01—Abstract
Summary
Summary of the 10-K filed February 17, 2017. Cited figures are marked; the original filing is the authoritative source.
Edwards Lifesciences Corporation (EW) reported strong performance in its 2016 10-K filing, highlighting significant revenue growth driven primarily by its Transcatheter Heart Valve Therapy (THVT) segment.
The company continues to solidify its global leadership in structural heart disease and critical care monitoring. THVT sales saw a substantial increase, propelled by the successful launches and expanded indications of its SAPIEN family of transcatheter heart valves in key markets like the U.S. and Japan. The company's Surgical Heart Valve Therapy (SHVT) segment experienced a slight decline, attributed partly to supply constraints and product mix shifts towards THVT.
However, advancements like the EDWARDS INTUITY Elite Valve System and the INSPIRIS RESILIA aortic valve show continued innovation in this area. The Critical Care segment also demonstrated growth. Overall, Edwards Lifesciences maintained a strong financial position, investing heavily in research and development to fuel future growth and expand its portfolio, particularly in areas like mitral and tricuspid valve repair.
Key financial highlights include robust top-line growth and a commitment to R&D investment, representing 15.0%a of net sales in 2016. The company also addressed potential risks such as competition, regulatory hurdles, and supply chain management, while actively managing its global operations and intellectual property. The acquisition of Valtech Cardio Ltd. further signals the company's strategic intent to bolster its transcatheter repair technologies.
02—Key points
Key Highlights
- Transcatheter Heart Valve Therapy (THVT) sales surged by 38.0% in 2016, becoming the largest segment and driving overall company growth.
- The company received multiple FDA approvals and CE Marks in 2016, expanding indications for its SAPIEN 3 and SAPIEN XT transcatheter heart valves, including for lower-risk patients and pulmonic valve replacement.
- Surgical Heart Valve Therapy (SHVT) sales saw a slight decrease of 1.3% in 2016, impacted by product mix shifts and supply constraints for mitral valves.
- Research and Development (R&D) investment increased to $443.3 million (15.0% of net sales) in 2016, reflecting a strong commitment to innovation, particularly in mitral and tricuspid valve technologies.
- Net sales grew by 18.8% year-over-year to $2,963.7 million in 2016.
- Edwards Lifesciences announced its agreement to acquire Valtech Cardio Ltd., a move expected to strengthen its position in transcatheter mitral and tricuspid valve repair.
- The company repurchased approximately $646.5 million of its common stock in 2016, demonstrating a commitment to returning value to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Edwards Lifesciences kept $0.19.
- Revenue$2.96B100.0%
- Cost of revenue−$797.4M26.9%
- Gross profit$2.17B73.1%
- Operating costs−$1.42B47.7%
- Operating income$751.2M25.3%
- Interest, other & tax−$181.7M6.1%
- Net income$569.5M19.2%
Where FY2016 revenue went
$2.96B- SG&A: $904.7M, 31% of revenue
- Cost of revenue: $797.4M, 27% of revenue
- Net income: $569.5M, 19% of revenue
- R&D: $442.2M, 15% of revenue
- Other operating costs: $68.2M, 2.3% of revenue
- Interest, other & tax: $181.7M, 6.1% of revenue
Kept 19% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 17, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.96B$2.49B | +18.8% |
| Cost of Revenue | $797.40M$617.20M | +29.2% |
| Gross Profit | $2.17B$1.88B | +15.4% |
| R&D Expenses | $442.20M$382.90M | +15.5% |
| SG&A Expenses | $904.70M$850.70M | +6.3% |
| Operating Income | $751.20M— | — |
| Interest Expense | $19.20M$17.20M | +11.6% |
| Net Income | $569.50M$494.90M | +15.1% |
| EPS (Basic) | $0.89$0.77 | +16.1% |
| EPS (Diluted) | $0.87$0.75 | +16.0% |
| Shares Outstanding (Basic) | 639.00M646.50M | −1.2% |
| Shares Outstanding (Diluted) | 653.40M660.90M | −1.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Edwards Lifesciences' revenue growth in 2016?
The primary driver of revenue growth was the Transcatheter Heart Valve Therapy (THVT) segment, which saw a significant increase of 38.0% in 2016, largely due to the strong performance of the Edwards SAPIEN 3 valve in the U.S. and Japan, along with expanded indications for its transcatheter valves.
What are the company's main product segments and their performance?
Edwards Lifesciences operates in three main segments: Transcatheter Heart Valve Therapy (THVT), Surgical Heart Valve Therapy (SHVT), and Critical Care. In 2016, THVT was the strongest performer with 38.0% sales growth. SHVT experienced a slight decline of 1.3%, while Critical Care saw a 6.0% increase in sales.
How is the company addressing innovation and future growth?
Edwards Lifesciences is heavily invested in research and development, allocating $443.3 million in 2016. Key areas of focus include developing new transcatheter valve technologies for mitral and tricuspid valve diseases, as demonstrated by the planned acquisition of Valtech Cardio Ltd. and ongoing development of devices like the Edwards SAPIEN 3 Ultra and CENTERA valve.
What is the company's stance on dividends and share repurchases?
Edwards Lifesciences has never paid cash dividends and currently plans to reinvest earnings back into the business. However, the company actively engages in share repurchases, having repurchased approximately $646.5 million of its common stock in 2016 under its authorized programs.
06—Continue