On August 20, 2019 Medtronic plc (NYSE:MDT) reported financial results for its first quarter of fiscal year 2020, which ended July 26, 2019 (Press release, Medtronic, AUG 20, 2019, View Source;p=RssLanding&cat=news&id=2406815 [SID1234538876]).
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The company reported first quarter worldwide revenue of $7.493 billion, an increase of 1.5 percent as reported or 3.5 percent on a constant currency basis, which adjusts for a $146 million negative impact from foreign currency. As reported, first quarter GAAP net income and diluted EPS were $864 million and $0.64, respectively. As detailed in the financial schedules included through the link at the end of this release, first quarter non-GAAP net income and non-GAAP diluted EPS were $1.703 billion and $1.26, respectively, increases of 6 percent and 8 percent, respectively. Adjusting for a negative 2 cent impact from foreign currency, first quarter non-GAAP diluted EPS increased 9 percent.
First quarter U.S. revenue of $3.918 billion represented 52 percent of company revenue and increased 1.4 percent as reported. Non-U.S. developed market revenue of $2.377 billion represented 32 percent of company revenue and decreased 1.2 percent as reported and increased 2.6 percent on a constant currency basis. Emerging market revenue of $1.198 billion represented 16 percent of company revenue and increased 7.5 percent as reported and 12.5 percent on a constant currency basis.
"Medtronic had a solid first quarter, delivering revenue growth, operating margin expansion, and adjusted EPS growth all ahead of expectations," said Omar Ishrak, Medtronic chairman and chief executive officer. "It’s a good start to our fiscal year."
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 first quarter revenue of $2.790 billion decreased 0.7 percent as reported and increased 1.4 percent on a constant currency basis. CVG’s revenue performance was driven by mid-single digit growth in CSH and low-single digit growth in APV, offset by low-single digit declines in CRHF, all on a constant currency basis.
Cardiac Rhythm & Heart Failure first quarter revenue of $1.382 billion decreased 3.1 percent as reported or 1.2 percent on a constant currency basis. Arrhythmia Management grew in the mid-single digits on a constant currency basis, driven by mid-single digit growth in Pacemakers, including mid-twenties growth of the Micra transcatheter pacing system, as well as mid-thirties growth of the TYRX absorbable antibacterial envelope, high-single digit growth of the Reveal LINQ insertable cardiac monitoring system, and high-single digit growth in AF Solutions, all on a constant currency basis. Arrhythmia Management growth was offset by low-double digit declines in Heart Failure, including high-forties declines in sales of left ventricular assist devices (LVADs), both on a constant currency basis.
Coronary & Structural Heart first quarter revenue of $941 million increased 2.6 percent as reported or 5.2 percent on a constant currency basis, led by mid-teens constant currency growth in sales of transcatheter aortic valves, reflecting the clinical benefits of the CoreValve Evolut PRO platform. Transcatheter aortic valve growth was offset by low-single digit declines in drug-eluting stents, in-line with the market.
Aortic, Peripheral & Venous first quarter revenue of $467 million decreased 0.2 percent as reported or increased 1.7 percent on a constant currency basis. Venous grew in the high-single digits on a constant currency basis on strong VenaSeal and ClosureFast system growth. Aortic grew in the mid-single digits on a constant currency basis, reflecting strong demand for the Valiant Navion thoracic stent graft system. Peripheral declined in the high-single digits on a constant currency basis, as low-thirties constant currency declines in drug-coated balloons offset growth in other core product segments.
Minimally Invasive Therapies Group
The Minimally Invasive Therapies Group (MITG) includes the Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions. MITG first quarter revenue of $2.100 billion increased 2.3 percent as reported or 4.8 percent on a constant currency basis. MITG’s revenue performance was driven by balanced growth across both divisions, with mid-single digit constant currency growth in both SI and RGR.
Surgical Innovations first quarter revenue of $1.417 billion increased 1.4 percent as reported or 4.2 percent on a constant currency basis, driven by strong contributions from Advanced Energy and Advanced Stapling. Advanced Energy grew in the high-single digits on continued strength in sales of LigaSure vessel sealing instruments, including the Ligasure Exact dissector, and the Valleylab FT10 energy platform. Advanced Stapling grew in the mid-single digits on a constant currency basis, driven by strong demand for Tri-Staple 2.0 endo stapling specialty reloads and the EEA circular stapler with Tri-Staple technology for colorectal procedures.
Respiratory, Gastrointestinal & Renal first quarter revenue of $683 million increased 4.3 percent as reported or 6.1 percent on a constant currency basis. Respiratory and Patient Monitoring grew in the mid-single digits on a constant currency basis on strong sales of Nellcor pulse oximetry, Microstream capnography, and INVOS cerebral oximetry systems, Puritan Bennett 980 ventilators, and McGRATH MAC video laryngoscopes. GI Solutions grew in the low-double digits on a constant currency basis, with solid growth in PillCam systems, Emprint ablation systems, and Beacon endoscopic ultrasound products. Renal Care Solutions grew mid-single digits on a constant currency basis on strength in renal access products.
Restorative Therapies Group
The Restorative Therapies Group (RTG) includes the Brain Therapies, Spine, Specialty Therapies, and Pain Therapies divisions. RTG first quarter revenue of $2.012 billion increased 3.2 percent as reported or 4.6 percent on a constant currency basis. RTG’s revenue performance was driven by low-double digit growth in Brain Therapies, mid-single digit growth in Specialty Therapies, and low-single digit growth in Spine, offset by mid-single digit declines in Pain Therapies, all on a constant currency basis.
Brain Therapies first quarter revenue of $740 million increased 9.8 percent as reported or 11.4 percent on a constant currency basis, driven by mid-teens constant currency growth in Neurovascular and low-double digit constant currency growth in Neurosurgery. Neurovascular results were broad-based, with high-teens growth in stent retrievers and flow diversion and low-double digit growth in coils, all on a constant currency basis. In addition, the company is seeing rapid adoption of the Riptide aspiration system and React aspiration catheters. Neurosurgery was led by strong, double digit growth of StealthStation S8 surgical navigation systems, O-arm surgical imaging systems, and Mazor X robotic guidance systems.
Spine first quarter revenue of $658 million increased 0.9 percent as reported or 2.0 percent 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. Cervical spine products grew mid-single digits on a constant currency basis, driven by the continued launch of the Infinity OCT system and solid growth of the Prestige LP cervical disc system. Sales of Infuse bone graft grew in the low-double digits on a constant currency basis.
Specialty Therapies first quarter revenue of $322 million increased 4.2 percent as reported or 5.5 percent on a constant currency basis. ENT grew in the mid-single digits on a constant currency basis, driven by capital equipment sales of the StealthStation ENT surgical navigation system and intraoperative NIM nerve monitoring systems. Pelvic Health grew in the mid-single digits on the strength of InterStim II system sales.
Pain Therapies first quarter revenue of $292 million decreased 7.0 percent as reported or 6.1 percent on a constant currency basis. Pain Stimulation declined in the low-double digits, reflecting channel destocking and the overall slowdown of the spinal cord stimulation market.
Diabetes Group
Diabetes Group first quarter revenue of $592 million increased 3.5 percent as reported or 5.4 percent on a constant currency basis. Diabetes Group revenue performance was led by international markets, which grew 15.3 percent as reported or 19.8 percent on a constant currency basis, driven by the ongoing launch of the MiniMed 670G hybrid closed loop insulin pump system with the Guardian Sensor 3.
Sales of integrated continuous glucose monitoring (CGM) sensors grew in the mid-teens on a constant currency basis, driven by global adoption of sensor-augmented insulin pump systems and the resulting strong sensor attachment rates. The Diabetes Group also continued to see strong adoption of the Guardian Connect Smart CGM system, which grew in the high-eighties.
Guidance
The company today reiterated its revenue growth guidance and raised its EPS guidance for fiscal year 2020.
The company continues to expect revenue growth in its fiscal year 2020 to approximate 4.0 percent on an organic basis. If current exchange rates hold, revenue growth in fiscal year 2020 would be negatively affected by 0.8 to 1.2 percent.
The company increased its fiscal year 2020 diluted non-GAAP EPS guidance from the prior range of $5.44 to $5.50 to the new range of $5.54 to $5.60, including an estimated 10 cent negative impact from foreign exchange based on current rates.
"As a result of our first quarter outperformance and confidence in our outlook, we are raising our full year EPS guidance," said Ishrak. "We’re excited about what lies ahead, as we expect the investments we’ve made in our pipeline to begin to pay off with multiple pipeline catalysts, accelerating revenue growth, and value creation for our shareholders."
Webcast Information
Medtronic will host a webcast today, August 20, at 8:00 a.m. EDT (7:00 a.m. CDT) to provide information about its businesses for the public, 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 its 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 first quarter financial schedules and non-GAAP reconciliations, click here. To view the first quarter earnings presentation, click here. Both documents can also be accessed by visiting newsroom.medtronic.com.