[Operator Instructions] I would like to remind participants that this call is being recorded, and a digital replay will be available on the Baxter International website for 60 days at www.baxter.com. Your first question from the line of Robert Marcus of JPMorgan.

Congrats on the nice 2Q. I will ask both my questions upfront here. Clearly, a better-than-expected result on the top and bottom line in second quarter. I'd love if you could speak to some of the drivers of the acceleration on the top line and the confidence in the guidance raise. Same question on the bottom line, but it does appear like there were a number of onetime items in 2Q, and you did raise the EPS guide less than the 2Q beat, implying perhaps softer second half underlying EPS. And then on 2027, given the onetime items, do you still feel confident you'll be able to grow EPS next year?

Yes. Look, if I do a step back, I'll walk this through in pieces. First, we're pleased with the quarter. This demonstrates continued steady progress on our strategic priorities and improved execution across the business. Now even more importantly is, we saw broad-based operational performance improvement and all segments and divisions were growing. A couple of callouts. In MPT, we saw strength driven by double-digit growth in Drug Compounding. We also saw continued strong performance in our Advanced Surgery business. And also, while the baseline was lower, we saw strong performance in our IV Solutions organization. In HST, CCS benefited from strong patient support systems demand. And within our FLC business, our Connex 360 product line continues to resonate well with customers, and we see improved performance on our funnel and our ability to execute. Now as a reminder, and I did walk through this or we did walk through this in our prepared remarks, there was a tariff refund that was not contemplated initially. It's about $0.11. Absent this, we continue to be focused on how we're going to strengthen the organization and continue to perform. As we look at '27, the path to '27 is through execution in '26 and especially the second half of '26. While certainly pleased with the quarter, it's 1 quarter. Our team is focused on driving the business and continuing to execute through the remainder of the year. Now as we know, the nonrecurring tariff benefit won't flow through next year. And we're going to give you additional color on '27 at the appropriate time. But right now, we're focused on executing in '26.

Travis Steed of Bank of America is on the line with a question.

Congrats. I guess Q2 was a pretty high say-do ratio. So nice to see. Maybe I would start with the Q2. I'm curious how big the Drug Compounding was in Q2. How much of that? Was that 20% plus? Is that something that drove more of the upside this quarter, just given the mix on gross margin was a little bit light. So if there's anything you could say on Drug Compounding this quarter and how much that was of the beat?

Travis, this is Kevin. We did call out Drug Compounding as a good chunk of the beat in the quarter. And when you think about our raise for the second half of the year, it kind of reflects what we saw in the second quarter. It grew double digits. And you're absolutely right, that inherently does have lower margin. And so that does impact our mix.

I do want to add on this a little bit. While we're certainly pleased with the double-digit growth. Additionally, this business has favorable cash conversion, and there is some improvement on where we're focused on driving margin in a better place. So overall, again, pleased with this. We have some work to do to get this more in line with the overall Baxter performance.

Makes sense. And then I do want to push a little bit more on the guide. Earnings beat $0.19 this quarter, tax -- the tariff refund, $0.11, TSA $0.04, lower interest $0.02 to $0.03, only raising by $0.10. Is this just being conservative on the second half? And then curious how you're thinking about the TSA income dynamic and the headwind for next year. Is that something you can offset or have to lap?

Travis, let me start real quick just on the TSA, and then I'll turn it back to Andrew on kind of the overall confidence in the second half. So we did see higher TSA income in the quarter than we were expecting. But importantly, we also saw higher TSA-related expenses. So when we think about it at a net level, at the operating income, it was not a material impact. And it's the same story for the full year. So yes, expecting higher TSA income, but you should think about it as not a big change when we're thinking about dropping through to the bottom line.

Yes. And not much more to add here, except, look, we're pleased with the performance in the quarter, but a lot of work remains and our team is very focused on this, and it's just 1 quarter. So to your point, say-do ratio, we are very focused on executing for the second half of the year, getting ready for '27 and aligning the organization around how we perform. And at its core is how we align GPS in action and that becoming our driver across the organization.

Larry Biegelsen of Wells Fargo is on the line with a question.

Congrats on the progress here. Andrew, maybe a little bit more of an update on Novum IQ. You talked about it early in the validation process. What are the kind of the next steps here, Andrew? And if you don't get Novum back on the market, how durable is Spectrum IQ as a workhorse pump?

Yes. And a couple of items here. Punch line is, we're making progress. Now we continue to closely work with regulatory authorities, and we support our current Novum LVP customers, and they're working with the mitigating actions that are in place. As we do a step back, we like our total pump portfolio. We have Novum syringe. We have Spectrum LVP and they're on the IQX platform. And as I mentioned in my prepared remarks, we've even launched PeerVue that enables these to really bring higher value for our customers. So overall, we're pleased with our total offering. We're pleased with the value proposition it brings to customers, and we're continuing to drive to when it's ready, launch LVP. That said -- or Novum LVP, that said, we're very focused on bringing that value to customers today and continuing to expand our value proposition.

That's helpful. Andrew, obviously, compounding was strong. You talked about that earlier. Talk about injectables and anesthesia, what the plan is to turn that around? When we had visibility on that, it was -- those were declining, I believe.

Absolutely. Look, this business, look, it remained pressured due to ongoing supply constraints and continued softness in premix. Now we are taking very specific actions to improve some supply conditions, select products. And there's an area, and I've talked about this in the past, and we're staying very focused on a contract manufacturer, and that does remain constrained. We are working extremely close with them on how to improve operational efficiency, how to align around product and continued high level of quality within the solution set. As -- just to outline this, our full year guidance does have this built in. So we are in our stages around how do we execute and continue to perform in this space. We have taken that into account in our full year.

Vijay Kumar of Evercore is on the line with a question.

Congrats on a nice sprint here. Maybe just on the performance within second quarter, Andrew, some questions around were there any one-timers? Was there any restocking benefit from IV fluid? I know the market went through a rebasing effort, if you will. And also any quarter end phenomenon, how -- talk about phasing in the quarter, anything that stand out to you?

Yes. So let me take those in 2 areas. First, in IV Solutions, look, we didn't see a massive restocking. So I'd say it's not material in our overall IV business. That said, this is the new norm. And we've talked about how this is the baseline and how our product set and our alignment with customers, we bring a high value here. And so we're -- we feel good about our market position, but we don't rest on this. We're always focused on how to improve for our customers and align this business to execute. We have a high value creation. We have the ability to help our customers as they utilize this solution set. But we are at the new norm within the business. And the second piece of your question throughout the quarter, look, all I can say is we saw broad-based strength across the business. And certainly, when we look -- and I called out a few of the areas that we saw some additional increase throughout the quarter, we're pleased across the board. That said, we've got a lot of work to do to finish the year strong, and our teams are very focused on rolling our sleeves up, continuing to execute and utilizing our GPS as our guide forward.

That's helpful, Andrew. And then maybe one more product-related question, if you will, on Connected Care. There's been some concerns around maybe cautiousness by hospitals on utilization and maybe that spills over into their CapEx outlook. So can you talk about your order book within Connected Care that business did well. Any signs of slowdown that we're seeing from a customer CapEx spending standpoint?

Yes. So a couple of items here, and I'll walk through what our teams are executing to. I'll walk through my current engagement with customers and how we view this space. But demand remains stable. And this is really supported by U.S. strong capital order book and funnel visibility across PSS and our GSS business. And so we've continued to see our ability to support our customers as they're investing for the future. That said, we are staying very close to this market, and we want to ensure that we are aligned with their needs. I will also additionally add that I have met and part of my standard work as a CEO is to meet with customers on an ongoing basis. And what we're hearing from them is a few items. First, their continued focus on how they're investing to improve their workflow, improve their process alignment to our business. Number two, I've been able to see real time firsthand how our new stretcher is resonating with our customers and the excitement that they have around this Dynamo platform and what it's going to mean to them as far as the ability to utilize this in their network. Early days, but certainly pleased with the progress. All that to be said, we are not immune. We continue to stay very focused on this to ensure we've got alignment for our business.

Pito Chickering of Deutsche Bank is on the line with a question.

I'm going to ask the Drug Compounding question a little differently. Just looking at the organic revenue guidance raise of 200 to 300 basis points, and the implied EPS in the back half of the year was a little lighter than the Street despite some good guys like interest. What is the margin contribution of the guidance raise that you put in the guidance?

Pito, this is Kevin. So just to kind of reiterate a couple of points, drug compounding a good chunk of the performance in Q2. And when we think about overall first half performance, organic sales grew about 2%. Our new full year sales outlook of 2% to 3% means we expect sales to be at that growth rate or higher. So continued momentum. When we think about the EPS guidance raise, I think the easiest way to think about it is that reflects the tariff refund that we received in the quarter. That was $0.11. That was onetime in nature that was not previously included in our EPS guidance. And that is what the new EPS guidance reflects is the inclusion of that refund in Q2.

Okay. So let me ask this I guess, a little differently, like you're raising EPS by the tariff. You're increasing revenues in the back half of the year on continuation, but there's no EPS flow-through on that despite, I think, $0.03 coming from better interest rates. I guess, can you give me like the good guys and bad guys on margins in the back half of the year versus previous guidance and things like oil and shipping costs sort of, can you put that in there as well?

Yes. So I think the punchline is, from an operating margin standpoint, we've been pretty clear about first half headwinds followed by expected improvement in the second half. The new item this quarter is the tariff refund, which is nonrecurring in Q2. And so if you're thinking about kind of modeling on a sequential basis for the balance of the year, you normalize for the tariff benefit in Q2 and then you think about the drivers for sequential improvement that we've talked about, higher volumes in the second half, benefits from the cost structure actions. We've already seen that start to manifest in our Q2 results and then rolling through the higher cost inventory produced at the end of 2025, which importantly, we saw that recognized in the first half of the year. And so that item specifically is going to be a Q2 to Q3 sequential improvement. And so I think, again, as kind of an overall, the framework we've laid out is consistent. Obviously, the first half of the year from a top line has come in a bit stronger than we expected. But we are still very confident on the full year guidance and reiterated kind of the same underlying operating performance that we had before.

And just to add additional minor color around the supply question. Look, it's something we continue to closely monitor. And like everyone else, we've seen some pressure here, but it has been manageable, and it's within our guidance. So to be very clear, it's within our guidance. And so overall, I would say we're taking a very proactive approach on where we might have challenges and then we take mitigating actions and align around what actions are going to get us back in line. On oil prices, I've talked to that quite a bit with the Vantive spin, it's obviously lesser of an impact on our business. Therefore, we're continuing to monitor it. That said, we've been able to offset.

Patrick Wood of UBS is on the line with a question.

But I'll ask them both upfront. I guess first one, if you could unpack a little bit more on the Advanced Surgery side, the hemostats and sealants growth. I mean that stayed a lot stronger for a lot longer than at least we had anticipated. So that's one. And then the second one, just -- I know you're not guiding on '27, but as we contemplate '27 and the TSA income that comes out, is that still EPS neutral in that year? Or is this something that we should at least be conceiving could be a factor to put into our models for next year?

Yes. So to walk through Advanced Surgery, look, pleased with the progress here. Strong performance for the team, strong alignment with customers and having traveled with this team and having been seeing firsthand with our customers, our product set, our enablement and how our customers really look to us to help in the patient and having high patient care really aligns with our mission, and Save and Sustain Lives at Baxter is very important to us, and this business is front and center on that. So strong performance, strong growth. The team continues to align around strong demand and increased volumes for our global portfolio and execution and staying very close to our customers through this. As far as '27, look, the only thing I can add on this, and of course, there's a lot of moving parts. We're laser-focused on finishing '26 strong. We have aligned around the actions we have to take as an organization and being very focused on what those align to for getting us ready as we finish the year and get ready for '27, and we will provide more color on '27 as the year comes closer. That includes TSA, that includes a continued view on markets and ensuring that we've got clear focus on how we want to execute to finish the year out.

Joanne Wuensch of Citi is on the line with a question.

Really nice revenue results. I have 2 quick ones. The first one has to do with just the overall hospital environment and procedures. There's a pretty active debate out there on how much changes to the ACA is impacting procedures and with your presence in the hospital, I suspect you have a frontline seat. And then the second one is, I just want to make sure I understand the moving parts on gross margins, impact of tariffs on the second quarter specifically? And then how should we think about full year gross margins and that strength of recovery?

All right. So I'll take the first part of that. And look, if I just do a step back, overall, we're not seeing any changes with behavior from our customers and the overall environment. And we're staying very close to this, and we're not immune. That said, we have not seen a change in behavior and/or view on our product set. But we are staying very close around this. And as a reminder, I visit customers often. We align around understanding what their needs are. And we're launching new products to expand that and to truly support their focus on patient care and also workplace optimization and Baxter has a strong ability to support that.

And then as far as gross margins for the full year, we haven't provided explicit guidance at the gross margin level. But when you think about some of the items we've talked about and some of the moving pieces, mostly focused on operating margin, they're obviously relevant to gross margin. So obviously, the tariff refund in Q2 was a positive rolling through the higher cost inventory, that was the largest headwind this quarter. And as we've noted, importantly, we've now cycled through that. And so if you're looking at Q2 as kind of your starting point after normalizing for the tariff refund, you should expect sequential improvement for the balance of the year.

Rick Wise of Stifel is on the line with a question.

Two questions. My first is on Front Line Care, up 2% in the quarter. Anita, you highlighted planned product exits. My question is, what -- can you quantify the specific 2Q impact on growth? What would it have been ex that? Or maybe it wasn't large enough to really quantify, but when do we get past that? And maybe a bigger question is, how do we think about Front Line Care growth going forward? Or what are you aspiring to? Is this a mid-single-digit grower? Is there something in the innovation pipeline that's going to change the trajectory? And then I have a follow-up.

Rick, this is Kevin. Maybe let me start here just talking about kind of the Q2, and then I'll turn it back to Andrew for kind of a broader innovation discussion. So as it relates to Q2, Connex 360 did contribute to the growth year-over-year of Front Line Care. Obviously, in the context of total Baxter, it's less of a contributor. But for Front Line Care, it was impactful in the quarter. Andrew, maybe a little more on the second part of his question on innovation more broadly.

Yes. And the piece on planned exits, I would say they're not material, but we do monitor these. And I'll just say a couple of items on this business and overall. We are focused on really alignment to where we have value creation for customers. And part of that is going to be strong portfolio management. And look, we're -- I'm a markets first person. And so we want to understand where we have value for customers, aligned with that value is and ensure that we're not only launching products to meet that and expand that, we sustain our solution set that's going to keep our customers in a good place. And so think about this as base hits, that constant drive to always get better, be better and be in front and relevant in front of our customer base. And overall, long term within this business, look, we've seen improvement. It's early days. And I would say the leadership team is really laser-focused on how to execute and the right value creation for customers. And that ultimately then what that means for the business growth.

Yes. And Andrew, this is more for you and sort of a big picture question. Obviously, you -- these are your words you said earlier, you've made continuous positive progress. It's impressive. It's good to see the quarter. And I know you're pleased with the progress. I suspect my sense of you is I doubt you're satisfied. But my question is, where has it gone better, faster, bigger than you -- what's the biggest better, faster thing that's happened that you're pleased about? But where are you -- I don't want to say disappointed or frustrated, but where would you have wished it could go faster? And maybe talk to us about how you personally are evolving your focus to make the faster stuff go faster and make the stuff that's maybe been a little slower than you would have wanted to go -- turn around better.

You bet, Rick. And let me just walk through a couple of items. And I've been very pleased with how GPS has taken shape across the organization. And look, having done this before and I've been a part of many organizations that have aligned -- the team at Baxter has really embraced this. And if I were to coin a phrase, boring in consistency, brilliant in execution, we want to be consistent, and we want to continue to execute. And so the nuance that I want you to think through is, and I referenced this, we have done -- and think about this, year-to-date, we have done over 400 continuous improvement events. We have almost 200 in flight, and we have another 400 planned in the pipeline. And when we think through that, that is the driving force. And if you look at the flywheel of our GPS system. It starts with strategy. It starts with understanding the markets, understanding the position, understanding the products. And then it aligns to what are the breakthroughs that we want to drive within each business, within each segment. Then it goes to how we're going to measure KPIs, and we look at annual, we look at quarter, we look at monthly, we look at daily where possible. And then it's on our teams actually, and I travel a lot. And I get to see firsthand how the teams have embraced this concept, this drive, their passion for making tomorrow better than today. And I can go reference point after reference points, I can give you examples after examples. But to me, that's how we think about the future. There's no one innovation that will define our future. There's no one continuous improvement event that will define. It's the accumulation and combination of all of them that puts us in that execution cadence. That said, it starts with leaders. And even this week, we have a leadership team here that's going through their view on how to get better every day, how to build capable teams, that drive and that passion around making tomorrow better than today. And so we're early in our journey. Now you nailed it in the question, which is, am I ever satisfied? No, I'm in that constant drive to always get better, but I am pleased with our progress. That said, one quarter is one quarter. It's that drive to finish the year strong, get ready for '27, launch new exciting products that are base hits and build the team's momentum around how we continue to perform, continue to drive. Thank you for the question.

Matt Taylor of Jefferies is on the line with a question.

So first, I wanted to ask a follow-up on the operating environment because there are several places in the release and the materials where you talked about stable demand for patient support for your products. It really seems like you're saying nothing is changing with CapEx spending. So could you be specific, are you seeing any impact from ACA or HIX subsidies and/or Medicaid? And do you expect any impact from that? If you could help to frame that risk at all, that would be great.

Yes. So a couple of items here, look, we are not immune. We stay very focused on this, and it's a part of -- look, we assess customer base. We go through all the external documentation. And what I can tell you is net-net, we've not seen a massive change in behavior and buying behavior. And -- but we're staying very close around it. And I walked through a little bit of that earlier around funnel, around outlook. So again, we're seeing strong demand for our product set. That said, we're staying very, very close to this to ensure we've got alignment with customers on their buying behaviors and their needs. So overall, no update on our expectation. That said, it's something we are continuing to monitor and continuing to assess.

Got it. And can I ask one follow-up on '27? I know you're not going to be specific, but previously, you had talked about confidence in at least being able to grow the top line and earnings in '27. Can we still assume that's the case or maybe you have more confidence in that now that you've produced some good results here in Q2?

So a couple of things. And I'll just walk through it. Look, we are pleased with our progress. No one quarter is going to define us. Now we're pleased with the progress in Q2. That said, as I talk to the team, look, we've got a lot of areas we want to target and drive in the second half of the year. And certainly, we don't want that to get ahead of ourselves. And so as we look at '27 to get there goes through '26. And so we'll give update and color at the appropriate time. But right now, we are laser-focused on executing for the remainder of the year.

Josh Jennings of TD Cowen is on the line with a question.

Andrew, I know it's Baxter has had some comp variability as we're trying to assess each business unit and the go forward as Matt's question addressed about 2027. But I was hoping to just get an update on your team's view on the weighted average market growth rate of the portfolio, various business units, many different product lines. But historically, we've thought of the weighted average market growth rate of Baxter's portfolio around 3% to 4%. I mean does that hold true when comps stabilize and as you look forward? And where do you see Baxter's portfolio, which business units are primed to gain share as you reach that steady state and maybe in 2027 and beyond?

You bet. And look, if I just do a step back, look, we view this as a low single-digit area, and that's overall. Now if we then piece this apart and we go into different areas of the business, we've obviously seen and continue to see strong areas, and I'll just call out a couple. We've seen strong performance in our Advanced Surgery business. Compounding has obviously been a strong grower. That said, all of our businesses are focused on executing and bringing value and innovation to our customers and alignment to that cadence around that. And what gets me excited as we continue our execution journey is how -- and I know we didn't talk about this, but how we're looking at leverage. And we talked in our prepared remarks around getting to approximately 3x by year-end, obviously, gaining confidence in that, gaining our ability and what that means for our future. And how we think about capital allocation with our alignment to internal investment as well as potential tuck-in M&A as well as other opportunities that are going to really be part of the future narrative. That said, it's about execution. It's about how we align. It's about GPS being at the core of everything we do and our people to align to that future. Thank you.

There are no further questions at this time. I will now turn the call back to Andrew for closing remarks.

Thanks, operator. We are encouraged by the progress we're making and remain focused on the work ahead. Our turnaround is gaining traction. Execution is improving. We're building momentum across the business. We believe this positions Baxter to deliver more consistent performance, sustainable growth and long-term value for shareholders. Thank you for your time. Appreciate the interest. Stay safe, and goodbye for now.

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