Medtronic plc 2027 Q1 Earnings Call

Good morning, and welcome to our fiscal 2027 first quarter earnings webcast. I am Ingrid Goldberg, Head of Medtronic Investor Relations. I am joined by Geoff Martha, Chairman and Chief Executive Officer, and Thierry Piéton, Chief Financial Officer. Geoff and Thierry will provide comments on the results of our first quarter, which ended on July 31, 2026, and our outlook for the remainder of the fiscal year 2027. After our prepared remarks, we will take questions from the sell-side analysts that cover the company. Earlier this morning, we issued a press release discussing our quarterly results and several financial schedules. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com. During today's program, many of our statements will be forward-looking, and actual results may differ materially as explained in our SEC filings.

We undertake no obligation to update any forward-looking statements. Unless otherwise stated, all comparisons are on a year-over-year basis, and revenue comparisons are made on an organic basis, which excludes the impact of foreign currency, first quarter revenue in the current and prior year reported as other, as well as significant acquisitions, divestitures, or other significant discrete items. As a reminder, fiscal 2027 is a 53-week fiscal year, with the extra week occurring in the first fiscal month of the first quarter and is included in our Q1 results. References to sequential revenue changes compare the fourth quarter of fiscal 2026 and are made on an as-reported basis. Unless otherwise stated, all references to share gains or losses are on a revenue and year-over-year 52-week basis, comparing our most recently completed fiscal quarter to our competitor's most recently completed calendar quarter.

Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. Finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to the earnings during the fiscal year. With that, I am now pleased to hand it over to you, Geoff.

Okay, thanks, Ingrid, and good morning, everyone. Thank you for joining us. Q1 represents a strong start to fiscal 2027. With revenue of $9.8 billion and adjusted EPS of $1.45, both well ahead of expectations. Organic revenue growth was 13.7%, reflecting strong underlying market demand and excellent execution across our businesses. Importantly, these results reinforce our confidence in the durability of our growth. Our three largest businesses, CRM, CST, and Surgical, all delivered strong results this quarter. Cardiac Ablation Solutions continues to perform exceptionally well, and we are making progress in Symplicity, Altaviva, and robotics with Hugo. At the same time, our recent acquisitions are contributing to reported growth and strengthening our portfolio for the long term. We are executing, and this quarter's results are a clear proof point. Our strategic and operational focus is translating into stronger commercial performance and greater consistency.

With healthy underlying markets, relentless execution, and multiple growth platforms all gaining scale, Medtronic is increasingly well-positioned to deliver on our FY 2027 targets and our long-term revenue and earnings trajectory. Let's get into the details of what drove the quarter. Starting with Cardiac Rhythm Management, which delivered an outstanding quarter with global growth of 15%. Performance reflected strength across both high-power and low-power therapies, with contributions from Aurora EV-ICD, Micra, and conduction system pacing, including OmniaSecure. At more than $5.5 billion in annual revenue, CRM is one of our largest businesses and has been a long-standing source of strength for the company. As an example, Micra, which launched more than a decade ago, continues to grow at a healthy double-digit rate, which underscores the lasting impact of meaningful innovation within CRM. We are not standing still.

We are further advancing innovation across pacing, defibrillation, and diagnostics, supported by a strong pipeline and excellent execution from our teams. CRM is a flagship business for Medtronic, and we continue to view this business as a key source of innovation, one that will drive durable growth for years to come. Cranial & Spinal Technologies was another Q1 highlight, delivering 13% growth, including 14% in the U.S. and 10% internationally. Our AiBLE ecosystem continues to resonate with customers as it connects technologies that have traditionally operated in silos. By bringing together AI-driven planning, imaging, navigation, robotics, implants, and outcomes data across the surgical journey, AiBLE helps surgeons make more informed decisions, operate with greater precision, and learn from each and every case. Our recently launched Stealth AXiS platform also meaningfully outperformed this quarter.

While we are still early in the launch, adoption is building, and customer feedback has been very positive. With U.S. spine robotics penetration still in the single digits, we see a significant opportunity to drive ecosystem pull-through and extend our leadership position in spine and cranial technologies for years to come. Moving to surgical, which delivered another strong quarter with 9% global growth. Surgical is our largest operating unit with over $6 billion in annual revenue. Here we are leveraging our decades of innovation and operating room partnerships to build a connected surgical ecosystem. We are going to dive deeper on this in just a few minutes. In addition to these businesses, our next cycle of large growth opportunities are playing a more significant role in our performance. Cardiac Ablation Solutions delivered another quarter of excellent performance, further strengthening our position in one of the most attractive markets in med tech.

In Q1, CAS delivered 88% worldwide growth, reflecting the team's execution and the strength of our platform. Sphere-9 momentum continued with a nine-point increase in U.S. share during the quarter. I am pleased to share that we achieved an important commitment this quarter, ahead of the timeframe we promised, surpassing the $2 billion mark in trailing 12-month revenue. The broader EP space remains healthy, growing in the mid-teens, and we continue to expect CAS to grow at more than 2.5 times the market rate this fiscal year. Our U.S. Affera installed base again grew more than 35% sequentially in Q1, demonstrating that we remain in the early innings of this opportunity.

As we look ahead, our runway extends well beyond today's share gains as we build out a comprehensive EP platform, one that spans mapping, ice catheters, focal ablation software, and single shot innovation, positioning ourselves to serve electrophysiologists with more complete solutions and expand the number of patients who can benefit from advanced EP therapies. This quarter, we expanded our offering with CE mark for Sphere-9 for the treatment of ventricular arrhythmias, including ventricular tachycardia, opening the door to a patient population that is notoriously difficult to treat. Enrollment in our U.S. VT pivotal trial is also underway. We are only at the beginning for CAS. With a differentiated platform, a growing installed base, expanding indications, and a strong innovation pipeline, we are well-positioned to treat more patients, to continue to gain share, and further extend our leadership in this large and growing market. Now turning to Symplicity. Q1 was another strong quarter, and we are increasingly encouraged by this market's evolution.

Real-world outcomes, well, they just keep getting better, as evidenced by the three-year data we recently presented. We are pleased to share that the SPYRAL AFFIRM clinical trial was accepted for a late breaker at TCT this fall. The conversations with clinicians is increasingly shifting from awareness to access, and more hospitals are approaching us about establishing Ardian programs. Here, our key focus areas are on expanding coverage and integrating Ardian into the care pathway. Looking ahead for Ardian, our transradial catheter remains on track to launch in the second half of this fiscal year. This is an important step forward as many interventional cardiology procedures are performed via radial access today, making the therapy easier to integrate into existing workflows and potentially improving patient outcomes.

These positive signals further reinforce our conviction that Symplicity is one of the most compelling long-term growth opportunities in med tech. Now turning to pelvic health. The business delivered strong growth this quarter, increasing 15%, driven by significant progress from Altaviva, where procedures doubled sequentially. Demand for Altaviva is building, and while we are still early in our launch, Altaviva is gaining traction with physicians, as well as the 16 million U.S. patients who still suffer from urge urinary incontinence. As we continue to expand training, reimbursement support, and patient awareness, we are really encouraged by the progress we are already seeing. We are confident in Altaviva's ability to become a meaningful contributor to growth for years to come. Okay, back to surgical. We have a strong leadership position in surgery built on decades of innovation, trusted technologies, and a long-standing partnerships with surgeons worldwide.

As robotic-assisted surgery continues to expand, we believe our portfolio breadth, our global reach, and our operating room presence uniquely position us to help shape the future of surgery and extend the benefits of these technologies to more patients around the world. Robotic-assisted surgery, or RAS, is one of the most compelling growth opportunities in healthcare, with global penetration still in the single digits and only 1% in emerging markets. At the same time, RAS is in high demand, with procedure volumes up approximately 16% per year over the last decade. There is a significant runway here, and we expect robust expansion for many years to come. Now we have established our foundation in soft tissue robotics with Hugo, where we continue to make meaningful progress.

By the end of the fiscal year, we expect Hugo to surpass 50,000 completed procedures with procedure growth continuing at more than twice the market rate. We are also advancing our platform through new capabilities and new indications, including the expected U.S. expansions into general surgery and gynecology. We are investing in building out a broader surgical ecosystem, just like in CST. An ecosystem that integrates robotics, advanced visualization, navigation, instrumentation, and digital technologies, including AI-enabled capabilities like Touch Surgery. Today, Touch Surgery is used in more than 1,500 operating rooms globally, supporting AI-powered insights, collaboration, and workflows. With Touch Surgery Aide unveiled at SRS, we are bringing 300 times more computing power into the operating room and creating a foundation for increasingly advanced AI capabilities over time. Now that brings us to Cornerstone Robotics.

As announced this morning, we are further enhancing and expanding our robotic portfolio through a strategic investment and distribution agreement for Cornerstone's Sentire Surgical System in select markets outside the U.S. Sentire complements Hugo by extending our reach into select international markets and broadening the range of customer needs that we can address as robotic surgery continues to expand globally. Taken together, the platforms, Hugo, Touch Surgery Aide, Sentire, and our enhanced surgical instrumentation, position Medtronic to build a differentiated global robotics portfolio. Combining advanced robotics, AI, visualization, and instrumentation to push the field forward, improving surgical precision and workflow, and serve a broader range of customers and patients around the world. Look, Q1 performance is further evidence that our strategy is translating into stronger results. We are accelerating growth, advancing innovation, and focusing the portfolio and deploying capital with discipline.