Stryker Corp (SYK) May 13, 2026 Conference Transcript

Hey everybody, Travis Steed, first presentation of the afternoon, welcoming Striker up. We have Spencer Stiles, president and COO, Jason Beach, VP and group CFO. What's the division? Make sure I got the name right.

Med Surgeon Neurotech.

Med Surgeon Neurotech, okay. And then Nick Mead, VP of IR, probably one of your first Farsights. All right, good. Well, thanks everybody for joining us. Spencer, maybe first question for you, you know, as you kind of moved into the COO role and, you know, I'd say probably have more influence on the striker strategy going forward. You know, what do you think kind of changes? What are you doing differently in this kind of bigger picture strategy-wise for Striker as you have a more influence?

Super. First off, Travis, thanks for including us. It's been great, and I appreciate the question and the time today with everyone. So high level, nothing really will change. We still love our strategy about leading our markets with innovation, M&A, our specialized businesses that we run. That will still be foundational to our growth strategy in the future, and our expectations will continue to lead at the high end of MedTech and perform at the high end of MedTech. So not a lot of day in and day out change. There's always things we're looking at, some more portfolio management, some of our prioritization, our geographies on a regional basis, but a lot more of the same of how we win in the marketplace.

Okay, that's helpful. And going into the cyber talk, maybe first of all, what did you learn kind of as an organization about Stronger on the other side?

Well, it's been an interesting first part of the year in stepping into this new job. I took over as January 1st, and we've had all kinds of fun. We've had rotation out of MedTech. We've had a cyber incident. It's off to a wild start, but it's been really interesting to go through our cyber incident. I don't wish it upon anybody. It was pretty significant, and it teaches you a lot about an organization, your response. But in good striker fashion, our resilience has been incredible, a testament both to our customers and our employees all over the world. It's already rallied behind this cause of getting our business back up and running. We were sort of out of manufacturing for a couple of weeks, on and off with some customers just for a handful of days, and then fully operational, as we call it, on April 1st. You know, thinking back, maybe a couple of things we've learned. One is the empathy from our customers and our customers' trust in us and really the gratitude they showed and the support where they stood by us through this, saying, how can we help? This is an attack on health care. How can we ensure that we're, you know, making sure we've got the right systems and protections in place? And so I think it's a good lesson for all of us just to think about ensuring we have the right investment and contingency plans if things happen like this. Second, again, is just on the resiliency of our workforce and how we run our business in terms of goal setting, annualized targets, our high expectations we have for ourselves. If you're walking the hallways of Striker today or you're at a hospital, some of the Striker sales professionals, and you ask them, how's it going? They're like, we're back to doing what we do best, winning in the marketplace, competing for our business, taking care of our customers. And I credit the organization really being focused around the customer throughout this entire event. That was probably, you know, the most important learning. And if this happens to anyone else, keep that as your true north. And the rest of it you can sort of figure out. So we're back up and running and really proud of where we're at today.

Helpful. And I guess if you think about the gap in Q1 from, you know, what you were expecting versus what you reported, I assume share was mostly, you know, kept share, so they probably didn't lose a lot of share, correct me if I'm wrong. Does all that revenue come back over the course of 26?

Yeah, generally we think of this all as a 26 matter. It'll phase over Q2, 3, and 4, depending on the business and the cycles that we have. As we kicked off January and February, our plans were in place. You know, we just reaffirmed our full year guide on our earnings call, and we feel confident in that, mainly due to the incentive programs we have and the look that we have into our business in terms of the demand from the customer, both on the consumables and, you know, in plants and on the capital. but generally remain very confident in that full-year outlook and sort of the outlook that we have for the organization.

Did you put special incentives in place?

We did it different than even in COVID. So when we were in COVID, it happened to all of us. We had sales professionals asking, hey, are you going to change something in the incentives? Are you going to change our expectations? We haven't done any of that this time. Another reason we have confidence in our full year and the outlook. We haven't needed to. There hasn't been a request. And our sales professionals and our service organizations, They're back to doing what they do each and every day with the expectation of delivering on their commitments.

Can you help us understand on the procedure side, there was a little bit of the revenue recognition timing, and then just how long it takes to get procedures rescheduled and how much can come in Q2 versus the second half?

Yeah, we've described sort of three buckets of how we're sort of capturing the couple of weeks that the cyber incident impacted us. First was revenue recognition, the smallest portion. A lot of that is in Q2. Then we break it down to the other two, the capital businesses, which is some made-to-order production, just building back up. And we've implemented third shifts, weekend shifts, some additional lines there. And then the other bucket is on the procedural side, both on the consumables and implantables. Interestingly, on the timing, one might think that if your procedure is delayed, a total need, for example, on March 22nd, you can reschedule it for April 10th. Not so fast. Hospitals are fully optimized. At least they believe they are in their scheduling criteria. so you're dealing with the hospital schedule next is the doctor's schedule they might only work tuesdays and thursdays in surgery they're fully booked up for x amount of time then you have personal the patient's schedule as well and you're bringing those three things together as you re-put these surgeries on the schedule and on the books and we've seen some of that in q2 some of that in q3 and some of that in q4 so it sort of spreads throughout the full year and interestingly something like a total knee although not ideal you can live with that pain And, you know, it hurts, but you can push that out a couple of months as needed and still get that procedure done.

And then this kind of spreads kind of evenly over Q2, Q3, and Q4?

Yeah, it spreads variously depending on how we're seeing things a little bit. It depends on the business. And if you capture all three of those, you'll see some different aspects. We're back and loaded anyway. We weren't our original plans based off new product introductions. So we'll see that second half of the year accelerate grow. So we're comfortable with that. but again feel really good about the full year and on the capital side just when you think about manufacturing and production how much of that is the impact on the capital side versus kind of shipping it's it's a portion of it but we're getting caught up maybe nick you can comment here nick comes from our beloved medical business uh where we make beds and nick maybe you can comment just what we've done at medical sure yes spencer mentioned the additional shifts that we put in place this is just one example of many across the company but for our procuity bed We have since activated our teams, hired a third shift.

We're in the process of training that third shift now. And by the end of the quarter, they'll be producing finished goods that will start flowing through in the back half of the year.

And Travis, throughout all that, we've seen the order book continue to grow and build. Our backlog continues to go up. So we've continued to have that customer continuity through the entire time.

Are you going to have enough production to kind of meet all the demand for this year?

So, yeah, we feel really confident. You know, credit to our operations team. You know, over the last handful of years, we really invested in our competency there as we think about our manufacturing strategy and manufacturing footprint, our best cost sites, our supply chain resiliency, our procurement. All of that is a much stronger organization today in Striker and gives us confidence in our outlook for the bull year.

And why can't capital kind of pick up in Q2 more and why is the capital kind of pushed more to the second half on the recovery there?

That's sort of how the plans were. Some of that is production, that we're building up some of that capability right now. And when you think about even adding more capacity, you have to hire these people. You have to train them. They have to make sure they build the extra line. So some of that's built in. So that's why it drips into Q3 and Q4 as well.

One question we've gotten a lot is, why did you guys just continue to reiterate the full-year guide despite the cyber attack?

You're asking? Yeah, no, why?

Why did you have the confidence or why did you decide to reiterate the full-year guide versus to say, hey, we'll have the full-year guide?

A couple of reasons. One, we have a line of sight to it. We understand this is the opportunity for it. The second, that confidence in those plans for the sales professionals, their incentives, their quotas, their goals, their targets for the year, they still have those all in place. We don't want to come off that at all. We believe that's our expectation and we have plenty of opportunity and the timing of this. So this took place not in a great time in the quarter, the back end of the quarter, but it was still in the front side of the year. So there's a lot of the year left in front of us to ensure that we're putting all the right plans in place and we can capture back all that business.

And you gave a range, obviously, for your guidance, as you always do, and the full confidence in the high end of the range even.

Today, we give ourselves that entire range. We'll keep you posted as we learn more throughout the year, but that's part of the reason why we reiterated our guide in that range, knowing that we'll learn as we go throughout the year.

Travis, maybe just one other thing I'll add there, just in terms of why do you reiterate coming off an event like the cyber event? I mean, the reality is, as we've said, right, while material to the first quarter, we see it in material on the full year, right? And so, as Spencer said, as you stack up all the pluses and minuses when it comes into thinking about the full year, feel really good about the full year guide, which is obviously why we reiterated.

And when you think about, you typically build in, you know, some cushion on the full year guide. Is this using some of that cushion for the full year, or are you kind of back fully in your whole plan?

I think right now, where we're at in the year, we're still working through that to understand what upside or any downside that might be in that guide for the full year.

Okay, that's helpful. I think the street shook out at like 8.9% for Q2 on the revenue side. Is that kind of how you're seeing the course of the year?

We don't guide for the quarter. I would tell you that our plans, as we think about Q2 coming even out of the incident, but even on the full year basis, we're right on track where we thought we'd be in Q2. and we're holding pretty strong and we're going to call it sort of halfway through and feel really good about what our expectations were for Q2.

Yeah, just maybe just one thing to add there to Spencer's point. We don't guide to the quarter. I think some of the messaging that Spencer's already talked about, about the rev rec, the procedures, the capital, I think the street has definitely listened in terms of how that phased approach is across the year. So feel good about where consensus is for Q2.

Okay. Anything else on the cybersecurity and cadence of the year on this topic that's come up today that you wanted to highlight?

You know, just a massive bit of gratitude to our organization and the customers for helping us get through this. Maybe as we've studied best practices and benchmarking, Striker did what it did. It performed extremely well. This recovery effort for this scale and scope of the wipe, as it's called, was sort of best in class. We're really proud of that, and we're chipping away at making sure we take care of our customers.

One kind of some macro stuff, you know, ECA utilizations, people are kind of worried about, you know, is there an impact on procedures? Are you seeing anything? What are you exposed to there?

We're really not, you know, starting in Jan and Feb before the cyber, we saw the volumes that we expected, didn't see a lot of change. If you think of our portfolio and all the different products we sell, we have a great mix of products on a consumable, implantable, all different type of coverage from commercial pay to Medicare and Medicaid. And we really haven't seen a lot of shift at all in the volumes other than what we expected originally in terms of the outlook for the year. And that's still on track.

So kind of call the utilization environment fairly stable, fairly stable as far as we've seen across our business.

Yes.

And then on the cost and the inflation side, you know, there's been some inflation worries as well.

Yeah, we've contemplated it throughout the year. Maybe a benefit, as I've described throughout some of our meetings this morning of the cyber event, is we probably put a few controls in place a little earlier than the rest of the industry since this happened to us, you know, in the early part of March. We slow down some of our transactional costs, you know, travel, hiring, things like this, just to be thoughtful, not knowing exactly where the cyber was going to go. And as we hear more and more noise about the inflation, we're keeping track of it, fluid environment. We're watching it, but we haven't seen anything material to our business yet, one way or the other. The other thing we still have our controls on is on price. And so some of our businesses where we have price capabilities, we're making sure we're thinking about those and bringing those into the discussions with our customers. But we feel pretty good about our place right now. But we're monitoring the situation like everyone else. on on the inflation side what where's your kind of exposures in all the resins how much computer chips yeah i think i would i'd describe it more on the supply chain of the chips and that exposure still in this sort of immaterial in our entire supply chain less than one percent uh and even a smaller portion of the memory chips that you're hearing some of the demand even on the pricing side of those or the increase in the cost it's not quite the same increase like it was back in 2022 in the supply chain crisis. So it's a little different. And we have some other things in our business that are favorable that is offsetting some of that in our discipline around the manufacturing excellence I talk about in some other things.

But when you think about 2022 versus now, if inflation does, this gets worse. Do you think you can respond faster or better than you did in 22? And why?

Mentioning back to this competency we've built in our supply chain, our procurement, our strategic thinking about this, ensuring we have line of sight, we think we can respond a lot faster we're still going to prioritize customers and taking care of the customers much like we did in 22 but right now we don't feel there's any exposure uh to our outlook that we've provided to the street and then pricing strategy anything you'd call it on pricing yeah the competency so you know a modest improvement is how we described at the beginning of the year still on track for that more of that comes from our med surge side of the businesses where we have a little more price control based off the product type and the portfolio we have there a little less than the orthopedic side, but orthopedics has been stable. You know, MAKO really helps with that. MAKO's a closed system, as you know, so that gives us some price protection and still provides a world-class clinical outcome. So we feel pretty good about where we're at with price. The last thing I'd say on price is I think you've heard about our journey over the years of building this organization, our customer solutions, which helps with our contracting across our entire portfolio, partnering with customers. We build pricing and discussions like this in those contracts, And so we have a lot more consistent approach with our customers and an opportunity there, if things change, to pass along some of that cost to our customers as well.

On the margin impact of the cybersecurity, how is that impacting margins? How much is excluded and non-gapped versus included in numbers we use?

Yeah, there's certainly some element, as you know, that went non-gapped. There's also elements like lost absorption that's running through the adjusted P&L, right? I think we'll probably get to tariffs here, but I'll just deal with it here really quickly. Give them a preview. Yeah, that's right. So if you rewind the clock on tariffs to January, right, we said it was roughly $400 million in the guide. As you know, since then, IEPA, as an example, has been invalidated. So that's obviously created where you had called a 15% baseline tariff, now down to 10. So that's created some good news to the guide, if you will. that is offsetting then some of these, I'll call them pressures that came into the business as a result of the cyber event.

How do we think about the timing of all that over the course of Q2, Q3, and Q4?

Yeah, so a big portion of it already happened behind us in Q1. And then there's, in terms of the cost pressure side of the cyber event, then there's a little bit from an absorption side that'll trickle through over the balance of the year. And then tariffs, I mean, you know, obviously it's extremely fluid. um you know the 10 percent's in place today we'll see what happens as we go throughout do you get refunds on the terrace so that's the other piece um public set up by the federal government right there is a refund process that we're obviously participating in as well when do those sit at a certain quarter yeah we haven't uh obviously disclosed amount or or timing but i would expect it to be over the course of the year okay and then kind of when you look for then assume there's not of major change in tariffs is like you look into 27 is there any kind of is it a headwind a tell when you know how any kind of puts and takes of 27 well there's a lot to talk about for 2027 we'll

talk about that in january of next year so probably won't say a lot at this point about 2027 fair um the margin 150 basis points over the lrp though can you kind of walk through you know how that is there when some years bigger or less or can i have to think about that because i think that was over a CAGR and some of the drivers behind that.

You want to talk about the supply chain stuff? You can go ahead. Yeah, sure. So to your point, obviously we've said 150 basis points plus over the next three years. We've effectively held our guide this year as it relates to margin expansion. We've talked about a variety of things, I think, in our investor day in terms of operational excellence, I would call, that would play into that. There's certainly a level of OPEX leverage that we continue to get with our plans in a high growth company, right? There's leverage that you get throughout the P&L and that, that plays into the margin expansion goals over the next three years.

Okay. So cool. And then on the capital backlog, I mean, some of the hospitals talk about compressed budgets and worries about, you know, ACAs and stuff like that. What, it sounds like your capital backlog is really strong. Like just no signs of that slowing?

No signs of it's at the moment we've we've uh you know been really grateful for the customers continuity with us and continue to show their demand uh the orders continue to outpace uh the the shipments that we had over the last couple months which is great to see so we're building that backlog we're adding this additional production capability but right now we've seen a relatively healthy capex environment and which is it like six months visibility that you have in the backlog uh you bet it sort of depends by business we have we have various cycles our communications business is an outlier. Sometimes it's even longer for new hospital bills, things like this. But some can be a couple of weeks up to a few months.

Okay. And then Mako, I feel like I recall we have, you're putting up record Mako.

Record breaking.

Yeah. What's going on in Mako?

We joke about it and say that at some point we just have to say this how we do it at Striker, but we like saying it's record breaking still. We did have another really strong quarter. You know, I point us back to in the pandemic when we were really aggressive in our strategy of getting more Mako into the market and in particular a focus on teaching institutions this has led to more of the standard of care uh so more and more people as they enter into their practices are asking to have this technology uh in their in their capability set either at their hospital or surgery center so we're just seeing this ongoing demand and growth across mako which is very favorable for our implant business as well you also know travis we added the mako rps which is a the smaller footprint, handheld with some robotic technology and a smart power tool. And still our premium products, Mako, but this fills a nice opportunity in the market, and that's all competitive focused right now as well. So that's been a really nice addition, and we launched it at Academy. It's hit the ground running right now.

How do you think about your robotic portfolio in Ortho as some of the other competitors launch newer products in different directions and bigger portfolios?

Yeah, the focus is still really on that clinical outcome, and can we provide this consistent, safe, and effective intervention with the enabling technology with MAKO, and the answer is yes, yes, and yes, and so that's part of what makes MAKO so attractive. The surgeon that's operating at 8 in the morning is every bit as good and accurate and perfect in that case as they are at 8 at night, and they can do that over and over and extends longevity in how they provide their care as well, so we really like our position in the marketplace with MAKO. We continue to win competitive situations when it comes up, and really it's that focus still on that clinical outcome for those patients. I think you've been in robotics 12, 12 years in orthopedics, if i remember correctly what how hard is it to run a robotics program in ortho like we we know in other areas of robotics is tough but in in ortho it's tough they're thirsty it takes a lot of dedicated r&d investment i would even argue looking back it's a little easier to say uh for some of those early years there as we focus in on the knee application we actually move some of the investment off the implants and put it solely on the robotics so you probably starved a little bit the implants then we worked our way back now you're seeing the benefit of that things like triathlon gold msi insignia in the hip these are areas that we've caught back up on and so we have a more balanced portfolio but they're they're really difficult they're demanding you have to invest both in the hardware platform capability as well as in the applications and once you build

that competency it's really hard to catch up with it because it's sort of embedded in how you operate and deliver your your solution and then um i guess in the influence side we've heard some competitors getting more aggressive in price and trying to take take accounts are you seeing that in the market? How are you responding?

I would say no different than it normally is in a competitive environment. We haven't seen anything specifically. Orthopedics has been a very competitive space for a long, long time. And price is one factor that goes into the purchasing decision, but not the only one. There's oftentimes we might win when we're actually charging more, but it's due to the service and the technology and other things that we provide in that scenario. So we haven't seen anything of note. We've had some of these same questions, but nothing that I would point to that we've seen any change in the pricing strategy.

And you established the new orthopedic tech business. What's the strategy behind that? Why?

We call it orthotech. So this is the combination of our MAKO organization, which we called MET, and our orthopedic instruments. So think of traditional heavy-duty power tools and the personal protection. So flight helmet systems, our togas, we put those together all under our orthopedics umbrella. It was really important to bring the power of our power tools. We're developing the Mako RPS system with Mako at the same table. We wanted those leaders talking, thinking about how do we show up to the customer, understanding the customer's needs, meeting them where they're at. So we brought those together, and we actually think it's another great strategic differentiator for us. World category leading power tools, world category leading personal protection, world leading category leading enabling technology in Mako and Mako RPS.

Okay, that's helpful. And do you think about kind of the pipeline at Striker, kind of the growth? A lot of it's in MedSearch probably, but you've talked about cameras and stuff like that. What's kind of the pipeline here at Striker that's going to kind of keep growing above your markets?

Yeah, and we're really proud of the innovation cycles that we have in our business, the new product flow that's continuing to come, as well as the M&A we've done over the last few years that creates organic growth for us year in and year out. And some of that's exposed us to new markets. And we have winners across all those different portions of our portfolio. I'll highlight a couple. Think, for example, something like in our neurosurgical business, fast-growing brain surgery business, Sonopet 2. That's a next-generation ultrasonic aspirator helping the remove of tumors from brain surgery. That second gen is coming out, best-in-class product, category leader. And we have an example like this across all of our different businesses. IBS, one of our fastest growing, benefiting from the Virtos acquisition we did in 2025. That's the mild procedure, bringing phenomenal growth to the business. In orthopedics, gold, the hinge still is bringing a lot of new growth. Pangea, recently cleared in Europe in trauma. Perform Humeral in our upper extremities business. These are all new technologies that continue to drive and outperform the markets in their growth rates.

You've guys been pretty visible on seeing M&A as a big strategy this year. Balance Sheet's in a really healthy place. How should we think about M&A for a striker in 26?

Remains, you know, our number one use of cash, our top priority. We love our pipeline. Interesting environment, maybe a benefit of some of the rotation out as valuation shifts. So it just gives you another sort of portion of your thinking as you think of some of the companies and where they sit right now in the marketplace. We've been active. You know, we just closed on AVS and extension in our peripheral vascular NARI striker PV business and AVS giving us an IVL technology. And so we're really excited about that. But that's more of that will be on our horizon. A variety of tuck-ins, adjacencies, the same adjacencies we've been talking about from HIT to neuromodulation. We do keep track of the STR space off tissue robotics and sort of track that. It's not a must-do, but obviously has significant growth. and we have some synergies that position appropriately, women's health, urology. There's just a lot of really great markets still for us to grow our business in that we have some competency that we think we can bring the striker strategies to that outperform and grow.

When you think about healthcare IT, there's a lot of opaque areas in that market. Can you help us understand which direction you want to go in that market?

Yeah, we call it SmartCare, the smart hospital. It's the bedrock. It's the combination of both Sarah and Care AI. So you're bringing workflow, technology, and ambient visualization together, really helping drive greater efficiencies, predictability, safety, take the burden off the care providers. But one of our great differentiators is taking a platform like that that lives within the hospital and tying it to the operating room. You know, our real estate in the operating room is second to none. When you think of you walk in an operating room, the lights, the table, all the products around it, it's all Striker. And we want to connect that ecosystem of those platforms into the smart care and smart hospital, really defining and differentiating, sharing that data and providing that information for better care.

On soft tissue robotics, you said it's not a must have. How much is it? Is it a nice to have? Yeah.

Look, it's it's a it's a fascinating market. There's a big incumbent there that's had a significant track record of success. So you have to be really thoughtful about, if you were to get in it, how you position a technology, what niche does it solve, what problem does it solve, is there some connectivity or synergy that comes from being in Stryker? So it's something we monitor, but, again, it's not a must-have. It's something that we think that we know pieces of that market well, and we'll continue to stay close to it and watch for if there's an opportunity or not.

I mean, I feel like Stryker's been saying 7, 8, 9, 10 years that you've been looking at 50-plus companies in that market. Is there a point where you have to make a decision, yes or no, in this market?

I don't think there's ever a point in some of these. Innovation's a beautiful thing. There'll be new technologies, new differentiation. There are more winners and losers in that set that you just mentioned there, for sure. And so we're keeping track of that. But again, I don't want to say that if you don't do something now, there could be something else in three or four years that makes a lot of sense.

When you think about all the kind of categories that you laid out, I think there are five, six categories that you're thinking about from an M&A perspective. Which of those are kind of must-haves?

Well, I don't think any of them are must-haves. They're all adding additional value to our portfolio we have today. This HIT space, we're in it. The cardiovascular space, which we just did this deal, we're really like that. You know, there's great pathology there, large population sets that have need, and there's amazing innovation. So that's one we're going to continue to stay close to and build additional competency in that space. You know, as I think about neuromodulation, a lot of different technologies out there, a lot of opportunities, but that'd be another space that I think we'd prioritize that would be a great fit within our portfolio.

Is it more about kind of call point, the selling cycle of these assets, or is it more about where the kind of TAM and market growth and opportunity longer term? How do you kind of evaluate it?

A few things. We start with that call point. Is there a problem that we can help solve with a customer that we know well or a customer that we're connected to? Next priority is culture. Is it the right fit? Is it built the right way? Ethics, is there an economic model? Third, does it drive value? Is there an opportunity to grow the business in the TAM? Does it increase your wham girl over time? These type of things. But you don't want to do a deal just solely on that. It has to fit these other buckets of fit and customer first.

You're seeing in your pipeline of deals that you look at, kind of valuations and sellers being more realistic on valuations?

Some, some for sure. It's amazing. I still talk to some that aren't. I have to remind them of, look at the public markets right now in MedTech. But, yeah, I think there are some for sure that the valuations have shifted, and it creates maybe an opportunity for a different discussion.

I don't know, Jason, Spencer, anything else that you wanted to end with or we didn't touch on?

No, just really appreciate you having us today. We're, again, grateful for all the support through the cyber incident, and we look forward to an impactful rest of the year.

Great. I promise I have to get you out on time.

Thanks so much. Appreciate it. Thanks, everyone.