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    EW
    Earnings call· Dec 2024(Q4 FY24)

    Edwards Lifesciences Q4 FY24 earnings call EW

    Feb 11, 2025 Source

    Executive summary

    Edwards Lifesciences Q4 FY24 — Strong Performance Driven by TMTT and Positive Clinical Data

    Edwards Lifesciences delivered a strong Q4 FY24, exceeding sales and EPS expectations, primarily driven by robust performance in its TMTT segment and continued adoption of its TAVR technologies. The company is strategically focused on structural heart, with significant investments in R&D and acquisitions, and anticipates continued growth in 2025 and beyond, supported by key clinical catalysts like the EARLY TAVR trial and the EVOQUE launch. Management is committed to expanding profit margins while investing for sustainable growth.

    Highlights

    5

    • Total company sales grew 9% to $1.39 billion in Q4, exceeding expectations.

    • Full year 2024 sales grew 9% to $5.4 billion, in line with original guidance.

    • TMTT full year sales increased 77% year-over-year to $352 million, overachieving expectations.

    • EVOQUE Tricuspid replacement system launch progressing well in US and Europe, with strong demand.

    • EARLY TAVR trial demonstrated superior outcomes for asymptomatic severe AS patients, presenting a multi-year growth catalyst.

    Concerns

    4

    • TAVR growth was lower than originally expected for full year 2024.

    • Q1 FY25 total company and TAVR year-over-year growth rates are expected to be below full year guidance ranges (8-10% and 5-7% respectively).

    • Sales in Japan for TAVR grew at a slower pace than in other major regions.

    • Experienced a few instances of regional pricing pressure for TAVR globally.

    Guidance & targets

    21
    CategoryTargetConfidence
    Total company sales
    $5.6 billion to $6 billion
    high materiality
    High
    TAVR sales
    $4.1 billion to $4.4 billion
    high materiality
    High
    TMTT sales
    $500 million to $530 million
    high materiality
    High
    Surgical sales
    $970 million to $1.05 billion
    medium materiality
    High
    Total company sales growth
    8% to 10% annually
    high materiality
    High
    Surgical sales growth
    mid-single digits
    medium materiality
    High
    Adjusted gross profit margin
    78% and 79%
    medium materiality
    High
    Adjusted operating profit margin
    27% to 28%
    high materiality
    High
    Adjusted tax rate (excluding special items)
    15% and 18%
    medium materiality
    High
    FX impact on sales
    $130 million or 2.5 percentage points downside
    medium materiality
    High
    Average diluted shares outstanding
    $585 million and $595 million
    low materiality
    High
    Q1 sales
    $1.35 billion to $1.43 billion
    high materiality
    High
    Q1 adjusted EPS
    $0.58 to $0.64
    high materiality
    High
    Q1 total company growth rate
    below the low end of our full year guidance ranges of 8% to 10%
    high materiality
    Medium
    Q1 TAVR growth rate
    below the low end of our full year guidance ranges of 5% to 7%
    high materiality
    Medium
    SAPIEN M3 European approval
    midyear 2025
    medium materiality
    High
    SAPIEN M3 U.S. approval
    2026
    medium materiality
    Medium
    CMS final NCD for transcatheter Tricuspid valve replacement
    by the end of Q1 2025
    high materiality
    High
    TMTT sales
    over $500 million
    high materiality
    High
    Total company sales growth
    10% annually on average
    high materiality
    High
    TMTT business size
    $2 billion business
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    TAVR
    Q4 growth was driven by the U.S. and Europe. Sales in Japan grew at a slower pace but increased sequentially and year-over-year. The company remains confident in its differentiated technology and evidence.
    Full year 2024 global sales: $4.1 billionFull year 2024 growth: 6% year-over-yearU.S. and OUS sales growth rates: similarPricing: stable globallyRegional pressure: few instances
    		$1.04 billion5.3%——
    TMTT
    The unique portfolio of repair and replacement technologies continues to deliver strong growth, with increasing contribution to overall company performance. PASCAL and EVOQUE both contributed meaningfully to growth.
    Full year 2024 sales: $352 millionFull year 2024 growth: 77% year-over-yearPASCAL adoption: strong in U.S. and globallyEVOQUE launch: expanding in U.S. and Europe
    		$105 million———
    Surgical Product Group
    The category-leading business is positioned to grow consistently and expand globally, driven by increasing adoption of RESILIA-based technology. The company expects positive procedural growth globally.
    Full year 2024 global sales: $981 millionFull year 2024 growth: 6% versus prior yearAdoption: healthy global adoption of Edwards premium RESILIA portfolio (MITRIS, INSPIRIS, KONECT)
    		$244 million5%——

    Operational metrics

    14
    Adjusted gross profit margin
    79%vs 80% prior year
    Q4 FY24

    Compared to 80% in the same period last year.

    SG&A expenses
    $492 millionvs $417 million prior year
    Q4 FY24

    Increase reflects growth in TMTT field-based teams, transition expenses, and strategic growth acquisitions.

    R&D expenses
    $271 million12% over prior year
    Q4 FY24

    Increase primarily due to a full quarter of R&D spend from 2024 acquisitions.

    Adjusted operating profit margin
    25.6%
    Q4 FY24

    In line with expectations for the quarter.

    Reported tax rate
    11.6%
    Q4 FY24

    In line with expectation for the quarter.

    Reported tax rate
    9.8%
    FY24

    Full year reported tax rate.

    Adjusted tax rate (excluding special items)
    13.3%
    Q4 FY24

    In line with expectation for the quarter.

    Adjusted tax rate (excluding special items)
    11.0%vs original guidance 14-17%
    FY24

    Benefited from several onetime tax events, resulting in a lower than originally expected rate.

    FX impact on reported sales growth
    60
    Q4 FY24

    Increased fourth quarter reported sales growth.

    FX impact on gross profit margin
    30
    Q4 FY24

    Negatively impacted fourth quarter gross profit margin.

    Cash and cash equivalents
    $3 billion
    as of 2024-12-31

    Maintained a strong and flexible balance sheet.

    Average diluted shares outstanding
    591 million
    Q4 FY24

    Average diluted shares outstanding during the quarter.

    Share repurchase authorization remaining
    $1.4 billion
    as of 2024-12-31

    Remaining under current share repurchase authorization.

    TMTT business target
    $2 billionvs $352 million FY24
    FY30

    Long-term vision for the TMTT business.

    Industry KPIs

    9
    MetricValueDetails
    Tariff impactimmaterial
    Pricing realized pricestable
    New product launch rampcontinued launch
    Procedure volume growthpositive
    FCF conversion leverage guidance8% to 10%%
    Segment franchise organic growth6%%
    Sales force commercial capacity buildinvesting
    Indicated addressable patient populationsignificant undertreatment
    Pivotal trial clinical evidence milestonessuperior outcome

    Deals & partnerships

    3
    JC MedicalAcquisition to expand portfolio

    Acquisition provides an expanded opportunity in aortic regurgitation.

    InnovalveAcquisition to expand portfolio

    Acquisition provides an expanded opportunity in mitral disease.

    EndotronixAcquisition to expand portfolio

    Acquisition provides an expanded opportunity in heart failure patients.

    Risks & headwinds

    6
    TAVR growth lower than expectedFY24

    Lower than original anticipation for full year 2024

    Regional pricing pressureQ4 FY24

    Few instances of regional pressure

    Mitigation: Confidence in differentiated technology, high-quality evidence, and value proposition.

    Slower TAVR growth in JapanQ4 FY24

    Grew at a slower pace than other major regions

    Mitigation: Committed to enhancing capability in the region and bringing innovation faster to address undertreatment.

    Hospital capacity constraintsNear term

    New technologies and education put pressure on the system

    Mitigation: New technologies provide hospitals clarity and incentive to make investments to expand ability to treat structural heart patients in the longer term.

    Foreign exchange impactFY25

    $130 million or 2.5 percentage points downside to sales

    Q1 growth rates below full year guidanceQ1 FY25

    Q1 total company and TAVR year-over-year growth rates below the low end of full year guidance ranges (8-10% and 5-7% respectively)

    Mitigation: Attributed to one less selling day and typical slowdown in January; higher growth rates expected in subsequent quarters.

    What to watch in Q1 FY25

    5

    CMS Final NCD for EVOQUE

    by the end of Q1 2025
    CurrentProposed NCD language aligned with expectations
    TargetFinal NCD published

    Why it matters

    The final National Coverage Determination is crucial for providing Medicare patient access to the EVOQUE Tricuspid replacement system, which is a key growth driver for the TMTT segment.

    We look forward to the final NCD, which we expect by the end of Q1 2025.

    Q&A highlights

    9

    What dynamics drove TMTT's above-expectation performance in 2024, and what operational factors will accelerate growth to the $500M+ guidance in 2025?

    Management explained that EVOQUE became a significant growth contributor in 2024, complementing PASCAL's continued adoption in new centers and existing practices. They expect both PASCAL and EVOQUE to drive linear growth throughout 2025, with strong emphasis on both Europe and the U.S.

    “As you can imagine, in 2025, EVOQUE will continue to grow. Additionally, on the PASCAL side of things, the U.S., as Bernard said, was probably only in the second full year of launch. And for PASCAL, we continue to open new centers, both the U.S. and Europe and throughout the world and grow as physicians see the differentiation of PASCAL.”

    asked by David Roman · answered by Daveen Chopra

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus and Acquisitions

    Edwards Lifesciences completed the sale of its Critical Care business in Q3 2024, sharpening its focus solely on structural heart. The company also strategically acquired JC Medical, Innovalve, and Endotronix, expanding its portfolio into new therapeutic areas such as aortic regurgitation, mitral disease, and heart failure. These decisions are aimed at increasing agility, accelerating innovation, and reinforcing confidence in sustainable long-term growth by addressing unmet patient needs.

    02

    EARLY TAVR Trial Impact and Future Growth

    The EARLY TAVR trial results, presented in October, demonstrated superior outcomes for asymptomatic severe AS patients treated with the SAPIEN platform compared to watchful waiting. This compelling data is expected to be a significant catalyst for improved patient care, driving changes to the standard of care, streamlining patient flow, and reducing system costs. Management anticipates FDA approval in mid-2025, setting the stage for multi-year growth opportunities through guideline and policy changes in the U.S. and globally.

    03

    TMTT Momentum and Portfolio Expansion

    The Transcatheter Mitral and Tricuspid Therapies (TMTT) segment continues to deliver strong growth, with full year 2024 sales increasing 77% year-over-year to $352 million, exceeding expectations. This growth is driven by the PASCAL repair system and the EVOQUE Tricuspid replacement system. The company's unique portfolio strategy, which includes the forthcoming SAPIEN M3 mitral replacement system, aims to provide the broadest set of treatment options, with TMTT sales projected to exceed $500 million in 2025 and reach $2 billion by 2030.

    04

    Surgical Business Performance and RESILIA Adoption

    The Surgical Product Group reported full year 2024 global sales of $981 million, up 6% year-over-year, and Q4 sales of $244 million, up 5%. This performance was driven by healthy global adoption of Edwards' premium RESILIA portfolio, including MITRIS, INSPIRIS, and KONECT. The company expects continued positive procedural growth globally for patients best treated surgically and is generating clinical evidence to expand global access for its RESILIA products.

    05

    Capacity and Market Expansion Initiatives

    While the rapid growth in structural heart procedures and the introduction of new technologies place near-term pressure📎 on hospital capacity, these factors also provide incentives for hospitals to invest in expanding their ability to treat structural heart patients. Edwards sees significant long-term growth opportunities outside the U.S. for TAVR, given low international adoption rates. The company is particularly focused on enhancing capabilities in regions like Japan to address the substantial elderly population with undertreated aortic stenosis.

    06

    Financial Outlook and Capital Allocation

    Edwards Lifesciences maintains its financial guidance for 2025, anticipating operating profit margin expansion and EPS growth that will outpace top-line growth beyond 2025. The company boasts a strong and flexible balance sheet with approximately $3 billion in cash and cash equivalents as of December 31, 2024, and $1.4 billion remaining under its share repurchase authorization. This financial strength provides the flexibility to advance its growth strategy and deliver long-term shareholder value.

    AI-generated summary of the company’s earnings call. Not investment advice.