Baxter International Inc.

Good morning and welcome to our fourth quarter 2023 earnings conference call.

Joining me today are Joel Mehta, Baxter's Chairman and Chief Executive Officer, and Joel Grady, Baxter's Executive Vice President and Chief Financial Officer. On the call this morning, we will be discussing Baxter's fourth quarter and full year 2023 financial results, along with our financial outlook for 2024. 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 2024, New product developments, including the impact and status of pending regulatory approvals, the status and potential impact of our ongoing strategic and recent pricing actions, business development, regulatory matters, and the macroeconomic environment, including commentary on improving supply chain conditions and evolving customer capital spending trends, 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 SEC 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 factors ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation, along with our earnings release issued this morning, which are both 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 us. I will begin with a brief overview of Baxter's performance for the quarter and the year. After this, I will review our progress against the transformational actions we laid out for you just over a year ago, including the planned separation of our kidney care business. I will then turn it over to Joe Grady, who will walk through our results and outlook in more detail. Finally, we will open it up for your questions. As you saw this morning, Baxter reported strong performance for the fourth quarter of 2023, with top-line sales exceeding our projections and bottom-line results coming in at a high end of our guidance range. As a reminder, continuing operations exclude the impact of our biopharma solutions business, which we divested at the close of the third quarter. Sales from continuing operations rose 4% on a reported basis, ahead of our outlook of 1% to 2% growth. On a constant current basis, sales increased 3%, also ahead of our guidance, which projected growth of approximately 1%. Strength in the quarter was broad-based with year-over-year growth in the healthcare systems and technologies, medical products and therapies, and pharmaceuticals, which was a slightly offset but an expected decline in kidney care. Relative to expectations, both of our chronic therapies and drug compounded divisions reported better than expected sales. On the bottom line, adjusted earnings per share from continual operations came in at 88 cents, at the top end of our prior guidance range of 85 to 88 cents. Our fourth quarter results further reinforce our building momentum. In 2023, we focused on consistently meeting and or exceeding our financial outlook, particularly in light of the significant supply chain and macro environmental challenge we encountered during 2022. As a testament to this focus, over the course of 2023, we were able to deliver sequential improvement every quarter, and we believe this performance provides us with a solid foundation to build off in 2024. Turning to the four-year sales from continuing operations of $14.8 billion, advanced 2% on a reported basis and 3% on a constant currency basis. driven by sales growth for all of our segments at constant currency rates. First, looking at the constant currency sales growth in the segments set to comprise our future Baxter portfolio following the planned kidney care separation, sales in healthcare systems and technologies were up 7%, in the fourth quarter and 3% for the year. Medical products and therapy sales rose 4% in both the quarter and for the year, and sales in pharmaceuticals were up 7% for both the quarter and the year. Performance in these segments was fueled by strong execution across our commercial and manufacturing teams. New product launches increased availability of electromechanical components in a more stable supply chain and macroeconomic environment relative to the significant volatility experienced last year. With respect to hospital capital spending, while we still believe there may be pockets of softer spending, we are encouraged by the sequential improvement we experienced every quarter in 2023 within our care and connectivity solutions division. Our kidney care segment, which will be called Ventive, post separation, declined 1% in the quarter and grew 1% for the year at constant rates. Strong growth in acute therapies was offset by flat growth in chronic therapies, reflecting a difficult year-over-year comparison. Due to certain discrete items that benefited sales in the prior year, as well as lower sales in China, due to the impact of government-based procurement initiatives and a lower patient census due to the pandemic. The underlying state of the kidney care business continues to improve, and the momentum we are building is evident. Among key indicators, we are seeing renewed growth in the peritoneal dialysis patient population following the earlier impact of pandemic-driven mortality issues. Our strategic rationale and hypothesis For an independent kidney care business remains as strong as ever. Our team is executing and gearing up for a successful separation this year. Given overall business performance and environmental dynamics, I'm optimistic as we look ahead to the prospects for both Baxter Inventive as separate entities. Our solid financial performance was achieved in parallel with meaningful progress against the strategic priorities we announced to open 2023. We kicked off the year with an urgency to rethink both the scope and velocity of our transformation. Since then, our team delivered, executing on a range of goals to position a separated Baxter Inventive for a new era of enhanced patient and shareholder impact. enabled by heightened strategic clarity, operational efficiency, and innovation. We realigned our businesses into newly streamlined, simplified operating models based on globally integrated business segments. Each segment is led by a seasoned and knowledgeable executive who has profit and loss accountability, inclusive of dedicated commercial research and development, manufacturing, supply chain, and functional teams. We are already seeing the benefits of improved line of sight to our customers and greater agility to recognize and capture growth opportunities. We completed the divestiture of our biopharma solutions business at the close of Q3, which further allowed us to streamline our strategic focus on our core businesses. We are in the process of utilizing the after-tax proceeds of approximately $3.7 billion to pay down debt in line with our stated capital allocation priorities, including $2.8 billion of repayments in the fourth quarter. Finally, we continue to make progress towards separating inventive out of Baxter. As we have consistently stated, we believe this separation will ultimately empower both companies to pursue their own unique strategic and investment priorities. Many of you had the opportunity to meet designated Ventev CEO Chris Doth at the JPMorgan conference last month. Chris has been hard at work building out his organization, meeting customers, and setting near-term and long-term strategies. Among recent developments, Chris has onboarded Matt Harbaugh as designated vent of CFO. Many of you may know Matt from his days as CFO at Newvasive. Meanwhile, we continue to hit key separation milestones across operational, legal, regulatory supply chain IT domains. In summary, 2023 was a year of rebuilding and renewing our momentum. We made significant progress on an ambitious slate of strategic initiatives coupled with solid financial performance while never losing focus on our foundational commitments to our customers and patients. Additionally, we have created new potential to embrace more exciting opportunities to come. I do not take the accomplishments of this past year for granted. I want to thank and recognize all of the employees who hard work and commitment helped us to achieve our objectives. I have never been more impressed by what a team could achieve in a single year. And that is why I'm so energized by our potential to seize on opportunities we have created together. Now we turn it over to Joel for a closer look at our fourth quarter and full year 2023 performance, as well as our 2024 outlook.