Medtronic plc (NYSE: MDT) announced this week its preliminary revenue results for the fourth quarter and fiscal year 2015, which ended April 24. As this is the first quarter where the company is reporting results that include its recent acquisition of Covidien, full financial results are expected to be reported on June 2, two weeks later than the company’s normal reporting date.
Unless otherwise noted, all comparisons and growth rates in this press release are stated on a comparable, constant currency basis, which includes Covidien plc in the prior year comparison and aligns Covidien’s prior year monthly revenue to Medtronic’s fiscal quarters. Aligning historic Covidien revenue to Medtronic’s fiscal quarters is different than the pro forma revenue information previously included within certain SEC filings, which combined revenues from the closest historical reported quarters of both companies. Management believes that referring to comparable, constant currency growth rates is a more useful way to evaluate the underlying performance of Medtronic’s revenue. For additional revenue detail and the reconciliation of these revenue amounts and growth rates to the most directly comparable GAAP financial measures, please refer to the link at the end of this release.
The company announced preliminary fourth quarter worldwide revenue of approximately $7.302 billion, compared to $7.257 billion on a comparable basis in the fourth quarter of fiscal year 2014, an increase of 7 percent after adjusting for an approximately $482 million negative foreign currency impact. As reported, revenue increased 60 percent when compared to the $4.566 billion reported by Medtronic, Inc. in the fourth quarter of fiscal year 2014.
Fourth quarter U.S. revenue of approximately $4.055 billion increased 8 percent, or 67 percent as reported. Fourth quarter non-U.S. developed market revenue of approximately $2.320 billion increased 5 percent, or 48 percent as reported. Fourth quarter emerging market revenue of approximately $927 million increased 11 percent, or 62 percent as reported, and represented approximately 13 percent of company revenue.
As reported, Medtronic’s fiscal year 2015 revenue of approximately $20.259 billion, increased 19 percent, or 6 percent on a comparable, constant currency basis.
“I am very encouraged by our strong preliminary fourth quarter revenue performance especially as it is the first quarter that reflects the combined results of Medtronic and Covidien,” said Omar Ishrak, Medtronic chairman and chief executive officer. “In addition to making solid progress on our integration of Covidien, these preliminary revenue results reflect disciplined execution across our three core strategies of therapy innovation, globalization, and economic value.”
The Restorative Therapies Group (RTG) includes the Spine, Neuromodulation, Surgical Technologies, and Neurovascular divisions. The group had worldwide revenue in the quarter of approximately $1.854 billion, representing an increase of 5 percent, or 7 percent as reported. Group revenue performance was driven by growth in Surgical Technologies, Neuromodulation, and Neurovascular, partially offset by declines in Spine.
Fourth quarter RTG U.S. revenue of approximately $1.233 billion increased 4 percent, or 8 percent as reported. Fourth quarter RTG non-U.S. developed market revenue of approximately $426 million increased 4 percent, or declined 4 percent as reported. Fourth quarter RTG emerging market revenue of approximately $195 million increased 12 percent, or 25 percent as reported.
Spine revenue of approximately $743 million declined 2 percent, or 5 percent as reported. Core Spine and Interventional revenue both declined in the low-single digits, offsetting low-single digit growth in Bone Morphogenetic Protein (BMP). The Core Spine business is focused on differentiating itself from the competition over the long-term through its leading technology and procedural innovation, enhanced by its Surgical Synergy(TM) program of enabling technologies, including imaging, navigation, and powered surgical instruments.
Neuromodulation revenue of approximately $518 million grew 6 percent, or 1 percent as reported. Neuromodulation performance was driven by mid-teens growth in Gastro/Uro and double-digit growth in Deep Brain Stimulation (DBS). Pain Stim was flat in the quarter, in-line with the market. Geographically, the Neuromodulation business benefitted from strong growth of over 30 percent in emerging markets, low-single digit growth in the U.S., and mid-single digit growth in Europe.
Surgical Technologies revenue of approximately $461 million grew 9 percent, or 5 percent as reported. Surgical Technologies’ performance was driven by solid, balanced growth across all three businesses. Neurosurgery grew in the mid-single digits reflecting record worldwide O-arm® surgical imaging unit sales, continued strength in StealthStation® navigation service revenue, and the contribution of Visualase® MRI-guided laser ablation. ENT low-double digit growth reflected continued strong StraightShot® M5 Microdebrider and NuVent(TM) sinus balloon penetration offset partially by a divestiture in the Surgical Technolgies division, which occurred in the third quarter of fiscal year 2015. Advanced Energy grew in the upper-teens driven by the continued adoption of PEAK PlasmaBlade®. Geographically, the business had low-teens growth in the U.S. on the strength of new products.
Neurovascular revenue of approximately $132 million increased 23 percent. The business, formerly part of legacy Covidien, posted strong double-digit growth across coils, stents, flow diversion, and access product lines. Robust growth in neurovascular stents was driven by the SolitaireTM FR revascularization device following the publication of several positive clinical studies in the New England Journal of Medicine, including SWIFT PRIME. Flow diversion growth benefitted from the third quarter U.S. launch of the PipelineTM Flex embolization device.
Based on preliminary revenue and operating results, the company today updated its expectation that fourth quarter adjusted cash earnings per share would be at the upper half of the previously communicated range of $1.08 to $1.13. However, it is important to note that adjusted cash earnings per share for the fourth quarter exclude a number of significant charges, including, but not limited to, amortization of intangible assets, net restructuring charges, acquisition related items, the impact of inventory purchase price step-up, and certain tax adjustments.
“As we look ahead to fiscal year 2016, we feel increasingly confident about our business outlook on an operational basis.” said Gary Ellis, Medtronic executive vice president and chief financial officer. “However, foreign exchange continues to represent a significant headwind to many multinational companies, including Medtronic. While recently the U.S. dollar has weakened, it is important to note that the foreign exchange rates in our fourth quarter were below the rates assumed in the outlook we forecasted on our third quarter earnings call in February.”