Baxter International Inc (BAX) — Q4 2024 Earnings Call Transcript

Good morning and welcome to our fourth quarter 2024 earnings conference call. Joining me today are Brent Shafer, Baxter's Chair and Interim Chief Executive Officer; Joel Grade, Baxter's Executive Vice President and Chief Financial Officer; and Heather Knight, Baxter's newly appointed Chief Operating Officer. On the call this morning, we will be discussing Baxter's fourth quarter and full year 2024 results, along with our financial outlook for the first quarter and full year 2025. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the first quarter and full year 2025, the anticipated impact of our strategic actions, the potential impact of various regulatory and operational 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 details 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 certain non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and available in our earnings release issued this morning, which are both available on our website. As a reminder, continuing operations exclude Baxter's Kidney Care business and Baxter's former BioPharma Solutions business, which are both reported as discontinued operations. During the Q&A session this morning, Brent, Heather, Joel and I will be available to address questions. Questions on our results and outlook will be addressed by me and Joel. Now I'd like to turn the call over to Brent. Brent?

Thank you, Clare, and good morning, everyone. I appreciate you joining us. As you know, I recently stepped into the role of Chair and Interim CEO at Baxter. Joe Almeida led the business through a period of significant evolution over his nine year tenure, and we're sincerely grateful for his dedication to the company. One of the Board's top priorities, of course, is the identification of a permanent CEO. The Board is actively engaged in the search process with a supportive leading firm, evaluating both internal and external candidates. We're moving expeditiously, but most importantly, we're taking a rigorous approach to ensure we identify the right candidate to lead Baxter into the future. During the transition period, I'm committed to helping ensure we remain focused on a crisp execution of our priorities and delivering strong, consistent results. I'm pleased to be working with the entire leadership team on these shared goals. We're continuing to move the company forward into a new era. And as recently announced, we closed the sale of Vantive on January 31, 2025. This significant milestone was the final step of three strategic actions outlined in January of 2023 to transform the business. You'll recall these actions included the implementation of a new verticalized operating model. As a Director and in my role as Interim CEO, I can confirm that this segment-driven approach has created increased focus and execution-related benefits, bringing greater clarity and agility to how we pursue opportunities globally. And as part of our transformation efforts, we completed the divestiture of Baxter's non-core BioPharma solutions business in 2023. Since joining Baxter's Board in 2022, I've observed and supported these shifts in the company's strategic direction, and I'm extremely proud of the hard work and dedication of our teams to reach this stage. These actions have positioned Baxter to accelerate innovation for patients and customers, and to drive profitable growth for our shareholders. Later in this call, Joel will provide details on our quarterly and full year performance as well as our outlook for 2025. As you have seen in this morning's release, we finished 2024 on a high note, beating our fourth quarter guidance for continuing operations on both the top and bottom lines. And we're starting 2025 building on this positive momentum. During this interim period, I'll be working closely with Heather, Joel and the rest of Baxter's strong leadership team to ensure we maintain that momentum. I've been very impressed by what I've experienced in the last few weeks, an engaged, talented, highly motivated team that is squarely focused on Baxter's mission to save and sustain lives, a truly collaborative spirit and an intense focus on delivering on our commitments. This includes initiatives focused on innovation and profitable growth to enhance performance, deliver increased value and to better serve the needs of our patients and customers. To support these efforts and as we've shared earlier this month, we've instituted a new Chief Operating Officer position as a next step in leveraging the potential of our vertical operating model. We're fortunate to have Heather Knight step into this role as COO. Heather brings extensive experience and a proven track record to this position after a successful tenure as head of our largest segment, Medical Products & Therapies, among other key leadership roles at Baxter and prior large healthcare companies. She'll be leading day-to-day operations across our three segments, encompassing global commercial operations, R&D, supply chain and medical and regulatory affairs. Her leadership will be critical as we navigate the next phase of growth. Now, I'd like to turn it over to Heather to share her perspectives. Heather?

Thank you, Brent, and good morning, everyone. I'm very pleased to be joining today's call. I look forward to building upon what we've achieved to date and helping to launch a new chapter of accelerated performance for the company. As Brent mentioned, over the last two years, I've had the privilege of leading Medical Products & Therapies, or MPT, which is Baxter's largest segment with over $5 billion in sales and operations spanning the globe. During this time, I spearheaded numerous vital initiatives with the support of my talented colleagues, including the recent successful launch of our Novum IQ infusion pump platform in the United States. As the leader of MPT, I also helped oversee the North Cove recovery efforts following Hurricane Helene. Given the essential nature of the products that are manufactured in North Cove, we spared no expense in our efforts to help address product supply for patients and customers, including importing products from Baxter sites globally. Thanks to the incredible dedication and resilience of the North Cove and broader Baxter teams, we were able to restart production on eight of the site's 10 manufacturing lines in the fourth quarter. Our final two manufacturing lines came online in January, and I'm very proud to report that we are now producing at pre-hurricane levels. This is just another critical milestone in our recovery, as we continue to work to replenish inventory and support our customers and patients' needs. Additionally, I've served as the lead interface to many of our key customers and have been deeply involved in successfully renegotiating the recent renewals of select U.S. GPO contracts, helping to ensure we continue to meet our customers' needs while also delivering positive movement in pricing. As COO, I'm excited to build upon my deep knowledge and understanding of our markets and operations to enhance collaboration across our segments and create a more holistic Baxter experience for our customers and the patients they serve. I'm confident that by harnessing our combined strength and expertise, we can unlock significant value and accelerate our efforts to drive customer-inspired innovation for all of our stakeholders. I look forward to partnering with Brent, Joel, and the entire Baxter team as we work to achieve our strategic objectives and deliver exceptional results. I'll now turn it over to Joel to discuss our financial performance in more detail. Joel?

Thanks, Heather, and good morning, everyone. I'm happy to be joining the call this morning to provide some additional details on Baxter's fourth quarter and full year 2024 financial performance, as well as commentary on our financial outlook for 2025. As Brent mentioned, we're very pleased with our fourth quarter results and how we ended the year. Our results came in ahead of our prior guidance on both the top and bottom lines, driven by better-than-expected sales and solid operational performance. Fourth quarter 2024 global sales from continuing operations of $2.75 billion increased 1% on a reported basis and 2% on a constant-currency basis, and compared favorably to our previous guidance, which calls for sales to decline in low single digits. Outperformance in the quarter was broad-based and reflected positive sales across most of our product additions. As expected during the fourth quarter, Hurricane Helene negatively impacted our sales by approximately $110 million or approximately 400 basis points. Although the overall magnitude is less than the previously anticipated approximately $150 million, given the company's swift recovery efforts. For the full year, Baxter reported sales from continuing operations at $10.6 billion, increasing 3% on both the reported and constant-currency basis. Hurricane Helene negatively impacted growth for the full year by just over 100 basis points. On the bottom line, fourth quarter adjusted earnings per share from continuing operations were $0.58 and came in ahead of our prior guidance of $0.50 to $0.53 per share, driven by the favorable top-line results and solid operational performance. In addition, our tax rate came in favorable to our expectations, which offset a negative impact from foreign exchange. On a year-over-year basis, adjusted earnings per share from continuing operations declined 11% in the quarter, primarily due to the negative impact of Hurricane Helene on our results. For the full year, adjusted earnings per share from continuing operations totaled $1.89 per share and increased 11% over the prior year, reflecting solid underlying operational performance and a benefit from non-operational items, including lower interest expense and tax rate.

Great. Good morning and thank you for taking the questions. Two from me. First, Joel, how should we think about with all the moving pieces on the top and bottom line, the cadence for 2025? Sure.

Good morning, Robert. Thanks for the question. So I'll start on the sales line. And as you know, we normally have some ramp in our business over the course of the year, but there's a couple of things I'd call out this year specifically. First and foremost is, in the first quarter, we're taking somewhat more conservative approach in the sense that we're still recovering from the hurricane. And so, we've given ourselves a little bit of, I'd say, conservatism to see how that all plays out. So I'd say, despite what should be relatively easier comp with HST, certainly there's going to be an element of conservatism built into the first quarter from a conservatism standpoint. I would say, the other thing I would call out over the course of the year is that, in the fourth quarter, we do anticipate that being a larger quarter in the sense that obviously we're comparing up against the impact from Helene. So those are a couple of things that I'd probably call out from a cadence perspective on the top. From an earnings perspective, yes, I think the main thing I'd call out there is that we do anticipate a continued ramp over the course of the year, mostly driven by the impact of our stranded cost work that will be kicking in and continue improvements over the course of the year. Obviously, that's what we've already started to do, but obviously that will continue to build over the course of the year.

Great. Maybe a quick follow-up. The HST business especially frontline care was still negative growth this quarter. What's the latest you're seeing there, the confidence you could turn it around in 2025 and your level of visibility to it? Thanks.

Yes. So I'd say a couple of things there. I mean, first of all, we are anticipating a stabilization of the Primary Care markets, and we certainly have seen some of that and are starting to see that even as we head into the first quarter. So, I think that obviously had a substantial decline in 2024. And so, from that perspective, I think the stabilization of that market is an important piece of this. Yes, certainly, as you know, we do anniversary some difficult comps over the course of the year, for example, things like some of the government orders, some of the things that were against, some of the stimulus packages, some of the spending things in the backlog, we're up against in 2024 versus 2023. We don't have those headwinds to the extent that we did, obviously as we ended the 2025. So I think that's another important piece of this. And then I think some of the things we called out in the prepared remarks around some of the things of supply constraints, I think that we're looking to resolve in Q1 of this year. And so, I think generally speaking, some of the impacts that we had last year, we won't be up against in the same way this year. And in addition to that, in a little bit of longer-term perspective, we do have some interesting new product launches that are coming out with the older practice certainly more later in the year than '26. But that's sort of reasons we feel confident in that. I know you asked about that, Steve, but just from the perspective of CCS as well. One of the other differences this year versus last year was, as you recall, we ended the last year with an order book that actually had quite a bit of softness in it and had an impact in the early part of the year last year. As we talked about in the second half of this year, our order book in CCS has remained quite strong, particularly in PSS U.S. And so, we ended this year with certainly a much better momentum in that business as well. So I think the combination of those things, Robert, gives us a perspective on how why we think there's a good opportunity for some recovery this year, I think at HST overall.

Thank you. Good morning, everybody. Heather, congratulations on the new role. I'm looking forward to working with you in this capacity. And Claire, thank you and the finance team for the extensive financial information here. Super helpful as we look at the company post Vantive. For my first question. The past several years for Baxter have been characterized by exogenous events like Hurricane Helene, elevated inflationary pressures, the transition with the Hill Rom deal and the strategic actions you've taken with BPS and Vantive. Can you help us think about the direction of the company from here and how you're thinking about strategic priorities and maybe at the same time give us a flavor for how that fits into the profiling characteristics if you go to the CEO search?

Absolutely. I'll start and then Brent can add anything that he'd like to on the second piece of that. Obviously, Dave, you're right. There certainly has been a lot going on here at Baxter. But what I would say, first of all, this company has done an amazing job of working through these transformational efforts here over the last couple of years and really set us up in a good place for this company moving forward. And so, how do I think about priorities for the company? And again, certainly, we'll roll on this Capital Markets Day sometime after the CEO has been named. But we're starting. I would say, it starts with customer-inspired innovation. These are things that we as a company want to make sure that we are driving innovative products and opportunities, obviously, inspired by our customers. We're certainly going to have a focus on targeted markets. I would say, it's one of the kind of the grow of the growers. How do we find those opportunities where we can actually invest our capital in places that ultimately going to drive growth for the organization? I'd say, the third thing really I think about it is how do we optimize the structure of our company, obviously with the sale of the Kidney business, optimizing both our cost structure from a standard certain cost perspective, but also optimizing our supply chain and some of the things that allow us to take advantage of some of the more simple supply chain opportunities without having to have our whole deliveries of the Kidney business. So that's the third thing. I'd say fourth is really around this concept of commercial excellence and how do we drive consistent execution as a company as a key focus. The last I'd say is really around disciplined capital allocation, those things that allow us to both focus on driving growth, both organically and again in a folded tuck-in way inorganically, but that also balances with returning value to shareholders. So I would call those things really out as how to think about our company moving forward. And again, I'll turn it over to Brent in terms of just how does that really fit into the process of the CEO search.

I'd just add, in this transition period, certainly, I'm looking for stability, predictable, consistent, strong results. And by Joel, I give tremendous credit to this organization for all the things they have worked through, many of them very complex projects, time-consuming, et cetera. So directionally starting to move the organization to a more emphasis on growth, both through innovation and through commercial execution is in the short-term moves we can make that accelerate progress in the company. And as far as the CEO search and how we're looking at that at the Board level, that work is already underway. And as you can imagine, there's a pretty good profile of Baxter's portfolio, where we are at this point in time. So the experience that we're looking for would be appropriate with the company's situation and opportunities in front of us. So the fact that candidates need to have that experience and a vision that can lead the company forward to its next chapter. And having been here and now been on the board and just working with this management team, I just think there is phenomenal opportunity here because so much heavy lifting has been done over the last few years to streamline and to put this new vertical organization in place, which I think is a real winner honestly. It's a great opportunity.

Thank you. And maybe just a quick follow-up on the financial side. Joel, can you walk us through the post Vantive sale capital structure of the company and maybe update us on target leverage ratios and the timeframe to achieve that?

Yes, absolutely. So maybe I'll start with the leverage ratio. Certainly, what we've talked about, we're continuing to be committed to is a target leverage ratio around 3x net debt-to-EBITDA. And I think that is a level that gives us again, this opportunity to both balance strategic investments as a company and as well, again, return value to shareholders in a way that I think balances our capital structure. We anticipate being able to achieve that term of leverage by the end of 2025. We'll certainly have it sometime in the later part of the second half of the year. Feel good about that. Obviously, since the deal closed with Vantive, we paid down nearly $3 billion of debt. The first part of it was taking out our delayed raw turbo that we had taken out earlier in 2024. And then, we also paid off a portion of $1 billion with the 2026 term loan that was actually our highest coupon debt. So I guess I would say, between that work and our continued efforts in terms of driving free cash flow out of the organization, I feel comfortable with the fact that we're heading towards that target. That will allow us to really adjust our capital allocation priorities from what's been mostly paying down debt to those areas that would allow us to get continued investments in driving organic growth, continued opportunities for folding tuck-in opportunities, will that make sense? And the opportunity to restart the buyback program. Certainly, initially, the offset option dilution and I'd say opportunistically from there.

Thank you for the questions and congratulations on a successful conclusion to a busy year. I would like to follow up on your comments regarding new product investments and the product pipeline. Could you elaborate on which business lines you would emphasize and the timing for when we might begin to see the advantages of these investments? I also have a follow-up question.

Sure. So really, let me start with the fact that, it's really across our portfolio where we actually have some innovation happening here. And certainly, I would start with Heather's business and FLC. Obviously, the Novum pump has been a resounding success. It's a differentiated product that, again, has got a great customer response. The launch has gone extremely well. Obviously, we got a partial year of that growth last year, in 2024, we'll have a full year of that growth heading forward here in 2025. So certainly, Novum is obviously a huge, key part of our innovation and again really a great success story. Certainly in pharma, one of the things that you heard from us talk about Pharma is our need and our opportunity to continue to accelerate with new product launches in pharma. This past year, we launched nearly 10 and we anticipate another double-digits year heading into 2025. That is something we should expect from us to continue to do. And while there's not necessarily one large molecule that you can tie something to, that level of activity is something that we are committed to, and we have a great pipeline of opportunities ahead of us. I would tell you that the effect of that, you see the growth we've had in our pharma business, and so you're seeing the impact of some of that that's already happened, and we anticipate as we head into next year, again another solid year from Pharma in terms of their innovation as well.

Great. Yes. That's super helpful. The one other comment I wanted to make is maybe a follow-up on Robbie's, on HST. Just the environment for sort of capital and some of the patient support devices and other things that you're selling, fleets and beds, et cetera, that you're selling in hospitals, just maybe a general comment on that environment, demand cycles, sector trends, anything that can help us gauge where that business is going? Thanks so much.

Yes, absolutely. Thanks for the question. Yes, so I would say generally speaking, the capital environment is quite good. I think, as we talk about this year, our capital orders particularly in PSS in the U.S., especially in the second half of the year, have actually been very consistent. And over year-over-year, we've had about a 15% growth in those orders, which obviously, there's a timing element in terms of when the orders turn into cash or turned into a sale. But we certainly headed this next year with some good momentum, and we expect to continue to build on that momentum as we head into 2025. So I would say, generally speaking, the capital environment is quite good, both from, I'd say, the monitoring the patient monitoring devices as well as from a beds perspective. Obviously, we've had continued success with our Progressive Plus model as well. So I think overall the environment is healthy. We're encouraged by some of the competitive wins that we've had in those areas. As I said, we're anticipating some new products coming up that will benefit us as we get to go to that area as we have in 2020.

Hi, guys. Good morning and thank you for taking my question. Joel, maybe my first question on TSA and margins here. I know the optics, these are apples-to-oranges comparison rates, but the year-on-year, it does look margins were up 250 basis points. So if you can just break that down, right? What is TSA? How much of this was stranded costs, which were there in fiscal '24 and that's going away? What is pricing elements here? And did the China IV fluid exit, is that a headwind or a tailwind to margins?

Thank you for the question, Vijay. To bridge our year-end figure of 13.9% to our target of 16.5%, we can break it down as follows: starting with the 13.9%, we add approximately 40 basis points for the 2024 impact of Helene, followed by roughly 220 basis points representing the stranded cost impact. Additionally, we anticipate about 100 basis points in operational improvements as we approach 2025, which include items such as light pricing in the U.S. within our MPT business and enhancements in our product mix. This includes advancements in our injectables portfolio, increased growth in advanced surgery, and improvements in HST, all contributing positively. We also discussed some of the leverage we gain from volume growth. This 100-point benefit is partially reinvested but remains a crucial component of our strategy. There are two opposing factors from stranded costs and MSA; we see a net impact of approximately 40 basis points from stranded costs yet to be resolved in 2025 and about a 60 basis point impact from MSA revenues, which are producing lower margins. This effectively accounts for our movement from 13.9% to 16.5%. I hope that clarifies things for you. Can you please repeat your second question?

No, that was extremely helpful, Joel. But my second one was on, if I look at the performance in the quarter, it looks like the beat was just more than the headwinds from Hurricane Helene coming in slightly better than expectations, right? Can you quantify what the headwind from Helene was in the quarter? And what drove the hurricane impact? It looks like pumps were very strong. So maybe some commentary around pump performance?

Yes. I'll start with the quarter, but then I'll pass it over to Heather to talk a little bit about the performance of the IVS and pumps in the quarter. Obviously, the headwinds for Helene was 100 basis points in the quarter.

Yes, about $110 million on the top line and $0.1 on the bottom line.

But obviously, the great news on that is we over-performed in terms of the recovery time, in terms of offsetting some of that. I don't know, maybe Heather, I'll give over to you to talk a little bit about some of that.

Sure. Hi, Vijay. Good morning. Nice to hear from you. So we did better in Q4 with the swift recovery of our North Cove site, thanks to the great work of our team. So about $45 million better on IV Solutions as a result of the swift recovery that we had out of that location. So we did see strength across our infusion therapies business and the infusion pump platform in particular in the fourth quarter. So I'll say, we're very happy with the launch of Novum IQ and where we are. The teams are doing a great job driving this new platform. If you recall, Baxter placed a pretty big bet to internally develop a brand new to market and novel infusion pump platform both with the hardware, software, and digital platform and we're seeing it pay off. So our infusion business grew 50% last year in 2024, and we're expecting another great year this year in 2025. And it's not only important because we get the revenue from the hardware and software, but also because we get to pull through very consistent revenue over the life of that pump. So share capture, competitive gains are really important. And customer satisfaction right now is very high, both on the implementation of the pump as well as the EMR integration with the new platform. And this was developed in collaboration with our customers. Again, we're starting to see the benefit of that. We took multiple points of market share last year in 2024, and we're expecting to see more of the same competitive gains in 2025. And then, we have some new complementary digital suites that are now launching that will be a great complement to this launch midyear in 2024 that we released. So I'll tell you, I'm pretty excited about where we are in this new chapter, the new pace, momentum that we're building around the Novum platform. And IVs are stable. We've gone through the GPO resign and are in line with our expectations, if not slightly better than we expected. So we're expecting a great rebound in 2025 and certainly really appreciate our customer support during the recovery of Hurricane Helene, and hats off to the Baxter team for the fast recovery. But thanks for the question today.

Yes. This is Brent. I'd just like to recognize Heather and her team and really all the folks who worked on North Cove recovery. It's hard to explain it in a financial setting, but the work to deal with the disaster situation, to work through that effectively, bring the plant back up and really look after the community at the same time. It's just a world-class response by the folks who were involved. And I personally want to thank them all, especially Heather.

Hi, thanks. I'll follow up a question on the saline side and obviously a great job on the fast recovery. I think it went better than most expected. I was just thinking about how you think about the book of saline business kind of before and after the hurricane. Did you see customers add a second source and how you're kind of thinking about the share of that? And then I had a follow-up question on free cash flow.

Yes. Thanks for the question, Travis. So as I mentioned to Vijay, I mean, our expectations are in line or even slightly better. I think because of the flat fast recovery that we had quite honestly out of North Cove, we're not seeing as many customers take on a second particular because as we mentioned we're at pre-hurricane levels started at this point. So, the new U.S. GPO contract is particular stated on January 1st and February 1st. So now that we've fully recovered, most customers are still committed to their remaining compliance and minimum committed volumes that they've given to Baxter. So, we're pleased with the response and our customers sticking with Baxter during this time. We know the fourth quarter wasn't easy for them, but we proved to them the resiliency that we have and the investments, quite honestly, that we've made over the last few years and our global network and activating that during Helene certainly helped and relieved some of the pressure. So we think that that's pretty unique to Baxter and the hundreds of millions that we've invested in our platform and IV solutions due to the critical nature that they play in healthcare. Again, in line are slightly better and are working closely with our customers to make sure that they can resume normal clinical practice as they've had and patients can get the critical solutions that they need.

Great. That's helpful. And then, I did want to ask on free cash flow generation. I know there's a lot of adjustments this quarter. How should we think about some of these adjustments going forward? When do you think you can kind of get back to kind of 80% free cash flow conversion? I don't think you gave a guidance for free cash flow next year. I'm curious how you're thinking about that. And then the Frontline Care write-down, any more color on that? I don't know if that's kind of a change in the growth expectations for that business long-term.

Yes, thanks, Travis. So on free cash flow, the way I would think about that is that we have talked about the fact that we want to have an 80% conversion of net earnings to free cash flow. And I expect that to be, generally speaking, what we'll do in the course of the year with one caveat to that. And that is in the first quarter, we're anticipating some negative impacts from thinking about it this way: it's two things from working capital perspective. Number one is some of the expenses we incurred in Q4 related to Hurricane Helene actually going to be paid in Q1. And then secondly, there's going to be some level of restock from an inventory perspective that's going to have a negative drag on cash. So I would think about that number for this year as somewhere more like in the low 70s, but that is mostly impacted by the first quarter, and I anticipate a much more normal cash conversion in the second few quarters of the year and obviously going forward. We'll hopefully continue to improve that as we go forward. Regarding the write-down of Frontline Care, the way I would look at that, Travis, is we do a once-a-year review of our goodwill and other tangible as it relates to those assets. And 2024 was obviously an impactful year from an FLC perspective. So I guess I'd characterize it more as an impact to 2024 on the model than I would any type of overarching concern about the growth prospects going forward.

Good morning. Thanks for taking the questions and congrats on the nice finish to the year here. Brent, I was hoping to ask you two questions. First, David earlier in the call talked about the challenges Baxter's had in recent years. How do you think about the pros and cons of an external versus internal candidate for CEO bringing in fresh perspective versus someone who kind of already knows Baxter? I have one follow-up for you.

I mean, that's the big question, I guess. And the Board is very focused on that because there are pros and cons to either solution. Obviously, an internal candidate knows all the details of the business, how it runs, how it operates? An external one can bring a fresh perspective, but they have to ramp up quickly to try to catch that same level of knowledge, which takes a while, especially in a complex business. So I can just tell you that it is a full Board activity. The Board is very focused on this. And though they would like to move as quickly as possible, the general sense is, it's more important to get the right fit for the company at this point in time than it is to necessarily be quick. So I hope that gives you a little flavor for it.

That does. Thank you. Secondly, Brent, how did you evaluate the guidance as interim CEO? And how do you think about the process for the permanent CEO to re-evaluate it? You know that, just to be candid, you know the investors typically think a new CEO will come in and want to put his or her stamp on the guidance, may want to change investment priorities and things like that. How did you think about that? Thanks for taking the question.

How do I think it, coming in as an interim, you mean? Yes, from a Board perspective, reviewing the three-year outlook for the business and understanding the details and drivers gives me confidence. Being part of the team now, I see that there are strong plans in place. Since I am currently the interim leader, my main focus is on implementing the existing plans. A new leader might approach things differently, but the overall market conditions and our offerings are well understood within the company. Therefore, anyone stepping in would be building upon that foundation. It's difficult to provide a definitive answer as it largely depends on various factors.

I think the one thing I would just give Brent the opportunity and he's talked about it. I would just reiterate the fact that this is a great opportunity for someone to come in and I guess Brent has a perspective on that and maybe could share that as well. But I think as we talked about some of the key strategic initiatives that have done over these last three years, there's really last couple of years, there's a really nice opportunity for someone to come in here and take a company that really I think is actually set up well for success. And so, I don't know if Brent is a good company.

Yes, I'll comment a little bit about that. I mean, the organization, as you know, has been consumed with a lot of project work, very tough, detailed work working through these separations, the spins. And there is a real energy in the organization to turn now to growth and innovation. And so, you can feel it. You really can. That is a real opportunity here. There are good leaders ready to move it forward. And I think whoever comes into the role that is the key piece to drive is that profitable growth from the base that's been done now, because a lot of clean-up has been done.

Hi. Good morning, everyone. Thank you so much for taking the question. And, Heather, excited to work with you. Just a quick question. Actually, Larry's question is a good segue into Brent and Joel and Heather. Just as we look to 2025 and sort of some of the pipeline drivers specific to 2025 and maybe even 2026. I know you guys talked about like 10 product launches in pharma, for example. But any color you can give on sizing these and what we as analysts and investors can look forward to over the next 12 to 24 months? And that's all. Thanks so much.

Sure. I'll start, and others can chime in as they like. So I guess, I'll start with what I call a few of the key drivers as we think about our guidance in 2025 and the year ahead of us. Number one, we continue to have strong growth in MPT. I think, obviously, as we mentioned a little earlier, the full year of the Novum launches, again, we're really excited about that. Advanced surgery, we're anticipating good single-digit growth there. And our clinical nutrition business was actually kind of an interesting notice and started to get the penetration into the ASC space. So we've seen some nice growth there and anticipate that continuing into the next year as well as the impact of GPO pricing. That's a strong element in that business. We talked a little earlier about the recovery of HST and the continued momentum on the capital side of the particular PSS in the U.S. as well as the stabilization of FLC. We talked about pharma, as sort of the key of the innovations of new product launches and the mix improvement there of injectables relative to compounding, I'd say, even stabilization on the anesthesia side. I think that's really on the top line. And then the drivers of the line that I talked about here, again, some of the GPO pricing, the new product launches, the mix, continued improvements in our ISC, our supply chain with our margin improvement programs and volume leverage. And then, over the course of the year, continued impact from driving out some of the stranded costs that we've talked about here. So I think those are really the things to look forward to. And then from a new product launch perspective, just in general, again, a renewed focus on that and accelerated focus there. So some impact in the ways I talked about '25, but also sets up for some impact beyond that.

I'll chime in. Yes, I'm looking forward to working with you too. This is Heather. So some things that I'm excited about. I mean, the pump platform, as I mentioned, is something that we will continue to build on and we have additional launches to support Novum IQ and a gateway now that can work across our entire portfolio. So really excited about that and a connected ecosystem in the hospital, which is going to help clinical decision support and more personalized patient care. I mean, that's something that was the original thesis of the Hillrom acquisition and we're starting to really see good pilots and momentum with our customers on that. HST is going to be introducing some new products. They've got launches coming out throughout 2025 and early 2026. We're still seeing great momentum on Progressive Plus and PFS, so that continues to pay good dividends and taking market share there. And then, Pharma is hitting a really exciting cadence of new product launches, getting into more complex molecules, 10 to 12 launches a year that are really going to help buoy. And as Joel mentioned, the margins of that business, they're really focused on that, and when they hit this innovation cycle that they're on right now. So those are some of the things that I'm personally excited about. And then he mentioned alternate site. We made investments two years ago in alternate site in the United States, and we are starting to see dividends paid there in the nutrition portfolio with some small tuck-ins licensing and distribution deals that we did in MPT, and those are starting to bear fruit. So that momentum in the U.S. will continue. So those are just a few things that I'm personally excited about. So when I talk about a new rhythm, a new pace and momentum that's building, we're definitely starting to see that across the portfolio and those investments that we made bearing fruit now moving into 2025 and 2026. Thanks for the question.

Yes. Thanks, Heather. This is Brent. I'd just add to that. I sort of referred to it, but really starting right now, we're putting the emphasis on accelerating time to market innovation development. So that is an area of very strong focus right now is how to speed up that whole innovation cycle and get product solutions to market faster. So that will be ongoing work. Thanks for your questions.