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Item 2. Management’s Discussion and Analysis

2024-11-26 compared with 2024-08-27 · 172 added, 108 removed, 421 unchanged (40% of the section changed)

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For a full understanding of financial condition and results of operations, you should read this discussion along with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 26, 2024.

In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three months ended July 26, 2024.

In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and six months ended October 25, 2024.

Amounts reported in millions within this quarterly report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding.

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Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat, and diabetes conditions.

The following is a summary of revenue, diluted earnings per share, and operating cash flow for the three months ended July 26, 2024 and July 28, 2023:

The following is a summary of revenue and diluted earnings per share for the three months ended October 25, 2024 and October 27, 2023, and operating cash flow for the six months ended October 25, 2024 and October 27, 2023:

GAAP to Non-GAAP Reconciliations

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended July 26, 2024 and July 28, 2023:

Three months ended July 26, 2024

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended October 25, 2024 and October 27, 2023:

Three months ended October 25, 2024

(in millions, except per share data) Income Before Income Taxes Income

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(25) 5 (30) (0.02) (20.0)

(Gain)/loss on minority investments (3)

(10) 10 (21) (0.02) (100.0)

Medical device regulations (4)

12 2 10 0.01 16.7

Certain tax adjustments, net — (16) 16 0.01 —

Non-GAAP $ 1,995 $ 366 $ 1,620 $ 1.26 18.3 %

Three months ended October 27, 2023

(in millions, except per share data) Income Before Income Taxes Income

Tax Provision (Benefit) Net Income Attributable to Medtronic Diluted EPS

GAAP $ 1,313 $ 402 $ 909 $ 0.68 30.6 %

Non-GAAP Adjustments:

Amortization of intangible assets 425 65 360 0.27 15.3

Restructuring and associated costs (1)

91 16 76 0.06 17.6

Acquisition and divestiture-related items (2)

58 7 51 0.04 12.1

Certain litigation charges, net 65 15 50 0.04 23.1

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30 6 24 0.02 20.0

Certain tax adjustments, net (5)

— (176) 176 0.13 —

Non-GAAP $ 2,008 $ 339 $ 1,667 $ 1.25 16.9 %

(1) Associated costs primarily include salaries and wages for employees supporting the restructuring activities, consulting expenses, and asset write-offs.

(2) The charges primarily include business combination costs, changes in fair value of contingent consideration, and exit of business-related charges.

The three months ended October 25, 2024 also includes gains related to certain business or asset sales.

(3) We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing or future business operations.

(4) The charges represent incremental costs of complying with the new European Union (E.U.) medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses.

We consider these costs to be duplicative of previously incurred costs and/or one-time costs, which are limited to a specific time period.

(5) The charge primarily relates to the establishment of a valuation allowance against certain net operating losses.

The tables below present our GAAP to Non-GAAP reconciliations for the six months ended October 25, 2024 and October 27, 2023:

Six months ended October 25, 2024

(in millions, except per share data) Income Before Income Taxes Income

Tax Provision (Benefit) Net Income attributable to Medtronic Diluted EPS Effective Tax Rate

GAAP $ 2,827 $ 500 $ 2,312 $ 1.79 17.7 %

Non-GAAP Adjustments:

Amortization of intangible assets 827 149 678 0.52 18.0

Restructuring and associated costs (1)

108 21 87 0.07 19.4

Acquisition and divestiture-related items (2)

(13) 6 (19) (0.01) (46.2)

Certain litigation charges, net 81 13 68 0.05 16.0

(Gain)/loss on minority investments (3)

(27) 10 (38) (0.03) (37.0)

Medical device regulations (4)

27 5 22 0.02 18.5

90 20 70 0.05 22.2

Certain tax adjustments, net — (33) 33 0.03 —

Non-GAAP $ 3,921 $ 693 $ 3,213 $ 2.49 17.7 %

Three months ended July 28, 2023

Six months ended October 27, 2023

(in millions, except per share data) Income Before Income Taxes Income

Tax Provision (Benefit) Net Income Attributable to Medtronic Diluted EPS

Tax Provision (Benefit) Net Income attributable to Medtronic Diluted EPS Effective Tax Rate

GAAP $ 2,510 $ 802 $ 1,700 $ 1.28 32.0 %

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Non-GAAP $ 3,910 $ 640 $ 3,262 $ 2.45 16.4 %

(1) Associated and other costs primarily include salaries and wages for employees supporting the restructuring activities, consulting expenses, and asset write-offs.

(1) Associated costs primarily include salaries and wages for employees supporting the restructuring activities, consulting expenses, and asset write-offs.

(2) The charges primarily include business combination costs, changes in fair value of contingent consideration, and exit of business-related charges.

The six months ended October 25, 2024 also includes gains related to certain business or asset sales.

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(5) Reflects the recognition of incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

(6) The charge relates to an income tax reserve adjustment associated with the June 2023 Israeli Central-Lod District Court decision in Medtronic Ventor Technologies Ltd v.

Kfar Saba Assessing Office and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(6) The charge relates to an income tax reserve adjustment associated with the June 2023, Israeli Central-Lod District Court decision, the establishment of a valuation allowance against certain net operating losses and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

Free Cash Flow

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GAAP measure) and free cash flow are as follows:

Three months ended

(in millions) July 26, 2024 July 28, 2023

Six months ended

(in millions) October 25, 2024 October 27, 2023

Net cash provided by operating activities $ 1,944 $ 1,536

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Segment and Division

Certain prior period revenue has been recast to reflect the new reporting structure in the fourth quarter of fiscal year 2024.

Certain prior period net sales has been recast to reflect the new reporting structure in the fourth quarter of fiscal year 2024.

Refer to Note 17 to the consolidated financial statements for additional information regarding the Company's reporting structure.

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developed markets and the emerging markets into an international market geography.

Prior period revenue has been recast to conform to the new presentation.

The charts below illustrate the percent of net sales by segment for the three months ended July 26, 2024 and July 28, 2023:

The table below illustrates net sales by segment and division for the three months ended July 26, 2024 and July 28, 2023:

Prior period net sales has been recast to conform to the new presentation.

The charts below illustrate the percent of net sales by segment for the three months ended October 25, 2024 and October 27, 2023:

The table below illustrates net sales by segment and division for the three and six months ended October 25, 2024 and October 27, 2023:

Three months ended

(in millions) July 26, 2024 July 28, 2023 % Change

Six months ended

(in millions) October 25, 2024 October 27, 2023 % Change October 25, 2024 October 27, 2023 % Change

Cardiac Rhythm & Heart Failure $ 1,578 $ 1,492 6 % $ 3,114 $ 2,938 6 %

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Diabetes 686 610 12 1,333 1,189 12

Total reportable segment net sales 7,967 7,652 4

Reportable segment net sales 8,366 7,923 6 16,333 15,575 5

Other operating segment (1)

37 61 (39) 75 111 (32)

Other adjustments (2)

— — — (90) — 100

Total net sales $ 8,403 $ 7,984 5 % $ 16,318 $ 15,686 4 %

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Segment and Market Geography

The charts below illustrate the percent of net sales by market geography for the three months ended July 26, 2024 and July 28, 2023:

The table below includes net sales by market geography for each of our segments for the three months ended July 26, 2024 and July 28, 2023:

The charts below illustrate the percent of net sales by market geography for the three months ended October 25, 2024 and October 27, 2023:

The table below includes net sales by market geography for each of our segments for the three and six months ended October 25, 2024 and October 27, 2023:

International (2)

Three months ended Three months ended

(in millions) July 26, 2024 July 28, 2023 % Change July 26, 2024 July 28, 2023 % Change

(in millions) October 25, 2024 October 27, 2023 % Change October 25, 2024 October 27, 2023 % Change

Cardiovascular $ 1,434 $ 1,427 1 % $ 1,668 $ 1,496 12 %

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18 23 (22) 19 37 (49)

Total net sales $ 4,304 $ 4,175 3 % $ 4,099 $ 3,809 8 %

International (2)

Six months ended Six months ended

(in millions) October 25, 2024 October 27, 2023 % Change October 25, 2024 October 27, 2023 % Change

Cardiovascular $ 2,836 $ 2,776 2 % $ 3,272 $ 2,996 9 %

Neuroscience 3,242 3,057 6 1,526 1,449 5

Medical Surgical 1,825 1,815 1 2,298 2,292 —

Diabetes 447 405 10 886 784 13

Reportable segment net sales 8,350 8,054 4 7,983 7,521 6

Other operating segment (3)

37 45 (19) 38 66 (42)

Other adjustments (4)

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(4) Incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

The increase in net sales for the three months ended July 26, 2024, as compared to the corresponding period in the prior fiscal year, was driven primarily by growth in most businesses, including Diabetes, Neuromodulation, and Cardiac Rhythm & Heart Failure.

The increase was partially offset by the $90 million incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

The increase in net sales for the three and six months ended October 25, 2024, as compared to the corresponding periods in the prior fiscal year, was driven primarily by growth in most businesses, including strong growth in Diabetes, Cranial & Spinal Technologies, Neuromodulation, TAVR, Cardiac Rhythm Management, and Cardiac Surgery.

The increase in net sales for the six months ended October 25, 2024, was partially offset by the $90 million incremental Italian payback accruals resulting from the two July 22, 2024 rulings by the Constitutional Court of Italy relating to certain prior years since 2015.

Looking ahead, a number of macro-economic and geopolitical factors could negatively impact our business, including without limitation:

• Competitive product launches and pricing pressure, geographic macro-economic risks including fluctuations in currency exchange rates, general price inflation, changes in interest rates, reimbursement challenges, impacts from changes in the mix of our product offerings, delays in product registration approvals, replacement cycle challenges, and supply chain challenges from time to time;

• Competitive product launches and pricing pressure, geographic macro-economic developments including changes in global trade policies and fluctuations in currency exchange rates, general price inflation, changes in interest rates, reimbursement challenges, impacts from changes in the mix of our product offerings, delays in product registration approvals, replacement cycle challenges, and supply chain challenges from time to time;

• National and provincial tender pricing for certain products, particularly in China;

• The sanctions and other measures being imposed in response to the Russia-Ukraine conflict are having, and could continue to have impacts on revenue and supply chain.

The financial impact of the conflict in the first quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material, and for the three months ended July 26, 2024, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets.

The financial impact of the conflict in the second quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material, and for the three and six months ended October 25, 2024, the business of the Company in these countries represented less than 1% of the Company's consolidated revenues and assets.

Although the implications of this conflict are difficult to predict at this time, the ongoing conflict may increase pressure on the global economy and supply chains, resulting in increased future volatility risk for our business operations and performance.

• Although the long-term implications of Israel's recent conflict are difficult to predict at this time, the financial impact of the conflict in the first quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material.

For the three months ended July 26, 2024, the Company had 6 facilities and approximately 1,500 employees in Israel.

For the three months ended July 26, 2024, the business of the Company in Israel represented less than 1% of the Company's consolidated revenues and assets.

• Although the long-term implications of Israel's recent conflicts are difficult to predict at this time, the financial impact of the conflicts in the second quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material.

As of October 25, 2024, the Company had 6 facilities and approximately 1,500 employees in Israel.

For the three and six months ended October 25, 2024, the business of the Company in Israel represented less than 1% of the Company's consolidated revenues and assets.

Cardiovascular

Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators, leads and delivery systems, electrophysiology catheters, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products.

Cardiovascular products include pacemakers, insertable cardiac monitors, cardiac resynchronization therapy devices, implantable cardioverter defibrillators, leads and delivery systems, products for the treatment of atrial fibrillation, information systems for the management of patients with Cardiac Rhythm & Heart Failure devices, products designed to reduce surgical site infections, coronary and peripheral stents and related delivery systems, balloons and related delivery systems, endovascular stent graft systems, heart valve replacement technologies, cardiac tissue ablation systems, and open heart and coronary bypass grafting surgical products.

Cardiovascular also includes Care Management Services and Cath Lab Managed Services (CLMS) within the Cardiac Rhythm & Heart Failure division.

Cardiovascular's net sales for the three months ended July 26, 2024 was $3.0 billion, an increase of 6 percent as

compared to the corresponding period in the prior fiscal year.

The net sales increase was primarily due to strong performance of Pulsed Field Ablation, High Power, TAVR, Cardiac Surgery, and Coronary.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended July 26, 2024 and July 28, 2023:

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three months ended July 26, 2024 increased 6 percent, as compared to the corresponding period in the prior fiscal year.

The net sales increase was driven by continued adoption of Micra AV2 and Micra VR2, PulseSelect Pulsed Field Ablation, and the Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system.

Structural Heart & Aortic (SHA) net sales for the three months ended July 26, 2024 increased 5 percent, as compared to the corresponding period in the prior fiscal year.

The net sales increase was driven by growth in TAVR, including strong growth internationally from adoption of Evolut FX TAVR system, and in Cardiac Surgery driven by growth in Perfusion, particularly in the U.S., and Surgical Valves.

Coronary & Peripheral Vascular (CPV) net sales for the three months ended July 26, 2024 increased 5 percent, as compared to the corresponding period in the prior fiscal year.

The increase in net sales was driven by growth in guide catheters, balloons, and drug-eluting stents, as well as growth in our Vascular Embolization products.

Cardiovascular's net sales for the three and six months ended October 25, 2024 were $3.1 billion and $6.1 billion, an increase of 6 percent for both periods as compared to the corresponding periods in the prior fiscal year.

The net sales increase was primarily due to strong performance of TAVR, Cardiac Rhythm Management, and Cardiac Surgery.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended October 25, 2024 and October 27, 2023:

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and six months ended October 25, 2024 increased 6 percent for both periods as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by Cardiac Pacing Therapies and Defibrillation Solutions with growth in Micra transcatheter pacing systems, Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system, and TRYX.

Cardiac Ablation Solutions experienced strong growth in PulseSelect Pulsed Field Ablation with offsetting declines in cryoablation.

Structural Heart & Aortic (SHA) net sales for the three and six months ended October 25, 2024 increased 8 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by U.S.

and international growth in Structural Heart from adoption of Evolut FX+ TAVR system and in Cardiac Surgery driven by growth in Perfusion and Surgical Valves.

Coronary & Peripheral Vascular (CPV) net sales for the three and six months ended October 25, 2024 increased 5 percent for both periods as compared to the corresponding periods in the prior fiscal year.

The increase in net sales was driven by growth in Coronary led by guide catheters and balloons, in addition to growth in Peripheral Vascular and Vascular Embolization.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead, we expect Cardiovascular could be affected by the following:

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• Continued acceptance, adoption, and growth of our innovative portfolio of products in the electrophysiology (EP) segment, including the Arctic Front cryoablation system, PulseSelect PFA, and Affera mapping and ablation system.

The Affera mapping and ablation system and Sphere-9 catheter received U.S.

FDA approval in late October 2024.

• Continued acceptance and growth of the self-expanding CoreValve Evolut transcatheter aortic valve replacement platform.

This includes Evolut PRO which provides enhanced hemodynamics, reliable delivery, enhanced durability, advanced sealing, and Evolut FX, a system designed to improve the overall procedural experience through enhancements

in deliverability, implant visibility, and deployment stability.

The Evolut FX+ TAVR system maintains the valve performance benefits of the legacy Evolut TAVR platform and is designed to facilitate coronary access.

The system was approved by the U.S.

FDA in March 2024.

FDA in March 2024 and received CE Mark in late October 2024.

• Market acceptance and reimbursement for the Symplicity Spyral renal denervation system, also known as the Symplicity blood pressure procedure, for the treatment of hypertension.

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Neuroscience also manufactures products related to implantable neurostimulation therapies and drug delivery systems for the treatment of chronic pain, movement disorders, and epilepsy.

Neuroscience’s net sales for the three months ended July 26, 2024 was $2.3 billion, an increase of 4 percent compared to the corresponding period in the prior fiscal year.

The net sales increase was primarily due to growth in Neuromodulation, Spine and Biologics, and Hemorrhagic Stroke.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended July 26, 2024 and July 28, 2023:

Cranial & Spinal Technologies (CST) net sales for the three months ended July 26, 2024 increased 4 percent as compared to the corresponding period in the prior fiscal year.

The net sales increase was driven by increased sales of Core Spine and Biologics products driven by AiBLE spinal ecosystem pull-through.

Specialty Therapies (Specialty) net sales for the three months ended July 26, 2024 increased 3 percent as compared to the corresponding period in the prior fiscal year.

Neuroscience’s net sales for the three and six months ended October 25, 2024 were $2.5 billion and $4.8 billion, respectively, an increase of 7 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase for both periods was primarily due to growth in Neuromodulation, Spine and Biologics, Neurosurgery, and Hemorrhagic Stroke.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended October 25, 2024 and October 27, 2023:

Cranial & Spinal Technologies (CST) net sales for the three and six months ended October 25, 2024 increased 7 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by the continued adoption of the AiBLE ecosystem of spine implants and enabling technology with growth in Core Spine, Biologics, and Neurosurgery.

Specialty Therapies (Specialty) net sales for the three and six months ended October 25, 2024 increased 5 percent and 4 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by hemorrhagic stroke products, growth on continued adoption of the Interstim X system, and ENT.

Neuromodulation (NM) net sales for the three months ended July 26, 2024 increased 9 percent as compared to the corresponding period in the prior fiscal year.

The net sales increase was driven by growth within Brain Modulation, driven by the continued launch of the Percept RC deep brain neurostimulator, as well as growth in Pain Stim driven by the U.S.

launch of the Inceptiv spinal cord stimulator and continued adoption in Western Europe.

Neuromodulation (NM) net sales for the three and six months ended October 25, 2024 increased 13 percent and 11 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by the continued launch of both the Inceptiv spinal cord stimulator in the U.S.

and the Percept RC deep brain neurostimulator.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Neuroscience could be affected by the following:

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• Continued acceptance and growth of our Percept family of deep brain stimulation (DBS) devices with proprietary BrainSense technology for objectifying and personalizing the treatment of Parkinson's Disease, epilepsy, and other movement disorders.

In August 2024, the U.S.

FDA approved Asleep DBS surgery for people with Parkinson's and people with essential tremor.

• Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, which include hemorrhagic stroke intravascular device and our next-generation spine enabling technologies.

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The products include those for advanced and general surgical products, surgical stapling devices, vessel sealing instruments, wound closure, electrosurgery products, hernia mechanical devices, mesh implants, advanced ablation, interventional lung, airway products, and sensors and monitors for pulse oximetry, capnography, level of consciousness and cerebral oximetry.

Medical Surgical's net sales for the three months ended July 26, 2024 were $2.0 billion, flat, as compared to the corresponding period in the prior fiscal year.

The net sales increases in Hernia, Wound Management, Endoscopy and Perioperative Complications, was offset by the net sales declines in Advanced Surgical Technologies and Respiratory Compromise.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended July 26, 2024 and July 28, 2023:

Surgical & Endoscopy (SE) net sales for the three months ended July 26, 2024 were flat, as compared to the corresponding period in the prior fiscal year.

The net sales decrease in Advanced Surgical Technologies was offset by growth in Hernia, Wound Management, and Endoscopy.

Acute Care & Monitoring (ACM) net sales for the three months ended July 26, 2024 decreased 2 percent as compared to the corresponding period in the prior fiscal year.

The net sales decrease was largely due to declines in Respiratory Compromise and airways, partially offset by growth in Perioperative Complications.

Medical Surgical's net sales for the three and six months ended October 25, 2024 were $2.1 billion and $4.1 billion, an increase of 1 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales were primarily impacted by growth in Advanced Energy and Blood Oxygen Management with partially offsetting declines in Stapling.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended October 25, 2024 and October 27, 2023:

Surgical & Endoscopy (SE) net sales for the three and six months ended October 25, 2024 increased 1 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales for both periods were impacted by growth in Advanced Energy, driven by continued adoption of the LigaSure Maryland XP vessel sealer, and strength in Hernia and Wound Management products.

The net sales results were partially offset by declines in Advanced Stapling and Endoscopy.

Acute Care & Monitoring (ACM) net sales for the three and six months ended October 25, 2024 increased 4 percent and 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase for both periods was largely due to growth in Nellcor pulse oximetry driven by strong sensor sales and continued adoption of the RespArray patient monitor in addition to strength in Bispectral Index monitoring system (BIS).

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Medical Surgical could be affected by the following:

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Diabetes' products include insulin pumps, continuous glucose monitoring (CGM) systems, and consumables.

Diabetes' net sales for the three months ended July 26, 2024 were $647 million an increase of 12 percent as compared to the corresponding period in the prior fiscal year.

The increase in net sales was primarily driven by strong U.S growth as a result of the continued adoption of the MiniMed 780G insulin pump system, and strong international growth in CGM systems from increased attachment rates, and adoption of Simplera Sync.

Diabetes' net sales for the three and six months ended October 25, 2024 were $686 million and $1.3 billion, respectively, an increase of 12 percent for both periods as compared to the corresponding periods in the prior fiscal year.

The increase in net sales for both periods was primarily driven by strong U.S growth as a result of the continued adoption of the MiniMed 780G automated insulated delivery (AID) system, and strong international growth in CGM systems from increased attachment rates and adoption of Simplera Sync.

In addition to the macro-economic and geopolitical factors described in the Executive Level Overview, looking ahead we expect Diabetes could be affected by the following:

• Continued acceptance and growth for the MiniMed 780G insulin pump system, which is powered by SmartGuard technology and features the added benefits of meal detection technology that automatically adjusts and corrects sugar levels every five minutes.

The global adoption of our Automated Insulin Delivery (AID) systems has resulted in strong sensor attachment rates.

The MiniMed 780G insulin pump system with the Guardian 4 Sensor was approved by the U.S.

FDA in late April 2023.

The MiniMed 780G insulin pump system with Simplera Sync received CE Mark in early January 2024.

The global adoption of our AID systems has resulted in strong sensor attachment rates.

The MiniMed 780G insulin pump system with the Guardian 4 Sensor is available in the U.S., and the MiniMed 780G insulin pump system with Simplera Sync received CE Mark in early January 2024.

• Continued acceptance and growth of the Guardian Connect CGM system, which displays glucose information directly to a smartphone to provide patients access to their glucose levels seamlessly and discretely.

The Guardian Connect CGM system is available on both Apple iOS and Android devices.

• Market acceptance and growth of our sensor Simplera, which received U.S FDA approval in August 2024 and CE Mark in September 2023.

• Market acceptance and growth of our InPen smart pen system, which allows users to have their Medtronic CGM readings in real-time alongside insulin dose information, all in one view.

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• Changes in medical reimbursement policies and programs, along with additional payor coverage on insulin pumps.

FDA approval in early August 2024 and CE Mark in September 2023, and the products resulting from our partnership with Abbott to expand CGM options for people living with diabetes.

• Our ability to meet growing demand for our existing products and to successfully develop, obtain regulatory approval of and commercialize the products within our pipeline, including our Minimed 780G insulin pump system with Simplera Sync in the U.S., and the products resulting from our partnership with Abbott to expand CGM options for people living with diabetes.

COSTS AND EXPENSES

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three months ended July 26, 2024 and July 28, 2023:

Cost of Products Sold Cost of products sold for the three months ended July 26, 2024 was $2.8 billion, as compared to $2.6 billion for the corresponding period in the prior fiscal year.

The increase in cost products sold as a percentage of net sales for the three months ended July 26, 2024 was primarily due to unfavorable currency impact.

The following is a summary of cost of products sold, research and development, and selling, general, and administrative expenses as a percent of net sales for the three and six months ended October 25, 2024 and October 27, 2023:

Cost of Products Sold Cost of products sold for the three and six months ended October 25, 2024 was $2.9 billion and $5.7 billion, respectively, as compared to $2.8 billion and $5.4 billion, respectively, for the corresponding periods in the prior fiscal year.

The increase in cost products sold as a percentage of net sales for the three and six months ended October 25, 2024 was primarily due to unfavorable currency impact.

Research and Development Expense We remain committed to deliver the best possible experiences for patients, physicians, and caregivers we serve;

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and to expand healthcare access and deliver positive outcomes.

Research and development expense for the three months ended July 26, 2024 was $676 million, as compared to $668 million for the corresponding period in the prior fiscal year.

Research and development expense for the three and six months ended October 25, 2024 was $697 million and $1.4 billion, respectively, as compared to $698 million and $1.4 billion, respectively, for the corresponding periods in the prior fiscal year.

Selling, General, and Administrative Expense Our goal is to continue to leverage selling, general, and administrative expense management initiatives.

Selling, general, and administrative expense primarily consists of salaries and wages, other administrative costs, such as professional fees and marketing expenses, certain acquisition and divestiture-related costs, and restructuring associated expenses.

Selling, general, and administrative expense for the three months ended July 26, 2024 was $2.7 billion, as compared to $2.6 billion for the corresponding period in the prior fiscal year.

Selling, general, and administrative expense for the three and six months ended October 25, 2024 was $2.8 billion and $5.4 billion, respectively, as compared to $2.7 billion and $5.3 billion, respectively, for the corresponding periods in the prior fiscal year.

The increase in selling, general, and administrative expense for both periods is primarily due to new product launches and commercialization activities.

The following is a summary of other costs and expenses (income):

Three months ended

(in millions) July 26, 2024 July 28, 2023

Three months ended Six months ended

(in millions) October 25, 2024 October 27, 2023 October 25, 2024 October 27, 2023

Amortization of intangible assets $ 413 $ 425 $ 827 $ 855

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Certain litigation charges, net — 65 81 105

Other operating expense, net 1 1

Other operating income, net (34) (31) (33) (30)

Other non-operating income, net (173) (154) (330) (230)

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Amortization of Intangible Assets Amortization of intangible assets includes the amortization expense of our definite-lived intangible assets, consisting of purchased patents, trademarks, tradenames, customer relationships, purchased technology, and other intangible assets.

Restructuring Charges, Net For the three months ended July 26, 2024 and July 28, 2023, restructuring costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

Restructuring Charges, Net For the three and six months ended October 25, 2024 and October 27, 2023, restructuring costs primarily related to employee termination benefits and facility consolidations to support cost reduction initiatives.

For additional information about our restructuring activities, refer to Note 5 to the current period's consolidated financial statements.

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For additional information, refer to Note 16 in the current period's consolidated financial statements.

Other Operating Expense, Net Other operating expense, net primarily includes expenses associated with royalties paid for the in-license of intellectual property from third parties, currency remeasurement and derivative gains and losses, changes in the fair value of contingent consideration, certain acquisition and divestiture-related items, and income from funded research and development arrangements.

For the three months ended July 26, 2024, other operating expense, net was flat compared to the corresponding period in the prior year.

Other Operating Income, Net Other operating income, net primarily includes expenses associated with royalties paid for the in-license of intellectual property from third parties, currency remeasurement and derivative gains and losses, changes in the fair value of contingent consideration, certain acquisition and divestiture-related items, and income from funded research and development arrangements.

For the three and six months ended October 25, 2024, the increase in other operating income, net was largely driven by insignificant gains from certain business or asset sales in the Cardiovascular and Neuroscience Portfolio.

The increase in other operating, income net was partially offset by the net impact of currency remeasurement and our hedging programs, which resulted in net expense of $39 million and $44 million for the three and six months ended October 25, 2024, respectively, as compared to a net gain of $32 million and $29 million, respectively, in the corresponding periods in the prior fiscal year.

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and postretirement benefit cost, investment gains and losses, and interest income.

For the three months ended July 26, 2024, the increase in other non-operating income, net is primarily attributable to an increase in net gains on our minority investment portfolio.

Net gains on minority investments were $17 million for the three months ended July 26, 2024, compared to a net loss of $64 million for the three months ended July 28, 2023.

For the three months and six months ended October 25, 2024, the increase in other non-operating income, net is primarily attributable to an increase in net gains on our minority investment portfolio.

Net gains on minority investments were $10 million and $27 million for the three and six months ended October 25, 2024, respectively, compared to net losses of $25 million and $89 million for the three and six months ended October 27, 2023, respectively.

Interest Expense, Net Interest expense, net includes interest incurred on our outstanding borrowings, amortization of debt issuance costs and debt premiums or discounts, and amortization of amounts excluded from the effectiveness assessment of certain net investment and fair value hedges.

For the three months ended July 26, 2024, the increase in interest expense, net was primarily driven by the €3.0 billion debt issuance on June 3, 2024 and the higher commercial paper balance during the quarter.

Three months ended

(in millions) July 26, 2024 July 28, 2023

For the three and six months ended October 25, 2024, the increase in interest expense, net was primarily driven by the €3.0 billion debt issuance on June 3, 2024.

Three months ended Six months ended

(in millions) October 25, 2024 October 27, 2023 October 25, 2024 October 27, 2023

Income tax provision $ 281 $ 402 $ 500 $ 802

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As a result, the Company recorded a $187 million income tax charge during the first quarter of fiscal year 2024 and has filed an appeal with the Supreme Court of Israel.

Our effective tax rate for the three months ended July 26, 2024 was 17.4% as compared to 33.4% for the three months ended July 28, 2023.

The decrease in the effective tax rate primarily relates to an income tax reserve adjustment made during the three months ended July 28, 2023 associated with the Medtronic Ventor Technologies Ltd court decision and year-over-year changes in operational results by jurisdiction, which were partially offset by the impact of the Pillar Two global minimum tax for the three months ended July 26, 2024.

Our Non-GAAP Nominal Tax Rate for the three months ended July 26, 2024 was 17.0% as compared to 15.8% for the three months ended July 28, 2023.

Our effective tax rate for the three and six months ended October 25, 2024 was 18.0% and 17.7%, respectively, as compared to 30.6% and 32.0% for the three and six months ended October 27, 2023, respectively.

The decrease in our effective tax rate for the three months ended October 25, 2024 primarily relates to the establishment of a valuation allowance on certain net operating losses recorded during the three months ended October 27, 2023, which was partially offset by the implementation of the Pillar Two global minimum tax.

In addition to the items discussed in the current quarter, the decrease in the effective tax rate for the six months ended October 25, 2024 was also attributable to an income tax reserve adjustment made during the six months ended October 27, 2023 associated with the Ventor court decision noted above.

Our Non-GAAP Nominal Tax Rate for the three and six months ended October 25, 2024 was 18.3% and 17.7%, respectively, as compared to 16.9% and 16.4% for the three and six months ended October 27, 2023, respectively.

The change in our Non-GAAP Nominal Tax Rate was primarily due to the implementation of the Pillar Two global minimum tax and year-over-year changes in operational results by jurisdiction.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three months ended July 26, 2024 of approximately $19 million.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three and six months ended October 25, 2024 of approximately $20 million and $39 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of July 26, 2024 provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of October 25, 2024 provide us with flexibility, and our cash, cash equivalents, and current investments, along with our credit facility and related commercial paper programs will satisfy our foreseeable operating needs.

Our liquidity and capital structure are evaluated regularly within the context of our annual operating and strategic planning processes.

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The following is a summary of cash provided by (used in) operating, investing, and financing activities, the effect of exchange rate changes on cash and cash equivalents, and the net change in cash and cash equivalents:

Three months ended

(in millions) July 26, 2024 July 28, 2023

Six months ended

(in millions) October 25, 2024 October 27, 2023

Cash provided by (used in):

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Net change in cash and cash equivalents $ 110 $ (232)

Operating Activities The $111 million increase in net cash provided was primarily driven by an increase in cash collected from customers due to an increase in sales and a decrease in cash paid to vendors.

The increase in net cash was partially offset by increased annual incentive payouts and an increase in cash paid for taxes.

Investing Activities The $280 million decrease in cash used was primarily attributable to a increase in net sales and maturities of investments of $446 million partially offset by an increase in net additions to property, plant, and equipment of $166 million.

Financing Activities There was a $230 million increase in net cash used during the three months ended July 26, 2024, as compared to the corresponding period in the prior fiscal year.

In the current period, there was an decrease in commercial paper that was issued and outstanding at quarter end of $624 million, as compared to an increase of $500 million in the prior year.

Operating Activities The $408 million increase in net cash provided was primarily driven by an increase in cash collected from customers due to an increase in sales and a decrease in cash paid to vendors, which was partially offset by an increase in cash paid for taxes and increased annual incentive payouts.

Investing Activities The $359 million decrease in cash used was primarily attributable to an increase in net sales and maturities of investments of $386 million partially offset by an increase in net additions to property, plant, and equipment of $109 million.

Financing Activities There was a $674 million increase in net cash used during the six months ended October 25, 2024, as compared to the corresponding period in the prior fiscal year.

In the current period, there was a decrease in total short-term borrowings of $67 million, as compared to an increase of $1.3 billion in the prior year.

Additionally, on June 3, 2024, Medtronic Inc.

issued four tranches of EUR-denominated Senior Notes with an aggregate principal of €3.0 billion, or $3.2 billion, which was partially offset by a $2.3 billion increase in net share repurchases during the three months ended July 26, 2024, as compared to the corresponding period in the prior fiscal year.

issued four tranches of EUR-denominated Senior Notes with an aggregate principal of €3.0 billion, or $3.2 billion, which was partially offset by a $2.3 billion increase in net share repurchases during the six months ended October 25, 2024, as compared to the corresponding period in the prior fiscal year.

For more information on commercial paper and Senior Notes issued, refer to the Debt and Capital section below.

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From time to time, we may repurchase our outstanding debt obligations in the open market or through privately negotiated transactions.

Total debt at July 26, 2024 was $27.9 billion as compared to $25.0 billion at April 26, 2024.

The increase in total debt was driven by issuance of Euro-denominated Senior Notes and fluctuations in exchange rates.

Total debt at October 25, 2024 was $28.3 billion as compared to $25.0 billion at April 26, 2024.

The increase in total debt was primarily driven by issuance of Euro-denominated Senior Notes and fluctuations in exchange rates.

On June 3, 2024, Medtronic Inc.

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In March 2024, the Company's Board of Directors authorized the repurchase of $5.0 billion of the Company's ordinary shares.

In March 2024, the Company's Board of Directors authorized the repurchase of an incremental $5.0 billion of the Company's ordinary shares.

There is no specific time period associated with these repurchase authorizations.

During the three months ended July 26, 2024, the Company repurchased a total of 30 million shares under this program at an average price of $82.28.

At July 26, 2024, we had approximately $2.8 billion remaining under the share repurchase program authorized by our Board of Directors.

During the six months ended October 25, 2024, the Company repurchased a total of 33 million shares under this program at an average price of $82.61.

At October 25, 2024, we had approximately $2.6 billion remaining under the share repurchase program authorized by our Board of Directors.

For more information on credit arrangements, refer to Note 7 to the current period's consolidated financial statements and Note 6 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 26, 2024.

Our liquidity sources at July 26, 2024 included $1.3 billion of cash and cash equivalents and $6.5 billion of current investments.

Our liquidity sources at October 25, 2024 included $1.4 billion of cash and cash equivalents and $6.6 billion of current investments.

Additionally, we maintain commercial paper programs and a Credit Facility.

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We maintain multicurrency commercial paper programs for short-term financing, which allow us to issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $3.5 billion.

At July 26, 2024 and April 26, 2024, we had $449 million and $1.1 billion commercial paper outstanding, respectively.

At October 25, 2024 and April 26, 2024, we had $899 million and $1.1 billion commercial paper outstanding, respectively.

The issuance of commercial paper reduces the amount of credit available under our existing line of credit, as explained below.

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The Credit Facility provides us with the ability to increase our borrowing capacity by an additional $1.0 billion at any time during the term of the agreement.

At July 26, 2024 and April 26, 2024, no amounts were outstanding under the Credit Facility.

At October 25, 2024 and April 26, 2024, no amounts were outstanding under the Credit Facility.

Interest rates on advances of our Credit Facility are determined by a pricing matrix based on our long-term debt ratings assigned by Standard & Poor's Ratings Services (S&P) and Moody's Investors Service (Moody’s).

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Agency Rating (1)

July 26, 2024 April 26, 2024

October 25, 2024 April 26, 2024

Standard & Poor's Ratings Services

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A security rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the rating agency, and each rating should be evaluated independently of any other rating.

S&P and Moody's long-term debt ratings and short-term debt ratings at July 26, 2024 were unchanged as compared to the ratings at April 26, 2024.

S&P and Moody's long-term debt ratings and short-term debt ratings at October 25, 2024 were unchanged as compared to the ratings at April 26, 2024.

We do not expect the S&P and Moody's ratings to have a significant impact on our liquidity or future flexibility to access additional liquidity given our balance sheet, Credit Facility, and related commercial paper programs.

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We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

As of July 26, 2024, there were no material changes to our critical accounting estimates.

As of October 25, 2024, there were no material changes to our critical accounting estimates.

NEW ACCOUNTING PRONOUNCEMENTS

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(CIFSA Subsidiary Guarantors)

The following tables present summarized financial information for the three months ended July 26, 2024 and summarized balance sheet information at July 26, 2024 and April 26, 2024 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes.

The following tables present summarized financial information for the six months ended October 25, 2024 and summarized balance sheet information at October 25, 2024 and April 26, 2024 for the obligor groups of Medtronic and Medtronic Luxco Senior Notes, and CIFSA Senior Notes.

The obligor group consists of the parent company guarantor, subsidiary issuer, and subsidiary guarantors for the applicable senior notes.

The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuers and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

The summarized results of operations information for the three months ended July 26, 2024 was as follows:

The summarized results of operations information for the six months ended October 25, 2024 was as follows:

(in millions) Medtronic & Medtronic Luxco Senior Notes (1)

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Net (loss) income attributable to Medtronic (151) 118

The summarized balance sheet information at July 26, 2024 was as follows:

The summarized balance sheet information at October 25, 2024 was as follows:

(in millions) Medtronic & Medtronic Luxco Senior Notes (1)

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expected timing for completion of research studies relating to our products;

integration of new technologies, including artificial intelligence (AI) and data analytics, into our products, therapies and services;

market positioning and performance of our products, including stabilization of certain product markets;

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changes in the market and our market share;

our ability to meet growing demand for our existing products;

acquisitions and investment initiatives, including the timing of regulatory approvals as well as integration of acquired companies into our operations;

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our accounts receivable exposure;

our human capital management with respect to our global workforce;

and the potential impact of our compliance with governmental regulations and accounting guidance.

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• fluctuations in currency exchange rates,

• inflation, or

• disruption of our current plans and operations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis