Stryker Corporation

Welcome to the fourth quarter and full year 2022 Stryker earnings call. My name is Tamia 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. 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, Chair 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 Jason Beach, Vice President of Investor Relations. For today's call, I'll provide opening comments, followed by Jason with the trends we saw during the quarter, MACO performance insights, and updates on Vocera and Wright Medical. Glenn will then provide additional details regarding our quarterly results and 2023 guidance before we open the call to Q&A. I will begin with the macroeconomic environment. 2022 was a year where we, alongside many companies, faced unprecedented supply chain challenges and inflationary pressures. We faced these challenges and delivered for over 130 million patients and for our customers all over the world. We also remained focused on the future as we progressed our pipeline of innovation, enabling a super cycle of new product launches across our portfolio in 2023 and 2024. I want to thank our 50,000 employees for their unrelenting determination and agility. In the fourth quarter, we delivered organic sales growth of 13.2%, which brought our full year organic sales growth to 9.7%. During my 10 plus years in this role, these were record quarterly and annual growth rates. The growth was balanced across our businesses and regions, in implants, disposables, and capital equipment, and was highlighted by our medical division, which had Q4 organic sales growth of over 25%. Additionally, for the fifth consecutive year, our international organic growth rate exceeded our US growth rate, demonstrating the progress we are making on globalization. This was highlighted by Europe, Canada, Australia, and emerging markets, which all posted double-digit growth in the quarter. International growth remains a significant opportunity in the years ahead and should continue to complement our strong U.S. business. Next, we delivered quarterly and full-year adjusted EPS of $3 and $9.34, respectively, exceeding our latest guidance range. This was driven by our strong sales performance, which offset inflationary pressures and negative foreign currency. Also, we are progressing with our actions to address higher costs which include both pricing and targeted restructuring plans. We have begun to see the impact of these initiatives and expect an improving trend over the course of 2023. We also expect the positive trends in procedural recovery to continue alongside strong demand for capital products. And while component availability will continue to be variable in 2023, we do expect that it will gradually improve throughout the year, lessening the need for spot buys. We will remain disciplined with our spend and will continue to invest in innovation, including potential tuck-in M&A. We remain confident in the outlook of our business and expect to continue to deliver sales growth at the high end of MedTech, which is reflected in our full year 2023 guidance of organic sales growth of 7% to 8.5%. This growth, combined with the continued challenging macroeconomic environment, our pricing and cost actions, will translate to an adjusted EPS of $9.85 to $10.15 per share. I will now turn the call over to Jason.

Thanks, Kevin. My comments today will focus on providing an update on the current environment, as well as MACO, Vocera, and Right Medical. Procedural volumes continue to recover throughout the fourth quarter in most countries. Parts of Asia Pacific, however, have continued to be more volatile due to ongoing COVID-related impacts. While volumes are recovering, hospital staffing pressures have continued in pockets around the globe, and patient backlog remains. As mentioned on the Q3 call, these challenges will likely resolve gradually, and we continue to expect this will be a moderate tailwind as we move through 2023. Additionally, demand for our capital products remains very healthy in the quarter, as seen from the double-digit organic growth of our medical, endoscopy, and instruments divisions. Even considering our finish, we exited the year with a very strong order book. Next, specific to Mako, we had a record quarter of installations in both the U.S. and internationally. We continue to be agnostic to the form these deals take and will continue to offer flexible options for our customers to acquire capital equipment. The great progress of our Mako offense has resulted in strong growth of our installed base alongside continued increases in utilization. In the U.S., we saw approximately 55% of knees and almost 30% of hips performed using MAKO in a quarter. Also, in December, we surpassed our 1 millionth cementless knee procedure with cementless knees continuing to index higher in MAKO accounts. So, in addition to being the leader in robotic-assisted surgery, we are also well ahead on cementless knee adoption. Finally, we are making good progress with the development of our Mako spine and shoulder applications and expect to have the initial launch of spine in the back half of 2024 and the initial shoulder launch at the end of 2024. Now to our key acquisition and integration activities. Our Vocera integration continues to progress well, and as a reminder, will anniversary in February of this year. Q4 results were consistent with our commentary on the last earnings call, as is the expected sales ramp beginning in Q2 of this year. Turning the page to Wright Medical, we've now passed the two-year mark of the integration of Wright Medical. This has been our largest acquisition to date. Now complete, we have exceeded expectations on both our sales and synergy assumptions as the cultural fit was strong and we implemented our integration playbook very effectively. Additionally, it was the catalyst that drove the creation of three separate business units, allowing us to serve unique customers across core trauma, upper extremities, and foot and ankle. All three businesses exited the year with terrific momentum and strong R&D pipelines. Overall, this acquisition has proven to be a great success, and we are excited about what the future holds. With that, I'll now turn the call over to Glenn.