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spk05: Welcome to the first quarter 2021 Stryker earnings call. My name is Christine 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 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 and the number one on your touchtone phone. This conference call is being recorded for replay purposes. Before I begin, I would like to remind you that discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially are also 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.
spk16: Welcome to Stryker's first quarter earnings call. Joining me today are Glenn Bainline, Stryker CFO, and Preston Wells, Vice President of Investor Relations. For today's call, I will provide opening comments, followed by Preston, with an update on the right medical integration. Glenn will then provide additional details regarding our quarterly results before opening the call to Q&A. Despite the ongoing presence of the pandemic, we posted a strong quarter of organic sales growth of 4.7% versus Q1 2019. This was driven by outstanding international results, particularly in Asia Pacific, and the benefits of our diversified business model. Across our franchises, Mako, Neurotech, and Medical had excellent performances, each posting strong double-digit growth versus 2019. a trend that we expect to continue for the remainder of the year in these businesses. Mako followed up a very strong Q4 with a banner Q1 performance, including an uptake in international installations. As expected, elective procedures were negatively impacted to start the year, which had the largest impact on our hip and knee businesses. However, the trends improved progressively throughout the quarter, with U.S. hip and knee accelerating in March and into April, where we are seeing mid-single-digit growth as compared to April 2019. We also saw improved growth in small capital within parts of neurotech and instruments during the quarter. In addition, our order book has picked up across our capital businesses, which is a good sign of pending growth as procedure volumes return to more normal levels. These trends give us confidence in achieving our guidance of 8% to 10% full year organic sales growth compared to 2019, which is equivalent to 12% to 14% organic growth versus 2020, despite one less selling day. While the press release shows our performance versus both 2020 and 2019, we believe that 2019 is a better reference point for comparison. Our momentum has continued regarding cost management and cash flow, and while spending will increase to support future growth, it will be done in a disciplined manner. Glenn will elaborate on our raised EPS guidance shortly. We also published our first annual comprehensive report during the quarter, which captures our environmental, social, and governing strategy, as well as commitments regarding our carbon footprint, diversity, equity, and inclusion, and supply chain transparency. We are encouraged by the progress we are making in these areas. Overall, I am pleased with the strong start to the year and the momentum that is continuing to build. And while pandemic flashpoints are still occurring, we are well positioned to deliver growth at the high end of MedTech with leveraged adjusted earnings. I will now turn the call over to Preston. Thanks, Kevin. My comments today will focus on first quarter performance in our combined trauma and extremities business, an update on the ongoing integration of Wright Medical, and on our most recent acquisition activity. During the quarter, our combined trauma and extremities business showed good resiliency, growing 2.6%, including Wright Medical, compared to 2019, despite the ongoing impacts of COVID restrictions during the quarter. Our trauma business, which is less selective in nature, benefited from inclement weather in the U.S. and Europe in February. Performance in upper extremities and foot and ankle was driven by the recovery of elective procedures throughout the quarter, along with lower than expected sales dis-synergies through the initial stages of the integrations. As a result of the strong performance of our trauma and extremities business in the first quarter, we now expect the combined business to deliver mid-single-digit growth for the full year when compared to 2019. We remain encouraged with the progress and pace that the team has delivered with bringing the businesses together throughout the right medical integration. As we have mentioned previously, we utilize the lengthy period from announce to close to build and resource the robust integration plan that we are now executing. As we move through the quarter, our teams made progress against many key integration milestones. To date, the team has established three distinct business units with specialized commercial, R&D, and selling organizations. We believe this dedication and focus will be a core driver of future growth across trauma, upper extremities, and foot and ankle. In addition to establishing dedicated business units, the team made considerable progress with our U.S. sales integration, including the establishment of sales leadership, sales channel and territory alignment, and identification of cross-selling priorities. Considerable progress has also been made on aligning the long-term portfolio and pipeline strategies. Our focus on the integration will remain a key priority for the remainder of 2021 as we balance the complexity of the integration while minimizing sales disruption. Over the next few quarters, we will conclude the U.S. commercial integration, including the initiation of cross-selling, and we will kick off sales integrations across our international markets over the next several months. Finally, our dedicated business development teams continue to identify and execute on tuck-in acquisitions. During the quarter, we completed the acquisition of TMJ Concepts, a medical device company that manufactures a patient-specific temporomandibular joint reconstruction prosthesis system. In our cranio-maxillofacial business, personalized medicine plays a critical role, and the acquisition of TMJ Concepts supports their business strategy of driving category leadership through innovation and purpose of restoring form, function, and hope to patients. These acquisitions continue to demonstrate our focus on our strategy of driving category leadership and market-leading growth. With that, I'll now turn the call over to Glenn.
spk03: Thanks, Preston. Today I will focus my comments on our first quarter financial results and the results. Our detailed financial results have been provided in today's press release. As a reminder, we are providing our comments in comparison to 2019 as it is more normal baseline given the variability throughout 2020. Our organic sales growth was 4.7% in the quarter. As a reminder, this quarter included the same number of selling days as Q1 2019 and one less day than 2020. Compared to 2019, pricing in the quarter was unfavorable 1.4%. Versus Q1 2020, pricing was 0.9% unfavorable. Foreign currency had a favorable 1.3% impact on sales. During the quarter, the continued impact of the COVID-19 pandemic and related surgical procedure cancellation, primarily in the U.S. and Europe, negatively impacted our sales. However, towards the end of the quarter, we did see improvements in sales momentum, primarily in the U.S. and our Asia-Pacific businesses. Also, as noted in the fourth quarter, demand for certain capital products continued as we saw strong results in our MAKO and emergency care products. For the quarter, U.S. organic sales increased by 1%, reflecting the continuing slowdown in elective procedures as a result of the pandemic, somewhat offset by strong demand for Mako, medical products, and neurovascular products. International organic sales showed strong growth of 15%, impacted by positive sales momentum in China, Japan, Australia, and Canada. Our adjusted quarterly EPS of $1.93 increased 2.7% from 2019, reflecting sales growth partially offset by higher interest charges resulting from the right acquisition, as well as an overall disciplined ramp-up in operating costs. Our first quarter EPS was positively impacted from foreign currency by $0.03. Now I will provide some highlights around our segment performance. Orthopedics had constant currency sales growth of 17.2% and organic sales decline of 0.7%, including an organic decline of 1.7% in the U.S. This reflects a slowdown in elective procedures related to COVID-19. Other ortho grew 49% in the U.S., primarily reflecting strong demand for our METO robotic platform, partially offset by declines in bone cement. As noted previously, in March, we began to see good sales momentum in our U.S. orthopedic businesses with all segments delivering positive organic growth as compared to March 2019. Internationally, orthopedics grew 1.5% organically, which reflects the COVID-19-related procedural slowdown in hips and knees, especially in Europe, offset by strong performances in Australia and Japan. For the quarter, our trauma and extremities business, which includes Wright Medical, delivered 2.6% growth on a comparable basis. This includes strong performances in U.S. shoulder and U.S. trauma. In the U.S., comparable growth was 4.4%. In the quarter, MedSurge had constant currency and organic sales growth of 5.3%, which included 1.6% growth in the U.S., Instruments had a U.S. organic sales decline of 3%, primarily impacted by continued procedural slowdown that impacted its power tool business, partially offset by gains in its waste management, smoke evacuation products, and services business. As a reminder, during the first quarter of 2019, Instruments had a very strong growth of approximately 18%. Endoscopy had a U.S. organic sales decline of 5.7%, reflecting a slowdown in some of the capital businesses, which was partially offset by gains in our general surgery, video, and sports medicine businesses, the latter of which grew over 11% in the quarter. The medical division had U.S. organic sales growth of 13.6%, reflecting double-digit performances in its emergency care and phage businesses. Internationally, MedSurge had an organic sales growth of 19.9%, reflecting strong growth across Europe, Canada, Australia, and Japan in medical endoscopy and instruments. Neurotechnology and spine had concurrently an organic growth of 12.8%. This growth reflects double-digit performances in our interventional spine, neurosurgical, and EMT businesses, and 27% growth in our neurovascular business. Our U.S. neurotech business posted an organic growth of 12%, reflecting strong product growth in our neuropower drills, Sonopet IQ, bipolar forceps, bioreabsorbables, and nasal implants. Additionally, within our U.S. neurovascular business, We had significant growth in all product categories, including hemorrhagic, flow diversion, and ischemic. Internationally, neurotechnology and spine had organic growth of 31.7%. This performance was driven by strong demand in China and other emerging markets. Now I will focus on operating highlights for the first quarter. Our adjusted gross margin of 65.4% was unfavorable approximately 40 basis points from our first quarter 2019. Compared to the first quarter in 2019, gross margin was primarily impacted by price, acquisitions, and business mix. Adjusted R&D spending was 6.8% of sales, reflecting our continued focus on innovation. Our adjusted SG&A was 35.2% of sales, which was unfavorable to the first quarter of 2019 by 70 basis points. In summary, for the quarter, our adjusted operating margin was 23.5% of sales, which is 160 basis points decline over the first quarter of 2019. This reflects the dilutive impact of the right medical acquisition combined with the disciplined ramp-up in cost to fuel future growth, as well as the two-year compounding of certain costs given the comparison to 2019. We also reiterate our operating margin expansion guidance of 30 to 50 basis points improvement over 2019 operating margin, excluding the impact of Wright Medical. Related to other income and expenses compared to the first quarter in 2019, we saw a decline in investment income earned on deposits and interest expense increases related to increases in our debt outstanding for the funding of the Wright Medical acquisition. Our first quarter had an adjusted effective tax rate of 13% given our mix of income. Given our current circumstances and the outlook for the full year, we would expect to be at the lower end of our range for the full year guided effective tax rate of 15.5 to 16.5%. Focusing on the balance sheet, we ended the first quarter with $2.3 billion of cash and marketable securities and total debt of $13.1 billion. During the quarter, we repaid $715 million of maturing debt. Turning to cash flow, our year-to-date cash flow operations was approximately $450 million. This performance reflects the results of earnings, continued good management of working capital, and approximately $170 million of one-time expenditures related to the right medical integration. Based on our first quarter performance and the current operating environment, we continue to expect 2021 organic net sales growth to be in the range of 8 to 10%. We believe that the recovery ramp of electric procedures will continue to be variable based on region and geography and will continue into the second quarter of 2021. As it relates to sales expectations for Wright Medical, we now expect comparable growth for trauma extremities to be in the mid-single digits for the full year when compared to the combined results for 2019. If foreign currency exchange rates hold near current levels, we expect net sales in the full year will be positively impacted by approximately 1%. Net earnings per diluted share will be positively impacted by 5 to 10 cents in the full year, and this is included in our revised guidance range. Based on our first quarter performance and including consideration of our improved full-year right medical sales impact, disciplined cost management, and continued positive recovery outlook, we now expect adjusted net earnings per diluted share to be in the range of 905 to 930. And now I will open up the call for Q&A.
spk05: Thank you. We will now begin the question and answer session. If you have a question, please press star 1 on your telephone keypad. If you wish to be removed from the queue, please press the pound or hash key. As a reminder, callers will be limited to one question and one follow-up question. Your first question comes from the line of Robbie Marcus from J.P. Morgan. Please proceed.
spk09: Oh, great. Congrats on a good quarter and thanks for taking the question. So maybe first start on the outlook. Kevin, you mentioned in the release and in the script that March was much better than the rest of the quarter overall with most items in ortho growing in March. I was hoping you might give some early color or a good way to frame second quarter here coming out of the fourth quarter call. The street had a wide range and didn't really update through the quarter as trends developed. So I was hoping maybe you could start off with giving some thoughts on where second quarter might shake out, given the trends you're seeing here exiting first quarter. Thanks.
spk16: Hi, Robbie. First thing I would say is that we're not going to be providing quarterly guidance, but I can give you an indication of what's happening. We did indicate in my prepared remarks that U.S. Japanese is currently growing in the mid-single digits, and that obviously was the business areas that were most impacted by the pandemic. So that recovery is pretty notable. If you look back in January, February, where we were declining, by the end of March, we started to pull ahead and to positive territory. And you can see that that's on the upswing. Difficult to predict with the flashpoints around the pandemic, but you can see we feel very good about confirming the full year organic sales growth. So whether that occurs in April, May, June, July, Parsing it by month is obviously very difficult. The other thing that makes us very confident on the full year outlook is the order book for capital equipment, both large capital and small capital, which is both picking up. So overall, we're feeling bullish. Obviously, growth has to accelerate to get to 8% to 10% organic when you start at 4.7% in the first quarter. But the exact pacing between Q2, Q3, and Q4 is still a little uncertain.
spk09: Great. That's really helpful. And maybe, Glenn, it seems like a lot of the 10 cents of dilution for Wright might have came in first quarter and earlier in the year. You know, one, is that true? And second, any thoughts on just as we straighten our models out here, I realize you're not giving guidance, but just how to think about the progression of EPS as we incorporate Wright Medical here and some of the comments on expense management you made earlier in the call? Appreciate it.
spk03: Yeah, Robbie, if you just think about the activities that are going on related to the integration of Wright Medical. Naturally, we would be working on cost synergies early in the year and incurring a lot of the costs that we need to incur relative to integrating Wright Medical, as well as aligning their sales forces and all the things that Preston mentioned. And a lot of that did flow through in Q1, and I think that impact was certainly reflected in our EPS. I think moving forward, as we think about it, you know, we are optimistic about where we stand relative to sales disenergies and how that will play out for the remainder of the year. And so some of that positivity is certainly reflected in our EPS guidance. And we fully expect that, you know, that benefit will also contribute to sort of raising the guidance like we did. And then as it relates to the cost management and how that will play out in the year, You know, we are encouraging divisions to ramp up some of their spendings to make sure that we are properly positioned for growth. That would also include spending in innovation, and so we are making sure that we are not doing anything to hold back product development and other innovation spending that, frankly, will be needed to really fuel growth. even towards the end of this year or even on into next year. So I think we'll see growth in that spending. And then, you know, we did learn a lot from the experience that we went through and how we work. And so there are some benefits and savings that we fully expect to realize in the full year as it relates to primarily SG&A costs. And so it's kind of a balance of those things that really get us to a lot of the confidence we had in raising our guidance.
spk05: Your next question comes from the line of Vijay Kumar from Effacore ISI. You may proceed.
spk13: Hey, guys.
spk14: Thanks for taking my question. One, Glenn, back on the guidance question here. Is the assumption here back half perhaps we're looking at double-digit organic growth versus 2019?
spk16: Is that a reasonable assumption just given how we're seeing procedures come back? in your commentary on mid-singles growth in April. It seems like back half should be doubled. Is that a reasonable assumption?
spk03: Yeah, I think, you know, Vijay, you could probably do the math as easily as I can. in terms of what it will take in the back half of the year to really get to the 8% to 10%. But, yeah, we do see accelerating growth, and we'll see accelerating growth throughout Q2. In fact, underlying some of these assumptions is that Q2 has sort of a return to normalcy by the time we get to the end. And then we'll continue to see great growth in Q3 and Q4. That's helpful.
spk16: Kevin, one for you on capper trends in the quarter.
spk13: I think I heard you say strong capper trends.
spk14: Looking at the other line item with an ortho, I mean, that was 45%, 50%. That's a big number. Was there any catch-up from last year or what's driving any sense on how MACO placements are trending? Is there an acceleration in the end market? Thank you.
spk16: Yeah, well, as you saw, we had a terrific fourth quarter with Mako, and that continued into the first quarter. So it was an absolute banner first quarter for Mako. And what we saw really was an acceleration in the international markets. The U.S. continued its tremendous positive momentum, but we saw a real pickup. As you know, we received total new approval in some new markets towards the end of last year, and we started to see those Mako installations happening in the first quarter. So it's really Mako around the world that was booming in the first quarter, and that gives us a lot of optimism because that's an early indicator of future in plant growth.
spk05: Your next question comes from Peter Chikering from Deutsche Bank. You may proceed.
spk12: Good morning, guys. Thanks for taking my questions. Neurovascular was very strong this quarter. Can you give us some more color on what you think your end markets grew versus market share gains? Can you give us any color on key products like Atlas Stents or the Surpass flow diverter? And also, it's been growing very, very well in China. Just curious what's driving that growth and how sustainable you think that is.
spk16: Hey, Peter, it's Preston. Just wanted to follow up on your neurovascular question. I mean, I'd say overall we're really pleased with the double-digit growth. And I think certainly, you know, as we've seen in the past, that market has been accelerating. But I do think that with some of those launches that you mentioned, we are seeing share gains in that space as well. You know, those launches that we had throughout 2020 were really starting to capitalize as we've gotten into 2021. And so seeing good growth across a variety of those items, including floating earnings spends and our aspiration products. As it relates to China, again, same thing as we brought technologies to those markets and been able to grow there, similar to how we've done in our other markets with neurovascular. And so we really are looking forward to a strong year in total as we think about that neurovascular business. Can I just add one comment? I just think we have a really incredible leadership team at Neurovascular. This is not just a one-quarter wonder. I mean, they've been putting up tremendous numbers quarter after quarter. And as Preston said, the product cycle is really hitting beautifully across all of our categories. So this will be a very strong year.
spk12: Excellent. And it's a quick follow-up question. I think you referenced strength at the end of the quarter for U.S. and Asia, obviously on easy comps. Can you give us any color of what you saw in the end markets in Europe and other key markets in March? Thanks so much.
spk16: Yeah, so just in terms of some of those other markets, I mean, I think, as we know, Europe was a little bit behind in terms of some of the recovery. I mean, we saw some areas like the UK that might have been a little bit out in front. But certainly, as we saw the continued impacts on procedural volumes from the fourth quarter, we saw similar impacts in Europe really throughout the quarter. But similar to how we saw the U.S. and some of those other areas, we did see improvements as we ended the quarter. And so, again, as Glenn mentioned, our expectation as we go into second quarter is that we're getting back to more normalized levels. Of course, there's some other markets that are out there, like in Latin America and certainly with India, that will remain a little bit impacted by the coronavirus restrictions, et cetera. But as far as Europe and the U.S., and especially the Asia-Pacific, as we talked about there, we do expect those markets to get back to more normal levels.
spk05: Your next question comes from the line of Larry Bealson from Wells Fargo. You may proceed.
spk15: Good afternoon. Thanks for taking the question. Just two big picture questions for me. One on ASCs. Kevin, you know, J&J said that about 15 to 20 percent of hip and knee procedures now being done in ASCs. What are your thoughts on this trend? How are you positioning Stryker to tap into this shift? And
spk16: you know i guess everybody's concern is is you know implications for implant pricing and i had one follow-up larry i would say that 15 to 20 might be a little high but there's no doubt that the uh the trend is is increasing and increasing pretty rapidly we are delighted with the asc offense that we've put together really over the last two years we we have a unique way that we go to the market for asc a new sales organization that we created And we really bring the best of Stryker because we have everything that they need in the ASC. We have booms. We have lights. We have power tools. We have Neptune Waste Management. We have operating tables. We have hips and knees and sports medicine and foot and ankle and shoulder and ACDF procedures for spine. So we really are a one-stop shop that makes life very easy for the ASC customer. We're winning deals at a very, very large clip right now, which usually involve at least five of our business units and last multiple years. And so we welcome this shift to the ASC. As of now, it's largely commercial pay that we're seeing. Those procedures are the ones moving to the ASC. So there really hasn't been much at all in the way of price pressure. Not to say that won't happen sometime in the future, but certainly for the next at least few years, we don't see much in the way of price pressure. And frankly, it's a tailwind for us, just given our portfolio is really ideally suited. And we've structured a very good offense to be able to sell to the ASC.
spk15: That's very helpful. And then, Kevin, on the backlog, how do you think about it? There's two analogs here. There's the Vioxx recall, which was a long time ago, but I think you were in the industry then. And then there was the financial crisis. It took a couple of years to see it catch up there. Anybody can do the math in terms of how many patients deferred last year. How do you think about it? Do you think it will come back quickly, or do you think it will be protracted over years before we see those patients come back? Thanks for taking the questions.
spk16: Hey, Larry, thanks for the question. As we think about the backlog, I think you're right. We will see that recovery happen. And certainly, if we go back a year now, that backlog's really been building over time. And while some surgeons have been able over the last several quarters to get back to doing procedures, it hasn't been at the rates that we would have expected pre-pandemic. And so as we get back to more normal periods, we expect that we'll see extra shifts being put in or even some shifts in site of care to get procedures done and work through the backlog. But I would say that we're not expecting that we're going to see a significant or outsized growth in any one particular month or quarter, but you'll see rather a steady flow of elevated levels that will happen over the course of several quarters.
spk05: Your next question comes from Bob Hoskins from Bank of America. You may proceed.
spk10: Oh, great. Thanks. And good afternoon. It was an interesting quarter. I mean, incredible strength in medical and neuro and versus 2019. But then obviously, hips and knees versus 2019 down high single digits. So I guess I want to just focus there for a second. Kevin, did you say that current trends are up mid single digits currently versus 2019? Is that what I heard you say? Yes, in the month of April, Bob. That's what we're seeing. Okay. Okay. That's encouraging. And then does the guidance assume for the year, the total company guide of 8 to 10 versus 2019, does it roughly assume that hips and knees are kind of in that ballpark as well?
spk16: Yeah, I would say, Bob, as we think about that 8 to 10, I mean, it's obviously all encompassing of all of our businesses. And certainly we have some that are growing faster than others. What I would say is if you take where we landed in the first quarter and then what Kevin's saying about April and what we would expect kind of as we go through second quarter and into the rest of the year, certainly we are expecting a return to more normalized levels. And as we just talked about the question with Larry around the backlog, I think we will see some elevated levels compared to kind of historical norms. And so I think if you take all of those into account in context of that 8 to 10, you can get a sense of where we think HPSA needs are going to be.
spk05: Your next question comes from the line of Matt Missick from Credit Suisse. You may proceed.
spk02: Hi. Thanks so much for taking the questions. Just one on the guidance and a follow-up on sort of the pipeline and some of the investments you're making. Just to talk a little bit about the EPS raise a bit more, I'm curious if it sounds like part of that is confidence and returning to growth on the top line. I'm just wondering if that's the case. You know, why not take up the top line guide slightly? And as I mentioned, I have one follow-up.
spk03: Yeah, thanks, Matt. Well, first of all, we're just through the first quarter, and so... the uh you know there's lots of twists and turns here in the next three quarters i i i would say that you know the the fundamental thing on the guidance a couple thing is that is it boils down to a lot of the optimism that we're seeing around many of our current businesses we're definitely not unhappy at all with our q1 earnings performance uh or our q1 top line performance. And so I do think that as we, you know, accelerated through the quarter and what we're seeing in April, you know, we feel pretty good about our prospects for the remainder of the year. You know, Kevin referenced our order books, which are certainly a good indicator of where future sales could land. So we just feel like there's very solid momentum across many, many of our businesses. You know, we also have strong underpin of discipline costs, which is going to help EPS. And I just think that all of that combined with also the progress that we're making on Wright Medical just gives us the confidence that we felt like we should raise our guidance, which is why we did it.
spk02: Got it. Thanks. That's helpful. Ben, just you mentioned also in the operating margin sort of puts and takes that you had sort of continued your discipline investment in, I think you said, innovation and growth programs. which I think many investors appreciate. I'm wondering if you could maybe put a finer point on that in terms of basis points, and then also maybe more importantly, talk a little bit about what the first or second most important or near-term project or program is in that stack of innovation that we might see, say, later in the year or next year.
spk16: Matt, I think if you look at it in terms of investment, as we think about the quarter in particular, and even as we go forward, I think you can probably just look at the rate of percent of sales in terms of the investment that we've made in R&D this quarter compared to previous quarters. And you'll see that it's a bit elevated over our historical norms, which is, I think, what Glenn's referencing in terms of additional investments and making sure that we're being disciplined about how we spend against innovation and in our R&D platforms. as it relates to future projects i mean the part of part of the the beauty of our model is that the decentralized nature of it allows each of our business units really to focus in on those projects that are important uh to them as they as they try for growth as we go forward and so really that that innovation and that investments being made across all of our businesses and as we have uh items that that that make sense to talk about in this type of forum will certainly do so uh in terms of new launches and key product innovations that will be coming to market in the future
spk05: Your next question comes from the line of Joanne Lentz from Citibank. You may proceed.
spk07: Thank you for taking the question. Good afternoon. Two questions. I'll put them right up front. What are your debt goals or debt pay down goals? I'm not sure how you're measuring it, whether it is sort of the debt to EBITDA metric over a certain period of time or net debt that you're aiming towards. And then, right, medical, if I hear you correctly, that's integrating somewhat faster than expected. And I'd be curious what you see as sort of the surprise in that integration. Thank you.
spk03: Hi, Joanne. You know, in terms of debt pay down goals, and we've been pretty clear with the rating agencies on this as well, we really look at debt to EBITDA as the ratio that we focus on and really bring it back down to kind of what are our historical levels, two and a half times roughly. And if you think about the next couple of years, It means a pay down of $2 billion, $2 billion plus in terms of what we'll do. If you think about what we paid off in the fourth quarter and what we paid off this quarter, we're about $1 billion towards that goal. We probably have an opportunity to pay down a little more debt this year that we'll take advantage of too. And so that's where we think we'll land. Once we do that, we think we'll be in solid territory to – you know, sort of accelerate our programs around looking at sort of larger opportunities. But the organization is very focused on cash flow and reaching those debt pay down goals.
spk16: And maybe I'll take the question on Right Medical. I would say we're off to a very good start. So far, so very good with the Right Medical integration. It's proceeding much more quickly than K2M, which was our first overlap deal. And I would say I'm delighted with the products, the people, and the pipeline that we've acquired with Wright Medical. And really, if I could think back to all the deals we've done in recent history, maybe Novodax, the only other deal I would say that's kind of in the same ballpark as this one in terms of the speed of integration, the speed of decision-making. We have mixed management teams that are leading. A lot of the Wright Medical leadership has come over in key leadership roles. And the momentum is terrific. And we had baked in a certain level of disenergies. And even on the cost side, I think we're making progress a little bit more quickly than we had expected. So overall, delighted with where we are with Wright Medical, and the future is very bright.
spk05: Thank you. Your next question comes from Ryan Zimmerman from BCIT. You may proceed.
spk13: Great. Thank you for taking the question. So I want to ask first about the U.S. spine market, and you flapped now the K2M acquisition, and so if you comment on kind of, you know, your assessment of your spine franchise and your expectations for getting back to market growth in that business. And then my second question is just around, you called out the sage business, and it seems like it was very strong this quarter in medical, and so it Is there some dynamic of kind of pantry reloading on the expectation that procedures could be picking up sooner and, you know, just how to think about that cadence within that business going forward? Thank you.
spk16: Hey, Ryan, this is Preston. I'll take both those questions. So from a spine perspective, I think overall, you know, we're very encouraged by the performance that we've seen in our spine business over the last several quarters. You know, certainly it's being enhanced by enabling technologies, certainly our recent acquisition of Mobius being a part of that. And I think the other thing I would just point out to you as we think about spine in relation to some of the other implant businesses, we certainly didn't see the same level of impact as a result of the COVID restrictions, particularly across this last quarter, like we saw in some of the other implant businesses. So it's just something to keep in mind when you think about the performance. But overall, like I said, we're encouraged by the performance and we're with high expectations in terms of our spine business getting back to market levels and continuing to perform that way. As it relates to SAGE, I think you hit it. I mean, really, it's a product that certainly was impacted by the procedural slowdowns. And so as hospitals ramp back up and get ready for the procedures to pick back up, there's an element of SAGE that will pick back up in terms of stopping to get ready. But at the same time, I think you'll also begin to see the flow through that's happening from a SAGE perspective as well as more and more procedures are done in that catch-up of the recovery process. Thanks for taking the questions. Kevin, I'd just like to add one comment. I think our medical business sometimes gets a little underestimated, and the reason is you have three different components of it. You have the acute care, the beds and stretchers, and we have a brand-new bed, Percuity, that was launched towards the end of last year that will have four models. Two of those models will be launched a little later this year. That will drive very strong growth for that business. And then you have the emergency care, which is the defibrillators and the ambulance cots. and then you have the SAGE business. And so you have three different businesses that, frankly, last year you had a little bit more contribution from acute care and emergency care and not so much from SAGE. This year you're going to have a lot more SAGE. Emergency care is going well, and acute care should pick up as we get into the latter course of this year. So overall, it really is a much more stable, high-growth business than it was a decade ago based on the acquisitions of both Physiocontrol and SAGE. Thank you for taking the question.
spk05: Your next question comes from the line of Chris Pasquale from Guggenheim. You may proceed.
spk14: Thanks for taking the questions. Glenn, one quick one for you and then one on the business.
spk03: I just wanted to confirm with the guidance, how much of the change in EPS guidance was related to a change in expectations for currency versus operational performance? It wasn't clear to me what the components were there. Yeah, Chris, we basically incurred some positivity of $0.03 in Q1, and we think the full year will have an impact of $0.05 to $0.10. Just there's still some variability out there, so that's where we got it to.
spk14: Well, I guess relative to the original guidance, was there a delta there, or is that the same as you were expecting with the original EPS range?
spk03: Really, it's wordsmithing. I mean, the original guidance, we thought it would be – a dime, a firm, 10 cents. And now we're sort of more thinking that we might see a range of 5 to 10 cents.
spk05: Your next question comes from the line of Anthony Patron from Jefferies. You may proceed.
spk14: Hi, thanks. Just a couple of questions, one on robotics, one on Wright Medical. On robotics, just trying to get a sense of sort of the competitive landscape. We're hearing quite a bit about the J&J Bellis robot launch here pending. And so just wondering if there was, you know, any sort of impact in the 1Q numbers, perhaps a bigger selling effort ahead of a competitive launch. And then secondly, on right, when we think about sort of settling at mid-single-digit growth, pre-acquisition, it was a high single-digit grower. I'm just wondering if we can sort of break that out between this synergy and pandemic and sort of what is the timing to get back to that high single-digit growth rate. Thanks a lot.
spk16: So with regards to your question on robotics, I mean, from our perspective, really nothing's changed in our focus. And what you saw in the first quarter really is just a continuation of the effort that we've had since we launched Mako. And so we're really seeing the uptick as a result of just selling in our technology. And overall, we really remain bullish about Mako and what it brings. Um, you know, other, other competitive systems like, like Dallas or Rosa haven't slowed us down at all. And if anything, what they've done is they've increased, uh, the validation that robotics are here to stay and, and really demand for Mako and our technology continues to be super strong as, as we saw by the results we posted. And then also, you know, we believe we have the best solution. And so from a head to head comparison is something that we look forward to with the technologies that are on the market today. As you think about right medical, and again, the high single digits, I mean, it's all inclusive in there. Obviously, we're coming off of a pandemic or still kind of coming at the end of the pandemic. So there's certainly some impact there. There's dis-energies that are associated with the deal itself. And then there's also just the integration happening in terms of the right business and our own business through cross-selling and things like that. You know, it's not something that we've parsed out in terms of the different components of it. I think what we can expect to see is that as we work through the integration, we'll get our total trauma and extremities business back up to performing above market growth. Yeah, I think the key thing to remember at the middle, mid-single-digit growth, that includes our existing trauma business. So that wasn't just for the right medical portion, right? That's the combined trauma and extremities business. And so Right Medical will be a faster-growing component of the combined trauma and extremities business, but obviously wasn't in the first quarter just because of the pandemic. Thank you very much.
spk05: Your next question comes from the line of Stephen Likens from Oppenheimer. You may proceed.
spk16: Thank you. Hi, guys. First question, I know you haven't been providing NACO numbers in recent quarters. I was wondering if you could give us your perspective on where U.S. market penetration is today. Any color you could provide on where you think we're at penetration-wise from a procedure replacement perspective, from a market perspective, would be really helpful. Yeah, I mean, obviously, we're not providing specifics on the quarter. But I think if you go back and look at what we said in the fourth quarter, that'll give you some sense of where we are in total installation base, both from a U.S. or a global perspective. And you can make some assumptions about what that might mean, U.S. versus international. But If you think about what that total placement is and you think about the fact that there's the potential for 4,500 or so hospitals that could carry a MAKO, that just gives you a sense of where we are penetration-wise. But even then, I would tell you that many of these hospitals are able to take more than just one. So I think the bottom line with all that is it's still early days in terms of penetration. So there's a lot of opportunity out there in terms of robotics and taking MAKO and taking more than one MAKO as we look forward. Got it. Great. And Glenn, you mentioned relative to right, obviously, integration going better and you're up the top line.
spk14: Is part of the operating margin confidence also some pull forward of the expense synergies that you were expecting, or is that still yet to come as well?
spk03: Yeah, I think that's a fair assessment. We're executing very well on the cost synergies that were planned in our modeling, and so we are going to see a little bit of that favorability that's flowing through the revised guidance.
spk05: Your next question comes from a line of Drew Reniers from Morgan Stanley. You may proceed.
spk04: Hi, thanks for taking the questions. Kevin, you called out strong China results in the quarter. Could you just maybe talk a little bit in more detail about what you're seeing now over the next 12 months and what your expectations are moving through 2021? And just sticking with APAC for a second, kind of what's your enthusiasm for MAKO in China and Japan? Is 2021 an inflection year for these countries, or should we see more gradual adoption in the nearer term?
spk16: Yeah, so first of all, China had a terrific first quarter. As you know, the pandemic is not really affecting day-to-day life in China. And they had a very, obviously in 2019, even going back to 2019, we had terrific growth. But obviously last year was very badly affected in the first quarter if you compare to 2020. So China as a whole, we're very small in China relative to other companies, but we grew incredibly fast, very, very high double-digit growth in Q1. The outlook for China for us is still very positive given our lower relative market shares. It will be a very good make-all market. We're just getting started in China. I would say Japan, certainly Australia is farther ahead of where we are in China. So it's early days, but very promising, very encouraging. The one negative for China, of course, is this trend towards volume-based procurement. which you've seen with cardiac stents, and we know that that's going to come down the pipe and affect a couple of our businesses. It hasn't yet, but we're starting to, and there'll be noise around that. But overall, China for us still remains a high-priority market and will be a growth market for us just given our relative position. But even as it relates to Mako, that will be carved out of the tendering related to volume-based procurement, so we still have a significant runway there. for robotics, both in Japan and China. Those are going to be both big markets, and we're very excited about our progress in both of those.
spk04: Great. Thank you. And just a question for Glenn. Glenn, you mentioned momentum continues for cash flow, but could you just give us some more color on your efforts to drive cash flow kind of as discretionary expenses come back? Just how is Striker focused on cash flow generation today, maybe versus 12, 24 months ago? Thank you.
spk03: Yeah, I think one of the things that we got the whole organization garnered around over the course of 2020 was just the importance of cash flow and good management of that cash flow, just so we could operate the company at reduced revenue levels, but then also just so we could reallocate that cash flow to areas that provide better returns in terms of M&A and things like that. So I do think organizationally we are well positioned relative to manage cash flow. We have efforts ongoing in terms of moving a lot more of our collections to standardized shared service centers. We have efforts in inventory management and working very closely with the businesses so that we can forecast inventory needs better. We also look at distribution strategies that sort of are more efficient in terms of how much inventory we have to have on hand to serve customers. And then lastly, we are also working with our vendors in terms of accounts payable and, you know, how do we have more favorable terms in terms of payment terms on accounts payable. And so all of that is just really tightening up our working capital. Certainly will benefit us this year as we look at improving the results of cash flow.
spk05: Your next question comes from the line of Matt Taylor from UBS. You may proceed.
spk14: Hi, and thank you for taking the question. So I wanted to ask about the guidance last quarter uh you were asked about what the swing factor was between the high and the low end and you said basically a big one was uh how quickly things come back in q2 if they came back better on the front end you could be near the high end and on the back end you know near the low end if that makes sense so you know is that still how you're thinking about it and based on the trends that you're seeing is that leading you towards the high or the low end of guidance for the year
spk16: thanks matt so as we think about it um again you know we provided the range because of the variability that exists and certainly you know as we think about where we're headed we're happy with what happened in the first quarter um and as we you know with the momentum we're taking into the second quarter and certainly you know if we continue to have great momentum obviously it means it means a good thing for us as we think about our overall sales but you know we put the guidance range out there for exactly that reason because there's still a lot of variability that's happening across the different marketplaces so I think that's how I would think about it. And certainly as we come in to our second quarter results, we'll have another update that we'll be able to talk about that. Okay. And then you mentioned a couple of times you've got a strong order book, which is a good sign. I was hoping you could characterize that first a little bit better in terms of maybe the percentage of your sales that it impacts directly or indirectly, because you talked about it as an indicator for implants and just kind of the timing of that.
spk03: When does that start to land and how long does it last to help us think about how that impacts the forecast?
spk16: Yeah, so I think when we talk about our order book, generally it's in reference as we think about our capital businesses because those items are being placed in some cases well in advance as we think about our larger capital items or even the smaller capital items, the orders that are coming there. it's just a leading indicator as we look at those businesses and so um really when we talk about capital you know we've talked about capital before as being about 15 or so being our personal capital and about nine or ten percent being our large capital items as we think about it as a percent of our total our total business so i think if you think about those items those are the ones that we're talking about when we reference our order book it generally is impacting those 25 or so percent And, again, it's just a leading indicator as we think about return of procedures and also just the strength of our customers in terms of their financial positions as well.
spk05: Your next question comes from the line of Mike Mattson from Needham & Company. You may proceed. Hi.
spk16: I wanted to ask one on M&A. After you did the Bright acquisition, we really haven't seen as many deals. There was a pandemic last year, so it's probably not too surprising given everything that was going on. But how do you balance the need to digest the Bright deal, integrate that company with Striker versus the funnel for M&A and just the valuations on some of these companies out there now? Yeah, no, a good question. And, you know, as we talked about when we did the right deal, obviously it was the largest deal in our history. And so one of the things we talked about is while we go through the integration of right, that we would continue to focus on M&A, but the focus that we'll have on M&A will be more of a tuck in variety. So as we look at, at placing either smaller products or more technologies into our existing businesses. And so we go back to the end of the year, we had the ortho sensor acquisition, and then we just talked about today, the TMJ concepts acquisition. So it's, You'll continue to see those types of acquisitions in the near term as we continue to go through the integration of right and the debt pay down that we've talked about as well. So I think that's how I would think about acquisitions for us as we think about going forward. I think one key point is that we're always looking. We have dedicated business development teams as part of our commercial business units, and they're always out there evaluating the landscape and looking at targets so that whenever the opportunity presents itself, that we're able to take advantage of it. Okay, thanks. And then just want to ask one on spine. So you get good, good growth there in the spine business. And I would suspect you're probably outperforming the market. But do you have any sense for the degree to which that that market was affected by the procedural slowdown in the first quarter, early part of the first quarter, as opposed to the hip and knee market? So as we think about spine, you know, the only thing that we can look at is what's happened over the last several quarters. And I think what we see with spine, even as we look at our own business, is that it's not as impacted. I mean, it certainly is impacted as there's elective components of it, but it's generally more emergent as we think about spine versus some of the hip and knee business, for example. And so we haven't seen the same level of slowdown. As we think about where that lands in regards to the total market, I think as we come through the pandemic, it's just something we're going to have to continue to evaluate once we get into a more normalized setting.
spk05: Your next question comes from the line of Richard DeWitter from SVB Leary. You may proceed.
spk11: Just first, Kevin, you mentioned mid-single-digit trajectory relative to 19 for hips and knees. Those are different businesses with different deferral characteristics throughout COVID, and they also have different comps in the 2019 period. So I was just curious, should we be thinking of knees as being substantially higher than that mid-single-digit, and maybe hips drag that down to an average of mid-single-digits? I'm just trying to get a sense of the difference between the two categories, especially given where the backlog's coming.
spk16: Yeah, so first of all, I don't want to get too carried away with one month of comp, right? It's a very positive sign. Both are in the mid-single-digit range. I'm not going to sort of say which is higher than the other one. They both are doing mid-single-digit growth versus April of last year. But again, we're talking about 25 days of selling days roughly between two years apart. And so it's definitely a change from the trajectory we saw in the first three months of the year. and a positive change, but I don't want to get too excited about that. It's just an indication, a data point for you that tells you things are improving, volumes are coming back, but it's not really providing you guidance with which hips and knees, which one is going to be performing better than the other one. They're both coming back, and that's a good sign overall.
spk11: Okay, thanks. And then just a follow-up, you mentioned some dynamics in spine relative to the recovery January to March. Can you talk a little bit about some of your other electives in nature for senior areas like sports medicine, maybe ENT, and just talk a little bit about what the recovery is looking like there and prospects for back house? Thanks.
spk16: Yeah, sure. Those are actually recovering very well. Sports medicine, I think we mentioned in our previous remarks, grew double digits. In the first quarter, it actually doubled in the fourth quarter last year. So we're delighted that those procedures are done in surgery centers where you frankly haven't seen the same degree of slowdown as you have in the inpatient hospital. ENT was the most negatively impacted when the pandemic started because of the aerosolizing procedures. We're seeing that have a nice rebound. And so both of those areas are going to be strong performers and strong contributors to growth in 2021.
spk05: Your next question comes from the line of Kayla Crum from Truer Securities. You may proceed.
spk06: Great. Hi. Thanks for taking our questions. So can you guys speak a little bit in a little bit more detail about the CMJ concepts acquisition you mentioned on the call, just the rationale, how important or significant that could be? Just any additional detail there would be helpful.
spk16: Sure. So as we think about that acquisition, and again, it fits the overall strategy that we have in terms of finding products and technologies that are out there and really fitting them into our sales force's hands to help them really go out and serve the surgeons and the customers and patients that they serve. So with TMJ Concepts, really, it's adding that TMJ prosthesis product to the bag that's allowing us to go in and really service customers and patients that are actually in that position of needing that replacement. But I would say overall, it's a very small deal. So this is not something that's going to really hit your radar screen for the overall size of Stryker. It's very meaningful to our CMF business, very meaningful to the oral maxillofacial surgeon, but not a big mover of the needle for overall Stryker. And so you'll see that as we report our results. We'll report that in the acquisition column. You'll be able to see that. But it's very small, nothing that's going to be really meaningful to the overall Stryker.
spk06: Got it. Okay, helpful. And then just high level, Kevin, I'd love to just hear what you're hearing from your hospital customers in recent months. I mean, you mentioned you're seeing more of a shift to ASCs. Are there any other sort of interesting trends in the market you're hearing about that have surprised you either to the positive or negative in recent dialogue with your customers? Thank you.
spk16: I wouldn't say surprising, Kayla, but I would say is that the shift to the ASC, every hospital you speak to has programs underway. And so that was already happening prior to the pandemic. It is definitely accelerating. That's probably the most notable thing I would say. The other thing is that they're actually in pretty good financial position. So unlike prior crises that we've gone through, whether it was the financial meltdown or other issues, the hospital liquidity is actually very good. And so there was a pause for a little while on some of the capital, certainly the smaller capital. But as procedures are coming back, we're seeing that through our order book that hospitals are in actually a very good financial position and better than, frankly, I would have expected when the pandemic first hit.
spk05: Your next question comes from the line of Jeff Johnson from Baird. You may proceed.
spk00: Thank you. Good afternoon, guys. Two just clarifying questions, if I could. Preston, you were talking about the spine market, and, you know, good to hear that it's a little more emergent and maybe not as pressured as much in 1Q as the hip and knee market. But I'm assuming the pass-through payments on SpineJack helped a decent amount in 1Q. So when I look at your down 2% U.S. spine versus the down 7%, 8% U.S. hip and knee, is that about the right way to think about a six-point differential in core spine versus hip and knee market growth at this point, or... Would that differential be less than that if we kind of exclude some of those benefits I'm assuming you got on the interventional side?
spk16: Yeah, I mean, I think it's, again, being that we're right in the middle of a pandemic, there's a lot of regional variability with this. I mean, I think to take any number in absolute is probably not the right bet. But I think certainly there is that gap there that's driven by that less emergent impact if you think about hits and needs versus fines. So, I mean, I think if you take some gap in that small single-digit range, that's probably about right.
spk00: All right, fair enough. And, Kevin, I found it interesting your comments on the ASCs and the five business units typically being involved in a in a contract, you know, I think historically, and correct me if I'm wrong, but historically, you said there's not a lot of bundling that goes out at the hospital level, cross-business units, things like that at this point. Obviously, in the ASCs, that seems to be happening more. Does that mean your incremental share gains in ASCs should be even greater than what we've seen historically on the hospital side for you guys? It just seems like you're so well-positioned there, given the diversification of the business model.
spk16: Yeah, it's a great point. There is very different buying that occurs at the ASC than it does in the hospital. The hospitals have very elaborate procurement divisions and departments, and they buy by service line, and it's very decentralized. The ASC is a very simple sort of customer that you have to interact with. There are not as many people. They can't receive 22 striker salespeople. They don't want to. That's not the way they want to do business. So we have a different offense for the ASC. And fortunately, we have a portfolio for the orthopedic ASC, which includes sports, that is just perfect for what they're looking for. And so, yes, we've adapted our offense. We have the portfolio, but it is a very different buying pattern. The hospital isn't as interested, frankly, in looking across our different divisions and hasn't historically been as interested, but the ASC customer certainly is. And the good news is we've adapted our offense. If we had continued with the same way we used to sell, we wouldn't be having the success that we're having now. And really, I'm optimistic about this continuing in the future.
spk05: Your next question comes from the line of Matt O'Brien from Piper Sanders. You may proceed.
spk08: Hi, this is Corrine on for Matt. Thanks for taking the questions. Just one quick one for us. Can you talk a little bit about how NACO HIP is going and how you expect it to perform for the remainder of the year?
spk16: Yeah, sure. So the Mako HIP application, if you remember, we launched it last year, but we really couldn't get it out to all of our customers because of the pandemic. We've got roughly 50%, maybe a little bit more than 50% of the accounts have the new software. So it's not as simple as just sort of doing an upload over the web of a software. We actually have to go to the account. put the software on and do an in servicing with our customers because there's new information they have to learn. So there's actually a training regimen that goes with it. So right now we're excited about the procedure. Growth in hip is increasing as more and more accounts have the software installed and are in serviced by our striker team. This will continue through the second quarter, probably through a good part of the third quarter before all of the accounts have the new hip software. But The feedback from the surgeon customer is terrific. It takes less time to register, so that speeds up the overall procedure time. And there's some very valuable information, such as pelvic tilt, that surgeons find very beneficial to make sure they're managing length discrepancies. And so the feedback, again, very positive, but we're still in the throes of this implementation. And it does take time because it requires that high touch in servicing. And due to the pandemic, we haven't been able to move as quickly as we would like in all of our accounts in all of our regions.
spk05: Thank you. Your next question comes from the line of Josh Jennings from Cohen. Your line is open.
spk01: Kevin, just two questions on the need business. First, just, you know, you've had unprecedented success with your strategy of pairing robotics with the triathlon implant. Do you see any need now that the other business Three of the big four have introduced robotic platforms to pivot from that strategy. And how do you see implants evolving from here, knee implants in the robotics era? And then the second question is just, sorry, another ASC question. But for knees, are you overrepresented in ASCs? That's our assumption. Just wanted to sanity check that. Do you have a higher share in ASCs than the rest of the U.S.? ? and you just received approval for patient-specific instrumentation for the triathlon. Can you help us understand how that improves your competitive positioning, particularly in ASCs? Thanks for taking the questions.
spk16: Okay, great. There's a few questions in there, so I'll try to cover them all. So first of all, the ASC is an area that we welcome. We're having success with NACO, frankly, in the ASC, more success than I would have imagined, honestly, two years ago. when we initially signed the deal with Conformis. That deal was designed to really have a very simple solution for the ASC customer that is not using Mako. And there will be ASCs. Some of the deals we've won don't involve a Mako, where they will use manual procedures. That's where this solution will be terrific because it requires much less sterilization and is really custom designed for the ASC. So we're excited to get that FDA approval, and we look forward to being able to offer that to our ASC customers. I think you asked about market share. I don't know, Preston, do you have a feel for whether we're over-indexed in ASCs? I think it's fairly representative. Yeah, I think it's fairly representative at this point. I mean, obviously it's a growing sector, but I think very representative right now. Yeah, and it's still early, but we like our chances of being able to do very well. And as it relates to the implants, I would tell you in the short term, No real need to change anything. We're going to continue to have high, high adoption of robotics. We have cementless that continues to grow, as we talked about on the fourth quarter. Over 40% of our knees are cementless, but that still has a long runway to go. Longer term, I do think of different types of implants that are more bone-sparing, that don't use planar cuts, but those will require IDE trials. But I think something that is able to keep the ACL in place is is the area that we're exploring more from a science standpoint, so nothing that we launched imminently. But I do think that will be the future is new kinds of implants that are thinner, that are curved, that only a robot will be able to implement into a patient. So that's kind of the longer-term future. But in the near term, let's say call it the next two, three years, I think we're very pleased with the portfolio we have and a long runway for continued growth.
spk01: Thanks a lot.
spk05: There are no further questions at this time. I will now turn the conference over to Mr. Kevin Lobo for any closing remarks.
spk16: So thank you all for joining our call. We look forward to sharing our Q2 results with you in July. Thank you.
spk05: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.
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