Welcome to the 44th Annual Raymond James Institutional Investors Conference. My name is Jayson Bedford. I cover the medical device sector here at Raymond James. It's really my pleasure to have with us the senior management team from Baxter. We have the company's CFO, Jay Saccaro, and the company's VP Investor Relations, Clare Trachtman. I think we'll get going, Jay can start us off. All right. Thank you very much. Thanks for the invitation here to Orlando. It's nice to see everybody, and it's also great to see such a diverse investor base. Thank you all for your interest in our company. It's my pleasure to share a few slides, introducing our company to you for those that are new. I'll just pause briefly. We have our safe harbor statement here. This is also available on our website. Baxter is a company with a rich heritage. We've been around for about a century, saving and sustaining lives. The company that we have is a mission-driven organization, and that mission to save and sustain lives is central to everything that we do. We are also... I'll spend the majority of the presentation talking about products and financials and sales and so on, but I think it's important to also recognize that we serve an incredibly diverse stakeholder base. For us, being responsible corporate citizens is also at the center of what we do. I'm very proud to share with you a number of the recognitions that we've received recently, including Dow Jones Sustainability Index, Seramount 100 Best Companies, Corporate Equality Index, where we for once again have received a 100% score on the Human Rights Campaign Inclusion Index. Really proud of the progress that we're making as a company along a whole host of different dimensions. Last year, we outlined our strategy for investors. As I said at the beginning, it starts with this mission to save and sustain lives, but it encompasses a lot more than that. Our goal is quite simple: to transform healthcare with a patient-focused strategy and patient-focused initiatives to simplify workflow, to make lives easier for our hospital customers, and to enable cost-effective care. That's really everything that we're doing can be embodied in that particular statement. We've identified four vectors upon which we're gonna build this strategy. It begins with innovation. I'll talk throughout the presentation today about a lot of the exciting innovation we have at our company. In addition, the idea of expanding the markets that we participate in is another core area of focus. Operational efficiency. We dealt with an unprecedented environment last year. The inflationary impacts that we've seen, the global supply chain fragility that we were exposed to were remarkable. Through it all, we were incredibly focused on enhancing operational efficiency through cost synergies, through digital transformation, through transformation of our integrated supply chain. We've made a lot of progress, but we have so much more to do. Finally, capital allocation. Really being thoughtful about portfolio management, and I'll talk a bit more about this in a moment. Also on targeting deleveraging, which we will accelerate over the next couple of years, continuing to pay dividends, and then over time, return to share buyback once we achieve the debt levels that we're targeting. Earlier this year, we announced a number of strategic initiatives. I'm convinced that these strategic initiatives will significantly enhance our prospects going forward. It starts with the proposed spin-off of Renal Care and Acute Therapies businesses. I'll talk more about this in the presentation, as I will the simplified Baxter operating model. One of the as we looked at our business model and we looked at many of the challenges that we were faced with last year, we concluded that a regional business model with businesses that did not have full responsibility for the P&L, for trade-off decisions, and also for manufacturing, was suboptimal. We decided to move forward with this simplified Baxter operating model, which I'll elaborate on in moments. Finally, we announced the sale of our BioPharma Solutions business, a sale process or strategic alternatives. This is a great business that Baxter has. We are a incredibly valuable partner to the pharma partners and others that we support in this business. As we looked at our portfolio last year, as we studied what we're trying to achieve, we concluded that this was an asset that, while wonderful, was perhaps even better in the hands of others. We concluded that this process that we're undertaking right now, which is going very well, was the right thing to do with this particular asset. What our view is each of these actions will contribute, first, to strategic clarity. Simplifying our business structure, simplifying our operating model will go a long way to accelerating strategies. It will also allow us to accelerate investment in innovation. Importantly, I think this was very much highlighted during some of the challenges we experienced last year, the world is incredibly volatile. Having a supply chain that is effective and, more important, agile, is crucial to succeeding in today's environment. That's one area where I think some of these changes will help. Finally, we'll ensure that capital is allocated directly against growth strategies that can win in the market. First, as it relates to KidneyCo and the remaining part of Baxter, we are very excited to spin off our renal business. You know, from our standpoint, we've had a lot of experiences with spin-offs. Edwards Lifesciences, Baxalta, which has since been acquired by Shire then Takeda, have been very successful spin-offs. I think the ingredient in all of these was simple. We had very specific needs targeted by a business that was a little bit different than the rest of the company. In the case of the Renal Care business, it is so much about an intense close relationship with a very specific patient population targeting a very specific disease. In the case of Vantive, you know, we have this Renal Care plus Acute Therapies that will move to Vantive, then Baxter International will be about much of the hospital legacy of Baxter, along with some of the very exciting things we've added from Hillrom. We have a Medical Products and Therapies business, which is really the core legacy hospital business of Baxter. We have the Frontline Care business, TSS, and our VSS businesses, which came to us through Hillrom, which will sit together in Healthcare Systems and Technologies. Finally, we have our pharmaceuticals business. Speaking for a second about our Renal Care business or KidneyCo, I should say, it's a tremendously rich portfolio today. We are the leader in terms of providing peritoneal dialysis, and between PD and HD, we are one of the largest product suppliers to end-stage renal disease. Those businesses comprise $3.7 billion today, and they have a rich complement of products supporting that business. In our Acute business, this was a remarkable business during the pandemic, as it was a critical line of therapy for COVID patients that were in the intensive care unit. Beyond that, this is a life-saving and sustaining business, which we expect to grow for years to come. Interestingly, the expected market growth rate for this is solid at 3%-4%, but there have been some factors that are negatively impacting this. We do believe over time, the market growth rate will err on this higher side of this 3%-4%, and in the short term, it's been depressed. One of the factors that has contributed to this is the fact that, unfortunately, end-stage renal disease patients and pre-ESRD patients have been very vulnerable to COVID. We lost a lot of patients over the last several years. We are seeing or we expect to see this normalize in the coming months and quarters, such that in 2024, 2025 and beyond, we'll be at a much broader and normalized growth rate. From an innovation standpoint, it's really an interesting story. We are essentially focused from a PD and HD standpoint on really two things. How can we enable better and extended outcomes through the use of technology? Also, how can we lower the cost of care? Those are really the dual mandates of the innovation pipeline in Renal Care. If you think about it, the Sharesource platform, which we launched years ago, and to those not familiar with it really is about this idea of using telehealth to connect patient and clinic in more advanced ways. As we now progress, there is data and analytics that we can enhance with Sharesource. There are additional things that we can connect to Sharesource to measure the patient progress, all of these things yielding better outcomes. Excited about the innovations in Sharesource. As we look longer term, you know, we're looking at a next gen APD cycler that is lower cost. Because this comes down to, in many markets, a capitated reimbursement model. To the extent that we can use innovation to lower costs, that's a great win for all parties. A next -gen APD cycler and home PD solution generation. That's another area that we're focused on. Interestingly, we have an enormous logistics cost associated with this business. The reality is shipping patients' fluid to their homes is incredibly costly and burdensome. To the extent that there are elegant ways to solve that from an innovation standpoint, that's wonderful. We're hard at work in that. As we look at Acute Therapies, this is predominantly focused today on acute kidney injury. The vast majority of our sales are associated with that. There are ways to potentially expand beyond that. There may be even further application of this particular and powerful technology in other areas in the future. As we think about remaining Baxter, it too is an incredibly exciting story. We've grouped it into three, and I've described this briefly. The heritage of Baxter, the Medical Products and Therapies business, nearly $5 billion. Our Healthcare Systems and Technologies, which came to us through Hillrom, is another area that we are really quite excited about. If I think about, this particular business, you know, really interesting end markets, a lot of innovation, in particular, coming from the Frontline Care business at Hillrom, so tremendous opportunity. Then finally, our Pharmaceuticals business. We are gonna be launching more than five products this year in the U.S., so a lot of new launches to support growth in this area. As we think about the expected market growth, we expect roughly 3% compounded growth. Through innovation, our view is over time, we can do better than that 3%. The innovation that we're talking about starts soon. We expect that this quarter, we'll be submitting our Novum pump platform application to FDA. Really, really interesting and new development. We've not included any impact from this important launch in our financials this year, but I can tell you, we are very optimistic about where we sit today and the opportunities provided by that pump over the long term. In medical products, you can see a number of the other areas like Floseal, where we'll have a next-gen offering there, HEMOPATCH. We'll also be launching an ambulatory pump over time to complete our suite of pumps that we'll have available. Healthcare Systems and Technologies, a number of exciting launches coming from Hillrom. I think, you know, with the semiconductor shortage in 2022, we had some challenges with respect to fulfilling the sales potential of the Hillrom business. What I walk away from the year with is an incredible excitement about the portfolio of products that they have, the existing products, but also the pipeline in development. Notably, we expect to launch a next-gen upgrade to our ICU bed this year. That will be an important catalyst for 2024. Our Pharma business, as I mentioned earlier, we started to revitalize the pipeline. We have a new leader for this business, Alok Sonig, who's doing a wonderful job, and we'll be commercializing five products, as I mentioned earlier, in 2023. Looking at it from a manufacturing and supply chain standpoint, you know, this is an area that we faced unprecedented challenges in 2022. It was remarkable. Not only did we see more inflation on our input costs than we could possibly imagine at the start of the year, but in addition to that, things like semiconductor shortages, things like the extended supply chain because of port closures and congestion, all of these things led to very real challenges that we had to confront. We've embarked on a number of improvements, and some of these have been discussed in the past by our supply chain leader, Jim Borzi. Things like manufacturing footprint network optimization. This represents a real opportunity for us to simplify the number of facilities that we have, the footprint, how things go. We've talked in the past about make where you buy, make where you sell. Historically, we've done an okay job at this, but the work that we're doing now really will enhance this idea of simplifying and shortening the global supply chain that we have. We are also looking at distribution networks as part of this. Finally, we'll be disentangling the KidneyCo operation from our business. I think that's, you know, one of the most important aspects that we're focused on of the separation is how can we elegantly and simply separate out the Medication delivery and Renal Care businesses. We've made enormous progress, and frankly, we would not be spinning it off had we not developed a really sound plan for simplifying that network. We're also focused on enhancing our operations. It's interesting because we took out several hundred million U.S. dollars from our manufacturing network costs last year, but it was clearly overshadowed by the dramatic impact of inflation. This year, we'll do the same. What you can expect in a stable inflation environment is these benefits to shine through on the P&L. What's happened is we've done our best to offset an extraordinary inflationary situation. The things that we're focused on, we have a real opportunity for automation in our facilities. Still today, many of our facilities are very manual in nature. So by including robots, it really will simplify and expedite the flow of product through those facilities. We're also looking at how we can upstream and downstream integrate the various elements of the manufacturing process. One of the areas that I haven't really talked extensively about in this presentation is cash flow. We had a disappointing cash flow year for all of the reasons that I mentioned. We expect to more than double cash flow, free cash flow this year, which will be a dramatic improvement. Part of that relates to inventory optimization. We've come a long way in terms of enhancing our systems around inventory optimization. I think the new business model that we've established, the vertical business model, will also really help us think more intelligently and swiftly about how we optimize inventory. Finally, continuing to enhance the analytics that we have in place. All of these things working together will radically improve the supply chain of Baxter and allow us to more effectively navigate a tumultuous global supply chain environment. In short, you know, we're really happy with where we sit today after what can only be described as a very challenging 2022. As we sit here in 2023, I believe the actions that we've outlined in this presentation and announced will really position our company for success. The proposed kidney spinoff, I think, benefits us by allowing both companies to focus on very specific and different things. The simplified operating model enables greater strategic clarity and faster decision-making. The manufacturing disentanglement will drive margin improvements. The additional capital will allow for focused investments in R&D and commercial development to accelerate value creation. Finally, we expect our new simplified GBU reporting model to be integrated beginning Q3 2023. While this has implications for financial statements and reporting, I think far more important are the implications that it has to the effectiveness of the operating model of our company. I'll end where I began. We as a company, we've been around 100 years. We're incredibly excited about the next 100 years, with the purpose of our company, simply put, to save and sustain lives. I think the actions that we've discussed in this presentation today will really set us up for future and sustained success as we look to those next 100 years. At this point, I think we have a few minutes for some questions. Yeah, yeah. Let's get into it. We do. Jay, thank you, and well done. I guess just to start, it's been a few months since you unveiled the strategy here. Curious as to the response from internal folks, from customers, from potential suitors in the case of BPS. Is the response what you thought it would be? I would say generally, yes. I think internally, there's a lot of excitement. Our company has had a lot of great success with spinoffs in the past. Our Baxalta business created opportunities for our bioscience team to really shine under their own spotlight. At the same time, it created a foundation for our Baxter business to really explore growth in new and different ways, which to a large extent, we paid off on over the last several years. I think interestingly, many of the renal folks have been at the company for a long time. As they look at it, there's a very real excitement around what does this mean for us, and can we proceed like some of Baxter's previous spinoffs? A lot of excitement on that front. From a customer standpoint, you know, many of our hospital customers appreciate the simplicity because at the end of the day, you know, having a more focused hospital business is something that they definitely appreciate. As we think about the BPS business, we announced that sale process, and what we knew about that business is it's a wonderful business. We have world-class facilities. That team does a great job. It's just so different than what we do on an ongoing basis that strategically it didn't make sense to keep it, as I said earlier. The result of this is, you know, we have a very rich process that's ongoing. I hope it results in sale. We'll see. Of course, we're open to all strategic alternatives, and so far, so good. That's generally speaking what I would say. Okay. I guess one of my questions coming in was, what if you don't get the price you want for BPS? I think you mentioned in the prepared comments that the process was going well, which I assume is a good thing. Yeah, the process is going well, so I think, I don't have a large concern about that at this point. What I will tell you is, we're very focused on economics. You know, we understand what this business is worth to us, and so we would expect something well in excess of that as part of the sale process. If that were not to materialize, then we'd look at things in a very different way. So far, so good. It's not a real concern at this stage. What would you identify as the major risks in this strategy? Overall? Yeah. I would always say that, execution of a spin, causes you to focus internal. Execution of a vertical model implementation too causes you to focus internally. What we have to make sure of, and I'm actually very proud of the team in terms of our continued focus, is that you continue to look outward because it is a dynamic and volatile environment, both from a supply chain inflation inputs, but also from a competitive standpoint. As we think about this, I always worry about the risk of disruption, but I think we've got the right model in place, and we have a lot of experience in this kind of stuff in the past, having done spinoffs, having done reorganizations in the past. I think we've got the right capability in place. We're staffing it in the right way such that our critical teams, which need to sell and win in the marketplace every day, they're doing what they do. Okay. Okay. Thinking about the combined business, pre-COVID, the Op margin profile was in the 18%- 19% range. The guide this year is 15%-16%. I think a lot of investors are asking, "Hey, is there structurally something different that would prevent you from getting back to 18% and 19%?" That's kind of the question, if you can comment on that. Sure. I'll stop short of giving long-term guidance today, but like maybe some general comments. I believe that our business was incredibly impacted by some inflationary phenomena and a supply chain constraint on a lot of our business. I'm hopeful that some of those things alleviate going forward. We've started to see that. We commented on our earnings call that things were looking a little bit better. You see the second half margin of Baxter versus first half. We expect a very large improvement. Now, as we move into 2024, there are a number of other things that will accrue in our favor. First, we'll start to see hopefully the benefits of a couple of new products launching, namely our pump and Progressa+ Plus, a new bed for ICUs. As we move to 2024, we will start to see the benefit of some of the cost actions that we take this year are not fully realized in 2023, but accrue more to 2024. In addition to that, we'll see some incremental Hill-Rom synergies. Hopefully, commodities continue to cooperate, semiconductors continue to cooperate. Some of that backlog that we've had and some of those incredible costs alleviate, all of which would lead to better performance in 2024. As we move to 2025, you know, we'll look at various pricing levers and other levers that we have in place. In combination, I do believe there is a very nice story on HoldCo, the margin restoration plan, let's put it that way. That's something that, you know, we as a team are very much focused on. On the remaining Baxter business, is there a desire to accelerate some of the spending such that when it's a cleaner story, the top line growth is faster? Meaning, do you think there's gonna be excess cost for the next couple of years on the base business to drive better top line? We actually included some incremental R&D, geared specifically towards Frontline Care and some, of our other businesses in 2023, because it pays off. You know, we had some very specific programs that pay off, we expect will accelerate growth. Of course, it takes a little bit of time, but yeah, to your point, making strategic investments now. Now, I'm not talking hundreds of millions of U.S. dollars in excess, but in the case of this year, you know, it's far less than that, but impactful. I think what we'll see is, I hope, meaningful improvements in some of these indices, incremental costs, launches, leading to an enhanced margin story in 2024, but being mindful that there will be some reinvestment along the way, in terms of R&D. I think that the first factors will outweigh the second by far. Okay. Just on the macro factors that hit you in 2022, can you just level set us on what you're seeing today in terms of some abatement in some of those pressures? Yeah. I mean, it's, this is a movable feast, right? I think, you know, what we said on the earnings call is I think generally correct. We've seen some improvement in commodities relative to our expectations. We're watching this very carefully, and it's a real wild card, but things are going okay there. With respect to supply chain and semiconductors, you know, we have started to see some alleviation here. Now, I don't want to sit here and prematurely call victory, we're gonna be really cautious about this going forward. So far, it's going okay. I think that, you know, after 2022, which was clearly a challenge for us, it's nice to see some level of stability. Okay. Lastly, I think we had one last ESG question, from Leslie. Yeah. Actually, this is an exciting area. We basically survey our supplier base, and we have a third party validate those results, and compare to, their benchmark. For us, being a good corporate citizen is multifaceted and involves our suppliers. We actually have increased the number of suppliers that we've surveyed. We're now well over 1,000 suppliers, up from, I think it was maybe perhaps 800 suppliers. The compliance with the surveys was over 80%, which too is really good. The fact that our suppliers understand that this is important to us and that they're willing to participate. Finally, as we look at these results, our suppliers benchmark above the... Our supplier base is above the benchmark overall in terms of the third party that we use. The name of that third party is escaping me at this moment. I think overall it's a good story and, you know, it's just one more illustration. I'm happy that we end with that question because for us, you know, our company is about a lot of different things, but being a good corporate citizen is squarely in the middle of all of that. Holding our supplier base accountable to support us in this endeavor is something that, you know, is part of our mission. Anyways, I think we may be out of time. Yeah. That, that's it. We're bumped up against time. Thank you, Jay. Thank you.