Medical technology analyst here at Citibank. So for our next session, I'm quite thrilled to have the incoming CFO, Preston Wells, and Jason Beach, which I think most people know quite well. But thank you for joining us today.
Thank you for having us.
I hope you're having a good day. I want to kick off. Preston, you're stepping into some big shoes here. I know we all know you from your IR days. I'm curious how you're feeling about this new role, and how do you think you're going to make your mark?
First of all, thank you for having us. It's been a good morning so far, and I look forward to a good afternoon as well. You know, the good news is the shoes that I'm stepping into, they are big, but we are certainly in a good position as a company. We've got really well-defined targets of where we're heading and a real clear vision of where we're going. And obviously, maybe Kevin, you heard Kevin talk about it on the earnings call. You know, as long as he's at the helm, we're steering the ship in the same direction.
No, I'm looking forward to just helping continue the pathway that we've been on and looking forward to working with folks like Jason and Kevin and some of the leadership team and continuing the trajectory that we've been on both on the top end with our op margin and EPS goals.
All righty. I need to get some things out of the way. Some of them are specific to the markets you participate in, and others I'm asking absolutely everybody today. So let's do the everybody today. Washington directives.
Yeah.
It's putting a little volatility.
A little bit.
Into the stocks. What do you think the impact is in no particular order? Tariffs, FDA, staffing cuts, NIH funding, Medicare, Medicaid.
All right. See if we can hit all of those for you.
Before.
That's right. We'll see if we can hit all of them. So I guess maybe a couple of things. I think number one, and this is probably true for all of the above, is we're still waiting to see what really happens. Obviously, there's a lot of noise. There's a lot of discussion that's going back and forth. But ultimately, we'll have to wait and see what policies actually get put in place before we react too much. Maybe just hitting a few of these. So if I think about NIH and Medicaid and FDA, which all have to do kind of with either funding or how quickly maybe we can get some of our products through. Right now, we're not overreacting to anything. We're not hearing too much anything in terms of changes in trajectory of where we're going.
If I think about from a funding standpoint, you know, our capital markets remain pretty strong. The information that we're hearing as we talk to customers and hospitals is pretty good. The start of the year that we've had is continuing the momentum that we had at the end of last year, and I would say the same thing on the procedural volumes. We're still seeing pretty strong procedural growth. Obviously, if there are major, major changes, we'll have to adapt to what those are, but right now, we're not seeing much in the way of any major impacts as of yet. From a tariff standpoint, you know, I'll just articulate that we do have facilities in the geographies that have been discussed. We have a small plant in Canada. We have a facility in Mexico.
And just as a reminder, those are two of our 40-plus facilities that we have. So they're a small portion of what our actual cost of goods are or what our supply chain is. And we already are impacted by some of the previous tariffs that were coming out of China. And what we would expect there might be a little bit more impact there. But overall, not overly worried about what may happen there from an overall impact. And again, I think some of what we've heard versus what actually might happen is still a little bit up in the air. But we are less exposed in some of those markets maybe than others.
Okay and you went right into my next question, which is some of the orthopedic stability. I keep hearing from many of the manufacturers that this is sort of a new growth rate as it relates to procedures. And you know, pricing, which had historically been 2%-3% headwinds, seems stable. Maybe positive?
It's certainly less bad.
Less bad.
I think we'll call it less bad. I think it's been just an effort in terms of showing, you know, what is the value that we bring with our products and services. That's true both in orthopedics and in our MedSurg and capital businesses as well. We've seen very positive momentum over the last year. We expect that to carry forward into 2025 as well. As it relates to the overall, what is the new ortho market? You're right. It does appear to be better than maybe what we thought when we were coming out of COVID, where that might stabilize. It certainly appears to be on a growth rate trajectory a little bit higher than what it was pre-COVID. It's probably a few different things that are driving that. Price is one, as you mentioned.
The other is, we think about it. We've seen a pretty big explosion in where procedures get done. I mean, the ASCs have really grown since COVID. And that's created more capacity. It's created other places where people can get procedures done. The other thing we're seeing is that folks are getting procedures done at a lower age. So traditionally, it was about 65 or so where people were getting procedures done. And we're seeing that tick down to about 60. So all of that's just introducing additional volume that's in the system right now that we think will be there for.
G ood. I do want to spend some time talking about the Q4 call. It was shared that it accounts now for 17% of knees and 14% of hips. You and I were talking about this. You're already laughing.
Keep going.
You and I were talking about this a couple of years ago. What would that stack have been?
Wow. I think when we were talking about it a couple of years ago.
If we were.
I think we were probably in that 5-ish% range, if not even a little bit lower. It was really on the early days at that point where people, you know, I think the way we think about the ASC is it's going to continue to grow because it's a place where otherwise healthy patients want to go have procedures done. You know, if you don't have other comorbidities or other issues or ailments, you know, why not go to a place where you can get the procedure done, get in and out, as opposed to staying in a hospital where maybe other things are happening there? So you know, we really do believe that it's going to be a place that'll continue to expand and grow. And certainly, we've seen that over the last couple of years.
Where can it peak out?
You know, I don't know that we have a number of where it's going to peak out because a lot of it's going to just depend on the type of patient, but we do expect it to keep growing for sure, and I don't think we're near where the peak may be, so I think we have lots of room for expansion and opportunity to grow.
One of the things that strikes me about Stryker is that it's not just that you sell orthopedic implants into the ASC. You sell one or two other things.
One or two, yes.
One or two. Okay, so walk me through what one or two is?
Yeah.
Walk me through a new ASC is going up in New Jersey. You're Stryker sales rep knocking on the door. What do you do?
Yeah, so I'll talk through some things, and Jason can certainly help clean me up here, but you know, when we start a new build, there's a lot that we can offer, so we have our communications business. We go into any operating room, and you see big booms and lights and things that are hanging down off the ceiling. Those are products that we sell, and actually, the infrastructure even behind that, so if you looked behind the wall of any of those big booms and lights, there's a tremendous amount of infrastructure that's going into that build that's holding all of that up, and so that's one element that we add that we're able to add to any new build.
And then on top of that, it's just retrofitting out that operating room, whether it's the beds, it's the Neptune waste management, it's the stretchers, it's all of the different capital that might go into actually supporting that operating room. And then on top of that, all of the implants that it would take to support procedures happening, particularly in the orthopedic-focused ASCs. So we really, as a rep, we have an organization that we created a few years ago called Customer Solutions that our ASC business kind of sits within. And so we have one rep that'll approach that ASC to help simplify the administrative burden of working with a Stryker. And so the individual reps that are still working with that one rep to make sure that we are selling the best of Stryker into that ASC at that point.
How many Mako procedures are done in the ASC versus in the hospital these days?
You know, I don't know that we've disclosed that number. But what we are seeing, and I would say early when you and I were talking about ASCs, I think there was some concern, would we have robotics in the ASC?
We didn't think it was possible.
What we're seeing is it's quite the opposite, actually. I think that robotics is making a big difference. Part of it is because of the ability to get the procedure done and get the patient out, you know, relatively soon, same day even. And so we're actually seeing a pretty significant tick up as we think about all the installs that we've had of Mako, which we mentioned on the call was a record year. You know, we are seeing a significant portion of those go into ASCs as well.
Okay. When do you top out on the number of procedures that can be done on Mako? I think you gave the statistic on the call that 45% of knees and 20% of hips are being done on a Mako device.
Is it higher on knees? That was a global number. The global number.
Okay , global way.
So yeah, so I mean, I think what we're seeing, and those numbers are higher in the U.S. What I think is that we're continuing to see that grow. You know, if you're an otherwise healthy patient, getting a procedure done on a Mako is becoming for us a standard of care, and so I'd see that continuing to grow. You know, I don't know if we've given a top-out number, but there will always be some element of people that have comorbidities and things that won't do that, but for the most part, we believe most patients can move towards a Mako. We're seeing that same trend happen outside the United States as well, which is even just as exciting. You think about the early days of Mako, and we started to see that adoption really take hold.
We're seeing that same thing happen in countries outside the United States, which is going to then just further that growth rate that we have in those markets as well.
What stops? I'm trying to figure out, like, if I was going to go in to get a hip or a knee, I'd be like, robotics, Mako. What stops somebody from saying, no, no, that's o kay ?
Yeah, I think it's education. Right?
Education and who? The physician or the patient?
It's a bit of both. And I think as patients, one of the things we've done, and we saw we had a direct-to-consumer advertising last year to help educate patients, they can ask for it. You know, I think most folks that know Stryker, that cover Stryker, that are in Stryker, have educated their family members to ask for it. And I think that what we would just continue to try to do is having people ask for robotic procedures, ask for those surgeries. And now we have enough of an installed base that most of the times when people ask for it, we are in that area or there is a robot in that area. So I think that's one of the things is just continued education and more and more consumer awareness around it. It's going to help drive that. Also, surgeons.
We're seeing more and more surgeons that are coming out of school, coming out of training as we have Makos that are in many of the training institutions that are training folks on Mako. So they want to do Mako procedures. They want to do robotic procedures to start their practices. So I think it's training and education on both sides of it that is really important.
But is there a reason a physician would not want to do a robotic surgery? I mean, again, you'll have.
You know, I think there's going to be some preferences. There's going to be some people. But I think what we are seeing is that certainly newer surgeons, as they come into the market, just like with anything else, they want to utilize technology. And this is one of the things that.
Okay . Is there, because it is a capital equipment purchase.
It is, so I mean, in terms of getting a Mako, you have to make sure that that equipment is purchased by the hospital and brought in. And now we are able to work with hospitals in many different varieties on how we do that. And so as a result, we are able to enable a lot more of Makos to go in to support where surgeons want them.
So, one of the things that, when I do diligence robotics, whether it's soft tissue robotics or orthopedic robotics, that surprises me is if you have a center that has three robots, they are more likely to buy a fourth than a fifth than a center that has nothing.
That's right.
Why is that?
I think the proof's in the pudding, right? I think when surgeons are using it, what we see is, you know, we really rally behind a surgeon championing a robot into a particular system. And once we do, you know, that surgeon then starts using it, and other surgeons want to use it. And it's really word of mouth and people getting the experience of using the Mako. And once that happens, you're right, it starts to put more and more. And then you have capacity. And so once you run into capacity issues, they're asking for another. And so you're right, getting over that initial hurdle is important because once you do, we really do see a lot of uptake. We were talking in one of our meetings earlier today, one of the mechanisms that we've seen is rentals. We do have Makos that are rentals.
What's interesting about that is a significantly large percentage of the rentals that we have turn into purchases because as they utilize the Mako, they want to actually then own the Mako.
Do you have to have a 2.0 or 3.0 version of Mako?
I think we always have to think about innovation. You know, if we just stood still, eventually somebody will innovate something. And so we're always constantly thinking about innovating. We've launched different applications. We've launched different software upgrades. And so we will continue to look at innovation. Matter of fact, when it comes to AAOS, we'll probably talk about a few different things that are happening on Mako and additional our shoulder and spine applications.
Okay, there's like four questions I want to ask out of that, but I'm going to stick to my plan here, and I need to talk next about shoulder applications for Mako. And where are you in the rollout? And I think it's sort of interesting to think about you have a Mako for hip and knee. Can the same one be used for shoulder? Do you need a different one?
You can use the same Mako. So the good news is that we are launching Mako, and we're going to launch these applications to retrofit into Mako. So really, the big change will be there will be software that's required. There's going to be a change factor, a change in some of the handpieces that are associated. But ultimately, the goal is that you have one Mako that's able to serve all of these different elements and applications that we have. Now, the challenge is, as you think about how do you split that from a capacity standpoint.
Goes back to question one.
It goes back to question one. I think that's one of the areas where we think we have a big opportunity is to build on the existing install base as you widen the number of procedures that are being done here. You asked about shoulder and where we are. We launched shoulder at the end of last year. We've done a few procedures over the course of last year that continues into this year. We're in more of a limited launch while we continue to gain feedback from many different surgeons on how that's going and are there tweaks that we need to make. So far, the feedback's been really, really positive.
You know, we think about Mako for shoulder aligned with our Blueprint technology from a planning standpoint and really just continuing to evolve a really difficult procedure in a tight space to continue to make that a better procedure for everyone.
Okay , I'm familiar with Blueprint because I covered 20A, I covered Wright Medical, and now I'm covering Stryker. What's special about Blueprint?
Yeah, I think what's really special about Blueprint is it allows the surgeon to, on CT scans, do a whole plethora of pre-planning and even on the spot planning with some of the virtual reality opportunities that we have in that space as well. So that surgeon can make sure they're making the right plan and even at times get suggested the right type of implant to be used for that patient. So it just gives a lot more power to the surgeon in terms of that planning opportunity that they have. And then you think about that combined with Mako, so more power in planning and then a better opportunity around execution is really what we're focused on.
Okay . You mentioned spine. Is that staying with you? Is that going with spinal implants?
Mako spine will remain part of Stryker.
Okay .
And it'll be part of our overall enabling tech organization. And so maybe if I just think about and help everybody think about spine and the way we think about it pre-divestiture and then maybe post. So pre, when we talk about our spine business, it's really three components. So it's our spinal implants, which is really the metal business. It's our interventional spine business, which is a different segment of that spine market, a faster growing segment of the spine market. And then it's enabling tech. And so those are the three elements that made up spine as we would think about it before our announcement. And so what's really being impacted is the spinal implants. So the metal business, the implant business is what we've sold to VB Spine. And that part of the business will exit. But we will maintain those other elements of spine.
And just for clarity's sake, even before this happened, each one of those verticals had its own sales force. They had their own organization that was lining up behind it from an R&D standpoint, marketing standpoint. So it is really like sectioning off just a portion of what our spine business was.
Why? What makes now the right time to do that? Because I'm watching Stryker build up spine.
Yeah. Yeah, I would say we've tried, and I think it was one of those areas that we felt like over time was important for us as we connected the overall orthopedic markets with our Neurotechnology markets, and I think the key here is we're not leaving overall spine. We're just leaving a portion of spine.
The hardware.
The hardware portion. And if I could remind everybody back from when we did analyst analysis, I think Jason showed a slide that talked about where our markets were and our market growth rates. And that spine implant market growth rate was very different than the others. And so as we think about our overall just understanding our portfolio and again, adding Inari into that portfolio, which is another faster growing segment from just a capital allocation and where we're going to spend our resources, it just made more sense to make a move now with spine and understanding that we've moved it to a strategic partner that we can still work with in terms of promoting and how we utilize our enabling technology with that.
They're still going to have access to it.
They will have access to our.
Okay , and it's revenue accretive, getting rid of spinal implants.
From a growth standpoint, yes, it is accretive for us.
You did not share the timing of the sale or the amount of the sale.
Correct.
Will we have some say to those things?
You will. Well, yes, you will know when we close. We will make sure we let everybody know.
Okay .
Certainly, you will see it as we report where those cash flows are and what's coming from it.
Okay , thank you for that. There are other recon products across the portfolio that we don't spend a lot of time on. Is there something you'd like to highlight?
Yeah, maybe. So we obviously we've talked about Pangea, which is the big one. We've talked about Mako and all the things that are happening there. But if we think about our orthopedic business, and this is true for all of our businesses, we're in a constant cycle of innovation. Orthopedics might be less predictable than maybe some of our Med-Surg businesses. But we do. We just launched our Triathlon Hinge, which is for our revision products. And that is another area of our portfolio that we continue to enhance. We have our Gamma nailing platform that we launched for trauma and extremities. And so again, continuing to build out small portions of our portfolio. And one of the interesting ones, and one of the ones we probably talked about before I left the IR chair, was Insignia.
Yeah.
And so, you know, we launched our Insignia hip stem about three and a half years ago or so. And that continues to be a giant contributor to our overall hip growth as we go forward. And so it's just those are the key products that really supplement some of these bigger ones that we tend to talk about. But it's important to note that across all of our divisions, there is this constant wave of innovation that's happening that's supporting these larger, bigger name items that are launching as well.
So when we go to AAOS, what are we going to be seeing?
I will turn it over to my friend Jason, who can tell you about all the things that you're going to be seeing at AAOS.
Yeah, no, so Preston talked a little bit about Mako being prominent at the show for sure. You know, we will absolutely have Mako spine, Mako shoulder there for folks to see. So I know that'll be a bit of the excitement for sure. I think the other elements here that you'll see, you'll see a bit of our sports med business and one or two products there as well on display. And then you'll also get an opportunity to see our latest line of Steri-Shield. So that's in our instruments division. So think hoods and togas that will be on display as well. So there'll obviously be other ones, but those will be the main just kind of the showcase.
Okay . Med-Surg. Tied to the hospital CapEx environment. The number of questions that I have on the hospital CapEx environment. Tell us your view, please.
I feel like any time there's some sort of economic thing, the first question is, what's going on with hospital CapEx?
CapEx.
Yeah, look, I mentioned it before. You know, we obviously are very close with hospitals as they build out orders for things. As of now, you know, we're not hearing any major changes in strategies, major changes in approach to what they're doing. Our capital order book remains really strong. It was strong as it ended last year. We've seen those orders continue to be strong heading into this year for the first couple of months. And maybe just a reminder as we think about what our capital business is, we've talked about this before, it's about 25% of our overall business. And so much smaller maybe than what people are thinking when we start talking about some of these different categories that we're in with medical and instruments and endoscopy. But really, it's about 25% of our overall business.
And that's broken into that is small capital, 10% of that's larger capital, like your Mako and beds and things like that. And so I think it's just a matter of it is a smaller piece of our overall. And of what we have, we have a pretty good line of sight, at least for the next several quarters of what that looks like. And right now, again, the feedback that we're hearing from hospitals isn't changed too dramatically from what we saw at the end of last year.
Okay . I don't think Med-Surg gets enough attention.
I agree with you.
All right, so if I want to be more attentive to it, what would I be paying attention to?
Yeah.
I was trying to figure out how to say that properly. But those are the words.
Yeah, no, I think I understand. So you know, it's interesting. I think we were talking about this too a few years ago. It is interesting the evolution of our Med-Surg business. And let's just take a business like Medical, for example, which maybe 15 years ago was beds and stretchers. And that's all it was. And now when we look at that business, and it's defibrillators, it's beds and stretchers still, of course, it's healthcare IT type products with Vocera and care.ai. It's a whole host of different things. And so I think I would just pay attention to the evolution of these businesses. So we do a lot of deals. I think last year we did some close seven deals. Most of those were in the Med-Surg space.
And all of those deals continue to build out these categories in slightly different ways so that they're very different organizations from a product portfolio and where we're playing than maybe what they were five, 10, 10, 15 years ago. And so I think just continuing to pay attention to that, continue to pay attention to those markets that we're getting into with each of these. Because generally, we'll get into faster subsegments that are helping us to continue to maintain the growth rates that we do on those businesses.
So when you think about adding businesses, you know, M&A, how do you think about building out that portfolio?
Yeah, the beauty of our approach is that it is from the bottom up. You know, we have very few things that happen top down from an M&A standpoint, if any, really. And so all of the M&A that we do in each of these business units is coming from the business unit. So they all have dedicated business development people that are constantly looking at the market. They're constantly working with the sales force who are working with customers to understand needs. And they also understand where the opportunities exist at those call points. And so as a result, that's where the M&A bubbles up from. And then after we do the M&A, those divisions and businesses own it. And so there's an ownership element that's there as well. So we spend a lot of time over our targets.
We spend a lot of time understanding our targets, understanding their needs. And then we jump in and make those deals. And then we own those deals.
So when you buy something, do you leave it alone? Do you let it run on its own? Do you fold it in? Is the goal? I'm going to throw out five things here. So just stop me in a minute. Do you say, OK, we're owning this revenue. We're owning this to cross-sell. I mean, how do you think about this?
I would tell you it varies, and each market varies. So if I think about, let's just go back to Med-Surg for a minute. You know, one of the beauties of Med-Surg is there's lots of room to expand. So if I think about the operating room, so one of the businesses that Jason was responsible for when he was the vice president of finance for instruments was our surgical technologies business. That's Neptune Waste Management. And it's a whole plethora of other products that exist in an operating room that most people probably don't really know about. And so there's so many more opportunities to expand into other little parts of that operating room that maybe aren't as well known for people. But our businesses, since they are specialized in a category, they're able to look deeper into that.
And so that might be one where they identify a product and they say, you know what, this is a good add. We'll add this. Smoke evacuation would be a great one. We find smoke evacuation. We're going to add it to the existing bag. And off we go. There's others, and I'm sure we'll talk about Inari, but there's others like Inari, which is a much larger scale adjacency that's going to be a little bit more left alone in terms of where they are and what they're doing because there's not a specific bag that it just fits into. And then there's going to be others that are more, how do we get this and make it more scale play? So we did the SERF acquisition in France for joint replacements, a hip product. And that's about how do we get new technologies into Europe.
And so take that technology that's primarily in France and broaden it across Europe and then broaden it into other markets. So there's a variety of approaches that we take. And a lot of it depends on that marketplace, that sales organization, and then probably the size of the acquisition as well.
So I want to talk about Inari. Walk straight there. Recently closed. Congratulations. Why? And why now?
Yeah. Yeah, I mean, I guess similar to the opposite of what we talked about with spine is, you know, we've talked about peripheral for a while. We've talked about trying to find what's the right entry point into peripheral. And quite frankly, I think just the timing of when this asset became available and our time having spent time looking at it and understanding what we really wanted to do just gave us just the timing just lined up, and I think it lined up with adding a faster growing segment into our overall market growth and then taking one that was slower growing and eliminating it with spine, so I think it's just really a timing of our portfolio evolution from that standpoint with an asset that we knew that it's something that we wanted to get into.
Why do you want to get into it?
I think, just with regards to the faster growth that it is, and then also there's some synergies from an R&D perspective with our current neurovascular business, so we really do believe there's an opportunity to leverage know-how, to leverage some of the expertise on both sides to really help get products out to market faster, to maybe even develop some differential technologies in that space, and then we also believe just with our scale that there's an opportunity to scale them broader, particularly on a geographic basis outside the United States.
So I get questions about things like sales force. Are they going to be able to be retained? What does this mean for pricing in the market? What does this mean for maybe investments you need to make to make it a Stryker asset?
Yeah, so all of that's factored in when we think about making the acquisition. And I can't and I don't know all the specifics of how that's going to roll out. But what I would tell you is we are going to maintain a relatively separate sales force. We've just hired a head of that business. We hired a president for that business who is a Stryker person that's coming in that has PV experience. And so they're going to be able to leverage their Stryker know-how and their previous vascular know-how to lead that organization. There will certainly be elements of how do we operate a Stryker and line up behind our sales force and all of our businesses. And we'll continue to do the same here for the Inari business. And it's one of those things that there will be investments.
There will be elements that we have to do things for. Again, back to looking at our overall portfolio, these are areas we want to make investments in versus other areas that, quite frankly, we weren't going to get the same return.
Okay . Anything else you'd like to say on that?
I don't know. Anything I missed on Inari, Jason?
Well said.
Moving on. I want to go back to Med-Surg products for one second. We've spent a lot of time over time talking about things such as LIFEPAK 35, 1788 camera system. I didn't hear you mention those in AAOS speak. Any particular reason?
No. I mean, again, I just highlighted a few. I think you meant 1788 just in terms of.
1788, sorry.
Cameras. But no, look, these big platform launches are very much a part of how we deliver the revenue we deliver quarter after quarter, year after year. And you know, I think Preston even touched on this earlier. But as we think about just the long-term growth rate of Stryker, these will be things that 1788 becomes 1888, right? They'll be the next gen of LP35, though that was the next gen AED, the first one in whatever, 17, 18 years. But this is part of how Med-Surg goes to market. And so no, you should expect to see those as well.
Okay . 2025 guidance. When you gave it, you had Inari coming in, spinal implants going out, a stable ortho market, and hunting towards your margin expansion that you had set at your last analyst meeting. How did you put all those pieces together?
Very carefully.
Okay . No, but you were part of that.
Yeah.
It wasn't. Glenn put it together and then high-fived you and said, "Hey, Preston.
That's not what happened. I can't play the new guy card.
No, you cannot.
No, no. In all seriousness, it is one. It's a continuation from if we think about the top line growth. Top line growth is really a continuation of the momentum in the markets and the execution. And it's the new products that we've been highlighting here. It's also lining up behind the sales force and the continuing sales force. It's also the acquisitions that we've done over time, really over the last year, that are going to flip into the organic growth bucket. And so all of those give us a lot of comfort around our top line. Obviously, there's going to be some noise with spine exiting and with Anari coming in, but we'll manage. I mean, we'll manage through those integrations on both sides.
And all of that is going to be on the foundation that we will deliver an additional 100 basis points to get back to our pre-COVID operating margins. So we're well positioned coming out of last year, both from a top and bottom line standpoint in that.
Why was 8%-9% the right number?
I think it was really just, again, starting with our end markets and understanding where we are and understanding where our execution is versus those markets and understanding that we're growing off of big growth rates as well and so giving ourselves the opportunity to deliver to the high end of that is part of it.
What gets you to the high end?
Yeah, it's really going to be around, like I said before, it's going to be execution. It's going to be, can we get these new products out? Can we get them out in a manner that gets them into the marketplace even faster in some cases, and just delivering on our commitments from that standpoint.
What can go wrong?
Washington. No, I think, you know, look, there's always things that are going to happen. There's always going to be some event somewhere that might cause some disruption. And so I think we feel really good about our ability to work through that in the 8%-9%. So all of those pluses and minuses get factored in. You know, there could be any sort of economic thing that happens. There could be any sort of. There's always something. But we'll work through that as we go throughout the year. But we feel good about the 8%-9% with all the pluses and minuses.
Could you have another double-digit year?
Never say never.
Never say never. I'll take that. All right. So at the end of 2025, you're going to hit, you know, what was the phrase? Back to pre-pandemic.
Back to pre-pandemic, yeah.
Yeah, but there was a phrase, swiftly or marching.
Oh, we're marching back to.
No, it wasn't marching. There was a phrase.
Sprinting back. Sprinting back.
Sprinting.
Sprinting back.
Thank you, so you're going to sprint back.
Yes.
Then what?
We're going to take a break. No, I'm just kidding. I think what we're going to do is we will have some level of margin improvement, and you know, I think that was something we committed to pre-COVID, and then, of course, COVID happened with all the hyperinflation and things of that nature that we had to work through. I think we'll get back to those pre-COVID levels at the end of this year, and then you can expect that there will be some ongoing margin improvement. You know, we'll talk about that at our analyst day later this year and what specifically that is, but certainly, we are expecting that we'll continue to deliver the high-end growth and we'll continue to deliver some level of margin expansion as we go forward.
What helps you get to that margin expansion?
Yeah, this year it's probably categorized in three buckets. We talked about price. Price already. That'll be a component of it for sure. Certainly, when we look at our manufacturing and supply chain, our operations will be an area just in terms of gaining efficiencies within those operating areas. You know, when we do these acquisitions, they come with plants a lot of times. So making sure that we're deploying the right network strategy and optimizing our plant structure and network will be another component of it. We're certainly spending a lot of time in some of the verticals within supply chain. If I think about procurement and really looking at the overall base of suppliers that we have and culling that down and making sure we have a focus there.
Then the last thing I would maybe point to is when I think about SG&A and thinking about the G&A part and elements like the finance organization or IT or HR and how do we make sure that we're setting those organizations up from a scalability standpoint. We've started moving things into shared services and other elements like that that are going to help us to create a more sustainable model all the way through. Julian, maybe just one other comment on the margin expansion piece. For 2026 and beyond, right? Last investor day, we said 30 basis points is the floor. We'll obviously update it again in November when we get there. I think the point is, you know, no reason to think we'd walk away from 30 being the floor.
And we've said could be years where there's more depending on levels of M&A and some of those things. So again, we'll update it in November, but just didn't want to lose the point that 30 basis points, 2026 and beyond is absolutely the floor.
At least.
That's right. That's right.
It gets harder and harder, I would think, leveraging an organization of your size. Is that true?
You know, I think that's generally true, but I think we have lots of opportunity. I mean, part of our acquisition strategy gives us more opportunity because we are bringing in a lot of different things each acquisition. And I think the other element is we have some opportunity in some of those buckets like G&A that we haven't necessarily set up for a longer-term scalability that we have opportunity there as well. Pricing will continue to be an opportunity for us. So all those buckets that I outlined for you, they're not at their end state. And so there's a lot of opportunity to continue to drive those as we go forward. Plus, the other element I would just point to with growth in the ranges that we're talking about, you know, if we can sustain those growth, there's some natural leverage that comes from that as well.
How do you think about white spaces and continue to stand out to sort of further Stryker?
Yeah, I think, you know, we've talked about a lot of these different spaces. And some of them we've been able to get into. I mean, we've gotten into PV. We've gotten into health care IT. We've talked about urology in the past. And I think we'll continue to evaluate these higher growth areas. I think the other is that even though we're in some of them, I would say that we'll continue to evaluate how to even get further into some of those areas. Health care IT is one, for example, where we've done Vocera, you know, care.ai. There's probably other opportunities to continue what we have in that space. So I think we'll look at all different sorts of opportunities that exist where they make sense. We'll continue to make some plays there.
But you know, we'll also strategically look at our existing markets that we're in and where there's opportunities to either fill gaps or add or build on adjacencies that are in a smaller way onto those spaces.
Artificial intelligence is a cool word.
It's a very cool word.
How do you think about folding that into the Stryker product family?
Yeah, you know, it's one that we spend a lot of time talking about. So you may know we formed what we call our Digital, Robotics and Enabling Technology organization. And that organization is responsible for a lot of our platform technologies. And so as part of that, they're looking at a lot of how we think about AI across our product portfolio. You know, we have done some work. Obviously, the Care AI business brings in some elements of artificial intelligence, but really understanding how we're going to build that across our portfolios in a sustainable way, focused on. And so I don't know that I have anything that I would point to other than that specifically right now, but just knowing that it is a topic of discussion as we think about product development moving forward.
So when we think about the medical technology industry, AI may mean fee-for-service revenue and maybe folded into a robot, for example.
Potentially. Yeah, I mean, I think a lot. I mean, that's kind of care.ai if we think about that bit of the model, like how that's going to follow.
What is care.ai?
care.ai is a business that we bought that's more of a monitoring business. If you think about it in a hospital, so it's able to detect a lot of what's going on in that room, and so we think about one of the things that you're trying to prevent in a hospital room is patient falls. You're trying to understand when a patient might be in distress, and oftentimes, there's not enough nurses that are running around a particular wing or a particular hospital. What care.ai will do is help to facilitate a lot of that by kind of a visualization.
Okay . I think the Vocera acquisition did not get a lot of attention. I can't guess why, but what was it about the technology that was appealing for Stryker?
Yeah, I mean, I think it was really a couple of things. I think number one, at the time, there was a big shortage on nurses and a lot of pressure on nurses. And so one of the things that Vocera does is it lightens the load from a nurse perspective. The other thing that's probably a little bit less known is it's actually a platform that goes into a hospital that becomes more of a connected care type platform. And so the goal being that ultimately, you could have a lot of different elements that are lined up and connected behind that Vocera application. So it really is about building a bit of an infrastructure as well as lessening the burden on the nurses.
Where do you guys get your ideas?
They come locally. I mean, they really do. And that's the kind of sweet thing here is that we have business development teams that are local with sales reps. They're local with marketing teams and R&D teams that are focused on a specific category. I mean, that's what they do. They eat, live, and breathe those categories. And as a result, they understand the landscape. They understand the customers. They understand where the pain points are. And as a result of that, that's where a lot of ideas come from, whether they're inorganic or organic in terms of R&D.
When I think about several years ago, there was an increasing globalized push outside the United States. And yet, the majority of Stryker sales are still inside the United States. Why is that? And what makes that tilt a little bit more in the other direction?
Yeah, you know, it is, I think, two things. I think there still is, we still have a very big geographic push to grow our business in all parts. The hard part is it's hard to get bigger outside the United States meaningfully when your United States business is growing just as fast, so it's not that we have a deficiency that we're trying to offset, so I think that's part of it. But we have made some concerted efforts. I just point back to SERF, I mean, where we've done an acquisition purely focused outside the United States, and that really will help grow our business, primarily in Europe to begin with, and so we are making other efforts to do the same in some key markets around the world, so Japan being another one that we're highly focused on, on how do we grow that market.
But ultimately, all of our businesses are focused on not only maintaining this incredible growth rate that we have in the U.S., but we're trying to meaningfully grow outside the United States. And we do look every year do we grow faster outside the United States or not. We traditionally have.
Okay . When we're sitting here together a year from now, what do you think we're going to be talking about?
I hope we're talking about this great momentum out of 2025 and into 2026 and all these new products and maybe some acquisitions that are going to drive us forward beyond that. But ultimately, look, our goal this year is to achieve the guidance that we set. We want to grow at the high end of med tech, which we believe for us is about 8%-9%. We want to make sure we're delivering on those margin commitments and ultimately then delivering back to the business for future growth.
Excellent. Preston and Jason, thank you so much.
Thank you.