Becton, Dickinson and Company Q4 FY2025 earnings call

• Q4 and full-year performance was in line with preliminary results announced earlier. - BD Excellence operating model drove strong P&L leverage, with adjusted gross margin up 140 basis points and adjusted operating margin up 80 basis points. - Initiatives underway include rearchitecting the operating model for commercial excellence, expanding the sales force in targeted high-growth markets with an incremental $30 million investment, and expanding Mike Feld's role to Chief Revenue Officer. - Moved nearly $50 million of corporate costs into R&D and businesses to fuel innovation in areas like tissue regeneration and PureWick adjacent markets. - Initiated a $200 million 2-year cost-out program.

Q4 revenue was $5.9 billion, increasing 7% with 3.9% organic growth. Full year revenue was $21.8 billion, up 7.7% with 2.9% organic growth. New BD achieved 4.9% organic growth in Q4 and 3.9% organic growth for the full year. Pharm Systems had Biologics growth driven by GLP-1s but was offset by lower vaccine demand. Diagnostic Solutions in Life Sciences returned to positive growth, while Biosciences had subdued research spending but saw growth in the U.S. and EMEA led by the FACSDiscover platform. Combined, BDB and DS increased low single digits on a reported basis and were flat on a currency-neutral basis excluding discontinued platforms.

• Fiscal '26 guidance includes low single-digit revenue growth with headwinds: over 100 basis points from Alaris capital installations (last year of remediation), mid-teens decline in China, and ~25% decline in vaccine demand in Pharm Systems. - Excluding these headwinds, the remaining 90% of the portfolio is expected to drive mid-single-digit growth. - Full-year adjusted diluted EPS guidance range is $14.75 to $15.05. - Q1 EPS guidance range is $2.75 to $2.85, inclusive of tariffs and a tax rate headwind. - Post-Waters transaction, New BD is expected to have similar revenue growth and margin profiles to WholeCo BD, with pro forma adjusted EPS growth over 200 basis points higher than WholeCo.

• Transitory market dynamics such as slowdown in vaccine demand and continued impact of China's volume-based procurement policies. - Alaris remediation creating a headwind to growth in fiscal '26. - Macro environment uncertainties that could impact performance if not improved.

Q: Travis Steed asked about the guidance for New BD and confidence in delivering it.

A: Thomas Polen responded that they are taking a prudent approach, incorporating macro dynamics like vaccines, Alaris, and China, and are confident in delivering the guidance with continued margin expansion from BD Excellence.

Q: Patrick Wood inquired about capital allocation and buybacks.

A: Christopher DelOrefice and Thomas Polen discussed continuing share buybacks based on intrinsic value, with $250 million buyback planned and proceeds from the Waters transaction to be used for buybacks and debt repayment, expecting higher EPS growth for New BD post-transaction.

Q: Larry Biegelsen asked about China's performance.

A: Thomas Polen said China was down high single digits in Q4 '25, with a mid-teens decline expected in fiscal '26, and VoBP coverage expected to reach 80% by end of '26.

Q: Robbie Marcus asked about Alaris.

A: Christopher DelOrefice and Thomas Polen explained that Alaris was a headwind in '26, with a favorable comp in '25, and longer-term, the fleet replacement cycle will become a tailwind.

Q: Frederick Wise asked about initiatives and their impact.

A: Thomas Polen expanded on the operating model change, sales team focus, and Mike Feld's role, stating these initiatives will start showing benefits this year and have longer-term implications for New BD's growth and margins.