Baxter International Inc. · NYSE:BAX
Baxter International — Q2 2019 Earnings Presentation
39 slides from Baxter International's earnings presentation, Jul 25, 2019
Slide 1: Second-Quarter 2019 Earnings
Second-Quarter 2019 Earnings Baxter International Inc. July 25, 2019
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 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 States
Slide 4: Performance Highlights
Performance Highlights Second-Quarter 2019 First-Half 2019 $2.8B +4% Constant Currency $5.5B +3% Constant Currency (0%) Reported (1%) Reported 1 1 Sales +4% Operational2 Sales +3% Operational2 Key Metrics GAAP Adjusted3 Key Metrics GAAP Adjusted3 Gross Margin 40.8% 44.5% Gross Margin 40.9% 44.1% YOY
Slide 5: Table of Contents
Table of Contents Performance Summary 7 Financial Results 12 2019 Outlook 22 Non-GAAP Reconciliations 27
Slide 6: Top Quartile Goals and 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 6
Slide 7: Executing On Our Strategy
Executing On Our Strategy Second-Quarter 2019 Highlights Building Momentum With Strong Focus On Operational Performance1 ▪ Delivered 4% operational sales growth reflecting impact of innovation and emphasis on operational excellence ▪ Adjusted diluted EPS growth of 16% driven by solid operational per
Slide 8: Continuing Momentum Of Key Financial Metrics
Continuing Momentum Of Key Financial Metrics Second-Quarter 2019 Snapshot1 Global Reported Sales Adjusted Operating Margin Adjusted Diluted EPS ~$2.8B ~$2.8B 18.0% $0.89 17.1% $0.77 +4% Operational Growth2 +90 bps +16% Q2 2018 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Q2 2019 1Non-GAAP financial metrics refer
Slide 9: Strong Performance Driving Growth Across Portfolio
Strong Performance Driving Growth Across Portfolio Second-Quarter 2019 Business Drivers1,2 Renal Care Medication Delivery $910M, +3% Constant Currency $689M, +4% Constant Currency Global growth in PD therapies partially offset Growth driven by continued uptake of by lower sales for select U.S. in-ce
Slide 10: Second-Quarter 2019 Sales And Adjusted Earnings
Second-Quarter 2019 Sales And Adjusted Earnings1 Metric Q2 2019 Q2 2019 Guidance Actual Sales Growth (~2%) (0%) Reported Sales Growth ~2% +4% Constant Currency Sales Growth 2% - 3% +4% Operational Adjusted Diluted EPS $0.80 - $0.82 $0.89 Growth vs. Prior-Year Period 4% – 6% +16% 1Non-GAAP financial
Slide 11: Advancing Our New Product Portfolio
Advancing Our New Product Portfolio Recent R&D And Commercial Milestones1 ► Announced U.S. FDA approval of Myxredlin, the first and only ready-to-use insulin for IV infusion in the hospital and other acute care settings. Utilizing Baxter’s proprietary Galaxy container technology, Myxredlin offers an
Slide 12: Financial Results
Financial Results Second-Quarter 2019 Earnings July 25, 2019 12
Slide 13: Second-Quarter 2019 Sales By Global Business Unit
Second-Quarter 2019 Sales By Global Business Unit1 Q2 2019 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $196 $714 $910 (2%) +3% +3% Medication Delivery $441 $248 $689 +1% +4% +4% Pharmaceuticals $235 $304 $539 +0% +4% +7% Clinical Nutrition $79
Slide 14: First-Half 2019 Sales By Global Business Unit
First-Half 2019 Sales By Global Business Unit1 H1 2019 Revenue Total Growth $ In Millions U.S. International Total Reported Constant Operational Renal Care $388 $1,373 $1,761 (2%) +3% +3% Medication Delivery $847 $476 $1,323 (3%) (0%) (0%) Pharmaceuticals $467 $581 $1,048 +1% +5% +8% Clinical Nutrit
Slide 15: Second-Quarter 2019 Sales By Operating Segment
Second-Quarter 2019 Sales By Operating Segment1 Q2 2019 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $1,520 (0%) +1% +2% (North and South America) EMEA (Europe, Middle East and $744 (2%) +6% +6% Africa) APAC $576 +3% +9% +9% (Asia Pacific) Total Baxter $2,840 (0
Slide 16: First-Half 2019 Sales By Operating Segment
First-Half 2019 Sales By Operating Segment1 H1 2019 Revenue Total Growth $ In Millions Reported Reported Constant Operational Americas $2,928 (1%) 0% +1% (North and South America) EMEA (Europe, Middle East and $1,449 (2%) +5% +5% Africa) APAC $1,095 +2% +8% +8% (Asia Pacific) Total Baxter $5,472 (1%
Slide 17: Second-Quarter 2019 Adjusted Financial Results
Second-Quarter 2019 Adjusted Financial Results1 Q2 2018 Q2 2019 Change Adjusted Gross Margin 45.5% 44.5% (100 bps) Adjusted SG&A Expense 22.6% 21.5% (110 bps) (% of Sales) Adjusted R&D Expense 5.8% 5.0% (80 bps) (% of Sales) Adjusted Operating Margin 17.1% 18.0% +90 bps Adjusted Diluted EPS $0.77 $0
Slide 18: First-Half 2019 Adjusted Financial Results
First-Half 2019 Adjusted Financial Results1 H1 2018 H1 2019 Change Adjusted Gross Margin 44.6% 44.1% (50 bps) Adjusted SG&A Expense 22.3% 21.9% (40 bps) (% of Sales) Adjusted R&D Expense 5.5% 4.7% (80 bps) (% of Sales) Adjusted Operating Margin 16.9% 17.6% +70 bps Adjusted Diluted EPS $1.47 $1.66 +1
Slide 19: Driving Operational Excellence Across the Company
Driving Operational Excellence Across the Company Second-Quarter Adjusted Operating Margin Expansion1 190 bps 18.0% Key Drivers: 17.1% (100 bps) ▪ Benefits from manufacturing improvements and portfolio optimization initiatives offset by lower sales of U.S. cyclo and Brevibloc and less favorable prod
Slide 20: Maintaining Focus On Cash Flow Generation
Maintaining Focus On Cash Flow Generation1 Operating Cash Flow Capital Expenditures Free Cash Flow2 $852M $617M $541M $311M $352M $265M H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 1Non-GAAP financial metrics referenced in this slide include free cash flow. A reconciliation to comparable GAAP mea
Slide 21: 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 16% increase in quarterly dividend; currently targeting ~35
Slide 22: Full-Year 2019 Outlook
Full-Year 2019 Outlook Second-Quarter 2019 Earnings July 25, 2019 22
Slide 23: Full-Year 2019 Sales Guidance
Full-Year 2019 Sales Guidance1 Full-Year 2019 Full-Year 2019 Prior Guidance Current Guidance Sales Growth 0% - 1% 1% - 2% Reported Foreign Exchange 200+ bps 200+ bps Sales Growth 2% - 3% ~4% Constant Currency U.S. Cyclo Competition <100 bps <50 bps Sales Growth 3% - 4% ~4% Operational 1Non-GAAP fina
Slide 24: Full-Year 2019 Financial Guidance
Full-Year 2019 Financial Guidance1 Full-Year 2019 Full-Year 2019 Prior Guidance Current Guidance Adjusted Operating Margin 18.2% - 18.4% 18.2% - 18.4% Adjusted Diluted EPS $3.27 - $3.35 $3.34 - $3.40 Growth vs. Prior-Year Period 7% - 10% 10% - 11% Operating Cash Flow ~$2.3B ~$2.3B Free Cash Flow ~$1
Slide 25: Full-Year 2019 Sales Guidance By Business
Full-Year 2019 Sales Guidance By Business1,2 Full-Year 2019 Full-Year 2019 Constant Currency Operational Renal Care ~2% ~2% Medication Delivery ~6% ~6% Pharmaceuticals LSD Increase MSD Increase Clinical Nutrition ~3% ~3% Advanced Surgery HSD Increase HSD Increase Acute Therapies 7% – 8% 7% – 8% Othe
Slide 26: Third-Quarter 2019 Financial Guidance
Third-Quarter 2019 Financial Guidance1 Third-Quarter 2019 Guidance Sales Growth 3% - 4% Reported Foreign Exchange 100+ bps Sales Growth ~5% Constant Currency U.S. Cyclo Competition <50 bps Sales Growth ~5% Operational Adjusted Diluted EPS $0.82 - $0.84 Growth vs. Prior-Year Period 3% – 5% 1Non-GAAP
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations Second-Quarter 2019 Earnings July 25, 2019 27
Slide 28: Non-GAAP Reconciliation as of July 25, 2019
Non-GAAP Reconciliation as of July 25, 2019 Non-GAAP Reconciliations: As part of its Q2 2019 earnings announcement on July 25, 2019, Baxter presented its financial results for Q2 2019, Q2 2018, and the related year to date periods. Baxter also presented guidance for Q3 2019 and FY 2019. In these pre
Slide 29: Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of 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 GAAP results for the three months ended June 30, 2019 and 2018 included special items which impacted the
Slide 30: Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of 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 ($35 million, or $0.07 per diluted share, on an after-tax basis) and
Slide 31: Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures Six Months Ended June 30, 2019 and 2018 (unaudited) (in millions, except per share and percentage data) The company's GAAP results for the six months ended June 30, 2019 and 2018 included special items which impacted the GAAP
Slide 32: Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures Six Months Ended June 30, 2019 and 2018 (unaudited) 1 The company's results in 2019 and 2018 included intangible asset amortization expense of $88 million ($68 million, or $0.13 per diluted share, on an after-tax basis) and $
Slide 33: Reconciliation of Change in Net Sales As Reported 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 Unit1: Q2 2 0 1 9 N et Sales U.S. Operational As Reported C yclophospham ide FX Sal
Slide 34: Reconciliation of Change in Net Sales As Reported to Operational Sales
Reconciliation of Non-GAAP Financial Measure Change in Net Sales As Reported to Operational Sales From The Six Months Ended June 30, 2018 to The Six Months Ended June 30, 2019 (unaudited) Sales By Global Business Unit1: Y TD 2 0 1 9 N et Sales U.S. Operational As Reported C yclophospham ide FX Sales
Slide 35: Adjusted SG&A Expense and Adjusted R&D Expense
Adjusted Selling, General and Administrative Expense and Adjusted Research and Development Expense From The Three Months Ended June 30, 2018 to The Three Months Ended June 30, 2019 (unaudited) On Page 29, the GAAP Selling, General and Administrative Expense (SG&A) has been reconciled to the adjusted
Slide 36: Non-GAAP Reconciliation as of July 25, 2019
Non-GAAP Reconciliation as of July 25, 2019 Reconciliations for Q3 2019 and FY 2019 Forecasts The reconciliations between the projected 2019 GAAP sales growth and projected adjusted sales growth follows: 2019 Sales Growth Guidance Q3 2019 F Y 2019 Sales Growth – GAAP 3% - 4% 1% - 2% U.S. cyclophosph
Slide 37: Non-GAAP Reconciliation as of July 25, 2019
Non-GAAP Reconciliation as of July 25, 2019 Reconciliations for Q3 2019 and FY 2019 Forecasts The reconciliations between the projected 2019 GAAP operating margin and projected adjusted operating margin follows: 2 0 1 9 Operating M argin Guidance FY 2019 Operating M argin - GAAP 1 4 .9 % - 1 5 .4 %
Slide 38: Non-GAAP Reconciliation as of July 25, 2019
Non-GAAP Reconciliation as of July 25, 2019 Reconciliations for Q3 2019 and FY 2019 Forecasts The company’s outlook for 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 GAAP earnings per share for the thi
Slide 39: Second-Quarter 2019 Earnings
Second-Quarter 2019 Earnings Baxter International Inc. July 25, 2019