Baxter International Inc.

Good morning, ladies and gentlemen, and welcome to Baxter International's fourth quarter 2021 earnings conference call. Your lines will remain in a listen-only mode until the question and answer segment of today's call. At that time, if you have a question, you will need to press the star and the number one on your touchtone phone. If anyone should require assistance during the conference, please press star, then zero on your touchtone phone. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Clara Trackman, Vice President, Investor Relations at Baxter International. Ms. Trackman, you may begin.

Good morning and welcome to our fourth quarter 2021 earnings conference call. Joining me today are Joel Madoff, Baxter's Chairman and Chief Executive Officer, Jay Saccaro, Baxter's Chief Financial Officer, and Giuseppe Iacoli, Baxter's Chief Operating Officer. On the call this morning, we will be discussing Baxter's fourth quarter and full year 2021 financial results, along with our financial outlook for 2022. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the first quarter and full year 2022, including the anticipated impact of COVID and inflationary pressures on this outlook, The recent acquisition of Pilgrim, including anticipated cost synergies and future net leverage targets, new product development or launches, business development and regulatory matters contain forward-looking statements that involve risks and uncertainty. And of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more details concerning factors that could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Factor's ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in our earnings release issued this morning and available on our website. As mentioned in our press release this morning, following Baxter's acquisition of Hillrun on December 13, 2021, Baxter's fourth quarter and full year 2021 financial results include Hillrun's financial results for the last 19 days of the quarter ended December 31, 2021. Hillrun's financial results for these periods are recorded as a new operating segment in addition to Baxter's existing three geographic segments. On the call this morning, we will be discussing operational sales growth, which for the fourth quarter and full year 2021 adjusts for the impact of foreign exchange, the December 2021 acquisition of Pilgrim, and the February 2021 acquisition of the rights to Calix and Doxil for specified territories outside of the U.S. Later in the call, Jay will discuss our guidance for the first quarter and full year 2022. Operational sales growth for 2022 will include the impact of foreign exchange and the acquisition of Hillrump. Historical 2021 quarterly sales for Hillrump have been posted to the investor section of our website. Now I'd like to turn the call over to Joe.

Thank you, Claire. Good morning, everyone, and thank you for joining today's call. As always, I hope that you and your loved ones are healthy and safe. I will start this morning with some perspective on our performance last year and future trajectory. Jay will take a closer look at the financials and share our outlook for the first quarter and full year 2022. Then we'll take your questions. As you all know, this is our first earnings call since acquiring Hiram. The next inflection point impacts this multi-year transformation. The combination further extends our already diverse MedTech portfolio and provides opportunities to broaden our reach, both geographically and across the CARE continuum. Importantly, it also unlocks exciting new possibilities for connected care innovation across our product lines, with the potential to spark clinical insights, enhance patient outcomes, and increase workflow efficiencies. In short, it holds the promise of greater value for all of our stakeholders, from patients and clinicians to our employees and investors. The deal closed on December 13th, so our Q4 and full year 2021 financials reflect 19 days of contribution from Hiram. Looking at company-wide performance, Baxter delivered fourth quarter 2021 sales growth of 10% on a reported basis, 12% at constant currency, and 4% at operational rates. Fourth quarter adjusted earnings per share were $1.04. Up 30% year over year, Hill-Rom contributed $212 million in sales and $0.08 of adjusted earnings per share in the quarter. For full year 2021, sales growth was 10% on a reported basis, 7% on a constant currency basis, and 5% on an operational basis. On the bottom line, adjusted earnings per share of $3.61 increased 17% year over year, which also reflects the contribution of Eurom. Growth for both the quarter and year reflect the ongoing, somewhat erratic impact of COVID-19, which negatively affected top-line sales for certain businesses while fueling demands for others, particularly later in the fourth quarter as the Omicron variant surged. Our top-line performance for the year continues to demonstrate the diversity and durability of our portfolio, which allowed us to deliver operational sales growth of 5% for the year. Demand across both our legacy Baxter and legacy Hiram businesses is strong. During the fourth quarter and continuing through the start of this year, we have been experiencing a higher than normal rate of backwaters due to certain supply chain limitations and staffing-related challenges in our plants resulting from high rates of absenteeism amid the rising cases of COVID. We're working expeditiously to address the situation and anticipate continued improvement in the coming weeks. As we have discussed throughout the year, our cost structure has been negatively impacted by rising rates of inflation, as well as an increasingly challenging supply chain network situation. which has at times resulted in expedited shipments and extraordinary steps to procure necessary components. While our teams have worked diligently to offset many of these pressures, our fourth quarter results reflect higher than expected freight costs. Given the critical and essential nature of our products, we made decisions to expedite product to our customers to ensure we stay true to our mission, which means prioritizing the needs of patients and clinicians who depend on steady access to our lifesaving products. We will never compromise on this commitment. We are realistic about the supply chain challenges that continue to test the global industry as a whole, and we are laser-focused on addressing them successfully now and going forward. We are in the process of implementing new measures in procurement and logistics, including evaluating opportunities to pass through certain costs in selected geographies. that will enhance performance and deliver value to all stakeholders, both in the near term and long run. We're focused on making sound choices to promote our long-term success as a viable, growing enterprise. We're building off our solid foundation and remain focused on executing against our multi-year transformation. This transformation has bolstered our operational efficiency and given us the tools to navigate through these challenging times with the resilience and tenacity this team has demonstrated over the course of the last two years. Beyond this, the acquisition of HealROM introduces crucial growth drivers across multiple fronts. The integration process is moving forward productively. We are already identifying opportunities for geographic expansion as well as synergies to drive meaningful cost reduction and margin expansion. And we are advancing connected care across our newly expanded capabilities. As always, we continue to evaluate our portfolio to ensure the businesses we operate are aligned with our long-term strategic objective to accelerate top-line growth and expand margins. This commitment was clearly demonstrated with the Hiram acquisition, which augmented and strengthened our underlying portfolio. As part of this ongoing process, to the extent we identify areas that do not align with our long-term objectives, we will look to exit or divest these businesses while also continuing to identify new opportunities to enhance future performance. We recognize that innovation is at the core of any successful enterprise, and we're focused on introducing new products that address the evolving needs of our customers and patients. Some of these include the anticipated U.S. launch of our Novum IQ smart pump this year, as well as our TrueView connected digital solutions for our Prismax2 continuous renal replacement therapy technology, which is in early stage launch right now in the U.S. and Europe, Middle East, and Africa. Obviously, we assess our performance across multiple dimensions, just as we must continually strengthen our performance as a thriving and resilient enterprise. Our mission also demands our continued leadership as a corporate system, 2021 marked the launch of our 2030 corporate responsibility commitment, comprising 10 key goals for the next decade and beyond, focused on three key action areas. Empower our patients, protect our planet, and champion our people and communities. We have also taken significant steps in the past year to advance or activating Change Today, or ACT, initiative to advance racial justice within Baxter and across the communities and markets we serve. Our progress as both a business and as a corporate citizen is entirely the commitment of our employees worldwide. This outstanding team has achieved so much in several years, from building our transformation to stepping up tirelessly in the face of COVID-19. Now it stands prepared for our new chapter of momentum and growth. With these teams' proven track record, I'm confident in our ability to deliver on the opportunities we have worked so hard to create. We will be sharing much more about our strategic trajectory at our investor conference later this year. Now I will turn it over to Jay to share a closer look at our performance and outlook.