Hello, and welcome to BD's First Fiscal Quarter 2024 Earnings Call. At the request of BD, today's call is being recorded and will be available for replay on BD's Investor Relations website investors.bd.com or by phone at 800-688-7339 for domestic calls and area code +1 402-220-1347 for international calls. 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 Greg Rodetis, Senior Vice President, Treasurer and Head of Investor Relations.

Good morning, and welcome to BD's earnings call. I'm Greg Rodetis, Senior Vice President, Treasurer 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 first quarter of fiscal 2024. We also posted an earnings presentation that provides additional details on our business, strategy and performance. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's calls 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 BD 2025 strategy. Chris will then provide additional details on our Q1 financial performance and our updated guidance for fiscal 2024. Following the prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents, Mike Garrison, President of the Medical segment; Dave Hickey, President of the Life Sciences segment; and Rick Byrd, President of the Interventional segment. Before we get started, I want to remind you that we will be making forward-looking statements. I encourage you to read the disclaimer in our earnings release and the disclosures in our SEC filings, which are both available on the Investor Relations website. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant period. Revenue percentage changes are on an FX-neutral basis unless otherwise noted. When we refer to any given period, we are referring to the fiscal period unless we specifically noted as a calendar period. I would also call your attention to the non-GAAP reconciliations included in the appendices of the press release and earnings presentation. With that, I’m very pleased to turn it over to Tom.

Thanks, Greg. Good morning, everyone, and thank you for joining us. Earlier today, we reported our results for the first quarter. Overall, we executed Q1 as expected. Total revenue growth was largely in line with our expectations. And on the bottom line, adjusted EPS was ahead of our expectations due to good execution on our margin goals through our BD Excellence operating system and the timing of discrete tax item. Also consistent with our plan, we delivered very strong growth in cash flow that positions us well to deliver another year of growing free cash flow double-digits. I want to thank our team of over 70,000 associates for the strong execution, agility and unrelenting determination to deliver for our customers, patients and shareholders. These results give us the confidence to increase our FY '24 guidance. Turning to our BD 2025 strategy. During Q1, we continued to execute well against the five actions we outlined at our Investor Day to drive profitable growth and value creation. This includes continuing to advance our innovation pipeline which supports our durable 5.5% plus targeted revenue growth profile. We remain focused on advancing innovation in high growth areas, anchored against three irreversible forces we see reshaping healthcare today and over the next decade, connected care, new care settings and chronic disease. Specifically in Q1, we made meaningful progress achieving several key R&D milestones for technologies that position BD as key enablers of care shift in new settings. In our PureWick portfolio, which is now the market's leading platform for non-invasive urine management in a billion dollar market growing double-digits. We started our randomized clinical trial pilots for PureWick Female to generate evidence to support future at-home reimbursement. Our PureWick program is progressing well and we remain on track to launch our next-generation Female External Catheter…

Thanks, Tom, and good morning, everyone. As Tom noted, we executed well against our performance goals in Q1. Q1 revenue growth was largely as we expected and I'm pleased to share we exceeded both our margin and earnings goals and delivered strong cash flow that positions us well to support our double-digit free cash flow growth goal. I'll now provide some insight into our revenue performance in the quarter. Additional detail can be found in today’s earnings' announcement and presentation. Q1 revenue was $4.7 billion with organic growth of 2.4% that was driven by high-single digit organic growth in BD Interventional and solid growth in BD Medical with China market dynamics playing out as expected, partially offset by a decline in BD Life Sciences, which was impacted by the comparison to the prior year respiratory season. As expected, China and respiratory were the primary drivers of Q1 revenue growth under indexing our full year goal. The respiratory season alone impacted total company growth by about 150 basis points. Regionally, organic growth was driven by the U.S., EMEA and Latin America, partially offset by the expected decline in China. Total Q1 revenue growth of 1.6% reflects the divestiture of our surgical instruments platform. Turning to the segment performance. BD Medical revenue totaled $2.2 billion in the quarter, growing 2.4%, driven by growth and medication management solutions and pharmaceutical systems, min-single digit growth in MMS was led by strong performance in dispensing, driven by innovations in our BD Pyxis portfolio that are improving nursing workflows and efficiencies. In our infusion business, we are pleased with our strong progress, bringing the BD Alaris Infusion System back to the market and continue to expect Alaris to ramp over the course of the year. Infusion also reflects strong demand for IV sets. Performance in Pharmacy…

[Operator Instructions] Thank you. And our first question will come from Rick Wise with Stifel. Please go ahead. Your line is open.

Good morning, Rick.

Tom, hi, Chris. You used the word confidence repeatedly, and just picking up on that, heading into the quarter, we know you were very clear about things like currency and the peso divestitures, the flu benefit, if you will, time shift, but the setup and your new guidance clearly says that the rest of the year, we're going to see accelerating organic growth second half, I think your language in the slide, above full year guide. Help us, maybe you could talk in little more detail about the drivers of sales acceleration than the things that are most critical to creating that outlook that you're feeling confident about.

Yeah. Thanks for the question, Rick, and good to connect. So, as you said, Q1 played out as expected, total revenue growth was largely in line with our expectations, as you said, there were really two factors that we recognize we're going to be playing out in Q1. One was the flu compare given the large kind of early timing last year that was about 150 basis points that we knew was going to happen and then value-based procurement in China. And those two factors played out actually exactly as we expected in China, in fact that we were watching that and we saw VOBP stay focused within MDS which was just our assumption. We had really strong growth in BDI within the quarter, double-digit, mid-teen growth, high-single digit growth in life sciences and so we saw that play out. China actually did a little bit better than budgeted in Q1 and so we feel good that that's going to continue to play out for the year. I think, as we also think about the back part of the year to your question, something else we are looking at as we started and gave guidance to begin, '24 was, of course, Alaris. We were really pleased to have Alaris back with new improvements. Our new 510(k), it's a big deal to be back servicing our customers fully. It's a great product and highly unique and so, of course, Q1 was really the first quarter with Alaris relaunched and our team backed it proactively upgrading and remediating our base and we wanted to get feedback and engagement. And it's been quite positive, and I think that part also, as we look ahead, that confidence in those early engagements and the progress we're making is what's led us to also comment that we're seeing now $200 million as the floor for the year. In the other aspects, as you think about the growth drivers that we've been talking about and we often call out six specific platforms, we saw a really great growth in PureWick this quarter. Pharm systems, we have signaled very clearly the anticoagulant topic that was going to create a slower compare or slower growth in Q1. We're seeing the underlying business there do really well. Biologics grew double-digits in the quarter. Flow playing out, strong demand for FACSDiscover, Molecular double-digit growth as you heard in the prepared remarks, Peripheral Vascular and Pharmacy Automation, those trends in the marketplace continue with strong outlooks for those businesses. So again, we saw very clearly the two factors that we knew were going to impact us in Q1 and they played out as expected. Chris, any other comments to add.

I mean, just, sometimes, it's easier just play bigger picture right. I'm sure you're looking at our balance to go plans which we are very confident into Tom's point. We've expressed confidence in Alaris and establishing a floor now. I think the Alaris dynamics important. If you look at the balance to go, it's about 7% revenue growth. Last two years, we delivered right around 7%. This year, actually, if you think about it, Alaris is going to cycle over medical necessity. It's not a significant contributor to growth in the first half despite seeing very strong progress, but what that does is it adds about a point to growth more in the second half, right? So, we see really good momentum there. So when you think of sort of Alaris adjusted, you're at six and we cycle over the China compare in Q4, which have declined as well. So, I think plans are intact, the strong underlying fundamentals in kind of these six key areas we keep pointing to, like, Tom mentioned in biologics are well positioned and feel good about the rest of the year.

Thanks for the question, Rick.

Yeah. And just as a follow-up, I'd ask about the EPS guide, the $0.07, Chris, I think, I'm calculating correctly, you beat operationally EPS. You've raised $0.09 at the midpoint for the full year. Talk about your confidence in that driving that midpoint EPS raise. Again, how margins are -- in more detail, are going to, or mix or volume are going to help you get to those EPS targets? Thank you.

Yeah. Thanks, Rick. Yeah. We were definitely pleased with the margin progression and operating income delivery Q1 and it was strong and exceeded expectations. We basically passed that through to your point. The other thing we did is we actually accelerated margin improvement in Q2 by about 25 basis points to 50 basis points, so de-risks the back half of the year. We did that on a couple of things. Whenever you start the year, you want to ask -- you want to see a couple of things. One, to recall some of these transitory headwinds like China. We knew we had a transitory item in inventory that hit us in the first quarter that was 200 basis points. We have outsized FX in the quarter. All those played out as expected and we have stronger delivery on calling inflation dynamics and more importantly, our margin improvement program. So, we continue to accelerate those. We've had two years now of consistent track record of delivering against our margin expectations, back to pre-pandemic levels 400 basis points over two years. If you look at our margin progression throughout the year, basically, with these transitory items behind you, the level of cost improvement we delivered in Q1 alone with moderating outsized inflation through the back half of the year. It goes from nearly -- in Q1, we said it was almost 2x what we're calling for the full year and outsized inflation 100 basis points. It cuts in half in Q2 and then moderates in the back half. So, we just have to keep executing against our margin improvement portfolio, which is really strong. And that's what gave us confidence with the Q1 performance and our ongoing programs to raise for the year and we're focused on executing against that.

Thanks, Chris.

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

Hi. Thanks for taking my question. I'll take the first question on revenue. Just curious if there's anything to call out in some of non-flu areas, pharm systems MMS. If you think kind of growth outlook, they are still on track with your expectations, and the decision to raise the revenue guidance. Just curious, what's giving you the confidence at this stage to go ahead and raise that revenue guidance at this point.

Yeah, Travis. This is Tom. Thanks for the question. Good morning. So, on pharm systems specifically, again, as I mentioned, we saw that play out as expected with the impact of the one customer that we mentioned in anticoagulants and strong underlying growth beyond that, again, double-digit growth in biologics. Our capacity continues to -- those investments that we made continue to play out as expected. We have capacity to meet customer needs, and we're engaged very actively in that space. And as we think about the slight raise on revenue, again, we feel really Alaris the floor of 200, as we see now for the year based on, again, early engagement with customers. We thought that was prudent to do given our outlook in that space. I don't know, Mike, if you have any other comments to add.

Just also commented in addition to the double-digit demand in biologics, we've been pretty successful in terms of entering, the development agreements for future pipeline of molecules in this space, our innovation portfolio around Hypak and Neopak, and also the wearables portfolio with Libertas and above that continues to progress really well and additional developments -- development agreement in this area are occurring. We've described the pharm systems business is a high-single digit grower, going back to Investor Day and we continue to see that in '24. It's our expectation, despite any early part of the year headwinds.

Great. And last question, Chris, just on margin in Q1 was a nice kind of core outperformance on margins in Q1, especially without the revenue upside. Just curious kind of go through what got better in Q1 on the margin side and confidence, and what gets better if you think about that 300 basis point step-up in margins from Q1 to Q2, just to give some confidence that that 300 basis point step-up sequentially is achievable?

Yeah. Thanks, Travis. So, first of all, in the quarter, it wasn't one thing. I'd just say execution is kind of the theme here, organization is hyper focused consistent with what we've done is predominantly our cost improvement programs. We had some mix benefit as well which has been part of our strategy on portfolio as well. So, all of that, I would say, the headwinds kind of played out as expected and we over delivered through good focus, execution on our margin improvement initiatives. To your point, the Q1 step-up, the step-up from Q1 to Q2 about 300 basis points that we've signaled. If you think of it this way, again, we had two, what I would call, pretty transitory items in Q1. We have the outsized FX, coupled with the inventory reduction in absorption dynamic. Those two items alone as you head into Q2 are about 30%, so as we're 400 basis points. They're only about 30% of that value in Q2. So, you pick up momentum there, coupled with the fact that the outsized inflation, which was almost 2x, what we call, for the year in Q1. It starts moderating significantly almost in half in Q2 and then it further moderates by the back half of the year. So really, it's just cycling over those kind of one-time items, outsized inflation moderating back and us continuing to deliver what we already delivered in Q1. So, we're confident that that progression continues. With that, you naturally get the sequential step-up that we're driving towards. And again, feel good about our operating margin, which is why we improved our phasing increased Q2 and feel good about the line of sight we have to the back half of the year.

Super helpful. Thanks, Chris

We'll take our next question from Vijay Kumar with Evercore ISI. Please go ahead. Your line is open.

Good morning, Tom, and thanks for taking my question. My first one, Tom, if I just look at Q1 organic 2.4 right? A lot of questions on, look utilization is strong. Why is this optically 2.4 well below medtech sort of trends we've seen so-far. Can you help us bridge? I think you mentioned 150 basis points of respiratory, does that include COVID? I think you mentioned China. What was the China impact in Q1? I think you mentioned some timing elements, customer orders. What was that impact? And Alaris, it looks like it was not a contributor to growth, so maybe just help us draw bridge between the 2.4 and what it should have been without some of these underlying one-time items?

Yeah. Great question, Vijay. Maybe just those two items that we've referenced, from the start of our guide, flu and China. Those two combined, if you take those out, it's about 5% underlying growth, just excluding those two items. So, those are quite significant. If you look at procedure volumes, etc., you're seeing that flow through in the base business where those two items aren't, so as an example, if you look in Interventional, you'll see that very strong growth in surgery, right, double-digit growth, which is getting the benefit of procedure volume. We're seeing in UCC, 9% growth there as an example, solid in PI, a little bit of inventory timing there, but we're seeing those factors play out. Again I’d concentrate on those two topics, which again played out as we expected. The large flu compare just given the early timing last year in China, underlying was about five. Chris, do you have any comment?

No. Just I mean on Alaris, Alaris played out as expected actually. Again, what we've highlighted is, it was going to be a journey as you think of the natural progression of engaging with customers and the natural kind of life cycle of then placement, revenue recognition, etc. We're actually very pleased with our progress there. And as a matter of fact, right, we declared the $200 million more of a floor that was part of what gave us confidence to increase the low end of the revenue guide. And so we're continuing to focus on executing there and that was as expected on the flip side, what it does is, in the back half of the year, gives you almost basically a full point of growth tailwind that will help, which so, when you look at the back half, think of that or kind of moderate the expectation that you're seeing around feeling like that growth is outsized versus the front half of the year. It's as expected with the ramp we were expecting on Alaris.

Yeah. I will turn it to Mike here. I think it's -- obviously, this is the first quarter that we've relaunched Alaris. And so the focus is first on engaging customers, getting agreements in place for remediation and upgrades. And that those are the key metrics that we look at in the first quarter of launch because that's what's indicating how the revenue is going to evolve in the back half of the year and that's what we, right, are feeling good about.

That's right. And just to remind that last year, we had the Certificate of Medical Necessity, how we were shipping, we're not doing that now. So, it becomes more like a step over to get to there, and then growth on top of that, so that's what we're seeing in first quarter. So, it's actually, starting from ground zero in terms of selling process and ramping it up. I actually feel really good about that. I feel really pleased with the way our manufacturing ramp-up has gone and that scale-up is going quite well. So, we're able to supply product to our customers. I think the customer response, yeah, they're recognizing that, Alaris is almost like a different system. It's a different category in a way it's, the power of one with all the infusion modalities as a single system, the most advanced interoperability in the category, 750 live sites, order of magnitude more than anyone else. Yeah, so, it's almost being recognized a little differently that way, so that's good. And we have sort of exceeded, we set certain expectations, we've exceeded those relative to return to market in terms of upgrading the fleet in the field. So, it's early, but I think the way things have progressed, that's what -- those are the sort of the elements that led us to build confidence to say that we think 200 is the floor.

That's helpful. And Chris, maybe one quick one for you. The margins still imply a 300 basis point step-up in back half versus your 2Q levels. Can you just talk -- I think inflation was part of it, but just maybe a similar bridge on margins from the '23 to '26 and back half?

Yeah. Again, it's basically a continuation of Q2 when you move out of Q2, both FX, the inventory dynamic goes completely away, which is almost 75 basis points still in Q2, so right off the bat, you pick that up as you move through Q2. That's probably the biggest item FX continues to moderate. We have reasonable signals on FX, obviously can continue to move, but that moderates down. The other thing is outsized inflation moves from about 100 basis points, which is our full year average in Q2 that further moderates down significantly. And then again, if you just continue the cost improvement and margin improvement initiatives, we already executed in Q1 throughout the year, it gets you to where we need to be from a margin standpoint.

Fantastic. Thanks, guys.

Thanks, Vijay for the question.

We'll take our next question from Larry Biegelsen with Wells Fargo. Please go ahead. Your line is open.

Good morning. Thanks, for taking the question. Mike, why would medical growth in fiscal '24 be in line with the corporate average given the tailwinds in MMS and pharm systems, you just said you expect pharm systems to grow high-single digits in 2024, so what are the expectations for MMS and MDS this year. Last year, Medical was 90%, was above the corporate average.

Yeah. So for -- I'll talk first about, MDS. The business is actually showing really good momentum underlying which is masked a little bit by the impact of VOBP in China. So, that VOBP is a headwind for the year. Yeah. It's playing out as we expected, and built into our plan, but we're seeing strong momentum in the U.S., strong momentum, in catheters, and somewhat, driven by some of the new recent product launches that we've had. Site-Rite 9, Nexiva, NearPort, PIVO Pro, yeah these advancements are working out in the field and being very attractive to customers as we advance the One-Stick Hospital Stay vision. We're also watching injection systems and hypodermic. We're aware of some of the recent recalls, agency action in this area and we've ramped our capacity prepared to serve if market needs arise in the U.S. So, that's sort of, MDS. From MMS perspective, the way that I'm sort of seeing it and thinking about it as infusion sort of returning to be a contributor to growth versus maybe flat to a drag with return of Alaris. And then also, we're really excited for, very soon, our upcoming market release of the ex-U.S. infusion system BD neXus. Our dispensing business continues to perform very well. It's got solid growth both in the quarter, in hospital and alternate site. Our MedBank acquisition grew double-digits in the quarter, and continues to expand our presence in non-acute settings. So, I feel good about that. Pharmacy automation that proposition continues to resonate really well for both ROWA and Parata. As we noted previously and in the presentation, this quarter, last year was actually Parata's strong Q4 finish for their fiscal year. So, created a bit of a tough compare. This was expected and our timing ramp of installs is weighted more towards the back half. So, those are sort of the things that, give me confidence around, MDS and MMS.

That’s helpful. And Tom, China was down 5% in this quarter in Q1. Talk about what you're seeing there and you're confidence. I think in the past, you said you expect China to be flat to up low-single digits this year. Thanks for taking the question.

Yeah. Thanks, Larry. That expectation remains unchanged. China played out essentially exactly as we expected in the quarter was a little bit favorable to budget. What we saw and what we expected was VOBP, as Mike described, specifically within MDS which is where it's remained, we didn't see it expand to other areas at all. We're not seeing that it's -- our view is as we had projected. And we also expected to see strong growth in BDI which we've had over the last several years. We saw that play out in the quarter, mid-teens growth in BDI in Q1 and we saw solid growth, high -- very high single-digits on the cusp of double-digit growth in Life Sciences in China. And so that base business in China is continuing to do well. We'll -- we saw VOBP start in the back half of last year. And so again, that's going to become a tailwind for us as we think about compare in China as we go over that, so. Thanks for the question.

Thank you.

Thank you.

We'll take our next question from Robbie Marcus with J.P. Morgan. Please go ahead. Your line is open.

Great. Thanks for taking the question. I wanted to ask, I know we're in fiscal '24 here, but wanted to look out to '25, and based on operating margin guidance, it implies about 100 basis points expansion next year to get to your long range plan target. So, I'm sure the answer is pretty similar to the '24, but how do we think about the implied about 100 basis points next year and your confidence in that?

Yeah, Robbie. Thanks for the question. Actually, at J.P. Morgan, as you know, we outlined a strong plan outlining all of our margin improvement initiatives. I think gross margin is the next stage of accelerated focus for us and we already have a great pipeline of margin improvement initiatives there through Project Recode, right? We actually already completed our 20% goal SKU rationalization. We're actually going to go further there. The network architecture, Tom, highlighted in our prepared remarks the strong progress there with initiatives underway that reduced our network by 20%. As a matter of fact next year, the network architecture value we get out of that actually doubles going into '25, you're going to really start seeing the benefits of that. BD excellence is another one. We're getting great traction this year. It's part of the momentum we have in this year on margin that will continue into next year. You also have the Alaris dynamic. As that fully ramps up and scales, we'll get margin leverage there. So, all those things coupled with the continued strong growth profile of being able to consistently do 55 plus which we've been well above gives us strong confidence in 2025 and the 100 basis points, as a matter of fact, as we exit this year. Doing everything we did, we really should be well positioned to carry that kind of momentum into next year. It's premature to kind of make a formal commitment and manage all the puts and takes but certainly high confidence in the '25 and great momentum there.

And maybe, Robbie and good morning. Just to add to Chris's good comments, I think another way just to think about it is, as we've launched BD 2025 in '22, it was a four-year road-map ahead, right? And so, the end of '24 will be 75% of the way through BD 2025. As you think about the margin number that we've set out as our guide for FY '24, that's 80% of the way through our margin goal, right? So from a timing perspective, 75% of the way through BD 2025, 80% of our margin goal, we are clearly on track, slightly ahead. And we're seeing really good momentum in our programs as evidenced this quarter. I think you've heard us talk about BD excellence. Obviously, as we started BD 2025, our focus was let's get Alaris back. Number one, take those learnings, apply them across the company to make sure we're building capabilities. Second was optimize our portfolio for growth spinning back up. Obviously, we sold the V. Mueller. We drove tuck-in M&A that's driving accretive growth, we rebalanced our R&D into high-growth spaces. And we've built our portfolio simplification programs starting with Recode which are on track and you're seeing those play out. Along the way and starting last year, we began to develop capabilities for BD Excellence, right? And it's our operating model -- operating system to drive a whole new scale of lean capabilities across the company. And last year, we had thousands of associates across the company engaged in BD Excellence. This year, we're really pressing the pedal on that program now as we've made progress on those first three areas that I mentioned. And so, as we said in the prepared remarks, if you think about the Kaizens that we did all of last year through BD Excellence, we did just as many in Q1 of this year just completed and that's going to continue to scale as we go through the year. And so, we see really good momentum there. It's giving us visibility not only on our '25 margin goal, those we also indicated, it's giving us visibility beyond '25 to continue, margin progression as we look ahead. So, thanks for the question, Robbie.

Great. Really helpful. Just a quick follow-up. China VBP is a headwind you've talked about. How do we think about where that's hitting each of the business units and the size, just so we can, kind of try and back out that headwind in our models? Thanks.

Hey, Robbie. It's almost all within MDS specifically. Essentially, it is all within MDS. That's where we see it, so.

Great. Thank you.

Thanks.

We'll take our next question from Patrick Wood with Morgan Stanley. Please go ahead. Your line is open.

Amazing. Thank you. Two quick ones. I guess the first is Pharmacy Automation completely get the timing of year end and that side of things, but just curious, how you think things on orders, whether it's like order mix and kind of the outlook for the rest of the year based on, what you're hearing from the customers right now from the order book?

Yeah. I'll take that. So for pharmacy automation, yeah, we feel really good on that, like I mentioned, the tough compare because, they were incentivized Parata and the team there was incentivized to finish their Q4 strong. So, they had already lined up installations last year for their finishing. They had a record for them quarter last year. So, it's a little bit of a tough compare. Order book looks good, especially in the sort of Retail Long-Term Care channels. Yeah. And we continue to leverage our BD Salesforce to talk to our acute-care customers about starting to transform the pharmacy in the acute care with our IDN customers. So, we see that continuing to grow throughout the year. Overall, it's been -- yeah, we've described it as sort of a low double-digit grower, and that's sort of what we have projected and expected for the rest of the year.

Brilliant. And then maybe quickly one either you, Tom or Dave. Elience, Molecular Point-of-Care is obviously a very fast growing but very competitive market. Just curious, how you're seeing that product fit in, the interplay between like high and low plex? Just curious, how you're going to fit into that market? Thanks.

I turn that to Dave. Thanks for the question, Patrick.

Thanks, Patrick and for picking up on Elience. Just take a step back. If you look at the molecular dynamics overall, we have said that this is one of the sort of six growth drivers for BD, right? So, we continue and if you look at the divergence of the market, there is real thesis playing out in terms of the way customer evolution will happen, right? So you think about the centralization of high-volume molecular cervical cancer testing, we satisfy that with BD COR. You think about BD MAX in the acute setting, and we're seeing good, as you heard Tom say in the prepared remarks, good double-digit growth there. But clearly, there is decentralization of relevant testing to the point-of-care and these new care settings. And obviously, Elience will be our entry there in this sort of high, you know, single-digit market. If I think about it specifically on Elience, the way to think about it is, what is different about it? Our goal here will be that we would anticipate it to be CLIA-waived giving critical results, within less than 15 minutes but can be used in a wide variety of settings. What is the unmet need that it will actually address and deliberately, we've actually selected CT/GC as our first assay because when you look at all the CDC and NIH reports, there is an increasing burden of STI. So, it will increase access to testing. And I think about it now, if you're one of those unfortunate patients and you're in the clinic, you could get that result diagnosed and a potential treatment administered while you're in a clinic in a decentralized setting. So, deliberately, we think CT/GC is really the right assay to lead with. And then, of course, because of the capabilities and these less than 15 minute results, we see a strong roadmap behind it, you know, focused on respiratory assays, other STI assays, vaginitis, etc.

Yeah. That testing treat concept with 15 minutes or less time to [Multiple Speakers] core component.

Love it. Thank you.

Thank you.

We'll take our next question from Patrick Miksic (ph) with Barclays. Please go ahead. Your line is open.

Good morning, Patrick. Sorry, Matthew.

This is Matt. It's okay. Just a couple of follow-ups on some of the factors that, play through Q1, you talked about last quarter and I have one follow-up. One was, obviously, a lot of detail and questions that came after around the peso and around wages. If you could just sort of -- you know, It sounds like you're most of the way through that and during Q2 and just maybe a quick update on that. And then the anti-coagulation business in China. I think there was something that you were hoping was going to find -- that capacity would find a new home, perhaps in this quarter or next quarter and an update on that. And then just one follow-up if I could.

Yeah. It's Chris. Thanks, Matt, for the question. Appreciate it. Yeah, when we started the year, we talked about kind of the inflationary dynamics and supply-chain. One of the biggest ones that we were still seeing play out through the year was wage dynamics in our supply-chain organization, that continues but it's playing out as expected. So, nothing new there. Regarding FX, good news is moderately favorable. We passed through both the revenue and earnings on that. So, stable at this point and moving in the right direction. We'll continue to watch it, and I think we're happy with the operational performance in passing through both the $0.07 operational beat and the $0.02 of FX.

And maybe Mike for pharm systems.

Yeah. For pharm systems, that the capacity that's freed up for anti-coagulants, there is, some of it where the teams are, hunting for home for that. And there's been some success there, but I think we also just took a strategic decision to look at the anticoagulant market overall and it returning to more of a post-COVID normalization there and our converting lines over to biologics to help accelerate our ability to have capacity to serve in that area and that's playing out pretty well. So, we've been able to -- there has been some increased demand that's come in for biologics that, we'll be able to recognize later in the year and then, we'll be able to serve that, in part because of these line conversions. So, it's been a little bit of both relative to that anticoagulant dynamic.

Thanks for the question, Matt.

That's super helpful. You bet. And just one follow-up if I could on cash flows and sort of M&A and I remember last quarter, Chris, you emphasized a bunch of times, and part of that impact was, bringing up excess inventory having an impact on margins, you threw that you made nice progress on leverage. Could you talk a little bit about, what that looks like for the rest of the year, drove M&A outlook and the kinds of things, maybe the size of things that you might be -- we might expect in the next, six, 12, 18 months. Thanks.

Yeah. Thanks for the question, Matt. I appreciate you recognize. We've definitely been extremely focused on cash flow performance. I was really pleased with the quarter. There was really strong cash flow, strong double-digits, gives us confidence for the year. It played out in all the areas we've been trying to leverage. One, we're getting more efficient with our CapEx expenditures. Part of this is from a simplification efforts on BD Excellence that we're driving through our plans. In addition, you saw improvement in inventory and you saw improvement in our collection cycle as well. So, all really positive things. We sit basically at our net leverage target and so we're well positioned and consistently will remain disciplined as you think of M&A, but as you can imagine, we always have an active portfolio of things that we look at. We're going to remain disciplined. It's been a nice contributor organically to growth last year, delivered nearly 40 basis points. So, certainly something that we're going to continue to focus on as part of our growth strategy and more to come on that. Tom, I don't know if you want to add?

Extremely well said. Remains an active part of our growth strategy and I think as we've shared in the past, we've been focused on accretive growth, accretive margin acquisitions, which has been our track record and we've executed well against those over the last several years. I think we've clearly built a good track record of that. And so, we've got a strong healthy M&A, you know, active pipeline focused again in strategic areas where the market has significant structural or macro tailwinds to drive sustainable growth and where we can bring meaningful additional value either through our channel or global footprint, our manufacturing prowess. And again, we remain very disciplined on strong returns accretive growth. We haven't been doing dilutive deals that remains, right? Our emphasis is we're focused on delivering on our 25% operating margin goals. And but we're going to continue to focus on that and we have a strong pipeline. Thanks for the question.

And this time, I'll return the call to Tom for any closing comments.

Thank you all for joining our call. As you heard, we had good momentum to start the year and we look forward to sharing our progress towards delivering our BD 2025 goals and increased outlook for FY '24 on our next call in May. Thank you very much and have a great rest of the day.

Thank you. This does conclude today's program. On behalf of BD, thank you for joining today. Please disconnect your line at this time and have a wonderful day.