Greetings and welcome to Edwards Lifesciences Third Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Mark Wilterding, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you very much, and welcome everyone. Thank you for joining us this afternoon. With me on today's call is our CEO, Bernard Zovighian, and our CFO, Scott Ullem. Also joining us for the Q&A portion of the call will be Larry Wood, our Group President of TAVR and Surgical Structural Heart, Daveen Chopra, our Global Leader of TMTT, and Wayne Markowitz, our Global Leader of Surgical Structural Heart. Just after the close of regular trading, Edwards Lifesciences released third quarter 2024 financial results. During today's call, management will discuss those results included in the press release and accompanying financial statements and then use the remaining time for Q&A. Please note that management will be making forward-looking statements that are based on estimates, assumptions, and projections. These statements include, but are not limited to, financial guidance and expectations for growth opportunities, strategy, leverage, and integration of our acquisitions, regulatory approvals, clinical trials, litigation, reimbursement, competitive matters, and foreign currency fluctuations. These statements speak only as of the date on which they were made, and Edwards does not undertake any obligation to update them after today. Additionally, the statements involve risks and uncertainties that could cause actual results to differ materially. Information concerning factors that could cause these differences may be found in the press release, our 2023 Annual Report on Form 10-K, and Edwards' other SEC filings, all of which are available on the company's website at edwards.com. Unless otherwise noted, our commentary on sales growth refers to constant currency sales growth. Reconciliations between GAAP and non-GAAP numbers mentioned during this call are also included in today's press release. Growth rates refer to continuing operations and do not include contributions from critical care, which was sold on September 3. With that, I'd like to turn the call over to Bernard for his comments.

During the third quarter, we achieved sales of $1.4 billion, a 10% increase on a constant currency basis versus the year-ago period, slightly ahead of our expectations. TAVR and TMTT both contributed significantly to growth in the third quarter as more patients globally benefitted from our catheter-based structural heart therapies. Our team made important advancements in our clinical research and new product introduction to address the unmet needs of structural heart patients around the world. Next week at TCT, you will hear more about our commitment to generating crucial clinical evidence to help physicians and the healthcare ecosystem care for many patients in need. At the conference, we will discuss the pivotal clinical data presentation of early TAVR, TRISCEND II, and CLASP IID, along with more than 20 other essential updates. Edwards is leading the advancement of science in this large, diverse, and rapidly growing field. Our priority remains positioning TAVR for long-term growth. In addition to introducing differentiated next-gen technologies, we are leading several global initiatives, including reaching more patients through patient awareness, activation, and access, and enhancing physician training and support programs. For TMTT, we continue to scale our fast-growing business, and we are pleased with its trajectory over the last several quarters. Key initiatives include broadening the launch of PASCAL, advancing the introduction of EVOQUE in the U.S. and Europe, and launching SAPIEN M3 in Europe next year. Edwards' unique pipeline of innovation should drive strong multi-year growth. We are also committed to bringing differentiated surgical innovation to patients, supported by strong evidence generation, ensuring we remain at the forefront of surgical advancement. We are entering new therapeutic areas, such as aortic regurgitation (AR) and implantable heart failure management (IHFM). These initiatives align with our long-term vision of expanding into more therapies, driving sustainable growth for Edwards. It was an especially busy quarter, as our team around the world delivered on our strategy. We closed the sale of Critical Care in September, took important actions to sharpen our focus on structural heart, including integrating recent acquisitions and right-sizing the company for long-term profitable growth. As we look ahead, we see significant growth opportunities across our differentiated portfolio of leading structural heart therapies for TAVR-AS, TAVR-AR, TMTT, Surgical, and IHFM. This commitment will be discussed in detail at the upcoming investor conference, where we will outline our strategies for differentiated value creation in the years ahead. Now, I will provide details on Q3 results by product group. In TAVR, third quarter global sales of $1 billion increased 6% when adjusted for currency and billing days. Edwards' strong competitive position and pricing remain stable globally, although we experienced a few instances of regional pressure. We are confident in our differentiated technology, high-quality evidence, and the value we continue to demonstrate to patients, clinicians, and healthcare systems. We remain deeply committed to advancing evidence for AS patients. In August, one-year data from the RIA trial, a first-of-its-kind trial focused exclusively on outcomes for women receiving TAVR, were presented at the ESC meeting held in London. Investigators reported superior outcomes for women receiving the Edwards SAPIEN 3 or SAPIEN 3 Ultra Valves as compared to those receiving surgical aortic valve replacement for the primary endpoints of death, stroke, and re-hospitalization at one year. We are proud of this high-quality clinical research. The outstanding success of TAVR points to the importance of valve selection for women undergoing aortic valve replacement, especially those with small annuli, to preserve their option for future valve-in-valve procedures, ensuring the lifetime management of their disease. Next week at TCT, the clinical community will hear results from the early TAVR trial, the first and largest randomized controlled trial to date studying asymptomatic severe AS patients and the impact of early intervention with TAVR. Turning to the U.S., our year-over-year third quarter TAVR sales growth rate was in line with our global TAVR constant currency growth rate. We believe our U.S. competitive position was largely unchanged. In the U.S., hospitals and physicians continue to acknowledge our team capacity constraint nationally, and it is encouraging that many hospitals are exploring additional investments to address future workflow needs to manage these patients. We know from experience that hospitals have historically demonstrated the ability to scale to support trans-catheter procedure growth over time. Outside of the U.S., in the third quarter, our constant currency TAVR sales growth was in line with our global TAVR growth. In Europe, our market position improved sequentially, supported by the continued launch of SAPIEN 3 Ultra RESILIA. We are pleased with the exceptional patient outcomes delivered with this platform, and we expect this momentum to continue as more centers adopt our best-in-class TAVR platform. Additionally, we received CE mark approval for our Alterra system for congenital heart patients. Alterra should result in quality of life improvement and a reduction in the number of procedures that this younger patient will require over their lifetimes. We have initiated the introduction of this novel therapy in Europe, and initial feedback from clinicians has been positive. In Japan, slower market growth pressured our results. We remain dedicated to expanding this therapy to address significant under-treatment of AS among the substantial elderly population in Japan. In closing, we are pleased with our Q3 TAVR results, which were slightly above our expectation. Our 5% to 7% growth guidance for the full year remains unchanged. However, we expect the Q4 year-over-year sales growth rate to be lower due to some one-time items that Scott will describe later. We remain confident that Edwards is positioned for healthy and sustainable TAVR growth, driven by our differentiated TAVR technology and our commitment to advancing patient care through high-quality clinical evidence. Last quarter, we announced the acquisition of JC Medical and JenaValve, early innovators in the treatment of AR. These acquisitions provide an opportunity in a new therapeutic area to address the unmet needs of AR patients around the world, a deadly disease that impacts more than 100,000 patients in the U.S. alone and is largely untreated today. As the pioneer in valve innovation, we believe Edwards is best positioned to develop, study, and deliver novel technologies. I am pleased to report that we performed our first implant in the Journey pivotal trial with the Edwards J-Valve AR system, which was recently acquired from JC Medical. As noted in our announcement of the JenaValve transaction, the acquisition is subject to regulatory review and other customary closing conditions. We are responding to a second request from the FTC in connection with their review and anticipate closing the acquisition by mid-2025. Now turning to TMTT, our unique innovations, including the PASCAL repair system, the EVOQUE tricuspid replacement system, and the upcoming SAPIEN 3 mitral replacement system, provide a broad set of treatment options to serve the many diverse and complex patients in need. We are pleased with the Q3 result, achieving $91 million in sales, representing 74% growth over the prior year. Sales were led by PASCAL growth globally, and we continue with the initial commercial expansion of EVOQUE in the U.S. and Europe. Globally, we continue to see more patients diagnosed and treated, leading to strong therapy adoption, resulting in mitral procedures experiencing ongoing double-digit growth and even stronger tricuspid therapy growth. Adoption of the differentiated PASCAL technology is expanding in both new and existing sites around the world. We look forward to presenting the two-year outcomes of the CLASP IID pivotal trial studying DMR patients at TCT next week. We are also pleased to announce the earlier than expected completion of enrollment for the CLASP IITR trial studying TR patients with PASCAL randomized against optimal medical therapy alone. This achievement is great news for patients suffering from tricuspid regurgitation given the differentiated characteristics of PASCAL. The EVOQUE launch continues to progress well as we successfully activate new sites in both the U.S. and Europe beyond our initial trial centers. We are also increasing our field teams to deliver on our high-touch model to support new sites as we bring EVOQUE into their clinical practice to achieve excellent patient outcomes. The strong interest in this therapy continues to highlight the large unmet need. The full 400 patient cohort of a TRISCEND II pivotal study at one year will also be presented at TCT next week. In our continued efforts to reach more patients, a fourth and larger EVOQUE valve size, the 56 millimeter, was recently approved in the U.S. The addition of this larger valve size will expand the addressable patient population.

Thanks a lot, Bernard. We were pleased with our financial results in the third quarter, starting with third quarter sales from continuing operations of $1.35 billion. Our continuing operations underlying sales growth was 9.6%, and Edwards adjusted earnings per share was $0.67, both slightly ahead of what we had modeled for Q3 guidance provided in July. A full reconciliation between our GAAP and adjusted earnings per share for continuing operations is included with today's press release. The sale of critical care, as well as the acquisitions we announced last month, resulted in some new features in the presentation of our financial results this quarter. First, it's important to note that our original sales guidance for Q3 assumed we would own critical care for all of Q3. We were pleased to close the sale of critical care in early September, so we did not have critical care sales in the last month of Q3. Second, the discontinued operations in today's release and the 10-Q that we will file in early November are comprised of the two components that represent our plan to exit product groups that are not focused on implantable medical innovations for structural heart disease. The discontinued operations include critical care as well as a small, non-core product group that reduces the reported sales of surgical structural heart. Third, as it relates to the previously announced acquisitions, we do not expect meaningful contribution to Edwards sales in 2024 and 2025. The additional operating expense from three of the four acquisitions announced is included in our fourth quarter earnings per share guidance. Additionally, there is a new line of the profit and loss statement above operating income called 'other operating expense and income,' reflecting an impact related to critical care transition service agreements. So now I'll cover additional details of our continuing operations P&L. For the third quarter, our adjusted gross profit margin was elevated at 80.7%, slightly higher year-over-year and sequentially due to variable expense timing. We expect fourth quarter gross margin to be in line with the high end of our 76% to 78% full-year guidance range, which is also a reasonable preliminary modeling assumption for 2025. Selling, general, and administrative expenses in the quarter were $421 million or 31.1% of sales compared to $382 million in the prior year. This increase was driven by an expansion of field-based personnel to support the growth of our transcatheter therapies, including the launch and rollout of PASCAL and EVOQUE. Research and development expenses in the third quarter grew 4% over the prior year to $253 million or 18.7% of sales. This increase was primarily the result of continued investments in our transcatheter valve innovations, including increased clinical trial activity. Adjusted operating profit margin in Q3 was elevated at 31.4%, reflecting unusual benefits of variable expense timing. We expect Q4 adjusted operating margin to decline to the mid-20s, resulting in a full-year 2024 average adjusted operating profit margin of approximately 27% to 28%, which is also a reasonable preliminary modeling assumption for 2025, with forecasts for expanding margin thereafter. Turning to taxes, our reported tax rate this quarter was 10.1% or adjusted 12.4%. We expect a similar adjusted tax rate in Q4. As a reminder, our original 2024 adjusted tax rate guidance range was 14% to 17%, and we are benefiting this year from several one-time tax events resulting in a lower than originally expected rate. Foreign exchange rates decreased third quarter adjusted sales growth by 70 basis points or $7.9 million compared to the prior year. GAAP earnings per share of $5.13 reflects the one-time gain on the sale of critical care. Also unique to this quarter were several special items, including a restructuring charge, a gain on our original investment in Endotronix, and a $30 million charitable donation to support the work of the Edwards Lifesciences Foundation. Turning to the balance sheet, following the critical care sale, we had approximately $3.5 billion of cash and cash equivalents as of September 30. During the third quarter, the company repurchased $1 billion of stock through a combination of pre-established trading plans and accelerated share repurchase programs. Edwards currently has approximately $1.4 billion remaining under its share repurchase authorization. Based on our year-to-date share repurchase activity, we expect average diluted shares outstanding for Q4 2024 to be between 590 million and 595 million. I'll finish with comments related to guidance. Our full year guidance for Edwards sales growth of 8% to 10% remains unchanged, as does our guidance for our three product groups. Our guidance assumes fourth quarter year-over-year TAVR growth below the full year TAVR range of 5% to 7%. Recall, Q4 of 2023 was an especially strong quarter for TAVR. In Q4 of this year, we have seen the impact from the hurricanes in the southeast, as well as a one-time impact from a China distributor rebate adjustment, and fewer selling days versus Q3. It's important to note that our daily TAVR procedure volume is still forecasted to be sequentially higher in Q4 versus Q3. We expect Q4 sales of $1.33 billion to $1.39 billion and Q4 earnings per share of $0.53 to $0.57. We look forward to providing detailed 2025 financial guidance at our investor conference in New York on December 4th.

Thank you, Scott. We are confident that our innovative therapy will allow Edwards to treat more patients around the world and continue to drive strong organic growth in the years to come. As patients and clinicians increasingly recognize the significant benefit of breakthrough technologies, we remain as optimistic as ever about the long-term growth opportunity. With that, I'll turn it back to Mark.

Thank you very much, Bernard. We're ready to take questions now. In order to allow for broad participation, we ask that you please limit the number of questions to one plus one follow-up. If you have additional questions, please re-enter the queue, and management will answer as many participants as possible during the remainder of the call. Please refrain from asking questions related to our Early TAVR or TRISCEND II pivotal trials. We will present data on those trials next week at TCT and host investor briefings on both Monday and on Wednesday after the presentation to discuss the results in more detail. We really hope to see you there.

Thank you. And at this time, we will conduct our question-and-answer session. And our first question comes from Larry Biegelsen with Wells Fargo. Please state your question.

Good afternoon. Thanks for taking the question. Scott, I guess maybe help us bridge the Q4 guidance implies about $2.20 on an annual basis, just using the midpoint times four. Can you bridge from the prior guidance of $2.75 at the midpoint? Did it only change for Critical Care, which we thought was always going to be $0.40 diluted? Seems like something else changed, and I had one follow-up.

Yes, thanks for the question, Larry. There are a couple of things that changed. One was the elimination of Critical Care, which on a full-year basis would have impacted earnings per share by about $0.35. We're also picking up in the fourth quarter some additional expenses related to three of the four acquisitions that we announced earlier, which will hit us in Q4. Q4 does not reflect some of the benefits of the right-sizing that we conducted earlier, which we will see in 2025.

That's helpful, Scott. And then just a follow-up on that.

No, just to add on what Scott said, Larry, obviously we are also expecting growth from our continued operations in 2025 together with the EPS leverage. We will provide full guidance during the investor conference in December.

Okay. I mean, that was my follow-up, Scott. I mean, I know you anticipated the question. Just using that kind of Q4 EPS of $0.55 at the midpoint, people are going to multiply and get to $2.20. How should we think about that in the context of 2025 EPS? You gave some helpful color on the operating margin. Is there anything else we should consider when we're trying to model 2025 here?

Yes. Obviously, the big driver is top-line growth, and we'll be prepared to talk about that for Edwards and for different product lines on December 4. We tried to give you some building blocks for margins, both operating margin. We talked about the special tax rate benefits we achieved in 2024, which we're not going to model in 2025. We will see benefits from some of the actions we've taken this year when we hit the full year 2025. Those are the different moving pieces that we can give you for now, and we'll take you through the top-line impact in December.

Thank you. And our next question comes from Vijay Kumar with Evercore ISI. Please state your question.

Hi, guys. Thank you for taking my question. Scott, maybe if I could go back to this Q4 guidance assumptions, I think you called out a few line items on TAVR between the hurricane and China. Could you parse out what the impact of the hurricane is? I'm assuming we've already seen some impact, and what was China? Is this just one-timer on China? Could there be some lingering impact as we think about next year? And based, I know you said lesser days versus third quarter, but on a year-on-year basis, any change in number of days in Q4?

Sure. Thanks for the question, Vijay. First on China, this is a one-time adjustment to a rebate for a distributor in China. It does not have anything to do with our operations or our sales growth in China at this point. As it relates to selling days, yes, there are three fewer selling days in Q4 than there were in Q3, which impacts us when we start talking about sales dollars. But what's important to know and remember is the procedure volume on an average daily basis is growing sequentially in Q4 over Q3.

Understood. And then maybe one more related to the guidance here. What is the implied operating margins here for Q4, right? When you look at the DPS and the revenue sales dollars? Is that something like mid-25s? And I'm just trying to think, what is the right run rate here on operating margins as you get the benefit from right-sizing expense line item? And sorry, back on the days. On a year-on-year basis, was it consistent, or did the year-on-year basis change?

Well, I understood the first part of your question. Let me answer it, and then maybe you can help me on the second part of the question. So, yes, for Q4, the guidance assumes mid-20s or implies mid-20s percentage operating margin. For next year, we expect that to grow to the range of 27% to 28%, which is also the same as our full-year 2024 operating margin. And help me with the other piece of your question, Vijay.

Sorry, on the days, fourth quarter days versus fourth quarter ‘23, I was looking at it on a year-on-year basis on the days common.

I believe the selling days were comparable in Q4 of 2023 and in 2024. We'll check that, and I'll come back on if that's not right.

And our next question comes from Robbie Marcus with JPMorgan. Please state your question.

Oh, great. Thanks for taking the questions. I'll switch it over to some of the products. TMTT, again, came in better than expected. We've seen from your competitor a nice quarter on the repair side. I was wondering if you could talk about, on tricuspid repair specifically, I was wondering if you could talk about your tricuspid replacement and how you're seeing doctors choose in the market which patients are appropriate for which and the decision-making process.

Thanks, Robbie. This is Daveen. Appreciate the question. Maybe I'll just start off with a couple of overall comments on EVOQUE. Obviously, we've been very pleased so far with the introduction of EVOQUE in both the U.S. and Europe. We've really seen strong physician and patient demand, which reinforces that there's a lot of unmet needs for these patients. We've observed that with EVOQUE, we have very predictable times that are very similar to the clinical trial times from both clinical trial sites and new sites. Clinical outcomes are very much similar to TRISCEND II. In the U.S., where we just have EVOQUE, our experience in Europe indicates the importance of having a portfolio of both repair and replacement technologies to treat the diverse and complex tricuspid patient population. Right now, we're continuing to open up new centers, activating new sites, focusing on major tricuspid centers with robust training and high clinical support. We are also continuously adding to our clinical support training team. As for your question about repair and replacement, the learning process continues regarding which patients are right for each. We see anatomical considerations where one may be better than the other. However, as a field, we are still figuring this out. We believe that you need both technologies to effectively treat the greatest number of patients. Two other quick comments: over time, we expect EVOQUE to become a larger percentage of our portfolio, but presently, PASCAL is still our largest growth driver year-on-year due to its established base and larger overall volume. We are excited about treating more patients with both EVOQUE and PASCAL.

Great. Maybe just as a quick follow-up on TAVR, you've now had three more months to evaluate the market and really dig into the capacity issue. I am asking this more from a market perspective because none of your competitors validated a capacity issue. So when you see it, I imagine that, as one of the biggest players in the structural heart lab, you probably have the best view. But how are you thinking about capacity here? Is it more of a TAVR volume issue versus capacity? I know the market is still substantial from a top-down basis, just because we don't hear anybody else validating the capacity. So I'd love to get your thoughts there.

Thanks, Robbie. This is Larry. Yes, we spend a lot of time on this issue in the quarter, engaging with hospital administrators and physicians in the field. Given our overall market position, we are more dependent on market growth than any of our competitors. For those coming off small bases, slight share gains or a few cases here and there do not necessarily reveal capacity constraints in the same manner. The new technology in the last few years has been created to fit in the Cath lab space. We are part of the problem as Daveen grows and introduces new products like EVOQUE and sees continued PASCAL adoption. This puts tremendous pressure on structural heart teams to prioritize and move patients. We're encouraged by discussions with administrators, who now view this growth as a long-term segment of their hospital operations, indicating they realize not only the need for capacity additions but also that they cannot simply move resources around to meet these demands. Some hospitals are specifically investing in their structural heart divisions to meet these needs. While the constraints vary by hospital, with some facing physical space limitations and others experiencing staffing challenges, it is crucial to note that it is not a shortage of patients; backlogs are growing and times to treat are increasing for our TAVR patients. We must address this because patients don't wait well.

No, no. I think you said it all well, Larry. We are part of the issue here. We are a significant innovator in the space with PASCAL, EVOQUE, and TAVR. We hold a market-leading position in TAVR. Many of our larger TAVR centers require extensive resources when introducing EVOQUE. We are introducing TR as a new disease, leading to the health teams learning about it, training with the new device, and screening patients. This adjustment is not instantaneous; it requires time. We are confident that patients—tricuspid, mitral, and AS—are out there. We bring innovative technologies. Historically, healthcare systems have proven their capacity to scale, and all these procedures are profitable. While we acknowledge the current situation, we do not see it as a long-term issue. It will take weeks or perhaps a few months to resolve, but not years.

And our next question comes from David Roman with Goldman Sachs. Please state your question.

I wanted to start by laying out some of the pieces here post-TCT. I appreciate that we won't see data until next week. But as you think about the subsequent activities either on the asymptomatic patient population concerning label expansion or additional patient activation efforts, what happens next there? And could you talk about the dynamics on the tricuspid side, appreciating that the FDA has already approved EVOQUE, NCD is underway, and you have the NTAP to support adoption?

Thanks, David, for the question. Anything related to TCT, I suggest we wait until next week when we can share extensive information about what we did and our upcoming events on Monday and Wednesday after the presentations. We'll go deep during those sessions. Regarding the NCD for EVOQUE, perhaps you could touch on that, Daveen?

Absolutely. Presently, we are in a national coverage analysis position, and CMS is progressing on their pathway. We expect a draft NCD hopefully by year-end, aiming for a final NCD by the end of Q1. We fully support CMS's efforts to expedite this process for patient access.

Okay. One follow-up regarding the P&L, understanding that we'll get guidance in December. The 27% to 28% operating margin as a starting point implies a flattish year-over-year margin. Is the right conceptual way to think about this, Scott, that the actions you've taken to right-size the company effectively help fund the incremental investments associated with the acquired assets, forming a new base of operating margin from which we can see expansion longer-term? Also, Daveen, could you clarify the relationship between the NCD and NTAP post-Q1 of next year?

Yes, David, you articulated it perfectly. Yes, the 27% to 28% range reflects the impact of the acquisitions and the right-sizing initiatives taken this year. After 2025, we anticipate continued expansion of operating margins. Daveen?

Certainly. The NTAP, which began on October 1, provides incremental payments above the existing DRG for hospitals depending on their cost structures. This is highly center-dependent. The NCD will determine which patients and centers can utilize EVOQUE and get reimbursed, while the NTAP will enhance payments for each patient treated.

Our next question comes from Travis Steed with Bank of America. Please state your question.

I just wanted to clarify the 27% to 28% operating margin. Does that include the JenaValve deal, which hasn't closed, and everything, including the cost savings? It seems like that's about a $240 million to $250 million earnings range. I don't know if there's a floor or comment you would like to make related to the EPS side?

The 27% to 28% range includes three of the four acquisitions; we aren’t providing specifics on the implications of Jena. We're also not getting too specific about earnings per share, as we want to paint a full picture regarding top-line growth at the investor conference in December.

That's fair. Also, the 5% to 7% TAVR growth that you have seen this year— is that how you should conceptualize ongoing steady state, or do you think there are catalysts that could reaccelerate growth going forward? How are you considering the TAVR opportunity for Edwards long-term?

We see positive catalysts for TAVR, and while it's too early to comment on precise growth rates, we are excited to present this at the December conference.

To provide a general comment on profitability, we acted in Q3 to optimize the company. We are looking thoughtfully at cost optimization and resource allocation. We aim to deliver sustainable, healthy, profitable growth over the years.

And our next question comes from Matt Taylor with Jefferies. Please state your question.

I want to ask about the results but want to confirm the timing of impact. If these trials yield positive results next week, how quickly do you think we could see a lift in TAVR and/or TMTT from early TAVR and the tricuspid results?

Matt, thank you for the question. We will be able to discuss this in detail on Monday. It's not easy for us to comment before then because the trial is embargoed and still being analyzed. However, please attend the upcoming session, as Larry will provide insights into TAVR.

And our next question comes from Matt Miksic with Barclays. Please state your question.

Thanks for taking the question. Scott, I'm not sure if I missed it, but I appreciate the color on the operating margin. Can you share anything about gross margin, FX related or otherwise?

For gross margin, we expect that in the fourth quarter, we'll be back to the high end of our original guidance range of 76% to 78%. This range is also a reasonable preliminary modeling assumption for 2025. A lot can shift between now and then, including foreign exchange impacts; however, that's the guidance for now.

Our next question comes from Joanne Wuensch with Citibank. Please state your question.

Thank you for taking the question. Can you quantify the one-time impacts for the fourth quarter for TAVR? It seems like that's causing some confusion as people are considering how that's progressing sequentially. My second question has to do with products. I haven't heard you discuss SAPIEN M3 for mitral replacement in a while. Can you give an update on the timing of that or when we might see anything incremental?

On the first one, the specific impact we know relates to the China distributor adjustment, which is about $5 million. The other items we mentioned are not something we’re ready to quantify right now, but that’s the number we can confirm.

Great, and as a follow-up on M3, we continue to be very excited about SAPIEN M3. This is the first transfemoral sub-30 French mitral valve replacement system, built from SAPIEN, which has been successfully deployed in thousands of mitral positions. For Europe, we anticipate the launch in mid-2025, with a U.S. launch at a later stage. Currently, we are in the one-year follow-up period this year for M3, which requires us to compile data, secure PMA submission, and navigate through standard FDA timelines, whether there's a panel or not. But we are very optimistic about SAPIEN M3. Larry may have additional comments.

I want to confirm, Joanne, that we cannot precisely quantify the hurricane and IV solution issue's impact. We know we faced impacts with cases early in the quarter, but any lingering effects should not be a significant factor; we're looking ahead positively. As Scott mentioned, we anticipate our average daily cases to increase from Q4 to Q3.

Our next question comes from Danielle Antalffy with UBS. Please state your question.

Congrats on a solid quarter, considering everything. Just a quick question about how we should understand the competitive dynamics, especially in the U.S. We're expecting some competitive data next week, and we might see a fourth valve come to market. While you’ve maintained your share, how are you thinking about the future in terms of receptivity to having a third valve? Who's losing share to that third valve? And can you address pricing dynamics? Sorry, that’s a lot.

I appreciate your question, Danielle. We do charge a premium for our platform because we believe S3 UR represents the absolute best-in-class technology and performance. It incorporates everything we value about SAPIEN 3 Ultra while integrating our RESILIA tissue, which we know well from our surgical background. We hold our technology and clinical evidence in deep regard, which supports our best-in-class approach. It's vital to communicate this value to our customers carefully. We understand the competitive landscape but view it positively, given the significant body of evidence we have to support our technology. While competition exists, the structural heart space continues growing, attracting interest from numerous competitors. Our strategy is effective, and we aim to deliver breakthroughs that add value to patients and all stakeholders involved.

Reflecting on the company as a whole, in surgical, we have been pioneering innovation for 65 years, making us the global leader in premium pricing. Our surgical valves are the best in quality, and in TAVR, we maintain the same leadership position. The innovative drive we exhibit with EVOQUE reinforces our leadership in this category. We consistently provide value to the entire healthcare ecosystem. While we respect competition that arises and have faced it for years, we believe in our superior products, technology, and strategy. There is a vast patient population to address across surgical, TAVR, TMTT, and heart failure fields. This fuels our confidence in delivering sustainable, profitable growth in the coming years.

And our next question comes from Patrick Wood with Morgan Stanley. Please state your question.

Beautiful. Thank you. I just had one quick one to follow up on that, which was for TAVR. Can you provide a sense of how growth appears in larger centers relative to smaller ones? With EVOQUE and PASCAL rolling out, how has this impacted your views on capacity? Have you seen different growth rates in smaller programs compared to larger ones?

Absolutely, Patrick. The situation shifts quarterly. Larger academic programs are adopting new therapies, often nearing their capacity limits. Thus, we may observe some impact there. However, generalization is challenging due to our diverse 850 centers in the U.S., each with unique challenges. Fundamentally, larger academic centers, which are early adopters of innovations, feel the capacity constraints more acutely.

And our next question comes from Adam Maeder with Piper Sandler. Please state your question.

I wanted to focus on EVOQUE and the NTAP that went into effect on October 1. I'm interested in any noticeable uptick in adoption in recent weeks. How do you see improved reimbursement influencing this? On a side note, regarding the 56-millimeter valve size, now that it has FDA approval, what patient population does that size serve?

I appreciate the question, Adam. The NTAP provides an important reimbursement boost for EVOQUE adoption. Previously, some centers were taking their time getting through the EVOQUE training phase. Now, we have substantial demand from various centers eager to begin, which aligns with the NTAP timeline but didn't solely rely on it. As for the 56 millimeter valve approval, we estimate it adds roughly 20% to 25% applicability to the patient population. We're excited about having this larger size now available for those in need.

Thank you, and we have run out of time for questions at this point. I will now hand the floor back to Bernard Zovighian for closing remarks. Thank you.

Thank you for your continued interest in Edwards. Scott, Mark, and myself welcome any additional questions by telephone. Thank you, everyone, and see you next week at TCT.

Thank you. And with that, we conclude today's conference. All parties may disconnect. Have a great day. Thank you.