J.P. Morgan Healthcare Conference

Transcription

1 J.P. Morgan Healthcare Conference John J. Greisch, President and CEO January 9, 2018

2 This presentation contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of All statements included herein that are not historical facts are forwardlooking statements, including without limitation statements regarding Hill-Rom s ability to drive sustainable profitable growth and shareholder value, the timing and success of new product launches and portfolio expansion, operational execution, the achievement of long-range financial objectives, portfolio transformation through mergers and acquisitions and optimization initiatives, the continuation of stable customer demand trends, a stable U.S. capital environment and stable global macro-environment, the timing and success of the divestiture of non-core assets, our ability to reduce debt, impact from U.S. tax reform legislation, and all other statements concerning future strategy, plans, objectives, projections, expectations and intentions. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Hill-Rom s results could be materially adversely affected. For a more in-depth discussion of factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading Risk Factors in the company's previously filed most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Hill-Rom assumes no obligation to update or revise any forward-looking statements. Certain financial figures presented herein have been presented on an adjusted basis (non-gaap). Reconciliation between non-gaap financial measures and reported U.S. GAAP measures are included in the appendices to this slide deck. Page 2

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4 Leadership $2.7B global medical technology leader with market-leading positions 2017 Revenue by Business US$ Billions Surgical Solutions Front Line Care $2.7B FY 2017 Patient Support Systems Note: Hill-Rom s fiscal year end is September 30 Innovation Advancing global scale and brand equity while enhancing outcomes Increased Investment in R&D US$ Millions 4.6% of revenue $92 4.9% of revenue $ Value Transforming to drive sustainable profitable growth and shareholder value Key Valuation Metrics As of 12/31/2017 $5.5B $7.6B +51% $97M Market Capitalization Enterprise Value LTM Total Shareholder Return Fiscal 2017 Returned to Shareholders* *Includes dividends and share repurchases Page 4

5 Assembled seasoned leadership team Created competitive advantage across continuum with One Hill-Rom vision Executed on key strategic priorities Achieved financial objectives ahead of expectations Accelerating growth across care settings Innovating to enhance outcomes Transforming the portfolio with select M&A and optimization initiatives Driving operational execution and strong financial performance Note: Adjusted gross margin, operating margin and EPS are non-gaap measures. See reconciliation to reported GAAP numbers in the appendix to this presentation Page 5

6 Revenue Earnings Per Share Cash Flow $2.62B ~3% Core* Growth $2.66B $2.74B 11.8% +450 BPS 15.3% 16.3% $ % CAGR $3.38 $3.86 $214M +20% CAGR $281M $311M 2015** **Pro forma revenue includes Welch Allyn Total Shareholder Return +91% Since 2015 Page 6 Note: Adjusted gross margin, operating margin and EPS are non-gaap measures. See reconciliation to reported GAAP numbers in the appendix to this presentation; Axis not to scale; CAGR calculated ; *Core revenue growth calculated 2017 vs and excludes foreign currency, Mortara acquisition and completed divestitures (Völker, Architectural Products and WatchChild)

7 Quarterly Revenue Growth* Quarterly Adjusted 8% 18.6% 19.3% 5% 2% 2% 1% 4% 3% 13.2% 13.9% 15.2% 14.6% 15.0% 16.1% -2% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 ~3% CAGR Core Revenue Growth BPS Expansion Page 7 *2016 pro forma revenue growth includes Welch Allyn in the current and prior-year period; 2017 core revenue growth excludes foreign currency, Mortara acquisition and completed divestitures (Völker, Architectural Products and WatchChild) in the current and prior-year period; Note: Adjusted operating margin is a non-gaap measure. See reconciliation to reported GAAP numbers in the appendix to this presentation

8 Accelerating growth across care settings inside and outside the hospital Advancing our strong brands and geographic footprint to drive sustainable growth and profitability Participating in large, growing markets while meeting evolving customer needs Innovating to enhance outcomes for patients and their caregivers Driving steady cadence of new product introductions Capitalizing on new market potential and achieving $350M+ of new product revenue by 2020 Transforming the portfolio with select M&A and optimization initiatives Strengthening portfolio with M&A that presents attractive financial profile and returns Improving revenue diversification with M&A and portfolio optimization Driving operational execution and strong financial performance through 2020 Achieving core revenue CAGR* of 4% - 5% and expanding adjusted operating margin by 300+ bps Generating adjusted EPS CAGR of 10% - 12% and $1.1B+ of cumulative operating cash flow Enhancing Shareholder Value By Executing Our Strategy Page 8 Note: CAGR calculated ; *Core revenue excludes foreign currency, completed divestitures and exit of non-strategic assets (third-party rental and third-party surfaces); collectively, 2017 divestitures and non-strategic revenue totaled ~$100M

9 I N S I D E H O S P I T A L O U T S I D E H O S P I T A L Emergency Department Room Intensive Care Unit MedSurg Unit Physician's Office Ambulatory Settings Post-Acute Care Home 2017 By Business 2017 By Geography 2017 By Setting Surgical Solutions Front Line Care $2.7B FY 2017 Patient Support Systems U.S. $2.7B FY 2017 Europe Asia-Pac Canada Middle East Latin America Acute $2.7B FY 2017 Non-Acute Diversifying Portfolio Geographically And Across Care Settings Page 9

10 Patient Support Systems Front Line Care Surgical Solutions TS 3000 Surgical Table Next-Gen Surgical Table iled 7 Surgical Light Accella (OUS MedSurg/ICU Bed System) Mobile NurseCall Next-Gen RetinaVue Next-Gen Allen Advance Table LikoGuard Patient Handling Integrated Table Motion Centrella Smart+ Bed (MedSurg Bed System) Patient Handling OH Platform Spot Vision Screener (New Indications) Physical Assessment Revitalization Connex Spot Monitor VisiVest Welch Allyn Home Hypertension Next-Gen Surfaces Connex Vital Spot Monitor With ECG Vital Signs Patch Spot Vision Screener RetinaVue Monarch Vest WatchCare Incontinence Welch Allyn Home Products Next-Gen Respiratory Therapy Outlook Page 10

11 New Product Revenue* Market Potential Of Key Products $350M+ RetinaVue Network Spot Vision Screener Monarch Airway Clearance System $200M+ $200M+ $100M+ ~$150M Welch Allyn Home Hypertension Mobile NurseCall WatchCare Incontinence $50M+ $500M+ $350M+ $250M Outlook Generating $350M+ Revenue With Accretive Gross Profile Note: Market potential based on internal assessment; *New product revenue includes top 25 products launched from Page 11

12 Global Revenue Acquisitions Acquisitions $3.0B+ $1.5B 2010 Acquisitions & Divestitures Base Business 2020 Outlook Enhancing Customer Value Proposition And Financial Profile Note: Axis not to scale Page 12

13 Capital Revenue % of Total Revenue Outlook ~50% <20% <40% ~20% ~30% ~70% 2020 Non-Capital Revenue ~10% MedSurg Frames Acute Care Frames* Capital-Based Revenue Enhancing Visibility With Reduced Reliance On Capital Products Note: Axis not to scale; *Includes all MedSurg and Specialty Frames sold into the acute care setting Page 13

14 Revenue Earnings Per Share Cash Flow +4% - 5% Core CAGR* $3.0B BPS 19% - 20% +10% - 12% CAGR $ $ % - 12% CAGR $1.1B+ $3.86 $806M $2.7B+ 16.3% Outlook Outlook Outlook Cumulative Cumulative Outlook Compelling Strategy To Create Value For Shareholders Page 14 Note: Adjusted gross margin, operating margin and EPS are non-gaap measures. See reconciliation to reported GAAP numbers in the appendix to this presentation; Axis not to scale; CAGR calculated ; *Core revenue excludes foreign currency, completed divestitures and exit of non-strategic assets (third-party rental and third-party surfaces); collectively, 2017 divestitures and non-strategic revenue totaled ~$100M

15 Strong Cash Flow Generation US$ Millions $1.1B+ Cumulative Cash Flow ~$350M Cumulative CapEx ~$800M Cumulative Free Cash Flow $1.1B+ Cumulative Cash Flow Capital Allocation Priorities Reducing debt levels Re-investing in business (R&D and CapEx) Increasing dividends Executing disciplined M&A strategy emphasizing: Accelerated growth with diversified revenue streams and accretive P&L profile Products and services that strengthen clinical and economic value with customers <2.5x Leverage by 2020 Enhancing Financial Flexibility With Strong Cash Flow Generation Note: Leverage calculated as Total Debt divided by EBITDA as defined in Hill-Rom s compliance certificate Page 15

16 Making significant progress on our transformational journey Delivering on our commitments and achieving financial objectives Generating durable and profitable core growth with enhanced margins Capitalizing on new products and advancing our pipeline Building on a solid foundation while expanding into new markets Solidifying investor confidence in growth prospects, strategic plan and returning enhanced value to shareholders Helping People Get Better Care Inside And Outside The Hospital Page 16

17 J.P. Morgan Healthcare Conference John J. Greisch, President and CEO January 9, 2018

18 Appendix Reconciliations of Non-GAAP Disclosures

19 Gross Quarter Ended December 31, 2016 es EPS 1 Gross Quarter Ended December 30, es EPS 1 GAAP Basis 47.5% 8.8% $ 35.3 $ 11.8 $ % 4.4% $ 5.8 $ 1.5 $ 0.07 Adjustments: Acquisition and integration costs - 0.9% % 3.9% Acquisition-related intangible asset amortization - 4.0% % Field corrective actions % 0.2% Special charges - 0.9% % Foreign tax law change (2.2) Gain on disposition - - (1.0) (0.4) (0.01) Adjusted Basis 47.5% 14.6% $ 71.6 $ 21.6 $ % 13.2% $ 64.0 $ 19.6 $ 0.68 Gross Gross Quarter Ended June 30, 2017 es 1 EPS Gross Quarter Ended June 30, 2016 es GAAP Basis 48.0% 5.9% $ 16.1 $ 10.4 $ % 8.9% $ 35.3 $ (9.7) $ 0.68 Adjustments: Acquisition and integration costs 0.3% 0.9% % Acquisition-related intangible asset amortization - 4.1% % Litigation settlements and expenses - 0.2% Special charges - 5.1% % Foreign valuation allowance (0.28) Adjusted Basis 48.3% 16.1% $ 86.5 $ 25.5 $ % 15.2% $ 76.6 $ 22.7 $ 0.81 Gross Quarter Ended March 31, 2017 es Quarter Ended September 30, 2017 es EPS Gross Quarter Ended September 30, es GAAP Basis 49.1% 15.4% $ 90.3 $ 21.2 $ % 13.2% $ 69.1 $ 17.7 $ 0.77 Adjustments: Acquisition and integration costs 0.3% 0.6% % 0.7% Acquisition-related intangible asset amortization - 3.8% % Field corrective actions -0.1% -0.1% (0.5) (0.1) (0.01) Litigation settlements and expenses % (11.9) (4.3) (0.11) Special charges - 1.2% % Foreign valuation allowance (0.01) Debt refinancing Gain on disposition (10.1) (3.7) (0.10) Adjusted Basis 49.3% 19.3% $ $ 30.8 $ % 18.6% $ $ 30.9 $ 1.18 EPS Gross Quarter Ended March 31, 2016 es GAAP Basis 47.8% 9.4% $ 41.3 $ 7.3 $ % 7.9% $ 28.1 $ 6.0 $ 0.33 Adjustments: Acquisition and integration costs 0.1% 1.1% % Acquisition-related intangible asset amortization - 3.9% % Field corrective actions 0.1% 0.1% 0.5 (0.1) % -0.2% (1.0) (0.3) (0.01) Litigation settlements and expenses - 0.1% Special charges - 0.5% % Adjusted Basis 48.0% 15.0% $ 79.6 $ 20.8 $ % 13.9% $ 66.0 $ 19.1 $ 0.71 EPS EPS EPS 1 Page 19 1 Total does not add due to rounding.

20 Gross Year to Date Ended September 30, es EPS Gross Year to Date Ended September 30, 2016 es EPS 1 GAAP Basis 48.1% 10.0% $ $ 50.7 $ % 8.7% $ $ 15.5 $ 1.86 Adjustments: Acquisition and integration costs 0.2% 0.9% % 1.5% Acquisition-related intangible asset amortization - 4.0% % Field corrective actions (0.2) (0.1) - Litigation settlements and expenses % (9.4) (3.4) (0.09) Special charges - 1.9% % Foreign tax law change (2.2) 0.03 Foreign valuation allowance (0.29) Debt refinancing Gain on disposition - - (1.0) (0.4) (0.01) - - (10.1) (3.7) (0.10) Adjusted Basis 48.3% 16.3% $ $ 98.7 $ % 15.3% $ $ 92.3 $ 3.38 Gross Year Ended September 30, es EPS 1 Gross Year Ended September 30, es EPS GAAP Basis 47.3% 8.7% $ $ 15.5 $ % 4.2% $ 65.1 $ 18.3 $ 0.82 Adjustments: Acquisition and integration costs 0.8% 1.5% % 3.2% Acquisition-related intangible asset amortization - 3.6% % FDA remediation expenses % Field corrective actions (0.1) - 0.2% 0.2% Litigation settlements and expenses (0.6) (0.2) (0.01) Special charges - 1.5% % Supplemental stock compensation charge % Foreign valuation allowance (0.29) (0.03) Debt refinancing Gain on disposition - - (10.1) (3.7) (0.10) Adjusted Basis 48.1% 15.3% $ $ 92.3 $ % 11.8% $ $ 63.3 $ Total does not add due to rounding. Page 20