What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-25 compared with 2024-11-26 · 143 added, 113 removed, 480 unchanged (35% 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 and six months ended October 25, 2024.

In addition, you should read this discussion along with our consolidated financial statements and related notes thereto at and for the three and nine months ended January 24, 2025.

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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Medtronic is the leading global healthcare technology company — alleviating pain, restoring health, and extending life for millions of people around the world.

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 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:

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

The following is a summary of revenue and diluted earnings per share for the three months ended January 24, 2025 and January 26, 2024, and operating cash flow for the nine months ended January 24, 2025 and January 26, 2024:

GAAP to Non-GAAP Reconciliations

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

The tables below present our GAAP to Non-GAAP reconciliations for the three months ended January 24, 2025 and January 26, 2024:

Three months ended January 24, 2025

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

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28 5 23 0.02 17.9

Certain litigation charges, net 22 5 18 0.01 22.7

(Gain)/loss on minority investments (3)

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Non-GAAP $ 2,130 $ 334 $ 1,787 $ 1.39 15.7 %

Three months ended October 27, 2023

Three months ended January 26, 2024

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

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58 6 52 0.04 10.3

Certain litigation charges, net 65 15 50 0.04 23.1

(Gain)/loss on minority investments (3)

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(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.

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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

(5) The net tax benefit primarily relates to a change in a Swiss Cantonal tax rate associated with previously established deferred tax assets from intercompany intellectual property transactions and the step up in tax basis for Swiss Cantonal purposes.

The tables below present our GAAP to Non-GAAP reconciliations for the nine months ended January 24, 2025 and January 26, 2024:

Nine months ended January 24, 2025

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

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Certain tax adjustments, net (6)

— (49) 49 0.04 —

Non-GAAP $ 6,051 $ 1,027 $ 4,999 $ 3.87 17.0 %

Six months ended October 27, 2023

Nine months ended January 26, 2024

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

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(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.

The nine months ended January 24, 2025 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, the establishment of a valuation allowance against certain net operating losses and amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(6) Primarily relates to amortization of previously established deferred tax assets from intercompany intellectual property transactions.

(7) The net charge primarily relates to an income tax reserve adjustment associated with the June 2023, Israeli Central-Lod District Court decision and the establishment of a valuation allowance against certain net operating losses which were partially offset by a benefit from the change in a Swiss Cantonal tax rate associated with previously established deferred tax assets from intercompany intellectual property transactions and the step up in tax basis for Swiss Cantonal purposes.

Free Cash Flow

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GAAP measure) and free cash flow are as follows:

Six months ended

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

Nine months ended

(in millions) January 24, 2025 January 26, 2024

Net cash provided by operating activities $ 4,516 $ 4,010

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Segment and Division

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

Certain prior period net sales have 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 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:

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

The charts below illustrate the percent of net sales by segment for the three months ended January 24, 2025 and January 26, 2024:

The table below illustrates net sales by segment and division for the three and nine months ended January 24, 2025 and January 26, 2024:

Three months ended

Six months ended

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

Nine months ended

(in millions) January 24, 2025 January 26, 2024 % Change January 24, 2025 January 26, 2024 % Change

Cardiac Rhythm & Heart Failure $ 1,545 $ 1,470 5 % $ 4,659 $ 4,408 6 %

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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 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:

The charts below illustrate the percent of net sales by market geography for the three months ended January 24, 2025 and January 26, 2024:

The table below includes net sales by market geography for each of our segments for the three and nine months ended January 24, 2025 and January 26, 2024:

International

Three months ended Three months ended

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

(in millions) January 24, 2025 January 26, 2024 % Change January 24, 2025 January 26, 2024 % Change

Cardiovascular $ 1,405 $ 1,373 2 % $ 1,632 $ 1,556 5 %

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International

Six months ended Six months ended

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

Nine months ended Nine months ended

(in millions) January 24, 2025 January 26, 2024 % Change January 24, 2025 January 26, 2024 % Change

Cardiovascular $ 4,242 $ 4,149 2 % $ 4,904 $ 4,552 8 %

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Total net sales $ 12,624 $ 12,219 3 % $ 11,986 $ 11,555 4 %

includes the United States and U.S.

(2) Includes all other non-U.S.

countries and U.S.

(1) Includes historical operations and ongoing transition agreements from businesses the Company has exited or divested.

(2) 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.

The increase in net sales for the three and nine months ended January 24, 2025, as compared to the corresponding periods in the prior fiscal year, was driven primarily by growth in most businesses, including strong growth in Cardiac Ablation Solutions, Cardiac Pacing Therapies, TAVR, Diabetes, and Neuromodulation.

The increase in net sales for the nine months ended January 24, 2025, 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:

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• 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 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.

The financial impact of the conflict in the third quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material, and for the three and nine months ended January 24, 2025, 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 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.

• 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 third quarter of fiscal year 2025, including on accounts receivable and inventory reserves, was not material.

As of January 24, 2025, the Company had 6 facilities and approximately 1,500 employees in Israel.

For the three and nine months ended January 24, 2025, 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, 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, open heart and coronary bypass grafting surgical products, and renal denervation systems for the treatment of hypertension.

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 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.

Cardiovascular's net sales for the three and nine months ended January 24, 2025 were $3.0 billion and $9.1 billion, an increase of 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was primarily due to strong performance of Cardiac Ablation Solutions, Structural Heart, Cardiac Pacing Therapies, and Cardiac Surgery.

The graphs below illustrate the percent of Cardiovascular net sales by division for the three months ended January 24, 2025 and January 26, 2024:

Cardiac Rhythm & Heart Failure (CRHF) net sales for the three and nine months ended January 24, 2025 increased 5 percent and 6 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by growth in Micra transcatheter pacing systems, Aurora extravascular implantable cardioverter defibrillator (EV-ICD) system, and TYRX.

Cardiac Ablation Solutions experienced strong growth in PulseSelect and Sphere-9 pulsed field ablation with partially offsetting declines in cryoablation.

Structural Heart & Aortic (SHA) net sales for the three and nine months ended January 24, 2025 increased 4 percent and 5 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales increase was driven by continued 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 nine months ended January 24, 2025 were flat and increased 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

Net sales were impacted by growth in Coronary led by guide catheters and balloons, partially offset by impacts from tender pricing in China in Peripheral Vascular Health.

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 use and acceptance of Reveal LINQ and expansion of the LINQ II cardiac monitor.

• 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.

• Continued acceptance, adoption, and growth of our innovative portfolio of products in the electrophysiology (EP) segment, including the PulseSelect pulsed field ablation system and the Affera mapping and ablation system with Sphere-9 catheter.

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

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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 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.

Neuroscience’s net sales for the three and nine months ended January 24, 2025 were $2.5 billion and $7.2 billion, an increase of 4 percent and 5 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, and Neurosurgery.

The graphs below illustrate the percent of Neuroscience net sales by division for the three months ended January 24, 2025 and January 26, 2024:

Cranial & Spinal Technologies (CST) net sales for the three and nine months ended January 24, 2025 increased 4 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 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.

Specialty Therapies (Specialty) net sales for the three and nine months ended January 24, 2025 increased 1 percent and 3 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

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

Hemorrhagic stroke products also contributed to the net sales increase for the nine months ended January 24, 2025.

Neuromodulation (NM) net sales for the three and nine months ended January 24, 2025 increased 12 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.

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

In January 2025, BrainSense Adaptive DBS and BrainSense Electrode Identifier received CE Mark approval in the E.U.

and United Kingdom.

• 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 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).

Medical Surgical's net sales for the three and nine months ended January 24, 2025 were $2.1 billion and $6.2 billion, a decrease of 2 percent and flat, respectively, as compared to the corresponding periods in the prior fiscal year, resulting from declines across most businesses as outlined below.

The graphs below illustrate the percent of Medical Surgical net sales by division for the three months ended January 24, 2025 and January 26, 2024:

Surgical & Endoscopy (SE) net sales for the three and nine months ended January 24, 2025 decreased 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 declines in Stapling and General Surgical Technologies, primarily driven by ongoing stapling product pressures and changes in U.S.

distributor buying patterns.

Partially offsetting these declines was growth in Advanced Energy on continued adoption of LigaSure vessel sealing technology.

Acute Care & Monitoring (ACM) net sales for the three and nine months ended January 24, 2025 decreased 4 percent and 1 percent, respectively, as compared to the corresponding periods in the prior fiscal year.

The net sales decrease for the three and nine months ended January 24, 2025 were driven by declines in Nellcor pulse oximetry as a result of year over year declines in U.S.

respiratory related hospitalizations in the quarter and Airways with partially offset growth in Bispectral Index monitoring system.

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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• Continued global acceptance and future growth of powered stapling and energy platform.

• Our ability to execute ongoing strategies addressing the near-term pressures to bariatric surgery procedure volumes in the U.S.

• Our ability to execute ongoing strategies addressing the pressures to bariatric surgery procedure volumes in the U.S.

from pharmaceuticals, and growth of surgical soft tissue robotics procedures in the U.S.

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• Acceptance of less invasive standards of care in chronic and colorectal, as well as hepatology products, including products that span the care continuum from diagnostics to therapeutics.

Recently launched products include GI Genius.

• Expanding the use of less invasive treatments and furthering our commitment to improving options for women with abnormal uterine bleeding.

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

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.

Diabetes' net sales for the three and nine months ended January 24, 2025 were $694 million and $2.0 billion, an increase of 8 percent and 11 percent, respectively, 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.

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

• 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.

• 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., the products resulting from our partnership with Abbott to expand CGM options for people living with diabetes, as well as expanded labeling in Type 2 diabetes, fast acting insulins, and pregnancy warning removal.

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 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.

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 nine months ended January 24, 2025 and January 26, 2024:

Cost of Products Sold Cost of products sold for the three and nine months ended January 24, 2025 was $2.8 billion and $8.5 billion, respectively, as compared to $2.8 billion and $8.2 billion, respectively, for the corresponding periods in the prior fiscal year.

The decrease in cost of products sold as a percentage of net sales for the three months ended January 24, 2025 was primarily due to favorable currency impact and lower costs for quality remediation and excess and obsolete inventory charges.

Cost of products sold as a percentage of net sales for the nine months ended January 24, 2025 was primarily flat as compared to the corresponding period in the prior fiscal year.

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 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.

Research and development expense for the three and nine months ended January 24, 2025 was $675 million and $2.0 billion, respectively, as compared to $695 million and $2.1 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 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.

Selling, general, and administrative expense for the three and nine months ended January 24, 2025 was $2.7 billion and $8.1 billion, respectively, as compared to $2.7 billion and $8.0 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 Six months ended

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

Three months ended Nine months ended

(in millions) January 24, 2025 January 26, 2024 January 24, 2025 January 26, 2024

Amortization of intangible assets $ 416 $ 419 $ 1,243 $ 1,274

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Certain litigation charges, net 22 — 104 105

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

Other operating (income) expense, net (5) 17 (38) (13)

Other non-operating income, net (72) (177) (403) (407)

Interest expense, net 179 188 555 517

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 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.

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

Restructuring Charges, Net For the three and nine months ended January 24, 2025 and January 26, 2024, 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 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.

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 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

Other Operating (Income) Expense, Net Other operating (income) 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 January 24, 2025, the change in other operating (income) expense, net was largely driven by the net impact of currency remeasurement and our hedging programs resulting in a net gain of $12 million for the three months ended January 24, 2025 as compared to a net loss of $12 million in the corresponding period in the prior fiscal year.

For the nine months ended January 24, 2025, the change in other operating (income) expense, net was largely driven by insignificant gains from certain business or asset sales in the Cardiovascular and Neuroscience Portfolio.

In addition, the change in fair value of contingent consideration for the nine months ended January 24, 2025 was $5 million of income as compared to $59 million of expense in the corresponding period in the prior fiscal year.

The change in other operating (income) expense, net was partially offset by increased acquisition and divestiture-related charges and the net impact of currency remeasurement and our hedging programs.

The currency impact for the nine months ended January 24, 2025 was a net loss of $32 million as compared to a net gain of $16 million in the corresponding period 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, which includes income on marketable debt securities and our global liquidity structure.

For the three months and nine months ended January 24, 2025, the decrease in other non-operating income, net was primarily attributable to changes in interest income and net losses on minority investments.

Interest income was $114 million and $364 million for the three and nine months ended January 24, 2025, respectively, as compared to $170 million and $429 million for the three and nine months ended January 26, 2024, respectively.

Net losses on minority investments were $68 million and $41 million for the three and nine months ended January 24, 2025, respectively, as compared to $24 million and $113 million for the three and nine months ended January 26, 2024, respectively.

Interest Expense, Net Interest expense, net includes interest incurred on our outstanding borrowings, global liquidity structure, 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 January 24, 2025, the decrease in interest expense, net was primarily driven by lower interest on the balances in our global liquidity structures, partially offset by the €3.0 billion debt issuance on June 3, 2024.

For the nine months ended January 24, 2025, the increase in interest expense, net was primarily driven by the aforementioned debt issuance.

Three months ended Nine months ended

(in millions) January 24, 2025 January 26, 2024 January 24, 2025 January 26, 2024

Income tax provision $ 237 $ 135 $ 737 $ 936

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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 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.

Our effective tax rate for the three and nine months ended January 24, 2025 was 15.4% and 16.9%, respectively, as compared to 9.2% and 23.5% for the three and nine months ended January 26, 2024, respectively.

The increase in the effective tax rate for the three months ended January 24, 2025 primarily relates to a Swiss Cantonal tax rate change on previously recorded deferred tax assets during the three months ended January 26, 2024, and the implementation of the Pillar Two global minimum tax.

The decrease in the effective tax rate for the nine months ended January 24, 2025 was primarily attributable to the establishment of a valuation allowance on certain net operating losses and an income tax reserve adjustment made during the nine months ended January 26, 2024 associated with the Ventor court decision noted above, which was partially offset by the Swiss Cantonal tax rate change on previously recorded deferred tax assets and the implementation of the Pillar Two global minimum tax noted above.

Our Non-GAAP Nominal Tax Rate for the three and nine months ended January 24, 2025 was 15.7% and 17.0%, respectively, as compared to 15.2% and 16.0% for the three and nine months ended January 26, 2024, 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 and six months ended October 25, 2024 of approximately $20 million and $39 million, respectively.

An increase in our Non-GAAP Nominal Tax Rate of 1 percent would result in an additional income tax provision for the three and nine months ended January 24, 2025 of approximately $21 million and $61 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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.

We are currently in a strong financial position, and we believe our balance sheet and liquidity as of January 24, 2025 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:

Six months ended

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

Nine months ended

(in millions) January 24, 2025 January 26, 2024

Cash provided by (used in):

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Investing Activities The $223 million decrease in cash used was primarily attributable to an increase in net sales and maturities of investments of $442 million partially offset by an increase in net additions to property, plant, and equipment of $239 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.

Financing Activities There was a $927 million increase in net cash used during the nine months ended January 24, 2025, 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 $1.1 billion, as compared to an increase of $1.0 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 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.

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 nine months ended January 24, 2025, as compared to the corresponding period in the prior fiscal year.

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

Debt and Capital

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

Total debt at January 24, 2025 was $26.6 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.

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

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.

During the nine months ended January 24, 2025, the Company repurchased a total of 35 million shares under this program at an average price of $82.75.

At January 24, 2025, we had approximately $2.4 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 October 25, 2024 included $1.4 billion of cash and cash equivalents and $6.6 billion of current investments.

Our liquidity sources at January 24, 2025 included $1.2 billion of cash and cash equivalents and $6.7 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 October 25, 2024 and April 26, 2024, we had $899 million and $1.1 billion commercial paper outstanding, respectively.

At January 24, 2025 and April 26, 2024, we had no 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 October 25, 2024 and April 26, 2024, no amounts were outstanding under the Credit Facility.

At January 24, 2025 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)

October 25, 2024 April 26, 2024

January 24, 2025 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 October 25, 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 January 24, 2025 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 assess goodwill and indefinite-lived intangible assets for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired.

There were no impairments of goodwill in the current period as a result of the annual impairment test.

The Company calculates the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis and revenue and earnings multiples using comparable public company information.

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

As of January 24, 2025, 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 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 following tables present summarized financial information for the nine months ended January 24, 2025 and summarized balance sheet information at January 24, 2025 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 six months ended October 25, 2024 was as follows:

The summarized results of operations information for the nine months ended January 24, 2025 was as follows:

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

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Net (loss) income attributable to Medtronic (282) 134

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

The summarized balance sheet information at January 24, 2025 was as follows:

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

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These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

Our forward-looking statements may include statements related to our growth and growth strategies, developments in the markets for our products, therapies and services, financial results, product development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, the potential or anticipated direct or indirect impact of public health crises and geopolitical conflicts on our business, results of operations and/or financial condition, restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products, therapies and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts.

Our forward-looking statements may include statements related to:

our growth and growth strategies;

developments in the markets for our products, therapies and services;

financial results;

product development launches and effectiveness;

research and development strategy;

regulatory approvals;

competitive strengths;

the potential or anticipated direct or indirect impact of public health crises, geopolitical conflicts, or changing governmental executive actions and regulations (including relating to global trade policies, enforcement priorities and compliance requirements), on our business, results of operations and/or financial condition;

restructuring and cost-saving initiatives;

intellectual property rights;

litigation and tax matters;

governmental proceedings and investigations;

mergers, acquisitions, and divestitures;

market acceptance of our products, therapies and services;

accounting estimates;

financing activities;

ongoing contractual obligations;

working capital adequacy;

the value of our investments;

our effective tax rate;

our expected returns to shareholders;

and sales efforts.

In some cases, such statements may be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “plan,” “possible,” “potential,” “project,” “should,” “will,” and similar words or expressions.

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our approach towards cost containment;

our expectations regarding the potential impact of changing governmental executive actions and regulations (including relating to global trade policies, enforcement priorities and compliance requirements), on our business;

our expectations regarding healthcare costs, including potential changes to reimbursement policies and pricing pressures;

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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