Baxter Reports First-Quarter 2023 Results

• First-quarter revenue of $3.65 billion decreased 2% on a reported basis and increased 2% on a constant currency basis¹
• First-quarter U.S. GAAP earnings per share (EPS) totaled $0.09; Adjusted EPS totaled $0.59
• Baxter expects full-year 2023 sales growth of 1% to 2% on a reported basis and ~1% on a constant currency basis
• Baxter expects full-year U.S. GAAP EPS of $1.16 to $1.31 and adjusted EPS of $2.85 to $3.00

Baxter International Inc. (NYSE:BAX), a global medtech leader, today reported results for the first quarter of 2023.

“Baxter’s performance in the first quarter reflects sustained demand for our medically essential products amid a stabilizing macroeconomic climate and healthcare marketplace,” said José (Joe) E. Almeida, chairman, president and chief executive officer. “I am confident that the transformational actions announced earlier this year, and currently underway, will help us advance our performance, fueling enhanced agility, efficiency, and resilience as we navigate an evolving landscape. Our goal, as always, is to drive increasing impact and value for the patients, clinicians, investors and numerous other stakeholder communities that depend on us.”

First-Quarter Financial Results

Worldwide sales in the first quarter totaled approximately $3.65 billion, a decrease of 2% on a reported basis and an increase of 2% on a constant currency basis, exceeding the company’s previously issued guidance.

Sales in the U.S. totaled $1.73 billion, decreasing 1% on a reported basis. International sales of $1.92 billion decreased 2% on a reported basis and increased 4% at constant currency rates.

Sales performance at constant currency rates reflects overall positive demand across the portfolio, supported by a continued recovery in patient and procedure volumes following the height of the COVID-19 pandemic, in combination with generally stabilizing macroeconomic conditions and an improvement in recent supply chain challenges. Sales growth in the quarter was primarily driven by strength in Advanced Surgery, Front Line Care, Pharmaceuticals and Renal Care. First-quarter performance was partially offset by expected declines in Acute Therapies and BioPharma Solutions as well as in Patient Support Systems, which reflected a slowdown in capital spending for certain healthcare products.

Please see the attached schedules accompanying this press release for additional details on sales performance in the quarter, including breakouts by Baxter’s product categories and segments.

For the first quarter, net income attributable to Baxter was $44 million, or $0.09 per diluted share, a decline of 36% on a U.S. GAAP (Generally Accepted Accounting Principles) basis. These results include special items totaling $253 million after tax, which were primarily related to intangible asset amortization, business optimization and separation costs. On an adjusted basis, net income attributable to Baxter totaled $297 million, or $0.59 per diluted share, a 37% decrease. Results in the quarter exceeded the company’s previously issued guidance, driven primarily by better-than-expected sales performance.

Advancing Strategic Transformation Initiatives

Baxter continues to execute against a range of strategic objectives announced in early 2023, focused on enhancing patient outcomes, innovation, efficiency and long-term shareholder value:

• The company is implementing a new operating model to realign its 10 businesses, region-based commercial geographies, and centralized manufacturing and supply chain operations into four vertically integrated global business segments: Medical Products and Therapies; Healthcare Systems and Technologies; Pharmaceuticals and BioPharma Solutions; and Kidney Care (through completion of the proposed spinoff). The company believes this new model will help fuel greater performance through enhanced strategic clarity, accountability, speed and innovation across the new segments. Baxter expects to report quarterly performance in line with the new operating model beginning in the second half of 2023.
• Progress is advancing on the proposed spinoff of Baxter’s Kidney Care segment (comprised of the company's Renal Care and Acute Therapies product categories) into an independent, publicly traded company, with a preliminary operating model and organizational design now identified. The spinoff is currently expected to occur by July 2024 or earlier, subject to customary conditions.

Business Highlights²

Baxter continues to advance its strategic priorities in pursuit of its Mission to Save and Sustain Lives. Among recent highlights, the company:

• Resubmitted the Novum IQ large volume pump (LVP) for U.S. FDA 510(k) clearance. The pump is part of Baxter’s leading edge Novum IQ infusion platform, which includes both large volume and syringe (SYR) infusion pumps. The platform features Baxter’s Dose IQ Safety Software and IQ Enterprise Connectivity Suite, intuitive digital health technologies developed to protect patients, manage devices, and provide advanced insights. The Novum IQ SYR is now in use in the U.S.
• Launched ZOSYN (piperacillin and tazobactam) Injection premix in the U.S. Zosyn premix is indicated for the treatment of multiple infections caused by susceptible bacteria and is available in Baxter’s proprietary single-dose Galaxy containers, which enable premixed medications to have a longer shelf life. Its frozen premix formulation helps support patient safety, simplify medication preparation and improve operational efficiencies.
• Commercially launched the new Baxter Patient Warming system, which minimizes risks associated with forced air warming, reduces noise and waste in the operating room, and lessens the burden on clinician workflows. The updated system eliminates the need for disposables, as the warming technology is built into the table pad and employs reusable conductive warming blankets that can reach temperatures of 43 degrees Celsius.
• Launched Floseal + Recothrom, the first and only active flowable hemostat with a recombinant thrombin, resulting in 1.5 times faster preparation. Floseal + Recothrom has a thrombin component manufactured using recombinant DNA technology, and therefore contains no human blood components and eliminates reliance on human blood donations.
• Introduced the ReadyConnect System for Baxter’s Centrella Smart+ Bed. This innovative system delivers reliable, cable-free connectivity between the hospital bed and most nurse call systems on the market, and requires no wireless network, incremental server software licenses, or other IT resources from the customer.
• Launched ExactaMix Pro, a next generation automated nutrition compounder. This new technology builds on Baxter’s original, industry leading ExactaMix automated nutrition compounder, which has been used in 1,000+ hospitals and compounding centers to create more than 100 million bags of medications customized to individual patients’ needs. ExactaMix Pro offers a wide array of enhancements designed to strengthen security, improve customer experience and offer stronger data reporting capabilities. It is also the first and, to date, only automated compounder certified to the U.S. FDA-recognized UL 2900-2-1 cybersecurity standard.
• Announced a collaborative research agreement with life sciences company Miromatrix to help support additional treatment options for patients with acute liver failure (ALF). Miromatrix has developed a new therapy called miroliverELAP, which combines its single-use bioengineered liver with Baxter’s PrisMax system and is designed to provide external support to the patient’s native liver as a bridge to transplant or bridge to recovery. The agreement includes an intended Phase I clinical trial designed to generate key evidence to support additional therapeutic options for patients.

Among recent corporate responsibility highlights, Baxter and the Baxter International Foundation advanced support for disaster relief in response to February’s devastating earthquake in Turkey and Syria. Support included cash grants and product donations managed through humanitarian partners Direct Relief and Americares.

2023 Financial Outlook

For full-year 2023: Baxter now expects U.S. GAAP earnings of $1.16 to $1.31 per diluted share and adjusted earnings, before special items, of $2.85 to $3.00 per diluted share. The company expects sales growth of 1% to 2% on a reported basis and approximately 1% on a constant currency basis.

For second-quarter 2023: The company expects sales growth of approximately 1% to 2% on a reported basis and 2% to 3% on a constant currency basis. The company expects U.S. GAAP earnings of $0.18 to $0.20 per diluted share and adjusted earnings, before special items, of $0.59 to $0.61 per diluted share.

First-Quarter 2023 Earnings Conference Call

A webcast of Baxter’s first-quarter 2023 conference call for investors can be accessed live from a link in the Investor Relations section of the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on April 27, 2023. Please see www.baxter.com for more information regarding this and future investor events and webcasts.

About Baxter

Every day, millions of patients, caregivers and healthcare providers rely on Baxter’s leading portfolio of diagnostic, critical care, kidney care, nutrition, hospital and surgical products used across patient homes, hospitals, physician offices and other sites of care. For more than 90 years, we’ve been operating at the critical intersection where innovations that save and sustain lives meet the healthcare providers who make it happen. With products, digital health solutions and therapies available in more than 100 countries, Baxter’s employees worldwide are now building upon the company’s rich heritage of medical breakthroughs to advance the next generation of transformative healthcare innovations. To learn more, visit www.baxter.com and follow us on Twitter, LinkedIn and Facebook.

Non-GAAP Financial Measures

Net sales growth rates are presented on a constant currency basis. These non-GAAP financial measures provide information on the percentage change in net sales growth as if foreign currency exchange rates had remained constant between the prior and current periods.

Other non-GAAP financial measures included in this release and the accompanying tables (including within the tables that provide the company’s detailed reconciliations to the corresponding U.S. GAAP financial measures) are: adjusted gross margin, adjusted selling, general, and administrative expenses, adjusted research and development expenses, adjusted other operating income, net, adjusted operating income, adjusted income before income taxes, adjusted income tax expense, adjusted net income, adjusted net income attributable to Baxter stockholders and adjusted diluted earnings per share. Those non-GAAP financial measures exclude the impact of special items. For the quarters ended March 31, 2023 and 2022, special items for one or more periods included intangible asset amortization, business optimization items, acquisition and integration items, divestiture-related costs, expenses related to European medical devices regulation and product-related items. These items are excluded because they are highly variable or unusual and of a size that may substantially impact the company’s reported operations for a period. Additionally, intangible asset amortization is excluded as a special item to facilitate an evaluation of current and past operating performance and is consistent with how management and the company’s Board of Directors assess performance.

This release and the accompanying tables also include free cash flow, a non-GAAP financial measure that Baxter defines as operating cash flow less capital expenditures. Free cash flow is used by management and the company’s Board of Directors to evaluate the cash generated from Baxter’s operating activities each period after deducting its capital spending.

This release also includes forecasts of certain of the aforementioned non-GAAP measures on a forward-looking basis as part of the company’s financial outlook for upcoming periods.

Non-GAAP financial measures may enhance an understanding of the company’s operations and may facilitate an analysis of those operations, particularly in evaluating performance from one period to another. Management believes that non-GAAP financial measures, when used in conjunction with the results presented in accordance with U.S. GAAP and the company’s reconciliations to corresponding U.S. GAAP financial measures (which are included in the tables accompanying this release), may enhance an investor’s overall understanding of the company’s past financial performance and prospects for the future. Accordingly, management uses these non-GAAP measures internally in financial planning, to monitor business unit performance, and, in some cases, for purposes of determining incentive compensation. This information should be considered in addition to, and not as substitutes for, information prepared in accordance with U.S. GAAP.

Forward-Looking Statements

This release includes forward-looking statements concerning the company’s financial results (including the outlook for second quarter and full-year 2023) and business development and regulatory activities (including anticipated cost savings). These forward-looking statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: the company’s ability to execute and complete strategic initiatives, asset dispositions and other transactions, including the proposed spinoff of the company’s Renal Care and Acute Therapies product categories; the company’s plans to simplify the company’s operating model and manufacturing footprint and the company’s review of strategic alternatives (including a potential sale) for the company’s BioPharma Solutions product category, the timing for such transactions, the ability to satisfy any applicable conditions and the expected proceeds, consideration and benefits; failure to accurately forecast or achieve the company’s short- and long-term financial improvement performance and goals (including with respect to the company’s strategic actions); the company’s ability to execute on its capital allocation plans, including the company’s debt repayment plans, the timing and amount of any dividends, share repurchases and acquisition proceeds and the capital structure of the public company that the company expects to form as a result of the proposed spinoff (and the resulting capital structure for the remaining company); the impact of global economic conditions (including, among other things, inflation levels, interest rates, financial market volatility, banking crises, the potential for a recession, the ongoing war in Ukraine, the related economic sanctions being imposed globally in response to the conflict and potential trade wars) and continuing public health crises, pandemics and epidemics, such as the ongoing COVID-19 pandemic, or the anticipation of any of the foregoing, on the company’s operations and on the company’s employees, customers and suppliers, including foreign governments in countries in which the company operates; downgrades to the company’s credit ratings or ratings outlooks, and the related impact on the company’s funding costs and liquidity; demand for and market acceptance risks for and competitive pressures related to new and existing products (including challenges with the company’s ability to accurately predict changing consumer preferences and future expenditures, which has led to and may continue to lead to increased inventory levels, and needs and advances in technology and the resulting impact on customer inventory levels and the impact of reduced hospital admission rates and elective surgery volumes), and the impact of those products on quality and patient safety concerns; the continuity, availability and pricing of acceptable raw materials and component parts (and the company’s ability to pass some or all of these costs to the company’s customers through recent price increases or otherwise), and the related continuity of the company’s manufacturing and distribution and those of the company’s suppliers; inability to create additional production capacity in a timely manner or the occurrence of other manufacturing, sterilization or supply difficulties (including as a result of natural disaster, public health crises and epidemics/pandemics, regulatory actions or otherwise); product development risks, including satisfactory clinical performance and obtaining and maintaining required regulatory approvals (including as a result of evolving regulatory requirements), the ability to manufacture at appropriate scale, and the general unpredictability associated with the product development cycle; the company’s ability to finance and develop new products or enhancements on commercially acceptable terms or at all; loss of key employees, the occurrence of labor disruptions or the inability to identify and recruit new employees; product quality or patient safety issues leading to product recalls, withdrawals, launch delays, warning letters, import bans, sanctions, seizures, litigation, or declining sales, including the focus on evaluating product portfolios for the potential presence or formation of nitrosamines; breaches or failures of the company’s information technology systems or products, including by cyber-attack, data leakage, unauthorized access or theft (as a result of remote working arrangements or otherwise); future actions of (or failures to act or delays in acting by) FDA, the European Medicines Agency or any other regulatory body or government authority (including the SEC, Department of Justice, the Federal Trade Commission, Centers for Medicare & Medicaid Services or the Attorney General of any State) that could delay, limit or suspend product development, manufacturing, sale or reimbursement or result in seizures, recalls, injunctions, monetary sanctions or criminal or civil liabilities, including the continued delay in lifting the warning letter at the company’s Ahmedabad facility; failures with respect to the company’s quality, compliance or ethics programs; future actions of third parties, including third-party payers and the company’s customers and distributors (including group purchasing organizations and integrated delivery networks), the impact of healthcare reform and its implementation, suspension, repeal, replacement, amendment, modification and other similar actions undertaken by the United States or foreign governments; the outcome of pending or future litigation, including the opioid, ethylene oxide and Linet antitrust litigation or other claims; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; global regulatory, trade and tax policies (including with respect to climate change and other sustainability matters); the ability to protect or enforce the company’s owned or in-licensed patent or other proprietary rights (including trademarks, copyrights, trade secrets and know-how) or patents of third parties preventing or restricting the company’s manufacture, sale or use of affected products or technology; the impact of any goodwill or other intangible asset impairments on the company’s operating results; fluctuations in foreign exchange and interest rates; any changes in law concerning the taxation of income (whether with respect to current or future tax reform); actions by tax authorities in connection with ongoing tax audits; and other risks identified in Baxter’s most recent filings on Form 10-K and Form 10-Q and other SEC filings, all of which are available on Baxter’s website. Baxter does not undertake to update its forward-looking statements unless otherwise required by the federal securities laws.

Baxter, Centrella, Dose IQ, ExactaMix, ExactaMix Pro, Floseal, Galaxy, IQ Enterprise, Novum IQ, PrisMax, ReadyConnect, Recothrom and Zosyn are registered trademarks of Baxter International Inc. or its subsidiaries.

Miroliver and miroliverELAP are registered trademarks of Miromatrix Medical, Inc.

Any other trademarks or product brands appearing herein are the property of their respective owners.

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¹ See tables to the press release for reconciliations of non-GAAP measures used in this press release to the corresponding U.S. GAAP measures.

² See links to original press releases for additional product information.

The company’s U.S. GAAP results for the three months ended March 31, 2022 included special items which impacted the U.S. GAAP measures as follows:

Constant currency growth is a non-GAAP measure. For more information on the company’s use of non-GAAP financial measures, please see the Non-GAAP Financial Measures section of this press release.

The company’s outlook for U.S. GAAP earnings per share only includes the impact of special items that are known or expected as of the date of this release. Accordingly, actual U.S. GAAP earnings per share for the second quarter and full year of 2023 may differ significantly from those amounts. For example, the company’s outlook does not reflect the potential impact of future business or asset acquisitions or dispositions (including discontinued operations presentation, if applicable), goodwill or intangible asset impairments, restructuring actions, developments related to gain or loss contingencies, or unusual or infrequently occurring items that may occur during the remainder of 2023.

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