Q2 2025 Medtronic PLC Earnings Call
Strong performance from franchises like hover.
TSA Lila's pacemakers diabetes spine and Neuromodulation just to name a few.
And we're confident that this diversified growth will keep going, especially with the strength of our pipeline and high impact markets like hypertension, which is a big exciting opportunity for us. If you look at our recent performance. It's clear the foundation of the company is much stronger.
We've integrated a real performance mindset, alongside our mission driven culture, and it's making a difference.
And as we continue to drive durable top line growth.
Use our scale to deliver leveraged earnings.
General strong free cash flow pursue smart tuck in M&A and grow our dividend, we're setting ourselves up to create strong long term returns for our shareholders.
Now, let's turn to the details of our Q2 business results and discuss our performance.
Looking first at our highest growth businesses combined they grew 8% again this quarter and made up 20% of our revenue.
Starting with structural heart, we grew high single digits on the strength of our tavern franchise in the U S. We launched evolute FX, plus and we're seeing strong customer adoption.
We also received CE Mark for FX, plus last month and began commercializing in Europe last week.
FX plus is important not only for the lifetime management benefit it offers.
But also because it creates an additional opportunity for us to reiterate our positive smart trial results.
Now, you'll recall that smart demonstrated our superior valve performance and small annulus patients who are primarily women.
And they make up about 40% of the tower segment.
With this combination of FX, plus low risk data and now smart data, we expect to continue to grow at or above market in the quarters ahead.
Next in cardiac ablation solutions, our technology is helping to drive the rapid shift of the market to pulse yield oblations we've.
We've been significantly expanding our manufacturing capacity to meet this growing demand and we're well positioned as the only company with both single shot and focal PFA catheters.
We continue to drive our growth of our pulse select PFA single-shot catheter.
This is offsetting cryoablation declines and our rate of cryo sequential decline significantly improved versus what we saw in Q1.
With PSA this quarter, we nearly doubled the number of physicians using pulse select and we more than doubled the total number of patients treated with this catheter in Q2.
That said, our overall cash growth did not accelerate as expected this quarter due to a third party component supplier interruption.
They've now expanded capacity, allowing us to continue to ramp pulse select availability and activate new accounts.
On top of pulse select we were pleased to receive FDA approval late last month for a fair a mapping ablation system and sphere nine focal catheter.
This all in one catheter was designed from the ground up to perform high density mapping as well as pulse field, an RF ablation.
So fear nine replaces competitors mapping and RF catheters, allowing us to increase our revenue per case.
We're ramping commercial availability now having already entered some of the top U S centers by volume and this will accelerate over the coming weeks and quarters to meet the significant demand and.
And we continue to rapidly hire mapping specialists in advance of entering new centers, giving us confidence in our ability to accelerate account activations.
With the strong customer response to the breadth of our new PFA portfolio, we expect our overall cash growth rate to accelerate through the back half of the fiscal year, including strong double digit growth in Q3.
And we expect to reach and then exceed market growth in this large and fast growing 9 billion dollar cardiac ablation space.
Next in surgical robotics, we continue to invest in our Hugo platform building, a strong foundation for future growth.
In the U S. We've completed capturing the necessary data for our urology submission and expect to file with the FDA in the first quarter of calendar 'twenty five.
We're also seeing fast enrollment in our next two U S indication studies hernia and gynecology.
In digital we commenced commercial rollout of our touch surgery livestream remote connectivity solution across the U S and Western Europe, as we continue to digitize operating rooms globally.
And we're making progress, bringing our advanced surgical technologies to Hugo we expect ICD fluorescent imaging to be available in certain countries. Soon followed by adding our market, leading ligature vessel sealing technology to Hugo next calendar year.
Next in diabetes, we delivered another quarter of double digit growth growing 11%. Despite more difficult comparisons from the 780 G. U S launch last year, our CGM sales grew over 20% in both the U S and international markets driven by the high CGM attachment rates to the.
Seven AG.
In addition, our simpler a sink sensor, which is half the size and much easier to apply than our previous sensor is gaining strong acceptance in international markets.
On the smart M D. I front, we just secured FDA clearance for our in Penn App, which paves the way for a limited U S release of our smart MDI system with our supplier of CGM.
So we continue to add new patients with the seven AG system. The majority are coming from MDI and we're also seeing success from our competitive switch programs patients are attracted to seven agee's highest time and range of any commercial AIG system and achieving this control with less burden.
In the D. Q&A survey of over 1500, AIG users in the U S. The seven AG had the highest user satisfaction of any AAD system, including scoring 20 percentage points higher than the tandem decks com combination and 25 points higher than the insulin <unk> combination.
We're investing heavily in diabetes to expand manufacturing capacity and advance our robust technology pipeline.
Including our partnership with Abbott on integrated sensor.
These activities support our strategy to be number one in the fast growing AI D and smart MDI space with a technology ecosystem that is focused on achieving better control with less burden.
Now turning to hypertension, and the large future growth opportunity of our simplicity blood pressure procedure.
With a proven track record of long term efficacy and safety and unique design. This innovative solution is poised to transform hypertension management.
We're pleased that CMS earlier this month finalize the outpatient transitional pass through payment, which will take effect on January 1st.
With coding and sufficient Medicare payment now in place the key step for broader adoption is to establish standardized coverage on this front, we continue to engage with CMS to facilitate access for patients to this important therapy.
And we're working with private payers to advanced coverage as well.
Hypertension is a global health challenge and the leading cause of cardiovascular disease and premature death worldwide.
In fact, it impacts more than 1 billion people globally, including nearly half of all U S. Adults.
Despite the availability of numerous medications.
Only one in four adults with hypertension in the U S have it under control.
And the direct cost to the U S health care system for hypertension are massive <unk>.
Somewhere between a 100 and $200 billion a year.
So our simplicity procedure can play a very important role in cost effectively improving public health.
Now looking at our established market leaders combined they made up nearly half of our revenue and grew mid single digits.
In many cases, we've innovated on the technology and business models to reinvent these businesses over the past few years and we continue to invest in them to ensure durable growth.
They are a key part of our financial model, helping us to consistently deliver on the top line.
And they contribute a disproportionate amount of profit and cash flow.
And cranial and smiled technologies, we grew 6% worldwide, including 7% growth in U S core spine and biologics.
In a market that rewards scale, we're continuing to win.
This is driven by our leading able ecosystem of differentiated spine implants, and enabling technologies, including AI, driven Preop planning software imaging robotics navigation and powered surgical instruments.
Our large global able installed base is changing the competitive dynamics in spine.
And we continued to expand its features and its capabilities.
At the NASS Conference in September, we announced a new partnership with Siemens health in years to co market and integrate their imaging technologies for spine care.
We expect C. S T to continue to deliver sustained above market growth with able and its differentiated best in class solutions, attracting not only spine surgeons around the world, but also the best sales reps and distributors, who continue to leave the competition to join our winning team.
Next in surgical we had flat results as I mentioned last quarter, we had difficult year over year comparisons given the supply recovery last year as well as the Korean market slowdown from the ongoing physician strikes, it's worth noting that on a sequential basis surgical had strong high single digit growth.
Both globally and in the U S.
We had outsized strength in advanced energy driven by accelerated adoption of our ligature XP, Maryland vessel sealer.
Overall, we continue to expect surgical to return to more normalized growth starting next quarter as these comparisons ease.
In cardiac rhythm management, we had another strong quarter growing in the mid single digits, including high single digit growth in both defibrillation solutions and in cardiac pacing therapies.
Our micro led <unk> pacemaker franchise grew high teens with broad strength around the world.
Now turning to our synergistic businesses, which collectively grew mid single digits and represented over 30% of our revenue.
The highlight again this quarter was neuromodulation.
Where growth accelerated to 12% and the business continues to grow well above the market, we're seeing broad based growth across product lines, including pain stim and brain modulation.
In pain Stim, we grew 10%, including 12% growth in the U S. On the continued launch of the Inceptive closed loops spinal cord stimulator.
The innovation in Inceptive is transforming the treatment of chronic pain for patients it automatically keeps therapy at the optimal dose and allows patients to focus on everyday life not on managing their chronic pain and.
In addition has the best full body MRI conditional access on the market and the competition really isn't even close.
This is important given that over 80% of these patients need an MRI within five years and nearly all of them need one within 10 years.
And brain modulation growth accelerated to 17% the third quarter in a row of double digit growth. This innovation driven growth is built on the ongoing launch of our percept arce with brain sense technology.
Speaker Change: Personally I'm, just having a huge impact for patients with movement disorders, like Parkinson's central tremor, dystonia and epilepsy.
It not only delivers therapy to specific brain targets, but it is the only DBS system that captures and records brain signals now this equips physicians with valuable data and the insights needed to personalize the therapy.
Speaker Change: And just like in pain stim, our DBS devices have differentiated MRI advantages versus the competition.
Speaker Change: In addition to neuro Mod, we also had strong performances in other synergistic businesses Carty.
Speaker Change: Cardiac surgery grew 10% with the broad strength coming from innovative products like our available ultra surgical valve penetrate L. A a exclusion system and vital flow Ecmo system.
Speaker Change: Acute care and monitoring grew 3%, including 9% in Nellcor pulse oximetry.
Speaker Change: And pelvic health accelerated its growth to 5%.
Speaker Change: Now with that let's go to Gary who will give you a deeper look at our Q2 financial performances and our outlook Gary over to you.
Gary: Thanks, Jeff we delivered a strong top line performance again this quarter with revenue growth of 5% 50 basis points above our guidance on the bottom line adjusted EPS was $1 26, a penny above the midpoint of our guidance.
Gary: We continue to invest in our pipeline and behind our emerging growth drivers, while also delivering bottom line growth, which was up 8% on a constant currency basis. The EPS beat was driven by two cents from greater operating profit on the revenue beat partially offset by one cent from tax.
Gary: The sources of our revenue growth continue to be diversified.
Gary: Both by business, and geography, which gives us confidence and its durability from a segment perspective, we had double digit growth in diabetes high single digit growth in neuroscience and mid single digit growth in cardiovascular.
Gary: The low single digit growth in our medical surgical portfolio was expected given the comparisons and surgical that Jeff addressed.
Gary: It's worth noting that med surge grew 7% sequentially and we expect to return to more normalized year over year growth starting next quarter.
Gary: From a geographic perspective, our international markets grew revenue high single digits, including mid single digit growth in Western Europe, and Japan, and low double digit growth in emerging markets move.
Gary: Moving down the P&L, our adjusted gross margin was 65, 2% down 70 basis points, but in line with our expectations. The decline was entirely driven by foreign currency as our adjusted gross margin was up 40 basis points on a constant currency basis.
Gary: Our adjusted operating margin was 24.3% also in line with our expectations.
Gary: The 90 basis point year over year decline was entirely driven by FX.
On a constant currency basis operating margins increased 100 basis points.
Gary: The organization remains extremely focused on improving our margins were more than doubling our underlying productivity in the Cogs line through centralizing operations, consolidating factories and suppliers and driving the Medtronic performance system across our manufacturing network. We're also laser focused on pricing discipline and optimization.
Gary: <unk>, particularly behind our new innovation at.
Gary: At the same time, we're very early in a number of new product launches that arent fully at scale, including our Farah simpler era, and Hugo which can create a mix headwind for us that said on the SG&A line, we're focused on growing at less than sales like we did again this quarter as we drive efficiency and productivity gains.
Gary: Particularly in our back office functions.
Gary: Given all the levers we have we have line of sight to improving our margins over time, while continuing to prioritize and make significant investments in our organic pipeline and product launches.
Gary: Now regarding capital allocation, we continue to make choices and invest to drive future profitable growth. While also returning capital to shareholders, primarily through our dividend and from time to time opportunistic share repurchases.
As I mentioned last quarter, we've increased our focus on tuck in M&A. We're also continuing to work to evaluate our portfolio.
Gary: Overall, we view active portfolio management as an important lever to delivering on our long term strategic and financial objectives.
Gary: Now turning to guidance.
Gary: Given our continued outperformance and positive momentum, we're raising our full year revenue and EPS guidance. We now expect fiscal 'twenty five organic revenue growth of 4.75% to 5%.
Gary: An increase from the prior range of four 5% to 5% for Q3, we're expecting to deliver another quarter of mid single digit growth on the top line and we'd have your model organic revenue growth of approximately 4.75% base.
Gary: Based on recent rates FX would have an unfavorable impact to fiscal 'twenty five in the range of $225 million to $325 million, including a $100 million to $150 million in the third quarter move.
Gary: Moving down the P&L, we expect our third and fourth quarter gross margins to improve sequentially as currency becomes much less of an impact. We also continue to expect our full year operating margins to expand as we balance driving efficiencies with investing behind our product launches and in our long term pipeline.
Gary: On the bottom line, we're raising our fiscal 25, non-GAAP diluted EPS guidance to a new range of $5 44 to $5 50, an increase from the prior range of $5 42 to $5 50.
Gary: For the third quarter, we expect EPS of $1 35 to $1 37.
Gary: The fiscal year 'twenty five guidance range continues to include an unfavorable 5% impact from foreign currency, including an unfavorable 1% impact in Q3.
Gary: Further details on our annual guidance can be found in the guidance slide in our presentation.
Gary: So to conclude we remain focused on restoring our earnings power, having just delivered another quarter of leveraged EPS growth on a constant currency basis. We continue to expect to report high single digit adjusted EPS growth in the back half of our fiscal year in line with our long term commitment to deliver durable mi.
Gary: Mid single digit organic revenue growth with EPS leverage.
Jeff: Jeff back to you.
Jeff: Thank you Gary.
Jeff: Now before we go to analyst questions I want to close with a few thoughts.
Jeff: We're delivering durable mid single digit revenue growth, which we've been doing consistently now for two years.
Jeff: This is the direct result of all the changes we've made to the company over the past few years from the resiliency of our operations and supply chain.
Jeff: So our performance incentive plans to our culture and our people.
We've also been investing to position ourselves in high growth markets and this has led to a wave of recent product approvals across many of our businesses.
Jeff: Look it's exciting and it creates a tailwind that this company hasnt had in a while.
Jeff: We've been working hard to put ourselves in a position to win.
Jeff: With revenue growth tailwind on top of a strong foundation.
Jeff: And now it's up to us, it's it's just up to us to execute and deliver on these opportunities.
Jeff: And then as we go down the P&L the significant work that we've been implementing to drive cost savings and earnings power will start to show up in our reported results in the back half of this fiscal year.
Jeff: And when our organization to deliver strong earnings we translate this into strong free cash flow.
Jeff: This creates a virtuous cycle with incremental firepower for investments and returning capital to our shareholders.
Jeff: And when you combine all of this with the work that we've been doing with portfolio management.
Jeff: We expect to deliver significant long term value for our shareholders.
Jeff: Finally, I want to thank all of our employees around the world I know many of you are watching today and it's because of your efforts and those that came before you that Medtronic has accomplished so much in the 75 years. Since this company was founded.
Jeff: Your work directly benefit the lives of over 78 million people. This year, that's an incredible accomplishment and when I think about the work you're doing to create our future.
Innovations that you're inventing engineering manufacturing and and preparing to sell this work has the potential to alleviate pain restore health and extend life for hundreds of millions of people and create tremendous value for many other stakeholders.
Speaker Change: Thank you for everything that you do.
Speaker Change: With that let's move to Q&A, where we're going to try to get to as many analysts as possible. So we ask that you limit yourself to just one question and only if needed a related follow up if you have additional questions you can reach out to Ryan in the Investor Relations team after the call.
Brad: With that Brad can you. Please give your instructions for asking a question for the sell side analysts that would like to ask a question. Please select the participants button and click raise hand.
If you're using the mobile app pressed them more button influx of raise hand. Your lines are currently on mute when called upon you will receive a request to Unmeet airline, which you must respond to you before asking your question lastly, please be advised that this Q&A session is being recorded.
Brad: For today's session, Jeff Gary and Ryan are joined by Q to Lora, EVP and president of diabetes, Mike Mirror, narrow EVP and president of the medical surgical portfolio, Sean Salmon, EVP and president of the cardiovascular portfolio and Brett wall EVP and president of the neuroscience portfolio, we'll pause for a few seconds to assemble the queue.
Brad: Hugh.
Brad: Okay.
Speaker Change: Alright, we will take the first question from Larry <unk> at Wells Fargo. Larry. Please go ahead.
Larry: Good morning, Thanks for taking the question and congrats on a nice quarter here.
Speaker Change: I heard you guys talk about the hypertension opportunity a few times on this call I think we saw video before the call highlighting renal denervation. So I wanted to ask on about that Shawn you have the TPG ardian beginning in January how much of a benefit are you expecting from that and when are you anticipating the national coverage decision.
Speaker Change: And are you planning to use the new T. CEP process for that Sean I think it's been a while since we've heard you talk about just kind of your overall thoughts on the renal denervation opportunity. Thanks for taking the.
Speaker Change: Question.
Speaker Change: Okay. Thanks I. Appreciate the question look we continue to make really great progress on the reimbursement front.
Speaker Change: As you mentioned the T P T or the outpatient coverage for for devices and what that really addresses is.
Speaker Change: A portion of the patients with Medicare roughly half of the Medicare patient population.
Speaker Change: Those on fee for service would now be covered.
With this transitional pass through payment, which is certainly going to be an accelerator for the therapy.
Speaker Change: But as you noted getting broader coverage will get us out of the sort of the the prior authorization loop well I'm going to just bill to the accounts that have already been established so making that headway is important.
Speaker Change: We also have to go further with the private Payor universe that does take longer you go with payer by payer state by state in terms of the efforts on coverage. What we're doing is going for coverage with evidence development.
Speaker Change: There are numerous pathways for that and we will be giving an update on that in the future, but ive got no incremental update today.
Speaker Change: Alright, thank you.
Speaker Change: Thanks, Barry will take the next question please breath.
Speaker Change: The next question comes from Robbie Marcus of JP Morgan Ravi. Please go ahead.
Speaker Change: Yeah Robby.
Speaker Change: Okay.
Speaker Change: You can go back will come back.
Speaker Change: The next question comes from Travis Steed at Bank of America Travis. Please go ahead.
Travis Steed: Hey, Thanks for taking the question I guess I wanted to just talk about your kind of your ability to grow earnings high single digits longer term despite.
Travis Steed: Despite maybe some potential for you guys, maybe a stronger dollar tariff potential and it sounds like some of the initial affair ardian launches could be negative on margins initially, but it is there is there enough upside on some of those programs to offset potential headwinds are there potential cushion on some of the cost productivity.
Speaker Change: I want to know your flexibility and your commitment to continuing to grow earnings. Despite some of those potential headwinds that investors have been starting to worry about.
Speaker Change: Yes, Travis Thanks for the question Yeah, we are definitely committed to the to the earnings I'll let.
Speaker Change: Gary Walk you through some of your the specifics to your questions.
Gary: Thanks, Jeff.
Speaker Change: We're pleased to raise our guidance on both revenue and EPS for the year as we continue to move kind of build momentum there's a lot to be excited about and we're focused on driving durable both revenue growth.
Speaker Change: As well as restoring the earnings power of the of the company.
Speaker Change: On the margin front.
Speaker Change: You know what what I want you to hear from US is there is no change to our margin expectations. In Q3, we expect margins of 25, 6% up 30 basis points year over year full year, we expect operating margins to be 25, 7% up both up year over year by 10 basis points.
Speaker Change: Gross margins will be up sequentially in both Q3 and Q4.
Speaker Change: And that'll that'll deliver our guidance on the SG&A front or will drive leverage through a focus on our highest priorities leveraging what we talked about before automation and digitization will make some structural changes and we have strong discipline on our discretionary expenses to help drive that.
Speaker Change: That margin expansion.
Speaker Change: You mentioned there.
Speaker Change: The early launches and we're committed to investing behind those both commercially and in R&D.
Speaker Change: Taken together that mid single digit revenue growth will deliver upwards of 10% EPS on a constant currency basis, you mentioned the foreign exchange that'll be a five point headwind in line with what we've talked about before and that'll get us to the $5 44 to <unk> to $5 50 guidance that we gave today. So overall we feel good.
Speaker Change: And worth mentioning once that guidance up that sets us up for success.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thanks, Travis next question please bread.
Speaker Change: Yeah Ravi will go back to you have here, Iran. The wise well, we'll move on.
Yes can you hear me this time.
Ravi: Yep. Thanks Ravi.
Ravi: Great.
Speaker Change: Sorry about that I forgot to on mute before so thanks for taking the question.
I wanted to ask.
Speaker Change: Kind of as a counter to our travel <unk> question. Some of the products. You mentioned that were important growth drivers on sales, but an early in their lifecycle on margin expansion.
Speaker Change: You know our renal denervation, both pulse select which had the supplier issue this quarter in the upcoming or ongoing severe nine is a thorough launch.
Speaker Change: Hugo robotic and renal denervation.
Speaker Change: Maybe you could just talk about it.
Speaker Change: Especially over next.
Speaker Change: Six to 12 months as some of these products start to launch and progressively launch how youre thinking about the cadence of growth for them and then also the margin implications as we think about some of these lower margin products, maybe adding some of the most incremental growth.
Speaker Change: A lot.
Speaker Change: Yes. Thanks Ravi Thanks for the question, Yes, I mean look on the on the margin side.
Speaker Change: Obviously, you're asking a question around mix.
Speaker Change: That's a piece of it but in addition to that the pricing is an op continues to be an opportunity for us I think.
Speaker Change: That's been a positive here over the last couple of quarters, and I think theres more upside for us there and pricing.
Speaker Change: And in our cost in our cost down programs or are you now or have kicked in and are helping as well. So those are you know I think both tailwind for us on the mix side. It is a bit of a mixed bag Gary Gary give you some details, but you know some of the programs like <unk>.
Speaker Change: Hugo and Ah Farah.
Speaker Change: That involve you know capital.
Speaker Change: Can be a little it can be lower especially earlier in the cycle. As you are ramping them up but then we have some others like are you know already in and in neuro Mod, which are you know our neuromodulator now having a pretty big positive impact on price in our on our on our margins and our mix and Rd and would do the same.
Speaker Change: I don't know if you would how you want to add to that Gary yes, not.
Gary: Not much to add Jeff I would just say yes.
First of all all of the.
Gary: All of this is contemplated in our in our guidance for 25, we're expecting gross margins to be flat on a constant currency with foreign exchange driving about a half a point of headwind I talked about the sequential improvement that we expect in both Q3, and Q4 and our focus on stabilizing and improving from there.
Speaker Change: Sure Jeff talked about some of the headwinds, but I you know I also sabre, we're really laser focused on cost reduction.
Speaker Change: On price, especially behind our our innovation across the board.
Speaker Change: To fund the investment to ensure commercial success of these critical launches.
Speaker Change: Thank you very much.
Speaker Change: Thanks, Robbie next question. Please Brad the next question comes from Vijay Kumar of Evercore ISI.
Speaker Change: DJ Please go ahead.
Speaker Change: Hey, guys. Thanks for taking my question and.
Speaker Change: Congratulations on a on a steady execution.
Speaker Change: Execution here, Jeff maybe I wanted to focus on ablation here.
Speaker Change: You know you mentioned flattish growth in the quarter due to some disruption what was the issue when was it resolved what gives us the confidence of strong double digit growth in third quarter.
Speaker Change: Is that some revenue catch up from second quarter when do you think.
Speaker Change: Cryo could bottom out is that in third quarter and you did that I thought was interesting you mentioned the revenue per case enough ore is that a three action trees now versus.
Speaker Change: Versus our cryo. Thank you.
Speaker Change: Yeah. So you know as I said in the commentary Cas Archea ablation business didn't accelerate as we expected this quarter because of this third party component supplier that had experienced.
Speaker Change: An interruption in their supply to us that's suppliers back on track that issues resolved they've expanded their capacity as well and which is allowing us to ramp the Pos slipped supply and activate new accounts plus like is doing well I mean, it's and it's in it's in a good spot from a supply perspective going forward like we literally sold there.
Speaker Change: Every unit, we had in Q2 and as I mentioned, we did double or close to double the physicians using pulse select and we will now have the confidence to open more council that should continue and then we more than doubled the.
Speaker Change: The number of procedures and number of patients treated in our in our as for cryo the declines actually got better sequentially.
Speaker Change: In into Cryo wasn't the issue are you know Q2 versus I'm, sorry, Q1 versus Q2, because in Q2 as declines got better than Q1.
Speaker Change: And so it really was a supply issue that that's been resolved.
Speaker Change: So we know we have we expect pulse look to continue to ramp and we have this and now we have sphere nine and that's and that gives us all of this combined.
Speaker Change: The supplier issue being resolved in.
What we're seeing on Paul select demand in an affair demand that gives us the confidence in the strong double digit growth in Q3.
Speaker Change: So this is an important area for us scenario of focus.
And we feel like we're well positioned with both the single shot and the only player with single shot and vocal going forward.
Speaker Change: And sorry the.
Speaker Change: Revenue per case on an F era is that three cryo.
Speaker Change: Sean do you want to handle that one the revenue per case on a fairer yes.
Speaker Change: So Vijay when you when you do cryo is really just the balloon.
Speaker Change: Balloon catheter that youre, using and when Youre doing.
Speaker Change: Thermal bush with RF for non thermal with PFA theres additional components can be used including like a mapping catheter.
Speaker Change: The patches that you used for navigation system. So their case by case revenue.
Speaker Change: It goes up.
Speaker Change: And there's also the use of other other technologies like crossing needles that we sell as well so.
Speaker Change: The revenue per case Tesco.
Speaker Change: I don't think it's three X quite but.
Speaker Change: It's certainly more than the correlates that choose with the sphere nine catheter since you don't need a dedicated mapping catheter it actually saves them.
Speaker Change: On a per case for the.
Speaker Change: So the hospital so it's the value proposition of having one catheter that can do the entire job with a single stack across the cross Trans septal is really appealing to physicians.
Speaker Change: Thank you Dennis better workflow.
Speaker Change: Better workflow for them and you know even though is as excited as hospitals are about PFA. They are still conscious on the price and so the fact that if you could save them. The catheters like Sean just mentioned that helps.
Speaker Change: Thanks, Vijay will go to the next.
Speaker Change: Please spread.
Speaker Change: The next question comes from Shanghai thing at RBC capital markets share again. Please go ahead.
Speaker Change: Oh, great. Thank you for taking my question. That's all I was wondering if you could say our parts on the med Tech landscape.
Speaker Change: Under the Trump administration in a specific way what aon parts on tariffs.
Speaker Change: How do you plan to navigate.
Speaker Change: Our supply chain and perhaps thinking.
Tony: Tony our exposure to imports from China.
Speaker Change: Well first before I jump into the election questions I.
Speaker Change: The med tech landscape.
Speaker Change: The underlying market is healthy you know, we're seeing good procedure growth and we think that steady going forward really driven by.
Speaker Change: Innovation, whether it be net growth of minimally invasive procedures like Teva or.
Speaker Change: Innovation and pacing like lead list in conduction system pacing or it would just be the PFA conversation. We just added it you know pulling.
Speaker Change: Pulling patients from.
Speaker Change: Drug solution to a med tech solution. All of these things are this innovation is what's driving a lot of this growth plus just demographics. So I think it's a healthy market and under any administration. If you go back you know you know decades, whether it be in the U S or other countries health care is an important priority for any government and so we.
Speaker Change: Feel good in that way when he come to the specific election I do think it's with the president elect Trump coming in I do think it's still a bit early to speculate about.
Speaker Change: Different policies, whether it be health care policy or exactly what's going to happen or not going to happen to tariffs. It's like I said, it's still too early we're running different scenarios here, obviously in preparing for different scenarios, but I don't want to get into that speculation in terms of though our exposure to importing products from China, It's small it's less than one.
Speaker Change: Our percent of our revenue.
Thank you.
Speaker Change: Thanks, Shannon go to the next question please Brad.
Speaker Change: The next question comes from Christopher Pasquale at Nephron, Chris. Please go ahead.
Christopher Pasquale: Thanks, I wanted to ask about the diabetes segment and your upcoming FDA submission for type two label expansion how much of your current insulin pump installed base.
Christopher Pasquale: Maybe in the U S that easier is made up of type two patients and how do you think about your opportunity in that segment without a more discreet on body form factor, which seems to be a priority for many of those users.
Speaker Change: I'll, let <unk> answer the question on diabetes cube.
Speaker Change: Okay.
Speaker Change: Hey, Thanks for the question on type two.
Speaker Change: We finished enrollment we expect to submit to FDA or expanding indication the first half of next calendar year.
So that's progressing very well.
Speaker Change: <unk> as a percentage of our installed base, we're still largely a type one.
Speaker Change: Business.
Speaker Change: We can teach high change being quite a large opportunity.
And the date and the clinical data that we've that we've.
Speaker Change: That we've generated we'll attaching is extremely good. So we are actually quite optimistic about the type two opportunity.
Chris: Okay. Thank you Chris.
Speaker Change: Next question please Brad.
Speaker Change: Okay.
Speaker Change: The next question comes from Peter Chickering Deutsche Bank. He don't please go ahead.
Speaker Change: Yeah. Good morning, guys going back to 2025 guidance and your updated guidance, you're absorbing more FX headwind, increasing EPS guidance I think you told privates that your margin guidance at 25, 7% for the year and against.
Speaker Change: 25, 8% last quarter, so with revenue guidance up a little bit FX had on increasing EPS moving up is tax rate and positive tailwind in the back half year versus the previous guidance I'm just trying to bridge the moving parts into the EPS guidance raise thank you.
Speaker Change: Barry you want to take that yeah happy to happy to take that.
Barry: What I would say is FX on an EPS basis is very much in line with what we've been sharing all year and that's really the power of our of our hedging program, giving us giving us good visibility.
Barry: Revenue is up.
Barry: Gross margins are essentially in line with with our expectations and we are as I mentioned investing behind.
Barry: The power of these.
Barry: These launches both commercially.
Barry: As well as R&D taxes up a little bit.
Barry: We're navigating we're navigating pillar two but all in all.
Barry: P S.
Barry: A penny at the midpoint and we're pleased with the we've taken our guidance up today.
Speaker Change: Okay. Thank you Peter next question please Brad.
Barry: Okay.
Speaker Change: The next question comes from Anthony Petrone Mizuho Securities Anthony. Please go ahead.
Anthony Petrone: Thanks, and congrats on a quarter here back back to renal denervation, just looking at some data CMS, just quoting 16 million patients 65, plus.
Anthony Petrone: That have uncontrolled hypertension, but they're also on medication. So just maybe a recap here with the end tab.
Anthony Petrone: And T P T in place now how much of that.
Population can you go after and how much is still out there that you would need an NCD to sort of address that that patient population. Thanks.
Speaker Change: Hey, Sean.
Speaker Change: Okay.
Speaker Change: Yes sure.
Speaker Change: The payer mix is roughly 50 50 between.
Speaker Change: Those in Medicare and non Medicare.
Speaker Change: Medicare Medicaid I'd say.
Speaker Change: The GPT addresses the fee for service component of the Medicare eligible patients. It does not include those on Medicare advantage. So that's that's roughly split evenly between the two of those.
Speaker Change: So the you know the.
The patient population was obviously very very large here for those with uncontrolled hypertension those were taken.
Speaker Change: Taking drugs still having elevated blood pressure as Chad noted at the beginning it's really the minority of patients actually get control. Despite the availability of those drugs. So.
Speaker Change: Say, you announced Medicare if it's $16 million if that's the baseline our numbers are more like $18 million for the uncontrolled hypertension.
Speaker Change: Potential patients greater than 150 out of drug treated.
Speaker Change: The addressable market with within an outpatient is about half the Medicare population Medicaid is going to be a state by state determination like commercial insurance would be but suffice to say I think there are a lot of patient setup that could be addressed with this therapy.
The demand is really not the issue, it's going to be making sure we get that coverage and we establish centers that can do the procedure.
Speaker Change: Thank you.
Anthony Petrone: Thanks Anthony.
Anthony Petrone: Next question Brett.
Speaker Change: The next question comes from Rich <unk> at Trust Securities Rich. Please go ahead.
Speaker Change: Alright, Thanks for taking the question maybe maybe just go on is five.
Speaker Change: That continues to be a strong business for you guys, you're growing above market, especially in the U S. I guess.
Speaker Change: Can you parse out a little bit the markets been stronger here.
Speaker Change: The ear, how how much.
Speaker Change: The underlying market strength or or or the pickup in recent quarters or years is attributable to that and I'm just trying to get a sense for how sustainable high single digit growth profile Krieger U S core spine franchise pardon me.
Speaker Change: Yep.
Speaker Change: Yeah first of all I look at is it is a bit of we're seeing a bit of market expansion. Here. We're also seeing a bit of market consolidation theres, a large tail of spine companies out there that are going away.
Speaker Change: And as I said in our commentary this market's a leaning towards those with scale and technology, but I'll, let I'll, let Brett go on some of the details here.
Brett Wall: Yes. Thanks.
Brett Wall: Thanks, Rich for the the market itself still remains strong and as Jeff said.
It really benefits companies with scale because of the consolidation and technology with the able system and if you look at the technology that we're bringing to this it recruits the best reps. It recruits the best physicians and it brings together more market opportunity much more significant opportunity across the world. So are we.
See this is sustainable and we see this as a platform that we will continue to take share and continue to grow this business.
Speaker Change: Okay, and maybe just as a follow up to that you know you have a competitor you know.
Speaker Change: Their main consolidated right now and the spaces and is approaching.
Speaker Change: The anniversary of what felt what feels like it could be the worst case for disruption in the marketplace, you talked about opportunity to take share.
Speaker Change: As as consolidation disruption is unfolding can you just update us on what youre seeing on that front. Thank you.
Speaker Change: Yeah, you bet Rich you know we have a good pipeline there and we have had a good pipeline there of strong growth and good consolidation with more.
Speaker Change: High quality reps and other people coming towards Medtronic.
Speaker Change: And you know, we're continuing to see that develop and we have a pipeline and significant opportunity into the future.
Speaker Change: And you know once again, it benefits companies with scale and benefits with technology.
Speaker Change: And we see that are continuing to occur and continuing to happen.
Speaker Change: Thank you.
Rich: Thanks Rich next question please.
Speaker Change: Next question comes from Daniela and healthier UBS Danielle. Please go ahead.
Speaker Change: Thanks, So much good morning, everyone. Thanks for taking the question just a question on camera Theres been a lot of.
Speaker Change: Data over the last few weeks here in cash are you guys still are benefiting from the smart trial I just wanted to get a state of the nation on on the tanker market, where do you see that growth going from here, especially with the recent asymptomatic data that we saw and also wanted here at potential competitors.
Speaker Change: The very least delayed from entering the U S market. Thanks, so much.
Speaker Change: Sean you want it the tougher question.
Sean Salmon: Yeah. Thanks, Daniela I think the market's in good shape I think in line, what we've been saying in prior quarters in that high single digit range for growth.
The expansion of the patient population. There is continued opportunities for that as we mentioned the asymptomatic patient population, which I think yes.
Sean Salmon: Texas is a class effect would increase that but the bigger unlock would be moderate new York's gnosis down the road when we get when our trials read out there.
Sean Salmon: Then there's sort of tap in Teva indications that would also help expand that along with continued global growth of the therapy. So look I think the evidence base that we've got the strength of our our product just gets better and better for the longer term data really starts to distinguish what we've got and we've got certain use conditions like small alistair.
Sean Salmon: Clearly the human Nymex var valves are better and what's really opened up the aperture for us as well as really eliminating the concerns of coronary access with the new FX plus product, which we've launched the United States. Just began launching also this quarter in Europe, and we'll we'll be.
Sean Salmon: Pursuing that technology into other world markets, including Japan.
Sean Salmon: I'm here, so I think we're well positioned the market is healthy and that we still see lots of room for growth for a long time.
Speaker Change: Okay. Thanks, Danielle next question please.
Speaker Change: The next question comes from Joanne Wuensch City Joanne. Please go ahead.
Joanne Wuensch: Thank you so much and good morning.
It's been a while I think since we've heard an update on your mitral valve replacement and repair programs could you just give us an update on where you are thinking about that as well as tricuspid opportunities. Thank you very much.
Well I'll stick with Sean on the structural heart questions.
Speaker Change: Yeah. Thanks for the question so the the intrepid valve, which is used in both the mitral position as well as in the tricuspid position continues in its trial for U S and European approval, that's the at par or trial.
Speaker Change: We're doing well in that study I think the acceleration for the trial is really had by going to a 29 French version of the Trans septal side of that and we've seen really really good results when we completely eliminate.
Speaker Change: But regurgitation, which is very different than what we see with repair technologies.
Speaker Change: The clinical outcomes have been really excellent we've taken out a population of those who are not clickable, those who can't get surgery and <unk>.
Speaker Change: In patients with severe mitral aortic calcification or Mac. So that's really going to be the first indications for that although tricuspid front. It is the same got were making some modifications for that in the future, but right now we're using.
Speaker Change: The existing intrepid valve.
Speaker Change: And the tricuspid position and the early feasibility study.
Speaker Change: The iterations that will make our include sizes and just making it more fit for purpose in that in that location, but we continue to do well, we believe that elimination of regurgitation is better for patients and that's been our primary focus and we have some other investments in repair technology as well.
Speaker Change: Yeah, I think just overall just you know just kind of recapping last two questions. Our structural heart business is in a good spot. It's as Sean mentioned, we built on our tavern franchise with data and product improvements.
Speaker Change: And then in the pipeline. He just went through mitral and tricuspid with Intrepid.
Speaker Change: And this is you know getting back to other questions on mix. This is a good guy on our mix, it's a very profitable.
Speaker Change: Franchise for us so it's good to see that it's doing well and the underlying market is also doing well.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks, Joanne I think we have time for two more questions. Brad we'll take the next question. Please.
Speaker Change: The next question comes from Matt Mexican Barclays. Matt. Please go ahead.
Speaker Change: Hey, Thanks for taking the question so I was hoping to get.
Speaker Change: Deep into Q&A here, just maybe clarify couple of things that come up during Q&A.
Speaker Change: Question.
Speaker Change: Investors. So just on a couple of other key pipeline programs.
Speaker Change: So maybe pace and timing.
Speaker Change: Sarah.
Speaker Change: In the U S.
Speaker Change: I think Sean you talked about the NCD, but unclear.
Speaker Change: And whether that's sort of in calendar 'twenty five.
Speaker Change: Any sort of timing I know, it's a tough process to nail down and then diabetes.
Speaker Change: The patch pump.
Speaker Change: We get off that well what can you tell us and and just to again clarify something I think it's come up a couple of times is on earnings growth in the back half so the 5% headwind to EPS about 'twenty six 'twenty seven cents I think if we do the math on that right you got about a dime of that left.
Speaker Change: Back as of most of the impact.
Speaker Change: That FX headwind on EPS growth has been in the first half just.
Speaker Change: Any color cadence or mechanics, you can help us understand how that plays out in Q3 and Q4 I guess, that's for Gary but thanks, so much.
Speaker Change: Yes, I think thanks for the question, Matt on unlock on a fairer look as part of our PFA story.
Speaker Change: Obviously, we just got the approval and this is one that we're in the process of ramping who.
Speaker Change: We didn't quantify that exactly but when you put it all together with pulse select which is at a more scaled.
Speaker Change: Position, that's where we're getting the the.
Speaker Change: Our strong double digit growth.
Speaker Change: In Q3 and beyond so it's we're not breaking out a fair, specifically, but but we.
Speaker Change: We are in the process of scaling that.
Speaker Change: Yes, we're already in the coverage Sean went through the ins and outs of that but to your point, Matt. It is it is difficult to predict exactly when.
Speaker Change: When CMS gives us some some indication on on coverage.
Speaker Change: We've got a as you know a strong indication of our strong approval from the FDA with a broad indication.
Speaker Change: And.
Speaker Change: So we've got to see where we're at CMS ends up and as we've talked about the conversations have been very constructive but.
Speaker Change: We don't want it was hard to predict timing on when they'll get back to us and publicize something.
Speaker Change: As far as diabetes goes into the patch programs.
Speaker Change: You know remain dynamic we've got a couple of shots on goal there.
Speaker Change: I don't believe we've given any timing on that other than look we've been investing heavily.
Speaker Change: In diabetes across.
Speaker Change: The entire one of our strengths is just the.
Speaker Change: The fact that we have the entire ecosystem.
Speaker Change: And in past needs to be part of that we've got a couple of shots on goal here and it's but we have that.
Speaker Change: We have not given a timing on that and then as far as the earnings growth.
Speaker Change: As Gary mentioned, we in the back half of the year.
Speaker Change: And I mentioned that we mentioned in the commentary as well, we see a high single digit we see that that.
Speaker Change: Earnings growth that you saw on a constant currency basis that was high single digit even double digit we see that trends translating into the back half of the year high single digit realized EPS growth.
Speaker Change: If you have anything to add to that.
Speaker Change: You hit the EPS.
Speaker Change: Matt the foreign exchange headwind is pretty much spot on five points for the year at about a dime a dime in the second half I know.
Speaker Change: Currencies on a lot of folks' mind, we're a we're a global company and historically it has been a thorn for us.
Speaker Change: This.
This is where you see the benefit of our hedging program.
Speaker Change: A key part of our strategy as we think about the impact going forward you know one of the best things. We can do is grow our U S business. We're also looking aggressively at dynamically pricing.
Speaker Change: In devaluing currency environments, and we're seeing that in our in our results and we're also looking at.
Speaker Change: Balancing our cost base around the world.
So we're we're taking action, it's a priority of mine and as Jeff said, we will see that high single digit EPS in the second half.
Speaker Change: I think on the currency thing its important I just want to reemphasize, what Gerry said I mean, yeah, our hedging program.
Speaker Change: Can delay impact and help with stability in a given year, but we're really attacking this the underlying.
Speaker Change: No issues. So that we don't we are exposed to it as much in <unk>.
Speaker Change: Whether it's prioritizing you know putting a lot more investment in the U S growth, but also a number of other actions like Gary mentioned, Mike and some of these.
Speaker Change: Valued countries that have constant devaluation that you valuation of currency a whole different pricing regimen. There it's much more dynamic and this is something that.
Speaker Change: You know, we're really commit to gary's really championed this in and yelling from the mountain tops as you can tell.
Speaker Change: From his voice on this call are this is this is a priority for him and for us.
Speaker Change: Okay. Thanks, Matt.
Speaker Change: We'll take our last question please Brett.
Brett Wall: Our final question comes from Patrick Wood at Morgan Stanley Patrick. Please go ahead.
Patrick Wood: Beautiful thank you I'll keep it tight on this one.
Patrick Wood: Given the.
Speaker Change: Focus on tuck in M&A I'm, just curious the kind of assets you're most interested on that side and then you obviously there's language around looking at the portfolio of assets. The O'brien should we expect.
Speaker Change: The potential for any slightly more radical repositioning of the business over the next coming in thanks.
Speaker Change #100: Okay. Thanks, Patrick.
Speaker Change #101: In terms of M&A that this is something we talked about last quarter as well I mean this is a.
Speaker Change #101: An important part of our growth algorithm.
Speaker Change #101: And the type of assets are the type of M&A, we want to do is more tuck in and I don't want to forecast exactly where we're prioritizing but I tell you. This it is a more of a top down approach here, where we're looking at the our leadership team looking at the areas that we're prioritizing.
Speaker Change #101: And really looking to those areas.
Speaker Change #101: For that to be the priority areas for M&A, So our high growth markets, but also our high growth segments that we've talked about but also some of our well established businesses from time to time need some tuck in support to keep them going because we're counting on a minimal amount of growth from them in a disproportionate amount of our.
Speaker Change #101: Of.
Our profits and cash flow. So we want to make sure they're healthy so that's kind of within that we're not getting much more specific and then in terms of ports.
Speaker Change #101: Portfolio management, Okay, I, just can't emphasize enough how important it is for us to this portfolio management is an ongoing process not a destination. We're constantly looking at the portfolio to make sure. It's constructed in a way that is aligned with our mission aligned with our where our strengths and it's a competitive world out there and we want to make sure we're.
Speaker Change #101: Playing to our strengths and we've got a number of those but it also is constructed in a way that can give us.
Speaker Change #101: The company from a financial performance perspective that.
Speaker Change #101: Reliable durable mid single digit innovation driven growth at that mid single digit level on the topline that can translate that with a profitability mix like we went through some of the the mix dynamics, where we have some products that are or a negative on the nexen and some that are businesses that are you know.
Speaker Change #101: A good guy on the mix, we want make sure that all adds up to that that the earnings leverage down the P&L and the translation to cash flow that gets you to.
Speaker Change #101: The dividend and get you to that double digit shareholder returns. So we are really actively looking at the portfolio and make sure. It's constructed in a way to durably deliver that and that's that.
Speaker Change #101: That's about as far as I can go on context on portfolio.
Jeff Gary: Thanks, so much Jeff.
Thanks, Patrick and we apologize if we weren't able to get to everyone. In the queue. This morning, So feel free to follow up with me or or anyone on the IR team. After the call. So with that Jeff. Please go ahead with your closing remarks, okay, well, thanks to all the analysts for the questions and to all of you that joined us today and.
Jeff Gary: Like always we certainly appreciate your support and your continued interest in Medtronic and we hope you'll join US for our Q3 earnings broadcast, which we anticipate holding on Tuesday February 18th Werewolf date, you on our continued progress against our long term strategies and our commitment so so with that.
Jeff Gary: Again, thanks for joining us and have a great rest of your day and for those of you in the U S are.
Jeff Gary: Wishing you and your family is all a very happy Thanksgiving next week. So thank you and I have a good day.
Jeff Gary: Okay.
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