Becton, Dickinson and Company — 2024 Q2

Yes. Thanks for the question, Travis. Yes. So first of all, we were pleased with the quarter. To your point on revenue, one, we did see strong acceleration quarter-over-quarter as expected on revenue. We tried to outline the ramp. Clearly, the back half guidance at our midpoint implies about 7.5% growth. But when you unpack that with the momentum that we have in Alaris, we now expect nearly 250 basis points contribution to our second half growth. That would put us at least $300 million for the full year. So if you strip that out, the rest of the BD portfolio has to perform at just over 5%. We feel confident in that. We have strong areas of momentum.

Nice quarter. I'll try and ask one that answers a couple of things. As you look at the balance of the year, you said you just need 5% in the base business. So if we look at second quarter, excluding the Urology payment and Alaris, what did the base business do so we could get that kind of comparison?

Thanks, Rob. So I think as we look at the quarter and as we look forward to the year, we feel really good about the momentum and the diversity of BD's portfolio. And I'd say, as you look at the areas across the company, we see particular strengths in Medical, in Intervention, in the Life Science businesses that are focused in the health care provider space, right, that are benefiting from strong utilization across the board.

I would just add, I think Q2 is certainly representative of the growth rate that we need. We feel good about that. There's all kinds of puts and takes in the P&L. I mean just -- Alaris was a modest contribution. It wasn't significant. It's really most predominant in the second half, and that will be a strong driver for us. I articulated the second half drivers. Keep in mind, in Q2, you had some of these other negative comps, right?

I guess my one question here is on Alaris, the $300 million, Tom, can you give us a sense on what the implied exit rate number is in Q4 for Alaris? Because I understand from a growth perspective, it might be a little tricky. I know you have some upgrades going on. What is the dollar revenue number implied for Q4? And I know Alaris was raised from $200 million to $300 million, but the organic for fiscal was maintained. Is that just conservatism?

Yes. Thanks for the question. So first off, we are really happy that we delivered on our #1 priority last year, which is the clearance of the BD Alaris system. And we said our #1 priority for this year became the relaunch of Alaris and remediation and return to it being a contributing growth driver. And we're certainly delivering exactly on that goal like we did last year. Really proud of our manufacturing team. Hopefully, you heard it in our prepared remarks, right? We went from clearance at the end of Q4 to this past quarter, Q2, setting an all-time record in both the production and shipment numbers of Alaris. That's a combination for sale and remediation, but it really reflects that core manufacturing excellence capability that BD has, which we think is best-in-class in the industry, and this is a great example of it.

The only thing -- just small thing I would add, we did say that for Q3, you should expect total growth inclusive of Alaris of at least 6%. And then you would expect a sequential step up in Q4. So you think of that step up, a portion of that is going to be Alaris. There's also the China grow-over favorable comp that we'll have, but Alaris is a portion of that.

Congrats on a nice quarter here. Chris, I know it's really early, but love to hear your confidence in the 25% operating margin goal in fiscal 2025. And are there items right now we should be aware of, such as TSAs rolling off or an increase in the tax rate that would make double-digit EPS growth challenging next year?

Yes. Thanks, Larry. Good question. Yes, first of all, to your point, it's a little early to get into 2025. TSA is not material. That's a normal dynamic that happens. As a matter of fact, year-over-year, we're down. So we're actually absorbing that already. And by the time you get through this year, it's not substantive.

So just because there's a lot of focus on the phasing and the ramp through the second half of the year. I guess, you gave us some math and some confidence in that. I was wondering if you could take the other side of the coin and maybe talk about any risks that you see to that ramp? I mean what would have to go wrong for you not to hit this express progression in revenue acceleration and margin expansion?

Yes. Thanks for the question. I guess -- so 2 things. One on margin. If you think of margin, a lot of the momentum comes from 2 things like I shared, right? One, we just exit those one-timers in the first half. So high confidence that's done. It's behind us. The second thing is, our cost improvement initiatives with -- when you think of a cap and roll period and inventory, we have a strong line of sight to that, and we already know the embedded inflation dynamics that are all locked up. So we have a high degree of confidence in what's flowing through gross margin.

Can I just ask...

Sure, go ahead.

I just want to ask a follow-up. You mentioned in the presentation some enhancements to Alaris and Pyxis. So I was hoping you could just talk about the importance of those submissions.

Yes, sure. Happy to, Matt. So on Alaris, and we'll only share a certain level of information on those at this time. We want to keep some of that surprise for customers in the market as we actually launch them. But on Alaris, we're really happy to be back at the innovation cadence. I think when we got the clearance, not only are we happy to be back servicing our customers and driving growth and getting after remediation, but we're happy to immediately jump back into innovation cadence. And you can see our team didn't hesitate in doing that.

Yes, I was on mute. Sorry for that. So just one question, and it's kind of a high-level question, Chris and Tom. You talked about the sequential acceleration in growth, which is evident and the improvement in margins, which you had kind of laid out early in the year. I think when folks look at the results, we're seeing really strong margin growth and strength in the quarter. And what I just mentioned and what you described, sequential acceleration but sort of in an environment where volumes have been stronger across a bunch of med tech businesses. Maybe a touch closer to in line even after adjusting for FX.

Yes, I'll take that, Matt. So no, we feel good. It fits right in line with what we -- what I described before, which was you're seeing the diversity of our portfolio, which is a real strength for the company. Where again, those -- the Medical products, Intervention, Life Science businesses that are exposed to health care utilization, health care provider space, right, the vacutainers, the diagnostic systems products, et cetera, along with Intervention and all the Medical products used in that. They're benefiting from that strong utilization and our innovation pipeline that are enabling us to offset what our transitory broad dynamics in the -- that people are seeing in the life science research space and the B2B pharma systems with some destocking, particularly in vaccines and anti-coag.

Okay. Thank you, operator, and thank you, everyone, and thank you for your questions and interest in BD. We look forward to sharing our progress towards delivering our BD 2025 goals and increased outlook for FY '24 on our next call. Have a great rest of the day.