Medtronic Reports Third Quarter Financial Results

DUBLIN — February 19, 2019 — Medtronic plc (NYSE: MDT) today announced financial results for its third quarter of fiscal year 2019, which ended January 25, 2019.

The company reported third quarter worldwide revenue of $7.546 billion, an increase of 2.4 percent as reported or 4.4 percent on an organic basis, which adjusts for a $149 million negative impact from foreign currency. As reported, third quarter GAAP net income and diluted earnings per share (EPS) were $1.269 billion and $0.94, respectively. As detailed in the financial schedules included through the link at the end of this release, third quarter non-GAAP net income and non-GAAP diluted EPS were $1.751 billion and $1.29, respectively, both increases of 10 percent. Adjusting for a positive 2 cent impact from foreign currency, third quarter non-GAAP diluted EPS increased 9 percent.

U.S. revenue of $4.001 billion represented 53 percent of company revenue and increased 2.3 percent as reported. Non-U.S. developed market revenue of $2.368 billion represented 31 percent of company revenue and increased 0.6 percent as reported and 3.6 percent on a constant currency basis. Emerging market revenue of $1.177 billion represented 16 percent of company revenue and increased 6.8 percent as reported and 13.9 percent on a constant currency basis.

"Our organization executed on multiple fronts to deliver a strong quarter for Medtronic," said Omar Ishrak, Medtronic chairman and chief executive officer. "Revenue outperformance in our Minimally Invasive Therapies and Restorative Therapies Groups, as well as broad strength across Emerging Markets, helped to offset certain market-specific headwinds we faced during the quarter, reflecting the full benefits of our diversification."

Cardiac and Vascular Group 

The Cardiac and Vascular Group (CVG) includes the Cardiac Rhythm & Heart Failure (CRHF), Coronary & Structural Heart (CSH), and Aortic, Peripheral & Venous (APV) divisions. CVG revenue of $2.786 billion decreased 0.5 percent as reported, while increasing 1.6 percent on a constant currency basis. CVG revenue performance was driven by mid-single digit growth in APV and CSH, offset by low-single digit declines in CRHF, all on a constant currency basis.

— Cardiac Rhythm & Heart Failure revenue of $1.397 billion decreased 4.1 percent as reported or 2.3 percent on a constant currency basis. Arrhythmia Management grew in the mid-single digits on a constant currency basis, driven by the continued uptake of the Micra® Transcatheter Pacing System and the Azure® wireless pacemaker. Arrhythmia Management results were also driven by mid-twenties growth of the TYRX® Absorbable Antibacterial Envelope and mid-teens growth in AF Solutions, both on a constant currency basis. This was offset by mid-teens declines in Heart Failure, including mid-forties declines in sales of left ventricular assist devices (LVADs).

— Coronary & Structural Heart revenue of $913 million increased 3.0 percent as reported or 5.9 percent on a constant currency basis, led by mid-teens constant currency growth in transcatheter aortic valves, reflecting the clinical benefits of the CoreValve® Evolut® PRO platform. Coronary growth was flat on a constant currency basis, driven by mid-teens growth in guide catheters and low-double digit growth in coronary balloons, offset by mid-single digit declines in drug-eluting stents, all on a constant currency basis. 

— Aortic, Peripheral & Venous revenue of $476 million increased 4.2 percent as reported or 6.1 percent on a constant currency basis. The strength in the division was driven by mid-teens growth in Venous, reflecting strong demand for the VenaSeal(TM) closure system, mid-teens growth of drug-coated balloons, and high-single digit growth in thoracic stent graft systems, given the continued launch of Valiant Navion(TM).

Minimally Invasive Therapies Group 

The Minimally Invasive Therapies Group (MITG) includes the Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions. MITG revenue of $2.124 billion increased 4.1 percent as reported or 6.6 percent on a constant currency basis. MITG revenue was driven by strong performances in both divisions, with high-single digit constant currency growth in RGR and mid-single digit constant currency growth in SI.

— Surgical Innovations revenue of $1.434 billion increased 3.6 percent as reported or 6.4 percent on a constant currency basis, driven by low-double digit constant currency growth in Advanced Energy resulting from the strength of the LigaSure(TM) vessel sealing instruments with innovative nano-coating and Valleylab(TM) FT10 energy platform. Advanced Stapling grew in the high-single digits on a constant currency basis, driven by strong demand for Tri-Staple(TM) 2.0 endo stapling specialty reloads and the Signia(TM) powered stapler. 

— Respiratory, Gastrointestinal & Renal revenue of $690 million increased 5.0 percent as reported or 7.0 percent on a constant currency basis. Respiratory grew in the high-single digits on a constant currency basis, with strength in Puritan Bennett(TM) 980 ventilators, McGRATH(TM) MAC video laryngoscopes, and Nellcor(TM) pulse oximetry products. Renal Care Solutions grew mid-teens on a constant currency basis, with strength in both renal access products and the Bellco product line. GI Solutions grew mid-single digits on a constant currency basis, led by a solid performance in GI Diagnostics.

Restorative Therapies Group 

The Restorative Therapies Group (RTG) includes the Spine, Brain Therapies, Specialty Therapies, and Pain Therapies divisions. RTG revenue of $2.026 billion increased 4.2 percent as reported or 5.5 percent on a constant currency basis. Group results were driven by low-double digit growth in Brain Therapies, mid-single digit growth in Pain Therapies, low-single digit growth in Specialty Therapies, and flat results in Spine, all on a constant currency basis.

— Spine revenue of $655 million decreased 0.9 percent as reported and was flat on a constant currency basis. When combined with the company's sales of enabling technology used in spine surgeries, including robotics, navigation, imaging, and powered surgical instruments that are recognized in the Brain Therapies division, global Spine revenue and U.S. Core Spine revenue both grew in the mid-single digits on a constant currency basis. Posterior Cervical grew in the mid-teens on a constant currency basis, driven by the continued launch of the Infinity(TM) OCT System. 

— Brain Therapies revenue of $650 million increased 11.1 percent as reported or 13.2 percent on a constant currency basis, driven by high-teens constant currency growth in both Neurovascular and Neurosurgery. Neurovascular delivered mid-twenties constant currency growth in stent retrievers for acute ischemic stroke, on the strength of Solitaire(TM) Platinum. The business also had double-digit growth on a constant currency basis in neuro access, flow diversion, and embolic products. Neurosurgery was led by strong capital equipment sales of StealthStation® S8 surgical navigation systems, O-arm® surgical imaging systems, Mazor X(TM) robotic guidance systems, and Midas Rex® powered surgical instrument systems.

— Specialty Therapies revenue of $407 million increased 2.3 percent as reported or 3.3 percent on a constant currency basis. Results were led by mid-teens constant currency growth in Transformative Solutions on strong sales of the Aquamantys(TM) bipolar sealers. 

— Pain Therapies revenue of $314 million increased 4.7 percent as reported or 5.7 percent on a constant currency basis. The division had high-single digit constant currency growth in Pain Stimulation on the continued strength of the Intellis(TM) platform for spinal cord stimulation. The division also had mid-single digit constant currency growth in Interventional Pain.

Diabetes Group 

The Diabetes Group includes the Advanced Insulin Management (AIM) and Emerging Technologies divisions. Diabetes Group revenue of $610 million increased 4.5 percent as reported or 6.5 percent on a constant currency basis. Despite facing more difficult comparisons on pump sales given the backlog of patient orders that the company cleared in the prior year, revenue increased 4.6 percent versus the prior quarter as reported.

— Advanced Insulin Management revenue grew mid-single digits constant currency, driven by the sustained global market demand for the MiniMed® 670G hybrid closed loop insulin pump system with the Guardian® Sensor 3. While the division faced more difficult comparisons versus the prior year, it grew mid-single digits versus the prior quarter as reported, including high-single digit growth in insulin pumps versus the prior quarter as reported. The global adoption of its sensor-augmented insulin pump systems has resulted in strong sensor attachment rates, with integrated CGM sales growing in the high-twenties on a constant currency basis.

— Emerging Technologies revenue grew in the low-fifties on a constant currency basis, driven by the ongoing launch of the Guardian® Connect CGM system with Sugar.IQ(TM) personal diabetes assistant, which grew triple digits for the third consecutive quarter.

Guidance 

The company today updated its revenue growth guidance and raised its EPS and free cash flow guidance for fiscal year 2019.

For fiscal year 2019, the company updated its organic revenue growth guidance from a range of 5.0 to 5.5 percent to a range of 5.25 to 5.5 percent. If recent exchange rates hold for the remainder of the fiscal year, the company's fiscal year 2019 revenue would be negatively affected by approximately $425 million to $475 million. 

The company increased its fiscal year 2019 diluted non-GAAP EPS guidance from the prior range of $5.10 to $5.15 to the new range of $5.14 to $5.16. If recent exchange rates hold for the remainder of the fiscal year, foreign exchange would have a modest positive impact on the company's fiscal year 2019 EPS. 

The company also increased its fiscal year 2019 free cash flow guidance from the prior range of $4.7 billion to $5.1 billion to the new range of $5.0 billion to $5.2 billion.

"We continue to make progress on our robust and exciting pipeline, which contains more opportunities for growth than at any time in our company's history," said Ishrak. "We expect this forthcoming innovation to disrupt existing markets and invent new markets, all with the goal of creating significant value - for patients, physicians, healthcare systems, and for our shareholders."