10-QPeriod: Q1 FY2022

Medtronic plc Quarterly Report for Q1 Ended Jul 30, 2021

Filed September 2, 2021For Securities:MDT

Summary

Medtronic plc's (MDT) Q1 FY2022 results, ending July 30, 2021, demonstrate a significant recovery and robust growth, with net sales increasing by 23% year-over-year to $7.99 billion, driven by the rebound in global procedural volumes post-pandemic. Diluted EPS saw a substantial jump to $0.56 from $0.36 in the prior year, reflecting improved operational performance. The company highlighted strong performance across its Cardiovascular, Medical Surgical, and Neuroscience segments, with notable growth in areas like Cardiac Rhythm & Heart Failure, Surgical Innovations, and Neuromodulation, underscoring the effectiveness of its product portfolio and market recovery. Despite the overall positive trend, the company did experience a slowdown in elective procedures in late July due to the Delta variant, though management believes the impact may be less severe than prior waves. A significant event during the quarter was the $726 million charge related to the decision to stop the distribution and sale of the Medtronic HVAD System, which included substantial impairments. This impacted profitability but was largely treated as an "other operating expense" and adjusted for in non-GAAP measures. Medtronic also reported healthy operating cash flow of $1.29 billion and demonstrated a strong financial position with $3.0 billion in cash and cash equivalents.

Financial Highlights

53 data points
Beta

Revenue

$7.99B

67.5% Gross Margin

Net Income

$769.00M

9.6% Net Margin

EPS (Diluted)

$0.56

Total Assets

$91.80B

Cash & Equivalents

$3.00B

Free Cash Flow

$914.00M

Financial Statements
Beta
Revenue$7.99B
Cost of Revenue$2.60B
Gross Profit$5.39B
SG&A Expenses$2.55B
Operating Income$859.00M
Interest Expense$137.00M
Net Income$769.00M
EPS (Basic)$0.57
EPS (Diluted)$0.56
Shares Outstanding (Basic)1.34B
Shares Outstanding (Diluted)1.36B

Key Highlights

  • 1Net sales increased 23% to $7.99 billion, driven by a recovery in global medical procedure volumes.
  • 2Diluted EPS rose to $0.56, up from $0.36 in the prior year's comparable period.
  • 3Cardiovascular segment sales grew 19% to $2.89 billion, with strong performance in Cardiac Rhythm & Heart Failure and Structural Heart & Aortic.
  • 4Medical Surgical segment sales increased 29% to $2.32 billion, led by Surgical Innovations.
  • 5Neuroscience segment sales grew 29% to $2.20 billion, benefiting from recovery in deferrable procedures.
  • 6A significant charge of $726 million was recorded due to the decision to stop sales of the Medtronic HVAD System, impacting reported net income.
  • 7Operating cash flow was strong at $1.29 billion, and the company maintained a healthy liquidity position with $3.0 billion in cash and cash equivalents.

Frequently Asked Questions

The primary driver for the 23% increase in net sales to $7.99 billion was the recovery of global medical procedure volumes. This rebound occurred as the impact of the COVID-19 pandemic lessened compared to the prior year's comparable period, allowing for a return to pre-pandemic procedure levels in most of Medtronic's businesses and geographies.

The decision to stop the distribution and sale of the Medtronic HVAD System resulted in a significant charge of $726 million during the quarter. This included $515 million in non-cash impairments (primarily intangible assets) and $211 million for commitments and obligations. This charge impacted 'Other operating expense (income), net' and negatively affected reported net income and EPS, although it was excluded from non-GAAP financial measures.

Medtronic experienced a slowdown in elective procedures in certain areas during late July due to the Delta variant. However, the company believes the impact may be less severe than previous waves due to better prepared healthcare systems and rising vaccination rates. The company anticipates continued variability in medical procedure rates based on regional COVID-19 case volumes and vaccination levels.

Medtronic maintained a strong liquidity position with $3.0 billion in cash and cash equivalents and $7.6 billion in investments. Total debt stood at $26.0 billion. The company has access to a $3.5 billion revolving credit facility and commercial paper programs, of which no amounts were outstanding. Medtronic also continues to return value to shareholders through share repurchases, with approximately $5.1 billion remaining under its authorized program.