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OMAR ISHRAK
CHAIRMAN & CHIEF EXECUTIVE OFFICER
KAREN PARKHILL
EVP & CHIEF FINANCIAL OFFICER
RYAN WEISPFENNING
VICE PRESIDENT, INVESTOR RELATIONS
ryan.weispfenning@medtronic.com
Financial Data
Certain information in this presentation includes calculations or figures that have been prepared internally and
have not been reviewed or audited by our independent registered public accounting firm. Use of different
methods for preparing, calculating or presenting information may lead to differences and such differences may be
material. This presentation contains financial measures and guidance, including free cash flow figures (defined as
operating cash flows less property, plant and equipment additions), revenue and growth rates on a constant
currency and constant weeks basis, and constant currency growth rates, net income, and diluted EPS, all of which
are considered non-GAAP financial measures under applicable SEC rules and regulations. We believe these
measures provide a useful way to evaluate our underlying performance. Detail concerning how all non-GAAP
measures are calculated, including all GAAP to non-GAAP reconciliations, are included at the end of this
presentation.
Medtronic
Differentiators
Medtronic
Differentiators
Innovation
Size / Scale
$40B
Free Cash Flow
Profitability
Cash
Accessibility
Disciplined
Allocator
Return to Shareholders
$10B
Next 5 Years
Returns
Focused
Consistency
3
$20B
$10B
Financial Flexibility
Morgan Stanley Global Healthcare Conference | September 13, 2016
REVENUE GROWTH
MARGIN EXPANSION
CAPITAL DEPLOYMENT
EPS GROWTH
EPS GROWTH
Committed to consistently
delivering strong double
digit constant currency EPS growth
Committed to delivering consistent double digit
constant currency EPS growth
Free cash flow (FCF) defined as operating cash flow, less capital expenditures
4
REVENUE
GROWTH
EPS
LEVERAGE
CAPITAL
ALLOCATION
MID-SINGLE DIGIT
CONSTANT CURRENCY REVENUE GROWTH
DOUBLE-DIGIT
CONSTANT CURRENCY EPS GROWTH
>50 PERCENT
RETURNED TO SHAREHOLDERS
Preserve
Maintaining business
momentum at both
companies while
delivering consecutive
quarters of strong
business performance.
Optimize
Integrating the best of
our systems, policies
and facilities
reinventing ourselves to
achieve global growth
and savings.
Capturing operational
synergies
Accelerate
Realizing synergy
opportunities for
Covidiens Peripheral
Vascular and
Neurovascular divisions.
Increasing capital
deployment and access to
trapped cash.
Transform
Delivering higher
value in healthcare.
Aligning solutions to
emerging value-based
payment models.
Partnering with new
stakeholders.
MARGIN EXPANSION
Utilizing systems and
structures at scale across
the enterprise to drive
margin expansion
Covidien
Synergies
COGS
Reduction
Operating Leverage
Low to Mid-Single Digits
G&A Leverage
~(110)
(130) bps
~(20) bps
28.0%
28.4%
28.2%
27.0%
26.0%
25.0%
FY15
OM
Improvement
FX
FY16
Extra Week
OM
Improvement
FX
FY17E
FY17E
~$355M
$225-250M
Total
FY18E
>$850M
$250-275M
Sourcing ~$300M
Shared supplier rationalization
SG&A
1
CVG ~$60M
Manufacturing ~$5M
Peripheral Vascular
integration
Plant network
~$600M
COGS
~$215M
Benefits Harmonization
~($50)-(70)M Impact
Non-Operations Facilities ~$100M
Consolidation of >100 facilities globally (sales offices, corporate offices, back offices)
Manufacturing / Plant network optimization will result in significant future savings
9
R&D
~$35M
35.0%
34.0%
~70
140 bps
33.0%
~70
140 bps
32.0%
31.0%
30.0%
~50
100 bps
~70
140 bps
~130
210 bps
29.0%
28.0%
27.0%
FY17E
Lev.
Other
COV Synergies
~$355M in FY16
~$225M-$250M in FY17E
~$250M-$275M in FY18E
FY18E
Lev.
Underlying SG&A
Other
FY19E
Lev.
Underlying GM Improvement
FY17E operating margin includes the impact of FX, but shows CC leverage
Operating Margin on constant currency basis for FY17-FY21
10 Underlying GM improvement net of ASP reduction
Morgan Stanley Global Healthcare Conference | September 13, 2016
FY20E
Lev.
FY21E
Discretionary
CAPITAL DEPLOYMENT
Share
Repurchases
Free Cash Flow
Dividends
Debt Paydown
Balance Sheet
Cash
Deploying massive
amounts of capital
strategically, consistently,
and with discipline
M&A
Financial
Flexibility
11
~$40B FCF
High-single digit CAGR
Mid-teens accessible FCF CAGR
to generate ~$1.5B in
incremental FCF over next 5 yrs
5% Inventory Turn
improvement annually
Billions ($)
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
suppliers to 60 days
FY18E
Trapped FCF
FY19E
FY20E
FY21E
Accessible FCF
Free cash flow (FCF) defined as operating cash flow, less capital expenditures
12
SOURCES OF CASH
~$13B of cash and investments currently on the
balance sheet
~$28B
Accessible
FCF
~$12B
Trapped
FCF
~$2B
Trapped
B/S Cash
$3B
Puerto Rico
Resolution
~$8B
Accessible
B/S Cash
Free cash flow (FCF) defined as operating cash flow, less capital expenditures
13
Improved
Capital
Sustainability
FY17
FY16
FY15
OsteoCoolTM
14
Clear financial
value proposition
Revenue Growth
Adds ~50-100 bps
Target $1.5B
M&A / Year
EPS
Neutral / Accretive
Increased
Confidence
Double-Digit
EPS Growth
50%
$2.75
$2.50
$2.00
$1.75
$1.50
$1.25
40%
Recent
Large
Increases
$1.00
Payout Ratio1
$0.25
20%
FY79
FY80
FY81
FY82
FY83
FY84
FY85
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
FY19E
FY20E
FY21E
$0.50
30%
25%
$0.75
$0.00
35%
15%
Payout Ratio
$2.25
45%
2.00
1,200
0.00
Shares (Millions)
Billions ($)
1,400
1,000
FY16
FY17E
FY18E
Base Share
Repurchases
FY19E
Incremental Share
Repurchases
FY20E
FY21E
Diluted Weighted
Shares Outstanding
3.8x
~2.5X
FY19-FY21E
~2.5X
17
FY17E
FY18E
REVENUE GROWTH
Universal Healthcare Needs:
Perpetual Source of
Opportunity
Medtronic Strategies to
Capture Growth
Three Diversified
Growth Vectors
New Therapies
200-350bps
Therapy Innovation
Emerging Markets
Expand Access
150-200bps
Globalization
Economic Value
18
PORTFOLIO MANAGEMENT
STRONG CROSS GROUP SYNERGIES
Surgical Innovations
CRHF
SCA
Arrhythmia
Heart Failure
AF
Coronary and
Structural Heart
Focused
Companies
Hypertension
CAD
Heart Disease
Groups
CVG
PAD
Brain
Stroke
Movement Disorders
Early Technologies
Spine
Spinal Deformity
Patient Monitoring
& Recovery
Respiratory
Nutritional
Insufficiency
Degenerative Spinal
Conditions
Infection
Deep Vein
Thrombosis
Pain
Chronic and Cancer Pain
Renal Care
Specialty Therapies
MITG
RTG
Comorbidity
Integrated Technology
Corporate
Synergies
19
Intensive Insulin
Management
Type 1
Non-Intensive
Diabetes Therapies
Pre-Diabetes
Type 2
Diabetes
FOCUSED
Cross-Selling
TYRX through NeuroStim & Spine
Reveal LINQ through Neurovascular
Peak Plasmablade through CHRF
Product Cadence
New therapies key to sustainable midsingle digit growth
2
3
GM Structure
Ensure breadth of offerings across BUs
Partner with physicians to champion next
Technology-Sharing
RF Generator Design (MITG & CVG)
Vascular Embolics (RTG & CVG)
Patient Management Database Architecture
(Diabetes & CVG)
major innovation
Marketplace Leadership
20
Extravascular ICD
FY20 &
Beyond
IntrepidTM TMVR
LINQ IITM
Polaris (US / EU)
Drug Filled Stents (EU)
FY19
Renal Solutions
FY17
FY16
SigniaTM Powered
Stapler
4th Generation
Pipeline
iPro 4
Harmony 1
iPro 3
Stealth-Midasv
Stealth-Connect
Solitaire
Platinum
Atlantis EssentialsTM
Anterior Cervical Plate
NextGen
O-Arm
21
iPro 5
Cranial Robot
FY18
Harmony 2
Valiant Evo
Resolute ONYXTM
(US)
Minimally Invasive
Therapies Group
Restorative
Therapies Group
Diabetes
Group
TECHNOLOGY
SHARING ACROSS
BUSINESS UNITS
TECHNOLOGY
SHARING ACROSS
GROUPS
GROUP
CROSS-SELLING
OPPORTUNITIES
LEVERAGING GLOBAL
OPERATIONS CENTERS
OF EXCELLENCE
RF Generator Design
(e.g. MITG & CVG)
ECT Cannula
from MITG Mexico
Vascular Embolics
(e.g. RTG & CVG)
Patient Management
Database Architecture
(e.g. Diabetes & CVG)
22
Chip-based Glucose
Sensors from MTC Tempe
Reveal LINQTM
through Neurovascular
Peak Plasmablade
through CRHF
Transcatheter
Valve/Endovascular
Delivery Systems from
Galway
DIVERSIFIED EMERGING
MARKET GROWTH
Other Asia
~5%
India
~5%
Existing
technology
Central &
Eastern EU
Out-of-pocket
~10%
Greater
China
Latin
America
~40%
~20%
payment or
reimbursement
established
$5B
Annual
Opportunity
Comparable
margins to
developed
markets
Channel
Optimization
Private
Partnerships
Public
Partnerships
APPROACHES
OPPORTUNITY
24
Responsibilities
Adjust distributor margins
correspondingly
Distributors focus more on logistics
and last-mile services
DISTRIBUTOR TRANSITIONS
TURKEY
Q4 FY14: Formed Biostar JV with
largest distributor; expanding to
additional business units
SAUDI ARABIA
Q1 FY16: Formed JV with largest
distributor (Gulf Medical) for select
business units
Commercial commitment
25
PRIVATE PARTNERSHIPS
ECONOMIC VALUE
THREE CATEGORIES OF OFFERINGS
Historical Business
Medical
Devices
Value-Based
Healthcare Offerings
New Business
Core business
Proprietary
technology
Examples:
ICD, Stent, Spinal
Fixation System, Insulin
Pump
Primary Customers:
Physicians, Patients
2
3
Business Model Innovation
26
GDP
Pressures
Expertise in Care
Pathway
Development
Current
Efforts Not
Enough
Stakeholders
Engaged in
Change
Opportunity
to Lead
27
Disease &
Condition
Understanding
Technology Innovation in
Care Delivery: IT, PostAcute Care, Mobile
Healthcare
Economics &
Payment Model
CHRONIC CARE
MANAGEMENT
Diabeter
EPISODIC
BUNDLE
Orthopedic Solutions
Comprehensive solution
3 THERAPY OPTIMIZERS
TYRXTM
NOK
28
CABG
Respiratory Compromise
Overview
100
88
97
77
75
66
NGC
Acquired
savings
52
1.5
62
50
38
48
1.0
25
0.5
15
capacity
0.0
Q1
Q2
Q3
Q4
Q1
Q2
FY2015
Total Managed
Service Agreements
Long-term managed service agreements including CLMS and ORMS (beginning in Q1 FY16).
Contracted service and product revenue over an average span of 6 years.
29
2.0
Q3
FY2016
Q4
Q1
FY2017
Contracted Service
and Product Revenue
2.5
~12-16% CC
EPS growth
~$0.20
$0.25
$4.37
FY16
EPS
$4.70
$4.60
~($0.08)
($0.10)
Extra Week
Impact CC
Rev. Growth
OP.
Lev.
FIN
Lev.
FY17E EPS CC
FX
FY17E
EPS
EPS growth of 12%-16% CC, excluding the impact of the extra week
Despite significant FX pressure, EPS growing 7%-10% on reported basis (excluding the impact of the
extra week)
30
~400-650 bps
EPS Lev.
Financial
Leverage
~400-650 bps
EPS Lev.
$4.70
$4.60
FY17E
EPS
Rev.
Growth
Lev.
FY18E
EPS
Rev.
Growth
Lev.
FY19E
EPS
Rev.
Growth
Lev.
FY20E
EPS
Rev.
Growth
Lev.
FY21E
EPS
Balanced drivers of EPS growth: revenue, operating leverage, and financial leverage
Multiple levers to achieve low double-digit EPS growth commitment
EPS leverage on a constant currency basis
31
Revenue Growth
Mid-Single Digits
Covidien Synergies
COGS Reduction
G&A Leverage
Interest Income
Operating Leverage
Low to Mid-Single
Digits
Financial Leverage
Low-Single Digits
EPS Growth
Double Digits
Low-Double Digits
to Mid-Teens
Dividend Yield
Low-Single Digits
Tax
Share Repurchases
Total Shareholder
Return