Assets Under Management (AUM) - Ending AUM increased to $88.9 billion as of June 30, 2025, compared to $87.6 billion as of March 31, 2025[2] - Average AUM for Q2 2025 was $87.2 billion, up from $86.8 billion in Q1 2025[2] - Market appreciation contributed $2.3 billion to AUM in Q2 2025, compared to $2.1 billion in Q1 2025[2] Flows - The company experienced net outflows of $131 million in Q2 2025, a shift from net inflows of $222 million in Q1 2025[2] - Open-end funds and closed-end funds saw net inflows, while advisory and subadvisory experienced net outflows[2] - Total firm net flows were -$0.1 billion in Q2 2025, representing an organic decay of -0.6%[18] Financial Performance (As Adjusted) - Net income was $37.3 million in Q2 2025, slightly lower than $38.4 million in Q1 2025[2] - Diluted EPS was $0.73 in Q2 2025, compared to $0.75 in Q1 2025[2] - Operating margin was 33.6% in Q2 2025, a decrease from 34.7% in Q1 2025[2] - Revenue reached $135.3 million in Q2 2025, compared to $133.8 million in Q1 2025[4] - Expenses totaled $89.9 million in Q2 2025, up from $87.3 million in Q1 2025[4] Revenue Breakdown (As Adjusted) - Open-end fund fees generated $69.9 million in revenue in Q2 2025[8] - Institutional fees contributed $32.8 million in revenue in Q2 2025[8] - Closed-end fund fees accounted for $24.9 million in revenue in Q2 2025[8] Expense Breakdown (As Adjusted) - Employee compensation and benefits amounted to $54.8 million in Q2 2025[11] - Distribution and service fees were $15.7 million in Q2 2025[11] - General and administrative expenses totaled $17.0 million in Q2 2025[11] Investment Performance - 94% of total AUM was in outperforming strategies over the 1-year period as of June 30, 2025[32] - 90% of total AUM was in outperforming strategies over the 10-year period as of June 30, 2025[32] - 96% of U S open-end fund AUM was rated 4 or 5 stars by Morningstar[32]

Financial Performance - Net income available to common shareholders was $534 million[3], with diluted earnings per share at $0.59[3] - Adjusted net income available to common shareholders reached $538 million[3], resulting in adjusted diluted earnings per share of $0.60[3] - Total revenue remained stable at $1,905 million[3] - Pre-Tax Pre-Provision Income was $832 million[3] - The efficiency ratio was 560%[3] - Return on Average Tangible Common Equity was 1934% on a reported basis and 1948% on an adjusted basis[3] Loan and Deposit Trends - Average loans remained stable, while ending loans grew by 1%[8] - Average deposits increased over 1%[22] - Pipelines are up 17% YoY and commitments are up 1%[8] Net Interest Income (NII) and Margin (NIM) - NII increased by 5% QoQ, and NIM increased 13bps to 365%[27] - Expect 2025 NII to grow between 3-5%[31] Non-Interest Income and Expense - Adjusted non-interest income increased 5%[36] to $646 million[33] - Non-interest expense increased 3%[40] to $1,073 million[38] - Expect FY25 adjusted non-interest income to grow between 25-35%[36]

Financial Performance - Revenue growth was 9%, reaching $17.856 billion, compared to $16.333 billion in the prior year [7] - Adjusted EPS increased by 17% to $4.08, up from $3.49 in Q2'24, excluding the Accertify gain [5, 7] - Net income decreased by 4% to $2.885 billion [7] - The company reaffirmed its full-year guidance of 8-10% revenue growth and $15.00-$15.50 EPS [5] Billed Business - Total billed business grew by 7% year-over-year (FX-adjusted) [9] - U S Consumer Services billed business also increased by 7% year-over-year [12] - International Card Services billed business grew by 12% year-over-year (FX-adjusted) [17] - Commercial Services billed business increased by 2% year-over-year (FX-adjusted) [14] Credit Metrics - The net write-off rate for Card Member Loans was 2.2% [67] - The net write-off rate for Card Member Receivables was 1.4% [67] - Total provision increased by 11% year-over-year, driven by a larger net reserve build and higher net write-offs [77] Capital and Guidance - The company's CET1 ratio was 10.6% [53] - The company projects an EPS of $15.00 - $15.50 for 2025 [56]

Financial Data and Key Metrics Changes - The second quarter earnings per share, excluding charges and credits, was $0.74, representing a sequential increase of $0.02 and a decrease of $0.11 compared to the same quarter last year [21] - The second quarter revenue was $8.5 billion, a 1% sequential increase driven by 2% growth in international markets [22] - Adjusted EBITDA margin for the second quarter was 24%, reflecting a sequential increase of 21 basis points [22] Business Line Data and Key Metrics Changes - Production Systems revenue increased by 3% sequentially to $3 billion, driven by strong sales in artificial lift and midstream production systems [24] - Digital and Integration revenue decreased by 1% sequentially to $1 billion, with margins expanding by 240 basis points to 32.8% [22][23] - Reservoir Performance revenue declined by 1% sequentially to $1.7 billion, while Well Construction revenue was essentially flat at $3 billion [24] Market Data and Key Metrics Changes - In international markets, revenue grew by 2%, with strong growth in Iraq, UAE, Kuwait, East Asia, China, and Australia [7] - North America saw a revenue decline, primarily due to seasonal spring breakup in Canada and a non-repeat of exploration data sales in U.S. offshore [8] - The macro environment remains uncertain, particularly with OPEC plus supply releases impacting market dynamics [12][13] Company Strategy and Development Direction - The acquisition of ChampionX is expected to enhance the company's portfolio, providing capabilities in producing chemicals and naturalist, which are critical for long-term asset performance [15][16] - The company aims to integrate ChampionX's capabilities to deliver a fully integrated service offering from reservoir to surface facility [18] - The focus is on creating a less cyclical and growing market opportunity that is more OpEx driven and less sensitive to short-term commodity cycles [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth of the offshore market despite current project delays, citing a steady backlog in OneSubsea [9] - The company anticipates second half revenue to be between $18.2 billion and $18.8 billion, driven by the contribution of ChampionX and steady revenue in legacy business [19][33] - Management noted that while the macro environment is uncertain, there is resilience in the Middle East and Asia markets, driven by lower breakeven costs and a focus on energy security [13][57] Other Important Information - The company generated $1.1 billion of cash flow from operations and free cash flow of $622 million during the quarter, representing a significant increase compared to the previous quarter [25] - Capital investments for the full year are expected to be approximately $2.4 billion, reflecting the impact of the ChampionX acquisition [26] - The company plans to start reporting digital business results as a separate segment beginning in the third quarter [23] Q&A Session Summary Question: Insights on customer behavior and spending trends - Management indicated that major adjustments in international markets are largely behind them, with customers prepared to adjust spending rates due to uncertainty and declining commodity prices [39] Question: Concerns about deepwater activity - Management acknowledged some near-term activity slowing but expressed optimism about a robust pipeline of advantageous projects in the Americas and other regions [44] Question: Growth outlook for the production business - Management highlighted that the focus is on extracting more value from the production recovery phase, with expectations for long-term resilience and growth in the production market [49] Question: Expectations for synergies with ChampionX - Management expects to achieve $400 million in annual pre-tax synergies within the first three years post-acquisition, with a significant portion coming from cost synergies [29][80] Question: Insights on Mexico's gas supply growth - Management noted the need for Pemex to address restructuring issues and expressed readiness to respond to gas development opportunities in Mexico [87]

Financial Data and Key Metrics Changes - The company reported strong quarterly earnings of $534 million, resulting in earnings per share of $0.59, with adjusted earnings of $538 million or $0.60 per share [3] - Pretax pre-provision income increased by 14% year over year to $832 million, with a return on tangible common equity of 19% [3] - Average deposits grew organically by over 30% over the last five years, among the highest in its peer set [4] Business Line Data and Key Metrics Changes - Ending loans grew by 1%, while average loans remained stable; growth in ending business loans was driven by commercial and industrial (C&I) and real estate sectors [12] - Wealth management revenue has grown at more than an 8% compounded annual growth rate since 2018, contributing to record fee income [6] - Treasury management revenue increased by 8% year to date, with a 10% increase in total clients served [6] Market Data and Key Metrics Changes - Consumer deposits in priority markets grew by 20% more than in core markets during the quarter [14] - Average deposit balances in the Corporate Banking Group grew over 1% sequentially, while ending balances remained stable [15] - Net interest income rebounded, increasing by 5% linked quarter, with expectations for full year 2025 net interest income to grow between 3% to 5% [18] Company Strategy and Development Direction - The company is focused on modernizing its core technology platforms, including a new cloud-based commercial loan system and deposit system [8] - The company is not interested in depository M&A, preferring to execute its existing strategic plan and focus on organic growth [37] - The company aims to continue delivering top quartile results and has increased its dividend at a compounded annual growth rate of over 10% over the last six years [9] Management's Comments on Operating Environment and Future Outlook - Management noted that both business and consumer customers are in good shape, maintaining liquidity and managing debt levels well [31] - There is some uncertainty regarding interest rates and inflation, but overall sentiment among business customers has improved [30] - The company expects to maintain positive operating leverage over time, despite the need for ongoing investments [120] Other Important Information - The company executed $144 million in share repurchases and paid $224 million in common dividends during the quarter [23] - The estimated common equity Tier one ratio increased from 9.1% to 9.2% due to strong capital generation [23] Q&A Session Summary Question: Implications of the tax bill on loan growth and consumer spending - Management indicated that the tax package creates certainty for businesses and consumers, which is expected to lead to positive momentum in 2025 and 2026 [30][34] Question: Perspective on bank M&A activity - Management stated they are not interested in depository M&A, focusing instead on executing their current plan and exploring non-bank opportunities [37][39] Question: Details on net interest margin and deposit cost leverage - Management discussed the recent improvements in net interest margin and the expectation for stable to modest growth in the third quarter [18][52] Question: Loan growth dynamics and competitive backdrop - Management highlighted a 17% year-over-year increase in pipelines and emphasized their disciplined approach to portfolio management [59][61] Question: Credit quality and specific portfolios under scrutiny - Management noted that overall credit quality remains strong, with some challenges in specific portfolios, but they are manageable [106][108] Question: Approach to stablecoin solutions - Management expressed intent to participate in a consortium of banks for stablecoin solutions, similar to their involvement with Zelle [111][112]

Financial Data and Key Metrics Changes - The company reported record sales and earnings for Q2 2025, with net sales of approximately $2.7 billion, representing a 4% year-over-year increase [10][21] - Adjusted operating income increased by 14% to $251 million from $221 million last year, with an adjusted operating margin of 9.3%, an improvement of 80 basis points [10][21] - Earnings per share for Q2 reached a record high, with a year-over-year increase of $0.33, driven by higher operating income and a reduced share count [8][21] Business Line Data and Key Metrics Changes - The company achieved a gross margin of 18.5%, an increase of 30 basis points year-over-year, primarily due to direct labor efficiency and headcount reductions [11][21] - Direct labor productivity improved as the company reduced direct production personnel by 3,200 year-over-year [11] - The company successfully recovered approximately 80% of the tariff costs incurred during Q2 and expects to recover most of the remaining portion later in the year [8][29] Market Data and Key Metrics Changes - Global light vehicle production for Q2 increased by 2.7%, exceeding expectations, while production in North America and Western Europe declined by around 3% each [12][30] - In China, the company outperformed light vehicle production growth, with sales to domestic OEMs growing more than 16% [16][30] - The company’s sales in June outpaced the growth of Chinese light vehicle production, indicating a positive trend expected to continue [7][30] Company Strategy and Development Direction - The company emphasized its commitment to achieving $300 million to $500 million annually in stock repurchases and increasing its dividend to $0.85 per share [9][34] - The strategic roadmap focuses on sustainable growth through partnerships with leading global and Chinese OEMs, innovations in safety systems, and operational improvements [33][34] - The company aims to navigate the complexities of tariffs and economic factors while maintaining a strong balance sheet and shareholder returns [29][34] Management Comments on Operating Environment and Future Outlook - Management expressed caution about the remainder of the year due to complexities from tariffs and economic factors, despite a strong Q2 performance [6][30] - The outlook for global light vehicle production in 2025 remains uncertain, with expectations of a decline in the second half of the year [30][34] - The company anticipates a challenging 2025 for the automotive industry but expects significant improvement in sales performance in China [34] Other Important Information - The company’s cash flow remained strong despite higher receivables, driven by robust sales and tariff compensations [9][24] - The trade working capital increased by $185 million compared to the prior year, attributed to higher accounts receivables and inventories [25] - The company’s leverage ratio remains strong at 1.3 times, well below the target limit of 1.5 times [26] Q&A Session Summary Question: Performance in China - The company indicated that it is closing the gap in performance with Chinese OEMs and expects to continue outperforming the market in China towards the end of the year [41][43] Question: Product Volume Dynamics - The company explained that the fluctuations in product volumes are due to mix effects and launch activities, which can lead to significant variations [44][45] Question: Tariff Recovery - Management clarified that the slower recovery of tariffs in Q2 was due to timing effects and expressed confidence in recovering the remaining tariffs by the end of the year [49][51] Question: Margin Guidance - The company expects Q3 to be the weakest quarter due to a projected drop in light vehicle production, with Q4 anticipated to be the strongest [56][78] Question: Pricing Dynamics - The company continues to negotiate pricing in light of tariffs and inflationary impacts, maintaining a historical pricing model [104][105] Question: EV and ICE Dynamics - The company noted that the EV component has not significantly impacted its gross operating margin in the Americas, and tariffs create uncertainty regarding new model launches [108][109]

[Financial Highlights](index=3&type=section&id=Financial%20Highlights) Regions Financial Corporation reported Q2 2025 net income of $563 million, with total assets at $159.2 billion [Financial Highlights](index=3&type=section&id=Financial%20Highlights) In the second quarter of 2025, Regions Financial Corporation reported a net income of $563 million, or $0.59 per diluted share. This represents a significant increase from the $490 million, or $0.51 per diluted share, in the prior quarter. Total assets stood at $159.2 billion, a slight decrease from the previous quarter, while total deposits remained stable at $130.9 billion. Net interest income grew to $1.26 billion, up from $1.19 billion in the first quarter of 2025 Q2 2025 Earnings Summary ($ in millions, except per share data) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net interest income | $1,259 | $1,194 | $1,186 | | Provision for credit losses | $126 | $124 | $102 | | Non-interest income | $646 | $590 | $545 | | Non-interest expense | $1,073 | $1,039 | $1,004 | | Net income | $563 | $490 | $501 | | Net income available to common shareholders | $534 | $465 | $477 | | Diluted earnings per common share | $0.59 | $0.51 | $0.52 | Q2 2025 Balance Sheet Summary ($ in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Loans, net of unearned income | $96,723 | $95,733 | $97,508 | | Assets | $159,206 | $159,846 | $154,052 | | Deposits | $130,919 | $130,971 | $126,616 | | Shareholders' equity | $18,666 | $18,530 | $17,169 | [Selected Ratios and Other Information](index=4&type=section&id=Selected%20Ratios%20and%20Other%20Information) Key performance ratios for Q2 2025 showed improved profitability and efficiency, with ROA at 1.43% and efficiency ratio at 56.0% [Selected Ratios and Other Information](index=4&type=section&id=Selected%20Ratios%20and%20Other%20Information) Key performance ratios for Q2 2025 showed improvement in profitability and efficiency. The return on average assets (ROA) increased to 1.43% and the return on average common shareholders' equity rose to 12.72%. The efficiency ratio improved to 56.0%. The Common Equity Tier 1 (CET1) ratio was 10.7%, and the net interest margin (FTE) expanded to 3.65% Key Performance Ratios - Q2 2025 | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on average assets* | 1.43% | 1.27% | 1.32% | | Return on average common shareholders' equity* | 12.72% | 11.49% | 12.74% | | Efficiency ratio | 56.0% | 57.9% | 57.6% | | Common equity Tier 1 ratio (estimated) | 10.7% | 10.8% | 10.4% | | Net interest margin (FTE)* | 3.65% | 3.52% | 3.51% | | Net charge-offs as a % of average loans* | 0.47% | 0.52% | 0.42% | *Annualized - The tangible common book value per share increased to **$12.91** at the end of Q2 2025, up from **$12.29** in the prior quarter and **$10.61** in the prior year[6](index=6&type=chunk) - The allowance for credit losses to non-performing loans increased to **225%** from **205%** in the prior quarter, indicating stronger coverage[6](index=6&type=chunk) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $159.2 billion, with net loans at $95.1 billion and total deposits stable at $130.9 billion [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $159.2 billion, a slight decrease from $159.8 billion in the previous quarter. Net loans increased to $95.1 billion. Total deposits remained stable at $130.9 billion. Total shareholders' equity increased to $18.7 billion, partly due to a reduction in accumulated other comprehensive loss Consolidated Balance Sheet Highlights ($ in millions) | Account | 6/30/2025 | 3/31/2025 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Total assets | $159,206 | $159,846 | ($640) | | Net loans | $95,111 | $94,120 | $991 | | Debt securities (AFS & HTM) | $32,305 | $31,137 | $1,168 | | **Liabilities & Equity** | | | | | Total deposits | $130,919 | $130,971 | ($52) | | Total liabilities | $140,500 | $141,279 | ($779) | | Total shareholders' equity | $18,666 | $18,530 | $136 | - Accumulated other comprehensive loss improved, decreasing from a loss of **$2.28 billion** in Q1 2025 to a loss of **$1.97 billion** in Q2 2025[9](index=9&type=chunk) [Loans](index=6&type=section&id=Loans) Loan portfolio analysis reveals end-of-period loans increased to $96.7 billion, driven by business loan growth, while average balances remained stable [End of Period Loans](index=6&type=section&id=End%20of%20Period%20Loans) Total loans at the end of Q2 2025 were $96.7 billion, an increase of 1.0% from the previous quarter, primarily driven by growth in business loans. Total business loans grew by 1.5% QoQ to $63.8 billion, while consumer loans remained flat. Year-over-year, total loans decreased by 0.8% End of Period Loans by Category ($ in millions) | Loan Category | Q2 2025 | Q1 2025 | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Total business | $63,849 | $62,877 | 1.5% | (0.6)% | | Total consumer | $32,874 | $32,856 | 0.1% | (1.3)% | | **Total Loans** | **$96,723** | **$95,733** | **1.0%** | **(0.8)%** | - Within business loans, Commercial investor real estate mortgage loans saw the largest quarterly growth, increasing by **9.0%** to **$6.9 billion**[11](index=11&type=chunk) - The loan portfolio composition remained stable, with business loans constituting **66.0%** and consumer loans **34.0%** of total loans[12](index=12&type=chunk) [Average Balances of Loans](index=7&type=section&id=Average%20Balances%20of%20Loans) Average total loan balances in Q2 2025 were $96.1 billion, nearly flat compared to Q1 2025 and down 1.2% from Q2 2024. Average business loan balances saw a slight increase of 0.1% QoQ, while average consumer loan balances decreased by 0.4% QoQ Average Loan Balances ($ in millions) | Loan Category | 2Q25 | 1Q25 | QoQ Change | 2Q25 vs. 2Q24 | | :--- | :--- | :--- | :--- | :--- | | Total business | $63,212 | $63,140 | 0.1% | (1.2)% | | Total consumer | $32,865 | $32,982 | (0.4)% | (1.2)% | | **Total Loans** | **$96,077** | **$96,122** | **(0.05)%** | **(1.2)%** | [Deposits](index=8&type=section&id=Deposits) Total deposits remained stable at $130.9 billion, with average balances increasing to $129.4 billion, driven by money market growth [End of Period Deposits](index=8&type=section&id=End%20of%20Period%20Deposits) Total deposits at the end of Q2 2025 were $130.9 billion, remaining flat compared to the prior quarter but increasing by 3.4% year-over-year. There was a notable shift in deposit mix, with non-interest-bearing deposits decreasing by 0.6% QoQ, while money market deposits grew by 3.3% QoQ End of Period Deposits by Type ($ in millions) | Deposit Type | Q2 2025 | Q1 2025 | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Non-interest-bearing | $40,209 | $40,443 | (0.6)% | (1.8)% | | Interest-bearing | $90,710 | $90,528 | 0.2% | 5.9% | | **Total Deposits** | **$130,919** | **$130,971** | **(0.04)%** | **3.4%** | - By segment, Corporate Bank deposits grew **1.0%** QoQ to **$40.1 billion**, while Consumer Bank and Wealth Management deposits saw modest declines[16](index=16&type=chunk) [Average Balances of Deposits](index=9&type=section&id=Average%20Balances%20of%20Deposits) Average total deposits for Q2 2025 increased by 1.4% QoQ to $129.4 billion. The growth was driven by a 5.0% increase in average money market deposits and a 1.3% increase in average non-interest-bearing deposits. Year-over-year, average total deposits grew by 2.0% Average Deposit Balances ($ in millions) | Deposit Type | 2Q25 | 1Q25 | QoQ Change | 2Q25 vs. 2Q24 | | :--- | :--- | :--- | :--- | :--- | | Non-interest-bearing | $39,556 | $39,053 | 1.3% | (2.4)% | | Money market—domestic | $37,389 | $35,625 | 5.0% | 8.8% | | **Total Deposits** | **$129,444** | **$127,687** | **1.4%** | **2.0%** | [Consolidated Statements of Income](index=10&type=section&id=Consolidated%20Statements%20of%20Income) For Q2 2025, net income increased to $563 million, driven by higher net interest income and non-interest income [Consolidated Statements of Income](index=10&type=section&id=Consolidated%20Statements%20of%20Income) For Q2 2025, the company reported net income of $563 million, a 14.9% increase from Q1 2025. Net interest income rose to $1.26 billion, and non-interest income increased to $646 million. Non-interest expense also grew to $1.07 billion. For the six months ended June 30, 2025, net income was $1.05 billion, compared to $869 million for the same period in 2024 Q2 2025 Income Statement Summary ($ in millions) | Item | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total interest income | $1,784 | $1,725 | $1,762 | | Total interest expense | $525 | $531 | $576 | | **Net interest income** | **$1,259** | **$1,194** | **$1,186** | | Provision for credit losses | $126 | $124 | $102 | | Total non-interest income | $646 | $590 | $545 | | Total non-interest expense | $1,073 | $1,039 | $1,004 | | **Net income** | **$563** | **$490** | **$501** | Six Months Ended June 30 Income Statement Summary ($ in millions) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net interest income | $2,453 | $2,370 | | Total non-interest income | $1,236 | $1,108 | | Total non-interest expense | $2,112 | $2,135 | | **Net income** | **$1,053** | **$869** | [Consolidated Average Daily Balances and Yield / Rate Analysis](index=12&type=section&id=Consolidated%20Average%20Daily%20Balances%20and%20Yield%20%2F%20Rate%20Analysis) Q2 2025 saw net interest margin expand to 3.65%, driven by higher earning asset yields and lower interest-bearing liability rates [Consolidated Average Daily Balances and Yield / Rate Analysis](index=12&type=section&id=Consolidated%20Average%20Daily%20Balances%20and%20Yield%20%2F%20Rate%20Analysis) In Q2 2025, the net interest margin on a taxable-equivalent basis (FTE) expanded to 3.65%, up from 3.52% in Q1 2025. This was driven by a higher yield on total earning assets (5.12%) while the rate on total interest-bearing liabilities decreased to 2.20%. The total cost of deposits remained relatively stable at 1.39% Yield/Rate Analysis (FTE Basis) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Yield on Total Earning Assets | 5.12% | 5.01% | 5.17% | | Rate on Total Interest-Bearing Liabilities | 2.20% | 2.27% | 2.55% | | Net Interest Spread | 2.92% | 2.75% | 2.62% | | **Net Interest Margin** | **3.65%** | **3.52%** | **3.51%** | - The yield on total loans increased to **5.75%** in Q2 2025 from **5.64%** in Q1 2025[23](index=23&type=chunk) - The total cost of deposits for Q2 2025 was **1.39%**, a slight decrease from **1.40%** in the prior quarter[25](index=25&type=chunk) [Pre-Tax Pre-Provision Income (PPI) and Adjusted PPI](index=14&type=section&id=Pre-Tax%20Pre-Provision%20Income%20(PPI)%20and%20Adjusted%20PPI) Pre-tax pre-provision income (PPI) for Q2 2025 was $832 million, reflecting an 11.7% increase from the prior quarter [Pre-Tax Pre-Provision Income (PPI) and Adjusted PPI](index=14&type=section&id=Pre-Tax%20Pre-Provision%20Income%20(PPI)%20and%20Adjusted%20PPI) Pre-tax pre-provision income (PPI), a non-GAAP measure, was $832 million for Q2 2025, an 11.7% increase from the prior quarter. Adjusted PPI, which excludes certain items like securities losses and severance charges, was also $832 million, up 7.5% from Q1 2025. The report provides a reconciliation from GAAP income before taxes to these non-GAAP measures - The company uses non-GAAP measures like PPI to provide a basis for period-to-period comparisons that management believes assists investors in assessing performance[32](index=32&type=chunk) PPI Reconciliation ($ in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Income before income taxes (GAAP) | $706 | $621 | $625 | | Provision for credit losses (GAAP) | $126 | $124 | $102 | | **Pre-tax pre-provision income (non-GAAP)** | **$832** | **$745** | **$727** | | Total other adjustments | $0 | $29 | $22 | | **Adjusted pre-tax pre-provision income (non-GAAP)** | **$832** | **$774** | **$749** | [Non-Interest Income](index=15&type=section&id=Non-Interest%20Income) Total non-interest income for Q2 2025 increased to $646 million, driven by growth in mortgage, card, and capital markets income [Non-Interest Income Overview](index=15&type=section&id=Non-Interest%20Income%20Overview) Total non-interest income for Q2 2025 was $646 million, a 9.5% increase from Q1 2025 and an 18.5% increase from Q2 2024. The growth was driven by higher mortgage income, card and ATM fees, and capital markets income, as well as a significant reduction in net securities losses compared to prior periods Non-Interest Income Components ($ in millions) | Category | Q2 2025 | Q1 2025 | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Service charges on deposit accounts | $151 | $161 | (6.2)% | 0.0% | | Card and ATM fees | $125 | $117 | 6.8% | 4.2% | | Wealth management income | $133 | $129 | 3.1% | 9.0% | | Capital markets income | $83 | $80 | 3.8% | 22.1% | | Mortgage income | $48 | $40 | 20.0% | 41.2% | | Securities gains (losses), net | ($1) | ($25) | 96.0% | 98.0% | | **Total non-interest income** | **$646** | **$590** | **9.5%** | **18.5%** | [Service Charges on Deposit Accounts by Segment](index=15&type=section&id=Service%20Charges%20on%20Deposit%20Accounts%20by%20Segment) Total service charges on deposit accounts were $151 million in Q2 2025, a decrease of 6.2% from the prior quarter. The decline was driven by both the Consumer Bank and Corporate Bank segments, which saw decreases of 6.3% each Service Charges by Segment ($ in millions) | Segment | Q2 2025 | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | | Consumer Bank Segment | $90 | $96 | (6.3)% | | Corporate Bank Segment | $60 | $64 | (6.3)% | | **Total** | **$151** | **$161** | **(6.2)%** | [Wealth Management Income](index=15&type=section&id=Wealth%20Management%20Income) Wealth management income rose to $133 million in Q2 2025, up 3.1% from Q1 2025 and 9.0% from Q2 2024. The growth was primarily due to a 4.7% quarterly increase in investment management and trust fee income Wealth Management Income Components ($ in millions) | Category | Q2 2025 | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | | Investment management and trust fee income | $90 | $86 | 4.7% | | Investment services fee income | $43 | $43 | 0.0% | | **Total** | **$133** | **$129** | **3.1%** | [Capital Markets Income](index=15&type=section&id=Capital%20Markets%20Income) Capital markets income was $83 million in Q2 2025, a 3.8% increase from the prior quarter and a 22.1% increase year-over-year. Excluding valuation adjustments on customer derivatives, income was $85 million Capital Markets Income ($ in millions) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Capital markets income | $83 | $80 | $68 | | Capital markets income excluding valuation adjustments | $85 | $81 | $70 | [Mortgage Income](index=15&type=section&id=Mortgage%20Income) Mortgage income increased significantly to $48 million in Q2 2025, up from $40 million in Q1 2025. The rise was driven by higher production and sales income and a positive swing in the MSR and related hedge impact. Total mortgage production volume surged by 54.0% QoQ to $1.1 billion Mortgage Income and Production ($ in millions) | Metric | Q2 2025 | Q1 2025 | QoQ Change | | :--- | :--- | :--- | :--- | | Production and sales | $17 | $13 | 30.8% | | MSR and related hedge impact | ($16) | ($20) | 20.0% | | **Total mortgage income** | **$48** | **$40** | **20.0%** | | **Total mortgage production** | **$1,118** | **$726** | **54.0%** | [Non-Interest Expense](index=17&type=section&id=Non-Interest%20Expense) Total non-interest expense for Q2 2025 increased to $1.07 billion, primarily due to a rise in salaries and employee benefits [Non-Interest Expense](index=17&type=section&id=Non-Interest%20Expense) Total non-interest expense for Q2 2025 was $1.07 billion, an increase of 3.3% from Q1 2025 and 6.9% from Q2 2024. The quarterly increase was primarily driven by a 5.3% rise in salaries and employee benefits. For the first six months of 2025, total non-interest expense decreased by 1.1% compared to the same period in 2024 Non-Interest Expense Components ($ in millions) | Category | Q2 2025 | Q1 2025 | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $658 | $625 | 5.3% | 8.0% | | Equipment and software expense | $104 | $99 | 5.1% | 4.0% | | Professional, legal and regulatory expenses | $28 | $23 | 21.7% | 12.0% | | **Total non-interest expense** | **$1,073** | **$1,039** | **3.3%** | **6.9%** | - Salaries and benefits expense, when adjusted for market value changes on 401(k) liabilities, increased by a smaller **2.6%** quarter-over-quarter[53](index=53&type=chunk) [Reconciliation of GAAP Financial Measures to non-GAAP Financial Measures](index=18&type=section&id=Reconciliation%20of%20GAAP%20Financial%20Measures%20to%20non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP financial measures, including adjusted efficiency, net income, tangible common, and CET1 ratios [Adjusted Ratios (Efficiency, Fee Income, Operating Leverage)](index=18&type=section&id=Adjusted%20Ratios%20(Efficiency%2C%20Fee%20Income%2C%20Operating%20Leverage)) This section provides reconciliations for key operating ratios by adjusting GAAP revenue and expense for certain items. For Q2 2025, the adjusted efficiency ratio was 56.0%, an improvement from 56.8% in Q1 2025. The adjusted fee income ratio was 33.7%, roughly in line with the prior quarter Adjusted Ratio Reconciliation - Q2 2025 | Metric | GAAP | Adjusted (non-GAAP) | | :--- | :--- | :--- | | Non-interest expense | $1,073M | $1,073M | | Total revenue, taxable-equivalent basis | $1,917M | $1,917M | | **Efficiency Ratio** | **56.0%** | **56.0%** | | Non-interest income | $646M | $646M | | **Fee Income Ratio** | **33.7%** | **33.7%** | - For Q2 2025, there were no adjustments to non-interest income or expense, so the GAAP and non-GAAP ratios were the same. In prior quarters, adjustments were made for items like securities losses and FDIC special assessments[57](index=57&type=chunk) [Adjusted Net Income, EPS, and Return Ratios](index=20&type=section&id=Adjusted%20Net%20Income%2C%20EPS%2C%20and%20Return%20Ratios) This section reconciles GAAP net income to adjusted non-GAAP figures. For Q2 2025, adjusted net income available to common shareholders was $538 million, or $0.60 per diluted share, compared to GAAP figures of $534 million and $0.59. The adjusted return on average tangible common shareholders' equity was 19.48% Adjusted Net Income and EPS - Q2 2025 | Metric | GAAP | Adjusted (non-GAAP) | | :--- | :--- | :--- | | Net income available to common shareholders | $534M | $538M | | Diluted EPS | $0.59 | $0.60 | | Return on avg. tangible common equity* | 19.34% | 19.48% | *Annualized - Adjustments for Q2 2025 included a **$4 million** non-taxable expense for the redemption of Series D preferred stock[62](index=62&type=chunk)[63](index=63&type=chunk) [Tangible Common Ratios](index=21&type=section&id=Tangible%20Common%20Ratios) The report calculates tangible common equity and related ratios to assess capital adequacy absent intangible assets. As of June 30, 2025, the tangible common book value per share increased to $12.91 from $12.29 in the prior quarter. The ratio of tangible common shareholders' equity to tangible assets improved to 7.52% from 7.17% Tangible Common Ratios | Metric | 6/30/2025 | 3/31/2025 | 6/30/2024 | | :--- | :--- | :--- | :--- | | Tangible common shareholders' equity (non-GAAP) | $11,541M | $11,047M | $9,709M | | Tangible common book value per share (non-GAAP) | $12.91 | $12.29 | $10.61 | | Tangible common equity to tangible assets (non-GAAP) | 7.52% | 7.17% | 6.55% | [Common Equity Tier 1 (CET1) Ratios](index=21&type=section&id=Common%20Equity%20Tier%201%20(CET1)%20Ratios) The estimated Common Equity Tier 1 (CET1) ratio was 10.7% at the end of Q2 2025, slightly down from 10.8% in Q1 2025 but above the 10.4% from the prior year. An adjusted CET1 ratio, which includes the impact of AOCI, was calculated at 9.2%, showing an improvement from 9.1% in the prior quarter CET1 Ratios (Estimated) | Ratio | 6/30/2025 | 3/31/2025 | 6/30/2024 | | :--- | :--- | :--- | :--- | | Common equity Tier 1 ratio | 10.7% | 10.8% | 10.4% | | Adjusted common equity Tier 1 ratio (non-GAAP) | 9.2% | 9.1% | 8.2% | - The company provides the adjusted CET1 ratio to show the potential impact under recent proposed rulemaking standards that would include AOCI in the calculation[66](index=66&type=chunk) [Asset Quality](index=22&type=section&id=Asset%20Quality) Asset quality improved in Q2 2025, with reduced net charge-offs and a decrease in non-performing loans and delinquencies [Allowance for Credit Losses and Net Charge-Offs](index=22&type=section&id=Allowance%20for%20Credit%20Losses%20and%20Net%20Charge-Offs) Asset quality metrics showed improvement in Q2 2025. The total allowance for credit losses (ACL) stood at $1.74 billion, or 1.80% of total loans. Total net charge-offs decreased to $113 million from $123 million in the prior quarter, resulting in an annualized net charge-off ratio of 0.47%, down from 0.52% Allowance for Credit Losses (ACL) Roll-Forward ($ in millions) | Item | Q2 2025 | | :--- | :--- | | Beginning ACL | $1,730 | | Total Net Charge-offs | ($113) | | Provision for credit losses | $126 | | **Ending ACL** | **$1,743** | Net Loan Charge-offs as a % of Average Loans (Annualized) | Category | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total commercial | 0.45% | 0.35% | 0.37% | | Total investor real estate | 0.07% | 1.02% | 0.00% | | Total consumer | 0.63% | 0.66% | 0.61% | | **Total** | **0.47%** | **0.52%** | **0.42%** | [Non-Performing Loans and Delinquencies](index=25&type=section&id=Non-Performing%20Loans%20and%20Delinquencies) Credit quality continued to improve as non-performing loans (NPLs) decreased to $776 million, or 0.80% of total loans, from 0.88% in the prior quarter. Total delinquencies (30-89 days past due) also declined to $312 million from $333 million in Q1 2025 Non-Performing Loans (NPLs) (excludes loans held for sale) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total NPLs ($M) | $776 | $843 | $847 | | NPLs as % of Loans | 0.80% | 0.88% | 0.87% | - The largest portion of NPLs came from the Commercial and industrial category (**$391 million**) and Commercial investor real estate mortgage (**$283 million**)[74](index=74&type=chunk) Total Delinquencies (Accruing 30-89 Days Past Due) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total Delinquent Loans ($M) | $312 | $333 | $300 | | Delinquencies as % of Loans | 0.32% | 0.35% | 0.31% | [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) This section provides a legal disclaimer on forward-looking statements, highlighting various risks and uncertainties that could impact actual results [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) This section contains a standard legal disclaimer regarding forward-looking statements. It cautions investors not to place undue reliance on such statements as they are subject to various risks and uncertainties that could cause actual results to differ materially. The company lists numerous risk factors, including economic conditions, interest rate changes, credit risk, competition, regulatory changes, and cybersecurity threats - The company cautions that statements about future operations, strategies, and financial results are not guarantees and are subject to risks beyond its control[78](index=78&type=chunk) - Key risk factors mentioned include: * Economic and market conditions, including interest rates, inflation, and unemployment * Changes in monetary and fiscal policies * Creditworthiness of customers and collectability of loans * Competition from traditional and non-traditional financial services companies * Cybersecurity risks, including data breaches and hacking * Changes in laws, regulations, and accounting policies[78](index=78&type=chunk)[82](index=82&type=chunk) - The company assumes no obligation to update forward-looking statements except as required by law[80](index=80&type=chunk)

[Abbott Q2 2025 Financial Highlights & Outlook](index=1&type=section&id=Abbott%20Reports%20Second-Quarter%202025%20Results) Abbott delivered strong Q2 2025 results with high single-digit organic sales growth, double-digit EPS growth, and raised full-year guidance [Second-Quarter 2025 Performance Summary](index=1&type=section&id=Second-Quarter%202025%20Performance%20Summary) Abbott achieved strong Q2 results with high single-digit organic sales growth, double-digit EPS growth, and significant margin expansion Q2 2025 Key Financial Metrics | Metric | Value | Growth vs. Prior Year | | :--- | :--- | :--- | | Reported Sales Growth | 7.4% | - | | Organic Sales Growth | 6.9% | - | | Organic Sales Growth (Ex-COVID) | 7.5% | - | | GAAP Diluted EPS | $1.01 | - | | Adjusted Diluted EPS | $1.26 | Double-digit growth | Q2 2025 Margin Performance | Margin Type | Reported | Adjusted | Basis Point Increase (Adjusted) | | :--- | :--- | :--- | :--- | | Gross Margin | 52.7% | 57.0% | 100 bps | | Operating Margin | 18.4% | 22.9% | 100 bps | - Key strategic advancements in the quarter include: - Completed enrollment ahead of schedule for the FlexPulse U.S. IDE trial for treating atrial fibrillation (AFib) - Announced positive late-breaking data from the AVEIR Conduction System Pacing (CSP) clinical feasibility study for a leadless pacemaker - Received FDA approval for the Tendyne transcatheter mitral valve replacement (TMVR) system - Initiated plans to develop a new cardiovascular device manufacturing facility in Georgia, to be completed by 2028[3](index=3&type=chunk) [Full-Year 2025 Financial Guidance](index=7&type=section&id=ABBOTT%27S%20FINANCIAL%20GUIDANCE) Abbott raised its full-year 2025 guidance, projecting strong organic sales growth and double-digit adjusted diluted EPS Full-Year 2025 Projections | Metric | Projected Range | | :--- | :--- | | Organic Sales Growth (Ex-COVID) | 7.5% to 8.0% | | Organic Sales Growth (Incl. COVID) | 6.0% to 7.0% | | Adjusted Operating Margin | ~23.5% of sales | | Adjusted Diluted EPS | $5.10 to $5.20 | - The company projects third-quarter 2025 adjusted diluted earnings per share to be in the range of **$1.28 to $1.32**[20](index=20&type=chunk) [Quarterly Dividend Announcement](index=7&type=section&id=ABBOTT%20DECLARES%20406%20CONSECUTIVE%20QUARTERLY%20DIVIDEND) Abbott declared its 406th consecutive quarterly dividend, extending its 53-year track record of dividend increases - A quarterly dividend of **$0.59 per share** was declared, payable on August 15, 2025, to shareholders of record on July 15, 2025[22](index=22&type=chunk) - Abbott has increased its dividend for **53 consecutive years** and is a member of the S&P 500 Dividend Aristocrats Index[22](index=22&type=chunk) [Business Segment Performance](index=2&type=section&id=SECOND-QUARTER%20BUSINESS%20OVERVIEW) This section details Q2 2025 performance across Abbott's Nutrition, Diagnostics, Established Pharmaceuticals, and Medical Devices segments [Nutrition](index=3&type=section&id=Nutrition) The Nutrition segment reported Q2 sales growth driven by strong Adult Nutrition performance, particularly Ensure and Glucerna brands Nutrition Sales Performance (Q2 2025 vs. Q2 2024) | Category | Total Reported Sales ($M) | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | **Total Nutrition** | **$2,212** | **2.9%** | **3.4%** | | Pediatric | $1,054 | (0.4%) | 0.2% | | Adult | $1,158 | 6.1% | 6.6% | - Growth was led by the Adult Nutrition portfolio, particularly the **Ensure** and **Glucerna** brands[10](index=10&type=chunk) [Diagnostics](index=4&type=section&id=Diagnostics) The Diagnostics segment experienced a Q2 sales decrease primarily due to declining COVID-19 testing sales, despite slight organic growth excluding these tests Diagnostics Sales Performance (Q2 2025 vs. Q2 2024) | Category | Total Reported Sales ($M) | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | **Total Diagnostics** | **$2,173** | **(1.0%)** | **(1.4%)** | | Core Laboratory | $1,358 | 2.2% | 1.6% | | Molecular | $123 | (2.7%) | (3.4%) | | Point of Care | $148 | (5.1%) | (5.2%) | | Rapid Diagnostics | $544 | (6.7%) | (6.8%) | - COVID-19 testing-related sales were **$55 million** in Q2 2025, compared to **$102 million** in Q2 2024[12](index=12&type=chunk) - Excluding COVID-19 testing sales, global Diagnostics organic sales increased by **0.8%**[11](index=11&type=chunk) [Established Pharmaceuticals](index=5&type=section&id=Established%20Pharmaceuticals) The Established Pharmaceuticals segment achieved strong Q2 growth, primarily driven by double-digit organic sales increases in Key Emerging Markets Established Pharmaceuticals Sales Performance (Q2 2025 vs. Q2 2024) | Category | Total Reported Sales ($M) | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | **Total** | **$1,383** | **6.9%** | **7.7%** | | Key Emerging Markets | $1,059 | 7.3% | 8.7% | | Other | $324 | 5.9% | 4.5% | - Sales in Key Emerging Markets were led by double-digit growth in several countries across Asia, Latin America and the Middle East[15](index=15&type=chunk) [Medical Devices](index=6&type=section&id=Medical%20Devices) The Medical Devices segment delivered outstanding Q2 performance with broad-based double-digit organic sales growth, led by Diabetes Care Medical Devices Sales Performance (Q2 2025 vs. Q2 2024) | Category | Total Reported Sales ($M) | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | **Total Medical Devices** | **$5,369** | **13.4%** | **12.2%** | | Diabetes Care | $1,981 | 20.2% | 18.5% | | Electrophysiology | $700 | 11.5% | 10.3% | | Heart Failure | $368 | 14.7% | 14.0% | | Structural Heart | $636 | 13.0% | 11.7% | | Rhythm Management | $673 | 10.9% | 9.8% | - Sales of continuous glucose monitors (including FreeStyle Libre) were **$1.9 billion**, growing **21.4%** reported and **19.6%** organically[18](index=18&type=chunk) - Strong performance was driven by several products, including **FreeStyle Libre**, **Navitor**, **TriClip**, and **AVEIR**[18](index=18&type=chunk) [Consolidated Financial Statements](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Earnings) This section presents Abbott's condensed consolidated statements of earnings for Q2 and the first half of 2025 [Condensed Consolidated Statement of Earnings (Q2 2025)](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Earnings%20Q2) Abbott reported Q2 2025 net sales of **$11.142 billion**, with significant increases in operating earnings and net earnings Q2 2025 Statement of Earnings Highlights (in millions, except per share data) | Metric | 2Q25 | 2Q24 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $11,142 | $10,377 | 7.4% | | Operating Earnings | $2,052 | $1,669 | 23.0% | | Net Earnings | $1,779 | $1,302 | 36.7% | | Diluted EPS | $1.01 | $0.74 | 36.5% | | Adjusted Net Earnings | $2,213 | $2,003 | 10.5% | | Adjusted Diluted EPS | $1.26 | $1.14 | 10.5% | [Condensed Consolidated Statement of Earnings (First Half 2025)](index=11&type=section&id=Condensed%20Consolidated%20Statement%20of%20Earnings%201H) For the first half of 2025, net sales reached **$21.500 billion**, with strong growth in operating and net earnings First Half 2025 Statement of Earnings Highlights (in millions, except per share data) | Metric | 1H25 | 1H24 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $21,500 | $20,341 | 5.7% | | Operating Earnings | $3,745 | $3,055 | 22.6% | | Net Earnings | $3,104 | $2,527 | 22.9% | | Diluted EPS | $1.77 | $1.44 | 22.9% | | Adjusted Net Earnings | $4,132 | $3,732 | 10.7% | | Adjusted Diluted EPS | $2.35 | $2.12 | 10.8% | [Non-GAAP Reconciliations](index=13&type=section&id=Non-GAAP%20Reconciliation%20of%20Financial%20Information) This section provides reconciliations from GAAP to non-GAAP financial measures, including earnings, tax rates, and revenue adjustments [Reconciliation of Financial Information](index=13&type=section&id=Reconciliation%20of%20Financial%20Information) This section reconciles GAAP to non-GAAP financial measures for Q2 and H1 2025, detailing the impact of specified item exclusions Q2 2025 GAAP to Non-GAAP Reconciliation (in millions, except per share) | Metric | As Reported (GAAP) | Specified Items | As Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Net Earnings | $1,779 | $434 | $2,213 | | Diluted EPS | $1.01 | $0.25 | $1.26 | H1 2025 GAAP to Non-GAAP Reconciliation (in millions, except per share) | Metric | As Reported (GAAP) | Specified Items | As Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Net Earnings | $3,104 | $1,028 | $4,132 | | Diluted EPS | $1.77 | $0.58 | $2.35 | [Reconciliation of Tax Rates](index=15&type=section&id=Reconciliation%20of%20Tax%20Rates) This section reconciles GAAP to non-GAAP tax rates for Q2 and H1 2025, showing adjustments after excluding specified items Q2 2025 Tax Rate Reconciliation | Basis | Pre-Tax Income ($M) | Taxes on Earnings ($M) | Tax Rate | | :--- | :--- | :--- | :--- | | As reported (GAAP) | $2,150 | $371 | 17.3% | | Excluding specified items | $2,650 | $437 | 16.5% | H1 2025 Tax Rate Reconciliation | Basis | Pre-Tax Income ($M) | Taxes on Earnings ($M) | Tax Rate | | :--- | :--- | :--- | :--- | | As reported (GAAP) | $3,928 | $824 | 21.0% | | Excluding specified items | $4,948 | $816 | 16.5% | [Non-GAAP Revenue Reconciliation](index=16&type=section&id=Non-GAAP%20Revenue%20Reconciliation) This reconciliation adjusts H1 2024 revenue for the ZonePerfect discontinuation, providing a comparable organic growth rate for H1 2025 - The reconciliation adjusts for the impact of discontinuing the **ZonePerfect** product line in the Nutrition business in March 2024[50](index=50&type=chunk) H1 2025 Total Company Revenue Reconciliation | Metric | Value | | :--- | :--- | | Reported Growth | 5.7% | | Adjusted Growth | 5.8% | | Organic Growth | 6.9% | [Details of Specified Items](index=17&type=section&id=Details%20of%20Specified%20Items) This section details the specified items excluded from non-GAAP results, primarily intangible amortization and restructuring costs Details of Specified Items - Q2 2025 (in millions) | Category | Gross Margin | R&D | SG&A | Total Before Tax | | :--- | :--- | :--- | :--- | :--- | | Intangible Amortization | $420 | - | - | $420 | | Restructuring & Cost Reduction | $55 | $(7) | $1 | $61 | | Acquisition-related | $1 | - | $(3) | $5 | | Other | $2 | $(13) | $1 | $14 | | **Total** | **$478** | **$(20)** | **$(1)** | **$500** | - Specified items for Q2 2025 include costs for restructuring, acquisitions, and compliance with European medical device regulations (MDR/IVDR)[52](index=52&type=chunk)[53](index=53&type=chunk)

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share (EPS) of $2.16, a 12% increase year-on-year, exceeding expectations [5][19] - Organic sales growth was 1.5%, with all three business groups showing positive growth for the third consecutive quarter [5][16] - Operating margins increased by 290 basis points year-on-year, driven by productivity and cost controls [5][18] - Free cash flow was solid at $1.3 billion for the quarter, with a conversion rate of 110% [5][20] Business Line Data and Key Metrics Changes - Safety and Industrial organic sales grew by 2.6% in Q2, with six out of seven divisions posting positive results [21] - Transportation and Electronics adjusted sales were up 1% organically in Q2, led by commercial graphics and auto personalization [22] - Consumer business saw a slight increase of 0.3% organically in Q2, despite soft consumer sentiment [23] Market Data and Key Metrics Changes - Growth was led by China, which was up mid-single digits, driven by strong commercial execution [17] - The U.S. market grew low single digits, primarily in Electrical Markets and Personal Safety, but faced weakness in Auto OEM and Aftermarket [17] - Europe remained flat, with strength in Electrical Markets and Personal Safety, offset by weakness in Transportation Safety and Auto [17] Company Strategy and Development Direction - The company is focused on innovation excellence, increasing the cadence of new product launches, with 64 new products launched in Q2, a 70% increase from last year [6][7] - A commitment to operational excellence is evident, with improvements in service, asset utilization, and quality metrics [11][13] - The company is tightening pricing controls and reducing customer churn through predictive analytics [10] Management's Comments on Operating Environment and Future Outlook - Management noted a sluggish global economy, with expectations for organic growth of approximately 2% for the year [14][15] - The company is navigating uncertain times by focusing on customer problem-solving through innovation and efficiency [16] - Management expressed confidence in meeting increased guidance and delivering strong shareholder returns in 2025 [27] Other Important Information - The company returned $3 billion to shareholders through dividends and share repurchases in the first half of the year [14] - A settlement with the State of New Jersey on PFAS claims was announced, with cash payments spread over 25 years [14][70] - The company is exiting PFAS manufacturing by the end of the year, addressing legacy issues [72] Q&A Session Summary Question: Can you talk about the new product plan and its impact on margin versus growth? - Management highlighted the importance of R&D and new product innovation, expecting both growth and margin improvements as new products stabilize in the market [31][34] Question: What are the sources of operational upside in the footprint versus G&A? - Management indicated that productivity gains are split evenly between G&A and supply chain, with significant cost controls and procurement savings contributing to overall performance [44][46] Question: Can you elaborate on the tariff assumptions and their impact? - The company updated its tariff impact guidance, now estimating a gross headwind of $0.20, with mitigation actions in place to offset some of the costs [108] Question: How is the demand trend evolving, particularly regarding pre-buy concerns? - Management noted that while there may be some lingering pre-buy effects, overall orders were up low single digits, indicating stable demand trends [117]

Financial Performance - Record Q2 sales of $2714 million, compared to $2605 million in Q2'24[10] - Adjusted operating income increased to $251 million from $221 million in Q2'24[10] - Adjusted operating margin improved to 93% from 85% in Q2'24[10] - Share repurchases amounted to $51 million in Q2'25[8] Sales and Market Dynamics - Organic sales grew by 34% despite a negative regional Light Vehicle Production (LVP) mix[23] - Europe and India were strong sales drivers, along with tariff compensations[8] - The company successfully recovered approximately 80% of tariffs incurred during the quarter[8] - Global Light Vehicle Production (LVP) is expected to decline by around 05% in 2025[60] Cost Management and Efficiency - Substantial cost improvements were achieved through direct labor productivity and other operational efficiencies[12] - The company is progressing with structural cost reduction activities[8] Future Outlook - The company anticipates average annual share repurchases between $300 million and $500 million through the end of 2029[8] - Full year 2025 guidance includes an organic sales increase of around 3% and an adjusted operating margin of around 10 to 105%[75]