10-QPeriod: Q3 FY2022

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 28, 2022For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported its third-quarter 2022 financial results, showcasing modest top-line growth amidst a challenging macroeconomic environment. Net sales increased slightly year-over-year, primarily driven by the performance of Transcatheter Aortic Valve Replacement (TAVR) products, especially the Edwards SAPIEN platform. The company experienced some headwinds from foreign currency fluctuations, particularly impacting sales outside the United States. Operationally, the company recorded a significant special charge related to the exit of its HARPOON surgical mitral repair system program. Despite this, profitability remained robust, though diluted earnings per share saw a slight decrease compared to the prior year, influenced by factors like changes in contingent consideration liabilities and increased R&D and SG&A expenses. The company maintained a strong liquidity position and continued its share repurchase program, demonstrating confidence in its financial health and future prospects.

Financial Highlights

50 data points
Beta

Revenue

$1.32B

80.8% Gross Margin

Net Income

$343.50M

26.0% Net Margin

EPS (Diluted)

$0.55

Total Assets

$8.64B

Cash & Equivalents

$1.25B

Free Cash Flow

$250.00M

Financial Statements
Beta
Revenue$1.32B
Cost of Revenue$253.80M
Gross Profit$1.07B
R&D Expenses$233.60M
SG&A Expenses$377.30M
Operating Income$402.40M
Net Income$343.50M
EPS (Basic)$0.55
EPS (Diluted)$0.55
Shares Outstanding (Basic)619.80M
Shares Outstanding (Diluted)624.50M

Key Highlights

  • 1Net sales for the nine months ended September 30, 2022, increased by 3.4% to $4.0 billion, driven primarily by TAVR products.
  • 2A special charge of $66.8 million was recorded in the third quarter of 2022 due to the decision to exit the HARPOON surgical mitral repair system program.
  • 3Gross profit increased for both the three and nine-month periods, benefiting from sales growth and a favorable foreign currency hedging program.
  • 4Diluted earnings per share for the nine months ended September 30, 2022, decreased to $1.79 from $1.85 in the prior year, impacted by contingent consideration changes and increased operating expenses.
  • 5The company reported strong cash flow from operating activities of $935.4 million for the nine months ended September 30, 2022.
  • 6A new Five-Year Credit Agreement for $750.0 million was established in July 2022, with no amounts outstanding as of September 30, 2022, indicating a strong liquidity position.
  • 7The company continued its share repurchase program, buying back shares worth $844.9 million in the first nine months of 2022.

Frequently Asked Questions

The primary driver of revenue growth in the first nine months of 2022 was the strong performance of Transcatheter Aortic Valve Replacement (TAVR) products, particularly the Edwards SAPIEN platform. Net sales for TAVR increased by 3.9% to $2.65 billion for this period.

The 'Special Charge' of $66.8 million was recorded in the third quarter of 2022 due to the company's decision to exit its HARPOON surgical mitral repair system program. This charge primarily relates to the impairment of intangible assets and other exit costs associated with the program. While it impacted quarterly results, the company believes this strategic decision is beneficial for long-term focus.

Foreign currency fluctuations had a notable impact, particularly on sales outside the United States, which decreased net sales by $44.4 million for the third quarter and $97.1 million for the nine months ended September 30, 2022. This was primarily due to the weakening of the Euro and Japanese Yen against the US Dollar. However, the company's foreign currency hedging program also positively impacted gross profit.

The company is involved in ongoing tax audits, including a significant Notice of Proposed Adjustment (NOPA) from the IRS regarding transfer pricing for Surgical/TAVR intercompany royalty transactions. This NOPA could result in approximately $200 million in additional US taxable income. The company is contesting this and has transferred the case to the IRS Independent Office of Appeals. While uncertain, the company believes its current accruals for uncertain tax positions are sufficient. The impact of these unresolved matters could be significant.