Boston Scientific(US:BSX)2023-10-31 16:00Financial Performance - Net sales for Q3 2023 were $3.527 billion, an increase of 11.2% compared to $3.170 billion in Q3 2022, driven by operational growth of 11.1% and a 10 basis point positive impact from foreign currency fluctuations[152] - Adjusted net income for Q3 2023 was $732 million, or $0.50 per diluted share, compared to $620 million, or $0.43 per diluted share, in Q3 2022[152] - Net sales for the first nine months of 2023 were $10.515 billion, an increase of 11.4% compared to $9.440 billion in the same period of 2022, with operational growth of 12.6% and a negative impact of 120 basis points from foreign currency fluctuations[157] - Adjusted net income for the first nine months of 2023 was $2.181 billion, or $1.50 per diluted share, compared to $1.816 billion, or $1.26 per diluted share, in the same period of 2022[157] - Reported net income for Q3 2023 was $505 million, or $0.34 per diluted share, including $227 million in after-tax charges and credits[152] - Reported net income for the first nine months of 2023 was $1.065 billion, or $0.73 per diluted share, including $1.116 billion in after-tax charges and credits[157] - Adjusted net income for the first nine months of 2023 was $1.816 billion, compared to $516 million in the same period of 2022[161] - Gross profit for Q3 2023 was $2.426 billion, compared to $2.191 billion in Q3 2022, with a gross profit margin of 68.8% in Q3 2023, down from 69.1% in Q3 2022[176][177] - Gross profit for the first nine months of 2023 was $7.317 billion, up from $6.495 billion in the same period of 2022, with a gross profit margin of 69.6%, compared to 68.8% in 2022[176][177] Operational Growth and Acquisitions - Organic net sales growth for Q3 2023 was 10.2%, with a 90 basis point positive impact from acquisitions, including Acotec and Apollo[152] - Organic net sales growth for the first nine months of 2023 was 11.9%, with a 70 basis point positive impact from acquisitions, including Acotec, Apollo, and Baylis Medical[157] - The company's majority stake investment in Acotec and acquisition of Apollo contributed to net sales growth in 2023[152][157] - The company's acquisition of Baylis Medical in 2022 also contributed to net sales growth in the first nine months of 2023[157] - The acquisition of Apollo and the divestiture of the pathology business contributed 130 and 110 basis points to operational net sales growth in Q3 and the first nine months of 2023, respectively[166] - The majority stake investment in Acotec contributed 450 and 160 basis points to operational net sales growth in Q3 and the first nine months of 2023, respectively[172] - The company announced a definitive agreement to acquire 100% of Relievant Medsystems, Inc. for approximately $850 million, with additional contingent payments based on sales performance over the next three years[205] Segment Performance - Endoscopy net sales grew by 12.6% to $629 million in Q3 2023, driven by operational growth of 11.9% and a positive foreign currency impact of 70 basis points[165] - Urology net sales increased by 11.5% to $483 million in Q3 2023, with operational growth of 11.1% and a positive foreign currency impact of 50 basis points[167] - Cardiology net sales rose by 11.4% to $1.647 billion in Q3 2023, with operational growth of 11.4% and a positive foreign currency impact of 10 basis points[169] - Peripheral Interventions net sales grew by 12.3% to $538 million in Q3 2023, with operational growth of 12.9% and a negative foreign currency impact of 60 basis points[171] - Emerging Markets net sales increased by 14% in Q3 2023, with operational growth of 19% and a negative foreign currency impact of 460 basis points[174] Expenses and Charges - SG&A expenses increased by $110 million (10%) in Q3 2023 compared to Q3 2022, reaching $1.242 billion, and increased by $454 million (14%) in the first nine months of 2023 compared to the same period in 2022[179] - R&D expenses increased by $16 million (5%) in Q3 2023 compared to Q3 2022, reaching $356 million, and increased by $58 million (6%) in the first nine months of 2023 compared to the same period in 2022[179][180] - Intangible asset impairment charges were $58 million in the first nine months of 2023, compared to $132 million in the same period of 2022[182] - Contingent consideration net expense was $12 million in Q3 2023, compared to $20 million in Q3 2022, and $43 million in the first nine months of 2023, compared to $68 million in the same period of 2022[183] - Restructuring charges were $15 million in Q3 2023 and $51 million in the first nine months of 2023, compared to $4 million and $18 million in the same periods of 2022[185] - Interest expense was $66 million in Q3 2023, compared to $63 million in Q3 2022, and $200 million in the first nine months of 2023, compared to $406 million in the same period of 2022[189] Tax and Cash Flow - The effective tax rate from continuing operations was 17.3% in Q3 2023, down from 23.3% in Q3 2022, and 26.5% in the first nine months of 2023, compared to 25.2% in the same period of 2022[190] - As of September 30, 2023, the company had $952 million in unrestricted cash and cash equivalents, including $130 million held by Acotec[194] - Cash provided by operating activities increased by $827 million in the first nine months of 2023 compared to the same period in 2022, driven by higher net sales and operating income[198] - Cash used for investing activities in the first nine months of 2023 included $1.018 billion for the acquisition of Apollo and a majority stake in Acotec, and $444 million for property, plant, and equipment purchases[199] - Cash provided by financing activities in the first nine months of 2023 included $165 million from employee stock compensation and purchase plans, and $54 million used for net share settlement of employee equity awards[200] Debt and Financial Instruments - The company's 2021 Revolving Credit Facility requires a maximum leverage ratio of 3.75 times, with provisions for higher ratios following qualified acquisitions exceeding $1.000 billion[202] - As of September 30, 2023, the company had $369 million remaining in restructuring charge exclusions and $1.494 billion in litigation exclusions from the calculation of consolidated EBITDA[203] - The company issued approximately 24 million shares of common stock following the mandatory conversion of MCPS, resulting in the retirement of an annualized $55 million cash dividend payment[207] - The company received $165 million in proceeds from stock issuances related to employee stock option and purchase plans during the first nine months of 2023[208] - The company's stock repurchase program, authorized for up to $1.000 billion, had the full amount remaining available as of September 30, 2023[208] - Currency derivative instruments outstanding amounted to $6.005 billion as of September 30, 2023, with a ten percent appreciation in the U.S. dollar increasing their fair value by $255 million[235] - The company's outstanding debt obligations at fixed interest rates totaled $8.953 billion as of September 30, 2023, representing approximately 100% of total debt[236] - The company uses derivative financial instruments to manage currency and interest rate risks, with no interest rate derivative instruments outstanding as of September 30, 2023 and December 31, 2022[234][236] - The company manages counterparty risk on derivative instruments by contracting with a diversified group of major financial institutions and actively monitoring positions[234] - The company's currency risk includes foreign currency denominated firm commitments, forecasted transactions, and net investments in subsidiaries, managed using both nonderivative and derivative instruments[235] - The company's interest rate risk primarily relates to U.S. dollar borrowings, partially offset by U.S. dollar cash investments, with no interest rate derivative instruments outstanding as of September 30, 2023[236] Risks and Challenges - Global supply chain disruptions, inflationary pressures, and geopolitical tensions continue to impact the company's operations and results[175] - The company faces risks from labor shortages, inflation, and supply chain disruptions, which could impact raw material and labor costs[225] - The impact of the COVID-19 pandemic continues to affect worldwide economies, financial markets, and manufacturing systems[225] - The company is exposed to risks from geopolitical tensions, including the Russia/Ukraine war and Israel/Hamas conflict, which could affect operations in those regions[231] - The company's ability to generate sufficient cash flow is critical for funding operations, capital expenditures, and strategic investments[232] - The company's dependency on international net sales for growth is a key factor, particularly in emerging markets like Brazil, India, and China[230] - The company's ability to complete clinical trials, obtain regulatory approvals, and launch new products in a timely manner is crucial for future growth[229] Internal Controls and Reporting - The company's disclosure controls and procedures were deemed effective as of September 30, 2023, ensuring timely and accurate financial reporting[238] - The company began implementing a new global ERP system in 2022, expected to be completed in phases over several years, with changes in internal control over financial reporting observed in the first nine months of 2023[239] - The company's disclosure controls and procedures were deemed effective as of September 30, 2023 by the CEO and CFO[238] Non-GAAP Financial Measures - The company uses non-GAAP financial measures, including adjusted net income and operational net sales, to evaluate performance and analyze underlying business trends[218][220] - Adjusted net income (loss) and operational net sales growth rates are provided to offer investors greater transparency into management's decision-making process[222]