Becton, Dickinson and Company (BDX) Earnings Call Transcript & Summary

Shareholders who have already voted by proxy need not cast ballots unless they wish to change their votes. Shareholders who are not shareholders of record but instead hold their name -- excuse me, their shares in street name must present a valid proxy from their bank, broker or other nominee in order to vote. If anybody needs a ballot, please raise your hand. [Voting]

Okay. While the vote is being tallied, we will have a presentation on the operations of BD. We'll move to the microphone here. Okay. Thank you, Gary. And before I get started, I want to remind you that I will be making some forward-looking statements. I encourage you to read the disclaimers in today's presentation slides and the disclosures in our SEC filings, which are both available on the Investor Relations website. With that, let's turn to Slide 3 in today's presentation. BD has always had a central role in global health care, driven by our purpose of advancing the world of health. Our solutions are concentrated in discovery and diagnosis and the treatment of disease either through the delivery of medication or interventionally through medical devices. 2022 marked an important milestone as we celebrated our 125th year anniversary. It's a testament to our history of innovation and our leadership in health care. As an innovative med tech leader, we generated approximately $19 billion in worldwide sales, and our 77,000 global associates deliver products that are known as the backbone of health care. We make over 37 billion devices a year and serve patients in more than 190 countries, touching more patients than any other med tech company in the world. Our contributions to advancing health care are enabled by our customer-focused innovation, world-class manufacturing capabilities, outstanding quality and unmatched global scale. Through our 2025 strategy, we are developing bold, innovative solutions that are transforming the future of health care. I'm thankful to our associates around the world who are focused on executing our strategy and delivered another strong year for BD. At Investor Day in 2021, we outlined our plan for sustained shareholder value creation in 5 key focus areas. Execution of all 5 pillars is well underway and is on track. We are strengthening our long-term targeted growth profile of 5.5% plus by reshaping our innovation pipeline and tuck-in M&A strategy towards higher growth end markets. Our simplification programs include simplification of our manufacturing network, our portfolio and our recently initiated operating model simplification program. We are creating a more agile and focused organization that is delivering on our margin expansion goals while continuing our disciplined capital allocation strategy and ultimately delivering shareholder value. Over the next few minutes, I will share more details on how we are executing against this plan. We closed the year with excellent momentum, having delivered strong and consistent growth in our base business. Our performance reflects our strategy in action and the dedication of our global teams who are reliably serving our customers, controlling costs and throughout -- through foresight, focus and agility enabled our enhanced and differentiated performance during a very challenging environment. With base revenue growth of over 9%, we exceeded our revenue and earnings guidance and achieved our margin expansion goals. Additionally, we achieved our margin expansion goals in an increasingly inflationary environment by both leveraging our revenue performance and realizing savings and efficiencies from several of our multiyear simplification and cost improvement initiatives. We also continue to transform our innovation pipeline with about 60% of our new product development invested in 3 market spaces that are reshaping health care and are helping to fuel our growth. That's smart connected care, enabling the shift in new care settings and improving chronic disease outcomes. We believe our current pipeline is the most exciting in the history of the company. Next, we executed our simplification programs and managed our cost structure through the spin of embecta as well as exiting more than 2,500 SKUs as we accelerated our Project RECODE initiative. As a result, in fiscal '22, we were able to absorb significant increases in inflation during the year and improve our margin profile back towards BD's prepandemic level of 25% in FY '25. We have maintained a disciplined and balanced capital deployment strategy that's allowed us to advance our framework and support growth-enhancing investments in capital, R&D and tuck-in M&A. And finally, our strong teams continue to execute and create value even during uncertain times. And all of these results confirm that our BD2025 strategy is the right strategy and that it's working. Now this execution is largely driven by our disciplined capital allocation strategy, which is focused on continuous value-creating opportunities. Our capital allocation strategy is categorized into 4 main buckets. First, we will invest in organic growth with an emphasis on R&D. In fiscal '22, we invested over 6% of sales in R&D to advance our pipeline of innovative programs. Second, we're going to deploy capital expenditures efficiently with about $1 billion annually to acquire key technologies and build capacity to support our growth. Third, we returned value in the form of dividends. In November, we announced our 51st consecutive year of dividend increases, continuing our long-standing recognition as a member of the S&P 500 Dividend Aristocrats Index, a distinction that reflects the consistency and the reliability of our dividend policy. Fourth, the remaining capital will support both tuck-in acquisitions and share repurchases. In fiscal '22, we invested over $2 billion in 6 tuck-in acquisitions across our businesses that support our strong growth profile in 2023 and beyond. This includes Parata, which is our largest acquisition since Bard and is aligned to our focus on smart connected care and enabling new care settings. Parata makes BD a leading provider in the fast-growing pharmacy automation market and enables us to provide solutions to help pharmacies address rising costs and increasing labor shortages. In connection with the April spin of our diabetes business, now known as embecta and consistent with what we've shared regarding the planned use of associated proceeds, we paid down $500 million in long-term debt this year, and we returned $1.6 billion in capital to shareholders through dividends and share repurchases. In fiscal '22, we saw evidence of the power of our capital allocation strategy at work. We've been able to execute on our R&D and M&A strategies while also paying down debt and returning capital to our shareholders. We're going to continue to execute against this proven strategy. It is also important to remember that our purpose as a company extends beyond the products we manufacture. Our company's impact on human health, communities and the planet is at the forefront of every decision that we make. ESG is central to our identity as a good corporate citizen and our strategy serves as a framework through which we address the most relevant ESG issues for BD and for our stakeholders. In July, we published our 2021 ESG report, which provides details about our ESG strategy and progress against our 2030 ESG goals. Highlights include the launch of our Sustainable Medical Technology Institute; efforts to reduce our greenhouse gas emissions, which include joining the UN race to zero; and increasing our investments in on-site renewable energy. In December, we published our second annual inclusion, diversity and equity report, highlighting the journey to elevate our strong culture to even higher levels seeking to become best-in-class as a more empowered and innovative workforce, and we're making great strides there. ID&E is integrated into everything that we do from setting goals to creating strategies, making decisions and ensuring accountability. Our efforts are not only being celebrated within the company, but we're also very proud and appreciative to receive continued external recognition of our ESG efforts. In summary, I'm extremely proud of our organization. Fiscal '22 was another outstanding year with impactful results that confirm the effectiveness of our BD2025 strategy. We delivered reliable, consistent performance that reflects our team's unwavering commitment to our purpose and the execution of our growth strategy, all while navigating the challenging macro environment that all companies are facing. BD's future is very bright, and our opportunity to make an impact has never been greater. Looking forward, our strong performance and momentum increases our confidence to continue to create substantial, sustained value for all stakeholders. Thank you again for joining us today, and I hope that you have a good day. At this time, I declare that the polls are closed. We will now take questions from the floor. Please give your name and the number of shares you own or represent. And please also limit your question and comments to 3 minutes to allow sufficient time for all those who may wish to participate. Open it up for any questions. Okay. It looks Like there's no questions. And so I will ask the inspector to report the preliminary voting results.

Mr. Chairman, on the election of directors, each director nominee received the affirmative vote of majority of the votes cast. Proposal 2, to ratify the selection of the independent registered public accounting firm, received the affirmative vote of 94% of the votes cast. Proposal 3, the advisory vote to approve named executive officer compensation, received the affirmative vote of 92% of the votes cast. Proposal 4, the advisory vote to approve the frequency of say-on-pay votes option 1 year, received the most support with the affirmative vote of 98% of the votes cast. Proposal 5, to amend BD's 2004 plan, received the affirmative vote of 95% of the votes cast. Proposal 6. The shareholder proposal to require prior shareholder approval of certain termination payments. 61% of the shares cast were voted for and 38% were voted against. That concludes our report.

Okay. Thank you. Based on the report of the inspectors, I declare that the nominees for directors named in the company's proxy statement have been elected to serve for a term of 1 year. The selection of Ernst & Young as the independent registered public accounting firm of the company for fiscal '23 has been ratified. The advisory vote on named executive officer compensation has been approved. And regarding the advisory vote on the frequency of say-on-pay votes 1 year has received the most votes. The Board intends to hold such votes in accordance with this vote. The amendments to the company's 2004 plan has been approved. And the shareholder proposal to require prior shareholder approval of certain termination payments has passed. These are preliminary voting results and final results will be available after the votes have been certified by the inspectors. With that, I will entertain a motion to adjourn. Hearing no objections, the meeting has now ended, and thank you very much for coming.