Baxter International Inc. Q3 FY2025 earnings call

• Stabilizing the Business: Focus on areas needing attention, including the pause on Novum IQ Large Volume pump deliveries/installations, working to resolve flow rate issues, and supporting current users while offering Spectrum IQ LVP as an alternative.
• Strengthening Balance Sheet: Reducing the quarterly dividend to $0.01 per share starting January 2026 to free up cash for deleveraging.
• Driving Enterprise Efficiency: Rolled out Baxter GPS, a data-driven system aimed at driving continuous improvement and efficiency.

Medical Products & Therapies (MPT): Sales totaled $1.3 billion, declining 1% in the quarter. The Infusion Therapies & Technologies (ITT) division saw sales of $1 billion, down 4% due to infusion pump issues and ongoing softness in U.S. hospital IV solutions. Advanced Surgery sales were $306 million, up 11%. MPT's adjusted operating margin was 20.5%, an increase of 50 basis points. Healthcare Systems & Technologies (HST): Sales were $773 million, up 2%. Care and Connectivity Solutions (CCS) division sales were $473 million, up 3%, with U.S. capital orders increasing 30%. Front Line Care sales were $300 million, up 1%. HST's adjusted operating margin was 13.5%, a decrease of 460 basis points. Pharmaceuticals: Sales were $632 million, up 7%. Injectables and Anesthesia division sales were $333 million, up 3%, while Drug Compounding grew 11%. Pharmaceuticals' adjusted operating margin was 8.9%, a decrease of 100 basis points. Other Sales: $16 million, with MSA revenue from Vantive at $85 million.

Full Year 2025: Reported sales growth expected to be 4%-5%, with operational sales growth of 1%-2%. MPT is expected to be flat to 1%, HST to grow 3%-4%, and Pharmaceuticals to increase ~2%. Adjusted operating margin is projected to be between 14.5% and 15%, nonoperating expenses are expected to total between $210 million and $220 million, the tax rate is anticipated to be ~15%, and adjusted earnings per share are revised to $2.35 to $2.40. Fourth Quarter 2025: Reported sales growth is expected to be approximately 2% on a reported basis and decline ~2% operationally, with adjusted earnings per share of $0.52 to $0.57.

• Novum IQ Large Volume pump issues: Ongoing hold on deliveries/installations, impacting sales and causing some customers to evaluate alternative solutions.
• IV solutions demand: Continued post-Hurricane Helene fluid conservation leading to lower demand recovery than expected.
• Regulatory and macroeconomic factors: Uncertainties around tariffs, potential impact on results, and broader macroeconomic environment affecting capital spending.

Q: Robert Marcus from JPMorgan asked about Andrew's vision for Baxter and 2026 growth.

A: Andrew Hider discussed focus on stabilizing, balance sheet, enterprise efficiency, and anticipation of growth but no specific 2026 guidance.

Q: David Roman of Goldman Sachs asked about Baxter's portfolio and future acquisitions.

A: Andrew Hider mentioned focus on deleveraging and innovation first, with M&A to be considered in the future.

Q: Travis Steed of BofA Securities asked about Novum's delay and free cash flow.

A: Andrew Hider discussed ongoing work to resolve Novum issues and Joel Grade talked about free cash flow expectations.

Q: Larry Biegelsen of Wells Fargo asked about Andrew's experience and portfolio focus.

A: Andrew Hider discussed his continuous improvement experience and belief in Baxter's portfolio.

Q: Joanne Wuensch of Citi asked about IV fluid conservation and hospital CapEx.

A: Andrew Hider discussed fluid conservation recovery timeline and ongoing hospital CapEx robustness.

Q: Vijay Kumar of Evercore asked about pharma softness and Novum updates.

A: Joel Grade discussed pharma softness reasons and Joel Grade provided updates on Novum field actions.

Q: Matthew Taylor of Jefferies asked about near-term actions and possibilities.

A: Andrew Hider talked about GPS system and future performance expectations.

Q: Matthew Miksic of Barclays asked about reconciling surgical volumes and IV solutions demand.

A: Joel Grade reinforced IV solutions recovery confidence and focus on customer utilization.