Good morning, ladies and gentlemen, and welcome to Baxter International's Second Quarter 2024 Earnings Conference Call. Your lines will remain in a listen-only mode until the question-and-answer segment of today's call. [Operator Instructions] As a reminder, this call is being recorded by Baxter and is copyrighted material.

It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Clare Trachtman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trachtman, you may begin..

Good morning, and welcome to our second quarter 2024 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer; and Joel Grade, Baxter's Executive Vice President and Chief Financial Officer.

On the call this morning, we will be discussing Baxter's second quarter 2024 results, along with our financial outlook for the third quarter and full year 2024.

With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the third quarter and full year 2024, the status and anticipated timing of our ongoing strategic actions, including the proposed Kidney Care separation and the potential impact of our recent pricing actions, regulatory matters and the macroeconomic environment on our results of operations contain forward-looking statements that involve risks and uncertainties, and of course, our actual results could differ materially from our current expectations.

Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter's ongoing business performance.

A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and also available in our earnings release issued this morning, which are both available on our website. Now, I'd like to turn the call over to Joe.

Joe?.

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With that, I will pass it over to Joel to provide more detail on our results for the quarter and outlook for the balance of the year..

For MPT, we now expect sales growth of approximately 5%. This is an increase from the prior guidance of 4% to 5% and reflects the outperformance year-to-date and continued momentum for our Novum platform. Sales in our Healthcare Systems and Technologies segment are expected to be approximately flat to the prior year, consistent with prior guidance.

This guidance reflects improved performance in the second half of the year, but also assumes the installation of some CCS orders are phased to 2025.

In addition, our guidance assumes FLC performance also improves in the second half of the year, but that both primary care and government orders decline in 2024, neither of which we believe represent market share losses. We expect both the primary care market and orders from the government will improve in 2025.

We now expect Pharmaceuticals sales growth of approximately 7%, which compares favorably to prior guidance of 6% to 7% and reflects the strong start to the year and continued momentum for our new product launches as well as increased contribution from Drug Compounding.

The contribution from Drug Compounding is expected to meaningfully slow in the second half of the year as supply constraints for certain hospital customers ease and the business focuses on driving more profitable growth.

Collectively, sales for these three remaining Baxter segments are now expected to increase approximately 4% in 2024 and exit the second half of the year at the higher end of our prior expectation of 4% to 5%. For Kidney Care, we now expect sales growth of 1% to 2% as compared to 2023.

This also compares favorably to prior guidance and reflects the underlying momentum of this business. Now, turning to our outlook for other P&L line items. We continue to expect adjusted operating margin to increase by more than 50 basis points in 2024.

We expect our non-operating expenses, which include net interest expense and other income and expense to total approximately $330 million in aggregate during 2024. We now anticipate a full year adjusted tax rate of approximately 23%. We expect our diluted share count to average 511 million shares for the year.

Based on all these factors, we now anticipate full year adjusted earnings, excluding special items, of $2.93 to $3.01 per diluted share, which also compares favorably to prior guidance of $2.88 to $2.98 per diluted share and reflects the outperformance we realized in the second quarter and expect for the remainder of the year and includes an incremental headwind from non-operational items totaling approximately $0.02 per share.

Specific to the third quarter of 2024, we expect global sales growth of 3% to 4% on a reported basis and 4% to 5% on a constant currency basis. And we expect adjusted earnings, excluding special items, of $0.77 to $0.79 per diluted share. With that, we can now open up the call for Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Robbie Marcus of JPMorgan.

Your question, please?.

Great. Thanks for taking the questions, and congrats on a nice quarter. Two from me. Wanted to start with the revised guidance. And it looks like it's pretty much going higher from the second quarter beat and then third quarter upside versus the Street.

So, you gave a lot of detail, but I was hoping you could just walk us through the underlying drivers and did I get the raise and impact correct? Thanks..

Hi, good morning, Robbie. It's Joel. Thank you for the questions. Yes, I think certainly, the new guidance is actually starts with the performance we had in Q2. We had a strong operational quarter and obviously, that's part of what's carried through to the rest of the year.

What I would just say in general, though, is that our businesses continue to have strong momentum in them. And so, I think when you think about this from a sales perspective, it's the recovery -- continued recovery over the course of the year sequentially in HST.

Again, we've raised the guidance for MPT as well from a sales perspective as well as Pharma. And so, I think the -- and all those businesses are going to continue to improve from a sales perspective. So, on the top-line, that's part of the really key driver.

From a margin perspective, we continue to expect a positive progress from a pricing standpoint from an ISC standpoint. I think our margin improvement programs and the continued work there are also a part of obviously what's driving ultimately the bottom-line beat as well.

The offset of some of that from an operating margin perspective, we do make -- we're making continued investments in our business from a sales and marketing standpoint, from an R&D perspective, from new product launch perspective. And so, those things continue to impact the opposite direction.

As well as we've got an MSA in Pharma that I think you're aware of was related to BPS sales. So that's an offset. And then finally, on the bottom-line from a -- we do have a headwind from an FX and a tax rate perspective. But again, punchline here, continued sales momentum, margin expansion with a couple of the offsets I talked about..

Thanks. And maybe just a quick follow-up here. The HST had a tough first quarter. It looks like it improved sequentially in second quarter. Front Line Care still negative year-over-year.

Maybe just speak to the underlying trends you're seeing in the two businesses there and your confidence in a reacceleration and return to a positive growth in the second half of the year? Thanks..

Hi, Robbie, good morning. We feel that a great deal of the operational issues are being addressed and behind us. We still are addressing them and will be throughout the 2024 calendar year. Primarily the one involved in one of our plant transfers is being addressed and is in really, really good shape at the moment.

I want to make sure that we also have -- our sales force is doing a fantastic job. We did a significant amount of revamping there. So, we see that going well. We also see a very positive trend in capital and the positive trend in capital allows us to have very strong, one of the strongest quarters we ever had in orders, it was the second quarter.

So, we see that going extremely well. This is in the CCS business, which is our beds and nurse call systems. FLC, completely different dynamic that has to do with the primary care market that has significant shift during 2024 with big players coming in and out.

We believe our market share is still growing in that slightly, but it's very high, and we feel that business is going to come back into normality towards the end of the year, as well as in government orders, which has been very, very low. And the most important factor was the comp versus last year. All in all, I think HST has turned the corner.

We see some very interesting dynamics on the market with our product offering gaining ground and stable market share and possibly growing into Q3 and Q4..

Great. Thanks a lot..

Travis Steed of Bank of America Securities is on the line with a question. Please state your question..

Hey, thanks for taking the question. I wanted to ask about the KidneyCo separation. I think that was new that you added early 2025, so I wanted to ask about that. And does your thinking change at all on spend versus sell? And also noticed an impairment charge on that business.

So, wasn't sure if there's anything to kind of read into that impairment charge this quarter..

So, a couple of things on this. First of all, thanks for the question, Travis. From a timing perspective, again, look, we're continuing to make progress and continue to move forward on a dual path to ensure that we're ready for both of -- from a sale and spin process.

And so, we're obviously doing that in a way that's going to maximize our shareholder value for all of our stakeholders. And so, we continue to make solid progress, what I would say.

I think the timing difference, again, I just look at it as we've continued to evolve the process and move it forward, again, we're in -- I think we're in a good place from the perspective of both, but the timing has shifted a little bit as we continue to move through the year.

And so, our plan is to still continue to get it done by the end of 2024, but it could move into the early part of 2025, which is why we put the guidance out that it did. From a goodwill perspective, the way I would take that is we've had a -- now a process where we actually had bidders put a value into what the goodwill is.

And so, as we assess that relative to the obviously the value of the books, there is a negative impact there from a goodwill perspective. I would say this, in the event that there was a sale moving forward, we would be recognizing a gain on that sale. So, there's a little bit of a timing issue from that perspective.

But it's just part of a normal process to reassess our goodwill. And now that again, we have an actual kind of what I call market value for that, so to speak, and that's where that came from..

Great. Thanks a lot. I wanted to ask a follow-up on the margins. So, first of all, the second half total company, you got a couple of hundred basis points second half margin ramp. So, I wanted to ask about the confidence and kind of what's driving that.

But also if you think about the segment margins, in the first half of the year, all the margin expansion for the total company was more on the renal side and the core of Baxter business down year-over-year.

I wanted to kind of think about how we get confidence that ex the RenalCo longer-term, like the RemainCo Baxter business is going to be expanding margins kind of the 50 basis points or so a year that you've kind of set out in the past?.

Sure. Let me start by taking what I call some of the drivers of our margin perspective and then I'll get to the second part of your question. Our margin drivers continue to be from a couple of different things.

One is, again, our top-line -- obviously, our top-line growth and some of the new product launches that are coming into play, that's both a short-term and something over the longer term, that's going to be a driver from a margin perspective. Pricing, we continue to see upside opportunities from a pricing perspective.

In the current year, it's been primarily outside the US. We looked for some of that inside, in the US next year as again some of the GPO contracts take hold, et cetera, et cetera, but -- and we continue to take pricing. ISC continues to be a area where we expand our margins.

Again, both the margin improvement programs and just the efficiencies we continue to gain from some of our investments in automation, et cetera, et cetera. And so that's where the kind of the really key drivers and why we feel continued confidence in our ability to actually drive our margins going forward.

I think the -- from an ex-Kidney perspective, there's a couple of things that I would just say. Number one, as we move to a vertical structure in this company, we've continued to refine the process of allocations. So, some of this from an ex-Kidney perspective is an impact.

Again, as we continue to refine our allocation methodology and you see some of that again impacting where the [indiscernible] Kidney and some of them margins ex-Kidney. The other part to it from -- just as I mentioned in some of my comments in the earlier question, we are continuing to invest in R&D.

We are continuing to invest in new product launches and things that ultimately are going to again drive growth that are impacting operating margins in general.

So that's the -- did that answer your question?.

Yeah, thanks a lot. I appreciate that..

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

Thank you, and good morning, everybody. I wanted just to start on the revenue outlook for the balance of the year, and recognizing the comment on exiting the year at the higher end of the 4% to 5% on the core Baxter business.

But as you look at the sort of guidance that you've provided for Q3 and the balance of the year, I think that implies revenue growth in Q4 below 1%. Can you maybe just help us understand the drivers of the phasing of revenue for the balance of the year? And then, I have one follow-up on the strategic capital allocation side..

Sure. Thanks for the question. Yeah, the primary driver of some of the movement there in terms of, I'll call, the squeeze math in the fourth quarter is really product mix impacted. It starts with compounding in Pharma. We've had some -- again, that's been a significant driver of some of the upside.

In addition, obviously, other parts of the business and that actually starts to slow down in the second half of the year, but in particular in the fourth quarter.

And so, I would say that's really one of the key drivers of some of the little bit of the phasing from what you'd call third quarter perspective and again the squeeze math on the fourth quarter..

Got it.

And then maybe just a follow-up, if you look at kind of the increases in discretionary spending on the SG&A and R&D side, could you maybe go into a little bit more detail about the internal capital allocation priorities? Where those incremental dollars in SG&A and R&D are being deployed? And maybe any early look you can give us into some of the either product launches or geographic expansion initiatives that may come out the other side of these investments?.

Good morning, David.

How are you?.

Hello, Joe. Thank you. Nice to talk to you..

Likewise, listen, just adding a bit to Joel's previous answer is compounding, we had a customer in Australia, which had maintenance planned into their hospitals, and we took a great deal of that volume. So, you see their volume dwindling down in the third and fourth quarter, which we knew about it.

So, when you do this squeeze method in the fourth quarter, you get what you -- or you get, but primarily driven by that part of the business having a specific event in the first and second quarter. Moving to the capital allocation, our capital allocation, now putting Kidney Care on the side, is driven by innovation.

So, what is the highest innovation drivers for the company is going to be in infusion technology. So, we have more investment to do into new categories of pump, more software. We have intelligence software coming out in 2025 with artificial intelligence that attaches to the pump.

We also have five new product launches that we're planning the next 12 months for HST, significant ones, really good ones. We need to put the money behind to close the gap in the research and development regulatory affairs as well as the commercial launch. So, that is where we allocate the money, and we have some molecules in Pharmaceuticals.

So, you're talking about infusion systems, specifics into PSS and care communications and what we call the injectable specialty drugs, primarily [indiscernible] that we have coming out of one of our facilities.

So, all the capital allocation is going into products that have higher margin and higher contribution to the company plus associated to that is the spending that goes along. So, it's a good spending put for good use. We did a lot of work internally to understand the major drivers of shareholder value to be able to achieve that..

Very helpful. Thank you for taking the questions..

Larry Biegelsen of Wells Fargo is on the line with a question. Please state your question..

Good morning. Thanks for taking the question, and congrats on the nice quarter here. Joel, I was hoping you could just give us a refresher on the key assumptions for Kidney Care sale or spin. The tax basis, how might it look different from the BPS sale? Just the margins for KidneyCo, first half was 10.9%, which is much higher than in prior year.

So, when we're trying to estimate the dilution, what should we think about for margins and the stranded cost assumptions and use of proceeds would be helpful. Any color on that? Thanks for taking the question..

Sure. Thanks for the question. Let me just start with the -- again, a little bit from a margin perspective. Again, our first quarter with Kidney, you'll recall, was -- had some substantial one-time impact that drove that margin that, what I'll call it, disproportionately high level.

So, I think as we've talked about Kidney in general, think about that, I think as a high single-digit sort of low double-digit margin profile at this point. And again, that was somewhat inflated though particularly in Q1 will be the way I would answer that question.

From a stranded cost perspective, look, this is an area we haven't specifically given that type of guidance yet on it. What I will tell you is that that's one of the key initiatives that I'm driving personally in terms of our ability to again to reduce the dilutive impact on that.

And so, I think that's something we're going to -- you'll hear more about as we go forward. But that's really, again, we haven't come out yet and given that type of information. And we have plans really underway and again, we're starting execution of that to get way ahead of it.

Certainly, from a sales versus spin perspective, obviously, the overarching goal is to maximize shareholder value. And so, we're going to do what is best in order to accomplish that.

And if I weigh the puts and takes on some of that kind of stuff, obviously, all else evaluations being equal, so to speak, there are certain advantages of the sale from the perspective of more cash earlier, from the perspective of valuation, certainly, et cetera, but obviously, there's lots of parts to play in that.

And then, from a tax perspective, I guess, to answer your final question, I think I look at that as a part of the overall economics of what we're going to do. I think there's been a lot of questions on tax leakage, et cetera, et cetera, et cetera.

But in the end, it really is about economics in terms of what we end up with from a net tax proceeds and again what maximize the shareholder value..

All right. I'll leave it at that. Thanks for taking the question, guys..

Thank you..

Vijay Kumar of Evercore ISI is on the line with the question. Please state your question..

Hey, guys, thanks for taking my question. Joel, I just want to go back on the fourth quarter, you implied sort of 1% organic. And if I heard you correctly, is the only thing that's changing is Drug Compounding.

So, should the exit rates for MPT, HST, KidneyCo they should all be in that sort of annual range rate in the low- to mid-singles for MPT, HST, KidneyCo in the 1% to 2%, and only thing that changes for Q4 is Drug Compounding, is that correct?.

It's primarily that and some Kidney, but I think the Drug Compounding is the main part of it. We haven't talked about the fact that our ex-Kidney exit rate for the year will be in the 4% to 5% range. So I think the -- but yeah, it's primarily compounding and then some slowdown in Kidney..

So Vijay, the Kidney part is primarily driven by value-based procurement in that specific business. So, as we await the inclusion or not, we look at our forecast and we look -- that is the biggest impact that we're going to have in Kidney is VBP.

And of course, that associated with Drug Compounding have muted the good growth and results of the rest of the businesses of Baxter..

Understood, Joe. And maybe, Joe, a bigger-picture question for you. If I just go back last 18 months, there's been a lot of moving parts, challenges, a lot of questions raised on, is Baxter losing share. When I look at your order commentary within HS&T in some of the performance in core business, it looks like we're back to 4%-plus.

When we look at the sort of the forward trajectory here, right, the implied exit rate, is that 4%-plus organic sustainable? Any one-offs we should be aware of? I know this year we had China VBP and some product exits.

Any other noise factors that we need to be aware of as you look at the outlook and your comments on share losses?.

Let me start from the beginning -- from the end of your question. On VBP, VBP is a factor in Kidney Care. It is a very muted factor in the rest of Baxter, because our presence in China is quite different. Our Kidney holds the vast majority of profitability in China for Baxter in the product offering as well. So, put that aside now.

So, VBP Baxter ex-Kidney is a non-event at the moment. Moving to share. We had a tough first quarter for HST. And that greatly was self-inflicted. We had execution issues, which are behind us, as you could see. We had really good performance in PSS. Our orders are significantly up and we're back on the saddle on that without any hesitation.

I see us moving forward into Q3 and Q4 with possibility of share gains in that space due to our offering and our ability to bring Baxter together, okay? We have a great offering that actually underscore our mission to save and sustain lives and that is becoming more clear to hospital customers and IDNs when we present, then we've seen a movement towards Baxter, what called the Baxter accounts.

The other portion of the market share, which has been spoken as of lately in some of the other calls is on the pump. Baxter will continue to gain 1% plus, the Novum can get up to 2% of market share points on a yearly basis and hopefully more as we continue to see great opportunities.

Baxter has converted some really large and important accounts from the competition with our Novum pump. So, I want to make sure that we are a really strong company competing in the marketplace and we're having some successes, as you can see by our guidance going into Q3 and Q4.

And the Q4, just to close the loop on that, is depressed primarily by Kidney Care going into negative growth territory for sales and the reduction into compounded sales..

Fantastic. Thanks guys, and congrats on the execution..

Thank you..

Danielle Antalffy of UBS is on the line with a question. Please state your question..

Hey, good morning, everyone. Thank you so much for taking the question. Congrats on a good quarter here. Joe and Joel, I wanted to ask a high-level question, and that was really you've been undertaking a sort of a restructuring over the last few quarters here.

I'm just curious about, Joe, where you think you guys are? Have you completely turned the corner? This is obviously quite a good quarter, relatively speaking and even not relatively -- on an absolute basis.

So, how do you guys turned the corner? Where -- are there still more areas for improving execution that you see going forward, or are we on the path to more consistent improvement from here? And I'll leave it at that. Thanks so much..

Thank you, Danielle. Listen, one of the things I want to underscore has been Baxter's capability bringing together a life-saving portfolio of products. And we have made significant progress in the last two years in our enterprise accounts and how Baxter-connected products now are starting to show to our customers and how interested they are.

So, I feel that commercial execution not by segment or division only, but as a company has been very successful as of late, and we're starting to see that coming around. Second thing is now moving down from the sales into the ISC, we have turned the corner.

Our colleagues in supply chain and our presidents of the segments have worked very, very closely and have devised and are implementing and executing really good plans in terms of cost optimization. And we can see that in our margins, start to turn the corner and we have made great changes to accomplish that.

Going down one level, SG&A is all about what Joel spoke about, is our stranded cost associated with other efficiencies, primarily in G&A.

This is where the recipe is for the next 12 to 24 months is to optimize the Baxter shared services organization even further and there's great opportunity there as well as contain and offset the stranded costs, so we can show progressively in the next year, two, three, consistent improvements in operating income margins..

Thanks..

Matt Miksic of Barclays is on the line with a question. Please state your question..

Hey, thanks so much, and congrats on a really strong quarter here. I wanted to just touch on a couple of things that I don't know where [indiscernible] framed out yet in the call.

One was just, where you are in terms of the pricing resets that you've talked about a fair amount? And then, also just any sense that you can get from the patient support side of the business or call it the capital equipment side of the business that maybe speaks to overall demand in the market that you're seeing around investment in infrastructure and capacity as that's come up a few times this earnings cycle? And again, congrats, and thanks so much for taking the questions..

Thank you. As we had previously disclosed, we have negotiated two very large GPO agreements and conversations now have moved to the IDN level. As expected, customers are being thoughtful and thorough about evaluation -- evaluating their options.

We believe now with the Novum launch and our ability to provide product, our supply chain resilience, by the way, is second to none. We have proven that over the years and that resonates with our customers tremendously.

The association of that and the ability to have a large-volume parenteral pump as well as a syringe pump on a novel platform on the market makes a huge difference. So, I feel optimistic that we're going to close those negotiations in the next four months and be able to move on into 2025 with these things behind us.

And by the way, pricing has been a contributor to Baxter, in Q2 2024, was about 100 basis points and expect to be roughly 100 basis points for the full year..

Yeah. And then I'll just take that from a capital perspective, you'd asked about investments in capacity and other types of things. I mean, I think the way I would think about this obviously is as we contemplate our world post-separation, this certainly is an opportunity from -- to really evaluate the -- I guess I'll call it our overall network.

There's a lot of things that are intertwined while Kidney is part of our company and the ability to actually really reevaluate that once again that separation does happen is really going to be a key driver of how we think about our network, how we think about our manufacturing, how we think about our distribution network, et cetera.

So again, as we think about our capital spend moving forward, and again, with now the ability to allocate capital, if you will, in a way that's really focused on both -- it allows both companies to where both companies can really focus their capital on their highest priorities.

Again, that's really how we're going to think about the way we evaluate our capital investments and our infrastructure moving forward..

Rick Wise of Stifel is on the line with a question. Please state your question..

Hi, good morning to you both. Joe, I was just hoping you would expand on your Novum comments. Where are we in the rollout? Is this -- you talked about the positives about high customer interest and the healthy backlog or funnel of orders.

Does adoption -- does growth accelerate in the second half and into '25? Is that the right way to think about it? And are you seeing more orders than you were expecting last quarter or sort of in line?.

Rick, good morning. We found, as a matter of fact, we have sales of Novum in the second quarter, which we did not expect to have, but we're a little faster in having the product ready for the market. What we've seen is great interest. It plays well for our ability to compete. As you know, Spectrum is a great product, but it does not have a syringe pump.

And having a syringe pump makes a huge difference. So, we're very happy with the momentum that we're getting in Novum. We'll been showing that to very large hospital systems and small as well. Our team is very hard at work and we feel confident in the technology. So, we have the ability to take market share. I think that is an important thing.

This is about providing our patients and our customers with the best technology on the market, not a re-engineered technology from many, many years ago..

Got you. And Joel, maybe just one for you. You obviously -- you and Joe highlighted multiple times in multiple ways Front Line Care and your optimism that things improve from here. And I was hoping you'd just dig in a little deeper on the turnaround.

So, will patient care and government, is that potentially going to get better? And maybe talk about that transition to cardiology and acute, I think those are two areas you mentioned. What do you need to do to get there and how soon can it have a positive impact? Thank you both..

You're welcome. So, Rick, let me break up a little bit, break down FLC for -- or Front Line Care to all listening to the call. Primary care is one segment, one division of that business. We have other divisions such as cardiology and monitoring. Those are going very well. We have no issues in the acute care space.

So, let's focus on a specific, the patient, the primary care physician office. We believe this market has two dimensions. One is the amount of backlog we had in 2023 that we're able to catch up and ship and sell and fulfill orders that were outstanding.

The second one is the slowdown in churn that we've seen due to several of these large primary care outfits exiting the market and moving. The demand is still there. Primary care demand is still there. We're number one shareholder, gaining a slight share with 80%-plus of market share already.

So, we see that coming back because the demand is not going anywhere. The demand is high. So, the churn due to the changes on the market as well as what we saw last year, we're catching up with the backlog. Government orders is a completely different thing altogether.

So eventually the government will need to buy the products that are needed for the government. And when that happens, we'll see the orders come in. We are a very large supplier of the government and I feel comfortable that those problems that we've seen in '24 with the decline in primary care, this year will turn the corner in 2025.

The business has solid footing, good technology. On the other side of Front Line Care, we have technology that will be launched in early -- in mid-2025 to compete into monitoring and we are very happy with new launches that will happen in the MedSurg monitoring products that we have coming out in mid-2025.

So, technology launches will fuel FLC in 2025 as well as the comp between '24 and '25, a re-emerging of the primary care and probably resuming orders with the government..

That's a great overview. Thanks, Joe..

You're welcome..

Pito Chickering of Deutsche Bank is on the line with our final question. Please state your question..

Hey, good morning, guys. Nice quarter and thanks for fitting in here.

Looking at the infusion pumps, what do you think the market is growing sort of in 2024? And are you guys picking up or losing share this year? And with all the RFPs out for '25 and beyond, do you guys see yourselves as market share gainers or market share maintainers? And then, on the strong pricing gains for infusion that you talked about, as we think about pricing in 2025, should we see an acceleration of this pricing for next year?.

Pito, can you repeat the last part of your question on the pricing, please?.

Yeah. So, you talked about the 100 basis points of pricing sort of this quarter and that continued in the back half of the year.

Should that be accelerating in 2025 as you think about the GPO contracts?.

Yeah. So, this is Joel. Let me take that. I think the way I would think about that is we talked about some pricing of maybe 100 basis points this year as part of the gain that was again mostly outside the US across our portfolio.

We think about that -- it's about that same pricing bump from next year as we think about -- as we move into the GPO contracts that come through and that's primarily US pricing. So, I think that's the way I would interpret that.

I don't know I'd call it accelerating necessarily, but I would call it consistent with what our expectations were for this year, heading into next year..

And Pito, answering the question on the infusion pump, first of all, we are market share gainers and have been for a long time, just about 100 basis points a year. This will accelerate and is accelerating with Novum we're going to see Q3, Q4 into 2025. So, we find that we have great interest in our pump.

I think there is a churn -- a natural churn of the market in terms of number of pumps that need to be replaced and our objective is to be -- in every competitive account with our new technology..

And then, a quick follow-up to David's question, not asking for 2025 [indiscernible] the year with revenues growing under sort of 1% with compounding slowing due to competitors' issues lapping.

I guess, how should we model revenue growth compounding in the fourth quarter and then what are the headwinds and tailwinds that we should be thinking about for 2025 revenues?.

Can you just repeat that? So, your phone was going in and out during that question. I apologize.

Do you mind repeating that one more time, please?.

Oh, yes, -- so apologies. So, a follow-up to David's question just about the fourth quarter revenues. We're exiting the year growing less than 1% with compounding becoming a headwind in the fourth quarter.

So, I guess the question number one is, how should we model compounding growth in the fourth quarter? And number two, with the compounding slowing, how should we think about headwinds and tailwinds for 2025 revenue growth?.

Yeah. I mean, look, I think the main thing here is really we're going to continue to see, again, improvements in HST. So that's where I'm going to start with.

In other words, we've seen that over the course of this year as that HST business has continued to accelerate, again, we think there'll be a strong exit rate for that business and that will continue to accelerate into 2025. I think as we talked about from a Pharma perspective, again, compounding is going to be a portion of that, that's going to drag.

I don't know that we've specifically guided the actual compounding business, but that is something that is again going to be a continued -- it's slowing, as Joe talked about, for various customer reasons that that's happened.

From MPT perspective, again, we continue to believe we've got some really solid momentum going into 2025, certainly coming out of 2024.

And then, obviously -- so just to kind of summarize all that, I think the -- while there is a bit of a squeeze math from the -- we talked about the Kidney and the compounding, the reality of it is that we have a 4% to 5% growth of ex-Kidney that we're heading into -- exiting the year with and heading into next year.

So that momentum is really strong, again ex-Kidney, and that's the part that we feel really excited about as we head into 2025..

Pito, just reinforcing and underscoring, our exit rate is 4% to 5%. We feel comfortable with that. That's what Baxter is taking into 2025 and we tend to think that our business and innovation can drive even further going into '26 and '27..

Great. Thanks so much..

Thank you..

Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating..