Medtronic : Q3 FY19 IR Presentation

MEDTRONIC PLC Q3 FY19

EARNINGS PRESENTATION FEBRUARY 19, 2019

• •Q3 FY19 CONSOLIDATED RESULTS & GROUP REVENUE HIGHLIGHTS

• •FREE CASH FLOW

• •FY19 GUIDANCE & OTHER ASSUMPTIONS

FORWARD LOOKING STATEMENTS

This presentation contains forward-looking statements. 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.

Non-GAAP Financial Measures

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 which are considered "non-GAAP" financial measures under applicable SEC rules and regulations. Medtronic management believes that non-GAAP financial measures provide information useful to investors in understanding the company's underlying operational performance and trends and to facilitate comparisons with the performance of other companies in the med tech industry. 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 EPS projections exclude the impact of foreign currency fluctuations and other potential charges or gains that would be recorded as non-GAAP adjustments to earnings during the fiscal year. 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. GAAP to non-GAAP reconciliations are provided on our website and can be accessed using thislink.

Financial Comparisons

References to quarterly results increasing, decreasing, or remaining flat are in comparison to Q3 FY18. References to organic revenue growth exclude the impact of material acquisitions, divestitures, and currency. References to pro-forma or comparable exclude the impact of material divestitures and include the required accounting reclassifications described on slides 15-16 in the Q1 FY19 Earnings Presentation . Unless stated otherwise, quarterly rates and ranges are given on a constant currency basis, which adjusts for the impact of currency and required accounting reclassifications. Unless stated otherwise, annual rates and ranges are giving on a comparable, constant currency basis, which adjusts for material divestitures, the impact of currency, and required accounting reclassifications.

Basis of Presentation of Comparable Full Year FY18 Financial Metrics

Previously disclosed full year FY18 financial metrics have been revised to adjust for (a) the estimated results of the portion of our Patient Monitoring & Recovery division, which was divested to Cardinal Health on July 29, 2017, and (b) the change in the presentation of revenue related to the Advanced Ablation and GI Solutions product lines, which were historically included within the Surgical Solutions division and which, effective Q2 FY18, are now included within the Respiratory, Gastrointestinal, and Renal (RGR) division. The non-GAAP reconciling items remain the same as those presented in previous earnings release materials. The GAAP to Non-GAAP reconciliations are available with previous earnings release materials, available athttp://investorrelations.medtronic.com.

The revised comparable financial metrics represent estimates based upon available information and certain assumptions which management believes are reasonable under the circumstances. Actual results may have differed materially from the assumptions used to prepare the revised financial metrics. The revised financial metrics are not necessarily indicative of the financial position or results of operations that would have been realized had the divestiture occurred as of the dates or for the periods indicated, nor is it meant to be indicative of any financial position or results of operations that Medtronic plc may have experienced had the divestiture occurred in an earlier period.

Q3 FY19HIGHLIGHTS

Revenue:

U.S.	4,001	2	2
Non-U.S. Dev	2,368	1	4
EM	1,177	7	14
Total	$7,546	2%	4%

Other Financial Highlights:

Cash Flow from Ops

$2.1B

Free Cash Flow2

$1.8B

STRONG EXECUTION, SOLID QUARTER;

RAISING GUIDANCE

• REVENUE:Delivered 4.4% organic revenue growth; outperformance in MITG & RTG, and broad strength in Emerging Markets, offset tougher CVG quarter

  • •MITG growth of 6.6%, led by strength in Advanced Energy, Advanced Stapling, Respiratory, and Renal Care Solutions

  • •RTG growth of 5.5%, driven by high-teens growth in Neurosurgery and Neurovascular

  • •Emerging Markets grew 13.9%, driven by low-20's growth in South Asia and the Middle East & Africa and low-double digit growth in China

• EPS:Delivered 10.3% non-GAAP EPS growth (+8.5% cc)

• OP MARGIN:Delivered 140 bps non-GAAP operating margin expansion (+50 bps cc)

  • •SG&A: 70 bps improvement (+70 bps cc), reflecting execution on our company-wide Enterprise Excellence initiatives

• FCF:Strong YTD Free Cash Flow2performance of $4.1B versus $2.9B in prior year

• GUIDANCE:Given the YTD strength of the business, raising FY19 EPS, free cash flow, and lower end of organic revenue growth guidance

  • •Organic Revenue Growth: Increasing lower end by 25 bps to 5.25% - 5.5%, top half of our prior range

  • •EPS: Increasing to $5.14 - $5.16, from $5.10 - $5.15 prior

  • •Free Cash Flow: Increasing to $5.0 - $5.2B, from $4.7 - $5.1B prior

• 1 Figures represent comparison to Q3 FY18 on a constant currency basis.

• 2 Operating cash flows less property, plant equipment additions.

Q3 FY19 NON-GAAPSELECT FINANCIAL INFORMATION

Operating Leverage3

180 bps

EPS Leverage3

410 bps

• 1 Revised Baseline includes the required accounting reclassifications described on slides 15-16 in the Q1 FY19 Earnings Presentation.

• 2 Non-GAAP

• 3 Figures represent comparison to Q3 FY18 Revised Baseline on a constant currency basis.