kevin Lobo: But overall, the trauma extremities business is a terrific business for our company. And we have a slight slowdown in this in the foot and ankle area now for two quarters, but the overall growth of the business is still terrific.

Speaker Change: And we have a slight slowdown in the foot and ankle area, now for two quarters, but the overall growth of the business is still terrific.

Unknown Executive: Thank you.

Shagun Chadha: Our next question will come from the line of should guns thing with RBC. Your line is not open. Please go ahead. Great. Thank you so much. So Kevin, you have a new robotic platform in the US market with our integration capabilities. I was just wondering, you know, what are you seeing or hearing in the market currently? You know, what impact you expected to have? And, you know, I guess more importantly, I'm just trying to understand, you know, what efforts you have in place to better drive or integration with your products longer term.

Speaker Change: Thank you.

Kevin A. Lobo: Please go ahead. Great. Thank you so much.

Speaker Change: Our next question will come from the line of Shagun Singh with RBC. Your line is now open. Please go ahead.

Kevin A. Lobo: So, Kevin, you have a new robotic platform in the U.S. market with OR integration capabilities. I was just wondering, you know, what are you seeing or hearing in the market currently? You know, what impact do you expect it to have? And, you know, I guess, more importantly, I'm just trying to understand, you know, what efforts you have in place to better drive OR integration with your products longer term. And then I have a follow-up question.

Shagun Singh Chadha: Great, thank you so much. So, Kevin, you have a new robotic platform in the US market with OR integration capabilities. I was just wondering, you know, what are you seeing or hearing in the market currently? You know, what impact do you expect it to have? And, you know, I guess more importantly, I'm just trying to understand, you know, what efforts you have in place to better drive OR integration with your products longer term? And then I have a follow up.

Kevin Lobo: And then I have a follow up. Yeah, listen, we, if you look at our portfolio, the new entrance that we're seeing, whether it's our integration, whether it's new robots, we're really not seeing it. Having much of an impact at all in our business, we have great technology that's meeting the needs of what our customers want, and if you can see the type of growth we continue to post and the guidance that we're providing of what we see for future growth. We're not really concerned about what we're seeing; we like our chances. We believe we're on the right path with our technologies; there really isn't anything out there.

Kevin A. Lobo: Yeah, listen, we, if you look at our portfolio, the new entrants that we're seeing, whether it's our integration, whether it's new robots, we're really not seeing it having much of an impact at all on our business. We have great technology that's meeting the needs of what our customers want. And if you can see the type of growth we continue to post and the guidance that we're providing about what we see for future growth, we're not really concerned about what we're seeing.

Speaker Change: Yeah, listen, we, if you look at our portfolio, the new entrants that we're seeing, whether it's our integration, whether it's new robots, we're really not seeing it.

Speaker Change: We have great technology that's meeting the needs of what our customers want, and if you can see the type of growth we continue to post and the guidance that we're providing of what we see for future growth,

Kevin A. Lobo: We like our chances; we believe we're on the right path. With our technologies, there really isn't anything out there, at least right now, that is a cause for major concern for us to maintain our strong and high growth organic profile. Got it. And I just wanted to get your thoughts on one of the adjacencies you previously called out that is of interest to you, which is neuromodulation. And you said including sleep apnea as an adjacency.

Speaker Change: We're not really concerned about what we're seeing. We like our chances. We believe we're on the right path with our technologies. There really isn't anything out there, at least right now, that is a cause for major concern for us to maintain our strong and high growth organic profile.

Kevin Lobo: At least right now, that is a cause for major concern for us to maintain our strong and high-growth organic profile.

Kevin Lobo: Got it, and I just wanted to get your thoughts on one of the adjacencies you previously called out that is of interest to you, which is neuromodulation, and you said including sleep apnea as an adjacency. So could you just share your thoughts there, and is that something that makes sense for you to have and how it's given the ENT call point. Thank you for taking the question. Yeah, this kind of relates back to the soft tissue question, right? Which is, do we need to be in the space? No, we don't need to be in neuromodulation.

Speaker Change: Got it. And I just wanted to get your thoughts on one of the adjacencies you previously called out that is of interest to you, which is neuromodulation. And you said including sleep apnea as an adjacency. So could you just share your thoughts there? And is that something that makes sense for you to have in-house given the ENT call point?

Kevin A. Lobo: So could you just share your thoughts there? And is that something that makes sense for you to have in-house given the ENT call point? Thank you for taking the call. Yeah, this kind of relates back to the soft tissue question, right, which is, do we need to be in this phase? No, we don't need to be in neuromodulation. There are a lot of electrical treatments that I think are fascinating, whether it's deep brain stem, peripheral nerve stem, spinal cord stem, and obviously related to sleep apnea.

Speaker Change: Thank you for taking the questions.

Speaker Change: Yeah, this kind of relates back to the soft tissue question, right, which is do we need to be in this phase? No.

Kevin Lobo: There are a lot of electrical treatments that I think are fascinating, whether it's deep brainstem, peripheral nerve stem, spinal cord stem, and obviously related to sleep apnea. So I do believe that's going to be part of the future. I do believe Striker one day will be in the neuromodulation space. I really can't predict which where we'll enter first and how we'll grow from there, but it is a place that's appealing to us. But again, you know, we have to make sure that we can win in the market. If we're going to spend money and buy a company that we can deliver strong value for our investors with those acquisitions, then we're going to be careful and thoughtful like we always are.

Speaker Change: We don't need to be in neuromodulation. There are a lot of electrical treatments that I think are fascinating, whether it's deep brain stem, peripheral nerve stem, spinal cord stem.

Kevin A. Lobo: So I do believe that's going to be part of the future. I do believe Stryker one day will be in the neuromodulation space. I really can't predict which one we'll enter first and how we'll grow from there, but it is a space that's appealing to us. But again, you know, we have to make sure that we can win in the market, and if we're going to spend money and buy a company, we can deliver strong value for our investors with those acquisitions.

Speaker Change: and obviously related to sleep apnea. So I do believe that's going to be part of the future. I do believe Stryker one day will be in the neuromodulation space. I really can't predict which, where we'll enter first.

Speaker Change: and how we'll grow from there. But it is a place that's appealing to us. But again, you know, we have to make sure that we can win in the market. If we're going to spend money and buy a company that we can deliver.

Kevin A. Lobo: And so we're going to be careful and thoughtful like we always are. And but that is a space that continues to be of interest. And we'll, you know, stay tuned. Thank you. Our next question will come from Matt Miksic with Barclays. Your line is now open.

Speaker Change: strong value for our investors with those acquisitions. And so we're going to be careful and thoughtful like we always are. And but that is a space that continues to be of interest. And we're, you know, stay tuned.

Kevin Lobo: But that is a space that continues to be of interest, and we're, you know, stay tuned.

Unknown Executive: Thank you.

Matthew O'brien: Our next question we'll call from that mix with Barclays. Your line is not open. Please go ahead. Great. Thanks so much for taking the question.

Kevin A. Lobo: Please go ahead. Hey, great. Thanks so much for taking the time to answer the question. So first, you know, congrats, obviously. And I haven't loved the bullish, you know, posture on sort of the sustainability of growth and some of your end. I think the perception was maybe the first quarter, maybe the first half, wasn't as strong as folks maybe came into the year thinking. And I mean, when you talk about mid-single digits, is it as simple as saying, look at last year's comps, and you start seeing that mid-single digit number play out?

Speaker Change: Thank you.

Speaker Change: Our next question will come from Matt Miksic with Barclays. Your line is now open. Please go ahead.

Matthew O'brien: So first, you know, congrats, obviously, and I haven't loved the bullish, you know, posture on, on sort of sustainability of growth and some of your end markets, like worth a few days. I think the perception was maybe the first quarter, maybe the first half wasn't as strong as folks maybe came into the year thinking, and I mean, when you talk about mythical digits. You know, is it is it is simple saying, you know, look at last year's comps and and you start seeing that, you know, maintain the number play out, or what gives you the confidence that when it's back, or something else that they said that you're going to be able to sustain as you said, like into the into some time early next year, and it won't fall.

Matthew Stephan Miksic: Hey, great, thanks so much for taking the question. So first, you know, congrats, obviously, and I, Kevin, love the bullish, you know, posture on on sort of sustainability of growth in some of your end markets like orthopedics and

Speaker Change: I think the perception was maybe the first quarter, maybe the first half.

Speaker Change: wasn't as strong as folks maybe came into the year thinking and I mean when you talk about mid-table digits

Speaker Change: You know, is it as simple as saying, you know, look at last year's comps and you start seeing that, you know, mid-single digit number play out or?

Kevin A. Lobo: Or what gives you the confidence that, whether it's backlog or something else, that you're going to be able to sustain this, as you said, into some time early next year and it won't fall off? Yeah, it's really our insight into the market, right? Talking to surgeons, looking at their surgery schedules, and seeing how far they're booked out.

Speaker Change: What gives you the confidence that, whether it's backlog or something else, that you're going to be able to sustain this, as you said, like into some time early next year, and it won't fall?

Matthew O'brien: Yeah, it's really our insight in the market, right, talking to surgeons, looking at their surgery schedules, and seeing how far they're booked out. That is a very good indicator for us, and over the years, we've built sort of our internal models that can kind of project that. Now it's hard to go out past six, seven, eight, nine months; then it gets a little murkier. But we have a pretty good visibility, and right now we see the market is robust and healthy, and of course, we love our position. And as you've seen, like the demand for Mako would not be this strong if you didn't have surgeons that are really excited about doing all of these procedures. And I think I mentioned earlier, to lies off to a very strong start.

Speaker Change: Yeah, it's really our insight in the market, right? Talking to surgeons, looking at their surgery schedules and seeing how far they're booked out. That is a very good indicator for us. And over the years, we've built sort of our internal models that can kind of project that. Now, it's hard to go out past 6, 7, 8, 9 months, then it gets a little murkier.

Kevin A. Lobo: That is a very good indicator for us. And over the years, we've built sort of our internal models that can kind of project that. Now, it's hard to go out past six, seven, eight, nine months; then it gets a little murkier.

Kevin A. Lobo: But we have pretty good visibility, and right now, we see the market as robust and healthy. And of course, we love our position. And as you've seen, the demand for MAKO would not be this strong if you didn't have surgeons that are really excited about doing all of these procedures. And I think I mentioned earlier July is off to a very strong start. And so that's, it's obviously only one month, but a strong month of volume. And then looking at the surgery schedules that we survey and talk to surgeons about and actually gather data on, we're feeling bullish about the market. That's super helpful.

Speaker Change: But we have a pretty good visibility, and right now we see the market as robust and healthy, and of course we love our position.

Speaker Change: And as you've seen, like, the demand for MAKO would not be this strong if you didn't have surgeons that are really excited about doing all of these procedures. And I think I mentioned earlier.

Matthew O'brien: So that's it's obviously only one month, but strong month of volume, and then looking at the surgery schedules that if we survey and talk to surgeons and actually gather data on, we're feeling bullish about the more.

Speaker Change: July is off to a very strong start and so that's

Speaker Change: It's obviously only one month, but strong month of volume and then looking at the surgery schedules that if we survey and talk to surgeons and actually gather data on, we're feeling bullish about the market.

Matthew O'brien: That's super helpful and on a great point on me go and thinking in Ashley your comments on me go and the fact that you're starting to get traction and you're starting to, I guess it sounds like, you know, taking maybe the same way in the intermediate years of make a launch in the US. If you could talk about other areas of strength internationally because it was sort of a notable lift some of your core markets and is there a pull through effect any other, any other drivers you can see that might be sustainable there on the international side and thanks so much for taking the question.

Kevin A. Lobo: And on a great point on MAKO, and thinking internationally, your comments on MAKO and the fact that you're starting to get traction, you're starting to, I guess it sounds like, you know, taking shit in the same way. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: That's super helpful and on a great point on MAKO and thinking internationally, your comments on MAKO and the fact that you're starting to get traction and you're starting to, I guess it sounds like, you know, taking share may be the same way.

Speaker Change: Intermediate years of MAKO launch in the U.S. If you could talk about other areas of strength internationally because it was sort of a notable lift some of your core markets and

Kevin A. Lobo: Any other drivers you can see that might be sustainable there on the international side? And thanks so much for taking the question. Yeah, great question there on the international side. What we're seeing, Matt, is there are two tips of the spear in international racing. One is Mako, and the other is our cameras, the 1788.

Speaker Change: Is there a pull-through effect? Any other drivers you can see that might be sustainable there on the international side? And thanks so much for taking the question. Yeah, great question there on the international. What we're seeing, Matt, is there are two tips of the spear in international.

Kevin Lobo: Yeah, great question there on the international. What we're seeing, Matt, is there are two tips of the spear in international: one is Mako and the other is our cameras, the 1788. So whenever we sell cameras and towers, and when we sell Mako, it does create a pull through of other striker business, and we're seeing that in multiple countries. And Mako took a little longer to move, but now it's really starting to take off. And because our market shares are actually a little bit lower internationally, as we get Mako's place, more of that business actually is coming from competitive accounts than they were in the United States. But those, we've discovered that those are the two really important platforms. And as we sell more cameras and as we sell more Mako's, it lifts the entire Striker portfolio. And so we're laser focused on those two businesses as the tips of the spear. But we've also really done a good job.

Kevin A. Lobo: So whenever we sell cameras and towers, and when we sell Mako, it does create a pull-through for other Stryker business. And we're seeing that in multiple countries. Mako took a little longer to move, but now it's really starting to take off.

Speaker Change: One is Mako and the other is our cameras, the 1788.

Speaker Change: So whenever we sell cameras and towers, and when we sell Mako, it does create a pull-through of other Stryker business.

Speaker Change: and we're seeing that in multiple countries.

Kevin A. Lobo: And because our market shares are actually a little bit lower internationally, as we get Makos placed, more of that business is actually coming from competitive accounts than they were in the United States. But we've discovered that those are two really important platforms. And as we sell more cameras and as we sell more Makos, it lifts the entire Stryker portfolio. And so we're laser focused on those two businesses as the tips of the spear, but we've also really done a good job.

Speaker Change: and Mako took a little longer to move, but now it's really starting to take off and because our market shares are actually a little bit lower internationally, as we get Makos placed, more of that business actually is coming from competitive accounts than they were in the United States.

Speaker Change: But those we've we've discovered that those are the two really important platforms and as we sell more cameras and as we sell more

Speaker Change: Makos, it lifts the entire Stryker portfolio.

Speaker Change: And so we're laser focused on those two businesses as the tips of the spear.

Kevin A. Lobo: It took us a while, as you know, to really get great leadership and get better connections between our divisions and international, to get international financials into the bonus plans of our US division leaders. That's been a series of, I'll call them small steps, that have really made us a much more global company. And so we've had, I think, five years now in a row where international growth has been at or above US growth.

Kevin Lobo: It took us a while, as you know, to really get great leadership and great better connection between our divisions and international, getting international financials into the bonus plans of our US division leaders. That's been a series of, call them small steps, that have really made us a much more global company. And so we've had, I think, five years now in a row where international growth has been at or above the US growth. I know the first half of the year international is a little bit behind, but we expect international to accelerate in the second half of the year and will be at or above the US for the full year once again, and that should continue for another many five ten years just to make up for last time as we gain the same kind of market shares that we enjoy in the US in many other countries around the world.

Speaker Change: But we've also really done a good job. It took us a while, as you know, to really get great leadership and better connection between our divisions and international, getting international financials into the bonus plans of our U.S. division leaders. It's been a series of, I'll call them small steps.

Speaker Change: that have really made us a much more global company. And so we've had, I think, five years now in a row where international growth has been at or above the U.S. growth. I know the first half of the year, international is a little bit behind, but we expect international to accelerate in the second half of the year and will be at or above the U.S.

Kevin A. Lobo: I know that in the first half of the year, international is a little bit behind, but we expect international to accelerate in the second half of the year and will be at or above the US for the full year once again. And that should continue for another five, 10 years, just to make up for lost time as we gain the same kind of market share that we enjoy in the US in many other countries around the world. Thanks so much.

Speaker Change: for the full year once again. And that should continue for another many five, ten years just to make up for lost time as we gain the same kind of market shares that we enjoy in the U.S. in many other countries around the world.

Steve Lichtman: Thanks so much.

Jason Beach: Our next question will come from Steve Litchman with Oppenheimer. Your line is now open; please go ahead. Thank you, evening guys. I'm having one to ask you about China. You know some mixed commentary during the quarter so far. You mentioned it as a positive. Can you talk about the environment overall from where you guys sit. You know from a macro perspective and you know just an operating environment perspective.

Kevin A. Lobo: Our next question will come from Steve Lichtman with Oppenheimer. Your line is now open. Please go ahead. Thank you. Evening, guys.

Speaker Change: Thanks so much.

Speaker Change: Our next question will come from Steve Lichtman with Oppenheimer. Your line is now open. Please go ahead.

Kevin A. Lobo: Kevin, I wanted to ask you about China. Some mixed commentary during the quarter so far, but you mentioned it as a positive. Can you talk about the environment overall from where you guys sit? You know, from a macro perspective, and you're just an operating environment? Yeah, Steve, it's Jason.

Steven Michael Lichtman: Thank you. Evening, guys.

Steven Michael Lichtman: Kevin, I wanted to ask you about China. Some mixed commentary during the quarter so far. You mentioned it as a positive. Can you talk about the environment overall from where you guys sit from a macro perspective and just an operating environment perspective?

Jason Beach: Yes, Steve, it's Jason. I'll take a swing at this, and Kevin can jump in if you want anything additional. But I would tell you, as you think about China in the quarter, good growth for us in China. I would say less impact from VBP than maybe we originally anticipated. So I think from a VBP standpoint, that environment is starting to stabilize and turning to grow for us. Yeah, and just as a reminder, it's a pretty small portion of Striker's overall business, and just so keep that in mind when you see the growth rates. They can be a little bit more volatile, both positive and negative, just given that it's small. The base is very small for us.

Jason: I'll take a swing at this, and Kevin can jump in if you want anything additional. But I would tell you, as you think about China in the quarter, good growth for us in China, I would say, less impact from VAT than maybe we originally anticipated. So I think from a VAT standpoint that that environment is starting to stabilize and turning to growth for us. Yeah, just as a reminder, it's a pretty small portion of Stryker's overall business. And just to keep that in mind, when you see the growth rates, they can be a little bit more volatile, both positive and negative. Just given that it's small, the base is very small for us.

Jason: Yeah, Steve, it's Jason. I'll take a swing at this, and Kevin can jump in if you want anything additional. But I would tell you, as you think about China in the quarter,

Speaker Change: Good growth for us in China. I would say less impact from VBP than maybe we originally anticipated. So I think from a VBP standpoint, that environment is starting to stabilize and turning to growth for us.

Kevin A. Lobo: Look, it's an important market with a large population; we're not, we're not going to sort of move away from China. But it's been a challenge for the last couple of years. And I think the worst is over, and now we, hopefully, will get into a more sustained positive profile, like we saw last quarter. Appreciate it. And then just a follow up on free cash flow. So you know, it's trailed a bit here in the first half of this year versus last. You mentioned, "Here's some working capital movement."

Kevin: Yeah, and just as a reminder, it's a pretty small portion of Stryker's overall business.

Speaker Change: and and just so keep that in mind when you see the growth rates they can be a little bit more volatile both positive and negative just given that it's small the base is very small for us

Jason Beach: Look, it's an important market with a large population. We're not, we're not going to sort of move away from China, but it's been a challenge the last couple of years, and I think the worst is over. Now we hopefully will get into a more sustained positive profile like we saw last quarter. Appreciate it.

Speaker Change: Look, it's an important market with a large population. We're not going to sort of move away from China, but it's been a challenge the last couple of years. And I think the worst is over. And now hopefully we'll get into a more sustained, positive profile like we saw last quarter.

Glenn Boehnlein: And then just a follow-up on free cash flow. So, you know, it's traveled a bit here for half of this year versus last. You mentioned, you know, some working capital movement. Any thoughts you could provide on sort of full year pre-casual outlook or, you know, improvement on that working capital viewing parts that you talked about. Sure, I think, you know, first of all, we still have that target out there: 78% free cash flow conversion. We don't think any differently about that, given our performance year to date this year. I think, kind of what you're seeing, you know, in the first half of this year are some working capital differences year over year from last year.

Speaker Change: Appreciate it. And then just a follow-up on free cash flow. So, you know, it's trailed a bit here, first half of this year versus last. You mentioned

Glenn: Any thoughts you could provide on sort of a full year, pre-cash flow outlook or improvements on that working capital moving parts that you talked about? Sure. I think, you know, first of all, we still have that target out there of 70 to 80 percent free cash flow conversion. We don't think any differently about that, given our performance year to date this year. I think kind of what you're seeing, you know, in the first half of this year are some working capital differences year over year from last year.

Speaker Change: Here's some working capital movement. Any thoughts you could provide on sort of full year, pre-cash flow outlook or, you know, improvements on that working capital moving parts that you talked about?

Speaker Change: Sure. I think, um...

Speaker Change: You know, first of all, we still have that target out there of 70 to 80% free cash flow conversion. We don't think any differently about that.

Speaker Change: Given our performance year-to-date this year, I think

Speaker Change: What you're seeing in the first half of this year are some working capital differences year over year from last year, some of those having to do with, you know, we picked back up M&A, so we're seeing a little bit more of integration flow through. We also are seeing, you know, inventory changes just related to higher sales. That naturally happens. Same thing with accounts receivable.

Glenn: Some of those having to do with, you know, we picked back up M&A, so we're seeing a little bit more integration flow through. We also are seeing inventory changes just related to higher sales that naturally happen. The same thing with account receivable.

Glenn Boehnlein: Some of those having to do with, you know, we picked that up M&A. So we're seeing a little bit more of integration flow through. We also are seeing, you know, inventory changes just related to higher sales. That naturally happens; the same thing with accounts receivable. And then lastly, you know, we have timing of the transition tax payments that tell into this first half of the year that are, say, larger payments than what we normally would expect. And so that, that also impacted our cash flow in the first half of this year.

Glenn: And then lastly, you know, we have timing of some transition tax payments that fell into this first half of the year that are, say, larger payments than what we normally would expect. And so that also impacted our cash flow in the first half of this year. For the second half of this year, you know, I feel like we'll see.

Speaker Change: And then lastly, you know, we have timing of some transition tax payments that fell into this first half of the year that

Speaker Change: Jason Boehnlein, Jason Beach, Kevin Lobo

Glenn Boehnlein: So the back half of this year, you know, I feel like we'll see. You know, we'll see what we normally see, seasonally, a lot of pickup in our free cash flow conversion to Q3 and then honestly on into Q4. And a lot of that has to do with just, you know, the flow of earnings is much higher in Q3, Q4. So that really impacts our capital performance. It also rings down inventory, and then we'll work to keep it a hard line. So, you know, we'll still part between 70 and 80% free cash flow. And we have a map away from that.

Glenn: You know, we'll see what we normally see seasonally, a lot of pickup in our free cash flow conversion in Q3, and then honestly, into Q4, and a lot of that has to do with just, you know, the flow of earnings is much higher in Q3, and Q4, so that really impacts our cash flow performance. It also brings down inventory, and then we'll work to keep AR in line. So, you know, we'll still target between 70 and 80% free cash flow, and we haven't backed away from that. Got it. Thanks, guys. Our next question will come from Vijay Kumar with Evercore SI. Your line is now open.

Speaker Change: You know, we'll see what we normally see seasonally.

Speaker Change: A lot of pickup in our free cash flow conversion in Q3, and then honestly on into Q4. And a lot of that has to do with just, you know, the flow of earnings is much higher in Q3, Q4, so that really impacts our cash flow performance. It also brings down inventory, and then we'll work to keep AR in line. So, you know, we'll still target between 70% and 80% free cash flow, and we haven't backed away from that.

Glenn Boehnlein: Got it.

Glenn Boehnlein: Thanks, guys.

DJ Kumar: Our next question will come from DJ Kumar with Evercore Asset. Your line is not open. Please go ahead. Hi guys, thanks for taking my question. Apologies for the argue issues in our end.

Speaker Change: Got it. Thanks, guys.

Speaker Change: Our next question will come from Vijay Kumar with Evercore SI. Your line is now open. Please go ahead.

Kevin A. Lobo: Please go ahead. Hi guys, thanks for taking my question. Apologies for the audio issues on our end.

Kevin A. Lobo: Kevin, maybe one on LP35, maybe talk about the launch. I think in the past you mentioned some capacity constraints. They're contributing in 2Q. Are we at full launch mode right now? Well, we've already started taking orders. Let me put it to you that way.

Kevin Lobo: Kevin, maybe one on that LP 35, maybe talk about the launch. I think in the past, you mentioned some capacity constraints. They're contributing in two Q. Are we at the full launch more right now? Well, we've already started taking orders. Let me put it through that way. And we have the ability to ramp production pretty fast. So this is not like an implant launch like if you think about Panjia. You have to make a set of implants. You have to make sets of instruments. This is an assembly operation. So we'll be able to scale this pretty quickly.

Vijay Muniyappa Kumar: Hi guys, thanks for taking my question. Apologies for the audio issues on our end. Kevin, maybe one on LP35, maybe talk about the launch. I think in the past you had mentioned some capacity constraints. Did it contribute in 2Q? Are we at full launch mode right now?

Kevin A. Lobo: And we have the ability to ramp production pretty fast. So this is not like an implant launch. Like if you think about Pangea, you have to make sets of implants; you have to make sets of instruments.

Speaker Change: Well, we've already started taking orders, let me put it to you that way. And we have the ability to ramp production pretty fast. So this is not like a implant launch, like if you think about Pangea, you have to make sets of implants, you have to make sets of instruments. This is an assembly operation. So we'll be able to scale this.

Kevin Lobo: And so I wouldn't look at this as being capacity constraint. The only constraint is obviously getting out there, having customers see it, putting it in their budgets, ordering it. And then our ability to meet the demand will be faster out of the gates with LP 35 than we would be for any kind of an implant launch. So don't think about capacity as a major concern.

Speaker Change: Pretty quickly. And so I wouldn't look at this as being capacity constraint. The only constraint is obviously getting out there having customers see it.

Kevin A. Lobo: This is an assembly operation, so we'll be able to scale this pretty quickly. And so I wouldn't look at this as being a capacity constraint. The only constraint is obviously getting out there, having customers see it, put it in their budgets, and ordering it, and then our ability to meet the demand will be faster out of the gates with LP35 than we would be for any kind of implant launch. So don't think about capacity as a major concern. And maybe one on that guidance here.

Speaker Change: putting it in their budgets, ordering it, and then our ability to meet the demand will be faster out of the gates with LP35 than we would be for any kind of an implant launch. So don't think about capacity as a major concern.

DJ Kumar: I'm sure in maybe one of that guidance here. The overall organic dollar revenues. It seemed in line as far as street, but guidance was raised. Just talk about; I think you mentioned about July being strong.

Kevin A. Lobo: The overall organic dollar revenues, it seemed in lineage versus street, but guidance was raised. Just talk about, I think you mentioned about, you know, July being strong. Looks like there were some one-off items impacting 2Q.

Speaker Change: Understood. And maybe one on that guidance here.

Speaker Change: The overall organic dollar revenues, it seemed in lineage versus free, but guidance was raised. Just talk about, I think you mentioned about, you know, July being strong. Looks like there were some one-off items impacting in 2Q.

Kevin Lobo: Looks like there were some one-off items in impacting in two Q to talk about the visibility and confidence in the guide race. Yeah, listen, we don't raise guidance without having pretty good confidence. And you saw we raised after Q1, we raised again after Q2. We have very good visibility into our capital, and we have a very significant backlog of capital, which we know are going to ship. So that gives us a lot of confidence.

Kevin A. Lobo: So talk about the visibility and the confidence in the guide race for that cap. Yeah, listen, we don't raise guidance without having pretty good confidence. And you saw we raised guidance after Q1, and we raised it again after Q2.

Speaker Change: So talk about the visibility and confidence in the guiderace for that cast.

Kevin A. Lobo: We have very good visibility into our capital, and we have a very significant backlog of capital, which we know we're going to ship. So that gives us a lot of confidence. And then you feel about the procedures, and that's the other part of it.

Speaker Change: Yeah, listen, we don't raise guidance without having pretty good confidence and you saw we raised after Q1, we raised again after Q2. We have very good visibility into our capital and we have a very significant backlog of capital which we know we're going to ship.

Kevin Lobo: And then how you feel about the procedures, and that's the other part of it. And again, we have pretty good visibility into the procedures. So, at least for six months, we've tended to be pretty good. That predicting six months, predicting beyond six months, that's a little harder. But we feel very confident that we're going to deliver this raised guidance, and don't be afraid if we scare 10% again. That'll be the third year in a row of being hovering around that number or being above that number. And so we have a lot of headwinds. I think I nominated those earlier in the call, and those had those tailwinds are really going to help us.

Kevin A. Lobo: And again, we have pretty good visibility into the procedures. So, at least for six months, we've tended to be pretty good at predicting six months. Predicting beyond six months, that's a little harder, but we feel very confident that we're gonna deliver this raised guidance and don't be afraid if we miss 10% again. That'll be the third year in a row of hovering around that number or being above that number. And so we have a lot of headwinds. I think I enumerated those earlier in the call, and those tailwinds are really gonna help.

Speaker Change: So that gives us a lot of confidence, and then how you feel about the procedures, and that's the other part of it, and again, we have pretty good visibility into the procedures, so at least for six months,

Speaker Change: We've tended to be pretty good at predicting six months predicting beyond six months so that's a little harder, but we feel very confident that we're going to deliver this raised guidance and

Speaker Change: Don't be afraid if we scare 10% again, that'll be the third year in a row of being, you know, hovering around that number or being above that number. And so we have a lot of headwinds. I think I enumerated those earlier in the call, and those tailwinds are really going to help us.

Kevin Lobo: Thanks. Thanks, guys.

Kevin A. Lobo: Okay. Thanks, guys. Our next question will come from Matt Taylor with Jeffreys. Your line is now open.

Matthew Taylor: Our next question will come from Matt Taylor, which Jeffries; you're line is not open. Please go ahead. Hi guys. Thanks for taking the question. I guess I wanted to follow on. I think it was Travis of Question before asking about some of the growth drivers next year. You called out. And the deep and seeing big incremental drivers.

Speaker Change: Understood. Thanks, guys.

Speaker Change: Our next question will come from Matt Taylor with Jeffries. If your line is not open, please go ahead.

Kevin A. Lobo: Please go ahead. Hi guys. Thanks for taking the question. I guess I wanted to follow on. I think Travis's question before asking about some of the growth drivers next year. You called out Tangier and the DFIB as being big incremental drivers. Could you help us think about the shape of those launches or the contributions in 2025? Any guideposts that you could give us in thinking about how they could roll in and contribute to the opportunity sets? And I guess how long you view those as growth drivers in 2025 and beyond? Listen, they're both very significant contributors to future growth. I would say LP35 will be more rapid.

Matthew Charles Taylor: Hi guys, thanks for taking the question.

Matthew Charles Taylor: I guess I wanted to follow on. I think it was Travis's question before asking about some of the growth drivers next year. You called out Tangier.

Matthew Taylor: Could you help us think about the shape of those launches or the contributions in 2025? Any guide post that you would give us and thinking about how they could roll in and contribute the opportunity sets. And I guess how long you do those as growth drivers in 25 and beyond. Listen, they're both very significant contributors to future growth. I would say LP 35 will be more rapid. So you'll see a pickup in the second half of this year, a big year next year, a big year of the year after. But these products last a long time.

Speaker Change: and the DFIBs being big incremental drivers. Could you help us think about the shape of those launches or the contributions?

Speaker Change: In 2025, any guideposts that you would give us in thinking about how they could roll in and contribute the opportunity sets, and I guess how long you view those as growth drivers in 2025 and beyond?

Speaker Change: Listen, they're both very significant contributors to future growth.

Kevin A. Lobo: So you'll see a pickup in the second half of this year, a big year next year, a big year the year after, but these products last a long time. And so some people who are buying these defibs will hold them for seven, eight years. So it'll have a long sort of tailwind, but it'll be spiky in the first sort of two years, two to three years; you'll see pretty meaningful growth out of Lifepak 35. Pangea is a little different.

Speaker Change: I would say LP35 will be more rapid.

Speaker Change: So you'll see a pickup in the second half of this year, a big year next year, a big year the year after, but

Kevin Lobo: And so some people who are buying these DFS will hold them for seven or eight years. So it'll have a long sort of tailwind, but it'll be spiky in the first sort of two years, two to three years. You'll see pretty meaningful growth out of life back 35. 10G is a little different. So it won't be fully launched until the second half of next year. It takes multiple quarters to be able to build all of the instrument sets and the implant sets. And so it'll be, but these implant latches launches will last a long, long, long time.

Speaker Change: These products last a long time. And so some people who are buying these defibs will hold them for seven, eight years. So it'll have a long sort of tailwind, but it'll be it'll it'll be spiky in the first

Speaker Change: Sort of two years, two to three years, you'll see pretty meaningful growth.

Kevin A. Lobo: So it won't be fully launched until the second half of next year. It takes multiple quarters to be able to build all of the instrument sets and the implant sets. And so it'll be, but these implant launches will last a long, long, long time. They'll be providing a more, let's say a little bit more moderate, but sustained and consistent tailwind to our core trauma business and make us comprehensive with fabulous nailing systems, as well as plating.

Speaker Change: Out of Life Pack 35.

Speaker Change: Pangea is a little different. So it won't be fully launched until the second half of next year. It takes multiple quarters to be able to build.

Speaker Change: All of the instrument sets and the implant sets and so it'll be, but these implant launches will last a long, long, long time. It'll be providing a more, let's say, a little bit more moderate, but sustained and consistent tailwind.

Kevin Lobo: It'll be provided a more, let's say, a little bit more moderate, but sustained and consistent tailwind to our core trauma business and makes us comprehensive with a fabulous nailing systems, as well as plating. So we will be an absolute leader in the trauma and extremities business, and you know super excited, but that that doesn't also it doesn't stop at those two products, right? You still have the Mako spine coming, the coal pilot coming, the Mako shoulder coming, 78 is still, and we were still getting new indications with new floor floors to be able to light up cancer. We have that for long, but we're going to get that for bladder and as well as ovarian cancer. That opens up new markets and new opportunities as well.

Speaker Change: to our core trauma business and makes us comprehensive with with a fabulous

Kevin A. Lobo: So we will be an absolute leader in the trauma and extremities business and super excited. But that doesn't also, it doesn't stop at those two products, right? You still have the Mako spine coming, the Co-Pilot coming, the Mako shoulder coming. 1788 is still, I mean, we're still getting new indications with new fluorophores to be able to light up cancer.

Speaker Change: Nailing Systems, as well as plating, so we will be a

Speaker Change: an absolute leader in the trauma and extremities business and

Speaker Change: You know, super excited, but that doesn't also, it doesn't stop at those two products, right? You still have...

Speaker Change: You have the MAKO spine coming, the co-pilot coming, the MAKO shoulder coming. 1788 is still, I mean, we're still getting new indications with new fluorophores.

Kevin A. Lobo: We have that for lung cancer, but we're going to get that for bladder cancer and as well as ovarian cancer. That opens up new markets and new opportunities as well. So this new product cadence that we're in right now, these products are multi-year. They don't sort of just provide a small one-year benefit.

Speaker Change: To be able to light up cancer, we have that for long, but we're going to get that.

Kevin Lobo: So, this, this new product cadence that we're in right now, these products are multi-year. They don't sort of just provide a small one-year benefit in many of these products. Stiles. I haven't yet been launched internationally. So we've launched these in the US and maybe in some markets Europe because of you at EMDR. These products, we're going to be talking about as new products a year or two from now. They haven't even been launched, right? So that's going to provide that international tail tailwind for for many years to come. So there's a lot to be excited about in terms of the product innovation cycle, and we're hitting the mark.

Speaker Change: for bladder and as well as ovarian cancer that opens up new markets and new opportunities as well so this this new product uh cadence that we're in right now these products are multi-year they don't sort of just provide a a small you know one-year benefit and many of these products

Kevin A. Lobo: And many of these products haven't yet been launched internationally. So we've launched these in the U.S., and maybe in some markets. But Europe, because of UMDR, these products we're going to be talking about as new products a year or two from now. They haven't even been launched.

Speaker Change: haven't yet been launched internationally.

Speaker Change: So we've launched these in the U.S. and maybe in some markets in Europe because of UMDR.

Kevin A. Lobo: Right. So that's going to provide that international tailwind for many years to come. So there's a lot to be excited about in terms of the product innovation cycle. We're hitting the mark. That's another reason for the raise.

Speaker Change: These products we're going to be talking about as new products.

Speaker Change: A year or two from now.

Speaker Change: They haven't even been launched, right? So that's going to provide that international tailwind for

Speaker Change: for many years to come, so.

Speaker Change: There's a lot to be excited about in terms of the product.

Kevin Lobo: That's another reason for the raise, right? So you launch a new product, you see the customer feedback, you realize you have a winner and Pangea is a winner and Life Pack 35 is a winner. And then you can lean forward, and we already know with the orders that are coming in already that these are going to be winners and they're going to be multi-year winners. Thanks, gentlemen.

Kevin A. Lobo: Right. So you launch a new product, you see the customer feedback, you realize you have a winner, and Pangea is a winner, and Lifepack 35 is a winner. And then you can lean forward.

Speaker Change: Innovation Cycle, and we're hitting the mark.

Speaker Change: That's another reason for the raise, right? So you launch a new product, you see the customer feedback, you realize you have a winner.

Kevin A. Lobo: And we already know from the orders that are coming in already that these are going to be winners, and they're going to be multi-year winners. Thanks, Kevin. Could I ask a follow-up on just the margins?

Speaker Change: and Pangea is a winner and LifePak 35 is a winner and then you can lean forward and we already know with the orders that are coming in already that that these are going to be winners and they're going to be multi-year winners.

Glenn Boehnlein: Could I have to follow up on just the margins? We talked a lot about the margin, facing this year clan and contributions in the second half. And I guess I was just wondering if you could make some high-level comments on how the shape of the margin progression would look in 2025. You think it's going to be similar where there's more expansion in the second half and the first half, or would it be different because of the progress you're making this year.

Speaker Change: Thanks, Kevin. Could I ask a follow-up on just the margins? We talked a lot about the margins.

Jason: We talked a lot about the margin facing this year, Glenn, and the contributions in the second half, and I guess I was just wondering if you could make some high-level comments on how the shape of the margin progression would look in 2025. Do you think it's going to be similar where there's more expansion in the second half than in the first half, or would it be different because of the progress you're making this year? Hey Matt, it's Jason.

Speaker Change: I guess I was just wondering if you could make some high-level comments on

Speaker Change: How the shape of the margin progression would look in 2025, do you think it's going to be similar where there's more expansion in the second half than the first half, or would it be different because of the progress you're making this year?

Jason Beach: Hey, man, it's Jason. I'll jump in here. You know, as we think about 2025, obviously, we'll talk more about that in January. Certainly, you can expect us to deliver on the 100 basis points of op margin expansion next year. But in terms of how that shape will look, we'll give you more information when we get to January.

Jason: I'll jump in here. You know, as we think about 2025, obviously, we'll talk more about that in January. Certainly, you can expect us to deliver on the 100 basis point of operating margin expansion next year. But in terms of how that shape will look, we'll give you more information when we get to January. All right. Thanks, Jay. Our next question will come from the line of Josh Jennings with TD Cowan. Your line is not open. Please go ahead. Hi, good evening.

Jason: Hey Matt, it's Jason. I'll jump in here. You know, as we think about 2025, obviously, we'll talk more about that in January . Certainly, you can expect us to deliver on the 100 basis point of op margin expansion next year, but in terms of how that shape will look, we'll give you more information when we get to January .

Joshua Jennings: Our next question will come from the line of Josh Jennings with TD Talent. Your line is not open. Please go ahead. Hi, good evening. Thanks for taking the questions. Congratulations on organic revenue growth. We're just a quarter. We're looking for just some commentary.

Matt: All right, thank you.

Speaker Change: Our next question will come from the line of Josh Jennings with TD Cowen. Your line is not open. Please go ahead.

Kevin A. Lobo: Thanks for taking the questions. Congratulations on Organic Gravity Growth being raised a quarter. We're looking for just some commentary, Kevin and team, on just the Inventory Surgical Center Channel in the United States. Our understanding is that just the infrastructure, the number of ortho ASCs, is the bottleneck in terms of the pace of migration for total joints into that setting. Anything you can share just on the first half in terms of infrastructure buildout, was it impacted by interest rates, and any change in the outlook for this migration pace over the next couple of years for total joints?

Joshua Thomas Jennings: Hi, good evening. Thanks for taking the questions. Congratulations on Organic Revenue Growth being raised quarter.

Kevin Lobo: Kevin and team are just on the Inventory Surgical Center channel in the United States. Our understanding is that just that the infrastructure number of worth away. The policies are the bottleneck in terms of the pace of migration for total joints into that setting. Anything you can share this on the first tap in terms of infrastructure build out was impacted by interest rates. And any change in the outlook in this migration pace over the next couple of years for total joints.

Speaker Change: We're looking for just some commentary, Kevin and team, on just on Inventory Surgical Center Channel in the United States. Our understanding is that just that the infrastructure, the number of...

Speaker Change: ortho ASCs are the bottleneck in terms of the pace of migration for total joints into that.

Speaker Change: Anything you can share just in the first half in terms of infrastructure build out, was it impacted by interest rates?

Kevin A. Lobo: And then lastly, sorry for the three-part question, just the pricing commentary for the company, should we hold that for the ASC business as well, or was there more pricing pressure or less pricing pressure, or more pricing improvement or less pricing improvement in that ASC channel? Thanks for taking the question. Okay, I hope I cover all parts of this question in my answer. But let me start by saying that the pricing that we're seeing, ASC versus hospital, there really isn't any difference. Our pricing is very consistent across the different channels where we sell.

Speaker Change: and any change in the outlook in this migration pace over the next couple of years for total joints.

Kevin Lobo: And then lastly, sorry for the three-part question, just the pricing commentary for the company. Should we hold that for the AFC business as well? Or was there more pressing pricing pressure, or less pricing pressure, or we're pricing improvement, or less pricing improvement in that AFC channel. Thanks for taking the question. Okay, I hope I get all parts of this question in my answer, but I'll be start by saying that the pricing that we're seeing AFC versus hospital there really isn't any difference. Our pricing is very consistent across the different channels where we sell, so that's the first part.

Speaker Change #101: And then lastly, sorry for the three-part question, just the pricing commentary.

Speaker Change: for the company.

Speaker Change #100: Should we hold that for the AFC business as well, or was there more pricing pressure or less pricing pressure or more pricing improvement or less pricing improvement in that AFC channel? Thanks for taking the question.

Speaker Change #102: Okay, I hope I get all parts of this question in my answer, but let me start by saying that the pricing that we're seeing, ASC versus hospital, there really isn't any difference.

Kevin Lobo: The second part is I'd say the AFC continues to be a positive trend that you're going to see, and it's not going to slow down anytime soon. Even with interest rates being high, hospitals are finding ways to get their AFCs built and constructed, and we've seen continued. I would call it steady growth. This second quarter finished with the highest percent of knees and hips done in amateur research recenters. We're not going to give the exact number; we'll perhaps at the end of the year give you the exact percentage, but it continues to climb. Our percent of hips and knees done in the AFC every quarter continues to move up, and that happened in the first quarter.

Kevin A. Lobo: So that's the first part. The second part is, I'd say the ASC continues to be a positive trend that you're going to see, and it's not going to slow down anytime soon, even with interest rates being high. Hospitals are finding ways to get their ASCs built and constructed. And we've seen continued, I would call it steady growth. This second quarter finished with the highest percent of knees and hips done in ambulatory surgery centers.

Speaker Change #103: Our pricing is very consistent across the different channels where we sell. So that's the first part. The second part is I'd say the ASC continues to be a positive trend that you're going to see and it's not going to slow down anytime soon.

Speaker Change #103: Even with interest rates being high, hospitals are finding ways to get their ASCs built and constructed, and we've seen continued, I would call it steady growth.

Speaker Change #104: This second quarter finished with the highest percent of knees and hips done in ambulatory surgery centers. We're not going to give the exact number. Perhaps at the end of the year we'll give you...

Kevin A. Lobo: We're not going to give the exact number; perhaps at the end of the year, we'll give you the exact percentage, but it continues to climb. Our percent of hips and knees done in the ASC every quarter continues to move up. And that happened in the first quarter. It happened again in the second quarter.

Speaker Change #104: The exact percentage, but it continues to climb.

Speaker Change #104: Our percent of hips and knees done in the ASC, every quarter it continues to move up, and that happened in the first quarter, it happened again in the second quarter.

Kevin Lobo: It happened again in the second quarter. And if we look at our AFC, our growth in AFCs is accreted to strikers' overall growth. So we are growing at a high rate in AFCs. This trend, we believe favors us given the breadth of our offering our offering in orthopedic AFCs. And so we welcome this shift, and so far, so good.

Kevin A. Lobo: And if we look at our ASC, our growth in ASCs, it is accreted to Stryker's overall growth. So we are growing at a high rate in ASCs. This trend, we believe, favors us given the breadth of our operating our offering in orthopedic ASCs. And so we welcome this shift. And so far, so good.

Speaker Change #105: And if we look at our ASC, our growth in ASCs, it is accreted to Stryker's overall growth. So we are growing at a high rate in ASCs. This trend, we believe, favors us given the breadth of our offering in orthopedic ASCs.

Speaker Change #105: And so we welcome this shift, and so far, so good.

Kevin Lobo: Great. Thanks for that. And then just follow up. And you've kind of given it. Trikers outlook for multiple ortho categories or in segments.

Kevin A. Lobo: And then just to follow up, you've kind of given Stryker's outlook for multiple ortho categories or segments. I was hoping you could do the same for the U.S. spine industry and just your outlook there, the health of the market. And you got Q Guidance and CoPilot approval today. You were launching Mako Spine.

Speaker Change #106: Great, thanks for that. And then just to follow up, you know, you've kind of given and

Speaker Change #107: Stryker's outlook for multiple ortho categories or in segments was hoping to do the same for the U.S. spine industry and just

Jason Beach: We hope you could do the same for the US spine industry and just your outlook there, health of the market. And, you know, you got cue guidance and co-pilot update of approval today. You're launching Mako's spine. You think Stryker's spine is kind of maintaining share in the first half of 2024 and can gain share with these enabling technology ads, or is Stryker's spine gaining share currently in the US market? Thanks a lot.

Speaker Change #108: Your Outlook there, Health of the Market, and you know, you've got...

Jason: Do you think Stryker Spine is kind of maintaining share in the first half of 2024 and can gain share with these enabling technology ads? Or is Stryker Spine losing share currently in the U.S. market? Thanks a lot. Yeah, Josh. This is Jason.

Speaker Change #109: Q Guidance and Co-Pilot update of approval today.

Speaker Change #133: We're launching Mako Spine. Do you think Stryker Spine is kind of maintaining share in the first half of 2024 and can gain share with these enabling technology ads? Or is Stryker Spine gaining share currently in the U.S. market? Thanks a lot.

Jason: I'll take this one. I would say, you know, just as you think about specifically the second quarter, I would say we have had a solid quarter in spine, led by interventional spine. You know, as we think about the future, we've certainly talked about Copilot and Mako spine and how that will help us in the spine market. And so really, no, nothing additional to add there in terms of how we think about the future. I appreciate it.

Jason Beach: Yeah, Josh, this is Jason. I'll take this one. I would say, you know, just as you think about specifically the second quarter, I would say we have had a solid quarter in spine, led by interventional spine. You know, as we think to the future, we've certainly talked about, you know, co-pilot and Mako's spine and how that will help us in the spine market. And so really know nothing additional to add there in terms of how we think about the future. Appreciate it. Thanks.

Jason: Yeah, Josh, this is Jason. I'll take this one. I would say, you know, just as you think about specifically the second quarter, I would say we have had a solid quarter in spine led by led by interventional spine.

Jason: You know, as we think to the future, we've certainly talked about, you know, Copilot and MakoSpine and how that will help us in the spine market. And so, really, nothing additional to add there in terms of how we think about the future.

Danielle Antalffy: All right. Our next question will come from the line of Danielle Antelope. Would you be? Yes. Your line is now open. Please go ahead. Thanks. Good afternoon, guys. Thanks so much for taking the question. Congrats on a really good quarter. Just a follow-up question on the ASC dynamic. Kevin, just curious about how you're seeing, if there's any difference, you're seeing from a market share perspective in the ASC versus outside the ASC for your both of the robot and the hip and knee implant. And I ask this question because they think one of the advantages of strikers is just the breadth of the product offering in the ASC.

Kevin A. Lobo: Thanks. Our next question will come from the line of Danielle Antalffy with UPS. Your line is now open.

Speaker Change #110: Our next question will come from the line of Danielle Antalffy with UPS. Your line is now open. Please go ahead.

Kevin A. Lobo: Please go ahead. Hey, good afternoon, guys. Thanks so much for taking the question. Congratulations on a really good quarter. Just a follow-up question on the ASC dynamic. Kevin, just curious about how you're seeing if there's any difference you're seeing from a market share perspective in the ASC versus outside the ASC for your both the robot and the hip and knee implant. And I ask this question because I think one of the advantages of Stryker is just the breadth of the product offering in the ASC.

Danielle Joy Antalffy: Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on a really good quarter. Just a follow-up question on the ASD dynamic. Kevin, just curious about how you're seeing, if there's any difference you're seeing from a market share perspective in the ASD versus outside the ASD for your, both the robot and the hip and knee implant. And I ask this question because I think one of the advantages of Stryker is just the breadth.

Kevin A. Lobo: So I just want to sanity check that with you. Yes, Danielle, what I'd say is that if there is a big renovation or new construction, we do extremely well. But I don't want to speak on behalf of all ASCs, right?

Kevin Lobo: So just want to sanity check that with you. Yes. Danielle, what I'd say is that if there is a big renovation or new construction, we do extremely well. So I don't want to speak on behalf of all ASCs, right? If it's already an ASC that's an orthopedic ASC and there are entrenched surgeons that are using competitive products, that's a little harder for us to displace. But if they're doing a big renovation or if they're doing new construction, we have a fantastic offense that wins at very, very high rates. And that's been one of the engines that's caused this tremendous growth for us in the ASC, and why we continue to believe that that's the area where we're going to be laser focused.

Danielle Joy Antalffy: of the product offering in the ASB. So just want to sanity check that with you.

Kevin A. Lobo: If it's already an ASC that's an orthopedic ASC, and there are entrenched surgeons that are using competitive products, that's a little harder for us to displace. But if they're doing a big renovation, or if they're doing new construction, we have a fantastic offense that wins at very, very high rates. And that's been one of the engines that's caused this tremendous growth for us in the ASC and why we continue to believe that that's the area where we're going to be laser focused.

Speaker Change #112: Yes, Danielle, what I'd say is that if there is a big renovation or new construction

Speaker Change #113: We do extremely well.

Speaker Change #114: So I don't want to speak on behalf of all ASCs.

Speaker Change #115: Right, if it's already an ASC that's an orthopedic ASC and there's entrenched surgeons that are using competitive products, that's a little harder for us.

Speaker Change #115: to displace. But if they're doing a big renovation, or if they're doing new construction, we have a fantastic offense.

Speaker Change #115: that wins at very, very high rates.

Speaker Change #115: And that's been one of the engines that's caused this tremendous growth for us in the ASC and why we continue to believe that that's the area where we're going to be laser focused. That's the area where we are winning today, and that's the area we're going to continue to win in the future.

Kevin Lobo: That's the area where we are winning today, and that's the area we're going to continue to win in the future. So it's not necessarily all ASCs. Definitely, definitely, that segment, and there's new construction going on all the time. Yeah, got it. Understood. Thank you so much for that.

Kevin A. Lobo: That's the area where we are winning today. And that's the area we're going to continue to win in. So it's not necessarily all ASU, definitely, definitely that segment, and there's continued new construction going on all the time. Yeah, got it. Understood. Thank you so much for that.

Speaker Change #115: So it's not necessarily all AFC. Got it. Definitely. Definitely that segment. And there's new construction going on all the time.

Kevin A. Lobo: And then just to follow up on that, if we fast forward, so the shift has been happening over the last few years now. I mean, where do you think this settles out if you're talking about hips, knees, and extremities and the percentage of procedures being done at the ASC versus in the hospital in, say, five years? Thanks so much.

Kevin Lobo: And then just to follow up on that, we fast forward so the shift has been happening over the last few years now. I mean, where do you think this settles out if you're talking about hip, knees, and extremities and percentage of procedures being done at the ASC versus in the hospital in, say, five years? Thanks so much. Yeah. Look, I don't have a crystal ball. It's going to go higher. This is an undeniable trend. Surgeons love it. They have a; they get a piece of the action in terms of their ownership interest. Patients love it because they don't have to worry about parking.

Speaker Change #116: Yeah, got it. Understood. Thank you so much for that. And then just to just to follow up on that, if we fast forward, so the shift has been happening over the last few years now. I mean, where do you think this settles out? If you're talking about hips, knees, and extremities and percentage of procedures being done at the ASC versus in the hospital in, say, five years?

Kevin A. Lobo: Yeah. Yeah. Look, I don't have a crystal ball. I think it's going to go higher. There's just this undeniable trend. Surgeons love it. They get a piece of the action in terms of their ownership interest. Patients love it because they don't have to worry about parking. It's close to their home. Everybody's happy. There are no sick people.

Speaker Change #117: Thanks so much. Yeah. Yeah. Look, I don't have a crystal ball. It's going to go higher. There's just, this is an undeniable trend.

Speaker Change #118: Surgeons love it. They have a they get a piece of the action in terms of their ownership interest.

Kevin Lobo: It's close to their home. Everybody's happy. There are no sick people. So it's just good for the healthcare system. And so it's just going to continue increase. What's the upper limit? I don't know. But I would tell you, I feel differently about this than I did five years ago. I thought it would grow. It is growing at a faster rate than I thought. We are even seeing total ankles done in ASCs, obviously shoulder replacements done in ASCs, even, you know, lumbar spine, which I didn't think; I thought cervical sure didn't think I'd see lumbar. So you're, you're just going to see more and more procedures being done.

Kevin A. Lobo: So it's just good for the health care system, and so it's just going to continue to increase. What's the upper limit?

Speaker Change #118: Patients love it because they don't have to worry about parking. It's close to their home. Everybody's happy. There are no sick people. So it's just good for the healthcare system. And so it's just going to continue to increase. What's the upper limit? I don't know.

Kevin A. Lobo: I don't know. But I would tell you I feel differently about this than I did five years ago. I thought it would grow.

Kevin A. Lobo: It is growing at a faster rate than I thought. We are even seeing, you know, total ankles done in ASCs, obviously shoulder replacements done in ASCs, even, you know, the lumbar spine, which I didn't think I'd think of as cervical. Sure, but I didn't think I'd see the lumbar spine.

Speaker Change #119: But I would tell you, I feel differently about this than I did five years ago. I thought it would grow. It is growing at a faster rate than I thought. We are even seeing, you know, total ankles done in ASCs, obviously shoulder replacements done in ASCs, even

Kevin A. Lobo: So you're just going to see more and more procedures being done. Now, obviously, you're not going to see revisions and very high acuity, scoliosis, those types of procedures. But I think it's frankly exceeded our expectations internally, and I think that that's going to continue. The rate limiting factor is just being able to construct these ASCs and have the obviously finance, finance, and capital, and the ownership structure sorted out between the hospital and the surgeons.

Speaker Change #119: You know, lumbar spine, which I didn't think, I thought cervical, sure, didn't think I'd see lumbar. So you're just going to see more and more procedures being done. Now, obviously, you're not going to see revisions and very high acuity, scoliosis, those types of procedures, but

Kevin Lobo: Obviously, you're not going to see revisions and very high acuity, scoliosis, those types of procedures. But I think it's frankly exceeded our expectations internally. And I think that that's going to continue. The rate limiting factors just being able to construct these ASCs and have the, obviously have the financing and the capital and the ownership structure sorted out between the hospital and the surgeons. That's the rate limiting factor. But I just see this continuing to grow. And I don't really see, you know, sort of where this stops. It's just going to keep growing five years from now.

Speaker Change #119: I think it's frankly exceeded our expectations internally, and I think that's going to continue. The rate-limiting factor is just being able to construct these.

Speaker Change #119: ASCs and obviously have the financing and the capital and the ownership structure sorted out between the hospital and the surgeons, that's the rate limiting factor, but I just see this continuing to grow.

Kevin A. Lobo: That's the rate limiting factor. But I just see this continuing to grow. And I don't really see, you know, sort of where this stops. It's just going to keep growing five years from now. What will it be? It's in the 10 to 15 percent range now. It'll cross 15 percent next year, and then it could go to 30, 40. It could.

Kevin Lobo: What will it be? It's in the 10 to 15% range now. It'll across 15% next year. And then it could go to 30, 40. It could.

Speaker Change #119: and I don't really see, you know, sort of where this stops. It's just going to keep growing. Five years from now, what will it be? It's in the 10 to 15% range now. It'll cross 15% next year. And then it could go to 30, 40. It could.

Kevin A. Lobo: Thank you. Thank you. Our next question comes from Mike Matson with Needham. Your line is now open.

Speaker Change #119: Thank you. Thank you.

Mike Matson: Our next question comes from Mike Matson with Needham. Your line is now open. Please go ahead. Yeah, thanks. So, so good to hear about the some momentum in the international business. I wanted to ask about the what that would mean to your margin to see that business continue to outpace the US. You know, how does it compare for both the growth and operating margin? perspective? Is it something that could be kind of a headwindier margin?

Glenn: Please go ahead. Yeah, thanks. So good to hear about the momentum in the international business. I wanted to ask about what that would mean to your margins if you see that business continue to outpace the US. How does it compare from a gross and operating margin perspective? Is this something that could be kind of a headwind to your margins? Oh, yeah. Hi Mike.

Speaker Change #119: Our next question comes from Mike Matson with Needham. Your line is now open, please go ahead.

Michael Stephen Matson: Yeah, thanks. So good to hear about the momentum in the international business.

Michael Stephen Matson: I wanted to ask about what that would mean to your margins if you see that business continue to outpace the U.S. How does it compare from a gross and operating margin perspective? Is this something that could be kind of a headwind to your margins?

Glenn Boehnlein: Well, yeah, hi, Mike. You know, if we look at international, a couple things, keep in mind, you know, we don't have R&D expense in our international sort of numbers as we looked at sort of performance of their margins. So you have that performance. We also, you know, it can vary market by market. I mean, I think in some of these more developed markets, we see good price performance and, you know, good, good operating margins. Sometimes in more sort of emerging markets, we, you know, we will see a slight headwind relative to sort of what we're, but we're realizing from a pricing standpoint in those markets.

Glenn: You know, as we look at international, a couple of things keep in mind. You know, we don't have R&D expenses in our international sort of numbers as we look at the sort of performance of their margins. So you have that performance. We also, you know, it can vary market by market. I mean, I think in some of these more developed markets, we see good price performance and good operating margins. Sometimes in more sort of emerging markets, we, you know, we will see a slight headwind relative to sort of what we're realizing from a pricing standpoint in those markets.

Michael Stephen Matson: Well, yeah. Hi, Mike.

Speaker Change #121: You know, as we look at international, a couple things to keep in mind, you know, we don't have R&D expense in our international sort of numbers as we look at sort of performance of their margins.

Speaker Change #121: So you have that performance. We also, you know, it can vary market by market. I mean, I think in some of these more developed markets, we see good price performance and good operating margins.

Speaker Change #121: Sometimes in more sort of emerging markets, we, you know, we will see a slight headwind relative to sort of what we're realizing from a pricing standpoint in those markets.

Glenn: I would tell you that, you know, I think that, you know, as we look out over the long term, though, you know, we obviously are cognizant of the fact that international sales and how that will contribute to our overall margin profile. And so, you know, we have planned for, you know, the kind of the kind of infrastructure needs and the kind of other savings needs that we need to do to make sure that we drive this consistent margin and drive a consistent, you know, 30 basis points plus margin performance once we get past this 200 basis points increase that we're looking at. So there will be some things you're talking about, but overall, I think that as we look at it, we're not seeing that it's going to be a headwind that we will not overcome. Okay, I got it.

Glenn Boehnlein: I would tell you that, you know, I think that, that, you know, as we look out over the long term, though, you know, we obviously are cognizant of the fact of what international sales and how that will contribute to our overall margin profile. And so, you know, we have, we have planned for, you know, the kind of the kind of infrastructure needs and the kind of other saving needs that we need to do to make sure that we drive this consistent margin and drive a consistent, you know, 30 basis points plus margin performance once we get past this 200 basis points increase that we're looking at.

Speaker Change #121: I would tell you that, um...

Speaker Change #121: You know, I think that, you know, as we look out over the long term, though, you know, we obviously are cognizant of the fact of what international sales and how that will contribute to our overall margin profile.

Speaker Change #121: And so, uh...

Speaker Change #121: You know, we have, we have planned for.

Speaker Change #121: You know, the kind of the kind of infrastructure needs and the kind of other saving needs that we need to do to make sure that we drive this consistent margin and drive

Speaker Change #121: A consistent, you know, 30 basis points plus margin performance once we get past this 200 basis points increase that we're looking at.

Glenn Boehnlein: So there will be your question, but overall, I think that, as we look at it, we’re not, we’re not seeing that it’s going to be a headwind that we will not overcome.

Speaker Change #121: So there will be some things that you're talking about, but overall, I think that...

Speaker Change #121: As we look at it, we're not seeing that it's going to be a headwind that we will not overcome.

Kevin Lobo: Okay, got it. And then just, I think you did do one small acquisition, the art of one company, I believe is an extremities area. Can you just comment on that and kind of how it fits or what it brings to the table. Yeah, listen, this is a gap filler for us and soft tissue fixation that's used in foot mangle procedures by sports medicine doctors as well as foot mangle doctors. It's an elegant, terrific product; we're really excited about it. Both of our sports business unit and foot mangle business units, both teams are going to be selling this product based on the surgeon call point that they have. So, really, really terrific product. We've been trick, trick, tracking the company for quite some time.

Kevin A. Lobo: And then just, I think you did one small acquisition, the Ardalan company, which was in the extremities area. Can you just comment on that and kind of how it fits or what it brings to the table? Yeah, listen. This is a gap filler for us and soft tissue fixation that's used in foot and ankle procedures by sports medicine doctors as well as foot and ankle doctors.

Speaker Change #122: Okay, got it. And then just, I think you did do one small acquisition, the Ardalan company, I believe it was in the extremities area. Can you just comment on that and kind of how it fits or what it brings to the table?

Speaker Change #123: Yeah, listen, this is a gap filler for us and soft tissue fixation that's used in foot and ankle procedures by sports medicine doctors as well as foot and ankle doctors. It's an elegant, terrific product.

Kevin A. Lobo: It's an elegant, terrific product. We're really excited about it. Both of our sports business unit and foot and ankle business units, both teams are going to be selling this product based on the surgeon call point that they have. So really, really terrific product. We've been tracking the company for quite some time, and we're not going to get into details about how much. It's not a big product, but it's a really great gap filler that, again, our sports business has, as you know, been growing at very high rates for many years now. And this fits in with them.

Speaker Change #123: We're really excited about it, both of our sports business unit and foot and ankle business units, both

Speaker Change #123: teams are going to be selling this product based on the surge in call point that they have. So really, really terrific product. We've been tracking the company for quite some time, and we're not going to get into details about how much. It's not a big product, but it's a really great gap filler that, again, our sports business has

Kevin Lobo: And, you know, we're not going to get into details about how much it's not a big product, but it's a really great gap filler that, again, our sports business has, as you know, been growing at very high rates for many years now and this fits in with them; it also fits in with our foot mangle business. Okay, got it.

Kevin A. Lobo: It also fits in with our foot and ankle. Okay, got it. Our next question comes from Caitlin Cronin. We can't record.

Speaker Change #123: As you know, been growing at very high rates for many years now, and this fits in with them, it also fits in with our foot and ankle business.

Caitlin Cronin: Thanks. All right, next question comes from Caitlin Cronin with Can't Accord. Your line is not open, please go ahead. Hi, thanks for watching. The question just jumping off of the time question earlier, the interventional find this is how to get quarter this quarter and last quarter as well. Can you talk about what makes up that business for you and why you think you're seeing strength there? Is this more of a market, so when they're capitalizing on or. Yeah, listen, no, this IBS business of ours has been a really terrific business. If you think about what is in that business, we bought these curved balloons from the CareFusion a while back, we acquired the Spine Jack product.

Jason: Your line is not open. Please go ahead. Hi, thanks so much for taking the question. Just jumping off of the great question earlier, the interventional finders have had a good quarter this quarter and last quarter as well. Can you talk about what makes up that business for you and why you think you're seeing strength there? Is this more of a market sell one that you're capitalizing on, or specifically Stryker? Yeah, listen, this IVS business of ours has been a really terrific business. If you think about what is in that business, we bought these curved balloons from Carefusion a while back.

Speaker Change #124: Okay, got it, thanks.

Speaker Change #125: Our next question comes from Caitlin Cronin. We can't record. Your line is not open. Please go ahead.

Caitlin Cronin: Hi, thanks so much for taking the question. Just jumping off of the fine question earlier, the Interventional Fine Business had a good quarter this quarter and last quarter as well. Can you talk about what makes up that business for you and why you think you're seeing strength there? Is this more of a market sale one that you're capitalizing on or specifically Stryker?

Speaker Change #127: Yeah, listen, this IVS business of ours has been a really terrific business. If you think about what is in that business, we bought these curved balloons.

Jason: We acquired the SpineJack product. We've also developed some terrific internal products. We launched the OptiBlade product. So we have the pain docs, and we have the oncology.

Kevin Lobo: We've also developed some terrific internal products. We launched the up to Blade, Blade product. So we have the pain docs and we have the oncology. So two different call points within our ideas business and a pretty robust portfolio and just outstanding commercial execution has been, you know, been really a terrific engine of growth for us.

Speaker Change #127: from the Carefusion. A while back, we acquired the SpineJack product. We've also developed some terrific internal products. We launched the OptiBlade blade product

Jason: So two different call points within our IVS business and a pretty robust portfolio and just outstanding commercial execution has been, you know, been really a terrific engine of growth for us. And it's an area we like, and we continue to believe we're going to expand in this area at some point in the future. We're certainly going to be adding salespeople, as we have been doing, because we have the product portfolio partially organic and partially inorganic. And you maintained expectations to launch Mako Shoulder later this year.

Speaker Change #127: So we have the pain docs and we have the oncology, so two different call points within our IDS business and a pretty robust portfolio and just outstanding commercial execution has been, you know, been really a terrific engine of growth for us.

Jason Beach: And it's an area we like, and we continue to believe we're going to expand in this area. At some point in the future, we're certainly going to be adding salespeople, as we have been doing, because we have the product portfolio, partially organic and partially inorganic. Great. And you maintain the expectations to launch, make the shoulders layer this year. You know, what are you seeing in the market with the most early launch of a shoulder robot application and any updates you're seeing in the use case of shoulder robotics. Yeah, no feedback yet competitively. So it's not really had any impact thus far.

Speaker Change #127: And it's an area we like, and we continue to believe we're going to expand in this area at some point in the future. We're certainly going to be adding salespeople, as we have been doing, because we have the product portfolio partially organic and partially inorganic.

Speaker Change #129: Great, and you maintained expectations to launch Mako Shoulder later this year, you know, what are you seeing in the market with Zimmer's early launch of its Shoulder Robotic application and any updates you're seeing in the use case of Shoulder Robotics?

Kevin A. Lobo: You know, what are you seeing in the market with Zimmer's early launch of its Shoulder Robotic application? And any updates you're seeing in the use case of Shoulder Robotics? Yeah, no feedback yet competitively, so it's not really had any impact thus far.

Jason Beach: It's early. So there really isn't anything to share right now. Well, once we learn something, we'll let you know. But we like our chances. We like our chances with our make go shoulder.

Speaker Change #128: Yeah, no, no feedback yet competitively. So it's not really had any impact thus far. It's early. So there really isn't anything to share right now. We'll, once we learn something, we'll let you know.

Kevin A. Lobo: It's early, so there really isn't anything to share right now. Once we learn something, we'll let you know. But we like our kids. We take our chances with our Mako Shoal.

Speaker Change #130: But we like our chances.

Speaker Change #130: We luck our chances with our MAKO shoulder.

Jason Bedford: Our next question comes from the line of Jason Bedford with Raymond James. Your line is not open. Please go ahead.

Kevin A. Lobo: Our next question comes from the line of Jason Bedford with Raymond James. Your line is now open. Please go ahead. Good afternoon.

Speaker Change #131: Our next question comes from the line of Jason Bedford with Raymond James. Your line is now open. Please go ahead.

Jason: Thanks for squeezing me in. I'll be quick. Just a neurovast?

Jason Beach: Good afternoon. Thanks for squeezing me, and I'll be quick. Just a neurovast. I thought I heard you mention a supply issue with inflow to voters. I'm just wondering when will this resolve. And maybe you can just give us a broader view on the health of the supply chain, whether it be input costs for a call. Jason is Jason. I would say just overall striker; I would say supplies in quite good shape. Do we see, you know, spotty issues like I mentioned relative to neurovascular. Yes, we saw a little bit of a supply disruption as it relates to our medical business outside of the United States as well.

Jason Beach: Good afternoon. Thanks for squeezing me in. I'll be quick. Just a neurovasc?

Jason: I thought I heard you mention a supply issue within flow diverters. I'm just wondering when this will resolve, and maybe you can just give us a broader view on the health of the supply chain, whether it be input costs or rate costs. Hey, Jason. It's Jason.

Jason Beach: I thought I heard you mention a supply issue within flow diverters. I'm just wondering when will this resolve and maybe you can just give us a broader view on the health of the supply chain, whether it be input costs, rate costs, etc.

Jason: I would say just overall, Stryker, I would say supplies are in quite good shape. Do we see, you know, spotty issues, like I mentioned, relative to neurovascular? Yes.

Jason Beach: Hey Jason, it's Jason. I would say just overall Stryker, I would say supplies in quite good shape. Do we see, you know, spotty issues like I mentioned relative to neurovascular? Yes.

Jason Beach: We saw a little bit of a supply disruption as it relates to our medical business outside of the United States as well, but you know, these things are resolving themselves July for neurovascular off to a good start.

Jason Beach: But, you know, these things are resolving themselves; July for neurovascular off to a good start. I think it relates to medical. You know, I think you should expect robust growth in the second half as well. So nothing from a supply standpoint is a concern for us as we move forward.

Jason: We saw a little bit of a supply disruption as it relates to our medical business outside of the United States as well. But, you know, these things are resolving themselves in July for neurovascular, off to a good start. You know, and as it relates to medical, I think you should expect robust growth in the second half as well. So nothing from a supply standpoint is a concern for us as we move forward. That's helpful.

Jason Beach: You know, and as it relates to medical, you know, I think you should expect robust growth in the second half as well. So nothing from a supply standpoint is a concern for us as we move forward.

Jason Beach: Okay, that's helpful.

Jason: And just quickly, I wanted to follow up on the foot and ankle commentary. I'm just wondering why you think the market is soft, and just historically, what drives the rebound out of these lows?

Kevin Lobo: And just quickly I wanted to follow up on the put an ankle commentary. I'm just wondering why you think that the market is soft and just historically what drives the rebound out of these lows. Yeah, look, there's a lot of different dynamics, and one of the dynamics is our time. It's getting prioritized for other procedures. So you have surgeons that actually are getting squeezed out of operating because the ORs are being used for. Let's call them more higher value, higher revenue producing procedures. That's one part. You've got these co-pays that people have to pay, and sometimes, you know, they're just a little bit squeezed, and that can cause a bit of a delay.

Speaker Change #134: Okay, that's helpful. And just quickly, I wanted to follow up on the foot and ankle commentary. I'm just wondering why you think the market is soft and just historically, what drives the rebound out of these lulls?

Kevin A. Lobo: Yeah, look, there's a lot of different dynamics, and one of the dynamics is OR time. It's getting prioritized for other procedures. So you have surgeons that are actually getting squeezed out of operating because the ORs are being used for, let's call them, higher-value, higher-revenue-producing procedures. That's one part. You've got these co-pays that people have to pay. And sometimes, you know, they're just a little bit squeezed, and that can cause a bit of a delay.

Speaker Change #135: Yeah, look, there's a lot of different dynamics, and one of the dynamics is O.R. time.

Speaker Change #136: It's getting prioritized for other procedures, so you have surgeons that actually are getting squeezed out of.

Speaker Change #136: Operating, because the ORs are being used for...

Speaker Change #136: Let's call them more higher value, higher revenue producing procedures. That's one part.

Speaker Change #136: You've got these copays that people have to pay and sometimes, you know, they're just a little bit squeezed and that can cause a bit of a delay. So there are multiple factors at play. And like I say, we've seen this happen in the past. I don't know how long it'll last.

Kevin Lobo: So there are multiple factors at play, and like I say, we've seen this happen in the past. I don't know how long of the last. It kind of caught us a little bit by surprise, to be honest. But we've liked the business that we have. We like the portfolio that we have. And these patients aren't, you know, they're going to use money and just don't heal themselves. So they're going to come back to the market. And I think we're going to be well positioned when that happens. But, yes, it has been two quarters in a row.

Kevin A. Lobo: So there are multiple factors at play. And like I say, we've seen this happen in the past. I don't know how long it'll last. It kind of caught us a little bit by surprise, to be honest, but we like the business that we have. We like the portfolio that we have. And these patients aren't, they're going to, these bunions don't heal themselves.

Speaker Change #137: It kind of caught us a little bit by surprise, to be honest.

Speaker Change #137: But we like the business that we have. We like the portfolio that we have. And these patients aren't, they're going to, these bunions don't heal themselves. So they're going to come back to the market. And I think we're going to be well positioned when that happens. But yes, it has been two quarters in a row.

Kevin A. Lobo: So they're going to come back to the market, and I think we're going to be well positioned when that happens. But yes, it has been two consecutive quarters.

Kevin Lobo: We'll let you know how Q three goes. But again, it's not going to be a problem for our trauma extremities business. We'll continue to have very high growth. Regardless of what happens in this. Thank you.

Kevin A. Lobo: We'll let you know how Q3 goes. But again, it's not going to be a problem for our trauma and extremities business. It will continue to have very high growth, regardless of what happens in this. Our next question comes from the line of Drew Ranieri with Morgan Stanley. Your line is not open.

Speaker Change #137: We'll let you know how Q3 goes, but again, it's not going to be a problem for our trauma and extremities business. We'll continue to have very high growth regardless of what happens in this market.

Drew Ranieri: Our next question comes from the line of Drew Ranieri with Morgan Stanley. Your line is not open. Please go ahead. Hi, next day, the question.

Speaker Change #138: Thank you.

Speaker Change #138: Our next question comes from the line of Drew Ranieri with Morgan Stanley . Your line is now open. Please go ahead.

Operator: Please go ahead. Hi, thanks for taking the question. Maybe just one for Kevin, but I think you also mentioned that you did another small acquisition of Malib. But I'd just curious if you could kind of detail a bit more about that deal.

Drew Ranieri: Maybe just one for Kevin, but I think you also mentioned that you did another small acquisition of Molly. But just curious if you can kind of detail a bit more about that deal, and I know it would be fairly small, but kind of curious to hear about how this kind of informs your overall breast strategy in the market, how you might be able to bundle this with 1788 and some of the other maybe prior deals you've done down in the breast base. Thanks for taking the question. Yeah, thanks. Women's health and erology has been an area of interest for us, and the endoscopy division's pretty excited about Molly to be able to localize the lesions that need to be removed in surgery.

Speaker Change #139: I'd like to take a question, maybe just one for Kevin, but I think you also mentioned that you did another small acquisition of Mali.

Andrew Christopher Ranieri: But just curious if you can kind of detail a bit more about that deal, I'd imagine it would be fairly small, but kind of curious to hear about how this kind of informs your overall breast strategy in the market, how you might be able to bundle this with 1788 and some of the other maybe prior deals you've done done in the breast space. Thanks for taking the question.

Speaker Change #141: Yeah, thanks. Women's health and urology has been an area of interest for us, and the endoscopy division is pretty excited about Molly's, to be able to localize the

Kevin Lobo: And for surgery, as you mentioned, we have Novodac with the exoscope. We have the, from the enduty acquisition, we have the photon blade, we can do single stage procedures, because you can assess the health of the tissue and then having a localization, and we already have the rep there. They're already, so this is a perfect classic tuck-in for Stryker; the reps are there. They're in the procedure, and this, this product, even though it's not a big revenue producer, at least now, it is elegant. It is easy to use. It is a terrific product. And so, we've watched all the other products in this space.

Speaker Change #142: The lesions that need to be removed in surgery, and for surgery, as you mentioned, we have NOVADAC.

Speaker Change #142: With the Exascope, we have the, from the In-Duty Acquisition, we have the Photon Blade.

Speaker Change #143: We can do single stage procedures because you can assess the health of the tissue, and then having a localization, and we already have the rep there, they're already, so this is a perfect classic tuck-in for Stryker.

Speaker Change #143: The reps are there, they're in the procedure, and this product, even though it's not a big revenue producer, at least now, it is.

Speaker Change #143: elegant. It is easy to use. It is a terrific product. And so we've we've watched all the other products in this space. This is the one we've we've had our eye on. And we are really excited to have that as as part of Stryker.

Kevin Lobo: This is the one we've had our eye on, and we are really excited to have that as part of Stryker. And, it will enable us to be a bigger force in breast care.

Kevin A. Lobo: And I imagine it would be fairly small, but I'm kind of curious to hear about how this kind of informs your overall breast strategy in the market, how you might be able to bundle this with 1788 and some of the other, maybe prior, deals you've done in the breast space. Thanks for taking the question. Yeah, thanks.

Kevin A. Lobo: Women's health and urology has been an area of interest for us, and the endoscopy division is pretty excited about Molly's, to be able to localize the lesions that need to be removed in surgery. And for surgery, as you mentioned, we have Novodac with the exoscope. We have the, from the in-duty acquisition, we have the photon blade. We can do single-stage procedures because you can assess the health of the tissue.

Speaker Change #143: And it will enable us to be a bigger force in breast care.

David Arumant: Our final question comes from the line of David Arumant with Goldman Sachs. Your line is now open. Please go ahead. Thanks, and good afternoon. I'm Kevin.

Kevin A. Lobo: And then having the localization, we already have the reps there. They're already, so this is a perfect classic tuck-in for Stryker. The reps are there. They're in the procedure. And this product, even though it's not a big revenue producer, at least now, it is elegant. It is easy to use.

Kevin A. Lobo: It is a terrific product. And so, we've watched all the other products in this space. This is the one we've had our eye on, and we are really excited to have that as part of Stryker, and it will enable us to be a bigger force in breast care. Our final question comes from the line of David Roman with Goldman Sachs. Your line is now open. Please go ahead. Thanks, and good afternoon.

Speaker Change #144: Our final question comes from the line of David Roman with Goldman Sachs. Your line is now open. Please go ahead.

Kevin A. Lobo: Kevin, I wanted to follow up on a comment you just made about capacity in the hospital and the prioritization around, certainly, whether it's acuity cases or other dynamics influencing how hospitals are managing capacity constraints in their surgical suites. How should we think about that as a potential long-term or even intermediate-term tail end to your med? Yeah, it's a good question. And certainly where the demand for capital is very high.

Kevin Lobo: I want to talk about a comment you just made about capacity in the hospital and the prioritization around, certainly, whether it's acuity cases, or their dynamics influencing how hospitals are managing capacity constraints in their, in their circles. So, how should we think about that as a potential long term or even intermediate, intermediate term tail into your, to your med church business? Yeah, it's a good question. And certainly, the demand for capital is very high. There is construction, as you know. If hospitals are being constructed, ASEs are being constructed. Patients are getting great outcomes. I think the ASEs are a contributor.

David Roman: Thanks and good afternoon. Kevin, I wanted to follow up on a comment you just made about capacity.

David Roman: in the hospital and the prioritization around.

David Roman: Certainly, whether it's acuity cases or other dynamics influencing how hospitals are managing capacity constraints in their surgical suites, how should we think about that as a potential long-term or even intermediate-term tailwind to your med-surg business?

Speaker Change #146: Yeah, it's a good question and certainly

Kevin A. Lobo: There is construction, as you know, hospitals are being constructed, ASCs are being constructed, and patients are getting great outcomes. I think the ASC is a contributor. People go home the same day, and they can't believe they can get back to playing their sport of choice so quickly.

Speaker Change #147: Where the demand for capital is very high, there is construction, as you know, hospitals are being constructed, ASCs are being constructed.

Kevin Lobo: People, they go home the same day. They, they can't believe they can get back to playing their sport of choice. So quickly, word is spreading. And so I think this is one of those reasons where you're seeing the demand increasing. And as the operating school up, they're looking for outlets to be able to do more and more procedures. So I do believe that that's contributing to this, this sort of elevated procedures. And, and for our med church business, a lot of our small capital that, that gets has to be replaced. And, and that's probably why we're experiencing the kind of high growth.

Speaker Change #148: Patients are getting great outcomes. I think the ASC is a contributor.

Speaker Change #149: People, they go home the same day, they can't believe they can get back to playing their

Kevin A. Lobo: The word is spreading. And so I think this is one of those reasons where you're seeing the demand increase, and as the operating rooms fill up, they're looking for outlets to be able to do more and more procedures. So I do believe that that's contributing to this sort of elevated procedure. And for our med surg business, a lot of our small capital that has to be replaced. And that's probably why we're experiencing the kind of high growth. I mean, you look at instruments, you look at power tools, you see very, very high growth and promising output going forward.

Speaker Change #149: sport of choice so quickly word is spreading and and so I I think this is one of those reasons where you're seeing

Speaker Change #149: The demand is increasing, and as the operating rooms fill up, they're looking for outlets to be able to do more and more procedures. So I do believe that that's contributing to this.

Speaker Change #150: This sort of elevated procedures and and for our med surg business a lot of our small capital that that gets has to be replaced and and that's probably why we're experiencing the kind of high growth and you look at instruments you look at power tools you

Kevin Lobo: I mean, you look at instruments, you look at power tools; you mean very, very high growth. And, and I'm promising output going forward. So, I hope this continues. We see it continuing at least through the end of this year.

Speaker Change #150: I mean, very, very high growth.

Kevin A. Lobo: So I hope this continues. We see it continuing at least through the end of this year. And obviously, we'll let you know what we think about guidance for next year in January. Got it. And then maybe just a follow-up for Glenn and maybe Jason, just on the P&L, I think on the last call, you had laid out a path that more of the gross margin on a go forward basis would come from, sorry, more of the operating margin expansion would come from gross margin versus off X. I think you're pointing to the back half of the year, reflecting more SG&A leverage.

Speaker Change #150: And a promising output going forward. So I hope this continues. We see it continuing at least through the end of this year. And obviously we'll let you know what we think about guidance for next year in January .

Glenn Boehnlein: And, and obviously we'll let you know what we think about guidance for next year in January. Jeffrey. You got it.

Kevin A. Lobo: How should we think about just the interplay between different line items of the P&L with med surg becoming a larger percentage of total? And how should we think about it in the context of the different drivers for operating margin? Uh, yeah, hi David, um...

Glenn Boehnlein: And then maybe just a follow-up for Glenn and maybe Jason, just on the P&L. I think on the last call, you had laid out a path that more of the gross margin on a go-forward basis would come from, sorry, more of the operating margin expansion would come from gross margins versus affect. I think you're pointing to the back half of the year, reflecting more SG&A leverage. How should we think about just the interplay between different light ends of the P&L with measures becoming a larger percentage of total, and how we think about in the context of the different drivers for operating margin expansion?

Speaker Change #151: Got it. And then maybe just a follow-up for Glenn and maybe Jason. Just on the P&L, I think on the last call,

Speaker Change #152: You had laid out a path that more of the gross margin on a go-forward basis would come from, sorry, more of the operating margin expansion

Speaker Change #155: would come from gross margins versus OPEX. I think you're pointing to the back half of the year reflecting more SG&A leverage. How should we think about just the interplay?

Speaker Change #153: between different line items of the P&L with MedSurg becoming a larger percentage of total and how we think about in the context of the different drivers for operating margin expansion.

Glenn Boehnlein: Yeah, hi David. I think, as I think back to how we have characterized it, if you think about what we did in 2023, that had more gross margin expansion and not margin. And we've all said that 2024 would lean more to sort of SG&A and leverage of off expenses. So I don't think we've really sort of changed sort of how we think about how the year is going to play out for off margin expansion. So I do think that we're, you know, we are bullish on opportunities in gross margins, but a lot of those are things you do this year that are going to benefit us in 2025.

Glenn: I think, I think, though, as I think back to how we have characterized it, if you think about what we did in 2023, that had more gross margin expansion in operating margin, and we've always said that 2024 would lean more to sort of SG&A and leverage of operating expenses. So I don't think we've really changed how we think about how the year is going to play out for operational margin expansion.

Speaker Change #154: Yeah, hi, David.

Speaker Change #156: I think though, as I think back to how we have characterized it, if you think about what we did in 2023, that had more gross margin expansion and not margin.

Speaker Change #156: And we've always said that 2024 would lean more to sort of SG&A and leverage of op expenses.

Speaker Change #156: So I don't think we've really sort of changed sort of how we think about how the year is going to play out for off-margin expansion. So I do think that we're, you know, we are bullish on opportunities in gross margin, but a lot of those are things we do this year that are going to benefit us in 2025.

Glenn: So I do think that we're, you know, we are bullish on opportunities and gross margins, but a lot of those are things you do this year that are going to benefit us in 2025. On SG&A, you know, that's more near-term things that we have that we budgeted for and planned for that I think actually will allow us to give us a lot of confidence to say that we will get to that 100 basis points of operating margin expansion.

Glenn: Got it. Okay. Thank you for the clarification.

Glenn Boehnlein: On SG&A, you know, that's more in the ear term, things that we have, that we budgeted for or planned for, that I think actually will allow us to give us a lot of confidence to say that we will get to that 100 basis points a lot more on the expansion.

Speaker Change #156: On SG&A, you know, that's more near-term things that we have that we budgeted for and planned for that I think actually will allow us to give us a lot of confidence to say that we will get to that 100 basis points of op margin expansion.

Glenn Boehnlein: Got it, okay, thank you for the clarification, sir.

Speaker Change #157: Got it. Okay. Thank you for the clarification. Sure.

Kevin Lobo: There are no further questions; I'll turn the call over to Kevin Lobo for closing remarks. Thank you for all your questions and for joining our call. We look forward to sharing our Q3 results with you in October. Thank you.

Kevin A. Lobo: There are no further questions. I'll turn the call over to Kevin Lobo for closing remarks. Thank you for all your questions and for joining our call. We look forward to sharing our Q3 results with you in October. Thank you. This concludes the Second Quarter 2024 Stryker Earnings Call. You may now disconnect.

Speaker Change #157: There are no further questions. I'll turn the call over to Kevin Lobo for closing remarks.

Kevin A. Lobo: Thank you for all your questions and for joining our call. We look forward to sharing our Q3 results with you in October .

Unknown Executive: This concludes the second course 2024 Striker earnings call. You may now disconnect.

Speaker Change #159: Thank you.

Speaker Change #160: This concludes the Second Quarter 2024 Stryker Earnings Call. You may now disconnect.