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Hill-Rom (HRC)

Participants
Mary Kay Ladone SVP, Corporate Development, Strategy and IR
John Groetelaars President and CEO
Barbara Bodem CFO
Larry Keusch Raymond James
Rick Wise Stifel
David Lewis Morgan Stanley
Bob Hopkins Bank of America
Kristen Stewart Barclays
Matt Taylor UBS
Call transcript
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Operator

Good morning. And welcome to Hillrom’s Fiscal Second Quarter 2020 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]

call recorded this is Hillrom reminder, material. copyrighted a is by being and As recorded, transmitted rebroadcast, consent. be cannot It or without written Hillrom’s

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

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

Mary Kay Ladone

and XXXX Call. I hope morning, for us joining times. Conference Good during for our challenging is Earnings healthy remaining and thanks Fiscal safe these Second Quarter everyone

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

related you we this are let Before to assumptions, Please impact materially. could to materially started, me SEC COVID-XX described, factors concerning get our and risks, results to includes results including begin and today’s release that by statements actual reminding for could to factors refer more filings information differ that that differ cause risk that forward-looking any pandemic. other the actual press uncertainties, cause presentation to subject from those

highlights In posted pandemic. website. in to a addition to response today’s Relations and are mention also in Reconciliations issued to our of measures used. non-GAAP issued be financial Investor measures between we page included materials this which accessed includes the can financial addition, press current morning, on like These supplemental release have will call, earnings morning. Hillrom’s I presentation, GAAP release that this the on would on our be the non-GAAP

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

John Groetelaars

through and saying global your all I to challenging everyone. Good and families friends that an healthy. morning, pandemic. times and goes safe COVID-XX Kay. related It Mary you, unprecedented the without And we’re living Thanks, are hope

for take details our unwavering quarter, never been the their customers, support entire into a patients commitment team health Hillrom of outcomes to caregivers delivery the patients more fight has the get of in to extraordinary against enhancing vital of and to care. thank we our for contributions our virus. moment and wanted Hillrom’s I line mission caregivers to united and front this Before

has culture multiple fronts. our inspiring and response, of positive Our more nothing never impressive short been on global

We lines products. by of front care production critical are on supporting rapidly those the expanding

and introduce products the pivoted treatment business $X of our million continuity the chain. of in delivered supply our to and operations R&D to implemented spectrum monetary donations lines care to at disruption lives. who global a meet health we’ve a approximately new of form challenges, unique saving of the efforts manufacturing We to plan product COVID support ensure are heroes, minimal our And both, have comprehensive support front

strength diversified times. are Hillrom’s turbulent of businesses a these source in

to a commitment ability of result, combination confidence our have through and our the to diverse for enhancing over environment. long all shareholders strength portfolio we value and the today and underscores future exceptional both, The financial navigate execution, the successfully As term.

category highlights both, the quarter, our risk second results financial guidance the serve. our again our leadership and our modulate we once to critical for Moving and These line. position product portfolio the we our top-line demonstrate to in markets reinforces of bottom nature and ability exceeded on

end our of from points net Core mid-single-digit recent COVID-XX includes that of the acquisitions, approximately a eighth revenue the growth X%, a of XXX $XX quarter. contribution was Core consecutive tailwind of basis growth. toward ensued million and revenue quarter approximately

increase of margin resulted significant of operating We over expansion, of margin XX.X%. a prior EPS of and record an diluted achieving in year. share, adjusted XX.X% gross $X.XX an continue XX% per margin to be pleased the with This adjusted

that for Our globally, us QX. products allows is from accelerated while financial execution is Growth continued This the us long-term. respond in supported positioning priorities. of performance by new strategic four the foundation to our

nearly XX% year. in million On more increase of achieved now new revenue, we’ve to a $XXX last than basis, an year-to-date product

we to full product approximately million. revenue of continue year Importantly, anticipate new $XXX

innovations teams patients. I’m developing R&D how the rapidly challenge product new five about of our to COVID-XX for responded proud

In also remote addition help they solutions measurements use our to to emergency mobile caregivers for receiving we’re virus. pleased overall this PPE protect respiratory authorization signs and monitoring reduce communications new for offer vital for to with that demand the MetaNeb enhance System will deal and as support,

Geographically, contributing our growth three strong with businesses core X%. U.S. performance all was very to of

performance timing COVID-related than also was the expected. of international offset of saw improved core than which international products better in result ICU which projects capital of more beds like large the This markets. selected impact from and demand growth We the was X%, for with thermometry, strong expected

Canada, had growth including EMEA except regions positive and double-digit results, America, All Asia-Pacific. in Latin

you in emerging key position to year we our on in turned investments markets. last enhance know, As China

This quarter, in plans. XX%, strategy growth of validating investment than achieved China more and we once our again

term While the markets, some of emerging will other growth in we expect choppiness to near-term see this a to result as longer and China of be a strategy. driver pandemic key our continue

constant by now at rates. QX currency me turn business to Let performance

First, med-surg the core early Communications. across Patient Support growth again the growth this In by Smart+ portfolio solutions broad our U.S., X%. and of Care related Bed benefited double-digit The the of services. grew majority of included Systems and bed was business. core was X% contributions revenue This connected systems, demand once X% growth Centrella care including and from COVID-XX supported

was largely thermometry This ICU the growth Hillrom pressure System products including earlier, the non-invasive in with strong for the was result our X% and products, and certain MetaNeb equipment, and from and ventilator. significant global strength broad-based health particularly result Front respiratory U.S. the X% in beds, demand growth, of signs mentioned both blood the international Welch LifeXXXX QX vital business Care, new Line across Core internationally. monitoring, advanced like and revenue Canada. Allyn this was In monitoring of and times

of as our markets than the we revenue related previous Core year. X% X% growth expected surgical Lastly, the declined discussed timing the Surgical decline of in international projects on select Solutions XX%, capital offset call. of divestiture the was to that consumables declined impact revenue reflecting U.S. last more by large

environment our the the our that with this outcomes. may environment recovery continue current as to reality. on now, this The regions to duration for execution scope, various health These of eye mission. from period the largely the be So, categories the variables new and will the care. faced companies adapting depend on some time. shape as weigh new care net Hillrom No to challenges, of pose to All health and well with our demand and obstacles in future we to of an immune look predict with pandemic, including intensity the macro will for company while Hillrom as advancing customers ability to will completely priorities, the and be toward impact support disciplined of our backdrop, product global

to previously issued elected have So, our guidance. we suspend

of However, have the share dynamics, as we our point businesses important visibility and view of the to it was and our provide we transparency thought environment and current today. on

a a From portfolio diverse demand our significant perspective, to due advantage represents built-in hedging.

Communications These office Care or Some experience access while is others parts performing affect installations expect to challenges, levels We where the Solutions, resilient challenges high business Line visits Front and delays Care physician-oriented of primarily impact lower our currently physician demand. where meet dynamics of are requirement portions hospital are related approximately facing portfolio. project significant may at results. business to Surgical our to of or XX% a and

decline the in second of expect category for products by of collectively half growth more than XX% the to We year. this

access However, of hospitals primary also quarter, in it care assume to sites, large believe into resume to patient we is fourth starting the new installations and our that majority will fair fiscal will access return. a physicians gradually for in

treat bed current the and XX% portions of business our XX% of diagnose, resilient respiratory smart the demand. other including COVID patients. remaining course, monitor aiding The Hillrom’s of is of care to comprises and that supporting dynamics, This, our is to lines fairly the portfolio caregivers front portfolio of on devices tools, higher portfolio, approximately and

these of and products the and continues. strong care variety rental demand products book of business. a Care fleet order for This reflects As QX beds, strong for med-surg Front and the our today, backlog within ICU Line critical

than a orders, of incremental demand quarter forward were record orders funnel. already growth than double or that our and more in QX. smart XX% nearly typical versus more of we represents increase new pull representing For achieved that expansion beds, of half a acceleration over an We estimate a U.S. this level

impact A we wave look as this other and key pandemic the for the beds the related planning pandemics. including or for another consideration, national local of possible state on to towards outlook by is future and the second hospitals, and of preparedness the governments, purchases potential future half capital

to increased capacity, multiple clear there visibility growth demand calling evolving term not While implications. for we could will that monitor we continue Durability vigilantly. the longer on a which reports dynamic additional of have do global are bed cycle, is multiyear fuel

From down increase efforts a to our doubled perspective, supply capacity. we’ve on

tremendous team members work more job, by very team shifting quickly a and our to products, healthy while a than operations Hillrom being to Our maintain high-demand safe workforce scaling is environment. employees, XXX rigorous doing additional hiring

monitoring, upstream ensuring supply parts is availability. team countermeasures and implementing tracking proactively Our moving to keep chain and our

no to pleased we supply disruptions manufacturing very continue I’m to report that material global or have chain to our operations.

patient demand doubling We thermometry beds, where ICU far monitoring continue for towards and med-surg track supply. on current and and exceeds capacity

to moderate product as on may device care for Lastly, and fivefold we’re for Patients, respiratory a ideal approved home in by is with LifeXXXX of use This is It COVID-XX, ventilator. such in of mild and be for from annualized distress ventilation. with those care the currently non-invasive capacity basis at home. States ventilator. mechanical or United increasing process to than COPD eligible patients support our weaning as greater critical the the

to by and capacity Health $XX order Human efforts demand other will from additional million Our expansion customers. Services from summer, and acute support our a this fulfill

committed the meet position the and immediate enhanced look uncertainty. We to providing to deliver our challenges we are updates continued we We well-positioned all value forward Company success, to solutions mission, with team the summary, believe you great right during to So, entire in stakeholders. of remains us. have sustained before even as time Hillrom and for and this our strategies

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

Barbara Bodem

Good John. Thanks, morning, everyone.

results share. quarter, other from impact of strategic costs, reflect $X.XX diluted Adjusted XX% growth, earnings items expansion share to diluted the per the of per For core growth. second after-tax These to related per share advanced GAAP period, as COVID-XX $X.XX long-term solid diluted margin amortization, revenue the our $X.XX and $X.XX we quarter, investments our the top-line ongoing $X.XX include diluted per range fiscal and prior late intangible integration well of share. earnings in drive in results to guidance year special reported charges. These acquisition as of special exceeding

Now, our P&L. through let me QX XXXX walk briefly

above was of $XX $XXX our revenue net guidance revenue revenue year million. was contributed impact X% points a the X%, increased XXX second for the Acquisitions $XXX currency and Core of We prior the an approximately of reported approximately million. COVID-XX quarter, of increase growth. basis, of which million revenue X% revenue approximately On basis core over X%. of advanced constant growth

basis Turning the an spending gross certain X% positive than from initiative. to at due operating impact meeting expansion improvement million a were margin of prior and products, and and like reflecting of over project rest costs transformation P&L. reflects compared of of mix, Adjusted year. acquisition This XXX more across the $XXX margin was $XX initiatives businesses. all reflects XX.X%, manufacturing declined SG&A XX.X%, of the year, as record by and portfolio offset prior XXX three timing. the lower sourcing and the marketing level X% of Adjusted the discretionary and increased basis to of to spending with Adjusted new optimization IT points, primarily M&A benefits travel, R&D points, expenses improvement million contribution product represents efficiencies.

of was million. million diluted Interest increased and XX%. fiscal second other non-operating impact approximately tax from of XX% $X $X.XX quarter and earnings unplanned adjusted for per currency an quarter the rate $XX adjusted included devaluation expenses for the share, The

the impact diluted $X.XX surgical which divestiture, the diluted consumables adjusted of share EPS Excluding increased last year, per contributed XX%.

higher Cash and software than flow. year. year-to-date was million, costs million, on Capital capitalized cash driven first $XX prior $XXX from a costs operations investments. of months related the to expenditures IT transformation $XX prior turning flow R&D by to year, six totaled XXXX flat Now, to million for the

result, As $XXX totaled free cash year-to-date a million. flow to

Our balance sheet strong. and remains overall financial very position

for XXXX. during share dividend year. our raised returned we’ve we fiscal and million quarter, the to shareholders dividends consecutive To-date, $XX XXth repurchases through the During

ended Our we the March with million X.X end cash. quarter the debt-to-EBITDA $XXX at in and ratio of times, was

no have within We to covenants maturities XXXX. well continue until operate our and debt material debt

last refinancing lastly, year, billion And as given a our facility of address recent any revolving we access have efforts necessary. upto credit capital to needs to $X.X

to over suspend on to our me back turning call decision guidance. John, the comment Now, before let

it’s First, and three to each geographically of actively potential landscape businesses. important the and note within that monitoring the our evolving are implications we tracking

portfolio demand continued across areas see during the some of We to accelerated April.

and now in of Front also visits. areas are office lower due we experiencing Solutions, project primarily delays, Communications However, Surgical Care certain Care physician some to Line

result, not would We As of the scope a in and look nature the not future into given on the remainder performance recommend providing are extrapolating recent and fiscal at these reasonably future. the projections a uncertainties, this We estimate for year. we results also evolving forward net updates impact of of ongoing you position with additional pandemic, in time. the dynamics the financial to to our our

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

John Groetelaars

Barb. Thanks,

ability response to and Hillrom’s in times to our strategy. positive our execute this our mission close value and to provides crisis and our portfolio, to innovate the assurance like rapidly in diverse of these. like I’d prepared remarks ability product by The our current adapt reiterating morning to commitment

is sheet including balance optionality emerging growth and the to invest strong and strategic continue us market product new our Our in innovation, affords acquisitions. to priorities,

We add on longer our well-positioned are fortunate will health to term delivery. that value to growth to further play in to the response global care pivotal remain COVID. role we And a focused prospects be

thanks Of the our dedication I and daily I our and and On entire that possible course, stories share help they and life. about customer while we am and teamwork, and by acknowledge the Hillrom words success patient messages our postings heroic extraordinary We these call employees’ efforts. dedication Company our employees’ without none support, inspired mission encouragement. our consistent of work team. the as would be efforts, receive Hillrom hard stories, a humbled inside of of power our Strong, role basis, of success to and to bringing and

And turn call over to now, So, let’s the Q&A. thanks.

Operator

you. Thank

replay to question-and-answer participants seven Hillrom’s be for www.hillrom.com. session [Operator this begin Hillrom’s that at days will remind is And digital now will earnings the like being available QX recorded. on Instructions] call call. We of I’d a website

participant first comes Larry The James. -- Keusch first our from question of Raymond

please? question, Your

Larry Keusch

everyone. just John, pandemic. execute of to morning, guys to I doing demonstration a are during some Thanks. Obviously, what questions. the lot Good you of continue guess

thoughts out the guidance. and of some just dynamics year, I about think at you’ve how But, view you ramping remainder point, you what’s thinking As are that of the the just up your procedures recognize about by governments now the may hospitals this suspended of the remainder to as think how relative kind either you right around preparedness, the about or shake of Again, here? high level year? kind

John Groetelaars

Yes. Larry. Thanks,

strategy. about let vision of First, fact, of strategic the prior our feel we care really that have main vision our me That connected in start post-COVID of COVID throughout current the even criticality reinforced. environment time, and priorities environment. and good in the hold really pre-COVID and and the the with outlined and our environment, I this period strategy if intact anything, been advancing

in can are resources of in our without course look deployment invest really both, tried that position this, communicate we external opportunities. to enviable So, stay think in and comments, contemplation radical I the continue prepared in a I we’re for significant capital I shifts inorganic and mean -- to as and to internally we

So, let first recovery. as start around with me a specifically that backdrop, comment the

fourth fourth our ever really it quarter I’ve to in I networks crystal volumes? had and interactions a elective baseline hearing that come to saying. to what to providers. quarter, consensus quarter, and the it comes are start around back we what when think, to back of hospital growing ball That’s that what get group no back. the and pre-COVID accelerate. continues kind And with think, listened a we’re our We’ve of it to a you’re CEOs like there’s our and major in providers much fiscal procedures determine see our we activity line at pretty the current very half our lot as one back looks provider fiscal closely I that CFOs. with Does and enter of return peer individual has

transition next comments what over care effectively hard months, So, up And speed our our to we And of hard reasons quarter the our and even, quarter the demand our the suspended fourth is like, the shape is recovery third the those around areas. main and six ends to and our between some some are looking of really guidance. in health predict. really of predict

a a Even though like through the -- halfway very with outcomes not year, what new lot we’re our never timing just of seen versus before. QX own equation fiscal is the variables look of that we’ve QX in will complex

important, up then implications arrive, and kind from care understanding equally providers providers, and those open down a not COVID think recover who of area, So, are the argue well. pretty did financially in One financial as of things suffering as zone patients to would wave to start begin health both those have we in of they’re health those as that and systems impacted. shut an general, care hot states that the here COVID do to impacted of significantly heavily and activity not the

the macro up. think, provided begin actual that’s money to flow starting bit comment, approved comment, those and Larry, thing of from around of other just only to a and is a show Congress. I funds stimulus of that’s The the been I point the really would

is still they haven’t total they have them, looks the And funds the what an ultimately amount received do some any to for that portion provider that visibility so, -- but like of them. to amount allotted unknown. individual received receives small of nor They’ve

with care. activity along ambulatory of surgical, So, current get and and providers understand of next the resumption normal we diagnostic in uncertainty months, should care That have P&L their sheet. don’t around resolved balance own their where a period of couple short the

customer, acute our come that of better the two implication think we’ll much what environment. group our CapEx things the clarity is then environment better what centers, provide will that understood. care customer think, able those biggest I of the And I once be for be to together, So, -- on to

Larry Keusch

forward Very sort buying your in And you’re beds find suggesting, pocket. now super of Barb. you got good. may one a air the of guess, an I think But, the one for into might a of Okay. fast and I pull comments of one one little sort here, be represent just that you just would that maybe yourself might prepared that a But, again, on think case. right not this demand. other bit

on you’re you out may why seeing could this and if then, So, again, be for maybe just what you situation? pull quickly there not And expand just Barb. do think forward a

I think, $XX if have non-core I to of million thought fiscal $XX now I million. for you’re revenues this know was I that previously in this right, closer looking year. it

So, am changed? please could on just understand Thanks. you right if what help us that, I

John Groetelaars

take I’ll revenue then part, pass the piece Yes. to Barb. first the Larry, over non-core and

at slide nice look that significantly comments, mean, in I -- a our respiratory all demand, XX think, seeing as are in high stated in of I in my a portfolio, resilient think care, demand. presentation, XX% depiction I our increase demand, of in stated our as significant we signs the XX% XX% that which beds, of if vital you really of thermometry, prepared you the experiencing high gives of is both I monitoring, comments, those part

And near-term think our Roughly U.S. was the or increased it expansion to On demand it think of at was visible forward than we is that increased there pull did portion, not areas it, saw for Europe, of just capacity. have suddenly we’re our around provide commentary pull-forward. working. we an we pipeline of us, much we as demand half the additional and to actively And clearly for least that more Canada many bed of -- how capacity. of pipeline, tried we and around where and and half

XX% pulled periods, So, was future the than in roughly, category, a demand the bed near the from little remainder more was more term. expanded in and forward

I we’re a mean, very obviously think robust QX. I at said, looking that So,

orders like in backlog and We other monitors and have continuing quarter, have good the smart these into we building some significant, products. orders visibility of beds and backlog coming to record it, of respiratory products critical and a

to a to give that QX. continue near-term strong us those going we’re So, visibility have very

rush for and we’re expanded that transition. happens out it we have you What which how be the None this to is transition, a going we for well, laid capacity. sustained, to want of us this sake humanity, have I of think ongoing

So, there be a will transition.

what is as environment agile positioned time allow new -- health I is, into well our represent portfolio we’re adapt we’ve it and the will lines that products these us like about to that that I for some value the patient in and I of the being it transitions. to to broad as think What can care portfolio we remote care our when for really adapt. us health And proven quick growth as love And future products diverse comes, be transition monitoring. of respiratory driving transition are from away some nice and portfolio critical along opportunities the and to

And, around Barb around question for over revenue. to the I’ll or it comment the the noncore turn -- the

Barbara Bodem

for Hi, Thanks question. the Larry.

had we them international OEM Previously, to estimating that our million. demand some was right. the revenue going $XX business We’ve be surgical increased from seen actually noncore from quarter. this absolutely You’re been

are about not to year. exiting change change this to the goal next of working we’re million. does to calculations sort our for core, It that does our retiring we of estimating it’s it so, going $XX noncore trajectory business, be that. And not closer meet therefore, nor And

Operator

Wise Stifel. Rick of

Rick Wise

I to and of off as recover, correctly. it just or as this over thinking in detail but are we me impacted, the you unfold expect just given us -- connectivity accelerate could elsewhere. sounds critical could on next understand understandably if demand, about what’s Let it helping a correctly, potentially happening, that, possibly maybe you how And appreciate your significant expect part that thinking how it a restarted? six about mean, more the part with hospitals it your Care spend John, Comm I’m and start initiatives like of exactly Care bed months us Maybe possibly the minute strategy, get was you Comm. and know I’m business how don’t story I focusing obviously, help smart little if

John Groetelaars

Yes.

us Comm and double-digit in double second So, for did Care growth the Voalte. for digit deliver quarter growth including

So, of phase ended for category hitting, feeling good, even double-digit into up we a we COVID us. came initial the as product still was quarter with the growth

we on quarter, so we coming customers ended sense. saw However, the completely makes around be preparedness focus the course, were to and patients of -- And as restricting indoors, that COVID. which complete about access,

that in of still and these and patients verification restricting to be taking care to communication phase need to systems access install and We’re the of recognize able there complete our on be validation teams would and site who be to revenue. to of the

to our again the begin fourth expect to of our along greatly and can revenue will quarter, in complete get -- fiscal work that and that quarters. as we two a sites outline into improves around and get we So, fourth in can our try we we And the we trajectory recognition there back get next going. quarter, the occur access majority

the products hospital of one was launched strong response. solution Extend, in several in a use to period, was met field a interim the with for off-premises specifically. And was five we deployed which cloud-based situation that In applications allow around Voalte

how many you current our strategy the partner I think was And clinical is take and around early environment. best with can AgileMD, the warning the connectivity help offering to small patients with and to We around great in which be happy a do practices develop of COVID-XX, good which we detection and are really level, the specifically around also digital and pathways that products some about we’re doing next who patients, an AI deployment partnered of early intelligence. this technology for times so insight you -- monitoring AI with provide talked to company pathways deteriorating, really

real communicating As strategy, does potentially able workflow, it Rick, the relates to this that question to in isolation, being to of think, you’re respond your a right, the patients. longer I and and with very closely patients absolutely second importance vital in are condition around clinical their signs validate term monitoring who part time, adapt for of changing the communication,

visits. adapted solutions isolation, as help ICU and to PPE, preventing manage patients, I these Some of can be easily mentioned, in preserve

acquisition So, able we And did the think recent example, with to another is and the see room. good patient that is vitals on without monitor in have live You the well we a aligned. and smartphone, patient Excel status be interact strategically you’re right? Medical to waveforms very with

strategy So, right we reinforces us COVID post path our think the again, we’re -- on gives as confidence and that it here, world. a are we about

Rick Wise

And just financial the on Great. maybe side.

your think are mix, new had record excellent the mix quarter? you and a cetera. How about the of But, we are the obviously and to You going capital now? What portfolio a priorities financial, seeing, no, just be I’m headwind doing is on next in the sustainable maybe seems But I It as gross not higher couple you’re actually we because anything talk can moving like about quarters, I’ll think we’re it? the the portfolio, et margin. sneak should you now long M&A. give -- path them know to or to long-term because as strength tough as deployment this the guidance I’m products, about expecting level -- just next in precise. it’s at of And are for you --

Barbara Bodem

Hi. Barb. Rick, it’s Hey.

talking First, about margins. gross

really about that in that not expansion particular, of we the as to that dates, in you mix, first actions. of that mix. we half in the of from coming you’re have XXX anniversary those saw about it’s going see coming divestiture surgical of well the of remember portfolio XXX half the last as When is important that QX points, that get healthy to those think We And from consumable the contributions year, But, business contribution as first same from portfolio part lift acquisitions. year we from the gross year. of seen our margin basis

you wane the as think about going that back of the So, year. is end to

the as of portfolio that’s our mix about remainder some our think you bucket earlier, to do in XX% Now, products. margin some of going think about the year. see are there’s lower as of In that outlined challenges that John of the portfolio, we the

think latter are. will product we we us. But, changes a be the overall, the think year in will about there there and demand of what and mix takes cost the many for look as puts be in part underlying still So, structures positive at

just of in think will mix, in demand we take activities seeing the but about portfolio positive our also the half the see reflect So, the I over and would year, of in changes that you gross do we’re of contribution the to the anniversarying think margin how into from course year. the encourage consideration, we’ll just second M&A from

With to regards strong. staying phrase the I is really Balance deployment, Cash that to think sheet Access capital about as when used earlier And John deployment. is is would good well. same position we good. exactly the about course. say is that the capital capital

priorities, And and our to ongoing foremost, we’re be looking when going as we’ve we so, think growth for about about opportunities. talked before, first

us, M&A for So, the right priority remain for the will looking with financial a strategic M&A and criteria. right

just all. in That’s that changing the XXth continue to will something that a at dividend. year We That’s dividend. we’ve it. increased not our increased see maintain row We recently our we

XXXX. the this of started beginning we to over repurchases, And the traditionally the just the repurchase a in really markets completed dilution felt at then, before And in managing we areas, year. have stock dilution course to QX used for way year’s of offset here, regards with as fact, repurchases be other COVID of to our

front to finally, to And the we us, we going go if when right have options build cash our whatever we have for use up investment of pay see we’re don’t then, continue in after to and coffers opportunities. down debt to do great

capital we the as think about course priorities really really, deployment. changed So, haven’t the staying here,

Rick Wise

you. Thank

Operator

David Lewis state online Stanley of the with Please the Morgan question. is question.

David Lewis

you’re and John thank that the investors of out mean, hospitals, and significant There the the I in debates kind clear are And for want bit it’s you months. your business. months. I two next on very is from next going John. there, quarter demand are six very think to see don’t I more, presentation doing focused for out morning. all to in Good a the some got go know, patients little you’ve six here questions next team. I John.

XX to that’s challenging. just sustained; some If acute the and going over preparedness to the to is months, environment of the get an level you think is, that to going capital see dynamic is going and XX they’re one other demand pandemic be next is this debate

are side equation, And there officers kind and the how my of to saying capital what procurement for think from to crisis XXXX I financial compares have future? have were are, follow-up a Barb. how the perspective? other questions about quick So, this one they then, prepared the hospital And crisis how then, do and related they you CEOs on in the of be prepared

John Groetelaars

Yes.

urgent on into the I and elective early planning We’re middle level door, innings, on normalcy time, think, back right? at the the with and the of in it’s getting illnesses still crisis, procedures. same these of in coming dealing some

our not and internationally prepared -- in their tremendous urgency The and and that we early from their have med-surg indications enough mention Whether would be input equipment around on and panic eyes both intense were we had in their or beds a there’s of the beds ventilators that the off to extrapolate involved directly to that far monitoring in I but getting want environment, new capacity. into and and of amount we the in too not that U.S. like. wouldn’t were don’t this, was here people ICU providers, discussions

we some see countries the a some I think, we world the this worse. U.S. Europe what and would post with So, of could have this how deal how analysis lot were and in don’t the prepared, not clearly we’ll been it. be. the see surprised we pandemic were as as and be preparedness how state well is has -- been, in been and bad we here post around I changes we large it -- prepared various surg have in if We And our scale of capacity that around should well

here there’s a say. for expansion, early longer-term too So, to likely opportunity market

We’ve to in multiple review environment, been did of couple we weeks. And CapEx cycles and the then, I through this recently guess, it at before. looked as the through we again last we and a retrospective it relates went

During ways that is would worse -- and I some as and than the CapEx. crisis in relates different argue a crisis, a this, liquidity time very time, financial during uncertain and uncertain it Obamacare around to which around

decline of a in XX% saw double-digit time, what that now During we is our portfolio.

headwind you’re we get XX of -- would future, that into represent time to about past as X% frame in the talking the So, months. a about XX

that’s headwind develops, that reasonable I think scenario don’t if a we would think So, that. to consider. I view change our on

is look does what It what look When the we QX what be does will come What’s near-term QX period. unknown it like, QX, transitional like? this will be. in off this really strong of

to an month and an COVID without us a vital their and there for monitoring environment. patient monitoring propositions and product But, And are the I we -- that office, care portfolio our SpOX. care be highlight adapt now well-positioned our driving ventilation monitoring needs our allow directly temperature, also, to emphasis move patient think as the around patients also with to value that that but without the ideal website and introductions, connected to and care in this launch. ventilation as special patients devices adjust that in and as Comm, times through we’re for pressure one Care them, our for clinicians around several setting without for multi-parameter have home device changing app is seeing on which extremely Comm be our is remote the home monitoring, health of that acute and signs one at that think, blood with in our the monitoring ones respiratory and in with remote strong them the going we do or a seeing it to integrating our telehealth. our deserves This adding I Care remote needing vital acute a allow next signs pivoted we’re from come monitor to setting ambulatory attention, bedside, to having business would will pandemic. new well platform, of will I of And in to

that think I So, Company represents yet forward. the as another look accelerated for growth we vector

David Lewis

detailed. very, for XX Thank That’s one quick next And a you the just that. months. helpful over then, for Barb, you. very Very

thinking giving companies the of your decremental supply struck of from I with forecast dynamics, logistical demand a of means specifically, but intermediate these sense Can definition for kind are that capacity are kind what what manufacturing what margins us do these comments the here. upside businesses. I perspective increased margin process? during to a of here increased type a is with was incremental how what new volatility that many and upside. of decremental the environment of significant having And our over numbers, you’re and seeing of think, some to of and I spending margins this spending support give guess, by us you you’re and and associated of device Other about type to some incremental of just significant customers spending term?

Barbara Bodem

to David. hear worries, No you. Nice from

As about to expand additional our about some done capacity, how we what we’ve we’ve think talked we’re doing hiring.

QX, transportation. productivity done in cost headwind well. into we CapEx some to the the we’re XX general, reprioritization and still as to were yet right putting overall basis of related regards points spending there real that has with some that experiencing sure But, We minor And have that seen only in of we’ve freight make that already in improvement. posted we to our equipment and been

we good supply with offset result a stress not the our manufacturing of the the as the got more our we And on organization. handle initiatives so, material. like have chain. feel that to And in we’re incremental ongoing costs a way they’re coming than we’ve that But, that are able in

John Groetelaars

less Yes. on. And outlook confident is less the meetings is course, -- so on David, looking, only we’ve there, and as our and might we I money make are as we’re saving seen being other of point as travel and

out money -- We’re product can this and adapt. side that internally redeploy we and preparedness in launches where of to state more new of readiness the out get the other and investments to a our really pandemic come of going back into adjust

on speak. So, organic going investments activated and those are we as are

David Lewis

Thank you so much.

Operator

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

Bob Hopkins

the where I’m and some I and that other beds you to potential for you and follow-up for potential guess, And you capital and I’d good how Communications. capital, the Thanks outlook that demand all the least have intermediate lot But, cycle. at sit kind what the ask term. been the today, call I characterize on the level the the you’re for highlighted uncertainty multiyear that asked, a of wanted possibility. way the to Care beds on would morning. And this curious of from what one on about near a seeing the and I just of for actually here Thanks Hi. Is low have, conviction there’s happen? on detail. point? from of already level Just questions realize John, much if conviction how conviction this point, high sort that’s today, at might at wondering you you question

John Groetelaars

Bob, as models pandemic basis. day-to-day on a and what more we’ve do all looked epidemiologists acutely various learned at

of significant across where -- highlighted country, in one our in woefully the ICU really these they a we’ve United country. me internationally, to demand another capacity seen are this an point outbreaks. came increases or case, of particular spoke area Italy certain that I in or in they as this the action recently become States, we’ve I’ll team view, a around in here of -- our And pandemics volumes spots to and relative of it’s become and orders the of in recognize in example. think whether capacity, particular, it’s Canada, to with from point was kinds flurry short ICU with how deal And their they out

was. very situation, a even have difficult And capacity potentially namely the ICU York, some regions New I more probably have should hospitals where is field Jersey, more it hard been been place, in New close. And that really the have it’s not without that put than who that were at it’s So, came think hit, additional really they could clear worse international, be. level it actually in

do so of it I I’d on is recommend the to post activity that this something speculative. action in this -- it’s review But, So, area. say. be postmortem think likely early surprised to if didn’t that’s or going the

XX-XX. XX-XX. conviction said, than than that All So, less level? Less what’s my

a have humans unfortunately, -- memory. short have We

it’s So, have in going take is area But, warranted I on if I our lessons once behavior. we really know that to passed, this better we’re and don’t change think the this capacity.

Bob Hopkins

growth $XXX the question, XX% double you think outlook answer. accelerate, this whole Communications Care pre-pandemic, I that business? that of Communications, for around And Care it for so on business outlook long-term there’s a business a because decent-sized you to Is That’s that for Care of inside rough of today, of business. a that know to and for just Rick’s understanding side growth answer Just a pandemic hospital. seems fair growth thought in potentially Company, you durable the but now. limited I it’s digits? roughly plus? independently, And the Communications to kind durable about for is do that other other on is I today connected potential on the know, what outlook the on the install -- outlook this Is million, a what pandemic, around wondering, you’re to terms need side your all you think it acute. thinking ability I’m for it Very the given just then, heard guess, the for you

John Groetelaars

importance of and you of place in I product the and really But, offering of puts get can in the tell It expand very the some frankly, there with quickly assets a the there, quite did remaining and We we my rapidly think outlook, we think prior exhibited with view position over were us re-visitation in it growth that digital three-year I added period. strategically And speaking, through out acquired Medical. Excel to outlook. have some not guidance for a it AgileMD, we view. acquisition to very as kind recent the reinforces and -- to the with direction innovation partner is That’s in good of opportunities have adapt best to that’s partnership a question. that need this double-digit we was year and the innovation that our taking take for there of going and quickly. great our Yes, year. can what the as the does next growth our about area part under change

acute more even about communications smart it. So, in excited about it I’m clinical And to prospects monitoring beds of beds, of excited care and setting, big looking value the care the taking the smart and with we’re that in off vision it life integrating the to meaningful setting non-acute but also and making at sure do in future. way, premises comes a ways in that to adding

business. I strategically, So, think great

We’re like going continue And to there. invest to we really positioning. our

Mary Kay Ladone

Jack, more morning. this questions for time we have two

Operator

a with of Barclays Stewart on Please line question. Kristen Certainly. your the is state question.

Kristen Stewart

Good Hey. morning, everyone.

Just a questions for of couple me.

Just It’s first on slide helpful. very this just XX.

kind get want a Just XX%. of for sense the to

having $XX It that is. third kind coming like. kind business? you your can contract of sort the to I harder The understand upside, XX%, you’ve of what of upside quantifying downside they just you’re of guess, looked backlog us quarter got think, the of time any But, some what quantifying I I’m in XX% know, maybe of a million way help that in size from you’ve that’s done I fourth in of the anything said or just like backlog good significant just demand. particularly like And more resilient of I that? job HHS, demand, the of seems trying of kind seems just size have the reduced dollars follow-up. but kind the quarter. in terms level of way other it then, any rest but a of the to one

John Groetelaars

in being do orders things to orders tried in the level the side comments total. that QX here in on our We our level, in Kristen. beds above normal prepared Xx of XX% our with Thanks, bed Yes. and having slide

indicators probably at So, best we this provide the you point. can are those

hasn’t our it’s very -- on to of capital April, QX continues solid. into the a That for come whether internationally What versa. vice it’s or in versus to look here we delivery whether beds some ship it’s this might surgical QX activity, what or changed. around As the project side we side, or view or a -- easy,

primary to and can around and predict the the we were -- QX, guidance work that of surgical Comm the and shape So, just around in installations Care decided reasons to that get because we is of there complete the the our that of back that hard one slope where recovery, timing scheduled. withdraw and QX, timing element and

So, I and I more. just have ball could I don’t of give wish you QX. clarity between the QX crystal the

Kristen Stewart

correct up is XX% down be business the wouldn’t kind of of than XX% of and the or... it down, XX% looking And x to the more revenues percent XX%, are your say, then is

John Groetelaars

XX% it do and what then that would being XX% Yes. I stable, guess, digits. into if to pretty low is, flat you single take put I

It XX% remaining -- to double declining. that’s XX% So, than rate in those seeing and at gives supply higher have I But, up takes a strong inventory, revenue, that and offsetting can’t it’s increasing XX% you your the areas. much ballast you you product the directly this it’s a production time that Right? XX% doubling so increasing area that’s factored took action timing and a level ramp of means us, where to chain for a because production significant So, correlate. then the mean, a to Doubling we element tailwind. of many replenish declining. Right? sense to of -- we’re is the element the high-double-digit doesn’t get in. it growth now,

Barbara Bodem

is elements, where it of right, going just tricky upside and that’s well all Kristen, as downside. becomes becomes the you and then it And time, about gets magnitudes, to both match sustainability are really would think those the another. to those one I how about both those about the add, it up that of

Kristen Stewart

Right.

John Groetelaars

one the think sorry, -- And, Kristen… yes, Yes. I -- I and

Kristen Stewart

no. no, No, ahead. Go

John Groetelaars

beds, The is We deployments in connectivity, a in one with requesting are those, of with a thing again, fully beds, there. with the sensors. surge clarify them to smart sense right, lot wanted lot of early just that I featured saw

think to because. competitors the asset. in So, proof a a is of purchases, said, that’s really we’ve our a to This like going future us you’re out positioned making want our because pandemic, well capital what these we when always you’re there even long peers you’re and compared buying middle lived

to make you’re to demand this most increased want add You And out sure I surge. think, it. get features future to we’ve been to going well-positioned the of

Kristen Stewart

type and you like associated, said all revenues recurring have all those And watch Right. of those? sense

John Groetelaars

right. That’s Yes.

Kristen Stewart

Yes.

the that extrapolate these those right, Okay. the you timing out that on in on things see probably these made and you don’t but sounds not, seem going just kind had it Barb, net-net, then what forward thinking we’ll may, how sounds hearing the directionally, kind of coming it depending shake upon future quarters order still like quarters this event XQ, like of timing comment just this maybe your And out, guess, timing kind again, and quarter, I’m guidance. some thinking balance, you’re you’re maybe bed of the look maybe numbers like, on with think, positive it of numbers of kind sounds not bit like kind I I a with of the if and deliveries stronger of

Barbara Bodem

Yes.

of that are there certain think feel things terms expansion. can I about margin in gross that you good

all cautious, and need to where there’s that is and improvement And long in we You really too it’s be don’t just to timing peak timing. can to feel you about recover QX want that QX. we it clear QX, the expecting how is XX% where challenged. see certainly timing unknown, to you sustain this that we’re But of and demand the because versus much extrapolate in long between or demand it’s takes us high how being the the that’s

the estimate. for not really reason because So, that guidance a for we’re timing giving is I year would just difficult -- to

John Groetelaars

I QX. we for but expect QX with be it can be kind at the you’re getting stronger will of of I and sake that just a high this, we than degree do we’ve -- think Kristen, said what to Now, that a than quarter mean, I like don’t QX better that Right? say think there, clarity, of confidence QX. seems

Kristen Stewart

Okay.

John Groetelaars

looks That’s of have like? it part QX? big visibility shape that on. the What is How the versus don’t just good we

Kristen Stewart

doing the for are Perfect. Thank guys on you all And so front much. line. thanks you

John Groetelaars

you. Thank

Mary Kay Ladone

Jack. close with more we’ll And one just Great. question.

Operator

ask question. Matt Please is line Taylor UBS Certainly. the with question. on of your a

Matt Taylor

my morning. question. you taking for Good Thank

versus microcosm of other what you’re size So, much normally happened one maybe I there, of Canada. I question ask talk to the orders it it that in you this a seeing Could folks bigger see that you a what for wanted the you sense contributed, to to wanted kind what is about referring the were represents of of how market? just that kind expansion there? because and just in get

John Groetelaars

and Kay to of here, in -- It’s But, that QX, think -- delivered and saw Matt. going specific get our fiscal it’s -- overall part looking. but we numbers part Mary I is is QX. the don’t Yes, in have we got some demand delivered

today We’re that QX seeing out. playing In in Europe we call, Europe on than we QX, be now to discussion. was said care with prior remains part delays, stronger and that didn’t there We earlier. critical still perspective. have And about the our and the that were a to our the also talk outlined project going seen our reinforced is demand products we’ve that of demand signal and going in EMEA

basis a contribution we’ll international see So, implement. on from as they nice a go-forward

through. of of Some as increasing was -- by home level came of be kind from of to one moving where the coronavirus. didn’t was ICU get capacity this market We the they close in our It for new a saw Canada. were these one expanded for demand almost in to we demand funnel. example demand as clearly expansions wasn’t Canada an anticipate to province And province, prepared coming quickly of

Matt Taylor

million be products future with for had you this used state of ones in guess, follow-up, And federal any conversations have non-invasive And a products HHS. the about as have the I for And mentioned international order could a are governments Okay. was with I stockpile? your or for earmarked ventilators then, stockpile? those $XX you any you wondering, that government,

John Groetelaars

I will they’re HHS. FEMA distribute with This go either one through think go scenario think, will to stockpile Good question. destination, that Yes. what their it, or working will in is. And, I $XX million that it

you’d usage which same had purchases see the make mechanical stays the product that help right in patients support product. there’s or deployed We, non-acute to gets potentially ICU provide a But, next that don’t and level in case in yet and actively we COVID setting, support also ventilation have hospitalization, the real which of trying benefit. want a of patients a have also several and to use home we of additional follow that. it to course, do if -- just be there, for of some at could case haven’t the be like looking states it We but the developed you the it we’re oxygen it plus And avoid ventilation, use that provide off clearly wean you will use. setting ideal care support, to because can avoid of oxygen with a

Matt Taylor

lot, a Thanks it. John. Got

John Groetelaars

Great. Matt. Thank you,

all And forward call we Well, the the to And interim appreciate might questions our meetings interest. thanks next we and for today. everybody look your and I have. update

Operator

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