Q4 2025 Medtronic PLC Earnings Call

May 21, 2025

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Good morning, I'm, Ryan why spending vice President and head of Medtronic Investor Relations and I appreciate that you're joining us for our fiscal twenty-five fourth quarter video earnings webcast.

Before we go inside to hear our prepared remarks I'll share a few details about today's webcast. Joining me are Jeff Martha Chairman and Chief Executive Officer, and Terry P. Atone Chief Financial Officer, Jeff injury will provide comments on the results of our fourth quarter, which ended on April 25, 2025, and our outlook for fiscal year 'twenty.

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After our prepared remarks, the executive V piece from each of our four segments will join us and we will take questions from the sell side analysts that cover the company todays program should last between 60 and 90 minutes.

Earlier. This morning, we issued a press release containing our financial statements divisional and geographic revenue summaries and non-GAAP. Reconciliations. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at Investor Relations that Medtronic Doctor.

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During todays program many of the statements we make may be considered forward looking statements and actual results may differ materially from those projected in any forward looking statements additional information.

Information concerning factors that could cause our actual results to differ is contained with our periodic reports and other filings that we make with the SEC and we do not undertake to update any forward looking statements.

Unless we say otherwise all comparisons are on a year over year basis and revenue comparisons are made on an organic basis, which excludes the impact of foreign currency in fourth quarter revenue in the current and prior year reported as other.

References to the sequential revenue changes compared to the third quarter of fiscal 'twenty five and are made on an as reported basis. All share references are on a revenue and year over year basis, and compare our fourth fiscal quarter, two our competitors first calendar quarter.

Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at Investor Relations stop Medtronic Dot com.

References to the sequential revenue change as compared to the third quarter of fiscal 'twenty five and are made on an as reported basis. All share references are on a revenue and year over year basis, and compare our fourth fiscal quarter, two our competitors first calendar quarter.

Finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year with that let's head into the studio and hear about the quarter and our outlook for fiscal 'twenty six.

Conciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investor relation stop Medtronic Dotcom and finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year with that let's head into the studio and hear about the quarter.

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Our outlook for fiscal 'twenty six.

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Hello, everyone and thanks for joining us today as you can see in our Q4 results released this morning, we had a strong finish to our fiscal year growing five 4%.

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Our growth drivers or have any impact and are still building momentum.

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And we've proven to you that our growth is durable as we've now delivered mid single digit revenue growth for two and a half years.

Speaker Change: Hello, everyone and thanks for joining us today as you can see in our Q4 results released this morning, we had a strong finish to our fiscal year growing five 4%.

Our cardiovascular growth accelerated as forecasted growing 8% on broad strength across the portfolio, including nearly 30% growth in cash.

Speaker Change: Our growth drivers or have any impact and are still building momentum and we've proven to you that our growth is durable as we've now delivered mid single digit revenue growth for two and a half years.

We also delivered double digit growth in Neuromodulation, and diabetes and high single digit U S growth in cranial and spinal technologies.

Speaker Change: Our cardiovascular growth accelerated as forecasted growing 8% on broad strength across the portfolio, including nearly 30% growth in cash.

Two of our businesses Cas and E. N T reached important milestones entering the $1 billion annual revenue club alongside 10 of our other businesses.

Speaker Change: We also delivered double digit growth in Neuromodulation, and diabetes and high single digit U S growth in cranial and spinal technologies.

And we've had a number of important clinical and regulatory updates during the quarter as we continued to advance our pipeline.

Speaker Change: Two of our businesses Cas and E. N T reached important milestones entering the 1 billion dollar annual revenue club alongside 10 of our other businesses.

Operationally, we translated our revenue growth into leveraged earnings with high single digit operating profit and low double digit EPS growth.

Speaker Change: And we've had a number of important clinical and regulatory updates during the quarter as we continued to advance our pipeline.

Coupled with our Q3 results, we delivered a very strong 9% EPS growth in the back half of the year.

Speaker Change: Operationally, we translated our revenue growth into leveraged earnings with high single digit operating profit and low double digit EPS growth.

And for the full year, we delivered at the upper end of the commitments that we laid out a year ago.

We shared with you. This morning, our view on the potential impact from tariffs, which we have included in our newly issued guidance tier you will walk you through this later in the broadcast but you can see from the significant amount that we've already been able to offset that we are extremely focused on mitigating actions.

Speaker Change: Coupled with our Q3 results, we delivered a very strong 9% EPS growth in the back half of the year.

Speaker Change: And for the full year, we delivered at the upper end of the commitments that we laid out a year ago.

Speaker Change: We shared with you. This morning, our view on the potential impact from tariffs, which we have included in our newly issued guidance Cheery will walk you through this later in the broadcast but you can see from the significant amount that we've already been able to offset that we are extremely focused on mitigating actions, you'll also see from our <unk>.

Well see from our guidance that the underlying fundamentals of the business are strong.

And they are getting stronger.

We had also announced this morning that we have decided to separate our diabetes business as we continue to execute on our active portfolio management.

Speaker Change: <unk> that the underlying fundamentals of the business are strong.

Look we see this as a win for both diabetes and for Medtronic and I'm going to touch upon this a bit later.

cheery: And theyre getting stronger.

cheery: We also announced this morning that we have decided to separate our diabetes business as we continue to execute on our active portfolio management.

So we have several details to cover today in and let's start with our Q4 performance highlights starting first with the cardiovascular portfolio innovation drove broad based growth in the quarter, which accelerated to 8%.

cheery: Look we see this as a win for both diabetes and for Medtronic and I'm going to touch upon this a bit later.

We delivered double digit growth in cardiac ablation solutions structural heart.

cheery: So we have several details to cover today and and let's start with our Q4 performance highlights starting first with the cardiovascular portfolio innovation drove broad based growth in the quarter, which accelerated to 8%.

In cardiac surgery and high single digit growth in cardiac rhythm management.

Cardiac ablation solutions growth accelerated as forecasted to nearly 30% with high thirties growth in the U S and low twenty's in international markets.

cheery: We delivered double digit growth in cardiac ablation solutions structural heart.

cheery: In cardiac surgery and high single digit growth in cardiac rhythm management.

Our portfolio of pulse field ablation products.

The broadest in this space continues to drive rapid growth around the world. We're opening up new accounts as our supply continues to quickly increase and demand for our fair of PSA products is extremely high.

cheery: Cardiac ablation solutions growth accelerated as forecasted to nearly 30% with high thirties growth in the U S and low twenty's in international markets.

cheery: Our portfolio of pulse field ablation products.

This quarter I spent a lot of time talking to EPS and we're hearing great feedback physicians are saying that our sphere nine focal catheter is the most desired PFA catheter on the market and we're seeing large centers switched to Medtronic <unk>. Appreciate the efficiency that comes from fewer catheter exchanges given that sphere Nanking.

cheery: The broadest in this space continues to drive rapid growth around the world. We're opening up new accounts as our supply continues to quickly increase and demand for our fair of PSA products is extremely high.

cheery: This quarter I spent a lot of time talking to EPS and we're hearing great feedback physicians are saying that our sphere nine focal catheter is the most desired PFA catheter on the market and we're seeing large centers switched to Medtronic EPS. Appreciate the efficiency that comes from fewer catheter exchanges given that fear Nanking.

Speaker Change: Do mapping PSA and RF ablation, all from the same catheter.

Speaker Change: Now across our PSA platforms customers appreciate their ease of use their precision durable efficacy and of course the safety.

Speaker Change: Now if there's a PSA catheter.

Speaker Change: That is driving even more customer excitement and sphere nine.

cheery: Do mapping PSA and RF ablation, all from the same catheter.

Speaker Change: It's our Nextgen a ferret sphere 360, single-shot catheter sphere, 360 is an integrated mapping and ablation catheter, where the entire lattice tip delivers pulse field energy. So the E. P doesn't have too to rotate the catheter.

cheery: Now cross our PFA platforms customers appreciate their ease of use their precision durable efficacy and of course the safety.

cheery: Now if there's a PFA catheter.

cheery: That is driving even more customer excitement and sphere nine.

cheery: It's our Nextgen a ferret sphere 360, single-shot catheter sphere, 360 is an integrated mapping and ablation catheter, where the entire lattice tip delivers pulse field energy. So the E. P doesn't have too to rotate the catheter.

Speaker Change: One year data for three of $3 60 was presented last month at the HRS meeting, which showed excellent efficacy durability and safety as well as very fast procedure times, we plan to start our U S. Pivotal trial for a 360 later this calendar year sorry.

cheery: One year data for three or $3 60 was presented last month at the HRS meeting, which showed excellent efficacy durability and safety as well as very fast procedure times, we plan to start our U S. Pivotal trial for <unk> 360 later this calendar year.

Speaker Change: So our cash business has a lot of momentum and its contribution to total company growth continues to increase including 70 basis points. This quarter and we expect catalyst growth rate to accelerate again next quarter.

The business reached $1 billion in revenue in FY 'twenty, five and we have near term line of sight to doubling that as we continue to enter new accounts globally with a fair and with pulse select.

cheery: So our cash business has a lot of momentum and its contribution to total company growth continues to increase including 70 basis points. This quarter, and we expect cashless growth rate to accelerate again next quarter.

With the cardiac ablation space now at roughly $10 billion and growing double digits. This is a huge growth opportunity for Medtronic and our focus is to be the leader in this space.

cheery: The business reached $1 billion in revenue in FY 'twenty five.

cheery: And we have near term line of sight to doubling that as we continue to enter new accounts globally with a fair and with pulse select.

Speaker Change: Next our cardiac rhythm management business had a very strong quarter growing 7% with high single digit growth in both defibrillation solutions and cardiac pacing therapies.

cheery: With the cardiac ablation space now at roughly $10 billion and growing double digits. This is a huge growth opportunity for Medtronic and our focus is to be the leader in this space.

Speaker Change: With deepest solutions, we're seeing strong customer adoption of our Aurora EV ICD with its revenue doubling year over year as were taking meaningful share from the incumbent.

cheery: Next our cardiac rhythm management business had a very strong quarter growing 7% with high single digit growth in both defibrillation solutions and cardiac patient therapies.

Speaker Change: We are seeing our customers, placing larger and faster repeat orders for Aurora.

cheery: With detailed solutions, we're seeing strong customer adoption of our Aurora EV ICD with its revenue doubling year over year as were taking meaningful share from the incumbent.

Speaker Change: Now in pacing, we continue to have strong growth in lila's pacing and conduction system pacing, our micra <unk> pacemaker had strong 17% growth.

cheery: We are seeing our customers, placing larger and faster repeat orders for Aurora.

Speaker Change: And our 38 30 conduction system pacing lead grew 19%.

cheery: Now in pacing, we continue to have strong growth in legal is pacing and conduction system pacing, our micra <unk> pacemaker had strong 17% growth.

Speaker Change: In structural heart, we grew 10%.

Speaker Change: With strong growth of our evolute tavern platform in the U S, Japan and emerging markets we.

Speaker Change: We continue to differentiate evolute with positive clinical evidence.

cheery: And our 38 30 conduction system pacing lead grew 19%.

Speaker Change: Our five year low risk data was presented at ACC during the quarter showing outstanding Val performance revolute.

cheery: In structural heart, we grew 10%.

cheery: With strong growth of our evolute tavern platform in the U S, Japan and emerging markets.

Speaker Change: And our two year data from our head to head Smart trial was presented at CRT.

cheery: We continue to differentiate evolute with positive clinical evidence.

Speaker Change: Boeing continued superior performance versus the leading competitors valve.

cheery: Our five year low risk data was presented at ACC during the quarter showing outstanding Val performance revolute.

Speaker Change: The smart data and FX plus launch continued to have an impact to give you just a few examples a large nonprofit system in the upper Midwest that does over 200 tower implants, a year recently reviewed their own patient data and found that smart was consistent with their outcomes.

cheery: And our two year data from our head to head Smart trial was presented at CRT.

cheery: Boeing continued superior performance versus the leading competitors valve.

cheery: The smart data and if X plus launch continued to have an impact to give you just a few examples a large nonprofit system in the upper Midwest that does over 200 tavern implants, a year recently reviewed their own patient data and found that smart was consistent with their outcomes.

Speaker Change: Valve performance with evolute.

Speaker Change: And as a result, we went from a low single digit share to evolute being their valve of choice.

Another example would be in an east coast academic center that implants about 200 valves, a year and whose physicians participated in the competitors first balloon expandable tavern trials.

cheery: Valve performance with evolute.

cheery: And as a result, we went from a low single digit share to evolute being their valve of choice.

Well now they've moved from using the competitors valve almost exclusively to using our evolute valves and a majority of their patients.

cheery: Another example would be in an east coast academic center that implants about 200 valves, a year and whose physicians participated in the competitors first balloon expandable tavern trials.

Now I can keep going with such examples the point is that our data our technology and our sales execution are having a significant impact giving us confidence that we can continue to grow structural heart at or above the market.

cheery: Well now they have moved from using the competitors valve almost exclusively to using our evolute valves and a majority of their patients.

Speaker Change: And hypertension, we continue to ramp our market development activities for our simplicity blood pleasure procedure as we await reimbursement coverage from CMS.

cheery: Now I can keep going with such examples the point is that our data our technology and our sales execution are having a significant impact giving us confidence that we can continue to grow structural heart at or above the market.

CMS has indicated that they will finalize the NCD on or before October 11th.

cheery: And hypertension, we continue to ramp our market development activities for our simplicity blood pleasure procedure as we await reimbursement coverage from CMS.

And ahead of this they will issue a draft on or before July 13th.

Many large health care systems are establishing outpatient simplicity service lines today, so that they're prepared to rapidly scale to meet the large demand.

CMS has indicated that they will finalize the NCD honor before October 11th.

Speaker Change: And we're right there with them.

cheery: And ahead of this they will issue a draft on or before July 13th.

Speaker Change: We're hiring market development managers clinical specialists and health care economics managers to supplement our existing coronary sales force.

cheery: Many large health care systems are establishing outpatient simplicity service lines today, so that they're prepared to rapidly scale to meet the large demand.

Speaker Change: So we expect simplicity revenue to meaningfully ramp when it discovered.

cheery: And we're right there with them.

Speaker Change: And just like PFA overtime, it will become an important contributor to overall medtronic growth.

cheery: We're hiring market development managers clinical specialists and health care economics managers to supplement our existing coronary sales force.

Speaker Change: Nearly half of U S. Adults have hypertension and one in four of those with hypertension don't have their blood pressure under control. Despite the broad availability of numerous generic drugs look the opportunity here is massive and we will be the leader in addressing this large unmet need now.

cheery: So we expect simplicity revenue to meaningfully ramp when it's covered.

cheery: And just like PFA overtime, it will become an important contributor to overall medtronic growth.

cheery: Nearly half of U S. Adults have hypertension and one in four of those with hypertension don't have their blood pressure under control. Despite the broad availability of numerous generic drugs look the opportunity here is massive and we will be the leader in addressing this large unmet need.

Speaker Change: Now turning to the neuroscience portfolio, our cranial and spinal technologies business grew mid single digits, including 7% growth in the United States as we continue to win share we've.

Speaker Change: We've changed the basis of competition in spine to one we're enabling technology draw spine implant decisions and our differentiated able spine ecosystem, including AI, driven Preop planning software imaging robotics navigation and powered surgical instruments has by far the.

cheery: Now turning to the neuroscience portfolio, our cranial and spinal technologies business grew mid single digits, including 7% growth in the United States as we continue to win share.

cheery: We've changed the basis of competition in spine to one we're enabling technology drives spine implant decisions and our differentiated able spine ecosystem, including AI, driven Preop planning software imaging robotics navigation and powered surgical instruments has by far the law.

Speaker Change: The largest installed base with over 10000 capital units.

Speaker Change: Well ahead of our competition.

Speaker Change: Now this is important because when a customer upgrades one of our pieces of capital.

Speaker Change: They're not just upgrading one product.

cheery: Largest install base with over 10000 capital units well ahead of our competition.

Speaker Change: They're upgrading to the full able ecosystem. So you don't go just from O arm to new alarm or navigation to new NAV or robot to new robot you go from one of these pieces of equipment to the entire cable ecosystem.

cheery: Now this is important because when a customer upgrades one of our pieces of capital.

cheery: They're not just upgrading one product.

Speaker Change: April is not only appealing to spine surgeons around the world.

cheery: They're upgrading to the full able ecosystem. So you don't go just from.

Speaker Change: It's also attracting the competition's pest sales reps and distributors to joined Medtronic.

Oh armed new alarm or navigation to new NAV or robot to new robot you go from one of these pieces of equipment to the entire ecosystem.

Speaker Change: Some of the world's leading spine in neurosurgery centers, including large iconic teaching institutions.

cheery: April is not only appealing to spine surgeons around the world.

Speaker Change: Moving to Medtronic and combined with the investments, we're prioritizing to even further enhance the able ecosystem.

cheery: It's also attracting the competition's pest sales reps and distributors to joined Medtronic.

Speaker Change: We expect our strength in CST to continue.

cheery: Some of the world's leading spine in neurosurgery centers, including large iconic teaching institutions are moving to Medtronic.

Speaker Change: Another business that continues to win shares Neuromodulation, which grew 10% are.

Speaker Change: Our closed loop sensing technology is driving strong growth in both pain stim and brain Mod in pain Stim, we grew 12%, including 15% growth in the U S. On the continued strength of our Inceptive closed loop spinal cord stimulator.

cheery: And combined with the investments we're prioritizing to even further enhance the able ecosystem we expect.

cheery: Our strength in CST to continue.

cheery: Another business that continues to win shares Neuromodulation, which grew 10%.

cheery: Our closed loop sensing technology is driving strong growth in both pain stim and brain Mod in pain Stim, we grew 12%, including 15% growth in the U S. On the continued strength of our Inceptive closed loop spinal cord stimulator.

Speaker Change: We continue to win share and have now reached the number one global position in SCS Inceptive is changing patients lives as they no longer have to adjust their therapy throughout the day.

Speaker Change: And they are having to come back to the doctor's office to have their device settings changed.

cheery: We continue to win share and have now reached the number one global position in SCS Inceptive is changing patients lives as they no longer have to adjust their therapy throughout the day.

Speaker Change: So incentive is reducing burden for the patient and for the physician.

Speaker Change: And brain modulation, we grew mid single digits, including 9% growth in international markets on the continued adoption of our brain sense adaptive DBS for people with Parkinson's.

cheery: And they aren't having to come back to the Doctor's office to have their device settings changed.

cheery: So incentive is reducing burden for the patient and for the physician.

Speaker Change: Look this is a groundbreaking technology a fully closed loop brain computer interface that automatically provides personalized real time therapy based on brain activity feedback.

cheery: And brain modulation, we grew mid single digits, including 9% growth in international markets on the continued adoption of our brain sense adaptive DBS for people with Parkinson's.

Speaker Change: In the U S. We received FDA approval for brain sense during the quarter.

cheery: Look this is a groundbreaking technology a fully closed loop brain computer interface that automatically provides personalized real time therapy based on brain activity feedback.

Speaker Change: Now following stories on adaptive DBS technology on good morning America, the BBC and several other media outlets, we're seeing patients now proactively talking to their doctors and requesting adaptive devices.

cheery: In the U S. We received FDA approval for brain sense during the quarter.

cheery: Now following stories on adaptive DBS technology on good morning America, the BBC and several other media outlets, we're seeing patients now proactively talking to their doctors and requesting adaptive devices.

Speaker Change: The early results are very exciting and we're now entering full market release in the U S and Europe with Japan launching next month, so a neuro mod we have near term growth drivers, we're the category leader and we're well positioned to capture the future innovations that are coming.

cheery: The early results are very exciting and we're now entering full market release in the U S and Europe with Japan launching next month. So a neuroma, we have near term growth drivers, we're the category leader and we're well positioned to capture the future innovations that are coming.

Speaker Change: Now turning to our medical surgical portfolio in our surgical business, which improved and grew 2%.

Speaker Change: We continue to drive strong growth in emerging markets and advanced energy.

Speaker Change: Our market, leading ligature vessel sealing technology continues to attract strong surgeon adoption, resulting in our 11th straight quarter of winning share in advanced energy.

cheery: Now turning to our medical surgical portfolio in our surgical business, which improved and grew 2%.

Speaker Change: Now, we expect our surgical growth to improve over time, as we expand and launch our Hugo soft tissue robotic platform Hugo continues to reach important milestones like last quarter, we filed with the U S FDA for Urologic indication.

cheery: We continue to drive strong growth in emerging markets and advanced energy.

cheery: Our market, leading ligature vessel sealing technology continues to attract strong surgeon adoption, resulting in our 11th straight quarter of winning share in advanced energy.

cheery: Now, we expect our surgical growth to improve over time, as we expand and launch our Hugo soft tissue robotic platform Hugo continues to reach important milestones like last quarter, we filed with the U S FDA for Urologic indication.

Speaker Change: And the pivotal data from the urology trial, which met its primary safety and effectiveness endpoints was presented last month at a UA.

Speaker Change: We expect to follow our your urology indication in the U S with hernia and benign guy and indications and we will begin enrollment in our gyn oncology trial in the coming months.

cheery: And the pivotal data from the urology trial, which met its primary safety and effectiveness end points was presented last month at <unk>.

Speaker Change: We also continue to expand instrumentation, having conducted our first cases with literature on Hugo this past quarter.

cheery: We expect to follow our your urology indication in the U S with hernia and benign guy and indications and we will begin enrollment in our gyn oncology trial in the coming months.

Speaker Change: We're expanding hugo's installed base and are now in 30 countries around the world and we continue to see strong increases in Hugo procedure volumes and utilization.

cheery: We also continue to expand instrumentation, having conducted our first cases with literature on Hugo this past quarter.

Speaker Change: In surgical we are also driving impressive expansion in our AI powered touch surgery ecosystem touch surgery is a foundational intelligence technology used across both robotic and laparoscopic surgery, and we're leading the industry in establishing this digital surgical ecosystem globally.

cheery: We're expanding hugo's installed base and are now in 30 countries around the world and we continue to see strong increases in Hugo procedure volumes and utilization.

cheery: In surgical we are also driving impressive expansion in our AI powered touch surgery ecosystem touch surgery is a foundational intelligence technology used across both robotic and laparoscopic surgery, and we're leading the industry in establishing this digital surgical ecosystem globally.

Speaker Change: We see our growing digital footprint as a long term strategic advantage for our surgical business and this will apply to other businesses across Medtronic overtime.

Speaker Change: Finally in diabetes, we grew 12% or six quarter in a row of double digit growth. The growth was broad based with strength in pumps CGM and consumables.

cheery: We see our growing digital footprint as a long term strategic advantage for our surgical business and this will apply to other businesses across Medtronic overtime.

Speaker Change: We continue to grow or mini med seven AG installed base in both the U S and international markets.

cheery: Finally in diabetes, we grew 12% or six quarter in a row of double digit growth.

Speaker Change: People with diabetes are attracted to 70 g's highest time and range of any commercial aig's system, giving them the ability to achieve more control with less burden in Europe. The launch of our simpler of sinks sensor is driving strong mid teen CGM growth. Some player is half the size and much easier.

cheery: The growth was broad based with strength in pumps, CGM and consumables, we continue to grow or mini med seven AG install base in both the U S and international markets.

cheery: People with diabetes are attracted to 70 g's highest time and range of any commercial aig's system, giving them the ability to achieve more control with less burden in Europe. The launch of our simpler of sinks sensor is driving strong mid teens CGM growth simpler is half the size and much easier to <unk>.

Speaker Change: To apply than our previous sensor now in the U S. We received FDA approval for Sinclair sink just last month and expect to begin the launch this fall.

Speaker Change: Regarding our Abbott based sensor backend integration and development work is progressing well, we submitted our interoperable pump and controller for FDA clearance, which paves the way for bringing our AI system with this sensor to the market.

Apply then our previous sensor now in the U S. We received FDA approval for some players think just last month.

cheery: And expect to begin the launch this fall rigor.

Speaker Change: We also submitted to the FDA for a seven AG label expansion, including for type two diabetes and rapid acting insulins.

cheery: Regarding our Abbott based sensor backend integration and development work is progressing well, we submitted our interoperable pump and controller for FDA clearance, which paves the way for bringing our AI system with this sensor to the market.

Speaker Change: And looking ahead, we expect to submit for H series next generation pump the mini med flex by the end of the fiscal year.

cheery: We also submitted to the FDA for a seven AG label expansion, including for type two diabetes and rapid acting insulins.

Speaker Change: So as you can see we've significantly turned around our diabetes business and it's very well positioned.

cheery: And looking ahead, we expect to submit for eight series next generation pump the mini med flex by the end of the fiscal year.

Speaker Change: And this morning, we announced our plan to separate diabetes into a standalone public company with.

Speaker Change: With a capital market separation through our preferred path of an IPO split.

cheery: So as you can see we've significantly turned around our diabetes business and it's very well positioned.

Speaker Change: This is a win for both companies for Medtronic, our portfolio becomes more focused on high margin growth markets like PFA and renal denervation at the same time, the independent new diabetes company, who will be a scaled leader and the only diabetes company to commercialize a complete ecosystem too.

cheery: And this morning, we announced our plan to separate diabetes into a standalone public company with.

With a capital market separation through our preferred path of an IPO split.

cheery: This is a win for both companies for Medtronic, our portfolio becomes more focused on high margin growth markets like PFA and renal denervation at the same time, the independent new diabetes company will be a scaled leader and the only diabetes company to commercialize a complete ecosystem to.

Speaker Change: Address intensive insulin management today.

Speaker Change: Today's announcement marks a significant milestone in our ongoing active portfolio management efforts, an important lever to delivering on our long term strategic and financial objectives.

Speaker Change: Well there is a clear strategic rationale for diabetes to be a standalone company diabetes is predominantly b to C. Whereas medtronic our businesses are predominantly b to b.

cheery: Address intensive insulin management today.

cheery: Today's announcement marks a significant milestone in our ongoing active portfolio management efforts, an important lever to delivering on our long term strategic and financial objectives.

Speaker Change: We sell different types of products to different types of customers.

cheery: Look there is a clear strategic rationale for diabetes to be a standalone company.

Speaker Change: Medtronic commercial manufacturing and technology platform synergies are less applicable to the diabetes business given their distinct customer go to market and supply chain infrastructure.

cheery: Diabetes is predominantly BDC, whereas medtronic, our businesses are predominantly b to b.

We sell different types of products to different types of customers.

Speaker Change: For Medtronic, we will continue to have leading franchises and attractive med tech markets and this separation shifts and simplifies our portfolio to have even more intense focus on our highest margin growth drivers.

cheery: <unk> commercial manufacturing and technology platform synergies are less applicable to the diabetes business given their distinct customer go to market and supply chain infrastructure.

cheery: From a tronic, we will continue to have leading franchises and attractive med tech markets and this separation shifts and simplifies our portfolio to have even more intense focus on our highest margin growth drivers.

Speaker Change: These growth drivers are already building momentum.

Speaker Change: And this increased focus will ensure that they reach their full revenue growth potential.

Speaker Change: Our portfolio also shifts to higher profitability, allowing us to pick up both margin and earnings and the shift increases our exposure to markets, where we demonstrate our strongest core capabilities and have scale and synergy benefits, which importantly lowers the overall risk profile of the company.

cheery: These growth drivers are already building momentum.

cheery: And this increased focus will ensure that they reach their full revenue growth potential.

cheery: Our portfolio also shifts to higher profitability, allowing us to pick up both margin and earnings and the shift increases our exposure to markets, where we demonstrate our strongest core capabilities and have scale and synergy benefits, which importantly lowers the overall risk profile of the company.

Speaker Change: Now taken altogether will be in a great position to continue delivering mid single digit or higher organic revenue growth as well as accelerating our earnings leverage.

Speaker Change: So our direction of travel here is clear.

Speaker Change: This is about greater focus on the significant opportunities in high margin growth markets, where we are well positioned and we believe that this will result in a win for Medtronic.

cheery: Now taken altogether will be in a great position to continue delivering mid single digit or higher organic revenue growth as well as accelerating our earnings leverage.

cheery: So our direction of travel here is clear.

Speaker Change: Look I'm also excited about what the future holds for the diabetes business and now I'd like you to Laura who will become the CEO of the new diabetes company to share some of her thoughts Q joined Medtronic in 2022 and has been instrumental in turning the diabetes business into what it is today. She is an inspirational transformative leader.

cheery: This is about greater focus on the significant opportunities in high margin growth markets, where we are well positioned and we believe that this will result in a win for Medtronic.

Speaker Change: Look I'm also excited about what the future holds for the diabetes business and now I'd like Cuda, Laura who will become the CEO of the new diabetes company to share some of her thoughts.

Speaker Change: Who is also strategic and pragmatic.

Q: Her impressive track record in driving growth and innovation has set the diabetes business on a path to continued success ensuring the needs of people with diabetes are met around the globe. So over to you Q.

Q: Q joined Medtronic in 2022 and has been instrumental in turning the diabetes business into what it is today. She is an inspirational transformative leader who.

Q: Who is also strategic and pragmatic her impressive track record in driving growth and innovation has set the diabetes business on a path to continued success ensuring the needs of people with diabetes are met around the globe. So over to you Q.

Q: Thanks, Jeff I want to start by thanking you for your leadership and vision. Your decision a few years ago to double down on the diabetes business and significantly increased investment has positioned us well setting us up to generate significant returns for stakeholders, we wouldn't be where we are with that you'll have unwavering support I'm very excited.

Thanks, Jeff I want to start by thanking you for your leadership envision your decision a few years ago to double down on the diabetes business and significantly increased investment has positioned us well setting us up to generate significant returns for stakeholders, we wouldn't be where we are with that your unwavering support I'm very excited.

Speaker Change: It should be leading this large scale direct to consumer diabetes business, we have over 8000 employees into global manufacturing facilities and a lot of innovation in the works.

Speaker Change: Our innovations are driven by the desire to improve outcomes, while reducing burden and as an independent company. We will have a shareholder base that is aligned to our business and financial profile.

Q: It should be leading this large scale direct to consumer diabetes business, we have over 8000 employees into global manufacturing facilities and a lot of innovation in the works. Our innovations are driven by the desire to improve outcomes, while reducing burden and as an independent company. We will have a shareholder base that is aligned to our business.

Q: This will enable more focused investment in innovation as well as manufacturing scale and automation positioning us for success in automated insulin delivery and smart MDI. While also driving margin expansion overtime out 2.8 billion dollar diabetes business has strong momentum in a large 16.

Q: In financial profile.

Q: This will enable more focused investment in innovation as well as manufacturing scale and automation positioning us for success in automated insulin delivery and smart MDI. While also driving margin expansion overtime Ouchie point 8 billion dollar diabetes business has strong momentum in a large 16 bill.

Q: <unk> global addressable market, we've delivered double digit growth now for six consecutive quarters, along with several recent prototype poodles and the strategic partnership that we have established with Abbott diabetes care and we have a deep pipeline as we've been investing in CGM option.

Q: <unk> global addressable market, we've delivered double digit growth now for six consecutive quarters, along with several recent product approvals and the strategic partnership that we have established with Abbott diabetes care and we have a deep pipeline as we've been investing in CGM options insulin delivery options, such as a pan patch and durable.

Speaker Change: Insulin delivery options, such as a pin patch and durable pump a fully automated algorithm and a unified digital customer experience. This full ecosystem 90 enables people with diabetes to have a seamless transition between therapies without changing companies, but it also allows them to achieve better control with less burden.

Q: Pump a fully automated algorithm and a unified digital customer experience. This full ecosystem 90 enables people with diabetes to have a seamless transition between therapies without changing companies, but it also allows them to achieve better control with less burden.

Speaker Change: And finally, I want to thank and celebrate the dedication of our diabetes team their passion and perseverance is transforming diabetes care to give people the freedom to forget about diabetes and live their best lives back to you Jeff.

Jeff Martha: Thanks, Kew I couldn't agree more.

Jeff Martha: Next I'm going to turn it over to Terry to share some additional transaction and financial information on the diabetes separation as.

Terry: As well as take you through a deeper look at our Q4 financial performance and our guidance for the coming year.

Jeff: Thanks, Kew I couldn't agree more.

Speaker Change: But before I do that I I want to officially welcome theory to his first earnings call with Medtronic.

Jeff: Next I'm going to turn it over to Terry to share some additional transaction and financial formation on the diabetes separation as.

Speaker Change: He is now in his 12 week and has already hit the ground running including playing a critical role in preparing for today's announcement.

Terry: As well as take you through a deeper look at our Q4 financial performance and our guidance for the coming year.

Speaker Change: Tier he is a proven experienced CFO, having most recently been in the automotive industry, where he created significant value for shareholders by increasing margins earnings power and free cash flow.

Speaker Change: But before I do that I I want to officially welcome theory to his first earnings call with Medtronic.

Speaker Change: He is now in his 12 week and has already hit the ground running including playing a critical role in preparing for today's announcement.

Speaker Change: His extensive experience with M&A divestitures, and forming innovative partnerships is proving to be highly relevant to work here at Medtronic.

Speaker Change: His presence is already having a significant impact on organization. He's brought forward many new ideas on how we can further invest in innovation.

Speaker Change: His extensive experience with M&A divestitures, and forming innovative partnerships is proving to be highly relevant to work here at Medtronic.

Speaker Change: Accelerating R&D, while also driving operating leverage and he brings with it the expertise to ensure we get it done.

Speaker Change: His presence is already having a significant impact on organization. He's brought forward many new ideas on how we can further invest in innovation.

Jeff Martha: It's great having you onboard Terry.

Terry: Thank you for the warm welcome Jeff.

Speaker Change: Certainly an exciting time to join Medtronic I've had the pleasure of visiting many of our facilities and meeting our employees and also starting to meet with many of you in the investment community.

Speaker Change: Celebrating R&D, while also driving operating leverage and he brings with it the expertise to ensure we get it done.

Speaker Change: It's great having you onboard Terry.

Terry: Thank you for the warm welcome Jeff.

Terry: A common question from many of you who has been why did I come to Medtronic.

Terry: This is certainly an exciting time to join Medtronic I've had the pleasure of visiting many of our facilities and meeting our employees and also starting to meet with many of you in the investment community.

Terry: For me health carrier as a special industry given the connections per patients.

Terry: And I've always wanted to return since working in health care earlier in my career.

Terry: A common question from many of you who has been why did I come to Medtronic.

Terry: In addition to the sector. There were two specific things that stood out about medtronic for.

For me health carrier.

Terry: Special industry, given the connections to patients.

Terry: First I saw an opportunity to apply my backgrounds to enhance the operations of the company.

Terry: And I've always wanted to return since working in health care earlier in my career.

Terry: And second <unk>.

Terry: In addition to the sector there were two specific things that stood out about medtronic.

Terry: <unk> has a few large exciting growth opportunities.

Terry: That don't come around very often and the company is at an inflection point.

Terry: First I saw an opportunity to apply my backgrounds to enhance the operations of the company.

Terry: I'm energized by the opportunities for durable growth and value creation that are ahead of us.

Terry: And second <unk>.

Terry: <unk> has a few large exciting growth opportunities.

Terry: And I'm really looking forward to hopefully, making a difference here.

Terry: That don't come around very often and the company is at an inflection point.

Terry: Now, let's cover our plan to separate the diabetes business.

Terry: I'm energized by the opportunities for durable growth and value creation that are ahead of us.

Terry: Which represented about 8% of our revenue and 4% of our separate our segment operating profit in fiscal year 'twenty five.

Terry: And I'm really looking forward to hopefully, making a difference here.

Terry: We intend to separate diabetes through a series of capital market transactions.

Terry: Now, let's cover our plan to separate the diabetes business.

Terry: Which represented about 8% of our revenue and 4% of our separate our segment operating profit in fiscal year 'twenty five.

Terry: Our preferred path involves two steps.

Terry: First we plan to execute an IPO of up to 20% of the diabetes business.

Terry: We intend to separate diabetes through a series of capital market transactions.

Terry: The proceeds are expected to appropriately capitalize the new diabetes company.

Terry: Our preferred path involves two steps.

Terry: And provide the ability to retire medtronic shares.

Terry: First we plan to execute an IPO of up to 20% of the diabetes business.

Terry: Second we intend to execute a spit off where medtronic, while exchange our remaining new diabetes company shares for Medtronic shares from willing shareholders.

Terry: The proceeds are expected to appropriately capitalize the new diabetes company.

Terry: And provide the ability to retire medtronic shares.

Terry: We plan to retire those shares resulting in a lower medtronic share count.

Terry: Second we intend to execute a spit off where medtronic, while exchange our remaining new diabetes company shares for Medtronic shares from willing shareholders.

Terry: We're targeting completion of the entire separation within 18 months.

Terry: And taking that preferred path.

Terry: We plan to retire those shares resulting in a lower medtronic share count.

Terry: Sure.

Terry: X impact to Medtronic shareholders for U S federal income tax purposes.

Terry: Yeah.

Terry: We're targeting completion of the entire separation within 18 months.

Terry: From a financial standpoint.

Terry: There are several benefits to electronic.

Terry: And taking this preferred path should result in a tax free impact to Medtronic shareholders for U S Federal income tax purposes.

Terry: Diabetes has lower gross margins and operating margins and overall Medtronic.

Terry: So upon full separation, we're expecting our growth.

Terry: From a financial standpoint, there are several benefits to Medtronic.

Terry: Gross and operating margins to improve by approximately 50, and 100 basis points respectively.

Terry: <unk> has lower gross margins and operating margins than overall Medtronic.

Terry: Given the share retirement, the separation is expected to be immediately accretive to Medtronic EPS upon completion.

Terry: So upon full separation, we're expecting our adjusted gross and operating margins to improve by approximately 50 and 100 basis points respectively.

Terry: We don't expect any change to our dividend policy.

Terry: So financially very sound clear short term financial benefits.

Terry: Given the share retirement, the separation is expected to be immediately accretive to Medtronic EPS upon completion.

Terry: The most important aspect is what Jeff mentioned earlier.

Terry: This separation will allow us to increase our growth accretive investments in our core businesses, where margins are structurally higher.

Terry: We don't expect any change to our dividend policy.

Terry: So financially there are some clear short term financial benefits.

Terry: But the most important aspect is what Jeff mentioned earlier.

Terry: This is all about capital allocation and creating the conditions to fuel our future growth.

Jeff: This separation will allow us to increase our growth accretive investments in our core businesses, where margins are structurally higher.

Terry: So clearly the separation will be beneficial for both Medtronic and the new diabetes company.

Jeff: It's all about capital allocation.

Terry: Our locking both strategic value and shareholder value.

Jeff: And creating the conditions to fuel our future growth.

Terry: With that let's now come back to Medtronic overall and recap our Q4 results.

Jeff: So clearly this separation will be beneficial for both Medtronic and the new diabetes company are locking both strategic value and shareholder value.

Terry: As Jeff mentioned earlier Q4 revenue of 8.9 billion grew 5.4% organic on the bottom line adjusted EPS was $1 62 up 11% both revenue and EPS were ahead of expectations driven by our.

Jeff: With that let's now come back to Medtronic overall and recap our Q4 results.

Speaker Change: As Jeff mentioned earlier Q4 revenue of $8 9 billion grew 5.4% organic.

Terry: Good performances in CRM structural heart, and aortic diabetes and neuro Mod among others.

Speaker Change: On the bottom line adjusted EPS was $1 62 up 11%.

Terry: Long with better than expected interest and tax expenses.

Speaker Change: Both revenue and EPS were ahead of expectations driven by outperformance is in CRM structural heart and aortic diabetes and neuro mod among others, along with better than expected interest and tax expenses.

Terry: Our revenue growth was broad based from a geographic perspective, we grew 5% in the U S.

Terry: Our strongest quarterly U S growth in 15 quarters.

Terry: As we accelerated on the strength of new technology.

Speaker Change: Our revenue growth was broad based from a geographic perspective, we grew 5% in the U S. Our strongest quarterly U S growth in 15 quarters.

Terry: Japan grew high single digits.

Terry: In Western Europe, and emerging markets grew mid single digits with strength in India, Southeast Asia and Eastern Europe.

Speaker Change: As we accelerated on the strength of new technology.

Terry: Moving down the P&L, our adjusted gross margin was 65.1% down 70 basis points year over year as a result of mix from diabetes and Cas.

Speaker Change: Japan grew high single digits, and Western Europe, and emerging markets grew mid single digits with strength in India, Southeast Asia and Eastern Europe.

Terry: As well as foreign exchange.

Speaker Change: Moving down the P&L, our adjusted gross margin was 65, 1% down 70 basis points year over year as a result of mix from diabetes and cash as well as foreign exchange. Our gross margin was actually unchanged on a constant currency.

Terry: Our gross margin was actually unchanged on a constant currency basis.

Terry: On the positive side, we continue to see the benefit of increased pricing in particular in areas, where we introduce new products such as neuro Mod.

Terry: Crem and structural heart and we continue to improve our ability to offset FX with price in emerging markets.

Speaker Change: Basis.

Speaker Change: On the positive side, we continue to see the benefit of increased pricing in particular in areas, where we introduce new products.

Terry: This quarter again, the savings from our Cogs efficiency programs more than offset the impact of inflation.

Speaker Change: Such as neuro Mod CRM and structural heart and we continue to improve our ability to offset FX with price in emerging markets.

Terry: Our Medtronic performance system, which we implemented across our manufacturing network resulted in high single digit improvement in labor efficiency.

Speaker Change: This quarter again, the savings from our Cogs efficiency programs more than offset the impact of inflation.

Terry: We in sourced three of our distribution centers to drive cost savings and further improve supply.

Speaker Change: Our Medtronic performance system, which we implemented across our manufacturing network resulted in high single digit improvement in labor efficiency.

Terry: Finally, we were able to significantly reduce our scrap and obsolescence charges.

Terry: With SG&A, we drove significant leverage, particularly with G&A.

Speaker Change: We in sourced three of our distribution centers to drive cost savings and further improve supply finally, we were able to significantly reduce our scrap and obsolescence charges.

Terry: While at the same time, increasing investments in R&D more to come on that later.

Terry: The net of this was leverage on our adjusted Op profit line, which grew seven 6% or $175 million.

Speaker Change: With SG&A, we drove significant leverage, particularly with G&A.

Speaker Change: At the same time, increasing investment in R&D more to come on that later.

Terry: Our adjusted operating margin was 27, 8% an increase of 90 basis points or 200 basis points on a constant constant currency basis.

Speaker Change: The net of this was leverage on our adjusted Op profit line, which grew 7.6% or $175 million.

Terry: Below the operating profit line, our adjusted tax rate of 16% was better than expected due to favorability in our actual jurisdictional mix of profits for the year, which also resulted in a modest pick up from prior quarters.

Speaker Change: Our adjusted operating margin was 27, 8% an increase of 90 basis points or 200 basis points on a constant constant currency basis.

Speaker Change: Below the operating profit line, our adjusted tax rate of 16% was better than expected due to favorability in our actual jurisdictional mix of profits for the year, which also resulted in a modest pick up from prior quarters.

Terry: All in all as stated in Q4, we delivered EPS of $1 six to true up 11% and 16% at constant currency.

Terry: This was a strong close to the year, we're in fiscal year 'twenty five we grew revenue, 5% organic and EPS, 6% or 10% on a constant currency basis.

Speaker Change: All in all as stated in Q4, we delivered EPS of $1 62 up 11% and 16% at constant currency.

Terry: From a capital allocation perspective, we returned $6 3 billion to shareholders and twenty-five through share repurchases and through our dividend and this morning, we announced that we're increasing our dividend for the 48 consecutive year.

Speaker Change: This was a strong close to the year, we're in fiscal year 'twenty five we grew revenue, 5% organic and EPS, 6% or 10% on a constant currency basis.

Speaker Change: From a capital allocation perspective, we returned $6 3 billion to shareholders and twenty-five through share repurchases and through our dividend and this morning, we announced that we're increasing our dividend for the 48 consecutive year.

Terry: Okay.

Terry: Now, let's move to our 26 guidance.

Terry: We've now delivered mid single digit organic revenue growth for 10 quarters in a row and we expect this to continue through fiscal year 'twenty six with an increasing contribution from our key growth drivers.

Speaker Change: Yeah.

Speaker Change: Now, let's move to our 26 guidance.

Speaker Change: We've now delivered mid single digit organic revenue growth for 10 quarters in a row and we expect this to continue through fiscal year 'twenty six with an increasing contribution from our key growth drivers.

Terry: We expect organic revenue growth of approximately 5% in fiscal year, 'twenty, six including four 5% to 5% growth in Q1.

Terry: Based on recent FX rates, we would expect a tailwind from FX.

Speaker Change: We expect organic revenue growth of approximately 5% in fiscal year, 'twenty, six including four 5% to 5% growth in Q1.

Speaker Change: Zero to $100 million and Vittorio your whether roughly neutral impact in Q1.

Speaker Change: Moving down the P&L I'll first talk about our underlying business is.

Speaker Change: Based on recent FX rates, we would expect a tailwind from FX of zero to $100 million and Vittorio your whether roughly neutral impact in Q1.

Speaker Change: Excluding the impact of tariffs like.

Speaker Change: Like we saw in the fourth quarter, we expect continued mix headwinds within gross margin from Cassa in diabetes with an increasing impact from diabetes. As we are early in the manufacturing ramp of the simpler a sensor.

Speaker Change: Moving down the P&L I'll first talk about our underlying business, excluding the impact of tariffs.

Speaker Change: Like we saw in the fourth quarter, we expect continued mix headwinds within gross margin from Cas in diabetes with an increasing impact from diabetes. As we are early in the manufacturing ramp of the simpler a sensor.

Speaker Change: We will continue to drive pricing discipline in particular on the back of new product introduction.

Speaker Change: And to cover FX.

Terry: We will also accelerate our cogs efficiency programs to significantly outpace inflation.

Speaker Change: We will continue to drive pricing discipline in particular on the back of new product introduction and to cover FX.

Speaker Change: Given my background. This will be a key area of focus for me.

Speaker Change: Together with our businesses and Greg Smith, and our global supply chain team.

Speaker Change: We will also accelerate our cogs efficiency programs to significantly outpace inflation.

Speaker Change: In fiscal year 'twenty, six we will significantly increase the investment in our growth drivers to maximize future growth.

Speaker Change: Given my background. This will be a key area of focus for me.

Speaker Change: Together with our businesses and Greg Smith, and our global supply chain team.

Speaker Change: For the first time in four years, we're planning to grow R&D faster than revenue.

Speaker Change: Yeah.

In fiscal year 'twenty, six we will significantly increase investment in our growth drivers to maximize future growth.

Speaker Change: We will also invest in sales and marketing.

Speaker Change: These investments will be deliberately focused on areas like cardiac ablation as well as in surgical robotics and origin as we prepare for scaling the U S launches of our Hugo robot and simplicity Hyperinfection procedure.

Speaker Change: For the first time in four years, we're planning to grow R&D faster than revenue.

Speaker Change: We will also invest in sales and marketing.

Speaker Change: On the flip side, we do expect to drive significant leverage with G&A expenses.

Speaker Change: The net of this will be an operating profit line that grows materially faster than revenue.

Speaker Change: On the flip side, we do expect to drive significant leverage with G&A expenses.

Speaker Change: Hello, There our profit line, we're expecting increases in both interest and tax expense.

Speaker Change: The net of this will be an operating profit line that grows materially faster than revenue.

Speaker Change: Which combined results in a 300 basis points impact on EPS growth.

Speaker Change: On the interest this is driven by the fact that any debt, we refinance will likely be at higher rates given the current higher interest environment, whereas the pressure on the tech side derived primarily from the effects of pillar two.

Speaker Change: Hello, The op profit line, we're expecting increases in both interest and tax expense.

Speaker Change: Which combined results in a 300 basis points impact on EPS growth.

Speaker Change: On the interest this is driven by the fact that any debt, we refinance will likely be at higher rates given the current higher interest environment, whereas the pressure on the tax side derived primarily from the effects of pillar two.

Speaker Change: This leads to our expectation for approximately 4% EPS growth in fiscal year 'twenty six excluding the impact of tariffs.

Speaker Change: And foreign exchange is a neutral impact to fiscal 'twenty six at recent rates.

Speaker Change: This leads to our expectation for approximately 4% EPS growth in fiscal year 'twenty six excluding the impact of tariffs.

Speaker Change: For Q1, we would expect EPS in the range of $1 22 to $1 24, which includes many more expected impact from tariffs and a 1% to 2% headwind from foreign exchange at recent rates.

Speaker Change: And foreign exchange is a neutral impact to fiscal 'twenty six at recent rates.

Speaker Change: For Q1, we would expect EPS in the range of $1 22 to $1 24, which includes minimal I expected impact from tariffs and a 1% to 2% headwind from foreign exchange at recent rates.

Speaker Change: Next I'll share with you our thinking on tariffs.

Speaker Change: Which we laid out in our earnings presentation. This morning.

Speaker Change: We built our expectations based on two potential scenarios. The low ends of the potential impact assumes that the current bilateral U S. China tariffs that are in place during the 90 day pause remain throughout fiscal year 'twenty six why are the high end assumes that they resume at the higher levels.

Speaker Change: Next I'll share with you our thinking on tariffs, which we laid out in our earnings presentation. This morning.

Speaker Change: Following the 90 day pause.

Speaker Change: Through focused efforts from teams across Medtronic, we already have visibility to offsetting a good portion of this headwind.

Speaker Change: Why are the high end assumes that they resume at the higher levels. Following the 90 day pause.

Speaker Change: And we have high confidence in our ability to execute additional mitigation efforts.

Speaker Change: Through focused efforts from teams across Medtronic.

Speaker Change: As a result, we forecast a net tariff impact to Cogs in fiscal year, 'twenty six of approximately $200 million to $350 million.

Speaker Change: We already have visibility to offsetting a good portion of this headwind.

Speaker Change: And we have high confidence in our ability to execute additional mitigation efforts.

Speaker Change: From a quarterly breakout we would expect minimal impact in Q1 as I mentioned earlier.

Speaker Change: As a result, we forecast a net tariff impact to Cogs in fiscal year, 'twenty six of approximately $200 million to $350 million.

Speaker Change: And then approximately 10% in the second quarter.

Speaker Change: And approximately a 30 and 60% in Q3 and Q4, respectively.

Speaker Change: From a quarterly break out we would expect minimal impact in Q1 as I mentioned earlier.

Speaker Change: All that said, it's highly likely that the impact from tariffs will change and we'll keep you updated periodically as we go through the year.

Speaker Change: And then approximately 10% in the second quarter.

Speaker Change: And approximately a 30 and 60% in Q3 and Q4, respectively.

Speaker Change: So combining our underlying performance with our current tariffs expectations.

Speaker Change: All that said, it's highly likely that the impact from tariffs will change and we'll keep you updated periodically as we go through the year.

Speaker Change: We would have your model fiscal year 'twenty six EPS in the range of $5 50 to $5 60.

Speaker Change: We've shown you that we can deliver high single digit EPS growth as we did with a 9% growth in the back half of fiscal year 'twenty five.

Speaker Change: So combining our underlying performance with our current tariffs expectations.

Speaker Change: We would have you modeled fiscal year 'twenty six EPS.

Speaker Change: In the range of $5 50 to $5 60.

Speaker Change: As we look beyond next year to fiscal year 'twenty seven we expect to return to high single digit EPS growth upon the diabetes separation driven by several factors, including strong revenue growth and further underpinned by FX tailwind at.

Speaker Change: We've shown you that we can deliver high single digit EPS growth as we did with a 9% growth in the back half of fiscal year 'twenty five.

Speaker Change: As we look beyond next year to fiscal year 'twenty seven we expect to return to high single digit EPS growth.

Speaker Change: Recent rates and their margin and share retirement benefits of the separation.

Speaker Change: On the diabetes separation driven by several factors, including strong revenue growth.

Jeff Martha: Jeff back to you.

Jeff Martha: Okay. Thank you Terry.

Speaker Change: Now before we go to Q&A I'll make a few closing remarks, starting with it we had a strong close to the fiscal year with two and a half years of mid single digit revenue growth that is now also translating into strong operating profit and EPS leverage.

Further underpinned by FX tailwind at recent rates and the margin and share retirement benefits of the separation.

Jeff: Jeff back to you.

Jeff: Okay. Thank you Terry.

Jeff: Now before we go to Q&A I'll make a few closing remarks, starting with it we had a strong close to the fiscal year with two and a half years of mid single digit revenue growth that is now also translating into strong operating profit and EPS leverage.

Speaker Change: We have durable growth drivers that are taking hold and we also have clear line of sight to improving growth drivers in other businesses. For example, peripheral vascular where we're working with <unk> medical in the crowded market and we will soon enter the peripheral thrombectomy segment as well.

We have durable growth drivers that are taking hold and we also have clear line of sight to improving growth drivers in other businesses. For example, peripheral vascular where we're working with contango medical in the crowded market and we will soon enter the peripheral thrombectomy segment as well.

Speaker Change: In pelvic health, we are working to open a large new market when our revolutionary tibial stimulation devices approved.

Speaker Change: And as for Hugo procedures, and utilization are growing and the cadence of key milestones is accelerating.

Jeff: In pelvic health, we are working to open a large new market when our revolutionary tibial stimulation devices approved.

Speaker Change: We're also working aggressively to to manage external factors that are impacting our twenty-six guide.

Jeff: And as for Hugo procedures, and utilization are growing and the cadence of key milestones is accelerating.

Speaker Change: And as Terry pointed out we'll be back to high single digit EPS growth in 'twenty seven.

Speaker Change: So as I assess the overall business the underlying fundamentals are strong.

Jeff: We're also working aggressively to to manage external factors that are impacting our twenty-six guide.

Speaker Change: And they are getting stronger.

Speaker Change: We've been working on a number of changes to the company and those changes are making a difference.

Jeff: And as Terry pointed out we'll be back to high single digit EPS growth in 'twenty seven.

Speaker Change: We streamline the operating model and implemented performance driven incentives.

Jeff: So as I assess the overall business the underlying fundamentals are strong.

Speaker Change: We brought in outside leadership with accretive skill sets, which are enhancing execution and improving operating rigor.

Jeff: And they are getting stronger.

Jeff: We've been working on a number of changes to the company and those changes are making a difference.

Speaker Change: We prioritized investments in groundbreaking innovation that are now paying off and accelerating company growth.

Jeff: We streamline the operating model and implemented performance driven incentives.

Jeff: We brought in outside leadership with accretive skill sets, which are enhancing execution and improving operating rigor.

Speaker Change: We centralized global operations supply chain and quality, resulting in improved kpis.

We prioritized investments in groundbreaking innovation that are now paying off and accelerating company growth.

Speaker Change: And we're adding a performance culture to this mission minded company and transforming our portfolio.

Jeff: We centralized global operations supply chain and quality, resulting in improved kpis.

Speaker Change: And today's diabetes announcements accelerates our speed of travel to higher profitable growth aligned around our core strengths, giving all of our stakeholders increased conviction in our ability to deliver.

Jeff: And we're adding a performance culture to this mission minded company and transforming our portfolio.

Jeff: And today's diabetes announcement accelerates our speed of travel to higher profitable growth aligned around our core strengths, giving all of our stakeholders increased conviction in our ability to deliver.

Speaker Change: I want to thank our employees around the world who are listening today, you've truly embraced our and culture, our culture of driving both our Medtronic mission.

Speaker Change: And performance this.

Speaker Change: This is directly leading to our strong financial outperformance.

Jeff: I want to thank our employees around the world who are listening today, you've truly embraced our and culture, our culture of driving both our Medtronic mission.

Speaker Change: And it's making a difference for the millions of people around the world that depend on Medtronic.

Speaker Change: To alleviate pain.

And performance.

Speaker Change: Restore health and extend life.

Jeff: This is directly leading to our strong financial outperformance.

Speaker Change: We've made a lot of progress this past year and your efforts have laid the groundwork for the inflection point that we're now entering.

Jeff: And it's making a difference for the millions of people around the world that depend on Medtronic.

Speaker Change: And I couldn't be more excited about what we're going to accomplish here in the new fiscal year. So thank you for your dedication and service.

Jeff: To alleviate pain.

Jeff: Restore health and extend life.

Jeff: We've made a lot of progress this past year and your efforts have laid the groundwork for the inflection point that we're now entering.

Speaker Change: Finally, as you may have seen in our earnings press release. This morning, Sean Salmon is moving on and this will be his last earnings call with us after more than 20 years of service to Medtronic.

Jeff: And I couldn't be more excited about what we're going to accomplish here in the new fiscal year. So thank you for your dedication and service.

Speaker Change: Shawn has been responsible for leading a number of our successes. He leaves a legacy of having developed strong capable leaders in our cardiac and vascular businesses as well as a robust technology pipeline both of which are responsible for driving the CV growth acceleration you saw this quarter.

Jeff: Finally, as you may have seen in our earnings press release. This morning, Sean Salmon is moving on and this will be his last earnings call with us after more than 20 years of service to Medtronic.

Speaker Change: Shawn has been responsible for leading a number of our successes. He leaves a legacy of having developed strong capable leaders and our cardiovascular businesses as well as a robust technology pipeline.

Speaker Change: So under parts with our cardiovascular portfolio in a leading position.

Speaker Change: To lead CV going forward, we're promoting skip keel you've.

Speaker Change: Both of which are responsible for driving the CV growth acceleration you saw this quarter.

Speaker Change: You've seen skips impact in driving above market growth in our cranial and smiled technologies business.

Speaker Change: Shonda parts with our cardiovascular portfolio in a leading position.

Speaker Change: And he had success in other parts of Med tech prior to joining Medtronic skip will augment our deep CV leadership team with his strategic mindset brought global expertise strong customer focus and demonstrated track record of developing new markets and driving commercial success.

Speaker Change: To lead CV going forward, we're promoting skip kill you.

Speaker Change: You've seen skiffs impact in driving above market growth in our cranial and spinal technologies business.

Speaker Change: And he had success in other parts of Med tech prior to joining Medtronic Skip will augment our deep C. V leadership team with his strategic mindset brought global expertise strong customer focus and demonstrated track record of developing new markets and driving commercial success.

Speaker Change: So I want to thank Sean for his service and we're looking forward to skip leading our continued success in cardiovascular.

Speaker Change: So with that let's move to Q&A, where we're going to try to get to as many analysts as possible. So we ask that you limit yourself to just one question and only if needed a related follow up if you have additional questions you can reach out to Ryan in the Investor Relations team after the call.

Speaker Change: So I want to thank Sean for his service and we're looking forward to skip leading our continued success in cardiovascular.

Speaker Change: When can you please give the instructions for asking a question.

Speaker Change: So the sell side analysts that would like to ask a question. Please select the participants button and click raise hands.

Speaker Change: If you're using the mobile app pressed more button and select raise hand you.

Speaker Change: When can you please give the instructions for asking a question.

Speaker Change: All lines are currently on meat.

Speaker Change: So the sell side analysts that would like to ask a question. Please select the participants button and click raise hand.

Speaker Change: And when called upon you'll receive a request to Amit Your line, which you must respond to you before asking your question.

Speaker Change: Lastly, please be advised that this Q&A session is being recorded for today's session.

If you're using the mobile app pressed them more button and select righthand.

Speaker Change: Your lines are currently on meat and when called upon you'll receive a request to Amit Your line, which you must respond to you before asking your question.

Mike Marinara: F QE and Ryan I joined by key Tomorrow, EVP and President of diabetes, Mike Marinara, EVP and president of the medical surgical portfolio.

Speaker Change: Lastly, please be advised that this Q&A session is being recorded for today's session, Jeff Terry and Bryan are joined by key Delara, EVP and president of diabetes, Mike Marinara, EVP and president of the medical surgical portfolio.

Mike Marinara: Sean Salmon, EVP and president of the cardiovascular portfolio and Brett Wong EVP and president of the neuroscience portfolio, we'll pause for a few seconds to assemble the queue.

Speaker Change: Sean Salmon, EVP and president of the cardiovascular portfolio and Brett Wong EVP and president of the neuroscience portfolio, we'll pause for a few seconds to assemble the queue.

Mike Marinara: First of all good question.

Daniel: Daniel pointed out.

Mike Marinara: And.

Speaker Change: I'll take the first part of it and then hand it to.

Mike Marinara: So Terry to go through the the earnings stuff, but on the on the gross I look we're very bullish on the growth drivers.

Mike Marinara:

Mike Marinara: We even in Q and in the markets that we're in and the growth drivers that we have so like even in.

Mike Marinara: Q4.

Mike Marinara: Our markets grew 7%, even without diabetes and we've got strong positions in these markets and we see.

Mike Marinara: Growth from our big three portfolios to be mid single.

Mike Marinara: And then some will run the company in you know.

Mike Marinara: <unk>.

Mike Marinara: Higher expectations than more than we are.

Mike Marinara: Then we're guiding here yeah, just just some examples of when you see our CV business accelerating to 8% with nearly 30% growth in cast which Adam Yeah. That's just that alone added seven basis points of company growth and that's about audio and audio and it will start ramping through 'twenty six you've got neuroscience with double digit growth in neuro modern.

Mike Marinara: And you will see as well.

Speaker Change: Okay, let's say and it is separating itself from from the pack.

Speaker Change: And we've got tibial coming.

Speaker Change: In pelvic health.

Speaker Change: And so we've got some growth drivers there of course in surgical you know Hugo as.

Speaker Change: As we talked about the commentary is building momentum and we'll start to have more of a meaningful impact on med surge next year and then beyond that on the company. So we're bullish about the markets. We're in the positions we have in those markets and our growth potential. So that's what's baked into the to the next year's guide and going into 'twenty seven I mean, we're at the early.

Speaker Change: So.

Speaker Change: Hello.

Speaker Change: Oh, Hey, Hey, this is Travis.

Speaker Change: I didn't hear anything so thanks for taking the question.

Speaker Change: I wanted to ask on congrats first of all congrats on all the good news. This morning I wanted to ask on the guidance philosophy with the new CFO.

Speaker Change: Ages of these growth drivers with more to come on the earnings I'll turn it over theory and anything else went out of growth no. Thanks, I think Jeff you were pretty complete on the growth. So we feel comfortable that we've got a good opportunity for them from a growth perspective or from a profitability standpoint and are what their construction as as you may have seen in the details.

Speaker Change: <unk> got ethics confident have to put out the 5% no range, what's being assumed on the on the pipeline on the revenue side and then I wanted to ask on the 4% EPS growth ex tariffs.

Speaker Change: Curious, how youre thinking about what you kind of built in on conservatism on some of the below the line items, there and if it's possible to offset some of the headwinds over the course of the year. If the revenue comes in better and and then on FY 'twenty seven are the high single digit EPS growth, maybe talk about the framework and the visibility to be able to go ahead, and and kind of give that two years.

Speaker Change: We've got in their commentary.

Speaker Change: It is actually you're still getting a lot quite a bit of leverage before tariffs at the operating profit level. So we've got a construction that has operating profit that's growing around 7% so significantly in excess of revenue.

Speaker Change: That's despite <unk>.

Speaker Change: Two years ahead that you can kind of get to the high single digit EPS growth in FY 'twenty seven.

Speaker Change:

Speaker Change: Making a significant investment for the future of that business here I mentioned that in the commentary for the first time in four years.

Speaker Change: We actually have a plan that has R&D growing quicker than revenue and that's even with revenue up 5%. So our R&D spend should be increasing around $300 million.

Speaker Change: And we're not we're not hearing anything.

Speaker Change: Next year, which is about 7% versus the 5% growth rate.

Speaker Change: So much of the consumers responding.

Speaker Change: Despite that we have significant significant leverage at your profit level.

Speaker Change: And then to your point, we've got a couple of pressure points below the line.

Speaker Change: Okay.

Speaker Change: You know one is Ah is around the tax rate and that's primarily driven by our pillar two and so our tax rate should go from about 16, 7% of their shirts of about 18% next year and then as I as we refinance our debt in a higher interest rate type of environment.

Speaker Change: This or that the brokers question.

Speaker Change: Okay.

Speaker Change: Particular major open Travis it's Larry.

Speaker Change: Okay.

Speaker Change: And it's a great question.

Speaker Change: That also put some pressures or we lose about 300 basis points between the op profit level and.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: The middle mindfulness minute just to relax.

Speaker Change: And the net.

Speaker Change: For the answer.

Speaker Change: Morning, everyone. This is Danielle I have an answer for you al just kidding.

Speaker Change: You know on the opportunity to do better.

Speaker Change: Look we're you know first of all operationally were as usual going to drive the teams to a higher number than this.

Speaker Change: Danielle you might get live everyone can hear you.

Speaker Change: Now selling shares Larry.

Speaker Change: Whether it's a from a growth perspective or from a margin standpoint.

Speaker Change: How do you know it was Larry because you have a very distinct voice Larry.

Speaker Change: On the margin side given my background. This is going to be a key area of focus for me and my initial view is that there is some opportunity from a cost perspective.

Speaker Change: This is all being taped and everyone can hear it.

Speaker Change: Should we logged off you and Lagonda I'll, let them fix it.

Speaker Change: No.

Speaker Change: I think the supply chain team with Greg Girl has kicked off with a lot of very positive initiatives.

Speaker Change: And we're starting to see the results and I think theres more to come.

Speaker Change: So I'll be focusing on that deeply and then on the below the line items.

Speaker Change: Sure on the tax front, where we'll we'll keep working it.

Speaker Change: Some of the increase between 25 and 26 is due to the temporary self safe harbors that we've got and Peter too.

Speaker Change: There is uncertainty in terms of our ability to qualify for some of those safe harbors going into next year.

Speaker Change: We'll do everything we can to secure.

Speaker Change: You know being able to capture that opportunity.

Speaker Change: Sure we'll be working on it so.

Speaker Change: We've tried we've tried to give a guidance that's all that's all in and well work from there.

Speaker Change: That's helpful. Just a quick you also had a question on on 27, I'm sorry, Ed I wanted to address your the 22nd part of the question Hey look as best as Jeff mentioned.

Speaker Change: The growth is not a one off thing and twenty-five ore in Q4 25, it's going to carry on to 'twenty six.

Speaker Change: And some of the new products that are carrying this are going to carry us well into 'twenty seven.

Jeff Martha: So Jeff mentioned.

Speaker Change: Tariffs in our agenda in February that will start having a small impact towards the end of the 26 at <unk>.

Speaker Change: Carry on into 'twenty seven.

Speaker Change: So you know first.

Jeff Martha: We expect to continue to have good growth into 'twenty, seven and that's regardless of the separation of the diabetes business Jeff.

Jeff Martha: Just figured you some clarity on that.

Jeff Martha: Diabetes or drives about 40 basis points of our growth. So we're comfortable we could still achieve that mid single digit growth even after the diabetes separation.

Jeff Martha: We'll continue to drive our cost out initiatives as I mentioned earlier.

Jeff Martha: <unk> should start turning and through.

Jeff Martha: Ah is a small or a headwind towards the end of 'twenty six and enter 'twenty seven.

Jeff Martha: And the last cycle and I wanted to mention as we'll probably talk about it more in detail in the rest of the conversation but the.

Jeff Martha: The the the deal that were the structure that we're taking on.

Jeff Martha: The diabetes deal actually provides us the opportunity to retire some shares.

Jeff Martha: So.

Jeff Martha: This will be immediately accretive to our EPS and helps strengthen the construction to get back to a high single digit growth into 'twenty seven.

Jeff Martha: And just one clarification.

Jeff Martha: Clarification on the FX it it it flips to a tailwind what did I say headwind sorry tailwind.

Jeff Martha: Tailwind sorry on your mind that headwind, but FX flips to a tailwind.

Jeff Martha: Yeah, Thanks for the questions rabbits.

Speaker Change: Yeah go ahead.

Speaker Change: Can I ask is that 7% operating profit, including or excluding tariffs is there an extra week this year.

Speaker Change: And then why is there a diabetes EPS headwind this year.

Speaker Change: That's 18 months away those are just a few questions.

Speaker Change: So yeah. So the 7% is excluding the impact of tariffs and the impact of tariffs again, though.

Speaker Change: As you probably saw in the commentary, it's 200 to 300 350.

Speaker Change: $1 million of the cost or the cost of goods sold level.

Speaker Change: So from a an impact on the op profit growth I guess, it's something between two point 203 two points depending on.

Speaker Change: The the outcome on China.

Speaker Change: And then the the pressure on diabetes.

Speaker Change: I think it's primarily driven by the rollout of <unk>.

Speaker Change: So it's the launch of <unk>.

Speaker Change: So this product and as we grow it.

Speaker Change: The cost is going to go down but initially.

Speaker Change: It does but you know quite a bit of pressure on our margin rate.

Speaker Change: To the tune of about 60 basis points at the GM level.

Speaker Change: What translates into the earnings.

Speaker Change: Again that will get better at manufacturing ramps up.

Travis: Okay. Thanks, a lot thanks Travis.

Speaker Change: Let's take the next question. Please limit okay. The next question from Ravi marking at Jpmorgan.

Speaker Change: Oh great.

Speaker Change: Everyone and theory welcome.

Speaker Change: Maybe question for you and I'll just have one.

Speaker Change: You said, you'll you'll be back to high single digit EPS growth in fiscal year 'twenty seven that's with.

Speaker Change: Assuming currency remains the same and favorable and you execute the diabetes spin and resulting share buyback.

Speaker Change: Which.

Speaker Change: Arent really quite sustainable in nature, so without those benefits, which are kind of one time with fiscal 'twenty seven EPS still grow high single digits. Thanks.

Speaker Change: Okay.

Speaker Change: You know I want to insist on the fundamentals here.

Speaker Change: So I think the first thing to look at.

Speaker Change: If you think about the constructions for 27.

Speaker Change: To come back to the performance that we're showing for Q4 here in the second half of the year.

Speaker Change: And this is all with no FX tailwind.

Speaker Change: And with diabetes in the portfolio, we just delivered a quarter.

Speaker Change: That's up five 4% organically on revenue.

Speaker Change: That has operating margin up 90 basis points for this 200 basis points, if you actually exclude effects and.

Speaker Change: And we've got an EPS, that's up 11%, which is really 15.8%. If you exclude EPS that earnings growth is actually 9% in the second half of the year. So that's.

Speaker Change: The fundamentals of the business that we're trying to build off.

Speaker Change: Now.

Speaker Change: Back back to 27.

Speaker Change: As I said you know we were looking at a growth rate that should continue to be positive with all the momentum that Jeff mentioned.

Speaker Change: We're going to continue driving the leverage either on on the cost side.

Speaker Change: So.

Speaker Change: Here you see some signs.

Speaker Change: Of of improvement that are pretty significant from an operating profit perspective, and we're going to continue to work on that.

Speaker Change: You know FX.

Speaker Change: We're just assuming that it's flat so we're not assuming that it improves where the tailwind that I mentioned on 27 is just the effect of the carryover of the goodness that at all.

Speaker Change: Well, we'll have based on the current FX rate.

Speaker Change: And then you are right there should be some accretion that comes from diabetes.

Speaker Change: From the separation.

Speaker Change: That's going to help.

Speaker Change: But the target that we're that we have for the teams.

Speaker Change: Is to deliver on the framework regardless of the transaction.

Speaker Change: Great. Thanks, Terry I appreciate it.

Ravi: Thank you Ravi take the next question please.

Speaker Change: We'll take the next question from Larry <unk> from Wells Fargo.

Larry: Good morning, and thanks for taking the question.

Speaker Change: Jeff I wanted to focus on the decision to spin diabetes I.

Speaker Change: I guess a couple questions. One did you consider breaking medtronic up into four separate businesses. One could argue that the remaining three business has scale on their own and have different customers and capital allocation requirements. So why not go further and breaking up the company and the pushback I think youre going to get on diabetes is that it's growing.

Speaker Change: Above Medtronic corporate average.

Speaker Change: So why spin it off at your focuses on accelerating top line growth. Thank you.

Speaker Change: Well look yes, good question, Larry like why diabetes why now.

Speaker Change: So first of all on the diabetes business like I said earlier, we believe this is a win win for both diabetes and Medtronic and now on diabetes, where we're well down the path of the turnaround is ready to stand alone and we think it's well suited for public markets.

Speaker Change: This move is going to ensure that they get really both the funding and the focus the franchise needs to reach its full potential as much as you know as we're sitting here there much progress we've made so about six quarters in a row of double digits.

Yeah.

We'll continue to drive the cost out initiatives, such as I mentioned earlier FX should start turning into.

Speaker Change: But more to come here at the port.

Speaker Change: Product pipeline is very robust we submitted several.

A small of a headwinds towards the end of 2006 and into 'twenty seven.

Speaker Change: File to the FDA for approvals of multiple products here in the last couple of months.

And the last item I wanted to mention as we'll probably talk about it more in detail in the rest of the conversation but.

Speaker Change: And we believe with this focus and funding the business well.

Speaker Change: <unk> be a top tier diabetes franchise.

Yes.

The the.

Speaker Change: Well into the future and then for Medtronic, though it allows us to focus more on our high margin growth drivers that we just walk through like I, just mentioned, where we even without diabetes, we're in great markets, 7% growth last quarter.

The deal that were the structure that we're taking.

On the diabetes deal.

Actually provides us the opportunity to retire some shares.

So.

Speaker Change: Stable.

This will be immediately accretive to our EPS and help strengthen the construction to get back to.

Speaker Change: And and this and that these are higher margin sectors for us and this accelerates our speed of travel to these high margin growth.

Single digit growth into 2007.

And just one clarification.

Speaker Change: The areas and its aligned around our core strengths of the <unk>.

On the FX it it it flips to a tailwind what did I say headwinds sorry.

Speaker Change: Yeah, not technology strengths.

Speaker Change: As well as our go to market.

Tailwind sorry on your mind, that's headwind, but FX flips to a tailwind.

Speaker Change: Channel two to health care systems. So we think it's a it's a win win it's going to create shareholder value in short and long term material walked through the accretive nature of the deal accretive to our EPS or operating margin and gross margin.

Thanks for the question Travis.

Yes go ahead.

I was going out because the 7% operating profit, including or excluding tariffs is there an extra week this year.

Speaker Change: And.

And then why is there a diabetes EPS headwind next year.

Speaker Change: I think I don't want to speculate, but I think the diabetes business is probably worth more outside the company that then in.

18 months away those in a few countries.

So yes, so the 7% is excluding the impact of tariffs and the impact of tariffs again, though.

Speaker Change: And then back to all these point of yet it'll provide a kind of a onetime step up in margins, but the whole idea to Terry's point is that we're growing them from there and getting to that.

As you probably saw in the commentary it 200 to 300 350.

Speaker Change: You saw a little bit of that in the last two quarters and we're going to continue to do that once we get through some of these below the line issues.

Speaker Change: $1 million as a cost but at the cost of goods sold level.

Speaker Change: So from a an impact on the op profit growth I guess, it's something between $2 2 million three two points depending on.

Speaker Change: But the rest of the company, we believe I've said R. R.

Speaker Change: They do have scale, we think it's better together.

Speaker Change: There's a lot of synergies and we've got really robust growth drivers across all three of those are those portfolios of businesses.

Speaker Change: The outcome on China.

Speaker Change: And then the the pressure on diabetes.

Speaker Change: Alright, thanks, so much.

Speaker Change: I think it's primarily <unk>.

Speaker Change: Thank you Larry next question. Please when we'll take the next question from Vijay Kumar from Evercore.

Speaker Change: Hey, guys. Thanks for taking my question Jacqueline Terry maybe one sort of on the earnings and margins kind of question.

Speaker Change: You look at the guidance of 4% EPS growth ex territory Q1, that's implied is like flattish.

Speaker Change: Earnings growth.

Speaker Change: Why is earnings growth.

Speaker Change: And loaded.

Speaker Change: Is this a mix impact on margins I think Q4 gross margins came in at below was there a product mix issue and.

Speaker Change: Jeff sort of a when you look at the earnings algorithm can you can make the EPS growing above revenues irrespective of the ethics environment. Thank you.

Speaker Change: I'll tell you I'll take the first part.

Speaker Change: Sure look I think the question is why why is the construction of backend loaded I think in the first quarter.

Speaker Change: Got a couple of things I would say first so it's always a bit lower from a revenue perspective, and then the fourth quarter and the rest of the year or so.

Speaker Change: That generates a lower absorption from the factories et cetera. So we typically have a dip.

Speaker Change: Between the first quarter and the rest of the year. The second elements, which I think is as important as curious as I mentioned previously we're investing.

Speaker Change: And the growth areas both in R&D.

Speaker Change: For cardiovascular for cast Floridian.

Speaker Change: And also in sales and marketing.

Speaker Change: To make sure that we capture the opportunities of growth that are provided by these areas and so in Q4, what youre going to see is a bit of that investment ahead of the return from a growth perspective. The growth in Q4 is slightly lower than the average of the year. You know, we're we're looking at roughly four 5% growth versus the <unk>.

Speaker Change: 5% on the full year. So we're invested ahead and investing ahead, and we'll reap the benefits of that towards the towards the second half of the final element there. So there's a little bit of FX headwind.

If you actually exclude effects.

And we've got EPS, that's up 11%, which is really 15, 8%. If you exclude EPS that earnings growth is actually 9% in the second half of the year. So.

Speaker Change: Into early into the first quarter that will turn into a tailwind towards the rest of the year or so so that kind of explains why we have a better performance awards.

That's the fundamentals of the business and we're trying to build off.

Now.

Back back to 2007.

As I said, we were looking at a growth rate that should continue to be positive with all the momentum that Jeff mentioned.

Speaker Change: Towards the backend.

Speaker Change: And your question on the leveraged P&L risk.

Speaker Change: Leverage at EPS growth, regardless of FX I think that was your question. So so first just getting to deteriorate point just one more point as you know I don't think it is back ended loaded is last year. We did end up hitting I remember a year ago, we put out guidance that had the back half of the year growing quite a bit and there was some.

We're going to continue driving the leverage on the cost side.

No.

Here you see some signs of improvement that are pretty significant from an operating profit perspective, and we're going to continue to work on that.

FX.

We're just assuming that it's flat so we're not assuming that it improves.

Speaker Change: Skepticism.

Speaker Change: All we did end up hitting on the higher end of that guidance across the board is going to point that out but to your other more strategic question. The answer is yes, you know FX over the years as you guys have always dogged us a bit.

The tailwind that I mentioned on 'twenty seven is just the effect of the carryover of the goodness that.

We will have based on the current FX rate.

And then you are right there should be some accretion that comes from diabetes.

Speaker Change: And and yes, you know we believe in the economist that we're talking to it's quite amazing is that the FX is going to be a tailwind for us for the next couple of years that being said.

From the separation.

That's going to help.

But the target that we're that we have for the teams.

As to deliver on the framework regardless of the transaction.

Speaker Change: What we're doing here is underlying.

Great. Thanks, Terry I appreciate it.

Speaker Change: In the operations of the company is creating natural hedges rolling our exposure to FX through a number of different areas, including something we've already really made a lot of progress on is dynamic pricing in countries that are serial you know.

Speaker Change: Thank you Ravi take the next question please when.

Speaker Change: We'll take the next question from Larry <unk> from Wells Fargo.

Speaker Change: Good morning, Thanks for taking the question.

Speaker Change: I wanted to focus on the decision to spin diabetes I.

Speaker Change: Where the currencies are devaluation on a consistent basis and that has had a pretty a fairly meaningful impact positive impact for us, but in addition to that and expanding that to other countries around the world.

Speaker Change: I guess a couple questions. One did you consider breaking medtronic into four separate businesses. One could argue that the remaining three business has scale on their own and have different customers and capital allocation requirements. So why not go further and breaking up the company and the pushback I think youre going to get on diabetes is that it is growing.

Speaker Change: Our teams on on you know kind of actual FX basis.

Speaker Change: We are making some structural changes such as lower our overall exposure to FX and then you combine it with our hedging program I think it's a good formula, but we've got to put it in place natural hedges. So the answer is yes.

Bob: Bob Medtronic corporate average.

Speaker Change: So why spin it off if youre focuses on accelerating top line growth. Thank you.

Speaker Change: I just wanted to give us some incremental color on maybe tell us to give visibility on the gross margin side you know what we're seeing in Q4 and at what we'll see for a part of 'twenty six.

Speaker Change: Well look yes, good question, Larry by diabetes why now.

Speaker Change: So first of all on the diabetes business like I said earlier, we believe this is a win win for both diabetes and Medtronic and now on diabetes.

Speaker Change: There's really two things that are offsetting each other we do have a negative impact coming from mix and you know that.

Speaker Change: Well down the path of the turnaround is ready to stand alone and we think it's well suited for public markets.

Speaker Change: It's about 80 basis points, but it's a combination of of Cas and diabetes.

Speaker Change: This move is going to ensure that they get really both the funding and the focus the franchise needs to reach its full potential as much as you know.

Speaker Change: That mix impact is.

Speaker Change: Offset by the progress that we're making from a pricing and from a cost standpoint right.

Speaker Change: The progress, we're making on pricing and cost.

Speaker Change: As we're sitting a data much progress as we made about six quarters in a row of double digits.

Speaker Change: That's going to carry forward.

Speaker Change: I'm going to be focusing on what I can do to help accelerate that the mix effect on Katherine diabetes. So look the diabetes part I guess, though will be addressed through the portfolio moves that we're making it's not why we're doing it they will help.

Speaker Change: But more to come here.

Speaker Change: Product pipeline is very robust we submitted several.

Speaker Change: File to the FDA for approvals on multiple products here in the last couple of months.

Speaker Change: And we believe with this focus and funding the business will.

Speaker Change: <unk> be a top tier diabetes franchise, well into the future and it from Medtronic, though it allows us to focus more on our high margin growth drivers that we just walk through like I just mentioned.

Speaker Change: The cash impact on mix.

Speaker Change: Actually translates into good news at the operating profit level number one number two some of it is driven by the fact that Oh.

Speaker Change: Right now a lot of the growth is done on the capital equipment sales. So we're shipping capital equipment first.

Speaker Change: Even without diabetes, one great market, 7% growth last quarter.

Speaker Change: Stable.

Speaker Change: The catheters will come after so the fact that the mix within cash is towards the capital equipment is actually good news for the future because as as.

Speaker Change: And and this.

Speaker Change: These are higher margin sectors for us and this accelerates our speed of travel to these high margin growth.

Speaker Change: We increased the catheter sales that's going to alleviate a big portion of that mix effect. So so the dynamic you should see is the mix getting better.

Speaker Change: Areas and its aligned around our core strengths of the company not technology strengths.

cheery: As well as our go to market.

Speaker Change: The other cost initiatives, hopefully et cetera, or anything so I hope that gives some additional color on why we should be able to continue to leverage.

cheery: Panel two healthcare systems. So we think it's a it's a.

cheery: When when it's going to create shareholder value short and long term material walks through the the accretive nature of the deal accretive to our EPS or operating margin and gross margin.

Speaker Change: Very helpful. Thank you.

Vijay Kumar: Thank you Vijay next question went okay.

Speaker Change: We'll take our next question from Joanna <unk> from Citi.

cheery: And.

cheery: I think I don't want to speculate, but I think diabetes business is probably worth more outside the company than in.

Joanna: Good morning, and congratulations on all the news this morning.

Speaker Change: I'm going to pivot here, a little bit too juice products and I was curious about your commentary regarding the preparation that you and you're seeing hospitals do for renal denervation and reimbursement and if you could just sort of share a little bit more about what you're seeing that would be fabulous.

cheery: And then back to <unk> point, and yet it will provide a kind of a onetime step up in margins, but the whole idea to Terry's point is that we're growing them from there in getting to that.

cheery: You saw a little bit of that in the last two quarters and we're going to continue to do that once we get through some of these below the line issues.

Joanna: Yeah.

Joanna: Sure.

cheery: But the rest of the company. We believe I've said are great. They do have scale, we think it's better together.

Joanna: Maybe I'll collyn, Sean for that one.

Joanna: Yes.

Joanna: Thanks for the question. So as you imagine our focus has been about opening centers that are getting ready to take on this new service line and that involves making sure that we train physicians added to the procedure of course and educate them on coding and billing for the current.

cheery: There's a lot of synergies and we've got really robust growth drivers across all three of those those portfolios of businesses.

cheery: Alright, thanks, so much.

Speaker Change: Thank you Larry ex question points win.

Speaker Change: The next question from Vijay Kumar from Evercore.

Joanna: Fee for service Medicare patients.

cheery: Hey, guys. Thanks for taking my questions, Jeff and Gary maybe one sort of on the earnings and margins kind of question.

Joanna: In addition to that of course with the NCD and the frame that's going to open up a lot of patients and really it's about focusing as they build the sort of assignment, which they are able to work our patients up without secondary causes us.

cheery: You look at the guidance of 4% EPS growth ex territory Q1 <unk>.

Joanna: Disease, and then get them appropriately to the Cath lab for renal denervation, which they perform safely.

cheery: <unk> is like flattish.

cheery: Earnings growth.

cheery: <unk> earnings growth back.

cheery: Back end loaded.

Joanna: There's a lot of enthusiasm as you can imagine from customers, who are looking for new service lines to grow their practices.

cheery: Is this a mix impact on margins I think Q4 gross margins came in below was there a product mix issue and Jeff sort of.

Joanna: Their cath labs, so it's really about that it's training education and support for their programs as they build that up.

cheery: When you look at the earnings algorithm can you can make to EPS growing above revenues.

cheery: The aspect of the FX environment. Thank you.

Joanna: One getting reimbursement there is more to do to activate patients more directly.

Joanna: We will channel those patients to a physician finder and geographies weighted.

cheery: I'll tell you I'll take the first part there sure look I think the question is why is the construction of backend loaded I think in the first quarter.

Joanna: Patients can then find their way to the treatment and as you probably recall from our clinical trials a large proportion of our patients were self preferred by using social media tools. So it's a very efficient way to recruit patients to the efforts of course, we want to do that with all the reimbursement barriers come down and that's where we're at.

cheery: Couple of things I would say first so it's always a bit lower from a revenue perspective, and then the fourth quarter and the rest of the year or so.

That generates a lower absorption from the factories et cetera. So we typically have a dip.

cheery: Between the first quarter and the rest of the year the second elements, which are I think so.

Joanna: More and more important to that yesterday.

cheery: As important this year.

Speaker Change: Thank you and if I could do a follow up the how do you think about this revenue ramping.

As I mentioned previously we're investing.

cheery: And the growth areas both in R&D.

Speaker Change: You sort of parallel the two P. F E adoption and I just wanted to sort of set you know get expectation set of how to think about that thank you.

cheery: For cardiovascular for cast Floridian.

cheery: And also in sales and marketing.

cheery: To make sure that we capture the opportunities of growth that are provided by these areas.

Speaker Change: Yeah, John I think that's a very different thing right. So PSA is replacing an incumbent procedure.

cheery: And so in Q4, what youre going to hear a bit about the investment ahead of the return from a growth perspective. The growth in Q4 is slightly lower than the average of the euro going to where we're looking at roughly four 5% growth versus the 5% on the full year. So we're invested ahead and investing ahead and we will reap the benefits.

Joanna: Faster safer procedure that appears to have just excellent efficacy is really pretty easy switch.

Joanna: It's not so difficult to train on our tools and techniques to that this is a little bit more involved of course, because there are other reasons why people have high blood pressure you have to sort those costs out.

Joanna: Get patients into the satisfied so it's a longer ramp, but it's a long annuity. This is a massive patient population as you know and be able to build that practice I think you've got to think about this is one of those.

cheery: Of that towards towards the second half.

cheery: Final element there so there's a little bit of FX headwind.

cheery: Into our into the first quarter that will turn into a tailwind towards the rest of the year or so so that kind of explains why we have a better performance towards.

Joanna: Really important durable growth drivers for the company.

Joanna: Set us up well for a lot of <unk>.

Joanna: Success for a long time.

Speaker Change: Yeah, just to build on that point Joanne to build on that point that John's, making the larger health systems around the country I mean, not just the larger ones, but a lot of them are really proactively calling us.

cheery: Towards the backend.

cheery: And your question on <unk>.

cheery: The leveraged P&L.

cheery: Leverage EPS growth, regardless of FX I think that was your question. So first just getting to <unk> point, just one more point is.

Speaker Change: For partnerships around hypertension building.

Speaker Change: Building these clinics wattleton virtual some not and establishing these patients pathways with us jointly investing.

cheery: I don't think it is back ended loaded is last year, we did end up hitting remember a year ago, we put out guidance that had the back half of the year growing quite a bit and there was some skepticism.

Speaker Change: So it's a this is this is going to be a big one for us for a long time.

cheery: Paul We did end up hitting the higher end of that guidance across the board I want to point that out but to your other more strategic question. The answer is yes, FX over the years as you guys have always dogged us a bit.

Speaker Change: And we're in of course, we're going to continue to invest in.

Speaker Change: And the innovation around this so.

Speaker Change: Yeah.

Speaker Change: Thank you Joanne next question. Please well take the next question from Matt Taylor at Jefferies.

cheery: And and yes.

cheery: We believe in the economist that we're talking to it's quite amazing is that the FX is going to be a tailwind for us for the next couple of years that being said.

Speaker Change: Yes.

Matt Taylor: Alright, Thanks for taking my question I was wondering actually if you could.

Matt Taylor: Spend on some of the pipelines are ideas that you had poor for diabetes.

cheery: What we're doing here is underlying.

cheery: In the operations of the company is creating natural hedges and lowering our exposure to FX through a number of different areas, including something we've already really made a lot of progress on is dynamic.

Matt Taylor: About their differentiation and timelines if you can.

Speaker Change: Sure I will hand that one off to Q.

Speaker Change: Yeah. Thanks for the question.

cheery: <unk> in countries that are cereal.

Speaker Change: Okay.

Speaker Change: So if I start with the recent approval of a simple I was thinking the U S.

cheery: <unk>.

cheery: The currencies devaluation on a consistent basis and that has had a pretty a fairly meaningful impact positive impact for us, but in addition to that and expanding that to other countries around the world.

Speaker Change: Well again, we're ramping.

Speaker Change: That we're going to be launching that in a limited fashion in the fall.

Matt Taylor: And in Europe that product has already launched commercially and just to give you an idea of the volume ramp.

cheery: Paying our teams on kind of actual FX basis.

cheery: We are making some structural changes that just lower our overall exposure to FX and then you combine it with our hedging program I think it's a good formula but we've got a we're putting in place natural hedges. So the answer is yes.

Matt Taylor: Versus last year, and we expect to ramp our volume at least five times, what we gave last year.

Matt Taylor: So we have not really begun to see the potentials and clear on the business yes.

cheery: I just wanted to give us some incremental color on maybe to give visibility on the gross margin side, what we're seeing in Q4.

Matt Taylor: Then we have submitted for an ace pump in IAG seeing algorithm.

Matt Taylor: The FDA.

Matt Taylor: In April.

cheery: We'll see for a part of 2006.

Matt Taylor: We're ready to launch that working very well with Abbott.

cheery: It's really two things that are offsetting each other we do have a negative impact coming from mix.

Matt Taylor: To make that happen and we're ready to launch.

Matt Taylor: We.

cheery: It's about 80 basis points, and it's a combination of cash and diabetes.

Speaker Change: Let me see clearance on us.

Matt Taylor: And then so that's all CGM often can address a lot of that.

And that mix impact is.

Matt Taylor: The sale of Al Khan CGM lineup.

cheery: Offset by the progress that we're making from a pricing and from a cost standpoint right.

Matt Taylor: And then we also have a multiple insulin options.

cheery: The progress, we're making on pricing and cost.

Matt Taylor: We had intended in market today.

cheery: That's going to carry forward.

cheery: I'm going to be focusing on what I can do to help accelerate that the mix effect on Katherine diabetes. So look the diabetes part I guess, so will be addressed through the portfolio moves that we're making it's not why we're doing it will help.

Speaker Change: Our next generation durable, Tom we expect to submit by the end of this fiscal year.

Matt Taylor: And then following that patch will follow up to that.

Matt Taylor: And what you can see in the lineup is significant improvement to our form factor.

cheery: The cash impact on mix.

Matt Taylor: That feedback we've been given.

Matt Taylor: And so that makes it.

cheery: Actually translates into good news at the operating profit level number one number two some of it is driven by the fact that saw.

Matt Taylor: More wearable.

Matt Taylor: All these pumps having phone control.

Matt Taylor: As a feature in a lot of al canceling the vessel.

cheery: Now a lot of our growth is on the capital equipment sales. So we're shipping capital equipment first.

Matt Taylor: And then in addition to that we have.

Matt Taylor: Third generation closed loop algorithm.

cheery: The catheters will come after the.

Matt Taylor: That.

cheery: The fact that the mix within cash is towards the capital equipment is actually good news for the future.

Matt Taylor: Yes, we believe will be a very exciting development.

Matt Taylor: Is there any reduction while driving the clinical outcomes that people expect from us. So when you look at the total ecosystem.

cheery: As we.

cheery: We increased the catheter sales that's going to alleviate a big portion of that mix effect. So so the dynamic you should see is the mix getting better and the cost initiatives, hopefully et cetera. So I hope that gives us some additional color on why we should be able to continue to leverage.

Matt Taylor: I would say a couple of things one the.

Matt Taylor: The form factor I'm completely upgraded.

Matt Taylor: Only that we completely re architected the <unk>.

Matt Taylor: When including the aggregate and that drives everything.

Matt Taylor: Then you can see the way ability of the entire system.

cheery: Very helpful. Thank you.

Speaker Change: Thank you Vijay next question win.

Matt Taylor: And it's not talked about.

Speaker Change: We'll take our next question from Joanne Wuensch from Sandy.

Matt Taylor: In the product itself, but when you think about.

Matt Taylor: The burden of diabetes management.

Joanne Wuensch: Good morning, and congratulations on all the news this morning.

Matt Taylor: It is something very attractive and burden reduction that patients have to only deal with one company.

Speaker Change: I don't want to pivot here, a little bit too.

Speaker Change: <unk> products and I was curious about your commentary regarding <unk>.

Matt Taylor: Especially when things go wrong.

Matt Taylor: Our customer our tech support and customer service.

cheery: Preparation that you and Youre seeing hospitals do for renal denervation.

Matt Taylor: Not just for patients, but also physician.

cheery: Reimbursement and if you could just sort of share a little bit more about what youre seeing that would be fabulous. Thank you.

Matt Taylor: Is it is it is also a differentiator.

Matt Taylor: Great. Thank you very much.

cheery: Sure.

cheery: Maybe I'll collyn, Sean for that one.

Matt Taylor: Okay.

Speaker Change: Hey, Thanks, Matt when we have time, probably for three months.

cheery: Yes, I think thanks for that.

cheery: So as you imagine our focus has been about opening centers that are getting ready to take on this new service line.

Matt Taylor: Okay.

Speaker Change: We'll take the next question from Matt <unk>.

Speaker Change: Great.

cheery: And that involves making sure that we train physicians how to do the procedure of course and educate them on coding and billing for the current.

Speaker Change: Hey, Thanks, so much for taking the question and congrats on a strong finish here.

Speaker Change: Just to make sure I understand.

cheery: Fee for service Medicare patients.

Matt Taylor: The the.

cheery: In addition to that of course with the NCD and the frame.

Matt Taylor: The operating line grows 7%.

cheery: To open up a lot of patients that really its about focusing as they build to serve assignment, which they are able to work the patients up without secondary causes of it.

Matt Taylor: With about 300 basis points getting you back to 4% EPS growth for the full year and that's inclusive of all the investments that you're talking about that's inclusive of the sort of gross margin headwinds around investments and so on just to be crystal clear is that right.

cheery: And then get them appropriately to the Cath lab for renal denervation, which they perform safely.

cheery: Theres a lot of enthusiasm as you can imagine from customers, who are looking for new service lines to grow their practices.

Speaker Change: Yes, that's correct, Chris before the tariffs impact right just to just to get here and.

cheery: Absorb their cath labs, so it's really about that training education and support for their programs as they build that up upon getting reimbursement there is more to do to activate patients more directly.

Speaker Change: Again the test.

Speaker Change: About 33333 to three two points on that.

Speaker Change: Right and so congrats on that leverage I mean, I just take a minute to I know what it has been difficult getting growth of EPS above sales with other headwinds and so on so getting that operating line growing so within on tariffs you mentioned high confidence in getting to the mitigation as you've described.

cheery: Channel those patients to a physician finder and geographies weighted basis.

cheery: Patients can then find their way to the treatment and as you probably recall from our clinical trials a large proportion of our patients were self referred by using social media tools. So it's a very efficient way to recruit patients to the effort.

Speaker Change: <unk>.

Speaker Change:

Speaker Change: Opportunity to take those further.

Speaker Change: And then just maybe if I could drill down a bit on the spine business just to get a sense of.

cheery: We want to do that with all the reimbursement barriers come down.

cheery: That's what we're hopeful for.

Speaker Change: Above market performance.

cheery: As we move forward into the <unk>.

Speaker Change: Where if we were to sort of like like for like spine growth.

cheery: Got it.

cheery: Thank you and if I could do a follow up the how do you think about this revenue ramping.

Speaker Change: Comparing to your pure play peers, where do you see your growth where do you see the market any color you provide on that would be great as well. Thanks. So much.

cheery: You sort of parallel the two PFA adoption and I just wanted to get.

cheery: Patient set of how to think about that thank you.

Speaker Change: Sure.

Speaker Change: Yes, John I think that's a very different thing right. So PFA is replacing an incumbent procedure that is faster safer procedure that appears to have just excellent efficacy is really a pretty easy switch.

Speaker Change: So for US first of all thanks for acknowledging the the op.

Speaker Change: Profit growth.

Speaker Change: Did that 8% in Q4.

Speaker Change: Next year, seven and if you take out the diabetes.

Speaker Change: That would that would go eight.

cheery: It's not so difficult to train on on our tools and techniques to that this is a little bit more involved of course, because there are other reasons why people at high blood pressure you have to start those costs out.

Speaker Change: Built we've built that we've built that muscle and that's going to that's going to continue.

Speaker Change: In terms of.

Speaker Change: The spine business again, the markets I would say the demand is there the markets have been stable and technology as a differentiator here.

Get patients into the service line, so it's a longer ramp, but it's a long annuity. This is a massive patient population as you know and be able to build that practice I think you've got to think about this is one of those.

Speaker Change: And it's pretty extreme.

Speaker Change: If you go back over the last couple of years, you're seeing a number of our competitors tap out.

cheery: Really important durable growth drivers for the company.

cheery: Set us up well for a lot of success for a long time.

Speaker Change: Because of the.

Speaker Change: Investment and expertise it takes to build out the capital equipment, enabling technology strategy around this.

Speaker Change: Yes, just to build on that point Joanne to build on that point that John's, making the larger health systems around the country I mean, not just the larger ones, but a lot of them are.

Speaker Change: And we've got a big lead here like I said in the commentary with the dynamic that we're seeing.

cheery: Really proactively calling us.

cheery: For partnerships around hypertension building.

Speaker Change: By us taking this portfolio of enabling technology and integrating the workflow we've gone from a product story to a solution story, we branded Abel and AI enabled technology and so as our customers are upgrading.

cheery: Building these clinics lotto virtual some not and establishing these patient pathways with us jointly investing.

So this is this is going to be a big one for us for a long time.

Speaker Change: We're upgrading from a product to a to a broader ecosystem. So it's not a linear upgrade it's more algorithmic and that's giving us and that's a that is a durable advantage.

cheery: And we are and of course, we're going to continue to invest in.

cheery: On the innovation around this so.

cheery: Yeah.

Speaker Change: And so we're seeing the market growth is stable.

Joanne Wuensch: Thank you Joanne next question. Please well take the next question from Matt Taylor of Jefferies.

Speaker Change: And we're seeing our competitive advantage growing you know you've seen a bunch of <unk>.

Matt Taylor: Alright, Thanks for taking my question I was wondering actually if you could.

Speaker Change: Our competitors tap out like I said, you see or are like probably primary competitor this quarter.

Matt Taylor: On some of the pipeline ideas that you had for diabetes.

Speaker Change: Put up some results that you know.

cheery: About their differentiation and timelines if you can.

Speaker Change: We'll see where it goes from here, but there's a pretty big difference between us and them this past quarter, and we'll see where it goes from here, but we're.

cheery: Sure.

Q: I'll hand that one off to Q.

Speaker Change: We're feeling good about spine and its something <unk> been highly.

Speaker Change: Yes, thanks for the question.

cheery: Hey.

Speaker Change: Highly involved with and leading a along with skip I think Brett you would like to comment on this yes sure Jeff.

cheery: So if I start with the recent approval of Sinclair Rethinking the U S.

cheery: With <unk>, we're ramping.

Speaker Change: Matt. Thanks for the question and you were just seeing as Jeff said good stable demand in the ecosystem is driving that and if you look at our enabling technology growth. This last quarter. It remains.

cheery: We're going to be launching that in a limited fashion in the fall.

cheery: And in Europe that product has already launched commercially and just to give you an idea of the volume ramp.

cheery: Versus last year, we expect to ramp our volume.

Speaker Change: You know very attractive very strong.

Speaker Change: And we just see that stability continuing as an attractor.

cheery: <unk> five times, what we gave last year.

cheery: So we have not really begun to see the potential Sinclair on the business yes.

Speaker Change: For not only.

Speaker Change: Customers real we're seeing a large scale important academic centers come to Medtronic for this and we're also getting very good response from other sales reps and other individuals that want to join Medtronic. So we're comfortable with.

cheery: And we have submitted.

cheery: <unk>, four and Ace pumping IAG seeing algorithm.

cheery: In April so we're ready to launch that working very well with Abbott.

cheery: To make that happen and we're ready to launch.

cheery: The.

Speaker Change: How this is moving forward.

Speaker Change: Let me see clearance on that.

Speaker Change: So I just think that you know.

cheery: And then so thats all CGM is going to address a lot of that.

Speaker Change: I'm glad you asked the question.

Matt Taylor: You know, Matt because we talk a lot about Psa.

cheery: <unk>.

cheery: Cowen CGM lineup.

Speaker Change: Already in robotics, but part of our a key part of our growth story is the rest of the company.

cheery: And then we also have a multiple insulin options.

cheery: We have in hand in market today.

Speaker Change: And you've talked about C S T or a spine business CRM.

cheery: Our next generation durable com, we expect to submit by the end of this fiscal year.

Speaker Change: High single digit quarter there.

Speaker Change: Strong growth from lead list conduction system pacing EV ICD again. These are durable growth drivers for us that are going to go out so and then and then the other thing we mentioned in the commentary some of the slower growing parts of the company. We have plans for like peripheral vascular as we enter the carotid space with contango.

cheery: And then following the patch will follow after that.

cheery: And what you can see in the lineup is significant improvement to our form factor.

cheery: Feedback has been given.

cheery: And so that makes it.

cheery: Low wearable.

Speaker Change: With all these comps heading fund control, which is a feature of a lot of our customers the vessel.

Speaker Change: And then through an organic program into thrombectomy.

Speaker Change: Some technology from our neurovascular business to get into that space and then we've got things like tell the tale.

cheery: And then in addition to that we have our third generation closed loop algorithm.

Speaker Change: Which will I think it's going to surprise people. Both there once we launch the <unk> system, we think that's going to be very disruptive and we don't see a real answer from our competitors. So the rest.

cheery: Matt.

Matt Taylor: We believe will be a very exciting development in terms of <unk> reduction.

Matt Taylor: Driving the clinical outcomes that people expect from us. So when you look at the total ecosystem.

Speaker Change: The growth story is pretty broad at the company, it's not just the the lightning bolts a PSA in already.

cheery: I would say a couple of things one the.

cheery: The form factor.

cheery: Slightly upgraded.

Speaker Change: So thanks for the question.

cheery: That we completely re architected the software, including the algorithm that drives everything and then.

Speaker Change: Thanks, Pat two more questions. Please.

Speaker Change: Okay. The next question from Danielle <unk> from UBS.

cheery: The way ability of the entire system and it's not.

Danielle: Hey, good morning, guys. Thanks, so much for squeezing me in here.

cheery: <unk> talked about.

cheery: In the product itself, but when you think about.

Danielle: Echo everyone's congrats on all the news this morning.

cheery: The burden of diabetes management.

cheery: He is something very attractive and burden reduction that patients have to only deal with one company.

Danielle: Just a quick question to clarify on some of the commentary around PSA obviously, a really important growth driver I think you talked about.

cheery: Especially when things go wrong.

Danielle: Reaching $2 billion in sales so essentially.

cheery: Our customers technical and customer service.

Danielle: About doubling I'm just curious how to think about the ramp from just over 1 billion to $2 billion in Nat Cat business. I mean is that something that based on your commentary I mean, it seems like thats more near term versus long term, but anything you can add there as far as how we think about getting from that one to two.

cheery: Not just for patients, but also physician.

cheery: Is it is it is also a differentiate them.

cheery: Great. Thank you very much.

cheery: Okay.

Joanne Wuensch: Okay. Thanks, Matt when we have time, probably for three months.

cheery: Hey.

Matt Taylor: We'll take the next question from Matt <unk>.

Speaker Change: I mean, one of your competitors that was first to market here or close to it.

cheery: Great.

Speaker Change: Hey, Thanks, so much for taking the question and congrats on the strong finish here.

Speaker Change: You guys came to market about the same time, so sorry about that but.

Speaker Change: They ramped pretty pretty quickly. So just curious if you could give any more color there.

Speaker Change: Just to make sure I understand.

cheery: The.

cheery: Operating line grows 7%.

Speaker Change: Yeah, no they did they didnt ramp really quickly.

Speaker Change: And I think.

Speaker Change: With about 300 basis points getting you back to 4% EPS growth for the full year and that's inclusive of all the investments that you are talking about this inclusive of the sort of gross margin headwinds around investments and so on just to be crystal clear is that right.

Speaker Change: We feel very good about our product portfolios here in PSA and and what we're seeing right now is just an incredible demand.

Speaker Change: For our Farah.

Speaker Change: And the capital we got to get this capital systems out there, which we're doing.

Speaker Change: Yes, that's correct, but it's before the tariffs impact Greg.

Speaker Change: When you get these high volume centers, they get one and like I said I spent the last couple of weeks you know I'd say, 80% of my time or so has been on PSA score and the heart Rhythm Society meeting.

Speaker Change: Just to just to be clear.

cheery: And again the task.

cheery: About three.

cheery: Three 2% to 2% to three two points on that.

cheery: Right and so congrats on that leverage I mean, I would just take a minute to.

Speaker Change: And then and then a trip to the northeast United States, just meeting with the leading centers in the dynamic working on is to get to one of their system.

cheery: I know what it has been difficult getting growth of EPS above sales.

cheery: Other headwinds and so on so getting that operating line growing so and then on tariffs you mentioned high confidence in getting to the mitigation as you've described.

Speaker Change: And then they then there is.

Speaker Change: Planning over that system amongst the different piece at these systems and they're getting.

Speaker Change: Getting their second affair system.

Speaker Change: And then we're you know then the catheter sales built from that again, it's not a once you get the installed base is not linear and the systems are getting this technology theyre not being held back by <unk>.

cheery: Opportunity to take those further.

cheery: And just maybe if I could drill down a bit on the spine business just to get a sense of.

cheery: Above market performance.

Speaker Change: Capital constraints and if that is an issue we have opportunities here.

cheery: Where if we were to sort of like like for like spine growth.

cheery: Comparing to your pure play peers, where do you see your growth where do you see the market any color you provide on that would be great as well. Thanks. So much.

Speaker Change: With through contracting to eliminate that friction and then our supply chain has really ramped right. This was we bought a fair it's a super innovative technology.

Speaker Change: But then we had to spend quite a bit of time innovating the manufacturing processes that wasn't really designed in with the acquisition. So so that's up and running and we're scaling that and we're really happy with that.

Speaker Change: Sure.

Speaker Change: First of all thanks for acknowledging.

Speaker Change: The op profit growth, we did 8% in Q4 and next year seven and if you take out the diabetes.

Speaker Change: And then you've got a nice robust demand and a robust pipeline.

Q: That would that would go eight bill.

Speaker Change: <unk> like I said in the commentary.

Q: Built we book that we've built that muscle and that's going to that's going to continue.

Speaker Change: The only thing thats more exciting than us for nine catheter out there right now is for 360 and that goes right at the heart of.

Q: In terms of the spine business again, the markets I would say the demand is there the markets have been stable and technology as a differentiator here.

Adam: The competition right Adam.

Adam: And then then we've got Paul select which is not under any kind of supply constraints and it gives it gives centers around the world and option in a way to blend their pricing as.

Q: And it's pretty extreme.

Q: If you go back over the last couple of years, you're seeing a number of our competitors.

Adam: As well so, especially in the global area is where the resources aren't as much you got pulse is a very good system high quality very safe.

Q: Tap out.

Q: Because of the <unk>.

Q: Investment and expertise it takes to build out the capital equipment, enabling technology strategy around this.

Adam: And it's not priced where it where the.

Adam: With a.

Adam: A fair is and so what I would say is that we strongly believe in doubling the business. We didn't put a specific timeframe on it but it's not far off I mean, you know it's not far off so I'd say, it's more near term.

Q: And we've got a big lead here like I said in the commentary with the dynamic that we're seeing.

Q: By us taking this portfolio of enabling technology and integrating the workflow we've gone from a product story to a solution story, we branded April AI enabled technology and so as our customers are upgrading.

Adam: Over the next couple.

Adam: Maybe I don't know if that what exactly happened in the fiscal year, but we're in that ballpark.

Adam: And really excited about it.

Q: They are upgrading from a product to a to a broader ecosystem. So it's not a linear upgrade it's more algorithmic and thats, giving us and that's a that is a durable advantage.

Speaker Change: That's so helpful. Thanks, so much.

Speaker Change: Thank you Danielle lets take that.

Speaker Change: The last question. Please with our last question comes from Shannon thing at RBC.

Q: And so we're seeing the market growth is stable.

Adam: Oh, great. Thank you so much so a couple of follow ups on those on the floor, especially with.

Q: And we're seeing our competitive advantage growing.

Adam: Impressive growth can you can talk about the mix of cryo. It seems like it's becoming less and less of a headwind any color on pricing there and then on IBM any updated thoughts on what patient subset do you think you could get coverage for thank you for taking my questions.

Q: You know you've seen a bunch of our competitors tap out like I said you see are are probably primary competitor this quarter.

Q: Put up some results that.

Q: We'll see where it goes from here, but there's a pretty big difference between us and them this past quarter, and we'll see where it goes from here but.

Sean: Sean do you want to take the first.

Sean: Yes. It was just one sure thanks guys.

Q: We're feeling good about spine and thats something <unk> been highly.

Sean: Yes, so first of all on <unk> cloud will become less and less a part of the mix, but I think that rate of decline will slow and then that will aid in the growth of that business going forward.

Q: Highly involved with and leading.

Speaker Change: Along with Skip I think Brett you would like to comment on this.

Brett: Sure Jeff.

Brett: Matt. Thanks for the question and you were just seeing as Jeff said, good stable demand in the ecosystem is driving that.

Sean: Still a really valued tool and particularly in places that don't use general anesthesia and in a more cost constrained that's that really is holding up very very well. So I think it has a kind of a near mid year and will stay there and then we'll have growth on top of that.

Speaker Change: You look at our enabling technology growth this last quarter it remains.

Speaker Change: Very attractive very strong.

Speaker Change: We just see that stability continuing its an attractor.

Sean: With regard your question on what we're expecting for coverage of the population of patients I think what I'd, just say as ill talk.

Jeff: For not only.

Jeff: Customers, we're seeing a large scale important academic centers.

Sean: On the CMS decision makers here, but what.

Sean: What we've been saying to them is what is the evidence and what are the guidelines and professional society is saying and that was really track pretty closely so to meet the standard of reasonable and necessary for CMS.

Terry: To Medtronic for this and we're also getting very good response from other sales reps and other individuals that want to join Medtronic. So we're comfortable with how this is moving forward.

Sean: I think it can be very close to what we what we've studied and what's being recommended by the guidelines and that would be patients that said.

Speaker Change: So I just think.

Speaker Change: I'm glad you asked the question.

Speaker Change: Matt because we talk a lot of our PSA.

Sean: Aren't able to control their blood pressure despite lifestyle medications, but also those patients that are unable to take medications due to side effects and such so I think relatively broad we'll find out soon enough in July but I think just following that evidenced in an expert opinion and the commentary that was collect.

Speaker Change: Already in robotics, but part of our a key part of our growth story as the rest of the company.

Speaker Change: We talked about CST, our spine business CRM hi.

Speaker Change: High single digit quarter there.

Speaker Change: Strong growth from Needless conduction system pacing EV ICD again. These are durable growth drivers for us that are going to go out so and then and then the other thing we mentioned in the commentary some of the slower growing parts of the company we have plans for.

Sean: And in the public commentary period.

Sean: So that decision.

Sean: Got it if I could just squeeze in one last one just a strategy around portfolio management.

Sean: And I think Jeff at some point you had indicated that you like them, but there are two areas that you can build an ecosystem and diabetes was one of those areas you know you're now looking to separate that.

Speaker Change: Like peripheral vascular as we enter the carotid space with contango.

Andrew: And Andrew.

Speaker Change: And organic program into thrombectomy.

Speaker Change: Taking some technology from our neurovascular business to get into that space and then we get things like Teladoc health.

Speaker Change: How should we think about your portfolio management strategy going forward. Thank you for taking the questions.

Terry: Which will I think it is going to surprise people with both their once we launch the <unk> system. We think that's going to be very disruptive and we don't see a real answer from our competitors. So the rest of the.

Sean: Sure I mean look we've been as I said before it's a continuous process we've been at it we're going to stay at it diabetes as an N. We exited ventilation for different reasons, we had exited ventilation we exited our.

Terry: Gross story is pretty broad at the company, it's not just the the lightning bolts a PSA in already.

Speaker Change: Our <unk> business, we exited dialysis.

Speaker Change: And now diabetes and it really comes down to you know.

Terry: So thanks for the question.

Speaker Change: Where do we have.

Matt Taylor: Thanks, Matt two more questions. Please.

Speaker Change: These are secular growth opportunities along with a financial profile.

Danielle: Okay. The next question from Danielle <unk> from UBS.

Speaker Change: <unk>.

Speaker Change: Hey, good morning, guys. Thanks, so much for squeezing me in here.

Speaker Change: Higher margins that that works for us.

Speaker Change: Where we have core strengths.

Speaker Change: Echo everyone's congrats on all the news this morning.

Speaker Change: Any of those for you know there are different degrees, but you know I think there's other stuff inside the company that is.

Speaker Change: And just a quick question to clarify on some of the commentary around PFA, obviously, a really important growth driver I think you talked about reach.

Speaker Change: Higher degree of higher margin growth and aligned around our core of course synergies and capabilities and that's what's really driving it.

Terry: Reaching $2 billion in sales so essentially just about doubling I'm just curious how to think about the ramp from just over $1 billion to $2 billion in net cash business. I mean is that something that based on your commentary I mean, it seems like thats more near term versus long term, but.

Speaker Change: And so we're we like where we are like I mentioned before where we were in high growth markets, but we'll continue looking at the portfolio I want this to be both additions and subtractions and want to do more deals.

Speaker Change: Two I think.

Terry: You can add there as far as how we think about getting from that one to two I mean, one of your competitors that was first to market here or close to it I mean, you guys came to market about the same time, sorry about that but yes.

Speaker Change: The fundamentals of the company.

Speaker Change: Sure.

Speaker Change: The best I've seen in my nearly 14 years here and so we are you know the markets that we're in the technology that we have our operational how we're executing operationally and we're at a point now where I would like to turn up the heat on some tuck in M&A to support these strong market positions.

Speaker Change: They ramped pretty pretty quickly. So just curious if you could give any more color there.

Terry: Yeah, no they did they ramp really quickly.

Terry: And I think.

Speaker Change: So thats part of the portfolio piece and then on the divestiture side I just talked through that.

Terry: We feel very good about our product portfolio here in PFA and and what we're seeing right now is just an incredible demand.

Speaker Change: And it's an ongoing process and on that note.

Speaker Change: Just seeing some of the chatter back and forth here on the diabetes deal I do want to clarify the mechanics of that a bit and how this transactional work because it is it is unique and has unique benefits for Medtronic. So Terry could you just hit on that sure.

Speaker Change: For our Farah.

Speaker Change: And the capital we got to get this capital systems out there, which we're doing.

Speaker Change: You get these high volume centers they get one.

Speaker Change: As I said I spent the last couple of weeks I'd say, 80% of my time or so has been on PSA, It's going to heart Rhythm Society meeting.

Terry: Sure Yeah. Thanks, Jeff.

Terry: Luca.

Speaker Change: The preferred path that we've laid out really has two steps.

Terry: And then and then a trip to the northeast United States, just meeting with the leading centers and the dynamic we're hearing is to get to one of their system.

Terry: The first step is though.

Terry: We do an IPO of up to 20% of the shares of the new diabetes company.

Terry: And then.

Terry: <unk>.

Terry: And what that does is it enables us to raise capital to make sure that the new diabetes company is fully capitalized.

Terry: Fighting over that system amongst the different piece at these systems and they're getting.

Terry: Getting your second affairs.

Terry: Those proceeds will also cover the costs that are relative to executing the deal overall.

Terry: And then we're then the catheter sales build from that again, it's not a lit once you get the installed base is not linear and the systems are getting this technology theyre not being held back by <unk>.

Terry: And it will.

Terry:

Terry: Our projections they will enable potentially to have some of the proceeds towards electronic.

Terry: Capital constraints and if that is an issue we have opportunities here.

Terry: Potentially apply.

Terry: With through contracting to eliminate that friction and then our supply chain is really ramp right. This was we bought a fair to super innovative technology.

Terry: Our capital allocation typical policy. So it provides an opportunity to do a buyback in the first phase.

Terry: Then there is a second phase which would should occur.

Terry: But then we had spent quite a bit of time innovating the manufacturing process that wasn't really designed in with the acquisition. So so that's up and running and we're scaling that and we're really happy with that.

Terry: Roughly six months after the first phase of that.

Terry: And that second phase, we do a split and what that means is.

Terry: We closed the lockup period, we give an opportunity for medtronic shareholders. Some of which will have entered the stocks to participate to the fed we give them the option either to keep the medtronic stock or to swap for stock and via our shares in the new diabetes companies.

Terry: And then you have got a nice robust demand.

Jeff: <unk> pipeline like I said in the commentary the <unk>.

Jeff: Only thing Thats more exciting us for nine catheter out there right now is for 360 and that goes right at the heart.

Adam: The competition right Adam.

Jeff: And then then we've got <unk>, which is not under any kind of supply constraints and it gives it gives centers around the world on option in a way to blend the pricing.

Terry: So the result of that is that.

Terry: It will reduce the share count of Medtronic on a permanent basis. So.

Terry: This is the accretive effect that it will have on EPS. So it's not a one off buyback I want to be clear it's a permanent.

Jeff: As well, so, especially in the global area is where the resources aren't as much.

Jeff: Pulse is a very good system high quality very safe.

Terry: Permanent retirement of the shares corresponding to a something probably around 80% of the shows that though the new diabetes.

Speaker Change: And it's not priced where were.

Jeff: With a.

Speaker Change: And so what I would say is that we strongly believe in doubling the business, we didn't put a specific timeframe on it but it's not far off.

Terry: <unk> company.

Terry: So all of this.

Terry: It should be a tax free transaction for U S federal income taxes.

Speaker Change: It's not far off so I'd say, it's more near term.

Terry: And the goal is to get everything done.

Speaker Change: Over the next couple or maybe I don't know if exactly happened in the fiscal year, but we're in that ballpark.

Terry: Within our within the next 18 months, which means that we will fully consolidate the diabetes business through 2026.

Speaker Change: And really excited about it.

Terry: And see the impact of the deconsolidation on the EPS accretion primarily in 2027.

Speaker Change: That's so helpful. Thanks, so much.

Speaker Change: Thank you Danielle lets take that.

Speaker Change: The last question please.

Terry: That one time EPS, we're not looking at that we see it for what it is it's a onetime bump and we're going to.

Speaker Change: Our last question comes from Sharon Kim at RBC.

Oh, great. Thank you so much so a couple of follow ups on those.

Terry: Apply our algorithm on top of that and grow that EPS year over year like we talked about as part of our as our algorithm.

Speaker Change: S business.

Speaker Change: Impressive growth can you could talk about the mix of cryo. It seems like it's becoming less and less of a headwind any color on pricing there and then on IBM any updated thoughts on what patient subset do you think you could get coverage for thank you for taking my questions.

Terry: And then additionally, the.

Terry: The other benefit it does reduce with retired shares does reduce the cash burden on the dividend liability. So that's another benefit of it. So it's a unique structure. It's a unique deal its unique structure and that's why I say, it's a win win.

Sean Collyn: Sean do you want to take the first.

Sean Collyn: Yes. It was just one sort of thing.

Terry: Sorry for the.

Terry: Little technical challenge at the beginning of the call. Thanks for your patience on that thanks for going the extra half hour plus.

Speaker Change: Yes, so first of all on on cast quietly become less and less part of the mix, but I think that rate of decline will slow.

Terry: And all the great questions and engagement I'm sure there'll be a lot of conversation throughout the day, we there's a lot a lot of news a lot of good news I think we're like I said.

Speaker Change: And then that will aid in the growth of that business going forward.

Speaker Change: Bill a really valued tool and particularly in places that don't use general anesthesia and in a more cost constrained. It's it really is holding up very very well. So I think it has a hedged kind of a near midyear and will stay there and then we'll have growth on top of that.

Terry: I'm as excited about the setup as I've ever been and we're at the early stages of it. So thanks for all the questions and.

Terry: So all to all of this is joined today. We appreciate your support and continued interest in Medtronic and.

Speaker Change: As regards your question on what we're expecting for coverage of the population of patients.

Terry: We will hope that you'll join our our Q1 earnings broadcast, which we anticipate holding on Tuesday August 19th where we will continue to update you on all the progress here so with that thanks for spending time with us today and have a great rest of your day.

Speaker Change: What I would just say is our partner on the CMS decision makers here, but.

Speaker Change: What we have been starting to them is what is the evidence and what are the guidelines and professional society is saying and that was really track pretty closely so to meet the standard of reasonable and necessary for CMS.

Terry: Okay.

Terry: Yes.

Terry: Okay.

Speaker Change: I think it's going to be very close to what we what we've studied and what's being recommended by the guidelines and that would be patients that.

Speaker Change: Are able to control their blood pressure despite lifestyle medications, but also those patients that are unable to take medications due to side effects and such so I think relatively broad we'll find out soon enough in July but I think just following that evidenced in an expert opinion and the commentary that was collected.

Terry: Okay.

Speaker Change: And the public commentary period.

Speaker Change: Are you to that decision.

Terry: Okay.

Speaker Change: Got it if I can just squeeze in one last one just a strategy around portfolio management.

Terry: Yes.

Terry: Okay.

Terry: Yes.

Speaker Change: I think Jeff at some point you had indicated that you are committed to areas that you can build an ecosystem and diabetes was one of those areas.

Terry: Yes.

Terry: Okay.

Terry: Yes.

Terry: Sure.

Speaker Change: Looking to separate that just.

Speaker Change: How should we think about your portfolio management strategy going forward. Thank you for taking the questions.

Speaker Change: Sure I mean look we've been as I said before it's a continuous process we've been at it we're going to stay at it diabetes as an end we exited ventilation for different reasons, we had exited ventilation we exited our.

Terry: Okay.

Terry: Yes.

Terry: Yeah.

Speaker Change: Our <unk> business, we exited dialysis and know diabetes and it really comes down to.

Terry: Okay.

Speaker Change: Okay.

Speaker Change: Where do we have.

Speaker Change: Our secular growth opportunities along with a financial profile.

Terry: Yes.

Terry: Okay.

Speaker Change: No.

The higher margins that that works for us.

Terry: Okay.

Speaker Change: We have core strengths.

Speaker Change: Those four.

Speaker Change: There are different degrees, but.

There's other stuff inside the company that is.

Speaker Change: A higher degree of higher margin growth and aligned around our core of course synergies and capabilities and that's what's really driving it.

Speaker Change: And so we're.

Speaker Change: We like where we are like I mentioned before where we're in high growth markets, but we'll continue looking at the portfolio I want this to be both additions and Subtractions, we want to do more deals.

Speaker Change: I think.

Speaker Change: The fundamentals of the company.

Speaker Change: <unk>.

Speaker Change: The best I've seen in my nearly 14 years here and so we are the markets that we're in the technology that we have our operational how we're executing operationally and we're at a point now where I would like to turn up the heat on some tuck in M&A to support these strong market positions.

Speaker Change: <unk>.

Speaker Change: So thats part of the portfolio piece and then on the divestiture side I just talked through that.

Speaker Change: And it's an ongoing process.

Speaker Change: That note.

Speaker Change: Seeing some of the chatter back and forth here on the diabetes deal I do want to clarify the mechanics of that a bit and how this transaction will work because it is it is unique and has unique benefits for Medtronic. So Terry could you just hit on that.

Terry: Sure Yeah. Thanks, Jeff.

Speaker Change: Or not.

Speaker Change: Preferred path that we've laid out really has two steps.

Speaker Change: The first half or so.

Speaker Change: Do an IPO of up to 20% of the shares of the new diabetes company.

Speaker Change: And what that does is it enables us to raise capital to make sure that the new diabetes company is fully capitalized.

Speaker Change: Those proceeds will also cover the costs, but are relative to executing the deal overall.

Speaker Change: It will.

Speaker Change: And our projections will enable.

Speaker Change: Centrally to have some of the proceeds go to Medtronic.

Speaker Change: Potentially apply our capital allocation typical policy. So it provides an opportunity to do a buyback in the first phase.

Speaker Change: Then there is a second phase which would should occur.

Speaker Change: I guess roughly six months after the first phase.

Speaker Change: And that second phase, we do a split and what that means is.

Speaker Change: Post the lockup period, we give an opportunity for medtronic shareholders. Some of which four have entered the stock to participate to the fifth we give them the option either to keep the medtronic stock or to swap for stock and via our shares in the new diabetes companies.

Speaker Change: So the result of that is that it will.

Speaker Change: The share count of Medtronic on a permanent basis so.

Speaker Change: This is the accretive effect that it will have on EPS. So it's not a one off buyback I want to be clear it's a R.

Speaker Change: Permanent retirement of the shares corresponding to something probably around 80% of the shows with.

The new diabetes company.

Speaker Change: So all of this.

Speaker Change: It should be a tax free transaction for U S federal income taxes.

Speaker Change: The goal is to get everything done.

Speaker Change: Within our within the next 18 months, which means that we will fully consolidate the diabetes business through 2026.

Speaker Change: And see the impact of the deconsolidation on the EPS accretion primarily in 2027.

Speaker Change: And that one time EPS, we're not looking at that we see it for what it is it's a onetime bump and we're going to.

Speaker Change: Apply our algorithm on top of that and grow that EPS year over year like we talked about as part of our as our algorithm.

Speaker Change: And then additionally, the.

Speaker Change: The other benefit it does reduce with retired shares does reduce the cash burden on the dividend liability. So that's another benefit of it. So it's a unique structure its unique deal its unique structure and that's why I say, it's a win win.

Speaker Change: So with that look sorry for the.

Speaker Change: Little technical challenge at the beginning of the call. Thanks for your patience on that thanks for going the extra half hour plus.

Speaker Change: And all the great questions and engagement I'm sure there'll be a lot of conversation throughout the day, there's a lot a lot of news a lot of good news I think we're like I said.

Speaker Change: I'm as excited about the setup as I've ever been and we're at the early stages of it. So thanks for all the questions and.

Speaker Change: <unk> talked to all of this is joined today. We appreciate your support and the continued interest in Medtronic.

Speaker Change: I hope that you'll join our our Q1 earnings broadcast, which we anticipate holding on Tuesday August 19th where we will continue to update you on all the progress here so with that thanks for spending time with us today and have a great rest of your day.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Jeff: Yes.

Jeff: Okay.

Jeff: Yes.

Jeff: Okay.

Jeff: Yes.

Jeff: Okay.

Jeff: Yes.

Jeff: Okay.

Jeff: Yes.

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