Welcome to Stryker's first quarter earnings call. Joining me today are Preston Wells, Stryker's CFO, and Jason Beach, Vice President of Finance and Investor Relations.

Today's call will reflect a dynamic quarter. The cyber incident had a big impact on our results and affected each of our businesses differently, given their varied go-to-market models and processes to record revenue.

This resulted in distortions in our first quarter results that will normalize over the course of the year. Preston will provide additional color in his remarks, but this situation will not enable us to provide the normal level of detail or explanations that you are accustomed to hearing from us.

The incident occurred late in the quarter and resulted in a global disruption to our business operations. In partnership with third-party experts, our internal teams reacted quickly to remove the unauthorized party from our environment.

We also began to work tirelessly to bring our systems back online to mitigate the disruption to our customers and the patients they serve. Patient care is our top priority, and we are incredibly thankful to our employees, customers, healthcare professionals, and other partners for their continued trust.

As of the week of April 1st, we were fully operational across our global manufacturing network as we continued to meet demand and support patient care. We are proud of the resilience shown by our teams and partners during the recovery effort.

Now, moving to our financial results. For the first quarter, organic sales growth was 2.4% on a worldwide basis, 1.9% in the US, and 3.9% internationally.

While our growth this quarter was meaningfully impacted by the cyber incident, we remain encouraged by the solid fundamentals in the markets we serve and remain well-positioned within them. As a result, we are maintaining our full-year guidance and look forward to another year of healthy performance in 2026.

On the M&A front, we recently announced the agreement to acquire Amplitude Vascular Systems that we expect to close in the second quarter. The acquisition of AVS will help expand treatment options for our peripheral vascular customers and is also a step toward expanding our presence in the broader cardiovascular space.

Also, at the beginning of Q1, we established our new OrthoTech business by combining the Mako and enabling technologies with the orthopedic instruments portfolio from our Instruments business to simplify the customer experience, accelerate innovation, and increase our speed to market. This move aligns two units that serve orthopedic customers with products such as System 9 power tools, Flyte personal protection products, pulse lavage, as well as Mako and enabling technologies.

Finally, I'd like to thank Jason for his last 4 years as Vice President of Finance and Investor Relations and wish him continued success as CFO of our MSNT group. We look forward to Nick Mead assuming the role of VP of Investor Relations on May 1st.

With that, I'll now turn the call over to Jason.

Thanks, Kevin. My comments today will focus on providing an update on the current procedural environment, select product highlights, and reporting changes.

As Kevin mentioned in his remarks, we are fully operational across our global manufacturing network and have provided information on our recovery efforts on our website and recent SEC filings. For today's call, inclusive of Q&A, our focus will remain on recovery and business performance.

Turning to the environment, underlying demand across our businesses remained healthy in Q1, even as the cyber incident created operational disruption. Procedural volumes were solid, supported by favorable demographics and the continued adoption of robotic-assisted surgery.

The hospital CapEx environment also remains steady, and our capital order book remains elevated as we enter the remainder of the year. Additionally, we delivered our best-ever Q1 for Mako installations, both in the US and internationally, with high and increasing utilization rates across the globe.

We continue to expect sustained momentum from installations and utilization to drive growth in our joint replacement businesses. We also continue to receive ongoing positive feedback from surgeons on Mako Shoulder, for which we anticipate fully launching on Mako 4 midyear.

Next, to reflect the launch of the OrthoTech business, we've updated our segment disclosures beginning with our first quarter earnings materials. Within the Orthopedics segment, OrthoTech results include our orthopedic instruments and Mako and enabling tech portfolios, as well as other products such as bone cement.

Additionally, the neuro-cranial businesses are now reported together with the remaining surgical technologies portfolio under Instruments. These changes align with our internal organizational structure where we have presidents leading both our OrthoTech and Instruments businesses.

On our Investor Relations website, we've also provided additional information with our earnings release on segment quarterly revenues for 2023 through 2025 that reflects the changes I've discussed as if they had been effective for those years. With that, I will now turn the call over to Preston.

Thanks, Jason. Detailed financial information has been provided in today's press release.

Today, I will discuss key elements of our performance and provide color on several items that meaningfully impacted our results in the quarter, most notably the recent cyber incident. Before I go into our overall performance, let me start by saying we continue to see healthy demand across our businesses, and we are encouraged by the progress we are seeing as we head into the remainder of the year.

For the first quarter, organic sales growth was 2.4%. Pricing had a 0.3% favorable impact, and foreign currency had a 1.6% favorable impact.

This quarter had the same number of selling days compared to the prior year. Adjusted earnings per share of $2.50 was down 24 cents, or -8.5%, from 2025.

This decline was driven by limited sales growth and lost manufacturing absorption related to the cyber incident, as well as tariffs and increased interest expense, partially offset by our ongoing focus on operational excellence and a slightly favorable impact from foreign currency translation. We have diverse businesses, and the incident affected each of them differently.

Because their individual results this quarter are not indicative of the underlying market performance, I will not be going into detailed sales results by business. It is also important to note that the cyber incident occurred towards the end of the quarter, creating an outsized impact on sales due to delays in revenue recognition in addition to the delayed shipments.

As Kevin noted, patient care remains our top priority. From a sales standpoint, our US and international markets maintained healthy demand trends throughout the quarter despite overall sales growth being constrained by the cyber incident.

Differences in the impact of the incident across our businesses primarily reflect their varied operating models and go-to-market strategies. Certain businesses, such as acute care and emergency care within Medical, are more heavily weighted towards capital equipment, such as beds, stretchers, and defibrillators, which can be made to order and have longer fulfillment cycles.

Other businesses are more focused on recurring consumables, such as disposable waste management products, that are replenished regularly and tend to demonstrate greater demand resilience. The degree of the disruption also varied based on inventory levels and consignment structures, including the extent to which products are held locally at customer sites versus centrally within our supply chain.

In addition, differences in supply chain and manufacturing complexity, sourcing flexibility, and logistics requirements influence how quickly each business could adapt to the disruption. Finally, procedural dynamics also affected the degree of the incident's impact.

Businesses supporting procedures that could be deferred or rescheduled, such as hips and knees, experience different timing effects compared to those supporting more urgent or non-deferrable procedures, such as trauma and vascular, resulting in variability in both near-term volume and revenue recognition across the portfolio. Turning to the Middle East, the conflict in Iran has had modest effect on our international growth for the quarter.

However, the impact on our overall results was limited. Despite persistent geopolitical risks, we continue to see meaningful opportunities for long-term growth in countries like Saudi Arabia, as well as other markets within the region.

Now, I will focus on certain operating and non-operating items in the quarter. Our adjusted gross margin of 63.6% was 190 basis points lower than the first quarter of 2025, reflecting the impact of lost manufacturing absorption from production shutdowns due to the cyber incident, as well as the impact of tariffs.

As a reminder, there were no incremental tariff impacts in the first quarter of 2025. Our adjusted operating margin was 21.1% of sales, which was 180 basis points lower than the first quarter of 2025, driven by the gross margin pressure I previously discussed and the deleveraging impact of lower sales growth on operating expenses, partially offset by continued cost discipline and our focus on operational excellence.

Adjusted other income and expense of $97 million was $24 million higher than 2025 due to higher interest expense from debt issued in 2025 to help fund the acquisition of Inari, as well as lower interest income from a combination of lower average cash balances and lower interest rates. We continue to expect our full-year 2026 adjusted other income and expense to be approximately $420 million.

The first quarter had an adjusted effective tax rate of 14.5%, reflecting the impact of geographic mix and certain discrete tax items. For 2026, we continue to expect our full-year effective tax rate to be in the range of 15% to 16%.

Turning to cash flow, our year-to-date cash from operations was $581 million, reflecting the results of normal first quarter seasonal cash outflows and the cyber incident's impact on net earnings and working capital, including inventories and the timing of receivables. Now, I will discuss our full-year 2026 guidance.

Despite the disruption we experienced this quarter, we are maintaining our full-year guidance. Given our presence in attractive end markets, healthy procedural volumes, and strong demand for our capital products, we continue to expect organic net sales growth to be in the range of 8% to 9.5% and adjusted net earnings per share to be in the range of $14.90 to $15.10.

We expect most of the first quarter's lost sales to be realized throughout the rest of the year, with the timing and magnitude reflecting the different product types and operating models we have across our portfolio. In limited cases involving emergent or non-elective care, we expect to offset any permanently lost sales through the strength of our continued commercial execution.

While we don't provide quarterly guidance, the cadence of our sales momentum that occurs through the rest of the year is expected to reflect the catch-up of revenue recognition in Q2, while the rescheduling of certain delayed procedures and the fulfillment of customer orders impacted by production shutdowns will be delayed into the second half of the year. Our full-year sales guidance reflects a modestly positive pricing impact.

Additionally, should rates hold near current levels, we anticipate a slightly favorable impact to both sales and earnings per share. Our full-year adjusted earnings per share guidance reflects our expected sales recovery, our continued focus on operational excellence, and some anticipated improvements in the tariff outlook.

Before I wrap up, I would like to reiterate that we are incredibly grateful for the continued trust and partnership from our employees, customers, and healthcare professionals throughout the past several weeks. Patient care remains our highest priority, with the continued focus on supporting healthcare providers and the patients they serve.

With that, I will now open up the call for Q&A.

great. Thanks for taking the questions.

I'd imagine this was probably a busier last quarter as IR, Jason, but we'll miss you. I wanted to ask just on sort of the cadence through the rest of the year and how you're thinking about the updated guidance.

I think it's pretty fantastic despite the disruption you were able to reiterate the top and bottom line for the full year. I guess any more specific color on how we should think about the recovering sales just given how much of a wild card it is and the variability quarter-to-quarter versus street numbers.

Then also, one of the discussions with investors is how much of the upside was removed to be able to reiterate the guide, or is this still the typical Stryker philosophy that you think you'll get almost all of it back and there's still the potential for upside? Thanks a lot.

Hey, Robbie. Thanks for the question.

As you can imagine, you're right. It was definitely a pretty big event, especially as we ended the quarter, and certainly having that disruption so late in the quarter did cause the numbers that you're seeing.

In terms of how we think about it the rest of the year, as I mentioned in my prepared remarks, it depends. We have a lot of variability across our business with the different operating models that we have and how they essentially serve the customers that we support.

We think about areas like orthopedics, for example. We know we had procedures that continued, but we do have revenue recognition items that will be caught up in the second half of the year.

In the case where we had some instances where some of the cases got deferred or need to be rescheduled, given where the scheduling is for those products today, we know that that'll happen, but it'll probably happen not all in Q2. It'll probably bleed into Q3 and Q4 for those.

Similarly, when we have some of our products, like I mentioned, that are make-to-order, where we had production down for a bit of time, and so getting those back into the schedule, getting those products made, that'll happen probably in the back half of the year rather than in Q2. We'll see some recovery in the second quarter, and then we'll really see some additional recovery as well as what we would normally see in our Q3 and Q4 kind of seasonality happening in the back half of the year.

That's how we're thinking about the cadence. As we don't provide exact guidance on our quarters, so that's really how I would frame it for you.

In terms of the overall guidance itself on an annual basis and the upside, etc., look, I think at this point, just getting to the numbers of reconfirming our guidance from where we are, we feel really good about that. We're going to really live into those numbers as we get through second quarter.

As we get through second quarter and have our results there, we'll take a look at where we are again on the full-year basis and provide an update at that point in time.

Fantastic. Thanks a lot.

Congrats, Jason, on the new opportunity there. I guess the same question as Robbie, maybe, on the the margins.

Preston, this year, I'm sure that changes the cadence, the recovery here, and do you still expect operating margin to be up about 50 basis year-of- 50 basis points year-over-year this year? I had one follow-up.

Yeah.

Larry, I guess I would tell you from a full-year perspective, nothing's changed if we think about what our guidance is and what our expectations were for the year. There's not a change in even those margin expectations off of what we set from the 3-year the 3-year window that we gave, the 150-plus.

We're going to continue to expect to live into that. Now, you're right in terms of how we're going to see that play out.

It might change slightly quarter-over-quarter for this year. As a reminder, we do have some headwinds on that margin in the first and second quarter just given where some of the tariffs are coming in versus last year.

We've talked about that before. Really, from a full-year standpoint, given that we've reconfirmed where our guidance is, we don't expect much of a change overall in terms of what our margin performance will be for the year.

That's helpful. Just for my follow-up.

Preston, there's been a lot of noise around inflation, higher oil costs, etc., memory 50 basis points increase in operating margin is still the guidance. How are you mitigating these higher input costs?

Thank you.

Yeah. Thanks, Larry.

You cut out a little bit, but I think you were asking particularly about some of just the higher input costs as a result of maybe the oil and other inflationary areas. We are expecting that we will see some level of pressure just coming out of some of the geopolitical items that are happening and events that are happening across the world.

As a result, we do expect that there will be some level of pressure on some of our input costs. Our procurement team is actively working right now in terms of trying to mitigate those where necessary or where we can.

Certainly, we have contracts that are in place that help us do that a little bit in terms of mitigating some of those input costs as we go forward. That's something that's factored into our guidance as we have it right now, and so we anticipate based on what we know today to be able to absorb those input costs that are arising as we see them right now.

Good afternoon. Thank you for taking the question.

Jason, best of luck. I'm curious what you're seeing competitively in the market at this stage.

There's a lot happening not just given the cyber issue for Stryker in the first quarter, but also another orthopedic company looking to be spun, another orthopedic company reorganizing its sales force. Can you just sort of give us a lay of the land of what you're actually seeing out there as the market absorbs these shifts?

Thank you. Yeah.

Hi, Joanne. This is Kevin.

I'm assuming you're talking about the orthopedic marketplace, and what we would say there is we love our position as market leaders in robotics. You can see with Mako 4 getting a huge uptake in that, tremendous excitement about that.

In addition to Shoulder being launched on Mako 4 midyear, the feedback's great on that. We have the Mako RPS, the handheld.

Early stage, we haven't had much in the way of revenue, but getting great feedback from customers. That'll pick up in the second half of the year.

We also have obviously the launch of Triathlon Gold, our medial-stabilized insert. There's just a lot of momentum that we have.

Regardless of what competitive actions are occurring, we're really not seeing that take away from customer interest in Stryker, our leading position. If you look at our full-year guidance that we reaffirmed, that assumes we will continue to outgrow the orthopedic marketplace by 2 to 300 basis points, just as we have in the last few years.

Really no change in the end markets, and if anything, probably a bit of an acceleration towards the end of the year with those three launches that are more back-half loaded.

Thank you.

Thanks for taking our questions. Jason, echo those congrats.

On the health of your customer base, I'm wondering if you could talk a little bit about the dynamics in the hospital market right now. I appreciate that you guys were under very extenuating circumstances this past quarter.

Some of that pause in orders, I'm wondering if you can kind of parse out between what is your ability to serve the market versus what may or may not be changes in demand and just kind of how you think about those two dynamics interplay, particularly as it relates to your capital business. Yeah.

First thing I would say is we did not see a pause in orders. We definitely had a pause in shipments because we obviously couldn't make a product for almost 3 weeks, and so we were not able to ship the capital equipment that we normally would ship.

We have a very healthy order book. There's no new dynamic in Q1.

There's no way we'd be reaffirming our full-year guidance if we suddenly felt there was some kind of slow down in orders. Hospitals still have healthy balance sheets.

They have a strong interest in our products, and Mako again had record Q1. It would have been even higher had we been able to continue to ship through the end of the first quarter.

No, we're not seeing any slowdown in orders, and our hospital environment is still very stable.

Very helpful, Kevin. If I could ask about M&A for a minute here.

If you look at the M&A contributions to top-line growth, they've come down a bit, I guess, over the last few years, particularly as we think about fourth quarter '25 and into first quarter 20 '26. Historically, M&A is contributed closer to 18% to 20% to your growth.

Given your comments at AAOS and kind of where the net debt-to-EBITDA sits right now and your eagerness to deploy capital, I guess, what is holding you back or what isn't holding you back, I guess, to re-accelerate M&A as a contributor to Stryker's top-line growth?

It's a great question, and I can tell you we're very excited about the deal pipeline and we're excited about our cash position. Sort of ending the quarter at 2.1 gross debt to EBITDA definitely means we have firepower to do more acquisitions.

You obviously heard about AVS, which we're very excited about for peripheral vascular, but we have a good pipeline. You should expect us to be active in M&A going through the end of this year and into next year.

Hey, thanks for the question. Maybe one on Amplitude and the deal you did there.

I think I'd ask it kind of higher level. We rarely see you buy kind of pre-commercial stage companies given how critical commercial excellence is to the Stryker strategy.

Does this still kind of signal that maybe you're willing to take on more risk to grow revenue now that your base is over $20-plus billion? Should we kind of expect more earlier stage deals going forward?

Yeah. It's not really related to the size of our company.

It's the nature of the business. If you look at these PMA-type products in peripheral vascular, this space sometimes requires early stage investment.

That's been the case for us in neurovascular, and in this case, we're not long away from an approval in the PV space, right? We might actually be able to sell this product before the end of this year based on the filing of their submission.

This is not pre-revenue years away from launch. Obviously, we'll pursue other indications in addition to above-the-knee indications.

This is a pipeline that will live on for many years to come. It's pretty close.

We know the technology. We've assessed the technology.

We think it's very differentiated, and obviously IVL is a very exciting space and we're excited to be embracing that. It's more related to the type of business than the size of our company.

As you've seen in the past, we're not afraid to take risks if we believe we're going to have value-creating deals. This is one where we feel very confident about.

Great. Thank you.

Thank you, and I appreciate you taking the question here. Maybe we could start on Inari.

I think we're just around a year into anniversarying the acquisition. It looks like a lot of the commercial and sales force challenges had already faded behind you exiting 2025.

Maybe you could give us an update on how you're thinking about that business on a go-forward basis here, especially given a pending acquisition in the space and what opportunities that may provide for you to further hit the accelerator.

Yeah. Look, we're very excited about the space.

We're excited about the company. We've made the management changes that we normally do when we do an acquisition, putting in Stryker people in charge of some parts of the business, bringing our commercial offense to bear.

We wouldn't be doing the AVS deal if we didn't feel very strongly about this business. That's going to be a turbocharger because that'll be again in the same call point with the same physicians doing those procedures.

We love the space. There's a huge market potential growth that a lot of people that are not being treated today that can be treated.

As I said when we did the deal the first time, we're not a one-and-done kind of company. We're going to continue to look for ways to increase the pace of innovation in the business with either internally developed products or products through acquisitions.

Obviously it's been a challenging first year as you go through all the attrition and you Strykerize the sales force. That's mostly behind us now, we're looking for clear sailing in the years ahead.

That's great. Maybe I just follow up on international.

I know it's been an area you've continued to highlight over a long period of time and at the analyst meeting that you had in November. Appreciating that results do bounce around quarter-to-quarter, but it does look like you've re-accelerated your relative performance versus peers, especially in orthopedics in markets outside the US.

Is there anything specific to call out there as look at just the spread between your performance versus others does look to be widening here as we start the year? Any color you could provide there I don't know if it's product launches or specific geography related or just a culmination of some of those efforts that have been in play for a while?

It's really probably more of a culmination of these efforts that have been playing out. As from 2016 to let's say 2023, Europe was the biggest contributor to our international strength.

More recently, we've seen Japan come on and really perform at a very, very high level, and that's our second largest country outside of the United States, which is experiencing tremendous growth certainly last year. Again, we're going to see that again this year.

We're starting to now get some of the approvals of the great product pipeline that we've been launching in the United States over the past few years. Just recently, we received approval of Pangea in Europe.

Obviously not the best timing when you have production shut for a period of time, but we are going to start to ramp up production of Pangea, and that'll start to have an impact in Europe towards the back half of this year and certainly into next year. It's really the innovation that we have and the commercial model that we've put in place.

Places like India are accelerating, East Asia, Korea. It's been a culmination of a lot of efforts over a long period of time.

Still have a lot of scope for improvement. Middle East is a good example.

Obviously, tough time over there now, but if you think about Saudi Arabia, that's going to be a very big market for us. We still have work to do in Latin America.

Pleased with the management we have in place. We have a path to improve that business.

Products like Mako and our fluorescence imaging are really starting to take off in these markets. I would say the last 3, 4 years you've seen we were double-digit growth in international or high single digits depending on the cadence.

International still is a huge growth engine for Stryker. There are a lot of market shares that are below where they should be, and we're getting after it.

Hi. This is Samantha on for Matt.

Thank you for taking our question. I guess I just want to go back and touch on the cyber attack real quick.

I know you mentioned how it impacts different businesses differently, and I was hoping you could speak to just how it could impact MedSurg versus Ortho differently and the cadence of that throughout the year.

Certainly. In our orthopedic businesses, most of those businesses have consigned inventory, in many cases that inventory is located at the hospital.

Those cases were able to proceed as almost normal in many instances. As a result of that, the procedure happened, but given the fact that our systems were down, we had some revenue recognition activities that still needed to be performed.

Some of those activities and revenues that are going to get pushed into second quarter. As I mentioned before, where we had to defer some of those procedures and reschedule those surgeries, those will happen probably throughout the rest of the next three quarters, not necessarily all in second quarter.

On the MedSurg side, you had a different impact just given the fact that a lot of that business is capital-related. Some cases it's make-to-order.

Any of the make-to-order items certainly are going to get deferred until later into the year given the fact that production was down, and so we had to bring production back up and then get those items back into the scheduling from a production standpoint. In other cases where we had items that just needed to be shipped, and just getting those items shipped through our network is going to take some time.

Really we expect to see, again, like I mentioned, some recovery in the second quarter, primarily as it relates to revenue recognition and some of those areas, and then really in the back half of the year is where we would expect to see the rest of the recovery based on delays and rescheduling or even just delays in some of the production as a result of the shut down that happened in the first quarter.

The way to think about that in terms of the MedSurg side of the business is Endo and Medical are more capital-intensive than let's say Instruments, you would expect more of their recovery to occur in Q3 and Q4 as opposed to Q2.

Perfect. Thank you.

Then I also wanted to touch on Pangea and LIFEPAK and wondering about the room for continued rapid growth there. I know you touched on international.

Just any more thoughts on the runway for those products. Yeah.

Listen, I'm really excited about both of those. We know they're winners.

Pangea has driven explosive growth in our trauma business in the US. We have approval in Japan, that's starting to take off there, and just literally a week or two ago received approval in Europe, a little bit ahead of schedule, to be honest.

We're really excited about that. It's a phenomenal platform that is going to drive above-market growth without question, and our European team is super excited.

We just have to make the product as fast as we can. They're very complex kits, and as you know with these big orthopedic launches, they take many quarters to be fully launched.

We're going to have this tailwind and the tail will last well into '27 and even '28. Really excited about Pangea.

LIFEPAK, we know is a fantastic product as well. We now have that approved in Europe as well as the United States.

I think most markets around the world, LIFEPAK is approved. Again, production was slowed, and so we have to re-ramp production on LIFEPAK 35, but it's a great product and still has many, many years.

We'll be talking about that as a new product 5 years from now because of the replacement cycle is so long on these defibrillators.

Hey, thanks so much for taking the questions, guys. I would say everything that happened last 8 weeks or so obviously must have been difficult to get through, but it was great to see kind of the focus on customers, folks on patients, and all the communications, and I'm sure a lot of hustle that sort of kept things together.

Congrats on getting through it at least to this point. I wanted to ask one question around the consolidation of the enabling call it tech businesses in Orthopedics.

Makes a lot of sense. Mako pulls through implants, powered instruments pulls through blades, and service support revenue, and so on.

Wondering if you could give us a sense of maybe as those things move into one line, round numbers, what kind of the recurring revenue aspect of that for that capital, I'm assuming that part of that's going to be blades and service, just some sense of how much of that is recurring and then I have one follow-up.

Hey, Matt. In that line item, I think you have all the different parts certainly.

The one item that doesn't flow into that line, there's no pull-through of the knee number into that OrthoTech line. The knee number will stay separate on its own line item.

The other items that you mentioned will all be a part of that. We're not breaking out the specific components of each of our different businesses.

I think if you just go back and just think about the overall mix of our capital, large and small capital as part of our overall business, that has remained relatively the same as what we've said in the past. Again, just to think about the entirety of our business along those lines.

Those other elements that you called out in OrthoTech, that's right. You'll see both the capital elements of the orthopedic instruments business flowing through there as well as some of the pull-through items, and then also Mako will be in that number as well.

Okay. Then on some of the new product launches like RPS, made a pretty big splash at AAOS.

Maybe just an update as to what that early traction looks like, how it's either complementing deals, contracts and on the Mako side or what independent growth looks like if that's being pulled more into an ASC channel or just anything that you've seen so far in the launch would be great. Yeah.

Listen, it's still a bit early, but what I'd tell you is we're getting tremendous feedback from customers that felt that the move all the way to Mako was a bit too big of a leap. For now, it seems like the ASC has been a bit of a sweet spot.

Again, that's early. I'm not saying we're going to limit this at all to just the ASC.

The actual transition to RPS is much easier for a surgeon than going all the way to Mako in terms of how you do the procedure. It's just very, very easy to adopt, and there were some competitive surgeons that felt that they really like the idea of going to a robotic solution obviously with haptic boundaries.

Just the move all the way to Mako was just a little bit too intimidating, and we're receiving great feedback. We're really in a very, very active phase of trialing and getting our customers to actually try the product.

They really can't believe how well it performs. We're getting great feedback on it, and it will be a really great product that will be frankly additional.

It's not slowing down any of our Mako momentum. It's really going after a set of customers that we would have just left to the sideline prior who see this as something that can move them from manual power tools into robotics.

Your line is open. Please ask your question.

Thanks. I just had a few more on the Amplitude Vascular acquisition.

When you close the deal, the idea that those products, once they're approved or anything, largely be sold through the Inari sales team? Then is that kind of going to be the approach as you do acquire more peripheral and potentially coronary products, it'll just continue to kind of feed them through that sales force or would you have a separate sales team for IVL?

I think initially, given that it's the same call point, it'll be run through the peripheral vascular sales force. Is there a chance that we could add additional sales reps?

Sure, of course. As that technology gains further indications or as we do additional indications and or new acquisitions, depending how broad the applications are and how broad the sales forces are, specialization down the line is not something we would rule out, but certainly we're a long way from that right now.

Okay. Then do you happen to know the expected timing on FDA approval for both peripheral and coronary indications for their product?

Where they stand with the trials, I guess,

yeah? Mike.

Sorry, it's Jason. Just given the fact that the transaction's not closed at this point, we won't comment much further at this point, but once we get to that point, obviously we'll expand on that.

Hi, guys. Thank you for taking my question.

Kevin, maybe one one for you on the big picture M&A. I think there's been some questions around soft tissue robotics.

I know you've made some comments in the past, but as you look at the landscape, sort of how are you looking at product versus channel play within soft tissue robotics?

I'm sorry. I don't really understand product versus channel player.

I'm not sure I understand, Vijay. Could you just clarify that?

A product company versus more perhaps an instrument consumable kind of play, remanufacturing, etc.

Oh, I see. You're talking about reprocessing?

Yes.

Yeah. Look, listen.

The reprocessing business sort of stands on its own, and they'll look for any opportunity to provide products that create value for the customers. There was one company that had that approved.

We have not pursued that indication yet. We have a pretty good portfolio within our sustainability solutions business.

When we talk about soft tissue robotics as an adjacency for Stryker, we're looking at actually getting into the business of soft tissue robotics. There are, as you probably know, at least 50 startup companies at all different stages that are pursuing indications, and some of them have FDA approval already.

We are evaluating all of those companies. If we believe that we can find a company that could be successful and could be value-creating for Stryker, then we would pursue that.

It's one of the many adjacencies that I've pointed out. One was peripheral vascular, where we actually did an acquisition.

We're in just the evaluation stage, and not predicting that we will do it, but it's one area that we like. It's an interesting space.

It's not for the faint of heart, right? These are not easy.

As you've seen with other people who have tried to enter the market, it's not easy. Certainly, all of the different adjacencies, none of them we have to do.

Soft tissue is a good example. We don't have to do it.

We're not defending any business, but if we do it, we'll feel very confident that we'll create value from it.

That's very helpful. Maybe, Preston, one for you and I don't know if you've answered this, but how are you thinking about margin cadence?

I know you've reiterated the guidance, but it'd be helpful if you can give some guideposts on margin cadence.

Vijay, I guess I would tell you that from a margin standpoint, again, full year, no different than where we were when we started and gave our initial guide that we would expect to deliver on a full-year basis. Certainly, we've had a little bit of a hiccup in the first quarter as a result of the cyber incident, but we expect fully to recover over the next three quarters in terms of achieving that number.

I wouldn't expect any outsized kind of margin component in one quarter versus the other, but we will continue to work on delivery through those channels that we've talked about, our operational excellence and manufacturing supply chain focus and pricing really being the drivers over the rest of the year.

All right, great. Thanks for taking our questions.

This is Young Li on for Matt. I guess one more on the cyber incident.

Just on sort of getting manufacturing back to normal. I think by early April, you are back to that.

How long does it take for you guys to sort of restock inventories and get enough products back in the field so that your reps can get back to offense? Yeah.

You're right. We've got things back on track at the beginning of the month here in April.

Really, as soon as we're back on track, manufacturing's back up and going. It's not that we were completely depleted across our whole portfolio of businesses.

As I mentioned before, where we have areas like Orthopedics, which we have a lot of inventory that's in the field, much of that is already at the customer location. That flows a little bit more seamlessly in terms of getting production back online and getting product replenished out into the field and then ultimately into the customer.

Similarly with many of our disposable businesses, those are held at distributors in many cases, and so that was also able to flow pretty regularly. Really, it's going to be on some of the MedSurg products where we have make-to-orders, I mentioned before.

That'll take some time, and a lot of it is just not in getting production ramped back up and going, it's really getting those products rescheduled back in so that we can put them back into the program and actually get them produced and made for those specific orders. Our expectation, as I mentioned before, is that we will do that throughout the rest of the year, and so you'll see that recovery particularly on the MedSurg products that are capital-driven in really the third and fourth quarter.

All right, great. Very helpful.

I guess maybe one more on Mako Shoulder. Seems like the early feedback so far is pretty positive.

Can you maybe level set us a bit on the ramp expectations as well as maybe some color on the health of the shoulder market if you saw enough data points so far? Yeah.

Hey, this is Jason. A couple of comments here I'd say.

First off on the market, continues to be a very strong market for us. It's a business that quarter after quarter, maybe Q1 aside with the cyber incident, has continually grown double digits.

Very happy with that business in that market. As I mentioned in my prepared remarks, as it relates to Mako Shoulder, it is available today on Mako 3.

It'll be available in Mako 4 kind of midyear. Very very excited to see that on Mako and the potential as we move forward here.

Thank you. Evening, everyone.

Kevin, I'm wondering how you're feeling about your customer relationships coming out of the cyber incident. It certainly doesn't sound like you're expecting any notable impact given your response to the incident and your guidance reiteration, but I'm wondering what kind of response you've gotten as you've talked to customers.

Yeah. Great question.

In fact, I've been really overwhelmed by a lot of positive commentary from our customers about how we handle this incident. They're very empathetic to having 40,000 laptops wiped, having computers wiped.

It's just has not been easy to go through this, people's phones, and the way we've responded, the clarity of our communication, how we were able to keep a lot of cases going in spite of this was really something that they gave us a lot of high marks on. You sort of don't know until you go through a crisis kind of how things are really going to go.

We've come out of this very strong. There isn't really any business I could think of that we've lost.

We did lose some cases. Obviously, reps couldn't get into hospitals and so there are some urgent cases that we lost, but not really loss of any customers that I can think of.

If anything, they feel better about our resilience through this process. I think the Stryker brand is stronger than ever, but it was certainly not something I'd wish upon any other company to have to go through.

It was very, very challenging. There were cases, certain incidents, where we weren't allowed into hospitals for a period of time.

It was challenging, to say the least, but the customer response to me directly has been actually very positive and very supportive.

That's great. Just Preston, how are you thinking about free cash flow conversion for this year coming out of an obviously unusual 1Q?

Do you think it can be in that 70% to 80%? Are there some one-time outlays you needed to make in the cyber recovery?

Yeah. We're still thinking about it in that 70% to 80% range.

We are contemplating different investments that we'll be making as a result, and all of that is contemplated in our guidance that we have. Again, not changing the overall trajectory of where we're headed or what we've committed to in our long-term financials.

Hi, this is Elaine on for Jayson. Thanks for taking my question.

I had one on smart hospital, which officially launched in March, if I'm correct. Can you please remind us on what are the key parts of the system, how does it differ from a hospital that's maybe already using Vocera or Care.ai, and what has been that early feedback from customers?

Thanks.

Thanks. We created a new business unit called Smart Care at the beginning of this year, which combines the Vocera and the Care.ai businesses, and the launch of smart hospital is really providing seamless integration.

The Vocera is seamlessly integrated with Care.ai and integrated with our ProCuity beds and a whole host of other products. It's a very seamless system that we're now providing to hospitals.

The feedback has been very positive. In fact, they had a really good first quarter.

Obviously, we weren't able to ship everything, but they're building really good momentum within Smart Care. I'm very bullish on this for the long term, and the creation of the business unit was really well-timed to really be very focused and to be able to pour more investment into this area.

Thank you so much. I'm I just wanted to go back to the cyber incident and how to think about it.

The guidance now implies 10.5% growth for the balance of the year. It looks like the impact is about $375 million.

I don't know if you can directionally tell us, how much is deferred procedures versus production delays. As I start to think about the Q2 guide, the Q2 growth rate, should we be modeling, closer to the full-year guidance for Q2?

Are you able to do that? Then even more so more than 10.5%, I guess, in the back half because of the MedSurg orders that you referred to.

Then just as a follow-up, I'm just wondering what are the learnings from the cyber attack to prevent something like this in the future? Thank you for taking the questions.

All right. In terms of your question around the guidance and how to think about Q2 and Q3, we don't guide to the quarters, and we haven't for quite some time.

The way, again, that I've laid it out before is how I would continue to think about it. There is going to be some level of recovery in Q2, and then we will see some additional recovery in the rest of the year, ultimately getting to the full-year guide number that we mentioned.

Again, I can't give you any more breakout of what portion of that was deferred procedures versus capital delays, things of that nature. Just in terms of how you're thinking about it, just know that it'll flow back in kind of throughout the rest of the year in terms of that guide.

Yeah. In terms of the cyber event, I'm not going to get on this call to all the lessons learned.

Certainly, we had an incursion, and whenever that happens in any cyber event for any company, there are going to be lessons learned around that. What I can say is the recovery of our backups, 100% of those worked, and we were able to get the threat actor out very quickly.

The recovery portion was pretty stunning. Frankly, you don't know until you go through something, will it actually be that successful.

The recovery was incredibly successful. There are lessons learned.

We are going to at some point down the line share those lessons learned with other industry actors, but it's not time for that right now. Right now, we're still very, very focused on recovery, getting our business back to health.

As Preston mentioned, that we'll be making some investments, but all of that's contemplated within our guidance, and we feel very good about the position we're in going ahead.

Hi, everyone. Thanks very much for taking our questions.

Maybe just in terms of the April volumes and overall medtech procedure environment, what's giving you the confidence to reiterate the guidance and especially in the backdrop of any ongoing disruptive factors like GLP-1 impact, what have you seen so far this quarter?

We're not seeing any GLP-1 impact, certainly for our business. It may be impacting other people's business, but we're not seeing any impact whatsoever on our business.

We would not be reiterating guidance if we suddenly had seen any kind of impact. The underlying demand is strong.

Surgery schedules are still full. Our business is in good shape.

I'm not sure where you're picking that up from. It might be businesses really unrelated to Stryker's portfolio.

Understood. Maybe just a follow-up, but another one on the AVS acquisition, but in terms of how you think about maybe broadening your presence in cardio, what might that look like moving forward and could you look to do that through piecemeal M&A or would you potentially be open to considering more of a platform acquisition?

Listen. We're getting into new call points.

With Inari, we now have new call points. The vascular surgeon's a new call point.

The interventional cardiologist is a new call point. As a company, you've seen when we do acquisitions, most of them tend to serve existing call points.

As we look to serve that interventional cardiologist, that'll get us into different technologies, and over time, that could lead to different assets being acquired and or internally developed. I'm not going to predict.

We are excited to be in this space. It's a fast-growing space, and we'll continue to look at assets that serve those call points.

Over time, could it lead to a platform deal? Sure, but I'm not going to predict that right now.

Hi, everyone. It's Doron on for Matt.

Kevin, maybe just for you to start, at AAOS, you talked about the neuro-cranial business maybe being a pretty underappreciated business within MedSurg. With you rolling it up into Instruments now, kind of what should we expect and maybe what are some of the key products or innovation or markets that you might be more willing to go into?

Just as a follow-up, sorry to pile this all on, but with Mako 4, maybe how should we be thinking about the installed base growth versus maybe replacing the fleet and maybe any early feedback you've gotten on utilization changes from Mako 4 versus Mako 3? Thanks for taking the questions.

Great. First on neuro-cranial, internally, we were running neuro-cranial as part of Instruments.

Instruments had the orthopedic instruments business, it had the surgical technologies, and then it had the four business units that were part of neuro-cranial. That was all being run by one president.

We just reported it separately. Now the new president is running five of the six business units, with orthopedic instruments moving over to join Mako as part of OrthoTech.

This really goes back to aligning to the way we're running the company today. There's no change to our internal way that we run the company.

I think you're going to gain a greater appreciation because when Instruments had the power tools and Neptune waste management, that kind of took up all the air time in terms of attention and questions. Now you're going to learn a lot more about the neurosurgical power tools, the craniomaxillofacial products.

Our IBS business has been one of our fastest businesses for the past 5, 6 years, and as we did the recent acquisition of the MILD procedure, and that business is going to continue to grow. You're just going to get a bit more granularity around that business because it won't be overshadowed as it has been in the past.

No change in terms of how it's run internally, and lots of innovations going on in those businesses. We have an upcoming launch of Sonopet 4, which is really exciting, the ultrasonic aspirator for neurosurgeons.

That'll be towards the latter part of this year. It'll just give us a chance to share a little bit more of those diverse businesses, but they're all very, very fast-growing businesses.

As you saw even in Q1, Instruments had actually pretty good results, although everything was kind of thrown off by the cyber attack. On the second part, you said about Mako 4.

The way to think about Mako 4 in terms of utilization, all of our Makos get utilized, pretty similar rates. What's different about Mako 4 is you're getting into new procedures.

Advanced hip and revision hip is really getting tremendous feedback from our surgeons. Revisions are hard, and Mako 4 makes the revision hip procedure much, much easier.

Of course, it's being also used for knees and other applications. It's more multi-functional, and what we're seeing really is just tremendous uptake in the interest around having a robot that's so multi-functional and that he can even do eventually shoulders soon coming up, that it's going to put pressure on the number of robots required in addition to Mako Spine, and what that'll drive is actually more demand for Mako 4 over time.

I would think for this year and maybe into the early part of next year, you should see kind of a similar cadence between the utilization of Mako 4 as you saw with our past Makos, but then it'll probably pick up thereafter as the word gets out certainly on the shoulder because a lot of surgeons are not going to want to wait for the robot to be available on a Friday to do their shoulder procedures, and so they'll start asking for additional Makos. Demand is strong.

We're super excited about this platform and the ability to add these extra indications, and we're not going to stop. We have some other things in the pipeline, not ready to share today, but we're going to continue to build upon this multi-functional robot with additional procedures.

Hi. Thanks for taking the question.

You called out on the last earnings call that foot and ankle was softer last year. What did you see in the Q1 and have you launched the EnCompass total ankle?

Yeah. Listen, the foot and ankle market as a whole was pretty soft last year, not just Stryker's business.

If you look at the market itself, it was pretty soft. Q1 of course was obscured by the cyber incident.

We have launched the EnCompass total ankle. We're really excited about the product.

Unfortunately, the prophecy guides have not yet been approved. These are the cut guides that are used, the surgeons who are using the ankle today they're very proficient surgeons that can actually do it without the cut guides.

Most of the surgeons want the cut guides before they're going to start to adopt the ankle. That should get approval very, very soon.

That's been in. We've had a couple of volleys with the FDA.

I think we're at the final stages now, and once those cut guides are approved, that ankle will really take off. It is absolutely a market-leading product that we know is a winner, but just need to have the guides.

Once the guides are approved, certainly that'll start to pick up in the second half of the year, and plus with the additional extra reimbursement on total ankle procedures, it couldn't be better timing to launch a new total ankle.

Great. Thank you.

Thank you all for joining our call. As you've heard, despite the cyber incident, our business remains poised for another strong year of performance, and we look forward to sharing our Q2 call with you in July.

Thank you.