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Hill-Rom (HRC)

Participants
Mary Ladone VP of IR
John Groetelaars President, CEO & Director
Steven Strobel Senior VP & CFO
David Lewis Morgan Stanley
Matthew Mishan KeyBanc
Rick Wise Stifel
Larry Keusch Raymond James
Isaac Ro Goldman Sachs
Mike Matson Needham & Company
Call transcript
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Operator

Good morning, and welcome to Hill-Rom's Fiscal Third Quarter 2018 Earnings Conference Call. (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.

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

Mary Ladone

for good earnings for morning, and joining conference everyone. XXXX Thanks, quarter Thanks us third our call. fiscal

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

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

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

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

lives Now Kay. call is and call of morning, why markets and operations, world opportunities start This by President myself John. my observations immersed over shareholders. so business you I'm understanding part levels of in I'd Since strong results, our the initial thank record and to our of future. many part helpful Good portfolio. having systems. enhance company customers today. employees, future joining have quality I've visited our around provided focus to of and and with proud for of a known leaders, in the integrity, I'm on patients, us Hill-Rom May, in innovative everyone, healthcare journey all has and I pipeline. Passion has of my company its be for Groetelaars respect responsiveness, deeper are Thanks such the in about first delivering our Hill-Rom to wanted fun team and solutions that and pleased be to organization. joining strength to like a I while insights this turn values to of John of transformational integrity, years. engaged our are several the earnings capabilities track its CEO, Since sites doing Hill-Rom growth a of the company, strengthen its Mary priority as of a to the Hill-Rom's admired sharing and some outcomes customer-first that a excited and quite a diversify also it. economic across I'm and and I'm a for see proud caregivers and evident. and our that clinical leadership been and culture multiyear with

around the the We solid the I on of strong is There brands XX,XXX a and excellent world, journey. lead have through phase great build and thank foundation, of next across want and associates portfolio. our have our to also me positive a momentum global our Hill-Rom's next phase to the transformation. growth the welcomed opportunity embraced who company prospects

I the Although mission ahead. on are aligned only we XX know been it's highly weeks,

accomplish leadership diversified X supported portfolio Looking enhance our and is be allow will by objective. forward, global top believe will priorities. I to our this line my primary category strategic to durable, objective growth. This drive sustainable us

growth deploying strategy First, drive a new to leadership differentiated products. category of

growth third, particularly, M&A. augmenting Second, increasing emerging with organic in focus And on our markets. international strategic growth,

First, category with respect leadership. to

value customers. expect deliver organic are proposition our We to and R&D deliver clear our efforts impactful solutions that innovative a for

growth accelerating launched. from we've continue focus improving products to margins on will We and recently

and we recently we R&D are meaningful most current to ensure our initiatives periods. rigorous the growth future the to programs biggest in at have look sustained drive to taken a addition, allocating In resources

conduct momentum particularly first like one objective in I'm our growth model, plan contributors categories robust expansion, a is the assessment driving infrastructure Africa, Once to In growth emerging the acceleration. emerging support with going happy second and markets. be highest priorities and identified the continue of to forward. other international our Europe, in regions performance capabilities is appropriate potential. to of product which mix Middle the markets, with product the important will we've in meaningful the to we penetration invest to Our go-to-market East organizational and

will Lastly, forward. It play our to continue important an strategy going M&A. part of

capacity larger the creating balance delevering sheet, for successfully transactions. are incremental We

support through larger and We are that targets for looking leadership positions acquisitions deals. our category actively both tuck-in

Importantly, To summarize, as flow accretive returns. core margins includes I the expanding provide active our financial and and compelling we activities financial fiscal growth be LRP. XXXX plans top and must to we our of double-digit growth to X%, look This attractive accelerated to over an our M&A XXXX. a revenue through outlook growth X% have beyond. and community dialogue with and earnings shape cash maintaining for investment forward line

and our to while value our for creating shareholders. enhanced financial committed customers, strategic are on We delivering objectives, caregivers and

diluted of to that, quarter. by highlights $X.XX, results, our $X.XX for adjusted the turn to with financial strong the Hill-Rom we the and quarter of share. $X.XX raised key low to EPS So delivered per let's another end guidance

exceeded was double-digit per quarter end our and products of revenue guidance the of is growth contribution at was increased our the a decline Strong offset range U.S. by Third revenue. fiscal top X% Middle I'm diluted to challenging our report core share X% performance growth. comparisons half The from This to adjusted to earnings primarily pleased in and driver. due range to international growth, compared growth very XX%. quarter guidance in lower accelerated partially and in $X.XX first key the OEM the consecutive XXth EPS new was of the East of year.

in year America. Today, consistent This performance our our of Asia-Pacific to X% digits. the momentum growth these regions X Excluding international headwinds items, is Latin X continue with international for for core positive, only and absorbing after revenue. these with mid-single be account total in even

which commercial in accelerated. expansion tailwind. mix these and margin operational stages combined operations X to to we revenue of in encouraging And with growth reinvigorating core continue of delivered We markets, our represents Overall, improvements, upside and be points XXX operating guidance. the an our future basis early earnings

revenue As third I over mentioned the top products In XXXX, now earlier, new $XXX our $XXX revenue. priority. contributed in that million. new to innovation report very is already million our pleased through nearly product is quarter, I'm

exceeding product XXXX. fiscal revenue on to We in are new an $XXX well million important of for our than way more milestone

on achievements. just Let recent me a to take a elaborate few moment

we bed that Since are in equipment. surpassed core improved risk and patient and new technology the team to several our bed Late growth continues patient including assets our and experience, has frames, exceeding as revenue, product launch, from orders med-surg clinicians of Support expectations. the and reduce Patient positive. we an Centrella are differentiating Clinical in that Workflow care Systems, have features $XX Double-digit competitive falls million communications in year, backlog business, new now in be Solutions very safety, feedback Smart+ system, attributes last including tremendous launched increased citing enhances key new Centrella and First, offering. our patient conversions. handling Customers

WATCHCARE, period. contact-free and we're respiratory spending setting. rate unique a continuous commercial monitor, in to hospital Along new stable EarlySense, care the standard and heart device release detection and care we a costly complications rate set opportunity in a a have of reduce acute our the of integrating accelerate a med-surg our upcoming growth to ability confident with U.S. environment, capital with incontinence forward, multiyear Looking over

patient Hill-Rom's care many XX% this For business platform, been years, communicating Clinical TWS With has in environment. market-leading our in an year. increased revenue more has information Workflow innovator the by Solutions critical than

construction. significant market from Market Nurse several fueled $XXX growth large We replacement hospital is cycle, million by generating provider an and are in making demand consolidation and inroads competitive here the innovation-driven being U.S. Call new systems.

our During the patients the smartphone solutions mobile with we members mobile a the our With further quarter, each mobile, we limited of Linq to -- of and device application, securely in a entering can information communications team time. communication to connect care strengthened to release patient the other, market. real clinical workflow

full improve monitoring with surveillance Clinical this the and efficiency. planned integrates mobile clinical Workflows platform to communication Call, in Linq launch team With year, commercial care systems the Nurse

smartphones part will essential as This we million. represents incremental an daily market believe an Linq $XXX for our become have become mobile lives, of U.S. the of world. a opportunity Just around vital tool caregivers

to leadership the improve digital Our patient in enable measurement, platform across communications monitoring a and clinical hospital patient beds, to uniquely outcomes bioscience communication environment synchronized continuum. care with Hill-Rom positions the

here to complications. analyze vector by We help technology will identifying a in actionable workflows, for new continue communications a transformative, to reduce critical caregivers company. predict and improve risks, information the pursue to excited assess opportunities insights, with the This of investments number I'm bedside. provide and growth create at

way Care, Line our higher-margin a products digits new key this to Leading driver Turning double Care continue of the be is Front growing business, is to which year. Respiratory growth.

provide and setting. been in screening nearly reduce an single more partnership included diabetic This make care instruments This With primary cystic is screens launch follow-up expand stream can eliminating team last the will a XXX,XXX with suite affordable primary active treatment testing The the Allyn a device has provide new the a with visits convenient use, announced proactive AXC RetinaVue The productive for upcoming while in making since overall RetinaVue device leader RetinaVue and retinopathy Vision to accelerating to recurring exciting of with and System, Monarch to patients other XXXX. easier Network, Care, and conditions therapy. respiratory long-term the our this new to of of With care sales enhancements comprehensive receiving and diabetes we increase care testing the be quarter. setting. are in chronic imager to the dedicated fibrosis Siemens will diabetic screens represents simple we XX,XXX of and U.S. of in with compliance. With revenue visit. be Airway Welch Clearance growth since nearly one market the the introduction steadily our partnership drivers. of investments our Healthineers, In increase the costs,

very Finally, a robots. the more partnerships. strategic Surgical from da Motion strong, sustain Vinci to up benefiting rate than XI a Integrated placements this of Table be attachment high number to very Solutions as quarter continue we XX% is

our the this table and XXXX is neurosurgical ergonomics. markets new improving with focus An MRI only maximizing IMRIS like also key IMRIS of operating Overall, international novel We example but continue of rooms Surgical Japan. our hybrid This the new robotics. to in be neurosurgical tabletop for to operating efficiency TruSystem Surgical workflow Theater. strategic on MRI launch U.S., not in a Solutions and on select continues table table, the focus room integrates the penetration increasing

we strengthening the trajectory. closing, in of So early are revenue of stages our the in durability growth

drive to brands category global strong portfolio, leadership product diverse strategy. our and broad a have We

to continue will confronted unique, meet We challenges and reduce solutions patients, our and costs. caregivers with complications customers differentiated by innovate to to

current and We assessing opportunities that our are actively leverage build new position. M&A upon

We the guidance. XXXX. And let very Steve? as transformation. Steve over forward solid you we phase to quarter turn of as financial for enter we plans complete fiscal next of We have for updated our foundation third our look a our progress a it results to on our keeping now me our review and

Steven Strobel

John, Thanks, morning, good and everyone.

the guidance mentioned $X.XX business range compared release, results reform press to to diluted in tax other items These earnings $X.XX special recent to share per earnings intangible $X.XX year. of special share our in $X.XX and we share. charges. of amortization, the the related Adjusted diluted XX%, in increased of reported include per quarter per $X.XX after-tax optimization GAAP As exceeding prior third diluted legislation,

me revenue. Starting with financial let to XXXX through walk our briefly Now P&L before turning outlook. the

X% our Revenue basis. third on the a quarter, X% revenue constant Core the guidance For million range. increased increased currency revenue end of at grew of fiscal top X%. $XXX

to As impact assets for core a a Solutions. the international This last project Systems divestitures of in lower growth East on large X%, was a core currency, partially in resulting comparison Patient by Support growth nonstrategic a from plan revenue revenue exit. year. OEM Domestic and adjusts and challenging strong basis and Middle increased construction performance Surgical revenue offset by reminder, foreign the we driven

single growth core trend year. the high Excluding X%, in international was this momentum Europe, digits these is with particular positive strength factors, of top continuing across line which growing

a while address Before moving Patient $XXX business revenue advanced core million reflecting keep capital the Systems. Support comparable of currency that will revenue I each Revenue with key constant growth as product X%. to strong I in only. mind accelerated basis X%, performance categories. on year, discuss to prior was from Starting segment, all revenue on, Domestic core

patient in our and XX% and systems, Workflow building last Clinical momentum may recall, equipment. third the with quarter materialized were U.S. Med-Surg than As you of Solutions capital more we quarter backlog growth handling encouraged in bed with

U.S. and primarily accelerated as the XX% declined our last for continue our quarter, improved but backlog Patient order, excluding orders med-surg Europe. total This performance accounted and pace. Systems an grow revenue of nearly increased core Outside a X% Centrella Support year's of East result at X%, across to revenue Middle U.S.,

portfolio revenue increased across increasing we Performance Hill-Rom's Europe, to focus the leveraging X%. thermometry Now moving contribution brand Welch new continue with growth solid also contributed Front the Vest Middle X% Line on by and Canada to the Physical portfolio. Care tools, from growth. Care. X% Vision of East presence, Mobile was to products International geographic to our $XXX increased by infrastructure. penetration Allyn our products, and driven and and as U.S. women's million. Monarch Revenue was including health assessment

revenue to international of year was of the last the was prior revenue lower strongest U.S. totaled OEM order. growth Lastly, result declined X% as Middle Surgical year, while East and flat of in million. the Solutions a $XXX revenue year's

Excluding these increased a basis. global revenue on items, X% surgical

to procurement the XX from improved mix, contribution X% year, benefits portfolio efforts. and points XX.X% primarily basis manufacturing the our last well spending to declined the as as positive of initiatives and R&D $XX reflecting gross our rest from productivity related turning million commercial to P&L. X%. the This Disciplined investments, the million optimization global selling supporting of Now products margin SG&A new prior period Adjusted versus of management increased elevated Adjusted of capabilities. the marketing in for prior preparation of year. Centrella. initiatives $XXX our partially new other impact the spending cost offset year of decline in and products and reflects versus commercial launch enhance

the margin Our from and the of reform. XX.X% benefit compared was operating tax And quarter rate of points included adjusted impact $X.XX prior XXX in stock-based year. basis tax adjusted the to U.S. XX.X%, the third favorable a an from compensation improvement

share quarter adjusted XX% to again, per of XX%. increased $X.XX diluted adjusted line, So XX%. excluding basis, diluted And of increased a reform, EPS EPS third bottom On share. EPS benefit tax per advanced year-to-date the adjusted $X.XX

versus cash cash flow. support X% of new product been X-month initiatives million Turning from launches. increased $XXX operations the to Through higher and in levels year. has to our cash the impacted flow flow prior consolidation inventory period, by Growth manufacturing

for X% to cash expenditures fiscal the were levels of decline than end $X million year We And the million of cash than period million, result, XXXX. expect inventory as the period. flow prior lower Capital by $XX is year. year-to-date the higher X-month a free -- $XXX

ratio the In reduced this year $XXX X.X. levels leverage, our terms of end debt-to-EBITDA at debt of sheet And the million. by and financial was June, balance we have

the year Now let of fourth full our me and call portion this by conclude providing guidance. fiscal quarter

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

recall, XXXX may collectively, revenue totaled divestitures $XXX you million. nonstrategic in As approximately and

expected quarter, revenue With business By third-party the approximately segment, in guidance. the to million prior contribute business divestiture in of third to rental there in nonstrategic is the our change revenue no $XX XXXX. is

expected is Systems single PSS We the a continue On decline to Patient in digits. revenue to low revenue digits. single core low in Support basis, to expect increase

XX%. margin is for From with to Front mid-single XX digit expand And expected we of Care, a expect be and gross lastly, Line exceed to mid-single we high to points single profitability growth to expect the adjusted basis Surgical For growth low core Solutions. reported now digits, growth standpoint, digits. in low

of of including of spending We of X% sales, growth our XX% investment sales adjusted R&D SG&A and further expect behind approximately initiatives.

legislation. $XX adjusted expect tax tax to benefit continue to reform reflecting expansion U.S. expense including XX%, approximately We million XX% interest basis operating XXX and the and Other points. stock-based from margin of rate compensation a approximately of of ongoing

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

into share. per $X.XX summarize, to earnings translates adjusted to guidance $X.XX of So diluted this

a share raising while to $X.XX and $X.XX, a new in tariffs the which per quarter was of previous flow to free the by fourth project diluted modest the to are absorbing capital expenditures guidance cash million. end the now With $X.XX implementation perspective, full our cash now We approximately cash we million low related of year. strengthening be continue to project $XXX flow we range, headwind dollar. operating million, From around $XXX of flow of expected the for $XXX

approximately X% both and expect For revenue the reported we of growth constant the basis. quarter, currency on fourth

and the adjusted to We share for $X.XX per $X.XX. diluted X% expect guidance increase for providing to core of -- X%, to earnings revenue are

So call Q&A. with that, for open the we'll now up

Operator

first Stanley. the line of from Instructions] Morgan comes [Operator of question David Our Lewis

David Lewis

morning, couple quick of A John and questions here Steve. this

thinking the guidance just how about off So the of, year. intend sort finish to, and you

expectations. your the is Steve, a -- $XXX gets got will million. you've into ahead So exceed It pipeline of fourth Comp little quarter. easier,

X% X% quarter of sort the You're fourth business in similar to third. guiding the to

business walk easier you So of OUS. U.S. off And comps, can kind versus momentum? that kind of of how year, building kind us through how see growth, just looks finishing the the you same

John Groetelaars

Yes. question. guidance David, thanks confident the for fourth for the quarter. setting with the we're feel We

represents where levels deliver objective confident into deliver headwinds quarter need to our that here in and But -- are. the year. to We the set a It the and overcome set increase this growth with sustainable here significant guidance. have year, some rate guidance. durable, we half are We end guidance account the then is against first is we do our when that that as we we've goal to we still taken this fourth over we feel of at

David Lewis

core core are to mid-single-digit organic strategic sort deliver the you, had this start I a to morning. of, sort to about as the consistent of is that to of to externally about John. accelerate And wonder, you need you going thinking is the have goal growth. some then, feeling growth? acquired? helpful, versus to of How what mean, opportunity chance of obviously, be overview that active business be nice this assess what's you get have would in how mid-single-digit company I to here you to pipeline And the pipeline That's And Okay. gave kind growth?

John Groetelaars

as good And the as business I internal we comments, of review the our is a about what about We year-to-date, get what feel us feel our performance deliver our current our third and in done would ability I on future our by prepared say, product delivering. and David, $XXX equally at R&D an to moment. new pace will across product that units. like in at pipeline mentioned million. quarter clearly we all We're good there looks currently objective do of the Yes. projects recently X of LRP evidenced the this

business feel good leadership support to I units. organic So X in opportunities the about our category

are our is what a opportunities each further we in actively enhance across unit assessing amount, have multiple development business businesses. leadership That a increased We of M&A would resources building, category that we've and over and by each our significant recently that support business pipeline today.

of So we're line the development execute pipeline we of against pipeline can Operator against then Mishan with putting question. sure businesses. make people build X incremental own that across a the these on resources is business Matthew our KeyBanc and to

Matthew Mishan

a fourth to going first up Can to you think think you on think I the I previous bit? I little in quarter just -- headwinds have the off, mentioned you're question, elaborate -- following overcome.

John Groetelaars

let enter as some the of Yes. we fourth Steve comment the fourth specific quarter here. headwinds I'll on the in quarter

Steven Strobel

probably biggest but are as X% little had for America the U.S. balanced into going continuation across Asia-Pacific third going to the to we were Those headwinds. a which a third in go deliver, those core fourth to to a are are we Latin as we're us and in growth, have first -- quarter. trends OUS, we the we have quarter, Matt, of is both continue Yes. headwind in from We're going to we the the half quarter. where like the and in going and growth X% said, step-up and

major our -- and team are Carlos as those eye got -- on we we've the we we addressing have So feel that -- that things are team the go. that

So those things in of the about business we the good us. that front probably feel the biggest are rest and of we've in general, got the momentum across

Mary Ladone

Mary was had we the East Kay. recalling have Yes. really over Matt, don't order quarter, comp quarter. Middle a third Also $XX that to comparison large significant million. issue is the this the just the difficult in just We construction related fourth

out OEM well comps. will pointed impact lower-margin business. bit the that a did fourth That's headwind. a of David us in and exiting back we we to But think here half, some going little -- be are as this that have I we in the quarter easier

Matthew Mishan

then X% And go Okay. this in over initial from X% Great. next especially growth, you've deal? X% the plan, on you the that growth that confident long-range to years. conducted to of long-term are LRP the the year couple X% portfolio X% you the implies How in to now

John Groetelaars

Yes. very -- feel we're LRP Matt, confident I outlook. that about

But I We lot growth work that against the strength to team, of portfolio do have and the opportunity strength tailwind. into to continue of our turn and businesses, emerging accelerate of our the have diversity markets in this. a leadership the to our we our a execute think of to

reasons us our for to ability meet I about that's all are -- feel confident to LRP those projection. think that

Matthew Mishan

question. then year? now? cadence you And last about area noncore How And be looking it next OEM of the of at little like potential is you bit thinking be businesses how down. another a that? helpful. be about winding that And through Can the wind down we the surgical That's seems talk should should should we

Steven Strobel

Yes.

the of this year. business surfaces Matt, be -- rental Steve. winding of third-party the think been out -- Those have we of we're by the is down the we'll third-party end business, businesses -- I out that this

revenue or of year's million we're for out that getting this next $XX year. businesses we those the that of had results So basically in nothing will so be

Operator

with line the a on is Stifel of Wise question. Rick

Rick Wise

for a turn me John, Let could I M&A, second. to if back

been clearer. Your comments couldn't have

that. just bigger about actively A or around couple larger looking mean of May you and kind Allyn it be smaller Welch larger Is talk defined for assessing. you're is of at you're -- looking, -- things larger. us? new it we that? take should mean, that tolerance When whenever is than press comes actively You're a on leader size release about sense think willingness we obviously. us maybe given How or give expect And across? here, dilution? you're do what I a your to of just

John Groetelaars

Thanks but questions. opportunity -- think down progress primary pay attractive. our to We're M&A And allocate here capital keep for debt with debt, continue very do our in balance down Yes. the look, that paying financially our I objective our to is to with on leverage. and and the strategic to our that's reducing pleased the --

be leverage end And expect more by the capacity -- continue to year. X.Xx transactions. that larger allows a We little this consider that us to of approaching

us driving key that key at at we in staying though the financially. it. to that I accretion we're here to a feel how of larger we were were theme or have. scale, to #X look see ready of our or the terms of or leadership once deal really That's We financial being into come a about of #X. support today tuck-in in across environment opportunities a right then category to growth -- of profile actually enhancing pretty rich increasing And deal getting strategy. strategic think #X and opportunity that scale. categories is the our flexibility position if along And we position and be but do driving really spectrum look the would at, that I returns won't we those size do fit we that specific and that have M&A what #X spans that

Rick Wise

Go ahead.

John Groetelaars

No, it's good.

Rick Wise

Okay.

Centrella, to John. Turning

more Centrella competitive should across from opportunity. in since we accounts, And or success How I'm color through -- a Centrella success Maybe adoption color on I so X we success the highlighted you're you Does pull of the about were seeing Where you in does month directly from growth other are that a ago, that parts Anymore in uptake think or the in launch? You it? accelerate front? quoting of think setting, here? little accounts. on far indicated the just you -- Hill-Rom. competitive having another

John Groetelaars

Yes. A there, Rick. couple good of questions

is feel still cycle. launch its we Centrella the -- Centrella in So phases earlier of

double-digit in than quarter. in We is the what average see and are QX. seeing as a almost we of record would revenue business, larger and half It's in back this recorded backlog, our the normally order med-surg size Xx we've in of orders fact. growth significantly larger revenues representing matter And

the So the and the combination of and Centrella back of our order backlog in for us higher growth very ASPs, and in opportunity orders feel sizes seeing the than Is actually the is, general. Xx. and replacement category metrics you in us double-digit it We accelerating by I sizes cycle? normal fact believe around make confident we're it gave just the front given higher that order larger med-surg

pull to have pull to communicate Again, at growth CWS our last at bed to our smart in franchise, a on our our an and through, would I system, to smart the bed and to it -- that and -- terms far growing I really ability CWS, XX%. the would point guess, of question orders as for you of which grow In integrated I the digits. continues backlog XX%, is year through. connect so CWS demonstrates grew year-to-date backlog double really combination

So entering enhance mobile the Linq that product segment helps offering. excited that about new opportunity only with we're and

Operator

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

Larry Keusch

level sounds just strategy at but that in high important this assessing at things recognize be at to of is perspective. least this the growth a over you're market it time, I early its like will sort emerging point, and stages your John, from

of move product stuff level you with high look think that countries kind you interested what could So this as at a in? some you're of of get to what into where -- those markets? kind Or at do perhaps portfolio, you

John Groetelaars

the for question, Thank Yes. Larry.

In first Middle area of Let well -- and would say, point me East a very for we disproportionately do the well, I strength. of to an Africa, company our size.

East it repeat we So and Africa. having how the an emerging gives organization execute Europe. of opportunity, are confidence that our Middle market we know It in can that confident. whole performance me actually exceptional and to We out gives in

and Hill-Rom focus it. structure and emerging approach the right get we go-to-market right portfolio, One to demonstrated into do focus ourselves Latin in ability on it. organizational developed can know the We've growth our of in can We to untap and cadence markets. and international performance to both regular on we America need the a Our do strategy We Asia-Pacific.

will America of and be those Latin areas Asia-Pac. priority, the So X specifically,

We only our Those there. of regions X X% have for revenue. significant opportunities total account

a we high are from these the -- to a have our double-digit in we opportunities have to rate -- place, what future. believe plans are, in benchmarking for investments. regions As our growth make These that of we us point we disproportionately But understand have to low. can view, get that's the deliver

we're more the indicating and busy should for today, plans, forward. there us, that to the share opportunity but be a very which we in not investment about hope we're opportunity preparing busy assessing -- So going that little with you and those months

Larry Keusch

Perfect. central to I just the X emerging question China How markets. on strategy? -- have X additional more is about

John Groetelaars

big is comes XX,XXX-pound it when markets. gorilla, to emerging China the Well,

it and the on our list opportunity unpack make So and is we there that's tap -- sure to into it. it's how #X we understand what

Larry Keusch

at we up you you And I least bit numbers? John the should can then about for of question know that be think as XXXX guidance through some as today, Okay. Steve. that Look, as second but 'XX considering us comp the think against dynamics little not as you're Perfect. perhaps perhaps we we providing well help a

John Groetelaars

kind up business investors, the a We're of and we reduce we've and And ourselves to past. making question. lumpiness, discussions to effort past. in I've that in from that eliminate pieces feedback of that the speak, great in one the so don't down like of quarter-to-quarter That's had every Yes. our the heard

and as as us for very we about think XXXX over So feel activity large even at at launching That year. performance. of have a XXXX, about that nice distribution look are. as we There's pad of the stands to we single year-to-date event this we the no baseline our look we course a where good out

us into a a to backdrop future. it consistent, think line performance provides we durable stable the more top So have

Steven Strobel

but color going that to of tailwinds of to And going on one, have, drive well. generate revenue products. to to continue benefit bit only new see in going I'd XXXX we're that now, that And the ones guess, think we'll that Larry. to I invest a are in we add behind from we're are continue about our market little some as not continue to those ones

So -- for cost The what know be the of tailwind have that tariff that benefit if stock-based our a going think this rate is, we've I determining see on that be us. an for situation impact I tailwind to don't the today. The The should but that you some in things is of XXXX. that year. our structure. in enjoyed headwinds us. could tax are have Still news as in comp somewhat a level we'll

about into good -- like screen carrying for year that the a on and our some are XXXX. the are we have, speak lot feel plans of in those in the as got But we and are of so And the things second said, we've momentum half as our of XXXX developed sit radar the John we of here now. preparing we process

Larry Keusch

the is you Though up like kind 'XX. end are quite 'XX on message good into head guys the core it and growth sounds of you you as feeling side,

John Groetelaars

Yes.

expect outlined. deliver what We we to

Operator

Ro on of line with a the Goldman is question. Isaac Sachs

Isaac Ro

the if something that improvement for with a flow? worth but opportunities terms as John, the you wondering fresh was new might financial Obviously, that you perhaps cash see up, in So [indiscernible] talk just new progress be company, there's something curious either or margins any showed before about review of in that structure was you look to of

John Groetelaars

thanks question. Isaac, for Yes. the

feel seen terms of liked we outlined improved margin are. as about what we've Really our for flow, cost opportunity confident in and we've consolidations. very think I improved I've what efficiencies, uncovered cash of where from chain goods, expansion supply plant I mix,

things to moving underway. those level at getting of be efforts to also gross All drive good. and top Obviously, is continue our line going And help operating mix margin. business feel margin improved growth optimization a improved

growth We would that say communicate be halfway plans -- I'd very the we're but the expect putting serious past we're our little sustainable and us up to help effort for leadership us more going it's investments in that against together. outlined optimization initiatives are to bit really more earlier around business additional I we driving resources our category could and line feel deploy top objectives point We able something durable, a We specific before. to of future, free in the significant identified about putting to achieving the of around driving M&A.

Steven Strobel

a the in opportunity as there's we and talked to us in about But that's that simplifying expect the there's and terms side well. across optimization. reducing going complexity on for -- of capital company, what to be working obviously, we've flavor the Isaac, P&L

working And the cash balance to as strong as on generate if on the aisle, you ends we're of will, the sheet -- in to company. flow P&L so continue generate that both well the

Isaac Ro

just just then follow-up if comment made a could helpful a on little the watch, around earlier. will the your we're be guys? And you it Maybe means how It are important more that put clarity, affects not so tariff directionally you of business. for that precision just parts moving prepared more Okay. but to numbers, you specific once for some there's us -- for what

Steven Strobel

Yes. Isaac, have and has and in structure cost our the steel products -- aluminum them. our

Our lifts beds or be Systems, aluminum. have whether Patient and they Support steel

on our structure. of impact had an tariffs cost has the market the on prices So impact

XXXX. see the right little that the and to Here we're would from now that land, also little of quarter, in alluded on of fourth going the imports continuing based into a to headwind experience quarter. of in There's expect the we lay will part fourth that of bit as some the a We China. bit

are the of process and tariff to we that other products, of products in instance, many types to that be boards printed products connected would going that things -- circuit containing we'll our have, codes the are the So what assessing in of materials are the -- our for use. raw we we extent and

could and estimate about are areas particular So impact. X watching in probably as we're we XXXX those be to trying the -- closely think that those

John Groetelaars

covered modest costs we confident the that it overcome far We fully is. on what got increased we're headwinds Isaac, As that contemplated be goes, there. QX as in able our to guidance, we'll and

Mary Ladone

I we for have question. X Matthew, think more time

Operator

question. Needham a is with on Matson with Company the line Mike &

Unidentified Analyst

Saxon David is for This Mike.

diversify M&A year-end. continue capital -- on more X.Xx, equipment? to Is at be But if you one would for away deal by Just right you're from came strategy. And you to willing high the idea the X.Xx how along, the mentioned your aiming to go?

John Groetelaars

Again, not Thanks, high we'd talk for go -- David, Yes. question. prepared the about how with to leverage. the

you think can gone. I where we've see historically

returns the that, opportunity, the provide for strategic us contemplate certainly to we right the For and that. -- fit be need right it would do provide right but would to

position. of enhance Our going product really those is, We primary objective we're opportunities kinds we're that for leadership categories. us pursuing by at a to point this see leverage amount from And different to in we of know get that doing tremendous multiple nice financial deals. clear

can line medium-sized So top we our small of can -- a size. the move on and needle growth with we to transactions with significant company

actionable, always that's exist right be look times an active conditions to harder transactions, scale So determine to if area if deals. us larger for look they're the it's at just to those to going larger at. pursue We financial and at determine

in it's So all place.

of do to but rich after. historical You've with past, a we nice opportunities leverage been we've comfortable point what in here set seen our see go from the

Unidentified Analyst

new hasn't you $XXX by then Okay. increase significant million driven Appreciate of this contribution, with are just year-to-date, revenue significant product more XXXX? growth comfortable then color. achieving that in terms just acceleration? the And with And still why

John Groetelaars

a seen good make I well the growth. are and quarters dozen of that to that basis of products question. out follow points significant set new is over products a we've new driving product. a It point driving -- confident We from of the as want amount core incremental contribute question, feel Good to growth this to that is final not X clear. Great. It products is that growth XXX is X% about in here. just product new There performance. are Look, I growth. ability diverse Yes. of guess, momentum products. our X build the first

driving with our the is presence it engine around our the our and growth, combined So the regional diversity of world. portfolio that's line top

your attention So thanks and question, today. for the appreciate

Mary Ladone

our is incremental only all the other probably to half thing David, I are them revenue. that -- add are existing these Yes. growth, would driving are base products of not cannibalizing

that have from our when about you so new think just in and mind growth -- the products. the So contribution you're overall

John Groetelaars

call, look associated to less for some A with thanks half our have I the the little forward Yes. and everybody. it. with appreciate than very next much Well, cannibalization questions call you.

Operator

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