MDT - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Medtronic's Second Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now turn the conference over to Mr. Ryan Weispfenning.

Ryan Weispfenning

Great. Krystal. you, Thank welcome webcast. and second conference quarter Good to and call morning Medtronic's

During Chairman prepared questions. will Ishrak, Officer Omar XX, take second the hour, next your on ended Medtronic will the of Parkhill, October be Chief quarter to which on After and Medtronic and we Financial comments Officer, our provide XXXX. results our remarks, Karen Executive Chief happy

morning, revenue-by-division we financial First, issued press Earlier a few our a logistical release statements this and summary. comments. containing a

issued also that additional We earnings an provides outlook. details presentation and performance on our

During this results made statements in earnings might call, considered actual statement. statements forward-looking many projected of and those any maybe the differ from materially forward-looking

and factors actual forward-looking make could cause we concerning we is with results the information SEC contained not that any filings periodic update other undertake to and that differ Additional reports do statement. to in our

addition, In investorrelations.medtronic.com. as and financial details ranges a as foreign basis, are constant reconciliation adjust divestiture, for comparable with quarter release. the recent care, the can adjustment rates DVT our second nutritional insufficiency increasing currency. website, available year of XXXX our the results on impact comparison quarterly to or patient on These say to be found and of included which tables press and our non-GAAP the currency well in earnings of are reconciliations fiscal references in are decreasing we measures Unless any given otherwise,

to With Officer, and be am Chairman any Executive earnings as pleased Omar as to that, or than non-GAAP EPS Finally, other year. call Chief Ishrak. turn would the the now not and noted, our recorded I fiscal Omar? over to during charges does Medtronic's growth gains that guidance include adjustments

Omar Ishrak

operations These hurricanes share quarter faced after Ryan, Maria. affected Rico. in X% you, per a very our when from results wildfires. approximate these Against everyone we thank non-GAAP challenges financial these yet $X.XX Maria a of the we natural manufacturing thank of California encouraging overcome including dedication remarkable. our context resulted the second of to The the lives in backdrop, employees a affected our reported Puerto for this X%, $X.XX joining and by diluted financial or adjusting thousands resiliency, which and persistence to were team considered in three excluding was of revenue earnings not results revenue X% Maria. delivered our in also only disruption the us. and quantifiable were impact significantly impact X% billion, Hurricane growing which to an for We a of in from growth This impact particular but morning $X.X teams. Hurricane or the direct morning, from quarter currency constant are you quarter comparable to Good the impact Hurricane our and unquantifiable X% disasters,

Our as share maintaining CRHF, the growth performance important noted our digits, leveraging be in In have growth. I innovation, therapy breadth momentum as market to of innovation drive rapidly value. positions globalization well entered strategies we increased the important products several continues revenue acceleration. last driven period We acceleration markets as we from of to year-over-year of our economic grew the growth. a clear see and high-growth innovation cycle. combined of a core our weighted representing organic product the in third Overall, grew in expanding our X% its therapy of while revenue new in Vascular lines its basis and by our In we in creating grew and are CVG which continue X%, points the lines services, the Cardiac driver QX, improvement meaningfully will launches total product into growth half year. strong sequential second which growth fiscal XXX market and main business and quarter approximately mid-single our CRHF This in our from product a new organically of expect quarter, pacing markets was CRHF of In ICD about the CRT organic are enhancing that past company Group mid-XXs. sustainable average

gain in new Evolut intermediate recently traditional revenues. expansion Solutions both infection around valve, U.S. In Specifically, XXs to now our as sequentially of product our risk Japan shifting line PRO a low of well market digits these systems. control, and is capture about the both the product and delivered growth for to growth the recent resulting diagnostics, as its Onyx in by and mid-single as mix the DES high share centers launch included in Resolute which driven of points we third low returned see share Coronary, transcatheter lines Circulatory pacemakers, XXs in market we Mechanical and indication. transcatheter growth higher world markets. our revenue towards international TAVR AF introduced represents business U.S. CSH CSH as Support these our Similarly U.S. strong our total adoption In in growth markets TAVR, we valve from U.S. our

Invasive of as driven procedures surgical our growth during and Surgical energy endo healthcare resulting X% Valleylab single-handed open platform. well better X% stapling lower LigaSure powered our our growth stapling to minimally provide in to Innovations outcomes advanced or system surgeons than as Maria. new new given with patient our was driven our costs. Hurricane and and advanced specialty innovations energy. invasive Energy, continue surgery. reloads by Therapies In less stapling, in with These MIS rollout In technology, transition as we growth expected Group momentum stapling new Tri-Staple are In we Next, our FTXX from instruments strong that minimally surgical experienced advanced surgery to by initially feedback grew Signia, providing Advanced was the products the real-time impact

to development more toward ahead, we to procedures year. platform. customers the continues drive of As our proposition use to offering the key robot expand fiscal of team services. MIS by use through across look opportunity surgical availability we see the forward this first-in-human value our surgical The and comprehensive of MIS, robotic all traditional open end surgery, the We areas, a to look surgery

Next, our Restorative less Hurricane the quarter impact expected given X% this Group Therapies Maria. than of grew initial

Our a growth. high with strong neurovascular This very growth driven entire XX% stroke neurosurgery. strength in quarter division by the and across growth with Brain XXs had was in Therapies portfolio mid-teens

well market. Our a declined the spine reflection as X%, impact, in the Spine division of hurricane modest global a deceleration continued as

launch which performed to enabling results such systems, is Excluding technologies of deliver better spine navigation, overall core now are combination monitoring competitors. in our attribute the success growth business combines this the to market. impact surgical our believe implants product an of and spine nerve synergy our as Hurricane Robotics imaging, with well of our relevant our against with in our our enabling the Maria, comparison power business reported of as scale in our several a as the is Inside resulted spine which of than technologies our our indication spine speed initiative, strategy more revenue, to and We in procedures this X% We ongoing neurosurgery our integrated procedures. spine QX. growth of Mazor

recently for our Our received Mark FDA spinal CE at stimulator. cords Intellis Pain approval division Therapies

stem experiencing businesses. by affected the we is positively rollout the the business. several our expect the pain And received customer Intellis has While with have do Hurricane reverse quarters by declines product and in been finally been initial requirements affected pump to health Maria, we also implantable warning in modulation last earlier public The its had brain in therapies warning lifted our FDA the drug but month distribution only our this this letter our pain its month. and letter not division

due anticipated purchase to the declined we the from the Turning demand willing X% CGM sensors. pump revenue Diabetes, than had patients growth XXXG ahead to of what strong MiniMed better to prepared

pump patient has expansion hampered the improved plans Last facilitate of to and partner pleased transition meet that they our that patients. on and were selected market as they we increasing month, Animas were constraints JNJ of supply demand are choice capacity our sensor growth, the us Although exiting announced to the their track. ability overall sensor insulin

currently approximately transition if to so. to patients of actively their majority like existing Medtronic working the ensure they smooth While warranty, Animas we XX,XXX are to the are under do

expect and fourth Priority now for we've Looking complete plans growth accelerate we quarter. when expansion to quarter ahead pumps that we fiscal Program to capacity fiscal our shipping increase the in continue revenue third sensor in Access then our the diabetes finished

addition, preparing for and In We're and the innovation standalone XXXX. our international professional CGM the with divisions. new in our FY diabetes pipeline fiscal across all of year remains its of three system Connect launch later CGM sugar XXXG of this launch the our IQ both iPro®X Guardian robust U.S.

Latin America growing long-term to highest continue and globalization again mid-XXs. with Next XX% Emerging strategy. market Brazil to products but let’s growth line quarter the the turn growth access this region the double-digit grew in services in around world. XX% our in our our as we expectations to expand our grew markets

expanding In region with Latin to We Turkey. drive in continue America XX% and strong East our the in our direct optimization channel in the recovery growth operations. we Arabia continues and as Africa grew Saudi Middle strategy

low quarters. We've strength high-teens for divisions. XX% mid-teens double-digit CVG. XX% years grew can and with the in been coming also Asia & in we growth therapies brain over Greater now MITG, believe this few and growth with continue China spine, Southeast the market Coronary the Heart and China momentum in outperforming Structural RTG, growth grew past in

Let’s economic turn now to strategy our third growth value.

for are accounts infection we quarter over the previously, and hospitals. in U.S. our seeing payment result growth linking a past out This our contract we programs two program under in control XX% that mentioned TYRX XXX was value-based implantable outcomes. devices. the to value implantable therapies. directly patient to of improve our under CRHF's payment tripling have In covered based revenue TYRX value-based infection in As quarter to healthcare past total Nearly strong CVG that from arrangement outcomes additional innovative patient links related the rolled quarters, over

using AAA part DCB reducing of programs payment using reducing and AF when as AF our and therapies CRT tied is these when our ablation portion ablation, reinterventions a our Specifically, ICD, technologies. rehospitalizations and of to

solutions We're volume. while believe outcomes to partnering delivering improving shift outcomes additional value in other on reward and value aggressively We remain that across stakeholders regions. unique to increasingly payment chain, better the healthcare focused our with improve based efficiency as are has developing healthcare we healthcare We systems of groups patient the over each play and systems. technology for value key a leading on role medical

a discussion systems, Karen let As in fiscal ask second through always, quarter do a healthcare to year. the this With for shareholders. we as to way and remainder patients you now our outlook that our well of take benefits the as Karen? of expect me that, and financials

Karen Parkhill

Thank you.

mentioned, basis currency Maria. or a constant as of X.X% growth approximately of a comparable further As second represented for on our and $X,XXX,XXX,XXX quarter when X% Hurricane reported decrease revenue Omar adjusting X.X%

tuck-in and revenue currency contributed basis Foreign quarter growth. acquisitions $XX positive on had million impact revenue to approximately a XX second points

groups MITG Puerto While manufacturing some four direct of Hurricane of of and all had financial limited our Maria RTG. level impact in to Rico, was the

$X.XX operating we X%. The than Hurricane the alternate and per basis the earnings negative directed the movement, year-over-year impact more currency from from we're points. through XX.X% $X.XX diluted was the anticipated. of share mentioned, Maria, and utilized for determination XXX divestiture, a hard Omar positive As a of many grew $X.XX. currency basis non-GAAP quarter impact diluted field margin able work manufacturing comparable non-GAAP constant inventory representing for After foreign on and were decline EPS to operations adjusting restore colleagues, ultimately GAAP sites, quickly was $X.XX,

temporary product margin launches in as supported our new of As lighter impact expected operating revenue group. our a the declined and in experienced quarter diabetes we

expect addition, goal and of our we quarter fiscal impact decline, to infusion our our operating Hurricane of Covidien Despite year. reach in deliver Maria synergies further second of recall continue to In on affected net delivering and million $XXX the set diabetes synergies the margins. this

to mentioned in synergies our even hardware. on was to net in constant expense currency the hedging compared the the margin the ongoing near prior related XX detail operating million after year, our improvement expect points in margin activities which The was As on gain to affected intent negatively on by change a equity delivery we $XX our those currency prior million in other as our Non-GAAP expense from year increased impacted well provide focus we basis. is $XX comparable basis margin operating included future. of our continue program, past, and and as investment to in the by

per quarter be Looking per including $XX million our expect to on currency approximately recent quarter ahead $XX other expense to exchange million net to net rates. program based $XX we million approximately related hedging

rate tax nominal rate. the divestiture year. non-GAAP and to than was Our our be better annual XX% a rate of given initially of We tax year-to-date expect XX% between expected tax for our now our on impact remainder the recent XX%

a our shares basis daily in $XXX were outstanding on quarter quarter. of the We repurchased diluted a million net second X,XXX,XXX,XXX shares. shares Second average ordinary

year, enter income. As second repurchase XX% ratio continue quarter, net on we second roughly with million in the we income share expect half GAAP paid XX% in our stay the fiscal non-GAAP Combining to the net our the on was of we shares dividends payout total activity $XXX and flat. to

turning annual reiterate and guidance. I constant our like Before guidance would to growth currency. are the back call all Omar, comments my EPS Unless to comparable specified, of revenue

quarters. growth growth would For second we X%. of X.X% approximately and expect for of to year, the revenue This fiscal be range in half to X% a full the both the to a fourth we range to third imply continue expect would X.X%,

of our to to X% range to due products, more the revenue Looking with weighted favorable quarter growth third grow its strength growth CVG prior at X.X% full expect new in to the business a groups, continue given comparison. we year of year to by

we be in which of in X.X% growth expect given implies Maria. MITG accelerated the consistent growth to with For growth a Hurricane range. guidance This X.X% first half our part now half is of to in to lower second due to X.X% prior range the X%

We continue impact down balancing Hurricane spine Maria is market of to in that to in grow with brain approximately to RTG strength X% therapies. slightly continued and expect flat the

expected the high sensor group, well in increase full-year. growth half for completion improve to supply an fourth Finally Program, given Priority in growth second the the resulting to Access by as in single-digit our mid we expect as quarter the diabetes of significantly in the

the grow remainder of margin in our the stronger expect to over to XX%. improvement continue of for and we expect margins in our earnings basis to to per XXX we operating diluted to reflect Regarding respect the With of the year, year-over-year the quarter. range third gross to significant points roughly be margin improvement non-GAAP in flat fourth earnings, and share X%

I EPS back to annual midpoint growth X% XX% at previously and fiscal noted, we to growth to of upper the half year range. EPS end As have accelerate would be expect third expect in the to of the the quarter

to $XXX million its an million by is from positively full-year million fluid including and forecast, exchange the approximately $XXX While remains our full the year currency in not stable rates therefore revenue quarter. impact something the affected we for fiscal tailwind recent be million $XXX $XXX third would approximate to

balance change on on of FX to differ And fourth effect of and EPS negatively margins $X.XX third be impact approximately of cost the with be inventory can due XXX the the mind quarter in turns third FX quarter sold positive difference EPS Keep and affected in sheet. along $X.XX quarter. the basis year-over-year would Our related hedging the of fourth by goods margin our revenue, affected magnitude impact to expense our program operating currency of and reflecting greater timing and to a would full-year by XX third. negative including points with the our approximately the than approximately

continue Regarding compounded a to in and removes of we cash divested well fiscal generated the annually the basis the single-digits grow by transaction given loss as as free it 'XX cash the free to 'XX the costs, businesses. expect which year comparable divestiture flow, on from tax flow to high

our point, long-range growth drive well to digit you keep mind operating to on call you fourth your of May, revenue plans margin about encourage expansion. to longer-term to we outlook, 'XX know starting as in that in models. I I as many At forward while quarter intend this to our year our our guidance give would think fiscal Lastly earnings are mid-single continue

the of to the year the is next are excludes growth ease a single-digit fiscal We CVG growth. impact given give current EPS million year if into to revenue expected on MITG would remain impact expecting It that the approximately and slightly EPS. a basis deliver quarter prior $X.XX. also effect comparable a year, base $XXX back to $XXX impact has rates is diabetes and revenue noting RTG mid intend exchange by from to year fiscal expect that and XXXX the and of through our of we mid-single-digits positive year next positive by a growth guidance and stable XXXX grow divestiture to comparisons, approximately we the double-digit While worth to lowering million fiscal first in on up

Now I will back the call return Omar. to

Omar Ishrak

realized and reliable from that consistent our are expect expecting Thanks to Karen, and that the execution I by I’d conclude and noting management Know Medtronic. that results same. like team your Board shareholders

the our extraordinary through we've quarters which to that few affected to our aspire even masked can improving said, be past similar the events has faced. events of we That performance company those recently overall some been extraordinary have by that fundamentals a business. Over manage

as focused for execution, dependable world on and the keenly our scale we're results as So diversification leveraging solid well our around to shareholders. deliver

lines Q&A. open now Let's phone the for

RTG, In I get President us. to Bryan addition of Diabetes of Hakami, Coyle, Geoff Hanson of Martha, President our possible. have MITG, try as and to to want to Hooman President Karen, of Mike We CVG, President to questions many join as Group

So question follow-up. if necessary yourself to please one by a related only us help limiting and

Ryan If our after you the additional Relations and call. questions contact team Investor have please

operator question So please? first with that

Operator

first with comes Mike our the JPMorgan. from of line And Instructions] question [Operator Weinstein

Mike Weinstein

work question, that was this Rico quarter I let Omar significant one on and get me it and questions I’ll were and by behalf so your impacted follow-up. hurricanes two question do let employees the all both first know of how the me that just was did then fires we off, let and know me Santa Rosa - good that Puerto just in I and forget the say tough congratulations,

and the adjusted effectively growth half X% different all on first for quarter organic in outlook the fiscal the activity, for you adjusted the half of first the hurricanes, the did question adjust for this hurricanes. if for is try did the second growth year I The X% you

in the second a half to of the back contribution in comp year the and no that's organic, and tougher despite year that’s is X.X% to You're Medtronic. the acquisition guiding is half what of to the X.X% there overall

So can talk gives business acceleration see, just the despite the besides and Medtronic in this overall what about I diabetes all the confidence can we of which accelerating rest think you comps? that you

Omar Ishrak

continues emerging I consistently. driven that in pretty non-U.S. that group, double group basis of X% by through product seeing almost and on think that And this go digits they’re market think so a delivering. grow let’s we’re I developed in growth market all the or around to we've been growth

as So take Europe is CVG the and therapy, key the destination think will are confident drivers the as products, we exciting leadless you continue. indication to of if are the really portfolio this in for the the U.S. momentum of given which launching CVG in CoreValve Evolut The mentioned our and like most U.S. accelerated risk Micra well a the that pretty here quarter with the recipient I concluded pacemaker for TAVR. HVAD we've in currently that just growth the has these be earlier we PRO new most seen

And that upcoming continue. in with this we advanced Now to had you our see diabetes of launches in FY hold, our think to in we including but brings yourself continued capital and reinforced all neurosurgeons tick-up we really powered reloads bit We addition we’re Signia MITG have a them the in an in expect quarters. mentioned are the our good and you’ll in solution and StealthStation have the growth groups a other specifically SX taking and instruments. stapler seeing quite too RTG many in XXXX product in equipment we'll improvement in technologies traction QX which enabling

growth of we really Mike So, as about our feel in confidence acceleration and an pipeline this is see our driven innovation pretty good it. you by can

Mike Weinstein

am a I two I And can I'm free year high growth X.X XXXX half about one the spend the flow right imply of improve single to the if follow-up, would free your correct flow on just of cash there, my the about XXXX if and in why billion, correct and one, was FY to am they Karen minute of XXXX cash flow your X FY commentary talk billion for cash second somewhere that cash you can you half upper single-digit on X.X free me wrong FY so year? around flows to so meaningfully just first

Karen Parkhill

we high FY on from comparable XXXX digit basis. would a compounded annually FY single expect For right, you're approximately XXXX growth

our typically that's So do year we half math what know I right slightly the with about free we in growth what cash on high can you a last from that flow, but XXXX the third flow did rate. FY free would first our of now. generate seeing cash say we're that

effects continue our digits the we confident remain about to There high in outlined single XXXX the call. ability our do first grow been to compounded on we earnings quarter FY in So annually. fourth from have half that some

of occur a expect the in did this We settlement FY that in legal fiscal and most tax significant XXXX year. half of first

a divestiture had related We cash additional the were an and some specifically flow related couple half. comparable half first with the year. contributions, to divestiture. on QX also into of the in million this also mind businesses year to QX impact of in related of And payments of cash that last first pension timing basis year also hundred second the that expenses the plan happened some versus tax keep of our it the foregone both had And half then a payment of this had prior in divestiture we fall

Mike Weinstein

it, divestiture free obviously FY have number adjusted the do what are is using that? And Karen you know we so that flow just the cash you XXXX for

Karen Parkhill

basis with it cash it million is it slide quarter of free nets to about is cash of divestiture deck and it Yes, the impact X.X. flow a X.X a look free you in and XXX if comparable on flow at the

Operator

Morgan comes Lewis David question Stanley. of next Our line from with the

David Lewis

still perspective, How versus growth from part in Geoff trends from questions it’s the do with from a spine Geoff your market I’ll businesses think Intellis me, and slightly getting market just quick can doing related RTG those worse two Karen? to market trend start growth to spine one a back SCS getting about for market with above the growth and growth about doing think have you RTG. of two in or way territory you you perspective. the that four in back better positive rates next do two to is obviously two performance, and Just a quarters on rates maybe I a kind question think to to so market

Geoff Martha

So ability the perform market product We comes thanks, to or take in and see five last us a over over to I’ll first. and I’ll them We the one here two has spine quarters launches at one definitely the that scale confident from from our about last couple worked pullback things, above six flat let's feel for say slightly the very continued call it quarters. down. launching still it X% which

between effect do next now continue it is placements a affect synergies in so over that's as sure done betting really done our lot two So us. technological and we've force with Mazor reps our a physicians launching will a or helped implants. and the taking and all move the that having over sure robotics tangible a the halo and enabling on or now robots. of of really implants hold, and appropriate quarters, technology, from with the And launches, on combination last product training the the three ties sets, our making of year. the year surgical navigation, the we we’ve of And equipment making power, is the We appropriate that's have pull-through our that forward, actually we'll actually and

are XX So good because given we that our help about we up to our continue feel about go to really where above globally would feel perform I'd in so market we market. spine. but see share we good the to at like the market ability percent

us that's combine that, our growth. other and with out think it The look put our X% we're mentioned cetera is technologies thing you about point how a if implants NuVasive competitors our of really Globus, that enabling Omar like lot et I to I’ll growing

feel and there we to a U.S. And high the and U.S. markets three we as have have The So we as exposure doing growing markets. exposure then the good. are high the markets fast a global outside are times pretty well. global

our So stem in pumps, here overall were the at we from good. because get spine, have say launch flow. launched of Pain the end I to that work mid-single a little the Pain stem of market us to mid-single-digit And the growth we stem, a to market last acceleration are single-digit pain low experiencing though. evolved already And growing actually Intellis, I wish quite faster growing yet. digit in lot high feel the does would pain not quarter. declines of

here I enhancements new now growing that think of products, really bit will, plus high about, that to forward given of and of can, its growth well picked up time. that’s certificate a couple of like in of launched boost digits. business the quite going is we the take medical last But product stem. mid-single-digit couple need that good listing then very feel single a you over of we a - quarters, with going next of of a little pain the the kind for steam And pain all re-launching the the product that we’ve bit if as and at pumps that’s quarters,

So really in turnaround the a pretty pain last quarter. here rapid experienced business has the

David Lewis

on gave early us appreciate year’s guidance. quickly next on, you Then carrying comments I the

China, where terms of make in year? whether those next what be mid-single-digit cuts. biannual should in Just think price ex-U.S. Was or about mid-single that we headwinds, for there they allotments pricing range that India made allotments for how the dynamics digit thinking Japan various did you profile, corporate of about sort

Karen Parkhill

geographies into and our our we guidance. and of across have continue Yes businesses consideration to longer-term is give when pricing all pressure we taken that

Operator

Our comes of America. of from with next line Bob Hopkins Bank question the

Bob Hopkins

of comments I growth that though appreciate any David’s start curious So commentary on to curious there if in there off on is of for both not I about. I some ‘XX pro any questions, Karen ‘XX XXXX, forma of reason early fiscal will reason echo in of expect I earnings and you XXXX realize revenue on to But talking growth were not just sort front of $X.XX the two that fiscal expect XX% just the with off currency. XX% okay, what fiscal new XXXX, and is am restated that that sort if earnings is a growth to base?

Karen Parkhill

working next our currently for year. on forecast are and we plan long-range annual our Bob,

that the So But drive growth. clearly to we robust much we'll mid-single-digit in meantime revenue margin the very significant bottom and continue expect normal expansion do give should line operating that in growth lead guidance better to timeframe. to

Bob Hopkins

follows as just given the the Omar, for ICDs was trends my second terms of emerging question broadly of stents. little in relates the degree could seeing on China what sort emerging MedTech wondering could States you generally you're seeing this it announcement a the Omar, United rates and growth on currently in if But question, to of in both comment talk you're and MedTech in the market pricing last I some just growth? market bit you and markets So markets U.S. just and broadly guess I on make what speaking to

Omar Ishrak

Let markets with Bob. emerging me start

Middle across China, are markets You East major the and diversified know delivering and of markets continues Latin look, the growth we Africa. in position America, in emerging that

big where these markets You diversified. are positions got fairly and we've well significant are know

see ourselves by markets we double-digit, sustained backdrop are that pretty powered in Given fashion the say a markets in emerging that robust. going in

also expect experienced one in to at in can they They’re participate we that range. big. is growth. double-digit to our with we biggest is performance the variations work market future shown as that And variations that the MedTech. we confident be but year-to-year market markets And and different the there perhaps going that delivering are that from we sometime those manageable, still close continue and not are are thereof stakeholders may China have there Now be in to to revenue it have

And has around a don’t most level. which same, may X% more to spine market being to some U.S. the But forecast the new Geoff reasons of heard the one that pressure to at just the we really precision that in variations try basically drives we So small U.S. we the say side that got position market emerging With now. product driven are confident variety that's of outside surgical procedures on our spine be sustained that is for about importantly the have good are and very markets and and U.S. experiencing impact and in of about pretty are elective the probably, feel the markets are introductions significant end we X% delivery. we seen them. the the market U.S. you with see. right for overall that by volumes The one our cycles, in product want new

different have our you I the from actions see that’s can we on a before, doing. focus ourselves what I that's lot So by influence seen that mean not what own that way markets, and we

Operator

Stewart from Bank. with line Our next Deutsche of question Kristen comes the

Kristen Stewart

I go business. the diabetes if you specifically little more could was in wondering a over bit

confident next you're how feeling confidence on about Just grow in for maybe to double-digit reacceleration? what, you then the How are touch just year what range. that and the gives

market for the the of path Just bring supply onto forward new kind the sensors? of to the some

Mike Coyle

acceleration let’s start FY with is then the I'd expect year know first by this XXXX. say back we three the driven can in and Kristen of things. year about that half the the the say, we half back I'd of talk you really

actually capacity ahead is only plans according plan but of are one our schedule. that to first going sensor The slightly not

And of that's sensor we of to allow so the where this we a going the one. by all our year fiscal that end capacity to meet in anticipate be us will demand, are so position

of of but not that we as up pump to acceleration revenue sensor only also we expect So get back see revenue.

Kristen, XXXG second get market. into and the systems is XX,XXX patients what's This encouraging trial and their that is you seeing we’re really as CareLink pivotal and what is know world The of the that that system in are are volumes uploading the of these has similar even those is a XXXG the at FDA. outcomes saw to that for more into now what performance real we one the data performance very

addition physician and a for And to to so continue take go of patients half FY both the ’XX is perspective, to patient hold the as and those those we see I third the perspective which the then a things of Animas really And into transition dynamic back to will traction. from year start start will also think the all new entry forward Connect as to into mentioned, FY will for into professional dynamics in CGM then business. X, series as our there's Omar that XXXX number of And which we a product Medtronic. of standalone look launches X sensor new mentioned. one, and a Guardian just Type market be these iPro I our

FY You the about good second half combine double-digits XXXX. acceleration all into of we these feel and things and for the also

Kristen Stewart

fiscal supply full quarter have you ahead? fourth So or sensor for

Mike Coyle

right. That's

to better should QX. going are and be QX we up ramp than So

expansion where And allow last produce we position - to will this can will in capacity we be quarter So quarter. QX more plans a demand. our meet by did all the sensors of then than we us

Kristen Stewart

dynamics go there just Can Karen is you of gross just a for the the And you. puts and year-over-year takes then question the of margin through those? kind maybe

Karen Parkhill

puts pricing expect are COGS XXXX item. that FY year-over-year do in the and remain FY the gross pressure line focused see but our be We our margin XXXX expense fact relatively flat and driving to continued reduction takes to real on we

Kristen Stewart

quarter full you for, to positive? the impacts with with be when third mean mentioned guidance to or And said going for respect hedges. I for was the the Did negative to respect was had FX you the that hedges from that you that with year think

Karen Parkhill

assuming But on fourth to fourth we said from operating FX the to are we and remain than today. margin bit points. the be talked and Yes, greater and they constant by an that's about impact margin third negatively XX basis rates third XXX little affected it operating our a would perspective that the quarter perspective, where quarter

Operator

Biegelsen from of with comes Our Fargo. line Larry the Wells next question

Larry Biegelsen

one China, on follow-up robotics. and of One

and to cuts I hips you just stents ICDs. ask So drug-eluting proposed about wanted Omar the directly to price

you up have price invoice know are device heard similar the cuts follow-up pending other have could but that by You and one we've thinking offset And for China policy. categories How then robotics. cuts? to XX% the potential in I the on two be about changes those

Omar Ishrak

access and let's as to that way on out regulations together in noted, to channel we you healthcare optimize us. feel the patients government price and demonstrate cost market China know in and for may factors with best to the and those models our of but to working the right priority size not certain channels for well right the trade-off we many a closely big priority the look be has now our leading for which forget are as out with used distribution managing the there end in value working that government the government. Again will China the and big value-based ability between we're experience And volume, is figure and as pricing and with distribution those markets, price to the you give the the us a

So done performance has the lot and and we and over that we which the be in through that of in variables got products end we've many change will a these we a through confident can time. China to team our that a place in feel focus work can pretty deliver. in continuously place but in feel place a which we dynamics big It's maintain market here through

Larry Biegelsen

launch XX I said question program still million you And points XXXX in about in the fiscal select your if guess robotics, comfortable that? doing which still is, you on the for of markets robotic at questions. international expect basis in draw I question to I the comments at time equated planning then XXX in XXX this my I Thanks the first-in-human, to year? with I last you are think growth XXXX analyst think XX And that think contribute heard is taking correctly, revenues. to to you I but meeting, heard are to about fiscal

Omar Ishrak

question. let I’ll Go answer ahead robotic Brian. Brian that

Bryan Hanson

system lot on a pieces pretty and moving the project parts. have lot of a on and pieces a robotics quite our of obviously with We parts hands complex moving literally actually,

this slippage risk you fiscal launch that sticking what would first-in-human to consistent have there is for the be so and this FY at timelines in time at we're point end in committed of launch launch relative but to to And in said year the dates XXXX. in always which with we full

the competitive pretty system product So tell point in tell confident that, then the more already just past and pilot have now fact have going going our production further really the we're beyond the even feel and will We're off and about line. would we a building that I probably any I why? I systems robotic it you I you are excited viable

those continuing built line. we've are write systems So to pilot off already build and production the

the there's and is which associated more a development work design passed of of time behind product well fully point a into this lot viable is work risk are any at of fees really work We retire where us, verification to and ahead although validation and us. is the the

So product a viable us. not having we're is behind

surgeon I from they're confident I product just feel very we're confident we I feel technology feedback not its have we very are. forward feedback that we're where that but So launch. and the going excited look we do and have the to to that about continue getting a viable surgeons very is to so about

Operator

comes line Jefferies. next Denhoy the with Our Raj from of question

Raj Denhoy

X% down perhaps curious reflection I the that Wonder and market? happening It in was volumes if even MITG. the am ask in correcting hurricanes, was U.S. a negative of so now else still if just in or U.S. that's procedure I we're results could it seeing a that growth around after the for something

Bryan Hanson

the saw that see where that in but So business through came the strength of concerning that carry year real that QX, obviously pressure through really of as some the PBXXX QX. that RGR we had had we which in and result concentrated in surgical remember probably strength year because because had last growth a business as We relaunched challenging in comps real it's some of rates result the as of of in pressure fundamentally QX see you saw I would and our me. we that a where drive revenue challenging from we in we expected QX last anything in don’t that result as and for in But procedures to leverage the QX on overall. business lot procedural that volumes is was the good surgical even specifically which The around less respiratory business we the piece pressure a biggest of we pretty lot a pressure saw the one of of a some hurricanes, be that.

Operator

question with comes Blair. line the Kaila next from of William Krum Our

Kaila Krum

I much you I you don’t that double-digit continues but emerging headwinds the in anticipated just bit of on in assume performance got on high more Can any that mentioned. constraints speak color off first some just that it a the sort give Is fiscal and of XXXX little growth the year? fair that into you’ve to guys to and know of starting taking you So too market account next durability the saw leveling quarter.

Omar Ishrak

the for performance First let don’t - we've markets, demonstrated in like know said double-digit I emerging a five markets I emerging quarterly me take now years. on the basis almost

you working clearly about these that products, the that access closely our of and as well we position provided with the as to the in - our is creation is So of stakeholders government, question different methods markets of to is you these working to providers therapies awareness at there. for in we’re need well therapies. and closely because as every markets market different continue there infrastructure, only the just creating no private is need, going know as expectation will stakeholders which physicians, based create work to look our the beyond continue through need requirement with strengthening we math on our training population And and facilitate have to with

of the different size So markets. the the given that we emerging we're market have pretty continue confident across that this diversification major that and double-digit given growth emerging opportunity will

become think terms strategies provided emerging of a new that with growth year the our our color in we question coupled more. market reliable on next that growth I and growth really into second launches will built to product the down goes three

by RTG mentioned. our like led also recovery but uniform improvement both we across in diabetes, So in and different strong MITG good a groups,

trajectory of growth we all continue together put plans. that's gives can confidence and that long-term mid single-digit our think us this in short our I

Kaila Krum

up biologic your business research. of segment mean I then in dollars And growth I it you’re incremental investing in to field spine, solid put But the and you’re in guess was I continuing guess clearly those longer-term? your there or titanium is is Thank they more require guess companies use, that the of that biologics you. biologic I so that introduce dynamic what's porous question as technologies view some on less value

Bryan Hanson

edgings the in a participate but porous that in surface I there that market titanium is we'll first to launching well. also be the impact our cage on porous just lot needs technologies the and more it. done we’re bodies, on some research the We're Look think inner so surface of of watching as

and in pressure think things the the that's is the cells invest coatings questions the though seen over think like and going results biologics are last million years the that dismiss next the clinical I the but we’re $XX surface some And to intrigued decade. use existing think research. in over several the biologics, that, and dismissing that what that a I we’re more on of premature I about but the we’re we based around good where stem to some biologics seeing. of we've is that of as claims little the is investing well, is We the are confident new on premature of we're it feel so very

We’re that’s the on it for not seeing if Infuse, question. example

feel hearing is we related about that we're data. there's in in that. record are but thus payers, proven we cell it in is there and porous products that pushback confident but on terms new some biologics of still the intriguing existing the track lot the We have clinical And prove from of technology stem investing more to

Operator

Jennings Josh of question next line the Our comes from with Cowen.

Josh Jennings

almost if to wanted you last two gains defend positioning thoughts updated hear launches you share the you and in competitive see and years impact any ability October? launches congrats sounds concerns, had ICD the question for in concerns competitors quarter limited quarter. like competitor CRM Mike a some the Just on business in had for the on for had just to the did of and that Having your the CVG about any Coyle, specifically, those from but performance it capture

Mike Coyle

Josh thanks for the question.

and right. so As you impact of segment. have up on the not in experience have the launched And I September first three labeling those weeks not mid-to-late are by true, what in both already significant labeling. to that and now shift power the our unit also in we bigger hasn’t market, with and to have have have negatives it’s lot and say their that detectable the we but they very products the expansion, the works test or that done have, job competitive we advantage think perform you competitors obviously nine able a share on that meaningful before implement approval really they I a eight the they there got are seen a launches of workflow indicating their basically been to of matching high a would was there approval restrictions the products probably number been they really had really the MRIs on to the same that to selling of is we when our customers is And labeling mentioned just even this frankly were is not offerings be it's reasons why product for of our try labeling that to they think good implants but that when their it have field that that just MRI reason

of of in actual share put that the had basically product it. So to was where approval that had special before in they they the shift a they and never position they we saw kind selling them could wait saw until Brady, a lead start where we

like competitor. the effective highly have our products really shot our line are come busy these in that CRT from that the So that or are features and in up features differentiated we from have that most been features matched with we've come seen shift of not the technology our AF smart the have that or share adaptive product is embedded devices from

our to in us shift big as seen least so MRI XX% expecting eight or we of at happen. XX% launch share from came weeks major mix, not they nine have and away So that into see a represent product to we were - competitors from the labeling

Operator

Our next Goldman question Isaac comes Sachs. from the with Ro line of

Isaac Ro

in electric on you healthcare overall wondering views for your Omar just utilization the could procedures particular. if comment environment in

struck care the of the would end - say outlook of provider constructive ask their I community as little we seems I more more went of trend for like kind has around back bit the device and the for year? year tone companies that Just expectations half a the is, little cautious into been quarter what’s here the underlying the it curious managed baked into they reason the kind your have fiscal and trend. on of And a

you if that seeing view reconciling to be spend minute bit will of So as that you're kind what maybe a helpful? little a

Omar Ishrak

mentioned marketplace. and I of spine is but acute procedures increase an a almost if on slightly. And emergency most we steady which performance procedures said phases need procedures different which that seeing The you those like with have one because is there and - required that are some statistical of some our surgical a before, I of of and continue will and and of some like forward. It's in the seen some think it not we that probably needed. we’re anything Well see of basis in are core elective that out completely demographic for what area will pretty we procedures, to line I elective demographics don't the then that stabilize procedures those we’ve even but of historically seen pressure beyond were expect the changing there's nature with going

of that some So procedural driven from really much we're different these in that procedures. primarily some I elective a shifts don't the of think areas perspective see nature by we the change, between

emphasize though far are the accelerated what that’s more overall market the the and get and in before see product us that half I next introductions growth second like and to these we into general I new than think drive want MedTech into of I in year. mentioned shifts going to kind projecting

Isaac Ro

shift as couple your so TAVR competitive in you. does game how follow that the just again you quarters of Thank what’s kind year well outlook XXXX contest into for your your planning and a rest TAVR, Europe last the done into in U.S. maybe we for landscape calendar in guidance? of the Mike the then the it’s fiscal And business in for of interested on baked up here curious obviously to in for of be move figure

Mike Coyle

as the doing only improvements leak the the full paravalvular early was obviously that to PRO but the exceptionally well to in quarter being which in Evolut the in able product. first both Europe last physicians lower quarter United use of We're are really well. have lower into the rates really for rates States in It’s really system and terms of not pacemaker launch fairly that

in to really feel the basically of then product to take really PRO market we customers. available growth R well where the the our relative our we're obviously United the growth. obviously in Evolut with both intermediate us obviously And also centers and the approval risk in now States So positioned to that. allowed line And advantage is Evolut now Japan Evolut access driving and significant R expanding approval is to

like and looking mid risk positioned any the and our market for indication. indications the expanded marketplace capture So invest against overall at low new in and including lines we low mode, continue well robust remains through XXs things product to compete share we that entrants in obviously and we come are think obviously to the into are to bicuspid use

is plenty there expansion. think we of for So room continued

Operator

of next Our the question Navarro line Capital. from RBC with Glenn comes

Glenn Navarro

competitors given had versus its question tax Karen A Medtronic for status. on inverted an advantage reform.

Karen, can a you reform there of tax you're based I if what on part initial out thoughts Thank of give of reform on it any Does helps - Is part So some puts in seeing Medtronic? disadvantage? you what of reform. reform that at today, wonder Washington you. your D.C.

Karen Parkhill

We including Thanks lower for territorial the of We working a potential now. is tax U.S. on right that continue reform system pleased reform support Congress a question rate. Glenn. and in corporate establishment do to the general tax

reform its very final has in long-term say of obviously versions our and version need staying too recognize access any on House of impact the be the so of to are and cash bill that I Senate to its to night reform one you most early with reconcile that speculate has us it’s us released both to potential bill the Houses to But OUS just close advanced if the its the but process. would this their limited the we to ongoing know, potential today. only positive bill last draft. legislative would passage impact the we As is a the into

Operator

Barclays. comes the Taylor next from Our with question of Matt line

Matt Taylor

additional the support you in and to the any you give in the prepared Covidien wondering us from called you margin of those impacted and that about talk was I could this to temporary there And you beyond you out if us on bit plan? remarks operating impact Can thing a eluded the then Karen that operating can some programs if synergies quantify little kind launch any product things the in you different of the laid those that quarter of do what hurricane. margin. out are some clarity prior you what help

Karen Parkhill

recall hurricane, the about diabetes. in did that had this infusion decline with we So business the driven a as lower revenue and was that really - impact of well set lighter margin talk things, quarter our by as the we along four in revenue impact diabetes the of

half is year quarter. fourth on down operating with driving continued we in forward margins of the cost our synergies going strength and improve can. And the driven we where the our substantially to do driving back in focus so And this that particularly revenue expect really along by cost more

center going et do processes we used continued enabling of do on expect fiscal Covidien this the shared we year. synergies plant discussed longer-term basis close improving consolidation, cetera. margin the we’ve focus drive Looking to functions to movement in delivery to that excellence continue increase And is of beyond the expect out driving operating global as improvement the on which forward service, past and expect to our a our of we continued

forward. drive margin So continue to going expansion do expect we to

Operator

line the Wuensch Markets. from comes BMO Joanne question next Our Capital of with

Joanne Wuensch

about how and into guidance puzzle you putting of your share verbiage remarks appreciate going to the those then towards your about philosophically the in with consistency us think next second all or do prepared half us depreciated, the remarks of of you how think the year year together? we you pieces think tell what Can about of regarding sort I you but you as

Omar Ishrak

we growth models. of towards drive with by innovation set and of business healthcare businesses emerging therapy of a and Well that which some mentioned strategies we've market - feel new like got we us growth pricing value of driven based helps

the demonstrated together that we happy new certainly single-digit the I businesses. every we we continue. across deliver think of yearly for a in we've three product and and our about that year we've reasons sight that all expectation which have general basis to see those spread of we’re feel on acceleration in the that we And take You growth in mid dynamics do and that on in things to this quarters fiscal need delivered given we line second but and issues that of a which our had the the we can different businesses, that, half certain of launches variety that not we will have an

So really our as fill products that, new markets is a a growth. think double-digit this we emerging straightforward on strong base of

Joanne Wuensch

the new to three are are the you thank the next And really products which or And up, XX then follow for think XX the just drivers two as quick you. months. of

Omar Ishrak

our in in approval a excited the And that and destination to well that we as share position XX pacemaker repeating continue real reimbursement risk pacemaker, leadless in next CVG quite changer traction a that U.S. for cardiovascular Evolut in CoreValve that's our line. own therapy market in seeing seen growth driving approval about is strong really addition exist the U.S. our to XX we go and We're we the and product Micra as from across segment only which months to us CMS for product we've the got TAVR varies the market as leadless have and continue growth, benefit and that a bit full also as well. the through we're to game with then success It that PRO but - with we're in we the that and pleased both world. intermediate that very is HVAD the

in areas So CVG product to in other lines. all three those to of continue grow addition the

results in be next we're dynamics confident through quarters And pretty capital which where we’ve But stimulation. have degree equipment continued the big in innovations at that the in we we have the rather cadence months other towards to regular will than by platform talked with CVG. There and be take partnership also addition that successful XX us higher seeing some that our and year also are launches in businesses will and that then we're MITG earlier in it but turnaround positive we O-arm on. through the about contributing. like the go spinal StealthStation surgical that So later we cord the deliver is the Mazor in Robotics, of that’s growth in specifically supplemented different RTG, look SX to will go growth should really a Intellis

strong In sugar do technology. supply with addition beginning difficult the that in stages place highly market. that were in diabetes in a removal addition finally anything loop Guardian And the and that pump product in the IQ a letter highly through supplementing for decree mostly warning to later this our then our consent line. the closed hybrid sensors of in that, in to only of the with demand the we've is differentiated shortage for very product the from in CGM available we’re launched with phase our fairly requirements diabetes, And to patients but pain gone with is growth sometime be technology. product which the in to Connect of year which differentiated we’re in that that’s fiscal kind U.S. differentiated And from

can together, mid-single-digit that the we see enough that growth. while relative may serve diversification the we've that businesses all in of different dynamics markets we got quarter-to-quarter, the that overall put vary maintain you So we the

Operator

Our from line the Guggenheim. of Chris Pasquale comes with final question

Chris Pasquale

by one Omar increase CRM, based getting Is contracts one Karen. those of expansion into what's effectively and net where your Omar so on of quick Mike, for for a this you're One quantify risk hands price and if contracts, event situation in can hospital rates you a maybe likely taking implied it then or the the impact the on your highlighted that? you estimates the pricing. value-based off

Omar Ishrak

a we’ve in evidence, clinical that the is doing. where we are the hospital The for to highly example financials is we’re the we've at translated which financials or to reduced of driven. healthcare of our - variables value what translation got I the the for of value that the this base hospital that value way and not look Yes, guessing to program we’re just that clinical driven got value evidence economic so clinical reintervention shows technology innovation trial the that's rates think is to better demonstrate

financials pricing pricing we clinical with some So only based because contracts degree with as an existing through technology get enhanced think trials then technology create to through And we gaining off create these translate a in experience to as the than we clinical healthcare to then variables, providers other few not is would - of the economic hospital benefit. the indeed this model. as overall that’s overall changes, which improved this our value that the hospitals end of model know is and programs. we benefit better in that, protected fee-for-service And essence evidence the how without, financially new the to we’re lot we’ve but payment

a think more the we’ll business of to well model, even we broaden As to these arrangements. pay-for-value very we be translate scope positioned

Chris Pasquale

and you of for PMR year. dividends to tied is the Karen, How I was return third the the straight as a in of one guidance on ahead math a on free sustainable you're year. I in cash in it piece XXXX? then a back flow know lot flow first back cash that a looks bought and track but proceeds, stock if basically the half then year, the the of like And half of do sort XXX% add the time of look to that the to we free to of shareholders

Karen Parkhill

cash return of proceeds our return of free which cash while with expect did to going commitment. and divestiture we greater repurchase to a portion to our would XX% greater we year, stick we commitment actual Our to shareholders stock this flow use on is that flow than of shareholders XX% elevate free our forward than does that generate,

Omar Ishrak

team, so We you we call your holding questions. forward call progress our U.S., the support interest XX. a on that would in all you and wish to for of Okay, on behalf to like Thank of want thank continued you Medtronic. to look And in I I our very and in very for again Tuesday, families close much currently updating And up. the your February QX with Thanksgiving. very those you management your anticipate let's you entire the you on much. Thank all which Happy for

Operator

This conference concludes call. today's

You may now disconnect.

Medtronic (MDT) 21 Nov 172018 Q2 Earnings call transcript