Q2 2024 Becton Dickinson & Co Earnings Call
Please standby we're about to begin.
Speaker Change: Hello, and welcome to Bd's second fiscal quarter 2024 earnings call at.
Operator: Please stand by; we're about to begin. Hello, and welcome to BD's second fiscal quarter 2024 earnings call. At the request of BD, today's call is being recorded and will be available for replay on BD's Investor Relations website, investors.bd.com, or by phone at 1-800-723-5792 for domestic calls and area code 1-402-220-2664 for international calls. During today's call, all parties have been placed in a listen-only mode until the question and answer session. I will now turn the call over to Greg Rodetis, Senior Vice President, Treasurer, and Head of Investor Relations.
Speaker Change: At the request of BD today's call is being recorded and will be available for replay on Bd's Investor Relations website investors <unk> B D dot com or by phone at one 807 235792 for domestic calls and area code 140 to two.
Speaker Change: Two zero to 664 for international calls.
Speaker Change: For today's call all participants have been placed in a listen only mode until the question and answer session. I will now turn the call over to Greg readiness, Senior Vice President Treasurer, and head of Investor Relations.
Speaker Change: Good morning, and welcome to Bd's earnings call Gregory Lewis Senior Vice President Treasurer head of Investor Relations. Thank you for joining us.
Greg Rodetis: Good morning and welcome to BD's earnings call. I'm Greg Rodetis, Senior Vice President, Treasurer, and Head of Investor Relations. Thank you for joining us.
Greg Rodetis: This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the second quarter of fiscal 2024. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's calls are Tom Polen, BD's Chairman, Chief Executive Officer, and President, and Christopher DeLorefice, Executive Vice President and Chief Financial Officer. Following this morning's prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents, Mike Garrison, President of the Medical Segment, Dave Hickey, President of the Life Sciences Segment, and Rick Byrd, President of the Interventional Segment.
Gregory Lewis: This call is being made available via audio webcast IBD dotcom.
Speaker Change: Earlier. This morning, <unk> released its results for the second quarter of fiscal 'twenty 'twenty four.
Speaker Change: Press release and presentation can be accessed on the IR website at investors Dot BD dotcom, leading today's calls are Tom Polen, Bd's, Chairman, Chief Executive Officer, and President and Crystal Wharf, as executive Vice President and Chief Financial Officer.
Speaker Change: Following this morning's prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents.
Speaker Change: Garrison President of the medical segment, Dave Hickey President of the Life Sciences segment, and Rick Perry President of the Interventional segment.
Speaker Change: Before we get started I want to remind you that we'll be making forward looking statements you can read the disclaimer in our earnings release and disclosures in our SEC filings available on the Investor Relations website.
Greg Rodetis: Before we get started, I want to remind you that we'll be making forward-looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings, available on the Investor Relations website. Unless otherwise specified, all comparisons will be made on a year-over-year basis versus a relevant fiscal period. Revenue percentage changes are on an FX-neutral basis, unless otherwise noted. Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation. With that said, I am very pleased to turn it over to Tom.
Speaker Change: Unless otherwise specified all comparisons, but do you need on a year over year basis versus a relevant fiscal period.
Speaker Change: Revenue percentage changes are on an FX neutral basis, unless otherwise noted reconcile.
Speaker Change: Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation with that I am very pleased to turn it over to Tom.
Speaker Change: Yeah.
Thomas E. Polen: Thanks, Greg. Good morning, everyone, and thank you for joining us. Second quarter revenue growth accelerated significantly, as expected, driven by the strength of our portfolio, increasing volumes across our consumables, and Alaris. Margin performance drove adjusted EPS ahead of our expectations, and consistent with our plan, we delivered very strong cash flow and are on track to deliver another year of double-digit free cash flow growth. These results give us the confidence to once again increase our FY24 adjusted EPS guidance.
Thomas E. Polen: Thanks, Greg Good morning, everyone and thank you for joining us.
Thomas E. Polen: Quarter revenue growth accelerated significantly as expected.
Thomas E. Polen: Driven by the strength of our portfolio increasing volumes across our consumables and alero.
Thomas E. Polen: Margin performance drove adjusted EPS ahead of our expectations and consistent with our plan. We delivered very strong cash flow and are on track to deliver another year of double digit free cash flow growth.
Thomas E. Polen: These results give us the confidence to once again increase our FY 'twenty four adjusted EPS guidance.
Thomas E. Polen: Turning to our beauty 2025 strategy, we continue to execute well on the actions, we outlined at our Investor day to drive profitable growth and value creation.
Thomas E. Polen: Turning to our BD 2025 strategy, we continue to execute well on the actions we outlined at our Investor Day to drive profitable growth and value creation. This includes advancing our innovation pipeline, which supports our durable 5.5% plus targeted growth profile. One such area is the strong pace of new innovation across our connected medication management suite, which delivers many unique benefits to our customers. Q2 was the second full quarter since clearance of our new ALERA system. The first half of Laris sales has already eclipsed our total FY23 performance.
Thomas E. Polen: This includes advancing our innovation pipeline, which supports our durable 5.5% plus targeted growth profile.
Thomas E. Polen: One such area is the strong cadence of new innovation across our connected medication management suite.
Thomas E. Polen: Which delivers many unique benefits to our customers.
Thomas E. Polen: Q2 was the second full quarter since clearance of our new alert system and first half Polaris sales have already eclipsed our total FY2023 performance.
Thomas E. Polen: Our return to market is ramping faster than initially planned, which wouldn't be possible without our manufacturing, who have executed extremely well in scaling Eleris Productions. Q2 set an all-time record for both the number of BD Alaris pumps manufactured and the number of pumps shipped in a quarter to upgrade our customers to the cleared version of the pump. We have also seen acceleration of committed contracts, inclusive of competitive conversions, as health systems value the capability of ALERIS and look to standardize their fleet. This offers confidence in the plan's second half contribution to growth and will support momentum heading into FY25. The ALERIS 510K clearance is just the beginning.
Thomas E. Polen: Our return to market is ramping faster than initially planned which wouldn't be possible without our manufacturing team.
We have executed extremely well in scaling of Irish production queue.
Thomas E. Polen: Q2 set an all time records in both the number of BD Larish pumps manufactured and the number of pumps shipped in a quarter to upgrade our customers to the cleared version of the pump.
Thomas E. Polen: We have also seen acceleration of committed contracts inclusive of competitive conversions as health systems value the capability of our Laris and look to standardize their fleet.
Thomas E. Polen: This offers confidence in our planned second half contribution to growth and will support momentum heading into FY 'twenty five.
Speaker Change: Yeah. There is five 10-K clearance is just the beginning.
Thomas E. Polen: As we have shared, we are excited about our innovation roadmap, and we are planning upcoming ALERIS 510 case submissions to further strengthen our capabilities, like best-in-class interoperability with over 800 live sites, introduce a steady flow of new customer innovations, and ensure continuous compliance. Examples such as over-the-air technology for efficient software updates and continued advanced cybersecurity are planned in the next submission later this calendar year.
Speaker Change: As we have shared we are excited about our innovation roadmap and we are planning upcoming Alere has five 10-K submission to further strengthen our capabilities like best in class interoperability with over 800 live sites.
Introduce a steady flow of new customer innovations and ensure continuous compliance.
Speaker Change: Examples such as over the air technology for efficient software updates and continued advanced cyber security are planned in the next submission later this calendar year.
Speaker Change: Beyond <unk>, we have a market leading connected medication management portfolio across inventory management.
Thomas E. Polen: Beyond Dolaris, we have a market-leading connected medication management portfolio across inventory management, compounding, pharmacy automation, medication dispensing, and infusion, and are excited about future innovations and development. This includes new medication dispensing and informatics innovation, including the next generation of our Pyxis dispensing platform, which innovates on our hardware design and will advance our cloud connectivity. We continue to scale our BD Health Sites informatics platform, now live in over 1,000 sites, and have upcoming launches to integrate hospital medication data from Pyxis with non-acute medication data from our MedBank and MedKeeper platforms to bring visibility to medication flows across the customer's care network.
Speaker Change: Compounding pharmacy automation medication dispensing and infusion and are excited about future innovations in development.
Speaker Change: This includes new medication dispensing and informatics innovation, including the next generation of our Pyxis dispensing platform.
Speaker Change: Which innovates on our hardware design and will advance our cloud connectivity.
Speaker Change: We continue to scale, our BD health sites Informatics platform now live in over 1000 sites and have upcoming launches to integrate hospital medication data from pyxis with non acute medication data from our bad bank and med keeper platforms to bring visibility to medication flows across the customers care.
Speaker Change: Network.
Thomas E. Polen: In Q2, we made meaningful progress achieving other key R&D milestones, including several in our peripheral vascular disease platform, which is one of our key growth areas. Longer term, these technologies are each expected to deliver over $50 million in incremental fifth year revenue and will broaden our leadership in the $5 billion PVD category that is growing high single digits. In our Venus portfolio, we have now enrolled over 60 patients in our Arch Pivotal IDE for our BD Liberty TIPS stent graft. This novel, self-expanding coverage stent improves the standard of care for portal hypertension.
Speaker Change: In Q2, we made meaningful progress achieving other key R&D milestones, including several in our peripheral vascular disease platform, which is one of our key growth areas.
Speaker Change: Longer term. These technologies are each expected to deliver over $50 million and incremental fifth year revenue and will broaden our leadership in the $5 billion P. V. D category that is growing high single digits.
Speaker Change: In our venous portfolio, we have now enrolled over 60 patients in our arch pivotal I D E for BD Liberty tip stent graft this novel self expanding coverage stent.
Speaker Change: Improves the standard of care for portal hypertension built.
Thomas E. Polen: Building on our success in launching Venus products that help deliver better clinical outcomes for patients and strengthening our presence in the Venus market, in our arterial portfolio, we enrolled the first patient in our Agility Pivotal IDE study for our low-profile arterial stent graft. A differentiated technology that minimizes access site complications with precise stent placement could provide an important new treatment option for over 18 million patients with peripheral arterial disease in the U.S. alone.
Speaker Change: Building on our success in launching venous products that help deliver better clinical outcomes for patients and strengthening our presence in the Venus market.
Speaker Change: In our arterial portfolio, we enrolled the first patient in our agility pivotal IDE study for our low profile arterial stent graft a.
Speaker Change: A differentiated technology that minimizes access site complications with precise stent placement that could provide an important new treatment option for over 18 million patients with peripheral arterial disease in the U S alone.
Thomas E. Polen: We also filed our Scion SFA Pivotal IDE submission with the FDA for our new sirolimus DCB for the treatment of PAD. We see this new alternative drug platform as a key growth catalyst for both SFA and below-the-knee applications.
Speaker Change: We also filed our Psi on S. S. A pivotal I D E submission with the FDA for our new Sirolimus D. C. B for the treatment of ph D. We see this new alternative drug platform as a key growth catalyst for both SFA and below the knee applications.
Thomas E. Polen: We are also executing well on our simplification strategy to drive margin expansion. We are seeing growing momentum as we scale our BD Excellence operating system and build world-class lean management systems and cultures throughout BD. This drove strong Q2 performance in areas such as waste reduction and production efficiency, contributing to our margin goals. Our focus on cash flow also continues to deliver positive results. Generating about $1.1 billion in free cash flow in the first half.
Speaker Change: We are also executing well on our simplification strategy to drive margin expansion we.
Speaker Change: We are seeing growing momentum as we scale, our BD excellence operating system and build a world class lean management systems and culture throughout BD.
This drove strong Q2 performance in areas, such as waste reduction and production efficiency contributing to our margin goals.
Speaker Change: Our focus on cash flow also continues to deliver positive results.
Generating about $1.1 billion in free cash flow in the first half.
Thomas E. Polen: This strong start to FY24 positions us to deliver double-digit growth in free cash flow for the full year. It also enables continued execution of our disciplined capital allocation strategy, including accretive M&A opportunities in higher growth categories and opportunistically returning cash to shareholders. Lastly, our teams around the world continue to make advancements on our corporate sustainability strategy. We were recently named among Fortune magazine's list of the most innovative companies. This is testament to our 70,000 associates who work every day to deliver innovation that meaningfully advances the standard of care around the world.
Speaker Change: This strong start to FY 'twenty four positions us to deliver double digit growth in free cash flow for the full year.
Speaker Change: It also enables continued execution of our disciplined capital allocation strategy, including accretive M&A opportunities in higher growth categories, and Opportunistically returning cash to shareholders.
Speaker Change: Lastly, our teams around the world continue to make advancements on our corporate sustainability strategy. We were recently named among Fortune magazine's most innovative companies list a testament to our 70000 associates, who work every day to deliver innovation that meaningfully advance as the standard of care around the world.
Speaker Change: We continue to forge partnerships that expand access to these critical innovations and most recently, we announced the first ever option in Singapore for women to self collected sample for cervical cancer screening and the privacy of their own home.
Thomas E. Polen: We continue to forge partnerships that expand access to these critical innovations. And, most recently, we announced the first ever option in Singapore for women to self-collect a sample for cervical cancer screening in the privacy of their own home.
Thomas E. Polen: In summary, we are delivering accelerated revenue growth, executing ahead of our plan on ALERIS, and driving strong margin performance with a growing contribution from BDX. We have once again raised our adjusted diluted EPS guidance for fiscal 2024 and believe we are well positioned to achieve our BD 2025 goals. I'll now turn it over to Chris to review our financials and outlays.
Speaker Change: In summary, we are delivering accelerated revenue growth are executing ahead of our plan on a laris and driving strong margin performance with a growing contribution from BD excellence.
Speaker Change: We once again raised our adjusted diluted EPS guidance for fiscal 'twenty 'twenty four and believe we are well positioned to achieve our BD 2025 goals.
Speaker Change: I will now turn it over to Chris to review, our financials and outlook.
Chris: Thanks, Tom and good morning, everyone as Tom noted, we executed well on our performance goals in Q2 as expected we delivered strong acceleration in our revenue growth, we exceeded both our margin and earnings goals and delivered very strong free cash flow growth.
Christopher J. DelOrefice: Thanks, Tom. And good morning, everyone.
Christopher J. DelOrefice: As Tom noted, we executed well on our performance goals in Q2. As expected, we delivered strong acceleration in our revenue growth. We exceeded both our margin and earnings goals and delivered very strong free cash flow growth. Now, I'll now provide some insights into our revenue performance in the quarter. Q2 revenue was $5 billion, with organic growth of 5.7% driven by strong volumes.
Chris: I'll provide some insights into our revenue performance in the quarter.
Chris: Q2 revenue was $5 billion with organic growth of five 7% driven by strong volume.
Chris: Growth was led by double digit growth in BD interventional with low single digit growth in BD medical and BD life Sciences.
Christopher J. DelOrefice: Growth was led by double-digit growth in BD Interventional with low single-digit growth in BD Medical and BD Life Sciences. Total Q2 revenue growth of 4.7% reflects the divestiture of our surgical instruments platform; regionally, organic growth was driven by the US, partially offset by expected market dynamics in China. In BD Medical, growth was led by medication management, with strong performance in infusion systems, driven by the BD ALERIS return-to-market, and Mid-Single-Digit Growth across our Medication Delivery Solutions Portfolio in the U.S. and EMAEA, as well as strong demand for our pharmaceutical systems, pre-filled devices for biologic drugs.
Chris: Total Q2 revenue growth of 4.7% reflects the divestiture of our surgical instruments platform.
Chris: Regionally organic growth was driven by the U S, partially offset by expected market dynamics in China.
Chris: In BD medical growth was led by medication management with strong performance in infusion systems, driven by the BD awareness returned to market.
Chris: And mid single digit growth across our medication delivery solutions portfolio in the U S and EMEA.
Chris: Strong demand in our pharmaceutical systems prefilled devices for biologic drugs.
Christopher J. DelOrefice: Offset transitory market dynamics across the industry, including customer inventory, the stock, BD Life Sciences performance was led by Integrated Diagnostic Solutions, with high single-digit growth in our microbiology platforms and mid-single-digit growth in specimen management, which offset a comparison to the prior year and transitory market dynamics in select segments in bioscience. BD Interventional Organic Growth was led by continued strong growth in UCC and continued momentum in our Purwick franchise, delivering another quarter of double-digit growth along with related licensing revenue.
Chris: Offset transitory market dynamics across the industry, including customer inventory destocking.
Chris: BD Life Sciences performance was led by integrated diagnostic solutions with high single digit growth in our microbiology platforms and mid single digit growth in specimen management.
Chris: Which offset a comparison to the prior year and transitory market dynamics in select segments and biosciences.
Chris: BD interventional organic growth was led by continued strong growth in UCC.
Chris: With continued momentum in our pure Wick franchise, delivering another quarter of double digit growth along with related licensing revenue.
Chris: Surgery delivered another strong quarter with double digit organic growth supported by global adoption of our physics resorbable scaffold.
Christopher J. DelOrefice: Surgery delivered another strong quarter with double-digit organic growth supported by global adoption of our Phasics Resorbable Scaffolding. Additionally, growth was supported by Peripheral Intervention. Double-Digit Growth in our Peripheral Vascular Disease Platform, where we continue to drive market penetration with our Rotarix, Atherectomy System, and our Venus Portfolio. The quarter's performance reflects the breadth of the BD portfolio that delivers an attractive growth profile. Now moving on to our P&L.
Chris: Lastly growth was supported by peripheral intervention with double digit growth in our peripheral vascular disease platform, where we continue to drive market penetration with our Rotarix atherectomy system in our venous portfolio.
Chris: The quarter's performance reflects the breadth of the BD portfolio that delivers a durable growth profile.
Speaker Change: Now moving to our P&L.
Christopher J. DelOrefice: We realize strong sequential margin improvements, with Adjusted Gross Margin of 53% and Adjusted Operating Margin of 24.3%, both above our expectations. For Adjusted Gross Margin, our Simplification and BD Excellence initiatives are continuing to drive net cost improvement, and sequentially, as planned, we saw a reduced impact from prior year inventory reductions that increased cash flow. Driven by strong SSG&A expense reductions and leverage, our adjusted operating margin increased sequentially by 410 basis points and year-over-year by 160 basis points, with Q2 being above our fiscal year 23 full-year margin.
Speaker Change: We realized strong sequential margin improvement.
Speaker Change: With adjusted gross margin of 53% and adjusted operating margin of 24, 3%.
Speaker Change: Both are above our expectations.
Speaker Change: The adjusted gross margin, our simplification and BD excellence initiatives are continuing to drive net cost improvement and sequentially as plan, we saw a reduced impact from prior year inventory reductions that increased cash flow.
Speaker Change: Driven by strong S SG&A expense reductions and leverage our adjusted operating margin increased sequentially by 410 basis points and year over year by 160 basis points with Q2 being above our fiscal year 'twenty three full year margin.
Christopher J. DelOrefice: As a result of these items, we exceeded our Q2 operating income and adjusted diluted EPS expectations, resulting in adjusted diluted EPS of $3.17, which grew double digits or 10.8% on a reported basis. Regarding our cash and capital allocation, year-to-date free cash flow increased more than $900 million year-over-year to over $1.1 billion.
As a result of these items, we exceeded our Q2 operating income and adjusted diluted EPS expectations, resulting in adjusted diluted EPS of $3 17.
Speaker Change: Which grew double digits or 10, 8% on a reported basis.
Speaker Change: Regarding our cash and capital allocation.
Speaker Change: Year to date free cash flow increased more than $900 million year over year to over $1 $1 billion.
Christopher J. DelOrefice: This reflects continued improvements around working capital, including our actions to optimize inventory levels, continued discipline around capital investments, and leveraging our fixed asset base as a result of the benefits from our BD Excellence operating system. We remain focused on free cash flow conversion and are on track to deliver another double-digit step improvement in FY24 and remain well positioned to achieve our long-term cash goals. With our strong cash flow, year-to-date, we have returned over $1 billion in capital to shareholders, including dividends and $500 million in share repurchases.
Speaker Change: This reflects continued improvements around working capital, including our actions to optimize inventory levels continued discipline around capital investments and leveraging our fixed asset base as a result of the benefits from our BD excellence operating system.
Speaker Change: We remain focused on free cash flow conversion and are on track to deliver another double digit step improvement.
Speaker Change: In FY 'twenty, four and remain well positioned to achieve our long term cash goals.
Speaker Change: With our strong cash flow year to date, we returned over $1 billion in capital to shareholders, including dividends and $500 million in share repurchases.
Christopher J. DelOrefice: We improved our net debt position ending Q2 with a net leverage ratio of 2.6 times. Our cash and short-term investments balance was almost $3.2 billion, inclusive of about $2 billion in proceeds from debt refinancing during the quarter that will be utilized to repay maturing debt over the balance of the calendar year.
Speaker Change: We improved our net debt position ending Q2 with a net leverage ratio of two six times.
Speaker Change: Cash and short term investments balance was almost $3 $2 billion.
Speaker Change: Inclusive of about $2 billion in proceeds from debt refinancing during the quarter, there will be utilized to repay maturing debt over the balance of the calendar year collectively.
Christopher J. DelOrefice: Collectively, this positions us well to capitalize on accretive value-creating tuck-in M&A. Moving to our updated guidance for fiscal year 24, the detailed assumptions underlying our guidance can be found in our presentation. As we look ahead for the balance of the year, we remain focused on driving areas of momentum, including Elaris, and continue to monitor transitory market dynamics. For the full year, we are maintaining our organic revenue growth guidance range of 5.5% to 6.25%.
Collectively this positions us well to capitalize on accretive value, creating tuck in M&A.
Speaker Change: Moving to our updated guidance for fiscal year 'twenty for the detailed assumptions underlying our guidance can be found in our presentation.
Speaker Change: As we look ahead for the balance of the year, we remain focused on driving areas of momentum, including our laris.
Speaker Change: We continue to monitor transitory market dynamics.
Speaker Change: For the full year, we are maintaining our organic revenue growth guidance range of five 5% to 625%.
Christopher J. DelOrefice: Based on our Q2 margin performance, we are raising our adjusted diluted EPS guidance range to $12.95 to $13.15 on a reported basis, which is an increase of 11 cents at the midpoint. Strong delivery in Q2 positions us well to achieve our second half earnings growth target. Regarding foreign currency based on current spot rates, the impact of currency has moved modestly since our last update, and for illustrative purposes, we've seen an additional headwind of approximately 40 basis points to full-year revenue from translational currency impact. As you think of the second half of fiscal 24, the following are some considerations.
Based on our Q2 margin performance, we are raising our adjusted diluted EPS guidance range to $12 95 to.
Speaker Change: To $13 15.
Speaker Change: On a reported basis, which is an increase of 11 cents at the midpoint.
Speaker Change: Strong delivery in Q2 positions us well to achieve our second half earnings growth targets.
Speaker Change: Regarding foreign currency based on current spot rates the impact.
Speaker Change: Currency has moved modestly since our last update and for illustrative purposes, we've seen additional headwind of approximately 40 basis points to full year revenue from translational currency impacts.
Speaker Change: As you think of the second half of fiscal 'twenty for the following are some considerations.
Christopher J. DelOrefice: First, regarding revenue, the midpoint of our guidance reflects about 7.5% second half organic sales growth with nearly 250 basis points of contribution from Alaris and just over 5% growth in the remainder of the BD portfolio. We expect Q3 organic growth of at least 6%, with Q4 further accelerating, driven in part by Alaris momentum and improving grow-over dynamics in China. For the full year, our assumptions imply just over 100 basis points of revenue contribution from ALARIS or at least $300 million in FY'24 revenue.
Speaker Change: First regarding revenue the midpoint of our guidance reflects about seven 5% second half organic sales growth with nearly 250 basis points contribution from <unk> and just over 5% growth in the remainder of the BD portfolio.
Speaker Change: We expect Q3 organic growth of at least 6% with Q4 further accelerating driven in part by <unk> momentum.
Speaker Change: And improving grow over dynamics in China.
Speaker Change: For the full year, our assumptions imply.
Speaker Change: Just over 100 basis points revenue contribution from awareness or at least $300 million in FY 'twenty for revenues.
Speaker Change: Second we are well positioned to achieve our updated adjusted operating margin guidance of at least 50 basis points improvement, which implies full year operating margins of at least 24%. We expect Q3 adjusted operating margin will be modestly higher than Q2, given the strong performance.
Christopher J. DelOrefice: Second, we are well positioned to achieve our updated adjusted operating margin guidance of at least 50 basis points of improvement, which implies full year operating margins of at least 24%. We expect Q3 adjusted operating margin to be modestly higher than Q2, given the strong performance in this quarter. We continue to expect margin acceleration in Q4, driven by our BD excellence and continuous improvement efforts. Continued Expense Leverage on Expected Strong Revenue Performance, including ALARIS.
Speaker Change: In this quarter.
Speaker Change: We continue to expect margin acceleration in Q4, driven by our BD excellence and continuous improvement efforts and continued expense leverage unexpected strong revenue performance, including <unk>.
Speaker Change: Lastly, we expect our tax rate to be ratable across Q3, and Q4 at about 15% when considering the midpoint of our updated full year guidance range.
Christopher J. DelOrefice: Lastly, we expect our tax rate to be routable across Q3 and Q4 at about 15% when considering the midpoint of our updated full-year guidance range. In summary, based on the strength of our portfolio and momentum in ALARIS, we have clear line of sight to deliver our fiscal year 24 revenue guidance and another year of strong growth. Our team's execution supported over-delivering on our margin expectations, and as a result, as we enter the second half, we are on track to achieve our full year margin improvement goals and once again increased our fiscal year 24 earnings outlay.
Speaker Change: In summary, based on the strength of our portfolio and momentum in <unk>, we have clear line of sight to deliver our fiscal year 'twenty four revenue guide and another year of strong growth.
Speaker Change: Our team's execution supported over delivering on our margin expectations and as a result, as we enter the second half we are on track to achieve our full year margin improvement goals and once again increased our fiscal year 'twenty four earnings outlook.
Christopher J. DelOrefice: Additionally, we remain well positioned to deliver another year of double-digit free cash flow growth, which increases our capacity to support additional value-creating opportunities, including M&A. Our strategy is demonstrating positive momentum, and we remain well positioned to continue to deliver on our BD 2025 growth objective. With that, let's start the Q&A session. Operator, can you please assemble our queue?
Speaker Change: Additionally, we remain well positioned to deliver another year of double digit free cash flow growth, which increases our capacity to support additional value creating opportunities including M&A.
Speaker Change: Our strategy is demonstrating positive momentum and we remain well positioned to continue to deliver on our BD 2025 growth objectives with that let's start the Q&A session. Operator can you please assemble our queue.
Speaker Change: Thank you at this time, if you have a question. Please press star one.
Operator: Thank you. At this time, if you have a question, please press star 1. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. In order to allow for broad participation, please limit yourself to only one question. Lastly, to provide optimal sound quality, please pick up your handset while you ask your question. Thank you. Our first question will come from Travis Steed with Bank of America.
Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing star Kim.
Speaker Change: In order to allow for broad participation. Please limit yourself to only one question.
Speaker Change: Lastly to provide optimal sound quality. Please pickup your handset while you ask your question.
Speaker Change: Thank you. Our first question will come from Travis Steed with Bank of America.
Travis Lee Steed: Thank you congrats on the good quarter I wanted to ask about the second half ramp both from a revenue and margin perspective. So on the revenue growth you need to top up closer to a kind of above the full year range in the second half kind of what the underlying drivers there are and how much of that is dependent upon the increased demand you saw.
Travis Lee Steed: Hey, congrats on a good quarter. I wanted to ask about the second half ramp, both from a revenue and margin perspective. So on revenue growth, you need to step up closer to kind of above the four-year range in the second half. I'm curious what the underlying drivers there are and how much of that is dependent upon the increased demand you're seeing in ALERIS. And then on the margin side, I'm curious how much of the outperformance in Q2 was one-time versus underlying and how you're thinking about the second half and how much that's kind of de-risked versus three months ago. Thanks a lot.
Travis Lee Steed: And Ah Laris and then on the margin side I'm curious how much of the outperformance in Q2 as was one time versus the underlying.
Speaker Change: And how youre thinking about the second half and how much of Thats kind of derisked versus three months ago and thanks a lot.
Speaker Change: Yeah. Thanks for the question Travis Yeah. So first of all we were pleased with the quarter to your point of revenue one we did see strong acceleration quarter over quarter as expected on revenue.
Christopher J. DelOrefice: Yes, so first of all, we were pleased with the quarter. To your point on revenue, one, we did see strong acceleration quarter over quarter as expected on revenue. We tried to outline the ramp clearly, the back half guidance that our midpoint implies about 7.5% growth, but when you unpack that with the momentum that we have in ALARIS, we now expect nearly 250 basis points of contribution to our second half growth. That would put us at at least $300 million for the full year.
Speaker Change: We tried to outline the Ram clearly the back half guidance that our midpoint implies about seven 5% growth, but when you unpack that with the momentum that we have an awareness. We now expect nearly 250 basis points contribution to our second half growth.
Speaker Change: Would put us at least $300 million for the full year.
Christopher J. DelOrefice: So if you strip that out, the rest of the BD portfolio has to perform at just over 5%. And we feel confident in that. We have strong areas of momentum. I think one thing that you saw in our core performance this quarter was core consumables that are anchored against the core of healthcare performing really well as you see strong utilization in the healthcare system. We continue to see great momentum in areas like PUREWIC driving strong outsized double-digit growth in that platform, and momentum in PVD. And so there are a lot of pockets of strength that we'll continue to build on there.
Speaker Change: So if you strip that out the rest of the BD portfolio has to perform at just over 5%.
Speaker Change: We feel confident in that we have strong areas of momentum I think one thing that you saw in our core performance this quarter was.
Speaker Change: Our core consumables that are anchored against the core of health care are performing really well as you see strong utilization in the health care system.
Speaker Change: We continue to see great momentum in areas like a pure wick driving strong outsized double digit growth in that platform momentum in TVD and so theres a lot of pockets of strength that will continue to build on there from a margin standpoint.
Christopher J. DelOrefice: From a margin standpoint, so first the drivers, the margin that we articulated at the start of the year has played out as expected. To your point, we had really strong execution in the quarter. This is driven by our cost improvement initiatives and the momentum on BD excellence. So we over delivered two quarters in a row, and we're well on track to deliver the full year, which is at least 50 basis points increase year over year.
Speaker Change: So first the drivers, though more margin that we articulated at the start of the year have played out as expected to your point, we had really strong execution in the quarter.
Speaker Change: This is driven by our cost improvement.
Speaker Change: <unk> the momentum on BD excellence.
Speaker Change: So we over delivered two quarters in a row and we're well on track to deliver the full year, which is at least 50 basis points increase year over year were just over 24% as you think of the performance in the quarter. It really wasn't one thing.
Christopher J. DelOrefice: We're just over 24%. As you think of a performance in the quarter, it really wasn't one thing. I would just say strong execution throughout, and we remain focused on executing in the back half of the year. I think the important thing is that in the back half of the year, there were questions about the ramp.
Speaker Change: Say strong execution throughout and we remain focused on executing in the back half of the year I think the important thing is in the back half of the year. There were questions about the ramp Q2 was a strong signal that we're well on track as a matter of fact, one simple way to think of this is our first half growth gross margin was about 52%.
Christopher J. DelOrefice: Q2 is a strong signal that we're well on track. As a matter of fact, one simple way to think of this is that our first half growth gross margin was about 52%. We know we had those transient one-time items, the outsized FX, and then the decision we made last year to reduce inventory levels, which improved strong cash flow. Those are worth over 200 basis points. Those are completely behind us as we move to the second half.
And we know we had those kind of trends you're in one time items. The outsized FX and then the decision we made last year to reduce inventory levels, which improves strong cash flow.
Speaker Change: Those are worth over 200 basis points those are completely behind us as we move through the second half you add that to the 52% and you're basically where we need to be in the back half already. So we just have to continue the strong cost improvement. In addition to that we lap the outsized inflation.
Christopher J. DelOrefice: You add that to the 52%, and you're basically where we need to be in the back half already. So we just have to continue the strong cost improvement. In addition to that, we've lagged on the outsized inflation. In the front half of the year, that was almost 150 basis points. We cycle through that, and that moderates down very low.
Speaker Change: In the front half of the year that was almost 150 basis points, we cycled through that and that moderates down very low so lot of momentum in terms of how we're advancing margin and then lastly, what I would point to is obviously without <unk> momentum and ramp through Q3, and Q4, you get a bit of what I would call outsized leverage on the revenue.
Christopher J. DelOrefice: So a lot of momentum in terms of how we're advancing margin. And then lastly, what I would point to is obviously with that hilarious momentum and ramp through Q3 and Q4, you get a bit of what I would call outsized leverage on revenue. That's also worth about 150 basis points in the back half. As a matter of fact, our OPEX expenditures are not going down. They're about flat. They're even up slightly. So it's not about cost reductions in OPEX. It's all about top-line leverage, which we feel good about.
Speaker Change: That's also worth about 150 basis points in the back half.
Speaker Change: It's a matter of fact, our opex expenditures are not reducing thereabout flat or even up slightly so it's not about cost reductions.
Speaker Change: Opex, it's all about the top line leverage, which we feel good about.
Christopher J. DelOrefice: Great. Thanks a lot. A great answer.
Speaker Change: Great. Thanks, a lot great answer.
Speaker Change: Well go next to Robbie Marcus with Jpmorgan.
Operator: We'll go next to Robbie Marcus with J.P. Morgan.
Robert Justin Marcus: Oh, great. Thanks for taking the questions and for the nice quarter. I'll try and ask one that answers a couple things.
Robert Justin Marcus: Oh, great. Thanks.
Robert Justin Marcus: Thanks for taking the questions and nice quarter.
Robert Justin Marcus: I'll try and ask one that answer is a couple of things.
Robert Justin Marcus: You know, as you look at the balance of the year, you said you just needed 5% in the base business. So, if we look at the second quarter, excluding the urology payment and ALARIS, what did the base business do so we could get that kind of comparison? And then maybe while you're at it, speak to some of the underlying trends. For example, in farm systems and MMS, where results came in a little lower, but it sounds like you're very confident about the rest. Thanks a lot.
Robert Justin Marcus: As you look at the balance of the year. You said, you just need 5% in the base business. So if we look at second quarter, excluding the urology payment and allows us what is the base business do.
Robert Justin Marcus: So we could get that kind of comparison.
Robert Justin Marcus: And then maybe while you're at it speak to some of the underlying trends.
Robert Justin Marcus: <unk>.
Robert Justin Marcus: Pharm systems, and MMS, where.
Robert Justin Marcus: Results came in a little lower but it sounds like you're very confident for the rest of the year. Thanks a lot.
Thomas E. Polen: Hey, thanks, Robin. Good morning.
Hey, Thanks, Rob and good morning.
Speaker Change: So I think as we look at the at the quarter and as we look forward to the year, we're really feel really good about the momentum and the diversity of Bd's portfolio and I'd say as you look at the areas across the company, we see particular strength in medical and intervention in the life science businesses that are focused in the health care provider Spa.
Thomas E. Polen: So I think as we look at the quarter and as we look forward to the year, we feel really good about the momentum and the diversity of BD's portfolio. And I'd say, as you look at the areas across the company, we see particular strengths in medical and intervention and the life science businesses that are focused in the healthcare provider space, which are benefiting from strong utilization across the board. You can see our volumes here.
Speaker Change: <unk> right that are benefiting from strong utilization across the board you can see our volumes. If you compare volumes this year versus last year, you're seeing strong growth.
Thomas E. Polen: If you compare volumes this year versus last year, you're seeing strong growth from a volume perspective. And that's, of course, being supplemented by our very strong innovation pipeline as well. That's allowing us that the strength of our diverse portfolio is allowing us to overcome what we see as transitory market dynamics that you're seeing across companies in the life science research area, as well as in the B2B farm systems marketplace, where you're seeing destocking in certain areas.
Speaker Change: From a volume perspective, and that's of course being supplemented by our very strong innovation pipeline as well, that's allowing us that strength of our diverse portfolio is allowing us to overcome what we see as transitory market dynamics that youre seeing across companies.
Speaker Change: Companies in the life Science research area as well as in.
Speaker Change: In the B to B Pharm systems marketplace, where you're seeing destocking in certain areas with that said, we're seeing really strong growth continue right around double digit growth in biologics biologics are now over 40% of our Pharm systems business. So we feel really good about that and that that percentage and weighting is only incur.
Thomas E. Polen: With that said, you know, we're seeing really strong growth continue right around double-digit growth in biologics. Biologics are now over 40 percent of our farm systems business. So we feel really good about that and that that percentage and weighting are only increasing towards a billion dollars of biologic sales in that area. And so as we think about that, one of the strengths of BD's portfolio is those puts and takes across and being able to deliver in multiple different environments, you know, really strong revenue. Chris, anything to add from
Speaker Change: Leasing towards $1 billion of biologic sales in that area and so as we think about that as one of the strengths of Bd's portfolio is is those puts and takes across and being able to deliver in multiple different environments. You know really strong revenue performance, so Chris anything to add from.
Christopher J. DelOrefice: Now, I would just add that I think Q2 is certainly representative of a growth rate that we need. We feel good about that. There are all kinds of puts and takes in the P&L.
Chris: I'd just add I think Q2 is certainly representative of the growth rate that we need we feel good about that theres all kinds of puts and takes in the P&L I mean, it just <unk>.
Christopher J. DelOrefice: I mean, ALERIS was a modest contribution. It wasn't significant. It's really predominant in the second half, and that'll be a strong driver for us. I articulated the second half drivers. Keep in mind in Q2, you had some of these other negative comps, right? You mentioned licensing.
Chris: <unk> was a modest contribution it wasn't significant it's really most predominant in the second half and that'll be a strong driver for us I articulated the second half drivers keep in mind in Q2, you had some of these other negative comps right. You mentioned licensing there was also a licensing headwind that was in our life Sciences business.
Christopher J. DelOrefice: There was also a licensing headwind in our life sciences business, and we were cycling through some very large capital installations. That's a space that we still feel good about. Customer interests have strong momentum, and there were some timing dynamics there with the launch of our technology and BDB and a really strong install result in the quarter. So net-net, you know, there's always lots of puts and takes. The 5% is something that we're confident in as we think of the second half. Great.
Chris: And we were cycling through some very large capital installed so that's a space that we.
Chris: We still feel good about customer interests have strong momentum and there were some timing dynamics there with.
Chris: The launch of our technology, and BBB and a really strong install result in the quarter. So net net there's always lots of puts and takes the 5% is something that were confident and as we think of the second half.
Christopher J. DelOrefice: Great. Thanks a lot. I appreciate it. Thank you, Robbie.
Speaker Change: Great. Thanks, a lot I appreciate it thank you Ravi.
Speaker Change: We'll go next to Vijay Kumar with Evercore.
Operator: We'll go next to Vijay Kumar with Evercore.
Vijay Muniyappa Kumar: Good morning Vijay.
Vijay Muniyappa Kumar: Hi guys, thanks for taking my question. Good morning, Tom and Chris.
Vijay Muniyappa Kumar: Hi, guys. Thanks for taking my question. Good morning, common crest I guess my one question sure.
Vijay Muniyappa Kumar: I guess my one question here is on Alaris. The $300 million, Tom, can you give us a sense of what the implied exit rate number is in Q4 for Alaris? Because I understand from a growth perspective, it might be a little tricky. I know you have some upgrades going on. What is the dollar revenue number implied for Q4? And then I know Alaris was raised from $200 to $300, but the organic for fiscal was maintained as a just conservatism. Thank you.
Vijay Muniyappa Kumar: <unk>.
Vijay Muniyappa Kumar: The $300 million com.
Vijay Muniyappa Kumar: Can you give us a sense on what the implied exit create number as in Q4 for Alere I asked because I understand from a growth perspective, it might be a little tricky.
Vijay Muniyappa Kumar: I know you have some upgrades going on what is the dollar revenue number implied for Q4.
Vijay Muniyappa Kumar: I know <unk> was raised from 200 to 300, but the organic for fiscal was maintained is that just.
Speaker Change: Conservatism. Thank you.
Thomas E. Polen: Yeah, thanks for the question. So first off, we are really happy that we delivered on our number one priority last year, which was the clearance of the BD ALARIS system. And we said our number one priority for this year became the relaunch of ALARIS and remediation and return to it being a contributing growth driver. And we're certainly delivering on that goal, like we did last year. I'm really proud of our manufacturing team. Hopefully, you heard it in our prepared remarks, right?
Speaker Change: Yeah. Thanks for the question.
Speaker Change: So first off we are really happy that we delivered on our number one priority last year, which is the clearance of the <unk> system and we said our number one priority for this year became the relaunch of our Laris and remediation and return to it being a contributing growth driver and we're certainly delivering exactly on that goal.
Speaker Change: Did last year.
Speaker Change: Proud of our manufacturing team.
Speaker Change: Hopefully you heard it in our prepared remarks right. We went from clearance at the end of Q4 to this past quarter Q2, setting an all time record in both the production and shipment numbers of a laris that's a combination.
Thomas E. Polen: We went from clearance at the end of Q4 to this past quarter, Q2, setting an all-time record for both the production and shipment numbers of Alaris. That's a combination of sale and remediation, but it really reflects that core manufacturing excellence capability that BD has, which we think is best in class and industry, and this is a great example of it. We continue to get really positive customer feedback. We've got positive contract momentum, and as you heard, we've got plans progressing for our next 510K submission later this calendar year, which will begin to build new innovations on the back of the 510K that we got cleared in Q4.
Speaker Change: The nation for sale and remediation, but it really reflects that core manufacturing excellence capability that BD has which we think is best in class and industry and he is a great example of it we continue to get really positive customer feedback, we've got positive contract momentum and as you heard we've got plants progressing for our next five years.
Speaker Change: K submission.
Speaker Change: Later, this calendar year, which will begin to continue to build new innovations.
Speaker Change: On the back of the 500 10-K that we got cleared in AR in Q4. So as we think about next year to your question, we don't put out quarterly guidance by by product line by any means but what I would say is that as Chris said, our current guide implies as you said over 300 actually closer to $3 50 for the year.
Thomas E. Polen: So as we think about next year, to your question, we don't put out quarterly guidance by product line by any means, but what I would say is, as Chris said, our current guide implies, as you said, over 300 actually, closer to 350 for the year, and we've said before that we expect certainly FY25 to be at least at our historical run rate, which you kind of think of as 400. Anything beyond that, we'll get into as we get into FY25 guidance, but clearly, our performance this year is positioning us really well towards that previously stated goal. The only thing...
Speaker Change: And we've.
Speaker Change: We've said before that we expect certainly FY 'twenty five to be at least at our historical run rate right, which you kind of think of as 400.
Speaker Change: Anything beyond that we will get into as we get into FY 'twenty five guidance, but clearly outperformance. This year is positioning us really well towards that previously stated goal.
Christopher J. DelOrefice: You know, the only thing, just a small thing I would add, we did say that for Q3, you should expect total growth inclusive of layers of at least six. And then you would expect a sequential step-up in Q4. So when you think of that step-up, a portion of that is going to be Elaris. There's also the China grow-over favorable comp that we'll have, but Elaris is a portion of that. Thanks for the question, Vijay.
Speaker Change: The only thing just small thing I would add we did say that for Q3, you should expect total growth inclusive of layers of at least six.
Speaker Change: And then you would expect a sequential step up in Q4, So you think of that step up.
Speaker Change: A portion of that is going to be <unk>. There's also the.
Speaker Change: China grow over a favorable comp that will have Polaris as a portion of that.
Speaker Change: Thanks for the question Thanks Richard.
Speaker Change: We will go now until everybody wholesome with Wells Fargo.
Operator: We'll go now to Larry Biegelsen with Wells Fargo.
Lawrence H. Biegelsen: Good morning. Thanks for taking the time to answer the question. And congrats on a nice quarter here. Morning, Chris, I know it's really early, but I would love to hear your confidence in the 25% operating margin goal in fiscal 2025. And are there items right now we should be aware of, such as TSA rolling out or an increase in the tax rate that would make double-digit EPS growth challenging next year? Thanks for taking the time to answer my question. Yeah, thanks, Larry. Good, good question.
Speaker Change: Good morning, Thanks for taking the question and congrats on a nice quarter here. Good morning, Hey, Chris I know, it's really early but love to hear your confidence in the 25% operating margin goal in fiscal 2025 and are there items right now we should be aware of such as TSA rolling off or increase in the tax rate.
Speaker Change: That would make double digit EPS growth challenging next year. Thanks for taking the question.
Christopher J. DelOrefice: Yeah, thanks, Larry. Good question. Yeah, first of all, to your point, it's a little early to get into 2025. TSAs are not material.
Chris: Yes. Thanks, Larry Good question, Yeah first of all to your point, it's a little early to get into 2025 TSA is not material. That's a normal dynamic that happens as a matter of fact year over year were down so we're actually absorbing that already.
Christopher J. DelOrefice: That's a normal dynamic that happens. As a matter of fact, year over year, we're down. So we're actually absorbing that already. And by the time you get through this year, it's not substantive.
Speaker Change: And by the time you get through this year, it's not substantive.
Christopher J. DelOrefice: The tax dynamics and things like that are evolving. We'll share more at a future date. But I think the key thing is we remain committed to our BD 2025 goals. That remains unchanged, specifically operating margin. I'm glad you mentioned that.
Speaker Change: The tax dynamics and things like that are evolving we'll share more at a future date I think the key thing is as we remain committed to our BD 2025 goals that remains unchanged specifically operating margin I'm glad you mentioned that I just think what we've delivered through the first half of this year the momentum we have with pdx.
Christopher J. DelOrefice: I just think what we've delivered through the first half of this year, and the momentum we have with BD Excellence through the back half of this year sets us up nicely with a strong exit rate that gives us confidence in delivering 25% by 2025. I think the big thing that you'll see is the progression from that improvement coming largely from gross margin. So we have really great momentum inside on our improving waste, and improving yield in our manufacturing lines that will drive continued momentum there.
Speaker Change: <unk> through the back half of this year sets us up nicely with a strong exit rate that gives us confidence in delivering 25% by 2025 I think the big thing that Youll see is the progression from that improvement coming from largely gross margin. So we have really great momentum inside on our.
Speaker Change: Our improving waste improving yield and our manufacturing lines that will drive continued momentum there and that'll be a catalyst beyond 2025, as we get to the point that we talk about that too that will be very positive helped facilitate reinvestment and continue to drive the topline growth as well.
Christopher J. DelOrefice: And that'll be a catalyst beyond 2025, as we get to the point that we talk about that too. That'll be very positive, help facilitate reinvestment, and continue to drive top-line growth as well. Thanks for the questions.
Speaker Change: Thanks for the question.
Speaker Change: Thank you.
Speaker Change: Well go now to Matthew Taylor with Jefferies.
Operator: We'll go now to Matthew Taylor with Jeffrey.
Matthew Taylor: Good morning, Matt.
Matthew Charles Taylor: Good morning. Hi, thanks for taking the question.
Matthew Taylor: Good morning, Hi, Thanks for taking the question.
Matthew Taylor: So just because there's a lot of focus on on the phasing and the ramp through the second half of the year I guess, you gave us some math and some confidence in that I was wondering if you could take the other side of the coin and maybe talk about.
Matthew Taylor: Any risks that you see to that ramp I mean, what would have to go wrong for you not to hit this express progression and revenue acceleration and margin expansion.
Matthew Taylor: Yeah.
Speaker Change: Yeah. Thanks for the question I guess, so two things one on margin.
Matthew Charles Taylor: So just because there's a lot of focus on the phasing and the ramp through the second half of the year, I guess you gave us some math and some confidence in that. I was wondering if you could take the other side of the coin and maybe talk about any risks that you see to that ramp. I mean, what would have to go wrong for you not to hit this expressed progression of revenue acceleration and margin expansion?
Speaker Change: A margin a lot of momentum comes from from two things like I shared right. One we just we just exit those one timers in the first half so high confidence that's done it's behind US. The second thing is our cost improvement initiatives with the when you think of a cap and roll period in inventory, we have strong line of sight to that and we already know the embedded.
Speaker Change: Inflation dynamics that are all locked up so.
Speaker Change: When we have a high degree of confidence in what's flowing through gross margin and then that operating margin again as you get natural leverage on top of that from the growth expansion in Q2, which we also feel good about the momentum of <unk> as part of that kind of outsized back half growth.
Christopher J. DelOrefice: Yeah, thanks for the question. I guess so two things, one on margin. If you think of margin, a lot of the momentum comes from two things, like I shared, right? One, we just we just exit those one-timers in the first half.
Christopher J. DelOrefice: So high confidence that's done; it's behind us. The second thing is our cost improvement initiatives with the when you think of a cap and roll period and inventory, we have a strong line of sight to that. And we already know the embedded inflation dynamics that are all locked up.
Speaker Change: And we have strong line of sight to.
Speaker Change: To that progression, so really with where we sit in a year, where we're feeling good about that obviously, we continue to monitor the market dynamics that we touched on within the quarter. That's.
Christopher J. DelOrefice: So we have a high degree of confidence in what's flowing through gross margin. And then that operating margin, again, you get natural leverage on top of that from the growth expansion in q2, which we also feel good about the momentum of Alaris is part of that kind of outsized back half growth. And we have a strong line of sight to that progression. So really, with where we sit in the year, we're feeling good about that.
Christopher J. DelOrefice: Obviously, we continue to monitor the market dynamics that we touched on in the quarter. That's something that, you know, we always look for other levers and opportunities to deliver for the full year, but that's probably the thing that we'll continue to watch.
Speaker Change: That's something that's.
Speaker Change: We always look for other levers and opportunities to deliver the full year, but that's probably the thing that will continue to watch.
Speaker Change: That makes sense.
Christopher J. DelOrefice: Thanks for the question. Oh, sure. I just want to ask a follow-up. You mentioned in the presentation some enhancements to ALARIS and PIXIS, so I was hoping you could just talk about the importance of those changes.
Speaker Change: Sure go ahead.
Speaker Change: I just want to ask a follow up you mentioned in the presentation. Some enhancements to allow us and pyxis I was hoping you could just talk about the importance of those submissions.
Matthew Charles Taylor: Yeah, sure. Happy to do it, Matt.
Speaker Change: Yeah sure happy to Matt.
Speaker Change: So on <unk>.
Speaker Change: The only share a certain level of information on those at this time when it keeps some of that.
Matt: Price for our customers in the market as we as we actually launch them, but on a laris, we're really happy to be back at the innovation cadence I think when we get the clearance not only are we happy to be back servicing our customers and driving growth and getting after a mediation, but we're happy to immediately jump back into the innovation cadence and you can see our teams.
Thomas E. Polen: So on Olaris, and we'll only share a certain level of information on those at this time. We want to keep some of that surprise for customers in the market as we actually launch them. But on Olaris, we're really happy to be back on the innovation cadence. I think when we got the clearance, not only were we happy to be back servicing our customers and driving growth and getting after remediation, but we were happy to immediately jump back into the innovation cadence. And you can see our team didn't hesitate in doing that.
Matt: Hesitate in doing that so the next five 10-K submission on layers. Later this calendar year will include customer benefits.
Thomas E. Polen: So the next 510k submission on Olaris later this calendar year will include customer benefits, such as over-the-air updates for that for software upgrades, advanced cybersecurity features, as well as a number of other components, as well as making sure we continue to keep that file updated as part of our compliance strategy. So I'm really excited about those. And on PIXIS, there hasn't been a new PIXIS instrument; there have been software upgrades, but there hasn't been a new PIXIS instrument, certainly since we've owned Carefusion, and it's been more than 15 years.
Matt: Such as over the air has planned for that for software upgrades advanced Cyber security features as well as a number of other you know.
Matt: Components as well as making sure we continue to keep that file updated as part of our compliance strategy. So that's really excited about those and on pyxis there hasn't been a new pyxis instrument theres been software upgrades, but hasn't been a new pyxis instrument certainly since we've owned Carefusion and it's it's been more than 15 years.
Matt: And so the new pyxis.
Thomas E. Polen: And so the new PIXIS looks different. It's got, so it's a new hardware platform that we'll be building off of. It significantly advances our cloud strategy and connectivity, as well as continuing with advanced analytics, as well as hardware features built into that. So it's a significant new platform that we'll be launching and investing in to continue to serially innovate upon over the next many, many years. But we're excited about the first launches of that plan for next year.
Matt: Looks different it's got.
Matt: It's a new hardware platform that we'll be building off of its significantly advances, our cloud strategy and connectivity as well as <unk>.
Matt: <unk> with advanced analytics as well as hardware features built into that so it's a significant new platform that will be launching and investing in to continue to serially innovate upon over the next the next many many years. So we're excited about the first launches of that plan for next year.
Thomas E. Polen: I'll just say the other thing is that, you know, we do continue to invest across our connected medication management portfolio, which is obviously highly unique in the industry. And it's one of those questions we get asked about connected care and how we think about it, because it can often be used as a buzzword. You know, our approach to connected care has been to look at major healthcare processes, and we look at how we use data and connected solutions to then transform them.
Matt: I would say just say the other thing is is that we do continue to invest across our connected medication management portfolio, which is obviously highly unique in the industry and it's one of those when we get asked the question about connected care and how we think about it 'cause it can often be used as a buzzword.
Matt: Our approach to connected care has been we look at major health care processes, and we look at how we use data and connected solutions that and transform them and what we've done in med management right from software in the pharmacy for.
Thomas E. Polen: And what we've done in medication management, right, from software in the pharmacy for compounding and inventory management to PIXUS on the floor to ALARIS and our health site platform, which brings that site line or visibility to all the data coming from all of our systems to improve processes. It's a great example of how we're doing that. Obviously, we talked about continuing to innovate ALARIS, continuing to innovate on PIXUS, but we're also continuing to innovate on other elements of that.
Matt: For compounding and inventory management to pyxis on the Florida alert and our health site platform, which brings that sight line of visibility to all the data coming from all of our systems to improve processes. It's a great example of how we're doing that obviously, we talked about continuing to innovate to layer is continuing to innovate on Texas, but we're also continuing to innovate.
Matt: On other elements of that and we shared another good example of that earlier today one of the upcoming launches.
Thomas E. Polen: And we shared another good example of that earlier today in one of the upcoming launches. And we're taking now not only our Pyxis platform but two of the acquisitions we made over the last couple of years, our MedBank platform, which is basically Pyxis for the non-acute, a benchtop unit, and GSL, and we're putting that data now through health sites so that people will be able to see end-to-end visibility of medications from PIXIS to MedBank to GSL, all integrated.
Matt: We are taking now not only our pyxis platform, but two of the acquisitions. We made over the last couple of years, our Med Bank platform, which is basically pyxis for the non acute a bench top unit and GSL and were.
Matt: Putting that data now in through health site. So that people will be able to see end to end visibility of medications from pyxis med banked that GSL all integrated so if youre an idea and you are trying to manage across the care continuum as you've been acquiring assets. There BT is going to be a company that enables you to do that very uniquely as part of our strategy.
Thomas E. Polen: So if you're an IDN, you're trying to manage across the care continuum as you've been acquiring assets there. BD is going to be a company that enables you to do that very uniquely as part of our strategy. So yeah, thanks for the question, Matt.
Speaker Change: So yeah. Thanks for the question Matt.
Thomas E. Polen: All right. Awesome. Thanks, Tom.
Speaker Change: Alright, Thanks, Bob.
Speaker Change: Thank you we'll go next to Matt <unk> with Barclays.
Operator: Thank you. We'll go next to Matt Miksic with Barclays.
Matt: Matt Good morning.
Matt: Hey, there. Thanks, so much yes, I was on mute sorry for that so just.
Matt: Just one question.
Matt: Kind of a high level question, Chris you talked about.
Matt: So the acceleration in growth, which.
Matt: As evident in the improvement in margins, which you had kind of laid out early in the year.
Matt: I think when folks look at the results we're seeing.
Matt: Really strong.
Matt: Margin growth and strength in the quarter and and what I, just mentioned and what you've described sequential acceleration.
Speaker Change: Sort of.
Matt: In an environment, where volumes have been stronger across a bunch of med tech businesses.
Matt: Maybe a touch closer to in line.
Matt: Even after adjusting for FX, and so I guess <unk>.
Matt: News and Hershey Newsround Claris is great and on the other.
Matt: And lines that you talked about isn't great was there anything that kind of surprise.
Matt: <unk>.
Speaker Change: On the downside something that was remained challenging longer you should call out and maybe how you see that playing out the rest of the year. Thanks, so much.
Thomas E. Polen: Yeah, I'll take that Matt. So no, you know, we feel good. It fits right in line with what we what I described before, which was you're seeing the diversity of our portfolio, which is a real strength for the company. Where again, those, you know, the medical products, intervention, life science businesses that are exposed to healthcare utilization, healthcare provider space, right, the vacutainers, the diagnostic systems, products, etc, along with intervention and all the medical products used in that they're benefiting from that strong utilization in our innovation pipeline that are enabling us to offset what our transitory broad dynamics in the people are seeing in the life science research space and the b2b pharma systems with some destocking, particularly in in vaccines and anticoag.
Matthew Stephan Miksic: Yeah, I'll take that, Matt. So no, you know, we feel
Speaker Change: I'll take that Matt.
Operator: We feel good it fits right in line with what we what I described before which was youre seeing the diversity of our portfolio, which is a real strength for the company.
Matt: Whereas again those you know the medical products intervention life science businesses that are exposed to.
Matthew Stephan Miksic: Health care utilization health care provider space, the vacuum cleaners, the diagnostic systems products et cetera, along with intervention and all the medical products Houston that they're benefiting from that strong utilization in our innovation pipeline that are enabling us to offset what are transitory broad dynamics. Indeed that people are seeing in the life science.
Matthew Stephan Miksic: Search space and the BTB pharma systems with some destocking, particularly in in vaccines and anti coagulant. So we feel really good about those businesses as well as I said, we're seeing strong double digit growth right around double digit growth in biologics in Pharm systems, We've got a great pipeline there.
Thomas E. Polen: So, you know, we feel really good about those businesses as well. As I said, we're seeing strong double-digit growth or right around double-digit growth in biologics and farm systems. We've got a great pipeline there with key launches later this year, turning over to customers Libertas and Evolve for them to start doing trials on. And in our B2B space, you know, we're still in a market that's going through a cycle that we certainly see some positive signs on with NIH funding, higher visibility.
Christopher J. DelOrefice: With key launches later this year, turning over to customers' liver tox and evolve.
Thomas E. Polen: For them to start doing trials on we see.
Thomas E. Polen: In our.
Thomas E. Polen: Overall, we're seeing the FACTS Discover Now platform; we just launched the three and four lasers, so that's adding access to a more cost-effective option for customers to get into that transformational technology. So we're excited by that, and we're still over delivering, I think, versus what you're seeing in comps from others in some of those spaces. And so as those markets, you know, end up rebounding again, which we see that will happen over time, we think we're really well positioned there as well, which is just going to help our overall growth. And again, in the meantime, that diversified portfolio strength is allowing us to do very well, both on revenue and clearly on a margin.
Thomas E. Polen: <unk> space, we're still in a market that's going through a cycle that we certainly see some positive signs on with NIH funding, having higher visibility.
Thomas E. Polen: Overall, we're seeing that the fax discover now platform. We just launched the three and four laser so that's adding access to our more cost.
Thomas E. Polen: Effective option for customers to get into that transformational technology. So we're excited by that and were still over delivering I think versus what youre seeing comps from others and some of those spaces and so as those markets.
Thomas E. Polen: End up rebounding again, which we see that that forthcoming overtime. We think we're really well positioned there as well, which is just going to help our overall growth and again in the Meanwhile, that diversified portfolio strength is allowing us to do very well.
Thomas E. Polen: On revenue and clearly on a margin perspective.
Speaker Change: Great. Thank you Tom.
Thomas E. Polen: Okay.
Thomas E. Polen: And that will conclude today's question and answer session. At this time I would like to turn the floor back over to Tom Polen for any additional or closing comments.
Operator: And that will conclude today's question and answer session. At this time, I'd like to turn the floor back over to Tom Polen for any additional or closing comments. Okay, thank you all.
Thomas E. Polen: Thank you, Operator, and thank you, everyone, and thank you for your questions and interest in BD. We look forward to sharing our progress towards delivering our BD 2025 goals and increased outlook for FY24 on our next call. Have a great rest of the day.
Thomas E. Polen: Okay. Thank you operator, and thank you everyone and thank you for your questions and interest in BD, we look forward to sharing our progress towards delivering our BD 2025 goals and increased outlook for FY 'twenty four on our next call have a great rest of the day.
Speaker Change: Thank you. This does conclude this audio webcast on behalf of BD. Thank you for joining today. Please disconnect. Your lines at this time and have a wonderful day.
Operator: Thank you. This does conclude this audio webcast. On behalf of BD, thank you for joining us today. Please disconnect your lines at this time and have a wonderful day.
Operator: Okay.
Operator: Okay.
Operator: [music].
Operator: Okay.
Operator: [music].