Stryker Corporation

Good day, and welcome to the first quarter 2023 Stryker earnings call. My name is Todd, 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. Please note 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 first quarter earnings call. Joining me today are Glen 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 and some product updates. Glen will then provide additional details regarding our quarterly results before opening the call to Q&A. In the first quarter, we delivered organic sales growth of 13.6% with double-digit growth in both med-surg and neurotechnology and orthopedics and spine. Our international business continues to be a growth engine with strong results in all countries other than China, which had negative growth due to COVID and volume-based procurement. We are also seeing good traction with our pricing initiatives, delivering positive pricing overall in the first quarter. Importantly, we have begun to realize the gradual improvement of component availability and lessened supply chain constraints. We delivered quarterly adjusted EPS of $2.14, reflecting 8.6% growth compared to the first quarter of 2022, driven by our strong sales performance. With one quarter behind us, we now expect an increased full year organic sales growth of 8% to 9%. Coming off a year with almost 10% organic sales growth, this continued sales momentum is a testament to our team's strong execution. We are increasing our expected adjusted earnings per share to $10.05 to $10.25 a share. I remain pleased with our ongoing commitment to talent and culture. which is reflected in the recognition of Stryker for the 13th year in a row as one of Fortune's 100 best companies to work for. I would like to thank our leaders for maintaining our positive culture through the significant growth that we have experienced over this period of time. In addition, we recently published our third annual comprehensive report, which captures our commitment and disclosures on our three pillars of corporate responsibility. Stronger people, healthier planet, and good business. In July, we will share a virtual corporate responsibility roundtable with leaders from across the organization, bringing to life our progress and how these three pillars tie to our mission. Finally, we'll be holding an investor day on November 8 in Mahwah, New Jersey. We will provide more details about this event in the coming months. 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 capital demand, product launches, updates on MACO, and acquisitions. Procedural volumes continue to recover throughout the first quarter in most countries. As a reminder, Q1 of 2022 had softer volumes in many markets because of COVID-related impacts. While volumes are recovering, hospital staffing pressures continue in pockets around the globe, and patient backlog remains. As mentioned on the Q4 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 remain healthy in the quarter, as seen from the double-digit organic growth of our medical, endoscopy, and instruments divisions. Our capital order book remains strong as we head into Q2. Our product super cycle is underway and driving positive momentum. This began in late 2022 with the U.S. launch of our System 9 power tools, which gained momentum in the quarter, and it is getting great customer feedback regarding ergonomics and quality. In mid-Q1, we launched the Neptune S waste management system. We've seen significant trialing already with positive customer feedback related to workflow advantages and environmental benefits. Also, some of our other launches this year include the Expedition-powered stair chair Mako 2.0 software for knees, cue guidance for cranial procedures, and the Insignia hip stem pacing to be on track for 85% launch by year end. Finally, we received 510K clearance on our 1788 camera platform, which will expand our endoscopies division addressable market into new procedures, including the ability to visualize lung and other cancers. As a reminder, the launch of the 1788 camera is set for late Q2. We continue to see steady progress with these launches and expect them to be a tailwind for growth in the coming quarters and years. Next, the progress of our Mako offense has resulted in continued growth of our installed base combined with high utilization rates. In the U.S., we realized strength in our rental contracts, which resulted in lower upfront revenue for the quarter. We continue to be agnostic to the form these deals take and are offering flexible options for our customers to acquire capital equipment. Our Beaucera integration continues to progress well and, as a reminder, is now included in our organic growth beginning in February of this year. Our expectation that sales will accelerate beginning in Q2 of this year remains unchanged. We will provide our next update on Vocera when we report our full year 2023 results. Lastly, we have obtained regulatory clearance regarding our acquisition of Cirrus Endovascular, and we expect the deal will close shortly. With that, I'll now turn the call over to Glenn.