Becton, Dickinson and Company (NYSE:BDX) Q2 2024 Earnings Call Transcript

Becton, Dickinson and Company (NYSE:BDX) Q2 2024 Earnings Call Transcript May 2, 2024

Becton, Dickinson and Company beats earnings expectations. Reported EPS is $3.17, expectations were $2.97. Becton, Dickinson and Company isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, and welcome to BD’s Second Fiscal Quarter 2024 Earnings Call. At the request of BD, today’s call is being recorded and will be available for replay on BD’s Investor Relations website, investors.bd.com, or by phone at 1800-723-5792 for domestic calls, and area code +1 402-220-2664 for international calls. For today’s call, all parties have been placed in a listen-only mode until the question-and-answer session. I will now turn the call over to Greg Rodetis, Senior Vice President, Treasurer, and Head of Investor Relations.

Greg Rodetis: Good morning, and welcome to BD’s earnings call. I’m Greg Rodetis, Senior Vice President, Treasurer, and Head of Investor Relations. Thank you for joining us. This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the second quarter of fiscal 2024. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today’s calls are Tom Polen, BD’s Chairman, Chief Executive Officer, and President; and Chris DelOrefice, Executive Vice President, and Chief Financial Officer. Following this morning’s prepared remarks, Tom and Chris will be joined for Q&A by our Segment Presidents, Mike Garrison, President of the Medical Segment; Dave Hickey, President of the Life Sciences Segment; and Rick Byrd, President of the Interventional Segment.

Before we get started, I want to remind you that we will be making forward-looking statements. You could read the disclaimer in our earnings release and the disclosures in our SEC filings, available on the Investor Relations website. Unless otherwise specified, all comparisons will be made on a year-over-year basis versus the relevant fiscal period. Revenue percentage changes are on an FX-neutral basis unless otherwise noted. Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation. With that, I am very pleased to turn it over to Tom.

Tom Polen: Thanks, Greg. Good morning, everyone, and thank you for joining us. Second quarter revenue growth accelerated significantly, as expected, driven by the strength of our portfolio, increasing volumes across our consumables, and Alaris. Margin performance drove adjusted EPS ahead of our expectations. And consistent with our plan, we delivered very strong cash flow, and are on track to deliver another year of double-digit free cash flow growth. These results give us the confidence to once again increase our FY’24 adjusted EPS guidance. Turning to our BD 2025 strategy, we continue to execute well on the actions we outlined at our Investor Day to drive profitable growth and value creation. This includes advancing our innovation pipeline which supports our durable 5.5%-plus targeted growth profile.

One such area is the strong cadence of new innovation across our connected Medication Management suite, which delivers many unique benefits to our customers. Q2 was the second full quarter since clearance of our new Alaris system. And first-half Alaris sales have already eclipsed our total FY’23 performance. Our return to market is ramping faster than initially planned, which wouldn’t be possible without our manufacturing team who have executed extremely well in scaling Alaris production. Q2 set an all-time record in both the number of BD Alaris pumps manufactured, and the number of pumps shipped in a quarter to upgrade our customers to the cleared version of the pump. We have also seen acceleration of committed contracts inclusive of competitive conversions as health systems value the capability of Alaris and look to standardize their fleet.

This offers confidence in the planned second-half contribution to growth, and will support momentum heading into FY’25. The Alaris 510(k) clearance is just the beginning. As we have shared, we are excited about our innovation roadmap, and we are planning upcoming Alaris 510(k) submissions to further strengthen our capabilities, like best-in-class interoperability, with over 800 live sites, introduce a steady flow of new customer innovations, and ensure continuous compliance. Examples such as over-the-air technology for efficient software updates, and continued advanced cyber security are planned in the next submission later this calendar year. Beyond Alaris, we have a market-leading connected medication management portfolio across inventory management, compounding, pharmacy automation, medication dispensing, and infusion, and are excited about future innovations and development.

This includes new medication dispensing and informatics innovation, including the next generation of our Pyxis dispensing platform, which innovates on our hardware design, and will advance our cloud connectivity. We continue to scale our BD HealthSight informatics platform, now live in over 1,000 sites, and have upcoming launches to integrated hospital medication data from Pyxis with non-acute medication data from our MedBank and MedKeeper platforms to bring visibility to medication flows across the customer’s care network. In Q2, we made meaningful progress achieving other key R&D milestones, including several in our peripheral vascular disease platform, which is one of our key growth areas. Longer-term, these technologies are each expected to deliver over $50 million in incremental fifth-year revenue, and will broaden our leadership in the $5 billion PVD category that is growing high single digits.

In our venous portfolio, we have now enrolled over 60 patients in our ARCH pivotal IDE for our BD Liverty TIPS Stent Graft. This novel, self-expanding covered stent improves the standard of care for portal hypertension, building on our success in launching venous products that help deliver better clinical outcomes for patients, and strengthening our presence in the venous market. In our arterial portfolio, we enrolled the first patient in our AGILITY pivotal IDE study for our low-profile arterial stent graft, a differentiated technology that minimizes access site complications with precise stent placement that could provide an important new treatment option for over 18 million patients with peripheral arterial disease in the U.S. alone. We also filed our SCION SFA pivotal IDE submission with the FDA for our new Sirolimus DCB for the treatment of PAD.

We see this new alternative drug platform as a key growth catalyst for both SFA and below-the-knee applications. We are also executing well on our simplification strategy to drive margin expansion. We are seeing growing momentum as we scale our BD Excellence operating system and build world-class lean management systems and cultures throughout BD. This drove strong Q2 performance in areas such as waste reduction and production efficiency contributing to our margin goals. Our focus on cash flow also continues to deliver positive results, generating about $1.1 billion in free cash flow in the first-half. This strong start to FY’24 positions us to deliver double-digit growth in free cash flow for the full-year. It also enables continued execution of our disciplined capital allocation strategy, including accretive M&A opportunities in higher-growth categories, and opportunistically returning cash to shareholders.

Lastly, our teams around the world continue to make advancements on our corporate sustainability strategy. We were recently named among Fortune magazine’s Most Innovative Companies list, a testament to our 70,000 associates who work every day to deliver innovation that meaningfully advances the standard of care around the world. We continue to forge partnerships that expand access to these critical innovations. And most recently, we announced the first ever option, in Singapore, for women to self-collect a sample for cervical cancer screening in the privacy of their own home. In summary, we are delivering accelerated revenue growth, are executing ahead of our plan on Alaris, and driving strong margin performance, with a growing contribution from BD Excellence.

We once again raised our adjusted diluted EPS guidance for fiscal 2024, and believe we are well-positioned to achieve our BD 2025 goals. I’ll now turn it over to Chris to review our financials and outlook.

Chris DelOrefice: Thanks, Tom, and good morning, everyone. As Tom noted, we executed well on our performance goals in Q2. As expected, we delivered strong acceleration in our revenue growth. We exceeded both our margin and earnings goals, and delivered very strong free cash flow growth. I’ll now provide some insights into our revenue performance in the quarter. Q2 revenue was $5 billion, with organic growth of 5.7% driven by strong volume. Growth was led by double-digit growth in BD Interventional, with low single-digit growth in BD Medical, and BD Life Sciences. Total Q2 revenue growth, of 4.7%, reflects the divestiture of our Surgical Instruments platform. Regionally, organic growth was driven by the U.S., partially offset by expected market dynamics in China.

In BD Medical, growth was led by Medication Management, with strong performance in infusion systems driven by the BD Alaris return to market, and mid single-digit growth across our Medication Delivery Solutions portfolio in the U.S. and EMEA. Strong demand in our Pharmaceutical Systems pre-fill devices for biologic drugs offset transitory market dynamics across the industry, including customer inventory destocking. BD Life Sciences performance was led by Integrated Diagnostic Solutions, with high single-digit growth in our microbiology platforms, and mid single-digit growth in specimen management, which offset a comparison to the prior year, and transitory market dynamics in select segments in biosciences. BD Interventional organic growth was led by continued strong growth in UCC, with continued momentum in our PureWick franchise delivering another quarter of double-digit growth, along with related licensing revenue.

Surgery delivered another strong quarter with double-digit organic growth, supported by global adoption of our Phasix resorbable scaffold. Lastly, growth was supported by Peripheral Intervention, with double-digit growth in our peripheral vascular disease platform where we continue to drive market penetration with our Rotarex Atherectomy System and our venous portfolio. The quarter’s performance reflects the breadth of the BD portfolio that delivers adorable growth profile. Now moving to our P&L, we realized strong sequential margin improvement with adjusted gross margin of 53% and adjusted operating margin of 24.3%, both above our expectations. Adjusted gross margin, our simplification and BD Excellence initiatives are continuing to drive net cost improvement.

And sequentially as planned, we saw reduced impact from prior-year inventory reductions that increased cash flow, driven by strong SSG&A expense reductions and leverage, our adjusted operating margin increased sequentially by 410 basis points, and year-over-by 160 basis points with Q2 being above our fiscal year ’23 full-year margin. As a result of these items, we exceeded our Q2 operating income and adjusted diluted EPS expectations resulting in adjusted diluted EPS of $3.17, which grew double digits or 10.8% on a reported basis. Regarding our cash and capital allocation, year-to-date free cash flow increased more than $900 million year over year to over $1.1 billion. This reflects continued improvements around working capital, including our actions to optimize inventory levels, continued discipline around capital investments, and leveraging our fixed asset base as a result of the benefit from our BD Excellence Operating System.

We remain focused on free cash flow conversion and are on track to deliver another double digit step improvement in FY ’24 and remain well-positioned to achieve our long-term cash goals. With our strong cash flow, year to date we returned over $1 billion in capital to shareholders, including dividends and $500 million in share repurchases. We improved our net debt position ending Q2 with a net leverage ratio of 2.6 times. Our cash and short-term investments balance was almost $3.2 billion inclusive of about $2 billion in proceeds from debt refinancing during the quarter that will be utilize to repay maturing debt over the balance of the calendar year. Collectively, this positions us well to capitalize on accretive value-creating tuck-in M&A.

Moving to our updated guidance for fiscal year ’24, the detailed assumptions underlying our guidance can be found in our presentation. As we look ahead for the balance of the year, we remain focused on driving areas of momentum including Alaris and continue to monitor transitory market dynamics. For the full-year, we are maintaining our organic revenue growth guidance range of 5.5% to 6.25%. Based on our Q2 margin performance, we are raising our adjusted diluted EPS guidance range to $12.95 to $13.15 on a reported basis which is an increase of $0.11 at the midpoint. Strong delivery in Q2 positions us well to achieve our second-half earnings growth targets. Regarding foreign currency, based on current spot rates the impact of currency has moved modestly since our last update.

And for illustrative purposes, we see an additional headwind of approximately 40 basis points to full-year revenue from translational currency impacts. As you think of the second-half of fiscal ’24, the following are some considerations. First, regarding revenue the midpoint of our guidance reflects about 7.5% second-half organic sales growth with nearly 250 basis points contribution from Alaris and just over 5% growth in the remainder of the BD portfolio. We expect Q3 organic growth of at least 6% with Q4 further accelerating driven in part by Alaris momentum and improving rollover dynamics in China. For the full-year, our assumptions imply just over a 100 basis points revenue contribution from Alaris or at least $300 million in FY ’24 revenues.

Second, we are well-positioned to achieve our updated adjusted operating margin guidance of at least 50 basis points improvement, which implies full-year operating margins of at least 24%. We expect Q3 adjusted operating margin will be modestly higher than Q2 given the strong performance in this quarter. We continue to expect margin acceleration in Q4 driven by our BD Excellence and continuous improvement efforts and continued expense leverage on expected strong revenue performance, including Alaris. Lastly, we expect our tax rate to be ratable across Q3 and Q4 at about 15% when considering the midpoint of our updated full-year guidance range. In summary, based on the strength of our portfolio and momentum in Alaris, we have clear line of sight to deliver our fiscal year ’24 revenue guide and another year of strong growth.

Our teams’ execution supported over-delivering on our margin expectations and, as a result, as we enter the second-half, we are on track to achieve our full-year margin improvement goals, and once again increased our fiscal year ’24 earnings outlook. Additionally, we remain well-positioned to deliver another year of double-digit free cash flow growth, which increases our capacity to support additional value-creating opportunities, including M&A. Our strategy is demonstrating positive momentum, and we remain well-positioned to continue to deliver on our BD 2025 growth objectives. With that, let start the Q&A session. Operator, can you please assemble our queue?

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question will come from Travis Steed with Bank of America.

Travis Steed: Thanks. Congrats on the good quarter. I wanted to ask about the second-half ramp, both from a revenue and margin perspective. So, on the revenue growth, you need to step up closer to kind of above the full-year range in the second-half. Curious what the underlying drivers there are, and how much of that is dependent upon the increased demand you’re seeing in Alaris? And then on the margin side, curious how much of the outperformance in Q2 was one-time versus underlying, and how you’re thinking about the second-half, and how much that’s de-risked versus three months ago? And thanks a lot.

Chris DelOrefice: Yes, thanks for the question, Travis. Yes, so first of all, we were pleased with the quarter. To your point on revenue, one, we did see strong acceleration quarter-over-quarter, as expected, on revenue. We tried to outline the ramp, clearly the back-half guidance at our midpoint implies about 7.5% growth. But when you unpack that with the momentum that we have on Alaris, we now expect nearly 250 basis points contribution to our second-half growth. That would put us at, at least, $300 million for the full-year. So, if you strip that out, the rest of the BD portfolio has to perform at just over 5%. We feel confident in that. We have strong areas with momentum. I think one thing that you saw in our core performance this quarter was our core consumables that are anchored against the core of healthcare performing really well as you see strong utilization in the healthcare system.

We continue to see great momentum in areas like PureWick driving strong outsized double-digit growth in that platform, momentum in PVD. And so, there’s a lot of pockets of strength that we’ll continue to build on there. From a margin standpoint, so, first, the drivers of margin that we articulated at the start of the year played out as expected. To your point, we had really strong execution in the quarter. This was driven by our cost improvement initiatives, the momentum on BD Excellence. So, we over-delivered two quarters in a row, and we’re well on track to deliver the full-year, which is at least 50 basis points increase year-over-year. We’re just over 24%. As think of the performance in the quarter, it really wasn’t one thing. I would just say strong execution throughout, and we remain focused on executing in the back-half of the year.

I think the important thing is, in the back-half of the year, there were questions about the ramp. Q2 was a strong signal that we’re well on track. As a matter of fact, one simple way to think of this is our first-half gross margin was about 52%. And we know we had those transient one-time items, the outsized FX, and then the decision we made, last year, to reduce inventory levels which improved strong cash flow. Those are worth over 200 basis points. Those are completely behind us as we move to the second-half. You add that to the 52% and you’re basically where we need to be in the back-half already. So, we just have to continue the strong cost improvement. In addition to that, we lapped the outsized inflation in the front-half of the year that was almost 150 basis points.

We cycled through that, and that moderates down very low. So, a lot of momentum in terms of how we’re advancing margin, and then lastly, what I would point to is, obviously, with that Alaris momentum and ramp through Q3 and Q4, you get a bit of what I would call outsized leverage on the revenue. That’s also worth about 150 basis points in the back-half. As a matter of fact, our OpEx expenditures are not reducing. They’re about flat or even up slightly. So, it’s not about cost reductions in OpEx. It’s all about the top-line leverage, which we feel good about.

Travis Steed: Great, thanks a lot. Great answer.

Operator: We’ll go next to Robbie Marcus with J.P. Morgan.

Robbie Marcus: Oh, great. Thanks for taking the questions and nice quarter. I’ll try and ask one that answers a couple things. As you look at the balance of the year, you said you just need 5% in the base business. So, if we look at second quarter, excluding the Eurology payment and Alaris, what did the base business do, so we could get that kind of comparison? And then maybe while you’re at it, speak to some of the underlying trends in farm systems and MMS, where results came in a little lower, but it sounds like you’re very confident for the rest of the year. Thanks a lot.

Tom Polen: Hey, thanks, Robbie, and good morning. So, I think as we look at the quarter and as we look forward to the year we feel really good about the momentum and the diversity of BD’s portfolio. And I’d say as you look at the areas across the company, we see particular strengths in medical and intervention and the life science businesses that are focused in the healthcare provider space, right, that are benefiting from strong utilization across the board. You can see our volumes. If you compare volumes this year versus last year, you’re seeing strong growth from a volume perspective. And that’s, of course, being supplemented by our very strong innovation pipeline as well. That’s allowing us, that strength of our diverse portfolio is allowing us to overcome what we see as transitory market dynamics that you’re seeing across companies in the life science research area as well as in the B2B farm systems marketplace where you’re seeing destocking in certain areas.

With that said, we’re seeing really strong growth continue right around double-digit growth in biologics. The biologics are now over 40% of our farm systems business, so we feel really good about that. And that percentage and weighting is only increasing towards a billion dollars of biologic sales in that area. And so, as we think about, that’s one of the strengths of BD’s portfolio is those puts and takes across and being able to deliver in multiple different environments in really strong revenue performance. So, Chris, anything to add?

Chris DelOrefice: No, I would just add I think Q2 is certainly representative of the growth rate that we need. We feel good about that. There’s all kinds of puts and takes in the P&L. I mean, just Alaris was a modest contribution. It wasn’t significant. It’s really most predominant in the second-half, and that will be a strong driver for us. I articulated the second-half drivers. Keep in mind in Q2 you had some of these other negative comps, right? You mentioned licensing. There was also a licensing headwind that was in our life sciences business, and we were cycling through some very large capital installs. That’s a space that we still feel good about. Customer interests have strong momentum, and there were some timing dynamics there with the launch of our technology and BDB and a really strong install result in the quarter. So, net-net, there’s always lots of puts and takes. The 5% is something that we’re confident in as we think of the second-half.

Robbie Marcus: Great. Thanks a lot. Appreciate it.

Tom Polen: Thank you, Robbie.

Operator: We’ll go next to Vijay Kumar with Evercore.

Tom Polen: Good morning, Vijay.

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

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

We continue to get really positive customer feedback. We’ve got positive contract momentum. And as you heard, we’ve got plans progressing for our next 510(k) submission later this calendar year, which will begin to continue to build new innovations on the back of the 510(k) that we got cleared in Q4. So, as we think about next year, to your question, we don’t put out quarterly guidance by product line by any means. But what I would say is, as Chris said, our current guide implies, as you said, over 300, actually closer to 350 for the year. And we’ve said before that we expect certainly FY ’25 to be at least at our historical run rate, which you kind of think of as 400. Anything beyond that, we’ll get into as we get into FY ’25 guidance. But clearly our performance this year is positioning us really well towards that previously stated goal.

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

Tom Polen: Thanks for the question, Vijay.

Chris DelOrefice: Thanks, Vijay.

Operator: We’ll go now to Larry Biegelsen with Wells Fargo.

Larry Biegelsen: Good morning. Thanks for taking the question, and congrats on a nice quarter here.

Chris DelOrefice: Good morning.

Larry Biegelsen: Good morning. Chris, I know it’s really early, but love to hear you’re confident in the 25% operating margin goal in fiscal 2025. And are there items right now we should be aware of, such as TSAs rolling off or an increase in the tax rate that would make double-digit EPS growth challenging next year? Thanks for taking the question.

Chris DelOrefice: Yes, thanks, Larry. Good question. Yes, first of all, to your point, it’s a little early to get into 2025. TSAs is not material. That’s a normal dynamic that happens. As a matter of fact, year-over-year, we’re down. So, we’re actually absorbing that already. And by the time you get through this year, it’s not substantive. The tax dynamics and things like that are evolving. We’ll share more at a future date. I think the key thing is we remain committed to our BD 2025 goals. That remains unchanged. Specifically, operating margin, I’m glad you mentioned that. I just think what we’ve delivered through the first-half of this year, the momentum we have with BD Excellence through the back-half of this year sets us up nicely with a strong exit rate that gives us confidence in delivering 25% by 2025.

I think the big thing that you’ll see is the progression from that improvement coming from largely gross margin. So, we have really great momentum inside on our improving waste, improving yield in our manufacturing lines that will drive continued momentum there. And that will be a catalyst beyond 2025 as we get to the point that we talk about that, too. That will be very positive. It will help facilitate reinvestment and continue to drive the top-line growth as well. Thanks for the question.

Larry Biegelsen: Thank you.

Operator: We’ll go now to Matthew Taylor with Jefferies.

Tom Polen: Good morning, Matt.

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

Chris DelOrefice: Yes, thanks for the question. I guess so two things. One on margin, if you think of margin, a lot of the momentum comes from two things, like I shared, right? One, we just exit those one-timers in the first-half. So, high confidence that’s done, it’s behind us. The second thing is our cost improvement initiatives, when you think of a cap and roll period and inventory, we have strong line of sight to that, and we already know the embedded inflation dynamics that are all locked up. So, we have a high degree of confidence in what’s flowing through gross margin. And then, that operating margin, again, is you get natural leverage on top of that from the growth expansion in Q2, which we also feel good about. The momentum of Alaris is part of that kind of outsized back-half growth, and we have strong line of sight to that progression.

So, really with where we sit in the year, we’re feeling good about that. Obviously, we continue to monitor the market dynamics that we touched on within the quarter. That’s something that’s we always look for other levers and opportunities to deliver the full-year, but that’s probably the thing that we’ll continue to watch.

Tom Polen: Thanks for the question, Matt. Oh, sure. Go ahead.

Matthew Taylor: I just wanted to ask a follow-up. You mentioned in the presentation some enhancements to Alaris and Pyxis, so I was hoping you could just talk about the importance of those submissions.

Tom Polen: Yes, sure, happy to, Matt. So, on Alaris, and we’ll only share a certain level of information on those at this time. We want to keep some of that surprise for customers in the market as we actually launch them. But on Alaris, we’re really happy to be back at the innovation cadence. I think when we got the clearance, not only were we happy to be back servicing our customers and driving growth and getting after remediation, but we were happy to immediately jump back into innovation cadence, and you can see our team didn’t hesitate in doing that. So the next 510(k) submission on Alaris later this calendar year will include customer benefits, such as over-the-air is planned for that, for software upgrades, advanced cybersecurity features, as well as a number of other components, as well as making sure we continue to keep that file updated as part of our compliance strategy.

So, that’s really exciting about those. And on Pyxis, there hasn’t been a new Pyxis instrument. There’s been software upgrades, but there hasn’t been a new Pyxis instrument, certainly since we’ve owned CareFusion, and it’s been more than 15 years. And so, the new Pyxis looks different. It’s a new hardware platform that we’ll be building off of. It significantly advances our cloud strategy and connectivity, as well as continuing with advanced analytics, as well as hardware features built into that. So, it’s a significant new platform that we’ll be launching and investing in to continue to serially innovate upon over the next many, many years. But we’re excited about the first launches of that plan for next year. I’d just say the other thing is that we do continue to invest across our connected medication management portfolio, which is obviously highly unique in the industry, and it’s one of those when we get asked the question about connected care and how we think about it, because it can often be used as a buzzword, our approach to connected care has been we look at major health care processes, and we look at how we use data and connected solutions to then transform them.

And what we’ve done in med management, right, from software in the pharmacy for compounding and inventory management to Pyxis on the floor, to Alaris and our health site platform, which brings that site line or visibility to all the data coming from all of our systems to improve processes. It’s a great example of how we’re doing that. Obviously, we talked about continuing to innovate Alaris, continuing to innovate on Pyxis, but we’re also continuing to innovate on other elements of that, and we shared another good example of that earlier today. One of the upcoming launches that we’re taking now, not only our Pyxis platform, but two of the acquisitions we made over the last couple of years, our MedBank platform, which is basically Pyxis for the non-acute, a benchtop unit, and GSL.

And we’re putting that data now in through health sites so that people will be able to see end-to-end visibility of medications from Pyxis to MedBank to GSL, all integrated. So, if you’re an IDN, you’re trying to manage across the care continuum as you’ve been acquiring assets there. BD is going to be a company that enables you to do that very uniquely as part of our strategy. So, yes, thanks for the question, Matt.

Matthew Taylor: All right. Awesome. Thanks, Tom.

Operator: Thank you. We’ll go next to Matt Miksic with Barclays.

Tom Polen: Matt, good morning.

Matthew Miksic: Hi there. Thanks so much.

Operator: Matthew, your line is open.

Matthew Miksic: Yes, I was on mute. Sorry for that. So, just one question, and it’s kind of a high-level question, Chris and Tom. You talked about the sequential acceleration growth, which is evident, and the improvement in margins, which you had kind of laid out early in the year. I think when folks look at the results, we’re seeing really strong margin growth and strength in the quarter. And what I just mentioned and what you’ve described, sequential acceleration, but sort of in an environment where volumes have been stronger across a bunch of MedTech businesses, maybe a touch closer to in-line, even after adjusting for FX. And so, I guess the good news and encouraging news that Alaris is great. Some of the other business lines that you have talked about are doing great.

Was there anything that’s kind of surprised on the downside? Something that has remained challenging longer, anything you could call out, and maybe, how you see that playing out the rest of the year? Thanks so much.

Tom Polen: Yes. I’ll take that, Matt. So, no, we feel a good — it fits right in line with what we — what I described before, which was you are seeing the diversity of our portfolio which is a real strength for the company. Again those — the medical products intervention, life science businesses that are exposed to healthcare utilization, healthcare provider space, the vacutainers, the diagnostic systems products et cetera along with intervention and all the medical products used in that, they are benefiting from that strong utilization in our innovation pipeline. They are enabling us to offset what our transitory broad dynamics in the — the people are seeing in the life science research space and the B2B phrama systems with some destocking, particularly in vaccines and anticoag.

So, we feel really good about those businesses as well. As I said, we are seeing strong double digit growth or around double digit growth in biologics and phrama systems. We have got a great pipeline there. We have key launches later this year turning over to customers [indiscernible] for them to start doing trials on. We see — in our B2B space, we are still in a market that’s going through a cycle that we certainly see some positive signs on with NIH funding, having higher visibility. Overall, we are seeing the FACSDiscover platform, we launched the three and four-laser. So, that’s adding access to a more cost-effective option for customers to get into that transformational technology. So, we are excited by that. And, we are still over delivering I think versus what you are seeing comps from others in some of those spaces.

And so, as those markets end up rebounding, again which we see that forthcoming over time, we think we are really well-positioned there as well which is just going to help our overall growth. And again, in the meanwhile that diversified portfolio strength is allowing us to do very well both on revenue and clearly on a margin perspective.