Boston Scientific Corporation (BSX) Earnings

Management highlights

- Overall Quarterly Performance * Q2 2026 was a solid quarter with organic growth hitting 7%, the upper end of guidance, and adjusted EPS exceeding the high end of guidance driven by favorable discrete tax results * 75% of the company's business portfolio is expected to grow ~6% in H2 2026, consistent with historical performance, while growth headwinds are concentrated in the Watchman and EP segments * Management reaffirmed confidence in the company's long-term outlook rooted in a strong product pipeline, disciplined cost structure, and focus on innovation to improve patient outcomes - Product Development and Regulatory Milestones * Received FDA clearance for Revos (endoscopy) and TruSelect microcatheter (interventional oncology) * Seismic Force coronary IVL catheter met all endpoints in the Fracture trial, with launch expected in H1 2027 * Commenced enrollment in the pivotal Faradime trial for Fairflex PFA mapping/ablation catheter for AFib * Progressing Thrive trial enrollment for the Tyvus renal denervation system for hypertension, with expected market launch in 2028 * A new CRM platform (Precedent) is expected to launch in H2 2027 to address current portfolio gaps - Strategic Initiatives * Entered an investment agreement with Mirus for its differentiated Siegel TAVR valve, with an option to acquire 100% of TAVR assets upon completion of clinical and regulatory milestones * The Penumbra acquisition remains on track to close in H2 2026, subject to remaining regulatory clearances, and will strengthen the company's cardiovascular portfolio * Launched a company-wide restructuring program targeting $500 million in annual run-rate cost savings by end-2029, with over half of savings expected by end-2027; savings will drive margin expansion and support reinvestment in high-priority growth initiatives - Watchman (LAAC) Market Mitigation Actions * Expanding physician education and clinical evidence dissemination to clarify appropriate patient eligibility and improve referral patterns * Increasing commercial investment to boost account engagement for both concomitant and standalone procedures * Increasing direct-to-patient investment to stimulate demand and activate patients earlier in the care journey - Capital Allocation * Maintains a disciplined, growth-oriented approach with top priorities of strategic tuck-in M&A and opportunistic share repurchases * Completed the previously announced $2 billion accelerated share repurchase program, reducing share count more than initially expected

Guidance

- Full Year 2026 Organic Revenue Guidance: Revised downward to 5-6%, from prior guidance that called for higher growth, with the revision concentrated in the Watchman and EP segments - Full Year 2026 Adjusted EPS Guidance: Revised to $3.28-$3.32, representing 7-8% year-over-year growth, with a 5 cent headwind from foreign exchange - Q3 2026 Guidance: Organic revenue growth of 3-5%, adjusted EPS of 80-82 cents - Full Year 2026 Adjusted Operating Margin: Expected 0-25 basis points of expansion year-over-year, down from prior expectations, due to unfavorable product mix from lower Watchman and EP sales, and incremental investments in supply chain and quality systems - H2 2026 Segment Specific Guidance: Global Watchman revenue expected to decline mid-to-high single digits year-over-year (full year growth flat to low single digits); global EP growth expected to be flat (full year growth flat to low single digits, with 20% international full year growth) - 2027 Guidance Framework: Management is being appropriately conservative, assuming current Watchman and U.S. EP market dynamics will persist for most of 2027, leading to limited adjusted EPS growth. The 75% of the portfolio growing 6% in 2026 is expected to improve gradually in 2027 - Long-Term Growth: Management expects a return to above-market organic growth and double-digit adjusted EPS growth in 2028 and beyond, driven by new product launches and cost efficiencies from restructuring

Segment performance

Consolidated total Q2 2026 revenue was $5.442 billion, representing 7.5% reported year-over-year growth; organic revenue growth hit 7%, at the upper end of the 5-7% guidance range. Adjusted EPS was 86 cents, up 15% year-over-year, and adjusted operating margin was 28.4%, a 70 basis point year-over-year expansion. - Neuromodulation: Organic sales grew 12% year-over-year, with double-digit growth in both pain and brain segments. NALU contributed a full quarter of strong performance, and differentiated products drove global brain segment growth. This segment contributes approximately 10-12% of total revenue. - Urology: Organic sales grew 1% year-over-year, missing expectations. Recovery in sacral neuromodulation is taking longer than planned, and stone management faces continued market pressure and portfolio gaps. Full-year 2026 growth is expected to be flat to low single digits. This segment contributes approximately 5-7% of total revenue. - Endoscopy: Organic sales grew 7% year-over-year, with better-than-expected performance from Axios. FDA clearance was received for the new Revos device for endoscopic ultrasound biliary drainage. This segment contributes approximately 15-17% of total revenue. - Cardiovascular: - Interventional Cardiology and Vascular Therapies (ICBT): Grew 12% year-over-year, with interventional cardiology up 15% driven by strength in DCB, imaging, and complex PCI. Interventional oncology and embolization grew 12% year-over-year driven by broad global adoption of innovative technologies; new positive clinical data for Theresphere and FDA clearance for TruSelect microcatheter were achieved. Vascular therapies grew 8% year-over-year driven by Varathena adoption and successful Seismic IVL launch. This segment is the company's largest growth driver, contributing approximately 30-35% of total revenue. - Cardiac Rhythm Management (CRM): Declined 2% year-over-year, with high single-digit declines in low voltage CRM and mid single-digit declines in high voltage CRM, driven by competitive pressure and portfolio gaps. Diagnostics grew low double digits, and the full-year 2026 CRM outlook is flat. This segment contributes approximately 10-12% of total revenue. - Watchman (LAAC): Grew 4% year-over-year globally, with 18% international growth and 3% U.S. growth. One-third of U.S. Watchman procedures are now concomitant (grew over 60% year-over-year), while standalone procedures saw a low teens year-over-year decline. This segment contributes less than 10% of total revenue. - Electrophysiology (EP): Grew 9% year-over-year globally, with 3% U.S. growth and 23% international growth driven by the Opal mapping platform and FerroPulse PFA technology. U.S. PFA now accounts for ~80% of the AFib market, and the segment faced unexpected competitive share losses in the U.S. This segment contributes approximately 8-10% of total revenue. Regional performance: U.S. grew 6% operationally, EMEA grew 4% operationally, and Asia-Pacific grew 11% operationally led by double-digit growth in Japan, China, and Korea.

Risks & headwinds

- Unexpected sharp slowdown in the U.S. Watchman market driven by new clinical evidence that has disrupted referral patterns for standalone procedures, and operational inefficiencies from the rapid adoption of concomitant procedures; further share erosion is expected in 2027 with the entry of a new competitor - Unanticipated competitive share losses in the U.S. EP market, as competitors have taken share in the rapidly growing PFA segment faster than expected; competitive pressure is expected to continue through H1 2027 - Urology segment underperformance, with slower-than-expected recovery in sacral neuromodulation and ongoing portfolio gaps in stone management - Foreign exchange volatility has created unhedged impacts on below-the-line expenses, and continued currency swings pose a risk to full year results - The Penumbra acquisition, while strategically attractive, is expected to be slightly dilutive to operating margins and EPS in the near term - New clinical evidence could continue to shift referral patterns and slow demand for LAAC procedures if educational outreach does not resolve current market confusion - Integration of acquired businesses and execution of the restructuring program may take longer or deliver lower cost savings than currently expected

Analyst Q&A

• Q: This guidance cut is concentrated in Watchman and EP. Is this based on current exiting trends, or deliberate conservatism to avoid future cuts? What is your framework for 2027 organic growth, where buy side expects ~5%? /

  A: 75% of the business continues to grow 6% consistent with history, and that portfolio will improve over time as urology and CRM strengthen. The guidance cut is driven entirely by Watchman and EP, which saw unexpected sudden slowdowns. For Watchman, the H2 decline guide reflects current observed trends with no assumption that current mitigation actions will drive improvement in 2027, for conservatism. For EP, the team is executing well on the pipeline but we underforecast U.S. competitive share losses. We expect EP to rebound in H2 2027 and return to above-market growth in 2028. Overall we are being appropriately conservative for 2027, and aim to improve on H2 2026 trends.

• Q: You said no improvement in Watchman trends in 2027. What is your outlook for new competition, the 20% CMS position fee cut, and first-line labeling from Champion trial data? /

  A: The assumption of no 2027 improvement refers to overall market growth, not just our guidance. We expect a new competitor to enter in 2027, and while we remain confident Watchman will stay the clear market leader, we do expect some modest share erosion that we have incorporated into our conservative outlook. We still anticipate that the totality of Champion data will support an FDA labeling update and a reconsideration of CMS national coverage, which could drive upside if achieved.

• Q: Can you confirm that 2026's 5-6% organic growth is a good starting framework for 2027, and what new products will drive 2028 reacceleration? /

  A: We will not provide formal 2027 guidance until January, but our framework is that we expect 2027 to be challenging but an improvement on H2 2026 trends. For 2028 and beyond, we have seven major new launches across a $25 billion total addressable market, including Seismic Force IVL, renal denervation for hypertension, the closed Penumbra acquisition, ICE imaging entry for EP, next-gen FerroPulse Ultra, and the potential Mirus TAVR acquisition. Interventional cardiology and vascular will be the core growth drivers, and EP will return to growth in 2028.

• Q: What is the P&L impact of the new restructuring program, and will savings be reinvested in growth? /

  A: The comprehensive enterprise-wide program targets $500 million in annual run-rate savings by end-2029, with over half of savings achieved by end-2027. Savings will initially show up in selling, general and administrative expense first, with cost of goods savings coming later. The savings will fund continued investment in high-growth opportunities, and position the company to return to meaningful operating margin expansion and strong EPS growth starting in 2028.

• Q: How will you address shifting Watchman referral patterns driven by new clinical evidence, what is your action plan? /

  A: Recent clinical study releases created greater market confusion and a drop in referrals for soft indications, even as there remains large unmet need for stroke prevention in patients who cannot take long-term blood thinners. Our plan includes education on the totality of existing clinical data to reinforce Watchman's proven benefit. Additional data is coming: the Simplified trial results are expected in H2 2026, which could simplify post-implant drug regimens, and we have a new iteration of the device (Watchman Elite) entering clinical testing. We continue to pursue updated labeling from the FDA based on existing trial data.