Becton, Dickinson and Company

Hello, and welcome to BD's first fiscal quarter of 2023 earnings call. At the request of BD, today's call is being recorded, and a replay of the call will be made available on BD's investor relations website on BD.com. The call is also being made available by phone at 800-695-0395 for domestic calls and area code plus 1-402-695. 220-1388 for international calls. For today's calls, all parties have been placed in a listen-only mode until the question and answer session. I will now turn the call over to BD.

Good morning, and welcome to BD's earnings call. I'm Francesca DiMartino, Senior Vice President and Head of Investor Relations. On behalf of the BD team, thank you for joining us. This call is being made available via audio webcast at BD.com. Earlier this morning, BD released its results for the first quarter of fiscal 2023. We also posted an earnings presentation that provides additional details on our performance. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's call are Tom Pollin, BD's Chairman, Chief Executive Officer and President, and Chris Del Orfis, Executive Vice President and Chief Financial Officer. Tom will provide highlights of our performance in the continued execution of our BD 2025 strategy. Chris will then provide additional details on our Q1 financial performance and our updated guidance for fiscal 2023. Following the prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents, Mike Garrison, president of the medical segment, Dave Hickey, president of the life sciences segment, and Rick Bird, president of the interventional segment. Before we get started, I want to remind you that we will be making forward-looking statements. I encourage you to read the disclaimer in our earnings release and the disclosures in our SEC filings, which are both available on the Investor Relations website. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant period. Revenue percentage 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 will also call your attention to the basis of presentation slide, which defines terms such as base, revenues, and continuing operations. With that, I am very pleased to turn it over to Tom.

Thanks, Francesca, and good morning, everyone, and thank you for joining us. We delivered another quarter of strong performance in Q1. Our results reflect the momentum of our BD 2025 strategy, which we are driving through a powerful combination of innovation and strong execution. We exceeded our revenue and earnings expectation in Q1 despite market disruption in China and continue to drive consistent, durable performance in our base business, with revenue growth of 5.2% and $2.98 in adjusted diluted EPS. Our results are a testament to the continued relentless focus by our team of talented associates who are delivering BD products and solutions that are enabling our customers to provide high-quality, cost-effective care to patients around the world. In Q1, we continue to make excellent progress, driving all three pillars of our strategy to accelerate growth, simplify the company, and empower our associates. Our growth continues to reflect consistent performance of our durable core, which has become known as the backbone of healthcare, and our continued shift into attractive and higher growth end markets through investments in both R&D and Tuck and M&A. These higher growth transformative solutions are focused in the three areas we see reshaping healthcare, and where we are currently investing approximately 60% of our R&D, and that's in smart connected care, enabling new care settings and improving chronic disease outcomes. Today we have what I believe is the most exciting innovation pipeline in the history of the company. And through our investments, we are systematically increasing the WAMGR across our portfolio and supporting our strong growth profile. I'll highlight a few of the end markets that are driving our growth and some of the key products recently launched and in our pipeline that we're excited about. Our medical segment is focused on improving medication delivery across a wide range of settings, making it safer, simpler, and smarter across end markets that include medication management solutions, pharmacy automation, pharma and biotech drug delivery, and vascular access management, where we recently launched PosiFlush SafeScrub, consistent with the expected launch timing we shared on our Q3 FY22 call. A pre-filled flush syringe with an integrated disinfection device, PosiFlush SafeScrub, is designed to simplify nursing workflow and enhance compliance with infection prevention guidelines. It's a good example of how we're driving continuous innovation that extends our leadership and our durable core, and within the broader $9 billion vascular access management market. Another milestone in our vascular access portfolio was clearance of our new PowerMe midline catheter, by the Chinese regulatory agency NMPA. This was designed by our R&D center in China for China. It is our first midline in this geography and offers up to 30 days of continuous venous access while reducing patient complications. We're excited about the opportunity PowerMe creates to help develop a new category for vascular access in China, and we look forward to the expected launch later this quarter. Our BD Life Sciences segment provides solutions from sample collection and discovery to diagnosis and serves dynamic end markets like single cell analysis, clinical microbiology, point of care, and the molecular diagnostics market where we continue to advance our strategy of menu expansion with initial sales outside the U.S. of our BD Max Respiratory Viral Panel, or RVP. This multiplex respiratory panel detects COVID-19, flu A, and B and RSV in a single test and is an ideal solution for endemic respiratory testing. This aligns to our strategy to accelerate our growth in the $4 billion molecular diagnostics end market that's growing about 9%. The RVP panel is currently under FDA EUA review for US launch. We also continue to progress our strategy in blood collection at the point of care. Point of Care is one of the fastest growing categories in diagnostics today that we believe will accelerate as diagnostic testing migrates to new and more convenient care settings such as retail clinics and pharmacies and even the potential of at home. Our BD MiniDraw capillary blood collection system is a disruptive innovation that enables collection of a high quality blood sample without a venipuncture and is designed to provide a better patient experience across the broad range of care settings. We remain on track for 510K submission by the second half of FY23. Our BD interventional segment, which provides solutions for chronic disease management, serves end markets that dramatically improve people's lives, such as oncology, incontinence, advanced repair and reconstruction, and the $5 billion peripheral vascular disease market, a space that's growing about 6%. Within PVD, we continued our strategy to globalize the BDI portfolio with the recent launch of our Venovo venous stent in China, the first stent in this market specifically designed for iliofemoral venous disease. Within the $3 billion oncology end market, a space also growing about 6%, we achieved a significant milestone completing safety testing for our multimodality vacuum-assisted biopsy system, and we're on track for FDA submission and launch in FY24. The BD Multimodality VAB device is expected to be the first vacuum-assisted biopsy system designed to work across all three imaging modalities of ultrasound, CT, and MRI, allowing customers to consolidate capital equipment, standardize consumables, and simplify physician and nurse training. These launches and milestones are good examples of how we're strengthening our position in attractive end markets across our portfolio. Our purposeful strategic investments in R&D, as well as tuck-in M&A and CapEx, are supported by our strong, flexible balance sheet and disciplined and balanced capital deployment strategy. This framework also gives us the flexibility to return capital to shareholders through a competitive dividend and share repurchases. In Q1, we also continue to simplify our company with programs across our manufacturing network, our portfolio, and most recently, our operating model. More specifically, we continue to make progress on our Recode Portfolio Simplification Program, where we are reducing SKUs of older generation products in order to focus on the most important products needed to deliver care today. We remain on track to remove 20% of our total portfolio by 2025, having achieved more than half of these SKU reductions thus far. In addition, we have numerous initiatives underway to consolidate our manufacturing footprint and more cost-effective locations. All of these efforts are designed to reduce complexity, drive supply chain excellence, and make BD more agile while supporting the achievement of our margin expansion goals. Our BD 2025 strategy is balanced, robust, and resilient. And our foresight planning and agility are enabling us to deliver strong performance despite the continued macro environment challenging all companies. To share some perspectives specific to healthcare, overall the environment continues to stabilize and is in line with our view that challenges are going to persist, not escalate, at least through 2023. While inflation is easing in some areas, we do expect that it will remain well above what we have seen historically and have planned for another year of outsized inflation, primarily in labor and raw materials. We see continued labor pressure with different market dynamics impacting hiring and increasing wages for certain roles, primarily in our manufacturing organization. Across raw materials, some categories of resins used in finished goods are beginning to show signs of improvement, while other materials such as packaging and rubber are still inflated versus historic prices. In terms of the COVID pandemic, broadly speaking, we see stabilization. While there continues to be surges in certain pockets around the world, similar to our customers, we have become more accustomed to managing through COVID-driven dynamics and have been effective at avoiding any extended manufacturing and distribution disruptions. Specific to China, We anticipate that the recent COVID restrictions that impacted us in Q1 will affect our peers as well. Our local teams are navigating these restrictions well, which reflects the resiliency and strength of our China organization and the diversity and durability of our business. By successfully navigating the challenging macro environment, we are distinguishing BD and supporting our ability to continue delivering strong performance. Before I turn it over to Chris, I'll share a few updates on the strong progress our team is making to advance our ESG strategy and goals. In December, we published our second annual ID&E report, which provides details about our progress towards our 2030 ESG goals for promoting a healthy workforce and communities. The report highlights our improvements towards increasing diversity at the management and executive levels and spotlights our global associates who are advancing our culture and driving meaningful change within BD and the communities that we serve. We also published our third annual cybersecurity report. BD was the first in MedTech to outline our ongoing efforts to advance cybersecurity in a report, including our work to protect against cyber attacks and empower customers with information about cyber risks and vulnerabilities. We're proud to receive continued recognition for our ESG efforts, most recently being named for the fourth consecutive year to both Newsweek's list of America's most responsible companies ranking in the top 25%, and the Bloomberg Gender Equality Index, recognizing our ongoing commitment to workplace equality. In summary, I'm proud of our progress and momentum. Our associates are bringing our BD 2025 strategy to life as we operate as a more agile, innovative med tech leader. BD is well-positioned to drive profitable growth and create long-term value. First, our growth profile is consistent and durable. Second, we are enhancing our leadership positions through purposeful portfolio shifts into higher growth markets, increasing the WAMGR across our portfolio. Third, we are improving our margin profile through our differentiated growth, enhanced simplification programs, and ongoing supply chain excellence. And fourth, we are committed to remaining disciplined and maintaining a strong and flexible balance sheet. We see an increasing capacity through our BD2025 timeframe to support value creation and continued strong growth through Tuck and M&A. All of this adds up to a compelling financial profile with long-term targeted base revenue growth of 5.5% plus and double digit EPS growth. Our updated guidance for FY23 reinforces our confidence in our ability to achieve these targets. With that, Let me turn it over to Chris to review our financials, guidance, and outlook.