Medtronic plc

Good morning. I'm Ryan Weisfenning, Vice President and Head of Medtronic Investor Relations. And I appreciate that you're joining us for our fiscal 25 fourth quarter video earnings webcast. Before we go inside to hear our prepared remarks, I'll share a few details about today's webcast. Joining me are Jeff Martha, Chairman and Chief Executive Officer, and Thierry Piatone, Chief Financial Officer. Jeff and Thierry will provide comments on the results of our fourth quarter, which ended on April 25th, 2025, and our outlook for fiscal year 26. After our prepared remarks, the executive VPs from each of our four segments will join us and we'll take questions from the sell side analysts that cover the company. Today's program should last between 60 and 90 minutes. Earlier this morning, we issued a press release containing our financial statements, divisional and geographic revenue summaries, and non-GAAP reconciliations. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com. During today's program, many of the statements we make may be considered forward-looking statements, and actual results may differ materially from those projected in any forward-looking statement. Additional information concerning factors that could cause our actual results to differ is contained with our periodic reports and other filings that we make with the SEC, and we do not undertake to update any forward-looking statement. Unless we say otherwise, all comparisons are on a year-over-year basis, and revenue comparisons are made on an organic basis, which excludes the impact of foreign currency and fourth quarter revenue in the current and prior year reported as other. References to sequential revenue changes compared to the third quarter of fiscal 25 and are made on an as-reported basis. All share references are on a revenue and year-over-year basis and compare our fourth fiscal quarter to our competitor's first calendar quarter. Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. And finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year. With that, let's head into the studio and hear about the quarter and our outlook for fiscal 26.

Hello, everyone, and thanks for joining us today. As you can see in our Q4 results released this morning, we had a strong finish to our fiscal year, growing 5.4%. Our growth drivers are having an impact and are still building momentum. And we've proven to you that our growth is durable, as we've now delivered mid-single-digit revenue growth for two and a half years. Our cardiovascular growth accelerated, as forecasted, growing 8% on broad strength across the portfolio, including nearly 30% growth in CAS. We also delivered double-digit growth in neuromodulation and diabetes and high single-digit U.S. growth in cranial and spinal technologies. Two of our businesses, Cass and ENT, reached important milestones, entering the $1 billion annual revenue club alongside 10 of our other businesses. And we've had a number of important clinical and regulatory updates during the quarter as we continue to advance our pipeline. Operationally, we translated our revenue growth into leveraged earnings with high single-digit operating profit and low double-digit EPS growth. Coupled with our Q3 results, we delivered a very strong 9% EPS growth in the back half of the year. And for the full year, we delivered at the upper end of the commitments that we laid out a year ago. We shared with you this morning our view on the potential impact from tariffs, which we have included in our newly issued guidance. Tyria will walk you through this later in the broadcast, but you can see from the significant amount that we've already been able to offset that we are extremely focused on mitigating actions. You also see from our guidance that the underlying fundamentals of the business are strong and they're getting stronger. We had also announced this morning that we have decided to separate our diabetes business as we continue to execute on our active portfolio management. Look, we see this as a win for both diabetes and for Medtronic, and I'm going to touch upon this a bit later. So we have several details to cover today, and let's start with our Q4 performance highlights. Starting first with the cardiovascular portfolio, innovation drove broad-based growth in the quarter, which accelerated to 8%. We delivered double-digit growth in cardiac ablation solutions, structural heart, and cardiac surgery, and high single-digit growth in cardiac rhythm management. Cardiac ablation solutions growth accelerated, as forecasted, to nearly 30%, with high 30s growth in the US and low 20s in international markets. Our portfolio of pulse field ablation products, the broadest in the space, continues to drive rapid growth around the world. We're opening up new accounts as our supply continues to quickly increase, and demand for our Farrah PFA products is extremely high. This quarter, I spent a lot of time talking to EPs, and we're hearing great feedback. Physicians are saying that our Sphere 9 focal catheter is the most desired PFA catheter on the market, and we're seeing large centers switch to Medtronic. EPs appreciate the efficiency that comes from fewer catheter exchanges, given that Sphere 9 can do mapping, PFA, and RF ablation all from the same catheter. Now, across our PFA platforms, customers appreciate their ease of use, their precision, durable efficacy, and, of course, the safety. Now, if there's a PFA catheter that is driving even more customer excitement than Sphere 9, it's our next-gen Afera Sphere 360 single-shot catheter. Sphere 360 is an integrated mapping and ablation catheter where the entire lattice tip delivers pulse-filled energy. So the EP doesn't have to rotate the catheter. One-year data for Sphere 360 was presented last month at the HRS meeting, which showed excellent efficacy, durability, and safety, as well as very fast procedure times. We plan to start our U.S. pivotal trial for 360 later this calendar year. So our Cass business has a lot of momentum, and its contribution to total company growth continues to increase, including 70 basis points this quarter. And we expect Cass' growth rate to accelerate again next quarter. The business reached $1 billion in revenue in FY25, and we have near-term line of sight to doubling that as we continue to enter new accounts globally with Afera and with Pulse Select. With the cardiac ablation space now at roughly $10 billion and growing double digits, this is a huge growth opportunity for Medtronic, and our focus is to be the leader in this space. Next, our cardiac rhythm management business had a very strong quarter, growing 7% with high single-digit growth in both defibrillation solutions and cardiac pacing therapies. With DFIP solutions, we're seeing strong customer adoption of our Aurora EVICD, with its revenue doubling year over year as we're taking meaningful share from the incumbent. We are seeing our customers placing larger and faster repeat orders for Aurora. Now in pacing, we continue to have strong growth in leadless pacing and conduction system pacing. Our micro leadless pacemaker had strong 17% growth, and our 3830 conduction system pacing lead grew 19%. In structural heart, we grew 10%, with strong growth of our Evolute TAVR platform in the US, Japan, and emerging markets. We continued to differentiate Evolute with positive clinical evidence. Our five-year low-risk data was presented at ACC during the quarter, showing outstanding valve performance for Evolute. And our two-year data from our head-to-head SMART trial was presented at CRT, showing continued superior performance versus the leading competitor's valve. The smart data and FX Plus launch continue to have an impact. To give you just a few examples, a large nonprofit system in the upper Midwest that does over 200 TAVR implants a year recently reviewed their own patient data and found that smart was consistent with their outcomes. Better valve performance with Evolute. And as a result, we went from a low single-digit share to Evolute being their valve of choice. Another example would be an East Coast academic center that implants about 200 valves a year and whose physicians participated in the competitor's first balloon expandable TAVR trials. Well, now they've moved from using the competitor's valve almost exclusively to using our Evolute valves in a majority of their patients. Now I could keep going with such examples. The point is that our data, our technology, and our sales execution are having a significant impact, giving us confidence that we can continue to grow structural heart at or above the market. In hypertension, we continue to ramp our market development activities for our simplicity blood pressure procedure as we await reimbursement coverage from CMS. CMS has indicated that they will finalize the NCD on or before October 11th. And ahead of this, they will issue a draft on or before July 13th. Many large healthcare systems are establishing outpatient simplicity service lines today so that they're prepared to rapidly scale to meet the large demand. And we're right there with them. We're hiring market development managers, clinical specialists, and healthcare economics managers to supplement our existing coronary sales force. So we expect simplicity revenue to meaningfully ramp when it's covered. And just like PFA, over time it will become an important contributor to overall Medtronic growth. Nearly half of U.S. adults have hypertension, and one in four of those with hypertension don't have their blood pressure under control, despite the broad availability of numerous generic drugs. Look, the opportunity here is massive, and we will be the leader in addressing this large, unmet need. Now turning to the neuroscience portfolio, our cranial and spinal technologies business grew mid-single digits, including 7% growth in the United States as we continue to win share. We've changed the basis of competition in spine to one where enabling technology drives spine implant decisions. And our differentiated AbleSpine ecosystem, including AI-driven pre-op planning software, imaging, robotics, navigation, and powered surgical instruments, has by far the largest install base, with over 10,000 capital units, well ahead of our competition. Now, this is important because when a customer upgrades one of our pieces of capital, they're not just upgrading one product. They're upgrading to the full Able ecosystem. So you don't go just from Oarm to new Oarm or Navigation to new Nav or Robot to new Robot. You go from one of these pieces of equipment to the entire Able ecosystem. Able is not only appealing to spine surgeons around the world, it's also attracting the competition's best sales reps and distributors to join Medtronic. Some of the world's leading spine and neurosurgery centers, including large, iconic teaching institutions, are moving to Medtronic. And combined with the investments we're prioritizing to even further enhance the ABLE ecosystem, we expect our strength in CST to continue. Another business that continues to win shares is neuromodulation, which grew 10%. Our closed-loop sensing technology is driving strong growth in both pain stim and brain mod. In pain stim, we grew 12%, including 15% growth in the U.S. on the continued strength of our inceptive closed-loop spinal cord stimulator. We continue to win share and have now reached the number one global position in SCS. Inceptive is changing patients' lives as they no longer have to adjust their therapy throughout the day and they aren't having to come back to the doctor's office to have their device settings changed. So Inceptive is reducing burden for the patient and for the physician. In brain modulation, we grew mid-single digits, including 9% growth in international markets on the continued adoption of our BrainSense Adaptive DBS for people with Parkinson's. Look, this is a groundbreaking technology, a fully closed-loop brain-computer interface that automatically provides personalized, real-time therapy based on brain activity feedback. In the U.S., we received FDA approval for BrainSense during the quarter. Now following stories on adaptive DBS technology on Good Morning America, the BBC, and several other media outlets, we are seeing patients now proactively talking to their doctors and requesting adaptive devices. The early results are very exciting, and we're now entering full market release in the U.S. and Europe, with Japan launching next month. So in Neuromod, we have near-term growth drivers, we're the category leader, and we're well positioned to capture the future innovations that are coming. Now turning to our medical-surgical portfolio and our surgical business, which improved and grew 2%. We continue to drive strong growth in emerging markets and advanced energy. Our market-leading ligature vessel sealing technology continues to attract strong surge in adoption, resulting in our 11th straight quarter of winning share in advanced energy. Now, we expect our surgical growth to improve over time as we expand and launch our Hugo soft tissue robotic platform. Hugo continues to reach important milestones. Like last quarter, we filed with the US FDA for urologic indication. And the pivotal data from the urology trial, which met its primary safety and effectiveness endpoints, was presented last month at AUA. We expect to follow our urology indication in the U.S. with hernia and benign GYN indications. And we will begin enrollment in our GYN oncology trial in the coming months. We also continue to expand instrumentation, having conducted our first cases with ligature on Hugo this past quarter. We're expanding Hugo's installed base and are now in 30 countries around the world. And we continue to see strong increases in Hugo procedure volumes and utilization. In surgical, we are also driving impressive expansion in our AI-powered touch surgery ecosystem. Touch surgery is a foundational intelligence technology used across both robotic and laparoscopic surgery. And we're leading the industry in establishing this digital surgical ecosystem globally. We see our growing digital footprint as a long-term strategic advantage for our surgical business, and this will apply to other businesses across Medtronic over time. Finally, in diabetes, we grew 12%, our sixth quarter in a row of double-digit growth. The growth was broad-based, with strength in pumps, CGM, and consumables. We continue to grow our MiniMed 780G install base in both the U.S. and international markets. People with diabetes are attracted to 7-A-G's highest time and range of any commercial AID system, giving them the ability to achieve more control with less burden. In Europe, the launch of our Simplera Sync sensor is driving strong mid-teen CGM growth. Simplera is half the size and much easier to apply than our previous sensor. Now, in the U.S., we received FDA approval for Simplera Sync just last month and expect to begin the launch this fall. Regarding our Abbott-based sensor, back-end integration and development work is progressing well. We submitted our interoperable pump and controller for FDA clearance, which paves the way for bringing our AID system with this sensor to the market. We also submitted to the FDA for a 7-AG label expansion, including for type 2 diabetes and rapid-acting insulins. And looking ahead, we expect to submit for our eight series next generation pump, the MiniMed Flex by the end of the fiscal year. So as you can see, we've significantly turned around our diabetes business and it's very well positioned. And this morning we announced our plan to separate diabetes into a standalone public company with a capital market separation through our preferred path of an IPO split. This is a win for both companies. For Medtronic, our portfolio becomes more focused on high-margin growth markets like PFA and renal denervation. At the same time, the independent new diabetes company will be a scaled leader and the only diabetes company to commercialize a complete ecosystem to address intensive insulin management. Today's announcement marks a significant milestone in our ongoing active portfolio management efforts, an important lever to delivering on our long-term strategic and financial objectives. Look, there is a clear strategic rationale for Diabetes to be a standalone company. Diabetes is predominantly B2C, whereas Medtronic, our businesses are predominantly B2B. We sell different types of products to different types of customers. Medtronic's commercial, manufacturing, and technology platform synergies are less applicable to the diabetes business given their distinct customer, go-to-market, and supply chain infrastructure. For Medtronic, we will continue to have leading franchises and attractive medtech markets, and this separation shifts and simplifies our portfolio to have even more intense focus on our highest margin growth drivers. These growth drivers are already building momentum, and this increased focus will ensure that they reach their full revenue growth potential. Our portfolio also shifts to higher profitability, allowing us to pick up both margin and earnings. And the shift increases our exposure to markets where we demonstrate our strongest core capabilities and have scale and synergy benefits, which importantly lowers the overall risk profile of the company. Now, taken all together, we'll be in a great position to continue delivering mid-single-digit or higher organic revenue growth, as well as accelerating our earnings leverage. So our direction of travel here is clear. This is about greater focus on the significant opportunities in high-margin growth markets where we are well-positioned, and we believe that this will result in a win for Medtronic. Look, I'm also excited about what the future holds for the diabetes business. And now I'd like Q to Laura, who will become the CEO of the new diabetes company, to share some of her thoughts. Q joined Medtronic in 2022 and has been instrumental in turning the diabetes business into what it is today. She's an inspirational, transformative leader. who is also strategic and pragmatic. Her impressive track record in driving growth and innovation has set the diabetes business on a path to continued success, ensuring the needs of people with diabetes are met around the globe.

So over to you, Q. Thanks, Jeff. I want to start by thanking you for your leadership and vision. Your decision a few years ago to double down on the diabetes business and significantly increase investment has positioned us well, setting us up to generate significant returns for stakeholders. We wouldn't be where we are without your unwavering support. I'm very excited to be leading this large-scale, direct-to-consumer diabetes business. We have over 8,000 employees in two global manufacturing facilities and a lot of innovation in the works. Our innovations are driven by the desire to improve outcomes while reducing burden. And as an independent company, we will have a shareholder base that is aligned to our business and financial profile. This will enable more focused investment in innovation, as well as manufacturing scale and automation, positioning us for success in automated insulin delivery and smart MDI, while also driving margin expansion over time. Our $2.8 billion diabetes business has strong momentum in a large $16 billion global addressable market. We've delivered double-digit growth now for six consecutive quarters, along with several recent product approvals and the strategic partnership that we have established with Abbott Diabetes Care. And we have a deep pipeline, as we've been investing in CGM options, insulin delivery options such as a pen, patch and durable pump, a fully automated algorithm and a unified digital customer experience. This full ecosystem not only enables people with diabetes to have a seamless transition from between therapies without changing companies, but it also allows them to achieve better control with less burden. And finally, I want to thank and celebrate the dedication of our diabetes team. Their passion and perseverance is transforming diabetes care to give people the freedom to forget about diabetes and live their best lives. Back to you, Jeff.