HRC - Earnings call transcript Q1 2020 | Hill-Rom Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to Hill-Rom's Fiscal First 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]

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

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

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

Mary Kay Ladone

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

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

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

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

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

John Groetelaars

execution, quarter Good exceeded everyone again successful a Kay. Hill-Rom for us bottom-line. disciplined we another and the morning was following operational Mary XXXX. today. Thanks, thanks for expectations QX joining strong on With

our adjusted guidance and the our raised to EPS We outlook are bottom also full year reaffirm growth revenue pleased range. of

XXX mid achieved contribution growth EPS XX%. of quarter recent revenue core a another adjusted diluted expansion an basis level per and first approximately XXX XXXX gross of points, margin points share, including growth, We basis a from since of In $X.XX the of acquisitions. of increase single-digit X% record quarter, was

our short-term flexibility solid provides objectives. for and in both performance our a long-term sets to foundation growth achievement initiatives strong and of financial reinvest this Importantly, key

continued category to on vision execute bottom-line mid-single-digit and our priorities our to global four durable, leadership double-digit team sustainable strategic enhancing and Our drive growth. aimed at topline

category revenue exceeded differentiated solutions great product of than innovative Our is of $XXX priority new start with last off expectations. a more approximately year. this This QX represents year. million of advancing to versus our XX% growth and leadership

full offerings this We and looking million business to the year, year remain all deterioration, digital half on patient to forward of product includes launches on second operating tools, a the room a future cadence $XXX and product across track steady balanced new of deliver and revenue digital falls a three of few. physical our focused are mobile approximately name key to assessment new in six table units. This new year

portfolio growth Surgical performance Systems and Line the Turning digits line single our QX, the with Core grew results to of Solutions high our top the U.S. a highlight in Front following QX. Care, growth while growth strong across -- X% core U.S. was in mid-teens. was Patient Support each

markets. X% X% Overall, international growth core from declined emerging with revenue

China for and second in was a We decline by are offset the I'll moment. a in that America growth PSS in quarter, double-digit pleased consecutive strong address Latin with which international

opportunity, encouraged of the China way year. remains last on confident to growth will we performance. accelerate it key improved and back in the overall actions lead markets China growth know, half in our turned are into investments that translating year we're and in we the now to you emerging our As are very a key growth double-digit these

business Now, QX performance let me review constant rates. currency at by

across X%, advanced the and and care by First, Patient services, Connected contributions driven by of beds. more grew X%. Support portfolio including smart increased U.S. revenue revenue Systems broad core solutions communications while revenue than X% Core

workflows and digits outcomes with Centrella. improving bed smart of med-surg across systems simplifying high systems. U.S. healthcare to from we delivering With growth bed single continuum better the double-digit smartphone, communications, grew are

standard system includes platform grow excluding Care in we Voalte, double-digit this and nurse future than the and call high faster our Even both benefit communications, category overall include digital mobile of rates. grew when which market. increased continue high-teens offerings at to the also

comp the med-surg now decline is U.S. now a care and in of year which result we the offset now larger some was business. second, XX% prior This of half Strong to business. capital this large XX%. accelerated our for to For improved U.S. anticipated; of international PSS in U.S., of visibility category, are factors; the timing than second a backlog. growth the communications two almost given the PSS year, performance first, which projects, representing U.S. the our product our challenging expect our backlog, was Therefore, of the

products vital Line Allyn in highest in result to Front U.S. physical revenue assessment and advanced Care, seeing years X%, strong respiratory portfolio. performance the products tools, growth organic and Turning across acceleration internationally. with broad-based signs new we're vision QX the Welch health recent This growth the rate of monitors, is the and

the driven growth declined in workflow equipment, Surgical impact divestiture. strong surgical Core including record by globally. Solutions consumables Integrated of revenue of Motion double-digit XX%, reflecting the Surgical Table placements Lastly, revenue the advanced X%

our to plan Breathe we reshape attractive you excellent to examples advance of can capital As strategic category financial deploy categories higher in continue The criteria and to we through our know, generate represent adhering acquisitions. rigorous Technologies to to while returns. leadership higher and margin strategic portfolio acquisition oriented Voalte growth, how of successfully growth

on remain integrations track. Both

commercial a disruptive both in a are days re-launching and with therapy integrated attractive in leveraging in market, device, fast-growing home respiratory for settings. early acute and LifeXXXX patients non-invasive the We the the of new direct Breathe vertically our model

on we our platform are in XX,XXX and business. Voalte, across more devices accelerated communications than currently U.S. system care our have healthcare the With growth driving

we commercial will And over addition, market are opportunities that incremental In value the our uncovering drive leadership. expand synergy long-term.

company health with a a solution. capabilities expand platform, digital patient the with acquisition predictive is Medical. clinical improve assimilation greater digital analytics to further connected and access of are our workflow, a vendor-neutral As strengthen pleased our we interoperable of real-time value Excel we data proposition, care recent provide with software and to Excel,

The addition of waveforms the patient costs. will in alarm real-time of lower data management suite to of integration outcomes platform, hands and actionable medical a improve help and put caregivers tools, device a

M&A As continues been has of an you to be for know, and strategy growth. important overall part our

enhance With flexibility, a growth we sheet balance improved our are to strong position in and objectives. category further leadership our

our deploy continue rigorous a will adhering to to and We disciplined attractive strategic returns. capital generate approach, criteria financial to with

into execute was look our as both So in our quarter we a closing, this expect do be in great and timing visibility to international current With the second short-term to the on growth during delivering four select to forward a priorities. headwind on long-term we quarter, year. earnings objectives we quarter. And revenue first strategic modest both the order to start and markets

improved clarity we However, on timing. performance from our and remain resulting confident acceleration international second half in

from emerging new second In continued growth contribution tailwinds, from will the we transactions addition, enter markets, half. and the recent M&A be products as all

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

Barbara Bodem

and good morning, everyone. John, Thanks,

costs These For fiscal items, $X.XX intangible we to of the include and share. quarter, acquisition charges. first amortization, related reported other results special and integration earnings per special after-tax GAAP diluted

top results rate. diluted per period. of lower growth, margin earnings revenue from growth strategic These and tax reflect ongoing investments $X.XX diluted in solid line a $X.XX per Adjusted prior expansion, the drive core share $X.XX advanced share, long-term year to

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

mentioned, $XXX the which prior John of to As a currency quarter, X%. $XXX first revenue was increased reported we the On of for revenue constant year comparable million. million basis,

guidance of X%, And revenue our the range. advanced core points end for accounted at high Our basis approximately XXX of growth. acquisitions

P&L, gross portfolio and improved last optimization, businesses. contribution the continues the margin M&A, basis product XXX expansion XX.X% benefits adjusted reflect improvement the to to all three new rest from of year, points efficiencies. sourcing with of cost of versus and positive manufacturing launches the Turning across Margin

prior X% year, of spending timing. to due $XX million R&D project declined the versus

increased of driven SG&A by strategic transformation IT including While investments, adjusted our and markets. X%, million emerging $XXX

reflecting improvement Our the the an was The adjusted XX.X%, an points to compensation quarter tax quarter XX was diluted of in compared increase $X.XX the in rate basis share year. year. in last prior margin adjusted benefit per of versus first stock-based operating XX.X%, first

XX%. first rate stock-based of Excluding was the compensation, impact our quarter tax

quarter increased earnings XX%. first The for per $X.XX diluted fiscal adjusted share bottom line the of

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

turning a of transition as was as flow was Now, which timing year. surgical prior to to of decline collections. million, related of of payroll costs the the cash and $XX well cash inclusion business, flow. reimbursable from million period flow operations was to the $XX the decline the an extra in consumables from Cash largely divestiture The related

related of due to recent $X expenditures higher million Capital year the capitalized software and $XX costs transformation than million, to IT costs, acquisitions, impact period, the R&D. totaled prior

a As totaled $XX free cash result, million. flow

a the of end refinancing leverage, In the ratio bonds the sheet financial X.X. and balance of long-term completed our of maintained at of debt-to-EBITDA during December terms the and we quarter

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

our As are revenue reaffirming guidance and year our growth are release, noted full bottom EPS the in press adjusted the we raising of range.

currency both full to reported continue constant year, the basis expect X%. we and revenue for to X% to growth X% and X% core increase So the to increase on to revenue reported

the core to X% anniversary increase Excluding to to incremental date, X%. acquisitions expected prior is revenue of benefit the

basis, million to is By Non-core in in grow XXXX revenue on expected segment, core three the approximately totaled and we expect single-digit range. all $XX approximately mid $XXX million to businesses in decline a XXXX. to

profitability standpoint, to no there outlook. change is our From a

expand points. adjusted our sales, key increase transactions, adjusted transformation, sales, single-digits, as impact gross of expect M&A in to continue recent the We investment margin low well growth of business basis savings. approximately and as in our XXX R&D initiatives organic X% to XX.X% to representing of of optimization IT approximately reflecting SG&A XXX to

continue As an we to approximately adjusted of a operating margin result, XX.X%. expect

share And of expense, includes XX% million approximately rate a other expect lastly, expect of $XX of $XX $XX million and we shares. a million. We which approximately count to tax interest

results, share. quarter our we With guidance bottom previous diluted the per $X.XX are by strong first end range raising of

$X.XX prior now to $X.XX share and diluted was adjusted $X.XX diluted per Our share. $X.XX expect of earnings we guidance to per

flow flow approximately $XXX to expenditures of perspective, million. flow expect operating $XXX into cash cash cash free guidance and approximately approximately of $XXX million. a This of capital we From million continue translates

constant quarter, on fiscal to to revenue both For we expect the X% decline and basis. second a reported currency X%

including of basis XXX the approximately revenue to contribution core X% acquisitions expect points. approximately of increase We

topline core highest quarter, international reflects comparison timing the in well The the in XX% projects capital as large a as growth of XXXX given year last select guidance challenging in same the U.S. markets.

consumable translates of year diluted This $X.XX. to into earnings divestiture. includes core of on we first the approximately per $X.XX per growth for revenue guidance of surgical of are providing dilution for a X%. $X.XX related this, adjusted guidance QX to Based share half the QX diluted the share approximately

growth quarter Excluding EPS divestiture, X% and in of XX% half first growth the we to the the expect the adjusted second X% of year. of for to XX%

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

John Groetelaars

confidence I'd close in to our to conviction execute by reiterating the high and our strategic we ability like priorities. on have

more We with back markets, products, expect revenue half of in contribution profitability recent year improved from the M&A. new and the acceleration and emerging

be long-term shareholders. prospects continue our We value excited growth enhancing for to about and

of encourage would Of course, of Hill-Rom them dedication and employees values with Hill-Rom's success that live provides strive recent mission. We and our work the possible be foster to opportunity team. and hard the none excel a entire culture to to without our the

our along advancing I'm with Newsweek patients ability goals, to build recognition our achieve XXXX the Companies. to list exhibit recently our and the America's our achieve Most Responsible result, success, for and connected care. improve by supports of of a outcomes proud very named that continued every on day foundation passion caregivers strong our to This Hill-Rom employees As

like open I'd for that, call With to the Q&A. up

Operator

you. Thank

remind Hill-Rom question-and-answer the is available at We begin call session. website seven be a will to recorded this like and replay Instructions] now days for digital being participants www.hill-rom.com. I'd will that the [Operator on

Our go first Matt Taylor Please from comes ahead. with question UBS.

Matt Taylor

the and good thanks Hi, taking morning question. for

of had called of the and So that What the OUS, confidence your I confidence? you the in what that the of what comments you the half of out timing orders you PSS you looks order there? think timing first second about, kind just funnel about gives is, the to year. the like in orders question acceleration some in talk Can ask and have affected for just I that

John Groetelaars

of timing the the in region, in orders of out It's a orders international timing really, Matt. now process our second Thanks, John. they're primarily where is were Yeah. saw in in driven Middle and we shift East Yeah, backlog the for that the half. of

That's and revenue it really shift second first So, $XX one that shifted into shift. about half. half the from a million the of is primarily of of of QX that drivers

in growth that, with of getting Latin still how market of the traction. really as we're phases and early it's emerging top working On we We're mentioned, pleased in China America.

market points half we tailwind the be to growth will half the year, point second growth As the of second about the basis look emerging in growth accelerated to of add a international the of driving the year, second half. in the XXX basis overall XXX

that the market half of shift, East second growth seeing that's the in to second of plus China out acceleration and ago So, then a primarily points primary conviction driver XXX basis the investments made the to year emerging drive is half. of the and acceleration that around confidence Middle in the

Matt Taylor

Front in the Care a news follow-up, And nice is then John. good Surgical. just Thanks, as you and Okay. saw ask some pretty growth I that core we Line to wanted

factors just ones was Voalte driving bit of on the of integration little the as including I of a well? and deeper on You just acquisition checking that. could talked the go you some the Breathe main maybe up hoping some about

John Groetelaars

Yeah.

highest you but mid-teens we've was core surgical growth as X% FLC, PSS, growth growth the So, U.S. of three X%, the seen X% rate U.S. the really and in all the ever quarter first of businesses, across core noted, in balanced

question So, driving that to drivers where our and vital are the the assessment your in tools portfolio. devices, Care Vision signs our products physical FLC our

the just you pleased device quarter fourth As seeing we last really our in recall, we're RetinaVue may the here. and RV year traction XXX we're quarter in with the launched new first

the of the are So, growth. main those drivers

is a basis to Breathe contribution from to relaunch we that of up product contribution as significant sales in and organization any contribution acquisition really for prescriptions our device. and until There's Breathe expect year ramp that really ramp the point, we we we phase. the expect -- exit see material At is XXX the on to basis no points continue XX Breathe into about QX. points that don't in would acquisition

of, kind So, in that second the ramps. provides again Breathe half year driver another, the of supporting growth as

Matt Taylor

John. Great. lot, a Thanks

John Groetelaars

Thank you.

Operator

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

David Lewis

Good me morning. you hear Can okay?

John Groetelaars

David? Good morning, Yeah.

David Lewis

Great. All right. you. Thank

second. want digital for So to here to back come I John, a

of think quarter. So, drove investors business Voalte. But in quarter, the and think I this about two a larger is faster. growing or up the little specifically digital patient than Comm obviously was Voalte high Care lot communications without a points growth teens

investments quick what in of medication think patient I year So, business two as sustainability you said, into of when had those what specific wondering, is you Then the the patient think And growth communication driving just this of follow-up. a ex-Voalte. sort growth the a lot confidence the XXXX, in about franchises? gives in are you half of back heading

John Groetelaars

Yes.

premium platform that So proposition Hill-Rom the drivers there more provides. really enhance care value call nurse are communications The is a segment the product.

a got for alerts we and it's set featured customization, compete So more that integration of primarily. fully and alarms

and That nice than order that and be that's much For in competition our business. now, a business continues to rate at way. led to that been couple backlog a of winning years we've higher a

the set; offering unique the tier and scale is part is: one, value our of Hill-Rom's larger and value higher at product secondly, So, larger IDNs. of to proposition think, ability proposition I feature customers our the

have of significant technical relatively complex our systems deploy We implementations service and to some implementations. our teams because and communication we're team very able that these deploy customer to

and scale And scale we their offer acquisition and into that compete Hill-Rom as to can positioned well Voalte drive we're feed complex of and they the IDN together. in help part environments. So, become assurance helps we growth that just

David Lewis

helpful. Okay. very That is

Barbara Bodem

launches in to just as I'm David, in say add the some just going I'm second on our going to I'm coming of ask John half the well. area And, digital comment product -- to David, going --

John Groetelaars

Yes.

unique We're launch David, and or track to QX. we portfolio is half able but calls AI, tools, and of second result the and well. as proposition launch on with more digital into a we're to limited launch are lower and that patient excited that bring and AI there. really But along really digital to our progress be The algorithms -- of certainly offering those patient planned making deterioration value that bit cost algorithms of as recall the as a the about save these is, is, product for get There'll stretch, timings. QX both for the we're we're a lives to a

equipment couple data. patient display recent The well, Medical of of to of different the now pieces as right, drive out third-party been and Excel acquisition smartphone there, alarm certainly and with into third-party also feeds real-time a because waveforms a that integration of smart on alert we're able do hundred

David Lewis

is I described. assume transitioning just Centrella? year, this the low Okay. seeing the about Very early of growth sort the portfolio Centrella and bed concerns And seeing launch beds you're know year? half the you are And what you if so in you John, you Centrella the year this then, are pipeline of side? about from any helpful. think Centrella on Thanks away of of the the much. kind growth from from back year, as this you product single-digit, focus kind sort of, think are But into year. seeing competitive there We X% What on the anything

John Groetelaars

Yes, probably is had we growth. as double-digit I its the thank mentioned, med-surg saw Centrella part mid high our in single-digit -- for in we growth, But The U.S. that is, quarter, our rates double-digit the med-surg growth you. important business business.

lead high-mid-single-digit driving be growing there. the whole product – at a It's is and category digits Centrella grower. to the double So mid-single-digit

or changes a either point don't environment changes view, imminent anything we outlook, competitively our to see terms macro there. In of of the from that

growth. single-digit continued for outlook the like we So,

and today, – not looks is year. in highly enter guidance med-surg our the we as our we we guidance sit if confident, improved. that our low-single-digit it's expectation that slightly in growth as here And mentioned we've As – are

David Lewis

Okay. much. Thanks so

Operator

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

Bob Hopkins

Thanks morning. and good

Can us Centrella as Just your States? installed to still is of where you a follow-up sense as a your below XX% comment. base on that last percentage Is in currently? the of base it give installed a United

John Groetelaars

XX%, Bob. Yeah, below still

Bob Hopkins

you better great. business And guidance? XX% of the And do business. us there? little guidance, more the Okay, growth the assume back-half follow-up assumptions you so QX then, in assumptions and with that give OUS on What if for specific in business little using, the a be for then to quarter. your wondering, maybe that a a a in just bit to Just just the declined bit you're little could more sense

John Groetelaars

Yeah. Sure. as Specific example, said I Middle to QX, about an – we see East. why

We here. they that we've are we of second good have – really in is in loaded. about what's timing Currently where – those those revenue. international are our a sense know and orders revenue the the XX% of back-end on region. factor hence Saudi and a to – timing the our very as good sit Gulf that is, good feel for projected be news good single decline occur, we quarter, have And a the when push-out pushing we largest backlog, in of The will

Barbara Bodem

And Bob, just to of clarify a couple things.

at So and to look QX surgical international internationally grew QX X%, declined as with was we business, that overall, at and XX%. declined isolated localized both PSS performance, the U.S. QX really that core in pleased revenue performance. were for FLC in and which we and

the we all think about those has the all slightly to three three across businesses expected down that flat be performance international. as given outlined, John are QX, at look we As in businesses drivers to

in rates And driver XX% of decline view, the a so East the being little depth. key Hopefully, is with that pulling are overall that you growth what's is down. those where more we a gives Middle sort

John Groetelaars

so times purchases a right looks to Yeah. again and year. revenue this shape growth a about project of of exposed end of higher the this we the the capital QX reshaping All And timing of be international, many now based a so international. international growth is back more phasing the end is loaded lower for based on that the back-end year, international business our can way and growth on much talked the now back year

Bob Hopkins

East seen this business. We've Yeah. Middle in before the

– not your the in in in confidence back East like of situations characterize Middle not, previous what's where orders? I pushback that So, Middle guess back shocking, surprised but Is to get – you it this just how that? East in it the half you'll would relative terms

John Groetelaars

the see investments I'd going have part we're other say, before in confidence, progressing we and really that is that that have it's nicely. very didn't the we this high markets, emerging Bob. year to China turned And on we

double-digit high. and we row quarter markets really in Second in emerging other in confidence LatAm in is both have – China. growth The a of

is exciting year. becoming the more and visible more that of as we second So, at the and more look half

we're emerging may source We've we have not growth markets regardless what Middle East, confident that which in transpire or new got So, the before. of may about. did in not a of

Bob Hopkins

very much. Thank you Terrific..

Operator

Larry your Keusch online question. Raymond Please the James with question. with state is

Larry Keusch

John Thanks. I morning Yeah. Good wanted to start just everyone. guess I question. Care with Connected

So, Care curious, of you're to roll Connected as comprehensive out your portfolio I'm components. this starting

to How administrators? lot it what me advantage take to a of have Central becoming And seems that's can't with competitors, really is have Centrella. offer. doing, Because you're you that the of -- the to Centrella something that the conversation in hospital

I And conversation again where is Centrella to was But understand that think how taking that again, the Centrella role? numbers. quarter's really I place. is in first certainly wanted So, reflected playing strong.

John Groetelaars

Yeah.

of presumption Medical the with acquisition. the the call is we've Excel both mobile and added there Pinnacle integration components, and now correct. Centrella, with -- the think Communications nurse call nurse I And new the

that from offering. a of to nice bed smartphone is now All smart continuum

base. lowered that for reason us across we've off So, about it reason growth the The is on expectations we've certainly for before, a we nicely, talked as we're high Centrella -- portfolio. our positions coming seeing growth

of revenue in we're but -- purchases med-surg the not or acquisition, with it while. really haven't a and whole and Centrella And that seen at acquisition is levels category

prudent would on top of about incremental growth what the that. we're being So, be

with of this go sustaining a overall is there high that solution But level along purchases this of set. Centrella

is So, still confidence there.

move see prudent more in this and more Centrella direction. offering, can the and as we we're about to additional customers what product growth think being I measured

a And as that when you year I let source It be way we'll today, it beginning way of the looks upside could it. the unfolds. here was the we'll it in we characterize right of sit at called see to future. the it we way how think And know. the But

Larry Keusch

Okay, coming East, not to these to driving And back perfect. perhaps And to it's get Middle sense just do the that just what's then is, clear the two quick in you me ones, Hill-Rom? orders? out other what a was push unique

Or in I And is the that that region $XX-ish ramp. half million might second free guess ramp said the something I on broader be there you does you year cash for going flow, of big than $XXX for you're that because on obviously have million that industry? for towards first the How implied the think just a for Barb, the quarter. kind

Barbara Bodem

you a Would then, around to take me can of And come to like the onerous? back we lot East? Middle

John Groetelaars

Sure.

Barbara Bodem

Larry. Hi.

capital that of able we drive $XXX flow $XXX a with $XXX reiterate million. million So, operating in worth did be of and full our cash for year confidence and to into translates million the

QX really there. in had items a lot of timing

So, really as as on have talked related we of surgical receivable agreement time is logistical impact of, things. this the the Those year-over-year transition payroll sort had of consumables. the quarter cycle in like extra had things as about, to point the are well sort an sale some, just there we we that an service in

accounted decline That of for half about our year-over-year.

the of receivables a couple receivables. that had days confidence me the of timing thing in. And coming January, we in is bolus of gives just large other of half really first those The is about

was in really week that I a came the of in the just So function think first cash of of December last January. came what it versus week what

to our remainder year. about be feel of very So, of we the the we're going projections confident for where

John Groetelaars

And basis the then we a on comp have process go through the the we a are the it, looks your without future question, of like what names and routine rigorous where first looking in account because we believe pretty and fairly QX going me, Larry, here. part rigorous of East, Middle through

a about of bit in East. are. a a those It's East top we first us that where half $X again, exactly same quarter magnitude of Middle know given the in million. the we the of year the QX -- comp of Middle of had But the about So in around out that, it's in headwind has the on tough

I visibility that don't its point, not -- I to think make industry wouldn't enough this I'm industry-wide based, actually at have determination.

is it's And There's that we a see this of can or I unrest place all some issue the protracted we specific at little some Hill-Rom the decision-making, a that's around point. region. noise say taking did of So that will delayed of because in guidance that might that us. macro that slow speak That QX to given that's this the is perspective. likelihood into down but some is it factored factor our things into for environment might us. in slow QX. others, for And I can't down

Larry Keusch

Thank terrific. Okay, you very much.

Operator

the question. question. your Rick Wise online Please with Stifel is with state the on

Rick Wise

toward about next just you with refinancing over sheet, leverage you more can XX everybody. off to hoping leveraged go? X.X and a morning you're highlighted us the on Maybe start update times little X.X months where the so Barb Good the bond maybe directed that balance think or times,

I Barb, repurchase the barring it share what understand the your just about release think for you that implications the added $XXX says just M&A of part to thinking million to curious that? are And program? And the press if as any program,

Barbara Bodem

for the thanks Rick question.

quarter. at the me the year X.X of So, our turn. It take year, the to end a end had prior at the X.X is We try than we those fiscal did X.X. in lower let

and is steadily down we pretty we cash our flow leverage good So go. as coming generating are

projections throughout of tackle In the what of on really at will is of be where terms year. all course sort M&A dependent it would transactions the of we that end of year, the we the

that about acquisitions priorities M&A really we are accelerate that a talked in about going well. growth go particular our find top believe we As us accelerate standpoint, gross that growth can and looking investments. and are we've And help where we line capital to from at as as deployment our margin

$XXX starting approval, prior down. With win regards really to our million share repurchase to we're approval, the

area. And this about changed. our replenishing operate this in So our approach is has not freedom to

repurchases continue will to dilution. ongoing way as offset share We to a at look

We to differently our from are approach anything not that do changing strategy.

Rick Wise

Great.

margins, products, you chain, quarter called mix, to gross excellent new factors, supply out Turning the And various a obviously just there. an of had things. you couple

the You it maybe had basis should sounds part be the high-end, I'm we maybe incorrectly year. projected even like points XXX assuming, with since lower I can at to margin, might comment. improvement this thinking the be that second XXX you not, quarter, mean, capital

guide GMs are on we from process efficiencies in -- are where we chain. But all you and rethinking of at? so that, supply for here, out gross margins, with for Are where the Maybe called the year? above there? range also reflecting looking potentially your And one, we

Barbara Bodem

thanks for question. the Again,

So in pleased improvement points for think margin that is expansion guided we point basis the the will with we've the to very year. gross go. reconfirmed we were at XXX of we've what But year the XXX for is QX higher basis we where think end XXX in QX, to

the reflection to With balance drivers ongoing And our of good really XX a coming improvement is that's regards key points the key productivity. back that in to about two doing just there organization the work drivers. is of of for basis that QX, the underlying is and

portfolio, XX consumables about bringing launches, the for through basis surgical product then, portfolio have. acquisitions One is new divestiture which business, that the And the balance is the we're well new that as the of points. as we our of accounted the that

to part applies sort expansion the of this well, course divestiture. what we plays gross stronger want think over part call to about as is, the first of plan, to first the the consumable you get that three-year the of you about said year, of of and that year going we're because surgical which three-year I in that plan, margin to back the As out how

the think And basis full year, full about think the so, to sense. points makes as of you XXX lot still we for XXX a year

the But into not over Over see efficiencies processes we the contribution improvements time back improved through improvements we'll three-year get year of the productivity greater that this improved time period. to towards from We there's that continue -- to a as drive expect three-year that opportunity believe that productivity it, are we and coming done. the period. period, across the and we not still can sourcing we're end see

Rick Wise

in. if could of stage Breathe you're And and the get relaunch. at highlighted product you early just I more one John, the

about if right XXX but the -- little what you all potentially contribution But, unfolds. How relaunch why really talk so are end the relaunch year XX as much. great? said, just material trying remind you the and a in briefly the to is broader more would us be and how it, detail Just at of could, now, color no to you Thanks bps kindly achieve?

John Groetelaars

bringing our was and sure yes, and the Rick, the and forces sales first customers. on two one is making product Sure, it together trained that confident phase to bringing

product we're nice has new So that in this they the early in productivity initial seeing as of we're of And stages And that launch. sales has occurred. portfolio. our their team,

vertically integrated market recall, it's a is with and Breathe you'll for And As group our about really, the the approach new overlap their target product. a direct, approach. prior the customers just to – XX% customer the

channel – own and was we're not active DME we place third-party are really with directly So, prescribing our going DME. DMEs. emphasizing before. physicians, the But we to are We're still in that

model. direct So our It's our and of primary our is direct – a with control with more organization focus DME. own and we're profitable, it in sales to our It's drive more it. own

of just on patients that these time with the to get So, up new it prescriptions book some therapy. to emphasis, takes build

training the and product sales and So, progress. see model through. patient it's to and that that a monitor, natural recurring kind will be prescriptions And new it these with, stream, and of we building revenue be launch ramp a come have climb introduction a just as of

with as in starting model. as our expected ramp this be expected early we model said in the it's year. seeing. a see what get-go, our on to in we're we're So, And we going and our track we'll from that cumulative the that QX really It's ramp kick-in, with pleased to

Rick Wise

Really helpful. Thanks.

Mary Kay Ladone

time have more two Sharon, we questions. for

Operator

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

Mike Matson

given slowdown about ask a cash the of I flow the for second first of there. quarter in I free wanted the bit you Hi. a questions. for just confident the taking the target quarter? here my that Thanks guess, the are to shortfall can guidance year. deliver And little on How for kind just

going it pretty second So, do half to be like fleeted. looks – you

John Groetelaars

let, take one I'll Barb Matt. first there, the

Barbara Bodem

QX if both, I'll With like, a like really to we Matt, timing in take issue. Yeah, what was if you saw regards again, you but. flow, cash

of was So, full One that of this the at. impact timing there the different looking year. and pieces are the payroll a couple something not we're across about that a timing really that will the is course year of

the have that's the see us to we QX. a around but The wouldn't divestiture thing, ago, transition will catch-up a other have timing one we in of consumables. something had and related the receivable Again, is services on surgical year we that

timing And really is billings. then about the the third the of

strong which more And have the said so, saw had in minutes than January, timing we QX. few first as for a we part really made-up would the collections ago, difference I in of

confidence, $XXX we year. the cash that that's have full why the we believe do of million that look and as both million the So, high flow cash operating year. full can for we've free reiterated the we $XXX We at for flow

John Groetelaars

comment in back the to Mike then, about And acceleration the half.

me here. drivers you big the Let give

New the really QX new late QX. starting six start and they into that products products and we're launching, going significant in QX, – then launching,

of in contribution points bring contribution XXX about which back of approximately points, XX to markets, to year. half product in points the excess second second mentioned basis to about in new as of that the international year basis by before entire XXX So, the year. the half half the XXX points the in helps I the basis of Emerging basis accelerates accelerates

those completed M&A two contribution So, recently growth are primary the work. the of plus drivers ongoing from

Barbara Bodem

year first first well. first look of low just you the a that in we When you it you be that EPS the EPS in X%, And add growth double-digit we're at when at divestiture impact with the growth to revenue look line the in QX. for looking on year is the you the look at guidance. very growth once at the the half expected would of had the -- of half year core full half the adjust Mike, strong as of I is when then first year, half which

Mike Matson

Got it. Thank you.

Operator

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

Matthew Mishan

talk you stronger-than-expected you M&A more squeezing normalized can Kay if performance. just understand in. numbers orders? Voalte just down keeping base about numbers thank the much has the to accounting Mary I'm just me John, waned was for Hey, represent that of adjustment Or trying Barb, the a revenue? and it's

John Groetelaars

that Yes, Matt. I'll take

So, the April the an -- as in Voalte in you'll anniversary is Xst acquisition up coming April dates anniversary. recall

with of to the the the of very combined the continues We're the product ahead expectations. culture importantly, fit, the integration customer our to it track offering. and teams, pleased fit, So, product most response

is performance. pro on So, the that basis is with market forma expected to which and above that we're pleased a grow the in mid-teens

Matthew Mishan

we that And next the Or acquisition-related Has some actually then that And on based still initial that? or adjustment that is that? upon from X Okay. or that see quarter the weighed there? accounting you accounting. -- acceleration is

Barbara Bodem

It by debt is waning bit quarter. a each

quarters So, in have heaviest has period. time been declining it would the over and that early been

the but an in results. of less seeing of impact impact you're that that. an of of So, completely gone not less It's

Matthew Mishan

describe trying digital excellent. Okay, contextualize to look it. Can problems offering going what like? And having around falls. I'm just to around lastly, you that's the then patient

John Groetelaars

Yes.

-- weight connect our that sensors communication be And going So, the digital itself. able to front. are ecosystem of bed integrated into the then in movement the our be detect that the the it's of scales It's namely going in the into to patient because bed. the to bed platform on the

will in So, angle alert of or it and caregivers around. able and we'll the settings rails the to the be weight the alarm detect or bed are in bed shifts where then of terms patient the to bed both

anticipate and in So, predictive safety there features the the of to position indicate both is effort that prevent can bed fall. terms here are -- we risk the the to a certainly our that's of as to possibly get as potential fall

Matthew Mishan

you Okay. much. very Excellent. Thank

John Groetelaars

of and thanks The the and of drivers discussion and today. say everyone more to couple more a pleased for diversity just I and as about very year. to want we're growth the Well, the Great. evident start we becoming had I emerging close questions we are today with and year the think comments think durability questions our our clearly the those China drive beginning of as we made investments growth well organic half organic digital year are about in and ago this show well-timed inorganic as like second we growth. to at look as markets a investments both the to that were other talked we areas

mission associates the all colleagues thank you possible. And And just like all our everybody. very around this vision. wrap-up and to and Thanks much and and who really really your dedication call Hill-Rom to the I world of our thank for passion the thousands made

Operator

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

Hill-Rom (HRC) 24 Jan 202020 Q1 Earnings call transcript