Q2 2019 Highlights - Boston Scientific/media/Files/B/... · 2019-07-26 · Q2 2019 Highlights 6 Q2...

Q2 2019 HighlightsJuly 24, 2019

2 Q2 2019 Financial & Operational Highlights | July 24, 2019

Safe Harbor for Forward-Looking Statements andUse of Document:

Safe Harbor for forward-looking statements:This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “estimate,” “intend,” "aiming" and similarwords. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended tobe guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual resultscould differ materially from the expectations and projections expressed or implied by our forward-looking statements.

Factors that may cause such differences can be found in our most recent Form 10-K and Forms 10-Q filed or to be filed with the Securities and ExchangeCommission under the headings “Risk Factors” and “Safe Harbor for Forward-Looking Statements.” Accordingly, you are cautioned not to place undue reliance onany of our forward-looking statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements to reflect any change inour expectations or in events, conditions, or circumstances on which they may be based, or that may affect the likelihood that actual results will differ from thosecontained in the forward-looking statements.

Non-GAAP Measures:This document contains non-GAAP measures (denoted with *) in talking about our Company’s performance. The reconciliations of those non-GAAP measures totheir most comparable GAAP measures are contained within this document including appendices attached to the end of this presentation.

Operational revenue growth excludes the impact of foreign currency fluctuations. Organic revenue growth excludes the impact of foreign currency fluctuations andsales from the recent acquisitions of NxThera, Inc., Claret Medical, Inc., Augmenix, Inc. and Vertiflex, Inc., each with no prior year comparable sales.We define EmergingMarkets as the 20 countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Periodically,we assess our list of Emerging Markets; effective January 1, 2019, we updated our list of Emerging Market countries. Our current list is comprised of the followingcountries: Argentina, Brazil, Chile, China, Colombia, Czech Republic, India, Indonesia, Malaysia, Mexico, Philippines, Poland, Russia, Saudi Arabia, Slovakia, SouthAfrica, South Korea, Thailand, Turkey and Vietnam. We have revised prior year amounts to the current year’s presentation (as denoted with † throughout). The revisionhad an immaterial impact on prior year Emerging Markets sales.

Use of Document:This document contains certain highlights with respect to our second quarter 2019 performance and developments and does not purport to be a complete summarythereof. Accordingly, we encourage you to read our Earnings Release for the quarter ended June 30, 2019 located in the investor section of our website atwww.bostonscientific.com and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 to be filed with the Securities and Exchange Commission.

Amounts reported in millions within this presentation are computed based on the amounts in thousands. As a result, the sum of the components reported in millionsmay not equal the total amount reported in millions due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentagespresented are calculated from the underlying numbers in dollars.


Q2 2019 Highlights

• Revenue growth Y/Y:• +8.0% operational*, +5.6% as reported,

+6.3% organic*• Earnings per share:

• Adjusted*: $0.39 vs. $0.41 Q2:18 • GAAP: $0.11 vs. $0.40 Q2:18

• Gross margin:• Adjusted*: 72.1%, +80 bps Y/Y

◦ Includes +80 bps FX impact Y/Y• GAAP: 71.2%, +90 bps Y/Y

• Operating margin:• Adjusted*: 25.5%, +10 bps Y/Y• GAAP: 14.6%, (110) bps Y/Y

• Reiterated FY guidance:• Organic* revenue growth: +7-8% • Adjusted EPS*: $1.54 - $1.58

• Began the global OPTION trial, a study of patients with non-valvular atrial fibrillation who undergo a cardiac ablationprocedure, to compare the safety and effectiveness of the next-generation WATCHMAN FLX™ LAAC Device to first-line oralanticoagulants for stroke risk reduction

• Announced and closed the acquisition of Vertiflex, Inc., aprivately-held company that developed and commercialized theSuperion® Indirect Decompression System, a minimally-invasive device used to improve physical function and reducepain in patients with lumbar spinal stenosis

• Presented positive Neuromodulation data which included (i) two-year results from the INTREPID randomized controlled trial thatdemonstrated the safety and effectiveness of the Vercise™ DBSSystem, and (ii) real world data from 420 patients using theSpectra WaveWriter™ SCS system where two-thirds of patientsreported a pain score of two or less at last follow-up

• Announced acute results from the UNTOUCHED study of theEMBLEM™ S-ICD system at HRS. The data demonstrated S-ICDtherapy had a complication-free rate of 95.8% at 30 days post-procedure and high conversion efficacy of 99.2%

• Initiated randomized IDE study (assessing the safety andeffectiveness) of the ACURATE neo2™ Aortic Valve System andcommenced controlled launch in the U.S. and Europe of theLOTUS Edge™ Aortic Valve System

Financial Highlights Operational Highlights


WW Sales by Segment and Business

Q2 2019 Reported Revenue: $2,631M Revenue by Business; Segment Percentage of Total Sales

CRM$498M

EP$84M

NM$204M

IC$706M

PI$320M

Endo$470M

UroPH$348M

MedSurg31%

Rhythm andNeuro30%

Cardiovascular39%


Three Months Ended June 30, 2019 and 2018

WW Sales Detail

(in millions)Q2

2019Q2

2018

AsReported

Basis

Less: Impact ofForeign

CurrencyFluctuations

OperationalBasis

Less: Impactof Certain

AcquisitionsOrganicBasis

ENDOSCOPY $ 470 $ 442 6.3 % (2.1)% 8.4% —% 8.4%

UROLOGY AND PELVIC HEALTH 348 308 13.0 % (1.6)% 14.6% 8.5% 6.1%

MEDSURG 818 751 9.0 % (1.9)% 10.9% 3.5% 7.4%

CARDIAC RHYTHM MANAGEMENT 498 494 0.6 % (2.2)% 2.8% —% 2.8%

ELECTROPHYSIOLOGY 84 79 7.0 % (2.5)% 9.5% —% 9.5%

NEUROMODULATION 204 202 1.0 % (1.2)% 2.2% 2.1% 0.1%

RHYTHM AND NEURO 786 775 1.4 % (1.9)% 3.3% 0.5% 2.8%

INTERVENTIONAL CARDIOLOGY 706 662 6.7 % (3.0)% 9.7% 1.6% 8.1%

PERIPHERAL INTERVENTIONS 320 304 5.6 % (2.6)% 8.2% —% 8.2%

CARDIOVASCULAR 1,026 965 6.3 % (2.9)% 9.2% 1.1% 8.1%

WORLDWIDE NET SALES $ 2,631 $ 2,490 5.6 % (2.4)% 8.0% 1.7% 6.3%

EMERGING MARKETS† SALES 318 283 12.3 % (7.7)% 20.0%

EMERGING MARKETS SALES PERCENTAGE OF TOTAL BSC 12 % 13%

UNITED STATES SALES PERCENTAGE OF TOTAL BSC 56 % 55%

INTERNATIONAL SALES PERCENTAGE OF TOTAL BSC 44 % 45%

Q2 2019 Highlights


MedSurg Performance Summary

Measure($ in millions) Q2 2019 Q2 2018 Change Y/Y

Reported Revenue $818M $751M +9.0%

Operating Income $295M $273M +8%

Operating IncomeMargin 36.1% 36.4% -30 bps

• Endoscopy: Global revenue +8.4% Y/Y operational* and organic* (+6.3% as reported)▪ Strong organic growth trend continued and was fueled by a dozen+ product launches over the last 18 months; key launches include SpyGlass™

DSII, Jagwire™, and ORISE™ Gel▪ Additional growth drivers include strong Infection Prevention sales, continued momentum from AXIOS™ stent, and improved supply in

OrcaPod™ single use valves▪ Remain on track for YE 2019 launch of Exalt™ D single-use duodenoscope to be used in ERCP procedures, which helps address the FDA’s

concern of higher than expected levels of contamination post duodenoscope reprocessing

• Urology and Pelvic Health: Global revenue +14.6% Y/Y operational*, +6.1% organic* (+13.0% as reported)▪ Mid-single digit growth fueled by mid-teens growth in core stone franchise with strong LithoVue™ Single-Use Ureteroscope sales across all

regions, and particularly robust Emerging Markets growth▪ SpaceOAR™ hydrogel continues strong adoption and is on pace to reach $100M in FY:19, trending above initial plans▪ Expect acceleration in H2 to be driven by continued LithoVue™ and SpaceOAR™ strength, NxThera and Augmenix acquisition anniversaries,

and new product launches such as Tactra™ implant in Men’s Health

1 Under development. Not available for use or sale in the U.S.

Q2 2019 Highlights



Reported Revenue $786M $775M +1.4%

Operating Income $167M $160M +4%

Operating IncomeMargin 21.2% 20.6% +60 bps

Rhythm and Neuro Performance Summary

• Cardiac Rhythm Management: Global revenue +2.8% Y/Y operational* and organic* (+0.6% as reported)▪ CRM performance was led by mid-single digit growth in defibrillators, reflecting strong uptake of RESONATE™ platform with HeartLogic™ (the only

FDA-approved heart failure alert system), continued EMBLEM™ S-ICD growth, and on-track device replacement cycle tailwind

• Electrophysiology: Global revenue +9.5% Y/Y operational* and organic* (+7.0% as reported)▪ Growth was led by RHYTHMIA™ HDx mapping and navigation platform, as well as LUMIPOINT™ software adoption post full launch in Q2▪ Maintain optimistic outlook in the atrial fibrillation single shot market, and expect approval of cryo-based system, POLARx™, in Europe expected by

YE:19, with LUMINIZE™, the RF-based system, expected to follow in H1:20

• Neuromodulation: Global revenue +2.2% Y/Y operational*, +0.1% organic* (+1.0% as reported)▪ Vercise™ Deep Brain Stimulation continued its strong U.S. and international momentum due to uptake of the Cartesia™ Directional Lead; MRI-labeling

in the U.S. is expected in H2▪ Expect continued momentum post closing the acquisition of Vertiflex (June 11); the Superion® system is an option for patients suffering from moderate

lumbar spinal stenosis, thus providing BSC the ability to offer a complete continuum of care for Pain patients; Vertiflex is on track to generate sales of$60M for FY:19

1 CE Mark. Not available for use or sale in the U.S.

Q2 2019 Highlights



Reported Revenue $1,026M $965M +6.3%

Operating Income $301M $300M +0.3%

Operating IncomeMargin 29.3% 31.1% -180 bps

Cardiovascular Performance Summary

• Interventional Cardiology: Global revenue +9.7% Y/Y operational*, +8.1% Y/Y organic* (+6.7% as reported)• Q2 acceleration was again led by Structural Heart sales and mid-teens growth in Complex PCI, partially offsetting continued pricing pressures in DES.• Remain on track to achieve SH revenue guidance of $700-725M in 2019 with the combined strength of WATCHMAN™, ACURATE™, LOTUS Edge™, and

Sentinel™:– WATCHMAN™ again grew sales ahead of plan and is now in 600+ U.S. accounts. Target Q3 launch in Japan with reimbursement. In Europe,

WATCHMAN FLX™ transitioned to full launch and has received excellent physician feedback; target mid-2020 launch in the U.S.– ACURATE™ TAVR momentum continued with 30% growth and is now available in 40+ countries– LOTUS Edge™ is on pace to be in 150 accounts in its first 12 months; actively enrolling patients in the US REPRISE IV clinical trial to expand indication

to intermediate-risk patients– Sentinel™ cerebral embolic protection device continues to build momentum and is now in 400+ accounts globally and is emerging as the standard of

care; Sentinel™ acquisition will anniversary in July

• Peripheral Interventions: Global revenue +8.2% Y/Y operational* and organic* (+5.6% as reported)▪ High-single digit growth led by the launches of VICI™ Venous Stent in the U.S. and ELUVIA™ DES in Japan, as well as strong regional growth in Interventional

Oncology, particularly in China▪ ELUVIA™ physician usage continues post FDA Paclitaxel panel; maintain FY:19 ELUVIA™ estimates (revised in April)

1 CE Marked. U.S.: "Caution: Investigational Device. Limited by Federal(or U.S.) law to investigational use only. Not available for sale"2 Pending CE Mark. Not available for use or sale in the U.S.


Income Statement InformationNon-GAAP ReconciliationThree Months Ended June 30, 2019 (unaudited)

in millions, except per share dataGAAP

Results Amortization

IntangibleAsset

Impairment

Acquisition-RelatedCharges(Credits)

Restructuringand

Restructuring-RelatedCharges(Credits)

Litigation-RelatedCharges(Credits)

InvestmentImpairment

ChargesDiscrete Tax

ItemsAdjustedResults

Net sales $ 2,631 $ — $ — $ — $ — $ — $ — $ — $ 2,631Cost of products sold 758 — — 19 6 — — 734Gross profit 1,873 — — (19) (6) — — — 1,897

Gross margin 71.2% 72.1%

Selling, general and administrative expenses 968 — — 28 4 — — — 936

SG&A margin 36.8% 35.6%

Research and development expenses 280 — — 7 — — — — 273

R&D margin 10.6% 10.4%

Royalty expense 17 — — — — — — — 17

Royalty expense margin 0.6% 0.6%

Amortization expense 161 161 — — — — — — —

Intangible asset impairment charges 37 — 37 — — — — — —

Contingent consideration expense (benefit) 10 — — 10 — — — — —

Restructuring charges (credits) 1 — — — 1 — — — —

Litigation-related charges (credits) 15 — — — — 15 — — —1,489 161 37 45 5 15 — — 1,226

Operating income (loss) 384 (161) (37) (64) (11) (15) — — 672Operating margin 14.6% 25.5%

Other income (expense):

Interest expense (89) — — (23) — — — (66)

Other, net (150) (1) — (138) — — (1) — (10)Income (loss) before taxes 145 (162) (37) (225) (11) (15) (1) — 596

Income tax expense (benefit) (9) (18) (2) (48) (1) (3) — 18 46Net income (loss) $ 154 $ (144) $ (35) $ (177) $ (10) $ (12) $ (1) $ (18) $ 550

Net income (loss) per diluted common share $ 0.11 $ (0.10) $ (0.02) $ (0.13) $ (0.01) $ (0.01) $ (0.00) $ (0.01) $ 0.39

Weighted average diluted shares outstanding 1,408.6 1,408.6 1,408.6 1,408.6 1,408.6 1,408.6 1,408.6 1,408.6 1,408.6

10 Q2 2019 Financial & Operational Highlights | July 24, 2019 Margin rates are based on actual, non-rounded amounts and may not recalculate precisely.

in millions, except per share data GAAPResults Amortization

IntangibleAsset

Impairment

Acquisition-RelatedCharges(Credits)

Restructuring-RelatedCharges(Credits)

Litigation-RelatedCharges

InvestmentImpairment

ChargesDiscrete Tax

Items AdjustedResults

Net sales $ 5,124 $ 5,124Cost of products sold 1,488 31 10 1,447Gross profit 3,636 — — (31) (10) — — — 3,677

Gross margin 71.0% 71.8%

Selling, general and administrative expenses 1,837 40 7 1,791

SG&A margin 35.9% 34.9%

Research and development expenses 559 15 544

R&D margin 10.9% 10.6%

Royalty expense 32 32

Royalty expense margin 0.6% 0.6%

Amortization expense 321 321Intangible asset impairment charge 105 105Contingent consideration expense (benefit) (18) (18)Restructuring charges (credits) 7 7Litigation-related charges (133) (133)

2,711 321 105 38 14 (133) — — 2,367Operating income (loss) 925 (321) (105) (69) (23) 133 — — 1,310

Operating margin 18.1% 25.6%Other income (expense):Interest expense (198) (49) (149)Other, net (125) (2) (83) (2) (38)

Income (loss) before income taxes 602 (323) (105) (201) (23) 133 (2) — 1,123

Income tax expense (benefit) 24 $ (35) $ (7) $ (46) $ (4) $ 17 $ (1) 18 82

Net (loss) income $ 578 $ (287) $ (97) $ (155) $ (19) $ 116 $ (2) $ (18) $ 1,040

Net income (loss) per diluted common share $ 0.41 $ (0.20) $ (0.07) $ (0.11) $ (0.01) $ 0.08 $ (0.00) $ (0.01) $ 0.74

Weighted average shares outstanding 1,408.5 1,408.5 1,408.5 1,408.5 1,408.5 1,408.5 1,408.5 1,408.5 1,408.5

Income Statement InformationNon-GAAP ReconciliationSix Months Ended June 30, 2019 (unaudited)


Balance Sheet & Cash Flow Metrics

Days Sales Outstanding (DSO) Adjusted Free Cash Flow*

Days Inventory on Hand (DIOH) Capital Expenditures

Jun2019

Mar2019

Dec2018

Sept2018

June2018

59 59 58 61 58

Jun2019

Mar2019

Dec2018

Sept2018

June2018

152 148 147 155 134

Q2 2019

Q2 2018

FY2019Guidance

$406M $558M $2.2B

Q2 2019

Q2 2018

FY2019Guidance

$91M $73M $375M to$400M


Measure Q3 2019 FY2019Organic Growth* +7.5% to +9% +7% to +8%Contribution from Acquisitions +180 bps +140 bpsOperational Revenue Growth* +9% to +11% +8% to +9%Reported Revenue Growth +8% to +10% +7% to +8%FX Impact on Revenue ($M) $30M - $35M headwind $170M - $180M headwindAdjusted Gross Margin* 72.5% to 73% 72% to 73%Adjusted SG&A % of Sales* 34.5% to 35% 34.5% to 35%Adjusted R&D % of Sales* 10.5% to 11% 10.5% to 11%Adjusted Operating Margin* 26% to 26.5% 26% to 26.5%Adjusted Tax Rate* ~11% ~9%Adjusted EPS* $0.37 to $0.39 $1.54 to $1.58FX Impact on EPS Neutral NeutralAdjusted EPS Growth* +7% to +13% +5% to +8%Adjusted EPS Growth, ex. 2018 IRSsettlement* n/a +10% to +13%

GAAP EPS $0.23 to $0.25 $0.94 to $0.98

Q3 & FY2019 Guidance SummaryIssued July 24, 2019


Coronary Therapies• SYNERGY™ 4.5/5.0• MAMBA™ MicroCatheter family• DFR™ Diastolic Hyperemia-Free Ratio • AVVIGO™ Guidance System for physiology

Structural Heart• WATCHMAN FLX™ LAAC Device – EU• WATCHMAN™ LAAC Device – Japan• LOTUS Edge™ Valve System – U.S. & EU• Sentinel™ CPS – Int’l expansion

Peripheral Interventions• ELUVIA™ DES SFA - Japan• VICI™ Venous Stent – U.S.• BTG pipeline post-close

CRM/EP• RHYTHMIA™ HDx w/ LUMIPOINT™ software• POLARx™ single shot cryo balloon – EU

Neuromodulation• Expanded DBS platform• Superion™ InterSpinous Spacer• SCS System enhancements

Endoscopy• EXALT™ Model D single-use duodenoscope

Urology/Pelvic Health• Swiss LithoClast™ Trilogy Lithotripter – EU• Tria™ Stent Soft and Firm• Tactra™ Malleable Penile Prothesis• AdVance™ XP Male Sling – U.S.

2019E Product Launches1 2020E Product Launches1

Coronary Therapies• SYNERGY™ XD, 48mm, MEGATRON• COMET™ II pressure wire (Asahi partnership)

Structural Heart• WATCHMAN FLX™ LAAC Device – U.S.• LOTUS Edge™ Valve System – Japan• ACURATE neo2™ Valve System – EU• Sentinel™ CPS – Int’l expansion

Peripheral Interventions• Ranger™ DCB SFA – U.S.• Interventional Oncology Embolic Coils• Athletis™ PTA Balloon• OptiCross™ 35 IVUS Catheter

CRM/EP• LUX-Dx™ ICM – U.S.• DIRECTSENSE™ Catheter – U.S. • Force-Sensing Catheter – EU• LUMINIZE™ single shot RF balloon – EU

Neuromodulation• DBS next gen programmer

Endoscopy• SpyGlass™ Discover single-use choledochoscope• ORISE™ ProKnife

Urology/Pelvic Health• LithoVue™ Ureteroscope next gen• SpaceOAR™ & Rezūm™ – Int’l expansion• SpaceOAR™ Vue Hydrogel• Cytuty™ claim expansion • Rezūm™ enhancements

2019E & 2020E Catalysts

1 All launches are WW, unless otherwise noted


Coronary Therapies• Next gen stent• Rota Tesla Atherectomy System

Structural Heart• Millipede Transcatheter Mitral Valve Repair – EU• LOTUS Mantra™ Valve – U.S. & EU• ACURATE neo™ Prime Valve – Japan • ACURATE neo™ Prime Valve – expanded sizes U.S. & EU

Peripheral Interventions• SAVAL™ DES BTK

CRM/EP• POLARx™ single shot cryo balloon – U.S.• LUMINIZE™ single shot RF balloon – U.S.• Empower™ leadless pacing/modular CRM – U.S. TBC• Force-Sensing Catheter – U.S.• Next gen CRM pulse generator

Neuromodulation• SCS indication expansion

Endoscopy• Single-use scope platform expansion• Endoluminal surgery toolkit expansion

Urology/Pelvic Health• StoneSmart™ expansion• Core Stone enhancements• Rezūm™ enhancements

2021E Product Launches1 2022E/2023E Product Launches1

Coronary Therapies• AVVIGO™ Guidance System for IVUS• GUIDEZILLA™ II matrix expansion

Structural Heart• WATCHMAN FLX™ LAAC Device – China• ACURATE neo™ Prime Valve – U.S.

Peripheral Interventions• Ranger™ DCB SFA – Japan• AngioJet Clothunter™

• CLI Catheter

CRM/EP• POLARx™ next gen• RHYTHMIA™ 5.0• RESONATE™ 2.0

Neuromodulation• SCS and DBS next gen systems

Endoscopy• Single-use scope platform expansion• AXIOS™ Stent expanded indications – U.S.

Urology/Pelvic Health• StoneSmart™ expansion• AMS 700™ IPP enhancements • Rezūm™ enhancements

2021E & 2022E Catalysts

1 All launches are WW, unless otherwise noted


Business Development Activity - 2019 YTD

Target Business Description ClosingDate

Upfront($M)

MaxMilestone

($M)

PotentialTotal($M)

Comments OrganicDate

Acquisitions

Millipede(a) IC - Structural Heart TMVR - Full annuloplastyring for mitral repair Jan-19 325 125 450 Initial $90M investment made 2018 Upon Launch

Vertiflex(c) Neuromodulation Spacer for Lumbar SpinalStenosis Jun-19 465 N/A 465 Overlapping call point with SCS/

RF treatment for pain Mid-2020

Proposed Acquisition, Not Yet Closed

BTG(b) IO, venous and arterialportfolio additions Aug-2019 4,204 — 4,204 Includes specialty pharmaceuticals and

licensing segments Aug-2020

(a) Previously held equity investment; purchase price represents cash paid for remaining stake not already owned

(b) Represents purchase price of approximately £3.311 billion using an exchange rate of U.S. $1.27: £1.00 as of June 28, 2019

(c) Vertiflex contingent payments that are based on a percentage of Vertiflex sales growth in the first three years following the acquisition close. We estimate the sales-based contingent payments to be in a range ofzero to $100 million; however, the payments are uncapped over the three year term.


Use of Non-GAAP Measures

To supplement Boston Scientific’s consolidated financial statements presentedon a GAAP basis, the Company discloses certain non-GAAP financialmeasures. These non-GAAP financial measures are not in accordance withgenerally accepted accounting principles in the United States.

A reconciliation of the non-GAAP financial measures included in this documentto the corresponding GAAP measures follows in the Appendix. In addition, anexplanation of the ways in which Boston Scientific management uses thesesupplemental non-GAAP measures to evaluate its business and thesubstantive reasons why Boston Scientific management believes that thesenon-GAAP measures provide useful information to investors is included under“Use of Non-GAAP Financial Measures” in the Company’s most recent earningsrelease filed with the SEC on Form 8-K. This non-GAAP financial informationis not meant to be considered in isolation from or as a substitute for financialinformation prepared in accordance with GAAP.

Appendix A Sales Detail

Q2 2019 Financial & Operational Highlights | July 24, 2019 18

Year-over-Year Change

(in millions)Q2

2019Q2

2018As Reported

Basis

Less: Impactof ForeignCurrency

FluctuationsOperational

BasisMEDSURG SEGMENT:

ENDOSCOPYUNITED STATES $ 270 $ 245 10.2 % — % 10.2 %INTERNATIONAL 200 197 1.4 % (4.6)% 6.0 %

WORLDWIDE $ 470 $ 442

UROLOGY AND PELVIC HEALTHUNITED STATES $ 248 $ 213 16.7 % — % 16.7 %INTERNATIONAL 100 96 4.9 % (5.1)% 10.0 %


RHYTHM AND NEURO SEGMENT:CARDIAC RHYTHM MANAGEMENT

UNITED STATES $ 288 $ 290 (0.9)% — % (0.9)%INTERNATIONAL 210 204 2.8 % (5.3)% 8.1 %


ELECTROPHYSIOLOGYUNITED STATES $ 39 $ 39 (0.4)% — % (0.4)%INTERNATIONAL 46 40 14.0 % (5.0)% 19.0 %

WORLDWIDE $ 84 $ 79

NEUROMODULATIONUNITED STATES $ 160 $ 160 (0.1)% — % (0.1)%INTERNATIONAL 44 42 5.4 % (5.8)% 11.2 %


CARDIOVASCULAR SEGMENT:INTERVENTIONAL CARDIOLOGY

UNITED STATES $ 318 $ 296 7.4 % — % 7.4 %INTERNATIONAL 388 366 6.1 % (5.5)% 11.6 %


PERIPHERAL INTERVENTIONSUNITED STATES $ 155 $ 152 2.5 % — % 2.5 %INTERNATIONAL 165 152 8.6 % (5.2)% 13.8 %


Appendix A - Sales DetailThree Months Ended June 30, 2019 and 2018

Q2 2019 Financial & Operational Highlights | July 24, 2019 19

Year-over-Year Change

(in millions) 2019 2018As Reported

Basis


CurrencyOperational

BasisMEDSURG SEGMENT:

ENDOSCOPYUNITED STATES $ 523 $ 477 9.7 % — % 9.7 %INTERNATIONAL 387 384 0.8 % (5.6)% 6.4 %


UROLOGY AND PELVIC HEALTHUNITED STATES $ 479 $ 409 17.1 % — % 17.1 %INTERNATIONAL 195 192 1.7 % (5.9)% 7.6 %


RHYTHM AND NEURO SEGMENT:CARDIAC RHYTHM MANAGEMENT

UNITED STATES $ 576 $ 580 (0.7)% — % (0.7)%INTERNATIONAL 413 407 1.4 % (6.2)% 7.6 %


ELECTROPHYSIOLOGYUNITED STATES $ 75 $ 74 0.9 % — % 0.9 %INTERNATIONAL 89 79 12.1 % (5.9)% 18.0 %


NEUROMODULATIONUNITED STATES $ 304 $ 291 4.3 % — % 4.3 %INTERNATIONAL 86 79 9.0 % (7.1)% 16.1 %


CARDIOVASCULAR SEGMENT:INTERVENTIONAL CARDIOLOGY

UNITED STATES $ 614 $ 577 6.5 % — % 6.5 %INTERNATIONAL 753 730 3.1 % (6.1)% 9.2 %

WORLDWIDE $ 1,367 $ 1,307

PERIPHERAL INTERVENTIONSUNITED STATES $ 311 $ 297 4.9 % — % 4.9 %INTERNATIONAL 320 294 8.5 % (6.0)% 14.5 %


Appendix A - Sales DetailSix Months Ended June 30, 2019 and 2018


Appendix A - Sales InformationSales Growth by Region

Three Months Ended June 30, 2019

ReportedBasis


CurrencyFluctuations

Operational BasisRegional Sales Growth

U.S. 6.0% — % 6.0%EMEA 2.3% (6.0)% 8.3%APAC 8.9% (4.3)% 13.2%Latin America and Canada 4.5% (4.8)% 9.3%

Net Sales 5.6% (2.4)% 8.0%

Emerging Markets† 12.3% (7.7)% 20.0%

Appendix B Income Statement Information


Appendix B - Income Statement InformationMargins

Three Months EndedAdjusted Gross Margin 6/30/2019 6/30/2018 Basis Points ChangeGross Margin, as reported 71.2 % 70.3 % 90Less: Non-GAAP adjustments (0.9)% (1.0)%Adjusted Gross Margin 72.1 % 71.3 % 80

Three Months EndedAdjusted Operating Margin 6/30/2019 6/30/2018 Basis Points ChangeOperating Margin, as reported 14.6 % 15.7 % (110)Less: Non-GAAP adjustments (10.9)% (9.7)%Adjusted Operating Margin 25.5 % 25.4 % 10

Three Months EndedAdjusted SG&A Margin 6/30/2019 6/30/2018 Basis Points ChangeSG&A Margin, as reported 36.8% 35.6% 120Less: Non-GAAP adjustments 1.2% 0.9%Adjusted SG&A Margin 35.6% 34.7% 90

Three MonthsEnded

Adjusted R&D Margin 6/30/2019R&D Margin, as reported 10.6%Less: Non-GAAP adjustments 0.2%Adjusted R&D Margin 10.4%

Three MonthsEnded

Adjusted Tax Rate 6/30/2019Tax Rate, as reported (5.9)%Less: Non-GAAP adjustments (13.7)%Adjusted Tax Rate 7.8 %


Appendix B - Income Statement InformationEarnings per ShareThree Months Ended June 30, 2019 and 2018


(in millions, except per share data)

Cost ofProducts

SoldSG&A

ExpensesR&D

Expenses

OperatingIncome(Loss)

Pre-TaxIncome(Loss)

Net Income(Loss)

Impact perShare

GAAP net income (loss) $ 758 $ 968 $ 280 $ 384 $ 145 $ 154 $ 0.11Non-GAAP adjustments to net income (loss):

Amortization expense — — — 161 162 144 0.10Intangible asset impairment charges — — — 37 37 35 0.02Acquisition-related net charges (credits) (19) (28) (7) 64 225 177 0.13Restructuring and restructuring-related net charges (credits) (6) (4) — 11 11 10 0.01Litigation-related net charges (credits) — — — 15 15 12 0.01Investment impairment charges — — — — 1 1 0.00Discrete tax items — — — — — 18 0.01

Adjusted net income $ 734 $ 936 $ 273 $ 672 $ 596 $ 550 $ 0.39



Cost ofProducts

SoldSG&A

ExpensesR&D

Expenses


Pre-TaxIncome(Loss)

Net Income(Loss)

Impact perShare

GAAP net income (loss) $ 739 $ 886 $ 275 $ 392 $ 347 $ 555 $ 0.40Non-GAAP adjustments to net income (loss):

Amortization expense — — — 147 147 130 0.09Intangible asset impairment charges — — — 34 34 30 0.02Acquisition-related net charges (credits) (9) (27) (15) 46 5 9 0.01Restructuring and restructuring-related net charges (credits) (16) 5 — 15 15 13 0.01Discrete tax items — — — — — (168) (0.12)

Adjusted net income $ 715 $ 865 $ 260 $ 633 $ 547 $ 568 $ 0.41Less: Q2 2018 IRS tax settlement benefit 0.06

Adjusted EPS, excluding Q2 2018 IRS tax settlement benefit $ 0.35

YoY EPS growthGAAP EPS (73)%Adjusted EPS (4)%Adjusted EPS, excluding 2018 IRS tax settlement benefit 12 %


Appendix B - Income Statement InformationEarnings per ShareSix Months Ended June 30, 2019 and 2018

Six Months Ended June 30, 2019


Cost ofProducts

SoldSG&A

ExpensesR&D

Expenses


Pre-TaxIncome(Loss)

NetIncome(Loss)

Impact perShare

GAAP net income (loss) $ 1,488 $ 1,837 $ 559 $ 925 $ 602 $ 578 $ 0.41Non-GAAP adjustments to net income (loss):

Amortization expense — — — 321 323 287 0.20Intangible asset impairment charges — — — 105 105 97 0.07Acquisition-related net charges (credits) (31) (40) (15) 69 201 155 0.11Restructuring and restructuring-related net charges (credits) (10) (7) — 23 23 19 0.01Litigation-related net credits (credits) — — — (133) (133) (116) (0.08)Investment impairment charges — — — — 2 2 0.00Discrete tax items — — — — — 18 0.01

Adjusted net income $ 1,447 $ 1,791 $ 544 $ 1,310 $ 1,123 $ 1,040 $ 0.74

Six Months Ended June 30, 2018


Cost ofProducts

SoldSG&A

ExpensesR&D

Expenses


Pre-TaxIncome(Loss)

NetIncome(Loss)

Impact perShare

GAAP net income (loss) $ 1,411 $ 1,746 $ 536 $ 799 $ 670 $ 853 $ 0.61Non-GAAP adjustments to net income (loss):

Amortization expense — — — 288 288 248 0.18Intangible asset impairment charges — — — 35 35 31 0.02Acquisition-related net charges (credits) (15) (33) (22) 71 30 29 0.02Restructuring and restructuring-related net charges (credits) (23) (3) — 43 43 35 0.02Investment impairment charges — — — — 5 5 0.00Discrete tax items — — — — — (177) (0.13)

Adjusted net income $ 1,374 $ 1,710 $ 514 $ 1,237 $ 1,071 $ 1,023 $ 0.73


Appendix B - Income Statement InformationSegment Operating Income

Note: We measure and evaluate our reportable segments based on segment net sales, operating income allocated to reportable segments, excludingintersegment profits, and operating income allocated to reportable segments as a percentage of segment net sales. Operating income allocated toreportable segments as a percentage of segment net sales is defined as operating income allocated to reportable segments divided by segment netsales. Our presentation of segment net sales to include foreign exchange fluctuations, since the chief operating decision maker (CODM) reviews operatingresults at both actual foreign exchange rates and excluding foreign exchange rates and the following presentation more closely aligns with U.S. GAAP.We exclude from operating income allocated to reportable segments certain corporate-related expenses and certain transactions or adjustments thatour CODM considers to be non-operational, such as amounts related to amortization expense, intangible asset impairment charges, acquisition-relateditems, restructuring and restructuring-related items and litigation-related items. Although we exclude these amounts from operating income allocated toreportable segments, they are included in reported consolidated operating income (loss) and are included in the reconciliation below.

SEGMENT NET SALES (dollars in millions)Q2

2019Q2

2018

MedSurg $ 818 $ 751Rhythm & Neuro 786 775Cardiovascular 1,026 965

Net Sales $ 2,631 $ 2,490

OPERATING INCOME ALLOCATED TO REPORTABLESEGMENTS (dollars in millions)

Q2 2019

% of Sales

Q2 2018

% of Sales

YoY Change

(%)

YoYChange

(bps)

Less: Fx

Impact

YoYChange,excl. Fx

MedSurg $ 295 36.1% $ 273 36.4% (0.3)% -30 (0.1)% (0.2)%Rhythm & Neuro 167 21.2% 160 20.6% 0.6 % 60 (0.4)% 1.0 %Cardiovascular 301 29.3% 300 31.1% (1.8)% -180 (0.8)% (1.0)%

Operating income allocated to reportable segments 763 734Corporate expenses, including hedging activities (91) (100)Intangible asset impairment charges, acquisition-related,restructuring- and restructuring-related and litigation-related net (charges) credits (127) (95)Amortization expense (161) (147)

Operating income (loss) $ 384 $ 392

Appendix C Additional Non-GAAP

Reconciliations


Appendix C - Additional ReconciliationsAdjusted Free Cash Flow

in millions Three Months EndedAdjusted Free Cash Flow 6/30/2019 6/30/2018Operating cash flow, reported $ 292 $ (403) Less: Purchases of property, plant and equipment 91 73

Add: Proceeds on disposals of property, plant and equipment — —Free Cash Flow, reported 200 (476)

Plus: Restructuring and restructuring-related payments 14 27Plus: Acquisition-related payments 48 55Plus: Special tax payments (Refunds/Credits) 40 703Plus: Litigation-related settlements 104 249

Adjusted Free Cash Flow $ 406 $ 558


Appendix C - Additional Reconciliations

Three Months EndedACURATE Revenue Growth 6/30/2019Revenue growth, as reported 23.0 % Less: Impact of foreign currency fluctuations (6.7)%Revenue growth, operational 29.7 %

Estimated Tax Rate FY 2019Tax Rate, GAAP basis 7 %

Less: Non-GAAP Adjustments (2)%Tax Rate, Adjusted 9 %

Less: Impact of Discrete Tax Items (1)%Less: Impact of Stock Compensation (1)%

Tax Rate, Ordinary 11 %

Year EndedAdjusted Operating Margin 12/31/2018Operating Margin, as reported 15.3 %

Less: Non-GAAP adjustments (10.2)%

Adjusted Operating Margin 25.5 %

Three MonthsEnded

Interventional Cardiology Revenue Growth 3/31/2019Revenue growth, as reported 2.5 % Less: Impact of foreign currency fluctuations (3.7)%Revenue growth, operational 6.2 %

Less: Impact of certain acquisitions 1.4 %Revenue growth, organic 4.8 %

in millionsThree Months

EndedAdjusted Interest Expense 6/30/2018Interest expense, as reported $ (57)

Less: Non-GAAP adjustments —

Adjusted Interest Expense $ (57)



Three Months Ended June 30,

Q2 2018 Neuromodulation Revenue Growth(dollars in millions) 2018 2017

AsReported

Basis

Less: Impact ofForeign Currency


Basis

Less: Impact ofCertain


Neuromodulation $ 202 $ 154 31.5% 0.9% 30.6% —% 30.6%

Three Months EndedMarch 31,

Q1 2018 Neuromodulation Revenue(dollars in millions) 2018 2017

AsReported

Basis



Basis



Neuromodulation $ 169 $ 141 19.3% 2.1% 17.2% —% 17.2%

Second Half 2018 Neuromodulation RevenueGrowth(dollars in millions) 2018 2017

AsReported

Basis



Basis



Q3 Neuromodulation $ 189 $ 154 22.8% (0.7)% 23.5% —% 23.5%Q4 Neuromodulation $ 220 $ 186 17.9% (1.0)% 18.9% —% 18.9%Second Half 2018 Neuromodulation $ 409 $ 340 20% (1)% 21% —% 21%




Q1 2019 Neuromodulation Revenue Growth(dollars in millions) 2019 2018

AsReported

Basis


CurrencyOperational

BasisLess: Impact of

CertainAcquisitions

OrganicBasis

Neuromodulation $ 186 $ 169 10.5% (1.9)% 12.4% —% 12.4%

Three Months EndedQ2 2019 Neuromodulation SequentialRevenue Growth(dollars in millions)

June 30,2019

March 31,2019

AsReported

Basis


CurrencyOperational


CertainAcquisitions

OrganicBasis

Neuromodulation $ 204 $ 186 9% 1% 9% 2% 7%


Q1 2019 Total Company WW Sales Detail(dollars in millions) 2019 2018

AsReported

Basis


CurrencyOperational


CertainAcquisitions

OrganicBasis

Worldwide Net Sales $ 2,493 $ 2,379 4.8% (3.0)% 7.8% 1.5% 6.3%


Appendix D - Guidance

Q3 2019 Estimate Estimated Growth

(Low) (High) (Low) (High)Estimated GAAP EPS $ 0.23 $ 0.25Estimated amortization expense 0.10 0.10Estimated acquisition-related net charges (credits) 0.02 0.02Estimated restructuring and restructuring-related charges (credits) 0.02 0.02Estimated Adjusted EPS $ 0.37 $ 0.39 7 % 13 %

Full Year 2019 Estimate Estimated Growth(Low) (High) (Low) (High)

Estimated GAAP EPS $ 0.94 $ 0.98Estimated amortization expense 0.41 0.41 .Estimated intangible asset impairment charges 0.07 0.07Estimated acquisition-related net charges (credits) 0.14 0.14Estimated restructuring and restructuring-related net charges (credits) 0.05 0.05Estimated litigation-related net charges (credits) (0.08) (0.08)Estimated investment impairment charges 0.00 0.00Estimated discrete tax items 0.01 0.01Estimated Adjusted EPS $ 1.54 $ 1.58 5 % 8 %Less: Estimated impact of 2018 tax settlement — — (5)% (5)%Estimated Adjusted EPS, excluding estimated impact of 2018 tax settlement $ 1.54 $ 1.58 10 % 13 %



Full Year 2019 Estimate

(Low) (High)

Estimated GAAP sales growth 7 % 8 %

Less: Estimated impact of foreign currency fluctuations (1)% (1)%

Estimated operational sales growth 8 % 9 %

Less: Sales from certain acquisitions1 1 % 1 %

Estimated sales growth, organic 7 % 8 %

1 Full Year 2019 Estimate represents contribution of approximately 140 basis points from NxThera, Claret, Augmenix and Vertiflex.

Q3 2019 Estimate(Low) (High)

Estimated GAAP sales growth 8 % 10 %Less: Estimated impact of foreign currency fluctuations (1)% (1)%Estimated operational sales growth 9 % 11 %Less: Sales from certain acquisitions1 1.5 % 2 %Estimated sales growth, organic 7.5 % 9 %

1Q3 2019 Estimate represents contribution of approximately 180 basis points from Claret, Augmenix and Vertiflex.


Previously Issued April 24, 2019Q2 2019 Estimate Full Year 2019 Estimate

(Low) (High) (Low) (High)Previously estimated GAAP sales growth 5 % 7 % 7 % 8 %Less: Estimated impact of foreign currency fluctuations (2)% (1)% (1)% (1)%Previously estimated growth, operational 7.4 % 8.4 % 8.1 % 9.1 %Less: Estimated impact of certain recent acquisitons2 with no prior year comparable sales 1 % 1 % 1 % 1 %Previously estimated sales growth, organic 6 % 7 % 7 % 8 %

2Previous Q2 2019 and full year 2019 estimates exclude from the recent acquisitions of NxThera, Claret and Augmenix, each with no prior year period comparable sales.


Previously Issued on April 24, 2019Previously Issued April 24, 2019

Q2 2019 Estimate Estimated Growth(Low) (High) (Low) (High)

Previously estimated GAAP EPS $ 0.23 $ 0.25 (42)% (37)%Estimated amortization expense 0.10 0.10Estimated acquisition-related net charges (credits) 0.02 0.02Estimated restructuring and restructuring-related charges (credits) 0.02 0.02Previously estimated Adjusted EPS $ 0.37 $ 0.39 (9)% (4)%Less: Estimated impact of 2018 tax settlement — — (15)% (16)%Previously estimated Adjusted EPS, excluding estimated impact of 2018 tax settlement $ 0.37 $ 0.39 6% 12%

Previously Issued April 24, 2019Full Year 2019 Estimate Estimated Growth

(Low) (High) (Low) (High)Previously estimated GAAP EPS $ 1.09 $ 1.13 (9)% (5)%Estimated amortization expense 0.41 0.41Estimated intangible asset impairment charges 0.04 0.04Estimated acquisition-related net charges (credits) 0.03 0.03Estimated restructuring and restructuring-related charges (credits) 0.06 0.06Estimated litigation-related net charges (credits) (0.09) (0.09)Previously estimated Adjusted EPS1 $ 1.54 $ 1.58 5% 8%Less: Estimated impact of 2018 tax settlement — — (5)% (5)%Previously estimated Adjusted EPS, excluding estimated impact of 2018 tax settlement $ 1.54 $ 1.58 10% 13%


Appendix D - GuidanceForward-Looking Non-GAAP Financial Measures

The following is an explanation of the adjustments that management excluded from GAAP measures to calculate the following

forward-looking non-GAAP financial measures for the third quarter and full year 2019:

Adjusted Gross Margin: Excludes from GAAP gross margin the impacts of forecasted acquisition- and divestiture- and

restructuring-related charges or credits.

Adjusted SG&A: Excludes from GAAP SG&A the impacts of forecasted acquisition- and divestiture- and restructuring-related

charges or credits.

Adjusted R&D: Excludes from GAAP R&D the impacts of forecasted acquisition- and divestiture- and restructuring-related

charges or credits.

Adjusted Operating Margin: Excludes from GAAP operating margin the impacts of forecasted acquisition- and divestiture-

and restructuring- and restructuring-related charges or credits, and amortization expense.

Adjusted Tax Rate: Excludes from GAAP tax rate the tax impacts related to forecasted acquisition- and divestiture-,

restructuring- and restructuring-related charges or credits, and amortization expense.

Adjusted Free Cash Flow: Adjusts GAAP operating cash flow to include the impacts of forecasted capital expenditures and

excludes the impact of estimated after-tax acquisition- and divestiture-, restructuring- and litigation-payments.

Please refer to our Safe Harbor for forward-looking statements disclosure on slide 2 in conjunction with any forward looking

information presented within.

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