Medtronic plc (MDT) Earnings Call Transcript & Summary

All right. Good afternoon or good morning and it's about to be a good afternoon, and welcome to the 2024 Wells Fargo Healthcare Conference. Thank you to helping make this our largest health care conference yet. I'm Larry Biegelsen, the medical device analyst at Wells Fargo. And I'm thrilled to host his keynote session with Geoff Martha, the CEO of Medtronic. Geoff is an ideal keynote speaker, he leads the world's largest medical device company. So he has a unique perspective on device trends around the world as well as health care trends. Medtronic is also at an interesting inflection point as new growth drivers start to contribute to the company's revenue, and Geoff has made leverage more of a focus as well. So we should start to see high single-digit earnings growth later this year. The format will be moderated Q&A. If anyone has a question, just raise your hand and someone will come around with a mic. We'll spend about half the time talking about industry trends and the other half on Medtronic-specific topics. So Geoff, thanks so much for taking the time to be here today.

Yes. Thanks, Larry. Good to be here. And congratulations on the conference, the attendance and the impact that it's having is good to see.

Thank you. Appreciate that.

So Geoff, let's jump into the questions. From your perspective, what's the state of the med tech industry today?

Well, look, we've come through, I think, a couple of tough years with COVID and everything, but it's a very good spot right now, namely because of innovation, I believe. The innovation is really strong. And it's innovation in areas that -- where there's a big patient need in a lot of patients, areas like diabetes or AFib and we're counting on hypertension. But from an industry perspective, I think it's a lot of innovation and that innovation is getting rewarded with growth and pricing. And then we have, I think, healthy end markets. So all that, it's a good time to be here. And there's -- the other piece that I'm excited about for the industry is just the digital piece coming in. And I think in digital, whether it be data and AI, but also computing, supercomputing, edge computing, cloud computing, everything is connected, and then finally, robotics. All of that coming into the industry, these big tech areas coming into med tech is exciting.

That's good to hear. So Geoff, obviously, this is an investor conference. And year-to-date, large-cap med tech has underperformed the S&P 500 and in most other sectors, subsectors within health care. Why is this a good time to invest in med tech and Medtronic?

Well, from a Medtronic perspective, I'd say we're in the early innings, if you will, of launching, as you mentioned in the opening comments, new and novel technologies into high-growth areas. And we're starting to show consistency, 7 quarters a row, mid-single-digit growth. I still think that's early innings of these launches, and we believe that's durable. And as you mentioned, a number of changes we put in place to drive the bottom line as well, and we're starting to see that. And we anticipate the back half of our year at high single-digit growth. And so we think it's durable between investments and the innovation to drive the top line and the discipline and the rigor we're showing to drive the bottom line as well. We think it's durable.

That's helpful. And Geoff, can you talk about what you're seeing with regard to procedure volumes around the world?

Like I said just a second ago, I believe they're healthy. It's like in procedure volumes, I think the noise has worked its way out. There's a lot of conversations that you and I have had on different investor calls and stages like this. Is there -- when coming out of COVID, there's this is big bolus, what's going on. I think all that's worked out, and we're at a new normal, a healthy growth rate of procedures, and I expect that to continue. I think some places that the GLP-1s have had an impact on certain areas of med tech for us. It's -- well, I'd say GLP-1s has an impact on sentiment in certain areas. And actual procedures, the one area we're seeing is bariatric. That's a relatively small part of Medtronic, low single digits. And we expect that to actually get back to growth in calendar year '25. So we think that's kind of bottoming out and will start to grow again.

That's good to hear. You talked about innovation, that was in your opening comments. What are some of the areas you're most excited about?

Well, the areas I'm most excited about, what's driving the excitement is a couple of things. The patient impact, the size of the patient pool, the relative near-term nature and the financial impact. Like we have those kinds of criteria. Things that jump off the page for me would be PFA for fibrillation -- for atrial fibrillation and hypertension. So the RDN technology for hypertension. Those two, why they jump off the page is because in AFib, we were -- we've been like sub-$1 billion, relatively niche player in this growing market. The growth has accelerated, I think due to the innovation, and we feel like on the PFA side, we have a very comprehensive portfolio of technology, both in the single shot and in the point-to-point, it's a very comprehensive offering, and it's going to get us to market growth in the near term and then exceed that.

Well, we're definitely going to dive deeper into PFA in a minute when we talk about Medtronic-specific topics. I'm curious on the innovation has been strong within the industry, I agree with you, there's a change going on with the FDA, the Head of the Medical Device division, Jeff Shuren, is retiring. What -- how might his retirement impact of the regulatory environment at FDA?

First, I think, Jeff -- we owe Jeff a debt of gratitude. I've got the chance to work with him at Medtronic, but also in my role at AdvaMed, on the leadership team or the Board of AdvaMed. And I think he's done -- not just him, but the FDA, in general, has done a good job at protecting safety first and foremost, but being advocates for innovation and making the U.S. market competitive. Behind the scenes, I see them actively balancing that. Not -- it's not a balance. Patients' safety, #1, but still driving innovation. And they created new pathways and they've been constructive with industry. And so that's all under Jeff's leadership. So we'll miss him. But I do think, look, Michelle Tarver stepping in -- Dr. Michelle Tarver, on an interim basis, and they're conducting a search. I think there are a number of good candidates out there. And it was under Jeff's leadership, but there's a broader leadership team and of course, Dr. Califf, the head the FDA. I would expect that approach to continue where patient safety, #1, but advocates for innovation to make the U.S. market the best place to get the care.

That's helpful. You talked about digital a minute ago. Everyone talks about AI. But the questions investors are asking us, how do you monetize it?

Well, look, one -- that is a good question. One is -- first of all, I don't think it's hype. I think we're -- we've launched a number of FDA-approved AI-based innovation, whether it be in colonoscopies or surgery or AFib detection, diabetes or algorithm, it's really having an impact. And that's one of the things that I've challenged our team, and we've had some success here is making sure the business model is there, so you can get paid. So like -- and it's doable, like, for example, in our Spine business, with surgical planning, we talk about robotics and navigation and this whole AiBLE -- what we call this AiBLE ecosystem of enabling technology. One of the key things that has accelerated our Spine business growth is the surgical planning software, and that's an AI-based software that is -- really guides the surgeon through the procedure and how it -- tracks the follow-up, et cetera. We're just getting better outcomes. And for that, we're charging. We've created a subscription model there. Same thing we're doing in GI Genius. So we are -- you can get paid right now, it's been something that a hospital has got to come out of pocket for. I think the next step for us is getting actual specific reimbursement for this. And that's something we're working on. But the -- it's something you just have to focus on, but the opportunity is there to get paid for this.

Can you envision a time or a way where you could quantify that for investors? Or is it just the AI is embedded in the products, it's difficult to kind of -- in other words, AI or digital contributing $500 million. Is there any way -- do you think there's ever going to be a way where you can quantify?

Yes, I think for some products, the answer is yes. I mean, some products, like I said, sometimes the AI is embedded and it's just helping you win more market share or grow that market or win more market share, but it's embedded. In other cases, like I said, the two examples I gave, we're calling it out and saying there's a specific business model where you get paid for the AI specifically separate from the rest of the technology. And I think that's obviously quantifiable. I'm pushing for more of that versus just the embedded. But in some cases, it's embedded and kind of a cost of being competitive. But more and more, we're starting to charge for it and that we'll be able to quantify. We're not prepared to do that right now, but we've got these 6 AI-approved products. And about half of them are specific charge -- specifically charged for versus just buried in the price.

Is this an area where Medtronic scale is an advantage? Do you have like a centralized AI/digital function or research or leader? Or is it segment by segment that you...

We started -- the answer is yes. We hired Dr. Ken Washington. We hired him outside of health care. He was -- he was a big tech at Amazon. And before that, he was at automotive industry in Ford, driving the Ford F-150 program. All -- AI played a big role in all of that. And so we brought him in. The impetus because we hadn't had a Chief Technology Officer before at Medtronic. So why now? It was really AI and a bit of robotics as well. So we can -- it centralized a bit, but it's also in the businesses. We started in individual businesses. We did like a shark tank, said here is -- we held back some R&D -- after the budgeting process is over, we had held back some R&D, and we said to the businesses, shark tank, this is like 4 years ago, give us your best AI ideas and then we'll fund it from the center, just to get it going. And that was in the businesses, but we definitely see an opportunity and we've acted on to it to centralize part of it. There are certain aspects of your -- AI strategy, I think, are better at a company like ours to be centralized. So each business doesn't have to build the platform by themselves. So now we've got a platform and -- or platforms, if you will, at the enterprise level, the businesses can leverage.

That's helpful. Let's switch gears and talk about China, which has been very volatile in recent years in the medical device industry. What's Medtronic doing to, a, minimize the geopolitical risk there? And b, what are you seeing on the ground there today?

Well, first, let's start by -- yes, it's been with the volume-based pricing that have gone through quite a bit of the med tech industry in China. The pricing has come down quite a bit over the last couple of years, and we've had to eat that in our financials. That's largely behind us. What hasn't changed is the procedure growth there is very high, right? It's just high procedure growth, but now at a lower pricing level. And for Medtronic, that's largely behind us. We still have a little bit left to go in volume-based pricing. But what you have now is a very high-growth business from a procedure perspective, just at a lower pricing. But we've maintained good profitability there. We've been able to take out some costs and maintain very good profitability there. So that's where we are right now, and it's contributing to our emerging market growth, which is a strong contributor to our emerging market growth. Now what we're doing to derisk it for variety of reasons you mentioned, geopolitics and we don't rely on China as a big -- for our supply chain. There's a little bit there, but not a lot of exposure, and we continue to manage that down. But in terms of the end market, again, like I said largely, a lot of those VBP is behind us, still a little bit left to go, which, in a given quarter, it could be a little choppy, but we're still talking growth. What we're doing over time is -- oh, and by the way, when the next round of VBP comes back, we're seeing price increases. So I think we've kind of hit -- I think the government realizes we've hit kind of a bottom, if you will, and they don't want to see us pulling out. So what we're doing now for the long term is localizing more. So in China for China. Design, manufacture, sell in China for China. And we can export those products to other emerging markets. But that's -- and that's going to take us some time to shift our portfolio from largely import into China to more in China for China. We've been on this journey now for a decade, but we got to speed it up a little bit.

Any idea what percent is local today? Sold...

Yes, we haven't disclosed that, but it's -- the majority is still -- the majority is still imported into China. And as you look at other industries, we look at all the industries inside of health care and outside, I'm on the US-China Business Council, the Asia side, I spend a lot of time on this. You see patterns and so we just know we're going to have to accelerate localization now to participate in the growth. But that's not happening overnight. I mean it's local companies in our space -- China still relies heavily on the U.S. for its advanced medical technology.

Got it. Geoff, pricing has gotten better over the past few years for the industry. It sounds like pricing maybe even turned positive for Medtronic in fiscal Q1 that you just reported. How are you -- is that accurate? And how are you thinking about pricing going forward?

Yes. Historically, it's been like a low single-digit bad guy like every year. And we've been creeping it up and it's crossed over to being net, accounting for everything, including China VBP and other government pricing actions. Net, it's been a slight positive for us, and we attribute that to two things: One, focusing on pricing, having maybe a little more backbone on this and driving this and incenting people on this more than we had in the past, but two, innovation. So we're really measuring how much of our revenue comes from products we've launched in the last 3 years. And we measure that vitality index, we call it. And we're at, a little over 20% right now of our current revenue comes from products in the last 3 years. And we will keep growing that vitality index because we -- when you drive innovation, it helps your pricing. So that's how we're doing it.

But the pricing that was positive in fiscal Q1, that's pure price?

Yes. Yes.

Got it. Geoff, before we transition to Medtronic-specific questions, what about the industry risks? We talked about a lot of opportunities. I mean, China...

China, you brought up. I mean, I think, look, there's a lot of growth in China, okay? So the Chinese government, make no mistake, is investing in health care. They're serious, when you talk to the Chinese government and the Chinese health policy leaders, they're very sophisticated, and they really do want to drive better health care for their population. And -- but economically, they want that money that they're investing in health care to stay in the country, and so they are pushing for local. So it's a risk geopolitically. But I think if you take the -- that's something you got to watch for, but the health care policy is pretty clear. Localize over time, and it's a choice you can make or not make to participate in the market. So that's one risk. But look, let's start with the positive. I mean we started -- it's healthy procedure volumes that we're seeing out there in the industry. And you're seeing innovation combined with the healthy procedure volumes. So I think there's more opportunity than there are risks. I think China is one risk, but I don't know that there's another that rises to that. I think one opportunity that we've got out there is AI. I think a risk would be if the FDA somehow loses control of the regulation of that. Like I argue with U.S. government officials that we're already regulated in med tech on AI, don't come over the top with some other regulation. I'd like to think that's a risk that we want to mitigate. And I think, look, the hospitals that we sell into, the health care system we sell into isn't at the -- we've got to make sure that continues to be healthy.

That's helpful. Let's switch gears and focus on Medtronic. Geoff, a big picture question. How are you thinking about creating shareholder value at Medtronic?

Well, I mean, it starts with the top line, innovation-driven growth. The top line consistency at that mid-single digits over time even more, but let's start with mid-single digit, and it's durable. So it's coming from markets that are large and growing. And we've been -- we've gotten a lot better at that, 7 quarters in a row. And like I said earlier, our growth is starting to come from these big high-growth markets like diabetes, PFA, robotics will be coming, that will be more meaningful in the years to come, Structural Heart. But then also the driving leverage down the P&L and delivering that high single-digit actual EPS growth. The good news there, we made a lot of -- taken a lot of action there, driven a lot of rigor into the system, digitized a lot of things. And we're seeing the leading indicators of that with -- like last quarter, we were 8% EPS growth on a constant currency basis, but investors want to see actual, but it is a leading indicator. And that will flip in the back half of the year where we'll see the high single-digit actual EPS growth, and our goal is to make that durable. And I think we do that, what I'm told from investors is that, that will make the stock work.

Understood. And Geoff, in recent years, [indiscernible] have seen greater share appreciation. Would you consider getting smaller? Breaking into 3 or 4 smaller companies to grow faster?

We're always looking at -- we're constantly looking at what -- we're not -- shareholder value creation. And so we're not stuck mentally on being as big as we are. We're really focused on creating the shareholder value. And the last couple of years, it's been improving the fundamentals of the company, the operating rigor, the quality, the operations with all these supply chain issues and getting those products out there. We're going to maintain that. And I'd like to see scale benefits from the size in 3 areas going forward: Operations, global operations and supply chain, so resiliency there but also efficiency, driving costs down, and that's showing up in our numbers. Innovation, like you talked about, there are areas of innovation that cut across the company. AI is one, implantable electronics is another, robotics is the third. More of those are tangible results of -- like, for example, you asked me about like tibial nerve stim. We're taking a product from our Cardiovascular business and making a few alterations to it, and that's our tibial nerve stim. And so that's an example. We need more of that. And then finally, at the customer. So like scale -- contracting scale across. We'll talk about PFA, but that's a big part of our PFA strategies. Contracting across the Cardiac service line to make it easier for them to acquire PFA generators, and so there's no switching costs. So these 3 areas. And if we don't get that, then maybe we relook at the thesis. But we're -- it's a constant conversation with our Board, not out of defensive but out of proactiveness. What's the best way to create shareholder value. So one thing I would say there's openness to -- it's all about creating shareholder value. We're not stuck on a model, and they're humility in our thinking here. We're not just -- hope that makes sense.

That makes sense. And Geoff, you've talked about leverage. Your margins are still down pretty significantly versus pre-COVID levels. What's the plan and the timeline to get margins back up?

Yes. So you talked about the gross margins and yes, it has some impact on the operating margins. We started -- and we got the top line like we talked about, we spent a lot of time on how do you grow that top line without growing your SG&A at the same rate. We feel like we've got that like I said, between digitization, process changing, changes -- creating global capability centers, like we've got like a lot of our R&D now in India, for example, that's a global capability center. These things are helping us on the bottom line. So grow the top line without growing the SG&A. The gross margin is the one that's tougher to move, and that's a combination of the pricing, the cost of goods sold productivity, a part of which -- a lot of which has been masked by inflation and the strong dollar, both are improving. So you should see the benefit of that cost of goods sold productivity near term as inflation comes down as the impact of the strong dollar turns around. And the last one is mix. And certain things of mix we control. We're funding and prioritizing high-margin areas like hypertension is a very high margin for us. It will be like things like in Cardiovascular like PFA. These things are high-margin. Neuromodulation, our Spine business, we call it Cranial & Spinal Technologies. These are all -- cardiac rhythm. These are all areas that are very important to us, but we do have some -- mix is almost like a mixed bag because those things -- but we do have some high-growth businesses that are lower margin like right now, Diabetes. That growth that does create a mix issue for us at the gross margin line. But net-net, we believe we've stabilized it, and it will improve from here. We haven't given a time frame on getting back, but you'll see it stabilize in the back half of the year when that currency flips a bit, that's when you start to see it grow from here.

That's helpful. And how are you thinking about the EPS power of Medtronic beyond fiscal 2025?

The EPS, you said?

EPS and sales. I mean, is it basically mid-single digit, the algorithm mid-single-digit organic growth and high single digit EPS growth?

Yes, that's the algorithm that we're managing to.

In capital allocation, Geoff, you've been relatively quiet with regard to M&A recently. But based on your comments on the Q1 call, it sounds like you're preparing to do more. Is that fair?

Yes, I think it's fair. I mean, we've -- we haven't changed our capital allocation strategy. I mean the dividend is a priority for us. And then after that, it's tuck-in M&A. I'd say we raised the bar on tuck-in M&A in the last 18 months. If there's something we felt we really needed to have, we would go get it. But we had a lot of things going on inside the company, all the changes on the operations front. We were integrating Affera and other acquisitions. I wanted to make sure we focus on a few critical initiatives, a bunch of digitization initiatives as well, get the fundamentals right. But we're in a much better spot now. And so I think -- get an increased cadence on tuck-in M&A is where we -- that's a priority.

And dilution, how are you thinking about dilution? Are you -- because right now, you're on the cusp of this high single-digit EPS growth.

We have to -- we would have to make sure that this all works, and we're still committed to the high...

Offsetting dilution, if there is any.

Yes, we have to offset it. So again, part of the focus would be on these deals, make them less dilutive. So closer to commercialization. And if that means increased price, I think it's worth it because you're derisking it as well. The further you are from commercialization, the more risk you take. So closer to commercialization, you derisk it and it helps us on the dilution front.

Right. Let's talk about some of the new growth drivers. I've lost count of how many times you mentioned PFA so far during our conversation. So why don't we start there. So EP has been obviously a delta, electrophysiology, atrial fibrillation has been a strong market in general, and then PFA is accelerating that growth. How is Medtronic positioned? And what's the outlook for Medtronic?

So we're excited about -- first of all, the market is a great market. I mean, and it's growing, like even before PFA, you saw a pretty big market, continuing to grow really well. And I think it's a combination of just an aging population and the world getting a little bit more wealthy. And so people living a lifestyle that developed countries live and you're getting more AFib. And now with PFA, you're creating more capacity, doctors like the safety profile. So I think it's -- and you're lowering the threshold to do ablation on patients. So the market is going to grow even more. And so I really feel good about the market, and we're in a leadership role. We've got -- we may not be the first, but we've got, we believe, the most comprehensive offering here between our PulseSelect technology, which is a single-shot space, that's a smaller market, fast-growing. And then -- that's our PulseSelect. And then in the focal or the point-to-point, we've got Affera and that's a large market. So we've got to cut across. Everything I have talked to docs about, and I've seen from analysts and lot of good feedback on Affera that, that's like the creme de la creme, if you will, the premier product in the space today. And we're pairing the 2 together in contracting, and we have to [ wait ] to actually execute on some of those things until Affera gets approved in the U.S. And we're also -- so we feel good about it. And then you have the mapping, which is very differentiated, too. The Affera, what's so exciting about it, is that it's an all-in-one catheter so you do -- as you know, you do the PFA, but you're also going to do the RF. You don't need 2 catheters because hospitals are sensitive to the price because all this is a price uplift. So if you can help them on value, that's a big piece and then the mapping. It's a next-gen mapping system that everyone is excited about. So it's comprehensive. We're linking the two together. We're going to use our Cardiovascular service line [ HEFT ] to do contracting to ease switching. And I don't think -- this isn't like some other segments of health care where you've got -- or med tech, where the first player has some big training advantage or some big evidence advantage. I think switching is it really comes down to can the hospital acquire the generators or not and the best offering wins. And we like our offering. We think we're going to be growing at the market here soon and then going ahead of the market. So that's why I'm bullish about it.

What's the assumption for the U.S. approval of Affera?

We haven't -- it's not that far off. I don't want to get ahead of the FDA. We just talked, the partnership we have with them. I don't want to get ahead of them on that, but it's not far off.

And talk about when you do have approval, how you're feeling about the 3 kind of pieces that supply and being able to manufacture it, the map -- getting the mapping systems out there and having the personnel, the mappers, the clinical support.

Yes. I think, first of all, a lot has been written on a positive about the efficacy of Affera in particular, but -- and that's coming from physicians. And our competitors have also pushed a narrative on the complexity to make the catheters and they are hard to make. And the organic solution for us is it's scaling now that's PulseSelect. It's -- so that supply scaling and the revenue will start to scale. We grew 6.5% last quarter net. That's inclusive of cryo going down. So it's a lot of PFA, that's all PulseSelect, and that's going to continue to accelerate from here. And then Affera, we've had some breakthroughs on the manufacturing capabilities over the last couple of months, even weeks, and we've got lines up around the world, factories up around the world, and we feel like we've got our supply base in a good spot, and we're validating all that now. But for us, revenue for our FY '25 will be largely PulseSelect and then FY '26 is where you'll start to feel the impact of Affera revenue ramp.

But supply, you feel is good?

That's what I'm saying -- yes, that's the timing, the -- inclusive of supply. We feel -- we've got work to do, but we feel good about it based on what we've seen and the breakthroughs we've had, and we're validating it all now. So we feel good about it. And we're hiring mappers. We're hiring mappers. Mappers are coming over from the established players in mapping. They see the future in the Affera mapping system that -- where we're going with -- where Medtronic is taking PFA.

To your guidance for fiscal '25, which you're in right now, assume limited contribution from U.S. -- from Affera in the U.S.? Is that...

Yes, I'd say limited. Like I said, we said, we grew 6.5% last quarter. We said it's going to meaningfully accelerate from here. I don't want to change that. So that's accurate. I don't want to go in any further detail. And the only incremental detail that I'm dropping is that that's mainly going to come from PulseSelect. But the aura of Affera is already having an impact.

And you have it in Europe, obviously.

We have it in Europe, but even that is limited in supply, the aura of what's to come is having an impact on contracting and what -- [ in health care ].

That's helpful. What's it going to take to make renal denervation, Spyral Simplicity, a $1 billion product for Medtronic? And are you still bullish on the opportunity?

Yes, very bullish. I mean, look, we're the clinical study. I mean you need read through it a little bit to get to the bottom line, but we're seeing incredible patient outcomes here and a pristine safety profile. It's the #1 contributor to death in the world, 3 out of 4 people in the United States do not have the blood pressure under control. This is a solution that is patient friendly, like I said, pristine safety profile and it works. We're getting double-digit drop in blood pressure, and it sustains. So that's pretty exciting. And so what we need to do is two things. Everyone in the investment community is focused on the coverage decision. We are in very constructive conversations with CMS. I can't say the exact timing, but it doesn't seem like it's that far off that they'll give some sort of decision here, and the smoke signals are positive. The dialogue is positive. So we think a national coverage decision for CMS would be very helpful for this. Again, I can't get ahead of CMS, but the dialogue has been good. And then once you get through that, it's not totally sequential, but this will accelerate after, is working with health systems, particularly -- all over the world because the rest of the world is waiting for the U.S. to move, too, on the patient -- establishing patient pathways. These are patients that the health system really isn't used to managing from a specialist perspective. They're managed out on the edge with GPs and maybe even general cardiologists with medicine, but that's not working. So how do you funnel those patients into an appropriate funnel that the appropriate patients get Simplicity. So that -- we have to work with health systems on that, but this is going to be a big one for us.

That's helpful. Diabetes has been a nice turnaround for Medtronic. Why was this the right time to do the partnership with Abbott?

I think -- well, first of all, this is one of those situations like I was telling you off-line. It's a win-win-win. I think, Abbott said this publicly, I've talked to them about it personally, but it's a win for them, it's a win for us, and it's a win for patients, they have more choice. I think it's -- this -- now is the right time because I think Abbott, we were able to get the deal that we wanted. I mean Abbott sees the direction we're going in the automated-insulin delivery space and sees the strength that we have. They see the pipeline that we have, and they wanted to make this investment. It's an investment on their part too, to do the integration and they thought we were the right partner. And because of that strength, we were able to get terms that were acceptable to us. It's a fully integrated system. It's their latest technology, fully integrated, which I'm not sure -- and in terms that -- financial terms that make sense. We've said on the call, it's definitely revenue accretive and profit neutral for us. So -- and we're launching -- this may be counterintuitive, we're launching our latest sensor now. So we do think we're committed to that. We do think yet -- having the ability to control our own destiny and provide patient choice on the sensor is important.

Got it. And the integration timeline?

It's not going to be FY '25, so -- but I don't think it -- so it's sometime after that.

Got it. And the other area, you've talked about earlier is robotics. Just remind us of the timeline and do you believe you could be the #2 player after Intuitive Surgical?

Yes. No. First of all, we realized we're up against a strong competitor here, so I get that. We're not -- our head is not in the sand on that. And -- but we do feel we got a great platform here. We've got to make it meaningful from a financial perspective and scaling it. We've got to get our leading instruments on there. So Energy, Stapling and others, and we need to get that U.S. approval. And that -- we submitted or in the process of submitting, we wrapped up the urology trial and are gathering -- packaging all that data and are submitting that to the FDA and that went well. And this de novo 510(k) clock is like 180 days. So we don't know exactly how long it will take, but that's the clock, and we are close to submitting it all. And we believe the trial went well. And so we've got -- that's the U.S. approval time frame. And then we've got -- we've got to continue to -- it's not invention, but engineering, to get our instruments on. And you get all that, and we have -- we think we have a competitive solution. And yes, we -- it's right now, it's a -- surgery is the biggest market that there is, I think, I mean, it's everywhere. It's going to go more minimally invasive. It's going to go more robotic everywhere. And it's a 3 kind of company market at this point for most of it. And I like where we sit among those 3.

Hugo has been available outside the U.S. for a couple of years now. What's the timeline to integrate the instruments outside the U.S.?

It's the same in the U.S. I mean it will happen likely after the U.S. approval, in that time frame.

Got it. And it sounds like, Geoff, because we were talking off-line, you see robotics coming into developed markets, developing markets, more cost-sensitive markets. How do you see -- do you see different types of robots in different market segments? I'm talking about surgical. Or do you see Hugo being kind of a robot that is useful in all different types of price...

Yes. The thing is the -- one of the things we liked about Hugo is the design. The modularity leads to versatility. So you can -- the arms are modular, the open console is physician-friendly. So we think you don't have to have all 4 arms in every case. We think we can innovate on what's on the end of those robotic arms to make it versatile beyond just what the -- cases that you're seeing da Vinci do today. So we do think it has versatility beyond that. And think of -- I was just in India not too long ago, and they're really pushing -- okay, take 2 arms and focus it on certain procedures and optimize those procedures. So I do think the versatility of Hugo will be advantaged in price-sensitive markets, where we can still get the value for the robot and it's affordable to these countries. I just don't see -- and I don't see this going as sequential as you see open to lap. I think you're going to see a pretty fast adoption even in some of the poorer countries because they don't have the trained physicians. This will -- over time, robotics will be good enough to augment physicians.

Got it. Geoff, a minute left here, there's a lot of other things going on at Medtronic. I wanted to give you the last word. Other areas you're excited about Spine, neuromodulation and any other...

Well, you're hitting a couple of them. I -- we talked about, look, cardiac rhythm, really excited about what we've been able to do with cardiac rhythm and take it. Cardiac rhythm, Spine and surgery are big 3 businesses. We've got a lot of innovation going in surgery, just with robotics. But there's a lot going on in our Spine business, we call it Cranial & Spinal Technologies as well as it's this whole AiBLE ecosystem. So it's even more advanced than robotics. We're excited about that. And like I said, it's taking the spine industry and going from 400 competitors down to 4 and we're taking a lot of share there. And it's really shored up and then cardiac rhythm also doing well, whether it be leadless or conduction system pacing or the Aurora EV-ICD, these things are taking over half of our revenue -- about half our revenue and more when it comes to profit and cash flow. It feels very secure, very secure. And that allows us to fund other things. One of those things -- we talked about a lot of those things that we need to fund, but one is neuromod. This new technology, this sensing technology in DBS and spinal cord stimulation, I think is foundational and it is going to open the door to a whole -- decades of neuromodulation growth. So excited about that as well. And by the way, it's an immediate financial benefit. I mean, we grew double digits last quarter, and I would expect that to continue in our neuromodulation business, which is a meaningful business, $2.5 billion for the company.

All right. Well, perfect. Geoff, thanks so much for being here...

Thank you, Larry. Appreciate it. All right, thanks.