Baxter International Inc. Q4 FY2025 earnings call

• Fourth quarter 2025 global sales from continuing operations were $3,000,000,000, up 8% reported and 3% operationally. Adjusted EPS was $0.44.
• Results differed from prior expectations: modest net impact from Novum IQ large volume pump customer returns, margin pressure from unfavorable mix and nonrecurring items (inventory adjustments), and higher tax rate.
• Priorities: stabilize business (new operating model to simplify organization, delayer leadership, embed functional roles), strengthen balance sheet (focus on cash generation and leverage), drive continuous improvement (launched Baxter GPS for continuous improvement).
• Segment highlights: Advanced Surgery grew 11%, HealthCare Systems and Technologies had consistent performance with Connect 360 Monitor launch, and Dynamo series stretcher upcoming.

Medical Products and Therapies (MPT) segment had sales of $1,400,000,000 in the fourth quarter, increasing 4%. Within MPT, Infusion Therapies and Technologies (ITT) division sales were $1,100,000,000, growing 1%, with IV Solutions benefiting from favorable year-over-year comparison but offset by lower infusion pump sales due to Novum LVP issues. Advanced Surgery sales totaled $328,000,000, growing 11%. MPT's adjusted operating margin was 15.4%, down 110 basis points. HealthCare Systems and Technologies (HST) segment had sales of $827,000,000, increasing 4%. Care and Connectivity Solutions (CCS) division sales were $537,000,000, growing 4% globally, and Front Line Care sales were $290,000,000, increasing 3%. HST's adjusted operating margin was 15.2%, down 330 basis points. Pharmaceuticals segment had sales of $668,000,000, increasing 2%. Injectables and Anesthesia division sales declined 9%, while Drug Compounding grew 18%. Pharmaceuticals' adjusted operating margin was 5.8%. Other sales were $7,000,000, with MSA revenue from Vantiv totaling $84,000,000.

• Full-year 2026 sales growth expected to be flat to 1% reported, excluding foreign exchange and MSA revenues, organic sales flat.
• MPT: organic sales flat to slightly up; HST: organic low single digits growth; Pharmaceuticals: organic flat.
• Tariffs impact expected $130,000,000 to $140,000,000. Adjusted operating margin from continuing operations expected 13% to 14%. Nonoperating expenses $280,000,000 to $300,000,000. Tax rate 18.5% to 19.5%. Adjusted earnings per share $1.85 to $2.05. First quarter expected most challenging, improving later; ITT has unfavorable comp in Q1, HST new products in second half, Pharmaceuticals headwinds in first half, improving in second half.

• Volatility in results due to customer responses to Novum pump issues.
• Regulatory matters and operational execution challenges.
• Macroeconomic environment impact (tariffs, etc.).
• Inventory adjustments and operational execution issues affecting margins.

Q: Strategic question on competitive dynamic and forecasting.

A: Joel and Robert Justin Marcus discuss accountability, Baxter GPS for better forecasting, and streamlining organization to execute better.

Q: Follow-up on TSA runoff and G&A costs.

A: Robert Justin Marcus talks about cost takeout progress and TSA tail-off, expecting to eliminate stranded costs by 2027.

Q: Question on Q1 guidance and Novum communication.

A: Robert Justin Marcus discusses Q1 challenges like seasonality, Novum customer wait-and-see, and absorption headwinds; Joel Grade talks about communicating with customers and progress on Novum solution.

Q: Question on operating model impact on FCF.

A: Joel Grade and Robert Justin Marcus discuss new operating model benefits for accountability and FCF improvement, expecting FCF to improve in 2026.

Q: Question on Pharma margins and Compounding business.

A: Joel Grade and Robert Justin Marcus talk about Pharma margin challenges, actions taken to improve, and Compounding's cash cycle benefit.

Q: Question on portfolio opportunities and innovation.

A: Joel Grade discusses portfolio strengths, innovation importance, capital allocation, and focus on deleveraging and reinvestment in R&D.

Q: Question on guidance philosophy.

A: Robert Justin Marcus and Joel Grade talk about prudent guidance based on current info, transparency on challenges, and reliance on Baxter GPS for better predictability.