Greetings and welcome to the Edwards Lifesciences Corporation's Fourth Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I will now turn the conference over to our host, Mark Wilterding, Vice President of Investor Relations. Thank you. You may begin.

Thanks, Diego. Good afternoon and thank you for joining us everyone. With me on today's call are Mike Mussallem, Chairman and Chief Executive Officer; and Scott Ullem, Chief Financial Officer. Just after the close of regular trading, Edwards Lifesciences released fourth quarter 2020 financial results.

Thank you, Mark. Before we discuss fourth quarter's results and our expectations for 2021 and beyond, I want to spend a minute reflecting on 2020. Structural heart patients were severely impacted beginning in March, experiencing significant difficulties entering the system, which also had a profound impact on second quarter procedures and even though healthcare systems adapted to the challenge, the resurgence of COVID that began late in the year continues to impact structural heart patients, who need care. Despite unprecedented challenges throughout the year, I'm proud of our team's steadfast dedication to our patient-focused strategy. We continue to invest in developing solutions that extend lives, improve the quality of life and offer greater value for the healthcare system. Along those lines, we celebrated some exciting milestones in 2020 that directly impacted patients. In TAVR, despite headwinds, more than 100,000 patients benefited from treatment with SAPIEN valves worldwide.

Hey, thanks a lot Mike. Today, I'll provide a wrap-up of 2020 including detailed results from the fourth quarter as well as provide an update on guidance for the first quarter and full year of 2021. Despite the wave of COVID that began during the fourth quarter, we are pleased that we were able to achieve our sales guidance ranges across all product lines. Sales in the fourth quarter were flat year-over-year on an underlying basis and adjusted earnings per share grew 2% to $0.50 versus the prior year. GAAP earnings per share was similar at $0.49. For the full year 2020, sales increased 1% on an underlying basis to $4.4 billion, adjusted earnings per share was flat at $1.86 and we generated over $700 million of adjusted free cash flow. During 2020, we achieved cost efficiencies, but we intentionally did not take any actions to significantly impact our employees or reduce investments supporting our long-term strategy. I'll now cover the details of our results and then discuss guidance for 2021. For the fourth quarter, our adjusted gross profit margin was 75.3% compared to 75.8% in the same period last year. This reduction was driven by a negative impact from foreign exchange and incremental costs associated with responding to COVID, partially offset by lower performance-based compensation. We continue to expect our 2021 adjusted gross profit margin to be between 76% and 77%. Our rate should be lifted by an improved product mix, partially offset by a negative impact from foreign exchange. Selling, general and administrative expenses in the fourth quarter were $339 million or 28.4% of sales, compared to $347 million in the prior year. This decrease was primarily driven by reduced spending resulting from COVID and lower performance-based compensation, partially offset by the impact from foreign exchange. We continue…

Thanks, Scott. While a year like 2020 could threaten to cause persistent disruptions, our strategy of patient-focused innovations remains unwavering. As we look to 2021 and beyond, I'm as excited as ever about the work happening at Edwards and more importantly what we envision for the future of patient care. I continue to believe we are poised for success and that our innovation and cultural imperative to put patients first will drive strong organic sales growth and create long-term value.

Thanks a lot, Mike. With that, we're ready to take questions. 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. Diego?

Thank you. At this time, we will be conducting a question-and-answer session. . Our first question comes from Bob Hopkins with Bank of America. Please state your question.

Great and good afternoon. Mike, I was wondering, since we just met in December, if you comment on maybe just two quick things, first question would be just how different is the environment out there right now, the selling environment out there right now versus what you seeing at the time of the Analyst Day, kind of on the margins are things getting a little worse, are they getting a little better, just would love some thoughts on that topic and then I have one quick follow-up.

Yeah. I would say in general, it's been a little worse. It was already trending negative and we anticipated it was going to be a tough winter and it certainly has turned out to be that way, but probably a little worse since that time.

Okay. And then the other thing I'd love to get your quick comments on is just thinking a little bit long-term on the tricuspid opportunity and the reason I ask is that obviously, Abbott has reported some numbers too and their tricuspid business is already annualizing at over $50 million, if you just take the results this quarter and multiply it times four, so it looks like some pretty robust interest in tricuspid repair right off the bat, so would love your thoughts on that market and how quickly you think that could develop and what hurdles might be. Thank you.

Yeah. Thanks, Bob. It's interesting. So the tricuspid market size in terms of number of patients, it's very large, it's certainly as big as the mitral opportunity and we've talked about the fact that that patient group is greatly underserved. So in terms of people actually getting procedures, you're talking about 1%, 2%, 3% very low numbers. So if we can actually develop a great solution for them, it's going to be an important deal. They don't have great answers. And so the burden is going to be on us to develop great solutions and to create evidence that we are actually doing that. We have -- we have a high level of confidence that we can do it, of course mitral is going to be bigger here in the near term. It's got an earlier start, but we think there is a lot of potential in this. The patients themselves are very diverse and that's why we think, when it's all done for tricuspid patients, it's going to require a portfolio.

Thank you. Our next question comes from David Lewis with Morgan Stanley. Please state your question.

Great. Thanks for taking the question. Mike or Scott, I just want to followup here on guidance for a second. So obviously resurgence trends have probably trended more negatively than when you sort of gave earlier guidance in December, so while things are trending more negatively, you're still sort of holding things that are really going to drive even more significant inflection points, if you will, of course, we've got a great team, and a nice reputation and a nice really differentiated products, but the data is going to be the bigger issue and again it's -- it's got much more potential than this in the long run.

Thank you. And that's all the questions we have, I'll turn it back to Mr. Mussallem for closing remarks.

Okay. Well, thanks for all the continued interest in Edwards, and even though COVID is challenging right now, we do see better days ahead and we're very optimistic about the future of Edwards Lifesciences. So Mark, Scott, and I welcome any additional questions by telephone. And with that, back to you, Mark.

I don't think Mark's mic is open now, sir. Thank you. And this concludes today's conference and you can access the replay by dialing 877-660-6853, please use conference ID 13710472. Once again, to access the replay, please dial 877-660-6853 and using conference ID 13710472. Have a good day. Thank you.