Started. Good afternoon, everyone. Thanks for joining us. I'm Danielle Antalffy. I am the U.S. MedTech analyst here at UBS. Very lucky to have with us Team Baxter. We've got CFO Joel Grade and Head of Investor Relations, Clare Trachtman. Thank you guys so much for doing this, taking the time to fly out here and be with us. First, I want to start with just acknowledging how hard you guys have worked in rectifying what happened in North Cove and getting supply back online. And credit to you and your team for that. Thank you for that. But starting with the questioning here, Joel, you've now been at Baxter for a year-ish. And I just want to know, what has surprised you most, to the positive, to the negative? What have you found to be most challenging as you look back over this last year? Yeah, thanks. First of all, thanks for acknowledging, again, the work that was done. And thank you all for your interest here at Baxter. I would say a couple of things. First of all, it's been a really great first year. I think the things that I guess I've enjoyed the most are this idea of moving into the medical industry. Baxter's mission of saving and sustaining lives is something that our company lives every single day. And the work that we did in North Cove just absolutely illustrates that. The people of the company are really amazing. And I think what also really strikes me, and one of the reasons I was really excited to be here, is the opportunities we have at Baxter. I think some of the things that, as I sit and think about now, where we sit as a company post-separation, we've had a lot of strategic actions that we've taken since early January 2023, and I found myself in a place where I'm really excited and where we are today. We can obviously talk more about that. From an opportunity standpoint, I also take a look at, from the CFO seat, we've got the opportunity to continue, just again, to accelerate growth, to execute more consistently, to drive cash flow in a better way, and so those are the surprising, and I guess I wouldn't say surprising, but the things that I've really enjoyed the most, and somewhat what I expected coming in, and what's really held true. I think one of the biggest challenges, I would say, of anything, it's just simply the amount of transformation, the amount of change that this company has gone through over the last couple of years. Obviously, with the BPS sale, with the verticalization of the business, the kidney separation here pending, that's a lot to absorb. I know from an investor perspective, everybody certainly understands that loudly and clear. And so I'd say that's been probably the biggest challenge. But again, having said that, as I kind of started with it, I actually think those actions have really set us up for success moving forward. That's fair. All right. Well, and now, as your focus shifts from year one into year two, maybe talk about some of the initiatives where your highest priorities are as CFO. Yeah. Yeah, it really starts with how do we continue to be a company that both accelerates growth and expands our margins? It's not one or the other. It's both. I think when we think about why are we doing the separation, it's really about capital allocation. It's about how do we actually, again, allocate resources to now higher return projects, those things that are really our priorities. And again, Kidney will have the same opportunity in their business with Vantive. But that's a big focus of mine in the second year is how do we allocate our company's resources to help ultimately drive growth? Again, the cash focus is really important. We had a choppy year in 2024 from a free cash flow perspective with separation costs. And then in the fourth quarter, ultimately, some of the costs related to North Cove, but really driving improvements in how we manage working capital, and just how we become a more cash-efficient organization, which then, again, allows us to invest further. And then third is just, again, I will just say, again, just operational execution. There are things that, as a company, the separation of kidney does allow us to be a more nimble, agile company. I won't go all the way to simple, but simpler. And I think it allows us that opportunity. And so from my seat and from, I think, continuing to drive operational consistency and execution certainly is important to our company, certainly important to the market. OK, got it, and you guys did just report earnings about less than a week ago here, so just want to make sure. I think there was some confusion around the updated guidance for 2024, if you could bridge us, accounting for Vantive and also North Cove, because my understanding is you actually had a lot of underlying strength there, so just want to make sure we lay that out, and then I'll follow up with 2025. Sure. So I'll start with a couple of things. I'll start with the North Cove impact. In the quarter, we talked about there around $200 million of top-line impact. But $150 million-$160 million of that was on the solutions business with MPT. $40 million-$50 million of that was actually related to our kidney business. There was also about a 50 basis points operating income impact on a full-year basis that we talked about, as well as about a $0.15-$0.20 EPS. Now, your question on the bridge, I'll give this a shot, and Clare can clean up anything that she needs to clean up. If you think about us on now on a continuing operations basis, that had our margins somewhere in the high 13s. If you add this back, the stranded cost that was about 250 basis points, that takes us really to about 16% from an operating income perspective. Then if you add back the 50 basis points that I just talked about on North Cove, that takes the 2024 operating income number to 16.5% or so. If you think about that and now bridge it into 2025, the 16.5% from a purely operational perspective, we were looking to add around 100 basis points of operational improvement. That comes from things like pricing, that comes from ISC work, that comes from positive mix. All those things would then be added to that. It would take us from 16.5% to 17.5%. What you have to go back the other direction on is there's really two components. One is MSAs that we're entering into that have a dilutive effect. They're sales, but I'll call it low double-digit margin. And so there's about a 60 basis points impact going the opposite direction that takes the operating income down. And then the second is TSAs that don't fully cover our stranded cost. And so there's at least in 2025, and so there's that impact, where we've got about... so it gets you to 17.5% with about 100 basis points of dilution, gets you to 16.5%. OK. OK, that's actually very clear. Thank you for that. If we think about 2025 and what's driving, I think you guys talked about 4%-5% sales growth for 2025. What's the product launch cadence over the next 12 months that you see most meaningfully contributing to that growth? Yeah, sure. I think what I'd start with is Novum, even though that's not a launch coming into the next year. A lot of, we're certainly going to expect to continue to experience growth from our pump sales, from Novum, both from an LVP and a syringe perspective. We've had a robust level of pump sales in general. And so again, while that's not a new launch, it's certainly, at least in 2025, it's certainly a big element of growth. I think the other part of the cadence, though, I'd call out is in the other parts of other businesses as well. From a pharmaceutical standpoint, we have a large number of products that we're looking to roll out in our injectables area. We've had good success with that this year. And we anticipate continued strong growth from an injectables perspective into next year as well. From an HST perspective also, and really both in FLC and in CCS, we have new product launches that are coming out that will have some impact, I'll say, in 2025, but even set us up for future success in 2026 and beyond. And so I think from a cadence perspective, those are the areas you should expect us to hear about from us. And again, those will have both impacts in 2025 and beyond. Anything you'd add to that? I think that's perfect. All right, and I do want to follow up on HST because that's been a volatile business line this year. What level of visibility do you have into order patterns in that business? So when you're talking about that 4%-5% for 2025, how much do you know about what's happening in that business? Because there's capital equipment, things like that. Right. So maybe if I'll separate the business just a little bit to answer that question. Sure. I'll call it the U.S. CCS business, and then even more specifically PSS. That's where a lot of our capital orders come into play. And we actually have good visibility to the book of orders in that business. And in fact, even in this past quarter, where we still had some choppiness, as you call it out, in HST in general, we actually had a really strong quarter in our capital, and again, our U.S., particularly our U.S. PSS business. And so we do have good visibility to that. Our order book actually has continued to grow. Again, we've had kind of mid-double-digit growth in our orders. And the thing about these, and maybe a couple of points to make, one of the questions early on I asked when I got into the company was, okay, so you have orders. How does that translate into shipments? That percentage is actually extremely high, and so what does get ordered eventually gets shipped. Now, the timing on that can be somewhat variable, and so that's probably the piece I would say to that. I guess as we head into 2025, a couple of pieces that I feel good about from an HST perspective. One, we certainly are going to be rolling into some easier comps as we head into next year. Certainly, FLC in particular had some really difficult comps this year with the backlog that was being absorbed from 2023 that was absorbing 2022 backlog, and so we're going to certainly result in easier comps there. But also, just in general, the broader part of the business, again, we do have some good momentum on the capital side. And so again, we certainly feel good about that, and as we continue to build some momentum heading into next year. Okay, got it, and just thinking about that 4%-5%, again, just sticking to that line of questioning, what is reflected from a pricing versus volume perspective? Because pricing has been positive, and I'm thinking more about pure pricing, not necessarily product mix. Yeah. Actually, both. That top-line growth next year actually is reflective of both volume and price. And so I think one of the things we've talked about a lot is the renegotiation of our GPO contracts, the MPT side. There's a fair bit of pricing reflected in there that we've talked about around 100 basis points or so regarding the pricing. But there's also a volume component to that. And so I would really answer your question that it's actually both. Okay. Okay. And actually, on the GPO contracts, renegotiating those, where are we in that process now? Like how much more to go? Yeah. So I'll start, and then Clare can chime in. Obviously, there's been a lot of work. The GPO contracts themselves, and I just remind people, there's three primary GPOs. Two of the three were up for renegotiation this year, with the third actually going to be renegotiated in 2026. 2026. Okay. For impact in 2027. So just that reminder here. So the GPO contracts have actually been renegotiated when we've talked about the pricing, as well as what I'd call additional pricing flexibility for supply shocks, for whatever the reason, we have a better opportunity to pass some of those costs along. Got it. What we're now in the process of actually is renegotiating the individual IDNs. And that work is ongoing. And certainly, again, we anticipated that to continue through the end of the year. I think we're in a good place with that. Obviously, even with North Cove, I think we find ourselves in a place where the progress we've made on, again, restarting, if you will, the North Cove plan, I think puts us in a good position to complete those timelines. Anything you'd add to that? Okay. Okay, got it. All right. A question for you on the competitive dynamics in your business. So as you look at the business segments, where do you see BAX in a share gain position? I think Novum is probably an obvious area. Maybe talk about what you've seen so far and where you expect that to go. But anywhere else? And then I'm going to ask the other side of the question. Where is BAX more vulnerable, and therefore maybe more focused on beefing up the R&D pipeline there? Yeah. I think you're right to start with the pumps. I mean, I think one of the things we've talked about is that even prior to Novum, our Spectrum pump had actually been gaining share at about a one point a year. And so I think there's really good demand there. And now that Novum's, especially on the LVP pump, has come into play, we actually think that there's probably twice that opportunity, meaning a couple of points of share gain a year. And so I think, because what we've really been pleased with is not only on the demand, but the wins we've been taking have been both from existing customers as well as competitive wins. And so we feel good about that. And on a smaller base, the LVP pump, I'm sorry, the syringe pump is actually even taking more share than that. I think that's really, I think, the primary area we've actually seen share gains. Anything you'd add to that? Yeah. I'd say the pump is really the focus there from a share gain perspective. Okay. And then the other side of the question, where do you see parts of the business that are more vulnerable to share loss? Maybe it's because. Yeah. I mean, again, we've gotten a lot of interesting questions on, has North Cove impacted the solutions business? And the opportunity, is there a risk there of losing share? And I think the way we view that is not over the long term, no. Now, there's going to be some fill-in opportunities and some things that would happen in the shorter term, obviously. But I really think we've gotten a lot of recognition for some of the resilience we've shown, the way that we've gone about getting this done, the timing of getting it done. And so I think that's if there's one area that kind of jumps to mind as questions we've gotten from that. I think the other one maybe is in some parts of HST. But broadly speaking, again, this is also an area that from a Front Line Care perspective, again, I'll divide the business up just in half here. The frontline business, again, we have a very high share in that space. And while there's been softness in the primary care business, that's not an area that we believe we've lost any share in. And then in CCS broadly, the same thing. There's been some puts and takes in different parts of that. But while we've had some softness in that business, we've also had some competitive wins. And so I think all in all, our share position is strong. Yeah. Okay. Stable to improving in certain areas, I'm sorry to say. And just on Front Line Care, actually in the primary care offices, what is happening there and what's going to turn that around? You want to take that one? Yeah. I'm happy to take it. So one of the things I distinguish a little bit too is the overall primary care market, because I think there's a little bit of confusion. Patient volumes continue to be strong with the overall primary care market. So it's not really a demand. Patients are continuing to go visit their primary care physicians. It's more to do, I would say, with one, we talk about the backlog that we did see that's impacting us in 2024. So in 2023, as we had built up that backlog over 2022 because of some of the supply constraints, we were able to clear that in 2023. So it's a little bit of a headwind. Then in addition, because of the high interest rate environment, we saw new construction start slow down. So even expansions at existing clinics, we did see that slow down. And to Joel's point, we have a really competitive product offering within the Front Line Care. And these are the Welch Allyn products. When you outfit a clinic or expand a clinic, typically there's these small capital purchases. So as that slowed down, that impacted the overall market as well. The last piece I would say about that is there was some for community health centers, there was some funding from the government post the pandemic that went into them. And so there was likely some purchases. As that funding stopped in the middle of last year, probably some pull forward of demand. So I think to Joel's point, as we go to 2025, there's just an easing of those comps that we don't expect to face for Front Line Care and in particular the primary care market. I'd say those are really to simplify the factors on the primary care market. Yeah, and I think just, again, to that point, the fundamentals of are patients still going to primary care? Yes. Again, some of the Walmarts and others, is there a bit of a shortage of primary care physicians? Yes, and I think that's caused some of a little bit of the movement out of the big box stores and some of those companies that haven't gotten into it as much, but in general, again, we certainly believe there's a stabilization recovery. Yeah. Fundamentals still strong in the market. Yeah. Okay. Got it. Last question on 2025. What are you guys thinking about tariffs with this new administration and exposure there? Yeah. So just I think maybe to give a bit of perspective here, once we exit kidney, our exposure to China is less than 2%. Oh, okay. And so it's very low. So I think from the perspective of that, that again, I want to frame up a little bit of that context there. And then if I think about the raw materials that we purchase that are actually purchased from China, it's actually less than that as a percentage. So I think so that, generally speaking, is obviously a positive. But obviously, we're still a little bit of a wait and see on tariffs in Western Europe and to some extent Mexico as well. But from large exposure to China, we just don't have that. Okay. That's helpful. Okay. Let's talk about North Cove a little bit and the $200 million sales headwind that you're calling out for 2024, lost. Well, actually, that's the question. Are these entirely lost sales or are these sales that could be pushed into 2025 because procedures are getting delayed? How do we think about that? Yeah. I would say, generally speaking, we don't look at those as lost sales in the sense that these customers are going away forever. I think there's going to be some softness. Certainly, the $200 million obviously relates to Q4. And while we haven't quantified this, we're still expecting some softness. Into 2025. Into 2025, yeah. But do we expect those to be sales that never come back? Again, we really don't. And that gets back to this point I was making a little bit earlier on the, hey, is there a share loss for some reason out of our customer base? And I don't think there is. And in fact, one of the things that we're really proud of at Baxter out of this event, back to your point, is we've all along said to this, like, this is obviously a terrible thing to happen, all these other things. But we believe strongly this could be our finest hour in terms of how we come out of this thing. And I think we've gotten some of that kind of even recognition from some customers around how this has gone. And so I really don't look at that as these are permanently lost sales. And frankly, there's some expectation of a favorable comp heading into the fourth quarter that we cover some of that back. Yeah. Okay. All right. That's helpful. What about manufacturing? There's so much manufacturing concentrated in this facility. So now, and to your credit, after Maria, I guess you guys put redundancies in the system. But how does this incident evolve your change or change your view of your manufacturing footprint, if it's right as it is, or if you need to diversify more? Yeah. I guess I would say a couple of things. Number one, just for kind of factual statistics, we actually now have nine facilities around the world that actually manufacture these products. And so one of the things that we really, again, I'll say immediately swung into action on is leveraging the redundancy of our global manufacturing network, in particular, again, in plants in Shanghai, China, and outside of Barcelona, where we actually have products coming in daily in order to supplement that. And so I think I would say, if anything, it made us a better company in terms of leveraging some of the redundancy that exists across our network. Again, I don't believe anyone else in this space would have been able to pull that off. I think that's one of the implications that actually we have an even more refined plan as it relates to redundancy within our network. Okay. I do think that just the one thing that maybe comes out of this over the longer term is I think for a while this product has been viewed as a bit of a commodity product. I think when this has happened, one of the impacts that I think could be that people see this now, well, this is actually a really critical part of the medical system and not just a commodity product, and so there's probably an economic discussion to be had around the just general economics of selling IV solutions, and so where that leads, we'll see, but I think generally speaking, that's really the way I look at kind of what came out of this. Okay. Okay. That all makes sense. Let me shift gears to capital allocation, if I may. So Vantive gone what are the primary capital deployment priorities for you, and how are they evolving? Sure. Yeah. So just again, for those not as familiar, one of the really key strategic rationales for our separation of our kidney business really centered around capital allocation. That business has a substantially lower return on invested capital than our other businesses do. And so from just a return profile, this really does allow us to prioritize investments in areas. And so back to your question, really focused on driving innovation and driving growth. I think certainly, obviously, our ability, the whole thesis of the separation work was how do we then continue to, again, to drive innovation, drive growth, drive margin expansion. And that's really going to be the center of a lot of our capital allocation investments. I think just broadly speaking, we still have some debt pay down to have happen, obviously, post-separation. But in a place, we've talked about targeting a three times leverage on our balance sheet. And that being said, again, what I started with is certainly really important to us. And then over time, again, we certainly would look to reintroduce a buyback program. We'd look to, from certainly starting with reducing option dilution, but then opportunistically from there. And then from an M&A perspective, which kind of fits back into the growth point, you certainly shouldn't expect us to do something that would be a large transformational deal. But in the spirit of are there opportunities for smaller tuck-in deals that actually accelerate? Again, we've talked about we'd want to accelerate the WAMGRs in the market. So these are the types of things that allow us to do that. And so that's really how you should be thinking about our investments. Yeah. Okay. Well, you brought up WAMGR. So I'm going to run with that because we love to talk about WAMGRs. Every other sector, it's like, what's a WAMGR? But MedTech. Back to the WAMGR. Yeah. You were probably like, what is this? That's a big deal. Yeah. Well, so that is a topic of conversation. And just in general, in the MedTech industry, you've seen WAMGRs move up into the right. Where do you think you are in the process? Do you have the pieces in place today? So can you accelerate that up into the right even without doing tuck-in deals? How much is relying on organic investment that's already underway versus potentially having to go inorganic? I think some of both. Again, I think that there is now the word innovation is going. It does matter, obviously, significantly, and so part of the organic part of that story for us is clearly going to be around our ability to develop and execute new product launches and innovation at our company. That's a significant focus of ours coming out of the separation, so I do think there is an element of that that is organic. I also think there's an element of it that, as we think about the growth profiles of our company over the longer term, there's an element of that that does include some inorganic as well. That there's sort of a buy versus build story there that I think appropriately fits in. Sure. And I would look at the Hillrom deal post-close. And I appreciate you weren't at the company when they acquired Hillrom. But that is a business that was viewed as potentially moving that WAMGR up into the right. I mean, do you still feel that that's true? And what's your post-mortem on the Hillrom deal and integration? Yeah. So I'm going to start with your first question. I absolutely do believe that is a continued opportunity to drive WAMGR. I think, again, and back to your question on some of the sequencing of product launches, again, we have a very nice, I'd say, portfolio and a set of opportunities from an organic innovation standpoint within that business. And I think that's going to be something that is part of what will be our growth driver in the later years of what would be an LRP. So I'm actually very excited about that. And I think that business has a part to play in it. I think clearly, from a timing perspective, there's challenges there. And I think the supply chain environment following that, as well as the interest rate environment, were difficult. Yeah. It was a perfect storm for sure. But having said all those things, I think it's a really important part of our portfolio. And from a margin perspective, I think it could ultimately be one of our, again, a really strong part of our margin profile. Yeah. Okay. And just on the organic investment side of things, I mean, I think one of the things, one of the opportunities that maybe is underappreciated or understudied at Baxter is R&D productivity. And what's your approach to R&D? I imagine it's evolved over since the initial split back in 2015. And how would you say where you are today from an R&D productivity perspective? Are you where you want to be? How far are you from where you want to be? Maybe a little bit there. I think where I'll start is just as a percentage of sales I spend, I think is pretty well in line with our peers. What I would say, though, is that I think one of the things we've talked about as we look at our forward-looking horizon is that how do we transition even more of that spend from maintenance to things that really are growth accelerating? I think, like any company, I think we've continued to have opportunities to improve that. I also think we have the opportunity to be much more targeted and focused in terms of where we spend those dollars and really focused overall on a product, what I think of as a product development life cycle. I think we're a company that does have a lot of products. And I think the ability to continue to improve how we think about those things in terms of where in the product life cycle are upgrades, where are things where we phase out? And therefore, that's, again, a key component to how we spend R&D dollars. And so look, I think, again, I think we're in a decent place. But I always think we have the opportunity to get better. And I think we'll continue to do so. Yeah. Okay. All right. Another question that I get sometimes is Baxter's strategy in the ASC. Obviously, site of care is shifting. Can you talk about? I'm not sure I have the answer to the Baxter ASC strategy. So yeah, I'll start with that one. So in terms of the ASC, this is an initiative that we took on probably about two years ago, really starting to build out, maybe even a little less than two years ago, building out an ASC sales force. And again, it's pan Baxter too. So while it falls under the purview of Heather Knight, who runs our MPT business, and so it's kind of under hers, it really is the team that they're building is one that would leverage, obviously, both the pharmaceuticals and the HST portfolio. I think one area where we're actually seeing a lot of traction right now as we've been making these investments is in our U.S. Nutrition business. So we've had a lot of traction within the U.S. Nutrition in the ASC setting after we've made these investments. So we're continuing. There are some gaps within our portfolio. And I'd say, to Joel's point, maybe some of the opportunities we can look at to fill those gaps with some inorganic and even organic investments as well to really round out that portfolio. Because we agree, we know that that's where kind of care is going. That is the faster growing part of the market. So it's about continuing to build out and have the right portfolio to go. But the investments we've made to date, I would say, are really starting to bear fruit, mainly in that Nutrition side of it. Okay. Fair to say it's probably pretty early innings of Baxter in that yard. It's early. Yeah. It's early. But also fair to say, to Clare's point here, we certainly recognize the importance of the space. Yeah. Let's say grow with the growers. Yeah. And it sounds like you have a clear strategy in place and all that. We know what areas of the portfolio we need to. We've identified the gaps and how we're going to go about addressing those. Gotcha. Okay. Okay. And I appreciate it. I want to front run. I think you guys are going to have an investor conference probably early next year. Yes. First First half of next year. Talked about. So I imagine we'll get some more color there. But in the last minute or so that we have, I wanted to push you and see if you'd talk about some of the high-priority R&D projects or even conceptually some markets that are a key area of focus for Baxter that we might get more color on in the first half of next year. I'll start. Then Clare can chime in here. I mean, certainly the high-priority R&D projects really are focused around the product innovation. Again, you talked about why what is it that makes HST or Hillrom, now HST, important in our world? It really is this. And the ability to actually come out to be on the front line of innovation, those products is really where some of the focus of R&D is. Certainly in the pharmaceutical space, again, we have accelerated substantially the amount of products that we're looking to roll out in our injectable space in that area. And obviously, that facilitates both growth and margins. And so that certainly is an area as well. And then again, in certain areas in our business within an MPT, whether it's in our Advanced Surgery or other components in the solutions area, so it really, if I had to broadly characterize it, our R&D focus really and truly is about driving innovation and turning Baxter into even a more elevated innovation machine as we go forward. If there's anything else you'd add. Yeah. The only thing I would add there is in terms of areas of focus as well is about how do we connect all the devices? So we have a great footprint. We have the real estate. So now it's about leveraging that real estate and having them talk and really address some of those needs that the hospitals had in terms of workflow efficiency. Yeah. Yeah. We talked about connected care as a key element to the HST story. And that's, again, Clare's point there. That's a huge part of this. Okay. With that, we're at time. Thank you guys very much. All right. Thanks, everyone.