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Welcome to the Second Quarter 2026 Stryker Earnings Call. My name is Megan, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we will conduct a question-and-answer session. This conference call is being recorded for replay purposes. Before we begin, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC. Also, the discussions will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that is an exhibit to Stryker's current report on Form 8-K filed with the SEC. I will now turn the call over to Mr. Kevin A. Lobo, Chair and Chief Executive Officer. You may proceed, sir.
Welcome to Stryker's second quarter earnings call. Joining me today are Preston Wells, Stryker's CFO, and Nick Mead, Vice President of Investor Relations. For today's call, I will provide opening comments followed by Nick with market trends and some product updates. Preston will then provide additional details regarding our results and guidance. Before opening the call to Q&A: Our second quarter results demonstrated the strength of our broad product portfolio and the resiliency of our teams. Our recovery from the cybersecurity incident continued as we ramped overall production to meet ongoing demand and support patient care. We delivered strong organic sales growth of 9%, including high single-digit growth from both our MedSurg & Neurotechnology and Orthopedics businesses. Geographically, our U.S. organic sales growth of 9% included double-digit organic growth from our Medical, Trauma & Extremities, and Endoscopy businesses and high single-digit organic growth in OrthoTech and Instruments.
This growth was offset by supply disruptions in our Peripheral Vascular business. While our sales force hiring and integration has made great progress, the supply disruption resulted in a meaningful backorder situation with lost sales in the quarter. We have addressed the issue and backorders should reach a manageable level by the end of Q3. We remain confident in the long-term outlook for Peripheral Vascular, including the AVS acquisition which closed in the quarter. Internationally, our 8.9% organic sales growth was driven by strong performances in Australia and New Zealand, Germany, Canada, South Korea, Japan, India, and Brazil. We continue to see long-term growth opportunities in our international markets through strong commercial execution and the introduction of products that have demonstrated success in the United States in recent years. From an earnings perspective, we delivered adjusted EPS growth of 17.9% reflecting improved gross margins as well as our ongoing commitment to rigorous operational execution.
We exited Q2 with regained momentum and expect a strong second half of the year driven by high demand for our capital products, continued production ramp and strong commercial execution. We are narrowing our full-year guidance, and our businesses are well positioned to deliver another strong year of financial performance. Finally, our financial position and cash flow generation remains strong, providing firepower to deploy capital. Preston will elaborate on that in his section. I would like to acknowledge our teams for their efforts in putting us on track to deliver another strong year of organic sales and adjusted earnings growth. With that, I will now turn the call over to Nick.
Thanks, Kevin. My comments today will focus on the capital and procedural environment as well as several key product highlights. Capital delivery was a key driver of the growth in the quarter, as we recovered from the cybersecurity incident and demand remained strong. We exited the quarter with an elevated backlog, and expect continued strength in the hospital capital environment through the remainder of the year. The U.S. procedural environment remains stable. While there has been some commentary on softness in surgical volumes, particularly in discretionary procedures, we have not observed meaningful changes in volume trends. Our portfolio is highly diversified, with the vast majority of our businesses supporting high acuity, medically necessary, and emergent care. Clinical demand remains strong. Importantly, the fundamental drivers of health care demand remain firmly in place, including an aging population, the ongoing need for hospital workforce productivity, and the increasing occurrence of chronic disease.
Together, these trends continue to support durable demand for our differentiated product portfolio. Now I would like to turn to some product highlights. We delivered our best-ever Q2 for Mako installations, both in the U.S. and internationally, and utilization rates across our installed base continue to trend upward. This year, we celebrate 20 years of Mako and its evolution into a multi-specialty robotics platform with applications spanning hip, knee, spine, and shoulder procedures. Furthermore, we recently announced the full commercial launch of Mako RPS in the U.S., expanding our robotics portfolio and offering surgeons additional options across a range of care settings. With more than 2.5 million procedures performed globally and systems installed across 47 countries, Mako remains well positioned to drive continued growth through innovation, clinical evidence, and expanding adoption worldwide.
We are rapidly moving to full commercial launches of Triathlon Gold and our Triathlon Medial Stabilized Insert, both of which are generating strong interest and positive customer feedback. During Q2, we also gained approval on the PROPHECY patient-specific planning and guides for our new Encompass total ankle replacement system, and we have just moved to full commercial launch. Additionally, we recently received approval and have initiated a limited launch for our Pangaea Trauma Plating System in Europe, to be followed by a full commercial launch during Q4. Within Instruments, we look forward to the upcoming launch of the Sonopet 3 Ultrasonic Aspirator. These products are part of the steady cadence of next-generation and innovative products across our broad base of businesses that fuel our growth. Let me now turn the call over to Preston.
Thanks, Nick. Detailed financial information has been provided in today's press release. Today, I will focus my comments on our second quarter financial results and the related drivers. Organic sales growth was 9% for the quarter, against a double-digit comparable in the second quarter of 2025. Pricing was flat, and foreign currency had a 0.4% favorable impact on sales. This quarter had the same number of selling days compared to the prior year. Adjusted earnings per share of $3.69 was up $0.56, or 17.9%, from the same quarter last year. This was driven by our strong sales growth, a continued focus on operational excellence, and a net benefit in the quarter from tariff-related items. Foreign currency translation had a favorable impact of $0.1. Now I will provide some highlights around our quarterly segment performance. For the quarter, MedSurg and Neurotechnology delivered organic sales growth of 9.2%, which included 8.9% U.S. organic growth and 10.5% international organic growth.
Instruments U.S. organic sales rose 8.4% against the prior year comparable of 16.3%. Growth this quarter included a robust double-digit performance in our interventional spine pain portfolio, as well as a strong performance from our Surgical Technologies business, which includes Neptune waste management, smoke evacuation, and SurgiCount products. Endoscopy U.S. organic sales grew 10.2% reflecting strong demand across multiple areas of the business. Operating room infrastructure and renovations were a key growth driver, including a robust performance from the recently launched Oculon Light. We also delivered strong growth in our urology and connected OR products within the core endoscopy portfolio, as well as in Sports Medicine, where double-digit growth was driven by an expanded range of shoulder implant products. Medical U.S. organic sales increased 13.1% and included very strong double-digit performances from our Sage and Emergency Care businesses.
From a product perspective, growth was led by preoperative skin prep products, Howard Cots and LifeVac 35, which continues to generate strong customer interest and capture additional market share. Capital demand also remains elevated as evidenced by an increased backlog and strong orders as we exited the quarter, including ProCuity beds and our SmartCare business, which includes Vocera and care.ai. Vascular U.S. organic sales declined 6.7% from a year earlier due to the operational disruption in Peripheral Vascular that Kevin discussed, partially offset by solid growth in our hemorrhagic portfolio driven by the SURPASS Elite flow diverter. Internationally, MedSurg and Neurotechnology organic sales growth of 10.5% included broad strength across Endoscopy, Medical, and Instruments. Geographically, growth was led by robust performance in Australia and New Zealand, Germany, Canada, Brazil and India.
Orthopedics delivered organic sales growth of 8.6% in the quarter, which included 9.1% U.S. organic growth and 7.5% international organic growth. U.S. Knees organic sales grew 6.2% reflecting the continued adoption of Mako for robotic-assisted knee procedures and momentum from our cementless knee products. U.S. Hips organic sales rose 4.9% reflecting the ongoing success of our Insignia HipStem and the Mako Revive hip platform, with our latest application having the expanded ability to address more difficult primary hip cases and hip revisions. U.S. Trauma and Extremities organic sales increased 12.5% with strong double-digit sales growth in our Trauma and Upper Extremities businesses. Pangaea continues to be a key driver of our growth in Trauma, and our multiyear growth momentum in Shoulders was driven by the continued strong performance of our differentiated portfolio and the recent full commercial launch of Mako Shoulder on Mako 4.0.
U.S. OrthoTech organic sales grew 9.2% driven by robust Mako installations. Internationally, Orthopedics organic sales growth of 7.5% included strength in Knees, OrthoTech, and Trauma and Extremities, and was led regionally by Canada, South Korea, Australia and New Zealand, Brazil and India. Similar to the first quarter, the conflict in Iran had a modest impact on overall company growth. Now I will focus on certain operating and non-operating items in the quarter. Our adjusted gross margin of 66% was 60 basis points favorable to the second quarter of 2025, reflecting the impact of the net tariff benefit I previously mentioned as well as improvements in business mix and cost discipline. Our adjusted operating margin was 27.4% of sales, which was 170 basis points favorable to the second quarter of 2025. This was driven by the gross margin improvement as well as lower adjusted SG&A as a percentage of sales due to our ongoing focus on spend discipline and margin expansion.
Adjusted other income and expense of $101 million was $5 million lower than in 2025. We continue to expect our full-year 2026 adjusted other income and expense to be approximately $420 million. The second quarter had an adjusted effective tax rate of 16.5%, reflecting the impact of geographic mix and certain discrete tax items. For 2026, we continue to expect our full-year effective tax rate to be in the range of 15% to 16%. Turning to cash: we ended the second quarter with approximately $3.5 billion of cash and marketable securities, and year-to-date cash from operations of $1.8 billion. Supported by a strong balance sheet and robust cash flows, we remain focused on M&A opportunities to drive top-line growth as our primary capital allocation priority. Additionally, considering our elevated level of cash flow generation and recent valuation compression across the MedTech sector, we plan to resume share repurchases this quarter.
I will now discuss our full-year 2026 guidance. Considering our year-to-date results, our presence in attractive end markets largely supporting acute and emergent procedures, and durable demand for our capital products, we are narrowing our full-year guidance and now expect organic net sales growth to be in the range of 8.3% to 9.3% and adjusted net earnings per share to be in the range of $14.95 to $15.10. Our full-year sales guidance reflects a modestly positive pricing impact. Additionally, should rates hold near current levels, we anticipate a slightly favorable impact to both sales and earnings per share. With that, I will now open up the call for Q&A.
分析師問答
At this time, we will open the floor for questions. You may remove yourself at any time by pressing star 5 again. We would like to remind callers to please limit themselves to one question and one follow-up question so we can accommodate as many participants as possible. Our first question will come from Joanne with Citibank. Your line is open. Please go ahead.
Good afternoon, and thank you so much for taking the question. I actually have a lot. I am curious for guidance, the updated guidance, what your thought process was in narrowing it, particularly lowering the top end of the range. That leads me to my second question of how you are thinking about revenue growth in the back half of the year. And then I am just going to go straight into this. EPS: you had a really nice beat in the quarter versus what we were looking for. But it does not look like it is flowing through for the full-year guidance, and I am curious why. Thank you.
Hi, Joanne. I will take the first part of your question and then the EPS question, then we will have Kevin jump in on how we are thinking about sales for the remainder of the year. So from a top-line guidance standpoint, really, we have half the year done. Obviously, we are coming out of the cyber event that impacted Q1. We have seen the momentum and the recovery starting to come back in Q2. We have a good ways to go in the second half in terms of continuing that momentum to deliver on the guidance range. And, quite frankly, when we look at what is left to do with the rest of the year and where we are with our products and with the markets right now, we felt like it was a prudent range to be in the 8.3% to 9.3% organic growth. Just looking at it in totality.
Let me address the EPS question first. From an EPS standpoint, when we look at the beat in the quarter, it is driven partially by the tariff refunds that occurred in the quarter. But, as a reminder, when we talked about the first quarter earnings, which were obviously well below expectations driven by the cyber event, there are costs that are coming through from a cyber perspective, both with loss absorption from manufacturing as well as R&D and IT costs that we are planning for as we come through the remediation that will offset that benefit. So when you look at it on a half-year basis, you can see those offsets are already happening.
And related to your question about lowering the top end, Joanne, that was Preston's point: half the year is already done.
As we look at the production that we have to do—the building of all of the capital equipment that is required—we have the orders to really drive very high growth. It is just how fast we can actually make everything to deliver. I would say our ability to beat the top end would hinge on two factors. One is the market would have to be stronger in procedures; we expect it to be consistent, and if it improves a little bit, that obviously gives us a tailwind. Two, if we can ramp our products, including some of the new products that we are launching, ahead of what we are projecting right now, then that could cause us to raise the top end. But right now, this is the best visibility that we have with what we know now. At the end of Q3 we will update our guidance, and if things improve on a faster trajectory, then we could look to move it up. But at this point, this is the best visibility we have. And, honestly, on a $25 billion business, if you are growing around the 9% range, it is still a pretty good year given that we were knocked out for almost an entire month. Thank you.
Your next question will come from Robbie Marcus with JPMorgan. Your line is open. Please go ahead.
Two for me. One, Kevin—or Preston, whoever wants to take it—one of the things we are all trying to figure out is what is underlying and what is catch-up from the first quarter. I know you had talked to some of the capital being more second-half weighted. The quarter was in line with expectations with some puts and takes, vascular being one of them, hips being another, medical being on the plus side. How should we think about what is underlying and normal trend versus where you saw the recapture from the first quarter? And if you are able to quantify anything, that would be helpful. And then I have a follow-up after. Thanks.
Yeah. So thanks. As we talked about in the first quarter call, remember, we talked about the variability of the different businesses that we have. So it is hard to really pin down what is specifically underlying versus catch-up. There are some areas where there was just some catch-up revenue. For the most part, what we are seeing is continued momentum across all of our businesses. We see really strong demand for our capital products. I think that is the one where we will see a more significant uptick in the second half of the year based on getting production ramped—really getting ourselves back online to be able to produce at a faster rate to support the volumes that we have. So, really, I would say what you see in the second quarter is primarily the momentum of the underlying business, primarily with a few other elements that are kind of coming into play here and there throughout the business.
The only thing I would add is we always have variability in our quarters given the range of businesses that we have. Peripheral Vascular was certainly not something we were expecting. That supply disruption was acute, and we took the pain. But overall, we hit the number that we were aiming for in the quarter because we had some outperformance in Endoscopy and Medical and even within Medical our bed business has a tremendous number of orders that we have a big job to catch up to deliver. So that actually was not a very strong performer in spite of Medical's overall terrific growth, and it is not because we do not have the demand; it's because making beds takes time and we were out of production for a long period. So that is one particular product where we have a lot of catch-up to do. There is a lot of noise underneath these numbers, but overall, the business performed very well. Demand is still strong, and you will see a little bit of volatility across our businesses probably in Q3 and Q4, but we feel good about the overall health of our businesses. They will recover at different points in time. Rescheduling procedures was very, very hard—we have never gone through this kind of an event—and so it has created a little bit of inconsistency across our businesses. But overall, for the full year, we are feeling really good about our business.
Great. One quick follow-up. Kevin, one of the things everybody's been concerned about, and you kind of touched on this, but I would love a little more color: just the backdrop of slowing or stable procedure volumes. We have had a lot of mixed data points. And the current and future state of the CapEx environment—would love to get your thoughts on both of those. Thanks.
We see the procedure environment as healthy in the businesses where we operate. We see demand for procedures as strong and stable. Capital is very strong: if I look at our backlog, we have an elevated backlog. We had a record month of Mako sales. We are just not seeing any issues related to capital equipment. We did see, and we commented on this in the last quarter, a slight slowdown in Europe related to procedures, but certainly not in the United States and not in the other markets around the world.
Our next question will come from Larry Biegelsen with Wells Fargo. Your line is open. Please go ahead.
Good afternoon. Thanks for taking the question. Kevin, just a follow-up on the revenue guidance: the organic growth needs to be about 11%, I think, in the second half to reach the midpoint of the guidance. Is there any more color you can provide on what is driving your confidence to be able to recapture the lost sales to achieve that and, of course, offset the vascular supply issue you had? Just remind us of why you expect more catch-up in the second half than the second quarter. That has been a lingering question investors have had.
Listen. We raised the bottom end of our sales guidance from 8.0% to 8.3%. That should give you some idea: we are not going to raise the bottom end if we see a risk of missing it. That raising is based on tremendous orders for our capital and just execution. All we have to do is make the products and ship the products, and we can see the production ramp now that our plants have been operating pretty consistently since April 1. That visibility is very clear on the capital side. Even on the procedure side, we have pretty good visibility into small capital orders, surgery schedules, and our business is feeling really healthy. So we feel very confident in delivering the 11% implied in the second half to get to the midpoint, which is why we raised the lower end of our sales guidance.
No, I think, again, like we said before, you are going to see that happening at different paces and different times. Part of it is ramping production for those capital products so we can get those out the door. You are going to see a steady cadence across both quarters as we go forward.
Your next question will come from Ryan Zimmerman with BTIG. Your line is open. Please go ahead.
Thank you. Preston, you have talked enough about the top line; can you spend a little bit on margins and the EPS guide for the second half of the year? If I look at how the Street is thinking about Q3 to Q4, what is going to drive maybe lower EPS in the fourth quarter, which is kind of what the Street is assuming to get to the guidance? Are there additional expenses needed? Is there a margin impact when you think about the excess production you are going to do that we need to consider? Help us think through the cadence on margin and P&L for the EPS guide. Thank you.
Sure. First of all, we are still committed to what we talked about last year: our objective to expand adjusted operating margin by 150 basis points over the course of three years. That is still our commitment. We have demonstrated the ability over the last couple of years to drive operating margin, and we are going to continue to do that. Teams are fast at work on continuing to find ways to get better from an efficiency and productivity standpoint. We do have several larger moving parts this year. With the cyber event we had manufacturing shut down for some period of time, so we have lost absorption and idle costs that we have to recover from. We also have work ahead in terms of remediation and stabilization from a cybersecurity perspective, so there are IT and related costs that will be spent throughout the year to support those activities. In addition, there are pressures on various raw materials that we are managing in this environment.
That is offset by what I mentioned before on the tariff refund piece. So there are a lot of moving parts with different macro items we are managing. That is why we have a little wider guide on the EPS side. But we feel good about being able to fall in that range. As Kevin mentioned, as sales improve and deliver, we expect that to flow through to EPS. It is really managing those macro items throughout the rest of the year that we will be wrestling with.
Okay. Very helpful. Kevin, one for you: physician reimbursement on large joint replacement has come down over the years, and this year Medicare took a big proposed swing on knees, hips, shoulders. Any thoughts on what the orthopedic industry is doing to push back on this or whether you think this has any impact in future years on knee and hip replacement on the physician side?
The proposed rules are always a point of noise; this has been going on for many years. Proposed rules create attention, then the normal course of feedback from stakeholders tends to result in adjustments. I don't assume it will be different this time. You are also seeing a shift in site of care within orthopedic procedures, which will continue. For Stryker, this is actually positive because we like the ASC as a place where we can win—not just in hips and knees but across our entire portfolio. That trend will continue. Related to reimbursement pressures, demand for joint replacement procedures remains unabated. Every day, about 12,000 people turn 65, and more people are active, so I don't see that dynamic changing. Physicians will be heard and will do fine.
Your next question will come from Travis Steed with Bank of America. Your line is open. Please go ahead.
Hey, thanks for the question. I wanted to push a little bit more on the U.S. Ortho numbers, especially the U.S. hip number. It was a little lighter than some expected. Is there anything on share shifts in the market for U.S. hips and knees that took some upside away this quarter?
Travis, in terms of U.S. hips, nothing we would point to in terms of major share shifts. One thing to point out is the delivery of the number this year was against a pretty large prior-year comparable: we had 8% growth last year in that space. So it's largely about comparables. One quarter does not make a trend.
Okay. And maybe a little more color on the Inari supply disruption: what exactly happened? Is it just the Inari business or other parts of Vascular? Is there a catch-up in Q3 assumed in the guide, or is there some lingering impact? I know you said manageable by the end of Q3. Curious how it works out on the numbers for Q3.
The supply disruption was specific to one plant in the Inari business, which makes most of those products other than third-party items. The plant had an operational issue that created a significant backorder. The backorder is elevated now, and it will work down to a manageable level by the end of Q3. We still expect the business to grow in Q3 and Q4, but it will take time for that to build because of the backorder situation. We finally got the salesforce stabilized and are feeling good, but then we had this hiccup. When we do acquisitions and integrate salesforces and manufacturing systems, we sometimes see these pains; we've seen similar challenges in prior deals. We do not enjoy it, but we like the market and the products, and we will be back—it will just take a bit of time to dig out from under the backorder situation.
Your next question will come from Vik Chopra with BMO Capital Markets. Your line is open. Please go ahead.
Kevin, you characterized the second half outlook as strong. I'm curious what key assumptions are embedded in the back half regarding volume growth, capital conversion and backlog realization? And then I had a quick follow-up, please.
I will take that one. We won't give all the specifics across each element, but when we exited this quarter the momentum we see across the business—procedural and capital—is strong. For the capital business, we look at the order book and how it is trending; we see solid orders that support the backlog. Our confidence in the back half is driven by our ability to capitalize on that through production ramp. The same applies on the procedural side: continuing to push Mako and related launches like RPS into full commercial activity will help drive both sides of the business.
Great. And then just for my follow-up, could you talk about the early feedback on Mako RPS and how we should think about the ramp and impact in 2026?
We were in a limited launch in the second quarter and feedback has been outstanding. It is easy to use; surgeons enjoy the experience and the haptics surprise them—how you can do that in a handheld robot. We are getting great feedback and now moving to full launch. There is a subset of surgeons not ready to move all the way to full Mako who are focused on total knees, especially in ASCs; RPS is a great fit for them. We have had some conversions so far—small to date—but we plan to ramp this up and are excited about it.
Your next question will come from Matthew O'Brien with Piper Sandler. Your line is open. Please go ahead.
Afternoon. Thanks for taking the question. I hate to keep harping on the back half because I think everybody is really nervous now about your ability to hit those numbers. You keep talking about this production ramp and facilities being able to meet a sizable ramp in the back half. Are there any factors that could impact your ability to make enough product? It seems like primarily in MedSurg you need to deliver a significant ramp in Q3 and Q4. Could anything prevent you from getting to the full-year guidance because many are worried about that.
We are not worried. The guidance is based on what we know. We know how many shifts to run. These are products we know how to make; they are not new products. Based on adding shifts and planning, we feel very comfortable with the guidance. The orders are already there; demand is not the issue. For capital equipment it's really just being able to fulfill those demands. Could we have an issue here or there? It's always possible, but we have accounted for that in the guidance. We have a habit of hitting or beating the numbers we provide, and we give this guide with great confidence in our team's ability to deliver. Our plants are fully operational after the cyber event and we have added shifts. Those shifts are performing well, and based on that we have laid out our guidance for the year.
Got it. And then just a follow-up on Peripheral Vascular: I know you have the salesforce in place and then a short supply issue. These procedures cannot be delayed. Do you think you could lose share durably, or can you recover based on your early experience with that business? Thanks.
We did lose sales because those are procedures you do not delay. We prioritized products and allocated to our highest-volume, most loyal customers. Customers ordering smaller amounts we had to let go because of allocation. We now have a fully ramped-up salesforce that we did not have earlier; we went through turnover and non-compete transitions. We now have a very stable and hungry salesforce that is going back on offense. As the backorder comes down, which has already started, we expect to recapture business from other accounts and fortify our position. We have great products and a great brand in this business and expect to recover.
Your next question will come from Vijay Kumar with Evercore ISI. Your line is open. Please go ahead.
Hi, thanks for taking my question. One on capital deployment and M&A historically: given where the stock is, Kevin, and you guys just put up great numbers, is there a bias towards share repurchase? I know you mentioned it on the call. Maybe talk about the opportunity that you see and what size we could think of from a share repurchase perspective? Thanks.
Thanks. As we think about capital deployment strategy, nothing major has changed. M&A continues to be our number one priority and we plan to continue finding opportunities to drive future growth. What we have seen, though, is continued growth and scale plus efficient cash flow generation, which gives us the ability to return shareholder value in multiple ways. That is why we are discussing potentially resuming share buybacks. In terms of size, we already have prior board approval of about $1 billion available. I'm not saying that's what we will use, but it is available. The amount and timing will be determined by deal flow, the M&A environment, and our view of current valuation. So our primary focus on M&A does not change, but we will supplement it with opportunistic share buybacks this year.
That is helpful. And Kevin, maybe one on backlog and orders: any elongation of backlog or cancellations given some of the cautious comments from hospitals? If you could comment on backlog and order book, that would be helpful.
We exited the quarter with an elevated backlog. We have seen zero cancellations in our books. Our teams are experienced in dealing with slight delays when we have manufacturing issues and customers order in advance such that we can meter deliveries. Thus far we have not seen cancellations and feel good about the capital business. On cash flow, the amount of cash flow we generate now versus several years ago has improved dramatically, which allows us to do buybacks and still have substantial firepower for acquisitions. We still have a robust pipeline of deals, and we remain disciplined—if the price is not right we will pass—but we are going to pursue M&A and also opportunistic buybacks given the current stock price.
Your next question will come from Patrick Wood with UBS. Your line is open. Please go ahead.
Amazing. Thanks so much. Two quick questions: first, SmartCare and the Smart Hospital product push — Vocera is obviously growing strongly; how has feedback been and what's the vision? Second, ASC trends: have you seen any pickup lately? Some data suggest ASC volume shift picked up this year. Curious if you are seeing that. Thanks.
I'm super excited about SmartCare. We created the business unit at the beginning of the year and modernized the tech stack; everything's cloud-based. care.ai was already modern and Vocera required upgrades which we completed. Orders have been very strong in SmartCare since we integrated the tech stack and created the business unit. We expect a really big second half of sales growth because orders have picked up; we're getting great feedback from hospital customers and are bullish on SmartCare. On the ASC trend, it's more of the same steady expansion. The limiting factor is construction of ASCs, which takes time, but virtually every hospital system is looking to add or renovate ASCs. Our hip and knee business has seen ASC share move into the high teens, approaching 20% of procedures—up from about 5% pre-COVID. It's a significant ramp but steady, not an inflection. We're also starting to see interest in ASCs in other countries, but it's early. Construction timelines mean growth is steady.
Your next question will come from Richard Newitter with Truist. Your line is open. Please go ahead.
Hi, this is David for Richard. Thanks for taking the question. Pivoting to IVL and Amplitude, the PE/IVL market: could you discuss timing of clinical trials and when you expect to come to market? What market growth do you see from a procedure perspective—previously you mentioned mid to high teens—does that still hold? Also, we've heard IVL brings pull-through to other coronary or adjunct products. Given that hypothesis, how do you think about building out that portfolio quickly ahead of FDA approval?
We are excited about the AVS acquisition. The first product, IVL, is targeted for an above-the-knee indication and will be sold through our Peripheral Vascular salesforce. Customer feedback from clinical participants has been very positive; surgeons like the mechanism of action and how the product performs. We have submitted to the FDA and there is a chance we could begin selling before the end of the year if we receive approval; we'll keep you posted. We have commenced a trial on the coronary indication, which will take longer—it's not something to expect in the next 6 to 12 months. When we acquire a business we tend to follow up with adjacent technologies to broaden the portfolio; we will continue that playbook. The market is compelling with huge demand; we will size the opportunity as products come to market and are excited about early surgeon feedback.
Your next question will come from Matthew Charles Taylor with Jefferies. Your line is open. Please go ahead.
Hi. Thanks for taking the question. Could you discuss the results in Q2 and the recovery going forward in terms of the three buckets you had mentioned earlier—revenue recognition, some catch-up in procedures, and capital? Could you be specific about Q2: how much did revenue recognition or procedural recovery help? Which buckets will contribute most in the second half?
We didn't quantify each piece specifically. The rev-recognition piece would have been a small part of Q2. The largest pieces are the capital and procedural catch-up. The rev-recognition is largely done; you will see the capital components and rescheduling of procedures play out more in Q3 and Q4.
Your next question will come from Matthew Blackman with TD Cowen. Your line is open. Please go ahead.
Good afternoon. Thanks for taking my questions. Two Inari-related ones. Preston, a bit more color on the Inari supply shortfall: how much of an organic drag was it? Our math suggests 50 to 75 basis points—rough ballpark? Kevin, can you give a bigger picture on the mechanical thrombectomy market: what does the market look like today, sustainable growth over the next couple years, and could growth step higher? Also, is there an opportunity to cross-sell mechanical thrombectomy and IVL in Peripheral Vascular—are we underappreciating that?
You are in the ballpark on the impact; the financial impact you estimated is roughly correct.
This market has huge potential to grow. There are parallels to neurovascular where seminal trials opened broader adoption. The PEERLESS II study we just finished enrolling—about 1,200 patients—will be a major catalyst when read out, likely mid-next year after data processing. That could lift the entire market. There are new competitors, mostly in aspiration, but our product suite includes full clot retrieval and flow retriever capability. The market today is good and will be helped by clinical evidence; we will start sizing the opportunity as products come to market. There is also cross-selling potential in Peripheral Vascular as we broaden the portfolio, and we will continue to build out adjacent technologies in a disciplined way.
Your next question will come from Caitlin Roberts with Canaccord Genuity. Your line is open. Please go ahead.
Hi. Thanks for taking the questions. Two for me. On the innovation front, you called out recent product launches. Is the manufacturing disruption impacting the timing or pace of any recent or upcoming launches? And more color on RPS: what has the site mix been between ASCs versus hospitals? Have converts been more existing Mako surgeons adding capabilities, or new-to-Stryker surgeons?
It is early days for RPS. We have done installs in both hospitals and ASCs, but early focus has been intentional on competitive users versus existing Stryker users to expand the user base. Regarding launches, Triathlon Gold is a bit slower out of the gates than we'd like because we lost production for a few weeks, but demand is strong and we're ramping production. If you close plants for a few weeks it delays sets and instruments, but now our plants are humming and we have a lot of new products scaling in the second half, including Sonopet launching in the second half, which will be an extra catalyst to propel growth. For total ankle and PROPHECY, the limited launch timing was not as affected because PROPHECY planning and guides were still awaiting approvals earlier, so that launch was less hindered.
There are no further questions. I will turn the call over to Kevin A. Lobo for closing remarks.
Well, thank you all for joining our call. As you can see, we have fought back from the cyber event, delivered overall growth that was in line with our plan, and have narrowed our guidance where we feel we can deliver a very strong year for Stryker. We look forward to sharing our Q3 results with you in October. Thank you.