Welcome to the Second Quarter 2024 Stryker Earnings Call. My name is Luke, and I'm your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we will conduct a question-and-answer session. This conference is being recorded for replay purposes.

Before we begin, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC. Also, the discussions will include certain non-GAAP financial measures.

Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that is an exhibit to Stryker's current report on Form 8-K filed today with the SEC. I will now turn the call over to Mr. Kevin Lobo, Chair and Chief Executive Officer. You may proceed, sir..

Welcome to Stryker's second quarter earnings call. Joining me today are Glenn Boehnlein, Stryker's CFO; and Jason Beach, Vice President of Finance and Investor Relations. For today's call, I will provide opening comments followed by Jason with the trends we saw during the quarter and some product updates.

Glenn will then provide additional details regarding our quarterly results before we open the call to Q&A. In the second quarter, we delivered strong organic growth sales of 9% against last year's nearly 12% comparable. Our performance included high single digit growth across both MedSurg and Neurotechnology and Orthopaedics and Spine.

This broad performance reflects our diverse business model, sustained demand for our products and our team's strong commercial execution. Our organic growth was well balanced between the US and international with both growing roughly 9%.

Our strong results were led by double-digit organic growth in instruments, neuro cranial and Mako and high single digit growth in our medical, endoscopy, neurovascular, trauma and extremities and knee businesses.

Internationally, our organic sales growth accelerated from the first quarter with strength in Europe, emerging markets, Australia, New Zealand and Japan. As we expand our global share, we continue to see international markets as a key catalyst for our long-term growth. On the M&A front, we continue to execute on our offense.

In July, we completed the acquisition of Artelon, which specializes in innovative soft tissue fixation products for foot and ankle and sports medicine procedures. Also yesterday, we closed our acquisition of MOLLI Surgical.

MOLLI offers wire free soft tissue localization technology that allows surgeons to precisely mark the location of lesions for removal during breast cancer surgeries. MOLLI's differentiated technology enhances our endoscopy portfolio. We remain bullish about our deal pipeline and we expect continued activity as we move into the back half of the year.

We delivered quarterly adjusted EPS of $2.81, reflecting 10.6% growth compared to the second quarter of 2023. This performance was primarily driven by the strength of our sales as well as continued expansion of our margins.

Finally, we are raising our expectations for 2024 and now anticipate full year organic sales growth of 9% to 10% and adjusted earnings per share of.

Coming off full year organic sales growth of 11.5% in 2023, our updated guidance reflects the strength of our capital backlog, innovative product portfolio, healthy procedure volumes and passionate commercial execution across the globe. I will now turn the call over to Jason..

Thanks Kevin. My comments today will focus on providing an update on the current environment, capital demand and select product highlights. Procedural volumes remained robust in the second quarter driven by strong fundamentals, increased adoption of robotic assisted surgery and healthy patient activities with surgeons.

We continue to expect strength in procedural demand as we move into the second half of the year. Demand for our capital products also remained healthy in the quarter with continued elevated backlog across our endoscopy and medical divisions.

Continued patient interest in Mako contributed to our best ever second quarter for installations worldwide and in the US with high utilization rates across the globe. Also in the quarter, we reached over 1 million robotic total knee procedures performed to date with Mako and Triathlon.

We expect the growing momentum in installations and utilization will continue to drive sustained growth in our hips and knees businesses. Our recent product introductions highlight our commitment to innovation and the durability of our innovation cycle.

Pangea's comprehensive plating system complements our market leading nailing portfolio and will enable sustained above market growth in our core trauma business. We expect Pangea availability to continue to ramp and reach full launch in the US by the second half of 2025.

Next, our LIFEPAK 35 defibrillator and monitor continues to drive significant excitement in the marketplace. This flagship product within our emergency care business unit was launched near the end of the second quarter with a strong order book, and we believe it will have a multiyear benefit to our medical division.

Lastly, we announced this morning that we received FDA clearance for our Spine Guidance 5 Software featuring Copilot, which introduces smart powered instruments to our Q guidance ecosystem.

This innovative technology is designed to support surgeon precision by providing auditory and sensory alerts when approaching anatomical boundaries during spinal procedures and enhanced patient safety and outcomes. Copilot is an important step on our development pipeline which also includes Mako Spine.

Mako Spine with Copilot is on track to launch in Q4 and Mako's Shoulder is on track to launch at the end of the year. With that, I will now turn the call over to Glenn..

Thanks Jason. Today I will focus my comments on our second quarter financial results and the related drivers. Our detailed financial results have been provided in today's press release. Our organic sales growth was 9% in the second quarter compared to 11.9% in the same quarter of 2023. Average selling days are in line with 2023.

We had a 1.1% favorable impact from pricing. We continue to see positive trends in our pricing initiatives, particularly in our MedSurg and Neurotech businesses, all of which contributed positive pricing for the quarter. Foreign currency had a 0.9% unfavorable impact on sales. In the US, organic sales growth was 9%.

International organic sales growth was 8.9%, driven by positive sales momentum across most of our international markets. Our adjusted EPS of $2.81 in the quarter was up 10.6% from 2023, driven by higher sales and partially offset by foreign currency exchange translation which had an unfavorable impact of $0.03.

Now we'll provide some highlights around our quarterly segment performance. In the quarter, MedSurg and Neurotechnology had constant currency sales growth of 9.8% and organic sales growth of 9.7% which included 10.1% of US organic growth and 8.2% of international organic growth.

Instruments had US organic sales growth of 11.9% led by strong double-digit growth in the surgical technologies business. From a product perspective, sales growth was led by power tools, waste management, smoke evacuation and Steri-Shield.

Endoscopy had US organic sales growth of 8% with strong growth in its core endoscopy business and its sports medicine business. This growth was led by the continued success of the 1788 platform and sports medicine shoulder and knee products.

This was somewhat offset by slower communication sales due to the timing of installations which will recover in the second half of this year. Medical had US organic sales growth of 11.9%, driven by strong sales performances in its emergency care and sage businesses with growth in transport capital, defibrillators and sage products.

Neurovascular had US organic sales growth of 2.3% which reflects some US supply disruption related to flow diversion products. And finally, Neuro Cranial had US organic sales growth of 10.6%, led by double-digit growth in our bone mill, bipolar forceps and cranial maxillofacial products.

Internationally, MedSurg and Neurotechnology had organic sales growth of 8.2%, led by double-digit organic growth in our instruments, neurovascular and neuro cranial businesses. Geographically, this included strong performances in China, Australia and Japan.

Orthopaedics and Spine had constant currency sales growth of 8.9% and organic sales growth of 8%, which included organic growth of 7.3% in the US and 9.8% internationally. Our US knee business grew 6.6% organically, reflecting our market leading position in robotic assisted knee procedures and the continued strength of our installed Mako base.

Our US hip business grew 4.3% organically, fueled by our insignia hip stem. Our US trauma and extremities business grew 9.1% organically, with strong performances across our upper extremities, biologics and core trauma businesses. Our US spine business grew 4.4% organically, led by the performance in our interventional spine business.

Our US other ortho business grew 15.4% organically, particularly driven by robust continued momentum of Mako installations. Internationally, Orthopaedics and Spine grew 9.8% organically, including strong performances in Canada, Europe and most emerging markets. Now I will focus on operating highlights in the second quarter.

Our adjusted gross margin of 64.2% represents approximately 30 basis points of favorability against the second quarter of 2023 and 60 basis points sequentially as compared to the first quarter of this year. This favorability primarily reflects positive pricing trends and improved material cost and manufacturing efficiencies.

Adjusted R&D spending was 6.5% of sales, which was approximately 10 basis points higher than the second quarter of 2023. Our adjusted SG&A was 33.1% of sales, which was consistent with the second quarter of 2023.

In summary, for the quarter, our adjusted operating margin was 24.6% of sales, which was approximately 30 basis points favorable to the second quarter of 2023. Net adjusted other income and expense of $54 million for the quarter was $12 million lower than 2023, driven by favorable interest income in our invested cash balances.

The second quarter of 2024 had an adjusted effective tax rate of 15.2%, reflecting the impact of geographic mix and certain discrete items. For 2024, we still expect our full year effective tax rate to be in the range of 14% to 15%.

Focusing on the balance sheet, we ended the second quarter with approximately $2 billion of cash and marketable securities and total debt of approximately $12.2 billion. During the quarter, we repaid $600 million of debt that came due in May. Turning to cash flow.

Our year-to-date cash from operations is $837 million, reflecting the results of net earnings somewhat offset by working capital changes.

Based on our year-to-date performance and our positive outlook related to sustained procedural volumes and a healthy demand for our capital products, we now expect full year 2024 organic sales growth to be in the range of 9% to 10%, with favorable pricing impacting of approximately 0.5%.

If foreign exchange rates hold near current levels, we anticipate a moderately unfavorable impact on the full year sales and now expect EPS will be negatively impacted in the range of $0.10 to $0.15. This is reflected in our guidance.

Given our sales momentum, we now expect adjusted net earnings per diluted share to be in the range of $11.90 to $12.10 per share. And now I will open the call up for questions..

At this time, we will open the floor for questions. [Operator Instructions] Our first question will come from Larry Biegelsen with Wells Fargo Securities. Your line is now open. Please go ahead..

Good afternoon. Thanks for taking the question and congrats on a nice quarter here. So, Kevin, it's hard to not notice the quote in the press release about you're being excited about the product and M&A pipeline. So I'd love to hear your updated thoughts on M&A in 2024.

You've talked about smaller deals in the first half and potentially larger deals in the second half. Is there any change to your view, and how should we think about the impact of larger deals on the margin targets you have for '24 and '25? And I had one follow up..

Yes. Listen, we're still committed to our margin targets of 200 basis points, roughly 100 basis points this year, another 100 basis points next year. And that is inclusive of M&A. We do have a very active deal pipeline. Most of them are in the tuck-in variety and most of them are not very large.

But you continue to see us be active, as you've seen in the first two quarters of the year, much more active than we were last year. And we will be very active in the second half of the year. It's always hard to predict exactly which deals will land, as you know.

But we have a very strong balance sheet now, given the debt that we paid down after Wright and Vocera, and we're going to put our balance sheet to work..

That's helpful. And Glenn, in order to hit the margin goal for this year, it requires a pretty big step up in the margins in the second half. What are the drivers? Is it gross margin or OpEx? And what's your visibility? Thank you..

Yeah. Larry, really good question. I think if you looked at our performance historically, you would always see that op margin leverage in the second half of the year just really, really takes off. And so I don't think this year is really going to be different from performances in past years.

I would tell you that we're seeing, like you saw here in the first half of this year, kind of a good balance, honestly between gross margin and SG&A.

I think moving forward in the back half of the year, just given sort of how we spend in SG&A our variable comp models, we'll probably see more leverage come out of SG&A than gross margin in the back half of the year. And we're very bullish on, like Kevin said, still holding to our 100 basis points of op margin expansion for this year..

Thank you..

Our next question will come from the line of Robbie Marcus with JP Morgan. Your line is not open. Please go ahead..

Great. Thanks for taking the questions. Two for me. I'll just ask them upfront. Kevin, you guys don't guide quarter to quarter and I saw you during the quarter -- I know you've made a bunch of public comments and the quarter came just in line versus the Street. Again, you don't guide quarterly. I understand that. But you did raise guidance for the year.

So I was hoping you can reconcile inline versus the Street 2Q with the confidence to raise the guide both on the top and bottom. And then the second question, I imagine part of that is also. What you're seeing and the visibility you have into the capital equipment and procedure volume complex? Just maybe you could touch on that as well. Thanks a lot..

Yeah, sure. Thanks Robbie. And thanks for remembering that we don't guide to quarters. We were actually very pleased with the way the quarter played out. We can see our seasonality and how things are going to flow from quarter to quarter. We had a big Q2 last year, big comp. If you look at the back half of the year, we're very bullish on capital.

We have a big backlog, particularly in endoscopy and in medical. We're also seeing very strong demand. As you've seen, quarter after quarter, our Mako installations are very high. That leads to future strong demand for hips and knees. And July is off to a really strong start in joint replacement.

We've also been able to achieve more price than we thought at the beginning of the year, and we expect that that price tailwind will continue into the back half of the year.

And lastly, I'd say the new products, the two big products we've talked about, Pangea and LIFEPAK 35, are both receiving tremendous positive feedback and really both had very negligible impact in Q2. But you're going to see those in a big way in Q3, Q4, and into next year. So a lot of tailwinds that are going to push our growth up in Q3.

Certainly in Q3 is going to be a big one and also in Q4. So we're very confident of raising the guide. Love the fact that we have 10% at the high end of our growth coming off a year of 11.5% last year and 9.7% the year before. So we are growing off big numbers and we're feeling very good about the top line..

Appreciate it. Thanks a lot..

Our next question comes from the line of Ryan Zimmerman with BTIG. Your line is now open. Please go ahead..

Thanks for taking the questions and congrats on the nice quarter here. I want to kind of dovetail on Robbie's question a little bit and appreciate that there's some product drivers in the back half of the year. Kevin, there's some easier comps.

Can you just comment maybe on seasonal dynamics a little bit, and expectations around the health of the orthopedic market, the ability to see kind of that sustained growth rate through the back half of the year and then potentially into 2025? And then I have one question for Glenn on pricing..

Yeah. Listen, we're not changing our story on the market. So we've been saying for many quarters now that we see this, the hip and knee market as kind of a mid single digit market and our ability to outpace that market largely on the backs of Mako, as well as insignia for hips. But that's the same story we've been telling.

And frankly, we're seeing that. And we're seeing that in July. As we talk to surgeons and see their surgery schedules, we see a healthy and sustained good market for hips and knees elevated from pre-pandemic and something that we see through the end of this year and potentially into next year..

Very helpful. And then, just the second question for me around pricing, Glenn, I mean, it's really nice to see the tailwind that you're getting from pricing.

As you think about pricing as an opportunity, I mean, do you see an upper bound on pricing where you can't go beyond that? I mean, how long can you sustainably push pricing as you think about both this year and then potentially into 2025..

Yeah. Maybe I'll limit my comments really just to 2024. So I would tell you that if you just look at our pricing teams and what they've accomplished, first of all, we've seen really great positive outcome on the MSNT side and related to the MSNT products.

And I would tell you that if you think about their product cycle and how they introduce new innovations, we'll constantly gain price on those innovations. I would tell you that on the ortho side, I'm equally pleased. We're addressing this in contracts as they come up. And frankly, we're less negative.

We are just less negative than we used to be on ortho, which honestly is a win. I would tell you that this carries over not just to the people at our enterprise level that are working on this, but it's down in the field with our salespeople.

So the divisions have put in various programs that drive certain incentives related to positive pricing or improvements in margins. And so my money's on our salesforce in terms of keeping this going. That's what I would say.

I would tell you that if you just look at our performance year-to-date in Q1, 0.7%, 1.1% in Q2, in the back half of the year, we're going to see some anniversary of products and contracts. And so there may be a little bit of moderation.

But I do think that to Kevin's point, there's a lot of newer products that are going to be out there that are going to drive price that maybe isn't necessarily captured in here, but I'm bullish on it. I think we'll continue to see really good price performance this year, and I'll hold my comments till we guide 2025..

Thank you..

Our next question will come from Joanne Wuensch with Citibank. Your line is now open. Please go ahead..

Thank you very much, and very nice quarter. I'm trying to figure out where to go here because there's so much. I'm going to pause on Mako. It sounds like when I look at my notes, the fourth quarter '23 was record Mako, first quarter '24 was record Mako, second quarter the same. What is going on that each quarter you're placing record Mako robots.

Thank you..

Yeah. Thanks. I'll take that question. So, first of all, a big contributor is international. Joanne. We are really picking up the pace in international, particularly in countries like Japan, some of the emerging markets, India, and even Europe. So international is really where the US was four or five years ago. That is a new -- I would say a new tailwind.

Obviously, we are very well penetrated in Australia, but the rest of international has lagged. That is now coming on and coming on strong. And that on top of the US organization, that's really done a terrific job continuing to promote Mako and the use of Mako. And every quarter, the percent of hips and knees on the robot is actually increasing.

And the demand, as more offerings came on the market, people got a chance to look at that and they clearly are preferring our technology and we're winning in the marketplace, and people are putting in their fifth system and their 6th system and their seventh system. And so there are a lot of ours that still don't have Makos in them.

And our teams are out there hunting, so we're super excited. I think the software changes we made with the 4.0 software for hip, the 2.0 software for knee with functional alignment, these have been really sort of quiet successes that have fueled growth. And then, of course, we're going to add spine and then shoulder to Mako.

So it's an engine that still has a lot, a lot of juice in the tank..

Just as a follow up to that, with spine and shoulder coming on, how do you anticipate rolling those out? Are there software and hardware upgrades? Just walk us through that. Thank you and have a great night..

Yes. Thank you. Yes. In both cases, there are attachments. So it's the same robot that you can use, but there are attachments that would be specifically for spine as well as software. So it comes with both software and hardware, just as the knee application did when we launched the total knee back in 2017..

Our next question will come from Vijay Kumar with Evercore ISI. Your line is not open. Please go ahead..

Vijay? Hello, Vijay, we can't hear you..

We'll go to the next question. We'll go to Travis Steed with BofA Global Research. Your line is now open. Please go ahead..

Hey, thanks for taking the question. First, start with. So, Stryker, typically 9% to 10% growth this year, kind of well above the historical growth rate for Stryker. So a question I get a lot is how sustainable is this level of growth? And kind of look at some of the growth drivers this year.

What are these drivers going to sustainable next year? Anything getting better, getting worse over the next one to two years? Just kind of curious, your confidence of kind of sustaining this kind of above normal Stryker growth rate going forward..

Yeah. Let me start by two years ago we grew 9.7% organically. Last year we grew 11.5% organically. This year we're growing 9% to 10% organically. So I think we are showing that we can sustain high growth over multiple years.

If I think about next year, these two big flagship launches in trauma and in medical are really only going to take much more of an impact next year. They'll have some impact obviously in the back half, but a bigger impact next year. Our camera launch is still gaining steam. Our ProCurity launch still has years ahead of it.

Our power tool launch still has plenty of opportunity. Mako is going to continue to expand as it has been actually both internationally, which is a giant opportunity, as well as in the United States. Our international growth has been high single digit, double-digit for the last few years. That's going to continue.

We still have huge opportunities in international. And then as we get back to our M&A offense, recall that we tend to buy fast growing assets. Thats part of our formula. And after one year that then rolls into organic growth. So I'm bullish on the future of our ability to sustain high organic growth.

If you think about this year, a lot of the organic growth is actually not M&A related. It's really product cycle, innovation cycle and all of our innovation teams as I travel around and meet our different divisions, they have tremendous innovation. Mako Spine hasn't had any impact yet, nor has Copilot, nor has Mako Shoulder.

So there is plenty of room for high growth in this company. And the expectations have changed. If you go back 10 years ago, we were growing 4%, 5%, 6% organically and that has clearly changed. And there are new expectations and we continue to split business units and split salesforces and play offense.

And it's a formula that's working and I don't see it slowing down anytime soon..

Super helpful. And another question I'm getting more lately is kind of your interest in soft tissue surgical robotics, if that's going to change at all or how you're thinking about that market. I know it's a market you guys have looked at closely for many years now..

Yes. Look, it's an area that we like as a space. It's complicated, and there is room for more than one big player, if you think about all the types of procedures that are done that are not done robotically. But we're going to be cautious and careful about how we choose to enter. Fortunately for us, we're not defending any business in this case.

This would be all playing offense if we decide to move into that space. So we do like it. There are a lot of startups, as you know, that are in the space. We've looked at many. We haven't pulled the trigger. I'm not going to predict if we will or if we won't. We don't need to get into it.

But it's an attractive space and there are still a very small fraction of general surgery procedures that are done robotically. And so there is that opportunity. We're going to continue to explore it, but we explore multiple adjacencies. That's not the only one that we like, and I can't predict which one we're going to enter first or second or third..

Great. Thanks a lot, Kevin..

Our next question will come from the line of Matthew O’Brien with Piper Sandler. Your line is now open. Please go ahead..

All right. Thanks for taking the question. Maybe just to start with, Glenn, as I look at the stock, it's down about 5% in the aftermarkets. And I think it's related to this margin concern that Larry surfaced in the back half.

If I go back several years for Stryker, you put up this type of growth in operating margins in the back half of the year, but typically off the easy comps, you have tougher comps this time around.

So can you be a little more specific in terms of where you can see some of these improvements on the margin side, especially in SG&A? And then how do you do that without potentially impacting strength areas on the top line and impacting the top line in next year or even in '26?.

Sure. I think, first of all, a couple of things. If you look at getting margin out of gross profit or getting margin out of SG&A, I mean, a lot of the drivers are honestly in our control. You look at hiring, that's completely in our control. You look at travel and meetings completely in our control.

And so a lot of these just come down to say good budgeting, let's say, in terms of how we plan it and how we know that we have the confidence that we're going to be able to drive that margin.

The other thing is if we look at when we grow with these sort of lofty rates across a lot of our businesses, those are growing off of fixed cost basis where it just drives natural leverage that will drive in our business. So we won't be spending at a comparable level. And if you look at Q4 time in and time out, that honestly has been what's happening.

We also have a lot of exciting things that are going on. And if you look at what we're doing in supply chain and changes that we're making there in terms of working with vendors, working down some of those inflation charges that we took over the last two years. We also look at low-cost manufacturing.

We have facilities now in Poland and also in Mexico, where we're sourcing product in those. And then lastly, sort of back into operating expenses.

We continue to push more and more of that day to day transactional work into these shared service centers, which are at a third of the cost of what we see in sort of our developed areas, US and Europe, primarily. So honestly, I think we have a very good pathway to deliver that 100 basis points.

And we wouldn't have talked about it so loudly if we weren't confident that we did have a plan that is going to get us there..

Got it. I appreciate that. And then just on the -- across the portfolio, everything's doing well, with a couple of modest exceptions. I mean, neurovascular is doing pretty well. I think there's a little hiccup in the quarter. I don't -- Kevin, I didn't really hear you talk about lower extremities.

So you've got these new products, Pangea, LIFEPAK, tons of runway there.

Are there things coming down the pike on the organic side in those categories that we should maybe start thinking about? I know you don't like to show your cards too early, but are there things coming down the pike there that can help those big markets? Or do you need to go inorganic to be more successful there? Thanks..

Hey, Matt, this is Jason. I'll start with maybe make a quick comment on neurovascular and then I'll turn it over to Kevin for foot and ankle. But to your point on neurovascular, I'll tell you, globally, we were pleased with the business overall.

I think Glenn made a comment in the prepared remarks around a little bit of a supply hiccup, I'll say, as it relates to business in the US. July is actually off to a really nice start. So we feel much better about that. I think you also know that the ischemic business, specifically in the US, continues to be quite competitive.

We are making adjustments in the salesforce to address that and better serve our customers. But overall, still feel good about the market..

Yeah. And as you talk about foot and ankle, if you recall, since we did the Wright Medical acquisition, foot and ankle has been a really good grower for us. Growing kind of high single digits, low double-digits. I would tell you this year, the foot and ankle market has been softer.

You saw that in the first quarter, not just with us, but with the standalone foot and ankle companies that continued in the second quarter, where we're seeing the market being softer than we have seen in the past.

So the big trauma number that we put up was really driven by upper extremities, which continues to be a freight train of growth, and now core trauma, which had a fabulous second quarter. But in foot and ankle, it's not that we need any kind of inorganic products.

We have great product pipeline that's organic, including Footprint, which is pre planning software for total ankle replacement. And we've launched a number of products for forefoot procedures at the end of last year and into this year. So it's really more about the market. The market's gone a bit quiet. This has happened in the past in foot and ankle.

We've been in the business a long time where you've had a quarter to where the market slows down. The patients haven't gone anywhere. They'll come back. And so it is kind of a little bit more semi elective. So we're going to watch the market closely. We'll give you an update next quarter on that.

But overall, the trauma and extremities business is a terrific business for our company. And we have a slight slowdown in the foot and ankle area now for two quarters. But the overall growth of the business is still terrific..

Thank you..

Our next question will come from the line of Shagun Singh with RBC. Your line is now open. Please go ahead..

Great. Thank you so much. So, Kevin, you have a new robotic platform in the US market with OR integration capabilities.

I was just wondering, what are you seeing or hearing in the market currently? What impact do you expect it to have? And I guess, more importantly, I'm just trying to understand what efforts you have in place to better drive OR integration with your products longer term. And then I have a follow up..

Yeah. Listen, if you look at our portfolio, the new entrants that we're seeing, whether it's OR integration, whether it's new robots, we're really not seeing it having much of an impact at all on our business. We have great technology that's meeting the needs of what our customers want.

And if you can see the type of growth we continue to post and the guidance that we're providing and what we see for future growth, we're not really concerned about what we're seeing. We like our chances. We believe we're on the right path with our technologies.

There really isn't anything out there, at least right now, that is a cause for major concern for us to maintain our strong and high growth organic profile..

Got it. And I just wanted to get your thoughts on one of the adjacencies you previously called out that is of interest to you, which is neuromodulation. And you said including sleep apnea as an adjacency.

So could you just share your thoughts there? And is that something that makes sense for you to have in house, given the ENT call point? Thank you for taking the questions..

Yeah. This kind of relates back to the soft tissue question, right, which is, do we need to be in this phase? No, we don't need to be in neuromodulation. There are a lot of electrical treatments that I think are fascinating, whether it's deep brain stem, peripheral nerve stem, spinal cord stem, and obviously related to sleep apnea.

So I do believe that's going to be part of the future. I do believe Stryker one day will be in the neuromodulation space. I really can't predict which, where will enter first and how we'll grow from there. But it is a space that's appealing to us.

But again, we have to make sure that we can win in the market if we're going to spend money and buy a company that we can deliver strong value for our investors with those acquisitions. And so we're going to be careful and thoughtful like we always are. But that is a space that continues to be of interest. And we're -- stay tuned..

Thank you..

Our next question will come from Matt Miksic with Barclays. Your line is now open. Please go ahead..

Hey, great. Thanks so much for taking the question. So first, congrats, obviously. And I, Kevin, love the bullish posture on sort of sustainability of growth in some of your end markets like orthopaedics. And I think the perception was maybe the first quarter, maybe the first half wasn't as strong as folks maybe came into the year thinking.

And I mean, when you talk about mid single digits, is it as simple as saying, look at last year's comps and you start seeing that mid single digit number play out? Or what gives you the confidence that whether it's backlog or something else, that you're going to be able to sustain this, as you said, into sometime early next year and I have one follow up..

Yeah. It's really our insight in the market, right? Talking to surgeons, looking at their surgery schedules and seeing how far they're booked out, that is a very good indicator for us. And over the years we've built sort of our internal models that can kind of project that.

Now it's hard to go out past six, seven, eight, nine months, then it gets a little murkier. But we have pretty good visibility and right now, we see the market as robust and healthy. And, of course, we love our position.

And as you have seen, the demand for Mako would not be this strong if you didn't have surgeons that are really excited about doing all of these procedures. And I think I mentioned earlier, July is off to a very strong start. It's obviously only one month, but strong month of volume.

And then looking at the surgery schedules that we survey and talk to surgeons and actually gather data on, we're feeling bullish about the market..

That's super helpful and a great point on Mako. And thinking internationally, your comments on Mako and the fact that you're starting to get traction, you're starting to -- I guess it sounds like taking share the same way in intermediate years of Mako launch in the US.

If you could talk about other areas of strength internationally, because it was sort of a notable lift some of your core markets. And is there a pull through effect? Any other drivers you can see that might be sustainable there on the international side? And thanks so much for taking the question..

Yeah. Great question there on international. What we're seeing, Matt, is there are two tips of the spear in international. One is Mako and the other is our cameras, the 1788. So whenever we sell cameras and towers and when we sell Mako, it does create a pull through of other Stryker business. And we're seeing that in multiple countries.

And Mako took a little longer to move, but now it's really starting to take off. Because our market shares are actually a little bit lower internationally, as we get Makos placed more of that business actually is coming from competitive accounts than they were in the United States.

But we have discovered that those are the two really important platforms. And as we sell more cameras and as we sell more Makos, it lifts the entire Stryker portfolio. And so were laser focused on those two businesses as the tips of the spear. But we've also really done a good job.

It took us a while, as you know, to really get great leadership and better connection between our divisions and international, getting international financials into the bonus plans of our US division leaders. That's been a series of, I'll call them small steps that have really made us a much more global company.

And so we've had, I think five years now in a row where international growth has been at or above the US growth. I know the first half of the year international is a little bit behind, but we expect international to accelerate in the second half of the year and will be at or above the US for the full year once again.

And that should continue for another many five, 10 years just to make up for lost time as we gain the same kind of market shares that we enjoy in the US, in many other countries around the world..

Thanks so much..

Our next question will come from Steve Lichtman with Oppenheimer. Your line is now open. Please go ahead..

Thank you. Evening, guys. Kevin, I wanted to ask you about China. Some mixed commentary during the quarter so far. You mentioned it as a positive.

Can you talk about the environment overall from where you guys sit, from a macro perspective and just an operating environment perspective?.

Yeah. Steve, it's Jason. I'll take a swing at this and Kevin can jump in if he wants anything additional. But I would tell you, as you think about China in the quarter, good growth for us in China. I would say less impact from VBP than maybe we originally anticipated.

So I think from a VBP standpoint, that environment is starting to stabilize and turning to growth for us..

Yeah. And just as a reminder, it's a pretty small portion of Stryker's overall business. Just so keep that in mind. When you see the growth rates, they can be a little bit more volatile, both positive and negative. Just given that it's small, the base is very small for us. Look, it's an important market with a large population.

We're not going to move away from China. But it's been a challenge the last couple of years and I think the worst is over. And now hopefully we'll get into a more sustained positive profile like we saw last quarter..

Appreciate it. And then just a follow up on free cash flow. So it's trailed a bit here, first half of this year versus last. You mentioned some working capital movement.

Any thoughts you could provide on sort of full year free cash flow outlook or improvements on that working capital moving parts that you talked about?.

Sure. I think, first of all, we still have that target out there, 70% to 80% free cash flow conversion. We don't think any differently about that, given our performance year-to-date this year. I think kind of what you're seeing in the first half of this year are some working capital differences year-over-year from last year.

Some of those having to do with. We picked back up M&A, so we're seeing a little bit more of integration flow through. We also are seeing inventory changes just related to higher sales. That naturally happens. Same thing with accounts receivable.

And then lastly, we have timing of some transition tax payments that fell into this first half of the year that are, say, larger payments than what we normally would expect. And so that also impacted our cash flow in the first half of this year. For the back half of this year, I feel like we'll see what we normally see seasonally.

A lot of pick up in our free cash flow conversion in Q3 and then, honestly on into Q4. And a lot of that has to do with just the flow of earnings is much higher in Q3, Q4. So that really impacts our cash flow performance. It also brings down inventory. And then we'll work to keep AR in line.

So we'll still target between 70% and 80% free cash flow and we haven't backed away from that..

Got it. Thanks, guys..

Our next question will come from Vijay Kumar with Evercore ISI. Your line is now open. Please go ahead..

Hi, guys. Thanks for taking my question. Apologies for the audio issues in our end. Kevin, maybe one on LP 35, maybe talk about the launch. I think in the past it mentioned some capacity constraints.

Did it contribute in 2Q, are we at full launch mode right now?.

Well, we've already started taking orders. Let me put it to you that way. And we have the ability to ramp production pretty fast. So this is not like a implant launch. Like, if you think about Pangea, you have to make sets of implants, you have to make sets of instruments. This is an assembly operation, so we'll be able to scale this pretty quickly.

And so I wouldn't look at this as being capacity constraint. The only constraint is obviously getting out there, having customers see it, putting it in their budgets, ordering it, and then our ability to meet the demand will be faster out of the gates with LP 35 than we would be for any kind of an implant launch.

So don't think about capacity as a major concern..

Understood. And maybe one on guidance here. The overall organic dollar revenues, it seemed in line versus Street, but guidance was raised. Just talk about. I think you mentioned about July being strong. Looks like there were some one-off items impacting in 2Q. So talk about the visibility and the confidence in the guide raise for back half..

Yeah. Listen, we don't raise guidance without having pretty good confidence. And you saw we raised after Q1, we raised again after Q2. We have very good visibility into our capital, and we have a very significant backlog of capital which we know we're going to ship. So that gives us a lot of confidence, and then how you feel about the procedures.

And that's the other part of it. And again, we have pretty good visibility into the procedure. So at least for six months, we've tended to be pretty good at predicting six months. Predicting beyond six months, that's a little harder. But we feel very confident that we're going to deliver this raised guidance.

And don't be afraid if we scare 10% again, that'll be the third year in a row of being hovering around that number or being above that number. And so we have a lot of headwinds. I think I enumerated those earlier in the call, and those tailwinds are really going to help us..

Understood. Thanks, guys..

Our next question will come from Matt Taylor with Jefferies. Your line is now open. Please go ahead..

Hi, guys. Thanks for taking the question. I guess, I wanted to follow on. I think it was Travis's question before asking about some of the growth drivers next year. You called out Pangea and the Defib as being big incremental drivers.

Could you help us think about the shape of those launches or the contributions in 2025, any guideposts that you would give us in thinking about how they could roll in and contribute the opportunity sets? And I guess how long you view those as growth drivers in '25 and beyond?.

Listen, they're both very significant contributors to future growth. I would say LP 35 will be more rapid. So you'll see a pickup in the second half of this year, a big year next year, a big year the year after. But these products last a long time, and so some people who are buying these defibs will hold them for seven, eight years.

So it'll have a long sort of tailwind, but it'll be spiky in the first sort of two years, two to three years, you'll see pretty meaningful growth out of LIFEPAK 35. Pangea is a little different, so it won't be fully launched until the second half of next year.

It takes multiple quarters to be able to build all of the instrument sets and the implant sets, but these implant launches will last a long, long, long time.

It'll provide a more -- let's say a little bit more moderate but sustained and consistent tailwind to our core trauma business and makes us comprehensive with a fabulous nailing systems as well as plating. So we will be an absolute leader in the trauma and extremities business and super excited.

But that doesn't also -- it doesn't stop at those two products, right? You still have the Mako Spine coming the Copilot coming, the Mako Shoulder coming. 1788 is still -- I mean we're still getting new indications with new fluorophores to be able to light up cancer.

We have that for lung, but were going to get that for bladder and as well as ovarian cancer. That opens up new markets and new opportunities as well. So this new product cadence that were in right now, these products are multiyear. They don't just provide a small one year benefit. And many of these products haven't yet been launched internationally.

So we've launched these in the US and maybe in some markets Europe because of UMDR. These products we're going to be talking about as new products a year or two from now. They haven't even been launched, right? So that's going to provide that international tailwind for many years to come.

So there's a lot to be excited about in terms of the product innovation cycle and we're hitting the mark. That's another reason for the raise, right? So you launch a new product, you see the customer feedback, you realize you have a winner and Pangea is a winner and LIFEPAK 35 is a winner.

And then you can lean forward and we already know with the orders that are coming in already that these are going to be winners and they're going to be multiyear winners..

Thanks, Kevin. Could I ask a follow up on just the margins? We talked a lot about the margin phasing this year, Glenn, and these contributions in the second half. And I guess, I was just wondering if you could make some high-level comments on how the shape of the margin progression would look in 2025.

You think it's going to be similar where there's more expansion in the second half than the first half? Or would it be different because of the progress you're making this year?.

Hey Matt, it's Jason. I'll jump in here. As we think about 2025, obviously we'll talk more about that in January. Certainly, you can expect us to deliver on the 100 basis point of op margin expansion next year, but in terms of how that shape will look, we'll give you more information when we get to January..

All right. Thanks, Jason..

Our next question will come from the line of Josh Jennings with TD Cowen. Your line is now open. Please go ahead..

Hi, good evening. Thanks for taking the questions. Congratulations on organic revenue growth being raised quarter. We're looking for just some commentary. Kevin and team on just on inventory surgical center channel in the United States.

Our understanding is that just the infrastructure, the number of ortho, ASCs or the bottleneck in terms of the pace of migration for total joints into that setting.

Anything you can share just in the first half in terms of infrastructure build out, was it impacted by interest rates and any change in the outlook in this migration pace over the next couple of years for total joints? And then lastly, sorry for the three-part question, just the pricing commentary for the company.

Should we hold that for the ASC business as well? Or was there more pricing pressure or less pricing pressure, or more pricing improvement or less pricing improvement in that ASC channel? Thanks for taking the question..

Okay. I hope I get all parts of this question in my answer, but let me start by saying that the pricing that we're seeing, ASC versus hospital, there really isn't any difference. Our pricing is very consistent across the different channels where we sell. So that's the first part.

The second part is, I'd say the ASC continues to be a positive trend that you're going to see and it's not going to slow down anytime soon. Even with interest rates being high, hospitals are finding a ways to get to get their ASCs built and constructed and we've seen continued, I would call it steady growth.

This second quarter finished with the highest percent of knees and hips done in ambulatory surgery centers. We're not going to give the exact number. Perhaps at the end of the year we'll give you the exact percentage, but it continues to climb. Our percent of hips and knees done in the ASC every quarter continues to move up.

And that happened in the first quarter. It happened again in the second quarter. And if we look at our ASC, our growth in ASCs, it is accretive to Stryker's overall growth. So we are growing at a high rate in ASCs. This trend we believe favors us given the breadth of our offering in orthopedic ASCs. And so we welcome this shift and so far so good..

Great. Thanks for that. And then just a follow up. I know you've kind of given in Stryker's outlook for multiple ortho categories or segments. I was hoping you could do the same for the US spine industry. And just your outlook there. Health of the market and you got Q Guidance and Copilot update of approval today. We're launching Mako's Spine.

Do you think Stryker Spine is kind of maintaining share in the first half of 2024 and can gain share with these enabling technology ads? Where is Stryker Spine gaining share currently in the US market? Thanks a lot..

Yeah. Josh, this is Jason. I'll take this one. I would say just as you think about specifically the second quarter, we'd say we have had a solid quarter in spine led by interventional spine. And as we think to the future, we've certainly talked about Copilot and Mako Spine and how that will help us in the spine market.

And so really nothing additional to add there in terms of how we think about the future..

Appreciate it. Thanks..

Our next question will come from the line of Danielle Antalffy with UBS. Your line is now open. Please go ahead..

Hey, good afternoon, guys. Thanks so much for taking the question. Congrats on a really good quarter. Just a follow up question on the ASC dynamic. Kevin, just curious about how you're seeing -- if there's any difference you're seeing from a market share perspective in the ASC versus outside the ASC for your, both the robot and the hip and knee implant.

And I asked this question, because I think one of the advantages of Stryker is just the breast of the product offering in the ASC. So just want to sanity check that with you..

Yes, Danielle, what I'd say is that if there is a big renovation or new construction, we do extremely well. So I don't want to speak on behalf of all ASCs, right? If it's already an ASC, that's an orthopedic ASC, and there's entrenched surgeons that are using competitive products, that's a little harder for us to displace.

But if they're doing a big renovation or if they're doing new construction, we have a fantastic offense that wins at very, very high rates. And that's been one of the engines that's caused this tremendous growth for us in the ASC and why we continue to believe that that's the area where we're going to be laser focused.

That's the area where we are winning today, and that's the area we're going to continue to win in the future. So it's not necessarily all ASCs..

Got it..

Definitely that segment. And there's continued -- there's new construction going on all the time..

Yeah. Got it. Understood. Thank you so much for that. And then just to follow up on that, if we fast forward, so the shift has been happening over the last few years now.

I mean, where do you think this settles out? If you're talking about hips, knees and extremities and percentage of procedures being done at the ASC versus in the hospital in, say, five years. Thanks so much..

Yeah. Look, I don't have a crystal ball. It's going to go higher. There's just -- this is an undeniable trend. Surgeons love it. They get a piece of the action in terms of their ownership interest. Patients love it because they don't have to worry about parking. It's close to their home. Everybody's happy. There are no sick people.

So it's just good for the healthcare system. And so it's just going to continue to increase. What's the upper limit? I don't know, but I would tell you I feel differently about this than I did five years ago. I thought it would grow. It is growing at a faster rate than I thought.

We are even seeing total ankles done in ASCs, obviously, shoulder replacements done in ASCs, even lumbar spine, which I didn't think. I thought cervical, sure, didn't think I'd see lumbar. So you're just going to see more and more procedures being done.

Obviously, you're not going to see revisions and very high acuity scoliosis, those types of procedures. But I think it's frankly exceeded our expectations internally, and I think that's going to continue.

The rate limiting factor is just being able to construct these ASCs and obviously have the financing and the capital and the ownership structure sorted out between the hospital and the surgeons. That's the rate limiting factor. But I just see this continuing to grow and I don't really see sort of where this stops. It's just going to keep growing.

Five years from now, what will it be? It's in the 10% to 15% range now. It'll cross 15% next year and then it could go to 30%, 40%. It could..

Thank you. Thank you..

Our next question comes from Mike Matson with Needham. Your line is now open. Please go ahead..

Yeah, thanks. So good to hear about the momentum in the international business. I wanted to ask about what that would mean to your margins.

If you see that business continue to outpace the US, how does it compare from the gross and operating margin perspective? Is this something that could be a headwind to your margins?.

Yeah. Hi, Mike. As we look at international, a couple of things. Keep in mind, we don't have R&D expense in our international sort of numbers as we look at sort of performance of their margins. So you have that performance. We also -- it can vary market by market.

I mean, I think in some of these more developed markets, we see good price performance and good operating margins. Sometimes in more sort of emerging markets, we will see a slight headwind relative to sort of what we're realizing from a pricing standpoint in those markets. I would tell you that.

I think that as we look out over the long-term, though, we obviously are cognizant of the fact of what international sales and how that will contribute to our overall margin profile.

And so we have planned for the kind of infrastructure needs and the kind of other saving needs that we need to do to make sure that we drive this consistent margin and drive a consistent 30 basis points plus margin performance once we get past this 200 basis points increase that we're looking at. So there will be some.

But overall, I think that as we look at it, we're not seeing that it's going to be a headwind that we will not overcome..

Okay. Got it. And then just, I think you did do one small acquisition, the Artelon company, I believe is in the extremities area.

Can you just comment on that and kind of how it fits or what it brings to the table?.

Yeah. Listen, this is a gap filler for us in soft tissue fixation that's used in foot and ankle procedures by sports medicine doctors, as well as foot and ankle doctors. It's an elegant, terrific product. We're really excited about it.

Both of our sports business unit and foot and ankle business units, both teams are going to be selling this product based on the surgeon call point that they have. So really, really terrific product. We've been tracking the company for quite some time, and we're not going to get into details of how much.

It's not a big product, but it's a really great gap filler that, again, our sports business has, as you know, been growing at very high rates for many years now, and this fits in with them. It also fits in with our foot and ankle business..

Okay. Got it. Thanks..

Our next question comes from Caitlin Cronin with Canaccord. Your line is now open. Please go ahead..

Hi. Thanks so much for taking the question. Just jumping off of the spine question earlier. The interventional spine business had a good quarter this quarter and last quarter as well.

Can you talk about what makes up that business for you and why you think you're seeing strength there? Is this more of a market tailwind that you're capitalizing on or specifically Stryker..

Yeah. Listen, this IVS business of ours has been a really terrific business, if you think about what is in that business. We bought these curved balloons from the CareFusion a while back. We acquired the spine jack product. We've also developed some terrific internal products. We launched the OptaBlate Blade product.

So we have the pain docs and we have the oncology. So two different call points within our IVS business, and a pretty robust portfolio. And just outstanding commercial execution has been really a terrific engine of growth for us. And it's an area we like. And we continue to believe we're going to expand in this area at some point in the future.

We're certainly going to be adding salespeople, as we have been doing, because we have the product portfolio, partially organic and partially inorganic..

Great. And you maintained expectations to launch Mako Shoulder later this year.

What are you seeing in the market with Zimmer's early launch of its shoulder robotic application? And any updates you're seeing in the use case of shoulder robotics?.

Yeah. No, no feedback yet competitively, so it's not really had any impact thus far. It's early, so there really isn't anything to share right now. We'll -- once we learn something, we'll let you know. But we like our chances. We like our chances with our Mako Shoulder..

Our next question comes from the line of Jayson Bedford with Raymond James. Your line is now open. Please go ahead..

Good afternoon. Thanks for squeezing me and I'll be quick. Just a neurovas. I thought I heard you mention a supply issue within flow diverters. I'm just wondering, when will this resolve? And maybe you can just give us a broader view on the health of the supply chain, whether it be input costs, freight costs, et cetera..

Hey, Jason. It's Jason. I would say just overall, Stryker, I would say supply's in quite good shape. Do we see spotty issues like I mentioned, relative to neurovascular? Yes. We saw a little bit of a supply disruption as it relates to our medical business outside of the United States as well. But these things are resolving themselves.

July for neurovascular, off to a good start. And as it relates to medical, I think you should expect robust growth in the second half as well. So nothing from a supply standpoint is a concern for us as we move forward..

Okay. That's helpful. And just quickly, I wanted to follow up on the foot and ankle commentary. I'm just wondering why you think the market is soft and just historically, what drives the rebound out of these lulls..

Yeah. Look, there's a lot of different dynamics, and one of the dynamics is OR time, it's getting prioritized for other procedures. So you have surgeons that actually are getting squeezed out of operating because the ORs are being used for, let's call them more higher value, higher revenue producing procedures. That's one part.

You've got these copays that people have to pay. And sometimes they're just a little bit squeezed and that can cause a bit of a delay. So there are multiple factors at play. And like I say, we've seen this happen in the past. I don't know how long it'll last. It caught us a little bit by surprise, to be honest. But we've liked the business that we have.

We like the portfolio that we have. And these patients aren't -- they're going to -- these bunions don't heal themselves, so they're going to come back to the market, and I think we're going to be well-positioned when that happens. But yes, it has been two quarters in a row. We'll let you know how Q3 goes.

But again, it's not going to be a problem for our trauma and extremities business. It will continue to have very high growth regardless of what happens in this market..

Thank you..

Our next question comes from the line of Drew Ranieri with Morgan Stanley. Your line is now open. Please go ahead..

Hi, thanks for taking the question. Maybe just one for Kevin, but I think you also mentioned that you did another small acquisition of MOLLI. But just curious if you can kind of detail a bit more about that deal.

And I'd imagine it would be fairly small, but I'm kind of curious to hear about how this kind of informs your overall breast strategy in the market, how you might be able to bundle this with 1788 and some of the other maybe prior deals you've done in the breast space. Thanks for taking the question..

Yeah. Thanks. Women's health and urology has been an area of interest for us. And the endoscopy division is pretty excited about MOLLI to be able to localize the lesions that need to be removed in surgery. And for surgery, as you mentioned, we have NOVADAQ the Exoscope from the Invuity acquisition, we have the PhotonBlade.

We can do single stage procedures because you can assess the health of the tissue and then having the localization. And we already have the rep there. They're already -- so this is a perfect, classic tuck-in for Stryker. The reps are there, they're in the procedure. And this product, even though it's not a big revenue producer, at least now.

It is elegant, it is easy to use, it is a terrific product. And so we've watched all the other products in this space. This is the one we've. We've had our eye on and we are really excited to have that as part of Stryker. And it will enable us to be a bigger force in breast care..

Our final question comes from the line of David Roman with Goldman Sachs. Your line is now open. Please go ahead..

Thanks, and good afternoon. Kevin, I wanted to follow up on a comment you just made about capacity in the hospital and the prioritization around certainly whether it's acuity cases or other dynamics influencing how hospitals are managing capacity constraints in their surgical suites.

How should we think about that as a potential long-term or even intermediate term tailwind to your MedSurg business?.

Yeah. It's a good question. And certainly, the demand for capital is very high. There is construction, as you know, if hospitals are being constructed, ASCs are being constructed, patients are getting great outcomes. I think the ASC is a contributor.

People -- they go home the same day, they can't believe they can get back to playing their sport of choice so quickly. Word is spreading. And so I think this is one of those reasons where you're seeing the demand increasing. And as the operating room spill up, they're looking for outlets to be able to do more and more procedures.

So I do believe that that's contributing to this elevated procedures. And for our MedSurg business, a lot of our small capital that has to be replaced. And that's probably why we're experiencing the kind of high growth. You look at instruments, you look at power tools, very, very high growth and a promising outlook going forward. I hope this continues.

We see it continuing at least through the end of this year and obviously, we'll let you know what we think about guidance for next year in January..

Got it. And then maybe just a follow up for Glenn and maybe Jason. Just on the P&L, I think on the last call, you had laid out a path that more of the gross margin on a go forward basis would come -- sorry -- more the operating margin expansion would come from gross margins versus OpEx.

I think you're pointing to the back half of the year, reflecting more SG&A leverage.

How should we think about just the interplay between different line items of the P&L with MedSurg becoming a larger percentage of total and how we think about in the context of the different drivers for operating margin expansion?.

Yeah. Hi, David. I think, though, as I think back to how we have characterized it, if you think about what we did in 2023 that had more gross margin expansion and op margin. And we've always said that 2024 would lean more to sort of SG&A and leverage of op expenses.

So I don't think we've really sort of changed sort of how we think about how the year is going to play out for op margin expansion. So I do think that we are bullish on opportunities in gross margin, but a lot of those are things you do this year that are going to benefit us in 2025.

On SG&A, that's more near-term things that we have that we budgeted for and planned for that I think actually will allow us to give us a lot of confidence to say that we will get to that 100 basis points of op margin expansion..

Got it. Okay. Thank you for the clarification..

Sure..

There are no further questions. I'll turn the call over to Kevin Lobo for closing remarks..

End of Q&A:.

Thank you for all your questions and for joining our call. We look forward to sharing our Q3 results with you in October. Thank you..

This concludes the second quarter 2024 Stryker earnings call. You may now disconnect..