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Edwards Lifesciences 8-K Report, Financial Results (Feb 6, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed February 6, 2024
Period End
February 6, 2024
Security
EW
In the record · 2016–202610-K1110-Q328-K88

EW filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 88 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jun ’18Jun ’18
  2. Leadership change8-K · Dec ’22Dec ’22
  3. Leadership change8-K · Aug ’26Aug ’26

01—Abstract

Summary

Summary of the 8-K filed February 6, 2024. Cited figures are marked; the original filing is the authoritative source.

Edwards Lifesciences (EW) reported fourth-quarter 2023 results on February 6, 2024, with net sales up 14% reported (13% constant currency) to $1.53 billiona, and TAVR sales of $979 million growing 13%.

Full-year 2023 sales reached $6.0 billionb, up 12%, while GAAP diluted EPS was $2.30 and adjusted EPS was $2.51. Q4 GAAP diluted EPS of $0.61 compares with $0.65 a year earlier, reflecting higher SG&A and R&D spending, a $9.9 million IP litigation expense, and a $17.2 million charge tied to the planned spin-off of Critical Care. Adjusted Q4 EPS of $0.64 was flat year over year, and the adjusted gross margin fell to 76.8% from 81.0%, which management attributed mainly to foreign exchange.

The quarter's main investor takeaways are the early U.S. FDA approval of the EVOQUE tricuspid replacement system, which prompted management to move TMTT 2024 sales toward the high end of the $280 to $320 millionc range, and reaffirmed 2024 guidance of 8 to 10% constant-currency sales growth to $6.3 to $6.6 billion with adjusted EPS of $2.70 to $2.80. Q1 2024 guidance calls for sales of $1.53 to $1.61 billion and adjusted EPS of $0.62 to $0.66. Management also highlighted the planned spin-off of Critical Care, which is a key structural event for the company's future.

Balance sheet and capital return remained strong. Cash and short-term investments totaled $1.6 billiond at year-end, and total debt was about $600 million. Edwards repurchased $867 million of stock in 2023, including a $400 million accelerated share repurchase in Q4, and roughly $1 billion remains under its authorization.

Full-year adjusted free cash flow was $943 million, though Q4 free cash flow was only $48 million. Investors should also note the $139 million and $37 million charges in 2023 tied to the Medtronic IP agreement, which weighed on GAAP results.

02—Key points

Key Highlights

  1. Q4 2023 net sales rose 14% to $1.53 billion (13% constant currency); TAVR sales of $979 million grew 13%, with double-digit constant-currency growth in the U.S., Europe and Japan.
  2. Q4 GAAP diluted EPS was $0.61 versus $0.65 a year ago; adjusted EPS was $0.64, flat year over year, as SG&A rose to 31.3% of sales and R&D grew 16%.
  3. Adjusted gross margin fell to 76.8% from 81.0%, driven mainly by foreign exchange, per management.
  4. FDA approved EVOQUE, the first transcatheter therapy for tricuspid regurgitation, earlier than expected; TMTT 2024 sales now expected at the high end of $280 to $320 million, and TMTT grew more than 65% in 2023.
  5. 2024 guidance reaffirmed: 8 to 10% constant-currency sales growth to $6.3 to $6.6 billion and adjusted EPS of $2.70 to $2.80; Q1 2024 sales guided to $1.53 to $1.61 billion.
  6. Capital return remained active: $867 million of buybacks in 2023 (including a $400 million ASR in Q4) with about $1 billion left on the authorization; year-end cash and short-term investments of $1.6 billion against roughly $600 million of debt.
  7. Planned spin-off of the Critical Care product group incurred a $17.2 million one-time cost in Q4, and 2023 GAAP results included $176 million of IP agreement charges tied to Medtronic.

03—Questions

Frequently Asked Questions

  1. Why did Edwards' GAAP EPS decline in Q4 2023 even though sales grew 14%?

    Q4 GAAP diluted EPS fell to $0.61 from $0.65 because operating expenses grew faster than sales. SG&A rose to $480 million (31.3% of sales) from $411 million, reflecting investments in transcatheter field personnel and patient activation, while R&D grew 16% to $270 million on valve innovation and clinical trials. Gross margin also compressed to 76.7% from 80.9%, largely due to foreign exchange.

  2. What is the financial impact of the EVOQUE approval?

    The early U.S. FDA approval of EVOQUE led management to expect 2024 TMTT sales at the high end of the prior $280 to $320 million guidance range, up from a 2023 TMTT base of $198 million. Management also noted that EVOQUE is launching in Europe, though the filing does not quantify its contribution to overall 2024 guidance.

  3. Is Edwards' 2024 guidance still intact?

    Yes. Management reaffirmed 2024 constant-currency sales growth of 8 to 10% to $6.3 to $6.6 billion and adjusted EPS of $2.70 to $2.80. It also expects Q1 2024 sales of $1.53 to $1.61 billion and adjusted EPS of $0.62 to $0.66, and it stated confidence in the sales guidance given at its December 2023 investor conference.

  4. How strong is Edwards' cash generation and balance sheet?

    Full-year 2023 adjusted free cash flow was $943 million, but Q4 free cash flow was only $48 million (operating cash flow of $136 million less $88 million of capex). Year-end cash and short-term investments were $1.6 billion against about $600 million of total debt, which leaves ample liquidity for buybacks and investment.

  5. What are the main non-recurring items affecting 2023 results?

    The largest was the Medtronic IP agreement, which produced charges of $37 million in Q1 and $139 million in Q2 2023 for a 15-year covenant not to sue. Other items included IP litigation expenses ($27.5 million for the year), a $17.2 million Q4 cost tied to the planned Critical Care spin-off, and a $23.2 million tax benefit from the suspension of certain foreign tax credit regulations. Adjusted EPS of $2.51 excludes these items.

04—Continue

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