Summary of Conference Call Company Overview - The conference call involved Baxter, a company undergoing a transformation period, including a portfolio transformation and CEO change [6][10]. Key Industry Insights - Saudi Arabia announced a $5.8 billion investment in Michigan for a high-capacity IV fluid facility, which may face economic challenges and could take several years to build [1][2][3]. - Baxter has recently renewed its Group Purchasing Organization (GPO) contracts, which are multiyear agreements, limiting competition for the next three to five years [4]. Financial Performance - Baxter reported a 5% growth in Q1, with underlying growth adjusted for one-time factors at 3% [14][19]. - The HST business showed strong performance with a 7% growth in CCS and 14% growth in PSS US [16]. - The company anticipates Q2 growth to be lower, guided at 1-2%, due to expected conservation in fluid usage and a pull forward effect from distributor restocking [23][24]. Strategic Focus - The company is focusing on capital allocation to prioritize investments that drive higher growth and returns, especially after divesting the kidney business [8][10]. - Simplification of operations is a key strategy, reducing the number of distribution centers and associated costs [9][10]. - Baxter aims to pay down debt, targeting a net debt to EBITDA leverage of three times by the end of the year [10]. CEO Search - The board is conducting a thoughtful and expedient search for a new CEO, looking for candidates who can drive innovation and operational excellence [12][13]. Market Dynamics - The company is managing the impact of tariffs, particularly from China, which constitutes about half of their exposure. They are optimistic about potential benefits from recent trade negotiations [45][46]. - Baxter has not factored in the impact of pharma tariffs into their current forecasts, indicating a strong position due to domestic manufacturing [49][51]. Margin and Growth Outlook - Baxter raised its operating margin guidance to 16.5% for the year, with expectations for sequential improvement in margins throughout the year [59][63]. - The company is focused on maintaining R&D investments while also implementing cost reduction measures to improve margins [52][71]. - There is confidence in achieving long-term operating margins above 19%, supported by strategic exits from lower-margin businesses and improved product mix [73][70]. Conclusion - Baxter is positioned for steady growth with a focus on innovation, operational efficiency, and strategic capital allocation, despite facing challenges from market dynamics and economic conditions [80].

Core Viewpoint - Baxter International (NYSE: BAX) has faced challenges in stock ownership over the past decade, particularly due to high valuation levels in the second half of the 2010s, with the stock trading at approximately 23 times earnings at the end of the decade [1]. Group 1 - The stock of Baxter International appeared too expensive during the latter part of the 2010s [1]. - The company closed the decade with a valuation of about 23 times earnings [1].

Financial Performance - Net income attributable to Baxter stockholders for Q1 2025 was $126 million, or $0.25 per diluted share, compared to $37 million, or $0.07 per diluted share in Q1 2024 [172]. - Total net sales for Q1 2025 were $2.625 billion, representing a 5% increase compared to $2.490 billion in Q1 2024 [175]. - The Medical Products & Therapies segment reported net sales of $1.262 billion in Q1 2025, a 3% increase from $1.229 billion in Q1 2024 [179]. - Infusion Therapies and Technologies net sales increased by 3% in Q1 2025, driven by growth in infusion systems and IV solutions, with a 1% adverse impact from exiting the China market and a 2% impact from foreign currency exchange rates [181]. - Advanced Surgery net sales rose by 2% in Q1 2025, primarily due to increased sales volume outside the U.S., with a 2% adverse impact from foreign currency exchange rates [182]. - Healthcare Systems & Technologies segment net sales increased by 6% in Q1 2025, with Care and Connectivity Solutions and Front Line Care growing by 6% and 5% respectively [185][187]. - Pharmaceuticals segment net sales increased by 1% in Q1 2025, with Injectables and Anesthesia growing by 2% and Drug Compounding decreasing by 2% [190][191]. - Total operating income for the company was $58 million in Q1 2025, down from $115 million in Q1 2024 [216]. Cost and Expenses - Gross margin ratio decreased to 32.8% in Q1 2025 from 38.6% in Q1 2024, impacted by special items reducing the margin by approximately 9.0 percentage points [198]. - SG&A expenses ratio improved to 26.8% in Q1 2025 from 29.3% in Q1 2024, with special items impacting the ratio by approximately 3.6 percentage points [200]. - R&D expenses ratio increased to 5.3% in Q1 2025 from 4.8% in Q1 2024, reflecting increased project-related expenditures [203]. - Interest expense decreased to $64 million in Q1 2025 from $78 million in Q1 2024, driven by debt repayments [208]. - Total special items from continuing operations amounted to $237 million in Q1 2025, compared to $119 million in Q1 2024, significantly impacting gross margin and SG&A ratios [194]. Cash Flow and Financing - Cash used in operations from continuing operations was $99 million in Q1 2025, compared to cash flows of $67 million in Q1 2024, negatively impacted by Hurricane Helene-related payments [224]. - Cash used in investing activities was $124 million in Q1 2025, primarily for capital expenditures, compared to $100 million in Q1 2024 [223]. - Cash used in financing activities totaled $3.23 billion in Q1 2025, including $2.83 billion in debt repayments, compared to $140 million in Q1 2024 [226]. - As of March 31, 2025, the company had $2.29 billion in cash and cash equivalents, with $10.07 billion in long-term debt and finance lease obligations [234]. - The company did not repurchase any shares in the first three months of 2025, with $1.30 billion remaining available under its share repurchase authorization [227]. Business Transactions - The company completed the sale of its Kidney Care business to Carlyle for an aggregate purchase price of $3.80 billion, receiving approximately $3.71 billion in pre-tax cash proceeds at closing [157]. - The sale of the BioPharma Solutions business generated cash proceeds of $3.96 billion, which were primarily used to repay debt obligations [163]. - For the three months ended March 31, 2025, income from discontinued operations was $62 million, up from $33 million in the same period of 2024, primarily due to a $191 million pre-tax gain from the sale of the Kidney Care business [214]. Operational Challenges - The company faced significant challenges in its global supply chain, including production delays and increased costs due to geopolitical events and inflation [165]. - The company anticipates that macroeconomic conditions and high inflation rates will continue to impact its operating costs and profitability [167]. - Foreign currency rates adversely impacted net sales growth by 2% in Q1 2025 due to the weakening of the U.S. Dollar against several currencies [177]. Compliance and Regulatory - The company has implemented corrective actions in response to FDA inspections and has fully responded to the 2023 Warning Letter, indicating ongoing efforts to enhance compliance and operations [243]. - The company is subject to legal contingencies that may incur charges exceeding established liabilities, although these are not expected to materially affect the consolidated financial position [242]. Strategic Initiatives - The company implemented a new operating model in Q3 2023, resulting in three reportable segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals [160]. - The company is focused on integrating acquisitions, including Hillrom, and managing related personnel capacity constraints and potential knowledge loss [246]. - The company is actively pursuing new product development and enhancements, facing risks related to regulatory approvals and market acceptance [246]. - The company is exposed to various risks including foreign exchange volatility, supply chain disruptions, and regulatory changes that could impact operations and financial performance [246]. - The company uses forward contracts to hedge foreign exchange risk, with a maximum term of eight months for cash flow hedge contracts as of March 31, 2025 [250]. - The company has implemented strategic actions, including the sale of its Kidney Care business, to achieve intended benefits and improve financial performance [246]. Other Financial Information - Other operating income increased to $40 million in Q1 2025 from $3 million in Q1 2024, primarily related to income recognized under the Kidney Care TSA [207]. - Segment operating income for Medical Products & Therapies increased to $244 million in Q1 2025 from $227 million in Q1 2024, driven by increased pricing [217]. - Healthcare Systems & Technologies segment operating income rose to $93 million in Q1 2025 from $67 million in Q1 2024, attributed to higher sales [218]. - Pharmaceuticals segment operating income decreased to $63 million in Q1 2025 from $78 million in Q1 2024, due to lower gross margin percentages and increased product costs [219]. - The company is currently evaluating the impact of new accounting standards effective for annual consolidated financial statements for the year ending December 31, 2025, which will require additional disclosures related to income taxes [241]. - As of March 31, 2025, the company reported a net pre-tax liability balance of $1 million related to foreign exchange contracts, which could change by $73 million if the U.S. Dollar weakened by 10% against all currencies [252]. - The subsidiary in Turkey had net monetary assets of $29 million as of March 31, 2025, following the implementation of highly inflationary accounting due to a cumulative inflation rate exceeding 100% [254].

Core Viewpoint - Baxter International Inc. reported strong first-quarter 2025 results, with adjusted EPS of 55 cents, exceeding estimates and showing significant year-over-year growth [1][14]. Financial Performance - Adjusted EPS of 55 cents beat the Zacks Consensus Estimate of 48 cents by 14.6% and improved 52.8% from the prior year [1] - Revenues from continued operations reached $2.63 billion, up 5.4% year-over-year, surpassing the Zacks Consensus Estimate by 2.3% [2] - Adjusted operating income from continuing operations was $285 million, reflecting a 55.7% year-over-year increase, with an adjusted operating margin improvement of 360 basis points to 10.9% [10] Segment Performance - Medical Products & Therapies segment sales totaled $1.26 billion, up 3% year-over-year, driven by strong demand in Infusion Therapies & Technologies [4] - Infusion Therapies and Technologies sales were $994 million, up 3% year-over-year, while Advanced Surgery category sales reached $268 million, up 2% [6] - Healthcare Systems and Technologies segment sales were $704 million, up 6% year-over-year, with strong performance in Patient Support Systems [7] - Pharmaceuticals segment sales were $581 million, up 1% year-over-year, primarily due to growth in specialty injectables [8] Margin Analysis - Adjusted gross profit was $1.09 billion, a 1.7% increase year-over-year, but the adjusted gross margin contracted by 160 basis points to 41.8% [9] Future Guidance - For Q2 2025, Baxter anticipates sales growth of 4-5% and adjusted EPS in the range of 59-63 cents [11] - For full-year 2025, continuing operational sales growth is expected to be 7-8%, with adjusted EPS projected between $2.47-$2.55 [12] Strategic Initiatives - Baxter completed its transformation plan with the sale of its Kidney Care business, aiming to redefine healthcare delivery and drive profitable growth [3] - The company introduced the Voalte Linq device to enhance communication in clinical settings, integrating with existing digital solutions [15] - The launch of Hemopatch Sealing Hemostat with room temperature storage is expected to improve surgical efficiency [16]

Core Viewpoint - Baxter International Inc. reported strong first-quarter 2025 results, exceeding both management guidance and Wall Street estimates for adjusted EPS and sales growth [1][2]. Financial Performance - Adjusted EPS for Q1 2025 was 62 cents, surpassing management's guidance of 47 to 50 cents and Wall Street's estimate of 48 cents [1]. - Total sales reached $2.63 billion, reflecting a 5% year-over-year increase, which also exceeded the consensus estimate of $2.59 billion [1][2]. - The company raised its 2025 adjusted EPS guidance to a range of $2.47-$2.55, compared to the previous guidance of $2.45-$2.55, with sales growth expectations adjusted to 7%-8% from 5%-6% [3]. Segment Performance - Medical Products & Therapies sales increased by 3% to $1.26 billion, with a 6% increase on a constant currency basis, driven by strong demand for IV infusion pumps and nutrition therapies in the U.S. [3]. - Healthcare Systems & Technologies sales totaled approximately $704 million, up 6% on both a reported and operational basis, fueled by strong U.S. sales in Patient Support Systems [3]. - Pharmaceutical sales reached $581 million, reflecting a 1% increase on a reported basis and a 3% increase operationally, driven by mid-single-digit growth in specialty injectables [3]. Future Guidance - For Q2 2025, Baxter expects adjusted EPS in the range of 59 to 63 cents, with a consensus estimate of 61 cents, and sales growth projected at 4%-5% on a reported basis [4].

Core Insights - Baxter International reported a revenue of $2.63 billion for the quarter ended March 2025, reflecting a decline of 26.9% year-over-year, while EPS was $0.55 compared to $0.65 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $2.57 billion by 2.09%, and the EPS surpassed the consensus estimate of $0.48 by 14.58% [1] Financial Performance Metrics - Net Sales in Advanced Surgery - International reached $123 million, exceeding the average estimate of $117.52 million, with a year-over-year increase of 6% [4] - Net Sales in Pharmaceuticals - U.S. were $195 million, slightly below the average estimate of $196.51 million, showing a year-over-year growth of 2.1% [4] - Net Sales in Front Line Care - International totaled $75 million, surpassing the average estimate of $69.14 million, with a year-over-year increase of 7.1% [4] - Net Sales in Other - U.S. were reported at $48 million, significantly above the average estimate of $15.59 million, reflecting a year-over-year increase of 336.4% [4] - Total Net Sales in Pharmaceuticals amounted to $581 million, compared to the average estimate of $590.04 million, with a year-over-year change of 0.5% [4] - Net Sales in Other reached $78 million, exceeding the average estimate of $46.71 million, with a year-over-year increase of 387.5% [4] - Net Sales in Front Line Care were $277 million, above the average estimate of $269.11 million, showing a year-over-year increase of 4.5% [4] - Net Sales in Infusion Therapies and Technologies were $994 million, surpassing the average estimate of $975.62 million, with a year-over-year change of 2.9% [4] - Net Sales in Care and Connectivity Solutions reached $427 million, exceeding the average estimate of $416.60 million, with a year-over-year increase of 6.2% [4] - Net Sales in Healthcare Systems and Technologies were $704 million, above the average estimate of $685.71 million [4] - Net Sales in Medical Products and Therapies totaled $1.26 billion, slightly above the average estimate of $1.25 billion [4] - Net Sales in Injectables and Anesthesia reached $335 million, exceeding the average estimate of $330.83 million [4] Stock Performance - Baxter's shares have returned -7.4% over the past month, compared to a -0.7% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - First quarter sales from continuing operations grew 5% on both a reported and operational basis, totaling $2.63 billion, exceeding previous guidance of 3% to 4% [8][13][34] - Adjusted earnings per share from continuing operations were $0.55, up 53% compared to the prior year, driven by favorable top line results and lower non-operational expenses [8][33] Business Line Data and Key Metrics Changes - Medical Products and Therapies (MPT) segment sales were $1.3 billion, increasing 6%, with strong growth in U.S. infusion systems [14][35] - Healthcare Systems and Technologies (HST) segment sales totaled $704 million, up 6%, driven by 14% growth in the U.S. for Care and Connectivity Solutions [19][20] - Pharmaceutical segment sales were $581 million, increasing 3%, with specialty injectables showing mid-single-digit growth [23] Market Data and Key Metrics Changes - The U.S. market showed strong recovery with hospitals beginning to rebuild inventory levels, particularly in IV Solutions, which is expected to improve as allocations are removed [17][22] - International sales performance was weaker, but capital orders picked up, indicating potential future growth [20] Company Strategy and Development Direction - The company is focused on leveraging its verticalized operating model to enhance innovation and drive profitable growth [6][8] - Strategic actions are being taken to mitigate the impact of global tariffs and optimize the supply chain [9][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic trajectory despite global macroeconomic volatility and uncertainty [9][10] - The company anticipates total sales growth of 7% to 8% for the full year 2025, with operational growth expected at 4% to 5% [34][42] Other Important Information - The search for a permanent CEO is active, with the board working with a leading search firm [10] - The company is committed to accelerating investments in innovation to redefine healthcare delivery [27] Q&A Session Summary Question: What actions are being taken to offset tariff headwinds? - Management is optimizing supply chains, negotiating with suppliers, and seeking exemptions while implementing targeted pricing strategies [46][50] Question: What is the outlook for the HST business recovery? - The HST segment showed strong performance with a healthy backlog and competitive wins, indicating positive momentum [52][54] Question: What impact do conservation programs have on IV Solutions? - Hospitals are expected to continue conservation efforts, but some are using more solutions than pre-hurricane levels, indicating a mixed recovery [60][62] Question: How is the company addressing potential pharmaceutical tariffs? - The company is proactively planning for potential tariff impacts and seeking exemptions, but the situation remains uncertain [66][68] Question: What is the outlook for operating margins in 2026? - The company remains committed to margin expansion, but the impact of tariffs and other factors will be evaluated as the situation develops [100]

Financial Data and Key Metrics Changes - First quarter sales from continuing operations grew 5% on both a reported and operational basis, totaling $2.63 billion, exceeding previous guidance of 3% to 4% [6][12] - Adjusted earnings per share from continuing operations were $0.55, up 53% compared to the prior year, driven by favorable top line results and lower non-operational expenses [27][33] - Adjusted gross margin from continuing operations was 41.8%, a decrease of 160 basis points year-over-year, impacted by higher planning and fulfillment costs [29] Business Line Data and Key Metrics Changes - Medical Products and Therapies (MPT) segment sales were $1.3 billion, increasing 6%, with strong growth in U.S. Infusion systems [13][14] - Healthcare Systems and Technologies (HST) segment sales totaled $704 million, increasing 6%, driven by 14% growth in the U.S. for Care and Connectivity Solutions [18][19] - Pharmaceutical segment sales were $581 million, increasing 3%, with injectables and anesthesia sales growing 4% [22] Market Data and Key Metrics Changes - The U.S. market showed strong recovery with hospitals beginning to rebuild inventory levels, particularly in IV Solutions, which is expected to improve as allocations are removed [16][62] - International procurement remains a part of operations, with ongoing impacts from U.S. and retaliatory tariffs affecting the supply chain [39][40] Company Strategy and Development Direction - The company is focused on leveraging its verticalized operating model to enhance agility and drive profitable growth [5] - Continued investments in innovation are prioritized to bring new products to market and redefine healthcare delivery [26] - The search for a permanent CEO is active, with the board working with a leading search firm to identify the right candidate [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatility in the global macro environment and the uncertainty created by new tariffs, but remains positive about opportunities for sales growth and margin expansion [8][34] - The company expects total sales growth of 7% to 8% on a reported basis for the full year 2025, with operational growth of 4% to 5% [35][42] Other Important Information - The company is actively working on mitigating the impacts of tariffs, including optimizing supply chains and seeking exemptions [40] - Adjusted operating margin from continuing operations is expected to be between 16% to 16.5% for the full year [41] Q&A Session Summary Question: What actions are being taken to offset tariff headwinds? - Management is optimizing supply chains, negotiating with suppliers, and seeking exemptions while maintaining targeted pricing strategies [47][48] Question: How should we think about the sustainability of the HST business recovery? - The HST segment has shown strong order growth and competitive wins, with management optimistic about its future performance despite monitoring the capital environment [52][56] Question: What is the expected impact of IV Solutions on the business as hospitals return to normal inventory levels? - Hospitals are expected to continue conservation efforts, but some are using more solutions than pre-hurricane levels, indicating a mixed recovery [60][62] Question: Can you provide clarity on the potential impact of pharmaceutical tariffs? - The company is monitoring the situation closely, with a small exposure from the Clarus plant, and is proactive in scenario planning [66] Question: What are the expectations for operating margin expansion in 2026? - Management remains committed to margin expansion, but acknowledges that the tariff environment will influence future projections [100][102]

Financial Performance - Worldwide Baxter sales from continuing operations grew by 5% on both a reported and operational basis[16] - Adjusted earnings per share from continuing operations totaled $055, exceeding the original guidance of $047 to $050 per diluted share[16] - Adjusted diluted EPS increased by 53% year-over-year, from $036 in Q1 2024 to $055 in Q1 2025[18, 21, 23] - Global reported sales increased from $25 billion in Q1 2024 to $26 billion in Q1 2025, representing a 5% increase[21] - Adjusted operating margin increased by 260 bps, from 123% in Q1 2024 to 149% in Q1 2025[21, 23] Segment Performance - Medical Products & Therapies net sales increased by 3%, from $1229 million in Q1 2024 to $1262 million in Q1 2025[34] - Healthcare Systems & Technologies net sales increased by 6%, from $667 million in Q1 2024 to $704 million in Q1 2025[36] - Pharmaceuticals net sales increased by 1%, from $578 million in Q1 2024 to $581 million in Q1 2025[38] 2025 Outlook - The company expects full-year 2025 operational sales growth from continuing operations to be 4%-5%[44] - The company expects full-year 2025 adjusted diluted EPS from continuing operations to be $247-$255[44]

Financial Performance - First-quarter sales from continuing operations totaled $2.63 billion, representing a 5% increase on both a reported and operational basis, exceeding the company's previous guidance[4] - Adjusted diluted EPS from continuing operations for the first quarter was $0.55, surpassing the company's prior guidance of $0.47 to $0.50 per diluted share[8] - Baxter has raised the lower end of its full-year 2025 adjusted diluted EPS guidance to a range of $2.47 to $2.55[4] - For full-year 2025, Baxter expects sales growth from continuing operations of 7% to 8% on a reported basis and 4% to 5% on an operational basis[11] - The company anticipates second-quarter 2025 sales growth from continuing operations of 4% to 5% on a reported basis and 1% to 2% on an operational basis[12] - Net sales for Q1 2025 were $2,625 million, a 5% increase from $2,490 million in Q1 2024[26] - The company reported a total operating income of $58 million for Q1 2025, down from $115 million in Q1 2024[35] - Free cash flow from continuing operations was $(221) million in Q1 2025, compared to $(43) million in Q1 2024[39] - The company anticipates U.S. GAAP sales growth of 4% - 5% for Q2 2025 and 7% - 8% for the full year 2025[44] - Adjusted diluted EPS guidance for Q2 2025 is projected to be between $0.59 and $0.63, and for FY 2025 between $2.47 and $2.55[44] Segment Performance - Medical Products & Therapies segment sales reached approximately $1.26 billion, a 3% increase on a reported basis and 6% on an operational basis, driven by strong demand in Infusion Therapies & Technologies[7] - Healthcare Systems & Technologies segment sales totaled approximately $704 million, reflecting a 6% increase on both a reported and operational basis, supported by strong U.S. sales[10] - Pharmaceuticals segment sales were approximately $581 million, showing a 1% increase on a reported basis and 3% on an operational basis, with mid-single-digit growth in specialty injectables[10] - Infusion Therapies & Technologies segment reported sales of $994 million in Q1 2025, up 3% from $966 million in Q1 2024, with operational sales growth of 6%[33] - Medical Products & Therapies segment achieved sales of $1,262 million in Q1 2025, a 3% increase from $1,229 million in Q1 2024, with operational sales growth of 6%[33] - Healthcare Systems & Technologies segment saw sales rise to $704 million in Q1 2025, a 6% increase from $667 million in Q1 2024, with operational sales growth of 6%[33] Cost and Income Analysis - Cost of sales increased by 15% to $1,764 million, compared to $1,529 million in the previous year[26] - Gross margin decreased by 10% to $861 million, representing 32.8% of net sales, down from 38.6%[26] - Operating income fell by 50% to $58 million, which is 2.2% of net sales, down from 4.6%[26] - Adjusted operating income (excluding special items) increased by 28% to $392 million from $307 million[26] - Adjusted income from continuing operations (excluding special items) rose by 56% to $285 million compared to $183 million[26] - Net income attributable to Baxter stockholders increased to $126 million from $37 million[26] - Adjusted diluted EPS from continuing operations (excluding special items) increased by 53% to $0.55 from $0.36[26] - The company reported a significant increase in income from discontinued operations, rising 88% to $62 million from $33 million[26] - The effective tax rate for income tax expense in 2025 was 2.4%[28] - The company reported a significant increase in intangible asset amortization costs in 2025, totaling $104 million[28] Research and Development - Research and development expenses increased by 17% to $140 million, representing 5.3% of net sales[26] Strategic Initiatives - Baxter introduced the Voalte Linq device, its first voice-activated technology, enhancing communication efficiency among care teams[10] - The company launched Hemopatch Sealing Hemostat with room temperature storage in Europe, optimizing accessibility for surgeons[10] - The company is focusing on optimizing its organization and cost structure to better align its manufacturing and supply chain with commercial activities[29] - The company incurred restructuring and business optimization costs in 2025 primarily related to initiatives following the sale of its former Kidney Care segment[29] - Incremental costs for compliance with EU medical device regulations were recognized, which the company views as a significant one-time regulatory change[31] - The company incurred charges related to Hurricane Helene amounting to $98 million in Q1 2025[35]