10-QPeriod: Q1 FY2016

Edwards Lifesciences Corp Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 29, 2016For Securities:EW

Summary

Edwards Lifesciences Corporation reported solid revenue growth of 18.1% for the first quarter of 2016, reaching $697.3 million, driven primarily by strong performance in its Transcatheter Heart Valve (THV) Therapy segment, particularly the SAPIEN 3 valve. The company's net income also saw a healthy increase of 15.9% to $143.0 million, translating to diluted earnings per share of $0.66, up from $0.56 in the prior year's comparable period. While gross profit margin saw a slight decline due to foreign currency impacts, the company effectively managed its operating expenses, leading to improved profitability. The company highlighted its ongoing investment in R&D and its strong liquidity position, with ample cash reserves and an undrawn credit facility.

Financial Highlights

49 data points
Beta

Revenue

$697.30M

74.1% Gross Margin

Net Income

$143.00M

20.5% Net Margin

EPS (Diluted)

$0.22

Total Assets

$3.85B

Cash & Equivalents

$501.40M

Free Cash Flow

$79.40M

Financial Statements
Beta
Revenue$697.30M
Cost of Revenue$180.30M
Gross Profit$517.00M
R&D Expenses$101.80M
SG&A Expenses$212.70M
Interest Expense$2.40M
Net Income$143.00M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)639.30M
Shares Outstanding (Diluted)653.40M

Key Highlights

  • 1Net sales increased by 18.1% to $697.3 million, primarily driven by the Transcatheter Heart Valve (THV) Therapy segment's 37.0% growth.
  • 2Net income grew by 15.9% to $143.0 million, resulting in diluted EPS of $0.66, an increase from $0.56 in Q1 2015.
  • 3The launch and adoption of the Edwards SAPIEN 3 valve in the United States and Europe were key drivers of THV sales growth.
  • 4Research and development expenses increased by 16.0% to $102.4 million, reflecting continued investment in new product development, particularly in mitral and aortic THV.
  • 5The company actively repurchased shares, with $400.0 million spent on treasury stock purchases during the period, including accelerated share repurchase agreements.
  • 6Gross profit margin decreased by 2.9 percentage points to 74.1%, mainly due to foreign currency exchange rate fluctuations.
  • 7The company continues to face ongoing intellectual property litigation with Boston Scientific, with new lawsuits filed in Q1 2016 and Q2 2016.

Frequently Asked Questions

The primary driver of revenue growth was the Transcatheter Heart Valve (THV) Therapy segment, which saw a 37.0% increase in net sales. This growth was largely attributed to the successful launch and adoption of the Edwards SAPIEN 3 valve in both the United States and Europe.

Edwards Lifesciences demonstrated improved profitability, with net income increasing by 15.9% to $143.0 million. Diluted earnings per share rose to $0.66 from $0.56 in the prior year's first quarter. Despite a slight decrease in gross profit margin due to currency headwinds, the company effectively managed its operating expenses.

The company is committed to innovation, evidenced by a 14.7% investment of net sales in research and development (R&D) expenses. The increase in R&D spending was primarily directed towards new mitral and aortic THV product development efforts, indicating a focus on expanding its structural heart portfolio.

Yes, Edwards Lifesciences is involved in ongoing intellectual property litigation with Boston Scientific. Several lawsuits concerning heart valve technology have been filed by both parties in various jurisdictions. While the company intends to defend itself vigorously, these matters could potentially impact future financial results, although management currently does not believe they will have a material adverse effect on the company's financial position.