Medtronic PLC (MDT) Q3 2022 Earnings Call Transcript

Medtronic PLC  (NYSE: MDT) Q3 2022 earnings call dated Feb. 22, 2022

Corporate Participants:

Ryan Weispfenning — Vice President and Head, Investor Relations

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Geoffrey S. Martha — Chairman and Chief Executive Officer

Wynne Edgson — Director of Investor Relations

Bob White — Executive Vice President and President Medical Surgical Portfolio

Sean Salmon — Executive Vice President and President, Diabetes Operating Unit, Cardiovascular Portfolio

Brett Wall — Executive Vice President and President Neuroscience Portfolio

Analysts:

Robert Marcus — JPMorgan — Analyst

Vijay Kumar — Evercore ISI — Analyst

Pito Chickering — Deutsche Bank — Analyst

Matthew Miksic — Credit Suisse — Analyst

Larry Biegelsen — Wells Fargo Securities LLC — Analyst

Joanne Weunsch — Citigroup — Analyst

Danielle Antalffy — Leerink Partners — Analyst

Rick Wise — Stifel Nicolaus — Analyst

Presentation:

Ryan Weispfenning — Vice President and Head, Investor Relations

Good morning and welcome to a balmy February morning here in Minnesota. I’m Ryan Weispfenning, Vice President and Head of Medtronic Investor Relations, and I’m pleased that you’re joining us for Medtronic’s Fiscal Year 2022 Third Quarter Earnings Video Webcast. Before we start the prepared remarks, I’ll share a few details about today’s webcast. Joining me are Geoff Martha, Medtronic Chairman and Chief Executive Officer; and Karen Parkhill, Medtronic Chief Financial Officer. Geoff and Karen will provide comments on the results of our third quarter, which ended on January 28, 2022, and our outlook for the remainder of the fiscal year. After our prepared remarks, our portfolio Executive VPs will join us, and we’ll take questions from the sell-side analysts that cover the company. Today’s event should last about an hour.

Earlier this morning, we issued a press release containing our financial statements and divisional and geographic revenue summaries. We also posted an earnings presentation that provides additional details on our performance. The presentation can be accessed in our earnings press release or on our website at investorrelations.medtronic.com.

During today’s webcast, many of the statements we make may be considered forward-looking statements, and actual results may differ materially from those projected in any forward-looking statement. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports and other filings that we make with the SEC, and we do not undertake to update any forward-looking statement.

Unless we say otherwise, all comparisons are on a year-over-year basis and revenue comparisons are made on an organic basis. Third quarter organic revenue comparisons adjust only for foreign currency, as there were no acquisitions or divestitures made in the last four quarters that had a significant impact on total company or individual segment quarterly revenue growth.

References to sequential revenue changes compare to the second quarter of fiscal ’22 and are made on an as reported basis. And all references to share gains or losses refer to revenue share in the fourth calendar quarter of 2021 compared to the fourth calendar quarter of 2020, unless otherwise stated.

Reconciliations of all non-GAAP financial measures can be found in our earnings press release or on our website at investorrelations.medtronic.com. And finally, our EPS guidance does not include any charges or gains that would be reported as non-GAAP adjustments to earnings during the fiscal year.

And with that, let’s head into the warm studio and get started.

Operator

[Video Presentation] Hello, everyone, and thank you for joining us today. This morning, we reported Q3 results, delivering solid earnings growth in a challenging market. We felt the short-term impacts of Omicron in January, particularly in the U.S. causing our Q3 revenue to fall short of our expectations. The COVID resurgence affected not only procedure volumes, but also created acute periods of worker absenteeism with our customers, suppliers, and in our own operations and field teams. Now, that said, COVID infections in the U.S. are declining. Available hospital ICU capacity is increasing, and procedure volumes are picking up. While some of the impacts from the pandemic, like inflation, supply chain issues, and health care worker shortages will linger, we do expect that our markets, our customers, and our industry are on the path to recovery.

Over the last 18 months, we’ve made significant changes to our operating model, moving to 20 focused operating units, as well as making major enhancements to our culture and incentives. These changes have improved our pace of innovation and our competitiveness, as evidenced by recent product filings and approvals that came faster than expected. We’re not finished driving change. We’re accelerating improvements to our global supply chain and operations, leveraging our scale to further improve quality, increased product availability and reduced costs.

In addition, we’ve enhanced our portfolio management and capital allocation processes. Our new operating model is giving us line of sight into what is required to compete and win over the long term in each of our businesses. As a result, we’re looking at our portfolio with a more critical eye, with a focus on growth and creating shareholder value. I’d be surprised if there weren’t changes over the coming fiscal year. But I don’t know yet if they will be smaller or more significant.

Now, let’s look at our third quarter results, starting with our market share performance. Now, market share is an important metric, and a reflection of the culture and incentive changes that we’re making in the company. About 60% of our businesses held or won share in the last calendar quarter. While that’s down slightly from last quarter due to some supply constraints, and where certain businesses are in their product cycles, it is a significant improvement from where Medtronic was just 18 months ago.

So starting with our Cardiovascular portfolio in Cardiac Rhythm Management, one of our largest businesses, we continued to build on our category leadership, adding over 1.5 of share. We’re winning share in both high and low power devices. And we recently launched our Micra AV leadless pacemaker in Japan, and Micra VR in China, resulting in international Micra growth of over 50% in Q3.

In Peripheral Vascular Health, we won about 1 point of share with strong growth in our Abre deep venous stents and VenaSeal Closure System. And in Cardiac Surgery, we gained over 1 point of share on the strength of our extracorporeal life support products. In our Medical Surgical Portfolio, we estimate we gained share in GI, driven by momentum from the recently launched Emprint HP Generator in our Beacon Endoscopic Ultrasound franchise.

In Respiratory Interventions, despite the year-over-year headwind as ventilator sales continued to return to pre-pandemic levels, we estimate we gained about 400 basis points of share. We won share in premium ventilation with our Puritan Bennett 980, in video laryngoscopes with our McGRATH MAC and in core airways with our TaperGuard endotracheal tubes.

In our Neuroscience Portfolio, we increased our market share in cranial and spinal technologies. We’re launching new spine implants that enhance the overall value of our ecosystem of preoperative planning software, imaging, navigation and robotic systems, as well as powered surgical instruments, all of which are transforming care in spine surgery.

In Neuromodulation, we have great momentum from new products in both Pain Stim and Brain Modulation. In Pain Stim, despite the headwinds from Omicron, we estimate we gained over 1 point of share, driven by both our Intellis with DTM technology, and Vanta recharge-free systems. And in Brain Modulation, while we continue to face headwinds from replacement devices, our business grew 15% on strong adoption of our Percept neurostimulator with BrainSense technology, paired with our Sensight directional lead. Medtronic is the only company with sensing capabilities on our deep brain stimulators, which drove about 10 points of new implant share and over 1 point of overall DBS share in Q3, and we expect this momentum to continue.

Another business with momentum is our Neurovascular business, we are back to winning share, picking up about 2 points this quarter. We’re seeing strength from our pipeline family of flow diverters for treating intracranial aneurysms. Our flow diversion launches in Japan, CE Mark countries, and the United States, coupled with broader portfolio growth in China, propelled neurovascular to 12% growth this quarter.

Now, while the majority of our businesses are winning share, we have some businesses that lost share in Q3 where we are focused on improving our performance. In Cardiac Diagnostics, despite year-over-year share loss, we gained share sequentially for the first time in many quarters. We’ve made good progress, increasing our manufacturing capacity for our LINQ II insertable cardiac monitor. And we began our rollout of our AccuRhythm artificial intelligence algorithms, which were just enabled for all LINQ II patients in the U.S. We expect ongoing supply improvement and additional AI detection algorithms, along with new indications to expand the market and drive growth.

In our Structural Heart & Aortic business, we lost share in Aortic due to supply constraints and continued pressure from our Valiant Navion recall and competitive launches. At the same time, though, we maintained our TAVR share in Q3, growing in the mid-teens. In our Surgical Innovations business, we lost a little over 0.5 point of share overall due to acute resin shortage that impacted our flagship LigaSure vessel sealing portfolio. This was partially offset by increased share in advanced stapling, given strong market adoption of our Tri-Staple reinforced reloads, as well as share gains in hernia and sutures. The good news here is that our teams have improved our resin supply, and we expect to be able to meet demand in Q4.

In Patient Monitoring, we estimate we lost a few points of share due to a difficult comparison from the strength we had last year in pulse oximetry and capnography monitor sales. However, our share has been relatively consistent for the past four quarters. In Pelvic Health, procedures slowed this past quarter, and we lost some share. We expect this market to recover, and we are well positioned to compete.

In ENT, we lost share for the first time in a long time, given some temporary supply chain disruptions that we expect to have resolved going forward. And in Diabetes, we continued to lose share predominantly in the U.S. Look, we are extremely focused on resolving our warning letter and bringing new products to the U.S. market, although timing is difficult to predict.

In December, CMS expanded coverage for our CGM sensors, including those integrated with our insulin pumps, and we’re pleased that this will take effect for Medicare patients at the end of this month.

In international markets, we launched the 770G in Japan last month, making it the first hybrid closed-loop system available in that country. And in Europe, we continue to see success and strong adoption of our 780G with the Guardian 4 sensor.

Next, let’s turn to our product pipeline. We’ve launched over 200 products in the U.S., Western Europe, Japan and China in the last 12 months. And these are having an impact across our businesses. At the same time, we continue to advance new technologies that are in development, with increased investments in R&D. We’re expecting these investments to create new markets, disrupt existing ones, and accelerate the growth profile of Medtronic.

Now, starting with our Cardiovascular portfolio, we continue to make progress in Cardiac Rhythm Management on disrupting the ICD market with our AURORA Extravascular ICD. Our U.S. pivotal study is fully enrolled. We continue to expect CE Mark approval later this calendar year and U.S. approval next calendar year. Our EV ICD can both pace and shock without any leads inside the heart and veins. And it does this in a single device that is the same size as a traditional ICD. We believe AURORA will accelerate adoption of EV ICDs and make this a $1 billion market by 2030.

In Cardiac Ablation Solutions, we’re advancing a number of technologies to become a leader in the $8 billion EP ablation market. We’re rolling out our DiamondTemp RF ablation system as well as our exclusive first line paroxysmal AF treatment indication, using our cryoablation system. We also continue to make progress with our anatomical PulseSelect PFA system, which has breakthrough device designation from the FDA. Our global pivotal trial completed enrollment back in November, and we’re very excited about how our PFA system could disrupt the EP ablation market.

Last month, we announced our intent to acquire Affera. Affera has several development programs underway, including a differentiated mapping and navigation system that closes a competitive gap in our product portfolio and a focal PFA system that is a separate and complementary platform to our anatomical PFA system. We’re looking forward to welcoming the Affera team into Medtronic.

Moving to our Symplicity Renal Denervation procedure for hypertension, we continue to enroll our ON MED study and expect to complete the 6-month follow-up in the second half of this calendar year. We’ll then submit the data to the FDA as ON MED is the final piece of our submission to seek approval for Symplicity. Adding to our body of evidence, 3-year data from our ON MED pilot study will be presented at the ACC Scientific Sessions in April.

In Structural Heart, we now expect to begin the limited U.S. market release of our Evolut FX valve in Q1, followed by full market release later in fiscal ’23. Evolut FX enhances ease-of-use improvements in deliverability, implant visibility, and deployment stability. In China, we expect to launch our Evolut PRO valve this quarter, our first entry into this large and under-penetrated TAVR market.

We also continue to advance our transcatheter mitral and tricuspid development programs. In our APOLLO Pivotal Trial for TMVR, we just had the first implant using our Transfemoral Delivery System, and we expect this new system to meaningfully accelerate patient enrollment.

Moving to our Medical Surgical Portfolio in our surgical robotics program, we’ve made progress improving our supply chain and manufacturing and remain focused on scaling production. At the same time, we continue to add regulatory approvals and expand our limited market release, most recently in Canada, Australia and Israel. And we intend to start our U.S. urology clinical trial soon. In addition to uro and gyn cases, surgeons in Panama, Chile and India are now performing general surgery procedures with Hugo, including advanced cases like colorectal and lower anterior resection surgeries. And we announced earlier this month the first Hugo procedures in Europe.

In Diabetes, our MiniMed 780G insulin pump, combined with our Guardian 4 sensor, continue to be under active review with the FDA, with approval subject to our warning letter. When approved and launched in the U.S., we expect this system to be highly differentiated and accelerate growth in our diabetes business. We continue to expect submission of our next-generation sensor, SIMPLERA, to the FDA this quarter. SIMPLERA is fully disposable, easy to apply, and half the size of Guardian 4. Finally, we’re making progress on multiple next-gen sensor and pump programs, including patch pumps, although we haven’t disclosed details for competitive reasons. While it will take time, we expect the technology pipeline investments we’re making will result in our Diabetes business being accretive to total company growth and eventually, grow with this important market.

Now, turning to our Neuroscience Portfolio, we were pleased to receive FDA approval for our diabetic peripheral neuropathy indication for our Intellis and Vanta spinal cord simulators last month. This came following the FDA’s rigorous review of our clinical submission, and years earlier than we had previously communicated. The approval represents the beginning of a multi-year market development process, which we are uniquely suited to execute, given our presence in both the Pain Stim and the Diabetes markets. We believe the DPN market opportunity will reach $300 million by FY ’26 and with an annual TAM of up to $1.8 billion, making DPN for SCS one of the biggest market opportunities in med-tech.

In addition to DPN, we also continue to make progress on expanding indications for SCS into non-surgical refractory back pain and upper limb and neck chronic pain. If that was not enough for Pain Stim, we’re also excited about our Inceptiv ECAPS closed-loop spinal cord stimulator, which we submitted to the FDA late last year. We expect Inceptiv’s closed-loop therapy that optimizes pain relief for patients to revolutionize the SCS market.

Finally, in Pelvic Health, we’re expecting FDA approval for our next-gen InterStim recharge-free device in the first half of this calendar year. With its designed best-in-class battery, constant current, and full-body MRI compatibility at both 1.5 and 3 Tesla, we expect this device will extend our category leadership in Sacral Neuromodulation.

And with that, I’ll turn it over to Karen to discuss our financial performance and our guidance. Karen?

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Thank you, Geoff. Our third quarter organic revenue increased 2%. While we were tracking to our quarterly guidance in early January, the impacts from this latest wave of COVID affected our revenue in the last month of the quarter. Despite the challenging revenue, we controlled expenses and delivered adjusted EPS in line with our guidance and $0.01 ahead of consensus.

From a geographic perspective, our U.S. revenue was flat and non-U.S. developed markets grew 1%, given the impacts of Omicron. Our Emerging Markets were relatively stronger, growing 7% with strength in South Asia, Latin America and the Middle East and Africa.

Converting our earnings into strong free cash flow is a priority. Our year-to-date free cash flow was $4.3 billion, up 23% from last year. And we continue to target a full-year conversion of 80% or greater. And we remain focused on allocating our capital to generate strong future growth and shareholder returns. We are increasing our organic R&D investments broadly across the company to fuel the pipeline that Geoff walked through earlier, and we are supplementing this with attractive tuck-in acquisitions.

Since the beginning of last fiscal year, we’ve announced eight acquisitions totaling over $3.2 billion in total consideration, including last month’s acquisition, Affera, in our Cardiac Ablation business. At the same time, we’re increasing our minority investments in companies that could become future acquisitions, as was the case with Affera.

We have a commitment to return more than 50% of our free cash flow to our shareholders, primarily through our attractive and growing dividend. We are an S&P Dividend Aristocrat and fiscal year-to-date, we paid over $2.5 billion in dividends to our shareholders. And finally, particularly in periods where we see share price dislocation, we look to execute opportunistic share repurchases, as was the case this quarter. Fiscal year-to-date, we’ve repurchased over $1.1 billion of our stock.

Turning to guidance, while procedure volumes are still impacted from Omicron in the first few weeks of February, we are beginning to see improvement. Our outlook assumes continued procedure volume recovery through March and April, and we expect to be back to pre-COVID levels in most of our markets before the end of the fourth quarter. Assuming that holds, for the fourth quarter, we’re comfortable with current Street consensus for our organic revenue growth of approximately 5.5%. At recent foreign exchange rates, currency would be a headwind on fourth quarter revenue of approximately $185 million.

By segment, we would model Cardiovascular at 7.8% growth; Neuroscience at 2.5% to 3.5% growth; Medical Surgical at 7.5% to 8.5% growth; and Diabetes, down 6% to 7%, all on an organic basis. On the bottom line, we expect fourth quarter non-GAAP diluted EPS in the range of $1.56 to $1.58, in line with current consensus. And at recent rates, we expect currency to have a flat to slightly positive impact on the bottom line.

Before I send it back to Geoff, I want to acknowledge the additional strain that the recent COVID resurgence has placed on our customers and our employees over the past couple of months. I am truly grateful for the perseverance that both health care workers and our employees have demonstrated to ensure patients receive our life-changing therapies around the world. Back to you, Geoff.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Thank you, Karen. For the last few quarters, I’ve been closing by commenting on the progress the company is making in various areas of ESG, our environmental, social and governance impacts. Today, I want to highlight that we recently released our global inclusion, diversity and equity 2021 Annual Report entitled Zero Barriers. The report shares how we are accelerating our efforts to remove barriers to opportunities, by creating an inclusive work environment, doubling down on removing bias, and amplifying our impact in our local communities.

Our commitments to ID&E and the UN Sustainable Development Goals compel us to solve health inequities faster, systemic, socio-economic, racial, geographic, and even generational factors, all contribute to a person’s ability or inability to achieve good health and reach their full potential as a contributing member of society. We’re committed to urgently addressing barriers to education, diagnosis and treatment, as the global crisis of health inequity can be solved by accelerating access to health care technologies.

One such inequity is mortality from colorectal cancer. While colorectal is one of the most preventable cancers, low screening rates make it one of the deadliest, with mortality rates 40% higher for the Black population in the United States. In addition, Hispanic and Latino adults are more likely to be diagnosed in later stages of the disease, when it’s more difficult to treat.

Today, I’m pleased to announce that Medtronic is collaborating with Amazon Web Services and the American Society for Gastrointestinal and Endoscopy to place GI Genius modules at facilities that support low-income and underserved populations across the United States. Our GI Genius system improves the quality of colonoscopies, using AI to assist physicians in detecting both precancerous and cancerous growths. Increasing access to technology that can improve clinical outcomes through earlier and more accurate detection can provide a significant positive impact for communities most vulnerable to colorectal cancer. We continue to look for creative solutions like this one to address health inequities.

Now, let me close on this note. While the pandemic and its associated impacts have affected our revenue in the past couple of quarters more than we expected, we haven’t lost sight of the big picture. We’ve made significant changes in the company, and we’re strengthening our operations, supply chain, and global quality systems. We’re also laser-focused on capital deployment and portfolio management processes, with a deep commitment to creating shareholder value. And we have several exciting growth catalysts in our pipeline.

We expect to benefit as market procedures re-accelerate post-Omicron and as we lead in high-growth med-tech markets. While it’s been a bumpier ride than I would have liked, and we still have challenges to work through, I’m confident in our organization’s ability to accelerate and sustain our growth profile over the long-term, to grow at or above our markets and, as we do so, create value for our stakeholders. And finally, I want to join Karen in thanking all of our employees around the world, who, despite the challenges we faced day in and day out, engineered the extraordinary, so that we can serve our customers and patients in all four corners of the globe. As a result of your efforts, we can fulfill the Medtronic mission, alleviating pain, restoring health and extending life for millions of people around the world.

Now let’s move to Q&A. We’re going to try to get to as many analysts as possible, so we ask that you limit yourself to just one question and only if needed a related follow-up. If you have additional questions, you can reach out to Ryan in the Investor Relations team after the call. With that, Wynne, can you please give the instructions for asking a question?

Questions and Answers:

Wynne Edgson — Director of Investor Relations

For the sell-side analysts that would like to ask a question, please select the Participants button and click Raise Hand. If you are using the mobile app, press the More button and select Raise Hand. Your lines are currently on mute. When called upon, you will receive a request to unmute your line, which you must respond to before asking your question. Lastly, please be advised that this Q&A session is being recorded. For today’s session, Geoff, Karen, and Ryan are joined by Sean Salmon, EVP and President of the Cardiovascular Portfolio and the Diabetes Operating Unit; Bob White, EVP and President of the Medical Surgical Portfolio; and Brett Wall, EVP and President of the Neuroscience Portfolio. We’ll pause for a few seconds to assemble the queue.

We’ll take the first question from Robbie Marcus at JPMorgan. Robbie, go ahead.

Robert Marcus — JPMorgan — Analyst

Oh, great. Thanks a lot and congrats on the quarter. Maybe, my first question, I think one of the bigger investor questions that’s building here, especially with and some of the warning letter and the delays in diabetes and some of the inflation pressure we’re seeing with some of your competitors, any early thoughts on how we should be thinking about fiscal ’23? There is a wide range on estimates. So just wanted to get any early since you had for us. Thanks.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Sure. Maybe, I’ll — first of all, thanks for the question. I agree. It’s a big question, and maybe, I’ll turn to sort of Karen to provide some color commentary on FY ’23.

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Thank you, Geoff and Robbie. So, I would first say it’s early. And obviously, we’re going to give our full-year outlook on our Q4 call in May. And we’re working through our planning process, as we speak. And we’ve noted before with you that there are more puts and takes than normal for next fiscal year. So let me help by sharing some broad thoughts.

On revenue, we continue to drive to our long-term organic revenue growth goal of 5-plus percent for sure. Although, I would say on the plus side, the plus side of that LRP may be more difficult in FY ’23, just given some of the challenges that we’ve talked about. We are, as you know, expecting really great product launches. Geoff talked about several of them on the call. And we do expect a continued rebound in procedure volumes in our markets. And as we think about FX on the top line for next year, think about that as being a few hundred million dollar-headwind at recent rates.

On the bottom line, you’ve heard from others around the increased pressure from the macro environment, and we’ve got that same increased pressure on things like inflation and wage adjustments. And we noted last month that currency is expected to flip from a tailwind to a headwind next fiscal year. And we’ve also shared that we’ve got some dilution from our Affera acquisition. Those last two, combined, could impact EPS by a few hundred basis points. While we continue to work to offset these headwinds, we certainly don’t want to short-change our investments and our meaningful growth drivers for the future. And it’s those investments that are really going to help us deliver on that plus side of the 5-plus percent over the long-range plan.

So I would say FY ’23 will be a unique and challenging year, just given the macro environment and the timing of our major pipeline launches. And on the bottom line, we do expect to grow EPS next year, certainly. But at this stage, we don’t expect it to be above revenue growth. I want to make sure, though, that you take away from this that we are still very committed to our long-range plan. We’ve got investments in quality, along with the more-than-modest FX dilution next fiscal year that should subside going forward. And while it’s hard to predict the macro factors like inflation and wage adjustments, I’m not sure they’ll continue at the pace that we’re currently experiencing. And obviously, as we look forward, we expect to have meaningful revenue growth to go along with those investments that we’re prioritizing, which will ultimately help drive EPS growth. So, I hope that color is helpful, Robbie.

Robert Marcus — JPMorgan — Analyst

Yeah, that’s great. And then as my follow-up, Geoff, at the JPMorgan Conference, you first mentioned maybe doing some bigger changes to the business. You mentioned it again today. I was just hoping you could give us a little flavor for what you’re thinking. Is it divestitures? Is it a bit of a break-up of the company, and what’s the timeframe we should be thinking about for some of the larger potential actions? Thanks.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Sure, Robbie. Yeah. So we’re definitely looking at the portfolio more intently. I can’t — however, at this point, I can’t really get into specifics, I will — I’ll say we’re looking to improve our WAMGR. We’re looking to improve the consistency of our growth. Our North Star — to summarize, our North Star is durable growth. And we’re looking at our businesses, and we’re evaluating them for, one, how well they fit into the portfolio, how well they fit into our strategy. Are we the right owners of these assets, and then how we, Medtronic, add value and grow these businesses. It’s still at this point, like I said it at the conference, we don’t know if these changes will be significant or more limited. But I can assure you we’re deeply committed to doing the right things for shareholders and all the Medtronic stakeholders. So we intend to get through this analysis and I think have more, over the next several — over the course of the next fiscal year, as what we said at the JPMorgan, and I don’t have any more update from that in terms of timing.

Robert Marcus — JPMorgan — Analyst

Great. Thanks a lot. Appreciate it.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thank you, Robbie. Next question, please, Wynne.

Wynne Edgson — Director of Investor Relations

Next question comes from Vijay Kumar at Evercore ISI. Go ahead.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Vijay, are you there? Do you want to go to the next question and come back to Vijay?

Vijay Kumar — Evercore ISI — Analyst

Hi. I’m so sorry about that.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Oh, there he is.

Vijay Kumar — Evercore ISI — Analyst

Hi, Geoff, Karen. Good morning, and thanks for taking my question. I guess, maybe one, my first one is on the guidance comments you made, which was helpful. What is fiscal point of view assuming on Diabetes, where did you guys have that second meeting with the FDA? Is the warning letter going to be de-linked with the approval or how are you treating Diabetes in that comment of 5-plus, with plus being difficult? Is that assuming a 50 to 100-basis points headwind from Diabetes?

Geoffrey S. Martha — Chairman and Chief Executive Officer

On the very last part of the question, I’ll let Karen and maybe Sean chime in. In terms — look, the dialog with the FDA is ongoing. I mean, we’ve got an ongoing dialog on the 780G approval. We’ve got an ongoing dialog on the warning letter. Our priority is — they’re both priorities, but our first priority is to work the warning letter issues that we’ve been working these like, as we talked about for two years now, even before the warning letter was issued. So, the dialog with, like I said, with the FDA is ongoing, and it’s very constructive I would say. Karen, do you want to talk about the last part of the question there?

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Sure. Vijay, good morning. It’s still too early to get specific. We’re in our planning process, and as we talked about before, there are a variety of outcomes and ranges that can happen depending on the approval. We’re obviously focused on getting that approval out as quickly as possible, and we’ll be working toward that, but too early to get specific on guidance. We’ll give that guidance, including for our business units, in the fourth quarter call.

Vijay Kumar — Evercore ISI — Analyst

Understood. And maybe, Geoff, my second question on the robot. Some early feedback seems to be positive. Have — you did mention supply chain has been resolved or ramping up production. Maybe some sense for where production is or some color on how many surgeons have been trained, what is the order book looking like for the robot would be helpful?

Geoffrey S. Martha — Chairman and Chief Executive Officer

Yeah, maybe I’ll bring in Bob here in a second to provide some of that — more color on that. Just overall, we make — we’re making progress on the robot. Demand is — continues to be strong. We continue to get additional regulatory approvals, a couple more last quarter. We did our first surgery in Europe and are getting good feedback from surgeons there, which I think is a great sign. And the breadth of our procedures continues to grow, get more complex. And so we’re feeling good about the kind of where the robot is like, that we’ve got something really powerful on our hands here, and we’re going to achieve our long-term objectives here. And, as we’ve said before, we anticipate strong ramp in FY ’23, but I’ll give Bob — Bob, do you want to add some color here?

Bob White — Executive Vice President and President Medical Surgical Portfolio

Yeah. Thanks, Geoff. And Vijay, thanks for the question. It was nice to read your report after the time you spent with Professor Moitri [Phonetic] as well. And certainly, what we’ve seen, Vijay, is we’ve seen some nice progress. We’re installing more systems across the world. As you know, now that we have our CE Mark approval, Geoff mentioned some of the general surgery procedures taking place, and we certainly expect to continue to expand the regulatory approvals in more countries. We’ll certainly look to expand in the future to thoracic, colorectal, hernia, bariatric procedures. Obviously, Hugo was designed with all those procedures in mind, working with all those regulatory agencies. And the feedback itself has been really positive, Vijay. The open council has been excellent, the visualization, staying connected with the OR staff, and we like about that. We really think the council in our whole system is designed for where healthcare is moving, which is a real kind of cross-functional team-based approach to physician care delivery.

So obviously, you picked up some of these feedback. The way our system is designed, it’s also allowing to train multiple surgeons in parallel. And sort of your question, we’re training lots of surgeons. We have training centers now opened up in geographies across the world and seeing really good traction there as well. So we’re going to do what we told you consistently throughout, which is expand our limited market release into these markets, and continue to make progress, but thanks for the question, and thanks for spending time with Professor Moitri.

Vijay Kumar — Evercore ISI — Analyst

Thanks guys.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Thank you, Vijay.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thanks, Vijay. Next question please, Wynne.

Wynne Edgson — Director of Investor Relations

The next question comes from Pito Chickering at Deutsche Bank.

Pito Chickering — Deutsche Bank — Analyst

Good morning, guys. Thanks for taking my questions. On the guidance questions, I understand that the macro environment for 2023 is pretty challenging. But as you look at both the labor and material inflation, do you think that, that would change your long-term EPS targets or do you need more revenue growth to offset these margin pressures? Or do you think that you can pass some of those costs on to your customers over time?

Geoffrey S. Martha — Chairman and Chief Executive Officer

Let me take a stab at that. First, there are things that we’re doing. I’ll let Karen talk about some of this in a second here, but we are, in addition to — we are obviously facing these inflationary pressures. And even before the inflation kicked in, as part of our organizational kind of new operating model, one of the areas we’ve talked a lot about, moving to the 20 operating units, and putting more into R&D, and really speeding up the pace of innovation, and I think that is working. We’re getting good evidence around that this is working in terms of the pace of our product launches. And some of these product launches coming much faster than we anticipated. Like, we talked about in the — and I talked about in the commentary, like, in our Pain Stim market with DPN, diabetic peripheral neuropathy approval or — and I can go off on a couple of other lists, our ECAP submission for pain. These are areas that we just sped things up. So, I feel good about that.

But another area that we had planned to address and now are accelerating is the operations area and there is an opportunity there to get some more benefits of scale that we have, and simplify our global operations. And in simplifying that, that’s going to — I think we’re going to also invest in some enhanced capabilities there. That is going to give us a lower cost to serve, if you will, and set us up for cost of goods sold improvements over time. So that is going to help address some of this. You also mentioned price. And again, those plans were put in motion before the inflation, but we’ve been accelerating it since the inflation has hit.

And then price, I mean, price, there are — we are looking more acutely at our new technology. We have a lot of new products coming out, and we are looking at the pricing of that in the wake of some of the — of this inflation. And there are select markets around the world, where I think we have the ability — we have the opportunity to improve our pricing. So we are looking at pricing as well. So both those levers, reducing our cost to serve, and setting ourselves up for cost of goods — and better cost of goods sold over time, and then the pricing that I just mentioned. Now, Karen, do you want to add?

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Yeah, I’ll just add a little bit. While it varies by geography, we are seeing a wage inflation in our direct labor currently of almost 9%. So that is much higher than typical. And that’s just a near-term headwind that we’re dealing with that will impact us a bit in FY ’23. And on materials, right now, we’re typically able to drive net material savings through productivity efficiencies and cost-down initiatives. And right now, we’re expecting a couple of hundred basis points of inflation on that just in the near term. But again over the long term, we’re focused on driving revenue growth, on driving continued cost-down and expense efficiencies, pricing opportunities where we have them. So we’re focused on and remain committed to that long-range plan.

Pito Chickering — Deutsche Bank — Analyst

Okay. Thanks so much.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thanks, Pito. Next question, Wynne.

Wynne Edgson — Director of Investor Relations

The next question comes from Matt Miksic at Credit Suisse.

Matthew Miksic — Credit Suisse — Analyst

Hi. Thanks so much. Can you hear me okay?

Geoffrey S. Martha — Chairman and Chief Executive Officer

Yeah. We can hear you, Matt.

Matthew Miksic — Credit Suisse — Analyst

Great. So like, one — a quick one on sort of your portfolio comments. And then just a clarification on the ’23 guidance comments, if I could. So Geoff, I think sometimes when folks ask about portfolio changes or puts and takes to your businesses, they are thinking of just to put it bluntly commitment to Diabetes, frankly. So would love to get your thoughts on your commitment to that business, how important it is to the portfolio? Where you stand in terms of the process of getting it back on its feet? And then I have just one clarification, as I mentioned, for Karen.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Sure. On the comments we made about the portfolio, let me start by saying it wasn’t intended to be focused on Diabetes. It’s a real, I guess, deep dive, I would say, on the whole portfolio, okay, and more intent than we’ve done in the past. Regarding Diabetes, look, I’d say we are confident in our turnaround story here. I know the warning letter didn’t help, but we are confident in the turnaround story. We believe we have a solid pipeline of new technologies and some near-term growth opportunities. And our clear priority though is resolving the FDA warning letter and getting these new products to market, especially in the U.S., right. It’s a situation when you see the product is working in other markets, we know it would have huge impact on patients here in the U.S. as well. And we have multiple shots on goal, to deliver competitive pump and CGM technology through our organic R&D, through the Blackstone partnership and through some structured investments.

And as we mentioned in the JPMorgan Conference, we do have some parts of the pipeline that we haven’t provided much detail on for competitive reasons. So we feel — wish we were further along in Diabetes in terms of not having the warning letter, but we — it doesn’t change the narrative on our mind. We have the technology, with the pipeline. It’s a high-growth market, and we feel good about it.

Matthew Miksic — Credit Suisse — Analyst

That’s great. Thank you. And then just on — Karen, I appreciate the color on ’23 and understand it’s — we’re a quarter away here from formal ’23 guidance. But the few hundred basis point impact on EPS you mentioned from FX and some other items, dilution from Affera, just to put a finer point on it, that’s inclusive of the Diabetes impact, and also just to make sure we have the math right, that’s somewhere in the range of $0.15, $0.15 to $0.20 or something like that of a headwind from those items? Thanks.

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Yeah, Matt. Thank you. Those items, the few hundred basis points that I talked about are just from the foreign exchange flipping from a tailwind this fiscal year to a headwind next year and from the dilution. So it is — so you can see the magnitude just from those two temporal items. And that foreign exchange flip, I think at least at current rates, we would say, is much more than modest. And so that’s why we point them out.

Matthew Miksic — Credit Suisse — Analyst

Great. Thanks.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thanks, Matt. Next question, please, Wynne.

Wynne Edgson — Director of Investor Relations

Next question comes from Larry Biegelsen at Wells Fargo. Go ahead, Larry.

Larry Biegelsen — Wells Fargo Securities LLC — Analyst

Good morning. Thanks for taking the question. So, just one on the recovery and related one on China. It looks like January was soft, given your comments at JPMorgan, and the results today. So wanted a little bit more color on what you’ve seen in February and the confidence in the Q4 guidance does imply a pretty significant increase I think sequentially. And just lastly, I mean, on China, it was flat in Q3 versus growing high-teens in the second quarter. Any color on that and how you guys are thinking about VBP there? Thanks for taking the question.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Sure, Larry, on the first part of the question, yeah, Omicron impacted cases and it caused a broad-based absenteeism, right? And we use the word absenteeism to separate it from health care worker shortage. The health care worker shortage I think is more — is going to last longer into FY ’23 versus the absenteeism, and that’s driven by all the things you’ve heard about, like burnout, people leaving the workforce versus absenteeism was more short-term and acute caused by the broad number of Omicron cases. And absenteeism applies not just to healthcare workers, but our own employees working in factories, in our distribution centers, our suppliers, it was broad-based.

And so that absenteeism, plus the COVID cases suppressing elective cases in hospitals, that peaked the second half of January and into the first half of February. And trends are now favorable, as we’ve highlighted — indicated with our Q4 guidance, and we think procedure volumes will improve throughout March and April, and back to pre-COVID levels by the end of our fiscal Q4. However, you still have these chronic staffing shortages that will be — from what we’re hearing from hospital administrators persistent to FY ’23, but how — into 2023, sorry, but they are — they will be mitigated by these traveling or temporary staff where the hospitals are just paying more for these employees, and technologies like remote monitoring and telehealth. And so, we think that those mitigants will allow them to get back to the normal levels, but it will maybe limit them from going 110% or 120% of pre-COVID levels like we saw in prior waves, prior to Delta and Omicron. So that’s how we’re seeing it, and it does imply a big improvement here in Q4. But we don’t see that hospitals have a capacity to kind of handle 110%, 120% kind of levels that we’ve seen in other waves. So I hope that answers that question. And then maybe on the China piece, I’ll turn that over to Karen.

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

Yeah. Thanks, Geoff. On China, it was a bit flat in Q3, and we did see some regional tenders happening or beginning to happen in the trauma space. And as we see those tenders happening, the channel slows down their buying. So that just happens in advance. But just on VBP, in general, in China, we do expect the government to focus on the top 10 medical device products by public insurance spending. And as you know, we’ve been through stents and other industry players have gone through large joints. I mentioned we’re now seeing this regional trauma tender. And we see two more potential national tenders on that list where we have exposure, and that would be in spine and surgical stapling. And obviously, there is a lot of uncertainty around these tenders, including timing.

But just so you know, if you look at our spine and stapling business in China, our gross exposure is somewhere between 1% to 1.5% of the total company revenue. And based on what we experienced with stents, there should be offsets to that ultimate — to the ultimate number so that the net would be less than the gross that I mentioned, because we’ve got pull-through of products, and we’ll obviously be working those. We are anticipating at least one of those tenders to happen in FY ’23. These are among the things that put pressure on the plus side of our long-term 5% plus goal for next year. So, hope that’s helpful.

Larry Biegelsen — Wells Fargo Securities LLC — Analyst

Thank you so much, Karen.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thank you, Larry.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Thanks, Larry.

Ryan Weispfenning — Vice President and Head, Investor Relations

Next question, Wynne.

Wynne Edgson — Director of Investor Relations

The next question comes from Joanne Weunsch at Citi.

Joanne Weunsch — Citigroup — Analyst

Good morning. Can you hear me okay?

Geoffrey S. Martha — Chairman and Chief Executive Officer

Yeah. Sure, Joanne. How you’re doing?

Joanne Weunsch — Citigroup — Analyst

I’m doing okay. Thank you for taking my question. And I want to just build off of Karen’s last comments on the plus side of the 5% somewhat for next year, but even the year after that, what needs to happen in order for you to get there? And specifically, I do have a number of investors who think or say they can’t get plus side without a Diabetes turnaround.

Geoffrey S. Martha — Chairman and Chief Executive Officer

I think what I like about our position right now is the breadth of the portfolio — the strength of the current portfolio, and the strength and breadth of the pipeline. And we have several drivers — there’s a lot of focus on obviously on Hugo, and we talked about that, and we’re feeling good there. And certainly, by that time, we’ll work through some of these manufacturing and supply chain issues, and we’re feeling really good about the quality of what we have here and the impact that Hugo is going to have. We’ll get the RDN data readout as well, and I’ll come back — we talked about Diabetes. But beyond that, you’ve got things like, and I’ll just highlight a few, and I’ll start in cardiovascular, you got our EV ICD coming. We see that market to be $2 billion to $3 billion. And then our Cardiac Ablation Solutions business, there for A-fib, we’ve got PFA. Of course, our DiamondTemp rollout is — will peak, and we’ve got PFA coming. In Med-Surg, beyond Hugo, SI is hitting a nice part of its product cycle here. There is a number of products that will have an impact coming in SI. And then our Neuroscience Portfolio, just across the board, is well positioned.

You heard in the commentary about Neuromodulation, with DPN and Pain, ECAPS and Pain, and that’s strength on strength, sort of DTM is doing well there. You got DBS with the sensing in the closed-loop. Pelvic Health, that market continues to be a stronger growth market, and we’ve got a great product lineup there. ENT, we’ll be adding Intersect, and I really believe our Spine business is poised with the broad base of enabling technology and just where that market’s going definitely favors us. And then you heard today that Neurovascular is back to gaining share. We’ve — over the years, we’ve relied on that. So it’s a broad base of technology. And I think with the new operating model, I expect it to keep refilling that pipeline up.

That’s the focus. So that’s what I would say. We feel good about, as Karen said, there’s more puts and takes next year than normal for sure. And she has gone through that, I think, in good detail. But the long — we are committed to the long-term plan, and it starts with this top line growth. And based on the broad nature of it, we feel good.

And then, getting back to Diabetes, remember, we do have the 780G with the Guardian 4 sensor. We will have a new sensor beyond that in that timeframe with Simplera. And that Simplera sensor could also be paired with our pen from Companion and creating a whole new vector of growth for our Diabetes business there, with smart pens paired with our sensor. So there is a number of drivers there. And you take it all, it doesn’t all need to happen to get to that 5%-plus once you get past FY ’23.

Karen Parkhill — Executive Vice President and Chief Financial Officer, IT and Enterprise Excellence

And, Joanne. I just want to emphasize from the — from my seat that we are really confident in that 5%-plus over the long term, and it is because it’s not dependent on any one thing, but it’s the strength of the pipeline that Geoff mentioned.

Joanne Weunsch — Citigroup — Analyst

Excellent. Thank you so much.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thanks, Joanne. Next question, Wynne.

Wynne Edgson — Director of Investor Relations

The next question comes from the line of Danielle Antalffy from SVB Leerink.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Hey, Danielle?

Danielle Antalffy — Leerink Partners — Analyst

Oh, so, sorry. Can you guys hear me okay?

Geoffrey S. Martha — Chairman and Chief Executive Officer

Yeah, we can hear you just fine.

Danielle Antalffy — Leerink Partners — Analyst

Okay. Great. Thank you so much and appreciate all the commentary you guys provided as we look out over the next fiscal year. Just a quick question as you think about the ramp in new — major new product launches. So you’ve talked about Hugo a little bit here, but there is obviously also RDN. And just a follow-up on Joanne’s question, I guess, as we think about fiscal ’24 and beyond, so beyond the next fiscal year, how we should be thinking about that ramp? I know we’re waiting for the data, but has anything changed as far as thinking about contribution for some of these major new product launches? Thank you so much.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Well, on the RDN question, and maybe I’ll pull in Sean Salmon here to provide an update on RDN.

Sean Salmon — Executive Vice President and President, Diabetes Operating Unit, Cardiovascular Portfolio

Okay. So, Geoff, I think the data readout on RDN we’re expecting now and that kind of late fall, early winter time frame of this calendar year. But there may be a milestone in between now and then to give you more confidence. We have the 3-year data from the pilot trial On MED is being presented at ACC this year. And why that’s important is that would be the first time we’ve had randomized data with long-term follow-up, so the question around how long does the effect last, it doesn’t wear out. That’s going to be really important for payers, and it’s an important inflection point. But — and we remain very confident. All the body of evidence that we had for RDN has continued to be very consistent. And we’re making preparations to really go after a blockbuster launch here.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Good. Another one that we’ve mentioned a little bit in the commentary, Danielle, that, maybe I’ll have Brett Wall comment on, is two things in Pain. Our Pain businesses are really well positioned with our DTM, but the diabetic peripheral neuropathy and the ECAPS submission, do you want to comment on those two things, Brett, because those are I think together pretty meaningful.

Brett Wall — Executive Vice President and President Neuroscience Portfolio

Yeah, sure, Danielle. These two things are pretty meaningful. We received the diabetic peripheral neuropathy approval about 2.5 years before we anticipated that. We think that’s a market that, as Geoff said, in the commentary is going to grow to $300 million pretty quickly. We are well positioned with that and the data there that we submitted is very strong data. And it’s reflective of the other data that has been presented in that same field. So we have every right to win there, and we will be investing and moving accordingly. In addition, we submitted late last year our ECAPS filing. And ECAPS is a closed-loop algorithm that will be utilized in SCS. And we are back to gaining share really across the Neuromodulation portfolio, but in SCS, in particular, with DTM, and now with the embodiment of our stimulation programs with the sensing capability to close the loop and allow for really more effective therapy there. So the entirety of this portfolio is set up, as the markets recover and as procedures recover, as we wind down Omicron for share gain and growth across the field with more effective therapies in this entire area.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Yeah, and so just last comment on that. I mean, look, obviously, they’re both great opportunities. But the other piece that I really like about them is just how we did this, right. These, in both cases, you had a small, smaller — and in one case, with ECAPS a start-up, smaller focused companies that innovate — that signaled the innovation here. And historically, we haven’t moved that fast to — and now we’re moving at a much faster pace and I just love the way we’ve put these focus teams on there, gave them this challenge in both of these instances to move fast, don’t sacrifice quality, but move fast. And this is the type of thing that we want to see — we’re starting to see across the portfolio with the new operating model, with the leaders we have in place, so some of the new leaders we brought in from outside the company, and like I said earlier, also now, beyond innovation, moving on to really improving our capabilities in our end-to-end supply chain, to make sure that it’s reliable, and it sets us up from a cost position as well. So like where the company is headed, and like those two examples, in particular.

Danielle Antalffy — Leerink Partners — Analyst

Thank you so much.

Ryan Weispfenning — Vice President and Head, Investor Relations

Yeah. Thanks, Danielle. And I apologize we’re not going to be able to get to all the analysts today, but we do have time for one more question. Can we take that, Wynne?

Wynne Edgson — Director of Investor Relations

Our final question comes from Rick Wise at Stifel. Go ahead, Rick.

Rick Wise — Stifel Nicolaus — Analyst

Thanks, Wynne. Good morning, Geoff. Hi, Karen. Geoff, maybe just given your commentary about — and appreciation for your stepped up R&D spending, and your comment about using a portion of cash flow for a continuing M&A sort of in a sense an extension of R&D. Maybe can you talk a little more, just give us your latest thinking on how your reflection is on your targets? Are there a lot of opportunities to increase your minority investments? Where are you — what are you prioritizing for the calendar year and the next several years, what are you targeting, just any updates would be very welcome? Thank you.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Sure, Rick. Great to hear from you, thanks for that question. I’ll answer it a couple of ways. One, yeah, this is separate. These tuck-in acquisitions and venture investing, that’s separate from the broader portfolio comments I made earlier. This is what we view part of our everyday business here is doing tuck-ins. And so, a couple of things I’d say, one we have stepped up our venture investing. We separated our invest — our venture team maybe two years ago from our M&A team to have more focus. We have separate operating mechanisms with these — with this team that Karen, myself and several others from the Executive Committee participate in. And so we have stepped up those investments. And a lot of those investments, some of them are just debt or equity, but some of them are more structured investments that give us opportunities down the line. So that is significantly up.

And then on the acquisition space, I was hoping, like I said in prior calls, that during COVID evaluations would go down a bit and present opportunities. That didn’t happen initially, but valuations have come down a bit and our pipeline is fuller than it has been over the last two years. You see the Intersect deal, that Intersect deal for ENT that we announced and the Affera deal for our Ablation Solutions business, those are the type of like acquisitions in that billion, multi-billion dollar range that have — in the case of Intersect ENT, we’ll have an immediate impact, because they’ve got meaningful revenue. The Affera deal, it will take a little bit longer. It’s still earlier in development, but hugely impactful. What I like about that deal is how it repositions our — really strengthens our ablation business, thereby providing the MAP NAV and complements our PFA offerings.

So we’re seeing things across the board, if you will, particularly I would say a lot interesting things in Neuroscience, a lot of interesting things in the Cardiology space as well. So that’s how I’d answer that question.

Rick Wise — Stifel Nicolaus — Analyst

Thank you very much.

Ryan Weispfenning — Vice President and Head, Investor Relations

Thanks, Rick. Geoff, please go ahead with your closing remarks.

Geoffrey S. Martha — Chairman and Chief Executive Officer

Okay. All right. Thanks, Ryan. Okay. Look, thanks everybody for the great questions. And we appreciate, certainly appreciate your support and your continued interest in Medtronic. And look, we obviously — Karen outlaid — outlined some of the puts and takes that we have that we’re working through, but we also have, like I ended on like some extraordinary opportunities in the marketplace, and you combine that with the changes that we’ve made in the company and continue to make that I think are having a meaningful impact, I’m confident in our ability to work, move past these — to work through these challenges, move past these challenges and deliver on these opportunities, and deliver on that plan, that long-range plan that we’ve outlined. And we are steadfast in our commitment to deliver durable and higher growth, full stop. So look, we’ll hope you join us for our Q4 earnings webcast, which we anticipate holding on May 26, where we’ll update you on how we finished the fiscal year and then even a more detailed look ahead at fiscal ’23. So with that, thanks for tuning in today. Please stay healthy and safe. And have a great rest of your day.