10-QPeriod: Q3 FY2018

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 26, 2018For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported a solid third quarter of 2018, showcasing revenue growth driven by its Transcatheter Heart Valve Therapy (THVT) segment, particularly the SAPIEN 3 valve. Total net sales increased by 10.4% year-over-year for the quarter and 7.8% for the first nine months. The company also saw strong performance in its Critical Care segment. Despite some headwinds in Surgical Heart Valve Therapy due to a transition to a consignment inventory model and ongoing litigation expenses, the overall financial health appears robust. Net income grew significantly, aided by operational improvements and a notable benefit from the Tax Cuts and Jobs Act and tax audit settlements, leading to a lower effective tax rate. The company maintains a strong liquidity position and continues to invest in research and development, reflecting a commitment to innovation and future growth.

Financial Highlights

53 data points
Beta

Revenue

$906.60M

75.2% Gross Margin

Net Income

$225.90M

24.9% Net Margin

EPS (Diluted)

$0.35

Total Assets

$5.96B

Cash & Equivalents

$1.26B

Free Cash Flow

$257.20M

Financial Statements
Beta
Revenue$906.60M
Cost of Revenue$224.90M
Gross Profit$681.70M
R&D Expenses$161.80M
SG&A Expenses$269.50M
Operating Income$248.90M
Net Income$225.90M
EPS (Basic)$0.36
EPS (Diluted)$0.35
Shares Outstanding (Basic)627.00M
Shares Outstanding (Diluted)639.60M

Key Highlights

  • 1Total net sales increased by 10.4% to $906.6 million for the third quarter of 2018, and by 7.8% to $2,745.1 million for the first nine months of 2018, compared to the prior year periods.
  • 2Transcatheter Heart Valve Therapy (THVT) sales grew by 15.9% to $557.8 million for the quarter, driven by strong adoption of the SAPIEN 3 valve, particularly in the US and Japan.
  • 3Critical Care segment sales increased by 13.5% to $164.2 million for the quarter, boosted by the HemoSphere platform.
  • 4Surgical Heart Valve Therapy (SHVT) sales decreased by 5.6% to $184.6 million for the quarter, largely due to sales return reserves related to the conversion to a consignment inventory model.
  • 5Net income increased to $225.9 million ($1.06 per diluted share) for the third quarter of 2018, up from $170.1 million ($0.79 per diluted share) in the prior year quarter, benefiting from operational performance and tax adjustments.
  • 6The company ended the quarter with a strong cash position of $1,261.3 million in cash and cash equivalents, an increase from $818.3 million at the end of 2017.
  • 7Research and Development expenses increased to $161.8 million for the quarter, reflecting continued investment in structural heart programs and clinical trials.

Frequently Asked Questions

Revenue growth was primarily driven by the Transcatheter Heart Valve Therapy (THVT) segment, with strong sales of the Edwards SAPIEN 3 valve in the United States and Japan. The Critical Care segment also contributed positively with its HemoSphere advanced monitoring platform.

The Tax Cuts and Jobs Act led to a lower U.S. federal corporate tax rate and a one-time deemed repatriation tax. For the nine months ended September 30, 2018, the company recorded a benefit from the lower U.S. federal corporate rate, partially offset by adjustments to provisional tax amounts. The effective tax rate for the nine months was significantly lower in 2018 (6.3%) compared to 2017 (17.5%).

Edwards Lifesciences is involved in ongoing patent infringement litigation with Boston Scientific concerning transcatheter heart valves. While the company is defending itself vigorously, the ultimate outcome of these matters is uncertain and could potentially have a material adverse impact on financial position, results of operations, or liquidity.

The company repaid its $600.0 million in 2013 Notes in October 2018 and issued $600.0 million in new senior notes in June 2018. As of September 30, 2018, there were no borrowings outstanding under its $750.0 million credit agreement. The company ended the quarter with $1,261.3 million in cash and cash equivalents, indicating a strong liquidity position to fund its operations and investments.