Frederick Wise • Stifel, Nicolaus & Company

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CEO Bryan Hanson clarified that tariffs primarily affect the bottom line, not revenue. He explained that the Q1 order timing benefit, related to ERP cutovers and SKU rationalization, is expected to reverse in Q2 and Q3, with the most significant negative impact on growth anticipated in Q3.

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CEO Bryan Hanson identified three potential upside drivers: smooth execution of major ERP system cutovers, success of the new commercial excellence model, and improved capacity planning for high-demand products. Regarding HIS, he explained that autonomous coding is in its early phases but has the potential to automate 50-90% of cases, significantly reducing labor costs and errors for customers using their Encompass 360 platform.

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CFO Fred Hite explained the gross margin guidance reflects potential future international set sales, which have lower margins, and typical fourth-quarter softness. CEO David Bailey added that OPSB clinic expansion is progressing well, with increasing volume in established locations like Ohio, Colorado, and Florida. He noted the expansion pipeline is 'very full' for the coming years and that the company is actively exploring international OPSB opportunities, particularly in Western Europe.

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Executive David Bailey emphasized that scaling OPSB is a top priority, noting the large, capital-efficient market opportunity and a strong funnel for clinic expansion that could exceed the guided four new territories in 2025. He highlighted the rapid growth of products like the DF2 brace as proof of concept. Regarding margins, CFO Fred Hite stated the flat guidance is conservative. While acknowledging the reclassification impact, he indicated that activities around pricing, manufacturing consolidation, and other cost reviews could provide future upside.

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Chief Innovation Officer Ahmet Tezel highlighted the strength of the OSPREY data, noting the trial included more severe OSA patients and those with CCC, yet still showed a 65% responder rate at 12 months. He emphasized the differentiated 6-electrode technology offers future optimization potential. CEO Vladimir Makatsaria added that the commercial strategy is being developed, with options including partnerships, and will be detailed at the upcoming Investor Day. Regarding Cardiopulmonary, Makatsaria confirmed strong oxygenator demand is outpacing supply, with capacity expansions underway. For HLMs, he noted the Essenz system is on track to comprise 60% of placements in 2025, boosted by a recent, ahead-of-schedule approval in China.

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CFO Alex Shvartsburg stated the company was pleased with Cardiopulmonary performance, noting strong sequential growth in HLM placements despite a tough 40% growth comp from Q4 2023. He highlighted that demand for consumables outpaces supply and that manufacturing capacity increased by 10%. CEO Vladimir Makatsaria emphasized innovation as a strategic pillar, focusing on milestone delivery in core businesses and market access for OSA and DTD. Chief Innovation Officer Ahmet Tezel added that near-term epilepsy plans include submitting for FDA approval for connected care VNS therapy. He also mentioned the development of a NextGen oxygenator and continuous software upgrades for the Essenz system.

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CEO Vladimir Makatsaria stated that strong procedure growth and industry-wide supply constraints continue to drive demand, and LivaNova is on track to increase its manufacturing output by at least 10% in 2024. CFO Alex Shvartsburg added that demand continues to outpace global supply despite competitor actions. Chief Innovation Officer Ahmet Tezel noted that while core product timelines are not disclosed, they are mid-to-late stage programs. For DTD, a formal CMS request will follow publications expected in Q1 2025, with a decision typically taking about a year.

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CFO Micah Young explained that the large tender contract shifted some revenue timing but the underlying business remains strong, with double-digit consumable growth ex-tender. He guided towards normal seasonality for revenue, with Q2 typically flat to slightly down sequentially. Both Young and CEO Katie Szyman advised against annualizing the 2025 tariff impact for 2026, citing the fluid nature of trade negotiations and ongoing mitigation efforts, particularly concerning the disproportionate impact from China tariffs.

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CEO Catherine Szyman noted that while she is still learning Masimo's core markets, she sees a broad opportunity in hemodynamics focused on expanding monitoring to a large number of currently untreated patients. CFO Micah Young explained that 2025 includes a 53rd week in Q4 and advised analysts to apply historical seasonality (approx. 24.5% of revenue for each of the first three quarters) after adjusting for the impact of the extra week.

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CFO Micah Young reiterated the long-term growth plan, highlighting opportunities in the rainbow and hemodynamics platform (LiDCO) and the U.S. launch of ORi. COO Bilal Muhsin also mentioned the new Radius VSM wearable monitor. For Q4 driver guidance, Young explained that the range accounts for variability in OEM ordering, which constitutes about 75% of shipments. He noted that strong contracting, with $318 million in new contract value YTD, provides a solid foundation for future growth.

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Interim CFO Jason Pickett addressed the quarterly cadence, noting that a Q1 distributor order benefit in the Specialty Nutrition Systems (SNS) segment will likely lead to a softer Q2, but the full-year segment guidance remains intact. CEO David Pacitti outlined his focus on optimizing go-to-market strategies and commercial execution within the two new segments. Pacitti and executive Scott Galovan detailed the tariff impact, stating the revised guidance includes an estimated $15 million in incremental costs, assuming rates on Chinese goods will be below the threatened 145% but still higher than last year. They also listed mitigation strategies, including leveraging trade agreements, product exemptions, and internal cost controls.

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President and CEO Ivan Tornos expressed excitement for the launch, confirming they are on track to train 'north of 1,000' surgeons by year-end. He highlighted strong early momentum, with contract penetration already over 50% and expected to reach 70-80% in the second half of 2025, positioning it to be one of the company's most significant product launches.

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President and CEO Ivan Tornos asserted the guidance is not overly optimistic. He highlighted the Z1 hip stem and HAMMR impactor as key to gaining U.S. Hip share in H2. He particularly emphasized the Oxford Partial Cementless Knee as a highly differentiated, PMA-approved product capable of reclaiming significant market share lost over the past few years in a $1 billion market segment.

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CEO George LeMaitre noted that Q1 organic growth was 9% price and 4% unit growth but declined to forecast the split for the full year, suggesting the status quo was a reasonable assumption. He stated that while the European Artegraft market is estimated at $8 million, the company has only modeled €350,000 in sales for the remainder of 2025 as it gains experience. Executive Dorian LeBlanc explained the gross margin drag was due to the strong performance of lower-margin allografts, a trend that may continue.

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CFO Joseph Pellegrino highlighted that the company's niche product strategy and new pricing floors support sustainable price hikes. CEO George LeMaitre expressed confidence in reaching the 155-160 sales rep target by year-end, noting that hiring is on track and similar expansion is anticipated for the next year.

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CEO Patrick Beyer explained that supply chain efforts are focused on three key areas: procurement, production planning, and production itself, with an initial focus on implant products. He noted that several key portfolios are now off backorder. Regarding BioBrace, Beyer reported strong progress, including its use in 52 clinical procedures, recent FDA 510(k) clearance for a new rotator cuff delivery device, and over 50% enrollment in its 268-patient prospective randomized clinical study.

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CFO Todd Garner explained that the guidance reflects current performance levels and the need to 'earn their way up,' citing the recovery of the Orthopedics business as a key potential upside. He also noted currency headwinds and operational investments as temporary margin pressures. CEO Patrick Beyer highlighted AirSeal's clinical benefits in both robotic and laparoscopic procedures, noting a significant uptick in U.S. laparoscopic adoption.

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Michael Mahoney, Chairman and CEO, expressed confidence in the company's ability to manage geopolitical complexities. He noted that while China is a complex market facing VBP headwinds, the local team consistently delivers strong results driven by innovation and strategic local partnerships. He affirmed that the company's global manufacturing footprint is well-optimized for long-term growth and resilient to disruptions.

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CEO Mike Mahoney confirmed the guidance is thoughtful and prudent, consistent with past practice. He detailed that the company has more tailwinds than headwinds, citing momentum in FARAPULSE, the AGENT DCB launch, and solid growth across most business units. Key headwinds include potential PFA competition, more extensive VBP/DBP pricing pressure in China, and emerging low-cost competitors in some MedSurg businesses.

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CMO Dr. Ken Stein detailed that the FARAVIEW software on the OPL platform is the first mapping system designed around PFA, offering unique features like dynamic catheter visualization and 'field tagging'. He noted that while FARAWAVE is for AF ablation, future catheters like FARAPOINT and FARAFLEX will expand capabilities. He declined to comment on specific product pricing.

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Executive Jamie Samath attributed the strong OUS procedure growth to excellent performance in emerging markets like India and Taiwan, solid growth in Europe led by the U.K., and increased capacity from placements in distributor markets. Executive David Rosa explained that after-hours surgery growth is driven by hospitals seeking to provide consistent, high-quality MIS care around the clock. On cardiac surgery, he stated that advancements in the da Vinci 5 platform make it the right time to increase investment in the growing indication.

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CEO Gary Guthart outlined three categories of digital benefits for dV5: enabling better outcomes with real-time tools, accelerating the learning curve for care teams, and allowing customers to perform value analysis with their own data. CFO Jamie Samath stated that Ion's growth will come from international expansion and new indications, while SP's growth depends on broader indications in the U.S., pending stapler clearance. He described improving the margins for both platforms as a 'midterm' objective.

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President David Rosa acknowledged that during the supply ramp, dual console availability is being prioritized for incremental single-system deals, and the team is working with a broad set of customers. CEO Gary Guthart stated he doesn't anticipate this dynamic will significantly inflect procedure growth rates. Regarding the Hub, Guthart noted its current strength is as an on-premise data recorder and media manager, and that the company is at the beginning of the Hub's journey in terms of penetration and future cloud-based features.

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CEO James Mackin detailed the AMDS launch process, highlighting strong physician interest driven by new clinical data. CFO Lance Berry and CEO Mackin explained that revenue recovery is expected because underlying demand for tissue and On-X products consistently outstrips supply. Mackin clarified the PMA delay is due to new, industry-wide FDA testing requirements, which does not impact the revenue ramp given the existing HDE approval.

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CFO Angela Wirick advised modeling a relatively flat gross margin around 75% for 2025, with international mix being a headwind offset by new products and efficiencies. She explained the Q4 R&D charge was a $12 million upfront payment for the PFA partnership and that the 2025 R&D forecast includes about $10 million in potential milestone payments.

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CFO Scott Ullem confirmed there was no change in expectations and the Q1 guidance was consistent with their plan from December. Larry Wood, Global Group President of TAVR, acknowledged hearing anecdotal reports of increased referrals but stressed that broader education of the referral community is still needed. He noted the key balancing factor for this new patient inflow will be hospital capacity.

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EVP and CFO Chris DelOrefice clarified that capital allocation priorities are largely unchanged, with dividends remaining reliable and tuck-in M&A still a priority. He explained that strong cash flow generation provides the flexibility to execute a $1 billion buyback—reflecting a belief in the stock's intrinsic value—while simultaneously focusing on integrating APM and deleveraging to the company's 2.5x net leverage target within 12 to 18 months.

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CFO Nabeel Ahmed explained the guidance reflects passing through the Q3 outperformance while remaining thoughtful. CEO Leslie Trigg added that the company is being conservative until there is more than one quarter of evidence of a turnaround, though she expressed high confidence for Q4 and 2025. Trigg also highlighted that the 2025 pipeline is large, with nearly half of opportunities in later sales stages, and confirmed that the hurricanes had no adverse effect on business operations or patient starts.

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CEO Arun Menawat explained that physicians are highly receptive to the flexibility of the new reimbursement codes, which allow procedures in various settings like OBLs and ASCs. He noted that while some customers paused ahead of the proposal, the sales pipeline is now more engaged, underpinning the confidence in the 75-system goal. Menawat also detailed that partnerships with MRI companies are focused on creating a synergistic "interventional MR" ecosystem, including new, smaller, and more practical MRI systems that will facilitate the adoption of MR-guided diagnosis and treatment.

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