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Hill-Rom (HRC)

Participants
Mary Kay Ladone Senior Vice President, Corporate Development, Strategy and Investor Relations
John Groetelaars President and Chief Executive Officer
Barbara Bodem Chief Financial Officer
Matthew Taylor UBS Securities LLC
David Lewis Morgan Stanley
Lawrence Keusch Raymond James & Associates, Inc.
Robert Hopkins Bank of America Merrill Lynch
Frederick wise Stifel Financial Corp.
Matthew Mishan KeyBanc Capital Markets Inc.
Mike Matson Needham & Company
Kristen Stewart Barclays
Call transcript
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Operator

Good morning and welcome to Hill-Rom’s Fiscal Fourth Quarter 2019 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. rebroadcast without recorded, written be cannot or Hill-Rom’s transmitted consent. It

disconnect have time. any you at objections, If please this

Now, I’d Development, like Ms. Relations. Mary to Ladone, turn the Ladone, Ms. Vice call Senior President, may Corporate you Strategy Investor Kay and begin. over to

Mary Kay Ladone

morning. good us joining XXXX for fourth for conference call. Thanks fiscal quarter and Thanks our earnings

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

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

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

beginning know, first be ASC the revenue modified with fiscal you of will commentary As adopted this retrospective standard on a our morning recognition XXX The quarter, new focus accounting we basis. our the our as to allow this on under standard and financial guidance. apples-to-apples new XXXX will our results periods, prior-year well which for for an financial on comparisons comparability current basis as

and be This lot results ground guidance. fourth XXXX our discussing We’ll and morning quarter a year cover. have financial our we to full XXXX of

We up outlook call the highlight will through fiscal new switch then for gears before opening and XXXX our financial Q&A. X-year

under of on details our presentation the page Relations be Events additional can Presentations. comprehensive accessed a in included and We’ve website at www.hillrom.com, Investor that

John. turn over to me that the with introduction, let now So call

John Groetelaars

everybody. Thanks, Kay. Mary morning, Good

strong saying XXXX international. momentum year a the broad-based fiscal me across with year for Hill-Rom. start U.S. successful portfolio and the We both concluded our in Let very by was

financial results core in X% periods. exceeded and these achieved XX% comp expectations. stock-based revenue both EPS Once growth, we excluding again, growth QX, In adjusted

For $X.XX in the quarter per earnings of revenue Xth share or growth adjusted mid-single-digits consecutive diluted core fiscal XXXX, higher. reflects of

$XXX margin portfolio adjusted favorable SG&A our multiple operating New revenue efforts, new XX.X%. team M&A, manufacturing accretive efficiencies factors. was expansion more than operations driven product from leverage. Margin million by products, These optimization include mix was and from was and

more and Importantly, disciplined execution to tariffs, fourth dilution than in near-term offset quarter. consumables onetime related surgical costs discreet divestiture

each back into top-line investing also achieving year, growth The to foundation term. consistently this and the top quarter expectations are future durable bottom both results setting long financial in We line, delivered and the a over beyond. on bolster and business Hill-Rom and team XXXX solid the every has above success for

team and in shareholders. and QX for the more of significant Our priorities points Contribution deliver our revenue four QX, with for basis points in I full value growth and basis X% continue the category to by to pleased adding execution full than and XX strategic to leadership X% of year. growth couldn’t accelerated core from year. to impressive strategy patients, the acquisitions more be deliver caregivers XXX

more highlights early to XXXX exciting million year, last million We product $XXX our XXXX revenue new impact was most our the on the one top-line. compared our maturely than for of One delivered of objective exceeding new year goal. above product innovation in $XXX and

basis incremental the While points products the from cannibalizing, contribution XXX is revenue some new year. for was about

X by across key X is all businesses. products overall being driven Performance

growth we XXX expect With EarlySense durable in include products launched from the pipeline, additional to WatchCare. New several in continue well new the products new XXXX products into Imager, future. RetinaVue and

launched double-digits. pent Surgical in And Patient difficult than the both U.S. Care, the Front last as due in Solutions in QX Monarch growth Performance U.S. geographically. Support vest comps primarily grew Line we offset balanced year. to in and was more X%, this the was Systems up anticipated demand

growth International all Asia powered across businesses: quarters X by the Pacific, it in was in is highest performance achieved EMEA. X and level Latin of X% America and

Now, by constant at let rates. moment review me business to currency the a performance take

XX% rate Systems core QX, in This XX%. grew Centrella revenue Patient year First, while comp is a the the of in last challenging year. advanced Support revenue very despite highest

Voalte, Excluding and and of XX%, the grew from beds. care driven Care by broad communications contributions positive the Connected smart solutions including business portfolio across services,

our This portfolio. signs the this spending environment, see current no favorable is where stable momentum capital reflect of We trend to continues changing. the mix currently to

analysis spending hospital crisis a capital detailed ended since environment historical financial in of Our growing XXXX. the highlights stable and

category med-surg vulnerable has past. segment, portfolio our total diverse the it U.S. in more This category less was much spending the shifts. XX% represents most the than capital our and of revenue. to sensitive been or only Historically, is And today, resilient

to improving year, communications, they customers as from Patient Hill-Rom’s delivering growth better smart are the we revenue core strong outcomes Systems’ from For embraced reflecting Care XX%, a workflows bed market across Support was solutions. simplifying With phone, continuum response a healthcare. and smart Connected

equality. more differentiated With opportunities, value provides declined $X future X%. point improving that clinical data real-time will valuable Hill-Rom offering Front care, product revenue insights at that connected Care and by of created that be has and the devices million safety than QX drive digital workflow, can a Line and significantly

rate challenging comparison. As prior of U.S. made expected, X% growth for the a year

international revenue Care from products, growth came Line increased the along health Front and portfolio. X%. impact vision Contributors at X%, growing respiratory to thermometry this Excluding with

Front grew X%. the Line For Care year,

number and Table consumables. revenue reflecting with Surgical placements X% a Vinci robot. quarterly for the and Motion declined Core positioning growth Lastly, double-digit however QX surgical the da revenue record the OR in patient XX% advanced Integrated of of divestiture Solutions’ of select equipment,

X%. For surgical the core growth year, full revenue was

portfolio of strategic know, we to reshape acquisitions select through continue in XXXX, you successfully our As businesses. divestitures growth-oriented and low-growth

annualized XXXX, more non-core, Since $XXX of non-strategic divested revenue. million we’ve than

top-line are growth, While has quarter our portfolio our acceleration. to along revenue strategic an are indication contributing that innovation this focus results fourth these encouraging reported muted on with moves

non-core examples rigorous of while to returns. and advance adhering to category excellent higher growth, represent criteria to plan and last XXXX to attractive we financial deploy Breathe strategic mentioned, capital how is revenue. with we’ve Technologies acquisition strategically our As higher categories fiscal in generate Voalte margin year of leadership the The

still on continues but track. days, integration strong particular with remained Voalte revenue in growth. exceed to It’s early has Voalte expectations

synergies beginning are as expand care our long uncover to also range leadership value We the commercial we over incremental communications drive outlook. market and

this are in for And with care we respiratory model Ventilator, acute the patients non-invasive market, Breathe direct therapy in disruptive LifeXXXX commercial both our vertically new leveraging settings. forward integrated looking with a attractive the home and to

operations, aspirations to are surgical the capital to focus related decision treatment Lastly, strengthens our not consumables a was our our business ability to we and and XXXX the our future does dilution divestiture the earnings growth of the Hill-Rom. as exit financial fiscal that towards resources underscores for absorbing in a divestiture headwind guidance. qualified discontinued Since

to diluted the base expect earnings to Excluding XXXX. XX% in deliver XX% in per adjusted we year, fiscal share the divestiture

are In position XXXX of a summary, we exiting momentum. from strength and

market are benefit cash look and value plan growth, and in flow. are and energized chapter durable Today, includes This creation We to another the and of progress revenue double-digit strong our from mid-single-digit earnings multiyear XXXX financial we of journey. M&A. emerging forward a penetration by growth outlook, unveiling transformational beyond and product recent compelling a momentum, XXXX new plan X-year a

details and capabilities We additional profitability. top-line in growth We commercial and look to sustain also enhanced long-term included the IT transformational to our infrastructure call investments providing later forward in today.

for spirit. our across reflect Hill-Rom from I to personally am Hill-Rom, be surgical proud global progress our at hospital at all on significant care settings first delivery what their passion to add the mission the team accomplished. to and physician’s year on providing to and that advanced I their At the extremely healthcare enhancing outcomes as caregivers to and for as home. winning we solutions I commitment our the suite my the Finally, acknowledge of of for CEO, connected have and office to want value and continues patients unwavering

As in of we of build to we Connected our the pursuit continue Advancing for this vision look foundation future, Care. solid on will

me the over let And Barb. turn Thanks. to now call

Barbara Bodem

morning, good and John, everyone. Thanks,

quarter posted a our Our basis to on Please results on adjusted supplemental XXX. will to to ASC follow comparable the along. commentary morning for use the year prior schedules this fourth period website focus

fourth earnings of charges. Adjusted special These results of amortization, after-tax standard related share. per $X.XX special to guidance fiscal and items accounting $X.XX of share. under the diluted revenue range include intangible per share reported diluted other $X.XX For costs, our GAAP earnings we ASC XXX, acquisition integration per diluted $X.XX quarter, and exceeded to

excluding Acquisitions revenue, than on our acquisitions a X% quarter, with I guidance will core constant increased X%, X% XXX quarter fiscal so fourth of contributed advanced range revenue $XXX X% currency points, reported line by for Starting basis basis. growth. P&L the Core the exceeding approximately was more now core million growth item. of review X%. revenue

year, our products, once offset approximately $X.XX global tariffs points X and to of of operational XX material discrete team. share. or from prior again new diluted absorb raw per margin of expanded well XX.X% product from businesses flexibility the costs mix, as all gross driven across by accretive operational basis Adjusted impact positive the provided continues as improvement. performance M&A support $X inflation Collectively, with and execution one-time expansion million including tremendous over to margin benefit Gross operations

these the XX in points year Excluding the line one-time for with expectations. margin for expanded and quarter gross costs, basis our

drive to future emerging innovation our and quarter Adjusted growth. as SG&A strategic was million in the X% of of acquisitions. impact spending to markets well investments recent ongoing in increased for R&D as due reflecting programs primarily investments $XX to the $XXX key commitment million,

was points prior the Our to basis the adjusted XX.X% of compared operating improvement fourth in year. quarter reflecting margin XX an

was $X.XX earlier, for expanded basis and last Excluding a was compensation the the year. the basis quarter, a presenting Stock-based XX for benefit XXX XX.X%. year. The rate benefit diluted mentioned significant in share tax one-time adjusted of points the quarter compared the to costs operating per when headwind points $X.XX margin

line, the fourth per diluted share. increased quarter So earnings $X.XX bottom to X% adjusted for

Excluding increased per share earnings stock-based XX%. compensation,

cash X% year. generated than which flow result, $XX free cash Now flow last turning for the from as cash is $XXX $XXX we flow, And million. to was million, expenditures a totaled year million. of Capital higher operations

share In and fiscal we’ve debt-to-EBITDA our balance sheet year. the times, dividends XXXX and terms the returned and ratio end million leverage, at was during repurchases financial September X.X of shareholders to of through $XXX the

the this me XXXX. conclude for Let call fiscal with portion our of guidance

to X% constant range. expect and First, of X% full basis. to expected both growth X% revenue to we for is in currency the reported a year, Core be on revenue X% the

the incremental is in expected Excluding revenue acquisitions, range. growth to from benefit the be X% to X% core

before complete of in the totaled reminder pending OEM year-over-year to and $XXX the XXXX. plan decline surgical exit attributed million The surgical is majority end XXXX. The is XXXX revenue to total to products, completion relates Non-core vast $XX international approximately we of million to of the consumable expected which in the of XXXX the divestiture. the

As will we as the report have non-core in currency and we year, XXXX growth revenue core to rate is begin last XXXX. mentioned constant converge

we to standpoint, expect margin XXX profitability and points. a XXX expand basis gross From adjusted

R&D expect in low-single-digits sales. approximately increase to We X% representing the of

of initiatives as of growth We transactions, XX.X% expect of reflects well adjusted savings. as sales. the SG&A investment recent M&A approximately key optimization impact in This business

includes as systems. modernize This multiyear global Our our effort drive transformation, a an X experience service guidance customer’s operating way improved business, planning related step-up the streamline our and to efficiencies financial as to consolidate investment new resource outlook. savings and year will well IT transform a IT investment of enterprise and by and we also future do customer including incremental our

operating strategic expansion adjusted investments, of a which million. recent savings of As debt other $XX we to approximately margin we expect expense, XX.X%. expect solid of and refinancing, $XX an result interest includes our million With margin from gross

the X% excluding be expected growth divestiture, range. the million an per earnings be to tax share. into per and to consumable XX.X surgical reported the basis, This share a approximately expected is share we of impact range XX% lastly, of to a of adjusted translates X% a growth XX% adjusted shares. is in of in per diluted share $X.XX adjusted rate the And earnings expect $X.XX guidance earnings to On range, count XX% when to

free approximately impact of of approximately million, guidance of which perspective, cash capital year From expenditures approximately our flow expect includes flow $XXX This investment. transaction $XXX flow related IT of and of a including operating million, $XXX cash into outflows the first million. translates we the cash

currency For period constant revenue prior to increase X% fiscal revenue both X%. to reported quarter, to on we the and comparable is the expect be a Core expected year basis. first to

X%. approximately of growth revenue core expect we acquisitions, Excluding

We expect adjusted earnings, excluding $X.XX share. special $X.XX to of diluted items per

turn I’ll the now, And John. over back call Thanks. to

John Groetelaars

Thanks, At turn I’d Barb. to outlook point, X-year to this through like our XXXX.

our website. in posted to reminder, As a our are details earnings also presentation available

have and we an significantly followed For to that our of Hill-Rom, durable diversified growth organic those through business, compelling improved of transformation. value exciting profile both inorganic investments, have our and and deployment you propositions leading that enhanced our

this changes. brand fact updated these year, an reflecting seen In the you for had company

of consistently XXXX strong with we’re record exceeded and We’ve solid entering confidence. met established high a track and performance momentum has or that expectations,

objective you, performance of seasoned Our plan to XXXX how executing With a to share our we priorities. strategic continue team, plans. strategy as X we drive by will today we execute and sustain our is on elevated with level to clear this enhanced foundation, value solid leadership

solutions. let to start me leadership accelerate with products First, innovative with and category growth top-line new

product products launch in focus to to high solid market and drive through drive With revenue of – year can than efforts can X growth new we categories, above high a XXXX. new base We high million each where value, to X expect organic market. continue XXXX, on more the in growth $XXX margin R&D

the New of annually XXX X-year approximately growth result points basis of over product plan. launches in the contribution will

global Our emerging Hill-Rom, will it only represents to a in international business. driver our international penetration of Enhancing emerging is second of total variability significant reducing be not not revenue quarterly global opportunity, potential care Today, XX% our this this expansion approximately untapped objective represents international growth and revenue. our – source markets across X% represents markets. driving and is for of is in key emerging only a a access markets of

will areas, strengthen emerging Hill-Rom’s As unique to recent offering investments patients healthcare, will product access select increased from competitive markets benefit our further and competitiveness. company’s the and provide and quality

mentioned, we reinvigorating capabilities markets a in in with As new our operations these leadership, products. key on and early the of stages commercial organizational are focus strategic

meaningful We expect this growth acceleration over period.

growth years, adding growth high-single-digits double-digits period. emerging and to top-line XXX next this X-year increase the annually points thereafter, expected of basis approximately over to market XXXX ramp-up X is Over in the

Breathe great our source and have new over Voalte to a M&A, acquisitions growth of we component Third, it’s created and recent a of strategy our and The key strengthening made progress portfolio. period. multiyear durable

exist while profile, M&A Additional clinical margin our strengthening enhanced accretive customers. drive proposition to and value economic our opportunities to revenue and

generate to to of opportunities, criteria prudent We the these evaluation will rigorous to attractive and in financial be strategic our continue returns. adhering

to incremental we outlining expect We plan X-year future M&A be to the today. are

Lastly, committed are and performance. to strong operational we driving execution financial

double-digit margin both by flow commitment to organic Our investments The growth, earnings X-year outlook while and includes significant approximately on reflects cash focused a improving P&L growth of core and stay profile revenue X%, to a already that generation. inorganic value our completed continuing growth profile. top-line operating driving are to accelerate

to our Given planning we an including resource enterprise multiyear a our confidence, investment to transform systems, elected initiative. information take IT

to and is near-term, dilutive and margin right on believe while to the And modestly now future in for expected time us we decision this is this operating to that position the execute be success. growth

through today, financial we details outlook So with XXXX. our backdrop this as a are on providing

the Q&A. before rest we open turn there through call can over for voice in me this and Let of up her call the the hopefully, to back hang Barb, call

Barbara Bodem

pleasure It outlook to financial is present details regarding my Thanks, through Hill-Rom’s John. XXXX.

and manifest that you have is expected compelling it vision the several itself Hill-Rom performance of ensure the a clear have financial want a understanding of We over in to next how years. to

we projections. to Before review assumptions me included let the into moment get a our the in details, key take

the First, to global we environment. no assume changes macro major

price the areas modest and persistent conditions of assuming pressures are portfolio. We competitive in select

spending We a environment stable in States. also capital assume hospital the United

exit XXXX. reported surgical headwind the XXXX revenue of products exited, we and to the a non-strategic consumables discussed, including international we have OEM the divestiture surgical As in related assets the incorporates in expected

in the charges. device $XX medical and constant rates, million tax, the assumes change This approximately permanent This million special nonrecurring foreign totals of and XXXX. and in excludes excise repeal items outlook non-core XXXX unusual revenue $XXX

healthcare, We any reform. are not impact from incremental or nor including from any benefits potential additional M&A future or tax tariffs, government

at Now, approximately compound on revenue annual to given as basis XXXX. of the XXXX financial core the me XXXX rate objectives. describe these through expect fiscal a we assumptions, grow let With year, base serving a X%

benefits This to outlook negligible recent annual X-year of incremental the acquisitions, and growth rate. is revenue XXXX anniversary the these acquisitions growth their in inclusive as is early compound

million revenue a headwind X% to basis mentioned, reported expected approximately foreign annual expect on $XXX growth XXX we compound to reported points. rates. a compound revenue the Therefore, annual grow XXXX top-line in As non-strategic of the rate by be to is approximately basis current at approximately exchange

and growth constant begin in Core currency converge to growth XXXX.

basis each In growing in over currency very addition, expect we businesses, a on planning X the across period. constant growth core the mid-single-digits balanced

XX% We our adjusted basis through grow annual expect from a least reported compound diluted to XXXX. per earnings share at XXXX on

we the expect XX% over at base diluted in of earnings the to year share consumables compounded surgical adjusted increase period. XXXX, least the X-year Excluding per

and expect cash in flow this growth $XXX between flow, cash significant is to cumulative and we XXXX, expected expenditures generate performance timeframe. XXXX with approximately accelerated Our billion and drive capital over $X.X operating approximately to totaling million

to Consistent will with we very capital a our approach disciplined strategic allocation. to objectives, deploy continue

resources As not value-creating to will deploy reluctant be inorganic capital accelerated towards and or fuel we identify growth. to initiatives profitable organic opportunities, we

of In near-term continued growth top-line be will bottom-line our sheet opportunities, our mid-single-digit the growth. these priority. top deleveraging to double-digit summary, our commitment In outlook and durable balance the absence reconfirms

modeling, financial line P&L Now, today view items. the providing purposes of on are for the other we of as our

next a X top- our manage factors over variety you years, due time, of the could may over which wide to to bottom-line As we know, the of materialize and the as evolve P&L commitments. shape

we XXXX. approximately margin adjusted to XXX at expansion, achieving in front, of compared basis gross least expect XX.X% growth the of the XX% XXXX On points margin margin

XXXX. Our from to points basis adjusted by by XXX XXXX model in expand approximately to operating approximately margin XX.X% shows XX%

and the manufacturing from and and expected recently new improved acquisitions cost be is mix, driven accretive geographic product benefit productivity. completed to expansion margin Gross by

while managing efficiency an in diligent strong operating ability and Hill-Rom drive performance In has business. G&A demonstrated to being the across recent years driving

XXXX this As growth. initiative continue to support growth, includes we in driving on focus future top-line sustainable durable key plan our to investment

we a a be approximately XX.X% SG&A approximately revenue in and XXXX as revenue annually. X% of to expect result, to be R&D As spending percentage of

are initiatives years. We have executed savings million approximately last optimization to well $XX estimated and pleased over in pre-tax our already across business the few our have of achieved X/X

savings capabilities As areas, priority global optimize are reinvested to business. be you with allowing these growth know, key to expand and internationally the resources across intended

million, recent the million over XX% our We expense are of from rate refinancing including annual of period. $XX for tax and interest Hill-Rom approximately benefits projecting to $XX underlying debt

assuming XX.X also share are count We stable a shares. of approximately million

we very a to summary, sustainable In and when mid-single-digits believe including adjusted be this top-line excluding growth each and durable the surgical growth EPS year plan the impact of balanced consistent, divestiture. XXXX consumable in with double-digit

look quarterly call Thanks. to We I’ll over John. you execution. And our on forward back to updating turn the

John Groetelaars

right, comments this All wrap and that summarize continues. our transformation up prepared me morning let our

durable We our generating business, growth of cash profitable on and earnings strength are over the flow accelerating focused revenue capitalizing and the X next on and core strong years.

continues New to product build. momentum

are we returns. to to profile, We pipeline while continue margin And our are attractive transactions M&A markets. accretive pursue and generating growth and our emerging that advancing penetrating

and solid a future a are and our customers strength, foundation excited value we strategy, have financial execution for We patients, a disciplined and our great shareholders. and driving team. operational With compelling about

Q&A. we’ll turn So, the operator, call that, with over for

Operator

Thank you.

begin question-and-answer first line the will from Taylor We Instructions] of with question UBS. [Operator Matt comes session. now Our the

please. question, Your

Matthew Taylor

the taking for you thank Hi, question.

about in XXX in to here a the little of you contribution major of getting XXXX. bit kind a And in drove product So from are basis fiscal your that? what to XXXX points revenue you confidence first. fiscal talk XXX revenue able that Could about being new of new drivers and to product ask continue wanted XXXX I lot

John Groetelaars

Matt. thanks, Yeah,

of product lot great our actually in a pipeline. have confidence We

year both take PSS, business. all as Line X all place specifically more in of actually products be the mentioned We come per X the equally, in our – new more Care surgical to and X – X a X prepared expect X-year across Front will But than XXXX, our significant fiscal They product that period. three comments, XXXX. launching, businesses, to over launches in products little it’s

we competitive the that for would this specifics products the haven’t, of we we kind reasons, Centrella products the feel that offset marketplace performance that in disclosed really the them. of about, But year. those good really some coming saw are So and of help

mid-single-digit expect fiscal As prior we low-single fiscal growth growth XXXX. Centrella double-digit down in in XXXX the rate more mentioned in to to meetings, like rate do come a to

we into of a the incremental having about good really of So fiscal taking basis adjustment the prudent XXXX high-double-digit our account, that really on with expect performance some in outlook there growth fiscal in from XXX portfolio Centrella product XXXX. performance the points that for new total, very feel we off in biggest

Matthew Taylor

What outlook acquisitions Got it those? then, bit with the sustainable you. Can talk can other what understand are maybe to or and for Thanks, the longer-term sales Voalte John. of more there? the measure talk well kind integrating deals and a doing kind well. growth about of like for of And some peak and Breathe those drive you sounds you us opportunity little the is

John Groetelaars

It Yeah, it take the to immaterial comp. had even QX. month the scale on in really only In so was quarter, in QX, question. this wasn’t Breathe X measurability I’ll

So, that nicely our we growth accelerate with would And from that and That in growing was asset Voalte, acquiring which love. performance QX our of fit that we’re care all you that when which would see the order business very and to intention coming revenue sequentially the begin we QX, would portfolio. was from communications to QX acquisition business.

done. that’s exactly is And what

beating fact, In our expectations. it’s

that’s growth ahead into more how before the two rate. performing. and It’s roles So we’re with pleased that us really organic of annualizes quarters base

So that. with pleased we’re

are really a On respiratory just now disease of that combined health and early going integration weeks well. portfolio a ago. together market to the this with to state really it’s but is excited had have come COPD. Breathe a with the new meeting We come front, a team includes few portfolio big They the days, full

for for a category market. is you non-invasive product know, as all that us this because offering a upside, category that And a it’s had it’s the high-double-digit market a and we talked ventilation we’ve And and is never large before, us. in about grower it

So with and for for out Breathe a this to in the respiratory a us other is capture the bullish organization to it COPD substantial all the that value biggest related diseases, and long-term health prospects with but a combines COPD one. on DME the integrated come opportunity, very disease building state sales of we’re quite vertically in business of

So for pretty and those great excited about two a Matt. start, off the question. Thanks to

Matthew Taylor

John. Thanks,

Operator

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

David Lewis

Great.

real so markets the couple which a quickly John, the plan, for emerging growth sort kind Just LRP In just me, business? on XXXX, emerging kind of just sense. markets, expectation a of through of double-digit that makes XXXX, LRP is EM versus for calling for realistic perfect the

John Groetelaars

We We’re our with David, on at emerging QX course. growing exited But of emerging better, to the X%. markets markets. year projecting, high-single-digit we aspire do in

position So into the to what that sustain exiting we’re XXXX for performance. right fiscal in baked That’s our guidance XXXX.

growth is high-single-digit markets. I like aspire in a investments multi-year emerging but with for which and two much for number We into outlook like tracking a better, established. markets, do say, what’s more a I the way the prudent guess, would we is to given number and performance historical guidance established our are markets: markets things And a baked emerging emerging period over between probably low-single-digit balanced and,

David Lewis

versus on us, it – for since think Okay. XXXX, the me, quick mean, Voalte And appear ones first real and just fiscal difference I X X does more in just two guide Breathe. you’re it’s to the I so, at

for – total a consider? number Breathe, there for way $XX of That’s year a for contribution of decent to and and us John. back-half sort is those the in next to dynamics excess million, any loaded contributions, about you, Breathe are thinking revenue X Voalte For of

about just you in expansion, wondered outlook operating statement high-level, outlook prior fiscal it how the just about opportunity the expansion. some margin for leverage? talk there middle I’m long-term X-year then of think if gross differences Thanks vary of are Barbara, income kind LRP, margin the on benefits of margin gross wondering you XXXX, – of for of X-year as much. I the could And sort next relates mix-driven to and so the for terms

John Groetelaars

Yeah, are so, the outlook acceleration acquiring product a very really beginning year launch. a the the acquisition that back-half of in would its product acquisition. we with expect in on of was We the Breathe

had the we So, starting it’s starting yeah, when acquired million, company line around together. it from to from the revenue of of almost more the a it $XX although base think – realistic of

So two together we and bring a sales organizations XX year contributor as ramp that of build that towards and will of of the anniversary the our midyear. proficiency around back-half the in become basis we Voalte expect point. at the back earlier, the I to We it’s going XXX points year as Breathe. on And way mentioned is like the performing half to this

basis together. more a you you So contribution total, points, take little average a maybe of it basis about over course in when from it altogether, XXX XXX it’s points two full maybe acquisitions the full of year, the

hope pass Barb. over David, and I’ll it your question, that answers So to

Barbara Bodem

the your you? was operating year outlook gross how think I and is around So David, margin X-year Hi, prior evolving how are and the versus question outlook. new margin X-year

we’re we’re it – that improvement next should improvement over where like years. of terms few the seeing aggregate, the looks what similar in look think in is seeing the I very

about then about at think as about gross we’ve launching, the plan divestitures as we’ve accretive old couple years. was look of But the from of moving more It’s as from X-year that in great been margin, think it new margin in margin are you we’re be probably there, well really forward. probably expansion over been the past I the I businesses the past of in of the as really well gross way would When gross is the years less a mix. from the also drivers bringing portfolio to couple product X-year the the products getting acquisitions exiting – over margin. gross we’ve mix that seen also seen emphasis product new that the to the the the a We’ve lift contribution the early productivity part and been

new as the we going from new where higher well as margins when really big acquisitions product and contribution the you ramping portfolio, the be about the mix forward, going as think being the the about over impact piece gross gross the will next of expansion couple impact shifting the more would margin see to of that portfolio and higher of of we’re mix, I to overall and product up recent our years. a of be product the away of product as And But continue their well divestitures productivity. the see

over in driving in So characterize difference expansion the how that. that versus future be the the what’s gross margin would I would past the

Mary Kay Ladone

about just terms Kay. would margin expansion Mary over – of the XXXX to it’s M&A, we We gross products come productivity it’s a new mentioned. add improvements will Barb half and in Barb and and and bit outlook particular. in to the look said, come than the little margin that half David, think just less I over what from the from going mix

David Lewis

you. Thank helpful. Very Okay.

Sorry…

Barbara Bodem

– question we next In on and Did sorry. margin think years. regards you around the the operating operating part comments to was want about as quick to of second of – I’m the X a margin couple just

IT our from some We see, years. through and What the XXX as the greater and X-year part then still projecting you the latter going the of over we new margin expansion see of investment plan. operating points basis in though, significant frontend through are part of the as as IT well margin in you’ll the you’ll see margin are the operating latter see expansion adding expansion the investment related starts the on to as impact acceleration contribution the on to X to the acquisitions in the particular, to X-year operating when next coming really of flow period

the ready with question. think next that, for I we’re

Operator

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

Lawrence Keusch

everyone. starting maybe just Thanks. for Good John. X off morning, questions,

think corporate profitability years thinking the it in that? the X next the Just and that emerging strategy the markets China the us on sort through can LRP. way you’re with this margins on to markets broader? is help there Just here Is any that franchise? how about your it really thoughts you of And see Is you average? for do dig X-year above emerging think about, a about as trying you or

John Groetelaars

thanks strategy. broader for the question, an Larry. It Yeah, emerging just than Sure. overall is markets It’s China.

of material China the and biggest most geographies. is that However, opportunity within opportunity group

our Middle well. Asia in We of would all and of include definition – of be markets So typical very emerging sector. that and the all LatAm would the as East definition emerging across Asia

when So is all look China. the us biggest at that, in for opportunity you

of From a the point margin total. accretive view, to it’s actually corporate margin overall in

So we’re phases early here. in the

invest, the corporate below corporate slightly above as to investments, it would levels. expect those be we our it’s we As mature margin level. But we

Lawrence Keusch

with system do the getting thinking side, you And system? as And couple how And but here, in of way well Barb, system? I the as on you’ve about right other the how think or IT ERP benefits CapEx of about Is step-up ERP the XXXX sort investment the just are well tactically as a think Okay. place? into Perfect. this for I a financially, from associated both on times just to you the questions. savings in it that total know, strategically the mentioned mostly of then guess just as couple platform, in about the

Barbara Bodem

much it. a great Thanks question. That’s for very

heading the we’re we our all all, of priorities. key enabler, strategic that believe of that with IT is for key into X enabler transformation a a First long-term

intended to But our their driving over experience incremental X and us. really service take the modernize do investments it supposed with operating the efficiencies it’s our we So the to improving also to customers and future savings. years, X way and will next be business transform place

or next that be The and to we’re that’s to at mix operating estimating CapEx and years, the of we’re expenses. a going X X about looking total investment be million, $XXX over

that that moving, this we’re the expansion then as the to the CapEx investment we out IT. anticipating points the between And longer-term, increased margins that step-up and get we’re XXXX get with directly operating correlated in in the is investment. related in basis transformation we the XX efficiencies we correct and see in of seeing XX to are You expect somewhere

Lawrence Keusch

Okay. Perfect. Thanks, guys. I appreciate it.

Operator

state Please your Bank Bob the Hopkins question. on America the is of question. with of line

Robert Hopkins

Good Thanks. morning. Great. Okay.

couple magnitude and follow-ups. the cost last transformation, of quick Probably of a on IT a what’s Just follow-up say, one, the running P&L, just in through on XXXX? the the that XXXX

Barbara Bodem

of couple in less. maybe still like planning, working look to a look – neighborhood to that will update say. transformation. approximately we the XXXX million what closer will the to say As XXXX. will million through so But we’re is get It related XXXX, of we $XX we’re probably operating estimating at to dollars our IT we’ll hard precisely expense It as

Robert Hopkins

Okay. And then just X that. more quick ones. Thank you for

might the quarter. look but been side, estimates see, like pro as how fourth growth Rough curious the of XX%, a approaching it was the just pro forma did Voalte forma to quarter curious in On just to rate in what on – quarter, in the basis? have curious Voalte just it the

John Groetelaars

probably above an double-digit there, It’s it. Yeah, that bit we quoted Bob. at little you look apples-to-apples number a it’s basis high as on

competing of the of really and pleased the around received. customers the in portfolio performance has product. we’re from combination response marketplace really Voalte the the we’re well We’re love Hill-Rom been the We way getting the with plus

side total it’s the year double-digits, talking care-com business total. now, in the business actually all been all long, while been than we’ve interesting growing note, As in larger an about and actually at business the care-com Centrella med-surg has

is business substantially the total United a care-com businesses larger as med-surg segment our than in So States.

Robert Hopkins

of that putting LRP? is new with a the little Then growth picture at just Or just is I in bit there LRP. of guidance an one the year out really growth products. year? this LRP opportunities opportunities John. you’re are And sound the the on below and you, really strong in exceptional question for rate headwinds big today. other a Kind Interesting. internationally other have picture you worth the big on really function And revenue follow-up that on year. of kind Obviously, the congrats Is up bullish calling growth

John Groetelaars

I guess, first would were quarters bit Yeah. we at joined Great question, I being reflect exiting on when if now a last X%, X%, X% so year. and revenue in full acceleration, basis, nice a the year X%, pretty going core acceleration over on from over XXXX nice this year, year again, X% of little Hill-Rom, the actually it’s I X so to Bob. growing at and at

forward, a things be all and that we’re to on especially we looking a advised happen over puts prudent As be – perspective, I can at X-year balanced and takes, plan the period. we’d and and think, look X-year well

that I core top-line – our in see – guidance you’ll of long-range reflected long-range X% think, you’ll outlook growth. So

growth. and In drive this the confident our near-term, about we bullish outlook do feel very to

probably that high a kind However, strong rates XXXX. in we to It’s had saw category performance again, wise, really the of we can double-digit into sustain in med-surg level Centrella XXXX. not that think we growth

we’ve as launched. launch mentioned and the really we to expect they’re contribute, ramp to X perform the going driver. our guidance, products we’re products we products – as And be in to I about there, products think continuing see that’s XXXX. launching primary launch And in adjusted we’ve to the to So expectations new new and XXXX that the starting our that nicely

it, very a of the from in, So point headwind and the well we a all factored it’s as having view, don’t next really thought year see years. on perspective as next balanced both about X

Robert Hopkins

Great.

Okay. sense. That makes much. Thanks very

John Groetelaars

you. Thank

Operator

Rick Wise question. your with question. state Please of is the online Hill-Rom

John Groetelaars

Rick Wise of Hill-Rom?

Frederick wise

Good morning, everybody. Hi.

Barbara Bodem

to team. Welcome the

Frederick wise

pay cash, – delevering an balance the $X particular into maybe you over X-year as well there, Or on inclined, that. are cash M&A, of in more stabilize? is about projecting sheet, filled? have couple one debt as we’re you’ve Do opportunistic? you the questions to look the just period. would of at the sort to generating down discussion you at free Does it And your John? businesses over M&A, it this a done you flow it’s balance the no, times. you’re to X adding priority, about – me, And any to In mean and remains pending another? billion seems to If related see debt more pipeline excellent thinking I of job $X A than sheet, where more priorities over like billion roll focus be, of free could terms X.X now near-term

John Groetelaars

X Yeah. from listen, part in first M&A. me priorities not all turn see, mean see, over Thanks, to leverage. build We Hill-Rom. and in Stifel, I businesses. of capital, leadership opportunities terms I’ll really strategy of think, continue Rick the to But around is – do our category to our let out nice But foremost, I strategic question Barb of – the

active have process around very We our reviewing pipeline of a opportunities.

We’re you and as it’s the opportunities lot enhanced has engaged we more ago. fronts, did into visibility And know, on even giving months there, a us than XX our significantly multiple team been expanded.

and of going we’re of kind on what I biasing and of our businesses it’s ones we like to opportunities say we’re and the necessarily our able pursue. be which our So optionality There one there. depending really over in I wouldn’t And X see us other. all to I – opportunities front love

parallel, mentioned, of year the us you to forward. going multiple number do financial work flexibility company we And these structure we to As have this. a approach I need the on the fronts think, allows per to its and – do of in decentralized while do

it to I’ll question. over So hand Barb leverage the for

Barbara Bodem

thanks for on And question the leverage.

where which year. is right, at started we’re the X.X also currently, we You’re

the which X.X, again, So while of target we we range, that think our M&A. outlined, the $XXX of we priority I – in growth. that course lots in continued the seeing target nearly front about maintained throughout – think, year, acquisitions I don’t just cash top-line would flow strong And fuel opportunities shareholders and testament we we X is When down for to our see opportunities generation. John doing to million opportunities, we’ve returning could out just probability think to as back drive it’s think really we a to range, good leverage a near-term have see a good but because Absent us. X.X we the that our in invest of to and there going us somewhere really see as

Frederick wise

for last Great. And X just me.

you’re come and stable takeaway is PSS, your feeling to we’ve slides into fiscal current that would and read sales it you’re of benefiting next – business, potential – from way no, it it faster from products? were on last, headwinds, John, front just fiscal if the from year? better pretty is side bed that upside, with Or above? tough OUS the the Is on the orders the et from heading you et execution? so right all penetration the challenges Thank shape backlog. emphasize or in much. it quickly it’s even comp, And Is think new right the do on solid about you good? Just the of Is or Is talked this market could, at Is pretty I X some cetera, there the year and if that it emerging the new years? cetera? looking but particularly the that,

John Groetelaars

Yeah.

X areas Centrella. in a I business, are comfortable Okay. been know, confident I It’s portfolio a with and all have balanced, – think it’s very the it’s multiple Good last PSS really we’re got balanced our been business, first portfolio. in talked the But of we’ve question. overall large And and the year, that very consistently very last I’ve here. delivering over growth quarters lot about a of it’s med-surg there.

future is upside of of could kind terms or where where growth see that coming In from, performance. that the we

I think areas us. for emerging and in the acquisitions products, focus we’re new investments markets making all are key

we’re We’re and tracking how very where investing ourselves there. we’re how very, we’re and intentional measuring about

way our the be motivated, our execute, team engaged, versus they very to the pleased doing with to doing back comes And and outcome it we’ll our job. continue again, highly to guidance. think perform is they’re So ability I a great they’re

Frederick wise

so much. you Thank

Operator

of state your KeyBanc the online question. Please with is question. Mishan Matthew

Matthew Mishan

John. Thanks, Great.

said the are you last You have kind strong were want international your of it. you a how plan. sense fixing in for I you reinvigorating assumptions went kind it? some wrong years get couple of like and over very What just of of to

John Groetelaars

I start would I they’re guess, they’re and I Yeah. would that balanced premise cautious. with say the ambitious appropriately plans.

growth XXXX the year. of it the established double-digit get the half growth back guidance fiscal and as then into exiting Our we in with to has low-single-digit baked markets

markets. So in in it’s high-single-digit growth year, for emerging total the

don’t the overly ambitious we of X-year with at And as level don’t set so risk when rolling an I significant XXXX. at I the think fiscal any kind markets, it’s built exiting expectations. look emerging in of it’s think that outlook, We’re again, forward in

love around. raising Now chronic had before we’ve and on few that for quarters said, I’d down a seeing more performance that expectations area up results an some

rolled a it into we’ll how it our from good see quantified progress and really guidance, take as quarter But about let’s take is time, at and So there. it. a things it I feel

Matthew Mishan

over lot how are also a that issues then, have Have sorry them? Okay, been asking this And the great. affecting people practices for haven’t accounting your at But certain look you of taken an I confident And from those you enhanced at years. Baxter of question. brought adopted couple are last you been over that believe Hill-Rom?

Barbara Bodem

So that I I’ll take question. guess

John Groetelaars

you from are Baxter? You,

Barbara Bodem

from not either. I’m And of aware from came not anybody leadership Baxter. I’m all, Baxter of direct First on over team that my

and it. our books we as what and about So accounting think we’re confident how doing we’re practices, and our we’re records, really in doing

Matthew Mishan

very Thank Barb. you much,

Mary Kay Ladone

Great, Jack.

more questions, two for Jack. time have We

Operator

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

Mike Matson

Thanks. Yeah.

with, I start Breathe Technologies. to wanted Just guess,

of So I part think of non-invasive category competitive is the XXXX the bidding. ventilation round

So there does that And that how of affect and with happen kind what will to affect not the business? bid you that reimbursement, you Breathe products? that you expect whether on or can just comment

John Groetelaars

Yeah.

that going for whatsoever acquisition. take bidding doesn’t category. competitive process. until is is into It XXXX. for It that effect in no participating fiscal we’re impact There XXXX. knew partly the We bidding product So competitive

position. probably the from low for a going a little share – acute high-growing is the the than we’re space more market overall to double-digit than be NIV and our the are stand focused the market, where we which good especially what And we feel we’re about in opportunities The again, competitive mentioned, in I as is more where NIV front. home, us care for categories, market entering that bidding and

Mike Matson

are and Okay. growth update, WatchCare, adoption business? then, the just us EarlySense of the smart That’s there you you bed helpful. of terms give PSS in impact any like us on an features there can kind and in metrics And give can on

John Groetelaars

making. first to ecosystem of smart that important I and the and really think I and through and Yeah, product customers whole to it’s our investments future-proofing bed differentiator connectivity offering, a the the think all, are it’s – overall smartphone

team seeing of XXXX as In terms and start sales that it do expect products. in focused hasn’t to of a that with dedicated enter we its both been fiscal really specialist. we some them ramp and on material, XXXX dedicated But revenue those contribution

stories where and on have heart changes tell respiratory sensors detecting then, we’ve as in I rescuing gotten is some the that activated. we deployed continuous time EarlySense activated of rate, over the in device and areas products, will you incredible we’re our turned back on and rate, patients

So rescue alarm will think also platform. And at just helping of bringing out and the marketplace same are going compelling falls, game-changer that be proposition in that really that deployed as connectivity product not later to nurse on be we be offerings fiscal and then platform type Voalte in future on bedside, and to directed call patients notification the system the and very and and the that the of is our will in patient XXXX systems digital at we’ll alert rolling for that the really about be value deterioration care to on in kind deterioration. a communications

Mike Matson

a Thanks Great. lot.

Operator

Barclays Stewart online state is your last of question. Please Kristen your question. with

Kristen Stewart

picture Hey, again? good big guess, occur what that quick, clarification one a something it and and is a margins, morning, onetime was you could, everybody. for, have I issue one. I Barb, clarify guess, The then that in gross can I just

Barbara Bodem

be $X discontinued it’s small adjustments were thing. They Thanks as we that one-offs we million had quarter why really but That’s projects as the quarter. the inventory some question. them in expect amounted They in Barb. Kristen, for about some total, to really that to not items. called Hi, well were We a during something would recurring onetime out. the

Kristen Stewart

LRP. going question guess, maybe, you John. I’m little saying, of kind I having I bit was I difficult guess, back it’s big I a just think the on guess, just And Okay, were picture, to, kind a I conservatism great. of time then, and little of guess, it as a X%

here markets just think and $XXX lot you basis new pretty just accretive a the I to emerging going through the new being basis respect annually. the is seemed contributing to in products that As some And with the product growth to from have points management Voalte portfolio then and done positive, your lot that’s XXX and acquisition numbers with contributing XXX opportunities of on you’ve a points and a Breathe, million, just doing front.

it surprised I’m that things And that doing X% moving those more thinking favorably. growth. just like I on running and like guys lot. But still, to you’ve you kind M&A likely seems You guess, that is be But extent the number. ahead additive all a of are side, to on I things are X% too, LRP, been to are sure additive. because the doing really of kind a know these I make said to lot it got the the seems the just you of very that want those standing

kind I just guess, of really So walk growth prospects me I through, company? about how for the should the think

John Groetelaars

something and we where really are. spend obviously Great we We good around. feel deal thanks. of Yeah, about time great Kristen, question, a

me let against conviction on confidence amount good, with our that really start So the outlook execute of and ability outlook. go-forward and tremendous that, and to

growth and our any And on – of market just established get That outlook will, here. average will said, the rolled holding bit to today. rate, if going I of weighted internationally. secondly, you top be we – additional we’ve one what kind then, confirm, little think a is the not to us It’s M&A part outlined that’s until somehow markets more of into guidance our our back

a and company is those there. got balanced. Once we’ve lot period increased average, of the there things we But of outlook. over performing time, going on little in the for that X-year prudent And think to that a mid-single-digits, to be can work until a and do to closer can bullishness happen are we’re bit there get I I think room

Operator

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