2017 Jefferies Global Healthcare Conference Matthew E. Monaghan Chairman, President and CEO June 6, 2017
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2017 Jefferies Global
Healthcare Conference
Matthew E. Monaghan
Chairman, President and CEO
June 6, 2017
02/09/17 Webcast Slides
Forward-Looking Statements
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 words such as “will,” “should,” “could,”
“plan,” “intend,” “expect,” “continue,” “forecast,” “believe,” and “anticipate” and
include, for example, any statement made regarding the company's future
results. Actual results may differ materially as a result of various risks and
uncertainties, including those expressed in the cautionary statement and risk
factors in the company’s earnings press release for the first quarter 2017 posted
on www.invacare.com/investorrelations, as well as in the company's annual
reports on Form 10-K, quarterly reports on Form 10-Q and other filings with the
Securities and Exchange Commission. The company may not be able to predict
and may have little or no control over many factors or events that may influence
its future results and, except as required by law, shall have no obligation to
update any forward-looking statements.
Financial results as of March 31, 2017, unless otherwise indicated.
5/18/17
IVC IP 6/2/17 22
Investment Summary
• Transformation: In Phase Two of three-phase turnaround from generalist durable
medical equipment company toward clinically complex solutions for
rehabilitation and post-acute care.
• Quality: Quality excellence – our clear #1 priority. Demonstrating progress.
• Commercial shift: Completed early investments in North America/Home Medical
Equipment (NA/HME), including commercial renovation. Institutional
Products Group (IPG) underway.
• Product mix: Margin expansion from mix shift has occurred, expected to continue.
NA/HME gross margin has improved by 200 bps since beginning of
transformation in third quarter 2015.
• Pipeline vitality: Launching over 10 new products in 2017 with sustained R&D as a
percentage of net sales. Pace anticipated to continue. Focusing
resources on clinically complex devices.
• SG&A: Streamlining opportunities realized, more underway.
Transforming legacy company into leading medical device company.
Good early progress; turning point expected in 2017.
IVC IP 6/2/17 33
About Invacare Corporation (NYSE: IVC)
• Global Headquarters near Cleveland, OH
• 2016 revenues of approximately $1.0 billion
• Design, manufacture and distribute non-acute durable medical equipment
• Primarily distribute to home medical equipment providers, rehabilitation facilities and
residential care providers in over 100 countries worldwide
• 2016 global sales: 44% North America; 52% Europe; and 4% Asia/Pacific
• 4,600 associates as of March 31, 2017
• Well diversified for growing global healthcare market and expanding delivery of
healthcare in non-acute settings
Unique opportunity to participate in broad healthcare growth.
IVC IP 6/2/17
5/18/17
44
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 COPD
Spina Bifida Post Acute Recovery Bariatric
Pressure Ulcers Elderly
Settings
Low Acuity High Acuity
Home Hospitals
Solutions outside high acuity settings
Customers
Equipment fleet owners: single payor, private payors, equipment providers
Residential care facility operators
Well positioned to serve
Well positioned diverse
to serve clinical
diverse clinicalneeds
needsacross non-acutechannels
across non-acute channels.
IVC IP 6/2/17 5
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 was a good competitive strategy.
2. Some markets, notably the United States, have lowered demand and feature set for basic products, as
some customers accept more single-use concept.
3. New strategy focuses on maximizing value of company’s strong technical capabilities for solving complex
clinical needs; generating better returns for re-investment and growth. Continue ADLs where durability is
still valued.
3
1 1
Sales by gross margin percentage
Sales by gross margin percentage
2
CCP CCP
adjust
Non
Non CCP/ADL CCP/ADL
< AVG > < AVG >
Gross margin percentage by product Gross margin percentage by product
Graphs for illustrative purposes only. CCP = Clinically Complex Products. ADL = Aids for daily living.
IVC IP 6/2/17 6
Invacare’s Value: 24 Hours Of Continuous Clinical Care
Complex Rehabilitation Post Acute Care Respiratory
Integrating solutions for maximum care in key clinical areas.
IVC IP 6/2/17 77
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 Care wheelchairs &
controls
12
Breathe
Portable O2
Move concentrators
Focusing on solutions that do the most for people with challenging
conditions to maximize care and independence.
IVC
IVCIP
IP6/2/17
1/6/2017 8
Business Changes To Emphasize Market Needs
Shifting the company’s focus toward clinically complex solutions
Products
by
APAC (4%)
Other
Profitability drivers from:
Europe
• Evolving mix expansion with
(52%)
greater clinical value
• Efficiency improvements
Total Sales
Lifesty Lifestyles Profitability drivers from:
les
• U.S. mix shift away from low
Continuing
N. America Care clinical value single-use products
(44%)
Res Respiratory • Cost reductions & efficiency gains
pira
tor
y Mobility &
The
rap
Seating
y
Financial Results from 2016 10-K ADL – Aids for Daily Living; CCP = Clinically Complex Products
Transformation focused in North America.
IVC IP 6/2/17 9
Transformation
Leverage the company’s strong technical capabilities for solving
complex clinical needs to generate better returns for re-investment and growth
2015 2019+
( = prospective, = completed)
Phase One – Assess and Reorient
Developed & expanded talent
Phase Two – Build and Align
Accelerated quality efforts
Launch new clinical product platforms Phase Three – Grow
Re-oriented N.A. commercial team
Improve quality systems, processes, CD
Restarted innovation pipeline Quality culture is ‘natural’
Leverage N. America commercial shift
Shifted product mix Grow above market
Reshape business for cost & efficiency
Managed balance sheet
Manage working capital & balance sheet
Expand talent management & culture
Results: Reduced non-core sales; Expected Outcome: Growth in sales and Expected Outcome: Margins, OI
balancing GM% improvements and GP dollars; OI and FCF turning reflect leverage on business
accelerating results, SG&A infrastructure
investments and CF usage
Mid-way through Phase Two commercial transformation.
Continued improvement expected in second half 2017.
IVC IP 6/2/17 10
10Key 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 margin and share
%
• SG&A: Growing commercial team then getting $
leverage
• Cash Flow: Investing + seasonality as
transformation takes place
Shifting away from less differentiated products is expected to lead
to long-term margin improvement and sustainable growth.
IVC IP 6/2/17 11
11Phase Two Objectives – Build and Align
Beginning to shift into Phase Two activities in 2017
Focus Summary Actions ( = prospective, = completed)
Küschall active manual wheelchairs in NA Cruise Mode upgrade on Alber Twion
New products and
New clinical products PinDot CLIP 3D imaging system in NA Matrx MX2 back cushion
programs in pipeline
“Outcomes by Design” service in NA Top End Preliminator racing chair
Continuing progress on quality culture and consent decree
FDA accepted updated third-party expert’s Certification-2 report (April 2017)
Quality systems CD Progress FDA accepted third-party expert’s Certification-3 report (April 2017)
Submitted Certification-3 5(H) report (April 2017)
FDA initiated Cert-3 inspection (May 2017). Duration TBD.
Q117 – NA/HME mobility and seating sales increased, excluding discontinued products
Shift call points, mix,
Commercial output Q117 – Gross margin as a percentage of net sales grew 180 basis points from mix shift
and build revenue
Positive clinical engagement, building backlog
Streamline processes, Further optimize supply chain
optimize resources, Jan ‘17: Headcount reduction, facility closure expected annual savings $6.6 million
Cost and efficiency
simplify customer May ’17: Headcount reduction expected annual savings $2.7 million
interaction Improve B2B interactions
Manage working
Working capital, capital for extended Manage the balance sheet
balance sheet transformation and Restructuring and growth paced by available resources and cash
growth
Phase Two improvements expected to continue through 2018.
IVC IP 6/2/17 12Recent Performance - Key Expectations
Key indicators of the transformation
Phase
1 and 2
Indicators Q415 Q116 Q216 Q316 Q416 Q117
Constant Currency Net (1.7)% (4.8)% (1.6)% (4.5)% (8.1)% (4.4)%
Sales(a)(b)(c)
Gross Margin Percentage % +190 bps +90 bps +120 bps +/- 0 -60 bps +180 bps
of Net Sales(a)(b)
Gross Profit(a)(b) $ $(1.7)M $(3.7)M $2.1M $(4.2)M $(12.1)M $(2.7)M
Constant Currency 0.8% 1.8% 2.7% 0.8% (2.3)% 2.7%
SG&A(a)(b)(c)
Free Cash Flow(d) $28.6M $(40.2)M $(17.4)M $1.5M $(10.6)M $(33.4)M
EBITDA(d) $5.5M $(1.4)M $(2.2)M $(1.1)M $(3.2)M $(7.1)M
Operating Income $1.5M $(5.1)M $(5.8)M $2.6M $(6.9)M $(10.7)M
(Loss)(d)
(a) Compared to same period prior year.
(b) The comparative periods for Q415, Q116 and Q216 exclude the divested rentals businesses.
(c) The comparative periods for Q416 and Q117 exclude divested Garden City Medical.
(d) Amounts shown represent actual results achieved, not comparison to same period prior year.
*Constant currency net sales, constant currency SG&A, free cash flow, and EBITDA are all non-GAAP financial metrics. Appendix A includes a reconciliation to the corresponding GAAP historical measure
for each of these non-GAAP items.
“Do-Say” Ratio: Results are tracking with key indicators.
IVC IP 6/2/17 13Research and Development
Strong opportunities for growth in attractive and adjacent markets
Electromotive Technology Informatics
Applying Alber power add-on Connecting and sharing product data to
technology to new products, improve the user, clinician and provider
including recreational experience.
mobility devices, and
extension apps (LiNX® – move, rest,
& breathe applications)
Post-Acute Care Respiratory
Clinically valuable solutions and higher Significant opportunity to advance
acuity products (i.e., safe patient technology and grow
handling, wound mgmt.) share. More focus on
ambulatory oxygen.
Core growth focused in important clinical areas with existing R&D.
IVC IP 6/2/17 14Looking 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
Executing well with clinically meaningful products
enables return to solid financial performance.
IVC IP 6/2/17 15Investment Summary
• Transformation: In Phase Two of three-phase turnaround from generalist durable
medical equipment company toward clinically complex solutions for
rehabilitation and post-acute care.
• Quality: Quality excellence – our clear #1 priority. Demonstrating progress.
• Commercial shift: Completed early investments in North America/Home Medical
Equipment (NA/HME), including commercial renovation. Institutional
Products Group (IPG) underway.
• Product mix: Margin expansion from mix shift has occurred, expected to continue.
NA/HME gross margin has improved by 200 bps since beginning of
transformation in third quarter 2015.
• Pipeline vitality: Launching over 10 new products in 2017 with sustained R&D as a
percentage of net sales. Pace anticipated to continue. Focusing
resources on clinically complex devices.
• SG&A: Streamlining opportunities realized, more underway.
Transforming legacy company into leading medical device company.
Looking forward
Good early to ourturning
progress; goals of top-line
point growth,
expected greater
in 2017.
profitability and sustainable innovation at existing levels.
IVC IP 6/2/17 16
16Questions? IVC IP 3/31/17 17
Appendix A:
Reconciliation of Non-GAAP Performance Metrics
to GAAP Financial Measures
IVC IP 6/2/17 18Non-GAAP Financial Measures
Non-GAAP Financial Measures
Some of the information in this presentation is derived from the company’s consolidated financial
data but not presented in its financial statements prepared in accordance with U.S. generally
accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial
measures” under Securities and Exchange Commission rules. These non-GAAP financial measures
supplement the company’s GAAP disclosures and should not be considered an alternative to the
GAAP measure. The reconciliations to their most directly comparable GAAP financial measures are
included in Appendix A. The company uses non-GAAP financial measures including the following:
“Constant currency net sales”, which is net sales excluding the impact of foreign currency
translation.
“Constant currency SG&A”, which is SG&A excluding the impact of foreign currency translation
and divested entities.
“Free cash flow”, which is net cash provided (used) by operating activities less purchases of
property and equipment plus proceeds from sales of property and equipment.
“EBITDA”, which is net earnings (loss) from continuing operations plus: income taxes, interest
expense-net, net gain or loss on convertible debt derivatives, and depreciation and
amortization.
IVC IP 6/2/17 19Reconciliation Of Non-GAAP Performance Metrics To GAAP Financial Measures IVC IP 6/2/17 20
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