Q3 2024 Stryker Corp Earnings Call
We remain committed to complimenting our growth through acquisitions and have a strong deal pipeline and healthy financial capacity.
We delivered a Justice League court lead to US $2.87, reflecting 16.7% grown compared to the third quarter of 2023.
Finally, we are now in our expectations for 2024 to the high end of our previously provided guidance ranges and now anticipate full-year organic sales growth of 9.5 to 10% and adjusted EPS of $12 to $12.10.
Our updated guidance reflects the continual momentum from a prognodination, healthy procedure volumes, and terrific commercial execution across the globe.
We are on track and remain committed to our goal of 200 basis points of margin expansion by the end of 2025. This includes 100 basis points of margin expansion this year, while offsetting dilution from an emanating.
I will now turn the call over to Jason. Thanks, Kevin. My comments today will focus on providing an update on the current environment, capital demand and recent acquisitions.
Jason: Procedural volumes remain healthy in the third order, in line with our expectations, and underscored by continued adoption of robotic assisted surgery. We continue to expect strength and procedural demand through the end of the year.
Jason: The man for a capital product was strong, or within elevated backlog across our capital business.
Jason: Patients and customer interests in make-up was highlighted by record Q3 installations, both worldwide and in the US with high utilization rates across the globe. We expect the sustained momentum from installations in utilization will continue to drive growth in our HIPs in these businesses.
Jason: Our latest platform launches continue to experience success in the marketplace. Our pansy-applaying system is progressing well with a full launch expected in the US by the second half of 2025.
Jason: Our LifePak 35 defibrillator and monitor has a strong order book and sales have begun to ramp. Additionally, robust adoption of our 1788 visualization platform continues to contribute to the growth we are seeing in our endoscopy business.
Jason: Lastly, we've begun early cases with both our Spine Guidance 5 software featuring Copilot and our Mako Spine robot.
Jason: As with prior product launches, these spine offerings will be on a limited market release for some time as we refine training protocols.
Jason: Mako Shoulder is on track to launch at the end of the year. We continue to receive positive feedback from surgeons who have seen these products.
Jason: From an inorganic perspective, our 2024 acquisitions reinforce our dedication to improving outcomes across the continuum of care and our commitment to meeting our customers' needs.
Jason: Year-to-date, we have closed seven acquisitions while investing approximately $1.6 billion to complete.
Jason: In 2025, we expect these acquisitions will contribute approximately $300 million to sales.
Jason: With that, I will turn the call over to Glenn. Thanks, Jason. Today I will focus my comments on our third 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 11.5% in the quarter compared to 9.2% in the third quarter of 2023. This quarter had one more selling day than 2023. We had a 1.2% favorable impact from pricing.
Glenn: We continue to see a positive trend in our pricing initiatives, both in the U.S. and international markets, and both with our med-surg and neurotech and orthopedic and spine segments, each contributing positive pricing for the quarter.
Glenn: Foreign currency had a 0.1% unfavorable impact on sales.
Glenn: In the U.S., organic sales growth was 11.4 percent. International organic sales growth was 11.7 percent, driven by positive sales momentum across our international markets.
Glenn: Our adjusted EPS of $2.87 in the quarter was up 16.7% from 2023, driven by strong sales growth and continued margin expansion. Foreign currency exchange translation had minimal impact on our adjusted EPS for the quarter.
Glenn: Now I will provide some highlights around our quarterly segment performance.
Glenn: In the quarter, MedSurg and Neurotechnology had constant currency sales growth of 12.9%, and organic sales growth of 12.7%, which included 13.2% of U.S. organic growth and 11.2% of international organic growth.
Glenn: Instruments had U.S. organic sales growth of 9.9 percent, led by strong double-digit growth in the surgical technologies business.
Glenn: From a product perspective, sales growth was led by waste management, smoke evacuation, tourniquet cuffs, stair shield, and power tools.
Glenn: Endoscopy had U.S. organic sales growth of 10.9% with strong growth across all businesses. Growth in the quarter was fueled by robust demand for our OR infrastructure and renovations and the continued success of the 1788 platform and sports medicine shoulder products.
Glenn: Medical had U.S. organic sales growth of 18.5 percent, driven by strong performances across all of its businesses, acute care, SAGE, and emergency care.
Glenn: From a product perspective, the medical business was led by strong sales growth in beds and stretchers, saved products, transport capital, and defibrillators. The order pipeline for LifePak 35 is robust and continues to drive excitement in the market.
Glenn: Neurovascular had U.S. organic cells growth of 1.5%, which reflects solid performance in our core hemorrhagic products, offset by recovering performance in our flow-diverting stent products due to supply chain issues earlier in the year and competitive pressures in our ischemic business.
Glenn: And finally, Neurocranial had U.S. organic cells growth of 16.1%, led by strong growth in our bone mill, high-speed drills, bipolar forceps, and cranial maxillofacial products.
Glenn: Internationally, med-surg and neuro-technology had organic sales growth of 11.2%, led by double-digit organic growth in our endoscopy and medical businesses. Geographically, this included strong performances in Canada, the United Kingdom, Australia, New Zealand, Japan, and most of our emerging markets.
Glenn: Orthopedics and spying had constant currency sales growth of 10.8% and organic sales growth of 9.7%.
Glenn: which included organic growth of 8.6% in the U.S. and 12.3% internationally.
Glenn: Our U.S. Knee Business Group 8.4% organically, reflecting our market-leading position in robotic-assisted knee procedures, and the continued strength of our installed Mako base, as well as continued momentum in new Mako installations.
Glenn: Our U.S. HIP business grew 10.9% organically, driven by the continued success of our Insignia HIP STEM and momentum from our Mako robotic HIP platform.
Glenn: Our U.S. trauma and extremities businesses. Business grew 11.8% organically with double-digit sales growth across our core trauma, upper extremities, and biologics businesses.
Glenn: Our U.S. spine business grew 2.4% organically, led by performance in our interventional spine business.
Glenn: Our U.S. other ortho business had a slight decline organically of 0.6 percent, driven by seasonal mako-peel mix and a decline in bone cement.
Glenn: Internationally, orthopedics and spine grew 12.3% organically, including strong performances in South Korea, Japan, Canada, Europe, and most of our emerging markets.
Glenn: Now I will focus on operating highlights in the second quarter. Our adjusted gross margin of 64.5% was 20 basis points unfavorable from third quarter of 2023. This variance resulted primarily from mix.
Glenn: Adjusted R&D spending was 6.6% of sales, which was 20 basis points lower than the third quarter of 2023.
Glenn: Our adjusted SG&A was 33.2% of sales, which was 130 basis points lower than the third quarter of 2023, due to natural expense leverage combined with spending discipline, somewhat offset by investments to support growth.
Glenn: In summary, for the quarter, our adjusted operating margin was 24.7% of sales, which was 130 basis points favorable to third quarter of 2023.
Glenn: Net adjusted other income and expense of $42 million for the quarter was $19 million lower than 2023. They're driven by favorable interest income on our invested cash balances.
Glenn: We expect our full year net adjusted income and expense to be in the range of 230 to 240 million.
Glenn: The third quarter of 2024 had an adjusted effective tax rate of 15.8 percent.
Glenn: Reflecting the impact of geographic mix and certain discrete tax items.
Glenn: Focusing on the balance sheet, we ended the third quarter with approximately 4.7 billion of cash, marketable securities, and short-term investments.
Glenn: Total debt was approximately $15.5 billion. This debt includes approximately $3 billion from our bond offerings in September 2024, a portion of which will be used to pay down upcoming debt maturities in the fourth quarter.
Glenn: Turning to cash flow, our year-to-date cash from operations is $2.3 billion.
Glenn: an increase of $120 million from 2023.
Glenn: driven mainly by higher earnings and improvements in inventory and accounts payable, partially offset by higher accounts receivable from sales timing and other expense timing.
Glenn: Based on our year-to-day performance, sustained demand for our capital products, and healthy procedural volumes, we now expect full-year 2024 organic sales growth to be in the range of 9.5% to 10%.
Glenn: If foreign exchange rates hold near current levels, we anticipate full year sales will be slightly unfavorably impacted, and adjusted EPS will be negatively impacted by approximately 10 cents, both of which are reflected in our guidance.
Glenn: With a strong first nine months of the year, strong Q4 sales and operating margin momentum, we now expect adjusted net earnings per diluted share to be in the range of $12 to $12.10. Now I will open up the call for Q&A.
Glenn: Thank you.
Speaker Change: At this time, we will open the floor for questions. If you'd 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. We'd like to remind callers to please limit themselves to one question and one follow-up question so we can accommodate as many participants as possible.
Speaker Change: and we'll pause for just a moment.
Speaker Change: Okay, our first question comes from Robbie Marcus with J.P. Morgan. Your line is now open. Please go ahead.
Robbie Marcus: Oh, great. Thanks for taking the questions and congrats on a great third quarter here.
Robbie Marcus: Kevin, I wanted to ask...
Speaker Change: medical really stands out you know 60% is now of sales is now in that med-surg and neuro-tech and
Speaker Change: Medical grew closer to 20% this quarter.
Speaker Change: You called out the life pack had really good orders, but also beds and stretchers as well There's a lot in that medical line item. So just wanted to see what's going on there How much is one time versus sustainable and then I have a follow-up. Thanks
Speaker Change: Yeah, thanks Robbie. We love our medical business. If you look over the past five years, it's probably been our highest
Speaker Change: growing division pretty consistently. Now from quarter to quarter it does move around a little bit given the capital equipment nature of the business but it's not unusual for us to post an 18% growth if you just look back over the past let's say 8 to 12 quarters.
Speaker Change: Why? Because we have tremendous innovation and momentum behind Purcuity, Wireless Stretchers, Lifehack 35, the stage business is just on fire as we're performing.
Speaker Change: extremely well. You have both Sarah in the mix.
Speaker Change: and more recently we've acquired Keri Eye, of course, nothing really showing for that this quarter, but all of this is just feeding an engine of momentum.
Speaker Change: great leadership team, great talent culture, and so I don't see medical slowing down anytime soon. Will we have A-teams every quarter? Probably not, but you can expect double-digit growth through the medical division for a long time to come.
Speaker Change: Thank you. Have a great day.
Speaker Change: Great. Maybe just to follow up, the fourth quarter implied guide with the updated guidance is still a really good number, but it looks to be just a bit below the trend, at least on sales, versus year-to-date. Is there any impact that we're seeing from the hurricanes or any other disruptions we should be thinking about in fourth quarter? Thanks.
Speaker Change: Yeah, no, we don't we're not really counting on any disruption from the hurricanes. Sure, there was a little bit here or there, but we expect those procedures to be made up in the quarter. So no effect whatsoever to do with weather.
Speaker Change: I think it's a reasonable guide, we moved it up, but clearly we are hoping and aiming to finish at the high end of that guide.
Speaker Change: of the 10%, which you've seen us do in the past couple of years. So that's where we're aiming, but we have big comps, right? Last year's fourth quarter was 11.5%.
Speaker Change: So we're running against big numbers, but certainly we don't have anything negative in terms of the vibes that we're feeling on the business. The momentum is good.
Speaker Change: Just running against big numbers and we've moved it up what we feel is a reasonable amount and we're going to shoot for the high end So it's certainly possible that we'll have a 10% organic growth quarter in Q4
Speaker Change: and Pauline. Understood. Thanks a lot.
Speaker Change: Thank you.
Speaker Change: Okay, our next question will come from Larry Beechelson with Wells Fargo Securities. Your line is now open, please go ahead.
Larry Beechelson: Good afternoon. Thanks for taking the question and I'll echo Robbie's congratulations on a really nice quarter here.
Larry Beechelson: So Kevin, you know, I wanted to ask a little bit about 2025. You're guiding to 9.5% to 10% this year. How sustainable is the momentum in the top-line growth we're seeing, and what are the drivers of the 100 basis points of growth?
Larry Beechelson: Margin expansion that you called out on the call, and Glenn, given the recent retirement, I think, you know, should we be thinking about, you know, below the line or interest expense differently next year?
Jason: Hey Larry, it's Jason. I'll jump in here and handle the 2025 piece and then maybe Glenn can speak to that.
Jason Glenn: 100 Basis Points of Up-Margin Expansion as we land this year. You know, as we think about next year, we'll talk more obviously about that in January. The one thing I would say, you know, we're certainly happy with the momentum in the business. We stand very committed to the 100 Basis Points of Up-Margin Expansion that begin next year, but beyond that we'll certainly get into in January.
Speaker Change: Yeah, and then just as it relates to Audemars,
Speaker Change: Go ahead, sorry.
Speaker Change: No, no, no. My apologies. Please go ahead.
Speaker Change: Okay, yeah, I just wanted to give you some comments and color around the sort of 100 basis points up margin Expansion that we're fully expecting to deliver on this year and the hundred basis points up margin Expansion that will carry over into next year as well. First of all, if you look at our results for Q3, we had great momentum
Speaker Change: and we feel like that momentum definitely will carry forward into Q4. Just as a reminder, you know, during the year, and honestly, even last year, we started several initiatives to drive this improved leverage.
Speaker Change: These included, you know, looking at low-cost manufacturing sites.
Speaker Change: looking at insourcing opportunities, looking at site rationalization, working hard on freight optimization coming off of the supply chain crisis.
Speaker Change: Also, we've been looking at R&D product design opportunities, how can we make things cheaper? And then, you know, we also looked at sort of ramping up our direct sourcing negotiations with vendors to offset a lot of the inflationary increases that came across, you know, post-pandemic.
Speaker Change: Moving down to operating expenses, our shared services footprint continues to expand. We continue to push more transactional work into those shared services.
Speaker Change: We're also seeing good results from IT system rationalization, and that means we're putting more and more of our businesses on similar systems, and it's just a lot inexpensive to operate that way.
Speaker Change: And then, of course, coming off of sort of this hybrid work environment, we also are focusing on office space rationalization.
Speaker Change: So I have all of that that is ongoing and in process and starting to really deliver. I also am seeing strong price performance, like you just heard, and there is an ongoing focus there.
Speaker Change: And then lastly, you know, Q4 is our biggest.
Speaker Change: Sales order.
Speaker Change: of the year, and the amount of natural leverage that will drive, because sales are going to go up and our fixed costs are not growing, will create a lot of, you know, natural leverage that will benefit from.
Speaker Change: And then, you know, the last point I would make, and we talk about this internally in Stryker all the time.
Speaker Change: The target that we're reaching for is not something we haven't seen before. We've been there. We know what that kind of leverage looks like. So nobody at Stryker doesn't know how that feels or how you deliver on that. And so there's a lot of confidence, and you heard it from Kevin, that we'll deliver the 100 basis points this year and we'll deliver it next year.
Speaker Change: That's super helpful. Just for my follow-up, the hip growth was really strong in Q3, especially outside the U.S. What drove that and how should we think about the sustainability? Thank you.
Speaker Change: Thanks, Larry. We're super excited with the hit performance. It's not just a one-quarter thing. Of course, this quarter did pop a little bit more.
Speaker Change: The Insignia launch is now starting to spread around the world. We were kind of constrained on supply.
Speaker Change: and had to delay some of the international markets. They are now starting to receive that product and driving that. In addition, we have Mako Hip really starting to take off. We've got a bit of additional reimbursement in Japan. And then if you look organically, obviously the growth was double digits. It looks even bigger because of the SURF acquisition.
Speaker Change: So there is an inorganic component to the plant.
Speaker Change: of HIP Business in Europe. That acquisition is off to a great start ahead of the deal model. So we're really excited about that European acquisition.
Speaker Change: primarily in France, but also in other European markets. But overall, we're delighted with the progress of our HIP business, not just internationally, but also in the U.S. I think we posted a very strong number in the U.S. as well. So our HIP business has tremendous momentum.
Speaker Change: Thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question will come from the line of Joanne Wench with Citi. Your line is now open. Please go ahead.
Speaker Change: Hi, can you hear me okay? Yes, we can, yeah.
Joanne Wench: Excellent. Very nice quarter.
Speaker Change: One of the things that I think that investors struggle with is when they see this kind of growth in ortho, an impression that this is not sustainable and either at some level of pent-up demand and volume or
Joanne Wench: pricing that has, you know, moved positively that may not remain positively.
Speaker Change: Can you please address that? Tell me what I've said wrong. Thank you.
Speaker Change: I don't know how many quarters it takes for you to start to believe that this is going to be a good market. This has been going on for some time now.
Speaker Change: I think obviously potentially long memories, but we've called the market up more than a year ago.
Speaker Change: I said this I think one or two quarters ago that this feels like we're kind of in a bit of a new normal.
Speaker Change: And of course, no one has a crystal ball. We can't predict exactly how the market will evolve.
Speaker Change: All signs and signals are pointing to this being kind of like a new normal, at least for the market growth, being no longer low single, kind of a mid-single-digit growth. And of course, we're achieving a higher growth rate just based on our innovation and our sales execution.
Speaker Change: To me, I'm not surprised to see these kind of numbers. We're excited about these numbers and maybe I'll ask Glenn to comment a little bit about pricing.
Speaker Change: Yeah, and Joanne, I think, you know, one of the things that you've seen us deliver on quarter for quarter, and I think even with orthopedics, is just
Jason Glenn: We have a very big focus on these contracts as they're coming up and the negotiations related to those contracts.
Jason Glenn: And we're seeing the results. We're seeing that, okay, we're not always getting into positive territory on OCDs, but we are seeing less negative than we had seen before. And so I don't see that, you know, focus going away anytime soon.
Speaker Change: Thank you.
Speaker Change: Well, as my follow up, can you comment on early feedback for Mako Spine? And thank you.
Speaker Change: Yeah, thanks, Joanne. It's very early. So, so far, so good. That's all I can say. We've just started the cases literally just, you know, in the last week or so, so it is a little bit early to give you more color. Certainly on the next call, we'll be able to provide a lot more feedback, but
Speaker Change: So far, in the early stages, it is performing kind of as we expected. We're also excited about CoPilot, which is part of that same ecosystem. We've had actually a bit more experience with CoPilot, so that launched a little bit.
Speaker Change: ahead of Mako Spine. So what's exciting for me is that, you know, robotics launches typically tend to
Speaker Change: be delayed, right? If you just look at the industry at large, it's not always easy to launch a robotic application on time.
Speaker Change: And these two came right on time, right on schedule, and so far we're getting very good feedback, but it's early. And it's not going to have a big impact on our sales for a little while, because we do want to make sure everything is going as it should. We get the training right, not just for the surgeon, but also for their staff. As we've learned with previous launches,
Speaker Change: It pays to go a little bit slow at the beginning to make sure you get everything nailed before you really start to scale. But all signs and signals are pointing to these two products being really successful for our spineless.
Speaker Change: Excellent, thank you.
Speaker Change: Thank you.
Speaker Change: Our next question will come from the line of Ryan Zimmerman with DTIG. Your line is now open. Please go ahead.
Speaker Change: Thank you and congrats on the quarter. You know, Kevin, we have a chance to see.
Speaker Change: the Vocera Acquisition, you know, really be integrated into your beds, your stretchers, even to some extent the LifePak 35 product.
Speaker Change: And I'm wondering if you could just talk a little bit about kind of where Stryker's headed from a software versus hardware standpoint, you know, how to think about maybe some of this.
Speaker Change: recurring revenue that you expect to get as you create this ecosystem with Vocera and now maybe Care.ai to some extent and other products and kind of where
Speaker Change: You're driving the business to versus what we've historically thought of as more Traditional med tech if you will. I'm just curious your thoughts on that focus
Speaker Change: Yeah, thanks. Listen, we focus on solving customer problems. That's fundamentally how we think about it. We know our customers very intimately.
Speaker Change: and we have been evolving as a company. We moved into 3D printing, we moved into robotics.
Speaker Change: We've moved into digital, we're now moving into workflow and software as a service. So this is not something that's sort of new, it's been a gradual progression over a number of years. But I do see us getting more and more involved in connected services for our clients.
Speaker Change: for our customers. And these are all high growth spaces with very good margin profiles. And I think CARE-AI is incredibly exciting, getting into virtual nursing, which solves a lot of the problems that hospital customers are having around staffing.
Speaker Change: and being able to integrate that with Locera. So we're not done. I would say we're going to continue to expand both organically with follow-on software upgrades, because these things you have to have continual upgrade cycles.
Speaker Change: but also looking at other acquisitions to continue to bolt on to the Vocera and Care AI solution. We're looking at expanding Vocera into areas like the Emergency Department of Hospitals, so there's a lot more footprint that we can actually extend these technologies into. So, to me, it's an incredibly exciting...
Speaker Change: platform opportunity for us in the future, these wireless and digital solutions, but just think about it as us continuing to
Speaker Change: to look for ways to get into high-growth spaces that solve customer problems, and we'll just continue to extend it and expand it. But it's not a shift. We're still very focused on hips and knees and neuro, and our other businesses are also, as you see from our results today.
Speaker Change: are also high growth, and we do that with sometimes traditional methods.
Speaker Change: producing our products and sometimes getting into new technologies like 3D printing. So do expect more of the same and this diversification towards med surge, it's been going on for a decade.
Speaker Change: And they do have a lot more opportunities for new innovations than you would see in the traditional implant business. So I would expect this diversification story to probably continue going forward.
Speaker Change: Fair enough.
Speaker Change: Jason, you made the comment, you know, that you expect procedures to be healthy through your end.
Speaker Change: historically made those comments in kind of a three to six month window and I know this is trivial and it's kind of a follow-up to Joanne's question but any reason why you know early thoughts on in you know early 25 we wouldn't result in any type of you know similar procedure environment I mean it seems like
Speaker Change: It would suggest, you know, even into the first quarter of 25, that there wouldn't be some type of slowdown. And again, I know, you know, it's a more near-term question.
Speaker Change: Yeah, no, Ryan, I think what I would say is we don't have any indication that would suggest there's any level of slowdown. And I'd say as a reminder, you know, Kevin made this point as well. If you go back to as far back as our investor day, right, we said we kind of see these markets as mid-single-digit growing markets.
Speaker Change: I think that's how you're going to see kind of this year play out, and we're going to perform two to three hundred bases points above that.
Speaker Change: I don't have any reason to believe, as we turn the page and go to January, that there'll be some material slowdown. So we feel good about how we think we'll end the year and then start off 2025.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Travis Deed with Bank of America. Your line is now open. Please go ahead.
Speaker Change: I have a question. I wanted to ask one on Lifehack. Any sense for if you could comment on the order backlog compared to kind of typical product backlogs?
Speaker Change: some of the early feedback. Do you think this is enough for medical to grow and accelerate the growth rate of medical next year? And then just wanted to make sure on the installed base, the 100,000 plus, is that a installed base for the market or is that an installed base for Stryker? There's some confusing comments out there. So I wanted to clarify that here.
Speaker Change: Hey Travis, it's Jason. First off on the on the backlog, I'm not going to try to...
Jason Glenn: quantify it for LP35 specifically, but I'll say it's healthy, right? And there is a ton of excitement in the marketplace here.
Speaker Change: And we certainly think it'll be one of the pieces, as Kevin talks about, medical being a double-digit grower.
Speaker Change: OP35 is certainly going to play into that. In terms of install base, yeah, the 100,000 that you referenced, that's a good worldwide number for us as we think about that Stryker specifically. Yeah, so that, just to be clear, that's our install base. That's the LifeVac install base, which I think was the root of your question.
Speaker Change: given the replacement cycle you should think of this as a multi-year tailwind for medical.
Speaker Change: It's just, it's not a one-year, two-year, it's just going to be three, four, five-year tailwind, just given the lengthy life cycle of these farms.
Speaker Change: Great. And I had a follow-up, just kind of a two-part one for you, Kevin, just how you're thinking about the...
Speaker Change: overall M&A environment and sizable deals later this year, early next year. And Jason, the $300 million you called out on M&A contribution, is that all inorganic revenue, or is it just any of that flow into organic? And I'm curious how fast that piece of revenue is growing.
Jason Glenn: Yeah, so thanks. First of all, on the question on the organic or inorganic, obviously these deals happened over the course of this year, the seven deals, right? So we're going to give our guidance for organic sales growth in January, and you should assume that roughly half of the sales that we talked about, roughly half of the $300 million, will end up being inorganic next year.
Jason Glenn: The other roughly half will appear in our organic guide for the year. But we wanted to give you a sort of a sense for all of these. They're small tuck-ins for the most part, but actually very exciting for each one of those individual businesses. So that was the first part.
Jason Glenn: M&A environment continues to be great. We have a very healthy pipeline of deals. We've been active with a large number of deals. We're going to continue to stay active on the M&A front. We do have still significant financial capacity, having only spent $1.6 billion.
Jason Glenn: and continue to generate strong cash. So that will be the number one use of our cash going forward, just as it has been in the past, and we look forward to staying active on the M&A front.
Speaker Change: Thanks a lot.
Speaker Change: Our next question comes from the line of Matthew O'Brien with Piper Sandler Companies. Your line is now open, please go ahead.
Matthew O'brien: Afternoon. Thanks for taking the question. Maybe, I don't know if this is for you, Kevin or Glenn, but just help reconcile the commentary on, I think you said record new Mako installations, but then
Matthew O'brien: But then the other line was essentially flat this quarter. So I think you said there was some international pressure that you saw this quarter. So that would imply, I think you're saying that the domestic MACO number was, I don't want to say bananas, but very, very strong.
Matthew O'brien: You know, is that the case? Are you starting to see a lot of interest build in the multi-platform capability of MAKO, or is there something else, you know, just going on where you're seeing such strong domestic demand for MAKO?
Speaker Change: Yeah, just to clarify, in that other line, the two biggest components are...
Speaker Change: Revenue from Mako Installations, and
Speaker Change: The revenue from MAKO installation comes from outright cash sales.
Speaker Change: Finance deals through capital and rentals.
Speaker Change: And as the year progresses, what we typically see in the back half of the year is that more of our customers
Speaker Change: choose rental agreements.
Speaker Change: which ultimately usually end up in purchase agreements a year later. Even though we have a large number of installations, we're only booking rental income on a monthly basis. So that's what you feel revenue-wise in that line. The other thing that I mentioned is that bone cement
Speaker Change: you know, continues to decline and that really is primarily just a factor of the growth we're seeing in our cementless business. And so those are the two pieces that make that up.
Speaker Change: Thank you. Bye-bye.
Speaker Change: Okay, so I guess just specifically then, I mean, did the domestic MAKO number surprise to the upside in the quarter?
Speaker Change: in terms of the installations.
Speaker Change: didn't surprise to the upside it continued to be strong so we've had continued strength in installation both in the US as well as international sometimes the revenue number it looks volatile because of deal mix primarily where you have a lot of cash sales versus a lot of finance deals but steady I would call it steady good growth in installation
Speaker Change: both internationally and in. Okay.
Speaker Change: Okay, and then, you know, as I look at the ortho business, and I know medical's got a ton of growth in front of it, but the ortho business in your three biggest buckets is, you know, continues to be well above market averages.
Speaker Change: large joint here in Q3 or not, but just the confidence and the ability to unnecessarily put up this level of growth, but to grow so much faster than the market in 25 and even in 26.
Speaker Change: Thanks.
Speaker Change: I'll start with trauma and extremities because if you look, they had a very big calm from last year and still posted a very significant number and we're very confident in the future of trauma and extremities. Shoulder, as you know, has been a very strong grower, double digits pretty consistently. Last week I had a chance to go to the
Speaker Change: Orthopedic Trauma Association, which is our core trauma business unit, the biggest of the three business units within trauma and extremities.
Speaker Change: And I would say I got to see the full force of our trauma team at that meeting with the Pangea launch, with the VOLAR plating launch for distal radius fractures.
Speaker Change: They are absolutely on fire, and I see core trauma continuing to be a very strong grower. Tangier is just getting started, and they're already posting.
Speaker Change: Tremendous growth, fantastic management team.
Speaker Change: Very engaged. I'll tell you it was a very exhilarating conference to see that last weekend.
Speaker Change: and that momentum will continue and then, you know, foot and ankle and biologics. Biologics was very strong, double-digit growth.
Speaker Change: foot and ankle used to be kind of a high single-digit grower, a little bit lower than that this year. So in spite of that, you're still seeing these very, very big growth rates. And we're actually bullish that the foot and ankle will start to start to pick up a little bit.
Speaker Change: and that will contribute to future growth. So I would say trauma extremities is a big business and a double-digit kind of overall grower, at least for the foreseeable future.
Speaker Change: And then getting back to hips and knees, you know, we just continue to grow the MAKO sort of percent of procedures done in knees, percent of procedures done in hips.
Speaker Change: cementless continues to grow quarter after quarter after quarter. Insignia was obviously a massively important launch.
Speaker Change: For our hip business, we launched the Hinge product for revisions for knees that is going extremely well. So, tremendous product momentum across the board. From quarter to quarter, how much market share will we take? Hard to predict exactly, but we've said for quite some time now, we're going to grow above the market.
Speaker Change: what level above the market, let's see how that plays out. But we're in a very good position with our portfolio, with our talent, with our culture across all of these orthopedic businesses.
Speaker Change: Our next question will come from the line of Vijay Kumar with Evercore ISI. Your line is now open. Please go ahead.
Speaker Change: Hey guys, thanks for taking my question and congrats on a nice sprint here. Kevin, maybe my first one on Mako here. I think...
Vijay Kumar: I think in the past you mentioned about a certain percentage of tips being performed robotically in the U.S. I think that number was maybe 25-30%.
Vijay Kumar: Where are we on MAKO utilization? Any qualitative numbers? And is it up mid-singles, up double digits? How should we think about utilization? What percentage of hits are being done robotically right now?
Vijay Kumar: Hey, BJ, it's Jason. I'll dial that number in for you a bit more precisely in January, but what I would tell you is those numbers continue to progress in a positive direction quarter after quarter. And with the offense that we're playing, we certainly think that'll continue that pace in the fourth quarter and beyond.
Speaker Change: Yeah, we moved to a once a year disclosure of that given that our competitors don't disclose their percentage that are done on their robotic platforms.
Speaker Change: Understood. And maybe Kevin, one on the macro environment here. I know you've said procedure environment remains healthy. I think in the past you've spoken about wait times as sort of being a leading indicator.
Speaker Change: You know, when you look at those wait times, where are we right now from a procedure scheduling perspective? And I think on the capital side backlog, does it still remain robust? Did it grow sequentially? Thank you.
Speaker Change: It's just on schedule times. The reason we sort of say we still think the market is healthy is wait times are about, this is again not super scientific, just given the data we have, but it's roughly double the wait times that were pre-pandemic.
Speaker Change: So, average wait times were kind of two months or so. Schedule, surgery schedules were booked out about two months, now they're booked out more like four months. There are some surgeons that are booked out an entire year.
Speaker Change: and so we're just not seeing that go back. It's staying at that kind of normalized level.
Speaker Change: which gives us, it doesn't give us a full year visibility, but it gives us visibility out of at least probably four to six months. It's a good idea. You'd start to see things slowing down on the intake ahead of time. So that's why we feel pretty good about it, but.
Speaker Change: Again, every quarter, we get a chance to talk to you. If we see something change, we'll let you know, but we're not seeing any change whatsoever, at least not now.
Speaker Change: That's helpful. Thank you guys.
Speaker Change: Our next question comes from the line of Matt Nixick with Barclays. Your line is now open. Please go ahead.
Speaker Change: Hey, thanks so much for putting me in. There's a couple of clarifying questions on MAKO. So one, there was a question on color around that product line.
Speaker Change: ways of purchasing and so on. Just quick, what I think is the mix on leasing in the U.S. versus the mix on leasing O.U.S.?
Speaker Change: and more cash purchases in one geography or another, that kind of color might be helpful, and then I had just one quick follow-up.
Speaker Change: Hi, Matt. In terms of our leasing business relative to Makos, we see more leasing and financing in the US versus OUS.
Speaker Change: And I would agree that we also see more rentals in the U.S. than O.U.S.
Speaker Change: That's super helpful. And then the kind of next question, given the strain.
Speaker Change: in that business, and frankly, in Fort Booth in general, is...
Speaker Change: Can you give us any color on maybe the change in the percentage of new robots?
Speaker Change: installations going into, you know, ASCs as a site of care, you know, versus, you know, more traditional acute care centers or patch centers. That'd be super helpful if you're willing to share any color. Thanks.
Speaker Change: Yeah, thanks. Just like we said before on the previous question, you know, we're going to once a year kind of give you those kind of metrics rather than doing it every single quarter just for competitive reasons. But suffice to say that the percentage of NACOs going into ASCs is going up.
Speaker Change: with the increase in the number of ASCs. We love our ASC offense, and typically as we win our ASC deals, at least one of those operating rooms tends to have a Mako in it. And so we'll share more of that at the end of the year.
Speaker Change: Great, thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Stephen Lichman with Oppenheimer & Co. Your line is now open. Please go ahead.
Speaker Change: Thank you.
Stephen Lichman: Thank you. Hi guys. Just on Spine, you are obviously increasing your presence on the enabling technologies here.
Stephen Lichman: Do you see your platform there, obviously led by Mako, as sort of the driver for accelerated growth as you look ahead, or are there other pipeline products or M&A areas that you think could help bolster growth in that segment as well?
Speaker Change: Well, in the short term, I would say the enabling tech is really the engine for growth. Both Mako Spine as well as Coal Pilot.
Speaker Change: Of course, like every business, we have a number of products that the teams are working on. And as those products launch, they'll also be contributors. But for us, the robot was a major gap in the portfolio. And co-pilot gives us a bit of a leap forward.
Speaker Change: and spine surgeons are more than ever interested in enabling technologies and we know what that's done to hips and knees and are hopeful that that will really put us back on offense. We've been kind of playing defense for spine for quite some time so.
Speaker Change: I would say that's our immediate focus. The team, of course, are working on other innovative products, but this is the biggest area of opportunity for us.
Speaker Change: at least in the short term.
Speaker Change: Thanks. And then Glenn, just I think following up on Larry's question from earlier, looking at below the line expenses next year, any direction you can provide on sort of interest expense compared to 2024 based on what you guys have due and are refinancing?
Speaker Change: Hey Steven, it's Jason. We'll get into more of that certainly in January, but at this point we won't provide any more guidance relative to 2025.
Steven: Okay, understood. Thank you, guys.
Speaker Change: Our next question comes from the line at David Roman with Goldman Sachs. Your line is now open. Please go ahead.
Speaker Change: © The Mooji Media Ltd. All Rights Reserved. Mooji Media Ltd.
Speaker Change: Thank you and good afternoon.
David Roman: I wanted just to dive a little bit more deeply on the international side, and I appreciate Kevin, this is something that you've been focused on.
David Roman: for several years.
Speaker Change: OUS. Can you give us a sense?
Speaker Change: of which businesses perhaps don't lend themselves to significant OUS expansion versus those that do. And then a number of your competitors have talked about exiting markets OUS and does that provide an opportunity to accelerate your penetration into those geographies?
Speaker Change: Yeah, the biggest opportunity we have isn't really taking advantage of competitors exiting. It's really taking our technologies to these markets and earning our fair share. And by far the biggest opportunities are in the med-surg portion of our portfolio.
Speaker Change: Norovascular is already very well penetrated internationally, but actually it's the reverse of the rest of Stryker, where the majority of their sales are actually outside the United States.
Speaker Change: and then we have some other business like HIPS that are quite strong internationally. Trauma is very strong internationally, but basically all the other divisions of our company, especially in the med search, we have massive opportunities.
Speaker Change: The businesses that are a little less likely to be great internationally, something like a Sage
Speaker Change: Those products are terrific, but they involve extra costs to prevent infections, and there are certain markets that are just not as...
Speaker Change: interested in those businesses, but I would call them more of one-off types of businesses that the vast majority of our
Speaker Change: our MedSearch portfolio lends itself very well to international deployments. Now something like Gocera will take time, we'll have to do translation, so these things just take time. The reason, one of the biggest reasons why we have
Speaker Change: such a high percentage of U.S. sales is because we keep buying companies that have only U.S. revenue.
Speaker Change: And then it takes us time to then take those products to international markets. But the way you should think about it is, this is a multi-year, 10, 15-year tailwind for our company, just given our starting position. If you think of something like Power Tools, where we had...
Speaker Change: 33% market share. Five, six years ago we've now crossed 50%, but we're far from the market share we have in the United States.
Speaker Change: And it's just not something that spikes dramatically in one year. It takes the steady drumbeat.
Speaker Change: of adding sales forces, and penetrating, and providing training, and education, and...
Speaker Change: So it's a very nice, gentle push to our revenue and being able to grow double digits organically as we have the last couple of years, we're going to continue to do that for many years to come. So that for Stryker provides tremendous upside.
Speaker Change: versus other companies that are already well penetrated in international markets.
Speaker Change: Thank you.
Speaker Change: That's very helpful. And maybe on the MAKO expanded applications in shoulder and spine, as you think about what MAKO has been able to accomplish on the hip and knee side, really consolidating a lot of market share around robotics as that's become
Speaker Change: increasingly so standard of care. Should we expect to see something similar on the shoulder and spine side where
Speaker Change: The application robotics ends up being a significant share driver overall, and is this the path to catalyzing your spine business, maybe more specifically to a number one or number two position?
Speaker Change: Well, I'll start with spine. So in the case of spine, our Mako robotic solution, I wouldn't say is the best solution.
Speaker Change: materially different than the other offerings. So it's a very competitive offering. It's a good offering, but we're not first.
Speaker Change: and it's not incredibly differentiated.
Speaker Change: The co-pilot product is fabulous, so our ecosystem I'm delighted with. If you take the Q-Guidance and Incredibly Fast Camera, plus co-pilot, plus MakoSpline together as a system, very exciting. A robot by itself isn't as differentiating as it is in hips and knees.
Speaker Change: When I think about shoulder, I'm wildly excited about the potential. Now, we don't necessarily need it. Our shoulder business is absolutely humming and growing extremely well with great implants. We already have the Blueprint software, which is fabulous.
Speaker Change: for surgical pre-planning, but that blueprint will feed NACO and we will do bone preparation, and so it'll make a very hard procedure much more easy to accomplish. So I'm extremely bullish on its potential and shoulder, I would say, as much as I am.
Speaker Change: in the knee business. So shoulder should be great. Spine, I think it'll make us very competitive and it'll be good, but not as transformational as the potential is in shoulder.
Speaker Change: Thank you.
Speaker Change: Great, I appreciate you taking the questions.
Speaker Change: No problem.
Speaker Change: Our next question comes from the line of Chris Pascal with NetBond Research. Your line is now open. Please go ahead.
Chris Pascal: Thanks. Kevin, I wanted to ask about the Virtos acquisition. Pain is a therapeutic area that you had expressed interest in for some time. You're there now, or at least there now, in a bigger way with Virtos.
Chris Pascal: You talk about your plans for that mild procedure and do you see that as a platform that you can build on to add other solutions in interventional pain or do you view that as more of a one-off tuck-in?
Speaker Change: It's definitely not a one-off. We're really excited. We have an amazing IBS business. It's been high-performing.
Speaker Change: for quite some time.
Speaker Change: It's not the first deal we've done. We did the spine jack acquisition, we did the curb balloons that we bought from Carefusion during the BD acquisition of Carefusion. We picked up the curb balloons.
Speaker Change: We've had our own internal innovation as well. We launched OptiBlade, so we have both the pain as well as the oncology business within our IBS business. But it is a fabulous business. This is solving real problems that patients have, and it debulks the ligament and then...
Speaker Change: the pain subsides and then that obviously alleviates the need for more serious surgery. So we're very excited. We want to fill the bag up. We have an amazing
Speaker Change: the leadership team there in Salesforce that knows how to win, and I wouldn't say we're going to stop. I think we do have another internal innovation that's planned. We haven't communicated yet. We'll probably communicate that in the first quarter, which we're very excited about.
Speaker Change: and so that business will continue to be a high grower or striker in the future and I wouldn't say we're done.
Speaker Change: Great, thanks.
Speaker Change #100: Our next question comes from the line of Jason Witt with Roth MKM. Your line is now open. Please go ahead
Jason Witt: Hi, thanks for taking the question. So, you know, clearly one of the biggest trends in knees is the move towards cementless knees, but if you look at the data, it's almost entirely driven by Mako.
Jason Witt: recent numbers I've seen are you know well above or 75% or so. So just looking at the competition is there any other commercial robot out there that's even capable of making the appropriate cuts to put in a cementless knee or is that kind of what's driving sort of this dominance here?
Speaker Change #102: Well, let's start, just sort of rewind to say we've been 10 years in the market with Smythos.
Speaker Change #102: So, we launched the Mentalist prior to make-up.
Speaker Change #102: Offering
Speaker Change #102: provides fantastic results. We have good long-term data, five-year registry data that's 99% you know success rate so this is a huge advantage for us when a surgeon thinking of moving to cementless knowing they have a proven implant.
Speaker Change #102: is big. You're right that the cut and the precision of our cut lends itself to to really doing a press fit knee or a cementless knee and our percentage of cementless with Mako is much higher than our percentage of cementless.
Speaker Change #102: with standard instruments, but we do have quite a lot of surgeons doing standard knee replacement with cement where our cementless offering.
Speaker Change #102: And the competition is much later in providing their offerings. Some of them are just launching their Cementless now. It took us time. Surgeons aren't going to switch right away. They're going to want to make sure that there's no aseptic loosening. They're going to follow their patients.
Speaker Change #102: very carefully for the first six months, one year. Some of the prior versions of cementless hasn't gone well, so some of them have scarred from that.
Speaker Change #102: So I think for the competition, it's just going to take time, just like it did for us. It took us time early on. We just have a massive head start in the timing, and now we have long-term data, which proves that this is a terrific solution. So we love our position. That was our bet. We bet on cementless and robotics.
Speaker Change #102: and did not launch a brand new knee system and we are in a good position right now because of it.
Speaker Change #103: Yep, I agreed.
Speaker Change #103: And if we think about hips, you know, it's the same game plan, I mean, obviously a different, slightly different approach, but you're obviously a first mover.
Speaker Change #104: In terms of just the implant or just the technology, do you see sort of those things positioning you better in hips right now than everybody else? Or how should we think about, you know, how that's going to sort of work its way through? Because, obviously, knees were kind of the first focus, and now, obviously, hips is.
Speaker Change #104: not that they're new, but they're kind of followed these.
Speaker Change #105: Yeah, look, the need in me is more obvious.
Speaker Change #105: Peace.
Speaker Change #105: There's a lot more dissatisfied patients in these.
Speaker Change #105: and hips has a much higher satisfaction rate, so sometimes it's not as obvious.
Speaker Change #105: the need for hips, and that's why we try to get it in front of surgeons so they can see the power of Mako with pelvic tilt information. We also have, of course, the Insignia stem, which is doing great. I forgot to mention the Trident II hip cup. So we have a 3D printed hip cup, which surgeons absolutely love. That's actually our first, I'd call it, replacement product. Most of the 3D printing products we've done across our business, including CMF,
Speaker Change #105: as well as our HIPCINY business. So mostly been innovation around 3D printing to enable cementless as an example. But we actually have replaced our HIPCUP with a 3D printed HIPCUP, which provides fantastic fixation. And with Mako, you actually don't need to have.
Speaker Change #105: poroscopy.
Speaker Change #105: during the direct anterior procedure. So getting lead out of the operating room is a big deal.
Speaker Change #105: And we're only just starting to market that, and as surgeons realize that initially they'll reduce the number of shots because it gives them comfort and security doing the direct anterior method of procedure, but we're starting to see more and more surgeons reduce the number of shots.
Speaker Change #105: shots and then actually get it out of, get radiation out of the operating room, which
Speaker Change #105: not only makes the surgeon happy, it makes all the surgical staff.
Speaker Change #105: very happy. And you can do that with NACO for hips. So that is one of the compelling advantages that our system has.
Speaker Change #105: that we're going to continue to start to push. So that should, over time, increase the uptake of MAKO HIPs. And of course, outside the United States, there's a lot more HIP procedures done.
Speaker Change #105: It's not nearly as great a Tunis other than India, the rest of it.
Speaker Change #105: The world has much more balance between hips and knees and they're seeing the benefit of the hip application. Japan is a good example where the hip business is doing extremely well on Mako. So yes, there's a lot more upside. It takes a little longer because
Speaker Change #105: It's not as obvious that you're going to get these benefits until you actually try it, and that's what we're trying to educate our customers on these benefits.
Speaker Change #106: Great, thanks for all the detail Kevin. I'll jump back in queue. No problem.
Speaker Change #107: Our next question comes from Mike Madsen with Needham & Company. Your line is now open. Please go ahead.
Mike Madsen: Yeah, thanks. Just have another one on Mako, I guess with spine and shoulder coming.
Mike Madsen: You know you you're kind of a different position as the company because you have such a huge installed base already of systems that are out there
Mike Madsen: So, is it safe to assume that your existing installed base will provide an advantage and that you could potentially upgrade some of those to either do spine and or shoulder?
Mike Madsen: Or do you expect most of those robots doing those procedures to be sort of more greenfield placements?
Speaker Change #109: I think the answer is probably a bit of both. What we most benefit from is the brand of NACO.
Speaker Change #109: Mako is a brand that is trusted, that is known, that they have success and experience buying already.
Speaker Change #109: And so having another application on a proven robot, I think is a massive advantage, whether they add the application to existing robots or whether they purchase a standalone robot for their spine surgeon. In either case, they have experience with the robot, they have trust with the robot, they have trust with the brand of Mako.
Speaker Change #109: I think that gives us a massive advantage, absolutely.
Speaker Change #110: Okay, got it. And then just...
Speaker Change #111: and the pricing looks good this year. I know you're not giving guidance for next year, but maybe you could just talk about, you know, what you're seeing there, kind of the areas where you're seeing better or worse pricing and, you know, just the, your expectation of the sustainability.
Speaker Change #112: Yeah, Mike, I think...
Speaker Change #113: Gosh, how the years unfolded. You know, you think about Q1, we had positive 0.7, Q2 positive 1.1, and now Q3 positive 1.2, so we are, we're seeing good results from the programs that we put in place.
Speaker Change #113: And keep in mind, too, the program's...
Speaker Change #113: sort of span the gauntlet from
Speaker Change #113: working with
Speaker Change #113: large healthcare systems contractually, but even working on smaller scale individual hospitals or even ASCs drive better pricing and an understanding of why we are driving that kind of pricing. So I do think that we know we've exercised this muscle across our business both in the U.S. and international.
Speaker Change #113: that now this has become systemic in our business. And so it is something that will get attention in every deal that we do. Moving forward, I don't expect that to change. I'm sure things could get more competitive.
Speaker Change #113: and we'll provide that kind of guidance when we hit January , but right now we're very bullish on this year and we're going to get to the pricing.
Speaker Change #114: Okay, got it. Thank you.
Speaker Change #115: Our next question comes from the line of Danielle Antalpe with UBS equities. Your line is now open. Please go ahead.
Danielle Antalpe: Hey everyone, good afternoon. Thanks so much for taking the question. Congrats on a really good quarter here. Clearly a lot of momentum here. I was wondering if I could focus the conversation on the orthopedics business, large joint orthopedics, and I appreciate
Danielle Antalpe: your position, your competitive position with Mako and things like that, but I guess I'm just curious at a high level. I mean, you guys continue to, it seems like you continue to gain share here.
Danielle Antalpe: the product offering and and Stryker's ability to provide a broad swath of product offerings to the ASC and then I'll up now the follow-up is on ASC specifically and where we are in the transition of procedures large joint orthopedic procedures to the ASC. Thanks so much.
Danielle Antalpe: Hey Daniel, it's Jason. I would say in terms of, you know, our ability to win here, it's a combination of probably all the things that you just listed, frankly. But, you know, I would say we've been very consistent here in terms of the messaging of how we're going to win in the market, how the market's going to play out for several quarters now, right? You know, if you look and just start with
Danielle Antalpe: our Mako install base, and we've had a number of quarters now of record installations. If you think about how that translates into growth in our hips and knees business, that's certainly a positive.
Danielle Antalpe: And then when you think about it from a utilization standpoint, obviously I commented that we'll add a bit more color in January, but...
Danielle Antalpe: that continues to go up. So again, just a variety of positive factors. You know, Glenn talked about price. That certainly is a piece of what we see as well, but certainly several factors.
Speaker Change #117: you know, your question on the ASC environment.
Speaker Change #117: You know, Kevin commented on this earlier as well, where we continue to see the MAKO footprint built out in the ASC environment, again, helping the HIPs in these businesses.
Speaker Change #117: Again, I'll provide in January, we typically do this once a year in terms of percentage of large joints done in the ASC, but that continues to go up as well.
Speaker Change #117: It's certainly a variety of factors that are attributing to our growth over time. Yeah, the last thing I'd add is, you know, when you see sustained performance over time, that's one of the things we really value at Stryker. If you look at our, if you go to our national sales meetings and
Speaker Change #117: We have numerous awards for performance over time. To sustain something requires, yes, you need a portfolio, but people catch up and sometimes someone jumps ahead of you, and so the portfolio by itself is not ever going to be enough.
Speaker Change #117: to have sustained high performance. It's also the culture in the sales force, the way we hire our sales force, how engaged our sales forces are, how well they execute.
Speaker Change #117: and we are an incredibly sales-driven organization and our teams are highly engaged and they're very high performing.
Speaker Change #117: and sometimes not always with the leading product in some cases, but they know how to sell and that's been a strength for a long, long time at Stryker, and that is still very alive today.
Speaker Change #118: Thank you.
Speaker Change #119: Our next question comes from the line of Richard Dwitter with Truist Securities. Your line is now open. Please go ahead.
Richard Dwitter: All right, thanks for taking the questions and congrats on a really strong third quarter performance. So, my first question...
Richard Dwitter: Can you guys put any quantification around the amount of dilution or earnings dilution from the roughly 300 million of deals you did in 24 that you need to overcome?
Richard Dwitter: And is all of that going to be absorbed at 24?
Richard Dwitter: Is there going to be any kind of impact from a dilution standpoint in 2025, and can you quantify either?
Speaker Change #121: Yeah, hi, Richard.
Speaker Change #122: The only thing we really commented on, and I think Kevin said this, was that we will cover the dilution, and it's contemplated in the guidance that we have provided for this whole year, and it's anticipated that that dilution will be covered next year as well.
Richard Dwitter: Okay, thanks. And if you could actually, I'll sneak another one in, just what's the visions, the key acquisitions go into, if you could just remind us for modeling. And then my second question, my real second question, ischemic stroke, you know, Kevin, what do you think it's going to take to turn that business around? Is that a product?
Richard Dwitter: Six, is that a sales organization? Six, you know, how can you reaccelerate the momentum in that franchise? Thank you.
Speaker Change #123: Yeah, thanks. Look, the ischemic segment has been more demanding and challenging. We had some supply challenges on our flow diverting.
Speaker Change #123: a STEM portfolio, so that that is being rectified. So we're feeling better about that as we end this year and go into next year. On the aspiration side, there's just a large number of competitors. We do have, we launched the Vector46, a really good catheter, an aspiration catheter that's doing well.
Speaker Change #123: But we are looking at some sales force changes, perhaps, because in some cases
Speaker Change #123: The competitors have only shelved that in part.
Speaker Change #123: salesforce is solidly broad.
Speaker Change #123: suite of products. And so we have had a little bit of experimentation on some dedicated.
Speaker Change #123: sales reps that are only selling SG Mix. So we're looking at a number of different options to try to short that business but
Speaker Change #124: I would say we still love the neurovascular space. It's just that segment has become very competitive with a lot of new entrants. And we're looking at different options to be able to improve that. So we do have a good portfolio, so the portfolio isn't the biggest part of the problem. We did have a supply chain issue, that's getting better.
Speaker Change #125: Thank you.
Speaker Change #126: Our next question comes from the line of Matt Taylor with Jeffries. Your line is now open, please go ahead.
Matt Taylor: Hey guys, thanks for taking the question. I wanted to ask you about
Speaker Change #128: Thank you very much.
Matt Taylor: Yeah, Matt, you know, on pricing, I think we've told you everything we can on 2024, to be honest.
Matt Taylor: and in January we'll provide full guidance on where we think pricing will come out for 2025.
Speaker Change #129: Okay, thanks guys.
Speaker Change #130: Our next question comes from the line of Jeff Johnson with Robert W. Baird & Co. Your line is now open. Please go ahead.
Jeff Johnson: Thank you. Good afternoon guys. I'll try to be quick here at the end. So Glenn I know you said you've said about everything you can on price, but can I just confirm I think this is your first quarter of positive orthopedic pricing at least as far back as my model goes in 2012
Jeff Johnson: qualified it earlier in your comments versus just hospitals have realized they've kind of cut to the bone and you know in an inflationary environment if they want innovation out of all of you manufacturers you need to start they need to you know maybe stop asking for those those bigger price cuts every year and things like that thanks
Speaker Change #132: Yeah, I think, first of all, you're correct. This is the first.
Speaker Change #132: quarter for positive orthopedic pricing growth.
Speaker Change #133: Keep in mind a lot of that was driven in international markets, and especially in international markets where we saw more extreme effects and inflationary pressures, which we obviously adjust our pricing in those markets to match that.
Speaker Change #133: I would say in the U.S. orthopedic market, we're seeing good performance, but we're not necessarily seeing positive performance on pricing in the U.S. orthopedics market.
Speaker Change #134: All right, that's helpful. And then Kevin, just last one, it just, you know, I think way back many years ago we used to think about like medical endo and instruments, you know, one would be going through a new cycle, double digits, strong double digits growth. One would be coming up against tough comps from a cycle maybe 18, 24 months earlier. It was in the, you know, mid single digits and then one of the other segments kind of in between, you know, you're double digits in all those segments.
Speaker Change #134: here year-to-date. Are we, is there just so much diversity now, diversification in those three units and they're so big that you can just you know kind of keep up product cycles across all three and we don't really have to think about at least the valley part of that in any of these segments and given years down to five percent growth or something like that just think about conceptually the balance between medical endo and instruments. Thanks.
Speaker Change #135: Listen, I think that was extremely well said. What you just described is exactly what the strategy has been. To diversify away from purely capital businesses, to get into high growth segments, to make these bigger, stronger businesses. That underneath...
Speaker Change #135: the noise of the business. You can have some parts of the business maybe slowing a little bit but other parts accelerating and overall living in the double-digit growth land for the overall division. So that is very well said and frankly that's what we've experienced if you look at the last three years.
Speaker Change #136: You're not seeing the peaks and troughs you used to see in those businesses if you go back six, seven, eight, nine years ago, and you should expect going forward that you're going to have much more sort of sustainable, consistent growth at those divisional levels. So, well said.
Speaker Change #137: Thank you.
Speaker Change #138: Our next question comes from the line of Caitlin Cronin with Kennecord Genuity. Your line is now open. Please go ahead.
Caitlin Cronin: Hi, congrats on the great quarter. Thanks for taking the question. I guess just turning back to M&A, I think you've been focused on, you know, top-line growth through acquisitions, but I've also noted that the margin expansion expectations is really inclusive of the recent acquisitions.
Caitlin Cronin: Just stepping back, how do you think about the margins of potential acquisitions? Is there a floor or is it more fluid if you're able to see how you can drive efficiencies?
Speaker Change #140: Yeah, Katelyn, I think, you know, as we look at our modeling for M&A, obviously we're looking for fast-growing markets, we're looking for things that are creative to Stryker.
Speaker Change #140: And sometimes that accretion is over a longer period of time.
Speaker Change #140: and sometimes over a shorter period of time. I mean, ultimately, we're going to drive all these acquisitions to be accretive and accretive at the margin line and especially accretive at the EPS line. But the modeling and the timing of that can extend over a period of time. For product tuck-ins, those are fairly immediate.
Speaker Change #140: For close adjacencies, those maybe take a little bit longer.
Speaker Change #140: But being a high-growth acquirer, we're not going to look at dilution as something that scares us off. And as we said, if they're tuck-in deals, we're going to just absorb the early dilution and we know that that's going to then become accretive over time.
Speaker Change #141: I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change #142: Got it. Thanks so much.
Speaker Change #143: Our final question comes from the line of Josh Jennings with TD Cowen. Your line is now open. Please go ahead.
Speaker Change #144: Great, thank you. This is Eric Alford, Josh. Thanks for taking the question. On ortho, congrats on a really strong quarter and results there. One of your competitors has shared that they're going through a restructuring of their ortho business. I was just curious if you've seen any impact from that and to what extent it may have been a benefit this quarter. Thank you.
Speaker Change #145: Eric, as Jason said, I would say, you know, typically we don't we don't comment on competitor comments and continue to rely on the offense that we're playing. So we'll certainly continue to do that as we move forward.
Speaker Change #146: There are no further questions. I'll now turn the call over to Kevin Lobo for closing remarks.
Kevin Lobo: Thank you all for joining our call. We are excited about the business momentum that we have going forward and look forward to sharing the fourth quarter and full year results with you in January. Thank you.
Speaker Change #148: This concludes the 3rd Quarter 2024 Striker Earnings Call. You may now disconnect.