Becton Dickinson BDX Q1 2026 Earnings Transcript

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DATE

Feb. 9, 2026, 8 a.m. ET

CALL PARTICIPANTS

• Chairman, Chief Executive Officer, and President — Tom Polen
• Senior Vice President and Interim Chief Financial Officer — Vitor Roach

TAKEAWAYS

• Total Revenue -- $5.3 billion, up 0.4% on an FX-neutral basis; growth driven by multiple high-growth platforms.
• New Becton, Dickinson and Company (NYSE:BDX) Revenue -- Grew 2.5%, with “broad-based growth” in targeted segments and double-digit expansion in biologic drug delivery, PIRWIC, advanced tissue regeneration, and Pharmacy Automation.
• Portfolio Performance -- 90% of the portfolio reported mid-single-digit revenue growth; remaining 10% saw headwinds from Alaris and vaccines in China as expected.
• Adjusted Gross Margin -- 53.4%, down 140 basis points from the prior year, impacted by approximately 170 basis points of tariffs, partially offset by productivity initiatives.
• Adjusted Operating Margin -- 21.2%, a decline of 240 basis points year over year, attributed to tariffs and increased commercial investments.
• Adjusted EPS -- $2.91, down 15.2%, “driven primarily by the impact of tariffs,” but exceeded internal expectations on revenue and operational execution.
• Free Cash Flow -- $548 million, with free cash flow conversion improving to 66% from 59% in the prior year, reflecting working capital discipline and capital efficiency.
• Shareholder Returns -- $550 million returned to shareholders in the quarter, including $250 million in repurchases and dividends.
• Net Leverage -- Ended the quarter at 2.9x, with commitment to a long-term target of 2.5x.
• Guidance: Fiscal 2026 Revenue -- Low single-digit revenue growth expected, with currency projected to be a 120 basis-point tailwind.
• Guidance: Adjusted Operating Margin -- Maintained at approximately 25%, inclusive of tariffs.
• Guidance: Adjusted EPS -- Expected range of $12.35–$12.65 (6% growth at midpoint), including a 370 basis-point impact from tariffs and a $2.4 per share net effect from the Waters transaction and cash deployment.
• Capital Allocation from Waters Transaction -- $4 billion cash distribution to be split equally between an accelerated share repurchase and debt paydown, both to occur near-term.
• Manufacturing Network Rationalization -- Global manufacturing sites reduced to under 50, compared to over 90 several years ago, via the Life Sciences transaction and ongoing consolidation initiatives.
• New Product Launches -- Initiated U.S. launch of Avatene Flowable (entering a $400 million market), European launch of SurgiFor, and targeted release of HemoSphere Stream following 510(k) clearance.
• Productivity Improvement -- Delivered 8% productivity gains, contributing to gross margin and cash flow.
• Tuck-In M&A Strategy -- Continued focus on targeted, accretive tuck-in acquisitions in high-growth markets, with no plan for transformational M&A.
• GLP-1 Portfolio Update -- More than 80 novel and biosimilar GLP-1 molecules now contracted to Becton, Dickinson and Company delivery devices; GLP-1 accounts for approximately 2% of revenue.
• Alaris Share Gains -- Company stated this was the “strongest quarter of competitive wins since the relaunch,” with approximately 100 basis points category share gain and a share position nearing 60%.
• Q2 Guidance -- Expected revenue growth of approximately 2% and adjusted EPS range of $2.72–$2.82; first-half and second-half performance expected to be consistent with no ramp.

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RISKS

• Adjusted EPS declined 15.2%, “driven primarily by the impact of tariffs,” which also caused a 140 basis-point reduction in adjusted gross margin and a 240 basis-point decline in adjusted operating margin.
• 10% of the portfolio—specifically Alaris and vaccines in China—continues to face challenging market dynamics and contributed to headwinds in reported growth.
• Tariffs are expected to have a 370 basis-point impact on 2026 adjusted EPS, and continue to pressure margins and earnings performance.
• U.S. and China Life Sciences segments experienced revenue declines, with U.S. impacted by point-of-care headwinds and China facing price compression and challenging market conditions.

SUMMARY

The quarterly call marked the completion of the Life Sciences transaction with Waters, with $4 billion in proceeds to be split between share repurchases and debt reduction as part of a disciplined capital allocation strategy. Management emphasized a transformation to a focused pure-play medtech company, reaffirming expectations for low single-digit revenue growth, flat phasing across quarters, and adjusted EPS guidance that incorporates both tariff impacts and transaction effects. Portfolio management actions have resulted in under 50 manufacturing sites, 8% quarterly productivity gains, and growth platforms strongly aligned with long-term healthcare trends in connected care, home-based delivery, and chronic disease management. Broad-based consumable demand and high-value product launches support sustained performance, while top-line pressures from China, vaccines, and Alaris headwinds remain contained within anticipated bounds.

• Management stated there are “no specific one-timers” expected in margin performance, highlighting that gains are being driven by operational improvements and higher margin portfolios, not transitory factors.
• Becton, Dickinson and Company confirmed maintenance of free cash flow strength with conversion rising to 66%, directly supporting share buybacks and dividends.
• Investment in commercial capabilities included a 15% sales force expansion in high-growth categories and compensation plan redesigns for the global selling organization.
• Innovation pipeline acceleration was achieved by reallocating $50 million from corporate R&D to fund business segment development, shortening product launch timelines by 6–12 months in several areas.
• Pricing was described as generally “flat to slightly positive. That's up a little over 50 basis points ex China,” with further pricing strength expected once China’s value-based procurement headwinds subside.

INDUSTRY GLOSSARY

• Reverse Morris Trust (RMT): A tax-efficient structure used to spin off and merge a portion of a company's business with another entity, typically resulting in divestiture without immediate tax consequences.
• ASR (Accelerated Share Repurchase): A method for a company to buy back its shares quickly through an upfront transaction with a counterparty, reducing outstanding share count in the near term.
• VBP/VOBP (Volume-Based Procurement in China): A government procurement process in China that leverages bulk purchasing to negotiate lower prices for medical products, often impacting industry pricing and volumes.
• GLP-1: Glucagon-like peptide-1, a class of drugs used to treat diabetes and obesity, representing a rapidly expanding biologics market for drug delivery devices.
• APM: Advanced Patient Monitoring, a category within connected care solutions focused on integrated patient data and monitoring technology.
• PI: Peripheral Intervention, referring to devices and procedures treating peripheral vascular diseases.
• UCC: Urology and Critical Care, a product line within interventional solutions targeting urological and acute care markets.
• MMS: Medication Management Solutions, a business segment encompassing automated dispensing, medication safety, and related pharmacy automation systems.
• PIRWIC: Not explicitly defined in the transcript; appears as a proprietary or segment-specific term within the business.
• Pyxis Pro: A recently launched medication dispensing system aimed at improved workflow and competitive share gains within MMS.
• HemoSphere Stream: Advanced patient monitoring system recently cleared for expanded use in the U.S. and Europe, designed for general ward adoption.
• PURWIC: A proprietary urinary incontinence solution/platform within the company’s interventional business.
• SurgiFor/SurgiFore: Ready-to-use wound irrigation systems introduced in Europe, expanding surgical product offerings.
• Avatene Flowable: Next-generation biosurgery flowable hemostat product launched in the U.S. to address new market demand.

Full Conference Call Transcript

Tom Polen, Becton, Dickinson and Company's Chairman, Chief Executive Officer and President, and Victor Roach, Senior Vice President and Interim Chief Financial Officer. Before we get started, I want to remind you that we will be making forward-looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings on our Investor Relations website. Unless otherwise specified, all comparisons will be made on a year-on-year basis versus the relevant fiscal period. Revenue percentage changes are on an FX-neutral basis unless otherwise noted. Also, references to adjusted EPS refer to adjusted diluted EPS.

As a reminder, beginning October 1, we began operating under our previously disclosed new Becton, Dickinson and Company segment structure that includes Medical Essentials, Connected Care, Biopharma Systems, and Interventional, and a fifth Life Sciences segment comprised of Biosciences Diagnostic Solutions. The financials discussed here and included in the earnings release and 10-Q have been recast to reflect this reorganization. Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation. With that, I will turn it over to Tom.

Tom Polen: Thank you, Sean, and good morning, everyone. Before we get started, I'd like to take a moment to welcome Sean to Becton, Dickinson and Company. We are very excited to have Sean join our team, and I look forward to partnering with him as we continue to communicate our strategy, performance, and growth opportunities. Turning to our Q1 performance, we delivered stronger than expected results which reflect our disciplined execution, including accelerated commercial initiatives and strengthening our key growth platforms. Revenues of $5.3 billion increased 0.4%. New Becton, Dickinson and Company grew 2.5%, with broad-based growth across the markets where we've been doubling down on investments.

This includes double-digit growth in biologic drug delivery, PIRWIC, advanced tissue regeneration, Pharmacy Automation, and high single-digit growth in APM. We delivered mid-single-digit growth across 90% of New Becton, Dickinson and Company's portfolio. Partially offset by 10% of our portfolio Alaris vaccines in China undergoing challenging market dynamics that were in line with our expectations. We delivered an adjusted gross margin of 53.4%, and adjusted EPS of $2.91 both of which were also ahead of our expectations on the strength of revenue performance and operational execution. Later this morning, we expect to close the combination of our life sciences business with Waters via a Reverse Morris Trust transaction.

This is a significant milestone as we fully pivot to new Becton, Dickinson and Company and the next chapter of the company's growth. I want to thank both the Becton, Dickinson and Company and Waters team whose exceptional hard work and transaction experience are enabling us to close nearly two months ahead of schedule. We believe this transaction unlocks significant value for our shareholders through both participation in the New Waters entity and value creation in the new Becton, Dickinson and Company. As part of the transaction, we will receive a $4 billion cash distribution. I'm pleased to announce $2 billion will be deployed towards share repurchases through an ASR and $2 billion will be deployed towards debt pay down.

Both are expected to be executed in the near term subject to market conditions. This is in line with our enhanced capital allocation strategy, which prioritizes share repurchases, reliable and growing dividends, and focused tuck-in M&A in targeted high-growth markets all designed to steadily increase return on invested capital. With the completion of our Life Sciences transaction, Becton, Dickinson and Company enters this next chapter as a far more focused pure-play medtech company. This transformation builds on several years of deliberate portfolio shaping. Including divesting three substantial non-core assets and the more than 20 strategic tuck-ins we've completed to strengthen our presence in some of the most attractive areas of healthcare.

We recognized early on how the world of healthcare is changing rapidly. Providers everywhere are seeking partners who not only deliver high-quality products but who can help them transform care pathways. Improve outcomes, and reduce costs. As we've previously discussed, we've identified three key trends shaping the future of healthcare that have guided our portfolio strategy. These include one, the rise of smart connected devices, robotics, AI, and informatics that transform the cost and quality of care, two, the shift of care towards lower cost more convenient settings including outpatient facilities and the home, and three, rapid growth in technologies to address chronic disease. One of the fastest-growing segments in healthcare.

Over the last several years, we've built multiple growth platforms each with billion-dollar plus potential, that position New Becton, Dickinson and Company squarely at the center of these trends. From our nearly $5 billion Connected Care business, with AI-driven advanced patient monitoring and connected medication management, to advanced pharmacy robotics, to leading platforms for biologic drug delivery at home, urinary incontinence, vascular disease, and tissue regeneration. New Becton, Dickinson and Company is positioned to lead in advancing the future of care. We have leading positions in more than 90% of the markets we serve, with over 90% of our revenues driven by recurring consumables.

Every year, we manufacture more than 35 billion devices, that reach healthcare providers across more than 190 countries. Few companies in healthcare are as foundational to the daily delivery of care and that scale powers the strong free cash flow that underpins our strategy. While these trends guide where we innovate, and invest, Becton, Dickinson and Company excellence guides how we execute. Together, they shape our strategy for the new Becton, Dickinson and Company. Excellence unleashed, which is expressed through our three strategic priorities. Compete, innovate, and deliver. We've begun executing on these priorities enhancing the speed, agility of the company. I'll share some examples of where we're seeing early positive momentum.

Compete reflects how we're elevating our commercial capabilities to win in the fastest-growing parts of the market and deliver an exceptional customer experience. We made significant progress across our commercial initiatives this quarter, including planned sales force expansion in APM, PI, and advanced tissue regeneration. While accelerating initiatives to make PureWick at home available for our veterans. We're also seeing broad-based commercial success across the company. The Pyxis Pro launch is off to a good start, with 85% of initial orders coming from competitive conversions. Alaris delivered our strongest quarter of competitive wins since the relaunch. Increasing our category share by approximately 100 basis points. Our medical essentials business also gained share across multiple categories and with major U.S.

Health systems. Including in flush, picks, and catheters. Pharma Systems delivered significant GLP-one wins. With now over 80 novel and biosimilar GLP-one molecules contracted Becton, Dickinson and Company delivery devices. And BDI saw continued strength with notable conversions in oncology and peripheral arterial disease and strong adoption of recent launches of PURWIC Flex, and Galaflex. These results reflect the strong execution of our teams and the growing impact of our commercial initiatives. Turning to our second priority, innovate. Innovate focuses on how we bring high-impact solutions to market. Executing a pipeline that's now stronger, more focused, more productivity-driven than ever. This quarter, we strengthened our innovation pipeline by completing the reallocation of $50 million of central R&D to the businesses.

To fund multiple new product innovations in our high-growth platforms. We also continued to scale Becton, Dickinson and Company excellence into R&D. Reducing development times and accelerating future launches by six to twelve months across several areas. In surgery, we entered several new markets. Increasing our served markets by over $550 million in categories that offer higher growth, higher margin, and long-term strategic value. This includes The U.S. Launch of Avatene Flowable, a next-generation flowable hemostat that strengthens our position in biosurgery and enters us into a nearly $400 million market growing approximately 5% annually. We also advanced our global wound irrigation portfolio, with the European launch of SurgiFor, a ready-to-use wound irrigation system that simplifies operating room workflows.

In addition, we submitted SurgiFore Pulse to the FDA. A pulse lavage system that can expand Becton, Dickinson and Company's presence in this nearly $200 million market by approximately 40%. Finally, in connected care, HemoSphere Stream began targeted market release in The U.S. And Europe following October's 510 clearance. Stream's smart cable compatibility can expand its addressable market tenfold and early feedback has been very positive. Finally, our third priority, deliver represents our commitment to operational excellence, across safety, quality, delivery, and cash flow. As a result of the Life Sciences transaction, and the network consolidation initiative that we began in FY 2022, we've created a meaningfully simpler manufacturing network.

Reducing our network by nearly half to under 50 global sites lowering costs, improving resiliency, and enabling scaled smart factories. We have actions underway to improve this even further. Becton, Dickinson and Company excellence continued to drive meaningful productivity improvements of 8% in the quarter. Contributing to gross margin and cash flow. Finally, we achieved good progress on the $200 million cost-out program communicated last quarter. Already executing actions representing $150 million or 75% of the target. With a clear line of sight to the balance. We are pleased with our strategic progress. Yet we recognize there's more work to do. This is an exciting moment for the new Becton, Dickinson and Company.

As we focus actions and raise our standards to outcompete, outinnovate, and outdeliver. With that, I'll turn it over to Vitor.

Vitor Roach: Thanks, Tom. Starting with revenue. Total company revenue of $5.3 billion grew 0.4% with 2.5% growth in UBD. In Medical Essentials, MDS performance reflects expected order timing dynamics and volume-based procurement in China that was partially offset by continued share gains in The U.S. In our Vascular Access Management portfolio. Within specimen management, solid growth in Becton, Dickinson and Company vacutainer portfolio in The U.S. Was offset by expected market dynamics in China, order timing, and a tough comparison to the prior year. Connected Care delivered solid mid-single-digit growth. Performance was led by APM which grew high single digits on strong volume across the portfolio. MMS, growth was led by pharmacy automation with double-digit growth in our LoRa platform.

In our infusion business, growth was driven by sets which were up strongly on increased utilization against last year's fluid supply shortage. Alaris pumps performance was slightly ahead of our expectations despite the expected revenue decline due to tough comparison to the prior year. Biopharma systems grew low single digits with continued double-digit growth in biologics led by GLP-one. This was partially offset by lower demand for vaccine products in line with our expectation. Interventional delivered solid mid-single-digit growth. This includes high single-digit growth in UCC driven by double-digit growth in Purit. In surgery, we delivered mid-single-digit growth led by strong performance in our advanced tissue regeneration and infection prevention portfolios.

Low single-digit growth in PI reflects strength in peripheral vascular disease and oncology partially offset by China market dynamics. Life sciences declined in the quarter. In The U.S. Results were impacted by U.S. Point of care headwinds, a difficult prior year comparison, and market dynamics in China. In VDB, growth was pressured by market dynamics in China, lower life science research funding, and a difficult compare from prior year licensing revenue. Turning to the P&L. Adjusted gross margin of 53.4% was down 140 basis points versus the prior year driven by approximately 170 basis points of tariffs, partially offset by productivity initiatives through BDX.

Adjusted operating margin of 21.2% was down 240 basis points versus the prior year due to the impact of tariffs increased commercial investments in key growth areas. Despite these declines, both adjusted gross and operating margins were ahead of our expectations. Adjusted EPS of $2.91 was down 15.2% driven primarily by the impact of tariffs. However, earnings exceeded our expectations on the strength of both revenue performance and operational execution. Free cash flow was $548 million in the Free cash flow conversion improved 66% versus 59% in the prior year, driven by working capital discipline and capital efficiency. During the quarter, we returned approximately $550 million to shareholders. Including dividends and $250 million in share buybacks.

We ended the quarter with net leverage of 2.9 times and remain committed to our 2.5 times long-term net leverage target. Moving to our fiscal '26 guidance for new Becton, Dickinson and Company. All guidance we are providing today is on a continuing operations basis, and reflects the expected closing of the combination of our life science business with Waters. Following the closing, the separated business will be treated as discontinued operations for the full fiscal year. Our guidance includes deployments of $4 billion cash distribution we will receive as part of the transaction. For fiscal 2026, we continue to expect new Becton, Dickinson and Company to deliver low single-digit revenue growth.

Based on current spot rates, currency is estimated to be a tailwind to revenue of about 120 basis points. Moving down to the P&L, we continue to expect adjusted operating margin of about 25% inclusive of impact of tariffs. Interest other net is expected to be between $600 million and $620 million. Our adjusted effective tax rate is expected to be between 16-17%. Weighted shares outstanding for the full year are expected to be approximately 282 million shares. Given these considerations, we are establishing an adjusted EPS guidance for new Becton, Dickinson and Company in a range of $12.35 to $12.65. This reflects growth of approximately 6% at the midpoint including an impact of 370 basis points from tariffs.

The net estimated impact of the closing of the waters transaction including the deployment of associated $4 billion cash distribution is approximately $2.4. Therefore, our adjusted EPS guidance for new Becton, Dickinson and Company remains operationally unchanged. As we think about fiscal 2026 phasing, we expect Q2 revenue growth of approximately 2%. Consistent with our full-year guidance assumption. With the balance of the year also expected to be within the low single-digit range. We expect Q2 adjusted EPS to be in the range of $2.72 to $2.82. Finally, we are pleased with our Q1 performance. However, with just one quarter behind us, we are maintaining a prudent approach to our guidance for new Becton, Dickinson and Company.

With that, let's start the Q&A session. Operator, can you please assemble the queue?

Operator: Absolutely. And at this time, Lastly, to provide optimal sound quality, Thank you. Our first question is coming from Travis Steed with Bank of America. Please go ahead. Your line is open.

Travis Steed: Everybody. Congrats on the RMT and getting that done ahead of schedule. I wanted to ask about the guidance, both the Q2 revenue guide, the step down in Q2 and the EPS guide as well as kind of the full year, some of the assumptions on the cadence of the year and how you're going Q2 to the second half on both revenue and earnings?

Tom Polen: Yes. Thanks for the question, Travis, good morning. So we're really pleased with the start of the year. And Q1 performance. I think you saw our team executed well and we saw strength across several of the high-growth areas of the portfolio. We can talk about those in just a bit. When it comes to Q2, nothing's fundamentally changed in our Q2 outlook. As you mentioned, the core growth driver supporting new Becton, Dickinson and Company growth in Q1 they all remain on, intact, and we feel really good about the trajectory of the business. Our Q2 outlook does reflect some modest timing benefits in biopharma systems and MMS. That we saw in Q1.

And if you adjust for that, basically Q1 and Q2 are in line with each other. I think a few things we're really pleased to be starting the year at our full-year run rate. Q2 has no ramp versus Q1. And really importantly, there's no ramp first half to second half either. Right, which is a much better spot and something that we really wanted to have this year. That as you know we had that topic last year. And so just where we want to be, no ramp in the year, strong start to Q1 and executing, as you said, the RMT transaction ahead of schedule. Really excited about the new Becton, Dickinson and Company.

Travis Steed: Great. Thanks a lot.

Operator: Thank you. We will move next with Patrick Wood with Morgan Stanley. Please go ahead. Your line is open.

Patrick Wood: Fabulous. Thank you so much. Tom, maybe just a midterm one around the categories you're looking at. Obviously, this year, a bit of a transition year. There's a few things like China VBP and Alaris that are kind of affecting numbers. But I guess as you look across NewCo Becton, Dickinson and Company's categories, is there any structural change that happened recently or in the past that would preclude you from sort of hitting that normalized mid-single-digit growth rate as a general framework? Anything it's changed way or the other that would make you feel better or worse about that and how you feel about that? Thanks.

Tom Polen: Yes. Patrick, and thanks for the question. Absolutely not. We feel really good about our portfolio. As we talked about, we've been extremely active over the last several years in very purposely reshaping our portfolio. We've done three significant divestures starting with diabetes, obviously, Mueller and most recently, our life science business. We've very purposely brought in 20 tuck-in acquisitions, everything from our Parata pharmacy automation to APM and a number of others. All reshaping the portfolio in those high-growth areas that we've been talking about that we identified some time ago. Today, as you mentioned, we do have some known headwinds that are in 10% of our portfolio.

The fundamentals across the remaining 90% remain very strong and they continue to perform at a solid mid-single-digit growth. We're continuing to lean in behind those areas. You're seeing us put meaningful commercial investment behind those, the $30 million of incremental sales investments, all 100% on track. You heard that update on the call, investing behind areas like VA the Veterans Administration, PureWick now that's purely fully reimbursement for veterans. Launching a number of plastic surgery products in Europe and Brazil. Expanding our sales forces by 15% in PI and APM, Right? All investing behind those growth areas.

Which is again, you saw strong growth double-digit growth, in fact, this past quarter in areas like PURWIC, Biologics, tissue reconstruction, and others, you saw high single-digit growth in areas like APM, Pharmacy automation grew double digits in the quarter. So, again, we feel really good. Those aren't slowing down. We don't expect them to we could expect them to continue strong through the year. We've got a great innovation pipeline that's going to continue to fuel growth in those over the next several.

Patrick Wood: Love it. Thank you. Thanks for the question.

Operator: Thank you. Our next comes from Larry Biegelsen with Wells Fargo. Please go ahead. Your line is open.

Larry Biegelsen: Good morning. Thanks for taking the question. Congrats, Tom, on the closing of the Waters deal. Tom, maybe we could talk about the other the 10% of the portfolio that's not growing mid-single digits. China VBP, what's the expected impact in fiscal 2026? When did these the vaccine headwind lap in farm systems? And any change to the Alaris expectation this year and next year that you gave us on the last call?

Tom Polen: Yeah. Thanks for the questions, Larry. Everything's playing out as we expected it in Q1, and we expect that to continue for the balance of the year. China was in line with our expectations in the quarter. Vaccines were relatively in line with expectations in the quarter as was Aleris. Anything, we're seeing some really strong competitive momentum in Aleris I think as we shared on the prepared remarks, we had a record in new competitive wins in the quarter. We gained about a full point of share just in the quarter. Those take some time to come through in our run rate as we implement those. And see the consumables revenue pickup.

But in terms of actual contract signed deals closed, was a really strong quarter in Aleris, right, which is exactly what we want to see. We're coming to the tail end of, of course, remediation, So our whole sales force is focused now on competitive gains, just as we said. And so we're pleased with that. Vaccines, on the counter side of vaccines, we continue to see biologics grow very solidly. Vaccines, we expect that will continue to play out for the year as we expected and we'll have to look at that in as we go into 2027. Certainly, it will be a smaller portion of our revenue and biologic will be a larger portion of our revenue.

So the it's absolute impact in 2027. Likely will not be anywhere near what it would be in 'twenty six, but we'll continue to monitor that very closely. And China, the market, I was just there at the January. I think we've shared before that we expect that VOB will have gone through 80% of our portfolio by the 2026. We don't see any change to that assumption. And we do continue to see positive volume growth. Happening in China despite the price compression in the few areas that we've discussed where VOBP is happening.

So overall, we said at the beginning of the year when we gave guidance for the old Becton, Dickinson and Company we expected those combined areas to be about two fifty basis points of headwind in the full year, and that's consistent with what we outlined. And how we think about it going forward.

Larry Biegelsen: Thank you.

Operator: Thank you. Next question comes from Robbie Marcus with JPMorgan. Please go ahead. Your line is open.

Robbie Marcus: Great. Good morning and thanks for taking the questions. I'll add my congratulations on the RMT going effective today. Two quick ones for me. I'll ask them both upfront. One, just on second quarter, it's the easiest comps of the year. Both on a one and a two-year stack basis. So a lot of people just wanted to get help on why 2% is the right starting point for fiscal 2Q and any considerations there? And then as we get to the 25% operating which I think is a touch better than people were thinking, You know, any one-time considerations or TSAs, MSAs, anything we should be aware of as we try and build up our models to get there?

Thanks a lot.

Vitor Roach: I'll turn that to Vitor. Hi, Ravi. This is Vitor. So regarding Q2, so first, I think we were very pleased with Q1 performance. I think we started the year solidly, and it puts us in very sound grounds for the rest of the year. But for the Q2, Tom mentioned on his remarks, nothing fundamentally changed on Q2. We have our core drivers supporting the new Becton, Dickinson and Company growth in Q1 actually continuing in Q2 and we expect that trajectory to continue for the rest of the year as well. In Q2, the only thing that happened is slight change timing situations in both farm systems and MMS.

But if you normalize for those factors, you actually had a little bit of a more normalized growth between Q1 and Q2. I think the most important piece is that nothing fundamentally changed. On our Q2. We feel very confident about the numbers going forward as well.

Tom Polen: Both very much in line with our full-year guidance.

Vitor Roach: Exactly. Very aligned with our full-year guidance. And from a margin perspective, there is no specific one-timers that we are expecting. So we are still holding the 25% as we committed before. And this is in the basis of our margin performance, which is the strongest execution of our Becton, Dickinson and Company excellence and also the favorable mix that we are driving through intentional investments in strategic areas like high growth, high margin areas like APM, UCC, surgery among others. So, we feel good about the 25 and there is nothing specific that changes the number from 25.

Tom Polen: And Ravi, maybe just to share a little bit more color on the margin performance. Right? We're continuing to be very focused. Our innovation pipeline the areas where we're putting commercial investment are all both the innovation pipeline has a notably higher gross margin than our average portfolio and the areas that we're putting commercial behind that we've talked about also have a notably higher gross margin than our broader portfolio. So those help fuel margin. At the same time, obviously, Becton, Dickinson and Company Excellence in our operations organization is continuing to gain momentum. Right? We've been at it for a couple of years. We're still in relatively early innings.

Saw us talk about 8% productivity improvements in the quarter. That's world-class levels. Really proud of the teams there and how they're executing. Also heard us talk about, I think, the first time, share some statistics around our plant network. We started the last phase of Becton, Dickinson and Company's strategy, We talked about investing behind the network. Simplification. And you're seeing the outputs of that combined with obviously the separation of our Life Science business. More than cutting our manufacturing network in half. So when we started the journey several years ago, we had a little over 90 manufacturing plants. Right? We're under 50 today.

And so these are fewer plants more scaled plants, where we're getting more leverage more costs being spread over higher volume in these sites, also all helping to contribute to our operating margin. So that's been something systematic that we've been working on. We're really pleased with that. And when you think about that, that drop from nearly 90 to under 50 plants, about half of that, over 20, that's over 20 plant closures and a little over 20 plants going to Waters as part of the RMT, but a dramatically simplified network that we're investing behind as we go forward as well. It just helps us further on the op margin. Thanks a lot.

Operator: Thank you. We will move next with Joanne Wuensch with Citibank. Good morning and congrats on getting to this phase. Two questions. The first one has to do more macro, if you're seeing anything in the quarter on things like nursing shortages, weather impacts, or anything on the ACA? And then I was hoping you could maybe flush out some of the contracts you have in for the GLPs and if there's anything noteworthy you can share with us there. Thank you.

Tom Polen: Morning, Joanne, and thanks for the question. So utilization as we think about just the broader hospital demand trends, we continue to see steady utilization levels in line with hospital surveys that we monitor. Say the CapEx environment, all also see remaining solid. We haven't seen any weather effects through January and into February. Then I would just say, overall, too, as we think about utilization, over 90% of our revenue is consumables, particularly for New Becton, Dickinson and Company, which provides a very resilient base. And the portion that is CapEx, we're seeing that solid as well. You saw that come through very clearly in MMS.

If you exclude kind of the dynamic of Alaris and the Grover MMS grew nearly 6% in the quarter and that includes CapEx there. So really strong Pharmacy automation is actually one of our largest percent businesses of CapEx, and it grew double digits, 10% in the quarter. And that's a mix of both strong CapEx purchases in Europe and in The U.S. There as we think about pharmacy automation. Again, that's a big labor savings play and that's a big part of our CapEx spending as well as helping where there are shortages of pharmacists or other clinicians. A lot of our solutions help in that environment. When it comes to GLP-1s, we're in a really good position there.

Certainly, it's a modest portion of our business today, about 2% of our revenue. But it's a high-growth area and certainly a growth opportunity as we look forward. Today, we support some of the largest molecules that are on the market. We continue to have a very high win rate on both new novel molecules that are coming to market and on biosimilars. We updated some information today on the call. We now have more than 80 novel and biosimilar GLP-1s contracted in our devices. And we're continuing to see momentum in injectables. Obviously, there's always the question in the news. I know some investors of ours have asked a question about how do we think about oral injectables.

Reality is, is we're seeing continued momentum in injectable GLP-1s. We continue to see the largest pharma companies putting billions of dollars some very recent announcement in multibillion-dollar investments in injectable capacity, including in The U.S. And people really view that, orals as complementary rather than displacing injectables at scale. So we're continuing to be bullish on that and continue to focus on having a very high win rate on both new novel and biosimilar molecules in the space. Thanks for the question.

Operator: Thank you. We will move next with Matt Taylor with Jefferies. Please go ahead. Your line is open.

Matt Taylor: Hi, thanks for taking the question. Tom, as a follow-up to that question, I think previously you had talked about the potential for the GLP one franchise within Becton, Dickinson and Company to get to about a $1 billion by the end of the decade. Do you still feel the same way about the trajectory long term given all these deals that you signed? And maybe you could address that and where it is now, where and where it is, today.

Tom Polen: Yeah. We feel we still feel very much with that on track. Our growth rate continues to be very strong as we share double digits. We're nearing that halfway point. On that journey now. So and again, you haven't seen the number of new novel molecules coming to market that will be over the next several years. And of course, as you look at the back half of this decade, you start really hitting stride on the biosimilars. And when we talk about our biosimilar portfolio, it's very broad geographically. So our biosimilar portfolio includes biosimilars across China, Southeast Asia, Europe, Latin America. Canada, and The U.S. It's a very broad global.

And so as you think about certain patent expiries, varying geographically, have good exposure across those different time points. Thank you for the question.

Matt Taylor: Thank you, Tom.

Operator: Thank you. We will move next with Matt Miksic with Barclays. Please go ahead. Your line is open.

Matt Miksic: Good morning, Tom. Thanks so much for taking the questions and congrats on getting to the starting line, I guess, is one way to think about it. So when you mentioned just a question on the innovate part of your plan. And investments you're making in R&D. Maybe some sense of when I understand the commercial investments this year execute and compete, but when do you think we'll start to see things come through the pipeline or maybe come through at a faster pace from these R&D investments that you're making in the kind of Innovate segment of strategy?

Tom Polen: Yes. Thank you. You're going to see those continue to come through. This year, we've got a lot of great launches happening. We talked about some of the very recent ones that are just ramping up like Pyxis Pro. We couldn't be more pleased with how that one's been going as we mentioned, really strong competitive share gain. Chemosphere Stream just launching now. You're going to continue to see throughout this year and into next 2027 is quite a big year for launches as is 2028. Across the portfolio. At the same time, we've shared we've put $50 million that we took from efficiencies in and shifting from corporate expenses, moving that into R&D.

And we just started quite a few new R&D programs as well. This fiscal year, not only what we would normally start with our traditional increase, but that bolus of money starting more projects in tissue regeneration. Additional biologic drug delivery some adjacencies in PureWick that we're really excited about. Investments and also in the connected care space. The other thing that we're seeing some really positive, still early, but very positive results. As we shared, we're taking Becton, Dickinson and Company excellence commercial and into innovation. And we actually have some dedicated resources now that go across working with our different R&D teams doing kaizens. To accelerate our innovation timelines. We've been doing quite a few of those.

We started that really in late last year. We've been doing those throughout Q1. And we've seen a number of R&D projects where we've accelerated timelines to launch by six and even up to twelve months on that. So we're going to continue to get after that. We've got a goal to do all of our key development programs. We're focused on driving those Kaizens and accelerations. This year. They're all scheduled with the teams. And so that capability and that momentum that we saw in operations through Becton, Dickinson and Company Excellence we're really pleased with some of the early signs that we're seeing taking those same processes and systems into innovation and also into our commercial organization.

So we'll continue to provide updates on that as it progresses. And we'll look forward to sharing more through the year and eventually at an Analyst Day. In the future on that innovation pipeline. Thanks for the question, Matt.

Matt Miksic: Thank you.

Operator: We will move next with Shagun Singh with RBC Capital Markets. Please go ahead.

Shagun Singh: Thank you so much. I just wanted to get a better handle on the three areas of headwinds, Alaris Vaccines In China, It seems like vaccines in China will hopefully be behind us this year. But how should we think about Aleris beyond this year? Do you get to that 5% or mid-single digits next year? Or will Aleris be a headwind? And then just very quickly on M&A. Is there an opportunity for you guys to be more aggressive under the new Becton, Dickinson and Company strategy on M&A to help raise the weighted average market growth here? Thank you for taking the questions.

Tom Polen: Yes. Thank you for the question, Shagun. So on vaccines and China, I think you described those. Aleris, we communicated at the end of as we gave the guide to start this year, the Holco Becton, Dickinson and Company guide. We do expect Aleris to step up in 27, 100 basis points headwind this year stepping up to a 200 basis point headwind in 2027. That's just again as we've fully completed the remediation. Expect to actually be at record share levels. As that dynamic is happening, it's just the grow over from the remediation. That's happening there. But expect to be in stronger than ever competitive position on Aleris.

As it comes to tuck-in M&A, so as we've communicated, for new Becton, Dickinson and Company, we're very focused on a balanced capital allocation strategy. We're pleased obviously this year between the $2 billion plus share buyback that we did, $250 million buyback that we did in Q1. Plus the $2 billion buyback that we're doing now, the through the ASR, but that's significant return of capital to our shareholders. We are, as part of that balanced capital allocation strategy, we have communicated that we're focused on focused tuck-in M&A. Our focus remains on tuck-in M&A not transformational M&A. And we do have a robust pipeline from that perspective.

When it comes to the criteria for those tuck-in M&A, they remain unchanged versus what we've shared in the past. That means accretive to revenue growth and accretive from an EPS perspective. We're not looking at dilutive M&A. And we do see with the new Becton, Dickinson and Company, there's a number of very attractive high-growth sectors that we're in that we see the opportunity to supplement that WAMGR with tuck-in M&A. So more to come on that, but we'll continue to do it in a focused way and very much aligned with that balanced capital allocation strategy that we've communicated. Thanks for the question.

Shagun Singh: Thank you.

Tom Polen: Our next question the way, just for those who had congratulated earlier on, the deal with Waters is officially closed now. Operator?

Operator: Thank you. Our next question comes from Rick Wise with Stifel. Please go ahead. Your line is open.

Rick Wise: Good morning. Hi, Tom. Tom, you seem very well set up for the rest of the year. I think Vitor said it, and I apologize that these were not the exact words. But I think you said prudent guidance for fiscal 2026. You're well set up for a stable, predictable outlook without the usual second-half ramp we've seen in the past. That's great. And sort of a variation, a little bit of Matt's question. I can't believe you're investing in Salesforce the way you are. The M&A you've done, the focus on faster growth. Businesses, the cost-cutting. My question is, if there would be some upside to this thoughtfully prudent guidance, in the next two, four, six quarters.

You think it would be from all the above? Is it more likely from the new products? Is it more likely to come from the expanded sales efforts? Is it the some of the growth drags are a little less. Just any color on how we should just reflect on that? And just as since this is not exactly one question, I'll ask at a half. When are you gonna where are you with your CFO search announcement timing and maybe talk to us a little bit about what you're looking for in your new partner. Thank you so much.

Tom Polen: Yes. Thank you for the questions. So when it comes to the CFO search, continue that is well underway, and we'll look forward to providing an update when that complete. In the meanwhile, of course, Vitor is doing a great job stewarding the company and obviously doing a great job here on the call. So more to come on that. But we're running a thoughtful process focused on, you know, continuity of execution and financial discipline. And obviously, it's a really important moment in the company's evolution, and we're going to make sure we get the right person there. When it comes to upsides, guidance for the year, Look, again, we're really pleased with how we started the year.

As we think about the areas that we're investing behind, those areas of high growth and higher margin urinary incontinence pharmacy automation, connected care, APM. Tissue regeneration, biologics, right? Those are the areas that we're putting our investments behind, both commercially and disproportionately from an R&D perspective. And so those are areas that could be natural areas of opportunity for us. I think, you know, as Mike Feld now also as chief revenue officer, who's been running the Life Science segment, essentially as of today. He's now full-time in that role. We see opportunity the reason we created that role, it's never existed in the history of Becton, Dickinson and Company, is we've been very good commercially.

You don't get to our category-leading shares in 90% of the markets in which we compete without being good commercially. We think there's another level of performance that we can reach, just like we've always been good operationally. But we're reaching and we're executing at levels that we've never executed at before operationally. We view that same opportunity exists commercially, And when we execute that, that will deliver higher growth. We're convinced of that. And so more to come there. As Mike's now fully in that role, we'll provide more exposure to our investors on the programs that he's executing.

It not only has to do with sales force expansion, but we've changed compensation plans for our selling organization around the world going into this year. We're putting in new tech stacks for our sales teams to help them be more effective. We're optimizing our management systems and processes with our selling organization, and Mike's leading that, working with our teams around the world. So, again, like we've seen in operations, we believe that there's opportunities, meaningful opportunities, to help accelerate growth as well through that commercial excellence. And complementing that with our innovation pipeline, the growth areas that we've been focusing on and, of course, complementary tuck-in M&A over time as well. So thanks for the question, Rick.

Rick Wise: Thank you, Tom.

Operator: Thank you. We will move next with Josh Jennings with T. P. Cowen. Please go ahead. Your line is open.

Josh Jennings: Hi, good morning. Thanks for taking the questions and congratulations on officially breaking through the tape there. On the Waters transaction. Wanted to just get help thinking about the pricing environment hospitals, demands for concessions versus whether that's stepped up and just with all the innovation that's on tap for from Becton, Dickinson and Company, you know, can that help drive price premiums and pricing be a tailwind in fiscal 2026 and into the out years and help with organic revenue growth and gross margin expansion. Thanks for taking the question.

Tom Polen: Yeah. Thanks for the question, Josh. So we continue to see, I'd say, a stable pricing environment, you know, relative there's always pressure from our customers for pricing. That's something that we've, you know, obviously navigated for quite some time. We're very focused on, obviously, articulating and delivering value to our customers and outcomes, both clinical outcomes and financial outcomes through the technologies that we provide. Pricing what we're seeing so far in Q1, details will come out further in the 10-Q that will be filed later today. But overall, pricing generally flat to slightly positive. That's up a little over 50 basis points ex China. Positive price. Offset by the pricing dynamic that we see in China.

As we think about that going forward, we expect to continue to have positive pricing in the rest of the world. And as China VOBP abates as we move into 2027, we would expect and beyond that pricing dynamic to continue to be more of a positive for us as we go forward as VOBP lessens, from that perspective. I think as we think about new product innovations and pricing there, we're entering into a lot of new product categories with our products, probably more so than ever before. Historically, we've done a lot of serial innovations where we're upgrading base products.

We're continuing to do that in a number of cases, but more so than ever before we're entering into new spaces. I think actually all of the new products that we shared today are brand new spaces for us. Avatene Flowable, brand new biosurgery space for us that we've never been in before, a $400 million market. Surgiaphor, which is complementary to Chloroprep, but it's for once you're in the surgery. Chloroprep's before the surgery. That's a whole new market for us. And hemosphere stream, is really extending the hemisphere platform into the general ward. Expanding it to about 30,300 monitors, that we don't tap into today, so a brand new market. Space for us with Hemisphere Stream.

So there, we make sure that pricing equals the value of the products and what they're delivering to our customers. I think the other thing is in areas, and we have a number of new products launching in pharmacy automation for example, for central fill. Or the Pyxis Pro, which, by the way, Pyxis Pro launched at a premium. To the base Pyxis. But it's all associated with very clear data that we have. That it's delivering greater economic value to our customers, right? Those areas, for example, it's meaningful helping with nursing workflow by reducing drug shortages on the floor. Or in the case of pharmacy automation, it's reducing labor costs associated with preparing medications and pills.

And it's enabling many places, let's say like online pharmacies that are delivering to your home, for them to do that in warehouses, and they're starting from scratch, they never even hired in the first place there. They go straight to the robots and automation and the warehouses are delivering. Medications to home and able to do that in a cost-effective manner. So I think our solutions are well tailored. To this environment that we're in and expect we'll continue to see. As is our innovation pipeline. Thanks for the question.

Operator: Thank you. We will move next with Jason Bedford with Raymond James. Please go ahead. Your line is open.

Jason Bedford: Good morning and congrats on the progress here. So I had a question on OLERIS. Was down year over year, but you mentioned you gained 100 basis points of category share. I'm guessing the share commentary is on an installed base basis. So my questions are, one, is your expectation that you continue to gain share at this rate? And then two, just to level set what is your share position today? Thanks.

Tom Polen: Yes. Thanks, Jason, for the question and bringing us home here on the call. Our share position is nearing 60%. Overall. And yes, you're right. So obviously, through the remediation efforts, that we've been doing over the last three years, we've been upgrading about 20% of the market per year. And so as this is now coming to the tail end of that and peaks last year, you physically can't even if we took all competitive share that's opening up, this year, we still would see declining growth and the same dynamic would happen next year just because of what it means for us in terms of the scale in which we just upgraded the marketplace.

But yes, are pleased with our performance on share capture in the first quarter. We have a very strong funnel as we go forward. And we continue to innovate very rapidly on Alaris, not only on the current platform, we've had of course, had new 510s approved since the original one that allowed us to relaunch the platform. But we're continuing to bring new features to Alaris. We have another one planned for submission late this year. That will add further new features to that. And of course, we also continue to have it and we've shared in the past a whole new Alaris platform which is moving forward very nicely through our innovation pipeline.

And we'll look forward to sharing more details on in the future. But we feel good about Alaris feel good about our overall connected medication management platform. It's great to have Alaris and our new Pyxis Pro out there together as well, as we also shared Pyxis had a really strong competitive quarter in Q1 with the launch of Pyxis Pro. And has a really strong pipeline as we look forward as well. So thank you for the question, Chase.

Jason Bedford: Thank you.

Operator: And that will conclude today's question and answer session. At this time, I would like to turn the floor back over to Tom Polen, for any additional or closing comments.

Tom Polen: Okay. Thank you, operator. In summary, we delivered solid Q1 results that exceeded our expectations we believe positions us well to achieve our full-year guidance. As we navigate transitory headwinds in contained areas within our business, Our broader portfolio continues to perform well and we're actively investing in high-growth, high-margin areas. To our Biosciences and Diagnostic Solutions colleagues transitioning to Waters, want to thank you for your passion, professionalism, and the tremendous contributions you've made to Becton, Dickinson and Company. You're stepping into an exciting new opportunity with a strong growth-driven life science leader, and we're proud of all you've accomplished and wish you every success in this next chapter.

Of course, with the completion of the transaction this morning, we're very excited to fully pivot to our strategy for the new Becton, Dickinson and Company. We look forward to updating you on our progress next quarter. Thank you all for your time today.

Operator: Thank you. This does conclude this audio webcast. On behalf of Becton, Dickinson and Company, thank you for joining today. Please disconnect your lines at this time. Have a wonderful day.

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