The operator of BD's Fourth Quarter and Full Year Fiscal 2023 Earnings Call introduces the speakers and provides information on how to access the call. The call will feature BD's Chairman, CEO, and President Tom Polen, as well as Executive Vice President and CFO Crystal DelOrefice, who will discuss the company's performance and strategy. After their remarks, there will be a Q&A session with segment presidents. The speaker also reminds listeners that there will be forward-looking statements made during the call.

In the paragraph, the speaker encourages the audience to read the disclaimer and disclosures on the Investor Relations website and explains the terms and comparisons used in the presentation. They then introduce Tom Polen, who discusses the company's strong performance in the fiscal year, driven by their BD 2025 strategy, new innovations, and diversified portfolio. The company's focus on connected care, new care settings, and chronic disease, as well as their operational excellence and strategic capital allocation, have contributed to their consistent performance.

The company has seen strong growth in both current and 2-year performance, with a 7% base revenue growth and 5.8% organic growth in FY '23. They have also made significant progress towards their BD 2025 financial targets, with a 7% base organic revenue CAGR and 390 basis points of operating margin expansion. They have also achieved their top priority of obtaining FDA clearance for the updated BD Alaris infusion system and are now focused on remediation, scaling up manufacturing, and engaging with customers. The company is confident in their remediation plan and has already begun the process, with active contracting and shipments ahead of schedule.

The updated Alaris system offers numerous benefits to customers and patients, including an integrated infusion platform and interoperability with other medication management solutions. The clearance of the system is a positive sign for the company's future goals. BD has also launched 27 new products that utilize advanced technologies like AI and robotics, helping researchers and healthcare providers. The pharmacy automation business and robotic microbiology platform have seen strong growth, with menu expansion on molecular platforms.

BD is expanding its reach in the healthcare industry by providing innovative solutions for at-home care, such as the PureWick system for urinary incontinence. They are also making strides in the pharmaceutical sector with self-injection solutions for chronic diseases. In surgery, their products like the Rotarex Atherectomy system and Phasix Mesh are helping to address unmet needs for patients. They are also focused on improving patient and clinician satisfaction with products like PIVO Pro and BD Nexiva. Additionally, their R&D team has had a successful year with on-time milestones and launches.

The company's focus on high-growth programs and strategic acquisitions has positioned them for future expansion. They are on track to meet their targets for new product launches and revenue contribution. The company has also simplified their portfolio and implemented an operating model simplification initiative to reduce complexity and increase efficiency.

The company was able to absorb inflation and improve operating margins, while also strengthening their balance sheet and returning capital to shareholders. They have also made progress in their ESG goals, including reducing greenhouse gas emissions and implementing circular economy pilots. They are also working on innovative solutions for health and equity issues, such as at-home HPV testing.

The paragraph discusses how BD has been recognized for its progress and outlines the macro environment and BD2025 plans for FY '24. The company will focus on advancing its organic portfolio, launching new products, and expanding into higher-growth areas in healthcare. Some specific products mentioned include a new umbilical product and a vacuum-assisted biopsy device that works across multiple imaging modalities.

In FY '24, BD will be launching new products such as the PureWick incontinence solution, FACSDiscover S8 Cell Sorter, Libertas 5 ML device, and BD next-generation infusion pump for Europe. They will also continue to simplify their organization through Project Recode and focus on BD Excellence to achieve their 25% adjusted operating margin goal in FY '25. They will also continue their balanced approach to capital deployment, with a focus on larger tuck-in acquisitions and higher growth categories. In FY '23, BD demonstrated strong execution and agility in advancing their BD 2025 strategy.

BD has shown consistent strong performance in a challenging environment, with a growing pipeline and focus on higher growth markets. They have delivered $5.1 billion in revenue in Q4, exceeding expectations with base organic growth of 7%. For the full fiscal year, they delivered $19.4 billion in revenue with base organic revenue growth of 5.8%, driven by strong performance in BD Medical and BD Interventional. This was supported by their durable core portfolio and an increasing contribution from higher-growth spaces. They have also benefited from organic contributions from tuck-in acquisitions. Over a 2-year period, they have achieved a strong base organic revenue CAGR of about 7%.

In the fourth quarter, BD Medical revenue grew by 6.2%, with strong performance in Medication Management Solutions and Pharmaceutical Systems. This was partially offset by a decline in medication delivery systems in China. Ed Life Sciences revenue totaled $1.3 billion, with base revenues growing by 3.8% due to strong growth in Biosciences. This was partially offset by a decline in specimen management and a comparison to the prior year's COVID-related recovery in China.

In the fourth quarter, BD experienced strong growth in their PDB and Interventional segments, driven by the success of their recently launched BD Fax Discover SH cell sorter and strong demand for their clinical reagents and surgical products. The company also saw significant growth in their PI and Urology divisions, aided by global market penetration and strong demand for their products. Overall, the company's adjusted diluted EPS increased by 24% and gross margin increased by 20 basis points, leading to a 340 basis point increase in adjusted operating margin.

In fiscal year 2023, the company saw margin improvement due to strong revenue performance, offsetting inflation, and lower expenses. Adjusted diluted EPS grew by 7.6%, and gross margin and operating margin remained flat despite absorbing inflation. The company also maintained investment in R&D to support future growth. Cash flows from operations totaled $3 billion for the year. The company is on track to achieve its pre-pandemic margin improvement goals and plans to return to targeted operating margins in the next 2 years.

The company's cash flow improved over the course of the year, with a significant increase in Q4. They plan to continue improving cash flow in the future through inventory management and disciplined investments. They are well positioned to achieve their long-term cash conversion target and have paid down debt and returned capital to shareholders. The company's strong performance in the past two years is attributed to their strategy, portfolio, cost improvement programs, and capital allocation decisions. They are confident in their ability to execute with agility.

In fiscal year 2024, the company remains committed to its revenue growth profile, expecting organic growth above 5.5%. There is strong momentum in 6 key areas of the portfolio, and the company is able to deliver strong results despite macro dynamics affecting many industries, especially in China. The healthcare industry is facing inflation and labor pressures, but BD's essential role and ability to drive efficiencies make it more resilient. The largest headwind is expected in the China business, with market softness and volume-based procurement impacting MDS and farm systems.

The company is projecting China to have flat to modest growth in FY '24, which will create a 75 basis point headwind to revenue growth. They expect to deliver base organic growth of about 6% at the midpoint, with COVID-only testing having a negative impact. The company will no longer report base organic growth excluding COVID-only testing. The sale of a surgical instrumentation platform in Q4 FY '23 will have a 75 basis point impact on total revenue growth in FY '24. The company plans to deliver another year of strong profitable growth, with a focus on improving gross margin and cash flow. They expect gross margin to be flat year-over-year, with currency headwinds and inflation offset by their simplification strategy and inventory reduction efforts.

The company's simplification programs, lean principles, and strong revenue performance are expected to drive productivity gains and improve adjusted operating margin. The company plans to maintain consistent R&D spending and expects adjusted EPS growth of 8.25% to 10.25% before the impact of currency, with double-digit earnings growth expected excluding the divestiture of a surgical instrumentation business. The adjusted effective tax rate is expected to be between 13% and 15%.

The company manages its business on a currency-neutral basis and takes into account the impact of currency fluctuations on its reported results. The recent strengthening of the U.S. dollar has had a significant impact, particularly in relation to sourcing from Mexico. Based on current spot rates, currency is expected to be a headwind for the company's revenues and adjusted EPS growth for the full year. However, the company remains focused on its investment profile and expects strong base organic growth in the next 3 years.

The company has been successful in improving margins and expects double-digit free cash flow growth. However, in the first quarter of fiscal year 2024, organic revenue growth is expected to be lower than the full year, and adjusted EPS is expected to decline. This is due to the impact of the prior year's sales base and COVID-related testing, as well as market dynamics in China. The company also expects a decline in operating margin, largely due to inventory-related FX dynamics and planned inventory reductions. However, they anticipate higher organic sales growth in the second half of the year, driven by the ramp-up of Alaris. They also expect a significant expansion in margins in the second quarter, resulting in nearly flat or slightly increased operating margin for the year.

The company is pleased with its performance in the past year despite facing challenges. They have confidence in their ability to continue this momentum and create value for stakeholders. The first question in the Q&A session is about reported EPS growth and how it compares to the original guidance for fiscal '20. The company's guide range reflects the top line and contemplates both upside and downside scenarios for sales and reinvesting in the business.

In this paragraph, the speaker discusses the company's performance and outlook for the future. They mention that the company cannot control currency and factors such as the COVID-only testing impact. They also highlight the strong top-line growth, with a 6% organic growth rate and a 5.75% midpoint range. The speaker acknowledges the complexity of the macro environment and mentions a 75 basis point headwind from China. They attribute the company's resilience to its diversified portfolio and efforts to drive growth in transformative spaces. The speaker highlights 6 key areas that are contributing to the company's growth and potential for upside. These include farm systems, MMS portfolio, infusion, bioscience research, peripheral vascular disease, molecular diagnostics, and urinary incontinence.

The company's earnings on an FXN basis are consistent with the previous quarter, with double-digit growth at the midpoint and 11% growth at the top end. The company is absorbing a China headwind and focusing on driving down inventory levels to create value. Despite a 5% FX movement across major currencies and a 10% movement in the peso, the company is still on track to reach its 25% goal by 2025. Other companies have also been impacted by these currency fluctuations in Q4.

BD reported their full fiscal year results and many other companies are expected to do the same. They focus on underlying results rather than FX impact. They are expecting strong cash flow growth in 2024 due to their strong earnings growth and cash conversion. They are focused on creating long-term value and will not take actions to cover the impact of FX. The operating margin for the fourth quarter was slightly below expectations but they delivered on their commitments for fiscal 2023. They are confident in achieving their operating margin guidance for the second half of the year.

The company saw a $0.14 increase in earnings on an FXN basis, excluding currency fluctuations. They also delivered on their margin commitments, despite a small accounting adjustment. The company has absorbed $1 billion of inflation over the last 3 years while improving their margin by almost 400 basis points. For the next year, the company expects another 100 basis points of inflation, but they have a strong cost improvement program in place to offset it. They also expect to absorb 75 basis points of FX, but will more than offset it with a 225 basis point cost to win price mix in GP. Overall, the company expects flat gross margin for the year and 50 basis points coming from SG&A leverage and operating model simplification. In the quarter, there was a 350 basis point headwind, but this was due to two one-time items in Q1.

The company has been consistently meeting its margin targets for the past 8 quarters, and predicts a similar trend for the current year. They expect to see a margin improvement of 200 basis points in the second half of the year, with only 100 basis points of inflation to offset. This is a more manageable challenge compared to the previous year. The company is confident in achieving its margin goals for the year, as they have already made significant cost improvements in Q1. The inventory numbers also look promising for the next two fiscal years.

In Q3, the company saw improvements in cash flow, with a $200 million reduction in inventory. This was followed by a $300 million reduction in Q4. The decrease in inventory was due to producing less inventory and will continue into the first half of next year. This has had a positive impact on cash flow, which is expected to grow double digits next year. In Q1, the company's organic growth is projected to be 200 basis points lower than the annual guide, mainly due to respiratory testing dynamics and COVID-related sales.

The paragraph discusses three factors that may impact the growth of the company BD. These include a slowdown in China's medical business, the strong performance of BDI, and the ramp-up of Alaris throughout the year. Despite these challenges, BD remains confident in its growth potential due to its diverse portfolio and strong focus on R&D and tuck-in acquisitions. The company has also started shipping Alaris and is making progress with customers.

The company has secured contracts, but expects a bigger ramp in the second half of the year due to the natural selling cycle. They have made assumptions for Q1 regarding respiratory testing and COVID levels, but this could change depending on how the respiratory season plays out. The gross margin for Q1 is expected to be lower due to one-time factors such as FX and inventory take down, but is expected to improve throughout the year due to cost improvements.

The company has successfully completed its SKU rationalization program and plans to continue simplifying its SKU portfolio. They have seen cost improvements and will need to maintain this throughout the year in order to meet their margin improvement goal. There will be some one-time expenses in Q1, but overall the company is confident in their ability to improve cash flow and see double-digit growth in free cash flow in FY '24. OpEx is expected to be down in the first half of the year due to timing dynamics, but will renormalize in the second half. R&D spending will be more normalized this year compared to the previous year.

In the question and answer session of a conference call, Larry Biegelsen from Wells Fargo asks about the drivers of China's 13% decline in Q4, the impact of the anticorruption initiative and VBP, and how sales will be flat to up in fiscal '24. He also asks about the tax guidance and the impact of FX on sales and EPS. Chris DelOrefice responds by stating that the tax guidance does not include Pillar 2 changes and that they are still assessing those dynamics. He also explains that the FX impact is due to a combination of currency movements and timing of FX flows through inventory, and that it will normalize over time.

Tom Polen, speaking on behalf of the company, notes that the growth in China is more normalized when looking at the 2-year growth rate, as last year's numbers were influenced by the recovery. He mentions two key areas of focus: VOBP and farm systems. The company has seen a slowdown in exports of pharmaceutical products from China, leading to a decline in demand for their products. However, they have reallocated this supply to other customers globally. Additionally, they have seen strong growth in Interventional and life sciences, which is expected to continue in the future.

The speaker discusses the current situation in the MDS business and the impact of the anticorruption campaign in China. They express confidence in their compliance system and mention stabilization in the market. The speaker then addresses a question about the Alaris product and clarifies that it is not a driver of the second half margin ramp. They mention being on track with their expectations for the product, but note that it is a 3-6 month process to get installs and a 6-month sales process. The speaker concludes by saying they will continue to share progress on the product and that the $200 million figure has not changed.

The speaker mentions that they shared a specific revenue number for Aleris in the past, but they will not do so in the future for competitive reasons. They will, however, provide updates on their progress. The team was able to ship products ahead of schedule and discussions with customers are going well. Interoperability is a key consideration for customers and the company is well positioned in that area. The speaker also mentions the impact of currency fluctuations on their financials and how it is managed in their P&L. They also mention their growth priorities and investments for the upcoming year.

Tom Polen, CEO of Becton, Dickinson and Company (BD), discusses the company's approach to managing foreign exchange (FX) dynamics. They use various strategies such as netting, matching sourcing locations, and hedging to mitigate currency fluctuations. However, their focus is on maintaining a strong business and generating cash flow, which has resulted in strong top-line growth and margin improvement despite a 75 basis points FX headwind. BD is also making strategic decisions, such as inventory takedowns, to improve cash generation.

The company is facing pressure before the open, but their actions show confidence and a focus on growth. They have been making bold choices that are paying off, such as investing in inventory and pursuing tuck-in M&A deals. They are also well-positioned to take advantage of opportunities in the future.

Tom Polen discusses the company's strong financial performance and its commitment to investing in growth, despite any potential impact from foreign exchange. He also highlights the success of several products, including bioabsorbable materials in surgery and the PureWick mail product, which is experiencing rapid adoption and will likely exceed $50 million in sales.

The Life Science business of the company has shown great growth in the Biosciences sector, particularly in the fax Discover platform and unique dies. They expect continued strong growth and demand for this platform. The investment made in capacity during COVID has paid off with a strong performance in farm systems. The company is well positioned to capitalize on the durable trends in the market. The pharmacy robotics business is also growing strongly, and the return of Alaris has been a top goal for the company. They have a strong M&A pipeline due to their strong leverage and cash flow.

The speaker discusses the company's focus on tuck-in M&A and their commitment to being disciplined in their targets. They are pleased with their track record and see opportunities for growth. They thank their team and express confidence in their BD 2025 strategy, exceeding commitments and outlining a strong outlook for fiscal 2024. They thank listeners and conclude the call.

This summary was generated with AI and may contain some inaccuracies.