Baxter International Inc. · NYSE:BAX
Baxter International — Q2 2023 Earnings Presentation
53 slides from Baxter International's earnings presentation, Jul 27, 2023
Slide 1: Second-Quarter 2023 Earnings
S E C O N D - Q UA R T E R 2023 EARNINGS Baxter International Inc. July 27, 2023 C e r t a i n i n f o r m a t i o n o n s l i d e s 2 4 , 2 7 , 2 8 , 3 0 , 3 1 , a n d 3 9 h a s b e e n up d a t e d o n J ul y 2 8 , 2 0 2 3 . A d d i t i o n a l l y , c e r t a i n i n f o r m a t i o n o n 1 s l i
Slide 2: Forward-Looking Statements
FO RWA R D - LO O K I N G S TAT E M E N T S This presentation includes forward-looking statements concerning the company’s financial results (including the outlook for third quarter and full-year 2023) and business development and regulatory activities and the company’s ongoing strategic actions. Th
Slide 3: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES To supplement Baxter’s consolidated financial statements presented on a U.S. GAAP basis, the company discloses certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with generally accepted accounting principles in the United S
Slide 4: Table of Contents
TA B L E O F C O N T E N T S Performance Summary 5 Financial Results 13 2023 Outlook 21 Non-GAAP Reconciliations 25 4
Slide 5: Performance Summary
P E R FO R M A N C E S U M M A RY Second-Quarter 2023 Earnings July 27, 2023 5
Slide 6: Executing on Our Strategy for Value Creation: Recent Highlights
E X E C U T I N G O N O U R S T R AT E GY FO R VA LU E C R E AT I O N RECENT HIGHLIGHTS Q2 2023 Results1 Q2 2023 constant currency sales increased 4% both for continuing operations and in the aggregate (including discontinued operations) driven by overall positive demand for Baxter products reflec
Slide 7: Performance Highlights
P E R FO R M A N C E H I G H L I G H T S C O N T I N U I N G O P E R AT I O N S Second-Quarter 2023 First-Half 2023 $3.7B +3% Reported +4% Constant Currency1 $7.2B +1% Reported +3% Constant Currency1 Sales Sales Key Metrics GAAP Adjusted2 Key Metrics GAAP Adjusted2 Gross Margin 30.0% 40.4% Gross Mar
Slide 8: Key Financial Metrics: Second-Quarter Snapshot
KEY FINANCIAL METRICS S E C O N D - Q U A R T E R 2 0 2 3 S N A P S H O T ( C O N T I N U I N G O P E R AT I O N S ) 1 Global Reported Sales Adjusted Operating Margin Adjusted Diluted EPS2 $3.6B $3.7B $0.73 14.7% 13.2% $0.55 +4% Constant Growth 3 (150 bps) (25%) Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 20
Slide 9: Key Financial Metrics: First-Half Snapshot
KEY FINANCIAL METRICS F I R S T - H A L F 2 0 2 3 S N A P S H O T ( C O N T I N U I N G O P E R AT I O N S ) 1 Global Reported Sales Adjusted Operating Margin Adjusted Diluted EPS2 $7.2 B $7.2 B 15.6% $1.53 12.9% $1.04 +3% Constant Growth 3 (270 bps) (32%) H1 2022 H1 2023 H1 2022 H1 2023 H1 2022 H1
Slide 10: Second-Quarter Performance (Continuing Operations)
S E C O N D - Q UA R T E R 2 0 2 3 P E R FO R M A N C E 1 ( C O N T I N U I N G O P E R AT I O N S ) Metric Q2 2023 Q2 2023 Guidance Actual Sales Growth N/A +3% Reported Sales Growth N/A +4% Constant Currency GAAP Diluted EPS N/A ($0.39) Growth vs. Prior-Year Period (208%) Adjusted Diluted EPS N/A $
Slide 11: Second-Quarter Performance (Including Discontinued Operations)
S E C O N D - Q UA R T E R 2 0 2 3 P E R FO R M A N C E 1 ( I N C L U D I N G D I S C O N T I N U E D O P E R AT I O N S ) Metric Q2 2023 Q2 2023 Guidance Actual Sales Growth 1% - 2% +3% Reported Sales Growth 2% - 3% +4% Constant Currency GAAP Diluted EPS $0.18 - $0.20 ($0.28) Growth vs. Prior-Year
Slide 12: Second-Quarter Business Drivers
S E C O N D - Q UA R T E R 2 0 2 3 B U S I N E S S D R I V E R S 1 Product Category Sales2 CC Growth3 Quarterly Performance Drivers Performance driven by solid growth in U.S. PD business partially offset by lower U.S. In-Center HD Renal Care $936M +2% sales following the exit of a distribution agree
Slide 13: Financial Results
F I N A N C I A L R E S U LT S Second-Quarter 2023 Earnings July 27, 2023 13
Slide 14: Second-Quarter Sales by Product Category
S E C O N D - Q UA R T E R 2 0 2 3 S A L E S BY P RO D U C T C AT E G O RY 1 Q2 2023 Revenue Total Growth2 $ In Millions U.S. International Total Reported Constant Renal Care $234 $702 $936 +1% +2% Medication Delivery $487 $274 $761 +7% +7% Pharmaceuticals $182 $368 $550 +4% +6% Clinical Nutrition $
Slide 15: First-Half Sales by Product Category
F I R S T- H A L F 2 0 2 3 S A L E S BY P RO D U C T C AT E G O RY 1 H1 2023 Revenue Total Growth2 $ In Millions U.S. International Total Reported Constant Renal Care $466 $1,362 $1,828 +0% +3% Medication Delivery $923 $525 $1,448 +2% +4% Pharmaceuticals $355 $719 $1,074 +2% +6% Clinical Nutrition $
Slide 16: Second-Quarter Sales by Operating Segment
S E C O N D - Q UA R T E R 2 0 2 3 S A L E S BY O P E R AT I N G S E G M E N T 1 Q2 2023 Revenue Total Growth2 $ In Millions Reported Reported Constant Americas (North and South America) $1,564 +5% +5% EMEA (Europe, Middle East and Africa) $762 +3% +3% APAC (Asia Pacific) $638 (1%) +4% Hillrom $743
Slide 17: First-Half Sales by Operating Segment
F I R S T- H A L F 2 0 2 3 S A L E S BY O P E R AT I N G S E G M E N T 1 H1 2023 Revenue Total Growth2 $ In Millions Reported Reported Constant Americas (North and South America) $3,030 +2% +3% EMEA (Europe, Middle East and Africa) $1,476 +3% +6% APAC (Asia Pacific) $1,240 (3%) +3% Hillrom $1,474 +0
Slide 18: Second-Quarter Adjusted Financial Results
S E C O N D - Q UA R T E R 2 0 2 3 A DJ U S T E D F I N A N C I A L R E S U LT S 1 ( C O N T I N U I N G O P E R AT I O N S ) Q2 2022 Q2 2023 Change Adjusted Gross Margin 42.0% 40.4% (160 bps) Adjusted SG&A Expense 23.2% 22.8% (40 bps) (% of Sales) Adjusted R&D Expense 4.1% 4.5% +40 bps (% of Sales)
Slide 19: First-Half Adjusted Financial Results
F I R S T- H A L F 2 0 2 3 A DJ U S T E D F I N A N C I A L R E S U LT S 1 ( C O N T I N U I N G O P E R AT I O N S ) H1 2022 H1 2023 Change Adjusted Gross Margin 43.3% 40.6% (270 bps) Adjusted SG&A Expense 23.5% 23.3% (20 bps) (% of Sales) Adjusted R&D Expense 4.1% 4.5% +40 bps (% of Sales) Adjuste
Slide 20: Executing Portfolio Management Actions to Accelerate Disciplined Capital Allocation Strategy
E X E C U T I N G P O R T FO L I O M A N AG E M E N T AC T I O N S TO AC C E L E R AT E D I S C I P L I N E D C A P I TA L A L LO C AT I O N S T R AT E GY PORTFOLIO SHARE MANAGEMENT DEBT REPAYMENT DIVIDENDS REPURCHASES Entered into a definitive Committed to deleveraging with Paid quarterly dividend
Slide 21: 2023 Outlook
2 0 2 3 O U T LO O K Second-Quarter 2023 Earnings July 27, 2023 21
Slide 22: Third-Quarter Guidance
T H I R D - Q UA R T E R 2 0 2 3 G U I DA N C E 1 Q3 2023 Guidance Sales Growth ~2% Reported (Continuing Operations) Foreign Exchange ~(100) bps Sales Growth ~1% Constant Currency (Continuing Operations) Adjusted Diluted EPS $0.65 - $0.67 Continuing Operations Adjusted Diluted EPS ~$0.13 Discontinue
Slide 23: Full-Year Guidance (BPS Divestiture Does Not Close in 2023)
F U L L -Y E A R 2 0 2 3 G U I DA N C E 1 ASSUMING BPS DIVESTITURE DOES NOT CLOSE IN 2023 FY 2023 Guidance Sales Growth 1% - 2% Reported (Continuing Operations) Foreign Exchange ~50 bps Sales Growth ~2% Constant Currency (Continuing Operations) Adjusted Diluted EPS $2.49 - $2.57 Continuing Operation
Slide 24: Full-Year Guidance (BPS Divestiture Closes by September 30, 2023)
F U L L -Y E A R 2 0 2 3 G U I DA N C E 1 ASSUMING BPS DIVESTITURE CLOSES BY SEPTEMBER 30, 2023 FY 2023 Guidance* Sales Growth 1% - 2% Reported (Continuing Operations) Foreign Exchange ~50 bps Sales Growth ~2% Constant Currency (Continuing Operations) Adjusted Diluted EPS $2.54 - $2.62 Continuing Op
Slide 25: Non-GAAP Reconciliations
NON-GAAP R E C O N C I L I AT I O N S Second-Quarter 2023 Earnings July 27, 2023 25
Slide 26: Non-GAAP Reconciliations as of July 27, 2023
NON-GAAP RECONCILIATIONS AS OF JULY 27, 2023 Non-GAAP Reconciliations: As part of its Q2 2023 earnings announcement on July 27, 2023, Baxter presented its financial results for the second quarter of 2023. Baxter also presented guidance for the second quarter and full year of 2023. In these presentat
Slide 27: Reconciliation: Three Months Ended June 30, 2023
DESCRIPTION OF ADJUSTMENTS AND RECONCILIATIONS OF U.S. GAAP TO NON-GAAP MEASURES Three Months Ended June 30, 2023 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended June 30, 2023 included special items which impacted the U.S. GA
Slide 28: Reconciliation: Three Months Ended June 30, 2022
DESCRIPTION OF ADJUSTMENTS AND RECONCILIATIONS OF U.S. GAAP TO NON-GAAP MEASURES Three Months Ended June 30, 2022 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended June 30, 2022 included special items which impacted the U.S. GA
Slide 29: Reconciliation: Three Months Ended June 30, 2023 and 2022
DESCRIPTION OF ADJUSTMENTS AND RECONCILIATIONS OF U.S. GAAP TO NON-GAAP MEASURES Three Months Ended June 30, 2023 and 2022 (unaudited) For more information on the company's use of non-GAAP financial measures in this presentation, please see the company's Current Report on Form 8-K filed with the Sec
Slide 30: Reconciliation: Six Months Ended June 30, 2023
DESCRIPTIONS OF ADJUSTMENTS AND RECONCILIATIONS OF U.S. GAAP TO NON-GAAP MEASURES Six Months Ended June 30, 2023 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the six months ended June 30, 2023 included special items which impacted the U.S. GAAP
Slide 31: Reconciliation: Six Months Ended June 30, 2022
DESCRIPTION OF ADJUSTMENTS AND RECONCILIATIONS OF U.S. GAAP TO NON-GAAP MEASURES Six Months Ended June 30, 2022 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the six months ended June 30, 2022 included special items which impacted the U.S. GAAP m
Slide 32: Reconciliation: Six Months Ended June 30, 2023 and 2022
DESCRIPTION OF ADJUSTMENTS AND RECONCILIATIONS OF U.S. GAAP TO NON-GAAP MEASURES Six Months Ended June 30, 2023 and 2022 (unaudited) For more information on the company's use of non-GAAP financial measures in this presentation, please see the company's Current Report on Form 8-K filed with the Secur
Slide 33: Operating Cash Flow to Free Cash Flow
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Operating Cash Flow to Free Cash Flow (unaudited) (in millions) Free cash flow is a non-GAAP measure. For more information on the company's use of non-GAAP financial measures in this presentation, please see the company's Current Report on Form 8-K filed
Slide 34: Constant Currency Sales Growth by Product Category, Three Months
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Change in Net Sales Growth As Reported to Constant Currency Sales Growth From The Three Months Ended June 30, 2022 to The Three Months Ended June 30, 2023 (unaudited) Sales By Product Category: *Totals may not add across due to rounding Change in constant
Slide 35: Constant Currency Sales Growth by Operating Segment, Three Months
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Change in Net Sales Growth As Reported to Constant Currency Sales Growth From The Three Months Ended June 30, 2022 to The Three Months Ended June 30, 2023 (unaudited) Sales By Operating Segment: *Totals may not add across due to rounding Change in constan
Slide 36: Constant Currency Sales Growth by Product Category, Six Months
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Change in Net Sales Growth As Reported to Constant Currency Sales Growth From The Six Months Ended June 30, 2022 to The Six Months Ended June 30, 2023 (unaudited) Sales By Product Category: *Totals may not add across due to rounding Change in constant cur
Slide 37: Constant Currency Sales Growth by Operating Segment, Six Months
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Change in Net Sales Growth As Reported to Constant Currency Sales Growth From The Six Months Ended June 30, 2022 to The Six Months Ended June 30, 2023 (unaudited) Sales By Operating Segment: *Totals may not add across due to rounding Change in constant cu
Slide 38: Projected Sales Growth and Adjusted Operating Margin
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Projected Third Quarter and Full Year 2023 Continuing Operations U.S. GAAP Sales Growth to Projected Constant Currency Sales Growth and Projected Full Year 2023 Projected Adjusted Operating Margin (unaudited) The Company’s current expectation is that the
Slide 39: Projected Adjusted Tax Rate and Adjusted Earnings Per Share
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Projected Full Year 2023 Projected Adjusted Tax Rate, and Projected Third Quarter and Full Year 2023 Projected Adjusted Earnings Per Share (unaudited) The Company’s current expectation is that the pending sale of BPS is likely to close towards the end of
Slide 40: Supplemental Historical Financial Statements
S E C O N D - Q UA R T E R 2023 EARNINGS S U P P L E M E N TA L HISTORICAL FINANCIAL S TAT E M E N T S 40
Slide 41: Summary of Discontinued Operation Adjustments on Net Sales
BAXTER INTERNATIONAL INC. Summary of Discontinued Operation Adjustments on Net Sales (unaudited, in millions) Quarterly Net Sales Full Year Net Sales Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 2021 2020 Net Sales As originally reported $ 3,649 $ 3,887 $ 3,773 $ 3,746 $ 3,707 $ 12,784 $ 11,673 Discontin
Slide 42: Impact of Discontinued Operations on Prior Period Results
BAXTER INTERNATIONAL INC. Impact of Discontinued Operations on Prior Period U.S. GAAP and Adjusted Results (unaudited, in millions) Quarterly Results Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Gross Margin U.S. GAAP as originally reported $ 1,347 $ 1,463 $ 1,133 $ 1,453 $ 1,348 Discontinued Operations
Slide 43: Impact of Discontinued Operations on Prior Period Results, continued
BAXTER INTERNATIONAL INC. Impact of Discontinued Operations on Prior Period U.S. GAAP and Adjusted Results, continued (unaudited, in millions) Quarterly Results Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Other Operating (Income) Expense, net U.S. GAAP as originally reported $ (13) $ 16 $ 48 $ (11) $ (1
Slide 44: Impact of Discontinued Operations on Prior Period Results, continued
BAXTER INTERNATIONAL INC. Impact of Discontinued Operations on Prior Period U.S. GAAP and Adjusted Results, continued (unaudited, in millions) Quarterly Results Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Income Tax Expense (Benefit) U.S. GAAP as originally reported $ 25 $ 39 $ (32) $ 40 $ 21 Discontinu
Slide 45: Reconciliation: Three Months Ended March 31, 2023
BAXTER INTERNATIONAL INC. Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures (unaudited, in millions) The company’s U.S. GAAP results for the three months ended March 31, 2023 included special items which impacted the U.S. GAAP measures as follows: Income (Loss) Other Fr
Slide 46: Footnotes: 2023 Special Items
4 The company's results of continuing operations in 2023 included costs of $9 million ($9 million, or $0.02 per diluted share, on an after-tax basis) of divestiture-related costs, primarily reflecting costs of external advisors supporting its activities to prepare for the proposed spinoff of its Ren
Slide 47: Reconciliation: Three Months Ended December 31, 2022
BAXTER INTERNATIONAL INC. Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures (unaudited, in millions) The company’s U.S. GAAP results for the three months ended December 31, 2022 included special items which impacted the U.S. GAAP measures as follows: Income (Loss) Other
Slide 48: Footnotes: 2022 Special Items
4 The company's results in 2022 included costs of $7 million ($4 million, or $0.01 per diluted share, on an after-tax basis) of divestiture-related costs of external advisors related to the proposed spinoff of its Renal Care and Acute Therapies product categories and the pursuit of strategic alterna
Slide 49: Reconciliation: Three Months Ended September 30, 2022
BAXTER INTERNATIONAL INC. Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures (unaudited, in millions) The company’s U.S. GAAP results for the three months ended September 30, 2022 included special items which impacted the U.S. GAAP measures as follows: Other Income (Loss
Slide 50: Footnotes: 2022 Special Items, continued
1 The company’s results in 2022 included intangible asset amortization expense of $168 million ($126 million, or $0.25 per diluted share, on an after-tax basis). 2 The company’s results in 2022 included charges of $73 million ($52 million, or $0.10 per diluted share, on an after-tax basis) associate
Slide 51: Reconciliation: Three Months Ended June 30, 2022
BAXTER INTERNATIONAL INC. Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures (unaudited, in millions) The company’s U.S. GAAP results for the three months ended June 30, 2022 included special items which impacted the U.S. GAAP measures as follows: Other Diluted Diluted S
Slide 52: Reconciliation: Three Months Ended March 31, 2022
BAXTER INTERNATIONAL INC. Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures (unaudited, in millions) The company’s U.S. GAAP results for the three months ended March 31, 2022 included special items which impacted the U.S. GAAP measures as follows: Other Diluted Diluted
Slide 53: Footnotes: Infusion Pump Warranty and Remediation Charges
5 The company's results in 2022 included charges of $23 million ($20 million, or $0.04 per diluted share, on an after-tax basis) related to warranty and remediation activities from two field corrective actions on certain of our infusion pumps. 53