Becton, Dickinson and Company

Hello and welcome to the BD's fourth quarter and full year fiscal 2021 earnings call. At the request of BD, today's call is being recorded. It will be available for replay through November 11th, 2021 on the investors page of the BD.com website or by phone at 800-839-1246 for domestic calls. and area code plus 1-402-220-0464 for international calls. The replay bridges are now dedicated. You no longer need a conference ID to hear the replay. I would like to inform all parties that your lines have been placed in a listen-only mode until the question and answer segment. Beginning today's call is Ms. Nadia Goncalves, Senior Director of Investor Relations. Ms. Goncalves, please, you may begin.

Good morning, and thank you for joining us today. This call is being made available via webcast at bd.com. This morning, BD released its results for the fourth quarter and full year of fiscal 2021. You can find the press release along with an accompanying presentation on the investor relations website, investors.bd.com. Leading today's call are Tom Poland, BD's chairman, chief executive officer, and president, and Chris DeLorfis, Executive Vice President and Chief Financial Officer. Following the prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents, Alberto Mas, President of the Medical Segment, Simon Campion, President of the Interventional Segment, and Dave Hickey, President of the Life Sciences Segment. During the call, we will be making forward-looking statements, and it is possible actual results could differ from our expectations. Risks, uncertainties, and other factors that could cause such differences can be found in our earnings release and in our latest SEC filings, including our Form 10-K and 10-Qs. We will also be discussing non-GAAP financial measures regarding our performance. Reconciliations to GAAP measures, including the details of purchase accounting and other adjustments, can be found in our earnings release and financial schedules and the appendix to our investor presentation. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant period. Revenue percent changes are on an FX-neutral basis unless otherwise noted. When we refer to any given period, we are referring to the fiscal period unless we specifically note it as a calendar period. I would also call your attention to the basis of presentation slide, which defines terms you will hear today, such as base revenues, base margins, NUCO, and marine manco. With that, I'm very pleased to turn it over to Tom.

Thank you, Nadia, and good morning, everyone, and thank you for joining us. Before I get started, I would like to officially welcome Chris DeLorfis, BD's recently appointed chief financial officer. Chris brings deep healthcare and med tech experience to BD across both operations and corporate finance. Many of you already know Chris from his most recent role as head of investor relations at J&J. We are thrilled to have Chris join the team And while he's only been with us for two months, he's already immersing himself and making a very positive impact. I look forward to Chris sharing his perspective with you both today and at our Investor Day next week. I would also like to welcome Dr. Carrie Byington, who was recently appointed to the BD Board of Directors. Dr. Byington is Executive Vice President and Head of University of California Health, where she leads the nation's largest academic health system. Dr. Byington brings deep and highly relevant experience to BD as we work to advance our BD 2025 strategy and accelerate innovation in smart, connected care, enabling the transition to new care settings and improving chronic disease outcomes. On today's call, I will provide highlights of our performance and the continued progress we have made on our BD 2025 strategy. I'll then turn it over to Chris for the financial review and outlook for fiscal 2022. After our prepared remarks, Chris and I will open the call up for Q&A. Now let's jump into our results and key highlights for the year on slide seven. We were very pleased with the strong close to fiscal 2021, which drove full-year revenues, EPS, and cash flows ahead of our expectations, despite a volatile environment. This reflects our continued laser focus on execution and the strength and expansiveness of our diversified business and geographic model. Revenues grew over 15% to more than $20 billion in fiscal 21, with $2 billion in COVID testing revenues and strong 8.1% growth in our base business. Our adjusted EPS increased 28% to $13.08. And through continued execution of cash flow initiatives we instituted in fiscal 20, we further improved our operating cash flow by over $1.1 billion compared to the prior year. Overall performance reflects strong momentum in our base business with a return to more normalized growth rates across all three segments versus pre-pandemic revenue levels. As hospitals have been able to return to serving both COVID and non-COVID patients and the overall healthcare utilization levels increased, we saw strong demand for our broad portfolio of products that were essential to patient care, including new products delivered across our innovation pipeline. At the same time, We are proud to have supported our customers and the patients they serve by bringing to market and scaling a broad range of innovations to help the world diagnose, treat, and prevent COVID. Turning to slide eight. At the highest level, our strategy has been deeply rooted in helping healthcare systems balance four key priorities, and those are improving outcomes, driving efficiencies, expanding access to care, and more important than ever, improving the clinician experience. BD is uniquely positioned to help our customers deliver against these three key priorities across discovery and diagnosis, medication delivery, and interventional treatment. And through our innovation-driven growth strategy, we're investing in our broad foundational durable core portfolio while also shifting a larger portion of our business into higher growth, higher impact areas. And those three higher growth, higher impact areas that we're focused on that you've heard me talk about before are smart connected care, enabling the transition of treatment to new care settings, and improving chronic disease outcomes. In addition, by simplifying our product portfolio, we're driving growth through increased efficiency and margin expansion. Turning to slide nine. Importantly, we've significantly advanced our strategy this past fiscal year. taking bold steps to position BD for the long term, beginning with the actions we took to strengthen our balance sheet and enhance our working capital and cash flows. These actions have positioned our cash and net leverage well, giving us the capacity to increase investments in R&D and tuck in M&A, accelerating our innovation pipeline, and advancing our strategy to drive growth in fiscal 22 and beyond. In FY21, we invested over $1.2 billion in R&D, 21% more than last year, with increased funding for key projects through our new growth and innovation fund. We also continued our increased pace of tuck-in acquisitions, completing seven acquisitions in fiscal 21, as well as a number of additional early phase investments, as we also began to build our long-term inorganic funnel. In addition, we reinvested over $200 million in profits from COVID testing to drive our growth strategy. through investments in our commercial organization and accelerate our simplification strategy by investing to speed up our recode portfolio and architecture program. And today, these investments are meaningfully advancing our strategy to expand in higher growth spaces across smart connected care, new care settings, and chronic disease outcomes. And just a few recent accomplishments that I can share here underscore our growing momentum. We're looking forward to sharing a lot more of those accomplishments next week at Amnesty. These include new manufacturing lines that are now operational and will support demand for vaccination devices globally. And this investment is in addition to our $1.2 billion commitment to expand capacity for our pre-fillable syringe and advanced drug delivery systems, which represent high growth opportunities in our durable core. Emergency use authorization for BD Veritor at home, which is the first at-home COVID antigen test to use a smartphone to interpret and report results. This platform is a great example of how we're applying digital capabilities to bring new first-world innovations to market and expanding care to new settings. We also received 510K clearance of expanded indications for Rotarex, atherectomy system, to include treatment of instant restenosis, which is a first-of-its-kind label expansion, and it's a great example of how we expand optionality for physicians and customers in the treatment of chronic disease. We also received US FDA approval of our new high-throughput molecular system, BD-Core. In today's challenging labor environment, BD-Core's advanced robotics and software algorithms provide customers a way to do more testing with less available staff. while providing important new clinical insights for cervical cancer screening and management through our BD on Clarity HPV assay. Now, beyond BD Core, as you know, we have a portfolio and pipeline of unique automated solutions that help our customers perform in a tight labor market, from helping nursing staff and pharmacists be more efficient with medication management to increasing efficiency in diagnostic testing for labs experiencing staffing shortages. We're engaging with customers in these markets and are seeing great interest in our solutions. At our Investor Day, we'll share more about how we are well-positioned, not only capitalized on this opportunity, but how we've been very actively optimizing our investment mix to both expand our durable core platforms and simultaneously add technology and platform innovation in higher impact and higher growth spaces that we expect to enhance our long-term growth profile. Through our disciplined capital allocation framework, we are balancing these investments and future growth with the return of capital to shareholders through our competitive dividend, while also resuming our share repurchasing program, having repurchased $1.75 billion in fiscal 21. We also just announced our 50th consecutive year of dividend increases, and we're very proud to be one of only 16 companies across all industries to achieve that milestone. Turning to slide 10, we will remain disciplined in our approach to portfolio management as we systematically advance and deliver against our strategy. And earlier this year, we announced the decision to spin off our diabetes care business. The proposed spin represents a value creation opportunity for all stakeholders and is intended to enable growth acceleration for both BD RemainCo and NuCo with more efficient business processes and allocation of resources and capital. NUCO will be able to invest its capital in growth opportunities, including high growth geographies, markets, and next generation products. We continue to make good progress, and the spinoff remains on track for the first half of calendar 2022. Regarding our BD Alaris pump, we recently received CE Mark and Health Canada approval for the updated BD Alaris system. We also achieved a significant milestone earlier this year with the filing of our BD Alaris 510K submission. We have dedicated resources supporting this and continue to make progress. Alaris is an important tool for clinicians and there continues to be strong demand for our platform during the pandemic. Turning to slide 11, I'd like to share some details about our enhanced ESG strategy, Together We Advance. BD has been a long-standing leader as a case study for sustainable business models and innovating for shared value. Our strategy serves as a framework through which BD addresses the most relevant ESG issues for the company and its stakeholders and aims to further our leadership role and build on our commitment to improve and advance individual and public health at a global scale. The health of our company, our planet, our communities, and the people we serve are directly connected, And when we successfully address the health of one, we often solve for challenges of another. And under our strategy, we announced a suite of goals for 2030 and beyond, with commitments in five areas that are most important to BD and our stakeholders, and where we have opportunities to create meaningful measured change over the next decade. And those specifically are climate change, product impacts, responsible supply chains, healthy workforce and communities, and transparency. And we're acting on these commitments, and for example, we recently signed onto the United Nations Race for Zero campaign. We look forward to sharing more about the advances and impact we're having in each of these areas. Before I turn it over to Chris, as we look ahead, we expect the greater resiliency exhibited by healthcare systems during Delta will continue, along with continued recovery and patient demand post-Delta. While there are inflationary pressures occurring across most every industry, we have been very active in addressing these challenges. We have put specific, defined, actionable plans in place to help mitigate these pressures, which are coordinated through an inflation task force that we've established with work streams across procurement, shipping, cost structure, and continuous improvements in our plans. And in this environment, it's also required to initiate pricing actions, which we have begun. Looking ahead, while we believe there will be longer-term macro solutions like expanded shipping and resin capacity, we're not waiting for those to occur. Our aim is to be best in class in navigating the current environment, and we believe we have a clear path to accelerating margin recovery. We are proud of the progress we are making advancing our BD 2025 and ESG strategies. We have excellent momentum in our base business heading into fiscal 22, a stronger balance sheet, and steadily increasing cash flows despite inflationary pressures, all positioning us well for the future. With that, let me turn it over to Chris to review our financials and outlook. And again, Chris, welcome.