Solventum (NYSE:SOLV) Q4 2025 Earnings call February 26, 2026 04:30 PM ET Company ParticipantsAmy Wakeham - Senior Vice President of Investor Relations and External Finance CommunicationsBryan Hanson - CEODavid Roman - Managing Director in Global Investment Research DivisionDylan Finley - Director in Equity ResearchRick Wise - Managing Director in Medical Technology and SuppliesTravis Steed - Director in Medical Technology Equity ResearchVik Chopra - Director in Medical Technology Equity ResearchWayde McMil ...

Solventum (NYSE:SOLV) Q4 2025 Earnings call February 26, 2026 04:30 PM ET Company ParticipantsAmy Wakeham - Senior Vice President of Investor Relations and External Finance CommunicationsBryan Hanson - CEODavid Roman - Managing Director in Global Investment Research DivisionDylan Finley - Director in Equity ResearchLeah Keiser - Equity Research AssociateRick Wise - Managing Director in Medical Technology and SuppliesTravis Steed - Director in Medical Technology Equity ResearchWayde McMillan - CFOConference ...

Solventum (NYSE:SOLV) Q4 2025 Earnings call February 26, 2026 04:30 PM ET Speaker6Good afternoon. My name is Audra, and I will be your conference call operator today. I would like to welcome everyone to Solventum's fourth quarter 2025 earnings call. As a reminder, this conference is being recorded. All lines have been placed on mute to prevent any background noise. I would now like to turn the program over to your host for today's conference, Amy Wakeham, Senior Vice President of Investor Relations and Fina ...

Financial Data and Key Metrics Changes - Third quarter 2025 sales reached $2.1 billion, representing a 2.7% increase on an organic basis compared to the prior year and a 0.7% increase on a reported basis [19] - Gross margins were 55.8% of sales, reflecting a 20 basis point sequential reduction primarily due to tariff headwinds [22] - Earnings per share (EPS) was reported at $1.50, exceeding expectations driven by sales outperformance and stronger gross margins [24] Business Line Data and Key Metrics Changes - The MedSurg segment generated $1.2 billion in sales, an increase of 1.1% on an organic basis, with advanced wound care growing by 2.7% [19][20] - Dental solutions sales were $340 million, up 6.5% on an organic basis, driven by back-order improvements and new product launches [21] - Health Information Systems (HIS) segment sales reached $345 million, a 5.6% organic increase, supported by strong performance in revenue cycle management solutions [22] Market Data and Key Metrics Changes - Foreign exchange contributed a 110 basis point benefit to reported growth, while the intra-quarter sale of the Purification & filtration business had a 310 basis point impact on reported growth [19] - The company noted that volume continues to be the main driver of growth, with pricing remaining stable within the expected range of ± 1% [19] Company Strategy and Development Direction - The company is executing a three-phase transformation plan, focusing on commercial restructuring, innovation revitalization, and portfolio optimization [5][9] - The "Transform for the Future" initiative aims to reshape the cost structure and improve operational efficiency while driving innovation [8][29] - The company is positioned to pursue tuck-in M&A opportunities valued under $1 billion in established markets [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate tariff pressures and achieve margin targets despite current challenges [31] - The company is progressing towards its long-range plan goal of 4%-5% growth faster than expected, with continued sales and margin improvement anticipated in 2026 [27][72] - Management highlighted the importance of innovation and commercial infrastructure in driving future growth [50][54] Other Important Information - The company completed the sale of the Purification & filtration business, resulting in a significant debt reduction and improved cash position [24][29] - Free cash flow guidance was updated to $150 million-$250 million due to the divestiture, with expectations for strong cash generation moving forward [28][70] Q&A Session Summary Question: Was the Transform for the Future program initiated early on or a response to tariffs? - Management indicated that the program was always contemplated but was initiated once the company was ready, following restructuring and separation activities [35][36] Question: What is the expected cadence of the $500 million cost for the Transform for the Future program? - The company has not provided specific details on the cadence of the spend, which will depend on various projects [44] Question: How should the market view the guidance for the remainder of the year, particularly in dental? - Management noted that Q4 growth would be impacted by absorbing first-half volume benefits but expected performance to align with previous quarters [47] Question: Were there geographic trends in the dental portfolio? - Management reported no significant regional differences, attributing momentum to new product launches globally [50] Question: Is there visibility on sustaining the underlying growth in dental? - Management expressed confidence in sustaining and potentially improving growth in the dental segment due to strong commercial infrastructure and innovation [54] Question: Why is the tariff impact range still wide? - Management stated that the dynamic environment necessitated maintaining a broader range for tariff impact estimates [55] Question: What are the potential areas of interest for future acquisitions? - The company is actively looking for tuck-in acquisitions under $1 billion in value, focusing on areas where they already operate [76]

Core Insights - Solventum (SOLV) is set to release its third-quarter 2025 results on November 6, with expectations of mixed performance due to various challenges despite a strong first half [1][3][10] Financial Estimates - The Zacks Consensus Estimate for Solventum's revenues is $2.09 billion, while the earnings per share (EPS) estimate is $1.43 [2][10] Performance Outlook - The company is expected to face temporary headwinds from order timing, ERP implementation challenges, and tariff-related cost pressures, which may offset underlying business strength [3][10] - Revenue growth is likely to have softened sequentially, aligning with management's guidance of decelerating sales in the second half due to the reversal of advanced orders in the Infection Prevention and Surgical Solutions (IP&SS) segment [4][5] Segment Analysis - **MedSurg Segment**: Anticipated revenue normalization after a strong first half, with a temporary pullback in the IP&SS subsegment due to reversed orders [7] - **Advanced Wound Care**: Expected to show improvement driven by the adoption of single-use negative-pressure wound systems and expanded product rollout in Europe [8] - **Dental Solutions**: Projected to maintain low-single-digit growth supported by new product launches despite sluggish global dental demand [9] - **Health Information Systems (HIS)**: Likely to see steady growth benefiting from the adoption of the 360 Encompass platform, although spending constraints among hospital clients may impact near-term demand [11] - **Purification & Filtration (P&F)**: Expected to remain stable ahead of its planned divestiture, with continued demand for bioprocessing and industrial filtration products [12] Margin and Cost Management - Despite challenges, Solventum's focus on pricing discipline, restructuring savings, and a favorable product mix is expected to help sustain operating margins near the mid-20% range [6][10]