BECTON DICKINSON & CO Q2 FY2025 earnings call

• Q2 revenue was below expectations, with growth at 0.9% organic. Adjusted EPS exceeded expectations, with adjusted gross margin at 54.9% (+190 basis points year-over-year).
• BD Excellence had momentum with four consecutive quarters of strong gross margin expansion and nearly tripling the number of Kaizens year-over-year.
• The separation of the Biosciences and Diagnostics business is advancing on schedule, with details to be shared this summer.
• Strategic initiatives: BD Interventional launched Phasix ST Umbilical; BD Medical advanced connected care with new 510(k) clearances; Life Sciences was on track to launch the BD FACSDiscover A8.

Revenue in Q2 grew 6% or 0.9% organic. Life Sciences was the main driver of lower-than-expected organic growth, affected by lower biosciences instrument demand and a slower recovery in the back tech blood culture business. MedTech organic growth was 1.9%. Alaris performance remained strong, PureWick achieved double-digit growth, and Phasix bio-resorbable mesh saw double-digit growth. Biosciences reagent side showed continued growth. Diagnostics had softness in the back tech blood culture but returned to historical inventory levels.

• Revised full-year revenue guidance to 3%-3.5% organic growth. Fiscal 2025 total revenues expected in the range of $21.8 billion to $21.9 billion.
• Adjusted EPS expected in the range of $14.06 to $14.34, reflecting ~8% growth midpoint, including ~2% tariff impact.
• Q3 adjusted gross margin expected to be flat year-over-year, with Q3 adjusted operating margin expected to be ~24.5%.

• International trade policies, trade restrictions, and tariffs are rapidly evolving, with no assurance on their impact to guidance and results. Tariff commentary is based on policies as of April 30th and doesn't include delayed/threatened tariffs, which could change the landscape.

Q: Larry Biegelsen asks about whether the $0.25 tariff impact is net or gross and fiscal 2026 guidance.

A: Chris DelOrefice states it's a net number after significant mitigation efforts, the situation is fluid, and one should annualize with ongoing mitigation.

Q: Larry Biegelsen follows up on second half organic growth improvement.

A: Chris DelOrefice explains Q3 expected to be ~3% and Q4 ~5% due to factors like APM cycling, Pharm Systems growth, BDI's high single-digits, and BDB's FACSDiscover A8 launch.

Q: Robbie Marcus inquires about organic sales growth softness.

A: Chris DelOrefice explains factors like BDB challenges, China volume-based procurement, and DS back tech inventory/utilization issues.

Q: Matt Taylor asks about tariff mitigation levers.

A: Tom Polen talks about inventory positioning, global sourcing, e.g., Veritor inventory and vacutainer/flush sourcing shifts.

Q: Travis Steed asks about guidance and execution.

A: Tom Polen and Chris DelOrefice discuss market dynamics in Life Sciences, China, and research spending impacts.

Q: Patrick Wood asks about BD Excellence and employee engagement.

A: Tom Polen and Mike Feld talk about Kaizens, employee empowerment, and expanding BD Excellence to R&D/commercial.

Q: David Roman asks about market intelligence.

A: Tom Polen talks about central strategy group, outside perspectives, and monitoring research spending/pharma dynamics.

Q: Matt Miksic asks about BD Excellence and AI.

A: Tom Polen and Chris DelOrefice discuss AI use in expense reviews, manufacturing scheduling, inventory management, and AI incubator in R&D.