What was, what would you say your key takeaway or take-home messages were from AAOS?
A couple of things. AAOS is first of all a great event, allows us to check in with sort of a lot of orthopedic customer, customers of ours and doctors, obviously, all at once. I think some of the things that we took away were, you know, we definitely have hit the mark with a lot of our key products, especially Mako, obviously, for hips and knees. We also got sort of confirmation that schedules are still robust, so there is still procedural backlog that's ongoing within hips and knees, and most of the docs were very confident that that would carry on most of this year.
And then I think the other thing, too, is there was a fair amount of excitement over future technologies that we're launching, and so, obviously, we didn't show those, but there were lots of conversations about them, so.
Side conversations.
Side conversations, yeah.
All right, so let's talk about the things that you did showcase.
Okay.
—not the side conversations. What do you think was the most meaningful? We saw the new camera. We saw Pangea, the new plating system. We saw, oh, a couple of other things. What, what do you think was the most—
You know, those first two you just mentioned are big. Starting with the 1788, you know, if you think about our camera launches all over the years, we'll incrementally improve features-
Mm-hmm.
and visualization with each launch. But then, I don't know, every third one or second one, we'll have sort of a meaningful jump in the technology.
Mm-hmm.
And so I would say the 1788 has that meaningful jump in visualization, fluorescence, the ability to see cancerous tissue, the ability to distinguish between older blood and newer blood within the surgical cavity. And so I do think that, and customers are recognizing this. It's very early days since we just launched, had our full launch in September. You know, if I just look at order flow, even at year-end 2023, it's gonna be a big product, so we are really excited about that.
The second thing you mentioned, Pangea, it's funny coming off of all my one-on-ones. We probably haven't talked about this enough, but you know, if the President of Trauma were up here right now, he would tell you that that's the biggest launch in the history of Stryker Trauma.
Wow!
And so, I mean, what it really is gonna do for us is, first of all, it's gonna level the playing field. If you think about Stryker, Stryker has traditionally led and been a nailing company in trauma. We've had a lot of gaps in our plating portfolio. Some of that was because of patent issues and things like that. Those things have expired, and so Pangea really is gonna fill a lot of those plating gaps that our customers have really wanted. So you think about competitively now, if you're a customer, and you're buying your nails from us, and maybe you're plating from someone else, you actually can go to us for one stop to buy the complete portfolio.
And so I do think, you know, Pangea is really exciting, and our trauma sales force is just, you know, over the top about finally getting a competitive plating offering.
What else?
What else did we show? Those were the big ones.
Those were the big ones.
The big ones, yeah.
What about the ones that were not shown in the slides? I would assume there's a shoulder robot.
Yeah, shoulder and spine. You know, it's not-
Just an assumption.
Yeah, just assumption. We're not the, not that... God, I haven't really been asked any questions about those two today, so-
Yeah. No, no, no.
It's time to talk about it. You know, yeah, spine's coming out late this year, and shoulder will be at the very end of the year. If you think about... You know, we're excited about both of them. I think spine maybe is a little more catch up.
Okay.
In other words, there's robots out there.
Yep.
Customers are used to robotic spine surgery. I do think that the ecosystem that we'll surround our robot with, with, you know, products like Copilot that have some haptics in the burring, and then some of our visualization and imaging products, will make a difference in terms of what we offer for spine. I do think that market acceptance will be quicker for spine because there's robots already out there.
So let's just pause there for a second. So is this a product that will bring you even with the competition, or will you surpass your competition? And which we're like, "Yeah, they got a robot, for spine." But how much is this meaningful, really, to the portfolio, and does it level set your entire spine franchise, or just helps out?
No, I think it's gonna level set, to be honest.
Okay.
You look at, I mean, from a robotic standpoint and what it'll do, it's a little bit, it's pretty similar to what the robots out there now are doing. But if you look at what we're surrounding it with and how it might impact a procedure, I think that is maybe the unique selling feature of the technology. And I do think, you know, our loyal spine customers have been like: "Hey, Stryker, when are we gonna get this?
Right.
I think the other thing that it'll do is, if you look at sort of how you would go about acquiring, the spine product, if you have a Mako, you just have to buy an end effector and software.
Mm-hmm.
You don't have to buy a whole robot. So I think that is a little bit of a differentiator. I also think that for those that wanna try before they buy, but not make a full commitment on a robot, and they have some utilization capacity in an existing, you know, hip or knee robot-
Mm-hmm
that this is a vehicle for them to get there.
You said you have to buy an end effector and some software.
Yep.
But if you're trying it out, are there trials of those types of things in a business model?
Yeah, there would absolutely be trials.
Okay.
Most companies, you know, KOLs might get there quicker, but most companies would do capital trials, robot to robot. And I'm sure even if they had a Mako, they might do trials as well.
What percentage of spine procedures are now done robotically?
I don't know. You know-
Yeah, we have, we have not disclosed that-
Yeah.
Okay. Okay. Because I'm just trying to figure out if the opportunity is, if I'm making this up, a third of the procedures in the market are done robotically, and you're at zero, that gives you a lot of runway.
I think that the efficacy and revision rates and some of the benefits that those that have spine robots have already seen-
Yep.
are really sort of proof points and validation points for using a robot in spine procedures.
Okay. Let's ask similar questions about a robot in shoulder. A competitor of yours just got their first shoulder robot. I'm sure you that's news. And I'm wondering, how do you think about bringing yours to market at the end of the year?
Yeah, I think, first of all, shoulder is going to be a little bit different, because there are no shoulder robots out there.
Mm-hmm.
So robotic shoulder will be a new procedure to those docs. I do think that, you know, whether, you know, theirs is three months ahead of ours or four months ahead of ours, I'm not sure if that will actually really even matter competitively. I think that, you know, there will be this slower uptake of the shoulder robot just because they'll need to be training, there'll be qualifications of surgeons. It'll be a different procedure than they've done before.
Okay.
There is no proxy that exists in the market. But again, just like spine, it'll just... For us, it'll just be an end effector and software if you have capacity in existing Mako robots.
Do a lot of people have capacity in existing Mako robots?
You know, we like to think no, but there probably is some.
Okay. Enough to try it out before they go, yeah.
Enough to try it out. I mean, I do think you don't want to spend the money for a whole robot and that commitment, but you do have surgeon interest-
Yep.
to want to do this. I think that's a pathway that gets you halfway there and bridges the gap.
Is there a surgeon interest for shoulder procedures? It seems to me that the shoulder procedures are quite good as they are, and, with things like Blueprint and other navigation and planning procedures, where is the level of need for an actual robot?
I mean, I think if you're a shoulder doc who does a lot of total shoulder replacements and whatnot, you're, you're right, the procedure is probably pretty good.
Yeah.
I think if you're the doc who doesn't do them all the time-
Mm-hmm.
- and supplements other orthopedic procedures, a shoulder, you know, probably provides more data, more consistency, more standardization-
Okay.
of that procedure for shoulder. I also think, too, that, you know, shoulder robotics will probably show some of the benefits that we've seen in hip and knee.
Okay.
Just, you know, potentially reduced recovery rates. There's lots of soft tissue in the shoulder.
Yep.
And so if a robotic procedure can help preserve some of that soft tissue, that will make a difference. And if you've ever known anybody who's had a shoulder procedure, they have really long recovery rates.
Yep.
So any dent that can be made in that rate, I think it will matter for patients.
Okay. I feel like we dove straight into the deep end.
Yeah, we did.
We did, didn't we? Can I back up?
Sure.
Thank you. So procedures, if procedures are some level of pent-up demand, is that a multi-quarter or multi-year pent-up demand? How do I think about it? And one of the things that I walked out of the AAOS with was, younger patients are getting more hip and knee procedures, and I'm not sure why.
Well, I think a couple things, like, let me unpack-
There's a couple of questions there.
All the questions there.
Yeah.
Um-
I'm good at that.
First of all, I do know that. First of all, I would say that there is still sort of this pent-up procedural demand. I actually think that we'll continue to feel that all year long in 2024.
Okay.
I also think that, and it gets difficult to parse all these things out, there are more patients coming into the funnel. The average patient age is reducing. And we're also seeing, you know, what is it? 10,000 people a day are turning 65, and guess what? They're all playing pickleball and running. And so that we're seeing a more active, older population that is accessing these procedures now, too. To your question on the younger population, I think what you're seeing is that these procedures now have been perfected to a point where it's an out procedure.
Mm.
You can check yourself in, you know, if you meet all the qualifications, get the procedure and go home in the same day. I'll also say that you're not going to be on crutches for three months. And so the procedures, especially the robotic procedures, have gotten to a point where if you're that, you know, 45-year-old runner who has always had this, you know, knee problem, but you never wanted to do it because you never wanted to sacrifice three to six months, well, now you're like: Oh, okay. And the doctors are recommending this.
Right.
Go ahead and get that knee fixed.
Right. Get it done. Let's talk a little bit about, I hate to say this, GLP-1s.
Mm-hmm.
One of the things, you know... One of the things that struck me as I was talking with physicians at AAOS is that they say they're starting to see patients that are, you know, lowering their BMI and able to get the procedure done. Are you seeing the same thing? And if so, how do you quantify it?
Yeah, I think, you know, we don't, we don't have a good quantification at this point in time. We, we have a lot of the anecdotal evidence that you have-
Yeah.
Relative to what our KOLs are seeing. I mean, what we do know is that they probably turned away maybe 10% of their patients and said: "Hey, guess what? You got to go lose 10, 20, 30, 40 pounds and then come back." And for those patients, you know, that, that's a long period of time-
Yeah.
-to drop that kind of weight and bring your BMI down. Now, with these medications, there's a pathway, and a time frame of when that weight can be lost and they can be brought back into the funnel. And so I do think that the confidence of surgeons is that: Okay, now I have something I can do for these patients that helps them and gives them a reasonable time frame of when they can get their knee fixed and can get their hip fixed. So I, I do absolutely agree with most docs that, that, again, this will bring more people into the funnel.
You are seeing it anecdotally?
Anecdotally, from what our docs are telling us and KOLs are telling us in the field.
Okay, I'll take that.
But I don't think the numbers have caught up. I still think it's early days.
Yeah, I think so, too.
Yeah.
That makes sense. One of the statistics that you gave on the fourth quarter call, I found very interesting. You highlighted in the United States, 60% of your knees and 34% of hips are performed robotically. If it was a year ago, what was that statistic?
Did we get that?
I'm not sure that we disclosed that exact figure, but, here's what I would say. I think what's important, as you look over the course of the last year-
Yep.
That's continued to accelerate, right? More and more. And I think probably your next question then would be, okay, what can those numbers get to, right? And I, I think it's, I think it's fair to say, if you're talking knees or hips, there's a fair amount of runway, right? As we continue to build out that Mako footprint, robotic adoption continues. We're nowhere near the end in terms of tapped out potential there.
I do think hips is the one that maybe there wasn't a lot of certainty about.
Yeah.
But, you know, with the launch of Accolade and that all being on the robot, I think, you know, hips now is really a growth engine as well for Mako.
What percentage of your procedures are done in the ASC?
Large joint?
Mm-hmm.
Call it 12%, 13%.
You know, I'm going to ask, a year ago?
It was below that.
Less than that.
Yeah.
Okay.
So again, same trend, right? And we expect that trend will continue to ramp up. You know, I think we said recently that probably the gating factor at this point is capacity of new builds-
Yeah
and those kind of things. And, but as that continues to ramp up, that number is certainly going to ramp up with it.
I would have thought that number would have been higher.
Yeah. Again, the constraint that I just talked about-
Right
-is the issue, right? And keep in mind, too, when we focus on ASCs, we're looking at major remodels, new constructions, right? Where we can bring in our, the breadth of our portfolio. So again, we feel really good about the growth of the ASC business, and I think it'll be a significant tailwind for the foreseeable future.
How do you think about staffing, hiring for the ASC? Dedicated sales force, you've been growing at X%. How... Walk me through that.
You mean at the ASC or for us?
You.
Oh, for us. Yeah, we have people knocking down our doors to get on that sales force.
Okay.
But we qualify people, actually. What we do, we recruit for that sales force, we recruit internally.
Yeah.
We want to bring in somebody who has some level of familiarity with product sets for the ASC.
Mm-hmm.
Also, somebody who can act as a good facilitator and coordinator across divisions, because most of these deals involve four, five, six divisions-
Yeah
At any one given time. And the thing that the ASC wants is: Okay, Stryker, don't, you know, inundate me with 10 sales reps and, you know, four clinical specialists. I want to talk to one person.
Right.
That really is the key role that this ASC sales force provides. And then also, too, these deals are, you know, they're all slightly unique in terms of what are the needs of the ASC and what kind of financing might you wrap around that, and how do we do the pricing, and then make sure that it meets sort of the parity that we require at the sort of the very Stryker top level. There's some complexity there, but, you know, we've been at it now for three, three years, three years or more. It's going gangbusters. It's probably our, maybe one of our fastest growing segments within Stryker.
Are there products you're missing?
Oh, that we're missing in our ASC offense?
Yes.
No, I don't think anything comes to mind.
Okay.
I mean, as you think about how we focus, again, like I talked about, breadth of a portfolio. I mean, we've, we offer a full menu, right?
Yeah.
For customers that, you know, other competitors can't offer.
Yeah, and they call us because they got to fill out an ROI. So they want booms, lights, tables. They want, you know, a stack of arthroscopy equipment or whatever it is, and a robot, maybe.
A robot.
There isn't any other companies they could call to get all that in one place. They want a single bill.
They want a single bill for it.
Yeah.
Mm-hmm.
Monthly.
Monthly?
Yeah.
Okay. Answers that question. Anything else I should be asking you about ASCs, that you're burning to share?
I think you covered it.
Yeah.
Excellent. Okay, other product launches this year, in your super cycle. Physio-Control?
Yeah.
A new AED. How important is that?
... It's a long overdue product. Keep in mind, this is like sort of your professional level AED.
Yep.
It would be in emergency rooms, fire stations, police stations.
So it's not what's on the side of the wall?
No, it's not what you see at Walmart or probably in this building somewhere.
We have a few.
Yeah. It's the heavy duty one that's used by professionals. Keep in mind, too, we haven't launched a product in 15 years, so, you know, think about your cell phone 15 years ago versus now. There is really an upgrade in technology in this device. There's touch screens, there's better data manipulation technologies. It'll command a double price of the current product.
Two times.
Two times.
Okay.
You know, we show it's due to launch second half, or first half year. You know, we've showed it to customers already, so there is a lot of excitement just because something new hasn't come along in a long time.
Right. My impression is that a cycle like this is multi-year. Is that the right impression?
That is the right impression.
Okay. So you're going into an emergency vehicle, emergency room, something like that. Is it a conversation of buy the new bed and stretcher, and we have a new—this new Physio-Control device, or is do you need we have a new Physio-Control device? Help me understand where in the conversation this shows up.
Well, bed and stretchers are acute care, so that's one sales force.
Okay.
We have a separate sales force that's solely focused on emergency. And so both of these sales forces would be, you know, visiting the emergency room, and selling those products. I do think, too, like, if you look at, you know, the price points are a little bit less on these products than beds and stretchers. Those are usually very large deal sizes. Additionally, if you're talking about fire departments or police stations, you got to match up with their budgeting cycle.
Yep.
Which is typically June 30. So, you know, we'll get this thing out in time to get into the new budgeting cycle. They also are interested in financing, so what are the financing offerings that we can wrap around it? On the hospital side, you're probably right. They're going to bundle it with some other probably medical products that they would buy at that same point in time.
What other products in the super cycle do you want to make sure we discuss?
Well, you talked about 1788.
Okay.
I do think that the unique thing about that product in terms of where it is in the super cycle, because it came out in September of last year, it's gonna really ramp up in 2024, versus these other products that are launching in 2024, this will be more of a slower ramp here. Versus word's out on 1788 now, trials are arranged. We saw good order flow come in at the end of December. And so I do think that 1788 is gonna, you know, be a needle mover for 2024. Whereas these other things are gonna kind of grow slowly.
Mm-hmm.
But, you know, will they be something that, you know, meaningfully moves the needle this year? Probably not.
Okay.
The following year? Yeah.
Fourth quarter was a pretty amazing quarter. Very clean on multiple places. I think it exceeded expectations.
That's what we aimed it in.
Well, that's what I wanted to know. Do you aim to do that in the first quarter?
We don't guide towards quarters, which, you know, never gets you anywhere anyways. But, you know, I do think we're, you know, generally what we have said around Q1, and where you guys have angled in, we're clearly on that pathway.
Clearly on that pathway. Revenue and EPS?
Sure.
Sure. Okay. That's what I wanted to know. I think there was a comment at AAOS, and I'm going to paraphrase here, that all the, all the energy momentum wasn't spent in the fourth quarter, or that it continued into the first quarter. That's still fair to say?
Yeah. And honestly, if you look at, especially on the MedS urg side of the house, our rep quotas all come to a head at the end of December. So... And you would just you'd be amazed at the amount of orders that we get, not only in just the last week, but like the last two days. There's a load of competitions. And so all of those orders go in at year-end as open orders.
Yep.
They're delivered usually in Q1. That momentum from bolus of orders that comes in really delivers in Q1, especially on the instruments and endoscopy side of the businesses.
Right. I mean, because when we were looking at a lot of company models, that first quarter was facing tough comps. You, you're facing a tough comp also, if you haven't noticed.
Yeah. You would've said that about fourth quarter, too, right? For-
Many quarters, I would have said that-
Yeah.
-for you.
Yeah.
Okay.
I think, you know, we've planned for that.
Okay.
And at least what we have eked out relative to guidance has factored that in.
Okay.
The only unique thing about Q1 that's of maybe a little headwind is that there's one less selling day.
Yep. All right. One of your, I'm trying to choose the right words here. I was going to say greatest moments, but it sounds too much like greatest hits. At the Analyst Day, was sprinting back to pre-pandemic operating margins in two years. That's 200 basis points, by the way?
Yep.
How do you get there?
... It's, you know, it's a lot of what I said at Analyst Day. I mean, we made progress in 2023, especially at the gross margin line, with improvements, and those will all carry over into this year, especially the ones that we can leverage on the fixed cost side. I think this year you'll see more maybe focus on operating expenses and driving leverage and operating expenses. We'll continue to push out G&A functions to our shared services. And there's significant labor arbitrage there between, you know, doing the work in Poland or Costa Rica or China versus doing it in the US or Europe. We'll also see, you know, we tinker with our commission programs every single year, and so there is natural leverage we can build based on-
Mm-hmm.
reductions in commissions and things like that, and structures. So we'll see, you know, some of that will play through, as well. I do think that we're, you know, we're not closing our eyes to gross margin. We are working hard with our vendors to kind of get back to sort of this cadence of, you know, "Hey, we'll have higher volumes, but you got to take your prices down." We are seeing normalization of freight, so less air freighting, more ocean freighting, which is significantly cheaper. We'll continue our march forward with price. And if you think about these new products, we generally gain price on those new products, even if it doesn't show up in the pricing statistic that we-
Yeah.
that we publish, because that's like for like. And so that will be helpful as well. So I do think we have a good pathway to get there. And I would tell you, to a person, 55,000 Stryker employees, everyone has 26.3-
Right there?
burned in their brain. Yeah.
Okay. Yeah.
We have incentive plans and all these other things that support this, so I, I have a lot of confidence we're going to get there.
Okay. So why not do it over three years? What made two years the right number? And then I'm going to throw my next question out there. Can you get above that in three years?
Get above?
26.3%.
Yeah, for sure.
Okay. Yeah, for sure.
Yeah.
I'm writing that down.
I think what we guided was to, you know, 26.3% at the end of 2025, and then a floor of 30 basis points a year improvement thereafter.
Okay. Can we talk about M&A?
Sure.
Again, quoting from AAOS, "A flurry of procedures, a flurry of acquisitions." What is your definition of a flurry?
Flurry.
Flurry.
Yeah. I can even hear that in my brain. Keep in mind, you know, last year we didn't execute on a lot. I think we did three, right? But that doesn't mean we weren't talking to a lot of companies.
Yep.
And so, you know, acquisitions are managed at the divisional level by business development staffs that exist across all those divisions. They remain fully busy in figuring out, you know, who they wanted to line up first. I would say out of the gates, I don't know if flurry is the right word, but we have, you know, lots of IOIs in place to go deeper with companies and look hard at them. And so I do think that, you know, there is quite a bit of a lineup of acquisitions that are targeting closing, I know, probably closer to the end of second quarter. And I would say that the vast majority of these are just sort of part of tuck-ins.
They're $100, $200, $300 million acquisitions, where we can quickly take a product, put it in our salesforce bag, and you know, basically restructure out the rest of the company and then drive you know, meaningful accretion, top line and bottom.
Can you take on the dilution from an acquisition and still hit 26.3%?
So right now we've said yes.
Right now you've said yes.
Yeah.
Might that change?
I don't think so. I mean, we've put acquisitions into the modeling to get to the 26.3%.
That's what I want to know.
We're fairly confident that even with acquisitions, we're going to get there.
Okay. Over years, decades, maybe, Stryker has evolved through acquisition. Why are you so good at it?
Practice makes perfect, maybe.
I mean, is there something about the way you choose your targets, something about the process?
You know, I think if you talk to anybody that's been acquired by us, they would tell you it is an incredibly protracted process. We spend a lot of time over target. You know, if you look at, like, Physio, we probably were talking to them for four years. Sage, I bet we were talking to them for five years. Vocera, three years. So we really, really get to know these companies, understand their markets, their products, and then honestly understand how does that fit within Stryker?
Mm-hmm.
Can we take this and make something more of it?
Yep.
Not just continue what they might be doing. So that's key. I think the other thing is, you know, we, we have an integration management office, and we've looked at, like, here are the things that we can standardize on in an integration that we can do as fast as possible.
Mm-hmm.
And so, you know, when we hit go, those teams move quickly to do that. The divisions, if you think about, if you're a division and you're at Stryker, you got to grow 200 or 300 basis points above market. Part of their strategy is to do that through acquisitions. And, you know, they're going to spend their dollars prudently and efficiently and make sure that they execute on that, because they need that growth to hit their numbers. And we've done 50 over the last decade or so. So we really have honed it fairly well.
Okay. Um-
Well, one other thing I will say is, we don't mandate targets at the top, so we don't sit at the top and go: Go into this area, go here, go there. We think that having our BD people closest to the customer-
Mm-hmm.
does a better job of identifying, you know, what are the new trends, what are the gaps, what are the keys, what should we be going after, in order to bubble up these acquisitions? And I, and I think maybe that's a little bit of a different strategy.
Mm-hmm.
-than others.
I'd agree with that. I'm going to ask one more thing on M&A. Is it more likely to add to the verticals you already have or to enter a new space you haven't been in?
It would be more likely to add to the verticals we already have.
Okay. What have I not asked you that your meetings this morning enlightened you, or you're like, "This is what I want to make sure everyone hears today?
Well, I don't know. You touched on a lot of it. What was your last question?
My last question on all of these?
Yeah.
Oh, my last question.
It was a great question.
Well, I have seven minutes.
I know!
Let's get to the next question.
We could ask you guys anyway.
Yeah, yeah. Have any questions? Oh, man, it's late in the day.
Yeah, we've signed the after-lunch crew.
I know. I think I had cookies for sugar or something.
Yeah. Yeah. No, I think you touched on all the big things. Sometimes I think we spend an inordinate amount of time on ortho, and I know you guys all love it. I know you love the robot, and there's easy comparables, but, you know, our MedS urg and Neurotechnology business is a very big business. And it's, it's got healthy double-digit growth. It has great profitability, and it, it probably gets a little undersold just because it's not-- there's not a good comparable. But, you know, these are multibillion-dollar businesses that are growing 10, 11, 12%.
Yeah.
Which is no easy feat. And they're dropping, you know, accretive off margins. So I do think that we're as excited about those segments as we are about what you're going to ... You know, and I know Mako gets all the glamour, shoulder and sp ine, but we are very excited about what those businesses are doing, too.
Excellent. I can ask my last question.
Yeah.
All right, you ready? Here we go. When we were talking this time next year, what do you think investors will be saying about Stryker?
Great job on op margin. You exceeded our expectations. Wow, you still have market-leading growth across all your segments. We're excited about all the acquisitions that you've closed on during the year, and we see how they'll be accretive to your business in the future. And we're excited about the successful Mako launches that you executed on during the year, and we can see how those are going to be accretive and helpful to 2025. Does that leave anything out? You nailed it. Yeah.
I'm going to end there.
All right.
Glenn and Jason, thank you so much.