[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Solventum reported solid second quarter 2025 results with increased sales and adjusted EPS, though operating cash flow and margins were pressured by stand-up costs and supply agreement impacts - CEO Bryan Hanson highlighted five consecutive quarters of positive sales volume growth and raised full-year guidance, reflecting confidence in the company's strategy and execution[4](index=4&type=chunk) - GAAP and adjusted operating income margins declined due to lower gross margins, impacted by the 3M supply agreement mark-up, and increased operating expenses from public company stand-up costs and growth investments[5](index=5&type=chunk) - Organic sales growth was positive across all segments, with MedSurg and Health Information Systems (HIS) being the primary drivers[4](index=4&type=chunk) Q2 & First Six Months 2025 Financial Results | (Dollars in millions, except per share) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $2,161 | $2,081 | 3.9% | $4,231 | $4,097 | 3.3% | | **Operating income margin** | 9.9% | 11.7% | (180) bps | 8.7% | 15.3% | (660) bps | | **Adjusted operating income margin** | 21.9% | 20.7% | 120 bps | 20.8% | 22.3% | (150) bps | | **Net income** | $90 | $89 | 1.1% | $227 | $326 | (30.4)% | | **Diluted earnings per share** | $0.51 | $0.51 | — % | $1.30 | $1.88 | (30.9)% | | **Adjusted diluted earnings per share** | $1.69 | $1.56 | 8.3% | $3.03 | $3.64 | (16.8)% | | **Net cash provided by operating activities** | $169 | $355 | (52.4)% | $198 | $797 | (75.2)% | | **Free cash flow** | $59 | $297 | (80.1)% | $(21) | $637 | (103.3)% | [Full-Year 2025 Guidance](index=2&type=section&id=Full-Year%202025%20Guidance) The company raised its full-year 2025 guidance for organic sales growth and adjusted EPS, while maintaining its free cash flow outlook - The current guidance includes the Purification & Filtration segment and will be updated after the partial sale of this segment closes[9](index=9&type=chunk) - Solventum does not provide reconciliations for forward-looking non-GAAP measures like organic sales and adjusted EPS to their GAAP equivalents due to the inability to predict certain items with reasonable certainty[10](index=10&type=chunk) Updated Full-Year 2025 Guidance | Metric | Prior Guidance | Updated Guidance | | :--- | :--- | :--- | | **Organic Sales Growth** | +1.5% to +2.5% | +2.0% to +3.0% | | **Adjusted EPS** | $5.45 to $5.65 | $5.80 to $5.95 | | **Free Cash Flow** | $450M to $550M | $450M to $550M (No change) | [Segment Performance](index=2&type=section&id=Segment%20Performance) [Segment Sales and Operating Income Analysis](index=2&type=section&id=Segment%20Sales%20and%20Operating%20Income%20Analysis) All business segments achieved positive organic sales growth in Q2 2025, led by Infection Prevention and Surgical Solutions, with Health Information Systems maintaining the highest operating margin and Purification and Filtration showing significant margin expansion Q2 2025 Net Sales by Segment (YoY Growth) | (Dollars in millions) | Q2 2025 Sales | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | **MedSurg** | $1,218 | 4.8% | 3.9% | | *Advanced Wound Care* | *$467* | *1.7%* | *0.8%* | | *Infection Prevention and Surgical Solutions* | *$750* | *6.9%* | *5.9%* | | **Dental Solutions** | $338 | 2.3% | 0.7% | | **Health Information Systems** | $339 | 3.4% | 3.2% | | **Purification and Filtration** | $252 | 5.4% | 3.1% | | **Total Company** | **$2,161** | **3.9%** | **2.8%** | Q2 2025 Operating Income by Segment | (Dollars in millions) | Q2 2025 Operating Income | Q2 2025 Operating Margin | Q2 2024 Operating Income | Q2 2024 Operating Margin | | :--- | :--- | :--- | :--- | :--- | | **MedSurg** | $210 | 17.3% | $214 | 18.4% | | **Dental Solutions** | $96 | 28.5% | $93 | 28.0% | | **Health Information Systems** | $120 | 35.5% | $111 | 33.8% | | **Purification and Filtration** | $48 | 19.2% | $19 | 8.0% | First Six Months 2025 Organic Sales Growth by Segment | Segment | H1 2025 Organic Growth | | :--- | :--- | | **MedSurg** | 4.9% | | *Advanced Wound Care* | *1.8%* | | *Infection Prevention and Surgical Solutions* | *7.0%* | | **Dental Solutions** | 0.6% | | **Health Information Systems** | 3.5% | | **Purification and Filtration** | 2.6% | | **Total Company** | **3.5%** | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q2 2025, total net sales increased to **$2.16 billion**, but rising SG&A expenses led to a decrease in operating income, while net income and diluted EPS remained relatively flat Q2 2025 Statement of Income Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total net sales** | $2,161 | $2,081 | 3.9% | | **Gross profit** | $1,175 | $1,137 | 3.3% | | **Operating income** | $214 | $244 | (12.3)% | | **Net Income** | $90 | $89 | 1.1% | | **Diluted EPS** | $0.51 | $0.51 | 0.0% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$15.1 billion**, primarily due to assets held for sale, while total liabilities remained stable and total equity grew to **$3.6 billion** - The balance sheet now includes significant amounts for 'Current assets held for sale' (**$168 million**) and 'Non-current assets held for sale' (**$2,060 million**), related to the planned divestiture of the Purification and Filtration business[26](index=26&type=chunk) Balance Sheet Highlights (in millions) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $492 | $762 | | **Total current assets** | $3,208 | $3,249 | | **Total assets** | $15,074 | $14,457 | | **Total current liabilities** | $2,620 | $2,703 | | **Long-term debt** | $7,815 | $7,810 | | **Total liabilities** | $11,429 | $11,498 | | **Total equity** | $3,645 | $2,959 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash provided by operating activities significantly decreased, resulting in negative free cash flow, a sharp reversal from the prior year - The significant drop in operating cash flow was primarily driven by a large negative swing in deferred income taxes and unfavorable changes in working capital, including inventories and accounts payable[28](index=28&type=chunk) Six Months Ended June 30 Cash Flow (in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $198 | $797 | | **Net cash used in investing activities** | $(224) | $(160) | | **Net cash (used in) provided by financing activities** | $(249) | $66 | | **Net increase (decrease) in cash** | $(268) | $703 | [Supplemental and Non-GAAP Information](index=12&type=section&id=Supplemental%20and%20Non-GAAP%20Information) [Non-GAAP Financial Measures Reconciliation](index=12&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section provides detailed reconciliations for key non-GAAP financial measures, including adjusted operating income, adjusted diluted EPS, and free cash flow, to offer a clearer view of underlying operational performance - Management uses non-GAAP measures to evaluate current performance and focus on underlying operational results and liquidity[43](index=43&type=chunk) - The primary adjustments to GAAP earnings include amortization, restructuring costs, Spin-Off and separation-related costs, certain litigation-related costs, and impacts from the sale of the Purification and Filtration business[46](index=46&type=chunk)[47](index=47&type=chunk) [Adjusted Operating Income and EPS Reconciliation](index=12&type=section&id=Adjusted%20Operating%20Income%20and%20EPS%20Reconciliation) For Q2 2025, GAAP operating income and diluted EPS were significantly adjusted to non-GAAP figures, primarily due to **$150 million** in pre-tax spin-off and separation costs - Key pre-tax adjustments for Q2 2025 included Spin-off costs (**$150 million**), Amortization (**$78 million**), Purification and Filtration sale-related costs (**$15 million**), Restructuring (**$8 million**), and Certain litigation costs (**$8 million**)[49](index=49&type=chunk) Q2 2025 GAAP to Non-GAAP Reconciliation (in millions, except EPS) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | **Operating Income** | $214 | $260 | $474 | | **Operating Margin** | 9.9% | 12.0% | 21.9% | | **Net Income** | $90 | $206 | $296 | | **Diluted EPS** | $0.51 | $1.18 | $1.69 | [Free Cash Flow Reconciliation](index=15&type=section&id=Free%20Cash%20Flow%20Reconciliation) Free cash flow for Q2 2025 was **$59 million**, a significant **80.1%** decrease from the prior year, primarily due to higher capital expenditures Free Cash Flow Calculation (in millions) | Line Item | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $169 | $355 | $198 | $797 | | **Purchases of property, plant and equipment** | $(110) | $(58) | $(219) | $(160) | | **Free cash flow** | **$59** | **$297** | **$(21)** | **$637** |

Core Insights - Solventum (SOLV) is set to release its second-quarter 2025 results on August 7, with previous earnings surpassing estimates by 12.61% and a trailing four-quarter average surprise of 11.48% [1][2] Financial Estimates - The Zacks Consensus Estimate for Solventum's revenues is $2.12 billion, while the earnings estimate is $1.45 per share [2] Segment Performance - The MedSurg segment achieved 6% organic growth in the last quarter, driven by strong contributions from Infection Prevention and Surgical Solutions, which rose 8.2%. Continued product adoption and improved execution are expected to support this segment, despite some anticipated moderation in growth due to earlier order timing [3] - The Dental Solutions segment experienced a modest 0.4% organic growth, reflecting a softer market. However, steady demand for core products and new launches are expected to stabilize performance in the upcoming quarter [4] - The Health Information Systems (HIS) segment posted nearly 4% organic growth, supported by strong customer retention in revenue cycle management software. Continued interest in AI-powered tools is expected to maintain steady growth [5] - The Purification and Filtration segment grew 2.2% organically, with solid demand in bioprocessing. This segment is anticipated to remain stable despite preparations for divestiture later this year [6] Strategic Developments - Investors are keen on updates regarding Solventum's three-phase transformation plan, which includes exiting over 30% of transition service agreements and executing a significant ERP deployment [7] - The company raised its full-year organic revenue growth guidance to 1.5% to 2.5%, reflecting stronger volume trends. Adjusted earnings per share are expected to remain between $5.45 and $5.65, despite anticipated tariff headwinds [10] Tariff Impact - Solventum expects an $80 to $100 million impact from tariffs in the second half of the year, which will pressure margins but not revenue. An update on the planned divestiture of the Purification and Filtration business is also anticipated [9]

Core Insights - Solventum (SOLV) is expected to report quarterly earnings of $1.45 per share, a decline of 7.1% year-over-year, with revenues projected at $2.12 billion, reflecting a 1.9% increase compared to the previous year [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating analysts have reassessed their initial estimates [1][2] - The stock has returned -4% over the past month, underperforming the Zacks S&P 500 composite, which increased by 1% [5] Revenue Estimates - Analysts forecast 'Net Sales- MedSurg' to reach $1.18 billion, indicating a year-over-year change of +1.6% [3] - 'Net Sales- Purification and Filtration' is predicted to be $242.52 million, reflecting a year-over-year increase of +1.9% [4] - The consensus estimate for 'Net Sales- Health Information Systems' stands at $334.42 million, suggesting a +2% change from the year-ago quarter [4] - 'Net Sales- Dental Solutions' is expected to arrive at $332.90 million, indicating a +0.6% year-over-year change [4]

Group 1 - Solventum Corporation (SOLV) successfully sold its purification and filtration business to Thermo Fisher Scientific Inc. (TMO) for $4.1 billion [1] - The transaction is viewed as a significant achievement for Solventum Corporation, indicating strong corporate performance and strategic capital allocation [1] - The investing group "Value In Corporate Events" focuses on identifying opportunities in major corporate events such as IPOs, mergers & acquisitions, and earnings reports [1]

Core Viewpoint - Solventum (NYSE: SOLV) is set to release its second quarter fiscal 2025 financial results on August 7, 2025, after U.S. market close, followed by a management-hosted webcast to discuss the results and other relevant information [1][2]. Group 1: Earnings Release Information - The financial results will be released on August 7, 2025, after the U.S. financial markets close [1]. - A webcast will be held at 3:30 p.m. CDT / 4:30 p.m. EDT to discuss the results and other forward-looking information [2]. - Dial-in details for the webcast include a U.S. number +1 (800) 715-9871 and an international number +1 (646) 307-1963, with a conference ID of 6342275 [2]. Group 2: Company Overview - Solventum focuses on enabling better healthcare through innovative solutions at the intersection of health, material, and data science [3]. - The company aims to create breakthrough innovations that improve patients' lives and empower healthcare professionals [3].

Company Overview - Solventum Corporation (SOLV) is currently experiencing significant attention in the options market, particularly with the July 18, 2025 $40.00 Put option showing high implied volatility, indicating expectations of a substantial price movement [1] Implied Volatility Insights - Implied volatility reflects market expectations for future stock movement, suggesting that investors anticipate a major event that could lead to either a rally or a sell-off [2] - High implied volatility in options often indicates that traders are preparing for significant price changes in the underlying stock [2] Analyst Sentiment - Solventum holds a Zacks Rank 3 (Hold) within the Medical Services industry, which is positioned in the top 21% of the Zacks Industry Rank [3] - Over the past 60 days, two analysts have raised their earnings estimates for the current quarter, while one has lowered them, resulting in a consensus estimate increase from $1.38 to $1.45 per share [3] Trading Strategy Implications - The high implied volatility surrounding Solventum may present trading opportunities, as options traders often seek to sell premium on such options to capitalize on expected price stability at expiration [4]

Core Insights - Solventum has been recognized among the top 25 percent of companies in healthcare and research, as well as in the Midwest, just 14 months after its formation as an independent company [1] - The company achieved a perfect score of 5/5 in three critical workplace factors: Work-Life Balance, Stability, and Belongingness, reflecting its commitment to a positive work environment [2] - The recognition is part of Solventum's successful first phase of a three-phased Transformation Plan, which emphasizes culture and employee engagement [3] Company Overview - Solventum has over 70 years of legacy innovation and focuses on providing breakthrough solutions for healthcare professionals while fostering an empowering workplace culture [4] - The U.S. News rankings evaluated over 5,000 publicly traded companies based on employee sentiment and various workplace factors, highlighting Solventum's strong performance [5] - The company aims to enable better healthcare through innovative solutions at the intersection of health, material, and data science [6]

Financial Data and Key Metrics Changes - The company reported a 1.2% growth rate for 2024, exceeding the original guidance of 0% to -2% by 1% [12][16] - For 2025, the company raised its guidance by 50 basis points, indicating a growth expectation of 1.5% to 2.5% [15][16] - The normalized growth rate for Q1 was approximately 2.5%, which is more than double the growth rate from 2024 [38] Business Line Data and Key Metrics Changes - The dental solutions business is expected to grow in the mid-single digits, with a market recovery projected at 3% to 5% over time [25][27] - The company identified five key growth drivers, including negative pressure wound therapy and revenue cycle management, which are expected to contribute significantly to overall growth [59][66] Market Data and Key Metrics Changes - The dental market has been challenging, with economic pressures impacting consumer confidence and elective dentistry [22][23] - The company noted that the clinician productivity solutions segment has been declining double digits but is becoming a smaller part of the overall business [20] Company Strategy and Development Direction - The company is focused on a three-phase transformation strategy, emphasizing growth drivers and operating margin expansion [6][8] - The management team is prioritizing free cash flow improvements and has plans for potential M&A activities following the P and F divestiture [8][93] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's turnaround, citing strong contract wins and improved commercial execution [14][15] - The company is committed to achieving operating margins in the low 20s and is actively working on efficiency projects to drive leverage [87][90] Other Important Information - The company is undergoing an ERP implementation, which is progressing well and is expected to enhance operational efficiency [34][35] - Tariff situations remain fluid, with potential earnings per share upside if tariffs stabilize [53][54] Q&A Session Summary Question: What are the expectations for growth rates in the dental market? - Management indicated that the dental market is currently flat but expects it to recover to a growth rate of 3% to 5% over time, driven by essential care needs and technological advancements [26][25] Question: How is the ERP implementation affecting business operations? - The ERP implementation is on track, with no significant challenges reported, and is expected to improve operational efficiency [35][36] Question: What is the company's approach to M&A? - The company plans to explore M&A opportunities, particularly tuck-in acquisitions, starting in earnest in 2026 after the completion of the P and F divestiture [93][94]

Core Viewpoint - Solventum will participate in the Goldman Sachs 46th Annual Global Health Care Conference on June 10, 2025, showcasing its commitment to the healthcare sector [1]. Company Overview - Solventum focuses on enabling better, smarter, and safer healthcare solutions, aiming to improve lives through innovative approaches [2]. - The company has a legacy of creating breakthrough solutions and is dedicated to pioneering innovations at the intersection of health, material, and data science [2].

Core Insights - Solventum Corporation (SOLV) reported a strong first-quarter performance with earnings per share (EPS) of $1.34, exceeding consensus estimates by 12.6%, and revenues of $2.07 billion, reflecting a 4.3% organic sales increase year over year [1][10] - The company raised its organic sales growth guidance for the full year to 1.5-2.5%, demonstrating confidence in its growth strategy despite macroeconomic challenges [2][10] Short-Term Growth Drivers - The first-quarter results were significantly driven by improvements in commercial operations, particularly in the MedSurg, Dental, and Health Information Systems (HIS) segments [3] - The MedSurg segment achieved 6% organic growth, supported by infection prevention solutions and the V.A.C. Peel and Place dressing [4] - Dental Solutions maintained a 0.4% organic growth despite a soft market, aided by innovations like Filtek Easy Match [5] - HIS segment revenue increased by 3.9%, driven by AI-powered autonomous coding tools [5] - Adjusted for order timing and SKU exits, underlying Q1 sales growth was approximately 2.5%, more than double the expected pace for 2024 [6] Long-Term Growth Catalysts - Solventum's growth strategy is anchored in a three-phase transformation plan, focusing on mission definition, talent enhancement, and cultural alignment in Phase I, scaling growth areas in Phase II, and pursuing M&A post-divestiture in Phase III [11] - Significant investments, including hundreds of millions for expanding IV site management capacity, signal a commitment to long-term scalability [12] - The planned divestiture of the Purification & Filtration segment by the end of 2025 is expected to unlock capital for strategic acquisitions [13] Challenges - The company anticipates a tariff impact of $80-$100 million in the second half of the year, translating to a 35-45 cents hit to EPS, although management is confident in mitigating these costs [15] - Solventum is in the execution phase of its post-spin separation, with over 30% of Transition Service Agreements exited, which carries inherent risks but is essential for future agility [16] Competitive Context - Solventum operates in a competitive environment with large-cap medtech players like Becton Dickinson, STERIS, and Henry Schein, all of which are expanding their portfolios and streamlining operations [19]