Q3 2024 Becton Dickinson & Co Earnings Call

Operator: Hello, and welcome to BD's third quarter fiscal 2024 earnings conference call. You can access the call at investors.bd.com or by phone at 800-839-2385 for domestic calls and area code 1-402-220-7203 for international calls. For today's call, all parties have been placed in a listen-only mode until the question and answer session begins. I will now turn the call over to Greg Rodetis, Senior Vice President, Treasurer, and Head of Investor Relations. Please go ahead.

Unknown Executive: Hello, and welcome to Beatty's third quarter fiscal 2024 earnings conference call. At the request of Beatty, today's call is being recorded and will be available for replay on Beatty's investor relations website at investors.bd.com or by phone at 808-39-2385 for domestic calls and area code 1402-220-7203 for international calls.

Hello, and welcome to <unk> third quarter fiscal 2024 earnings conference call.

At the request of BD today's call is being recorded and will be available for replay replay on BD <unk> Investor Relations website.

At investors that BD dot com.

Or by phone at 800, 839 to 385 for domestic calls and area code 140 to 2207203 for international calls.

Unknown Executive: For today's call, all parties have been placed in a listen-only mode until the question-and-answer session.

For today's call all parties have been placed in a listen only mode until the question and answer session.

Greg Rodetis: I will now turn the call over to Greg Rodetis, Senior Vice President, Treasurer, and Head of Investor Relations. Please go ahead.

I will now turn the call over to Greg ROE, Dennis Senior Vice President Treasurer and.

Greg ROE: Head of Investor Relations. Please go ahead.

Greg ROE: Good morning, and welcome to Bd's earnings call Gregory Senior Vice President Treasurer, and head of Investor Relations. Thank you for joining US. This call is being made available via audio webcast at BD dotcom.

Greg Rodetis: This call is being made available via audio webcast at BD.com. Earlier this morning, BD released his results for the third quarter of fiscal 2024. The press release and presentation can be accessed on the IR website at investors.bd.com.

Greg Rodetis: This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the third quarter of fiscal 2024. The press release and presentation can be accessed on the IR website at investors.bd.com. 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, and Rick Byrd, president of the interventional segment. Before we get started, I want to remind you that we will be making forward-looking statements.

Greg ROE: Earlier. This morning, <unk> released its results for the third quarter of fiscal 2024.

Greg ROE: The press release and presentation can be accessed on the IR website at investors diabetes Dot com.

Tom Polen: Meeting today's call are Tom Poland, Beatty's chairman, chief executive officer, and president, and Crystal Arifus, executive vice president and chief financial officer. Following this morning's prepared remarks, Tom and Chris will be joining for Q&A by our segment presidents.

Speaker Change: Leading today's call are Tom Polen, Bd's, Chairman, Chief Executive Officer, and President and Crystal RFS exactly goes 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, Mike Garrison President of the medical segment and brick Byrd President of the interventional segment.

Michael Garrison: Mike Garrison, President of the Medical Segment, and Rick Byrd, President of the Interventional Segment.

Greg Rodetis: Before we get started, I want to remind you that we will be making forward-looking statements. You can read this claim in our earnings release and its disclosures in our SEC filings available on the Investor Relations website. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant fiscal period. Revenue percentage changes are on an FX neutral basis, unless otherwise noted. Reconciliation between GAAP and NAMDAT measures are included in the appendices of the earnings release and presentation.

Speaker Change: Before we get started I want to remind you that we will 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: You can read the disclaimer in our earnings release and the disclosures in our SEC filings available on the Investor Relations website. Specifically, during the quarter, we recorded accruals resulting from recent developments relating primarily to the Italian government's medical device payback legislation, which essentially relate to years prior to the current fiscal year. We are presenting adjusted revenues excluding the impact of these accruals.

Speaker Change: Unless otherwise specified all comparisons will be on a year over year basis versus the relevant fiscal period.

Speaker Change: Revenue percentage changes are on an FX neutral basis, unless otherwise noted.

Speaker Change: Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation.

Tom Polen: Specifically, during the quarter, we recorded our cruel results in from recent developments relating primarily to the Italian government medical device payback legislation, which essentially relates to years prior to the current fiscal year. We are presenting adjusted revenues excluding the impact of these accruals.

Speaker Change: Specifically during the quarter, we recorded accruals, resulting from recent developments relating primarily to the Italian government medical device payback legislation, which essentially relates to years prior to the current fiscal year. We are presenting adjusted revenues excluding the impact of these accruals with that I am very pleased to turn it over the time.

Tom Polen: With that, I am very pleased to turn over the time. Thanks, Greg, and good morning, everyone. We continue to make excellent progress advancing our BD 2025 strategy. This quarter demonstrates the durability of our portfolio and strength of new innovations, delivering mid-single digit or organic revenue growth of 5.2%. Growth was broad-based and reflects strong volume and share gains across the portfolio. Our team executed very well through transitory market dynamics in BDB and PS and macro factors in China. We continue to grow above the market and believe we are extremely well positioned as these markets recover. We have growing momentum from our BD excellence operating system that enabled us to deliver significant sequential and year-over-year adjusted gross margin increases.

Thomas E. Polen: With that, I am very pleased to turn it over to Tom. Thanks, Greg, and good morning, everyone. We continue to make excellent progress advancing our BD2025 strategy. We continue to grow above the market and believe we are extremely well positioned as these markets recover. This drove strong operating margin expansion, contributed to over 18% adjusted earnings per share growth, and is allowing us to raise our earnings guidance once again. Our team's excellent execution also drove over 100% year-to-date growth in free cash flow, reaching over 80% free cash flow conversion year-to-date, with margins, earnings, and cash flow all ahead of plan. Critical care significantly advances our connected care strategy to use AI and digital tools to help clinicians deliver more efficient and higher quality care.

Thanks, Greg and good morning, everyone. We continue to make excellent progress advancing our BD 2025 strategy.

Speaker Change: This quarter demonstrates the durability of our portfolio and strength of new innovations delivering mid single digit organic revenue growth of five 2%.

Speaker Change: Growth was broad based and reflects strong volume and share gains across the portfolio.

Speaker Change: Team executed very well through transitory market dynamics, and BTB and PFS and macro factors in China.

Speaker Change: We continue to grow above the market and believe we are extremely well positioned as these markets recover.

Speaker Change: We have growing momentum from our BD excellent operating system that enabled us to deliver significant sequential and year over year adjusted gross margin increases this.

Tom Polen: This drove strong operating margin expansion, contributed to over 18% adjusted earnings per share growth, and is allowing us to raise our earnings guidance once again. Our team's excellent execution also drove over 100% year-to-date growth in free cash flow, reaching over 80% free cash flow conversion year-to-date, with margins, earnings, and cash flow all ahead of plan.

Speaker Change: This drove strong operating margin expansion contributed to over 18% adjusted earnings per share growth and it's allowing us to raise our earnings guidance once again.

Speaker Change: Our team's excellent execution also drove over 100% year to date growth in free cash flow, reaching over 80% free cash flow conversion year to date with margins earnings and cash flow all ahead of plan.

Tom Polen: As a reminder, our strategy consists of three pillars: driving growth through innovation and tuck-in M&A, simplifying through BD excellence, and empowering our organization with the capabilities and systems to deliver on our strategy. I like to provide updates on each of these this morning, starting with our growth pillar and the critical care acquisition. Things continue to progress well towards the successful close, and as we've gotten to know more members of their team, we only become more excited to welcome them to the BD family. Critical care significantly advances our connected care strategy to use AI and digital tools to help clinicians deliver more efficient and higher quality care.

Speaker Change: As a reminder, our strategy consists of three pillars.

Speaker Change: Driving growth through innovation and tuck in M&A, simplifying through BD excellence and empowering our organization with the capabilities and systems to deliver on our strategy.

Speaker Change: Like to provide updates on each of these this morning star.

Speaker Change: Starting with our growth pillar in the critical care acquisition.

Speaker Change: Things continue to progress well towards a successful close and as we've gotten to know more members of their team we only become more excited to welcome them to the BD family.

Speaker Change: Critical care significantly advances our connected care strategy to use AI and digital tools to help clinicians deliver more efficient and higher quality care.

Tom Polen: Additionally, it adds a high-growth business that is immediately accretive to margins and earnings.

Speaker Change: Additionally, it has a high growth business that is immediately accretive to margins and earnings.

Tom Polen: Turning to several of our most significant long-term growth drivers. To begin with, our connected medication management strategy has strong momentum, with Q3 setting another new all-time record for the number of hilarious pumps shipped in a quarter. The scale of upgrading our fleet is unprecedented, and I'm very proud of the work our teams are doing to support our loyal customer base and deliver ahead of our commitments. Customer feedback has been very positive, and we gained a market position in the quarter. We are now back at our historical quarterly run rate of about $100 million and have built a healthy committed contract backlog, which puts us in a position to be above our historical run rate for FY25.

Thomas E. Polen: Turning to several of our most significant long-term growth drivers. To begin with, our connected medication management strategy has strong momentum, with Q3 setting another new all-time record for the number of Valeris pumps shipped in a quarter. This expands BD in the smart critical care space and creates new opportunities to combine AI-driven monitoring with systems such as infusion technology to simplify nursing workflow and improve patient care.

Speaker Change: Turning to several of our most significant long term growth drivers.

Speaker Change: To begin with our connected medication management strategy has strong momentum.

With Q3, setting another new all time record for the number of Alere as pumps shipped in a quarter.

The scale of upgrading our fleet is unprecedented and I'm very proud of the work our teams are doing to support our loyal customer base and deliver ahead of our commitments.

Speaker Change: Customer feedback has been very positive and we gained market position in the quarter.

Speaker Change: We are now back at our historical quarterly run rate of about $100 million and have built a healthy committed contract backlog, which puts us in a position to be above our historical run rate for FY 'twenty five.

Tom Polen: Our connected medication management portfolio, which includes Hilarious, is just one example of how BD is at the forefront of combining AI, automation, and robotics to improve the core processes that run healthcare. Through our strategy, BD is advancing our leadership in automating the pharmacy, the medication management process, and the microbiology lab. Today, BD has a $4 billion-plus business in healthcare automation and informatics AI, and will increase this to over $5 billion as we complete the acquisition of critical care. This expands BD in a smart critical care space and creates new opportunities to combine AI-driven monitoring with systems such as infusion technologies to simplify nursing workflow and improve patient care.

Speaker Change: Our connected medication management portfolio, which includes Soliris is just one example of how BD is at the forefront of combining AI automation and robotics to improve the core processes that run health care.

Speaker Change: Through our strategy BD is advancing our leadership in automating the pharmacy, the medication management process and the microbiology lab.

Speaker Change: Today, BD has a $4 billion plus business in health care automation and informatics AI and.

Speaker Change: And will increase this to over $5 billion.

Speaker Change: As we complete the acquisition of critical care.

Speaker Change: This expands BD in the smart critical care space and creates new opportunities to combine AI driven monitoring with systems, such as infusion technologies to simplify nursing workflow and improve patient care.

Tom Polen: Looking ahead to 2030, we view healthcare process automation and informatics AI as having the potential to become a business exceeding $7 billion, as we continue to build more connected, automated, and intelligent solutions to transform the core processes underlying care delivery.

Thomas E. Polen: Looking ahead to 2030, we view healthcare process automation and informatics AI as having the potential to become a business exceeding $7 billion as we continue to build more connected, automated, and intelligent solutions to transform the core processes underlying care delivery. Turning to other key platforms, Q3 was the 28th consecutive quarter of double-digit growth in our Pure WIC platform. Given the incredible response from the first Pure Wixflex users, we couldn't be more excited about the impact this will have on patients and their providers, enabling new discoveries in a broader range of fields.

Speaker Change: Looking ahead to 2030, we view health care process automation and informatics AI as having the potential to become a business exceeding $7 billion as we continue to build more connected automated and intelligent solutions to transform the core processes underlying care delivery.

Tom Polen: Turning to other key platforms, Q3 was the 28th consecutive quarter of double-digit growth in our PureWick platform. In our recently launched next generation female external cathar, Purewick Flex, is expected to support this continued momentum. Purwick Flex delivers improved performance for a wider range of body types, both in acute and home care settings. Given the incredible response from the first Purwick Flex users, we couldn't be more excited about the impact this will have on patients and their providers. As I think about Purwick overall, we see this as having the potential to become a billion-dollar franchise by 2030, continuing its double-digit growth momentum.

Speaker Change: Turning to other key platforms Q3 was the 28th consecutive quarter of double digit growth in our peer with platform and our recently launched next generation female external catheter pure wake Flex is expected to support this continued momentum.

Rick: Sure Rick Flex delivers improved performance for a wider range of body types, both in acute and home care settings.

Speaker Change: Given the incredible response from the first peer with flex users we couldn't be more excited about the impact this will have on patients and their providers.

Speaker Change: As I think about pure wake overall, we see this as having the potential to become a billion dollar franchise by 2030, continuing its double digit growth momentum.

Tom Polen: We're also advancing our impact in immune health and oncology, continuing the super cycle of innovation within BD Biosciences, which positions it well as a long-term growth driver. Coming off the landmark BD FACS Discover S8 Cell Sorter launch in FY23, we recently released additional three and four laser configurations, which contain the same new-to-world BD spectral effects and BD Cell View technologies, enabling new discoveries in a broader range of fields. We expect to continue our innovation cadence with our FY25 launch of the BD Facts Discover A8 analyzer, which will provide customers high throughput sample analysis with the same innovative technologies.

Speaker Change: We're also advancing our impact in immune health and oncology continuing this super cycle of innovation within BD, Biosciences, which positions it well, it's a long term growth driver.

Speaker Change: Coming off the landmark BD facts discover <unk> cell sorter launch in FY2023 we recently released additional three and four laser configurations, which contain contain the same noodle world BD spectral FX and BD Stelvio technologies, enabling new discoveries and a broader range of fields.

Speaker Change: We expect to continue our innovation cadence with our FY 'twenty five launch of the BD facts discover a eight analyzer, which will provide customers high throughput sample analysis with the same innovative technologies.

Tom Polen: The combination of BD Facts Discover and our BD Real Blue and Real Yellow reagents were used in the world's first 50 color flow cytometry experiment, which was published this year in the Journal of Cytometry. This serves as a testament to these groundbreaking new technologies. The immune health and oncology space remains a primary focus for research, and as the market returns to growth, we believe our leading technology and portfolio position us well to capitalize on future opportunities in this space.

Speaker Change: The combination of BD facts discover and our BD real blue and real yellow reagents were used in the world's first 50 color flow cytometry experiments, which was published this year in the journal of cytometry.

Thomas E. Polen: This serves as a testament to these groundbreaking new technologies. Finally, within our pharmaceutical systems business, in Q3, biologics drug delivery continued to grow double-digit. Since the start of BD 2025, we've been implementing a strategy to enhance our innovation leadership, expand our manufacturing scale, and prioritize quality excellence to be the preferred partner for biologic drug delivery, and we believe that no other company in medtech is better positioned than BD to capitalize on this trend. First, the majority of biologics that use a prefilled syringe have and continue to be launched in a BD device.

Speaker Change: This serves as a testament to these groundbreaking new technologies.

Speaker Change: The immune health and oncology space remains a primary focus for research and as the market returns to growth, we believe our leading technology and portfolio position us well to capitalize on future opportunities in this space.

Tom Polen: Finally, within our pharmaceutical systems business, in Q3, Biologic Struct Delivery continued to grow double digits. Biologics now represent over 40% of our total pharmaceutical systems revenue, and we see it as a significant growth opportunity, including GLP-1. Since the start of BD 2025, we've been implementing a strategy to enhance our innovation leadership, expand our manufacturing scale, and prioritize quality excellence to be the preferred partner for Biologic Drug Delivery. And we believe that no other company in MedTech is better positioned than BD to capitalize on this trend. First, the majority of biologics that use a pre-filled syringe have and continue to be launched in the BD device.

Speaker Change: Finally within our pharmaceutical systems business in Q3, biologics drug delivery continued to grow double digits.

Speaker Change: Biologics now represent over 40% of our total pharmaceutical systems revenue and we see it as a significant growth opportunity, including G. L. P. One.

Speaker Change: Since the start of BD 2025, we've been implementing a strategy to enhance our innovation leadership expand our manufacturing scale and prioritize quality excellence to be the preferred partner for biologic drug delivery and.

Speaker Change: And we believe that no other company in Med Tech is better positioned in BD to capitalize on this trend.

Speaker Change: First the majority of biologics that use a pre filled syringe have and continued to be launched in the BD device.

Tom Polen: Since 2023, BD has been the chosen partner for 19 out of the 23 new biologic drug approvals that use a pre-filled syringe. Second, as we consider the significant clinical potentials of GLP1, the strength of BD's innovation in this category, and our previously announced capacity expansion, we view GLP1 drug delivery as a potential $1 billion product category by 2030. Today, we serve multiple market leaders, have device contracts with multiple novel GLP-1 therapies, advancing through clinical trials, and beyond novel molecules, we now have over 40 signed GLP-1 biosimilar agreements across our pen, auto-injectors, and syringe platforms. We are actively supporting biosimilars for early generation GLP-1s that are entering the market over the next 12 months.

Speaker Change: Since 2023 BD has been the chosen partner for 19 out of the 23, new biologic drug approvals that use a prefilled syringe.

Speaker Change: Second as we consider the significant clinical potentials of G. O P ones the strength of Bt's innovation in this category and our previously announced capacity expansion, we view <unk> drug delivery as a potential $1 billion product category by 2030.

Speaker Change: Today, we serve multiple market leaders.

Speaker Change: Have device contracts with multiple novel <unk> therapies advancing through clinical trials.

Thomas E. Polen: And beyond novel molecules, we now have over 40 signed GLP-1 biosimilar agreements across our pen, auto-injector, and syringe platforms. We are actively supporting biosimilars for early generation GLP1s that are entering the market over the next 12 months. Outside of GLP-1s, our customers are working to develop next-generation biologics that have the potential to revolutionize care for patients and conditions like Alzheimer's. At the same time, we see trends to enable patient self-treatment that point to the need for wearable on-body injectors, and have provided products to support their clinical trials.

Speaker Change: And beyond novel molecules, we now have over 40 signed G. L. P. One biosimilar agreements across our pen auto injector and syringe platforms.

Speaker Change: We are actively supporting Biosimilars for early generation G. O P ones that are entering the market over the next 12 months.

Tom Polen: Outside of GOP1s, our customers are working to develop next-generation biologics that have the potential to revolutionize care in conditions like Alzheimer's, certain immunological disorders, and types of cancer. Many of these are extremely complex molecules and proteins that will involve significantly greater volumes for injection and higher viscosity compared to therapies presently available in the market. At the same time, we see the trends to enable patient self-treatment that point to the need for wearable on-body injectors. We've developed the BD Libertas and BD Evolve wearable injectors to support the unique delivery needs of these therapies. We're actively supporting multiple customers testing their pipeline molecules with our wearable solutions and have provided products to support their clinical trials.

Speaker Change: Outside of G. L. P ones, our customers are working to develop next generation biologics that have the potential to revolutionize care in conditions like Alzheimer's certain immunological disorders and types of cancer.

Speaker Change: Many of these are extremely complex molecules and proteins that will involve significantly greater volumes per injection and higher viscosity compared to therapies presently available in the market.

Speaker Change: At the same time, we see the trends to enable patient self treatment that point to the need for wearable on body injectors.

Speaker Change: We've developed a BD liver tox and BD evolved wearable injectors to support the unique delivery needs of these therapies.

Speaker Change: We're actively supporting multiple customers testing their pipeline molecules with our wearable solutions and.

Speaker Change: And have provided product to support their clinical trials.

Tom Polen: While this is a longer-term opportunity that we expect to develop in line with drug development timelines, we believe we are well positioned for this future trend and are getting very positive feedback on our platforms. Moving to our Simplification Strategy and BD Excellence, first let me express my gratitude to everyone in our organization who is accelerating BD Excellence through our global supply chain through the completion of over 500 Kaizen events this year. I'd especially like to thank those working in our manufacturing plants and warehouses who improve product quality and reliability for our customers this year while delivering double-digit improvements in both waste reduction and production yield.

Thomas E. Polen: Well, this is a longer-term opportunity that we expect to develop in line with the drug development timeline. Lastly, we continue to empower our organization through strong corporate responsibility and recently issued our FY23 Corporate Sustainability Report. We doubled the number of sites using green electric power and solar power, and we reduced our water usage by 21% and waste by 18% over the same time period.

Speaker Change: Well this is a longer term opportunity that we expect to develop in line with drug development timelines. We believe we are well positioned for this future trend and are getting very positive feedback on our platforms.

Speaker Change: Moving to our simplification strategy and BD excellence.

Speaker Change: First let me express my gratitude to everyone in our organization, who is accelerating BD excellence through our global supply chain through the completion of over 500 kaizen events. This year.

Speaker Change: I'd, especially like to thank those working in our manufacturing plants and warehouses.

Speaker Change: To improve product quality and reliability for our customers this year, while delivering double digit improvements in both waste reduction and production yield.

Tom Polen: We are seeing the outcomes of BD Excellence in accelerating margin progression and delivering strong cash flow. Our plans to reduce our manufacturing network by over 20% remain on track. And as we are consolidating our plant architecture, we're investing in smart factories. Our top 30 sites are already accelerating performance, leveraging smart automation and digital capabilities such as predictive analytics. We're excited about the opportunity to further accelerate manufacturing productivity through the combination of BD Excellence and our Smart Factory Strategy. The momentum in our Simplification programs, including BD Excellence, positions us for success as we finish FY24 and as we look ahead to FY25 and beyond.

Speaker Change: We are seeing the outcomes of BD excellence and accelerating margin progression and delivering strong cash flow.

Speaker Change: Our plans to reduce our manufacturing network by over 20% remain on track.

Speaker Change: And as we are consolidating our plant architecture, we're investing in smart factories.

Speaker Change: Our top 30 sites are already accelerating performance, leveraging smart automation and digital capabilities, such as predictive analytics.

Speaker Change: We're excited about the opportunity to further accelerate manufacturing productivity through the combination of BD excellence and our smart factory strategy.

Speaker Change: The momentum in our simplification programs, including BD excellence positions us for success as we finish FY 'twenty four and as we look ahead to FY 'twenty five and beyond.

Tom Polen: Lastly, we continue to empower our organization through strong corporate responsibility and recently issued our FY23 Corporate Sustainability Report. Notably, in FY23 we reduced scope 1 and 2 greenhouse gas emissions 18% versus our FY19 baseline, surpassing our goal of 13%. We doubled the number of sites using green electric power and solar power, and we reduced our water usage by 21% and waste by 18% over the same time frame.

Speaker Change: Lastly, we continue to empower our organization through strong corporate responsibility and recently issued our FY2023 corporate sustainability report.

Speaker Change: Notably in FY 'twenty, three we reduced scope, one and two greenhouse gas emissions, 18% versus our 2019 baseline surpassing our goal of 13% we.

Speaker Change: We doubled the number of sites using green electric power and solar power and we reduced our water usage by 21% and waste by 18% over the same timeframe.

Tom Polen: In summary, we delivered above-market mid-single digit organic revenue growth and significant margin expansion and cashflow generation. On the strength in the quarter, we are once again raising our adjusted diluted EPS guidance for fiscal 2024 and believe we are well positioned for continued strong financial performance next year. We have leadership positions in many of the most significant trends reshaping health care, positioning us well in FY25 and beyond.

Speaker Change: In summary, we delivered above market mid single digit organic revenue growth and significant margin expansion and cash flow generation.

Speaker Change: On the strength in the quarter, we are once again, raising our adjusted diluted EPS guidance for fiscal 2024, and believe we are well positioned for continued strong financial performance next year.

Chris DelOrefice: We'll now turn it over to Chris to review our financials and outlook. Thanks, Tom, and good morning, everyone. As Tom noted, the quarter's results reflect strong performance across multiple parts of our portfolio, even amid the previously noted transitory market dynamics and macro factors. Importantly, with strong execution of our BD excellence programs, we exceeded our margin, earnings, and cash flow goals. I'll now provide some further insight into our adjusted revenue performance. Two three revenue grew 5.2% organic, driven by volume growth and share gains. Regionally, over 90% of our revenue, which includes our three largest geographies, grew 6% plus organic.

Thomas E. Polen: I'll now provide some further insight into our adjusted revenue performance. Q3 revenue grew 5.2% organically, driven by volume growth and share gain. Regionally, over 90% of our revenue, which includes our three largest geographies, grew 6% plus organically. The strong performance was partially offset by a decrease in China from continued market dynamics.

Chris DelOrefice: The strong performance was partially all set by a decrease in China from continued market dynamics. BD Medical growth was led by MMS with exceptional performance in infusion systems, driven by the BD Allaris return to market and higher utilization of infusion sets. Partially offset by a tough, prior comparison in dispensing. Broad volume growth and share gains across our MDS consumable portfolio in developed markets also contributed to the segment's growth. Farm systems had another quarter of increasing demand with double-digit growth in pre-filled devices for biologic drugs, primarily GLP ones. This growth was offset by transitory market dynamics across the industry, including expected customer inventory destocking.

Thomas E. Polen: BD Medical growth was led by MMS with exceptional performance in infusion systems. However, this growth was offset by transitory market dynamics across the industry, including expected customer inventory destocking. The segment's growth was partially offset by transitory market dynamics in biosciences that resulted in lower market demand for instruments.

Speaker Change: And infusion systems.

Speaker Change: Driven by the BD <unk> returned to market and higher utilization of infusion sets.

Speaker Change: Partially offset by a tough prior year comparison in dispensing.

Speaker Change: Broad volume growth and share gains across our Mds consumable portfolio in developed markets also contributed to the segment's growth.

Speaker Change: Pharm systems had another quarter of increasing demand with double digit growth in pre filled devices for biologic drugs primarily <unk>.

Speaker Change: This growth was offset by transitory market dynamics across the industry, including expected customer inventory destocking.

Chris DelOrefice: BD Life Sciences performance was led by IDS with high single-digit growth in specimen management, which reflects both increased utilization and customer upgrades to higher value products to provide an enhanced patient experience. The segment's growth was partially all set by transitory market dynamics in biosciences that resulted in lower market demand for instruments. Given our leading portfolio in instruments and reagents, we significantly outperformed the category in the quarter. Strong organic growth in BD interventional was led by a high single-digit growth in UCC with continued momentum in our pure-wicked franchise, delivering another quarter of double-digit growth. Surgery delivered another strong quarter across all three major platforms with double-digit organic growth across advanced repair and reconstruction, infection prevention, and bioseurgery.

Speaker Change: BD Life Sciences performance was led by Ibs with high single digit growth in specimen management, which reflects both increased utilization and customer upgrades to higher value products that provide an enhanced patient experience.

Speaker Change: The segment's growth was partially offset by transitory market dynamics in biosciences, the resulted in lower market demand for instruments give.

Thomas E. Polen: Strong organic growth in BD Interventional was led by high single-digit growth in UCC with continued momentum in our Pure Wick franchise, delivering another quarter of double-digit growth. Surgery delivered another strong quarter across all three major platforms with double-digit organic growth across advanced repair and reconstruction, infection prevention, and biosurgery. We continue to make excellent progress with conversion to our bioresorbable phasics technology, which we see as a durable contributor to future growth. BDI performance was also supported by peripheral intervention, with double-digit growth in peripheral vascular disease that was partially offset by a decrease in oncology driven primarily by market dynamics in China.

Chris DelOrefice: We continue to make excellent progress with conversion to our bio-resorbable phasic technology, which we see as a durable contributor to future growth. BDI performance was also supported by peripheral intervention, with double-digit growth in peripheral vascular disease that was partially offset by a decrease in oncology, driven primarily by market dynamics in China.

Chris DelOrefice: Now moving to our P&L, we realize strong sequential and year-over-year margin improvement, with adjusted gross margin of 54.3 percent and adjusted operating margin of 25.2 percent, both above our expectations. The gross margin year-over-year increase of 170 basis points was primarily driven by increased productivity and cost improvement from our BD Excellence initiatives and moderating inflation. Our operating margin increased by 220 basis points year-over-year, driven by the increasing gross margin and healthy operating expense leverage, with expenses increasing slightly on a dollar basis year-over-year. As a result of these items, we exceeded our two-three operating income and adjusted diluted EPS expectations, resulting in adjusted diluted EPS of $3.50, which grew double digits or 18.2 percent on a reported basis.

Thomas E. Polen: The gross margin year-over-year increase of 170 basis points was primarily driven by increased productivity and cost improvement from our BD Excellence initiatives and moderating inflation. Our operating margin increased by 220 basis points year over year, driven by the increasing gross margin and Healthy Operating Expense Leverage, with expenses increasing slightly on a dollar basis year over year. Regarding our cash and capital allocation and the ability to leverage our capital expenditures as we benefit from BD Excellence productivity gains.

Speaker Change: On a dollar basis year over year.

Speaker Change: As a result of these items, we exceeded our Q3 operating income and adjusted diluted EPS expectations, resulting in adjusted diluted EPS of $3 50.

Speaker Change: Which grew double digits or 18, 2% on a reported basis.

Chris DelOrefice: Regarding our cash and capital allocation, I'm really pleased with our strategic choices and the execution on cash flow. As a result, year-to-date free cash flow increased 1.2 billion dollars year-over-year to 2.2 billion dollars, reflecting continued improvement in working capital, including continued inventory optimization, plan-facing of certain cash flow items, and the ability to leverage our capital expenditures as we benefit from BD Excellence productivity gains. We remain focused on free cash flow conversion and are on track to deliver another double-digit step improvement in fiscal year 24, with our year-to-date free cash flow conversion above 80 percent. We remain well-positioned to achieve our long-term cash goals.

Speaker Change: Regarding our cash and capital allocation.

Speaker Change: Im really pleased with our strategic choices and the execution on cash flow as a result year to date free cash flow increased $1 $2 billion year over year to $2 2 billion.

Speaker Change: Reflecting continued improvement in working capital, including continued inventory optimization.

Speaker Change: Planned phasing of certain cash flow items.

Speaker Change: And the ability to leverage our capital expenditures as we benefit from BD excellence productivity gains.

Thomas E. Polen: We remain focused on free cash flow conversion and are on track to deliver another double-digit step improvement in fiscal year 24, with our year-to-date free cash flow conversion above 80%, and we remain well-positioned to achieve our long-term cash goals. Moving to our updated guidance for fiscal year 24, the detailed assumptions underlying our guidance can be found in our presentation.

Chris DelOrefice: Net leverage improved to 2.4 times, and cash and short-term investments total 5.3 billion dollars, inclusive of about 3.4 billion in proceeds from the February debt refinancing and the critical care acquisition financing in June.

Chris DelOrefice: 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, we are confident in a strong close to fiscal year 24. We remain focused on driving multiple areas of momentum and share gains across our portfolio, including Alaris. For the full year, even with this broad-based momentum, it is prudent for us to reflect the latest market dynamics, which others are also experiencing. As a result, we now expect organic revenue growth to be 5 percent to 5.25 percent for the full year. Based on the strength of our margin performance, we are able to absorb the revised organic revenue growth guidance and are raising our adjusted diluted EPS guidance range to $13.50 to $13.15 on a reported basis.

Chris DelOrefice: This reflects an increase of 5 cents at the midpoint and 10 cents at the bottom of the ring.

Chris DelOrefice: College. We believe we are well positioned to achieve our updated, adjusted operating margin guidance of over 50 basis points improvement, which implies full year, adjusted operating margins of over 24%. We continue to expect margin acceleration in Q4 driven by our BD excellence and continuous improvement efforts and continued expense leverage on our expected strong revenue performance, including Alaris.

Thomas E. Polen: We continue to expect margin acceleration in Q4, driven by our BD excellence. Looking ahead to fiscal year 25, While it's too early to provide guidance as we are in our planning process, I can offer the following thoughts. Even in an environment where these dynamics continue to exist, we are confident in delivering strong performance, particularly our ability to exceed our 25% adjusted operating margin goal and deliver double-digit EPS growth, given the increasing benefit to gross margin from accelerating BD Excellence momentum.

Chris DelOrefice: Looking ahead to fiscal year 25, while it's too early to provide guidance, as we are in our planning process, I can offer the following thoughts. We are continuing to monitor dynamics and select markets. Even in environment where these dynamics continue to exist, we are confident in delivering strong performance, particularly our ability to exceed our 25% adjusted operating margin goal and deliver double-digit EPS growth given the increasing benefit to gross margin from accelerating BD excellence momentum. We think 10% EPS growth would be a good starting point for fiscal year 25, including critical care and the expected impact of Pillar Two.

Speaker Change: Year 'twenty five.

Speaker Change: While it's too early to provide guidance as we are in our planning process I can offer the following thoughts.

Speaker Change: We are continuing to monitor dynamics in select markets.

Speaker Change: Even in an environment, where these dynamics continue to exist. We are confident in delivering strong performance, particularly our ability to exceed our 25% adjusted operating margin goal and deliver double digit EPS growth given the increasing benefit to gross margin from accelerating BD excellence.

Speaker Change: Momentum.

Thomas E. Polen: We think 10% EPS growth would be a good starting point for fiscal year 25, including critical care and the expected impact of Pillar 2. Our team's execution supported over-delivering on our margin expectations, and as a result, as we entered Q4, we are on track to exceed our full-year margin improvement goals, deliver another year of double-digit free cash flow growth, and once again, increase our fiscal year 24 earnings outlook. At this time, if you have a question, please press star 1. Oh, great. Good morning, and thank you very much for taking the questions. Two for me.

Speaker Change: We think 10% EPS growth would be a good starting point for fiscal year, 'twenty, five including critical care and the expected impact of pillar two.

Chris DelOrefice: So in summary, based on the durability of our portfolio and momentum in Alaris, we are confident in delivering another year of strong growth. Our team's execution supported over-delivering on our margin expectations, and as a result, as we enter Q4, we are on track to exceed our full year margin improvement goals, deliver another year of double digit free cash flow growth, and once again, increased our fiscal year 24 earnings outlook. Our strategy is demonstrating positive momentum, and we remain well positioned to continue to deliver on our BD 2025 value creation objectives.

Speaker Change: So in summary, based on the durability of our portfolio and momentum in <unk>, we are confident in delivering another year of strong growth.

Unknown Executive: With that, let's start the Q&A session. Operator, can you please assemble or two? At this time, if you have a question, please press star one. If at any point your question is answered, you may remove yourself from the Q by pressing star two.

Unknown Executive: In order to allow for broad participation, please limit yourself to only one question.

Unknown Executive: Lastly, to provide optimal sound quality, please pick up your handset while you ask your question.

Robbie Marcus: Our first question will come from Robbie Marcus with JP Morgan. Please go ahead. Great. Good morning, and thank you very much for taking the questions. Two for me. First, I wanted to ask on guidance, particularly fourth quarter, what's implied there in revenue guidance and the margins. It looks like by my math about six and a half percent organic growth and still healthy operating margin performance.

Unknown Executive: First, I wanted to ask about guidance, particularly the fourth quarter, what's implied there in revenue guidance and the margins. It looks like, by my math, about 6.5% organic growth and still healthy operating margin performance. Maybe just walk us through some of the things that happened in the third quarter that led to a touch lower organic growth and the confidence in the fiscal fourth quarter, both from a revenue and a margin perspective, where you did well in the quarter. Thanks, this is what we saw.

Tom Polen: Maybe just walk us through some of the things that happened in third quarter that led to the touch lower organic growth and the confidence in fiscal fourth quarter, both from a revenue and a margin perspective rated well in the quarter. Thanks.

Chris DelOrefice: Good morning, and thanks for the questions. This is Tom. I'll start off and then turn it over to Chris. I think as we look at Q3, first off, we're really pleased with strong performance across, you know, many areas of most every area of the company, particularly as we look at it compared to market where we saw strong share gains in the number of areas; we saw strong volume performance. And even in markets that are undergoing transitory market dynamics, specifically, you know, the BDB research market environment and the destocking and farm systems, you know, as we look at our performance, I really like our competitive position in those spaces.

Speaker Change: It is.

Tom Polen: You're seeing as outperform what's been announced by others to date. And so, as those markets ultimately rebound, and you heard us talk about some of the new innovations in BDB, obviously our position in biologics and the differentiated growth that we're getting there and the differentiated share gains that we're getting there in terms of our share of new molecules and even biosimilar spaces, we really like, you know, our position there a long term. So I think that's really, you know, as we think about Q3, those dynamics in those spaces, as well as just a continued play out in China is what we saw.

Speaker Change: You're seeing us outperform what's been announced by others.

Speaker Change: To date, and so as those markets ultimately rebound and you heard us talk about some of the new innovations and BTB, obviously, our position in biologics and the differentiated growth that we're getting there and the differentiated share gains that we're getting there in terms of.

Speaker Change: Our share of new molecules and even biosimilar spaces, we really like.

Speaker Change: Our position there long term so I think that's really as we think about Q3 those dynamics in those spaces as well as just to continue to play out in China.

Unknown Executive: I'll turn it to... On operating margin, the gross margin will flow through. We're actually increasing expenses slightly from an OPEX standpoint, where you end up with that, call it high 6% growth. You get a little bit of natural leverage there that'll flow through, and we feel really good about that. I think importantly, and we can talk more about this, it pretends well for 25 as we think of margin. 10% EPS growth. I want to make sure that's reported.

Speaker Change: Because what we saw I'll turn it to.

Chris DelOrefice: I'll turn it to Chris just to talk a little bit more about how we think about guidance in Q4. It's pretty clear. Yeah, thanks, Tom. Thanks, Robbie, for the question. Yeah, Q4 is actually pretty straightforward. So to your point on the top line revenue organic, it implies upper 6% range consistent, you know, with what you shared, maybe a little north of that. It's really attributed to one key dynamic. It's the continued momentum of a Larus. By the way, we obviously have a much stronger line of sight based on our committed contract position. This is the strongest quarter that we have this year as it relates to line of sight to that, because now we're three quarters in that.

Speaker Change: Chris just to talk a little bit more about how we think about guidance in Q4.

Speaker Change: Appreciate it.

Chris: Thanks, Tom Thanks, Robert for the question, Yes, Q4 is actually pretty straightforward so to your point on the top line revenue organic.

Chris: It implies upper 6% range consistent with what you share maybe a little north of that it's really attributed to one key dynamic. It's the continued momentum of awareness.

Chris: By the way, we obviously have much stronger line of sight based on our committed contract position.

Chris DelOrefice: In addition to that, if you recall, last year in Q4, we have a favorable comp in a Larus as well, because we had stopped shipping under medical necessity as we got the approval and we're preparing for launch. So you actually have a favorable comp, and you've continued the momentum with the Larus, which, as you saw, was very positive in the quarter. The rest of the portfolio, we actually assume similar performance. So, you know, we're not making assumptions of significant market recovery or things of that. We're going to continue to outperform in those spaces from a relative standpoint.

Chris DelOrefice: So feel good about revenue margin. Hopefully everyone had an opportunity to see Q3 was really strong. We outperform margin. It led to the outperformance on EPS. The story there is straightforward gross margin. It basically just have to repeat two three, which is already flowing through our cost base right where in our cap and roll period there, so there's not a substantive change in terms of gross margin. On operating margin, the gross margin will flow through. We're actually increasing expenses slightly from an op-ex standpoint, where you end up with that call it high 6% growth. You get a little bit of natural leverage there that will flow through, and we feel really good about that.

Chris DelOrefice: I think, importantly, and we can talk more about this, you know, pretends well for 25 as we think of margins.

Robbie Marcus: Well, that's a perfect segue to my follow-up question on Cisco 25. You gave color of about 10% EPS growth. I want to make sure that's reported. I think I heard. And, you know, there's a lot of moving parts, timing of when critical care closes, the accretion that could add, you know, China versus Alaris.

Unknown Executive: I think I heard and, you know, there's a lot of moving parts, the timing of when critical care closes, the accretion that could add, you know, China versus Laris. You know, when you came up with that, the 10%, which I think is about where the street is, when we factor in the critical care accretion, maybe just some of the components, I heard 25% operating margin you feel good about, just anything else you could give us up and down the P&L. Thanks a lot.

Chris DelOrefice: You know, when you came up with that, the 10%, which I think is about where the street is, when we factor in the critical care accretion, maybe just some of the components, I heard 25% operating margin. You feel good about just anything else you could give us up and down the P&L. Thanks a lot. Yeah. Thanks, Robbie. Yeah. Look, we're excited about 25. It's setting up nicely to deliver strong performance. You know, first top line, I'll just reiterate what we're extremely pleased; our strategies paying off in terms of strength of portfolio, continuing to focus on driving volume and share gains.

Chris DelOrefice: And what you're really seeing in this quarter is the ability to deliver strong performance despite these market dynamics, most notably BDB farm systems and, as Tom noted, China. So we're not dependent on one thing. The durability of our portfolio sets us up nicely. And then I, you know, from a margin standpoint, I shared that on the momentum we have this year, we expect an Alex seed 25%. I think importantly what you'll see different in 25 going forward is the significant majority that will come from gross margin. And actually, if you look at where we are in the back half of the year, you can kind of think of Q3 as sort of a nice number directionally to think of 25 and carrying that through.

Chris: We expect to now exceed 25% I think importantly, what youll see different in 25 going forward is.

Chris: The significant majority of that will come from gross margin.

Chris: And actually if you look at where we are in the back half of the year.

You can kind of think of Q3 as sort of a nice number directionally to think of 25 and carrying that through so feel very good about line of sight to margin.

Unknown Executive: 25, and carrying that through. So, I feel very good about line of sight to margin. As you noted, we're excited about critical care. It just gives us another positive catalyst to continue to deliver double-digit earnings growth. We are contemplating, you know, headwinds from pillar two.

Chris DelOrefice: So feel very good about line of sight to margin. As you noted, we're excited about critical care. It just gives us another positive catalyst to continue to deliver double-digit earnings growth. We are contemplating, you know, headwinds from Pillar Two. So still more to come on that. It's premature to share specifics, but we do anticipate that that's a headwind that we will absorb as part of that. And so all that collectively sets us up nicely to your point. I think what I see externally, where the street is. We, we would see that more in the low end of the range, and it would be 10%, and that is on a reported basis.

Chris: As you noted we're excited about critical care. It just gives us another positive catalysts to continue to deliver double digit earnings growth.

Speaker Change: We are contemplating.

Unknown Executive: So still more to come on that. It's premature to share specifics, but we do anticipate that's a headwind that we will absorb, part of that. And so all that collectively sets us up nicely to your point. I think what I see externally, where the street is, we would see that more in the low end of the range, and it would be 10%, and that is on a reported basis. So, you know, FX, at this point, there's a modest.

Speaker Change: Headwinds from pillar two so still more to come on that it's premature to share specifics, but we do anticipate that as a headwind that we will absorb as part of that and so all of that collectively sets us up nicely to your point I think what I see externally.

Speaker Change: Where the street is.

Speaker Change: We.

Speaker Change: We would see that more in the low end of the range and it would be 10% and that is on a reported basis.

Chris DelOrefice: So, you know, FX at this point, there's a modest, modest headwind into the year, but, you know, we've contemplated that. The other thing just, we did actually activate formally. We had talked about doing this, but partially de-risk transactional effects. But that we are active with now cash flow hedges. It gives us another lever just to help solidify that performance.

Speaker Change: FX at this point that there is a modest.

Unknown Executive: Unknown Speaker, A modest headwind into the year, but you know, we've contemplated that the other thing just, we did actually activate formally, we talked about doing this, but partially de-risk transactional effects, but we are active with cash flow hedges now. That gives us another lever just to help solidify that performance. Mid single-digit growth is a strong position, particularly given those dynamics that we see in those spaces. And even at flat, essentially, in BDB, that's differentiated versus what you're seeing competitively. And so that's what we've built in here. The same dynamic is a bit similar in China.

Unknown Executive: Thank you very much. Thank you.

Travis Steed: Our next question will come from Travis Steve with Bank of America. Please go ahead. Hey, thanks for the question. I guess first, first of two questions here. I wanted to focus on the guide change. And so I think China, bioscience, the environment, we're the big, big reasons why you lower the revenue guide this quarter. But it's not like things were all on kind of track over the course of the quarters. It's curious, like what change, what kind of surprised you when it happened. And, and yeah, I thought you didn't assume those markets to get better.

Tom Polen: So it was just kind of curious if there's, you know, are you changing your assumptions on when those things get better, kind of going forward.

Tom Polen: Hey, Travis, this is Tom, and thanks for the question. Yeah, so as we mentioned before, we feel really good about the performance across the different businesses. Of course, mid-single digit growth is a strong position, particularly given those dynamics that we see in those spaces, and even at flat, essentially, in BDB, that's differentiated versus what you're seeing competitively. I think what you're what we're doing is just recognizing that we're not calling that those markets are going to turn in Q4, that we're going to continue to see some transitory dynamics in those spaces. We assume we're going to continue to compete and perform above market in those spaces, which we've been doing all year, and so that's what we've built in here.

Tom Polen: The same dynamic a bit in China. I take China's played out as we look at Q3 and into Q4, so MDSVBP playing out as we projected at the beginning of the year. No real change in that. I'd say in China, the two things are: the bioscience dynamic is certainly noted in China. You're seeing that reported across essentially every peer where research spending is down in China, just given the economic macro environment, and so we're projecting that that would continue. Also, as we see anti-corruption in certain markets, one of the things that we see happen, and we saw that in Q3, is that distributors, when there's uncertainty, they'll pull back on their inventory until they better understand it.

Unknown Executive: I'd say China's playing out as we look at Q3 and into Q4. So MDS, and VBP are playing out as we projected at the beginning of the year. Okay, and then I guess the follow-up question is more about next year, kind of what kind of revenue growth do you need to kind of get to that double-digit reported EPS growth? You know, before you were kind of talking about BD at five and a half percent plus, is that still possible if some of these headwinds that you're seeing this year linger into next year?

Tom Polen: They won't let their inventory levels come down. We saw that play out a bit in Q3. We don't expect Q3 China performance to repeat in Q4. We do think there was some one-time dynamics there, but nevertheless particularly on the bioscience side, we expect that dynamic to continue through the year.

Unknown Executive: That's really a trap.

Unknown Executive: Okay, and then I guess the follow-up question is more in the next year.

Travis Steed: What kind of revenue growth do you need to get to that double-digit reported EPS growth? Before you were kind of talking about BD at 5.5%, is that still possible if somebody's headwinds that you're seeing this year linger in the next year, just kind of doing the math this year, kind of exolair. It looks like the growth is close to 3.5 to 4%.

Unknown Executive: Just kind of doing the math this year, kind of ex hilaris, looks like the growth is close to kind of three and a half to four percent, just wanted to see how to think about next year's revenue growth. We're not going to give revenue guidance on this call, Travis, but what I can do is maybe just share some color. Obviously, you're seeing us even in this environment, which we do expect, particularly the farm systems are probably easier to predict on recovery timing, just given you can't destock forever. So that's pretty clear.

Unknown Executive: There's one thing he has to think about: the next year revenue growth.

Chris DelOrefice: We're not going to give revenue guidance on this call - trouse. What I can do is maybe just share some color. Obviously, you're seeing us even in this environment, which we do expect, particularly the farm systems, is probably easier to predict on recovery timing. Just give in; you can't destock forever. That's pretty clear. Some of the life science research spending dynamics, if you think about a lot of pure players in those spaces, are projecting recoveries later into 25 or early into 25. I think we'll hold to see that come up as we'll give the next quarter to be able to observe that a little bit more before we give guidance on that space.

Unknown Executive: Some of the life science research, spending dynamics. If you think about a lot of pure players in those spaces are projecting recoveries later into 2025 or early into 2025, I think we'll hold to see that come up as we give the next quarter to be able to observe that a little bit more before we give guidance on that space. But across all those spaces, we feel good.

Chris DelOrefice: Across all those spaces, we feel good. While we're facing those exact transitory market dynamics, of course, you see us continue to deliver mid-single digit growth this year, this quarter, despite that environment. I think we would expect particularly in those that only improve as we go into FY20. 25. Travis, just made me one other, just two things. One in my prepared remarks, I did say even in an environment where these dynamics continue, we're confident in delivering strong performance. We did that this quarter. This is still quality growth. I think just to put in context your hilarious comment.

Unknown Executive: And while we're facing those exact transitory market dynamics, of course, you see us continue to deliver mid-single-digit growth this year, this quarter, despite that environment. And I think we would expect, particularly, those to only improve as we go into FY20. Travis, just maybe one other thing.

Unknown Executive: One, in my prepared remarks, I did say, even in an environment where these dynamics continue, we're confident in delivering strong performance. And we did that this quarter. This is still quality growth. I think, just to put in context your Alaris comment. And so we continue to perform well there, and as those recover, those market trends are definitely long-term, durable trends, and we feel good about that. So just to add to context, what that means is the rest of our portfolio, like look at, you know, BDI across the board was really strong, MDS performing well, Specimen Management, there is strong growth throughout our portfolio.

Chris DelOrefice: These transitory market dynamics, just those two areas alone are worth more than a laris benefit, right? You've got high single-digit growth businesses that are nearly $4 billion. Farm systems used to be consistent double-digit growth. We're still seeing that strong biologics performance, that that's a significant headwind they're absorbing into Tom's point. We're well outperforming those markets. And so we continue to perform well there. And as those recover, you know, those market trends are definitely long-term, durable trends. We feel, feel good about that. So I just that added to consciousness of that means is the rest of our portfolio, like, look at, you know, BDI crossed the board was really strong MDS performance specimen managed before.

Speaker Change: Transitory market dynamics, just those two areas alone are worth more than <unk> benefit right. You've got high single digit growth businesses that are nearly $4 billion pharm systems used to be consistent double digit grower, we're still seeing that strong biologics performance.

Speaker Change: That's a significant headwind there were absorbing and to Toms point, well outperforming those markets.

Tom: And so we continue to perform well there and as those recover.

Speaker Change: Those market trends are definitely long term durable trends and we feel we feel good about that so I would just add a context as what that means is the rest of our portfolio.

Speaker Change: PDI across the board was really strong Mds performing one specimen management point there is strong growth throughout our portfolio, maybe just a couple of other bits of color is as we look at at kind of our core business. The durable portfolio of this high volume products, what we're seeing really strong volume growth and share gain in areas like MD.

Tom Polen: There's strong growth throughout our portfolio. Maybe just a couple other bits of color is, you know, as we look at at kind of our core business, the durable portfolio is high volume products. We're seeing really strong volume growth and share gain in areas like MDS, PAS, kind of the consumable side of MMS. And we don't see a slow down to that momentum. So we feel good on that. Certainly, as we think about our strategy and healthcare automation and AI informatics. And now with a laris back in our connected medication management portfolio, we're making really good progress.

Unknown Executive: Yeah. Maybe just a couple other bits of color is, you know, as we look at kind of our core business, the durable portfolio, those high-volume products, we're seeing really strong volume growth and share gains in areas like MDS, PAS, kind of the consumable side of MMS, and we don't see a slowdown to that momentum. So we feel good about that.

Tom: Yes.

Unknown Executive: Certainly, as we think about our strategy in healthcare automation and AI informatics, and now with Alaris back in our connected medication management portfolio, we're making really good progress. You heard us say we're already back in Q3. We're back at the $100 million plus per quarter run rate that we had prior to Alaris going on shiphold, that's three to six months faster than we had expected going into the year. So we feel really good about that, and that momentum we expect to continue basically from here on out. We're at that $100 million plus run rate.

Tom Polen: You heard us say we're already back Q3. We're back at the $100 million plus per quarter run rate that we had prior to a Laris going on shiphold. That's three to six months faster than we had expected going into the year. So we feel really good about that. And that momentum we expect to continue basically from here on out. We're at that $100 million-plus run rate. Going forward, and we've built a nice backlog of orders for a Laris. Remember, we started with zero backlog as we went into the year. We expect to exit this year at again, a normalized backlog that we had pre-shiphold, at least at that level.

Unknown Executive: I'm going forward, and we've built a nice backlog of orders for Alaris. Remember, we started with zero backlog. We expect to exit this year at, again, a normalized backlog that we had pre-shiphold, at least at that level. Other areas of that connected medication or the connected healthcare automation portfolio we're really excited about for next year as well. Of course, that's our pharmacy automation strategy and our laboratory automation strategy there as well, which continues to really resonate very well with customers.

Tom Polen: Other areas of that connected medication or the connected care healthcare automation portfolio were really excited about for next year as well. Of course, that's our pharmacy automation strategy and our laboratory automation strategy there as well, which continued to really resonate very well with customers. Products like PureWik that are targeting new care settings. We've got not only the new PureWik female launch happening, but we also have the mobile PureWik launch happening next year, which we're really excited about. And then, you know, in that chronic disease management space, you heard us talk about in farm systems, double-digit biologics growth.

Unknown Executive: Double-digit biologics growth; we expect that to continue very strongly into 25. And then as de-stocking on the vaccine and the anti-COAG side starts to alleviate, right, that'll lift that whole boat. But we certainly don't expect any change in underlying biologics momentum there. Biosciences, maybe I can just give a little bit more color on that one too, is I would say that we're at the point now where we're, you know, we've seen us be flat. The market's certainly been down. If you look at peers, I think almost every single peer is down in that space.

Tom Polen: We expect that to continue, you know, very strongly into 25, and then as destocking on the vaccine and the anti coag. Side starts to alleviate right that will with that whole boat, but we certainly don't expect any change in our underlying biologics momentum there. Biosciences, maybe I can just give a little bit more color on that one too. I would say that we're at the point now where we're, you know, we've seen us be flat. The market's certainly been down. If you look at peers, I think almost every single peer is down in that space.

Unknown Executive: We've been a bit of an outlier as being flat. Thank you. Thank you. Thank you. Good morning, everyone.

Tom Polen: We've been out a bit of an outliers being flat. We are seeing, if we look at quarter-on-quarter instrument purchases, we're seeing them up a bit sequentially, quarter on quarters. As we think about China in the future, there is discussion around China stimulus that's been widely discussed across the industry. I think the timing of that still needs a bit more clarity; certainly, sometime in '25 it's expected. But again, as we get into guidance and more specifics there on the November call, I would expect it will probably be a bit more clarity on the timing of stimulus in China too.

Tom Polen: But from a bioscience perspective, I think our assumptions now and what we're seeing is it's certainly not getting worse, and we're seeing some green shoots of some positivity in some areas. Other science that we see are people that even in the US from an NIH perspective folks that were maybe we're turned down initially for grants we're seeing on the second submissions those grants starting to get approved and more POs than coming in for those instruments.

Unknown Executive: Thank you.

David Roman: Our next question will come from David Roman with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. Want to ask one question on revenue, then one on capital allocation, but maybe starting on the revenue side. Appreciate some of the perspective around a layer is in the contribution that you expect that to drive this year and then the sort of high level perspective into next year. But how do how should we think about that? How do we think about the growth drivers in that business beyond the bolus of performance you have from Alaris? I think you have a next generation picks this platform launching.

Unknown Executive: I wanted to ask one question on revenue, then one on capital allocation, but maybe starting on the revenue side, appreciate some of the perspective around Alaris and the contribution that you expect that to drive this year and then the sort of high-level perspective into next year. But how should we think about the growth drivers in that business beyond the bullets of performance you have for Alaris? I think you have a next-generation PIXIS platform launching.

David Roman: You have some of the pharmacy automation products starting to pick up steam. Maybe sort of contextualize the growth in that business beyond just the Alaris boost that we should see for the next five quarters.

Unknown Executive: You have some of the pharmacy automation products starting to pick up steam. Maybe sort of contextualize the growth in that business beyond just the Alaris boost that we should see for the next five quarters and Big Demands for Productivity Improvements, which we're ideally suited to address and are by far the market leader in each of those spaces when it comes to serving those customer needs. So I think in both areas, there are areas that augment and underscore, you know, while Alaris is obviously coming back very strong, it's just, you know, the one year anniversary of this call last year where we announced that we had gotten clearance, and yeah, that couldn't be going any better than it is right now. But the fundamentals across that connected management strategy are very strong and continue to resonate. Thanks for the question, David. Sorry. Can I ask you a follow-up question here?

Tom Polen: Yeah, I'll start off, David, and thanks for the question. And then I'll turn it to Mike Garrison. We have here with us in the room. It really in MMS break it into kind of we've got three or four categories. One is the consumable space. Let's just start off with that. We see really strong growth in overall procedure volumes driving strong growth in the consumables of IV sets, etc. that fit along with the layer. As you mentioned, Alaris is not only back to its historical run rate, but we believe we took share in the quarter as we look at independent market data as well as our own.

Tom Polen: So we feel really good about the position there. And then, of course, that starts pulling through other elements of our connected care portfolio, inclusive of interoperability, health site, and other solutions.

Michael Garrison: We do have the next gen picks is launching in the back half of next year, which we're excited about long term and might can comment on that. And then, of course, we have pharmacy automation both in the US and Europe, and the overall trends there around pharmacy shortages, labor costs, and big demands for productivity improvements, which we're ideally suited to address and are by far the market leader in each of those spaces when it comes to serving those customer needs.

Michael Garrison: So maybe Mike is some more details on what we're seeing there. Sure, so in addition to the next gen picks is launch for next year, we've got about 10 additional releases across the connected management portfolio that will come out. What we've implemented is a cadence of innovation. So whether it's in a core pharmacy, the acquisition of MedKeeper, which is growing very nicely, some additions to that portfolio are MedBank acquisition, which is going into long-term care settings and non-acute settings. These are some ways that that entire market we're starting to expand and go along with the shift of care into less acute environments or less hospital based environments, but still the hospital needing to stay connected from a data perspective from the understanding of their total inventory perspective.

Michael Garrison: So I think we're really well positioned for the innovation; there growth in that market is cyclical. So it goes sort of with the book of business as a capital would happen, but we do have a very strong service model there and also we offer a very flexible set of financing terms around capital operating leases. So we have a little bit less cyclical nature to make some of the competitors that show a little bit more volatility in that area. Pharmacy automation between Pirata and ROA and our Rapidorex acquisition, we sort of built a fairly significant, I think it's the largest pharmacy automation robotics company in the world.

Michael Garrison: And the customer interest in that is very, very strong. It's been is very high double digit growth last year. A bit of change in tax incentives in Europe that we've commented on before that we've been watching, you know, cause a little bit of a slowdown in Europe here this year, but we've also started to see the order book pickup sequentially quarter to quarter of both in the US and in Europe. So we feel good about that the fundamentals there are very, very strong around labor efficiency, around safety, around the use of both artificial intelligence and robotics to provide additional efficiencies and health care in the retail sector, in the long term care sector.

Tom: Customer interest and that is very very strong.

Tom: It's been very high double digit growth last year.

Speaker Change: A bit of change in tax incentives in Europe.

Speaker Change: We have commented on before that we've been watching.

Speaker Change: Cause a little bit of a slowdown in Europe here. This year, but we've also started to see the order book pick up.

Speaker Change: Sequentially quarter to quarter, both in the U S and in Europe. So we feel good about that the fundamentals there are very very strong round.

Speaker Change: Around labor efficiency around safety around the use of both artificial intelligence and robotics.

Speaker Change: To provide additional efficiencies in health care in the retail sector in the long term care sector and as hospitals start to reinvent their pharmacy.

Tom Polen: And as hospitals start to reinvent their pharmacy. I think in both areas, there are areas that augment and underscore, while Alaris is obviously coming back very strong. It's just the one year anniversary on this call last year is where we announced that we had gotten clearance, and that couldn't be going any better than the expectations than what it's going right now. But the fundamentals across that connected management strategy are very strong and continue to resonate with the customers. Thanks for the question, David. Sorry, I was doing it all right.

Speaker Change: So I think in both areas.

Unknown Executive: Sorry about that. Can you maybe just, on the P&L comments for next year, one of the things that would be helpful to put together here is, as you think about your growth rate, a lot of what you're describing here are macro factors and sort of end market dynamics, which logically flow through to you given your high market share, but what can you do to differentially position BD from a performance perspective, especially given what looks to be like flattish operating

David Roman: Can I have a follow up here, sorry about that. Can you maybe just on the P&L comments for next year, one of the things that we hope to put together here is, as you think about your growth rate, a lot of what you're describing here are macro factors and market dynamics, which logically flow through to you given your high market share. But what can you do to differentially position BD from a performance perspective, especially given what looks to be like flatish operating expenses?

Chris DelOrefice: So what are the underlying assumptions around discretionary expense spending that are in that kind of 10% type earning sort of floor that you put out there for next year, and how should we think about the rest of the P&L below gross margin? Thanks, David. I think the exciting pivot is, and I think of Q3 as kind of an indicator of what 25 would be full year 25 based on the comments I shared. So we talked about exceeding now 25% operating margin in FY 25, so it implies north of 100 basis points of improvement; the significant majority that's coming from gross margin.

Chris DelOrefice: So you're seeing all the benefit of BD excellence flow through. We, which to your point, creates an opportunity for us to kind of reshape below gross margin. The intent is, too, as part of that 10% starting point, to drive more investment in R&D and more investment in business building growth, digital capabilities, commercial go to market, et cetera. Our principal will always be to sort of get natural leverage from kind of our G&A space, and we've also talked about that we're advancing a global business services model there as well. So that'll be a minor catalyst in 25; the leverage will be there, but it'll also go forward catalyst.

Unknown Executive: So, what are the sort of underlying assumptions around, So you're seeing all the benefits of BD Excellence flow through, which to your point, creates an opportunity for us to kind of reshape below gross margin. The intent is to, as part of that 10% starting point, to drive more investment in R&D and more investment in business building growth, digital capabilities, commercial go-to-market, et cetera. Our principle will always be to sort of get natural leverage from kind of our GNA space.

Unknown Executive: And we've also talked about that we're advancing a global business services model there as well. So that'll be a minor catalyst. In 25, the leverage will be there, but it's also a go-forward catalyst. So that's how we think of the formula: more value out of gross margin.

Tom Polen: So that's how we think of the formula: more value out of gross margin to your point that lends itself nicely to the natural flow through on sales and reinvestment to support growth and leverage kind of your core infrastructure base. Maybe just one other thing to add to Chris's good points there, and you heard us talk about this in the prepared remarks. You know, BD excellence, which we really launched last year, we couldn't be more pleased with the momentum that we're getting there. So, as you heard, we're up to over 500 Kaizen events this year. Of course, BD excellence is based on; she could get to Kaizen, which is the idea of the pursuit of excellence through continuous improvement and providing our organization with the tools, the systems, the capabilities to do that as part of their every day work.

Tom Polen: And then a series of major events like the 500 plus Kaizen that we mentioned, where we would immerse in that as an organization. in specific areas. And we're really seeing that come through in reduced waste and improved line productivity. You're seeing that flow through also in our cash flow performance, with exceptionally strong year-to-date, as we're able to actually operate the company on a continued basis with less capex, just given the productivity improvements that we're seeing from that. At the same time, of course, Project Recode, which we've folded up under our excellence initiatives now, which is the consolidation.

Unknown Executive: [inaudible] given the productivity improvements that we're seeing from it. At the same time, of course, Project Recode, which we've folded up under our Excellence Initiative now, which is the consolidation of over 20% of our manufacturing plants, right, that starts kicking in in 25 as well, which at a scale level, we got a bit of it in 24, but we really see that ramping up in 25, which further flywheels that margin behind our smart factory strategy and those as well. We think as we think about technology around AI, predictive analytics, companion robotics, etc.

Tom Polen: Of over 20% of our manufacturing plants, right, that starts kicking in in 25 as well, which at a scale level. We've got a bit of it in 24, but we really see that ramping up in 25, which further flywheels that margin. And then you also heard me mention that, of course, as we now are consolidating plants, one of the things that happens is you end up with fewer, larger plants. And as you're having fewer, even larger plants, we're taking advantage of investing behind our smart factory strategy and those as well. We think as we think about technology around AI, predictive analytics, companion robotics, et cetera, there's no company in MedTech that's better positioned to be able to capitalize and get value out of that, the BDS, given the scale of production that we have.

Tom Polen: And so we've been digitizing; we have now quite a few areas that are fully paperless. So we're digitizing all the data coming off of our lines, which has been allowing us to now start putting predictive analytics against those. As I mentioned, we've done that. And with a focus on our top 30 plants, we're seeing accelerated performance from that. And so we're really combining that excellence, Kaizen strategy with that smart factory strategy as well, which is going to be. We're continuing to drive that GP strategy of ours, not just in '25, but that's going to be a key theme as we look forward to Investor Day.

Speaker Change: Coming off of our line, which has been allowing US just now start putting predictive analytics against those as I mentioned, we've done that.

Speaker Change: And with a focus on our top 30 plants, where were seeing accelerated performance from that and so we're really combining that excellence kaizen strategy with that smart.

Speaker Change: Factory strategy as well, which.

Speaker Change: It's going to be continuing to drive.

Unknown Executive: There's no company in med tech that's better, is going to be continuing to drive that GP strategy of ours, not just in 25. But that's going to be a key theme as we look forward to Investor Day. You know, in Q2 of 25. Expect to hear more about that in our question, which will come from Patrick Wood with Morgan Stanley. Please go ahead.

Speaker Change: That GP strategy of ours, not just in 'twenty, five, but that's going to be a key theme as we look forward to investor day.

Unknown Executive: You know, in Q2 of 25, expecting to hear more about that and margin focus over the next phase, post PD 2025. Perfect. Thanks for all the detail.

Speaker Change: In Q2 of 25% expect to hear more about that in our margin focus over the next phase post PD 2025.

Speaker Change: Perfect. Thanks for all the detail.

Patrick Wood: Thank you. Our next question will come from Patrick Wood, with more in Stanley. Please go ahead. Amazing. Thank you.

Speaker Change: Thank you. Our next question will come from Patrick Wood with Morgan Stanley. Please go ahead.

Patrick Andrew Robert Wood: Amazing. Thank you. I'll keep it to one, just given the timing and appreciate you guys have covered this, but I definitely want to dig into China a little bit more because you've had quite a few companies come out across a range of different industries and have had a reasonable tough time in the market. So I guess, you know, obviously the VPP dynamics, we know there's biosciences on that side, as you said, lots of companies are flagging on I guess my question is, what are you hearing from some of the customers? Have you seen any, you know, MDS volume changes outside of stocking? I'm just trying to dig into the underlying in the market.

Patrick Wood: Amazing. Thank you I'll keep it to one just given the timing.

Patrick Wood: I'll keep it to one, just given the timing and appreciate you guys have covered this, but I definitely want to dig into China a little bit more because we've had quite a few companies come out across a range of different industries and have a reasonable tough time in the markets. So I guess, you know, obviously the VPP dynamics, we know this by sciences on that side, as you said, lots of companies flag on that. I guess my question is like, what are you hearing from some of the customers? Have you seen any, you know, MDS volume changes outside of stocking?

Patrick Andrew Robert Wood: Is there anything that you feel has structurally changed or these genuinely transitory dynamics? Awesome. Thanks.

Tom Polen: I'm just trying to dig into underlying in the market. Is there anything that you feel has structurally changed or these genuinely transferring dynamics? Awesome. Thanks. Thanks, Patrick, for the question. You know, so we've got a great team in China. You know, we still view it as a large market with significant unmet needs, and we continue to serve that market opportunity across the breadth of our portfolio. We continue to invest in advancing healthcare practices and access in China. As you mentioned, we see VPP has been playing out in MDS as expected. Just a note there of our volumes in MDS China are actually up very nicely.

Unknown Executive: Yeah. Thanks, Patrick, for the question. We've got a great team in China. You know, we still view it as a large market with significant unmet needs, and we continue to serve that market opportunity across the breadth of our portfolio. We continue to invest in advancing healthcare practices and access in China.

Unknown Executive: As you mentioned, VBP has been playing out in MDS as expected. Just as a note there, our volumes in MDS China are actually up very nicely. So as we look at even the categories where we're seeing VBP, we see price pressure, but we're seeing strong volume growth in those categories in MDS that are complementing that. So our plants are very busy in China because of higher volumes in those spaces.

Tom Polen: So as we look at, even the categories where we're seeing VPP, we see price pressure; we're seeing strong volume growth in those categories in MDS that are complementing that. So our plants are very busy in China because of higher volumes in those spaces. The lower research funding, as you mentioned, that's been broadly commented on across the board. And we do think there will be an end in sight to that as the market ultimately recovers in research investment. We don't see that as a long term. The China will be de-investing in research over the long term.

Unknown Executive: The lower research funding, as you mentioned, that's been broadly commented on across the board. And we do think there will be an end in sight to that as the market ultimately recovers and research investment increases. We don't see that as a long-term trend that China will be de-investing in research over the long term. We expect that that will recover, and that's more of a transitory dynamic. And then some of these other factors; they are related.

Speaker Change: We think there'll be an end in sight to that.

Speaker Change:

Speaker Change: As the market ultimately recovers and research investment, we don't see that as a long term that China will be deinvesting in research over the long term, we expect that that will recover.

Tom Polen: We expect that will recover, and that's more of a transitory dynamic. And then some of these other factors, they are related. There are economic challenges at a macro level happening in China where I think that combines with the anti-corruption and some of the actions that distributors take when there's uncertainty, and they'll pause to pull inventory down a bit. Those dynamics. Thanks. I think we'll evolve as just clarity in the economy and in those processes end up coming into light. So, which again we would expect to be more transitory in nature. So we continue to invest in the market.

Speaker Change: And that's more of a transitory dynamic and then some of these other factors.

Speaker Change: They they are related there are economic challenges at a macro level happening in China, where I think that combines with the anti corruption and some of the actions that distributors take when there's uncertainty in the pause to pull inventories down a bit.

Unknown Executive: There are economic challenges at a macro level happening in China, and I think that combined with the anti-corruption and some of the actions that distributors take when there's uncertainty, and they'll pause to pull inventories down a bit.

Unknown Executive: You know, those dynamic High-Level Overviews of what we see and as we look are going to be much more balanced throughout the year. I mean, last year, we had one strategic choice on inventory takedown that was all front-end loaded, right? That was a predominant driver. The execution this year played out exactly as we talked about.

Speaker Change: Those dynamics.

Speaker Change: I think we will evolve as just clarity on the economy and in those processes and upcoming and into light, So which again, we would expect to be more transitory in nature. So we continue to invest in the market, we still see it as a long term attractive space I'm, an important market for us and we do have areas of the business that are.

Tom Polen: We still see it as a long-term attractive space. I'm an important market for us. And we do have areas as a business that are continuing to do, you know, really well in China, you know, beyond some of those transitory spaces that we see. So maybe that's that's a high level overview of what we see. And as we look forward.

Unknown Executive: Thank you.

Larry Biegelsen: Our next question will come from Larry Biegelsen with Wells Fargo. Please go ahead. Thanks for taking the question. It's two quick ones for me. And I'll have come both up front on the Larus, the 350 million in fiscal 24 sales implies about a $600 million annual run rate using the implied Q4 sales, about 150 million if I'm doing the math right. Is that the right way to think about fiscal 25 layer sales about 600 million. Just lastly, Chris, the last two years, you know, growth and margins have been very back-weighted. And obviously it's, you know, caused a lot of investor anxiety.

Chris DelOrefice: Is there any way or do you expect, you know, fiscal 25 to look different from a cadence standpoint? Thank you.

Chris DelOrefice: Hey, Larry, thanks for the question. Yeah, on the second question, but we're still in our planning stance, and, you know, we need to continue to monitor market dynamics, all these factors. I think the one thing is for sure that the margin rhythm is going to be much more balanced throughout the last year. We had one strategic choice on inventory takedown that was all front and loaded, right. That was a predominant driver. The execution this year played out exactly as we talked about the matter of fact the past two years, and we've executed against everything we said from a margin standpoint to the past two years.

Unknown Executive: As a matter of fact, the past two years, I mean, we've executed against everything we've said from a margin standpoint the past two years, so that's a big change. FX also was another big front-end item that we don't see to the same degree.

Chris DelOrefice: So that's a big change. FX also was another big front end item that we don't see that same degree.

Chris DelOrefice: So I think naturally we're going to end up with a much more balanced facing, and we'll share more when we provide our official guide in November, but I don't think that's an item that should be top. But the other big thing that we had this year was, of course, a Larus was a ramp in the second half given that we just launched the very end of Q4. So you're going to have much more ratable performance in a Larus Q1 through Q4 of next year as well. So we would expect much more smooth. It was very much looking forward to being back at that as we look forward.

Unknown Executive: So I think naturally we're going to end up with a much more balanced phasing, and we'll share more when we provide our official guide in November. But I don't think that's an item that should be talked about.

Speaker Change: I don't think that's an item that should be top of the other big thing that we had this year was of course Solaris was a ramp in the second half.

Unknown Executive: The other big thing that we had this year was, of course, Alaris was a ramp in the second half, given that we just launched at the very end of Q4. So you're going to have much more ratable performance in Alaris from Q1 through Q4 of next year as well. So we would expect much more, which we're very much looking forward to being back at as we look forward. Just on ALARIS, we're not certainly going to give guidance by any product line for 24, you know; we're not at that point. I think that's, I wouldn't necessarily take the run rate necessarily from that and take it through 25, but back to my commentary, we're back at at least the $100 million historical run rate.

Speaker Change: Given that we just launched at the very end of Q4, so you're going to have much more ratable performance in our Laris Q1 through Q4 of next year as well. So we would expect much more smooth.

Speaker Change: Which we're very much looking forward to being back at that as we look forward just on alert.

Chris DelOrefice: Just on a Larus, we're not certainly going to give guidance by any product line for 24. You know, we're not at that point. I think that's, that's I wouldn't take the run rate necessarily from that and take it through 25. But back to my commentary, we're back at at least the $100 million historical run rate. Cannot be the opportunity to do better than that as we go into 25 for sure. And we'll give more color on that on the November call. Thanks for the question, Larry.

Speaker Change: Certainly going to give guidance by any product line for 24, you know we're not at that at that point I think that that's I wouldn't take the run rate necessarily from from that and take it through 'twenty five but.

Speaker Change: Back to my commentary, we're back in at least the $100 million historical run rate cannot be opportunity to do better than that as we go into 'twenty five for sure and we'll give more color on that on the November call.

Unknown Executive: It cannot be an opportunity to do better than that as we go into 25, for sure, and we'll give more color on that in November. Yeah, thanks for the question, Rick. Yeah, I mean, look, 25 is, you know, we think there's a lot to be excited about. Critical care is part of it, to your point.

Rick Wise: Thank you. Our next question will come from Rick Wise with Steve. Please go ahead.

Rick Wise: Good morning to you both. Maybe, you know, back to the fiscal 25 guide. I just want to make sure I'm thinking about it correctly. It's been talked about several times, but I just want to hear your language one more time. That 25 EPS growth commentary and the operating margin for over 25% clearly includes critical care if I understand correctly. I But, but to make sure it doesn't, that sort of imply that everything else on a total basis is not going to grow as fast in fiscal 25 as it has in 24. And if I'm thinking about it remotely correctly, maybe too deep into earnings season, I'm not thinking about it clearly.

Chris DelOrefice: Are you, does that imply you're being conservative or careful in this initial commentary? Just to make sure we're thinking about it correctly.

Chris DelOrefice: Yeah, thanks for the question, Rick. Yeah, I mean, look, 25 is, you know, we think there's a lot to be excited about. Critical care is part of it, to your point. That's not a substantive contributor, just to be clear to margin. The margin we're generating is fully on the BD base business. So we're well positioned there to now exceed the 25% operating margin goal. Again, importantly, the mixed shifts significantly in terms of where margin improvements are coming from. It's coming from gross margin. Look, I think external estimates now are sitting actually just under 9%, right?

Unknown Executive: That's not a substantive contributor, just to be clear, to margin. The margin we're generating is fully on the BD-based business. So we're well positioned there to now exceed the 25% operating margin goal. Again, importantly, the mix shifts significantly in terms of where margin improvement is coming from.

Unknown Executive: It's coming from gross margin. Look, I think external estimates are now sitting at actually just under 9%, right? We see that to the low end of our range. 10% reported is a great starting point above where we are externally. And like we do every year, our goal is to continue to create opportunities to, you know, exceed that as we move throughout the year. So it's early. We just knew it was important to kind of share context.

Chris DelOrefice: We see that to the low end of our range. 10% reported is a great starting point above where we are externally. And like we do every year is, you know, our goal is to continue to create opportunity to exceed that as we move throughout the year. So it's early. We just knew it was important to kind of share context. And we've been able to do this, by the way, this year, like on the top line, the questions deliver strong performance despite these market dynamics. So we'll continue to monitor those, but feel really good about how we're positioned moving into 2025.

Speaker Change: You know our goal is to continue to create opportunity to exceed that as we move throughout the year. So it's early.

Speaker Change: I just knew it was important to kind of share context.

Speaker Change: And we've been able to do this by the way this year like on the top line the questions deliver strong performance. Despite these market dynamics. So we'll continue to monitor those but feel really good about how we're positioned moving into 2025.

Unknown Executive: And we've been able to do this, by the way, this year, like on the top line, the questions deliver strong performance despite these market dynamics. So we'll continue to monitor those, but feel really good about how we're positioned moving into 2025, with maybe bioscience, and then we'll touch base on farm systems, and then we'll touch base on China. So on farm systems or biosciences, I think, as you mentioned, it's been widely commented on across the tool companies. Again, we see ourselves outperforming the market this year. That's pretty straightforward, very few that are flat like we are in that space.

Unknown Executive: Thank you. Our last question will come from VJ Kumar with every core ISI. Please go ahead. Morning, VJ. Hi, Tom. Good morning. And thanks for taking my question. Just that one for me. Some of these issues, we mentioned, right? I think on the farmer side, some of your tools peers are talking about a bottoming on decocking. So just maybe from your perspective, like, how are you seeing this destocking impact playing out? And when I look at those moving transitory sort of issues, right, China, bioscience and climate, be, decocking. It looks like bioscience should certainly headwind should continue.

Speaker Change: Thank you our last question will come from Vijay Kumar with Evercore ISI. Please go ahead.

Speaker Change: Good morning, VJ, Hi, Tom Good morning.

Vijay Kumar: Thanks for taking my question just one for me.

VJ Kumar: I think most of the tools companies have been cautious about the first half of 25. How should we think about China? Is that, is that, you know, should that get back to growth, or is this. VVP headwinds could that last for a while? Thank you.

Tom Polen: Yeah, it's a great question. VJ. So let me, let me start with. Maybe the bioscience then will touch base on farm systems and then touch base on China. So on, on farm systems or on biosciences, I think as you mentioned, it's been widely commented on across the tools companies. Again, we see ourselves outperforming the market this year. That's pretty straightforward. It's very few that are flat like we are in that space. And you heard us make sharing our prepared remarks. Some of the really exciting innovations that we see driving that, and not only are they driving that in this environment, as the market ultimately recovers, those same technologies around facts, discoverer, and the continued cadence of new innovations, not only with sorters, but next year launching our first analyzer in that segment, continued innovation with dies.

Unknown Executive: And you heard us share in our prepared remarks some of the really exciting innovations that we see driving that. And not only are they driving that in this environment, but as the market ultimately recovers, those same technologies around facts discovery and the continued cadence of new innovations, not only with sorters, but next year launching our first analyzer in that segment, continued innovation with dyes and other technologies that are allowing more and more multiplexing in that category, returning to more normalized growth. [inaudible] declined. We're seeing that play out this year as we expected. We don't expect it to be as significant next year for MDS, just given the scale that happened this year.

Tom Polen: And other technologies are allowing more and more multiplexing in that category. Or all just going to benefit us as that market picks up and people can begin to buy. Those systems in larger volume, so we feel good about that, and it really comes down to the timing of the recovery, which, as you mentioned, we're assuming is going to continue to be tight through the balance of this year, which is how we've updated our guidance. And then we would expect, at some point in '25, again, let's watch Q4; we'll update '25 guidance in November on that. I think we'll benefit from that timing to get clarity, as will the whole market.

Speaker Change: Those systems and larger volume so we feel good about that and it really comes down to the timing of the recovery.

Speaker Change: Which as you mentioned, we're assuming it's going to continue to be tight through the balance of this year, which is how we've updated our guidance and then we would expect at some point in 'twenty five.

Speaker Change: Again, let's watch Q4, we'll update 25 guidance.

Speaker Change: In November on that I think will benefit from that timing to get clarity is where the whole market on pharm systems. We continue to see that strong demand on on biologics underlying which is also differentiated versus peers double digit growth again in biologics within that space, we see no slowdown there obviously GOP ones are a big component of that in our.

Tom Polen: Well, on farm systems, we continue to see that strong demand on biologics underlying, which is also differentiated versus peers, double digit growth, again, in biologics within that space. We see no slow down there, obviously, GOP ones are a big component of that and our position of that we have on some of the large current market molecules is benefiting us. Who also shared we've got a position with the number of new GOP ones that are moving through the pipeline towards launch are already having our device spec'd in, and then we also see we have over 40 signed agreements for biosimilar GOP ones that early molecules of GOP ones that we start seeing launch as early as the next 12 months there and that will play out over the longer term as those play out, but we really like our position there.

Speaker Change: Position of that.

Tom Polen: Of course, the destocking that's happening that, as you mentioned, everyone seeing across the sector is really been focused on the anti-coagulant and vaccine segments for us. And I think broadly for others, and that can't continue forever. So we would expect that as we move into FY25, and again, we'll give more specifics on timing as we go into guidance, but certainly, as we go to the back half of that, we would expect that to be a start coming returning to more normalized growth.

Tom Polen: On China, look, we have China; we don't have, as we think about the numbers that we've shared around double-digit EPS growth for next year, we don't have a major assumption of China returning back to high growth next year in that. We've taken a conservative position in our internal monitoring on modeling on that, and we'll continue to watch that market play out as we go forward, but we've taken a conservative stance in our own internal modeling there. As we look at and build our plan for the 10 percent EPS growth numbers. So we still see, and again, that'll be related to the bio-farmate research spending that's happening in China. That will be something we'll continue to watch closely and how that overall macro market recovery recovers.

Speaker Change: We look at and built our plan for the 10% EPS growth numbers. So we still see and again that'll be related to the buyout.

Speaker Change: Pharma research spending that's happening in China will be something we'll continue to watch closely and how that overall macro market recovery recovers, we'll continue to watch the China macro economic environment overall.

Tom Polen: We'll continue to watch the China macroeconomic environment overall. We do see MDS; we don't see a change in terms of the timing of VBP starting to decline. We've seen that play out this year, as we expected. We don't expect that to be as significant next year for MDS, just given the scale that happened this year. I think we've said that in the past, we don't expect that to change, i.e., we see less pressure in MDS next year in China from VBP. The more to come on China as we give guidance, but hopefully that just gives some color on China and what we've built into some of our preliminary thinking as we share the number on EPS for next year.

Speaker Change: We do see Mds, we don't see a change in terms of the timing of EVP.

Speaker Change: Starting to.

Speaker Change: The decline.

Speaker Change: We're seeing that play out this year as we expected we don't expect that to be as significant next year for Mds, just given the scale that happen this year.

Speaker Change: I think we've said that in the past, we don't expect that to change I E. We see less pressure in Mds next year in China from from GBP, but more to come on China, as we give guidance, but hopefully that just give some color.

Speaker Change:

Unknown Executive: Thank you.

Thomas E. Polen: Thank you. That concludes 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 remarks.

Unknown Executive: Back concludes today's question-and-answer session.

Tom Polen: At this time, I'd like to turn the floor back over to Tom Paulin for any additional or closing remarks. Okay, thank you, operator, and thank you to all of our investors for joining us on our call today. We are pleased to deliver strong, above-market, broad-based growth and a well-positioned to achieve our increased FY24 earnings guidance. As we look ahead to FY25, we are excited by multiple growth opportunities across our portfolio, momentum in BD excellence, driving continued strength in gross margins and cash flow, and welcoming the critical care team to BD.

Thomas E. Polen: As we look ahead to FY25, we are excited by multiple growth opportunities across our portfolio, momentum in BD excellence, driving continued strength in gross margins and cash flow, and welcoming the critical care team to BD. We look forward to connecting with everyone again in November, and thank you for your continued support of BD.

Tom Polen: We look forward to connecting with everyone again in November and thank you for your continued support of BD.

Unknown Executive: Thank you, operator. Thank you.

Unknown Executive: This does conclude this audio webcast on behalf of BD. Thank you for joining today.

Unknown Executive: Please disconnect your lines at this time and have a wonderful day. Thank you.

Speaker Change: Okay.

Speaker Change: Okay.