Boston Scientific(BSX) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Consolidated Financial Statements This section presents Boston Scientific Corporation's unaudited consolidated financial statements for Q2 2025 and 2024, including operations, balance sheets, cash flows, and detailed notes on accounting policies and key financial activities Consolidated Statements of Operations Net sales for Q2 2025 increased to $5.061 billion from $4.120 billion in Q2 2024, driving net income to $797 million from $324 million Consolidated Statements of Operations Highlights (Unaudited) | Metric (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $5,061 | $4,120 | $9,724 | $7,977 | | Gross profit | $3,424 | $2,850 | $6,633 | $5,498 | | Operating income | $819 | $520 | $1,740 | $1,195 | | Net income attributable to Boston Scientific | $797 | $324 | $1,471 | $819 | | Diluted net income per share | $0.53 | $0.22 | $0.98 | $0.55 | Consolidated Balance Sheets Total assets increased to $41.56 billion as of June 30, 2025, from $39.40 billion at year-end 2024, driven by acquisitions and increased debt Consolidated Balance Sheet Highlights (Unaudited) | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $7,121 | $6,920 | | Goodwill | $18,076 | $17,089 | | Other intangible assets, net | $7,260 | $6,684 | | TOTAL ASSETS | $41,559 | $39,395 | | Total current liabilities | $5,190 | $6,399 | | Long-term debt | $11,107 | $8,968 | | TOTAL LIABILITIES | $18,906 | $17,392 | | Total equity | $22,653 | $22,003 | | TOTAL LIABILITIES AND EQUITY | $41,559 | $39,395 | Consolidated Statements of Cash Flows Cash provided by operating activities significantly increased to $1.83 billion for the first half of 2025, while investing activities used $1.63 billion and financing activities used $107 million Consolidated Cash Flow Highlights (Unaudited) | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $1,827 | $977 | | Cash used for investing activities | ($1,626) | ($556) | | Cash provided by (used for) financing activities | ($107) | $1,593 | | Net increase (decrease) in cash | $135 | $2,006 | Note B – Acquisitions and Strategic Investments The company completed several acquisitions in 2025, including SoniVie and Bolt Medical, significantly increasing goodwill and intangible assets, with contingent consideration rising to $367 million - Completed the acquisition of SoniVie (TIVUS™ Intravascular Ultrasound System) on May 7, 2025, for an upfront cash payment of $362 million and up to $200 million in future milestone payments[26] - Completed the acquisition of Bolt Medical (intravascular lithotripsy laser platform) on April 1, 2025, for an upfront cash payment of $475 million and up to $200 million in future milestone payments[29] - The fair value of contingent consideration liability increased from $171 million at year-end 2024 to $367 million as of June 30, 2025, primarily due to new acquisitions[35] Note C – Goodwill and Other Intangible Assets Goodwill increased to $18.08 billion by June 30, 2025, primarily from acquisitions, with no impairment charges recorded in Q2 2025, contrasting with $276 million in charges in 2024 - Goodwill increased by approximately $987 million in the first six months of 2025, primarily from the acquisitions of Cortex, Bolt Medical, Intera, and SoniVie[39][40] - The annual goodwill impairment test performed in Q2 2025 using a qualitative approach resulted in no impairment charges for any reporting units[41][43] - In 2024, the company recorded $276 million in intangible asset impairment charges related to the Cryterion and Devoro acquisitions, driven by lower revenue projections and program cancellation[45] Note E – Contractual Obligations and Commitments Total debt increased to $11.59 billion by June 30, 2025, following a €1.5 billion senior note issuance, while the company maintained compliance with its leverage ratio covenant - Total debt outstanding was $11.587 billion as of June 30, 2025, an increase from $10.746 billion as of December 31, 2024[71] - In February 2025, the company's subsidiary completed a public offering of €1.5 billion in senior notes (2025 Eurobonds), with net proceeds of $1.558 billion[81] - The company was in compliance with its maximum permitted leverage ratio covenant as of June 30, 2025, with an actual ratio of 2.16 times compared to the requirement of 4.75 times[74][75] Note H – Commitments and Contingencies The company faces various legal proceedings, including patent litigation and governmental investigations, with a legal accrual of $300 million as of June 30, 2025 - The accrual for legal matters that are probable and estimable was $300 million as of June 30, 2025, down from $326 million at year-end 2024[106] - The company is appealing a patent infringement verdict that awarded the University of Texas $42 million in damages plus interest related to the Synergy™ Stent System[109] - The company is cooperating with DOJ and SEC subpoenas related to alleged Foreign Corrupt Practices Act (FCPA) violations in Vietnam and is also investigating other potential concerns in other countries[113] Note J – Segment Reporting The company's two segments, MedSurg and Cardiovascular, reported sales of $3.31 billion and $6.47 billion respectively for the first half of 2025, with strong operating incomes Segment Performance - Six Months Ended June 30, 2025 (Constant Currency) | Segment (in millions) | Net Sales | Segment Operating Income | Operating Margin | | :--- | :--- | :--- | :--- | | MedSurg | $3,312 | $1,127 | 34.0% | | Cardiovascular | $6,474 | $2,119 | 32.7% | | Total Segments | $9,786 | $3,246 | 33.2% | - The company measures segment performance based on net sales and operating income at internally-derived standard currency exchange rates, excluding items like amortization, impairment charges, and restructuring costs[119] Note K – Revenue Total net sales for Q2 2025 reached $5.061 billion, driven by the Cardiovascular segment's $3.345 billion sales and strong U.S. market growth Net Sales by Business - Three Months Ended June 30 | Business (in millions) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | MedSurg | $1,716 | $1,483 | 15.7% | | Endoscopy | $737 | $676 | 9.1% | | Urology | $676 | $525 | 28.9% | | Neuromodulation | $303 | $282 | 7.2% | | Cardiovascular | $3,345 | $2,637 | 26.8% | | Cardiology | $2,647 | $2,047 | 29.3% | | Peripheral Interventions | $698 | $590 | 18.3% | | Total Net Sales | $5,061 | $4,120 | 22.8% | Net Sales by Geographic Region - Three Months Ended June 30 | Region (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | U.S. | $3,224 | $2,466 | | Europe, Middle East and Africa | $878 | $822 | | Asia-Pacific | $790 | $670 | | Latin America and Canada | $169 | $162 | | Total Net Sales | $5,061 | $4,120 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial performance, highlighting a 22.8% net sales increase to $5.061 billion driven by commercial execution and acquisitions, alongside liquidity, capital resources, and covenant compliance - Q2 2025 net sales grew 22.8% to $5.061 billion, including 21.6% operational growth and 17.4% organic growth, primarily driven by strong commercial execution, especially in the Electrophysiology business[138] - Adjusted EPS for Q2 2025 was $0.75, compared to $0.62 in Q2 2024, while reported EPS was $0.53, up from $0.22 in the prior year[138][140][142] Quarterly Results and Business Overview Q2 2025 saw Cardiovascular net sales grow 26.8% to $3.345 billion, driven by Cardiology, while MedSurg sales increased 15.7% to $1.716 billion, with strong growth in Urology and Emerging Markets - Cardiology net sales increased 29.3% in Q2 2025, driven by the Farapulse™ Pulsed Field Ablation (PFA) System, WATCHMAN FLX™ devices, and the AGENT™ Drug-Coated Balloon[155][156] - Urology net sales grew 28.9% in Q2 2025, which included 21.7 percentage points of growth from the acquisition of Axonics[151][152] - Emerging Markets net sales grew 11.6% in Q2 2025 (12.1% operationally), primarily driven by growth in China[160] Gross Profit Gross profit margin decreased to 67.7% in Q2 2025 from 69.2% in Q2 2024, primarily due to $85 million in inventory charges from the ACURATE platform discontinuation - Gross profit margin for Q2 2025 was 67.7%, a decrease from 69.2% in Q2 2024[162] - The margin decline was primarily caused by inventory charges of approximately $85 million related to the discontinuation of the ACURATE platform[162] Operating Expenses Operating expenses increased in Q2 2025, with SG&A up 19% to $1.716 billion and R&D up 37% to $526 million, alongside an expanded restructuring plan with $110 million in Q2 charges - SG&A expenses increased 19% in Q2 2025, driven by higher selling costs for product launches like Farapulse™ and increased acquisition-related and restructuring expenses[164] - R&D expenses increased 37% in Q2 2025 as the company invested in its product pipeline[165] - The Board approved expanding the 2023 Restructuring Plan by up to $250 million, with total estimated pre-tax charges now ranging from $700 million to $800 million, and recorded approximately $110 million in restructuring charges in Q2 2025 from the discontinuation of the ACURATE platform[172][173] Liquidity and Capital Resources The company maintains strong liquidity with $534 million cash and $2.553 billion credit facility availability, $1.827 billion in operating cash flow for H1 2025, and compliance with debt covenants - As of June 30, 2025, the company had $534 million in cash and cash equivalents and $2.553 billion available under its $2.750 billion revolving credit facility[187][188] - Cash provided by operating activities for the first six months of 2025 was $1.827 billion, a significant increase from $977 million in the prior year period[190][191] - The company had the full $1.000 billion remaining available under its stock repurchase program as of June 30, 2025[199] Quantitative and Qualitative Disclosures About Market Risk The company manages market risk from foreign currency and interest rate fluctuations using derivatives, with $10.828 billion in currency derivatives and 98% of debt at fixed rates as of June 30, 2025 - The company manages currency and interest rate risk through a documented risk management program and does not use derivatives for speculative purposes[220] - As of June 30, 2025, the company had outstanding currency derivative instruments with a contract amount of $10.828 billion[221] - Approximately 98.0% of the company's total debt of $11.319 billion was at fixed interest rates as of June 30, 2025[222] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, while a new global ERP system implementation is expected to materially impact internal controls in future phases - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[224] - The company is undergoing a multi-year implementation of a new global ERP system, which is expected to have a material impact on internal controls over financial reporting in future phases[225] PART II OTHER INFORMATION Legal Proceedings This section incorporates by reference legal proceedings information from Note H – Commitments and Contingencies in the consolidated financial statements - For details on legal proceedings, the report refers to Note H in Part I, Item 1 of the financial statements[227] Risk Factors This section refers readers to the Risk Factors in the most recent Annual Report on Form 10-K for a comprehensive understanding of potential business risks - The report refers to the Risk Factors section of the most recent Form 10-K for a detailed discussion of risks affecting the company[228] Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025[229] Exhibits This section lists exhibits filed with the Form 10-Q, including compensatory plan agreements, CEO/CFO certifications, and Inline XBRL data files - A list of exhibits filed with the report is provided, including certifications and XBRL data[230]