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Good morning, ladies and gentlemen, and welcome to Baxter International's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcasted without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Mr. Kevin Moran, Vice President, Investor Relations at Baxter International. Mr. Moran, you may begin.

Good morning, and welcome. Today, we'll discuss Baxter's third quarter 2025 results, along with an update to our full year 2025 outlook and newly issued fourth quarter 2025 guidance. This morning, a press release was issued with our preliminary earnings results and updated outlook. The press release and investor presentation are available on the Investors section of the Baxter website. Joining me today are Andrew Hider, President, Chief Executive Officer; and Joel Grade, Executive Vice President and Chief Financial Officer. During the call, we will be making forward-looking statements, including comments regarding our financial outlook for the fourth quarter and full year 2025 and matters related to future dividend declarations, the anticipated impact of the Kidney Care sale, including our ability to eliminate related costs, the anticipated impact of various regulatory and operational matters, including ones related to our infusion pump platform, what we believe to be continuing fluid conservation and heightened inventory levels and commentary regarding the global macroeconomic environment, including tariffs and proposed mitigating actions. Forward-looking statements involve risks and uncertainties, which could cause our actual results to differ materially from our current expectations. Please refer to today's press release, the forward-looking statement slide at the beginning of our investor presentation and our SEC filings for more details. In addition, please note that on today's call, all our comments will be on a non-GAAP basis unless they are specifically called out as GAAP. Non-GAAP financial measures are used to help investors understand Baxter's ongoing business performance. GAAP to non-GAAP reconciliations for all relevant periods can be found in the schedules attached to our press release and in our investor presentation. Finally, as a reminder, continuing operations excludes Baxter's Kidney Care business, which is now reported as discontinued operations. Now I'd like to turn the call over to Andrew.

Thank you, Kevin. Let me welcome you officially as the new Head of Baxter's Investor Relations team, and good morning, everyone. I am pleased to be here for my first earnings call as CEO, and look forward to getting to know everyone here better as the quarters progress. As I've said in many settings over the last several weeks, it is an honor to have the responsibility to lead this new chapter at Baxter. Our company is essential to health care with an iconic brand that is valued and trusted by caregivers and patients globally. Since joining the company, I've immersed myself in Baxter's business, leading teams around the world. 14 site visits across 7 countries and counting, working side-by-side with employees, speaking directly with customers and gaining a more detailed view of the opportunities and challenges we face. I have learned a great deal in a short period, but I want to reflect on 2 things that clearly stand out. First is that we are building from a fundamental position of opportunity. I have been struck by the commitment and pride this team brings to Baxter's mission to save and sustain lives and to serving our customers. This is a business whose portfolio has proven resilient over its almost 100-year history, one that has delivered significant revenues and attractive operating margins and generated solid cash flow over the years. The strength of our business, the critical role we play in health care and the talent and dedication of our people who are committed to win should position us well to deliver lasting value. Second is that we are proactive and clear-eyed about what needs to improve and change at the company, so we're better positioned to deliver on our potential. Let me be clear about that. We are not satisfied with our current performance. There is a recognition that challenges must be met head on with both immediate actions as well as real long-term solutions. I am also very realistic about the road in front of us as we work to prioritize our areas of focus, improve execution and business performance, deliver sustained growth and improve profitability and cash flows. Turning briefly to this quarter's results, which Joel will speak to in detail. Our third quarter top line performance came in lower than our previously issued guidance and exceeded expectations on the bottom line due to a favorable tax rate. These results reflect challenges in 2 divisions: the Infusion Therapies and Technologies division within the Medical Products & Therapy segment and the Injectables and Anesthesia division within the Pharmaceuticals segment. Importantly, Baxter's Healthcare Systems & Technologies segment demonstrated improved performance. Before I turn it to Joel to discuss financial results in more detail, I want to give you a better sense of how I'm approaching the first several months of my time at Baxter and to give you some context on the decisions and actions that we have taken to date and will take in the coming months. We will have more opportunities to discuss long-term strategy down the road. But in the near term, you will see us take actions and decisions designed to support 3 areas: first, stabilizing the areas of the business that require increased focus; second, strengthening our balance sheet; and third, driving a culture of continuous improvement and enterprise-wide efficiency. Let me share my initial thoughts on each. I'll start with stabilizing the business. Baxter already has undergone significant transformation in recent years and is now a more streamlined and focused enterprise. But of course, there have been challenges in certain areas that have hampered growth and consistent execution, and we expect our growth algorithm to continue to be pressured in the near term. With my background in operations, I am bringing a keen eye to people, process and performance of Baxter, along with what we call uniform value creators, standardized metrics that we are focused on value creation. One critical area of focus and attention right now, for example, is related to the pause we've taken on deliveries and installations of the Novum IQ Large Volume pump. While we're disappointed that we expect the current hold to remain in place beyond year-end. We are working tirelessly to evaluate and test potential corrections to fully resolve the flow rate issues. In parallel, we will continue to closely support current Novum IQ LVP users. We will also continue to offer Baxter's Spectrum IQ LVP, a long-standing and well-known product used in more than 1,500 facilities across the U.S. and Canada, as a leading option for infusion therapy, one that Baxter continues to invest in. The Spectrum IQ LVP now operates on a shared gateway with Novum IQ syringe, creating a cohesive user experience and is built for the future with EMR interoperability, enhanced software and innovative analytical capabilities. A second area of focus will be improving Baxter's balance sheet. It is from the basis of a strong balance sheet that we will be better able to invest in the business, support innovation and deliver and return increased value to our shareholders. This means focusing on improved cash flow and taking a consistent approach to our capital allocation objective. The first step in addressing our balance sheet is taking decisive and clear steps to reduce our leverage. It is in this context that we and the Board intend to reduce the quarterly dividend to $0.01 per share, beginning with the dividend to be paid in January 2026. This will free up cash to accelerate deleveraging, consistent with our prior commitments. Joel will provide more details on that in his section of the call as well. The last area you will continue to see us prioritize is building enterprise efficiency into everything we do at Baxter. Earlier this month, we rolled out Baxter GPS, our new growth and performance system, aimed at driving continuous improvement and a growth and performance mindset. This data-driven system is inspired by best-in-class models from organizations known for strong cultures of continuous improvement and represents a positive change in how we work. It also adapts in real time, helping to ensure we are moving toward greater efficiency, stronger performance and impact. Ultimately, this will help build the habits and discipline across the enterprise that will define our future success. I've led this type of system successfully at several other companies, and I'm confident it will lead to improved performance of Baxter over the long term. In closing, I want to step back and reflect on what makes me confident and excited about Baxter's future. Yes, there is work ahead. And the coming quarters will require significant focus, discipline and execution. But I see a company with a strong foundation, a clear path forward and the ability to turn challenges into opportunities. You can expect us to work with urgency and focus to accelerate growth, improve margins and cash flow and drive enhanced innovation. We are on a journey to build a better Baxter that is more resilient, more agile and more capable than ever, a Baxter with a more consistent execution, what I like to call a higher say-do ratio, a Baxter that will work to redefine health care delivery and in doing so, continue to deliver meaningful impact for customers, patients and long-term value creation for shareholders. I look forward to keeping you updated on our progress and getting to know you all better in the coming weeks and months. With that, I will now turn it over to Joel. Joel, over to you.

Thanks, Andrew, and good morning, everyone. Let me also take a moment to welcome Kevin Moran as our new Vice President of Investor Relations. Many of you already know Kevin from his prior IR roles at other companies in the space. Kevin brings valuable finance, IR and, importantly, health care experience to the team. We're excited to have Kevin on the team and look forward to his leadership in continuing to strengthen our relationships with you all. Before I begin the sales discussion, a reminder that results discussed on today's call will reference operational growth, which excludes the impact of foreign exchange, MSA revenues from Vantive and the previously announced exit of IV solutions from China. Third quarter 2025 global sales from continuing operations totaled $2.8 billion and increased 5% on a reported basis and 2% on an operational basis. Performance in the quarter reflects growth across nearly all divisions. On the bottom line, total company adjusted earnings from continuing operations were $0.69 per share. Results in the quarter reflect positive pricing in select segments, receipt of Kidney Care TSA income and lower nonoperating expenses, including interest and tax. Now I'll walk you through results by reportable segment. Commentary regarding sales growth will reflect growth on an operational basis. Sales in our Medical Products & Therapies, or MPT segment were $1.3 billion and declined 1% in the quarter. Performance in the quarter reflects softness in Infusion Therapies & Technologies or ITT, slightly offset by strong demand for advanced surgery products. Within MPT, third quarter sales from our ITT division totaled $1 billion and declined 4%, primarily reflecting lower infusion pump sales due to the previously discussed ship and installation hold of Novum LVP and ongoing softness in U.S. hospital IV solutions, which we believe is due to continuing post-Hurricane Helene fluid conservation efforts. Sales decline in Infusion Systems includes lost sales, Novum LVP customer returns and certain customers electing to transition to our Spectrum IQ LVP. We expect sales across our Infusion Pump portfolio to remain under pressure as we work with our customers to complete the necessary corrections to fully address the outstanding field actions and lift the shipment and installation hold on Novum. While we see continued interest in our Pump portfolio, we recognize that the timing and nature of the resolution of the Novum LVP hold is leading some customers to evaluate alternative solutions. We are actively supporting Novum customers with both initial and eventually additional corrections as well as offering Spectrum IQ as an alternative. We remain focused on minimizing disruption and maintaining strong relationships across our installed base. Within IV solutions, U.S. demand remains below pre-Hurricane Helene levels. Based on our current expectations, we expect further recovery in demand, though at a more moderate pace and some level of fluid conservation is likely to remain in 2026. Over the medium and longer term, we remain confident in the strength of our IV Solutions business. Sales in Advanced Surgery totaled $306 million and grew 11% globally. Results in the quarter reflect solid demand for our portfolio of hemostats and sealants, strong commercial execution across all regions and steady procedure volumes. MPT's adjusted operating margin totaled 20.5% for the quarter, increasing 50 basis points over the prior year period and reflecting positive pricing in the quarter, partially offset by lower sales volumes and increased manufacturing and supply costs resulting from the factors previously discussed. R&D expense declined in the quarter, primarily due to onetime items, while underlying investment remained unchanged. Kidney Care TSA income contributed to positive performance in the quarter as well. In Healthcare Systems & Technologies or HST, sales in the quarter totaled $773 million, increasing 2%. Within HST, sales of our Care and Connectivity Solutions or CCS division were $473 million and grew 3% globally. Performance in the quarter was driven by 4% growth in the U.S. for CCS, reflecting double-digit growth in our Surgical Solutions business and continued momentum across our Patient Support Systems and Care Communications portfolios. Total U.S. capital orders for CCS increased 30% compared to the prior year, driven by broad-based strength across Patient Support Systems, Care Communications and Surgical Solutions. We continue to believe our order pipeline remains strong. To date, we have not observed a slowdown in U.S. hospital capital spending. However, given the broader macroeconomic uncertainty, we continue to closely monitor the situation. Front Line Care sales in the quarter were $300 million and increased 1%. Performance in the quarter reflects increased demand in our Cardiology portfolio. HST adjusted operating margin totaled 13.5% for the quarter, decreasing 460 basis points compared to the prior year. These results reflect higher costs related to tariffs, increased R&D investments and increased corporate allocation expenses following the sale of Kidney Care. TSA income partially offset these increased expenses. Moving on to our Pharmaceuticals segment. Sales in the quarter totaled $632 million, increasing 7%. Within Pharmaceuticals, sales of our Injectables and Anesthesia division were $333 million and grew 3% globally. Performance in the quarter reflects high single-digit growth in our Anesthesia portfolio, driven by increased volumes in certain markets outside the U.S. Injectables growth benefited from a favorable comparison to the prior year period, which was negatively impacted by the timing of certain sales and supply constraints impacting international sales. We continue to experience softness in certain premix products, largely consistent with the dynamics discussed last quarter related to IV infusion protocols and increased use of IV push in select hospital settings. Our teams remain focused on reinforcing the clinical value of our Premix portfolio and driving improved commercial execution. Drug Compounding grew 11% and reflects strong demand for our services outside the U.S. Pharmaceuticals adjusted operating margin totaled 8.9% for the quarter, decreasing 100 basis points compared to the prior year. These results reflect the unfavorable product mix, increased procurement costs and increased corporate allocation expenses. These expenses were partially offset by Kidney Care TSA income. Finally, other sales, which represent sales not allocated to a segment and primarily include sales of products and services provided directly through certain manufacturing facilities were $16 million in the quarter. MSA revenue from Vantive totaled $85 million. As a reminder, these sales are included in our reported growth; however, they are not reflected in our operational growth for the quarter. Before moving on to the rest of the P&L, an important reminder on our continuing operations reporting. Following the sale of the Kidney Care business, certain corporate costs that did not convey with the business are now allocated across our segments in both cost of goods sold and SG&A, along with income from the TSAs, which is currently recognized within other operating income. In addition, as previously discussed, we reclassified certain functional expenses from SG&A to cost of goods sold beginning earlier this year. These costs support manufacturing and are now treated as indirect expenses, subject to inventory capitalization and recognized in cost of sales when sold. Therefore, as a result of these cost shifts across the P&L, we believe it is most appropriate to focus on operating income expansion. Importantly, operating margin on a continuing operations basis was 14.9% in the quarter, improving 40 basis points compared to the prior year period. Results reflect disciplined expense management and the benefit of TSA income, partially offset by softer volumes and mix. Third quarter adjusted gross margins from continuing operations were 39.4%, a decrease of 430 basis points compared to the prior year. The decline reflects the factors I just discussed. Third quarter adjusted SG&A from continuing operations totaled $629 million or 22.2% as a percentage of sales, a decrease of 240 basis points from the prior year period. Results reflect disciplined expense management and the benefit from the reclassification of functional costs. Adjusted R&D spending from continuing operations in the quarter totaled $115 million or 4.1% as a percentage of sales, a decrease of 70 basis points from the prior year period. Results reflect the timing of certain R&D expenses currently expected to shift into the fourth quarter and certain onetime items and, therefore, do not reflect our anticipated level of R&D spend going forward. Kidney Care TSA income and other reimbursements totaled $85 million in the quarter and came in line with our expectations. As previously discussed, the associated expenses related to this income are reflected in other lines of the P&L, including cost of goods sold and SG&A. Altogether, these factors resulted in an adjusted operating margin of 14.9% on a continuing operations basis, improving 40 basis points compared to the prior year period. Net interest expense from continuing operations totaled $58 million in the quarter, a decrease of $29 million versus the prior year period, reflecting lower interest expense following the paydown of existing debt with proceeds from the sale of Vantive. Adjusted other nonoperating income totaled $7 million, reflecting lower losses from foreign currency translation compared to the prior period. The continuing operations adjusted tax rate for the quarter was 5.1%, driven primarily by the release of reserves withholding taxes and discrete benefits related to mix of earnings across jurisdictions. And as previously mentioned, adjusted earnings from continuing operations were $0.69 per share for the quarter and increased 41% versus the prior year. Contributions to earnings growth included positive pricing, the receipt of Kidney Care TSA income as well as lower nonoperating expenses, including interest and tax. Before turning to our updated outlook, I want to comment on cash flow and liquidity. Third quarter free cash flow was $126 million, bringing year-to-date free cash flow to roughly flat. As we close out the year, we expect continued free cash flow generation in Q4. We remain focused on strengthening cash flow generation through improvement across all areas of working capital. As Andrew mentioned, to prioritize and accelerate our deleveraging, we anticipate reducing the quarterly dividend to $0.01 per share beginning with the next payment scheduled to be made in January of 2026. This action is expected to free up more than $300 million in annual cash flow. Given our year-to-date business challenges, we now expect to achieve our 3x net leverage target by the end of 2026. Once achieved, we will look to expand our aperture for capital deployment. We recognize the importance of improving our balance sheet and are continuing to prioritize deleveraging in the near term, including with cash made available from the proposed reduction in our dividend. Let me conclude my remarks by discussing our 2025 outlook for the full year and the fourth quarter, including some key assumptions underpinning the guidance. For full year 2025, Baxter expects total sales growth of 4% to 5% on a reported basis. This guidance reflects current foreign exchange rates, which are expected to contribute approximately 50 basis points to top line growth for the year. In addition, our reported sales guidance includes the contribution of approximately $320 million of anticipated MSA revenues from Vantive. Excluding the impact of foreign exchange, the MSA revenues and the exit of IV solutions in China, Baxter now expects operational sales growth of 1% to 2% for 2025. This reflects a reduction from our prior expectations of 3% to 4% as we have updated our outlook to better reflect the evolving dynamics across select parts of the business. Operational sales guidance for the full year by reportable segments is as follows: For MPT, we now expect sales to be flat to 1%, reflecting the uncertainty around the Novum situation as discussed previously. We continue to expect sales in our HST segment to increase 3% to 4%. Performance reflects sustained momentum across the portfolio, supported by a healthy order pipeline and strong execution. We now expect Pharmaceuticals to increase approximately 2%, which reflects the continued softness in select premixed products, which we continue to work through. Turning to our outlook for other P&L line items, beginning with tariffs, we continue to estimate the net impact to our results is approximately $40 million in 2025. TSA income and other reimbursements are expected to range between $170 million to $180 million. We now expect full year adjusted operating margin from continuing operations between 14.5% and 15%, which reflects the top line sales reduction and the associated impact on our integrated supply chain costs from lower volumes flowing through our manufacturing facilities. We expect our nonoperating expenses, which include net interest expense and other income and expense to total between $210 million to $220 million. On a continuing operations basis, we now anticipate a full year tax rate of approximately 15%. We expect our diluted share count to average approximately 515 million shares for the year. Based on all these factors, we have adjusted our outlook for full year adjusted earnings per share on a continuing operations basis to $2.35 to $2.40 per diluted share from the prior guidance of $2.42 to $2.52 per share. This reflects our updated adjusted operating margin and tax rate assumptions. Specific to the fourth quarter of 2025, we expect continuing operations sales growth of approximately 2% on a reported basis and declined approximately 2% on an operational basis. For the fourth quarter, foreign exchange is expected to positively impact the top line by approximately 100 basis points and MSA revenues are expected to total approximately $80 million. Note that we have now mostly lapped the China IV solutions exit and is not expected to have a meaningful impact to top line growth in the fourth quarter. On a continuing operations basis, we expect adjusted earnings per share of $0.52 to $0.57. With that, we can now open up the call for Q&A.

[Operator Instructions] I would like to remind participants that this call is being recorded, and a digital replay will be available on the Baxter International website for 60 days at www.baxter.com. Our first question comes from Robert Marcus from JPMorgan.

Great. Welcome, Andrew and Kevin. I'll ask both of mine upfront. They're sort of intertwined. Andrew, you've been there for 2 months, almost 2 months, making some pretty important and bold moves on capital allocation. Maybe you could just help us understand your vision for Baxter, what you've learned, what you've seen, how you feel about the health and trajectory of the business and any other changes we should be expecting in the future as you look to right the ship? And then part 2, obviously, fourth quarter is coming in well below the Street. Third quarter EPS probably would have been a lot lower without tax. With that lower jumping off point into 2026, how do you want people to think about their models as we extrapolate into next year? Do you think there's still a potential you can grow on the top and bottom line next year? And maybe any early thoughts on puts and takes?

Great. I'll take the first part and then, certainly, we can dig into the second and make sure I don't miss any of the part of the question. But look, first and foremost, as you're well aware, it's still early in the journey, yet really gained a lot of insight, and I've been most impressed with our people, deep commitment to building the best Baxter and advancing our mission to save and sustain lives. And I'll tell you, and I outlined this in my initial kind of highlights in the quarter. Look, our focus is on 3 areas: First, stabilizing the areas of the business that need focus and really driving our business around execution, and I referenced this say-do ratio. Second, strengthening our balance sheet and really aligning to enabling this for future investment back into the business and long-term shareholder value. And you're going to hear me say that quite often, how we think about capital allocation as our guide to long-term shareholder value. And then third, driving a culture of continuous improvement. And we've launched GPS, which is our growth and performance system. It's early in our journey, yet the excitement on the team is aligned around how we monitor, track and improve every day as we move forward. Now these journeys take time, but our team is committed and aligned to this is becoming the future of Baxter. And we often reference building the best Baxter. It will be underpinned with our continuous improvement journey, our GPS. And lastly, and I'll just highlight around strategy. And look, we do anticipate an Investor Day in 2026. We'll give a lot more insight around the long-term strategy, our portfolio focus and deeper insight into our financial outlook. But as we sit today, we are obviously not providing guidance for 2026, and we'll continue to update as the year unfolds, but we'll -- certainly, we will be providing that as we go into next year.

Maybe if I could just ask, do you think Baxter can have positive growth in '26? Are you willing to comment on that?

What I'll say, Robbie, is part of my standard work as a CEO is I go and visit customers on a frequent basis, and I visited several customers. Our customers really value Baxter. They value the products we have, the solutions and our ability to help them in their focus on patients. And so certainly, markets will do what markets do. We look to outpace the markets we participate in. And so I would anticipate a growth. But again, we are not providing guidance today.

David Roman of Goldman Sachs is on the line with a question.

Andrew, nice to meet you. I look forward to working with you. Kevin, welcome to Baxter. I wanted just to start a little bit more. I understand you're going to have an Analyst Day meet that you just referenced to ultimately lay out the long-term strategy. But Andrew, as you come into the company now, the business has spent the better part of the past, call it, 5 to 7 years focused on cost rationalization and balance sheet required capital allocation moves up to the point of cutting the dividend today and potentially further moves beyond that. So as you think about the forward identity for Baxter, is this a med-tech company in your eyes? Is this a diversified manufacturing company? And what decisions are you going to make that ultimately align to supporting how you see the business? Then I had a follow-up question.

Yes. David, so first and foremost, as you're well aware, I'm going very deep on the business, assessing, understanding our value story to our customers and then how we turn it into long-term shareholder value. If I do a step back for a minute, look, you will often hear me talk about capital allocation as the framework for our success. And that is how we utilize and really drive investment back in the business to really outpace and continue to add high value for our customers, our employees and then, ultimately, our shareholders. And so you're going to see us continue to focus on that. Again, I will go into a bit more color around where we sit in the markets, how we're utilizing innovation to drive expansion to really align to the needs of our customer base, and how we continue our trajectory in our growth story at Baxter. But to give additional color today is a bit early in the journey, yet we will go into that in 2026 as we lay out our view of the markets, our position and where we're going to invest and also where we're going to continue to drive improvement in our operating system.

Okay. And then maybe just on the businesses more specifically, Joel, if you look across the different growth drivers here, whether that's in pharma or parts of MPT, you are seeing a lot of the growth come from, I think, lower-margin segments like compounding versus anesthesia and injectables. Can you maybe help us think about the implications from the drivers of top line growth down the rest of the P&L and how that's factoring into your Q4 and updated guidance for 2025?

Yes. Thanks, David. A couple of things. And first of all, I'll just make one comment. And you're right, one of the challenges we have had and had this quarter was around mix. The one thing I would like to call out, though, is our Advanced Surgery business in MPT, which certainly is on the positive side of mix, continues to have strong performance. And so again, while I agree with your general thesis, just I did want to point that out. Look, there's a number of things I would say that are really factoring into some of the -- both the challenges we've had and sort of the forward look. It's not just one thing. It's a number of different areas. Certainly, we expect the sales across our Infusion Pump portfolio to remain pressured as we work with our customers to fully address the outstanding field actions in order to lift -- to ultimately lift the shipment and install hold on Novum. And so as we sort of think about where we are and where we're headed, our updated guidance reflects the uncertainty around the Novum situation, including the potential impact from various customer responses. I think within IV solutions, the demand in the U.S. certainly remains below pre-Hurricane Helene levels and certainly below our expectations. And I'd say based on our current expectations, we do expect further recovery in demand, although the pacing and the timing of that, I would say, is at a pace that's -- a pace on a time that's less than we had originally expected. And so there's some level of fluid conservation we're anticipating is likely to remain into 2026. From a pharma standpoint, you're right, we certainly grew our compounding at a high rate this quarter. The main challenge really there is in our injectables business in the U.S. We continue to experience softness there in certain premix products, which is fairly consistent with what we -- the dynamics we discussed last quarter related to IV infusion protocols and the increased use of IV push in select hospital settings. Again, some of this is also kind of a follow-on to some of the challenges we've had with IV solutions. But all in all, there, our updated guidance reflects the continued softness in select premixed products, and we continue to work through that. And so from a -- that's really sort of the top line discussion, David. And then as it flows through to the bottom line, the real story there really is around just the volume. For the most part, our pass-through has been pretty predictable and consistent. And in fact, had we actually -- even excluding the tax item, actually, we would have ended up on the lower end of our guidance without some of the tax benefit on an EPS basis just operationally. However, the impacts as we think about our forward look really are truly related to volume and the impact that has on our supply chain. So I'll pause there and, hopefully, that answers your question.

Travis Steed of BofA Securities is on the line with a question.

Welcome, Andrew and Kevin. I look forward to working with you both at Baxter. I wanted to ask a follow-up on the Novum. First, why is it kind of taking longer? Kind of do you need to redesign the product or refile with the FDA? And you also mentioned, I think, customer responses because of Novum in the last answer. So I just wanted to kind of follow up on that and how much of the guide change is based from the Novum impact?

Yes, Travis, thanks for the question. So let me basically maybe take you back and just for a second and remind that our hold is in place to support our customers' safe use of the device, while we seek to develop additional corrections of the field actions. We're working with urgency with our customers to complete the necessary actions in order to fully address the outstanding field actions and, ultimately, and lift the shipment. But certainly, we see continued interest in our Pump portfolio. I want that to be very clear. It's one of the takeaways I want certainly to have here, and that is -- but we do recognize the timing and nature of the resolution of the Novum LVP hold is leading some customers to evaluate alternative solutions. Some of that is they've already initiated returns, some have initiated exchanges for Spectrum. Obviously, we're actively supporting our customers in this way with both initial and, obviously, additional corrections eventually, but also offering Spectrum IQ as an alternative. And certainly, we all remain focused on minimizing disruption and maintaining strong relationships across our installed base. From a timing standpoint, again, at this point, we're unable to commit to specific timing around the shipment and install for Novum LVP. We do anticipate this though being in place beyond 2025. And I would just say, again, we are certainly working closer with our regulators while implementing field actions any kind. We'll continue to do so and look forward to providing updates on proposed corrections and timing when they become available.

Okay. And Andrew, I know in your past roles, you've done M&A to transform the portfolio. At what stage do you think Baxter is willing to start doing more acquisitions and willingness to take on margin dilution from those acquisitions? And Joel, in terms of free cash flow, how do you anticipate to improve free cash flow in this business and to kind of help fund some of those acquisitions? If I'm looking at this right, it doesn't look like there's been a lot of free cash flow generation at least over the last 9 months. I don't know if there's any kind of onetime things to kind of point out there and underlying free cash flow is better, but kind of wanted to kind of touch on the free cash flow aspect as well.

Yes. So -- and I'll hit the first part here. Look, we're pretty clear on -- as we think about capital allocation, our first priority right now is to strengthen our balance sheet, which means obviously, the drive to delever. While we're going through that, we're continuing to invest in innovation. And just to highlight one area we -- in our business, we did launch a product, very excited about our product in our FLC business. And we're seeing strong uptick in customer excitement around that product around the Connex 360. So first and foremost, delever our balance sheet, continue to invest in areas around innovation. And then to be specific on M&A, this will be part of our journey in the future. We're going to continue to cultivate, build our portfolio. And then when we're in a position to be able to pounce, we'll move forward. That said, we've got our focus around the first 2, as I've said earlier.

Yes. And I'll take the cash piece and just what may want to add to Andrew's piece, the one thing to be clear on, certainly, as he said, that would eventually certainly be part of our growth story. Think about that as fold-in tuck-in opportunities versus something that would be larger and strategic, clearly. I just wanted to make that clarification. From a free cash flow perspective, so the good news is we had a really strong September. We did have positive free cash flow of $126 million in the quarter. And I certainly do anticipate having continued positive free cash flow as we head into the fourth quarter. It's typically our strongest quarter of the year. And so I certainly do anticipate that. As we go forward, maybe just a broader comment. I mean the main issues we've had with cash this year fall into a couple of categories. One, as you probably expect, is operational performance. You'll recall, we did have a fairly large outlay of cash in the first quarter related to Hurricane Helene expenses and the expenses occurred in the prior year, but the payables got paid for the most part in Q1. There's certainly been a tariff impact. And then from a working capital perspective, the payables and receivables are in a pretty decent place. The main issue has really been around inventory. That's been driven really by some of the challenges with the Novum fluid conservation as well as tariffs and a few last time buys. I do think some of the things, again, I do anticipate as we head into next year, continuing improvement in those areas. We're putting a lot of work and focus around all areas of working capital. But -- and -- so as we head into next year, I do think that's going to improve. And I've talked in the past about a cash conversion of 80%. I think, again, that's something that I think ultimately, this company should aspire to. I look forward to making continued progress towards that target as we head into next year.

Larry Biegelsen is on the line from Wells Fargo with a question.

Andrew Kevin, welcome. Andrew, given this is your first call, I wanted to ask you 2 high-level questions. First, you came -- many of us on this call don't know you from your prior experience, and it was a nonmedical device company that you came from. So help us understand how your experience at ATS will help you turn Baxter around. And I had one follow-up.

Yes. Larry, a couple of things. First, having launched and driven a continuous improvement culture at several businesses, look, it takes time, yet it drives impact at every level of the business. And we've launched GPS to really align around that. And it's more an empowerment tool than a disablement. And so it's really aligning to putting the power in the business units, driving and enabling our teams to have impact. And I'm excited about the passion this team has for Baxter and for our shared future. And that's usually an area that aligns well with continuous improvement. As far as my experience within medical tech and med devices and roughly our space, you got to remember, not only was Baxter a customer, many of our areas and peers were customers as well. So clearly understand the space, and we have a leadership team that has deep insight around our area and where we have a key focus on enabling our customers. So getting comfortable in where we are in the journey, yet we have some work ahead, and you're going to see us continue to highlight where we're making progress and where we need to have laser focus to improve.

That's helpful. Andrew, I'd also love to hear your thoughts on the Baxter portfolio. It's still a diversified company with call points in the hospital and physician office. Do you think all the pieces fit together? Or could we see you focus more on the hospital setting, less on the office setting?

Yes. So again, and I'll default to 2 months, yet, I've been able to meet with many customers and -- or several customers. And their focus on Baxter and their feedback on Baxter has been very positive. Now certainly, there's work to do. And I want to be very clear around what that looks like and how we need to drive operational execution. And so where we sit today, we believe our portfolio is a strong portfolio for the future. Of course, we're going through the assessment. And we've also done some reassessment of that before my time. And we've become more streamlined, more aligned to our higher-value areas of focus. And so I would say it's early days yet, really, really pleased with the feedback I've received. And as I mentioned, one of my standard works as a CEO is I'll be visiting with customers frequently to gain insight to drive impact into our ability to execute in the markets we serve.

The next question comes from the line of Joanne Wuensch of Citi.

I look forward to working with you. Two quick questions upfront. I'm a little confused about IV fluid conservation this far after Hurricane Helene. At what stage is this just sort of a more normalized adoption or utilization rate and not a recovery rate? And then my second question, I'll just toss it out there. You guys are always closest to the hospital environment and understanding CapEx and procedures and everything else that's going on there. What are you seeing? And do you anticipate any change or changes given -- I don't know how to word this, politics, we'll just put it at that.

Thanks for the question, Joanne. So I'll start with the fluid conservation piece. Certainly, look, this has been an ongoing issue, as you said, the demand remains below the hurricane Helene levels. Again, we do expect recovery in demand, Joanne. But certainly, what we -- the best estimate and the best information we have available today from our customers, from market insights, we certainly believe our customers' buying patterns still continue to reflect fluid conservation. It's more of a, I'll say, buying pattern issue. Interestingly, recently, there's been also articles that have come out on this from various interviews with hospitals where they've seen -- they've said, hey, look, there's -- hospitals have reinforced this focus on the fact that they really are focused on conservation. And I would remind you, I mean, again, back in 2017, we did have, again, not directly related, but somewhat similar experience to this and some of the return to buying patterns did take even up to the better part of 2 years in order to recover. So I think the thing I would leave you with is that over the medium and long term, we certainly remain confident in the strength of our IV solutions business. Clearly, our teams are actively focused on working closely with our customers to make efforts to improve utilization given certainly the improved supply of fluids that we have and, obviously, the clinical benefits of our products. And so that's -- I guess I'll leave you with that as far as the conservation. And then as it relates to your other question from a hospital CapEx, obviously, since certainly I'll just face some of the uncertainty that's been going on in -- coming out of Washington, it's generally been -- we've certainly been looking carefully for signs of hesitancy from a capital spend perspective. And that's just -- it just hasn't been something we've seen at this point. Our order book in our capital business has been -- in our HST business has actually been quite robust. It continues to be. In fact, our year-over-year growth from -- for this quarter, our orders were up around 30%. And so I think we haven't seen that yet, certainly being looking for it, paying attention for that purpose. But at this point, we really haven't seen a slowdown in hospital CapEx, just kind of crimping those buying patterns.

Vijay Kumar of Evercore is on the line with a question.

Andrew, welcome to your inaugural earnings call. I guess my first one, perhaps for you, Joel, Q4, I just want to clarify, is the implied injectables something like down mid-teens on the pharma side? What drives that? And I think guide implies operating margin declines. I just want to make sure we're thinking about the right way.

Yes. Thanks, Vijay. So for pharma, I mean, it really truly is, as I've kind of talked about, it's somewhat of, I'll say, a change in the marketplace that we're working through. Again, there's been softness with some of our premixes. Again, there's always competitive pricing in the space. That's something that's kind of always been a thing there. And so I don't know that there's something new, although there is some shift. Again, we talked about using IV push. IV-related protocols have been different where there's some, again, more purchasing of vials versus premixes. So I think there's really, to me, has been some shift that is mostly in the U.S. Our business outside the U.S. primarily has, for the most part, been quite good. I think one of the things that maybe I would focus on here too is kind of -- so what are we doing about this as opposed to here's some of the things that are being done to us, so to speak. And one of them is just really remaining focused on reinforcing the clinical value and the value-add of our premix portfolio in order to continue to drive commercial execution of our new product launches. We've taken a real comprehensive kind of cross-functional look at this portfolio to kind of assess the current state of it and identified some areas for improvement in terms of including like really focused teams on how to drive out even more effectively our product launches, active territory management and just a real end-to-end review process. And then on the -- from an OI perspective, how do we think about the ways that we're making investments in that space to optimize our OpEx spend and really to make sure, again, prioritization is the key there. And so that's the best -- that's what I can tell you from a pharma perspective. From an OI, I'm taking your question to be an overall OI as it relates to our guidance, that really truly is an impact to, say, of volume declines as we think about the guidance. Again, it's -- our business right now really is a bit of a top line story from a softness perspective. The drop-through really does reflect the -- just the impact of volume on our overall operations.

Understood. And then maybe, Andrew, one for you. Look, Novum is such a key topic for the story right now. What is the issue, Andrew, that you've been able to identify, has Baxter been in touch with the FDA? When was the last communication? What has the FDA asked you or asked Baxter from a remediation perspective?

Yes. So Vijay, let me take this one. Look, we described the specifics of our field actions. Those have been out there. Obviously, we're working closely with our regulators. And when implementing field actions of any kind, we're going to continue to do so. And our focus team is working really closely both with regulators and customers as it relates to these field actions, again, and those are all out there. I would say for this audience, the thing I'd like to reinforce as much as anything is we remain confident in our Novum, Spectrum infusion platforms. And as we continue to work through the ship hold, we've been duly focused on supporting our current customers, continued use of the device, determining appropriate additional corrections to fully resolve our field actions. And as I said earlier, we look forward to providing updates as decisions are made as we continue to support our customers, including ramping up production to increase our available Spectrum inventory as, again, as a great alternative as part of our pump portfolio.

The next question comes from Matt Taylor of Jefferies.

I guess I wanted to follow up on your comments regarding some of the near-term and long-term actions. I realize you're not going to provide any quantitative guidance, but I'd love to hear from you what you think could happen, what could go right near term with some of these immediate actions you're taking and maybe qualitatively describe the range of possibilities over the coming quarters if things do go your way?

Yes. Look, if I just walk through the journey, first, and I aligned around stabilizing and our focus on areas of the business that need support. We've launched GPS. It's called Growth and Performance System for a reason. Our business is aligned to not only monitoring, but then also how do you improve. And so while we've stated what we're going to be aligning to from a guidance perspective in Q4, we'll be updating as we go into next year on what that would look like. Our business has a key area and position with customers, and we want to fully unlock that potential. When we look to future and how we hold ourselves accountable, we'll be driving at or above market performance. And again, as we step back and look at our journey, GPS is early, yet we see real strong followership from the early engagement. And it takes time, but we're excited about the future and where that takes us.

And unfortunately, we are at time for today's call, and this will be our last question. Matt Miksic with Barclays is on the line.

Welcome, Andrew and Kevin. A lot to cover. So I'm just going to keep it to one question. I'm getting a lot of questions on this issue of IV demand. I guess just zooming out for a second. You maybe can appreciate that investors are having a little difficulty reconciling what's been a pretty strong procedure, surgical quarter for med-tech generally and some sense of like slower demand. So is there a competitive factor here, marginal or significant that's worth mentioning or a mix of procedures shift to outpatient or something else that would explain -- help reconcile that disconnect between pretty strong surgical volumes in Q3 and the ongoing demand around IV solutions that you mentioned?

Thanks for the question. Look, I guess all I could do is kind of reinforce what I said before. I mean we spent a lot of time with our customers. We also spent a lot of time gaining market insights. And again, as I referenced earlier, there's been some recent external articles probing on this topic, where actually hospital CEOs and others have talked about their focus -- continued focus on fluid conservation. And so again, I'll just continue to reinforce a couple of key points. Number one, we do believe over the medium and longer term, this will continue to recover. And the -- we're very confident in the strength of our IV solutions business. And again, the second point, again, I just -- we're -- our teams are actively and with urgency working with our customers to continue to help improve their utilization because this is not an issue of product availability from our perspective. And so I think that's just reinforcing that it's available and reinforcing the clinical benefits of those products. There's no question that the recovery to some degree has come in below our expectations. It's taking longer. And again, it's certainly been made that difficult to predict. At the same time, again, our guidance reflects our best expectations of that. And so I'll leave you with that.

And at this time, I'll hand the call back over to Andrew for some closing comments.

Thanks, operator. As we close, I want to reinforce my confidence and excitement about Baxter's future. We're building on a solid foundation with a clear mandate to drive continuous improvement, strengthen execution and accelerate our shared performance. And we are committed to delivering long-term value for our shareholders. I look forward to sharing our progress in the months ahead. Thanks, and stay safe.