Baxter International Inc.

Good morning, ladies and gentlemen, and welcome to Baxter International's first quarter 2023 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 star 1 on your touchtone phone. If anyone should require assistance during this conference, please press star then 0 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. Claire Trackman, Vice President, Investment Relations at Baxter International. Ms. Trackman, you may begin.

Good morning, and welcome to our first quarter 2023 earnings conference call. Joining me today are Joel Mehta, Baxter's Chairman and Chief Executive Officer, and Jay Siccaro, Baxter's Chief Financial Officer. On the call this morning, we will be discussing Baxter's first quarter 2023 financial results, along with our financial outlook for the second quarter and full year 2023. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the second quarter and full year 2023, New product developments, the potential impact of our in-flight proposed strategic and pricing actions, business development, regulatory matters, and the macroeconomic environment, including commentary on anticipated customer capital spending, contain forward-looking statements that involve risks and uncertainties. And of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our FEC filings for more detail 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 Baxter'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. Now I'd like to turn the call over to Joe. Joe?

Thank you, Claire, and good morning, everyone. We appreciate you taking the time to join today's call. I will begin with an overview of our first quarter performance and trajectory. Jay will follow with a closer look at our financials, as well as our outlook for Q2 and the remainder of 2023. After that, we will open up the lines for Q&A. First quarter sales declined 2% year over year on a reported basis. and rose 2% at a constant currency, exceeding our original outlook, driven primarily by better than expected sales in renal care, pharmaceuticals, and frontline care. On the bottom line, first quarter adjusted earnings per share of 59 cents also came in above our guidance range of 46 cents to 50 cents per share, again, driven primarily by operational performance in the quarter. Results in the quarter were impacted by the expected declines in two of our legacy Baxter businesses, Biopharma Solutions and Acute Therapies, reflecting the tough comparisons to the prior year period due to COVID. Looking at our legacy, Huron Businesses' strength in frontline care and global surgical solutions was offset by declining patient support systems or PSS performance. This reflects what we believe to be softness in certain hospital capital spending patterns in the current economic environment. Following what I will candidly describe as a difficult 2022, we begin 2023 with a solid quarter and on a strong footing for future momentum. From a macroeconomic perspective, while the high rates of inflation we absorbed last year continue to impact our performance, most notably in the first half of the year, we're beginning to see more stability in the overall market. We are also starting to see an improvement on the supply chain front, which includes the increased availability of electromechanical components, creating more predictability in our operations in a reduced need for premium cost spot purchasing. Specifically in terms of the healthcare marketplace, admissions and procedural volumes continue to recover from pandemic lows, contributing to positive demand. We also continue to see steady improvement in PD patient growth in many markets, following several quarters of this lower demand linked to pandemic-related mortality issues. In another crucial signal, healthcare staffing levels have stabilized or are rising at hospitals and other facilities, following some concerning lows. That said, we believe based on conversations with our U.S. customers, the hospital capital spending has been deprioritized for certain product areas, which has impacted near-term performance of our PSS business. Our current expectation is that the situation starts to improve over the course of the year. We're nearing the launch of our next version of our market-leading ICU bed, Progressive Plus. Progressive Plus is the only true ICU bed with new features that help clinical staff address complications and provide the best care possible for patients. We are already seeing strong customer interest in the new solution and look forward to the anticipated launch this quarter. Lastly, regarding this topic, I will highlight that we are not currently seeing The softness in capital spending extends to our other businesses, such as infusion systems or frontline care, where demand remains strong for the products. Alongside these trends, we are, of course, moving full speed ahead on the critical strategic initiatives I announced at the outset of the year, focused on enhancing our impact and long-term shareholder value. Our plan to spin off our renal care and acute therapies business into a standalone kidney care company is well underway. The standalone company will emerge as a leader in a growing market segment with 2022 sales of approximately $4.5 billion and more than 1 million patients across more than 70 countries. It will hold leading positions across its portfolio and a well-established presence in homes, hospitals, in clinics worldwide. Perhaps most importantly, as a standalone entity, it will benefit from increased management focus and the pursuit of its unique investment priorities, better positioned to accelerate growth and innovation, emphasizing its distinct market drivers. We are finalizing our search process to identify the future CEO of our spin-off company and hope to share more information on this front shortly. We currently expect the spinoff kidney care to occur by July 2024 or earlier, and we'll continue to keep you informed of our progress. Last week marked the initial launch phase of the new operating model we previewed for you last quarter, realigning our current portfolio of 10 businesses into four vertically integrated global business segments Each segment is being led by an experienced, passionate senior executive with a proven track record of success and compelling vision for the future. Medical products and therapies led by Group President Heather Knight comprises our current medication delivery, advanced surgery, and clinical nutrition portfolios. Healthcare systems and technologies led by Group President Riaz Razoul Includes our legacy heel ROM businesses including patient support systems global surgical solutions in frontline care pharmaceuticals led by group president a look sonic includes our current pharma portfolio as well as our biopharma solutions business and Finally kidney care comprises our renal care and acute therapies businesses each of these segments has global profit and loss accountability, dedicated commercial operations, and fully aligned research and development, manufacturing supply chain, and functional support teams. Note that our global manufacturing sites are being aligned to each business to help fuel greater transparency, foresight, and resilience across the supply chain. While we are in the early stage of this implementation, our teams are moving fast, eager to capitalize on the tighter alignment that can help fuel enhanced strategic clarity, agility, and innovation. Even as we advance organizational and efficiency efforts, we also know that high-impact innovation is a critical factor to delivering accelerated growth among recent innovation milestones. We are very pleased to share that we have resubmitted our leading-edge NovoMyQ large volume pump for FDA 510K clearance. The NovoMyQ syringe pump is now in use in the United States. As a reminder, we have not included any U.S. sales for the NovoMyQ LVP in our guidance. I'm also pleased to report that our newly launched Zosyn premix is experiencing solid uptake in the U.S. hospital pharma marketplace. Other recent launches include Baxter's new patient warming system, which minimizes risks associated with forced air warming, reduces noise and waste in the operating room, and lessens the burden on clinician workflows. Full CO plus Ricothrombin, the first and only active fobable hemostat with a recombinant thrombin resulting in one and a half times faster preparation. Ready connect system from Baxter Centralis Smart Plus Bad, which delivers reliable cable-free connectivity between the hospital bed and most nurse call systems on the market. And finally, Exacta Mix Pro, the next generation automated nutrition compounder designed to enhance security, improve customer experience, and offer stronger data reporting capabilities. Looking ahead, while macroenvironmental factors show signs of improvement, we remain cautious and balanced about the pace of recovery. This is why our current transformational initiatives are so vital. Our goal is to redefine our operations for sustained success in a rapidly evolving environment, while always remaining true to our life-sustaining mission and focus on medically essential healthcare. Our momentum today and tomorrow is fueled entirely by our employees. I thank them for their dedication and resilience, which are vital to the transformation journey we are taking together. Now I will pass it on to Jay for a closer look at our performance and outlook.