- Earnings call transcript Q3 2022

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Operator

Good morning, ladies and gentlemen, and welcome to Baxter International's Third Quarter 2022 Earnings Conference Call.

Your lines will remain in a listen-only mode until the question-and-answer segment of today's call. [Operator Instructions].

As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission.

objections, at any time. have you please this disconnect If call to Ms. I like the over would now turn to Clare Trachtman, Vice President, Investor Relations at Baxter International. Ms. begin. may you Trachtman,

Clare Trachtman

Good our call. to morning, XXXX and conference earnings third quarter welcome

Chairman Joining are Jay Baxter's Financial me Chief Executive Joe Baxter's Saccaro, today Officer. Officer; and Almeida, and Chief

including contains the the morning, proposed from prepared results that, risks impact for With of involve materially. to presentation, be XXXX more fourth outlook detail that let start acquisition development, course, our development, we and the On by cause our financial discussing pricing XXXX uncertainties, reminding quarter product this of XXXX. third factors range release differ and call portfolio long year could expectations. filings outlook actual current regarding and results potential today's for materially statements this remarks regulatory actual for differ forward-looking everyone and press results to could and financial Hillrom, plans, quarter that of that to business full XXXX, new will refer our matters Baxter's comments year Please our our actions, optimization concerning financial me XXXX and our the full SEC

to release measures our our on comparable addition, A in Baxter's today morning to ongoing measures GAAP site. In reconciliation financial included will business financial this is earnings of non-GAAP today's the on help and call, discussed Web financial being performance. used measures be investors understand issued the available non-GAAP

of foreign exchange which be Hillrom. operational acquisition growth, of for we adjusts the will morning, this the impact call discussing the On and sales

over Now, to I'd call turn like Joe. Joe? to the

José Almeida

environmental X.X XXXX QX Legacy with dive reported and quarter quarter and your We $XXX for good of million on and contributed will on Jay third your deeper sales the will acquisition. which the call. everyone. outlook, the factors the close Hillrom some perspective our up performance, represents grew on third rates. impacting questions. our Thank our macro our trajectory. XX% constant at a since after of full will I look a near-term the we you, appreciate provide joining a open quarter. today's including Clare, in currency Hillrom morning, start lines billion sales XX% third a company at to basis financials Total

Excluding the operational rose slightly foreign basis. sales third of impact Hillrom and on quarter an exchange,

With end performance than in reflect quarter regard note related On the third valuation bottom have acquisition. adjusted in Both there this of headwinds, guidance the to and the initially legacy across $X.XX advancing others the rates progress confidence including capture reduced in charge we previously short, relates accelerating With Integration even an third are interest will to playing is both It Hillrom the our Jay further discussed. encountering equity quarter with to as already synergies potential the that Hillrom our care. earnings line, previously geographically opportunity legacy we provided organization impairment said, out journey, values with chain environment, achieving chain many shared, increased of multiples, This as supply inflationary top range want pipeline. the our wave costs many months swiftly. of want XX I in our impact shifting share is globally. higher lower continuing that related our the value market the along rising additional is as with were acquisition. continued footprint of of charge also the that underline the to dynamics, broadly continuum constraints anticipated. macroeconomic connected global significant of line portfolios ongoing digital per what provide supply financials bottom But to and our greater quarter as details. of expand expanding next previously. the of care macroeconomic had consistent and unlock the the innovation and perspective, to line are helping well we've pressures, across and to the through reach of and including And of I cost R&D

electromechanical Additionally, to we experience reduced backorders components. and and a overall materials Baxter due demand variety to meaningful Hillrom remains across of portfolios access legacy backlogs but the solid, to raw continue in

to resulted clinicians As products cost, in costs but expedited only on lives steadfastly higher patients get to also we I our has have depend shared freight and who not to previously, spot as the this steady purchases, work us.

that While begin in select our these as factors into that relates supply. persist to where current we semiconductors supply to will volatility of constraints expectation ease of some year, is continue see particularly macro we to may signals high XXXX, see next levels it

During experienced planning meaningfully we the quarter overall process. several various from impacting demand decommits suppliers, our

other constraints performance the total, which million. basis has And on In a semiconductor to experienced line XXX from supply we further estimate in the impacted performance. have constraints that raw we by this $XXX points. figure material approaching more than impacted approximately and seen materials, $XXX or top We be Baxter year-to-date raw quarter we've basis, estimate also negatively million,

for constraints to future position these to action improved the and We continue take the company help size mitigate of performance.

include undertaken out our capacity over allocate our further Baxter the key forecasts provide suppliers validating Baxter’s products. meeting and already and inventory horizon months demand XX manufacturing in sourcing, waste usage to to the reinforce alternate suppliers have teams constrained of to mature actions of extending of with criticality establishing critical reduce to and management long of flexibility horizon, allow buying to to our to categories options we for with suppliers, supply and relationships officials select our the Some government direct optimize component secondary processes supply enhancing

same are time, chain the our At we to ability impacts will improving enhance on mitigate mid-term initiatives focused that these that we implemented in across efficiency that future actions performance, operational the expected improve to processes ensuring and near with and on structure remain confident organizational We performance. the including optimal the are help organization Baxter’s further have place. already several supply business

actions In addition, initiatives, we're and integration restructuring some are experiencing. Hillrom hiring increased recent to discretionary we accelerating These help expenses our freeze, offset spending, efforts. pursuing actions, broad reduced the including near-term

will and be the these in and optimization to efficiency and customers are we and agreements to mentioned we execution absorbed do never this the we've appreciate realize include we customers sustained these fundamental successful savings to implementation pursue emphasis any And, action fueled are year. our on facing. have save passed customers. portion our will to our that operational Upon collaborating Additionally, to I actions these the value compromise expect which initiatives by incremental them a to pressures. our related annual deeply the year anticipate will quarter, that on lower performance. bonuses, costs our powered pricing with has and lives. tied as We these continue to We terms this of sustain of cost-based through help underscore date. will already Collectively, transformation through commitment which we directly our are cost revised address stress, as incentive to Also, employee and business reflected relationships believe patients revenues results continued are our finalize agreements, themselves unwavering challenges last mission

firm the our success innovation by next strength of connected continue is to year. many as our essential activities shareholders commitment We our products our portfolio with to on Baxter’s stakeholders our advancing to and early driving patient stakeholder portfolio enable diverse other are a help provide strategic on our lifesaving improve to combined create our details industry is on be in more other increased for durable to execute optimal care cost core of the in I leadership shareholders we core capabilities, focus our share to workflow to advancing transforming on position in to Baxter’s impact reiterate with ongoing of to these will ensure be review driving also will prospects strategic value outcomes, rapidly that scale, our anticipate remains spectrum long-term our serve. prospects the and and a want healthcare which and and efficiency advance founded mission, line structure turn in therapies. and our effective our of with we communities. care. vision enhance We enhanced and actively healthcare that digital

Finally, our to and I employees as always, macro want current especially and thank recognize for the remarkable we effort their environment. navigate

each stakeholders who passion, meet consistently all, depend saving the serving to with keen dedication, focus many on and our mission new on us. rising team global challenge Our embraces life above a

and Now, provide year. our outlook the more quarter remainder of on third for Jay performance details will the

James Saccaro

Thanks, and Joe, morning, good everyone.

to expected, chain-related select came quarter the for impact results our mentioned, to due in with as some Joe sales constraints. largely As supply

the and to discussed to mitigate teams objectives. our to we macroeconomic unprecedented delivering to committed long-term face continue remain headwinds our identify opportunities As earlier, continue and on been have we help

to on financial Turning advanced rose constant slightly on an reported global performance, basis, a billion XX% basis. X.X basis quarter operational our on currency sales third and XX% a of XXXX

of On of $X.XX reflect tax decreased increased falling exchange the headwinds, bottom the rate. per the well raw as foreign line, per of interest our labor, range the guidance quarter share, in costs and to as impact $X.XX freight $X.XX earnings adjusted the Earnings XX% share. rates, within rising materials, and to higher

charge to that EBITDA business spend and transaction. time quarter, a of our market recorded cash related Hillrom, we review Hillrom the the When Baxter’s prevailing of the to I impairment based anticipated the cost moment discussing acquisition. Before financial on we at performance non-cash valued we wanted the multiples flows, purchased the capital for I

we in As since significant date, changes in EBITDA down due Joe market-based seen factors in occurred the mentioned, rates have increase the and that was reason multiples. the external interest specifically for acquisition reduction the primary to the write have

factors in portfolios. other carrying projections, we chain appropriate we we Hillrom. which incurred, it these to As continue to the carry want with reduce environmental that of to Joe's our them goodwill comment intangible forward certain deemed impacts assets and earlier the I for potential see we and value coupled evaluated we've with supply reinforce associated tremendous our combined

cost accelerated to have our of to combined targets, are actions growth which and the of company. ahead our driving continue leaders unlock track our We commercial expectations, synergy the

in Baxter’s segment, growth our that is three and Note walk key currency through in Africa equal all with various due and slowdown constant I’ll country's zero a on the product in sales currency growth legacy our and to sales prior basis. from APAC value-based year sales X% policy, global quarter, and sales in initiatives segments Europe, categories. to by the estimate by constant reflected China, grew region regional we as constant being geographic on in sales the currency region COVID basis. the Middle were well sales Quarterly performance implemented procurement which in Now, impact Americas businesses to a basis, in million decreased XX operational for currency operating that on the as constant growth region. Starting impacted a by flat a approximately regions. East X% the in Sales anticipated

currency performance a PD patients constant Moving HD $XXX two similar by million. on were by totaling key the for in million PD globally. due by renal prior availability. growth HD we component offset was to a care currency lower to growth was constant quarter supply augmented was the basis. XXX category, million approximately on business, on by sales in observed to solid challenges quarter an level monitor global year medication driven were of X% where delivery items our a to due in product in Sales increasing sales PD discrete partially in sales Performance Performance basis. $XX partially increase in-center

million to which increased basis. $XXX by declined increased on the comparator IV were system anesthesia quarter infusion our offset quarter hospital of in strong currency constant in Within inhaled global in for portfolio. portfolio offset sales competitive which due generic availability the the large in we QX demand injectables prior year. order a than Pharmaceutical coupled X% XXXX, partially by sales, this therapy growth products difficult created remain the more challenged, activity, with sales in Performance our lower reflects was declines as globally. of system This component continued observed to

was our total vitamins. in the million $XXX clinical nutrition, product in to for $XXX surgery of X% levels. Growth challenges were by came demand on X% Europe, procedures quarter U.S. multi-chamber while basis. for and pre-COVID currency recovery on expectations. elective to million quarter APAC in offset currency broad volume recovery driven basis. reflects Performance advancing region slightly supply-related in the Moving our in relative constant below in a our Surgical strong procedures partially a advanced sales were increasing Sales offering, the constant was by

the we totaled CRRT was $XX sales for the last year were XXX our the in in down quarter, constant $XXX of front Hillrom XXX BioPharma in Within in for comparison basis, million to standalone currency million year. constant sales and to XXXX a quarter as difficult which as reflecting therapies $XXX in observed business of to in with comparison well million Performance basis given on in currency in COVID of contributed declining patient the reflecting entity. million sales XX% when demand the declining prior prior basis the XX Solutions had currency U.S. million and a company elevated a we of as impact reflects August and million slow September. acute supply discussed. surgical where the global July, cases. quarter an declined a included the constant semiconductor sales support X% COVID were uptick mid-single and constraints and compared tough line sales start to approximately to a experienced rise the a year we've period Hillrom COVID XXX the vaccines on solutions. compared step in the sales same period, million. sales a systems, a digits on vaccine the to in Sales QX care quarter

backlog experience Hillrom the for levels continue of We business. record to legacy

cancellations seen customers. strong Our remains order to we book any and have date, not significant from

budgets to mentioned light current capital remain the on environment. quarter, somewhat assess we cautious market As their as spending, hospitals of last continue in

increased Hillrom adjusted a XXX sales, million freight versus primarily by of an and of of well decreased freight margin XX.X percentage factors XX.X% our P&L, represented prior as the reflecting we've driven around supply of as the points addition inflation, basis by the gross of rest over XXX year, constraints. by the cost SG&A of driven as higher through Adjusted year, increase goods points XXX prior of basis discussed expenses. Moving sold the

to continue higher decrease tied of annual X.X incentive As versus sales, percentage benefit and XXX G&A represented to order These XXX of employee plans mentioned in prior following decrease performance. has due of primarily spend Hillrom earlier, an as XX million Hillrom. the the basis million quarter, period. a points in XX.X% in driven R&D driven lower in base. the the The amortization million in to our was in we adjusted quarter million year of XX adjusted in Both quarter bonus X in basis net adjusted prior by versus tax a from year. XX XX.X% year year-over-year tightly changed a totaled primarily debt SG&A the pension a increase interest accruals million R&D rate loss which the prior operating under earnings Baxter's the outstanding our reflect Adjusted of was $XXX compared of mix quarter the a the versus manage as to of by XX.X%, directly benefits. adjusted points to the The year. period, acquisition. factors the other compensation margin which quarter, income is year compared related acquisition the an totaled resulted of in of prior Adjusted non-operating expense increase balances to the prior Adjusted

a to in the as from quarter And rate adjusted versus addition, earnings period. the share third a the XX% discrete from $X.XX a its diluted item company ruling. resulting In reserve of recognized benefit tax the effective mentioned, prior declined of due favorable tax per during XXXX, previously release

fourth updated underpinning discussing including our guidance. full conclude XXXX, my our and for me by key the some quarter outlook Let assumptions year comments

for interest assumptions full exchange to interest U.S. the and tax a and adjusted full strengthening year have expected higher outlook primarily increased in our headwind, per rise due share to foreign expense dollar given resulting year mix. earnings account earnings We a rate rates,

select delivery, sales and line As patient businesses, the growth support we availability hamper quarter anticipate discussed, remain continue front for which electromechanical systems. will medication care XXXX, in to challenged will into including component fourth and

basis a diluted earnings, we of currency fourth mid-teens an approximately mid-to-high constant growth $X.XX quarter And adjusted excluding to per we XXXX, expect expect basis, flat the global share. a on For of on reported and special items, of operational digits sales basis. single on $X.XX

For currency basis, to of on reported we growth sales a year global single XX% basis, XX% and full operationally. XXXX, constant digits approximately on expect a now XX% low

various Moving down to the P&L, the dynamics today. and margin be of XX.X%, we expect full of year discussed adjusted the between operating all XX% reflecting impact we've

interest approximately expense approximately these With now a the excluding of earnings, shares. we diluted the on up million diluted to XXX special factors, now XXXX adjusted expect call items, rate of per Q&A. share. now $X.XX expect share and rate total $XXX year, and can Based increases tax count million, adjusted to XX% open for For that, we we of given $X.XX

Operator

you. Thank

session. We will question-and-answer the now begin [Operator Instructions].

may be respectful the to question follow-up many necessary. question. if possible as one your limit we'd of patience We like please question, opportunity comments So provide you that a appreciate and we to of everyone's with ask time, one everyone's to as

We will the recorded www.baxter.com. pause moment that the be I while available being International to like being remind and digital would this Baxter days Web list will compiled. a call replay XX at is for site is on a for participants

line of question Travis comes Bank of Securities. of first from the Our Steed America

Your question, please.

Travis Steed

more of you'd at next before? growth points X.XX thoughts still some of basis provide commit level as margin initial the if the off of would the gap taking guess, out, for expansion for importantly on be on love XX and XXXX you year question. if see to we'd just to would start Thanks guidance XXXX but everybody. changes morning, the Good the to Hi. I Jay, bridging helpful, earnings some

James Saccaro

part I of the the first Travis, question. missed Sure.

Clare Trachtman

for bridge guidance. So [indiscernible] the XXXX

James Saccaro

Great.

let's different walk pieces. through the yes, So

starts to the these XXXX. of third in the it line came But in tax our couple this largely in a were anticipated quarter. know, driven constraints better the for put And chain. our really to The set large cents, part with a well in areas. think little with think was performance are worse I were commercial We operations sales shortfalls in this, Overall, in related starting important supply by to is I than supply pleased QX up FX But all certain came books. to rate than $X.XX and offsetting in and expectations. of expectations. bit in off our

As you macro we've an environment. complicated for extreme of the know, this has been volatility navigated as us area

really team So see the the was quarter our beyond. it stage to and nice and set in supply fourth chain deliver for quarter the

Now, as a tax with interest year-over-year basis, impact and we $X.XX EPS, headwind to expect QX, On relative our items go previously respect exchange, from roughly $X.XX. we to to these guidance. foreign issued us now a roughly

we driver sales constrained non-operational these from line. continued so fourth that carefully. on overall, an expect This real environment in And is very navigating headwind the items. relates this to a quarter area we're the But the supply

next is X% expansion margin So points template previously compounded as what of growth, a you year, a now says we shared basis year. to XX in which operating all transition to I minimum sales X% with given

vaccines growth in part As point value lower our BPS we relates But in margin, a it confirm of of end we real of continued the to levels at sales about our margin emanating COVID on large points X%, expansion. business. focus lower of through synergies, on XX the because of basis impact with improvement to thought closer range Hillrom significant come in plans, XXXX, through and programs along the from this as our costs, execution can of will the

going we're to course, out will down it's plan of But to nice has that I share our extremely this supply stability at chain volatile. with point to a the you been as that you tell speak. of comes through in world And And be time. we this lot able our of Now, very coming organization.

is Now there we continued sales reason the look standpoint. as we're XXXX, will headwinds from not part constraint is are seeing one a say supply at the I growth thing accelerated of

expect to of component and to parts going we're XXXX So through areas. see challenges other

to be and so will through we And challenging supply, a move semiconductors continue as next from year.

we to that and have the something tailwind be with for a while. course we hoping move certainly We're of live as rehabilitates to XXXX. over going to that's year provides So next that a

operating we're other a the some roughly concentrated to to look moving be that exchange, to And Because first we've of lot neutral we in headwind. as a later rates items, range a be QX that's $X.XX Now, going deteriorate the margin, be an seen but on plan. approximately tailwind will fairly and in will half become start year. long will this and And then QX. foreign from looking headwind interest really it at of year-over-year, standpoint, in rate at the expense to interest $X.XX

XXXX. so feel here And as think for sit we the really us going I about today, we good prospects into

ability been a that. dealing controls add lot that forward. Joe, we putting so navigate I to important think And of think an XXXX I to don’t we've confirm and anything step want in to that. some I as of place to And move know with really if you'd our volatility, is

José Almeida

No, you covered all. have it

James Saccaro

Thanks, Travis.

Travis Steed

Novum Thanks. quick to sounds be putting together, that up it I versus IQ? inflation, make sure, the follow all wasn’t that XX earnings and that’s still up assume stable on year [indiscernible] basis think And like does XXXX. just points, next assume it can A

James Saccaro

I'm think So I of hear the expect on non-operational as some we do growth look sorry, I as I look And at that. then it. question. missed couldn't of but some we bit EPS, us, your little a part it at second there's as level quite relates impacting it to items of the based EPS we

Travis Steed

XX the IQ. assumed inflation not points Novum So in basis on was

James Saccaro

Okay.

think So standpoint, inflationary of I from looking today. we're at consistent an kind levels

slight improvement for Novum some utilities, related but certain Joe, price some we're We're any So in anticipating to to address question. not in example, also in commodities. want the Europe. significant negatives up areas, anticipating you

José Almeida

will. I

believe I that of information primary additional not So on we the referenced do this call. subject products the the we request. that the We resolved FDA’s we always have on behalf on last conversation FDA. are successfully We was not, QX issue that any which preface the approved speak of

we part additional response. we as to updating can and time, We our as data because successful demonstrates the to in submit response process in planning quickly our will resolution we're of we're everything that response. our the of that, consultation submit possible. And issue FDA. with changes of proactively of Since software believe we as implement doing have We're identified

While we hope January. weeks to may to half by a that January, be in responses it over QX, spill a of position late submit of into couple maybe those

we together. we're can the So doing to pull best this

We them. work before comprehensive very the are in send very that to sure has how the we to collaboratively answer We make product the FDA. all want we we with And information them.

there's further objective. no for our So request information. That's

Travis Steed

helpful lot questions. for taking a the Really color. Thanks

José Almeida

you. Thank

Operator

with Robbie Please line is a Marcus the of your question. JPMorgan question. state on

Robbie Marcus

you're Great, news thanks. business off of allocation, the us give about reports start renal low low sense environment potential just of here additive some capital I divestitures Maybe the no margin. about how saw mix. to thinking that done, the you're within We negative your about Maybe on sales or the to deals could in and subtraction? how it's of or growth some were a assets thinking in get whether to portfolio

José Almeida

Robbie, good morning.

from actively are market. the all, not comment We going I'm to first you doing. tell are what the on -- I'm looking to going of But rumors we

the company. at We portfolio by looking are actively

going is about But speak I tell on. to the by be you We moment. at can will information ready early what some bits not January, of that

every company care, of Day had the drive to forth dots we ahead the and is clinicians of top back on Investor that the at to ability higher will be that during the set vision in are at our margin, line connected institutions. growth, looking focus areas May, for We and higher software connecting the areas gross opportunity which

we're at we that, portfolio. looking So at our when look

Some will products products to retain, some for will make us sense not.

So we our to are optimize looking portfolio.

Baxter of about then We I decision terms of we Board said make way are of and as think we early new will what with in forward, January. three to come and forward be is a in going of portfolio our there understanding with the Directors going the quarters

It So value with that any transaction on underscore into invested always I is one, of of shareholder takes which account portfolio creation of want to also discount that implies value. any movement secondary. return primary is never or just It cash of number flows. of assets sale capital kind creation always improved through accretion is and

set what going deal we're And how being we're new and have mission of and said as suffice the we're intense. by I businesses to It through this going and process. So going January. going forward to hope with, is vision very we to the very, our early

Robbie Marcus

the follow Great. in from sales Maybe we was something backlog those in the lot. about a but Thanks just a supply about improvement a the we'll in I quarter How and $XXX the and much chain how year? Jay, think in you reconciling what's helped talked that positive we resolved XX should the guess two lost in next be margin, million, chain? supply like supply chain theoretical as quarter being about issues, should and how think and seeing about up, And also margins. how X% growth bips of the

José Almeida

Robbie, comment numbers. aspects. on the you couple I'll a of tell I'll about let really Jay

performing of is circumstances, a as and difficult great significant to inflation chain supply labor inflation very through sets said, has the we and seeing Baxter, well job been are we While against they're navigating doing material that.

better group It's of It job amount companies two. is that on significant we several. confident products plethora directly semiconductors. are a source XXXX, with getting What the doing the and will backlog more the directly is is board semiconductors from manufacturers be instead them. it's assemblers. products company company that are chips A relationships situation going produce to on the to of will happening long-term not distributors or to for couple going a of be things for developing feel and procurement that that one there we is And depending is or us, of the products a throughout are is us. I to Our great keep that more we of backorder doing

can’t what the the difficult forward at can we to coming under is sometimes second systems, funds, makes PSS, thing care, ship make full our effective of the very companies XXXX line very patient predict quarter are the support amount quarter to SIGMA of pump, make components two to for better which has the decommit in areas. chain front or for we’re and The due end as shortage our have during we more the been business other the key into acquisition has and automotives high three that is, in assemble supply good make commitments by our are of use we more our now current growth. marketplace is pump, our Business because we Hillrom, demand need ability our very view a Spectrum XXXX, into demand sources, the to in other of what our getting us missing that from of

So what what everything the we constraint top can tell the is we doing are really you in supply has Baxter’s line. and can is I impacted performance

for clarity Now VIPs, in you value improvement significant you I’ll us that been programs, have of our our Jay reduction driver asked. cost a give to numbers on to more group. on operations pass

James Saccaro

line other components. to move continue we we year, and top a next to due to semiconductors assume as Robbie, Sure. constrained of availability

will to to no fully year. of today's some see not So most with level. and improvement we that year. live deterioration this resolve expect do throughout next But does relative We next

But world. items course conservative a that we're point. We're the on we're sharing. that we break way big improvement, world for value an materializes, than extent this banking XX in points, basis on the uncertainties. big constrained support XX have the a Those helps not watch only margin in the roughly improvement we in To the to for our initiatives those And two like on because that freight. excess emanating see certainly commodity very are we or that decision of points most be and about supply assumption plan. programs, year. carefully. in that basis hopeful upside, the could we've basis of a improvement take that And lower that with at but XX have challenging targeting that over banking a along a living we'll think we don't are easing that We'll we discussed. numbers automation expected in points that's have the from going As really really things XXXX part, significant very I'm commodity the improvement

Robbie Marcus

Great. lot. Thanks a

James Saccaro

you. Thank

Operator

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

Rick Wise

Jay. digits. down single Hi, focus thought you as I'd Hillrom Joe. morning, on Good mid I described which

-- I today, First, know into -- was of think to when it understand follow-up being Do return related for just maybe Joe, Hillrom. bumps decline a it as all supplying mid Is frame year? a integration Hillrom Was is single what what kind extent components? to a you you I’d the what I like think And Hillrom it question was on take digit-ish it to Baxter, was that. components? if degree of to I then it it's of -- going to Hillrom wanted could with next have do you? decline And 'XX? half to to think based second you also grower,

José Almeida

Jay Rick, to answer have that. start. question, answering but I'm And Jay close going should I'll the

James Saccaro

X% of roughly our front in And decline what's business line Hillrom levels in is year-to-date. backlog did was interesting We've historic products business. incredibly that roughly and strong. for Rick, X% seen We've in quarter, as care demand Yes, backlog well. PSS down the remains Hillrom seen our the sure. Overall,

throughout products, fairly fairly But portfolio we incredibly strong look consistent. And their been the the as with had the the innovation, we've environment year, it's Baxter of orders the supply complementarity at has we're portfolio, severe excited. for constraints. the So been

would probably growing supply be characterize without Hillrom I flat where have quarter, so to a and we would which mid basis would And would constraints, the single in of close kind on third year-to-date would been as digits, the hard get front of care, it's hoped with in sales to level that have we line supply hoped case extremely these been been. have But challenging, the have that particular, constraints to been for. in it

you Joe, to So maybe want to add that.

José Almeida

we Rick, job here. integration done a Yes. company a have very thorough as

year Our much estimated coming in of synergies the than higher, the higher had we integration. are first

business. care semiconductor had we When to and supply the put we and had prices fact. that job We performance the matter in line a the hit, our Our And supply reestablish of Baxter products primary handle people is better came really into chain prepared into the a door. is lines a third to The better as out because today to Hillrom the do through come to front did of line what quarter, handle Hillrom we much to front of loss. of get better care. the best lot work able in issues, us planned doing for supply was chain we're

also extremely in management competent We have both businesses.

We have Reaz Rasul, the Line Head Care. Front of

the Frye, and GSS Andy PSS. have We Head of

the business very in has So confident purchased. to the ability we we perform. The are business

as we able Hillrom we're fix back get the that chain supply assumptions doing. we'll issues the currently be will to to buy. And made We

been you heard chain supply expected would Jay, from we had growth As to be. what have ex our

a there better Hillrom think Baxter able than in Baxter to team to great I and management that Hillrom this brought discipline probably was combination. long the has job brings replace and was a do So to of combination with great the term of portfolio.

Rick Wise

basis just and look 'XX points have Jay, depth thinking you're extra through topic, could perspective we talked do Maybe on color about another process impact How as Any agreements. and we be so the business? you. XX or we factor Thank portfolio? of follow think your about I'll how new on us price for but you passing help great. is Can even pressures Got well that cost into that do half my the of of -- change the you're or you the to touchy our would up think you sort this much. in XXX% price along the ahead feely, signing you

José Almeida

questions. great are they Rick,

last business. we general the into in here. went all let But so we're much that to start by me taken we two not of So and comment course up pricing of But input in split recouping if as Baxter years, that, has focused very Jay are going a significantly do costs portion on that in me saying possible.

which So about as say can agreements say you, would customers. we to I strongly with already prefer I we any I'm that on But the not or in price discussions what to have comment agreements as actions I of said, the labor cost raw going long-term had, of in. amount on to cost relationships with the because causes to delivering cost goes a an increased build how of our oil, them, that significant cost pricing best share beyond I money, our more to specifics of throughout remarks, said, But everything customers mentioned, of of reach year. and I materials, my on products logistics, opening cost to our

we because all last that to extent years margins, the in ago to to agreement our of would our on. here continue significant and of them partnership the the process and we sorry, that our our delivering and possible. innovation do with see We delivering products, the We I’d to and course, suppliers the I costs a not can say the came be in of mission mission employees. progress we evaluate of you continuing the to a of will, I’m made significant company. our continue any to for there to towards almost reach front job recover options incredible dedication to an about as defray and by continue cost customer, of -- great what -- costs have need to done our be to But have significant us It we're understand date we rather like partnership to that took to amount not if a very us we us, in that supply increased end. made I’m in That's has input it’s by is employees, it’s any company. that the but on serve with to you Baxter deliver XX,XXX two that chain patients. trying offset, our impressed But the increase seven ask important the years of

Jay. to I'll So end there and pass on

James Saccaro

want around so on. the to too a of be XXXX. we and year pieces what portfolio to Rick, in safe price detail into get on will expect price to and it's much our don't next Sure. contributor positive I But specifics say numbers

with single other high every in costs. product in The it we is every very one line. levels we look something that of our say thing every areas, inflation, I is at challenged have incremental in very levels of would of been high Why? market, Because

make and offsetting challenge to costs we of our have really garnering some we're perspective, from every sure significant sale to profit that from we've had. the So it that enough

Rick Wise

much. Thank you very

James Saccaro

Thanks.

Operator

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

Pito Chickering

questions. Thanks taking morning, guys. Good my for

on the issues versus with and And are backlog struggle sales high? look haven't lower any as versus seeing backlog backlog supply any seen that due here. and cancellations that of You mentioned do that remains keeping margins that flows? to full hospitals you levels pressures new hospital to orders stroke How new impact sort you CapEx you lower cash at

José Almeida

most retraction in seen that implementing institutions small and orders that seen We in of have part, wave that sometimes cancellations we have haven't issues for are sporadic labor programs. large. of CapEx projects of are capital But the

believe pumps. fact, monitors. of our made could had would if many infusion have pumps, sold I twice more make matter as we If have a sold we would monitors, As the of Xx, we those Xx we

different little a are So when implementation. it comes becomes larger it to beds. a Beds

becomes of the say, sometimes should the price I buttons, because Those ones more, nurse more Not because are because software see for but labor, because like call the software more we that software, phones the not like And cost, of elaborate. the postponement. labor. of

don't labor we're So programs in the of cost at high a a for market. and I seeing the makes seeing undertake hospitals time, them in that retraction believe shortage for labor moment to capital sometimes. difficult We're a large of

Pito Chickering

pressure And then macro semiconductors raw impact of sort fair out shortages? semiconductor materials, other the breakout versus Okay, that peaked can XQ, the the supply of up material a million on shows has the chain, are been XQ. improving in data on other into during raw sort And enough. then what of on the the of revenues curiosity, to follow the you $XXX XQ side,

semiconductor any see you versus if curious October? So improvement from shortage July

James Saccaro

Sure.

I would this things to question. related say of couple a So

other majority over that First, the challenges I semiconductors. faced areas would relates that the meaningful have impact. where we of vast the say seen relate semiconductors. There XX% select to of to sales are impact we've

but as the that that's For had And to are well, there relates secure example, we're an certain semiconductors. and challenges. to due business, impact to nutrition in majority supplier our unable ingredients vitamins

relates Now, than today. highest to used your little in question, semiconductor a in used semiconductors the different standard available that type devices are the products as semiconductor medical it is tech bit of

for build of from of I curtailment while demand a thin we these some not so use they And And of for this manufacturers, inventory the semiconductor semiconductor supply. would of size products, has are been and benefit the does levels normalization consumer some there curtailment of of seeing say, demand semiconductor. the super even certainly that

in to case normalize secure we hands so have that And we on to need. this where continue the we'll we components do yet And working seen all our not deck just are I've is don't to pathway we something have this as the I immediate don't anything if said, in for know getting term. resolved Joe, like that, a this But that. that. you'd

José Almeida

this so with we're the chips same. not More semiconductor manufacturers, is issue seeing the are doing what because created we're all

little, at hear Intel from is not. are don't bit you We PCs. We news the chips good actually very This Intel, for chips a use all. few it's instance. sales quite in very chips, So for same down use our

chips Our better that thicker of much using software. chips and they Things. are IoT, are are They Internet are

about output. of are semiconductor industry by the the of -- these demand XX% way, some that So chips

a we of successful that, is now companies. with being start companies very boards. very with because are So few directly well with our redesign working program we We're do what us. very who close for work But also

We with in one by we semiconductors XX of boards have and boards. XX process care key of redesign our critical our with programs to our and have be redesign constrained in months components business may line replace a now started started next have of suppliers we to the identified six a that Reno front

of as and form and and semiconductors as play, because boards the simple is think. not redesign function the of a fit plug It is change. So not everybody

the board. have redesign to We

clinically and revalidate to sometimes revalidate the board. have We

current in can have deal it redesigning redesigning the is [indiscernible] to them, inventory as boards saying that deck through not. is our boards available directly So buying alternates that just suppliers, so be well throughout ways we're hands world, the all is buying the is new can future. brokers put on as in, we with is from there finding It

significant it sharp is company this more So process a boards much expertise future. We when It’s in going became and pay area. fact had in very painful. to comes the we to in dividends to acquire this semiconductors and

Pito Chickering

And right. I great. this up on sure Joe, first have to question make to follow of the just sort Okay, just

saying orders? orders in XXXX new line than for last for is or Thanks new equipment at this capital better the XX in was in so it in much. that days You're XXXX time

José Almeida

not No, XXXX, of own high extremely the by we that were not we I'm in not did to is saying COVID, because their you this our year of XXXX, time extremely Hillrom, were business the last in book -- and high. have okay. rentals of we year affected orders seen capital but What Primarily, be were saying I'm constraint.

going in about and with orders. Now dialogue we primary large But continued see forward, shortages installations. due labor accounts to what have we our everyone delays some in is

going see planning be hospitals in in year first As to the I'm fact, doing matter in of large the U.S. quarter to we're probably a that installation a next

the I November of So effect significant because change see primarily year. coming I'm to the last see out as summer into order we in rental which in -- not I Hillrom, That's significant you don't to pattern a today going XXXX, of Omicron COVID revenue meant. know capital. what high in has don't October and the comparing is

Pito Chickering

guys. Thanks so Great. much,

José Almeida

Thank you.

Operator

Joanne question. a Wuensch of question. Citi state Please is on the line with your

Joanne Wuensch

working the Hillrom. before? they get and significant get my being like question by is you stage synergies else? may Thank backlogs. have of better you future, like what sounds would you now somebody in so it to orders? happening What think Are Briefly, at to those same a question. to what that you're Is Are And they quantify It piling my taking out for be just they versus they way toss up expense you be met? thought sounds also time? second I'll you. Thank there back those at fulfilled the some orders

James Saccaro

Sure.

seeing stay So constrained for a supply are share challenges. manufacturers place. we of that standpoint, of similar part overall, place. these number seeing a environment in Frankly, from we most those a result have not others as We're take the in orders backlog have

needs, opportunity cases, term represent in But those those that are be these will as think level might the long part, how for is some some question if sales impacted. things future. short-term they're about the will Now, of that the remain? In then we longer orders think perhaps I most

we As the are in it relates Hillrom, very the constraints where have that good to about trending of feel with we things exception place.

still those incremental Day trending much May along line and we Investor capture increased with in increasing the lines, so with And confidence. highlighted cost that at very we're

numbers. big we point XXXX sight cost we it's as as move progress continue ups have great of we at to terms some those in sit towards we step and synergies. think I clear line because make and of What's this is, here important have to feel XXXX incremental today, we

I good that as as think, story. it's far goes, very a So

Joanne Wuensch

Thanks.

James Saccaro

Thank you, Joanne.

Clare Trachtman

for time question. have one We more

Operator

We Joshua Jennings with a state have question. Cowen of Please line the your question. on

Joshua Jennings

just just just how or initiatives the of down updates on we technologies thinking these getting X.XXx then for to a Jay, Good leverage in thinking target about about net XXXX. ask acquisition connected morning. Thanks on about -- should a And the be Hillrom maybe can lot. Joe, and progress? care and progress I programs? wanted developing just care you to tracking And just post how connected share second the question anything

for target? pace confidence puts through you the on that and in hit in that terms Thanks Just some think level the help of taking takes questions. us your are to

José Almeida

Josh, good morning.

new patient programs connected hospitals, actually who that seeing enabled Head We the the we divisions creating by are systems. access where in group and features basic working is unified and in portals to several that are commonality is of our are from under established one we And connecting to be we support also of systems care. Frye, So executives PSS, can programs across devices. several GSS seeing a EMR Andy the

lot on. So a there's going

to XXXX an quarter with we think the care should I about programs. we give connected are this first in where update investors probably of

now Baxter group that So creating that this and we have a brand is is at across new looking opportunities.

other good Jay for question. pass So we're for in on making this answering progress the I’ll area.

James Saccaro

Sure.

ratings. solid We define focused maintaining grade As that as BBB. know, credit really we're you investment on

And that year income short build a in had I But our I interesting, to order we've one of what's currently say because want substantial objective. good fallen at that towards course we do some we on fairly cash expectations. have rating we which is the that had that, lacking from maintaining. would statement. to have is the the of our has course, look the this happening progress year, critical challenges say So one debt pump, is make the we've standpoint, And X.XX is which would we're EBITDA over of inventory, inventory a very which net of component. flow that, you as to is a

so pump sell get until that component. And to you're critical that you unable

also we inventory increases example, course of lane times extended cost For to due shipping our the and of saw year our the the in over suppliers.

expecting And inventory. had And third quarter, in note very flow we case. thing. the challenging I so here's the an did fourth is those see a typically in decline are fairly standpoint. for substantial cash reasons, in the free as all quarter, the a we've would year from But that improvement a interesting inventory we in

expect next is income cash growth net year we growth to low, While flow be free substantial.

start of free to will the management our one finalizing two see we're clear normalizes the growth get entire our acceleration still to which that to next over we're very flow debt But team. again net focus to you're so work EBITDA X.XXx going inventory for plans. really situation that a some to support is the of a to significant And as years. doing And cash

Joshua Jennings

Thanks a lot.

Clare Trachtman

very Thank much. you

Operator

all is for today we today's call have Thank gentlemen, that conference Baxter participating. and time Ladies This with concludes the for you International. questions.

Baxter International (BAX) 27 Oct 222022 Q3 Earnings call transcript