Boston Scientific Corporation

Good morning and welcome to the Boston Scientific first quarter 2025 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Monson, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Drew, and thanks, everyone, for joining us. With me today are Mike Mahoney, Chairman and Chief Executive Officer, and Dan Brennan, Executive Vice President and Chief Financial Officer. During the Q&A session, Mike and Dan will be joined by our Chief Medical Officer, Dr. Ken Stein. We issued a press release earlier this morning announcing our Q1 results, which included reconciliations of the non-GAAP measures used in this release. The release, as well as reconciliations of the non-GAAP measures used in today's call, can be found on the investor relations section of our website. Please note, on the call, all operational revenue excludes the impact of foreign currency fluctuations, and organic revenue further excludes certain acquisitions and divestitures for which there are less than a full period of comparable net sales. Guidance excludes the previously announced agreement to acquire Sonavi and Interra Oncology, which are expected to close during the second quarter of 2025, subject to customary closing conditions. For more information, please refer to the Q1 Financial and Operational Highlights deck, which may be found on the Investor Relations section of our website. On this call, all references to sales and revenue are organic and relative growth is compared to the same quarter of the prior year unless otherwise specified. This call contains forward-looking statements regarding, among other things, our financial performance, business plans, and product performance and development. These statements are based on our current beliefs using information available to us as of today's date and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or certain risks or uncertainties materialize, actual results could vary materially from those projected by the forward-looking statements. Factors that may cause such differences are discussed in our periodic reports and other filings with the SEC, including the risk factors section of our most recent annual report on Form 10-K. Boston Scientific disclaims any intention or obligation to update these forward-looking statements, except as required by law. So at this point, I'll turn the call over to Mike.

Mike? Thanks, John. Thank you, everyone, for joining us today. In Q1, we delivered excellent results, all while we continued to invest in our highly innovative portfolio and capabilities. Importantly, we remain excited about our near and long-term growth catalyst, which we believe will enable us to deliver on our fundamental aim of driving consistent, differentiated performance this year and well beyond. In first quarter 25, total company operational sales grew 22%, and organic sales grew 18%. both exceeding the high end of our guidance range of 14 to 16%. Our strong growth continues to reflect the durability of our category leadership strategy, which is powered through the meaningful innovation, clinical evidence generation, and the winning spirit of our highly engaged global team. First quarter adjusted EPS of 75 cents grew 34%, exceeding the high end of our guidance range of 66 to 68 cents. first quarter adjusted operating margin was 28.9%. Turning to our second quarter and full year 25 outlook, we are guiding to organic growth of 13 to 15% for the second quarter 25 and raising our full year guidance from 10 to 12% growth to 12 to 14% organic growth, reflecting the significant strength in our broad-based cardiology portfolio and the global execution of our category leadership strategy across our business units. Our second quarter adjusted EPS guidance of 71 to 73 cents, and we expect our full year adjusted EPS to be 287 to 294, which represents growth of 14 to 17%. This also includes an approximate 200 million impact from tariffs, based on the information that is available today, which we expect to offset through sales upside and smart reductions in discretionary spending. Dale will provide more details on this within the financials. We remain committed to our diversified global manufacturing footprint, investing across all regions and notably within the U.S., where we recently opened our new site in Georgia to continue to increase our Minnesota manufacturing capacity and footprint to support long-term growth. I'll now provide some additional highlights on our first quarter results. Regionally, on an operational basis, the U.S. grew 31% with double-digit growth in five of our eight business units, Midway through Q1, we crossed the one-year mark of the U.S. FerroPulse launch and the 10-year anniversary of Watchman's approval, two clinically impactful technologies that have helped to transform the growth profile of Boston Scientific. Europe, Middle East, and Africa grew 8% on an operational basis. This above-market growth was led by exceptional performance in EP, as well as double-digit growth in our anchor technologies across the broader portfolio, including Complex PCI, Therosphere and Interventional Ecology, Axios, and Resume. Asia Pacific grew 11% operationally, led by double-digit growth in Japan. Japan's on track to have an excellent year led by strong FaroPulse uptake, and we continue to anticipate launching FaroWave NAB and FaroView in the second half of the year. China also delivered high single-digit growth of a very tough 42% growth comp in first quarter 24, and we anticipate to deliver double-digit growth despite ongoing VBP pricing impacts in China. I'll now provide some additional commentary on our business units. As a reminder, we did have one less selling day in the first quarter of 25, which impacted our growth by approximately 200 basis points. Neurology sales grew 25% on an operational basis and 4% organically. Growth in the quarter was driven by our CoreStone franchise, and we're pleased to have completed our first Asuris fluid management case in Chile. The service system is part of our interconnected StoneSmart ecosystem, and we expect U.S. clearance in the second half of 2025. Looking ahead, we continue to be excited by the differentiated value Axonix brings and our ability to more broadly serve our customers, as we are pleased with the integration progress to date. Endoscopy sales grew 6% both operationally and organically, with balanced growth regionally and across our broad and deep portfolio. We continue to see sustained double-digit performance with a clinically differentiated Axios platform, as well as double-digit growth of both OverStitch and MantisClip, two very innovative technologies in our growing endoluminal surgery franchise. Neuromodulation sales grew 7% in the first quarter, with mid-single-digit growth in our brain franchise and high single-digit growth in our pain franchise. Within DBS, we saw improving growth exiting the quarter driven by early contribution of the launch of our Cartesia leads, and acceleration of the Lumina 3D programming algorithm in the U.S. Within our pain portfolio, Intercept grew strong double digits, and we continue to see robust demand underpinned by five-year data demonstrating the long-term efficacy and cost-effectiveness of this treatment. Cardiology delivered another fantastic quarter, with sales growing 31%. Within cardiology, interventional cardiology therapies sales grew an impressive 9%, Coronary Therapies was driven globally by double-digit growth in our imaging franchise and excellent performance from our novel Agent DCB technology. In the U.S., Agent DCB momentum was fueled by strong reorder rates and new account openings, with additional reimbursement established in the outpatient setting as of January and incremental inpatient reimbursement expected to follow later this year. Within the quarter, we're also pleased to to present the early feasibility results of our vitalis circulatory support system, with data demonstrating positive early experience and 100% technical success rate. In addition, we recently announced our agreement to acquire SonyV, which has developed a clinical stage differentiated ultrasound-based renal denervation technology. We look forward to closing this acquisition, which we expect in Q2 this year. Watchman grew 24% this quarter, reflecting robust market growth and an increase in our market share driven by strong concomitant uptake. With over half of our U.S. EP implanting customers now have been performing at least one concomitant procedure. We continue to invest in global clinical evidence, excuse me, most recently initiating the Option A trial in Asia Pacific, assessing the effectiveness of Ferripulse and Watchman in a concomitant procedure. Within the quarter in the U.S., we completed the full conversion to Watchman FlexPro, which is our third generation in market-leading technology, and we remain committed to increasing patient awareness and advancing physician training and workflow optimization. Looking ahead, we expect the U.S. label update for WATCHMAN as a first-line alternative to OACs in post-ablation patients in the second half of 25 and the Champion AF data readout in the first half of 26. Cardiac rhythm management sales grew 1% in the first quarter, Our Diagnostics franchise grew high single digits, led by double-digit growth in our LuxDX category. In Core CRM, our low-voltage business grew high single digits, and our high-voltage business declined low single digits. We've expanded our conduction system pacing offering with the recent launch of next-gen lead delivery catheters, which will provide physicians with additional tools to target the left bundle branch area of the heart. And further, we anticipate FTE approval in our leadless pacemaker in the second half of 2025. Electric physiology sales grew 145%, with fantastic performance across the globe. Globally, we are now the number two clear player in EP, and we intend to continue to expand our leadership position in PFA through clinical evidence, next-generation innovation, new offerings to fill portfolio gaps, and commercial capabilities. Within the quarter, we saw high commercial demand for Ferropulse, with strong sales in established accounts, and rapid new account openings as the global market continues to convert to PFA, given the compelling safety, efficacy, and efficiency profile. Earlier this month, results from the investigator-sponsored single-shot champion clinical trial demonstrate that Ferripulse achieves superior effectiveness for the treatment of symptomatic paroxysmal AF versus cryoablation. Importantly, this is the first prospective randomized demonstration of PFA superiority over any thermal ablation modality. We also continue to see strong adoption of our OPAL HDX integrated mapping solution, which provides operators enhanced visualization and confirmation of pulse field applications. In the first quarter, we completed enrollment in the AVANGAR trial, which studies a new patient population of drug-naive persistent AF patients. We also initiated and completed the first human case in the ELEVATE-PF trial, studying the Ferriflex catheter, which is our large focal high-density map and oblique catheter that integrates with the OPAL HDX mapping system. And tomorrow, data from the ADDvantage Phase II trial, studying FerriPoint, will be read out at the PFA Live Case Summit ahead of HRS, which we expect to support US FDA approval by year-end 2025. Also, peripheral inventions grew an impressive 16% operationally and 7% organically. Our interventional oncology and embolization franchise grew double digits across the portfolio, driven by a broad offering of embolization devices and cancer therapy technologies. In the quarter, we received FDA approval to expand the patient population and study additional areas in the brain in the Frontier trial, an early feasibility study for the use of Therosphere to treat reoccurring glioblastoma. We look forward to expanding our portfolio of offerings in this high-growth space and continue to expect the acquisition of Enteroncology to close in second quarter 25. Within our vascular franchise, we saw mid-single-digit growth in arterial and double-digit growth in venous in first quarter. And earlier this month, we completed the acquisition of Bolt Medical and also received FDA clearance of the IVL system for above-the-knee indications. We aimed to initiate a limited launch by the end of 25 as we ramped supply following the acquisition close and earlier than anticipated regulatory approval. On the coronary front, we continued to progress the fracture trial, now having enrolled patients in the U.S. Before I turn the call over, as you saw in our press release this morning, Dan Brennan has decided to retire from Boston Scientific after an outstanding 30-year career, including the last 12 years as our CFO. Thu will be succeeded by John Munson, who you know from his time leading investor relations at the end of June this year. Lauren Tangler will return to investor relations and succeed John. I would like to personally thank Dan for his leadership, his great friendship, and his many contributions over his remarkable career. Dan has been instrumental in transforming the trajectory of our financial performance and building a strong culture and values that are embedded throughout Boston Scientific. Thank you, Dan. And in closing, I'm grateful to our talented team of global employees who work every day to advance science for life, and I'm confident in the sustainability of our top-tier financial performance. With that, I'll turn it over to Dan.

Thanks, Mike, and thanks for the kind words. First quarter consolidated revenue of $4,663,000,000 represents 20.9% reported growth versus first quarter 2024 and includes a 130 basis point headwind from foreign exchange, which was unfavorable versus our expectations. Excluding this $49 million foreign exchange headwind, operational revenue growth was 22.2% in the quarter. Sales impact from closed acquisitions contributed 400 basis points, resulting in 18.2% organic revenue growth, exceeding our first quarter guidance range of 14% to 16%. Q1 2025 adjusted earnings per share of 75 cents grew 34% versus 2024, exceeding the high end of our guidance range of 66 to 68 cents, primarily driven by our strong sales performance in the quarter. Adjusted gross margin for the first quarter was 71.5%, which represents a 170 basis point improvement versus the first quarter of 2024. This strong performance was primarily driven by favorable product mix in the quarter. First quarter adjusted operating margin was 28.9%. This was favorable to our expectations due to our strong gross margin performance and timing of internal investments planned for the year. On a GAAP basis, first quarter operating margin was 19.8%. Moving to below the line, first quarter adjusted interest and other expenses totaled $106 million. On an adjusted basis, our tax rate for the first quarter was 9.8%, which includes favorable discrete tax items related to the benefit from stock compensation accounting. Our operational tax rate was 13.6% for the quarter. Fully diluted weighted average shares outstanding ended at 1,493,000,000 shares in the first quarter. Free cash flow for the first quarter was $354 million, with $541 million from operating activities, less $187 million in net capital expenditures. We continue to expect full year 2025 free cash flow to be in excess of $3 billion. As of March 31st, 2025, we had cash on hand of $725 million. We used $1 billion of the $1.5 billion Euro-denominated senior note offering completed on February 26th to repay approximately $1 billion of Euro-denominated notes that matured in March 2025. During the quarter, we were pleased to receive credit rating upgrades to single A-minus from both Standard & Poor's and Fitch ratings. our gross debt leverage ratio was 2.2 times. Our top capital allocation priority remains strategic tuck-in M&A, followed by annual sharing purchases. In alignment with the strategy, we recently closed the acquisition of Bolt Medical, which complements our existing interventional cardiology and peripheral portfolios. We expect to offset the associated earnings per share dilution through internal cost efficiencies and trade-offs. Our legal reserve was $316 million as of March 31st, with $48 million of this reserve already funded through our qualified settlement funds. I'll now walk through guidance for Q2 and full year 2025. We now expect full year 2025 reported revenue growth to be in a range of 15% to 17% versus 2024. Excluding an approximate 50 basis point headwind from foreign exchange based on current rates, we expect full year 2025 operational growth to be in a range of 15.5% to 17.5%. Excluding a 350 basis point contribution from closed acquisitions, we expect full year 2025 organic revenue growth to be in a range of 12% to 14% versus 2024. We expect second quarter 2025 reported revenue growth to be in a range of 17.5% to 19.5% with a neutral impact from foreign exchange based on current rates, Excluding a 450 basis point contribution from closed acquisitions, we expect second quarter 2025 organic revenue growth to be in a range of 13% to 15% versus 2024. We now expect full year adjusted gross margin to be roughly in line with 2024, reflecting the impact of newly enacted tariffs. Despite this headwind, we remain on track to deliver 50 to 75 basis points of adjusted operating margin expansion for the year. We continue to expect full year 2025 adjusted below the line expenses to be approximately $425 million. Under current legislation, including enacted laws and issued guidance, we continue to forecast a full year 2025 operational tax rate of approximately 13.5% and an adjusted tax rate of approximately 12.5%. We expect full year adjusted earnings per share to be in a range of $2.87 to $2.94, representing growth of 14% to 17% versus 2024, including an approximate 4 to 5 cent headwind from foreign exchange. We expect second quarter adjusted earnings per share to be in a range of 71 to 73 cents. Before I turn it back to John, I want to address the evolving trade environment. With the current schedule of expected tariffs, we forecast an approximate $200 million impact in 2025. We expect to fully offset this $200 million unanticipated headwind through our full-year organic sales guidance raise, targeted discretionary spend reductions, and a one-cent FX benefit. Additionally, tariffs are capitalized in the inventory and recognized in the P&L over the course of finished goods inventory turns. Therefore, the Q2 impact from tariffs will be minimal, and we expect to see most of the tariff impact in the second half of the year. These effects are fully contemplated in the guidance ranges we are sharing today. In closing, I'd like to thank my Boston scientific teammates over the nearly 30 years for making this such an extraordinary place to call home. Special thanks to Mike for choosing me for this role 12 years ago. I've thoroughly enjoyed our collaborations. I'm thrilled for John as he assumes the CFO role, and I look forward to seeing all the great things he and the team will accomplish for physicians, patients, BSC teammates, and investors in the years to come. With that, I'll turn it back to John. Thanks so much, Dan.

Well, Drew, let's open it up for questions for the next 40 minutes or so. And in order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then two. Again, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question comes from Robbie Marcus with JP Morgan. Please go ahead.

Oh, great. Good morning and congrats on a fantastic quarter. Dan, wish you all the best in retirement and John, congratulations. I hate to start off on such a great quarter with a tariff question. I'll leave the good performance for others to ask. But just on tariffs here, it's really impressive you're able to offset it. It looks like about 11 cents or so by my math for a half year. How do we think about the ability as you move through the rest of the year to maybe – move around some of the manufacturing. I imagine FX is still a big tailwind for next year at current rates, given your hedging program. And, you know, how you're thinking about the different buckets of tariffs and your ability to offset them. Thanks a lot.

Sure, Robbie. Just to be clear. So as you said, we have a $200 million tariff headwind for 2025. Based on the fact that we capitalize tariffs, as you would expect, Q2 doesn't have much in the way of incremental tariffs from the recent announced tariffs, so it's mostly a second half challenge. So what we're doing is effectively offsetting that with the increase in the revenue performance. So you saw us raise our revenue range to 12 to 14. We do have some targeted discretionary spend reductions, you know, travel meetings. Actually, we have some programs going there, and we're just looking to accelerate those programs to deliver more savings. And then we do get one penny of FX benefits. So the way I look at it is the revenue in the FX kind of offsets half, and then the discretionary spend reductions offset the other half. So we're really pleased that we're able to continue the momentum of the company and drive the raise in the revenue guidance range and the raise in the adjusted EPS guidance range. Relative to moving manufacturing around, we're not making any decisions now relative to moving infrastructure or anything around manufacturing. moving manufacturing around the globe. As Mike mentioned, we just made some significant investments both in Minnesota and in Georgia in significant capacity and bricks and mortar there. So we have a long-standing, very well-optimized supply chain around the globe and not looking to make any changes to that as we sit here today.

Great. Thanks a lot.

The next question comes from Larry Beagleson with Wells Fargo. Please go ahead.

Good morning. Thanks for taking the question and congrats on a really strong quarter. And of course, congratulations to Dan and John. Excuse me, Dan, thanks for all your help over the years and I'll miss working with you. So Mike, you mentioned that you're now number two in EP. And so the market shares look very different in the U.S. and outside the U.S. with the U.S. being much higher. So my questions are, Mike, one, do you think you can overtake J&J to become number one in EP? And second, what will it take for the OUS share to catch up to the US share? Thanks.

Sure. We have just excellent momentum broadly around the globe in EP. So I won't speculate as to when we might. We certainly aim to be number one in that business. It'll take a few years to potentially reach that goal, but it's clear what our aim is. And it's supported based on the clinical science, the breadth and depth of our PFA leadership position that we have and the significant investment that we're making in it around the world. So in terms of, you know, the U.S. is doing extremely well. Europe has also had excellent growth despite lapping one-year comps with their FerroPulse launch already, which shows you that durability and enthusiasm despite competitive entrance, the European business grew significantly quickly in the first quarter of 25. And we're really still early days, very early days in China. So China represents a plus $1 billion market. And it's an area that we're making significant investments in clinical and mapping and capabilities in China. So I think you'll see ongoing impact benefit for us throughout the year in 25 in China and a much bigger impact in 26 in China. And our Japan team, it really has done an amazing job with launching FerroPulse. We're a clear number one leader in PFA, despite being the third approval in Japan. So very impressed with the execution in Japan and the US and in Europe. And our China team is really building the blocks now to do the exact same thing in China. So Our aim is to continue our leadership in PFA. You see massive mass adoption to PFA usage, and we have a lot of momentum.

All right. Thank you so much.

The next question comes from Joanne Winch with Citi. Please go ahead.

Good morning, and thank you for taking the question, and congratulations to everybody all around. Dan, it's been a real pleasure to work with you over the years. I do want to spend a minute or two talking about the Watchman franchise, which poked its head back above 20% year-over-year growth. And you made some comments on concomitant procedures and additional data. If you can just unpack that a little bit for us, that would be great. And thank you.

Sure. We had an excellent quarter with Watchman. It's 24%. And then, as we said, all of our businesses were impacted by about 200 bps of COVID. one less day sale. So the Watchman sales were excellent in the first quarter, and Ken Stein concomitant a bit more. But we're seeing very strong adoption of concomitant. Based on the safety profile, ease of use, the benefits for the hospital, the benefits to the patient, the physician, it's great to see the stars aligned to doing the right thing for the patient, the right thing for the hospital system. And we happen to have the leading product in the LAC category and the leading product in the PFA category. And we actually gained share with LAC in the quarter, which is impressive. And we continue to invest significantly in clinical trials and next-gen products with Watchman as well. So, Dr. Stein, any other comments?

Yeah, thanks, Mike. And, Joanne, you know, as Mike was saying, right, what we've really seen over the course of a quarter is, you know, a couple of phenomena. One is the physicians are really now digesting the incredible strength of the data from the option clinical trial, right, which is phenomenal. read out last year. We will have more data from OPTION to be presented at the upcoming HRS meeting. People are also, I think, just getting more accustomed to the workflow and really just how straightforward the workflow can be doing a common procedure, particularly if it's done in conjunction with using TheraPulse. People also, frankly, are also getting used to some of the economic advantages, both to hospitals, but also to physicians in doing this procedure in an efficient manner, you know, under the current reimbursement. So, you know, all of that has led to uptake of concomitant procedures, you know, that has been, you know, frankly, faster than we would have expected, say, a quarter or two ago. And just to reiterate what Mike said, it's one of those unique things that it's good for patients, first of all, avoids the need to have two procedures. It's also good for docs and good for hospitals and good for the system altogether.

Thank you very much.

The next question comes from Rick Wise with CFO. Please go ahead.

Good morning, Mike. Maybe talk, if you would, about Not tariffs specifically, but sort of other aspects of the trade wars and the potential or current impact on Boston. For example, I was impressed that you still feel like you're going to see double digit growth in China. But maybe talk to us about the environment and how some of these trade battles are complicating Boston's performance there. And maybe just related to that, are you concerned at all? Are you anticipating supply chain disruptions or concerns? How are you planning for that? Just talk about those topics. Thank you.

Sure. Well, one is the companies deliver excellent results, top line and bottom line. So our ability to absorb the tariffs, I think, is more unique than most companies. given the strength of the growth and the leverage that we're driving to absorb the $200 million, which is unfortunate. But we're able to absorb it and still deliver very high performance. You know, our operations team is excellent, and we have manufacturing across the globe. And as Dan said, there's no major adjustments other than continuing investment to support the long-term growth of the company. A lot of investments in the U.S., some in Malaysia. and ones that make sense to facilitate our global operations. You know, China's a very complex market. John or Dan, it represents 7% or 8% of our sales approximately. And the team there, despite the challenges, does a great job. We expect to deliver double-digit growth again, despite being one of the more impactful VBP companies impacts for Boston Scientific in 2025 across the PI portfolio and some ICTX and some endo. So a lot of VBP pressure there. But again, the innovation that we have, some of the local partnerships that we've done in China are proving to be beneficial. And we do have some small manufacturing capabilities in China, which also makes sense. So we think our manufacturing footprint makes the most sense for the long term. and we'll continue to invest in that to grow. It's a dynamic market, but our team is the winning spirit of the Boston Scientific team. We find ways to deal with reality and deliver high performance. And you see we're very bullish on our full year outlook based on the guidance that we gave in sales and EPS.

Thank you, and thanks to Dan for everything. Congrats on a well-deserved retirement. Hope you won't miss us.

The next question comes from David Roman with Goldman Sachs. Please go ahead.

Thank you. Good morning, everyone. Maybe we could switch gears and talk a little bit about the med-surg business. And, Mike, in your prepared remarks, you did talk a little bit about the turn in neuromodulation here with Relievant going organic and the durability of kind of the category leadership strategy and the dynamics you're seeing in the peripheral business. But maybe you could talk a little bit about the path from the 5%-ish organic growth we saw in Q1 here? And what are the drivers to move that back toward a high single-digit growth rate, especially as silk turns organic, exonics turns organic, et cetera?

Sure. Yeah, so, again, the 5 is really a 7 if you look at the days. So, you know, kind of at or slightly above market overall if you do the days adjustment there. You know, and breaking it down, you know, the endo team continues to deliver at a high level when you factor in those days impact. And with the broad-based portfolios, we expect to see, you know, kind of consistent results in that business. The neuromod team is really starting to strengthen its capabilities. We leave it has gone organic, which is certainly helpful. And we continue to invest quite a bit in that platform, as well as continue to strengthen our commercial capabilities organization. So we expect to see, you know, improvement in the Neuromod results as the year goes on, based on the momentum we have there, as well as in DBS with the lead and so forth. Axonix is going well. It's an excellent addition to our company, and we continue to integrate that company, and that will go organic fourth quarter or so this year, as well as Silk Road will. And in urology, it's a tad under what we're used to. from our urology team. Again, very impressed with the Axonix capability and really the global strength we have in our urology portfolio. We are experiencing some supply chain issues across some specific categories, which I won't go into detail, that are impacting some back orders within urology business. So we expect that to improve, but be a bit of a headwind for us in 25. And we continue to invest across that portfolio with our StoneSmartz in our implant businesses. So we expect the urology business to kind of grow at market, I would say, in 25, and our endoscopy and neuromod business to grow above market, and overall providing a really healthy balance to our excellent cardiology growth.

The next question comes from Travis Steed with Bank of America. Please go ahead.

Hey, congrats, Dan, on a well-deserved retirement. Just wanted to say that up front. And then I wanted to ask about margins this quarter. It was a really strong margin quarter. I don't know if that's the EP growth turning margin or creative or anything else to call out. And on the tariff side, the $200 million tariffs, I'm not sure if you're giving kind of what you're assuming in that in terms of where the rates go after 90 days, how much of that's China versus Europe, and if the plan is still and 26 to continue to offset the tariff headwinds as they go forward.

Sure. So let me hit the tariffs one first here, second one first, just to be 100% clear on what's in. So $200 million tariff headwind for 2025, largely in the second half. It's, as you have seen in the news, as we have seen, which is a 10% blanket tariff through the end of the year. The reciprocal tariff rates that were put in place on April 2nd with the 90-day pause, would then commence early in Q3. We assume they commence in early Q3. And tariff, it's the 145 U.S., 125 China back and forth that's there now. And that's actually the largest component of that 200 million for us now is the China piece. Not going to get into 26. Obviously, very fluid situation there. Just really pleased that we've been able to offset the 200 that we see in front of us for this year. which will help us deliver 12% to 14% revenue growth, 14% to 17% EPS growth, and 50% to 75% basis points of margin expansion, all in the face of a $200 million headwind that we didn't anticipate until about 25 days ago. When you look at the operating margin, kind of building off of that, 28.9%, that was, I will admit, a little bit higher than I even thought it would be in Q1. So what's the driver of that? When Ferropulse grows like it's growing and you see Watchman in the mid-20s, that's a big driver of gross margin. You saw gross margin at 71.5%. I really like that number. Obviously, tariffs will challenge that number as we go forward into the rest of 2025. Likely, gross margin should be in line with where we were last year. So last year was 70.3%. I'd expect us to be kind of in that range because the $200 million at the gross margin line for tariffs is kind of 100 basis points north of 100 basis points of impact. And so the equation that I had laid out in February might look a little differently, right? But it just goes to the flexibility, the agility, and the winning spirit of the team that when confronted with the $200 million headwind, we originally thought gross margin would go north. We thought SG&A would go south. R&D would tick up a little bit, and we'd deliver 50 to 75 basis points. So now, as we sit in April, gross margins likely to go backwards. So what do you do? You look to take some actions, again, discretionary actions for spending that we can eliminate and with no impact on the top line or long-term growth and still drive the 50 to 75 basis points of expansion and get to that 27.5 to 27.75. So likely from the 28.9 that you see in Q1, You know, we manage for the full year. The quarters, you're always going to see fluctuations. You'll see the second half in particular be lower than the 28.9, but we're confident in the 27.5 to 27.75 for the year and proud of it. Awesome.

Awesome answer. Thanks a lot.

Great. Thanks, Travis.

The next question comes from Patrick Wood with Morgan Stanley. Please go ahead.

Beautiful. Thanks so much, and congrats to both Dan and John. I'd love to just touch on CRM, actually, of all things. And I'm curious, you know, obviously saw the shift between high and low voltage, but I'm curious in terms of Empower and the approval of that in the second half, you know, how you're thinking of the outlook for that division, how much does Empower impact growth going forward, just any kind of details on the CRM side of things. Would love a little bit more.

Thanks. Sure. Really pleased. with the future of CRM, I would say. Yeah, so I'd say we're kind of slightly below market with those results. You know, most all of our businesses grew at, or most of them grew above market. CRM a tad below, which we expect likely to be the case for most of 2025. But I think if you look at, you know, 26 and beyond, and really the momentum, maybe towards the end of 25, really confident in our CRM business. A lot of investment and, you know, in CSP labeling, longevity changes, new CSP catheters. The Empower, we should have approval at some point in second half of 25, so that'll have a nice larger impact in 2026. And also, you know, one of the biggest organic investments we've had in the company for six years now is really the total product refresh of our SICD Tacky and Brady portfolio called Denali. which will launch starting off with high power in 2026. And really those impacts over across that broad portfolio throughout the strat plan period. So we continue to make strong investments there, excited about Empower. So I think you'll see maybe a slight lag in performance throughout 2025, but then hopefully improved momentum likely in fourth quarter and accelerating in 26 and throughout the strat plan period.

And Patrick, maybe I just want to give a little more color just on Empower overall, just to make sure everyone understands why we're excited about it. Again, once we do get approval and train people and get into a full launch of it, I think, A, it gets us into the leadless pacing space. And while we've been holding our own in low voltage, even without a leadless pacer, this is an important growing area in CRM to get into. But Empower, for everyone to recognize, is much more than just a leadless pacemaker. And the truly differentiated feature of it is the ability to communicate with SICD and provide a modular option for patients who have an SICD who go on to develop a need either for Brady pacing or for anti-tachycardia pacing. This is probably the most important unmet medical need in high-voltage therapy today. ICD leads three times as likely to fail as Brady leads, and recognizing all the advantages of having a system that is leadless, where the defibrillating lead is extra thoracic, we think, again, A, this is an important option for patients with an existing SICD, but also, importantly, it's an enabler for docs to use the SICD in a much broader group of primary prevention patients because they don't have to be afraid that the patient is subsequently going to develop a need for pacing.

We did a bunch of work here, so thanks for that.

Thank you. The next question comes from Danielle Antalfi with UBS. Please go ahead.

Hey, good morning, everyone. Thanks so much for taking the question. Dan, I'm going to miss you a lot and miss talking sports smack with you for sure. So you better keep in touch so I can continue to tell you how much I hate Boston sports team. Sorry, Mike. Thanks, Danielle.

I won't miss that. We know you're an Iowa fan.

So, and John, excited to continue working with you and excited to also have Lauren back. So sorry about that long intro. Just a quick question on some of the recent acquisitions. So Sonavie, interesting acquisition there. And just curious about, you know, when you, I know it's early, but, you know, what your expectations are, if you can comment on timing for that acquisition and and some of the milestones there clinically and regulatory, and when that could be something that could really start to contribute, because obviously, you know, we're starting to do a lot of work on that space in general, and, you know, the numbers can get very large. So just curious if you can give any color on that. Thanks so much.

Yeah, I'll start off, and maybe Dr. Stein might have some additional comments, or maybe not, but we'll see here. SonyD, we're excited to close that likely in the second quarter. It's a company that we've tracked for quite a while. It came from our venture portfolio. We do feel that the ultrasound modality will be the preferred choice to get the most effective hypertension relief. We clearly have to prove that out more through the clinical. That clinical trial is very, very early days in the U.S. now, so we can't comment on that too much because we don't officially own the company. But assuming it closes the second quarter, we'll certainly be very involved with the clinical trial and the enrollment strategy there, which is already in place. So we're very impressed with the capabilities of Sony V, and we think our timing is pretty good. You know, this market has to – there's some cards that need to flip in this market in terms of reimbursement, in terms of eventual payer support, and we aim to deliver hopefully a very strong clinical result from the U.S. trial. TO HOPEFULLY FURTHER SUPPORT REIMBURSEMENT, WHICH WILL BE IMPORTANT IN THIS CATEGORY. AND AS THAT DEVELOPS OVER TIME, I THINK OUR TIMING WILL BE PRETTY GOOD GIVEN THE, YOU KNOW, IT WILL TAKE US A BIT TO ENROLL THE TRIAL. WE'LL HAVE FOLLOW-UP AND THEN WE'LL GET APPROVAL. SO, JOHN, I'M NOT SURE WE SAID PUBLICLY WHEN WE THINK IT WOULD BE APPROVED OR NOT. SO MORE DETAILS TO FOLLOW THERE. BUT WE'RE EXCITED ABOUT THE OPPORTUNITY. WE THINK IT'S A DIFFERENTIATED PRODUCT IN A POTENTIALLY LARGE MARKET.

Yeah, and Daniel, maybe just to add on to what Mike said, again, first off, there are a number of cards that need to fall into place, reimbursement, finishing our pivotal, et cetera. And just high level, this is one of the most important medical needs today. Recognize half of U.S. adults have high blood pressure, majority of whom are not adequately controlled on medications alone, accounts for probably somewhere around $150 billion a year in healthcare costs in this country, just reflecting the burden of disease due to uncontrolled hypertension, accounts for half of all cardiovascular disease globally. So there is a need for a solution. And we do believe that Sanavi is likely to prove out to have important differentiated advantages over the competition. ultrasound, first of all, we believe will turn out to be a better modality for doing renal denervation, offers greater tissue penetration. And the really unique feature on some of the catheter is that it's able to do ultrasound-based renal denervation without having obstruct flow in the renal artery, which means you don't have to worry about heating to the vascular endothelium. You don't have to worry about anything to do specifically to cold, it's cooled by blood flow. So, right, to recap, very optimistic about the clinical differentiation of Sanavi. And if all of the cards do fall into place, this address is one of the most important unmet medical needs out there.

Thank you.

The next question comes from Josh Jennings with TD Cowan. Please go ahead.

Hi, good morning. Thanks for taking the questions. I'm hoping, or the question, I'm hoping to just get a state of affairs on capacity within the electrophysiology sector. Provider capacity, clearly no hurdles in the near term, but PFA commercialization has driven significant increases in the cardiac ablation volumes and Watchman is obviously looking for significant growth. But maybe state of affairs of capacity today and then just the path for PFA to enable cases, calculation cases in ASCs or affibulation cases specifically. Help us understand the runway, the path to opening that channel up and what Boston's doing to facilitate that. Thanks a lot.

Yeah, so on capacity today, we do not see an issue at this point in time with capacity. And one of the reasons why is this is a highly successful procedure that's very efficient. And it also continues to have strong appropriate reimbursement. You also saw a potential proposal from CMS to further increase reimbursement for both AFib ablation and LAC at roughly 10-ish percent. So these are financially strong categories for hospitals. And it's very effective and very efficient procedures. Therefore, many hospitals are prioritizing their capital investments to meet the demand for this increased patient population for both LAC and for EP. So we are seeing quite a bit of investment in new cath labs being invested in and created around the world. But again, these categories are both growing very quickly. So there may potentially be some more capacity constraints, which would open up your question on site of service. Dr. Stein, do you have any comments there?

Yeah. The only other thing I'd add to that, Josh, particularly with respect to maybe moving more to an outpatient or ASC setting, there's stuff that's in our control. There's stuff that's outside of our control. Outside our control is reimbursement. But in our control, right, I mean, what do you need to do to move these procedures out of the inpatient hospital setting? And that's having procedures that are safe, number one, that are efficient, and that are predictable. And I'd submit that FerroPulse is industry-leading on all three of those accounts. And particularly when you look at the ability to do procedures without the need for intubated general anesthesia, if you want to drive lab efficiency, with the advent of our FerroWave NAV catheter and FerroView software on Opal, If you want to map, the ability to do the map in a way that is very cost-effective without needing to pull out a separate mapping catheter. And so we've done everything that we can within our power to optimize these procedures, again, both for safety, for efficiency, and for predictability with Faripos.

Appreciate that. Thank you.

The next question comes from Michael Polark with Wolf Research. Please go ahead.

Good morning. Thank you. I'm going to thrill with a question on tax. In this Trump tempest, the questions to me have been tariffs and tax. And so, Dan, I was hoping for a brief refresher on why the Boston operational and adjusted tax rate is so low. Do you view this as durable? Is there anything as it relates to Pillar 2, some of the discussions around transfer pricing, other policy changes involved? that might put the tax rate at risk in the out years. Help us understand why this is the way that it is. Thank you.

Sure, Mike. Yeah, so as you look at why our tax rate is where it is, and it's been pretty durable for a decade or more, you look at things like the source of manufacturing, your geographic mix of business and profits, the treatment of acquisitions, integration, location of IP. It's pretty complex, as you would imagine. So that all nets down to the $13.5 billion 12.5% that we talked about today, 13.5% operational, 12.5% adjusted. So we've been very public in saying for the last couple of years that as you look at 2026, there's a potential for 200 to 300 basis point headwind on that relative to the sunsetting of TCJA from back in 2017. I am heartened by some of the developments in Washington, some things and some discussions that are going on. that might help us there. So, you know, nothing's final until it's on paper and enacted. But optimistic that that might happen. But until that does, we would have a 200 to 300 basis point upward headwind in our tax rate for 2026.

The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.

Hey, guys. Thanks for taking my question. Dan and John, congrats to both of you. I had one maybe on the pipeline here. I'm curious on when you look at the TAVR and Watchman, both sort of interesting phase here. On Champion AF, have you guys done any patient preference kind of studies, assuming the trial is a success? How should we think of adoption in any update on that? U.S. FEA submission for TAVR?

So on TAVR, there's no updates on this call. We'll continue to work with the authorities in the U.S., and hopefully we'll have more of a clear update at some point in the second quarter, but nothing new to report on the TAVI front at this point, with the exception that the prime valve in Europe continues to do well. We did have I would say a slower first two months of the quarter than a nice pickup in March. And so we expect to, you know, the prime results are essentially prime is going extremely well in Europe. And we continue to put our focus there as it relates to accurate and more news to come regarding the U.S.

Yeah. And, DJ, on Champion again, you know, we continue to expect to read out the Champion data first half of next year. to remind everyone, right, that's our all-comer randomized trial Watchman against the new oral anticoagulants. And, you know, we continue to believe that a positive readout on Champion supports, you know, the continued 20% plus growth of Watchman over the near to medium term. And, you know, as we said our last Investors Day, right, that, you know, in between positive option, positive Champion, That supports tripling of the potential addressable market for Watchman. And from a patient standpoint, I can tell you, even back when I was in practice, the single thing that patients with AFib wanted more than anything else was the ability to get off blood thinners. And so we do see having a one and done alternative to being on lifelong blood thinners as something that is very attractive to patients.

Thank you, guys.

And I understand there's time for one last questioner. That will be from Matt Mixick with Barclays. Please go ahead.

Yeah, thanks so much. So just wrapping it up here, I know we've covered a lot of ground. Maybe just to answer the question, it seems a little silly to ask because you are so active. in the strategic investment front, but maybe comments if you have them on where you think some of your recent acquisitions can go under your management at Sonix and what other areas you continue to invest in and see as opportunities to flesh out the portfolio. And congrats to both John and Dan. I really enjoyed working with you both and appreciate you taking the questions.

Sure, Matt. As you know, we're very active and continuing to strengthen and widen our category leadership across the businesses that we have and expand our WAMGR, which we've done consistently over many years and aim to continue to do that. I made a few comments. So, Silk and Exonix are both inactive integrations now and will go organic in fourth quarter. Very bullish on both those platforms, you know, when they go organic in 26 and for the future. We made a lot of other investments, a closing of Antera in our interventional oncology business, and also some very recent news that you saw on Bolt, where we're very excited about entering the IVL space by the end of the year with above-the-knee applications in our PI vascular business, and then below-the-knee, and then we've initiated our clinical trial right now. That deal is closed. And then we made some comments earlier about Sony V. And we've also made, we continue to have largest venture fund in MedTech. We continue to invest more and more in that fund as it's been a nice source of acquisition growth for the company. So we will continue to be aggressive in the venture portfolio. So I don't think you're seeing any change in behavior here. We continue to want to deliver highly differentiated performance, increase our WAMGR, and be the best place to work in MedTech. And a lot of it comes through focus on innovation and engaging our employees.

Great. Thanks, Mike. And thanks, everyone, for joining us today. Appreciate your interest in Boston Scientific. And if we were unable to get to your question or if you have any follow-ups, please don't hesitate to reach out to the investor relations team. Before we disconnect, Drew will give you all the pertinent details for the reply. Thanks so much, everyone. Have a great day.

Please note, a recording will be available in one hour by dialing either 1-877-344-7529 or 1-412-317-0088 using replay code 3699621 until April 30th, 2025 at 1159 PM Eastern Time. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.