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Stryker Corporation
1/28/2020
Welcome to the fourth quarter 2019 Stryker earnings call. My name is David, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we will 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 would like to ask a question, please press star, then one on your touch-tone phone. This conference call is being recorded for replay purposes. Before we begin, I would like to remind you that the discussions during this conference call 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 that 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 Fourth Quarter Earnings Call. Joining me today are Glenn Bainline, Stryker's CFO, and Catherine Owen, VP of Strategy and Investor Relations. For today's call, I'll provide opening comments, followed by Catherine, with an update on MACO. Glenn will then provide additional details regarding our quarterly results before we open the call to Q&A. We finished 2019 on a particularly strong note, with Q4 organic sales growth of 8%, despite notably difficult year-over-year comparisons. This performance helped propel full-year organic revenue growth to 8.1%, topping the high end of our most recently raised target of 7.5% to 8%. 2019 marks the seventh consecutive year of delivering accelerating organic sales growth, which has consistently been at the high end of MedTech. In 2013 and 2014, we grew in the fives organically. 15 and 16, we grew in the sixes. And 17 and 18, it was in the sevens. Also, this past year marks our 40th consecutive year of sales growth since Stryker went public in 1979. The performance in 2019 was balanced across divisions and geographies, reflecting the durability of our business model. Turning to the results by our three segments, Q4 was led by over 12% organic sales growth for neurotechnology and spine, with our neurotechnology businesses growing in the high teens. Orthopedics posted a 7.3% organic sales increase in the quarter, powered by impressive double-digit growth in knees. Our orthopedics performance continues to reflect meaningful share gains fueled by Mako and our 3D printed implants. As Catherine will detail in her comments, Q4 delivered the strongest robot quarter since the launch of Mako. We finished the year with a healthy order book, demonstrating the commercial and clinical success of this highly differentiated technology. MedSurg was up roughly 7% organically in the quarter, as endoscopy led the way, growing 10%. All other divisions achieved mid-single-digit gains despite challenging comparisons. MedSurg continues to be a strong and consistent grower year in and year out. International organic growth was 7.6% in Q4, and for the full year, matched the U.S. growth rate of 8.1%. Emerging markets led the way with strong double-digit gains in Q4 and the full year. While it has taken some time, 2019 was an excellent year in emerging markets, and we are well positioned to continue this momentum into the future. Europe once again registered full-year organic sales gains in high single digits as we make progress towards achieving similar market share levels as we have in other developed market regions. This performance was well above the market and has significant runways as we continue to drive Salesforce specializations. Australia and New Zealand also had a strong Q4 across its portfolio. In the past seven years, we have strengthened our international businesses and have taken key steps to strengthen category leadership across our portfolio. The pending addition of Wright Medical later in 2020 will address our last meaningful category leadership gap, upper extremities. We continue to make investments in our sales, marketing, and R&D teams around the globe, in order to support our goal of consistently growing at the high end of MedTech. But with our focus on our cost transformation for growth initiatives, we are also delivering leverage. Off-margin expanded roughly 40 basis points in the year, which included absorbing approximately 30 bps of dilution related to acquisitions. We exited 2019 with nearly $15 billion in global sales and have demonstrated the ability to continue to drive high growth despite our larger size. We have expanded our offering through internal investments and acquisitions and believe we are well positioned to achieve continued success for our customers, employees, and shareholders. Looking at 2020, we are on track to continue to achieve strong organic sales growth and leverage earnings. In closing, the tremendous efforts of our 40,000 employees around the globe enabled us to once again achieve strong results and deliver on our promise to our customers and patients to make healthcare better. With that, I will now turn the call over to Catherine.
Thanks, Kevin. My update today will focus on Mako and the key data points that have allowed you to track our success in executing on our orthopedic robotics strategy. In Q4, we sold 89 Mako robots globally versus 54 in the comparable quarter a year ago. This includes 63 in the U.S. in Q4. Globally, our installed base of robots is approximately 860, with close to 700 in the U.S. In January, we received Japanese approval for the Mako partial knee indication, adding to the indications for the total knee and total hip procedures. We now have nine Mako robots in Japan and continue to believe this represents a significant market opportunity. Looking at U.S. procedures, in Q4, MACO procedures increased nearly 50% to 36,600, bringing the full-year total to over 114,000. Total need procedures posted a roughly 59% increase in Q4 to approximately 24,000, while full-year MACO need procedures increased roughly 66%, topping 75,000. Demand for MAKO is being driven by the myriad of unique benefits of our robotic technology, multiple reconstructive applications, and the ability to perform a cementless knee. MAKO's smart robotics have enabled surgeons to achieve a no-more-so-as-to-cut-less approach to joint replacement, which is driving improved outcomes for patients. These capabilities are clearly helping to increase robotic utilization rates, which achieves strong double-digit growth both year over year and sequentially. Lastly, it's worth noting that demand for our 3D-printed cementless knees continues to climb, exiting the year at over 36% of our U.S. knee procedures. We also continue to see growing demand for the MAKO hip application, underscored by over 40% growth in hip procedures on MAKO in 2019. Please note that going forward, we will no longer be providing quarterly MAKO results. Since acquiring the company in early 2014, we have provided detailed MACO data for 23 consecutive quarters in order to allow investors to accurately track the performance of this differentiated robotic technology. As we are now six years since the acquisition and nearly five years since the initial launch of the total lead indication, we believe we have validated the strategic rationale and competitive advantage of MACO as witnessed by the roughly 600 basis points of U.S. need market share that we have gained since 2013. Going forward, we continue to expect to take meaningful market share in knees owing to Mako, along with our differentiated portfolio of knee products, including our 3D printed implants. We will continue to report on a combined basis both manual and Mako implanted knees in our knee line, while robot sales will be reported in other orthopedics to allow for accurate tracking of our knee revenue. Looking at 2020, our MACO order book remains robust and supports our expectation for continued share gains in both hips and knees. With that, I'll now turn the call over to Glenn.
Thanks, Katherine. Today, I will focus my comments on our fourth quarter financial results and the related drivers. Our detailed financial results have been provided in today's press release. Our organic sales growth was 8% in the quarter. As a reminder, this quarter included the same number of selling days as Q4 2018. Pricing in the quarter was unfavorable 0.6% from the prior year, while foreign currency had an unfavorable 0.6% impact on sales. For the quarter, U.S. sales continued to demonstrate strong momentum with organic growth of 8.2%, reflecting solid performance across our portfolio. International sales grew 7.6% organically, which was balanced across our international regions. Organic sales growth for the year was 8.1%, which was slightly above our most recently raised full-year guidance of 7.5% to 8%. U.S. international organic growth was also 8.1%. 2019 had one additional selling day compared to 2018, and for the year, price had an unfavorable impact of 0.9% on sales. Our adjusted quarterly EPS of $2.49 increased 14.2% from the prior year, reflecting strong drop-through on sales growth combined with good operating expense control. Our fourth quarter EPS was negatively impacted by two cents from foreign currency, which was in line with our expectations. Our full year EPS was $8.26 with growth of 13% reflecting strong sales growth and disciplined leverage. Now I will provide some highlights around our segment performance. Orthopedics delivered constant currency and organic growth of 7.3%, including organic growth of 7.2% in the U.S., highlighted by U.S. knee growth of 10.5%. This performance reflects strong demand for our MAKO TKA knee platform, 3D-printed products, Trident II hip implants, and continued ramping of our T2 Alpha nailing system. Internationally, orthopedics delivered organic growth of 7.6%, which reflects strong performance in Australia, Canada, and Europe. MedSearch continued to have strong growth across all businesses in the quarter, with constant currency growth of 7.4% and organic gains of 6.8%, which included an 8% increase in the U.S. Instruments had U.S. organic sales growth of 4.1%, reflecting a strong prior year comparable. Full-year U.S. organic growth for instruments was 10.2%. In the quarter, sales growth was driven by gains in waste management, stair shield, and smoke evacuation. Endoscopy delivered U.S. organic sales growth of 15.4%. Endoscopy had strong performances across many product lines, highlighted by double-digit growth in its video products, including the 1688 camera and accessories, insufflator, suction irrigation, and booms and lights businesses. The medical division had U.S. organic growth of 5.7%, reflecting solid performance in its bed, including services and stretcher businesses. Internationally, MedSearch had organic sales growth of 2.4%, reflecting strong comparables across most geographies. Neurotechnology and Spine had constant currency growth of 18.2% and organic growth of 12.5% as K2M anniversary during the quarter. This growth reflects strong performance within our neurotech product lines. Our U.S. neurotech business posted organic growth of 16.5% for the quarter, driven by strong demand for our hemorrhagic, ischemic stroke, and our neuro-powered instruments products, including Sonopet IQ. During the quarter, we continue to be ahead of our K2M cost integration plan and begin to see good momentum related to our sales integration efforts. For the quarter, we delivered an increase in sequential quarterly growth, and on a full-year pro forma basis, delivered low single-digit increase across our combined worldwide spine business. Internationally, neurotechnology and spine had organic growth of 16.6. This performance was driven by strong demand in Europe and emerging markets. Now I will focus on operating highlights in the fourth quarter. Our adjusted gross margin of 66.3% was favorably reduced was favorable approximately 60 basis points from the prior year quarter. Compared to the prior year quarter, gross margin expansion was favorably impacted by acquisitions and foreign exchange, which were partially offset by price and business mix. For the full year, our adjusted gross margin of 65.9% was unfavorable approximately 20 basis points from the prior year. Compared to the prior year, gross margin expansion was favorably impacted by acquisitions, which were offset by price, foreign exchange, and business mix. Adjusted R&D spending was 5.6% of sales, which was 10 basis points lower than prior year quarter. For the full year, adjusted R&D spending was 6.1% of sales. Our adjusted SG&A was 32.3% of sales, which was favorable to the prior year quarter by 10 basis points. For the full year, our adjusted SG&A was 33.5% of sales, which was favorable to the prior year by approximately 40 basis points. For both the quarter and the year, this reflects continued focus on operating expense improvements through our Cost Transformation for Growth program, including key projects focused on indirect purchasing and shared services. This is offset by the negative impact of acquisitions and continued planned investments in other CTG program efforts, like our ERP project. In summary, for the quarter, our adjusted operating margin was 28.3% of sales, which was 80 basis points favorable to the prior year quarter. Our full year operating margin of 26.3% was up 40 basis points favorable from the prior year, delivering on our commitment of 30 to 50 basis points op margin expansion. Our operating margin primarily reflects good leverage and continued operational savings offset by investments and acquisitions, the latter of which had approximately 30 basis points negative impact for the year. Next, regarding other income and expense, our expenses decreased from prior year quarter primarily due to favorable interest rates. Our fourth quarter had an adjusted effective tax rate of 16.3%. Our full year effective tax rate was 15.8%. These rates reflect a higher operating tax rate reduced primarily by the benefit related to stock compensation expenses. For 2020, we expect full-year adjusted effective tax rate to be in the range of 15.5% to 16.5%. Focusing on the balance sheet, we continue to maintain a strong position with 4.4 billion of cash and marketable securities, which includes the proceeds from our 2.4 billion euro offering completed in December to partially fund the announced Wright Medical acquisition. Including this funding, total debt on the balance sheet was $11.1 billion. Turning to cash flow, our year-to-date cash from operations was approximately $2.2 billion. This reflects increased adjusted earnings, which are somewhat offset by increases in working capital, and increased acquisition integration and restructuring spending. Turning to cash flow for 2020, we will not be repurchasing any shares, and we anticipate that capital expenditures will be flat year-over-year, at $600 to $700 million. And now I will provide 2020 guidance on a standalone basis and further guidance including Wright Medical. Based on our momentum from 2019 and assessment of the current economic and market conditions, we expect organic sales growth to be in the range of 6.5 to 7.5 for 2020. There is one additional selling day in 2020 compared to 2019. As you update your quarterly models, please note that Q1 has the additional selling day and Q2, Q3, and Q4 have the same number of selling days. If foreign exchange rates hold near their current levels, we anticipate sales and EPS will be nominally impacted for the first quarter and full year. We also expect continued unfavorable price reductions of 1% to 1.5%, which is fairly consistent with the pricing environment experienced in 2019. In addition, we expect to continue to deliver on our full year commitment to expand operating margin. Including the negative impact of closed acquisitions, we anticipate expansion of 30 to 50 basis points of operating margin in 2020. Finally, for 2020, we expect adjusted net earnings for diluted share to be in the range of nine to 920 for the full year, including approximately 205 and 210 for the first quarter. As it relates to right medical acquisition, we reiterate our previous guidance. Assuming an end of Q3 2020 closing, we expect the transaction to be neutral to our 2020 EPS. For the full year 2020, we would not deliver on 30 to 50 basis points margin expansion on a combined basis. However, we would still expect to deliver positive operating margin expansion. And now I will open up the call for Q&A.
Thank you. We will now begin the question and answer session. If you have a question, you will need to press star 1 on your telephone. If you wish to be removed from the queue, press the pound or hash key. As a reminder, callers will be limited to one question and one follow-up question. Your first call comes from the line of Bob Hopkins with Bank of America. You may proceed.
Oh, thank you, and good afternoon. My first question is for Kevin. I was wondering if I could get your perspective on the 2020 guide. Last year, obviously, you guided a six and a half to seven and a half and ended up delivering over eight. This year, you're once again guiding a six and a half to seven and a half. Is there anything you're going to have different, Kevin, with your outlook for 2020 versus 2019, either from a macro market perspective or a kind of a striker-specific perspective?
Thanks, Bob. I would say, as I sit here today, I feel very similar to how I felt at the beginning of last year. A really nice balance of headwinds and tailwinds. Good operating performance across our businesses and our regions, but it's early in the year, and so we're giving a guidance that we feel very confident being able to hit. If things play out the way they did in 2019, obviously there could be a scenario where things would improve, but we really had a great year across many areas in 2019 and not a lot of turbulence in the macroeconomic environment.
Okay, that's fair. And then I was wondering if you could just quickly comment on a couple of other quick things. First, from a pipeline perspective, you guys still expecting a new bed and new physio launch sometime in 2020? And then I know this is a tiny business for you, but I'd love to get your perspective on coronavirus and could that impact procedures in China?
Okay, Bob, I'll take the first part just talking about some of the positives that we see. The pipelines are very strong across all of Stryker. Robotic surgery adoption, as you saw with the big fourth quarter, continues to be a tailwind for us both in hips and knees as well as Mako. We have year two of our camera launch in endoscopy. Our aspiration business in neurovascular will be another tailwind. We have acquisitions that are going to be turning organic. So we have a whole list of those kind of tailwinds. And then Across the medical, there's a number of new products that will be launching in acute emergency care and Sage.
Yeah, and Bob, maybe I'll just hop onto that. Really too early to get into details about coronavirus. You probably know our exposure in emerging markets is low, and in China it's even lower. It's low single digits, and that's one of the variables we often contemplate when we set out a range. So at this point, recognizing it's early, no comments. And just building on Kevin's comments, As you mentioned, medical does have a really healthy pipeline of products coming, including Abed. I should probably also note, though, LifePak, which is one of the physio products, it's a PMA product, that is no longer expected to be launched this year. Again, that's overall a lot of products, so it's not impactful from a revenue standpoint, but that will not be launched this year.
Your next call comes from the line of David Lewis with Morgan Stanley. You may proceed.
Good afternoon. Congrats on a nice quarter. Just two questions for me, one on sales and one on margin. So, Kevin, two businesses took out this particular quarter, Neath and Neuro. So just sort of curious, what drove those very significant MAKO placements? And in any way, was there a change in sales strategy from capital to rental? And then Neuro, I'm just curious what the drivers were in the fourth quarter. We've sort of waited for that pipeline to come through. We're expecting a big year in 2020. Was the fourth quarter kind of the first beginning of that? And how are you feeling about Neuro for next year? And then had a quick follow-up on earnings.
Yeah, so starting with MAKO, this is just a continuation of the great success we've been having. There is no new strategy. There's no change in the way we price MAKO. We've always been flexible in terms of different approaches to financing, whether it's leasing, whether it's rentals. And so the mix didn't change dramatically, maybe a little bit more rentals, but very, very similar to what we've had in the past. I think it's just there's a growing realization that technology is here to stay, and that adoption rate we expect to continue to increase in the future.
Yeah, and David, on the neuro, it was really across the board, both geographically, strong double-digit growth in the U.S., in Europe, and Canada, as well as other regions outside of Tom, and then the various business segments all had really healthy double-digit growth, whether you're looking at hemorrhagic or ischemic, and that really is across the board. We launched some new products last year, a new flow diverter outside the U.S., and part of our bullishness heading into this year is tied to the plans having the full portfolio around the end of Q1 of our aspiration products, including the larger BOR 074. So that should be a nice new product entry for us into that segment of the market. So it was very balanced, both geographically and across the product portfolio.
Okay. And then just to cook on earnings, you know, Kevin, investors are very focused on organic acceleration, and this was yet another year in 2019 of acceleration over 18. But I think what's interesting is this is the second consecutive year of earnings acceleration, which I think some investors have missed. So I think you're right in the associated dilution as concern investors on your opportunity for improving leverage or earnings growth for the company. So your conviction in the minimum 9% is clear, but the question really is can you do better, and is right integration going to delay your cost transformation initiatives? Thanks so much.
Yeah, thanks, David. So four years ago we gave 9% as a floor, and since then we've delivered 12% and 13%. each of the four years. So we saw it as a floor, and you can see we've clearly surpassed the floor by a wide margin. We really believe we have our cost transformation growth for growth firing, and we're going to continue to be able to deliver very strong earnings. The point on off-margin is obviously just a math issue with the amount of growth that we're coming in and the profile of their P&L. It'll take us time to work through the synergies that we need to work through to get back onto an off-margin expansion. But as you heard from Glenn, we expect to still deliver positive op margin in 2020.
Your next call comes from the line of Matt Mixick with Credit Suisse. Please go ahead. You may proceed.
Hi. Thanks so much for taking the question, and congrats on these really strong numbers. So, Kevin, I wanted to ask if you could maybe, Catherine, talk a little bit about, you know, where – we should think about the sort of progress or the timing cadence around upper extremities, given that that's an important part of this right medical acquisition. It certainly fits well with the MAKO platform. Maybe talk about how that deal fits and what it can do to maybe accelerate that program. And then I had just one follow-up.
Yeah, so as we've talked about on prior calls, we're continuing to prioritize in terms of next indications in spine and upper extremities for Mako. We have independent R&D teams working in collaboration with the Mako robotics team on those. It's too early to get into the timeline. I think what Wright will do for us, as we've said before, significantly bolsters our competitive position, so when we come to market we will have a stronger portfolio of products. But it would be premature to comment beyond that in terms of timing around the robot launch for either of those additional indications.
Understood. And then maybe just to follow up on Spine, what, if anything, if you can provide any color as to what you think has sort of gone well there, You obviously did a lot of things right, I think, but maybe where some of the challenges have been as things evolved last quarter or so, and where in that portfolio do you think the integration is going really well? Any call you could provide would be helpful.
Hi, this is Kevin. So certainly we had some challenges early with the integration with overlapping sales forces and didn't do a lot of hiring. New products got delayed. The fourth quarter showed some real signs of positive momentum on the Salesforce side, clear targets, clear accountabilities, and then a number of new products being launched at our sales meetings. So very excited that we're sort of back on offense after going through the tricky parts of the integration. We were very aggressive on costs, and so those cost synergies were ahead. But now I'm looking forward to 2020 and in the future to seeing accelerated growth in our spine business. We're well positioned now. It was tough. Certainly the first six months, but very encouraged by what I saw in the fourth quarter and expect 2020 to accelerate.
Your next call comes from the line of Pito Chickering with Deutsche Bank. You may proceed.
Good afternoon, guys. Thanks for taking my questions and really, really great quarter. Digging into the spine question as well, last quarter we saw a demand, supply, and balance coming from K2M versus Legacy Spine. Can you give us a manufacturing update? Where are we on the supply versus demand at this point? Are there any further tailwinds in the near term if demand remains at these levels going forward?
Yeah, thanks, Peter. I would say it's improved, and that's really the trajectory is on spine. Is there still improvement to go, of course, because we still have legacy spine products? in manufacturing that we're optimizing. But the fact that it is improving, you saw the sequential improvement. We feel great that we hit the revised target of low single-digit spine growth, and we feel really confident that the trajectory will continue to improve to get us to that acceleration throughout 2020. And part of that is having a better capability to meet the demand for the full portfolio of products.
Great. Then one margin question. You know, so I... I understand that there's dilution from acquisitions in 2019 you guys have been very clear about. For 2020, how should we think about core striker delivering margin improvement with the organic revenue growth versus simply having less dilution to deal with in 2020 versus 2019?
Yeah, I think on 2020 as we think about it and the way we've always segmented and planned on it even in spite of the right acquisition is for the core business, and maybe our smaller tuck-in acquisitions that we would normally do in the course of 2020, we will still strive and we will still incentivize our people and our businesses to deliver the 30 to 50 basis points expansion. I think as Kevin explained, just mathematically with what we'll average in on a combined basis at sales and at that op-income line, we won't be able to hold 30 to 50 basis points expansion for 2021. when we close on Wright Medical.
But we do have continued dilution because of the Mobius deal that we did at the end of the year and some other deals, maybe not to the same extent that we had this year, but we still do need to offset that dilution, and we are committed to continuing to deliver 30 to 50 in spite of that. And obviously, if dilution decreases, we expect to be at the higher end of that limit.
Your next call comes from the line of Rick Wise with Stifel. You may proceed.
Good afternoon. Hey, Kevin. Let me go back to MACO and a couple questions there, just particularly around MACO HIP. You know, what's next there? Can you give us any color about, you know, drivers of adoption from here and, your plans and just help us appreciate some of the initiatives that are ahead in 2020. Maybe, Catherine, you'll fill us in on the mix of striker accounts versus competitive. It's been 50-50. Does it continue at that kind of level?
Sure. I'll start off with MakoHip. Really excited about the progress. So, a lot of surgeons were initially interested in the knee. And then as they got the experience with Mako, they started to look at HIP. And once you try the HIP application, it tends to be pretty sticky. We're very excited. In the second quarter of this year, we're going to be launching a new software upgrade to our HIP program, and that's going to be much more user-friendly. The registration process and some of the software has been a little bit challenging from a change management standpoint. This is going to be much slicker, really exciting. The early feedback we've had from surgeons has been very positive. So, I am bullish on continued expansion of Mako with HIPS.
Yeah, and so we've seen very consistent hovering around that 65% to 60% of the robots we place are going into competitive accounts, and that was consistent, again, for the quarter and the year.
Okay, and just a follow-up question. Kevin, you've done an amazing job in transforming Europe and had a great performance. It seems like there's a lot more to go based on your comments. And just a At a high level, as we look ahead to 2020 and maybe beyond, you know, beyond some of your comments about spine, you're feeling better. Are there other areas where you're turning special focus that we might imagine, you know, could, based on that focus, just like Europe, perform better as 2020 unfolds? Or, you know, what are you less than satisfied with? Thank you so much.
Well, it was a terrific year, as you saw overall. I would say that the emerging markets, this has been the best year we've had since I've been the CEO. Very strong double-digit growth. And to me, I would expect that that will continue hopefully for the next decade. We are so underrepresented there relative to our overall portfolio and market shares around the world that I would say hopefully this is the first year of many years of very strong growth. double-digit growth in those markets. We've made leadership changes. We struggled with emerging markets for the first four years or so. 2018 was a good year. 2019 was a great year. And that's the area that I think has the biggest upside, in addition to MAKO in both China and Japan. Japan now has all the applications approved on the robot. We're still waiting for the NE application to be approved in China. Hope to have that sometime this year. But those will be very, very good markets for Mako as well.
Your next call comes from the line of Robbie Marcus with J.P. Morgan. You may proceed.
Great, and congrats on a really nice quarter. Kevin, maybe first I'll ask on the CapEx environment, what were you seeing exiting the year with business and consumer confidence rates so high, and what do you expect going into 2020?
Maybe I'll take that question. I would tell you based on our mix of capital, which runs a pretty big range from relatively lower ASP to obviously much bigger ticket items, the environment remains really healthy. We're seeing strong growth across the board for our capital businesses. And, you know, Mako, I would tell you what we are seeing is while it's still a long selling cycle, we are seeing that kind of move up ahead of other capital requests in the queue with hospitals just giving the growing demand and acceptance of robotics. So we feel really good heading into this year in terms of the capital environment, particularly the environment combined with the products that we're launching or continuing to build on prior launches.
Great. And while there were a lot of great performances in the quarter, the two misses versus street numbers that stood out were trauma and extremities and medical. I was just wondering if you could give a little more color on each of those and anything you saw in the quarter. Thanks.
Sure. Starting off with medical, I mean, they had very, very significant comparisons. If you look at last year's growth, and so we're still very pleased with our medical business, and that has been a consistent performer. If you go back four or five years, a consistent grower. The Sage and Physio acquisitions have been terrific acquisitions for that business. So I would say that's more of a comp issue, and expect that to continue to be a strong performer, especially with a lot of new products coming in 2020. In trauma extremities, again, we had a very strong year last year, so a little bit of that was comp-related. And we still believe that we have the leading market performer in trauma. It does vary sometimes from quarter to quarter. We've seen that over the past two or three years. But the T2 Alpha launch is starting to pick up steam. We also have a mini FRAG launch, which just occurred at the end of this year, which is pretty exciting. That's one of our sort of soft spots in our portfolio. So we believe we're well positioned, and we expect to continue to grow above the market. It was a slight reduction versus what we've experienced before, but nothing that concerns me.
Your next call comes from the line of Raj Denhoi with Jefferies. You may proceed.
Hi, this is Brianna on for Raj. I just have a quick question on MECO. So I'm just trying to characterize these sites that are adopting MECO. So do you find any difference in sites that might have adopted some level of computer-assisted navigation previously but not for robotics versus those that are mostly manual?
Yeah, I don't think we have that level of granularity around it. I would tell you we see across the board adoption by all types of customers. It can be high-volume hospitals. It can be more rural hospitals. It really is wherever there's a surge in champion, and increasingly what we're seeing is increased demand given how long we are into the launch now. We're also continuing to see increase in the percent of hospitals that are now purchasing a second or additional robots But I can't really tie it to navigation necessarily.
Thank you.
Your next call comes from the line of BJ Kumar with Evercore ISI. You may proceed.
Hey, guys. Thanks for taking my question, and congrats on a nice sprint here. So one housekeeping question here on the guidance, you know, below the line, you know, interest income came in above, I believe. The assumption for fiscal 20, Glenn, is that the new run right now we're looking at, you know, somewhere in the $8 million to $10 million per quarter on that line item?
Yeah, that would be, you know, let me go back and I'll have one of our guys get back to you on that. I mean, we basically will have more borrowings coming in if you think about what we're going to do for Wright Medical. And so... If that closes in Q3, then that will obviously change that interest number.
Gotcha. And then one on Right Medical. I know you won't comment on the timing, but the original deal model was no impact to EPS in fiscal 20 and 10 cents dilution in 21. Just given your cash balance, your free cash conversion, any change in your financing assumptions around the EPS in a contribution assumptions here on the deal? No.
Yeah, right now it's pretty early, and the guidance that we put out that you just mentioned is where we're at in terms of what we're willing to share at this point.
Your next call comes from the line of Matt Taylor with UBS. You may proceed.
Hi, guys. This is Young Lee from Matt. Thanks for taking our question. Maybe first on M&A. After you addressed the last category, leadership gap with Wright, what are your thoughts on expanding into additional verticals within MedTech that you currently aren't in? And maybe just thoughts on M&A for 2020 in general. How's the pipeline shaping up and views on evaluation of targets?
Yeah, we continue to have a very strong pipeline. Obviously, with the size of the RegMedical deal, We're not going to be looking at targets of scale for the next year or two while we start to pay down that debt, but we will still keep the lights on in our business development engine. We still have significant opportunities to add to our portfolio. So when I talked about closing the last major gap, it doesn't mean we don't have targets within all of our many businesses. Each business has business development people that are focused, and we continue to see attractive targets that continue to add to our category leadership portfolio. But this was, if you think about five, six, seven years ago, sports medicine, spine, and shoulder were the areas where we had the largest gap to category leadership. And we've made huge progress in our sports medicine business, mostly organically, but also with a series of tuck-in deals. With K2M, we've largely addressed our spine business, and then Wright Medical addresses upper extremities. So those are the areas that we clearly were not in the top one, two, or three in the category, and that will propel us into that category. But we don't really feel the need at this point to start to branch wildly outside of the three segments. These are big segments. If you think about med-surg, if you think about neurotech and spine and orthopedics, where there are still very, very active hunting grounds for acquisitions. But again, the target sizes will be smaller, at least for the next year or two, while we digest this one.
Okay, thanks. That's very helpful. And I guess just to follow up the MAKO international focus, really good quarter here. Can you maybe just talk about the opportunities international? I know you highlighted Japan and China, maybe India longer term. And maybe at a high level, can you comment on utilization rates, U.S. versus OUS?
No, we're not going to get into the latter part in terms of utilization rates. As you saw, we're seeing across the board a healthy increase, and that wouldn't be just in the U.S. But the data we have tracked for you guys has been the U.S., given that was the largest segment of our MAKO revenue right now. You're absolutely correct. There's significant opportunity outside the U.S. Markets like Japan, China, Latin America, we're selling robots really around the globe. Obviously, Japan is certain markets versus others. I would say near term, we're probably most excited about Japan now that we have all the indications, and China once we get the knee indication. But there are a lot of healthy robot markets beyond the U.S.
Your next call comes from the line of Christian Stewart with Barclays. You may proceed.
Hi, thanks for taking my question and congratulations on a good quarter. Kevin, I just want to ask kind of a big picture question to you and then I do have a follow up. If I look at the overall organic growth rate since you've taken over, it's been this really impressive linear line up and to the right, accelerating growth really each and every year. And I'm just curious on how you think about the growth profile of Stryker going forward. Should we continue to expect kind of this nice linear acceleration story? You know, going back to, I guess, one of the original questions I think was Babu asked, you know, thinking about the guidance, I know you guys tend to give kind of conservative guidance at the onset of the year. I know you said last quarter you still felt very strongly and you said it earlier about on this momentum, but should we just think about Stryker continuing to have this acceleration growth profile from here, or do you think that we should think about more of you being in a position to sustain kind of around the level of where we're at? And then we'll follow up.
Thanks, Kristen. Obviously, you've seen our focus has been on growth. We've been very acquisitive. We've focused on adding and splitting sales forces wherever possible, investing in R&D at a healthy rate, which fuels the growth. And so that's been our model, and that's continuing. And Wright Medical, this pending acquisition, is another example where they're a very high-growth business and a very large business. And so our actual model isn't changing. We continue to have the same offense, and we're growing big numbers on top of big numbers. And so that's what's been impressive is for four years I've been asked, You know, when is the growth going to start to slow down? And it hasn't. Now, can you take a line and draw a straight line forever? Probably not. We also have to look at the market. The market has been pretty healthy. We've maintained our gap and maybe accelerated our gap versus the market in growth. But we think we have an offense and an operating model that's structured for high growth. The decentralized model, the dedicated sales, marketing, R&D, and business development in each division – We've become a more global company, and that still has significant runway in emerging markets, in areas like Europe where we didn't have high growth. Year after year, we're growing in high single digits in Europe, which I think is rare, and that's not going to end anytime soon. So I think we're structured to have high growth. Putting a fine point on the actual number is difficult because you don't know what's happening in the macro environment, but I feel just as positive starting this year as I did at the beginning of last year.
That's helpful. And then I was just curious, you guys made some changes, I guess it was last summer, to just move around some of the reporting structure with spine and then neurotech as well to report up into orthopedics and med-surg. Is that something that from an R&D perspective or anything might have any implications from a growth perspective or anything like that? Maybe just talk through if there's anything there from also M&A if we should be thinking of it.
Thank you. Sure, that's just purely a reflection of leadership changes. It's really a recognition of terrific performance by both Spencer Stiles and Andy Pierce. These are two group presidents that are just shining. And so we've given them additional businesses to manage. There is no change at the divisional level. So the division presidents, who are also terrific, continue to run their business. The change that we made was one level above that, how we aggregate the divisions. But the center of gravity of our company is are the divisions, that's where the action happens in terms of R&D, marketing, sales. So don't read anything more into that other than it's a management structure change to give more businesses to Andy and Spence to manage directly, and it's a recognition of just how well they've performed over time.
Your next call comes from the line of Matt O'Brien with Piper Sandler. You may proceed.
Hi, guys. This is Drew on for Matt. Thank you for taking the questions. I just have two questions here on MAKON. I guess I'll ask both of them. I just want to follow up on the comment you made on the software update and HIPS there. Is that something that could kind of close the gap where you're actually placing the system organically for HIPS applications that is prior to NEED? And then second question is, I guess it seems like you guys have been talking about NEED being a, or about cementless NEED being a key growth driver for About two years now integration with Mako. I'm just kind of trying to gauge what your field as far as what any new and product wise, especially with a larger competitor on the market and then do see any headwinds or tailwinds here as we we think about 2020. Thank you.
OK, there's a few questions in there. Let me let let me start just with with Mako and robotics in general. It's still early innings within orthopedics and. we see a huge runway ahead of us to continue to have a broad adoption of robotics. Cementless has been a steady grower, and we don't think that's going to slow down. It'll continue. It probably won't have big step changes. It'll be a steady, gradual progression. And what we're seeing there are some new surgeons adopting cementless, but we're also seeing the surgeons that started with cementless with, let's say, younger, healthier patients, now starting to realize that the benefits are so good that they're starting to put them in older patients, and even patients, let's say, whose bone quality may not be pristine, but still adequate bone quality. So you're seeing even surgeons that are using it who used to use it on a smaller percentage of their patients now seeing just how well it's performing using it on a larger percentage of their population. So I think Cementless will continue to run, and we're pretty excited about the potential for the future. And again, getting back to the technology, This is many, many years ahead of us, and we're very excited about the potential.
Your next call comes from the line of Kayla Crum with SunTrust. You may proceed.
Hi, guys. Thanks for taking our questions. So just one on robotics and then another on trauma extremities. So just to follow up on the health of the robotics business and just the strength of your order book there, I'm just kind of curious if you're really even seeing new competition in the market at this point, and I guess more importantly, how you're contemplating competition in 2020.
We're really continuing to focus on the strategy that's been underway for five years now as it relates to total needs. We have a very concerted effort, a focus-selling organization, a capital sales force, and a really unique robot with smart intelligence and the ability to really give surgeons some differentiation, and we have multiple indications across the joint replacement market. So our focus is on the strategy that's been working, and that will continue to be the focus in 2020.
Great. Thanks, Catherine. And then just early anecdotal feedback on the right medical deal from your sales team. And then just how you're modeling the trauma and extremities business leading into the deal closure. Are you assuming there's going to be maybe dislocation leading into the deal closure, or just how are you thinking about that business? Thank you.
Yeah, I apologize. I really can't get into any color there. I refer you back to the comments we made at the time of the acquisition. We don't own the company. They're a publicly traded company. We're still competitors, so it would be inappropriate to say anything about that right now. We're obviously very excited about about what it will do for our extremities portfolio. But beyond that, I would just refer you back to the comments that we made around assumptions tied to dis-energies at the time that the Yale was announced.
Yeah, but we still feel bullish about our own trauma business. We have new products that we're launching. We have a very strong brand. And the feedback we've had from our sales forces is, I would say, excitement, really excitement that we're going to strengthen our position in extremities, and become the really most attractive company for extremities. That's what our belief is. That's what we're telling our sales force. That's what we're hearing from them. So there's always risks of dislocation in every sales force that we have. But for the moment, it doesn't appear to be significant.
Your next call comes from the line of Craig Bijoux with Cantor Fitzgerald. You may proceed.
Good afternoon, guys. Thanks for taking the questions. Just want to ask about the overall ortho and spine markets. Both seem pretty strong in the second half of 19. So I want to see, are you guys seeing any improvement in either of those broader markets? And then what are your expectations for those markets in 2020?
Frankly, the market seems very stable, and it's been pretty healthy for some time now. Not everybody's reported yet for the fourth quarter, so until we see the total numbers, we're not going to have a clear idea. But I would say the market is maybe modestly better. I think we said that at the beginning of the year. We thought it would be just a little bit better, but it's not that it's had a step change improvement. It's been a good, healthy market. We expect it will continue to be a good, healthy market.
Got it. And then just a follow-up on MAKO. In 2020, I mean, can we expect to see any clinical data or I guess, you know, what's the plan for the release of or potential release of any clinical data during the year?
Yeah, I'm sure. You know, we don't always have line of sight since we're not always the sponsor of the studies, but I would expect you'll continue to see data over what time frame or size of the studies. That's harder to tell. It will be another focused of the Academy meeting at the end of March. So we will again have a booth tour and we will be highlighting MACO and getting some insights around some of the new HIP technology that Kevin referenced. But I would expect you're gonna see continued data coming out. I just don't have specifics for you at this time.
Your next call comes from the line of Richard Newitter with SVB Lyric. You may proceed.
Hi, thanks for taking the questions. Kevin, maybe just the first one. In Europe, where you're underrepresented from a market share standpoint relative to your U.S. dominant share positions, can you maybe just tell us where you're most excited about potentially closing the gap even faster as you look to 2020? Where do you see the biggest opportunities, especially as you move into the next 12 months, and where are you most excited there? And then I have a quick follow-up.
Sure. I would start off with the MedSearch segment, so endoscopy. instruments and medical, those are areas where we have the biggest opportunity for market share gains. We have terrific products, and as we specialize in MedSurge, we do expect to have much more significant growth. The potential there is pretty significant. I also believe in NEIS. We've sort of underperformed on a market share standpoint historically. MAKO is a big help there. as is specialization, so that's another area. And then I think spine, now that we have K2M, spine had a terrific year in Europe last year, and we believe that will continue going into the future. So those are the areas that I think we have a pretty good-sized hip business. We're pretty strong there. Our neural businesses are very strong in Europe. So those are the areas that we still have growth potential, but maybe not as much. But I would say med-surgery, spine, significant runway.
Got it. And maybe just a follow-up on cementless. Where does this category potentially get to? Is there a cap in your view from penetration of what should be done cementless in these? And just remind us what your estimation for the penetration today is into the market. Thanks.
So I think Catherine in her prepared remarks mentioned that we exited the year at just over 36% of our U.S. needs being cementless. We are seeing adoption around the world as well, not as fast. as the adoption rate that we're seeing in the U.S. I don't believe it'll get to hips, which is virtually all cementless, just given the knee joint being a weight-bearing area and people's bone quality, there's always going to be some more conservatism. But there's no reason to believe why it won't continue to steadily rise, and I think it could exceed 50%. Hard to know and hard to predict, but I wouldn't be surprised at all if it exceeds 50%. Keep in mind that we have a very unique product for cementless, and that's why we're able to have this kind of spectacular growth rate and great clinical performance. And we'll see whether that applies to the rest of the market, but we certainly love our position in cementless.
Your next call comes from the line of Larry Beagleson with Wells Fargo. You may proceed.
Hey, guys. Thanks for taking the question. One on Mako, one on Japan. Catherine, I think I know the answer to this, but given the strength you saw in placements in Q4 and 2019, I think you placed about 220 Mako robots from doing the math right. Can you still grow Mako placements year over year in 2020? And any maybe color on how much you can grow?
So we don't model out how many full-year targets we have, but obviously it was pretty significant year-over-year growth. Given where penetration rates are and where we are in the launch and the increasing acceptance, we feel very comfortable that you'll see healthy year-over-year growth.
Perfect. And then, Kevin, do you guys have visibility yet on the Japan biannual price cuts, and what are you guys assuming in your guidance? Thanks for taking the questions.
We don't usually provide exactly what we're assuming in our guidance. This is something that occurs with regular frequency. Whatever we've modeled, if the number's a little higher or a little lower, we just absorb that within our targets, and that's why we have a range.
Your next call comes from the line of Kyle Rose with Canaccord. You may proceed.
Great. Thank you for taking the question. Just two MAKO-related ones for me. So, Catherine, I think you kind of alluded to it at the beginning of the call, but can you maybe help us understand how you view enabling technologies and spine? I mean, obviously, you've got Mako as a foundational technology there with your NavSuite, but you also acquired Cardin and Mobius in 2019. I guess I'm trying to understand how we should think about that in 2020. And then just with respect to Mako in Japan, you've got the full indications across the portfolios. Just How should we expect adoption to ramp there, given you've had five years in the U.S. market already and you've got clinical data and things of that sort? Should we expect an accelerated adoption in some of these new markets internationally?
Sure. I'll take the first one, and then I'll ask Catherine's comment on Japan. Enabling technologies, to us, we're big believers that this is going to be important for the future. We're very excited about Mobius. We launched that at our sales meeting. And we're very excited about the potential of that being part of the enabling solution portfolio. We're not ready yet to comment on robotics for Spine, so we obviously have two options, one with the Cardan, which came with the Mobius acquisition, as well as Mako. We are working on those programs, but it's just too early to give you an idea of when that will launch. And once we have a more firm date, we will let you know. But we are believers that that is an important part of the future.
And then your first question was specific around how we're thinking about Spine and Mobius in 2020?
No, about Japan.
Oh, sorry, Japan, excuse me. You know, it's an exciting market, and we now have all three indications, which is obviously a big plus. We have nine robots there. We got to nine fairly quickly. It's a market that really embraces technology, and obviously we're going to bring years of learnings on how to optimize the sale. It'd be premature to tell you how big it can be, but it absolutely feeds into our conviction level around the fact that we believe we're well-positioned to grow Mako year-over-year in robots and to continue to see significant market share gains in needs as we expand, not just in the U.S., but globally.
Yeah, in general, Japan, it will grow. It doesn't tend to spike as fast as the U.S., just if you look historically, look at Intuitive Surgical, look at other businesses, but it will grow, and we're pretty bullish about it and excited for the future.
Your next call comes from the line of Steve Lichtman with Oppenheimer and Company. You may proceed.
Thank you. Hi, guys. This first question with K2 now more in the fold, can you provide an update on the deformity opportunity that you see ahead and how that portfolio may provide an opportunity for pull-through of more traditional degenerative products for you guys?
It's certainly part of the rationale at the time of the deal. K2M are leaders in the deformity market, and the opportunity there to really leverage their call point and their relationships with key opinion leaders was absolutely part of the rationale for the transaction, along with the opportunity to refresh our portfolio. So that rationale was relevant then, and it's still very valid today.
Yeah, and obviously it took time to cross-train all of our salespeople. That was part of the integration challenges that we have. They are all cross-trained on the K2RM products. And you're right, that pull through is a key part of why our growth will accelerate.
Great. And then just secondly, on EU MDR, just curious on your thoughts for Stryker specifically, and obviously as an industry leader for the market, how do you see that impacting costs, pace of innovation, and perhaps product discontinuations as a result of those regulations?
Yeah, we continue to refine and expand how we look at EUMDR. We also have done a lot of work in terms of thinking about the value proposition that we offer in that space. More and more, our investors are becoming more interested in that and have asked us questions about it. When I was over in Europe doing fundraising in November, it pretty much came up in every meeting. So it is something that we have a focus on. Our communications department is working and has hired someone full-time to look at it, and so I think you'll see more out of us in the coming years.
Yeah, I think one of the things Stryker did, started frankly before UMDR, was what we call a focus on power brands. And so we've been rationalizing our portfolio pretty significantly, and that ended up being a real blessing when UMDR came about because we had already decided to move out of a lot of, let's call them peripheral SKUs, And so we feel very well prepared. There has recently been a slight reprieve on the dates for EMDR, but we are all systems go ready for that. We don't really believe it's going to have any meaningful change to how we innovate, given that we do have this kind of power brand focused mentality around our innovations.
Your next call comes from the line of Josh Jennings with Cowan. You may proceed.
Thanks for taking the questions, and congrats again on a stellar year. I just wanted to do two quick questions on MAKO. First, China, I know you're waiting on the total knee approval. Maybe you can just help provide us with some color just on that opportunity, any details that you can give in terms of, I guess, the TAM or number of orthopedic centers you could address with MAKO in China. And then secondarily, and with competition coming more into play, this year, understand that Stryker's not going to be standing still, but what can we expect over the course of this year to hear about in terms of iterative advancements for MAKO Total Knee? Is there anything we could see at AOS or anything, how should we be thinking about the advancement of MAKO Total Knee? Thanks a lot.
Yeah, I think I'll start with the latter. The capabilities, the functions, the clinical benefits that the current knee indication brings are increasingly being well established and received. So that remains our focus. Obviously, we have things in the R&D pipeline, as we do with all our capital-based products, looking at ways to improve. But this is really a leading robotics technology with unique capabilities and indications across the portfolio of joint replacements. As Kevin referenced, I believe, on his call, and I'm sure we'll talk about Academy, we do have some new HIP software coming to help facilitate that procedure, and so that'll be the focus. It's really hard, turning to your question about China, to give you a quantifiable answer there. It's a very large market, but it's still a developing market. It's around building out their orthopedics, but it's certainly one, once we get our knee indication approved, we have a lot of excitement around. But just keep in mind, OUS is really a number of different markets. It's not all tied to one or a couple markets. We've seen great performance in Asia, in Australia, in parts of Europe and Latin America, and now seeing Japan come online. So it's the totality of that geographic offering that I think will help really power our OUS Mako performance.
Your next call comes from the line of Ryan Zimmerman with BTIG. You may proceed.
Thanks for squeezing me in. Just two quick ones for me. You know, Kevin, you guys have made a big push in the ENT, both with the Intellis acquisition and then Airnex. Just curious if you could kind of speak to how you view your ENT business today, whether you have sufficient scale in that business or what else you may need to do, whether it's further M&A or additional hiring to kind of scale up in that space. And then the second question is just around the instrument line. You know, we've seen that revert to more of a mid-single-digit growth rate relative to the first half of the year, and just love to get your thoughts on kind of how we should be thinking about that line into 2020 and beyond, just given the cadence there. Thank you.
Yeah, I think you saw we split our sales force in surgical, which is the biggest part of our instruments division, had an incredible first half of the year, slowed a little bit in the second half of the year, but still a double-digit growth for the full year. Instruments has consistently, for the last decade, been a high single-digit or low double-digit growth kind of business, and we expect continued high growth out of our instruments franchise. So we are not lowering our expectations and thinking that instruments will suddenly become a slower grower And frankly, if you look at a lot of the acquisitions we've done, including more recently TSO3 and Vuity, so there's a number of acquisitions. We keep feeding the instruments machine. And so you're going to expect to see continued high growth out of instruments. I'm sorry, what was the other question? I think I missed the other one.
ENT.
Oh, ENT. Yeah, we have sufficient scale now in ENT with, I mean, Intellis. We already had some products within Stryker, Nasopore and some smaller products. With the addition of Intellis, we have what we need. I would call ARINX a tuck-in. Could we do other smaller additions? Sure. Just like any of our businesses, we can always do little tuck-ins, but I would say we don't need anything significant to be able to really win in A&T, and I was very pleased with the momentum that we have in that business as we exited the year.
Your next call comes from the line of Larry Cush with Raymond James. You may proceed.
Okay. Thanks. Two questions. I guess, Catherine, clearly done a sizable volume of total needs on Mako. You know, 2019 was a big year for you guys. As you start to expand into the other regions, what are the key benefits that you're hearing most from your Mako surgeons at this point? What I guess I'm really trying to understand is, you know, what is driving the continued stellar adoption of the technology?
I think it really comes down to several factors. The capabilities of the Mako robot with a CT scan that is specific to that individual patient and allows for a patient-specific plan that can be changed interoperatively with technology that allows optimal balancing of the knee, avoiding soft tissue disruption, and it really helps improve outcomes. We've seen data that shows patients are ambulating more quickly, they have less opioid use, they're getting out of the hospital more quickly, and that ties to having a better balanced knee and less tissue disruption, which is only possible with a patient-specific plan that allows you to cut less because you have more knowledge specific to that patient. That's really resonating with surgeons, and I think that's probably the biggest driving force behind what is increasing utilization and adoption.
Okay, perfect. And then... I guess just a financial question here. Look, you're going to have an increase in your leverage once the right deal is done. I think you've mentioned you'd peak around three times. But that's still actually relatively low compared to other med tech peers out there. So I guess the question is, where is the right level of leverage for you guys on a more steady state? And even as you come up to these peak levels, on post the right acquisition, can you continue to still do M&A as you continue to move the leverage back down again?
Yeah, I think the plan, first of all, is we would continue to deliver 30 to 50 basis points in the underlying business even once we combine right. Then, honestly, we would work through the integration plan to improve the overall leverage, which is obviously part of the acquisition modeling. I think as we think about continuing acquisitions after we close on the acquisition of Wright, you know, we would still plan to do small tuck-in acquisitions, which are really the bread and butter of how we drive a lot of growth for our divisions. So I don't see any change in that piece of the strategy.
There are no further questions at this time. I will now turn the conference over to Mr. Kevin Lobo for any closing remarks.
Thank you for joining our call. We look forward to sharing our Q1 results with you in April. And as a reminder, we will be hosting a booth tour and investor meetings at AOS on March 26th. Thank you.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.