hill-rom...q4 2016 fy2016 $1.18 latest guidance(2) original guidance(1) latest guidance(2) $1.12 -...

Hill-RomFourth Quarter 2016 Financial Results

November 3, 2016

© 2014 Hill-Rom Services, Inc. ALL RIGHTS RESERVED

Certain statements in this presentation contain forward-looking statements, within the meaning of

the Private Securities Litigation Reform Act of 1995, regarding the Company’s future plans,

objectives, beliefs, expectations, representations and projections. It is important to note that

forward-looking statements are not guarantees of future performance, and the Company’s actual

results could differ materially from those set forth in any forward-looking statements. 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. The Company 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).

Reconciliations between non-GAAP financial measures and reported US GAAP measures are

included in the appendices to this slide deck.

Forward Looking Statements


Table of Contents

2016 Highlights


Hill-Rom: Trusted Medical Technology Innovator

North America PSS

Int'l PSS

Surgical Solutions Front Line

Care

$2.7B+3% cc*

InnovationLeveraging global scale &brand equity whileenhancing outcomes

Leadership$2.7B global medical technology leader with market-leading positions

ValueTransforming to drive sustainable profitable growth

2016 Revenue By BusinessUS$ Billions

2016 Revenue By GeographyUS$ Billions

Europe

Asia-Pac

Canada

Middle East

Latin America

$2.7B+3% cc*

PSS = Patient Support Systems

*Pro-forma growth including Welch Allyn in both 2015 and 2016

U.S.


2016 Highlights: A Successful Year

Executing on our strategic priorities while …

• Building sustainable and profitable businesses with attractive growth prospects

• Successfully integrating Welch Allyn and driving expected synergies

• Investing in R&D capabilities resulting in multiple new product launches

• Optimizing global footprint; announcing five facility closures and in-sourcing key supply

• Enhancing product portfolio by divesting non-core products and businesses

… Enhancing shareholder value with disciplined financial management

• +3% pro-forma constant currency revenue growth

• +350 bps adjusted operating margin expansion

• +28% adjusted EPS growth and adjusted EPS of $3.38 per diluted share

• Operating Cash Flow of $281 million (+32% increase over prior year)

Establishing a solid foundation for driving future growth and value


Exceeding Guidance With Disciplined Financial Management

Pro Forma Revenue Growth% Growth at Constant Currency

Establishing a solid foundation for driving future growth and value

Adjusted EPS$ per Diluted Share

3%

FY2016Q4 2016

1%

Latest Guidance(2)

Original Guidance(1)

Latest Guidance(2)

FlatLow-to-mid single digits

2% - 3%

$3.38

FY2016Q4 2016

$1.18

Latest Guidance(2)

Original Guidance(1)

Latest Guidance(2)

$1.12 - $1.14 $3.08 - $3.14 $3.32 - $3.34

(1) Original guidance provided on Q4 2015 earnings call on November 5, 2015(2) Latest guidance provided on Q3 2016 earnings call on August 4, 2016


Momentum of

Key Product

Launches

350 bps2016 Operating Margin

Expansion

+3%2016 Pro Forma Revenue Growth

(constant currency)

Strong Execution Validates Company’s Commitment To Enhancing Shareholder Value

FY 2016

Patient Support Systems

FY 2016

SurgicalSolutions

FY 2016

Front Line Care

FY 2016

Gross Margin

ConnexSpot Monitor

Integrated Table Motion

RetinaVueTM

NetworkSpot

Vision Screener

FY 2016

North America International

Note: All revenue growth rates are constant currency

* On a pro forma basis

Driving SG&A

Leverage

Increased R&D

Investment


Significant revenue diversification over the past five years

• Specialty Frames & Surfaces: High acuity hospital beds

• MedSurg Frames & Surfaces: Lower acuity hospital beds

• Service & Rental: Acute care capital rentals on-demand, recurring maintenance and support services

• Clinical Workflow Solutions & Patient Handling: Connectivity solutions and patient lift products

• Other PSS: Includes both complementary acute care capital offerings and other non-core assets

PSS

SSFL

C

2016 Revenue By Product LineUS$ Billions

Product Portfolio Overview

• Vital Signs Monitoring & Physical Assessment

• Blood Pressure Monitoring & Thermometry

• Respiratory Care

• Operating Room Equipment: Tables, lights, booms

• Patient Positioning: Surgical site access equipment

• Surgical Consumables: Blades, scalpels, accessories

MedSurg Frames & SurfacesSpecialty

Frames & Surfaces

Service & Rental

CWS & Patient Handling

Other PSS

Surgical Solutions

Front Line Care

$2.7B+3% cc*

Stronger, More Diversified Business Profile…

*Pro-forma constant currency growth including Welch Allyn in both 2015 and 2016


… with More Predictable Revenue Streams

Capital Sales

Non-Capital

2016 Revenue By TypeUS$ Billions

$2.7B+3% cc*

• Specialty Frames & Surfaces: High acuity hospital beds

• MedSurg Frames & Surfaces: Lower acuity hospital beds

• Operating Room Equipment: Tables, lights, boomsCap

ital

Product Portfolio Overview

• Service & Rental: Acute care capital rentals on-demand, recurring maintenance and support services

• Clinical Workflow Solutions & Patient Handling: Connectivity solutions and patient lift products

• Other PSS: Complementary acute care capital offerings

• Vital Signs Monitoring & Physical Assessment

• Blood Pressure Monitoring & Thermometry

• Respiratory Care

• Patient Positioning: Surgical site access equipment

• Surgical Consumables: Blades, scalpels, accessories

No

n-

Cap

ital

Over 60% of revenues are not dependent on hospital capital expenditure spending

*Pro-forma constant currency growth including Welch Allyn in both 2015 and 2016


Well-Positioned to Deliver on Long-Range Financial Objectives

1 Includes Welch Allyn financial results since September 8, 2015 transaction completion, including interest associated with new borrowings, but excludes one-time costs associated with the transaction and the impact of a non-cash stock compensation charge. Operating cash flow includes one time Welch Allyn related transaction costs of $21M.

2 2016 operating Cash Flow includes $30M funding to U.S. pension plan and $4M incurred to refinance credit facility. Adjusting for these outflows, Operating Cash Flow was $315M

3 Revenue CAGR relative to full-year 2015 pro-forma revenue of ~$2.6B. All other metrics are relative to 2015 results, which includes contribution from Welch Allyn only during the period since the transaction completion.

4 Assumes no capital deployment for M&A transactions.

Key Metric20151

Results2016

Results2015-20183

Long-Range Plan

Revenue $2B $2.7B CAGR 3% - 5%

Adjusted GM% 45.3% 48.1% +350-450 bps

Adj. Operating Margin %

11.8% 15.3% +450-550 bps

Adjusted EPS $2.64 $3.38 Mid-to-high teens CAGR

Operating Cash Flow

$214M $281M2 $1B+ cumulative (FY 16-18)

Leverage 4.5x 3.9x Below 3.0x4

Enhancing shareholder value through sustainable growth


Hill-Rom: A Compelling Investment Opportunity

We are successfully transforming to drive sustainable profitable growth

We are expanding our leading market positions through our innovative solutions, leveraging our brand equity

We are driving solid operational execution and significant operating margin expansion

1

2

3

Financial Summary


Building Sustainable & Profitable Businesses

Stable U.S. capital environment

Driving growth in higher-margin products (CWS, Patient Handling, ICU)

Orders +5% and Backlog +11% in Q4 2016

10%+ Asia-Pacific growth curbs declines in Middle East and Latin America

Strong growth in core markets (US, Europe, Asia-Pacific)

Accelerating Integrated Table Motion revenue

Investing in innovation to drive future growth

Macro environment impacting Middle East and Latin America

Successfully integrating Welch Allyn

Leveraging HRC brand and customer relationships

New products driving growth in Vital Signs and Physical Assessment

Diagnostic screening launches (RetinaVue, Spot Vision Screener)


Q4 2016 FY 2016

Surgical Solutions

Q4 2016 FY 2016

Front Line Care*

Q4 2016 FY 2016Q4 2016 FY 2016

North America International

Note: All revenue growth rates are constant currency* Represents pro forma (adjusted for Welch Allyn transaction closed 9/8/2015) constant currency growth


Delivering Strong Financial Performance

Actual Results FY2016 Guidance

Q4 2016 FY 2016 Original1 Latest2

Revenue $706M $2.7B $2.66-$2.70B $2.65B

Revenue Growth (pro forma cc)

1% 3%Low-to-midsingle digit

2%-3%

Adj. Gross Margin 49.2% 48.1% 47%-48% 48%

Adj. Operating Margin 18.6% 15.3% n/a 15%+

Adj. Tax Rate 28.2% 29.2% 30%-31% 30%

Adj. EPS per Diluted Share $1.18 $3.38 $3.08-$3.14 $3.32-$3.34

Operating Cash Flow $76M $281M3 $300M $320M

Executing strategic priorities to create shareholder value

(1) Original guidance provided on Q4 2015 earnings call on November 5, 2015(2) Latest guidance provided on Q3 2016 earnings call on August 4, 2016(3) Includes $30M pension funding and $4M debt refinancing cost.

Excluding one-time cash flow impact, Operating Cash Flow would have been $315M


Adjusted Gross Margin and Operating Margin

Growth and cost discipline leading to significant operating leverage

11.8%15.3%

FY2015Actual

GMExpansion

SG&ALeverage

R&DInvestment

FY2016Actual

45.3%

48.1%

FY2015Actual

Welch Allyn OrganicExpansion

FY2016Actual

Adjusted Gross Margin Adjusted Operating Margin

280 bpsFY2016 Gross Margin Expansion

350 bpsFY2016 Operating Margin Expansion

+170 bps

+110 bps+280 bps

+110 bps

-40 bps


Adjusted Earnings per Share

Q4 2016 Adjusted EPS

• Driving diversified revenue growth

• Expanding gross margin with improved mix (business, product, and geographic)

• Creating operating leverage with disciplined cost management while investing in R&D

• Exceeding guidance of $1.12 - $1.14 per diluted share

Consistent track record of double-digit earnings growth

$1.18Q4 2016 Adjusted EPS

FY 2016 Adjusted EPSUS$

$2.25$2.64

$3.38

$0.00

$1.00

$2.00

$3.00

$4.00

FY2014Actual

FY2015Actual

FY2016Actual

+28% growth

+17% growth


Cash Flow and Capital Allocation Priorities

Capital Allocation Priorities

• Reducing debt levels

• Maintaining current dividend policy

• Re-investing in business (R&D and CapEx)

• 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

Enhancing financial flexibility with strong cash flow generation

FY 2016 Operating Cash FlowUS$ Millions

$210 $214

$281

$100

$150

$200

$250

$300

FY2014Actual

FY2015Actual

FY2016Actual

<3.0xTarget Leverage by 2018


Unparalleled care setting expertise enables enhanced market leadership

Investing in innovation to enhance outcomes for patients and caregivers

Leveraging brand equity, customer relationships and channels to accelerate innovative solutions

Proven track record of operational execution with top-tier management team

Strengthening portfolio through M&A and business development initiatives

Committed to achieving long-term financial objectives with disciplined financial management

Executing on Strategic Priorities

Serve as a trusted partner for healthcare providers

Deliver innovative

solutions for patient care

Leverage world-class sales and

marketing capabilities

Drive operational excellence

Continue transforming

through acquisitions

Customers Capabilities

Business Review



• Leveraging relationships and broad, differentiated portfolio across installed base

• Placing commercial focus on higher growth and margin opportunities (CWS, patient handling, ICU, Service)

• Diversifying revenue while creating operational flexibility to address capital volatility

• Innovating to provide caregivers predictive insights that result in lower costs and efficiencies

Growth Drivers

Diversified portfolio drives stable long-term growth and reduces volatility

MedSurg Frames & Surfaces

Specialty Frames & Surfaces

Rental &

Service CWS & Patient Handling

Other PSS$1.4B+2% cc

US$M2015

Revenue2016

RevenueReported Growth

CC Growth

US $959 $1,037 +8% +8%

OUS $468 $400 (15%) (11%)

Total $1,427 $1,437 +1% +2%

Frames & Surfaces Clinical Workflow Solutions Patient Handling


Front Line Care

• Providing solutions that improve clinical outcomes and patient safety

• Leveraging HRC global reach, brand and commercial capabilities

• Combining Welch Allyn technological leadership to further advance sensing and connectivity solutions

• Expanding portfolio leadership in ambulatory care with new diagnostic screening products (RetinaVue, Spot Vision Screener)

Growth Drivers

Significant opportunity to drive commercial value and innovation

Respiratory

Thermometry & Blood Pressure

Physical Assessment

Vital Signs

Other$810M+6% PF cc

US$MPF 2015Revenue

2016Revenue

Reported Growth

PF CC Growth

US $543 $585 +8% +8%

OUS $231 $225 (3%) +2%

Total $774 $810 +5% +6%

Physical Assessment Vital Signs Respiratory Care

Note: Revenue and growth reflects full-year Welch Allyn results in each period


Surgical Solutions

• Optimizing position with key customers while leveraging commercial presence in targeted geographic markets

• Capitalizing on comprehensive service infrastructure to support critical surgical equipment

• Focusing on patient safety and efficiency in the OR and peri-operative environment

• Expanding portfolio for minimally invasive surgical access with launch of Integrated Table Motion

Growth Drivers

Accelerating long-term growth of strong, innovative portfolio across global footprint

OR Tables & Lights

OR Booms, Pendants &

Other

Other OR Consumables

Patient Positioning

Blades & Scalpels

$408M(1%) cc

US$M2015

Revenue2016

RevenueReported Growth

CC Growth

US $197 $207 +5% +5%

OUS $226 $201 (11%) (7%)

Total $423 $408 (3%) (1%)

Operating Tables Operating Lights Consumables

2017 Financial Outlook


2017 Financial Guidance

10% - 13% Growth in

Adjusted EPS

16%+Operating Margin

~3%Revenue Growth

(constant currency)

FY 2017 Guidance

Revenue Growth (constant currency)

~3%

Gross Margin 50 - 75 bps expansion

Operating Margin ~100 bps expansion

Tax Rate ~30%

Adj. Earnings per Diluted Share $3.74 - $3.82

Operating Cash Flow $330M - $340M

Capital Expenditures $120M - $130M


2017 Financial Guidance (Revenue by Business)

Assuming stability in U.S. capital environment

Driving growth of higher margin platforms

Divesting non-core assets with lower growth and margin profile

Flat to declininginternational revenue

Assuming modest growth in surgical procedures

Accelerating revenue of Integrated Table Motion

Launching new products in patient positioning

Driving OUS growth following recent commercial realignment

Leveraging Hill-Rom global commercial platform

Continuing momentum in U.S. Vital Signs portfolio

Driving adoption of new diagnostic screening portfolio

Expanding recurring revenue streams in Respiratory Care


FY 2017(constant currency growth)

Surgical Solutions


Front Line Care


Note: All revenue growth rates are constant currency


Q1 2017 Financial Guidance

Q1 2017 Guidance

Revenue Growth(constant currency)

ApproximatelyFlat

Diluted EPS $0.75 to $0.77

Q1 2017 Guidance Reflects…

• Solid underlying market fundamentals and operational leverage

• Year-over-year revenue comparison impacted by:

- Large PSS customer order in 2016

- December quarter in 2016 was Welch Allyn’s fiscal year end

• EPS growth of 10% to 13% in line with full-year guidance

Revenue Reclassification

2015 and 2016 by New Reporting Segment


Reported Revenue - Reconciliation of Segments

Note: Segment revenue by U.S. and International for Fiscal Year Ended 9/30/2015 and 9/30/2016 in US$ million

United States International Total United States International Total United States International Total United States International Total

Patient Support Systems 241$ 100$ 342$ 219$ 119$ 338$ 10% -16% 1% 10% -7% 4%

Front Line Care 155 65 220 21 1 22 N/M N/M N/M N/M N/M N/M

Surgical Solutions 47 53 99 45 60 105 5% -13% -5% 5% -3% 0%

Total Hill-Rom 443$ 218$ 661$ 284$ 181$ 465$ 56% 21% 42% 56% 34% 47%




Surgical Solutions 48 48 95 44 55 99 8% -14% -4% 8% -12% -3%

Total Hill-Rom 438$ 194$ 633$ 297$ 178$ 475$ 48% 9% 33% 48% 13% 35%




Surgical Solutions 53 49 102 47 52 99 13% -6% 3% 13% -6% 3%

Total Hill-Rom 451$ 204$ 655$ 308$ 167$ 475$ 47% 23% 38% 47% 24% 39%




Surgical Solutions 60 53 112 61 59 120 -2% -10% -6% -2% -8% -5%

Total Hill-Rom 497$ 209$ 706$ 384$ 190$ 574$ 29% 10% 23% 29% 12% 24%


Patient Support Systems 1,037$ 400$ 1,437$ 959$ 468$ 1,427$ 8% -15% 1% 8% -11% 2%



Total Hill-Rom 1,829$ 826$ 2,655$ 1,273$ 715$ 1,988$ 44% 15% 34% 44% 20% 35%

Q2 2016 Q2 2015 % Growth @ Actual Rates % Growth @ Constant Rates


YTD 2016 YTD 2015 % Growth @ Actual Rates % Growth @ Constant Rates




Pro Forma Revenue* - Reconciliation of Segments

Note: Segment revenue by U.S. and International for Fiscal Year Ended 9/30/2015 and 9/30/2016 in US$ million* Pro Forma includes Welch Allyn in both periods



Front Line Care Pro Forma 155 65 220 140 69 208 11% -5% 6% 11% 4% 9%

Surgical Solutions 47 53 99 45 60 105 5% -13% -5% 5% -3% 0%

Total Hill-Rom 443$ 218$ 661$ 403$ 248$ 651$ 10% -12% 2% 10% -3% 5%





Total Hill-Rom 438$ 194$ 633$ 397$ 232$ 628$ 10% -16% 1% 11% -13% 2%



Front Line Care Pro Forma 139 54 193 141 50 190 -1% 8% 1% -1% 10% 2%

Surgical Solutions 53 49 102 47 52 99 13% -6% 3% 13% -6% 3%

Total Hill-Rom 451$ 204$ 655$ 427$ 216$ 643$ 6% -5% 2% 6% -4% 2%



Front Line Care Pro Forma 158 53 212 142 57 200 11% -7% 6% 11% -7% 6%

Surgical Solutions 60 53 112 61 59 120 -2% -10% -6% -2% -8% -5%

Total Hill-Rom 497$ 209$ 706$ 472$ 229$ 701$ 5% -9% 1% 5% -8% 1%


Patient Support Systems 1,037$ 400$ 1,437$ 959$ 468$ 1,427$ 8% -14% 1% 8% -11% 2%



Total Hill-Rom 1,829$ 826$ 2,655$ 1,699$ 924$ 2,623$ 8% -11% 1% 8% -7% 3%



YTD 2016 YTD 2015 % Growth @ Actual Rates % Growth @ Constant Rates



Appendix

Reconciliation of Non-GAAP Disclosures


Reconciliation: Constant Currency Revenue (by Segment)

2016 Foreign Exchange 2016 2015 Constant Currency

As Reported Impact Adjusted As Reported Change

North America Patient Support Systems $290.4 $0.1 $290.3 $277.5 5%

International Patient Support Systems 91.9 (1.1) 93.0 104.4 -11%

Front Line Care 211.5 (0.3) 211.8 72.4 N/M

Surgical Solutions 112.2 (1.3) 113.5 119.6 -5%

Total $706.0 ($2.6) $708.6 $573.9 24%

2016 Foreign Exchange 2016 2015 Constant Currency

As Reported Impact Adjusted As Reported Change

North America Patient Support Systems $1,076.9 ($2.7) $1,079.6 $1,002.0 8%

International Patient Support Systems 360.3 (13.0) 373.3 424.6 -12%

Front Line Care 809.7 (10.4) 820.1 139.0 N/M

Surgical Solutions 408.3 (8.4) 416.7 422.6 -1%

Total $2,655.2 ($34.5) $2,689.7 $1,988.2 35%

N/M - Not Meaningful

Quarter Ended September 30

Year Ended September 30


Reconciliation: Operating Expenses

2016 2015 2016 2015

Selling and Administrative Expenses (As Reported) $212.8 $208.7 $853.3 $664.2

Acquisition and integration costs (4.7) (31.9) (18.9) (46.6)

Acquisition-related intangible asset amortization (23.8) (10.7) (95.9) (34.1)

Supplemental stock compensation charge - (6.1) - (6.1)

Litigation settlements and expenses - - - 0.6

FDA remediation expenses - (0.8) - (3.8)

Selling and Administrative Expenses (Adjusted) $184.3 $159.2 $738.5 $574.2

Selling and Administrative Expenses As Percent of Total Revenue Adjusted 26.1% 27.7% 27.8% 28.9%

Year Over Year % Change 15.8% 28.6%

Year Over Year Change (160) bps (110) bps

Quarter Ended September 30 Year Ended September 30


Reconciliation: Gross Margin, Operating Margin and Earnings Per Share

Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS1

Gross

Margin

Operating

Margin

(Loss)

Income

Before

Income

Taxes

Income

Tax

(Benefit)

Expense

Diluted

EPS

GAAP Basis 49.1% 13.2% 69.1$ 17.7$ 0.77$ 44.7% -1.0% (16.5)$ (6.4)$ (0.16)$

Adjustments:

Acquisition and integration costs 0.1% 0.7% 5.2 1.6 0.05 2.0% 7.5% 43.3 11.7 0.53

Acquisition-related intangible asset amortization - 3.4% 23.8 7.0 0.25 - 1.9% 10.7 3.3 0.12

FDA remediation expenses - - - - - - 0.1% 0.8 0.2 0.01

Field corrective actions - - 0.1 - - -0.1% -0.1% (0.4) (0.1) -

Special charges - 1.2% 8.4 2.9 0.08 - 5.1% 29.3 9.5 0.33

Supplemental stock compensation charge - - - - - - 1.1% 6.1 2.2 0.06

Foreign valuation allowance - - - 0.7 (0.01) - - - - -

Debt refinancing - - 12.9 4.7 0.12 - - - - -

Gain on disposition - - (10.1) (3.7) (0.10) - - - - -

Adjusted Basis 49.2% 18.6% 109.4$ 30.9$ 1.18$ 46.6% 14.6% 73.3$ 20.4$ 0.89$

Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS1

Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

GAAP Basis 47.3% 8.7% 138.3$ 15.5$ 1.86$ 44.3% 4.2% 65.1$ 18.3$ 0.82$

Adjustments:

Acquisition and integration costs 0.8% 1.5% 38.9 11.3 0.41 0.8% 3.2% 62.8 18.0 0.76

Acquisition-related intangible asset amortization - 3.6% 95.9 31.7 0.96 - 1.7% 34.1 9.8 0.42

FDA remediation expenses - - - - - - 0.2% 3.8 1.2 0.04

Field corrective actions - - 0.2 (0.1) - 0.2% 0.2% 4.5 1.4 0.05

Litigation settlements and expenses - - - - - - - (0.6) (0.2) (0.01)

Special charges - 1.5% 39.9 13.4 0.40 - 2.1% 41.2 10.7 0.52

Supplemental stock compensation charge - - - - - - 0.3% 6.1 2.2 0.07

Foreign valuation allowance - - - 19.5 (0.29) - - - 1.9 (0.03)

Debt refinancing - - 12.9 4.7 0.12 - - - - -

Gain on disposition - - (10.1) (3.7) (0.10) - - - - -

Adjusted Basis 48.1% 15.3% 316.0$ 92.3$ 3.38$ 45.3% 11.8% 217.0$ 63.3$ 2.64$

1 Total does not add due to rounding.

Year Ended September 30, 2015

Quarter Ended September 30, 2016 Quarter Ended September 30, 2015

Year Ended September 30, 2016

hill-rom...q4 2016 fy2016 $1.18 latest guidance(2) original guidance(1) latest guidance(2) $1.12 -...

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