Geoff Martha:

Hello, everyone, and thank you for joining us today. We delivered a strong finish to the fiscal year with broad strength across our businesses. Each of our four segments delivered mid-single-digit or higher revenue growth and this was on top of a strong mid-single-digit performance last year. Throughout fiscal '24, we delivered consistent mid-single-digit revenue growth with over 5% for the full year. At the same time, we're making progress on our commitment to restore our earnings power, which is evident in our fiscal '25 guidance. We're executing COGS cost-out programs while maintaining pricing and maximizing efficiencies in our operating overhead. And we're translating our earnings into strong and improving cash flow, which we're investing to drive future growth and return to our shareholders. We also continue to enhance our operating model to make the company even more resilient, and our global workforce is embracing a performance-driven culture that is translating into durable results. We made solid progress in fiscal '24, and the momentum we're building into the new year has me very excited for '25. We're at the beginning stages of new product cycles. The runway from the differentiated technologies we've recently launched, along with the innovation we will launch over the next 12 months, give me significant confidence in our ability to drive durable growth. These launches put us in a strong position in some of MedTech's most attractive markets like AFib, Structural Heart, robotics, neuromodulation, hypertension and diabetes. And this is further enhanced as we apply AI across our portfolio. All that to say, we are very optimistic about what we can achieve here in fiscal '25 and beyond. Now let's turn to the details of our Q4 results, where we had a number of standout performances. We look at our businesses in three categories. Established market leaders, Synergistic and Highest Growth. Our Established Market Leader and Synergistic businesses both grew mid-single digits, while our Highest Growth businesses delivered high single-digit growth. Looking first at our Established Market Leaders, combined, they made up just under half of our revenue and grew 5%. The highlight of the quarter was Cranial & Spinal Technologies. After growing 6% or higher every quarter this year, CST accelerated to 9% growth in Q4. I want to say that one more time, 9% growth in Q4. This was driven by an outstanding quarter for capital sales with Neurosurgery growing 14%. We had double-digit revenue growth in Mazor Robotics, StealthStation navigation, O-arm Imaging and Midas Rex powered surgical instruments. And this pulled through Spine Implants and Biologics, with high-single-digit growth in Biologics and mid-single-digit growth in Core Spine, including 8% Core Spine growth in the US. We also continue to see strong adoption of UNiD Adaptive Spine Intelligence our integrated AI surgical planning solution. Here, we're taking data and building deep learning models that see patterns and create personalized outcomes for patients. As I've been sharing for several quarters now, our strategy of combining best-in-class implants and biologics with our best-in-class enabling technology, and then adding our unique intelligence into the procedure, is a winning formula in Spine. We call it the AiBLE ecosystem, and it's a big competitive differentiator for us. AiBLE is creating value for patients. It's winning over surgeons all around the world. And it's changing the competitive dynamics of the Spine marketplace. And it's attracting the best reps to Medtronic to expand our business. Next, in Cardiac Rhythm Management, Cardiac Pacing Therapies delivered another strong quarter of high-single-digit growth. Our Micra leadless pacemaker franchise grew over 20%, driven by the adoption of our latest generation, Micra AV2 and VR2, which improved procedure efficiency and increased battery longevity by 40% to 16 or 17 years. Now we hold the vast majority of share in the leadless pacing space. We also continue to expand our pacing leadership as the only company to offer an approved lead for an innovative alternative form of pacing called Conduction System Pacing. Our 3830 conduction system pacing lead grew over 40%. In Defibrillation Solutions, we're seeing good early adoption of our innovative Aurora EV-ICD, which requires no leads in the heart. Now as more implanters complete their training, we expect EV-ICD sales to ramp and become a significant driver of CRM growth, taking share from the competitor's S-ICD system. Next, in Surgical, we grew 5%. Our Advanced Energy product lines grew high-single-digits on the continued launch of our Ligasure XP Maryland vessel sealer. We've now taken energy share from our main competitor for six quarters in a row. Our Wound Management business also grew high-single-digits as strong sales of our V-Loc barbed sutures also resulted in continued share gains from our main competitor. In Q4, we expanded the capabilities of our Touch Surgery digital ecosystem. Just as our AiBLE ecosystem is transforming Spine, Touch Surgery is transforming laparoscopic and robotic surgical procedures. We collect robust datasets from surgeries, including video, to create models that inject intelligence into these procedures. We've launched 14 new AI-based algorithms on our Touch Surgery Performance Insights platform just at SAGES last month. These first-in-class algorithms automatically analyze surgical procedures from anatomy to critical structures, enabling surgeons to objectively assess performance. We also launched Touch Surgery Live Stream, which enables secure and seamless telepresence, including training and proctoring, from a procedure room to really anywhere in the world. Overall, adoption of our Touch Surgery ecosystem is accelerating, and it's becoming a very important differentiator for our Surgical Franchise. Now turning to our Synergistic businesses, combined, they grew 5% in Q4. Cardiac Surgery, ENT, and Endoscopy all grew high-single-digits. Pelvic Health, Coronary, Peripheral Vascular and Neuromodulation all grew mid-single-digits. In Neuromod, Brain Modulation had an outstanding quarter, growing low-single-digits. This was the first quarter of benefit from the launch of Percept RC with BrainSense technology, the only complete sensing-enabled DBS system on the market. Here, we are seeing a strong uptake and excitement for this exclusive technology, and it's extending our number one leadership position in DBS in both Europe and in the US. Our Neuromod business also received really great news at the end of Q4, with the US FDA approving the Inceptiv closed-loop spinal cord stimulator. The Inceptiv platform is a gamechanger in chronic pain therapy. The device automatically senses and adjusts stimulation, 50 times a second, 24/7, with no required interaction from the patient. And the therapy is delivered from the smallest and thinnest closed-loop SCS device on the market, along with the best 3T and 1.5T full-body conditional MRI access. Given all these advantages will now be carried in the bags of our very large SCS salesforce, we expect Pain Stim to grow above market in the coming quarters. Now let's cover the highlights from the businesses in our Highest Growth Markets. Combined, they made up 20% of revenue and grew high-single-digits. And we expect that their contribution to overall growth will accelerate over the coming quarters as we launch new technology. I'll start this quarter with Cardiac Ablation Solutions, which delivered 21% sequential growth in the quarter, including 23% in the US. This was driven by our Pulse Field ablation products, which are more than offsetting declines in our cryo product line. Q4 marked the first quarter of our PulseSelect PFA catheter launch. It's off to a great start, with strong adoption from both focal RF and single-shot users. As we expand the PulseSelect launch, we also continue to advance our robust pipeline of PFA technology. Last week, US pivotal data for our Sphere-9 focal catheter presented at HRS and published in Nature Medicine. These data were impressive, especially when you consider we were studying persistent AF patients, the most challenging to treat. We showed Sphere-9 has an excellent safety profile, superior efficiency, and numerically higher freedom from recurrent AFib compared head-to-head with the market-leading traditional RF ablation technology. Sphere-9 can perform both PF and RF ablation as well as high-density mapping, all from a single device. And we're looking forward to offering US clinicians this first of its kind wide focal catheter. The output of all this is that we expect our CAS business to continue to accelerate its growth throughout the coming fiscal year as we increase our PFA account training and catheter production to meet the high demand. And over time, we expect our CAS business will reach market growth and then win share. And this will be driven by our PFA launches and the pull-through of our broader portfolio, treating the growing population of patients with AFib. Next, in Structural Heart, TAVR continues to be a very important growth driver for Medtronic. And we grew high-single-digits in the quarter. Structural Heart had two meaningful developments during Q4. First, data from our SMART trial was published in The New England Journal of Medicine and presented at ACC last month. SMART, well, it clearly showed our valve was better than Edward Sapien in small annulus patients who are primarily women. This is a large segment of the TAVR space, about 40%, which is larger than most realized. Now while it takes time to broadly change clinical practice and change customer contracting, we're seeing early signs from many loyal Sapien users that they expect to increase their usage of Medtronic valves, and we're building our business for that growth. The second important development in Q4 was receiving US FDA approval for Evolut FX+, our newest TAVR valve. FX+ has large windows in the frame to allow easy coronary access, while providing the same exceptional valve performance of our Evolut platform. We've just started the limited launch now and are receiving really strong positive feedback from physicians. Full market release is expected in August. So when you consider our four-year low-risk data, our SMART data and our new FX+ valve, we expect this combination to drive our TAVR growth at or above the market, especially as the FX+ launch ramps in our second fiscal quarter. Turning to Robotics Surgical Technologies. We're establishing a strong foundation here and we continue to expand the Hugo system install base. In the US, we are nearing completion of our Urology pivotal trial. We also have now started enrollment in two new indication studies, hernia and gynecology. In addition, our development teams are making progress bringing our advanced surgical technologies to Hugo, such as ICG and our Ligasure vessel sealing technology. In Diabetes, our team delivered another strong quarter, growing 11% globally. In the US, we grew 12% as the rollout of the MiniMed 780G system continues. New US users doubled year-over-year again this quarter. And since launch, we've seen a significant increase in CGM attachment rates, resulting in high-teens growth in US CGM revenue in Q4. Users are choosing our differentiated 780G system for the outcomes it delivers, all with less effort and less burden. 780G is the only AID system that provides both basal insulin adjustments and correction doses every five minutes. It offers flexible glucose targets as low as 100 and features our proprietary Meal Detection technology. This all leads to 780G users achieving a high time in range as well as spending more time in automation with our SmartGuard technology. In Europe, we began the limited launch of Simplera Sync with 780G, and we're preparing for commercial launch this summer. The early users and their healthcare providers are giving us fantastic feedback. Simplera Sync is half the size of our current sensor, is disposable and it's a lot easier to put on. And in the US, I'm pleased to announce that we have now submitted Simplera Sync to the FDA. Look, the turnaround in Diabetes is palpable and now becoming a sustained growth story. We're committed to getting the business back to market leadership. This is why we're investing heavily in expanding indications for 780G system and developing next-generation differentiated technology. This includes durable pumps, smart pens, patch pumps, CGM and software and algorithms. You've seen us execute a steady drumbeat of submissions, product approvals and expanded indications, and this is a cadence we expect to continue. We're the only company building out a complete ecosystem of leading technology for patients who require intensive insulin management. We believe this strategy positions us well and will drive our growth as the market continues to shift to Automated Insulin Delivery and Smart Dosing. Finally, turning to hypertension. We believe Simplicity will become an important growth driver for Medtronic. Since gaining approval last year, we've been training physicians, and we're getting very favorable feedback from both clinicians and patients. We've also been working very closely with both CMS and private payers in the United States, and expect to make significant progress on coverage and payment here in fiscal '25. With over 1 billion people worldwide living with hypertension and every 1% penetration into the target market is over $1 billion of revenue, our Simplicity procedure represents a massive opportunity. Now with that, let's go to Karen for a deeper look at Q4 financial performance and our fiscal '25 guidance. Karen, over to you.

Geoff Martha:

All right. Thank you, Karen. Now before we go to the analyst questions, I'll close with a few brief remarks. I hope you're feeling what we are, that the momentum at Medtronic is building. Momentum that was set in motion by the comprehensive transformation we embarked on a few years ago. We streamlined our operating model. We put in place performance-driven culture, and we change incentives. We brought in new leaders. We improved how we allocate capital. And we started the work of driving significant operational efficiencies to leverage our scale. This transformation is taking hold, and you're seeing it in our results, and just in time for a very important Medtronic milestone. We're celebrating our company's 75th anniversary this year. It was back in 1949 that a medical electronics repair business was started in a garage in Minneapolis. Now certainly, a lot has changed over the past 75 years, but what hasn't stopped from the humble beginnings in that garage is our spirit of innovation and our dedication to delivering life-transforming health technology that alleviates pain, restores health and extends life. As we celebrate our past, we are even more excited about our future. That legacy of invention and market creation continues today and you see it. You see it with our PFA products in AFib, our sensing products in Neuromodulation, our 780G and Simplera Sync system. You see it with our robotics with our Evolut TAVR system, and our Simplicity hypertension procedure and the dozens of new products across our businesses. Our pipeline of breakthrough innovation is impressive. And I'm incredibly excited about the impact that these products will have on patients, on physicians and on our performance. It's these new product cycles, combined with exposure to secular growth markets and an aging population, that put us in a great spot to continue delivering durable revenue growth. And when you add this to our improving earnings power, our strong free cash flow and dividend growth, you have a great formula for creating shareholder value. Finally, I'd like to join Karen in expressing my gratitude to our employees watching today. We've been through a lot of change. But through it all, your unwavering focus on our mission and performance has propelled our company forward. Your contributions matter, not just for Medtronic, but for the millions of patients around the world that depend on us. And as we continue to innovate and grow, I'm confident that, together, we will achieve even greater heights in fiscal '25. 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question.

A - Brad Welnick:

We'll take the first question from Travis Steed at Bank of America. Travis, please go ahead.

Geoff Martha:

Well, Travis, thanks for the question. I'm going to hand this to Karen in a second, but let me just make a few opening comments on this. Look, the earnings power is something we've been working on for years. For example, we started our aggressive global operations and supply chain transformation over three years ago. We've been improving pricing. You see that in our FY'24 results, and we're strengthening this muscle and building on our momentum on pricing going into FY'25. We've made some tangible changes to mix, like exiting our ventilation business and divesting our dialysis business. These are a couple of examples which Karen will go through in more detail. But the point is, I think there's structural -- programmatic structural changes to the enterprise that are allowing us to achieve top line growth, but at the same time growing that earnings power. Like I said, they're structural, they're programmatic and they're giving us the confidence into FY'25 and beyond in terms of that earnings power improvement. So Karen, can you walk through some of the details on this.

Travis Steed:

Great. Thanks a lot.

Brad Welnick:

The next question comes from Robbie Marcus at JPMorgan. Robbie, please go ahead.

Geoff Martha:

Sure. I'll take a stab at this, Robbie, and Karen can jump in if I missed anything here. Well, first of all, look, we've got a lot -- as been pointed out by many of you on the call here, a lot of approvals here recently in really high-growth areas, and we're in the early stages of these launches. But specifically, to answer your question here in FY'25, some of the -- one is in Structural Heart with Evolut FX as it moves from this limited market release in the US to a full market release we're seeing strong uptick. And the SMART trial continues to build -- the SMART trial results in small annulus continues to build on our body of clinical evidence. And we are seeing it changed referral patterns. I mean it's pretty clear here what to do with these patients. And it's a bigger cohort of patients that I think most imagined at 40% of the market. So Structural Heart, TAVR is one. Evolut FX plus the changing referral patterns from SMART. PFA is another one. We've got PulseSelect here. You saw the results with over 20% sequential growth in the business, and we really haven't seen anything from a far yet. That's coming. So PFA is going to be a big one for us. And throughout the year, it's accelerating. And leadless, not only, I mean, look, we -- first of all, we still maintain the lion's share of the market here. And we just launched -- recently launched it and we're continuing to take share. We just launched Micra AV2 and VR2. And the market is expanding. UnitedHealth Group which you guys know is the largest commercial insurer in the US, just updated its policies to cover leadless pacemakers. And so you see us performing strong, new launches in an expanding markets. That's some of the cardiovascular related ones. And again, our EV-ICD as well. So there's a lot for FY'24, in this fiscal year from cardiology. Neuroscience also has a lot. I mean, Spine saw the acceleration. We expect that to continue with the combination of the implants plus the enabling technology plus the AI having a real impact. And this has been something we've been building on. And you're seeing good performance relative to the competition. I mean I know there's a lot of buys out there on Globus. But when you look at apples-to-apples, we grew 9% and they grew 3%. On an apples-to-apples pro forma basis in the year, when you look at the combined NuVasive and Globus, that's three, and we're nine. That's a pretty big gap. And we're -- and we've got four times the installed base, which is really a key to growth in that market now. ENT continues to do well and that's accelerating from the continued adoption of Propel and Sinuva that came from the Inceptiv acquisition. And then, of course, in Neuromod, with the closed-loop Technology, Percept RC, in my prepared remarks, you heard DBS growing double-digits. And then right at the end of the quarter, we got the launch of -- the approval of Inceptiv, which is our ECAPs closed-loop stimulator for pain. We think it's a better product that's on the market with our large sales force, we're going to do some damage there. And then the diabetes, the 780G, US growth continues low-double-digits. I think we're going to continue to surprise people on diabetes and show continued strength. And then, of course, Hugo and Ardian are both really good leading indicators of growth that you'll be seeing later in the year. So I mean there's a lot spread across the businesses. And that's why we have the confidence in the mid-single-digit revenue growth and Karen talked about how that translates to the bottom line.

Geoff Martha:

Yes. And said another way, we're entering the year with a lot less questions too, like risks. Like go back a year ago, China, a lot of uncertainty there. We had a high-single-digit growth for the year, accelerating throughout the year, double-digits in the last two quarters. So these are -- putting these things, some of these questions, risks or obstacles behind us is also, I think, another one. That just the elimination of those plus the addition of the new products is, you add it all up, it feels good going into the year.

Karen Parkhill:

Sure, Robbie. So just on the detail on gross margin, I said we expect it flat on a constant currency basis. We will have some currency headwinds, about 0.5 point of downward pressure on gross margin at recent rates. But as I said, we've got good cost down and pricing offsetting inflation there. And as those currency wins on the gross margin line should abate as we move through the year and be away be gone as we exit the year. As we look at R&D and SG&A, I would say in R&D, we're focused on continuing to invest. It's a critical priority to us. I've talked about it being the one line item that's allowed to grow in line or more than revenue in certain years. And we've been focused on driving efficiencies across the company, including in R&D to enable these levels of investment. Some of the recent portfolio moves we've made like setting up the JV for our renal care or shutting down our ventilator business has allowed us to reallocate investment in our highest strategic priorities in R&D. So that remains an area of investment. And then on SG&A, we are focused on driving continued significant leverage in SG&A. And I talked about the programmatic savings that we've been driving that you're seeing more this fiscal year than you saw last year. We actually drove this kind of leverage in '24. I said it was just masked by the impact of the true-up in incentive compensation. So we're excited about what we're going to continue to drive in SG&A. And then on tax, we expect tax to be a bit of a headwind given global tax reform. We're pleased with the work that we've done to offset some of this, both on the tax line and above the tax line, but we expect it to be about one point higher than we had this past fiscal year.

Geoff Martha:

So, Robbie, when you think about FY'25 on the bottom line, as Karen mentioned, that's going to come from operating margin actions. And it goes beyond expense management. These are programmatic changes we've made in FY'24. And we'll see the full benefit of these are changes that are made in the bank, and you'll see the full benefit of that in FY'25. On the gross margin line, which is super important, those programs are underway. And as Karen mentioned, it's hard to see that because of some of the inflation and FX. But as we get into FY'26 as those abate, you'll see that gross margin start to expand as well. So we think we've laid this out the right way and got the programs lined up against it and have been working on it for some time. And we'll see those benefits accrue over the next couple of years.

Ryan Weispfenning:

Thanks, Robbie. Next question please, Brad.

Vijay Kumar:

Hey, guys. Thanks for taking my question and congrats on a nice sprint here. Geoff, one on your restoring EPS power comments. What does it mean? What is the right base we should be thinking of? Are we thinking of operating margins perhaps getting back to upper 20s? Is there a time frame for that? And maybe some clarification on what that means.

Karen Parkhill:

Yes. And just on restoring the earnings power, Vijay, it means that we are focused on driving that durable mid-single-digit top line. It starts there, but then driving leverage down the P&L to deliver high-single-digit EPS. And you'll see us exit the year of FY'25 doing that, and we're focused on maintaining it and driving it continued from there.

Karen Parkhill:

Yes. We're expecting margins around 26% in '25, and that's on a reported basis or up from where we were, yes.

Ryan Weispfenning:

Thanks, Vijay. Next question, Brad.

Lawrence Biegelsen:

Good morning. Thanks for taking the questions. Congrats on a nice quarter here. Sean, it was great to see the mid-single-digit growth in AF Solutions in Q4 and congrats on the Affera data. How should we be thinking about the AF business before the Affera launch in the US. just remind us in the launch timing there and where you are with supply and your ability to get mapping equipment and personnel out there in the field. Thanks for taking the question.

Lawrence Biegelsen:

Thanks for taking the question.

Brad Welnick:

The next question comes from Pito Chickering at Deutsche Bank. Pito, please go ahead.

Karen Parkhill:

Yes. Thanks, Pito, for the question. You're right. So with the outperformance that we had on the top line, we did have some incremental incentive accruals in the quarter on sales incentive comp. And we've purposely driven investments in our strategic growth drivers as we work to commercialize many of the exciting innovations that we've got heading into '25. We did all this and absorbed the incremental incentive comp and investments while still delivering on our financial commitments and beating the bottom line, but that was it was driven by.

Brett Wall:

You bet. Hey, Pito, it's Brett Wall. Thanks for the question. We think it's very durable. If you look at where this business is going, as Geoff mentioned, we grew three times our nearest competitor in the space and that's on a very large base of business. We are recruiting the best sales reps. We have this technology system with AiBLE that is allowing us to change how spine surgery is being done. We are recruiting physicians, sales reps and our technology is making a difference in the marketplace. We see that as durable for several, several quarters here.

Pito Chickering:

Great. Thanks so much.

Brad Welnick:

The next question comes from Josh Jennings of Cowen & Company. Josh, please go ahead.

Geoff Martha:

Sure, Josh. Thanks for the question. Look, as I think most of you know, I mean, emerging market focus has been something that we've been on for a long time, and has been almost like an independent growth driver for us up until basically COVID, right, when certain markets like China shut down and then you had VBP. So the last couple of years have been choppy on emerging markets, I would say. But those fundamentals are coming back, right? VBP is almost like China is a big one there, right. VBPs are mainly behind us, not totally. You've seen, I'd say we're 80% of the way there. And you've seen the growth accelerating throughout the year for us. The last two quarters, double digits for China. When that last, call it, we don't think the -- there's a little bit of, I'll call it, hanging chads on VBP and the timing of those tenders in some of our smaller businesses in the like aortic or peripheral vascular, and there's a little bit left in neurovascular. When those hit, it could impact the quarter, so going from that double-digits down to mid-single. But we see in any given quarter, mid-single to high-single to double. But China is by and large back and the procedures are strong. And that's a big part of our emerging market business. And we're a combination there of import and local. That also gives us some strength our local product investments. And those local products also can be exported to other parts of the world. So I think the other thing we've done here over the last couple of years is empowered our emerging market leaders a bit more than we had in the past, and they're able to allocate resources, I think, more effectively to -- because the health care is local and these markets have different emphasis on different clinical areas. And some have more cath labs than others, and that makes a difference, for example. And so with our emerging market leaders able to have more influence and control over the resources that's helped accelerate our growth as well. So I think the fundamentals are back, especially in China. Our -- some changes we've made to our -- like our model and our incentives have helped as well and our continued investment in value products. You add all that up and I see this as a continued strength and a continued source of growth for the company over a decade plus. Karen, anything else?

Joshua Jennings:

Great. Just maybe one quick follow-up. Any product launches that we should be thinking about as we build out our -- update our models for fiscal '25, particularly in these emerging markets, but China specifically? Thanks.

Ryan Weispfenning:

Thanks, Josh. Take the next question please, Brad.

Richard Newitter:

Hi. Thanks for taking the question. Congrats on the quarter. Maybe first, just on Spine. You continue to put -- the turnaround in that franchise continues to unfold high-single-digit growth. And following up to an earlier question, I appreciate that you're growing faster than your closest competitor there. But you've talked about potential disruption from recent M&A and spine mergers as kind of being a once-in-a-decade opportunity. So can you comment on what, if any, contribution you've been seeing from the M&A environment to your benefit already and what's out in front? You mentioned rep hire, you mentioned competitive conversions. I'm just trying to get a sense of whether we're at the point where you're seeing those benefits? Or are there still more to come out in front, we could maybe even see these growth rates accelerate?

Geoff Martha:

Yes. I think taking a step back also, Rich, on this, this whole ecosystem approach, capital plus consumables and CST, that's largely informing what we're doing in surgical as well and how you acquire the capital with innovative financing and earn-outs and things like that, this is helping us. And that's what gives us confidence also in our surgical business as we bring in robotics, with Hugo there as well. And the second point I'll make is, look, you're starting to see the turnaround in both diabetes and CST. And the point there is when we focus on these type of opportunities, we're going to get results here, and you're seeing it there. And we're putting that same kind of focus on Hugo and our broader surgical business and our AFib business CAS. These are two big opportunities that we're focused on. And there's a lot of -- I know there's a lot of questions that we get on those two areas. And like CST and diabetes with the kind of focus we're putting on it at the leadership level of the company, I'm confident you're going to see those be growth drivers for the company as we move forward. And you're seeing it now in CAS.

Geoff Martha:

Thanks, Rich. Go ahead.

Geoff Martha:

I'll let Mike Marinaro answer that question. Mike?

Richard Newitter:

Thank you.

Brad Welnick:

Our final question will come from Matt Miksic at Barclays. Matt, please go ahead.

Geoff Martha:

Thanks for the questions, Matt. I'll have the subject matter experts answer those. I'll start with Sean on Simplicity.

Geoff Martha:

Okay. Que, you want to answer the diabetes one?

Matt Miksic:

Excellent. Thank you.

Geoff Martha:

Thanks, Ryan. And thanks for the questions, everybody. We definitely appreciate your continued interest in Medtronic. And we hope you'll join us for our Q1 earnings broadcast, which we anticipate holding on Tuesday, August 20th. We'll update you on our progress against all these strategies and our commitments. So with that, thanks for spending time with us today, and have a great rest of your day.

Geoff Martha:

Hi, everyone, and thank you for joining us today. Our momentum and solid execution continued this quarter as we establish a track-record of consistently delivering mid-single-digit organic revenue growth. Diabetes took another step forward with double-digit growth supported by a return to growth in the US. I'd also note that particular strength we saw in multiple businesses like Core Spine, Cardiac Surgery, Structural Heart and Cardiac Pacing. And we had strong growth across International markets as we expand access to our innovative healthcare technologies all around the globe. At the same time, we've had a rapid cadence of new product approvals and we're continuing to differentially invest in our pipeline of highest growth opportunities. We're advancing innovative core technologies like robotics, AI and closed-loop systems. And with five AI products already FDA approved, we're leading the way in bringing the tech into MedTech. We also continue to make progress on our comprehensive transformation of the company. We're incorporating a performance driven culture that's based on execution, speed and playing to win. And we're leveraging our scale to drive efficiencies. So when you look at our financials this quarter, you're seeing the early results of our focus on restoring earnings power and converting our earnings into strong cash-flow, and we're using that cash to both invest in high-return opportunities and return value to our shareholders. So we're executing and we're delivering, and we expect to continue over the coming quarters and years given our momentum. Our ongoing transformation, our breakthrough innovation, our exposure to strong secular growth markets and our numerous catalysts across the business. Now, before I get into the details of our Q3 results, I do want to mention that we provided a Portfolio Management update this morning on our patient monitoring and respiratory interventions businesses. After a comprehensive review, we have decided to exit our unprofitable ventilator product line. And retain and bring together our remaining PMRI businesses into one business, which we're calling acute-care and monitoring. Now we've determined, it is in the best interest of Medtronic, its stakeholders, the ACM business both near and long-term to exit vents because of its increasing unprofitability and market preference shift to lower acuity ventilators. Now as we exit vents, I want to recognize the strong legacy of our business and the Puritan Bennett brand. And we're committed to serving the needs of our customers and honoring our ventilator service contracts. And I also want to thank the employees in our ventilator business, who played an incredible role during the pandemic to dramatically expand production to get ventilators to the communities around the world that needed them. And while we exit, we do believe that existing manufacturers can meet the customer demand for new ventilators going forward. Now at the same time, we decided to retain and refocus the remaining PMRI businesses. Three main factors have driven this decision. First, we have strong conviction in our ability to lead and drive growth in acute-care and monitoring, given our improved competitive position. And our ability to properly fund this business with savings from exiting vents. Second, the importance of data in this space is changing rapidly. It's becoming the basis of innovation. And this fact further improves our competitive differentiation. And lastly, as a company more broadly, we continue to prioritize profitable, innovation-driven growth and category leadership and ACM can deliver both. That does not mean we will shy away from additional portfolio moves going forward. But the bar is high for any strategic activity that dilutes our focus on our profit and growth. So when you take these decisions together, we're able to provide increased investment for acute-care and monitoring, using the savings from vents and bringing two businesses together, all without creating dilution to our P&L. Now let's get into the details behind our Q3 results. We continue to look at our portfolio in three categories, established market leaders, synergistic and highest-growth businesses. In this quarter all three grew in line with our expected growth algorithm. Our established market leader and synergistic businesses grew mid-single-digits, while our highest growth businesses posted high-single-digit growth and we expect their contribution to our overall growth to further accelerate in the quarters ahead. Now, looking first at the established market leaders, a combined they made up just under half of our revenue and grew 4%. Starting with Cranial & Spinal Technologies. We're driving consistent above-market growth on the continued adoption of our AiBLE ecosystem. CST delivered high-single-digit growth in Core Spine, mid-teens growth in biologics and high-single-digit growth in enabling technology. We had strong double-digit unit growth in StealthStation navigation, O-arm Imaging and Mazor robotic systems. A leading indicator for future growth in this business. We also continue to see strong adoption of UNiD Adaptive Spine Intelligence, our integrated AI-based surgical planning solution. Now with AiBLE, we're offering a complete robust ecosystem of enabling technologies and associated implants for spine surgeons. Our global footprint, which includes over 10,000 systems is over four times greater than the nearest competitor. And with this scale and extensive and rapidly increasing installed-base, we're transforming the spine industry, we are leading the way. As more surgeons adopt our integrated spine technologies and in an environment where there is disruption from consolidation, we're attracting the best sales teams to Medtronic to grow and expand our business. Next in surgical, we grew 3%, our Wound Management business won share growing in the high-teens on the strength of our V-Loc barbed sutures. We also had solid mid-single-digit growth in hernia products, as we won share in synthetic permanent mesh with our ProGrip platform. And as expected, our surgical growth continue to have a modest impact from declines in bariatric surgery. Now we still believe this impact will be temporary as more patients become eligible for surgery, and as patients seek a more permanent treatment to weightloss. To wrap up our established market leaders, Cardiac Rhythm also grew 3%, driven by high-single-digit growth in cardiac pacing, our micro leadless pacemakers continued to post strong results growing 15% driven by the launch of our next-generation Micra AV2 and VR2 devices. We're also benefiting from the adoption of conduction system pacing, an alternative to traditional single or dual chamber pacing. Our 38-30 lead the only one on the market approved for conduction system pacing, continue to grow strong double-digits. In CRM, we also began training and the limited launch of our Aurora EV-ICD. We expect the EV-ICD to reaccelerate our Defibrillation Solutions growth in the coming quarters. As I've shared with you in the past, Aurora is a game-changer in the ICD space. It delivers the benefits of a traditional ICD including similar-size, longevity and pacing features. But without the leads in the harder veins, and these benefits can be realized with one device and only one implant procedure. We expect our advantages will not only displace the competitor's device, we will expand the population far beyond the existing segment and be a strong growth driver for CRM. Now turning to our synergistic businesses, combined they grew mid-single-digits in Q3. And I'll highlight some of the drivers here. Let's start with Aortic which grew 13% on supply recovery and continued momentum of our Endurant AAA franchise. Cardiac Surgery grew 10% driven by strength in Perfusion and Cannula and ECLS Oxygenators, given competitor quality issues and the strong sales in international markets of our Avalus surgical valve. Coronary grew 7%, driven by double-digit growth in both guide catheters and balloons. And we increased our drug-eluting stent share in the US and in Europe on the continued rollout of our Onyx Frontier drug-eluting stent. Now turning to businesses in our highest-growth markets. As I mentioned earlier, together these businesses grew in the high-single-digits this quarter, and we expect their contribution to our growth to accelerate going forward. Now diabetes led the way, growing double-digits on the global adoption of our game-changing MiniMed 780G system. We're seeing strong sequential momentum, growing 5% over the prior quarter. Our customer base is growing sequentially and we're driving more revenue per customer. In the US, we not only returned to growth, we grew mid-single-digits, driven by nearly 50% revenue growth and insulin pumps. We doubled our new users year-over-year, attracting those on multiple daily injection as well as users of competitor systems. Users are choosing 780G for the outcomes it delivers. With intensive insulin users, these outcomes matter. And the 780G is highly differentiated. It's the only AID system to automatically adjust and correct sugars every five minutes. It offers flexible glucose targets as low as 100, and features are proprietary meal detection technology. This leads to high time and range for users. And this type of glycemic control is coming with less effort and burden. As users realize the relief that comes from spending more time in automation with our SmartGuard technology. It's worth pointing out that in a recent third-party survey of nearly 2,000 US diabetes pump users, the 780G scored number-one in overall pump satisfaction, among Type 1 CGM users our Guardian 4 Sensor mirrored competitor sensors in overall satisfaction. And during the quarter, we secured CE Mark for our Simplera Sync sensor for use with the 780G, and we look to begin the limited release this spring. And in US, we're planning to submit the 780G with Simplera Sync to the FDA in the first half of this calendar year. Simplera Sync is half the size of our current sensor. It has a disposable design and is much easier to put on. Now we've been driving the diabetes turnaround for some time, and I got to tell you it certainly feels really good to return to double-digit growth. But we're not finished here, there is definitely more work to be done as we work to bring to market an even more robust ecosystem of differentiated technology for people living with diabetes, including next-generation durable pumps, smart pens, patch pumps sensors and algorithms. And as the intensive insulin management space moves to using smart dosing through either AID or Smart MDI, we expect an acceleration in the growth contribution from our diabetes business. Now turning to Cardiac Ablation Solutions, we delivered 11% growth in International markets, including 9% growth in Western Europe. Our strong International growth as well as our overall performance continues to be driven by our leading Arctic Front cryo solution as Pulsed Field Ablation is still in the early stages. We are seeing though a lot of enthusiasm in the market for our PFA products. In Europe, we're the only company with PFA offerings for both the single shot and the focal segments. And in single shot, we have now started the limited market release of our PulseSelect PFA system here in fiscal Q4. And we're seeing very efficient procedures, and after just a couple of cases. And so the learning curve is really short. The catheter handling and maneuverability has been excellent due to its small shaft and our custom 10Fr bidirectional sheath. Clinicians are also reporting no noticeable muscle contraction with our PFA product, which is beneficial for patient experience. In focal, we continue to ramp manufacturing of the Affera Mapping System and Sphere9 catheter and remain in limited market release in Europe. Sphere9 is the only catheter that can perform both pulsed field ablation and radiofrequency ablation and high-density mapping. It's really an all-in-one catheter. In the US, our CAS business declined in the quarter. We faced the first full quarter of competition in the cryoablation space, which is a space we created and had been the only player. In addition, many customers actually held back purchases as they awaited the launch of our PulseSelect PFA catheter, which is now commercially available. We do expect to improve from here as we roll-out the recently approved next-generation Nitron CryoConsole and PulseSelect, the only PFA catheter FDA-approved for both paroxysmal and persistent AF. And in addition to the European feedback, clinicians have consistently commented on how well it's visualized and how easily it connects to their mapping system. So, we're also making progress in bringing our Affera Mapping System and Sphere9 catheter to the US. With the last patient follow up in our SPHERE Per-AF Pivotal Trial now completed. We expect to see the results at a medical meeting in the first half of this calendar year. With an $8 billion market size, expanding our share in this underpenetrated cardiac ablation space is a big opportunity for us. We expect our growth profile to improve over time. First, moving towards market growth and then winning share as we bring our rich pipeline of innovation to patients you need this technology. In neurovascular this quarter we grew high single-digits, when you exclude sales in China, where the market is subject to volume-based procurement. We continue to have strong double-digit growth and flow diversion globally. This is being driven by our innovative Shield Technology for treating brain aneurysms, which is available on both Pipeline Flex and Vantage flow diverters. In Robotic Surgical Technologies, we continued growing the installed base for our differentiated Hugo Robotic System in International markets. In the US our EXPAND URO pivotal trial continues to enrol and we expect to have first enrollment in our hernia trial very soon. We expect Hugo equipped with advanced digital capabilities to be a meaningful growth driver for us in the years ahead. We believe surgeon preference for our open console and modular design, our leading position in minimally-invasive surgery and instrumentation, our connected digital ecosystem and data-enabled insights along with our world-class surgical training program and partnerships will meaningfully advance the low penetration of robotic surgery around the world. Now turning to Structural Heart, we grew high-single-digits in the quarter, including mid-single-digit sequentially, as we see ongoing adoption of Evolut FX and its improved design and market-leading valve performance. In Europe, where FX was launched for the first full quarter, we grew double-digits. And Japan grew in the low 20s on the continued adoption of FX. I'm pleased to share the news today that we have submitted Evolut FX+ to the FDA for approval. FX+ has three windows in the frame to allow easy coronary access, while providing the same dependable valve performance of our Evolut platform. And we were also pleased to hear that one-year trial results of our SMART Trial will be presented as a late-breaker at ACC, on April 7th. We're excited to see the results and are looking-forward to having both FX+ and the SMART Trial as well as the continued strength of our four year low-risk data as catalysts for our Structural Heart business. Now with that, let's go to Karen for a deeper look at our Q3 financial performance and our fiscal '24 guidance raise. Karen?

Geoff Martha:

Okay, thank you. But before I wrap up, I want to note that Tom Holleran passed away last week at the age of 94. Tom provided decades of leadership to our company. First as General Counsel, next as President and as a Director on our Board for many, many years. In the early 60s, Tom was one of the instrumental people who created our Medtronic mission together with our founder, Earl Bakken. Tom was also a significant leader in the twin cities and beyond and served on several company boards. Our thoughts are with Tom's family as they celebrate his life. Now, before we go to analyst questions, I'll close with a few brief concluding comments on our progress. You see now for several quarters in a row that we're delivering on our commitments with durable mid-single-digit revenue growth. And when you look over the last couple of quarters, we've had a rapid cadence of meaningful innovative product approvals, many of which are just getting started, including EV-ICD, both PulseSelect and Affera in PFA. Inceptiv for SCS, Percept RC for DBS. And of course, our new Simplera Sync sensor in diabetes. And we can't forget Symplicity for hypertension. When you combine these with our investments to enter surgical robotics, along with the strong execution we're having in businesses like spine and diabetes, this is what gives us confidence in our ability to continue delivering durable growth. At the same time, we've been sharing with you our efforts to restore the earnings power of the company. And we're seeing those efforts begin to show up in our financials. And the comprehensive transformation that we've been working on streamlining our operating model, aligning incentives, revamping our capital and portfolio management activities and instilling a performance-driven culture, well, this is also having an impact. These changes take time and we're certainly not done, but it's very encouraging to see our progress and where we stand today. And equally exciting are the catalysts that we see coming, which we believe will lead to significant advancements for patients and value-creation for both healthcare systems around the world and our shareholders. 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question.

Operator:

We'll take the first question from Larry Biegelsen at Wells Fargo. Larry, please go ahead.

Geoff Martha:

Yeah, well, first of all, thanks for the questions, Larry. Maybe I'll start with the CAS one, and then Karen, maybe, Sean and I will take the AFib one and then Karen can talk about the FY'25 questions. So I'm going to phone a friend and tap Sean here in a second here. But on -- but on our AFib business, look we are confident in the investments that we made that are going to bear fruit here. We haven't seen that translate into financials yet, but there's lots of leading indicators here that we're seeing that give us confidence both in you know one in continued I think stronger performance than people might think in cryo. But importantly in PFA for both PulseSelect organic program and then Affera. But Sean, do you want to comment on this a little more specifically for Larry.

Karen Parkhill:

Thanks, Sean. And on FY'25 Larry, I would just start with the fact that we're really pleased with our performance through these last several quarters. Q3 was another solid quarter, our fifth consecutive quarter of solid mid-single-digits. And I would point out that we drove that mid-single-digit growth this quarter off of mid-single-digit comps last year. And that's what we expect to continue into FY'25, you know, we've been working through our planning process, and we expect to wrap that up in advance of our Q4 earnings call. So we'll give our guidance in May. Not ready to give you real specifics, but from a high level, we've had no major changes to the puts and takes for next year that we discussed on our earnings call in Q2. And we're focused on obviously setting up guidance that sets us up for success, prioritizes innovation and allows us to deliver on our commitments. But just on margins and down the P&L, there are puts and takes, we've got inflation that's stabilizing a bit, but it's still higher than historical. Currency is always dynamic, but at recent rates we are facing a decent headwind from FX and we'll just have to see how that shakes out. Global tax reform is likely to be a headwind, but as always, we're focused on driving offsets, where we can. And as you know, we've made, we've made good and real progress on our COGS cost out work, and that started with centralizing our global ops and supply chain, and focusing those teams on putting in place tangible programs that we now have in place to drive that cost-out work. And always, we're continuing to focus on driving pricing as an important lever. We've built a new muscle around pricing and we're just making it stronger and stronger. And then we're always focused on controlling expenses. We've got discipline on our largest driver of our expense, which is our headcount. And we expect that to continue. So really no major changes from what we laid out last quarter.

Geoff Martha:

Okay, thanks, Larry. And I'll remind the analysts, please stick to one question and a related follow-up if needed. Brad, can we take the next question, please.

Robert Marcus:

Great. Thanks and good morning everyone. Wanted to ask on the Patient Monitoring business, the original intent was to try and sell it or spin it, you're now keeping it and exiting the ventilator business. Just maybe walk us through the thought process. What happened in the market and why this is the best outcome for Medtronic? Thanks.

Ryan Weispfenning:

Okay, thank you, Robbie. We'll take the next question please, Brad.

Joanne Wuensch:

Good morning, and thank you for taking the question. There are lot of products that I could ask around. So I'm just going to throw a couple of headline ones out there. Diabetes, congratulations on a return to US growth. Is there a way to peel that apart a little bit on new accounts or new patients versus renewals? And I guess my second question has to do with Hugo. And if you can give us a little bit of a state of an update on how those launches are going outside the United States? Thanks.

Que Dallara:

Yes, look we're very pleased with the progress that we've made every quarter since 780G launch. And we are seeing new patients grow significantly as well as renewals, so both are progressing very well. It will take time to rebuild our installed base, but you can see with the pump growth that we saw in the US, 40% -- high 40s year-over-year, that's going to be followed by consumables and CGM growth as well. So we expect to continue to make progress every quarter, but pretty pleased with how the markets reacted to the product introduction.

Mike Marinaro:

Yeah, and thanks Joanne for the question. So we continue to see very good progress with Hugo outside the United States with an expansion of installations, and countries around the globe. In fact we entered into two new sub-regions in Central and Eastern Europe. And are continuing to see very good response to the things we've talked about previously. So the open console, the very crisp visualization and increasingly very good feedback around our Touch Surgery Enterprise platform, which on its own continue to expand and had a very good quarter with installations both with Hugo and in our broader surgical business. Also as Geoff noted, during the commentary we continued very good progress with our EXPAND URO IDE here in the US and are preparing for our first patient enrollment in the hernia IDE. So, in total, good reception, a sharpening sort of appreciation for the features of Hugo. I think an emergence of the digital ecosystem and an appreciation for that as well.

Ryan Weispfenning:

Okay, thank you, Joanne. And we'll take the next question please, Brad.

Travis Steed:

Hey, thanks for taking the question. Can you hear me okay?

Travis Steed:

Good, good. Hey, Geoff, curious if you could talk a little bit more on the gross margin productivity. Some of the things you're driving there. And can you still get the kind of 2x to 3x annual cost savings on the gross margin line. And last month, at the investor conference you talked a lot about leveraged EPS growth. I'm just curious if that's a comment that applies to FY'25 or if that was more of a longer-term comment?

Karen Parkhill:

Yeah, so just on, I'll just add on gross margins too, we're pleased with our performance that we had this quarter. We overcame a 60 basis point headwind from FX and continued inflationary pressures. And a lot of that was driven by strong pricing, which Geoff talked about. We also did have some continued delays and China VBPs in Aortic and Peripheral Vascular and Stapling. And those VBPs could be coming through this coming fourth quarter or this current fourth quarter and potentially into next year. So that's just something going on in gross margins. You know, as we talk -- as we think about leverage down the P&L clearly we're focused on driving leverage. And I think we talked about it last quarter, Travis, clear leverage is where your bottom-line grows faster than your top-line. We're focused on getting there eventually. We're not ready to talk about that for FY'25, it's still too early for our planning guidance. And I've already pointed out, lots of different puts and takes for next year.

Ryan Weispfenning:

Okay. Thank you, Travis. Next question, Brad.

Vijay Kumar:

Hi, guys. Thanks for taking my question. And Geoff, good morning to you. I guess one on earnings question here. I look at your peers, their earnings have grown versus fiscal '19, 2019 pre-pandemic levels. Medtronic earnings have essentially been flattish. Can Medtronic commit to perhaps above trend earnings growth over the medium-term as you play catch-up, similar to what your peers have done? And I think related to that, Geoff, in the past, you've mentioned about a $400 million drag from investments in RDN, Hugo, where are we on those investments? Are they still a drag, when can those be profitable to the business?

Karen Parkhill:

Yeah, and I would just say on earnings, we've made good progress on driving the earnings part of the company just in this year. I noted that we've been able to increase our guidance on the bottom line by $0.15 at the mid-point from where we initially started the year and that's driven by the strong track-record that we've drove -- that we've driven in the last -- the first three quarters of this year. And we do expect that to continue. Over the medium and long term, we are committed to the right earnings growth. There's no -- there's no debate about that. And we're focused on overcoming the headwinds that we've got over that timeframe and delivering on that growth.

Brad Welnick:

Okay. The next question goes to Matt Miksic at Barclays. Matt, please go ahead.

Geoff Martha:

Yeah, we can now.

Geoff Martha:

Sure. So maybe I'll start with Sean. Before I turn it over to Sean, as I pointed out in the commentary, all the puts and takes in the -- our ablation business, we call, Cardiac Ablation Solutions, our AFib business, we do see an acceleration in this business and even in the fourth quarter here. So -- but I'll turn it over to Sean to talk about AFib and then Aurora.

Geoff Martha:

Que, you want to comment on diabetes?

Ryan Weispfenning:

Okay. Thank you.

Ryan Weispfenning:

Thanks, Matt. I apologize to the analysts that we weren't able to get to. We have time now for one more, Brad.

Anthony Petrone:

Thanks. Can you hear me okay?

Anthony Petrone:

Okay, great.

Anthony Petrone:

Just on -- one condolences on the passing of Tom to the team and his family. And maybe one just going to Structural Heart, maybe just to set up on SMART Study, quick two-part question. One was that ahead of schedule, was it expected to be at TCT instead of ACC. So as the late-breaker getting approved the surprise. And then maybe just high level, how do you think that study will play out once we have the results, it is head-to-head in TAVR, in high-risk symptomatic severe. So just thoughts on how you think that data is received once it's out there, post ACC at that session in the coming weeks? Thanks.

Sean Salmon:

Yes, thanks, Anthony. The completement of enrollment happened in October of '22, so that's a 12-month endpoint for the study, and that pushes you really out of the window for TCT. So, I think we're on schedule, I'd say, we're pleased to have been accepted as a late-breaker at ACC. But that's really as expected I'd say. In terms of the trial itself and how it will be received, I think just right the momentum that we have on data from the notion 10-year data that's low-risk patients out to 10 years showing superior durability of our valve compared to surgical implants, and then our four-year low-risk study with hard endpoint benefits and a widening benefit on serious outcomes like mortality and disabling stroke. And of course going head-to-head in a really important patient population, those with a small analysts. We said that's about 40% of the global market. Really prevalent among women and within smaller patient populations like in Japan for example. So that's, I think it's really important and compelling data, it's a one year outcome which portends long-term outcomes. And I think you know we're excited for the reception of those results. And we do think that, that's a catalyst for growth for us with our really unique position in that particular subset of patients, which is a big chunk of the market at 40%.

Geoff Martha:

Hello, everyone, and thank you for joining us today. Q2 was another good quarter for us as we executed and delivered mid-single-digit revenue growth. The underlying fundamentals of our business are strong, and our growth was broad-based across multiple businesses and geographies, with cardiovascular, neuroscience, and medical-surgical all growing mid-single-digits, and diabetes accelerating to high-single-digit growth. Our new product launches are performing well and driving growth across many businesses. And we look ahead to the back half of our fiscal year, those launches, combined with several recent regulatory approvals, give us confidence in our ability to continue delivering dependable growth. And at the same time, we're executing on our comprehensive transformation, including enhancing our global operations, quality, and supply chain. And we're decisively allocating capital into fast growth medtech markets and fueling innovative technologies in areas like robotics, AI, and closed-loop systems that will drive our growth over the next decade. We're forging the path to durable growth as we execute on the actions needed to create long-term value for our shareholders. So now let's get into the details behind our Q2 results. We continue to look at our portfolio of businesses in three categories

Geoff Martha:

Okay, thank you, Karen. Now I know GLP-1s have been on your mind, as the promise of these drugs has certainly had an outsized impact on medtech stocks, including ours, over the past four months. So I thought it would be helpful to share with you our view on their potential impact on our markets. Now, GLP-1s are clearly an exciting class of drugs for patients, and the select data presented at AHA suggests the potential for a large market. That said, the key takeaway from our analysis is that outside of a modest impact on the bariatric surgery market, which we believe will be temporary, we don't see these drugs impacting Medtronic’s growth outlook, even long-term. This expectation is based on our extensive, science-based work. Like many of you, we've modeled potential uptake and impact based on epidemiology, based on what we've seen historically with other drugs, and based on the relative risk reductions and adherence rates seen in select. So given the select results showed smaller impacts on the more obese patients, we believe that bariatric surgery will remain the gold standard for addressing obesity. We also know that many of the patients that try these drugs do not stay on them for more than a year, likely due to durability, side effects, or affordability, which creates opportunities for new patients to consider surgery. For these reasons, we believe the current headwinds on U.S. bariatric procedures will stabilize over the next several quarters and return to growth by calendar year 2025. And this is modest and manageable within our broader diversified surgical business. Now with diabetes, our customers are primarily Type I, with only 10% of our installed base in Type II insulin-dependent patients. We do expect growth in our Type II business going forward, but Type II pump penetration rates are so low that even using aggressive GLP-1 modeling assumptions, we don't see any meaningful change in our diabetes growth outlook through 2030. Now we'd be happy to discuss this in more detail in Q&A, including our view on the select trial and its potential implications for medtech. Now Before we go to the analyst questions, I'd like to close with a few brief concluding thoughts on our progress. You're seeing in our results that many of the challenges that have held back our growth have largely been mitigated, whether that's diabetes, China, or the issues in our supply chain. And we've established a track record of delivering durable mid-single-digit revenue growth, which we expect to continue in the back half of the fiscal year. We have some really compelling product approvals that drive our growth not only in the back half, but for years to come. There's been a number of things that have happened recently, big things. In the last four weeks in particular, with our TAVR data that gives us just such an advantage in the marketplace, new product approvals like EV-ICD, geographic and indication expansions. And last Friday, we got Ardian approval. This opens up a multi-billion dollar market opportunity for us. And with over 1 billion people worldwide with hypertension, the opportunity is massive. In fact, just 1% penetration of the target market represents over $1 billion of revenue. So we're focused on executing to deliver the top line. And at the same time, we're taking action to run our businesses more efficiently to counter the impacts that inflation and currency are having on our margins. And we've been implementing an extensive transformation to improve the durability of our growth. We've changed our operating model, brought in extensive new leadership, increased capital allocation to our highest growth opportunities, and are implementing a culture based on execution, speed and playing to win. And now we're positioning the company to take advantage of our scale in areas of operations and supply chain, core technology, and how we go to market with large customers around the globe. You're already seeing results from this today. And as we go forward, our focus is on translating the durable revenue growth that we've established into durable earnings power. This is a winning formula for creating value for shareholders and we are laser focused on making that happen. Now 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question.

Robbie Marcus:

Oh, great. Good morning, everyone, and thank you for taking the question. Maybe, I'll ask, both of them upfront. The first, Geoff, you talked about how most of the headwinds are largely mitigated. I look at the guidance implied in the second-half of the year, it's a point of growth or so below the first-half. So maybe just talk about how we should think about the lower growth in the second-half versus the first-half and the reasons for that? And then part b, if I look to 2025 or fiscal year ‘25, The Street has been pretty close to your long range plan of 5% plus on the top and 8% plus on the bottom. Is that the right way to think about next year? Are there any headwinds or tailwinds we should be thinking about here like potential dilution from the monitoring business? Just want to try and get Street numbers, correct as we head into year-end? Thanks so much.

Karen Parkhill:

Yes. Thanks, Geoff and Robbie. So just on the back half, Robbie, our comps do get a little tougher as you know, but we've got a really strong innovation pipeline that we talked about. And that’s driving growth acceleration actually from the first-half to the second-half. We’ve got our diabetes business returning to growth in the second-half, we talked about our extensive pipeline, EV-ICD, PFA, Hugo, Evolut FX,. and now the Ardian approval. And so we're confident in this growth acceleration, and we're confident that, that's going to continue beyond the back half of next year. We think about FY ‘25, you know, it's still early. We have two quarters left in this fiscal year, and we're laser focused on delivering the rest of this year. We're also at the beginning of our planning process, so we're not ready to give specifics. But I do know that all of you are working on your calendar year models for our competitors. So happy to give you some perspective based on what we know today and what we're thinking about. And I'll start with revenue, because we've been focused on consistently delivering that mid-single-digit revenue growth, and you've seen us do that for four quarters now. Our new full-year guide for this fiscal year is 4.75%. And as I mentioned, we've got the strength of those numerous product approvals in big markets that are launching around the world to help drive our back half growth. And, obviously, we're confident that strength will continue into next year and beyond. On margins and down the P&L, there are some puts and takes. We've got inflation stabilizing a bit, but it's still higher than historical, but again, it's stabilizing. Currency is dynamic, and as you know, the U.S. dollar's been strong. So we're likely facing a headwind from FX, but we'll see how that shakes out. Global Tax Reform will likely be a headwind. But as always, we're focused on driving offsets everywhere that we can. Geoff talked about it, we've made progress on cost of goods sold and cost out, starting with centralizing our global ops team. We have work to do, but those teams now have tangible programs in place to drive that work. And we'll continue to drive pricing as an important lever. We've built a new muscle on pricing, and our focus is to keep it strong. We've been working hard on controlling expenses, and that includes maintaining discipline on our largest driver of our expense, which is our headcount. So I hope that gives you some color on just the puts and takes. But to summarize, I'll remind you what hasn't changed? And that's our long range commitment of driving durable mid-single-digit top growth, of driving leverage down the P&L, of driving a strong free cash conversion and a growing dividend, which all combined ultimately, delivers a double-digit total shareholder return. What has changed though is our progress toward that commitment. You've already seen us at mid-single-digit top line. We've talked about the strong pipeline that gives us confidence in its durability. And, obviously, we've talked about the programs we have in place. Whether it's in headcount management, COGS, cost down, pricing discipline, and they're all levers to help us offset the headwinds and over time, establish that same durability on the bottom line.

Geoff Martha:

Thanks, Robbie. We'll take the next question please, Brad.

Travis Steed:

Hey, everybody. Congrats on a good quarter. Karen, just to sum up all those comments on FY ’24. I heard the leverage down the P&L comment. It sounds like based on what we know today, unless there's some kind of major surprise, there's still a good ability for -- there to be enough offsets to drive EPS growth faster than revenue growth. Just want to kind of make sure that's a fair comment? And then and, Geoff, I did want to follow-up on your thoughts on GLP-1s, post the Select trial. First, if there's any color you'd add on, on the Select trial and the cardio endpoints in diabetes prevention that maybe didn't mention in the prepared remarks?

Geoff Martha:

Hey, Travis. Good to hear from you. You know, on GLP-1s so, you know, so first of all, I just want to make it clear that, like, we see that it's an exciting class of drugs with a large opportunity. And I'm sure just like you, you know, I talked to many patients that are benefiting from these drugs, from a weight perspective, from mental health perspective, it's pretty amazing. You know, that being said, we've done a lot of work, and outside of the near-term temporary impact on bariatric surgery market we don't see these drugs impacting our growth outlook, even in the long-term. And then and on the bariatric piece, that as we mentioned, it's a small part of our revenue, low-single-digits, and the rate of decline has stabilized there, and I think we see that, that coming back here in the coming year even. So, we did do a lot of work here, and I'm going to you know, it was, like I said, science based and looking at epidemiology and really digging into Select. And what we do have on the call here, our Chief Medical Officer, Dr. Laura Mauri, and I thought I'd, you know, maybe kind of call her in here, bring in a relief picture here on that question to talk a little bit more about Select and kind of what we're seeing out of that. So, Laura, can you can you chime in here?

Travis Steed:

Yes. Well, what thank you, Laura. You know, and while we're on the topic, maybe on that one. I mean, Q -- any comments on diabetes relative to GLP-1?

Geoff Martha:

Alright. Thanks, Que. I mean so I mean, Travis and others, I mean, as you can see, you know, beyond the fact that the areas that we get questions on Type II intensive, hypertension, AFIB, obesity, besides the fact, these are just woefully underpenetrated from a medtech perspective, we've done all the analysis that, you know, Laura and Que just gave you the tip of the iceberg of. And that's why, you know, we're -- we feel strongly that, we don't see these drugs impacting medtronic's growth, medium or long-term. So I hope that answers your question and then some.

Geoff Martha:

Thanks, Travis. Next question, please, Brad.

Larry Biegelsen:

Good morning. Thanks for taking the questions. Just two product questions for me. One for Sean on Ardian congratulations. Don, can you talk about the ASP, you know, the reimbursement pathway and the ramp? And for Brett, you know, the slides talked about completing the six month primary endpoint on the pivotal TITAN 2, IT&S trial. Does FDA want 12 month data? Could you talk about the form factor here? And how you see IT&S being positioned relative to sacral neuromodulation? Thank you.

Sean Salmon:

Larry, thanks for the question. As you know, the ramp is going to be highly gated by reimbursement, and we've been working that in parallel with the regulatory approval all along. We see the payer split to be roughly 50:50 between Medicare and commercial payers of private insurance, and we've been, of course, pursuing both local and national, coverage determinations from Medicare. And that's an important input into the private payer decisions that will happen state-by-state and payer-by-payer. We've been in contact with those private payers, the largest ones, certainly. And the response so far has been very open and willing to engage with us to understand our data. And what's particularly of interest to them is the long-term data, which is atypical for a new therapy like this to have thousands of patients out three years from the therapy. So that's encouraging. Of course, you know, the Medicare population is the most important for us and to your question, that there are these alternative pathways that have been established by Medicare for temporary add-on payments, both in the inpatient setting with NTAP or the new technology add-on payment, as well as in that outpatient setting for transitional pass through payments or TPP. And given that the simplicity spiral system is a point through device designation. We will avail ourselves to those pathways for approval, over that two and three year period as we work to establish more permanent, reimbursement for like a national coverage determination. On that front, there is this T-Set pathway or the transitional coverage for emerging therapies that we're going to avail ourselves to. It's not finalized yet. We look forward to, that ruling coming out. We've seen the commentary has been largely, very, very positive along the way and in line with what we had been suggesting both to CMS and the Biden administration as well as other stakeholders along the way. And of course, CMS is also considering other refinements to covers with evidence development programs that we've used successfully as we've established many, many therapies as you know, including TAVR, Micra, ICD, CRT devices over time and we'll avail ourselves to those as well. So rest assured, we're working hard on reimbursement. It's really critical for the ramp of this technology, and we're getting a degree reception so far.

Brett Wall:

Yes, absolutely. Larry, good to hear your voice. Thanks for the question. The TITAN 2 study, was a six month follow-up, with the actual study design, and we will follow those patients for 24 months. So we'll be following, those patients that have, additional data as well. The form factor is about 2.8 cubic centimeters, really about the size of roughly half a stick of gum and it fits, in the ankle same place for everyone. This opens up a significant patient population. There's over 4 million people in the United States, that have discontinued their dual drug therapy or failed two drugs, and they are now receiving incontinence devices at home, adult incontinence products as opposed to seeking additional therapy. This is a 15 minute procedure. We now have established Category 3 reimbursement, and we'll be utilizing that to further, develop out the reimbursement profile. This particular product and technology opens up a substantial population that is not seeking help or seeking a therapy right now. We're in a modular submission. We'll be submitting the data here shortly, and this is an exciting new technology that opens up this field and will contribute to its ongoing growth.

Geoff Martha:

Yes. Thanks, Brett and thanks, Larry. [Operator Instructions] We’ll take the next question, please Brad.

Vijay Kumar:

Fantastic. Hi, Geoff. Thanks for taking the question. I had two product-related questions here. First one, just at a high level, right? You had three pretty meaningful product approvals in the past few months between EV-ICD, PFA and your RDN approval, right? You're already doing mid-singles. With all of these incremental growth drivers coming in, is that now a mid-single plus? I'm just curious how you're thinking about this new product opportunities.

Vijay Kumar:

And maybe my related product question here, perhaps for Mike on robotics here. You mentioned installed base went up in Europe. Any sense on what the size of that installed base is? In this U.S. clinical trial, you said it's on plan. But any sense and when this trial might end, perhaps timing for an FDA approval?

Vijay Kumar:

That’s it. Thanks, guys.

Ryan Weispfenning:

Yes, thanks, Vijay. Next question, please Brad.

Kristen Stewart:

Hey, thanks for taking my questions. I was just wondering if you could provide any updates on the patient monitoring respiratory interventions spin?

Kristen Stewart:

Perfect. Thanks very much.

Brad Welnick:

The next question comes from Matt O'Brien at Piper Sandler. Matt, please go ahead.

Ryan Weispfenning:

Yes, we can hear you, Matt.

Geoff Martha:

Yes. Thanks for the question, Matt. And yes, clearly, I think you're seeing asset prices come down. And it's a tough operating environment. I think they're going to continue to come down, in the mid-cap space in particular and below. And we definitely have the capabilities, as you pointed out, to do bigger deals. All that being said, our focus still is on tuck-ins. And we've got a lot of big organic -- or now organic programs between just Ardian, the robot, PFA, diabetes, I mean, the list goes on. There's a lot of big organic pipeline going up against these high-growth markets that we're really focused on. And I would augment that with the appropriate tuck-ins. So I'm not going to -- I don't think we're really focused on, and we're not going to signal that we're focused on any kind of bigger deals at this point.

Brad Welnick:

The next question comes from Rich Newitter at Truist. Rick, please go ahead.

Geoff Martha:

Sure. Thanks for the question, Rich. I'm going to ask Karen to answer that one.

Rich Newitter:

Thank you.

Brad Welnick:

Final question comes from Shagun Singh from RBC Capital Markets. Shagun, please go ahead.

Geoff Martha:

Well, I'll ask -- thanks for the question. I'm going to ask Mike to take the Hugo question and I'll follow-up on that one.

Geoff Martha:

Yes, and just to build on that, I mean, we talked about -- we call it robotics, but I would argue it's broader than that. And this isn't the first time we're out to change the dynamics of an entire market. That's what we're doing in the spine market right now. And it goes beyond robotics. It gets into interoperative imaging or visualization navigation, presurgical, AI-based planning. And like with -- and Mike's role here with Hugo, we've got Touch Surgery Enterprise, which is a leading digital platform with AI-driven digital platform. And like you're seeing in spine that's played out over the last couple of years, it's changing the competitive dynamics or what's important in the marketplace for our physicians and even patients. And you're seeing the impact as what you're seeing in the spine market as many competitors. It takes a lot of expertise. It takes a lot of capital to make this happen. And you're seeing competitors fall by the wayside. And I know there's been a big one here recently with NuVasive and Globus coming together, and we'll see how that plays out. But I believe we've demonstrated an ability to do this. And this is the kind of experience. And I know we're up against a big competitor in Intuitive in the surgical space, but we believe we've got a lot to offer here. And we are going to drive a change in how people think about the space and the competitive dynamics, and we're really confident and excited about that. So with that, I think we'll bring the call to close. Thanks for sticking with us a little longer. And I really appreciate the questions and the support and continued interest in Medtronic. And we look forward to updating you on our continued progress on our Q3 earnings broadcast, which we anticipate holding on Tuesday, February 20. With that, thanks for joining us today. And for those in the U.S., I'd like to wish you and your families a very happy Thanksgiving this week and enjoy the holiday and stay safe. Thank you.

Geoff Martha:

Hello, everyone, and thank you for joining us today. We are pleased with the strong start of our fiscal year. We executed and delivered another quarter of mid-single-digit organic revenue growth. Our solid results were broad-based with each of our four segments delivering 6% growth driven by execution, innovation, and much improved underlying fundamentals in our markets and supply chain. We also continue to make great strides on our comprehensive transformation which is designed to get at the root of what has held back our growth. We're executing large-scale functional improvements to global operations, supply chain and quality. And we're also decisively allocating capital, particularly to our programs and fast secular growth markets as well as focusing our R&D investments on technology megatrends like robotics and artificial intelligence that will drive growth in our industry over the next decade. And at the same time, we remain focused on our ongoing portfolio management efforts. And taken together, we expect this continued focus on executing our transformation will ensure durable top and bottom-line growth and create value for our shareholders. So let's turn now to the details of our Q1 results. We had another strong quarter of growth from our largest businesses. Cranial and Spinal, Surgical and Cardiac Rhythm, these businesses have durable established leadership positions. And combined, they made up just under half of our revenue and grew 6% organic. Starting with Cranial and Spinal technologies, we had another great quarter, growing 6% globally and 8% in the US, driven by our market-leading Aible ecosystem. We're seeing growth in both neurosurgery capital equipment and the associated pull-through of our best-in-class spinal implants and biologics as surgeons continue to adopt Aible. Neurosurgery grew 5%, including double-digit growth in Mazor robotics and high-single-digit growth in StealthStation navigation. And Spine and Biologics grew 7% globally and 9% in the US. These results demonstrate our successful strategy of offering surgeons a differentiated and innovative ecosystem including our AI-enabled surgical planning platform and patient-specific customized implants, along with imaging, navigation and robotic technologies. Now moving to Surgical, we grew 7%. Supply continued to improve and this drove high-single-digit growth in Advanced Surgical Technologies. And we had particular strength in Advanced Energy as we continue the rollout of our LigaSure XP and cordless Sonicision 7. Cardiac rhythm grew 5% with Mid-single-digit growth in defibrillation solutions diagnostics and Cardiac Pacing. And now within Pacing, we had strong mid-teens growth in our Micra leadless pacemaker franchise and we launched our next-generation Microdevices AV2 and VR2 in the US. These tiny 0.8 CC devices have a battery life of 16 and 17 years, respectively, 40% longer than our previous generation and well beyond average battery life of competing products. We're also seeing EPs rapidly adopt conduction system pacing as an alternative to traditional single or dual-chamber pacing. Our 3830 lead is the only one approved for conduction system pacing in the US and it grew 45% in the quarter. Looking ahead, we're preparing to launch the Aurora EV-ICD later this year. Aurora is a game changer for the ICD space. It delivers the benefits of a traditional ICD including the same size, longevity and pacing features, but without leads in the heart or veins. Turning to our synergistic businesses. There were several notable performances this quarter. Cardiac Surgery grew 8% again this quarter, with strength in perfusion and cannula. Our Aortic and ENT businesses both grew double digits, driven in part by improved product availability. Peripheral Vascular grew mid-single digits with low double-digit growth in drug-coated balloons and high single-digit growth in superficial vein therapy. Neuromodulation grew mid-single digits in both Pain Stim and Brain Modulation, driven by new implants of Intellis with DTM and Percept PC with BrainSense. And just last week, we received CE Mark approval for our next-generation spinal cord stimulator, Inceptiv, which will be available in Europe in the coming months. Inceptiv incorporates closed-loop therapy with ECAPs, the result of decades of Medtronic R&D, to unlock the ability to listen and respond to signals along the spinal cord. Both our largest and synergistic businesses had really strong quarters. And our businesses that compete in high secular growth med-tech markets, they did as well. All combined, these businesses made up 20% of our revenue and grew in the high single digits in Q1. We continue to disproportionately invest in these businesses, and we expect them to become a larger part of our revenue mix and be large contributors to our durable growth in the future. Starting with Structural Heart, transcatheter valves grew 11% globally, including 12% growth in the US and 21% growth in Japan. We continue to see improvements in the TAVR space and adoption of our differentiated Evolut FX valve. Evolut FX combines enhanced and predictable valve deployment with industry-leading durability. And next Monday, we're looking forward to the presentation of the NOTION 10-year data at ESC, which will look at the durability of the CoreValve and Evolut valves compared to surgery over a decade. In Neurovascular, we grew mid-single digits when you exclude China where the market is subject to volume-based procurement. Global growth was fueled by continued strength in flow diversion. We're seeing strong adoption of our Shield technology for treating aneurysms, which is available on our Pipeline Flex and Pipeline Vantage flow diverters. And Cardiac Ablation Solutions grew 5%. And as you know, Pulse Field Ablation has become one of the most anticipated technologies in medtech. And we will be leading the way in bringing PFA catheters to market for both focal and single-shot segments. We're continuing the limited market release in Europe for Affera mapping and ablation system, including our Sphere-9 focal catheter. Sphere-9 can perform both PFA and RF ablation and delivers high-density mapping, all from the same catheter. Turning to our single-shot PFA catheter, PulseSelect, we filed for approval with US FDA and expect to be one of the first companies with a PFA catheter in the US market. With our PFA catheters and the Affera map nav system, combined with our leading Arctic Front crowd solution and differentiated AcQCross Transseptal Access System, we're poised to become a more meaningful player in the fast-growing $8 billion EP ablation space. In Robotic Surgical Technologies, we increased our installed base as we continue the international rollout of our differentiated Hugo robotic system. And we've activated new sites in our EXPAND URO US pivotal trial which continues to progress to plan. We expect Hugo to be a meaningful growth driver for us in the years ahead, given its differentiated value proposition, our leading position in minimally invasive surgery and the low penetration of robotic surgery around the world. And in Diabetes, we had a good quarter as we continued to see very strong demand for the MiniMed 780G AID system in markets around the world. 780G is a true second-generation AID system and is the only one with five-minute adjustments in auto corrections and Meal Detection technology. We're getting great feedback that users are feeling a difference within one to two days. And our real-world evidence indicates that 90% of users are achieving or exceeding their glycemic targets when using our recommended settings as well as getting burden reduction in their diabetes management. And this differentiated value proposition is showing up in our results. Non-US developed markets grew 18%, our highest growth in four years, driven by both 780G adoption and increased CGM attachment rates. And in the US, we're seeing great results and momentum from the 780G launch. First, the launch drove low 30s growth in our US durable pump sales. Second, we're seeing our prescriber base rapidly expand. Since we last talked to you at ADA in late June, we've had a 30% increase in unique prescribers with now over 13,000 since launch. Third, we've had over half of our 770G installed base upgrade or place an order for the 780G since launch. And not only is demand coming from our existing installed base, but we're also getting competitive conversions. And finally, we're seeing very high CGM attachment rates in the 780G installed base, which will drive our economics and gives us confidence in accelerating growth. So the turnaround in Diabetes is real and underway, and I am pleased with the progress the team is making. And we're just at the beginning of this inflection point for the business. As we shared with you at our ADA investor briefing in June, we see the intensive insulin space moving from primarily standalone CGM today to one that is smart dosing through either AID systems or smart MDI, and we are well positioned for this trend. We continue to invest heavily in next-generation durable pumps, smart pens, patch pumps, sensors and algorithms with multiple programs under development. And importantly, we're the only company assembling this complete ecosystem of differentiated technology for people living with diabetes. With that, I'll turn it over to Karen to discuss our financial performance and our fiscal '24 guidance raise. Karen?

Geoff Martha:

Okay. Thank you, Karen. Now before we go to the analyst questions, I'll close with a few thoughts. First, Q1 was a strong start to our year and we're establishing a track record of delivering dependable mid-single digit growth. We're executing and bringing innovation in the market. We're making progress in countering the impacts that inflation and currency are having on our margins. And we expect this to lead to stabilization and then improvement over time. We're also seeing improved underlying fundamentals in our supply chain and in our markets, across our businesses and geographies. And like I said earlier, we're at the beginning of an inflection point in our Diabetes business and we're seeing strength in our established market-leading businesses like CRM and Spine. And with our pipeline, we have several important growth catalysts that we expect to come to market over the coming quarters. So we're on the right path and building momentum. And underneath all of this, what may be less visible to you are the steps we've taken to transform the company, tackling the root causes of what have made our growth less dependable in the past. We're ensuring a performance-driven culture, partially driven by a number of new leaders in the company. We're advancing our capital allocation and portfolio management priorities to take advantage of high-growth opportunities. And we're executing on the programs that we believe will lead to scale advantages, whether that's in our now centralized global operations and supply chain organization or in how we go to market with large enterprise customers around the world or in how we're leveraging core technologies and implementing new innovations across our businesses. Now to accelerate this last area, we created a new position of Chief Technology and Innovation Officer and hired Ken Washington this past quarter to fill that role. Ken was recently at Amazon, where he led consumer robotics, and before that, was Chief Technology Officer at Ford Motor Company and VP of the Advanced Technology Center at Lockheed Martin Space Systems. I look forward to sharing more details in the quarters ahead on how Ken is leading our efforts to leverage technologies like robotics and AI across the enterprise, which we believe will lead to new, differentiated therapies for patients and better experiences for our customers. So this is an extensive transformation. Yes, there's still work to be done, but you're seeing some of the benefits in our results. And you should expect to see more of this over time as we continue to work toward delivering durable revenue and earnings growth, which, combined with a growing dividend, is a winning formula for creating value for our shareholders. Now let's move to Q&A where we're going to try to get to as many analysts as possible. So we ask you to 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 and the Investor Relations team after the call. I also want to note that today is the first time we have Mike Marinaro, who runs our Surgical and our Endoscopy businesses joining us for the Q&A. Now Bob White's focus is on the PMRI businesses as we separate, which is a heavy lift. And we have Mike focused on the other two MedSurg businesses. So today, if you have questions on Surgical or Endoscopy, direct them to Mike. And PMRI questions can go to Bob. With that, Brad, can you please give the instructions for asking a question?

Vijay Kumar:

Yeah. Thanks for taking my question. And, Geoff, congrats on good print here, good execution. Maybe my first one on Diabetes here. The 30% US growth numbers here, I think that's a revenue number. Do you know what the comp growth number was in US and how much of this was existing customers? How much of this growth is grown by existing customers upgrading the 770G users update versus new customer adds?

Que Dallara:

Yes. Thanks, Geoff. Thanks, Vijay. We're really pleased with the momentum we're seeing in the US so far. In terms of what's driving the low 30s AID growth in the US, it's both our existing installed base of 770G users that have upgraded. We've had more than 50% of that cohort upgrade or in the process of upgrading. But we're also seeing growth coming from new patients. We've had the highest new patient growth in three years and that's coming from MDI as well as competitive switches.

Geoff Martha:

Yeah, you asked about the anticorruption and VBP so -- in China. So look, on the anticorruption, I recognize that there are concerns out there. And we're actively monitoring the situation, which is fluid in nature. But I'll say thus far, we're not seeing any material headwind for our business. And it is kind of pivoting to -- there's a linkage to VBP. It's worth noting that we -- you can argue that we're somewhat a bit insulated from some of this anticorruption with the coverage under VBPs, I mean, volume, in this case, is contracted. And with the hospital pricing is determined with VBP and we're less reliant on the field team and distribution, which has also allowed us to take cost out to mitigate the price impact. So no impact at this point from the anticorruption campaign that you read about. And then regarding VBP, I mean this -- it's -- we feel it's been -- it's a 2.5-year kind of impact here and we're -- for us, that fully -- that impact kind of fully takes effect in this fiscal year, FY '24. It's all in our guidance. As Karen pointed out in the commentary, the China growth this past quarter was at 4%, which is slightly higher than we expected, still well below what it used to be, but -- and where we think it's going to get back. As we kind of lap this -- these last couple of VBP areas in FY '24, we expect this revenue to get back to historical high single-digit, low double-digit growth for us. So hope that answers the question. This is something, as you look forward, it's a multibillion dollar of revenue for the company that over the last couple of years has been negative, more recently flat, now starting to get positive. And as we -- as we get out of FY '24, again, we expect a tick up in this growth. So that's coming.

Ryan Weispfenning:

Yeah. Thanks for the questions, Vijay. We’ll take the next question please, Brad?

Robbie Marcus:

Great, good morning. Congrats on a good quarter. Maybe to start for Geoff or Karen, as we think about guidance for the rest of the year, you raised the organic sales growth from the low end of 4% to 4.5% up to 4.5%. You did 6% in the first quarter. So maybe just walk us through why growth is going to decelerate for the rest of the year? And what are some of the factors affecting what could drive you above that? Thanks.

Robbie Marcus:

Yeah. Great. Thank you. Maybe just one more on margins. Margin expansion or the upside in the quarter came from gross margin. SG&A, I know you had some reductions in the head count. So as we just try and think about operating margins for this year and going forward, how should we think about how much more there is to come out of SG&A and how much more upside there is in gross margin moving back towards where we were pre-COVID? Thanks a lot.

Ryan Weispfenning:

Okay. Thank you, Robbie. We’ll take the next question please, Brad.

Larry Biegelsen:

Good morning. Thanks for taking the question. I guess two for Sean, given the upcoming events here with the Symplicity adcom and then the Affera pulse data this weekend. Sean, how are you feeling about the Simplicity panel tomorrow? And if we see a positive recommendation, help us think about timelines for approval and the ramp in the US for renal denervation. And second, we're going to see the Affera pulse data this weekend as well. You guys are growing mid-single digits, looks like a little bit below the market right now. What should we be looking for in the Affera pulse data? And how are you feeling about being able to grow your AFib business at or above the market going forward? Thank you.

Larry Biegelsen:

All right. Thank you.

Brad Welnick:

The next question comes from Danielle Antalffy at UBS. Danielle, please go ahead.

Geoff Martha:

Sure. Thanks, Danielle, for the comments and the question. And yeah, it is interesting. First of all, I'd say it's an important class of drugs and like you were monitoring to see how the GLP-1 therapy is being adopted. That said, our initial work indicates minimal impact to our business. When you -- bariatric -- the one area we've seen some modest impact is bariatric, but this is really a small impact and this is a relatively small part of our Surgery business. And we are hearing from -- the work we do is our internal analysis plus dialogue that we're having with physicians around the world. We actually operate obesity clinics in Europe as well. And they're talking about, longer term, this could actually bring in the bariatric space more patients into the funnel. Short term, we've seen some impact, again, modest and bariatric is a relatively small part of our surgery business. Longer term, we'll see how it plays out. There's a bit of optimism there though. No impact in Type 1 diabetes, which is the vast majority of our Diabetes business. And this is overall, I just don't see GLP-1s having a material impact on our business and medical device therapies at large. That's what our work is showing us at this point.

Geoff Martha:

Thanks. Look, I think this is AID for insulin-dependent patients, whether they're Type 2 or Type 1 is pretty under-penetrated. And we see way more upside there than headwinds.

Brad Welnick:

The next question comes from Travis Steed at Bank of America. Travis, please go ahead.

Geoff Martha:

Well, first, before I turn it over -- before I turn it over to Sean, we are -- if you go back the last couple of quarters, we are pleased with how our TAVR business is performing relative to competition and how the new valve is performing and also the pipeline for the future. But Sean, why don't you give the specifics on that question?

Travis Steed:

That's helpful. And then the PMRI spend, I assume the time change is more because spends take longer than sells. But maybe some other comments on when we could see the Form 10, can you confirm the operating margin profile of that business is still kind of slightly higher than overall Medtronic? And then do we need to wait for this to get through to see more on the portfolio management side of things? Thank you.

Geoff Martha:

And the business continues to perform well. Like Karen said, the margin profile has remained strong. And actually, the competitive dynamics, particularly in the patient monitoring side of it, have probably improved a bit in our favor. So it's a good business, and I think with more focus, I think these numbers can even improve.

Ryan Weispfenning:

Thanks, Travis. Next question please, Brad.

Matt Miksic:

Hi, thanks so much [Technical Difficulty] question and congrats on a really strong quarter across the board. There's a lot to talk about, but maybe one question on diabetes for Que and then one follow-up. So just would love to hear how things are progressing with some of the programs that you talked about at ADA, the next-gen sensor and integrated testing and the patch pump that you're in the process of acquiring here? And then if I could on that, Geoff mentioned something about the next-gen AID pump and I know it's way early to even ask the question, but just curious if you are ready to share any hints about that? And then one quick follow-up, if I could.

Matt Miksic:

That's helpful and understandable. Just one -- the follow-up is on sort of seasonality. You've seen July year and I know there's been a number of questions across the sector, given what we've seen over the last [Technical Difficulty] year-to-date in surgeries and procedure volumes and so on. Just any sense of what kind of summer quarter we should expect, which for you [Technical Difficulty] August, but softer than usual, seasonally normal. How would you describe what you've seen in July and what your expectations are built into your fiscal Q2 here? Thanks.

Matt Miksic:

That’s fair. All right, thanks so much.

Brad Welnick:

The next question comes from Chris Pasquale at Nephron. Chris, please go ahead.

Geoff Martha:

Sure. Well, first of all, I think for the medical device industry, the kind of the intersection of traditional biomedical engineering with these digital technologies, whether it be connectivity or data analytics techniques like AI and deep learning, robotics, these are all just a huge opportunity for the industry. This is -- and these are areas that we intend to lead in. AI specifically, we've got a number of businesses that have first-of-their-kind, AI-powered solutions that have received regulatory approval by the FDA and other regulatory bodies around the world. And what we're seeing here is just improved -- from the AI is just improved outcomes and access. And it's the -- when you combine the AI with good data, not just quantity, but the quality of data and that data is labeled properly, we're seeing the ability to even personal -- like evolve and improve the efficacy over time through the AI and even personalize it. The FDA has approved a couple of products for us in the Cardiac Rhythm space, in Spine, in GI, where you have like what they call a predetermined change control plan where you're allowed to kind of improve that efficacy over time. And some of the businesses that are impacted, like I mentioned, our GI are now calling Endoscopy space, where we have AI in the colonoscopy, you're kind of redefining traditional colonoscopies where the AI is finding polyps that physicians were missing. And this is a significant amount of polyps and it's obviously good for patient outcomes because there's a high correlation to cancer -- colon cancer from these polyps and it's also economically aligned with the hospital's interest as you find more polyps and remove them. Another area is in our Spine business. This is an industry that's being completely redefined by enabling technology -- transformed and redefined by enabling technology. And we talk about robotics and imaging and navigation and powered instruments, but AI is a key piece of this and we have thousands of surgeries in our AI -- that’s powering our AI algorithm. And with each -- and Spine is a complicated surgery, especially whether it be degen, or [for sure] (ph), deformity complex cases. Highly reliant on surgeon training. And the AI is really just improving outcomes here, especially when it's combined with enabling technology. I could go on, cardiac rhythm in our monitoring, our LINQ monitoring business there, we are cutting down false positives for -- in detecting AFib by 50% using AI, and that's creating multiple hours of productivity for these clinics around the country and given -- so and this really driving the deployment of that technology. So I'd say it's a huge opportunity. It's a differentiator. I mentioned we hired a new head of technology, Ken Washington, to really help us scale this across all our businesses and better partner with some big tech companies. We've talked about our partnership with NVIDIA. And in the end, I'd say what we're going to see over the next couple of years is you may not be replacing -- AI is not going to be replacing surgeons, but I'll tell you what, surgeons who use AI will be replacing surgeons that don't and we are going to be right in the middle of that mix.

Karen Parkhill:

Yes. Thanks for the question. As you've heard us talk about, we have been building a pretty strong muscle around pricing. And we're focused on ensuring that we price for the value that we deliver. Typically, historically, pre-COVID, we would experience up to 200 basis points of pricing pressure every year. And we've been able to neutralize that these last couple of years, including this quarter. We obviously have had VBP pressure this year, and last year, we were able to neutralize that as well at the total company level. By quarter, it may not be fully neutralized depending on how VBP hits us. But we do believe that this pricing muscle that we've built is going to be lasting. And we fully intend to continue to track, monitor, talk about pricing, so that even as we move into a lower inflationary environment, we're focused on continuing this pricing muscle that we've built.

Ryan Weispfenning:

Okay. Thanks Chris. We’ll take the next question please, Brad.

Jayson Bedford:

Good morning. Can you hear me okay?

Jayson Bedford:

All right. Thanks. So not to make this a call all around gross margin, but I did have a question. You mentioned stabilization. I just wanted to put a little context around that. What is the expected gross margin for fiscal '24?

Jayson Bedford:

Okay. And just, Karen, the drop down for the rest of the year versus first quarter levels, revenue is higher. Is this just strictly a function of the VBP impact hitting more in the back half?

Jayson Bedford:

Thank you.

Brad Welnick:

The next question comes from Joanne Weunsch at Citi. Joanne, please go ahead.

Geoff Martha:

Sure, Joanne. Yeah, good to hear from you. Thanks for the questions. I'll take the first one, and then I'll turn it over to Mike Marinaro to handle the Hugo questions. I think on procedure trends, we're -- as Karen mentioned, I mentioned in the commentary, they're definitely improved, and I'll start in the US where we're up about 5% or so. But across the board, we're seeing very good procedural trends, and we're largely back to pre-COVID or better. pre-COVID levels are better. As you know, over the last, I don't know, 18 months or so, the rebound has been, I'd say, held back a bit by staffing issues and those have seem to have abated. And like I said, we're getting pretty broad-based procedural pickups and are back to pre-COVID or even better levels. And outside of the US, I'd say it's even stronger. In Western Europe, high single digits. The recovery in Europe is definitely in full swing. Latin America, high teens. And just our -- like our emerging market base when you got to pull out -- if you pull out China, which is VBP, like I said before, this is -- we see the kind of the stabilizing year here for VBP FY '24. And then as you get into FY '25, you get back to some higher growth in China like we've seen before. But if you take out China and Russia with the sanctions, we're in the teens -- the mid-teens and -- high teens actually in emerging markets. So emerging markets trends are strong. I mentioned Latin America as a standout, Western Europe. So pretty good trends. We're not seeing like this -- at least in the areas we're in, I've heard some area like orthopedics, there's been a pent-up demand. But we're not seeing it in the areas we're in. It's been a steady flow versus like a pent-up demand. So I think that's good news for the industry. On the Hugo questions, I'd like to turn it over to Mike Marinaro, who runs our Surgical business, which includes Hugo and also our endoscopy or formerly called GI business reports up to him as well.

Geoff Martha:

Yeah, really look -- excited about the setup we have for our business. It's a very large business for us that where the supply capacity has been an issue, that's in a much better spot. The robots out there might just walk through kind of indication expansion and geographic expansion and update on the US trial. And I like the set up and the competitive dynamics going forward over the next couple of years. We got two major competitors, one with robot, one without. And we're feeling pretty good about where we are with Surgery.

Brad Welnick:

Our final question comes from Patrick Wood at Morgan Stanley. Patrick, please go ahead.

Geoff Martha:

Well, let me just start off by saying, I appreciate your question on supply chain. It's been a big focus area for us. And I know a couple of thousand people at Medtronic that do think it's a pretty sexy place to be and are pretty proud of the work that we're doing. To answer the question, I'll turn it over to Karen on the cost question.

Patrick Wood:

Amazing. Thank you.

Geoff Martha:

Well, first of all, thanks, everyone, for the questions. And as always, we appreciate your support and your continued interest in Medtronic. And we look forward to updating you on our continued progress on our Q2 earnings broadcast, which we anticipate holding on Tuesday, November 21. With that, thanks again for joining us today, and have a great rest of your day.

Geoffrey Martha:

Hello, everyone, and thank you for joining us today. We had a strong finish to our fiscal year with our fourth quarter top and bottom line results coming in ahead of expectations. Our accelerating organic revenue growth was broad-based with mid-single digit organic growth in cardiovascular, neuroscience and Medical Surgical and double-digit growth in our Diabetes business in Western Europe, where we're selling our latest generation of products. Now across the company, our growth was driven by procedure volume recovery, supply improvements and innovative product introductions. And despite continued margin pressures from macroeconomic factors like inflation and foreign exchange, we delivered adjusted earnings growth this quarter. And we reduced costs while also continuing to invest heavily in R&D to drive future growth. We're confident in delivering durable revenue growth in the year ahead as our recent revenue headwinds dissipate and we drive execution across our businesses. So let's turn to the details of our Q4 results. Our growth in the quarter started with a strong foundation from our largest businesses, Cardiac Rhythm, Surgical and Spine plus ENT. These businesses have durable established leadership positions. And combined, they made up half of our revenue and grew 5% organic. CRM grew 5% and one share in the quarter as we continue to see robust double-digit growth in our micro-leadless pacemakers franchise. Earlier this month, we received FDA approval for our next-generation leadless pacemakers, Micra AV 2 and VR 2, which extend the battery life by 40% to a projected 16 and 17 years, respectively. And in high power, we released data on our enhanced EVICD algorithm last weekend at HRS, and we're preparing to launch our Aurora Extravascular ICD later this year. In Surgical Innovations, we grew 4% or 8% when you exclude China given the provincial stapling VBP impacts in the quarter. Surgical procedures continue to recover and we regained share on supply improvements. Our advanced energy products, in particular, benefited from improving supply, growing high-teens, and we also launched our LigaSure XP and continued our rollout of the cordless Sonicision 7. Now Cranial and Spinal Technologies continue to deliver solid growth as well, growing 5%, including 6% growth in U.S. Core Spine. Look, we're seeing success from our market leading ecosystem of able, enabling technology and the associated pull-through of our best-in-class spinal implants. From our AI enabled surgical planning platform to our patient specific spine implants to our imaging, navigation and robotic technologies. Spine surgeons around the world are increasingly attracted to our differentiated and innovative solutions. So it was a solid quarter for our largest businesses. We also had a strong Q4 in our businesses that compete in high secular growth med tech markets. All combined, these businesses made up about 20% of our revenue and grew high-single digits organically, and we're feeding these businesses with the investments that they need. And as they grow, we expect them to become a larger part of our revenue mix and drive our durable growth going forward. So starting with Neurovascular, which is now annualizing at over $1.3 billion, we grew 13%. We saw broad strength across the business in both ischemic and hemorrhagic stroke with double-digit growth in several categories, including aspiration and flow diversion. Stroke is the number two cause of death globally and combined with low therapy penetration, we see a large opportunity for neurovascular to make a difference in the treatment of stroke, driving meaningful growth with strong margins for years to come. In Structural Heart, we grew 9% organic. We're seeing improvements in the TAVR space, especially in the latter part of our quarter post-spring holidays. We won TAVR share in the U.S. on the strength of Evolut FX, which combines industry leading durability with enhanced and predictable valve deployment. In Japan, our Structural Heart business grew low double-digits driven by the mid-quarter launch of Evolut FX. Next, in cardiac ablation solutions, we grew 5% and made significant advances in our pipeline during the quarter. In March, the impressive results of our landmark PULSE AF pivotal trial, studying our single-shot PulseSelect PFA catheter were presented as a late breaker at ACC and published in the journal circulation. The trial had strong efficacy and safety results in both persistent and paroxysmal patients. We filed our PMA with the FDA, and we expect to be one of the first companies with a PFA catheter in the U.S. market. We also received CE Mark in March for our Affera mapping and ablation system, including our Sphere-9 catheter, and we began our limited market release. Sphere-9 can perform both PFA and RF ablation as well as high density mapping, all from the same catheter. So with our Sphere-9 focal catheter and our Pulse Select single shot catheter, we have the full breadth of PFA catheter technology, from PFA to our Affera MAP NAV system to our leading Arctic Front Cryosolution and AcQCross Transseptal Access system we're assembling a leading ecosystem of technologies and we're poised to become a much more meaningful player in the fast growing $8 billion EP ablation space. In Surgical Robotics, we continue to have positive momentum with the rollout of our differentiated Hugo robotics system in international markets. And we're making progress bringing Hugo to the U.S. as we execute our Expand URO pivotal trial. We also saw a meaningful acceleration in sales of our Touch Surgery Enterprise solution, which is the first AI powered surgical video, analytics platform for the operating room. With Hugo and touch surgery, we're bringing innovative solutions to surgeons around the world. And given the low penetration of robotic surgery and our strong position as a global leader in the surgical space, we expect to deliver meaningful growth over the coming years. And in diabetes, it was a big quarter for us, as our warning letter was lifted and we received FDA approval of our MiniMed 780G system with the Guardian 4 sensor. These products drove double-digit growth in Western Europe and we're very excited to begin shipping them to U.S. consumers next week. We expect our U.S. Diabetes growth to ramp over time as our existing customers come up for renewal and as consumers switch to Medtronic. Health care professionals and people living with diabetes are really going to appreciate the innovation we're delivering, particularly the advanced meal detection technology. And just this morning, we announced our intent to acquire EOFlow, the manufacture of the EOPatch, a tubeless, wearable and fully disposable insulin delivery device. The EOPatch is already available in Europe, South Korea and the UAE. And this will accelerate our speed to market in the fast growing patch pump space with a product that has demonstrated manufacturability. In addition, upon close, we'll work quickly to integrate our clinically proven meal detection technology algorithm, which is in the MiniMed 780G system into the EOPatch and seek marketing authorization. Look, we have not blinked when it comes to diabetes, and we're shifting to offense as we continue to invest heavily in assembling our ecosystem of durable pumps, smart pens, patch pumps, sensors, algorithms and customer service with multiple programs under development. Having this ecosystem is really important because we believe the market will move from CGM first to automated insulin delivery, and we are well positioned for that trend. We look forward to updating all of you on these growth opportunities at our diabetes, analyst and investor briefing next month at ADA. Now turning to our synergistic businesses. There were several strong performances in the quarter. Our aortic business grew in the mid-20s as product availability and AAA share improved. Cardiac surgery had a great quarter, growing 8% with strength in perfusion and cannula sales. Cardiac Diagnostics had a high-single digit growth on the continued adoption of our differentiated AI-enabled LINQ II insertable cardiac monitor. And earlier this month, our LINQ II AI technology, which we call AccuRhythm AI was awarded the 2023 MedTech Breakthrough Award for the best new technology solution in monitoring. Our GI business grew 16% on procedure volume recovery and continued strong adoption of GI Genius, another one of our AI-enabled products. GI Genius uses AI during colonoscopies to help physicians detect polyps. We also announced a strategic collaboration in the quarter with NVIDIA and Cosmo Pharmaceuticals to allow third-party developers to train and validate AI models that can eventually run as apps on the GI Genius platform. We're excited about the potentially game-changing solutions this could offer for GI physicians and their patients. Now before I go to Karen, I want to note that we continue to focus on the transformation of Medtronic. As we reduce complexity, enhance our capabilities, drive efficiency and improve portfolio management and capital allocation, all with the goal of positioning the company for delivering durable growth. And the progress we're making is beginning to show up in our financial results. I shared with you last quarter that we were planning for significant cost reductions. We began to execute those plans last month, which included reductions in our global workforce. Well, these are never easy decisions, and I am mindful of the personal impact across our teams. These actions were necessary and are allowing us to increase our investments in innovation. They also help us to mitigate the inflationary and foreign exchange impacts on our profitability. Look, we're making progress enhancing our global operations, supply chain and quality systems, which is all yielding results and we continue to advance our active portfolio management processes. We closed on the divestiture of our Renal Care Solutions business during the quarter and we continue to work on the separation path for our patient monitoring, and respiratory interventions businesses. Now there's still work to be done, but we're making progress setting up the company to deliver durable growth and strong returns. With that, I'll turn it over to Karen to discuss our financial performance and give guidance for fiscal '24. Karen?

Geoffrey Martha:

Okay. Thank you, Karen. Now before we go to analyst questions, I'll close with a few thoughts. It was a good quarter with our broad-based growth, our Surgical Innovations business is back to mid-single digit growth tied to the improvement in our supply. And importantly, surgeon commitment to our differentiated products remained strong. We continue to see growth in Neurovascular and Structural Heart, and we're nearing an inflection point in both Diabetes and Cardiac Ablation Solutions, and both businesses have an arsenal of technologies in their pipeline. At the same time, we're seeing durable growth across our other businesses and importantly, no business is losing momentum. Behind the scenes, as I've shared with you since becoming CEO, we've really been pushing a comprehensive transformation to set up Medtronic to deliver durable growth and create value for our shareholders. Now it hasn't been a straight line. Some of that's market factors and some of that's been on us. But we've made progress, and you're starting to see this in our results. We've been making the necessary improvements to ensure long-term durability of our growth. We're investing in our key capabilities like global operations, IT, quality, and supply chain to turn our scale into an advantage. We're picking the markets where we're doubling down and redirecting investments to our most important R&D programs. And we're shaping the portfolio, adding tuck-ins and divesting non-core assets. All of these actions are establishing the strong foundation that will allow us to drive sustainable and consistent growth. Now there's still work to be done, but we are on the right path and we're confident in the choices that we've made and continue to make. We're executing. And you're starting to see this all come together with our study improvement. Finally, I'd like to join Karen expressing my sincere gratitude for our employees around the world. You've played a huge role in creating some of the world's most meaningful health care innovations and improving the lives of millions of people every year. Thank you. Thank you for all that you do to serve our Medtronic mission every day. And I'm confident that our best days are ahead of us. Now let's move to Q&A, where we're going to try to get to as many analysts as possible, so we ask you to 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question?

Karen Parkhill:

Thanks so much for the question, Robbie. When we were thinking through our guidance for the fiscal year, we thought it was prudent to start the year with guidance that sets us up for success. Geoff talked about it. We have a lot going on at Medtronic and we're intensely focused on delivering on our commitments that we -- and while doing so while we continue to transform the company. We got -- we have puts and takes, as we always do on the year, but there are no new issues from a growth perspective in FY '24. When we look at our geographies, China remains a drag from lingering VBP, but that's improving over last year. And we're really encouraged by our second half '23 performance of 5% and as we look early in May, we see good momentum. Our supply chain continues to improve. Our markets continue to recover. We've got a pipeline that we're really excited about and it's weighted towards the latter half of the fiscal year, then we've got 780G in the U.S. We've got the full suite of cardiac ablation with Affera. We've got our robot continuing to ramp. And we've got Guardian that's hopefully coming to market, too. So we don't have any new material risk to call out. We feel really good about the coming year. On EPS, we've highlighted for the past few quarters that we've got significant headwinds to EPS growth. That includes mid-single digit inflation that's impacting our gross margins. I talked about currency of approximately 6% as a headwind and interest and tax is around 1%. So when you combine all of these factors, they are a double-digit headwind to EPS growth. But our guidance is just a mid-single digit decline. So we've driven significant savings that allow us to protect and fund important R&D and help offset those savings just like we've talked about. As we think about our long range plan, we've got work to do to improve the bottom line. And that's going to be impacted by gross margin, which is obviously impacted by inflation and currency. But over time, we expect our gross margin to stabilize and then improve. And that's going to be one of the key things that will help drive our bottom line into the future. But longer term, our goals have not changed. We're just going to take it one year at a time.

Karen Parkhill:

Yeah. So Robbie, the comps are easier in the first half, but our pipelines weighted towards the back half. And so when we take all that together, you can think about Q2 through Q4 growth rates all being on about the lower end of our full year guidance. That's how we're thinking about it right now.

Brad Welnick:

We'll take the next question from Vijay Kumar at Evercore ISI. Vijay, please go ahead.

Geoffrey Martha:

Sure, Vijay. Thanks for the question. Good to talk to you. Well, yes, procedure volume was a tailwind for us relative to prior quarters. I mean, Europe, in particular, recovered well and was out in front. U.S. lagged a little bit, but it began to accelerate in April and May. So like I said, Western Europe, high-single digit growth and staffing issues improving, and beyond that better product availability resulted in a strong back half of the Q4 for us in Western Europe. But clearly, staffing issues getting better. Emerging markets grew 11%, mid-teens if you exclude China and then Japan was mid-single digits. So we're seeing around the world a strong pickup. Like I said, U.S. lagged, but we saw a strong April and into May, a pickup there. So that's how I'd characterize the procedures. If you kind of look at it -- beyond geography, if you look at it maybe by therapy or product area for us, surgical and GI procedures and MedSurg as well as TAVR procedures and some more electric procedures like Pain Stim picked up, I think, due to improved staffing. CRM was notable with good initial implant growth and for Medtronic specifically coming out of a replacement headwind. Maybe one outlier might be coronary still behind in procedure volume recovery, but that's how I look at it by geography and by therapy area. Overall, we're pleased with all this, like I said, overall, pleased with the acceleration and all this is kind of confirmed with what we are seeing in April and even into May.

Geoffrey Martha:

Yeah. I'm going to let Karen answer that one.

Vijay Kumar:

That was good. Thanks, guys.

Ryan Weispfenning:

Thanks, Vijay. Thanks. Brad, we are taking next question, please.

Larry Biegelsen:

Good morning. Thanks for taking the question and congrats on the strong finish to the fiscal year here. Yeah. I'd like to ask about the EOFlow acquisition, specifically the time lines for Q, the time lines for an AID system in the U.S. and Europe and I thought we saw that a competitor wanted injunction in Germany recently. So what made you comfortable with the IP, and I'd love to hear at a high level, any thoughts on how this product is differentiated? And just, maybe for Karen, maybe any update on the patient monitoring spend. I think people are interested to know how you're going to use the proceeds to offset dilution, we've seen media reports to be potentially selling the business and depending on the tax basis and the use of proceeds, that could be dilutive as well. So how should we be thinking about this? Thank you.

Que Dallara:

Good morning. We're very excited about the EOFlow acquisition. As you know, we're very familiar with the technologies in the tech space, as well as the manufacturing challenges there. From a strategic perspective, we are the only integrated player in a diabetes technological space with both CGM, our algorithms as well as dosing systems and very well positioned for AIG. So our portfolio is very holistic. We want to meet patients where they are, and this acquisition accelerates the introduction of an AID patch into the market, and we expect to be the next to market with a differentiated product. So our intention is to combine EFOs device with the meal detection algorithm that you see today in the 780G system along with our next-generation sensor and expect that to be a very differentiated offering that's next to market. In terms of the -- so I think that addresses the product differentiation in time. In terms of the IP, as you know, I think it's been disclosed previously that we have a covenant not to sue with Insulet. And so we're very confident about our IP position. And this is a very differentiated device with Medtronic algorithms and sensor technology. So we're very confident in the product differentiation in the market.

Karen Parkhill:

Yeah. Thanks for that question, Vijay. We continue to work on the separation of patient monitoring and respiratory interventions. And when we announced the separation last year, we said that a spin sets a high bar because it minimizes the tax leakage and it allows our shareholders to participate in what we believe is going to be a significant value creation opportunity. We also said we would consider alternatives and a sale as possible because we do believe that this NewCo could be an attractive asset to many parties. But we also said that the spin bar is really high because it's got attractive attributes for it. And any divergence from this spin path would really need to provide a greater value creation opportunity. But whatever course we take will be in the best interest of our shareholders, how we manage dilution on this will ultimately be determined by the potential transaction, and we'll provide details as we have them at a later date.

Ryan Weispfenning:

Thanks, Larry. Appreciate the questions. Just a reminder to the analysts to please stick to one question and one follow-up if needed. Brad, we will go to the next question please.

Matthew Miksic:

Hi. Can you hear me, okay?

Matt Miksic:

Great. Thank you. So – thanks for taking the questions, and congrats on a nice finish to the year and kind of navigating through the resetting of the bar here for fiscal '24. Just wanted to -- given that we came out of HRS last weekend, and there was a fair amount of news flow and presentations for Medtronic. Obviously, the big -- the main topic of the meeting was PFA, as I think everyone knows. I know you expect to be one of the first to the U.S. market. If you could talk maybe a little bit more about how you expect to -- the time line for that is big as you can? And then how you expect to sort of navigate this perceived pressure on the single shop market? And I have just one follow-up, if I might.

Sean Salmon:

Yeah, Matt. We really like our position. As you know, we've maintained a CE Mark for our point-by-point solution in Europe, and we just filed the PMA for our single-shot product in the United States and we'll have a data readout sometime next year. We completed enrollment for ferrous persistent (ph) trial in December. So we expect that, that one-year endpoint will be reached mid of this fiscal year. In terms of how we see the shift, obviously, we've got 85% of the market to play in, in point by point. And we have the other segment that we've been really strong in with Cryo at 15%. And I think as we initially launched into Europe, that's a much bigger opportunity for us as we go to point-by-point solutions. And when we come to the United States being among the first in PFA solutions and all of those are going to be anatomical or single shot. I think we'll garner interest from that 85% of the market that really wants to get to PFA, and they don't need to do that. So I think while you have the potential for some erosion of your base in anatomical, you also have the attraction of having the very first PFA offering coming in for anatomical solutions that will pull interest from 85% pool. And of course, when we launch globally, we'll have the opportunity to play in a bigger swing pool. So I think the concerns about cannibalization, I think are overblowing frankly. There's far more greenfield for us than I think people are appreciating.

Ryan Weispfenning:

Yes. Thanks, Matt, definitely .

Que Dallara:

Thanks, Geoff. We're very excited about Sinclair. It's an all-in-one disposable sense. It's half the size of the Guardian for sensor, no process, compared to our current sensor technology. As you know, we've submitted to CE Mark last year by summer and also to the FDA earlier this year. We hope that, actually, we've got to go through the regulatory process, but we're anticipating that this fiscal year, we should be able to get approval. So that's the best we have in terms of timing.

Geoffrey Martha:

Thanks, Matt for the question.

Travis Steed:

Hey. Can you hear me okay?

Travis Steed:

Maybe, Karen, if you can talk about some of the cost savings stuff that you built into this 5% to 5.10% EPS growth, and we've estimated like $0.50 offset from the cost savings side and then some of the R&D investments. Just a little bit more color on some of the puts and takes and what you have built in on the EPS guide? And then on FY '25 EPS, should we think about that as more of a transition back to the 8% plus or just kind of early comments on how to think about the out-year EPS.

Geoffrey Martha:

Getting back to Karen's earlier the answer, earlier part of the answer on the cost actions. I think we're focused on striking the right balance, as you mentioned, between kind of offsetting or mitigating some of the headwinds out there that affected EPS with the durability of our revenue growth and think about reinvestment in some of the top areas in med tech, right, diabetes, robotics, EP, PFA. So these are exciting opportunities. We've got to balance mitigating some of these headwinds with making sure that we're making the right investments and she walked through the R&D growth and to make sure that our revenue is durable.

Geoffrey Martha:

Que, you want to take the EOFlow question?

Geoffrey Martha:

Thanks, Que. Sean, quick response on the TAVR question.

Ryan Weispfenning:

I appreciate the questions, Travis. Just a reminder to the analysts one question and one related follow-up if needed. Brad, next question please.

Ryan Weispfenning:

Hey, Matt. Yeah. I think we've got a problem with your audio, Matt. We'll check that and come back to you. Can you please take the next question, Brad.

Peter Chickering:

Good morning, guys. Can you talk about PFA adoption trends in Europe, specifically, the interplay between PFA growth, PFA pricing versus losses from quite a market share, so when you put it all together, I guess, how was the European depletion growing for you guys?

Sean Salmon:

Yeah. We've done well. I mean it's early, early innings for our PFA offering. As you know, we're just really trying to scale up both training and operations for that. So a little too early to comment on that. I'd say there's been really continued underlying growth just ablation in general continues to grow of all flavors, but of course, PFA will grow the fastest. We'll keep you appraised as to how that's going. We're seeing really good strong trends, though within Europe and overall, is a very robust market.

Sean Salmon:

I don't think we're giving share ends, but we think we're in good shape with the momentum we have with FX, and we look to launch the FX into Europe in the back half of the year. So that's a -- and we've done well in the United States. We done in Japan., products is excellent and being well received.

Ryan Weispfenning:

Thanks, Peter. Next question, please, Brad.

Matt Taylor:

Thanks for taking the question. Can you hear me okay?

Matt Taylor:

Okay. I was hoping you could talk a little bit more about just reading that release. And it talks about 1% dilution to earnings for the first few years and neutral to accretive thereafter. So I guess I was hoping maybe you could touch on the run rate of the business today and how you assume that ramps revenue wise over the next couple of years. What are some of the assumptions that go into that dilution assumption for the first couple of years. And what are some of the key guideposts that we should be looking for out of that business as you acquire it.

Karen Parkhill:

Yeah. So the key here is to integrate this patch pump with our algorithm. And so we'll be spending on that and that's what drives the dilution. That's the key for the first few years. And Que, you want to talk about run rate from there?

Que Dallara:

I think the critical milestone to watch out for is really some development work to integrate our algorithm. We have that ready as part of the 780G system. We're obviously going through our sensor approvals today, so that will be variable. So there's a bit of development work, not a lot, the outflow has proven manufacturability at scale. The manufacturing exists. And so it is a relatively straightforward integration and approval process to get that to market. Once that AID patch system is available in market with our next-generation CGM, we think, obviously, we go through the commercialization and launch process, but we believe it's a very strong offering and second to market with this wearable disposable patch solution.

Ryan Weispfenning:

Thank you, Matt. Next question, please Brad.

Rich Newitter:

Can you hear me?

Brad Welnick:

The next question comes from Shagun Singh of RBC Capital Markets. Shagun, please go ahead.

Geoffrey Martha:

Yes.

Geoffrey Martha:

Well, thanks for those questions. I'll start with the China one and then get to the M&A. On China, yeah, we've heard about the -- some of the COVID -- I wouldn't call it an outbreak, but signs of COVID in China, we haven't felt any impact of that at this point in talking to some of our health care -- some of our customers, they're not at this point too worried about it, but we're going to watch that closely. In terms of our overall view on China, I was just there -- and look, the economy is back and the health care procedures are back. Obviously, we're still working through volume-based procurement. But it's going to be the largest healthcare market in the world. And it's an area that we're investing in. And as we talked about before, this volume based procurement, we believe, by the end, as we exit this next fiscal year, as we exit this FY '24, we believe we'll have been through that reset from volume based purchases and procurement rather, and then grow from there and get back to that double-digit growth and we've adjusted by taking out some costs in China, now that the business is more contracted, it's allowed us to take out some sales and marketing costs. And so it's still a profitable business for us that we'll get back to that double-digit growth. Obviously, we're going to have to watch the geopolitics here between the two countries, but it's encouraging some of the more recent conversations the two countries are having. And we spend a lot of time on this in China with the U.S. government and are optimistic that this will continue to be a good market for us. In terms of M&A, yeah, obviously, the EOFlow acquisition looks like one of our -- is one of our traditional tuck-in type of deals in a high-growth area that we have a strong position in. You asked about -- and that we still have a lot of appetite for those type of deals, I would say we are focusing on those deals that we believe are going to have a bigger impact on Medtronic, and deals like the Intersect ENT deal, deals like for ENT, deals like up the Affera deal in our API business for PFA that had mapping and navigation and some PFA technology. And this EOFlow fits right into that, that kind of mold, bringing a patch technology to our diabetes business. In terms of divestitures, I would say nothing has changed. I mean we just completed the dialysis joint venture with DaVita. So we're excited about that and closed out officially, and that's off and running called, is the new company's name, and we're working through, as Karen walked you through the patient monitoring and respiratory interventions separation, which is a large body of work. And in terms of those type of large-scale divestitures, the analysis and the thought process continues to look at our portfolio and see where opportunities are. But we're pretty focused right now executing on that one from an execution standpoint. And as you look forward, our appetite, our focus is still these tuck-in deals along -- and think of the three examples I gave, and that kind of size could be a little bigger than that, a little smaller. Those are the focus areas. If something bigger comes along, we'd look at it, but it's not what we're hunting for, if you will. So I hope that answers your question on M&A. I don't know, Karen if you have anything to add or I covered it.

Shagun Singh:

Thank you so much.

Brad Welnick:

The next question comes from Rich Newitter at Truist Securities. Rich, please go ahead.

Geoffrey Martha:

Sure. Thanks for the question, Rich. I'm going to turn it over to Brett in a second and talk about the details of capital and some of the other Spine trends. But I'll just start with one is, we've seen this trend, and I don't know if I call it disruptive, it's been moving for a number of years now, this trend of the value proposition being in the industry, centering around enabling technology, navigation, imaging, robotics, powered instruments, AI-based surgical planning and bringing that all together, we brought that together in our ecosystem called Able. You are now seeing the impact of that in the marketplace. And you're seeing what it's doing to the marketplace around consolidation. I mean this is where the business is heading, the industry is heading, and it takes a lot of technology prowess and it takes a lot of balance sheet to do this, and it's having a big impact on consolidation that you're seeing. And as we move forward, we're really excited about our position. But Brett's been overseeing this business for a number of years now and has a -- and I'll let him talk about more detail on the value proposition and also get into the capital dynamic.

Ryan Weispfenning:

All right. Thanks, Rich. Thank you, Rich. Next question please.

Joanne Wuensch:

Good morning and nice way to end the year and start the next. Briefly, my memory is, as you had two patch pump products in development. Are those going to be shut down or are those also continuing along? And I'll ask my second question. Hugo, could you sort of give us an update on where the launch is outside the United States? And should we be thinking about this as number of robots in the field or amount of revenue that it generates for the total Medtronic family? Thank you.

Que Dallara:

Yes. We have a complementary organic program. If anything, we're stepping on the gas, on that program that continues. It's complementary with next-generation features that we're not prepared to go to at this point for competitive reasons, but that program will help expand our market access, including type two market.

Bob White:

Yes. Thanks, Jeff, and thanks, Joanne, for the question. So we really liked our momentum, remembering, Joanna, as you know, that less than 5% of procedures that could be done robotically assisted or actually done that way. So a tremendous market development opportunity. And importantly, every quarter, we sell and install more Hugo systems than we did the prior quarter. And the modularity and the interoperability, the Hugo system with our leading surgical franchise is really being recognized by our customers. And it's really about the ecosystem. So to respond to your question, I would look at both, right? We look at the number of robots where we don't disclose that. And as Jeff pointed to, we look at this as a meaningful growth driver for Medtronic overall. So we like our position. We like our feedback, and we're excited about our opportunity ahead of us.

Brad Welnick:

Our final question comes from Anthony Petrone at Mizuho Securities. Anthony, please go ahead.

Geoffrey Martha:

Yeah, Anthony. Happy belated birthday by the way.

Geoffrey Martha:

Well, I might ask Sean to comment on the underlying volumes in a second because we see it across Cardiology a lot. But I would just say, Anthony, that the underlying volume is definitely getting stronger and accelerated for us to our Q1 into April and May. And as I mentioned earlier, we've been seeing strong growth out of Western Europe for quite some time. And then Japan came in. And all throughout this, the last quarter, we saw strong growth in emerging markets. U.S. has lagged but has picked up. And I think some of it, we're seeing some of that pickup in particular, in surgical procedures in our surgical business, but also across a couple of different cardiovascular procedure lines. I don't know, Sean, if you have any comments on that?

Karen Parkhill:

And Anthony, on your question on the annual guidance and anything of note on 780G, we expect diabetes to return to good growth in this fiscal year. And we noted that we expect it to begin the year below the corporate average, but obviously ramp throughout the year as we bring the 780G to more and more patients in the United States and the consumable revenue off of that comes with it.

Ryan Weispfenning:

Yeah. Thanks, Anthony. Geoff, please go ahead with your closing remarks.

Geoff Martha:

Hello, everyone and thank you for joining us today. We reported our Q3 results this morning and we executed to deliver a top and a bottom line that were ahead of our guidance and Street expectations. We are urgently forging the path to durable growth and there are many proof points of our progress in these results. Our cardiovascular and our neuroscience portfolios had strong high single-digit organic growth as we launch new products and demonstrated continued strength in our established market leading cardiac rhythm management and spine franchises. And at the same time, some of the recent revenue headwinds that have held back our growth are subsiding, including product availability in businesses like surgical innovations, cardiac diagnostics, aortic and ENT. The aggressive transformation at Medtronic is advancing. We are focused on reducing complexity, enhancing our culture, improving capital allocation and portfolio management and upgrading our global manufacturing operations and supply chain capabilities. At the same time, we are progressing on our plans for significant cost reductions. These are aimed at partially mitigating the continued impacts from macro conditions such as inflation and effects on our profitability and cash flow. These cost reductions also create room on our P&L so that we can increase our growth investments and I am very encouraged by the rebound in our revenue growth despite procedure volumes remaining a little softer in a few markets and volume-based procurement in China. We are confident in delivering durable revenue growth over the coming quarters as recent revenue headwinds continue to dissipate and we execute across our businesses. So, let’s take a closer look at our Q3 results. As I highlighted at an investor conference last month, we are thinking about our portfolio of businesses in three groups

Geoff Martha:

Thank you, Karen. Now before we open the lines for questions, I’ll make a few closing remarks. Last quarter, I noted that our aggressive agenda to transform this company would take time, and that’s still true. But I hope you’ll take away that we are operating with a high sense of urgency, which you can see reflected in our results this quarter. We’re reducing our complexity, enhancing our capabilities and augmenting our management team with new leaders that bring an outside diverse perspective. We’re also exercising decisive capital allocation and portfolio management devoting more capital to high-growth opportunities and divesting non-core assets. There is an intense focus from me, our Board, our management and our employees to create a company with sustainable growth that you can count on. We’re in attractive markets with growing populations globally that can benefit from our therapies. And we fully expect to deliver durable revenue growth and turn our scale into a long-term competitive advantage. And through this process, create tremendous value for our shareholders. Now let’s move to Q&A. We’re going to try to get as many analysts as possible, so we ask 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question?

Robbie Marcus:

Great. Congrats on a nice quarter, and good morning. Maybe I could start, and I appreciate, Karen, you’re not giving formal guidance, but I was hoping you could discuss where the OpEx cuts are coming from? It sounds like you’re going to continue to invest in R&D. So what exactly are you cutting? How aggressively are you cutting? Will this prevent any of your competitiveness on the top line? And then I’ll ask my follow-up as well. The street has you with 3% EPS growth for next year. Do you think that’s the right place for us to be based on your comments today? Thanks.

Ryan Weispfenning:

Okay, thanks, Robbie. Next question, please, Brad.

Larry Biegelsen:

Good morning. Thanks for taking the question. And I’ll echo my congratulations on a nice quarter here. I’d like to focus on China, which declined high single digits in Q3. Can you talk about what you’re seeing there in terms of procedure volumes coming back? And the VBP headwind, you gave a lot of helpful color in the JPMorgan slides on the percent of your – the headwind in the first half and the percentage products impacted in fiscal ‘23 and fiscal ‘24. I guess what I’m trying to understand is what would overall China growth, fiscal ‘23 and fiscal ‘24? How much of a headwind will that continue to be with VBP? And how does it impact your ability to grow mid-single digits in fiscal ‘24? I heard Geoff, you talked about durable growth a lot this morning. Should we be thinking more like 4 to 5 next year because of the VBP headwinds? Thanks for taking the question.

Karen Parkhill:

Yes. So just – it’s hard for us to parse out this quarter the impact of procedures in VBP. So we’re not doing that. But we have said on VBP that we expect to be 50% done with the impacts of VBP by the end of this fiscal year. And as we move into next fiscal year, we still do have some VBP to come, but we expect to be 80% done by the end of next fiscal year. So this quarter, we had a VBP impact from stapling and cardiac ablation and a little bit in coils from Neurovascular. And as we look ahead into next fiscal year, we still do have some stapling provincial tenders coming. And we’ve got a little bit more Neurovascular and some in some cardio businesses including cardiac rhythm, structural heart, aortic, peripheral vascular. But again, where the majority finished by the end of this fiscal year, and we’ve got a little bit more to go next fiscal year.

Ryan Weispfenning:

Great. Thank you, Larry. Next question, please, Brad.

Vijay Kumar:

Hey, guys. Congrats on the printed. Thanks for taking my question. I had a two-part and I’ll ask them upfront. When you look at Q4, what is changing sequentially here, Karen? Because when I look at 3Q, you did 4% organic despite med sort of declining, continued Diabetes headwinds and China headwinds since Q4. What are these three pieces – what are you assuming for those three buckets? And I think you mentioned the renal impact in Q4. Could you specify that? And Geoff, for you, I understand you’re not giving fiscal ‘24 guidance, but when you think about the incremental changes, right, what are the positive tailwinds and negative headwinds? Is China still declining in fiscal ‘24? What happens to Diabetes? Is that on the plus side or minus side? And any other plus or minus at a high level would be helpful.

Geoff Martha:

Just to finish off – just to highlight one thing in Karen’s commentary there. A big one will be continued turnaround of our Surgical Innovations business. That was really hit hard, as you guys know, by the supply chain issues. You saw a nice sequential improvement from Q2 to Q3, and you’ll see another improvement from Q3 to Q4. And that – Karen mentioned supply chain issues subsiding, a big area where you’ll see that manifested is in Surgical Innovations. When you look at FY ‘24, well, let’s start with some of the known risks. You highlighted China VBP, and we – Karen and I already talked about that a bit. That will still be an issue as we go from the 50% of our portfolio that’s done in FY ‘23 to the – to another 30% that gives us 80% by the end of FY ‘24. So that will be a headwind. I don’t know what we’ve said whether China’s growing or shrinking, but it’s definitely not growing at our historic double-digit again next year. The other – and look, there is still work to be done on supply chain. I mean it’s – our supplier – the supply chain out there is still a bit fragile. Although every quarter, it’s getting better for us and – but as you look at some of the momentum, like you’ve seen from us from Q1 to Q2, from Q2 to Q3 and then implicit in our guidance is a nice acceleration kind of from Q3 to Q4. So we’re excited about that, happy with the momentum. And as we look into FY ‘24, some of the specific businesses, you mentioned Diabetes. We’re optimistic we’re going to get 780G on the market here in the U.S., and that will have a nice impact on Diabetes plus continued performance in Europe. So that should be – assuming that happens, that should help accelerate some of the growth in Diabetes. Surgical Robotics is doing really well. And as we move into FY ‘24, have a bit more scale and a bit more impact on our numbers. Cardiac Ablation Solutions, I’m sure we will get some questions on our mapping and navigation system as well as our various PFA catheters. You start to – we will start to feel some impact from them. And continued strong performance across the Neuroscience portfolio, I think, highlighted the CST or cranial spinal technologies business as well as you’ll see continued strength in ENT. We will anniversary the Intersect acquisition at some point and that goes organic. So those are some of the things that we look at as – in FY ‘24. But it’s – there is some, I think, broad supply chain recovery, especially in SI and then a couple of highlights, like I mentioned, CAS, Surgical Robotics, Diabetes in the U.S.

Operator:

The next question comes from Joanne Wuensch at Citi. Joanne, please go ahead.

Geoff Martha:

Well, thanks, Joanne, for the question. Maybe I’ll start with the second one. Look, there is – the word urgent, there is a lot of major change that we’ve got going on across the business. And I think it’s important for people to understand the depth and breadth of those changes. And I know there is the desire to see things move quicker. And yes, we’re in some ways, encouraged and we’re encouraged by the progress, but we’d like to see it go faster as well. But the speed of the – of our progress of getting the top line growth and adjusting our cost base to reflect the new reality with inflation and FX, on a company our size, the impact of these changes take a bit more time than – they take some time. But the actions that we’re taking are – we are moving quickly on these. And I think that’s the idea here. So we’re moving quickly on a number of things, whether be the changes – all the investments and changes to our supply chain to the divestitures that we’re working on to the integration of these acquisitions, like Affera and are moving our cash business forward. There is just a lot going on and it’s just important to understand that we’re moving very quickly on these things, and the results are starting, and we’re encouraged by – that you’re starting to see the results. When it comes to spine, look – was strong. Last quarter was strong too. It was just offset by some of the – the last couple of quarters offset a little bit by the China VBP. But if you look underneath it, we have been quoting that U.S. implant growth rates that have been in the double digits, I mean that’s very, very strong and something, especially for some of our level of market share by far, again, the number one market share player to be growing like that. What’s driving that is the enabling technology ecosystem. It’s something we have been working on aggressively since 2015. You have got the robot, you have got navigation, you have got interoperative imaging, you have got power instruments. Now, you have got this AI-based surgical planning system that basically – it’s we are winning over the hearts and minds of physicians as they see where we are going and actually a real commitment to changing spine surgery with this arsenal of technology. And we have integrated it and it’s not – it’s starting to help the workflow and move faster and more efficient. All of this coming together, that’s what’s driving it. And at the same time, we have been able to invest in implants, so that the implants were still the latest and greatest. And I think Brett Wall and Skip Kill and the team have done a really good job. I don’t know, Brett, if you want to make any further comments on that?

Ryan Weispfenning:

Okay. Thanks Joanne. Next question please Brad.

Matt Miksic:

Hi. Thanks so much for taking the question. I had two follow-ups, if I could, just quickly on diabetes and TAVR. So Geoff, your comments this morning, I don’t know if it’s just tone or my own impression, but it seemed like incrementally, perhaps more confident and committed to diabetes and just – I know where you are at with the warning letter. But maybe if you could talk about whether you are incrementally more confident here than you were a few months ago and maybe talk about what the reentry to that market looks like, assuming that you can get that – the letter lifted and the product back to the market? And then just briefly on TAVR, as you know, one of your major competitors in that market has talked a lot about staffing and trends in the U.S. Just anything that you would add in terms of sequential improvements or changes in that market, or whether you are continuing to see some of the staffing challenges that they referred to, but don’t seem to be holding back your growth quite so significantly in the U.S.? Thanks.

Que Dallara:

Yes. I mean as Geoff said, we continue to expand access for the 780G system and Guardian 4 sensor. It’s in over 90 markets. And wherever we see 780G launch, we also see higher CGM attachment rates because physicians and patients recognize the value of automation – automated insulin delivery in driving outcomes. And we expect to see a similar trajectory when 780G is available in the U.S. market. And just to put a finer point on what Geoff said about our next-generation products, we submitted our next-generation sensor CGM for CE Mark last year, and we have also done that on a standalone basis to the FDA. And we continue to be very optimistic about the progress we are seeing in the market. The U.S. market needs new products. We all know that. But I think we are making forward movement on all aspects of the business.

Sean Salmon:

Yes. Thanks, Geoff. And we are seeing sort of mid-single digit growth underlying for the U.S. market. And obviously, we are moving faster than that 12% growth because of the launch of FX. And I think also this recognition that our valve hemodynamics is really playing out for better durability of that valve over time, which is becoming more and more important. And FX really levels the playing field on ease of use, which has been important, but also you can line the commerce [ph] up, which is great for coronary access. And as people are thinking about the lifetime of the valve, both durability and making sure that those corners are easy to get back into matters a lot. And that combination has played out well for us. We do still see spotty procedure volume challenges. It’s all around the world. Most acutely this last quarter in Japan, as we said, there was a wave of COVID that impacted us. And also we are dependent on a particular faster access that was impacted by supply chain issues last quarter. That’s been resolved. So, the launch of FX in Japan, returning procedure volumes and no constraint from vascular sheets will help us to grow there. And of course, as Evolut FX rolls out around the world, we will still perform well. The fundamentals of that market are still very, very strong. It’s just all the multiple touch points of the healthcare system that are required to get a patient in for therapy and through that therapy. But we expect that’s going to start to abate and get better with time.

Matt Miksic:

Thanks again.

Operator:

The next question comes from Josh Jennings at Cowen and Company. Josh, please go ahead.

Karen Parkhill:

Yes. In terms of the impact on total Medtronic earnings power, the separations are going to have minimal impact. So – and in terms of staging the moves so that we have minimal impact or disruption across the company, we have been very focused on that and have strong teams in place that are managing these separations really well. And we purposely put those teams in place as part of our new operating model. As we make these portfolio moves, we are focused on being best-in-class in how we do it.

Karen Parkhill:

Yes. Thanks Josh. We are focused on maximizing shareholder value with the separation. And we have announced the spin. We are moving forward with that. Should something come along that maximizes shareholder value, we will certainly listen to it.

Operator:

The next question comes from Cecilia Furlong at Morgan Stanley. Cecilia, please go ahead.

Geoff Martha:

Thanks Cecilia. Good to hear from you. On the first one, I will let Bob White answer the question on the Hugo neurourology IDE enrollment and just overall progress, what we are seeing in the U.S. And then turn it over to Karen for the question on Italy, so Bob?

Karen Parkhill:

And Cecilia, on the Italy question, there is a law in Italy that requires companies that are – that sell medical devices to make payments to the Italian government if those device expenditures exceed maximum ceilings. The law was put in place in 2015 and applies to expenditures from that year onward. You have heard from some of our other competitors on this. The law is obviously applicable to the whole industry. And we filed an appeal along with many other companies in our industry on this. In the third quarter, for the first time, actual claims were issued to Medtronic and our peers for the years ‘15 to ‘18. And so, we did revised our existing accrual. We already had an accrual and we did add to it in the third quarter. That accrual is a reduction of revenue. For us, it wasn’t too significant, but we do have a reserve on our books.

Operator:

The next question comes from Shagun Singh at RBC. Shagun, please go ahead.

Karen Parkhill:

Yes. Thanks Shagun. So obviously, we have said we have got tons of moving pieces on next fiscal year. So, we are not ready to give real guidance. And so, to quantify, the impact from EPS growth is difficult. But what I would say on currency, we talked about the fact that, that is a headwind. I mentioned that in the commentary. And just at recent rates, currency is about a 5% headwind to next fiscal year, so we did quantify that. We also said that inflation impacts are about a mid-single digit impact for us next fiscal year. So, those are two that we have quantified. In terms of interest and tax, those are more minor headwinds than inflation and currency, but still headwinds that we need to face. And then obviously, we have got investment that we intend to make to drive the long-term growth of this company. And where we see important investments, we are going to make them. And we have said that we think that we are going to drive R&D growth, at least in line with revenue and when we have important investments to make in some areas that may grow even more than revenue. So, hopefully that helps.

Geoff Martha:

Sure. Thanks for the question. We are definitely excited about the data that’s coming out at ACC and the PFA opportunity. I think Sean is best positioned to answer your question, Sean?

Geoff Martha:

Thanks Shagun. Brad, we have got time for two more questions, please.

Travis Steed:

Hi. Thanks for taking the question. Karen, I do want to ask on the Q4 margin step-up. Q3 was a little bit light on margins from FX and currency. Just curious if there is anything other than improving revenue to drive the Q4 margin step-up? And then I know you are not going to get much on FY ‘24, but curious if you could kind of frame the opportunity on the cost side. I don’t know if there is enough to offset the mid-single digit inflation or partly offset that or more than offset. Just a little bit of color on the cost savings side would be helpful. Thank you.

Travis Steed:

Great. Thank you.

Operator:

The final question comes from Rick Wise at Stifel Nicolaus. Rick, please go ahead.

Geoff Martha:

Yes. Great to hear from you, Rick. Thanks for the question. I will turn it over to Bob for some of the details there. But I would say just on Hugo, what – the evolution of the – is the feedback that we are getting, right. I mean we felt confident in the design. And as we get closer to launch, I was spending more time with physicians that were involved with the design that they don’t work for Medtronic, but they were involved, and they were very bullish on it and happy with the way the product turned out. But now we are getting feedback from physicians that are converting from the competition or have both and they are high-volume users and they have a high bar for robotic surgery and that feedback has been really, really strong. And that is, I think is very encouraging. And that word is spreading, as I talk to U.S. physicians that don’t have access to it yet because they are not part of the trial and they have a pretty detailed understanding of the robot and its features and its capabilities. And so, we are getting – and so that’s just driving really strong adoption. Yes. I will let Bob talk about any kind of constraints or supply chain and any other details on adoption now.

Rick Wise:

Thank you.

Rick Wise:

Appreciate it. Thanks Geoff. Thank you.

Geoff Martha:

Alright. Well, thanks for the questions, some great questions this morning. I really appreciate your support and continued interest in the company, and we hope you will join us for our Q4 earnings broadcast, which we anticipate holding on Thursday, May 25th, where we will update you on our progress and how we finished our fiscal year. And of course, I look ahead at fiscal ‘24. So with that, thanks again for spending time with us today. Please stay healthy and safe, and have a great rest of your day.

Geoff Martha:

Hello, everyone and thank you for joining us today as we discuss our Q2 results and outlook. Our Q2 organic constant currency revenue growth of 2.2% came in about 1 point below expectations due to a slower-than-expected recovery in both procedure volumes in certain markets and in our supply chain. In terms of reported revenue, the continued strength of the dollar over the course of the quarter drove over half the difference to expectations. Now despite the top line results, we were able to control expenses and deliver EPS at the high-end of our guidance range. We also issued guidance for the back half of our fiscal year this morning. We expect continued acceleration in organic revenue growth in the second half, although less than previously anticipated and this partially flows through to EPS. Now, this is something that I don’t take lightly, delivering on our expectations is important to building and maintaining trust and credibility with you. Karen will walk you through the details, but some of our markets and some of our supply constraints recovered more slowly than we expected in the quarter, and that, along with incremental China volume-based procurements, led us to reduce our expectations. While the current operating environment remains challenging, we had strong growth in several businesses and geographies, where our strategy, our operating model and execution are yielding solid results. We have near-term product catalysts in our pipeline. We are decisively allocating capital internally and selectively making focused acquisitions. We are making improvements to the operational health of the company and we are streamlining the company’s structure and taking cost out. All of this gives us confidence that we are on the path to creating durable growth and shareholder value. Now, diving deeper into our Q2 results, for reported revenue, as I said earlier, currency drove over half the miss to consensus. Organically, the miss was primarily split evenly between two challenges. One, procedure volumes in some markets have been slower to return to normal levels and two, some of our supply challenges have persisted longer than we anticipated. With regard to procedural volumes, in addition to an incremental China VBP, we are still seeing lower volumes in elective coronary PCI, GI procedures, TAVR, spinal cord stim and some less emergent surgical procedures. The slower-than-anticipated recovery in procedural volumes primarily occurred in developed markets as healthcare systems continue to work through staffing and other challenges. Now with regard to supply, we have made meaningful recovery and many of the most acute issues are now behind us, including the acute packaging issues, which we highlighted last quarter. But some of the improvements did come later than we expected in Q2, and as a result, we missed cases in businesses like surgical innovations and it has delayed our expected momentum. Now focusing beyond challenges impacting our markets and product availability, we have a number of businesses where our strategy and execution are yielding results. Recall that we moved to the new operating model 2 years ago, we created highly focused, accountable and empowered operating units that can move with greater speed and decisiveness. And today, we are clearly seeing the benefit of this model across many of our businesses. Starting with cranial and spinal technologies, CST grew 5% and this is despite a large negative impact from China VBP. In fact, our U.S. core spine business grew 15%. Additionally, this quarter, we launched our spine technology ecosystem, which we call Aible at the NASS conference. From planning to our best-in-class implants to navigation and robotic assistance to interoperative imaging and surgical tools up to and including patient follow-up. Aible brings spinal surgery together in one seamless and connected platform. And another highlight was our structural heart business, where our TAVR business grew 15% globally, including 17% in the United States. The launch of our Evolut FX valve drove 18% sequential revenue growth in our U.S. TAVR business, despite being at full market launch for only the last month of the quarter. So, we expect Evolut FX to drive momentum for us over the coming quarters. Our Cardiac Rhythm Management business continues to execute and win share, with 4% growth in this quarter. Within CRM, our pacing business grew 6%, well above the market, with 18% growth of our micro family of leadless pacemakers. And we are looking forward to the commercial introduction of our AURORA EV-ICD in the back half of this fiscal year. So while we have businesses where the changes we have made over the past couple of years are clearly having a positive impact. We are also focused on ensuring these efforts translate into improved performance in all of our businesses. It’s worth highlighting a few businesses where we are making strong progress to drive future growth over the near to mid-term and some of that already have immediate momentum. Let’s take cardiac ablation solutions, a business that we expect to be a strong future growth driver. Pulsed Field Ablation represents a large market opportunity and we are looking forward to seeing our PULSED AF pivotal trial results in the first half of the next calendar year, putting us on the path to be one of the first companies with the PFA catheter in the U.S. market, which we think is underappreciated. This is a meaningful growth opportunity for Medtronic in the next 18 to 24 months. And as you know, we closed our acquisition of Affera in August and Affera’s differentiated mapping and navigation system gives us the breadth and differentiation that we need to win share in cardiac ablation. And we expect to complete enrollment this quarter in the pivotal. This fully integrated system will be the first of its kind to offer a unique catheter that can perform high-density mapping and deliver both pulsed field and radiofrequency ablation in a single device. Now in diabetes, we remain focused on resolving our warning letter. We have now completed a 100% of our warning later commitments and have informed the FDA that we are ready for reinspection. We also remain in active review with the FDA on our submission of the MiniMed 780G system with the Guardian 4 Sensor. And outside the U.S., we continue to receive positive customer feedback on the performance of the 780G, which is now available in over 60 countries. In Q2, 780G drove mid-teens growth for our diabetes business in international markets. And across diabetes, we are investing heavily in the development of multiple next-generation insulin delivery and sensor technologies. And we remain focused on restoring strong growth to this important franchise over the coming years. Turning to our Hugo surgical robot, now I am sure we are going to get into this in Q&A, but we saw a lot of positive momentum this quarter as we scale manufacturing production, expand regulatory approvals and ramp installations. In addition, we just received FDA IDE approval last week on our product enhancements. Now, this allows us to start our U.S. urology clinical trial by the end of the calendar year and is a catalyst for continued progress with our international sales. Now, before I talk about our capital allocation and portfolio management, let me share my thoughts on the Ardian opportunity. Despite the impact we believe COVID and medication changes had on the ambulatory endpoint in ON MED, the totality of the data is compelling. The large drop in office blood pressure in the Ardian arm was impressive and it was consistent with what we have seen in our other trials. Importantly, the current standard of care for reducing blood pressure, it just isn’t working, which was evident in the long-term SPRINT trial results published just last month in JAMA Cardiology. Patients don’t seem to stay on multi-drug therapy for long periods of time and eventually just stop taking their medications. And that’s the advantage of Ardian, it’s always on. We have demonstrated that our Ardian procedure, it’s safe, it’s effective, and it’s durable. Physicians are excited and Ardian is preferred by patients. Now we have submitted our PMA to the FDA and we are looking forward to working with governments and payers in the U.S. and around the world who are searching for improvements to control high blood pressure and avoid the costly and devastating consequences of this disease. In addition to advancing our pipeline, we are focused on decisively allocating capital and streamlining the company to deliver durable growth. We are freeing up resources to invest more in R&D, feeding our fast growing businesses in areas where we can see the strongest returns. Cardiac ablation solutions and diabetes are two clear examples of this. We are also making moves with our portfolio to focus our company and our capital on opportunities that are better aligned with our long-term growth acceleration strategies. Over the past two quarters, we have announced our intent to separate three businesses that we believe will thrive outside the company. With our Renal Care Solutions business, we are progressing on the separation, forming a new kidney health technology company together with DaVita. We continue to expect this transaction to close in calendar 2023. And last month, we announced our intention to separate our combined patient monitoring and respiratory interventions business. We remain focused on active portfolio management, evaluating both potential additions and subtractions to further accelerate our growth and create value for our shareholders. Now with that, I will turn it over to Karen to discuss our second quarter financial performance and our guidance. Karen?

Geoff Martha:

Thank you, Karen. Now before we open the lines for questions, I want you to know that our growth rate and our consistency are not where we want them to be. That’s why I shared with you our aggressive agenda to transform this company 2 years ago when I became CEO. We embarked on a plan of implementing a new operating model, eliminating the bureaucracy of our groups and forming more nimble operating units, while at the same time, learning to leverage our scale. We set in motion a new performance-driven culture, and we changed our incentive plans to reward new behaviors and performance. We brought in new leaders to inject new ways of thinking in the organization, and we implemented new capital allocation and portfolio management processes. Now these changes take time, and we face setbacks along the way that have slowed us down. Some are environmental like COVID recovery rates, raw material shortfalls and Chinese procurement policy, while other setbacks are of our own doing, like our quality and operational challenges and the pace of improvement we anticipated. Look, I know we have more work to do here, but we understand the root causes that led to the years of underperformance from this company. And our aggressive transformation agenda is designed to fix these issues. I know we will get this right, choosing the right markets, being more efficient and productive with our resources, empowering businesses and increasing accountability, improving our quality, our manufacturing and our supply chain and turning our size and scale into an advantage. And I know we are on the right path. The progress we’ve made so far gives me that confidence. We have experienced leaders, a compelling pipeline and positions of strength in some of the most attractive medtech markets, which address significant unmet needs for patients. We will execute on our plan to deliver durable growth that we began 2 years ago. And as we do, we will create tremendous value for all of our stakeholders. So now let’s move to Q&A. We are going to try to get to as many analysts as possible, so we ask you to 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question?

A - Ryan Weispfenning:

We will take the first question from Robbie Marcus, JPMorgan. Robbie, go ahead.

Geoff Martha:

Okay. Thanks, Robbie. Okay. I saw three parts there. I’m going to ask Karen to chime in to help me here on this one, but provide some details. But on the miss, like we said in the commentary, the primary issue is the pace of the recovery and there is the two buckets. There is the pace of our supply recovery, which we did make quite a bit of progress there and they got over the most acute issues that were plaguing us, but happened a little – it happened late in the quarter and pushed out our momentum, which gets to the second part of your question, which is the effects the guide down. The other bucket is part of your second question as well as on the markets. Many of our businesses are back, the majority of them are back to the pre-COVID level of their markets. But there are some that are not. And I’ll let Karen walk through those and we were – we just overstated what that market recovery would be, and we will walk you through those and how those impact the second quarter – the second half. Karen, do you want to...

Robbie Marcus:

Great. Thanks for all the color.

Ryan Weispfenning:

The next question comes from Travis Steed at Bank of America. Travis, please go ahead.

Geoff Martha:

Yes. So thanks for the question, Travis. On the – why don’t we start with the TAVR one because we – the market didn’t grow quite as much as we had hoped, but it still was a strong growth driver for us, and we did do well from a share perspective. And why don’t I Sean maybe comment on that, and then we will come back and help Karen talk about the VBP part of the question. Sean?

Karen Parkhill:

And on your China VBP question, Travis, about 15% to 20% of our back half guide down is due to the incremental China VBP being pulled forward from next year from our perspective from what we had assumed. China declined 9% in the second quarter. And that was because of an impact of VBP and spine. For the rest of this fiscal year, we don’t expect China to be a material growth driver for us. And in fact, for the full year, we’re expecting low single-digit declines in China. That said, as we look forward into FY’24, we will continue to have some VBP, but I think the vast majority will be behind us, and China should be a contributor of growth again next fiscal year.

Travis Steed:

Great. Thank you.

Ryan Weispfenning:

The next question comes from Vijay Kumar at Evercore ISI. Vijay, please go ahead.

Geoff Martha:

Okay. Thanks for the question, Vijay. Let me take the – well, I’ll take the share loss question first and then I’ll get to the back half and maybe I have Karen talk to that one as well. But in SI, our surgical innovations, this – first of all, this is a contracted business with health systems and mainly us and our main competitor in that space. And in the past, there have been circumstances when the shoe is on the other foot when our competitor had a recall and have had recalls. And we did the same thing where we got picked up some incremental revenue and some share because the two big competitors are make-up the majority of what the hospitals are buying in the surgery space, but these hospitals do honor these contracts. There is a lot that goes into them and that revenue went back after the supply situation was resolved. And so that – we’ve seen that over the years on multiple times. So these are contracted – like I said, contracted business for us. And based on our dialogue, with the health systems, we’re confident this is going to come back as our supply, which we mentioned. We did get past the most acute part of our supply issues in the Surgical Innovations business, was this packaging issue. It did come later in the quarter and slower momentum, but we do have momentum now, and you should see that business recover. On the back half, I’ll ask Karen to...

Geoff Martha:

Yes. So I mean, beyond the supply returning, the back half, as Karen walked through a lot of it, is really powered by very tangible things beyond supply, product-related they are tangible and compelling.

Geoff Martha:

I didn’t hear the very last part of it, does Medtronic – but the answer to your question is yes. I mean, the mid-single-digit growth, we will exit the year at mid-single digits. You see throughout this year, you’re seeing the acceleration from the first quarter, which was the depth of our supply issues. We’re really in a tough spot. We were down minus 4%. Then this past quarter, on an organic basis, up 2% and then Karen walked you through the back half guide. But we exited the year at mid-single digits, and we believe that’s durable. Like I said, based on these product launches that are here now immediate drivers and then we – Karen brought up a list of things that are already kind of tangible in the back half, but there is a number of other things that are still coming. The Aurora EV-ICD, PFA and Afib and Inceptiv with ECAPs and our SCS business and then there is the whole diabetes discussion with those products coming on in the U.S. in the next year. And the Hugo ramp will go on for a while. So there is a number of things that keep us going. And so that’s why we feel good about the mid-single digit. Thank you, Vijay. Next question please, Ryan.

Larry Biegelsen:

Thank you. Can you, guys hear me, okay?

Larry Biegelsen:

Good morning. Thank you for taking the question. Maybe on diabetes for Que. So Que, just a multipart question here. Did you ask for a variance on 780G? And if so, what was the response or when will you know? And if you don’t get a variance, do you need reinspection for 780G clearance? And how long do you expect that to take? And just lastly on 780G, do you expect it to have the same impact in the U.S. as you’ve seen outside the U.S.? Thanks for taking the question.

Larry Biegelsen:

No, Que, that’s helpful. I guess, why didn’t you ask for variant in the U.S., it seems like a kind of no risk option here? So why not ask for it. Thank you.

Larry Biegelsen:

Alright. Thanks so much for taking the question.

Ryan Weispfenning:

The next question comes from Matt O’Brien at Piper Sandler. Matt, please go ahead.

Geoff Martha:

Okay. There seems to be a problem, Matt, with your audio. Maybe we will take the next question, Brad, and then we will try to come back to Matt.

Geoff Martha:

Josh, are you there?

Geoff Martha:

Yes, we can hear you, Josh.

Geoff Martha:

Maybe I will start with the supply situation. Are the supply chain issues gone, not completely, but the biggest pain, or if you will, is behind us, especially in surgical innovations with the packaging, as I mentioned, issue. What lingers a bit would be, like we have talked about before, some semiconductor, I would say, constraints. But the changes that we have made to our supply organization with the new leadership under Greg, the new structure, bringing in new people to help us with capabilities where we thought we weren’t – where we needed to be, implementing new systems and new processes. And these changes, I believe are durable. I mean they are – so we are going to get – we are getting through this. The worst is behind us. We factored in or updated into the guidance, but there are some. I mean like some issues that are outstanding like the semiconductors, but all that’s factored in, and we feel good about going forward, not just FY’24, but beyond that. Regarding Ardian, look, I will ask Sean to chime in here. But look, the – as you look at the data, we believe it’s very compelling. And you see that the sham arm in the trial increased their medication and the Ardian arm reduced. And the difference is 10x. I mean it’s a significant difference. And when you – when physicians look at it, they understand this and are excited about it and why we are optimistic with payers is because health systems and governments are really focused on – and payers are focused on hypertension, which – and like the current standard, as I mentioned in the commentary, just isn’t working and more data came out to substantiate that in September a physician – to substantiate what people already know. And so now there is a new option. And I think payers are going to be compelled to take it seriously, especially with the public health epidemic that we are facing here. Sean, do you want to chime in and add some more color to this?

Geoff Martha:

Thanks Josh. Take the next question please Brad.

Matt O’Brien:

How about now?

Matt O’Brien:

Thanks for taking my questions. Sorry about that. I guess just to follow-up a little bit on Josh’s question, and I know how enthusiastic you still are about Ardian. But I think the ambulatory number is one that is a little bit more robust in the office-based number. So, why would clinicians and payers be so interested in doing these cases or we are paying for them given the ambulatory feedback that we have seen? And are you guys still thinking about the market is $500 million by ‘26, $3 billion by the end of the decade?

Sean Salmon:

Yes. Matt, I think if you just recall how that study was done the patients were witnessed taking their blood pressure medicine in the morning. And whether they were taking that for the full six months or not, or they just took it that day, you saw the change in blood pressure that was during the daytime not what we have seen before in these prior trials. But at night time, there was still a reduction in ambulatory. So, I think the simple story here is that patients weren’t taking their medications, except on the game day and their blood pressure drops. Now, we don’t know that for sure, we didn’t test blood in urine every day. We just test it on game day. And we know that there were more medications in the patients that were in the control arm than in the treated arm. And as Geoff said, the changes increasing medication, decreasing medication, taking even medications for blood pressure that weren’t even prescribed maybe from their medicine cabinet, maybe from their spouse or partners medicine cabinet. There is a lot of changes in medicine, which we know were present different than the prior studies. We actually have that proof now that we can measure the drug metabolites. So, a cleaner, if you will, measure is that morning blood pressure, we took the office blood pressure. And that blood pressure is the one that’s used for all the epidemiology studies that show what the reduction in blood pressure means for the avoidance of events and reduction of cost. And it’s also the primary endpoint that’s gotten just about every – I think maybe every pharmaceutical approved for the treatment of high blood pressure. So, it is the robust standard. In fact ambulatory is not even reimbursed in this country. So, it’s not used routinely in clinical practice. So, it is a robust measurement that was consistently performed throughout this trial and across the other trials that we have done. So, I am confident in that part. In terms of the market size, we are very confident in this therapy. There is 1 billion people with blood pressure problems around the world, even if very small amount gets you to the kind of market growth that we think is going to be meaningful for the company. So, we are very confident in this therapy and that is approval and ultimate uptake.

Sean Salmon:

Yes. So, for Micra, we continue to grow, and you saw 18% globally, 40% of that was from international sales. And really Japan and China, in particular, really drove that growth and continued success. And we will see continued penetration in international markets and in the U.S. and a shift between single chamber to the AV device, which can pick up a larger proportion of patients. It’s about 30% of the market there. And in the next 12 months, we are going to refresh both the VR and the AV devices in the coming year around the world. So, while we have some competition in the United States, we fared pretty well. I think the ease of use of our micro device in the long-term data that we have as well as just the familiarity with our system has made it pretty durable. On Aurora EVICD, as you know, we have got CE Mark coming up. That’s a little bit of a different technique. You have got to put a lead underneath the breast bone, which takes some training to learn and we will be very meticulous in the way we roll that out. But make no mistake that is a product that really offers a huge benefit, getting leads out of the heart, having half the size in the can and twice the battery life compared to the other device that realm and being able to voice shock by pacing people out of their fatal arrhythmia as opposed to having to have a painful shock. Those are all really, really welcome improvements, and we are excited to roll that technology out first in Europe and then the United States next year.

Sean Salmon:

Thank you, Matt. Next question please Brad.

Matt Taylor:

Hey guys. Thanks for taking the question. Can you hear me okay? Sorry guys, can you hear me okay?

Matt Taylor:

Okay. Sorry. So, I wanted to just explore you talked about the slower recovery of some of these elective and developed markets. And obviously, there is staffing, and you said other challenges. I guess maybe you could just give us some insight into two things. One is, could you talk a little bit more about procedure trends through the quarter? Did you see any improvement? And then what gives you the confidence or what intelligence do you have to point to whether this is really staffing or I think investors are worried about lack of pent-up demand. Could you just address that?

Karen Parkhill:

Yes. So, I would say, through the quarter, we did see, particularly in the markets that we had mentioned not as robust recovery, but some recovery. But as we ended the quarter with less robust recovery, we are just assuming that in those areas, those procedures stay where they were in the back half. We will see if that’s a good assumption or not. As we look at the first few weeks of our current quarter – of the third quarter, we are seeing improvement from the second quarter. So, that’s pointing to some good things, but we will see.

Sean Salmon:

Yes. I would say a couple of things on that. First of all, there is – you take a therapy like TAVR, where there is multiple handoffs. You have to have pre-imaging. You have to get the patient worked up. They get their procedure done. And then there are sometimes even post imaging that’s done. So, a lot of handoffs and the patients tend to be elderly. So, there is – you want to sure you schedule that in a way that’s okay, that they can get it all done in an efficient way. We don’t want them exposed to the healthcare environment for a long time. And I think that’s challenging. It’s also true that you can’t wait forever. You have got – with severe aortic stenosis, there is about an 80% mortality rate for 2 years from your diagnosed that. So, it’s more lethal than cancer, for example, most cancers. So, it’s not something you can put off forever, but it is resource intensive. And I think the other thing we are seeing with staffing just in general is, there is a prioritization for patients that can get in and out relatively quickly so they can make downstream staffing available. So, whether it’s ICU recovery or you have got even transport to kind of move. And I think there is some arbitrage in some countries even on the margin that they make on those procedures. Cardiac surgeries have grown like a 5.5% for us, so very robust. There is a lot of margin that comes out of cardiac surgery patients. They tend not to be as deferrable as, say, like a PCI patient, for example. So, we hear it in pockets. I mentioned before, France and Germany seem to be some places that are really struggling with staffing in Europe, and we see it just in pockets around the United States and other places. So, it is a dynamic situation, and we think it has gotten better, certainly a lot of places, but not everywhere yet.

Brad Welnick:

Yes. The next question comes from Pito Chickering at Deutsche Bank. Pito, please go ahead.

Geoff Martha:

Our capital, first of all, isn’t a huge piece yet of our revenue. But it is – it tends to be tied to profitable procedures, and we actually had a strong capital performance in last quarter. And especially in our Cranial & Spinal Technology’s business, CST, our capital there, we had a number of our – whether it would be navigation, inter-operative imaging, had record capital quarters for us. So, we are – we definitely see a bit of – it takes a little longer to close a deal, but the demand as you are working with the hospital and how they are going to pay or finance this, but we are having strong demand in those areas. And then, of course, we mentioned Hugo. Hugo is still new for us, but we are very happy with the placements we have been able to make on Hugo here. Of course, those are outside the U.S., but very pleased with that.

Geoff Martha:

Thank you, Pito. We have got time for one more question, please, Brad.

Joanne Wuensch:

Hi. Can you hear me?

Joanne Wuensch:

Wonderful. Good morning and early happy Thanksgiving. This led straight into my Hugo question. Could you give us a little bit of an update on how you feel about the market potential for the product, the timing of U.S. approval? And at one stage, several years ago, you were talking about the potential contribution. Is there a way to start thinking about that again? Thank you.

Bob White:

Yes. Thanks Geoff and thanks Joanne. Good morning. Couple of thoughts here. First, on the overall market of 4Q go, we continued to be really excited about it. Remember, there’s – around the world still 95% cases are not done. That could be done robotically assistedly. So, we believe this is a true market expansion opportunity. So, we are still really excited about the continued long-term health of the market and excited to be the number two player in this space. With respect to the timing of U.S. approval, as Geoff mentioned, we expect to begin our U.S. IDE by the end of this calendar year. So, that’s exciting. Actual approval in the U.S., of course, depends upon the agency and the process there. So, I really can’t comment on that. And overall, with respect to the contribution, as you mentioned, I think it’s early to call that, but given our system is now installed around the world in markets in APAC, EMEA, Lat-Am. We just received regulatory approvals and indication expansions in Japan, which is the third largest robotics market in the world. We have general surgery approval in the EU, Canada and Australia, which opens up the hernia market for us. And we have started to see really strong presence at some really key congresses in Europe where live stream cases, etcetera. So, a little early to call it contribution, Joanne, but we are starting to see the momentum and the acceleration that we talked about. Thank you.

Geoff Martha:

Thank you, Joanne.

Geoff Martha:

Okay. Thanks Ryan. Well, first of all, thank you everybody for the questions. And we do really appreciate your support and continued interest in Medtronic. And we look forward to updating you on our progress on our Q3 earnings broadcast, which we anticipate holding on February 21. So with that, thanks again for tuning in today. Please stay healthy and safe. I understand there is a lot of people traveling this holiday. And for those of you in the U.S., I would like to wish you and your families a very happy Thanksgiving.

Geoff Martha:

Hello, everyone, and thank you for joining us today. We reported our Q1 results this morning, and the quarter played out largely as expected. Our organization executed to deliver revenue ahead of our guidance and EPS that was in line with our guidance. Macro factors that we discussed with you and forecasted over the past few quarters, like supply chain, inflation and foreign exchange, along with difficult comparisons to the prior year, caused our revenue and EPS to decline. At the same time, there were several bright spots in the quarter across our businesses, including strength in pacing, cardiac surgery, U.S. core spine, neurovascular, diabetes in Europe and strong overall growth in many emerging markets. And as we look to the future, we have several near-term pipeline catalysts approaching that will accelerate growth. We’re also making progress on our initiatives around quality and operating improvement. And in an uncertain economy, our business is well-positioned with our robust balance sheet, strong and growing dividend and leadership positions in many secular growth healthcare technology markets. So, taking a closer look at our Q1 results, as expected, acute supply chain disruptions impacted our performance, most notably, our Surgical Innovations business. We saw improvement in areas like packaging and resin supply as we progressed through the quarter. We also continue to manage semiconductor shortages across our businesses to minimize their impact on product availability as well as our financial results, and we’re expecting these chip shortages to linger throughout our fiscal year. Overall, our operations teams have executed and worked closely with our suppliers to minimize impact, improving our order backlogs as we exited the quarter. We expect our overall supply chain issues to continue to improve as we move through the fiscal year. On the demand side, we’re still seeing impacts to procedure volumes due to health professional labor shortages. And COVID is still causing procedure cancellations and deferrals in some pockets around the world. We see our hospital and physician customers are doing all they can to manage these dynamics. So, while procedure volumes in most of our markets remain at pre-COVID levels, we do have certain procedures or geographies where volumes are still lagging. Turning to market share. This is an important metric at Medtronic and is part of our annual incentive plan, along with revenue growth, profitability and free cash flow. And when we look at our quarterly market share performance, acute product availability challenges impacted our share capture opportunities in certain businesses, including surgical innovations and high-power CRM implants. We’re also facing some competitive pressures in pelvic health and in diabetes, predominantly in the U.S. We’re making good progress on the acute product availability issues and have pipeline plans in place to address competitive pressures over time. Now, let me highlight some of our bright spots. In CRM, our pacing business continues to outperform the market as our Micra leadless pacemaker family is driving strong growth around the globe as we enter new geographies and expand penetration in existing markets. Micra grew 15% in the quarter, including high-70s growth in Japan, mid-teens growth in Western Europe and high-30s growth in emerging markets. In CST, we had a good quarter in U.S. Core Spine, which grew 4%. We won market share on the strength of our overall portfolio, including our unit AI-enabled surgical planning platform and patient-specific implants, which had strong double-digit sequential growth in our U.S. user base. In addition, our recently launched Catalyft PL spinal system designed to target the TLIF and PLIF markets, drove meaningful results in Q1. And the breadth of our enabling imaging, navigation and robotic technologies is a key differentiator. In our Neuromodulation business, we are gaining initial implant share in both Pain Stim and DBS. In Pain Stim, the market continues to gravitate toward our Vanta recharge-free and Intellis with DTM rechargeable neurostimulators. And in DBS, customers value the differentiated sensing capabilities of our Percept PC system with our SenSight directional lead. In diabetes, we continue to see significant growth in markets outside the U.S. due to the increasing user base of our MiniMed 780G insulin pump, combined with our Guardian 4 sensor. The increase in this user base over the past couple of years is now driving significant recurring revenue growth for our CGM sensors and other supplies. In markets outside the U.S. where launched, the 780G and our Guardian 4 sensor has a very positive user experience with no fingersticks and more time and range. Now, this is due to its near real-time basal insulin and auto correction boluses every 5 minutes to address underestimated carb counts and occasional missed mealtime boluses. Now, let’s move to our product pipeline, where we’re advancing several meaningful technologies that can create new markets, disrupt existing ones and accelerate our growth. We continue to execute on our pipeline, having received over 200 regulatory approvals in the U.S., Europe, Japan and China over the past 12 months. And looking ahead, we have several near-term pipeline catalysts approaching that we expect will enhance the weighted average market growth rate of Medtronic. Now, starting with our cardiovascular portfolio in transcatheter valves. The limited U.S. market release of our Evolut FX valve is receiving an overwhelmingly positive customer reception. And we’re excited about the impact this next-gen valve can have as we move to full market release this fall. Evolut FX enhances ease of use and provides implanters with greater precision and control during the procedure, and it maintains all the industry-leading hemodynamic and durability benefits of the Evolut platform. When you combine the FX launch in U.S., PRO+ launch in Europe and Evolut PRO launch in China, we feel really good about the opportunities in our TAVR franchise around the globe. TAVR is one of the largest growth drivers for Medtronic, and we expect the market, which is roughly $5.5 billion today, to exceed $7 billion within the next three years and reach $10 billion in the next five years. In cardiac rhythm management, we’re really looking forward to disrupting the single-chamber ICD market with our Aurora extravascular ICD. Now, as you may know, one of our competitors has had a subcutaneous ICD in the market for many years, but it’s remained a niche device given its limitations compared to conventional ICDs. With Aurora, we’ve created a true game changer where the electrophysiologist and the patient don’t have to make trade-offs. It will deliver the benefits of a traditional ICD, including having the same size, battery longevity and ability to use proven antitachy pacing in lieu of delivering a painful shock to terminate life-threatening arrhythmias. Aurora does all of this without having to place leads inside the heart. Our EV-ICD global pivotal data will be presented this weekend in a late-breaking session at the ESC Congress in Barcelona. We’re also awaiting CE Mark approval for Aurora, and we expect U.S. approval next calendar year. In renal denervation, our breakthrough procedure to treat hypertension, we’re nearing completion of the six-month follow-up for the full cohort of patients in our SPYRAL HTN-ON MED study. We’ll then analyze the data and plan to present the findings in the next few months. This data will complete the final piece of our clinical module submission to the U.S. FDA as every other module has been submitted, reviewed and closed. The data on our simplicity blood pressure procedure is robust, including strong pivotal trial results and compelling real-world registry data from over 3,000 patients. And more recently, data has been presented that show already in patient spend nearly double the time and target blood pressure range through three years than those who received a sham procedure. This could have a profound effect on public health through the reduction of cardiovascular events, including stroke, heart failure and CV mortality. And we expect to be a leader in this market, which we project to exceed $500 million by calendar year 2026 and $2 billion to $3 billion by 2030. Moving to our Medical Surgical Portfolio, which includes surgical robotics. We continue to execute on the limited market release of our Hugo robot. We’re installing new systems and collecting clinical data in approved geographies, enhancing the system based on surgeon feedback, improving supply chain resiliency and scaling manufacturing production. Feedback and demand continue to be very strong. We’ve made progress over the last quarter, and we’re nearing the start of the U.S. IDE clinical trial for our urology indication. We also continue to increase our user base of Touch Surgery Enterprise, our AI-powered surgical video and analytics platform. With Touch Surgery Enterprise, surgeons can now easily review film from their surgeries to continuously improve and advance patient care. Overall, when it comes to surgical robotics, we’re investing heavily to become a major player in the market for the long term, leveraging our decades of experience and leadership in minimally invasive surgery. Now turning to our neuroscience portfolio. In Neuromodulation, we’ve submitted our inceptive ECAPs closed-loop stimulator. We expect inceptive’s closed-loop therapy, which optimizes pain relief for patients to revolutionize the SCS market. We’re also continuing to ramp our commercial activities to go after the diabetic peripheral neuropathy opportunity with our first cohort of DPN market development reps now trained. We believe DPN is one of the largest opportunities in med-tech, and we expect the market to reach $300 million by FY26 with an annual total addressable market of up to $2 billion. In diabetes, we’re in active dialogue with the FDA on our regulatory submission for the MiniMed 780G with the Guardian 4 sensor and we remain focused on resolving our warning letter. We’re making good progress on our warning letter commitments. We’ve completed more than 90% of the actions we committed to the FDA. This represents substantial progress toward resolving the warning letter and preparing for reinspection. In our CGM pipeline, we submitted our next-generation sensor, Simplera for CE Mark. Simplera is disposable. It’s easier to apply, and it’s half the size of Guardian 4. The Simplera file is ready to submit to the U.S. FDA, and we’re waiting to submit it as we’re prioritizing the 780G Guardian 4 review. And with regards to our overall diabetes pipeline, we’re making considerable investments, well above our corporate R&D average. We have a comprehensive pipeline of multiple next-gen sensor and pump programs, including patch pumps. This pipeline gives us confidence that we can restore strong growth to our diabetes business over the coming years. With that, I’ll turn it over to Karen to discuss our first quarter financial performance and our guidance. Karen?

Geoff Martha:

Thank you, Karen. Now, this last quarter, we made a lot of progress on our aggressive agenda of underlying changes that are needed to ultimately accelerate our growth. With supply chain, it’s getting better. And our back orders are coming down, not just because of the external environment, but because of the actions we are taking under Greg Smith’s leadership, and I expect these improvements will continue. We’ve co-located our employees with suppliers and are also working closely with sub-tier suppliers. We’re managing through the acute issues and making progress on improvements that I’m confident can enhance the resiliency of our end-to-end supply chain. On quality, we’ve been conducting a large transformation of our quality system over the past couple of years. We’re advancing quality in innovative ways, working very closely with our regulators, and this is leading to important progress. We’re also making progress on our pipeline and portfolio as these two strategies come together to create meaningful growth drivers. We’re tucking new products into dependable higher growth businesses like we did by adding Intersect ENT to our ENT business. We’re also broadening the product portfolio of some of our businesses so that they can become more meaningful growth drivers for the total company, like our strategy in cardiac ablation solutions. Overall, the path has not been easy, but I’m confident that these fundamental enhancements that we’re making to the company, combined with our op model change, culture changes and incentive changes, are positioning us to deliver a higher level of growth that can be sustained. And as we overcome the near-term issues and start to put points on the board with the pipeline, I believe the underlying transformation of Medtronic. All the work that we’ve been doing over the past couple of years will become increasingly apparent, setting up a durable value creation engine to fully capitalize on the mega trends in the healthcare and technology markets, which will benefit all stakeholders. So, to close, I want to join Karen in thanking our employees. It’s never easy going through change, especially in a challenging macro environment, but our teams have stayed focused and are playing critical roles in helping to alleviate pain, restore health and extend life for millions of people around the globe. Now, let’s move to Q&A. 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 and the Investor Relations teams after the call. With that, Brad, could you please give the instructions for asking a question?

Ryan Weispfenning:

We’ll take the first question from Robbie Marcus at JPMorgan.

Geoff Martha:

Robbie, well, thanks for the question. There’s a lot there to unpack. Maybe I’ll start and then hand it over to Karen. I mean, look, I think -- look, the quarter played out largely as expected, managing through these macro headwinds and making progress on supply chain issues, like resins and packaging. And the procedures largely remain at pre-COVID levels. And we are seeing month-over-month improvement and had a pretty good exit coming out of the quarter. Getting to the remaining three quarters of the year, I mean, one, you see coming out of this first quarter, you’ll see some tough comps anniversarying. I think we grew like 19% in Q1 last year, and we have vents and LVADs, certain tough comps anniversarying there. And then I mentioned earlier, some of these acute supply chain issues, we’re starting to put them behind us. I mentioned resins and packaging. We have semiconductors that we’re still dealing with across many businesses that will be with us for a little longer. But a lot of the acute issues we’re starting to put behind us. And then, we’ve got a number, and we’ll get -- I’ll let Karen get into the specifics of the Q2 versus the second half. But we have a number of nice growth drivers in the second half of the year, like the full market release of Evolut FX and EV-ICD coming as well. And it’s -- and there’s a whole -- there’s a number of other launches as well or even existing products that are out there that pick up momentum, and the cadence as they go through the three quarters. Maybe I’ll turn it over to Karen to provide a little more details on that.

Ryan Weispfenning:

Thanks, Robbie. Take the next question, Brad.

Vijay Kumar:

Geoff, I had two product-related questions, maybe one on RDN and one on the robot. RDN, can you just talk to us, and when can we expect this data? I think you said it’s in the upcoming months. Is that going to be a headline press release? Will that be a formal presentation at a conference? Is there any chance that the FDA looks at the data and could hold an adcom, or any sense on what we can expect from RDN?

Sean Salmon:

So, Vijay, we finished enrollment and then a six-month endpoint to get to, which will be ramping up very, very shortly, and we target the -- whatever comps we have this fall, which was most likely in the AHA. So, we’ll submit an AHA. And if it gets accepted, that would be the place that we’d see the results. Now, we’d also publish those results and make the top line available in that same period of time. And that is -- just a reminder, that is the last part of what we’ve submitted, right? So, every other module has been reviewed and closed. It’s just the clinical data that’s outstanding. So, we’re as close as we’ve ever been.

Geoff Martha:

Sure. And I’ll have Bob chime in as well. But yes, this quarter was a big quarter for us as we made, I think, quite a bit of progress on some of the supply chain concerns that we had, in some cases, some specific issues that we had to resolve and building our manufacturing capacity as well, ahead of the U.S. IDE and more importantly, expanded sales in Europe. We had a number of installs and continue to get good feedback. And the surgeon feedback continues to be really strong. And I actually had a chance to meet with a number of our surgical innovations reps, sales reps. And I was asking them, like what are you hearing from your surgeons? And I was pleased with what I heard. And there’s a lot of -- the word is out. They like the design. They like the approach we’re taking to the market. And they realize that when we launch, we won’t have all the indications yet, and we’re going to be building out our instrument on the number of instruments we have with it, but they want to be part of this journey with us. So, I think the expectations are appropriately set. We built out some manufacturing capacity. And like I said in the commentary, we are real close to this U.S. IDE. And so I don’t know, Bob, what do you want to add to that?

Geoff Martha:

Bob mentioned the Touch Surgery. That’s another big piece here with this ecosystem. That’s something we learned in the spine space, how important it is to have not just the robot, but the all enabling technologies around it. We’re starting to -- customers are starting to use Touch Surgery with Hugo now and surgeons are impressed with the kind of analytical capabilities and the benefits of the secure video storage and sharing for case review and training and whatnot. So, the ecosystem for our soft tissue robot is coming along nicely, as Bob mentioned. So, there’s definitely some excitement on our end.

Unidentified Company Representative:

The next question comes from Travis Steed at Bank of America Global Research.

Geoff Martha:

Okay. Yes. Thanks for the question, Travis. Yes, we’re definitely continuing to look at the whole portfolio more intently, and we’ve been doing that for several months now, as you mentioned. And look, I’ll start by saying, look, we’re really deeply committed to doing the right things for shareholders and all Medtronic stakeholders. And when we’re looking at this portfolio and capital allocation, we are talking about both, the buying and the selling side and actively looking at, as you pointed out, portfolio management to really improve our weighted average market growth rate, whether it be through addition or subtraction and to make sure that the growth is more durable. So look, we’re making -- we made a lot -- we’re making a lot of progress on the approach here to look strategically at each business. And last quarter, we -- I’ll remind you, we did announce an initial step on the subtraction side of things with the Renal Care Solutions JV with DaVita, but this process will be a continuous process. I just want to also set that expectation and will play out over time. So the goals are unchanged. The process continues. And like the goal is this durable growth. So, it’s a lot easier to grow and our rated market growth rate is increasing as well. And I’ll leave it at that and turn it over to Karen for the other question.

Ryan Weispfenning:

Thanks, Travis. Take the next question, please, Brad.

Cecilia Furlong:

I wanted to ask about the diabetes business, the updated guidance for the year. Obviously, OUS came in stronger. But just what you’re expecting now, both OUS, but then also in the U.S. from competitive pressures? And then, I wanted to follow up. It sounded like your timing for submission of Simplera shifted your strategy there. Just if you could comment on how you’re thinking about the cadence of submission. Thank you.

Que Dallara:

Thanks, Geoff. Yes, I would say the transition with Sean has gone really well, and I’m really encouraged with the progress we’re making on restoring this business to growth as well as innovation road map. And to address your two specific questions around what we see in the U.S. as well as around Simplera, I would say that, look, our short-term focus is remediating the warning letter and also making progress with the FDA around approval of the 780G and the Guardian 4 sensor system. We continue to be encouraged by that, making good progress. And so, our hope is that we can remediate that and secure approval in the near term. Now -- but we’re not standing still. In the U.S., we do see growth in our 770G system as well as our InPen technology. And not only that, we are very close to launching the extended-wear infusion set, which has been approved by the FDA for up to 7 days where this is a game changer for patients. It’s probably the biggest innovation we’ve seen in the last 20 years in this area and allows patients to be able to synchronize, if you like, their sensor CGM changes with the infusion set changes, leading to better site recovery and comfort for our customers. So, that’s happening. We obviously anticipate 780G, but we’re not standing still with respect to the products that we do have approved in the U.S. And with regards to Simplera, I mean, we’re very excited about this product. It’s half the size of the Guardian 4 sensor. It’s thinner. We’ve submitted a CE Mark in July as we said we would. It is ready to go for submission in the U.S. But we are -- we remain focused on prioritizing the efforts around the warning letter as well as 780G approval.

Ryan Weispfenning:

Thanks, Cecilia. Next question, please, Brad.

Larry Biegelsen:

First, on supply constraints, I think in Q4, you said it was about a $260 million impact. How much was the impact in Q1? What are your expectations for Q2? And are you assuming some catch-up from lost sales? And just lastly, Karen, maybe talk about the FX hedging gain in the guidance now for ‘22. I think it was $410 million to $440 million. And how that rolls off in fiscal 2024, how we should think about that? Thanks so much.

Karen Parkhill:

Thank you. I think you covered it well on supply chain. We did say that we expect it to get a little worse before it got better, and that’s what happened in the first quarter, but we expect it to get better from here. We do have the supply chain improving, but again, not necessarily a bolus catch-up built into the guide. In terms of FX, as you’ve seen, we’ve had the strengthening dollar continue to impact our reported revenue, just like it has for many of our peers. We do have foreign currency-based cost of sales and overhead. And now we have foreign currency-based interest expense as well, and those all provided some offset. And as you know, Larry, we also have the benefit of our multiyear currency hedging program, which did produce significant gains, and that resulted in a smaller FX impact to the bottom line in the quarter. As we look ahead for FX, I would say, keep in mind, it’s only Q1 now. We’ve got foreign exchange rates that are continually volatile. So, we know they’re going to move from here. But, if we look at next fiscal year, based on recent rates, we would expect the headwind next fiscal year to be similar to the headwind this fiscal year, again, if rates stay the same. I hope that helps.

Unidentified Company Representative:

Yes. The next question comes from Joanne Wuensch at Citi.

Karen Parkhill:

Yes. Thanks, Joanne. On margins, we do expect margins to improve sequentially through the year as revenue improves. So, the answer to that one is yes. And then, Geoff, for...

Bob White:

You’re exactly right, Geoff. It begins with our U.S. IDE that will start the U.S. process. And as we mentioned, Joanne, we’re nearing the start event, but that will be the key milestone that we’ll certainly update -- guide investors on it.

Unidentified Company Representative:

The next question comes from Jayson Bedford at Raymond James.

Geoff Martha:

I think the -- thanks for the question. I think the variance path is an option. But as I said earlier, I think our primary priority is to -- is to work with the FDA and remediate the warning letter, now focus entirely on doing that. Obviously, we’d love to. We’re very eager to launch the product, but we’re focused on patient safety, making sure that our remediation plans are robust. It’s really the first and foremost in our mind that we make those corrective actions. So, that’s our primary focus. In parallel to that, we are engaged with the FDA on getting the 780G and Guardian 4 sensor system approved. Those -- both those things continue to make progress. It’s obviously very hard for us to be completely predictive around when those things will happen, but I’m really pleased with the progress that we’re making on both of those.

Karen Parkhill:

We will do that as soon as we feel confident that we’ve made sufficient progress on the warning letter remediation as well as progress on the 780G. So, as you know, we submitted for CE Mark in July, as we said we would. And we just want to make sure that our focus remains on those immediate short-term goals of warning letter remediation and approval for the 780G.

Unidentified Company Representative:

The next question comes from Steve Lichtman of Oppenheimer & Co.

Geoff Martha:

That’s a great question. Thanks for that one, Steve. They’re -- they’ve made quite a bit of progress in a relatively short period of time. Greg started in April of 2021. So, it’s been a little over a year. And in that time, we’ve -- working with the executive team, we’ve centralized, if you will, the global operations and supply chain function. This is one of those opportunities in our new model where we’re trying to play small and play big at the same time. Certain things have been decentralized into the businesses and the businesses are more empowered, refer to them as operating units. And then certain things, a limited list where we’ll leverage our scale or drive and/or drive standards. And the supply chain is definitely one of those. So, we’ve made that change, that organizational change, which is probably the biggest organizational change we’ve made,, even more than going to the 20 operating units. And so, it’s significant. In addition, we started to invest in new capabilities, hiring people from outside the company, outside the industry, and in many cases, that are best-in-class in the various sub functions, if you will, or capabilities within global operations and supply chain, things like planning, things like factory automation, et cetera. And we’ve been -- so we’ve hired quite a few, and I think the majority of Greg’s team is new in the last year, and we’ve been making investments in technology, various different systems on planning and supply planning, demand planning, et cetera. And the number one focus has been resiliency and quality. There’s three things we’re looking at from this function

Ryan Weispfenning:

Okay. Thanks, Steve. Next question, please, Brad.

Rich Newitter:

Just on spine, I think you guys called out navigation and robotics may decline. I was hoping you could talk a little bit about what you’re seeing there on the funnel and the pipeline and the capital environment more broadly. Any changes that are taking place in the way you’re selling these types of capital items, especially robotics? And then we did see one of your orthopedics robotic competitors talk about changing business models, more rentals meanwhile, but your direct spine robotics competitor actually saw a sequential pickup in capital purchases. So, it would be great to get your color on the capital environment and specifically what’s going on in spine robotics. Thanks.

Brett Wall:

Sure, Rich. Yes, looking overall, the capital, we have a very extensive ecosystem and capital system within our CST business. And what we saw was extended purchasing times, particularly as we move through to the end of our quarter. Now specifically, as it relates to the technology and the selling models, we have a variety of different approaches that we use. And so, we’re well positioned. However, the markets seem to work and hospitals are in a mode of preserving cash. We have more opportunities to put forth different models where we actually utilize the implantables and other disposable products as a way of financing this particular capital, and that works very well. We didn’t see a significant uptick in our O-arms or StealthStations during the time -- this time with that model, but we saw a little bit of an uptick with Mazor in that particular model. And we think during these times, we’ll probably see more of that. The competitor you referenced there, if you look at calendar Q2, per our calculations, we continue to outstrip them in our actual placement and sales of robots. And so, we continue to do that and our procedural base there is nearing almost double the amount that they reported in their last earnings call. So, we are very well positioned there. And then the underlying spine business remains pretty attractive. We saw a 4% increase in our core spine business there. So we’re pleased with how that’s recovering.

Ryan Weispfenning:

Yes. Thanks, Rich. I think we’ve got time for one more question, Brad.

Rick Wise:

I was hoping, Geoff, just in closing, you’d expand on two of your exciting, I think, pipeline opportunities. You highlighted Aurora, the leadless subcu device. I was hoping you’d share your latest thinking in terms of the opportunity there. And when you talk about U.S. approval next year, you’re saying next calendar year or next fiscal year, and this seems like a major opportunity. I was hoping you could talk about that. And just last, you didn’t talk as much this time about the opportunity in pulsed field ablation. Maybe just update us on your internal Medtronic program and the fair programs and just some timelines on the U.S. trial, follow-up, submission and approval timing. Any of that would be great. Thanks so much.

Sean Salmon:

Yes, sure. So Rick, as Geoff mentioned in the commentary, today’s subcutaneous ICD market is, it’s a niche around $300 million, $350 million, $300 million to $350 million annually. And we think that within 10 years, this could be $1 billion segment. And the reason that it expands is all those limitations of the current device where we can get sort of the benefits of traditional IC, smaller devices, monoliner life, the ability to pace out of the arrhythmia rather than having to shock out arrhythmia. That’s really both can I expand the market like we saw with leaves pacing. When we went to that, we started picking up new patients that weren’t being treated because of the acuity of disease and leads to that strong growth. And with regard to timing, we’re saying next calendar year, to kind of put a finer point on that, it’s the first half of next calendar year is what we’re targeting for approval for the U.S. Pulsed field ablation, we have completed the trial, as you know, last November, and that’s been in its follow-up period. So that would put us for availability of data in the spring time. That’s probably one of the most likely to be presented. And, of course, the filing of our technology would be at that point in time. As Geoff mentioned, we’re waiting the regulatory closure of Affera, and that really expands out the fuller bag. It gives us within both RF and pulsed field, point-by-point ablation. And what we have with our own internal PFAs really for the isolation of pulmonary veins sleeve, right? So, it’s more anatomically based. And then, the other catheters that come with Affera would be for point-by-point ablation or for lines of conduction blocks that you do with a linear catheter. So, really nice complementary sort of technologies for PFA. But more importantly, we’ve been restrained from being able to participate in the full market because we don’t control the mapping navigation systems. There’s a strong monopoly between two players, Biosense Webster and Abbot, particularly really control and dominate that field. So, that Affera acquisition allows us to have all of our catheters now with mapping navigation really expands the opportunity into that and was today an $8 billion market. Should be, by the time all this stuff rolls out, it continues to grow robustly close to $10 billion, and we’ll be able to fully participate in that market. So, two really important growth drivers, we’re excited about them, and we’re making meaningful progress on both of them.

Geoff Martha:

So with that, I think that is all for Q&A, all the time we have. And I just, again, want to thank you for the questions, the engagement. As always, we appreciate your support and your continued interest in Medtronic. And we look forward to updating you on our continued progress, we talked about here on our next earnings call, our Q2 earnings broadcast, which we anticipate holding on November 22, so just before Thanksgiving, here in the U.S. -- just before Thanksgiving. And so with that, thanks for tuning in today, and please stay healthy and safe, and have a great rest of your day.

Geoff Martha :

Hello, everyone. And thank you for joining us today. This morning we reported our Q4 results. Now there were parts of the quarter that played out as anticipated, and there were also some unexpected challenges more than I would have liked, which caused us to come up short of our expectations. As we anticipated procedure volumes in most of our markets reached pre-COVID levels by the end of the quarter. We also executed and delivered on recent product launches. However, we faced challenges related to supply chain in China that impacted some of our businesses, and were the largest contributors to our shortfall. Now, I’ll get into more detail on these challenges shortly, but you should take away that we understand the root causes, and we are well down the path to addressing them. And to be prudent however, we've assumed that these challenges will persist for the next quarter or two in the guidance that Karen is going to walk you through shortly. So let's focus on what happened this quarter. The shortfall to our revenue guidance was primarily due to two factors. China, where the extended COVID lockdowns affected our results in the quarter, particularly in April, and global supply chain challenges. Over the past few quarters global supply chain challenges have impacted many of our businesses. And as they arise, our teams have worked quickly to resolve them. And prior to this quarter, we had largely mitigated their financial impact. However, this quarter one of our largest businesses, Surgical Innovations, was adversely affected by certain raw material shortages. And this resulted in large back orders and caused our SI revenue to come in well below our expectations. Several of our other businesses also face supply challenges in the quarter, but to a lesser extent. Now we're down the path of improving our supply chain capabilities. And we're leveraging the expertise that Greg Smith, our new Global Ops and Supply Chain leader brings from the retail consumer product and automotive industries. Greg and his team are making progress addressing the areas where we can improve, including the management and resiliency of our critical suppliers and manufacturing network. The recent stress of these global supply chain issues has further illuminated the need for the enhancements. We have a new global structure in place that consolidates operations and supply chain functions, which were previously fragmented throughout the organization. Now, this is a big move for us. And there is still a lot of work to be done. But I am confident we will come out of this with a more resilient end-to-end global supply chain that we believe will be a competitive advantage in our industry. While some of our Q4 challenges will persist in the near term, we expect strong improvement in the back half of our fiscal year. And we remain focused on delivering our long-term strategies. We've made significant changes over the past two years to position the company for accelerated and sustained innovation driven growth. Our pipeline is robust and continues to advance with a number of upcoming catalysts and fast growing medtech markets. We're committed to creating strong returns for our shareholders, and we're making progress with our enhanced portfolio management and our capital allocation processes. We're investing in future growth drivers, while at the same time returning capital primarily through our meaningful and growing dividend, which we just increased again today by 8%. Regarding portfolio management, we are continuing to advance the robust process we began talking about earlier this year. And within that, and as a smaller initial step, we're pleased to announce that we've reached an agreement where we will contribute our Renal Care Solutions business into a new company, which we will jointly own with DaVita. In return we’ll receive up to $400 million in value from them and we expect this transaction will close in calendar 2023. The new company is going to develop a broad suite of novel kidney care solutions, including home-based products. I'm excited about this for a couple of reasons. First, this business is going to have the focus that it needs. Second, DaVita is a global leader in kidney care and will be a great partner to commercialize and scale this innovative technology. And finally, both Medtronic and DaVita will participate in the expected upside. Now turning to market share, product availability affected our performance in the quarter with our overall company share down about a half a point. On the bright side, even with our challenges, half of our businesses held or gained share. And as you know, market share is an important metric for us at Medtronic as it is a driver of our annual variable compensation, along with revenue growth, profit, and free cash flow. Well, I won't go through market share business by business in the interest of time, we'll be happy to take questions in Q&A. Now, let's cover our product pipeline, where we're advancing several meaningful technologies that can create new markets, disrupt existing ones, and accelerate the growth profile of Medtronic. We made great strides with organic pipeline in fiscal ‘22, conducting over 300 clinical trials and receiving over 200 regulatory approvals in the U.S., Europe, Japan and China. Our recent product launches are starting to make an impact across our businesses. And as we look ahead, we have increasing visibility to upcoming catalysts in the back half of the calendar year that we expect will help accelerate our growth as we go through fiscal ‘23 and beyond. Starting with our Cardiovascular Portfolio and Cardiac Rhythm Management, recently launched Leadless Pacemakers, including our Micra AV in Japan and Micra VR in China led to above-market growth again this quarter. We just received approval for Micra AV in China earlier this month. And we expect geographic expansion to continue to drive strong Micra growth. In ICDs, we're preparing to disrupt the single-chamber market with our Aurora extravascular ICD. We continue to drive towards CE Mark approval for Aurora later this calendar year and U.S. approval next year. With Micra and EV-ICD, we expect continued strength in CRM. In Cardiac Ablation Solutions, we've been assembling a number of technologies to increase our impact in the $8 billion EP ablation market, building on our leadership in cryoablation. We're continuing the rollout of our DiamondTempt RF system and exclusive cryoablation first-line indication for paroxysmal AF. We're advancing our Pulsed Field Select anatomical pulsed field ablation system having fully enrolled our global pivotal trial. We're also expecting to fill competitive gaps in cardiac ablation with our recent announcements to add a differentiated mapping and navigation system and left heart access portfolio including a transseptal access system that can perform both mechanical and RF crossings. In renal denervation, data from our SPYRAL HTN-ON MED pilot study were presented last month at ACC and simultaneously published in the Lancet. These data demonstrated durable and clinically significant blood pressure reductions through three years. And last week, additional data were presented at EuroPCR which showed those receiving [RDN] (ph) spent significantly more time in target blood pressure range, adding to our robust body of evidence. In Q4, we also announced that we completed enrollment in the full cohort of patients in the ON MED study, which we expect to complete the six-month follow-up in the second half of this calendar year. We'll then look to present the data and submit for FDA approval as ON MED is the final piece of our submission. In Structural Heart, differentiated durability data for our TAVR valves were presented as a late breaker at ACC last month. The data showed that our TAVR platform is the only one to outperform surgical valves in durability at five years as measured by SVD or Structural Valve Deterioration. And less SVD was associated with better clinical outcomes, including mortality and heart failure hospitalization. Additionally, durability data were presented from a separate UK registry, the first to look at TAVR data past 10 years. And it showed CoreValve had one-third the rate of structural valve deterioration compared to SAPIEN and SAPIEN XT. And data at EuroPCR last week reinforced our excellent clinical outcomes with our cusp overlap implant technique, including one-day hospital discharge, single-digit pacemaker rates and the absence of moderate or severe PBL. In the quarter, we also continued to launch Evolut PRO+ in Europe and began the launch of Evolut Pro in China, our first entry into this large and underpenetrated market. In the U.S., we're planning to start the limited market release of our next-generation TAVR valve, Evolut FX here in our first fiscal quarter and move into full market release later in the fiscal year. We're also looking to expand our TAVR indications. We had first enrollment earlier this month in our EXPAND TAVR 2 pivotal trial, evaluating our TAVR platform in patients with moderate symptomatic aortic stenosis. Overall, TAVR represents a large growth driver for Medtronic as we expect this roughly $5.5 billion market to exceed $7 billion within the next three years and reach $10 billion in the next five years. Moving to our MedSurg portfolio and Surgical Robotics, we remain focused on the limited market release of our Hugo robot while we scale production. We completed Hugo installations in Denmark, France and Italy. We also continue to increase our installed base of Touch Surgery Enterprise, our AI-powered surgical video and analytics platform. In our Patient Monitoring business, we just received FDA clearance earlier this month for our next-generation Nellcor OxySoft pulse ox sensor. Now this sensor includes a special silicon adhesive designed to protect fragile skin while enhancing adherence. Its low profile and brighter LEDs improve accuracy and responsiveness for the most challenging neonatal and adult critical care patients. Now turning to our Neuroscience portfolio and our Cranial & Spinal Technologies business. We're seeing strong adoption of our unit AI-enabled surgical planning platform with a mid-30 sequential growth in our U.S. user base. The ongoing launch of our Catalyft expandable titanium interbody system and the rollout of our enabling technologies continues to differentiate us in spine. Customer demand for our Catalyft equipment remains strong. And we had record quarters for our Mazor robotics system and StealthStation navigation system. In Neuromodulation, we're building our commercial teams and have started the initial launch of our Intellis and Vanta spinal cord stimulators to treat diabetic peripheral neuropathy. We believe DPN is one of the largest opportunities in medtech, and we expect the market to reach $300 million by FY '26, with an annual total addressable market of up to $2 billion. And we're also excited about our Inceptiv ECAP’s closed loop spinal cord stimulator, which we submitted to the FDA late last calendar year. We expect Inceptiv’s closed-loop therapy, which optimizes pain relief for patients to revolutionize the SCS market. In Brain Modulation, our ongoing launch of the Percept PC neurostimulator and SenSight directional leads is driving new implant share in both Europe and the U.S. And this is the only system that can stimulate and sense brain signals. In Pelvic Health, we received FDA approval of our next-gen InterStim recharge-free device, InterStim X, and that was happened in the fourth quarter. InterStim X features our proprietary fifth-generation battery chemistry that provides 10 to 15 years of battery life without the need to recharge. And in ENT, we announced earlier this month that we completed the acquisition of Intersect ENT. And we're excited to add their attractive high-growth complementary products into our existing business. We believe we can grow Intersect's products in the double digits over the next several years as we expand use of both the PROPEL and SINUVA sinus implants globally. In Diabetes, our MiniMed 780G insulin pump, combined with our Guardian 4 sensor continues to be extremely well received in markets where it's available. Now this system has a very positive user experience with no fingersticks and more time and range. This is due to its near real time basal insulin and auto correction boluses every five minutes to address underestimated carbohydrate counts and occasional mismeal doses. Very strong data on 780G and Guardian 4 were presented at ATTD last month, showing improved time and range with less user interaction. Additional datasets on this differentiated system will be shared at ADA next month. And we also announced that Germany and France began reimbursement of our system in the quarter, which helped drive high-teens sequential international growth in diabetes. And in the U.S., we made substantial progress in meeting our observation and warning letter commitments, and continue to have regular communication with the FDA. In our CGM pipeline, we expect to submit our next generation sensor, Simplera, for CE Mark and FDA approval this summer. In addition, we're advancing multiple next gen sensor and pump programs, including patch pumps. We're making considerable investments in our diabetes pipeline with line of sight to restoring strong growth in this business over the coming years. And with that, I'll turn it over to Karen to discuss our fourth quarter financial performance, and our new guidance for the next fiscal year. Karen?

Geoff Martha :

Thank you, Karen. While we spent a lot of time covering the fourth quarter, it's worth briefly reflecting on what we've accomplished in fiscal '22. It's certainly been a difficult environment, and our organization has enacted big changes in such a short period of time and under unique circumstances to better position the company. It was our first full year in the new operating model, and with our enhanced Medtronic mindset of acting boldly, competing to win, moving with speed and decisiveness, fostering, belonging and delivering results the right way. We've also made strides to becoming a more diverse and inclusive organization. And I was very proud that Medtronic was recognized earlier this month as number 10 on Diversity Inc.'s Top 50 U.S. Companies for Diversity. Even with that, we're committed to improving through innovative programs to attract, develop and retain top talent from all gender and ethnic backgrounds. Along those lines, we've made notable hires in fiscal '22, recruiting great talent from healthcare technology industry and beyond. While we've implemented a number of changes, this past year has been choppier than I would have liked with some of our growth drivers being pushed out and the impact from the pandemic, quality challenges and supply chain affecting our results. But we have a clear direction, a clear direction where we're headed as we transform the company. Let's start with the top-line. We remain laser-focused on accelerating the growth through robust capital allocation and portfolio management. You're seeing our efforts to enhance our future growth through greater investment in organic R&D, as well as portfolio moves. We've already spoken of the organic growth catalysts in front of us, many coming later this fiscal year. We're also executing a healthy cadence of tuck-in acquisitions in faster-growing markets, and we're focused on reducing our footprint in lower growth and lower-margin businesses. We continue to work on additional portfolio moves with the goal of creating a portfolio where we have distinct expertise, synergies across the company and ultimately, higher growth and higher margins. And to aid this effort, we've assembled a dedicated team that is 100% focused on our integrations and divestitures. At the same time, we have the opportunity to improve our global supply chain and operations by centralizing these activities, allowing us to leverage our scale, invest in new technology and ensure we have world-class supply chain experts responsible for our global operations. And this isn't something new that we're just starting now. Although recent challenges have given us a greater sense of urgency, we've been on this journey for over a year. And while it will take time, I fully expect our efforts to drive lower cost and lead to consistent and reliable quality along with greater product availability, all on a sustainable basis. Now well beyond healthcare, our world is facing a lot of economic uncertainty with questions around inflation, global supply chain challenges and continued impacts from the pandemic and a potential recession. But our business, the business of health care and the delivery of essential lifesaving technology is something that continues in good times and uncertain times like these. And demand for our products continues to increase with the aging and growing of our global population. When you look at healthcare technology, Medtronic is uniquely situated, particularly in these uncertain times, given our diversified businesses with leading market positions in growth markets, a robust product pipeline, solid free cash flow, strong balance sheet, and a very attractive and growing dividend to add to our return to shareholders. We have near term challenges that we are overcoming. And the opportunities in healthcare technology and at Medtronic are immense. We are fully focused on continuing on our transformation journey and making our opportunities a reality as we alleviate pain, restore health and extend life for millions of people around the world. Finally, I want to thank our exceptional Medtronic employees. I get to see the outcome of their efforts to fulfill our mission every day. It's inspiring. In addition, their willingness to lean into our new operating model and embrace our new culture have been key to the ongoing transformation of the company. I also want to thank our partners in health care, the frontline workers who are at that final step in ensuring patients get our therapies and are dedicating their lives day in and day out. Their incredible efforts to continue care delivery and get us all through the pandemic will be noted as one of the great accomplishments in history. Now let's move to Q&A. We're going to try to get 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 and the Investor Relations team after the call. With that, Brad, can you please give the instructions for asking a question?

Vijay Kumar :

Hi, guys. Thanks for taking my question. Geoff and Karen, maybe I had a two part question. I'll ask both right away. When I look at the 4 to 5 organic guide for fiscal '23, perhaps it came in slightly better than expected. Can you talk about some specific assumptions around even -- you noted supply chain, there were some back orders. Is there some contribution from supply chain back orders? Any further disruption from supply chain? What are you assuming for diabetes, robotics? I think China AVP is something that investors have asked. And Geoff, related to that, I think if I take a step back, the Medtronic pieces of mid-singles up high singles earnings. Consistency has been something that people have questioned. We've had some moving parts over the years. As you look at all the changes that have happened, -- maybe talk about what gives you the confidence that this consistency of mid-singles on the top and high singles on the EPS line should be something that investors should look forward to?

Karen Parkhill :

Yeah. Thanks, Vijay, for the question, and I'd love to take this in pieces because I want to walk you through Q1 and then also talk about the full year because we expect improvement each quarter as we move through the year. So just starting with Q1, given our recent challenges, we've elected to take a conservative approach with our Q1 guide. We're assuming underlying fundamentals are pretty similar to last quarter to Q4, and we've built in some conservatism in the supply chain. If you look at the year-over-year view, it's influenced by COVID. And so to remove that noise, I think it's really good to look at it on a COVID comp-adjusted basis. And when you do that, our guide really just implies a slight deceleration from Q4 to Q1. That's not out of line with what we've seen historically. And again, I would just emphasize that we've included conservatism due to the supply chain. Some puts and takes that we've got in Q1, in addition to the supply chain impact that we factored in, we've also assumed some incremental pressure in spine in China ahead of a potential national volume-based purchasing tender. And Geoff already mentioned on the plus side, we anniversary some of our headwinds like the Navion recall and the LVAD shutdown. If I move beyond Q1 and then into the full year guide of the 4.5%, I mentioned we do expect improvement as we progress through the quarters with our back half much better than our first half. But I'd also talk about the puts and takes that we've got on the full year. We talked about the fact that we continue to actively work with the FDA on the diabetes warning letter. But for conservatism, we've elected not to assume the approval of the 780G in this guidance. And also, it's manageable, but we've got volume-based pricing in China that we believe will have a bigger impact in this fiscal year, primarily in Spine. And at the same time, Geoff talked about it, and we have a number of positives as we think about FY '23. First, we've got headwinds that are going to go away, the LVAD business, the Navion recall, the reduced ventilator sales that Geoff mentioned. And then we also had some volume-based pricing on drug-eluting stents in China that will anniversary. And combined, all of those headwinds had a 200 basis point impact in FY '22. Second, we expect these supply chain challenges to improve as starting in Q2 and obviously continuing to improve from there. And then thirdly, our year-over-year comps get easier, particularly in the back half. And then lastly, we've got a number of really important product launches throughout the year. And just to name a few of them, we've got Evolut FX, we've got ECAPs, we've got diabetic painful neuropathy. And again, I'm just naming a few. So I hope that's helpful and shows what our guidance implies as we move throughout the year.

Geoff Martha :

Thanks, Vijay. Next question, Brad?

Travis Steed :

Hey, good morning. Thanks for taking the question. I'll ask a two part one as well. I guess, first on the elective procedure recovery. Curious how May is shaping up versus April kind of around the world, both in the U.S. and China as well. And then the second part was going back to kind of some of the supply chain issues. The impact this quarter is a little bit worse than some of your peers. I don't know if things got a lot worse in April, or there was something specific with surgical innovations. I just want to make sure we have the confidence that, that's going to start to improve here in the next quarter or two.

Karen Parkhill :

Yeah. Travis, thank you. So just in terms of the month of May, it's still early. And we're obviously focused on managing through some supply issues that we've got in some of our businesses. So the numbers are a little cloudy, but when we look at our operating units that are not impacted by supply issues, just through the first three weeks of May, we're trending largely in-line with where we were first quarter last year. And I would note that elective procedures for the most part were back to pre-COVID levels for us last quarter.

Brad Lerman:

The next question comes from Larry Biegelsen with Wells Fargo Securities. Larry, please go ahead.

Geoff Martha :

Okay. Nice to hear from you, Larry. Thanks for the question. On the Renal Care Solutions joint venture with DaVita, this is what I'd characterize as a smaller initial step in terms of our portfolio management work. That work continues, and we do anticipate that there could be more portfolio moves over the course of FY '22. I'm not going to comment on the size of those. But I'd characterize this is a smaller initial step. It's been under consideration for a while. And like I said in the commentary, I am excited about this. This technology that we've been working on for years, I think DaVita, this joint venture will bring more focus to that finishing up the development. And then I think, obviously, DaVita as a leader in kidney care and will be a great partner as we commercialize and scale this innovative technology. They bring a lot to the table there. And I think we bring a lot to the table on the technology side and looking forward to it. But as we move forward, I don't know that I'm not -- the other portfolio moves would be JVs or anything like that. For this one, this one just made the most sense. And we think there's a lot of upside in this technology and the way we structured this deal. Both DaVita and Medtronic will share in that upside. So looking forward to that. In terms of the goals of the portfolio work, they remain unchanged. Our North Star is durable growth, durable growth without taking a step back on margins and free cash flow. We just want a higher level of growth. And so we want to remake the portfolio for a higher [Indiscernible] and more consistency and growth. So that's the goal. And I think the other -- the secondary goal would be just to simplify the company a bit. So that's -- those are the goals. That's where we're headed and more to come.

Geoff Martha :

Thanks, Larry. Next question, please, Brad.

Shagun Singh:

Thank you so much for taking the question. I was just wondering if you can give us an update on your portfolio management initiatives. What are you assuming for Hugo sales in your FY '23 guidance? And can you elaborate on the magnitude of China VBP impacted FY '23? And lastly, if you can just comment on the capital environment. We've heard some puts and takes. Q1 has been a little soft. Just what your outlook is for the full year. Thank you for taking the questions.

Karen Parkhill :

Thanks, Geoff. The other two, you had a question on portfolio management, which I know Geoff shared when he answered Larry's question. So I'll cover China VBP. With VBP, we've been dealing with a variety of regional and national tenders already. And just from a national expectation we expect the government to continue to focus on the top 10 medical device products by public insurance spending. So we've been through stents already, and some of our other industry players have gone through large joints. And we see two more potential tenders on that list where we've got exposure, spine and surgical stapling. And I talked about the fact that we expect spine to impact us this fiscal year and to likely happen in the second quarter. But ahead of ahead of tenders, distributors do pull back on their purchases. So we built that into our first quarter guide as well. Just to remind you, though, our gross exposure for both spine and stapling in China somewhere between 1% to 1.5% of our total company revenue. So it is small. And based on what we experienced with the coronary tender, we do believe there could be offsets to the ultimate net impact number because we have pull-through of other product lines, and we'll be working on those.

Brad Lerman:

Yep. The next question comes from Josh Jennings at Cowen & Company. Josh, please go ahead.

Geoff Martha :

Thanks, Josh for the questions. I'm going to turn it over to Sean here in a second, although he has officially moved on from that role to focus exclusively on our Cardiology portfolio. We have him on the call answering the diabetes questions this quarter. And I'll just say a few words about Que Dallara. She joined the company here a couple of weeks ago and has taken over our diabetes business unit, and we couldn't be really excited about having Que. She's already diving right in, she's already at ATTD, and she'll be in some other upcoming diabetes meetings that you'll get to see her. And she'll be on our next earnings call to fuel these questions, and she's getting settled in now and is moving her family out to our Northridge, California site and really excited you'll get a chance to hear from her shortly. In the meantime, I'm going to field this question to Sean. So Sean, can you answer the question that Josh post?

Geoff Martha :

Thanks, Josh. Next question, please, Brad?

Joanne Wuensch :

Hi, how are you this morning.