-
Revenue of $7.3 Billion
Grew 4% as Reported; 3% at Constant Currency
-
GAAP Diluted EPS of $0.80;
Non-GAAP Diluted EPS of $1.12
-
GAAP Diluted EPS Grew
122%; Non-GAAP EPS Grew 15% at Constant Currency
-
GAAP Operating Margin
Improved 50 bps; Non-GAAP Operating Margin Improved 150
bps
DUBLIN - November 22, 2016 -
Medtronic plc (NYSE: MDT) today announced financial results for its
second quarter of fiscal year 2017, which ended October 28,
2016.
The company reported second quarter worldwide
revenue of $7.345 billion, an increase of 4 percent, or 3 percent
on a constant currency basis. Foreign currency had a positive
$50 million impact on revenue. Second quarter GAAP net income
and diluted earnings per share (EPS) were $1.115 billion and $0.80,
increases of 114 percent and 122 percent, respectively. As
detailed in the financial schedules included through the link at
the end of this release, second quarter non-GAAP net income and
diluted EPS were $1.561 billion and $1.12, representing increases
of 6 percent and 9 percent, respectively. After adjusting for
the negative 6 cent impact from foreign currency, non-GAAP diluted
EPS increased 15 percent.
"Q2 revenue was disappointing and did not meet our
expectations. We faced issues that affected our growth,
including slower than expected revenue as we await new product
introductions, particularly in CVG and Diabetes," said Omar Ishrak,
Medtronic chairman and chief executive officer. "Despite this
revenue shortfall, we produced a strong improvement in operating
margins and double digit constant currency earnings per share
growth."
The second quarter GAAP operating margin was 18.9
percent, a 50 basis point improvement. As detailed in the
financial schedules included through the link at the end of this
release, the second quarter non-GAAP operating margin was 28.9
percent on a constant currency basis, a 150 basis point
improvement.
U.S. revenue of $4.152 billion represented 57
percent of company revenue and increased 1 percent. Non-U.S.
developed market revenue of $2.209 billion represented 30 percent
of company revenue and increased 8 percent, or 5 percent on a
constant currency basis. Emerging market revenue of $984
million represented 13 percent of company revenue and increased 8
percent, or 10 percent on a constant currency basis.
Cardiac and Vascular
Group
The Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm
& Heart Failure (CRHF), Coronary & Structural Heart (CSH),
and Aortic & Peripheral Vascular (APV) divisions. CVG
worldwide revenue of $2.584 billion increased 4 percent, or 3
percent on a constant currency basis, driven by CRHF growth from
the recent acquisition of HeartWare and strong growth in other CRHF
businesses, as well as growth in APV. CSH revenue growth was
flat as strong growth in Structural Heart partially offset declines
in Coronary.
-
CRHF revenue of $1.400 billion increased 6
percent, or 5 percent on a constant currency basis, driven by
growth from the company's recent acquisition of HeartWare,
high-twenties growth in AF Solutions on a constant currency basis,
mid-teens growth in Diagnostics on a constant currency basis,
partially offset by declines in core cardiac rhythm implantables,
which declined in-line with the global market.
-
CSH revenue of $753 million was flat on both a
reported and constant currency basis. Structural Heart was
driven by high-teens growth on a constant currency basis in
transcatheter aortic heart valves as a result of strong customer
adoption of the CoreValve®
Evolut® R. Coronary
declined in the mid-single digits on a constant currency basis,
driven by double-digit declines in drug-eluting stents in the US
and Japan, as the company awaits approval of Resolute
Onyx(TM). This was partially offset by mid-single digit
growth on a constant currency basis in drug-eluting stents in
Western Europe resulting from continued strong sales of the
Resolute Onyx(TM) platform.
-
APV revenue of $431 million increased 5 percent,
or 4 percent on a constant currency basis, with low-single digit
growth on a constant currency basis in the Aortic business, driven
by the success of the Heli-FX®
EndoAnchor® System. The
Peripheral Vascular business grew in the mid-single digits on a
constant currency basis, with mid-twenties growth on a constant
currency basis in drug-coated balloons, driven by the clinically
differentiated IN.PACT®
Admiral® DCB, which
holds the leading market position in the U.S. and globally.
Minimally Invasive Therapies
Group
The Minimally Invasive Therapies Group (MITG) includes the Surgical
Solutions and the Patient Monitoring & Recovery (PMR)
divisions. MITG worldwide revenue of $2.473 billion increased
5 percent, or 4 percent on a constant currency basis, led by MITG
growth drivers, primarily Open-to-MIS, Emerging Markets, and Renal
Care, as well as contributions from recent acquisitions and
strength in Ventilation.
-
Surgical Solutions revenue of $1.361 billion
increased 5 percent, or 4 percent on a constant currency basis,
driven primarily by its Open-to-MIS growth driver, including strong
product sales from Valleylab(TM) FT10 energy platform and continued
performance in endo stapling specialty reloads. In addition,
there was solid contribution from Emerging Markets with
overachievement in Latin America and China. The division also
benefitted from the recent acquisition of Smith & Nephew's
gynecology business. At the same time, Surgical Solutions
growth was offset in the U.S. by competitive pressures stemming
from reprocessing of advanced energy instruments, and in the Middle
East from the timing of tenders.
-
PMR revenue of $1.112 billion increased 4
percent, or 3 percent on a constant currency basis, driven by
mid-single digit growth in the Respiratory & Patient Monitoring
business as a result of strong sales of the Puritan Bennett(TM) 980
ventilator. The Renal Care Solutions business benefitted from
the recent acquisition of Bellco.
Restorative Therapies
Group
The Restorative Therapies Group (RTG) includes the Spine, Brain
Therapies, Specialty Therapies, and Pain Therapies divisions.
RTG worldwide revenue of $1.826 billion increased 4 percent,
or 3 percent on a constant currency basis. Group results were
driven by mid-single digit growth in Brain Therapies and Specialty
Therapies and continued improvement in Spine, offsetting declines
in Pain Therapies, all on a constant currency basis.
-
Spine revenue of $663 million increased 2
percent, or 1 percent on a constant currency basis, the division's
strongest growth in 7 quarters. The Core Spine business grew
in the low-single digits in the U.S., as the focus on
"Speed-to-Scale" new product launches is driving improved
results. BMP grew in the low-single digits on a constant
currency basis, with high-single digit growth in the U.S. partially
offset by the loss of InductOs(TM) sales in Europe as a result of a
shipping hold.
-
Brain Therapies revenue of $506 million
increased 7 percent, or 6 percent on a constant currency basis.
Neurosurgery grew in the high-single digits on a constant
currency basis, driven in part by strong imaging and navigation
capital equipment sales. Neurovascular grew in the mid-single
digits on a constant currency basis, slower growth than in prior
quarters due to a recently announced voluntary recall of certain
product lines. Brain Modulation grew in the low-single digits
on a constant currency basis on the strength of the company's MR
conditional Activa DBS portfolio.
-
Specialty Therapies revenue of $369 million
increased 6 percent on both a reported and constant currency basis.
All three businesses contributed to growth, with Advanced
Energy growing in the low-double digits, Pelvic Health growing in
the high-single digits, and ENT growing in the low-single digits,
all on a constant currency basis.
-
Pain Therapies revenue of $288 million decreased
2 percent on both a reported and constant currency basis.
After adjusting for the divestiture of the division's drug
business, which occurred in the third quarter of fiscal year 2016,
Pain Therapies revenue increased 1 percent on a constant currency
basis. This was a result of mid-single digit declines on a
constant currency basis in Spinal Cord Stimulation, as the business
faced competitive pressures, partially offset by the Interventional
business, which grew in the high-single digits, and Drug Pumps,
which grew in the mid-single digits, both on a constant currency
basis.
Diabetes Group
The Diabetes Group includes the Intensive Insulin Management (IIM),
Non-Intensive Diabetes Therapies (NDT), and Diabetes Service &
Solutions (DSS) divisions. Diabetes Group worldwide revenue
of $462 million increased 3 percent on both a reported and constant
currency basis. Growth was slower this quarter than in
previous quarters due to the dynamics associated with the U.S. FDA
approval of the MiniMed® 630G System
and earlier-than-expected U.S. FDA approval of the
MiniMed® 670G System,
which the company expects to become commercially available in the
Spring of 2017.
-
IIM grew in the mid-single digits on a constant
currency basis, including mid-teens growth on a constant currency
basis in International markets as a result of continued strong
sales in Europe and Asia Pacific of the MiniMed® 640G
System. This was offset by low-single digit declines in the
U.S. driven by the timing between approval and shipments for both
the MiniMed® 630G System
and MiniMed® 670G
System. In addition, the company is deferring a portion of
its MiniMed® 630G System
sales due to its Priority Access Program.
-
NDT grew in the high-thirties on a constant
currency basis, led by strong sales of the iPro®2
Professional Continuous Glucose Monitor (CGM) technology with
Pattern Snapshot to primary care physicians.
-
DSS grew in the low-single digits on a constant
currency basis as a result of growth in consumables, Diabeter
clinics in Europe, and continued strong growth of the
MiniMed® Connect,
offset by the impact of buying patterns due to the previously
mentioned insulin pump approvals.
Outlook
The company today updated its fiscal year 2017 revenue and free
cash flow outlook and EPS guidance. Consistent with the
company's long-term, mid-single digit constant currency revenue
growth expectation, the company now expects fiscal year 2017
revenue growth to be within the mid-single digit range on a
constant currency, constant weeks basis, as opposed to the upper
half of the mid-single digit range signaled previously. The
company expects revenue growth for the second half of fiscal year
2017 to also be in the mid-single range on a constant currency
basis. While the impact from foreign currency is fluid, if
current exchange rates remain similar for the remainder of the
fiscal year, the company's full year revenue would be negatively
affected by approximately $20 million to $60 million, including an
approximate $10 million to $30 million negative impact in the third
fiscal quarter.
In addition, the company updated its diluted
non-GAAP EPS guidance for fiscal year 2017. The company
continues to expect fiscal year 2017 diluted non-GAAP EPS growth to
be in the double digits on a constant currency, constant week
basis, which is consistent with the company's long-term, double
digit constant currency EPS growth expectation. The company
expects non-GAAP diluted EPS growth for the second half of fiscal
year 2017 to be in the 8 percent to 10 percent range on a constant
currency basis. While the impact from foreign currency is
fluid, taking into account the estimated 8 to 10 cent impact from
the extra week in the first quarter last fiscal year, as well as an
estimated negative impact from foreign currency to fiscal year 2017
EPS of 20 to 22 cents, assuming current exchange rates remain
similar for the rest of the year, this growth guidance implies
fiscal year 2017 non-GAAP diluted EPS in the range of $4.55 to
$4.60.
Starting this quarter, the company is modifying
its free cash flow outlook methodology to more closely align the
company's free cash flow projection with the results it reports
each quarter. The company previously provided an adjusted
free cash flow outlook, which would exclude cash payments related
to non-GAAP items that might occur during the year, and will now
provide an actual free cash flow outlook, which includes these
items in projected free cash flow. The company expects free
cash flow for fiscal year 2017 to be in the range of $5 to $6
billion.
"While some of the challenges that affected
revenue in Q2 could persist in the near term, we remain confident
in our ability to deliver mid-single digit constant currency
revenue growth and double-digit constant currency EPS growth, not
only in our current fiscal year, but on a sustained basis into the
future," said Ishrak. "As always, we remain committed to applying
our medical technology and solutions to help address the universal
healthcare needs of improving clinical outcomes, expanding access
to care, and optimizing cost and efficiency, which combined
represent a perpetual source of opportunity in healthcare."
Webcast Information
Medtronic will host a webcast today, November 22, at 8:00 a.m. EST
(7:00 a.m. CST) to provide information about its businesses for the
public, investors, analysts, and news media. This quarterly
webcast can be accessed by clicking on the Investor Events link at
investorrelations.medtronic.com and this earnings release will be
archived at newsroom.medtronic.com. Medtronic will be live
tweeting during the webcast on our Newsroom Twitter account,
@Medtronic. Within 24 hours of the webcast, a replay of the
webcast and transcript of the company's prepared remarks will be
available by clicking on the Investor Events link at
investorrelations.medtronic.com.
Financial Schedules
To view the second quarter financial schedules and non-GAAP
reconciliations, click here. To view the second quarter
earnings presentation, click here. Both of these documents
can also be accessed by visiting newsroom.medtronic.com.
About Medtronic
Medtronic plc (www.medtronic.com), headquartered in Dublin,
Ireland, is among the world's largest medical technology, services
and solutions companies - alleviating pain, restoring health and
extending life for millions of people around the world.
Medtronic employs more than 88,000 people worldwide, serving
physicians, hospitals and patients in approximately 160 countries.
The company is focused on collaborating with stakeholders
around the world to take healthcare Further, Together.
FORWARD LOOKING
STATEMENTS
This press release contains forward-looking
statements related to product and service growth drivers, market
position and opportunities, the transforming healthcare
environment, strategies for and sustainability of growth, benefits
from collaborations and acquisitions, availability of and plans for
cash, product launches, and Medtronic's future results of
operations, which are subject to risks and uncertainties, such as
competitive factors, difficulties and delays inherent in the
development, manufacturing, marketing and sale of medical products,
challenges with respect to third-party collaborations and
integration of acquired businesses, effectiveness of growth and
restructuring strategies, challenges relating to our worldwide
operations, challenges or unforeseen risks in implementing our
growth strategies, government regulation, fluctuations in foreign
currency exchange rates, future revenue and earnings growth, and
general economic conditions and other risks and uncertainties
described in Medtronic's periodic reports and other filings with
the U.S. Securities and Exchange Commission (the "SEC").
Anticipated results only reflect information available to Medtronic
at this time and may differ from actual results. Medtronic does not
undertake to update its forward-looking statements or any of the
information contained in this press release. Certain information in
this press release includes calculations or figures that have been
prepared internally and have not been reviewed or audited by our
independent registered public accounting firm, including but not
limited to, certain information in the financial schedules
accompanying this press release. Use of different methods for
preparing, calculating or presenting information may lead to
differences and such differences may be material.
NON-GAAP FINANCIAL
MEASURES
This press release contains financial measures and
guidance, including free cash flow figures (defined as operating
cash flows less property, plant and equipment additions), revenue
and growth rates on a constant currency basis, net income, and
diluted EPS, all of which are considered "non-GAAP" financial
measures under applicable SEC rules and regulations. Unless
otherwise noted, all revenue amounts given in this press release
are stated in accordance with U.S. generally accepted accounting
principles (GAAP). References to quarterly figures increasing or
decreasing are in comparison to the second quarter of fiscal year
2016.
Medtronic management believes
that in order to properly understand its short-term and long-term
financial trends, including period over period comparisons of the
company's operations, investors may find it useful to exclude the
effect of certain charges or gains that contribute to or reduce
earnings but that result from transactions or events that
management believes may or may not recur with similar materiality
or impact to operations in future periods (Non-GAAP Adjustments).
Medtronic generally uses non-GAAP financial measures to facilitate
management's review of the operational performance of the company
and as a basis for strategic planning. Non-GAAP financial measures
should be considered supplemental to and not a substitute for
financial information prepared in accordance with GAAP, and
investors are cautioned that Medtronic may calculate non-GAAP
financial measures in a way that is different from other companies.
Management strongly encourages investors to review the company's
consolidated financial statements and publicly filed reports in
their entirety. Reconciliations of the non-GAAP financial measures
to the most directly comparable GAAP financial measures are
included in the financial schedules accompanying this press
release.
Medtronic calculates
forward-looking non-GAAP financial measures based on internal
forecasts that omit certain amounts that would be included in GAAP
financial measures. For instance, forward-looking revenue
growth and EPS projections exclude the impact of foreign currency
exchange fluctuations. Forward-looking non-GAAP EPS guidance also
excludes other potential charges or gains that would be recorded as
non-GAAP adjustments to earnings during the fiscal year, such as
amortization of intangible assets and acquisition-related, certain
tax and litigation, and restructuring charges or gains. Medtronic
does not attempt to provide reconciliations of forward-looking
non-GAAP EPS guidance to projected GAAP EPS guidance because the
combined impact and timing of recognition of these potential
charges or gains is inherently uncertain and difficult to predict
and is unavailable without unreasonable efforts. In addition, we
believe such reconciliations would imply a degree of precision and
certainty that could be confusing to investors. Such items could
have a substantial impact on GAAP measures of financial
performance.
-end-
View FY17 Second Quarter Financial Schedules &
Non-GAAP Reconciliations
View FY17 Second Quarter Earnings Presentation
Contacts:
Fernando Vivanco
Public Relations
+1-763-505-3780
Ryan Weispfenning
Investor Relations
+1-763-505-4626
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Medtronic plc via Globenewswire
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