Travis Steed, the Bank of America Medical Device Analyst, and continuing our day of MedTech conversations. Next up, we've got Stryker Corporation, Preston Wells, newly appointed CFO, and Jason Beach, VP of Finance and IR. Welcome. Thanks for joining us. Yeah, thanks for having us. Good. Preston, maybe I'll start out. You're the new CFO. You've been at Stryker a while. Investors have known you for a while in your former roles, and it seems like it's a pretty seamless transition. Anything likely changing in your mind or doing anything differently at Stryker? No, first of all, thanks for having us. You know, I would say it has been pretty seamless, and I've had the fortune, obviously, of being at Stryker for the last 10 years. So, a part of the agenda already in terms of our focus areas. And really, as we think about who we are as a company, it's still going to be a focus on driving our top-line growth through our differentiated strategy from a commercial perspective and M&A. And so, really, capital allocation will be a big part of what I'm focused on. And then also driving our profitability story. We talked about a couple of years ago where we committed to a 200 basis point improvement over the next two years, which have been last year and this year. We're still setting on that journey and expecting to get there by the end of this year, and obviously looking to develop a muscle that will continue forward. Good. This bigger picture, like you guys, we used to think of Stryker as like a mid single- digit grower, kind of moved up to high single- digits. Now you're kind of flirting with that double-digit range. Since I've been covering you guys, it's been a gradual progression of acceleration on the top line. There's probably been some mix shift going on, but just think about high level. How have you fundamentally kind of energized the growth rate at Stryker? Kind of what's the secret sauce there? Yeah, you know, the beautiful thing about it is we're not overly reliant on any one product. We're not overly reliant on any one part of the business. We've been able to really put in place a differentiated commercial model that allows us to be very focused in our specific categories that we play in. We have a commercial model that sets up a sales force directly with a marketing team and an R&D team that really specializes in a particular part of our business. Our goal is how do we continue to fuel that organization with new products, whether it's through our own internal innovation or with our M&A strategy. As we do so, really just infusing the whole group from a growth perspective. We've been able to really kickstart each one of those. We have been fortunate enough to play in some categories that have been growing, but we have also been in some categories where we have been able to have good technology like a Mako that has been able to drive a slower growing category to faster growth for us. It has really been a good model that we have been able to continue to drive. Like I said before, my goal is how do I make sure that we have the right capital allocation from a resource perspective so we continue that into the future. One other area I would just add, we recently closed our divestiture of our spine business and the addition of Inari. Just again, adding a faster growing business and a faster growing segment as part of that overall focus that we have from a growth standpoint. This is kind of like the new normal at Stryker, if you will? We certainly hope so. Right. It seems like the bar is actually a little higher now just to kind of bring a new product in, a new acquisition in. We're very competitive, so it certainly fits with our nature. But yeah, we continue to strive to do better than we did the previous year if we can. A question I get a lot is the execution at Stryker is always consistent. It does not matter how crazy the world gets. We may worry about you guys, and next thing you know, it is like, well, you guys are okay. It is nonstop. It is like no matter what happens, you guys just seem to figure it out, execute it. What is it at Stryker that has kind of allowed you to kind of keep that execution and stability of this business? Yeah, I would say a couple of things. I think number one, I talked about our model. Our model is super focused at each category call point. We spend a lot of time where other companies may not. It allows us to be really close to our customers. It allows us to really understand not only customer needs, but how those needs may change given a dynamic situation. I think our operating model certainly helps us. We have a great talent offense. We continue to develop leaders who are coming into these various businesses, and they have either grown up through Stryker or come into Stryker and learned and are then contributing as leaders of these different business units. The last part is I think we play in some categories that are really important. They are really important not only in terms of the public and health, but also for a lot of the hospital systems that we support. They are profitable procedures that help drive growth for those hospitals. When you see times that are a little bit turbulent or there might be capital pullbacks in a broader sense, we still have parts of our business and the majority of our business that are supporting procedures that are really important and profitable to the hospital system. They get prioritized in a lot of these crazy environments. It was interesting, Glenn, who is our outgoing CFO, was giving me a hard time. My first earnings call was with all these tariffs happening. I had to remind him that my first earnings call as an investor relations was when COVID kicked off. It's been pretty much just ongoing changes that have happened, and we've been able to just work through all of those changing environments. Cool. Since you guys just reported Q1, it was 11.1% revenue growth in the quarter, I think even on a tough comp. I don't know if there's anything you think about the quarter, how it played out, anything you wanted to kind of highlight, make sure you get clarity on. No, I mean, listen, I think all of our businesses are really continuing strong momentum. We're seeing really strong procedural growth. That showed up as we look at our Orthopaedics business and both our hip and knee businesses really outperforming the market in the quarter, as well as our Trauma and Extremities business, which has really accelerated behind Pangea on the core trauma side. Even in the capital environment, we still see a really, really strong order book. We see strong capital pull-through on a lot of those products. Quite frankly, just a very healthy environment for us right now that, again, given some of the dynamics that are in the marketplace, we're still able to see a pretty strong pathway forward. On the tariffs, you called out $200 million, you're offsetting it. It's been some news that maybe helps that over the weekend. How should we think about the China news over the weekend? Yeah, it's interesting. I think it's just another case in point that things are changing pretty rapidly. I mean, here we are two weeks out from our earnings call. There's already a big change. When we think about China in terms of our overall business impact, the total business from a top-line perspective, not that big, call it 2%-3% of our total business that way. Obviously, we do some sourcing from China as we think about raw materials that are coming from different places. Given the magnitude, 140%, 125%, it did have an impact that was part of that $200 million. With the changes, and we're still working through it, and we're still working through what it means from a mitigation standpoint, we're in that, call it, $25 million-$50 million range that would impact that. Bring our number from $200 million down $25 million-$50 million. Okay. To that $25 million-$50 million benefit, how much of that, and how do you think about reinvesting that versus letting it flow through? Because you were not going to raise the EPS guide this quarter. Right. It is something that we are looking at. Again, I think part of what we are trying to understand is where the dynamics are. If you remember, our $200 million did not include the 90-day pause, the original 90-day pause. We have to really think about what happens, call it, in another 40-45 days, and what happens there in terms of some of those reciprocal tariffs coming back. Again, part of our mitigation factor would be how do we offset that as well. Then thinking about, is the 90-day pause on China truly 90 days, or will that be something that is ongoing? We are really looking at making sure that we have got the right mitigating factors in place to handle all of those different scenarios. Certainly, as the year progresses, our expectation, as it is every year, if we're raising top line, we want to be raising the bottom as well. We'll look to see how much of that favorability we'll be able to pass through, just depending on what the other dynamics happen in the market. When you think about who knows what kind of we're going to be annualizing for a full year at this point, but how are you thinking about potentially mitigation factors into 2026? Also just the mindset of, hey, at Stryker, we want to expand margins, we want to grow earnings double- digits, that mindset, no matter what really happens in the macro. Yeah. First of all, that is the mindset. I think when we guided at Analyst Day a couple of years ago, we wanted to get to this 200 basis point starting point, and then at least 30 basis points of profitability improvement every year thereafter. That is still our expectation. Quite frankly, it is something that we are looking at, how do we continue to grow that even more over time? That is the starting point. As we think about where tariffs are and the annualization of tariffs, to your point, it is still a moving target. We do not quite know where we are. A lot of the mitigation factors that we are putting in place are really what I would call hygiene-type things. There are things that we're looking at in terms of where we have dual sourcing and that we're able to change some of the trading lanes that we have to get a more favorable tariff impact from that. We're looking at elements around how we're thinking about what's included in the tariff and the impact from that standpoint. There are things that, quite frankly, that we should be doing anyway that aren't having long-term impact as we think about our overall supply chain model or financial model. We haven't made any decisions and, quite frankly, haven't really even spoken about anything with regards to moving manufacturing, changing where we produce certain products, things like that. Those are all longer-term decisions that, quite frankly, we need to get ourselves into a bit more of a stable environment in terms of what is going to be the end game. If there are requirements or things that we need to change as a result of that, that's when we would take a look at more longer-term impacts. If we move into another inflationary environment, you think about what are some of the things you learned in 2022 that maybe you could implement this time faster? Just like is Stryker kind of better positioned today to respond to inflation? How are you thinking about that? Yeah, 100%. I think we learned a ton. This is part of our profitability journey as well. Within our supply chain and manufacturing areas, we learned a lot about how to deal with some pretty inflationary areas. As a result of that, we are well positioned to handle some of that now. It does not mean we will not have any impact, but certainly being able to address where our products are coming from, how they are coming in, what the costing of that is. We have seen some of that even with some of the tariff actions. With some of the raw materials coming out of a place like China, you started to see suppliers already start asking for pricing. Those are elements we were able to mitigate with some of those strategies that we would use if we get entered into another highly inflationary environment. Clearly, we've taken some of those lessons on the cost side of things. I think the other element that we've learned is around pricing. If we think about where pricing was for our company entering into COVID, it was minimal to down. We really weren't getting much out of any part of the business. In the orthopaedics business, we were losing quite a bit. As we saw last year, as we see even at this first quarter, we're posting positive price across the company. We've really learned from a pricing perspective as well how to go out and try to drive that also. I think those two things would help us react a bit quicker than we certainly saw during the other period. Where are you seeing the best places in your business to take price? Is it easier to take price now than it was three or four years ago? Is this pricing sustainable? Yeah. I would not say it is easier, right? I think we are still in a marketplace where there is constant negotiation and constant discussion. I think for us, we have just learned how to do it a little better. We have learned how to put the right pricing behind the value that we bring with our products. Certainly, if we bifurcate our business into Orthopaedics and MedSurg, on the Orthopaedic side, we certainly are having a lot more pricing pressure. You have got three or four major competitors that are in that space. You have got most of your business that is contracted over certain periods of time. We have been able to mitigate some of the price. Where we maybe saw two to three points of price erosion every year, we are starting to see that tail off to be a bit flat or down one versus down two or three. That has been an area just through contracting and through the shift to the ASC that certainly helped us in that space. On the MedSurg side, we see a bit more opportunity to price behind the products and services that we bring. That is an area which even in this last quarter, we were able to drive positive pricing in that business. Again, I think it is a sustainable model. Will we always go price positive as a company? I do not know that we will always do that every quarter, but we will certainly be better than what we were historically. That's helpful. The capital environment comes up a lot. I'm curious what you're seeing. We see the numbers reported in revenue, but that's kind of like delayed. We don't see the orders and the backlog and all that that you can see. Just shed any light on kind of like the leading indicators in your capital business at this point? Yeah, absolutely. When I think about our capital business, we do take orders in advance. Anywhere from three to six months on some of the faster-moving items to even a year or longer on some of the longer-lead items like our booms and lights. Right now, our order book is as strong as it has been. I mean, we continue to see orders ramping up throughout the quarter. It is something that we pay a lot of attention to and understanding kind of where that spread is of orders versus sales. Quite frankly, it has stayed very, very strong. That leading indicator gives us a really good sense of where we are going to be for at least the next few quarters. In our conversations with our customers, we are not seeing that slow down at this point in terms of what their expectations are. That probably gets back to what I had mentioned earlier is that when we think about the products we're supporting even with our capital, that it really does create an opportunity for hospitals to prioritize where they're going to get profitability. What are you seeing? Can we compare this to 2022? I was guilty thinking it was going to slow. Do you remember? I do. I was wrong. It's like you guys never slowed. Is this environment better than 2022? Any corollaries? I would tell you it's different than 2022. There's a couple of things. I actually think it's maybe even different better a little bit in the sense that, remember in 2022, it was kind of coming out of this period of complete unknown. We went from an environment in 2020 where it was like, we're never going to do another procedure again to, oh my gosh, how am I going to pay for these procedures because the inflationary element had gotten so out of control. If you think about what a hospital was dealing with, they were dealing with higher prices maybe coming from suppliers. They were dealing with the nursing shortage. They were dealing with higher prices for labor. They were dealing with a lot of uncertainty. Right now, I mean, if we're talking about legislation that gets passed or cuts that are made, it'll be pretty certain what it is. I think they'll create more certainty and then hospitals can react to what they need to do at that point in time. None of it is, it all creates a little bit of uncertainty, but I think better now than maybe what it was when there was just a lot more of different parts that were moving that were uncertain. How do you think about managing the business? Let's say we do go into a recession. Are there levers you can pull on just helping customers finance products? Anything you think about how Stryker's positioned if we go into recession somewhere around? Yeah, I think the same things that we would do like we did even during 2022 is really we look at the strength of our business. We look at the different opportunities we have to sell capital. We do have different opportunities to sell it either direct or through financing. Same thing on Mako. We look at direct and financing. Part of what is important for our implants is they do drive profits. Really just making sure that we are working with our customers to make sure that they are getting those procedures done. That's helpful. I did want to touch on a few other businesses and product areas. I'll start with the one that the medical surgical, the med tech or the surgical supply issue in the quarter. What exactly was the supply issue? Is it more on you or more on your suppliers? Just trying to think about what happened in the quarter and then kind of the pathway to get it mitigated. Yeah, a couple of things. One, we haven't characterized all the specifics of it, certainly in between ourselves and our suppliers in terms of what's happening there. I think a couple of clarifications as well. It's mostly on our OUS business. It really impacted the growth of our medical business, OUS. Quite frankly, we expect that to continue a little bit through second quarter and start to alleviate in the back half of the year where we really see that return to growth. The other clarification is it does not impact LP 35. LP 35, the new defibrillator launch that we're having, is still progressing really well in the U.S. Strong order book, strong sales. I think Jason mentioned it on the call that it was meaningful to our sales growth in the quarter. We will continue to be as we think about a multi-year rollout of that product. We then will start our rollout of it in the regions outside the United States in the coming year as well. We will really see that be a multi-year tailwind for us. Really just contained to the OUS market. Okay. the LifePak, the installed base, I think you've called it over 100,000 units installed globally. That's a global number, right? It is. What's the kind of the U.S. OUS split? We have not dimensionalized U.S. versus OUS, though it is heavier in the U.S. for sure. Okay. Any way to think about the one, are we going to start to see an inflection in the U.S. medical growth rate because of LifePak? And internationally, when are we going to start to see that show up more into the growth rates? Yeah, no, I think as you go throughout this year, right, we talked about a robust order book specifically in the U.S. You'll start to see that ramp as we go throughout 2025. As we mentioned on the call, we'll start getting outside of the U.S. as we get to the end of this year and start to see an impact there as well. Okay. And then in Indo, the 1788 camera, kind of year two, you've always said year three is the big year for cameras. Yeah, that's right. It seems like pretty good outlook there on the camera. Yeah, look, we're pleased with where we are. The thing about these products, these small capital products that we have, you are talking about anywhere from three to five year cycles on these products. When we have these launches, there's a lot of tailwind that's behind the first few years. We're expecting another year of good growth this year and then even bigger for 1788 next year. Okay. That's helpful. On the Pangea plate, when I touch on Pangea as well, it's taking some time to kind of build sets there. Are you kind of through that process now or are you going to start to see some of the momentum in that business show up? Yeah, I mean, I think we've already started to see it. I think this is a huge launch for us. We've been very good in nailing, not as good in plating. This really gives us a really competitive offering and is allowing us to go out and earn some share. You see that in the core trauma numbers. If I think about our trauma and extremities performance in the quarter, it really is that growth was really driven by both core trauma and upper extremities and core trauma on the back of Pangea really starting to go. There's still some more growth to happen in terms of building sets and getting sets out to our customers. That's even in the U.S. We're just getting ready to start our launches outside the U.S., which will again contribute even more to that core trauma growth that's driving the overall T&E growth. Mako, you've had record placements for many quarters in a row now. How sustainable is that? I always like when Jason says we have record number of Mako placements because that means in six to nine months' time, when we get those Makos fully utilized, it usually leads to hip and knee share gains that we've had. I really think that it's something that we've continued to do. We continue to build out Mako. We recently launched Mako 4, where we're adding different to that system, in particular the hip revision and complex hip application. What that'll do is allow us to really have a robotic offering for a really, really difficult procedure. By doing so, we'll hopefully convert some additional business to even the primary hip as a result of surgeons starting to use the revision hip procedure as well. I think by offering different procedures that are available on our Mako system and also spine and upper extremities as well for shoulder, it allows us to have a really differentiated offering that we can go out in the marketplace and continue to win with. I think the other thing that cannot be overlooked is Mako has been on the market for some time now and our major applications around total hip and total knee. We have a lot of good 10-year data that we are publishing around that. I think that is also helpful as we think about showing the benefit of what the system has been able to do. Do you think there's going to be synergies between launching shoulder, spine, and then you kind of drive even more knee volume through the Mako? I think it has the potential to. I think the way that we're thinking about the rollout of both spine and shoulder is on the back of this large install base that we already have. Kind of building from the outside or inside out. In some cases where you do have some shoulder surgeons that are really primary shoulder, there's an opportunity to start there and then move over to where hips and knees might be. Really, our plan and our goal is to leverage the base that we have today. On Shoulder, the Shoulder business, I think it's been growing like 20% every quarter since you've acquired it, even before you acquired it. I think now you're number one share player in Shoulder. Just how incremental is the actual rollback going to be to the business and growth rates? Good question. It'll be different. When we think about what Mako has been to Hip and Knee, it will be a little different to Shoulder, right? Because we're not running from a position of two or three to try to catch up. What it really will do, though, is it'll do two things. One, it'll sustain where we are in terms of the number one share. I think the other thing it does is in a market like Shoulder, which is really underpenetrated from a number of people that should be having the procedure, that are getting the procedure, it really allows us to continue to grow that expansion. If we think about where the market growth is coming from or where our growth is coming from, it's coming from market. We continue to grow that market on top of being the number one share player. When you just think about your pipeline in general and kind of the durability of this growth, you guys have been through a supercycle, that's what you called it. Where are we in that supercycle? Is there going to be another supercycle coming? Is there enough behind this so we do not have a cliff in the growth rate in some of these businesses? Yeah. I'll lay out a couple of things. I know Jason will probably have a couple to add to that as well. Listen, the beauty of our products and the launches is they're multi-year. Just like you talked about even with 1788, which we talked a lot about two or three years ago, we're still seeing the benefit from that. Something like Pangea will be multiple years of benefit. Even when we think about ProCuity, we talked about ProCuit several years ago, but that's a seven to ten-year cycle that you're replacing capital on. All of these items will have multiple years of benefit that they'll drive. In addition to that, there are launches, even we're just talking about Mako spine and Mako shoulder, those will be things that really in 2026 start to kick off in more full launch mode. You'll have some other innovations that'll be happening on some of our implant businesses. You have the continuous kind of incremental innovation that happens on our capital businesses as well. I think we have a lot of momentum behind the acquisitions that we've done. Anything you'd call it? Anything to call it? Anything to add to that? Yeah, maybe just one thing. First off, I think Kevin's the master marketer when it comes to these terms. He'll probably have another one here soon. To Preston's point on deals, as a reminder, we did seven acquisitions last year. As you think about those gaining momentum throughout this year and in the next year, there's certainly going to be a tailwind of growth as well. You guys have benefited a lot from like big shift, new products, higher revenue per product or whatever. Is that something, I think it's probably driven, my math, a couple of points of growth even in some years. Is that sustainable going forward, do you think? I think that's how we've always thought about it. When you launch the incremental innovation or any new innovation, you're trying to price for that. That's also part of the muscle that we develop from a pricing standpoint. I think that's something that we will continue to see as we launch new products. If we can drive the right differentiation from those products from a benefits and features standpoint, then we expect that we'll be able to price them appropriately. Okay. On M&A, how are you thinking about the environment? You just did an acquisition early this year. Should we expect more in the near term coming up? Yeah, listen, as we've talked about before, we're still open to doing M&A. Obviously, we've just closed the Inari deal, and that's in its early days of integration. We're still in the integration phase for many of those acquisitions from last year. Like I mentioned before, if we look at our model, we still have a lot of folks that are heavily involved in looking at their call point and where there's opportunities from their call point to add additional products via M&A. We'll likely look at different types of tuck-ins and elements that way that drive our growth. Certainly, the rest of this year and even beyond, we'll continue to do M&A. It's a big part of our growth strategy. How are you thinking about managing dilution on the margins with acquisitions? Yeah, again, it's part of the balancing scorecard that we've got, right? We obviously want to make sure we're driving growth, but we're driving profitable growth. If we're going to lose margin as a result of something that we've done from an M&A standpoint, we've got to go find it somewhere else. If we get back to what those drivers of that profitability are, continuing to get consistent in our cost down from a manufacturing standpoint and being able to do that in a repeatable way allows us more flexibility. Certainly, as we look at the elements beyond our commercial model and getting scale that way is also something that we'll look. That's shared services, that's systems, that's technology, really driving down costs in the "back office" functions would be really another way. As we look to really get better at those, it provides us more flexibility that if we do have some deals that are certainly dilutive from a profitability standpoint until we can stand them up to be more profitable. Travis, I'd just add one other thing. I mean, we've proven that we can offset the dilution. If you think about the seven deals last year, the majority of them actually came without margin dilution and still delivered the 100 basis points last year. Yep. That's a good point. On Inari, just think about the integration of that deal. Was the kind of the growth rate in the quarter kind of in line with plan? How do you expect that business to kind of grow over the next year and then once it goes organic as well? Yeah. Yeah. I mean, I think everybody was able to see the Inari growth rate prior to our acquisition of it. It is certainly accretive to our business. We expect it to stay there. Even if we can try to drive it faster, we will do that as well. The integration has gone well. It obviously was a short time to close. We closed the business. We appointed a leader of that business that came from one of our other Stryker businesses. Tim Lanier left our Trauma and Extremities business and is now leading the Inari business. We have also started to infuse it with some other talent from inside Stryker. You have a nice balance of legacy Stryker and legacy Inari that is able to drive that business. I think the other thing that we've been able to do, we've done Inari now would be our third or fourth larger scale deal in recent years. We've really been able to leverage the learnings from those deals. Each one has gotten a little better as we've gone through that process. We've been able to apply a lot of those learnings, not only from how we set up to go do the deal, but then also just from an integration standpoint. It's allowing us to move a little bit faster and probably realize some of the benefits a little bit faster as well. Has the meshing the Stryker and Inari teams together has kind of been frictionless, if you will, or the culture? Nothing's without friction. Certainly, it has gone as expected. I mean, I think you do any of these deals, you can expect a little bit of disruption to happen. I mean, there's just the unknown sometimes, and that creates that. Nothing to date that's outside of any of the scope of what our expectations were. Then the synergy side, I mean, our math was like $100 million in synergies that you guys were going to get out of the business. I do not know how much that is G&A. Just how are you now that you have, I guess you can only see so much before you have an acquisition. Now that you have had the books open and you know the numbers, how are you feeling on the confidence of the synergies there? We feel really good. Yeah, we feel really good. Like I said, I think this has so far gone to plan. I mean, it is early. I'll caveat that. Certainly, what we've seen and what we think we can execute against, we feel really good against our deal model. I guess just to add to that, right? If you remember back in January, I guess we said with Inari there'd be 0- 20 basis points of op margin dilution. Obviously, with our latest guide, we've said it's zero. That also includes offsetting tariffs. To Preston's point, we feel really good about the synergies. Where are you finding the savings at internally? They're in lots of different places. Lots of different places. I did want to give you, Jason, an opportunity just to make sure to comment on the cadence of margins through the quarter growth. Anything like now you've looked at street models, kind of post-quarter, anything you'd call out important earlier? Yeah, I don't think there's anything that's concerning from a street standpoint. Certainly, as you think about op margin expansion, the one comment that we have made is you go back to last year, it was very much, I'll say, Q4-weighted in terms of getting the 100 basis points. That won't be the case this year. It'll be more evenly throughout the quarter. No, feel good about where things are at. Okay. And then continued op margin expansion kind of beyond this year? That's the plan. That's the plan. Great. Yeah. Certainly, we have an Analyst Day in November. Our goal is to, just like we've done the previous ones, just update on our pathway forward that will include our expansion. Okay. Pretty similar kind of LRP timeline. Is it kind of the same kind of path you took on the LRP this past LRP? Probably do the same thing again? Yeah. I mean, we'll certainly from a planning standpoint. And then, yeah, we'll communicate what our expectations are in November. All right. Perfect. That's all I had. Thanks a lot. Great. Thank you. Thanks, Travis.