This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk08: 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.
spk10: 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.
spk11: 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.
spk22: Thanks, Jason. Today, I will focus my comments on our first quarter financial results and the related drivers. Our detailed financial results have been provided in today's press release. Our organic sales growth was 13.6% in the quarter. The first quarter of 2023 had one more selling day than 2022, which is approximately a 1% benefit. The impact from pricing in the quarter was favorable by 0.7%. We continue to see a positive trend from our pricing initiatives, particularly in our U.S. MedSurg businesses, all of which contributed positive pricing for the quarter. Foreign currency had a 2.2% unfavorable impact on sales. In the quarter, U.S. organic sales growth was 12.6%. International organic sales growth was 16.6%, impacted by positive sales momentum across most of our international markets. Our adjusted EPS of $2.14 in the quarter was up 8.6% from 2022, driven by higher sales and a favorable adjusted income tax rate, partially offset by inflationary pressures and the impact of foreign currency exchange, which was unfavorable 6 cents. Now I will provide some highlights around our quarterly segment performance. In the quarter, MedSurge and Neurotechnology had constant currency sales growth of 13.1%, with organic sales growth of 12.4%, which included 12.1% of U.S. organic growth and 13.3% of international organic growth. Instruments had U.S. organic sales growth of 8.9%, led by double-digit growth in the surgical technology business. From a product perspective, sales growth was led by power tools, stair shield, waste management, and smoke evacuation. Endoscopy had U.S. organic sales growth of 16.2%, driven by strong growth across most of its major businesses. The growth was highlighted by general surgery, sports medicine, sustainability, communications, and ProCare products. Medical had U.S. organic sales growth of 13.2%, reflecting solid performances across our acute care, emergency care, and sage businesses, and benefiting from improvement in product supply throughout the quarter. Our U.S. neurovascular business returned to growth with organic sales growth of 7.3%, reflecting a strong performance in our hemorrhagic business. The U.S. neurocranial business had organic sales growth of 9.1%, which included double-digit growth in our Soniped IQ, signature high-speed drills, bipolar forceps, and MaxBase neuro product lines. Internationally, MedSurge and Neurotechnology had organic sales growth of 13.3%, reflecting double-digit growth in almost all businesses. Geographically, this included strong performances in Europe, Australia, Canada, and Japan. Orthopedics and spine had constant currency sales growth of 15.1%, with organic sales growth of 15.2%, which included organic growth of 13.3% in the U.S. and 20.3% internationally. Our U.S. hip business grew 16.2% organically, reflecting strong primary hip growth fueled by our insignia hip stem and continued procedural growth. Our U.S. knee business grew 20.7% organically, which reflects our market-leading position in our robotic-assisted knee procedures. Our U.S. trauma and extremities business grew 13.7% organically with strong performance across all three businesses. Our U.S. spine business grew 6.3%, led by the performance in our enabling technology and interventional spine businesses, including the recently launched Q Guidance Navigation System. Our U.S. other ortho declined organically by 14.8%, primarily driven by the impact of deal mix changes, specifically more rentals related to Mako installations in the quarter. Internationally, orthopedics and spine grew 20.3% organically, which reflects strong performances in Europe, Australia, Canada, and emerging markets. Now I will focus on operating highlights in the first quarter. Our adjusted gross margin of 63.2% was unfavorable approximately 90 basis points from the first quarter of 2022, reflecting the impact of increased manufacturing and supply chain costs driven by inflationary pressures, somewhat offset by price and volume increases. Sequentially, and compared to Q4 2022, we have improved our adjusted gross margin by approximately 50 basis points, driven by mix price, decreases in spot prices, and improved manufacturing efficiencies. Adjusted R&D spending was 6.5% of sales, which represents a 70 basis points decrease from the first quarter of 2022, due primarily to higher comparable in 2022, which related to the ramping of costs for product launches. Our adjusted SG&A was 35.6% of sales, which was 50 basis points higher than the first quarter of 2022, primarily due to normalization of Salesforce expansion and meetings. In summary, for the quarter, our adjusted operating margin was 21.1% of sales, which was approximately 70 basis points unfavorable to the first quarter of 2022. This performance is primarily driven by the aforementioned inflationary pressures primarily on gross margin. Adjusted other income and expense of 65 million for the quarter was slightly higher than 2022, mainly driven by a one-time benefit in 2022. The first quarter of 2023 had an effective tax rate of 12.8%, reflecting the impact of geographic mix and certain discrete tax items, including stock compensation. For 2023, we now expect full-year effective tax rate to be in the range of 14% to 15%. Focusing on the balance sheet, we ended the first quarter with $1.8 billion of cash from marketable securities and total debt of $13.1 billion. Approximately $100 million of term loan debt was paid down in the quarter. Turning to cash flow, our year-to-date cash from operations is $445 million. This performance reflects the results of net earnings and higher accounts receivable collections in the first quarter. Considering our first quarter results, our strong order book for capital equipment, and continued positive procedural trends, we now expect full year 2023 organic sales growth to be in the range of 8 to 9%, with pricing to be relatively neutral for the year. If foreign exchange rates hold near current levels, we anticipated sales and EPS will be modestly unfavorably impacted for the full year, being more negative in the first half of the year. This is included in our guidance. Based on our performance in the first quarter, together with our strong sales momentum and further progressive easing of supply chain disruptions throughout the year, we now expect adjusted earnings per share in the range of 10.05 to 10.25. And now I will open up the call for Q&A.
spk08: Thank you. At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. We ask that you limit yourself to one question and one follow-up. Once again, that is star and 1 to ask a question. Our first question comes from Larry Beagleson with Wells Fargo.
spk09: Please go ahead. Larry Beagleson, Wells Fargo, Good afternoon. Thanks for taking the question, and congratulations on a really impressive start to the year here. Kevin, I guess I would just love to start with the growth rates we saw in Q1 in some of your businesses, like both in Ortho and MedSurge. What, in your view, was there anything here that was one time here, and what do you see that's sustainable?
spk10: Yeah, thanks, Larry, for the question. You saw we had a great fourth quarter of sales growth, another great quarter This quarter of sales growth, we did benefit from some softer comparisons, given that Omicron was present in a lot of markets last year. But I would tell you that the procedures are really ramping very nicely, and they have been really since the second half of last year. That's continued. And the capital demand remains strong. So we really have strength kind of across the portfolio of our company. And that's what gives us the optimism to raise our full year guide.
spk09: So let me just follow up maybe for Glenn. If I'm doing the math right here, you know, you raised the guidance by about 70 to 80 basis points at the midpoint. The Q2 to Q4 organic growth, Glenn, and please correct me if I'm wrong, it implies about 7% at the midpoint. Is that close? And kind of, you know, how are you thinking about why the deceleration, I guess, and, you know, any color on the quarterly cadence from here? Thanks for taking the questions.
spk22: Yeah, Larry, I will trust your math. You know, the one thing I will say is that, you know, as Kevin mentioned, Q1 maybe had a little bit of a softer comparable. Moving forward, we're going to see stronger comparables. And right now, we're still in the first quarter. So we're anxious and excited about how the businesses are performing. But we're still, you know, mindful of the environment that we're in. And so we feel like this is a strong guide and implies solid performance.
spk08: Thank you. Our next question comes from Robbie Marcus with JP Morgan.
spk20: Oh, great. I'll also add my congratulations on a really impressive quarter here. Maybe to focus in ortho, I was kind of blown away by how good the growth rates were in hip, knee, and extremity. Would love to get a little more color on exactly What you're seeing there, how much the anterior hip stem is helping you in hip, what's going on in knee, and, you know, any color you could give on the trauma and extremities business and what's driving the trends there.
spk10: Yeah, sure. Thanks, Robbie. I would tell you that the knee performance is just a continuation of what you've seen for the past three or four years, where all the mako growth, the cementless growth continues to fuel the market-leading growth. So that's not a new story. Some of the numbers OUS were pretty breathtaking, but part of that was due to softer comparables. And part of that's due to really picking up Mako installations OUS. They continue to be strong in the US, but OUS has a much longer runway and started much later, as you know. And so Mako will fuel that OUS growth in the same way that it's fueled our US growth for many years. So that's the need part. On hip, it's really a combination of the Insignia stem as well as Mako. The 4.0 software was launched within two years, in the last two years. That combined with Insignia really positions us beautifully for direct anterior, and we really like the momentum that we're seeing in hips, and we expect that to continue. Trauma and extremities has been just a great story. The right medical deal has turned out spectacularly well. The upper extremities business is absolutely on fire. It's a market-leading business and grew very strong double-digit growth. And as well, foot and ankle has really started to pick up steam and had a very strong performance. But really, all three of those trauma and extremity businesses, including core trauma, had strong performances, and the outlook for those businesses continues to be very positive.
spk20: Maybe as a follow-up, Your medical came in another really good quarter there. Procurity launch continues strong. You know, we heard one of your competitors, specifically in the bed market, talk about a weaker capital environment. So is that something you're seeing in some of the less revenue-generating capital equipment items and any color you could give specifically in medical and how the beds are going? Thanks.
spk10: So far, we're still seeing very strong orders for all of our capital equipment businesses, large capital, small capital. We still have healthy order books across the board. There is a bit of noise here and there that you hear from some hospitals saying, well, they're starting to think about capital, but we're not seeing it in our order book, at least not yet.
spk08: Thank you. Our next question will come from Joanne Winch with Citibank.
spk12: Good evening, and thank you for taking the question. And quite a nice quarter, and I'm going to agree, some of the growth rates in hips and knees, particularly in the U.S., were quite strong. I just want to pick out, pick through a few things. Can you give us an update on where you think you are in the ASC? And I'll throw in my follow-up now on updated thoughts on use of cash. Thank you.
spk10: Yeah, the ASC joint continues its trend that we've been seeing. for some time, continued progression in both hips and knees. We're now in double-digit penetration in both hips and knees. A little bit more in knees, but they're both continuing. I'd call it a steady progression, and I don't think that'll slow down. I think that'll just continue over the next few years with the expansion into ASCs, with construction projects, with more and more procedures moving out. And we're even starting to see some of the extremity procedures move out, even some spine procedures. So it's a trend that will continue, but it's not something that's going to ramp exponentially because it's gated by construction and building out of new ORs, so it just takes time. And then the second question was on? Cash flow.
spk12: Well, use of cash.
spk22: Use of cash. Yeah. Sure, Joanne. I mean, it was honestly a strong quarter for cash flow for us. you know, coming in at $445 million. I will tell you that we've benefited from elevated receivable levels as we exited Q4 last year. As we think about sort of the priorities for cash flow, you know, we really haven't changed sort of how we think about, first of all, we want to focus on paying down the term loan. We paid $100 million in Q1. The remaining balance of $750 million, we will plan on paying off during this year. You know, we're also seeing, you know, we're closing on Cirrus Medical. That will happen fairly shortly here, and so we are allocating some cash to M&A. Teams are still working, and we're still being fairly choosy in terms of looking at opportunities and making sure we're lining up things for when cash flow frees up a little.
spk08: Thank you. Our next question comes from Vijay Kumar with Evercore ISI.
spk03: Hey, guys. Thanks for taking my question and congrats on a really strong start here. Kevin, maybe my first question here on the performance here on the ortho side. I guess there's a lot of moving parts. Is this, you know, there's some thoughts and perhaps we're seeing a pull forward of demand on recessionary fears. As again, the counter to that is share gains given the new product momentum versus, you know, perhaps some of the backlog being felt here. Can you just lay out the different pieces here on what is happening in all the markets from Stryker's perspective? And related to that, I'm curious on smart implants. Where is Stryker on smart implants given we just had ANTAP in that space?
spk10: Okay, well, there's a lot of questions in there, Vijay. So let me start first by saying that there really isn't a new story, right? The knee business continues its strong performance. The hip business, as we said, once we get the Insignia STEM launch, we're going to start to be able to grow above market when you combine it with NACO. And with Wright combined with Stryker, we have just an incredibly strong position in trauma and extremities. We just executed extremely well. The market is better, and we said that. There was going to be a tailwind. There's no new news there. There is a tailwind. I don't think it's pulled forward. I think you're going to see that tailwind last. We said six quarters was our estimate. So this is the first of six quarters where you're seeing that tailwind. Keep in mind that the comps are part of the story, not just for Stryker, for the entire market. The comps were affected by COVID in the prior year. And so you're going to see an elevated market growth this quarter. But I do believe the tailwind will continue into second quarter, third quarter, fourth quarter. Again, a moderate tailwind. But our ability to take advantage of our product flow and, of course, our Salesforce execution is something that I don't see changing. I think we'll continue to be able to perform very well relative to the market, and the market's going to be a little bit more elevated. And then the smart implant. So, no, we don't have any current plans for a smart implant. We do have the MotionSense that we've launched, which is a wearable that measures both on the femur and the tibia. And so we're in a limited launch on that, and that is a way to make sure that you can monitor postoperatively all the types of measures that you would be thinking about after the procedure. So that's our approach versus having it implanted in the body.
spk03: That's helpful commentary, Kevin. Maybe one for Glenn here on gross margins in the quarter. Up sequentially, Glenn, how much of this is volume leverage given revenues came in about – I'm just thinking about fiscal 24 here. And again, I'm not asking for guidance. But my understanding was your striker is still seeing a lot of inflationary pressures here in 23. Most of it is the inventory flowing through the P&L. Given pricing was positive and that inflationary impact, How should we think about margin progression? Should we directly be thinking of maybe perhaps above normal margin years for Stryker going forward?
spk22: Yeah, I mean, you know, first of all, we're pleased and we've made some incremental progress, and that's kind of why I wanted to call out sequentially as being maybe a little bit more important as you look at margin year over year. You know, if you look at just sort of in just for the quarter, you know, some of the big things are really price. We did see reduced spot buys, but keep in mind we're still amortizing those 2022 spot buys, so that's going to hit us you know, on into third quarter. We also, you know, as supply evened out, it just allowed our, you know, manufacturing to be a little more consistent and drive better efficiencies. And so we kind of got back on driving better manufacturing efficiencies. The other thing we're seeing is that, you know, freight rates are monitoring and we're seeing improvement in those rates. The couple pieces I would say, mix was a bit of a tailwind. Obviously, if you think about ortho and spine and the kind of gross margins they drive versus med-surg, that was a little bit of a tailwind. I think that will continue to be a little bit of a tailwind as the year progresses. We are still tempered in this environment, this inflationary environment, though, and so that will keep a tamper. You know, we're early in the year, BJ, and we're not thinking that we want to guide on gross margin yet. I think we see some daylight and we feel good about that, but it will be a work in progress as the whole year pushes forward.
spk08: Thank you. Our next question comes from Matthew O'Brien with Piper Sandler.
spk05: Matthew O' Great. Thanks for taking the question. Maybe to follow up a little bit on Larry's question on guidance, you know, I share his math. As I look at the numbers, I think you beat by a couple hundred million on the top line and kind of carried that through for the full year. And I think Kevin at Academy said he thought there'd be a little bit of headwind on pricing. That might have just been an ortho comment. but also staffing is getting better. So staffing better, pricing seems like it's getting better. I think, you know, given where the stock was trading, people are expecting you to guide a little bit higher if you did beat. So why not guide a little bit higher for the full year, incrementally higher than the beat, given what we're seeing in your markets and the super cycle is just about to start. Thank you.
spk10: Yeah, thanks. So first of all, I tell you that we started the year with a pretty good guide and obviously had a very strong quarter that we raised. And it's only one quarter. The supply chain, to Glenn's point, there are still, let's call them brush fires happening all the time that we're having to tamp out. And we are not completely out of the woods on supply chain issues, which can cause uncertainty. Launches have to actually occur on time and be able to deliver what we hope they can deliver. That creates uncertainty. We had roughly almost 10% organic sales growth last year with a monster Q4. And so there's a lot of reasons why, you know, let's just temper our enthusiasm. It was a great quarter. I'm very happy with it. But, you know, we've moved it up. Let's see how things play out over the next quarter or two quarters before we get ahead of ourselves. And you've seen us in the past. We're not afraid. You know, we don't have to raise once for the full year. If things go well in the future, if the launches hit on the right time, if we're able to sustain this kind of price performance, then we can think about raising, but it's a little too premature to do that right now.
spk05: Okay. Makes sense. As a follow-up, Kevin, on MAKO, I know more rentals. It just is, because I look at the rest of the business on the capital side of things, you're not having any problem selling things. I know MAKO is more expensive, but you've got ROSA out there, you've got VELOS from J&J, and now you're doing more rental contracts. So, I guess the interpretation from most investors would be that, hey, they're seeing more pressure in terms of the ability to sell MAKOs. Is that fair, or are we just not able to see that you're still capturing your fair share of MAKO sales and placements within the marketplace? Thanks.
spk10: Yeah, just to be clear, we are very bullish on the future of MAKO, and we have been. And if you look at our HIPAA NEE number, that's a pretty good indicator that a lot of our growth comes from accounts that had MAKOs installed. If the competitors offer things for free, that obviously causes the customer to say, do I need to pay something upfront? And we've always had rentals and financing within the mix of offerings. In the past, they would be much more inclined to purchase. they're now leaning much more towards rentals. And honestly, it doesn't bother me at all. And then Jason, any comments on rentals?
spk11: Yeah, I think maybe just one additional comment relative to rentals. I think the thing to keep in mind is a large percentage of these rentals, they'll flip to purchases, right? So it's not like they're going in and the units are coming back out. So to Kevin's point, we feel really good about the Mako business.
spk10: Yeah, but I'd say competitive pressures have caused a little bit of a shift in customer behavior. That doesn't concern us. We are winning at a very high rate. And the MECOs that are being installed are being used at a very high rate. And that, to me, is what's critical.
spk08: Thank you. Our next question comes from Ryan Zimmerman with BTIG.
spk19: Thanks for taking the questions. And let me echo everyone's sentiments. I want to ask guidance. You know, I think others are kind of getting that around the progression of quarters for the rest of the year. But if you look at the guidance on the top line relative to the growth and guidance on the bottom line, specifically for Glenn, I'm just curious, it's a little higher on the top line, doesn't quite flow through. And if there's anything in there that maybe you're reinvesting in, Glenn, that you want us to think about specific to the EPS growth at 8.6% relative to the top line?
spk22: Yeah, it's a good question, Ryan. I think, you know, first of all, if you look at sort of the midpoint of both guides, sales and EPS, we actually are starting to show leverage. So I think that's a positive direction. We're still very early in the year. And we are going to be mindful that we're still in, as Kevin referred to, somewhat volatile circumstances relative to supply chain, some other macroeconomic factors. And so that causes us to make sure that we're being smart about where we land the guide. You know, to that point, as we see the quarters play out over this year, if we see improvement, I think we'll definitely feel compelled to take the guide up.
spk10: And we did have a little bit of a lower tax rate, as you saw this quarter, based on some disagreements in stock comp. And that's going to, we think, start to get elevated over the next three quarters. So overall, we really feel like the guide is an appropriate lift, both on the top and the bottom line.
spk19: Okay. And then, Kevin, I'd love to get your perspective on the state of the spine market right now. There's obviously a lot of disruption, as you know, but Nuva Globus is progressing forward as of right now. Both parties voted to consummate that deal. Is there any disruption that you're able to capitalize on that we're seeing in your U.S. spine numbers right now as they are starting to show some nice growth?
spk10: Yeah, I think it's too early right now for us to have really seen much in the way of disruption. I think the disruption will come once they start to bring the organizations together and decide which salespeople are calling on which surgeons and which products they're going to keep, et cetera. So there really hasn't been much in the way of disruption from both of the mergers that are just starting to happen in this space. I'm pleased about our spine business momentum, and it's really because of our own innovations. some of the licensing deals that we've done, getting the queue guidance out, which is really getting very favorable attraction in enabling technologies. We've started to show our Mako Spine, which is also getting very, very good feedback, although that won't be launched until next year, but customers are warming up to that. So I think it's more about us focusing on our own business, and if we can bring the types of innovations that we need to to the market, I think we're going to continue to do well in Spine.
spk08: Thank you. Our next question comes from Shagun Singh with RBC Capital Markets.
spk23: Hi there. This is Ken Alon for Shagun Singh. Congrats on the nice quarter. I have a quick question on M&A. Can you talk about your appetite for M&A and remind us of the deal size that you would be willing to go for and what respective valuations you would look for as in the, like what do you think about valuations right now? And then, specifically Kevin, can you call it interest, like you've called that interest in five different adjacencies over the last couple weeks in M&A. Can you talk about urology and women's health, the call point in that area, and if that makes sense for Stryker to have?
spk10: Yeah, sure. So, let me start by saying that this year, to Glenn's previous remarks, We are focused on paying down debt and getting the term loan off the books. We are continuing to pursue what we call tuck-ins, and Sarasota-Vasco is one of those tuck-ins, which will close shortly. We have other tuck-ins that are in the works right now, and we'll see which ones of those happen this year. But this year is more of a year of tuck-ins than it is doing billion-dollar type of deals. But as we get into next year, if we continue with the strong cash flow performance that we're currently experiencing, we will be back in the market for those larger-sized deals The teams haven't slowed down in their work. They're continuing to pursue discussions with many of our targets. Valuations are getting better, which is good. Interest rates are going up, which is bad. But on the overall basis, we think the market's still primed with many, many good targets, and we continue to believe that using our available cash for acquisitions as the first source of cash and the first use of our cash is the right strategy. The strike rate's a key part of our growth formula. specific to your question on women's health and urology we do have a presence in urology with our endoscopy division and that is an interesting space that we'd like to build around over time we do have some women's health presence also a combination of part of the instruments division as well as our endoscopy division is present right now within breast care so these are not markets where we're sort of absent we're already present to some degree and if we could get a larger presence, that would be something that is one of many, as you mentioned, many adjacencies that we're looking at. And I think that's all I'll say for this running call.
spk08: Thanks so much for the call. Thank you. Our next question comes from Josh Jennings with TD Cowan.
spk21: Hi, this is Eric Hall for Josh. Thanks for taking the question. I wanted to focus on your MAKO shoulder and spine applications. I know we're still a ways off from commercial launch there, but could you just talk about the next steps in terms of development and the regulatory processes there? Are there any milestones that we should have on our radar for those applications? And the follow-up would just be on, are you able to share what sort of submission those applications would be to get clearance? Thank you.
spk10: Yeah, listen, we're not going to get into all the details of the launch or specific milestones. Suffice to say that we are still very much on track with the timelines that we laid out last quarter. No change and continued really positive feedback from customers that we are exposing to the technology. We feel the regulatory path has gotten more certain, which is why we never provided dates prior because we weren't as confident on the regulatory path. These are complex launches. If something changes, we'll let you know. But right now, everything remains on track as per the last discussion we had.
spk08: Understood. Thank you. Thank you. Our next question comes from Matt Mixick with Barclays.
spk02: Hey, good evening. Thanks for taking the question. And I have to say, I'm not sure that congrats on the quarter quite adequately covers these numbers. I mean, they're really just out of balance, I guess, in terms of these end markets. So, a couple of follow-ups, if I could. It looks, just looking at U.S. needs kind of as one line item. It looks like you accelerated on, obviously, just year over year, but also on a two-year stack basis into the first quarter. And, you know, just thinking about the drivers there and how sustainable they are, you obviously had a big lead in the market on robotics. We all know how that has worked out. I'm wondering if you'd talk about how you feel about the lead you have in ASCs And whether, you know, this could shape up to be kind of a similar long-term driver. And then just also on that subject, you know, the rentals came up earlier. I'm wondering what, you know, to what degree, you know, this, you know, rentals are really showing up more in the ASDs. I know there's a couple of questions in there, but I did have one follow-up on Med-Surg if I could.
spk10: Yeah, sure. Thank you. Yes, we have a very significant lead in robotics. We have a significant lead in cementless, and we have a significant lead in the ASC. So we have all three of those factors are at play and contributing to strong performance. And you are right, in the ASC, they tend to shift much more towards rentals, or let's call it forms of financing, because there's always physician ownership as part of these deals, and they don't have a capital budget. that hospitals do to make a purchase. So they do prefer financing. And so you'll continue to see that with ASCs, much more of a shift towards rentals. And we're seeing with ASCs strong demand for MAKO, which is really exciting for us. So if there's a three OR orthopedic ASC, usually at least one of those will have a MAKO in them. And our offense plays very well for that, given all the other technology we can provide for the ASC. So those, I would say all three of those factors are really at play, having significant leads across those three damage.
spk02: That's super, super helpful. Thank you for the color. And then on med-surg, just, you know, specifically, you know, your back order, your order condition, is there sort of stable? I'm wondering, have you started to see some of the bed back orders specifically start to move or accelerate or, you know, thoughts and timing on that? And then the factors, You mentioned still expecting to accelerate. Maybe just an update on some of the factors that you're expecting to drive that acceleration.
spk10: Thanks. Yeah, so if you think about medical, medical's going to have another very strong year this year. Even though you saw a boomer in the fourth quarter, I did signal that medical will still have another strong year. They have the largest backlog of all the divisions of our company right now. And that's across emergency care as well as acute care. the largest is within medical. And so we're still fighting the supply chain. It's getting better every month, but it's still not easy out there in the supply chain for medical. And then the other capital businesses follow behind medical. So still a very, very strong order book. And what was your second, Sarah? And on Beaucera, yeah, we're really pleased. We predicted this, right? If you go back to second quarter of last year, we said We're going through some disruption. We're making changes to the way that we go to market and in the commercial model. We're pushing much more towards the cloud. So very intentional decisions and things have played out basically as we thought. Their orders have also picked up pretty meaningfully. And we do expect to see an acceleration starting in Q2 based on the orders we already have in the system. We know that that's going to start to be a a nice contributor, and then given how much we paid for HOSERA, we will provide some more metrics on that at the end of the year, and we plan to probably do that on an annual basis, as we do with Bank of America.
spk08: Thank you. Our next question comes from Travis Steed with Bank of America.
spk15: Hi, thanks for taking the questions. I guess, and congrats on the quarter as well. I wanted to break down Q1 a bit more. A lot of companies have mentioned January was really the strong month where there was the confidence. I'm curious how you saw February and March shape up, and even April. I heard you say procedures were ramping over the quarter, so that implies April even kind of better than February and March. Just any kind of color you can give on the shape of the quarter and how things are trending across the different businesses would be helpful.
spk10: Yeah, I'd say January and February are both very strong versus prior year because those two months were more affected last year. March was a little bit, let's say, more muted than the first two months. And then I would say April has continued at good levels. So when I say ramping, it was really sort of over last year's fourth quarter into this year's first quarter. April continues to be strong. These elevated procedure levels are not that different between January, February, March, or April. It's just more about what the comparatives were in the prior period. But continue to expect good volumes overall.
spk15: Great. Thank you. And then, Glenn, maybe touch a bit more on the margins, if you can help quantify some of the supply chain purchasing improvements we've seen so far, and how to think about the first half, the second half margin improvements that just come from the higher costs rolling off. and then maybe longer term, you know, the path back to the, is there a path back to those 2019 gross and operating margins?
spk22: Yeah, sure. The, um, a couple of things like, you know, as we think about spot buys just in absolute dollar terms, um, we had a significantly less amount of purchases through that spot by channel in Q1. Um, so, you know, we know that, that, uh, As we see 2022 impact amortize off, we're not really adding to that. So I do know that that will give us a little bit of lift in the back half of the year. You know, I also think, you know, MIX is helpful as ortho procedures continue to ramp, as Kevin mentioned. The other big thing will be these new product launches. We usually gain, you know, price on these sort of next-gen products that we put out there. And while that's not specifically in the price component that we quote, it definitely will help margin. You know, in terms of the path back to 2019, That is a question that we get fairly frequently. I would tell you that we're hyper-focused on regaining sort of our position on gross margin, obviously going after that by being as aggressive as we can on price and putting in really good programs that will help on the price side. We're seeing improved manufacturing efficiencies in other areas, which also are going to drive You know, I don't foresee that that would happen this year, but that, you know, beyond this year, we definitely are focused on what the pathway would be back to that.
spk08: Thank you. Our next question comes from Steve Lichtman with Oppenheimer and Company.
spk07: Thank you. Congratulations, guys. I guess, Kevin, you know, tracking comps over the past three years obviously has been a challenge. I was wondering if you could give us your perspective on where you think underlying volume growth is for the joint recon market now.
spk10: Yeah, I think if you go back to 2019 and call that the last normal year that we've had, I would say we're fully back to 2019 and actually growing from that. You're right. It's very difficult to look at comps. You can't just look at last year. You have to look at how it was last year versus the year before. So it has been very tricky, to your point. But I think we're now in a kind of post-pandemic world. Even though we do have staffing shortages here and there, the surgeons are as busy as they've ever been. If they had sometimes more staff, they could do even more. But I would say we're in a very good situation. position in the market. There's healthy demand. Hospitals are learning how to get more procedures done. And so I would say we're fully back to the 2019 in most parts of the world. Maybe China's a little different. Outside of China, everything else is kind of fully back and building kind of what I'll call a normal growth rate off of being fully back. And of course, there's pent-up demand.
spk07: Right, right. Thanks for that. And then just Follow-up, you talked about the pricing actions from last quarter, and obviously those have kicked in, as you noted, particularly in orthopedics, a nice step. What is the sustainability of that sort of level of pricing you're able to hold here this year, particularly in orthopedics? Is this something that we could see sort of steadily fold in over the next few years? Is there some sort of catch-up this year that we maybe shouldn't count on as we look beyond? Any sort of color on that would be helpful.
spk22: Sure. I mean, first off, we're super excited that these pricing programs that we put in place last year are really starting to take hold and we're seeing an impact. You know, MSNT continues to perform fairly positive. I would expect that they'll continue to perform at a positive or near positive level throughout the full year. You know, Ortho is is a little bit more complex. You know, it's heavily driven by contracts. You know, the impact of pricing can vary depending on the anniversary of those contracts. So, you know, really going after ortho and just trying to manage that to be a little less negative. And then, you know, as you look at that price, you know, that we put out, it's impacted by mix. These product introductions are going to impact that. And I would say that all of these factors kind of go into, you know, where our forecast was that, yeah, Q1 was great. But as we anniversary these pricing programs, as we see new products come out, you know, we're going to see a little moderation of the impact of that price. And that's where we're holding right now as the year progresses.
spk08: Thank you. Our next question comes from Rick Wise with Stiefel.
spk06: Good afternoon. Hi, Kevin. Hi, Glenn. I wanted to ask for a little more color if we could on SG&A. I know you're reluctant to get into forecasting or talking in too much detail about specific lines, but the SG&A was a lot higher than I expected this quarter. Yeah, volumes were higher, so was it higher commissions? As I look at last year, and I know there's a million moving pieces here, but you started out at $1.5 billion in SG&A, and it was roughly approximately that in each quarter. So is this start to the year giving us some sense of how to think about SG&A in the second, third, fourth quarters as well? Thank you.
spk22: Yeah, no, no, great question. I mean, first and foremost, as you mentioned, the most variable item in SG&A really relates to sales commissions and relates to these tiered programs that we have for our reps. And as they, you know, really perform and perform at quota, we pay them well. I think the second thing, some of the things that happened in first quarter, you know, we invested in order to support these high growth levels. And this means hiring sales reps. This means full on national sales meetings. And you're seeing the sort of quarter over quarter impact of those things. I think in the background, we definitely still have this inflationary environment that obviously impacts some of those things that flow through SG&A. We had merit increases that also hit in Q1. You know, I think that SG&A should moderate somewhat over the remainder of the year, and Q1 is a little higher because of those factors I mentioned. But I also would say that, you know, we are sort of trending toward a more kind of normalized pre-pandemic level of SG&A spend as it relates to a percent of sales. Great.
spk06: And one other question to touch sort of a side topic a little bit, but smoke evacuation, I know you've talked about a lot in the past, Kevin, And we've seen three states, I think I'm remembering correctly, Oregon, New York, New Jersey, smoke bills going into effect this year, 10 additional states in the pipeline. I know it's not all driven by state legislation, but nurse associations, et cetera, continue to want to move in this direction. Any update there? Are you still excited about this? Is this still going to be an above-average growth area for Stryker? Thanks so much.
spk10: Yeah, thanks, Rick. Definitely excited about smoke evacuation. We now are at 11 states that mandate smoke evacuation with another roughly 10 that have sort of legislation that's pending that will likely pass. It'll be a tailwind for growth for sure. We have that business captured in both a little bit of endoscopy and also in instruments just based on our portfolio of products. Both grew well north of 20% in the first quarter, and that'll continue as more and more states adopt. So definitely bullish on smoke evacuation. We're still in the early stages. And absolutely with nursing shortages and nursing demands for safety, it plays very, very well.
spk06: Great. Thank you.
spk08: Thank you. Our next question comes from Matthew Michon with KeyBank Capital Markets.
spk14: Good afternoon. Thank you for taking the questions. Not to harp on like the one outlier, but I guess on neurovascular, could you comment on like on some of the weakness there and how you expect that to progress through kind of 23?
spk11: Yeah, Matt, it's Jason. I'll take this one. And I'd say a couple different things as you think about neurovascular. First off, in the U.S., you obviously saw in the first quarter we returned back to growth. As we look at the rest of the year, we're pleased with the progress in the first quarter, and we think that'll continue throughout the year in the U.S. As you think about international, right, as you all know, it's a dynamic environment in China with BBP. So that will be volatile. We did experience some BBP activity in the first quarter. You also know that China overall is a bit immaterial. So I won't get into the specifics of the impact in China, but it is included in our guidance.
spk10: Yeah, for NV, China was a pretty significant business. For overall striker, not so much. but it was for Envy. And so that negative you're seeing is really entirely driven by China in the international neurovascular business.
spk14: Okay. Excellent. And then just on the other line where Mako is, and I realize it's not all Mako in there, just at what point do you expect to lap how customers are purchasing Mako and potentially start showing some growth in that line?
spk11: Yeah, I'll take this one. As you can imagine, when you think about deal mix and some of the things that go into that line, it'll continue to move around as we go throughout this year. And, you know, as you start to get into next year, certainly you would expect to see that line turn to positive. But it is going to be driven by deal mix as we go throughout this year. All right. Thank you.
spk08: Thank you. Our next question comes from Imran Zafar with Deutsche Bank.
spk04: Hi. Good afternoon. Thank you very much for taking my question, and congratulations on a great quarter. I wanted to ask about the 1788 camera and endoscopy. Can you just quantify first how TAM expansive that could be, and then how much potential there is for share gain with that camera once it sounds like it could be A little bit more needle-moving than we've seen in prior launches for HD cameras. Thank you.
spk10: Yes, thanks for the question. I wouldn't think so much about the expansion of TIM. I would think much more about share gain because we're still basically in procedures that are using visualization. We're not creating new visualization for new procedures, but the reason I think it plays well for share gain is We have much better solutions for both sports medicine as well as neuro procedures. We were always fabulous with abdominal surgery. general surgery, but not quite as strong in those two specialties. And then being able to light up new fluorophores, new imaging agents to be able to detect cancer, that's game-changing, right? We will be first to the market in being able to identify new forms of cancer. We will share that when those launches occur. We'll actually share that with you But that will be a tremendous catalyst to drive share gain when you can identify critical parts of the anatomy much more precisely than the human eye can. And so we're very bullish on the long-term future for 1788. Okay. Thank you very much.
spk08: Thank you. Our next question comes from Richard Newiter with Truist Securities.
spk16: Hi, thanks for taking the questions and congrats on the quarter. Kevin, just on MAKO and ASCs, and forgive me if this is a naive question, just not the way things work. But just given that you're involved so early with so many instances where ASCs are getting resurrected or built out, I'm curious, does that give you an opportunity to seed or get, you know, a robotics conversation or consideration? capital placement conversation going very early. And I'm just wondering if that is kind of happening right now.
spk10: Yeah. Being on the ground floor for ASCs is helpful for all of our capital equipment. And the fact that we can provide a lot of what they need really helps. It puts us in a good position because we're on the ground floor. And MAKO speaks for itself. I mean, its brand is very strong in the market. The surgeons are very well aware of MAKO, and they're asking for it. But I think it gives us an advantage, frankly, not just for Mako, but for all of our capital equipment businesses being so involved or in the conversation, making it easy for the ASC to be able to not only design the ASCs, but actually be able to speed up the construction of the ASC if they partner with one company that can provide a lot of what they need.
spk16: Yep. And kind of a similar tag-on question to that, you know, you've been asked in the past about cross-selling or a cross-service line. You've said that just hospitals, you know, haven't moved as quickly along the path of being able to negotiate, you know, one product area for another and thinking along those lines. Is the ASC kind of further along on that negotiation process? And I'm just curious if you guys have an advantage there where if you start to tack on additional adjacencies you might be able to actually facilitate cross-selling with your strong foothold with the procedures that you're already in now and your, you know, the capital equipment businesses? Thanks.
spk10: Yeah, certainly for the ASCs, within orthopedic ASCs, they are buying really across product lines. They're still within the service line, but yes, they're buying capital, they're buying disposables, they're buying implants versus hospitals that tend to stick at the product line. category level. This has been a shift with ASC for sure. They're not buying across into a new service line like orthopedics or general surgery because these ASCs are either orthopedic ASCs or they're GI ASCs or general surgery ASCs, so they are quite specific. But within orthopedics and the orthopedic ASC, they are absolutely buying across product categories, and that definitely plays to our advantage because we're very deep within these service line of orthopedics, and obviously neuro.
spk08: Thank you. Our next question comes from Danielle Antolfi with UBS.
spk17: Hey, everyone. Good afternoon. Thanks for taking the question, and congrats on a really strong start to the year. Just one quick question for me, and sorry to Heart Wellness, it's come up a few times on the call, but Just as we look at the margins, not a lot of margin upside in the quarter. I appreciate you still have inflationary pressures and inventory rolling off the balance sheet that's impacting that. But wondering if you could talk a little bit more about anything specific that happened in the quarter given such a strong sales beat and you're talking positive pricing commentary. So just sort of reconciling inline margins given the extent of the sales beat. Thanks so much.
spk22: Yeah, Daniel, good question. You know, I hate to kind of be a broken record and reiterate some of the things that we did talk about. But I would tell you that, you know, you're absolutely right. We are feeling the higher product cost that came through towards the end of last year is now flowing through this quarter. And not a lot of upside is going to come from that. As I look at sort of upsides that we did see, this price is an upside that certainly helped us with margin. I would also say, and I don't want to make light of it, but these improved manufacturing efficiencies and improved freight rates although smaller, still incrementally helped us as well. And as the year goes on, as we feel, you know, the impact of those will become more significant. And so I think you'll see, you know, moderate improvements as the year goes on. Keep in mind, though, that, you know, mix is going to cause some fluctuation. And then we do have this underlying kind of inflationary environment that is a little bit of a headwind.
spk17: Thank you.
spk08: Thank you. Our next question comes from Jeff Johnson with Bayard.
spk01: Yeah, thanks. Good afternoon, guys. Two quick MACO questions here. Just, Glenn, first, what are the margin implications on kind of this leasing, this pickup and leasing on MACO? Is there anything good or bad that that does, the margin line? And when these contracts convert over to a sale, let's say in six or 12 months, any margin implications then?
spk22: Yeah, honestly, you know, rentals have been part of our plan. And so, as we look at sort of how we're attacking the market, we're focused on placements. And to Jason's point, if customers prefer rentals or if they are less inclined to put the upfront money forward just because maybe competitors are placing products for free or things like that, we're more than willing to spread out this purchase price over any period of time that they're interested in. I mean, oftentimes, these rentals convert within a one-year or two-year to a purchase, and then we'll gain back the purchase price. I would tell you that in the context of our entire sales portfolio, it's just not a material number in terms of how it could move. So, we are very happy to do rentals. Honestly, we want to just increase the make-out footprint.
spk01: All right, fair enough. And then, you know, it's a discussion here on competition, and if competitors are going to offer no-cost rentals or whatever, no upfront cost, then you guys will, and you're happy with that as well. I guess the other thing I keep hearing out in the field, and I just want to cross-check this with you, I mean, if hospitals are kind of allocating more capital towards procedural tools, things that take care of the patients that are coming back into the hospital, less towards non-revenue-generating capex, I would assume that's another – kind of thing that's impacting MAKO at this point too, right? I mean, if hospital can put more towards your power tools and your endo camera and get the rental up front, it's a good allocation for them to go that direction and get kind of the best of both worlds. So I'd assume it's not just competition. There's a little bit here of just hospitals reallocating the procedural tools right now and in the current cycle we're in.
spk11: Yeah, Jeff, it's Jason. I'll jump in here. I mean, what I would say is to your point, there's different buckets of money that a hospital has to to dip into, right? And so if they have operational expense, if you will, that they can use to place a maker or something like that, and there may be a little tighter on the CapEx side, it certainly is a lever that they have. And to Glenn's point, we're super happy to help them with that. So it is an option for them. And again, one that we're certainly happy to partner with them on.
spk08: Thank you. Thank you. Our next question comes from Jason Bedford with Raymond James.
spk18: Good afternoon. Thanks for taking the question. I realize we're getting a little late here, but I wanted to get back to the ortho strength, but maybe come at it from an international angle. The growth in the quarter was quite strong, admittedly, off a lower base, but Are there similar factors relative to the U.S. driving the growth, meaning a better staffing environment, backlog capture, or is there another kind of more dominant factor driving the international ortho growth?
spk10: Yeah, I'd say it's really the same factors. So the nursing situation's gotten better. Just dealing with COVID, that did affect us in the first two months of last year in Australia, in Europe, in many of these markets. And I would say that Mako is now really starting to pick up steam in many of these markets. It took a little longer than it has in the United States, but that's a contributor. Cementless is also growing pretty rapidly in certain markets around the world, some slower than others. But I would say it's the same factors at play. Not ASCs so much. I know in the UK they're looking at potentially starting to have some ASCs. It's a very small factor outside the United States. But the other two factors of of really getting procedures back up and running, doing a better job dealing with nursing. There's still issues here and there, but getting those back, patients, or there's a patient backlog like there is here in the United States of people who've been putting off their procedures now wanting to get their procedures done. So I would say it's a very similar dynamic in other parts of the world. But again, our head start in robotics, our head start in cementless does position us well, and we are extremely pleased with the performance internationally in the first quarter.
spk18: Okay, that's helpful. And maybe just a quick one for Glenn. You kind of touched on this earlier, but pricing, it was what, a 70 basis point good guy in one queue. The annual guidance calls for relatively neutral pricing for the year. Is it primarily a mixed dynamic acting as the biggest potential weight on price over the next few quarters? I'm just kind of wondering what would pressure price over the next three quarters?
spk22: Yeah, I mean, it's, you know, mix is one factor. I think some of the other things are, you know, these pricing programs are going to anniversary in Q3 when we kick them off. So year over year, it just won't show up as a big difference. The other thing I would say is on this, you know, product super cycle, those products are launched they're not included in the pricing calculation because they're next-gen models of the previous old models. And we really only compare like for like. So that's a little bit of a factor that honestly will help us on the top line because those products generally go out at much higher prices than the predicate product. And so I think, you know, if you take all that together, We just believe right now that we anticipate landing prices neutral for the full year, which honestly we'll still take as a win.
spk08: Thank you. Our last question comes from Kyle Rose with Ken Accord.
spk13: Great. Thank you for taking the questions and squeezing me in here. Just wanted to ask overall on the capital side, I mean, obviously you've talked about the capital super cycles that you have. I was wondering if you could compare and contrast some of the maybe new build-out demand versus replacement demand. I think if I remember correctly, Kevin, last year there were staffing shortages on things like the construction side of things. So just if you could help us understand what the new build-out demand looks like and then overall split between small and large capital would be very helpful. Thank you.
spk10: Yeah, so sure. Most of our demand comes from replacement, certainly on small capital by far. On the large capital, it does tilt quite a bit more towards construction. There are still a lot of construction activities that are still underway. Some of them got delayed because they just couldn't get supplies because they had staffing challenges. So there was a bit of push in some cases. But we have a really healthy order book, whether it's Mako, whether it's Beds, whether it's our Booms and Lights, pretty healthy order book. And those businesses have been performing very well. And those tend to be kind of a six-month. We have a forward look for about six months. And so right now, we're seeing pretty healthy demand across all of our small capital as well as large capital businesses. And we'll see how that plays out in the future. But at least we have pretty good visibility, at least for the next six months, that Things are good and we're going to expect continued strong performance in all of our capital business.
spk08: Thank you. At this time, I will now turn the call back over to Kevin Lobo for any additional or closing remarks.
spk10: So, thank you all for joining our call. As you can see, we had a very strong first quarter. We've raised our guidance and we look forward to sharing our Q2 results with you. Thank you.
spk08: This concludes today's call. Thank you for your participation. You may disconnect at any time.
Disclaimer