Core Viewpoint - Baxter International's stock has declined by 14% over the past month due to a disappointing earnings report and reduced full-year guidance, raising questions about its current valuation at approximately $25 [2] Financial Performance - Baxter's revenues have contracted at an average of 5.7% over the last three years, while the S&P 500 has seen a growth of 5.3% [6] - In the last 12 months, revenues rose by 3.6% to $11 billion, compared to a 5.2% increase for the S&P 500 [6] - Quarterly revenues grew by 4.3% to $2.8 billion from $2.7 billion a year earlier, while the S&P 500 experienced a 6.1% growth [6] Profitability Metrics - Baxter's operating income for the last four quarters was $398 million, resulting in a poor operating margin of 3.7%, significantly lower than the S&P 500's 18.8% [5] - The company's operating cash flow totaled $765 million, yielding a low cash flow margin of 7.0% compared to 20.2% for the S&P 500 [12] - Baxter reported a net income of -$155 million, translating into a negative net margin of -1.4%, while the S&P 500 had a net margin of 12.8% [12] Valuation Analysis - Baxter's price-to-sales (P/S) ratio is 1.2, which is significantly lower than the S&P 500's ratio of 3.3, indicating that Baxter stock appears inexpensive relative to the broader market [3] - The stock is currently valued at 1.3 times trailing revenue, well below its five-year average of 2.6 times, suggesting that the market has already factored in its performance challenges [9] Financial Stability - Baxter's balance sheet is described as adequate, with total debt standing at $9.7 billion against a market cap of $13 billion, resulting in a moderate debt-to-equity ratio of 77.2% compared to the S&P 500's 20.2% [12] - Cash and equivalents amount to $1.7 billion out of total assets of $21 billion, yielding a cash-to-assets ratio of 8.0%, which is slightly above the S&P 500's 7.0% [12] Downturn Resilience - Baxter's stock has performed slightly better than the S&P 500 during some recent downturns, indicating moderate resilience [8] - The stock has experienced significant declines in the past, including a 64.6% drop from $89.45 in February 2022 to $31.71 in October 2023, compared to a 25.4% drop for the S&P 500 [12]

Core Viewpoint - Baxter International Inc. reported a total revenue of $2.81 billion for Q2 2025, reflecting a year-over-year growth of 4.3%, with operational growth of 1% after adjusting for unfavorable exchange rates and structural changes [1][2][4]. Financial Performance - The company achieved a GAAP net profit of $91 million, reversing the net loss from the same period last year, with diluted EPS at $0.24 and adjusted EPS at $0.54, marking a 28% year-over-year increase [1][2][3]. - Gross margin decreased to 35.3%, down 300 basis points year-over-year, while adjusted gross margin was 40.7%, down 170 basis points [2]. - Operating margin improved to 6.8%, up 20 basis points year-over-year, with adjusted operating margin at 15.1%, up 180 basis points [2]. Business Segment Performance - Medical Products & Therapies (MPT) segment revenue was stable at $1.32 billion, with recovery in production capacity but demand recovery lagging [5]. - The Healthcare Systems & Technologies (TSS) segment reported revenue of $767 million, a 3% increase year-over-year, driven by strong sales of the Novum IQ infusion platform [6]. - Pharmaceuticals segment revenue reached $615 million, a 1% increase, supported by new products despite pressure from the anesthetics market [7]. Guidance and Outlook - The company adjusted its full-year sales growth forecast from 7%-8% to 6%-7%, with adjusted diluted EPS guidance lowered to $2.42 - $2.52 [8][14]. - Management indicated that the downward adjustment reflects short-term inventory factors and does not alter the long-term business structure optimization trend [9]. Strategic Developments - Baxter completed the divestiture of its kidney business, Vantive, generating approximately $3 billion in cash flow, which strengthens its balance sheet [10]. - Andrew Hider will take over as CEO on September 3, 2025, succeeding interim CEO Brent Shafer, marking a new phase in the company's organizational transformation [10][11]. - The company is focusing on digital integration, global supply chain restructuring, and commercialization of next-generation products [12][13].

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Baxter International Inc.'s unaudited condensed consolidated financial statements, reflecting the Kidney Care business sale and debt repayments [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The consolidated financial statements reflect significant changes from the Kidney Care divestiture, showing decreased assets and liabilities, and a shift to net income Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total current assets | $6,749 | $8,853 | ($2,104) | | Total assets | $21,046 | $25,782 | ($4,736) | | Short-term debt | $6 | $2,126 | ($2,120) | | Total current liabilities | $2,939 | $6,511 | ($3,572) | | Total liabilities | $13,753 | $18,758 | ($5,005) | | Total equity | $7,293 | $7,024 | $269 | Condensed Consolidated Statement of Income Highlights (in millions) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $5,435 | $5,184 | | Gross margin | $1,852 | $1,992 | | Operating income | $249 | $294 | | Income from continuing operations | $186 | $101 | | Income (loss) from discontinued operations, net of tax | $31 | $(373) | | Net income (loss) attributable to Baxter | $217 | $(277) | Condensed Consolidated Statement of Cash Flows Highlights (in millions) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash flows from operations | $24 | $278 | | Cash flows from investing activities | $3,150 | $(257) | | Cash flows from financing activities | $(3,988) | $(1,076) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail major corporate actions, including the Kidney Care business sale, Hurricane Helene charges, debt repayments, and the Novum LVP recall - Completed the sale of the Kidney Care business to Carlyle on January 31, 2025, for **~$3.71 billion** in pre-tax cash proceeds, recognizing a pre-tax gain of **$191 million** The business is now reported as discontinued operations[21](index=21&type=chunk)[24](index=24&type=chunk) - In H1 2025, recorded **$115 million** in pre-tax net charges for remediation, air freight, and other costs resulting from damage caused by Hurricane Helene to the North Cove, NC facility[22](index=22&type=chunk) - In H1 2025, used proceeds from the Kidney Care sale to repay approximately **$3.81 billion** in debt, including a **$1.83 billion** bridge facility, **$1.0 billion** of a term loan, and **$680 million** of senior notes[49](index=49&type=chunk)[45](index=45&type=chunk)[50](index=50&type=chunk) - Initiated a voluntary correction for the Novum IQ Large Volume Pump (LVP), which the FDA classified as a **Class I recall** Distribution in the U.S. and Canada was temporarily halted[55](index=55&type=chunk) Segment Net Sales - Six Months Ended June 30 (in millions) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Medical Products & Therapies | $2,582 | $2,551 | | Healthcare Systems & Technologies | $1,471 | $1,415 | | Pharmaceuticals | $1,193 | $1,180 | | **Total Baxter** | **$5,435** | **$5,184** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strategic actions, including the Kidney Care sale and debt reduction, alongside operational results, liquidity, and key challenges [Overview and Strategic Actions](index=39&type=section&id=Overview%20and%20Strategic%20Actions) The company completed its Kidney Care business sale for **~$3.3 billion** net after-tax proceeds, primarily used for **$3.81 billion** debt repayment, and is now restructuring costs - Completed the sale of the Kidney Care business on January 31, 2025, receiving approximately **$3.3 billion** in net after-tax proceeds[162](index=162&type=chunk) - As of June 30, 2025, the company had repaid **$3.81 billion** of debt, primarily using the proceeds from the Kidney Care sale[162](index=162&type=chunk) - The company is undertaking restructuring actions to manage dis-synergies and align its cost structure with the remaining business after the Kidney Care sale[164](index=164&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) H1 2025 consolidated net sales increased **5%** to **$5.4 billion**, driven by Healthcare Systems & Technologies and Pharmaceuticals, though gross margin declined Net Sales Growth by Geography - Six Months Ended June 30, 2025 | Region | At Actual Rates | At Operational Sales Growth | | :--- | :--- | :--- | | United States | 7% | 3% | | Emerging markets | (2)% | 3% | | Rest of world | 5% | 3% | | **Total net sales** | **5%** | **3%** | - Medical Products & Therapies sales were up **1%** in H1 2025, with growth in Advanced Surgery offset by challenges in Infusion Therapies due to Hurricane Helene's after-effects and the exit from IV solutions in China[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - Healthcare Systems & Technologies sales grew **4%** in H1 2025, driven by a **6%** increase in Care & Connectivity Solutions from higher U.S. capital spending[193](index=193&type=chunk)[194](index=194&type=chunk) - Pharmaceuticals sales increased **1%** in H1 2025, with Drug Compounding growth of **3%** offsetting flat performance in Injectables & Anesthesia[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Gross margin ratio for H1 2025 was **34.1%**, a decrease from **38.4%** in H1 2024 Excluding special items, the margin declined by **1.6 percentage points**, primarily due to the Kidney Care MSA and manufacturing variances[206](index=206&type=chunk)[207](index=207&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) The Kidney Care divestiture significantly strengthened liquidity, with **$3.15 billion** net inflow from investing activities used for **$3.99 billion** debt repayment - Cash flows from continuing operations were **$118 million** for H1 2025, compared to **$30 million** for H1 2024[238](index=238&type=chunk) - In H1 2025, cash used in financing activities was **$3.99 billion**, which included debt repayments of **$3.51 billion** and commercial paper repayments of **$300 million**[240](index=240&type=chunk) - In June 2025, the company entered into an amended and restated **$2.20 billion** multicurrency revolving credit facility maturing in 2030 and an amended term loan facility with **$645 million** outstanding maturing in 2027[243](index=243&type=chunk)[244](index=244&type=chunk) - No shares were repurchased in H1 2025 The company has **$1.30 billion** remaining available under its share repurchase authorization as of June 30, 2025[241](index=241&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages foreign currency and interest rate risks using derivatives, with a hypothetical **10%** U.S. dollar weakening having an immaterial impact - The company's primary foreign exchange risk is from operations denominated in the Euro, British Pound, Canadian Dollar, Australian Dollar, and other major currencies[263](index=263&type=chunk) - A sensitivity analysis showed that a **10%** adverse move in the U.S. Dollar against all currencies would result in a change of less than **$1 million** to the net pre-tax asset balance of its foreign exchange contracts[266](index=266&type=chunk) - The company continues to apply highly inflationary accounting for its subsidiary in Turkey, which had net monetary assets of **$30 million** as of June 30, 2025[268](index=268&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management, including the Interim CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[271](index=271&type=chunk) - No material changes to internal control over financial reporting were identified during the second quarter of 2025[272](index=272&type=chunk) [PART II. OTHER INFORMATION](index=61&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides details on legal proceedings, risk factors, equity sales, other corporate information, and filed exhibits [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference detailed discussions of legal contingencies from Note 6 of the financial statements - Information on legal proceedings is incorporated by reference from Note 6 of the financial statements[274](index=274&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report[275](index=275&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, Baxter did not repurchase any common stock, with **$1.30 billion** remaining under its share repurchase authorization - No shares were repurchased during the second quarter of 2025[275](index=275&type=chunk) - As of June 30, 2025, **$1.30 billion** remained available under the company's share repurchase program[275](index=275&type=chunk) [Other Information](index=61&type=section&id=Item%205.%20Other%20Information) This section discloses an amended compensation agreement for Interim CEO Brent Shafer and notes officer/director participation in non-Rule 10b5-1 trading arrangements - On August 2, 2025, the company amended the compensation agreement with Interim CEO/Chair Brent Shafer, modifying his bonus eligibility and outlining his transition to non-executive Chair[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) - Certain officers and directors participate in trading arrangements, such as for tax withholding on equity awards, which may constitute non-Rule 10b5-1 plans[280](index=280&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including amended credit agreements and CEO/CFO certifications - Lists exhibits filed with the report, including amended credit facilities, executive compensation agreements, and required CEO/CFO certifications[281](index=281&type=chunk)

Core Insights - Baxter International reported quarterly earnings of $0.59 per share, missing the Zacks Consensus Estimate of $0.60 per share, and down from $0.68 per share a year ago, representing an earnings surprise of -1.67% [1] - The company posted revenues of $2.81 billion for the quarter ended June 2025, missing the Zacks Consensus Estimate by 0.28%, and down from $3.81 billion year-over-year [2] - Baxter has surpassed consensus EPS estimates three times over the last four quarters and topped consensus revenue estimates two times in the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.64 on revenues of $2.9 billion, and for the current fiscal year, it is $2.50 on revenues of $11.35 billion [7] - The estimate revisions trend for Baxter was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Medical - Products industry, to which Baxter belongs, is currently in the bottom 26% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5]

Core Insights - Baxter International Inc. reported second-quarter 2025 adjusted earnings per share (EPS) of 59 cents, missing the Zacks Consensus Estimate of 60 cents by 1.7%, but showing a 28.3% improvement from the previous year [1] - Revenues from continued operations totaled $2.81 billion, reflecting a 4.3% increase on a reported basis but missing estimates by 0.4% [2] - The company's shares declined 8.9% in pre-market trading following the results, with a year-to-date loss of 3.8% compared to the industry's growth of 6% [2] Revenue Details - Total revenues from continued operations were $2.81 billion, up 4.3% reported and 1% operationally, but missed estimates by 0.4% [2] - The Medical Products & Therapies segment generated $1.32 billion in sales, flat year over year on a reported basis and up 1% operationally [4] - Infusion Therapies & Technologies sales were $1.02 billion, down 2% year over year, while Advanced Surgery sales reached $296 million, up 7% year over year [5] Segment Performance - Healthcare Systems and Technologies segment sales were $767 million, up 3% year over year, driven by growth in Care & Connectivity Solutions [7] - Pharmaceuticals segment sales totaled $612 million, up 2% year over year, with Drug Compounding showing strength [8] - Other segment revenues amounted to $111 million, reflecting a significant increase of 405% year over year [9] Margin Analysis - Adjusted gross profit was $1.14 billion, with an adjusted gross margin contracting 170 basis points to 40.7% [10] - Adjusted operating income from continuing operations was $423 million, up 18.5% year over year, with an adjusted operating margin improving 180 basis points to 15.1% [11] Guidance - For Q3 2025, Baxter anticipates sales growth of 6-7% and adjusted EPS in the range of 58-62 cents, while the full-year 2025 adjusted EPS is projected to be $2.42-$2.52 [12][13] - The Zacks Consensus Estimate for full-year sales is pegged at $11.35 billion, indicating an 11.7% year-over-year decline [13] Product Developments - Baxter launched Hemopatch Sealing Hemostat with room temperature storage in several European markets, enhancing surgical efficiency [16] - The company has restored inventory levels for IV solutions following Hurricane Helene, which is expected to boost demand going forward [14][15]

Baxter International (BAX) reported $2.81 billion in revenue for the quarter ended June 2025, representing a year-over-year decline of 26.3%. EPS of $0.59 for the same period compares to $0.68 a year ago. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. Here is how Baxter performed in the just reported quarter in terms of the metrics ...

Financial Data and Key Metrics Changes - In Q2 2025, sales from continuing operations grew 4% on a reported basis and 1% on an operational basis, with adjusted earnings per share increasing 28% to $0.59 compared to the prior year [5][6][26] - Adjusted gross margins from continuing operations were 14.7%, a decrease of 170 basis points year-over-year, primarily due to lower manufacturing volumes and an unfavorable product mix [19][22] - Adjusted operating margin improved to 15.1%, up 180 basis points from the prior year, reflecting operational execution and TSA income [22][24] Business Line Data and Key Metrics Changes - Medical Products and Therapies (MPT) segment sales were $1.3 billion, increasing 1%, with strong demand for advanced surgery products offset by softness in infusion therapies [9][10] - Advanced Surgery sales totaled $296 million, growing 5% globally, driven by demand for hemostats and sealants [14] - Pharmaceutical segment sales were $612 million, increasing 1%, with injectables and anesthesia declining 4% due to a difficult comparison to the prior year [16][17] Market Data and Key Metrics Changes - U.S. injectables experienced a decline in demand, attributed to a shift towards IV push protocols and lower patient admissions [18][64] - International sales in Care and Connectivity Solutions increased 7%, while U.S. sales rose 3% [15] - Frontline care sales declined 1% year-over-year, reflecting a high single-digit decline internationally [16] Company Strategy and Development Direction - The company aims to enhance operational effectiveness and improve performance, focusing on innovation and growth opportunities [6][7] - A strategic partnership with Visient was announced to ensure reliable access to IV fluids during supply disruptions [11] - The appointment of Andrew Heider as the new CEO is expected to bring fresh perspectives and drive growth [36][38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged softness in demand for certain products and the impact of fluid conservation efforts on sales [5][6][28] - The company expects total sales growth of 6% to 7% on a reported basis for 2025, with operational sales growth revised down to 3% to 4% [27][34] - Management remains optimistic about resuming shipments of the NOVUM infusion pump and expects fluid conservation levels to improve over time [29][30] Other Important Information - The company incurred negative free cash flows of $144 million year-to-date but generated $77 million of positive free cash flows in Q2 [26][27] - The anticipated impact from tariffs is now estimated at $40 million for 2025, down from previous estimates [32] Q&A Session Summary Question: Impact of NOVUM on sales and operating margin - Management confirmed no impact from NOVUM in Q2, emphasizing confidence in the platform despite a voluntary pause in shipments [43][44] Question: Evolution of business trends throughout the quarter - Management noted that business trends worsened, particularly in U.S. injectables, and emphasized a cautious approach for the second half of the year [62][63] Question: Timelines for stranded costs and TSA income - Management is on track to mitigate stranded costs by 2027 and is managing TSA income to avoid gaps in financial performance [70][72] Question: Long-term growth model and revenue growth expectations - Management expressed optimism about returning to 4% to 5% revenue growth, driven by new product launches and easing headwinds [84][90]

Financial Data and Key Metrics Changes - Second quarter sales from continuing operations grew 4% on a reported basis and 1% on an operational basis, with adjusted earnings per share from continuing operations at $0.59, increasing 28% over the prior year [5][10][24] - Adjusted gross margins from continuing operations were 14.7%, a decrease of 170 basis points compared to the prior year [19] - Adjusted operating margin was 15.1%, improving 180 basis points compared to the prior year [21] Business Segment Data and Key Metrics Changes - Medical Products and Therapies (MPT) segment sales were $1.3 billion, increasing 1% in the quarter, with ITT division sales declining 1% to $1 billion [10][11] - Advanced Surgery sales totaled $296 million, growing 5% globally [14] - Healthcare Systems and Technologies (HST) sales were $767 million, increasing 2%, with Care and Connectivity Solutions (CCS) division sales rising 4% to $474 million [15] - Pharmaceutical segment sales totaled $612 million, increasing 1%, with injectables and anesthesia sales declining 4% [16][17] Market Data and Key Metrics Changes - U.S. patient admissions were slightly lower than anticipated, impacting demand for certain products [11] - International sales in CCS increased 7%, while frontline care sales declined 1% compared to the prior year [15][16] Company Strategy and Development Direction - The company aims to enhance operational effectiveness and improve performance, focusing on innovation and growth opportunities [6][30] - A strategic partnership with Visient was announced to ensure reliable access to IV fluids during supply disruptions [12] - The company is committed to maintaining a comprehensive IV Solutions portfolio and is optimistic about the recovery of hospital practices over time [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged softness in demand for certain products and the impact of fluid conservation efforts on sales [5][11] - The company expects total sales growth of 6% to 7% on a reported basis for 2025, with operational sales growth revised to 3% to 4% [26][34] - Management remains confident in the fundamentals of the business and anticipates a return to normal practices in the healthcare sector [30][66] Other Important Information - The company has incurred negative free cash flows of $144 million year-to-date but generated $77 million of positive free cash flows in the second quarter [25] - The anticipated impact from tariffs is estimated at approximately $40 million in 2025, a reduction from previous estimates [32] Q&A Session Summary Question: Impact of NOVUM on sales and operating margin - Management confirmed no impact from NOVUM in the second quarter and expressed confidence in the platform despite a voluntary pause in shipments [42][44] Question: Guidance implications if NOVUM issues persist - The low end of guidance assumes no further shipments of NOVUM for the rest of the year, capturing potential downside risks [48][52] Question: Evolution of business trends throughout the quarter - Management noted that business trends worsened, particularly in U.S. injectables, and emphasized a more reserved approach for the second half of the year [62][66] Question: TSA income and stranded costs management - Management is on track to mitigate stranded costs and ensure that TSA roll-off does not outpace stranded cost reductions [71][73] Question: Revenue guide reduction specifics - Management did not provide specific numbers but indicated that the low end of guidance assumes no improvement in fluid conservation [78] Question: Long-term growth model and new CEO's impact - Management highlighted ongoing innovation and new product launches as key to returning to 4% to 5% revenue growth, with optimism for 2026 [83][88]

Q2 2025 Performance Summary - Worldwide sales from continuing operations grew 4% on a reported basis and 1% on an operational basis[18] - Adjusted earnings per share from continuing operations totaled $0.59 per diluted share, increasing 28% as compared to the prior year period[18] - Gross Margin was 353%, with a year-over-year change of (300 bps)[20] - Operating Margin was 68%, with a year-over-year change of +20 bps[20] - Diluted EPS was $024, with a year-over-year change of +26%[20] H1 2025 Performance Summary - Sales were $54 billion, with a +5% Reported and +3% Operational[20] - Gross Margin was 341%, with a year-over-year change of (430 bps)[20] - Operating Margin was 46%, with a year-over-year change of (110 bps)[20] - Diluted EPS was $036, with a year-over-year change of +80%[20] - Adjusted Diluted EPS was $115, with a year-over-year change of +40%[20] Q3 & FY 2025 Outlook - Third-Quarter 2025 Sales Growth Reported (Continuing Operations) Guidance is 6% - 7%[60] - Third-Quarter 2025 Operational Sales Growth (Continuing Operations) Guidance is ~ 3% - 4%[60] - Third-Quarter 2025 Adjusted Diluted EPS Continuing Operations is $058 - $062[60] - Full-Year 2025 Sales Growth Reported (Continuing Operations) Guidance is 6% - 7%[62] - Full-Year 2025 Operational Sales Growth (Continuing Operations) Guidance is 3% - 4%[62] - Full-Year 2025 Adjusted Diluted EPS Continuing Operations is $242 - $252[62]

[Baxter Q2 2025 Earnings Release](index=1&type=section&id=Baxter%20Reports%20Second-Quarter%202025%20Results) [Q2 2025 Performance Highlights](index=1&type=section&id=Q2%202025%20Performance%20Highlights) Baxter's Q2 2025 sales from continuing operations reached $2.81 billion, up 4% reported and 1% operational, with adjusted diluted EPS at $0.59 Q2 2025 Key Financial Metrics | Metric | Value | Basis | Growth (vs. Q2 2024) | | :--- | :--- | :--- | :--- | | Sales from Continuing Operations | $2.81 billion | Reported | +4% | | Sales from Continuing Operations | $2.81 billion | Operational | +1% | | GAAP Diluted EPS from Continuing Operations | $0.24 | GAAP | +26% | | Adjusted Diluted EPS from Continuing Operations | $0.59 | Non-GAAP | +28% | - The company appointed **Andrew Hider** as the new President and CEO to accelerate innovation, growth, and operational effectiveness[3](index=3&type=chunk)[4](index=4&type=chunk) [Second-Quarter 2025 Segment Performance](index=2&type=section&id=Second-Quarter%202025%20Segment%20Results) Q2 2025 segment performance was mixed, with Medical Products & Therapies flat at $1.32 billion, Healthcare Systems & Technologies up 3% to $767 million, and Pharmaceuticals up 2% to $612 million Q2 2025 Sales by Segment (Continuing Operations) | Segment | Sales (approx.) | Reported Growth | Operational Growth | | :--- | :--- | :--- | :--- | | Medical Products & Therapies | $1.32 billion | 0% | +1% | | Healthcare Systems & Technologies | $767 million | +3% | +2% | | Pharmaceuticals | $612 million | +2% | +1% | - Medical Products & Therapies performance was impacted by softness in **IV solutions demand** due to fluid conservation efforts post-Hurricane Helene[8](index=8&type=chunk) - Pharmaceuticals growth was driven by **Drug Compounding** strength, partially offset by a **1% decline in Injectables** and a low double-digit decline in Anesthesia sales[9](index=9&type=chunk) [Recent Business Highlights](index=3&type=section&id=Recent%20Highlights) Baxter restored IV solution inventory post-Hurricane Helene, partnered with Vizient for supply reliability, and published its 2024 Corporate Responsibility Report - Inventory levels for **IV solutions** from the North Cove, N.C. site were restored, and all product allocations removed post-Hurricane Helene[9](index=9&type=chunk) - Partnered with **Vizient** to include **IV fluids** in its Vizient Reserve Program, ensuring reliable access during supply disruptions[9](index=9&type=chunk) - Published the **2024 Corporate Responsibility Report**, detailing progress on 2030 sustainability goals[10](index=10&type=chunk) [2025 Financial Outlook](index=4&type=section&id=2025%20Financial%20Outlook) Baxter updated its full-year 2025 forecast to 6-7% reported sales growth and adjusted diluted EPS of $2.42-$2.52, with similar Q3 expectations Full-Year 2025 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Sales Growth (Reported) | 6% to 7% | | Sales Growth (Operational) | 3% to 4% | | Adjusted Diluted EPS | $2.42 to $2.52 | Third-Quarter 2025 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Sales Growth (Reported) | 6% to 7% | | Sales Growth (Operational) | 3% to 4% | | Adjusted Diluted EPS | $0.58 to $0.62 | [Financial Statements & Reconciliations](index=10&type=section&id=Financial%20Statements%20%26%20Reconciliations) [Consolidated Statements of Income (Loss)](index=10&type=section&id=Consolidated%20Statements%20of%20Income%20%28Loss%29) Q2 2025 net sales from continuing operations grew 4% to $2.81 billion, with GAAP income at $122 million, reflecting Kidney Care exclusion Q2 2025 vs Q2 2024 Income Statement Highlights (Continuing Operations) | Metric (in millions, except EPS) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,810 | $2,694 | 4% | | Gross Margin | $991 | $1,031 | (4)% | | Operating Income | $191 | $179 | 7% | | Income from Continuing Operations | $122 | $95 | 28% | | Diluted EPS from Continuing Operations | $0.24 | $0.19 | 26% | Six Months 2025 vs 2024 Income Statement Highlights (Continuing Operations) | Metric (in millions, except EPS) | YTD 2025 | YTD 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,435 | $5,184 | 5% | | Gross Margin | $1,852 | $1,992 | (7)% | | Operating Income | $249 | $294 | (15)% | | Income from Continuing Operations | $186 | $101 | 84% | | Diluted EPS from Continuing Operations | $0.36 | $0.20 | 80% | [Segment Performance Analysis](index=16&type=section&id=Segment%20Performance%20Analysis) For H1 2025, Medical Products & Therapies sales grew 1% to $2.58 billion, Healthcare Systems & Technologies 4% to $1.47 billion, and Pharmaceuticals 1% to $1.19 billion Six Months Ended June 30, 2025 Sales by Segment | Segment | Sales (in millions) | Actual Growth | Operational Growth | | :--- | :--- | :--- | :--- | | Medical Products & Therapies | $2,582 | 1% | 3% | | Healthcare Systems & Technologies | $1,471 | 4% | 4% | | Pharmaceuticals | $1,193 | 1% | 2% | | Total - Continuing Operations | $5,435 | 5% | 3% | Six Months Ended June 30, 2025 Segment Operating Income | Segment | Operating Income (in millions) | % of Segment Net Sales | | :--- | :--- | :--- | | Medical Products & Therapies | $483 | 18.7% | | Healthcare Systems & Technologies | $211 | 14.3% | | Pharmaceuticals | $127 | 10.6% | Six Months Ended June 30, 2025 Sales by Geography (Continuing Ops) | Region | Sales (in millions) | % Growth | | :--- | :--- | :--- | | U.S. | $3,026 | 7% | | International | $2,409 | 3% | | Total | $5,435 | 5% | [Reconciliation of GAAP to Non-GAAP Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Baxter reconciled Q2 2025 adjusted diluted EPS of $0.59 from GAAP EPS of $0.24, operational sales growth of 1% from 4% reported, and reported negative free cash flow of $144 million for H1 Q2 2025 GAAP to Adjusted EPS Reconciliation (Continuing Operations) | Item | Per Diluted Share | | :--- | :--- | | **Reported GAAP EPS** | **$0.24** | | Intangible asset amortization | $0.23 | | Business optimization items | $0.03 | | Product related reserves | $0.03 | | Hurricane Helene costs | $0.03 | | Separation-related costs | $0.02 | | Other items | $0.01 | | **Adjusted Non-GAAP EPS** | **$0.59** | Q2 2025 Reported to Operational Sales Growth Reconciliation | Item | Impact on Growth | | :--- | :--- | | **Net Sales Growth As Reported** | **4%** | | Kidney Care MSA | (4)% | | Exit of IV Solutions in China | 1% | | Foreign Exchange (FX) | (0)% | | **Operational Sales Growth** | **1%** | Free Cash Flow Reconciliation (Six Months Ended June 30, 2025) | Item (in millions) | Amount | | :--- | :--- | | Cash flows from operations - continuing operations | $118 | | Less: Capital expenditures - continuing operations | ($262) | | **Free cash flow - continuing operations** | **($144)** | [Other Information](index=5&type=section&id=Other%20Information) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) Baxter utilizes non-GAAP measures like operational sales growth and adjusted diluted EPS to clarify core performance by excluding variable or unusual items - Management uses non-GAAP measures internally for **financial planning**, **monitoring business unit performance**, and **determining incentive compensation**[16](index=16&type=chunk) - **Operational sales growth** is a non-GAAP measure excluding Kidney Care MSA impact, IV solutions exit in China, and calculated at constant currency rates[17](index=17&type=chunk) - Special items excluded from adjusted earnings include **intangible asset amortization**, **business optimization charges**, **acquisition costs**, **separation costs**, **Hurricane Helene costs**, and certain legal and tax matters[19](index=19&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements subject to risks including global economic conditions, supply chain disruptions, regulatory actions, and integration of acquisitions - Forward-looking statements cover the **financial outlook for Q3 and full-year 2025** and operational activities[22](index=22&type=chunk) - Major risks include impacts from **global economic conditions**, **supply chain disruptions**, **inflation**, and **geopolitical events**[23](index=23&type=chunk) - Other cited risks include **regulatory actions by the FDA**, **raw material availability**, **quality program failures**, and **IT system breaches**[23](index=23&type=chunk)[24](index=24&type=chunk)