Second Half Revenue and Margin Outlook
Q: What's driving the needed revenue and margin ramp in the second half?
A: Management expects strong acceleration in revenue in the second half, with growth of about 7.5% at the midpoint of guidance, driven by momentum in Alaris, which is expected to contribute nearly 250 basis points to second half growth, amounting to at least $300 million for the full year. Excluding Alaris, the rest of the BD portfolio needs to grow just over 5%, which they feel confident about due to strong areas of momentum like PureWick and core consumables. On margins, they had strong execution in the quarter, over-delivering two quarters in a row, and are on track to deliver at least 50 basis points increase year-over-year, achieving just over 24%. They highlight that certain one-time items affecting the first half are behind them, and they expect continued strong cost improvements.

Alaris Revenue Contribution
Q: What's the implied exit rate for Alaris revenue in Q4?
A: While they don't provide quarterly guidance by product line, current guidance implies over $300 million, actually closer to $350 million, for Alaris this year. They've previously stated that they expect fiscal year '25 to be at least at their historical run rate of around $400 million. For Q3, they expect total growth, including Alaris, of at least 6%, with a sequential step-up in Q4, a portion of which will be driven by Alaris.

Confidence in 2025 Operating Margin Goal
Q: Can you discuss your confidence in achieving the 25% operating margin goal by fiscal 2025?
A: Management remains committed to the BD 2025 goals, including delivering a 25% operating margin by 2025. They are confident due to the momentum from their BD Excellence initiatives and strong cost improvements. The improvement will come largely from gross margin enhancements driven by reducing waste and improving yield in manufacturing.

Risks to Second Half Ramp
Q: What risks do you see to the revenue and margin ramp in the second half?
A: They feel confident due to exiting one-time items from the first half and having strong visibility into cost improvements and Alaris progression. While they continue to monitor market dynamics, overall they believe they are well-positioned to achieve their guidance.

Alaris and Pyxis Enhancements
Q: Can you discuss the importance of upcoming Alaris and Pyxis submissions?
A: Management is excited to be back at an innovation cadence with Alaris. The next 510(k) submission later this calendar year will include customer benefits like over-the-air software upgrades and advanced cybersecurity features. Regarding Pyxis, they are launching a new hardware platform that significantly advances their cloud strategy and connectivity, with advanced analytics and hardware features. This is the first new Pyxis instrument in over 15 years.

Underlying Trends in Pharm Systems and MMS
Q: How are underlying trends in Pharm Systems and MMS affecting performance?
A: Management acknowledges transitory market dynamics in the life science research area and B2B pharma systems due to destocking in certain areas. However, they highlight strong double-digit growth in biologics, which now represent over 40% of the Pharm Systems business, approaching $1 billion in sales. They feel confident about the rest of the year due to the strength of their diverse portfolio and strong utilization in the healthcare system.

Impact of Market Dynamics
Q: Were there any surprises or challenges affecting growth and margins?
A: They feel good about their performance, emphasizing the diversity of their portfolio as a real strength. They are overcoming transitory dynamics in the life science research space and B2B pharma systems with strong performance in Medical products, Intervention, and Life Science businesses exposed to healthcare utilization. As markets rebound, they believe they are well-positioned for continued growth.