3M Company

Ladies and gentlemen, thank you for standing by. Welcome to the 3M First Quarter Earnings Conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you do have a question, please press star 1 on your telephone keypad. As a reminder, this call is being recorded Tuesday, April 21, 2026. I would now like to turn the call over to Chinmay Trivedi, Senior Vice President of Investor Relations and Financial Planning and Analysis at 3M.

Thank you. Good morning, everyone, and welcome to our first quarter earnings conference call. With me today are Bill Brown, 3M's Chairman and Chief Executive Officer, and Anurag Maheshwari, our Chief Financial Officer. Bill and Anurag will make some formal comments, then we will take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our investor relations website at 3M.com. Please turn to slide two and take a moment to read the forward-looking statements. During today's conference call, we'll be making certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-K lists some of these most important risk factors that could cause actual results to differ from our predictions. Please note, throughout today's presentation, we'll be making references to certain non-GAAP financial measures. The considerations of the non-GAAP measures can be found in the attachments to today's press release. With that, please turn to Slide 3, and I will hand the call off to Bill. Bill?

Thank you, Chinmay, and good morning, everyone. We delivered solid operating performance in Q1, with earnings per share of $2.14, up mid-teens versus last year. Operating margin increased 30 basis points to 23.8%, and free cash flow was over $500 million, up double digits. During the quarter, we returned $2.4 billion of shareholders, including $400 million in dividends and $2 billion of share repurchases. We had a light start to the year on the top line with organic growth of 1.2%, driven by pockets of macro pressure, but we saw encouraging order trends that support our outlook for acceleration in the balance of the year. Looking forward, we remain confident in achieving our full year 2026 guidance, despite the volatile environment. Our performance reflects strong execution on productivity, cost discipline, and commercial rigor. We're building a stronger foundation based on commercial, innovation, and operational excellence, underpinned by a relentless focus on strengthening our performance culture. In commercial excellence, we're seeing benefits from improved sales effectiveness and lower customer attrition, and we continue to make progress on cross-selling opportunities. To date, we've closed on approximately $80 million of new business against a three-year, $100 million target we laid out at Investor Day, with a pipeline of $85 million of additional cross-sell opportunities. We've introduced AI tools to drive growth, reduce churn, and automate manual work, including an agent that analyzes our sales and opportunity pipeline data to develop customized coaching plans for sales managers to help reps meet their targets. And we believe digital tools like Ask 3M, a new AI-powered digital assistant that helps customers find solutions to design challenges using 3M products, will allow us to reach a broader population of customers. Our pace of new product introductions is accelerating with better on-time performance, reduced cycle times, and clearer governance and accountability across R&D. We launched 84 new products in Q1, up 35% versus last year, and we're on pace to launch 350 in 2026. This will put us ahead of our investor-date target to launch 1,000 new products through 2027. We've maintained OTIS service levels above 90%, while at the same time reduced inventory by three days and delivery lead time by 25%, improving our competitiveness with customers. OEE improved over 100 basis points year-on-year as we optimized asset run length, run time, and changeovers, creating a stronger foundation for sustained productivity and fixed cost leverage. And cost support quality decreased by approximately 100 basis points versus Q1 last year, driven by more structured root cause analysis, significantly increased Kaizen activity, and tighter process controls. What matters is that these are not isolated wins. They collectively reflect greater execution discipline and constancy of purpose. And that consistency and momentum gives us confidence that we can meet or exceed the medium-term goals we outlined at our investor day last year, even in an uncertain macro environment. While we continue to strengthen our foundation and shift from a holding company to an operating company model, we're beginning a broad-based transformation of the company, simplifying and standardizing processes reducing complexity reshaping our portfolio and improving resilience and predictability we see substantial opportunities to streamline operations and consolidate facilities the transformation includes both deliberate footprint actions as well as targeted investments in manufacturing and process technology for example transitioning from solvent to solvent-free coating which brings cost capital, and environmental benefits. Earlier this month, we closed on the previously announced sale of our precision grinding and finishing business within SIVG, which reduced our footprint by seven factories, and we closed one factory and announced three other full or partial closures, bringing our total projected manufacturing site count to below 100. At the same time, we're investing more than $250 million over the next three years and standard, easy to replicate automation across our plants and distribution centers. By automating material handling in our warehouses, replacing manual slitters with automated systems, and automating our current manual visual inspection processes, we are improving safety, reducing labor costs, increasing yield, and putting ourselves in a better position to support demand as volumes recover. To illustrate the opportunity, We have 7,000 material handlers and over 600 operators performing manual visual inspections across our network and about 500 manual slitters. When we automated the slitting operation at our Nevada facility late last year, we achieved a 30% increase in square yards per hour productivity. Over time, this transformation will allow us to accelerate towards a structurally higher growth, higher margin potential portfolio of priority verticals. Slide four provides a more detailed view of growth and orders by end market. When you look across our portfolio, roughly 60% of our businesses showed relative strength in Q1, including general industrial and safety. Importantly, we also saw strong orders in these markets, which gives us visibility and reinforces that the demand environment in these verticals remains healthy. At the same time, we experienced macro and industry-driven softness in about 40% of the portfolio that we've been highlighting as watch areas. In electronics, we delivered flat year-over-year growth in Q1 versus mid-single digits last year. Our performance in semiconductor and data centers was very strong, while consumer electronics was soft due to industry-wide memory chip issues, which is impacting demand. Electronics orders were up double digits due to significant activity in semis and data centers, which will convert to revenue in Q2 and the second half. In automotive, the market was soft as expected in the first quarter. Global IHS build rates were down about 3% overall and 10% in China, which pressured volumes. And in consumer, we continue to see soft U.S. consumer discretionary spending with the few pockets of strength in categories with recent new product introductions. POS trends in the U.S. improved over the course of the quarter and were positive in seven of the last eight weeks, providing some encouragement heading into Q2. Overall, orders were up slightly over 10% in Q1, and backlog grew double digits, both sequentially and year-over-year, giving us momentum into Q2. This strength reflects the combined impact of our new product introductions, continued progress in commercial excellence, and orders for longer lead time products, with some additional benefit from pre-buying ahead of recent price actions. It's encouraging to see order strength continue into the first few weeks of April. Turning to slide five, as part of our ongoing focus on portfolio shaping, last month we announced the acquisition of Madison Fire and Rescue, which will be combined with our Scott Safety business to create a leading global fire and safety business. The combination of Scott Safety's premium self-contained breathing apparatus with Madison Fire and Rescue's premier portfolio in rescue technology and fire suppression creates an $800 million revenue business growing at a high single-digit growth rate. This strategic transaction broadens our safety portfolio, one of our priority verticals, by expanding our market reach and building scale for future growth. It positions us to maintain above-market growth, enhance margins, and drive strong free cash flow generation. I also want to highlight our growing data center and associated power utility business with current revenue of approximately $600 million, $100 million inside the data center, and about $500 million bringing power to the facility. This is a priority vertical space, but we are introducing new products like EBO, or expanded beam optics, a high-performance optical connector engineered to improve installation speed, reliability, and operational efficiency within data centers. EBO builds on our existing twin-axe copper connector for high-speed data transmission and positions us well for the copper to fiber transition underway. With hyperscaler validation, a significant order in hand, and a billion-dollar-plus addressable market, we're investing to more than double our capacity to support growing AI demand. We see additional opportunities here as demand expands to ceramics, silicon photonics, and on-ship optical connectors. We have strong IP to support this evolving market and a clear roadmap to develop new products that further drive growth. Overall, I'm pleased with our progress this quarter, encouraged by the pace, up-tempo, and executional rigor of the 3M team. We're on a multi-year journey, and progress won't be linear, but we're building the capability to execute consistently, to innovate with purpose, and to allocate resources toward the parts of the portfolio that deliver the most value. I'm grateful to the 3M team for their commitment, hard work, and focus as we deliver progress every day. With that, I'll turn it over to Anurag to share the details of the quarter. Anurag?