Medtronic (MDT) 1Q17 Earnings Call Notes

Product pipeline remains strong in all business segments

“Across all four of our groups, CVG, MITG, RTG and Diabetes, our new product pipeline is robust and we’re confident we can drive sustainable growth of our new therapies growth vector within our 200 to 350 basis point goal.” Omar Ishrak – Chairman & CEO


Emerging markets are a the biggest long-term opportunity for med tech

“Overall however, the consistency of our emerging market performance benefits strongly from increased geographic diversification reducing dependence on any single market. We continue to believe strongly that the penetration of existing therapies into emerging markets represents the single largest opportunity in med tech over the long term.” Omar Ishrak – Chairman & CEO


Heartware acquisition offers a better return on investment than R&D

“we had a number investments internally going on in R&D programs directed specifically at heart failure… we basically are reallocating resources and people to support the activities within HeartWare and backing off on some of those because we actually think HeartWare return on investment will be even better.” Mike Coyle – President, Cardiac and Vascular Group


Diversity of MDT portfolio allows for even organic growth despite geographic or categorical weaknesses

“one of our main strength is the diversity of not only our portfolio but our geographic presence as well as the nature of the sources of revenue that we have from emerging markets from services solutions and new therapies. And that by definition means that there will be areas which are strong one quarter and week in others but overall we’re pretty confident, very confident that we can maintain even just organically the mid-single-digit range within the full range of mid single-digits. We expect acquisition to supplement that” Kevin Miller


MDT takes advantage of interest rate environment to fund acquisitions and R&D, while staying committed to dividend and share repurchase policy

“obviously one of the key things that we had been doing in an ultra-low rate environment was focused on efficiency and driving strong bottom-line. And so that’s exactly what we’ll be doing here. In terms of capital deployment, I think the highest and best use of our capital is to grow the intrinsic value of the company through reinvestment first and foremost, but beyond that I think it’s very important to have a dividend that is strong and… pay back to our shareholders through share repurchase and that’s exactly what we’re doing with our commitment to deliver a minimum of 50% of our free cash flow to our shareholders” Karen Parkhill – CFO


CEO Omar Ishrak is very optimistic on healthcare and med-tech industry

“If you look at it both from a medical innovation perspectives, the number of problems that have to be solved that patients will value, that create a real difference in people’s lives driving equity in healthcare around the world. The opportunities there are again limitless and we’re just scratching the surface and then on top of that you know like we’ve talked about the challenge of addressing wastage in healthcare where we’re literally wasting across the world hundreds of billions of dollars in total healthcare spend… not one that should ever be a down market if we as players and stakeholders in the healthcare market can get our heads around this”. Omar Ishrak – Chairman & CEO

Medtronic 4Q16 Earnings Call Notes

Medtronic’s (MDT) CEO Omar Ishrak on Q4 2016 Results

Overall healthcare demand in the US is on an upward trajectory

“Well, give that it is consistent with what all the hospitals are reporting, I have got to say that the overall healthcare demand if you like in the U.S. is something that is on an upward trajectory. That’s got to be the fundamental reason and it’s probably some of it is just natural demographics which provides this. The other is probably we are seeing some of the impact of the Affordable Care Act and all of the initial pieces of increased coverage might have been more sort of upstream in nature in diagnostics and so.

I mean some of these will lead to more procedures. Those are the only things that I can sort of intelligently kind of talk about. Other than that just what we experienced. It is not something that’s easy to predict to be fair and we look at all kinds of different factors and do the best, we have leading indicators, we talk to people and we get a sense for it, but everything that I just said was close to conjecture in my part.”

Michael Coyle

There is an overall shift to minimally invasive surgery

“The other thing I would reference beyond just the increase in overall volumes, the other thing that we are seeing is a mix shift, a much greater growth in the MIS procedures versus [indiscernible] and this is pretty consistent when I look at other players in the marketplace and I look at their revenue growth in the quarter.

So I’m really happy about that and truthfully that’s probably the bigger opportunity, a smaller uptick in surgical volumes in the U.S. versus a real change in the make shift MIS, although the make shift MIS all day along. And that’s pretty consistent again with what we have seen and what the rest are telling us and what we are seeing from other companies that are playing in the same space. That’s to me is really the story.”

Miscellaneous Earnings Call Notes 3.4.16

Splunk (SPLK) Douglas Merritt on Q4 2016 Results

Amount of data will double ever two years through 2020

“Analysts estimate that between 2013 and 2020, the amount of data generated globally will increase tenfold, doubling every two years. That is why we firmly believe that by any measure of penetration, we are just getting started. ”

Clear Channel Outdoor’s (CCO) CEO Fred Davidson on Q4 2015

TV now reaches only 85% of US adults

“The other major trend is the much-publicized decline of TV usage as measured by Nielsen. According to Nielsen’s Q3 comparable metrics report TVs weekly reach continues to decline, now reaching only 85% of U.S. adult 18-plus and it’s particularly losing ground with the key millennial audience. By contrast, radio continues to reach 93% of all U.S. adults 18-plus.”

Only 3 in 10 millenials watch TV and 50% of 18-24 year olds don’t watch in prime time

“TVs weekly reach among millennials is only 73%, dropping into third, below broadcast radio at 92% and smartphones at 84%. In other words, today roughly 3 in 10 millennials don’t watch television. An incredible statistic. The picture is even bleaker with a younger audience. Only 50% of people aged 18 to 24 watch broadcast TV in prime time.”

Del Frisco’s Restaurant Group’s (DFRG) CEO Mark Mednansky on Q4 2015 Results

The upscale guest is spending more money

“contrary to popular belief, the upscale guest is spending more money. We see that at the Del Frisco’s brand, we see at the Sullivan’s brand. ”

Mitt Romney Donald Trump takedown speech

“If Donald Trump’s plans were ever implemented, the country would sink into a prolonged recession…His proposed 35% tariff-like penalties would instigate a trade war that would raise prices for consumers, kill export jobs, and lead entrepreneurs and businesses to flee America. His tax plan, in combination with his refusal to reform entitlements and to honestly address spending would balloon the deficit and the national debt. So even as Donald Trump has offered very few specific economic plans, what little he has said is enough to know that he would be very bad for American workers and for American families.”

Tutor Perini’ (TPC) CEO Ronald Tutor on Q4 2015 Results

Building markets stronger than ever in CA NY and FL

“Our Civil markets are continuing to grow as evidenced by the increased volume of bidding opportunities and we continue to maintain a significant part of that growth as we deliver the profits we expect. We believe the new highway bill will be realized in the near future and that should only add to the growth we expect. The building markets are stronger than ever in California, New York and Florida which are our primary building markets where several major projects are pending and we believe some significant announcements we will make in the next 60 to 90 days particularly in Florida.”

Dollar Tree’s (DLTR) CEO Bob Sasser on Q4 2015 Results

On track for a good first quarter

“As far as current trends, obviously we’ve finished one period out of the three so we still got two period to go on the quarter, but I’m pleased with where we are. It’s always — you usually get a weather report sometime in February and when weather was adverse, it wasn’t as good as we thought but overall we ended up with a good first period and on-track for a very good quarter. And frankly, I’m looking forward to a period of time when we don’t have those disruptions like we had last year from the port strike, and I think you can see in our inventory, we have the inventory that we should have had last year. We have that inventory this year, so my expectation is that we’re going to have a, we’re on track for a good first quarter. Easter’s a little early, the early Easters at Dollar Tree aren’t usually good, so we’ve said that’s a $10 million head wind. But at the end of the day, we’ve given you our first quarter guidance and any color on that is we’re on track.”

Medtronic’s (MDT) CEO Omar Ishrak on Q3 2016 Results

There were no economy related issue, but the anniversarying of the affordable care act did slow us down a bit

“Like I had mentioned in the last call, the three things that we look at in the U.S, one is one which we knew was going to slow things out a little bit was the anniversarying of the Affordable Care Act and that probably had a little bit of an impact. The overall procedure volumes based on the economy I think were more or less steady. I think in the Surgical Solutions maybe a slight drop in procedure volumes, but essentially it was steady. There was no economy related issues.”

Medtronic FY 2Q16 Earnings Call Notes

Omar Ishrak

Foreign translation is significant headwind

“we recognize foreign translation is a significant pressure to our bottom-line on a reported basis as it is for most multinationals, but we are attempting to offset this as much as possible by stretching our operations and through our conventional hedging programs.”

Cadence of product innovation has increased significantly

“The cadence of product innovation across the Board has increased significantly and when you sort of combine all of that together it makes quite a difference. That is our goal after all. We are in the end a technology company striving to sort of change outcomes.”

It’s been a good year for medtech in the US

“With respect to the overall medtech market, look we have had a – the medtech industries has actually had a pretty good year and I think a lot of that is you look knowledge is driven by U.S. growth so U.S. has been stronger than I can remember for a long time and that is not only the medtech sort of companies but also hospitals. Now as we going to sort of calendar year ’16, there will be some anniversarying that is happening and also some of the hospitals have reported slightly sort of lower growth rates, so we are watching this carefully.”

US procedure growth may slow down next year

“I do not know to what extent the procedure growth will continue at the same rate of growth. I do not think it will slowdown, per se, but the growth rate might well slowdown. So that is what we are watching very carefully and I think coming after the next couple of months it is pretty crucial to see how procedures go, but again really at the end of the day this is a U.S story”

Gary Ellis

Partnering with IBM Watson

“We also continue to partner with IBM Watson, combining our clinical expertise, close loop algorithm development and CareLink data analytics with IBM’s Watson Cloud and Watson Analytics and machine learning capabilities. In early pilot run, using the database of 100 randomized patients was able to predict some near-term hyperglycemic events, demonstrating the potential possibility of applying cognitive computing to support diabetes management.”

Medtronic 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

11% EPS growth

“This morning we reported third quarter revenue of $4.3 billion, which represents growth of 8% and Q3 non-GAAP diluted earnings per share of $1.01, growing 11%.”

Covidien acquisition closes next quarter

“Before turning the call over to Gary I would like to discuss the integration of Covedian. We decided to complete the acquisition in early Q4 and immediately began executing the comprehensive integration plans that our two companies have developed over the past seven months. Throughout the planning process and now into the integration we’ve had four clear priorities that are guiding our two organizations. These priorities are, preserve, optimize, accelerate and transform. Our first and highest priority is to preserve.'”

Return 50% of cash flow to shareholders

“In Q3, we generated $1.7 billion in free cash flow. We remain committed to returning 50% of our free cash flow to shareholders. In Q3, we paid $300 million in dividends and there were no share repurchases giving restrictions related to the Covidien acquisition.”

.30c impact from exchange rates on FY 2016

“if exchange rates were to remain similar to yesterday’s broad FY16, our combined FY16 revenue will be negatively affected by approximately $1.2 billion to $1.4 billion. On a bottom-line based on today’s rates, this could translate into our $0.30 to $0.40 negative impact to earnings per share.”

Organize the sales force by who the customers are

“over time some of those technologies show that there are opportunities for one sales force to have a broader basket of products depending on who the customers are. What I will point out is that our philosophy here starts with the customer and the physician and then works back to the technology we don’t start with the technology. So if customers require us, require products that come from some other group or division, that makes sense for the usage we will put it through that channel. We don’t want to force that technologies into places where customers aren’t necessarily using them.”

Medtronic 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

4% topline growth

” first quarter revenue of $4.3 billion which represents growth of 4% and Q1 non-GAAP diluted earnings per share of $0.93 growing 6%”

North America grew faster than the total

“in the U.S. where we grew 6%, the highest growth in this region for five years. We believe mid-single digit growth in the U.S. can be sustained over the coming quarters based on the momentum of our new products. Therapy innovation contributed over half of our global growth this quarter.”

Inversion about being more competitive on foreign profits

“Medtronic will continue to pay significant U.S. taxes and increase our investments in the U.S. On taxes, we will continue to pay federal, state, and local income taxes on all U.S. earnings as well as Social Security taxes, property taxes, and the medical device tax. Cumulatively, these taxes represent more than 45% of U.S. income and we expect to pay a similar rate post-close. In addition, this transaction will put us on an even playing field with foreign companies regarding use of internationally-generated profits”

emerging markets can power growth for decades

” Look, we view emerging markets, like I said before, as a key growth driver not just for the next few years but for decades, literally decades because that’s the nature of the opportunity. We’re only addressing the premium segment when we get to value segment and the underserved, this is going to go on for a very long time.

And as a result, if you really talk of the long term, the revenues from these regions will be big and certainly at par with what we get from developed markets. And we cannot have in that kind of a scenario go through indirect channels of – where we do not have direct control with respect not only to business conduct standards, but also and more importantly with respect to direct connection with our customers because we have to develop these markets”

Medtronic 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“While our international operations performed well, growing 9%, our U.S. business declined 1%. This was driven by pressures in three distinct areas, CRDM implants, PAINSTIM and diabetes”

“the Chinese government is looking at pricing very carefully and probably as they should. But in our view most of that is directed around go-to-market models using distributors, which we are looking at very carefully. It’s a market where we eventually have to have more direct presence with the customers themselves. Now the way we have traditionally gone to market we use distributors for a variety of reasons, a lot of those extremely necessary.”

“Well, look our outlook for emerging markets overall has not changed. We are confident that we can deliver between 15% and 20% quite reliably, and are striving to make that thing 20% or more. And in certain regions we actually have shown consistency at over 20% for an extended period of time. China, we haven’t been able to do that although our growth rate has consistently been 15% or better and have touched 20% every so often. And China is the biggest market, so we are very focused on driving that up as quickly as possible.”

“You know there may well be issues to do with government policy and all of that but in general healthcare is a tremendous need in China and access to healthcare is a big focus of the government. And we are making investments within China.”

“In India, the bigger issue other than the distributor transition which we also went through for other reasons, is that the government has imposed a very low ceiling on pricing for some of the stents…it was a dramatic change to the system and essentially it forced sales from not only us but all multinationals”

“the biggest issue was getting people on contracts. And that’s the change that’s probably occurred over in the industry over the last several years where what used to be maybe just a little price increase (inaudible) and immediately the doctors to make that call and that decision. Obviously with the buying decisions now in hospitals, these committees are more engaged in that process and ensuring that the products have the technology. So as he indicated, that slows down the process slightly. It doesn’t mean you don’t get the price increases. It just means that you have to go through certain processes.”