Slide 1: Q3 2023 Earnings Presentation
Q3 2023 Earnings Presentation November 1st, 2023 Getting patients back to the things that matter.
Slide 2: Presenters and agenda
Joe Woody Michael Greiner Chief Executive Officer Senior Vice President, CFO & Chief Transformation Officer Business Progress Q3 Results & 2023 Against 2023 Priorities Planning Environment 2
Slide 3: Forward-Looking Information; Non-GAAP Financial Measures
FORWARD-LOOKING INFORMATION Certain matters in this presentation, including expectations and planning assumptions, any comments about our expected performance, and any estimates, projections, or statements relating to our business plans, objectives, acquisitions and transformation initiatives, const
Slide 4: Reflections on Performance
Reflections on Performance • Overall results aligned with expectations • Continue to experience strong demand in our Digestive Health product portfolio • Improving supply chain environment • Remain focused on getting patients back to the things that matter as we meet customer needs 4
Slide 5: Third Quarter Performance
Continuing Operations Third Quarter Performance • Achieved net sales of $171 million. Excluding currency and the impact of products no longer sold, organic growth was flat • Generated $0.30 of adjusted diluted EPS and almost $28 million of adjusted EBITDA • Adjusted gross margins at 58.2% and SG&A a
Slide 6: Strong Quarter for Digestive Health
Continuing Operations Strong Quarter for Digestive Health Digestive Health Sales Millions • Digestive Health revenue greater than 10.5% $95 (constant currency sales) $86 • Strong NeoMed execution • Above market growth from CORTRAK guided tube placement Q3 2022 Q3 2023 6
Slide 7: Pain Portfolio Remains Challenged
Continuing Operations Pain Portfolio Remains Challenged Pain Management & Recovery Sales * • Pain Management down 10% Millions (constant currency / normalized sales) $82 • Low single-digit growth in Surgical pain businesses and sequential improvement $74 • Supply challenges to improve in the fourth
Slide 8: Priorities for Reimagining our Business
Priorities for Reimagining our Business Cost Capital 1 Optimization 2 Portfolio 3 4 Management Allocation Strategic & Transform the Additional Cost Continued Efficient Commercial Product Portfolio Management Capital Allocation Optimization Initiatives to Strategies to Enhance Operating Expand Return
Slide 9: Solid Execution on Our Priorities
Solid Execution on Our Priorities • Completed Respiratory Health divestiture • Closed Diros acquisition • Delivered strong Digestive Health performance • Implemented Pain Management & Recovery go-to-market strategy • Accelerated cost savings 9
Slide 10: Q3 2023 Results
Q3 2023 Results Michael Greiner Senior Vice President, CFO & Chief Transformation Officer
Slide 11: Third Quarter Performance
Continuing Operations Third Quarter Performance Sales Adj. EBITDA Adj. EPS Free Cash Flow Millions Millions Millions $172 $28 $0.30 $171 $25 $25 $23 14.6% 16.2% $0.24 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 Q3 2022 Q3 2023 11
Slide 12: EBITDA Margin favorable to 2022
Continuing Operations EBITDA Margin favorable to 2022 Adjusted Gross Profit Adjusted gross margin 210 bps lower compared Millions $104 to third quarter of 2022 $100 • Unfavorable impact of currency and raw material inflation 60.3% 58.2% margin margin • Anticipate gross margin at approximately 60% fo
Slide 13: 2023 Guidance
Continuing Operations 2023 Guidance Revenue Adj. Gross Adj. EBITDA Adj. Diluted SG&A % 2023 GUIDANCE (in millions) Margin (in millions) EPS Q1 $159 59.6% 47.9% $16 $0.13 Sales Flat/Low single-digit organic growth Q2 $169 59.9% 45.1% $23 $0.24 Margins EBITDA margin expansion ~100 bps Q3 $171 58.2% 41
Slide 14: Building Value Creation into 2025 and Beyond
Building Value Creation into 2025 and Beyond Increased FCF ROIC generation From 5.8% Margin to >8% ROIC >$100M FCF expansion ~60% FCF conversion +400-500 bps MSD EBITDA margin organic growth 14
Slide 15: Thank You
Thank You
Slide 16: Appendices: Non-GAAP Reconciliations
APPENDICES Non-GAAP Reconciliations
Slide 17: Non-GAAP Reconciliations
Continuing Operations NON-GAAP RECONCILIATIONS In millions
Slide 18: Non-GAAP Reconciliations: Operating Profit
Continuing Operations NON-GAAP RECONCILIATIONS In millions Operating (Loss) Profit Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 1.2 $ 6.7 $ 7.9 $ 12.8
Slide 19: Non-GAAP Reconciliations: Income Before Taxes
Continuing Operations NON-GAAP RECONCILIATIONS In millions (Loss) Income Before Taxes Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (2.6) $ 6.7 $ 4.1 $
Slide 20: Non-GAAP Reconciliations: Tax Provision
Continuing Operations NON-GAAP RECONCILIATIONS In millions C Tax Provision Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (6.2) $ (1.6) $ (7.8) $ 0.9 $ (
Slide 21: Non-GAAP Reconciliations: Net Income, Three Months
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts Net (Loss) Income Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (8.
Slide 22: Non-GAAP Reconciliations: Net Income, Nine Months
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts Net (Loss) Income Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (20.9
Slide 23: Non-GAAP Reconciliations: SG&A
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts Selling, General and Administrative Expense Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operatio
Slide 24: Non-GAAP Reconciliations: EBITDA, Three Months
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts EBITDA Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net (loss) income $ (8.8) $
Slide 25: Non-GAAP Reconciliations: EBITDA, Nine Months
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts EBITDA Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net (loss) income $ (20.9) $ (
Slide 26: Non-GAAP Reconciliations: Free Cash Flow and 2023 Outlook
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts Free Cash Flow Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Cash provided by (used in) operating activities $ 29.1 $ 28.4 $ 19.7 $ 57.2 Capital expenditures (3.9) (5.3) (11.9)