Q1 2023 Edwards Lifesciences Corp Earnings Call

Greetings and welcome to the Edwards Lifesciences first quarter 2023 earnings results at this time, all participants are in a listen only mode.

Question and answer session will follow the formal presentation.

If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad.

Please note that this conference is being recorded.

I will now turn the conference over to our host Mark Walter Lang Senior Vice President Investor Relations and Treasurer. Thank you you may begin.

Thank you very much Diego and thank you everyone for joining US with me on today's call are Mike <unk>, Chairman and CEO , Scott I'll, I'm, CFO , and Bernard Ziggy and President of Edwards Life Sciences.

Joining us for the Q&A portion of the call are Larry Wood, our group President of cover in surgical structural heart Devine Chopra, our global leader of T. M T T and Katie Simon our global leader of critical care.

Just after the close of regular trading Edwards Lifesciences released first quarter 2023 financial results. During today's call management will discuss those results included in the press release and accompanying financial schedules and then use the remaining time for Q&A.

Please note that management will be making forward looking statements that are based on estimates assumptions and projections. These statements include but aren't limited to financial guidance and expectations for longer term growth.

Opportunities regulatory approvals clinical trials litigation reimbursement competitive matters and foreign currency fluctuations. These statements speak only as of the date on which they are made and Edwards does not undertake any obligation to update them after today.

Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially information concerning factors that could cause these differences and important safety information may be found in the press release, our 2022 annual report on Form 10-K, and Edwards' other SEC filings all of which are available on the company's website at Edwards.

<unk> Dot com.

Finally, a quick reminder, that when using terms constant currency and adjusted management is referring to non-GAAP financial measures otherwise they are referring to GAAP results reconciliations between GAAP and non-GAAP numbers mentioned during the call are included in today's press release with that I'd like to turn the call over to Mike for his comments Mike. Thank you.

Mark We're pleased we're pleased with our first quarter performance, which exceeded our expectations and reflected an improvement in the health care and health care staffing along with strong execution of our patient focused innovation strategy.

Hills of $1.46 billion, representing 13% growth on a constant currency basis versus a year ago period.

<unk> therapy adoption of Transcatheter heart valves drove the majority of growth in the first quarter aided by better than expected performance of surgical structural heart and critical care.

By geography strong growth in the U S Europe and the rest of the world was partially offset by Japan, where COVID-19 impacts lingered.

First quarter results in the U S were also positively impacted in the quarter by some catch up in procedure volumes following a seasonal slowdown late last year.

Staffing remains a concern that many sites globally, we were optimistic that the environment will continue to improve.

In tavern first quarter global sales were $948 million, an increase of 11% year over year on a constant currency basis, we estimate global <unk> procedure growth was comparable with our growth multiple selling prices were stable.

In the U S. Our first quarter <unk> sales grew in the low double digits versus the prior year and we estimate total procedure growth was comparable as.

As we indicated we believe that first quarter trends were lifted by improved hospital staffing levels results were also lifted by a catch up in procedure volumes early in the quarter following the holiday season slowdown.

We're optimistic about the early results of our SAPIEN three ultra resilient launch.

As you know the resilient tissues anti calcification technology has demonstrated a strong track record of performance and Edwards surgical valves.

Options with this advanced technology is proceeding well and we expect it to represent the majority of our U S. <unk> sales before year end.

However growth in the first quarter was driven by larger volume centers and our SAPIEN valves continue to demonstrate distinguished clinical performance.

We're pleased with the continued enrollment of our progress clinical trial studying patients with moderate.

Related to this last month at the ACC Conference data were presented that examined mortality rates in cardiac damage of 600000 early stage <unk> patients in the U S.

Study concluded that all degrees of untreated <unk> severity were associated with increased mortality risk of note. The mean two year all cause mortality for moderate to us was approximately 20% approaching the rate of those with severe Ah yes.

Outside the U S. In the first quarter, our constant currency <unk> sales grew approximately 10% on a year over year basis.

Growth reflected positive contributions from all regions, excluding Japan, which was still impacted by Covid and the recent trialing of competitive products, we expect to see higher O U S growth as international adoption of <unk> therapy remains low.

And Japan, although growth was below our expectations. We were encouraged that conditions improved as the quarter progressed, and we expect COVID-19 headwinds to diminish substantially over the course of 2023.

With the launch of the SAPIEN three ultra resilient in Japan late last month, we expect growth rates to improve in this country, where aortic stenosis remains significantly undertreated relative to other large developed countries.

In Europe Edwards sales growth was driven by the continued strong adoption of our SAPIEN platform and was broad based across all countries.

Total tavern procedures grew over previous quarters, despite persistent disruptions related to hospital staffing shortages.

It's encouraging that healthcare systems across Europe are prioritizing lifesaving structural heart therapies, including tapper amidst these challenges.

Looking ahead to the Euro PCR Medical Congress next month in Paris, We anticipate additional data from the Edwards benchmark study focusing on strategies to optimize tavern programs across 28 European centers data will also be presented on the outcomes of balloon.

<unk> valves for tavern in Havre procedures.

In summary, given the strength of our first quarter performance, we now expect constant currency growth of 10% to 12% versus our previous expectation of 9% to 12% our outlook assumes that hospital resource constraints continue to improve during the year, we remain confident that this law.

Our global opportunity will increase to $10 billion by 2028, which implies a compounded annual growth rate in the low double digits.

Turning to TMT T. Our confidence continues to grow in the long term potential to transform care for the many patients with mitral and tricuspid disease, who need better solutions, we remain steadfast in our three key value drivers to unlock this opportunity.

Developing a portfolio of differentiated therapies for the complex mitral and tricuspid anatomies.

Rivaling positive pivotal trial results to support approvals on adoption and prioritize these favorable real world clinical outcomes.

First quarter sales of $42 million grew substantially driven by overall tier procedure growth the ongoing launch and growing adoption of Pascal precision in Europe and the initial launch in the United States.

We're pleased though we continue to have excellent outcomes for patients and clinician feedback on Pascal precision has been consistently positive, particularly highlighting the differentiated premium features of the system.

We are ramping production to support the launches of Europe and the U S.

In mitral, we look forward to presenting one year data from the full cohort of class two the pivotal trial later this year. Meanwhile, we continue to enroll the class II pivotal trial with Pascal for patients with functional mitral regurgitation.

In mitral replacement enrollment of the encircled pivotal trial with SAPIEN three and is going.

Ongoing and we anticipate completing enrollment of the main cohort around the end of 2023, we believe that this replacement therapy will expand options for a broader population of mitral patients.

And tricuspid, we've completed enrollment of the <unk> two pivotal trial over the evoke tricuspid valve replacement system and remain on track for a European approval by the end of 2023 and in the U S. Around the end of 'twenty 'twenty four the FDA recently approved.

Continued access, allowing U S hospitals that were involved in the clinical trial to continue to offer a bulk as a therapy option.

In addition, the class two T. Our pivotal trial with Pascal continues enrolling well.

In summary, we're pleased with our continued progress toward bringing a portfolio of therapies combined with contemporary clinical data in order to achieve our vision of transforming the lives of patients with mitral and tricuspid valve disease. We now expect full year 2023 sales of 170 to 200.

Dollars versus our previous $160 million to $200 million.

In surgical structural heart better than expected first quarter 2023, global sales of $248 million increased a robust 17% on a constant currency basis over the prior year.

Growth was driven by penetration of our premium products across all regions and valve surgery growth was higher than our expectations as hospital sapping levels improved leading to some catch up in procedures.

We continue to see strong momentum of the resilient portfolio globally.

Surgeons and patients value the features and benefits of this proprietary tissue technology for both aortic and mitral surgical valve replacement procedures and we've seen adoption of the mitral valve in the U S increase in the first quarter.

The seven year data from our commence clinical trial will be presented at the annual meeting of the American Association of thoracic Surgeons next month.

We also began enrollment of our momentous clinical trial to demonstrate the durability of brasilia in the mitral position.

In summary.

Based on our first quarter sales, we are raising our full year sales expectation to the higher to the high end of our 872 $970 million guidance range. We now expect high single digit underlying growth in 2023, driven by the adoption of our most advanced technology.

<unk> and an increase in the overall heart valve surgeries.

In critical care first quarter sales of $222 million increased 9% on a constant currency basis, driven by balanced contributions from all product lines.

Growth was led by our smart recovery portfolio and strong adoption of our acumen IQ sensor and finger cough, featuring our unique hypotension prediction index algorithm.

Demand for our <unk> gowns pulmonary artery catheters, and our haemus fear monitoring platform also remained strong in the first quarter with a healthy pipeline of future opportunities.

Based on the strong first quarter performance, we now expect critical care full year, 2023 sales of $870 million to $940 million versus our previous $840 million to $940 million.

We remain excited about our pipeline of critical care innovations as we can to take continue to shift our focus to smart recovery technologies designed to help clinicians make better decisions and get patients home to their families fastener and now I'll turn the call over to Scott.

Hey, Thanks, a lot Mike we are very pleased by our start to the year Q1 was particularly strong in January relative to historical seasonality and the rest of the quarter was more consistent with our growth expectations.

All product groups performed well and sales were balanced across all regions with the exception of Japan, which was impacted by lingering COVID-19 headwinds.

We achieved total sales in the quarter, a $1.46 billion, which represents 12, 6% year over year constant currency growth.

We achieved adjusted earnings per share of <unk> 62 sets. Our GAAP EPS was <unk> 56 cents and impacted by an intellectual property agreement, which I will speak to later.

Contribution from our stronger than expected sales performance was partially offset by a higher provision for performance based compensation.

A full reconciliation between our GAAP and adjusted earnings per share for these and other items is included with today's release.

For total Edwards based on the strong start to the year, we now expect 10% to 12% year over year sales growth on a constant currency basis, an increase from our prior guidance of 9% to 12%.

We now expect to be at the high end of our previous range of $5.6 billion to $6.0 billion.

Absent material moves in foreign exchange, we now expect full year <unk> sales of $3.8 billion to $4.0 billion TMT T sales of $170 million to $200 million in critical care sales of $870 million to $940 million.

For surgical structural heart, we now expect to be at the high end of our previous guidance range of $870 million to $970 million.

Lastly, we now expect our full year adjusted EPS to be between $2.48 and $2 60, we're projecting second quarter sales to be between 1.48 and $1.56 billion. We're also projecting second quarter adjusted earnings per share of <unk> 62 to <unk>.

68 <unk>.

I'll now cover additional details of our results.

For the first quarter, our adjusted gross profit margin was 77, 5% as expected compared to 77, 8% in the same period last year at 81% in Q4.

The slight year over year reduction was driven by a less favorable impact from FX. We continue to expect our full year 2023, adjusted gross profit margin to be between 76 and 78%.

Selling general and administrative expenses in the first quarter were $436 million or 29, 9% of sales, primarily reflecting increased investments over the prior year and transcatheter of field based personnel in support of our growth strategy.

These investments were partially offset by the weakening of the euro and yen against the dollar.

We continue to expect full year 2023, SG&A as a percent of sales to be 29% to 30% as we continue to invest in field based personnel had our therapy adoption initiatives.

Research and development expenses in the quarter grew 14% over the prior year to $261 million or 17, 9% of sales.

This increase was primarily the result of continued investments in our transcatheter valve innovations, including increased clinical trial activity.

For the full year 2023, we continue to expect R&D to be 17% to 18% of sales as we invest in developing new technologies and generating evidence to support <unk> and T. M T.

Turning to taxes, our reported tax rate. This quarter was 14, 6%. This rate reflects a 70 basis point excess tax benefit from stock based compensation. We continue to expect our full year tax rate, excluding special items to be 13% to 17%.

Earlier. This month, we were pleased to enter into an intellectual property agreement with Medtronic, and which we agreed to a 15 year mutual covenant not to sue with regard to certain structural heart products. We previously had a long term IP agreement that expired last year.

The terms of the new agreement limit, what we disclose but there will be a reference to it in our Form 10-Q, which we will file soon.

In consideration for the agreement, we paid Medtronic $300 million approximately half of which has been recorded as a one time charge and the other half will be amortized overtime.

Foreign exchange rates decreased first quarter reported sales growth by 380 percentage points or $44 million compared to the prior year.

At current rates, we continue to expect an approximately flat year over year impact to full year 2023 sales as compared to 2022.

FX rates negatively impacted our first quarter gross profit margin by 70 basis points compared to the prior year realm.

Relative to our January guidance FX rates had a minimal impact on first quarter earnings per share.

Free cash flow for the first quarter was $253 million defined as cash flow from operating activities of $314 million less capital spending of $61 million. We continue to expect full year 2023 free cash flow will be between 1.0 and $1.4 billion.

Before turning the call back over to Mike I'll finish with an update on our balance sheet and share repurchase activities. We continue to maintain a strong and flexible balance sheet with approximately $1.3 billion in cash cash equivalents and short term investments as of March 31.

In the first quarter, we repurchased approximately $250 million in stock through an accelerated share repurchase agreement as well as pre established 10 B five one programs.

As a result average diluted shares outstanding during the quarter declined by approximately 5 million shares to $611 million. We continue to expect average diluted shares outstanding for 2023 to be between 610 and $615 million.

We have approximately $650 million remaining under our current share repurchase authorization.

And with that I'll hand, it back to Mike, but before I do I know everyone. On both ends of this call joins me in congratulating you on this your 92nd earnings call.

We're now in our 10th year of working together and it's been a privilege at every step along the way.

Your leadership and support as the CEO of Edwards has been an inspiration to me our employees and I know, it's also fair to say the investment community so with that Mike back to you.

Thanks, So much Scott that it means a lot and I truly valued your trusted partnership over the years.

It's also a great segway as part of the upcoming planned CEO succession Bernard has been serving as president of a bedroom life Sciences since January one.

Since then we've invested at all our time to successfully transition responsibilities and I feel confident passing the baton next month I expect to transition into my new role as Nonexecutive Chairman of the board and Bernard will assume the CEO role I'm excited with the board's selection of Bernard.

I'm confident that the company is in great hands, and we will prosper under his proven leadership.

But before we go to Q&A I'll ask Bernard to say a few words Bernard.

Thanks, Mike I feel you know like how many fortunate to be leading this special company.

That has pioneered a breakthrough technologies and transform care for patients around the world.

During the world patents.

Transition Mike has been extremely generous in sharing learnings and experience having successfully transform a dwarf what we've got for last 20 plus years I am also grateful for the support of a bold and the partnership of your executive leadership team.

In recent months I have had the pleasure of meeting or listening to our patients.

The powerhouse and all employees around the world I've come away from the discussion even more confidence in Ed walls bright future.

All patients we will continue to advance breakthrough innovation that will positively impact their lives.

And who else has grown and evolved we've never lost sight of why we all here, we will stay focused well not long term strategic goals and foster a patient first culture and drive everything we do.

We know healthcare innovation, likewise trusted partner sheep with physicians.

Pier house, providing <unk> and <unk> and we've continued to build upon and self fund pheno deep partnerships take out ambitious goals and address large unmet needs.

Transforming care like we do at AWS is complex.

We remain committed to fostering a culture, where all employees and really enjoy you know they are impactful work.

Unique organic innovation strategy, Likewise, an extent motivated and dedicated global team I want a dwarfs couldn't you need to be a place that didn't spike has helped keep our employees to grow and succeed in approx bright talent.

As you heard from Mike and Scott, We believe that 'twenty 'twenty four will be an important year.

Well as we expect a return to high yield sales growth and meaningful progress on our innovations to improve careful many more patients.

Looking beyond 2020 free I remain confident that our long term strategy and pipeline of innovative therapy will create significant value for patients and healthcare systems, enabling strong organic census growth finally, I am confident that as we deliver on that.

<unk> strategy will create exceptional shareholder value with that.

I will pass it back to Mark to open it up for Q&A.

Thank you very much Bernard we're ready to take questions now in order to allow for broad participation. We ask that you. Please limit the number of questions to one plus one follow up if you have additional questions. Please reenter the queue and management will answer as many participants as possible during the remainder of the call Diego. Please go ahead with additional details on accessing the Q&A.

Nicole Thank you.

Thank you and at this time, we'll conduct a question and answer session to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment and they'd be necessary to pick up your handset before pressing the star keys and once again, please limit yourself to one question and one follow up our first question comes from Larry <unk> with Wells Fargo. Please state your question.

Oh, good afternoon, and thanks for taking the question Mike.

I just wanted to say I think I've been at almost 70 of your 92 calls. So I just wanted to take this opportunity to congratulate you on what you've accomplished at Edwards and wish you well in retirement.

I just wanted to take a minute to say I think your pursuit of Transcatheter valves may seem obvious now Mike.

But we know that it was a big risk.

When you decided to go down that path and it was clearly the right decision.

So congratulations again, Mike and I'll move on to my questions now.

So I'd love to start just with two on TMT T.

Just first on on there.

The TMT.

Our result in the quarter, the 42 million I'd love to hear a little bit about the U S. O U S trends you know how much.

Did the U S contribute.

And just any color on the launch of Pascal and I have one follow up.

Yeah, why don't I get started first of all thanks, so much Larry that that's very meaningful to me.

And you're right we've been out of a long journey together and I really appreciate the support from the investment community. So why don't I turn it over to Bernard and Devine to sort of answer your questions sure.

No. Thanks, you know what are you doing.

Good question, you know about Youll TMT Tito we are very pleased with first quarter results as you can.

Imagine we started in Europe going away before and we are still you know got to know if you approve it in Europe beautiful Pascal precision before the U S.

It is going very well in Europe , but we have been in the U S. Now you know four quarters plus.

And it's going well also.

If he said at the beginning of it I don't know David if you want to add anything here, Yeah, I would definitely say you know obviously, Europe's obviously than the majority of our revenue, but in the U S and in Europe , where we are in launch mode with Pascal precision you know, we've gotten really positive feedback so far from physicians. They loved the technology, they're seeing excellent safety and efficacy and we're continuing to grow we're continuing to open up.

New center trained physicians for the first time in and giving exposure to this new great technology.

That's helpful. And then just to follow up on Tri illuminate the.

<unk> seem to be mix from some physicians I'd love to hear you guys. Your reaction to the data and put evoke.

You've just completed the U S pivotal trial for you know trying to send to the enrollment I'm sorry.

One would expect with replacement youre going to see better efficacy in terms of TR reduction, but how confident are you that you'll see an improvement in outcomes.

Such as mortality and hospitalization with with a reasonable safety profile. Thank you for taking the questions.

Yeah sure. Thanks, Larry It's I Devine again, I'll jump in a little bit in our thoughts and try eliminate honestly I'm trying eliminate where we're very pleased to see a high quality randomized control data for the.

Treatment of tricuspid regurgitation for the first time, we're excited to see that this trial showed that tricuspid tiers, not only safe, but offer significant TR reduction and also offers really meaningful quality of life for patients and I think what we see is that the trend limited data actually kind of helps confirm outcomes that we've seen in previous Pascal studies.

In the tricuspid space like a class tier fast try class study et cetera that we really see the significant TR reduction great safety and good quality of life for.

Ross I'll take the class II TR study is ongoing and maybe they will give you some more potential on tricuspid tier therapy, but we also believe that you need a toolbox of technologies for tricuspid disease and that not only does tier offer a great solution, but we also think that tricuspid replacement also offers a great solutions.

Obviously as the data comes out in the future will help help figure out on and pack a lot of the questions that you just answered that you just asked right there, but I think we'll all figure this out together on this journey.

Alright, thanks for taking the questions.

Your next question comes from Robbie Marcus with Jpmorgan. Please state your question.

Oh, great. Thanks for taking the question and Mike I'll I'll add my congratulations as well.

I mean, maybe to start I wanted to spend a minute on tavern trends U S and O U S. And you said there was some pent up demand at the beginning of the quarter. But then also it sounds like staffing continues to improve around the world and if you get a little pricing benefit on SAPIEN three ultra.

We're a resilient that that might help sales throughout the year. So just love to get your thoughts on what you're seeing them do you think there was a bolus in January and it died off or are these trends that can continue to improve and accelerate throughout the year.

Yeah. Thanks, Robbie I appreciate your comments why don't we go to Larry on this one.

Yeah. Thanks Robbie.

No.

If I look at the quarter.

Yeah, we typically see a lot of seasonality in January as we come out of the holiday just kind of read filling up the pipeline with screening and we saw a much stronger January than we historically have seen and we just saw less seasonality I would say February and March played out pretty much in line with our expectations we've anticipated that.

It staffing or it's going to gradually improve and I think we see that and I think that's evidenced again in the.

Q1 results, but we expect to also continue to improve throughout the throughout the rest of the year. So you know in terms of trying to judge your backlog I'm not really you know it's hard for us to do that but we do think there was certainly some catch up in January .

Great and then Scott maybe one for you Opex came in a little higher than the street had been expecting in the corridor I yet you reiterated the margin targets for the year, how should we think about the cadence of spending in anything in the first quarter that.

Stood out to you that won't repeat going forward. Thanks.

Yes, So we did end up with higher spending in the first quarter than we had originally budgeted our plans for spending for the rest of the year are really unchanged and for the full year.

Our guidance for SG&A and R&D as a percentage of sales are unchanged in the first quarter. We came in a little bit higher for several reasons. We had some performance based compensation you know, it's highly sensitive to sales by design and so we like to reward people when the top line is performing well. We also had some little things. Some one time one off expenses.

The projects, we're working on we had a little bit higher tax rate as a result of income mix that came in U S and O U S. So those are some of the special things that you saw flow through in Q1.

I appreciate it thank you.

Our next question comes from Vijay Kumar with Evercore. Please state your question.

Hey, guys. Thanks for taking my question and congrats on a good start here and Mike Let me add my congratulations as well I wanted to move out and go back to that that prior question here on now.

You know look at tower I think it was four 5% in Q4 Q1 are double digit.

Can you quantify what the improvement.

Improvement from mid singles or double digits.

What part of that was a perhaps a catch up for <unk>.

Versus an underlying improvement in procedure trends and when you're thinking about procedure trends can you, perhaps talk about how the how the quarter progressed and what the exit rates were.

Yeah. Thanks for your comments P. J I appreciate that and I'll give it to Larry Although I think you already gave it his best shot but wanted to see if you have anything to add Larry right Yeah I.

I don't know if I have a lot more to add from my last question. You know you'll note we took up the bottom of our range and I think so we've tried to reflect a reflection of all of this in our guidance, but we're just encouraged overall by the staffing trends and where we're going and I think you're going to see Tam or back in double digit growth. After a couple of tough.

Orders, just really I think highlight that the system is getting capacity back and I think that's a real plus for patients.

Maybe I'll try to ask this a different way Larry let's see if we can pin that down.

Or this is the second straight quarter salaries outgrowing tower.

Is that 17%.

What percentage of that 17 as well.

What is volume versus price.

Do you have any thoughts on why why salver continuing to outgrow tower.

Shouldn't that be growing faster than ever.

Yeah, well I mean, I think first of all we're very excited by the surgical growth that we saw in Q1 I think.

Well it probably reaches probably at all time highs and we haven't seen in a long time.

I think that's really a reflection of the innovation and the investments we've made over the last several years. So I think part of this has been the adoption of our premium products and the premium we get in there.

It helps our competitive position and at the same time, we did see a procedure growth on that happened that I think the results from the capacity similar to what we saw in <unk>, we saw that capacity improvements on the surgical side of our business as well, but we do get some of the price from our premium products. In addition to the to the growth in the market.

Sorry, the volume versus price Larry can you comment whether majority of credit Suisse.

I mean volume was certainly a key contributor to it I mean, there's no question about that so that that's a big thing, but but again there are three things that are contributing to growth in the surgical business, whereas have or it's pretty much primarily units.

Okay interesting.

Thanks, guys and congrats again.

Our next question comes from Joanne Wuensch with Citibank. Please state your question.

Mike you will be missed.

But nice quarter to do your 92nd quarter for I, just want to spend a little bit of time on Japan, and China and Canada.

Similarly in Japan, if you had a tough beginning of the quarter with Covid overhang. What is your run rate looking like right now and just what's happening in the region.

Yeah. Thanks, Joanne I appreciate your time comments Bernard do you want to take a shot at that yes, So Japan has been largely impacted by Covid headwinds.

You know when we believe it is going to diminish over the course of 2020 free we are also bringing our latest technology in Japan.

Free all the.

<unk> and <unk> and we are starting.

Starting to see some positive reaction from our customers.

So to give you a recovery from Covid and us, bringing our latest technologies.

Are you hopeful you know if all of the year.

Yeah.

Yeah. The other thing I can add Joanne is that China is still relatively small on the tavern front for US remember we launched during the Covid years, but Japan is also going to benefit from the launch of the ultra resilient products. This year.

And so we think that's going to be a lift for Japan as the year goes on and that just launched here. This last this month right.

Thank you very much.

Thank you. Our next question comes from Travis Steed with Bank of America. Please state your question.

Hey, Thanks, a lot and congrats Mike.

Well.

Couple of questions here I guess, the first sticky normalized January .

You can say the U S still grew double digits. If you just normalize the January in Q1, but then the real question is like how about how to think about Q2 from here both U S and worldwide cover you know how much of a step up we should expect in Q2 total felt kind of ourselves or growth rates or just any color on what to expect for Q to cover.

Okay. Thanks, Travis I appreciate that so could you repeat your question about the Q1 gross or make sure we get it right.

Yeah of course, so January if you normalize the January catch up if you will is January looked more normal did you October still grow double digits high single digits.

Well again, just to try to expand we typically see pretty fairly extreme seasonality in January where it's our worst month of the quarter. We just didn't see as much extremism, but January was by no means our strongest month, we continue to see a ramp in a quarter just February and March were pretty much in line with our expectations where January was stronger.

But it wasn't like it was our strongest month so so.

I hope that gives more context and I think what we're seeing is the gradual improvement in staffing and I think what we've tried to build into our guidance. As you know we took up the bottom of our range. Because we felt we had a strong Q1, but you know it's kind of in our expectations now to be in that 10 to 12 range globally.

Trevor It's Scott I'll, just add to that you know our guidance at the midpoint for Q1 was around 9% growth that was the one point for $1 billion, we beat that by $50 million almost half of that was surgical and so you know it probably would have rounded to low double digit something like that if we were to normalize January but.

We're getting pretty precise at this point in trying to isolate every single month of the quarter.

Yeah.

And Oh good.

I guess my next question would be on the Brasilia rollout.

You know in terms of where you're at on penetration there and then as you move into 2020 for how Youre thinking about some of the competitive lunches and in the U S.

Yeah, we're very pleased with how the S. Three year. Our rollout is gone you know we're really following on the footsteps of our surgical franchise and resilience, which is an experienced and now on nitrous has become extremely popular resurgence and so we get to follow the legacy.

It really started for us and we've seen really positive impact from S. Three you are and we expect by the end of the year that that's going to be our leading platform in both the U S in Europe and.

Remember, we went through a list price increase with that which you know is never easy to do and you know we've been pretty pleased with how that's gone so far and I think that just shows the physicians respect and appreciate the value that resilient brings to the platform. So we're very encouraged with how the launch has gone to date will continue.

To roll it out through the rest of the year, but we do expect it to be our leading platform.

Yeah.

Okay.

I think you had a follow up question on competitive launches is that correct.

Correct Yeah.

You know I.

I mean can you.

Competitive launches have been going on for for a long time, you know if we look at Europe , there's a whole complement of.

Products out there and you know what I'm trying to get a number one and number two all of the competitors come in about probably around 15% of the market and that's been fairly stable. So I think it's for us it's more about us continuing to innovate and rolling out our leading platforms than it is about about anything else.

Okay, great and congrats on a better quarter.

Okay.

Our next question comes from Danielle <unk> with UBS. Please state your question.

Hey, good afternoon, everyone. Thanks, so much for taking the question and and make it sound like a broken record over here, but at the end of an era and you definitely will be now and it's been such a pleasure.

Being on this journey with you guys you have such a meaningful impact on so many patients' lives. So thanks.

Thanks for letting us share that with you and I guess my first question is on the hover growth guidance for the year and if you look at it from a comp perspective, and then Q1 is a tough comp you guys put up 11% constant currency growth. So I guess I get that we had you know some sort of backlog work down in January .

Gary but.

I guess my question is why not a little bit more.

Aggressive on the CAGR growth guidance given the strong Q1 print is there anything to consider as it relates to moving through the quarters.

Actually get easier.

Through the year. So just wondering if you could comment on that and then I have one quick follow up.

Yeah. Thanks, so much for your nice comment I know it has been a pleasure for me.

Why don't I turn this over to Scott to go through your question. Yeah. So I mean, the short answer is we did increase the bottom of a range. So we're expecting 10% to 12% not 9% to 12%, it's not a huge move but it does indicate that we had a nice January and and we're still positive on the rest of the year you know at this point, it's premature to start tinkering anymore.

And that with guidance. We think this is the right modeling assumption for us in that 10% to 12% range for <unk>.

Okay, that's fair.

And I think historically you guys don't tend to raise guidance very aggressively and after the first quarter. So that's there.

A quick question for on the TMT side of things I know, it's very early in the U S on Pascal launching but.

But I just curious what you're seeing as it relates to market growth there and how much you're seeing that market recover again I know you guys are so early so not sure. What you can say, but usually second entrant comes to market and markets accelerate in med Tech, but just wondering if we're getting any signs on on what market growth.

It look like going forward there. Thanks, so much.

We are pleased about Q1, we have seen some positive sign.

You know the market is recovering I'm sure you remember on the mitral market during Covid was not growing as expected and in Q1, we saw that the market was growing again, but again. If you think about you know the U S. We have not the share leader you're correct. So we look at the market, we see a good sign.

He is recovering and we are very pleased about the introduction of our technology as you know the customer will react.

Reacting very well to Pascal precision.

If a differentiated benefit. So you know we are we feel good about you know we feel good about the impact should we kind of hot here.

Two have you seen many patient in need.

Thank you. Thank you.

Thank you and our next question comes from Richard <unk> with <unk>. Please state your question.

Hi, Thanks for taking the questions.

So.

For me I guess, just the first week.

We've talked about hospital staffing is that just a catch all phrase I know in the past you said, it's the whole work up and everything for getting the patient diagnosis to the entire kind of worked up to a referral to getting the patient there. So with respect to the improvement that we saw from some some late last year just wanted to get.

It stands for.

What specifically kind of are you referring to when you say a hospital staffing is improving.

And kind of the the second.

Question on that just I think you talked about.

In the past a very varied kind of level of recovery across your installed base.

Any comments, you can provide a estimate or characterize kind of where and which types of implanting centers.

And at what rates or was it just more uniform across the entire installed base at this point. Thanks.

Yeah, maybe I'll start and I'll take your second question first because it might take a couple of those to answer your first question.

I think you know.

We saw the growth being driven more by larger centers than smaller centers. During this quarter and I think this is sort of a trend that we've seen throughout COVID-19 I think when COVID-19 is spike we've seen people stay closer to home and we've seen probably more growth than the smaller centers and as Covid wanes, we see people traveling maybe a little bit further and go into the larger centers and so I think.

This is consistent with trends, we've seen over the last year and a half or so.

In terms of when we talk about staffing you know it depends when you're talking about our surgical business or our timber business when you're talking about the surgical business. It's primarily all of our staff and ICU nurses in sort of a post care initiative, when youre talking about Tam or Theres, a lot more that goes into it because theres a lot more upfront work out so it required staffing improvements for C T.

And for Angio in sort of the broader Cath lab, and we don't need it so much on the on the aftercare side. So what we I think we've seen just generally and I think hospitals have been working at this for for you know probably better than a year now trying to get people trained and get people in and remember you don't just hire a person in their effective from day one they have to go.

Through a training process with that hospital, but I would say generally speaking.

Look at the quarter and say, we saw staffing to get better and that's reflected in her and I think our broad performance, where we certainly saw it in time and we certainly saw with surgical but it needs to continue to improve over the rest of the year. It sounds like we're done yet, but I think hospitals continue to work hard with this maybe I'll I'll have to begin to comment on the TMT side with what he saw.

Yeah, I mean, I think it's a similar kind of comment you made there you're probably not the differences where theres a lot of people a lot of different steps that go into a TMT tk's and again as Bernard said, we are still a minority player here, but we continue to be optimistic that all of those different parts of the fault patient pathway or continuing to get a little bit better in staffing.

Thank you. Our next question comes from Matt make such with Barclays. Please state your question.

Matt Your line is open. Please go ahead on me yourself.

Hi, Thanks, so much thanks for putting me in so a couple of quick follow ups here. So one.

On.

The color that you gave on Brasilia I. Appreciate the you know the target is kind of getting that to the majority of the U S revenues by the end of the year on a tablet.

However platform, if I understood that correctly.

But just broadly.

I know you'd had a policy of maintaining this kind of set price across the.

Yeah of course, you whichever platform.

Even if you sort of moved it up to the generations of products.

And that is a little bit unusual.

You know most companies in med devices do tend to sort of contract and rebate and make adjustments to pricing across like particularly in the U S. Given the with Drg's work in different hospitals teaching hospitals get different payments and then urban hospitals or hospitals here in New York.

And I'm just wondering is if this you know having resilience in the port.

Folio at a premium having three call it standard or whatever however, you are referring to it in the portfolio, if you're giving any thought to.

Is it just sort of joining the rest of the the rest of the group to sort of.

Some of the smaller centers, maybe be able to be able to.

Toward to due to ever win win.

When you are paying for 30 or $32000 for about just might be like might be out of reach given especially given the way staffing costs have gone up love to get your thoughts on that I have one quick follow up.

Sure well I, we havent changed really our pricing philosophy, we do try to be good partners with our hospital when we did.

Take a list price increase but that's the first price increase we've rolled out really since launch and this is the first time that we've gone through a price increase in and so the only thing that we've always done is we've always rebated based on volume. So large volume centers, obviously, you discount it out when we tried to treat everybody fairly across the country.

Having a standardized price you know that that's the way that we try to do that and then we try to recognize different centers performance based on their volume in and that's been our philosophy throughout I don't see us changing that philosophy I think that's worked really well for us and we do try to work with hospitals and bring a lot of value. You know, we still have people supporting virtually every case in the U S and <unk>.

The majority of the cases in Europe .

Virtually all of the cases in Japan, and that's just sort of a model that we have in and you know the only thing we tried to do is partner with hospitals and run our things like our benchmark program to help them be more efficient, but if you look at all the data that's been produced from our clinical trials. This is an incredibly cost effective procedure with almost unprecedented benefits when you look at mortality.

And you you look at some of the other things that it's done. So we feel you know the prices that we have are our more than fair for the value creation that we have.

That's fair and then I guess on the.

Centers that have done more active and staffing does to Christmas does it ease a little bit what are the pressure points has been around.

The extensive imaging and sort of.

The additional sort of staffing specialized staffing that's required for some of these.

Mitral mitral procedures to your procedures any any thoughts on.

Along the same lines of facilitating broader utilization and adoption to partnering with hospitals or anything that you can see yourself doing to sort of help help facilitate those procedures given sort of the specialized staffing needs behind them.

Yeah. This is devine I mean, obviously I think we were always going to look to partner with hospitals are going to look to try to help them across the board, where we're obviously in a very early days, we tried to provide excellent training top notch training to get these patients as efficiently and effectively treated getting through the recovery process.

Et cetera, and I think our teams you know since we're a little bit more at the infancy. We don't have the same kind of detailed programs that kind of Larry has like benchmark et cetera in the tablet program, but were working really hard to try to on the tire side as well start creating those as we start gaining getting more scale and being a great partner I mean, that's a part of it we altogether just want to help more patients together in a cost effective.

Manner, and that's how that's kind of how we think about it over the long term.

That's fair and Mike I have to say, it's been something to behold the culture the accomplishments of the company.

Congrats.

He will be missed thanks, so much.

Thank you Matt.

Our next question comes from Cecilia furlong with Morgan Stanley . Please state your question.

Good afternoon, and thank you for taking my questions.

Wanted to return to Japan some of the comments.

That you called out just around competitive Trialing, how you would frame edwards' growth there versus the market understanding you.

Seeing recovery in the region and then looking forward to really what's reflected in guidance.

Tam recovery at this point as well as.

Ultra resilient rollout.

So so so this is Mike.

Can you just zero in a little bit on the first part of that question again, I want to make sure that I understand it.

You talked a bit about competitive dynamics you are seeing in the region I believe so just curious.

Provide a little more detail just how that impacted your growth versus market growth.

Yeah. So we had two of our the two other competitors in Japan, both rolled out new products and so it's not uncommon when new products roll out that we see physicians trying those products and understanding how they work and what the features and benefits are in and I think we've seen this throughout our history and usually that ends up being.

Marguerite transient.

And you know we're excited because we're just getting ready to do our biggest launch ever done in Japan.

Our initial launch which is F. Three you are and so we're excited about that I think broader on the what's in our guidance for for Japan is we're expecting a broader COVID-19 recovery, but it was still pretty big in Q1, and we're looking for a broader COVID-19 recovery continuing I've checked it got better during the quarter, but we're looking for it to continue to improve throughout the year.

And that's what's in our guidance.

Yeah, the only thing I'd add to it as Japan has been a pretty strong grower for us over the last couple of years, and then really slowed down with Covid hit in.

In the second half of last year. So we're looking forward here, especially with the launch of went through the Covid waning in the launch of SAP.

SAPIEN ultra resilience that it's really going to make a difference starting in Q2 and moving forward.

Thank you and ladies and gentlemen, we have time for one final question before turning it over to management for some closing remarks.

<unk> comes from Josh Jennings with TD Cowen. Please state your question.

Hi, good evening, thanks for taking the questions Mike.

Appreciate all your insights on these 92 in the earnings call. They haven't been on behalf of them, but question really I may for Larry just wanted to we're getting questions on the tavern <unk> tap a replacement cycle I'm wondering if you could just size up the percentage of the market currently the tavern Tam represents and I imagine it becomes.

A bigger more meaningful piece as you get out to 2028 and $10 billion market that you guys have forecasted, but when do we start to think about tavern tablet contributing more meaningfully to market growth. Thanks for taking the question.

Yeah no it is.

It's a good question I don't know that I can quantify it for you today, but redo taverns Abbott, but we also do tavern in fiber.

You know for patients who've gotten tissue valves and I think you know one of the things that have are enabled with its development was the opportunity for more patients to get tissue valves. So even on the surgical side of our business younger patients can get tissue bounds now because physicians and patients now.

They're now that there is a catheter based option for them down the road. So certainly in time, Kathryn <unk>, who will continue to grow and taverns. However will become a bigger part you know tampered miles an hour just probably starting to get to the cusp of reaching that age that that'll start to be more greenfield, but it will be something there.

The growth in time, certainly as we look at the period that you discussed which is through 2028.

I appreciate it.

Okay.

This is Mike I can make some closing comments first of all thank you so much.

For many of your warm remarks, it's been a special honor and a privilege to lead our team at Edwards life Sciences for more than 20 years, and I really want to think of.

Our employees who've made immense contributions to advancing care and helping millions of patients around the world.

I'm, particularly proud of our patients first culture, and our commitment to innovation and excellence. Our success is really a testament to the talented and passionate executive leadership team and our employees worldwide and I believe we are well positioned for an even brighter future.

Truly been my greatest honor to be Edwards, CEO , and I look forward to supporting Edwards as I transition to my new role with the board of directors. So thanks, a lot for your continued interest in Edwards and the team who I welcome any additional questions after the call.

Thank you.

And with that we conclude today's conference all parties may disconnect have a great evening.