Bausch + Lomb (NYSE:BLCO) Q4 2025 Earnings call February 18, 2026 08:00 AM ET Company ParticipantsAndrew Stewart - President of Global Pharmaceuticals and International ConsumerBrent Saunders - Chairman and CEODavid Roman - Managing DirectorDouglas Miehm - Managing DirectorGeorge Gadkowski - VP of Investor Relations and Business InsightsJoanne Wuensch - Managing Director, Head of U.S. Healthcare ResearchPatrick Wood - Managing DirectorSam Eldessouky - CFOYehia Hashad - EVP and Chief Medical OfficerConferenc ...

Financial Data and Key Metrics Changes - The company reported full-year organic sales growth of 2%, operating EBITDA growth of 6%, and adjusted EPS of $1.68 per share, up 16% year-over-year [5][6][12] - Free cash flow generation was strong, with expectations for solid free cash flow conversion of greater than 90% in 2026 [12][21] Business Line Data and Key Metrics Changes - Healthcare and Water technologies saw fourth-quarter net sales of $821 million, up 4% year-over-year, driven by 3% organic growth [17] - Diversified Industrials reported fourth-quarter net sales of $872 million, a 3% decline year-over-year, with a 4% organic decline [18] - Organic sales for Healthcare and Water technologies grew 5% in the second half of 2025, while Diversified Industrials experienced a 1% decline [16] Market Data and Key Metrics Changes - Organic growth in Europe was up 2% year-over-year, while Asia-Pacific saw a 2% decline [16] - The company expects mid-single-digit growth in Healthcare and Water technologies for 2026, while Diversified Industrials is expected to grow in the low single digits [22] Company Strategy and Development Direction - The company aims to drive above-market organic growth and build a robust business system while maintaining a balanced capital allocation model [8][11] - The strategic priorities for 2026 include enhancing core values, focusing on growth, and continuing operational excellence [7][9] Management's Comments on Operating Environment and Future Outlook - Management noted a mixed macro environment, with expectations for mid-single-digit growth in Healthcare and Water technologies, while automotive demand is expected to be flat [12][13] - The company is seeing improving order trends in its Industrial Technologies business, indicating market stabilization [14] Other Important Information - The company completed the separation of Qnity Electronics and is focused on operational and portfolio transformation [6][7] - A $2 billion share repurchase authorization was announced, with $500 million executed in the fourth quarter of 2025 [11][50] Q&A Session Summary Question: Insights on industrial orders and channel inventories - Management indicated that industrial orders are picking up, particularly in aerospace, with low double-digit improvements expected [30][32] Question: Pricing and inflation outlook - The company does not expect significant headwinds from inflation and anticipates improvements in gross margins due to productivity initiatives [33] Question: Shelter business outlook - The Shelter business is expected to start slightly down in 2026 but improve throughout the year, aiming for flat performance overall [40] Question: Vitality Index and product innovations - The Vitality Index remains strong at about 30%, with new products contributing positively to both top-line growth and margins [42][44] Question: Margin improvements in diversified segments - Margin expansion in Diversified Industrials was attributed to favorable mix and productivity gains, with benefits from ongoing initiatives expected in the future [56] Question: M&A opportunities - The company is actively scouting M&A opportunities, particularly in the healthcare sector, to enhance its portfolio [106] Question: Water business growth in China - Slower growth in China is attributed to reduced industrial production, but the company expects to ramp up to mid-single-digit growth by the end of the year [68] Question: U.S. construction outlook - The outlook for U.S. construction is flat, with low single-digit growth expected in non-residential and repair and remodel sectors, offset by declines in residential [99]

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $149 million, up 1% reported but down 1% organically, with a 2% headwind from foreign exchange [16][18] - Non-GAAP EPS for the first quarter was $0.09, and adjusted EBITDA margin was 8.5%, down approximately 230 basis points year-over-year [17][19] - Free cash flow, including B Medical, was $15 million for the quarter, with cash, cash equivalents, and marketable securities totaling $571 million, an increase of $25 million quarter-over-quarter [17][18] Business Line Data and Key Metrics Changes - In Sample Management Solutions, revenue was $81 million, flat on a reported basis and down 2% organically, with growth in biorepositories offset by softness in automated stores [20] - Multiomics revenue was $67 million, up 1% on a reported basis and flat organically, with growth in next-generation sequencing and gene synthesis, but continued weakness in Sanger sequencing [21][22] Market Data and Key Metrics Changes - North America experienced softness due to macro-driven budget constraints and a government shutdown, while Europe and Asia showed positive momentum [9][22] - China reported 26% organic growth in Multiomics, driven by strong demand in biotech and pharma [22][76] Company Strategy and Development Direction - The company aims to embed operational excellence, accelerate growth, and expand margins as part of its turnaround strategy [8][10] - Focus on core portfolio and strategic capital deployment, including a $250 million share repurchase authorization [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about improvement in capital markets and government funding, expecting greater clarity in the coming months [9][10] - 2026 is viewed as a transitional year for the life sciences sector, with expectations for acceleration in the second half of the year [10][23] Other Important Information - The sale of B Medical Systems is expected to close on or before March 31, 2026, further sharpening the company's focus on its core portfolio [12][16] - The company is committed to maintaining financial flexibility to support disciplined capital deployment [18] Q&A Session Questions and Answers Question: Can you talk about your level of confidence in getting the SMS margins back to where you want them to be? - Management acknowledged challenges due to product mix and quality issues but reiterated confidence in achieving margin targets through operational improvements [25][26] Question: Can you characterize the conversations you've had with customers in the academic and government segments? - Management reported positive conversations and momentum in North America, indicating a bullish outlook for the back half of the year [32][33] Question: What are your expectations for top-line performance in Q2 and the cadence from Q2 to Q3? - Management indicated an uplift in Q2 revenue but emphasized that significant growth is expected in the second half of the year [40][41] Question: How are you thinking about performance in the U.S. academic market given flat NIH budgets? - Management noted a shift in funding priorities and expressed confidence in supporting core labs and driving productivity [46][47] Question: What are you seeing from pharma and biotech customers right now? - Management observed more clarity and commitment from pharma and biotech customers, indicating a positive sentiment moving forward [48][49] Question: Where do you think you can find some of the offset to achieve the 300 basis point expansion? - Management highlighted several levers, including increased sales volume and operational efficiencies, to achieve margin expansion [51][53]

Financial Data and Key Metrics Changes - The company generated full-year Adjusted EBITDA of $2.4 billion, down from $2.6 billion in 2024, reflecting lower ownership in three businesses following partial sales [17] - Adjusted EFO for the year was $1.2 billion, including $161 million of net gains during the year [17] - Excluding tax credits and the impact of acquisitions and dispositions, Adjusted EBITDA was $2.1 billion, compared to $2 billion in the prior year [17] Business Line Data and Key Metrics Changes - The industrial segment generated full-year Adjusted EBITDA of $1.3 billion, up from $1.2 billion last year, with a 10% increase excluding acquisitions and dispositions [18] - The business services segment generated full-year Adjusted EBITDA of $823 million, down from $832 million last year, but increased approximately 5% on a same-store basis [19] - The infrastructure services segment generated full-year Adjusted EBITDA of $436 million, down from $606 million last year, impacted by the sale of operations and lower terminal deliveries [20] Market Data and Key Metrics Changes - North America is benefiting from easing rates, steady consumer spending, and resilient labor markets, although growth remains challenging in certain end markets [10] - In Europe, conditions are more challenging with slower activity in cyclical and industrial end markets, but early signs of improvement are noted due to fiscal spending and stabilizing energy prices [11] Company Strategy and Development Direction - The company is close to completing a corporate reorganization to become a single, newly listed corporation, which is expected to improve trading liquidity and attract global investors [5] - The strategy focuses on operational excellence and capitalizing on de-globalization and AI trends to reshape supply chains and enhance business performance [7][8] - The company aims to continue compounding value for shareholders through capital recycling, growth acquisitions, and stock repurchases [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market backdrop, noting that the trading price is 50% higher than a year ago but still at a discount to NAV [8] - The company is well-positioned with capital and capabilities to build value in 2026, with a strong pipeline of new commercial opportunities [9][15] Other Important Information - The company ended the year with approximately $2.6 billion of pro forma liquidity at the corporate level, providing significant flexibility for growth and capital allocation [21] - The company has repurchased approximately $235 million of its units and shares, remaining committed to completing its $250 million buyback program [21] Q&A Session Summary Question: Regarding Clarios' performance and tax credits - Management indicated that Clarios is generating significant free cash flow, and the 45X tax credits will enhance cash for reinvestment, with various options for shareholder returns being considered [23][24] Question: On Scientific Games' earnings trajectory - Management expressed cautious optimism about Scientific Games, noting a strong market position and a robust pipeline, but emphasized that earnings growth may take time to materialize [26][27] Question: On the balance between reducing leverage and pursuing growth - Management stated that growing EBITDA will naturally reduce leverage, and the focus remains on growth while managing debt levels effectively [28][29] Question: Update on CDK operations - Management reported strong renewal activity and a focus on stabilizing churn through technology adoption, with a positive long-term outlook for the business [42][44] Question: On monetization environment and deployment pacing - Management noted a strong environment for monetizations and indicated that 2026 is expected to be an active year for acquisitions, continuing the momentum from 2025 [45][46]

Brookdale Senior Living (NYSE:BKD) 2026 Investor Day January 30, 2026 10:00 AM ET Company ParticipantsA.J. Rice - Managing DirectorAndrew Mok - DirectorBen Hendrix - VPDawn Kussow - CFOMary Sue Patchett - COOMike Grant - VP of Investor RelationsNick Stengle - CEONone - Video NarratorConference Call ParticipantsBrian Tanquilut - Senior Equity Research AnalystDavid Larsen - Managing Director and AnalystJoanna Gajuk - Equity Research AnalystJosh Raskin - Research AnalystMike GrantGood morning, everybody, and t ...

Financial Data and Key Metrics Changes - The company generated full-year Adjusted EBITDA of $2.4 billion, a decrease from $2.6 billion in 2024, primarily due to lower ownership in three businesses following partial sales [16] - Adjusted EFO for the year was $1.2 billion, which included $161 million of net gains during the year [16] - Excluding tax credits and the impact of acquisitions and dispositions, Adjusted EBITDA was $2.1 billion, compared to $2 billion in the prior year [16] Business Line Data and Key Metrics Changes - The industrial segment generated full-year Adjusted EBITDA of $1.3 billion, up from $1.2 billion last year, with a 10% increase in performance excluding acquisitions and tax benefits [17] - The business services segment generated full-year Adjusted EBITDA of $823 million, slightly down from $832 million last year, but increased approximately 5% on a same-store basis [18] - The infrastructure services segment generated full-year Adjusted EBITDA of $436 million, down from $606 million last year, reflecting the sale of offshore oil services and a partial interest in work access services [19] Market Data and Key Metrics Changes - North America is experiencing stable conditions with easing rates, steady consumer spending, and resilient labor markets, although growth remains challenging in certain end markets [10] - In Europe, conditions are more challenging with slower activity in cyclical and industrial end markets, but there are early signs of improvement supported by fiscal spending and stabilizing energy prices [11] Company Strategy and Development Direction - The company is close to completing a corporate reorganization to become a single, newly listed corporation, which is expected to improve trading liquidity and increase index-driven demand for shares [5] - The strategy focuses on operational excellence and capitalizing on de-globalization and AI trends to reshape supply chains and enhance business performance [6][8] - The company aims to continue compounding value for shareholders through capital recycling, growth acquisitions, and stock repurchases [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market backdrop, noting that the trading price is 50% higher than a year ago but still at a discount to NAV [8] - The company is well-positioned with capital and capabilities to continue building value in 2026, with a strong focus on operational efficiency and cash generation [9] Other Important Information - The company ended the year with approximately $2.6 billion of pro forma liquidity at the corporate level, providing significant flexibility for growth and capital allocation [20] - The company has repurchased approximately $235 million of its units and shares, remaining committed to completing its $250 million buyback program [20] Q&A Session Summary Question: Regarding Clarios' performance and tax credits - Management indicated that Clarios is generating significant free cash flow, and the 45X tax credits will enhance cash generation, providing optionality for shareholder distributions [22] Question: On the timing of production tax credits - Management stated that the application for tax credits is being processed, and they are optimistic about qualifying and receiving the credits in due course [23][24] Question: On Scientific Games' earnings trajectory - Management expressed cautious optimism about Scientific Games, noting a strong market position and a positive outlook, but emphasized that earnings growth may take 6-12 months to materialize [26] Question: On the balance between reducing leverage and pursuing growth - Management highlighted that growing EBITDA will naturally reduce leverage levels, and they are focused on growth while managing free cash flow for debt reduction or other purposes [29] Question: On the buyback program and stock valuation - Management confirmed their commitment to the buyback program and will continue to be opportunistic in repurchasing shares at discounts to intrinsic value [39]

Financial Data and Key Metrics Changes - The company reported a record performance in operating expenses as a percentage of revenue, with Operating EBITDA margin increasing by 150 basis points in the legacy business for the full year [6][20] - Cash flow from operations grew by double digits, reaching $6.04 billion, while free cash flow increased by nearly 27% to $2.94 billion [6][24] - Operating EBITDA margin for the full year expanded by 40 basis points to 30.1%, overcoming a 140 basis point headwind from the acquisition of the Healthcare Solutions business [20][24] Business Line Data and Key Metrics Changes - The collection and disposal business saw Operating EBITDA growth of more than 8% in Q4, with a margin expansion of 160 basis points [14] - The Healthcare Solutions segment improved service delivery metrics and customer satisfaction, with SG&A expenses decreasing to 20.8% of revenue in Q4, a 350 basis point improvement from the prior year [23][9] - The recycling segment delivered over 22% Operating EBITDA growth despite nearly 20% lower commodity prices [10] Market Data and Key Metrics Changes - The company experienced notable growth in special waste, renewable energy, and recycling volumes in 2025, while residential collection volumes showed signs of improvement [19] - The industrial line of business, which had been soft, showed signs of recovery, bouncing back to nearly flat volumes [31] - The landfill business remained a source of strength, contributing positively to overall performance [34] Company Strategy and Development Direction - The company plans to focus on growing its core business by leveraging customer lifetime value, operational excellence, and network advantages [12] - Strategic investments in sustainability include commissioning 7 new renewable natural gas facilities and upgrading recycling facilities, enhancing performance and creating new customer opportunities [10] - The company aims to balance shareholder returns with disciplined reinvestment and tuck-in M&A, targeting a leverage ratio between 2.5 and 3 times by 2026 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment, noting improvements in various business lines and a positive outlook for 2026 [31][34] - The company expects Operating EBITDA growth of 6.2% at the midpoint for 2026, with free cash flow projected to grow nearly 30% [11][26] - Management highlighted the importance of operational excellence and strategic investments in driving long-term shareholder value [12][27] Other Important Information - The board approved a 14.5% increase in the planned quarterly dividend rate for 2026, marking the 23rd consecutive year of dividend growth [11] - The company authorized a new $3 billion share repurchase program, planning to return about $3.5 billion to shareholders through dividends and repurchases in 2026 [12] Q&A Session Summary Question: Can you provide perspective on the macro backdrop and industrial activity? - Management remains optimistic about the macroeconomy, noting a recovery in the industrial line of business and improvements in residential volumes [31][34] Question: What are the expectations for pricing and cost refinement in the Healthcare Solutions segment? - Management indicated progress in customer service and expects better price realization in 2026, with a projected 4.2% price increase [36][38] Question: Can you clarify the decision to hold off on 2027 financial targets? - Management stated that 2027 estimates were not detailed guidance and emphasized the consistency of performance as a strength [45][46] Question: What level of margin expansion is expected in the collection and disposal business for 2026? - Management targets a 50 basis point margin improvement on a same-store sales basis across the portfolio [49] Question: How much cost synergy capture was realized in 2025, and what is expected for 2026? - Management reported exceeding synergy goals in 2025 and anticipates continued benefits in 2026, particularly in SG&A expenses [55][58]

Financial Data and Key Metrics Changes - The company reported organic growth of 2.2% in Q4, with an operating margin of 21.1% and earnings per share (EPS) of $1.83, marking a 9% increase year-on-year [5][18] - Full-year adjusted operating margin was 23.4%, up 200 basis points year-on-year, with adjusted EPS growing to $8.06, reflecting a 10% increase [5][25] - Free cash flow conversion was over 130% in Q4 and slightly above 100% for the full year [5][18] Business Line Data and Key Metrics Changes - Safety and Industrial segment saw organic sales growth of 3.8% in Q4, driven by strong performance in safety and industrial adhesives [19] - Transportation and Electronics segment reported a 2.4% increase in organic sales in Q4, supported by growth in electronics and aerospace, despite weakness in the automotive sector [21] - Consumer segment experienced a decline of 2.2% in Q4, leading to a full-year revenue decrease of 0.3% due to weaker consumer sentiment [22][23] Market Data and Key Metrics Changes - The company noted that all geographic areas delivered growth in 2025, with China growing mid-single digits, while Europe and the U.S. saw low single-digit growth [24][25] - The U.S. market showed signs of softness, particularly in the automotive and consumer sectors, but overall industrial businesses remained solid [39][40] Company Strategy and Development Direction - The company is focusing on three pillars of commercial excellence: improved sales effectiveness, stronger collaboration with channel partners, and increased customer loyalty [6] - A significant emphasis is placed on innovation, with 284 new products launched in 2025, and plans for 350 launches in 2026 [7] - The company is transitioning towards priority verticals, with over 60% of revenue now aligned to these areas, aiming for higher growth and margin potential [34][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a soft macro environment but emphasized that strong execution allowed the company to outperform [10][30] - For 2026, the company expects organic sales growth of approximately 3%, with adjusted EPS projected between $8.50 and $8.70 [11][26] - The management remains cautious about the pace of recovery in the U.S. consumer market and auto build rates, while maintaining confidence in industrial business performance [12][13] Other Important Information - The company returned $4.8 billion to shareholders in 2025, including $1.6 billion in dividends and $3.2 billion through share repurchases [9][25] - The company is committed to a multi-year capital allocation strategy, aiming to return $10 billion to shareholders [9] Q&A Session Summary Question: Can you provide context on the pivot to priority verticals? - Management indicated that over 60% of revenue is now aligned with priority verticals, with significant investments directed towards these areas [34][36] Question: How do you see the year starting out, particularly in the U.S.? - Management noted that while the industrial businesses performed well, there are concerns about softness in the auto sector and consumer electronics [39][40] Question: What is the current state of customer inventory levels? - Customer inventory levels in industrial channels are normalized, while consumer inventory is slightly elevated but improving [50] Question: What is the pricing strategy moving forward? - The company expects to implement price increases and tighten pricing governance, aiming for about 80 basis points in pricing improvement in 2026 [52][53] Question: How do you expect litigation costs to trend in 2026? - Management anticipates litigation costs to remain in line with 2025 levels, depending on the overall docket [85]

Financial Data and Key Metrics Changes - The company reported Q4 organic growth of 2.2%, with an operating margin of 21.1% and earnings per share (EPS) of $1.83, achieving free cash flow conversion of over 130% [5][17] - Full-year adjusted operating margin was 23.4%, up 200 basis points year-on-year, with adjusted EPS growing double digits to $8.06 [5][25] - Free cash flow conversion for the year was slightly above 100%, with $4.8 billion returned to shareholders through dividends and buybacks [9][25] Business Line Data and Key Metrics Changes - Safety and Industrial segment saw Q4 organic sales increase of 3.8%, driven by strong performance in Safety and Industrial Adhesives and Tapes [19] - Transportation and Electronics segment reported Q4 organic sales growth of 2.4%, supported by strong demand in Electronics and aerospace, despite weakness in the automotive sector [21] - Consumer segment experienced a decline of 2.2% in Q4, with full-year revenue down 0.3% due to weaker consumer sentiment and sluggish retail traffic [22][23] Market Data and Key Metrics Changes - China grew mid-single digits, driven by strength in general industrials and Electronics bonding solutions, while the rest of Asia grew low single digits [24] - Europe showed low single-digit growth, supported by general industrial and Safety, offsetting weakness in Consumer and auto aftermarket [24] - The U.S. market grew low single digits for the year, aided by commercial excellence initiatives in general industrial and Safety businesses [24] Company Strategy and Development Direction - The company is focusing on three pillars of commercial excellence: improved sales effectiveness, stronger collaboration with channel partners, and increased customer loyalty [6] - A significant emphasis is placed on innovation, with 284 new products launched in 2025, exceeding targets and contributing to top-line growth [7] - The company is transitioning towards priority verticals, with over 60% of revenue now aligned to these areas, focusing on higher growth and margin potential [34] Management's Comments on Operating Environment and Future Outlook - Management expects organic sales growth of approximately 3% in 2026, with adjusted operating margin expansion of 70-80 basis points and EPS guidance of $8.50-$8.70 [11][26] - The macroeconomic environment is expected to remain similar to 2025, with watch items including U.S. consumer recovery and auto build rates [12][13] - Management remains confident in the company's ability to outperform the macro environment due to strong execution and ongoing commercial excellence initiatives [38] Other Important Information - The company is committed to returning $10 billion to shareholders as part of its multi-year capital allocation strategy [9] - Operational excellence metrics showed significant improvements, with OTIF above 90% and cost of poor quality reduced to 6% of cost of goods [8] - The company is undergoing a transformation to optimize its footprint, with plans to consolidate factories and distribution centers over the next few years [68] Q&A Session Summary Question: Insights on the pivot to priority verticals - Management indicated that over 60% of revenue is now aligned with priority verticals, with significant investments in R&D focused on these areas [33][34] Question: Near-term outlook on U.S. IPI and industrial performance - Management noted that while the IPI is softening, the industrial businesses are expected to remain solid, with good exit rates from the previous year [36][38] Question: Customer inventory levels - Customer inventory levels in industrial channels are normalized, while consumer inventory is slightly elevated but improving [46][48] Question: Pricing strategy - The company expects to achieve about 80 basis points in pricing improvements in 2026, focusing on material cost inflation and pricing governance [50][51] Question: Footprint optimization plans - Management is starting to consolidate its factory and distribution network, with a focus on long-term margin improvement [68][69] Question: Consumer market demand trends - The consumer market showed a decline in Q4, but December sales were strong, indicating potential recovery as the year progresses [72][73]

Financial Data and Key Metrics Changes - In Q4 2025, the company reported organic growth of 2.2%, an operating margin of 21.1%, earnings per share (EPS) of $1.83, and free cash flow conversion exceeding 130% [4][15] - Full-year adjusted operating margin reached 23.4%, up 200 basis points year-on-year, with adjusted EPS growing to $8.06, reflecting a double-digit increase [4][21] - Free cash flow conversion for the year was slightly above 100%, with a total return to shareholders of $4.8 billion, including $1.6 billion in dividends and $3.2 billion in share repurchases [8][23] Business Line Data and Key Metrics Changes - Safety and Industrial segment saw Q4 organic sales increase of 3.8%, driven by strong performance in safety and industrial adhesives [17] - Transportation and Electronics segment reported a 2.4% increase in organic sales, supported by growth in electronics and aerospace, despite weakness in the automotive sector [19] - Consumer segment experienced a decline of 2.2% in Q4, leading to a full-year revenue decrease of 0.3% due to weaker consumer sentiment [20][21] Market Data and Key Metrics Changes - The company noted that all geographic areas delivered growth in 2025, with China growing mid-single digits, driven by strength in general industrials and electronics [22] - The U.S. market grew low single digits, supported by commercial excellence initiatives, despite challenges in the consumer and automotive sectors [22][23] - Europe showed low single-digit growth, benefiting from general industrial and safety sectors, offsetting weaknesses in consumer and automotive markets [22] Company Strategy and Development Direction - The company is focusing on three pillars of commercial excellence: improved sales effectiveness, stronger collaboration with channel partners, and increased customer loyalty [5] - A significant emphasis is placed on innovation, with 284 new products launched in 2025, exceeding targets and contributing to top-line growth [6] - The company is transitioning towards a more integrated operating model, aiming for structural cost reductions and embedding an AI-first mentality [12][13] Management's Comments on Operating Environment and Future Outlook - Management expects organic sales growth of approximately 3% in 2026, with adjusted operating margin expansion of 70-80 basis points and EPS guidance of $8.50-$8.70 [10][24] - The macroeconomic environment is anticipated to remain similar to 2025, with watch items including U.S. consumer recovery and auto build rates [11] - Management highlighted the importance of executing their game plan and controlling internal factors to drive performance despite external challenges [11][29] Other Important Information - The company is committed to returning $10 billion to shareholders as part of its multi-year capital allocation strategy [8] - Operational excellence metrics showed significant improvements, with OTIF above 90% and cost of poor quality reduced to 6% of cost of goods [7] - The company is targeting a cost of quality reduction to 5.4% in 2026 and less than 4% over time [8] Q&A Session Summary Question: Insights on the pivot to priority verticals - Management indicated that over 60% of current revenue is aligned with priority verticals, with 80% of R&D focused on these areas [30][31] Question: Outlook on U.S. IPI and industrial business performance - Management noted solid exit rates across industrial businesses, despite a softening IPI, and expects overall industrial performance to remain strong [33][34] Question: Customer inventory levels - Customer inventory levels in industrial channels are normalized, while consumer inventory is slightly elevated but improving [37] Question: Pricing strategy - The company expects to achieve about 80 basis points in pricing improvements in 2026, focusing on material cost inflation and pricing governance [39][40] Question: Incremental margins and productivity assumptions - Management expects higher productivity and volume contributions in 2026, with a projected increase in operating income from both factors [59][60]