Did Edwards beat expectations and raise guidance?

Edwards raised its full-year 2024 sales growth outlook to the high end of the prior 8-10% range and increased guidance for TMTT, Surgical Structural Heart and Critical Care. Adjusted EPS guidance of $2.70-2.80 was maintained, so the raise is on the top line rather than on earnings. The press release does not state consensus estimates, so a formal beat versus Street expectations cannot be confirmed from this filing alone.

Is TAVR, Edwards' core franchise, still growing well?

TAVR grew 6% reported and 8% constant currency adjusted for billing days, a solid but slower rate than TMTT. Management said procedure trends improved through the quarter and expects higher year-over-year growth in the second half. Full-year constant-currency TAVR growth guidance of 8-10% was reiterated.

Why did operating cash flow turn negative, and is the cash position a concern?

Operating cash flow was negative $53.5 million because of a $305.1 million deposit made to mitigate interest on tax liabilities the company is contesting in court. Excluding that deposit and separation payments, adjusted free cash flow was $206 million. With $1.7 billion in cash and short-term investments against about $600 million of debt, liquidity appears comfortable, although the contested tax exposure remains a key item to monitor.

What is the impact of the Critical Care spin-off on investors?

The Critical Care spin-off remains on track for completion by year-end 2024. Q1 included $41.3 million of separation costs, which are excluded from adjusted EPS. Critical Care sales grew 13% in the quarter, and full-year growth guidance was raised to 8-10%, so investors will be watching how the separated business performs as a standalone entity.

Are margins under pressure?

Yes, to some degree. Adjusted gross margin declined to 76.0% from 77.5%, mainly due to a less favorable foreign exchange impact than in the prior year. SG&A rose to 30.6% of sales and R&D to 17.8%, reflecting investment in transcatheter field personnel and valve innovation. Management is prioritizing growth investment, which is holding down operating leverage even as sales expand.

EW 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Edwards Lifesciences (NYSE: EW) reported first-quarter 2024 results that beat the top-line expectations embedded in its prior guidance, with net sales up 10% on a reported and constant-currency basis to $1.60 billion^a (GAAP net sales $1,598.2M vs. $1,459.6M a year ago).

Growth was led by Transcatheter Mitral and Tricuspid Therapies (TMTT), which rose 75% to $73 million^b on PASCAL adoption, while TAVR sales grew 6% to $1.01 billion (8% constant currency adjusted for billing days), driven by the U.S. and Japan. Critical Care grew 13% to $251 million and Surgical Structural Heart grew 7% to $266 million. Management raised its full-year 2024 sales growth outlook to the high end of the prior 8-10% range, lifted Surgical Structural Heart and Critical Care sales expectations and raised TMTT sales guidance to $320-340 million, while maintaining TAVR guidance of 8-10% constant-currency growth and adjusted EPS guidance of $2.70-2.80.

Profitability was mixed. GAAP diluted EPS was $0.58^c (up from $0.56), and adjusted EPS was $0.66 versus $0.62 a year earlier. Adjusted gross margin declined to 76.0% from 77.5%, reflecting a less favorable foreign exchange impact than in the prior year, while SG&A rose to 30.6% of sales and R&D to 17.8% of sales, driven by transcatheter field personnel and valve innovation spending.

GAAP operating income was roughly flat at $387.5 million^d, held back by $41.3 million of separation costs tied to the planned spin-off of Critical Care. Cash flow and the balance sheet warrant attention. Operating cash flow was negative $53.5 million, largely because of a $305.1 million tax deposit made to mitigate interest on contested tax liabilities; adjusted free cash flow, which excludes that deposit and separation payments, was $206 million.

Cash and short-term investments totaled $1.7 billion against roughly $600 million of total debt. Guidance for second-quarter sales of $1.62-1.70 billion and adjusted EPS of $0.67-0.71 was also issued.

02—Key points

Key Highlights

Q1 2024 net sales rose 10% (reported and constant currency) to $1.60 billion; full-year 2024 sales growth guidance raised to the high end of the prior 8-10% range.
TMTT sales grew 75% to $73 million, and full-year TMTT guidance was raised to $320-340 million from a prior $280-320 million range.
TAVR sales grew 6% to $1.01 billion (8% constant currency adjusted for billing days); management reiterated 8-10% constant-currency TAVR growth guidance for 2024.
Critical Care sales grew 13% to $251 million, and full-year Critical Care growth guidance was raised to 8-10%; Surgical Structural Heart grew 7% to $266 million with guidance raised to 6-8%.
GAAP diluted EPS was $0.58 and adjusted EPS was $0.66 (vs. $0.62 a year ago); full-year adjusted EPS guidance of $2.70-2.80 was maintained.
Adjusted gross margin fell to 76.0% from 77.5%, and SG&A and R&D rose to 30.6% and 17.8% of sales, respectively, pressuring margins despite top-line growth.
Operating cash flow was negative $53.5 million due to a $305.1 million tax deposit; adjusted free cash flow was $206 million, and cash plus short-term investments stood at $1.7 billion.

03—Questions

Frequently Asked Questions

Did Edwards beat expectations and raise guidance?
Edwards raised its full-year 2024 sales growth outlook to the high end of the prior 8-10% range and increased guidance for TMTT, Surgical Structural Heart and Critical Care. Adjusted EPS guidance of $2.70-2.80 was maintained, so the raise is on the top line rather than on earnings. The press release does not state consensus estimates, so a formal beat versus Street expectations cannot be confirmed from this filing alone.
Is TAVR, Edwards' core franchise, still growing well?
TAVR grew 6% reported and 8% constant currency adjusted for billing days, a solid but slower rate than TMTT. Management said procedure trends improved through the quarter and expects higher year-over-year growth in the second half. Full-year constant-currency TAVR growth guidance of 8-10% was reiterated.
Why did operating cash flow turn negative, and is the cash position a concern?
Operating cash flow was negative $53.5 million because of a $305.1 million deposit made to mitigate interest on tax liabilities the company is contesting in court. Excluding that deposit and separation payments, adjusted free cash flow was $206 million. With $1.7 billion in cash and short-term investments against about $600 million of debt, liquidity appears comfortable, although the contested tax exposure remains a key item to monitor.
What is the impact of the Critical Care spin-off on investors?
The Critical Care spin-off remains on track for completion by year-end 2024. Q1 included $41.3 million of separation costs, which are excluded from adjusted EPS. Critical Care sales grew 13% in the quarter, and full-year growth guidance was raised to 8-10%, so investors will be watching how the separated business performs as a standalone entity.
Are margins under pressure?
Yes, to some degree. Adjusted gross margin declined to 76.0% from 77.5%, mainly due to a less favorable foreign exchange impact than in the prior year. SG&A rose to 30.6% of sales and R&D to 17.8%, reflecting investment in transcatheter field personnel and valve innovation. Management is prioritizing growth investment, which is holding down operating leverage even as sales expand.

04—Continue

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