Stryker Corporation

Welcome to the first quarter 2019 Stryker earnings call. My name is Jesse, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we'll conduct a question and answer session. During that time, participants will have the opportunity to ask one question and one follow-up question. If you'd like to ask a question, please press star 1. This conference call is being recorded for replay purposes. Before we begin, I would like to remind you that the discussions during the conference call today will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC. Also, the discussions will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release. This is an exhibit to Stryker's current report on Form 8-K filed today with the SEC. I will now turn the call over to Mr. Kevin Lobo, Chairman and Chief Executive Officer. You may proceed, sir.

Welcome to Stryker's first quarter earnings call. Joining me today are Glenn Bainline, Stryker's CFO, and Catherine Owen, Vice President of Strategy and Investor Relations. For today's call, I'll provide opening comments, followed by Catherine, with updates on MACO and K2M. Glenn will then provide additional details regarding our quarterly results before we open the call to Q&A. Following an excellent 2018, Our Q1 results reflect continued momentum across our three segments, with over 7% organic sales growth. This growth was balanced between U.S. and international at roughly 7% each, with particularly robust gains in emerging markets and Europe. By segment, MedSurge led the way with 9% worldwide organic growth, driven by impressive mid-teens organic growth at Instruments. Orthopedics grew 5% globally, with knees growing 7% behind Mako, and hips gaining 4%, benefiting from the recent 3D-printed Ascotabular Cup launch. Neurotech and spine had worldwide organic growth of 8%, as Neurotech's double-digit growth, powered by neurovascular, was offset by low single-digit spine growth. Turning to the P&L, adjusted operating margin improved by 10 basis points, despite absorbing significant deal-related dilution. With the strong top line and continued progress with our cost transformation for growth initiatives, we remain on track to achieve our full-year target of 30 to 50 basis points of operating margin expansion. We continue to effectively integrate acquisitions and also make meaningful investments in R&D, which ensures a steady cadence of new product introductions, such as Endoscopy's recently launched 1688 camera. Overall, driven by the sales growth at the high end of MedTech, we achieved adjusted per share earnings of $1.88, up 12%. Looking ahead to the full year, we are confident in sustaining this momentum and in our ability to deliver on our commitments to our customers, employees, and shareholders. This is reflected in our adjusted guidance, which raises the bottom end of both our full year organic sales growth and adjusted EPS ranges. With that, I will now turn the call over to Catherine.

Thanks, Kevin. Starting with Mako, we installed a total of 35 robots globally in the quarter, with 27 in the U.S. By comparison, in the comparable quarter a year ago, we installed a total of 28 robots, of which 24 were in the U.S. Globally, our installed base of robots is approaching 700, with over 550 in the U.S. Looking at U.S. procedures, in Q1, Mako total knee procedures exceeded 15,000, increasing over 80% from the prior year quarter, while total MAKO procedures approximated 24,000. These results indicate we are continuing to build on the momentum we saw in 2018, where total MAKO knee procedures for the year topped 45,000. With a continued healthy order book, we anticipate strong robot sales in 2019, as hospital and surgeon interest in robotic programs for orthopedics continues to increase. We also expect to continue to build on the critical data that demonstrates the unique benefits of the Mako technology. Turning to K2M, we are pleased with the continued progress on the integration front. With the organizational structure in place, we are building inventory to help support cross-training for our combined selling organization. On a combined constant currency basis, our sales grew 2% in the quarter, and we anticipate a continued sequential ramp in sales for the full year, and we are on track to achieve combined fine sales growth in the mid-single digits for 2019. With that, I'll now turn the call over to Glenn.