CHICAGO, Nov. 1, 2019 /PRNewswire/ -- Hillrom (NYSE: HRC) today announced financial results for its fiscal fourth quarter and full year ended September 30, 2019. In addition, Hillrom provided its fiscal 2020 guidance and long-range financial outlook through fiscal 2022.
For the fiscal fourth quarter, Hillrom reported worldwide revenue of $783 million and GAAP earnings of $0.41 per diluted share. These results reflect the revenue recognition accounting standard, ASC 606, which the company adopted on a modified retrospective basis beginning in the fiscal first quarter 2019. The company's unaudited 2018 modified financial schedules reflecting the adoption of ASC 606 are available as supplemental schedules on the company's website.
"Our strong fourth quarter financial results mark the close of another successful year at Hillrom," said John Groetelaars, Hillrom president and CEO. "We enter fiscal 2020 with strong momentum and confidence in our ability to execute on our strategy, advance our category leadership, and deliver on our commitments to drive value for patients, caregivers and our shareholders."
Fiscal Fourth Quarter 2019 Financial Results
On a comparable basis under ASC 606, fiscal fourth quarter adjusted earnings of $1.69 per diluted share exceeded the company's guidance of $1.64 to $1.66 per diluted share.
Worldwide reported revenue of $783 million in the fiscal fourth quarter increased 3 percent, or 4 percent on a constant currency basis under ASC 606 in both the current and prior periods. Hillrom's core revenue advanced 8 percent, exceeding the company's guidance of approximately 5 percent growth. Core revenue excluding acquisitions advanced 6 percent. Core revenue excludes foreign currency, divestitures, and non-strategic assets the company may exit, including the Surgical Solutions international OEM business.
By reporting segment (under ASC 606):
- Patient Support Systems: Patient Support Systems revenue of $415 million increased 10 percent on a reported basis, or 11 percent on a constant currency basis. Core revenue advanced 14 percent, driven by strong performance across the diversified portfolio of connected solutions and services, including double-digit growth of care communication platforms and med-surg bed systems.
- Front Line Care: Front Line Care generated revenue of $257 million, a decline of 2 percent on a reported basis, or a decline of 1 percent on a constant currency basis. A difficult comparison from last year's U.S. launch of the Monarch® Airway Clearance System offset strong growth in other respiratory health products and certain diagnostic tools, including thermometry and the vision portfolio.
- Surgical Solutions: Surgical Solutions generated revenue of $110 million, a decline of 8 percent on a reported basis, or a decline of 6 percent on a constant currency basis reflecting the surgical consumables divestiture. Core revenue increased 11 percent, fueled by strong growth of patient positioning and operating room equipment, including Integrated Table Motion for the da Vinci Xi® Surgical System.
Fiscal Full-Year 2019 Financial Results
For fiscal 2019, Hillrom reported GAAP earnings of $2.25 per diluted share.
On a comparable basis under ASC 606, full-year adjusted earnings of $5.08 per diluted advanced 9 percent over the prior-year period. Worldwide reported revenue of $2.91 billion increased 3 percent, or 4 percent on a constant currency basis. Hillrom's core revenue grew 7 percent for the year, and excluding acquisitions, core revenue grew 6 percent.
Supporting the company's strategies and financial performance were several achievements aimed at advancing Hillrom's innovation, transforming the portfolio and delivering sustainable value to shareholders. Highlights include:
- Advancing category leadership with a new and unified Hillrom brand, and achieving over $450 million in new product revenue during fiscal 2019, with contributions from all three businesses.
- Defining a new standard of care with the commercial launch and integration of the EarlySense® continuous, contact-free heart rate and respiratory rate sensing and analytical technology into Hillrom's Centrella® Smart+ bed platform. EarlySense technology alerts clinicians to potential patient deterioration events much earlier than traditional monitoring methods, enabling health teams to intervene more effectively.
- Introducing the new Welch Allyn® RetinaVue® 700 Imager, a handheld retinal camera that enables remote ophthalmologists to diagnose diabetic retinopathy in patients with diabetes during routine primary care office visits. This next-generation device is a simpler, faster and more cost-effective way to help customers achieve patient compliance with eye exams and detect the vision-threatening disease earlier.
- Investing in innovation, connectivity and data to bring advanced, actionable point-of-care data and solutions to caregivers and healthcare provider organizations. The company's future digital offerings, using Microsoft® Azure®, are intended to analyze real-time sensing data from medical devices and historical medical record information, and communicate potential patient risk and hospital protocol actions directly to caregivers, in real-time, at the point of care.
- Driving Hillrom's vision of Advancing Connected Care™ with the acquisition of Voalte, a pioneer and leader in real-time, mobile healthcare communications that simplify communications and improve workflows and outcomes across healthcare systems. The combination strengthens Hillrom's connected solutions, including smart hospital beds, vital signs monitors, and its evolving digital offering to help care teams deliver better care to patients.
- Expanding the respiratory health portfolio with the acquisition of Breathe Technologies, Inc., a developer and manufacturer of a patented wearable, non-invasive ventilation technology that supports improved patient mobility in a broad range of reimbursable conditions including COPD, interstitial lung disease, restrictive thoracic disorder and post-lung-transplant rehab.
- Completing the sale of the company's surgical consumable products, including Bard-Parker® conventional and safety scalpels and blades, and a variety of other operating room accessories. The sale underscores the company's strategic focus on Advancing Connected Care in high-growth, high-margin categories where Hillrom can demonstrate leadership.
- Promoting excellence in the workplace and being recognized in 2019 with multiple designations, including gold status on the American Heart Association's Workplace Index, Ecovadis Gold Award for Sustainability, Women's Forum of New York Corporate Champion, Great Place to Work® Award in France, and the Dave Thomas Foundation for Adoption 2019 100 Best Adoption Friendly Workplaces.
- Generating significant operating cash flow of $401 million for the year, returning $177 million to shareholders in the form of dividends and share repurchases, and raising its dividend for the ninth consecutive year.
Fiscal 2020 Financial Guidance
For fiscal 2020, Hillrom expects revenue to increase 1 to 2 percent on both a reported and constant currency basis, and core revenue to increase 5 to 6 percent. Excluding the incremental benefit of acquisitions prior to the anniversary date, core revenue is expected to increase 4 to 5 percent. The company expects adjusted earnings of $5.46 to $5.56 per diluted share, and approximately $430 million in operating cash flow.
For the fiscal first quarter 2020, Hillrom expects revenue to be flat to the prior year on a reported and constant currency basis. Core revenue is expected to increase 5 to 6 percent. Excluding acquisitions, core revenue is expected to increase approximately 4 percent. The company expects adjusted earnings, excluding special items, of $1.07 to $1.09 per diluted share.
Long-Range Financial Outlook Through Fiscal 2022
Based on strong performance and execution of its previous long-range plan, Hillrom is also providing its long-range financial outlook through fiscal 2022.
Hillrom expects reported revenue growth of approximately 4 percent on a compound annual basis from 2019 through 2022 at constant currency rates. The company expects core revenue growth of approximately 5 percent on a compound annual basis from 2019 to 2022. Core revenue growth excludes revenue of approximately $150 million in 2019 primarily related to the surgical consumables divestiture and the pending exit of the Surgical Solutions international OEM business in 2020.
The company's focus on operating efficiencies and disciplined cost management has resulted in significant improvement in its margin profile over the last few years. Hillrom today reaffirmed its commitment to driving long-term margin expansion as a result of ongoing new product momentum, enhanced emerging market penetration, value creation from recent business development activity, and business optimization savings, while selectively investing in key strategic growth initiatives to sustain long-term top-line growth.
As a result of strong operational performance, Hillrom expects to grow adjusted earnings per share at least 10 percent on a compound annual basis from 2019 through 2022, or at least 12 percent when excluding the impact of the 2019 divestiture of surgical consumables. The company also expects to generate cumulative operating cash flow of approximately $1.4 billion and cumulative free cash flow of more than $1 billion over the next three years.
"We remain committed to driving accelerated core revenue growth, double-digit adjusted earnings per share growth, and significant operating cash flow through 2022, while investing to position our company for continued success," concluded Mr. Groetelaars. "This compelling outlook reflects continued strength and momentum across our diversified business, operational execution and financial discipline as we create sustainable, long-term value and deliver on our vision of Advancing Connected Care."
Discussion of Adjusted Financial Measures
In addition to the results reported in accordance with GAAP, Hillrom routinely provides gross margin, operating margin, income tax expense, and earnings per diluted share results on an adjusted basis because the company's management believes these measures contribute to an understanding of our financial performance, provide additional analytical tools to understand our results from core operations and reveal underlying operating trends. These measures exclude strategic developments, acquisition and integration costs and related fair value adjustments, gains and losses associated with disposals of businesses or significant product lines, regulatory costs related to updating existing product registrations to comply with the European Medical Device Regulation, special charges, the transitional impacts of U.S. tax reform legislation, change in tax accounting methods, other tax law changes and expenses associated with these tax items, the impacts of significant litigation matters, and other unusual events. The company also excludes expenses associated with the amortization of purchased intangible assets. These adjustments are made to allow investors to evaluate and understand operating trends excluding their impact on operating income and earnings per diluted share.
Management uses these measures internally for planning, forecasting, and evaluating the performance of the business. Investors should consider these non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Reconciliations of GAAP measures to adjusted measures appear in the financial tables of this release.
The company also routinely provides earnings per diluted share guidance on an adjusted basis. This excludes the impact of intangible asset amortization associated with prior business acquisitions, which we expect to be $1.34-$1.42 per diluted share for the fiscal year 2020. Management also does not include adjusted items such as strategic developments, acquisition and integration costs, special charges, and other unusual items in our guidance because such items are evaluated on an ongoing basis, can be highly variable and cannot be reasonably predicted. As such, prospective quantification of these items is not feasible, and a full reconciliation of non-GAAP earnings per diluted share guidance to GAAP earnings per diluted share has not been provided. However, as a result of acquisitions, our ongoing portfolio and business optimization initiatives, and any change to the transitional impacts from U.S. tax reform legislation, we do expect adjusted items we have not predicted to potentially be significant to our GAAP measures including gross margin, operating margin, income tax expense and earnings per diluted share.
The company also presents certain results on a constant currency basis, which compares results between periods as if foreign currency exchange rates had remained consistent period-over-period. Management monitors sales performance on an adjusted basis that eliminates the positive or negative effects that result from translating international sales into U.S. dollars. Management calculates constant currency by applying the foreign currency exchange rate for the prior period to the local currency results for the current period.
Conference Call Webcast and Dial-in Information
The company will host a conference call and webcast today beginning at 7:00 a.m. (CT) / 8:00 a.m. (ET).
Conference Call Audio Only Dial-in Information: To participate in the conference call, dial (844) 654-5620 (domestic) or (647) 253-8654 (international). Please dial into the call at least 10 minutes prior to the start to allow time to connect. The confirmation code is 2848548.
Webcast: A simultaneous webcast of the call will be accessible via the company's website at www.hillrom.com .
Presentation: A supplementary presentation will be posted to Hillrom's website prior to the webcast.
A recording of the webcast/call audio will be available for telephone replay through November 14, 2019. To access the replay, dial (800) 585-8367 (domestic) or (416) 621-4642 (international). For the replay, callers will need to use confirmation code 2848548. If you are unable to listen to the live webcast or the telephone replay, the webcast will be archived at www.hillrom.com
Hillrom is a global medical technology leader whose 10,000 employees have a single purpose: enhancing outcomes for patients and their caregivers by advancing connected care. Around the world, our innovations touch over 7 million patients each day. They help enable earlier diagnosis and treatment, optimize surgical efficiency and accelerate patient recovery while simplifying clinical communication and shifting care closer to home. We make these outcomes possible through connected smart beds, patient lifts, patient assessment and monitoring technologies, caregiver collaboration tools, respiratory health devices, advanced operating room equipment and more, delivering actionable, real-time insights at the point of care. Learn more at hillrom.com .
View original content to download multimedia:http://www.prnewswire.com/news-releases/hillrom-concludes-successful-fiscal-2019-with-strong-fourth-quarter-results-exceeding-guidance-300949680.html
SOURCE Hill-Rom Holdings, Inc.