Medtronic plc (MDT) Earnings Call Transcript & Summary

Morning, everyone. I'm Robbie Marcus, the med tech analyst at JPMorgan. I'm very happy to present the CEO for our next session, Geoff Martha, CEO of Medtronic. Just a little bit of housekeeping. Feel free to send me any questions [Operator Instructions] If you'd like me to ask it in the Q&A, I'll do my best to get to everyone. So Geoff, I'm going to turn it over to you and join you in a little bit for Q&A.

Okay. Well, thanks for the intro, Robbie. And thanks to everyone for joining the Medtronic presentation this morning. And I hope everyone is staying healthy and safe. And I really -- well, Robbie and I were just talking about it, I really do look forward to the day that we actually get back together again in San Francisco for this conference. Before I get started, I want to remind you of our disclosures, including that I'll be making some forward-looking statements today and may reference non-GAAP financial measures. So I encourage you to read these disclosures, which are also available on our Investor Relations website as part of the presentation. Okay. So moving on to Slide 3. I guess I've got to guide you through the slides, self-guided here, for today. So starting with Slide 3, look, we've obviously been executing through a difficult time. And I'll cover the Medtronic specific issues in a moment. But if there is one thing I want you to take away today, it's that there is significant change underway at Medtronic and we're continuing to drive that change through this challenging environment. This is something we started 18 months ago and we're all focused on accelerating. It's all about our focus on accelerating and sustaining higher growth. We've made Medtronic leaner through the formation of 20 operating units, and we're already seeing meaningful benefits in focus, accelerated decision-making and execution. And the transformation went beyond structure to include our changes to culture and incentive compensation, along with changes to better leverage our scale. Our technology development centers and building out our enterprise sales group are 2 important examples of this. And these changes are essentially fully implemented and they are making a big difference in our business performance with over 70% of our operating units now holding or winning share, up from about 35% just 18 months ago. Our new operating model is also giving us a lot of insight into what's working and what needs to be improved as well. And as a result, we are accelerating work in areas like operational excellence, which includes our end-to-end supply chain. And we're also accelerating our work around quality. This work is meaningful and it's necessary in order to give Medtronic a stronger foundation, improving product quality, improving product availability and reducing costs. And in addition to our new flatter OU operating model, this has allowed us to look at our portfolio of businesses with a more critical eye with more robust processes around capital allocation and portfolio management. And I'll be surprised if learnings from our new work structure don't lead to a couple of different decisions on the portfolio over the coming fiscal year. Although at this point, I don't know if those changes will be significant or more on the edges. And regarding our pipeline, we've had over 180 product approvals in the last 12 months. 180 product approvals, and we remain bullish on what's coming. And we've had several key pipeline updates coming -- we have several key pipeline updates coming over the next 6 to 12 months. And we also continue to invest heavily in organic R&D as well as execute on tuck-in M&A with significant growth potential over the medium and the long term. Finally, we aim to be a leader with ESG practices. Our ESG program is aligned with our mission, which is written 60 years ago and continues to inspire our teams to be good corporate citizens of the world as well as a leading technology company in health care. Simply put, there's a transformation underway at Medtronic. We've made and are making meaningful changes that are moving the company in a positive direction. And while that process has been bumpier than we thought and real challenges remain, we are confident that we're laying the foundation for durable growth and we're encouraged that the changes we've made are having an impact. Now moving on to Slide 4. Now let me take a bit -- let me talk a bit about the recent setbacks we've had on 3 of our pipeline programs. These are all disappointing to me and the team, and of course, to our shareholders. I feel a mix of disappointment and anger, and I feel deeply accountable for this. And of course, our incentives are aligned with shareholders, so I and our teams rightly feel it in a big way. But it's important to reiterate that while these programs are delayed, they are still expected to be meaningful growth drivers going forward. Starting with our Symplicity Renal Denervation procedure for hypertension, we were disappointed that we could not stop our ON MED trial early at the interim look-back in October. Based on what we had seen in the 3 prior sham-controlled studies, we felt the probability was high that we would be able to report the results and accelerate the clock on getting to market launch. Now that didn't happen. But it doesn't change our confidence in this program and our ability to realize this multibillion-dollar market opportunity. We'll run the trial to completion, and it is designed to show statistical significance with the whole cohort of patients. And we expect follow-up of the study will complete in the second half of this calendar year, and then we'll submit this data to FDA for approval. With our Hugo robotic-assisted surgery system, we adjusted our revenue expectations in November as we worked through manufacturing and supply chain issues. This revenue pushout was disappointing, but let's not forget where we are with this program. Customer interest is extremely high. Our order book continues to fill. We're installing systems in new accounts. Surgeons are using the systems to perform complex surgeries. And we expect to have the first surgery in our U.S. trial soon. We expect Hugo to deliver double-digit millions in sales this fiscal year with a meaningful step-up next fiscal year. And with Diabetes, while we're disappointed to receive a warning letter and this does introduce uncertainty into the approval timing for the 780G and Guardian 4 Sensor in the U.S., our extensive remediation efforts are well underway and we're working to resolve the warning letter as quick as possible. Improving the performance of our Diabetes business, including the quality system, is something that we've been working on for the past couple of years. We've committed increased investment to drive competitiveness, to drive remediation to our quality system as well as to take advantage of our strong platform. And we remain confident in our turnaround. Diabetes is one of the most attractive high-growth markets in med tech, and we have a path to market leadership. For competitive reasons, we haven't shared as much on our mid- to long-term pipeline. But I do want investors to know that we're advancing multiple programs, including competitive CGM and patch pump technology. And we're confident that we can bring value to patients and create value for shareholders. Now moving on to Slide 5. Next, a quick update on what we're seeing with regards to the pandemic impact on our business and our sector. Out of our 20 businesses, 14 reached revenue levels last quarter that were at or above pre-COVID levels 2 years ago. That said, the recovery from Delta has taken longer in the U.S. and Europe due in part to increased staffing shortages. And the recent Omicron variant is not helping when it comes to staffing shortages with our hospital customers, with our suppliers and even within our own distribution centers and manufacturing sites. We continue to -- we continue to manage supply disruptions. So we're continuing to track to the expectations as we set out on our third -- for the third quarter back when we gave guidance in November, right? But the potential impact of Omicron is uncertain and something that we're watching closely as we go into the final 3 weeks of our quarter. I also want to let you know that the strengthening U.S. dollar over the past couple of months versus the euro and some emerging market currencies means that we are now expecting a greater currency headwind in Q3 and going forward. For Q3, it's about $30 million to $40 million greater now than we had expected in November and about $50 million to $100 million greater for the full fiscal year. However, given our hedging program, there hasn't been a change to the expected currency impact on EPS in either Q3 or the full fiscal year. And as we look at next fiscal year, based on recent rates, we would expect FX headwinds on both revenue and EPS in FY '23. Now moving to Slide 6. So I talked earlier about the significant changes that are underway at Medtronic aimed at accelerating growth and improving our competitiveness. Now this page lays out where we are in our ongoing transformation. On the left, you can see the changes that we've already been implemented -- that have already been implemented, including a decentralized board structure, changes to our culture incentives and we've recently been attracting some key external hires. The new operating model is giving us increased visibility into our businesses and our end markets, and we're using this to accelerate additional changes in quality operations and supply chain. And this increased visibility into our end markets has allowed us to transform our capital allocation and portfolio management processes, which I'll touch on in a moment. Now moving to Slide 7. So looking specifically at the significant changes we've made at the company over the last 18 months. For those who might not be as familiar, we completely changed our operating model, eliminating our group infrastructure and we moved to 20 focused and accountable operating units. We gave the operating unit leaders increased responsibility and increased accountability. We eliminated a ton of bureaucracy in the process. At the same time, we introduced enhancements to our culture, which we call the Medtronic Mindset. We're driving a culture that embraces the principles of acting boldly, competing to win and moving with speed and decisiveness. Now while culture change takes time, it's been great to see how receptive our organization has been to the changes and the impact that it's having on the way we do things. Our people are feeling more ownership, taking more initiative and cutting through Medtronic's old bureaucracy in ways that are energizing to the company and energizing to me. We also made changes to our incentive system and our reward performance. So to reward increased competitiveness, we added market share to our annual plan to complement revenue growth, profitability and free cash flow generation. We also instituted a plan that allows for greater differentiation and reward based on separate businesses and individual performance. And we further aligned our compensation payment to shareholders by increasing the emphasis on equity over cash. These changes are all having a positive impact on our competitiveness and our relative performance, which I'll talk more about shortly here. So moving to Slide 8. We've also made changes to better develop our enterprise scale, including incorporating technology development centers. Across Medtronic, while our businesses are focused on specific disease states, many face common problems that can use similar technologies. And historically, our businesses, in many cases, would individually create these technologies instead of leveraging learnings and core technologies from other businesses. And we've created now centralized technology centers to harness the benefits of having best-in-class technologies in various disciplines and share those across the organization, resulting in reducing costs and accelerating development schedules. For example, we're investing today in future battery technology, microelectronics technology, catheter-based technology and robotics technology that will power innovation across multiple businesses. The push to create these technology development centers, it comes from really first-hand experience I have when running the former Restorative Therapies Group, which we now call the Neurosciences portfolio. And as we were able to, back then, significantly accelerate many of the new neuromodulation products that were coming to market today by utilizing help from our Cardiac Rhythm Management development team, so leveraging some of the technology in Cardiac Rhythm Management to help our Neuromodulation quickly bring new products to the market has been a huge benefit for us. Another area that we're leveraging our scale today is with the investments and increased focus on regions have put on strategic customer relationships. We're providing a single point of contact for large customers to do business with Medtronic. Our strategic accounts initiative has enabled us to partner with large health care systems and to grow our business with these increasingly important customers. We're also utilizing our sales performance academy and customer training and education platforms across our businesses to deliver a better customer experience at a lower cost. So these enterprise synergies, whether at the technology level or at the customer level, help to increase revenue as well as drive more efficient R&D spend. On Slide 9, we'll talk about attracting some top talent. So to change our culture, it's also important to bring in new people with outside-in thinking and diverse perspectives that will help supplement our talented leadership team that we have in place. And as you can see from this page, we've made a number of top talent hires. Some of these hires are at the corporate level, while others are leading or working at the operating unit level, whether it's Greg Smith, who joined us from Walmart to transform our global operations and supply chain to Bob Hopkins, the former med tech analyst at BofA who's bringing really new thinking to our strategy and our portfolio to highly respected physicians like Jeff Popma or with regulatory experts like Yarmela Pavlovic. All are joining Medtronic to drive change and help us fulfill our mission. Now moving on to Slide 10. These changes we've made as part of our transformation. Our new operating model, the culture and incentives are already driving results. And as you can see by the graph on the left, 18 months ago only 35% of our businesses were holding or winning share in their markets. We've dramatically improved our competitiveness with over 70% now of our operating units holding or winning share in their markets as of today. And it's important to note that we have strong market positions that are diversified across a number of key markets in med tech, whether it's in cardiology markets like CRM or TAVR, in MedSurg in areas like Advanced Energy and Stapling and in Neuroscience, like in markets like spine, DBS, neurovascular, among many others. Our competitive advantages are resulting in leadership across multiple markets, and we intend to grow this leadership as we go forward. All that said, we're competing well in most, but not all of our core markets, and there's work to be done. Our focus on share and market leadership, along with our pipeline and capital allocation, are intended to drive further improvement. Now switching to Slide 11. As I mentioned, there is still work to be done with our transformation. First, we're focused on making changes to our global operations and supply chain. As I mentioned earlier, we brought in Greg Smith from Walmart to consolidate and drive efficiencies across our global operations and supply chain. Greg has added new talent as well. And Greg and his team are identifying a number of opportunities to invest in automation and digitization. It's still early, and as the plans come to fruition, we'll share more on these changes, which I know are going to have a big impact on our -- and strengthen our foundation. And when it comes to patient safety and quality, nothing is more important. Medtronic has had a number of recalls in the past year relating to issues that originated over the past decade. We have -- we take responsibility for this, and we're focused on getting this right. This has to be fixed and we have to get this right. At the enterprise level, we're increasing accountability and aggressively accelerating plans to enhance patient safety and improve our quality performance. This is my top priority and the top priority of our leadership team. And our entire executive team is fully engaged and committed to keeping Medtronic as the unsurpassed standard of quality in the industry. We've also made significant changes to our portfolio management and capital allocation processes. Our new operating model has given us much greater visibility into our end markets, which is allowing us to take better capital allocation decisions, determining where we should invest more or less. We formed a capital allocation committee that meets regularly to make these decisions for the company. We're also actively managing the portfolio, and we've assigned each of our businesses to different investment cylinders, from our strategic bets where we invest heavily in high-growth markets to our businesses in the optimized bucket where we look to manage them differently or find a better owner, quite frankly. And as I mentioned earlier, I'd be surprised if this process didn't lead to different decisions on the portfolio over the coming fiscal year. So moving to Slide 12. As we think about our capital allocation framework, we're balancing investment for growth with our commitments to return capital to our shareholders. Regarding our growth investments, we've significantly increased our level of organic R&D investment with an increase this year of 10%. We're also accelerating our level of tuck-in M&A, including our acquisition of Affera, which we announced this morning, and I'll cover it in more detail in a moment. And we have a very attractive venture portfolio with over $750 million of investments in over 70 countries. So when it comes to returning capital to our shareholders, we have a very strong track record. We primarily return capital via our growing dividend, which we've increased for over 44 years, making us a dividend aristocrat. But at the same time, we're opportunistic regarding share repurchase. At a minimum, we execute share repurchases to offset dilution from stock-based compensation. But on times when we see a dislocation in our stock price, like recently, we increase our retail activity as we've been doing recently. So moving to Slide 13. Turning to our Medtronic pipeline. There's an incredible amount of innovation happening at Medtronic. This page captures just some of the development programs from a selection of over 180 products that have been approved in the last 12 months on -- and you see that on the left, to those that are just launching now and are expected in the coming quarters in the middle to the big investments in our long-range growth drivers on the right. It is a robust pipeline that gives us confidence in our revenue growth acceleration. And I would note that our acceleration is based on the richness that you see here. Or said another way, and I can't emphasize this enough, our acceleration is not reliant on only a handful of products like Ardian or our surgical robot. Now moving to Slide 14. Each of our portfolios has a number of near-term growth catalysts, and we have a detailed page for each of our portfolios. So let's start with cardiovascular. One of our biggest incremental revenue drivers here and for the company, quite frankly, is TAVR. And we expect to begin our limited launch of Evolut FX later this fiscal year. And I'm pleased to announce today that we now have approval to sell our TAVR valve, the Evolut PRO, in China. You can also see that we have a number of other important cardiovascular growth drivers coming soon, from our disruptive and novel Extravascular ICD to global expansion of our market-leading Micra leadless pacemaker to our LINQ II cardiac diagnostic monitor and new technologies in our Cardiac Ablation Solutions business. Now moving to Slide 15. Speaking of Cardiac Ablation Solutions business, we announced an important acquisition this morning of Affera. Affera has a number of cardiac ablation technologies in its pipeline that, when combined with our technologies, position us for significant growth in the $8 billion cardiac ablation market. Now with Affera, we'll be entering advanced cardiac mapping and navigation for the first time, giving us a much more complete EP ablation portfolio and enhancing our ability to compete head on in this important high-growth market. There's nearly 1 billion -- this is nearly a $1 billion transaction for us, although it does include a $250 million in contingent consideration and given the technology is still in development. And we were able to get this asset at a very attractive valuation, especially when you look at other deals in the space. It will be less than 1% dilutive to our EPS in the first 3 years before turning neutral to accretive thereafter. We're looking forward to closing this acquisition in the first half of next fiscal year and welcoming Affera -- the Affera team to Medtronic. Now switching to Slide 16 and turning to our Medical Surgical portfolio. One of the biggest near-term drivers of incremental revenue is coming from our $6 billion Surgical Innovation business. This is a great business where we have a market-leading position in advanced energy and advanced stapling and expect to continue to grow above the market. We also expect to continue to grow at or above the market in our GI and our patient monitoring businesses. And as I discussed earlier, Surgical Robotics is expected to drive growth in our Medical Surgical Portfolio as well. And as we became -- as we will become the second meaningful player behind Intuitive Surgical, our limited market release is underway, we continue to receive regulatory approvals and surgeons are doing increasingly complex cases with Hugo. We recently completed our first general surgery cases, which were colorectal and lower anterior resection. And we did these in Latin America and APAC. Now Slide 17 gets at our Neuroscience portfolio. And in our Neuroscience portfolio, we are really set up across our businesses to grow at or above the market. In Pain Stim, we've been growing above market and expect that to continue based on the adoption of our DTM SCS therapy and our Vanta recharge-free system. We also recently submitted our closed-loop SCS technology to the FDA. In Cranial & Spinal Technologies, this $4.2 billion business is expected to grow above market and contribute significant incremental revenue, especially as we roll out our new spine hardware, see continued adoption of our enabling robotics, imaging and navigation technology and increasingly see surgeon adoption of our UNiD platform. The UNiD platform includes AI-driven preoperative surgical plans, which inform patient-specific implants and longitudinal follow-up of patients and the storage and analysis of patient outcomes. And then those outcome data are used to enhance and expand our algorithms going forward. This entire Medtronic ecosystem in spine has us back on the offensive and definitely winning share. Now in Pelvic Health, we'll be launching our next-gen primary cell device in the first half of this calendar year. And new technologies in Neurovascular, ENT and DBS are all expected to drive growth at or above the market. Now moving to Slide 18. So across our portfolios, we have a number of catalysts to drive growth over the near term. But we intend to accelerate and sustain this growth, which is why we are investing heavily in some of the biggest advancements in med tech. Over the mid- to long term, we have a number of programs across our portfolio that will contribute to drive growth from Ardian, PFA and mitral in Cardiovascular to Hugo and PillCam genius in MedSurg to next-gen spine-enabling technologies and SCS indication expansion in Neuroscience to multiple programs in Diabetes to deliver next-gen insulin pump systems as well as competitive CGM and patch pump technologies. We're focused on the long term and intend to maintain important investment to deliver on this. So now Slide 19. So to pull it all together, while we're working through puts and takes for the next fiscal year and we'll give guidance in May, we remain committed to our goals over the long term punctuated with a double-digit total shareholder return. It starts with the 5-plus top line growth along with margin expansion to deliver 8%-plus EPS growth. We expect to convert those earnings into free cash flow at a minimum of 80%, giving us a capital -- giving us capital to reinvest and return a minimum of 50% of our free cash flow to our shareholders, primarily through the dividend that we expect to grow roughly in line with earnings. And combining our EPS growth with our dividend yield gets you to the 10% plus TSR. Now Slide 20. And finally, as I mentioned at the start, Medtronic is focused on being a leader, a leader in ESG. We will focus our efforts on specific priorities that are most material to our business, including innovation and access, patient safety and product quality and inclusion, diversity and equity. And we've also set ESG targets across our priority areas. And for more detail, I do encourage you to read our 2021 integrated performance report or watch our inaugural ESG investor briefing, both of which are available on our website and to learn more about these -- our work in this area. So finally, Slide 21, some key takeaways. So let me wrap it up this way. We're transforming Medtronic, and the important initiatives and changes we've made are having a significant impact and setting our company up for consistent and strong growth going forward. The majority of our businesses are growing at or above market. We're accelerating our focus on lean and efficient operations, excellence in execution and portfolio management. We have multiple levers to deliver double-digit shareholder return, and we're deeply committed to creating long-term shareholder value. And we expect our revenue growth to accelerate from here over the long term, not just as our markets rebound from the COVID impact, but as we compete and win in higher-growth markets with differentiated technologies and we benefit from an unmatched product pipeline. Look, we have a sense of urgency. Our recent setbacks, look, they're just not acceptable. The changes we are making are giving us better visibility into our businesses and are also a great opportunity to drive improved performance. And we're committed to giving you more readouts on our progress as we make these changes. So with that, thanks for your interest in Medtronic. Robbie, I'll turn it back over to you. We've got Karen, Sean, Bob, Brett on the line as well and happy to take your questions.

Yes. Great. Well, first off, thanks, everyone, for being here. There's a lot to talk about. So maybe we could start with the most topical. Geoff, you announced a new atrial fibrillation asset this morning, looks like for pulsed field ablation. Maybe just walk us through the rationale for this. You've done a lot of M&A and already have a pulsed field ablation asset at Medtronic. Is there any read-through to that? And just maybe we can start there.

Yes. No, I'll let Sean chime in, in a second. But there's no read-through on our PFA. I think the big thing here is, look, Afib is a huge market, growing condition. And we have some good therapies, but we had a gap. We have a gap in map nav, and that's an important gap that we wanted to fill. It's an important part of the procedure, an important part of the clinical side, important part of the economic side. And we feel Affera not just fills this gap, but gives us a best-in-class system. And on the PFA side, I would argue they have this focal catheter and it's a very complementary offering to what we have. I don't know, Sean, you want to add anything to that?

Sorry, Geoff, I was having some IT trouble here. I missed the question.

It was about Affera. I was just walking through. Robbie's question was why Affera and is there any read-through on our PFA, and I walked them through the fact that it's really more -- it's not a read-through on PFA for us. They're complementary from a PFA perspective, and the map nav is the strategic -- is really strategic for us.

Yes. No, absolutely. So Robbie, this is a platform that's really well integrated for all kinds of catheters, can work with a cryo catheter, it can work with the regular ablation catheter and it can work with PFA. And what they have is in the same catheter, you can navigate. With good precision, get a really high density map and also deliver therapy through that catheter. And that catheter can either deliver RF energy or PFA energy. So it's a complement, for sure, across the board for us. Really importantly, it gives us a navigation system that is not only closing a gap for us, but it is also highly differentiated, which is important in a crowded market space.

Got it. Geoff, you mentioned a couple of times during your presentation about a portfolio review. This is something I think you started to mention on the last earnings call, but it looked like it was a little more front and center here in the presentation. Anything that we should expect to hear about in the next few months and anything that you'd highlight as particularly at risk during the review?

No. I don't want to get into those details. But yes, it is a little more front and center. I mean, look, we -- as we highlighted on the one-pager on the changes, the initial focus was really on the 20 operating units and the culture change. And the 20 operating units really drives for us the faster innovation. Now we're moving into an area we're more focused on, some of the foundational things like operational excellence, end-to-end supply chain and quality. These are things that we've got to get our foundation stronger here. But lessons, kind of insights from the new model is definitely helping us provide, like I said, the new model is providing insights on the businesses, what it takes to win, what the market opportunities are, what are the dynamics, what are the challenges. And that's helped -- that's giving us insights on our portfolio analysis. And like I said in the prepared remarks, over the -- I'd be surprised if over the next year, there aren't some changes. But we don't know at this point if they're big, if they're around the edges. And we're not really prepared at this point to get into which businesses.

Got it. There's -- over the past few months, there have been a couple of pipeline updates, some positive, some negative. Maybe as you look at what happened, some of the negatives were a little more high profile, anything that you or Medtronic would have done differently in retrospect? And anything that you're thinking about doing forward to maybe make sure that there's more -- less disappointment on major pipeline updates?

Yes. No, look, like I said, these updates -- the setbacks on those 3 were -- it's disappointing to say the least and really upsetting. However, like I said, these things are delayed, but definitely are still going to be big drivers, we believe, and I can go one by one. But we do think there are going to be -- continue to be big drivers. If there's something maybe done differently, we thought we set the right expectations, spent a lot of time on that. And could we have set even more conservative expectations on like Ardian or in the robot? Maybe, as you look back on it, on hindsight. But we -- at the moment, we thought we had set appropriate expectations and that's where the frustration comes in internally here. And that all being said, these are things we're learning from. It doesn't change our focus on delivering on these and our optimism that they're going to be big and be part of a pipeline story that gets us to the next level of growth.

Got it. Great. Maybe for you, Geoff, and maybe for Karen, you noted a couple of times in the presentation about operational excellence and investment in quality. Is that over -- is that basically part of Medtronic now? Or is that an incremental spend? Really, the question is looking at, is this something you need to invest more in? Or is this already in the DNA of Medtronic and something that's in [indiscernible].

I mean, I think from a spend perspective, we've already been spending a lot like on ops. I mean our operating model, we've talked about the operating model being small and focused and big at the same time. Playing small and focused and playing big. The initial changes were really focused on 80% of it was on the small and focused on getting those operating units set up, establishing the transparency into their end markets, understanding the competition better, changing our incentives. All around kind of a more predictable, faster and more predictable innovation and driving growth. But we still have foundational operational excellence issues because of the fragmented nature of our global ops. And this is an area where we're saying, this is where we need to play big and have a more centrally architected strategy. So it's less about spending more. It's more about building capabilities and processes and putting the right systems in place. So that's what we brought in Greg to lead, for example. He's bringing in some outside talent outside of health care to mix with our existing talent. So that's on the ops piece. And the quality piece, we put this patient safety and quality improvement plan in place a number of months ago because we've had some unexpected recalls over the last 18 months that just aren't acceptable and going back and making sure that we make sure this doesn't happen like this again. But I -- we're not signaling a bigger spend in that area. I don't know, Karen, if you want to chime in on that.

I would just add that everywhere that we have places where we need to spend more, we're focused on driving efficiencies in other places to help offset.

Got it. This will probably fill up the rest of the question time here. But Geoff, even despite some of the updates over the past few months, Medtronic's remained very confident in the long-term growth profile of 5%-plus top line, 8%-plus bottom line growth over time. Maybe just at a high level walk us through what gives you that confidence to get there over time? And what's your visibility to that type of growth profile for Medtronic?

Well, one, I think the markets we're in are good. I mean we didn't talk about, so far, which is a nice change, talk about COVID or Delta or Omicron. But we do see while we're getting through that. And we're in strong end markets. And part of our portfolio management exercise, I think we can move into some additional higher-growth markets. And then we've got this really strong pipeline. And it's -- just look at our big 3 businesses. I talked about Spine in the prepared remarks with this ecosystem of technology and this unit platform we got from Medicrea really has been a nice addition to that. And you see it's changing spine surgery, and it's from a financial perspective, allowing us to take share and will over time consolidate the industry quite a bit. Cardiac Rhythm Management, we're disrupting. We continue to disrupt the pacemaker market with Micra, creating a $2 billion leadless pacing market opportunity by the end of the decade here, by 2030. And we're disrupting ICD market with EV ICD, which is another $1 billion opportunity by 2030. We talked about Cardiac Ablation Solutions and the PFA coming in now with the complementary offerings of Affera plus ours that gives us even a broader pipeline of PFA and now with map nav. And then look, our Neuroscience portfolio is really, in general -- I'm sorry, sticking to the big 3. In Surgical Innovations, you've got just a really strong pipeline there and energy in vessel sealing and stapling. And then you've got the robot adding to it. And like I said, the robot's on the market now and we're going to start a U.S. trial soon. And like I said, it's -- demand is high. And we're doing surgeries and doing more complex surgeries. And so just across the big 3, we've got a lot of growth drivers. I'm confident in our Diabetes. I know it's taken longer than we'd hoped and the warning letter hasn't helped that. But our Diabetes portfolio, we kind of hinted at some of the other technology coming in patch and further sensor technology beyond what we've talked about. So our Neuromod business, now stretching, is also in a really good spot with DBS and Pain Stim and ECAPs coming in Pain Stim. And then of course, you've got the rocket ship in TAVR and what's going on there for Structural Heart. So that's why -- and then you top it off with our strong presence in emerging markets, so that's why we feel good about this.

Well, great. Thanks, Geoff, Karen, Brett, Bob and Sean. I appreciate the whole team here. Sorry, I didn't get to ask you all questions. But thanks for your time, and wish you a great day.

Thanks a lot, Robbie. Appreciate it.