Boston Scientific exceeds expectations with 19% operational sales growth, raises full-year guidance to 15.5%, driven by strong performance in cardiovascular and med surg segments.

OPERATOR - (00:01:53)

Good morning and welcome to the Boston Scientific third quarter 2025 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Lauren Tangler, Vice President, Investor Relations. Please go ahead.

Lauren Tangler - Vice President, Investor Relations - (00:02:33)

Thank you, Drew. And thanks to everyone for joining us. With me today are Mike Mahoney, Chairman and Chief Executive Officer John Monson, Executive Vice President and Chief Financial Officer. During the Q and A session, Mike and John will be joined by our Chief Medical Officer, Dr. Ken Stein. We issued a press release earlier this morning announcing our Q3 results which included reconciliations of the non GAAP measures. The release, as well as reconciliations of the non GAAP measures used in today's call can be found on the Investor Relations section of our website. Please note that on the call, operational revenue excludes the impact of foreign currency fluctuations and organic revenue further excludes certain acquisitions and divestitures for which there are less than a full period of comparable net sales. Guidance excludes the previously announced agreement to acquire Nalu Medical, which is expected to close in the first half of 2026, subject to customary closing conditions. For more information, please refer to the Q3 financial and operating Highlights deck which may be found on the Investor Relations section of our website. On this call, all references to sales and revenue are organic and relative growth is compared to the same quarter of the prior year. Unless otherwise specified, this call contains forward looking statements regarding, among other things, our financial performance, business plans and product performance and development. These statements are based on our current beliefs using information available to us as of today's date and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect or certain risks or uncertainties materialize, actual results could vary materially from those projected by the forward looking statements. Factors that may cause such differences are discussed in our periodic reports and other filings with the sec, including the risk factors section of our most recent annual report on Form 10K. Boston Scientific disclaims any intention or obligation to update these forward looking statements except as required by law at this point. I'll turn it over to Mike.

Mike Mahoney - Chairman and Chief Executive Officer - (00:04:30)

Thanks, Lauren. Thank you everyone for joining us today. Our quarterly results again exceeded our expectations, led by our innovative portfolio, strong execution and a winning spirit of our Global team. In third quarter 25 total company operational sales grew 19% and organic sales grew 15, exceeding the high end of our guidance range of 12 to 14 with sustained high performance in both our cardiovascular and med surg segments. Q3 adjusted EPS of $0.75 grew 19%, exceeding the high end of guidance range of 70 to $0.72. Q3 adjusted operating margin was 28%. Turning to our fourth quarter and full year 25 outlook, we are guiding to organic growth of 11 to 13% for fourth quarter 25 which implies an increase to our full year 25 guidance to approximately 15.5% reflecting our confidence to sustain above market growth. Our fourth quarter adjusted EPS guidance is now 77 to $0.79 and we are thus raising our full year adjusted eps guidance to $3.02 to $3.04 representing growth of 20 to 21%. John will provide more details in the Financial section. I'll now provide some additional highlights on our third quarter results and outlook. Regionally on an operational basis the US grew 27% with impressive growth. The excellent growth is broad based across our cardiovascular businesses, endoscopy and neuromodulation. Europe, Middle east And Africa did decline 2% on an operational basis as a result of two impactful yet transient headwinds in the quarter. First, the discontinuation of our accurate valve in May 25th which had prior year third quarter sales of approximately 50 million and secondly we implemented our upgraded ERP system mid quarter at our Kirkrad Distribution center. This did result in a backorder of approximately $30 million impacting a number of our businesses in Europe. We do anticipate this backorder will improve throughout the fourth quarter excluding these two headwinds. EMEA growth would have been high single digits driven by strong double digit growth in EP and continued high utilization of Farapulse and double digit growth in complex PCI. Asia PAC grew 17% operationally led by strong double digit growth across Japan and China. Japan growth was driven by Watchman and EP which saw excellent performance in the quarter, led by Farapulse which recently received expanded labeling for persistent indication and was supported by our Opal HDX mapping system. China grew an impressive mid teens despite the substantial VBP in our peripheral business. China growth was broad based and driven again by growth in ICTX and ep. Within the quarter we received NMPA approval for the WATCHMAN FLX Pro device and recently began commercial launch which coupled with Farapulse and investment in clinical evidence such as Option A drives our confidence in sustained mid teens growth over the LRP in China. I'll now provide some additional commentary on our business units starting with urology. Urology sales grew 27% operationally and 5% organically. Growth in the quarter is driven by our international business and a global stone management franchise. Axonic's performance continues to be below expectations as we are focused on improving our commercial execution post the unplanned commercial disruption. However, we remain enthusiastic about the S and M market opportunity in our future as we focus on strengthening the commercial team, patient activation and globalization opportunities. We're pleased to have recently received approval for Axonix F15 in Europe. Our outlook for the Axonics business coupled with our broad innovation cadence across the business drives confidence in our expectation that urology growth will improve throughout 2026. Endoscopy delivered an excellent quarter growing 9% driven by double digit growth in key products including Axios, Mantis and Overstitch combined with our differentiated broad portfolio. Notably the US grew 11% led by the recent launch of Wallflex plus and above. Market growth across the pancreatico biliary franchise neuromodulation is a strong quarter as sales grew 9%. Our Brain franchise grew low double digits supported by the five year results from the Intrepid study which demonstrated sustainable benefits of DBS in patients with moderate to advanced Parkinson's disease. The pain franchise continues to strengthen and grew high single digits led by strong double digit growth in the US With Intracept. The team is in the early stages of launching Intercept in Europe. We also just announced our agreement to acquire Nalu Medical which we anticipate will expand our portfolio into a new pain adjacency in peripheral nerve pain. This is an excellent new growth opportunity and complements our commercial strength with the interventional pain physician. We expect this transaction to close in the first half of 2026. Peripheral intervention sales grew 16% operationally and 6% organically with excellent low double digit growth in the US that was offset by the China VBP. Within our peripheral vascular business we saw low single digit decline in arterial again driven by the China VBP During September. Silk Road turned organic and delivered improved high single digit pro forma growth within the quarter supported by the recent launch of Enroute in China. Looking forward, we continue to expect a very limited launch of seismic IVL for peripheral above the knee procedures by year end 2025 and increasing launch cadence I'm sorry in 26 and an increase in launch cadence in 27. In Venus we saw excellent double digit growth led by a continued strength in Varithena and Ecosystem. Within the quarter hypothro our clinical study with ECOs versus standard of care anticoagulants completed enrollment and we expect data to be presented in 2026. Our interventional oncology and embolization business grew double digits driven by our category leading embolization and cancer therapies portfolio with notable strength in cryoablation which treats a broad number of cancer types. Clinical evidence remains a key enabler for future growth and within the quarter we completed enrollment in two important trials. Rowan which studies TheraSphere in combination with AstraZeneca Stride regimen for patients with HCC and Occlude, a large real world registry for obsidio conformable embolic cardiology delivered another outstanding quarter with sales growing 23%. We within Cardiology Interventional Cardiology Therapy sales grew 3% which does include the impact of the accurate withdrawal with double digit growth in coronary therapies driven by agent drug coated balloon in the US and our imaging catheters globally. The US grew 21% led by agent DCB where we continue to expect strong growth supported by the new technology add on payment that was recently approved and went into effect October 1st. In the long term we're investing to expand the indicated patient population with evidence from our STANCE trial evaluating agent versus standard of care in de novo lesions which began enrollment in August. We continue to be excited about the addition of seismic IVL to our leading coronary therapies portfolio and expect completion of the fracture trial in first quarter 26. We expect to launch this differentiated technology in the US in early 27, further expanding our See Prep Treat approach. Across our portfolio, cardiac rhythm management sales grew 2%, our diagnostic franchise grew low double digits led by continued above market performance with our Lux ICM device in core CRM. Our low voltage business grew low single digits with the momentum from the launch of our conduction system pacing tools in the US and Europe and our high voltage business declined low single digits. We recently closed the acquisition of the Alucia BioEnvelope assets which are designed to prevent post operative complications for devices such as pacemakers and defibrillators. We look forward to expanding the reach of this technology to more global markets as a complement to our core CRM portfolio, Watchman grew an outstanding 35% this quarter and surpassed 600,000 patients targeted to date. The excellent growth in the quarter reflects accelerated concomitant uptake in the US and continued penetration into the 5 million patients indicated today through excellent clinical results and strong patient and physician awareness. We continue to expect approximately 25% of the US watchment procedures to be done, concomitantly exiting 25 with the potential for that to double by 2028 enabled by the trusted Farawatch approach. We are confident that we can continue to grow the Watchman market by approximately 20% for the years to come, driven by continued concomitant uptake, the upcoming data presentation of champion in 1H26 and the launch of our next generation device Watchman Elite expected in late 27 or early 28. Turning to EP we're incredibly proud of our EP performance with third quarter sales growing 63% as we drive continued share gains in the overall EP market. Verapulse remains the leading PFA technology having treated over 500,000 patients to date with consistent and reproducible real world results further demonstrated in the recently published one year results from the Faradayce trial which showed favorable procedural and safety outcomes and clinical effectiveness across ablation strategies and AF types. In the US we saw continued strong double digit growth in ferrupulse supported by ramping adoption of our Opal HDX mapping system with 1 in 3 Farapulse accounts now utilizing our integrated Fairwave NAV and OPAL device. The team is executing our pipeline strategy and we recently launched our Contact Sensing feature and are moving to full release this month. Looking forward, our aim is to continue to grow our share in the overall EP market and we expect to retain a strong leadership position in PFA enabled by our innovative portfolio, expanding mapping and commercial resources and consistent data publications. We expect global PFA penetration to continue to expand and to exit 2025 at 50% penetration and grow to approximately 80% by 2028. At our recent investor day, we shared that we aim to be the market share leaders not just in PFA but the overall EP market over time. We are investing today to outpace the approximately 15% market growth expected through 28 by advancing our ecosystem of innovative solutions across both the AF and non AF segments of the market. We are simplifying ablations and the workflows associated with them and expanding patient access through clinical evidence generation across the globe. By year end 25, we expect to make meaningful progress towards expanding access to new technologies and more complex and redo patients with the launch of our Fairpoint PFA catheter as well as initiating enrollment in the Optimized trial which will study the integration of OPAL in the Cortex AI algorithm. Cortex is a differentiated mapping software designed to precisely visualize and target sources of arrhythmias, addressing an unmet need in the treatment of persistent AF patients with unexplained reoccurrence. In closing, I look forward to finishing out an outstanding 2025 and delivering on our guidance, which will result in another year of delivering highly differentiated financial results versus our peer group. And as we highlighted at our recent Investor Day, we have an incredibly strong global team that is relentlessly pursuing and investing in meaningful innovation to deliver differentiated growth and leverage EPS growth this year and for years to come. And with that, I'll hand over to John to provide more details on the financials.

John Monson - Executive Vice President and Chief Financial Officer - (00:16:53)

All right, thanks Mike. Third quarter consolidated revenue of $5,065,000,000 represents 20.3% reported growth versus the third quarter of 2024 and includes a 90 basis point tailwind from foreign exchange which was favorable versus our expectations. Excluding this $38,000,000 foreign exchange benefit, operational revenue growth was 19.4% in the quarter. Closed acquisitions contributed 420 basis points to sales resulting in 15.3% organic revenue growth which was above our third quarter guidance range of 12% to 14%. Q3 2025 adjusted earnings per share of $0.75 grew 19% versus 2024, exceeding the high end of our guidance range of $0.70 to $0.72, primarily driven by strong drop through on above expectation revenue and margin performance in the quarter. Adjusted gross margin was 71% for the third quarter representing a 60 basis point improvement versus the third quarter of 2024 primarily due to favorable product mix driven by strong growth in electrophysiology and watchman and partially offset by tariffs. As a result of our Q3 performance, we now anticipate full year adjusted gross margin to slightly improve versus 2024 inclusive of an approximate $100 million tariff headwind for the full year, unchanged versus previous expectations. Third quarter adjusted operating margin was 28%, expanding 80 basis points versus the prior year period driven by strong drop through on our top line performance on a GAAP basis. Third quarter operating margin was 20.7%. Moving to below the line. Third quarter adjusted interest and other expenses totaled $116 million which was in line with our expectations. On an adjusted basis, our tax rate for the third quarter was 13.6% and our operational tax rate was 13.9%. Fully diluted weighted average shares outstanding ended at 1,495,000,000 shares in the third quarter and free cash flow for the third quarter was $1,163,000,000 with $1,343,000,000 from operating activities less $181,000,000 in net capital expenditures. We continue to Expect full year 2025 free cash flow to be approximately $3.5 billion, reflecting strong cash conversion driven by earnings growth and disciplined working capital management. As of September 30, 2025, we had cash on hand of $1,275,000,000 and our gross debt leverage ratio was 2.0 times. Our top capital allocation priority remains strategic tuck in M and A in high growth adjacencies followed by share repurchase. In alignment with this strategy, we recently closed our acquisition of the Alucia BioEnvelope assets and announced our agreement to acquire Nalu Medical. Our legal reserve was $306 million as of September 30, with $46 million already funded through our qualified settlement funds. I'll now walk through guidance for Q4 and full year 2025 we expect full year 2025 reported revenue growth of approximately 20% excluding an approximate 100 basis point tailwind. From foreign exchange, we Expect full year 2025 operational revenue growth of approximately 19% excluding an approximate 350 basis point contribution. From closed acquisitions, we expect full year 2025 organic revenue growth of approximately 15.5% versus 2024. We expect fourth quarter 2025 reported revenue growth to be in a range of 14.5% to 16.5%, excluding an approximate 200 basis point tailwind. From foreign exchange, we expect operational growth to be in a range of 12.5% to 14.5% and excluding an approximate 150 basis point contribution. From closed acquisitions, we expect fourth quarter 2025 organic revenue growth to be in a range of 11% to 13% versus 2024. As a result of our year to date margin performance, we now expect to expand full year adjusted operating margin by approximately 100 basis points at the high end of our prior range of 75 to 100 basis points and we continue to expect full year 2025 adjusted below the line expense to be approximately $440 million. We also maintain our forecast for a full year adjusted tax rate of approximately 12.5% and an operational tax rate of approximately 14%. We expect full year adjusted earnings per share to be in a range of $3.02 to $3.04 representing growth of 20% to 21% versus 2024. We continue to expect an approximate 4 cent foreign exchange headwind on full year adjusted earnings per share and for Q4 we expect adjusted earnings per share to be in a range of $0.77 to $0.79. In closing, I'm pleased with our strong third quarter financial performance and look forward to executing on our full year 2025 guidance and and our long range financial goals which we shared at our recent investor day. From 2026 to 2028, we're targeting 10% plus average organic revenue growth, approximately 50 basis points of annual adjusted operating margin expansion, leveraged double digit adjusted earnings per share growth, and 70% to 80% annual free cash flow conversion. We feel that these goals represent differentiated performance in Medtech and we look forward to executing on them. Thank you all for joining us today. For more information, please check our investor relations Website for the third quarter 2025 financial and operational highlights which provides more details on our results and updated guidance. And with that I'll turn it back over to Lauren who will moderate the Q and A.

Lauren Tangler - Vice President, Investor Relations - (00:23:18)

Thanks John Drew. Let's open it up for questions for the next 35 minutes or so. In order for us to take as many questions as possible, please limit yourself to one question. Drew, please go ahead.

OPERATOR - (00:23:30)

Thank you. We will now begin the question and answer session. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star then two. Again, please limit yourself to one question at this time. We will pause momentarily to assemble our roster. The first question comes from Robby Marcus with JPMorgan. Please go ahead.

Robby Marcus - (00:24:07)

Oh great. Good morning and congrats on a really good quarter here. One for me and Mike, this comes on the tail of what was a really bullish analyst day and I think what's really coming through in the discussion this morning with investors is EP has been a phenomenal growth driver, but Watchman is really what's the most exciting, at least from the print today and the incremental upside that you're continuing to see an acceleration here off the back of concomitant and the option data in the fall of last year. So the question is really do you think of Watchman as a key growth driver and how do you think people should really expect growth and dollar contribution to progress assuming the champion data is positive, just given how much this market has exploded and still how low penetration is potentially versus the addressable population. Thanks a lot.

Mike Mahoney - Chairman and Chief Executive Officer - (00:25:14)

Well, thank you very much Robbie. We're super pleased with the overall performance for the global company and you pointed out two excellent performers in EP and Watchman and Watchman clearly is a gem for Boston Scientific. We essentially created the market through great clinical evidence. And you saw at Investor Day a really strong portfolio going forth for the future, along with expanding evidence in the big Champion trial to be read out first half 2026. And concomitant really continues to exceed expectations. It's been adopted very quickly now. We expect 25% of the watchman procedures to be done concomitant. So that's certainly a tailwind for us. And the whole combination of Farapulse and Watchman together in that procedure is really becoming standard of care for hospitals and physicians, given the safety profile and trust they have in that solution, along with our excellent commercial teams. So in framing the market kind of similar to what we said, Investor Day, we're comfortable with a 20% market CAGR over the LRP given the strong momentum of Watchman, the underserved patient population that we continue to focus on. Also the globalization of Watchman. We saw some good news in China in the quarter with the approval of FLX Pro, which will help China really strengthen their performance in 2026. So there's just a lot of great things going on with Watchman in terms of the concomitant procedure itself, the trust that the community and referrers have in concomitant procedure, the tremendous pipeline of patients that are still very underserved, and the resources and investment that we're placing in additional portfolio enhancements and clinical to broaden it out. We have a very unique strong market share in Watchman and we plan to continue that market share strength that we have while this market continues to grow very quickly.

Robby Marcus - (00:27:17)

Appreciate the thoughts. Thanks a lot.

OPERATOR - (00:27:21)

The next question comes from Joanne Winch Jones and Citibank. Please go ahead.

Joanne Winch Jones - Equity Analyst - (00:27:27)

Good morning and thank you for taking the question. And may I also say, very nice quarter. I'd like to step back just for a second and get your impression on two sort of bigger items that are impacting MedTech. One is China. Sounds to me like your China business is doing just fine, but obviously would love your view. And second of all, we sort of picked up that there may be some procedures that are being pulled forward as people think about Affordable Care act cuts and Medicare cuts as we look forward. And I'd love to see or hear what you're seeing in those things. Thank you. Sure.

Mike Mahoney - Chairman and Chief Executive Officer - (00:28:07)

And the first one, procedure pull forward. We don't have any signals that would indicate we're seeing procedural pull forward across our businesses. So that's something we'll watch out for. But I would say we did not see that in the third quarter. More of a consistent procedural demand that we expected and continue to expect going forward. I think China shows the really the winning spirit of our global team and the strength of our team in China and really just the innovation focus that we have across Boston Scientific is represented well in China as we continue to differentiate ourselves versus our peer group there. In the quarter we again grew mid teens. We indicated at the Investor Day we are comfortable with double digit growth across the LRP even though that business is getting much larger for us. And as we've mentioned before, we are able to continue to offset VBP price pressures with new innovation and new launches and our combined portfolio combined with expanding our reach of our customer coverage across the China opportunity. So you know we have a, we have a broad base of business there years ago with solely ictx, but the ICD business is our largest business there. They do extremely well. The imaging business with ICD has done remarkably well and growing quite well and the EP business had a nice quarter and we expect bigger things out of the China EP business in the fourth quarter and as we go into 2026 that'll provide some additional tailwind. And Watchman Flex Pro was also a big launch for us as our Watchman business has been slower in 25 without that product. So we do see EP, Watchman and ICD continue to carry and offset the VBP headwinds that we face and that's why we're comfortable with the double digit growth going forward.

Joanne Winch Jones - Equity Analyst - (00:30:06)

Thank you so much.

Larry Beagleson - Equity Analyst - (00:30:09)

The next question comes from Larry Beagleson with Wells Fargo. Please go ahead. Good morning and I'll echo my congratulations on another really nice quarter here. I wanted to follow up on Robbie's question on Watchman and the LAA market. I think some investors were surprised by. The 20% market outlook you provided at Investor Day given the growth we're seeing. Today, which is much higher and we. Have champion coming in the first half of next year. So my question is, is there anything. You'Re seeing in studies like Alone AF. And Ocean that's coming at American Heart that concerns you? And Maybe just lastly, Dr. Stein, how.

Mike Mahoney - Chairman and Chief Executive Officer - (00:30:49)

Much of a read through will closure AF at American Heart be to champion? Thanks for taking the question. I would say at a high level. Hopefully you appreciate that we do like to provide as accurate forecast as we can on market growth, but we also like to deliver and exceed our commitments. I think that's really important for our team and our investors and I think Ken, you can speak to this more substantial part of the question.

Ken Stein - Chief Medical Officer - (00:31:19)

Yeah, no thanks. Thanks Mike. Thanks Larry. I got. Thinking about 20% growth over sustained number of years of the LRP as conservative just said something about just how impactful Watchman has been as a therapy and I think will continue to be. You know, as we mentioned earlier with Robby's question, even the currently indicated population is way underpenetrated. And that's why we are very comfortable in that 20% growth over the long range plan. But I think to answer your questions about some of the studies that are coming up, let me talk about them first. Closure. So that's trial that is going to be reported on aha. I don't think it's a particularly good reason read through for Champion. It's a very different European population, a very different primary endpoint, a shorter follow up. You know, we continue to think that other trials like Prog 17 and option honestly give us really confidence in what we hope that Champion will show. I think in terms of Alona F and a trial called Ocian that will be reported out at aha. You know, both of those. First off, if Ocean is confirmatory of alone af, that's great news, right? Saying that low risk patients undergoing AF ablation may no longer need stroke prevention. And I want to remind you all that up until now, except for very select populations, AF ablation was only really indicated as a way of managing patients with significant symptoms from their Afghanistan. And so this supports the continued growth of Faripulse as patients seek AF ablation in order to come off their blood thinners. But and this is important, the patients who are currently getting concomitant farawalch procedures are not the low risk patients who were studied in alone af. And we have not seen any material impact to concomitant following the publication of alone. And again, so taking all of this together, you know the, the significantly underpenetrated currently indicated population, the prospect of indication expansion with trial like Champion, the continued growth in ablation for AF. We remain really comfortable with the projection of 20% annualized growth over our LRP.

Larry Beagleson - Equity Analyst - (00:33:48)

Thank you so much.

OPERATOR - (00:33:51)

The next question comes from Rick Wise with Stifel. Please go ahead.

Rick Wise - Equity Analyst - (00:33:58)

Good morning, Mike. Hi John. I'd like to focus on the very impressive margin performance. John, you kept saying strong drop through to margins from the revenue outperformance. Got it. But I was hoping you'd sort of give us a little more color. I mean your gross margins which I know you don't got to specifically almost back now to pre Covid levels. Help us think through as we try to model looking ahead, where do we go from here on the margin front, how big a driver of your operating margin goals is gross margin and just help us understand maybe with a little more color the drivers from here it just feels like given the revenue strength and what we saw this quarter that your 50 basis point annual improvement could prove conservative. He said optimistically. Thanks so much Rick.

John Monson - Executive Vice President and Chief Financial Officer - (00:35:04)

Appreciate the question and yeah pleased with the performance in the quarter and our expectation to expand operating margins on our basis points on the year overcoming the tariff impact of approximately $100 million that we've sized for the year in the quarter as I mentioned saw very strong gross margin tailwind from mix. We spent some time talking in Q and A about watchman. The 35% growth there EP continuing to perform very well for us. Nice mix benefit there. Mike mentioned in his remarks how all our agent drug coated coronary balloon is performing. So mix really driving the gross margin performance that we saw in the quarter. And we're now expecting gross margin to slightly improve year over year despite that $100 million tariff headwinds. So then as we head into next year we're rolling up our annual operating plan process now and we'll provide more detail as we typically do when we have our Q4 call at the start of next year. But broadly as we mentioned at our investor day, do expect to expand operating margin each year, every year targeted roughly 50 basis points a year within the pieces there would expect to. With gross. Margin would expect that MIX will continue to be a tailwind for us. We will see annualization of tariffs in 2026. So that will be a further headwind based off of our expectations today. You know, expect us to continue to drive leverage through SG&A and then R and D. You know we've got that roughly between 9 and 10%. I think that's a nice level of investment at the high end of our peer set. So I think that's a good place for us to live moving forward. So again appreciate the question Rick. Love the momentum of the business and the financial performance while reinvesting back into the business for growth. And as always we'll provide much more detail when we get to our Q4 call at the start of next year.

Rick Wise - Equity Analyst - (00:37:24)

Thanks John.

David Roman - Equity Analyst - (00:37:26)

The next question comes from David Roman with Goldman Sachs. Please go ahead. Thank you. Good morning everybody. Mike, you referenced this in response to one of the earlier questions but was hoping you could expand on the dynamics in the business kind of outside EP and Watchman. There's obviously a disproportionate focus on those businesses given how strong a growth contribution they've been. But as we look forward I think everyone understands that the EP business is going to decelerate given just the size and the competitive landscape there, even with strong market growth. But if you look across the rest of the portfolio, you're seeing good momentum in businesses like neuromodulation and endoscopy. You talked about some of the improvements you're seeing in Silk Road but maybe help frame for us what are kind of the the drivers that support the growth outlook in the rest of the business and where you think from a product perspective we should be focused.

Mike Mahoney - Chairman and Chief Executive Officer - (00:38:26)

David, really appreciate that question. So much of the attention goes to our EP business and it should given the we were just number four, now we're clear number two and have higher aim over the future. But as you said it's not going to grow as fast as it has given that we're anniversary in comps and the size of the business. But we expect it to be an outstanding performer in 26 and beyond in our EP business. But I'm really proud of the rest of the divisions and not every one of our business grows faster than market every quarter. But as a composite we clearly do and that's what we indicated at our investor day to grow faster than our 9%. WAMGR (Weighted Average Market Growth Rate) Med surg in the quarter had a healthy 8% growth, very strong growth with our endoscopy business. We've got a few different alliances and product launches that we're launching in 26. We expect strong endo performance. Euro has had a tougher year. We have high expectations. We talked about Axonix in the script. We expect Axonics to get stronger in fourth quarter and in 26 and Euro will actually have some easier comps in 26. We expect some acceleration there and I'm really proud of our Neuromod team. They've really clawed back over the years and now they drove 9% I think it was 9% growth in the quarter and we just closed the or we haven't closed. We signed the Nalu acquisition, another great adjacency for us. So we're really will be with Nalu, the clear category leader from a portfolio perspective in paying business with a improved and strengthening SES business, a solid RF business. Relevant has done better than we had planned with that acquisition and now Nalu. So similar to Endo and other businesses, we have the widest portfolio in neuromodulation and some unique abilities to work with our customers in that regard. Our ICD business has transformed itself from a reliant on DES to a high growth business led by our imaging business, our agent and complemented with the rest of the portfolio. And we have, as we said in Investor day, we have our largest investments in the company within ictx. The most near term one is our IVL product for PI, which will launch in a limited way at the end of this year. We'll get a full benefit of that in 2026. And the trial for IVL and cardiology is going extremely well and we look to wrap that up hopefully early in first quarter 26 and launch that in early 27. And then we have a number of other large investments, some that we talked about in Investor day. IO continues to do well, growing double digits. Our Venus portfolio grew double digits and they absorbed the, you know, some of the pricing challenges in China. So EP gets the airtime, but the rest of the business continues to do very well. And what's most important is we spend a lot of time on those businesses, constantly feeding them with organic R and D, tuck in M and A, expanding clinical work. So we continue to grow above market as our WAM group continues to grow.

David Roman - Equity Analyst - (00:41:35)

Excellent. Appreciate all the perspective. Thank you. The next question comes from Travis Steed with Bank of America. Please go ahead. Excuse me, Mr. Steed, is your phone muted?

Travis Steed - Equity Analyst - (00:41:54)

Accidentally working on this fantasy draft? Yeah. Please go ahead with your question, sir. Waiver wire, not much on there.

Michael Pollark - Equity Analyst - (00:42:05)

We'll go to the next question comes from Michael Pollark with Wolf Research. Please go ahead. Take Drake May. Hey, good morning. Thank you. I have a question on PFA and persistent so far. Wave got the FDA label for persistent in July. I'm hoping you can confirm Fairpoint is on track for year end 2025, if both of those things are true, or Fairpoint still on track. Is this the cocktail to get the. Penetration of PFA into persistent kicked into a higher gear? I hear about 50% PFA penetration at. A high level, but I think that's. A much higher rate of pen into. Park sysmal or de novo cases and lower into more complex cases, including these persistent patients. So I'm just kind of interested. Is 26 the year where persistent really kicks into a higher gear? And if not, what is the cocktail to enable that? Thank you.

Ken Stein - Chief Medical Officer - (00:43:06)

Yeah, Mike, I'll take that. And I actually, particularly for de novo persistent, it's already in high gear. You know, we got that approval on the back of the results of our Advantage trial which frankly showed the best long term outcomes anyone has ever seen. In a de novo persistent ablation trial and you know, really remarkable long term freedom from high burden persistent atrial fibrillation or from symptomatic atrial fibrillation. And one of the things that I don't know that everyone has appreciated enough to this point, is that if you look at the results of trials like Advantage, as well as some of the real world data now that we've presented at meetings, the redo rates after de novo persistent AF ablation with faripulse are down into the single digit levels. And so I think I would not agree with the characterization today of de novo persistent as a particularly complicated ablation. The Farrow wave catheter is just exquisitely well suited for this ablation strategy of pulmonary vein isolation plus posterior wall ablation. I think I would agree with your premise when you get to the more complex things like redo procedures and that's where things like having Farah Point as an adjunct, we get to things like our Far Flex catheter that's in first human use clinical trials today, as well as things like the acquisition that we had of the cortex technology as Mike mentioned in the script. Right. To enable doing true precision mapping of AF sources so that you do have something that you can offer to those again, single digit number of patients who are going to have unexplained recurrences after their de novo ablation. But just to come back to it, we really already do see a very high degree of uptake of farawave in the de novo persistent population and expect to see that continue. Thank you.

Travis Steed - Equity Analyst - (00:45:32)

And the next question comes from Travis Steed with Bank of America. Please go ahead. Hey, congrats on a good quarter and. I'm finished with the fantasy draft, so I'm back. I wanted to ask about the $30 million backorder you called out. I know a small amount, but it. Did add could add a point of. Growth to the total company. What businesses did that impact was there. Anywhere where it impacted the most in the quarter?

Mike Mahoney - Chairman and Chief Executive Officer - (00:45:57)

And does that come back in Q4? Sure. Thanks for the question. This is a a very comprehensive global ERP implementation that we set embarked on a few years ago and this was our implementation at our Kirkrad distribution facility which didn't quite go as planned, but the team is doing a great job and recovering from that and things certainly look better now than they did 60 days ago. So appreciate our team's hard work in that area. The impact the quarter was fairly broad based, I'd say a little bit trended a bit more to the MedSurg and PI businesses. But so it was really kind of impacted across many businesses. Less impact on EP and less impact on Watchmen and a bit more impact on the other divisions. But the team has made really good progress. We're still not 100% out of the woods on the back order, but we expect that back order to bleed down to acceptable levels by the end of the year. Great, Thanks a lot.

Patrick Wood - Equity Analyst - (00:47:05)

The next question comes from Patrick Wood with Morgan Stanley. Please go ahead. Awesome. Thanks for taking the question. I'd love to just dig into Nalu given you guys it's very recent and. You'Re in that situation. You know, PNs obviously super interesting market. Like there's kind of nobody really else there. I know they're very small. The other players, what was it that. Kind of made you feel like now is the time? I know you guys have been following them closely for a while, but I'd love any more details on how you guys are feeling expanding there and driving particularly commercial coverage over time.

Mike Mahoney - Chairman and Chief Executive Officer - (00:47:36)

Thanks guys. Yeah, as I mentioned, we're excited about the NALU signing in terms of timing. Like many companies that we end up acquiring, we were a VC investor in Naulo when Keegan Harper and team started this many many years ago. So we always liked the space of peripheral nerve stem. The NALU team did a really nice job over many years of building up the portfolio, driving the clinical evidence where now they have solid Medicare reimbursement and improving coverage from the commercial payers. So nice job in terms of clinical evidence which is driving the reimbursements and also solid clinical performance and solid sales track record. I think just as importantly we always look at in our integrations, is it the right time for the business to integrate NALU and our Neuromod team with Jim Cassidy has done an amazing job. Brian Betts and others with relevance that we acquired, I don't know, 18 months ago or so, which also is a very unique asset in that pain space and what's driving considerable growth for the company. And so the team proved they can drive the integration successfully and they're ready to take on more. And we had a large VC investment in this business. So it's a perfect puzzle piece to add to our neuromodulation and pain business because it really does offer a highly differentiated portfolio versus our others who primarily compete in spinal cord stem. And this is another new adjacency that will add to our WAMGER and accelerate the growth of neuromod in 26. Love the caller, thanks so much.

Danielle Entelfi - Equity Analyst - (00:49:21)

The next question comes from Danielle Entelfi with ubs. Please go ahead. Good morning guys. Thanks so much for taking the question and congrats on a good quarter. Mike, I also have to admit to you that you were right about the Raiders. So with that, my question is on CRM and that's been a business where you guys have been growing below the market. You have a competitor that's in a new product cycle and they're actually talking about sustainable double digit growth going forward. You guys have a new product cycle coming. So I'm just curious about how you think about the cadence of growth in that business as we start to get into the launch of some of those new products. Thanks so much.

Mike Mahoney - Chairman and Chief Executive Officer - (00:50:04)

Yeah. So overall CRM, we're pleased with our performance in our Lux, which is a smaller part of the market, but that continues to do quite well. And we've been investing for a number of years on an entire new platform called Denali which will really be. There's different stages to that Denali launch that will happen through the tail end of second half of 26 and through the LRP period which and Ken can provide more detail which really is a complete refresh which we think will improve our core pacemaker defibrillator business. We're also enthusiastic about empower our entry into leadless pacemaker market combined with sicd. So you know, we've been probably growing at on a unit basis kind of at market, but on a dollar basis below market because we've had some of the gaps in lead list which drive a higher asp. But on a unit basis we're kind of holding our own during that market and we're confident that over this LRP period that the CRM business will strengthen versus where it is today and be a larger contributor for us.

Ken Stein - Chief Medical Officer - (00:51:12)

Yeah, maybe I'll just add to what Mike said. I mean again, we certainly do have a gap in not being in the leadless market. Excited about eventually being able to bring the Empower device to market, see that as important both as playing and leadless, but also as something that's going to be an enabler for, for accelerated growth within our SICD franchise. I'd also point to the acquisition of Alucia. You know, this is an important adjunctive technology that people are using to prevent complications in particular things like post operative infections or postoperative complications with the pockets for these devices. That's another market that we have not played in previously and it's one where we have a technology that we really do see as having differentiated advantages over the incumbent. You know, Mike mentioned our complete refresh of our entire implantable platforms, Brady High Voltage, CRT and sicd. That's sort of a generational opportunity to really develop, you know, market leading technology across all of those platforms. And I think also highlight where we've gone with conduction system pacing. You know, seeing fantastic growth in the use of our conduction system pacing technology for pacemaker for Brady indications, but also very excited to have a purpose built ICD lead for doing conduction system pacing in a tacky market that we think would be quite disruptive.

Danielle Entelfi - Equity Analyst - (00:52:59)

Thank you.

Vijay Kumar - Equity Analyst - (00:53:01)

The next question comes from Vijay Kumar with Evercore. Please go ahead. Hey guys, congratulations on the nice print and thank you for taking my question. John, maybe one for you. On margin share. When I Look at fiscal 2025, you had the TAVR recall charges in tariff. Despite that we're at 100 basis points of margin expansion rate. But when you look at the cadence. I think Q4 is down sequentially. Right. Is that the incremental tariff headwind from Q3 to Q4? And how should we think of fiscal 26? Is the analyst they had 50bps of annual OMX. Is that still relevant for 26?

John Monson - Executive Vice President and Chief Financial Officer - (00:53:45)

Yeah. Thanks Vijay for the question and yeah, pleased with our expectation for improving margins 100 basis points on the year despite the tariff headwind of roughly $100 million. And as you mentioned, we had the impact of the accurate withdrawal in the second quarter. So you know, despite that, I think we've done a nice job with finding appropriate offsets in the business, driving strong margin expansion predominantly with the top line performance that we've seen for the year. Again expecting 15.5% organic revenue growth and reinvesting back into targeted areas of the business to drive growth for the long term. So yeah, we'll see where we go for the fourth quarter. We manage margins really on an annual basis. So we're a little less focused quarter. By quarter more focused on how we're driving margin performance for the year. And as far as 2026, we're rolling up the plan process now and we'll provide much more detail there when we get to the Q4 call at the early part of next year. But you know, you should expect us. To expand operating margins and drive meaningful expansion there and deliver leveraged double digit EPS growth.

Chris Pasquale - Equity Analyst - (00:55:08)

Thank you. The next question comes from Chris Pasquale with Nephron Research. Please go ahead. Thanks. I wanted to ask about agents. Our work suggests that launch is going really well. Product has a chance to be maybe A billion dollar product for you as the indication expands. Although it's not getting a ton of attention yet. I'm curious how you're thinking about growth in the interim period before STANCE reads out. Is there enough room just an ISR to sustain the current momentum, especially with. Competition maybe coming into the US next year? And while I know you don't promote. Off label use, are you starting to. See physicians already moving beyond incident restenosis and utilizing the product in novo lesions? Yeah, Chris, maybe.

Ken Stein - Chief Medical Officer - (00:55:55)

I'll take that. The fast answer is yeah, we do see plenty of room for continued growth even before STANCE completes enrollment and reads out right please now to have a TPT and better reimbursement in place. I think, you know, point out we also with trials like stance, see an opportunity to at least double the indicated population as you move beyond instant restenosis into small vessel bifurcation disease and some other de novo lesions. We will have some additional data on agent coming out at TCT data from our agent post approval study. And I think that'll be helpful as you all do kind of see the sorts of lesions that it is being used for in the real world and see the real world outcomes in terms of competition. I think getting more data out about the use of drug coded balloons is good for us and good for our agent. And I think important to point out that within the use for drug coated balloons specifically, there are some real fundamental advantages to the use of paclitaxel as the drug compared to some of the other drugs. So, you know, very comfortable with the position that we have for Agent and excited about it as we laid out Investors Day as a long term growth driver for the company.

Chris Pasquale - Equity Analyst - (00:57:28)

Thanks Dr. Stone.

Peter Chickering - Equity Analyst - (00:57:31)

And the last question today will come from Peter Chickering with Deutsche Bank. Please go ahead. Hey, good morning guys and thanks for fitting me in here. A question about the proposed reimbursement for AF ablation and ASCs for next year. What proportion of AF ablations do you think could be moved into the ASCs? And how could the increased capacity using ASCS help fuel additional market growth? Yeah, I may have to phone in a friend with our IR team here. You know, just more anecdotally, we're certainly seeing some strong interest in the states that don't have a certificate of need. You're seeing some interest in Arizona and Florida, which we think is good. As we talked about before, given the oftentimes long backlog backlog that hospitals have with Ferrupulse. So we think this will help with the backlog over Time in some of the states. Many states aren't able to do it because of con needs and so forth. But we certainly think it's going to be increasing trend in 26 and will grow more so over the LRP period. And as importantly, I think we're uniquely positioned to win in that market given the reliability and trust that physicians have in Faripulse, the COGS profile and gross margin profile that we have for that product, as well as the complementary products that Boston Scientific offers across our cardiovascular portfolio to assist those customers. I did get an answer from my phone and the friends that says what we estimate is 40% of the AF ablations in the US will not need a certificate of need. Yeah. Are in states that don't require a certificate of need. But maybe I just add something. But even in those states it will take some time to build out the ASC capabilities. Right.

Ken Stein - Chief Medical Officer - (00:59:30)

It's capital deployment and you know, it's not going to be a step change like the step change that we saw with the adoption of concomitant. This is going to be more of a slow ramp. But I think really important just to come back to what Mike said at the end, which is that the faripulse and our entire ecosystem really is very well suited to enable these procedures to move out into the asc.

Mike Mahoney - Chairman and Chief Executive Officer - (00:59:56)

Yeah. So we think there'll be a minimal impact on ASC in 26, but I just think broadly on EP, you know. We'Re still. Remarkably early in the PFA journey given our launch, what, 18 months ago, Ken, or whatever. Less than two years ago, I guess. Yeah. And so the key for us is we continue to drive new account openings around the globe. We still have a lot of work to do with new account openings in the US and particularly in Asia. PAC and the new account openings help drive penetration. We also have the opportunity to continue to grow deeper with more physicians leveraging ferropulse. We also have the opportunity with our unique position with concomitant to train more electrophysiologists to do watchmen. So we still have a number of EPs out there that are not doing LAC procedures. And with the impact of concomitant, we are seeing an uptick in the number of physicians who want to be trained at lac. So that ecosystem of still early innings in PFA globally, the momentum of concomitant, the demand from physicians to learn and train on watchmen out to serve that need will continue to help us. Which is why the ASCs are important because we do need the ASCs over time to help with the volume demands that we're seeing across these markets.

Lauren Tangler - Vice President, Investor Relations - (01:01:20)

Thank you, Mike. Thanks for joining us today. We appreciate your interest in Boston Scientific. If we were unable to get to your question, or if you have any follow ups, please please don't hesitate to reach out to the investor relations team before you disconnect. Drew will give you all of the pertinent details for replay. Thank you everyone.

OPERATOR - (01:01:37)

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