Boston Scientific Corporation Q2 FY2025 earnings call

• Q2 Performance: Total company operational sales grew 22%, organic sales 17%, exceeding guidance. Adjusted EPS was $0.75, up 23%, and adjusted operating margin was 27.6%. - Outlook: Third quarter organic growth projected at 12%-14%, full year organic growth raised to 14%-15%. Third quarter adjusted EPS expected $0.70-$0.72, full year adjusted EPS $2.95-$2.99. - Regional Performance: U.S. grew 31%, Europe, Middle East, Africa grew 2% (7% excluding ACURATE), Asia Pacific grew 15%. - Business Units: Urology saw 28% operational growth; Endoscopy had 8% global growth; Neuromodulation had 7% growth; Cardiology sales grew 28%; Cardiac Rhythm Management grew 1%; Electrophysiology sales grew 94%; Peripheral Intervention grew 17% operationally and 7% organically. Acquisitions like SoniVie and Intera Oncology were noted, along with clinical trial progress.

Cardiovascular: Total company operational sales grew 22%, organic sales 17%. Cardiology sales grew 28%, Interventional Cardiology therapy sales grew 9% (excluding ACURATE, strong double digits), Coronary therapy had high teens growth, WATCHMAN grew 28%, Electrophysiology sales grew 94%, Peripheral Intervention grew 17% operationally and 7% organically. Urology: Sales grew 28% operationally and 6% organically. Endoscopy: Grew 8% globally and double digits in the U.S. Neuromodulation: Grew 7%, brain franchise mid-teens, pain franchise mid-single digits. Revenue contribution details were not explicitly broken down by percentage in the transcript provided, but key segments showed significant growth.

• Third quarter 2025 organic growth guided at 12%-14%, full year organic growth raised from 12%-14% to 14%-15%. - Third quarter adjusted EPS guided $0.70-$0.72, full year adjusted EPS expected $2.95-$2.99 (18%-19% growth vs 2024). - Full year free cash flow expected approximately $3.5 billion, and adjusted operating margin expected to expand 75-100 basis points.

• Impact of tariffs and the discontinuation of the ACURATE valve on financials. - Reimbursement issues that could affect procedure volumes and profitability. - Competition in product segments, particularly in areas like EP and neuromodulation.

Q: Congrats on another fantastic quarter. Two for me, kind of intertwined, so it is a related follow-up. Maybe to start, though, the WATCHMAN number was just phenomenal, plus 30% in the U.S., 28 worldwide. Big acceleration. I imagine a lot of that is coming on the back of OPTION and concomitant. But maybe just speak to the durability of that, the breadth and depth of usage that's driving it and what you're hearing in the field just as we think about going into champion next year, which could be another leg of growth for this franchise?

A: Yes, I'll make some initial comments, and Ken can certainly add more detail to it. We're really pleased with the results in the quarter at 28% and you also saw some good news in the script there. WATCHMAN FLX Pro approvals outside the U.S. and over the next LRP period, we aim to get more contributions outside the U.S. than we currently do today with that device, which has proven to be so safe and effective in the U.S., which is really the reliability and the trust that the physician community and referring physicians have in that device along with our clinical and sales team is driving that. And obviously, the continued investment in clinicals that you've noted on your comments there. Concomitant, as we've said in previous calls is really a breakthrough opportunity for hospitals, physicians and patients to be able to use the WATCHMAN device and the safety and efficacy profile combined with FARAPULSE and the same really superior safety and efficacy profile versus the competition and the ability to do that in the same procedure has proven to be very valuable and we're maximizing it as best we can commercially. Looking forward, we continue to believe that this category could grow in the plus 20% range as it continues to scale larger and larger each quarter. And we'll provide you more updates at Investor Day in terms of our programs on our next-generation valve and continued focus on clinical studies.

Q: Robbie Marcus followed up on the gross margin, asking about drivers of that. How much of that is new products versus underlying improvements? And how we should think about sort of that underlying gross margin ex tariff through the rest of the year?

A: Yes. Thanks, Robbie. And maybe a couple of points. Maybe first to the Eagle Eye folks. So the $130 million write-down from the ACURATE exit impacted a number of different areas of the P&L. Within the adjusted P&L, we had some inventory charges in sales returns reserves related to ACURATE that totaled, call it, approximately $100 million. Then we also had restructuring and intangible asset impairment charges that impact the GAAP-only P&L. So that's the $130 million that was in the appendix of our operational highlights that the Eagle Eye folks picked up. So as far as our adjusted gross margin, roughly $100 million impact there from the accurate charges. Importantly, really pleased to see that we're able to offset that through the strong sales performance that you heard Mike go through as well as strong spend control to make sure that we offset the impact there and through the full P&L and delivered the strong EPS performance that you saw in the quarter. And so looking forward, Robbie, we expect gross margin for the year to be roughly flat. So we have the impact of tariffs, the impact, which are now roughly $100 million is our estimate. The impact of those accurate charges, the roughly $100 million that I just talked about being offset predominantly by favorable mix. You saw the WATCHMAN numbers. FARAPULSE continues to perform. As you can see, very well for us, that's accretive to our gross margin. So have those 2 items that we didn't anticipate at the start of the year with the ACURATE charge and tariffs being a large headwind but mix offsetting that largely to get to flat for the year is our expectation for gross margin.