Solventum Corporation

Hello and welcome to Solventum's first quarter fiscal year 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Amy Wakeham, Senior Vice President of Investor Relations and Finance Communications. You may begin.

Thank you. Good afternoon and welcome to Solventum's first quarter fiscal year 2026 earnings call. Joining me on today's call are Chief Executive Officer Brian Hanson and Chief Financial Officer Wade McMillan. A replay of today's earnings call will be available later today on the investor relations section of our corporate website. The earnings press release and presentation are both available there now. During today's call, our discussion and any comments we make will be on a non-GAAP basis unless they are specifically called out as GAAP. The non-GAAP information discussed is not intended to be considered in isolation or as a substitute for the reported GAAP financial information. Please review the supporting schedules in today's earnings press release to reconcile the non-GAAP measures with the GAAP reported numbers. Our discussion on today's call will include forward-looking statements including, but not limited to, expectations about our future financial and operating performance. These statements are made based on reasonable assumptions. However, our actual results could differ. Please review our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ materially from any forward-looking statements made today. Following our prepared remarks, we'll hold a Q&A session For this portion of today's call, please limit yourself to one question and one related follow-up. If you have additional questions, you can rejoin the call queue. And with that, I'd like to now hand the call over to Brian.

All right. Great. And thanks, Amy, and to all of our shareholders and everyone else following the Solventum story. I just want to say thanks and welcome to our first quarter 2026 earnings call. And I'm going to start by addressing our solvers around the world, because I'm pretty sure that a few of them are listening in today. I just want to say thank you. I thank you once again for delivering on your commitments in our fast-paced transformation environment. I know it's not easy. I know it's not easy with the amount of change. But the results that we're sharing today, well, they just don't happen without you and your hard work. And I just want to say I'm extremely proud of not just your dedication, but the results that you continue to deliver. You know, this team's ability to drive outcomes while navigating ongoing separation efforts, ERP implementations and acquisitions and divestitures. Well, it's just, it's a testament to the strong talent that we have in the organization. It's a testament to you. And it's a testament to the culture that we've already built. So again, to our global team members, thank you very much for making it happen. Okay, now let's get into it. We delivered first quarter results ahead of our plan and ahead of expectations. Organic sales growth and EPS both exceeded our plan. And it's, again, reflecting a very strong execution across the organization and the momentum that we've already built. We saw solid performance across all segments, driven by strong commercial execution and new product launches. And thanks to positive volume, mix, and continued progress in our savings initiatives, we also achieved better than expected performance on margins as well. This is a clear reflection of the discipline and the rigor we've built into how we manage this business. You know, Q1 is a clear indication that we are well on our way to delivering our 2026 guidance and, importantly, our go-forward LRP objectives. You know, it's clear that our transformation journey is working. It's making progress. You know, we've mentioned before we've rebuilt our commercial engine with just clearer accountability and needed specialization and stronger leadership. And now innovation is reinforcing the commercial momentum that we've built. We expect to have close to 20 new products launch over the next two years. And as we would expect, as anyone would expect, a meaningful portion of them will be within our growth driver areas. This will be additional fuel now for that new and enhanced commercial team. And when it comes to operational efficiency and the separation from 3M, we've made meaningful progress on our ERP cutovers as well as the overall separation process. And I can tell you that the team continues to execute against these milestones with purpose. Now, that said, we cannot wait to get to 2027 and put the majority of the separation work behind us. You know, we expect the resources and the bandwidth we free up to create significant value, and that's exactly what our Transform for the Future program is designed to capture. And as a reminder, our Transform for the Future program is a multi-year, $500 million savings program, and it is our way of proactively reshaping our operating structure while freeing up resources to invest for the long term. We are streamlining systems, increasing automation, and optimizing our global footprint while repositioning spend toward the highest return areas of our business. This program is already paying dividends and will deliver more meaningfully in 2027 and beyond. When looking at our portfolio optimization program, you know, we've moved rapidly here with clear proof points of our ability to execute, ranging from skew rationalization to the sale of the PNF business to the acquisition of Acera, and we are just getting started. we see portfolio optimization as a perpetual lever for value creation here at Solventum. In other words, as we said in our original investor day, we will continually assess our businesses for strategic and financial fit. And when we determine that someone else can offer more value for our business than we derive, or we see another path to increase shareholder value, we will act decisively just like we did with the purification and filtration business. Relative to our skew rationalization, We're more than halfway through this process and expect to finish by the end of this year. Our separation of P&F is on track and progressing well. And Acera, although it's early, the performance reinforces our ability to identify, close, and effectively integrate attractive assets in our space. In fact, Acera is another great proof point that portfolio optimization isn't just a strategic priority. It's a value creation lever that we absolutely know how to pull. We targeted the right asset, a fast growth business, that is aligned to our existing call points and, as a result, immediately beneficial to our combined commercial teams. And importantly, we see Acera as just the beginning. We have a target-rich environment for additional tuck-in acquisitions and a balance sheet that gives us the flexibility to pursue them while also returning capital to shareholders. And as you probably remember, we have board approval for up to $1 billion in share buybacks. And given the substantial value we see in our shares and the quality of our business, one should expect that we will accelerate execution of that approval. Okay, so moving to our three operating segments. I'll start with MedSurge, which, of course, is our largest business. We continue to see strong underlying performance in our growth driver areas. Negative pressure wound therapy was led by ongoing demand for traditional and single-use therapy, continued expansion of our back peel-in-place dressing, and, of course, our specialized sales force. And now with Acera, it opens the door to the fast-growth acute care synthetic tissue space and really slots perfectly into our advanced wound care infrastructure. We're obviously early in integration, but the thesis is playing out. You know, the team is executing, the product portfolio is resonating with our customers, and we expect Acera to be a meaningful contributor to reported growth as the year progresses. In our infection prevention and surgical solutions business, well, Tegaderm CHG remains a consistent performer as our team successfully upsell this important clinical solution, and we're encouraged by the adoption of the recent attest sterilization product launches as well. And both of these areas are benefiting from our specialized sales teams. In dental solutions, we're building on the momentum we saw in 2025. Our Clarity brand relaunch, the Filtek Easy Match, and ClinProClear are resonating with our customers and benefiting, again, from a more specialized sales team. And as we exited 2025, this team made significant strides in improving back orders, and I can tell you that our customers are noticing. I want to thank our supply chain and the dental teams for making it happen. Okay, moving to our health information systems business, we continue to benefit from the strength of our revenue cycle management sub-business. And inside RCM, our autonomous coding offering continues to gain traction in both outpatient and inpatient settings. And our international expansion is providing a really strong tailwind as well. Relative to AI and autonomous coding, I'm going to reiterate what I said on our last call. We see AI as a helpful tool to deliver better outcomes when it comes to autonomous coding. But what differentiates the outcomes is the data. It's the rules. It's the rigor behind them. And we are differentially able to leverage AI thanks to our unique ability to efficiently and effectively train it. You know, we built deep rules and algorithms designed to ensure accurate and compliant reimbursement coding. And this combined with our vast data sets, our proprietary workflows, it allows us to more effectively train and maximize AI and ultimately, as a result of that, deliver autonomous coding that our customers can trust. And I can tell you the economics of autonomous coding, they're compelling. You know, our customers benefit by improving productivity, eliminating FTE cost infrastructure. and improving revenue capture thanks to increased accuracy. That's a powerful value proposition. Reduce cost, improve productivity, and capture more revenue. And you can see why our customers are interested in this pathway. Now, shifting gears to everyone's favorite topic, tariffs, we continue to expect the annual headwinds to be in that range of 100 to 120 million. And I can tell you from the very beginning, our supply chain teams have been actively working on mitigation strategies since we first saw tariff headwinds emerge. And our Transform for the Future program gives us additional firepower to offset these headwinds. And as a result, we've committed to expanding operating margins 50 to 100 basis points in 2026, and we absolutely intend to do so. But let me just zoom out for a moment, because I think it's important to keep the bigger picture in view. You know, going into Q1, we had people ask whether we could maintain the momentum we saw in 2025. Is it sustainable? And I can see why. We did triple our comparable annual sales growth in 2025, but that was before the full benefits of our recent product launches, our pipeline innovation, and the commercial enhancements that we made in 2025. So for our full year 2026 expectations, excluding skew exits, represent continued progress on that ramp. And as I've said in the past, and I'll say again, it's not a question of whether we get to our LRP targets of 4% to 5% organic sales growth. It's a question of when. All right, so let me summarize the key messages that I want you to take away from the call today because we put a lot out there already and Wade hasn't even gone yet. But number one, our underlying commercial momentum, it's real, it's continuing, and our new product pipeline will be the fuel that that momentum needs to continue from here. Number two, our operational programs, the Transform for the Future, Programmatic Supply Chain Savings, and the separation progress that we have made give us additional confidence in the margin expansion story for the full year and, of course, well beyond. Number three, we have moved with speed and, importantly, impact on portfolio optimization, but we are by no means finished. We will continue to actively shape this portfolio for the long term. And number four, the ramp toward our long-range plan is happening. It is real, and I think it's pretty clear it's happening faster than most people thought possible. And with that, I'm going to hand things over to Wade to walk through our financial details. And then, of course, we'll open things up to questions. Okay? Wade, go ahead.