Stryker Corporation (SYK) Earnings Call Transcript & Summary

Welcome again to Stryker's 2021 Analyst Meeting. The program is about to begin. [Operator Instructions] Stryker guests, please welcome to the stage, Vice President of Investor Relations, Preston Wells.

First of all, welcome it's unbelievable to think that we are here in person, for those of you who have joined in person. So thank you. Thank you for making the effort to be here in person. Those that have joined virtually, thank you as well. We are looking forward to spending some time with you today and talk to you a little bit about some of the different strategies and give you an update on the business as well. I can't believe it's been 3 years since the last time we had a chance to get together and do this in person. So it is really exciting. As you can see by the agenda, we have quite a few of our leaders who are going to come share with you their updates and provide you their insights as well. And so we're really looking forward to that. Before we do that, I just wanted to point you to our disclaimer. Obviously, I'm not going to read it, but there may be some forward-looking statements as well as non-GAAP financial measures that are included in the presentation. But before we -- as we get going, I'd like to welcome Kevin Lobo, our Chair and CEO.

Thank you, Preston. Really exciting to be with you here all in person, and I mean particularly good mood today, coming off last night celebration dinner of the 1-year anniversary of the Wright Medical closing. We had a great night celebrating all the major milestones and achievements. And really, it's been just an excellent integration which frankly positions trauma extremities to have a really bright future ahead of us. You're going to get a chance to hear more about that from Mike Panos later on. Starting with our mission and values, these are the unifying forces across all of Stryker's businesses and all of our regions, and it's really penetrated very, very deeply into our organization. We launched these roughly 8 years ago, and we haven't changed any of the words on this page. Earlier this year, we celebrated our 80th anniversary as a company since it was founded by Dr. Homer Stryker in Kalamazoo, Michigan. You can see 2 pictures of him in the upper left and bottom left images on the slide. We have a very special approach to talent and culture at Stryker, which has been recognized by Great Place to Work awards all around the world, including being a World's Best Workplace. We've also started to win many accolades as a great place to work for millennials, which are more than 50% of Stryker employees as well as winning awards as a Great Place to Work for Women and for Diversity, Equity and Inclusion. You can see here, I'm very fortunate to have an outstanding leadership team, which is pictured with me on the left-hand side of this slide. And on the right, you see a call out to Tim Scannell, who recently stepped down as President and Chief Operating Officer after a spectacular 31-year career at Stryker. Tim has shifted into an adviser role. And we've decided not to replace Tim's existing role. So rather than doing that, we've added additional responsibilities to Andy and Spencer on top of their jobs as Group President of MedSurg and Neurotechnology and Group President of Orthopaedics. Each of Andy and Spencer have picked up 1 corporate function and 1 regional area of responsibility. So Andy has picked up Strategy -- Corporate Strategy for Stryker as well as Asia Pacific, and Spencer is now responsible of Corporate Business Development as well as EMEA, Canada and Latin America. In the first quarter, in our comprehensive report, we outlined our ESG commitments, which are listed in the 6 boxes at the bottom of the slide, 2 of which include commitments related to carbon reductions as well as strengthening the diversity of our workforces. We are committed to creating a better and healthier world with 3 categories of stronger people, which not only include our existing employee workforce, but also strengthening our communities, a healthier planet and a commitment to doing good business. Stryker plays in a very diversified large, large markets with a diversified customer base. You're going to hear more about that from each of Andy and Spencer. And we are now category leaders in every business where we play. The last gap to being a category leader was resolved with the acquisition of Wright Medical, and that was upper extremities. That was our last gap. And so across all of our businesses, we're leaders in every place we play. That was not the case a decade ago at Stryker. Here is our company strategy. It's largely unchanged from what you've seen over the past few years. Same 4 pillars, same 2 foundational elements, but we have added some extra emphasis on ESG, which you see in the third bullet under globalization and in some of the verbiage around talent and culture. So nothing new, but more of a just a renewed focus and making sure we write down those commitments within our strategy. We've also added cash which recognizes the more recent emphasis that we placed on cash flow. And hopefully, you've noticed that in our results with our strong cash flow performance since the beginning of last year. So turning to the first pillar of our company strategy, Customer Focus. You can see highlighted the term business unit specialization. That has been and will continue to be a key component of our operating model at Stryker with dedicated selling, marketing, R&D and business development. We pride ourselves on having sales and marketing excellence and world-class customer service. And we're frankly pretty agnostic around whether the innovation occurs internally through R&D or via acquisitions. We have 22 distinct commercial business units, and I'm going to show you those on the next slide. So this is the way we currently do our external reporting. So if you look in the gold color, when you read our press releases every quarter, you see those are the terms you see, medical endoscopy. And you can see underneath each of those, the business units that belong in each one of those divisions. So this, again, is our existing reporting framework. Starting in 2022, we are going to make some changes to the way we lay out our external reporting, and that's shown on this next slide. So the same 22 business units are still reflected here. But in order to line up more closely to how we're organized internally, we're going to go from 3 segments to 2, MedSurg and Neurotechnology, which is really under Andy Pierce's leadership, Orthopedics and Spine under Spencer's leadership. And then the only other change that you'll notice is we've now spiked out Neurovascular. We're going to spike that out as a separate line. And then the other 3 businesses within Neurotechnology are going to be renamed Neurocranial. So why are we doing this? As you probably have noticed, the Neurovascular business has become a very large business within Stryker due to its explosive growth over the past decade. So we're now going to pull it out and just put it on its own and disclose that separately. So no other changes, no change to medical endoscopy instruments, joint replacements, spine, trauma and extremities, no changes there. That's really the only change at the business level in terms of our external reporting. So everything that's here in the gold color is what you're going to see on the future press releases starting in 2022. And of course, we'll restate the prior year for comparables. Second pillar of our strategy is innovation. And I'm really excited about the R&D pipelines that we have across those 22 businesses, really terrific pipelines. They've never really been better. What I've done here on this slide is just highlighted 4 areas where we have clear leadership in very exciting growth spaces. The next component of innovation is acquisitions. And you can know and you've seen from our history, we are very active -- an active acquirer of technologies. So you can see that the MSNT Group, MedSurg and Neurotechnology was focused on tuck-ins as well as adjacencies like physio, control and sage. Whereas in Orthopedics and Spine, our focus in more recent years has really been on addressing those category leadership gaps that we had in Spine as well as extremities. Looking ahead to the next 5 years, you can see that MedSurg and Neurotechnology, it's going to be about bolstering the core, but likely entering into more adjacencies. Given that we're a category leaders [indiscernible] we're going to be entering into more adjacencies, and that will primarily occur within MedSurg and Neurotechnology. Within Orthopedics and Spine, you're going to see us work on improving procedural and technology advancements. And one example is a recent acquisition, Orthosensor, getting into the sensor world to help improve procedural outcomes. Second pillar, globalization. If you look here, you can see that we're overweight U.S., and we've been overweight the U.S. for a long time, being a heavy acquirer of technologies makes us, frankly, it increases the U.S. percentage because if you look at all those acquisitions that we had, the vast majority of those come with large U.S. revenue and very little international sales. If you think about Sage, if you think about even Wright Medical, K2M, those came with very, very large U.S. revenue and not very much OUS. So that drives up our -- if you're a heavily acquisitive company, it drives up the U.S. percentage of total. However, we still have a fantastic opportunity internationally. I'm really delighted with that second column you see there, Europe. You remember back in 2014, '15, we talked about wanting to become a grower in Europe, while we've been able to sustain terrific growth in Europe, well above the market growth. You see close to 10% growth in '17, '18 and '19. And we have many, many years to come of continuing to grow well above the market in Europe because our market shares, our relative market shares in Europe are still far below what they are in other countries of the world, such as the United States, Australia and even Japan. In emerging markets, they reflect roughly 6% of our revenue. So we under-index again in emerging markets. But you can see in '18 and '19, we kind of finally found our footing, had 2 outstanding years in emerging markets, have terrific leaders running our emerging market businesses. Of course, COVID kind of took us a little sideways like it did everybody else, but I'm extremely excited about the future in emerging markets, especially since not only do we have the leadership in place with a couple of strong years of growth behind us but we have some of those most exciting technologies are just getting started in emerging markets. Mako has only recently been approved in countries like China and Brazil and Russia and Turkey. So that's wildly exciting. Fluorescence imaging, so the 1688 camera, which you've all heard about, we're just launching that in some of these emerging markets due to the regulatory pathway. So I think the growth in emerging markets, you can come to expect that it will be strong double-digit growth in the years to come. So in summary, the future is extremely bright at Stryker. We have a proven growth strategy, which is enduring and will continue to work well for us. We're incredibly customer-focused and continuing to innovate, both internally through R&D as well as through acquisitions, and I'm really delighted with the progress of Wright Medical, which has put us roughly 9 months ahead of schedule in terms of paying down debt, which means that opens up the window for us to pursue more acquisitions earlier than we had thought previously. International still for Stryker remains an enormous opportunity. Both increasing the market shares of some of the businesses where we under-index, our existing business as well as proliferating the new acquisitions that we've acquired in the past 5 years that have very, very small international presence. So enormous opportunity for us internationally, and we've never been better poised to take advantage of this opportunity. We also, in the fourth pillar of our strategy, deliver strong financial performance year in and year out. I haven't talked about that because I'm going to leave that to Glenn, who will elaborate on our financial performance. And then lastly and probably most importantly, we have an incredibly strong talent and culture at Stryker, which will help ensure that we win in the years ahead. So with that, I'll turn it over to Glenn. Thank you.

Thanks, Kevin. First of all, welcome to everybody. Welcome to those of you that are live. It's been 3 years. It's exciting to see all your faces again. I also want to say welcome to those of you that are joining us virtually. I think we're going to share with you some really good information, and I'm excited to talk to you today about our financial strategy and goals and how that leads into our long-term sustainable growth model. Now if you've been following us, you know that we've talked about our growth model before. There are really 4 main components to our model: sales growth, operating efficiency, leveraged earnings growth and cash flow generation. Starting at the top of that pyramid kind of at the very top of the stack there is sales growth. And I'm not talking about just sales growth. I'm talking about marketing leading sales growth. I'm talking about a business organization structure that is set up with specialized sales forces, specialized business units so that we deliver services to a customer in a clinical specialty. That focus, supported by, as Kevin mentioned, R&D, BD and marketing that also support that make sure that when we go out to see those customers, we're delivering the right technology and the right innovations to be the market leader. That's how you do market-leading growth. And that is what we have done over the past 5 years. The second point that I'd like to point out is operational efficiency, and Viju will expand on this more after me. But the one thing I would say is that, the focus on operational efficiency, and I know most of you that have followed us for a while have known about the 30 to 50 basis points op margin expansion. That's been a journey. That's been something that we introduced 5 years ago right here at this analyst meeting. And it's been a journey both in two ways. First of all, it's been a journey in bringing our own organization along to understand that if you're going to deliver revenue that's market-leading, you have got to deliver revenue that also has profits associated with it and that are accretive to our business. So how do we do that? And how have we done that? First of all, it's by setting up processes and procedures that allow us to have manufacturing excellence, allow us to have sort of scalable SG&A structures, then ensure that as we grow, we are going to be able to deliver op margin expansion over the years. The next piece of this is really leveraged earnings growth. This is sort of getting down to the EPS level. And what I would tell you here is that supporting all those things is really efficient and effective financial and debt structures as well as tax structures. That actually helped us over the years really expand our EPS. And then lastly, as Kevin mentioned, something that we've discussed for several years, but I would say that we really got after it in the last 3 years is really just cash flow generation. And this is really working on how do we get more efficient with the working capital that we're using. And also, how do we make the right decisions around capital expenditures that are going to give back to the business and making sure that we're prioritizing those decisions. So if you think about growth at the high end of med tech, what does that look like? Well, I will tell you, if I look at the period 2016 to 2019, Stryker grew an average of 7.4%. That is 300 basis points faster than market every single year. It just doesn't come together. Our business units and our divisions put together strategies that ensure that they have the products, the technology, the sales forces or the M&A that make sure that they are going to constantly beat market every step of the way. It also -- we also look at -- and Kevin talked about this, too, is we have a wonderful opportunity internationally. We are under-indexed in Europe. we are under-indexed in emerging markets. We have the same sets of competitors there that we have in the U.S., and we will go after our fair share. And we have set up business structures, most notably in Europe, that really allow us to compete at the same level we're competing in the U.S., and you see the results. Europe is accretive to Stryker. Not a lot of companies can say that. The last piece of this puzzle and really the piece that I know gets you excited, gets me excited, it's just we're a serial acquirer. We are constantly on the hunt for M&A. And our M&A teams are very close to the customer. So after we look at a deal and we spend a lot of time looking at deals, we spend maybe 3 years over a target before we decide to pull the trigger. We know that, that deal is meaningful to that business unit. And that business unit has made sure that it is meaningful to that sales force and ultimately, that customer. And that's how we -- that's how we've done these deals over and over again, and we'll continue to do that. So talking about leverage. At the top, we're at 7.4%, if I think about what has been the op margin expansion just on a very net basis. We've delivered almost 131 basis points of op margin expansion over the years 2016 to 2019. If I took out sort of deal dilution out of that number, I easily get over 50 basis points a year in op margin expansion. And then looking lastly, sort of EPS growth. If you remember, we had a floor of 9%. And working your way down the P&L, yes, that op margin expansion helps, but also our debt structures, I have a debt portfolio of $12 billion. It's got an after-tax effective interest rate of less than 2%. If I look at my tax structure, my global tax structure, I essentially have an effective tax rate of roughly 16% every single year. Those things make sure that we're structured right so we can continue to deliver this kind of EPS. So cash flow, this is an exciting thing. I would tell you never let a good pandemic go to waste. And as we thought about what do we need to get after during the pandemic. Let me set the story for you. We had announced Wright Medical. We were going to borrow money to pay for Wright Medical. And by the way, we had an uncertain future around our revenues relative to second quarter Q2. So what did we do? We basically harnessed the power of Stryker and the power of Stryker employees to really turn on cash flow. And I'll tell you what, you tell business units and you tell business unit leaders that if you deliver cash flow, if you deliver it more than you've done in the past, and I get a chance to pay down debt faster, you're going to have more money for M&A. We'll guess what they do. We're sitting at 87% free cash flow conversion year-to-date this year. 2020 was 100% free cash flow conversion. That compares to, say, a norm that is roughly around, you could see it 65% over the past few years. So I really think it's a muscle that we have exercised. It's a muscle that we have learned, and we will continue to deliver this cash flow. We have gotten very smart about shifting AR into shared service sites and driving an efficient process. We have worked with our vendors. So guess what, we have terms that work for them and work for us. And then lastly, you'll hear more about this from Viju. We've just -- we've gotten smart around inventory. So we make sure we have the right inventory the right location and enough for our customers. And that really has paid off in terms of our working capital management. On capital expenditures, we roughly spend $600 million a year on CapEx, and we really focused that CapEx on what are the things that are going to make sure that we are driving future efficiencies for Stryker. These include IT systems. These might include upgrading manufacturing equipment so we can drive in cost savings. It's really prioritizing that CapEx that is going to really contribute to the overall model. The other thing that we haven't talked about a lot that really helps us on the cash flow front, too, is we spend a lot of money integrating companies. We -- it's a lot of restructuring and a lot of other activities that go on. And we have put together a playbook. We have put together processes, we have put together teams across our business that do integrations faster and faster and faster. And frankly, it has contributed to our cash flow performance. And then lastly, I know you've heard this before, But if you're at Stryker and you want to get something done, put it on someone's bonus plan. I would tell you the last 2 years, we've had cash flow delivery on everyone in Stryker that has a bonus plan. And I'm not saying it works, but you can see the results. So speaking of capital deployment. And we've showed this before, you've seen kind of this donut of capital deployment. If I just took a 1 decade look and say, where is all your capital gone? We roughly had over $27 billion of capital to deploy over the last 10 years. I will tell you that almost $19 billion of that went to M&A, 67%. If I narrowed my range down to the last 5 or 4 years, that number would be in the 70s in terms of what we have deployed towards M&A. We have not altered this strategy. We haven't deviated from this. You won't see us deviate from in the future. Allocating capital to M&A is our #1 priority. Secondly, and we really haven't sort of talked about this a lot, but our dividend growth has been extraordinary. If you look at sort of the 10-year period and the CAGR over that period, we've grown our dividends almost 13% from 2011, every single year at a 13% CAGR. We now deploy about over 20% of our capital to dividends. Lastly, share repurchases. You'll remember that we suspended this as we were looking for prioritizing paydown of our Wright Medical debt. I will tell you that share repurchases are always our last use. We basically will do them opportunistically, and we usually only do them to the level to offset dilution created by our employee benefit plans. So 2021, this aligns with the guidance that you heard from us at the end of Q3. We are lined up to deliver between 7% and 8% organic growth. That will be north of $17 billion. I think about EPS, 9.9%, let's round up to 10%. We're going to get over 10% EPS growth, 9 08 to 9 15. And we're on track to live this guidance for the full year. So pulling all this together, what is Stryker going to look like and what is Stryker going to deliver post-COVID? Where will we be? What is our long-term financial performance after that? Well, first of all, at the sales growth level, expect more of the same. We will have growth at the high end of med tech. We will have market-leading growth across our businesses and across our divisions. At the operating efficiency level, we'll drive a minimum of 30 basis points, and that does not include, say, large deal dilution. The thing you should read into that, though, is we took off the top end. Remember, we were at 30% to 50%. Now we're just at 30%. I will tell you that looking at removing small deal dilution and things like that, we easily over deliver 50 basis points year in and year out. On the leveraged earnings growth, we're going to commit to double-digit EPS growth. I think if you went back and look at our past, I know we had a floor of 9%. I think we pretty consistently have already demonstrated that we can deliver double-digit growth. And then on the cash flow generation, we're going to commit to 70% to 80% free cash flow conversion. And we thought hard about what's the right number there, what feels right for Stryker, given our thirst for reinvesting in the business. And we think 70% to 80% is the right level. So wrapping this up, just in terms of financial summary, I would tell you, 2021 is on track. We're going to deliver to that earnings guidance that you heard in Q3. Yes, there is some lingering COVID variability. And yes, there are some regional ups and downs. But overall, we feel good about the guidance that we provided you. I think as you look at our long-term financial growth, the fundamentals are still there. We are going to have industry-leading growth and industry-leading earnings and that will continue to underpin our strategy. I think you're going to hear from Andy and Spencer later today about some of the market opportunities and how we execute against them. None of those dynamics have changed. We think there are wonderful opportunities still out there for Stryker. We will still actively go after the markets we're in. We will still actively look at near adjacencies. And then lastly, wrapping all around this is really a capital allocation strategy that make sure that we can deliver on those 4 pillars. And with that, I will hand it off to Viju, our President of Global Quality and Ops.

Good afternoon, and welcome to Stryker. Glenn talked about op margin accretion. I am pleased to share with you our absolute high confidence plans to accrete our op margin consistent with Glenn's guidance about 30-plus basis points of margin accretion, including dilutions and so on, but north of 50 barring that. So very robust. And in fact, we have been delivering op margin accretion for several years in a row, primarily coming from our CTG program, which is our affecting name for Cost Transformation for Growth Initiative. If you look at the work streams, this is exactly the same set of approach in the slide in fact, from several years ago. And the work streams that you see here have not only delivered, but there's plenty of gas left in the tank. I'll give you an example. So one of the harder lifts in this work streams was the ability for us to consolidate our manufacturing structure. So as Kevin and Glenn both referred to, we are a very active acquirer of companies, and we're really good at that. The margin accretion -- we go after the sales growth, but the margin accretion is also an expectation. But typically, we go for the product innovation. So the manufacturing facilities at times are relatively small, perhaps not the low-cost geographies of the world. So over time, we have a string of pulse in our manufacturing network. But in the last 18 months, through the pandemic, we have been able to successfully close down 8 manufacturing facilities, albeit some of them are small. But nonetheless, we have really gained the operational muscle and the technical depth to seamlessly close these manufacturing facilities and move the product, again, without disrupting supply, without disrupting the ability to continue introducing new products on those technologies to other locations. And we've also announced the further closure of additional 7 manufacturing facilities in the next 18 months. The point being, as we continue to acquire companies and bring manufacturing plants into our network, we now have a regular real operating cadence that we have established with extreme smoothness. So as I think about CTG, as we think about the next 5 years of continuing to deliver op margin accretion what we realized was we don't need to fundamentally retool CTG. We need to evolve it because these work streams have another higher gear to accomplish. So we have a very creative name for the next iteration of CTG. It's CTG [ 2.0 ]. It's because we believe in the fundamentals of what has gained us phenomenal momentum, and there's a lot more traction ahead. There's a couple additional changes, though. In the first version of CTG, we almost singularly focused on op margin accretion and leverage. In the next iteration of CTG, cash flow, to Glenn's point, has become a much higher vector along with scalability of how we deliver the op margin accretion and cash flow As we continue to accrete our top line, we want to make sure the op margin leverage activities we engage in are sustainable and scalable, so much more systematic. So I'll take you through some of the specific examples behind each of these 6 vectors here. But an additional thing I would say is the top 3 items around indirect procurement, around global business services and also M&A and integration excellence are commercially led along with really good partnership with the global functions. The next 3 that you see here are on manufacturing, direct procurement and plant and distribution network are more in the operational space. So I'll initially talk to the first 3, which is the commercially-centric initiatives that we have. The first that you see is indirect procurement. Indirect procurement is a fairly big component of our total third-party spend and has always been a very good contributor to the CTG 1.0 effort the last 5 years, very consistently delivering savings on their spend. But what the indirect team has done lately is also really double down on category management, category excellence, a lot of specialists in the respective categories joining the team and working very collaboratively with the divisions to get the next year of savings from that indirect spend portfolio. From a global business services, in CTG 1.0, we had HR through the implementation of Workday, what we call the Thrive initiative, delivered really good synergy. Glenn and team from a finance perspective set up shared services locations in different parts of the world. In CTG 2.0, we're going to build on that foundation. We have a couple of different centers of excellence, 1 in Costa Rica, 1 in Warsaw, Poland. And this is not just on finance. The procurement teams have set up shop there as well. And these are becoming really centers of excellence in their specializations. And there's absolutely more room to grow the global business services, and that's what we're focused on. Kevin talked about the M&A focus, but also the celebration last evening of the 1-year anniversary of the Wright Medical acquisition. There's an excellent playbook that has come out from not just the fast integration of the top line accretion, but also how do we get synergies much faster to a much higher level. So again, great successful track record that Stryker has from an M&A perspective. We are channeling all of that into how do we deliver the synergies even faster. So those would be the 3 initiatives that will drive a significant portion of the next iteration of CTG. Moving over to the operational side. The direct procurement organization, again, has really become a very key central point, especially through the pandemic with supply line shortages and so on. But as we have really accreted our capabilities in the direct procurement space, we have seen that say-on-pay in not just in helping us get more resilient today supply, but really understanding the cost base of our products, tearing apart a product and looking at the component level, biller materials, being able to negotiate based on that intimate understanding of the engineering should cost of that product. And we have seen that this strategy has really paid big benefits when we can really engage with our supplier partners in a way that really gets us both -- it's a win-win because there's value engineering outcomes that jointly come out of those discussions, and we end up with a better product at a much better cost point. We expect this muscle to really help us not just in the supply disruption aspect of the pandemic where we can quickly figure out what alternate components can go into these parts and get the R&D team engagement there, which is one of the areas we are really getting good at, but also longer-term savings that come from the specialized procurement. Glenn talked about the cash flow aspect of procurement that we have focused on the last few years. In this specific area, the direct procurement teams have worked with our supplier partners on supply chain financing programs that help our smaller suppliers, but also helps us with our cash flow, consignment inventory programs as well as the ability to extend payment terms. So collectively, those have had really big benefits from a cash flow perspective. As I think about manufacturing excellence, we have focused on the lean philosophy, extending it, implementing it across the 4 walls of our manufacturing facilities, but also digitizing our manufacturing plants, much less paper, much more analytics, how do we get better utilization of our equipment, how do we run our plants much more on a full 24 hours a day, 7 days a week type of schedule as opposed to a smaller schedule. So we're really getting much more effective in our utilization of our manufacturing facilities. The other aspect is inventory management. And again, Glenn touched upon it, If you look at the several years up to maybe 2018, 2019, you can see that our inventory was on the upswing in terms of the -- not just the value, but also days of inventory. Over the last 3 years or so, we have really looked at each of our product lines end to end and really put in place a variety of inventory optimization plans and strategies. And you'll see that our days of inventory have actually not just flattened, but its come down nicely, and we see further progress in the horizon as we continue to proliferate these methods. If I look at the plant network, I talked about closure of plants, but that's not what we're all about itself. We have chosen to really focus on how do we shift our plant network to much more larger scale facilities, really high-scale facilities at better advantaged cost locations. And what does this allowed us to do is really get a heck of a lot more efficient with our manufacturing footprint. I'll discuss one of the more recent examples, which is our greenfield plant in Tijuana, Mexico. Kevin inaugurated that just 2 months ago. This is one of our first manufacturing plants that is truly divisional agnostic. So if you think about a manufacturing plant in Tijuana, which is a manufacturing hub for med tech, one of the attractive aspects of that is there's tremendous amounts of talent, which is at a lower cost base, but highly talented. So the kind of products that we choose to bring to this facility are more high labor content or relatively low labor complexity. And we have been very successful at not just transferring product from our internal portfolio, but also in-sourcing products from our suppliers where we benefit from the scale that we have in Tijuana. So this is a key element, and this is not the first of our new greenfield facilities. we'll continue to expand on this theme. As I think about all of that, together from the CTG 1.0 version to the 2.0, there's a very smooth transition, but also a tremendous amount of continuity as well as further upside in the next few years, and that's our game plan to deliver even higher op margin accretion. So with that, let me turn it over to Spencer.

Well, good afternoon, everybody. Welcome to Mahwah, New Jersey. It's -- those that are here in the audience, it's outstanding to see you all. Those who are tuning in virtually, thank you for making the time. Here we are in the atrium of our home of 2 of our big businesses, our joint replacement business, making hips and knees and some of that's being done right behind those walls and our trauma and extremities business, which we'll hear all about and the continued growth and specialization journey that business has been on and how proud we are, and we're really grateful to the Stryker employees that allowed us to take up their atrium today and use it for this great event. So for those that help set this up and are helping facilitate all this, thank you so much for my Chair. So we heard about our mission and our values, and I want to go a little deeper on our purpose. And really, why do we do each and every day? And two things I want to talk about today and really to take home in our discussions is building specialization and how that drives long-term growth and then also ensuring that we're building this collaboration across our organization. And then ultimately, that fills into how we're advancing digital, robotics and enabling technology, an area where we really had a standout performance, and we couldn't be more excited about our future ahead. I love showing pictures in any of my presentations about our team and what we're up to, and I thought a few of these were really fitting. So the bottom right corner is actually when we installed our 1,000th Mako in the world. And it was a remarkable event. It actually happened in the height of the pandemic. A few of us traveled. This was down in Georgia. You can see Kevin in the back there, and we're actually -- this is a Mako with the cover off the side of it because they do a calibration on the front side. And so we have a specialist in that sets that all up, but we were really proud of that day to show now that we've sold and installed our 1000th Mako. And now we're well beyond 1,300 Mako's across the world, and we continue to be very bullish about the growth of that portfolio and product line in the future, but really a special event in our company's history and a testament to the great technology. The other two pictures are pretty unique. This is my collective leadership team, the Orthopedics and Spine leaders and a few of them are here and I'll highlight who they are in just a minute. But this is an opportunity when we go out and meet with our customers as a unified team, and it's different than all of our competition that can show up at some of the biggest teaching institutions in the world as 1 team and talk about collectively solving problems in Orthopedics and Spine for decades to come. Now you may not know these 2 sites, but they're pretty relevant in the world of care. The upper left big one, that's in Rochester, Minnesota. And we probably met with the leadership team that runs their orthopedic businesses, their spine businesses, and we talked about solving some of the biggest problems in health care for the decades to come. The lower left is actually at Mass General. And I thought very relevant considering sort of the crisis around staffing, and we met with their CHRO on top of all their orthopedic and spine leadership. A great educational opportunity, but more importantly, an opportunity to talk about our differentiated strategy and how we will work together to make sure that we're continuing to drive growth, innovation and world-class patient care for decades to come. And so we're continuing to do this. This is unique. Most companies can't bring that type of force to the table on either side, but we're able to do this, and we'll continue this journey in the quarters and years ahead. So speaking of leadership, this is the proud commercial leaders and the presidents of the businesses that I'm directly responsible that are the operating businesses. On the left, we have Don Payerle. We're actually in Don's business. I call it his house, and Don is here in the second row. So Don, thanks for having us. But Don has been with our organization for 28 years. We asked Don to take over our joint replacement business right on the front side of the pandemic, and he's been navigating building connections and competencies with our customers and our selling organizations all over the world and doing it in style. So Don, thanks for the leadership. Robert Cohen, many of you know. Robert was responsible for leading a variety of great technologies across the landscape of Orthopaedics. And before this particular role ran research and development inside our joint replacement business and had a heavy hand in robotics. But when we said we want to put more focus on this to bring the collective technology set across Stryker together and leverage this for our future, we asked Robert to step up and take that lead, and he's doing so with great stride right now. So Robert's been in this business for over 35 years and really an expert in technology, in leadership and in building great performance in teams. Next is Mike Panos, 25 years with Stryker, Mike too is in the audience. We'll hear from him in a minute. And we asked Mike early on to get involved in an assessment that we are looking at in the trauma and extremities space, and that was during the days of looking at acquiring Wright Medical. Mike jumped on that team. We asked him to come over play a commercial leadership role. And then as we bought Wright Medical, almost at the same time, put him in charge as being the President of the Worldwide business for our Trauma and Extremities. And it has been an excellent, excellent move on all fronts, and we are so grateful for the performance and the integration that you've heard about already today, and Mike will touch a little bit about it, and I'll talk about that additional specialization. But Mike, thank you for your leadership and all that you're doing, and we look forward to hearing from you in a minute. And then Robbie Robinson, newest leader to our team, but no stranger to Stryker, a 17-year veteran started in our Endoscopy businesses, spent time leading our Interventional Spine business and now leads our Spine organization after the planned transition of Eric Major. We asked Robbie to take on that role, a terrific addition. He continues to build out the leadership team there and additional specialization and growth in the business units. So Kevin mentioned this, part of we believe our growth strategy and success is our people and the specialization we build under them, and it's a testament to this leadership team. So I'm excited and proud to put up that our Orthopedic and Spine businesses play in a large addressable market that I'm pretty excited about the future growth outlook. You can see a big $36 billion market. But more importantly, I want you to focus on the right-hand side. We talked about our desire in a few of these markets to be leading the category and having market-leading growth. Well, yes, we're delivering market-leading growth, but in few of the fastest-growing segments, we're the #1 share position. By far, the #1 share position in robotics, and we plan to keep it that way forever. If you look at that, go down upper extremities. With the acquisition of Wright Medical, we've catapulted to be the #1 share position in upper extremities, and we really are the shoulder company across the world. And when people think about shoulder disease, they're coming to Stryker first. You can see the next one, foot and ankle, #1 in foot and ankle. We combined a very strong Stryker Foot and Ankle business with a very strong right medical foot and ankle business. This provides us a strong #1 share position, with good market growth and a lot of technology that we can surround these implants with to accelerate growth to meet that demand for the future. So we're optimistic about our positions, and we'll continue to focus on making sure we're taking our fair share across those various categories. So this one is really about specialization. And I want to give you a little bit of the journey we've been on. And if you think back, those that joined us for our last analyst meeting, 3.5 years ago in this atrium, we would have showed you a sort of a different footprint for our joint replacement and trauma and extremities business. You would have seen sort of 1 combined entity sort of 1 combined sales leadership team inside the United States and not the specialization that we have today. As we bought Wright Medical and as we thought about accelerating future growth in our businesses, we want to bring more specialization. Kevin highlighted it, Glenn talked about it. It's where we put focused leadership, a general manager. And underneath that, we put somebody leading sales, somebody leading marketing, somebody leading research and development and a lot of times, M&A. And those individuals wake up every single day focused on driving growth and solving big customer challenges in those particular segments. We believe it is a recipe for success, and it's proving out that way. So you might ask, what does this mean for joint replacement? Well, we now have a specialized business unit, Head of Marketing, Head of R&D for Hips. Somebody who wakes up to say, what are we doing to attack that hit market to continue to take our fair share and then some? Knees, same structure. Interestingly, in hips and knees, we do share a sales force in the United States. That's one unique aspect because it doesn't make sense to call on a hip and knee doctor with 2 different people. But look over at robotics, we do have specialization, all the way across into sales. And we think this is helping drive our differentiated approach, where we sell, install a robot, build that followership and obviously, a success for growth. Jumping down to Trauma and Extremities, which probably appropriately a few years ago, we would add a capital T and a little e within Extremities. Well, that's no longer the case. It's a big T and a really big E, and we balance that portfolio out and have market-leading positions across that business. And probably most exciting, we built specialization there, business unit leadership, heads of sales, heads of marketing, heads of R&D that are waking up, solving those customer opportunities in each of those markets. And with the acquisition of Wright Medical, it really helped that they already had specialization around their upper extremity business. It really helped that they had this around their foot and ankle business. As exciting the leaders that came over from Wright, we are absolutely thrilled with. They're culturally fitting, they've hit the ground running, and they're continuing to build sustainable growth in those organizations. Spine, it's a similar thing. We now have a specialized business for the core implants, one around enabling tech and a specialized business around our interventional spine businesses. And maybe a little different because the customers' demands and our technology set come into each other now is looking at our digital robotics and enabling technology. This is an internal entity at Stryker that really is focused on R&D and upstream customer marketing to say, what are the problems that we're solving for the future and how do we make sure we have the right technologies. You might say, well, what are those technologies? Things like robotics, things like navigation, utilizing those software interfaces, all the applications that we can provide over time, we can leverage expertise across the globe that Stryker has built up over the time that was once very decentralized that we can pull together to gain as capabilities as well as drive efficiencies and speed. So we're really excited about this from the core robots and enabling tech and maybe even more optimistic about what we can do with digital over time, and I'll touch base on that in just a minute. So speaking of robotics. Mako continues to win in the marketplace. It continues to drive growth in implants inside the United States. It continues to drive adoption and growth outside the United States. And we remain humbly very bullish about what we can do with Mako across the world over time as we think about applications, as we think about other ways to solve customer needs, as we think about accelerating our footprint with Mako and the robotic technology. So right now, when we go out and sell and install a Mako system, over 60% of the time, it is going into a competitive implant account, and the growth comes once we get that Mako installed. And a little different than other people in the marketplace, we build a champion first. We make sure there's an economic value tied to it. We sell the robot and then we build that program of growth. And we do that day in and day out, and it's a very successful formula for sustainable growth in this market. As you know, we continue to see a growth in every knee that we sell. 1 out of 2 of them roughly are now going in robotically. That's a pretty staggering trajectory, and we expect that to continue to climb in the quarters and years ahead. As I think about what we're doing outside the United States, we are now -- have applications, all 3 applications released in China, as Kevin mentioned. In other key markets like Japan, over 30 robots right now with many more to come as we think about a market that really values technology like navigation. So there's a gateway platform already in place where we can capitalize and bring them along to the robotics journey. Maybe most probably, we've recently surpassed all of our competition to be the #1 joint replacement company in market share in Australia. I like to call it Stryker Island, where we're down there, and we've really positioned ourselves as being the market-leading provider for Orthopedics in the great country of Australia. And it's a testament to the combination of our robotics technology and our great implants. And yes, the future, we continue to work on new applications. We're looking at other disease states, other parts of the body, maybe here and others back here, and you can imagine over time. We're working on those. Those are active funded programs, and obviously, we'll continue to help bolster our future growth. Speaking of robotics a bit more, it's led us into looking at this dray organization and how do you pull all this technology together. And I must tell you with the recent entrants for many competitors in this marketplace, it's only further opened up discussions with our customers about how to get Stryker at the table. We are invited to all the discussions around robotics. We are invited to all the discussions around digital, and we're continuing to help drive and shape that marketplace for the future. So this is really just to show you that dray digital robotics and enabling tech takes this capability across the entire enterprise, from a lot of the MedSurg businesses that are under Andy's responsibilities obviously the things in Orthopedics and Spine. And what are we doing with these? We're building capabilities, and we're accelerating the great position and strengths that we have today. If you look on the far left, we're the market leader in robotics. In hard tissue, we know what we're doing. We love taking the technology of a CT-based scan and building it into the haptics, a smarter robot. We know more, we cut less. That is a phenomenal way to go in and position our technology. It's a smart robot. A lot of the other technologies are navigation based. And we have that, too, if we want it, but we have the entire continuum all the way up to Mako. And so we're going to continue to invest in that market-leading position. At the same time, as you go across the slide to the right, we're looking at innovation and how to build digital competencies, utilizing things like AI and really data science and data assessment. We have these amazing technologies from the most basic intervention, which could be an accident down the street, a trauma event. When that person gets put in the back of an ambulance, that's a Stryker ecosystem. All the way to the ER, that's a Stryker ecosystem. In the ER, that's a Stryker ecosystem. They've got to go up to the OR to be operated on and put a trauma ex fix on, that's a Stryker ecosystem. The recovery, that's a Stryker ecosystem. So there's information coming out of every one of those devices and those events, and it's our opportunity to collect this, make sense of it and create more value with it in the future. It's an opportunity for us to really continue to drive and make health care better, and we're very, very bullish about our future in dray. So I mentioned briefly Wright Medical in this transformational opportunity in specialization. I introduced Mike already, as I mentioned, our fearless leader of our trauma and extremities. You heard a lot about the celebration last night. I do want to publicly comment again, we are so grateful for all of our employees and the customers that have helped us with this integration. We're extremely pleased with where we stand today. Really excited about the growth trajectory of the future. And we look forward to Mike's remarks today to tell us a little bit more about it. Mike, take it a while.

Hello, everyone. I'm grateful to be here to join you today. I really want to just start off a bit with some quick highlights relative to integration. First, as many of you know, we focused on pace over perfection, which meant we really wanted to work quickly, starting with naming leadership right out of the gates in day 1, not just at the top, but at virtually every management level, especially on the commercial side. I'm proud to say that we're largely through the commercial integration, not just in the United States, but really around the world. So we get to focus on the balance of our time moving forward on process improvement, things like customer service, things like OTC, things like working on sample equipment deployment, things like loaner trays and then make that sales rep experience even more enhanced. We also get to focus a bit on portfolio strategies. Now we set a goal of being clear on our portfolio strategy and our strategic plans by day 180. I'm proud to say that we achieved that. And now we also get to focus on PLCM and see what we will move out of the business. Lastly, relative to R&D. We want to make sure that those teams were not bogged down in integration and harmonization. We want to make sure that, that engine didn't slow down. Proud to say that, that is alive and well, and it's moving quickly. Not only that, but we brought in best practices from Wright Medical and have blended that with Stryker is a robust project that's underway today, should be completed around this time next year around accelerating new product development. Today, we have 7 different new product development processes across the business. Just in Trauma and Extremities, we're hoping to bring that down to 1 by this time next year and bringing these best practices in from Wright Medical as well as helping the ones that were within Stryker to come alive is going to make us go much, much faster. That's a combination of clinical, quality, regulatory and R&D, advanced operations, all coming together as 1 team to go faster. What I'm most proud of is the people that are here. Coming together is what sets us apart. If you look across the top of the screen there, you'll see some pictures of our rebranding efforts. Those are the 4 major sites that came to us from Wright Medical: Bloomington, Minnesota, where the upper extremity business is largely based; Columbia City, which is one of the primary hubs. We have more than 50 people there, not far from Warsaw, Indiana, where our upper extremities metal or implant team does their R&D; Memphis, where our foot and ankle business has a big hub and where the legacy Wright Medical business was headquartered; and then Arlington, Tennessee, which is also a major manufacturing site and distribution side for the foot and ankle business. All those places were rebranded inside of a year and probably so. So that's really, really mock speed. On the bottom, you'll see how we showed up in a unified way at many of these trade shows. AAOS, ACFAS, AOFAS, these are all big trade shows. We showed up as one Stryker, not just within trauma and extremities, but across the entire orthopedic landscape, including Don's business joint replacement and Mako, also across [ Dillon's ] business at orthopedic instruments and the rest of the instruments and endoscopy businesses. So really, really fun times. We knew well about Wright Medical's portfolio, really, really impressive. We knew that from afar. We knew that they had great customer relationships with key opinion leaders around the world, but what we couldn't place a value on with the people that are there. Proud to say that that's been one of the biggest assets that we've gotten from this whole transaction, some amazing talent, not just very capable people, but people that fit our culture. And today, we're building this culture together within this trauma and extremities business. It's not just Stryker's culture, it's Stryker and Wright coming together to build this from the ground up within trauma and extremities. And I think it's really alive and well. As Spence mentioned, this deal was a catalyst for specialization. So we've been able to create 3 distinct business units, trauma, foot and ankle, upper extremities and 4 product segments over those 3 business units, Plus Biologics, which serves all 3 of them. The trauma business didn't get a whole lot of new revenue or new products. They got some about $13 million of business. But what it allowed us to do is to put more focus, more feet in the street. We shared a number of reps in the field with trauma and joint replacement, and we reduced that somewhat. We've now got more than 50 new sales rep heads in the trauma business. Trauma is having one of its best years in its history. So it's been exciting times at trauma as a result of this transaction. The foot and ankle business, we took on nearly $350 million of new revenue and just about as many new sales reps. So we're well north of 500 dedicated foot and ankle reps in the United States alone focused on specialists, on podiatrists, on fellowship train, foot and ankle, MDs every day. And the upper extremity business, also about $350 million of new revenue and about 400 new sales reps that came to us from Wright Medical that are now probably were in the Stryker badge. We only had a handful of upper extremity reps within our organization previously. So those businesses are humming. Outside of the U.S., in Europe, about $130 million of new revenue and about 130 new dedicated people and about $100 million of additional revenue in the rest of the world. That is now under our guidance, and we're driving that around the globe. As I think about some of the highlights in this portfolio, in the foot and ankle business, as many of you know, the total ankle replacement at Wright Medical was already market leading. More than 85% of those users use PROPHECY. So it's a very, very intimate relationship as a result of that technology. I also think about the 4-foot market, which has become very popular. Some small publicly traded companies now are very focused in there. And given a lot of notoriety, we are competing fiercely there, and we're growing. We've got a great product in LapiFuse that's going after lapoplasty. We've got 1,000 customers over the last year or so that are using that product, and it's growing like a weed. Think about Biologics, we've got $100 million of new business as a result of this transaction. And as many of you know, AUGMENT, one of the most differentiated products, not just in this portfolio, but in all of biologics. And it is growing like a weed, more than 25% year-to-date. And over the last few months, it's growing north of 50%. So it's really humming with more than 400 new customers since AUGMENT came to Stryker. So fun times are within this business. I want to focus a bit on the upper extremity business, as I mentioned earlier. This business is one of the most exciting and all of Stryker, not just within Trauma and Extremities. This business is market leading. And it's not just about preserving its market-leading position, but it's about extending its lead. So it's the largest in the space, but it's also one of the fastest growing. Recently, we have the Tornier Perform Humeral launch. This is a really, really exciting launch for a few reasons. First, its novel design, had intuitive thesis to it to where we've got the trays systems, just down to 2 systems. Typically, they had 5 or 6 trays. So that the user experience, not just for the surgeon, but for that scrub tech, much cleaner and easier. Also for the sales reps supporting that case, just an incredibly beneficial element of this design. Also the inlay components, okay, much more diverse array to hit both the extremely large patients and they're really fatigue patients. So you think about that, there's only a few companies who offer inlay and now we're actually able to come out with a much broader offering. So huge differentiation here. It's also been the first time that we've been able to launch in the upper extremity space, both hardware and software at the same time. So this was a launch of not just new implants, but whole new BLUEPRINT platform to support this from day 1. So we're really excited about the potential of this. Also, BLUEPRINT, as many of you know, is an exciting piece of this portfolio that came with Wright Medical. And we're evolving BLUEPRINT. We now have mixed reality on the market been approved. We've done more than 1,000 cases with 35 key opinion leaders, not just in the U.S. but around the world, and they are going crazy about this. It takes the preplanning work that they typically do with BLUEPRINT, but now they're able to have a 3D experience in the OR, in the middle of surgery and really drive better outcomes for their patients. So this is just great, great stuff. This will help tee up a video that will play in a moment. Spencer will come up after the video. But in this video, you'll see a great patient story, okay? It takes place in Cincinnati with a former Major League baseball player who's now an announcer, a broadcaster for the Cincinnati Reds by the name of Jeff Brantley. So all of this takes place in Cincinnati, and we'll expand out to Ireland as well. So thanks for your time. [Presentation]

Well, hopefully, you enjoyed that video. It's the great reminder that behind all of our innovation, there's a customer and a patient and I think that story tells it well. And I love the parties and throws that ball and we know that's our shoulder in there, helping them play catch with the sun. So as we think about driving market-leading growth in Orthopaedics and Spine, there's a few things I want to bring the summary here. As before I transition over to Andy, I talked about that specialization. And hopefully, you can appreciate now the amount of specialization we built in our Orthopedic and Spine businesses in the future for growth. We heard about BLUEPRINT. That is an application. That is a differentiated technology to preplan for a surgery to know more before you're cutting somebody open and putting something in somebody. That's a really powerful tool and the most efficient that exists in the marketplace. And so we're really excited about that for shoulders and thinking about where else we can take that type of platform. Our commitment to innovation, we won't slow down on Mako. We'll continue to invest. We'll continue to drive market-leading performance there. And while we're doing this, we'll go out and continue the aggressive pursuit in M&A. Things like Orthosensor really is a phenomenal platform technology, where we now will know more about what's taking place in knees. And you can imagine that application could be positioned in other parts of the body in our portfolio as well. And then ultimately, our ambition remains significant, and that's a category of market-leading growth, and we're continuing on our journey to be #1 in Orthopedics and Spine. So thanks again for the time and attention today. Mike, thanks for spending some time with us and sharing the story about Wright Medical, congrats on the success. And now I get to turn over to what I call my partner in growth. That's Mr. Andy Pierce, our Group President of MedSurg and Neurotechnology. Andy, if you'd come on up.

All right. Thank you, Spencer. Thank you, Michael. I love the video. Hi, everybody. Welcome, and I really am extraordinarily grateful to have the opportunity this afternoon to share with you a little bit about our MedSurg and Neurotechnology group. Now I'd like to shorten it because that's long to MSNT. So you'll hear me talk MSNT as we go forward. I only have 20 minutes. And it's a great big group. So I look forward to the Q&A and having a little extra dialogue if you'd like to get a little more specific on our business when we transition over to the product fair. So MSNT, what is it? Who are we? Like I said, it's a great big group. Large, diversified group here at Stryker. What does that mean? Well, just a little bit on our structure, if you haven't picked this up, we're organized into 2 groups. There's MedSurg and Neurotechnology, and then there's Spencers Group, which is Orthopaedic and Spine. That's the company at the top. Underneath, you're going to find divisions. Within MedSurg and Neurotechnology, there are 6 divisions. 4 of those divisions, our Instruments division, our Endoscopy division, our Neurovascular division, and our Medical division make up 95% of the sales in MedSurg and Neurotechnology. They're big. Within those 6 divisions, you count them all, there are 13, and you've heard this many times now already this afternoon, 13 specialized, highly specialized, very focused business units. And those business units are broken down into sales, marketing and R&D, like Spencer said, they have VP, GMs, Vice Presidents, General Managers at the top, and they have their own specialized business development teams as well. And their job is to wake up, find those innovations, create those innovations, bring those innovations to the customers, have highly specialized sales teams that interface and take care of our customers every day. So that domain expertise, as you might imagine, being broken down into 13 business units is very deep. And we love that. We believe that is a very, very important part of our special sauce here at Stryker. If you look on this slide, you'll see that we and MSNT cover a very broad continuum of patient care. So you might imagine that you have an accident on the street, you get picked up off the street. Hopefully, you're not doing too bad, and you write a Stryker caught into the back of the ambulance. In the back of the ambulance, you might find our defibrillators, you might find our LUCAS, automatic chest compression device, et cetera, et cetera. You can transition also following MedSurg and Neurotechnology into the ED, into recovery, into surgery, into the patient floor, into the ICU. In fact, you can even find MedSurg and Neurotechnology products in the home. When we send patients home, you will find our Sage infection control products being used with patients in the home. So a very broad continuum of care that we cover. Now within our big businesses and across that continuum of care, we have 19 flagship product categories that we compete within. That's today that will expand over time, of course. And in addition to those 19 flagship categories, we have dozens of more ancillary categories that exist inside of our group. What's our profile look like from a business and sales perspective? We are about 60% what we call base. In our base business, as you might imagine, our disposable, single-use disposable products, consumables like our implants and also you'll find service within our base. Our capital business is about 40% of our total makeup. And within our capital, we have 2 categories, I'd like to talk about large capital, which is about 15% of that 40 or of the total 40%, it's 15%, the other 25% is what we call small capital. Small capital would be our power tools, our video cameras. Large capital would be our beds and stretchers and our operating room infrastructure products, so think about booms, lights and tables that we offer. So that's a little overview, and we'll get a little more specific as we move forward. As Spencer showed at Stryker, our leaders make the business run. It's in any place, but particularly here at Stryker. And I'll tell you, one of the things that we like to say in our company is that we love top performers, we love leaders who drive exceptional performance. But something that we love even more are leaders that drive exceptional performance over time, year after year after year. So if you're on this list, running 1 of our big 4 divisions inside MSNT, you can bet that these are leaders every single year, year in, year out that drive exceptional performance over time, market-leading growth, innovation, et cetera, et cetera. So Dylan Crotty, who you're going to hear from here in a few moments, he's going to talk about our safety and outcomes initiative that we have in the business. Dylan is sitting right up front here, runs our Great Big Instruments business, 22-year veteran in the company. Brad Saar, who runs our [ Giant ] Medical division. If you think about medical -- inside medical, it's our Sage products, our acute care business, our beds and stretchers and our emergency care business. We'll talk a little bit more about those products here in a moment. What Brad has been with the company just 39 years. So he's just getting started. Next to Brent, one of our more junior leaders, again, like Dylan had only 22 years. Next to Brad rather is Brent Ladd. Brent Ladd runs our endoscopy business. He has deep domain expertise in endoscopy in addition to other stents across the corporation. And next to Brent, you will see Mark Paul. Mark Paul was up here just a few years ago when we had our Analyst Day talking about the stroke business. Mark, we like to [ joke ] is a true key opinion leader in stroke care. Even though he's not a physician, he's a business person, but he really is called upon by our customers to be an expert in neurovascular care. Mark has now officially this month been with the company for 30 years. So these are individuals that have truly lived that outage that performance over time is what we value here at Stryker. So a little bit of a look inside of our businesses and our total addressable market that we have here in MedSurg and Neurotechnology. So a couple of things that I'll note here, and again, we won't get too deep into each and every business that we have. First of all, we love the markets that we play in, in MSNT. Why do we love them? Well, first off, you can see that they're big. It's big in terms of financial opportunity and though we have category leadership really across each and every one of our franchises. We have tremendous upside as well from a financial perspective in our businesses. And they're big in the way that not just growth inspires us, but also innovation inspires us as a company. So they're true innovation playgrounds. We have so much room to bring innovation to our customers to help them raise the standards of care for their patients. We also love the growth. If you look at the growth in these markets, it's pretty healthy. Healthy growth across the board at Stryker. And you know this well, we are in love with growth. That is the fuel that drives our organization. We love it, we love it, we love it. We take this growth and we turn it into something much more magical as we grow on top of our markets. We do not expect growing at the average rates in any of our markets, we expect true market-leading growth. We've done that, we've done that for a very long time. We will continue to do that. And last, I would say these are markets that we compete again really across the board that reward innovation. So when we have tremendous innovations. We'll talk a little bit more specifically about that here in just a second. In our businesses, our customers are willing to pay, they reward us for that. And again, we love innovating, being founded by an orthopedic surgeon, who drove his entire life to raise the standards of care for patients. That is in our DNA as a company. That's who we are. We love to partner together with our customers, find those great big problems to solve, solve them, and we know in our markets when we do that that our customers reward us. So as I said, we dig a little bit deeper into our group. And you could see MedSurg on the left, Neurotechnology on the right, this is how we're organized. And I'll talk just a little bit about a few of those 19 flagship product portfolios that we have inside the group. So if you orient to the upper left, you'll see our ProCuity bed. In fact, you'll be able to see our ProCuity bed when you jump across the street over here and to the product fair, you'll see it firsthand. You get to learn all about it. Where ProCuity is really accelerating in the marketplace, really taking hold and has been dazzling our customers. Our sales force and our medical acute care business loves this product, and you can expect great things from ProCuity as we move forward. If you jump down just to the right of ProCuity and down, you'll see, and it was already mentioned once before, our 1688 video platform, is our endoscopy video platform. This is really revolutionized for us, our video business, where once the market competed and it still does, to some extent. On video resolution, today, it's about what can your video system do to provide me clinical value. And in this case, of course, we do that through fluorescence technology. You'll think about our NOVADAQ acquisition, adding value to 1688. And of course, to future platforms as well. And we are truly leading the marketplace when it comes to fluorescence imaging and advanced imaging. Jump down just to the right of that, and you'll see are beloved by our customers, and you'll learn more about that from Dylan here in just a minute. Our beloved Neptune waste management system, which has really revolutionized the waste management -- fluid waste management space, along with smoke as well, smoke evacuation in particularly high fluid management cases, and also just fluid management in general. Nurses love this product. Today, there are over 36,000 operating rooms, 36,000 operating rooms around the world that collect their waste through Neptune. And then if you jump down to the bottom left, and I'll stop here on the MedSurg side, you see our flagship power tools category. So if you think about the founding of our company by Dr. Stryker, you can jump up to left and know that ProCuity came from the original invention by Dr. Stryker, which was the turning frame. And then, of course, our Power Tool System 8 is what you see there, a large bone orthopedic power tools. System 8 is a descendant, if you will, of Dr. Stryker's invention of the cast saw. So the lineage runs deep throughout MedSurg, and we love our power tools business, which is a true market leader when you think about market share, category leadership in that product. If you jump over to our Neurotechnology world, these are real high acuity cases. As you might imagine, these are patients going through some very difficult times. We love our Neurotechnology businesses, our Neurovascular business. You see our new flow-diverting stent there, see our great E&T business, our craniomaxillofacial and our neurosurgical business. This is an area where innovation is truly, truly rewarded, and we are doubling down from an R&D and an M&A perspective, and you can continue to expect great growth out of our Neurotechnology franchises. Purpose-driven innovation. So hopefully, you've picked up on that the drive to innovate, to help raise standards of patient care all around the world is really important to us here at Stryker. We have dedicated within MSNT, 13 individual research and development departments, along with marketing, wakes up every day, working with our customers to find those problems to solve and bring them to market. And if we don't do that through inorganic means -- organic means rather, we can do that through inorganic means. So as I said, 13 dedicated M&A teams working to find those opportunities that may exist in some other company, oftentimes in a small company, meaningful innovation that Stryker can bring to the masses. And then last, more around business innovation. We're focused on that as well in MSNT and across the corporation in partnership with Spencer and his team. So if you think about our flex financial arm in our business, which allows customers to more easily acquire our equipment, at a favorable -- in a more favorable way relative to their own financial situation. We have that. We have our dedicated ASC business. You're going to hear from Nate in our panel here shortly about that. That allows a single point of contact for our customers to do business with Stryker. And we have other areas like Neurotechnology, where we have individual teams in the field that allow us to actually simplify that approach with the customer as well. And we have programs like safety and outcomes that you're going to hear from Dylan. So just double-clicking on our purpose and our business. So this is LUCAS. Some of you know what LUCAS is, some of you don't. You'll also have the opportunity to see LUCAS as you move across the street in action. One of the great pleasures that we have in our company is the opportunity to hear directly from patients who are impacted by our products. And when they're impacted by our lifesaving product portfolio, that's a really big deal, true survivor stories that we get to hear about frequently in our company, and it truly is a privilege for us. So what is LUCAS? LUCAS is automatic chest compression device. So you imagine you're out on a walk and you go down with a sudden cardiac arrest. Now hopefully, somebody is nearby and they can provide manual chest compression themselves. They know how to provide CPR. And hopefully, they call an ambulance, the ambulance gets there. Oftentimes, you're revived. You're revived relatively quickly. You may need an AED or a defibrillator to be revived, but oftentimes you are in just a few minutes. Those are really good cases when that happens. But sometimes it doesn't work out that way. Sometimes, you need chest compression over many minutes. And occasionally, we've even seen over more than an hour. And the physical nature of providing chest compression, if anybody has actually ever done that, is really, really challenging. So what LUCAS does is it provides expert automatic chest compression. And guess what? LUCAS doesn't get tired. So you can stay on LUCAS as long as you need to, which allows caregivers to have more time to revive a patient, more options to revive a patient. And it also allows our caregivers, providing for that patient to take care of the patient in other ways. So I'm going to share with you today a video of one of our survivor stories. And you're going to learn about what it's like here at Stryker. We get those survivor stories all the time and it never gets old. One thing I want you to listen for. I want you to listen for how long Matt was under chest compression. And think about the relative impossibility that it would be for Matt to have been under chest compression as long as he was if a human being was providing that chest compression. Roll the video, please. [Presentation]

All right. As you can see, that never gets old. And happy to report that Matt is doing well. And of course, as you saw there, he's playing golf. Although he lives in the great state of Michigan, so he's probably not playing golf today, but he's doing fabulous. So just wrapping things up here, before I pass the torch to Nate Miersma, our ASC Panel, I just want to say that as we move forward, you can expect from MedSurg and Neurotechnology, more of what we've done, and that has drive market-leading growth in all of the markets that we compete within. Now we do that, of course, by staying close to customers like those first responders that you just saw in the video, identifying those opportunities for improvement in their workflow and how they provide patient care and innovating around that, driving those innovations into their hands through our tremendous sales teams. We drive an MSNT by helping to make health care better as all of our employees do here at Stryker, you can expect that through that mission, we will continue to drive market-leading performance in our businesses. With that, I'm going to turn the stage over to Mr. Nate Miersma. So many of you know that about 2 years ago, Stryker kicked off an ASC business. It's a dedicated team of professionals in our organization that learn, know the ASC customer inside and out and represent Stryker as a single point of contact within the ASC. Nate is going to have a terrific panel, that's going to talk more about the dynamics of the ASC, provide a little education in that regard. Our ASC program has far exceeded our expectations to date, and much of that is, again, it's a great leadership. So with that, it's Nate Miersma.

All right. Well, first and foremost, I want to extend a very, very warm welcome to our esteemed colleagues, 3 very talented surgeons and more importantly, business and ASC owners and operators themselves. So welcome, and thank you for joining us. As we've been monitoring the market over the last few years, one of the trends that has continued to stay at the very top of our list has been the migration of procedures from the inpatient or hospital setting through the ASC setting. And if anything, COVID has only accelerated that. In addition to that, at the top of the list is the fact that, as surgeons become business owners, they start to play a much more important role in all of the purchasing decisions. Their transition from the hospital to the ASC represents one of the few times in their careers, where they are most likely to consider switching from a competitive product to Stryker or committing to Stryker longer term in their surgery center. So just to frame the market a little bit, there are about the same number of surgery centers today as to our hospitals. There are about 6,000 Medicare-certified ASCs in the United States today, and about half of them do some form of orthopedics, foot and ankle, hand and wrist, total joints, sports medicine. About 500 to 600 of them today are doing joint replacement, and that number continues to grow. In addition to that, the market is really fragmented. So there's no single owner or operator that controls more than 5% of the market today. And in the same vein, the majority of ASCs are surgeon owned. And we anticipate that, that's going to continue to stay the trend well into the future. So we can quantify the market a little bit, but one of the more subjective things that continues to be true is this little phrase, if you've seen 1 ASC, you've seen 1 ASC. The reality is that every single surgery center is very different from its owners and partners to their long-term goals to their payer mix and the subspecialties of surgeries that they perform in the surgery center. So Kevin mentioned our mission together with our customers, we are driven to make health care better. And ultimately, our mission is what drove our entire approach. Our ASC customers were already telling us they wanted to do business with Stryker at a much more comprehensive level. So we listen to them, and we created a dedicated ASC business with 100% focused sales, marketing and finance professionals just focused every day on serving this customer segment better. In addition to that, we have 3 surgeons here who are going to speak to the unique idiosyncrasies of the ASC market. So we're going to start off with a few questions. And the first question is going to be, if you could just introduce yourself and speak a little bit about your personal experience owning and operating an ASC, some of the opportunities that you've seen as you've transitioned out of the hospital and maybe some of the challenges as well. So if we can start with Dr. Michael Joyce, I'll turn it over to you.

[indiscernible] we have an opportunity to come, talk to a very unique audience for me, certainly as a surgeon. And the group here Stryker. I've been an orthopedic surgeon in Total Joint and Sports Medicine for over 25 years. And have worked in hospitals and ambulatory surgery centers for a long, long time. And then about 5 years ago, started on an endeavor to develop our own ambulatory surgery center in Hartford, Connecticut called Lighthouse Surgery Center, 30,000 square feet. We have 6 ORs and put together a group of surgeons and our facility is like all of them being unique, it is 75% surgeon-owned, 25% partnered with our local hospital in the area. That's my background.

Wonderful. Dr. Patel, would you mind?

Yes, absolutely. Thanks for having me here. So I'm a foot and ankle surgeon who's had ownership in an ASC, which is a multispecialty ASC here in New Jersey for the last 11 years. Our center is not a new build. It's been in existence for 20 years. We celebrated our 20th year this year. So our needs tend to be a little bit different than new build. We are definitely focused on growth and winning in our markets and how to -- our real goal is how do we sustain for the next 20.

Thank you, Dr. Patel. And Dr. Nessler?

Thanks. Thanks, everyone, for having us here. I'm [indiscernible] I'm an orthopedic joint replacement specialist in Minnesota. We're affiliated with -- and we're a physician-owned, 82% physician-owned, 18% corporate partner in an ASC that's actually been in continuous operation since 1972. It was actually the second ASC, freestanding ASC ever built in the U.S. And it's gone through many iterations. Most recently, a major overhaul as we've become very busy in total joint business and have partnered with Stryker.

Thanks, Dr. Nessler. One of the things that we were talking about just recently was the growth that we've seen in the surgery segment as a result of COVID. Do you think these trends are going to continue? And are these trends sustainable long term into the future? Dr. Joyce?

We started planning for this transition as [indiscernible] in the field started doing total joint replacements in an ambulatory setting where patients could go home the same day. Technology have got to the point where that was possible for a number of reasons that I'm sure we'll cover. So we planned for a few years, started building, starting construction, and then we opened wonderfully on February 14, 2020, just in time for COVID. And it actually played to our favor. Hospitals became a scary place to go, and people had an opportunity to get their orthopedic needs addressed. And we jumped right into that and we started to accelerate our growth. And I think as we get to the later stages of COVID now, we're seeing a trend that's now actually accelerating. And our biggest growth has been really just in the last few months. And it's been a transition where people have almost dichotomously moved from an idea and an acceptance to a preferred pathway of care through an ambulatory surgery center. And we're seeing that come in. And this is against a really diverse health care landscape. I mean, the relationships that we've had with hospitals in the last 25 years has changed. Hospitals were local and now hospitals are large corporations. Surgeons definitely want to continue to care for our patients and to execute that care with our patients, we want to control that experience. Ambulatory surgery centers have been an incredible way for almost all aspects of orthopedic care that remain in the control of the doctors and nurses that run our surgery center and be able to deliver that. So we think, initially, we are ready for a transition. We now think growth of that transition is going to be really a big deal going forward.

Yes. Absolutely. We've talked about on our ASC meetings really what drives that growth. And not just COVID, but I think patients are becoming their own consumers of health care. They want to be able to choose where they're getting their care. They want to make sure that they're the young healthy patient, and they're having a deferrable procedure that can be done in an outpatient, why not do it in an ASC setting where that is basically all we do. There are very few delays in an ASC setting. There is no -- very low risk for you to be delayed or have to stay overnight. So for us, I think this market is just expanding exponentially. The amount of procedures that we're doing and the ability to partner with a company that's going to allow us to grow the types of surgeries we do recruit younger physicians, younger surgeons with the advent of Mako and using that as a tool to bring in joint replacement into our center, which we don't do currently, but we will do in the next 5 years. That's a huge thing for centers that are already existing and successful.

Well, the group I work with [indiscernible] technology-oriented and forward-looking. So we actually started our journey into increasing our outpatient presence, especially our total joint program back in 2014. And it really took off in 2015 when we decided that we wanted to invest in some technology and in robotics and the local hospital system didn't want to do that. So we kind of put our money where our mouth is, and we invested in that technology and then the entire system kind of just took off. And we're already up to probably about 30%, 40% outpatient joint replacements in our local area pre-COVID. And now post-COVID, overall, we're up to about 60%, 70%. My personal practice is over 80% outpatient now. So that's really accelerated. And what we saw at the beginning is trying to direct patients there and give them reasons to go there with the technology. Now the question patients have is, am I a candidate for this? Can I go to your ASC? So that whole dynamic has changed.

And are you seeing any changes in the patient demographics who were requesting coming to the ASC, Dr. Nessler?

Yes. So now it's across the board. So we're about 45% Medicare at our ASC and 55% commercial payers. So the majority of the commercial payers already have migrated to the ASC. And we found ways to make it financially viable to do the CMS patients, the Medicare patients and the ASC as well.

Dr. Patel, Dr. Joyce, any thoughts on demographics? Are you seeing the same trends?

For our total joints, we see the same thing. I mean there's the kind of patients that are going to jump into this new experience here in New England, they started coming around to this a few years ago. But really, that's accelerated. And as more people in the community have had that experience where they went in and have that kind of thing done -- kind of patient who is an attorney, came in and had an outpatient hip on Monday. He called me on Wednesday to ask if it [indiscernible] on that day and he was at work. And so keeping up with them, sometimes it's hard. They set the bar kind of high. But because that happens, I mean, the environment that, that patient is in, everybody there is kind of starting to see that. But then when they come to see us, it's now that just like you heard, "Am I a candidate? Can I do that outpatient joint thing that I've been hearing about?" For our surgeons, it really works great for them because you start to move all of your practice activities into an ambulatory surgery center instead of dividing your time between a hospital and then dividing your time in a surgery center. And then as a caregiver in general, we keep fine-tuning that entire inventory surgery experience working with our nursing staff so that it really is focused on what the patient wants. It's not just all about patient care. There's almost a concierge level of service that comes to be expected from patients with a peace of mind and an ease and to kind of eliminate some of the bigger hospital bureaucratic processes that go on, so you can really address directly to a patient what their concerns are before they arrive, when they arrive, and after they go home. Having that flexibility in a small setting kind of helps design it. And I think there's almost a rogue nature to these ambulatory surgery centers because we're out disrupting. And the sogginess that had existed is now where we're overturning. And we talk to each other. I mean, like when I learn something from him, give him something from us, and we just kind of keep rolling that along.

Any thoughts, Dr. Patel?

Yes. No, I agree totally. I think as far as demographics, post-COVID, I think when hospitals closed in New Jersey, there was no alternative. So for our surgery centers, at least in the area, we were shut down completely for about 6 weeks. So that pent-up demand for procedures for all age groups wherever they could get in, that was there. So not only did we provide high-level patient care with really good outcomes, we showed that it can be done, that it doesn't necessarily have to be an in-patient in a hospital setting. So with proven results after 6 months of just continued COVID cases, at least in this area, it's a no-brainer for patients to say, "I want to do this outpatient. I don't want to go," and we hear this in our practices all the time, "I don't want to go to the COVID hospital," because that's the perception at this point. So did COVID accelerate that? Absolutely. I think that transition is lasting because of the results we're seeing in the ASC sector.

Thank you. Dr. Joyce, you mentioned opening your surgery center just before the shutdown in 2020. Would you mind just sharing the story of what happened to your business and how you used that time to prepare for growth?

Yes. This is not a business model to be [indiscernible]. But I personally have a little bit of a background in some of this. And when I saw what was happening in January and early February, we were really at a vulnerable time point, having all of our infrastructure in and being ready to transition and planning to do our first cases in February. So we moved our kind of entire line of credit into the business. At that point in time, we went out and really loaded up on PPE, kind of anticipating a potential problem. But then when the prices hit full hard, we partnered with the state in Connecticut and prepared to whatever would happen next as our hospital filled up and ICU beds were filled up, we were ready to convert to over 60 ICU beds to provide that care. And then we got closed and not quite. And thankfully, things subsided, but our hospital stayed full with COVID patients for a while, yet a lot of orthopedic injuries -- I mean, there's the emergency of [indiscernible] going to get fixed, but there's a lot of orthopedic urgencies. If you tear a rotator cuff, results can diminish as surgeries delayed and other examples. And so we needed to fill that middle ground, and we have that opportunity when nurses were being furloughed to bring them on board, kind of put everything together, and then we just started rolling people into a very COVID-free environment. So the entire crisis, we never had a COVID case or a transmission. It remained and is today very, very safe. But it filled that niche that needed to be done in this health care way. And we've all heard the stories about delayed care during COVID and now we're looking through the ramifications of some of that now. But that flexibility is kind of part of how ASCs are. I mean, that ability to kind of do one thing on Monday and a different thing on Friday is kind of critical to the quick move -- flexibility that we have to be successful.

And how do you think about your job or how is thinking about your jobs changed as you become business owners?

Well, yes, I [indiscernible] for years when you work with the hospital, we would just ask -- we want this technology, we want that. Sometimes they say yes, sometimes they say no. Now we take a second look to see what's it takes to achieve those goals, what our spend is going to be, how difficult is it going to be to put this all together. And it really came to fruition at our center. We started small in 2014, started getting bigger. And before we knew it, now we're doing volumes at the size of a medium to large-sized regional hospital in our ASC. And it got a point where we needed to do something. We needed the capacity for throughput, and we needed to do something. So we ended up partnering with Stryker ASC business to work on a large remodel and a large upgrade of our facilities, which kind of brought all of Stryker together across all the divisions, every [ beds to the booms ] to when patients check in to the technology with the Mako robotics. So we're able to do that with one point of contact. We don't have the large purchasing departments that hospitals have, so we [ can't ] get groups of people and panels of people to meet with dozens of different people. We're able to get one person and get this all wrapped up into one nice little deal.

Certainly makes it easier.

Dr. Joyce and Dr. Nessler, you both have Mako robotics in your programs. Could you speak a little bit to the role of robotics in your practices?

Well, I think as part of a narrative that patients understand, if you're going to transition to what your, parents had where they had a joint replacement in the hospital for a week, it's not just that we all got tougher society and now you can go home. Believe me, that's not true. It's much more what is the narrative that helps explain it. So we have better preparation for surgery. We've taken the technology that comes with MAKOplasty as something that patients understand as a way to really make that surgical approach much easier. And then we partner with anesthesia in different ways of pain control, and then we actually start physical therapy like from the recovery room. And that kind of whole package of that technology beginning with the MAKOplasty and the patient's understanding how that works, followed with all the caregiving that goes across different ancillary care services, then the patients feel that that's a great way to go. But it's still -- I mean, for surgeons that have done this for a long time, to do a knee replacement on somebody and then 3 hours afterwards come -- go up and down a few stairs is still kind of stunning. We have an observation room in our center where a couple of rooms you can sit and watch. And a good front of mine from medical school, who's an invasive radiologist, and he came in and I did his knee replacement in the morning. And then he went to the recovery room and then he did a therapy, and then we are still doing surgery that day and my nurses looked into the observation room, and they just go, "Is that our first patient?" And it was. And I think that it's still amazing to us. But it's for real, and we see it across the country, not just our center.

Yes. And the thing I like is once you start getting some of these technologies, oftentimes in the past, in the hospitals when they started doing robotics for soft tissue, you had a big infrastructure. You had to build out big rooms. It took a lot of space, and that's not compatible with the ASC. And with Mako SmartRobotics, I know what I'm putting in, I know what I'm doing before we start. So we've had a dramatic diminishment in the amount of instrument tray. So the turnaround time has decreased, which is great everywhere, but really good in ASC. The amount of equipment you need is less. So to me, it's the most efficient way to do a total joint now on things that enables that and makes it very smart and very easy for the ASC.

Great. What opportunities do you see still to further improve your businesses moving forward coming out of the pandemic?

For me, yes. So our biggest opportunity is going to be growth. Recruiting younger physicians to come into our ASC is key for our success. And one of the ways we talk about it internally is how do we incentivize a young physician to come to our ASC. So Mako robotics, these types of solutions are great. We can recruit surgeons who are trained on Mako and want to do joint replacement in an outpatient setting, which is a division of our ASC that we are not doing. We have a robust foot and ankle portfolio at our ASC. We have tons of surgeons who are doing that. With Stryker's Wright acquisition, for us, it's been a game changer because there's less argument -- there's less arguments. We can use everything. It's a full package of tools and equipment and pretty much anything you need. And we're actually been transitioning to total ankle replacements through the Wright products in the ASC setting. So it's really exciting for us. I do have to do this for another 20 years. So I do want my ASC to be a successful then. And Stryker's ASC business is really a good way for us to kind of go forward.

So in our -- again, it's the same thing. It's growth, and we've positioned ourselves with the new deal with Stryker. We actually just don't have a [indiscernible] of 3 Makos in our ASC. I think that's the most in any ASC worldwide. And with this partnership, we're trying to grow not just the joint business, we're transitioning more and more of the sports business and [indiscernible] business to Stryker because of the package we get by utilizing Stryker across the board. So we're working with the rest of our partners, and we've actually seen movement now in not just the total joints, but the spine. We're seeing it with the trauma, and we're seeing it with the Sports Medicine taking market from other people, which helps us because we're doing it at a lower price point.

Dr. Joyce?

I think we are a new build and a new facility. So part of our difficulty was launching. And so if you're a surgeon and get the notion that this is what you want to do, you want to build a new ASC, you have a couple of pathways. You can partner with a hospital where the hospital runs the show and that doesn't change your narrative very much. They're going to just tell you what to do in the ASC, like they told you what to do when you're in the main hospital. You can partner with large national corporations where they pretty much think they haven't figured out and they're going to do their things. But for surgeons that have a good relationship with their peers and a good relationship with their patients, who want to continue to control how patient care is delivered, you would like the idea of autonomy. How do you maintain that surgeon autonomy? And so what partners do I need to launch a venture that's going to be successful with that degree of autonomy? And that's where Stryker and I really came together on this deal because their product divisions are so fluid throughout the entire ASC environment, but I was able to go from building and designing my OR rooms, the lights, the booms, all that equipment to all of our processing, all lines of orthopedic care, the robotics with the MAKOplasty that we brought into place, our recovery room, how we recover our patients instead of a parade of vendors that come in and we brought all that together. And then also have a unifying financial structure, which is important when it's being led by surgeons. Because if we don't have that unifying financial structure, then we have to turn to other partners for capital. And all partners don't understand our business the way Stryker does, and they don't have the same long-term relationship that they have -- that we have -- I've been doing Stryker joint placements for 25 years. It's a company I'm familiar with, and I know, and I know the people. So they brought in [indiscernible] areas, and we partnered. And behind the scenes, they were coordinating that response. So that for us, we were able to focus on what we were trying to achieve, while the -- not some goals that all of the surgery center coming together was brought together by the expertise in each of these different divisions across the Stryker brand. That was really helpful for us. And I think as successful as it was for us with a new construction in a 30,000 square foot facility, it would be just as successful [indiscernible] now renovating and expanding or any of those type of options. I mean when we look for what potential partners that we can have, there's a few that have the breadth of experience that so much aligns with what we need to do every day. And that's how we kind of got our relationship to where it is right now.

So each one of you just had a considerable amount of experience with Stryker. Why do you feel that Stryker is best positioned to succeed in the ASC market?

Well, it's my experience. So as we just heard here in terms of the breadth of offerings across -- not just -- we're kind of practice centric. I keep talking about orthopedics, but we're a multispecialty group. When we get into the ENT and spine realms as well, which we do, they are able to cover us across that. When we did the buildout, I mean, it wasn't a small buildout. It was $11 million expansion of our existing ASC. They're able to take us through the whole process from the sterile processing areas to the paper checking areas to the rooms, to the booms, to the new ORs, to the communications and everything. And then they also give us the ability to do some of that flex financing as well. So when you're looking at the financing, you have a partner that's going to be able to deliver all this and the financing as well. And then build in certain things like guaranteed technology upgrades down the road. And we're familiar, we've worked with them for years. So when you have all that ability to do all those things that guarantees going into the future, it really comes a no-brainer. We didn't have any other partner, any of the other vendors, any of the other large orthopedic companies that can even closely compete with that breadth of offerings.

Great comments. Dr. Patel, any thoughts?

Yes, I agree. I think Stryker's ASC business has focused using [indiscernible] opinion panel where there's 19 surgeons throughout the country who get together every 3 months. We had an in-person meeting about 2 weeks ago, and we discussed what are our pain points, what are the things that ASC struggle with. So Stryker's offering not just breadth and depth of portfolio with respect to implants and things that we can purchase, but also the experience of many ASC owners throughout the country and solutions for some of our everyday issues. And some of those are very simple or not simple, like sterile processing or software solutions, how to scale, how to grow and what to do with the fixed architecture. So for my ASC, it's a very finite space. If we are going to expand, how do we do that creatively, how do we add service lines. So it really gives us this like east to west, high level bird's eye view of everything that Stryker offers, but also how we can implement that into our ASC growth.

Dr. Joyce?

Yes. I talked a little bit about kind of how we got here. And so the next thing is where do we go? And at our organization, let's say that we're really looking hard to see where we can drive better value. We understand that the health care dollars that are out there are limited, and patients' expectations rise, and yet we have extensive technology that we wanted to deliver to our patients. And in our environment, the way our surgeons collaborate, we try to work together to standardize. We try to look for avenues to improve value, reduce cost and deliver a higher level of care to our patients to be able to evaluate new technology and see where it fits in and then deliver that in a really timely fashion. Things move very fast. We want to be able to do that. As we try to achieve those goals, we've worked with Stryker across those platforms. And they've helped us as they moved more to a digital strategy, they're going to see more across all the brands, what things are doing that helps us better understand our cost structures and how we're delivering that value. And we look forward to developing that and surviving whatever happens [indiscernible] health care to us.

Absolutely. Well, Dr. Patel, you mentioned that each one of you are a part of our ASC Advisory Board, and I just want to thank each one of you for your active participation all the way through COVID and up until now in helping inform and guide the decisions that Stryker has made as we start to serve this customer segment more actively. I want to thank you for being part of our panel today. And I got to ask all the questions of each one of you, but we're going to open up for open questions now to Kevin Lobo, our Chair and CEO and his leadership team. So with that, we will adjourn. I'll turn it over to Kevin Lobo.

Okay. Great. Thank you, everybody. We're going to start off with questions from the room. We also have obviously a remote audience, and we'll be taking remote questions. We have a mic runner, please raise your hand and a microphone will be brought to you.

Larry Biegelsen, Wells Fargo. Glenn, 2 for you, one short term on your Q4 comments, one on the long-term, updated long-term guidance. And -- In Q4, the guidance range is relatively wide. So I'm assuming your comments imply you feel comfortable with consensus and what's giving you that confidence? We've heard the U.S. has gotten slightly better, but Europe may be deteriorating? Any color on trends you could share? And then I just have one follow-up on the long term for you.

Sure. As we went into the earnings call, we were sitting at the end of October, so we did have a little bit of view into at least about, what, 1/3 of the quarter had looked like at that point. And you're right, we are seeing patches of sort of COVID impacts in regions and in geographies. We also did widen our range a little bit. We also brought guidance down from our optimism in Q2. And so within that range, we feel pretty comfortable that, that is where the quarter will land. There are parts of our business, too, that, obviously, those pieces that are elective procedure oriented, especially hips, knees, spine, those are feeling more of an impact. There are parts of our business, vascular, medical, where we're not seeing as big an impact, and we are still feeling good growth coming out of those businesses.

That's helpful. And on the updated long-term guidance. Double-digit EPS growth, 30 basis points operating margin improvement. I'm trying to understand the rest of the P&L. You talked about keeping tax constant. If I just keep everything constant, it looks like about 8% revenue growth you need with 30 basis points of operating margin guidance to get to 10% EPS growth. Is that -- am I doing the math right? And how do we think about the Stryker algorithm coming out of this meeting?

Sure. Well, that's -- the guidance is post-COVID because we really need to sort of move beyond a lot of these uncertainties before we can really say where we think we'll land. Preston is looking hard at me. I'm not providing top line guidance at this point in time. What I would say is that formula of having market-leading growth and growth that is on the high side of med device will continue once we kind of get back to a normalcy. So yes, I can't -- still that's a model for you, but I think that provides enough idea of where we'll land.

Yes. And I think the minimum of -- it's a minimum of 30 basis points, right? So that's not exactly our target. Our target will always be to be higher than the minimum as you've seen in the past. And that does include sort of small and midsized dilution. It doesn't -- it wouldn't include the dilutive effect of a Wright Medical or a Mako or something of that magnitude. But if it's smaller deals that we do regularly, we plan to eat some of that dilution and still deliver a minimum of 30 basis points. But the culture to get to 30%, the higher your growth rate has to be, to your question. But we'll continue to outpace the market as we have for the last 9 years. Sorry, wait for the microphone because we have a lot of people attending remotely. Thank you.

[indiscernible] Thank you, Kevin. Let me [indiscernible] with your comments on Europe, the potential of growth. Maybe if you could frame -- dig down to that -- those thoughts a little bit, Kevin. Is it going to be taking products in the U.S. to Europe? Is that going to be the driver of majority of the opportunity? Is it M&A in Europe? I mean, talk to us about concretely what's happening to get after that.

Yes. So the Europe story has been an amazing story. So it started with our change to the Transatlantic Operating Model, where we frankly didn't have as much dedicated sales reps. So a sales rep in Europe that was selling CMF would also be selling some spine and doing navigation and maybe doing beds. So they had portfolios that were far too fast. So it's a Stryker problem. And so we were underpenetrated in Europe historically. If you look at something like cameras, where we're a market leader. We were not a market leader in Europe in cameras. Our Endoscopy division was largely a Sports Medicine business. And we are really changing that story dramatically in the past 3, 4 years because we have great products, we're competing against the same competitors that we frankly beat in markets like United States and Australia and up in Canada. And we were not winning in Europe, and it was a Stryker problem. We had to get much more focused. We added resources. We added dedicated salespeople. So we're now starting to march towards what I call our fair share, our normal, what we expect market share to be. The biggest opportunity is by far were in MedSurg if you look at sort of the overall upside in market share. But even in orthopedics, we were very strong in the U.K., but not so much in some of the other countries. And Mako is at, frankly, a big catalyst to help improve. We're pretty good in hips, but we weren't as good in knees as we were in other markets around the world. So the fact that we're growing above Stryker's growth rate in Europe is pretty exciting, but it wasn't sort of a onetime blip. This is what I'll call a steady march. And I said that 4 or 5 years ago, I said this is a decade of steady march because you just don't [ deem ] this market share automatically. It takes time and effort with surgeons to gain adoption. And so it's just a steady, steady march. And as we grow, we can afford to fund more dedicated salespeople, which then feels more growth. So even something like instruments. If you recall, we did the split a while ago where we split out instruments, the Surgical Technologies and orthopedic implants, which you saw earlier. So that split took a little longer to do in Europe just because we -- the geographies are wider. We don't have as much business. So even things like a fully dedicated business units that we talked about with fully dedicated sales, they weren't always fully dedicated in all geographies of the world. And we are -- the more that we do that, the more we drive growth. So for me, Europe is a tailwind. It's an actual engine of growth, which I know most of my peers would not say, but it's a historical Stryker problem that we've been addressing, and we've been addressing very well. And that formula is going to continue to work for us.

Okay. And just to follow up on the M&A comments. I wonder, the breakout of neurovascular, does it make it sort of a hub for M&A? Specifically, just -- there are no little lighter, smaller subsegments under that, that you can comment on that. But just [ hoping ] you talk about the environment generally, the pricing, availability of properties. I feel like once you said to me over the last decade, we've done over 90 acquisitions, large and small. Is that -- over the next 10 years, is the magnitude of opportunity still there for you?

Yes. So we've done over 50 since I've been CEO over the 9 years. I think it's 55, 56, something like that. So over 50. And we've looked at a lot more than that, way more than 90 to get to the 50 deals. I'd say right now, obviously, multiples have gotten high. And so we have to make the math work. And Wright Medical is a good example. We liked it 5 years ago, but it took a while for us to feel like they earn their way into the valuation. And now a year after the acquisition, I can say I'm delighted with the price we paid for that asset. It's turning out to be a better asset than we had first thought. But we had to convince ourselves we could do the deal even though we like the assets. So there are a number of assets that are just a little bit out of range from a price standpoint. Some of the multiples are high. But I would say the ecosystem has never been better since I've been CEO. The IPO window, which frustrates us, because some of the companies I'd like to buy go IPO instead. But that's brought a lot of money into MedTech. And so they're at a start-up engine, which, frankly, we were worried about 8 or 9 years ago, probably has never been healthier than -- since I've been on Stryker. And so I think it bodes well for the future. In fact, a lot of these companies -- look, the elevator write-up on the IPO is fun. But they missed a couple of quarters, and you guys write [ nasty ] reports and then the elevator write-down will be very swift. And we've seen that, right? And we've been able to take advantage of that. We bought companies like Invuity and NOVADAQ that put the elevator write-down after having spectacular high valuations. And so we'll be poised and ready to pounce when those opportunities present themselves. There's also a lot of private companies out there. And the valuations on private companies, the multiples are not -- they don't seem to be quite as high as the public markets, at least right now. So I'm very bullish that we have a lot of companies who can go out and buy something like a Gauss Surgical. I wouldn't even have imagined buying something like that 5 years ago. It didn't even exist. The concept of using artificial intelligence to measure and quantify blood loss. Just incredible, right? So this new kind of innovation, digitally enabled innovation, wasn't even open for us 5 or 6 years ago. So those are new channels of innovation. Certainly, I think if you look at Andy's world, I think the landscape is probably a little wider, just a number of adjacencies. But even in Spencer's world of [ hip, knee ] and spine, there's all kinds of technology enabled innovation that still exists. So maybe I'll ask you to comment a little bit on [indiscernible] what you see.

Yes. I mean I would agree. Like I said, in our world, it's an innovation playground. And that doesn't mean that we have all those solutions inside of our business. But we are scouring the earth to find them and bring them to Stryker, and like I said, bring meaningful solutions to our customers. Kevin mentioned Gauss. I also use Gauss as an example of what I think is one of our real strategic advantages as a company. It is a secret, so don't tell anybody. And that is that deep specialization and expertise that we have, not just in sales or marketing or R&D, but also in M&A. So if you look at Gauss as an example, dedicated M&A inside of our Surgical Technologies business in Dylan's world, use of experience with that team and use -- Glenn mentioned this earlier, of time, not just over target but with target. We've been working with Gauss for 3, 4, 5 years and we built that relationship. And when it came time to transact [ high-fine ] Silicon Valley company, we were it. We had that relationship. We were the only show, and we closed the deal. And we have examples like that going on all across our business, where we're nurturing those relationships, we're learning about the technology and when it comes to time to transact, you can bet that we've done our homework.

Yes. The only thing I'd add on is take a business like Orthopaedics & Spine, when I took over, if the wish list was this long, we specialized and the wish list went like this and because of that domain expertise and people waking up, really building thoughts and deep strategic thinking in the markets that are tied. Take trauma for example. We have leader in trauma that is going deep now saying, hey, there are really attractive assets in the space. They need -- that we didn't think that was attractive before. But good solid growth, great innovation and technology, and we have leaders coming to us every day asking to say, "Hey, we want to look at this. We want to take a closer look." That's one. And the second aspect is we build this muscle. So we're very confident about our M&A strategy and our ability to assess and then integrate that builds from learning a lot along the journey from the various deals we've done, but that gives us confidence that when the team comes forward and says, "We've looked at the risk factors. We understand the economic return variability, and these are the things we're doing to prevent this as we go after it and integrate it," it makes us feel really, really confident about our strategy. So Andy and I both remain optimistic about the ability to drive M&A growth in our future.

Okay. Upfront here.

Robbie Marcus, JPMorgan. Kevin or Glenn, not sure who's better to take it, but -- so Andy's world has the highest end market growth, kind of mid-single digits versus 3%, 4% for the rest of the business. How do you think about capital allocation where the incremental dollars are spent throughout the business? Is it really geared from the bottom-up on what has the best opportunity? Or is it targeting towards the highest growth markets over time?

Yes. So we love to have very strong businesses, strong category leaders. So every business can pitch deals. There isn't any business that's sort of we say, well, there's no money for you for M&A. But it has to -- they have to be able to show value, and they have to be able to show growth. So growth is our first filter. If what they're acquiring, if they can't grow that at a high growth rate or accelerate the growth -- because a lot of these are small technologies that we buy, that we can put gas on the fire with our sales force and drive execution. If they can't drive high growth, that kind of screens them out. But you've seen we've not been afraid to make acquisitions in markets that are lower growth, but there are segments, subsegments that are -- we think, are higher growth like Orthosensor, for example, where we think smart and digital is going to be an enabler of very high growth. Extremities is the fastest growing segment within orthopedics. So we did a very large acquisition. It was an extremities acquisition. It wasn't a sort of a hip and knee acquisition, so it's playing in high-growth spaces. So I would say that they're all looking for ways to bolster their portfolios to make sure that their businesses are going to be strong. But safe to say, we like high-growth markets. So where we could -- ENT was a good example, a high-growth market that we did a strong acquisition of Entellus. But if you look at something like NOVADAQ, you could say, well, endoscopy, the camera business isn't the highest growth. It's good growth, right, mid-single-digit growth, but you put fluorescence imaging on it, you just change the basis of competition by going to advanced imaging, seeing things you can never see before and being able to do safe surgery. So if you can change the basis of competition, then that enables you to drive incredible growth. Like when we did Mako initially, I know it wasn't the most popular with all of you out there to allocate that much capital in hip and knees, but it changed the basis of competition and drives tremendous -- has driven tremendous market share gains in highly profitable segments. So that's -- sort of a short answer is we don't take an approach of, okay, Spencer's had his turn with -- right now it's Andy's turn. It doesn't work like that. It's every business, it's a jump ball. All the divisions know they can pitch their deals. And if their deals are going to be value creating for Stryker, we're open for business. But your point is right that we do -- we're not a kind of company that's going to buy a 2%, 3% grower and keep growing it 2%, 3% and get the value out of ripping out costs. That's not how we roll. So we're not good at that. That's not our offense. Our offense is to -- whatever we're going to take has to be able to take our growth rates up meaningfully higher. So safe to say, if you think about the next 5 to 10 years, I think we allocated a lot of more capital in Spencer's world the last little bit. The next little bit would more logically fall, but it's not automatic. It's just that he has a lot more room with adjacencies probably than Spencer does. But if there's a good trauma deal that Spencer comes forward with, that we think is value creating, and trauma is a pretty good market, it's growing mid-single digits already but it could take that growth rate even higher, I'm open for business. So let's go one more in the front until [ Rose ] gets tired, and then we're going to go to the back of the room, please. Go ahead. [ Rose, ] can you go to the back? There are some people in the back.

Matt Miksic, Credit Suisse. So I have one follow-up for Glenn on the margin questions earlier, the commitment, if you want to call it that, to double-digit EPS growth. So obviously, growth is going to be a factor and whether you're driving 30 or 50. I'm just wondering if like it's -- is it the right way to think about it is sort of count on double-digit EPS growth, of course, assuming we don't have another April 2020 but the X factors being growth and then the offset on investing after your growth opportunities is kind of the right way to think about what actually lands in basis points to op margin?

Yes. No, that sort of is a little light. I'd say it's a much firmer commitment. But you're right. All of those things have to line up to get to that double-digit growth. And I think if you look at the last, well, pre-2020, '16 to '19, we consistently did deliver double-digit growth on EPS. And the reason we did that is because we delivered on the top line. We very much focused on op margin expansion. And if I remove deal dilution from that number, it was well over 50. And all of that comes down to the bottom line. It also relies on that efficient tax structure and also being smart about our debt. And so I think all of those combined give us the confidence that we'll deliver double-digit EPS.

That's great. And then just a follow-up maybe for Kevin on M&A. You're ahead of plan, as you mentioned, on debt pay down. You're sort of reloaded and ready to be a little bit more active. I haven't asked you this question in a while, but there was a large deal that was under some consideration a bunch of years ago in orthopedics, and it would have considerably expanded your market share but there were some sort of questions around whether it was a good idea or bad idea. And I think at the time, you had an answer. I'd love to know if you've thought about that again or you've sort of moved on from getting bigger in hips and knees.

Yes. We think about all the companies, Matt, just -- we're always looking at everything. What I would say is once you become a category leader in anything, once you're already the leader, the notion of doubling down becomes less interesting. And I'm not talking just hips and knees. I'm talking about anything. When you're not the category leader like upper extremities, like spine, like sports medicine, when -- which we weren't 10 years ago, it's sort of very interesting to do deals to put yourself into the category -- leadership category. That's sort of the mindset that I have. So once you become the category leader, then it's much more about how do you create more exciting platforms, how do you do different types of innovation versus just adding size just to double down when you're already a category leader. Hopefully, that's clear. The back of the room, please.

Two questions. Joanne Wuensch from Citibank. The first one is on BLUEPRINT. I mean that was fascinating technology when it was part of Tornier and then part of Wright Medical and now it's in your house. How do you take that further? And is there an opportunity to combine some of that visualization and planning with your robotic platform?

Yes. I'll take a shot at providing some context. Right now the focus is squarely on upper extremity and fulfilling the growth strategy and the success strategy. We've recently launched a new shoulder platform called Perform. Mike showed it on his slide in the presentation. That's married very eloquently with BLUEPRINT and really drives significant adoption and a stickiness factor between both the implant, the software and then obviously, the adoption rate with our customers. We're being very sensitive about when and how we take that platform and take it to other parts of our organization. That being said, you can imagine those conversations are alive and well in the organization. We're not at a point that we're committing to sharing any time lines or outlook but know that we've been really impressed with what BLUEPRINT provides from a preplanning standpoint, really the ease of use, the ability to do it on a computer simply, even on some portable technologies. It is a phenomenal tool for surgeons to provide better care. So the aspiration and ambition to move it beyond just upper extremity is there. We just want to be really thoughtful about doing this. Part of what we're sensitive to when we do M&A is preserving the value we set out to accomplish when we did the deal and part of this is keeping our upper extremities business growing at the rates that it is today. So know that BLUEPRINT has a bigger play for us in the future, but right now, it's squarely focused on our upper extremities.

And my second question is -- you've covered a lot of ground today, so thank you. But if I was to say to you what is the 1 or 2 product that you're either the most excited about or that will drive the revenue for each of your segments over the next 3 years, what would that answer be?

Yes. Maybe I'll kick it off to Andy.

Maybe you can talk about -- why don't each of you talk about your -- the ones that's most exciting?

Sure. In joint replacement, obviously, it's on the backbone of Mako. I think many of you know, we're launching a new shorter stem for direct anterior approach. Here at the turn of the year, it'll start on limited release sometime in sort of mid- to late December, and we expect sort of a full launch of that at the orthopedic academy at the back half of Q1 of 2022. So that's really exciting. And it just further shows that the combination of a world-class implant and an application on Mako is a differentiator in the marketplace. So I really have to say Mako remains out in front for our joint replacement business. The other one I'm really excited about is our Perform launch, our newest total shoulder and the continued growth of the full offering in our total shoulder portfolio. we have the reverse. We have the direct anatomical, and we even are the world leader in revisions. So if you think about the entire platform of taking care of the shoulder, we're the company to provide that. And really, no one else can provide that solution. So I'd call those 2 out as big, exciting ones that will continue to drive growth for our organization for the next few years.

Sure, yes. And I'll take one from each Neurotechnology and from our MedSurg businesses. In Neurotechnology, I think without question, our Surpass Evolve FTS, that is tremendous upside opportunity for our neurovascular business. As we know, neurovascular is growing fast anyway. And Surpass is -- has plenty of upside opportunity to take market share from the market leader today. So Surpass on the Neurotech side and then lots of amazing products on the MedSurg side. But I think we'd have to go right to ProCuity and what that bed is doing for us today, and like I said, gaining steam in the marketplace, takes a while to trial those beds, get those beds in big multimillion dollar deals, budgeted with our hospitals, but that steam that's gathering behind ProCuity and you'll have the opportunity, Joanne, to go across and see that technology and how impressive it is both from the height and all the patient features around safety, the ability to be multi-acuity, both on the med-surg floor and easy transition to the ICU floor as well. So we're super excited about ProCuity, lots of ability to upgrade, existing customers, but really most excited and what we love to do anyway, to go take market share from our #1 competitor.

Yes. Joanne, just as a reminder, if you think about Stryker, we don't typically have these sort of big boom launches, right? All of our businesses are constantly launching new products. Foot & Ankle has 6 new products they're launching next year, just as an example. [ 78 ] cameras in development will be launched with -- you said a 3-year time frame. So there's all kinds of innovations that will be hitting the market. But to use the baseball analogy, we're a company of singles and doubles typically where we're constantly having these little innovations, and that's what drives our sustained high growth. We tend not to have these sort of big kind of blockbuster products. Now there are -- those are the ones that they're describing are very exciting. But I know some of our other divisions are listening and they're probably unhappy that we haven't listed all of their new products. I can tell you, we...

We love you all, including everything [indiscernible]

Just rest assured that the pipelines are very healthy across our portfolios and -- but those -- I think the ones I highlighted clearly are differential, but we do have healthy pipelines really across the whole portfolio and the sort of that constant innovation is the engine of success that feeds our sales forces. One here and there's one there. Go ahead.

Matt O'Brien, Piper Sandler. So one for Spencer and then one for Glenn. Spencer, on Mako, I don't know if I'm over reading this or not, but you said 60% of all your implants now are competitive implants. You've been kind of saying more like 50%-ish or half. I don't know, again, if I'm overreading it. Are you signaling that things are getting a little bit better there? And then second quick part of that question or long question, 1,300 Mako systems now. That's up another 300 versus the last check in about a year ago, so trending every bit as good as it has been. You've got a couple of competitors on the market now. The Street's modeling about 8% knee growth next year. That's what you did in '18 and '19. Having those 2 competitors in the market now, is that going to keep you from getting to about the same rate of growth in the knee business next year or not?

There's an awful lot of questions in there, but I'll provide a little context. First off, like I said, we're really pleased with the continued trajectory of our sale and installations at Mako. It's been really impressive even in light of a complicated environment. So we're really proud of our Mako capital team and that growth. Worldwide, we have exceeded 1,300 robots, and those are out in the marketplace and being utilized with great adoption, and that number will continue to grow. You are correct. It does create a platform for future growth, and so we're excited about that. We're not here to give specifics on what those growth rates look like in the future. But we really like and know that when we have a Mako place that drives future growth. On a couple of your comments on the results I shared, I said 60% of the Makos we go in with, it's in competitive accounts. So 60% of the time, we go into an account where they're using one of our competitors' implants, which is a pretty remarkable number. Now you have to remember, a lot of times, they might use parts of our product, and those are multiusers that we can easily bring over to use more. Take knees and hips. We might have a strong knee customer that's really excited about what they see with Triathlon. Now obviously, we'll be going back to them. We have the new launch of the 4.0 software. And when [ Insignia ], that's the name of the shorter stem, again, comes out, we'll upgrade that software to 4.1. It's an easy upgrade. And that will now be part of the option in the platform as well. So you can imagine we have a sort of an attack plan out in the marketplace to make sure we're taking advantage of it. And then the other comment I shared was roughly just shy of about every -- 1 out of every 2 implants that we sell for knees right now are done robotically. And that number continues to trend in that direction. It's a pretty remarkable statistic.

That's in the United States.

It's in the United States. Yes, in the United States. It's a pretty remarkable statistic to see the growth and really the adoption rate of knees on Mako. Also just for fun facts, you know that so many of our knee implants go in cementless on Mako, and we're seeing that number continue to rise as well. So we think that's a more efficient way to provide care and has a really great growth and adoption trajectory where we're seeing more cementless Triathlon knees go in with Mako.

Yes. In an interesting way, the fact that more competitors are coming to the market and if you went to AAHKS or AAOS, which I had a chance to do, every booth, every sign was robots, robots, robots. It's pretty amazing. And that, frankly, has just raised awareness in the category. And that's acted more as a tailwind than, frankly, a problem for us because we know we have the best solution. And so having the best solution means that there's more trial. Maybe people were waiting for their competitor to come up with theirs so they could try our [ stuff ]. But we love our chances side-by-side against any of the systems out there today. And frankly, this awareness, and even you heard from the panel, they're talking about recruiting surgeons and having robots. Residents are saying, "Well, do you have a Mako," before they accept the residency at certain teaching hospitals where we -- some of those teaching hospitals are holding out. They've now come forward, and we had great success this year, frankly, with some of those teaching hospitals that weren't necessarily Stryker friendly in the past. So this whole move to robotics is a tailwind. It's raising the water level in the industry, and we don't see that slowing down anytime soon.

Sorry, just one more follow-up. And sorry, I'll try to tighten it up. This one's for Glenn. I don't want to overread the 30 to 50 you're taking away some of the upside, though, as far as the margin expansion. Is that because of the international investments? Are there other investments we're not appreciating? And then second part of that question, sorry, is Street's modeling 12% EPS growth next year just given -- in light of what you just said here. Is that a little bit too rosy? Should we take numbers down a little bit for next year?

Yes. I think our confidence of really removing the upside is 5 years ago, when we sat in here and we talked about CTG and Viju sort of went over that, we really didn't have a sustainable process or programs in place to give us the confidence that as we saw growth coming in, that it was going to be leveraged growth, sort of naturally leveraged growth. I think, over the 5 years, we've put a lot in place that really give us the confidence. We also have 5 years of history to see how our businesses have performed. And so we're very comfortable taking the top side off of that 30 to 50. The 30 is really there, I think, more because we will include sort of the non-large deal dilution in delivery of that number. And depending on what those deals are and where they fall during the year, that could cause an op margin expansion in the 30s quarter-to-quarter or maybe even for the full year depending on the deals. And then as far as EPS goes, right now, we're watching this quarter very carefully. I would tell you, stay tuned to January of 2022, and we'll provide full guidance.

Yes. Just to be clear, taking the top 30 to 50, taking the top off is because we feel more bullish about our op margin expansion because before we were saying we were going to stay in that range of 30 to 50. Now we'd be very comfortable moving above 50 if we don't have meaningful deal dilution. So I just want to make sure that's clear that, that change is us feeling more optimistic, more confident in delivering op margin. As you heard from the CTG 2.0, that program has a lot -- rebuilt a lot of muscle that we can now start to execute on. That, frankly, didn't deliver as much in the past few years. So I just want to make sure that's clear, that we're setting a floor like we set the floor of 9% for EPS. And you saw we were very comfortable drifting quite a bit higher than 9%. We're now setting a floor of 30, and we're not afraid to drift higher and it really does depend a little bit on the deal -- the amount of deal dilution that we have. Here in the front. I know you've been waiting a while, sorry.

No worries. Matt Taylor of UBS. So maybe I'll just follow up with one question about that margin expansion. So if in an ideal world, let's say you're clocking towards 50 or 40 basis points year-over-year through LRP, are you saying basically you wouldn't limit that, you wouldn't reinvest? You'd let it flow through? Or just give us some thoughts that if things go well, how much margin expansion could we see kind of in ideal LRP?

Do you want to take it?

Sure. I'll start out. If you look at history where we've delivered, we have quarters or even years where we've hit 70 or 80. It all kind of depends on timing in terms of how we might think about reinvesting. Believe me, we've got lots of hungry mouths to feed, and so no shortage of places to reinvest. I mean we're also mindful of our return commitments, both at the op margin line and also down at EPS. And so if it needs to drift up to make sure that we can hit our commitments, then we'll let that happen.

Yes. Just because we have windfalls, we're not going to just spend it necessarily. We do -- we have a tough budgeting process. If there are good investments that we can make that -- you remember, when we did the -- when we had the tax benefits from the regional headquarters, we reinvested half of that back into Europe in building those specialized sales forces. Some of you may remember that. That's proven to be a fabulous investment. We are very transparent with the Street, but we had kind of a windfall profit, and we took half of that windfall to reinvest and we dropped half of that windfall straight to the bottom line, none of which the Street was expecting. And sort of think of it that way. If we're just grinding higher on op margin, it will fall. If we get a little bit more windfall than we expected and we have smart choices, we'll make investments, but we'll tell you about them. We'll be very transparent to say -- because we've taken out this much of this excess and we've invested in this specific way, but it'll be things that we feel very confident will be value creating in the future. But we're certainly not averse to letting op margin drift north of 50, which is why we took 50 off. Before we were -- we felt -- we didn't feel as confident that we could go to 60 or 70, et cetera, which now we feel greater confidence, at some point in the next 5 years, we can easily imagine us having a year or 2 where we would drift above 50.

Great. Can I just ask 1 follow-up? So this is kind of a joke followed by a serious question, but the joke is when does the post-pandemic guidance start. And I guess related to that, could you offer any thoughts on 2022 generally, meaning if COVID cases do go down like the models are predicting in Q2, can you deliver these kind of results in 2022? Or are there still enough challenges like staffing that would prevent you from having kind of a good LRP year next year?

I'm going to let Glenn answer that.

Yes. Boy, I wish I did have the crystal ball to tell you when I thought we would be out of our post-COVID period. And you're right. When we referred to the COVID period, there are challenges with inflation, challenges with supply chains, challenges with staffing. All of these are challenges that I think we'll continue to face. And I do think that just like this year, we will monitor the environment as the year rolls forward, and we will adjust guidance if we start to see sort of clear air and we think we can start to deliver on some of these metrics that we've laid out today. But right now, at this point in time, I really don't have visibility to where that will be or when that will be into next year.

Yes. I think COVID, when we say post-COVID, I mean the COVID will still be around. But if you think about the end of the second quarter when we gave guidance, it looked like there was clear air, and we put pretty bullish guidance in front of us. And then Delta hit, right? So absent something like a Delta, if we get down to those kind of low levels that we saw at the end of the second quarter, when that happens, you can probably consider that the post-COVID period. I don't know when that will be. I hope it'll be soon. Hopefully, it'll be in time for us to give the full year guidance at the end of January, but I don't know. And so if we're still in that -- this world where we have lockdowns and shutdowns in major markets, then that's -- we're still in the COVID world. That's kind of the way I'd describe it. Not that COVID is completely eradicated but still be around. But if it's in low levels like we saw at the end of the second quarter, that's probably what I would call the post-COVID period. And we'll let you know when that is. I don't know when that is yet. Over here, we got a couple. And then we'll go to the remote after these 2 just to give them -- people who are remote, to give them a chance. Go ahead.

It's Pito Chickering from Deutsche Bank. A question for you on the operating income again as it relates to Europe. Are margins in Europe similar to the U.S.? And do you see any potential drag to operating income as those markets are growing at the rates that we're seeing today?

Yes. I think a couple of things. As you think about margins in Europe, first of all, the pricing environment in Europe is generally tougher than the U.S. I would tell you that like the U.S., Europe does value technology. And so where we introduce new technologies, we do still gain price in Europe. I would tell you, the other thing to keep in mind about Europe is we're investing. We are growing sales forces. We are going into -- in a bigger way in specialization in new geographies. So Europe will naturally have lower margins for us. But if you saw from Kevin's slide and you look at what we're gaining on growth, we think that's worth it over the long term.

Okay. Then a follow-up for free cash flow conversion. You mentioned during the script that using lower -- like inventory levels have been a big part of how you have better free cash flow conversions. As you think about the supply channels today, the raw material issues, do you get more conservative about the inventory levels at this point, which could decrease your free cash flow conversions?

You take the cash flow conversion.

Yes. I think the 70% to 80% free cash flow conversion that we put out there, we -- as we sort of analyze where are our long-term needs, I mean, naturally, you can see we're feeling the benefit this year of a reduced level of spend in certain areas just because of the environment. That will naturally drift up next year, hopefully, as we get back to normal. And so we think leveling it at between 70% and 80% free cash flow conversion is the right number for us as we think about where we have to spend. And as it relates to supply chain, I'll defer to Viju.

Yes, happy to take that. So we're not immune, dissimilar to anybody else in the industry and the [ vaster ] economy as well. Having said that, I'll say that from a procurement perspective, there are some areas where we are deliberately making long-term buys to make sure that we have the supply assurance. But more than offsetting that is how efficiently we are running the overall supply chain. So the pressures, I think, would continue to last for the next 9 to 12 months. From an electronics perspective, it's expected to last 12 months or maybe a tad bit longer than that. Some of the other areas may be smaller and sooner. From a labor perspective, too, it's going to last for the next, again, several months, if not more, right? So it's going to be pretty fluid in the next year.

Yes. But if I think about the 3 months of working capital, receivables has always been pretty fairly well managed. Moving to the shared services, we're getting a little bit better. Payables has been actually a very good contributor to cash flow improvement, and that's going to continue with the work that Viju has done. And then your question is a good one on inventory. There are parts of our inventory where we're actually raising the inventory level, safety stocks for certain product categories. But there's others that the end-to-end inventory approach that they're taking across the commercial -- and we have a lot of inventory in the channel today. They were not in the right places. And they're finding all kinds of opportunities to optimize. So overall, it's still something that we can manage quite well in spite of some of the supply chain challenges. The supply chain challenges are not affecting all of our portfolio. It's acute in certain areas, but it's not affecting everything. Okay. Let's go to remote, and we'll come back to you. I'm sorry, just to give them a chance.

Our first question comes from Vijay Kumar with Evercore ISI.

Kevin, Glenn and team, applaud for making [ this live ] but this seems to be a great session. Good to see you guys online. Kevin, maybe my first one for you. A question on ASCs. The -- how fast is that market growing? It looks like [indiscernible] gaining share on ASCs and part of it seems to be because you have [indiscernible]. Do you see M&A opportunity in ASCs? And if ASCs grows faster, is there any margin [ hit ] for the business?

Okay. Vijay, I'm sorry that the sound wasn't great, but I think what you said that if ASCs really grow much faster, could there be a margin hurt, pressure for us. Is that what you're saying?

[ On the ] margin and do you see M&A opportunity within that [ just over the ] market?

So do you want to take that, [indiscernible]?

I'll take it. I think that's a pricing question, right?

Yes.

Okay. So yes, good.

Sorry, the resolution was a little tricky there, Vijay. I'm sorry.

So a margin question, a pricing question. Believe it or not, our pricing has stayed very stable as we move from the hospital to the ASC. So even though we have, certainly, as we heard, much more interested financial buyer, because of the way we're packaging our deals, the way that we can move discounts across our portfolio, overall, our margin stays very healthy whether it's in the hospital setting or in the ASC setting. So we are more than happy to see growth continue in the ASC. Now payer mix in the future can impact that as Medicare gets more active in the ASC. We know that. But as we see it today, we're feeling very good about our margin profile.

Yes. And the other thing, Vijay, to your question, the ASC contracts that we sign are typically longer in duration than what we do with the hospital. And so I think that type of stickiness over a longer period of time is actually of great benefit to us as a company. Okay. I'm afraid to ask about going remote again, but let's try one more remote, and then we'll go back to the room.

Our next question is for Viju from Mike Matson with Needham & Company.

Yes. Can you guys hear me okay?

Yes, we can.

Okay. So Viju, I had a question about the 8 manufacturing facilities that you closed. Given all the M&A that Stryker has done, I've got to imagine there's a lot more opportunities for footprint consolidation. What are your thoughts on this? And is this going to be a meaningful contributor to your gross margin in the coming years?

What's the last part of the question?

Is it going to be a major contributor to gross margin improvement over time?

Yes. Thank you for the question. I -- Yes. Yes is the short answer. I think as I mentioned earlier, a few years ago, we didn't quite have the technical muscle or the operational hustle, as I say it, to smoothly close these small plants. So as we have started doing that, we've really gotten pretty good at that. And so you're right. We are an active acquirer, so I fully anticipate the onboarding of new smaller plants along with these acquisitions. It's natural. And the right acquisition was an exception where every plant that came in with Wright was an at-scale plant. So as we get this train going and keep it going, absolutely expect it to be significant, not individually but collectively because there's a lot of fixed overhead that goes along with even a small plant. So yes, that would be my take.

Yes. I would just add that we have a lot of manufacturing facilities that are not at full capacity. But when Viju talked about 7 days a week, 24 hours a day, we have a lot of opportunity. So we have 2 choices. One choice is fill up the plant. And in the case of Cestas, as an example, which is a spine plant that we have in Southern France, we in-source -- K2M did a lot of third-party manufacturer. And we actually in-source [ thoughts and ] products in-house that has actually driven tremendous savings because those OEMs and those specific products were charging much higher than we can make internally. So we can either fill up the plants or, in many cases, we'll actually look to move the product from one plant to another and then close the facility. So obviously, we're not ready to announce -- make big announcements. But suffice to say that, that opportunity to have the facilities we have operating at max capacity is very significant. And what held us back historically was the fear of product transfer because we had challenges in the past. And if you have a product transfer that doesn't go well and you end up in back order or you have a regulatory issue, we just didn't lean in the same way. And the commercial teams, frankly, would fight, would kind of hold Viju away and his team away because they wanted to protect their -- the supply of their products. They now have tremendous confidence in Viju's organization. It took a while to build that confidence. And frankly -- so we were our own worst enemy in terms of making these decisions around product transfer. And now we're in great position to be able to do that. The Tijuana facility is a great example with the businesses who are moving product to that facility. We closed -- announced the closure of the Lakeland facility in Florida, and that product's being moved to Tijuana. That type of decision wouldn't have happened at Stryker 10 years ago. And so I'm very excited. Your question is spot on, and this will be a driver of future gross margin improvement. Okay. Let's come back to the room, and then we'll go back remotely afterwards. So pick any one of these. There's 3, 4 here.

Robbie Marcus, JPMorgan. Emerging markets are sort of a mid-single-digit percentage of sales. It was growing very nicely pre-pandemic. China was a great growth market and then overnight, maybe not so much a great growth market.

For the joint replacement division, not for all divisions.

No. So maybe how do you think about potential, China in general, the opportunity for future price cuts from the government there and how you think about emerging markets as a part of Stryker in general?

Yes. So our opportunity in emerging markets is very significant given our low presence today. It's kind of like what Europe was before we launched our transatlantic operating model, probably even greater. If you think about Latin America, if you think about India, if you think about Russia, Turkey. Excluding China, we have significant opportunities, the ASEAN countries where we're really having great growth. So those are all really exciting markets for us. China is hard, right? China is a challenging marketplace with obviously the volume-based procurement that's taken hold, first in trauma, now with joint replacement. We do have some businesses like neurovascular, our Medical division that are doing phenomenally well in China. And there are so many technologies we haven't even yet brought into China. We have Tornier, the shoulder business, is just in its -- it's in embryonic stage in China. And we have the products registered, thankfully. And Wright Medical hadn't really gone after that market. So that, to me, is just a fabulous opportunity. So for every challenge China presents on the one hand, you have these fabulous opportunities on the other hand. The good news for us, the silver lining of having a small business in China is that the VBP is not going to hurt us as much as it's going to hurt others in the hip and knee side of the business. And they do love technology. So the ability to have Mako present in the market is still -- we're still going to be able to build a joint replacement business in China outside of the VBP because it only covers about 80% of the procedures, still do 20% outside and our ability to commercialize robotics. We still believe we have a viable business. There's going to be -- it's not going to go up in a straight line. That's the issue with China. So you're going to have these bumps or these gyrations, but long term, it's a fabulous market that we have to stay committed to. The government's going to continue to invest in health care. So whereas you have other countries where health care is being sort of -- the overall spend is going down; in China, the overall spend is going to be very healthy. But these measures are tough. There's no -- I'm not going to say it's going to be easy and clear sailing. And they will over time probably go after other products. We also have the good fortune of having 2 manufacturing facilities in China. And there's obviously a bias towards made in China. And the fact that we can make products out of our Trauson facilities or out of our Suzhou facility, we're actually looking at being able to move manufacturing to China in some of our product categories where we don't manufacture in China. So we're going to be committed for the long term, but it's going to be bumpy. No doubt about it. But the fact that it's roughly less than 2% -- close to 2% of our sales doesn't really create a lot of anxiety in the short term, and we will be playing for the long term in China. I don't know if you guys want to add anything around China.

No, I think it's true that the joint replacement business, which probably has the most publicity right now, our business is smaller. And I think some of our competitors have had a harder time as they've seen that price drop. That being said, we're still committed. It's the second largest med tech market in the world right now and growing rapidly. And the opportunity with Mako -- and if we think about Mako, there's more to it than just the implant. There's the consumables that surround it and a growth trajectory there that we remain committed to and think it's an extremely important market for Stryker's future.

Right down here.

Jayson Bedford from Raymond James. So I hate to bring it back to COVID, but just a question on patient backlog. Has your view on backlog and your ability to fulfill the backlog changed at all throughout the year?

Do you want to take that, Spencer?

Yes, sure. Maybe I'll comment. I think a lot of the COVID pain can be directed my way in the elective surgery businesses. I have 2 businesses in particular that I think are more affected, both joint replacement and spine, where we've seen the volumes really slow down, especially when we saw the Delta variant come up and go into Q3. We don't know what the answer is on COVID and the effect. I will build upon the question that was asked earlier around staffing. And so if there's something that I consistently hear, it's a question about do we have the right staffing today. Do we have the right staffing tomorrow? And when the backlog starts to flow through, can we overoperate, can we overutilize our facilities? We love the shift to the outpatient setting. There seems to be more stability in staffing in the ASCs. But at the big hospitals, you read the headlines. It's a war for talent and the trading. And we do here where a joint surgeon might be told, "Hey, guess what, you can't put a case on after 3:00 in the afternoon." In this time of the year, they used to put them on at 4:00, 5, 6 and 7 and on Saturday. And so it's understanding what that will look like as we go into 2022. I do think that our side of the business will be ready for a backlog, and we have Mako ready. The more Makos we have out there, the more opportunity it builds for us in those competitive accounts and to build our programs. As we bring our new hip to market, that gives us an opportunity as well. But there are the macro environment factors that we have to be mindful of. We'll play a role and Andy has solutions in his world where we can drive some of those efficiencies from a staffing standpoint. But there is definitely backlog being created right now. These hips and knees aren't fixing themselves. And so I think it's geographic. It's regional. There's all the factors of where the spikes are, where the staffing challenges are. But I expect we're going to start to see this steady climb as we see the virus itself in a better state, and then it will be the staffing that we will have to monitor and how much we can take on in the capacity.

Yes. Certainly, we're not going to be a limiting factor. The ability for us to -- the supply that we have, the service that we have, if you look at Australia as an example, when they had those shutdowns in different states, when they turned it back on, the volumes just exploded, and we were able to marshal the resources and be able to supply everything they needed to do their cases. This staffing issue is the first time in my career I've seen it. This kind of is -- this is a new dynamic we never really had before. Absent that, I would have expected this backlog to really start to spike. Like we saw, if you think about the third quarter of 2020, we saw that nice little jump that spiked. I'm not sure that -- I think now it will be more of a steady climb than it will be a big spike. But we'll be ready. If the spike's big, we'll -- Stryker will be ready.

So the staffing shortage dynamic, is it bubbled up to have a material impact on procedure growth? Or is it more just a cost burden on your customer?

I'm not sure we know yet. And so a lot of it is happening real time. And a lot of it's sort of a feeling discussion that we hear from our customers and say, well, we can't find the staff, and we're going to put these limiting factors in right now. Usually, this is a high volume season for us as we go towards the end of the year and in the United States as people work through their deductibles, so I'm not sure we know exactly yet. I think the health care system is resilient, and it's going to find a way to take care of these people. And I think innovation and great thoughtfulness from the leaders will come to play, and they're going to find ways to get these patients in. It will be the expectation of the consumer in this. So I think, like Kevin said, we're going to see sort of a steady climb as the pandemic settles down, and I think we'll figure out the staffing issue with our customers.

Pick one of those. Sorry, there's 2 hands there.

This is Keith Mills from Trillium Asset Management. Excellent presentations today. Two questions, one for Viju and then one for you, Kevin. The first for Viju. You talked about the 8 plant closures over the last 18 months, 7 more coming. It sounds like even more potentially beyond that. Can you just talk about what the processes are internally when you do -- when you close a plant, transfer product production from one plant to another plant to ensure that product quality is maintained and you don't have any adverse consequences subsequent to that transfer?

Great question. That is our #1 priority, to make sure that the quality is same or better and then the supply assurance. So we rarely take a plant down. In fact, in the last -- that's one of the credibility enhancing moves we have made, is that we don't take a line down until a new line is up and running. Before we used to do, okay, bulk build and -- but there will be some hiccups on the other end and we have a bigger problem. To your point, from a quality perspective, we extensively characterize the current design history files and all of that. The validation of the new line is extremely precise and detailed because that is a -- if we can do that, it's a nonstarter. So that's the big hurdle for us first, right? So we do that. And there's tremendous -- so I keep talking about the engineering muscle. We really -- historically, my organization had approached this more of an operational transfer. But we realize for some of these products that have been around for a while, there needs to be the engineering characterization understanding and qualification of the new line technically along with then the operational ramp-up if you will. So I don't know if that helps, but it's really...

Plus, it's a dedicated organization now, a dedicated organization focused on tech transfer. Before, we sort of borrow resources. It wasn't focused. And like we've seen with our business units, right, when you have focus, it drives better performance. So that's another part of this.

It's a great point, Kevin. Yes, there's an engineering engine, dedicated organization that's now developed a playbook for product transfers. And by the way, the product transfers are not limited to plant to plant. For example, in Tijuana, we are in-sourcing product from our suppliers and really getting some good margin benefit as a result of that as well. So this is a well-tuned engine now.

Okay. Kevin, question -- yes, the next question is you and others today have spoken about corporate culture and you also mentioned earlier, I think 50% of your employees are millennials. Diversity, equity, inclusion is an important part of the organization. Today, in the revenue -- revenue-generating part of the business today, we didn't see diversity for the most part, particularly across the 2 business unit heads, the 12 -- I guess any other individuals that spoke, right, into diversity. So what do you think that says about your corporate culture? And do you think it has an impact on your ability to retain talent below these individuals so that they can see the opportunity to succeed and help drive growth?

Yes. I think what, unfortunately, you didn't see is a level below this, where we've made great progress. First of all, Robbie Robinson is our first Black President running our Spine business. If you look at Medical, the 2 mighty business units of medical emergency care, which is a giant business that combines the ambulance structures as well as the physio-controls run by Anne Mullally; and the bed, the ProCuity bed, I think -- I don't know, is Jess here?

Jess? She's not here.

She's not here. Okay. But Jess Mathieson is a General Manager, right, so these are sort of right below the Presidents running giant business of Stryker we have. And then if you look at internationally, Latin America, EMEA, India, our Trauson business, they were all run by women. So if you're inside of Stryker and you're looking up, the vision is a lot better than it was 10 years ago. Now have they yet reached all the president levels? No, not yet. So we still have work to do. If you look at our Board of Directors, we have 4 women out of 10, and we're -- very, very few companies have that. And 8 out of 10 are diverse. So I would say within med tech, we're actually doing very well. Our progress, we have [ 8 ] percentage point increase in women at the vice president level in the past 5 years. We have the endoscopy sales force has doubled the number of women in their sales force in the last 5 years. So again, doubling doesn't mean we're at 50%. So I'm not claiming victory, but I would tell you that inside our company, we absolutely believe diversity and inclusion. We're making progress. We still have a long way to go. And sadly, you haven't been able to see all of that today because it's a limited audience. But I think when we go to the product fair, hopefully, you'll be able to see some of the other people presenting products to you that have big roles in our company. And we've actually gotten much, much better over time. But it's a very fair question, and it's a good challenge. We actually published our -- for the first time, we published our diversity statistics in our comprehensive report. So we're not afraid to actually show the actual numbers, and we're going to show them every year. So we're not afraid of this challenge, and we're going to make progress.

And finally, is DE&I included in compensation now for you and for others?

It will be. It will be. We are including ESG in compensation starting next year. So right now, it's not part of my compensation, but next year, we are going to include ESG as part of our executive comp. Stay tuned for that. Let's -- can we go. I think we're almost at the end. Let's just take one more remote question. If you're in the room, still, hopefully, you'll stay. We're staying around. We're all going to be going over to the product fair, and so you can ask us your questions. But we'll give the remote one last question before we close this down.

Our last question is from Spencer -- or excuse me, is for Spencer from Steve Lichtman at Oppenheimer.

I'll keep it to one. As you mentioned Orthosensor, can you update us on where your smart [indiscernible] program is? And your thoughts on your [ margin plan ] [indiscernible].

Sure. A few remarks. As you know, we acquired Orthosensor, which has a portfolio of unique technologies. And obviously, we own this and great intellectual property behind this. And there's really 3 platforms. The first is VERASENSE, which is out in the market today and actually having some great adoption and success. This is used intraoperatively for balancing during a knee -- total knee procedure and another way to give feedback to a surgeon about making sure that the implant is going in exactly as they would like. It's a step into the sensor technology and using sensing technology to give you real-time feedback. The next product is called MotionSense and that's in limited market release. Just a few accounts have just started this in the marketplace as we learn more about this. But this is a wearable sensor, and you have to think about it no different than a sensor you put inside the implant. I'll get to that part of our portfolio as well. But it does all the same tracking of information and actually provides real-time feedback both to the physician that's providing the care and the consumer that's wearing it. Just as a fundamental note, I wore 1 for about 3 weeks, and it was really remarkable to get the feedback daily on my movements, on how much flexion and extension I had. I actually corresponded with one of our software developers who would act as the doctor. I could send pictures of my placements. It's really remarkable, this sort of real-time connection with the physician now. Why I love that product is it's a way to wear it on the outside and the point-to-point accuracy on the knee really gives us accurate data to make better decisions on the care of that patient. In early signs in the LMR, the limited market release are phenomenal. The compliance, the patient's feedback, they love this real-time interaction. The third part of that portfolio is the implantable. It's taking some of the sensor technology. We use intraoperatively or some of the sensor technology we're using wearable and putting it inside the implant. You have to be really smart about how you do this, based off the information you want to collect, making sure the information you collect is valuable and more valuable than the external sensor you're wearing and also then thinking about what else can that sensor do for us over time and what other applications. That project is under development. And there's well resourced and great learnings along the way and great progress in the development. We're not ready to provide release dates on when that's entering the market, but know that we have a comprehensive solution for our sensor technology. It's a really important part of the future of orthopedics so that we can know more about the implants, know more about the placements, know more about the recoveries. And we think it'll play a really important part in our future.

Okay. Great. Thanks, Spencer. So I'm going to call up Dylan Crotty who is the President of Instruments. He has a couple of slides on safety and outcomes, and he will give you a preview for the product fair. So come on up, Dylan. Thank you.

All right. Thank you, everybody. So our product fair tonight is focused on safety and outcomes and the many products across Stryker that create safer health care and better outcomes for our caregivers and for their patients. So we'll head over there in a second. Before we do, I want to give you a quick showcase of our Surgical Technologies business unit. Surgical Technologies was created with the Instruments split in 2019, and we did this for specialization to get more focused on what we saw as a great opportunity. But I'll tell you, the journey here at Instruments on safety and outcomes really started about 20 years ago when we launched the Neptune product line in the United States. So Neptune is this picture up here. Neptune is a device that collects, transports and disposes of blood and other fluid waste in a totally safe and closed environment. Before Neptune, nurses would collect this blood and fluid in these small suction canisters. They'd have to carry it to another room outside of the operating room and pour it down the drain or dispose of it somehow. Inevitably, this created a risk where they'd get splashed, they would drop these canisters. It put them at risk for hepatitis and HIV. So when Neptune came out, the response was tremendous because, finally, there was something that solved this major problem and a product that was created for these nurses just for them. So these pictures are of people hugging the Neptune. We used to get pictures sent in to us, in fact, we still do, of nurses hugging the Neptune. This is a hazardous fluid disposal machine they're hugging. But it shows you the emotions around these type of products. And so fast forward today, Neptune is standard of care in the United States. It's quickly growing outside of the United States. To Kevin's point earlier, we're just getting started in Europe. And it's a big business for us. So we stepped back in the time and said what other problems can we solve with our customers and with innovation to make health care safer. And so here's just a few of the examples up here, a few of the problems. First of all, surgical smoke. I think most of you know, surgical smoke is created in every procedure through electrocautery devices. And studies have shown that daily surgical smoke inhalation in the operating room is equivalent to smoking 27 to 30 unfiltered cigarettes a day. So smoke has gotten a lot of attention in the past couple of years and many hospitals are starting to move to become smoke-free. We saw this coming years ago and through listening with our customers, and we built smoke evacuation devices into each of our Neptunes when we ship them. So as Andy said earlier, there are 36,000 Neptune devices in operating rooms across the country waiting to be used with our disposables as these hospitals go smoke-free. And with the acquisition in 2018, the acquisition of SafeAir in 2018, we now have the most ergonomic and best-in-class disposables that we'll show you across the street. Super excited about this market. 12 patients each day leave surgery with a retained foreign object. So this means the patients leave surgery with something sewn up in them in the U.S., this is U.S. only, that shouldn't be there. The majority of these are surgical sponges. These little white sponges that surgeons use a lot in surgery that gets soaked with blood and they're hard to see. Every single one of these patients will need a reoperation. Most will need a reoperation. Many will have lifelong morbidities that they deal with. Some will die. And we can completely eliminate this risk with our SurgiCount technology for about $15 more per procedure. We just launched our SurgiCount+ system, which we're showing across the street, which makes this easier for the hospitals to implement, and we implemented the RFID technology. And then lastly, every 4 minutes, a mother dies from excessive bleeding during childbirth. This is because of postpartum hemorrhage and largely because of an inability for doctors to track blood loss real-time during surgery. And with our acquisition of Gauss Surgical, Gauss developed a product that does track blood loss real time during surgery, the only FDA-approved product on the market. And it does this through the use of computer vision and different AI algorithms that are on an iPhone today. So this is awesome technology that's saving lives today. We're working to implement that onto our Neptune devices and our SurgiCount devices to keep it in the ecosystem. So just a few exciting things that we're doing on the safety and outcomes side of the business. If you look at the full continuum of care that Andy went through from pre-hospital right until a patient goes home after surgery, we have safety and outcomes devices that address each one of these spaces. So we're going to head across the street to the product fair. We do have stations set up, and you can go through these products. This will conclude the broadcast. Thank you, everybody, for joining, and the reception will start right away. So thank you very much.