Good morning, ladies and gentlemen, and welcome to Baxter International's Third Quarter 2023 Earnings Conference Call. Your lines will remain in a listen-only mode until the question-and-answer segment of today’s call. [Operator Instructions]. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Clare Trachtman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trachtman, you may begin.

Good morning, and welcome to our third quarter 2020 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer; and Joel Grade, Baxter newly appointed Executive Vice President and Chief Financial Officer; and Brian Stevens, Baxter’s Senior Vice President, Chief Accounting Officer, Controller and former Interim CFO. On the call this morning, we will be discussing Baxter's third quarter 2023 financial results, along with our financial outlook for the fourth quarter and full year 2023. Please note, that we close the sale of our BioPharma Solutions or BPS business at the end of the third quarter, and results in the current and prior periods have been adjusted to reflect BPS as discontinued operations. Restated schedules reflecting that discontinued operations presentation are included in the appendix to our earnings presentation, and available in the IR section of our website. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the fourth quarter and full year 2023, new product developments, including the impact and status of pending regulatory approvals, the status and potential impact of our ongoing strategic and recent pricing actions, business development, regulatory matters, and the macroeconomic environment, including commentary on continuing supply chain challenges and evolving customer capital spending trends, contain forward-looking statements that involve risks and uncertainties, and of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter’s ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and in our earnings release issued this morning, which are both available on our website. Now, I'd like to turn the call over to Joe. Joe?

Thank you, Claire, and good morning everyone. We appreciate you taking the time to join us today. I am pleased to be joined this morning by Chief Accounting Officer and Controller Brian Stevens, and to welcome our new Chief Financial Officer Joel Grade to the call. I will begin the call today with an overview of our third quarter performance and the continuing momentum of our ongoing transformational initiatives. I will also share perspective on the progress and potential of our proposed Kidney Care spinoff, including some context around recent developments in that therapeutic area. Brian will provide a more detailed account of Baxter's third quarter and financial outlook, and as always, we will close with your questions. To get started, Baxter reported solid third quarter results that came in ahead of our projections, both on the top and bottom line. Sales from continuing operations rose 3% on a reported basis and 2% on a constant currency basis. As Claire noted earlier, sales from continuing operations exclude Baxter's BioPharma Solutions or BPS business, which Baxter divested at the close of the quarter. Sales in the aggregate, including discontinued operations, also increased 3% on a reported basis and 2% on a constant currency basis. Our better than expected top line performance was driven by positive demand for many of Baxter's products, combined with continued abatement of supply chain challenges. On the bottom line, third quarter aggregate adjusted earnings per share totaled $0.82, comprising EPS of $0.68 for continuing operations and $0.14 for discontinued operations. Adjusted EPS from continuing operations exceeded the top end of our outlook range of $0.65 to $0.67, driven by end market stabilization and good sequential margin improvement across our business, which reflects strong execution against our strategic priorities. Overall, and especially when compared to what we've seen…

Thanks, Joe. Let me start by saying how excited I am to join all of you today for my first earnings call as Baxter's new CFO, and more importantly, how motivated I am to be joining Baxter during such an important point in its transformational journey. For many years, I've admired Baxter as an iconic company with an incredible mission to save and sustain lives. When the opportunity arose to join the team, I recognize that this is the right next step in my career. The position presented me with the ability to utilize my broad experiences in finance, operations, strategy and transformation, to help the company deliver on its strategic actions that Joe outlined earlier. While early, I've been extremely impressed with the talented and dedicated employees at Baxter and their unwavering passion for and commitment to our mission. In addition, I'm very optimistic about the numerous opportunities that exist for the company to increase long-term value for our stakeholders. Finally, I look forward to both speaking with and meeting many of you over the next coming months. Your perspective on our business and the surrounding market landscape will be incredibly valuable as we move forward in our transformation journey. With that, I'll turn it over to Brian to take us through the Q3 results. Brian, over to you.

Thanks, Joel, and good morning everyone. I'm happy to be joining the call this morning to provide some additional details on Baxter's third quarter financial performance, as well as commentary on our updated financial outlook. As Joel mentioned, we are pleased with our third quarter results which came in ahead of our expectations. Third quarter 2023 global sales included $3.71 billion from continuing operations and $191 million from discontinued operations. Sales in the quarter increased 3% on a reported basis and 2% on a constant currency basis and compared favorably to our guidance. Sales performance in the quarter benefited from better than expected sales in medical products and therapies, particularly our infusion systems and IV solutions products, as well as continued strength in our pharmaceuticals business, driven by injectables and drug compounding. On the bottom line, adjusted earnings from continuing operations totaled $0.68 a share, decreasing 4% versus the prior year period and reflecting the ongoing operational improvements, primarily offset by the impact of increased interest expense. Adjusted EPS from continuing operations for the quarter came in ahead of our expectations of $0.65 to $0.67 per share, primarily driven by sales and operational performance, and partially offset by higher than expected tax rates. In the aggregate, inclusive of both continuing and discontinued operations, adjusted EPS was flat year-over-year and totaled $0.82 per share. Now, I’ll walk through the performance by our new reportable segments. Sales in our medical products and therapies segment were $1.26 billion, increasing 4% on a constant currency basis. Within medical products and therapies, sales from our infusion therapies and technologies division, which includes our former medication delivery and nutrition businesses, totaled $1 billion and increased 4% on a constant currency basis. Sales in the quarter benefited from strong growth in our infusion systems portfolio, driven by…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] I would like to remind participants that this call is being recorded and a digital replay will be available on Baxter International's website for 60 days at www.baxter.com. Your first question comes from a line of Matt Miksic from Barclays. Your line is open.

Thanks so much for taking the questions and congrats on a really strong quarter here. I appreciate all the color around dialysis and your position on all these concerns around GLP-1. That's super helpful. I'm wondering if you could talk a little bit about the loops and hurdles such that they are in front of you, still to complete this spin of Kidney Co. And if you could maybe just comment on where you're at, what the next steps are. And I have one follow-up if I could.

Thank you, Matt. Good morning. Matt, our preparations for the proposed spin-off of the Kidney Care segment into its own company, Vantive, continues to progress well. We've made significant progress in the – in Vantives operating model. We are designing the organization finished actually and we are allocating personnel to the company in all operational levels, and so it continues to progress well. But consistent with Board's exercise of its fiduciary duties, we'll continue to pressure test the related financials, including as a result of the evolving market conditions to ensure we proceed in the interest of maximizing shareholder value.

Of course. And the – any timeline for that sort of approval and presentation? Does that happen in the first half of next year at the round side of the board meeting? What should we expect?

Matt, July 2024 is – the end of July 2024 is where we stand today as the date. As far as we know today, the plan is July 2024.

Fair enough. And then maybe just if I could ask a business line question. The Hill-Rom businesses has been kind of under some pressure last year. Obviously everyone's aware of that for a variety of reasons. Just wondering if you could speak a little bit about how the back half is shaping up relative to your expectations and if we should expect things to continue to improve into your end and if you can give us some idea of a cadence into the fourth quarter year or any sort of puts and takes or updates as to how the sort of bounce back in that company, in that part of the business has progressed. Thanks.

Matt, we've made a lot of progress. We redesigned the organizations. We put some really good people. We had to replace key positions as we thought that we needed higher caliber in some areas of the business and we have those folks in place. We put Reaz Rasul as the segment President. We had Julie Brewer who came in and brought a new team in place. So we feel that we've seen steady momentum in our front-line care business as well. The front-line care managed by Jim O'Connell is doing well with the improved supply chain availability for electro-mechanic components is up 8% in the quarter and 7% year-to-date and is doing well. CCS, which is, we have the PSS and GSS and the Care Communications, the former group that we used to call is called CCS today as you see in your financials, has been impacted by lower rental revenues and a bit of softness in the capital expanding. We're seeing improved in order sequentially and expect that to continue in the fourth quarter into 2024. We have increased our investments in HST. As you notice, our research and development has increased and we're going to continue to increase to get more innovation out. But I have to say that the whole overall business of HST is going to have a very large fourth quarter in terms of growth compared to the rest of the year, and bring them more in line with our expectations, including its profitability, which will increase in the fourth quarter as the rest of the company.

Great, thanks for the color. A lot to cover, but I'll leave it there with you and thanks again for taking the questions.

Thanks, Matt.

Thank you.

Your next question comes from the line out of Vijay Kumar, Evercore ISI. Your line is open.

Hi, Joe. Good morning and thanks for taking my question. I had one on a financial question and one on fiscal ‘24. On the updated guidance here, what is fourth quarter assuming for interest expense? Is that stepping down? I'm getting implied operating margins close to 18%. That's a pretty big sequential step up. Does that math make sense to you?

Yes. Vijay, I'll just quickly. Obviously, interest expense would be kind of a below the line item, so would not be part of our operating margin. But we are expecting – I'll let Brian get into the details in terms of what we're expecting. But as we said in the prepared remarks, we expect interest to be down about $45 million, net interest expense about $45 million in the fourth quarter.

Yeah, and speaking to operating margin, you're correct. Our full year operating margin guidance that we gave of 14.3% to 14.5% implies a fourth quarter adjusted operating margin that exceeds 16% versus the 15.2% adjusted operating margin we landed at in the third quarter. Really, the primary driver of that increase is the sequential improvement in our sales, which is typical seasonally. That provides us a lot better operating leverage against our cost base, and we're really encouraged to see the progress we've made in significantly expanding our margins in the second half of the year compared to the first half. As we discussed on our last two earnings calls, that expansion is driven not just by the higher sales, but also by cost favorability in our supply chain network, as we sold through a lot of our higher cost inventory during the first half of the year. And we're starting to see these savings from our margin improvement initiatives, we think is going to begin to slightly outpace inflation starting in the fourth quarter. And then finally, driven by cost savings from the operational efficiency initiatives we've been undertaking in recent periods.

Understood. And maybe just off of that question, Joe, for you on fiscal ’24. Can you talk about the big variables? What gets better? What gets worse in ‘24? When can Baxter get back to that mid-single LRP thesis? I think the street's modeling 100 basis points of margin expansion based on some of Joel's comments here. Does it seem reasonable for you for the street to be modeling 100 basis points margin expansion?

So Vijay, let's start with the top line. We see stability in the market, in admissions, market growth rates. You saw some of the published numbers from other companies, their hospitals. We see that as well, and we continue to have a pretty stable top line growth, and consistently into 2024. So I'm confident about that. We have ex, our Kidney Care, the other three businesses of Baxter have steady growth into next year. They will probably be higher than in 2023. Talking about the bottom line, if you see the sequential improvement in our bottom line, that will continue into 2024. We continue to have cost reductions in our manufacturing facilities. We also get more stable volume and growth in volume, absorption of overhead, and some pricing opportunities in a couple of our businesses. I just highlight, for instance, the turnaround that we're seeing in our pharmaceutical business that will continue with new product launches from ‘23 into ‘24, and also the good demand for a SIGMA Spectrum pump from ‘23 into ’24 just to mention a couple of things. And also a stabilization of our HST business that we see in terms of our anniversary, some of the differences in end of fiscal years between Hill-Rom and Baxter. We start seeing the stabilization and the successful launch of our Progressive Plus. Just to give you a couple of things that give us more confidence in 2024 in terms of top and bottom line.

Thanks, guys.

Your next question comes from the line of Rick Wise from Stifel. Your line is open.

Good morning, everybody. Good morning, Joe. It's a funny place to start maybe, and I know that Joel is fairly new to the job, but it's hard to resist asking, both from your perspective Joel, what did you charge Joel? What are you tasking him? Maybe talk about your requests of him as he steps into the role. And Joel, I'd be curious to hear what kind of special sauce you're going to bring to the job, and where your priorities lie and just your initial thoughts there.

Rick, good morning. Good to hear your voice. Listen, we're in the process of selecting the CFO for the company. We're looking for the ability for the person to get operationally into the details and continue to help the transformation of the finance organization. And if you look back at the finance organization in BAS [ph], we had a lot of things that we changed. We have initiated and have done successfully shared service organizations across the board. Also, the development of new talent, the culture, and the people are very important to Baxter. So Joel coming to the company, need to understand that we are a complex operating company. We have a lot of manufacturing sites. We have a significant amount of R&D sites across the globe. It is a company that spans over 100 different countries in terms of sales, and more than 25 to 30 countries in terms of manufacture and distribution alone. So somebody who had the intellect to combine that ability to understand complexity and get through it and get operational efficiencies out of it, but continues to transform the finance organization and bring the talent and the culture to the point that we need the agility and the ability to cope with different inputs. Also, experience in the M&A space that we continue to rotate the portfolio of Baxter, look at opportunities to transform Baxter's WAMGR into a higher WAMGR to better value for our shareholders. But I pass on to Joel to answer the other side of your question.

Thank you. Great to be with all of you this morning. And I really look forward to meeting all of you in person, hopefully in the near future. So look, I'm first of all really excited to be here. I think all the things that I thought about when I was going through the process with Joe and with the team have only been reiterated to me as I've gotten here and realized the wonderful opportunities that we have here at Baxter. Yeah, I'd say early impressions, certainly as I said, lots ahead of us, there's lots to do, but we have great people here and incredibly passionate people as it relates to the mission of this company. And again, really a lot of talent as well is my early review. Yeah, I'd say my early focus, first of all, is going to be about learning the business. As you know I'm newer to the industry, but certainly I'm going to be focused heavily on making sure I understand and learn this complex, interesting business, so I can really make the best decisions to support the team. And from there, we're going to focus a lot on how do we continue to accelerate growth, how do we accelerate consistent execution of things, and how do we think about where those mechanisms are to ultimately fund growth and value creation. I’ll certainly be spending time understanding our talents and really just to focus the organization. As Joe said, the background I've gotten is both been rounded in finance, ops strategy, M&A, and transformation. And so bringing all those things to the table here for all the opportunities we have at Baxter, just really thrilled to be here, and those are some of the areas I'm going to be spending time focusing on going forward.

That's great. And one quick follow-up if I could, sort of picking up on Vijay’s question earlier on ’24. Just from one angle, when we think about current consensus ex-Kidney Co, how do we think about the impact of the spin relative to dis-synergy? Does consensus adequately reflect numbers inclusive of the dis-synergy costs for, when you think about the separation of the two companies and standalone standup costs, said differently, will numbers need to come down? That's what I think people are, that's what I'm concerned about, and I think that's what folks are concerned about. Thanks, Joe. I appreciate it.

Rick, maybe a few comments on that. As Joe mentioned earlier, the process of the spin is going between now and we're planning to wrap up in July of 2024. All the models are still in progress and we are refining our dis-synergy and standalone cost estimates. We do plan to be providing additional information on this in connection with our 2024 guidance that we provide at year end, as well as in connection with an Investor Day that we intend to have in advance of that spin taking place. So no specific guidance on the particular quantification of the synergies at this time.

And I want to underscore the fact that we're going to continue to see progress on Baxter's top line and bottom line ex those synergies, because we continue to accumulate the cost improvements that we put in place. Also, margin improvement programs, new product launches, the turnaround of pharmaceuticals, and the great demand that we're having for our SIGMA Spectrum pump. So there are some really good catalyzers I would say, in place that will make ‘24 a better year than ‘23. But I want to make sure that you understand that we will have the dis-synergies. We're in process of putting them in place.

Thank you, Joe.

Thank you. Our next question comes from the line of Pito Chickering from Deutsche Bank. Your line is open.

Hey. Good morning, guys, and thanks for taking my questions. On the Novum IQ pump, you now have two competitors with the next-gen pumps in the market right now. Yet your pump sales remain pretty robust in the quarter. At what point do you worry about losing market share to the other pumps? And then on your pump approval, any updates there? Is it worth pulling the 510-K and refilling helps you with the process or any updates there?

On the current fusion market, we have really good demand, really, really good demand. We haven't lost 1% of market share at all. As a matter of fact, we gained market share. Our growth, our infusion hardware growth has increased in the mid-teens. And for next year, the demand is pretty solid for our product. Remember, our product has – SIGMA Spectrum has the right precision, the pump has the right precision, and it has what – it’s very well-liked in the marketplace. So we continue to get significant income interest from competitive accounts to our pump, okay. On the specifically Novum, I want to make sure that we continue to work with the FDA. We have given them all the information required. We submitted with a package. We also give them all the incremental changes that we've made to the product, and we are in continual and regular conversations with them during their review period. This is where we are with Novum. But I just want to let you know, we really want to get this pump approved. We're doing everything we can. But in the meantime, we have a very capable and really good pump out there. That continues to gain market share and has very good demand as you'll see this year, and you're going to see next year as well. So it's altogether a good situation for Baxter. Of course, we are working very hard to have the other pump approved. We want to have that approved.

Okay. And then, next question. Oil and diesel have been very volatile over the last few months and why aren't giving 2024 guidance? If oil and diesel stay in this range, can you help us quantify the headwind for 2024 as the costs roll through the balance sheet and on the P&L, and in any ways of how you can offset those costs? Thank you.

Yeah. We have put a significant amount of operational efficiencies in place, primarily in our logistics and transportation and supply group. We see the headwinds in parts of the business about the cost of energy, primarily fuel, but that has been more than offset by the programs that we put in place. So our initiatives are expected to, as I said, more than offset any increment impact from rising of oil and diesel and diesel prices.

Thank you.

Thank you.

Your next question comes from a line of Robbie Marcus from J.P. Morgan. Your line is open.

Great. Thanks for taking the questions and congrats on a nice quarter. Maybe to start, I know there's been a couple of questions on ‘24 that have been centered around margins, but I wanted to ask on the top line. At the Analyst Day, your long range plan was for 4% to 5% organic top line growth. The street's modeling 4% next year, coming off a year of around 2%. What's your confidence level in being able to reach your long range plan targets? Don't focus on that.

Robby, good morning. We expect, as I say, ex our kidney business, that our margin will be in line with the expectations, okay. Of the short term, and our objective for mid to long term for the company is 4% to 5% as we improve the WAMGR as well. But we have plans ex, to get back at a growth close to what it is today expected. So it is a good story there, as we have momentum in several different areas of the company with some product launches. As I said, one of the biggest headwinds that we had experienced in the past few years had been our pharmaceutical business that we were able to turn around with great launches. So not giving guidance in 2024, but our expectations is to be around the expectations of the market in terms of growth, and our mid to long term expectations is to be 4% to 5%.

Great, I appreciate that. And, I want to say it's really helpful to get the segment margins, thank you for that. But I want to ask on sort of the trends here. We got year-to-date, and third quarter, and as well as ‘22. How should we think about maybe some of the past few years and your expectations for margins in the segments here? And now with four segments and more ownership on the leadership within each, what are some of the examples of things they could do that weren't able to be done before to help improve margins on a segment basis? Thanks a lot.

Robby, we have a significant amount of programs in our manufacturing team, logistics team, also pricing initiatives, as well as new product launches. So it's a mixed volume and cost reduction story. We will be improving sequentially our margins. As you've seen, as we said, remember we're executing on everything that we said we're going to do. We are improving our margins. You're going to see that in the fourth quarter as we have guided, as well as you're going to see that in 2024. So our confidence in continuing to improve our margins. And once we have the business spun off, the remaining Baxter we'll have even further ability to continue to grow its margins, okay. So because it's all about mix and new products and also pricing. So our story is about the same, is the aspiration to 45% on the top and the bottom – top line I’m sorry. And the bottom line continued to improve sequentially and continue to find a ways of getting productivity improvement through volume, mix and pricing.

Yeah, and Robby, our plan right now, this third quarter, completing our verticalization and reporting out segment profitability was a big milestone for us, and we're extremely excited to be able to share that with you. And I think our long-term plan is when we get to year end and we're putting out information, we do plan to go back and provide supplemental information on history, to provide some better comparability as we've done in other situations in the past. But I think, the way to generally think about it, as you're looking at the overall directionality of where Baxter margins have trended from the first half of the year, as we're selling through some of our higher cost inventory to the second half of the year, pretty much across all of our segments, you're going to see sequential margin increases in the back half, contributing not just to the items I've pointed out before, but also to additional operating leverage just from higher sales in the back half of the year. So stay tuned and we will be providing you more of that information.

Very helpful. Thanks a lot.

Your next question comes from a line of Travis Steed from Bank of America Securities. Your line is open.

Hey Joe, thanks for taking the questions. I just wanted to follow up on something you said earlier in the call about on the renal spend pressure testing and evolving market conditions to maximize shareholder value. I assume, current market conditions, you're still okay with the Renal thing going forward given you're still talking about it, but maybe just talk about what's left of analysis, the pressure tests, the Renal spend and kind of what you meant by that comment.

Well, as I mentioned before, it's the same answer. We are very much into the preparations. We have the team in place. We have put all the things in place. The company is working very hard. It is a complex separation, primarily not from the point of view of sales and marketing and the company itself, but it's all the manufacturing and distribution of it. So we're working on that. We have put people in place. We always, always have the fiduciary responsibility and duty, as our Board has it as well, to continue to pressure test the related financials and including as a result of evolving market conditions in the interest of maximizing shareholder value to ensure that we proceed with that in mind. That is our number one responsibility when we do anything in Baxter. So yes, we're moving forward, but we are always making sure that every step is taken and being analyzed and checked.

And Travis, one thing I would just say, it's Joel. This is also an opportunity to get me up to speed on all this. Again, I think there's going to be very sound strategic rationale on this bid, and obviously the team is taking me through a lot of the financials and a lot of those things. So part of this is also helping me, bring me up to speed in terms of sort of all the financial implications that are involved, so just to add that to this. Thanks.

Helpful. Thanks for that clarification. And then on 2024, I guess it sounds like you're confident in accelerating growth kind of above this 1% to 2% that you're doing now, but not quite back to 4% to 5%. So is there any examples you can give on reasons we should believe in kind of a little bit better growth in 2024? I guess Novum would be one of those. Anything else that could really kind of point out that? Can you give us some confidence that ‘24 revenue growth can be above this kind of 1% to 2% that you're seeing right now?

Well, we're going to anniversary some headwinds that we had in HST, primarily in the CCS business is one of them. Then we have some good launches in our pharmaceutical business, and we have continued demand increase for our SIGMA Spectrum pump, not even taking into consideration Novum on this, okay. Just by what we currently have today, give us confidence in our growth next year; ex-Renal to be higher than what we have today across all the three segments; MBT, HST, and Pharma.

You know what Travis, why don't I just add a little context here? Because the 1% to 2% you're pointing out, remember, does have some of the Kidney Care impacts in it this year from some of those one-time payments we received last year. So that is kind of putting some pressure if you think about just how much Kidney Care represents of Baxter are contributing to that 1% to 2%. In addition, within our other segment, you'll see that down pretty significantly. So I think for the base Baxter business, this is what Joe was alluding to, you are seeing nice progression this year. Within the HST business, I think you're seeing some momentum within the frontline care. I think as we get to next year, within the CCS business, we'll see some of that momentum going into 2024. Now, with respect to Kidney Care in 2024, that's one of the businesses. We will anniversary some of those one-time payments, but we will have to continue to look at some of the other factors that impacted growth this year, including just sales within our China region that have been impacted by the government procurement initiatives, as well as just the rebasing following the pandemic last year.

Just underscoring that the growth is in the remain part of Baxter ex-Renal is steadily improving and our MPT business has been growing above market every quarter and continues to do well. So I want to make sure that you appreciate the momentum that we are embarking and we have shown with the third quarter results what we meant by that.

Great. Thanks a lot for that.

Thank you.

Your next question comes from the line of Joanne Wuensch from Citi. Your line is open.

Thank you so much and good morning and thank you for taking the questions. I have two. The first one is, when I take a look at medical products and therapies year-over-year, the margin was down about 190 basis points. And I think someone was heading towards this question earlier. I'm trying to figure out the trend in that and if we should look at that continuing to be pressured as we look into next year. And then my second question has to do with some of your GPO contracts and pricing and how we should think about restructuring or renegotiating those and the potential for taking higher price. Thank you.

So Joanne, I'll first take the MPT question. I would say, within this quarter, there was a little bit of mix coupled with some increased investments within MPT, but we should see sequential improvement within that business as well as we go into the fourth quarter, similar to what we will see with most of the businesses as well, so kind of following the general trend of Baxter. But this quarter on a year-over-year basis, if you look at it, just face differences within mix and some increased investments.

And I think adding to that, as Joe mentioned, we have a strong pump on the market right now and we're seeing mid-teens growth in some of the equipment sales that are coming through that business. So I think that is something that has helped us that we'll be continuing to focus on next year. Regarding the second question on pricing, there's some puts and takes here. We do have some of our GPO contracts coming up for renewal and we are committed to negotiating pricing that reflects current costs that have increased in recent years and is fair to both parties. We did get some temporary price increasing during the – in recent periods that's going to be rolling off, but shortly after that we'll be entering it into the negotiation stage. So stay tuned on that, but we are committed to focusing on pricing as one of our levers in the future.

Just closing on the GPO contract, we're very engaged, the two out of three being negotiated at the moment. They are for 2025. And as Brian said, we are looking at all the opportunities to compensate the company for the significant cost increase that we had experienced in 2022.

Thank you.

And your final question comes from the line of Danielle Antalffy from UBS. Your line is open.

Hey. Good morning, everyone. Thanks so much for taking the question. Joel, excited to meet you. You have a great team over there with Clare and Company, so very excited to work together. My question is around the new operating model and how to think about from a tangible perspective, how this changes the way Baxter invests in R&D. Should we be thinking about the real benefit of the operating model, more on the accountability and cost side or on the R&D side and elevating the TAM and WAMGR of the company over the next few years? I guess I'm trying to get an understanding of where the real benefit comes from this new operating model, and that's it for me. Thanks so much.

Thank you. It comes first from the accountability of each one of the segment Presidents, who are fully accountable for the profit and losses of their business, including all the allocations that got put on. As you saw, is a fully allocated P&L. So they make all the decisions on portfolio management within their spectrum of business. Also, all the decisions in investment research and development. So you look at HST. This year we've been investing with higher intensity in the HST to get products out faster. There is no two different parties to talk to. It all sits within the business. Also a great advantage is to have the manufacturing supply chain reporting into this business. Despite the fact we still have a coordination overall for the company, we do have this business, the plants and the heads of those plants in the business, and they are on the same page. And that drives quite a bit of the cost reductions, the optimization of product design, because it's all within the same group. Some are fungible. Some are not fungible. Some are qualitative improvements that we see by communication. The other is really communication when you have set growth targets for CAGR for the business, it's easier that way. There's no two different parties. We don't have a region of the world that will decide on growth versus a business line that goes across the globe, which is trying to negotiate those numbers. So it's a very simple conversation. It's very easy to do it, and we're starting to see the effect in the creation of our annual operating plan at the moment, is an easier and better process.

Thank you.

Thanks, everyone. Rob, this can conclude our call.

Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating.