Q4 2023 Baxter International Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to Baxter International. This concludes today's 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 1 on your touchtone phone.

Good morning, ladies and gentlemen, and welcome to Baxter International's fourth quarter 2023 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 on your Touchtone phone.

Operator: 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 anyone should require assistance during the conference. Please press Star then zero on your Touchtone phone as a reminder, this recorded.

Recorded by Baxter and is copyrighted material it cannot be recorded or rebroadcast without baxter's permission.

Operator: If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Clare Trachtman, senior vice president, chief investigations officer at. Ms. Trachtman, you may begin.

You have any objections. Please disconnect at this time I would now like to turn the call over to MS. Clare Trackman Senior Vice President Chief Investor Relations Officer at extra additional Mr. Ackerman you may begin.

Clare Trachtman: Good morning, and welcome to our fourth quarter 2023 earnings conference call. Joining me today are Joel Almeida, Baxter's chairman and chief executive officer, and Joel Grade, Baxter's executive vice president and chief financial officer. On the call this morning, we will be discussing Baxter's fourth quarter and full year 2023 financial results, along with our financial outlook for 2024. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the first quarter and full year 2024, new product development, including the impact and status of pending regulatory approval, the status and potential impact of our ongoing, strategic, and recent pricing actions, business development And, of course, our actual results could differ materially from our current expectations.

Clare Trachtman: Good morning, and welcome to our fourth quarter 2023 earnings Conference call. Joining me today are Joe Almeida, Baxter's, Chairman and Chief Executive Officer, and Joe Friday, Faxes, Executive Vice President and Chief Financial Officer on the call. This morning, we will be discussing baxter's fourth quarter and full year 2023 financial result.

Clare Trackman: Along with our financial outlook for 2024.

Clare Trackman: With that let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the first quarter and full year 2024, new product developments, including the impact on status of pending regulatory approval.

Clare Trackman: Status and potential impact of our ongoing strategic and recent pricing actions business development right.

Clare Trackman: Inventory matter.

Clare Trackman: The macroeconomic environment, including commentary on improving supply chain conditions and evolving customer capital spending trends contain forward looking statements that involve risks and uncertainties and of course, our actual results could differ materially from our current expectations. Please.

Clare Trachtman: Please refer to today's press release and our SEC filings for more details 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 Baxter's 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 along with 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?

Clare Trackman: Please refer to today's press release, and our SEC filings for more detail concerning factors that could cause actual results to differ materially.

Clare Trackman: In addition on today's call non-GAAP financial measures will be used to help investors understand baxter's ongoing business performance.

Joe: A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation, along with 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.

Jos E. Almeida: Thank you, Clare, and good morning, everyone. We appreciate you taking the time to join us. I will begin with a brief overview of Baxter's performance for the quarter and the year. After that, I will review our progress against the transformational actions we laid out for you just over a year ago, including the planned separation of our kidney care business. I will then turn it over to Joel Grade, who will walk through our results and outlook in more detail. Finally, we will open it up to your questions.

Joe: Thank you Glenn and good morning, everyone. We appreciate you taking the time to join US I will begin with a brief overview of <unk> performance for the quarter and the ear.

Joe: After this we will review our progress against the transformational actions, we laid out for you would just over a year ago, including the planned separation of our kidney care business.

Joe: Ill turn it over to Joe Grady.

Joel T. Grade: Walk through our results and outlook in more detail. Finally, we will open it up for your questions. As you saw this morning Baxter reported strong performance for the fourth quarter of 2023 with top line sales exceeding our projections in bottom line results coming in at a high end of our guidance range as a reminder, continue.

Jos E. Almeida: As you saw this morning, Baxter reported strong performance for the fourth quarter of 2023, with top-line sales exceeding our projections and bottom-line results coming in at the high end of our guidance range. As a reminder, continuing operations exclude the impact of our biopharma solutions business, which we divested at the close of the third quarter. Sales from continuing operations rose 4% on a reported basis, ahead of our outlook of 1 to 2% growth. On a constant current basis, sales increased 3%, also ahead of our guidance, which projected growth of approximately 1%. Strength in the Quarter was broad-based, with year-over-year growth in healthcare systems and technologies, medical products and therapies, and pharmaceuticals, which was slightly offset by an expected decline in kidney care. Relative to expectations, both of our chronic therapy and drug compounding divisions reported better-than-expected sales. On the bottom line, adjusted earnings per share from continual operations came in at $0.88, at the top end of our prior guidance range of $0.85 to $0.88.

<unk> operations and exclude the impact of our Biopharma solutions business, which we divested at the close of the third quarter.

Joel T. Grade: Sales from continuing operations rose, 4% on a reported basis ahead of our outlook of 1% to 2% growth on a constant currency basis sales increased 3% also ahead of our guidance, which projected a growth of approximately 1% strength in the quarter was broad based with year over year.

Joel T. Grade: Growth in the health care systems, and technologist medical products and therapies in pharmaceuticals, which was slightly offset by an expected decline in kidney care.

Joel T. Grade: Relative to expectations, both of our chronic therapies and drug component divisions reported better than expected sales on the bottom line adjusted earnings per share from continue operations came in at 88 cents.

End of our prior guidance range of $85 to 88.

Jos E. Almeida: Our fourth quarter results further reinforce our building momentum. In 2023, we focused on consistently meeting and or exceeding our financial outlook, particularly in light of the significant supply chain and macroenvironmental challenges we encountered during 2022. As a testament to this focus, over the course of 2023, we were able to deliver sequential improvement every quarter, and we believe this performance provides us with a solid foundation to build off in 2024. Turning to the four-year sales from continuing operations of $14.8 billion, we advanced 2% on a reported basis and 3% on a constant currency basis, driven by sales growth for all of our segments at constant currency rates. First, looking at the constant currency sales growth in the segments set to comprise our future Baxter portfolio. Following the planned kidney care separation, sales in health care systems and technologies were up 7% in the fourth quarter and 3% for the year. Medical products and therapy sales rose 4% in both the quarter and for the year.

Joel T. Grade: Our fourth quarter results further reinforce our building momentum in 2023, we focused on consistently meeting or exceeding our financial outlook, particularly in light of the significant supply chain and macro environmental challenges we encountered during 2022.

Joel T. Grade: As a testament to this focus over the course of 2023, we were able to deliver sequential improvement every quarter and we believe this performance provides us with a solid foundation to build off in 2024.

Joel T. Grade: Turning to the full year sales from continuing operations of $14 $8 billion at fast, 2% on a reported basis and 3% on a constant currency basis, driven by sales growth all of our segments at constant currency rates.

Joel T. Grade: Looking at the constant currency sales growth in the segments set to comprise our future Baxter portfolio. Following the planned kidney care separation sales in health care systems and technologies were up 7% in the fourth quarter and 3% for the year medical products at therapy sales.

Joel T. Grade: <unk> rose, 4% in both the quarter and for the year and sales in pharmaceuticals were up 7% for both the quarter and a year performance. In these segments was fueled by strong execution across our commercial and manufacturing teams new product launches increased availability of electromechanical.

Jos E. Almeida: And sales in pharmaceuticals were up 7% for both the quarter and the year. Performance in these segments was fueled by strong execution across our commercial and manufacturing teams. New product launches increased the availability of electromechanical components in a more stable supply chain and macroeconomic environment relative to the significant volatility experienced last year. With respect to hospital capital spending, while we still believe there may be pockets of softer spending, we are encouraged by the sequential improvement we experienced every quarter in 2023 within our Care and Connectivity Solutions division. Our kidney care segment, which will be called ventive post-separation, declined 1% in the quarter and grew 1% for the year at a constant rate.

Joel T. Grade: Nickel component and a more stable supply chain and macroeconomic environment relative to the significant volatility experienced last year.

Joel T. Grade: With respect to hospital capital spending while we still believe there may be pockets of softer spending we are encouraged by this question improvement we experienced every quarter in 2023 within our care and connectivity solutions Division.

Joel T. Grade: Kidney care segment, which will be called Ventas post separation declined 1% in the quarter and grew 1% for the year.

Joel T. Grade: <unk> rates strong growth in acute therapies was offset by slight growth in chronic therapies, reflecting a difficult year over year comparison due to certain discrete items that benefited sales in the prior year as well as lower sales in China due to the impact of.

Jos E. Almeida: Strong growth in acute therapies was offset by flat growth in chronic therapies, reflecting a difficult year-over-year comparison due to certain discrete items that benefited sales in the prior year, as well as lower sales in China due to the impact of government-based procurement initiatives and the lower patient census due to the pandemic. However, the underlying state of the kidney care business continues to improve, and the momentum we are building is evident. Among key indicators, we are seeing renewed growth in the peritoneal dialysis patient population following the earlier impact of pandemic-driven mortality issues.

Joel T. Grade: <unk> base procurement initiatives and the lower patient census, due to the pandemic.

Joel T. Grade: Underlying state of the kidney care business continues to improve and the momentum. We are building is evident among key indicators, we're seeing renewed growth in the peritoneal dialysis patient population following the earlier impact of pandemic driven mortality issues always.

Jos E. Almeida: Our strategic rationale and hypothesis for an independent kidney care business remain as strong as ever. Our team is executing and gearing up for a successful separation this year. Given overall business performance and environmental dynamics, I'm optimistic as we look ahead to the prospects for both Baxter Inventive as separate entities. Our solid financial performance was achieved in parallel with meaningful progress against the strategic priorities we announced at OPEN 2023. We kicked off the year with an urgency to rethink both the scope and the velocity of our transformation. Since then, our team has delivered, executing on a range of goals to position a separated Baxter Inventive for a new era of enhanced patient and shareholder impact, enabled by heightened strategic clarity, operational efficiency, and innovation. We realigned our businesses into newly streamlined, simplified operating models based on globally integrated business segments.

Joel T. Grade: <unk> rationale a hypothesis.

Joel T. Grade: Independent kidney care business remains as strong as ever our team is executing and gearing up for a successful separation this year.

Joel T. Grade: Given overall business performance and environmental dynamics.

Joel T. Grade: <unk> optimistic as we look ahead to the prospects for both Baxter and Vantiv as separate entities, our solid financial performance was achieved in parallel with meaningful progress against the strategic priorities, we announced to open in 2023, we kicked off the year with urgency.

Joel T. Grade: To rethink both the scope and velocity of our transformation. Since then our team delivered executing on a range of goals to position a separated Baxter inventive for a new era of enhanced patient and shareholder impact enabled by heightened strategic clarity opt.

Joel T. Grade: <unk> efficiency and innovation, we realigned our businesses into newly streamlined simplified operating model based on globally integrated business segments. Each segment is led by a seasoned and knowledgeable executive who has profit and loss accountability inclusive of <unk>.

Jos E. Almeida: Each segment is led by a seasoned and knowledgeable executive who has profit and loss accountability inclusive of dedicated commercial, research and development, manufacturing, supply chain, and functional teams. We are already seeing the benefits of improved line of sight to our customers and greater agility to recognize and capture growth opportunities. We completed the divestiture of our biopharma solutions business at the close of Q3, which further allowed us to streamline our strategic focus on our core business. We are in the process of utilizing the after-tax proceeds of approximately $3.7 billion to pay down debt in line with our state capital allocation priorities, including $2.8 billion of repayments in the fourth quarter.

Joel T. Grade: Medicaid or commercial research and development manufacturing supply chain and functional teams, we have already seen the benefits of improved line of sight to our customers and greater agility to recognize and capturing growth opportunities. We completed the divestiture of our Biopharma solutions business at the close of Q3, which.

Joel T. Grade: Further allowed us to streamline our strategic focus on our core businesses.

Joel T. Grade: We are in the process of utilizing the after tax proceeds of approximately $3 $7 billion to pay down debt in line with our stated capital allocation priorities, including $2 billion of repayments in the fourth quarter.

Jos E. Almeida: Finally, we continue to make progress towards separating inventive out of Baxter. As we have consistently stated, we believe the separation will ultimately empower both companies to pursue their own unique strategic and investment priorities. Many of you had the opportunity to meet the designated Spentev CEO, Chris Doth, at the JPMorgan Conference last month.

Joel T. Grade: Finally, we continue to make progress towards separating incentive at Baxter.

Joel T. Grade: We have consistently stated we believe the separation will ultimately empower both companies to pursue their own unique strategic and investment priorities. Many of you had the opportunity to meet the zig Natus Vantiv CEO Christophe at the Jpmorgan Conference last month, Chris.

Jos E. Almeida: Chris has been hard at work building out his organization, meeting customers, and setting near-term and long-term strategies. Among recent developments, Chris has onboarded Matt Harbaugh as the designated vent of CFO. Many of you may know Matt from his days as CFO at Nuvasiv. Meanwhile, we continue to hit key separation milestones across operational, legal, regulatory, supply chain, and IT domains. In summary, 2023 was a year of rebuilding and renewing our momentum. We made significant progress on an ambitious slate of strategic initiatives coupled with solid financial performance while never losing focus on our foundational commitments to our customers and patients. Additionally, we have created new potential to embrace more exciting opportunities in the future. I do not take the accomplishments of this past year for granted.

Joel T. Grade: Chris has been hard at work building, the Atkins organization meeting customers and setting near term and long term strategies. Among recent developments Chris has onboard it Matt Harbaugh is designated Vantiv CFO. Many of you may know, Matt from his days as CFO, what new phases.

Joel T. Grade: While we continue to hit key separation milestones across operational legal regulatory supply chain domains. In summary, 2023. It was a year of rebuilding and renewing our momentum we made significant progress on an ambitious later strategic initiatives, coupled with solid financial performance, while never losing focus on our foundational.

Joel T. Grade: Commitments to our customers and patients.

Joel T. Grade: Additionally, we have created a new potential to embrace more exciting opportunities to come I do not take the accomplishments of this past year for granted I want to thank and recognize all of the employees, whose hard work and commitment have helped us to achieve our objectives I have never been more impressed by what our team could achieve in the.

Jos E. Almeida: I want to thank and recognize all of the employees whose hard work and commitment helped us to achieve our objectives. I have never been more impressed by what a team can achieve in a single year, and that is why I'm so energized by our potential to seize on opportunities we have created together. Now we turn it over to Joel for a closer look at our fourth quarter and full year 2023 performance, as well as our 2024 outlook. Thanks, Joe, and good morning, everyone.

Joel T. Grade: A single year and that is why I'm, so energized by our potential to seize on opportunities. We have created to get there now I will turn it over to Joel for a closer look at our fourth quarter and full year 2023 performance as well as our 2020 outlook.

Joel: Thanks, Joe and good morning, everyone.

Joel T. Grade: I'm happy to be joining the call this morning to provide some additional details on Baxter's fourth quarter and full year 2023 financial performance, as well as commentary on our financial outlook for 2024. As Joe mentioned, we are pleased with our fourth quarter results, which represented another step forward in our ongoing business transformation. Fourth quarter 2023 global sales of $3.9 billion increased 4% on a reported basis and 3% on a constant currency basis and compared favorably to our previously issued guidance of 1-2% reported and approximately 1% constant currency. Outperformance of the quarter benefited from better than expected sales in many product categories and particularly in chronic therapies and drug compounds. As compared to the prior year period, we reported solid quarterly growth in healthcare systems and technologies, pharmaceuticals, and Medical Products and Therapies.

Joel: I'm happy to be joining the call. This morning to provide some additional details on baxter's fourth quarter and full year 2023 financial performance.

Joel: As well as commentary on our financial outlook for 2024.

Joel: As Joe mentioned, we are pleased with our fourth quarter results, which represented another step forward in our ongoing business transformation.

Joel: Fourth quarter 2023, global sales of $3 9 billion.

Joel T. Grade: Increased 4% on a reported basis and 3% on a constant currency basis.

Joel T. Grade: And compared favorably to our previously issued guidance of 1% to 2% reported and approximately 1% constant currency.

Joel T. Grade: Outperformance in the quarter benefited from better than expected sales in many product categories, and particularly in chronic therapies and drug compounding.

Joel T. Grade: As compared to the prior year period, we reported solid quarterly growth and health care systems and technologies farmer.

Joel T. Grade: <unk> pharmaceuticals, and medical products and therapies.

Joel T. Grade: And collectively sales for these three businesses, which will comprise Baxter post the separation increased approximately 5%.

Joel T. Grade: And collectively, sales for these three businesses, which will comprise Baxter post the separation, increased approximately 5%. As expected, kidney care sales declined slightly in the quarter due to the factors Joe mentioned earlier. On the bottom line, adjusted earnings totaled 88 cents per share, increasing 13% versus the prior year period. These results reflect the ongoing operational improvements we are recognizing, both commercially as well as within our supply chain network, as that team successfully executes on its margin improvement program. Lower interest expense and a benefit from foreign exchange also contributed favorably to the quarter, partially offset by the impact of a higher tax rate compared to the prior year. Adjusted earnings per share for the quarter came in at the high end of our expected range of $0.85 to $0.88 per share, primarily driven by better sales and operational performance.

Joel T. Grade: As expected kidney care sales declined slightly in the quarter due to the factors Joe mentioned earlier.

Joel T. Grade: On the bottom line adjusted earnings totaled 88 cents per share increasing 13% versus the prior year period.

Joel T. Grade: These results reflect the ongoing operational improvements, we're recognizing both commercially as well as within our supply chain network.

Joel T. Grade: As that team successfully executes on its margin improvement programs.

Joel T. Grade: Lower interest expense and a benefit from foreign exchange also contributed favorably to the quarter, partially offset by the impact of a higher tax rate compared to the prior year.

Joel T. Grade: Adjusted earnings per share for the quarter came in at the high end of our expected range of 85 to 88 per share.

Joel T. Grade: Primarily driven by better sales and operational performance.

Joel T. Grade: Now I'll walk through performance by our reportable segments. Commentary regarding sales growth will reflect growth at constant currency rates. Sales in our medical products and therapy segments were $1.3 billion, increasing 4%. Full year 2023 sales totaled $5 billion, also increasing 4%. Within Medical Products and Therapies, fourth-quarter sales from our Infusion Therapies and Technologies Division totaled $1 billion and increased 4%. Sales in the quarter benefited from strength in our IV solutions portfolio, particularly outside the United States, as well as solid performance in our infusion system portfolio. Sales for advanced surgery totaled $278 million and grew 6%, coming in ahead of expectations and reflecting strong growth internationally. For our Healthcare Systems and Technologies, or HST, segment, sales in the quarter were $795 million and increased 7%.

Speaker Change: Now I'll walk through performance by our reportable segments.

Speaker Change: Commentary regarding sales growth will reflect growth at constant currency rates.

Speaker Change: Yeah.

Speaker Change: Sales in our medical products and therapies segments were $1 3 billion.

Speaker Change: Increasing 4%.

Speaker Change: Full year 2023 sales totaled $5 billion.

Speaker Change: Also advancing 4%.

Speaker Change: Within medical products and therapies fourth quarter sales from our infusion therapies and technologies division totaled $1 billion and increased 4%.

Speaker Change: Sales in the quarter benefited from strength in our IV solutions portfolio, particularly outside the United States as well as solid performance in our infusion system portfolio.

Speaker Change: Sales for advanced surgery totaled $278 million and grew 6% coming in ahead of expectations and reflecting strong growth internationally.

Speaker Change: For our healthcare systems and technologies or HST segment.

Speaker Change: Sales in the quarter were $795 million and increased 7%.

Joel T. Grade: Full year 2023 sales totaled $3 billion, advancing 3%. Within the HST segment, sales in our Care and Connectivity Solutions, or CCS, division were $492 million, increasing 11%. Performance in the quarter benefited from double-digit growth in all key product categories within the division, including our care communications, Surgical Solutions, and Patient Support Systems product offering.

Speaker Change: Full year 2023 sales totaled $3 billion.

Speaker Change: Advancing 3%.

Speaker Change: Within the <unk> segment sales in our care and connectivity solutions or Ccs division were $492 million.

Speaker Change: Increasing 11%.

Speaker Change: Performance in the quarter benefited from double digit growth in all key product categories within the division, including our care communications surgical solutions and patient support systems product offerings.

Joel T. Grade: Growth in the quarter was partially offset by lower contribution from rental revenue. Fourth quarter United States orders within CCS continued to improve sequentially, but notably also grew on a year-over-year basis for the first time in 2023. While we are encouraged by the improvement in capital spending we've seen from our U.S. hospital customers, we continue to believe there may still be select pockets of cautiousness in the marketplace. Frontline care sales in the quarter were $303 million, increasing 2%.

Speaker Change: Growth in the quarter was partially offset by lower contribution from rental revenues.

Speaker Change: Fourth quarter, United States orders within Ccs continued to improve sequentially, but notably also grew on a year over year basis for the first time in 2023.

Speaker Change: While we are encouraged by the improvement in capital spending we've seen from our U S Hospital customers.

Speaker Change: We continue to believe there may still be select pockets of cautiousness in the marketplace.

Speaker Change: Frontline care sales in the quarter were $303 million increasing 2%.

Joel T. Grade: Given the improvements in electromechanical component availability over the course of 2023, we were able to successfully address our elevated backlog and exit the year at more normalized levels. Sales in our pharmaceutical segments were $596 million, increasing 7%. For the full year, sales are $2.2 billion, also advancing 7%. Performance in the quarter reflected double-digit growth in our U.S. injectables portfolio driven by new product launches, as well as continued strong demand for our services within our drug compounding portfolio internationally. Other sales, which represent sales not allocated to a segment and primarily include sales of products and services provided directly through certain of our manufacturing facilities, were $18 million and declined 58% during the This lower level of sales reflects reduced demand for certain contract manufacturing volumes and the termination of a royalty arrangement.

Speaker Change: Given the improvements in electro mechanical component availability over the course of 2023.

Speaker Change: We were able to successfully address our elevated backlog and exited the year at more normalized levels.

Speaker Change: Sales in our pharmaceutical segment were $596 million.

Speaker Change: Increasing 7%.

Speaker Change: For the full year sales were $2 2 billion also advancing 7%.

Speaker Change: Performance in the quarter reflected double digit growth in our U S. Injectables portfolio, driven by new product launches as well as continued strong demand for our services within our drug compounding portfolio internationally.

Speaker Change: Other sales, which represent sales not allocated to the segment and.

Speaker Change: And primarily include sales of products and services provide a directly through certain of our manufacturing facilities.

Speaker Change: The $18 million.

Speaker Change: And declined 58% during the quarter in line with our expectations.

Speaker Change: This lower level of sales reflects reduced demand for certain contract manufacturing volumes and the termination of our royalty arrangements.

Joel T. Grade: Moving on to kidney care, sales in the quarter were $1.2 billion and declined 1%. Full year 2023 sales totaled $4.5 billion and increased 1%. Within kidney care, global sales for chronic therapies were $950 million, declining 3%, though as mentioned earlier, came in better than expected. However, sales growth in the quarter was impacted by a difficult comparison to the prior year period, which included certain discrete items in the U.S. that totaled approximately $25 million. Finally, performance in chronic therapies continues to be impacted by lower sales in China due to certain government-based procurement initiatives and a lower patient census due to the pandemic. We estimate that collectively, these country-specific factors negatively impacted sales by approximately $35 million in the quarter.

Speaker Change: Moving on to kidney care sales in the quarter were $1 $2 billion and declined 1%.

Speaker Change: Full year 2023 sales totaled $4 5 billion.

Speaker Change: <unk> increased 1%.

Speaker Change: Within kidney care global sales for chronic therapies were $950 million declining 3%, though as mentioned earlier came in better than expected.

Speaker Change: Sales growth in the quarter was impacted by a difficult comparison to the prior year period.

Speaker Change: Which included certain discrete items in the U S that totaled approximately $25 million.

Speaker Change: Finally performance in chronic therapies continues to be impacted by lower sales in China due.

Speaker Change: Due to certain government based procurement initiatives and a lower patient census, due to the pandemic.

Speaker Change: We estimate that collectively these country specific factors negatively impacted sales by approximately $35 million in the quarter.

Joel T. Grade: Sales in our acute therapies business were $206 million, representing growth of 6% with strength across most regions, including double-digit growth in the United States, where we've now rebased this business following the pandemic-related benefits we previously experienced. Now moving through the rest of the P&L. Our adjusted gross margin totaled 42% and represented an increase of 80 basis points over the prior year.

Speaker Change: Sales in our acute therapies business were $206 million.

Speaker Change: Representing growth of 6% with strength across most regions, including double digit growth in the United States, where we've now rebase. This business following the pandemic related benefits, we previously experienced.

Speaker Change: Now moving through the rest of the P&L.

Speaker Change: Our adjusted gross margin totaled 42% and represented an increase of 80 basis points over the prior year.

Joel T. Grade: The year-over-year improvement in gross margin primarily reflects the stabilization of macroeconomic factors and inflationary pressures that previously contributed to higher costs for raw materials, overhead, and labor that impacted our margins earlier in the year. Margin improvement in the Quarter also benefited from pricing initiatives in select markets and ongoing margin improvement programs in our integrated supply chain network. Performance for the quarter was in line with our expectations, as top-line outperformance in the quarter was driven by lower margin divisions, which drove a slightly negative gross profit mix in the quarter. Adjusted SG&A totaled $829 million, or 21.3 as a percentage of sales, an increase of 20 basis points versus the prior year period.

Speaker Change: The year over year improvement in gross margin, primarily reflects the stabilization of macroeconomic factors and inflationary pressures that previously contributed to higher costs for raw materials.

Speaker Change: Overhead and labor that impacted our margins earlier in the year.

Speaker Change: Margin improvement in the quarter also benefited from pricing initiatives in select markets and ongoing margin improvement programs and our integrated supply chain network.

Speaker Change: Performance for the quarter was in line with our expectations as topline outperformance in the quarter was driven by lower margin divisions, which drove a slightly negative gross profit mix in the quarter.

Speaker Change: Adjusted SG&A totaled $829 million.

Speaker Change: Or 21, three as a percentage of sales an increase of 20 basis points versus the prior year period.

Joel T. Grade: Performance in the Quarter benefited from our ongoing transformation initiatives to enhance operational efficiencies offset by higher bonus accruals under our Annual Employee Incentive Compensation Plan compared to the prior year and select investments in sales and marketing initiatives. Adjusted research and development spending in the quarter totaled 172 million dollars and represented 4.4 as a percentage of sales, increasing 20 basis points versus the prior year. We have ramped up our R&D efforts, particularly increasing our investments and advancing new products across the portfolio. Like SG&A, R&D expenses include the impact of higher employee incentive accruals as compared to the prior year period. These factors resulted in an adjusted operating margin of 16.2%, an increase of 30 basis points. Overall, we are very pleased with the second half margin expansion we were able to realize, with operating margins improving approximately 300 basis points in the second half of the year as compared to the first half of 2023.

Speaker Change: Performance in the quarter benefited from our ongoing transformation initiatives to enhance operational efficiencies offset by higher bonus accruals under our annual employee incentive compensation plans compared to the prior year.

Speaker Change: And select investments in sales and marketing initiatives.

Speaker Change: Adjusted research and development spending in the quarter totaled $172 million.

Speaker Change: And represented $4 four as a percentage of sales, increasing 20 basis points versus the prior year.

Speaker Change: We have ramped up our R&D efforts, particularly increasing our investments in advancing new products across the portfolio and so I guess G&A.

Speaker Change: R&D expenses include the impact of higher employee incentive accruals as compared to the prior year period.

Speaker Change: Yeah.

Speaker Change: These factors resulted in adjusted operating margin of 16, 2% an increase of 30 basis points.

Speaker Change: Overall, we are very pleased with the second half margin expansion, we were able to realize with operating margins improving approximately 300 basis points in the second half of the year as compared to the first half of 2023.

Speaker Change: Yes.

Joel T. Grade: Net interest expense totaled $73 million in the quarter, a decrease of $44 million versus the prior year and down $55 million sequentially, driven by debt repayment of approximately $2.8 billion associated with the utilization of the proceeds from our BPS divestiture. We plan to continue to repay debt in 2024 consistent with our stated capital allocation priorities. Adjusted other non-operating income totaled $11 million in the quarter, compared to an expense of $11 million in the prior year period. The year-over-year improvement was largely due to lower foreign exchange losses incurred as compared to the prior year period. The adjusted tax rate in the quarter was 21.0% compared to 14.6% in the prior year period. The year-over-year increase is primarily driven by statute expirations on certain tax positions benefiting the prior year period. The tax rate in the quarter came in higher than expected, primarily driven by changes in geographic earnings.

Speaker Change: Net interest expense totaled $73 million in the quarter, a decrease of $44 million versus the prior year.

Speaker Change: And down $55 million sequentially, driven by debt repayment of approximately $2 8 billion.

Speaker Change: Associated with the utilization of the proceeds from our bps divestiture.

Speaker Change: We plan to continue to repay debt in 2024, consistent with our stated capital allocation priorities.

Speaker Change: Adjusted other non operating income totaled $11 million in the quarter compared to an expense of $11 million in the prior year period.

Speaker Change: Year over year improvement was largely due to lower foreign exchange losses incurred as compared to the prior year period.

Speaker Change: The adjusted tax rate in the quarter was 21.0% compared to 14, 6% in the prior year period.

Speaker Change: The year over year increase was primarily driven by statute expirations on certain tax positions benefiting the prior year period.

Speaker Change: The tax rate in the quarter came in higher than expected, primarily driven by changes in geographic earnings mix.

Joel T. Grade: And, as previously mentioned, adjusted earnings totaled 88 cents and increased 13 percent versus the prior year, primarily driven by better than expected sales and operational efficiencies, as well as lower interest expense, partially offset by the tax rate in the quarter. For the full year, Baxter's adjusted earnings from continuing operations decreased 14% to $2.60 per diluted share. Reflecting the impact of higher costs of goods sold, driven primarily by the macro environmental factors we previously discussed. Greater Annual Employee Bonus accruals, as well as increased non-operating expenses. These factors were partially offset by our operational and supply chain savings initiatives. With respect to cash flow... We generated free cash flow for the year of over $1 billion from continuing operations, compared to $411 million in the prior year period. Going forward, cash flow generation, and in particular, improving our working capital metric, is a key priority both for me and the Baxter team.

Speaker Change: And as previously mentioned adjusted earnings totaled <unk> 88.

Speaker Change: And increased 13% versus the prior year, primarily driven by better than expected sales and operational efficiencies as well as lower interest expense, partially offset by the tax rate in the quarter.

Speaker Change: Okay.

Speaker Change: For the full year <unk> adjusted earnings from continuing operations decreased 14% to $2 60 per diluted share reflecting the.

Speaker Change: The impact of higher cost of goods sold driven primarily by the macro environmental factors. We've previously discussed.

Speaker Change: Greater annual employee bonus accruals as well as increased non operating expenses.

Speaker Change: Yes.

Speaker Change: These factors were partially offset by our operational and supply chain savings initiatives.

Speaker Change: With respect to cash flow, we generated free cash flow for the year of over $1 billion from continuing operations.

Speaker Change: Compared to $411 million in the prior year period.

Speaker Change: Going forward cash flow generation and in particular are improving our working capital metrics as a key priority both for me and the Baxter team.

Joel T. Grade: To close on our full year results, we were pleased with our operating performance through 2023, which reflected both consistent progress and building momentum. And it is important to note that our teams were able to achieve this performance while also making meaningful progress against our strategic initiatives, designed to enhance our future performance and drive incremental value for all stakeholders. We look forward to building on that positive momentum as we enter 2024. Let me conclude my remarks by discussing our outlook for the first quarter and full year 2024, including some key assumptions underpinning the guidance. For full year 2024, Baxter expects total sales growth of 2% on both reported and constant currency basis, as the impact from foreign exchange is currently expected to be minimal on a full year basis. Compton Currency Sales Guidance for the Full Year by Reportable Segments is as follows.

Speaker Change: To close on our full year results. We were pleased with our operating performance through 2023, which reflected both consistent progress and building momentum.

Speaker Change: And it is important to note that our teams were able to achieve this performance, while also making meaningful progress against our strategic initiatives.

Speaker Change: Designed to enhance our future performance and drive incremental value for all stakeholders.

Speaker Change: We look forward to building on that positive momentum as we enter 2024.

Speaker Change: Let me conclude my remarks by discussing our outlook for the first quarter and full year 2024, including some key assumptions underpinning the guidance.

Speaker Change: For full year 2020 for Baxter expects total sales growth of 2% on both reported and constant currency basis.

Speaker Change: As the impact from foreign exchange is currently expected to be minimal on a full year basis.

Speaker Change: Constant currency sales guidance for the full year by reportable segments is as follows.

Joel T. Grade: For medical products and therapies, we expect sales growth of 3% to 4%. Sales in our healthcare systems and technology segments are expected to increase approximately 3%. We expect pharmaceutical sales growth of 4% to 5%. Collectively, sales for these remaining Baxter businesses are expected to increase 3% to 4% in 2024. For kidney care, we expect sales growth to decline 1% to 2% as compared to 2023. Factors impacting year-over-year growth are primarily driven by select market and product exits in connection with our margin expansion initiatives for this segment, which we estimate will negatively impact sales by approximately $150 million. Additionally, the incremental impact from the ongoing government procurement initiatives in China is expected to total approximately $70 million in 2024.

Speaker Change: Yes.

Speaker Change: For medical products and therapies, we expect sales growth of 3% to 4%.

Speaker Change: Sales in our health care systems, and technology segments are expected to increase approximately 3%.

Speaker Change: We expect pharmaceutical sales growth of 4% to 5%.

Speaker Change: Collectively sales for these remaining Baxter businesses are expected to increase 3% to 4% in 2024.

Speaker Change: For kidney care, we expect sales growth to decline, 1% to 2% as compared to 2023.

Speaker Change: Yeah.

Speaker Change: Factors impacting year over year growth are primarily driven by select market and product exits in connection with our margin expansion initiatives for this segment, which we estimate will negatively impact sales by approximately $150 million.

Speaker Change: Additionally, the incremental impact from the ongoing government procurement initiatives in China is expected to total approximately $70 million in 2024.

Joel T. Grade: Now turning to our outlook for other P&L line items, we expect adjusted operating margin to increase by at least 50 basis points in 2024. We expect our non-operating expenses, which include net interest expense and other income and expense, to total approximately $350 million in aggregate during 2024. We anticipate a full-year adjusted tax rate between 22.0% and 22.5%, which reflects an approximate 100 basis point impact on the 2024 tax rate from the implementation of Pillar 2. We expect our diluted share count to increase slightly and average 510 million shares for the year. Based on all these factors, we anticipate full-year adjusted earnings excluding special items of $2.85 to $2.95 per diluted share.

Speaker Change: Now turning to our outlook for other P&L line items.

Speaker Change: We expect adjusted operating margin to increase by at least 50 basis points in 2024.

Speaker Change: We expect our non operating expenses, which include net interest expense and other income and expense.

Speaker Change: To total approximately $350 million in aggregate during 2024.

Speaker Change: We anticipate a full year adjusted tax rate between 22.0% and 22, 5%, which reflects an approximate 100 basis point impact to the 2020 for tax rate from the implementation of pillar two.

Speaker Change: Yes.

Speaker Change: We expect our diluted share count to increase slightly and average 510 million shares for the year.

Speaker Change: Based on all of these factors, we anticipate full year adjusted earnings excluding special items of $2 85.

Speaker Change: To $2 95 per diluted share.

Operator: Specific to the first quarter of 2024, we expect global sales growth of approximately 1% on a reported basis and 1 to 2% on a constant currency basis. Additionally, we expect adjusted earnings, excluding special items, of $0.59 to $0.62 per diluted share. With that, we can now open up the call for Q&A. Thank you. We will now begin the question and answer session. If you have a question, please press star one on your touchtone phone. If you wish to remove yourself from the queue, press star one again. If you are using a speaker...

Speaker Change: Specific to the first quarter of 2024, we expect global sales growth of approximately 1% on a reported basis and 1% to 2% on a constant currency basis.

Speaker Change: And we expect adjusted earnings excluding special items of 59 to.

Speaker Change: To <unk> 62 per diluted share.

Speaker Change: With that we can now open up the call for Q&A.

Speaker Change: Thank you we will now begin the question and answer session. If you have a question. Please press star one on your Touchtone phone.

Speaker Change: We wish to remove yourself from the queue Press star one again.

Operator: Please lift the handset to ask your question. So that we may be respectful of everyone's time, please limit your comments to one question and one follow-up question, if necessary. We appreciate everyone's patience and would like to provide as many of you as possible with the opportunity to ask a question. We will pause for a moment while the list is being compiled. I would like to remind participants that this call is being recorded and a digital replay will be available on the Baxter International website for 60 days at www.baxter.com. Our first question comes from Travis Steed of Bank of America Securities. Your question, please. Hey, good morning, everybody, and thanks for taking the time to ask me this question. I'll go ahead and ask both of mine up front.

Speaker Change: We're using a speaker.

Speaker Change: Please lift the handset to ask your question. So that we may be full of everyone's time. Please limit your comments to one question with one follow up question if necessary.

Speaker Change: Great everyone's patience and would like to provide as many of you as possible the opportunity to ask a question we will pause for a moment, while the list is being compiled.

Speaker Change: I would like to remind participants that this call is being recorded and a digital replay will be available on the Baxter International website for 60 days at Www Dot Baxter Dot com, our first quarter.

Speaker Change: Thanks from Travis Steed of Bank of America Securities. Your question. Please.

Travis Steed: Hey, good morning, everybody and thanks for taking the question I'll go ahead and up both of mine upfront.

Travis Steed: One on the revenue side.

Travis Steed: You talked about sequential improvement every quarter and when you look at the 2024 revenue got into 2%, maybe maybe think through like some of the areas that could improve over the course of the year, where there could be some conservatism built in to the 24 and how to think about the cadence of the year and then second question really is on margins you think about the 50 basis point margin guidance.

Joel T. Grade: One on the revenue side, you talked about sequential improvement every quarter, and when you look at the 2024 revenue guidance of 2%, maybe think through some of the areas that could improve over the course of the year, where there could be some conservatism built in to the forecast, and how to think about the cadence of the year. And the second question really is on margins. What do you think about the 50 basis point margin guidance? Curious what some of the underlying assumptions are on FX and inflationary pressures and stuff like that. Thanks a lot. Hi Travis, it's Joel.

Travis Steed: Curious about some of the underlying assumptions are on FX and inflationary pressures in and stuff like that thanks a lot.

Speaker Change: Hi, Jeff Thanks for the call.

Speaker Change: I guess I'd say a couple of things first of all we are we feel very good about the momentum in our business I think we saw.

Jeff: Saw a solid fourth quarter, we are pleased with some of the results that we have heading into this year.

Jeff: And I think the revenue guidance that Youll see youll see things.

Jeff: Think about overall the business outside of kidney.

Jeff: Is growing 3% to 4% that we have as we've talked about our forecast with kidney itself.

Jeff: Think about that in the scf above there is about $150 million of.

Joel T. Grade: Thanks for the call. So I guess I'd say a couple things. First of all, we feel very good about the momentum in our business. I think we had a, as you saw, a solid fourth quarter.

Jeff: A purposeful business that we're actually exiting products.

Jeff: <unk> markets and so if you actually factor that into that equation again, we're up year over that 3% number.

Jeff: For the year, which I think is great. If you think about the full year guidance itself couple some of that strong sales performance with the fact that we're actually expanding our margins over 50 basis points.

Joel T. Grade: We are pleased with some of the results that we have heading into this year. And I think the revenue guidance that you see, you know, if you think about the overall business outside of kidney, is growing three to four percent as we talk about our forecast. With kidney itself...

Jeff: And we're actually leading to double digit EPS growth I said, we feel really good about that and on the margin side that you asked the question you asked.

Jeff: I think the vein puts and takes in that the main part of the operational cost improvements.

Joel T. Grade: If you think about that, we actually have about $150 million of purposeful business that we're actually exiting products, we're exiting markets. So if you actually factor that into that equation, again, we're up, you know, over that 3% number for the year, which I think is great. If you think about the four-year guidance itself, couple some of that strong sales performance with the fact that we're actually expanding our margins by over 50 basis points, and we're actually leading double-digit EPS growth. I said, we feel really good about that. Now, on the margin side, she asked the question, you know, I think the main puts and takes in that, the main part of it, is the operational cost improvement. In that, there's a big piece of that.

Jeff: And that there is a big piece of that from also pricing from volume.

Jeff: And again, so I think some of the things that you have in there.

Jeff: Our sublease assumptions on the margins I think in all of those areas. We feel good about the opportunities again to build on momentum. We've had if you remember in the last quarter. Our HFC business. We're very pleased with the momentum we had from a sales perspective in Q4, and we do anticipate that heading into the year as well so again lots of good stuff.

Speaker Change: There, but I'll pause there for any other points.

Bob: Hey, Ravi I'll, just I'll add sorry, Travis I'll add a little bit here that was my Bob So in terms of the cadence I would say.

Bob: If we think about this the shape of the P&L I think sale.

Bob: We will be relatively youll see some slight acceleration in the second half of the year, but in terms of margin expansion you are going to see first half margin expansion more outside than you will see in the second half obviously, just given the comp and similarly, you will see that on earnings growth earnings growth in the first half of the year will be very strong.

Joel T. Grade: Also, pricing from volume. And again, so I think some of the things that you have in there are some of the key assumptions about the margins. I think in all those areas, we feel good about the opportunities again to build on the momentum we've had. If you remember in the last quarter, our HST... We're very pleased with the momentum we had from a sales perspective in Q4, and we do anticipate that heading into the year as well. So, again, lots of good stuff there, but I'll pause there for any other points that you didn't want to make. Yeah, and Robbie, I'll just, I'll add in a little, or sorry, Travis, I'll add in a little bit here. That was my fault.

Bob: Your question on FX Travis.

Bob: This negative on margins for the year about 40 basis points of an impact on our operating margins on a year over year basis.

Speaker Change: Great. Thanks, a lot clearer and everybody.

Speaker Change: Great.

Speaker Change: Sure.

Speaker Change: Robbie Marcus of Jpmorgan has a question. Please state your question.

Speaker Change: Thanks. This is Allen on for Robbie I had a question on some of the strength that we saw in fourth quarter and it's a little bit of a softer first quarter guide was there any pull forward of sales into this quarter you talked about how you recover it in the backlog. So I expect some of that drove the outsized strength, but also just.

Clare Trachtman: So, in terms of the cadence, I would say, you know, if we think about just the shape of the P&L, I think sales will be relatively flat, you'll see some slight acceleration in the second half of the year. But in terms of margin expansion, you are going to see first-half margin expansion more outside than you will see in the second half, obviously, just given the comps. And similarly, you'll see that on earnings growth. So, earnings growth in the first half of the year will be very strong. Your question on FX, Travis, was that FX is negative on margins for the year, about 40 basis points of an impact on our operating margins on a year over year basis. Thanks a lot, Clare and Varun.

Allen: Looking at first quarter, given what we view as an easy comp why arent you able to put up a better growth number to start off the year, how much of that is conservatism versus realism.

Speaker Change: Yes, so what I would say is probably one of the biggest drivers in terms of the quarterly cadence is within our HFC business, where sales to ramp over the course of the year. So very similar to what we saw in 2023, you will see our HFC business growth accelerated growth in the second half of the year as compared to the first half.

Speaker Change: So I think that's probably one of the bigger drivers in terms of the first quarter guidance and and also.

Speaker Change: We are continuing to see momentum from 2023 into 2024.

Speaker Change: So I feel.

Clare Trachtman: Great. Thank you. Robbie Marcus of J.P. Morgan has a question. Please state your question. Thanks. This is Alan speaking on behalf of Robbie.

Speaker Change: The optimistic about about the momentum that we got in Q4 into go into Q1 of course, we look at many different factors we are guiding.

Clare Trachtman: I had a question on some of the strengths that we saw in the fourth quarter and, you know, the little bit of the softer first quarter guide. Was there any pull forward of sales into this quarter? You know, you talked about how you recovered some of the backlogs. I expect some of that drove the outside strength, but also, just looking at the first quarter, given what we view as an easy comp, why aren't you, you know, able to put up a better growth number to start off the year? How much of that is conservatism versus realism?

Speaker Change: But I can tell you is at.

Speaker Change: Based on on the market.

Speaker Change: Growth.

Speaker Change: The demand that we're seeing we feel very comfortable with with Q1 and also we have always a crescendo throughout the year, whereas we have product launches, we have 10 molecules launching in pharmaceutical.

Speaker Change: Starting this quarter that we see ramping now towards Q2, Q3, and Q4 and also there are some very important accounts that we are still closing on for the rest of the year that will also boost our ability to to to do well.

Clare Trachtman: Yeah, so what I would say is probably one of the biggest drivers in terms of the quarterly cadence is within our HST business, where sales ramp up over the course of the year. So, very similar to what we saw in 2023, you will see our HST business have growth, accelerated growth in the second half of the year as compared to the first half of the year. So I think that's probably one of the bigger drivers in terms of the first quarter guidance. And also, we are continuing to see momentum from 2023 into 2024. So I feel cautiously optimistic about the momentum that we got in Q4 going into Q1. Of course, we look at many different factors when we are guiding. But I can tell you that based on market growth, some of the demand that we're seeing, we feel very comfortable with Q1. And also, we always have a crescendo throughout the year.

Speaker Change: In 2024.

Speaker Change: Got it and then if could slip in a quick one you talked about the capital equipment environment, continuing to improve some pockets of weakness.

Speaker Change: Are you assuming for 2024 in the guidance.

Speaker Change: Are you expecting continued a little bit the pockets of weakness are you having that basically normalize over the course of the year. Thank you.

Speaker Change: Most of our assumptions are large system medium to large systems continued to improve we can see that in <unk>.

Speaker Change: We're going to see that slightly.

Speaker Change: Slightly in Q1, but going into Q2, Q3 and Q4.

Speaker Change: There are pockets of softness in capital like to always are primarily smaller systems. You remember interest rates are still very high.

Speaker Change: And does affect the smaller systems, but for the majority of our customers. We're starting to see a recovery in capped out where we feel feel really comfortable with 2024 that debuts.

Clare Trachtman: We have product launches. We have 10 molecules launching in pharmaceuticals this quarter.

Speaker Change: That is recovering completely from what we saw in the beginning of the end of 'twenty two into 'twenty three.

Clare Trachtman: We see ramping now throughout Q2, Q3, and Q4. And also, there are some very important accounts that we are still closing on for the rest of the year that will also boost our ability to do well in 2025. Got it. And then, if I could slip in a quick one.

Speaker Change: Yes.

Speaker Change: To add on to that at similarly, I think we will see sequential improvement for capital orders within our Ccs business every quarter this year, leading to orders being up on a year over year basis, and as mentioned in our prepared remarks, we saw very similar trend kind of in 2023 as well and then in 2012.

Clare Trachtman: You know, you've talked about the capital equipment environment continuing to improve, you know, some pockets of weakness. What are you assuming for 2024 in the guidance? You know, are you expecting continued, you know, little bits of pockets of weakness, or are you having that basically normalized over the course of the year? Thank you.

Speaker Change: In the fourth quarter, we did see our orders up on a year over year basis. So we've been seeing this steady sequential improvement and so we're going to build on that momentum as we go into 2024.

Speaker Change: Yes.

Speaker Change: Matt <unk> of Barclays is on the line with a question. Please state your question.

Speaker Change: Okay.

Matt Miksic: Alright. Thanks, so much for taking the question can you hear me okay.

Matt Miksic: Yes, we can.

Speaker Change: Great. Thanks.

Matt: So congrats.

Clare Trachtman: Most of our assumptions are large systems; medium to large systems continue to improve. We can see that, and we're gonna see that, no, slightly in Q1, but going into Q2, Q3, and Q4. There are pockets of softness in capital, like always, primarily smaller systems.

Matt: Congrats on the.

Matt: Solid results here.

Jonathan: Hey, Jonathan.

Matt: In the wholesale business.

Jonathan: A question on the <unk>.

Jonathan: Seasonality of that business and also if you could maybe just.

Jonathan: Yes.

Jonathan: The extensive.

Clare Trachtman: You remember, interest rates are still very high, and those affect the smaller systems, but for the majority of our customers, we're starting to see a recovery in capital, and we feel really comfortable going into 2024, that that is recovering completely from what we saw at the beginning of and end of 22 into 24. Yeah, and Alan, just to add to that, similarly, I think we will see sequential improvement for capital orders within our CCS business every quarter this year, leading to orders being up on a year-over-year basis. And as mentioned in our prepared remarks, we saw a very similar trend kind of in 2023 as well, and then in the fourth quarter, we did see our orders up on a year-over-year basis. So we've been seeing this steady sequential improvement, and so we're going to build on that momentum as we go into 2024. Matt Miksic of Barclays is on the line with a question. Please state your question. Hi, thanks so much for taking the time to answer the question. Can you hear me okay?

Jonathan: Revenues in that business and you think we are used to the history, there being capital dividends in Q4, driven.

Jonathan: But.

Jonathan: With some of the increase in and sort of dragging around connected care systems.

Jonathan: Yes.

Jonathan: Im wondering is that a mix of recurring revenue that we should see.

Jonathan: Over time are you starting to see a mix change that business.

Speaker Change: Any color on that.

Speaker Change: Very helpful. Thanks.

Speaker Change: Okay.

Speaker Change: So.

Speaker Change: We always have the seasonality, we see hospitals, a little bit more cautious in the first quarter and then as you get through the first quarter. They start spending the money that they have for the year and culminates usually with a strong Q4 in terms of growth because a lot of spending gets done there we try to.

Speaker Change: As much as possible create more or less seasonal.

Speaker Change: Less seasonality, but those things happen and our folks are there I think one important program, we're having baxter as you'll notice.

Speaker Change: We strengthened our beds in the fourth quarter, we continued to to go for some larger accounts and conversions and we start to get some success there when we bring back together.

Operator: Yes, we can. Great, thanks. So I have to congratulate you on the solid results here and the pickup in the Old Hill Rock business.

Speaker Change: <unk> can do as one company is incredible for hospitals. So we feel that the momentum starting to kick in with with accounts that are partially penetrated going full blow into a baxter accounts, we saw that with the conversion that we get this going to launching in early 2025 in northern Cal.

Operator: I just have a question on the seasonality of that business and also, if you could, maybe just the extent of recurring revenues in that business. I think we're used to history there being capitals or acute forgery, but with some of the increase in the sort of contracting around connected care, I'm wondering, you know, is that a mix of recurring revenues that we should see over time, or are you starting to see a mixed change in that business? Any color on that front would be super helpful.

Speaker Change: Now that we have large accounts and all the things that we can see so this is a really good momentum for batch that we can see that going but the first part is always is always a much lighter quarter than the rest of the of the.

Operator: Thanks. So we always have seasonality. We see hospitals a little bit more cautious in the first quarter, and then as they get through the first quarter, they start spending the money that they have for the year, and it culminates usually with a strong Q4 in terms of growth because a lot of spending gets done there. We try to, as much as possible, create more, less seasonality, but those things happen. And our folks are always there.

Speaker Change: The revenue in terms of.

Speaker Change: Frontline care is a business that has less seasonality than the Ccs business and their HST. The reason is that is more consistent with procurement in doctors' offices and monitors into hospital.

Speaker Change: Our med search floors, so that brings less seasonality a business that is very.

Speaker Change: Very predictable is our is our MPT business, which has been.

Operator: I think one important program we have in Baxter, as you'll notice, is strengthening our beds in the fourth quarter. We continue to go for some large accounts and conversions, and we're starting to get some success there when we bring Baxter together. What Baxter can do as one company is incredible for hospitals.

Speaker Change: <unk> success.

Speaker Change: Successfully growing as you can see in 2023 150 basis points above above its market growth rates, driven tremendously by infusion systems as well as S.

Speaker Change: Our solutions IV solutions, so that that brings that business quite up to a quite.

Operator: So we feel that that momentum is starting to kick in with accounts that are partially penetrated, going full-blown into a Baxter account. We saw that with the conversion that we get that's going to launch in early 2025 in Northern Cal, that we have large accounts and other things that we can see. So this is really good momentum for Baxter, and we can see that going on. But the first quarter is always a much lighter quarter than the rest of the year.

Speaker Change: Less seasonable more repeatable I hope I was able to answer your question, yes, if I could just add one thing to that I mean, I think the way to think about that HFC business over the course of the year and then just to build on what Joe said is that we're going to see I would say sequential ramp up over the course of the year that business. So I think the.

Speaker Change: Again, this is Claire talked a little bit earlier, but theres going to be somewhat.

Speaker Change: Our ramp up in sales that youre going to see in that particularly going to be applicable to that segment. The other thing I would just say you'll recall last year frontline care had a fairly sizable amount of growth in 2023 as they worked through some backlog and there is a bit of a very earlier early headwind in that business. During the first part of the year as well so again sequential ramp up.

Operator: The revenue, in terms of frontline care, is a business that has less seasonality than the CCS business under HST. The reason is that it's more consistent with procurement in doctor's offices and monitors into hospital med surge floors, so that brings less seasonality.

Speaker Change: And that business is just want to add I would make to that so thanks.

Speaker Change: Great. Thank you.

Speaker Change: Hi.

Speaker Change: Vijay Kumar of Evercore ISI is on the line with a question. Please state your question.

Operator: A business that is very, very predictable is our MPT business, which has been successfully growing, as you can see, in 2023, 150 basis points above its market growth rate, driven tremendously by infusion systems, as well as IV solutions. So that brings that business to a less seasonal, more repeatable business. I hope I was able to answer your question.

Vijay Muniyappa Kumar: Hey, guys. Thanks for taking my question, Joe maybe my first one for you high level when I just look at the <unk>.

Vijay Muniyappa Kumar: Business X X <unk> kidney care.

Vijay Muniyappa Kumar: 3% to 4%, that's a reasonable number but its still below met that great. When I look at the utilization environment, what some of your peer server.

Clare Trachtman: Yeah, if I could just add one thing to that. I mean, I think the way to think about that HST business over the course of the year. The other thing I would just say, if you recall, last year, Frontline Care had a fairly sizable amount of growth in 2023 as they worked through some of the backlog. So there's a bit of an early headwind on that business during the first part of the year as well. So, again, a sequential ramp up on that business. I just want to add something I would make to that, so thanks. Great, thank you.

Vijay Muniyappa Kumar: Talking about like why is Baxter two to four are there any one offs in that sort of 4%.

Vijay Muniyappa Kumar: Ex kidney care when I look at the.

Vijay Muniyappa Kumar: The legacy Hill ROM business Q4 was really strong.

Vijay Muniyappa Kumar: Why should that business slowdown with camera order order book is turning around and now in.

Vijay Muniyappa Kumar: In fiscal 'twenty four.

Vijay Muniyappa Kumar: Vijay Let me give you a perspective on 3% to 4% for this business is still growing above its market growth rate because we expect to be on the high end of that that debt.

Operator: Vijay Kumar of Evercore ISI is on the line with a question. Please state your question. Hey guys, thanks for taking my question. Joe, maybe my first one for you.

Operator: High level, when I just look at Business X Kidney Care, three to 4%, that's a reasonable number, but it's still below MedTech, right? When I look at the utilization environment, what some of your peers are talking about, like, why is Baxter 3-4? Are there any one-offs in that 3-4% ex-kidney care?

Vijay Muniyappa Kumar: That guide guidance.

Vijay Muniyappa Kumar: What breaks that business go 100 basis points of <unk> that we.

Vijay Muniyappa Kumar: We have first of all this business is pharmaceutical win it we still have price erosion, there, but pharmaceutical is going to be a bunch of 4% to 5% our hour hour.

Vijay Muniyappa Kumar: Our MPT is going to be between 3% and 4% and probably with the opportunity to go above that.

Operator: You know, when I look at the legacy Hillrun business, Q4 was really strong. Why should that business slow down if the Capra order book is turning around in fiscal 24? Vijay, let me give you a perspective on three to four percent for this business. It's still growing above its market growth rate because we expect to be on the high end of that guidance. What makes that business go 100 basis points above that?

Vijay Muniyappa Kumar: Now becomes HST what is happening in HST, we have significant amount of launches going in at the end of 'twenty four 'twenty five we'll have new monitors we have new cardiology device and we continue to be successful in progressive plus so a lot of that has to do with our to get to the 4%.

Operator: We have, first of all, this business has pharmaceuticals in it. We still have price erosion there, but pharmaceuticals are going to be punching four to five percent. Our MPT is going to be between 3% and 4%, and probably with an opportunity to go above that. Now it becomes HST.

Vijay Muniyappa Kumar: To 5% is has to be new product launches in 2025, Napa pharmaceutical debt because that you can see already is making a difference to their growth rate.

Vijay Muniyappa Kumar: It is now for MPT, which which is continues to do extremely well infusion systems, we're going to have more than 40% growth between 24 and 23 in our infusion pumps is going to be new products in HST, primarily frontline care and Ccs with care communications.

Operator: What is happening in HST? We have a significant number of launches going on at the end of 25. We have new monitors. We have a new cardiology device. And we continue to be successful in Progressive Plus. So a lot of that has to do with our, to get to the 4% to 5%, it has to be new product launches in 2025. Not for pharmaceutical companies, because that you can see already is making a difference to their growth rate. It's now for MPT, which continues to do extremely well in infusion systems.

Vijay Muniyappa Kumar: New new versions of volt that as the two new three new versions will be launched this year as well as.

Vijay Muniyappa Kumar: Our new wireless communication device that we plan to launch in 2025, so monitors wireless communication and cardiologists that is what's going to drive that business to grow above 4% and if we execute well it will do it.

Vijay Muniyappa Kumar: I would also say too as you think about the <unk>.

Vijay Muniyappa Kumar: As we separate that kidney business.

Operator: We're going to have more than 40% growth between 24 and 23 in our infusion pumps. It's going to be new products in HST, primarily frontline care, NCCS with care communications, new versions of Volt, that is, three new versions will be launched this year, as well as our new wireless communication device that we plan to launch in 2025. So monitors, wireless communication, and cardiology.

Vijay Muniyappa Kumar: Talk about.

Vijay Muniyappa Kumar: Later on in this year, having an investor event, which youre going to hear US talk about is how we think about capital allocation. How we think about the opportunity for again portfolio ultimately too because think about we have a lot of products with very high market share businesses and so the opportunity to accelerate that growth is something we're going to talk about later on but again thats part of the benefit of that.

Vijay Muniyappa Kumar: Kidney separation was the ability to actually really focus our capital allocation on accelerating the growth of <unk>.

Vijay Muniyappa Kumar: Levels of Youre thinking about there.

Speaker Change: Understood and then maybe one on the guidance question.

Speaker Change: What is is inflation is still a headwind to margins what is price versus inflation and interest expense Q4.

Operator: That is what is going to drive that business to go above 4%, and if we execute well, it will do it. I would also say, too, as we separate the kidney business and we talk about, later on in this year, having an investor event, what you're going to hear us talk about is how we think about capital allocation, how we think about the opportunity for, again, the portfolio. Because think about it. We have a lot of products with very high market share businesses, and so the opportunity to accelerate that growth is something we're going to talk about later on. But, again, that's part of the benefit of having kidneys.

Vijay Muniyappa Kumar: You Didnt note the sequential step down in debt payments.

Speaker Change: Payments is that a sustainable number thank you.

Speaker Change: So I'll.

Speaker Change: Ill start with interest.

Speaker Change: What I would say Vijay on interest is that in the first half of the year, It's probably I'd say first quarter, probably similar it steps up likely a little bit in the second quarter and then we will step up in the second half of the year, we are planning to pay down some low coupon debt in the second quarter and so right now we're earning some cash.

Speaker Change: The earning interest income on the cash that we have and so that will go away in the second half of the year. So thats why youll see a bit of a higher interest expense in the second half of the euro as compared to the first half.

Operator: The separation is the ability to actually really focus our capital allocation on accelerating the growth to the levels that you're thinking about. And then maybe one on the guidance question: what is inflation still a headwind to margins? What is price versus inflation and interest expense in Q4? You didn't know the sequential step-down in debt payments. Is that a sustainable number? Thank you.

Speaker Change: On the debt Paydown I mean again we.

Speaker Change: The other $3 7 billion in proceeds after tax we got from the sale of EPS.

Speaker Change: <unk> used $2 eight of that to pay down debt in the fourth quarter again.

Speaker Change: Have some debt coming due that is maturing in 2024 that will in some of the rest of that for particularly the eurobond as Claire talked about and then obviously we have some debt maturing later in the year that will actually address at that point in time.

Speaker Change: And then on to your other questions kind of just an overall, the inflationary environment and Frac and pricing what I would say and we referenced this earlier is that our integrated supply chain team is executing on their margin improvement programs and so those programs and the savings we will generate this year will positively contribute to our margin expansion. So they will.

Operator: So, I'll start with interest. What I would say, Vijay, on interest is that in the first half of the year, it's probably, I'd say, first quarter, probably similar. It steps up, probably, a little bit in the second quarter, and then it steps up in the second half of the year.

Speaker Change: More than offset any sort of normalized inflation that we have in addition, we are getting pricing will be a benefit this year as well. So we are getting pricing, particularly in markets outside the U S. As well. So we are going after all of those.

Operator: We are planning to pay down some low coupon debt in the second quarter, and so right now, we're earning some cash, or earning interest income on the cash that we have, and so that will go away in the second half of the year. So that's why you'll see a bit of a higher interest expense in the second half of the year as compared to the first half. Yeah, and on the debt paydown, I mean, again, we used all the $3.7 billion of proceeds after tax we got from the sales BPS, and we actually used $2.8 of that to pay down debt in the fourth quarter. We have some debt coming due that's maturing in 2024 that we'll use some of the rest of that for, particularly the Euro bond, as Clare talked about.

Speaker Change: All of those.

Speaker Change: This is our targeting price in all of those markets as well so pricing will be positive for the year as well in terms of kind of all of those pieces, what I would say on the non op side is that well have a positive on interest, but you will see that our tax rate is increasing we did comment on that because of the implementation of pillar two.

Speaker Change: FX.

Speaker Change: So we have some FX I talked about it being kind of negative on the operating margin. So all in our non op is probably.

Joel T. Grade: A couple of cents negative impact for us on a year.

Speaker Change: Understood. Thank you guys.

Operator: And then, obviously, we have some debt maturing later in the year that we'll actually address at that point. And then, to your other questions, kind of just on the inflationary environment and pricing, what I would say, and we referenced this earlier, is that our integrated supply chain team is executing on their margin improvement programs, and so those programs and the savings we will generate this year will positively contribute to our margin expansion. So they will more than offset any sort of normalized inflation that we have.

Speaker Change: <unk> Chickering of Deutsche Bank Securities is on the line with a question. Please state your question.

Chickering: Good morning, guys, Joe, but given up in the seat for very long, but as you take a fresh set of eyes on the operations of Baxter can you walk us where do you think the most margin upside is over the next several years.

Operator: And what you need to do it as cost reductions.

Joel Grade: Areas that you weren't on it like procurement or any other sort of low hanging fruit.

Operator: In addition, we are getting, pricing will be a benefit this year as well, so we are getting pricing, particularly in markets outside the U.S. as well, so we are going after all of those, all of those, you know, our businesses are targeting price in all of those markets as well. So pricing will be positive for the year as well. In terms of kind of all of those pieces, what I would say on the non-op side is that, well, you know, you have a positive rate of interest, but, you know, you will see that our tax rate is increasing. We did comment on that because of the implementation of Pillar 2 FX. So we have some FX.

Speaker Change: Sure absolutely. Thanks, a lot for the question.

Matt Miksic: One of the biggest opportunities we have from.

Joe: Margin perspective, as we continue to work that we're doing in our independent supply chain group I think the team's got a lot of really good market.

Operator: Margin improvement programs going that are designed specifically around things like automation.

Joe: They are designed around things like how do we enhance our procurement.

Operator: Abilities.

Joe: They are around <unk>.

Operator: Continued around things about how do we optimize our network.

Operator: And some of the logistics opportunities I think some of.

Operator: The areas that are the most impactful over time.

Operator: In that space again.

Operator: The team has gotten off to get a really good start on that you've heard Claire talked about the fact that as we continue to see some inflationary pressures coming out I think the work that they've done is gotten us to a place where we have the ability to offset that but to continue the expansion of the margins to your point fall into some of those categories that I just referred to.

Operator: I talked about it being kind of negative on the operating margin. So all in, our non-op is probably, you know, probably a couple cents negative impact for us on the year. Thank you guys. Thank you very much.

Operator: I think the other piece of it.

Operator: Some of you heard me say this already we're not going to SG&A ourselves to prosperity.

Operator: But nonetheless, there is still opportunities in that space as well around things like again, how do we think about a.

Operator: Hey, good morning, guys. Joel, you've not been in that seat for very long, but as you take a fresh set of eyes on the operations of Baxter, can you walk us through where you think the greatest margin of upside is over the next several years and what you need to do to hit those cost reductions, you know, in the areas that you want to highlight, like procurement or any other sort of low-income. Sure, absolutely. Thanks a lot for the question. Yeah, I think one of the biggest opportunities we have from a margin perspective is to continue the work that we're doing in our independent supply chain group. I think the team's got a lot of really good margin improvement programs going that are designed specifically around things like automation. They're designed around things like how do we enhance our procurement. Freedom Wildernessunderstandings.org and some of the logistics opportunities.

Operator: It's a shared services environment that actually allows for consistent execution of operations across the business and I know this is not a margin.

Joe: Question.

Operator: Part of what we're going to focus on heavily.

Operator: As our.

Operator: As cash.

Operator: We will continue to out how do we drive improved use of working capital how do we improve our cash conversion ratio again, I know that specifically, what you asked but again thats going to be.

Joe: An area I see the opportunity and what that all leads to is then the opportunity for us to continue to reinvest.

Operator: Some of that into back into our business around innovation around new product development and back to the question was asked earlier, how do we continue to accelerate growth.

Operator: I call a flywheel that allows us to continue to grow continue to invest to continue to grow et cetera, et cetera, which is where we want to get a company.

Operator: I think some of the areas that will be the most impactful over time sit in that space, and again, the team has gotten off to a really good start on that. You've heard Clare talk about the fact that, you know, as we continue to see some inflationary pressures coming out, I think the work that they've done has gotten us to a place where we have the ability to offset that. But to continue the expansion of the margins, to your point, fall into some of those categories that I just referred to.

Speaker Change: Great and then for a follow up the open Pandora's box, a little bit here by providing segment.

Operator: Level margins for <unk> in 2023 now.

Operator: Now, we're going to be looking policy to rebuild our models can you break out sort of the margins in each division.

Operator: What you assume for 2024, and then a quick follow up question here how.

Operator: I think the other piece of it, and some of you have heard me say this already, we're not going to SG&A ourselves to prosperity. But nonetheless, there are still opportunities in that space as well around things like, again, how do we think about a shared services environment that actually allows for... Execution of Operations Across the Business. And I know this is not a margin question, but part of what we're going to focus on heavily is our... And the last piece is cash, which we will continue to... How do we drive improved use of working capital? How do we improve our cash conversion ratio?

Operator: How is the market share for pumps and <unk> compete against Nextgen pumps at any update on noble.

Speaker Change: Let me start with the pumps and then the claris is going to answer the first part of your question.

Operator: Yesterday, we just got awarded best in class K L. A S. Four our Sigma spectrum pump, which is a great honor that pumped continues to do a great job.

Operator: Nonetheless, we're looking forward to get Novum approved but in terms of market share. We are we continue to advance our market share. This year, we have 40 plus percent growth in our pumps versus last year dose our forecast. So we continue to do well and we look forward to continue to gain.

Operator: Again, I know that's not specifically what you asked, but again, that's going to be an area where I see the opportunity. And what that all leads to is the opportunity for us to continue to reinvest some of that back into our business around innovation and new product development. And back to the question that was asked earlier, how do we continue to accelerate growth? That's what I call a flywheel that allows us to continue to grow, continue to invest, continue to grow, et cetera, et cetera, which is where we want to get.

Operator: Market share and now with a nice award.

Operator: Two our pump as a service award at their pump received since it was launched.

Operator: So back to Claire now to answer the first part of your question.

Speaker Change: Peter in terms of the 2024 operating margin guidance, we arent going to give that by segment, but.

Operator: All of our actions are aligned to improve.

Operator: Both the segment and total Baxter margins, but one caveat I would point out is that within our pharmaceuticals business as Youre aware, we did divest our biopharma solutions business last year and so as a result, we entered into some msas, which will have a negative impact on the pharmaceutical margins and obviously on total Baxter margins for the year. So we've now entered into.

Operator: Great. And then for follow-up, you know, you opened Pandora's box a little bit here by providing segment level margins for ForkU in 2023. And now we're going to be looking possibly to rebuild our models. Can you break out sort of the margins in each division for what we assume for 2024? And then a quick pump question here. You know, how is market share for pumps and ForkU as you compete against the next gen pumps and any update on Novartis? Let me start with the pumps, and then Clare is going to answer the first part of your question.

Clare Trachtman: That MSA, so you will see that impact in the pharmaceuticals margins.

Clare Trachtman: Great. Thanks, so much.

Operator: Okay.

Speaker Change: Wells Fargo is on the line with a question. Please state your question.

Operator: Hi, its lei, calling in for Larry Thanks for taking my question I.

Operator: Just to make sure I didn't Miss it did you comment on the status of Novum IQ the Resubmission and your thoughts on potential approval in 'twenty, four and I have a follow up.

Operator: You know, yesterday we just got awarded a best-in-class KLAS award for our Sigma Spectrum pump, which is a great honor. That pump continues to do a great job. Nonetheless, we're looking forward to getting Novum approved. But in terms of market share, we continue to advance our market share. This year we expect 40-plus percent growth in our pumps versus last year. That's our forecast. So we continue to do well, and we look forward to continuing to gain market share. And now with a nice award for our pump. It's the seventh award that that pump has received since it was launched.

Operator: Yes.

Operator: I didn't comment on the details and we usually don't comment on anything that is with the FDA on behalf of the FDA. We can tell you that we answer all their questions Theres no other questions to be answered all the documentation was submitted so.

Operator: As always this is out there.

Operator: And their size now to make a final decision on this but.

Operator: So back to Clare now to answer the first part of the question. Yeah, Pito, in terms of the 2024 operating margin guidance, we aren't going to give that by segment, but obviously, all of our actions are aligned to improve, you know, both the segment and total Baxter margins. The one caveat I would point out is that within our pharmaceuticals business, as you are aware, we did divest our biopharmaceuticals business last year. And so as a result, we entered into some MSAs, which will have a negative impact on the pharmaceutical margins and, obviously, on total Baxter margins for the year as we've now entered into that MSA. So you will see that impact in the pharmaceutical margin. Great, thanks so much.

Operator: As I said before and I said this about a month or so ago.

Speaker Change: I feel I feel cautiously optimistic because there is nothing else for us to do we answer all the questions. So.

Operator: They'll be.

Operator: That happened in 24 will be a great thing.

Operator: Nevertheless, we continue to gain market share with Sigma spectrum as I've said before we just got an award at best in class for the pump and <unk>.

Operator: We're very happy and we continue to.

Operator: Sure.

Operator: To be very busy quoting new accounts and competitive accounts, which we are actually winning with their pump.

Speaker Change: Got it. Thank you and my follow up is just on your what you said about expectations for the two segments in 'twenty four so Baxter ex where you know.

Operator: You expect 3% to 4% growth.

Operator: The President of Wells Fargo is on the line with a question. Please state your question. Hi, it's Leigh calling in for Larry. Thanks for taking my question. I just want to make sure I didn't miss it.

Operator: Is that the right way to look at that is that the right way to look at it longer term and similarly in the renal business itself youre expecting one or 2% decline. This year once you adjust for the exits in China of Edp.

Operator: Did you comment on the status of Novum IQ, the resubmission, and your thoughts on potential approval in 24 hours? And I have a follow-up. I didn't comment on the details, and we usually don't comment on anything that is with the FDA on behalf of the FDA. We can tell you that we answered all their questions. There are no other questions to be answered. All the documentation was submitted.

Operator: We now normalize to have low single digit growth longer term. Thanks again for the question.

Speaker Change: Yeah, So I'm going to go back to something that Joe mentioned earlier, we plan to have in the capital markets Day. Later this year, where we will discuss our long term expectations for the business and but I think that both Joe and you'll have said that while we're growing 3% to 4% through the introduction of new products continued market.

Operator: So, as always, it's on their side now to make a final decision on this. But as I said before, and I said this about a month or so ago, I feel cautiously optimistic because there is nothing else for us to do. We have answered all the questions. So that will be a, you know, if that happened in 24, it would be a great thing.

Operator: Expansion. Our goal is to grow ahead of our weighted average market growth rate. So we do want to grow in advance of that and so we'll be unveiling kind of those longer term, but no I would say our goal is to accelerate growth off of that with respect to kidney care again, yes, we made $150 million of exits to that business all aligned.

Operator: With our goal of enhancing profitability for that for that business post separation. So I think thats, what we want to ensure that we are setting this business up for success as a standalone entity.

Operator: Nevertheless, we continue to gain market share for our sigma spectrum. As I said before, we just got an award at Basting Glass for that pump, and we're very happy, and we continue to be very busy quoting new accounts and competitive accounts, which we are actually winning with that pump. Got it, thank you.

Operator: We also have a value based procurement there might be some follow on to that in 2025, but I think the key is that that the fundamentals for this business are improving we're seeing solid patient growth, we're seeing a rebound in our acute therapies business. So I believe this business can accelerate off the levels are that will grow at the levels that we're seeing once we make these adjustments.

Operator: My follow-up is just what you said about expectations for the two segments in 24. So Baxter x Reno, you expect 3 to 4 percent growth. Is that the right way to look at it longer term? And similarly, in the Reno business itself, you're expecting 1 to 2 percent decline this year, but once you adjust for the exits in China VVP, does Reno normalize to kind of a low single-digit growth longer term? Thanks again for the question. Yeah, so Leigh, I'm going to go back to something that Joel mentioned earlier.

Speaker Change: Yes, and I would just just the question you asked we did again make purposeful decisions around exiting markets exiting products and so if you actually add that back from that $150 million, we referred to earlier.

Operator: Yes, you would find yourself in a place where there is where the growth is actually in the low single digits.

Speaker Change: Matt Taylor of Jefferies is on the line with a question. Please state your question.

Speaker Change: Hi, Thanks for the question.

Operator: I know you noted noted some progress on pricing I was wondering if you could comment on that and your expectations for pricing in 'twenty four and any updates on some of those bigger contracts that you've talked about in the past and your opportunities to reprice.

Operator: We plan to have a capital markets day later this year where we will discuss our long-term expectations for the business. But I think that both Joe and Joel have said that while we're growing 3% to 4% through the introduction of new products and continued market expansion, our goal is to grow ahead of our weighted average market growth rate. So we do want to grow in advance of that, and so we'll be unveiling some of those longer term. But, no, I would say our goal is to accelerate growth off of that. With respect to kidney care, again, yes, we made $150 million in exits to that business, all aligned with our goal of enhancing profitability for that business post-separation. So I think that what we want to ensure is that we're setting this business up for success as a standalone entity.

Operator: <unk> dialysis nutrition et cetera.

Speaker Change: Yeah sure.

Operator: We did make progress in pricing in 2023.

Operator: Some of that was.

Operator: Were temporary in nature in the sense that we had some adds to pricing that will fall off at the end of the year here, but we do have part of our growth and our margin expansion. In 2024 that is continued progress in the areas of pricing and I think one of the things that.

Operator: We've talked about is just as a reminder, some of the contracts with the with the GPO that we've signed we've made continued progress that actually doesn't kick in until 2025. So just to just to remind you that that's not part of what we're talking about in terms of progress, but again the team has made solid.

Operator: Progress in terms of continuing to take pricing in 2024, and the other thing I would say that we've done a good job of continuing to do an even better job of is to give ourselves the opportunities to actually have indexes within our pricing that allow us more flexibility to pass along.

Operator: We also have value-based procurement. There might be some follow-on to that in 2025, but I think the key is that the fundamentals for this business aren't going to be the same as they were in the past. We're seeing solid patient growth, and we're seeing a rebound in our acute therapy business. So I believe this business can accelerate off the levels, or it will grow off the levels that we're seeing once we make these adjustments. Yeah, and I would just, the question you asked: we did, again, make purposeful decisions around exiting markets, exiting products, and so if you actually add back some of that $150 million we referred to earlier, I think, yes, you'd find yourself in a place where there's growth is actually in Matt Taylor of Jeffrey's is on the line with a question. Please state your question. Hi, thanks for the question.

Operator: Costs that are coming into our world that we have historically struggled to pass along to our customers again, we're making progress in that area as well so generally speaking.

Operator: As Claire talked about our expansion margins really it's focused around some of the operational work that we're doing but also again our pricing progress continues in 2024, and we look to accelerate that further in 2025 and beyond.

Operator: Thanks.

Matthew Taylor: Well follow when can we hear more about the bigger contracts are you going to talk about that throughout the year and can you comment at all on the kind of opportunities you have with some of those contracts, what's the order of magnitude of pricing you could get.

Operator: We are making great progress.

Operator: In the middle of doing it once those contracts are signed the next steps for us to secure the idms underneath them and Baxter do well and that we are well poised to take that action.

Operator: I know you noted some progress on pricing. I was wondering if you could comment on that and your expectations for pricing in 24 and any updates on some of those bigger contracts that you've talked about in the past and your opportunities to reprice solutions, dialysis, nutrition, et cetera.

Matthew Taylor: We are feeling quite.

Operator: Comfortable where we are to date in terms of signing these agreements, we're not going to tell us equity a status of where we are signing them for competitive reasons. Neither the volume of dollars. So you need to think about this as value value is.

Speaker Change: Is dropping.

Operator: Profit to the bottom line is value that will be achieved with pricing and volume volume is important to us the size of our plants. So we are getting a combination of both is an important thing for us. So I will focus price is always important because the amount of headwind that we had in 2020.

Operator: Sure, so we did make progress in pricing in 2023, and some of that was more temporary in nature in the sense that we had some adds to pricing that will fall off at the end of the year here, but we do have part of our growth and our margin expansion in 2024 that is continued progress in the areas of pricing, and I think one of the things that we've talked about is. Just as a reminder, some of the contracts with the GPOs that we've signed, we've made continued progress on. That actually doesn't kick in until 2025, so just to remind you of that, that's not part of what we're talking about in terms of progress.

Operator: Of course, so we are considering that but also expansion of market share is important to us as well because we have capacity, we've been serving that market very well. So think about our objective in 2024 into 2025 used to continue to add value and.

Operator: Significant accretion potentially to the bottom line by getting those contract signed.

Operator: In good position and we're not going to give specific details on the pricing or volume as Joe referenced. So just think about that as guidance that we ultimately give on margins and volume growth will be inclusive of the progress we'll make with those contracts.

Operator: But again, the team has made solid progress in terms of continuing to take pricing in 2024. And the other thing I would say that we've done a good job of, or continue to do an even better job of, is to give ourselves the opportunity to actually have indexes within our pricing that allow us more flexibility to pass along costs that are coming into our world that we have historically struggled to pass along to our customers. Again, we're making progress in that area as well. So generally speaking, as Clare talked about, our expansion margins are really focused around some of the operational work that we're doing, but also, again, our pricing progress continues in 2024, and we look to accelerate that further in 2025. Can I just ask a follow-up question, what can we hear more about? The next question is, what is the order of magnitude of pricing you could get?

Speaker Change: Okay. Thanks, Joe Thanks, Joe.

Speaker Change: Thank you.

Speaker Change: Good question John.

Speaker Change: Danielle and Telsey of UBS is on the line with a question. Please state your question.

Speaker Change: Thanks, everyone. Good morning, just a quick question on sort.

Operator: Sort of what the longer term focus is post kidney care I assume we'll get some more color here once.

Speaker Change: Once we had the pre spin analyst day, but just at a high level, Joe until curious about where you see the most opportunities to improve whether organically or inorganically from an R&D perspective.

Operator: Longer term over the next few years.

Operator: Where.

Operator: We are making great progress; we're in the middle of doing it. Once these contracts are signed, the next step is for us to secure the IDNs underneath them. And Baxter does well in that; we are well poised to take that action. We are feeling quite comfortable where we are today in terms of signing these agreements. We're not going to tell exactly the status of the state where we are signing them for competitive reasons, nor will we tell you the volume of dollars. So you need to think about this as value. Value is dropping profit to the bottom line; that is value.

Operator: Where you think Baxter will be most focused in and investing behind thanks. So much. So then yes, we're thinking about the strategy and the over arching imperative of this strategy is to is to advance and significantly improve the intrinsic value of the company and we're going to do that organically.

Operator: Eventually inorganically as well with some tuck ins any strategic acquisitions that will supplement some of our business, but so in the organic side to drive that that intrinsic value multiplier is innovation acceleration of innovation expansion of our commercial footprint in areas that we can.

Operator: That will be achieved with pricing and volume. Volume is important to us, the size of our plans, so we're getting a combination of both is the important thing for us. So our focus price is always important because the amount of headwind that we have in 2022, of course.

Operator: Currently don't participate well as well as doubling down in operations excellence in all of our in all aspects of Baxter from the plants all the way to our back office, so creating value in all parts of the company. So we can take some of that money reinvest modestly.

Operator: So we are considering that, but also, expansion of market share is important to us as well because we have capacity and we've been serving the market very well. So think about our objective for 2024 into 2025 is to continue to add value and significant accretion potentially to the bottom line by getting those contracts signed, but we are in a good position. And we're not going to give specific details on pricing or volume, as Joe referenced, so just think about that as guidance that we ultimately give on margins and volume growth will be inclusive of the progress we'll make with those contracts. Thanks, Joe.

Operator: In research and development and continue to accelerate the innovation and the innovation. All of this is going to be done with a significant amount of importance to capital allocation, meaning where money goes inside of the company.

Speaker Change: How much is share buyback. So this is a post post spin when we are looking at a different debt structure and a different company fast that so think about our strategy to accelerate innovation accelerate.

Operator: Thanks, Joel. Thank you. Danielle Antalffy of UBS is on the line with a question. Please state your question. Thanks, everyone. Good morning.

Speaker Change: Penetration in commercial areas, we're not like alternate sites of care Asc's.

Operator: Those are the drivers of our organic growth and that should drive a quest for a multiplier on our intrinsic value as a company.

Operator: And just a quick question on sort of what the longer-term focus is post-kidney care. I assume we'll get some more color here once we have the, you know, pre-spin Analyst Day. But just at a high level, Joe and Joel, curious about where you see the most opportunities to improve, whether organically or inorganically from an R&D perspective, and just longer-term IU for the next few years, where you think Baxter will be most focused and investing in. Thanks.

Operator: And Danielle just to follow on.

Operator: Specific to kind of kidney care, what I would say as you know within kidney care and obviously, Chris talk will elaborate more on that but theyre going to focus on continuing to increase PD penetration globally really focusing on how do they enhance this digitally as well and what digital capabilities are out there to really help both clinicians and patients advance.

Operator: That therapy. In addition, within the acute therapies business I think we will continue to build upon that.

Operator: So, Danielle, we're thinking about a strategy, and the overarching imperative of this strategy is to advance and significantly improve the intrinsic value of the country. And we're gonna do that organically and, eventually, inorganically as well with some tuck-ins and strategic acquisitions that will supplement some of our business. But so on the organic side, to drive that intrinsic value multiplier, innovation, acceleration of innovation, expansion of our commercial footprint in areas that we currently don't participate well, as well as doubling down on operations excellence in all aspects of Baxter, from the plants all the way to our back office. So creating value in all parts of the company so we can take some of that money, reinvest modestly in research and development, and continue to accelerate innovation.

Operator: Continuous renal replacement therapy and brought it into more multi organ support therapies as well. So I think that they have a strategy there that they'll continue to build upon and execute at the standalone entity.

Speaker Change: I, just think what Joe said and what <unk> talked about is just reinforcement of the strategic rationale for the separation that then allows us and kidney frankly to both focused their capital allocation on those areas that really accelerate their growth and as Joe said I see that one start that is at a level.

Operator: We have targeted to actually reinforce this idea that we're going to have both organic and inorganic growth opportunities ahead of us.

Speaker Change: Thank you so much.

Speaker Change: Ladies and gentlemen, this concludes today's conference call with Baxter International Thank you for participating.

Operator: And the innovation, all of this is gonna be done with a significant amount of importance to capital allocation, meaning where money goes inside of the company, how much is the share buyback. So this is a post-spin when we are looking at a different debt structure in a different company, fast debt. So think about our strategy to accelerate innovation, accelerate penetration in commercial areas where now, like alternate sites of care, ASCs, those are the drivers of our organic growth. And that should drive a quest for a multiplier on our intrinsic value as a company. And Danielle, just to follow on and, you know, specific to kidney care, what I would say is, within kidney care, and obviously, Chris Toth will, you know, elaborate more on this, but they're going to focus on continuing to increase PD penetration globally, really focusing on how they enhance this digitally as well, and what digital capabilities are out there to really help both clinicians and patients advance that therapy.

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Operator: In addition, within the acute therapies business, I think they'll continue to build upon continuous renal replacement therapy and broaden it to more multi-organ support therapies as well. So I think that they have a strategy there that they'll continue to build upon and execute, you know, as a standalone entity. Yeah, and I just think what Joe said and what Clare talked about is just reinforcement of the strategic rationale for the separation that that allows us and kidney, frankly, to both focus their capital allocation on those areas that really accelerate their growth. And as Joe said, I see that one-star debt is at a level that we've targeted to actually reinforce this idea that we're going to have both organic and inorganic growth opportunities ahead of us.

Operator: Yes.

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Operator: Thank you so much. Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating.

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Operator: Okay.

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