Baxter International Inc. (BAX) Earnings Call Transcript & Summary

Good morning, everyone. Welcome, everyone, to day 3 of the 45th Annual Goldman Sachs Healthcare Conference. Very pleased to welcome Joel Grade, Executive Vice President and Chief Financial Officer; and Clare Trachtman, Senior Vice President and Chief Investor Relations Officer from Baxter. Joel, thank you for making the extra effort to be here. For those of you, Joel is going to be on Zoom. He was on a Spirit Airlines. I think Red Eye from Costa Rica to get here. So anyone who's worried about [indiscernible] spending at Baxter should not be and ability to demonstrate expense. Well, I don't think I've been on Spirit Airlines...

$236, one way.

Love it. Love it. Joe, will love that, too. So maybe we could jump in here, and you've joined Baxter sort of a really dynamic time for the company. Maybe you can sort of talk through what got you excited about the opportunity, what you saw in the company and how the first several months have gone?

Yes, absolutely. So again, thanks for the opportunity to be here, and thanks for everyone's interest in Baxter. Yes, I'd start with, first of all, the incredible mission of this company, the ability to save and sustain lives is something that the people of this company live and breathe every single day, and that's something certainly I'd never take for granted is that incredible passion. And just the place in the health care space that Baxter has is really something amazing. I think the other part of it that was really interesting to me is just the opportunities that we have here at Baxter. I think -- I came from an industry that had a large complex, that had a 4% operating margin on a good day. And you either operated or executed or you didn't make in that industry. And I think one of the things that I see as some of the opportunities at Baxter is to continue driving some real operational excellence, continue driving really rigorously around things like cash flows, working capital management. Some of the things that are just, again, kind of some of the blocking and tackling that I think we can do a continuously better job of and then you translate in that into investments for growth, I think there's -- again, there's the opportunity in this company to continue to accelerate growth through innovation. So I think when you kind of couple all that together, the ability to just -- and ability to make an impact, those are some of the things that really interested me. And then that's all played out just the way, I guess, I expected it to since I've been here.

Okay. Maybe we could talk about strategy here, and then we'll go into some of the business and financial performance in a second. But Baxter has been through a number of evolutions in its strategy over the past 10 or 15 years, both acquisitions and spin-offs and sort of reconstructing the portfolio. From where we sit today, how would you kind of characterize Baxter's key strategic priorities over, call it, the next 3 to 5 years?

Yes. I mean, I think what I'd start with a little bit is what are we today? And then I think Baxter is a company clearly that has an incredibly important place in the industry. There's really, I'll call, medically very necessary products in this space. It's a very global, very diversified product portfolio. We're going to have a presence in over 100 countries. We serve 350 million patients in any given year. And so there's a tremendous amount of breadth and depth to the business that Baxter has. I think it also -- with the acquisition of Hillrom, I would say the -- what was -- think of as a legacy Baxter really transitioned into a space where we now have more access into the digital space, into the connected care space. And then obviously, the other part of it that's really been strategic for the company is some of the really key transitions and transformational work that's happened. Think about the sale of BPS, think about the verticalization of the business, which, by the way, is something else I really loved about the company when I got here, I think this idea that people have an end to -- we have a leaders that have an end-to-end view of the businesses, so that's been an important strategic initiative. And then obviously, the Kidney transformation, the Kidney separation. And so I'd say today, we're heading down, again, a really strong path of being able to essentially, again, transform and reset the business a bit. And then I think we'll have the opportunity to really head into a future that has a lot of innovation associated with it. And so now as I think about where are we moving forward? I think certainly more to come as part of some type of a capital markets day or something we go to market with. But I think the -- as the medical industry continues to evolve and change, this idea of servicing, providing -- servicing the needs of our customers and the patients that are really ever-changing and evolving space. They have lack of staffing. There's all kinds of different issues that they have that is something that I think we feel a strong ability to be a part of. The ability to innovate. Again, when you think about some of the products, obviously starting with Novum and also products across our other businesses in the pharmaceutical space, also in HST. And so I think the future is one of that is going to involve a set of innovations from Baxter. And then also the -- and then execution is going to be an important part of this. I think we think about driving shareholder value. It's accelerating our growth. It's expanding margins. It's an 80% free cash flow conversion. It's the things that actually, again, allow us to then make those types of investments both organically, inorganically and then through R&D. So I think that's just being at a summary level, what I would see us as where we are today, where we're headed in the future.

And let's talk about Kidney Care for a second. Can you maybe help us think through just the decision tree and key considerations around spin versus sale? Because as I look at them, they appear to be sort of diametrically opposed outcomes from a strategic and financial outcome for the company. So maybe just talk through like what are the things that are going to go into your decision-making process and how should we kind of think about those considerations?

Yes. So I'd say a couple of things. Number one, strategically, the separation itself is certainly an important aspect of this, and we can go into that a little more later if you'd like in terms of just the -- but the idea that actually allows for capital allocation in both businesses for Baxter for strategic focus, for simplicity, et cetera, et cetera. So I think there's a -- for the separation itself, that rationale, I think, is fairly consistent. The difference, I would say, between the 2, I mean, number one, obviously, there's a valuation aspect of this in terms of what that might look like in public markets, what it might look like in a sale transaction. Obviously, from a sales transaction standpoint. Again, let's assume valuations are at relatively equal values, you do get more cash upfront, there's an ability to delever more quickly, to put ourselves in a position from a balance sheet standpoint, we're able to move to a capital allocation of further investment as opposed to more debt paydown focused. There's also sort of valuation certainty, I'd say, around a sale that is different than maybe in the public market. So I guess, those are some of the things we're certainly contemplating. The thing I would just emphasize is the most -- I guess, the most key point really is that we're going to do what's best for our shareholders. And so whatever that decision is, whatever it comes to, you can be sure that's where -- and all else that's what we're going to end up.

And in terms of that assessment, is that, in a lot of ways, just the time value of money question? Because I appreciate the comment, valuations being equal. It's hard to imagine a scenario where you're going to get the cash upfront, that will be the same absolute dollar value is what you might be able to achieve in a spin, but bird in the hand is worth 2 in the bush type thing. I guess, is it a time value money or NPV question? Like how do you define the creation of shareholder value metric?

I think it is that. But then again, I also go back to the point on uncertainty of valuation. Because again, I think the -- obviously, in a spin scenario, we would have a retained stake. We don't -- we wouldn't necessarily look at that in and of itself as a delevering event. I think we've -- what we've said is that would -- we'd look at putting debt on that new company and in somewhat of the same range that we would have today and no, we're not loading up that company with debt. And so I think the deleveraging would happen over time in a spin scenario, and again, and with some less certainty of valuation. And so I think those are some of the things that are really the -- just the delays to think about this.

And appreciate kind of wanting to put good parameters around the timing. But as you think about the opportunities in the kidney business, it looks like there's a lot of margin expansion potential here. I appreciate Q1 might have been overstated because of the Opelika dynamic, but at the same time, as you exit some of these lower margin or potentially negative margin businesses in HD, Acute and U.S. PD and other higher-margin businesses become a bigger percentage of total, like the value you could potentially accrue from a sale it could be higher if you saw that margin expansion. So maybe like why put this has got to be done by the end of the year time line out there sort of drawing that proverbial line in the sand, what does that accomplish?

Yes. I mean, I think, first of all, again, we're committed to doing that. And I think from a timing standpoint, obviously, it's important for our balance sheet, number one, from ultimately a deleveraging standpoint, and again, our ability to move forward. But I think just as, again, a reminder, and again, I said this a second ago, but just to elaborate on it a bit. The strategic rationale, though, number one, the Kidney business, again, yes, Q1 was a bit of an anomaly, I'll call it, from a margin perspective. But even within our portfolio, that business is certainly, again, the lowest margin business. It's the opportunity. When I think again about capital allocation for ourselves, it's capital-intensive. When I think about higher versus lower ROIC projects, the prioritization of that. And again, I think the simplicity, again, putting our -- allowing for a strategic focus and clarity, allowing for simplicity in the business, again, there's -- in a post-spin world, most of our manufacturing businesses are very cleanly lined up with our business segments. And I think that there's an element to that, that actually allows for -- there's a lot of benefits out of that for us. And so I think just -- I would look at it as much in the context of where it sits in our portfolio, what it allows us to do within the portfolio versus outside of it. And then, of course, for Kidney that allows them to focus their investments as well in a way that can help drive their outcomes.

Okay. One more on Kidney Care, then we move on to the balance sheet and back to the business. But how should we think about the underlying profitability of that business? I appreciate what you gave from a disclosure perspective today, but you also have the spin-related costs that are GAAP -- that are adjusted at non-GAAP, and I think we all understand why, but those separation-related costs, would those on a stand-alone basis actually be in the P&L? So we take the $200 million-or-so whatever the number was last year, I think that's right. And that gets added back to OpEx for Kidney Care on a [indiscernible] basis?

Yes, I guess the way I'd think about it, and Clare, you can chime in here. I think the business itself within Baxter, I know that's not what you're specifically asking, but I'll get to this, but within Baxter, this number is, I'd say, more than high single to kind of low double-digit number. I think there's been -- on a stand-alone basis, like there's going to be public company costs in the spin. There's going to be, obviously, other costs that today are absorbed as part of Baxter that would not be there. And so I guess, I think the -- that's just the way I would think about this thing because there are going to be stand-alone costs that would be deducted, if you will, from a...

And the only clarification I would make, of the $200 million, some of that would be onetime costs. That would not be the recurring cost, that would be included as a stand-alone entity. So that's -- it's a little bit some -- there are some recurring costs in there right now, but not all of that $200 million is it, so...

Care to offer a percentage of it?

So what we had said previously is that typically, what we have seen with precedence is that stand-alone costs are about 1% to 2% of sales for Spin Co. And everything we've seen so far, Kidney Care, Vantive would be in that range of that.

Okay. Very helpful. Let me get a little out of order here, but you brought up the balance sheet, so I want to touch on that because I think you paid the debt in May that was due, the $800 million. You got euro bonds with the remaining proceeds from the BPS sale. You do have debt due in November. I think you also have debt due January of next year. So as you think about -- I think it's like $1.8 billion of debt coming due that sits around 1.5% interest rate. How should we think about managing that?

Yes. I mean -- so first of all, again, I'm going to put a little [indiscernible] through the decision on the structure of the separation. And so again, that's going to impact the answer to this question. So it won't be as may be definitive as we'd like it to be. But I guess what I would say to this is certainly the proceeds from the separation is -- would be something that would be used to pay down debt. And I think about it as we've got, as you said, a tranche due in November of this year. We also have a term loan in 2026. That's one of our actually the higher end of the coupon debts that I think would be something we would also look to focus on as some of those proceeds are used. But I would just say the separation proceeds are certainly going to be a key part of what we're going to use and obviously, remaining cash that we have from the BPS sale.

And is there a good number we should think about as cash you would keep on the balance sheet to fund working capital, the dividend and CapEx? And then we'll be -- yes, maybe you can answer that first.

Yes. Again, I think somewhere in the $1 billion range is probably -- maybe a little higher, but I think that's a reasonable view.

Yes. I'm more aligned with you. I think our treasurer would say higher, but I think about $1.5 billion, we're good. So...

You got to push her. So the -- maybe we could talk -- so as -- if you think about the proceeds from the spin or sale, that's 1 avenue to pay it down. Just from where we sit today, though, if we assume you had to refinance that, that would create a pretty significant interest headwind for 2025. If we say you're paying off 1.5% debt with, I don't know, 5%, 5.5% wherever rates are now, that would create some sort of incremental net interest expense headwind for next year.

Yes. Again, I would go back to my previous answer. We're still evaluating. Again, depending on how the structure of this happens, we may or may not end up in that place. And I think there's certainly -- but either way, we're evaluating what the different options are in terms of navigating that. So I guess, just not ready to actually give specific clarity on that at this moment.

Okay. Maybe we could toggle on to the business. Q1 had a number of puts and takes in it. But as you look then -- you look at Q2, you're guiding to a modest deceleration in sales from the 3% in Q1 and 2% to 3% in Q2. Maybe help us think through the thought process there? Because it seemed like HST should be improving markedly on a sequential basis. What are some of the puts and takes in the trajectory of guidance here, Q1 to Q2?

Yes, I'll start, and certainly, again, Clare can chime in if she likes. I mean, I think generally speaking, I'd say the overall business itself is pretty consistent between the 2. There's couple of things I would call out. As you said, we are anticipating some incremental improvement from HST, certainly from Q1. We've talked about somewhat negative, but yet, again, improved incrementally from the first quarter. We also -- when I think about the Kidney business, we had a very strong in the Acute business in the first quarter, that's something I think we're anticipating some softening of as we head into the second quarter as well as the in-center HD, I think, is also something that we're anticipating having -- lessening in Q2 versus Q1. And I think finally, the compounding in pharma, we had a very strong first quarter from a compounding standpoint that we're anticipating some softness in or lessening, I'll say, of that in the second quarter. Those are things that really primary puts and takes from here.

Yes. The 1 piece I would add to there, if we think about just the margin because I take your point, is we are going to increase -- incur some increased costs as we separate out Kidney Care from Baxter from a manufacturing standpoint. So Kidney Care will have to be shifting to its own location. And so as a result, we're going to incur some increased cost logistics related as we do that. And that's really one of the primary drivers kind of margin because we do expect gross margins to actually decline slightly in Q2 versus Q1.

And push back on that for a second. But I start just sticking on the top line because those are some of the other things. How does Novum and some of the injectable pharmaceutical launches factor into the top line outlook? With Novum, you don't really have anything Q1 -- yes.

Yes, if you're talking about second quarter, they don't as much. As we head in the second half of the year, that's part of where you've seen us actually increase our guidance for MPT, increase our guidance for pharma and I think that's where that plays in.

So on the margin piece, I appreciate the 42 -- I think it's 42 or 42.5 in Q1, had some elevated factors related to overabsorption in the HD plant and then you -- but you also had this big headwind in the HST business. And I think if you look at the, I assume most of the 5-point margin decline year-over-year that was registered in operating margin and that business came in the gross profit line for that segment. So...

There's a lot of leverage there. So no, it wasn't all just in gross margin.

Okay. But you did have some improvement there in gross profit where you have probably injectables continuing to grow -- shifting the mix more to injectables compounding, exiting the lower-margin businesses within Kidney Care, HST improving and then appreciate the cost headwinds and the normalization of margins in Opelika. So all that together still gets you to down sequentially.

Yes, sequentially.

Okay. And then maybe we could talk about [indiscernible] I'm going to step back. I want to say on revenue for a second. I think you also said bridging from Q2 to the rest of the year, I think you mentioned on the call, you expect the business ex-Kidney to be in the 4% to 5% range by the fourth quarter, that was 2% in Q1. Talk to us about how we get from 2% to 4% to 5% exiting the year?

Yes. I can start with that. I mean because -- so back to my comment a couple of minutes ago, the -- keep in mind, we -- number one, we raised guidance for, again, both our MPT segment as well as pharma. So that's actually part of it. And then again, when you think about MPT, again, the introduction of Novum, that is actually going to have starting to have a strong impact. We've talked about an incremental $25 million in the second half of the year for MPT. And to your point, some of the injectable product launches in pharma. I think the other part of it, though, is HST. Now -- and certainly, as we continue to think about how, again, the -- over the course of the year that continues to evolve. They have a typically a second -- stronger second half than they do first half, and we're anticipating that as well. I think one of the things that gives us confidence about that is certainly in the CCS business, we referenced the fact that we had late incoming orders, if you will, in Q1 that was a bit of a timing element for what happened in the first quarter. The ability for us to continue to build, again, the order book has been strong, and we anticipate those orders continue to ship over the -- in the second quarter, but also as we head into the second half of the year. So I think the -- in general, between that and if you think about from a frontline care standpoint, last year, we've had a significant backlog that we had kind of really pushed through in the, I'll say, the first half of 2023. Again, that comparison changes as well as we head into the second half of the year.

And on the CCS business, specifically, I appreciate the timing of orders and then the corresponding impact on installation and revenue recognition. Is there anything holding you back from executing conversion of order to revenue either from a supply chain perspective? Or you talked about operational factors on the Q1 call, is there any reason why those orders would not translate into revenue at the normal pace you would see?

No, there's not. That's something that I think we -- one of the things I asked early on in my time here back at Baxter kind of, "Hey, what have I learned in the first few months?" This question between actually an order coming in and a shipment, there's a, what I'll call, extremely high batting average on that. Timing has fluctuated some, obviously, and certainly did in this case, but there's certainly nothing that we anticipate that would prevent us from actually shipping.

And on the operational issues that you discussed on the Q1 call, where were you in terms of resolving those as of May? And any other updates you can provide?

Yes. And maybe just a bit of specifics on that. I think the Q1 call had more of a general statement. I think the main operational issue that happened in our CCS business, in particular, was really around -- we actually -- as part of our work in our integrated supply chain, we're actually consolidating manufacturing facilities. In the case of CCS, there was a manufacturing facility in Massachusetts. There's one in Mexico. We work to consolidate those 2 facilities, and frankly, didn't execute it as well as we would like to have done. That drove both some timing of shipments, also increased distribution costs. And so there was actually a margin impact on that as well. And so I would say, we're the majority of the way through resolving that certainly by, I'd say, at the end of the second quarter, early third quarter, we'll be through that completely. And so I -- that's not a structural thing, it's an issue that we, I think, are well in control of. And so -- and then the other operational thing I'll just say in Front Line Care as part of what we also saw in the first quarter, I guess, I'll call it, we called out some quality issues in the Western Europe, that also has been -- is well on its way to being resolved. And so I'm confident those are not going to be issues that are going to hold us back.

And one of the things that I didn't appreciate about Front Line Care was the mix between hospital and physician offices. Can you just remind us what is the mix of business there and what are the trends in each of those subsegments?

Yes. So within -- so we've talked about the primary care market, which is probably about 1/3 of the overall Front Line Care business and that's where we have seen some softness within the overall market. So we've discussed that. The other part of the business for that -- for Front Line Care that's in the acute setting, we haven't seen that kind of impact with it, that business has been doing well. We also have the Cardiology and Respiratory Health businesses as well that have also been performing well. So within the primary care market, this is a market that we saw softness in the second half of last year, really in the fourth quarter. We saw a seasonally slow start to new construction starts given the high interest rate environment that has carried through, and we anticipated it to carry through to 2024, but it has been exacerbated a bit by some of the cyber attacks that we've seen on both Henry Schein and Change, so that has led to some softness as well. We expect that to slowly resolve. In general, we expect the primary care market to decline this year and rebound as we go into 2025.

And probably 2 other factors in that, I think, that have been part of that as well is the Change Healthcare that's come up as well as there was -- in 2023, there was still, at least about the first half of the year, some pandemic-related reimbursements that had happened that fell off and I think that's had also some impact, but to Clare's point, we do anticipate a slow recovery in that, but that over time will recover.

Okay. And maybe it's a good segue to the P&L. I think you've talked about at least 50 basis points of operating margin expansion this year. It would seem like -- I appreciate some of the cost dynamics, but as HST improves, you exit the certain businesses on the Kidney side, it would seem like you could do much better than that.

Well, I'll start. And I think 1 thing to remember, last year, we had a 300 basis point delta between our operating margin in the first half and the second half of the year. That was a lot related to, again, some of the inflationary costs that we were up against in the previous years. So I think it's as much that as anything where we certainly anticipated some of a larger amount of expansion in the first half of the year than in the second half. And I think that's -- and anything you'd add to that?

Yes, I mean I think that -- your question is probably more going forward. Is that...

No, this year. This year, I mean, 50 basis points given the expected improvement in HST in the back half of the year. I appreciate Kidney might come down from what you saw in Q1, but it would seem...

Yes, but the rest of the business should improve.

But the rest of the business should be moving higher. So it seemed like there's opportunity to be more in the 15-ish percent operating margin range, 15-plus versus what -- I know at least 50 basis points is a lot of room above at least 50, but if you take the 14.3 last year, it would seem like a number into the 15s is reasonable for this year.

I mean I think right now, we have said 50 basis points is just kind of the floor, and that's the minimum, and we would expect hopefully to do more than that.

And how should we think about just conceptually longer-term margins? So one of the things that's always challenging is that Baxter has been going from 9% to 19% to 14% post the separation of Baxalta in '19, you had a -- you still had BPS in there, so it's not a good representation of it. And maybe BPS, it was sort of in the high 17s without BPS or something like that. Like is that a good benchmark to think about where margins can go over time? Like how should we think about normalized margins?

Yes. I think that is a reasonable starting point. And I think that something certainly we'll come out with a longer-range plan at some point more definitively, but I do think the -- again, that's a reasonable starting point, and we'd certainly want to accelerate there. And I think that's reasonable.

Okay. And as you look at the profile of the P&L now, it seems like most margin expansion needs to come through the gross margin, which, as we know, takes time, it's harder to move. But at the same time, many of the input cost pressures that you faced throughout COVID, maybe they're not going down, but at least the pace of growth is moderating. So is your business -- as your -- kind of your volume grows into your new cost base, when -- how should we think about the progression of gross margin going forward?

Yes. I think -- so a couple of primary areas of focus to think about on that. Number one is in our ISC space. I think the -- we've had a continued stream of margin improvement programs that both offset increases that are happening, but also continue to expand our margins. We have a robust pipeline and margin improvement programs. We've talked about $300 million to $400 million a year improvement in the ISC and that's certainly a big part of it. We've also done a lot of work and are continuing to do a lot of work on our automation. I think the -- as one of the things that certainly has come up and isn't going back down is the cost of labor. And our ability to actually make the types of automation improvements that are -- we've done certainly -- our plants in North Carolina, for example, is our largest -- the largest solutions plant, done a lot of really good things in that area, and that's something we continue to work to scale across our supply chain. So ISC certainly is a big part of that. Pricing is another. I think there's another part of this that is an area that's going to also continue to drive gross margin. We talked about this year where we've had 50 to 100 basis points improvement in pricing. A lot of that this year is coming from outside of the U.S. The team has done a lot of good work in that space. And then as we think about going forward, one of the things we've talked about is the renegotiation or the negotiation of our GPO contracts. Those have been 2 of the 3 large GPOs, 1 of them is not due till '26 or '27, that's why it's not 3 of 3. But 2 of the 3, those have been successfully renegotiated. We're now negotiating the IDNs under that. But from a pricing perspective, we were able, again, to successfully pick price there as well as some, I'd say, additional flexibility in the event that for whatever the reason we had supply chain or other impacts on the business. And so I think as we think about the 50 to 100 basis points of pricing this year, again, mostly outside of the U.S., 2025 impacts from some of that and other work we're doing, I'd say, think about that in the same way as we head into next year. So those are really the 2 main impacts from a gross margin, but it's both.

Okay. And then on the OpEx side, like optically, you look at SG&A and R&D, and it's hard when you compare to "Medtech peers" it's not an apples-to-apples comparison because if you think about your revenue portfolio, you have a lot of businesses in there that are -- the Fluid Solutions business that doesn't require the same level of R&D as some of the -- compounding and some of the other portfolios. So how should we think about the trajectory of -- 4.5% of R&D, it's probably more like 7% to 8% on the segment R&D-able sales, so to speak, excluding sustaining. So how should we think about the trajectory of R&D and SG&A going forward?

Yes. From an R&D perspective, I would think about it as a -- I'll say, modest incremental gains year-over-year. Now again, I don't know that we're going to go...

In dollars there or as a percentage of sales?

Percentage of sale. So I'd say that's going to, again, I'll say, modestly increase. But I think the -- what we're going to do though there is from a focused and prioritization standpoint, I think that's where we really have some continued opportunities to advance that work. And so I think -- but certainly, again, innovation is driven by R&D and that's going to be a continued focus for us. From an SG&A standpoint, I've said a couple of times, we're not going to SG&A ourselves to profitability, if you will. But we do continue to see opportunities in the SG&A space. And in particular, around -- we -- I just recently hired a global services leader. Baxter today has a large, but very fragmented shared services environment. There's areas between that and that's really a focus of ours that I think is an opportunity from an operating model standpoint for efficiency. The other part of it, of course, is as we do separate Kidney the work around what you make -- you call stranded costs or some of the just potentially almost ensuring our cost structure lined up properly. That's -- I have a transformation office that's also reporting into me directly as is the shared services work. We're actually -- is really a key work stream of ours to ensure that we continue to drive real leverage in our business in SG&A, and I don't think it will continue to align it more, I'll assume, with industry peers.

And maybe just sort of close on sort of a cash flow question. You've talked about -- you referenced an 80%-plus free cash flow conversion number. I appreciate it's going to be below that now because of the spin costs and other dynamics, but what's the path back there and how should we characterize time lines?

Yes. I think it starts with really a focus and a real rigor around driving working capital. I think the -- from inventory standpoint, during COVID and some of the supply chain disruptions, the company had appropriately actually increased its inventories in order to ensure some of the service disruptions. I think we have continued opportunities to focus on that area and then obviously, in receivables collections as well. And this ties right into the value of the business services and some of that. But that type of rigor around working capital, which again is something I had a ton of experience from the company I came from, is a real key part of that.

And to put you on the spot here, maybe the fast forward. As we think about -- and I'm not going to put a time line on it, but as you think about Baxter going forward, I appreciate Kidney is a variable, but is it fair to think about the company as the goal to get to mid-single-digit top line growth, mid- to high-teens operating margins and 80% free cash flow conversion, is that a fair rough set of objectives?

I think that's a fair set of objectives, yes.

Okay. Excellent. Well, thank you for making the extra effort to be here. We really appreciate it. There's a ton of interest in Baxter. So I think you'll see that in your one-on-one schedule and very much appreciate you making the time and being here; and Clare, thank you for making the trip as well.

Thank you.

Thanks, everyone. Appreciate it.