10-QPeriod: Q1 FY2020

Edwards Lifesciences Corp Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 28, 2020For Securities:EW

Summary

Edwards Lifesciences Corporation reported strong top-line growth in the first quarter of 2020, with net sales increasing by 13.7% to $1.13 billion compared to the prior year. This growth was primarily driven by a significant 24.2% increase in Transcatheter Aortic Valve Replacement (TAVR) sales, largely attributed to the success of the Edwards SAPIEN 3 Ultra valve. Despite the onset of the COVID-19 pandemic in March 2020, which began to impact procedure volumes in the latter half of the quarter, the company demonstrated resilience. Profitability also saw improvement, with net income rising to $310.6 million, a 24.4% increase year-over-year, leading to diluted earnings per share of $1.47, up from $1.18 in the prior year. The company maintained a healthy financial position, although cash and cash equivalents decreased due to substantial share repurchases totaling $614.7 million during the quarter. Management highlighted the impact of COVID-19 as a significant uncertainty for future operations, particularly concerning procedure volumes and supply chain stability.

Financial Highlights

50 data points
Beta

Revenue

$1.13B

76.5% Gross Margin

Net Income

$310.60M

27.5% Net Margin

EPS (Diluted)

$0.49

Total Assets

$6.08B

Cash & Equivalents

$668.30M

Free Cash Flow

$124.90M

Financial Statements
Beta
Revenue$1.13B
Cost of Revenue$265.10M
Gross Profit$863.60M
R&D Expenses$187.40M
SG&A Expenses$307.80M
Operating Income$358.10M
Net Income$310.60M
EPS (Basic)$0.50
EPS (Diluted)$0.49
Shares Outstanding (Basic)624.60M
Shares Outstanding (Diluted)635.10M

Key Highlights

  • 1Net sales increased by 13.7% to $1.13 billion in Q1 2020 compared to Q1 2019.
  • 2Transcatheter Aortic Valve Replacement (TAVR) sales showed robust growth of 24.2%, driven by the Edwards SAPIEN 3 Ultra valve.
  • 3Net income rose by 24.4% to $310.6 million, with diluted EPS increasing to $1.47 from $1.18 year-over-year.
  • 4The company repurchased $614.7 million of its common stock during the quarter.
  • 5Operating activities generated $207.0 million in cash flow, a significant increase from $1.5 million in the prior year.
  • 6The company acknowledges significant uncertainty and potential adverse impacts from the COVID-19 pandemic on future operations and demand.
  • 7Research and Development expenses increased, reflecting ongoing investment in transcatheter mitral and tricuspid therapies.

Frequently Asked Questions

The primary driver of sales growth was the Transcatheter Aortic Valve Replacement (TAVR) segment, which saw a 24.2% increase in net sales. This growth was significantly boosted by the strong performance of the Edwards SAPIEN 3 Ultra valve, following its regulatory approvals.

The COVID-19 pandemic began to impact Edwards Lifesciences in March 2020, leading to a significant drop in TAVR and Surgical procedure volumes in the latter part of the quarter. While the company managed to achieve overall sales growth for the quarter, management anticipates ongoing uncertainty and potential adverse impacts from the pandemic on future operations, demand, and supply chains.

Operating activities generated $207.0 million in cash for the first quarter of 2020, a substantial increase from the prior year, largely due to improved operating performance and the absence of a large litigation settlement payment seen in Q1 2019. However, the company used significant cash for financing activities, primarily due to $614.7 million in share repurchases, leading to a decrease in cash and cash equivalents from $1,179.1 million at the end of 2019 to $662.9 million at the end of the quarter.

Edwards Lifesciences is involved in ongoing patent litigation with Abbott Laboratories concerning the PASCAL heart valve repair system. While the company intends to defend itself vigorously, the ultimate outcome of these matters involves judgments and uncertainties, and potential charges related to them could materially impact financial results. The company is unable to estimate the amount or range of any loss for these matters.