Q4 2024 Stryker Corp Earnings Call
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Luke: Welcome to the fourth quarter 2024 Striker Earnings Call. My name is Luke and I'll be your operator for today's call. At this time all participants are in a listen-only mode.
Luke: The following conference will conduct a question-answer session. The conference call will be recorded for replay purposes.
Luke: For your planning purposes and given amount of content we have to cover, in the event the call runs long, we plan to end the call no later than 6 p.m. EST.
Luke: Before we begin, I'd like to remind you that discussions during this conference call will include forward-looking statements.
Luke: Factors that could cause actual results to differ materially are discussed in the most recent findings with the SEC.
Luke: Also, the discussions will include certain non-GAAP financial measures. Reconciliation to most directly comparable GAAP financial measures can be found in today's press release that's an exhibit to Stryker's current report on Form 8K filed today with SEC.
Luke: I'd now like to turn over the call to Mr. Kevin Lobo, Chair and Chief Executive Officer. You may proceed, sir.
Luke: Welcome to Stryker's fourth quarter earnings call. Joining me today are Glenn Boehnlein, Stryker CFO, Andy Pierce, Group President, MedSurge and Neurotechnology, and Jason Beach, Vice President of Finance and Investor Relations.
Luke: For today's call, I will provide opening comments, followed by Andy, who will expand on our strategic rationale for the pending Inari acquisition.
Jason Beach: Jason will then follow with the trends we saw during the quarter and some product updates.
Luke: Finally, Glenn will offer further details on our 2024 results and 2025 guidance, as well as financial elements of Anari Medical and Spine, before we open the call to Q&A.
Speaker Change: First, as you saw in our press release, Glenn has decided to retire from Striker, effective April 1st, after a very successful nine-year tenure as our CFO.
Luke: He will be replaced by Preston Wells, who most of you know from his time in the Investor Relations role.
Speaker Change: I would like to thank Glenn for his outstanding leadership and great partnership with me and Stryker leaders as we grew the company significantly, delivered consistent strong financial results, and have positioned it very well for the future.
Luke: Now, let's move to our 2024 results, which were excellent, both for Q4 and the full year.
Luke: Against double-digit comparatives from a year ago, organic sales growth exceeded 10% for both Q4 and the full year.
Luke: Globally, for the full year, our instruments, endoscopy, medical, neurocranial, and trauma and extremities businesses all delivered double-digit organic sales growth.
Luke: Full year U.S. organic sales growth was an impressive 10.6% and international organic sales growth was 8.8%.
Luke: International results were led by strong performances in Canada, emerging markets in Europe. International continues to represent a significant opportunity for both our legacy businesses and recent acquisitions.
We also had excellent earnings performance.
Luke: including the dilutive impacts from the seven acquisitions that we completed in 2024, we exceeded our adjusted operating margin goals, delivering an improvement of 200 basis points in Q4 and 110 basis points for the full year versus 2023.
Luke: Our quarterly and full-year adjusted EPS of $4.01 and $12.19 represents 16% growth for Q4 and 15% growth compared to the full year of 2023.
Luke: This comprehensive performance demonstrates the durability of our high-growth offense, driven by organic innovation, focused M&A, and terrific commercial execution, as well as strong earnings power.
Luke: We have momentum entering 2025 and expect to continue delivering sales growth at the high end of MedTech, which is reflected in our full year 2025 guidance of organic sales growth of 8 to 9 percent.
Luke: This growth, combined with continuing operating margin expansion, translate to an adjusted EPS of $13.45 to $13.70 per share, before considering the impact of a NARI medical, which Glenn will cover.
Luke: We also announced an agreement to sell our spinal implants business, which has faced challenges in achieving our performance expectations.
Luke: This sale will place the spinal implants business in the hands of new owners that have extensive experience in the spine market, and it allows us to better align our resources.
Luke: We continue to be excited about Interventional Spine, which is one of our fastest growing businesses and was bolstered by the recent acquisition of Virtos Medical.
Luke: Additionally, we remain committed to enabling technologies for the spine market, including our Q-Guidance system, Co-Pilot, and MakoSpine.
Luke: These portfolio decisions reflect a continuation of our strategy to drive category leadership in attractive, high-growth end markets.
I will now turn the call over to Andy.
Andy Pierce: Thanks, Kevin. Our entry into the peripheral vascular market is a logical adjacency to our neurovascular division, given their complimentary product portfolios and parallel sites of service.
Andy Pierce: With the acquisition of Inari, Stryker will be a leading player in the fast-growing area of mechanical thrombectomy treatment for venous thromboembolism, or VTE.
Andy Pierce: Mechanical thrombectomy for PPE represents a 15 billion dollar addressable opportunity globally, with the U.S. comprising nearly 6 billion of that opportunity.
Andy Pierce: Today, less than one-fifth of treatments for VTE are addressed with mechanical thrombectomy, and we therefore believe this opportunity will expand over time as hospitals and clinicians look to elevate the standard of care for VTE.
Andy Pierce: We believe Inari solutions, which are supported by clinical research demonstrating their effectiveness, represent a significant opportunity for our portfolio.
Andy Pierce: Since bringing its ClotTreater and FlowTreater products to market in 2017, NARA has seen tremendous revenue growth in excess of 20% annually with a gross margin profile of approximately 85%.
Andy Pierce: In addition to its treatments for VTE, Inari has invested in four exciting therapies to address unmet needs in other patient populations.
Andy Pierce: These emerging therapies include chronic venous disease, dialysis access management, acute limb ischemia, and chronic limb-threatening ischemia. Together, they represent over $5 billion of incremental market segment opportunity globally.
Andy Pierce: We believe Stryker's international presence can help Inari more rapidly into global markets.
Andy Pierce: In recent years, Inari has made strides globally and is currently helping improve patient outcomes in over 30 markets, primarily in Europe and certain parts of Asia. Its international business is approximately 7% of sales.
Andy Pierce: Stryker has long been a global leader in interventional neurovascular procedures. And with the addition of Inari, we will be equipped with a more comprehensive interventional endovascular portfolio.
Andy Pierce: By leveraging the R&D and clinical capabilities of both organizations, we will have a greater opportunity to accelerate innovation and meet customer needs.
Andy Pierce: From a commercial perspective, we are excited about the great synergies that exist between our teams.
Andy Pierce: NRA brings significant operational infrastructure, which includes a commercial organization with attractive call points, including interventional radiologists, vascular surgeons, and interventional cardiologists.
Andy Pierce: NRE's strong commercial model and patient-focused mission aligns well with Stryker's culture and our go-to-market strategy in neurovascular.
and Patrick.
Andy Pierce: Finally, I would like to thank and recognize Drew Heitz and the entire NRE leadership team for building a strong mission-driven company that is improving patient lives.
Andy Pierce: and Ari has done an incredible job establishing this segment and driving adoption through extensive clinical studies and commercial excellence over the last 10 plus years.
Andy Pierce: I'd also like to thank the Stryker team for their tremendous efforts in bringing together our two companies.
Andy Pierce: With our track record in M&A, we have conviction in our ability to drive a successful integration, deliver innovative solutions to our customers, and create significant shareholder value.
Andy Pierce: With our long history of investing in customer-focused technologies, we look forward to achieving best-in-class performance through a world-class sales force, a highly complementary and clinically compelling product portfolio, and an exciting pipeline to ensure we continue to grow this segment.
Andy Pierce: And with that, I will now turn the call over to Jason. Thanks, Andy. My comments today will focus on providing an update on the current environment, as well as MAKO, an update on product launches, and an adjustment to our external reporting.
Jason Beach: Procedural volumes remained healthy in the fourth quarter, and we continue to expect the markets will remain strong in 2025, underscored by the continued adoption in robotic-assisted surgery, favorable demographics, and healthy levels of patient activity.
Jason Beach: Additionally, demand for our capital products remained robust, with strong organic growth in medical, instruments, and endoscopy in the quarter, and double digit growth for the full year across all three businesses.
Jason Beach: Hospital CapEx budgets are healthy and our capital order book remains elevated as we enter 2025.
Jason Beach: Next, specific to MAKO, we had another record quarter and year of installations in the U.S. and worldwide.
Jason Beach: The progress of our MAKO offense, including our direct-to-consumer campaign, has resulted in strong growth of our installed base, alongside continued increases in utilization.
Jason Beach: In the U.S., we are approaching two-thirds of knees and one-third of hips performed using NACO as we exited the year.
Jason Beach: Globally, we exited the year with just over 45% of knees and approximately 20% of hips performed using Mako. We have momentum and significant opportunities remain as Mako adoption increases.
Jason Beach: MAKO Spine completed its first cases in October, and we received excellent surgeon feedback.
Jason Beach: We will continue to progress through our limited market release and remain on track for full U.S. commercial launch in the second half of the year.
Jason Beach: Next, we received approval from the FDA for a MAKO shoulder application and were able to perform our first cases in December.
Jason Beach: We are excited to now offer a complete ecosystem for shoulders, which includes Blueprint, our pre-planning software, Mako Shoulder, and a leading portfolio of shoulder implants.
Jason Beach: As a reminder, 2025 will also be a limited launch year for MAKO Shoulder as we carefully gain clinical experience.
Jason Beach: We expect a full launch in the U.S. by Q1 of 2026.
Jason Beach: We have continued to see positive momentum driven by our recent product launches. Our Pangea plating system has seen robust customer interest since its launch, driving strong sales growth.
Jason Beach: Additionally, our LifePak 35 defibrillator and monitor continues to draw interest, driving meaningful sales performance in the quarter, along with a robust order book.
Jason Beach: Lastly, we have adjusted our external reporting to better align with how we are organized internally and to reflect the pending divestiture of the spinal implants business.
Jason Beach: Effective in the fourth quarter, our spine-enabling technologies results are reported as part of other orthopedics, and interventional spine results are reported as part of neurocranial.
Jason Beach: As a result, spinal implants is now reported separately within orthopedics. With that, I will now turn the call over to Glenn.
Glenn Boehnlein: Thanks Jason. Today I will focus my comments on our fourth quarter financial results and the related drivers. Our detailed financial results have been provided in today's press release.
Speaker Change: Our organic sales growth was 10.2 in the quarter compared to 11.4 in the fourth quarter of 2023.
Speaker Change: This quarter had one more selling day than 2023. We had a 1.1% favorable impact from pricing, with both med-surgeon neurotechnology and orthopedic segments contributing positive pricing for the quarter. Foreign currency had a 0.5% unfavorable impact on sales.
Speaker Change: In the quarter, U.S. organic sales growth was 10.9 percent. International organic sales growth was 7.9 percent and was led by positive sales momentum in Canada, Europe, and our emerging markets.
Speaker Change: U.S. full-year organic growth was 10.6, and international growth was 8.8. For the full year, the impact from price was favorable 1.1%. Foreign currency had a 0.5% unfavorable impact, and 2024 had one more selling day than 2023.
Speaker Change: Our full year adjusted EPS of $12.19 was up 15% from 2023, reflecting the favorable impact of sales growth and operating margin expansion, partially offset by the unfavorable impact of foreign currency exchange translation of $0.13.
Speaker Change: Now I will provide some more highlights around our quarterly segment performance.
Speaker Change: In the quarter, med-surg and neurotechnology had constant currency sales growth of 11.1%, and organic sales growth of 10.1%, which included 11.5% of U.S. organic growth and 5.8% of international organic growth.
Speaker Change: Instruments had U.S. organic sales growth of 8.8% with healthy growth in both the surgical technologies and orthopedic implants businesses. From a product perspective, sales growth was led by smoke evacuation, waste management, power tools, and StairShield.
Speaker Change: Endoscopy had U.S. organic sales growth of 12.9 percent, led by 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 our 1788 video platform and sports medicine shoulder products.
Speaker Change: Medical had U.S. organic sales growth of 11.1%, driven by double-digit performances in the emergency care and SAGE businesses.
Speaker Change: From a product perspective, the medical business was led by strong sales growth in beds, sage products, transport capital, and defibrillators. LifePak 35 continues to drive excitement in the market with a strong and accelerating order pipeline.
Speaker Change: Neurovascular had U.S. organic cells growth of 12% reflecting a strong performance in our hemorrhagic business and improvement against competitive pressures in our ischemic business.
Speaker Change: And finally, neurocranial had U.S. organic cells growth of 13.3%, led by strong growth in our bone mill, high-speed drills, bipolar forceps, cranial maxillofacial, and interventional spine products.
Speaker Change: As a reminder, our growth numbers now reflect the changes that Jason discussed earlier with interventional spine now reported as part of our neurocranial division.
Speaker Change: Internationally, MedSurg and NeuroTechnology had organic sales growth of 5.8%, led by growth in our instruments and endoscopy businesses. Geographically, this included strong performances in Canada and the United Kingdom.
Speaker Change: Orthopedics had constant currency sales growth of 11.3% and organic sales growth of 10.2%, which included organic growth of 10% in the U.S. and 10.5% internationally.
Speaker Change: reflecting our market leading position in robotic assisted knee procedures and momentum from the continued strength of our new Mako installations.
Speaker Change: Our U.S. hips business grew 7.1% organically, fueled by the continued success of our Insignia Hip Stem and momentum of our Mako Robotic Hip Platform.
Speaker Change: Our U.S. trauma and extremities business grew 16.2% organically with very strong double-digit sales growth in our core trauma and upper extremities businesses.
Speaker Change: The performance of Pangea continues to ramp amid robust interest and adoption of this differentiated plating portfolio.
Speaker Change: Our U.S. spinal implants business grew 2.3% organically in the quarter.
Speaker Change: Our U.S. other ortho business, which now includes enabling technologies, grew 1.3% organically, primarily driven by mako-deal mix and a decline in bone cement.
Speaker Change: Internationally, orthopedics grew 10.5% organically, including strong performances in our emerging markets, Australia, New Zealand, Europe, and Canada.
Speaker Change: Now I will focus on operating highlights in the fourth quarter.
Speaker Change: Our adjusted gross margin of 65.3% was favorable by 140 basis points compared to the fourth quarter of 2023. This improvement was primarily driven by positive pricing, manufacturing cost improvements, and mix.
Speaker Change: Adjusted R&D spending was 5.3 percent of sales, which was 30 basis points lower than the fourth quarter of 2023. Our adjusted SG&A was 30.8 percent of sales, which was 20 basis points lower than the fourth quarter of 2023.
Speaker Change: In summary, for the quarter, our adjusted operating margin was 29.2% of sales, which was 200 basis points favorable to the fourth quarter of 2023.
Speaker Change: For the full year, our adjusted operating margin was 25.3%, which was a 110 basis point increase over 2023.
Speaker Change: Adjusted other income expense of $51 million for the quarter with $20 million higher than 2023 driven by a full quarter of higher interest expense related to our September 2024 debt issuance.
Speaker Change: For 2025, excluding the impact from the pending acquisition of ANARI, we expect our full year other income and expense to be approximately $260 million.
Speaker Change: driven primarily by the full-year impact of additional interest expense from our September 2024 debt issues.
Speaker Change: Our fourth quarter and full year had an adjusted effective tax rate of 15.4% and 14.8% respectively, reflecting the impact of geographic mix and certain discrete tax items.
Speaker Change: For 2025, we expect our full-year effective tax rate to be in the range of 15 to 16 percent.
Speaker Change: Focusing on the balance sheet, we ended the year with $4.5 billion of cash, marketable securities, and short-term investments.
Speaker Change: Total debt was approximately $13.6 billion and includes approximately $3 billion from our bond offerings in September 2024, of which a portion of the proceeds were used to pay down debt of $1.5 billion during the fourth quarter.
Speaker Change: Turning to cash flow, our full year 2024 cash from operations was $4.2 billion, an increase of $531 million from 2023, driven mainly by higher earnings and improvements in inventory and accounts payable.
Speaker Change: For 2025, we anticipate that capital spending will be in the range of $800 to $850 million. We do not anticipate any share buybacks.
And now I will provide full year 2025 guidance.
Speaker Change: Based on our momentum exiting 2024, a sustained level of procedural volumes, strong demand for our capital products, and our presence in healthy end markets, we expect organic net sales growth to be in the range of 8-9% for 2025.
Speaker Change: and expect adjusted net earnings per share to be in the range of $13.45 to $13.70.
before considering the impact of ANARI.
Speaker Change: This guidance assumes a full-year adjusted operating margin of 26.3%, which is in line with our previous assertion to improve op margin to pre-COVID levels.
Speaker Change: Our sales guidance reflects our expectation that the full year impact of price is modestly favorable. Additionally, if foreign exchange rates hold near current levels
Speaker Change: We anticipate sales will be unfavorably impacted by approximately 1% for the full year, and that adjusted earnings per share will be negatively impacted in the range of $0.10 to $0.15, both of which are reflected in our guidance.
Speaker Change: Compared to 2024, we will have one fewer selling day in the first quarter of 2025. The remaining quarters of this year will have the same number of selling days as 2024.
Speaker Change: Finally, while we do not provide quarterly guidance, we do expect the seasonality of our sales, op margin expansion, and related earnings to be similar to 2024.
Speaker Change: As it relates to the pending close of the Inari acquisition, we expect to fund the $4.9 billion purchase price through a mix of cash on hand and new debt and anticipate closing this transaction towards the end of February.
Speaker Change: ending in December 2025, we expect Inari to deliver approximately 590 million of sales on a constant currency basis and have a dilutive impact on adjusted op margin of 0 to 20 basis points.
and $0.20 to $0.30 on adjusted EPS.
Speaker Change: As it relates to the divestiture of our spine implants business, we expect that the impact of this transaction will be absorbed into the above guidance for net sales growth, adjusted operating margin, and adjusted EPS.
Speaker Change: With that, I will now open the call up for Q&A.
Thank you.
Speaker Change: At this time, we will open the floor for questions. If you would like to ask a question, please press star 5 on your telephone keypad. You may remove yourself at any time by pressing star 5 again.
Speaker Change: 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.
and we'll pause for just a moment.
Speaker Change: Okay, our first question will come from Larry Beechelson with Wells Fargo. Your line is now open. Please go ahead.
Larry Beechelson: Good afternoon. Thanks for taking the question. Congrats on the strong finish to the year. Kevin, just wanted to start on the spine.
Dale. And first, also, congratulations to both Glenn and Preston.
Speaker Change: So, Kevin, on the Spine sale, just talk about why this was the right time, how much of that $700 million is going to VB, and just the economics of the deal, you know, sale price and, you know, how you're offsetting any dilution from the deal. And I had one follow-up.
Speaker Change: Yeah, sure. Thanks, Larry. Why is now the time? As you know, we've been looking at this market for a long time and we've been trying to make improvements in our spine business.
Speaker Change: We are excited about the enabling tech with Co-Pilot and MakoSpine, but fundamentally just have better opportunities to invest.
Speaker Change: Our funds and other businesses and the VB brothers have a lot of experience in spine
Speaker Change: They're going to provide the follow-on innovation that's required in the implant side of the business. As you saw in the press release, we will be partnering together.
Speaker Change: So, we will be providing enabling tech, they will be providing the implants. The entire $700 million is expected to be divested to them. And so the remaining portions that we're keeping have been moved into other, the IVS into neurocranial and the enabling technology being moved into other orthopedics.
Speaker Change: It's just one of those things where we've moved into so many other faster-growing spaces, and this is really where we'd like to spend our time and our energy. It's, as you know, a very competitive market on the implant side of the business.
Speaker Change: where we just haven't had the same degree of innovation that we've had in other parts of our portfolio. So this felt like the right time. We feel like we've got a really great partner. The business will be in good hands. Our employees will be in good hands and so will our customers.
Thank you.
Speaker Change: Thanks and then just to follow up on Inari maybe for Andy or for Glenn
Speaker Change: Just talk about maybe some of the deal assumptions. You know, by our math, the return on invested capital seems relatively low in year five. You know, how do you see ROIC in five years, and when does this deal turn accretive? Thanks for taking the question.
Speaker Change: Yeah Larry, thanks. You know, we don't really guide on RIC or talk about it too much, but we generally target to get back to WAC sometime between five and seven years.
Speaker Change: And I would say Inari fits squarely in that sort of model as we looked at our own modeling on this.
We feel there are a lot of opportunities.
Speaker Change: for us to partner with them and obviously we have the normal public company synergies that will be in our favor.
Speaker Change: And then when you work your way down to EPS, you know, most of the impact will result from additional borrowings and the interest expense related to that in terms of the dilution we'll feel at the EPS level.
Robbie Marcus: Okay, our next question will come from Robbie Marcus with J.P. Morgan. Your line is now open. Please go ahead.
Robbie Marcus: Oh great, congratulations on a really nice quarter. Glenn, I wish you the best in retirement. It was great working with you.
Robbie Marcus: Maybe to follow up on Larry's questions and ask another way, and this is more of a P&L focus,
It's really impressive that you could...
Robbie Marcus: probably one of your lowest growth businesses and still be able to absorb it within the existing range that people expected and the guidance you provided on operating margins.
Robbie Marcus: So maybe just we got a good look at where your margin structure was and how you were planning to get there at the analyst day
Robbie Marcus: and Ari DeLucian and what's still left to go afterwards and and you know any color into the building blocks would be really helpful.
Yeah, sure. Thanks, Robbie.
Robbie Marcus: Gosh, there's so many opportunities still as I think through sort of
Robbie Marcus: how we look at our structure, how we look at our P&L, how we look at our manufacturing footprints.
Robbie Marcus: I would tell you that our, you know, our GQO group is very excited about purchasing opportunities. We're very excited about expanding sort of our low-cost manufacturing footprint. And, you know, we've recently opened up facilities in Poland. We have our Tijuana facility. So, there really are still a lot of robust opportunities as we think about how do we streamline. You know, moving on down the income statement, if I look at operating expenses,
Robbie Marcus: We really, you know, we have scratched pretty hard the shared services sort of aspect.
Robbie Marcus: back office and transactional services, but I would say there is room to go for sure. We look at our worldwide facilities in Asia, in Poland, and in Costa Rica, and they're, first of all, they're some of the fastest growing facilities we have.
Robbie Marcus: And so there are really some opportunities to even sort of push more transactional
Robbie Marcus: type activities down to there. Even if we look at sort of leveraging R&D and using our India Tech Center, more often it's just from a cost standpoint we really have an opportunity to drive.
Robbie Marcus: additional cost savings there too. And then honestly, a couple of my favorite ways to drive up margin. We are continuing to be very successful gaining price, and it's not just price in the U.S., it's price on a worldwide basis.
Robbie Marcus: And then lastly, you know, the way our formula works, we get a lot of natural leverage just by growing sales, you know, eight to nine percent. And that model will work and that model will deliver what we need for 2025.
Thank you.
Speaker Change: Great, maybe a follow-up. If I had a sum, my takeaways coming out of our health care conference as it relates to to your business from your competitors, it was that the ortho markets remain healthy and stable, volumes are robust, less negative pricing.
Speaker Change: and capital equipment markets remain healthy around the world. I wanted to see if you agree with that outlook. You always have great insights and any other color if there's a difference in.
Geography that you want to add. Thanks a lot.
Speaker Change: Hey Robbie, it's Jason. I'll take this one. I would say well said across the board on the commentary there. I think we're very well aligned with that and feel really good as we enter 2025 really across all three of those.
Thank you.
Speaker Change: Our next question will come from the line of Travis Deed with Bank of America. Your line is now open. Please go ahead.
Speaker Change: Hey, thanks for taking the questions and congrats, Preston. I look forward to working with you again. I wanted to ask about kind of the M&A. You guys used to have kind of five things on the list and then I checked one of those off of the NARI.
Speaker Change: maybe kind of talk about Kevin some of your your new prioritized list of like focus areas for M&A and is this going to be a period of kind of digestion or is this going to be a period of continued M&A and I assume that some of the proceeds from this client business will
Speaker Change: will help pay down debt so you can kind of get back on the offense and the M&A sooner if that's the right read.
Speaker Change: Yeah, listen, what I'd say is even with the debt to purchase Anari, even before any proceeds from Spine, it takes our debt equity to around three times, so that we still have capacity to continue to do tuck-in deals. And as a reminder, over the last 12 years, the majority of the deals we do are tuck-ins.
Speaker Change: And they can range in size. Most of them are kind of small, medium sized. Occasionally we do a large.
Speaker Change: tuck in, but we're still on offense and looking at acquisitions.
Speaker Change: I don't necessarily think that we'll do necessarily one as big as an RE in the near term.
Speaker Change: But the adjacencies continue to be the ones that I've talked about. Peripheral vascular, obviously I've mentioned that in the past and we're very excited to be able to consummate that deal. And the other spaces like, I've talked about urology, I've talked about neuromodulation, I've talked about soft tissue robotics.
Speaker Change: I've talked about healthcare IT. Those all remain, you know, very interesting spaces for us, but that's in addition.
Speaker Change: to all of the tuck-ins. Every single business is out looking for deals and you saw the seven that we did last year were all within our existing businesses.
Speaker Change: And that will continue to be the majority of the deals that we do. Those bring tremendous ROIC returns because we already have existing sales forces and call points. And once an RE is integrated into Stryker, we'll also continue to look within that peripheral space for follow-on acquisitions, just as we do with all our businesses.
Speaker Change: Thank you. And I wanted to ask on the revenue guidance, the 7% to 9% there, kind of another year of, you know, above normal growth. And I guess five years now of above normal growth, it's probably kind of the new normal of higher growth. And so I wanted to kind of think about
Speaker Change: The sustainability of this kind of higher revenue, you've gotten, you know, light pack going and, you know, several of the pipeline products, so just kind of talk about the sustainability of this growth rate that you've gotten and the confidence and the revenue guidance for 2025. Thank you.
Speaker Change: Yeah, thanks. Listen, just to clarify, the guidance was eight to nine percent organic.
Speaker Change: And so on the low end, it's a little bit higher than it was last year. So we feel even less risk on the bottom end of the range.
Speaker Change: And look, we're feeling very bullish. If you look at all of our businesses, they all have robust pipelines and they're constantly following on with innovations. Our commercial offenses are extremely strong.
Speaker Change: I just spent a lot of time with our sales forces in the month of January at our kickoff meetings and I could tell you the morale and the spirit has has never been better. There are big impacts such as Pangaea and LifeVac 35, those big launches, but there's a series of smaller product launches that are occurring across our portfolio.
Speaker Change: And so by now, I would hope everyone thinks and knows that it's durable. We're doing it year after year after year. And I don't see that slowing down anytime soon.
Speaker Change: Our next question will come from David Roman with Goldman Sachs. Your line is now open. Please go ahead.
David Roman: Thank you. Good afternoon, everybody. I wanted just to follow up maybe on a couple of strategic questions here. I think on the last call, you had cited
David Roman: that the acquisitions you had completed in 2024 were expected to contribute about $300 million this year. Can you maybe just give us an update on how that's progressing, how you're thinking about commercial strategy there, and any updates that you have observed since you've been able to close these deals?
David Roman: Yeah, sure. First of all, I'd tell you I'm extremely excited about the deals. All of the acquisitions are actually...
David Roman: at or above the deal model. Kind of unusual for us. Normally you'd have one or two that are a little bit below the model, but they've all taken off really, really well.
David Roman: And so that $300 million, we feel very confident about achieving or surpassing.
David Roman: The integrations, frankly, are very simple on these deals because they tuck into existing call points.
and existing business units of our company.
In some cases, we've actually added some specialized sales forces.
just additional specialized people.
David Roman: In the case of, certainly, of Virtos, we've added some additional...
David Roman: sales feet on the street, and that some of them came obviously with the company. We've decided to add some, but adding sales feet on the street is something we do every year. All of our businesses are constantly looking to split territories, to split sales forces, or parts of sales forces.
David Roman: and we've created a number of small new sales forces across the company and continue to add salespeople, but it's quite an easy integration when you tuck it into an existing business with existing call points.
Speaker Change: And then maybe just a follow-up on the on the Mako shoulder rollout. I think as your competitor is also coming out with the robotic...
Speaker Change: Shoulder Solution has described similarly a measured and gradual rollout. Maybe you could just help us understand some of the dynamics in the shoulder market, how we should think about the addressable market here, the pace of adoption, if.
Speaker Change: Knees or hips was a good proxy and and how The robotic shoulder market should kind of evolve in your view over the next maybe one to three years
Speaker Change: Listen, I'm extremely excited about Mako Shoulder. It's a very difficult procedure to do and the harder the procedure is, the more the robot brings value. And in our case, we're doing bone preparation with haptics with our robot in a tight space, so the surgeon feedback, early feedback, is extremely exciting.
Speaker Change: at least as exciting in these if not more. Now it does require a lot of change management and we learned that through the knee launch that sometimes you have to go a little slow at the beginning so that you can go fast later on and so this year is going to be really getting the training protocols well defined and established and we'll really start to see more acceleration.
Speaker Change: in 2026 and beyond. So not much of an impact commercially, but our shoulder business doesn't really need it.
Speaker Change: It's growing strong, double digits. It's been doing that since we acquired Wright Medical and had a fantastic year in 2024. And we'll have another great year in 2025, even without the impact of MAKO. But this will take it to a whole other level.
Speaker Change: And as you know, as you've seen with these, our robotic solution is clearly compelling and will be very differentiating.
Thank you.
Speaker Change: Our next question comes from the line of Peto Chickering with Deutsche Bank. Your line is now open. Please go ahead.
Speaker Change: Hey, uh, good afternoon, uh, and Glenn, thanks for, you know, all the years in Preston, looking forward to working with you, uh, again. Uh, on this fine, uh, uh, Demetrious Shores, you know, like, another day...
Speaker Change: There's no, you know, colleague here on the economics around this transaction, but from a modeling perspective With the deal closed in the first half of the year, how should we think about EPS seasonality this year? Does the transaction change the normal EPS seasonality striker?
and everyone else. Thank you.
Yeah, Peto.
Speaker Change: Yet, you know, honestly, when we pull spine out, it's first of all, it's not really material to the overall numbers that we're delivering. And so I would say the seasonality that you saw in twenty twenty four will generally carry forward to twenty twenty five in terms of the cadence.
of sales.
op margin expansion and EPS.
Speaker Change: All right, great. And then in 24, a medical had, you know, a huge year. This never gets the same airtime as the other divisions. How should we think about growth there for 2025 and sort of what are the big growth drivers in medical for this year? Thank you.
Speaker Change: Yeah, I've said this many times. I think it's the most underappreciated division within our company.
Speaker Change: and you should expect another year of double-digit growth in medical. They have a tremendous number of growth drivers, tremendous momentum across.
Speaker Change: whether it's SAGE, emergency care, acute care, beds, wireless stretchers, Vocera, it's just, there's just a series of tremendous opportunities across the portfolio, so they're posting double digits on top of double digit growth years and I expect another year of double digit growth in 2025.
Speaker Change: Our next question will come from the line of Vijay Kumar with Evercore ISI. Your line is now open. Please go ahead.
Hey guys, thanks for taking my question, Glenn.
wishing you the best in Preston. Congratulations, well-deserved.
I guess my first question, and just a guidance clarification...
Um
Speaker Change: Inari, is the maximum dilution impact here 20 basis points? Glenn, is that what you're saying? And spine, I think the comment you made was spine will be absorbed in the current guidance. Does it mean the EPS of 1345 to 1370, that's intact even without spine?
Speaker Change: You heard it right. Inari will be, you know, maximum 20 basis points dilutive to to our op margin expansion and spine will be absorbed in the EPS guidance that we gave of 1345 to 1370.
Understood. And then maybe one related question here on
Speaker Change: with spying below corporate margin is that sort of, you know, aiding margins here. In our way...
Speaker Change: Kevin, this is a fairly quick deal close time. Sometimes we do have self-force disruption when deals are announced.
Speaker Change: But given the fairly quick DOJ turnaround claim, I'm assuming that should be minimal here. Is that a fair assumption? And how did you guys get comfortable? I know there was some noise around a DOJ investigation. If you could just clarify on how you got comfortable, that would be helpful.
Speaker Change: Hey, Vijay, I'm going to ask Andy to answer that since he's here in the room with us. Go ahead, Andy. Sure, Vijay. Yeah, the timing of the deal close, we do anticipate as noted.
Speaker Change: to be by the end of February and we we got pretty comfortable around that based on Regulatory filings and other customary closing conditions, and we feel like we're going to be a pretty good shape there
Speaker Change: And then secondarily to your question around the CID, of course,
Speaker Change: That was an area where we did go deep into in gaining our understanding of what the risk was with the CID, and as you see, of course, we went through with the transaction.
Speaker Change: Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is now open. Please go ahead
Matthew O'brien: Afternoon, thanks for taking the questions. Maybe this one is for Andy specifically, but just based on my math of the 560.
Matthew O'brien: Thinking about the annual contribution from NARA. It looks like it's, you know, about about six hundred and seventy million dollars. So
Speaker Change: Roughly about $40-$50 million of lost sales, I think, that you're factoring in.
Speaker Change: versus what the street had been modeling. So that's about 11% growth. So kind of well below market. Andy, do you think you can get this business back to market growth or do you need to fold in other technologies to be able to do that type of growth in the future, be it aspiration, et cetera?
Speaker Change: Hey, let me be really clear. This is only for 10 months worth of sales. We are assuming high double-digit growth.
Speaker Change: and this business. So not very far off from the growth rate they have. We are not assuming any fall off and you can follow up with Jason afterwards.
It was $5.90, not $5.60.
Speaker Change: And it's only for 10 months of the year, not 12 months of the year. So we are not assuming a fall off. We think the Salesforce is gonna stay very engaged. There isn't any overlap with our business. So we're not gonna have the Salesforce integration challenges.
Speaker Change: that we have had with overlap deals. This plugs right alongside our existing business and we plan to continue to make this business sing just the way they have as an independent company.
Speaker Change: and I'm going to turn it over to you. Thank you. Thank you.
Thank you.
Speaker Change: Thanks, I'll figure out how to do math one of these days.
Speaker Change: Kevin, you know, for you specifically, I know it's early in the year.
Speaker Change: But just the top line guide of eight to nine and you're trying to be, I'm sure somewhat conservative. But just getting even to the low end of that range, just given the, you know, the momentum and trauma in the extremities looks unbelievably good. Medically, you just talked about double digits. Still well above average on the hip and knee side of things. You know, I just guess what would get you down to the 8%-ish range versus midpoint or even higher just given, again, all the momentum that we see in the business?
Speaker Change: Yeah listen I feel really good about the business. Look it's early in the year and so the activity levels, procedure levels, capital, we have good visibility at least for the first six, seven, eight months but that's not a full year.
Speaker Change: and things can change. So obviously every quarter we're going to continue to update our guidance and the last year you saw us steadily move up our guidance. I'm not going to predict what will happen this year but assume that we're going to continue to be playing offense and
Speaker Change: and we're going to continue to launch products. Those have to continue to go smoothly as they have.
in the past.
Speaker Change: And if everything goes to plan, we could expect another, you know, very strong year towards the upper end of our guidance or potentially moving it up, but certainly don't feel risk on the downside. And I'm hopeful that if we continue the momentum the way it is, that we'll be able to deliver above where we're currently guiding.
but remains to be seen.
Thank you.
Speaker Change: Our next question comes from Shagun Singh with RBC. Your line is now open. Please go ahead
Shagun Singh: Great, thank you so much. And congratulations to both Glenn and Preston here. I was just wondering if we should expect any shift in priorities given this transition. And then, Kevin, a question for you on the LRP. You know, your algorithm growth algorithm has been five percent weighted average market growth. But, you know, another two to three hundred basis points of outperformance gets you to seven to eight percent. You know, you have exceeded those levels in recent years, including 2024. And you've made some.
Shagun Singh: you know, some deals here as well. So how should we think about that weighted average market growth going forward? And then just similarly on margins, you guys had previously said at least 30 basis points annually beyond 2025. How do you think about peak levels? Thank you for taking the questions.
Shagun Singh: Yeah, thanks again. We're going to have an analyst day later this year, and so we'll update at that time kind of the growth algorithm for the future years beyond 2025. Clearly, we're moving into faster-growing markets, so that weighted average market growth rate is moving up as we increase our exposure to faster-growing end markets.
Shagun Singh: And as it relates to operating margin expansion, you saw we had a terrific year in 2024. We're planning on another strong year. We believe we have this operating margin power in the company, which is why we're absorbing spine, which is why even for the Inari acquisition, we're not
Shagun Singh: planning to give up much in the way of dilution at the operating margin level but in terms of committing beyond that I think we'll do that later on in the year at the analyst day.
Shagun Singh: Oh, sorry, as it relates to the second part of your question. Sorry, there were many parts to your question. So the as it relates to priorities, I would say with me sitting in the chair here as CEO.
Shagun Singh: With Preston having been in the company both in the IR capacity and as the head of finance for orthopedics and spine, you shouldn't expect any change in terms of our priorities.
Bye.
Speaker Change: Okay, our next question will come from Matt Miksic with Barclays. The line is now open. Please go ahead.
[inaudible]
Hey, great, thanks for taking the question and congrats.
Speaker Change: to everyone who's moving in and out of these positions. I'm definitely looking forward to working with you again, if everyone's good.
Speaker Change: You know, I know the conversation has been around spine. There are a ton of questions. I don't think anybody saw this coming, but it does make a lot of sense for what it's worth.
Speaker Change: I just had one question maybe around some of the other businesses that have been doing so well with the many product launches that we spent a good part of last year talking about. So, camera.
Speaker Change: the defibrillator, even things like, I don't know, powered instruments and and waste management. The basic question is, these are all punching kind of above double digits. How, how
Speaker Change: Maybe if you could tick through any of them that are going to start to kind of hit the other side of these refresh and erotic cycles by the end of the year, or do all of these carry into 2026, any kind of color you could give on sustainability would be great. They have one quick follow-up.
Speaker Change: Yeah, yeah, thanks. Thanks, Matt. As you rightly say, we have a whole lot of businesses that are really firing on all cylinders. Thanks for mentioning the camera.
Speaker Change: because I think a year ago at this time, there was a lot of speculation that we would be impacted by the DR5, and that's clearly not the case. Looking at our tremendous performance in cameras, there's plenty of room for both companies to grow. The way we do our launches is, just before you start to see the business start to
Speaker Change: the peter of the new product as it comes on the scene and so we have that all locked and loaded the pipelines are still We're still investing healthy rates in R&D
Speaker Change: So you shouldn't expect really any material slowdown in any of those businesses in 2025, and we will restock the funnel and be able to launch products before you start to see that. In the old days of Strike, if you go back 10 years, you'd sort of have a bit of a gap sometimes.
Speaker Change: And in that gap year, you would have lower growth, but as you've noticed in the last five, six, seven years.
Speaker Change: Before the product starts to flag in terms of its growth, another system 8 goes to system 9, we'll go to system 10 and
Speaker Change: We have the R&D products teed up to be able to insulate against that, so I'm feeling very good.
Speaker Change: about 25, and then again, we'll have an analyst day later in the year and we'll talk about the outlook in the future.
Speaker Change: Great, and then just a quick follow-up on the shoulder. I know focus on the robot as being an important catalyst here, and one of your competitors is out there with the robot.
Speaker Change: Did you give us a sense that it's not just the implants and the robot, right? I mean, there's a fair amount of other enabling technology. Could you give us a sense of maybe how that's contributing to growth? What the uptake or adoption has been like there? And what other...
Speaker Change: Enabling Technology Solutions. Besides the robot, you see it is contributing to growth for shoulder in the next, say, I don't know, 12, 18 months.
Speaker Change: Yeah, well, first of all, we have an incredible ecosystem with our Blueprint software and market-leading implants, like absolutely terrific implants.
Speaker Change: stemless, short stem, anatomic, reverse, perform, femoral system, which is totally modern and outstanding. And Blueprint provides AI guidance to the surgeon that actually presents the surgical plan with which type of implant should be implemented, and that Blueprint software has been integrated with the robot.
Speaker Change: So the same software that the surgeons used to using to plan their procedure will be the same software they're using
Speaker Change: on Mako. And so, that has been the formula for the Tournier system under Wright Medical and now under Stryker.
Speaker Change: to have market-leading growth for years, and we plan to continue that progress forward.
Speaker Change: added benefit, but it hasn't been like we've needed the robot. And initially, our robot's going to come out and start off with a reverse, which is about two-thirds of the procedure. So by far, the most procedures are reverse. And then eventually we move to other parts of the procedure. But as we saw with hips and knees, not all robots are equal.
Speaker Change: and we love our Mako shoulder application and you'll start to hear surgeon feedback about it. We'll be showing it at Academy. If you're at AOS you'll get a chance to see it. It's really compelling. We think it's going to be very powerful but again it's not as if the shoulder business really even needs this.
Speaker Change: because of the high growth that they already have with market-leading implants and Blueprint software, which is the best-in-class software system to navigate and plan your shoulder.
Speaker Change: And not to mention that we have Shoulder ID, which is a custom patient-matched glenoid. Glenoid, as you know, is the trickiest part of the anatomy, and we are actually just starting to expand that personalized solution, which surgeons find absolutely fantastic, saves them time.
Speaker Change: You don't have to put an augment in the shoulder, so there's a series of other product launches that we have that are pretty exciting. And longer term, I can imagine a mixed reality will play into this, but that's sort of looking at 26, 27 and beyond.
Speaker Change: Our next question will come from Mike Matson with Needham & Company, Inc. Your line is now open. Please go ahead.
Mike Matson: Yeah, thanks. So, I, you know, with the spin, the spine, the vestiture,
Mike Matson: just wanted to ask about how the MAKO and Enabling Technologies Partnership will sort of work.
Mike Matson: You know, I know one of your competitors tried to do something similar when they spun out their spine business, and it didn't really seem to work in the end. You know, is there still the same type of revenue opportunity here from the Mako spine robot?
Mike Matson: Yeah, listen, the Mako Spine Robot is going to be compelling because it's Mako and the brand is extremely strong and the initial cases we've done have gone very well. The surgeons who are using our existing spine implants will now be obviously served by similar salespeople that will be part of the BB spine business.
Mike Matson: So there won't be a lot of change in that respect. It'll just be the same rep in the operating room using MAKO and the same implants that they've been using today.
Mike Matson: And then the VB Spine team will obviously go out and try to attract other surgeons to join the business. So we already operated in two different worlds. We had capital salespeople providing MAKO and our MAKO plastic specialists, and then we had the implant business. So instead of that being Stryker Spine, it's now VB Spine.
Mike Matson: Spine so it's it's not really for the customer a big difference We have a little bit more work to do because it's a third party So when we're doing contracts, we have to contract together with a third party
Mike Matson: But I'm not expecting it to be really a big difference versus what we have. What does change is we're not going to be investing in all the innovation on implants and having to deal with the management of the implant business, which, to be frank, we have not done a great job over the past 10, 12 years. It's a tough, competitive market.
Mike Matson: which the VB brothers know very well. They've been in this business a long time. They know this business and I think they're going to be laser focused on it. Whereas for us, we have a lot of other areas of investment that we put a bit more focus on. So, but to the customer in the short term, at least, it's not going to be much of an impact.
Mike Matson: What we thought we could do with Make Us Fine, in terms of the revenue, isn't much different.
Mike Matson: with this partner. They're going to be exclusive at least for the first few years and then we'll see what happens beyond that, whether it stays exclusive or whether it becomes a more open system. But I'm hoping that it stays exclusive and that they do really, really well and we do well alongside them.
Speaker Change: Okay, got it. Thanks. And then just in terms of, I know you mentioned that you've got a plant in Mexico. I, you know, there's talk of potential tariffs on Mexico and Canada. So, you know, how much of your manufacturing is coming from either of those two countries? And how much flexibility do you have to move production elsewhere? We do end up seeing some tariffs there this weekend.
Yeah, yeah, it's a good question.
Speaker Change: I think, first of all, just you got to keep in mind the scale here. We have roughly 40 manufacturing plants around the world and we have one in Mexico.
It does assembly of some of our products.
Speaker Change: So right now, you know, we are looking at this closely, we're following the discussions.
Speaker Change: It's a little early to really evaluate what the possibility of that might be and the impact to us, or even maybe the potential fall on impact to customers.
Speaker Change: So, right now, I would say we're, like most companies, especially medical companies, that may be excluded at some level from a certain level of tariffs, we're watching and sort of seeing which way this develops, but keep in mind it's one plant out of 40.
Thank you. Bye-bye.
Speaker Change: Our next question will come from the line of Caitlin Cronin with Canaccord Genuity. Your line is now open. Please go ahead.
Caitlin Cronin: Hey, congrats on a great quarter and congrats to Glenn and Preston as well.
Speaker Change: Hospitals and ASCs about, you know, the excitement of just having, you know, a one-stop-shop for, you know, the make-a-solution, as you kind of touched on before.
Speaker Change: Yeah, it's a bit early still, right? We're just kind of in limited launch on both of these and we're gaining experience and we're not out actively, certainly on shoulder, not actively promoting it in the ASCs yet.
Speaker Change: We're going to stay in a limited number of sites to make sure we get all our training protocols done.
Speaker Change: There is excitement. The Mako brand is a strong brand, certainly because of our success.
Speaker Change: with knees and hips, and so I do expect that we're going to be asked about it, but it's early days still. I would say stay tuned. We'll update you in future quarters.
Speaker Change: as the launches proceed. Spine will move a little bit more quickly than shoulder. There's less change management involved for the surgeon. So that'll move to a quicker launch. So we'll probably be able to tell you more about spine probably at the end of Q3.
Speaker Change: Thanks. And then, you know, just a strong trauma extremities number. You didn't really mention foot and ankle in the commentary. You know, how did that business fare in the Q4 and, you know, any commentary on the market environment going into 2025?
Speaker Change: Yeah, you recall like the first couple of quarters of the year the foot and ankle market was very soft It did start picking up kind of around September and fourth quarter certainly was better for the market overall and our business didn't improve but
Speaker Change: But the real story around an unbelievable fourth quarter for trauma and extremities was it was really powered by our shoulder business and our core trauma
core trauma business. I had an exceptional quarter.
Speaker Change: And it was partly Pangaea, but not just Pangaea, just amazing Salesforce execution.
Speaker Change: in that business and Pangea has created a halo impact around the entire business and I expect Trauma Extremities to have a terrific year again in 2025.
Thank you. Bye-bye.
Richard Witter: Our next question comes from the line of Richard Witter with Truist Securities. Your line is now open. Please go ahead
Richard Witter: Hi, thanks for taking the questions and congrats Preston and good luck Glenn. Just going back to the CapEx environment question I think someone asked earlier, I'm just curious
Richard Witter: You know, you guys obviously have great insight into conversations at the hospital C-suite level. Just with all the rhetoric going on out there about potential healthcare policy changes coming, some of the uncertainty that must be brewing with some of your customers. I'm just curious, are you starting to see...
Richard Witter: maybe not for the 2025 fiscal years and budgets, but are there any different behavior changes that are going going on or you know, how are your customers if at all expressing any of that potential emerging anxiety?
Jason Beach: Hey Rich, it's Jason. I won't try to speculate on any policy potentially coming in the future, but what I would say is similar to what I said earlier on the call, which is, as we look at kind of the capital environment as we ended 2024, and frankly,
Richard Witter: Early days here in 2025, very positive for us, and we feel good about the environment, certainly, and don't have any reason to believe as we go throughout this year, it'd be any different at this point.
Okay, that's...
Speaker Change: That's very encouraging to hear. And maybe just one more on ARI and the process. You know, we all had access to the proxy, and I think I read it right, but it looked like the...
Speaker Change: It looked like you guys got access to the financials and whatnot.
Speaker Change: in early December, it feels like a pretty quick turnaround to diligence.
Speaker Change: I guess, one, is that, was I reading that right, and can you give any color on how much work had been done prior to that or, you know, how you got comfortable with the diligence on this end market and the company so fast?
Speaker Change: Yeah, listen, it's a publicly traded company. That is a very typical due diligence period you have for publicly traded companies. There's a lot of information that was publicly available, and we had done our homework, frankly, prior to the start of this. As you know, I've mentioned ProVascular many, many times.
Speaker Change: So we were absolutely prepared and done all of our homework on everything public.
Speaker Change: And then when we got a chance to go in and look at things and go into our due diligence, we knew exactly where to look, what to look for.
Speaker Change: and including the R&D pipeline and felt very good about what we saw with the team that we sent there. So this is not atypical for a public company deal and we feel like we had a really sufficient amount of due diligence to feel comfortable moving forward.
Thank you.
Speaker Change: Our next question comes from the line of Josh Jennings with TD Cowen. Your line is now open, please go ahead.
Josh Jennings: Hi, good evening. Thanks so much, and congrats to Glenn and Preston. Kevin, I was hoping to just touch on the continued kind of build-out of the AFC infrastructure in the U.S.
Josh Jennings: It's been a tailwind, Stryker is best positioned. I think most think about procedure volume increases as being the biggest boost, but many of your businesses are levered to this.
Josh Jennings: this continuing year-over-year increase in the number of AFCs in the U.S. So I guess the question is really, one, what inning are we in, and this AFC infrastructure goes out in the U.S.? And two, will you just help us think about which businesses, because I think there are a lot.
Josh Jennings: Maybe it's too long to answer, but they're benefiting from this tailwind, and how long do you expect this to last?
Speaker Change: Yeah, listen, I still think we're in early innings, and it's very exciting for us at Stryker. So I love this trend because we have many businesses that play in the ASC. And most of the deals that we do, especially new construction and builds and big renovations,
Speaker Change: They involve at least six of our business units and sometimes more and which is really exciting So obviously the ones that you think about automatically are hips and knees, but it also involves our orthopedic instruments It can involve foot and ankle. It always involves sports medicine
Speaker Change: communications booms and lights sometimes you have stretchers so there's a suite of businesses and every one is customized so every ASC deal is is unique because of the number of RR's varies and the types of procedures that they choose to do also varies but normally you always have sports you have hips and you have knees and you have
Speaker Change: potentially other procedures around that interventional spine and on and on. So we love the way things are moving, uh, even ENT. But, uh, but what I, what I'd say is, uh, if you think about just hips and knees as kind of like the
Speaker Change: the sort of the biggest change that's occurred in the last four or five years. In this fourth quarter, we hit a high for both hips and knees in the U.S. ASC market. Knees, there were 17% of our knees were done in the ASC and 14% of our hips.
Speaker Change: And that's just been, I'll call it a steady climb, quarter after quarter. It's not...
Speaker Change: sort of inflecting, but it's just a steady increase. And I think the only gating factor is construction of new ASCs.
Speaker Change: which will take time, so this is not something that I see kind of
Speaker Change: changing the ramp of the curve is just going to continue kind of on its current linear trajectory. I don't think it's going to inflect because capacity just isn't easy to bring on on stream in large, large, large quantities. So I think it'll just be a continuation and I don't see an end in sight because I and patients have a great experience.
Speaker Change: The surgeons love it and healthy people should be going to these places to get procedures and don't have a risk of getting and contracting illnesses when they're there. And sick people go to hospitals and healthier people are going to go to ASCs. I don't see this slowing down but it'll be a gradual progression over time.
I appreciate that. And just to follow up on
the answer to the acquisition strategy post-Denarii.
Speaker Change: you know, getting that weighted average market growth rate higher. There are many high-growth cardiovascular segments, and you're now on peripheral vascular. Should we consider this kind of initial thrust into the peripheral vascular, kind of opening the door to other high-growth cardiovascular sectors as well for Stryker? Thanks again for taking the questions.
Speaker Change: Yeah, thanks for the question. At least initially, let's integrate this and we'll look to probably add within the peripheral space.
Speaker Change: Beyond that, we'll see longer term, but I don't expect that we'll in the near term kind of make a jump into cardiovascular. I think we have to get to our homework here, get this integrated, and frankly build out, build around these call points that we're in right now.
there's a lot more room within even peripheral vascular.
Speaker Change: for them to play. And those emerging technologies are really exciting. We want to light those on fire and be able to realize those businesses. And we also have a lot of other mouths to feed across Striker. A lot of businesses that are sort of spinning up deals. And so I think we're going to pay attention to those at least for the rest of this year.
Thank you. Bye.
Speaker Change: Our next question will come from the line of Danielle Antalfi with UBS. Your line is now open. Please go ahead.
Danielle Antalfi: Hey, good afternoon guys. Thanks so much for taking the question and Glenn, congrats to you. Enjoy retirement. Preston, really looking forward to working with you again. Just a question on R&D and productivity there. I mean you saw pretty healthy growth in R&D in 2024. I mean this plays into the super cycle of new products you have.
Danielle Antalfi: And it also helps on the pricing front. I mean, how do we think about R&D spend going forward? Appreciate you guys for 2025 has given us some goalposts there. But just at a high level and what you're seeing from an R&D productivity perspective and really
Danielle Antalfi: how the focus might be changing there, if at all, to ensure you continue to get at least a modest price benefit and sustain this, you know, this level of growth based on what is a very steady cadence of new product launches. Thanks so much.
Speaker Change: Yeah, yeah, thanks. Thanks, Danielle. And and honestly, thanks for a question on R&D. It gives us a chance to talk about
Speaker Change: the amazing job that our teams are doing in R&D and lining up pipelines of products and new product launches and feature enhancements and so
Honestly, that innovation engine is a giant engine of Stryker.
Speaker Change: We generally target anywhere between 6-7% of sales as sort of a rough number.
Speaker Change: to make sure that we're investing in R&D. It receives a very high priority in terms of as we go through our budgeting or our strategic planning process. We don't plan on backing down from that in any which way.
Speaker Change: We're very excited to take on the innovation of Inari and have those teams pulled into our current innovation engine and feel like there'll be great synergies with our neurovascular business on there. So, you know, honestly, I don't see that strategy really changing just in terms of the kind of spend we prioritize there. You know, I think we're looking at
Speaker Change: Where we look to drive better efficiencies might be where we're doing the R&D or building up
Speaker Change: centers of excellence around, you know, software programming or AI or digital or any of those things, but, you know, honestly, I think in the six to seven percent range, I think that's probably where you'll continue to see us stay.
Thank you.
Thank you. Thank you.
Speaker Change: Our final question comes from the line of Michael Polark with Wolfe Research. Your line is now open. Please go ahead.
Speaker Change: Good afternoon. I just have one final follow-up on the guidance, the organic revenue growth guidance as it relates to the spine. So I just want to be very clear, the full year for the whole company is guided 8 to 9. You're saying
Speaker Change: That includes spine, which if I'm doing math, assuming the 1H closed, it's kind of 150 to 250 basis points of impact. So, if I had to look at the eight and a half,
Speaker Change: say plus two is ten and a half is real kind of remain co-organic revenue growth guidance for 25. Thank you.
Michael: Yeah, hi Michael. I think this is something maybe you can follow up with Jason offline, that despite our eight to nine percent
Michael: organic will get some benefit when when spine is divested because spine is growing at a lower rate but it's pretty small the impact
Michael: on the overall Stryker business. And Jason can follow up with you offline on that, but we're gonna, that'll give us a slight benefit, probably not that similar to the headwind we're gonna get by having one less day.
Michael: in next year than we do this year. So those two kind of more or less offset. So the eight to nine percent is a pretty good guide, a pretty healthy guide, and spine doesn't give us this massive benefit just given its size. But again, Jason can follow up with you offline on that.
Thank you.
Michael: There are no further questions. I'll now turn the call over to Kevin Lobo for closing remarks.
Kevin Lobo: Well thank you all for joining our call. I want to thank Glenn once again for great nine years and also for building a great pipeline of talent and finance.
Kevin Lobo: we're obviously Preston but but the entire finance organization we have terrific people all over the company just as we do.
Kevin Lobo: and our commercial organizations. We've over time built extremely strong functions at Stryker that support our businesses.
Kevin Lobo: and line up behind our business to help them succeed. And we look forward to sharing our Q1 results with you in early May. Thank you.
Nick Relby, Eli Roth, Peter Heikkila Jonathan Carlson, Daniel Padalecki
Speaker Change: Ba dum tss, ba ba dum tss Ba ba ba dum
and do