Bernstein s 34 th Annual Strategic Decisions Conference

Transcription

1 Bernstein s 34 th Annual Strategic Decisions Conference Mike Mahoney Chairman and Chief Executive Officer

2 Safe Harbor for Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words like anticipate, expect, project, believe, plan, estimate, intend and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could differ materially from the expectations and projections expressed or implied by our forward-looking statements. Factors that may cause such differences can be found in our most recent Form 10-K and Forms 10-Q filed or to be filed with the Securities and Exchange Commission under the headings Risk Factors and Safe Harbor for Forward-Looking Statements. Accordingly, you are cautioned not to place undue reliance on any of our forward-looking statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements to reflect any change in our expectations or in events, conditions, or circumstances on which they may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. Non-GAAP Measures: This document contains non-gaap measures (denoted with *) in talking about our company s performance. The reconciliations of those non-gaap measures to their most comparable GAAP measures are contained within this document including appendices attached to the end of this presentation. Financial Disclaimers: Operational growth rates are non-gaap measures that exclude the impact of foreign currency fluctuations. Organic growth rates are non- GAAP measures that exclude the impact of changes in foreign currency exchange rates and the sales from significant acquisitions (Symetis SA, the American Medical Systems male urology portfolio and EndoChoice Holdings, Inc.) in the relevant periods. We define Emerging Markets as including certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Currently, we have 20 countries in our definition of Emerging Markets. Market Estimates: Unless noted otherwise, all references to market sizes, market share positions, and market growth rates are BSX internal estimates. 2

3 Regulatory Disclaimers Product Implantable Cardiac Monitor EMPOWER Leadless Pacer Apama RF Balloon Catheter DrectSense Technology Ranger Drug-Coated Balloon Drug Eluting Stent Below-the-knee indication Eluvia Drug eluting self-expanding SFA stent Lotus Edge ACURATE Self Expanding Valve Platform WATCHMAN FLX Regulatory Disclaimer Device under development. Not available for use or sale worldwide. Device under development. Not available for use or sale worldwide. Device under development. Not available for use or sale worldwide. Device under development. Not available for use or sale worldwide. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. Device under development. Not available for use or sale worldwide. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. CE Marked. U.S.: Caution: Investigational Device. Limited by Federal (or U.S.) law to investigational use only. Not available for sale. Pending CE Mark. Not available for use or sale in the U.S. 3

4 Our Mission and Values Boston Scientific is dedicated to transforming lives through innovative medical solutions that improve the health of patients around the world. Caring Meaningful Innovation High Performance Global Collaboration Diversity Winning Spirit 4

5 What to expect from BSX 1. Living BSX values Transforming patients lives through meaningful innovation and a WINNING SPIRIT 2. Driving category leadership and expanding globally Gaining share globally: Portfolio innovation & compelling economic value drivers Emerging markets: Building scale & new capabilities to increase patient access 3. Enhancing long term outlook: entering into multiple large & high growth markets Diversifying into large high-growth markets with differentiated portfolio & capabilities Multiple launches into $16B of new market opportunities 4. Consistently delivering revenue and EPS growth in top tier of peer group : 3 year avg. organic revenue* growth +7% and EPS CAGR +14.5% 2018E-2020E: 3 year organic revenue* CAGR +5-8% and EPS CAGR +DD 5. Building shareholder value with disciplined capital allocation strategy: more to come Strong free cash flow* generation: estimated $6.3B+ cumulative in years Rigorous and balanced approach to M&A 5

6 Boston Scientific At-A-Glance 2017 Revenue and Operational Growth*: (Total company: $9.0B, 8%; Organic Growth* 7%) Interventional Cardiology $2.4B, +6% Endoscopy $1.6B, +12% Structural Heart $275M+ Urology & Pelvic Health $1.1B, +12% Peripheral Interventions $1.1B, +7% Neuromodulation $0.6B, +14% CRM Rhythm Management Electrophysiology 6 $1.9B, +2% $0.3B, +14%

7 High Performance Culture and Track Record Revenue Reported Revenue, Y/Y Operational* growth Adjusted Operating Margin* Adjusted EPS* Y/Y Organic* growth rates 25.0% $1.26 $7.1 +2% $7.4 +6% +4% $7.5 +8% +5% $ % +10% $9.0 +8% +7% 18.9% 20.2% 22.3% 24.1% $ % $ % $ % $ % +13% Sales growth consistently > mkt w/ avg. 7% organic* growth 15-17E Delivering on margin expansion goals Consistent double digit adj. EPS* growth: 14.5% CAGR

8 Diversified and Durable Growth Profile Estimated Market Growth Rates High Growth Mkt (10%+ CAGR): SCS, TAVR, LAAC, EP, DBS, PI Drug Eluting, ICM Moderate Growth Mkt (4-9% CAGR): Endo, UroPH, PI (ex DES & DCB), Int. Oncology, IC (ex. SH, DES) Low Growth Mkt (0-3% CAGR): Pacers, Defibrillators, DES 2012 Revenue Mix $7.2B 2017 Revenue Mix $9.0B 2020E Revenue Mix High Growth 7% Low Growth 46% High Growth 15% Low Growth 35% High Growth 25% Low Growth 25% Moderate Growth 47% Moderate Growth 50% Moderate Growth 50% 8

9 Strong Product Pipeline Supports Long Range Plan Growth Targets All launches are WW, unless otherwise noted 2018E Coronary Therapies 5 launches in Complex PCI Structural Heart ACURATE TM Aortic Valve System OUS Expansion ACURATE neo2 TM Aortic Valve System EU PI 3 launches in Arterial and Venous portfolio CRM/EP Resonate TM CRT-D w/ HeartLogic TM HF Alert Rhythmia HDx TM Mapping System w/ LUMIPOINT TM DirectSense TM Rx Catheter EU/U.S. Neuromodulation Spectra WaveWriter TM SCS System Vercise TM DBS system U.S. Endoscopy New launches in Infection Prevention (valves, kits) SpyGlass TM DS II Visualization System & cholangioscopy tools Orise TM Endoluminal Surgery portfolio Axios TM Transluminal Stent OUS expansion Urology/Pelvic Health 4 launches in Stone 2019E Coronary Therapies Synergy TM DES line extensions Multiple launches in Complex PCI Structural Heart WATCHMAN FLX TM LAAC Device EU WATCHMAN TM LAAC Device Japan ACURATE TM Valve System Int l expansion LOTUS Edge TM Valve System** U.S. & EU Peripheral Interventions Eluvia TM SFA DES - U.S. Interventional Oncology Embolic Coils CRM/EP ICM Monitoring & Dx Force Sensing Catheter EU Apama RF PVI Balloon EU Neuromodulation Expanded DBS platform Endo SpyGlass TM Visualization System - next gen New launches in Infection Prevention New launches in Biliary Urology/Pelvic Health LithoVue TM Ureteroscope next gen 5 additional launches in Stone 2020E / 2021E Coronary Therapies Synergy TM DES line extensions Structural Heart WATCHMAN FLX TM LAAC Device U.S. ACURATE neo2 TM Valve System U.S./Japan ACURATE TM Valve System size matrix expansion LOTUS Edge TM Valve** size matrix expansion Peripheral Interventions Ranger TM SFA DCB U.S. SAVAL TM Drug Eluting Stent BTK CRM/EP Leadless Pacing/modular CRM EU Force Sensing Catheter U.S. Neuromodulation SCS & DBS next gen U.S./EU Endo EUS portfolio & indication expansion U.S./EU Pulmonary diagnostics Axios TM stent expanded Indications U.S. Urology/Pelvic Health Multiple launches in Stone Multiple launches in Men s Health Next gen Greenlight fiber for BPH 9 **Intend to launch Lotus in the U.S. & EU in 2019 pending final testing & regulatory approvals

10 Track Record of Driving Operating Margin Expansion AND Significant Future Opportunity Compelling opportunity beyond 2020 for 30%+ adjusted OM* 24.1% 25.0% ~+300 bps 28% 30+% 22.3% SG&A productivity 18.9% 20.2% Accretive new products Launches & commercial scale of key products R&D efficiencies 5-10% annual standard cost improvements E Longer Term Goal

11 Strong Cash Flow Generation Outlook AND Limited Reserved Contingencies E Improved Ability to Deploy Cumulative Free Cash Flow* Strong Free Cash Flow*: E : ~$4.7B 2018E-2020E: ~$6.3B ~$2.3B 20% 10% ~$1.9B ~$2.1B 80% 90% 10% $1.6B $1.7B M&A or Returning Cash to Shareholders Reserved Contingencies** E 2019E 2020E 11 ** Based on adjusted free cash flow. Refer to non-gaap reconciliations

12 Disciplined & Balanced Approach to M&A Pipeline LumenR Tuck-in M&A Peripheral Vasc. Securus Medical Group Venture Portfolio Portfolio of 30+ Companies in Selected Spaces: Mitral repair / replace HF Diagnostic / Therapeutic Venous Electrophysiology Overactive bladder Micro stimulation Benign Prostatic Hyperplasia (BPH) Autonomic Modulation Therapy (AMT) 12

13 Finalization of IRS Stipulation of Settled Issues Tax court dispute concluded for tax years Net payments expected to be approx. $600M Includes interest Payments are expected to be made within 3 months One-time, non-cash adj. tax benefit of $70-80M to be recorded in Q2 Will look to reinvest this benefit in Q3 and Q4 On a GAAP basis, the onetime, non-cash benefit is $ M Non-GAAP benefit is based on how reserves were originally booked No impact to our 2018 estimated annual adjusted ETR Given timing, may see variability in quarterly tax rates No change to our 2018 full-year adjusted EPS guidance Exploring ways to reinvest this one-time non-gaap benefit into our LT tax structure Goal is to reduce our annual adjusted ETR in below the 15% rate previously disclosed Expect to resolve tax years before YE 2018 on the same basis 13

14 Recent Awards and Recognitions Reflect Winning Spirit Culture that Drives Results Recognized for progressive life/work policies and programs Ranked #35 based on employee ratings Ranked #3 on U.S. Large Company list Ranked #16 in the U.S. Scored 100% for the 4th consecutive year Scored 100% for the 2nd year in a row Ranked 6th in industry category Highest recognition for Guard/Reserve employee support 14

15 Appendix A Non-GAAP Reconciliations 15

16 Use of Non-GAAP Measures 16

17 17 Appendix A: Non-GAAP Reconciliations

18 Appendix A: Non-GAAP Reconciliations Adjusted Free Cash Flow (in millions) Cumulative ꝉ ꝉ 2015 ꝉ Operating Cash Flow, as reported $ 3,299 $ 1,426 $ 1,182 $ 691 Plus: Proceeds on disposals of property, plant and equipment Less: Purchases of property, plant and equipment Free Cash Flow 2,386 1, Plus: Restructuring Payments Plus: Earnouts Plus: Special Tax Refunds/Credits (387) (239) (74) (74) Plus: Legal Settlements 2, Plus: Other Adjusted Free Cash Flow $ 4,717 $ 1,729 $ 1,622 $ 1,366 ꝉ - Certain prior year balances within our Consolidated Statement of Cash Flow have been updated to reflect the adoption of ASC Update and ASC Update Please refer to our annual report on Form 10-K for the period ended December 31, 2017 for additional details. Adjusted Free Cash Flow (in billions) Cumulative 2018E-2020E ꝉ 2020E ꝉ 2019E ꝉ 2018E ꝉ Operating Cash Flow, estimated GAAP $ - $ - $ - $ - Plus: Proceeds on disposals of property, plant and equipment Less: Purchases of property, plant and equipment Free Cash Flow Plus: Special Adjustments Adjusted Free Cash Flow $ 6.3 $ 2.3 $ 2.1 $ 1.9 ꝉ - Components of the reconciliation of operating cash flow, as reported, are not currently available. 18

19 Appendix A: Non-GAAP Reconciliations FY2017 Net Sales Growth as compared to FY2016 As Reported Less: Impact of Foreign Currency Operational* Less: Impact of Significant Acquisitions Organic* Interventional Cardiology 6.2% 0.1% 6.1% Peripheral Interventions 6.5% -0.1% 6.6% Cardiovascular 6.3% 0.0% 6.3% Cardiac Rhythm Management 2.5% 0.2% 2.3% Electrophysiology 14.5% 0.1% 14.4% Rhythm Management 3.9% 0.2% 3.7% Endoscopy 12.4% 0.1% 12.3% Urology & Pelvic Health 11.8% 0.2% 11.6% Neuromodulation 14.2% 0.1% 14.1% MedSurg 12.5% 0.1% 12.4% Total Company 7.9% 0.1% 7.8% 1.2% 6.6% 19

20 Appendix A: Forward-Looking Non-GAAP Financial Measures The following is an explanation of the adjustments that management excluded from GAAP measures to calculate the following forward-looking non-gaap financial measures: Adjusted Gross Margin: Excludes from GAAP gross margin the impacts of forecasted acquisitionand divestiture- and restructuring-related charges or credits. Adjusted SG&A: Excludes from GAAP SG&A the impacts of forecasted acquisition- and divestitureand restructuring-related charges or credits. Adjusted R&D: Excludes from GAAP R&D the impacts of forecasted acquisition- and divestitureand restructuring-related charges or credits. Adjusted Operating Margin: Excludes from GAAP operating margin the impacts of forecasted acquisition- and divestiture- and restructuring- and restructuring-related charges or credits, and amortization expense. Adjusted Tax Rate: Excludes from GAAP tax rate the tax impacts related to forecasted acquisitionand divestiture- and restructuring- and restructuring-related charges or credits, and amortization expense. Adjusted Free Cash Flow: Adjusts GAAP operating cash flow to include the impacts of forecasted capital expenditures and excludes the impact of estimated after-tax acquisition- and divestiture-, restructuring- and litigation-payments. Please refer to our Safe Harbor for forward-looking statements disclosure in conjunction with any forward looking information presented within. 20