Invacare — Investor Presentation (January 2017)
48 slides from Invacare's investor presentation, Jan 6, 2017
Slide 1: Invacare Corporation Investor Presentation
PLACEHOLDER Invacare Corporation (NYSE:IVC) Investor Presentation IVC IP 1/6/2017
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that describe future outcomes or expectations that are usually identified by wo
Slide 3: About Invacare Corporation (NYSE: IVC)
About Invacare Corporation (NYSE: IVC) • Global Headquarters near Cleveland, OH • 2015 revenues of $1.1 billion • Design, manufacture and distribute non-acute durable medical equipment • Primarily distribute to home medical equipment providers, rehabilitation facilities and residential care provider
Slide 4: Solutions Across The Continuum Of Care
Solutions Across The Continuum Of Care Providing essential clinical solutions for broad range of conditions Solution Areas Move Breathe Rest & Hygiene Conditions Congenital Acquired Degenerative Stroke Multiple Sclerosis Cerebral Palsy Spinal Cord Injury Muscular Dystrophy ALS Traumatic Brain Injury
Slide 5: Investment Summary
Investment Summary • Long-term global revenue growth opportunities: Strong commercial footprint in an attractive medical device industry • Margin expansion underway: Shift from a broad mix of durable medical equipment to being focused on clinically valuable solutions • Solid starting point: Strong E
Slide 6: Healthcare Moving To Lower Cost Settings
Healthcare Moving To Lower Cost Settings Population grows and ages faster than healthcare funding; payors are shifting healthcare spending The World’s population will continue to grow And per capita healthcare spending is rising WORLD'S TOTAL POPULATION 12 (actual & projected) 2.50% $ Thousands 1.05
Slide 7: Market Transformation Driving Strategic Shift
Market Transformation Driving Strategic Shift Focusing on greater clinical value contributes to profitable growth 1. Historically – a larger intersection of demand for features across full range of products, e.g. durability and features valued across product range. Invacare’s one-stop-shop strategy
Slide 8: Transformation Priorities
Transformation Priorities Focusing on two clear global priorities to drive the transformation Two strategic priorities since 2015 • Expand company-wide culture of excellence • Develop organizational strength Quality • Streamline procedures and deploy best practices • Progress with Consent Decree • F
Slide 9: Invacare's Value: Hours Of Continuous Clinical Care
Invacare’s Value: 24 Hours Of Continuous Clinical Care Complex Rehabilitation Post Acute Care Respiratory IVC IP 1/6/2017 9
Slide 10: Invacare's Value: Hours Of Continuous Clinical Care
Invacare’s Value: 24 Hours Of Continuous Clinical Care Providing innovative products for complex clinical solutions Premium hygiene solutions Wound management & safe rest with therapeutic support surfaces 24 Transfers with safe Rest patient handling 24 Hygiene 18 hours of 6 Advanced power Clinical C
Slide 11: Clinically Complex Mix Of Products
Clinically Complex Mix Of Products Shifting the company’s focus toward clinically complex solutions Region by by Products product Region Products Global Globally by product Approximate Global Product by product Mix 12/31/15 by Attribute APAC Other ADL EMEA Total Sales Starting point for mix shift Li
Slide 12: Transformation
Transformation Leverage the company’s strong technical capabilities for solving complex clinical needs to generate better returns for re-investment and growth 2015 2019+ Phase One – Assess and Reorient Strengthen balance sheet Develop and expand talent Phase Two – Build and Align Accelerate qu
Slide 13: Transformation: Progress on Phase One
Transformation Making meaningful progress on Phase One Assess and Reorient Completed $13 million debt at 12/31/15, ABL facility, divestiture of rentals businesses Strengthen balance sheet Convertible debt transaction ($150 million gross) as of Feb 2016 Cash and equivalents $138.4 M, Debt $197
Slide 14: Restart Innovation Pipeline
Restart Innovation Pipeline Supporting sales growth with frequent clinically innovative solutions Alber® Twion® Power Assist with Move smartphone controls May 2016 Breathe Invacare® Kogia Bath Lifter June 2016 Rest and Hygiene Invacare Myon® HC Manual Wheelchair Aug 2016 Invacare® LiNX® Microprocess
Slide 15: Key Indicators Of Transformation
Key Indicators Of Transformation As our transformation progresses, we expect to see the following trends: Phases 1 & 2 Phase 3 • Revenue: Reshaping revenue, reducing aids for daily living (ADL) then growing clinically complex products (CCP) • Gross Margin: Shifting mix where innovation % $ drives ma
Slide 16: Recent Performance - Key Expectations
Recent Performance - Key Expectations Phase One Indicators Q415 Q116 Q216 Q316 Constant Currency Net Sales(a)(b) (1.8)% (4.8)% (1.6)% (4.5)% Gross Margin Percentage of Net % +190 bps +90 bps +120 bps +/- 0 Sales(a)(b) Gross Profit(a)(b) $ $(1.7)M $(3.7)M $2.1M $(4.2)M Constant Currency SG&A(a)(b) 0.
Slide 17: Looking Forward
Looking Forward Transformation is the framework for strong future Key Objectives Phase 3 Expected Results Constant Currency Net Sales > $1.1 billion Growth Targets > Market Gross Profit > 30% SG&A Mid-20s% Operating Margin ≥ Upper single-digits EBITDA > $100 million IVC IP 1/6/2017 17
Slide 18: Investment Summary
Investment Summary • Long-term global revenue growth opportunities: Strong commercial footprint in an attractive medical device industry • Margin expansion underway: Shift from a broad mix of durable medical equipment to being focused on clinically valuable solutions • Solid starting point: Strong E
Slide 19: Appendix A: Reconciliation of Non-GAAP Performance Metrics to GAAP
Appendix A: Reconciliation of Non-GAAP Performance Metrics to GAAP Financial Measures 19 IVC IP 1/6/2017
Slide 20: Reconciliation Of Non-GAAP Performance Metrics To GAAP Financial Measures
Reconciliation Of Non-GAAP Performance Metrics To GAAP Financial Measures IVC IP 1/6/2017 20
Slide 21: Appendix B: Attractive Industry Dynamics For Durable Medical Equipment
Appendix B: Attractive Industry Dynamics For Durable Medical Equipment Used in Post-Acute Care 21 IVC IP 1/6/2017
Slide 22: Population Demographics – United States
Compelling Business Case For DME: Population Demographics – United States 1990 2025 1The New York Times – “The Aging of America.” United Nations Division. Published: February 5, 2011. 22 IVC IP 1/6/2017
Slide 23: Population Demographics – Europe
Compelling Business Case For DME: Population Demographics – Europe Changes from 1994 - 2014 EU Population Projection: 2014 - 2080 23 IVC IP 1/6/2017
Slide 24: Need For DME Spans Generations
Compelling Business Case For DME: Need For DME Spans Generations Clinical Needs Across Age Groups 2025 – United States • Congenital and developmental conditions throughout life (ALS, MS, obesity) • Severe spinal injuries • Respiratory conditions (COPD) • Elder care • Pediatric mobility 24 IVC IP 1/6
Slide 25: Healthcare Spending Is Increasing
Compelling Business Case For DME: Healthcare Spending Is Increasing Per capita total expenditure on health at average exchange rate (US$), 2013¹ As the aging of the population continues, the total expenditure on healthcare as a percentage of GDP is growing worldwide1 Invacare has a footprint to supp
Slide 26: Appendix C: Transformation
Appendix C: Transformation IVC IP 1/6/2017 26
Slide 27: Recent Challenges Create Opportunity
Recent Challenges Create Opportunity Historical Revenue(1)(2) U.S. National Competitive Bidding: Since 2011, $1,700 $1,459 $1,385 $1,393 $1,466 $1,416 $1,335 Medicare has implemented a series of reimbursement $1,270 $1,200 $1,142 cuts to our customers resulting in significant reductions in price in
Slide 28: Strategic Rationale For Transformation
Strategic Rationale For Transformation Fundamentals Industry • Favorable population • Substantial reimbursement demographics reductions • Increasing life expectancy • Increased audit activity • Expectation for active living at all ages • More alternative suppliers • Prosperity increases traumatic in
Slide 29: North America Transformation - Salesforce
North America Transformation - Salesforce Redesigning the clinical selling team to fit market’s needs From: To: • Multiple sales teams • Two integrated sales that overlap in care HME / Post- groups with specialized Invacare Acute setting, products, Full-Line product and clinical customers Exclusive
Slide 30: Appendix D: Innovation
Appendix D: Innovation 30 IVC IP 1/6/2017
Slide 31: Invacare's Focus On Clinically Complex Solutions
Invacare’s Focus On Clinically Complex Solutions Committed to delivering clinically relevant innovation in post-acute care Portfolio Products Differentiation Move • Proprietary custom power wheelchair technology • Controllers/Electronics • Electromotive technology • Suspension handling • Alternative
Slide 32: Investing In Research And Development
Investing In Research And Development Future R&D spending will be focused on critical product innovation Research and Development Spending $30 2.0% 1.9% $25 1.9% 1.8% $20 1.8% Millions $15 1.7% 1.7% $10 1.6% 1.6% $5 1.5% $- 1.5% 2011 2012 2013 2014 2015 R&D Spend $27.6 $23.9 $24.1 $23.1 $18.7 % of S
Slide 33: Invacare HomeFill Oxygen System And Perfecto2 V Concentrator
Invacare® HomeFill® Oxygen System And Invacare® Perfecto2™ V Concentrator ® ® Invacare HomeFill Oxygen System • The HomeFill oxygen system revolutionized ambulatory oxygen by allowing patients to fill their own oxygen cylinders from their Invacare 5-liter and 10-liter concentrators • Reduces provide
Slide 34: Invacare Platinum Mobile Oxygen Concentrator
Invacare® Platinum® Mobile Oxygen Concentrator Feature Invacare Vs. Comparable* Models Battery Life (max output) Battery Charging Times Durability Ease of Use O2 Concentration Sound Level Weight *Comparable weight class, portability and price point. Outperform Neutral 34 IVC IP 1/6/2017
Slide 35: Invacare Is Complex Rehab Technology
Invacare Is Complex Rehab Technology Adaptive Switch Labs (ASL) Headarray Invacare® MK6i® Motion Concepts ® Electronics Powered Seating System Motion Concepts® Seating Invacare® TDX® SP Power Base 35 IVC IP 1/6/2017
Slide 36: Invacare TDX SP Power Wheelchair
Invacare® TDX® SP Power Wheelchair Invacare’s custom power wheelchair features multiple patent-protected and innovative features: • Enhanced SureStep® Suspension, which aids in obstacle climbing and assists in easing the transition coming off of an obstacle (curb, step) making it effortless and near
Slide 37: Rovi X3 Power Base With Motion Concepts Ultra Low Maxx
Rovi® X3 Power Base With Motion Concepts® Ultra Low Maxx Power Positioning • Center-wheel drive with the narrowest base in the market • Unique chassis configuration for enhanced stability • Launched in North America and Asia/Pacific with full range of Motion Concepts power positioning products 37 IV
Slide 38: Freedom Designs P.R.O. CG Tilt-in-Space Wheelchair
Freedom Designs P.R.O. CG™ Tilt-in-Space Wheelchair • Lightweight design (34 lb. in transport configuration) • Compact size • The Precise Rotational Orientation makes the wheelchair easy to push, tilt, un-tilt, and turn, making it easy to use with a full range of patient sizes and living environment
Slide 39: Alber Twion Power Assist
Alber® Twion® Power Assist • Electric motors equipped with leading-edge digital electronics provide consumer with extra power for every propelling movement • Assists with speed up to 10 km/h (6.2 mph) • Lightweight and quiet • Option of Smartphone connectivity with Bluetooth interface Twion Power As
Slide 40: Appendix E: Historic Financial Results
Appendix E: Historic Financial Results 40 IVC IP 1/6/2017
Slide 41: Europe Long-Term Sales Performance
Europe Long-Term Sales Performance Demonstrated record of balancing solutions for repeated constant currency net sales growth1 Constant Currency Net Sales Growth In Europe 14.0% Constant currency net sales1 growth compared 12.0% 12.3% to same period prior year. 10.0% 7.9% 7.9% 8.0% 7.2% 6.0% 5.8% 5.
Slide 42: Appendix F: U.S. Government Reimbursement for Invacare's Customers
Appendix F: U.S. Government Reimbursement for Invacare’s Customers 42 IVC IP 1/6/2017
Slide 43: U.S. Reimbursement Changes – NCB
U.S. Reimbursement Changes – NCB National Competitive Bidding – Home medical equipment providers bid on select product categories. Winners earn the right to continue soliciting referral sources for Medicare patients and billing Medicare for their services. Winning the bid does not guarantee patient
Slide 44: U.S. Reimbursement Changes – NCB
U.S. Reimbursement Changes – NCB Round 1 – Nine Metropolitan Statistical Areas Round 2 – 91 Metropolitan Statistical Areas • The bid rates that were put in place on • The second round of NCB was extended to January 1, 2011 were an average of 32% 91 additional metropolitan areas and lower than previo
Slide 45: U.S. Reimbursement Changes – NCB
U.S. Reimbursement Changes – NCB Rural Roll-Out of Bid Rates • CMS reduced rates in non-bid areas for all items in bid product categories based upon Round 1 and Round 2 bid rates. • CMS divided the country into 8 regions and establishes a regional single payment amount (RSPA) based on the average of
Slide 46: Medicare / Medicaid Audits
Medicare / Medicaid Audits The entire U.S. healthcare space is currently experiencing an increase in the volume and intensity of Medicare and other payors claim audits. Home medical equipment providers are most impacted by the following: • Pre-payment and post-payment audits across a variety of DME
Slide 47: Appendix G: Convertible Debt Transaction Terms
Appendix G: Convertible Debt Transaction Terms 47 IVC IP 1/6/2017
Slide 48: Convertible Debt Transaction Terms
Convertible Debt Transaction Terms Issuer Invacare Corporation (NYSE: IVC) Security Offered Convertible Senior Notes Principal Amount $150 million Interest Rate 5.00% per year Initial Conversion Price* $16.65* (30% call premium) Settlement Currently in cash Ranking Senior unsecured Maturity February