Smith & Nephew plc

Ladies and gentlemen, welcome to the Smith and Nephew Q1 Trading Report. My name is Jerry, and I will be coordinating your call today. Certain statements in this presentation are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially, from those included in those statements due to a variety of factors. More information about these factors is contained in the company's fillings with the Securities and Exchange Commission. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. If you change your mind, please press star 2 to withdraw your question. I will now hand over to Deepak Nag to begin. Please go ahead.

Thank you. Good morning. I'm joined here by our Chief Financial Officer, John Rogers. I'm pleased to report a good start to the year. We achieved 3.1% underlying revenue growth in the first quarter, as ahead of the guidance we provided in February, with consistent performance across all of our business units. Sports medicine and advanced wound management continue to perform well in established markets and U.S. recon is maintaining the improvement that we saw in 2024. We've successfully absorbed known headwinds, including a 240 basis points headwind in China, and there being one fewer trading day. As we get into the detail of the quarter, you'll see that we're building on the operational and commercial improvements of the 12-point plan, which has brought better product availability, better commercial execution, and the focus and accountability of the business unit model. Those foundations are enabling innovation-driven growth across our key platforms. To highlight a few, Cori, Evos, Regeniton, and our negative pressure wound therapy portfolio all delivered strong double-digit growth in the quarter and are visibly driving the broader segment growth rates. We're also delivering further innovations at a rapid pace, Later, I'll discuss new product launches that are expanding our offerings in the high-growth categories of foams, dressings, and cementless knees. Additionally, I'll share new clinical evidence related to Xenium and rotator cuff repair. Overall, this quarter keeps us on track for our full-year guidance, which remains unchanged on both revenue growth and trading margins. We should see higher growth in the remaining nine months, giving a lower trading day effect on growth for the full year and the peak of the China headwinds having passed and continued fundamental progress in our commercial delivery, particularly in fifth pieces. The drivers of the guided step-up in profitability have been in place for some time now, and we should see the benefits of our cost savings and network optimization flow through to the P&L. John will come back later to the effects of the recently announced tariffs on our business. But to summarize for 25, we expect to absorb the impact within our existing margin guidance. And first, John will take you through the detail of the report.

Sean. Thank you, Deepak. And good morning, everyone. So revenue for the quarter was $1.4 billion with a 3.1% underlying growth. and 1.6% reported after 150 basis points headwind in foreign exchange. Those growth rates include the effect of one fewer trading day than in the first quarter of 2024, which, if considered proportionately, reduced growth by around 1.7 percentage points. Growth was largely consistent across the business units, and I'll come to the detail in a moment. Looking by region, growth was stronger in established markets with 3.6% growth in the US and 5% in other established markets. The 1.7% decline in emerging markets was due to the continuing headwinds in China, which we believe have now peaked. Growth in the other emerging markets was much stronger at 14.7%. For the business units, I'll start with orthopaedics, which grew by 3.2% in the quarter and 5.1% excluding China. As indicated with the four-year results, we've changed our reporting practice around robotics to be more in line with our orthopaedics peers. As of this quarter, robotics consumable sales are now recorded under the procedure where they're used, while capital and service revenue remain in other recon. Growth rates are all on a comparable basis. In US recon, the sequential trend in the headline underlying growth numbers mainly reflects trading dates. Normalizing for that, US recon maintained the improved performance from the previous quarter. The dynamics continue to be encouraging, with customer churn moving to being net favorable in Q4 and maintaining that in Q1, and a pipeline of competitive conversions building for the rest of 2025. On the product portfolio, Catalyst then continues to perform well against our plans with excellent feedback from existing and competitive customers. Outside the US, recon growth reflects the expected slow quarter in China with distributors continuing to reduce their inventory of implants. The overall level in the channel has come down significantly and we expect it to reach a normal level again in the middle of the year. Excluding China, AUS growth was healthier at around four points higher in knees and seven points higher in hips. Other recon grew by 46.6%, driven by robotics, reflecting both growth in units placed and a higher proportion of outright capital sales in the quarters business mix. Trauma and extremities grew by 6.3%. As in recent quarters, the EVOS plating system was the primary major growth driver. The growth contribution of the ATOS shoulder is increasingly significant, and we continue to develop the platform. We'll launch a stemless implant in the US in the coming quarters, and we also aim to introduce planning solutions in half two as part of Choreograph with execution on Choro to follow in 2025. Coming back to US recon growth, this slide shows a time series of underlying growth, both as we report and adjusted for trading days. Adjusting for days gives a more representative measure of our progress from quarter to quarter, particularly with the three-day swing from the two extra trading days versus the prior year in Q4 2024 to one fewer day in Q1 2025. We are also now reflecting the new reporting of robotics continuously. As I mentioned earlier, you can see that we have maintained the improvement from Q4. Our expectation is for further improvement in average daily sales growth as we move through 2025, supported by product availability, the improvements we've made in commercial execution, and the benefits of key growth products that capture STEM and Cori. Sports medicine and EMT grew by 2.4%. largely reflecting the headwind from China. This was due to lower year-on-year pricing from BBP in joint repair and early effects in arthroscopic enabling technologies as we proactively managed the channel ahead of the expected implementation in the second half of the year. We believe we are now past the peak of the China headwind. Comparisons in joint repair will become easier in Q2, with the effect fully lapping mid-year. Although the AET implementation is still to come, it should be a smaller overall drag. At the same time, consistent performance from key launches and growth drivers continued in the rest of the world, even after the strong finish to 2024. And this should be increasingly reflective in headline growth as we move through the year. For Q1, joint repair grew by 2.9% and 10.6% excluding China. Regenazen remains a key driver with strong double-digit growth. We added further to the evidence base with the publication of a two-year follow-up from a randomized controlled trial of rotator cuff repairs augmented with Regenazen, showing significantly lower retail rates compared with repair alone. There was also good momentum from new product launches, including Q-Fix Knotless and the developing foot and ankle repair business. Arthroscopic enabling technologies grew by 3.3%, excluding China. There was solid performance across multiple categories with double-digit growth from both video and wearable Farsio. Farsio is an application of our copulation technology and orthopedics procedures and is a leading example of commercial synergy in our portfolio. ENT grew by 7.8%, marking a return to more normalized growth after Q4. This growth was led by the tonsil and abnormal business with the halo wand for the coblation capsular tonsillectomy technique. We also continued the rollout of the ARIS wand, which further extends the use of coblation technology into turbinate reduction with launches in Europe and emerging markets. I'll finish with advanced weed management, which grew by 3.8% in the quarter. Advanced wound care grew 2.5% with high single-digit growth in foam dressings. We continue to develop our foams portfolio in an early stage of launching a leave-in AG Plus surgical into the U.S. market. Bioactives had a slower quarter as expected with a decline of 2%. While skin substitutes remained in double-digit growth, this has started to moderate as the benefit of the Graphics Plus launch eases. There was also a slow forward percentile after a strong finish to Q4, again reflecting wholesaler stocking patterns. A reminder, we expect AWB growth from 40 years to be in the low single digits. Lastly, advanced wound devices saw impressive growth at 15.7%, mainly driven by the negative pressure wound therapy with double-digit growth from both PICO and RENESYS. I'll finish with our outlook. As you can see on the slide, It's unchecked. There's clearly a lot of interest in the implications of the tariffs announced by the U.S. government. And the situation remains dynamic. But to give you some sense of our business mix, just over half our revenue is from the U.S., of which around two thirds is manufactured domestically. We also manufacture in Costa Rica, the U.K., Malaysia, China and Switzerland. We're working to mitigate tariffs on products and raw materials imported in the US as far as we can. In particular, we have a global manufacturing network that we can leverage in terms of mix and supply routes. Our approach is not to rely on external factors, but there still may also be some mitigation from foreign exchange, and we are engaging with industry groups like Avermed to explore the potentials for exemptions. Based on the tariffs as currently announced, and including those coming into effect after the current pause, we expect a net impact of around $15 to $20 million, which we expect to be able to absorb in our unchanged four-year guidance. And with that, I'll turn back to Deepak.