Q3 2024 Earnings Summary
- Edwards Lifesciences maintains a strong competitive position with best-in-class technology and premium pricing, supported by superior clinical evidence.
- The company is confident in positive catalysts for TAVR growth and expects sustainable, profitable growth in the coming years.
- Strong demand for new products like EVOQUE, with recent NTAP approval expected to further drive adoption.
- Operating margin pressures: The company expects fourth-quarter operating margins to be in the mid-20s percentage range, lower than the full-year expectation of 27% to 28%, indicating near-term profitability challenges.
- Increasing competition in the TAVR market: With the potential entry of a fourth valve, Edwards Lifesciences acknowledges that competition is intensifying, which may impact their market share and pricing power in the structural heart space.
- TAVR growth slowdown in Q4: The company anticipates fourth-quarter TAVR growth to be below the full-year range due to factors such as the impact of hurricanes, a one-time China distributor rebate adjustment, and fewer selling days, suggesting potential headwinds in their core business.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -9% | The decline was mainly driven by slower-than-expected TAVR volumes in certain markets and foreign exchange headwinds. Company initiatives in TMTT partly offset this drop, but overall net sales were lower than Q2 in the prior year due to hospital workflow constraints. |
TAVR | +6% | Growth came from continued adoption of the SAPIEN platform, particularly in the U.S. and Europe. However, hospital resource and staffing challenges moderated procedural volumes, preventing a higher rate of growth. |
TMTT | +74% | The significant increase was led by strong uptake of the PASCAL system and the ongoing rollout of EVOQUE in the U.S. and Europe. These launches, combined with broader center activation, fueled robust expansion in the transcatheter mitral and tricuspid segment. |
Japan | -25% | Performance was impacted by foreign currency pressure (weaker yen vs. the dollar) and ongoing competitive trialing in TAVR. These factors outweighed any benefits from new product introductions during the period. |
Rest of World | -18% | Decrease in sales stemmed from FX headwinds and variable procedure volumes in emerging markets. Although TMTT expansion contributed positively, it could not fully offset the currency and regional market constraints. |
Net Income | +698% | The sharp rise in net income was primarily due to significantly lower litigation expenses compared to the prior year and one-time favorable items, which dramatically boosted bottom-line results. Underlying operations also improved, but not to the same extent as the headline increase. |
EPS (Diluted) | +709% | Mirroring the net income trend, EPS benefited from one-time favorable adjustments and lower legal charges. Combined with modest top-line contributions and a favorable effective tax rate, these factors drove a substantial year-over-year increase. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales | Q3 2024 | $1.56B to $1.64B | no current guidance | no current guidance |
EPS | Q3 2024 | $0.67 to $0.71 | no current guidance | no current guidance |
Adjusted Gross Profit Margin | Q3 2024 | 77.1% | no current guidance | no current guidance |
Sales | Q4 2024 | no prior guidance | $1.33B to $1.39B | no prior guidance |
EPS | Q4 2024 | no prior guidance | $0.53 to $0.57 | no prior guidance |
Adjusted Operating Margin | Q4 2024 | no prior guidance | Mid-20s | no prior guidance |
Gross Margin | Q4 2024 | no prior guidance | High end of 76% to 78% | no prior guidance |
Adjusted Tax Rate | Q4 2024 | no prior guidance | 12.4% | no prior guidance |
TMTT Sales | FY 2024 | $320M to $340M | no current guidance | no current guidance |
Surgical Sales | FY 2024 | 6% to 8% | no current guidance | no current guidance |
TAVR Sales | FY 2024 | $4B to $4.2B | no current guidance | no current guidance |
Sales Growth | FY 2024 | no prior guidance | 8% to 10% | no prior guidance |
TAVR Growth | FY 2024 | no prior guidance | 5% to 7% | no prior guidance |
Adjusted Operating Margin | FY 2024 | no prior guidance | 27% to 28% | no prior guidance |
Adjusted Tax Rate | FY 2024 | no prior guidance | Originally 14% to 17%, benefiting from one-time tax events | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Sales | Q3 2024 | $1.56B to $1.64B | $1.3209B | Missed |
EPS | Q3 2024 | $0.67 to $0.71 | $5.12 | Surpassed |
Adjusted GPM | Q3 2024 | In line with Q2 2024 (77.1%) | ~81.6% ((1,320.9 - 243.7) / 1,320.9) | Surpassed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
TAVR Growth & Guidance | Discussed each quarter: Q2 2024 lowered guidance to 5–7% due to hospital workflow issues. Q1 2024 was at 8–10%. Q4 2023 reaffirmed 2024 TAVR guidance of $4.0–4.3B. | Maintained TAVR guidance; cited one-time factors (e.g., hurricanes, China rebate, fewer Q4 selling days) but expressed confidence in the SAPIEN 3 Ultra RESILIA platform and long-term growth. | Recurring, with short-term headwinds |
TMTT (EVOQUE, PASCAL) | Q2 2024: TMTT sales up 75% YoY, led by PASCAL and early EVOQUE adoption. Q1 2024: raised TMTT guidance, early EVOQUE success. Q4 2023: first transcatheter therapy for TR approved in the U.S., with PASCAL expansion. | Strong momentum in EVOQUE (new 56 mm size approved, NTAP reimbursement) and PASCAL (largest TMTT growth driver). Emphasis on physician training and global adoption. | Recurring, consistently growing |
Cost Optimization & Margin | Q2 2024: no updated EPS guide post-Critical Care sale, noted stable gross margins. Q1 2024: limited mention on cost optimization. Q4 2023: ongoing expense efficiency, guided 76–78% gross margin. | Continued focus on cost optimization and resource allocation; Q3 operating margin at 31.4%, but expected to fall to mid-20s in Q4. EPS guidance for 2025 remains uncertain, pending more details at investor conference. | Recurring, with heightened EPS focus |
Critical Care Elimination | Q2 2024: announced sale, created onetime separation costs and complex EPS guidance. Q1 2024: $41M in one-time spin-off costs. Q4 2023: spin-off for strategic focus, no detailed earnings impact. | Impacted full-year EPS by $0.35, yielded a one-time gain in GAAP EPS, and added $3.5B in cash. | Recurring, finalized in Q3 |
Product Launch Delays | Q2 2024: No explicit delays mentioned; SAPIEN M3 timeline set for 2025. Q1 2024 and Q4 2023: Not discussed. | Potential delay for JenaValve (FTC review, projected close by mid-2025) and SAPIEN M3 launch in Europe mid-2025; U.S. followed by trial completion. | New mention in Q3 |
New Acquisitions (AR & HF) | Q2 2024: Introduced JenaValve for AR and Endotronix for HF; minimal revenue expected until late 2025. Q1 2024 and Q4 2023: Not mentioned. | JenaValve expanding into Aortic Regurgitation; Endotronix’s Cordella system for implantable heart failure management. Early Cordella cases performed. | New since Q2, continued in Q3 |
Hospital Capacity Constraints | Q2 2024: Major factor slowing TAVR growth. Q1 2024: Not a significant issue. Q4 2023: Not mentioned. | Acknowledged ongoing but variable constraints limiting TAVR volumes; hospitals investing to handle backlog. | Recurring, perspectives shifted |
Japan TAVR Market | Q2 2024: Double-digit growth, big elderly population. Q1 2024 & Q4 2023: Emphasis on long-term potential. | Slower growth but viewed as a large untapped opportunity due to underdiagnosed aortic stenosis. | Recurring, remains a key focus |
EU Pricing Pressures | Q1 2024: Some aggressive competitor discounting in Europe. Q2 2024 & Q4 2023: Not highlighted [n/a]. | Pricing largely stable worldwide, with only minimal regional pressures. | Recurring, minimal mention in Q3 |
TMTT Adoption Complexity | Q4 2023: Acknowledged slower adoption historically due to complexity and education needs. Q2 2024 & Q1 2024: Not discussed [n/a]. | Not mentioned as a barrier in Q3; strong TMTT adoption continues. | No current mention, was a Q4 concern |
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Operating Margin Outlook
Q: What's the operating margin outlook for Q4 and beyond?
A: Edwards expects operating margins to be in the mid-20% range for Q4. For next year, they anticipate growth to 27% to 28%, aligning with the full-year 2024 margin. -
2025 EPS Outlook
Q: How should we think about 2025 EPS guidance?
A: The company emphasizes that top-line growth will drive 2025 EPS and plans to provide detailed guidance on December 4. Benefits from actions taken this year will contribute in 2025, but special tax benefits from 2024 won't recur. -
TAVR Growth Outlook
Q: Will TAVR growth stay at 5%-7% or reaccelerate?
A: Edwards sees positive catalysts for TAVR growth but considers it premature to discuss specific rates. More details will be shared in December. -
TAVR Capacity Constraints
Q: Are capacity issues affecting TAVR growth?
A: The company acknowledges capacity constraints due to new technologies and their market leadership. Hospital administrators are investing to expand capacity, and while backlogs are growing, they don't foresee long-term issues. -
EVOQUE Reimbursement Mechanics
Q: How do NCD and NTAP impact EVOQUE reimbursement?
A: The NTAP, effective October 1, provides incremental payments for EVOQUE cases. The NCD, expected by Q1 end, will determine coverage and which patients are reimbursed. -
Competitive Dynamics in U.S. TAVR Market
Q: How is competition affecting your TAVR market share?
A: Edwards maintains a premium pricing strategy, relying on their best-in-class SAPIEN 3 Ultra RESILIA valve. They acknowledge competition but are confident in their technology and clinical evidence supporting their leadership. -
Gross Margin Outlook
Q: What's the gross margin expectation?
A: Gross margins are expected to return to the high end of the 76%-78% range in Q4. This range is also a reasonable preliminary assumption for 2025. -
Q4 One-Time Impacts
Q: Can you quantify Q4 one-time impacts for TAVR?
A: They noted a $5 million adjustment related to a China distributor rebate. Other items weren't quantified, but they expect average daily cases to increase in Q4 over Q3. -
SAPIEN M3 Update
Q: What's the update on SAPIEN M3 for mitral replacement?
A: European launch is anticipated in mid-2025, with U.S. launch thereafter. They're in the one-year follow-up period in the U.S., with data submission and regulatory review to follow. -
EVOQUE Reimbursement and 56mm Valve Approval
Q: Has NTAP boosted EVOQUE uptake? What's the impact of the 56mm valve?
A: The NTAP provides a tailwind for EVOQUE adoption, with strong demand overall. The 56mm valve approval adds 20%-25% applicability to the patient pool. -
Tricuspid Repair vs. Replacement Market
Q: How are doctors choosing between tricuspid repair and replacement?
A: The company notes both technologies are important, and they're still determining patient selection criteria. EVOQUE is expected to become a larger part of their portfolio over time. -
Impact of Upcoming Trial Results
Q: When will trial results impact TAVR/TMTT growth?
A: Details are embargoed until next week; the company will discuss impacts after TCT presentations. -
Growth Dynamics in Large vs. Small Centers
Q: Are growth trends different between large and small centers?
A: Larger academic centers, early adopters of new therapies, may face capacity constraints impacting growth. Smaller centers may have different profiles. -
TCT Data and EVOQUE Reimbursement
Q: Post-TCT, when will benefits flow through the business?
A: They plan to discuss activities after TCT and expect the NCD for EVOQUE by Q1 end.
Research analysts covering Edwards Lifesciences.