NYSE:SOLV Solventum Q1 2025 Earnings Report $72.60 -0.16 (-0.22%) Closing price 03:59 PM EasternExtended Trading$72.63 +0.03 (+0.04%) As of 04:45 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Solventum EPS ResultsActual EPS$1.34Consensus EPS $1.19Beat/MissBeat by +$0.15One Year Ago EPS$2.08Solventum Revenue ResultsActual Revenue$2.07 billionExpected Revenue$2.02 billionBeat/MissBeat by +$53.70 millionYoY Revenue Growth+2.70%Solventum Announcement DetailsQuarterQ1 2025Date5/8/2025TimeAfter Market ClosesConference Call DateThursday, May 8, 2025Conference Call Time4:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Solventum Q1 2025 Earnings Call TranscriptProvided by QuartrMay 8, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good afternoon. My name is Amy, and I will be your conference call operator for today. I would like to welcome everyone to the Solventum First Quarter twenty twenty five Earnings Call. As a reminder, this call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:34Thank you. 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 Finance Communications. Please proceed. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:00:50Thank you. Good afternoon and welcome to Silventum's first quarter fiscal year twenty twenty five earnings call. Joining me on today's call are Chief Executive Officer, Brian Hansen and Chief Financial Officer, Wade McMillan. A replay of today's earnings call will be available later today on the Investor Relations section of our corporate website. The earnings press release and presentation are both available there now. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:01:18During today's call, our discussion and any comments we make will be made on a non GAAP basis, unless we have specifically called them out as GAAP. The non GAAP information we discuss is not intended to be considered in isolation or as a substitute for the reported GAAP financial information. You are encouraged to review the supporting schedules in today's earnings press release to reconcile the non GAAP measures with the GAAP reported numbers. Additionally, our discussion on today's call will include forward looking statements, including but not limited to expectations about our future financial and operating performance. We make these statements based on reasonable assumptions. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:02:07However, our actual results could differ. Please review our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ materially from any forward looking statements made today. Following our prepared remarks, we'll hold a Q and A session. For the Q and A portion of today's call, please limit yourself to one question and one related follow-up. If you have additional questions, you're more than welcome to rejoin the queue. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:02:42And with that, I'd like to now hand the call over to Brian. Bryan HansonCEO at Solventum00:02:47All right. Thank you, Amy, and to all of our shareholders and everyone interested in our company story, just thanks for joining us today for our first quarter results. And I'm just going to get straight to the point. We are off to a strong start for 2025. And as a result of this positive momentum, favorable FX and decisive steps we've taken to mitigate the impact of known tariffs, we are raising our organic revenue guidance and confirming EPS for the year. Bryan HansonCEO at Solventum00:03:14All right, before we jump into the strong start for the year, let me just quickly address tariffs specifically and Wade will provide more details in a minute. But to be clear, tariffs will be a headwind for us this year. And without them, we would be raising our EPS guidance commensurate with the underlying momentum we're seeing in the business. Now that said, we've begun executing short term mitigation measures based on what we know today and are actively developing, analyzing and of course implementing additional strategies. And as a result, and as I just mentioned, we expect to be able to manage the current year headwind within our existing full year EPS guidance. Bryan HansonCEO at Solventum00:03:51And obviously given just the fluid nature of the situation, we will continue to closely monitor the evolving policy changes and assess what they mean for our organization. Relative to our continued momentum, progress here is further evidenced by our first quarter results, marking another positive quarter of volume growth. This makes it now four consecutive quarters of positive growth and sequential improvement as we delivered 4.3% organic sales growth and adjusted earnings per share of 1.34 again continuing to perform ahead of expectations. I think this is particularly impressive though given the company's historical performance. As I shared at our recent Investor Day, this business experienced six years of a declining volume trend and seven quarters, that's nearly two years of negative volume growth before our spin. Bryan HansonCEO at Solventum00:04:41Now stopping that decline and reversing the trend are direct results of the foundational enhancements we've made across three primary areas. The first being our mission and culture. The second, our talent and capabilities. And third, our efforts to stabilize the business across commercial productivity, our innovation process and our strategic focus and alignment. And as I've referenced before, I am very impressed with the team's ability to execute all of these changes as quickly as they have, particularly given the distractions of the separation process. Bryan HansonCEO at Solventum00:05:13And I want to extend my gratitude to our dedicated team members around the globe, not just for another strong quarter, but really for their hard work overall, which is advancing our mission and driving us forward. This team continues to impress me as they make significant progress in executing the separation and advancing across all three phases of our transformation plan and very importantly, delivering results that have already changed the trajectory of this business. Now more broadly speaking, from a macroeconomic perspective, this quarter, well, it has certainly been one of the more eventful starts to a new year. And as such, we are actively navigating a shifting geopolitical landscape and rapidly evolving trade policies. Now while we are managing this turbulent environment aggressively, we are also ensuring that our primary focus remains very clear. Bryan HansonCEO at Solventum00:06:03Number one, and obviously, delivering for our customers worldwide so patients continue to receive the care they need. And number two, and very importantly, staying committed to investing in the key areas that will support continued and sustainable improvement in our growth. And as a result, just as I outlined at our Investor Day, we are fully committed to our growth and margin drivers to reposition this company for profitable growth and drive meaningful value for shareholders. Okay. Now moving to our business segments where progress and positive momentum continue. Bryan HansonCEO at Solventum00:06:35The MedSurg business had a very strong quarter benefiting from positive underlying business performance and favorable order timing. Now regarding our underlying business performance, we continue to focus on driving the adoption of our recently launched VAC Peel and Place dressing. As many of you may remember, this is a product within our negative pressure wound therapy business, which is one of our key growth drivers. As I've mentioned previously, this product provides value in three areas. It simplifies the procedure, it reduces procedure time and importantly reduces the number of dressing changes per week, all of which are meaningful advances for both patients and providers. Bryan HansonCEO at Solventum00:07:11And the team has done a really good job of ramping capacity to meet the very strong demand, and our newly dedicated commercial team continues to drive momentum in this space. Now also in MedSurg, the growth driver area of IV side management, we are very pleased with the traction that we're seeing in this space. And our newly dedicated commercial team has successfully converted key accounts during the quarter. Given our momentum here and to further support the needs of this business, we have invested hundreds of millions of dollars for capacity expansion in The U. S, specifically in South Dakota with strong support of the then Governor, Kristi Noem. Bryan HansonCEO at Solventum00:07:47And moving to our Dental Solutions business, we saw benefits in three areas. The first in our core restorative growth driver, as well as our strategic bed area of aesthetics and across other recent product launches. In core restoratives, our differentiated and strong brand recognition continues to resonate with our customers and it provides a solid foundation for growth. And our recent product launch of Filtek EasyMatch and our refocused dedicated sales team continue to support solid growth in this area. In aesthetics, customer response to the Q4 launch of our first to market and three d printed Clarity Precision Grip Attachments remains very positive, and this product enhances our ability to offer a unique combination of dental and ortho solutions, really enabling the team to expand their conversations with both dentists and orthodontists. Bryan HansonCEO at Solventum00:08:34And then finally, our ClinPro clear fluoride treatment launch continues to gain traction with customers and had strong demand in the quarter. It's the combination of these areas has helped to drive offsets for decelerating areas like impressioning materials to help stabilize the segment even as overall market volumes remain challenged. Okay. In our HIS business, we are focused on our growth driver of revenue cycle management. And as you remember, a key component of this is autonomous coding. Bryan HansonCEO at Solventum00:09:03And as we've mentioned, our AI driven autonomous coding technology really focuses on streamlining the coding process to help save our customers time and money. And medical coding is incredibly complex, and our computer assisted and emerging autonomous technology can account for the constant tide of regulatory changes, quality demands and local, state, and organization specific guidance. And this HIS team is highly focused on leading the way in autonomous coding and doing so, of course, with leading AI driven solutions, that's for sure. But importantly, and probably most important, leveraging our decades of trusted high quality and compliant coating. And last but not least, turning to our Purification and Filtration business, we saw another quarter of robust demand for our bioprocessing solutions, which gives us confidence in the strength of the end markets and the value of the segment's differentiated technology and reoccurring revenue model. Bryan HansonCEO at Solventum00:09:56And our investment in additional capacity in our industrial business supported accelerated growth in the quarter as well. And as we shared in our last quarter, the P and F business is very well positioned for growth under its new owner where it has a really strong strategic fit. We expect, as we mentioned before, to complete the transaction by the end of twenty twenty five and our team is working very diligently for a smooth close and ultimately a smooth transition. At our recent Investor Day, I spoke extensively about our progress across the three phases of our transformation plan. And if you didn't see it, I would encourage you to watch the replay or read the transcript for more details. Bryan HansonCEO at Solventum00:10:34Both of those are available on our Investor Relations website. But just as a quick summary regarding Phase one, our mission and values have been deployed globally and through our communications and transformation efforts, are seeing deep understanding and most importantly connection from our team members to both. We've hired great talent across a significant number of critical to transformation roles and our separation efforts continue to be on track. As a matter of fact, we have a very large team mobilized right now across the globe and have just started this week with our largest ERP cutover to date. And I know that team is working around the clock to execute this very important phase of our separation And I want to thank each and every one of them for burning the midnight oil and moving us forward. Bryan HansonCEO at Solventum00:11:15And moving to phase two, as a global team, could tell you that we are very aligned and executing a long range plan we just unveiled at our Investor Day. And we are hyper focused on driving our five growth driver areas, which will help expand our scale within our most attractive markets and ultimately, as a result of that, increase the weighted average market growth of our business. And finally, on Phase three, once we close the divestiture of the P and F business, we anticipate being able to execute tuck in M and A, which as we said before, will focus on enhancing our recently presented organic long range plan. So in summary, it's pretty clear that we are making steady progress on our transformation, And we're extremely confident that the changes we've already made, combined with our newly defined strategic plan, will accelerate sustainable and profitable volume growth and ultimately deliver significant shareholder value. And with that, I'll turn it over to Wade to walk us through more detail on our first quarter results and 2025 guidance as well as provide additional color on the separation and on everybody's favorite topic, tariffs. Bryan HansonCEO at Solventum00:12:16Okay. Wade, I'll pass it over to you. Wayde McMillanChief Financial Officer at Solventum00:12:19Thanks. And thank you to everyone at Solventum for the continued progress and for delivering a strong start to fiscal year '20 '20 '5. As you heard from Brian, we're making meaningful progress on the three phase transformation plan as we complete our first full year as a public company. I'll focus my comments initially on a quick separation update before moving into our Q1 financial performance. Then we'll wrap up with our 2025 guidance update, which includes the impact of tariffs. Wayde McMillanChief Financial Officer at Solventum00:12:53Overall, the separation remains on track and we are executing against key milestones while delivering on our financial goals. To date, we have exited just over 30% of the more than 200 transition service agreements, and we plan to exit all transition agreements over the next two years. In operations and supply chain, we continue to make progress consolidating across manufacturing and distribution centers. We expect to significantly advance progress on our ERP milestones with four deployments planned this year, including our first major deployment in Q2. We want to thank our global team of dedicated people around the world for their efforts in this large scale separation. Wayde McMillanChief Financial Officer at Solventum00:13:43Now turning to our Q1 results, starting with sales. First quarter twenty twenty five sales of $2,100,000,000 increased 4.3% on an organic basis compared to prior year and increased 2.6% on a reported basis. During the quarter, foreign exchange was a 160 basis point headwind. Overall, we had a stronger than expected volume performance driven by improved commercial execution as we drive focus and alignment across the organization on our growth drivers to accelerate sustainable sales growth. We also benefited from order timing related to customers buying ahead of upcoming ERP and distribution center moves and SKU exits. Wayde McMillanChief Financial Officer at Solventum00:14:36We expect this favorable timing benefit will be offset by year end, mostly in Q2 and Q3. The impact of SKU exits in the quarter was 30 basis points. All in, we estimate our normalized Q1 organic sales growth is closer to 2.5%. Pricing remains consistent within our expected range and we are encouraged by the continued shift to delivering positive volume growth across the businesses. Moving to the segments. Wayde McMillanChief Financial Officer at Solventum00:15:15Our largest segment, MedSurg, delivered $1,200,000,000 of sales, an increase of 6% on an organic basis. Growth was broad based and led by the Infection Prevention and Surgical Solutions business, which grew 8.2% and was the primary beneficiary of the previously mentioned timing benefits, which drove the significantly higher than expected performance. Advanced Wound Care growth of 2.8% was driven by negative pressure wound therapy consumables and continued market adoption of single use negative pressure wound therapy. Our Dental Solutions segment delivered $328,000,000 of revenue, an increase of 40 basis points on an organic basis. And as you heard from Brian earlier, we are seeing the positive benefit of new product launches even as the end market continues to be challenged. Wayde McMillanChief Financial Officer at Solventum00:16:16And we remain encouraged by the overall resilience of our Dental portfolio. Our Health Information Systems segment contributed $329,000,000 of revenue, an increase of 3.9% on an organic basis, which benefited from strong customer retention of our revenue cycle management software solutions. The competitive environment has resulted in continued declines in clinician productivity solutions. However, this product category grew in the current quarter, primarily due to an easy prior year comparison. Finally, the Purification and Filtration segment delivered $242,000,000 of sales, an increase of 2.2% on an organic basis, led by our Bioprocessing Filtration and industrial filtration categories. Wayde McMillanChief Financial Officer at Solventum00:17:10Similar to the prior quarter, performance in these areas was partially offset by declines in membranes. As a reminder, awarding timing benefits in Q1 last year resulted in a tough comparison. Looking down the P Wayde McMillanChief Financial Officer at Solventum00:17:25and L, Wayde McMillanChief Financial Officer at Solventum00:17:26gross margins were 55.6% of sales in the quarter, slightly ahead of our expectations and down two sixty basis points compared to the prior year. Our current quarter results include approximately 100 basis points of increased cost paid to three ms as part of the supply agreement when comparing year over year. Gross margins also decreased sequentially as expected based on normal manufacturing seasonality. Operating expenses increased versus the prior year and were roughly flat on a sequential basis as planned. The increased year over year spend reflects public company stand up costs and growth investments to support our business transformation. Wayde McMillanChief Financial Officer at Solventum00:18:17Savings from the recent restructuring are on track and will continue to ramp through the year. Altogether, operating expenses were in line with our expectations. In total, we delivered adjusted operating income of four zero seven million dollars which translates to an operating margin of 19.7%, ahead of expectations. Moving down the P and L to non operating items, our net interest expense remained consistent with Q4. Lastly, our effective tax rate of 19.9% is just below the low end of our full year outlook and reflects a slightly favorable jurisdictional mix. Wayde McMillanChief Financial Officer at Solventum00:19:04Overall, we delivered earnings per share of $1.34 ahead of our expectations driven by sales outperformance and favorable margins. We also ended the quarter with $534,000,000 in cash and equivalents with no outstanding borrowings on our revolving credit facility. To date, we have made cumulative repayments of $400,000,000 on our $1,500,000,000 prepayable term loans, which includes another $100,000,000 paid off in March. For Q1, our free cash flow declined $80,000,000 which was consistent with our expectations and reflects both Q1 planned payments and one time separation costs as well as the timing of interest payments and shift into the execution phase across several separation projects. Now turning to our 2025 guidance update, which reflects our strong Q1 performance and momentum to start the year. Wayde McMillanChief Financial Officer at Solventum00:20:12As a reminder, our guidance is for the whole company, including the Purification and Filtration business, which is held for sale until the transaction closes, which is expected before the end of the year. Starting with full year organic sales growth, we are increasing our outlook to a range of 1.5% to 2.5%, an increase of 50 basis points above our prior guidance. We continue to estimate a 50 basis point impact of SKU exits, which we anticipate will ramp throughout the year. Excluding this planned impact, our annual growth outlook is 2% to 3%, reflecting the momentum we are seeing in volume driven performance across our business segments as we execute against the phased approach to reposition for growth. Regarding foreign exchange, given the recent weakening of the U. Wayde McMillanChief Financial Officer at Solventum00:21:12S. Dollar, we now estimate currency will have a neutral impact on sales growth for the year. This compares to our prior outlook of a roughly 150 basis point headwind and will have a positive benefit on our reported sales and earnings per share. For earnings per share, we are maintaining our initial $5.45 to $5.65 earnings per share guidance, including estimated tariff headwinds that will impact us during the second half of twenty twenty five. The current trade policy environment and tariffs are an evolving dynamic and challenging to quantify. Wayde McMillanChief Financial Officer at Solventum00:21:57We currently estimate tariff headwinds of approximately 80,000,000 to $100,000,000 in 2025, which translates to an earnings per share impact of $0.35 to $0.45 This will pressure our gross margin and operating margin in the second half of the year. And we now anticipate operating margins for the year will be at the low end of our planned range of 20% to 21%. We expect our strong Q1 performance and business momentum, favorable foreign exchange and mitigation actions to offset the impact of tariffs within our earnings per share guidance range. Our tariff estimate includes all known tariffs at this time with the following assumptions: U. S. Wayde McMillanChief Financial Officer at Solventum00:22:49Exports to China at 125% and represents about half of the total impact with expected exemptions. U. S. To and from the EU remains at 10%, which represents about one third of the total impact. The remaining balance of tariff impacts reflects smaller amounts for Mexico and Canada given the USMCA exemptions and minimal imports from China to The U. Wayde McMillanChief Financial Officer at Solventum00:23:20S, consistent with our prior view. It's important to highlight that due to the short duration of our inventory turns, approximately one quarter, the impact of tariffs implemented in Q2 will be fully realized in our financial results starting in Q3 and continuing through Q4. Our team has moved quickly to adapt to the changing situation. While this will be an ongoing process of assessment and mitigation, we've already taken steps and are executing several action plans to mitigate the headwinds. We have filed for and received nearly all outstanding USMCA certifications and working across regions to secure additional exemptions. Wayde McMillanChief Financial Officer at Solventum00:24:08We're continuing to optimize our inventory, leveraging sourcing options across our supply chain and thoughtfully evaluating selective pricing strategies. We are also maintaining our free cash flow guidance of $450,000,000 to $550,000,000 Before closing out, I also want to reiterate our commitment to continued investment focused on the long term value creation opportunity ahead, while also looking for opportunities to expand margins and generate strong cash flows. In conclusion, we're building momentum, having delivered a strong financial performance in Q1 as we execute on our separation plans. With that, we'll now hand it back to the operator for the Q and A portion of the call. Operator00:24:59Thank Your first question comes from the line of Patrick Wood with Morgan Stanley. Your line is now open. Patrick WoodManaging Director at Morgan Stanley00:25:30Beautiful. Thanks guys and thanks so much for taking the question. I'll leave the tariffs to everybody else because I can't survive talking about that topic anymore. So I'm going go on the top line actually. How confident are you around that kind of 2.5 underlying? Patrick WoodManaging Director at Morgan Stanley00:25:48And I say this because obviously the RemainCo growth like is like 4.6, obviously all combined 4.3, like really, really strong quarter. Is this like a SKU level analysis or something like that? Because how confident are you that that's actually stocking from the customers and not just some of the commercial plans that you guys have been putting through and therefore is a little bit more durable than maybe you're suggesting? Wayde McMillanChief Financial Officer at Solventum00:26:13Hey, Patrick, it's Wade. We're confident. It's a number that's tough to predict beforehand because it's difficult to know how much customers are going to be buying in, the timing of it and and to the extent of it. But after the fact, we've got good analytics. We work with our distributor partners as well as our end customers and understand their order patterns. Wayde McMillanChief Financial Officer at Solventum00:26:37And it's something that we're confident in. It is still an estimate. We specifically called it out closer to 2.5% because there is some variability to it. But the 2.5% is a good number for us and that's what we think is the number that we grew in the quarter exclusive of those customer order buying ahead. And what that means for us is a really strong quarter. Wayde McMillanChief Financial Officer at Solventum00:27:01It's more than double the growth rate that we had in 2024. So very happy to see the continued acceleration of the business and it's really across all four of our segments. So we had a really strong quarter here to start the year. Patrick WoodManaging Director at Morgan Stanley00:27:15Yes. It's definitely faster than we thought. And then just as a quick follow-up, is it a fair assumption on our end to assume that the general price mix trends that you'd seen in the previous quarter was consistent here? You hinted at it in the opening remarks, but is it fair to assume that the entire delta basically is all volume? Wayde McMillanChief Financial Officer at Solventum00:27:33Yes. So we've been anticipating this for some time as we've got the business focused on volume growth, which we think is the sustainable strategy. And so for pricing, again, this quarter, we saw it in that normalized range for us, which is between plus or minus 1%, and it's not really the driver that we're focused on. It's all about volume growth for us from here. Operator00:27:59Your next question comes from the line of Your line is now open. Rick WiseAnalyst at Stifel Financial00:28:07Thank you. Hi, Brian. Hi, Wade. Maybe just to start with thinking about the year ahead, I mean to say it as simplest, tariffs are a bigger headwind, you were very clear. But offsetting that is the business momentum is the lower FX. Rick WiseAnalyst at Stifel Financial00:28:33Can you help us at all think through the quarterly cadence as we adjust our models? I mean, just starting with the second quarter, last year was sort of flat sequentially, but you have new products, you've got commercial momentum, etcetera. Help us a little bit directionally if you could. Bryan HansonCEO at Solventum00:28:53I just want to make sure that we clarify, Rick. Are you talking about growth by quarter? Or what are you talking about? Rick WiseAnalyst at Stifel Financial00:29:01Or dollars in can you report higher numbers in the second quarter given all the positives and relative to the negative impact of tariffs? Top line, Brian. I'm not sorry if I'm not clear. Probably Bryan HansonCEO at Solventum00:29:19for clarification, tariffs really don't have a significant impact for us on the top line. It's definitely more of a bottom line challenge for us. The ordering ahead or the timing that we saw in the quarter was more associated with our ERP cutovers and planned distribution changes and some buy ahead on the SKU rationalization. That will come back in Q2, Q3, maybe even Q4. Most of the impact will be in q three. Bryan HansonCEO at Solventum00:29:45That that's the way we're looking at it today because by the time we get to q three, we'll be past the distribution center changes, and we should be free and clear to see those, those changes. Operator00:29:57Thank you. The next question comes from the line of Jason Bednar with Piper Sandler. Your line is now open. Jason BednarSenior Research Analyst at Piper Sandler Companies00:30:06Hey. Good afternoon. Nice start to the year here, guys. Jason BednarSenior Research Analyst at Piper Sandler Companies00:30:11Want to come back a little bit on Patrick's question and talking about that 2.5% underlying. I guess my question is more around how does that compare to what you were internally expecting? It sounds like it's nicely above most of our models. But I guess, kind of where are you at? Where are you out executing? Jason BednarSenior Research Analyst at Piper Sandler Companies00:30:33And then we're five weeks removed here from quarter end. I guess, on that order timing that you referenced for 1Q, did you have any additional buy ahead in April? Or did some of that did you already start seeing some of that drawdown in April and early May? Bryan HansonCEO at Solventum00:30:47Why don't I start maybe with how we're looking at the 2.5 and how it compared to our performance or assumption of performance? And then, Wade, you could talk more about the drawdown. It was above our expectations too, but we're very happy with the 2.5. Bryan HansonCEO at Solventum00:31:00As a Bryan HansonCEO at Solventum00:31:01matter of fact, if you think about it on an annual basis, I'm not saying we're going to beat 2.5, but the last time this company did 2.5 was, I think, 2018. So was a long time ago. So we were very happy with the performance in the quarter. It was definitely ahead of our expectations even on an underlying basis. And really, the key driver for it is the thing that we talked about at our investor meeting, which is we are seeing the benefits of our enhancements to the commercial organization and the focus that we now have. Bryan HansonCEO at Solventum00:31:27Because remember, we we've enhanced the commercial organization by dedicating the sales organizations to those growth driver areas, and we're just seeing traction as a result of it. Now we have to keep that going. And quite frankly, we shouldn't be happy with 2.5% because we're still not in market, but it's a really nice improvement off of last year. Wayde McMillanChief Financial Officer at Solventum00:31:44Yes. And then just picking up on what we're seeing so far in Q2. Just before I get into Q2 specifically, Brian mentioned just a minute ago, the expectation is because of our ERP cutover and distribution center moves in Q2 that we'll see the majority of that order timing come back in Q3. It is tough to predict. We could see more of it in Q2 or a little bit more in Q4, but our expectation is most of it comes on the back of our ERP and distribution center moves, which the big moves are coming here in Q2. Wayde McMillanChief Financial Officer at Solventum00:32:15As far as quarter to date for us, it's in line with those expectations. But we've got a ways to go yet. And we are actually just as Brian said in his prepared remarks, the team is hunkered down right now as we go through the ERP implementation this week, and we're right in the throes of it. So from that standpoint, expectation would be we could see some of the headwind come back here in Q2, but we think majority will be coming in Q3. Operator00:32:47Thank you. Your next question comes from the line of David Roman with Goldman Sachs. Your line is now open. David RomanManaging Director at Goldman Sachs00:32:56Thank you. Good afternoon, everybody. I wanted to go into a little bit more detail here on the top line drivers, especially in med surg and certainly appreciate the order timing dynamic. But as you look at an underlying basis, it sounds like both infection prevention and advanced wound care are tracking ahead of where your original expectations are. So could you maybe just unpack for us in a little bit more specific some of the drivers there? David RomanManaging Director at Goldman Sachs00:33:23How much of that is new product launches or some of the commercial changes that you've made in the downstream organization? And I have a follow-up on the P and L. Bryan HansonCEO at Solventum00:33:33Yeah. Yeah. They're kind of connected, but you hit both of them. The way we look at it is there were three vectors of advancing the growth of our business. The first one and the one that is really benefiting us today is the commercial execution improvements. Bryan HansonCEO at Solventum00:33:49But as you have those improvements, you can also benefit from existing brands that we have in the marketplace and then new product launches as well, the ones that we just recently launched. And so it's a combination of the team is just focus, is delivering, The urgency around and the focus on delivering what you commit to is there, which makes a big difference. We've had a lot of changes in leadership, as we've talked about. We've a lot of different folks in place that are driving this harder than before. And if you look at some of the names that we're talking about that create an opportunity now for that new engine to drive it, which would be things like Tegaderm CHG, that is a product that's been out for a while, but it's a brand that is highly recognized, it's differentiated and it's significantly underpenetrated, as you probably remember from our presentation during the Investor Day. Bryan HansonCEO at Solventum00:34:35VACPEAL IN PLACE is another one. It's a great product. And it doesn't sound that great when you hear it, but it's a game changer when it comes to negative pressure wound therapy, and the team is highly focused on it. Eboe Dick is in our sterilization assurance business. This is basically taking an eighty year old process that was antiquated and is digitizing it. Bryan HansonCEO at Solventum00:34:54It's changing the game. So it's a really cool technology as well. And then you've got PlumePro Clear, clarity precision grip attachments that you would have in dental business. That's different from MedSurg. But again, this whole theme of the engine now being able to leverage new products is there. Bryan HansonCEO at Solventum00:35:08And it's the same thing in HIS. It's another motivator for the new team that's focused on this to drive autonomous coding, which is part of the revenue cycle management, that growth driver. So across the board, whether it's in med surg, whether it's in dental, whether it's in HIS, it's the commercial focus that we have. It's the, you know, it's the desire now to achieve the goals that are set, and it's the focus on these new product launches that are really driving. Operator00:35:36Thank you. Your next question comes from the line of Travis Steed with Bank of America. Your line is now open. Travis SteedManaging Director - Equity Research at Bank of America00:35:43Hey, guys, congrats on a good quarter. I wanted to ask a little more on tariffs. A way that you could help us kind of think about the mitigation efforts, how you're offsetting $0.40 of earnings here, how much of that's FX, how much of it's operational and all that? Wayde McMillanChief Financial Officer at Solventum00:36:01Yes. Those are the key areas for us. So just to maybe reiterate what we've got out there. And keep in mind, the inventory turns fast for us. So we just want to make sure we emphasize that because we have to be one of the fastest inventory turn companies out there. Wayde McMillanChief Financial Officer at Solventum00:36:19I think under three ms, inventory was managed very tightly. And we continue to have a ninety day inventory turn here or a three month turn. So as a result of that, we see the impact immediately start in Q3 and we'll have it in Q4. So in other words, we have two quarters of impact here. And so that 80,000,000 to $100,000,000 that we're estimating will be spread across Q3 and Q4 for us this year. Wayde McMillanChief Financial Officer at Solventum00:36:44We provided the major components as well. U. S. To China is half of it, and so we're closely monitoring those. So I think even before we get into the mitigations, exemptions play an important role here. Wayde McMillanChief Financial Officer at Solventum00:36:57And obviously, we're working closely with our teams and working with the regional partners, and exemptions in China are important to us. And that's where we've landed at this estimate. So as far as the mitigation goes, you've called it out. Strong business performance in Q1, and we're expecting that through the remainder of the year. Favorable foreign exchange, as you mentioned, we're not putting specific dollar amounts on any of these, but they are all major drivers in the offset. Wayde McMillanChief Financial Officer at Solventum00:37:26And then within those additional mitigating strategies, we're continuing to optimize our inventory. The sourcing teams are busy. It is incredible how much time and effort actually has been put into these initiatives that weren't expected. And so teams are heavily focused on sourcing options all across our supply chain. And then, obviously, we're looking at thoughtful pricing strategies where we think they make sense for the long term business, where they make sense for our customers as well as those in our value chain. Wayde McMillanChief Financial Officer at Solventum00:37:59So overall, we're very happy to be holding our key metrics here despite the tariff headwinds. Operator00:38:08Thank you. Your next question comes from the line of Vic Schopra with Wells Fargo. Your line is now open. Analyst00:38:25Hi, it's Blake calling in for Vic and thanks for taking the questions. Just two related to tariffs, please. First clarification, the 10% you're assuming for Europe, so it sounds like you're not assuming that rate goes up after the ninety day pause. Just want to confirm that. And two, can you just give some color around how we think about annualized tariff impact if we should start by just analyzing what you've given for this year? Analyst00:38:53Or could it be higher, lower given mitigation, etcetera? Sure, Wayde McMillanChief Financial Officer at Solventum00:38:58Blake. I can take that one. So that you heard the prepared remarks correctly. We're assuming that the 10% to and from the EU stays in place. And so we're not assuming those exemptions go away and there's any change to that. Wayde McMillanChief Financial Officer at Solventum00:39:11So our assumption is just it's 10% for the rest of the year, and that's what we're including in our guidance. On the annualized, it's really difficult to annualize right now. So the short answer is no. I would not annualize our 80,000,000 to $100,000,000 that we're expecting here in Q3 and Q4. And it's too early to try to annualize the number or think about what the impact to 2026 might be. Wayde McMillanChief Financial Officer at Solventum00:39:35It's just too early to call. Obviously, the tariffs are subject to change on an annual basis or over a longer span. And our mitigation strategies are underway. And some of those are shorter term, but some are longer term as well. I mentioned the manufacturing supply chain team have been working on mitigations. Wayde McMillanChief Financial Officer at Solventum00:39:54Some of those have time sensitivity with them. And we've been to date and will continue to strengthen our regional supply chain strategy. So these are strategies that were before tariffs. Certainly, we've given them a higher sense of urgency, but they'll be ongoing over time. We're also continuing to work with our industry trade associations to secure more exemptions in the various regions. Wayde McMillanChief Financial Officer at Solventum00:40:20And then I mentioned the selective pricing strategy. So it's really not something that I would recommend trying to annualize at this point, just given the difference between the impacts we're expecting here in 2025 and mitigations related to those and what the impacts might be over the longer term as well as what our mitigation strategies might be over the longer term. Our goal, obviously, is to manage the business and hit our metrics. And so we're very happy to be holding our key metrics here. Operator00:40:51Thank you. Your next question comes from the line of Steven Valiquette with Mizuho. Your line is now open. Steven ValiquetteMD & Senior Equity Research Analyst - Covering Health Care Technology & Distribution at Mizuho Securities00:41:00Thanks. Good afternoon, everyone. Maybe just a question on Dendlo for a moment here. Last quarter when you guys had 4% organic growth, you talked about you were taking share relative to the market growth. This quarter, a little bit slower at the 0.4, but a lot of surveys suggest that the market also kind of slowed down a lot in the quarter as well. Steven ValiquetteMD & Senior Equity Research Analyst - Covering Health Care Technology & Distribution at Mizuho Securities00:41:20So I guess I'm curious how you think you performed just relative to the market in Dental in the first quarter. Bryan HansonCEO at Solventum00:41:27Yes. I think pretty well. I mean, generally speaking, if you think about that business, we are in categories that, even in challenging times for the dental market, pretty resilient. If you chip a tooth, you get a cavity, you're usually going to take care of it because there's pain involved, certainly an aesthetic issue with it as well. So we're in, I would say, generally speaking, more resilient areas. Bryan HansonCEO at Solventum00:41:52So that's a benefit to us. And we have launched new innovation. Dental the dental group is probably out ahead of the reboot of innovation, and they're launching products now that are absolutely giving them tailwind for the year. And we fully expect that to continue throughout the year. Operator00:42:10Thank you. The last question comes from the line of Travis Steed with a follow-up question from Bank of America. Your line is now open. Travis SteedManaging Director - Equity Research at Bank of America00:42:19Hey, I had a follow-up. Thanks for putting me back on. I'm curious, I'm curious, Wade, if you could help us characterize how much of the tariff impact is tied up with the P and F business versus kind of what, call it, RemainCo? Wayde McMillanChief Financial Officer at Solventum00:42:31Yes. So we're not breaking that out, Travis, and that's really because we're guiding for the whole company at this point. And the timing related to P and F is somewhat variable as we look to plan to close before the end of the year. But I think just maybe part of your question maybe as you're modeling this, I think it's important to think about operating margins as well. As said in our prepared remarks, we're now planning for operating margins to be at the low end of 20% to 21%. Wayde McMillanChief Financial Officer at Solventum00:43:00But there's a key dynamic in here in timing throughout the quarters of the year. We're expecting Q2 to be another strong quarter like we saw in Q1. In fact, we're planning for it to be above that full year number, above 20%. And then with the pressure that we're seeing from the tariffs, we're expecting that pressure to be in the second half. And if you're just doing it mathematically, for us to end up at the lower end of our guidance range, that would mean the second half of the year would have to be below 20%. Wayde McMillanChief Financial Officer at Solventum00:43:29And so I just want to make sure everybody has that as you're thinking about the phasing. But we'll bring P and F into it when we close, and we'll provide a pro form a financial information so that it's easy to see the business without P and F. But at this point, we're guiding with P and F still in the business as a holdco. Operator00:43:51Thank you. At this time, there are no further questions. I would like to turn it back over to Amy for closing remarks. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:43:59Great. Thank you, Amy, and thank you everyone for listening and for your questions. We appreciate your interest in Solventum. If you do have any follow-up or need anything else, please don't hesitate to reach out to us directly. This concludes our first quarter fiscal year twenty twenty five conference call. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:44:17Operator, Amy, you can now close the call. Operator00:44:22Thank you. This concludes today's conference call. You may now disconnect.Read moreParticipantsExecutivesAmy WakehamSenior Vice President of Investor Relations & External Finance CommunicationsBryan HansonCEOWayde McMillanChief Financial OfficerAnalystsPatrick WoodManaging Director at Morgan StanleyRick WiseAnalyst at Stifel FinancialJason BednarSenior Research Analyst at Piper Sandler CompaniesDavid RomanManaging Director at Goldman SachsTravis SteedManaging Director - Equity Research at Bank of AmericaAnalystSteven ValiquetteMD & Senior Equity Research Analyst - Covering Health Care Technology & Distribution at Mizuho SecuritiesPowered by Key Takeaways Solventum raised its full-year organic revenue guidance to 1.5–2.5% (2–3% ex-SKU exits) and confirmed EPS of $5.45–$5.65 despite an estimated $80–100 million tariff headwind, citing strong volume growth and favorable FX. Q1 results showcased 4.3% organic sales growth—four consecutive quarters of positive volume gains—and delivered $1.34 adjusted EPS, outperforming expectations. The company’s three-phase transformation plan is advancing with global mission and values rollout, strategic talent hires, key ERP separation cutovers, and a commercial realignment driving momentum in negative pressure wound therapy, IV site management and other growth drivers. Solventum is mitigating tariff impacts through USMCA certifications, diversified sourcing and targeted pricing while maintaining a free cash flow outlook of $450–550 million. Its Purification & Filtration business grew 2.2% organically in Q1 and is expected to be divested by the end of 2025, positioning it for growth under new ownership. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallSolventum Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Solventum Earnings HeadlinesEnsemble and Solventum to launch autonomous coding solution for hospitalsMay 22 at 2:59 AM | msn.comPiper Sandler Upgrades Solventum (SOLV)May 20 at 10:38 PM | msn.comWashington Is Broke—and Eyeing Your Savings NextWashington is running out of money…And guess where they'll look next? When governments go broke, they take from the people. It's happened before, and it's happening again. The Department of Justice just admitted that cash isn't legally YOUR property.May 22, 2025 | Priority Gold (Ad)Solventum (NYSE:SOLV) Stock Rating Upgraded by Piper SandlerMay 20 at 2:07 AM | americanbankingnews.com3M: Still Lacking Growth Despite Robust New Product PipelinesMay 19 at 10:42 AM | seekingalpha.comSolventum Co. (NYSE:SOLV) Receives $79.00 Average PT from AnalystsMay 18, 2025 | americanbankingnews.comSee More Solventum Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Solventum? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Solventum and other key companies, straight to your email. Email Address About SolventumSolventum (NYSE:SOLV), a healthcare company, engages in the developing, manufacturing, and commercializing a portfolio of solutions to address critical customer and patient needs. It operates through four segments: Medsurg, Dental Solutions, Health Information Systems, and Purification and Filtration. The Medsurg segment is a provider of solutions including advanced wound care, I.V. site management, sterilization assurance, temperature management, surgical supplies, stethoscopes, and medical electrodes. The Dental Solutions segment provides a comprehensive suite of dental and orthodontic products including brackets, aligners, restorative cements, and bonding agents. The Health Information Systems provides software solutions including computer-assisted, physician documentation, direct-to-bill and coding automation, classification methodologies, speech, recognition, and data visualization platforms. The Purification and Filtration segment provides purification and filtration technologies including filters, purifiers, cartridges, and membranes. The company was incorporated in 2023 and is based in Saint Paul, Minnesota.View Solventum ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again?D-Wave Pushes Back on Short Seller Case With Strong EarningsAppLovin Surges on Earnings: What's Next for This Tech Standout?Can Shopify Stock Make a Comeback After an Earnings Sell-Off?Rocket Lab: Earnings Miss But Neutron Momentum Holds Upcoming Earnings PDD (5/27/2025)AutoZone (5/27/2025)Bank of Nova Scotia (5/27/2025)NVIDIA (5/28/2025)Synopsys (5/28/2025)Bank of Montreal (5/28/2025)Salesforce (5/28/2025)Costco Wholesale (5/29/2025)Marvell Technology (5/29/2025)Canadian Imperial Bank of Commerce (5/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
PresentationSkip to Participants Operator00:00:00Good afternoon. My name is Amy, and I will be your conference call operator for today. I would like to welcome everyone to the Solventum First Quarter twenty twenty five Earnings Call. As a reminder, this call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:34Thank you. 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 Finance Communications. Please proceed. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:00:50Thank you. Good afternoon and welcome to Silventum's first quarter fiscal year twenty twenty five earnings call. Joining me on today's call are Chief Executive Officer, Brian Hansen and Chief Financial Officer, Wade McMillan. A replay of today's earnings call will be available later today on the Investor Relations section of our corporate website. The earnings press release and presentation are both available there now. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:01:18During today's call, our discussion and any comments we make will be made on a non GAAP basis, unless we have specifically called them out as GAAP. The non GAAP information we discuss is not intended to be considered in isolation or as a substitute for the reported GAAP financial information. You are encouraged to review the supporting schedules in today's earnings press release to reconcile the non GAAP measures with the GAAP reported numbers. Additionally, our discussion on today's call will include forward looking statements, including but not limited to expectations about our future financial and operating performance. We make these statements based on reasonable assumptions. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:02:07However, our actual results could differ. Please review our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ materially from any forward looking statements made today. Following our prepared remarks, we'll hold a Q and A session. For the Q and A portion of today's call, please limit yourself to one question and one related follow-up. If you have additional questions, you're more than welcome to rejoin the queue. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:02:42And with that, I'd like to now hand the call over to Brian. Bryan HansonCEO at Solventum00:02:47All right. Thank you, Amy, and to all of our shareholders and everyone interested in our company story, just thanks for joining us today for our first quarter results. And I'm just going to get straight to the point. We are off to a strong start for 2025. And as a result of this positive momentum, favorable FX and decisive steps we've taken to mitigate the impact of known tariffs, we are raising our organic revenue guidance and confirming EPS for the year. Bryan HansonCEO at Solventum00:03:14All right, before we jump into the strong start for the year, let me just quickly address tariffs specifically and Wade will provide more details in a minute. But to be clear, tariffs will be a headwind for us this year. And without them, we would be raising our EPS guidance commensurate with the underlying momentum we're seeing in the business. Now that said, we've begun executing short term mitigation measures based on what we know today and are actively developing, analyzing and of course implementing additional strategies. And as a result, and as I just mentioned, we expect to be able to manage the current year headwind within our existing full year EPS guidance. Bryan HansonCEO at Solventum00:03:51And obviously given just the fluid nature of the situation, we will continue to closely monitor the evolving policy changes and assess what they mean for our organization. Relative to our continued momentum, progress here is further evidenced by our first quarter results, marking another positive quarter of volume growth. This makes it now four consecutive quarters of positive growth and sequential improvement as we delivered 4.3% organic sales growth and adjusted earnings per share of 1.34 again continuing to perform ahead of expectations. I think this is particularly impressive though given the company's historical performance. As I shared at our recent Investor Day, this business experienced six years of a declining volume trend and seven quarters, that's nearly two years of negative volume growth before our spin. Bryan HansonCEO at Solventum00:04:41Now stopping that decline and reversing the trend are direct results of the foundational enhancements we've made across three primary areas. The first being our mission and culture. The second, our talent and capabilities. And third, our efforts to stabilize the business across commercial productivity, our innovation process and our strategic focus and alignment. And as I've referenced before, I am very impressed with the team's ability to execute all of these changes as quickly as they have, particularly given the distractions of the separation process. Bryan HansonCEO at Solventum00:05:13And I want to extend my gratitude to our dedicated team members around the globe, not just for another strong quarter, but really for their hard work overall, which is advancing our mission and driving us forward. This team continues to impress me as they make significant progress in executing the separation and advancing across all three phases of our transformation plan and very importantly, delivering results that have already changed the trajectory of this business. Now more broadly speaking, from a macroeconomic perspective, this quarter, well, it has certainly been one of the more eventful starts to a new year. And as such, we are actively navigating a shifting geopolitical landscape and rapidly evolving trade policies. Now while we are managing this turbulent environment aggressively, we are also ensuring that our primary focus remains very clear. Bryan HansonCEO at Solventum00:06:03Number one, and obviously, delivering for our customers worldwide so patients continue to receive the care they need. And number two, and very importantly, staying committed to investing in the key areas that will support continued and sustainable improvement in our growth. And as a result, just as I outlined at our Investor Day, we are fully committed to our growth and margin drivers to reposition this company for profitable growth and drive meaningful value for shareholders. Okay. Now moving to our business segments where progress and positive momentum continue. Bryan HansonCEO at Solventum00:06:35The MedSurg business had a very strong quarter benefiting from positive underlying business performance and favorable order timing. Now regarding our underlying business performance, we continue to focus on driving the adoption of our recently launched VAC Peel and Place dressing. As many of you may remember, this is a product within our negative pressure wound therapy business, which is one of our key growth drivers. As I've mentioned previously, this product provides value in three areas. It simplifies the procedure, it reduces procedure time and importantly reduces the number of dressing changes per week, all of which are meaningful advances for both patients and providers. Bryan HansonCEO at Solventum00:07:11And the team has done a really good job of ramping capacity to meet the very strong demand, and our newly dedicated commercial team continues to drive momentum in this space. Now also in MedSurg, the growth driver area of IV side management, we are very pleased with the traction that we're seeing in this space. And our newly dedicated commercial team has successfully converted key accounts during the quarter. Given our momentum here and to further support the needs of this business, we have invested hundreds of millions of dollars for capacity expansion in The U. S, specifically in South Dakota with strong support of the then Governor, Kristi Noem. Bryan HansonCEO at Solventum00:07:47And moving to our Dental Solutions business, we saw benefits in three areas. The first in our core restorative growth driver, as well as our strategic bed area of aesthetics and across other recent product launches. In core restoratives, our differentiated and strong brand recognition continues to resonate with our customers and it provides a solid foundation for growth. And our recent product launch of Filtek EasyMatch and our refocused dedicated sales team continue to support solid growth in this area. In aesthetics, customer response to the Q4 launch of our first to market and three d printed Clarity Precision Grip Attachments remains very positive, and this product enhances our ability to offer a unique combination of dental and ortho solutions, really enabling the team to expand their conversations with both dentists and orthodontists. Bryan HansonCEO at Solventum00:08:34And then finally, our ClinPro clear fluoride treatment launch continues to gain traction with customers and had strong demand in the quarter. It's the combination of these areas has helped to drive offsets for decelerating areas like impressioning materials to help stabilize the segment even as overall market volumes remain challenged. Okay. In our HIS business, we are focused on our growth driver of revenue cycle management. And as you remember, a key component of this is autonomous coding. Bryan HansonCEO at Solventum00:09:03And as we've mentioned, our AI driven autonomous coding technology really focuses on streamlining the coding process to help save our customers time and money. And medical coding is incredibly complex, and our computer assisted and emerging autonomous technology can account for the constant tide of regulatory changes, quality demands and local, state, and organization specific guidance. And this HIS team is highly focused on leading the way in autonomous coding and doing so, of course, with leading AI driven solutions, that's for sure. But importantly, and probably most important, leveraging our decades of trusted high quality and compliant coating. And last but not least, turning to our Purification and Filtration business, we saw another quarter of robust demand for our bioprocessing solutions, which gives us confidence in the strength of the end markets and the value of the segment's differentiated technology and reoccurring revenue model. Bryan HansonCEO at Solventum00:09:56And our investment in additional capacity in our industrial business supported accelerated growth in the quarter as well. And as we shared in our last quarter, the P and F business is very well positioned for growth under its new owner where it has a really strong strategic fit. We expect, as we mentioned before, to complete the transaction by the end of twenty twenty five and our team is working very diligently for a smooth close and ultimately a smooth transition. At our recent Investor Day, I spoke extensively about our progress across the three phases of our transformation plan. And if you didn't see it, I would encourage you to watch the replay or read the transcript for more details. Bryan HansonCEO at Solventum00:10:34Both of those are available on our Investor Relations website. But just as a quick summary regarding Phase one, our mission and values have been deployed globally and through our communications and transformation efforts, are seeing deep understanding and most importantly connection from our team members to both. We've hired great talent across a significant number of critical to transformation roles and our separation efforts continue to be on track. As a matter of fact, we have a very large team mobilized right now across the globe and have just started this week with our largest ERP cutover to date. And I know that team is working around the clock to execute this very important phase of our separation And I want to thank each and every one of them for burning the midnight oil and moving us forward. Bryan HansonCEO at Solventum00:11:15And moving to phase two, as a global team, could tell you that we are very aligned and executing a long range plan we just unveiled at our Investor Day. And we are hyper focused on driving our five growth driver areas, which will help expand our scale within our most attractive markets and ultimately, as a result of that, increase the weighted average market growth of our business. And finally, on Phase three, once we close the divestiture of the P and F business, we anticipate being able to execute tuck in M and A, which as we said before, will focus on enhancing our recently presented organic long range plan. So in summary, it's pretty clear that we are making steady progress on our transformation, And we're extremely confident that the changes we've already made, combined with our newly defined strategic plan, will accelerate sustainable and profitable volume growth and ultimately deliver significant shareholder value. And with that, I'll turn it over to Wade to walk us through more detail on our first quarter results and 2025 guidance as well as provide additional color on the separation and on everybody's favorite topic, tariffs. Bryan HansonCEO at Solventum00:12:16Okay. Wade, I'll pass it over to you. Wayde McMillanChief Financial Officer at Solventum00:12:19Thanks. And thank you to everyone at Solventum for the continued progress and for delivering a strong start to fiscal year '20 '20 '5. As you heard from Brian, we're making meaningful progress on the three phase transformation plan as we complete our first full year as a public company. I'll focus my comments initially on a quick separation update before moving into our Q1 financial performance. Then we'll wrap up with our 2025 guidance update, which includes the impact of tariffs. Wayde McMillanChief Financial Officer at Solventum00:12:53Overall, the separation remains on track and we are executing against key milestones while delivering on our financial goals. To date, we have exited just over 30% of the more than 200 transition service agreements, and we plan to exit all transition agreements over the next two years. In operations and supply chain, we continue to make progress consolidating across manufacturing and distribution centers. We expect to significantly advance progress on our ERP milestones with four deployments planned this year, including our first major deployment in Q2. We want to thank our global team of dedicated people around the world for their efforts in this large scale separation. Wayde McMillanChief Financial Officer at Solventum00:13:43Now turning to our Q1 results, starting with sales. First quarter twenty twenty five sales of $2,100,000,000 increased 4.3% on an organic basis compared to prior year and increased 2.6% on a reported basis. During the quarter, foreign exchange was a 160 basis point headwind. Overall, we had a stronger than expected volume performance driven by improved commercial execution as we drive focus and alignment across the organization on our growth drivers to accelerate sustainable sales growth. We also benefited from order timing related to customers buying ahead of upcoming ERP and distribution center moves and SKU exits. Wayde McMillanChief Financial Officer at Solventum00:14:36We expect this favorable timing benefit will be offset by year end, mostly in Q2 and Q3. The impact of SKU exits in the quarter was 30 basis points. All in, we estimate our normalized Q1 organic sales growth is closer to 2.5%. Pricing remains consistent within our expected range and we are encouraged by the continued shift to delivering positive volume growth across the businesses. Moving to the segments. Wayde McMillanChief Financial Officer at Solventum00:15:15Our largest segment, MedSurg, delivered $1,200,000,000 of sales, an increase of 6% on an organic basis. Growth was broad based and led by the Infection Prevention and Surgical Solutions business, which grew 8.2% and was the primary beneficiary of the previously mentioned timing benefits, which drove the significantly higher than expected performance. Advanced Wound Care growth of 2.8% was driven by negative pressure wound therapy consumables and continued market adoption of single use negative pressure wound therapy. Our Dental Solutions segment delivered $328,000,000 of revenue, an increase of 40 basis points on an organic basis. And as you heard from Brian earlier, we are seeing the positive benefit of new product launches even as the end market continues to be challenged. Wayde McMillanChief Financial Officer at Solventum00:16:16And we remain encouraged by the overall resilience of our Dental portfolio. Our Health Information Systems segment contributed $329,000,000 of revenue, an increase of 3.9% on an organic basis, which benefited from strong customer retention of our revenue cycle management software solutions. The competitive environment has resulted in continued declines in clinician productivity solutions. However, this product category grew in the current quarter, primarily due to an easy prior year comparison. Finally, the Purification and Filtration segment delivered $242,000,000 of sales, an increase of 2.2% on an organic basis, led by our Bioprocessing Filtration and industrial filtration categories. Wayde McMillanChief Financial Officer at Solventum00:17:10Similar to the prior quarter, performance in these areas was partially offset by declines in membranes. As a reminder, awarding timing benefits in Q1 last year resulted in a tough comparison. Looking down the P Wayde McMillanChief Financial Officer at Solventum00:17:25and L, Wayde McMillanChief Financial Officer at Solventum00:17:26gross margins were 55.6% of sales in the quarter, slightly ahead of our expectations and down two sixty basis points compared to the prior year. Our current quarter results include approximately 100 basis points of increased cost paid to three ms as part of the supply agreement when comparing year over year. Gross margins also decreased sequentially as expected based on normal manufacturing seasonality. Operating expenses increased versus the prior year and were roughly flat on a sequential basis as planned. The increased year over year spend reflects public company stand up costs and growth investments to support our business transformation. Wayde McMillanChief Financial Officer at Solventum00:18:17Savings from the recent restructuring are on track and will continue to ramp through the year. Altogether, operating expenses were in line with our expectations. In total, we delivered adjusted operating income of four zero seven million dollars which translates to an operating margin of 19.7%, ahead of expectations. Moving down the P and L to non operating items, our net interest expense remained consistent with Q4. Lastly, our effective tax rate of 19.9% is just below the low end of our full year outlook and reflects a slightly favorable jurisdictional mix. Wayde McMillanChief Financial Officer at Solventum00:19:04Overall, we delivered earnings per share of $1.34 ahead of our expectations driven by sales outperformance and favorable margins. We also ended the quarter with $534,000,000 in cash and equivalents with no outstanding borrowings on our revolving credit facility. To date, we have made cumulative repayments of $400,000,000 on our $1,500,000,000 prepayable term loans, which includes another $100,000,000 paid off in March. For Q1, our free cash flow declined $80,000,000 which was consistent with our expectations and reflects both Q1 planned payments and one time separation costs as well as the timing of interest payments and shift into the execution phase across several separation projects. Now turning to our 2025 guidance update, which reflects our strong Q1 performance and momentum to start the year. Wayde McMillanChief Financial Officer at Solventum00:20:12As a reminder, our guidance is for the whole company, including the Purification and Filtration business, which is held for sale until the transaction closes, which is expected before the end of the year. Starting with full year organic sales growth, we are increasing our outlook to a range of 1.5% to 2.5%, an increase of 50 basis points above our prior guidance. We continue to estimate a 50 basis point impact of SKU exits, which we anticipate will ramp throughout the year. Excluding this planned impact, our annual growth outlook is 2% to 3%, reflecting the momentum we are seeing in volume driven performance across our business segments as we execute against the phased approach to reposition for growth. Regarding foreign exchange, given the recent weakening of the U. Wayde McMillanChief Financial Officer at Solventum00:21:12S. Dollar, we now estimate currency will have a neutral impact on sales growth for the year. This compares to our prior outlook of a roughly 150 basis point headwind and will have a positive benefit on our reported sales and earnings per share. For earnings per share, we are maintaining our initial $5.45 to $5.65 earnings per share guidance, including estimated tariff headwinds that will impact us during the second half of twenty twenty five. The current trade policy environment and tariffs are an evolving dynamic and challenging to quantify. Wayde McMillanChief Financial Officer at Solventum00:21:57We currently estimate tariff headwinds of approximately 80,000,000 to $100,000,000 in 2025, which translates to an earnings per share impact of $0.35 to $0.45 This will pressure our gross margin and operating margin in the second half of the year. And we now anticipate operating margins for the year will be at the low end of our planned range of 20% to 21%. We expect our strong Q1 performance and business momentum, favorable foreign exchange and mitigation actions to offset the impact of tariffs within our earnings per share guidance range. Our tariff estimate includes all known tariffs at this time with the following assumptions: U. S. Wayde McMillanChief Financial Officer at Solventum00:22:49Exports to China at 125% and represents about half of the total impact with expected exemptions. U. S. To and from the EU remains at 10%, which represents about one third of the total impact. The remaining balance of tariff impacts reflects smaller amounts for Mexico and Canada given the USMCA exemptions and minimal imports from China to The U. Wayde McMillanChief Financial Officer at Solventum00:23:20S, consistent with our prior view. It's important to highlight that due to the short duration of our inventory turns, approximately one quarter, the impact of tariffs implemented in Q2 will be fully realized in our financial results starting in Q3 and continuing through Q4. Our team has moved quickly to adapt to the changing situation. While this will be an ongoing process of assessment and mitigation, we've already taken steps and are executing several action plans to mitigate the headwinds. We have filed for and received nearly all outstanding USMCA certifications and working across regions to secure additional exemptions. Wayde McMillanChief Financial Officer at Solventum00:24:08We're continuing to optimize our inventory, leveraging sourcing options across our supply chain and thoughtfully evaluating selective pricing strategies. We are also maintaining our free cash flow guidance of $450,000,000 to $550,000,000 Before closing out, I also want to reiterate our commitment to continued investment focused on the long term value creation opportunity ahead, while also looking for opportunities to expand margins and generate strong cash flows. In conclusion, we're building momentum, having delivered a strong financial performance in Q1 as we execute on our separation plans. With that, we'll now hand it back to the operator for the Q and A portion of the call. Operator00:24:59Thank Your first question comes from the line of Patrick Wood with Morgan Stanley. Your line is now open. Patrick WoodManaging Director at Morgan Stanley00:25:30Beautiful. Thanks guys and thanks so much for taking the question. I'll leave the tariffs to everybody else because I can't survive talking about that topic anymore. So I'm going go on the top line actually. How confident are you around that kind of 2.5 underlying? Patrick WoodManaging Director at Morgan Stanley00:25:48And I say this because obviously the RemainCo growth like is like 4.6, obviously all combined 4.3, like really, really strong quarter. Is this like a SKU level analysis or something like that? Because how confident are you that that's actually stocking from the customers and not just some of the commercial plans that you guys have been putting through and therefore is a little bit more durable than maybe you're suggesting? Wayde McMillanChief Financial Officer at Solventum00:26:13Hey, Patrick, it's Wade. We're confident. It's a number that's tough to predict beforehand because it's difficult to know how much customers are going to be buying in, the timing of it and and to the extent of it. But after the fact, we've got good analytics. We work with our distributor partners as well as our end customers and understand their order patterns. Wayde McMillanChief Financial Officer at Solventum00:26:37And it's something that we're confident in. It is still an estimate. We specifically called it out closer to 2.5% because there is some variability to it. But the 2.5% is a good number for us and that's what we think is the number that we grew in the quarter exclusive of those customer order buying ahead. And what that means for us is a really strong quarter. Wayde McMillanChief Financial Officer at Solventum00:27:01It's more than double the growth rate that we had in 2024. So very happy to see the continued acceleration of the business and it's really across all four of our segments. So we had a really strong quarter here to start the year. Patrick WoodManaging Director at Morgan Stanley00:27:15Yes. It's definitely faster than we thought. And then just as a quick follow-up, is it a fair assumption on our end to assume that the general price mix trends that you'd seen in the previous quarter was consistent here? You hinted at it in the opening remarks, but is it fair to assume that the entire delta basically is all volume? Wayde McMillanChief Financial Officer at Solventum00:27:33Yes. So we've been anticipating this for some time as we've got the business focused on volume growth, which we think is the sustainable strategy. And so for pricing, again, this quarter, we saw it in that normalized range for us, which is between plus or minus 1%, and it's not really the driver that we're focused on. It's all about volume growth for us from here. Operator00:27:59Your next question comes from the line of Your line is now open. Rick WiseAnalyst at Stifel Financial00:28:07Thank you. Hi, Brian. Hi, Wade. Maybe just to start with thinking about the year ahead, I mean to say it as simplest, tariffs are a bigger headwind, you were very clear. But offsetting that is the business momentum is the lower FX. Rick WiseAnalyst at Stifel Financial00:28:33Can you help us at all think through the quarterly cadence as we adjust our models? I mean, just starting with the second quarter, last year was sort of flat sequentially, but you have new products, you've got commercial momentum, etcetera. Help us a little bit directionally if you could. Bryan HansonCEO at Solventum00:28:53I just want to make sure that we clarify, Rick. Are you talking about growth by quarter? Or what are you talking about? Rick WiseAnalyst at Stifel Financial00:29:01Or dollars in can you report higher numbers in the second quarter given all the positives and relative to the negative impact of tariffs? Top line, Brian. I'm not sorry if I'm not clear. Probably Bryan HansonCEO at Solventum00:29:19for clarification, tariffs really don't have a significant impact for us on the top line. It's definitely more of a bottom line challenge for us. The ordering ahead or the timing that we saw in the quarter was more associated with our ERP cutovers and planned distribution changes and some buy ahead on the SKU rationalization. That will come back in Q2, Q3, maybe even Q4. Most of the impact will be in q three. Bryan HansonCEO at Solventum00:29:45That that's the way we're looking at it today because by the time we get to q three, we'll be past the distribution center changes, and we should be free and clear to see those, those changes. Operator00:29:57Thank you. The next question comes from the line of Jason Bednar with Piper Sandler. Your line is now open. Jason BednarSenior Research Analyst at Piper Sandler Companies00:30:06Hey. Good afternoon. Nice start to the year here, guys. Jason BednarSenior Research Analyst at Piper Sandler Companies00:30:11Want to come back a little bit on Patrick's question and talking about that 2.5% underlying. I guess my question is more around how does that compare to what you were internally expecting? It sounds like it's nicely above most of our models. But I guess, kind of where are you at? Where are you out executing? Jason BednarSenior Research Analyst at Piper Sandler Companies00:30:33And then we're five weeks removed here from quarter end. I guess, on that order timing that you referenced for 1Q, did you have any additional buy ahead in April? Or did some of that did you already start seeing some of that drawdown in April and early May? Bryan HansonCEO at Solventum00:30:47Why don't I start maybe with how we're looking at the 2.5 and how it compared to our performance or assumption of performance? And then, Wade, you could talk more about the drawdown. It was above our expectations too, but we're very happy with the 2.5. Bryan HansonCEO at Solventum00:31:00As a Bryan HansonCEO at Solventum00:31:01matter of fact, if you think about it on an annual basis, I'm not saying we're going to beat 2.5, but the last time this company did 2.5 was, I think, 2018. So was a long time ago. So we were very happy with the performance in the quarter. It was definitely ahead of our expectations even on an underlying basis. And really, the key driver for it is the thing that we talked about at our investor meeting, which is we are seeing the benefits of our enhancements to the commercial organization and the focus that we now have. Bryan HansonCEO at Solventum00:31:27Because remember, we we've enhanced the commercial organization by dedicating the sales organizations to those growth driver areas, and we're just seeing traction as a result of it. Now we have to keep that going. And quite frankly, we shouldn't be happy with 2.5% because we're still not in market, but it's a really nice improvement off of last year. Wayde McMillanChief Financial Officer at Solventum00:31:44Yes. And then just picking up on what we're seeing so far in Q2. Just before I get into Q2 specifically, Brian mentioned just a minute ago, the expectation is because of our ERP cutover and distribution center moves in Q2 that we'll see the majority of that order timing come back in Q3. It is tough to predict. We could see more of it in Q2 or a little bit more in Q4, but our expectation is most of it comes on the back of our ERP and distribution center moves, which the big moves are coming here in Q2. Wayde McMillanChief Financial Officer at Solventum00:32:15As far as quarter to date for us, it's in line with those expectations. But we've got a ways to go yet. And we are actually just as Brian said in his prepared remarks, the team is hunkered down right now as we go through the ERP implementation this week, and we're right in the throes of it. So from that standpoint, expectation would be we could see some of the headwind come back here in Q2, but we think majority will be coming in Q3. Operator00:32:47Thank you. Your next question comes from the line of David Roman with Goldman Sachs. Your line is now open. David RomanManaging Director at Goldman Sachs00:32:56Thank you. Good afternoon, everybody. I wanted to go into a little bit more detail here on the top line drivers, especially in med surg and certainly appreciate the order timing dynamic. But as you look at an underlying basis, it sounds like both infection prevention and advanced wound care are tracking ahead of where your original expectations are. So could you maybe just unpack for us in a little bit more specific some of the drivers there? David RomanManaging Director at Goldman Sachs00:33:23How much of that is new product launches or some of the commercial changes that you've made in the downstream organization? And I have a follow-up on the P and L. Bryan HansonCEO at Solventum00:33:33Yeah. Yeah. They're kind of connected, but you hit both of them. The way we look at it is there were three vectors of advancing the growth of our business. The first one and the one that is really benefiting us today is the commercial execution improvements. Bryan HansonCEO at Solventum00:33:49But as you have those improvements, you can also benefit from existing brands that we have in the marketplace and then new product launches as well, the ones that we just recently launched. And so it's a combination of the team is just focus, is delivering, The urgency around and the focus on delivering what you commit to is there, which makes a big difference. We've had a lot of changes in leadership, as we've talked about. We've a lot of different folks in place that are driving this harder than before. And if you look at some of the names that we're talking about that create an opportunity now for that new engine to drive it, which would be things like Tegaderm CHG, that is a product that's been out for a while, but it's a brand that is highly recognized, it's differentiated and it's significantly underpenetrated, as you probably remember from our presentation during the Investor Day. Bryan HansonCEO at Solventum00:34:35VACPEAL IN PLACE is another one. It's a great product. And it doesn't sound that great when you hear it, but it's a game changer when it comes to negative pressure wound therapy, and the team is highly focused on it. Eboe Dick is in our sterilization assurance business. This is basically taking an eighty year old process that was antiquated and is digitizing it. Bryan HansonCEO at Solventum00:34:54It's changing the game. So it's a really cool technology as well. And then you've got PlumePro Clear, clarity precision grip attachments that you would have in dental business. That's different from MedSurg. But again, this whole theme of the engine now being able to leverage new products is there. Bryan HansonCEO at Solventum00:35:08And it's the same thing in HIS. It's another motivator for the new team that's focused on this to drive autonomous coding, which is part of the revenue cycle management, that growth driver. So across the board, whether it's in med surg, whether it's in dental, whether it's in HIS, it's the commercial focus that we have. It's the, you know, it's the desire now to achieve the goals that are set, and it's the focus on these new product launches that are really driving. Operator00:35:36Thank you. Your next question comes from the line of Travis Steed with Bank of America. Your line is now open. Travis SteedManaging Director - Equity Research at Bank of America00:35:43Hey, guys, congrats on a good quarter. I wanted to ask a little more on tariffs. A way that you could help us kind of think about the mitigation efforts, how you're offsetting $0.40 of earnings here, how much of that's FX, how much of it's operational and all that? Wayde McMillanChief Financial Officer at Solventum00:36:01Yes. Those are the key areas for us. So just to maybe reiterate what we've got out there. And keep in mind, the inventory turns fast for us. So we just want to make sure we emphasize that because we have to be one of the fastest inventory turn companies out there. Wayde McMillanChief Financial Officer at Solventum00:36:19I think under three ms, inventory was managed very tightly. And we continue to have a ninety day inventory turn here or a three month turn. So as a result of that, we see the impact immediately start in Q3 and we'll have it in Q4. So in other words, we have two quarters of impact here. And so that 80,000,000 to $100,000,000 that we're estimating will be spread across Q3 and Q4 for us this year. Wayde McMillanChief Financial Officer at Solventum00:36:44We provided the major components as well. U. S. To China is half of it, and so we're closely monitoring those. So I think even before we get into the mitigations, exemptions play an important role here. Wayde McMillanChief Financial Officer at Solventum00:36:57And obviously, we're working closely with our teams and working with the regional partners, and exemptions in China are important to us. And that's where we've landed at this estimate. So as far as the mitigation goes, you've called it out. Strong business performance in Q1, and we're expecting that through the remainder of the year. Favorable foreign exchange, as you mentioned, we're not putting specific dollar amounts on any of these, but they are all major drivers in the offset. Wayde McMillanChief Financial Officer at Solventum00:37:26And then within those additional mitigating strategies, we're continuing to optimize our inventory. The sourcing teams are busy. It is incredible how much time and effort actually has been put into these initiatives that weren't expected. And so teams are heavily focused on sourcing options all across our supply chain. And then, obviously, we're looking at thoughtful pricing strategies where we think they make sense for the long term business, where they make sense for our customers as well as those in our value chain. Wayde McMillanChief Financial Officer at Solventum00:37:59So overall, we're very happy to be holding our key metrics here despite the tariff headwinds. Operator00:38:08Thank you. Your next question comes from the line of Vic Schopra with Wells Fargo. Your line is now open. Analyst00:38:25Hi, it's Blake calling in for Vic and thanks for taking the questions. Just two related to tariffs, please. First clarification, the 10% you're assuming for Europe, so it sounds like you're not assuming that rate goes up after the ninety day pause. Just want to confirm that. And two, can you just give some color around how we think about annualized tariff impact if we should start by just analyzing what you've given for this year? Analyst00:38:53Or could it be higher, lower given mitigation, etcetera? Sure, Wayde McMillanChief Financial Officer at Solventum00:38:58Blake. I can take that one. So that you heard the prepared remarks correctly. We're assuming that the 10% to and from the EU stays in place. And so we're not assuming those exemptions go away and there's any change to that. Wayde McMillanChief Financial Officer at Solventum00:39:11So our assumption is just it's 10% for the rest of the year, and that's what we're including in our guidance. On the annualized, it's really difficult to annualize right now. So the short answer is no. I would not annualize our 80,000,000 to $100,000,000 that we're expecting here in Q3 and Q4. And it's too early to try to annualize the number or think about what the impact to 2026 might be. Wayde McMillanChief Financial Officer at Solventum00:39:35It's just too early to call. Obviously, the tariffs are subject to change on an annual basis or over a longer span. And our mitigation strategies are underway. And some of those are shorter term, but some are longer term as well. I mentioned the manufacturing supply chain team have been working on mitigations. Wayde McMillanChief Financial Officer at Solventum00:39:54Some of those have time sensitivity with them. And we've been to date and will continue to strengthen our regional supply chain strategy. So these are strategies that were before tariffs. Certainly, we've given them a higher sense of urgency, but they'll be ongoing over time. We're also continuing to work with our industry trade associations to secure more exemptions in the various regions. Wayde McMillanChief Financial Officer at Solventum00:40:20And then I mentioned the selective pricing strategy. So it's really not something that I would recommend trying to annualize at this point, just given the difference between the impacts we're expecting here in 2025 and mitigations related to those and what the impacts might be over the longer term as well as what our mitigation strategies might be over the longer term. Our goal, obviously, is to manage the business and hit our metrics. And so we're very happy to be holding our key metrics here. Operator00:40:51Thank you. Your next question comes from the line of Steven Valiquette with Mizuho. Your line is now open. Steven ValiquetteMD & Senior Equity Research Analyst - Covering Health Care Technology & Distribution at Mizuho Securities00:41:00Thanks. Good afternoon, everyone. Maybe just a question on Dendlo for a moment here. Last quarter when you guys had 4% organic growth, you talked about you were taking share relative to the market growth. This quarter, a little bit slower at the 0.4, but a lot of surveys suggest that the market also kind of slowed down a lot in the quarter as well. Steven ValiquetteMD & Senior Equity Research Analyst - Covering Health Care Technology & Distribution at Mizuho Securities00:41:20So I guess I'm curious how you think you performed just relative to the market in Dental in the first quarter. Bryan HansonCEO at Solventum00:41:27Yes. I think pretty well. I mean, generally speaking, if you think about that business, we are in categories that, even in challenging times for the dental market, pretty resilient. If you chip a tooth, you get a cavity, you're usually going to take care of it because there's pain involved, certainly an aesthetic issue with it as well. So we're in, I would say, generally speaking, more resilient areas. Bryan HansonCEO at Solventum00:41:52So that's a benefit to us. And we have launched new innovation. Dental the dental group is probably out ahead of the reboot of innovation, and they're launching products now that are absolutely giving them tailwind for the year. And we fully expect that to continue throughout the year. Operator00:42:10Thank you. The last question comes from the line of Travis Steed with a follow-up question from Bank of America. Your line is now open. Travis SteedManaging Director - Equity Research at Bank of America00:42:19Hey, I had a follow-up. Thanks for putting me back on. I'm curious, I'm curious, Wade, if you could help us characterize how much of the tariff impact is tied up with the P and F business versus kind of what, call it, RemainCo? Wayde McMillanChief Financial Officer at Solventum00:42:31Yes. So we're not breaking that out, Travis, and that's really because we're guiding for the whole company at this point. And the timing related to P and F is somewhat variable as we look to plan to close before the end of the year. But I think just maybe part of your question maybe as you're modeling this, I think it's important to think about operating margins as well. As said in our prepared remarks, we're now planning for operating margins to be at the low end of 20% to 21%. Wayde McMillanChief Financial Officer at Solventum00:43:00But there's a key dynamic in here in timing throughout the quarters of the year. We're expecting Q2 to be another strong quarter like we saw in Q1. In fact, we're planning for it to be above that full year number, above 20%. And then with the pressure that we're seeing from the tariffs, we're expecting that pressure to be in the second half. And if you're just doing it mathematically, for us to end up at the lower end of our guidance range, that would mean the second half of the year would have to be below 20%. Wayde McMillanChief Financial Officer at Solventum00:43:29And so I just want to make sure everybody has that as you're thinking about the phasing. But we'll bring P and F into it when we close, and we'll provide a pro form a financial information so that it's easy to see the business without P and F. But at this point, we're guiding with P and F still in the business as a holdco. Operator00:43:51Thank you. At this time, there are no further questions. I would like to turn it back over to Amy for closing remarks. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:43:59Great. Thank you, Amy, and thank you everyone for listening and for your questions. We appreciate your interest in Solventum. If you do have any follow-up or need anything else, please don't hesitate to reach out to us directly. This concludes our first quarter fiscal year twenty twenty five conference call. Amy WakehamSenior Vice President of Investor Relations & External Finance Communications at Solventum00:44:17Operator, Amy, you can now close the call. Operator00:44:22Thank you. This concludes today's conference call. You may now disconnect.Read moreParticipantsExecutivesAmy WakehamSenior Vice President of Investor Relations & External Finance CommunicationsBryan HansonCEOWayde McMillanChief Financial OfficerAnalystsPatrick WoodManaging Director at Morgan StanleyRick WiseAnalyst at Stifel FinancialJason BednarSenior Research Analyst at Piper Sandler CompaniesDavid RomanManaging Director at Goldman SachsTravis SteedManaging Director - Equity Research at Bank of AmericaAnalystSteven ValiquetteMD & Senior Equity Research Analyst - Covering Health Care Technology & Distribution at Mizuho SecuritiesPowered by