- Second-quarter revenues increased 3% on a reported basis and 4% on a constant currency basis, ahead of the company’s previously issued guidance1
- Second-quarter U.S. GAAP earnings (loss) per share (EPS) (including discontinued operations) of ($0.28); adjusted EPS (including discontinued operations) of $0.66
- Second-quarter U.S. GAAP EPS from continuing operations of ($0.39); adjusted EPS from continuing operations of $0.55
Baxter International Inc. (NYSE:BAX), a global medtech leader, today reported results for the second quarter of 2023.
“Baxter’s second-quarter performance reflects ongoing solid demand for our diverse, durable portfolio of medically essential products,” said José (Joe) E. Almeida, chairman, president and chief executive officer. “We are making progress across the transformational actions we announced at the start of 2023. These initiatives are focused on enhancing strategic clarity, increasing market responsiveness and accelerating innovation, in an effort to drive greater value for our stakeholders.”
Second-Quarter Financial Results
Worldwide sales from continuing operations in the second quarter totaled approximately $3.71 billion and sales from discontinued operations totaled $142 million in the quarter. This performance represented an increase of 3% on a reported basis and 4% on a constant currency basis, both for continuing operations and in the aggregate. Discontinued operations include Baxter’s BioPharma Solutions (BPS) business, which is currently expected to be divested in the second half of 2023, subject to the satisfaction of customary closing conditions, as announced on May 8, 2023. See “Recent Highlights” later in this release for more information about the pending BPS divestiture.
U.S. sales from continuing operations in the second quarter totaled approximately $1.75 billion and discontinued operations totaled $64 million in the quarter, an increase of 3% on a reported basis, both for continuing operations and in the aggregate. International sales from continuing operations in the second quarter totaled approximately $1.96 billion and discontinued operations totaled $78 million in the quarter, representing increases of 3% on a reported basis and 5% on a constant currency basis for continuing operations, and 3% on a reported basis and 4% on a constant currency basis in the aggregate.
Sales performance in the quarter came in ahead of Baxter’s previously announced second-quarter 2023 guidance, driven by overall positive demand for Baxter products, reflecting ongoing recovery in patient and procedure volumes, alongside generally stabilizing macroeconomic conditions and an ongoing abatement in recent supply chain challenges. Sales growth in the second quarter was driven primarily by high single-digit growth at constant currency rates in Front Line Care, Surgical Solutions, Medication Delivery, and Clinical Nutrition; and mid-single-digit growth at constant currency rates in Acute Therapies and Advanced Surgery. Second-quarter performance was partially offset by a low single-digit decline in Patient Support Systems, primarily resulting from lower rental revenues, as well as lower sales in BPS (reported in discontinued operations) due to a reduction in COVID vaccine manufacturing revenues.
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 second quarter, total net income attributable to Baxter was ($141 million), or ($0.28) per diluted share, a decline of 156% from the prior-year period on a U.S. GAAP (Generally Accepted Accounting Principles) basis. Total U.S. GAAP diluted EPS includes ($0.39) from continuing operations and $0.11 from discontinued operations. These results include special items totaling $476 million after tax, which were primarily related to business optimization costs and intangible amortization, among other factors. On an adjusted basis, total net income attributable to Baxter was $335 million, or $0.66 per diluted share, a 24% decline for the quarter as compared to the prior-year period. Total adjusted diluted EPS includes $0.55 from continuing operations and $0.11 from discontinued operations. Adjusted diluted EPS for the quarter exceeded Baxter’s previously announced second-quarter 2023 guidance, driven by better-than-expected sales performance and operational efficiencies.
Kidney Care Spinoff Update
As announced Jan. 6, 2023, Baxter is preparing to spin off its Renal Care and Acute Therapies global businesses (Kidney Care) into an independent, publicly traded company. The new company is poised to launch with a leading product portfolio, geographically diverse footprint, extensive commercial operations, and robust service capabilities supporting its therapies, which are delivered in homes, clinics, and intensive care units (ICUs) worldwide. As a standalone entity, the company should benefit from heightened management focus and the ability to pursue its unique investment priorities, emerging better positioned to accelerate growth and innovation and create incremental value for its patients, clinicians, investors, and other stakeholder communities.
In May, Chris Toth was named as the inaugural chief executive officer of the planned spinoff company. Mr. Toth most recently served as chief executive officer of Varian, a Siemens Healthineers company. He joined Baxter in June and will serve as executive vice president and group president, Kidney Care, until completion of the proposed spinoff.
Earlier this week, Baxter also announced that the new company will be named Vantive, with the logo and full visual identity to be unveiled at a later date. Until separation, the relevant businesses will continue to operate as Baxter.
Beyond these critical milestones, the underlying work of the spinoff continues. The new company’s operating model and organizational design are being finalized, and progress is ongoing across legal, regulatory, supply chain, and numerous other key operational channels. The spinoff, which remains subject to the satisfaction of customary conditions, is currently expected to occur by July 2024 or earlier.
Baxter continues to advance key strategic priorities in pursuit of its Mission to Save and Sustain Lives. Among recent highlights, the company:
- Signed a definitive agreement to divest its BioPharma Solutions (BPS) business to Advent International, one of the largest and most experienced global private equity investors, and Warburg Pincus, a leading global growth investor. The pending divestiture of BPS will further streamline Baxter’s strategic focus and represents an important milestone in Baxter’s ongoing business transformation. Baxter plans to deploy net after-tax proceeds of the transaction for debt repayment, consistent with the company’s stated capital allocation priorities. The transaction is currently expected to close in the second half of 2023, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions.
- Launched its next-generation Hillrom Progressa+ ICU bed in the U.S. Progressa+ offers new technology and features to help address complex critical care needs, including in-bed pulmonary therapies designed to aid in the reduction of pulmonary complications, improved protection of the patient’s skin to help prevent pressure injuries, and support for early mobility protocols. Baxter plans to launch Progressa+ in additional global markets over the next 18 months.
- Announced the FDA Premarket Approval (PMA) and subsequent U.S. launch of its PERCLOT Absorbable Hemostatic Powder. PERCLOT is a passive, absorbable hemostatic powder that is ready to use and designed for patients with intact coagulation to address mild bleeding. This represents Baxter’s first passive hemostat in the U.S. market, broadening Baxter’s portfolio to include a full range of active and passive solutions.
Annual Corporate Responsibility Report
In June, Baxter released its 2022 Corporate Responsibility Report, featuring performance updates on the company’s 2030 Corporate Responsibility Commitment and Goals. The report reflects Baxter’s first year of integration with Hillrom, demonstrating how the combined team has united in support of a shared commitment to “Empower our Patients,” “Protect our Planet,” and “Champion our People and Communities.”
Building on more than three decades of reporting environmental performance, Baxter has announced plans to further enhance its transparency and disclosures by reporting against the framework established by the Task Force on Climate-Related Financial Disclosures (TCFD) in a standalone publication later this year.
2023 Financial Outlook and Assumptions
For Full-Year 2023
The Company’s current expectation is that the pending sale of BPS is likely to close towards the end of the third quarter. However, as the ultimate timing is uncertain, and to provide comparability to prior guidance, it is providing a financial outlook that also contemplates a scenario in which the transaction does not close in 2023. Under either scenario, BPS is reflected as a discontinued operation, consistent with its presentation throughout this release and the accompanying tables. Adjusted diluted earnings per share amounts referred to below exclude special items.
Scenario 1: BPS Remains a Part of Baxter Through Full-Year 2023
- Under this scenario, Baxter expects full-year 2023 sales growth from continuing operations of 1% to 2% on a reported basis and approximately 2% on a constant currency basis. Under this scenario, sales growth in aggregate (including discontinued operations) would be the same as continuing operations on both a reported and constant currency basis.
- Under this scenario, Baxter expects full-year 2023 adjusted earnings on an aggregate basis (including discontinued operations) of $2.92 to $3.00 per diluted share and adjusted earnings from continuing operations of $2.49 to $2.57 per diluted share.
Scenario 2: The Pending BPS Sale is Completed on September 30, 2023
- Under this scenario, there is no change to sales growth for continuing operations and sales growth in aggregate (including discontinued operations) would be approximately flat to 1% on a reported basis and approximately 1% on a constant currency basis, reflecting the absence of BPS sales in the fourth quarter.
- Under this scenario, Baxter expects full-year 2023 adjusted earnings of $2.87 to $2.95 per diluted share in the aggregate (including discontinued operations) and adjusted earnings from continuing operations of $2.54 to $2.62 per diluted share. Baxter’s full-year 2023 adjusted earnings per diluted share outlook in the aggregate reflects a $0.10 per share negative impact from the absence of BPS earnings in the fourth quarter. The company’s outlook for adjusted earnings per diluted share in the aggregate and for continuing operations both reflect a net benefit of approximately $0.05, primarily due to reduced interest expense after giving effect to anticipated debt repayment plans.
For Third-Quarter 2023
The company expects third-quarter sales growth from continuing operations of approximately 2% on a reported basis and 1% on a constant currency basis.
The company expects third-quarter adjusted earnings in aggregate (including discontinued operations) of $0.78 to $0.80 per diluted share and adjusted earnings from continuing operations of $0.65 to $0.67 per diluted share.
Second-Quarter 2023 Earnings Conference Call
A webcast of Baxter’s second-quarter 2023 conference call for investors can be accessed live from a link on the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on July 27, 2023. Please see www.baxter.com for more information regarding this and future investor events and webcasts.