Hello, and welcome to BD's Earnings Call for the Second Quarter of Fiscal 2022. At the request of BD, today's call is being recorded and will be available for replay through May 12, 2022, on BD's Investor Relations website at bd.com or by phone at 866-342-8591 for domestic calls and list the Area Code +1-203-518-9713 for international calls. The replay bridges are now dedicated, so you no longer need a conference ID to hear the replay. For today's call. All parties have been placed on a listen-only mode until the question-and-answer session. I will now turn the call over to BD.

Good morning, and welcome to BD's earnings call. I'm Francesca DeMartino, Senior Vice President and Head of Investor Relations. On behalf of the BD team, 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 2022. We also posted an earnings presentation that provides additional details on our performance. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's call are Tom Polen, BD's Chairman, Chief Executive Officer and President; and Chris DelOrefice, Executive Vice President and Chief Financial Officer. Tom will provide highlights of our performance and the continued execution of our BD2025 strategy. Chris will then provide a financial review and our updated outlook for fiscal 2022. The Q2 results, we'll be discussing today include the results of our former diabetes care business as a spin-off of embecta, that was completed on April 01, subsequent to quarter end. On April 14, an 8-K was filed to provide re-casted historical financial information reflecting the results of operations of our former diabetes care business as discontinued operations for the 2019, 2022 and 2021 fiscal years and the first quarter of fiscal 2022. On today's call, we'll give an updated outlook for fiscal '22 for both legacy BD, which includes our former diabetes care business and BD RemainCo. We anticipate recasted financial information for the second quarter of FY '22 will be available by the end of May. In the meantime, to assist you with FY '22 RemainCo models, we're providing estimated impacts of excluding our former diabetes care business from our Q2 results. We don’t expect the Q2 recated financial information to differ material from the estimated impact nor affect the updated outlook for FY…

Thanks, Francesca, and good morning, everyone and thank you for joining us. We're very pleased with our strong performance in Q2 with revenues of $5 billion and base revenue growth of over 10%. These results reflect the continued focused execution of our BD 2025 strategy and another quarter of consistent strong growth in our base business. We exceeded our revenue, margin and earnings goals while advancing our innovation pipeline and our tuck-in M&A strategy, and year-to-date, we generated $1.1 billion in operating cash flow. In addition, we successfully executed the spin of our diabetes care business on April 1, which is now a standalone and publicly traded company named Embecta. It trades on NASDAQ under the ticker EMBC. I'm very pleased with how our strategy is progressing and coming to life. Through our efforts to grow, simplify and empower our company, we are creating an agile and resilient organization that is well positioned to deliver strong performance. Our durable core reflects our leadership position in areas of healthcare that remain in high demand. These are the products and solutions that form the backbone of healthcare around the world and create a very stable business, that weather storms and uncertainty. Through the performance of our durable core and our cash flow initiatives, we are fuelling our growth strategy with investments in organic innovation and tuck-in M&A. The investments we are making are targeted toward higher growth spaces aligned to the irreversible forces that are transforming the future of global healthcare across smart connected care, a shift to alternative care settings and improving chronic disease outcomes. You are beginning to see the impacts of that shift in our growth. Through the simplified pillar of our BD 2025 strategy, we are reducing complexity and driving excellence across supply chain operations, which delivers efficiencies…

Thanks Tom. So echoing Tom's comments, our Q2 results demonstrate the strength of our business and the momentum of our strategy. Additionally, we remain committed to supporting our customers and their patients and have made investments in many areas, including inventory, transportation, portfolio, simplification, and innovation, so that we can continue to do our best to ensure continuity of delivering critical healthcare offerings. We are delivering strong performance while simultaneously managing the increasing macroeconomic pressures through our simplification and mitigation programs. This balanced approach is helping us make strong progress against both our short and longer term commitments. Turning to our revenue performance, we delivered $5 billion in revenue in the second quarter, comprised of $4.8 billion in base business revenues, which had strong growth of 10.2% or 9.6% organic, which excludes the impact of acquisitions. Our revenue performance is supported by our durable core portfolio and an increasing contribution from the transformative solutions, we are bringing to the market through our innovation pipeline and tuck-in acquisitions. Price contributed 180 basis points to growth in Q2. While this is well below inflationary levels, it is one of many factors that is enabling our investments to ensure we can continue to deliver our healthcare all offerings to our customers. COVID only testing revenues were $214 million, which is expected to decline from $474 million last year. BD's unique ability to continue to deliver strong performance during these uncertain times is reflected in the performance across our segments with medical growing 6.4%, life sciences base revenues growing 17.1% and interventional growing 11.2%. Total company base business growth was also strong regionally with double-digit growth in the US and Europe, along with mid-single digit growth in Latin America, which helped to offset lower the normal mid-single digit growth in China, which was impacted…

[Operator instructions] We will take our first question from Vijay Kumar with Evercore ISI. Your line is now active.

Hey guys. Congrats in a good print here and thanks for taking my question. My first one maybe on the updated guidance here. We did close to 9% organic for first half and I'm looking at the legacy BD [rate] (ph). The midpoint of 7.25%, which implies mid-single 5.5-ish for the back half. I just want to make sure this is a comp issue or is there any timing impact first half versus the second half? Any change in first half or second half organic cadence on an underlying basis?

I appreciate the question. It's Chris. Hope you're well. Your math is correct. So again, our first half growth extremely strong here at about 9% on a year-to-date basis. Obviously we had benefited from some one-time items, but we also overcome some headwinds in that period too. I think when we talked last quarter and we would frame this quarter as probably from call it underlying adjusting for some of those puts and takes around seven-ish percent growth, the back half, you're right, 5.5% growth. I think there's a couple things to contemplate there. Of course, China, there will be a pretty significant impact in Q3 as they recover. We expect that recovery -- the recovery started in May. We expect that to ramp through June and we expect to make the majority of that up in the back half. Additionally, we do have some comps as you think of the back half of the year in particular our life sciences business. We did have our Triplex launch there. So if you look at Q4 that was a peak performance period for that business. So there's a couple kind of comps along with the China situation that will cycle through Q3 into Q4 to consider there in the back half, but 5.5% growth is consistent with our long-term outlook of 5.5-plus on top of a front half of 9%. So all in a really strong year. I think the other thing I would point to, if you look at the quarter performance from a top line standpoint, we actually increased our organic guide more than the beep on the base business in Q2. So it actually implies stronger second half performance. So we actually did strengthen our second half outlook, despite some of those headwinds that I noted. So hopefully that helps.

Yeah. That was helpful for us. And maybe one on the longer-term LRP guidance that you laid out at the Analyst Day. Appreciate all the details in the earning deck and making comparison easier. The longer term 5.5 on top $400 plus and margins in double-ish earnings. Are there any cadence issues when we think Chris for fiscal '23, and I'm not asking for a specific '23 guidance, I know it's early for that, but just thinking about any moving pieces here, I think FX, COVID diagnostic testing drop off, comes to my mind. So when you think about the base of $11.15 to $11.30 in fiscal '22, should we still expect that LRP to be intact for fiscal '23 over the base?

Yeah, it's a great question. Obviously, to your point, there's a lot of moving parts and one, if you remember our Investor Day guide, we actually stripped out testing. We see testing as something that'll move more to kind of the endemic opportunity here that gets more embedded in the base. So we need to see how that plays out this year. Obviously I think an important caveat just to see how COVID dynamics, the macro-inflationary environment plays out as well. So I think some big considerations, but what I would point you to over the long term horizon, definitely over the long term horizon, obviously there's can be fluctuations year-to-year, but you're seeing it play out this year. One definitely the enhanced growth profile, the five-five plus we're well north of that this year, given our strong focus on innovation and R&D, the benefit we're getting from tuck in acquisitions. As a matter of fact, just as a reminder, you'll see that we did provide the one-time lift associated with the tuck-in acquisitions, which was roughly 60 basis points. That was never part of our five, five plus. What was part of our five, five plus was taking those acquisitions and growing them. These are profitable double-digit growth opportunities. They're actually enhancing our growth profile on a year-to-date basis by about 30 basis points above that 60 basis points. So true organic growth once we've cycled over the anniversary. So I think we're going to continue to focus on our growth strategy. We remain confident in the five, five plus the spin of diabetes certainly enhances that confidence. You did see a 50 basis point lift here, just in this year alone, as a result of that. As we've talked about, that was a drag on growth. As you…

That's helpful, Chris. And thanks for taking my questions.

We'll take our next question from Travis Steed with Bank of America. Your line is now open.

Hi, thanks for taking the question and congrats on a great quarter. Chris, I'd just love to get a little bit more color on some of the operating margin bridge. I see you have 19.6% as the base for FY '21, 250 basis points on top of that gets you to kind of the low 22% range. When I'm thinking about '23, it sounds like you're comfortable somewhere around 50 basis points to 75 basis points of operating margin expansion in '23. Just love to see if that's how we should be thinking about it, which gets me to like a low $12 range for earning next year. If you have any early comments to that.

Yeah, no, thanks. I appreciate the question. Look, again, I think as it relates to '23 it's a little premature to give specifics at this stage. I think certainly though with, call it my 200 basis points delivered this year, 250 basis points, if you adjust for Embecta. And with -- to get to what I said by the end of 2025, to get back to the 25% operating margin legacy, you're going to expect kind of a relatively ratable call it glide path to get there. The only thing I would point out is I do think '23 will be a transition period, because you're still going to have the structural impact of inflation that's been ongoing, that'll carry over into '23. So I do view that a little bit as a transition year and you'll get more lift as the environment normalizes over that time is how I would probably think of a ramp curve if that makes sense.

Yeah, it does. Thank you for that. I appreciate the extra color. And then when we look at some of the incremental inflation impacts that that you're offsetting pretty much essentially all the way offsetting, love to get a little bit more color on some of the pressures that you've seen and also when you think about pricing, it was 1.1% last quarter, 1.8% this quarter. Is that how we should be thinking about it going forward, kind of the high 1% to 2% range, into '23 as well?

Hey Travis, this is Tom and good morning, I'll start in and turn it over to Chris. I think in terms of what we're seeing on the inflation side, we saw earlier on quite sometime early last year, we recognized obviously the impacts of inflation as well as supply chain challenges. And we made a very clear statement that while there is going to be no company that would -- was going to avoid inflation and supply chain challenges, that we were very committed to looking to be the best in our industry at navigating those. And that's been the mindset that our entire team has approached this environment over the last two years. And I think you can see the commitment and actions of our team coming through in our performance from as well. And so I've got our team empowered and focused on executing our strategy. And as part of that, they're navigating this complex environment and we're pulling a number of levers to overcome what are shipping chips, resin, just general raw material and inflation points that we see and those levers that the teams are pulling range from continuous improvement being notably increased in our plants in this environment. We're taking additional cost containment actions across all areas of the business. We're driving an acceleration of our portfolio optimization and product mix. That's always been part of our recode simplification initiative. We saw this as an opportunity, particularly with the strong revenue growth that we're seeing to accelerate, exiting lower margin products and products that are adding complexity in our plants, that when we move those out, we can actually run our plants more efficiently and get out more of the products that our customers need most, which is really important in this environment. And then lastly, we looked at as a last resort. We are taking pricing actions as well and as you can see, we're able to to get those, which are just a portion of the overall inflationary costs that people are seeing in this environment. So all of that's being done to ensure that we're positioned to best serve our customers and our patients and really proud of the team's work there, Chris, any additional comments?

I think the only build is just to reinforce I think the strong underlying growth profile is really creating opportunities to drive some of that simplification. For example, the strategic skew rationalization efforts, right? We're absorbing that within our growth rate. It unlocks value in the form of margin, drives enhanced mix, new product innovation launches is a way that will more look to create value in the marketplace and get value back for that versus thinking of things just as price. It's really a bigger picture though. The price is actually extremely modest relative to the level of inflation but thanks.

Thank you.

We will take our next question from Robbie Marcus with JPMorgan. Your line is open.

Oh, great. Thanks for taking the question and congrats on a nice quarter. Sorry to kind of follow up here, but maybe if I, I focus in on the second half implied guide here, it looks like there's something like $0.30 benefit from FX. And I was wondering if we're going to start to see, it sounds like, you're adding more into inventories. I would imagine it's at a slightly higher cost than previously. If we're going to start to see the impact of that flow through in fiscal second half, or if that's more a '23 impact. I'm just really trying to get to sort of the normalized earnings power going forward. Thanks.

I would just say, maybe I'll make a comment, Robbie, this is Tom good morning. On the inventory situation, that's a very strategic investment that we're making to increase inventory on what I would describe a scarce raw materials. So think about raw materials like semiconductors and chips or other components that are difficult to get. You can see companies across the industry running into challenges on those. We have a very systematic approach to secure those assets and we'll take the higher impact in our inventory to be able to best serve our customers. And that's a commitment that we make. I don't think that -- we'll end up taking that down as situations stabilize over time. So we don't see that as a long term, we've been very, very focused on our cash flow as, you know, moving that from 75% free cash flow conversion to 90% as an ongoing 90% plus as an ongoing target. We're not changing that at all. And we continue to have a very strong focus on inventory. We just see this as a transient and strategic investment that's paying off for us and it's paying off for our customers.

Yeah. Thanks Robbie, for the question, let me let me, let me just anchor on kind of the full year and then I'll provide you some set. I can second half context, and of course as always we can engage further in the discussion. But in terms of the guide adjustment, the best way to think of it is sort of the a 100 basis points of organic growth. We actually increased our top line by about $180 million at the midpoint. If you look at the EPS walk that we had provided, we're dropping about just under $0.13 through, which is basically at a BD margin drop through with that raise. So nothing's changed. We've actually reconfirmed our margin profile as a result, we've taken the guide up for the, the stronger growth profile above actually what was delivered in Q2. So from a full year standpoint everything remains intact. There there's no currency really just drops through it at a margin rate. The margin obviously fluctuates based on currency mix dynamics and/or margin mix in those respective markets. I don't think there's anything unexpected there. As a matter of fact, the currency that we talked about that was a carryover benefit into the year has played out as expected. So I don't think there's anything there to contemplate and then I think as you think of second half margins what you can expect to see there will be a small sequential decline on Op margin from Q2 to Q3 is really primarily driven by the fact that last year Q2 to Q3, you had nearly a 250 basis point decline from Q2 to Q3, and it was our low watermark, and we're actually going to be increasing the improvement in operating margin in the quarter year-over-year, versus what we did this quarter. We did 180 basis points this quarter. We will have a step increase there. So you'll see it relatively stable, but a small dropdown accounting for that low point base that we're jumping off of from last year. And then we'll continue to increase from there is sort of the glide as you think of the second half. But again, so if I tie this into your question about going forward, I think the important way to think about this is on track for the 200 basis point of margin improvement for the full year 250 basis points adjusted when you do the pro forma for embecta, which was half of what we said as part of our full year Investor Day commitment. Quite a big progression in one year, especially in phase of the inflationary pressures, which should set us up nicely over the long term.

Great. And maybe just sneak in two very quick questions here, one what was the size of the combo flu COVID 19 testing revenues in quarter, and should we assume going forward that there's no revenue from the cannula agreement with embecta, or was this more just a timing issue? Thanks.

Yeah, I can, I can take the second one maybe holistically. There will be, as, as noted in some of the public documents there will be various third party agree between Veta and BD. There will be a small contribution to top line, which would contemplate more supply agreements. We highlighted that as part of the 50 basis points lift. There was a small contribution. There there'll be a full year benefit next year. Obviously, but again, it was, it was not substantive. We had the TSA we said it was worth $35 million this year. It won't quite double next year because what's typical in the spin. Really the spirit of the TSA is to support and beta standing up as a standalone public company. And it gives us an opportunity to support them. We leverage our, our stranded costs to do that. So basically it keeps us whole from a supporting BECTA stranded cost standpoint. And then we, we shed those down as the TSA goes down in parallel. So there's no impact on a net basis from an income. So you should expect the 35 to lift next year, but not quite double,

Maybe just we could turn it over to Dave's answer, not just the, the COVID combo test question, but maybe just give some overall color and what was a, a strong momentum in life sciences across both IDs and, and significant demand we're seeing in BDB as well. So, Dave?

Yeah. Thank, thank you Tom. Robbie, thanks for the question. I mean, just pulling back a little bit, I mean, just want to recognize the life science segment colleagues around the world for just a tremendous quarter. And that's two successive quarters now, 17% growth excluding testing. If I talk about the test, just the overall testing dynamics at that highest level, so, you remember that we have the COVID testing piece, which is like the single antigen and molecular tests. And you hear Chris talk about, that was 214 million for us in the quarter 400 million year to date. I think you'll recall that we'd also said that, we were biasing our sort of all COVID performance to the, to the first half of the year because we are seeing Moderate some moderation in testing. We expect that moderation to continue through the balance of the year. So that overall testing dynamics are playing out with what we said. I mean, we're very close to 90% of the full year testing expectation for the combo. This is obviously the flu and COVID assay both on our max and our veal platforms. We've not given that number specifically because that's, that's in a mix of a lot of puts and takes in the overall base business. There was growth there as, as Chris had said, if you think about that as a, as a compared to the prior to the same period prior year, that's where we saw some of the growth come from. We do expect from a strategy perspective going forward, we do see value in the overall COVID combo portfolio. As we think Colby will move to more of an endemic situation. It's just too early to call out as to what that number would be for the, for the full year, even getting into early Q1 '23 when nobody knows what the dynamics of the flu are going to be right now. Yeah.

Thanks David and Robbie, maybe just a couple other small things to just give you a little color in terms of what would've comprised the, the revenue there, obviously there was almost no flu season last year, so you kind of got back to flu season. Additionally obviously the combo has a slightly higher value proposition. You benefited from that. Additionally there was a little bit of stocking giving. It was, it was new and you did have a lot of testing demand in that period where it was hard to get access to tests. So those were sort of the factors that, that played into where we were. But again, adjusting for that really strong underlying, especially in the back of still having back water in, in certain areas, both in life sciences and total.

And Robbie, this is Tom, as, as Dave said, I think we've said from the moment we launched the test that the combo test will be the go to kind of replacement for the base flu test. And so we, we do think flu testing, which was as, as Chris mentioned, was base was completely absent last year that this year we did see flu back as something that was causing infections, we expect that that would continue going forward. Of course, the rate at which that, and the size of that market every year varies each year. But we do believe that that combo test now back in our, our revenue will continue to be persistent as the go-to product for flu test.

Yeah. And Rob, we just one just on strategy piece, just one more piece, there would be, we're very committed to just looking at what, what are the unmet needs for, our patients around the world on a go forward basis. So we, we are committed to, developing more combo tests and we talk to the analyst day around the potential for an at home combo test, using the, the platform that we acquired in, in December. So the innovation piece of the strategy still continues and, and obviously as timelines firm up on that, we'll commune as it gets better though.

[Operator Instructions] And we'll take our next question from Larry Biegelsen with Wells Fargo.

Good morning guys. Thanks for taking the question and congrats on nice quarter here. Tom, on Alaris any update on the timing is it is fiscal 2023, reasonable assumption for, for when that's back in the us and at the investor last year, you talked about a new pump launching outside the us in fiscal 2022, I believe. Sorry if I'm wrong on the date. I can't remember if it was '22 or three, but any update on that? Thank you.

Yeah. Thank you, Larry, for the question. We've mentioned on several occasions that getting Alaris back on the mark, it is our number one priority. And while we're not providing any updates on, on timing, as, as we had had shared before, we are confident in the resources that we're investing in our submission and the team and the leadership that's tasked to make that happen. And so, we, we still think it's not prudent to predict the timeline given just how inherently complex these submissions are. And particularly that, that certainly applies to our filing. So as we had said, we don't expect clearance in '22, therefore any of our guidance doesn't factor that in, into our numbers for 20 gone what's in medical necessity and we'll continue to provide an update as, as that progresses, but we continue to remain focused on making sure that the FDA has the proper information for us to get clearance on that. And that will remain our focus in terms of the new pump for Europe. No, we remain very excited on that product and it is launching later this, later this year. So absolutely, Yeah.

And then thank you. Thank you for that just quickly, the supply constraint in Biosciences. Can you quantify that and, were there other supply constraints that hurt you this quarter? Thanks for taking the questions.

Yeah. Larry, let me make a, maybe a comment overall on supply constraints and then ask Dave to comment on, on Biosciences. We certainly saw record backlogs across the company. So demand was even much higher than what you saw as post in our revenue. And that's across every one of the segments. We saw demand in a number of categories, outstrip our ability to supply, even though we were producing at record levels. And, that's part of what gives us confidence as we look ahead you, we are working each and every day to, to get more out of our plants. We certainly see shortages in longer transit times for raw materials. We see shortages from certain suppliers. We work very aggressively with suppliers to help them secure raw materials. We even go so far as to put our own folks to help run supplier factories in certain cases, but we take, we take that part, those partnerships very seriously to optimize getting product to our customers, but we did end with a, a record backlog across each of the segments. And specifically to Biosciences turn to Dave. Yeah.

Larry, thanks for the question. So we, we've got, I mean, when you look at the backlog overall, we, we've not quantified it in terms of, the absolute number of instruments. This is, this is an instrument topic for us. It primarily sort of relates to the clinical side of the business. But as Chris had said in his in remarks, we anticipate with the supply with some of the supply securements that we've done the procurement leverage that we've been able to get. We expect this to clear up over the course of the year. So it just becomes a timing topic for us in the year. And the team is very confident about that. What we are doing to sort of mitigate any short term is we're obviously working on an allocation strategy. the research instrument base is, is still very strong. So we're prioritizing what we have to get everything out. And then we're just driving hard and aggressive on procurements Of those chips and those electronic components. We have a lot of the instruments sort of ready, built, ready to go. So as those things come in, we'll just execute and chip in the back half of the year.

We'll take our next question from Rick Wise with Stifel your line is now open.

Hi Tom. Hi, Chris. Let's start off perhaps with BD interventional, we haven't had a chance to dive into that strong quarter. Clearly comps helped a couple things. Maybe you could comment on and, and more expansively. I was a little surprised by that China double digits help us understand, what's happening there and how sustainable that performance is. And curious in general, are you all seeing the electric procedure volume recovery continue into April and maybe last on interventional help us think about the key drivers beyond recovery, beyond comps as we look at not just the next quarter, but the next sort of year ahead. Is, is it product, is it execution? Is it pipeline, help us think through the, the drivers there? Thank you.

Go ahead, Simon.

Good morning, Rick. Listen, fir firstly again, just reflection on the quarter really solid quarter across all, all three of our business units and, and, the soft compare in, in some areas certainly helped helped us, but I'm still, very proud of the team for executing across are broad and complex and clinically relevant portfolio. And then you might recall from, from analyst day all the plans that we had and please to say that all, all those, you know programs that we that we shared with the broad community at analyst day, that they, they are all on track now specifically about perform in, in the quarter in China, in particular the peripheral inter intervention business is extremely strong in China. And you, you you'll have heard us say in the past that BDI in China has doubled in, in revenue since since bar was acquired by BDI. And that has been led by, by peripheral intervention and the oncology business in particular. We, we had some background challenges with Encore probes over the past several months, and that's, that's begun to alleviate, we had a, a backlog in, in sterilization and that's begun to alleviate and that has certainly helped drive our business forward. But even in, in ESKD and [indiscernible] in China they, they performed a extra ordinary well in the last quarter as they do as they do very, very frequently and that performance NPI was also reflected in surgery. And, and to a lesser extent in, in UCC as well now, moving forward our, our outlook for the future, as, as we're, we're focused on, on innovation and trying to out execute the competition. And, I've heard Tom mention in his, in his prepared remarks about the relaunch of the, of Ben Novo. So we've…

Great. if I could follow up Tom you highlight, and I love your language, you're investing in three irreversible forces. That sounds great. So my question is just reflecting on Chris's commentary about your cash position and your priorities. I was a little surprised that you're going to deploy the 2 billion more towards share repo as opposed to M&A clearly it's going so well. So just wondering if you could put all that in perspective, help us think about your priorities and maybe on the M&A side. Okay. Is it AI informatics, robotics, new care? What's top of mind for you. Thank you.

Sure. Yeah. Thank you for the question, Rick, and, and I'll, I'll start off and then I'll turn it to Chris. So, as we had described that at, at analyst day, we've really rethought how we view our portfolio and our approach to growth. And we, are looking at how we invest in our, in our large essential to healthcare durable core portfolio and fast growing transformative solutions. And those three areas that you mentioned, smart, connected care, new care settings, chronic disease outcomes. And we're, we're really pleased with the performance of both. Hopefully there's something I said in the in my prepared remarks that, that I think is an important takeaway for everyone, which is our for we've had a focus over the last several years of increasing BDS R&D execution capabilities. And you may have heard me say that we reached a peak performance past actually year to date where over 90% on time milestone deliveries and on time launches, that's absolutely top quartile in the industry and something that we're really proud of, the momentum that we've had there. If you look at the pipeline that we shared at analyst day as well, all very much on track, and you're seeing a us announce those executions. And as we look at milestones for those things also very much on track, which is giving us a lot of confidence as we look out over the LRP and the years ahead to your point, we've been, we're really pleased with how we're executing that tuck and M&A strategy, right? We've got very strong core growth. We're staying very disciplined to making sure that we're creating value for our shareholders through the, in the acquisitions that we're doing. We don't have to go out and buy growth. We've got strong growth in our core, and we're adding value on top of that with 80% of those tuck and M&A focused in those high growth transformative solutionaries. And you heard Chris describe that. So we're gonna continue there. We have a very strong, robust pipeline. We think that actually this men, if anything, is creating incremental opportunities for us as we look ahead, and so we're gonna stay active and disciplined in there, but we do see the opportunity for that to continue to shift BDS growth rate upward. As we look ahead over the next coming years in terms of our decision and how we're using the cash from the, the spin. Let me turn it over to Chris on that.

Yeah. Thanks, Tom. Yeah. Rick, thanks for the question. So first of all, the, the tax free nature of the spin requires you to think about allocating between either debt and or share purchase. What we actually outlined in the script was we're going to prioritize a billion dollars of debt. Paydown, that's very consistent actually with our capital allocation strategy, maintaining a strong net leverage ratio, which gives us a lot of financial flex to actually support the strategy that, that Tom just outlined the, the balance of about 400 million plus will be opportunistic about. We do have a bias for that smaller remaining portion towards Sherry purchase, but of course will be dependent on market conditions and, and other strategic considerations. And then just to double down a little bit on, so that that's discreet and separate decision that, that we're taking associated with the spin beyond that our capital allocation strategy remains exactly intact as, as Tom articulated the most important thing. Actually that I think he shared is we're doing all this from a position of strength, underlying strength. It allows us to be extremely disciplined and identify S that have strong margin profile, strong growth profiles strategically fit against those three irreversible forces drive transformative solutions. So we will look to continue to drive strong cash flow with, by the way, higher R&D investments. We of course have continued to prioritize our, our dividend which actually the payout ratio know increased post spin another value to BD shareholders. And then we expected about one and a half to 2 billion of excess cash after doing all of those things where tuck in M&A would continue to absolutely be our, our priority. But importantly, we did agree that we would make sure at minimum we would do repurchases that avoid any dilution from share base comp. So that's the capital allocation strategy that we're, we're executing now. Thanks.

We have no further questions on the line at this time. I will turn the program back over to Tom Polen for any additional or closing remarks.

Okay. Thank you operator. And thank you today for, for joining our call and for all of the questions. I hope everyone took away a couple key points from our discussion today. BD is very well positioned to continue to deliver value in uncertain times. And we're seeing that driven by the execution of our BD 2025 strategy, which has led by our innovation driven growth strategy. This is we had strong base business performance across all three segments. We're continuing execution, delivering enhanced margin profile, amidst macroeconomic pressures. We've now successfully completed the spinoff of our diabetes care business as part of our simplification strategy. And today we further increased revenue and EPS guidance on strong results. Despite continued market uncertainty. As we wrap up today's call, I want to just take a moment to thank the 75,000 members of the BD team and those listening today who are working around the clock to ensure production and availability of essential products for patients and providers and who are going above and beyond to support our customers. I want to thank our teams who are working to bring new innovations to market that improve outcomes for patients and providers, and that are reshaping the future of healthcare through both our durable core and transformative solutions. And I want to thank our teams who are working to make BD stronger by simplifying our network, our portfolio, and our processes, as I've said many times while every company is navigating macro challenges, we're focused on being the best in our industry at doing so and to approach every challenge and every opportunity with a growth mindset. And we're doing exactly that. So thank all of you for attending today and be well,

Thank you. This does conclude today's audio webcast. Please disconnect your lines at this time and have a wonderful day.