EDWARDS LIFESCIENCES REPORTS FIRST QUARTER RESULTS
Edwards Lifesciences reported strong Q1 2023 results, with sales of $1.46 billion, a 9% increase year-over-year. TAVR sales reached $948 million, growing 8%, while adjusted EPS was $0.62. The company repurchased $250 million of its stock and raised its full-year sales guidance to a growth of 10-12%. The SAPIEN 3 Ultra RESILIA valve was launched in Japan, and the company completed enrollment for pivotal trials. Q1 gross profit margin was 77.5%, and free cash flow was $253 million. For Q2 2023, sales are projected between $1.48 and $1.56 billion, with adjusted EPS from $0.62 to $0.68.
- Q1 2023 sales of $1.46 billion, up 9% year-over-year.
- TAVR sales of $948 million, an 8% increase.
- Raised full-year 2023 sales guidance to 10-12% growth.
- Repurchased approximately $250 million of stock in Q1.
- Free cash flow of $253 million.
- Adjusted gross profit margin decreased to 77.5% from 77.8% year-over-year.
- Selling, general, and administrative expenses increased to $436 million, up from $370 million the prior year.
IRVINE, Calif., April 26, 2023 /PRNewswire/ -- Edwards Lifesciences (NYSE: EW) today reported financial results for the quarter ended March 31, 2023.
Highlights and Outlook
- Q1 sales grew 9 percent to
$1.46 billion ; constant currency1 sales grew 13 percent - Q1 TAVR sales grew 8 percent; constant currency sales grew 11 percent
- Q1 EPS of
$0.56 ; adjusted1 EPS of$0.62 - Repurchased approximately
$250 million of Edwards stock in Q1 - Completed enrollment of the transcatheter tricuspid valve replacement pivotal trial
- Initiated launch of the SAPIEN 3 Ultra RESILIA valve in Japan late last month
- Raised full year 2023 sales guidance
"We are pleased with our start to 2023, which exceeded our expectations and reflected an improvement in healthcare staffing, along with strong execution of our patient-focused innovation strategy," said Michael A. Mussallem, Chairman and CEO. "This encouraging start gives us increased confidence in our full-year outlook. We believe that 2023 will be an important year for Edwards as we expect a return to higher sales growth and pursue meaningful progress on our innovations to improve care for many more patients."
Transcatheter Aortic Valve Replacement (TAVR)
For the quarter, the company reported TAVR sales of
In the U.S., Edwards' TAVR procedures grew in the low-double digit range versus the prior year. Edwards remains enthusiastic about the early results of the SAPIEN 3 Ultra RESILIA launch in the U.S. and expects this advanced technology will represent the majority of the company's U.S. TAVR sales by the end of the year.
Outside the U.S., in the first quarter, Edwards' TAVR procedures grew approximately 10 percent, and the company continues to see excellent opportunities for growth given that international adoption of TAVR therapy remains quite low. With the launch of SAPIEN 3 Ultra RESILIA in Japan late last month, the company expects growth rates to improve in this country, where aortic stenosis remains significantly undertreated relative to other large, developed countries.
Transcatheter Mitral and Tricuspid Therapies (TMTT)
In the first quarter, the company continued to successfully deliver on its strategy and achieve milestones in pursuit of the significant opportunity to transform care for the large number of patients with mitral and tricuspid disease.
First quarter sales were
Surgical Structural Heart and Critical Care
Surgical Structural Heart sales for the quarter were
Critical Care sales were
Additional Financial Results
For the quarter, the adjusted gross profit margin was 77.5 percent, compared to 77.8 percent in the same period last year. This year-over-year reduction was driven by a less favorable impact from foreign exchange.
Selling, general and administrative expenses in the first quarter were
Research and development expenses in the first quarter were
Free cash flow for the first quarter was
Cash, cash equivalents and short-term investments totaled
Outlook
Overall, based on the strong start to the year, the company is raising its full year sales guidance for all product groups. Full year 2023 sales are expected to grow 10 to 12 percent, compared to the previous guidance of 9 to 12 percent. For total Edwards, the company now expects full year 2023 sales to be at the high end of its
For the second quarter of 2023, the company projects total sales to be between
"I'm pleased that the company is delivering strong results and I'm excited about our future. As I approach retirement as CEO next month, I reflect on the incredible journey leading our team for more than 20 years, and I'm proud of what we have accomplished together. Our team has made immense contributions to advancing care and helping millions of patients around the world," said Mussallem. "I'm confident that the company is in great hands and will prosper under Bernard Zovighian's leadership. It has truly been my greatest honor to be Edwards' CEO and I look forward to continuing to support Edwards in my role on the Board of Directors."
About Edwards Lifesciences
Edwards Lifesciences is the global leader of patient-focused innovations for structural heart disease and critical care monitoring. We are driven by a passion for patients, dedicated to improving and enhancing lives through partnerships with clinicians and stakeholders across the global healthcare landscape. For more information, visit Edwards.com and follow us on Facebook, Instagram, LinkedIn, Twitter and YouTube.
Conference Call and Webcast Information
Edwards Lifesciences will be hosting a conference call today at 2:00 p.m. PT to discuss its first quarter results. To participate in the conference call, dial (877) 704-2848 or (201) 389-0893. The call will also be available live and archived on the "Investor Relations" section of the Edwards web site at ir.edwards.com or www.edwards.com.
This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements can sometimes be identified by the use of words such as "may," "will," "should," "anticipate," "believe," "plan," "project," "estimate," "potential," "predict," "early clinician feedback," "expect," "intend," "guidance," "outlook," "optimistic," "aspire," "confident" or other forms of these words or similar expressions and include, but are not limited to, statements made by Mr. Mussallem, first quarter and full year 2023 financial guidance, statements regarding the international adoption of TAVR, statements regarding transforming patient treatment, approvals, clinical outcomes, adoption, and the information in the Outlook section. No inferences or assumptions should be made from statements of past performance, efforts, or results which may not be indicative of future performance or results. Forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though they are inherently uncertain, difficult to predict, and may be outside of the company's control. The company's forward-looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If the company does update or correct one or more of these statements, investors and others should not conclude that the company will make additional updates or corrections.
Forward-looking statements involve risks and uncertainties that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements. Factors that could cause actual results or experience to differ materially from that expressed or implied by the forward-looking statements include risk and uncertainties associated with the COVID pandemic, clinical trial or commercial results or new product approvals and therapy adoption; unpredictability of product launches; competitive dynamics; changes to reimbursement for the company's products; the company's success in developing new products and avoiding manufacturing supply and quality issues; the impact of currency exchange rates; the timing or results of R&D and clinical trials; unanticipated actions by the U.S. Food and Drug Administration and other regulatory agencies; unexpected litigation impacts or expenses; and other risks detailed in the company's filings with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for the year ended December 31, 2022, and its other filings with the SEC. These filings, along with important safety information about our products, may be found at edwards.com.
Edwards, Edwards Lifesciences, the stylized E logo, CLASP, ClearSight, EVOQUE, FloTrac, Hypotension Prediction Index, PASCAL, PASCAL Precision, RESILIA, SAPIEN, SAPIEN 3, SAPIEN 3 Ultra, SAPIEN 3 Ultra RESILIA, and TRISCEND are trademarks of Edwards Lifesciences Corporation or its affiliates. All other trademarks are the property of their respective owners.
1 "Adjusted" amounts are non-GAAP items. "Underlying" and "constant currency" growth rates in this press release exclude foreign exchange fluctuations. Adjusted earnings per share is a non-GAAP item computed on a diluted basis and in this press release also excludes a significant program discontinuation, intellectual property agreement and litigation expenses, amortization of intangible assets, and fair value adjustments to contingent consideration liabilities arising from acquisitions. See "Non-GAAP Financial Information" and reconciliation tables below.
EDWARDS LIFESCIENCES CORPORATION | |||
Unaudited Consolidated Statements of Operations | |||
(in millions, except per share data) | |||
Three Months Ended March 31, | |||
2023 | 2022 | ||
Net sales | $ 1,459.6 | $ 1,341.2 | |
Cost of sales | 329.5 | 299.3 | |
Gross profit | 1,130.1 | 1,041.9 | |
Selling, general, and administrative expenses | 436.3 | 370.3 | |
Research and development expenses | 261.2 | 228.6 | |
Intellectual property agreement and litigation expenses, net | 43.5 | 7.1 | |
Change in fair value of contingent consideration liabilities, net | 0.7 | (2.9) | |
Operating income | 388.4 | 438.8 | |
Interest income, net | (8.6) | (0.6) | |
Other (income) expense, net | (1.6) | 3.3 | |
Income before provision for income taxes | 398.6 | 436.1 | |
Provision for income taxes | 58.1 | 62.5 | |
Net income | $ 340.5 | $ 373.6 | |
Earnings per share: | |||
Basic | $ 0.56 | $ 0.60 | |
Diluted | $ 0.56 | $ 0.59 | |
Weighted-average common shares outstanding: | |||
Basic | 607.5 | 622.1 | |
Diluted | 610.9 | 629.4 | |
Operating statistics | |||
As a percentage of net sales: | |||
Gross profit | 77.4 % | 77.7 % | |
Selling, general, and administrative expenses | 29.9 % | 27.6 % | |
Research and development expenses | 17.9 % | 17.0 % | |
Operating income | 26.6 % | 32.7 % | |
Income before provision for income taxes | 27.3 % | 32.5 % | |
Net income | 23.3 % | 27.9 % | |
Effective tax rate | 14.6 % | 14.3 % | |
_____________________ |
Note: Numbers may not calculate due to rounding. |
EDWARDS LIFESCIENCES CORPORATION | |||
Unaudited Balance Sheets | |||
(in millions) | |||
March 31, 2023 | December 31, 2022 | ||
ASSETS | |||
Current assets | |||
Cash and cash equivalents | $ 872.5 | $ 769.0 | |
Short-term investments | 381.7 | 446.3 | |
Accounts receivables, net | 717.7 | 643.0 | |
Other receivables | 61.6 | 56.1 | |
Inventories | 914.3 | 875.5 | |
Prepaid expenses | 119.1 | 110.0 | |
Other current assets | 190.3 | 195.9 | |
Total current assets | 3,257.2 | 3,095.8 | |
Long-term investments | 1,066.7 | 1,239.0 | |
Property, plant, and equipment, net | 1,646.0 | 1,632.8 | |
Operating lease right-of-use assets | 88.5 | 92.3 | |
Goodwill | 1,308.4 | 1,164.3 | |
Other intangible assets, net | 446.8 | 285.2 | |
Deferred income taxes | 544.0 | 484.0 | |
Other assets | 293.6 | 299.1 | |
Total assets | $ 8,651.2 | $ 8,292.5 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities | |||
Accounts payable and accrued liabilities | $ 1,056.9 | $ 996.9 | |
Operating lease liabilities | 25.1 | 25.5 | |
Total current liabilities | 1,082.0 | 1,022.4 | |
Long-term debt | 596.5 | 596.3 | |
Contingent consideration liabilities | 26.9 | 26.2 | |
Taxes payable | 143.4 | 143.4 | |
Operating lease liabilities | 66.2 | 69.5 | |
Uncertain tax positions | 284.0 | 267.5 | |
Litigation agreement accrual | 130.1 | 143.0 | |
Other liabilities | 260.1 | 217.5 | |
Total liabilities | 2,589.2 | 2,485.8 | |
Stockholders' equity | |||
Common stock | 647.1 | 646.3 | |
Additional paid-in capital | 2,049.3 | 1,969.3 | |
Retained earnings | 7,930.5 | 7,590.0 | |
Accumulated other comprehensive loss | (255.4) | (254.9) | |
Treasury stock, at cost | (4,393.5) | (4,144.0) | |
Total Edwards Lifesciences, Inc. stockholders' equity | 5,978.0 | 5,806.7 | |
Noncontrolling interest | 84.0 | — | |
Total equity | 6,062.0 | 5,806.7 | |
Total liabilities and equity | $ 8,651.2 | $ 8,292.5 | |
EDWARDS LIFESCIENCES CORPORATION
Non-GAAP Financial Information
To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company uses non-GAAP historical financial measures. Management makes adjustments to the GAAP measures for items (both charges and gains) that (a) do not reflect the core operational activities of the Company, (b) are commonly adjusted within the Company's industry to enhance comparability of the Company's financial results with those of its peer group, or (c) are inconsistent in amount or frequency between periods (albeit such items are monitored and controlled with equal diligence relative to core operations). The Company uses the term "underlying" when referring to non-GAAP sales and sales growth information, which excludes currency exchange rate fluctuations. The Company uses the term "adjusted" to also exclude intellectual property litigation expenses, intellectual property agreements, amortization of intangible assets, and fair value adjustments to contingent consideration liabilities arising from acquisitions.
Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results, and evaluating current performance. These non-GAAP financial measures are used in addition to, and in conjunction with, results presented in accordance with GAAP and reflect an additional way of viewing aspects of the Company's operations by investors that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting the Company's business and facilitate comparability to historical periods.
Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. A reconciliation of non-GAAP historical financial measures to the most comparable GAAP measure is provided in the tables below.
Fluctuations in currency exchange rates impact the comparative results and sales growth rates of the Company's underlying business. Management believes that excluding the impact of currency exchange rate fluctuations from its sales growth provides investors a more useful comparison to historical financial results. The impact of the fluctuations has been detailed in the "Reconciliation of Sales by Product Group and Region."
Guidance for sales and sales growth rates is provided on an "underlying basis," and projections for diluted earnings per share, net income and growth, gross profit margin, taxes, and free cash flow are also provided on a non-GAAP basis, as adjusted, for the items identified above due to the inherent difficulty in forecasting such items without unreasonable efforts. The Company is not able to provide a reconciliation of the non-GAAP guidance to comparable GAAP measures due to the unknown effect, timing, and potential significance of special charges or gains, and management's inability to forecast charges associated with future transactions and initiatives.
Management considers free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by business operations, after deducting payments for capital expenditures, which can then be used for strategic opportunities or other business purposes including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock.
The items described below are adjustments to the GAAP financial results in the reconciliations that follow:
Intellectual Property Litigation Expenses, net - The Company incurred net intellectual property litigation expenses of
Change in Fair Value of Contingent Consideration Liabilities, net - The Company recorded expense of
Amortization of Intangible Assets - The Company recorded amortization expense related to developed technology and patents in the amount of
Intellectual Property Agreement - The Company recorded a
Provision for Income Taxes - The income tax impact of the expenses and gains discussed above is based upon the items' forecasted effect upon the Company's full year effective tax rate. Adjustments to forecasted items unrelated to the expenses and gains above, as well as impacts related to interim reporting, will have an effect on the income tax impact of these items in subsequent periods.
EDWARDS LIFESCIENCES CORPORATION | ||||||||||||
Unaudited Reconciliation of GAAP to Non-GAAP Financial Information | ||||||||||||
(in millions, except per share and percentage data) | ||||||||||||
Three Months Ended March 31, 2023 | ||||||||||||
Net Sales | Gross | Operating | Net Income | Diluted | Effective | |||||||
GAAP | $ 1,459.6 | 77.4 % | $ 388.4 | $ 340.5 | $ 0.56 | 14.6 % | ||||||
Non-GAAP adjustments: (A) (B) | ||||||||||||
Intellectual property litigation expenses, net | — | — | 6.5 | 5.3 | 0.01 | 0.1 | ||||||
Change in fair value of contingent consideration liabilities, net | — | — | 0.7 | 0.6 | — | — | ||||||
Amortization of intangible assets | — | 0.1 | 1.5 | 1.3 | — | — | ||||||
Intellectual property agreement | — | — | 37.0 | 30.5 | 0.05 | 0.2 | ||||||
Adjusted | $ 1,459.6 | 77.5 % | $ 434.1 | $ 378.2 | $ 0.62 | 14.9 % | ||||||
Three Months Ended March 31, 2022 | ||||||||||||
Net Sales | Gross | Operating | Net Income | Diluted | Effective | |||||||
GAAP | $ 1,341.2 | 77.7 % | $ 438.8 | $ 373.6 | $ 0.59 | 14.3 % | ||||||
Non-GAAP adjustments: (A) (B) | ||||||||||||
Intellectual property litigation expenses, net | — | — | 7.1 | 5.8 | 0.01 | 0.1 | ||||||
Change in fair value of contingent consideration liabilities, net | — | — | (2.9) | (2.6) | — | — | ||||||
Amortization of intangible assets | — | 0.1 | 1.7 | 1.5 | — | — | ||||||
Adjusted | $ 1,341.2 | 77.8 % | $ 444.7 | $ 378.3 | $ 0.60 | 14.4 % | ||||||
____________________ | |
(A) | See description of non-GAAP adjustments under "Non-GAAP Financial Information." |
(B) | The tax effect on non-GAAP adjustments is calculated based upon the impact of the relevant tax jurisdictions' statutory tax rates on the Company's estimated annual effective tax rate, or discrete rate in the quarter, as applicable. The impact on the effective tax rate is reflected on each individual non-GAAP adjustment line item. |
RECONCILIATION OF SALES BY PRODUCT GROUP AND REGION | ||||||||||||||
2022 Adjusted | ||||||||||||||
Sales by Product Group (QTD) | 1Q 2023 | 1Q 2022 | Change | GAAP Growth Rate* | FX Impact | 1Q 2022 | Underlying Growth Rate * | |||||||
Transcatheter Aortic Valve Replacement | $ 947.9 | $ 881.3 | $ 66.6 | 7.6 % | $ (25.2) | $ 856.1 | 10.8 % | |||||||
Transcatheter Mitral and Tricuspid Therapies | 41.6 | 27.0 | 14.6 | 53.6 % | (1.1) | 25.9 | 60.7 % | |||||||
Surgical Structural Heart | 248.2 | 220.8 | 27.4 | 12.4 % | (8.4) | 212.4 | 17.0 % | |||||||
Critical Care | 221.9 | 212.1 | 9.8 | 4.6 % | (8.8) | 203.3 | 9.2 % | |||||||
Total | $ 1,459.6 | $ 1,341.2 | $ 118.4 | 8.8 % | $ (43.5) | $ 1,297.7 | 12.6 % | |||||||
2022 Adjusted | ||||||||||||||
Sales by Region (QTD) | 1Q 2023 | 1Q 2022 | Change | GAAP Growth | FX Impact | 1Q 2022 | Underlying Growth Rate * | |||||||
United States | $ 849.1 | $ 749.5 | $ 99.6 | 13.3 % | $ — | $ 749.5 | 13.3 % | |||||||
Europe | 331.1 | 311.1 | 20.0 | 6.5 % | (18.3) | 292.8 | 13.1 % | |||||||
Japan | 114.1 | 135.5 | (21.4) | (15.8) % | (18.6) | 116.9 | (2.4) % | |||||||
Rest of World | 165.3 | 145.1 | 20.2 | 13.8 % | (6.6) | 138.5 | 19.4 % | |||||||
Outside of the United States | 610.5 | 591.7 | 18.8 | 3.2 % | (43.5) | 548.2 | 11.6 % | |||||||
Total | $ 1,459.6 | $ 1,341.2 | $ 118.4 | 8.8 % | $ (43.5) | $ 1,297.7 | 12.6 % | |||||||
___________________ |
Numbers may not calculate due to rounding. |
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SOURCE Edwards Lifesciences Corporation
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