雅虎香港財經 Edwards Lifesciences Corporation (NYSE:EW) Q1 2024 Earnings Call Transcript
Edwards Lifesciences Corporation (NYSE:EW) Q1 2024 Earnings Call Transcript April 25, 2024
Edwards Lifesciences Corporation beats earnings expectations. Reported EPS is $0.66, expectations were $0.64. Edwards Lifesciences Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Edwards Lifesciences First Quarter 2024 Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Wilterding, Senior Vice President, Investor Relations. Thank you, you may begin.
Mark Wilterding: Thanks a lot, Diego, and good afternoon, and thank you all for joining us. With me on today's call is our CEO, Bernard Zovighian, and our CFO, Scott Ullem. Also joining us for the Q&A portion of the call will be Larry Wood, our Global President of TAVR and Surgical Structural Heart; Daveen Chopra, our Global Leader of TMTT; Wayne Markowitz, our Global Leader of Surgical Structural Heart; and Katie Syzman, our Global Leader of Critical Care. Just after the close of regular trading, Edwards Lifesciences released first quarter 2024 financial results. During today's call, management will discuss these results included in the press release and accompanying financial schedules and then use the remaining time for Q&A.
Please note that management will be making forward-looking statements that are based on estimates, assumptions and projections. These statements include, but are not limited to, financial guidance and expectations for longer growth opportunities, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters and foreign currency fluctuations. These statements speak only as of the date on which they were made, and Edwards does not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially. Information concerning factors that could cause these differences and important product safety information may be found in the press release, our 2023 annual reform on Form 10-K and Edwards' other SEC filings, all of which are available on the company's website at edwards.com.
Finally, unless otherwise noted, our commentary on sales growth refers to constant currency sales growth, which is defined in the quarterly press release issued earlier today. Reconciliations between GAAP and non-GAAP numbers mentioned during this call are also included in today's press release. With that, I'd like to turn the call over to Bernard for his comments. Bernard?
Bernard Zovighian: Thank you, Mark. We are pleased with our total company performance with first quarter sales growth of 10% to $1.6 billion versus the year ago period. As a result, we are raising our 2024 sales guidance to the high end of 8% to 10%. As we look ahead, I'd like to share some perspective about the strategic direction of our company. Edwards is well-positioned to extend our leadership and deliver sustainable growth, driven by the strategic investments we have made across our transcatheter platforms to address the large and growing needs of patients impacted by aortic, mitral and tricuspid disease. We remain confident in the many opportunities to grow TAVR over the long term. In addition, TMTT is becoming an increasingly significant contributor to Edwards growth, and we expect this will continue.
An important element in our valve innovation leadership is our advanced tissue technology. We have been an innovator in tissue technology for more than 50 years and we are pleased with our latest technology RESILIA. With differentiated evidence of advanced durability, this technology is used across our comprehensive portfolio with a focus on lifetime management of a patient we serve. We are pleased that 0.5 million of patients will benefit from this tissue technology by the end of 2024. As the global leader in structural heart, we remain deeply committed to bringing the highest quality evidence, groundbreaking technology and world-class physician support to advance science and meaningfully improve patient care. This year, we are already making significant progress on multiple clinical trials and next-gen technologies.
In January, we achieved an important milestone with the completion of patient treatment in progress, a pivotal trial studying the treatment of moderate aortic stenosis patients, a population estimated to be twice as large severe aortic stenosis. In February, EVOQUE became the first transcatheter therapy to receive U.S. FDA approval for the treatment of patients with tricuspid regurgitation. EVOQUE is a groundbreaking treatment options that not only have the potential to improve quality of life, but also shown favorable clinical trends in all-cause mortality, reintervention and heart failure hospitalization. In March, at the annual CRT Conference, we announced compelling results from two large real-world studies demonstrating continued excellent outcome for patients treated with the Edward SAPIEN valve platform.
And earlier this month, at the American College of Cardiology Conference, we announced data from the HUDDLE study initiated by Edwards in 2021 with our partner at NFL Alumni Health, the study examine the prevalence of structural heart disease among groups historically known to experience disparities in access to care. Edwards is committed to helping identified and dismantle barriers to access for communities that are under sale due to race, gender and socioeconomic status. Each of these reflect our deep commitment to advancing patient care through our differentiated strategy and reinforce our confidence in sustaining the growth of transcatheter based structural heart intervention. Now I will provide some additional detail on Q1 results by product group.
In TAVR, first quarter global sales of $1 billion increased 8% year-over-year when adjusted for billing days. Q1 marked the first quarter that Edwards TAVR sales exceeded $1 billion, an exciting milestone for our team and a testament to clinician confidence in our leading technology. Performance was driven by growth in the U.S. and Japan, Edward's global competitive position and selling prices were both stable. In the U.S., our year-over-year first quarter TAVR sales growth rate was higher than our global constant currency growth rate. We estimate total procedure growth was comparable. Procedure volumes increased as the quarter progressed. We remain pleased with the continued performance of our best-in-class TAVR platform. SAPIEN 3 Ultra RESILIA, which builds on Edwards long-standing leadership in tissue technology and durability.
This innovative technology now makes up the majority of our sales in the U.S. This platform is supported by the robust real world data for more than 10,000 patients in the TVT Registry that demonstrated excellent outcomes across hundreds of centers. The technologies optimized tissue treatment is designed to extend durability of a valve, a feature that will be increasingly important as the therapy continues to treat patients with longer life expectancy. We are also proud to continue our deep commitment to advancing science for AS patients through the progress and early TAVR trials. As discussed in January, we completed enrollment and treatment of patients in progress, approximately two years of expectation. We also expect to release the results of early TAVR at the TCT Conference this year.
Symptom assessment is one of the most significant barriers to referral and the early TAVR trial evaluates the impact of TAVR on asymptomatic patients with severe AS. We believe if data are compelling, early TAVR may have a meaningful impact on deciding when to treat patients, while also streamlining referral and patient care for all severe AS patients. Outside of the U.S., in the first quarter, our constant currency TAVR sales growth was slightly below our global TAVR growth, strong growth in Japan and the rest of the world was partially offset by slower than expected growth in Europe. In Europe, our results were softer than expected in Q1. But we expect full year 2024 performance to normalize. We are actively preparing for the launch of SAPIEN 3 Ultra RESILIA in Europe, and we anticipate introducing the technology into the European market in Q2.
In Japan, we continue to see strong TAVR adoption driven by SAPIEN 3 Ultra RESILIA. We believe AS remains a significantly undertreated disease among the substantial elderly population and continue to focus on expanding the ability of an evidence supporting this therapy. In closing, we are confident that Edwards is positioned for healthy and sustainable TAVR growth well into the future, driven by our element development of differentiated TAVR technology, our deep commitment to advancing patient care through high-quality clinical evidence, and our investment in patient activation initiatives. Importantly, we are proud of our groundbreaking research into the treatment of AS through our early TAVR and PROGRESS trial, which could fundamentally change how AS patients are treated.
We remain confident in our full year TAVR sales growth of 8% to 10%. We expect higher year-over-year second half growth rate than in the first and second quarter. Turning to TMTT. We drove positive momentum with our unique and broad portfolio strategy for both repair and replacement therapies for mitral and tricuspid patients. We made significant progress in advancing important technologies, including the PASCAL repair system, the EVOQUE tricuspid replacement system, and the SAPIEN M3 mitral replacement system. We are the only company with multiple approved mitral and tricuspid therapies backed by world-class evidence to improve patient care. In Q1, we achieved positive results with sales of $73 million, representing a 72% increase versus the prior year.
The majority of our Q1 sales were driven by expanded adoption and new site activation of PASCAL supported by continued double-digit tier market growth in the U.S. and Europe. We are also pleased with strong physician feedback and excellent procedural outcome with the EVOQUE, tricuspid valve in both the U.S. and Europe. With this replacement technology, we see the unique elimination of tricuspid regurgitation, significant quality of life improvement for patients and favorable trend in all-cause mortality and heart failure hospitalization. The increasing physician demand for EVOQUE is a clear indication of unmet need and the potential for this therapy to treat a very large patient population. We continue to invest in expanding our high-touch field organization globally to support this therapy in order to continue to achieve excellent outcome for each patient.
Given the strong adoption of our differentiated technology, PASCAL and EVOQUE, we are raising full year TMTT guidance to $320 million to $340 million versus previous guidance, which was the higher end of $280 million to $320 million range. We are confident that our unique portfolio strategy with repair and replacement options for both mitral and tricuspid will offer clinicians the broad set of therapies necessarily to effectively treat many patients in need. This strategy positions us for global leadership, sustainable long-term growth and an increasing contribution to overall Edwards growth. In Surgical, first quarter sales of $266 million increased 8% over the prior year. Growth was driven by strong global adoption of Edwards premium surgical technologies INSPIRIS, MITRIS and KONECT.
We continue to see positive procedure growth globally for the many patients, best treated surgically, including for both undergoing complex procedures. We continue to expand the overall body of evidence in multiple technologies and multiple valves and now expect U.S. and Canada enrollment of our MOMENTIS clinical studying RESILIA performance in the mitral position to be completed in Q2 2024, one year ahead of expectation. The study will continue to open new sites in Europe and Latin America with global enrollment continuing into 2025. We are now raising our full year surgical sales guidance to 6% to 8% and versus expectation of mid-single digit growth. In Critical Care, variability of demand led to better-than-expected first quarter sales of $251 million, which increased 14% versus the prior year, driven by contribution from all product lines.
Growth was led by our smart recovery technologies, including the Acumen IQ sensor. Demand was also strong for our Swan-Ganz catheters and pressure monitoring devices used in the ICU. Critical Care remains focused on driving growth through smart recovery and smart expansion, which are designed to help clinicians make more informed decisions and get patients home to their family faster. We are now confident in raising our full year critical sales guidance to 8% to 10% versus previous expectation of mid-single digit growth. Since announcing the spin-off of Critical Care in December, our team has made significant progress, and I want to thank all of them for their hard work and dedication. Scott will provide additional details. And now, I will turn the call over to Scott.
Scott Ullem: Thanks a lot, Bernard, and good afternoon, everyone. As Bernard mentioned, we are pleased with our first quarter total company sales performance and progress on our strategic milestones. In addition, we achieved $0.66 of adjusted earnings per share. Our GAAP earnings per share of $0.58 included one-time expenses associated with our planned spin-off of Critical Care. A full reconciliation between our GAAP and adjusted EPS for this and other items is included with today's release. For the second quarter, we're projecting sales of $1.62 billion to $1.70 billion and adjusted earnings per share of $0.67 to $0.71. And now I'll cover additional details of our P&L. In Q1, our adjusted gross profit margin was 76% compared to 77.5% in the same period last year.
This expected year-over-year reduction was driven by a more favorable impact from foreign exchange in the prior year. We continue to expect our full year 2024 adjusted gross profit margin to be between 76% and 78%, driven by high value technologies that yield strong gross profit margins. Selling, general and administrative expenses in the quarter were $490 million or 30.6% of sales compared to $436 million in the prior year. This increase was driven by an expansion of transcatheter field based personnel in support of our growth strategy. We expect full year 2024 SG&A as a percent of sales to be approximately 30% as we continue to invest in field based personnel and patient activation initiatives. Research and development expense in first quarter grew 9% over the prior year to $285 million or 17.8% of sales.
This increase was primarily the result of continued investments in our transcatheter aortic valve innovations, including increased clinical trial activity. For the full year 2024, we continue to expect R&D to be 17% to 18% of sales as we invest in developing new technologies and generating evidence for our structural heart disease initiatives, with the goal of treating even more patients. Turning to taxes. Our reported tax rate this quarter was 14.3% or 14%, excluding the impact of special items. Our favorable non-GAAP rate in the first quarter includes a higher-than-expected benefit from stock-based compensation. We continue to expect our 2024 tax rate, excluding special items to be between 14% and 17%. Foreign exchange rates decreased in first quarter reported sales growth by 40 basis points or $5 million compared to the prior year.
Foreign exchange rates negatively impacted our first quarter gross profit margin by 160 basis points compared to the prior year. Relative to our January guidance, FX rates had a nominal impact on first quarter earnings per share. At current FX rates, we now expect a $70 million or 1% negative impact to full year 2024 sales versus the prior year. Regarding the previously announced spin-off of Critical Care, preparations are ongoing. We anticipate completing the unaudited carve-out financial statements next month and we are on track to obtain a tax-free ruling from the IRS by year end. We are currently assessing capital structure options for the spin-off company, and we plan to share details with investors later this year. During the first quarter, we incurred $41 million of one-time costs associated with the spin-off.
Additional one-time costs will be incurred throughout 2024. Free cash flow for the first quarter was reduced by a $305 million deposit contingent upon the resolution of a tax dispute and $20 million of payments associated with the spin-off of Critical Care. Excluding the impact of these items, adjusted free cash flow was $206 million, and we continue to expect full year 2024 adjusted free cash flow will grow to between $1.1 billion and $1.4 billion. So before turning the call back over to Bernard, I'll finish with an update on our balance sheet. We continue to maintain a strong and flexible balance sheet with approximately $1.7 billion in cash, cash equivalents and short-term investments, as of March 31. We continue to expect average diluted shares outstanding for 2024 to be between $600 million and $610 million.
We have approximately $1 billion remaining under our current share repurchase authorization. And so with that, I'll pass it back over to Bernard.
Bernard Zovighian: Thank you, Scott. We are pleased with a strong start to the year, as we continue to focus on helping even more patients worldwide and driving growth with leading innovative technologies. We remain confident in our increased 2024 financial outlook and look forward to launching breakthrough technologies and progressing multiple important clinical trials, while aggressively investing into our future. In closing, we believe Edwards is uniquely positioned to deliver sustainable growth, driven by our significant investment focused on structural heart to address the large growing needs of patients impacted by aortic, mitral and tricuspid disease. With that, I pass it back to Mark to open up Q&A.
Mark Wilterding: Thank you very much, Bernard. We're ready to take questions now. In order to allow for broad participation, we ask that you please limit the number of questions to one plus one follow-up. If you have additional questions, please reenter the queue and management will answer as many participants as possible during the remainder of the call. Diego, please go ahead with additional details on accessing the Q&A portion of the call.
Operator: Thank you. [Operator Instructions]. And our first question comes from Robbie Marcus with JPMorgan. Please state your question.
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