Baxter International Inc. Q1 FY2026 earnings call

1. Stabilizing the business: Made progress in clearing backorders at a manufacturing facility. 2. Strengthening the balance sheet: Positive free cash flow generation in Q1, targeting net leverage of ~3x by end 2026. 3. Driving continuous improvement: Rolled out Baxter Growth and Performance System (GPS), de-layered management teams, set rigorous KPI measures, deployed AI tools for efficiency gains within internal quality workflows.

Medical Products and Therapy (MPT) segment: Sales $1.3 billion, declined 2% organic; ITT division sales $981 million, declined 5% organic due to Novum LVP issues and prior year distributor build; Advanced Surgery sales $304 million, grew 10% organic. Healthcare Systems and Technology (HST) segment: Sales $705 million, declined 2% organic; Care and Connectivity Solutions (CCS) division sales $435 million, flat organic; Frontline Care sales $270 million, declined 4% organic. Pharmaceutical segment: Sales $621 million, increased 1% organic; Injectables and Anesthesia division sales $301 million, declined 13% organic due to supply constraints and soft demand; Drug Compounding grew 20% organic. Other sales $14 million, MSA revenue from Bantam $76 million.

1. Full-year 2026 total sales growth expected flat to 1% reported, flat to ~1% organic excluding foreign exchange and MSA. 2. MPT: Full-year organic sales flat to slightly up, guidance assumes Novum ship and installation hold remains. 3. HST: Full-year organic sales growth low single digits. 4. Pharmaceuticals: Full-year organic sales approximately flat, offset by drug compounding growth. 5. Tariffs: Full-year impact net of mitigating actions ~$80 million. 6. TSA income and other reimbursements: $130 - $140 million. 7. Adjusted operating margin: 13 - 14%. 8. Non-operating expenses: $280 - $300 million. 9. Diluted share count: Average ~518 million. 10. Full-year adjusted earnings: $1.85 - $2.05 per diluted share. 11. Second half 2026 expected improvement in organic sales growth, operating margin, and adjusted earnings with factors like volume improvement, cost structure actions, and inventory roll through.

1. Potential impact from Novum LVP related returns. 2. Higher manufacturing costs including absorption, tariffs. 3. Global macroeconomic environment impacts such as oil prices, conflict in Middle East. 4. Supply chain challenges. 5. Regulatory matters related to infusion pump platform.

Q: Robbie Marcus of JPM asked about first quarter translation into reiterated guide, conservatism, pull forward, and Q2 expectations.

A: Kevin Moran said Q1 in line with expectations, transparent about Novum customer response risk, Q2 expected to have sequential improvement but still pressured year over year.

Q: Robbie Marcus followed up on 2027, key new product launches, and EPS growth.

A: Andrew Heider talked about rolling out TSAs, modest growth in 2027, new products like Connex360 and Dynamo, and innovation as key growth driver.

Q: David Roman of Goldman Sachs asked about MPT beyond Novum IV conservation and signposts for second half margin ramp.

A: Andrew Heider talked about pump portfolio, strong customer interest, and HST growth in back half.

Q: Larry Beigelson with Wells Fargo asked about inflation impact on operating margin guidance.

A: Andrew Heider talked about oil impact mitigation, proactive supply chain management.

Q: Fajay Kumar of Evercore ISI asked about Q1 performance trends and HST order performance.

A: Kevin Moran talked about Q1 in line with expectations, HST growth weighted to back half.

Q: Matt Nixick of Barclays asked about macro factors and innovation.

A: Andrew Heider talked about proactive risk mitigation for chips, and innovation as baseheads with early successes.

Q: Joanne Wunsch with Citi asked about injectables and anesthesia recovery and CFO search.

A: Andrew Heider talked about pharma recovery in back half and CFO search underway.

Q: Jason Bedford of Raymond James asked about Novum fix and returns.

A: Andrew Heider talked about progress on Novum fix, guidance assuming ship and hold remains, and returns not material in Q1.