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01/11 16:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings report shows strong financial performance with a 27% increase in adjusted net income and a significant reduction in net debt. Despite some challenges in product adoption and customer forecast variability, the company maintains positive growth projections and strong demand in key segments. The Q&A reveals management's awareness of headwinds and plans to address them. The market cap suggests moderate volatility, leading to a 'Positive' prediction for the stock price movement over the next two weeks.
Sales Growth Sales grew 8% on a reported basis and 7% organically in Q3 2025, reflecting solid demand and execution. For the full year 2025, sales are expected to grow between 7% and 8% (7.6% at midpoint). The growth is attributed to new product ramps, acquisitions, and strong demand in neurovascular.
Adjusted Operating Income Adjusted operating income increased 14% in Q3 2025, driven by operational excellence and margin expansion. For the full year 2025, adjusted operating income is expected to grow between 12% and 14%, reflecting cost management actions and manufacturing efficiencies.
Adjusted Earnings Per Share (EPS) Adjusted EPS grew 25% year-over-year to $1.79 in Q3 2025. For the full year 2025, adjusted EPS is expected to grow between 19% and 21%, driven by operational improvements, reduced interest expense, and a lower adjusted effective tax rate.
Adjusted EBITDA Adjusted EBITDA was $106 million in Q3 2025, up $10 million or 11% year-over-year, driven by higher sales volume and operational improvements.
Adjusted Net Income Adjusted net income for Q3 2025 was $63 million, up 27% year-over-year, driven by operational improvements, manufacturing efficiencies, and a lower adjusted effective tax rate.
Free Cash Flow Free cash flow was $46 million in Q3 2025, flat compared to the prior year. For the full year 2025, free cash flow is expected to increase by 35% year-over-year, driven by higher cash flow from operations and controlled capital expenditures.
Net Total Debt Net total debt at the end of Q3 2025 was $1.158 billion, a $46 million decrease compared to Q2 2025, reflecting strong cash flow generation.
Cardio & Vascular (C&V) Sales C&V sales increased 15% in Q3 2025, driven by new product ramps in electrophysiology, acquisitions, and strong demand in neurovascular. For the full year 2025, C&V sales are expected to grow in the mid-teens.
Cardiac Rhythm Management & Neuromodulation (CRM&N) Sales CRM&N sales increased 2% year-over-year in Q3 2025, driven by growth from emerging neuromodulation customers and normalized CRM growth. However, the full year 2025 growth expectation has been revised to low single digits due to reduced customer demand for select emerging customers.
New Product Adoption Challenges: Customer updates indicate slower-than-expected market adoption for three new products (two electrophysiology and one neuromodulation product). This is expected to impact sales negatively in 2026, representing a 3%-4% headwind.
Product Development Pipeline: The company continues to expand its product development pipeline, with sales from new product development projected to grow over 300% by the end of 2025 compared to 2017.
Market Growth and Positioning: The company expects to return to above-market organic sales growth in 2027, driven by its strong development pipeline and focus on high-growth markets.
Operational Efficiencies: Adjusted operating income grew 14% in Q3 2025, with an 80 basis point margin expansion. Manufacturing efficiencies and operating expense management contributed to this growth.
Cost Management: The company is actively managing costs to minimize profit impact from reduced sales outlook, resulting in only a $3 million reduction in adjusted operating income for 2025.
Strategic Focus on High-Growth Markets: Approximately 80% of the product development pipeline is focused on emerging and growth markets, aligning with the company’s long-term strategy.
CEO Transition: Payman Khales has taken over as CEO, succeeding Joe Dziedzic, with a focus on continuing the company’s growth strategy and high-performance culture.
Customer Forecast Changes: Recent customer forecast changes have led to a reduction in the financial outlook for 2025. This includes a $16 million reduction in sales and a $3 million reduction in adjusted operating income due to lower demand for select emerging customers' PMA products.
New Product Adoption: The adoption of three new products (two electrophysiology and one neuromodulation) has been slower than expected, creating a 3%-4% headwind to total company sales in 2026. This is expected to result in organic sales being flat to up 4% in 2026, with a more pronounced impact in the first half of the year.
Portable Medical Market Exit: The planned exit from the portable medical market by the end of 2025 will create a 2% headwind to total sales in 2026, impacting overall revenue performance.
Cost Management Challenges: Efforts to align costs with reduced manufacturing volumes due to lower sales forecasts may impact operational efficiency and profitability in the short term.
Market Growth Recovery Uncertainty: While a recovery to market growth is anticipated in the second half of 2026, there is uncertainty regarding the timing and extent of this recovery, which could affect financial performance.
2025 Sales Outlook: The midpoint of the 2025 sales outlook has been reduced by $16 million due to recent changes in customer demand within the CRM&N product line, primarily related to select emerging customers with PMA products. Full-year sales growth is now expected to be between 7% and 8% (7.6% at midpoint).
2025 Adjusted Operating Income and EPS: Adjusted operating income is expected to grow between 12% and 14%, and adjusted EPS is projected to grow between 19% and 21% for the full year 2025.
2026 Preliminary Sales Outlook: Sales of three new products (two electrophysiology and one neuromodulation) are expected to decline in 2026 due to slower market adoption, representing a 3% to 4% headwind to total company sales. Organic sales are expected to be flat to up 4%, with a decline in the first half of 2026 and recovery in the second half. Reported sales are expected to range from down 2% to up 2%, including a 2% headwind from the Portable Medical exit.
2026 Adjusted Operating Income and EPS: Adjusted operating income is expected to range from a decline of 5% to an increase of 4%, and adjusted EPS is projected to range from down 6% to up 5%.
2027 Sales Outlook: The company expects to return to above-market organic sales growth in 2027, driven by a strong product development pipeline and strategic positioning in high-growth markets.
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The earnings report shows strong financial performance with a 27% increase in adjusted net income and a significant reduction in net debt. Despite some challenges in product adoption and customer forecast variability, the company maintains positive growth projections and strong demand in key segments. The Q&A reveals management's awareness of headwinds and plans to address them. The market cap suggests moderate volatility, leading to a 'Positive' prediction for the stock price movement over the next two weeks.
The earnings call summary indicates mixed signals. While there is strong financial performance and optimistic guidance, concerns about deceleration in the second half and tough comps are present. The Q&A section highlights management's unclear responses on demand variability and inventory management, adding uncertainty. Given the market cap of $3.8 billion, these factors suggest a neutral stock price movement in the short term.
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