Q1 2025 Baxter International Inc Earnings Call

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Operator: Good morning, ladies and gentlemen, and welcome to Baxter International's first quarter 2025 earnings conference call. Your lines will remain in a listen-only mode until the question-and-answer segment of today's call. At that time, if you have a question, you will need to press the star key followed by having number one on your touchtone phone. If anyone should require assistance during the conference, please press star, then zero on your touchtone phone.

Good morning, ladies and gentlemen, and welcome to Baxter International's first quarter 2025 earnings Conference call. Your lines will remain in a listen only mode until the question and answer segment of today's call.

At that time, if you have a question you will need to press the star key followed by the number one on your Touchtone phone.

If anyone should require assistance during the conference. Please press Star then zero on your Touchtone phone.

Operator: As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission.

As a reminder, this call is being recorded by Baxter and is copyrighted material it cannot be recorded or rebroadcast without baxter's permission if.

Operator: If you have any objections, please disconnect at this time.

If you have any objections. Please disconnect at this time I would now like to turn the call over to MS. Claire Trackman Senior Vice President Chief Investor Relations Officer at Baxter International MS. Trackman you may begin.

Clare Trachtman: I would now like to turn the call over to Ms. Clare Trachtman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trachtman, you may begin. Good morning, and welcome to our first quarter 2025 earnings conference call. Joining me today are Brent Kaper, Baxter's Chair and Interim Chief Executive Officer, Joel Grade, Baxter's Executive Vice President and Chief Financial Officer, and Heather Knight, Baxter's Chief Operating Officer. On the call this morning, we will be discussing Baxter's first quarter 2025 results, along with our financial outlook for the second quarter and full year 2025.

Speaker Change: Good morning, and welcome to our first quarter 2025 earnings Conference call. Joining me today are Brian Shaper, Baxter's Chair and interim Chief Executive Officer, Joel Karate backs as executive Vice President and Chief Financial Officer, and Heather Knight Baxter's Chief operating officer.

Speaker Change: On the call. This morning, we will be discussing Baxter's first quarter 2025 results along with our financial outlook for the second quarter and full year 2025.

Clare Trachtman: With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the second quarter and full year 2025, the anticipated impact of our strategic action, the potential impact of various regulatory and operational matters, and the global macroeconomic environment, including new and proposed tariffs on our results of operations contain forward-looking statements that involve risks and uncertainties. And of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially.

Speaker Change: With that let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the second quarter and full year 2025, the anticipated impact of our strategic actions the potential impact of various regulatory and operational matters in the global macro economic environment.

Speaker Change: Including new and proposed tariffs on our results of operations contained forward looking statements.

Speaker Change: Risks and uncertainties and of course, our actual results could differ materially from our current expectations. Please refer to today's press release, and our SEC filings for more detail concerning factors that could cause actual results to differ materially.

Clare Trachtman: In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter's ongoing business performance. A reconciliation of certain non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and available in our earnings release issue this morning, both of which are available on our website.

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

Speaker Change: A reconciliation of certain non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and available in our earnings release issued this morning, both of which are available on our website.

Clare Trachtman: As a reminder, continuing operations excludes Baxter's kidney care business, which is now reported as discontinued operations.

Bryan: As a reminder, continuing operations excludes Baptist kidney care business, which is now reported as discontinued operation now I'd like to turn the call over to Bryan Bryan.

Brent Kaper: Now I'd like to turn the call over to Brent. Brent? Thanks, Clare. And good morning, everyone. Thank you for joining us. Our results for the first quarter reflect the building momentum of our strategic transformation and the hard work of our Baxter colleagues. As you saw in this morning's press release, our first quarter performance for continuing operation. preceded our previously issued guidance on both the top and bottom. We're leveraging our verticalized operating model to create a more agile, focused product portfolio and advance innovation, improve execution, and drive profit.

Speaker Change: Thanks Claire.

Bryan: And good morning, everyone. Thank you for joining us our results for the first quarter reflect the building momentum of our strategic transformation journey and the hard work of our Baxter colleagues globally.

Bryan: As you saw in this morning's press release, our first quarter performance for continuing operations exceeded our previously issued guidance on both the top and bottom line.

Bryan: Leveraging our vertical wise operating model to create a more agile focused product portfolio.

Bryan: Advanced innovation improve execution and drive profitable growth.

Brent Kaper: First quarter sales from continuing operations group 5% honor reported in operation. As a reminder, continuing operations exclude the impact of our kidney care. which was acquired by Carlyle on January 31. Sales rose in all three of Baxter's continuing segments, with performance in medical products and therapies, and healthcare systems and technologies coming in ahead of expectations.

Bryan: First quarter sales from continuing operations grew 5% on a reported and operational basis. As a reminder, continuing operations exclude the impact of our kidney care business, which was acquired by Carlyle January 31 2025.

Bryan: Sales rose in all three of factors continuing segments with performance in medical products and therapies and health care systems and technologies coming in ahead of expectations.

Brent Kaper: Heather and Joel will share more on individual segment results later in the The bottom line, adjusted earnings per share from continuing operations were $55,000. These results were fueled by top-line Continued emphasis on driving operational benefit from lower non-operational We're pleased with our strong Q1 performance and confident in our strategic trajectory. At the same time, we're cognizant of the volatility that is present in the global macro environment. and the resulting uncertainty that has been created in the market. We, like others, are keenly focused on evaluating and working to address the impact of newly enacted global tariffs and future potential tariffs, as well as a range of other interrelated As you're all aware, this remains an evolving and fluid situation.

Bryan: And Joel will share more on the individual segment results later in the call.

Bryan: On the bottom line adjusted earnings per share from continuing operations were 55.

Bryan: These results were fueled by top line performance, our continued emphasis on driving operational efficiency and a benefit from lower non operational expense.

Bryan: We're pleased with our strong Q1 performance and confident in our strategic trajectory.

Bryan: At the same time, we're cognizant of the volatility that is present in the global macro environment.

Bryan: The resulting uncertainty that's been created in the marketplace.

Bryan: We like others are keenly focused on evaluating working to address the impact of newly enacted global tariffs and future potential tariffs as well as a range of other related factors.

Bryan: As Youre all aware this remains an evolving and fluid situation.

Brent Kaper: Joel will walk you through our key assumptions as they relate to our financial outlook for the remainder of this year, and also how we plan to mitigate a portion To be clear, we remain positive about our opportunities to accelerate sales growth and expand markets. We continue to build on the strengths of our operating model in a reinvigorated profile. And as always, we benefit from our durable portfolio of medically essential products, which has served as the underlying foundation of our strength for decades.

Bryan: Joe will walk you through our key assumptions as they relate to our financial outlook for the remainder of this year and also how we plan to mitigate a portion of these impacts.

Bryan: To be clear, we remain positive about our opportunities to accelerate sales growth and expand margins.

Bryan: We continue to build on the strengths of our operating model and a reinvigorated profile and as always we benefit from our durable portfolio of medically essential products, which has served as the underlying foundation of our strength for decades.

Brent Kaper: Finally, I want to address a topic that I'm certain is on your mind, which is the identification of Baxter's next permanent. While I'm not able to provide a detailed update, I can confirm that the search process is active and well underway. The board being assisted by a leading search firm. As I shared previously, the board is moving expeditiously, but also... to make sure we identify the right candidate to make the most of this opportunity to harness the potential our employees have. We will, of course, keep our stakeholders updated on new developments as we are able.

Bryan: Finally, I want to address the topic that I'm certain is on your mind, which is the identification of Baxter's next permanent CEO.

Bryan: Well im not able to provide a detailed update I can confirm that the search process is active and well underway with the board being assisted by a leading search firm in these efforts.

Bryan: As I shared previously the board is moving expeditiously, but also deliberately to make sure. We identify the right candidate to make the most of this opportunity to harness the potential our employees have helped create.

Bryan: We will of course keep our stakeholders updated on new developments as we are able to share them.

Brent Kaper: In closing, I want to recognize our global team for their dedication to our mission. and outstanding contributions to Q1.

Bryan: In closing I want to recognize our global team for their dedication to our mission.

Bryan: And outstanding contributions to Q1 performance.

Heather Knight: And with that, I'll turn it over to Heather for a closer look at performance.

Bryan: With that I'll turn it over to Heather for a closer look at performance by segment.

Heather Knight: Thanks, Brent, and welcome, everyone. I'm pleased to be here with you this morning to discuss our first quarter results. I'm going to walk through our sales performance in the quarter, and then we'll hand it over to Joel to walk through performance across the rest of the P&L, along with our financial outlook for the second quarter and full year 2025. Before I begin the sales discussion, I want to provide a reminder that results discussed on today's call will reference operational growth, which, as stated last quarter, when providing guidance, excludes the impact of foreign exchange, MSA revenues from Bantam, and the planned exit of IV solutions from China.

Heather: Thanks, Brian and welcome everyone I'm pleased to be here with you. This morning to discuss our first quarter results I'm going to walk through our sales performance in the quarter and then we'll hand it over to Joel to walk through performance across the rest of the P&L along with our financial outlook for the second quarter and full year 2025.

Heather: Before I begin the sales discussion I want to provide a reminder that results discussed on today's call will reference operational growth, which as stated last quarter when providing guidance excludes the impact of foreign exchange MSA revenues from Vantiv and the planned exit of IV solutions from China.

Heather Knight: As Brent referenced, and as you've seen from our release, all three Baxter segments delivered year-over-year growth for the quarter at both reported and operational rates, helping fuel company-wide, top-line outperformance. First quarter 2025 global sales from continuing operations total $2.63 billion and increased 5% on both a reported basis and operational basis. This compared favorably to our previous guidance, which called for sales to increase 3% to 4% on a reported basis and approximately 4% on an operational basis. Outperformance in the quarter was led by our HST segment with particular strength in our Care and Connectivity Solutions division, along with better than expected sales in MPT.

Heather: As Brian referenced and as you've seen from our release all three Baxter segments delivered year over year growth for the quarter at both reported and operational rates, helping fuel companywide top line outperformance.

Heather: First quarter 2025 global sales from continuing operations.

Heather: The $2 $63 billion and increased 5% on both a reported basis and operational basis.

Heather: This compared favorably to our previous guidance, which called for sales to increase 3% to 4% on a reported basis and approximately 4% on an operational basis.

Heather: Our performance in the quarter was led by our HST segment with particular strength in our care and connectivity solutions division, along with better than expected sales in M. P T.

Heather Knight: Now I'll walk through our results by reportable segment. Again, commentary regarding sales growth will reflect growth on an operational basis at constant currency rates. Sales in our Medical Products and Therapies, or MPT, segment were $1.3 billion, increasing 6% in the quarter, and came in ahead of expectation. Within MPT, first quarter sales from our Infusion Therapies and Technologies division totaled $994 million and increased 6%. Sales in the quarter benefited from double digit growth for our US Infusion Systems portfolio as the rollout of our Novum IQ pump platform continues. Nutrition sales in the quarter advanced mid single digits globally, reflecting strong growth in the US due to the continued progress we are experiencing in alternate sites for this business, as well as improved supply for certain products that resulted in the clearance of backorders.

Heather: Now I will walk through our results by reportable segments.

Heather: Again commentary regarding sales growth will reflect growth on an operational basis at constant currency rates.

Heather: Sales in our medical products and therapies or MPT segment were $1 $3 billion, increasing 6% in the quarter and came in ahead of expectations.

Heather: Within MPT first quarter sales from our infusion therapies and technologies division totaled $994 million and increased 6%.

Heather: Sales in the quarter benefited from double digit growth for our U S infusion systems portfolio as the rollout of our Novum IQ pump platform continues.

Heather: Nutrition sales in the quarter advanced mid single digits globally, reflecting strong growth in the U S. Due to the continued progress we are experiencing and alternate sites for this business as well as improved supply for certain products that resulted in the clearance of back orders.

Heather Knight: We also realized low single-digit growth for IV solutions. As we noted on the first quarter call, thanks to the team's stellar recovery efforts, production at our North Cove IV Solutions facility is back to pre-hurricane levels following the impact of Hurricane Helene. We're now focused on replenishing inventory and making continued progress on allocations for our customers. We expect to be on virtually all product allocations this month. IV solution sales in the quarter reflected continued conservation of fluids at hospitals across the U.S. while the network fully recovered. Our current outlook reflects our expectation that hospitals will continue to conserve fluids in the near term, but that utilization levels will improve, particularly as our allocations are removed and the U.S.

Heather: We also realized low single digit growth for IV solutions.

Heather: As we noted on the first quarter call. Thanks to the team's stellar recovery efforts production at our North Cove IV solutions facility in fact to pre hurricane levels following the impact of Hurricane Helene.

Heather: We are now focused on replenishing inventory and making continued progress on allocations for our customers.

Heather: We expect to be off virtually all product allocations this month.

Heather: IV solutions sales in the quarter reflected continued conservation of fluid at hospitals across the U S. While the network fully recovers.

Heather: Our current outlook reflects our expectation that hospitals will continue to conserve fluid in the near term, but the utilization levels will improve particularly as our allocations are removed and the U S supply returns to normal levels.

Heather Knight: supply returns to normal levels. During the first quarter, we did see some distributors begin to rebuild their inventory levels, which helped to offset the impact from the conservation efforts. Our original expectation was that these rebuilds would likely occur more in the second quarter. Sales in advanced surgery totaled $268 million and grew 4% globally. Results in the quarter reflected solid growth outside the US due to increased demand for our hemostatic sealants and the timing of sales to distributors. Sales in the US reflected one less billing day as compared to the prior year period. In addition, the prior year period reflected the benefit of a backorder clearance for one of our hemostat products.

Heather: During the first quarter, we did see some distributors begin to rebuild their inventory levels, which helped to offset the impact from the conservation efforts. Our original expectation was that these rebuilds would likely occur more in the second quarter.

Heather: Sales in advanced surgery totaled $268 million and grew 4% globally.

Heather: Also in the quarter reflected solid growth outside the U S. Due to increased demand for our hemostat sealant and the timing of sales to distributors.

Heather: Sales in the U S reflected one less billing day as compared to the prior year period.

Heather: In addition, the prior year period reflected the benefit of a backorder clearance for one of our hemostat products.

Heather Knight: In Healthcare Systems and Technologies, or HST, sales in the quarter were above expectations and totaled $704 million, increasing 6%. Within the HST segment sales in the quarter for our Care and Connectivity Solutions or CCS division were $427 million dollars advancing 7% globally. Performance in the quarter was driven by 14% growth in the US for CCS due to continued momentum in our patient support systems or PFS business, which once again delivered strong growth and reflected a benefit from competitive wins in both our med surge and ICU product lines, as well as upgrades for existing customers. Total U.S.

Heather: And health care systems, and technologies or HST sales in the quarter were above expectations and totaled $704 million increasing 6%.

Heather: Within the HFC segment sales in the quarter for our care and connectivity solutions or Ccs division were $427 million advancing 7% globally.

Heather: Performance in the quarter was driven by 14% growth in the U S for Ccs due to continued momentum in our patient support systems, our PFS business, which once again delivered strong growth and reflected a benefit from competitive wins in both our med surge and ICU product line.

Heather: As well as upgrades for existing customers.

Heather: Total U S capital orders for Ccs rose, 20% in the quarter, creating a healthy backlog to support future growth for this division.

Heather Knight: capital orders for CCS rose 20% in the quarter, creating a healthy backlog to support future growth for this division. Today, we have not seen a slowdown in U.S. capital hospital spending, but in light of the macroeconomic uncertainty, we are closely monitoring the situation. Our focus remains on highlighting the benefits of our broad portfolio and the enhanced digital capabilities we have added to improve workflow efficiency. Performance for this division was partially offset by weaker sales outside the U.S. Importantly, we did see capital orders pick up internationally, and these are anticipated to contribute to growth over the course of the year.

Heather: To date, we have not seen a slowdown in U S capital hospital spending but in light of the macroeconomic uncertainty we are closely monitoring the situation.

Heather: Our focus remains on highlighting the benefits of our broad portfolio and the enhanced digital capabilities, we have added to improve workflow efficiency.

Heather: Performance for this division was partially offset by weaker sales outside the U S.

Heather: Importantly, we did see capital orders pickup internationally and these are anticipated to contribute to growth over the course of the year.

Heather Knight: Frontline care sales of the quarter were $277 million and increased 5%. Performance in the quarter reflected a favorable comparison as well as continued signs of stabilization of the primary care market in the US. Moving to our pharmaceutical segment, sales in the quarter totaled $581 million, increasing 3%. First quarter sales with an injectables and anesthesia of $335 million grew 4%. Performance in the quarter reflected mid single digit growth in our specialty injectables portfolio, driven by strong international growth, reflecting a government order and increased demand. This performance was partially offset by lower sales of anesthesia in the quarter.

Heather: Frontline care sales this quarter were $277 million and increased 5% performance in the quarter reflected a favorable comparison as well as continued signs of stabilization of the primary care market in the U S.

Heather: Moving to our pharmaceutical segment sales in the quarter totaled $581 million increasing 3%.

Heather: First quarter sales within Injectables in anesthesia of $335 million.

Heather: Grew 4% performance.

Heather: Performance in the quarter reflected mid single digit growth in our specialty injectables portfolio, driven by strong international growth, reflecting a government order and increased demand.

Heather: This performance was partially offset by lower sales of anesthesia in the quarter.

Heather Knight: Our expectation is that the anesthesia business will begin to stabilize and the rate of decline for this business will start to slow. Drug compounding grew 2% and reflected a difficult comparison to the prior year period. And then Other Sales, which represents sales not allocated to a segment, and primarily includes sales of products and services provided directly through certain manufacturing facilities worth $15 million in the During the quarter, MSA revenue from Vantiv totaled $63 million. These sales are not reflected in our operational growth but are included in our reported growth for the quarter.

Heather: Our expectation is that the anesthesia business will begin to stabilize and the rate of decline for this business will start to slow.

Heather: Drug compounding grew 2% and reflected a difficult comparison to the prior year period.

Heather: And in other sales, which represent sales not allocated to the segment and primarily includes sales of products and services provided directly through certain manufacturing facilities were $15 million in the quarter.

Heather: During the quarter MSA revenue from Vantiv totaled $63 million. These sales are not reflected in our operational growth, but are included in our reported growth for the quarter.

Heather Knight: Before turning it over to Joel, I want to take a step back. Looking holistically, our strength across the segments reflects both the power and the trajectory of our newly defined enterprise. Our confidence and our future potential remains high, and we are committed to executing on our strategic objectives, even amid a more dynamic global macroeconomic environment. I'm confident we'll navigate this uncertainty just as we always do with the support of our 38,000 colleagues across the globe, and with our mission to save and sustain lives helping define our path forward.

Joel: Before turning it over to Joel I wanted to take a step back looking holistically our strength across the segments reflects both the power and the trajectory of our newly defined enterprise, our confidence and our future potential remains high and we are committed to executing on our strategic objectives.

Joel: Even amid a more dynamic global macroeconomic environment.

Joel: Confident we will navigate this uncertainty just as we always do with the support of our 38000 colleagues across the globe and with our mission to save and sustain lives, helping define our path forward.

Joel Grade: Now I'll pass it over to Joel who will discuss performance down the rest of the P&L along with our updated financial outlook.

Joel: Now I will pass it over to Joel who will discuss performance down the rest of the P&L along with our updated financial outlook Joel.

Joel Grade: Joel. Thanks, Heather, and good morning, everyone. As my colleagues mentioned, we were pleased with our first quarter results, which came in ahead of our expectations on both the top and bottom line. Before I begin, I want to highlight a point that both Brent and Heather referenced. As we're all aware, we now face a more dynamic global macroeconomic environment, which has created a level of uncertainty for everyone, including our customers. We remain squarely focused on addressing the needs of our customers through a broad portfolio of medically essential products and evaluating opportunities to better optimize our supply chain network in light of new tariffs with some activities already underway.

Joel: Thanks, Heather and good morning, everyone.

Speaker Change: As my colleagues mentioned, we are pleased with our first quarter results, which came in ahead of our expectations on both the top and bottom lines.

Speaker Change: Before I begin I want to highlight a point that both Brent and Heather referenced.

Speaker Change: As we're all aware, we now have even more dynamic global macroeconomic environment, which has created a level of uncertainty for everyone, including our customers.

Speaker Change: We remain squarely focused on addressing the needs of our customers through our broad portfolio of medically essential products and evaluating opportunities to better optimize our supply chain network in light of new tariffs with some activities already underway.

Joel Grade: And most importantly, we remain committed to accelerating our investments in innovation, focused on bringing products to the marketplace that solve the problems that our customers face and help redefine healthcare delivery. Importantly, we will not compromise on our efforts to thoughtfully accelerate innovation in targeted areas of the business, as this is critical to support our future growth aspirations. Starting with the bottom line, first quarter adjusted earnings per share from continuing operations were $0.55 per share and came in ahead of our prior guidance of $0.47 to $0.50 per share, driven by the favorable top-line results, lower than expected SG&A expense.

Speaker Change: Importantly, we remain committed to accelerating our investments in innovation focused on bringing products to the marketplace to solve the problems that our customers face and help redefine health care delivery.

Speaker Change: Importantly, we will not compromise on our efforts to thoughtfully accelerate innovation and targeted areas of the business. As this is critical to support our future growth aspirations.

Speaker Change: Starting with the bottom line first.

Speaker Change: First quarter adjusted earnings per share from continuing operations were 55 per share and came in ahead of our prior guidance of 47 to <unk> 50 per share.

Speaker Change: Driven by the favorable top line results.

Speaker Change: Sure than expected SG&A expenses, and a benefit from TSA income in other reimbursements.

Joel Grade: and a benefit from TSA income and other reimburses. In addition, our tax rate and other non-operational items came in favorable to our expectations, which more than offset a negative impact from foreign expenses. Before more specifically addressing the rest of the P&L results, I wanted to make some comments regarding our continuing operations. As a reminder, prior to the close of the Vantage deal, corporate costs that had previously been allocated to the kidney care segment that would not convey with the kidney care business in the sale were reported in unallocated corporate costs. Post-close, these costs are now allocated to each of our segments, along with income from our Transition Services Agreements, or TSAs, as well as cost containment initiatives the company is in the process of undertaking.

In addition, our tax rate and other nonoperational items came in favorable to our expectations, which more than offset a negative impact from foreign exchange.

Speaker Change: Before more specifically addressing the rest of the P&L results I wanted to make some comments regarding our continuing operations reported.

Speaker Change: As a reminder, prior to the close of the Vantiv deal corporate costs that had previously been allocated in the kidney care segment that would not convey what the kidney care business and the sale were reported in unallocated corporate costs.

Speaker Change: Post close these costs are now allocated to each of our segments along with income from our transition services agreements or TSA is as well as cost containment initiatives. The company is in the process of undertaking.

Joel Grade: Our goal remains to fully offset the impact of these stranded costs and loss of TSA income by the end of 2026. In addition, during the quarter, we reclassified certain functional expenses to cost of goods sold from SG&A following the completion of the sale of our kidney care business. These functional costs were previously recorded in SG&A and support manufacturing and are now classified as indirect costs subject to inventory and capitalization and recorded in cost of sales when sold. First quarter adjusted gross margin from continuing operations was 41.8%, a decrease of 160 basis points compared to the prior year.

Speaker Change: Our goal remains to fully offset the impact of the Australian costs and loss of TSA income by the end of 2027.

Speaker Change: In addition, during the quarter, we reclassified certain functional expenses to cost of goods sold from SG&A. Following the completion of the sale of our kidney care business.

Speaker Change: These functional costs for previously recorded in SG&A and support manufacturing and are now classified as indirect costs subject to inventory capitalization and recorded in cost of sales when sold.

Speaker Change: First quarter adjusted gross margin from continuing operations was 41, 8% a decrease of 160 basis points compared to the prior year.

Joel Grade: The year-over-year decline reflected the impact of NSA revenues from Vantage and higher expenses related to planning and fulfillment.

Speaker Change: The year over year decline reflected the impact from MSA revenues from Vantiv and higher expenses related to planning and fulfillment.

Joel Grade: First Quarter Adjusted SG&A from Continuing Operations. Total $608 million, or 23.2 as a percentage of sales, a decrease of 310 basis points from the prior year period. This year-over-year decrease reflects the benefit from the reclassification of functional costs, along with lower stock compensation expenses in the quarter and continued discipline expenses. Adjusted R&D spending from continuing operations in the quarter to over $138 million, and represented 5.3 as a percentage of sales, an increase of 50 basis points compared to the prior year period, and reflect our continued investments in advancing new products across the portfolio and bringing innovation to patients across our sector.

Speaker Change: First quarter adjusted SG&A from continuing operations totaled $608 million or $23 two as a percentage of sales a decrease of 310 basis points from the prior year period.

Speaker Change: This year over year decrease reflects the benefit from the reclassification of functional costs, along with lower stock compensation expenses in the quarter.

Speaker Change: And continued disciplined expense management.

Speaker Change: Adjusted R&D spending from continuing operations in the quarter totaled $138 million and represented $5 three as a percentage of sales an increase of 50 basis points compared to the prior year period.

Speaker Change: That reflects our continued investments in advance of new products across the portfolio and bringing innovation to patients across our segments.

Joel Grade: PSA income and other reimbursements totaled $40 million in the quarter. This came in higher than expected and reflected increased levels of support currently required by BAMF. The associated expenses are reflected in other lines of the P&L. These factors resulted in an adjusted operating margin of 14.9% on a continuing operations basis. Improving 260 basis points compared to the prior year period. This performance reflects continued focus on operational execution, as well as the benefit of TSA income and other reimbursements from VANS.

Speaker Change: TSA income in other reimbursements totaled $40 million in the quarter.

Speaker Change: This came in higher than expected and reflected increased levels of support currently required by Vantiv.

Speaker Change: The associated expenses are reflected in other lines of the P&L.

Speaker Change: These factors resulted in an adjusted operating margin of 14, 9% on a continuing operations basis improve.

Speaker Change: Improving 260 basis points compared to the prior year period.

Speaker Change: This performance reflects a continued focus on operational execution as well as the benefit of TSA income and other reimbursements from Vantiv.

Joel Grade: Taking a look at Adjusted Operating Margin by Each Reportable Cycle. MPC's adjusted operating margin for the quarter was 19.3%, increasing 80 basis points over the prior year period, and reflecting positive pricing in the quarter, partially offset by elevated costs as we continue to improve volumes at North Cove and experience higher planning and fulfillment costs. TSA income contributed to positive performance in the quarter. HST First Quarter Adjusted Operating Margins of 13.2%, a 320 basis point improvement from the prior year, driven primarily by improved top-line performance. TSA income also contributed to performance and helped offset increased corporate allocation expenses.

Speaker Change: Taking a look at adjusted operating margin, but each reportable segment.

Speaker Change: Mpc's adjusted operating margin for the quarter was 19, 3%.

Speaker Change: Creasing 80 basis points over the prior year period.

Speaker Change: And reflecting positive pricing in the quarter, partially offset by elevated costs as we continue to improve volumes at Northcote and experienced higher planning and fulfillment costs.

Speaker Change: TSA income contributed to positive performance in the quarter.

Speaker Change: HFC first quarter adjusted operating margins of 13, 2% or 320 basis point improvement from the prior year, driven primarily by improved topline performance.

Speaker Change: TSA income also contributed to performance and helped to offset increased corporate allocation expenses.

Joel Grade: Pharmaceuticals adjusted operating margins were 10.8% for the quarter, decreasing 270 basis points compared to the prior year. These results reflect certain one-time expenses realized in the quarter and an increase in quarter allocations. These expenses were partially offset by TSA. Net interest expense from continuing operations totaled $64 million in the quarter, a decrease of $14 million versus the prior year period, reflecting lower interest expense following the pay down of existing debt with proceeds from a sale advantage. Adjusted Other Non-Operating Income totals $17 million in the quarter, compared to income of $9 million in the prior year period, primarily reflecting lower losses from foreign exchange balance.

Speaker Change: Pharmaceuticals, adjusted operating margins were 10, 8% for the quarter decreasing 270 basis points compared to the prior year.

Speaker Change: These results reflected certain one time expenses realized in the quarter and an increase in corporate allocations.

Speaker Change: These expenses were partially offset by TSA income.

Speaker Change: Net interest expense from continuing operations totaled $64 million in the quarter, a decrease of $14 million versus the prior year period, reflecting lower interest expense following the pay down of existing debt with proceeds from the sale of them too.

Speaker Change: Adjusted other nonoperating income totaled $17 million in the quarter compared to income of $9 million in the prior year period.

Speaker Change: Primarily reflecting lower losses from foreign exchange balance sheet accounts.

Joel Grade: Continuing operations adjusted tax rate for the quarter was 17.4%, benefiting from the strategic use of select tax attributes as we optimize our global structure following the sale of kidney. And as previously mentioned, adjusted earnings from continuing operations were $0.55 per share for the quarter and increased to 53% versus the prior year. Contributions to Earnings included improved commercial performance, positive pricing, the receipt of TSA income, and other reimbursements, as well as the benefit of lower expenses from non-operational items, including interest and taxes.

Speaker Change: The continuing operations adjusted tax rate for the quarter was 17, 4% benefiting from our strategic use of tax attributes as we optimize our global structure following the sale of kidney care.

Speaker Change: And as previously mentioned adjusted earnings from continuing operations were 55 per share for the quarter and increased 53% versus the prior year.

Speaker Change: Contributions to earnings included improved commercial performance positive pricing the receipt of TSA income in other reimbursements as well as the benefit of lower expenses from non operational items, including interest and tax.

Joel Grade: Let me conclude my remarks by discussing our outlook for the full year 2025 and the second quarter of 2025, including some key assumptions underpinning the For full year 2025, Baxter expects total sales growth of 7 to 8% on a reported basis. This guide reflects current foreign exchange rates, which are expected to minimally impact growth on the top line. This is an increase relative to our prior guidance, which had assumed that foreign exchange would negatively impact sales by approximately 200 basis points. In addition, our reported sales guidance includes the contribution of approximately $310 million of anticipated MSA revenues from Bandit, down slightly from our original expectations of $345 million.

Speaker Change: Let me conclude my remarks by discussing our outlook for the full year 2025 in the second quarter of 2025, including some key assumptions underpinning the guidance.

Speaker Change: For full year 2025 faster expects total sales growth of 7% to 8% on a reported basis.

Speaker Change: This guidance reflects current foreign exchange rates, which are expected to minimally impact growth on the topline.

Speaker Change: This is an increase relative to our prior guidance, which had assumed that foreign exchange negatively impacted sales by approximately 200 basis points.

Speaker Change: In addition, our reported sales guidance includes a contribution of approximately $310 million of anticipated MSA revenues with Vantiv.

Speaker Change: Slightly from our original expectations of $345 million.

Speaker Change: Operationally Master continues to expect sales growth of 4% to 5%.

Joel Grade: Operationally, Baxter continues to expect sales growth of 4% to 5%. As a reminder, this guidance excludes the impact of foreign exchange, MSA revenues, and the planned exit of IV solutions in China. The negative impact from exiting the IV solution business in China continues to be approximately 50 basis points to growth.

Speaker Change: As a reminder, this guidance excludes the impact of foreign exchange MSA revenues and the planned exit of IV solutions in China.

Speaker Change: The negative impact from exiting the IV solutions business in China continues to be approximately 50 basis points to growth.

Joel Grade: Operational sales guidance for the full year by reportable segment is as follows. For MPT, we continue to expect sales to increase approximately 5%, driven by strength in our infusion systems business, positive pricing, and other underlying business momentum. As mentioned earlier, we do expect IV solutions growth to improve as we remove allocations and some of their conservation effects. This guidance excludes the impact of exiting the IV solutions market in China, which is estimated to impact sales growth by 100 basis points. We continue to expect sales in our HST segments to increase approximately 3%. While we are very pleased with the building momentum and healthy backlog we have built in HSP, we will continue to closely monitor the capital environment for any changes to hospital spending expectations.

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

Speaker Change: For MPT, we continue to expect sales to increase approximately 5% driven by strength in our infusion systems business positive pricing and other underlying business momentum.

Speaker Change: As mentioned earlier, we do expect the IV solutions growth to improve as we remove allocations.

Speaker Change: Excellent effort.

Speaker Change: This guidance excludes the impact of exiting the IV solutions market in China, which is estimated to impact sales growth by 100 basis points.

Speaker Change: We continue to expect sales in our HFC segment to increase approximately 3%.

Speaker Change: While we are very pleased with the building momentum and healthy backlog, we have built in HST.

Speaker Change: We'll continue to closely monitor the capital environment or any changes to the hospital spending expectations.

Joel Grade: We continue to expect pharmaceuticals to increase approximately five to Before turning to our outlet for other P&L line items, I want to provide some thoughts regarding our assumptions around tariffs. Our updated guidance now includes the estimated impact from tariffs based on the current proposals enacted and assumes a reversion back to original proposed tariff rates following the 90-day suspension. In addition, our guidance does take into account that we are able to mitigate a portion of these impacts. In general, Baxter strives to make where we sell This allows us to deliver our products and solutions around the world with greater control and visibility to our operations.

Speaker Change: We continue to expect pharmaceuticals to increase approximately 5% to 6%.

Speaker Change: Before turning to our outlook for other P&L line items I want to provide some thoughts regarding our assumptions around tariffs.

Speaker Change: Our updated guidance now includes the estimated impact from tariffs based on the current proposals are massive.

Speaker Change: Assumes a reversion back to original proposed tariff rates following the 90 day suspension.

Speaker Change: In addition, our guidance does take into account. So we were able to mitigate a portion of these impacts.

Speaker Change: In general faster strives to make where we sell and buy where we made as part of our broader integrated supply chain approach.

Speaker Change: This allows us to deliver our products and solutions around the world with greater control and visibility to our operations.

Joel Grade: Currently, the majority of Baxter's products sold in the U.S. are manufactured in the U.S. and made largely from U.S.-made components. However, international procurement is part of our business operations, and as such, we are impacted from the U.S. and retaliatory tariffs that have been issued. We plan to take several actions to help minimize the impacts related to terror. Some of these actions will be able to be realized more near-term to help mitigate the impact in 2025, and others will require more time to be implemented, but will help offset the impact in future years. Some of these mitigation opportunities include...

Speaker Change: Currently the majority of Baxter's products sold in the U S are manufactured in the U S and <unk>.

Speaker Change: Largely from U S made components.

Speaker Change: However, international procurement as part of our business operations and as such we are impacted from the U S and retaliatory tariffs that have been issued.

Speaker Change: We plan to take several actions to help minimize the impacts related to tariffs.

Speaker Change: Some of these actions will be able to be realized more near term to help mitigate the impact in 2025, and others will require more time to implement but will help offset the impact in future years.

Speaker Change: Some of these mitigation opportunities include.

Joel Grade: Actively communicating with and assessing our supplier base to identify risks and work to implement mitigation. which could include carrying additional inventory and identifying alternative suppliers or manufacturing. Identifying Alternative Shipping Routes for Suppliers and Finished Goods to Help Minimize the Overall Impact. Assessing Targeted Pricing Act. And finally, continuing to work closely with our trade association partners in various countries to advocate for possible Taking all this into account, we estimate the net impact to our results from tariffs is approximately $60 to $70 million in 2025. Additionally, based on our standard rollout period, we expect to see the majority of the tariff impact in the second half of the year.

Speaker Change: Actively communicating with and assessing our supplier base to identify risks and work to implement mitigation.

Speaker Change: Which could include carrying additional inventory and identifying alternative suppliers or manufacturing locations.

Speaker Change: Identifying alternative shipping routes for suppliers and finished good sales minimize the overall impact.

Speaker Change: Especially targeted pricing actions.

Speaker Change: And finally, continuing to work closely with our trade Association partners in various countries to advocate for parcel exemptions.

Speaker Change: Taking all this into account.

Speaker Change: We estimate the net impact to our results from tariffs is approximately $60 million to $70 million in 2025.

Speaker Change: Additionally, based on our standard rollout period, we expect to see the majority of the tariff impact in the second half of the year.

Joel Grade: I note that while China represents a very small percentage of our total sales, given the magnitude of the tariffs that have been enacted between the two countries, these tariffs now account for nearly half of the total impact. At this time, our tariff assumptions do not reflect any potential tariffs related to pharmaceutical products.

Speaker Change: I would note that while China represents a very small percentage of our total sales given.

Speaker Change: Given the magnitude of the tariffs that have been enacted between the two countries. These tariffs now account for nearly half of the total impact.

Speaker Change: At this time, our tariff assumptions do not reflect any potential tariffs related to pharmaceutical products.

Joel Grade: One other item I'd like to highlight is that while current foreign exchange rates are expected to benefit top-line relative to prior guidance, They do negatively impact our adjusted operating margins and adjusted earnings per share, which is driven by our current infrastructure footprint that remains post-sale advance. We have plans over time to optimize our global inclusive of these factors and underlying business performance. We now expect full year adjusted operating margin from continuing operations between 16% to 16.5%. TSA income and other reimbursements are now expected to range between $140 to $150 million. This increase reflects incremental services provided advantage with the related expenses reflected in the other lines of the P&L.

Speaker Change: One other item I'd like to highlight is that while current foreign exchange rates are expected to benefit top line relative to prior guidance they.

Speaker Change: They do negatively impacted our adjusted operating margins and adjusted earnings per share, which is driven by our current infrastructure footprint that remains post the sale of Vantiv.

Speaker Change: We have plans over time to optimize our global footprint.

Speaker Change: Inclusive of these factors and underlying business performance, we now expect full year adjusted operating margin from continuing operations between 16% to 16, 5%.

Speaker Change: TSA income in other reimbursements are now expected to range between $140 million to $150 million.

Speaker Change: This increase reflects the incremental services provided <unk> with the related expenses reflected in the other lines of the P&L.

Joel Grade: We expect our non-operating expenses, which include net interest expense and other income. The total is between $220 to $240 million. On a continuing operations basis, we anticipate a full year tax rate of approximately 19 to 19 and a half percent. We expect our diluted share count to average approximately 515 million shares for the year, which does not contemplate any share replacement. Based on all these factors, we are increasing the low end of our prior guidance range and now anticipate full year adjusted earnings on a continuing operations basis. $2.47 to $2.55 per diluted share.

Speaker Change: We expect our non operating expenses, which include net interest expense and other income and expense to total between $220 million to $240 million.

Speaker Change: On a continuing operations basis, we anticipate a full year tax rate of approximately 19 to 19, 5%.

Speaker Change: We expect our diluted share count to average approximately 515 million shares for the year, which does not contemplate any share repurchases.

Speaker Change: Based on all of these factors, we are increasing the low end of our prior guidance range and now anticipate full year adjusted earnings on a continuing operations basis.

Speaker Change: The $2 47.

Speaker Change: To $2 55 per diluted share.

Joel Grade: Specific to the second quarter of 2025, we expect continuing operations and sales growth of approximately 4-5% on a reported basis and 1-2% on an operational basis. For the second quarter, Ford Exchange is expected to positively impact the top line by approximately 50 basis points. and MSA Revenues are expected to total approximately $80 million. The China IV Solutions Exit is expected to impact top-line growth by approximately 70 basis points in the second quarter. On a continuing operations basis, we expect adjusted earnings per share of 59 cents to 63 cents.

Speaker Change: Specific to the second quarter of 2025, we expect considering operational sales growth of approximately 4% to 5% on a reported basis and 1% to 2% on an operational basis.

Speaker Change: For the second quarter Foreign exchange is expected to positively impact the top line by approximately 50 basis points and MSA revenues are expected to total approximately $80 million.

Speaker Change: The China IV solutions exit is expected to impact top line growth by approximately 70 basis points in the second quarter.

Speaker Change: On a continuing operations basis, we expect adjusted earnings per share of 59.

Speaker Change: The 63.

Operator: With that, we can now open up the call for Q&A. Thank you.

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

Speaker Change: Thank you we will now begin the question and answer session. If you have a question. Please press the star followed by the number one on your Touchtone phone if you wish to remove yourself from the queue Press Star then one a second time.

Operator: We will now begin the question and answer session. If you have a question, please press the star key followed by the number one on your touchtone phone. If you wish to remove yourself from the queue, press star then one a second time.

Operator: If you are using a speakerphone, please lift the handset to ask your question.

Speaker Change: If you are using a speaker phone please lift the handset to ask your question.

Operator: So that we may be respectful of everyone's time, please limit your comments to one question with one follow-up question if necessary. We appreciate everyone's patience and would like to provide as many of you as possible the opportunity to ask a question. We will pause for a moment while the list is being compiled.

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

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

Operator: I would like to remind participants that this call is being recorded and a digital replay will be available on the Baxter International website for 60 days at www.baxter.com.

Speaker Change: I would like to remind participants that this call is being recorded and a digital replay will be available on the Baxter International website for 60 days.

Speaker Change: W Dot Baxter dot com.

Joanne Wuensch: Our first question comes from Joanne Uch of Citi. Your question please. Good morning, it's Dorianne Wuensch, and very nice quarter and start to the year.

Operator: Our first question comes from Joanne Wuensch of Citi. Your question. Please.

Joanne Wuensch: Good morning, it's Joanne wuensch, and very nice quarter and start to the year.

Joanne Wuensch: I have to ask the obligatory tarot question, specifically what you are pulling back on or managing to offset some of the headwinds. And then how should we think about 2026? Should we just annualize your run rate that you gave for 2025?

Operator: Have to ask the obligatory Taro question.

Operator: Specifically, what you are pulling back on or managing to offset some of the headwinds and then how should we think about 2026 should we just annualize your run rate that you gave for 25.

Joel Grade: And then I'll give you my second question up front. The H2SP business, I think this was your strongest quarter since 2023. How should we think about that recovery and the sustainability? Thank you. Thanks, Joanne. Good morning. It's Joel.

Operator: Then I'll give you my second question upfront.

Operator: HST business I think this Mr. <unk> was your strongest quarter since 2023.

Operator: How should we think about that recovery and the sustainability. Thank you.

Joe: Thanks, Joanne good morning, It's Joe I'll take the first part and then I'll pass it over to Heather for a second.

Heather Knight: I'll take the first part and I'll pass it over to Heather for the second. So, from a tariff perspective, certainly, we do have a number of mitigation activities, some of which are underway already, others which are continuing to be developed. But also, from a timing perspective, again, there's going to be some spread on that. But I'd group it into a couple things, I mean, one from a supply chain perspective, certainly some optimization activities around negotiating with suppliers, you know, finding potential alternative supply, whether it's different suppliers, or, you know, we're different places. Looking to do things, we're optimizing freight, optimizing supply.

Operator: So from a tariff perspective certainly.

Joe: We do have a number of mitigation activities.

Joe: Some of which are underway already.

Joe: Others, which are continuing to be developed but also from a timing perspective again, there's going to be some spread on that but I grew up in a couple of things I mean, one from a supply chain perspective, certainly some optimization activities around.

Negotiating with suppliers.

Joe: We are finding potential alternative supply, whether it's so different suppliers where different places.

Joe: Looking to do things, we're optimizing freight Rob driving supply I think think about routes to and whether we need to go from one country to another to another or we can go direct and then there are certain things, we're looking to really do that to optimize those things.

Joel Grade: Think about, you know, routes and whether we need to, you know, go from one country to another to another, or we can go direct. Again, there are certain things we're looking to really do to optimize those things. You know, we're certainly, you know, from a pricing standpoint, I'd say it's very targeted. There's some very targeted areas around that. Again, not a broad strategy there necessarily, but then from... And then finally, just from, you know, continuing to seek additional exemptions on working with our government team and then the various countries we operate in, and certainly in our industry groups to find different ways to potentially have exemptions for other products.

Joe: Certainly from a pricing standpoint, I'd say, it's very targeted.

Some very targeted areas around that's not a broad strategy there necessarily but then from and then finally just from.

Joe: Continuing to seek additional exemptions.

Joe: With our government team in the various countries, we operate in and certainly in our industry.

Joe: Group's two youll find different ways to potentially have exemptions for other products. So those are some of the things I would say broadly.

Heather Knight: So those are some of the things I'd say broadly are the things we're focused on from a mitigation perspective. And I guess what I'd say from 2026, you know, the way I would look at that, again, is I think it's probably fair, although as I said in my comments, the mitigation impacts aren't necessarily all in place now. And so those things are going to phase. And so the impact, the mitigation activities will be phasing as we go into next year as well.

Joe: The things we're focused on from <unk> perspective.

Joe: Yes, what I would say from 2026, the way I would look at that again as I think it's probably fair, although as I said in my comments.

Joe: The mitigation impacts arent necessarily all in place now and so those things are going to phase in so the impact with litigation activities will be phasing as we go into next year as well so for.

Heather Knight: So for the second part, I'll pass that over to Heather. Yeah, hi, good morning, Joanne, and thanks for the question. And thanks for acknowledging the HST performance. We're really pleased with the first quarter. And our teams have been working really hard with our customers. So we're pleased overall with the beat. It was broad-based and across all of our businesses, really exceeding expectations, particularly around the building momentum that we're seeing across the U.S. So we've got a healthy backlog, particularly in the PFS business, as I mentioned, strong order growth, and a lot of competitive account wins.

Joe: The second part and I'll pass it over to Heather Yes.

Heather: Yes, hi, good morning, Joanna and thanks for the question and thanks for acknowledging the HST performance, we're really pleased with the first quarter and our teams have been working really hard with our customers. So we're pleased overall with a b. It was broad based and across all of our businesses really exceeding expectations, particularly around the building momentum that we're seeing across.

Heather: <unk> the U S. So we've got a healthy backlog, particularly in the PSS business as I mentioned strong order growth and a lot of competitive account wins. So the commercial excellence that we talked about last year and customer programs are starting to pay off as we've managed the supply recovery that we talked about last year.

Heather Knight: So, you know, the commercial excellence that we talked about last year and customer programs are starting to pay off as we've managed the supply recovery that we talked about last year. While we haven't seen any slowdown today in the capital environment, we are monitoring the situation, but didn't feel even based on the momentum that it was prudent to just raise guidance in HST this year, but more maintain. But overall, I would say we're happy with the momentum of the team and the business and the leadership across the organization.

Heather: We haven't seen any slowdown today in the capital environment, we are monitoring the situation, but didn't feel even based on the momentum that it was prudent to just raise guidance in HST. This year, but more maintained but overall I would say, we're happy with the momentum of the team in the business and the leadership across the organization. So thanks for.

Joel Grade: So thanks for the question.

Heather: Question.

Joel Grade: Yeah, and actually, if I could just add one thing, Heather, to that, even the FLC side, you know, I think one of the things that was actually a good impact on this quarter was a balanced growth between both the CCS and frontline care. And I think we saw some stabilization, I'd say, in the primary care markets. On the FLC side, we also had less headwinds. In 25 and 24, we kind of talked about that heading into the year. You know, our backlogs are, you know, closer to normal levels in FLC. And then, obviously, we also had some favorable year-over-year comparisons that we're up against.

Heather: Yeah, and actually if I could just add one thing tethered to that even.

Heather: I'll see you cited I think one of the things that was actually a good impact on this quarter was a balanced growth between both the Ccs and from a cure.

Heather: Thank you Luis.

Heather: Some stabilization I would say in the primary care markets.

Heather: And the SLC side, we had we also had less headwinds in 25% to 24 or are we kind of talked about that heading into the year.

Heather: Backlogs are moving closer to normal levels in <unk>.

Heather: We also had some favorable year over year comparisons that we're up against but just want to add to heather's winter I think again, it really was not only the Ccs part, which we're really.

Joel Grade: But just to want to add to Heather's point there, I think, again, it really was not only the CCS part, which we're really, you know, pleased with, but also, again, balanced really across that portfolio.

Heather: Pleased with but also again balanced across that portfolio.

Heather: Yeah.

David Roman: David Roman of Goldman Sachs is on the line with a question. Please state your question. Thank you.

Speaker Change: David Roman of Goldman Sachs is on the line with a question. Please state your question.

David Roman: Good morning, Heather, Joel, and Clare. I wanted just to start here on the IV side. Hospitals have been pretty successful at implementing conservation programs, and we haven't seen much of a disruption, at least it seems, from the outside in hospital operations or elective procedure volumes. So as you remove hospitals from allocation, can you maybe help us frame what you expect the impact to be to your business? And then also, if you think hospitals will return to pre-hurricane inventory management levels, or there's something that may have more structurally changed in how they approach managing this particular supply line, then I have a follow-up.

Speaker Change: Thank you good morning, Heather John unclear.

Speaker Change: Wanted to just to start here on the IV side.

Speaker Change: Hospitals have been pretty successful at implementing conservation programs and we haven't seen much of a disruption or at least it seems from the outside in hospital operations or electric procedure volumes. So as you remove hospitals from allocation can you maybe help us frame what you expect the impact to be to your business and then.

Speaker Change: Also if you think hospitals are returned to pre hurricane inventory management levels or is there something that may have more structurally changed in how they approach.

Speaker Change: Managing this particular supply lines and then I have a follow up on tariffs.

Heather Knight: Sure. Hi, David. Good morning. It's Heather. So I'll start. So when you think about conservation, it's really not across all hospitals. There's a subset of hospitals that are conserving right now. And we still assume in our outlook that there will be conservation as we exit the year, you know, in the 10 to 12% range is what we're assuming when you exit the year. So that's broadly for the US. So there are many customers that are actually using more solutions than pre-hurricane levels. So it's definitely not a one-size-fits-all. But we are assuming that conservation continues, that there's been some adjustment in practice.

Speaker Change: Sure Hi, David Good morning, it's Heather so I'll start so when you think about conservation its really not across all hospitals. There's a subset of hospitals that are conserving right now and we still assume in our outlook that there will be conservation as we exit the year.

Speaker Change: 10% to 12% range is what we're assuming when you exit the year so.

Speaker Change: That's broadly for the U S. So there are many customers that are actually using more solutions than pre hurricane levels. So it's definitely not a one size fits all but we are assuming that conservation continues that theres been some adjustment in practice and we saw some of that with hurricane Maria as while it sort of took about a year or so.

Heather Knight: And we saw some of that with Hurricane Maria as well. It sort of took about a year or so for that utilization to continue. So we baked that into the forecast. I think it's important to know when you think about MPT, you know, for the half, we worked really hard to make sure that we could stabilize our customers with inventory and IV. So the timing of how we manage that in the half, we recovered really quickly. And we're focused in Q1 on getting inventory back to good with our customers and with distributors. But the half, when you look at it, is really largely aligned with our expectations.

Speaker Change: For that utilization to continue so we baked that into the forecast I think it's important to note. When you think about MPT for the half we worked really hard to make sure that we could stabilize our customers with inventory and so the timing of how we manage that in the half we recovered really quickly and we're focused in Q1.

Speaker Change: I'm getting inventory back to good with our customers and with distributors, but the half when you look at it is really largely in line with our expectations. So that is driving how we're thinking about MPT, particularly for the first half but.

Heather Knight: So that is driving, you know, how we're thinking about MPT, particularly for the first half. But, you know, I would say that customers now are starting to really think about safety stock in an area like IVs that is critical to healthcare and, you know, overall very happy with the recovery out of North Cove. And I'm really proud of our teams and the work that they did to make sure that we could get products to patients as quickly as possible. So that drove some of the overachievement in the BEATs and MPT, but largely have baked in conservation to the forecast for the rest of the year.

Speaker Change: I would say that customers now are starting to really think about safety stock in an area like ivs that is critical to health care and overall very happy with the recovery out of North Cove, and I'm really proud of our teams and the work that they did to make sure that we can get products to patients as quickly as possible. So that drove some of the over achievement.

Speaker Change: And the beach.

Speaker Change: MPT, but largely baked and conservation to the forecast for the rest of the year.

David Roman: Thanks, David. Great. Thank you. Yeah. Thank you for that detail.

Speaker Change: Thanks statements alright, great. Thank you yeah. Thank you for that detail.

Joel Grade: I think, Joel, on the tariff side, there was a significant amount of confusion, and I would say misinformation that entered the market on your tariff exposure the past several weeks. So I understand that we don't know what the pharma tariff may or may not be, but can you give us any parameters to frame how to think about that? Because if a pharma tariff is announced between now and when you report earnings again, we're all going to try to quantify it. So maybe help us understand where the exposure is. How much do you import and finish goods from the Claris plant?

Joel: I think Joel.

Speaker Change: Tariff side.

Speaker Change: There was a significant amount of confusion and I would say misinformation and entered the market on your tariff exposure in the past several weeks.

Speaker Change: I understand that we don't know what the form of tariffs may or may not be but can you give us any parameters to frame.

Speaker Change: To think about that because if a farmer tariff is announced between now and when you reported earnings again, we're all going to try to quantify it so.

Speaker Change: Maybe help us understand where the exposure is how much do you.

Port in finished goods from the Claris plant I think it is very small, but there's obviously an API in fact, maybe just walk us through the moving parts, there and the level of potential exposure.

Joel Grade: I think it's very small, but there's obviously an API impact. Maybe just walk us through the moving parts there and the level of potential. Yeah, David, thanks. I mean, first of all, to answer your Clare's question, that's a very small thing. That's not a material impact there. I guess, I'm not sure exactly what to give you there, other than we're just going to be continuing to wait and see how this develops. I mean, we're certainly – some of the things we're thinking through from a mitigation perspective obviously apply there as well, and so we're trying to be very proactive and thinking about sort of scenario planning around that.

David Roman: Yes, David things.

David Roman: First of all to answer your <unk> question Thats, a very small.

David Roman: That's not a material impact there I guess.

David Roman: I'm not sure exactly what to give you there other than <unk> be continuing to wait and see how this develops I mean, we're certainly some of the things we're thinking through from a litigation perspective, obviously apply there as well and so we're trying to be very proactive in thinking about sort of a scenario planning around that.

Joel Grade: At this point, though, obviously, it's still pretty up in the air where that's going to go or how that's going to land and what, if any, types of exemptions may be part of that. And so certainly, again, as I mentioned earlier, part of our industry conversations with governments are around the ability to have some of these type of product exemptions. And obviously, for us, being generics versus some of the larger brand, obviously, that is a more sizable impact for us from a margin perspective potentially. But again, nothing really to say other than we're trying to be very proactive thinking about the scenario planning and what we're doing to mitigate, but really nothing else to add at this point.

David Roman: At this point, so obviously, it's still.

David Roman: Pretty awesome, there, where the Eskimo golar, how thats going to land and what if any types of.

David Roman: Exemptions may be part of that and so certainly again as I mentioned earlier part of the industry.

David Roman: Hello conversations with governments are around the ability to absolutely use type of product exemptions and honestly for us being generics versus some of the larger brands and obviously that is a sizeable and more sizable impact for us.

David Roman: From a margin perspective, potentially but again nothing really to say other than we're trying to be very proactive thinking about the scenario planning and what we can do to mitigate but really nothing else to add at this point.

David Roman: Yeah.

Travis Steed: Travis Steed of B of A Securities is on the line with a question, please state your question. I first wanted to ask a margin question, both kind of short term and long term. First on the gross margin, there's a little bit of a delta between your gross margin. Assume that's the reclassified. Cogs to SG&A. So I wanted to touch on that and kind of about TSA and MSAs over the course of this year and next year.

Travis Steed: Travis Steed at <unk>.

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

Speaker Change: Oh, Yeah first I wanted to ask a margin question, both kind of short term and long term.

Speaker Change: First one on the gross margin it was a little bit of a delta between your gross margin in consensus I assume that the reclassified certain functional expenses from Cogs SG&A. So I wanted to touch on that.

Speaker Change: And kind of understand when do you kind of think about TSA and msas over the course of this year and next year you know how to think about the margin impact and then longer term kind of the path back to that kind of pre COVID-19, 19% operating margins for this business.

Joel Grade: Margin Impact, and then longer term, kind of the path back to that kind of pre-COVID 19% opportunity. Sure. Thanks, Travis. I'll take that. A couple things. From the gross margin perspective question you had, it really comes down to, you said the reclassification is a part of this. The dilution from MFA income is also a sizable part of that. And then just other things that I would say we're still recovering from some of the planning and fulfillment costs that occurred in North Cove that are also contributing to our gross margins this particular quarter. So I think those are really some of the main puts and takes as it relates to the gross margin perspective.

David Roman: Sure. Thanks, Travis I'll take that.

David Roman: A couple of things from the margin for a gross margin perspective. The question you had.

David Roman: It really comes down so you said, it's the reclassification of the part of this.

David Roman: The dilution from the from MSA income is also a sizeable part of that and then just other things that I would say we're still.

David Roman: Recovering from some of the planning and fulfillment costs.

David Roman: That occurred in North Poles that are also contributing to our gross margins.

This particular quarter. So I think those are those are really some of the main puts and takes as it relates to the gross margin perspective again some of that particularly the.

Joel Grade: Again, some of that, particularly the last one that I talked about, we do anticipate some of that mitigating over the course of the year.

David Roman: The last one that I talked about we do anticipate some of them are mitigating over the course of the year.

Joel Grade: The long-term path, you know, from the TSA and MSA perspective, you know, again, our anticipation is that from a TSA perspective, you know, as I've said previously, our, you know, we anticipate those being part of our world for certainly a good, you know, 18 to 24 months. Now, again, we're certainly planning for the phasing off of those things where we have a lot of cost containment activities that are happening today that are happening in preparation for the TSA's falling off, but certainly, you know, the anticipation of the TSA's being where they are this year, we talked about a 40-fifth impact on a net basis from a strength and cost perspective.

David Roman: The the long term path from a TSA in MSA perspective.

David Roman: Again, our anticipation.

David Roman: From a TSA perspective.

David Roman: As I've said previously our yes, we anticipate those being part of our world for certainly a good job.

David Roman: You know 18 to 24 months now again, we're certainly planning for the phasing of those things where we haven't.

David Roman: A lot of cost containment activities that are happening today.

David Roman: They are happening in preparation for the TSA has fallen off but certainly it will be.

David Roman: The anticipation.

David Roman: The TSA is.

David Roman: Where they are this year, we've talked about 40 bps impact on a net basis from Sterling cost perspective, I think that's something you should still expect to throughout the course of this year.

Joel Grade: I think that's something you should still expect throughout the course of this year. And MSA's as well, we did talk about the fact that the MSA income is slightly less than we had anticipated, which therefore has again a slightly less diluted impact from a margin perspective, but I think the $310 million number we talked about, this will eventually phase out, but that's something that'll be in here certainly for the next couple of years.

David Roman: And Msas as well we did talk about the fact that the MSA income is slightly less than we had anticipated, which therefore has again a slightly less dilutive impact from a margin perspective, but.

David Roman: I think the $310 million number we talked about this will eventually phase out, but thats something that will be in Europe, certainly for the next couple of years.

Joel Grade: I would say the long-term path towards margin expansion, it really comes down to a number of different items, starting with just our continued opportunity to continue to have our, again, strong growth. We've talked about the ideas of how we plan to invest in innovation, and so new product launches are certainly an element of how, over time, we continue to expand from a margin perspective. You know, pricing, certainly we see some of that this year, obviously, on an ongoing basis, pricing will have, you know, on a kind of a normal year, a little, you know, lesser impact.

David Roman: I would say the long term path towards margin expansion really comes down to a number of different items.

David Roman: Starting with just our continued opportunity to to continue to have strong growth we've talked about the ideas on how we plan to invest in innovation and so new product launches.

David Roman: We have elements of how over time, we have continued to expand through.

David Roman: From a margin perspective.

David Roman: Pricing certainly we see some of that this year, obviously on an ongoing basis pricing will have.

David Roman: Kind of a normal euro through lesser impact, but then again, we do have another some GPO renegotiation coming up in a couple of years. So there may be some pricing impact there as well.

Joel Grade: But then again, we do have another, you know, some GPL renegotiation coming up in a couple years. So there may be some pricing impact there as well. From a product mix standpoint and a, again, I'll call it a business mix perspective is another area that we continue to see opportunities from a margin expansion, again, selling more of those areas that generate the higher margins. And then finally, things like our margin improvement programs along the way that we continue to have in our supply chain. These are areas that, again, are continuous drivers of our margin expansion in addition to, obviously, between now and 2027, there will be full removal, if you will, of our stranded costs that are left over from kidney.

David Roman: From a product mix standpoint, and.

David Roman: Again, I'll call a business mix perspective is another area that we continue to see opportunities for margin expansion again, selling more of those areas that generate higher margins and then finally things like our margin improvement programs along the way that we continue to have in our supply chain. These are areas that again are continuous.

David Roman: Drivers of our margin expansion in addition to obviously.

David Roman: Between now and 2027.

David Roman: The full removal if you will of Australia costs that are left over from kidney and so.

Joel Grade: And so that's a few of the areas that I put some takes as it relates to margins and how we see that opportunity to expand as we go forward.

David Roman: <unk>.

David Roman: Few of the areas of our puts and takes as it relates to margins and how we see that opportunity to expand as we go forward.

David Roman: Great. Thanks.

Vijay Kumar: Vijay Kumar of Evercore ISI is online with a question. Please state your question. Hey, guys, thanks for taking my question and congrats on the nice execution here. Joel, maybe my first one for you on the guidance kind of question. You look at second quarter, one to two percent for core Baxter. That's a three hundred and fifty basis points decel at the midpoint from Q1 levels. I think your comps get a little bit harder, you know, a couple of hundred basis points.

Speaker Change: Hey, Jay Kumar of Evercore ISI is on line with a question. Please thanks for your question.

Jay Kumar: Hey, guys. Thanks for taking my question and congrats on the nice execution here.

Speaker Change: Joe maybe my first one for you on the guidance kind of question.

Jay Kumar: You look at second quarter.

Jay Kumar: 1% to 2% for core Baxter that say 250 basis points diesel at the midpoint from Q1 levels.

Jay Kumar: Commscope.

Jay Kumar: A little bit harder.

Jay Kumar: Couple of hundred basis points whats driving this.

Joel Grade: So what's driving this deceleration in the second quarter in the operating margin prior to 16 and a half percent? Did that change because of tariffs? Yeah, thanks for the question. So, from a revenue standpoint, Q2, there's really a couple of things that are driving that outcome. One, as we've talked about, some of the conservation that is happening in some of the hospital systems from an IV fluid perspective is one of the key drivers. This is one of the things we've talked about and we've got a preview that we anticipated happening for a while, and we're seeing some of that.

Jay Kumar: The deceleration in the second quarter.

Jay Kumar: The operating margin of two five or 16, 5% did that change because of tariffs.

Jay Kumar: Yeah.

Jay Kumar: Yes. Thanks, Thanks for the question.

Jay Kumar: So from a revenue standpoint in Q2, it's really a couple of things that are driving that outcome. One as we've talked about some of the conservation that that is happening in some of the hospital systems from an IV fluid perspective is one of the key drivers. This is one of the things we've talked about and we've got a previewed.

Jay Kumar: We anticipate it happening for a while and we're seeing some of that and certainly that's one of the key drivers of that impact in the second quarter.

Joel Grade: And certainly that's one of the key drivers of that impact in the second quarter. I think another one part I would just say is, I guess I'll call it a degree of conservatism as it relates to some of the performance from an HSP perspective. Obviously, as we've talked about, we're pleased with the momentum in that business. We're pleased with the book on CPS side and some of the stabilization impact on frontline care. But I guess I would just say there is an element to this that is continuing to just have some level of conservatism in that as it relates to that business in particular.

Jay Kumar: I think another one part I would just say is I guess I'll call. It a degree of the degree of conservatism as it relates to.

Jay Kumar: Some of the performance from an HFC perspective, obviously as we've talked about we're pleased with the momentum in that business, we're pleased with that.

Jay Kumar: Yes side and some of the.

Jay Kumar: Stabilization impact on frontline here, but I guess I would just say that there is an element to this that is continuing to just.

Jay Kumar: Have some level of conservatism in that as it relates to that business in particular, but.

Joel Grade: But certainly those are some of the main drivers of the change from a Q1 to Q2 perspective. The other thing I would point out is that while that is the case, obviously some of the overperformance in Q1, when you factor in then a little bit of the impact we discussed in Q2, our H1, for the most part, comes in right around where we had expected. So while there was a little bit of a shift in distribution between the quarters, the first half of the year is something that we... Yes, sir. Yeah, we're pretty consistent with how we had anticipated it coming in.

Jay Kumar: Certainly those are some of the main drivers of the change.

Jay Kumar: Changed from Q1 to Q2 perspective, the other thing I would point out.

Jay Kumar: Is that well that is the case, obviously some of the over performance in Q1, when you factor in a little bit on the impact you discussed in Q2, our H one for the most part it.

Jay Kumar: Comes in right around where we expected so the.

Jay Kumar: While there was a little bit of a shift in the distribution between the quarters of first half of the year is something that we.

Jay Kumar: Yes.

Jay Kumar: We had anticipated coming in.

Joel Grade: Your second question, yes, the operating margin impact that you're referencing was related to tariffs as well as some of the effects, you know, the impact that we talked about from a foreign exchange perspective. Again, we, while we have some positive impact on the top line of FX, we actually do have a dilutive impact, I'll call it, on the bottom line as it relates to foreign exchange. And this, you know, this relates to some of the operations that we still have outside the U.S. Again, I'll say it's still a remnant from the Vantive business that we had.

Jay Kumar: Your second question, yes, the operating.

Jay Kumar: Margin impact that you are referencing was related to tariffs as well as us.

Jay Kumar: Some of the FX impact.

The impacts that we've talked about from a foreign exchange perspective.

Jay Kumar: Again, while we have some positive impact from a top line of FX, we actually do have.

Jay Kumar: The dilutive impact on our bottom line as it relates to foreign exchange.

Jay Kumar: Yes. This relates to some of the operations that we still have outside the U S. I'll say, it's still a remnant from from the Vantiv.

Jay Kumar: Business that we had this is overtime plans to continue to optimize our.

Joel Grade: This is, you know, over time, plans to continue to optimize our infrastructure and our business OUS. But that's the other part of it that I would say is driving some of that impact as well.

Jay Kumar: Infrastructure in our business or U S. But that's the other part of us that I would say is driving some of that.

Jay Kumar: <unk> as well.

Heather Knight: So maybe, Heather, one follow-up for you on this known very strong numbers. Can you just remind us for context, like what's been shared gains for the past few quarters? Has it accelerated? And if these trends sustain, what's the downstream implication from a consumables and IV fluids standpoint? Thank you. Yeah, hi Vijay, I'll tackle the first one, first question on Novum. So the, you know, the backlog and pipeline on Novum is strong. So yes, we have taken market share in the low single digit range already. So there's good momentum in the Novum franchise, not just for the launch, you know, Novum's been in the market now, less than a year, but also the innovation pipeline coming behind it.

Jay Kumar: Understood and maybe Heather one follow up for you on <unk>.

Jay Kumar: No.

Speaker Change: Very strong numbers.

Speaker Change: Can you just remind us for context like what's been share gains over the past few quarters has it accelerated in <unk>.

Speaker Change: If these trends sustain what's the.

Speaker Change: Downstream implications for them from a consumables and IV fluids standpoint, thank you.

Speaker Change: Yes, Hi, Vijay I'll tackle the first one first question on <unk>. So that you know the backlog and pipeline I know from his strong. So yes, we have taken market share in that low single digit range already said there is good momentum in the franchise not just for the launch of <unk> spend in the market now less than a year, but also the <unk>.

Speaker Change: <unk> pipeline coming behind that is pretty robust and rich. So we're excited and our customers are excited about partnering with us around Nova a lot of the pumps in the market have been.

Heather Knight: It's pretty robust and rich. So we're excited and our customers are excited about partnering with us around Novum. A lot of the pumps and the market have been, you know, a decade plus old. So we're bringing new technology to the market with smarter, more sophisticated capabilities on interoperability with digital suites that are going to follow to supplement that launch. So a good momentum around Novum and happy with the progress.

Speaker Change: A decade, plus all sand, we're bringing new technology to the market with smarter and more sophisticated capabilities on interoperability with digital suites that are going to follow to supplement that launch so a good momentum around Nova and happy with the progress and then your second question was about consumables.

Heather Knight: And then your second question was about consumables. Behind that was an IV solution. Yeah. Yeah, so similar to what I shared with David, you know, we are seeing, we saw a steady uptick in customers rebuilding and rebalancing their inventory and consumption in the first quarter. And, you know, we're largely seeing what we expected in the half in terms of consumption and conservation. You know, some customers that maintained inventory and are, you know, taking advantage of the volumes in the market are using more than they used before the hurricane. Some have conserved just as a result of, you know, lacking of inventory in the market.

Speaker Change: Behind that was that IV solutions.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah, so similar to what I shared with day that we are seeing we saw steady uptick and customers rebuilding and rebalancing our inventory in consumption in the first quarter and are largely seeing what we expected in the half in terms of consumption and conservation.

Speaker Change: Some customers that maintained inventory and our.

Speaker Change: Taking advantage of the volumes in our market are using more than they used before the hurricane and some have confirmed just as a result of.

Speaker Change: Lacking of inventory in the market, but that is really starting to stabilize and as I mentioned in my opening remarks, we will have allocations off really almost fully by this month in the month of May by about mid may.

Heather Knight: But that is really starting to stabilize. And as I mentioned in my opening remarks, we'll have allocations off really almost fully by this month, in the month of May, by about mid-May. So rebuilding customer confidence that they can order normally and stock their shelves normally with IV solution sets, all of the things that go along with IV therapy. That's been really a big part of it working. There's just some background. Yeah, working with our customers. So hopefully, that addresses the mobile question. But thank you, Vijay, and thanks for acknowledging the quarter.

Speaker Change: So rebuilding customer confidence that they can order normally and stock their shelves normally with IV solutions since all of the things that go along with IV therapy.

Speaker Change: Really a big part of that working.

Speaker Change: Theres just a bank.

Speaker Change: Yes, working with our customers so hopefully that addresses the mobile question.

Speaker Change: Thank you Vijay and thanks for acknowledging the quarter.

Robbie Marcus: Robbie Marcus of J.P. Morgan is on the line with a question. Please state your question. for me. One, I guess two and a half, a quick clarifying, how much of stocking and fluids is moving from second quarter Recorder, and then. real question.

Speaker Change: Robbie Marcus of Jpmorgan is on line with a question. Please state your question.

Speaker Change: Nice quarter.

Two from me.

Speaker Change: One I guess, two and a half a quick clarifying how much.

Speaker Change: Stocking and fluids is moving from second quarter to first quarter, and then I guess my first real question.

Heather Knight: HST had had nice performance, drove a good part of Yeah, Robbie, this is Heather. Good morning. I'll start that. So in terms of the stocking that we saw, I would say roughly about a point and a half on the total company that we saw in terms of the distributor stocking. Again, our priority was to make sure that we could get product to customers and rebuild the network as quickly as possible. So people could resume normal patient care. So you know, having that in Q1 versus Q2 is actually a good thing. And as I said, largely in line with what we expected in the Q3.

Speaker Change: HST had had nice performance drove a good part of the beat in the quarter and maybe speak to the trends Youre seeing there and how youre feeling about the sustainability.

Speaker Change: The performance.

Speaker Change: Yes, Ravi this is how they're good morning, I'll start that so.

Speaker Change: Terms of the stocking that we saw I would say roughly about a point and a half and the total company that we saw in terms of the distributor stocking again, our priority was to make sure that we can get product to customers and rebuild that network as quickly as possible. So people could resume normal patient care, so having that.

Speaker Change: In Q1 versus Q2 is actually a good thing and as I sat largely in line with what we expected in the half so about I would think about a point and a half.

Heather Knight: So about I would think about a point and a half in terms of the total company impact and then HSTs performance, again, very pleased with the first quarter. As both Joel and I have mentioned, we've got a strong order book that we built in CCS, strong order growth, we've got competitive share gains that we've seen primarily in CCS. Additionally, we've got higher than expected nurse call installations and really positive response so far to the launch of a little cautious on the capital environment that we're seeing just because of some of the reimbursement challenges that our customers are facing tariff concerns and not sure how pricing is going to roll out.

Speaker Change: In terms of the total company impact and then Hst's performance again, very pleased with the first quarter.

Speaker Change: Both Joe and I have mentioned, we've got a strong order book that we built and Ccs our strong order growth, we've got competitive share gains that we've seen primarily in Ccs. Additionally, we've got higher than expected nurse call installations, and really positive response, so far to the launch of Apple link with Scotty.

Speaker Change: So and Thats Ccs, so theres a lot of reasons to believe not just in the U S. But also building momentum O U S. And then as John mentioned SLC has largely stabilized. So we are seeing some really good benefits around our vital signs monitoring and recovering from some of the backlog in our coffee business and <unk>.

Speaker Change: Ranked <unk> as well so right now theres a lot of reasons to believe but I think like many other companies that are reporting we're being a little cautious on the capital environment that we're seeing just because of some of the reimbursement challenges that our customers are facing tariff concerns and not sure how pricing is going to rollout, but internally within Baxter.

Heather Knight: But, you know, internally within Baxter, we're really pleased with where HST is, you know, I think HST, we feel like is back and based on a lot of the work that we've done around, again, commercial excellence, customer programs, partnering with our customers on the things that they need, and then furthering the integration of HST. I think we can sort of all acknowledge that we've acknowledged at the beginning of that integration, it didn't quite go as planned, but we've done a lot of work over the last 12 months to really get that business back on track and delivering the growth that we expect.

Speaker Change: We're really pleased with where hfcs I think HFC, we feel like it's back end based on a lot of the work that we've done around again commercial excellence customer programs partnering with our customers on the things that they need and then furthering the integration of HST I think we can sort of all acknowledged at the beginning of that integration.

Speaker Change: And quite dealt with plan, but we've done a lot of work over the last 12 months to really get that business back on track and delivering the growth that we expect so we're pretty bullish internally on HST and what that team can deliver.

Heather Knight: So, you know, we're pretty bullish internally on HST and what that team can deliver.

Robbie Marcus: So thanks for the comments. Maybe just a quick follow up, Joel, you put out comments for 2026, I believe. 75 to 100. Operating Margin Expansion. You did a really impressive job offsetting the tariff impact. 2025. Does that commentary still hold for 2026 or is it under evaluation given the tariff environment? Thank you. Yeah, so thanks, Robbie. So a couple things on that. I mean, obviously, the, we're certainly committed to continue margin expansion. So let me just start with that. And, you know, obviously, there's a lot to play out here yet as it relates to the tariffs, just in general.

Speaker Change: So thanks for that.

Speaker Change: Okay.

Speaker Change: Maybe just a quick follow up Joel you put out comments for 2026 I believe it was may be 75 to 100 basis points of operating margin expansion.

Speaker Change: You did a really impressive job offsetting the tariff impact in 2025.

Speaker Change: Does that commentary.

Speaker Change: Commentary still hold for 2026 or is it under evaluation given the tariffs.

Speaker Change: Thanks.

Speaker Change: Yeah. So thanks, Robbie so a couple of things on that I mean, obviously the.

Speaker Change: We are certainly committed to continued margin expansion. So let me just start with that.

Speaker Change: And obviously theres a lot to play out here as it relates to the tariffs just in general.

Joel Grade: You know, as we, as I mentioned in my prepared remarks, we did put some pretty conservative assumptions in there in terms of how we anticipated that. And we're, as I also mentioned, continuing to work through mitigation activities that, you know, are, I'll say, are building over the course of the year. So, so again, like, I would say, generally speaking, again, we feel good about the underlying momentum of the business. We continue to really strive and execute on consistent execution, managing our expenses. And so, you know, in the end, like I said, we're committed to expanding margins and I'll just leave it at that.

Speaker Change: As we as I mentioned in our prepared remarks, we did put some pretty conservative assumptions in there in terms of are we anticipated that and.

And we're as I also mentioned and continuing to work through mitigation activities.

Speaker Change: Yes.

Speaker Change: We also are building over the course of the year. So so again Mike.

Speaker Change: Generally speaking again, we feel good about the underlying momentum in the business.

Speaker Change: <unk>.

Speaker Change: We're continuing to really strive and execute on our consistent execution, managing our expenses and.

Speaker Change: Yes.

Speaker Change: We are committed to expanding margins.

Speaker Change: Most of the reserve.

Joel Grade: Appreciate it. Thanks a lot.

Speaker Change: I appreciate it thanks a lot.

Speaker Change: Thanks.

Larry Biegelsen: Larry Biegelsen of Wells Fargo is on the line with a question. Please state your question. Good morning. Thanks for fitting me in. Congrats on a really nice quarter here. Just that most might have been asked an answer, so just a couple of quick ones.

Speaker Change: Larry <unk> of Wells Fargo is on the line with a question. Please state your question.

Larry: Good morning, Thanks for fitting me in congrats on that doesn't really nice quarter here just that most of might have been answered asked and answered. So just a couple of quick ones.

Brent Kaper: Maybe, Brent, just any update on the timing for, you know, CEO, permanent CEO announcement. And Joel, I'll ask them both up front here. And Joel, oil prices have come down a lot. You know, we remember when oil prices were going up, it negatively impacted Baxter. I mean, how should we think about the, you know, the reduction in oil prices potentially benefiting you? Thank you. Great. This is Brent. I appreciate the question. Obviously, I don't have a specific date. What I can tell you is the board is very focused and has been very diligent in their efforts to keep the process moving.

Speaker Change: Grant just any update on the timing.

Speaker Change: CEO permanent CEO announcement, and Joel on just I'll ask them both upfront here until oil prices have come down a lot. We remember we don't know prices were going up it negatively impacted Baxter.

Speaker Change: How should we think about the.

Speaker Change: The reduction in oil prices potentially benefiting you. Thank you.

Brent: Great. Thanks, Brent I appreciate the question.

Brent: Obviously, you don't have a specific date, but what I can tell you is the board is very focused and has been very diligent in their efforts to keep the process moving we're really pleased with the search firm and their efforts as well. So I can't give you an exact date, we don't expect it to be an extended period I think it's.

Joel Grade: We're really pleased with the search firm and their efforts as well. So I can't give you an exact date. We don't expect it to be an extended period. I think it's something making good, good progress. Great.

Brent: Making good progress.

Brent: Joe.

Joel Grade: Larry, thanks again for the questions. And, you know, from an oil perspective, I mean, yes, the price of oil is going down. The one thing I would remind you of is that for us, there's a lot less variability of the company as it relates to that now that the kidney business has exited. That was part of the business that obviously from a, you know, delivering supply chain perspective of a higher level of consumption on that. So while there is some impact, again, it's somewhat diluted pretty significantly given the fact that the kidney business has exited.

Brent: Great Todd Larry Thanks for the questions and.

Brent: From an oil perspective, I mean, yes. The first oil is going down so the one thing I would remind you of is that.

Brent: For us there's a lot less variability as the company as it relates to that now that the kidney boomers.

Brent: We exited that was part.

Brent: Part of the goodness that obviously from a.

Brent: Delivering supply chain perspective at a higher level of consumption on that so while there is some impact as we get into somewhat somewhat diluted pretty significantly given the fact that the kidney is exited.

Operator: All right, thanks so much. Thanks.

Speaker Change: Alright, thanks, so much.

Brent: Yes.

Peter Chickering: Peter Chickering of Deutsche Bank is on the line with a question. Please state your question. Hey, good morning, guys. Thanks for fitting in here. Looking at the updated EPS guidance, definitely a lot of moving parts here.

Speaker Change: Peter Chickering Deutsche Bank is on the line with a question. Please state your question.

Peter Chickering: Hey, good morning, guys. Thanks for fitting me in here.

Speaker Change: Looking at the updated EPS guidance definitely a lot of moving parts here can you can you bridge the <unk>.

Joel Grade: Can you bridge the previous EPS guidance to the updated EPS guidance in terms of the good guys from operational strength and FX to bad guys and terrorists? Sure. So, I mean, obviously, the top of the line stayed and obviously moved a little bit underneath. I would say a couple of things. One of the things we've talked about is the, again, continued strong operational performance. The downside of it, as we talked about, was really related to some tariff impact and impact of the FX. The, you know, those are, those are basically. You know, the main drivers of the downside of that, it's probably 15 cents on the EPS side that those are combined at.

Speaker Change: This EPS guidance to the updated EPS guidance in terms of the good guys.

Speaker Change: From the operational strength and FX.

Speaker Change: Bad guys from tariffs.

Speaker Change: Sure. So I mean, obviously the top the top.

Speaker Change: Alignment speed and obviously, we moved a little bit underneath I would say a couple of things.

Speaker Change: All of the things we've talked about is the continued strong operational performance.

Speaker Change: The downside of it as we talked about was really related to some tariff impact.

Speaker Change: And impact of the FX.

Speaker Change: Those are those are basically.

Speaker Change: The main drivers of the downside of that.

Speaker Change: Probably 15 cents on the EPS side that those are combined app.

Joel Grade: From there, obviously, though, we continue to talk about some of the strong operational performance, as well as, you know, some, underneath the line, interest in taxes. You know, obviously, our interest is coming a little bit better than we anticipated, and the work that we did from a tax perspective to optimize some of the opportunities there is the other part that's really driving that.

Speaker Change: From there obviously, though we continue to talk about some of the strong operational performance as well as some believe.

Speaker Change: The Liza line interest and taxes.

Speaker Change: Our obviously, our interests coming a little bit better than we anticipated and the work that we did from a tax perspective.

Speaker Change: The buyers some of the opportunities there is because the other part that's really driving that so.

Joel Grade: So, that's probably the best bridge I've got for you. Okay, fair enough.

Speaker Change: Probably the best of British I've got for you.

Speaker Change: Okay fair enough.

Joel Grade: Then looking at the CCS wins that you saw in the US quarter, you know, what's sort of really driving that? And how big is the backlog at this point? And then looking outside the US, you know, you talk about softness in the quarter, and then you talked about why it should rebound and go back to growth. I guess, why do you guys see the softness? And why do you think this should sort of return back to growth? Thanks so much. So from CCS perspective, a couple of things. I would say, again, we do have a strong backlog.

Speaker Change: And then looking at the Ccs wins that you saw in the U S. This quarter whats really driving that and how big is it backlog at this point and then looking outside the U S. You talked about softness in the quarter and then you talked about it why it should should rebound and get back to growth I guess why do you guys see the softness and why do you think this should serve returned back to growth. Thanks. So much.

Speaker Change: Okay.

Speaker Change: So from Ccs perspective, a couple of things I would say.

Speaker Change: We do have a strong backlog.

Joel Grade: I want to start with that. We've been talking about this now really since the latter part of last year that we've had a consistent, strong build. In fact, our order book growth this quarter was in the 20% range. And so I think that's really around part of what's driving that. I think, as I said in the earlier comments, there's probably an element of conservatism in this. And as you think about the, you know, I think Heather said earlier, we haven't yet seen any impact from the capital purchasing standpoint. But that's something we're certainly closely monitoring.

Speaker Change: I wanted to start with that we've been talking about this now really since the latter part of last year that we've had a consistent strong build in fact, our order book growth. This quarter was the moves in the 20% range and so I think that's that's really around.

Speaker Change: Part of what's driving that I think as I said in my earlier comments.

Speaker Change: There's probably an element of conservatism in this and as we think about the.

Speaker Change: I think another said earlier, we haven't yet seen any impact from the capital purchasing standpoint, but thats something were certainly closely monitoring and I would say part of the conservatism built into this is simply around that.

Joel Grade: And I would say part of the conservatism built into this is simply around that, as we monitor that situation. And obviously, just to give ourselves a little breathing room in terms of how that business is performed. But again, we feel good about it.

Speaker Change: We monitor that situation.

Speaker Change: Obviously, just to give ourselves a little breathing room in terms of how that business has performed as we would again, we feel good about it.

Heather Knight: There are some conservative assumptions, but a lot of it has to do with what I just referred to. Yeah, I can just add to that. I mean, Peter, we've really been focused on advancing and furthering our connected care agenda, too. And the digital enhancements that we've added in the CCS portfolio. And then, you know, recovery in FLC is a big one. And then there's some new product launches also coming across that business.

Speaker Change: Some conservative assumptions, but a lot of it has to do with what I just referred to.

Speaker Change: I can just add to that I mean, Peter we've really been focused on advancing and furthering our connected care agenda.

Speaker Change: The digital enhancements that we've added in our Ccs portfolio and on recovery and Src is a big one and then there's some new product launches also coming across that business, but in light of the dynamic environment that we're in didn't feel like it was prudent to really raise it at this point, but the backlog is strong the competitive wins are strong at this.

Heather Knight: But in light of the dynamic environment that we're in, didn't feel like it was prudent to really raise it at this point. But the backlog is strong. The competitive wins are strong at this point. And there's been a lot of great commercial work done to further the HST business. So a lot of reasons to believe at this point. Great. Thanks so much. Thank you.

Speaker Change: And there's been a lot of great commercial work done to <unk>.

Speaker Change: Further the HST business. So a lot of reasons to believe at this point.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thank you.

Matt Miksic: Matt Miksic of Barclays is on the line with a question. Please state your question.

Speaker Change: Matt mixing of Barclays is on the line with a question. Please. Thank you your question.

Speaker Change: Yeah.

Matt Miksic: Matt Misik of Barclays, your line is open.

Speaker Change: Matt <unk> of Barclays. Your line is open.

Speaker Change: Yeah.

Speaker Change: Yeah.

Operator: We can go to the next question.

Speaker Change: We can go to the next question.

Operator: And that will be our final question.

Speaker Change: And that will be our final question.

Speaker Change: Daniele <unk> of UBS is on the line with a question. Please go ahead with your question.

Danielle Antalffy: Danielle Antalffy of UBS is on the line with a question, please go ahead with your question. Hey, good morning, everyone. Thanks so much for squeezing me in and congrats on a really good start to the year. This might be jumping the gun a little bit, but you know, it feels like now the Baxter business is stabilized back on track. And I appreciate, you know, we're awaiting a CEO announcement and all this could change. But just curious, Brent, Heather, Joel, if you guys could provide some commentary on how you're thinking about when Baxter or maybe even just broadly the approach to organic versus inorganic investment.

Daniele: Hey, good morning, everyone. Thanks, so much for squeezing me in and congrats on a really good start to the year.

Daniele: This might be jumping the gun, a little bit, but it feels like now but back to your business is stabilized back on track and I appreciate.

Speaker Change: Awaiting a CEO announcement and all this could change, but just curious Brent Heather Joe If you guys could provide some commentary on how you're thinking about when Baxter or maybe even just broadly the approach keel organic versus inorganic investment I know.

Brent Kaper: I know, you know, paying down debt is a top priority. You've got a nice chunk of change to do that with the kidney care sale. So just high level thoughts there. Again, appreciating with the new CEO announcement that could change a little bit, but doubt it will change that much.

Speaker Change: Paying down debt is the top priority without a nice chunk of change do you do that with the kidney care sale. So just high level thoughts there again appreciating with the new CEO announcement that could change a little bit but that will change that much. So thanks so much.

Brent Kaper: So thanks so much. Absolutely. Thanks for the question and the acknowledgment of the quarter. I'll say a couple things about that. Number one, as we've talked about, the opportunity now post-kidney is for us to really focus and target our investments around those areas that are accelerating growth. And that includes both organic and inorganic opportunities in the sense of the fold-in, tuck-in deals. We have said that we anticipate our net-debt-to-EBITDA ratio three times by the end of this year. We, despite some negative cash impact from tariffs, we still anticipate that and are on target to do so.

Speaker Change: Absolutely. Thanks for the question and the acknowledgment of the quarter.

Speaker Change: I'll say a couple of things about that number one as we've talked about the opportunity now.

Speaker Change: Kidney.

Speaker Change: For us to really focus and target our investments around those areas that are accelerating growth and that includes both.

Speaker Change: Organic and inorganic opportunities in the sense of fold in tuck in deals.

Speaker Change: We have said.

Speaker Change: We anticipate our net debt to EBITDA ratio of three times by the end of this year.

Speaker Change: Despite some of the some negative cash impact from tariffs.

Speaker Change: We still anticipate that and on target to do so.

Brent Kaper: And once we, you know, so from there, then this is the time when I think our opportunity to actually start to make those kinds of investments in inorganic opportunities is a key part of our growth strategy. I would also say, and I know you didn't ask this, but I'll say it anyway, that's also an opportunity to reinstate a buyback program, where we are not only taking out some of the dilution from not having bought shares back for the last couple of years, but also to have a regular program of buying stock back. So, broadly speaking, certainly the capital allocation opportunity very much does change.

Speaker Change: And once we saw from there then though this is a time when I think our opportunity to actually start to make those kind of investments in inorganic opportunities as well.

Speaker Change: Key part of our growth strategy.

Speaker Change: I would also say and I know you didn't ask this but I'll say it anyway. That's also an opportunity to reinstate our buyback program.

Speaker Change: We have not only.

Speaker Change: Taking out some of the dilution from not having bought shares back for the last couple of years, but also the.

Speaker Change: A regular program of buying stock back so broadly speaking certainly the capital allocation opportunities very much does change again, we are on target with our <unk>.

Brent Kaper: Again, we are on target with our year-end goal of three times net-debt-to-EBITDA. Really looking forward to all those opportunities ahead.

Speaker Change: And the goal of three times net debt to EBITDA really looking forward to Oh.

Speaker Change: All of those opportunities ahead.

Brent Kaper: Thank you.

Speaker Change: Thank you.

Operator: Thank you very much.

Speaker Change: Thanks very much.

Operator: There are no further questions at this time.

Speaker Change: There are no further questions at this time, ladies and gentlemen. This concludes today's conference call with Baxter International Thank you for participating.

Operator: Ladies and gentlemen, this concludes today's conference call with Baxter International.

Thank you for participating.

Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yes.