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2017.06.02-MDT-Ishrak-Bernstein - PRESENTATION POST - FINAL PDF
2017.06.02-MDT-Ishrak-Bernstein - PRESENTATION POST - FINAL PDF
33 ANNUAL
RD
STRATEGIC
DECISIONS
CONFERENCE
JUNE 2, 2017
OMAR ISHRAK
CHAIRMAN & CEO
FORWARD LOOKING STATEMENT
This presentation contains forward-looking statements which provide current expectations or forecasts, including those
relating to market and sales growth, growth strategies, financial results, use of capital, product development and
introduction, partnerships, regulatory matters, restructuring initiatives, mergers/acquisitions/divestitures and related
effects, accounting estimates, working capital adequacy, competitive strengths and sales efforts. They are based on
current assumptions and expectations that involve uncertainties or risks. These uncertainties and risks include, but are not
limited to, those described in the filings we make with the U.S. Securities and Exchange Commission (SEC). Actual results
may differ materially from anticipated results. Forward-looking statements are made as of today's date, and we undertake
no duty to update them or any of the information contained in this presentation.
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, margin and growth rates on a constant currency, constant week basis, and
adjusted EPS, all of which are considered “non-GAAP” financial measures under applicable SEC rules and regulations. We
believe these non-GAAP measures provide a useful way to evaluate our underlying performance. Medtronic calculates
forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be
included in GAAP financial measures. For instance, forward-looking revenue growth and EPS projections exclude the
impact of foreign currency exchange fluctuations. Forward-looking non-GAAP EPS guidance also excludes other potential
charges or gains that would be recorded as non-GAAP adjustments to earnings during the fiscal year, such as amortization
of intangible assets and acquisition-related, certain tax and litigation, and restructuring charges or gains. Medtronic does
not attempt to provide reconciliations of forward-looking non-GAAP EPS guidance to projected GAAP EPS guidance
because the combined impact and timing of recognition of these potential charges or gains is inherently uncertain and
difficult to predict, and is unavailable without unreasonable efforts. In addition, we believe such reconciliations would imply
a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on
GAAP measures of financial performance. Detail concerning how all non-GAAP measures are calculated, including all GAAP
to non-GAAP reconciliations, are provided in the Appendix to this presentation.
FY17:
$29.7B
FY17:
$29.7B
Therapy
Innovation VALUE-BASED
Improve Clinical
HEALTHCARE
Outcomes PRINCIPLES
Globalization GOVERN OUR
Expand Access GROWTH
STRATEGIES
Optimize Cost &
Efficiency
Economic
Value
DEVELOP NEW
THERAPIES AND
COMPLEMENTARY
OFFERINGS TO
ADDRESS UNMET
CLINICAL NEEDS,
EXPAND PENETRATION,
AND CREATE VALUE
CoreValve® Resolute
Evolut® PRO ONYXTM (US) StealthStationTM
MiniMed® 670G
3rd genTAVR valve next gen DES S8 Customer Training
Launch
3T MRITM ICD (Japan) LigaSure™ Solera® Fenestrated
Vessel Sealing Screw – US
Micra™ Leadless Pacemaker (US) (Indication Expansion)
Instruments
LAUNCHING Visia AF MRI™ (Japan)
Axium™ Prime Guardian® Connect with
Enhanced Enlite Sensor (OUS)
CoreValve® Evolut® R (Japan)
SigniaTM Stealth-Midas®
HawkOne™ (6F) (EU)
Powered Stapler Rialto™ SI Fusion® System
CoreValve® MiniMed® 630G (US) with
Evolut® R 34mm Elevate™ / Voyager® Enlite® CGM sensor
TAVR valve Valleylab™ FT10
Energy Platform MAZOR Robotics
Visia AF MRI™ (US) Partnership
For patients to realize the full value of these exciting new therapies,
Economic Value as well as Clinical Value must be developed
DEVELOP
TAILORED
SOLUTIONS
TO EXPAND
ACCESS
FOR ALL
TRADITIONAL
Large Opportunity Today in MARKET
Premium Segment DEVELOPMENT
+
Out-of-pocket
payment or
reimbursement PREMIUM
1
established Longer-Term
Opportunity in Value
Comparable margins and Underserved
to developed VALUE Segments CHANNEL
UNDERSERVED
2
PUBLIC
PARTNERSHIPS
PRIVATE PARTNERSHIPS
CHANNEL OPTIMIZATION
PUBLIC PARTNERSHIPS
PARTNERSHIP MODEL CHANGE
TURKEY SAUDI
ARABIA CHINA CHENGDU: INDIA AND SEA MANAGED SERVICES
DIABETES & DIALYSIS
PANAMA SLOVAKIA
ACCOUNT-BY-ACCOUNT TRANSITIONS
BRAZIL
17%1 Greater
2.0 20%1 China
19%1 Latin ~40%
America
1.0 ~20%
DEVELOP NEW
INTEGRATED
HEALTH SOLUTIONS
AND BUSINESS
MODELS
TO WIN IN A
VALUE-BASED
HEALTHCARE
ENVIRONMENT
# of Contracts
expanding patient access 100
G&A Leverage
~ $600M+
$250-275M
Leverage / Cost Savings Opportunities
beyond Covidien Synergies through FY21
Shared supplier
rationalization
Sourcing ~$300M
Freight reductions through
common contracts
Value engineering
& make vs. buy
Strategic sourcing initiatives: global supply
base, cost modeling, value engineering
CVG ~$60M
PV integration
Supply Chain
Optimization ~$65M
Integrated transportation and
Plant Network
Optimization ~$5M
Manufacturing and distribution center
operating leverage enabled by lean
logistics & dist. center footprint
techniques
Benefits
Harmonization
~($50)-(70)M
Global footprint optimization: manufacturing,
distribution centers, admin sites
Enabling Functions
~$240M
Elimination of redundant
Functional Delivery Model
Evolution ~$130M
Service delivery optimization:
Functional delivery model transformation
roles / expenses Centers of excel. / shared serv. Expansion of shared services
Billions ($)
0.5
3.0% operating margin improvement 0.0
FY16: ~100 bps improvement1 FY17: ~100 bps improvement1 (0.5) ($34M)
2.0% (1.0)
(1.5)
1 ($1.5B)
1.0% (2.0)
FY16 FY17 FY18E
0.0% 0%
1
EPS
-1.0% FY16 FY17 FY18E
FY16: ~(20) bps decline FY17: ~(10) bps decline $0.00
($0.05)2
FX has significantly diluted operational performance
-2.0% ($0.10)
($0.10)2
($0.20) ~($0.17)
Non-GAAP Non-GAAP Constant Currency ($0.30)
($0.40)
($0.50) ($0.47)
Dividends
Free Cash Flow
Returns to
Shareholders
Share Repurchases
Debt Paydown
Targeting “A” Credit Profile
Reinvestment
Balance Sheet
Tuck-In M&A /
Cash Investments
Free cash flow (FCF) defined as operating cash flow, less capital expenditures
$1.50 Recent
Large 40%
Dividend per Share
Increases
$1.25
Payout Ratio
35%
$1.00
30%
$0.75
25%
$0.50
Dividend Payout Ratio1
$0.25 20%
Dividend per Share
$0.00 15%
FY78
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
FY17
18% Dividend Per Share CAGR over 39 Year History
Member of S&P 500 Dividend Aristocrats
1. On a non-GAAP basis. Calculated as annual dividend per share divided by prior year non-GAAP earnings per share.
60%
72%
65%
58%
53% 55%
40%
20%
0%
FY12 FY13 FY14 FY15 FY16 FY17
1. Payout ratio calculated as dividends plus net share repurchases divided by adjusted net income.
Integrated Technology
Corporate Infrastructure