j.p. morgan healthcare conference · j.p. morgan healthcare conference john j. greisch, president...

J.P. Morgan Healthcare ConferenceJohn J. Greisch, President and CEO

January 9, 2018

© 2018 Hill-Rom Services, Inc. ALL RIGHTS RESERVED

This presentation contains forward-looking statements, within the meaning of the Private Securities

Litigation Reform Act of 1995. All statements included herein that are not historical facts are forward-

looking 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.


InnovationAdvancing global scale andbrand equity whileenhancing outcomes

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

2017 Revenue by BusinessUS$ Billions

Increased Investment in R&DUS$ Millions

Patient Support SystemsFront

Line Care

Surgical Solutions

$2.7BFY 2017

Key Valuation MetricsAs of 12/31/2017

Market Capitalization

$92

$134

2015 2017

4.6% of revenue

4.9% of revenue $5.5B

$7.6B

+51%

$97M

LTM Total Shareholder Return

Enterprise Value

Fiscal 2017 Returned to Shareholders*

ValueTransforming to drive sustainable profitable growth and shareholder value

Note: Hill-Rom’s fiscal year end is September 30 *Includes dividends and share repurchases


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

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

✓

✓

✓

✓

✓

✓

✓

✓

Note: Adjusted gross margin, operating margin and EPS are non-GAAP measures. See reconciliation to reported GAAP numbers in the appendix to this presentation


~3%Core*

Growth

2015** 2016 2017

+20%CAGR

+20%CAGR

+450BPS

2015 2016 20172015 2016 2017

Total Shareholder Return +91% Since 2015

$2.62B$2.66B

$2.74B

11.8%

15.3%16.3%

$2.64

$3.38$3.86

2015 2016 2017

$214M

$281M$311M

OperatingMargin

RevenueEarnings Per Share

OperatingCash Flow

**Pro forma revenue includes Welch Allyn

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 2015 - 2017; *Core revenue growth calculated 2017 vs. 2016 and excludes foreign currency, Mortara acquisition and

completed divestitures (Völker, Architectural Products and WatchChild)


*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

13.2%13.9%

15.2%

18.6%

14.6% 15.0%16.1%

19.3%

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Quarterly Adjusted Operating MarginQuarterly Revenue Growth*

+450 BPSOperating Margin Expansion

2015 - 2017

~3% CAGRCore Revenue Growth

2015 - 2017

5%

2%2%

1%

-2%

8%

4%

3%

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17


Enhancing Shareholder Value By Executing Our Strategy

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

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

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

Note: CAGR calculated 2017 - 2020; *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


U.S.

Europe

Asia-Pac

Canada

MiddleEast

LatinAmerica

Patient Support SystemsFront

Line Care

Surgical Solutions

Emergency Department

Operating Room

Intensive Care Unit

MedSurgUnit

Physician's Office

Ambulatory Settings

Post-Acute Care

Home

O U T S I D E H O S P I T A LI N S I D E H O S P I T A L

$2.7BFY 2017

Acute

Non-Acute

2017 By Business 2017 By Geography 2017 By Setting

$2.7BFY 2017

$2.7BFY 2017

Diversifying Portfolio Geographically And Across Care Settings


Physical AssessmentRevitalization

Patient Support Systems

Front Line Care

Surgical Solutions

Connex® Spot Monitor

2015 2016 2017

Next-GenAllen® Advance

Table

Integrated Table Motion

Centrella™ Smart+ Bed (MedSurg Bed

System)

Spot™Vision Screener

(New Indications)

RetinaVue™Welch Allyn

Home™ Products

Vital SignsPatch

VisiVest®

Spot™ Vision Screener

Accella™(OUS MedSurg/ICU

Bed System)

Welch Allyn Home™ Hypertension

Monarch™Vest

Next-GenSurgical Table

iLed® 7Surgical Light

TS 3000Surgical Table

2018 - 2020 Outlook

Next-Gen RetinaVue™

Next-Gen Respiratory Therapy

Connex® Vital Spot Monitor With ECG

WatchCare™Incontinence

Mobile NurseCall

Next-GenSurfaces

Patient HandlingOH Platform

LikoGuard®Patient Handling


2016 2017 2020Outlook

Monarch™Airway Clearance

SystemRetinaVue™

Network

Mobile NurseCall

New Product Revenue* Market Potential Of Key Products

Generating $350M+ Revenue With Accretive Gross Margin Profile

~$150M

$350M+

$50M+

$100M+

Spot™ Vision Screener

$200M+$200M+

Welch Allyn Home™ Hypertension

$500M+ $350M+

WatchCare™Incontinence

$250M+

Note: Market potential based on internal assessment; *New product revenue includes top 25 products launched from 2015 - 2020


2010 Acquisitions& Divestitures

BaseBusiness

2020Outlook

$1.5B

$3.0B+

Global Revenue

Enhancing Customer Value Proposition And Financial Profile

Acquisitions Acquisitions

Note: Axis not to scale


~70%2020 Non-Capital

Revenue

Capital Revenue% of Total Revenue

Enhancing Visibility With Reduced Reliance On Capital Products

MedSurgFrames

Acute CareFrames*

Capital-BasedRevenue

2010 2020 Outlook

<40%

~30%

<20%

~10%

~20%

~50%

Note: Axis not to scale; *Includes all MedSurg and Specialty Frames sold into the acute care setting


OperatingMargin

2017 2020Outlook

2017 2020Outlook

2017 2020Outlook

2015 - 2017Cumulative

2018 - 2020Cumulative

Outlook

+10% - 12%CAGR

+10% - 12%CAGR

300+BPS

+4% - 5%Core

CAGR*

Compelling Strategy To Create Value For Shareholders

Revenue

$2.7B+

$3.0B+

EarningsPer Share

OperatingCash Flow

$806M

$1.1B+

16.3%

19% - 20%

$3.86

$5.10 - $5.40

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 2017 - 2020; *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


Note: Leverage calculated as Total Debt divided by EBITDA as defined in Hill-Rom’s compliance certificate

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

Enhancing Financial Flexibility With Strong Cash Flow Generation

Strong Cash Flow GenerationUS$ Millions

<2.5xLeverage by 2020

$1.1B+ Cumulative 2018 - 2020 Operating Cash Flow

CumulativeOperatingCash Flow

CumulativeCapEx

Cumulative FreeCash Flow

$1.1B+ ~$350M

~$800M


Helping People Get Better Care Inside And Outside The Hospital

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

J.P. Morgan Healthcare ConferenceJohn J. Greisch, President and CEO

January 9, 2018

AppendixReconciliations of Non-GAAP Disclosures


Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

Gross

Margin

Operating

Margin

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

GAAP Basis 48.0% 5.9% 16.1$ 10.4$ 0.09$ 48.1% 8.9% 35.3$ (9.7)$ 0.68$

Adjustments:

Acquisition and integration costs 0.3% 0.9% 5.9 2.4 0.05 - 0.5% 3.5 0.7 0.04

Acquisition-related intangible asset amortization - 4.1% 28.1 9.4 0.28 - 3.7% 24.1 8.2 0.24

Litigation settlements and expenses - 0.2% 1.6 0.6 0.02 - - - - -

Special charges - 5.1% 34.8 2.7 0.47 - 2.1% 13.7 4.7 0.13

Foreign valuation allowance - - - - - - - - 18.8 (0.28)

Adjusted Basis 48.3% 16.1% 86.5$ 25.5$ 0.91$ 48.1% 15.2% 76.6$ 22.7$ 0.81$

Quarter Ended June 30, 2016Quarter Ended June 30, 2017

Gross

Margin

Operating

Margin

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS1

GAAP Basis 49.1% 15.4% 90.3$ 21.2$ 1.03$ 49.1% 13.2% 69.1$ 17.7$ 0.77$

Adjustments:

Acquisition and integration costs 0.3% 0.6% 4.4 1.7 0.04 0.1% 0.7% 5.2 1.6 0.05


Field corrective actions -0.1% -0.1% (0.5) (0.1) (0.01) - - 0.1 - -

Litigation settlements and expenses - -1.6% (11.9) (4.3) (0.11) - - - -

Special charges - 1.2% 8.8 4.8 0.06 - 1.2% 8.4 2.9 0.08


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

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

Adjusted Basis 49.3% 19.3% 119.3$ 30.8$ 1.32$ 49.2% 18.6% 109.4$ 30.9$ 1.18$

Quarter Ended September 30, 2016Quarter Ended September 30, 2017

Gross

Margin

Operating

Margin

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS1

Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS1

GAAP Basis 47.5% 8.8% 35.3$ 11.8$ 0.36$ 44.0% 4.4% 5.8$ 1.5$ 0.07$

Adjustments:

Acquisition and integration costs - 0.9% 6.0 2.2 0.06 2.9% 3.9% 25.8 7.6 0.27


Field corrective actions - - - - - 0.2% 0.2% 1.1 0.2 0.01

Special charges - 0.9% 5.8 1.9 0.06 - 1.1% 7.1 2.0 0.08

Foreign tax law change - - - (2.2) 0.03 - - - - -

Gain on disposition - - (1.0) (0.4) (0.01) - - - - -

Adjusted Basis 47.5% 14.6% 71.6$ 21.6$ 0.75$ 47.1% 13.2% 64.0$ 19.6$ 0.68$

Quarter Ended December 30, 2015Quarter Ended December 31, 2016

Gross

Margin

Operating

Margin

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

Gross

Margin

Operating

Margin

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

GAAP Basis 47.8% 9.4% 41.3$ 7.3$ 0.51$ 48.1% 7.9% 28.1$ 6.0$ 0.33$

Adjustments:

Acquisition and integration costs 0.1% 1.1% 7.2 3.4 0.06 - 0.7% 4.4 1.4 0.05


Field corrective actions 0.1% 0.1% 0.5 (0.1) 0.01 -0.2% -0.2% (1.0) (0.3) (0.01)

Litigation settlements and expenses - 0.1% 0.9 0.3 0.01 - - - - -

Special charges - 0.5% 3.1 0.9 0.03 - 1.7% 10.7 3.8 0.10

Adjusted Basis 48.0% 15.0% 79.6$ 20.8$ 0.88$ 47.9% 13.9% 66.0$ 19.1$ 0.71$

Quarter Ended March 31, 2016Quarter Ended March 31, 2017

1 Total does not add due to rounding.


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:



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, 2015Year Ended September 30, 2016

Gross

Margin

Operating

Margin1

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS

Gross

Margin

Operating

Margin

Income

Before

Income

Taxes

Income

Tax

Expense

Diluted

EPS1

GAAP Basis 48.1% 10.0% 183.0$ 50.7$ 1.99$ 47.3% 8.7% 138.3$ 15.5$ 1.86$

Adjustments:



Field corrective actions - - - (0.2) - - - 0.2 (0.1) -

Litigation settlements and expenses - -0.3% (9.4) (3.4) (0.09) - - - - -

Special charges - 1.9% 52.5 10.3 0.63 - 1.5% 39.9 13.4 0.40

Foreign tax law change - - - (2.2) 0.03


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

Gain on disposition - - (1.0) (0.4) (0.01) - - (10.1) (3.7) (0.10)

Adjusted Basis 48.3% 16.3% 357.0$ 98.7$ 3.86$ 48.1% 15.3% 316.0$ 92.3$ 3.38$

Year to Date Ended September 30, 2016Year to Date Ended September 30, 2017

j.p. morgan healthcare conference · j.p. morgan healthcare conference john j. greisch, president...

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