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DATE

Thursday, July 30, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chair and Chief Executive Officer - Kevin A. Lobo
• Chief Financial Officer - Preston Wells
• Vice President of Investor Relations - Nick Mead

TAKEAWAYS

• Organic Net Sales -- 9% growth, reflecting recovery from a previous cybersecurity incident and increased production to meet demand.
• Adjusted EPS -- $3.69, a 17.9% increase from the same quarter last year, reflecting improved gross margins and operational execution.
• Adjusted Gross Margin -- 66%, representing a 60-basis-point increase driven by a net tariff benefit, business mix improvements, and cost discipline.
• Adjusted Operating Margin -- 27.4%, a 170-basis-point increase resulting from gross margin expansion and lower adjusted SG&A as a percentage of sales.
• MedSurg and Neurotechnology Organic Sales -- 9.2% growth, led by 10.5% growth in international markets and 8.9% in the United States.
• Orthopaedics Organic Sales -- 8.6% growth, supported by 9.1% growth in the United States and 7.5% in international segments.
• Medical US Organic Sales -- 13.1% growth, driven by performances in the Sage and emergency care businesses, including products like LifeVac 35.
• Trauma and Extremities US Organic Sales -- 12.5% growth, reflecting momentum in the shoulder portfolio and the Pangaea trauma plating system.
• Endoscopy US Organic Sales -- 10.2% growth, fueled by demand for operating room infrastructure, including the Oculon Light.
• Instruments US Organic Sales -- 8.4% growth, including performance in the interventional spine pain portfolio and surgical technologies business.
• US Orthotech Organic Sales -- 9.2% growth, supported by Mako installations and robotic platform adoption.
• US Knees Organic Sales -- 6.2% growth, reflecting adoption of Mako for robotic-assisted procedures and cementless knee products.
• US Hips Organic Sales -- 4.9% growth, driven by the Insignia HipStem and the Mako Revive hip platform.
• US Vascular Organic Sales -- 6.7% decline, due to operational supply disruptions in the peripheral vascular business that resulted in a backorder situation.
• Full-Year Organic Net Sales Guidance -- 8.3% to 9.3%, representing a narrowing of the previous range based on year-to-date performance.
• Full-Year Adjusted EPS Guidance -- $14.95 to $15.10, updated to reflect current operational visibility and production expectations.
• Cash and Marketable Securities -- $3.5 billion as of the end of the second quarter, providing capital for strategic allocation.
• Year-to-Date Cash from Operations -- $1.8 billion, supporting the company's financial position and capital deployment firepower.
• Share Repurchase Plan -- $1 billion available under board approval, with management planning to resume repurchases this quarter.
• Full-Year Effective Tax Rate -- 15% to 16%, reflecting geographic mix and certain discrete tax items.
• International Organic Sales -- 8.9% growth, with performance led by markets in Australia, New Zealand, Germany, and Canada.
• Full-Year Adjusted Other Income and Expense -- Approximately $420 million, maintaining previously stated expectations.
• Ambulatory Surgery Center Site of Care -- 20% of hip and knee procedures, up from approximately 5% before the COVID-19 pandemic.
• Research and Development Costs -- Management noted ongoing costs related to cybersecurity remediation and IT stabilization following a previous incident.

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RISKS

• Lobo stated, "The supply disruption resulted in a meaningful backorder situation with lost sales in the quarter," regarding an issue at a peripheral vascular manufacturing plant.
• Wells stated, "There are costs that are coming through from a cyber perspective, both with loss absorption from manufacturing as well as R&D or our IT costs that we have that we are planning for as we come through the remediation."

SUMMARY

Management reported a recovery process following a previous cybersecurity incident, noting that manufacturing facilities have operated consistently since April 1. The company stated that capital equipment demand remains elevated, resulting in an increased order backlog that it intends to address through expanded production shifts. Management indicated a strategic focus on expanding the Mako robotics platform through new applications and the commercial launch of the Mako RPS system. Furthermore, the company plans to utilize its cash flow for a combination of strategic acquisitions and the resumption of opportunistic share repurchases during the second half of the year.

• CEO Lobo noted that the Mako platform has reached 20 years of use, with more than 2.5 million procedures performed globally across 47 countries.
• Management indicated that orthopedic procedures continue to shift toward Ambulatory Surgery Centers, with the current site-of-care mix for hip and knee procedures approaching 20%.
• The company highlighted the full commercial launch of the Encompass total ankle replacement system and the upcoming launch of the Sonopet 3 ultrasonic aspirator.
• CEO Lobo commented on the AVS acquisition, stating that the company has submitted for FDA approval of an intravascular lithotripsy product and initiated a coronary trial.
• Management reported that international growth is being driven by commercial execution and the introduction of products previously established in the United States market.
• CFO Wells stated that the company remains committed to achieving 150 basis points of operating margin expansion over a three-year period.

INDUSTRY GLOSSARY

• ASC: Ambulatory Surgery Center, a facility where surgical procedures not requiring overnight hospital stays are performed.
• Haptics: Technology that simulates the sense of touch or tactile feedback during a surgical procedure.
• IVL: Intravascular Lithotripsy, a technology using sonic pressure waves to break up calcified plaque in arteries.
• Mako: Stryker's robotic-arm assisted surgical platform for joint replacement procedures.
• Prophecy: A patient-specific preoperative planning and guidance system for orthopedic surgeries.
• RPS: Robotic Precision System, a specific handheld robotic application within Stryker's robotics portfolio.
• Thrombectomy: A surgical procedure used to remove a blood clot from a blood vessel.

Full Conference Call Transcript

Operator: Welcome to the Second Quarter 26 Stryker Earnings Call. My name is Megan, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we will conduct a question-and-answer session. This conference call is being recorded for replay purposes. Before we begin, I would like to remind you that the discussions during this conference call will include forward looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC, Also, the discussions will include certain non GAAP financial measures.

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

Kevin A. Lobo: Welcome to Stryker's second quarter earnings call. Joining me today are Preston Wells, Stryker's CFO and Nick Mead, Vice President of Investor Relations. For today's call, I will provide opening comments followed by Nick with market trends and some product updates. Preston will then provide additional details regarding our results and guidance. Before opening the call to Q&A. Our second quarter results demonstrated the strength of our broad product portfolio and resiliency of our teams. Our recovery from the cybersecurity incident continued as we ramped overall production to meet ongoing demand and support patient care. We delivered strong organic sales growth of 9% including high single digit growth from both our med surg and neurotechnology and orthopedics businesses.

Geographically, our US organic sales growth of 9% included double digit organic growth from our medical, trauma extremities, and endoscopy businesses and high single digit organic growth in OrthoTech and instruments. This growth was offset by supply disruptions in our peripheral vascular business. While our sales force hiring and integration has made great progress, the supply disruption resulted in a meaningful backorder situation with lost sales in the quarter. We have addressed the issue and backorders should reach a manageable level by the end of Q3. We remain confident in the long term outlook for peripheral vascular including the AVS acquisition which closed in the quarter.

Internationally, our 8.9% organic sales growth was driven by strong performances in Australia and New Zealand, Germany, Canada, South Korea, Japan, India, and Brazil. We continue to see long term growth opportunities in our international markets, through strong commercial execution, and the introduction of products that have demonstrated success in The United States in recent years. From an earnings perspective, we delivered adjusted EPS growth of 17.9% reflecting improved gross margins as well as our ongoing commitment to rigorous operational execution. We exited Q2 with regained momentum and expect a strong second half of the year driven by high demand for our capital products, continued production ramp and strong commercial execution.

We are narrowing our full year guidance, and our businesses are well positioned to deliver another strong year of financial performance. Finally, our financial position and cash flow generation remains strong, providing firepower to deploy capital. Preston will elaborate on that in his section. I would like to acknowledge our teams for their efforts in putting us on track to deliver another strong year of organic sales and adjusted earnings growth. With that, I will now turn the call over to Nick.

Nick Mead: Thanks, Kevin. My comments today will focus on the capital and procedural environment as well as several key product highlights. Capital delivery was a key driver of the growth in the quarter, as we recovered from the cybersecurity incident and demand remained strong. We exited the quarter with an elevated backlog, and expect continued strength in the hospital capital environment through the remainder of the year. The U. S. Procedural environment remains stable, While there has been some commentary on softness in surgical volumes, particularly in discretionary procedures, we have not observed meaningful changes in volume trends. Our portfolio is highly diversified.

With the vast majority of our businesses supporting high acuity, medically necessary, and emergent care clinical demand remains strong. Importantly, the fundamental drivers of health care demand remain firmly in place. Including an aging population, the ongoing need for hospital workforce productivity, and the increasing occurrence of chronic disease. Together, these trends continue to support durable demand for our differentiated product portfolio. Now I would like to turn to some product highlights. We delivered our best ever Q2 for Mako installations. Both in The US and internationally. And utilization rates across our installed base continue to trend upward. This year, we celebrate 20 years of Mako.

And its evolution into a multi specialty robotics platform with applications spanning hip, knee, spine, and shoulder procedures. Furthermore, we recently announced the full commercial launch of Mako RPS in the US. Expanding our robotics portfolio and offering surgeons additional options across a range of care settings. With more than 2.5 million procedures performed globally and systems installed across 47 countries, Mako remains well positioned. To drive continued growth through innovation, clinical evidence, and expanding adoption worldwide. We are rapidly moving to full commercial launches of triathlon gold, and our Triathlon Medial Stabilized Insert. Both of which are generating strong interest and positive customer feedback.

During Q2, we also gained approval on the PROPHECY patient specific planning and guides, for our new Encompass total ankle replacement system. And we have just moved to full commercial launch. Additionally, recently received approval and have initiated a limited launch for our Pangaea Trauma Plating System in Europe. To be followed by a full commercial launch during Q4. Within instruments, we look forward to the upcoming launch of the Sonopet 3 Ultrasonic Aspirator. These products are part of the steady cadence of next generation and innovative products across our broad base of businesses that fuel our growth. Let me now turn the call over to Preston.

Preston Wells: Thanks, Nick. Detailed financial information has been provided in today's press release. Today, I will focus my comments on our second quarter financial results and the related drivers. Organic sales growth was 9% for the quarter, against a double digit comparable in the second quarter of 25. Pricing was flat, and foreign currency had a 0.4% favorable impact on sales. This quarter had the same number of selling days compared to the prior year. Adjusted earnings per share of $3.69 was up $0.56 or 17.9% from the same quarter last year. Driven by our strong sales growth a continued focus on operational excellence and a net benefit in the quarter from tariff related costs.

Foreign currency translation had a favorable impact of $0.1 Now I will provide some highlights around our quarterly segment performance. For the quarter, MedSurg and Neurotechnology delivered organic sales growth of 9.2%, which included 8.9% of U. S. Organic growth and 10.5% of international organic growth. Instruments US organic sales rose 8.4% against the prior year comparable of 16.3%. Growth this quarter included a robust double digit performance in our interventional spine pain portfolio, as well as a strong performance from our Surgical Technologies business. Which includes Neptune waste management smoke evacuation, and SurgiCount products. Endoscopy US organic sales grew 10.2% reflecting strong demand across multiple areas of the business.

Operating room infrastructure and renovations were a key growth driver including a robust performance from the recently launched Oculon Light. We also delivered strong growth in our urology and connected OR products within the core endoscopy portfolio, as well as in sports medicine. Where double digit growth was driven by its expanded range of shoulder implant products. Medical U. S. Organic sales increased 13.1% and included very strong double digit performances from our Sage, and Emergency Care businesses. From a product perspective, growth was led by preoperative skin prep products, Howard Cots and LifeVac 35. Which continues to generate strong customer interest and capture additional market share.

Capital demand also remains elevated as evidenced by an increased backlog and strong orders as we exited the quarter. Including ProCuity beds and our SmartCare business, which includes Vocera and care.ai. Vascular U. S. Organic sales declined 6.7% from a year earlier, due to the operational disruption in peripheral vascular that Kevin discussed in his remarks. Partially offset by solid growth in our hemorrhagic portfolio driven by the SURPASS Elite flow diverter. Internationally, MedSurg and Neurotechnology organic sales growth of 10.5% included broad strength across endoscopy, medical, and instruments. Geographically, growth was led by robust performance in Australia and New Zealand, Germany, Canada, Brazil and India.

Orthopedics delivered organic sales growth of 8.6% in the quarter, which included 9.1% of U. S. Organic growth, and 7.5% of international organic growth. U. S. Knees organic sales grew 6.2% reflecting the continued adoption of Mako for robotic assisted knee procedures. And momentum from our cementless knee products. U. S. Hips organic sales rose 4.9% reflecting the ongoing success of our Insignia HipStem and the Mako Revive hip platform. With our latest application having the expanded ability to address more difficult primary hip cases and hip revisions. U. S.

Trauma and extremities organic sales increased 12.5% with strong double digit sales growth in our Trauma and Upper Extremities businesses, Pangaea continues to be a key driver of our growth in our Trauma business. And our multiyear growth momentum in shoulders was driven by the continued strong performance of our differentiated portfolio, and the recent full commercial launch of Mako shoulder on Mako 4.0. US Orthotech organic sales grew 9.2% driven by robust Mako installations. Internationally, Orthopaedics organic sales growth of 7.5% included strength in knees, OrthoTech and Trauma and Extremities. and was led regionally by Canada, South Korea, Australia and New Zealand, Brazil and India.

Similar to the first quarter, the conflict in Iran had a modest impact on overall company growth. Now I will focus on certain operating and non operating items in the quarter. Our adjusted gross margin of 66% was 60 basis points favorable to the second quarter of 25. Reflecting the impact of the net tariff benefit I previously mentioned as well as improvements in business mix and cost discipline. Our adjusted operating margin was 27.4% of sales, which was 170 basis points favorable to the second quarter of 25. Driven by the gross margin improvement as well as lower adjusted SG&A as a percentage of sales due to our ongoing focus on spend discipline and margin expansion.

Adjusted other income and expense of $101 million was $5 million lower than in 2025. We continue to expect our full-year 2026 adjusted other income and expense to be approximately $420 million The second quarter had an adjusted effective tax rate of 16.5%, 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.

Ended the second quarter with approximately $3.5 billion of cash and marketable securities, and year to date cash from operations of $1.8 billion supported by a strong balance sheet and robust cash flows, we remain focused on M and A opportunities to drive top line growth as our primary capital allocation priority. Additionally, considering our elevated level of cash flow generation, and recent valuation compression across the medtech sector, we plan to resume share repurchases this quarter. And now I will discuss our full-year 2026 guidance.

Considering our year to date results, our presence in attractive end markets largely supporting acute and emergent procedures and durable demand for our capital products, we are narrowing our full year guidance and now expect organic net sales growth to be in the range of 8.3% to 9.3% and adjusted net earnings per share to be in the range of $14.95 to $15.10 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. With that, I will now open up the call for Q&A.

Operator: At this time, we will open the floor for questions. You may remove yourself at any time by pressing star 5 again. We would like to remind callers to please limit themselves to 1 question and 1 follow-up question so we can accommodate as many participants as possible. Our first question will come from Joanne with Citibank. Your line is open. Please go ahead.

Joanne Wuensch: Good afternoon, and thank you so much for taking the question. I actually have a lot. I am curious for guidance, the updated guidance, what your thought process was in narrowing it, particularly lowering the top end of the range. Which leads me to my second question of how you are thinking about revenue growth in the back half of the year. And then I am just going to go real straight into this. EPS you had a really nice beat in the quarter versus what we were looking for. But it does not look like it is flowing through for the full year guidance, and I am curious why. Thank you.

Preston Wells: Hi, Joanne. I will take the first part of your question and then the EPS question, then we will have Kevin jump in on how we are thinking about sales from a remainder of the year perspective. So from top line guidance standpoint, really, we have half the year done, Obviously, we are coming out of the cyber event that impacted Q1. We have seen the momentum and the recovery starting to come back in Q2. And we have a good ways to go in the second half in terms of continuing that momentum to deliver on the guidance range.

And quite frankly, when we look at what is left to do with the rest of the year and where we are with our products and with the markets right now, we felt like it was a prudent range to be in the $8.3% to 9.3%. Just looking at it in totality.

Kevin A. Lobo: And so Kevin can talk a little bit about the revenue piece. A little bit in just a second. Let me just address your EPS question. So from an EPS standpoint, when we look at the beat in the quarter, it is driven partially by the tariff refunds that are happening that happened in the quarter. But as a reminder, when we talked about the first quarter earnings, and those were obviously well below ex expectations driven by the cyber event.

There are costs that are coming through from a cyber perspective, both with loss absorption from manufacturing as well as R&D or our IT costs that we have that we that we are planning for as we come through the remediation that will offset that benefit. So when you look at it on a half year basis, it actually you can see those offsets are already happening.

Preston Wells: Yeah. And related to your question about lowering the top end, Joanne, Preston's point, half the year is already done.

Kevin A. Lobo: As we look at the production that we have to just the building of all of the capital equipment that is required. We have the orders. To really drive very high growth. it is just how fast can we actually make everything to deliver. I would say our ability to beat the top end would be hinging on 2 factors. 1 is the market would have to be strong in procedures. We expect it to be consistent. If it improves a little bit, that obviously gives us a tailwind.

And then if we can ramp our products and including some of the new products that we are launching, ahead of what we are projecting right now, then that could cause us to actually raise on the top end. But right now, this is the best visibility that we have. With what we know now. Obviously, at the end of Q3, we will update our guidance and if things improve on a faster trajectory, then we could look to maybe move it up. But at this point, this is the best visibility that we have.

And, honestly, on a $25 billion business, if you are growing at around the 9% range, it is still a pretty good year given that we were knocked out for almost an entire month. Thank you.

Operator: Your next question will come from Robbie Marcus with JPMorgan. Your line is open. Please go ahead.

Robert Justin Marcus: 2 for me. 1, Kevin, you know, 1 of the things or Preston, whoever wants to take it, 1 of the things we are all trying to figure out is what is underlying and what is catch up from first quarter I know you had talked to some of the capital being more second half weighted. The quarter was in line with expectations with some puts and takes, vascular being 1 of them. Hips being another, medical being on the plus side, How should we think about what is underlying and normal trend versus where you saw the recapture from first quarter? And if you are able to quantify anything, that would be helpful.

And then I have a follow-up after. Thanks.

Preston Wells: Yeah. So thanks, David. As we talked about really in the first the first quarter call, remember, we talked about the variability of the different businesses that we have. So it is hard to really pin down. Okay. This is specifically underlying versus catch up. I mean, there are some areas that was a little bit easier where there is just some catch up revenue to bulk. I would say for the most part, what we are seeing is we are seeing continued momentum across all of our businesses. We see really strong demand for our capital products.

I think that is the 1 where we will see a more significant uptick in the second half of the year based on what Kevin talked about earlier with production ramping. Really getting ourselves back online to be able to produce at a faster rate to support the volumes that we have. So, really, I would say what you see really in the second quarter is primarily just the momentum of the underlying business primarily with a few other elements that are kind of maybe coming into play here and there throughout that business.

Kevin A. Lobo: And the only thing I would add, Robbie, is we always have variability in our quarters given the range of businesses that we have. Would tell you peripheral vascular was certainly not something we were expecting. That supply disruption was acute, and we took the pain. But overall, we hit the number that we were aiming for. In the quarter, because we had some out performances in endoscopy and medical and even within medical, our bed business we have tremendous number of orders that we have a big job to catch up to deliver. So that actually was not a very strong performer in spite of medical's overall terrific growth.

And it is not because we do not have the demand. it is just because making beds takes time. And we were out of production for a long period of time. So that is 1 particular product that we have a lot of catch up to do But there is a lot of noise underneath these numbers, but overall, business performed very well. The demand is still strong. And you are going to see a little bit of volatility across our businesses probably in Q3, Q4, but we feel good about the overall health of our businesses. And they are going to recover at kind of different points of time.

And even the procedures, right, Rescheduling procedures was very, very hard. You know, no 1's ever gone through at least this kind of an event that we went through. And so it has created a little bit of inconsistency. across our businesses. But overall, for the full year, we are feeling really good. About our business.

Robert Justin Marcus: Great. And 1 quick follow-up. Kevin, 1 of the things everybody's been concerned about, and you kinda touched on this, but I would love a little more color. Just the backdrop of slowing or stable procedure volumes. We have had a lot of mix data points. And the current and future state of the CapEx environment. Would love to get your thoughts on both of those. Thanks.

Kevin A. Lobo: Yeah. Well, I think we have sort of talked about them in Nick's remarks. Look. We see the procedure environment as healthy in the businesses where we operate. We see the demand for procedures is strong. it is healthy. it is stable. it is whatever adjective you want to use. We do not see issues with the procedures that we play in. And capital, I would say, is very strong. If I look at our backlog, we have an elevated backlog We had a record month of Mako sales. We are just not seeing any issues related to capital equipment.

We did see, and we have commented on this even in the last quarter, a slight slowdown in Europe related to procedures, but certainly not in the United States and not in the other markets around.

Operator: Our next question will come from Larry Biegelsen with Wells Fargo. Your line is open. Please go ahead.

Larry Biegelsen: Good afternoon. Thanks for taking the question. Kevin, just a follow-up on the revenue guidance. The organic growth needs to be about 11%, I think, in the second half. To reach the midpoint of the guidance. So is there any more color you can provide on what is driving your confidence to be able to recapture the lost sales to achieve that and, of course, offset the vascular supply issue you had. And just remind us of why you expect more catch up in the second half in the second quarter. I think that is just been a lingering question investors have had.

Kevin A. Lobo: Listen. We lowered the bottom end of our range. That should give you some idea. We are not going to lower the bottom end of our sorry, We raise the bottom end of our sales guidance from 8% to 8.3%. Right? So if you are raising that, that means you really do not see a risk of us being able to deliver at the lower end. And that raising is based on just tremendous orders for our capital and that is just execution. All we have to do is make the products, and ship the products, and we can see the production ramp now that our plants have been operating pretty consistently since April 1.

And so that visibility is very clear on the capital side. Even on the procedure side, so the small capital, we do have orders for small capital. We have pretty good visibility into those orders. And surgery schedules, and our business is feeling really healthy. So that 11%, we feel very, very confident. Delivering. Other otherwise, we would not have raised the lower end of our sales guidance.

Larry Biegelsen: Any color just on how to think about the catch up in Q3 versus Q4? Thanks for taking the questions.

Preston Wells: No. I think, again, like we said before, we are going to see that happening at different paces and different times. And part of it is, as Kevin said, the ramping up of production for those capital products that we can get those out the door. So I think you are going to see kind of a steady cadence across both quarters as we go forward.

Operator: Your next question will come from Ryan Zimmerman with BTIG. Your line is open. Please go ahead.

Ryan Benjamin Zimmerman: Thank you. Thanks for taking the questions. Preston, just you have talked enough about the top line, I think, with the questions. But can you spend a little bit on margins and the EPS guide for the second half of the year? If I look at kind of how the Street is thinking about Q3 to Q4, what is it that is going to drive maybe lower EPS in fourth quarter, which is kind of what the Street is assuming to get to the guidance.

Is there additional expenses that are needed Is there a margin impact when you think about kind of the excess production that you are going to do that we need to consider, just help us think through the cadence there on the margin and P&L for the EPS guide. Thank you.

Preston Wells: Sure. So first of all, we are still committed to what we talked about last year, which is our 150 basis points over the course of 3 years. So that is still our commitment. I think we have demonstrated the ability over the last couple of years to drive op margin. We are gonna continue to do that So teams are fast at work on continuing to find ways to get better from an efficiency and productivity standpoint. So that is the underlying kind of focus of the organization. We do have this year several moving you know, larger moving parts.

So, obviously, with the cyber events, we have manufacturing shut down for some period of time, and so you have lost absorption and idle costs that are sitting there that we have to recover from. We also have a lot of work ahead of us in terms of the remediation and stabilization from cybersecurity perspective. So there is money that is going to be spent throughout the year to Support those 2 activities that are really related to the cyber event itself.

In addition, we know that there are some pressures on some different areas around oil, and other raw materials that we are managing in this overall environment as well. that is offset by what I talked about before in the tariff refund piece of it. So we have a lot of moving parts with a lot of different items that are happening from a macro perspective that we are managing. So I think it is those elements that are still kind of what is left us with a little bit wider of a guide On the EPS side. But at the same time, we feel really good about being able to fall in that range.

And certainly, as Kevin mentioned before, you know, as sales are delivering, the more we can do and deliver on the top line. That will we expect that to fall through EPS as well as we go. So it is really just managing those big macro items throughout the rest of the year is what we are going to be wrestling with.

Ryan Benjamin Zimmerman: Okay. Very helpful. And then, Kevin, 1 for you. You know, we have seen physician reimbursement on large joint replacement come down over the last 10, 15 years. Pretty steadily. But this year, Medicare took a pretty big swing as much as 20-plus percent on knees, hips, shoulders, etcetera. I am just wondering if you have any thoughts on what the orthopedic industry is doing to maybe push back on this or whether you think this has any impact in future years on knee and hip replacement on the on the physician side?

Kevin A. Lobo: Yeah. Listen. We the proposed rules are always, it is a sticker shock, but this has been going on ever since I have been at Stryker. For 15 years. See the proposed rules come out. They create noise, and then the normal course of everybody voicing their opinions and ends up getting to a reasonable place. And I do not assume that it will be any different this time. What you are seeing, of course, is, you know, there are shifting of site of care. Within orthopedic procedures. That is going to continue, but I question. And, frankly, for Stryker, that is a good thing.

Because we like the ASC as a place where we can win not just in hips and knees, but across our entire portfolio And so that trend, I think, will continue. Related to reimbursement pressures. But the demand for joint replacement procedures is unabated Every day, 12 thousand people are turning 65. there is more and more people being active. So I do not see that changing, that dynamic changing, and I think the physicians will do fine. They are needed. And their voice will be heard.

Operator: Your next question will come from Travis Steed with Bank of America. Your line is open. Please go ahead.

Travis Lee Steed: Hey, thanks for the question. I wanted to push a little bit more on the U.S. Ortho numbers especially the U.S. hip number. Hard for us to see the underlying growth there. But I know it was a little lighter than I think some expected. So I do not know if anything on share shifts to the market and U.S. hips and knees that took some of the upside away this quarter?

Preston Wells: Travis, in terms of U.S. hips, nothing that we would point to in terms of major share shifts or changes there. I think the 1 thing I would point out is, again, the delivery of the number this year was against a pretty large prior year comparable. So we had 8% growth last year in that space. So just it is really just a comparable. I think as we look at any of our numbers orthopedics, we always say, you know, 1 quarter does not make a trend. And so I think that is true here. So nothing major has changed in terms of anything that we have seen in from an underlying market conditions standpoint.

Travis Lee Steed: Okay. And maybe a little more color on the Inari supply disruption. What exactly happened? Is it just the Inari business or other parts of vascular certain products? Does that is there a catch up in Q3 assumed in the guide? Or is there some lingering impact? I know you said manageable by the end of Q3. Curious how it works out on the numbers for Q3.

Kevin A. Lobo: Yeah. The supply disruption, I am not going to get into the details of what it was, but let's just say it did cause a significant backorder specific to 1 plant in the Inari business. Which frankly makes virtually most of the products other than third-party products. A factor for us. So had an issue with that plant. That created the back order. The back order is pretty elevated right now. And we it will work down to a manageable level by the end of the quarter. We still look we do expect the business to grow in Q3 and to grow in Q4, but it is going to take a little time for that to build.

So because of the backorder situation. So we finally got the Salesforce stabilized. We are feeling really good about things, and then we had this hiccup. And then, unfortunately, when we do acquisitions, we have felt this pain before with some of our other deals in the past, and obviously moving into our Stryker Salesforce and now into our Stryker manufacturing systems that we have experienced this. We did this with Sage. it is happened to us with Mako. it is happened to us We do not obviously enjoy it, but we do love the market.

And we do love the products that they have, the pipeline that they have, and we will be back and it will just take us a little bit of time to dig out from under this backorder situation.

Operator: Your next question will come from Vik Chopra with BMO Capital Markets. Your line is open. Please go ahead.

Analyst: Kevin, you characterized the second half outlook as strong. I am just curious what key assumptions are embedded in the back half regarding volume growth, capital conversion and backlog realization? And then I had a quick follow-up, please.

Preston Wells: Hey, Vijay. I will take that 1. In terms of the back half of the year, you know, we are not gonna give all the specifics in terms of what we are expecting across each 1 of those elements that you laid out. But what I can tell you is when we exited this quarter, the momentum that we see really on across the business. So even just from a procedural standpoint, as well as the capital the capital business And the way we look at the capital business, in particular, is looking at the order book, looking at how that is. I have mentioned even some of the products that are driving it.

For medical, but we see that really across all of our capital businesses. And so it is really our ability to capitalize on that through the production ramp that Kevin's talking about. Is what gives us a lot of confidence in being able to deliver on the capital side. And the same thing on the procedural side, which really just continuing to run the offense behind Mako on the joint replacement side. And, obviously, with RPS hitting full launch as well, I think those are the things that we really believe in that are gonna help drive both sides of those businesses.

Analyst: Great. And then just for my follow-up, you know, if you could just talk about the early feedback on Mako RPS. And how we should think about the ramp and impact in 2026. Thank you.

Kevin A. Lobo: Yeah. Listen. We were in limited launch for the second quarter, and the feedback has been really outstanding. it is really easy to use. The surgeons really enjoy the experience. The haptics surprises them. Frankly, how you can do that in a handheld robot. So we are getting really great feedback, and now we are gonna move on to the full launch. There are there is a subset of surgeons that are not ready to move all the way to Mako. Who are only pinched in doing total knees, especially in the ASC. That this is gonna be a beautiful fit for. We have already had some conversions, but it is been small for now.

But we are planning to really ramp this up and excited about this.

Operator: Your next question will come from Matthew O'Brien with Piper Sandler. Your line is open. Please go ahead.

Matthew Oliver O'Brien: Afternoon. Thanks for taking the question. Kevin or Preston, I hate to keep harping on this, this back half because I think everybody is really nervous now about your ability to hit the back half numbers. But you keep talking about this production ramp. Our facilities being able to meet this sizable ramp in the back half. Young know, I am no manufacturing expert. By any means, but are there any factors that potentially could impact your ability to make enough product? It seems like primarily in med surg. To be able to deliver a significant ramp in Q3 and Q4. It seems like it is a little bit more even in Q3 than we are accustomed to.

Be able to get to the full year guidance because I think that is what everybody's really worried about.

Kevin A. Lobo: Yeah. Listen. We are we are not worried. I mean, the guidance that we are giving is based on what we know We know how many shifts to run. We these are products that we they are not new products we are making. These are products that we know how to make. And that we have made in the past. So based on adding shifts and being able to plan for this, we feel really comfortable with the guide that we are giving to you. Obviously, we are gonna try to make even more if we can, but we are we are we are setting the guidance in a place we feel very comfortable being able to deliver.

The orders are already there. So demand is not the problem. As it relates to capital equipment. it is really just being able to fulfill those demands and could we have an issue here or there? it is always possible. We think we have accounted for that. In the guidance that we have provided. Young know, we have a habit of hitting the numbers that we provide to you and potentially beating the numbers that we provide to you, and this is no different. When we give this guide, it is we give this guide with great confidence in our team's ability to deliver that. These are businesses we know. These are products that we know.

Our plants are fully operational. After the cyber event. And so we have added shifts here and there. Those shifts are not performing well. And based on that, we have we have laid out our guidance for the year.

Matthew Oliver O'Brien: Got it. And then just a follow-up on the peripheral vascular. I know you have the sales force in place, and then you have this hopefully short term supply issue. that is space, though, I mean, those procedures, they cannot be delayed. So just want to hear a little bit more about your confidence in and reenergizing and reaccelerating growth in that franchise. Getting through the supply issue? Do you think it is something where you could lose some share durably, or is it something where you can recover based on your early experience with that business? Thanks.

Kevin A. Lobo: Yeah. Young are right. We did lose sales. I think I said that in my opening comments that we those are procedures you do not it is not like capital equipment. That you so we did lose business because those cases are emergent. We did prioritize our products. We had allocation process. As you can imagine. So we kept our highest volume, most loyal customers we kept them happy. And then the customers that ordered sort of smaller amounts, and we let of that business go because we had to. But we have a fully ramped up Salesforce, and that is something that we had not had in the past year.

We have gone through a lot of turmoil with the signing of non competes and a lot of Salesforce turnover. We now have a very stable and hungry Salesforce, and they are going back on offense. And as this back order starts to come down, which had already, you know, starting to, I think we are gonna be in great position to recapture some of that business from those other accounts and actually fortify ourselves. So we are feeling pretty good about our ability to recover. We have great products in this business. We have a great brand. In this business, and, and we will be back.

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

Vijay Muniyappa Kumar: Hi, thanks for taking my question. I guess 1 on, you get asked on capital deployment and M&A historically. But curious given where the stock is, Kevin, and you guys just put up great numbers. Is there a bias towards share repo? I know you mentioned on the call. Maybe talk about the opportunity that you see you know, and what is the size that we could, think of from a share repo perspective? Thanks.

Preston Wells: Thanks, Vijay. The as we look to think about our capital deployment, strategy, I mean, really, nothing major has changed. I mean, the m and a continues to be our number 1 priority, and our plan is to continue to find those opportunities that are gonna drive future growth. So that is first and foremost. What we have seen, though, as we continue to grow and scale, and continue to focus on delivering more efficient cash flows, it has given us the ability to try to return shareholder value in a few different ways. And so as a result, that is why we are talking now about potentially going back and doing share buybacks.

And so we are looking at doing some more some of that in the second half of this year really focused on trying to just continue to use cash in a really efficient way. In terms of size and of what that could look like, we do have already approved from a prior approval by the board about a billion dollars available for us. I am not saying that is what we are going to do, but that is what we have available. And it is something that we are gonna take a look at. it is going to be really on deal flow and timing of that deal flow from an m and a standpoint.

As well as what the current valuation is of our share. So those are going to be some of the elements to determine when we go out and do something and how much we do. But really, it does not mean that our focus and our number 1 priority is not changing from m and a, but we will also supplement it with some share buybacks this year.

Vijay Muniyappa Kumar: that is helpful. And, Kevin, maybe 1 on backlog and orders. Any elongation of backlog or cancellations just given some of these concerns from cautious comments from hospitals. If you could comment on backlog and order book, that will be helpful.

Kevin A. Lobo: Yeah. Look. As we mentioned earlier, we have an elevated backlog. As we exit the quarter. We have seen zero cancellations in our books, and our teams know how to deal with slight delays when we have issues with manufacturing, and our customers order a lot quite a bit in advance, or we are able to meter that. But thus far, we have not seen really any cancellations. And feel really good about the capital business. And getting back to your first question on cash flow, because you, Vijay, were 1 that used to challenge us a lot, if I remember 10 years ago, in cash flow.

If you look at the amount of cash flow we generate now versus 6 years ago when we stopped doing share buybacks. We can now start to do some level of buybacks and still have huge amount of firepower to do acquisitions. So we still have a very, very robust pipeline of deals We are very disciplined, so we will pass if the price is not right. On deals. But we are going to execute m and a. No question about it. But given the sheer size of our cash flow, we can also start to do opportunistic share buybacks. And given where the price of stock is, we are going to start to do that.

Operator: Your next question will come from Patrick Wood with UBS. Your line is open. Please go ahead.

Patrick Wood: Amazing. Thank you so much. I will just ask the 2 upfront if I can. First 1, it is an area that does not get a lot of questions, but curious about SmartCare and the Smart Hospital that you guys pushed out. Vocera is obviously growing very strongly in the background. How the feedback to that has been and vision for that. So that is 1. And then the second is, obviously, business is very strong. I know that it is a slow tanker moving into the ASC that is been happening for very long time and over years. But have you seen any pickup of that in late?

It just looks some of the data that we see that ASC volume shift seems to have picked up this year a little bit more. Curious if you are seeing that. Thanks.

Kevin A. Lobo: Yeah. First, on SmartCare, super excited about the creation of the business unit. it is a new business unit that is started beginning of this year. The tech stack has been modernized, which took us a little bit of time. Everything's cloud-based. care.ai was already modern. Vocera, we had to kind of upgrade the tech stack. The orders were very strong in SmartCare.

So we are expecting a really big second half of sales growth so big because the orders have really, really picked up since we have created the business unit, integrated the tech stack, we are getting great feedback from our hospital customers, and I am expecting a very strong second half of the year and future related to SmartCare. So bullish on SmartCare. On the ASC trend, it is more of the same, honestly. it is just that the limiting factor right now is construction of ASCs. And that just takes time. But every single hospital system you talk to are looking at doing that. You look at our hip and knee business, it is now in the high-teens percent.

Pushing 20 percent of the procedures now being done in ASCs. And if you remember before COVID, it was 5%. So that is a pretty significant ramp, but it is steady. it is it is not gonna sort of inflect. I think it will just continue to be kind of on the current trajectory just based on construction. Of ASCs and or re rebuilding and renovations. Those just those things just take time. And we get to be on the front end of those with our communications business with booms and lights and we actually help customers design ASCs with our with our architects that are part communications business in Dallas.

So we have pretty good line of sight into the trend on ASCs. I think just steady growth And now you are starting to hear even in Europe and other countries, they are starting to have an interest, and I think that trend will actually start to pick up around the world as well. it is very early there, though.

Operator: Your next question will come from Richard Newitter with Truist. Your line is open. Please go ahead.

Analyst: Hi. This is actually David here for Richard. Thanks for taking the question. I want to kind of pivot to IVL in Amplitude, the PV and Inari market? Could you talk about, I guess, timing of some of the clinical trials there and when you expect to come to market? And then just overall, what the market growth that you see kind of from a procedure perspective, I think, a couple of quarters ago, you said mid to high teens. Is that still the case? And then just finally, 1 of the things that we have heard about IVL, is that it brings pull through to other kind of coronary products.

So given that hypothesis, how do we think about, you know, your desire to kind of build out that portfolio even more or even quicker than maybe FDA approval? Thanks.

Kevin A. Lobo: Yeah. Okay. Well, thanks. there is a lot in that question. So look, we are excited about the AVS acquisition. The first product, the IVL, the first indication is going to be above the knee. And that will drop right into our peripheral vascular Salesforce. The feedback from our customers has been really positive. They love the method of action, the way the product performs. At least from what they have heard and what they have seen, the ones participating in the clinical trial. So we are we have submitted. We do not know when it will be approved, but there is a chance that we will start to be selling that product before the end of this year.

We will keep you posted as we hear from the FDA on that. And we have commenced a trial on coronary indication. That trial will take a little while, so we will keep you posted on that, but it is certainly not something you can think about in the next 6 months to a year. it is gonna take longer than that. And then as you know, we never just do 1 thing. When we buy something, as we have done with Enari, we follow on with ADS, and we are gonna we will continue to look for other technologies to broaden the call point and the products that serve those call that is the Stryker offense.

We have done that. Young have seen us do that. Repeatedly with neurovascular. We started with the Boston Scientific business, and then we quickly followed up with SURPASS and cons Concentric and so that is our offense. So we will continue to do that, but these products kind of stand on their own. They are they are very it is a it is a very compelling treatment area, huge demand, We will start to size the demand and the opportunity as those products come to market rather than spend time today. But we are very excited about the technology Feedback from surgeons has been incredible. And I am looking forward to getting those on the market.

Operator: Your next question will come from Matthew Charles Taylor with Jefferies. Your line is open. Please go ahead.

Matthew Charles Taylor: Hi. Thanks for taking the question. Guess I was hoping you could discuss the results in Q2 and the recovery going forward in terms of the 3 buckets that you had talked about before with revenue recognition, some catch up in procedures, and then the capital that you have been talking about a lot on this call. So could you be specific at all in Q2 in terms of how much rev rec or procedural recovery helped? And then, you know, which of those buckets, presumably the last 2, are gonna contribute the most in the second half?

Preston Wells: Yeah. So as I mentioned before, really, the rev rec piece we would have seen, we did not we did not quantify that specifically certainly, that would have been a little a small piece of what happened in Q2. You are right. The last 2 buckets are the largest, particularly around the capital side of things. And so that, you will really see, as we talked about before, ramping in Q3 and q '4. So I would say we expected to see that. We have not quantified any of those pieces. Again, because across all our various businesses, it is a little bit different how they are all interacting.

But the way to probably to think about it is the rev rec piece is done. And you really start to see the capital components of that and the rescheduling of procedures More so in Q3, Q4.

Matthew Charles Taylor: Okay. Great. Thank you very much.

Operator: Your next question will come from Matthew Blackman with TD Cowen. Your line is open. Please go ahead.

Analyst: Good afternoon, everybody. Thank you for taking my questions. I have got 2. Both are Inari-related. I will just throw them out upfront. Maybe just to start quickly, Preston, just hoping for a little bit more color on Inari supply shortfall? How much of an organic drag was it? Our math says could have been 50 to 75 basis points. Is that sort of roughly the right ballpark as we think about the impact in the second quarter? And then, Kevin, I was hoping you could give us a bigger picture state of the union on mechanical thrombectomy market, maybe in 2 parts?

What does the market look like today? it is harder for us to get a feel for the underlying market trajectory, and there are a few crosscurrents. You have a supply headwind to work through, your biggest competitor is in the throes of an integration. There are emerging players coming. But there is also a bevy of supportive data out there and still coming. So the real question is, how do you think about a sustainable market growth rate over the next couple of years? And could that growth step higher over time?

And then the quick follow-up there is, how do you position mechanical thrombectomy and IVL when you have it later this year perhaps at the peripheral vascular call point? Is there an opportunity to cross sell? And are we underappreciating that aspect of these assets? Thank you, and sorry for throwing that all out there at once.

Preston Wells: Yeah. That was a lot. I will let Preston start, and then I will finish. Yeah. I will take I will take the easy 1. You are in the ballpark. On the impact. The financial impact you stated was you are in the ballpark.

Kevin A. Lobo: Look. As it relates to the market, this is a market that has huge potential to grow. it is kind of like if you think about neurovascular, the Mr. Clean study that happened, kind of created a big step up in the overall market demand. The equivalent of that is a PEERLESS II study that we just finished enrolling 1.2 thousand patients. We just finished enrolling. It takes roughly a year to do the data readouts on all the processing and everything. So that will come out sometime mid-next year. mid next year. And I think that will lift the entire market because this is really a high powered very, very important clinical trial, the most important.

Mean, there are we have some other trials going on, but this is by far I would call it, the seminal trial within peripheral vascular that will really hopefully blow the market open. There are some new competitors. They tend to be more in just the aspiration portion of the market. As you know, it already has a full suite of products which includes a clot retriever, as well as the flow retriever and so it is particularly a full product portfolio. But I would say that is gonna be the biggest catalyst for the market to grow. And we are looking forward to that, that data readout. and that being published in the middle of next year.

But, meanwhile, the market's still a good market even today. Our problems are internal to us. We will get those problems resolved. We will get back to the double digit growth, as we rectify our supply chain challenges.

Analyst: Great. Thank you.

Operator: Your next question will come from Caitlin Roberts with Canaccord Genuity. Your line is open. Please go ahead.

Analyst: Hi. Thanks for taking the questions. Maybe just 2 for me. On the innovation front, you called out some recent product launches earlier in the call. Just wondering if the manufacturing disruption is impacting the timing or pace of any of the recent or upcoming launches. And just some more color on RPS. what is the site mix been between ASCs versus hospitals? And has the convert been more existing Mako surgeons adding to their capabilities with RPS, or have you been converting new to Stryker surgeons?

Kevin A. Lobo: Yeah. Listen. it is really it is really early in the RPS days is what I would tell you. And we have done both hospital as well as ASCs. But it is been very early. We focused actually more on competitive users than we have existing Stryker users. that is been very intentional. And so that we are gonna continue to push probably much more on the competitive front in the early days and then eventually obviously, reach out to the Stryker surgeon. that is typically what we do.

As it relates to ramping new products, I would tell you that probably Triathlon Gold is the 1 that is just a little bit slower out of the gates than we would like. Just because we lost production for a few weeks. But the demand for triathlon gold is very good, and we are ramping the production. But that is probably the 1 Of course, if you close your plants for a few weeks, weeks, sorry, that is gonna delay, you know, your ability to get the sets out as-- and instruments and everything out as fast as you would like. But nothing in a material way. So we are we are really excited.

If I think about something like total ankle, with prophecy, we did not have the prophecy planning and guides approved. So we were all kind of on only a limited launch anyway. And so that production really was not hurt as much. So it kind of varies by product. But now that we have all our plants humming, we do have a lot of new products coming scaling in the second half and in the case of Sonopet launching. In the second half. And that is gonna be an extra catalyst to help propel our growth.

Operator: There are no further questions. I will turn the call over to Kevin A. Lobo for closing remarks.

Kevin A. Lobo: Well, thank you all for joining our call. As you can see, we have definitely fought back from the cyber event, delivered an overall growth that was in line with what we planned. And we have narrowed our guidance where we feel like we can deliver a very strong year for Stryker, and we look forward to sharing our Q3 results with you in October. Thank you.