HRC - Earnings call transcript Q4 2018 | Hill-Rom Holdings, Inc.

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Operator

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

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

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

Mary Ladone

Good call. joining quarter for morning, our and fourth fiscal us XXXX for conference earnings thanks

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

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

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

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

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

John Groetelaars

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

financial ongoing and was our that issued financial earnings growth expectations. to and you value and exceeded portfolio long-range execution. on our strategic We As in operationally our saw deliver successful our disciplined commitments commitment this a the priorities, This performance drive to reflects morning, our year our diversified year results release with the with business to in sustainable of core XXXX fiscal very concluded Hill-Rom. for strong momentum

by differentiated markets healthcare and value build our presence solutions, innovative strategy category shareholders. emerging for portfolio will leadership our we outcomes advancing forward, in and enhance caregivers patients, on the expanding geographic this transforming to and success Looking with

of XXth earnings conservative per increased quarter a the adjusted diluted growth. For $X.XX share double-digit of quarter, earnings fourth XX%, our

earnings guidance margin operating from $X.XX lower factors, mix multiple both and for new per leadership of successfully with revenue company. We representing by favorable new of diluted supply basis on with chain increased our and during completed SG&A. efforts, new expansion driven we of XX% Notably, in of XXXX initiatives Margin quarter. efficiencies year, rate. line strong earnings adjusted and to guidance, company, new each an and a growth core points tax milestones delivered share, the from the product and portfolio optimization margin revenue achieved important record the disciplined For XX.X%, also expansion products, transitioned a XXXX, XXX reflecting momentum, the was including manufacturing a leverage product

growth the core foundation line X% and solid in performance the this perspective, progress with for objectives. plan, our a From X% accelerated business. more three-year of diversified long-term half, year and the in goals second a establishing from durable is Importantly, first half revenue setting achievement established in reflecting in our of the a we to

to X% our with our compound objective X% growth On guidance. core excludes core X% growth increased For range. X%, year, Mortara Mortara, revenue before aligned revenue in the three-year in date, including which of we the directly a line basis, generating annual anniversary with delivered the full

account Asia-Pacific of encouraging representing in markets was single-digits, XXXX, core order for year, XXXX Canada opportunity. international an today revenue, more Emerging business represented business Latin strategic top our Hill-Rom's and the the X% East driving a the for representing important top growth sustained of in for XX% revenue. annual international Hill-Rom's growth excluding growth growth large accelerated line an X%. Middle Middle only was and while Europe, high and collectively growth grew positive Our remains in than consecutive Also, priority core but X%, achievement East in beyond. America total Core we headwinds. second

We QX. having during markets, in added are stages senior Asia-Pac experienced in our early leadership these reinvigorating in of operations commercial the

conducting the into and of growth a We support are robust product now assessment categories go-to-market future. to the plans meaningful

exciting most new with products innovation top With headway. of year was of impact than in of our this we on highlights are the One the generating million $XXX the making ramp, significant line, revenue. more

several In Integrated one leadership portfolio, of XXXX, of growth were early which driving fact, key and - to XXX a in Monarch core in rate. Motion, more meeting product strategy measuring market we our Spot our in year Monitor, innovative consist above and revenue, XXXX and Centrella, This our generate is Screener goal. million the XXX Spot Connex weighted our average this including success System Vision the the new to the Signs category RetinaVue. our expect than $XXX metric growth objective exceeding of and Airway Supporting Table Vision basis performance our products, Clearance above points Vital objective

to Support X% for year. the core Turning advanced US businesses, the Systems Patient revenue

the shaping Hill-Rom focus assets support market higher-margin non-strategic rental third-party allow emerging in progress platforms to to third-party by divesting significant down the and related and on expansion. winding strategic investments business. and business making to products actions are These portfolio resources the We surfaces new

our performance very its second launch with growth of Solutions achieving a from was Workflow the and handling Centrella equipment. in pleased PSS half in are $XXX patient X% to exceeding Contributing core ago. is nearly acceleration XX%. revenue We expectations, to Clinical million and Centrella a year growth revenue US safe this double-digit since

hospital growth our stable med-surg a ability we're accelerate period. environment, to spending with confident US capital a in multi-year over forward Looking

We beds. detection heart opportunity to continuous incontinence upcoming just US of integrated EarlySense, setting. acute surface have we releases of unique the new a have and reduce a of complications our WatchCare, and rate care in a monitor, on standard XXX,XXX respiratory and contact-free with device penetrating aging rate an commercial costly the set care scratched installed base And approximately

exciting to application We members connects new And now the portfolio. to East expand commercial to Solutions pleased an of launch digital discussed LINQ opportunity our Centrella of we and patients reach Workflow team mobile the real-time. Australia to the LINQ information the our full quarter, care in other, our securely our availability US. of expanding the global Last XXXX. that their announce unique Clinical to within are communications and also patient we each in in mobile with is business are in Middle smartphone

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

investments in to We and analyze at critical the continue access pursue to bedside. information technology

acts of vital our digital a the connected for ecosystem. acute excited are an hub number support digital We technologies new the company. as growth care increasingly investment of transformative vector believe which that bed will by opportunities, and We

Front core the as to on fourth a Line including and constant-currency new Mortara into as on the Turning new a markets basis Care, in quarter products with US. of strong innovative business well a and X% basis, channels. This is expansion revenue on X% increased capitalizing benefit

grew Vision Respiratory Care success Vision System All the double-digits Clearance Our for advancing campaign Screener and Monarch adults. are the with with successful business the in children our both introduction we the of and Airway of for Spot

stream placements the to for year sales RetinaVue and recurring has accelerating. the revenue in been Device results. yield beginning dedicated in for steadily increased investments team double-digits are the Our

our device XXXX, one of represents long-term With later the RetinaVue next-generation easier-to-use of the in exciting growth more launch opportunities.

constant-currency a grew for Lastly, Surgical the basis year. Solutions on X%

difficult East in the products comparison related New led way, Middle the large lower revenue. international a to offsetting partnerships a order and and OEM

than the those throughout in Momentum continuation seen year, Integrated the we've Motion this a revenue with XX%. Table including the Solutions last of factors, years. Surgical placements Excluding business strong two increased continued growth record and more mid-single-digits, of for in growth two

We In in are business, high select flow, allocating penetration but sustaining efficiently not exiting rate international attachment position very will we leverage XI XXXX from to in XXXX, summary, the only down paying we on markets Japan. shareholders. increasing our like reducing of cash a also and Robot the generating returning and Da debt, to a our Vinci and significant US are across value capital focus Europe strength, operating in

XXXX, by dedication by mission And patients of deliver we our their solutions energized Hill-Rom's revenue and their are forward look healthcare and outcomes will employees, and XX,XXX progress the growth, our team's innovative expansion focused of profitability. customers enhancing our are who for year proud extremely of I'm We and accomplishments margin improved patients. caregivers. on demonstrated to our and another to

like moment Before Hill-Rom leave turning his I'd his take comment our on Line the morning a X-K past call years. led Hill-Rom's to for contributions wish the success Alton business to well CEO on to regarding has we issued this over exciting and to to three Alton I'd Steve, new opportunity. position new like thank for Shader's Care for endeavor. him Alton the an Front to

and external turn successor over Steve. fiscal and Thank that. search will naming a We you include review which anticipate a now, of quarter. it internal Alton's for during have successor, both me let initiated And his we the first for to already candidates,

Steven Strobel

Thanks, John, everyone. and morning, good

As $X.XX and benefit reported includes a per earnings fourth charges. legislation, in incremental growth, These our results a share. and points These $X.XX an tax release, the the per tax as rate, after-tax the diluted a items in of tax intangible share to of compared mentioned of a a amortization, XXX tax reflect revenue as $X.XX business related to press exceeding the $X.XX prior of special quarter solid year. basis share earnings share $X.XX in stock-based per GAAP which to guidance well expansion diluted diluted recent $X.XX include from core of margin XX%, reform. range diluted compensation benefit results the other per Adjusted we to optimization special operating related reform lower increased

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

basis. quarter, more and million guidance at Core the increased on end of our fourth revenue $XXX a constant-currency X% both top a fiscal the grew reported range. X% revenue of than For

core currency, driven increased few quarter, reminder, Asia-Pacific revenue revenue in the first International a was international Care. very Domestic of have Front Europe, assets X% the revenue non-strategic a reflecting more strong divestitures in discussed Support following core projects, exited. headwind in Sequentially, Line and for of As primarily adjusts declined core in the foreign by we've timing the quarter, half Patient on and a outstanding Systems X%. fourth and of revenue core the X% basis year. a than capital impact in we performance growth up

of Solutions segment Clinical is and reflecting million second across categories. safe business strongest product double-digit and a in as XX%, the on X% X%. the year This to moving each with I revenue core capital of that med-surg was basis bed Domestic discuss systems, and will consecutive all equipment. Before growth Workflow I keep core in handling constant-currency growth revenue growth key revenue Systems, Patient accelerated the address advanced Support only. on, healthy with increased patient quarter performance Starting mind $XXX

US total also conversions. our revenue, of XX% reflecting a nearly from only for contribution med-surg accounted Centrella Hill-Rom existing from but not customers, quarter, This replacements competitive

We of continue the accelerated of revenue to Systems be an Europe, Outside backlog mentioned. capital core Patient to strong at launch the previously US, very Centrella growing Support pleased timing as in X%, and due declined orders primarily with that's pace.

geographic revenue portfolio to Vision Now growth. to US driven Canada continue X% we Care, in driven grew by $XXX our penetration by collectively the are Performance and X%, position contribution our brand X% moving increasing the from Hill-Rom's and increased of revenue future which primarily the for Asia-Pacific, by Allyn Mobile of new as we enhance Connex Europe, was International East, including Monitor, was to decline million. Spot leveraging across the commercial and solid Front Care and Middle the X%, infrastructure. portfolio. declined our Line growth business where Monarch presence, Welch presence Vest products,

Table growth X% million. Motion, totaled overcome Lastly, declined and $XXX versus in the sufficient to OEM Surgical revenue XX% international Surgical, year headwinds revenue the of and Asia-Pacific. Integrated placements prior Strong and not revenue Solutions lower nearly of was

a in on increased Excluding basis. global factors, revenue Solutions these Surgical low single-digits

original our than programs of transitional exceeding and to the turning offset basis year, XX.X% ongoing the the year, portfolio of SG&A year's in a mix, result, Now initiatives P&L. reflecting R&D reflecting margin rest primarily to in points. last disciplined Adjusted the commercial points of new versus million benefits from as Despite prior delivered modest our improved supporting X%, new key expansion quarter efforts. XX% increased and to spending commitment innovation the optimization tariff a $XXX of our costs more enhance cost exits, for points gross XX positive declined and gross and investments basis million to our capabilities. of non-core drive future guidance fourth investments related record Adjusted we as basis versus associated from XX to impact productivity global and initiatives with contribution management our products of growth. manufacturing, as $XX procurement margin XX marketing products well

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

an $X.XX tax achieved associated the new XXX we our adjusted operating XXX year, expansion includes margin a with leadership in XX% stock-based versus from impact margin favorable the record third US operating of the driving quarter incremental least as share a executive benefit improvement per year. the points For This of fourth consecutive well compensation The as rate year last transition of of basis marks XX.X%, points. Tax an basis of unplanned of of diluted Reform. from at

stock-based XX% diluted share advanced new EPS which - fourth per XX% share. tax for legislation. for adjusted fiscal included compensation, year of the benefits per quarter increased from reform XXXX diluted the So a share Adjusted bottom-line, $X.XX EPS for again, diluted to per and totaled $X.XX $X.XX and

the tax benefits, these XX%. adjusted increased impact of EPS Excluding incremental

gross in expansion we mentioned, positioning well operating achieved John As for and the both year beyond. our XXXX, and three-year us first of our XXXX margin targets plan

to million XX% the to were income level Higher million, management lower advancing turning and year $XXX strong working $X record cash the this company. to from in Capital prior capital million, year. than cash operations strong net performance. flow, flow for contributed was XXXX, $XX Now expenditures the very for a

XX% As $XXX million free year. a cash than of result, last flow is higher

ago. than X as level a very flow just years performance, pleased cash times this are few higher is We with generated free now the

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

let XXXX. fiscal providing Now, portion me conclude guidance our by for call this the of

revenue For we X% expect accelerate X%. growth and year, Core the expected to currency to growth to to X% growth X%. constant is revenue X% of full reported X% of to

year for the expand components to both in approximately basis, review associated incorporated a totaled X% flat to excluding to Patient page decline periods. of three expected of Support reported By core now reflects actions. the standpoint, expect in profitability XXXX to we Surgical the is segment is points, basis in in mitigation guidance to offsetting XXXX revenue lines, to XXXX. exit non-core non-core revenue expect XXXX Systems primarily portfolio decline up result lower-margin Surgical adjusted product incremental non-core reflecting guidance, benefits, ongoing X% in X% approximately revenue This our supplemental segment. a million revenue business mix tariffs million gross and revenue the From accelerate of composition and Solutions refer be expect our non-core breakup. basis, on our to to in a while in $XX XX and we X% increase revenue, presentation Solutions prior As and given a assessment, decision optimization in current all margin costs revenue approximately Please quarterly X%. to the $XXX we is with XXXX. core Collectively, growth grow On and non-core businesses reported by the in range the in to headwind to calculated XX the our

We expect R&D of representing mid-single increase to digits, approximately sales. in spending X%

points. we We expansion expect our expect in again, key optimization Once XX% of XX.X% to operating and basis business program sales, growth SG&A initiatives. including XXX savings of of adjusted incremental approximately investments to related margin

expense, tax compensation. We XX% does XX%, including stock-based any million include expect and benefit other for $XX not a tax which approximately of to rate interest, of

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

to we summarize, of related XX% share. for cash three-year stock-based for approximately project to $X.XX of growth million total with the share, $X.XX year. growth flow with free diluted expenditures flow of From per compensation our XXXX perspective, approximately range and guidance to cash our a we million, diluted After strong of adjusted expect plan. per $XXX XX% $X.XX benefit million, $XXX long-range double-digit $XXX expect income aligned implies and pretax we operating the expect tax cash in to flow full capital of to adjusting So in earnings EPS

revenue on growth reported constant-currency quarter, expect basis first a of approximately the basis. X% and on we X% For a

revenue to of and consistent for share benefit providing related per share, of guidance increase expect year approximately earnings range $X.XX compensation the XX% stock-based first first EPS XXXX with We guidance. tax full X% of diluted quarter are growth our quarter adjusting to XX% $X.XX. XXXX core adjusted in After to for to $X.XX diluted per the our of implies

revenue the John the to the the turning does this new closing recognition reflect on against and XXX. first fiscal comparability But quarter impact back a mentioned our morning, results. guidance ASC for we and allows ASC for retrospective modified XXX adopt of for consistency press Before not comments, quarter XXXX first XXXX, of the This will historical his call fiscal in the standard, release we basis. accounting of guidance as beginning in

under turn over to up to And million EPS reduction have per growth, and growth. material in company's on that, revenue John. in up to of reduction Thanks. margin expansion impact with $XX includes the share. XXXX earnings a the will made time, quarter. will back preliminary when XXXX for also guidance I'll to a results a accounting impact reconciliation The the restated XXXX year our supplemental Our fiscal the to of January will is impact schedules of available full adoption the we results that while XXX, and report new results it's standard we financial that ASC financial At first of provide a note update of $X.XX standard the of expected in fiscal be new or diluted not the our the revenue for adjusted assessment adjusted call to important

John Groetelaars

XXXX, future. foundation Thanks, very financial establishes which strong for with Steve. a summary, the pleased strong in we're performance In our

with durability progress diversification from in million efforts portfolio the XXXX. making growth our of new more of revenue We than $XXX our and products strengthening contribution in are

innovate, growth will challenges meet our customers reduce with rate We by to revenue costs. and R&D confronted patients, higher to continue unique at a to healthcare than and solutions complications our differentiated increasing spend caregivers

now on several the and plans focused million and driving savings our have generating business executing finalized We in efficiencies, on are structure an next optimization our pretax over $XX operating incremental improving years. cost

areas, penetration provides new know, assess and in actively to our in to like position. finally, plan. current that upon you were innovation. to reinvest continue This And emerging financial align beyond priority market M&A XXXX flexibility savings opportunities long-range resources in not product these As growth our included us we and and build new key leverage

As we this continue acceleration, with our value for That as while in our prepared ability my margin we core mission, revenue with Hill-Rom's shareholders. year enter profitability we expansion, transformation, growth enhance on to our remain focused remarks. confidence concludes creating overall deliver

like for Q&A. open I'd up it now So to

Operator

Thank Bank we first you. begin Instructions] will question America. question-and-answer comes Hopkins, from of And session. now the Bob Our [Operator

Your question, please.

Bob Hopkins

and you Thank good morning.

John Groetelaars

morning. Good

Bob Hopkins

clarify XXX. to the to Just out with accounting - Steven, stuff start on

So that $X.XX the is $X.XX today? you message the provided earnings that guidance to won't that impact

Steven Strobel

take to tune a will likely, going - EPS. and in itself, I XXXX place the an of said I the profitability from we're to the could like accounting tune That There because revenue the growth negatively of was rate Revenue impact we to in rate in impact to need is way impacted handle or mentioned of $X.XX. it's about well. up that or not either $XX actual be margins to in XXXX the as per million that What magnitude, number growth the of in share order this impact be earnings and EPS standpoint. to an going

top negative of two Respiratory Respiratory isn't up rev-rec, this like of accelerate on Care, have, magnitude EPS two of in in impact need the revenue standard, the fairly impact over but The mind CWS. $X.XX I those going our where revenue in impact to base of defer of XXXX and order in line piece revenue fact to affects similar businesses, $XX small by to keep and and business, our affected in million XXXX. have but impact I CWS will of we're that a said, net think Care, you need we things a to XX% in ASC, rev-rec

to the rates going come will The So good. are growth little actual bit. be just numbers down a

Bob Hopkins

- in earnings well, as On 'XX so

Steven Strobel

Yeah.

Bob Hopkins

of it's a where know have preliminary, earnings - XXXX I you preliminary shake that estimate might Do out? but

Steven Strobel

I think said, Well, to growth change. like I the rate going is don't

to off aren't top So numbers numbers to off those come what gave $X.XX you those line to the rates you on of EPS of I different. if be new look XXXX, the in $XX at The bottom-line. it's million up going on and going a growth

Bob Hopkins

Okay. basis. line X% question last the - John And My then year. a on core in range years, of I fundamentally top for has congrats couple a mean, more kind the the on you company good grown is,

the X%. of acceleration, growth you. For predicting a are geography minute XXXX core for just to you to either business X% the Thank the the first for acceleration that while time talk you in up a Can or drivers both? about of guys an product or in by

John Groetelaars

Bob. by address been and me year Yeah, growth half it last our let X%. years, address core started at couple of over we the year, then maybe Thanks, rate first this that Like the you said, of we the has Yeah. the accelerated unit. X% through how business and by year

globally, X%. globally business that if for from OEM business to Front Line at grew was putting adjust an orders, we're the at business X% business, X% But basis. unusually core last Care on large our minus really As we recap, the and mid-single the just growth at exit in business you some PSS which non-core our grew large into and the digit Surgery year grew now QX, adjusted then US

year, Bob, exited QX mid-single we So basis with at adjusted an Surgery. in digit X%, and X%, the on

three in range no next of of to across balance year or rates units. We're because of of a acquisitions we in any the and all QX it's in kind business X%, in obviously QX, feel not our so that our businesses that much is to the guidance X% about organic any it. given second to our forecasting X% point acquisitions year, the X% at giving with for with range for So confident And had as we launching sustain that look matter each growth acquisitions. guidance in not ability half different nice

we're at feel growth rate a sustain X% very about QX good X% - core confident a to range X% X% as exiting in our organic rate we to get to X% So into on well, a and at ability XXXX.

Mary Ladone

It's Bob. the geographically in too. emphasize Kay as the Hey, Mary growth will XXXX just pretty and between I would well. be balanced US that international

X% business, that So to not think the X% pleased John his with I international we momentum also only we're in $XXX also are it's exceeded been year. X% across new opening range. million expecting in being our goal. each this And - X% between the very US the and comments mentioned to We has product

you our goal original was If $XXX about recall, million.

we're that and so is in performance incremental. expecting XXXX, not $XXX great in million all So of XXXX, now

As of products, we're but some you of our know, cannibalizing about be it incremental. half will

that's the revenue in so to core contributing growth. acceleration And

Bob Hopkins

the for color. Thanks Great.

Operator

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

David Lewis

indulge morning. Good A questions if you'll from few me, me.

with on kind start I'll question. John, of Just you a compound

divestitures divestiture, quick I've and for how upper do given that related a of strategic half to then guidance, thinking Hill-Rom just to adjust First build the range. you're 'XX. the business think in about thinking now, your OEM with I of now 'XX? But for follow-up. is the base commentary, And my got have the listen for about no from my you're the the comfortable is sense non-surgical that if much of X.X more more X.X it's And qualitative non-core, all you M&A i.e., you you to base that, can sense

John Groetelaars

what's points benefit Yeah. Thanks, The that's - XX or non-core, about 'XX. constitution basis in worth Yeah. David. of of reclassification in of the

confidence providing done did around this we're in to And rigorously X% cycle, are planning we've So question we to certainly as it efforts? we of at we guidance about, and see provides optimization captured our your we As everything feel looked portfolio portfolio. everything in X%. our today our we additional it the with

your but I little M&A, we've say, that these non-core call, this last up on certainly we our And at feel bit, I we're would into we'll since look can in this if time, captured ramped point Of continue efforts. about with indulge a then to everything course, over at time. really we've - re-classifications question

and about or time, quickly in of they're them As top financially tuck-in We're But opportunities. we pipeline most strategy. going certainly more of developing and the M&A strategically, units. in category we've resources nice accretive growth added be our to great are line business talked beginning margin see and category last a supportive compelling. the to to leadership to accretive importantly of bolt-on a and fit Many

Nothing that's share but in pleased quick to at going update on development of point on So there. the M&A. pipeline time, a this activity we're the with of

David Lewis

Thanks John.

Just Steve, two more. One for you for one maybe.

you mean, million quarter set around expectation or run it I over in 'XX. And above $XXX the million was, that's So think really $XXX you out stuck third I that me the of this quarter. rate expectation I John, for for 'XX. think said $XXX million pipeline the above in revenue

from tariff much. numbers. so is sounds like then about that number? drivers Centrella Steve, de-risk impact that $XX massive million million So sort hit lot were to million million in to sequentially? jump $XXX a Thanks was your pipeline. or to But material firm pretty assuming what around $XXX the Have so inflection of And $X.XX key $X.XX big I'll for $XXX a sequentially, back queue. X.X% of to that just improved costs you inflection in in I'm of the 'XX which million. $XXX locked number

John Groetelaars

we're product finishing new on Certainly there Yeah. quarter, in very the million. building momentum the Thanks, the the with pleased David. $XXX launch, year at

in of But dozen question that new no about bucket $XXX a now of 'XX. will basket that a one it. contributors, Centrella products, million projection about products. Our are, is number is the in be there or

measurement our So Screener Vision that is Vital equipment, our Spot in Spot Signs category.

big a Table Integrated contributor. Motion Our is

or significant above for it's it's that revenue XX% the ratio to at our just a about top them, that about us line certainly punch not products the good that momentum. average that our I mentioned same It are weight it's about about Centrella, of half as about XX% So the look on dozen of contributors, of we weighted major And adds allows contribution outlook feel we And a market constitutes growth. few in about growth QX. XX% of 'XX, growth of our rate. of but

confidence growth it organic gives rate. we mid-single digit could that that again, an sustain So us

Steven Strobel

David, an we into but obviously that, If - with to the would in we've we on and plan. with fully be the to rate. is right think The tariffs. $XX got million to into exposure our you of have rates respect the then at that than question respect fully $XX baked stance government that our go XX% we That's imports plan. plan state at to the million to that's a additional tariff that's China now our raised it were have that from the higher us, baked the

Operator

the James your ahead with go Larry is Raymond Kirsch of on question. Please with line a question.

Larry Keusch

Yeah. Hi.

a Steve couple tariffs. just here. Just And the follow-up a quickly on maybe

that indicate that. were efforts looking in some of you did You mitigation to at XXXX offset

help you what are offset to So levers that? pulling

Steven Strobel

- pricing productivity at we're total, obviously looking looking we're actions, at additional suppliers. some efforts within We're within In operations. Yeah. the looking at alternative

have that offset are are now, of a probably actions then to having of fairly and the place impact, the think have the right take ones a we we but in list to right companies actions mix? major place, that usual lot those overall that I now the in

John Groetelaars

that drive helps which performance product too. helps mix, improved an really here The new offset

Larry Keusch

therefore to can that Is or would that just that items help your clear on offset and be assumptions? in help --? thank you. guidance so - those are that, And And is offset

Steven Strobel

No, The baked are the fully offsetting actions into our tariffs no. and guidance.

Larry Keusch

Perfect. Okay.

Steven Strobel

Yeah.

Larry Keusch

ones then quickly And a just Okay, great. here. other of couple

in I guess certainly benefit you're that tax in did that drove you SBC I And a question actually What which was So XXXX. such hear large the assuming got, correctly large XXXX? benefit on there? one tax nothing

John Groetelaars

Right. right. That's exactly

So actually ability benefit when had the I'll that, There's comp of Larry. of start value $X.XX with stock benefit is the vested XXXX stock-based deduct The of well. in XXXX in it's financial it's XXXX. in had in guidance. benefit appreciation actually to the assumed or the We of when tax genesis as benefit the no exercised. statements We really

with biggest that the the those the really through of years those to executive last transition. appreciated increase financial in do all stock benefit comp, incentive statements. with long-term exercised, as over price our RSUs, the value. to The XXXX the our between have are in And impact accrues tax couple company so of had And

Ralph with shares. time of stock-based leaving they vesting compensation either had options over being exercised that Chairman, a restricted lot John and accumulated via Greisch leaving, So as up ended and/or

significant a number, statements of benefit obviously, amount - financial amount significant XXXX. a a hitting our is but So $X.XX in big

Mary Ladone

a perspective, Larry, benefit And the would majority in 'XX in just occurred of I QX. mention from calendarization that

a had QX this but outlined, in and we as impact of minimal in year, $X.XX also, QX very QX. We

Steven Strobel

right obviously, the in outlined, is compensation Which of plan. the increase in on earnings wanted the that's feel, I when our be it, per one stock-based the percentage the reasons away share - where to with we in face of line our you despite look take long-range we

Larry Keusch

Okay.

in there the drove is leadership majority a doesn't executive the obviously XXXX? point that change and So repeat that that vast of

John Groetelaars

forecast can't going what it. I Exactly. to hardly And that's It's - hard to it's be. forecast

not So why it's the 'XX that's guidance. in

Larry Keusch

for deck guys, completed nothing one, I assuming either no which then the perfect. leadership that that saw, changes getting And can year the but you kind then I'm are change John, just where changing last LRP, of there Asia-Pacific just maybe of there. on touch you in And the assuming what's was you people? out? discussed, Okay, I'm two. you these And you

John Groetelaars

Yeah.

today I'll to this pick stand ability last to Yeah. execute gives No further that. we So changes and all, of confidence one the the LRP us first. just our at where on

His Asia-Pac then over new tenure, China, coming from to the have Vyaire at together Bard a that He's BD/Bard, new changes, new name us a the we Mark leader primarily to finance at also worked Jay Wallwork. and prior region. us and that, He's in is and leader. we whole a Bard, for On from leader joining Wang.

business and in around current sustainable attract a we're I'm a their region I bit a tremendous really our in - confidence on the there. of their those the - strategy. a Asia-Pac the coming going and contemplate team tailwind time to we're back not would of very year, little And headwind. growing execute in of to confident we'll get in and guidance us future. to take way that ability But have leadership amount to the in So second and and our skills a the see being run a It's individuals ability about that team's half high-caliber

Larry Keusch

Thanks it. Appreciate guys. Great. Okay.

John Groetelaars

you. Thank

Operator

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

Rick Wise

Good morning, everybody. Maybe - and there. congratulations to sheet go back to the the balance on all progress

like passing color Maybe one or - et if Are a an done that John of starting And built from you're see at. it there wand wave little can tuck-in a expanded? these new that had in look with emerging help more Is magic you in more to bolt-on? just markets, perspective, business there's area understand, cetera? M&A us geographic? full there. out, be work Is leadership there you're now you'd mentioned to You pipeline that to you a

John Groetelaars

financial category Yeah, strategic and the of sure. really from tuck-in. largely support of of point strategy environment is represent - pipeline around Rick overall fit Those, help better think our and leadership. metrics, I bolt-on the better the our M&A view, opportunities

each you our are or So or new our and development Not business the looking that distributor? vectors filling leadership. the integrations product to one Is at in in product of drive supplement other? growth geographic corporate. have we're we're for and as want exclusively the when that where and think business kind now a resources primarily at technology, companies buying companies as of technology gaps they we support We over well really to out company building favors category are businesses there finding portfolio, about, It's they almost really.

we're fiscal in we to optimistic I'm to the three the in pipeline all looking we'll the But developing. way that later the And business like year. we're have pipeline - talk some is categories. transactions fill about So

several the take certainly on have to year. tuck-in balance sheet We deals the throughout

Our it's without organizational so any us decentralized, do to disruption. structure, that because allow would

that that first to margin the did EPS, optimization top we if drive and that gross line - find I'm we're and given some would hopeful optimization our with our the accretive dilution our in And and their expansion P&L, right bullish contribute efforts year, by offset we strategically, deals flexibility fit first program. year. given within foremost, have have to and - we certainly in growth the aim second can we that So transform if immediately, not the

Rick Wise

of X% still ahead. products of in But we sales And sales the mean, two-part things ever the new some and of spending two are the can R&D maybe tables, your that those - Great. a on again should paying obviously you of that you're of now? most from with maybe are five question. where larger months, base, are at you see money supplementary R&D a Just sort re-prioritizing most front. One, be are where the one And where could we there what's Which but products be a a or you them to impactful? homerun? attention - of kind or R&D? single, are prioritizing I triple six

John Groetelaars

question, Rick. Yeah. Good

I enterprise, sure think the were R&D on a making talked around and doing all call, optimizing R&D and the kicking and the doing optimizing tires reviews programs we last of company assessing across about spend. going of our and and we thorough our developments the

rack done an we investment, our the ultimately of and pipeline. priorities enter within stack value our some end with as have up really year, portfolio our So to fiscal maximize our increased and reallocation new we

see were that's think existing high-value really I best that in new products then projects resources on but number our on And disclosed prudent growth part way in sure the beyond this the the on incremental future LRP. our we're that new our not allocating current one go platforms possible. the are of So chart make appendix, to some list our you for ones, there

sure some our the remarks of programs. as products the want LINQ we are should in the ease-of-use RetinaVue to simplicity. product for I we're planned launched answer just vest specific So an well got real 'XX excited and breakthrough your think the year, which we To our next-generation in have launched of just ongoing half product of those robust mobile, we of that the mentioned pretty half make about pipeline prepared certainly high-value question, second and on is be which second a I

we it's The all to big heart think respiratory non-invasive - EarlySense Vital - - the in now its phase Our early pretty sorry, contributor new portfolio for programs and that of which in of PSS Monitoring and EarlySense, are the our punch the line growth. detection to fiscal platform, one line, here. device, our rate which we think that enter stumble top exciting not WatchCare really as I with our for incontinence Signs year and now probably adding product a the I single summary, part look going is is as the a on are thing. good launch that's In rate product we're the

diversified product a that products have new set new contribute to to want that You basket. of

Rick Wise

Thank you very much.

Operator

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

Kristen Stewart

Hi. my Good taking for question. morning. Thanks

range closer it? way $XXX should million to, X% into guess, of think to, growing as Is that so think right clarify, to or about to I the guidance of and to taking an off as $XXX base around that, down account fiscal about so million low we Just 'XX $XXX - then implied more of call for million. the basically million the X% it for XXXX at recalibrated ASC, to a $XXX

Steven Strobel

given outcome then. output we've in recalibrated specifically first to with EPS our revised $XX at and then XXXX reductions line do grow call base, that of Yeah. it's guidance We'll the that the guidance you'll get think end XXXX I at to said on that line $X.XX the on for a and quarter the The we and million obviously just - top XXXX. of top a like update when the levels we for recalibrated the in earnings up our bottom-line our or

John Groetelaars

X% stock-based had to XX% the to adjusted to and EPS the of comp, excluding Yeah. then get you X% We've XX%.

Kristen Stewart

right. All

you than the And lower think LRP a I Okay, you perspective? Has that? just on should XX% rate was we tax from a that tax How what rate about is bit of LRP? thinking changed the comment can than then, just and tax XX% great. about talked the because the rate lower to

Steven Strobel

Just a little I bit, suppose.

one Here's to about a - it. think way

the though tax stock-based we XX.X%. reduction As from gets which also to about benefit this at overall got a in you XX.X% We've the point XXXX rate. about ended up rate, X comp, comes

full us of necessarily tax as beat And think LRP have essence to objective. our at do tax year, We now rate become confident that not And our we're continue our the XX% see, have which going question to points. I the an gets down get impact, And on-board ongoing in XX% we ongoing I'm we you in of certainly an - number. us - XX%. We have four every looking around we that XXXX, we to at look feel comfort as can ability more we efficient. for a on us quarters that at X opportunities to things then to reform can this XXXX. basis? to call point that is, that's of clearly, your But some

Kristen Stewart

potential reinvest Would you to you Okay. and And LRP, extent able the of just impact perspective? the rate think I potential, we in do just of you that of guess, potential the then guess about be it And some all I together? savings. I the things think $XX that how balancing I tax to then How sort about should keep a about that from these more over are was how inclined considering also to think million should bottom-line think EPS? optimization And to have, of growth I the this upside that?

Steven Strobel

Yeah.

out efficient we reinvest business top the free efficient, optimization our think our across I there, how and and operations the which optimization opportunity fuel is more what all line. we the program looking question you to through tax every tax to can down great We're grow figure of in reinvest. the we word think up manage more funds, entirety way up free for the business I used back to in right through become can -

top and to think to reinvest you about XX% figure should that guidance out that share going and that of being line. use top P&L on any top of any long-range that generate should anything of earnings. plan, get we've out per the think kind for the XX% that earnings you we growth, grow can we constant the to ways our about in can think I laid already The of to So on element benefits the we're

John Groetelaars

is to we in, know Yeah. the priorities. emerging And - innovation are know our and I markets and think our top I want two think you Kristen reinvest Kristen you pipeline right, here

Kristen Stewart

guys. very much Thanks

Steven Strobel

Yeah.

John Groetelaars

Thank you.

Operator

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

Matthew Mishan

a America internationally? market very ago you What's pretty Is and a with international comp. wasn't the changes. a a a you You've East your well were ton made significantly, know of John, much. Thank history. with quarter. very Middle your was Latin issue tough market on portfolio? This the tough - couple already it what What's Yeah. issue there? of a years going bottomed already up this or Hill-Rom-specific headwinds

John Groetelaars

it's is an on year year, We're internationally. a going exit a - year This what's movement you two a seen - year, of step rate full as take headwind. - X% basis. there on this we think growth first the I from back as QX, head if - - all, years core have a we a last growth of we're definitely it's we and X% in quarter-to-quarter row, - example getting

and on what's more to and more we process can deploy in So visibility the looking movement quarter-to-quarter put forecast go-forward understand is that guidance. management where something better manage have we and accurately and are basis coming effectively our a into

So right we that feel got captured way. XXXX in the good enter that we as we've

overcome. year, and As quarter we to enter quarter this second we strong have first a internationally

once again in growth half. toward international our be to a push second of the lot a bit little So 'XX will

the we However, about have feeling the guidance we're confident here. as enter issued year, we

from international year robust that movement international first in So better I quarter-to-quarter visibility month-to-month an think to a expect that help of place and don't the XXXX. and rates in repeat your better putting necessarily growth and management we perhaps, we're unusually to traction in systems long the half to in the in We the We're market. itself. with get answer will - question had Europe but

organization. year to looking half in as this really and markets rebuild Asia-Pacific Latin America our of we're have we contribute that emerging of the second So

Matthew Mishan

into from cadence run-offs And million of I and modes of business, continuing the well, to into then, walk you help our 'XX. going That's And about run-off? OEM then now? helpful. of like the surgical to it there's in has XXXX core why And be why non-core could moved been be guess be rationale to looks quarterly then to us $XX for going - of through non-core? as the with Kind it's

John Groetelaars

over international manufacturers We're the to Kay. business there have this of don't making the second turn surgery it's a OEM question, straight-forward. manufacturing. to - question of our non-core, One, pretty other part or the it's into surgical rationale But large lower we their end Two, market this - going destiny for case, of on there. business. Mary was for I'll part the two to control equipment in first in Yeah. equipment that they've and integrate the product over margin planned to

So They've a they're had us. clear timeframe integration. doing that vertical wasn't to

any we or a control want there those down But have represent not our - we of supportive XXXX. businesses. hope obviously, might be And to you growth Mary this exit top into scheduled strategic of wind destiny do in comments a largely to that on done So we're It's as of comes can. can Kay, get as small and we take here exiting the from to some as point quickly in sure talk add? They own strategy, we business We and low-margin headwind is as leadership something today, make XXXX view, you line. can category tail businesses, a rapid so fashion objective, as our there's on our here possible. that

Mary Ladone

Sure.

supplemental we So and the XX refer to breakout surgical where in quarterly presentation, of PSS page give non-core. you Matt, I would a

$XXX As to XXXX PSS, we said full businesses. going in and the completely year a that's in the prepared exited down was we've those remarks, for In million revenue for XXXX. non-core $XX million

down $XX XXXX. zero we will it call The revenue piece of in going year. million as in - to go the throughout surgical it's revenue So decelerate

you So the $XX headwind million quarters is be about it at way of million, $XX should headwind a, reduced that the to then look and each in call QX. through it will QX in

Matthew Mishan

much. very you Thank

Operator

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

Isaac Ro

morning. guys. Good you, Thank

the all towards the be the you've to appreciate the on into will plan I'm pending how given regards through for just Just as we and a process areas relates plan to the trying the under detail divestitures majority period strategic or when of this and get you normalized curious, John, would higher on I'm other period with transition of fiscal us So growth. extend it not whether try a come numbers. kind look that And Could divestitures? potentially when are well of more the XXXX? here? to we'll to growth could there curious, review that characterize

John Groetelaars

question, Good Yeah. Isaac.

exit to done get and majority and in as of we is these rapidly that XXXX. vast Our the try objective as can

As can at XXXX see sit today, look probably the mentioned we talk at goes half we of earlier, And in we that done I small there's should be point. into that today. a what portfolio as we tail - as first think the here I only and but XXXX, we

capture feel need to we'd we everything we've and portfolio. As This our of non-core this chapter it in final portion optimization we that our at thoroughly this look should was be of got captured. portfolio, the

Isaac Ro

you're concurrent a Okay. it get that think companies, divesting that. just about That's would with on guys I assets. in acquisitions mean, while divestitures? the just I acquiring of you if if the were guys possible maybe helpful. process could execute the that little Is you And follow a up complicated, numbers

it that curious I'm cycle. want overlap divestitures you. the XX might over Thank months, So to we XX, frame the see you next, however the call

John Groetelaars

- wouldn't work view, very of from acquisition it's manage a not certainly in - slowing it's any we multiple easy to down Well, streams. Yeah. hesitate This activity. management point these

the the have and it execute the well, We done people we've in past. to resources that

to resourced So we're do it.

we strive of what should in guidance, our all events help as some clear some happen. offset the those well. will and moving We transparent pieces this are And as about be that have to acquisitions

but not divestiture. our slow So some result initiatives drive as we'll of of do M&A going we're there, strategic to down our this a best to

Isaac Ro

Thank it. Got guys. you, Okay.

Mary Ladone

one Casey, last we have time question. for And

Operator

with a question. Thank Matson the state Needham on Michael line question. Please is & your of you. Company

Michael Matson

guess to tax including XXXX, ask, for kind squeezing rationale my Good that do to I for I of there happen stock that? like wanted just it Thanks sort perspective any I from probably a or guess, some in but I be understand anything have SBC there. something to lot have seems Would from morning. mean, me of for - rate SBC I for would the - like for there not what down it in. you XXXX? rate will with, benefit benefit have not tax your if to to the in went the

Steven Strobel

to to and what be any their and Well, is doing just hard - hard individuals it's to Mike, given RSUs whether options going or going what stock-based - to comp be on to when to stock not it's or vest. forecast going price people point at time are the in are going exercise

is been P&L flow is than put we a we've then exactly unpredictable time. highly very how have the and what past, point be going very do any at item on benefit much take chosen rather given transparent to on in So through a in in anything flyer my like to not that's

Michael Matson

Okay. I understand.

potential I to was the of kind of the that point given. a that's making of that So guidance is upside sort you've source

John Groetelaars

and it's can to look one-time the benefit, quarter have through ability it's in really - flow benefit see to in going it's didn't If get it reinvestments we will to we it's obviously, be. this if Yeah. some otherwise, within we hard do might any but coming, a very not quarter. going it But a case, predict we And what to that be operational. to make

Michael Matson

Okay. And then…

John Groetelaars

Okay. Go ahead.

Michael Matson

no. No,

Sorry, go ahead.

John Groetelaars

I yourself. you a got to going No, wrap question was But up.

Michael Matson

XXXX currency. Thank just quick just you. your you sorry, And to have there? on general exposure can about - us guidance? remind to a - the question, one, bottom-line What's of one currency you anything then, the I additional grid if your currency had headwind

Steven Strobel

Yeah.

of On but number We've not top come point a fairly they bottom-line. hedged as Mike, other a on well line take lot. got impact we naturally material and exposures the a the bottom-line not are generally and up, about X the on care

Michael Matson

you. Thank Great.

John Groetelaars

new clicking I of there's the the get we think product nice and if course, of innovation that's international our when the range. high-end head call finished thanks more let everybody. mid-single-digit feel driven for we say way growth. backs and really deliver can And, that are the businesses Very of without - off we from the we Well, up wrap even ability new confident year. inclusion consistently, We to just product a on into organic today 'XX me M&A our growth, - opportunity where the and the great of to we about hit as

But to we'll and - for beyond. next very So or thanks much the you call talk quarter.

Operator

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

Hill-Rom (HRC) 2 Nov 182018 Q4 Earnings call transcript