10-QPeriod: Q3 FY2023

Medtronic plc Quarterly Report for Q3 Ended Jan 27, 2023

Filed March 1, 2023For Securities:MDT

Summary

Medtronic plc reported net sales of $7.73 billion for the third quarter of fiscal year 2023, a slight decrease of 1% year-over-year. Diluted earnings per share (EPS) were $0.92, down from $1.10 in the prior year's comparable quarter. The company experienced a decrease in net income to $1.22 billion from $1.48 billion year-over-year, primarily impacted by higher cost of products sold and increased operating expenses. Despite the revenue dip, Medtronic's Cardiovascular segment showed resilience with a 1% increase in net sales, driven by strong performance in Micra, TAVR, and Diagnostics. However, the Medical Surgical segment saw a notable 7% decline in net sales, attributed to unfavorable currency impacts, supply chain challenges, and lower ventilator demand. Geographically, the U.S. market showed growth (3%), while Non-U.S. Developed Markets experienced a 6% decline and Emerging Markets saw a 1% decrease, impacted by currency headwinds and regional economic factors. The company's financial health remains robust, with $4.5 billion in cash and cash equivalents and $6.6 billion in current investments. Medtronic continues its share repurchase program, with approximately $2.5 billion remaining authorized. The company highlighted ongoing efforts to manage costs and navigate supply chain disruptions while investing in research and development for future growth.

Financial Highlights

55 data points
Beta

Revenue

$7.73B

65.2% Gross Margin

Net Income

$1.23B

15.9% Net Margin

EPS (Diluted)

$0.92

Total Assets

$94.13B

Cash & Equivalents

$4.52B

Free Cash Flow

$1.24B

Financial Statements
Beta
Revenue$7.73B
Cost of Revenue$2.69B
Gross Profit$5.04B
SG&A Expenses$2.62B
Operating Income$1.39B
Interest Expense$167.00M
Net Income$1.23B
EPS (Basic)$0.92
EPS (Diluted)$0.92
Shares Outstanding (Basic)1.33B
Shares Outstanding (Diluted)1.33B

Key Highlights

  • 1Q3 FY23 Net Sales of $7.73 billion, down 1% year-over-year.
  • 2Diluted EPS of $0.92, down from $1.10 in Q3 FY22.
  • 3Net income decreased to $1.22 billion from $1.48 billion year-over-year.
  • 4Cardiovascular segment net sales increased 1% driven by Micra, TAVR, and Diagnostics.
  • 5Medical Surgical segment net sales decreased 7% due to currency, supply chain, and lower ventilator demand.
  • 6U.S. sales increased 3%, while international markets saw declines, impacted by currency.
  • 7Strong liquidity position with $4.5 billion cash and cash equivalents and $6.6 billion in current investments.

Frequently Asked Questions

The decrease in net sales for the Medical Surgical segment was primarily driven by unfavorable currency impacts, provincial volume-based procurement stapling tenders in China, a decline in ventilator sales due to high COVID-19 demand in the prior year's comparable period, and supply chain disruptions, particularly impacting Surgical Innovations.

The company completed two significant acquisitions: Intersect ENT for $1.2 billion and Affera, Inc. for $904 million. While the impact of these acquisitions on revenue and net loss for the quarter was not significant, they are expected to expand Medtronic's product portfolios in the Neuroscience and Cardiovascular segments, respectively.

Medtronic anticipates potential negative impacts from competitive product launches, pricing pressure, currency fluctuations, inflation, rising interest rates, reimbursement challenges, China's tender pricing, the ongoing effects of COVID-19 on procedural volumes and supply chains, and the Russia-Ukraine conflict on revenue and supply chains.

Medtronic's Board of Directors authorized a $6.0 billion share repurchase program. As of January 27, 2023, approximately $2.5 billion remained available under this program. During the nine months ended January 27, 2023, the company repurchased 5 million shares.