Boston Scientific Corporation

Good morning and welcome to the Boston Scientific second quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lauren Tangler, Vice President, Investor Relations. Please go ahead.

Thank you, Andrew. Good morning, everyone, and thanks for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer, Dan Brennan, Executive Vice President and Chief Financial Officer. We issued a press release earlier this morning announcing our Q2 2021 results which included reconciliations of non-GAAP measures used in the release. We have posted a copy of that release, as well as reconciliations of the non-GAAP measures used in today's call to the investor relations section of our website under the heading financials and filing. The duration of this call is approximately one hour. Mike will focus his comments on Q2 performance, largely compared to 2019, since Q2 20 included key procedural impact from COVID, as well as future catalysts and the outlook for our business, including Q3 and full year 21 guidance. Dan will review the financials for this quarter, provide more details regarding our Q3 and full year 21 guidance, and then we'll take your questions. During today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Ann Meredith and Dr. Ken Stein. Before we begin, I'd like to remind everyone on the call that operational information foreign currency fluctuation and organic revenue growth further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales. Relevant acquisitions for organic growth versus 2020 and 2019 include preventives, which closed March 1st, 2021, and birthrights and BTG interventional medicines, which closed in May and mid-August of 2019 respectively. Divestitures include BTG specialty pharmaceuticals, which closed on March 1st, 2021. and the Global Embalic Microsphere Portfolio and the Intrauterine Health Care Franchise, which were divested in mid-August 2019 and second quarter 2020 respectively. Guidance exclusively recently announced Luminous Surgical Acquisition, which is expected to close in the second half of 2021, and Ferriculse Acquisition, which is expected to close in Q3 2021, which are subject to customary closing conditions, including antitrust insurances. For more information, please refer to slide 9 of our Financial Operating Highlights deck, which may be found on our Investor Relations page. On this call, all references to sales and revenue, unless otherwise specified, are organic. Finally, growth goals of 6% to 8% ex-COVID represent comparisons between time periods in which results are not materially impacted by the COVID-19 pandemic. Of note, this call contains forward-looking statements within the meaning of federal security laws, which may be identified by words like anticipate, expect, may, believe, estimate, and other similar words. They include, among other things, the impact of COVID-19 pandemic upon the company's operations and finance. about our growth in market share, new product approvals and launches, acquisitions, clinical trials, cost savings, and growth opportunities. Our cash flow and expected use, our financial performance, including sales, margins, and earnings, as well as our tax rates, R&D spend, and other expenses. Factors that may cause such differences include those we disclaim any intention or obligation to update them. At this point, I'll turn it over to Mike for his comments. Mike. Thanks, Lauren. Thank you to everyone for joining us today.

I'm pleased to report very strong Q2 financial results as a resumption of electric procedures strengthened in the U.S. and many, but not all, of our regions across the globe. We're well positioned for the second half of 2021 and beyond as we continue to execute our category leadership strategy, driven by our innovative pipeline, expansion to faster growth markets, Globalization efforts and enhanced digital capabilities. Total company's second quarter operational sales grew 50% versus 2020. Index sales grew 52% versus 2020 and 9% versus 2019. Exceeding expectations as recovery from the pandemic occurred more quickly than expected, particularly in the U.S. Importantly, six of the seven business units grew double digits organically versus 2019. We estimate that five of our business units grew faster than the respective Pleased with our ongoing and new product launches, and we're now enrolling our clinical trials at pre-COVID run rates. Q2 adjusted EPS at 40 cents grew 378% versus 2020, and 3% versus now, leading to high net guidance by 2 cents, primarily due to sales outperformance and lower spend. Adjusted operating margin of 25.1, slightly ahead of our expectations, as we continue to balance investment with sales recovery. Continue to be pleased with our free cash flow, second quarter pre-cash flow generation of $541 million, and adjusted pre-cash flow of $800 million. Given the second quarter outperformance, we are increasing and narrowing our guidance ranges for both sales and EPS, which assumes a manageable level of COVID impact in the second half of the year. Compared to 2020, we're targeting third quarter 21, organic revenue growth of 12% to 14%, and full year netting at 20%. And compared to 2019, we're targeting a third quarter 21 organic revenue growth of 5 to 7 and for the full year growth of 6 to 7. Our third quarter 21 adjusted EPS estimate is 39 to 41 cents, and we are updating our full year adjusted EPS to a revised range of $1.58 to $1.62. This will provide more details on both sales and EPS performance, including the revenue contribution.