Baxter International Inc. · NYSE:BAX
Baxter International — Q2 2020 Earnings Presentation
33 slides from Baxter International's earnings presentation, Jul 30, 2020
Slide 1: Second-Quarter 2020 Earnings
Second-Quarter 2020 Earnings Baxter International Inc. July 30, 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements concerning Baxter’s financial results, business development activities, capital structure, cost savings initiatives, R&D pipeline, including results of clinical trials and planned product launches, and outlook for full-
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: Top Quartile Goals / Our Strategy
Top Quartile Goals Patient safety and Quality Best place to work Growth through innovation Industry leading performance Our Strategy Strengthen our portfolio and extend our impact through transformative innovation that spans prevention to recovery 4
Slide 5: Table of Contents
Table of Contents Performance Summary 6 Financial Results 11 2020 Outlook 20 Non-GAAP Reconciliations 22
Slide 6: Performance Highlights
Performance Highlights Second-Quarter 2020 First-Half 2020 $2.7B (1%) Constant Currency $5.5B +3% Constant Currency (4%) Reported +1% Reported 1 1 Sales (2%) Operational2 Sales +3% Operational2 Key Metrics GAAP Adjusted3 Key Metrics GAAP Adjusted3 Gross Margin 38.2% 41.6% Gross Margin 39.9% 43.0% YO
Slide 7: Executing On Our Strategy
Executing On Our Strategy Recent Highlights Demonstrating Underlying Portfolio Resilience In Dynamic Environment1 ▪ Operational sales decline of (2%) in Q2 represents durability despite >$180 million net negative impact on total sales related to COVID-19 ▪ Adjusted diluted EPS decline of (24%) in Q2
Slide 8: Key Financial Metrics: Second-Quarter 2020 Snapshot
Key Financial Metrics Second-Quarter 2020 Snapshot1 Global Reported Sales Adjusted Operating Margin Adjusted Diluted EPS $2.8B $2.7B $0.84 17.9% 16.0% $0.64 (2%) Operational Growth 2 (190 bps) (24%) Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 as restated as restated as restated 1Non-GAAP financi
Slide 9: Key Financial Metrics: First-Half 2020 Snapshot
Key Financial Metrics First-Half 2020 Snapshot1 Global Reported Sales Adjusted Operating Margin Adjusted Diluted EPS $5.5B $5.5B $1.60 17.5% 17.5% $1.46 +3% Operational Growth 2 0 bps (9%) H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 as restated as restated as restated 1Non-GAAP financial metrics
Slide 10: Navigating COVID-19 Impact On Diverse Portfolio
Navigating COVID-19 Impact On Diverse Portfolio Second-Quarter 2020 Business Drivers1,2 Renal Care Medication Delivery $919M, +5% Constant Currency $612M, (9%) Constant Currency Increased global patient volumes driving MSD3 growth Strong execution on global infusion pump placements in PD therapies;
Slide 11: Financial Results
Financial Results Second-Quarter 2020 Earnings July 30, 2020 11
Slide 12: Second-Quarter 2020 Sales By Global Business Unit
Second-Quarter 2020 Sales By Global Business Unit1 Q2 2020 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $209 $710 $919 +1% +5% +5% Medication Delivery $401 $211 $612 (11%) (9%) (9%) Pharmaceuticals $212 $273 $485 (10%) (7%) (7%) Clinical Nutrit
Slide 13: First-Half 2020 Sales By Global Business Unit
First-Half 2020 Sales By Global Business Unit1 H1 2020 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $413 $1,376 $1,789 +2% +5% +5% Medication Delivery $862 $440 $1,302 (2%) 0% 0% Pharmaceuticals $443 $569 $1,012 (3%) (1%) (1%) Clinical Nutritio
Slide 14: Second-Quarter 2020 Sales By Operating Segment
Second-Quarter 2020 Sales By Operating Segment1 Q2 2020 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $1,407 (7%) (5%) (6%) (North and South America) EMEA (Europe, Middle East and $731 (1%) +1% +1% Africa) APAC $580 +1% +5% +3% (Asia Pacific) Total Baxter $2,718
Slide 15: First-Half 2020 Sales By Operating Segment
First-Half 2020 Sales By Operating Segment1 H1 2020 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $2,906 (1%) +1% 0% (North and South America) EMEA (Europe, Middle East and $1,485 +2% +5% +5% Africa) APAC $1,129 +3% +7% +5% (Asia Pacific) Total Baxter $5,520 +1%
Slide 16: Second-Quarter 2020 Adjusted Financial Results
Second-Quarter 2020 Adjusted Financial Results1 Q2 2019 Q2 2020 Change as restated Adjusted Gross Margin 44.4% 41.6% (280 bps) Adjusted SG&A Expense 21.5% 21.2% (30 bps) (% of Sales) Adjusted R&D Expense 5.0% 4.3% (70 bps) (% of Sales) Adjusted Operating Margin 17.9% 16.0% (190 bps) Adjusted Diluted
Slide 17: First-Half 2020 Adjusted Financial Results
First-Half 2020 Adjusted Financial Results1 H1 2019 H1 2020 Change as restated Adjusted Gross Margin 44.0% 43.0% (100 bps) Adjusted SG&A Expense 21.9% 21.1% (80 bps) (% of Sales) Adjusted R&D Expense 4.7% 4.4% (30 bps) (% of Sales) Adjusted Operating Margin 17.5% 17.5% Flat Adjusted Diluted EPS $1.6
Slide 18: Maintaining Focus On Cash Flow Generation
Maintaining Focus On Cash Flow Generation1 Operating Cash Flow2 Capital Expenditures Free Cash Flow3 $648M $580M $338M $316M $332M $242M H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 as restated as restated as restated 1Non-GAAP financial metrics referenced in this slide include free cash flow. A
Slide 19: Prioritizing Financial Flexibility While Driving Value For Shareholders
Prioritizing Financial Flexibility While Driving Value For Shareholders Reinvestment In Business Meeting the needs of patients and providers globally while continuing to invest in long-term innovation and accelerated launch cadence Increased Dividend Announced ~11% increase of quarterly dividend to
Slide 20: Full-Year 2020 Outlook
Full-Year 2020 Outlook Second-Quarter 2020 Earnings July 30, 2020 20
Slide 21: Full-Year 2020 Guidance
Full-Year 2020 Guidance1,2 Full-Year 2020 Guidance Sales Growth (1%) – 1% Reported Foreign Exchange <200 bps Sales Growth Flat To LSD Increase Constant Currency Seprafilm Acquisition <100 bps Sales Growth Flat To LSD Increase Operational Adjusted Diluted EPS $3.00 - $3.10 Growth vs. Prior-Year Perio
Slide 22: Non-GAAP Reconciliations
Non-GAAP Reconciliations Second-Quarter 2020 Earnings July 30, 2020 22
Slide 23: Non-GAAP Reconciliation as of June 30, 2020
Non-GAAP Reconciliation as of June 30, 2020 Non-GAAP Reconciliations: As part of its Q2 2020 earnings announcement on July 30, 2020, Baxter presented its financial results for the second quarter of 2020 and the related year-to-date period. Baxter also presented guidance for FY 2020. In these present
Slide 24: Reconciliation of U.S. GAAP to Non-GAAP Measures: Three Months
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended June 30, 2020 and 2019 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended June 30, 2020 included special items which impacted the
Slide 25: Reconciliation of U.S. GAAP to Non-GAAP Measures: Three Months Notes
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended June 30, 2020 and 2019 (unaudited) 1 The company’s results in 2020 and 2019 included intangible asset amortization expense of $56 million ($44 million, or $0.09 per diluted share, on an after-tax basis
Slide 26: Reconciliation of U.S. GAAP to Non-GAAP Measures: Six Months
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Six Months Ended June 30, 2020 and 2019 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the six months ended June 30, 2020 included special items which impacted the U.S
Slide 27: Reconciliation of U.S. GAAP to Non-GAAP Measures: Six Months Notes
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Six Months Ended June 30, 2020 and 2019 (unaudited) 1 The company’s results in 2020 and 2019 included intangible asset amortization expense of $108 million ($85 million, or $0.16 per diluted share, on an after-tax basis)
Slide 28: Operating Cash Flow to Free Cash Flow
Reconciliation of Non-GAAP Financial Measure Operating Cash Flow to Free Cash Flow (unaudited) (in millions) Six M onths Ended June 3 0 , 2 0 2 0 2019 2020 (As Restated) C ash flow s from operations - continuing operations $648 $580 Capital expenditures (316) (338) F ree cash flow - continuing opera
Slide 29: Net Sales Growth As Reported to Operational: Three Months
Reconciliation of Non-GAAP Financial Measure Change in Net Sales Growth As Reported to Operational Sales Growth From The Three Months Ended June 30, 2019 to The Three Months Ended June 30, 2020 (unaudited) Sales By Global Business Unit: N et Sales Grow th Operational As Reported Seprafilm FX Sales G
Slide 30: Net Sales Growth As Reported to Operational: Six Months
Reconciliation of Non-GAAP Financial Measure Change in Net Sales Growth As Reported to Operational Sales Growth From The Six Months Ended June 30, 2019 to The Six Months Ended June 30, 2020 (unaudited) Sales By Global Business Unit: N et Sales Grow th Operational As Reported Seprafilm FX Sales Grow
Slide 31: Projected Full-Year 2020 GAAP Sales Growth to Operational
Reconciliation of Non-GAAP Financial Measure Projected Full-Year 2020 U.S. GAAP Sales Growth to Projected Operational Sales Growth (unaudited) Sales Growth Guidance FY 2020* Sales Growth – U.S. GAAP (1)% - 1% Seprafilm (1)% - 0% Foreign exchange 1% - 2% Sales Growth - Operational 0% - 3% *Totals may
Slide 32: Projected Full Year 2020 GAAP EPS to Adjusted EPS
Reconciliation of Non-GAAP Financial Measure Projected Full Year 2020 U.S. GAAP Earnings Per Share to Projected Adjusted Earnings Per Share (unaudited) Earnings Per Share Guidance FY 2020* Earnings per Diluted Share – U.S. GAAP $2.40 - $2.50 Estimated intangible asset amortization $0.34 Estimated bu
Slide 33: Second-Quarter 2020 Earnings
Second-Quarter 2020 Earnings Baxter International Inc. July 30, 2020