Becton, Dickinson and Company

Hello and welcome to BD's third fiscal quarter 2025 earnings call. At the request of BD, today's call is being recorded and will be available for replay on BD's Investor Relations website, investors.bd.com, or by phone at 800-839-1246 for domestic calls and area code plus 1-402-220-7000. For today's call, all parties have been placed in a listen-only mode until the question and answer session. I will now turn the call over to Greg Rodriguez, Senior Vice President, Treasurer, and Head of Investor Relations.

Good morning, and welcome to BD's earnings call. I'm Greg Rodriguez, Senior Vice President, and Head of Investor Relations. Treasurer and Head of Investor Relations. 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 third quarter of fiscal 2025. 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. Following this morning's prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents, Mike Garrison, president of the medical segment, Mike Feld, president of the life sciences segment, Rick Bird, president of the interventional segment, and Bilal Muslin, president of our future connected care segment. Before we get started, I want to remind you that we'll be making forward-looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings on our investor relations website. Unless otherwise specified, all comparisons will be made on a year-on-year basis versus a relevant fiscal period. Revenue percentage changes are on an adjusted FX-neutral basis unless otherwise noted. Reconciliations between GAAP and non-GAAP measures are included in the appendices of this earnings release and presentation. With that, I am pleased to turn it over to Tom.

Thank you, Greg, and good morning, everyone. As you saw in our press release, In Q3, we sequentially improved growth across the company. We accelerated commercial initiatives and increased our organic growth trajectory through market headwinds. We continued our strong track record of executing BD excellence to drive gross margin upside. Additionally, we fulfilled our commitment to announce a definitive agreement to separate our biosciences and diagnostics business through a transaction that we believe will unlock meaningful value for our shareholders. Turning to details of the quarter, Revenue grew 8.5% to $5.5 billion, or 3% organic. New BD organic growth was 4%. Our BD Excellence lean operating system remains a flywheel for value creation, delivering Q3 adjusted gross margin of 54.8%, up 50 basis points year over year. Adjusted operating margin of 25.8%, up 60 basis points year over year. and supported delivering $3.68 in adjusted diluted EPS. Each exceeded our expectations. As we communicated last quarter, we've been taking actions to accelerate revenue growth. This includes further investing in growth opportunities by adding selling and marketing resources, capitalizing on new product launches, and continuing to drive BD Excellence to optimize product supply. The combination of these actions has already begun delivering results as you saw play out in a number of key areas. Farm systems improved sequentially to nearly 5% growth as we delivered another quarter of double-digit growth in biologics. BDI accelerated to nearly 7% growth in the quarter, with double-digit growth in UCC and mid-single-digit growth in PI and surgery. APM delivered double-digit pro forma growth ahead of our deal model. As expected, growth in both BDB and DS increased sequentially by approximately 250 basis points. This performance allowed us to deliver sequentially improved growth across the company through continued market headwinds in China, certain subsegments of farm systems such as vaccines, and the life science research market. Building off our Q3 performance, we reaffirmed our organic revenue guide range for the year and raised our earnings guidance 18 cents at the midpoint. Turning to an update on several strategic initiatives, as committed last month, we announced that we entered into an agreement to combine our biosciences and diagnostic solutions business with Waters through a tax-efficient reverse Morris trust. We strongly believe that Waters is the right partner and firmly believe in management strategy and ability to unlock the value of these assets. The transaction is progressing well towards an expected closing around the end of the first quarter of calendar year 2026. We're pleased to have named Brooke Story to lead Beatty's Integration and Separation Management Office. Brooke has most recently led the integration of Edwards Critical Care, which she will continue to oversee as part of her expanded scope. Her rich experience, including her tenure as president of the diagnostics business, makes her the ideal choice for this role. Upon closing, New BD will be established as a scaled pure play medical technology company with uniquely leading positions and a best-in-class consumable revenue profile of over 90%, a deep innovation pipeline, and strong margin expansion fueled by BD excellence. The company's strong growth and earnings profile will be supported by enhanced capital allocation with an emphasis on share buybacks as we continue to pay competitive dividends, and execute focused tuck-in M&A. As previously communicated and aligned with our emphasis on share buybacks, we intend to use at least half of the approximately $4 billion cash distribution from Waters to buy back shares with the balance for debt repayment as we continue to progress toward our 2.5 times long-term net leverage target. Moving to an update on our innovation pipeline, we had some great launches and milestones this quarter. as investment decisions we made at the start of BD 2025 are now advancing to market. In BD Life Sciences, BDB's innovation super cycle continued in Q3. We saw strong traction with the successful launch of FACTS Discover A8, which features breakthrough spectral and real-time cell imaging technologies and has exceeded our sales targets since launch. We're also launching our first Made in China for China Clinical Analyzer this quarter. BDB's R&D pipeline includes over 25 new product launches across instruments, reagents, and informatics, as well as continued expansion in the high-growth single-cell multi-omic segment. In DS, as blood culture momentum continues, we are excited about the next-generation BACTEC launch in fiscal 2026, which is expected to drive renewal of legacy systems and accelerate share gains. In molecular, Innovation remains focused on leveraging the increased BD Max installed base with continued growth of IVD revenue per system. Most customers today use just under three assays, while top users adopt five or more of our 14 assay menu. Our commercial team is focused on driving further menu adoption, supported by the upcoming launch of several new assays in 2026. Also in molecular, our BD Core platform is addressing a new $1 billion market for HPV testing. And last week, we submitted to FDA the first ever at-home self-collection kit for HPV screening using a simple dry swab. We expect approval in mid-FY26. Today in the U.S., approximately 30% of women have not been screened as recommended. And this population represents over 60% of cervical cancer deaths. We believe at-home self-collection can significantly improve access to screening and play an important role in reversing still rising deaths from cervical cancer. Moving to BD Medical. We recently announced that our BD Libertas Wearable Injector has entered into its first pharma-sponsored clinical trial. This device is being used for self-injection of complex biologic drugs by patients at home, rather than going to an infusion clinic. We also announced in another BD-sponsored studies that 100% of study participants would likely use the Libertas device if prescribed. Separately, we continue to expand signed agreements for GLP-1s, now reaching over 70 signed agreements for GLP-1 biosimilars. Biologics now represent 50% of total farm system sales. We're exceptionally well positioned to capitalize on the wave of new molecules coming to market over the next decade. Moving to our portfolio of connected care solutions, within MMS, we began limited commercial release of our new BD Pixis Pro, completing installs at several customer sites with our BD Encada Enterprise AI software to follow this quarter. Pixis Pro is our first redesigned hardware platform and includes multiple new features designed to improve nurse workflow, enhance drug availability for patients, and transform productivity using artificial intelligence. Pixis Pro is our first product line to feed data into our new Incada AI platform and will be followed by Alaris, Hemisphere AltaMonitor, and other devices, creating future data sets which will be unique in our industry. While still very early in our introduction, we are looking forward to this innovative journey over the next coming years. Following the APM acquisition, we immediately began investing in capabilities to develop increased connectivity and interaction between our Alaris infusion system and our Hemisphere altered high hemodynamic monitoring system, recognizing that critical care nurses can spend 50% of their time manually adjusting infusions today. We're advancing through early milestones in our innovation process with prototypes now working in lab models. We have a strong cadence of new solutions under development across Connected Care that BD is uniquely positioned to deliver. And I'm pleased to have Bilal Moussin, EVP and President of our Future Connected Care segment with us on the call today. Bilal joined BD in July from Mossimo and is known for his deep knowledge of the sector a strong track record of transformative innovation, and its commercial focus on driving growth. This is an exciting next step in our journey to becoming the new BD, and I look forward to Bilal's partnership. In MDS, we recently received FDA clearance for Centrovina 1, our rapid insertion central catheter, and we're on track to launch this quarter. This is BD's first entry into the $500 million central line market. And Centrovina is designed to transform the efficiency and safety of insertion and reduce the risk of serious complications. In our BD interventional segment and advanced tissue regeneration platform, we continue to expand indications for phasics. With the EU launch of the world's first reservable scaffold with broad indications to prophylactically prevent incisional hernias. With more than 2.5 million laparotomies performed annually across the U.S. and Europe. Incisional hernias affect an estimated 30% of patients and up to 50% among high-risk populations. These preventable hernias often lead to a cycle of complications such as recurrence, surgical site infections, and reoperations. The U.S. clinical trial is ongoing with full patient enrollment anticipated in FY26. Lastly, our BD Excellence operating system continues to be a key enabler of our strong margin execution and is expanding our competitive advantage in manufacturing, streamlining internal processes, and optimizing our supply chains in today's tariff environment. In Q3, customer service levels measured as on-time, in-full deliveries, or OTIF, reached their highest level in over five years and continue positive momentum into Q4. Over the last two years, BD Excellence has been used to reduce manufacturing waste by more than 35%, and OEE, or efficiency of equipment, is up significantly, creating capacity to produce an additional 2.5 billion units on the same production lines. We continue to be in the early innings of BD Excellence and see a long runway ahead across operations, commercial, R&D, and process excellence. This also applies to our life science businesses, which are being separated, where BD Excellence has accelerating momentum and margin expansion initiatives are progressing well. We'll be transitioning these capabilities to Waters to continue this progress. In closing, we achieved our objectives in Q3 and are fully engaged in executing our commercial initiatives to ensure we accelerate organic revenue growth through market dynamics. Simultaneously, We are focused on closing the transaction with Waters that will position BD for its next chapter of long-term success. With that, I'll turn it over to Chris.