Medtronic reports full year and fourth quarter fiscal year 2022 financial results; announces 8% dividend increase

·16 min read

Mid-single digit FY22 revenue growth; Q4 results affected by temporary global supply chain impacts and China lockdowns

DUBLIN, May 26, 2022 /CNW/ -- Medtronic plc (NYSE: MDT) today announced financial results for its fourth quarter and fiscal year 2022, which ended April 29, 2022.

Key Highlights

  • FY22 revenue increased 5% reported and organic

  • FY22 GAAP diluted EPS increased 40%; non-GAAP diluted EPS increased 26%

  • FY22 cash flow from operations of $7.3 billion increased 18%; FY22 free cash flow of $6.0 billion increased 22%

  • Quarterly dividend increased to $0.68, annual $2.72 from prior $2.52; 45th consecutive year of dividend increases

  • Q4 revenue of $8.1 billion decreased 1% reported and increased 1% organic

  • Q4 GAAP diluted EPS of $1.10 increased 10%; non-GAAP diluted EPS of $1.52 increased 2%

  • Company issues FY23 guidance

Fiscal year 2022 revenue of $31.686 billion increased 5% as reported and organic, which excludes the $75 million negative impact of foreign currency translation. Unless otherwise stated, all revenue growth rates in this press release are stated on an organic basis, which excludes the impact of foreign currency translation. Fiscal year 2022 GAAP net income and diluted EPS were $5.039 billion and $3.73, respectively, both increases of 40%. Starting with the quarter ended April 29, 2022, the company will no longer adjust non-GAAP financial measures for certain license payments for, or acquisitions of, technology not approved by regulators. Historical non-GAAP financial measures detailed in the financial schedules included at the end of this release have been recast for comparability, resulting in a decrease in non-GAAP net income and diluted EPS of $78 million and $0.06, respectively, for the fiscal year ended April 29, 2022. After making this adjustment, fiscal year 2022 non-GAAP net income and diluted EPS were $7.505 billion and $5.55, respectively, both increases of 26%.

Fiscal year 2022 cash flow from operations of $7.346 billion increased 18%. Fiscal year 2022 free cash flow of $5.978 billion increased 22%, representing free cash flow conversion from non-GAAP net earnings of 80 percent.

The company reported fourth quarter worldwide revenue of $8.089 billion, a decrease of 1% as reported and an increase of 1% on an organic basis, which excludes the $215 million negative impact of foreign currency translation. The company's fourth quarter revenue results were affected by temporary issues related to global supply chain, particularly in Surgical Innovations, and China, due to recent COVID-19 lockdowns.

Fourth quarter GAAP net income and diluted earnings per share (EPS) were $1.485 billion and $1.10, respectively, increases of 9% and 10%, respectively. As detailed in the financial schedules included at the end of this release, fourth quarter non-GAAP net income of $2.038 billion was flat year-over-year, and fourth quarter non-GAAP diluted EPS of $1.52 increased 2%.

Fourth quarter U.S. revenue of $4.097 billion represented 51% of company revenue and decreased 2%. Non-U.S. developed market revenue of $2.609 billion represented 32% of company revenue and decreased 2% as reported and increased 4% organic. Emerging Markets revenue of $1.383 billion represented 17% of company revenue and increased 4% as reported and 7% organic. China revenue, which represented 43% of Emerging Markets revenue, declined 10% as a result of COVID-19 lockdowns.

"Global supply chain and COVID-19 controls in China created acute impacts to our results in the fourth quarter. We understand the root causes, we're addressing them, and we expect them to resolve over the near-term," said Geoff Martha, Medtronic chairman and chief executive officer. "We remain keenly focused on delivering innovation-driven growth with a robust pipeline of technologies in fast-growing markets, and we're committed to creating strong shareholder value through strategic capital allocation and active portfolio management."

Cardiovascular Portfolio
The Cardiovascular Portfolio includes the Cardiac Rhythm & Heart Failure (CRHF), Structural Heart & Aortic (SHA), and Coronary & Peripheral Vascular (CPV) divisions. Fiscal year 2022 Cardiovascular revenue of $11.423 billion increased 6% as reported and 6% organic. Fourth quarter Cardiovascular revenue of $2.961 billion increased 2% as reported and 5% organic, driven by high-single digit organic growth in SHA and mid-single digit organic growth in CRM and CPV.

  • Cardiac Rhythm & Heart Failure fourth quarter revenue of $1.552 billion increased 1% reported and 4% organic. Adjusting for the discontinuation of HVAD™ System sales, CRHF revenue increased 6% organic. Cardiac Rhythm Management revenue increased in the mid-single digits, with low-single digit growth in Defibrillation Solutions and high-single digit growth in Cardiac Pacing Therapies, including low-twenties growth in leadless pacemakers on the continued global adoption of Micra™ transcatheter pacing systems. Procedure Innovations revenue increased in the mid-twenties on strong sales of TYRX™ absorbable antibacterial envelopes. Cardiovascular Diagnostics revenue increased in the mid-single digits, and Cardiac Ablation Solutions revenue increased in the mid-single digits, driven by the adoption of LINQ II™ insertable cardiac monitors and Arctic Front Advance™ cryoballoon catheters and consoles, respectively.

  • Structural Heart & Aortic fourth quarter revenue of $778 million increased 5% as reported and 8% organic. Structural Heart grew in the mid-teens, driven by mid-teens growth in transcatheter aortic valves (TAVR). Aortic declined in the mid-single digits due to product availability issues from supply chain and quality challenges. Cardiac Surgery increased in the high-single digits, driven by strength in the perfusion franchise.

  • Coronary & Peripheral Vascular fourth quarter revenue of $631 million increased 1% as reported and 4% organic. Coronary & Renal Denervation (CRDN) increased in the low-single digits, with high-teens growth in Guide Catheters offsetting low-single digit declines in drug-eluting stents. Peripheral Vascular Health increased in the mid-single digits, driven by low-twenties endovenous growth on strong sales of the VenaSeal™ closure system and the Abre™ deep venous stent.

Medical Surgical Portfolio
The Medical Surgical Portfolio includes the Surgical Innovations (SI) and the Respiratory, Gastrointestinal & Renal (RGR) divisions. Medical Surgical fiscal year 2022 revenue of $9.141 billion increased 5% as reported and organic. Excluding the impact of ventilator sales given the increased COVID-19 related demand in the prior year, Medical Surgical fiscal year 2022 revenue increased 9% organic. Medical Surgical fourth quarter revenue of $2.231 billion decreased 5% as reported and 1% organic, with flat year-over-year organic results in SI offset by mid-single digit organic declines in RGR. Excluding the impact of ventilator sales, Medical Surgical fourth quarter revenue was flat year-over-year organic.

  • Surgical Innovations fourth quarter revenue of $1.491 billion decreased 3% as reported and was flat year-over-year organic due to supply constraints of certain raw materials. In addition, the division was affected by recent COVID-19 lockdowns in China, resulting in a mid-teens decline in SI revenue in China. These challenges resulted in Advanced Surgical Instruments declining in the low-single digits globally, including low-single digit declines in Advanced Stapling and mid-single digit declines in Advanced Energy. This was partially offset by high-teens growth in Hernia & Wound Management.

  • Respiratory, Gastrointestinal & Renal fourth quarter revenue of $740 million decreased 7% as reported and 4% organic. Excluding the impact of ventilator sales, RGR revenue was flat year-over-year organic. Respiratory Interventions decreased in the mid-teens, with sales of ventilators declining in the mid-thirties as demand returned to pre-pandemic levels. Patient Monitoring increased in the mid-single digits, with mid-single digit growth in both Nellcor™ pulse oximetry products and Perioperative Complications products, offset by low-double digit declines in Respiratory Compromise solutions. Gastrointestinal revenue decreased in the mid-single digits given pressure on procedure volumes from COVID-19. Renal Care Solutions increased in the low-single digits, including high-single digit growth in acute therapies.

Neuroscience Portfolio
The Neuroscience Portfolio includes the Cranial & Spinal Technologies (CST), Specialty Therapies, and Neuromodulation divisions. Neuroscience fiscal year 2022 revenue of $8.784 billion increased 7% as reported and organic. Neuroscience fourth quarter revenue of $2.299 billion was flat year-over-year as reported and increased 2% organic, with mid-single digit organic growth in Specialty Therapies and low-single digit organic growth in Neuromodulation partially offset by low-single digit organic declines in CST.

  • Cranial & Spinal Technologies fourth quarter revenue of $1.165 billion decreased 2% as reported and 1% organic. Spine & Biologics was flat year-over-year, with low-single digit growth in Core Spine offset by low-single digit declines in Biologics. Neurosurgery grew in the low-single digits with mid-twenties growth in robotics and high-single digit growth in both navigation and powered surgical instruments on strong demand for capital equipment, offset by declines in both imaging and CSF (cerebral spinal fluid) management as a result of supply constraints.

  • Specialty Therapies fourth quarter revenue of $684 million increased 5% as reported and 6% organic. Neurovascular increased in the low double-digits, driven by high-teens growth in hemorrhagic stroke products. Pelvic Health decreased in the mid-single digits on increased competition, and ENT increased in the mid- single digits on strength in sales of StealthStation™ ENT navigation systems.

  • Neuromodulation fourth quarter revenue of $451 million was flat year-over-year as reported and increased 2% organic. Brain Modulation increased in the low-double digits, driven by the continued adoption of the Percept™ PC deep brain stimulation (DBS) system and SenSight™ directional DBS lead system. Pain Therapies declined in the low-single digits, with mid-single digit declines in Targeted Drug Delivery partially offset by low-single digit increases in Pain Stim on the continued adoption of the Vanta™ and Intellis™ with DTM™ SCS neurostimulators.

Diabetes
Diabetes fiscal year 2022 revenue of $2.338 billion decreased 3% as reported and organic. Diabetes fourth quarter revenue of $597 million decreased 8% as reported and 5% organic. U.S. revenue declined in the high-twenties, given the absence of new product approvals. This was offset by low-double digit organic growth in non-U.S. developed markets and high-teens organic growth in emerging markets. International sales were driven by mid-single digit organic growth of durable insulin pumps, mid-teens organic growth in consumables, and low-twenties organic growth of continuous glucose monitoring (CGM) products.

Guidance
The company today issued its fiscal year 2023 revenue growth and EPS guidance.

The company expects organic revenue growth in its fiscal year 2023 in the range of 4% to 5%. If recent foreign currency exchange rates hold, fiscal year 2023 revenue would be negatively affected by approximately $1.0 billion to $1.1 billion.

The company expects fiscal year 2023 non-GAAP EPS in the range of $5.53 to $5.65, including an estimated 20 to 25 cent negative impact from foreign currency translation based on recent foreign currency exchange rates.

"We expect recent and upcoming product launches to make a difference across our businesses this coming fiscal year," said Karen Parkhill, Medtronic chief financial officer. "Supply chain, inflation, and foreign exchange are expected to create near-term pressure. Yet, we remain focused on driving our R&D investments to accelerate our growth and create large, long-term returns for our shareholders."

Dividend Increase
The company today announced that effective May 25, 2022, the Medtronic board of directors approved an increase in Medtronic's cash dividend for the first quarter of fiscal year 2023, raising the quarterly amount to $0.68 per ordinary share. This would translate into an annual amount of $2.72 per ordinary share, an 8% increase from the prior $2.52. Medtronic has a long history of dividend growth, and the company is a constituent of the S&P 500 Dividend Aristocrats index. Today's announcement marks the 45th consecutive year of an increase in the dividend payment. Including today's increase, Medtronic's dividend per share has grown by 48% over the past 5 years and has grown at a 16% compounded annual growth rate over the past 45 years.

Medtronic has a strong track record of returning capital to its shareholders, including $5.5 billion in fiscal year 2022. The company remains committed to returning a minimum of 50 percent of its free cash flow to shareholders, primarily through dividends, and to a lesser extent, share repurchases. The dividend is payable on July 15, 2022, to shareholders of record at the close of business on June 24, 2022.

"Our substantial dividend increase reflects the confidence of our Board of Directors and executive management in Medtronic's financial strength and future earnings power," said Martha. "We've increased our dividend for the past 45 years and growing our dividend is an important component of the total return we generate for our shareholders."

New Kidney Health Technology Company
As part of its portfolio management strategy, Medtronic announced today together with DaVita the intent to form a new, independent kidney care-focused medical device company. Medtronic will contribute its Renal Care Solutions (RCS) business to the new company, which will focus on developing a broad suite of novel kidney care products and solutions, including future home-based products, to make different dialysis treatments more accessible to patients. Additional details on the agreement are available in the joint press release issued today by Medtronic and DaVita, and in the Form 8-K that Medtronic filed today with the U.S. Securities and Exchange Commission.

Webcast Information
Medtronic will host a webcast today, May 26, at 8:00 a.m. EDT (7:00 a.m. CDT) to provide information about its businesses for the public, investors, analysts, and news media. This webcast can be accessed by clicking on the Investor Events link at investorrelations.medtronic.com and this earnings release will be archived at news.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.

Medtronic plans to report its fiscal year 2023 first, second, third, and fourth quarter results on Tuesday, August 23, 2022, November 22, 2022, February 21, 2023, and Thursday, May 25, 2023, respectively. Confirmation and additional details will be provided closer to the specific event.

Financial Schedules
The fourth quarter financial schedules and non-GAAP reconciliations can be viewed by clicking on the Investor Events link at investorrelations.medtronic.com. To view a printable PDF of the financial schedules and non-GAAP reconciliations, click here. To view the fourth quarter and fiscal year 2022 earnings presentation, click here.

MEDTRONIC PLC

WORLD WIDE REVENUE(1)

(Unaudited)



FOURTH QUARTER



YEAR-TO-DATE(2)


REPORTED




CONSTANT
CURRENCY



REPORTED




CONSTANT
CURRENCY

(in millions)

FY22


FY21


Growth


Currency
Impact(3)


FY22


Growth



FY22


FY21


Growth


Currency
Impact(3)


FY22


Growth

Cardiovascular

$ 2,961


$ 2,908


1.8 %


$ (84)


$ 3,045


4.7 %



$ 11,423


$ 10,772


6.0 %


$ (32)


$ 11,455


6.3 %

Cardiac Rhythm & Heart Failure

1,552


1,539


0.8


(43)


1,595


3.6



5,908


5,584


5.8


(19)


5,927


6.1

Structural Heart & Aortic

778


744


4.6


(25)


803


7.9



3,055


2,834


7.8


(12)


3,067


8.2

Coronary & Peripheral Vascular

631


624


1.1


(16)


647


3.7



2,460


2,354


4.5


(1)


2,461


4.5

Medical Surgical

2,231


2,338


(4.6)


(78)


2,309


(1.2)



9,141


8,737


4.6


(44)


9,185


5.1

Surgical Innovations

1,491


1,542


(3.3)


(56)


1,547


0.3



6,060


5,438


11.4


(31)


6,091


12.0

Respiratory, Gastrointestinal, & Renal

740


796


(7.0)


(23)


763


(4.1)



3,081


3,298


(6.6)


(13)


3,094


(6.2)

Neuroscience

2,299


2,295


0.2


(33)


2,332


1.6



8,784


8,195


7.2


3


8,781


7.2

Cranial & Spinal Technologies

1,165


1,192


(2.3)


(17)


1,182


(0.8)



4,456


4,288


3.9


(7)


4,463


4.1

Specialty Therapies

684


654


4.6


(8)


692


5.8



2,592


2,307


12.4


13


2,579


11.8

Neuromodulation

451


449


0.4


(8)


459


2.2



1,735


1,601


8.4


(2)


1,737


8.5

Diabetes

597


647


(7.7)


(19)


616


(4.8)



2,338


2,413


(3.1)


(2)


2,340


(3.0)

TOTAL

$ 8,089


$ 8,188


(1.2) %


$ (215)


$ 8,304


1.4 %



$ 31,686


$ 30,117


5.2 %


$ (75)


$ 31,761


5.5 %


(1) The data in this schedule has been intentionally rounded to the nearest million and, therefore, may not sum.

(2) Fiscal year 2021 was a 53-week fiscal year with the extra week occurring in the first fiscal month of the first quarter and is included in reported prior year-to-date results. While it is difficult to calculate the impact of the extra week, the Company estimates the extra week benefited fiscal year 2021 year-to-date revenue by approximately $360 to $390 million.

(3) The currency impact to revenue measures the change in revenue between current and prior year periods using constant exchange rates.

MEDTRONIC PLC

U.S.(1)(2) REVENUE

(Unaudited)



FOURTH QUARTER



YEAR-TO-DATE


REPORTED



REPORTED

(in millions)

FY22


FY21


Growth



FY22


FY21


Growth

Cardiovascular

$ 1,455


$ 1,394


4.4 %



$ 5,545


$ 5,248


5.7 %

Cardiac Rhythm & Heart Failure

826


794


4.0



3,064


2,926


4.7

Structural Heart & Aortic

334


308


8.4



1,320


1,214


8.7

Coronary & Peripheral Vascular

295


293


0.7



1,162


1,108


4.9

Medical Surgical

913


973


(6.2)



3,862


3,650


5.8

Surgical Innovations

554


602


(8.0)



2,333


2,100


11.1

Respiratory, Gastrointestinal, & Renal

358


372


(3.8)



1,529


1,550


(1.4)

Neuroscience

1,517


1,522


(0.3)



5,753


5,456


5.4

Cranial & Spinal Technologies

842


846


(0.5)



3,170


3,064


3.5

Specialty Therapies

373


374


(0.3)



1,430


1,315


8.7

Neuromodulation

302


302




1,154


1,077


7.1

Diabetes

213


293


(27.3)



974


1,171


(16.8)

TOTAL

$ 4,097


$ 4,182


(2.0) %



$ 16,135


$ 15,526


3.9 %


(1) U.S. includes the United States and U.S. territories.

(2) The data in this schedule has been intentionally rounded to the nearest million and, therefore, may not sum.

MEDTRONIC PLC

WORLD WIDE REVENUE: GEOGRAPHIC (1)(2)

(Unaudited)



FOURTH QUARTER



YEAR-TO-DATE(3)


REPORTED




CONSTANT
CURRENCY



REPORTED




CONSTANT
CURRENCY

(in millions)

FY22


FY21


Growth


Currency
Impact(4)


FY22


Growth



FY22


FY21


Growth


Currency
Impact(4)


FY22


Growth

U.S.

$ 1,455


$ 1,394


4.4 %


$ —


$ 1,455


4.4 %



$ 5,545


$ 5,248


5.7 %


$ —


$ 5,545


5.7 %

Non-U.S. Developed

980


1,012


(3.2)


(63)


1,043


3.1



3,866


3,752


3.0


(39)


3,905


4.1

Emerging Markets

526


501


5.0


(20)


546


9.0



2,012


1,773


13.5


7


2,005


13.1

Cardiovascular

2,961


2,908


1.8


(84)


3,045


4.7



11,423


10,772


6.0


(32)


11,455


6.3

U.S.

913


973


(6.2)



913


(6.2)



3,862


3,650


5.8



3,862


5.8

Non-U.S. Developed

852


895


(4.8)


(58)


910


1.7



3,373


3,320


1.6


(42)


3,415


2.9

Emerging Markets

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