Baxter International Inc.

Good morning, ladies and gentlemen, and welcome to Baxter International's second quarter 2024 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 one keys 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. Claire Trackman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trackman, you may begin.

Good morning and welcome to our second quarter 2024 earnings conference call. Joining me today are Joel Meda, 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 second quarter 2024 results, along with our financial outlook for the third quarter and full year 2024. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the third quarter and full year 2024, The status and anticipated timing of our ongoing strategic actions, including the proposed kidney care separation, and the potential impact of our recent pricing actions, regulatory matters, and the macroeconomic environment on our results of operations 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 in 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. and also available in 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. Thank you for joining us. Our second quarter 2024 results reflect the continued progress and momentum of our ongoing strategic transformation. Our performance in the quarter was strong, reinforcing the benefits of our redesigned operating model, fueled by the commitment and hard work of our outstanding Baxter team. I will start the call today with some brief commentary on our strong second quarter performance before turning the call over to Joel to provide more detail on our results as well as our outlook for the rest of the year. Then, as always, we'll open up to your questions. As you saw in this morning's earnings release, Baxter's second quarter results exceeded our previously issued guidance On both the top and bottom line, this performance further enhances our confidence in our ability to continue executing against our strategic priorities and build upon this underlying momentum. As such, we have increased our four-year sales outlook and adjusted EPS guidance accordingly. Our second quarter performance provides further evidence that the steps we have taken to date to centralize and streamline our operating model are yielding results. These actions allow for improved visibility both externally and internally to our markets. as well as increased accountability for our segment leaders. These benefits, coupled with enhanced operational rigor, have enabled our teams to better identify opportunities to accelerate innovation to drive growth and expand margins. Turning to some of the highlights from the quarter. Second quarter sales from continuing operations grew 3% on a reported basis and 4% at constant currency rates. As a reminder, continuing operations exclude the impact of our biopharma solutions business, BPS, which we divested at the close of the third quarter of 2023, in line with our strategic transformation roadmap. Sales growth was broad-based, with all four Baxter segments delivering growth above our expectations, reflecting positive demand and improved pricing for products across much of the portfolio. On the bottom line, adjusted earnings per share from continuing operations were 68 cents. These results were driven by our top line performance combined with our continued emphasis on operational efficiency across the company with ongoing contributions from our integrated supply chain network. Our strong operational performance more than offset a negative impact from foreign exchange and a higher than expected tax rate in the quarter. Now looking at performance by segment. Medical products and therapies are MPT delivered second quarter sales growth of 4% at reported rates and 5% at constant currency rates. Growth was fueled by demand across the segment and results include the first US sales of our leading edge Novum IQ large volume pump with those IQ safety software. Customer interest is high for the Novum platform, including both large volume and syringe pumps with their ability to advance connectivity and intelligent infusion therapy. These pumps are already live and in use at multiple sites, making a difference for caregivers and the patients they serve. We have a healthy funnel of opportunities and anticipate continued strong growth. steady uptake from Novum across the balance of 2024 and beyond through the upgrades of existing customers and conversions of new customers. Our pharmaceuticals segment grew 9% at reported rates and 11% at constant currency rates. Performance was driven by double-digit growth in our specialty injectables portfolio, reflecting the recent launches of a range of new differentiated injectables as well as significant growth in our drug compounding business. Growth in the segment was partially offset by lower sales of inhaled anesthetics. Healthcare systems and technologies, or HST, performance advanced 1% at both reported and constant rates. Our care and connectivity solutions division delivered mid-single-digit growth, reflecting positive market demand and strong U.S. cap orders, which increased meaningfully both sequentially and year-over-year. Growth in the quarter was partially offset by an expected decline in the frontline care division, primarily due to a difficult comparison to the prior year period and continued softness in the U.S. primary care market. Overall HST results in the quarter benefited from the operation improvements that we are in process of implementing to enhance ongoing performance. As we discussed last quarter, we expect to see these efforts continue to yield positive results as 2024 continues and going forward. Finally, kidney care was flat year over year at reported rates and grew 3% at constant currency rates. Performance continues to be fueled by demand for our acute therapies portfolio, plus strong growth for peritoneal dialysis products due to positive volume and pricing globally. Growth was partially offset by an expected decline in sales of in-center hemodialysis products due to select product and market exits. Looking ahead, we remain confident and excited about the future of our company and our potential to continue to accelerate sales growth, expand our margins, and drive innovation that will deliver benefits to our customers, shareholders, and many other stakeholder communities. As you all know, we launched our strategic transformation in January of 2023 to recast Baxter as a more simplified, more agile and more focused company, passionate in its commitment to operational excellence and better positioned to accelerate growth through customer inspired innovation. Among the elements central to our plan was the separation of the kidney care business from Baxter in order to provide both companies with improved strategic clarity and greater flexibility to pursue their unique investment priorities. We are continuing to make steady progress toward the separation and while the ultimate pathway has not yet been determined, We currently expect the separation will occur in late 2024 or early 2025 with the separation of kidney care. We have a unique opportunity to redefine ourselves while also remaining firmly grounded in what has powered our success for nearly a century. Our life-sustaining mission, our focus on essential healthcare, our commitment to innovation, and at the heart of it all, our employees. whose unparalleled dedication turns our aspirations into impact. Together, we are united, energized, and eager to take Baxter into a future of sustained healthcare leadership. With that, I will pass it over to Joel to provide more detail on our results for the quarter and outlook for the balance of the year.