Financial Data and Key Metrics Changes - In Q3 2025, sales reached $2.1 billion, reflecting a 2.7% increase on an organic basis and a 0.7% increase on a reported basis [19] - Gross margins were 55.8%, a sequential reduction of 20 basis points, primarily due to tariff headwinds [22] - Earnings per share (EPS) was reported at $1.50, exceeding expectations, driven by sales outperformance and lower net interest expense [24] Business Line Data and Key Metrics Changes - The Med-Surg segment generated $1.2 billion in sales, up 1.1% organically, with advanced wound care growing 2.7% [20] - Dental Solutions sales were $340 million, a 6.5% organic increase, attributed to back-order improvements and new product launches [21] - Health Information Systems (HIS) segment sales reached $345 million, a 5.6% organic increase, driven by strong performance in management solutions and revenue cycle management software [22] Market Data and Key Metrics Changes - The company experienced stronger-than-expected sales growth in dental and HIS markets, with volume being the main growth driver [19] - The impact of foreign exchange contributed a 110 basis point benefit to reported growth, while the intra-quarter sale of the purification and filtration business had a 310 basis point impact [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] - The company is targeting tuck-in acquisitions valued under $1 billion to build scale in attractive markets [10] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate tariff pressures and improve margins through programmatic savings and restructuring initiatives [31][75] - The long-range plan (LRP) revenue growth targets are being achieved faster than expected, with a goal of 4-5% growth by 2028 [27][31] - The company anticipates a step down in separation costs in 2026 and 2027 as it completes its separation from 3M [25] Other Important Information - The company has successfully reduced debt by $2.7 billion following the sale of the purification and filtration business, improving its balance sheet [24][29] - Free cash flow guidance has been updated to $150-$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 post-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 $500 million cost is planned over the next four years, dictated by various projects [44] Question: What factors should be considered for fourth-quarter growth guidance? - Management noted that the fourth quarter will absorb remaining first-half volume benefits, with expectations for growth to align with previous quarters [47] Question: Were there geographic trends in the dental portfolio? - Management reported no significant geographic differences, attributing momentum to new product launches globally [50] Question: Was there any tariff-related price uplift in dental results? - Management stated that pricing remained in line with typical expectations, with no extraordinary pricing benefits observed [54] Question: How quickly can portfolio optimization occur? - Management expressed confidence in the operating cash generated and indicated that they are actively looking for tuck-in acquisitions [67][77]

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]

Financial Data and Key Metrics Changes - Third quarter 2025 sales reached $2.1 billion, reflecting a 2.7% increase on an organic basis and a 0.7% increase on a reported basis [18] - Gross margins were 55.8% of sales, a 20 basis point sequential reduction, primarily due to tariff headwinds [20] - Earnings per share (EPS) was reported at $1.50, exceeding expectations, driven by sales outperformance and lower net interest expense [22] Business Line Data and Key Metrics Changes - The Med-Surg segment generated $1.2 billion in sales, a 1.1% organic increase, with advanced wound care growing by 2.7% [19] - Dental Solutions segment sales were $340 million, up 6.5% organically, driven by back-order improvements and new product launches [20] - Health Information Systems (HIS) segment sales reached $345 million, a 5.6% organic increase, supported by strong performance in revenue cycle management solutions [20] Market Data and Key Metrics Changes - Stronger-than-expected sales growth was noted in dental and HIS markets, with volume being the main driver of growth [18][20] - The company experienced a 110 basis point benefit from foreign exchange in reported growth [18] Company Strategy and Development Direction - The company is executing a three-phase transformation plan, focusing on commercial restructuring, innovation revitalization, and portfolio optimization [4][8] - The "Transform for the Future" initiative aims to reshape the cost structure and improve operational efficiency while driving innovation [6][27] - The company is targeting tuck-in acquisitions valued under $1 billion to build scale in attractive markets [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate tariff headwinds and achieve long-range plan revenue growth targets faster than expected [4][30] - The company anticipates continued sales and margin improvement in 2026, despite expected tariff pressures [25][71] Other Important Information - The company completed a significant debt reduction of $2.7 billion following the sale of the purification and filtration business, improving its balance sheet [22][28] - Free cash flow guidance was updated to $150-$250 million due to the P&F divestiture, with expectations of $450-$550 million excluding the divestiture impact [26][65] 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 after completing necessary restructuring and separation activities [34] Question: What is the expected cadence of the $500 million cost for the Transform for the Future program? - The $500 million cost is planned over the next four years, with specifics on the cadence not yet provided [43] Question: What factors might affect the fourth quarter growth guidance? - Management noted that the fourth quarter guidance includes absorbing the remaining first-half volume benefits, particularly in infection prevention and surgical solutions [45] Question: Were there geographic trends in the dental portfolio performance? - Management reported no significant geographic differences, attributing momentum to new product launches and a specialized sales organization [49] Question: Was there any tariff-related price uplift in the dental results? - Management stated that pricing remained in line with typical expectations and did not see extraordinary pricing benefits from tariffs [53] Question: How should investors think about margin expansion in 2026? - Management expects continued improvement in margins, but tariffs may exert pressure, which is being addressed through savings initiatives [71]