Becton, Dickinson and Company

Good day, everyone, and welcome to today's Becton Dickinson Q2 Fiscal Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your touchtone phone. Please note this call may be recorded and that I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Francesca DiMartino. Ma'am, please begin.

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 second quarter of fiscal 2023. We also posted an earnings presentation that provides additional details on our business, strategy, and performance. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's call are Tom Poland, BD's Chairman, Chief Executive Officer and President, and Chris Delorifus, 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 Q2 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 IR 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 would also call your attention to the basis of presentation slide, which defines terms such as base revenues and the non-GAAP reconciliations included in the appendix. With that, I am very pleased to turn it over to Tom.

Thanks, Francesca. Good morning, everyone, and thank you for joining us. Earlier today, we reported another consecutive quarter of strong financial performance and significant progress advancing our innovation pipeline. The results we have been delivering for multiple periods reflect our strategy and action. We are now about halfway through our BD 2025 plan to accelerate growth and simplify and empower our company. And I'd like to share how our team's strong execution of our strategy is driving our performance and will enable continued momentum through 2025 and beyond. We have made purposeful and strategic investments, which we're seeing contribute to consistent higher growth and strong financial performance. We have been and remain very intentional with how we are deploying our capital towards higher growth spaces and are pleased with the significant progress we continue to make increasing our WAMGR. These actions have evolved BD into an agile, innovative, and durable medical technology company with a compelling growth profile. Our innovation mindset is driving higher product development velocity and super cycles of innovation in many of our businesses, through a focus on the most impactful programs, improve milestone achievement, and launch excellence. To highlight a few examples of our strategy and investments and how they're fueling strong results and momentum, first in farm systems. Near the start of our BD 2025 journey, we made a bold decision to invest $1.2 billion in additional capacity. Today, we're seeing this capacity investment along with several new innovations we've brought to market paying off as we are ideally positioned to enable delivery of the large wave of biotech drugs coming to market. We've built farm systems into a $2 billion growth platform with 11 consecutive quarters of double-digit growth. With over 70% of the top 100 biopharma companies using BD's portfolio and six times the capacity of the nearest competitor, we are well positioned to continue delivering strong growth. Second, During COVID, we also made several strategic reinvestments of certain COVID-only testing proceeds, particularly in our BDB business, which is one of the areas with a super cycle of new breakthrough innovations coming to market over this and the next several years. We've already begun to see acceleration from some of the early new launches, notably in biopharma for cell therapy and immune oncology research. We're looking forward to the upcoming launch of our FACTS Discover S8 cell sorter, that was previously featured on the cover of the journal Science. The S8 combines advanced spectral flow cytometry with novel CellView image technology. By combining the power of high parameter spectral flow cytometry with an unprecedented picture of a cell and its inner workings, we are defining a new standard in flow cytometry, which will empower scientists to unlock life-changing discoveries across fields like immunology, cancer research, and cell biology. We recently shipped our first early access BD FACTS Discover S8 and we remain on track for launch later this quarter. We've also already begun launching a new family of spectrally optimized BD Horizon reagents that together with the FACTS Discover S8 will create a unique spectral solution inclusive of instruments, dyes, and informatics that only BD can offer. Third, as you know, we have been very purposeful in increasing tuck-in M&A to drive scale within high growth adjacent markets, and have built strong M&A capabilities to successfully integrate assets. Our most recent acquisition of Parata's pharmacy automation solutions continues to exceed our expectations, and we're already seeing an early impact from revenue synergies. The Parata acquisition expanded our offering to establish BD as a leader in pharmacy automation, and created a new growth platform with revenues in excess of half a billion dollars growing double digits. This is an attractive, growing market that uses automation to address a number of the critical issues faced by our customers, such as wage inflation, labor attrition, pharmacist burnout, and the need to reallocate pharmacists' valuable time to clinical care. Prada is just one example of the successful tuck-in acquisitions we've made over the last several years. These acquisitions are currently contributing about 30 basis points to our organic growth rate this year. And once Parada annualizes, we expect that contribution will increase to about 50 basis points. Lastly, we continue to build on our strong competency of serially innovating on and expanding the application of new technologies we develop or acquire. This is exemplified in our urology and critical care business, where our acquisition of PureWIC continues to provide significant benefits to patients and is also an impactful growth driver for UCC. We've already launched the home version of PureWIC Female, which continues to be very well received and is aligned with our focus on providing solutions in new care settings. And at the end of FY22, we launched PureWIC Male, the newest product in our planned portfolio expansion for managing incontinence. PureWIC Male provides nurses with a non-invasive option for urine management in men, enabling early catheter removal and reduced risk of infection. We are receiving exceptional customer feedback, and the adoption of Pure Wick mail is exceeding our expectations. We have multiple additional R&D programs in the pipeline to continue to expand our solutions and incontinence. These are just some of the examples of key investment decisions we have executed to strengthen our business, contributing to our performance today and over the long term. Turning to our quarterly financial results, we are seeing the strength of our BD 2025 strategy in action across all businesses and geographies in our Q2 performance. We delivered another quarter of outstanding results that exceeded our expectations with 8.7% base revenue growth and double-digit currency neutral earnings growth. While we are excited by what we have achieved to date, we have much more to look forward to. Let me provide a few examples of how we progressed our pipeline this quarter, starting with our recent launches. In our BD medical segment, we launched our PowerMe midline catheter in China. And by the beginning of March, it was being used in the first patient. PowerMe was designed by our R&D center in China for China. We're excited about the opportunity it creates to develop a new category of vascular access in China. In our life sciences segment, we're really excited about how the BD-Core platform is expanding us into the high-throughput, high-growth molecular diagnostics market. In Q2, we received 510K clearance for our new vaginal panel on BD-Core, the world's first microbiome-based PCR assay that uses a single swab and test to simultaneously detect the three most common causes of vaginitis infections, enabling targeted, cost-effective treatment. And in our BDI segment, we launched our Highlander 014 PTA balloon in Q2. Highlander is the first and only non-compliant fiber-based balloon designed to treat peripheral artery disease in below the knee anatomy. We are proud to be leading in this space, building on our history of continuous innovation in the higher growth PVD market. We've also hit several crucial milestones this quarter. These include regulatory submissions of the PIVO Pro as well as BDnexiva with near port IV access, which are core elements of our one stick hospital stay and vascular access management strategy in our MDS business. In our biosciences business, we completed the early access program for our BD Rhapsody HT Express. And in fact, I'm pleased to report that just in the last few days, we announced the launch. The HT Express is a single cell analysis system that increases the throughput of the BD Rhapsody platform eight-fold while maintaining compatibility with our existing single-cell assays and reagents. This new instrument enables access to the fast-growing translational single-cell multi-omics market with a high-throughput research solution. In our surgery business, we completed testing for our Phase X ST umbilical product to support a 510K submission later this fiscal year. Phasix ST umbilical is designed to provide patients a reliable alternative to permanent mesh, bringing the benefits of the category-leading bioresorbable Phasix material into one of the most common abdominal wall hernia procedures. Phasix ST umbilical will be the first fully resorbable product customized for open umbilical repairs, which represents the majority of umbilical procedures. This is another example of a technology reacquired and are now expanding and accelerating the growth of. These launches and milestones are good examples of how we are strengthening our position in attractive end markets across our portfolio. While we advance our growth strategy, we also remain focused on our number one priority to bring the Alaris pump back to market. We are confident in the resources invested in our submission, the team and leadership tasked to prioritize this, and that we will get clearance. As we have stated in the past, the relaunch of Alaris is included in the BD 2025 strategic plan. And while we cannot predict clearance timelines, we can ensure that we are prepared for the relaunch with the proper operational capacity and functional capabilities so that we can provide our customers with the best experience. As a reminder, we've launched an updated Alaris pump in several international markets and continue to receive very positive feedback from customers. In Q2, we continued to simplify our company with programs across our manufacturing network, our portfolio, and our operating model. We made further progress on our Recode Portfolio Simplification Program, which reduces SKUs in order to improve customer service and focus on the most important products needed to deliver care. 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, improve cost and service while delivering on our ESG goals to address climate change and carbon neutrality. Earlier this year, we expanded our RECODE initiative to include our operating model to drive efficiency and effectiveness and simplify our organization to improve agility. These actions resulted in us reducing our overall headcount by about 2% this year. We also recently made the strategic decision to partner with a leading business process and professional services firm in our transitioning certain BD shared service center business processes. They will be working to optimize our back office processes and services using automation, data, and process excellence that they have implemented very successfully with other large companies. Collectively, our simplification programs are a core part of our strategy to drive efficiency and enable impactful growth. To share some perspective on the macro environment, overall, the environment continues to stabilize and is in line with our view that challenges will persist, not escalate. While we're seeing signs of inflation cooling off, it is still more than twice the historical average. We see continued labor pressure with different market dynamics impacting hiring and increasing wages for certain roles, particularly in our supply chain organizations. Across raw materials, some categories such as resins used in finished goods are beginning to show signs of stabilization, but overall they have not come down universally and remain well above prior cost levels. In terms of supply availability, we have seen significant improvements across materials, supplies, and labor, which are driving our backorder reduction, leading us to recover towards pre-pandemic supply levels. Broadly speaking, we are seeing stabilization and continued overall procedure volume recovery and volume momentum. Specific to China, we delivered strong performance despite some impact from increased COVID cases in the region and reduced hospital capacity that carried into Q2. We experienced a strong recovery in March and remain well positioned for continued growth in China. Our strategy has proven to enable strong results in some of the most challenging times And by successfully navigating the macro environment, we are distinguishing BD and remain well-positioned to deliver continued strong performance. Before I turn it over to Chris, I'll provide an update on the progress our team is making to advance our ESG strategy and goals. We continue to be proud of our leading focus on reducing the environmental impact of our product portfolio, and we recently announced the launch of our new circular economy pilot in several regions. where we are partnering with healthcare facilities and waste management companies to recycle used materials, including BD syringes in the US and BD vacutainers in Denmark. In addition to launching our 2022 cybersecurity annual report in early Q2, we also established the BD Cybersecurity Risk Committee, which serves as the management level governance body for oversight of all cybersecurity risk across the company. The committee is chaired by the Chief Risk Officer, and its members include cybersecurity leaders across enterprise, manufacturing, and product cybersecurity, as well as key functional leaders. We are also proud to receive continued recognition for our ongoing commitment to talent and culture. Most recently, we were named the noteworthy company for the fourth straight year in Diversity, Inc.' 's annual ranking of the top U.S. companies for diversity. We look forward to providing further updates on the commitments, disclosures, and progress on the four pillars of our ESG strategy, company health, planet health, community health, and human health, as we publish our 15th annual ESG report later this year. In summary, I'm proud of our progress and the positive impact our associates are delivering for our customers and patients around the world. Our purposeful and strategic investments in attractive end markets are driving higher growth and creating value. Our innovation mindset is improving our pipeline execution and launch excellence and creating the most exciting product pipeline in the company's history. Our simplification efforts are reducing complexity and driving business process excellence and agility. Our increased guidance for fiscal 23 reflects our strategy and action, strong execution by our team, and a strengthened growth profile. we will continue to increase investments to support profitable growth through 2025 and beyond. With that, let me turn it over to Chris to review our financials, guidance, and outlook. Thanks, Tom.