Baxter International Inc. Q2 FY2025 earnings call

• Brent Shafer noted second quarter performance for continuing operations met guidance, with sales growing 4% reported and 1% operationally, and adjusted EPS $0.59 up 28%. The sale of Vantive was complete, focusing on operational effectiveness. - Heather Knight discussed segment sales, the Novum LVP voluntary shipment pause for quality improvement, and the impact of fluid conservation on the ITT division. - Joel Grade detailed P&L aspects, adjusted margins, TSA income, and provided updated guidance including lower operational growth expectations, reduced tariff impact, and a revised range for TSA income.

Medical Products & Therapies (MPT): Sales were $1.3 billion, increasing 1% in the quarter. Impacted by IV fluid conservation but offset by infusion systems from the Novum LVP platform. A voluntary temporary pause on Novum LVP shipments was announced due to quality feedback. Advanced Surgery: Sales totaled $296 million, growing 5% globally driven by strong demand for hemostats and sealants. Healthcare Systems & Technologies (HST): Sales were $767 million, up 2%. The Care & Connectivity Solutions (CCS) division saw a 4% increase to $474 million, with international sales up 7%. Pharmaceuticals: Sales totaled $612 million, up 1%. Injectables & Anesthesia declined 4% due to soft demand and hurricane impacts, while Drug Compounding grew 7%.

• Full year sales growth is expected to be 6-7% on a reported basis and 3-4% operationally (down from prior 4-5%). Third quarter sales growth is anticipated to be ~6-7% reported and 3-4% operationally. - Adjusted earnings per share for the full year are revised to $2.42-$2.52 from $2.47-$2.55. - TSA income is expected to range between $170 million to $180 million. Tariff impact net is estimated at ~$40 million in 2025, a reduction from prior estimates.

• Voluntary temporary pause on Novum LVP shipments with potential longer-term impact if not resolved quickly. - Fluid conservation not improving as expected affecting sales volumes. - Macro economic environment and regulatory matters posing risks to operational results.

Q: About the impact of Novum on sales and margins, and comfort in guidance if the pause is longer.

A: Heather and Joel discuss the temporary nature of the Novum pause, focus on customer feedback, and how the guidance accounts for potential longer-term impacts.

Q: How business trends evolved through the quarter and exit rate.

A: Heather explains IV Solutions played out as expected, with injectables in pharma being a surprise factor.

Q: TSA income and stranded costs timeline.

A: Joel explains TSA timeline is ~24 months from deal close, and stranded cost mitigation is on track.

Q: Revenue guide reduction and Spectrum impact.

A: Joel and Heather discuss guidance assumptions, with Spectrum fill-in and fluid conservation affecting the guide.

Q: Novum severity and fluid conservation.

A: Heather addresses fluid conservation assumptions and the temporary nature of Novum issues.

Q: Gross margin and Andrew Hider's appointment.

A: Joel discusses gross margin drivers, and Brent talks about Andrew's experience and quick ramp to leading Baxter.

Q: Fluid conservation assumptions and pharma lumpy demand.

A: Heather talks about IV conservation assumptions and pharma order trends being baked into guidance.