Baxter International Inc. · NYSE:BAX
Baxter International — Q4 2019 Earnings Presentation
54 slides from Baxter International's earnings presentation, Mar 17, 2020
Slide 1: Fourth-Quarter 2019 Earnings
Fourth-Quarter 2019 Earnings Baxter International Inc. March 17, 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement 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 financial outlook for
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 Product 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 13 Q1 2020 Outlook 19 Selected Historical Financials 21 Non-GAAP Reconciliations 34
Slide 6: Performance Highlights
Performance Highlights Fourth-Quarter 2019 Full-Year 2019 $3.0B $11.4B +5% Constant Currency +7% Reported +2% Reported +8% Constant Currency1 1 Sales +9% Operational2 Sales +5% Operational2 Key Metrics U.S. GAAP Adjusted3 Key Metrics U.S. GAAP Adjusted3 Gross Margin 42.7% 45.7% Gross Margin 41.9% 44
Slide 7: Executing On Our Strategy
Executing On Our Strategy Recent Highlights Building Momentum With Strong Focus On Operational Performance1 ▪ Delivered 9% operational sales growth in Q4 2019; performance reflects Baxter’s strongest quarter since 2015 Baxalta spin-off ▪ Adjusted diluted EPS growth of 37% in Q4 driven by commercial
Slide 8: Continuing Momentum Of Key Financial Metrics
Continuing Momentum Of Key Financial Metrics Full-Year 2019 Snapshot1 Global Reported Sales Adjusted Operating Margin Adjusted Diluted EPS ~$11.1B ~$11.4B 18.7% $3.31 17.3% $2.91 +5% Operational Growth2 +140 bps +14% FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 as restated as restated as restated
Slide 9: Full-Year 2019 Selected Financial Detail
Full-Year 2019 Selected Financial Detail Metric Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 as restated as restated Sales Growth (2%) +1% +3% +7% +2% Reported Sales Growth +2% +4% +5% +8% +5% Constant Currency Sales Growth +2% +4% +5% +9% +5% Operational Adjusted Operating Margin 17.0% 17.9% 19.5% 20.0%
Slide 10: Fourth-Quarter 2019 Performance
Fourth-Quarter 2019 Performance1 Metric Q4 2019 Q4 2019 Guidance Actual Sales Growth 3% - 4% +7% Reported Sales Growth ~5% +8% Constant Currency Sales Growth ~5% +9% Operational Adjusted Operating Margin 18.5% - 19.0% 20.0% Fourth-Quarter Results Substantially Above Guidance; Growth Across All GBUs
Slide 11: Strong Performance Driving Growth Across Portfolio
Strong Performance Driving Growth Across Portfolio Fourth-Quarter 2019 Business Drivers1,2 Renal Care Medication Delivery $960M, +2% Constant Currency $775M, +19% Constant Currency PD patient growth of ~7% globally partially Growth driven by solid commercial execution offset by lower sales for selec
Slide 12: Advancing Our Strategic Growth Drivers
Advancing Our Strategic Growth Drivers Recent Milestones1 ► Acquired Cheetah Medical, a leading provider of non- invasive hemodynamic monitoring technologies; acquisition expands Baxter’s presence in the specialized patient monitoring space ► Completed acquisition of Seprafilm Adhesion Barrier, a st
Slide 13: Financial Results
Financial Results Fourth-Quarter 2019 Earnings March 17, 2020 13
Slide 14: Full-Year 2019 Sales By Global Business Unit
Full-Year 2019 Sales By Global Business Unit1 FY 2019 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $791 $2,848 $3,639 (0%) +3% +3% Medication Delivery $1,822 $977 $2,799 +5% +7% +7% Pharmaceuticals $940 $1,215 $2,155 +3% +6% +7% Clinical Nutrit
Slide 15: Full-Year 2019 Sales By Operating Segment
Full-Year 2019 Sales By Operating Segment1 FY 2019 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $6,094 +2% +3% +4% (North and South America) EMEA (Europe, Middle East and $2,968 +1% +6% +6% Africa) APAC $2,300 +4% +8% +8% (Asia Pacific) Total Baxter $11,362 +2%
Slide 16: Full-Year 2019 Adjusted Financial Results
Full-Year 2019 Adjusted Financial Results1,2 FY 2018 FY 2019 Change as restated Adjusted Gross Margin 44.9% 44.9% Flat Adjusted SG&A Expense 22.1% 21.4% (70 bps) (% of Sales) Adjusted R&D Expense 5.6% 4.8% (80 bps) (% of Sales) Adjusted Operating Margin 17.3% 18.7% +140 bps Adjusted Diluted EPS $2.9
Slide 17: Maintaining Focus On Cash Flow Generation
Maintaining Focus On Cash Flow Generation1,2 Operating Cash Flow Capital Expenditures Free Cash Flow3 Continuing Operations $2.0B $2.1B $1.7B $1.4B $1.4B $1.1B $0.6B $0.7B $0.7B FY 2017 FY 2018 FY 2019 FY 2017 FY 2018 FY 2019 FY 2017 FY 2018 FY 2019 as restated as restated as restated as restated as
Slide 18: Strategically Deploying Capital To Fuel Growth And Create Value
Strategically Deploying Capital To Fuel Growth And Create Value Reinvestment in Business Investing in higher-margin, faster-growing businesses to drive meaningful innovation and enable accelerating launch cadence Dividend Issuance Announced quarterly dividend of $0.22 per share; currently targeting
Slide 19: First-Quarter 2020 Outlook
First-Quarter 2020 Outlook Fourth-Quarter 2019 Earnings March 17, 2020 19
Slide 20: First-Quarter 2020 Financial Guidance
First-Quarter 2020 Financial Guidance1 First-Quarter 2020 Guidance Sales Growth 4% - 5% Reported Foreign Exchange 100+ bps Sales Growth 5% - 6% Constant Currency Seprafilm Acquisition <50 bps Sales Growth 5% - 6% Operational Adjusted Diluted EPS $0.72 - $0.74 Growth vs. Prior-Year Period (4%) – (1%)
Slide 21: Appendix I: Selected Historical Financials
Appendix I: Selected Historical Financials Fourth-Quarter 2019 Earnings March 17, 2020
Slide 22: First-Quarter 2019 Sales By Global Business Unit
First-Quarter 2019 Sales By Global Business Unit1 Q1 2019 Revenue Total Growth as restated $ In Millions U.S. International Total Reported Constant Operational Renal Care $192 $662 $854 (2%) +3% +3% Medication Delivery $406 $228 $634 (6%) (4%) (4%) Pharmaceuticals $232 $278 $510 +2% +7% +9% Clinical
Slide 23: Second-Quarter 2019 Sales By Global Business Unit
Second-Quarter 2019 Sales By Global Business Unit1 Q2 2019 Revenue Total Growth as restated $ In Millions U.S. International Total Reported Constant Operational Renal Care $196 $711 $907 (1%) +3% +3% Medication Delivery $441 $248 $689 +2% +4% +4% Pharmaceuticals $235 $303 $538 +1% +4% +6% Clinical N
Slide 24: Third-Quarter 2019 Sales By Global Business Unit
Third-Quarter 2019 Sales By Global Business Unit1 Q3 2019 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $199 $719 $918 +1% +4% +4% Medication Delivery $461 $240 $701 +8% +9% +9% Pharmaceuticals $223 $304 $527 +2% +4% +5% Clinical Nutrition $80 $
Slide 25: Fourth-Quarter 2019 Sales By Global Business Unit
Fourth-Quarter 2019 Sales By Global Business Unit1 Q4 2019 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $204 $756 $960 +1% +2% +2% Medication Delivery $514 $261 $775 +18% +19% +19% Pharmaceuticals $250 $330 $580 +8% +9% +10% Clinical Nutrition
Slide 26: First-Quarter 2019 Sales By Operating Segment
First-Quarter 2019 Sales By Operating Segment1 Q1 2019 Revenue Total Growth as restated $ In Millions Reported Reported Constant Operational Americas $1,409 (2%) (1%) (0%) (North and South America) EMEA (Europe, Middle East and $707 (4%) +4% +4% Africa) APAC $522 +1% +7% +7% (Asia Pacific) Total Bax
Slide 27: Second-Quarter 2019 Sales By Operating Segment
Second-Quarter 2019 Sales By Operating Segment1 Q2 2019 Revenue Total Growth as restated $ In Millions Reported Reported Constant Operational Americas $1,519 +0% +1% +2% (North and South America) EMEA (Europe, Middle East and $742 +0% +6% +6% Africa) APAC $573 +3% +9% +9% (Asia Pacific) Total Baxter
Slide 28: Third-Quarter 2019 Sales By Operating Segment
Third-Quarter 2019 Sales By Operating Segment1 Q3 2019 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $1,534 +2% +4% +4% (North and South America) EMEA (Europe, Middle East and $730 +3% +7% +7% Africa) APAC $587 +5% +8% +8% (Asia Pacific) Total Baxter $2,851 +3% +
Slide 29: Fourth-Quarter 2019 Sales By Operating Segment
Fourth-Quarter 2019 Sales By Operating Segment1 Q4 2019 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $1,632 +9% +10% +10% (North and South America) EMEA (Europe, Middle East and $789 +3% +5% +5% Africa) APAC $618 +7% +9% +9% (Asia Pacific) Total Baxter $3,039 +7
Slide 30: 2019 U.S. GAAP Financial Results
2019 U.S. GAAP Financial Results Metric Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 as restated as restated Sales ($M) $2,638 $2,834 $2,851 $3,039 $11,362 Gross Margin 40.9% 40.7% 43.1% 42.7% 41.9% SG&A % Of Sales 22.8% 22.6% 22.0% 21.9% 22.3% R&D % Of Sales 4.9% 5.9% 5.1% 5.1% 5.2% Operating Margin 14.
Slide 31: 2019 Adjusted Non-GAAP Financial Results
2019 Adjusted Non-GAAP Financial Results1 Metric Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 as restated as restated Sales ($M) $2,638 $2,834 $2,851 $3,039 $11,362 Gross Margin 43.6% 44.4% 45.7% 45.7% 44.9% SG&A % Of Sales 22.3% 21.5% 21.5% 20.6% 21.4% R&D % Of Sales 4.3% 5.0% 4.7% 5.0% 4.8% Operating M
Slide 32: 2018 U.S. GAAP Financial Results
2018 U.S. GAAP Financial Results Metric Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 as restated as restated as restated as restated as restated Sales ($M) $2,692 $2,813 $2,761 $2,833 $11,099 Gross Margin 41.6% 43.5% 44.6% 41.8% 42.9% SG&A % Of Sales 23.5% 24.0% 24.8% 22.1% 23.6% R&D % Of Sales 5.2% 6.1%
Slide 33: 2018 Adjusted Non-GAAP Financial Results
2018 Adjusted Non-GAAP Financial Results1 Metric Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 as restated as restated as restated as restated as restated Sales ($M) $2,692 $2,813 $2,761 $2,833 $11,099 Gross Margin 43.8% 45.4% 46.2% 44.1% 44.9% SG&A % Of Sales 22.2% 22.6% 22.5% 21.0% 22.1% R&D % Of Sales
Slide 34: Appendix II: Non-GAAP Reconciliations
Appendix II: Non-GAAP Reconciliations Fourth-Quarter 2019 Earnings March 17, 2020 34
Slide 35: Non-GAAP Reconciliation as of March 17, 2020
Non-GAAP Reconciliation as of March 17, 2020 Non-GAAP Reconciliations: As part of its Q4 2019 earnings announcement on March 17, 2020, Baxter presented its financial results for the third and fourth quarter of 2019 and restated its previously issued financial results for the first and second quarter
Slide 36: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended March 31, 2019 and 2018 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended March 31, 2019 included special items which impacted t
Slide 37: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended March 31, 2019 and 2018 (unaudited) 1 The company’s results in 2019 and 2018 included intangible asset amortization expense of $43 million ($33 million, or $0.06 per diluted share, on an after-tax basi
Slide 38: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended June 30, 2019 and 2018 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended June 30, 2019 included special items which impacted the
Slide 39: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended June 30, 2019 and 2018 (unaudited) 1 The company’s results in 2019 and 2018 included intangible asset amortization expense of $45 million ($36 million, or $0.07 per diluted share, on an after-tax basis
Slide 40: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended September 30, 2019 and 2018 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended September 30, 2019 included special items which im
Slide 41: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended September 30, 2019 and 2018 (unaudited) 1 The company’s results in 2019 and 2018 included intangible asset amortization expense of $48 million ($33 million, or $0.06 per diluted share, on an after-tax
Slide 42: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended December 31, 2019 and 2018 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the three months ended December 31, 2019 included special items which impa
Slide 43: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Three Months Ended December 31, 2019 and 2018 (unaudited) 1 The company’s results in 2019 and 2018 included intangible asset amortization expense of $47 million ($39 million, or $0.09 per diluted share, on an after- tax
Slide 44: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Year Ended December 31, 2019 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the year ended December 31, 2019 included special items which impacted the U.S. GAAP measur
Slide 45: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Year Ended December 31, 2018 (unaudited) (in millions, except per share and percentage data) The company’s U.S. GAAP results for the year ended December 31, 2018 included special items which impacted the U.S. GAAP measur
Slide 46: Reconciliation of U.S. GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures Years Ended December 31, 2019 and 2018 (unaudited) 1 The company’s results in 2019 and 2018 included intangible asset amortization expense of $183 million ($141 million, or $0.27 per diluted share, on an after-tax basis)
Slide 47: Reconciliation of Change in Net Sales to Operational Sales
Reconciliation of Non-GAAP Financial Measure Change in Net Sales As Reported to Operational Sales From The Three Months Ended March 31, 2018 to The Three Months Ended March 31, 2019 (unaudited) Sales By Global Business Unit: As Restated Q1 2 0 1 9 * N et Sales U.S. Operational As Reported C yclophos
Slide 48: Reconciliation of Change in Net Sales to Operational Sales
Reconciliation of Non-GAAP Financial Measure Change in Net Sales As Reported to Operational Sales From The Three Months Ended June 30, 2018 to The Three Months Ended June 30, 2019 (unaudited) Sales By Global Business Unit: As Restated Q2 2 0 1 9 * N et Sales U.S. Operational As Reported C yclophosph
Slide 49: Reconciliation of Change in Net Sales to Operational Sales
Reconciliation of Non-GAAP Financial Measure Change in Net Sales As Reported to Operational Sales From The Three Months Ended September 30, 2018 to The Three Months Ended September 30, 2019 (unaudited) Sales By Global Business Unit: Q3 2 0 1 9 * N et Sales U.S. Operational As Reported C yclophospham
Slide 50: Reconciliation of Change in Net Sales to Operational Sales
Reconciliation of Non-GAAP Financial Measure Change in Net Sales As Reported to Operational Sales From The Three Months Ended December 31, 2018 to The Three Months Ended December 31, 2019 (unaudited) Sales By Global Business Unit: Q4 2 0 1 9 * N et Sales U.S. Operational As Reported C yclophospham i
Slide 51: Reconciliation of Change in Net Sales to Operational Sales
Reconciliation of Non-GAAP Financial Measure Change in Net Sales As Reported to Operational Sales From The Year Ended December 31, 2018 to The Year Ended December 31, 2019 (unaudited) Sales By Global Business Unit: Y TD 2 0 1 9 * N et Sales U.S. Operational As Reported C yclophospham ide FX Sales Re
Slide 52: Non-GAAP Reconciliation as of March 17, 2020
Non-GAAP Reconciliation as of March 17, 2020 Reconciliations for Q1 2020 Forecasts The reconciliations between the projected Q1 2020 U.S. GAAP sales growth and projected operational sales growth follows: Sales Growth Guidance Q1 2 0 2 0 Sales Growth – U.S. GAAP 4% - 5% Seprafilm 0% Foreign exchange
Slide 53: Non-GAAP Reconciliation as of March 17, 2020
Non-GAAP Reconciliation as of March 17, 2020 Reconciliations for Q1 2020 Forecasts The company’s outlook for U.S. GAAP earnings per share only includes the impact of special items that are known or expected as of the date of this release. Accordingly, actual U.S. GAAP earnings per share for the firs
Slide 54: Fourth-Quarter 2019 Earnings
Fourth-Quarter 2019 Earnings Baxter International Inc. March 17, 2020