10-QPeriod: Q3 FY2019

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:EW

Summary

Edwards Lifesciences Corporation reported a strong third quarter ending September 30, 2019, with total net sales reaching $1.094 billion, a significant 20.7% increase year-over-year. This growth was primarily fueled by a robust 25.7% rise in Transcatheter Aortic Valve Replacement (TAVR) sales, largely attributed to increased adoption of the Edwards SAPIEN 3 valve and the launch of the SAPIEN 3 Ultra System. The company also saw healthy growth in its Surgical Structural Heart and Critical Care segments. Despite the impressive top-line performance, profitability was impacted by a substantial inventory write-off of $26.9 million related to strategic portfolio adjustments, particularly the discontinuation of the CENTERA program. This charge, along with increased R&D investments in transcatheter structural heart programs, influenced the net income. However, the company's financial position remains solid, with a significant increase in cash and cash equivalents, and it continues to prioritize strategic investments and shareholder returns through its share repurchase program.

Financial Highlights

51 data points
Beta

Revenue

$1.09B

73.3% Gross Margin

Net Income

$274.70M

25.1% Net Margin

EPS (Diluted)

$0.43

Total Assets

$5.97B

Cash & Equivalents

$1.19B

Free Cash Flow

$361.20M

Financial Statements
Beta
Revenue$1.09B
Cost of Revenue$292.40M
Gross Profit$801.60M
R&D Expenses$195.50M
SG&A Expenses$306.20M
Operating Income$294.30M
Net Income$274.70M
EPS (Basic)$0.44
EPS (Diluted)$0.43
Shares Outstanding (Basic)624.60M
Shares Outstanding (Diluted)636.30M

Key Highlights

  • 1Total net sales increased by 20.7% to $1.094 billion for the third quarter.
  • 2Transcatheter Aortic Valve Replacement (TAVR) sales saw a strong 25.7% increase, driven by the SAPIEN 3 and SAPIEN 3 Ultra systems.
  • 3A significant inventory write-off of $26.9 million impacted gross profit due to strategic decisions regarding the transcatheter aortic valve portfolio.
  • 4Research and Development expenses increased, reflecting continued investment in transcatheter structural heart programs.
  • 5Cash and cash equivalents increased substantially to $1.1866 billion at the end of the quarter.
  • 6The company completed the acquisition of CAS Medical Systems, Inc. (CASMED) for approximately $100 million, integrating its tissue oxygenation monitoring technology.

Frequently Asked Questions

The primary driver for the 20.7% increase in net sales was the strong performance of the Transcatheter Aortic Valve Replacement (TAVR) segment, which grew by 25.7%. This was largely due to higher sales of the Edwards SAPIEN 3 valve, particularly in the U.S., and the introduction of the Edwards SAPIEN 3 Ultra System following its recent regulatory approvals.

The company recorded a $26.9 million inventory write-off during the third quarter related to strategic decisions concerning its transcatheter aortic valve portfolio, including the discontinuation of the CENTERA program. This charge negatively impacted gross profit and net income for the period.

Edwards Lifesciences demonstrated a strong liquidity position, with cash and cash equivalents increasing to $1.1866 billion as of September 30, 2019. The company continues to generate cash from operations and has ample capacity under its credit facilities. It also actively engages in share repurchases, having $1.2 billion remaining under its stock repurchase authorization.

The key growth drivers are clearly the TAVR and TMTT (Transcatheter Mitral and Tricuspid Therapies) segments, with TAVR showing significant momentum. The company is also investing heavily in R&D for these and other structural heart programs, indicating a strategic focus on expanding its leadership in these areas.