Karen Parkhill: Yes, it’s both VBP and currency. And you’re right, higher revenue growth clearly helps on the margin front. But we have seen some timing on VBP that we talked about. We also have some timing on FX. It was a little bit better than we expected down the P&L in the first quarter, and we expect to give some of that back as we look at the currency impact going forward.
Jayson Bedford: Thank you.
Ryan Weispfenning: Thanks, Jayson. Brad, I think we have time for two more questions.
Brad Welnick: The next question comes from Joanne Weunsch at Citi. Joanne, please go ahead.
Joanne Weunsch: Good morning. And thank you very much for taking the question and nice quarter or nice way to start the fiscal year. Two quick questions. Volumes, we’ve seen throughout medtech this season have been quite strong, which leads me to wonder as to sort of a new normalized base or whether or not we’re just catching up on some pent-up demand. I’d love your opinion on that. And then for Hugo, you talked about activating new sites in the United States. Can you give us maybe an update on the thoughts on timing of a launch in the US? And then anything else you can add for OUS robotic placements would be appreciated. Thank you.
Geoff Martha: Sure, Joanne. Yeah, good to hear from you. Thanks for the questions. I’ll take the first one, and then I’ll turn it over to Mike Marinaro to handle the Hugo questions. I think on procedure trends, we’re — as Karen mentioned, I mentioned in the commentary, they’re definitely improved, and I’ll start in the US where we’re up about 5% or so. But across the board, we’re seeing very good procedural trends, and we’re largely back to pre-COVID or better. pre-COVID levels are better. As you know, over the last, I don’t know, 18 months or so, the rebound has been, I’d say, held back a bit by staffing issues and those have seem to have abated. And like I said, we’re getting pretty broad-based procedural pickups and are back to pre-COVID or even better levels.
And outside of the US, I’d say it’s even stronger. In Western Europe, high single digits. The recovery in Europe is definitely in full swing. Latin America, high teens. And just our — like our emerging market base when you got to pull out — if you pull out China, which is VBP, like I said before, this is — we see the kind of the stabilizing year here for VBP FY ’24. And then as you get into FY ’25, you get back to some higher growth in China like we’ve seen before. But if you take out China and Russia with the sanctions, we’re in the teens — the mid-teens and — high teens actually in emerging markets. So emerging markets trends are strong. I mentioned Latin America as a standout, Western Europe. So pretty good trends. We’re not seeing like this — at least in the areas we’re in, I’ve heard some area like orthopedics, there’s been a pent-up demand.
But we’re not seeing it in the areas we’re in. It’s been a steady flow versus like a pent-up demand. So I think that’s good news for the industry. On the Hugo questions, I’d like to turn it over to Mike Marinaro, who runs our Surgical business, which includes Hugo and also our endoscopy or formerly called GI business reports up to him as well.
Mike Marinaro: Yeah. Thanks for the question, Joanne. And specifically on the US, we did comment that we added sites in the quarter, and that’s true we had sites and enrollment and continue to progress according to plan in our EXPAND URO study. We’re pleased with the progress we’re making there and seeing that progress continue here as we’ve moved into this quarter. More broadly, we’ve seen good progress really and continue to be encouraged about the progress we’re making across the program. We’re now selling in five regions around the globe. Greater China, Asia, Western Europe, LatAm, North America and Canada. And increased our installations again here in this quarter. I think importantly, we’ve also seen an increasing flow or a steady flow of increasing indication approvals.
So we received the general surgery indication in Japan. And so now we have a full suite of approvals across general surgery, gynecology and urology in both Japan and Western Europe, which are two of the largest markets around the globe. Of course, US is the largest and that’s one we remain incredibly focused on. Overall, we’re seeing that the growth here in Hugo is contributing to the growth we’ve seen now in the Surgical business across the last couple of quarters, and it will become a more and more important part of our business as we move forward.
Geoff Martha: Yeah, really look — excited about the setup we have for our business. It’s a very large business for us that where the supply capacity has been an issue, that’s in a much better spot. The robots out there might just walk through kind of indication expansion and geographic expansion and update on the US trial. And I like the set up and the competitive dynamics going forward over the next couple of years. We got two major competitors, one with robot, one without. And we’re feeling pretty good about where we are with Surgery.
Ryan Weispfenning: Thanks, Joanne. I still see a number of people in the queue, and I apologize that we won’t be able to get to all of you today, given timing. We’ve got time for one more question, please, Brad.
Brad Welnick: Our final question comes from Patrick Wood at Morgan Stanley. Patrick, please go ahead.
Patrick Wood: Fabulous. Thank you so much. I’ll keep it to one given the timing. S&OP and supply chain is obviously not a very sexy topic, but you guys are doing a lot of work on that side. I’m just curious, typically, when we put processes and rationalization in place, there’s kind of upfront cost and like your dual running systems and it’s kind of difficult for people to transition. Are you seeing any slight — let’s say, short-term challenges or costs associated with that, where the payback is obviously going to come in the next, I don’t know, year or two? Just help us understand how that’s looking in the business. Thanks.
Geoff Martha: Well, let me just start off by saying, I appreciate your question on supply chain. It’s been a big focus area for us. And I know a couple of thousand people at Medtronic that do think it’s a pretty sexy place to be and are pretty proud of the work that we’re doing. To answer the question, I’ll turn it over to Karen on the cost question.
Karen Parkhill: Yeah. Thanks, Patrick. Yes, when we’re working on improving processes and driving better cost down, it does take investment. That investment is included in the guidance that we’ve given and is — it’s part of the reason that our gross margins are not yet stable. But we fully expect those investments to pay off over time and to help drive costs down more than inflation as we work to bring our gross margins up. Hopefully, that’s helpful.
Patrick Wood: Amazing. Thank you.
Ryan Weispfenning: Okay. Thanks, Patrick. Geoff, please go ahead with your closing remarks.
Geoff Martha: Well, first of all, thanks, everyone, for the questions. And as always, we appreciate your support and your continued interest in Medtronic. And we look forward to updating you on our continued progress on our Q2 earnings broadcast, which we anticipate holding on Tuesday, November 21. With that, thanks again for joining us today, and have a great rest of your day.
