Hello, and welcome to BD's Third Fiscal Quarter 2021 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through August 12, 2021 on the Investors' page of bd.com website, or by phone at 855-859-2056 for domestic calls and (404)537-3406 for international calls using the conformation number 9447085. I would like to inform all parties that your lines have been placed in a listen-only mode until the question and answer segment. Beginning today's call is Ms. Kristen Stewart, Senior Vice President of Strategy and Investor Relations. Ms. Stewart, you may begin.

Hi. Good morning, everybody. And thank you for joining us. This call is being made available via webcast at bd.com. This morning, BD released its results for the third quarter of Fiscal 2021. You can find the press release along with the accompanying presentation on the Investor Relations website at investors.bd.com. Leading this morning's call is Tom Polen, BD's Chairman, Chief Executive Officer, and President, as well as Chris Reidy, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer. Following the prepared remarks, Tom and Chris will be joining. For Q&A by our 3 segment presidents. Alberto Mas, President of the Medical Segment, Simon Campion, President of interventional segments. and Dave Hickey, President of the Life Sciences segment. During the call, we will be making forward-looking statements, and it is possible actual results could differ from our expectations. Risks, uncertainties, and other factors that could cause such differences can be found in our earnings release and in our SEC filings, including our 2020 Form 10 and subsequent form 10-Q. We will also discuss non-GAAP financial measures regarding our performance. Reconciliations to GAAP measures that include the details of purchase accounting, and other adjustments, can be found in our earnings release and its related financial schedules. They are also in the appendix of the Investor Relations presentation slides available on the BD.com website. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant period. Revenue present changes are on an FX-neutral basis, unless otherwise noted. When we refer to the base revenues, we're referring to our total revenues less our COVID diagnostic testing revenues, which include COVID-related revenues from Veritor, BD MAX, and Swabs. When we refer to base margins, we are adjusting for estimated COVID diagnostic testing profitability and the related profit we have reinvested back into our business. When we refer to any given peer group referring to the fiscal period, unless we note it as a calendar period. Finally, when we referred to NewCo during today's call we're referring to the planned spin out of our Diabetes Care business into an independently public traded Company following the effective trade date of the spin, which [Indiscernibl4e] announced on the second-quarter earnings call. RemainCo refers to BD post-separation. As a reminder, this transaction is subject to market regulatory, and other conditions, including final approval by BD's Board of Directors and the effectiveness of the Form 10 registration statement that will be filed with the SEC. With that, I'm very pleased to turn it over to Tom. Tom?

Thank you, Kristen. Good morning, everyone, and thank you for joining us. On today's call, I will provide highlights of the quarter and discuss the continued strong progress we have made on our BD 2025 strategy. I'll then turn it over to Chris for the financial review and outlook. After our prepared remarks, Chris and I will then open the call up for Q&A. But first, I want to comment on the other announcement we made this morning regarding Chris' intention to retire from BD, and join the Board of our Diabetes spin-off. On behalf of the Board of Directors, the leadership team, and the Company, I want to express my gratitude to Chris for his leadership and service to BD. I'm confident the CFO transition ahead will be seamless, and his leadership and experience will make him an excellent Director for NewCo's board. Now let's jump into our results. We were very pleased with our third-quarter performance, powered by strong growth and momentum in our base business across all three segments. Revenues totaled $4.9 billion and our adjusted EPS was $2.74, both ahead of our expectations. Total revenues were up 26.9% on a reported basis, and up 22% on a currency-neutral basis. Results included COVID diagnostic testing revenues of $300 million, which contributed 4.8% to growth. Excluding COVID testing revenues, our base business revenues were up 17.6%, better than we expected across most business units. The strong growth reflected the anniversary of the initial COVID wave and the temporary halting of elective procedures and its impact on the medical device utilization in the year-ago quarter. But Q3's result also reflects the continuing momentum driven by the successful execution of our BD 2025 strategy. Excluding COVID diagnostic revenues, base business revenues in Q3 Fiscal '21, increased 3.9% relative to our…

Thanks, Tom. I'm also very pleased with our overall performance in the quarter, particularly with the base business, which showed continued strong momentum. Third-quarter revenues of $4.9 billion increased 26.9% on a reported basis and 22% on a currency-neutral basis, and we're ahead of our expectations. Our current quarter results also include 300 million in COVID diagnostic testing revenues compared to 98 million in the prior-year period. Excluding COVID diagnostic revenues in both periods our base business revenues increased 17.6%. Our base business reflects continued strong performance as the market continues to recover from the COVID pandemic, the impact from which was most acute in Q3 of last year. The BD Medical segment revenues totaled 2.4 billion and were up 7.7% versus the prior year. MDS revenues increased 24%, reflecting a strong recovery in the U.S., led by strong growth in catheters and vascular care devices. Additionally, worldwide revenues included 18 million from COVID vaccination devices. In MMS, the double-digit increase in our dispensing revenues was more than offset by the expected declines in our Infusion Solutions. As you may recall, when the pandemic started, we saw a higher level of demand for infusion pumps and sets globally. Diabetes Care benefited from an easy comparison to the prior year, the timing of sales, and slightly better than expected market demand. Pharm Systems continued to deliver strong growth with revenues up 12% driven by demand for our prefilled devices. BD Life Sciences revenues totaled $1.4 billion and were up 43%. This included the 300 million in COVID diagnostic testing revenues, 212 related to our BD Veritor system, with the remaining 88 million from BD MAX collection, transport, and swabs. Year-to-date COVID diagnostic testing revenues were over 1.6 billion. Despite lower average selling prices driven in part by geographic mix, we are…

Thank you. Chris and Kristen, I think it's now we should open up the Operator -- open up the line to Q&A.

Great. The floor is now open for questions. [Operator instructions] Your first question comes from the line of Bob Hopkins with Bank of America.

Great, thank you and good morning. Can you hear me okay?

We can, Bob. Good morning.

Great. Great. Good morning. And Chris, congratulations on your decision.

Thank you very much.

Yeah. Absolutely. So I guess the first question I would have, and thank you for all the detail today in the early thoughts on 2022. It looks like you're suggesting operating margins in 20 -- next year will -- might be in the 22% to 23% kind of range. That's still multiple hundreds of basis points below where you were in fiscal '19. So can you just help us understand the difference between 2019, and this new guidance for 2022 and why you're those couple hundred basis points below that level?

Sure.

I'll let that Chris respond.

Sure, Bob. Thank you for your comments too. Yeah. We -- as we think about margins, we do see the opportunity to get back to those 2019 margins over time, and we'll see that as Alaris comes back into the market, and as recode and our normal continuous improvement occur, and we'll see that improvement also as we grow mid-single-digits and we provide leverage that drops to the bottom line and that will also increase. There's a number of things that have pushed those margins down. We've talked about those in the past. You have Alaris, the ship hold. Obviously, there's an impact, but that will come back. We also have the drop in the China volume-based procurement is an impact, and obviously we're seeing some pressure from inflation, et cetera, that have run through. So, they have come down, but the model is intact, and we're very confident that we can drive those margins back to the '19 levels in the next -- in the near term as Alaris comes back and as we get the continuous improvement from Recode.

Okay. Just to make sure I'm hearing it. So, the primary difference between those 2 is you guys see it as, really, those 3 things: Alaris, the China price cut, and then inflation? Just want to make sure we have a sense for all the moving pieces. Okay. That's it. Okay, and then in terms of the time line to get back to those levels, is that something that's a multiyear process or do you think that that can happen within a year or two? And then I'll get back in queue. Thank you.

Yes. So, a couple of things will help us improve. And the other thing that I should mention is there is some FX drag on margins as well, and that's been flowing through. But as we think about improvements going forward, we'll see improvements from utilization as utilization comes back. And so that will help -- will also comparatively to the margins that we have this year. We’ll see continuous improvement, Recode kicking in. We'll see less one-time items. We took in a number of one-time items this year, the spending in the Veritor proceeds, et cetera, so those come back. So you would expect to see us getting back to those kind of margins as Alaris kicks in, in '23, and we see that impact and as we make continuous improvement in '22 and '23.

Okay. Thank you.

Your next question comes from the line of Vijay Kumar with Evercore ISI.

Good morning, Vijay.

Morning, Tom. Thanks for taking my question. Chris, all the best to you.

Thank you, sir.

I hope you enjoy a good rest. –Tom, maybe starting with the margins back on Bob's question. It's -- one way of looking at it is your pre-pandemic gross margins were 56%. I think your base for the fiscal '21 is 53.5 to 54. Walk through the delta about 70 bps is -- seems to be inflationary costs, 70 bps. FX, you do have these inventory charges related to COVID diagnostics and Alaris for moving parts. I guess my question is, when do inflationory costs abate? Do we have to annaulize? Is that a mid of next year? Should FX still be a drag next year, and when you think about COVID inventory charges, are we done with that in Q4 or is that going to be a drag in fiscal '22?

Hey, Vijay, let me -- I'll take a little bit of that question and, again, let Chris comment further on the margin details. When it comes to just the inflationary question that you had, certainly I think we felt the most significant impact of inflation already, and we have a good view of where that's going to be in '22 as we've rolled up our costs. As you know, it's been an unprecedented period of time there as you look at everything from the cost of resins to electronic components and shipping. And shipping is up 4x to move products, let's say from Asia or Europe to the U.S. or vice versa. We are also being very proactive in -- we're not looking to absorb all of those increases in raw material costs over time. We are beginning to pass on some of those. We've raised our shipping rates for customers, and we are passing on price increases. Of course, as you know, we do have long-term contracts and tenders around the world, and so that's not something that we can pass through with those price increases immediately, but we do have a very active program to share those increases. We have to share those increases with customers that will not happen overnight. I’d just share that will also be something that will have an impact as we look forward. We're not going to absorb all of those raw material costs just within BD. Chris, other comments on margin?

Sure. Yeah, I think it would be helpful to look at the flow from third quarter to the fourth quarter. We do expect margins to improve. I think we said that our margins would be 53 to 53.5. That's up a full point from the Q3 margins, and that's coming from improved utilization combined with some of our continuous improvement efforts. We'll also have less one-time airfreight that we saw in the back half of '21, and we will have some pricing actions as well. We do expect it to improve operating margins more than the normal 50 basis points relative to that '21 to '22, and that again comes from utilization. As that improves next year, there's less impact from FX. We have seen FX flowing through our inventory, and so you'll see that abate going forward. And then, we see our continuous improvement items offsetting any continued flow-through of inflationary pricing. When we look at the impact on our raw materials, resins as you know, is a big piece of that. Resins is a combination of some inflationary pressure, but it's also a function of other things; supply and demand in the oil market. And we took a big hit on that in '21, and we would expect that to abate somewhat, and that's something that we're watching very closely as we think about giving guidance in '22.

Got you. And maybe Tom, [Indiscernible] more on the Q4 revenue guidance and some of the comments you made on reinvestments. The Q4, it looks like 3Q, your base grew 4% for pre-pandemic 3Q, 19 levels. Q4, I'm not sure if I'm doing the Math correct, but I'm getting to a 2% slight B-cell versus 3Q. Is that just conservatism, and related to that -- the reinvestments that we are making should we expect any new products looks through in fiscal '22? Thank you.

Yes. It was a little bit difficult to hear what you said there, Vijay on the Q4 topic, I'll let Chris comment on that. But as we've said in the past, we do expect that -- and we'll share a lot more about this on our Investor Day in November, which obviously we hope to see you there -- is we expect the impact of our investments of the COVID profit reinvestments to begin having an impact in the back half of next -- towards the tail end of next year. And we'll talk about what those specific programs are. Some are for short-term R&D lifecycle management programs that we'll be hitting, but also include non-R&D initiatives such as reinvestments we made to establish new, for example, telesales organization in Europe that's helping us access smaller hospitals that we weren't calling in before and we're getting new growth from, or expanding our non-acute sales channel in the U.S. We used some of those investments to accelerate investments there, tapping into a high growth market as the non-acute space is now growing much faster than the Acute Care market where we've had our traditional sales strength in. And so obviously, those commercial investments have near-term payoff. We expect actually the investments that we're making on the commercial side this year, to be fully-funding, self-funding next year. So they're quick paybacks and we'll see those benefits as we've said, that strong mid-single-digits profile in our base business next year. On the other question, let me turn that over to Chris.

Yeah. Vijay, I would just remind you that, going back in history, if you look at the Q4 of FY '19, that's a tough compare. That was the biggest MMS quarter for a number of reasons. And so that's what you're seeing as you're doing your calculation.

That's helpful, guys. Thank you.

Your next question comes from the line of Robbie Marcus with JPMorgan.

Hey Robbie. Good morning?

Good morning. And I'll hand my congratulations, Chris we'll be sorry to see you go.

Thanks Robbie, appreciate it.

I don't wanna be the dead horse here, but I wanted to focus on the fourth quarter margin guide, and the floor of $12 for next year. It's been, probably, if I go back, a decade-plus since we last had operating margins as low as you're guiding for fourth quarter. And even to get to a floor of $12, versus where you are in that fourth-quarter margin, is pretty tough to do. So I was hoping you could really, as best as you can, walk through the building blocks of why the fourth quarter margin is so low, especially after you said last quarter it'd be in the low twenties for the back half of this year, it looks more like high teens. And then some of the building blocks you used to get to a floor of $12 and on top of that, how you're thinking about what a floor means in relation to where numbers might settle out?

Hey Robbie. This is Tom. So on the -- let me take the -- I'll let Chris address the Q4 question that you had. On the $12 floor, I think Chris walked through very clearly how we built up the $12 floor there. And essentially that takes out all COVID -- standalone COVID diagnostics. So all of that comes out. Any standalone COVID testing that we were to have would be incremental to the $12 and you know how much that is this year. Again, it's very difficult to predict what type of COVID testing is going to occur next year, and so we thought it's most prudent to focus on projecting our base business. We do have some Veritor flu sales and flu - COVID combination, which is really a next generation flu test. Built-in but much more aligned to what you would see in a normal flu season, rather than increased demand from testing for COVID patients. As I said, we have no COVID standalone revenue. And so that's how we've built in our $12 floor. As Chris also mentioned, we don't have Alaris 510(k) assumed at all. We do believe that just given inherent inability to predict FDA approval timing, it's not prudent to try to peg when that would be. And so we do not have anything beyond Alaris revenues being flat year-on-year, which as a reminder, we said was a little over a $100 million in FY '21. And so we have that flat going into '22. So that's that. Those are the main factors, Chris went through a number of others. We can circle back on any other questions you have there, but let's go back on your Q4 question. I'll turn it over to Chris.

Sure. Thanks. Tom. And what I would remind you, Robbie, is that we have pointed to the fact that we are making investments this year and not to really look at the second half margins. We said they were going to be lower. You said not to use those as indicative base to jump off for '22, which is what we're saying today. The Q4 margins are pressured by an additional amount of COVID reinvestment. So we made that reinvestment announcement earlier. It takes a while. It tends to be back-end loaded, so there's a preponderance of reinvestment there in the quarter. We continue to see some drag from FX in the quarter, although less than the third quarter. We also expect to see the impact of inflationary costs running through our inventory. And we see that coming through in the fourth quarter as well. So when you sum all that up, we talked about the baseline of 21.5 to 22 as the jumping-off point. We said that it was more than our 50 basis point target going forward. And that -- how much more is where you have to plug it in to get to the $12 number that we gave as a floor. And I think Tom articulated what that $12 floor was meant to be. It doesn't have any testing assumption for COVID in it, although we would assume some water level of standalone testing. It also assumes the testing for flu and COVID combination, which is equal to a normal flu season. It's still pretty early to call that and that's something that we'll give more clarity on as we get into November. It is, just that, a baseline. We wanted to make sure people understood that we can grow more than normal off of '21. And get to at least that $12 level and to close out anything lower than that. And then we'll build from there as we give more specific guidance in November.

Great. And maybe just 1 quick follow-up. The tax rate came in a little lower this year. What do you think we should be thinking as we head into next year?

I think you flow that through for this year. And then for next year, we should be -- we've traditionally guided 14% to 16%. I think you should consider that being at the low end of that range.

Operator, next question, please.

Your next question comes from the line of Larry Biegelsen with Wells Fargo.

Good morning. Thanks for taking the question. Chris, congratulations on your decision.

Thanks Larry.

Just a couple of questions on the margin. When we look at the 20 to 20.5 base for Q4, what's the ramp through fiscal 2022 look like? On the last call, you said it would ramp through the year. And Chris just a multi-part question on the margin. So I apologize in advance. You had guidance to '25 to '26 post-Alaris, post-China VBP, so is the difference here mostly inflation? You talked about the moving parts and the $200 million reinvestment. That alone, you said would come off -- that's a 100 basis points. So just lastly here or any other headwinds, tailwinds to consider on that he margin commentary.

Okay. There were multiple parts of that, I'm not sure I got them all. So let's start with -- I would say from the phasing, let's talk about the phasing. I think, it's still too early to tell. We can't give that kind of specificity for November. I would say, one of the things that I did mention was utilization. I do think that builds throughout the year, but that's as much clarity as I would give to that. What's the second part of the question?

Well, just on the -- people have looked at this closely. Post Alaris, recall the China VBP. You gave guidance of 25% to 26% for the operating margin. Is the difference really here mostly inflation? And just lastly, the $200 million reinvestment in 2021, that goes away next year. That alone is a 100 basis points.

That does come back from that baseline and that's in the assumptions that get us to more than the normal 50 basis points. So that does go away and it does come back in margins. The difference between the -- weather it's the 56ish on gross margin or 25 to 26 on operating margin, is not really inflation it's more around the China VOBP, Alaris and some FX impacts that on the combination of those bring you down in the area of about a 150 basis points on a gross margin basis for example. If you take a step back, we're pulling all the levers that are necessary to drive that up. So the base business is doing well. That's a great foundation. We're reinvesting the Veritor proceeds that drive revenue growth going forward, but also to drive Recode and help there. We've got a balanced allocation strategy. You saw us buying back shares. That will help on the bottom line, we're divesting non-strategic businesses that will help with the growth profile going forward. So all of those things give us great confidence that we'll get back to those kind of margins in the near future as we take those steps. And we're headed in the right direction and the fundamental assumption of mid-single-digit growth on the top. And double-digit TSR in the bottom implies a certain amount of leverage that we feel very comfortable with. We feel good with that operating model, it's intact and that will drive margins up over time.

Thanks [Indiscernible] I'll drop given the multi-part question there. Thanks for taking the question.

Sure. Larry any time.

Your next question comes from the line of Richard Newitter with SVB Leerink.

Hi, Richard.

Hi. Thanks a lot. And that last one was really the question I was looking to ask, but just -- if you could just go through those parts a little bit more thoroughly. You've got China VOBP, you have inflation, you have Alaris. And then FX as the bad guys, but then you have reinvestment growing away as the good guy. Could you just add those up again for us 1 more time? Just to make sure I'm clear on what the pluses and minuses are. I think that would be helpful. Thank you.

Okay. I think you did a good job of it. That is the summary. You have exactly those parts and that is the headwind. The Alaris headwind is something that should come back to us in 2023 overtime. And I think you've got the parts.

Okay. And then going back to I think it was Robbie's question, maybe just putting a little bit more of a framework about how to think about what a floor truly means and any kind of broad strokes, how to thinking about what testing could look like based on everything that you know today.

Yeah.

And what a reasonable base case might look like based on what, you know today?

I would refer you back to the prepared remarks because I think we were very clear as to what's included in that $12, and what is not included. The ability to estimate what testing is going to be next year is very volatile. Frankly, if you asked me two weeks ago, it would have been a different answer than it is today with the Delta variant, and it'll be very different in November. So when we give November guidance, we'll give you a better sense of that, but the floor is exactly what it is. It's no testing other than a normal flu season and nothing in for Alaris. And that's all I'll say about that.

Okay. Thank you very much and good luck, Chris. Congratulations

Thanks a lot.

Your next question comes from the line of Travis Steed with Barclays.

Congrats Chris again, from

[Indiscernible]

On the calculus for the mid-single-digit revenue growth and the double-digit shareholder return. When you think about that, is there a minimum operating margin that you're committed to longer-term, with that calculus?

I think it's really an improvement in the margin year-in, year-out, and that's been the model. And we're very confident that we can return to that and to drive those margins back up to the '19 levels and beyond as we move forward.

Okay. And then do you expect Alaris to be accretive right away to operating margin or is there going to be a period where it takes a bit longer to get accretive? And then, on the COVID testing margins, you mentioned a lower price point, OUS. Is there a big difference in margins on COVID testing U.S. and OUS?

I'll just take that. On the ex-U.S., then 1 of the main differences is, as we had shared in the past, we did launch a manual test. Ex-U.S. particularly in Europe. We don't sell that in the U.S. and that is at a lower price competitive with manual -- manually read lateral flow test. So that's one, there's a product mix difference. And there is a slightly lower price, even on the base Veritor in some cases, given the way that those products are purchased in very large quantities on government -- country-based tenders. Therefore it gets a little bit better pricing, given the scale of the purchasing. So that's the main thing there on Veritor as we think about the mix. Again, we're really pleased that we're right in the revenue range that we project. We're actually ahead of what we projected at the beginning of the year and then have continued to be in that 1.8 billion to 1.9 billion outlook for the full year there. On your other question, Travis was uh?

On the operating margin difference.

The operating margin.

Okay. Yeah

Chris, on that one.

The operating margin from -- when it comes back, okay. Yes

Yes.

The only thing I would say is you're -- you should be thinking about when Alaris comes back that the -- it takes a while for the sales to ramp. And that's all I would say on that.

And we have said before, Travis, as well, we do have -- we very purposely kept a number of expenses on the P&L that stay at the GP line, that as Alaris does, is 510(k) approved. Those expenses will now get absorbed by the higher revenue as soon as the higher revenue starts to come through. Those expenses at stay on the GP line, for example, are very large service organization that we know we need. It's extremely experienced strong team, deep relationships with our customers. And we've kept that those expenses in place because we want that team in place to continue to service our customers, as we ultimately get the 510(k) approved, and back fully to market. Same thing on our commercial side, right? We've kept our -- while the revenue has gone down we've kept that commercial team in place. We have many, many people with decade-plus experience and long relationships with our customers who have great expertise in that -- not only that space, but overall medication management. And so we want to keep that expertise in place as we think about it long term. So those expenses, of course, as revenue ramps, we don't see the need to add those service or sales investments because we've actually kept them in place. Similar to what we had when it was at much higher revenue number.

All right. Great. Thank you.

Yeah.

Your next question comes from Matthew Mishan with KeyBanc.

Thank you for taking my questions and good morning.

Morning.

Not just throw another moving piece at you, but I'm assuming that the floor doesn't include the diabetes spend. Do you have a better sense of what dilution is from that and impact to our operating margin on a pro forma basis?

I'll take that. The floor does not contemplate that. As we complete the spin and as we get closer to the spin, we will make adjustments to any kind of outlook or guidance that we have. The $12 relates to BDX as a whole. And as it relates to dilution, what we have said is that the dilution to RemainCo would be primarily stranded costs. We'll have transition service agreements in place, and we'll have some time to offset any potential dilution that we have during that transition services period of time. And more to come on that as we get closer to the spin date.

Okay. And then -- excellent. And then, let's a little bit talk about the guidance for next year. I think everyone assume s there will be some COVID testing, so there will be upside from that, but the flu season, is also probably a little bit lower than what's normal. What is the normal flu season for you as far as revenue goes so we can adjust that Delta?

And then the first thing I would do is just correct your statement that we didn't give guidance for '22. Using the term guidance is inaccurate. We just gave you a floor and a way to think about it. I just want to make sure that that's clear. And what we said was a normal flu season. And we have talked about in the past that, that normal flu season is in the range of $80 to $100 million and it remains unclear as to what type of flu season, flu/ COVID season we have. Last year, the flu season was basically nonexistent. That's why we outlined that assumption as clearly as we did.

Okay. My apologies. And it seems like that COVID testing, the upside would be greater than downside from flu at that point. Is that correct?

I'm not sure what you just said there, but I think the -- would there be some COVID testing standalone that's something we'll give insights going forward in November.

Just a reminder, Matthew, we do have a COVID flu combination test, rapid test. Which we will can step -- that's in that flu category as well. So we do think even if there's a lighter flu season, the availability of symptoms; we will be testing for combination as well. We do expect there will be some continued testing of COVID only as well. But the ability to predict that number right now, again, we're not giving guidance. We just shared a floor number. If there is to predict how much standalone COVID testing is going to happen next year, it is not something one should do. Thanks for your question.

Your next question comes from the line of Matt Taylor with UBS.

Good morning, Matt.

All right, thanks. Good morning. Thanks for taking the question. And congrats, Chris, you'll be missed.

Thanks.

I think we've got margins [Indiscernible], so I'm going to ask a couple of growth questions. The first one is I wanted to ask you about your assumptions for disruption. I know there are some states that are seeing that [Indiscernible] procedures now. Would you characterize the build into your guidance as relatively minor? Any framing that you can do for us in terms of how much disruption you think we could see here in the coming month?

Yeah. This is Tom. Appreciate the question there. I can give a little bit of color on what we're seeing overall, both in just general utilization, and then I'll talk about what we're seeing more recently in just the last 1 or 2 weeks. As I think most folks are aware, we have one of our informatics platforms is called MedMined which is a software that allows us to see real-time admission data, utilization data, test data, outbreak data, resistance data, literally real-time. It's hundreds of hospitals across the U.S. And so some of the details that we see generally are over Q3. We saw about 91% to 92% utilization versus pre-COVID, about 92% exit in June. And that was a sequential improvement from Q2 average, which was in the 80's. And we expect to see further sequential improvement as we think about Q4 overall. In the non-acute sector it was already -- we saw a 105% utilization versus pre-COVID in May June, and sequential improvements from Q2, which was in the 95% range. As we think about the impact of -- and Europe by the way, with the data we look at show the bed utilization first pre-COVID utilization overall versus pre-COVID was estimated around 92%. Exited the quarter around 93%, which was sequentially up from Q2, which was about 86%. So as we think about the impact of COVID Delta variant in the last 1 or 2 weeks, we've seen it really, as was expected I think, when there would be outbreaks, that you'd start seeing them in concentrated geographic pockets. And that's certainly what you're seeing with the Delta variant. The last number I had was 16 meaningful U.S. healthcare systems that had stopped or significantly reduced elective procedures. And many of those, or the largest ones of those U.S. systems that have done that, that was as of last week, that was the number I had was 16. They were down in Florida, Louisiana, a [indiscernible] number of those were in the south. So it's -- we're seeing it in those areas, but not, certainly not across the country broadly. And we're not seeing really any significant change globally. Certainly there's pockets where that's happening, but for example in Europe, which is a major market for us we're not seeing a change there. We have built in some continuation of that into our guidance. And so if it doesn't continue at that level, that could be an opportunity. But again, being prudent as I think we've been all year long, we took an approach that said, well, if the Delta were to continue and there were to be some impact on procedural volumes, we would be absorbing that within our guidance. It would have to be a significant change versus what's being seen.

Great. Thanks for that. I just had one quick follow-up. You did a bunch of tuck-ins. I was wondering if you could quantify the contribution we could expect from those, as you purchased that we're going forward.

We see that as built into our outlook map. And when we talk about the strong mid-single-digit performance next year, and continuing to help fuel our mid-single-digit growth profile. None of those acquisitions have any meaningful impact in Q3. Many of them closed, actually, either at the very end of Q3 or even more recently in Q4. So not an impact in Q3, and part of our growth equation, as we look going forward. But as you said, we're excited about the tuck-ins we're doing. It's combination of both strengthening our base business like what you see in Velano, offering really unique innovation and into an already extremely strong portfolio and a bag that we have. 2 areas that are entering us into new spaces. Like what you saw with Tepha or the ZebraSci, which both enters us into new spaces, but connect us deeply with an important customer segments, small biopharma, providing them services. That -- ZebraSci is the leader in providing them combination drug-device testing services allows us to build those relationships further. And as you know, many of the new drugs coming into the pipelines are in that small biotech segment that we think is attractive to invest behind. Thanks for the question.

At this time we have reached our allotted time for questions. I would now like to turn the call back over to Tom Polen for closing remarks.

Thank you, Operator. Before we sign off and on behalf of the board and the entire executive team, I want to thank BD's 70,000 associates around the globe. This past quarter, I had a special opportunity to travel to a number of our sites, including our warehouse in Georgia, 2 of our plants in Nebraska, who've all been working tirelessly to produce essential medical devices. Some that are being used for the pandemic response. And I'd like to say a special thanks to them and all of our manufacturing associates around the globe. They are the essential part of our frontline team and make me proud to be BD. And so I thank you, directly, on behalf of the entire organization. For all of you listening, I hope everyone stays safe and healthy. And thank you for joining in. Hope you have a great day.

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