Stryker Corporation · NYSE:SYK
Stryker — Investor Day (November 2016)
52 slides from Stryker's investor day presentation, Nov 9, 2016
Slide 1: Analyst meeting November 2016
Analyst meeting November 2016
Slide 2: Forward looking statement
Forward looking statement This presentation may contain information that includes or is based on forward-looking statements within the meaning of the federal securities law that are subject to various risks and uncertainties that could cause our actual results to differ materially from those express
Slide 3: Agenda
Agenda Kevin Lobo Overview Chairman and CEO Mako Total Knee Surgeon Insights Introduction: David Floyd Guest Speakers: Group President, Orthopaedics Kirby D. Hitt, M.D. Moderators: Director, Division of Adult Reconstructive Surgery, Baylor Scott & White Health Bill Huffnagle President, Joint Replace
Slide 4: Mission
Mission Together with our customers, we are driven to make healthcare better. Values Integrity Accountability People Performance We do what's right We do what we say We grow talent We deliver stryker
Slide 5: Diverse global medtech leader
Diverse global medtech leader Pursuing global market leadership in three segments 3Q16 sales totaled $2.8B, +6.2% organically On track to deliver organic sales growth in 2016 of 6.0-6.5%
Slide 6: Culture of growth
Culture of growth 9.9B 10 Sales ($B) 9 8 7 6 5 4 3 2 1 0 79 15
Slide 7: Strong organic sales growth is sustainable …
Strong organic sales growth is sustainable … 2010: Today: • Limited knee industry market share shifts • Mako robotic offering & 3D printed products will drive share gains • Niche player in Neurotechnology • Market leader in total stroke care, powered instruments & CMF • Distant follower in Trauma an
Slide 8: … with strong operational leverage capabilities
… with strong operational leverage capabilities 2010: Today: • Decentralized manufacturing • Centralized Global Quality and Operations group • Disparate ERPs • Moving to a single ERP • Dispersed European leadership • European regional headquarters and Transatlantic Operating Model • Regionally focus
Slide 9: Stryker's core strategies
Stryker’s core strategies • Business unit specialization • Acquisitions • International growth • Cost transformation for growth
Slide 10: Business Unit Specialization
Business Unit Specialization • Enables critical link between customers, marketing, R&D and BD • Key to driving market share gains and category leadership • Long history of building specialized sales forces focused on specific surgeon specialties • Driving innovation with R&D spending now >6% of sale
Slide 11: Mergers and acquisitions
Mergers and acquisitions Color key: - Capital allocation prioritizes M&A, then dividends and buybacks Core business Adjacency - Focus on core and key adjacent markets to drive category leadership Synergetics USA’s Neuro Ivy Sports Portfolio Medicine, LLC Concentric Patient Safety Vertebral Compressi
Slide 12: International growth
International growth • New global operating model driving focus and results • Strong European momentum continues in 2016 • Canada growth accelerating • EM challenges continue but long-term opportunity remains compelling • EM returned to growth in Q3 • China will start to improve in Q4 • Launch of mi
Slide 13: Cost transformation for growth
Cost transformation for growth • Product line rationalization • Indirect procurement • Common ERP platform • Expansion of shared services • Continued plant network optimization
Slide 14: Summary
Summary • Driving strong organic sales growth • Focused on innovation & acquisitions • Enhancing global presence through focus and alignment • Delivering leveraged earnings gains • Effectively deploying capital to enhance shareholder returns
Slide 15: Orthopaedics group overview
Orthopaedics group overview David K. Floyd Group President, Orthopaedics
Slide 16: Orthopaedics Group
Orthopaedics Group Pursuing global market leadership in joint replacement, trauma, extremities, and spine Differentiated Cost Our business model Global growth Acquisitions transformation workplace
Slide 17: Mako
Mako Background MAKO MAKO First TKR First UKR First THR 2004 Surgical 2006 performed 2012 performed 2013 acquired 2015 performed Corp. Value proposition • Improved quality of care At a glance: • Reduced readmission costs (PKR) • Platform for hip & knee replacement 300 >60,000 • Operating efficiencie
Slide 18: Stryker's Performance Solutions
Stryker’s Performance Solutions Background Value proposition • Improved quality of care • Reduced episode cost of care Marshall CCS 2002 2006 2011 2011 2012 • Improved patient satisfaction Marshall CCS Steele SPS Steele acquired acquired • Proprietary digital platform • Long-term partnership At a gl
Slide 19: Welcome to the Joint Replacement Division
Mako Robotic-arm Assisted Surgery panel William Huffnagle President, Joint Replacement Welcome to the Joint Replacement Division
Slide 20: Mako Robotic-arm Assisted Surgery Panel
Mako Robotic-arm Assisted Surgery Panel Kirby D. Hitt, M.D. Orthopaedic surgeon • Director, Division of Joint Replacement Surgery • Baylor Scott & White Health • Consultant, Stryker Orthopaedics Seth Jerabek, M.D. Orthopaedic surgeon • Assistant Professor • Hospital for Special Surgery Robert Cohen
Slide 21: Mako Robotic-arm Assisted Surgery with Triathlon
Mako Robotic-arm Assisted Surgery with Triathlon
Slide 22: Mako Robotic-arm Assisted Surgery with Triathlon
Mako Robotic-arm Assisted Surgery with Triathlon
Slide 23: Mako Robotic-arm Assisted Surgery with Triathlon
Mako Robotic-arm Assisted Surgery with Triathlon
Slide 24: Mako Robotic-arm Assisted Surgery with Triathlon
Mako Robotic-arm Assisted Surgery with Triathlon
Slide 25: Mako Robotic-arm Assisted Surgery with Triathlon
Mako Robotic-arm Assisted Surgery with Triathlon
Slide 26: Mako Total Knee array placement
Mako Total Knee array placement
Slide 27: Mako Total Knee bone registration
Mako Total Knee bone registration
Slide 28: Mako Total Knee patient specific planning
Mako Total Knee patient specific planning
Slide 29: Mako Total Knee dynamic joint balancing
Mako Total Knee dynamic joint balancing
Slide 30: Mako Total Knee femoral bone cuts
Mako Total Knee femoral bone cuts
Slide 31: Mako Robotic-arm Assisted Surgery with Triathlon
Mako Robotic-arm Assisted Surgery with Triathlon
Slide 32: Performance Solutions Panel
Performance Solutions Panel Stuart Simpson Vice President & General Manager, Commercial
Slide 33: Stryker's Performance Solutions
Stryker’s Performance Solutions Background Value proposition • Improved quality of care • Reduced episode cost of care Marshall CCS 2002 2006 2011 2011 2012 • Improved patient satisfaction Marshall CCS Steele SPS Steele acquired acquired • Proprietary digital platform • Long-term partnership At a gl
Slide 34: Stryker's Performance Solutions
Stryker’s Performance Solutions Episode Payment Model (EPM) Value proposition • Improved quality of care • Reduced episode cost of care • Improved patient satisfaction • Proprietary digital platform • Long-term partnership Why does it matter • Value-based purchasing is here to stay The future • CMS
Slide 35: Performance Solutions Panel
Performance Solutions Panel Dr. John R., Schurman II M.D. • Orthopaedic surgeon • Via Christi Hospital, Wichita • (CJR Market) Mr. Jody White • Kansas Surgery & Recovery Center • (BPCI for DRG 470) • President • Consultant, Stryker Orthopaedics • Lowell General Hospital Mr. Brian McCrone • (BPCI for
Slide 36: Performance Solutions customer statistics
Performance Solutions customer statistics… 10% 78% 11% 1.6% Average post launch Average discharge to home vs 51% Average increase in Average complication rate vs volume growth Medicare national average reimbursement 3.6% Medicare national (26% top performing) (86% top performing) average (0.5% top p
Slide 37: Cost Transformation for Growth (CTG)
Cost Transformation for Growth (CTG) Analyst Day 2016 Lonny Carpenter Group President, Global Quality & Business Operations November 2016
Slide 38: Significant change over the past several years
Significant change over the past several years Setting the baseline Continue to invest Ongoing headwinds - Quality first - 40+ acquisitions over the - Complex and ever changing - Plant network optimization past 5 years regulatory environment - Sourcing and supply chain - New product innovation - Ris
Slide 39: Long-term sustainable growth model
Long-term sustainable growth model Sales Growth EPS Cost Transformation for Growth (CTG) Growth Operating • COGS reduction Leverage • SG&A leverage • Balanced growth investment Financial Efficiency
Slide 40: CTG Impact
Cost Transformation for Growth (CTG) Above market top line growth • Designed to enable long-term leveraged growth …and sustainable margin expansion • 3 guiding principles: 190 - 250 bps CTG Impact • Significantly reduce structural and non-value % of Sales added costs improvement over 5 years • Conti
Slide 41: Key Initiatives to Drive CTG
Key Initiatives to Drive CTG Product Life Cycle Shared Services Management (PLCM Global Operating Plant Network Model & Optimization Cost Organizational Design Transformation for Growth (CTG) Supply Chain Indirect Optimization Procurement Direct Sourcing Global ERP
Slide 42: Operating Leverage: COGS Focus
Operating Leverage: COGS Focus • Focus on ‘winning portfolio’ to drive growth, improve mix, and better meet customer needs Product Life Cycle Shared Services • Build global product strategies Management (PLCM) • Remove unnecessary complexity & cost • Drive efficiency and simplify the network Global
Slide 43: Operating Leverage: SG&A Focus
Operating Leverage: SG&A Focus Product Life Cycle • Scalable Finance and HR Shared Services • Pathway to best-in-class benchmarks Management (PLCM) • Shared service drive leverage for transactional tasks Global Operating Model & • TOM Europe/Canada Plant Network Organizational • Priority markets Opt
Slide 44: CTG Value Outcomes
CTG Value Outcomes Sales Growth Over next 5 years, Stryker will: ü Deliver above market topline growth EPS Growth Operating ü Drive 190-250 bps operating leverage Leverage improvement ü Deliver leveraged earnings gains 44 Financial Efficiency ü Create customer and shareholder value
Slide 45: Financial Update
2016 Analyst Meeting Financial Update Glenn Boehnlein Vice President, Chief Financial Officer November 9, 2016
Slide 46: Long-term sustainable growth model
Long-term sustainable growth model • Focused market approach (developed and emerging) • Power products/brands Sales Growth • Diversified portfolio • Disciplined M&A strategy EPS • COGS reduction Growth Operating • SG&A leverage Leverage • Balanced R&D investment • Tax Financial • Debt management Eff
Slide 47: Growth at the high end of Medtech
Growth at the high end of Medtech 7.0% Organic Revenue Growth (constant currency) 6.3% 6.1% 6.0% 5.8% 5.1% 5.0% 4.3% 4.0% 3.0% 2.8% 2.4% 2.0% 1.0% 0.0% 2013 2014 2015 2016 Q3 YTD Medtech Market* Stryker *Medtech market growth is based on Company research of 20 companies
Slide 48: Delivering leveraged earnings
Delivering leveraged earnings 14.0% 13.3% 12.0% 12.3% 10.0% 8.2% 8.0% 6.5% 5.8% 6.1% 6.0% 5.3% 5.1% 6.0% 3.9% 4.0% 2.0% 0.0% 2013 2014 2015 2016 Guidance Organic Sales Growth (constant currency) Adj EPS Growth * * A non-GAAP financial measure. The most comparable GAAP financial measure is reported n
Slide 49: Capital deployment strategy
Capital deployment strategy M&A to drive sales growth and innovation Dividend growth Share repurchases 2016 Capital Deployment
Slide 50: Delivering 2016
Delivering 2016 Continued strong organic growth Accretive acquisition activity ** Leveraged cost base Strong EPS growth ** A non-GAAP financial measure. The most comparable GAAP financial measure is reported net earnings per * Adjusted for FX, EPS growth is expected to be 13.5% diluted share. Refer
Slide 51: Long-term sustainable growth targets
Long-term sustainable growth targets Sales growth at the high end of Sales Growth med tech, which allows us to drive… EPS 30 to 50 basis points of annual Growth Operating operating income improvement over Leverage the next 5 years, resulting in … Financial EPS growth of at least 9% annually Efficien
Slide 52: Appendix A
Appendix A SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES We supplement the reporting of our financial information determined under accounting principles generally accepted in the United States (GAAP) with certain non-GAAP financial measures, including adjusted net