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Hill-Rom (HRC)

Participants
Mary Kay Ladone VP, IR
John J. Greisch President and CEO
Steven J. Strobel SVP and CFO
Robert Hopkins Bank of America
David Lewis Morgan Stanley
Lawrence Keusch Raymond James
Rick Wise Stifel Nicolaus & Company
Matthew Taylor Barclays Capital
Matthew Mishan KeyBanc Capital Markets
Mike Matson Needham & Company
Call transcript
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Operator

Good morning and welcome to Hill-Rom's Fiscal First Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. At the end of management's prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded by Hill-Rom and is copyrighted material. It cannot be recorded, rebroadcast or transmitted without Hill-Rom's written consent.

objections, at any time. have you please this disconnect If call to Ms. I like the over would now turn to Mary Kay Ladone, Vice President, Investor Relations at Hill-Rom. Ms. begin. may you Ladone,

Mary Kay Ladone

Thank XXXX everyone. our morning you joining and for us Thanks first conference earnings for quarter call. fiscal good

President Joining Chief of Chief Officer. Executive Strobel, and me Steve John and Officer are Financial today Greisch, Hill-Rom,

Investor a the issued this the morning, we I'd to page like accessed release Before Relations which mention that be have Web-site press under posted supplemental our get started, in presentation can addition at to & Events of we on hill-rom.com, Presentations.

actual other introduction, begin and reminding statements in So, let with morning statements presentation this this prepared are by subject that that contained factors certain me and our to forward-looking remarks risks, are you assumptions, actual uncertainties, from refer materially materially. cause to could more those and SEC differ cause to today's to concerning filings results could results Please detail that our for release press differ factors described. risk that

today's measures are included non-GAAP on measures earnings issued release In financial our financial used. morning. this will Reconciliations GAAP non-GAAP in addition, call, between and be

turn to like John. over call I'd Now, to the

John J. Greisch

Thanks, morning Mary thanks and joining today. Kay. everyone us for Good

been Hill-Rom billion financial a talented accomplished, As our of proud Xx our equity and leader. notified expand announced value last increase global in and journey during over for of position I'm medical morning, extremely $X seen to for the patients, customers device of honor during or years. transform of particularly globally we what as quarter. shareholders. portfolio, of proud our Directors as lead an addition eight and Board been together has this we over creation extremely has to have to on the our a We've of value you've first the team from created our fiscal CEO, and intention I'm enhance to quarter, that our retire years this eight this have after great results President I my It company of third

time While there to personally is never and for a perfect the right Company of transition time, the next generation leadership. is for me the this to

of transformation will be effort, that seasoned enough the to phase initial right bring a has complete, the our the a in tenure time the is now a next CEO With journey. phase execute so to of phase long multi-year the next

third external expect Board As search completed a the the for and be our a review planning we successor, thank around Board I to to success outside fiscal expects the want a for strategy, process, with will exciting transition including and and part comprehensive team, between well-developed seamless world our of candidates. succession better commitment and search my quarter helping hospital. of both well-positioned conduct growth now The prospects. our during employees internal each get ongoing for their care to inside people of strong a solid support a is and foundation, future and XX,XXX Hill-Rom the then.

continue that our our along important a We made. we stronger rest to financial of will and with the leadership outstanding next on that, than been our are the our let's turn progress positive confident in today. I'm have results. never CEO team With we momentum build position have

X% exceeding guidance We're first earnings our our we're momentum also into related initiatives, on release and to results. our future are solid strong core this quarter to $X.XX growth. morning, in a report earnings continued issued drive revenue growth, consecutive financial our was and our on growth, XX%, margin tax in absorbing to raising expansion XXth reform. saw growth Line you positive fiscal pleased a our Front From initiatives comparison XXXX This modest currency diluted and the updating from As and full-year Care reform This through a perspective, basis, Maria recent of the to quarter to XXXX challenging even of $X.XX a represents in U.S. an our investment delivered legislation. Hurricane after reflect per benefit reflects quarter, execution related constant share, we double-digit objectives strategic benefit a increase range. guidance business. adjusted earnings In financial first impact U.S. long-range tax revenue core of performance

made well on higher trend business, and in over With to rest during improve to international for in While core of difficult XXXX build focus sustain very expect strong the revenue core period. accelerated growth we all year with and core highlights Line margin comparable new prior growth have as momentum surgical adjusting constant of and the to establishing X%. comparisons growth the Front Care, on and good and include line as our respiratory care contributed the our for beyond. focus currency in on and disciplined year, I'm pleased basis. stable plan hurricane a the execution growth more equipment of international businesses business, the course three double-digit positive was growth where in impact and driving continue our margins revenue is products this continued progress growth U.S. we diversified our the but long-range X% top to contribution businesses. approached drivers, Key of we a

drive are expansion products Company. in approximately revenue and million a $XXX accelerated we new discussed, our revenue our to to innovation have quarter, growth strategy and achieving strong As remains With well in product a are In on expected new approximately and of XXXX. key way first contributed margin in revenue million XXXX, we XXXX $XXX for beyond.

me to recent a moment Let take some comment on achievements.

progress. for the Air bed for intensive and of patients Accella the in acuity Fluidized introductions to higher the system launched acute outside Envella Systems, Smart settings care And States United the continued Support Patient Bed Therapy bed and in recently, we system. wound care First, most the Centrella

States patient care Now transform caregiver satisfaction increased expected providing Canada, and is Centrella and both efficiency. available United in by safety, to

While the days clinicians of still in the positive. feedback has from early launch, been

orders potential they Within we are strongest enhancing in awareness Centrella's for with Welch making Front Line our and have simple exceeding building, the year-over-year, detection optimistic quarter, children promoting the accelerate Vision Med-Surg Spot to are screening affordable RetinaVue bed U.S. the In in the the focused Screener, be been primary Allyn on in up cycle. to XX% diabetic Care, our two the our about expectations. retinopathy risk continue in is early replacement strategic We with setting and Imager. the and Med-Surg backlog years, of All amblyopic Vision early investments first with care campaign,

Spot see in United continue solid to growth and We Japan. Screener, the Vision States particularly of

the and RetinaVue, For we a in screenings quarter. achieved of device placements level record

today, one of our with to more exciting be of With RetinaVue continues the growth in million diabetes mounting disease incidence Americans long-term. most than opportunities XX the

companies Within improve the around with with the offering on safety, world. of our a expect efficiency breadth we business, Surgical to partnering medical growth technology and other the drive to focus

up Theater, XX% with intra-operative better Motion with anatomical During detail imaging which strong, that allow the essential Neuro be to revenue support Table the than introduced XXXX last a quarter, IMRIS optimize The tabletop placements suite IMRIS treatment we the very were the And integrates to the Neuro workflow. will our component surgical again of Surgical Surgical table MR technologies year, during finally, and neurosurgeons surgical expectations. of Integrated TruSystem surgery. exceeding more of an versus see Table, critical patient MR new

expect We revenue XXXX million. to approach $XX

with and a driver continue we capture this investments capabilities revenue is of to growth So, accelerated our future new key our commercial to advance to appropriate value. product summarize,

Steve? let commentary. me updated will financial objectives our quarter his in turn financial in XXXX call outlook, review to our the who detail, Now over XXXX first Steve, our results and

Steven J. Strobel

and John, morning good Thanks, everyone.

the As $X.XX tax tax mentioned in we've per of the $X.XX diluted of related quarter year. share new the special legislation. to These a net reported including share in results items, to release, GAAP earnings press in first diluted per reflect prior benefit reform U.S. after-tax compared $X.XX

$X.XX guidance Excluding special increased $X.XX $X.XX earnings to reform adjusted new earnings. per our XX%, diluted of tax approximately our U.S. exceeding diluted legislation per share. adjusted contributed of The share per share range items, to $X.XX

Excluding XX%. earnings this benefit, adjusted increased

to the constant grew first geographies. advanced briefly Starting Strong revenue, a revenue reflects $XXX X%. me basis, let XXXX revenue multiple continued financial increased fiscal of million international momentum international P&L walk performance before X%. outlook. currency Domestic increased while revenue turning with On quarter, X% for across our revenue the Now X%. through

growth trends growth in improving in benefited and large from Canada One Middle revenue some the encouraged where Core approach in are double-digit we Hill-Rom East, X%, driving by with of we Europe. quarter. our exceeding flat are competitive expectation We increased wins and our the

other As excludes QX reminder, nonstrategic assets foreign Mortara, impact revenue prior current both exit and and divestitures, may the we in of a year. currency, the core

the to in of increased year, Support only. on, I keep that I X%. on $XXX Starting a mind segment, address growth Patient Before business will discuss revenue each core while Systems, as was constant million currency comparable basis revenue with revenue moving prior

adjusting increased Outside year. Europe Mid-single-digit partially as particularly by core as revenue by divestitures, portfolio, for prior solid after Patient businesses revenue Support Centrella, Middle offset nonstrategic growth the trends, in decline rental of core service and the core introduction revenue declined As in bed by softness expected, X%, products. patient Canada, well the lower Systems across and was in in domestic X%, driven and offset above margin revenue. was bed East, led revenue U.S., but slightly growth the core handling Asia-Pacific. U.S. Improving

increase Line moving $XXX million, Front Now, an to Care, was revenue of XX%.

year as Care our by in leveraging from result faced care we X%, presence, business. revenue This blood difficult Line pressure mid-single-digits. was vital in growth products, was in business. Mortara. to the solid our and Hill-Rom's a and contribution signs X% of new focus of and Excluding prior U.S. thermometry, physical grew On Front was growth respiratory strong Mortara, comp-adjusted assessment and Front a revenue the performance International geographic monitoring the our investment U.S. excluding brand tools, double-digit revenue declined and Care Line increased basis, infrastructure. again driven comparison

impact. the international, and Solutions by million. Performance revenue which placements driven and Integrated Operating contributed to despite Middle Table, led Lastly, in like the expectations grew Table Surgical Mobile increased strong was other exceeded Revenue the increased also in XX%, TS innovative and new our Motion and by U.S. X% growth. negative totaled XXXX momentum the products, Europe. X% iLED X East $XXX hurricane

to These $XXX XX.X% to reflect contribution and portfolio year Now Margin manufacturing efficiencies, contribution new partially improvement turning gross versus of R&D accretive impact. achieved improved offset while XX cost quarter. diversification, margin primarily percentage margin of with of however XX basis by the rest increased first continues basis $XX the from Adjusted as last the benefits launches, of adjusted approximately Mortara. headwind these consistent hurricane of million new record positive the created and Collectively, X%, of for ongoing of were a rental the within our from points. the R&D factors level points including to tailwinds the and and X.X%, of the a objectives. sourcing Mortara. revenue product surgical million SG&A lower business, long-range P&L, addition spending a X%, margins due temporary increased was

Excluding Mortara, enhance to investments, our to capabilities. prior SG&A flat Disciplined launches product than was management cost offset initiatives more supporting selling new and and marketing global year. the

Our stock-based lower than a our was adjusted adjusted compensation. the The of the discrete in compared including reform of benefit XX operating year. of tax items improvement basis impact tax expectations quarter last tax as of an of XX.X%, was reflecting margin rate result to and first the other points XX.X%

to $X.XX So, related benefit tax bottom of and as earlier, XX% to advanced earnings approximately adjusted quarter mentioned the share, diluted includes reform. $X.XX line, diluted per this first share per

are $XX off flow, This million. to million improvement with a of from paydown excellent ratio reducing $XX flow $XX this expenditures which of year. XX% cash million, totaled or leverage Turning million an $XX X.X. versus $XX more enabled to we cash financial flow totaling of free quarter $XX an in year, million, in capital for than our the last while resulted Strong debt higher of million year to is operations flow start than cash the free cash last quarter, debt-to-EBITDA

let outlook. Now fiscal the of XXXX quarter me conclude second and our full-year call by providing this portion

results to reflect stated press release, the year legislation. adjusted first full quarter earnings XXXX and tax raising U.S. our reform we benefit guidance are of new As we our in

Core full For the assets anniversary approximately the X%. the continue acquisition. revenue may to reported exit, of which to to currency, prior to currency expected and X% revenue, of divestitures, to is excludes X% and year, foreign date increase Mortara growth we X%, we nonstrategic expect constant of growth X%

be comparable a $XXX segment, revenue approximately divestitures As expected you revenue continuation nonstrategic changes to divestitures Core increase Patient PSS product million million digits, revenue stable reflecting totaled recall, is Systems collectively, the a impact constant may no XXXX and to to in basis, anticipated to Support single expected to On approximately $XX is the there completed XXXX. prior we previous are guidance. spending and capital currency of expect in in environment. our By throughout revenue low exits. revenue of year, contribute reflecting and business

growth For to is growth Front the core be while expected single-digits. be Line Care, in in digits, low to is reported mid expected single high to

we Lastly, of to approximately we Surgical sales. expand and expect for SG&A gross adjusted approximately of spending of standpoint, single-digit a R&D expect points adjusted profitability continue to mid XX%, margin approach XX.X% of low XX sales, Solutions. growth From basis to and X%

We $XX XX%, approximately reflected the benefit results. of million. the benefits a basis and remainder of of point a our now and guidance. basis first We for improvement other reform versus of our XXX for estimated expense approximately reflecting includes operating an expansion interest tax approximately tax expect XXX in discrete margin quarter rate points, adjusted XXX basis project tax including points prior This

Lastly, of shares. we expect approximately a XX share million count

So, guidance into to adjusted diluted legislation $X.XX tax to earnings reform of summarize, share. per of translates $X.XX $X.XX U.S. diluted benefit which the this includes from share, per

From guidance previous of million, reform. million year. capital positive diluted our was tax we of cash approximately to around approximately per $XXX also flow now operating the flow are cash raising flow of project share. $XXX perspective, Therefore, recall, free million, with for to and related now guidance expenditures to million project full we we $XXX of $XX $X.XX cash range a impact a may you incorporate As flow cash $X.XX

adjusted second $X we to X%. are and we expect share. approximately X% revenue for reported per of currency the revenue of growth growth On $X.XX expect increase a and approximately core earnings For quarter, basis, constant diluted to providing of X% guidance

anniversary as products, we half revenue accelerate new expect including Mortara we ramp to up As of and acquisition. second in mentioned last the the XXXX core quarter, we Centrella,

half recent compared benefit higher cost our half, in year initiatives. be Second, and Surgical margins, years, continued the and synergies, improved adjusted of and gross the consistent with higher first from to the from business benefit expect savings Mortara we second we to margins operating the as optimization revenue, of

updating XX% Finally, we also The benefit our annual press mentioned adjusted reform per going on prior the range forward result as XXXX. release, financial grow adjusted share our to of in to This tax EPS in annual XX% basis are we is compares in an the effective long-range through to expected approximately XX% XXXX. of objectives rate and through expect growth now compound adjusted to we therefore earnings to XX% a compound guidance XX%. tax

remainder may reflecting expect now approximately and cumulative unchanged cash benefit billion tax to this long-range reform during cash three approximately you questions generate also over million. guidance years, topic $XXX $X.X the We of to million flow happy free of cumulative operating I'm a $XX our next Q&A. have related to The on of flow and any address of remains

John. back to to over like call the I'd Now turn

John J. Greisch

Steve. Thanks

our team conclude successfully great a key strong this is priorities. first to our with on start quarter me a comments strategic off our and let So executing morning. We're

to focus structure, enhancing investing and markets. continue growth, value-creating profitable We while durable products, cost on and margins, opportunities. advancing our and growth new in generating optimizing pipeline, capitalizing expanding We're into new on our

Q&A. strong value call and expertise, operational and We to broad our management the our have execution, to the extremely have that, in With and are success. Hill-Rom for team's leadership, of continue team. positioning open With up a shareholders. confidence commitment strategy, healthcare compelling proud let's foundation we I I'm utmost sustained deliver seasoned a strength, to financial our well-positioned solid significant for to

Operator

digital www.hill-rom.com. like being recorded that replay is Web-site to Hill-Rom be the would this will days call on I remind Instructions] seven for a available at participants and [Operator

Bank Our comes Bob first from Hopkins question of of America.

please? question Your

Robert Hopkins

surprise, little if a love of throw you to John, so a I of you and you entire that run on lot guess questions bit I'd sure first Hill-Rom investors fantastic I'm the as the on a come of have will things throughout does at because a though I'll all just a just mind. career. congrats don't really of maybe retirement couple it address, for out

them of is, the completed thing CEO it on guess And that kind would want is this timeframe? just this I'll six-month complete? So, job rattle another that you, for six the that it then that's the last how until much. two longer just you future I quick is confident on search just the is, take sense just are personally, get med-tech front? a I or search than Thanks in very months, kind stay to of for would things and can underway you takes off. other If you be

John J. Greisch

Obviously questions. search. be the the the this they confident Great Board in search. are Yes, we several and next a with to Sure. about roll while a it talking for to been have can completed months. commenced I've ready We're

got eight I years the transition as think I in and the never I company. time We've here. through a I right here great transition tenure X.X when a great on want somebody handing seamless here. a and into me. and highly confident longer proud my to strategy great energy in right them, the team some as off it's commented other transition been Company extremely for have ago, run working focus than prepared We've a I I an and today said and my are who's highly a unlikely, and time has my both It future, of been With team, as is of respect I'll to job. to think ahead we'll came responsibility interests. in my management my personal that I we committed prepared comments, professional for are think the take got had the I'm CEO So, the to, we've what commitment I Bob, Board and stronger I, extremely accomplished. a seamless pretty a clear, comments,

way time out in said or I there and no perfect no leak pre-announce my comments, to a there's As this. like is change

private understand be personally professionally, to to a I'd stay was I about to turn of it's plenty than year, of as where there's engage got it family may from of run. unlikely a other that my and I'm I've other or kids other XX well interests been things focused, as kind be I those time another whether for of is. perspective going where seeing or CEO here I include my highly But a is in a what to personally if with want activities, eight but terms in work So, bit but are that's and interests interest years. timing, Board charity surprise twice the last once my equity and it's which my more mean is

Robert Hopkins

I hear you. Yes,

be So, search don't little be longer, have You'd though, just took date? if to clear the hard a there? a stop you like

John J. Greisch

be would Yes. third mean will expect I it I the as as seamless and said, quarter transition we be, possible. that as

Robert Hopkins

why conservative. you benefit does seems are guidance And little that. where going, given XX%, it It quarter? tax for thank then ask LRP just than tax particular the tax U.S. financial will curious, Okay, really, this you reform rate. one is want questions had others from on a too. and lower seem also And explain that. rate one move Steve, could you to your I one be like financial the have tax could I'm at on. sure then just rates I'm just

structural that there it at keep issues that that or some there are would XX% So, up level? conservatism is some in number

Steven J. Strobel

first code, as we some our applies in quarter, fourth rate fiscal year. to are had for tax XX which was your with being to entire actually the particular, provisions where has to in do to Section calendar year quarter, taxpayers change in first The our benefit recognize able existing question in why you

that impact first And the would would rate so, we what take we quarter estimate what tax as as be. appropriate obviously estimate full we full-year year the be, will into rate our

get blended rate and in for blended our into one full-year tax first is detail, quarter you So, rate, XX% and U.S. rate our across level the estimate and our into rate further tax quarters, book the rate well. the blend full a is then fiscal if what XX% that is year basis quarterly we on as year our but and three that that entire come remaining for a back and

end we why quarter. ongoing that's in an with up the So first benefit rate

which to basis we've a point question As rate, XXX on said improvement, our is a the LRP about it's mix.

business U.S., our XX% of XX% about foreign about have in jurisdictions. We

rate foreign and do we France tax is, Germany XX% business jurisdictions, actually where averages so around in tax international and forth our Our actually rate.

with net to we as which rate the that or to related the limitations forward here, what tax things basis to calculated So type additional on benefit call [GIL] basis. of what's and like base I'll erosion [ph] basis manufacturing when of compensation additional on you claw-backs to the potential executive have them credit us tax that be a out XXX expect mix a as we known [indiscernible] arrangement, is points on go a plus the

Operator

Morgan Stanley of Please is Lewis David question. on a line state question. with your

David Lewis

Xx thoughts, a you think came two. stock maybe up ago, drink, years quick eight so since buy investors should Just is I you

the just just I than interest CEO search seasoned CEO. here then to And on more second you. is a the your you Board CEO get to, questions external couple back But internal? I'll suggest looking dynamics. comments fundamentals. is and question search, the Does mentioned the around the thank on a that in So, of want Board

views some two departure decision points? specific but after very provide Then those fundamental to leave so some the got questions. corporate past, could your CEO, in had commentary as on on your the Board quickly some You've I've governance you maybe

John J. Greisch

first, Let the second take David. me question

say me feel an very the that outgoing should heard You've leave personally CEO I Board. this strongly before,

the or Not I everybody from and view our has cleaner been way It's his to that happens awkward It my been shoulder, it's when incoming years view view. somebody looking own have also. be agrees my my but team, break on Board, view at our CEO Board came got aligned know got here, continuity an case personal stay outgoing over a to experienced same a not should for not think the management issue with CEO my that universally-shared view who why the and that with that's one in experienced highly that a we've think and and not be Board's about her Board's around past. I'm and are Board. feel the eight I always And that's will has happened really We've I time. how I fortunately own highly that's but that's an what leaving over strongly aligned I a again, it's in.

the commented, In I we look will at terms of think and internal I search, external candidates.

I think we I found we've are very ago think I it an more today. incredibly attractive it and made company even years eight obviously attractive attractive.

against a our it's internationally, that on transformation and best best whether look accelerating person just to and the LRP, or to profile and think pick ball the growth, seasoned is CEO as as expanding several background to well-developed been and externally for pick pick I the and said our to I up X.X in a So, focused with executive, but seasoned will doing execute improve and Board last and right years, going both our time think we'll the with tell, and move experience continuing is and and person I strategy, person not and our innovation, the the internally financial come forward. continuing which experience drive we've

David Lewis

forward questions bottom. of outlook, on just And great. the one a one Okay, here top, couple

the perspective, obviously the about than year some guide there the comfort the with can On that you going implies your quarter pipeline other just confidence bottom conservatism? the is the so give out very can the acceleration, back line, second just Thanks and quarter, And on of much. that catalysts for tax, a you second momentum less half I acceleration? second beat. for acceleration anything are we you little Is a then back of much you talk and than where the with but for expected, for the the both there line in if factors and momentum raising quarter from execute that year

John J. Greisch

of through needed. Steve one our I'll clean as most It's up flowed This is in and that John. the can belt. take here beat quarter We QX. under

got momentum and to as with So, for we've most we the the the confident I second I flow year. feel being solid going did of conservative the but rest feel and into the we're that through of the a think think outlook of about. year QX we here. year, forward benefit The the QX, appropriately quarter the got really look of half we good we've rest

going As date for we've we of in, comments, into QX mid-February, past, was expect second accelerated be we have do year other in expansion thought in products, in this earnings and and of move year. here we growth anniversary is of were performance going to the with as is half much our drive, Centrella the the than you XX% with coming orders up second and year And for in some and stronger it heard my standard backlog to that's the prepared the Mortara the new better margin pretty to think I a along seen pattern our revenue with half, target post expect. go product into drive year new will you'll million in this the that talked growth put as We we on the continuing contribution Screener, product I well revenue Connex past, We're out half which that Spot trend the think of expected. our new on of pipeline and all Monitor, we core the year. are way we've half Integrated Motion, accelerated see fully Vision the they in the we that driving towards including Centrella, now about Everything QX second second in there growth that RetinaVue, the year. here our Spot a Table $XXX that list

Steven J. Strobel

year quarter $X.XX full-year and first standpoint, the that from reflects guidance we've and by in benefit raised the flow-through David, some change. our law EPS tax an flow-through the from full

David Lewis

Thanks guys. Okay, perfect.

Operator

Raymond a of question. the question. state is Keusch James line Please Larry your on with

Lawrence Keusch

lot potential had on able but brief I just getting and think those? congrats to of any closer period Steve, business, your might are the John, two flow questions. morning, some up sort terrific prior know, And then updates I is, it just change from the of at guidance. that about be you Good for cash you Hill-Rom. One a again, the provide divestitures secondly, we didn't a here to is as

So deleveraging potentially more in you're a how again, context just generating sense wanted to the of cash thinking get about of the flow?

Steven J. Strobel

I'll Larry. take that one first,

every $XX I in for think up new recognition and that and will tax bit the impact helps our over year, the for $XX million a it flow cash on have most on cash relates period. of deleveraging our of expected the as so won't cash our it this three-year our operating and took to outlook we toward be impact for deleveraging material XXXX, law little taxes increased did there, it to for – we And us really going that. million, XXXX, but

three-year the the LRP other acquisitions equal, from other law, certainly the things a we no or X.Xx helps timeframe, to it less million leverage benefit us all see of which forward. there's us assuming going get ratio, anything again $XX than in tax will Over timeframe. that But help from assuming additional standpoint deleveraging around that

John J. Greisch

course revenue On is third-party we two to year. we the service One the are phasing just out components. of that the everybody, remind divestitures, got over

probably here. equipment second second the And stream that's non-core right piece as of course a out us for we QX that business – that the is year. that's up third-party So we rental then that really a to not revenue wrap our we will now over the a event divestiture, phase be quarter expect

just planned revenue. some third-party one manufacturing service progressing as So, the that the support that and as as is facilities that a is phase-out exit we well of progressing one other

and QX So, in have we also. should news positive some cash some in coming

start. QX off add point I we're great We're to Steve's think on up cash to in just to XX% flow, year-over-year. a

and a saying it and every earnings been as well stronger machine growth from a great the that are I've year focus XXXX. team come and we Steve is think as both on cash our us I gets disciplined years stronger this for into balance that for leading, and So, as his start sheet QX the

Lawrence Keusch

Thank Okay, very very good. you much.

Operator

question. with Wise on a Rick Stifel state is Please of line question. your

Rick Wise

John. questions, Couple of

what had expand I'm Obviously getting the that on on, and it Could mentioned from hasn't rest that year into First comments expand, what's that could just for realized those mean, the Hill-Rom I you and are Welch synergies Allyn. disappointed publicly, happening perspective? what were recently right, the if good words and think implications a you you but better beyond, that you of us your help Mortara did there? were sales quarter put you

John J. Greisch

out I the on business win sales more one first gate. It's with our my of around we our the had was Allyn performance year Allyn that Welch of into. in Welch Mortara synergies. had which being our of this largest able that we Welch actually quarter, were So, the quarter our specifically last right news/bad bad within news Allyn entirely news back a We major comments with to relationships the Hill-Rom we customers think feel were really about of good good the bring

in was Front tough a the really this Line we comp So, quarter order Care very good got. due to

I think it year was Welch for Allyn. million last around $XX

and feel I to good from really being Welch a that sale it Line we off in some did and on now, Allyn get growth start that Care expecting years Mortara, we're synergy. we and year. sales last synergy driven think slow of Front by partially the So, a perspective, is into two-plus we're

to be synergies As some mid-single-digit our forward which year, of It into we acquisition, what the and disruptions see time you'll seeing in we private range range, look growth company Mortara we're by the of We had company at the just the the made look innings of we than the we it but in year, immaterial, family of laid to flowing as growth portfolio. some for Mortara think early the as we into I in probably out to is be. Mortara with this expect a the expected the mid-single-digit this but fiscal the XXXX, we relatively in going year-over-year, we expected less rest of forward little small was a was what it from Hill-Rom. rest

Rick Wise

Got you.

how obviously fiscal trends Moving will sustainable where a upside growth from just and thought kind that quarter went you the on to those that the had of Was solid really internationally. or first is what and continue? than you international, in better was quarter the surprise

John J. Greisch

developing our I that we I think by a under-appreciated came recent I the quarters probably commented also might are conference that we in saw one few for be board, the including business. international. been in QX the that from power I've international across saying community that a the investment think the that really area at upside is

year. You saw that last

think basis around X% I a performance for fantastic world. the is Latin performance in a Canada, And so us. X%. good about on America, grew QX we East, Middle great had growth double-digit a core in here mentioned, Europe Steve we quarter, the had

contribution a said, grow. we continuing here think what forward a say from the is factor headwind got but to to to forward, and to in a actually we QX we be but hope is something continue tough expect contribution as momentum bit a we at go sit in accretive certainly us, that X% do of X% positive positive as But for expect. and looking pleasantly to premature comp That little I do here I'd international that. internationally. surprised not like we're I continues international. is maintaining the the so norm it's is look a I Asia

As we and too. now the it is that, in same with quarter, the there one margins strong positive you our see international, continue at to quarter, improving the time with and to our sustainable but we're X% next portfolio, going basis year territory news good X% we're on are saw last a internationally probably know,

doing and commercial portfolio world, business So, our leveraging continue capitalizing I and a expect made forward. the think fantastic his to in Carlos the that team runs Alonso, and around teams we've job for who investments on us, are the that going

Rick Wise

front. leveraged, to leverage M&A should you think would period it, Last place as run But pipeline time, because time, assume or M&A on about that way the the go place in the the hold deleverage process John, way from now contemplate? right near-term until as your have of some the is announcement, M&A in gets much be or sheet, a extended short on thought active of ready that in doesn't balance to to as CEO the for period is would a new balance you assume in that even just sheet an of no, there's I'd the that with the more on M&A not front, we be now the me, for

John J. Greisch

said, We're priorities strategic think and opportunities that probably not, continue anything to strategically to got, bolt-on the to but Mortara we continue strategy. the going and against team expectations committed that I as and near strategy smaller financially execute to execute Board That sizable, Rick. management are term our against of we of interest

Rick Wise

well. My thanks as and congrats

amazing done job. You've

decision. you see make to this Sorry

John J. Greisch

Okay. Thanks Rick.

Operator

is a line question. your Please Barclays with question. on Matt Taylor of the state

Matthew Taylor

on congrats your We of best John, very it retirement your busy you at accomplishment the Hill-Rom. here in wish luck like. sounds

revenue to So, wanted of just the growth about talk the the I first first quarter rest the I question had, year. for and in

nice It why so the have your core of your really are a kind you question. beat just raise and That's enough expectation. had tracking well, guidance? like orders yet You versus first didn't to core confidence seems the curious I'm

John J. Greisch

and from We did hurricane in in QX, both calls headwinds beat QX. it we beat had guidance nice flat here QX some have Front Care. despite the growth we a Again, and our for Line that

today into with said core We're much with of to for in the expectation look I year second thrilled we look do over another We're We in to ahead take forward cash what at one right flow, earnings, confident where of expect year three in growth I we'll half our I year ski margins, be strong a and to we've into both going X% on be, an the prematurely revenue, beyond growth think one the our on and and in the our the tips us. don't where year I I highly QX pretty we we're was point. the are we nor very quarter think in got think another accelerated we're get is expectations. with want half as came we obviously year, are slightly the of basis, But think as Steve most hit of out line year. thought quarter, is I going which ago. think with line months the guidance of ahead half and here that you we second here and it

Matthew Taylor

detailed a question, launches? guess orders maybe a And convert, orders start the more lot revenues can that. talk we for so the from see when about talked and to being you you, of will just up, also, then you and bed those I about some when and Centrella Thank orders A, other

John J. Greisch

deliver, orders those when say, you Matt? did Sorry,

Matthew Taylor

all couple? when next we give the could recognize a those, next quarter, just Yes, if over you us they are sense

John J. Greisch

No, good them in we QX. had a chunk of

running as October. we here XXXX, the QX, early for some in hit sales in fiscal ground in trained revenue we really quarter force We we to, expected did and we adopters the fourth So, in the of Centrella. but October had get

Our Centrella, and quite see contributions go expectation for continued and in as big we beyond XXXX. a growth QX product, here think high you'll is for new terms Med-Surg I the of obviously product XXX forward from to growth this in fiscal from of XXX significant and contributions in part

a largely it's terms revenue both in products States in and good margin-accretive other rental last mentioned, in was here for we're that's United from that and already, our us contributions of launched Envella, product year our a The portfolio. product that seeing rental rental I that product but us, for

is which We're from then optimistic product, play. Arab international Accella, So more as beginning also we're as week, that that highly this we product actually that's as next move begin see product in XXXX is already well. well. contributions Med-Surg about we'll through weekend showing and and contribute at Health that to to And and our

and about obviously years to our ICU I franchise launched in growth well. already think our we've is products that's market performance ago about a saw the past, our contributing, and other that and Compella, and bed Progressa, see in product we pretty that significant the as ICU which four now product for product, bariatric our in continue talked good

Matthew Taylor

much. you very Okay. Thank

Mary Kay Ladone

time have for questions. we Kelly, two more

Operator

line on Please question. your is you. the Thank Mishan of a question. with Matthew KeyBanc state

Matthew Mishan

Thank you the last done you've over the job eight very years. on much, and congratulations John,

of question elevated my in I growth are quarters. You've the in your performance when number X% over next same the is, then were two you there is business your guess similar growth And realizing of are last in where several some of guidance your some preventing quarter area. broad your seen peers? that from of for strength your from kind for you that headwinds that core past X%, really area, core you peers quarters look at a

John J. Greisch

this but that and in we're a out We think first we're business the sized growth quarter. unusually hurricane last some lower-margin rates quarter, what quarter I of to here laid in last that couple year back comp execute Line thrown or talked LRP Front committed we headwinds executing QX our into from with being still core category, year an We're Care peeling we – non-core a we order last the and about tough right me. haven't excuse line in there towards marching

period. into on So, on the strategy and we've do delivering I'm on on executing very are we've track the the here done fiscal we that more focused successfully in we'll years rest made, and again so again do commitments and of out LRP the last we've the which confident move laid that to several as XXXX

Matthew Mishan

laid from are faster impacting million starting and Okay, in come you they or last thank optimization you. a bit benefiting SG&A quarter initiative you the business $XX potentially same year. savings optimization, out little this thought? than And you to some you in mentioned you later had those Are potentially

John J. Greisch

we're looking is no, what in to to same planning and mode right It there's the now. about talked initiative last deep the achieve. we acceleration quarter, I'd We're say, no

our LRP in benefit over us was specifically period than comment more going quarter last think the I that XXXX. here was, to

and as So, a the to we drive as vast going majority we're the of the of behind continue to LRP. growth of looking to rate three-year initiatives the that, reinvest into use to our go is rest line to some growth top period, of the forward we one, move two, that benefit accelerated lot

Matthew Mishan

Thank right. All very you much.

Mary Kay Ladone

question? Kelly, last our And

Operator

& Needham state Company from question. Please line Matson a on the question. with is Mike your

Mike Matson

Just question gross start to a wanted with margin. on

margin lower things point XX on quarter. first and the were for There a gross basis hurricane and drag So you margins. called impact out surgical there, the two rental

that So on the could two rental out. margins, of And timing those wondering you and I the terms in turns then around? when specifically if items surgical kind was of what's break

Steven J. Strobel

Steve. is this Mike,

think as as around, the you talked as composition, the in disruption it talked about margins as that far that's negativity margins half the between drivers surgical, few we've about. And of surgical of far the the last consolidation quarters can for headwind and half factors plant As for of one about turning the two we as been probably at and in folks first plant the up here with Puerto the of rectifying the fantastic we're I'll in our hurricane back on plant impact progress in have experienced making the issues really receiving and running. a the as we've well be will say. plant good getting as us job really And quarter the not done Rico

the to as of we I that going through year. rest impact lessen this think go is the of So

well So, for to as I think improved forward. the drivers going things two within going higher-margin growth as be of margin those surgical the continued in surgical are the products

Mike Matson

around TruSystem of you then little And if Okay. a this big opportunity launched, more detail does Neuro give Table represent? that us XXXX an that could how wondering just you just

John J. Greisch

surgical. to OR quantify I'd new addition specifically, initiative others an the we've strategic continue on efficiency, growth in been products the and IMRISes with important they partnering and whom surgical the has world of that will continue drive focusing with and will hybrid to as to be as seen some IMRIS. with compete do comments, to but my partnership I Mike, a that well. we've that's in mentioned looking that OR not other players got We're with hybrid in rather And

with it but about top another globally growth. surgical in We growth core year of last this X%, haven't X% lot our was talked morning, quarter about great think there I we X% a business surgical had a on

confident investments partnership and IMRIS that so we and be there with as product all So, the contributing a to the both forward will making partnership the well. globally. And new has you've going are part on others seen, front obviously we're great of Intuitive had front been growth the as I'm and

Mike Matson

track luck Congrats the Hill-Rom retirement. thanks. your with at right, and good All record on

Operator

Thank you gentlemen, this with Holdings, concludes conference call Ladies Inc. participating. and Hill-Rom for today's

John J. Greisch

everybody. Thanks

in support, back We'll for thanks on second quarter we'll you the first be here, see road to talk story. quarter, you and final Just comment and then. great your with three months