SOLV - Earnings call transcript Q3 2024

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Operator

Good afternoon. My name is Amy, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Solventum Third Quarter 2024 Earnings Call.

As a reminder, this conference is being recorded. [Operator Instructions] I would now like to turn the program over to your host for today's conference, Kevin Moran, Senior Vice President of Investor Relations. proceed. Please

Kevin Moran

welcome. along discuss our with and fiscal third XXXX we results, XXXX an Today, afternoon, Solventum's will quarter outlook. Good update to

issued the and market our are release available after close Investors a presentation release Just section the of today, and earnings earnings website. outlook. updated was results on The Solventum press press with

me our Chief McMillan, today and Officer; Wayde are Joining Officer. Brian Executive Hanson, our Chief Financial

to will we making statements risks be and subject uncertainties. During the call, that forward-looking are

uncertainties, periods on and at GAAP. risks in refer these the our of can description called all full the discussion, non-GAAP press they unless slide schedules out attached a a SEC our statement to GAAP are presentation. Please our and the reconciliations please filings comments as during For non-GAAP to our of will specifically relevant our be be note to forward-looking that release. found basis, all for beginning

call, one And you of that we portion ask Q&A I'll that, Brian. with and the question over hand the today's For to kindly call to one yourself limit follow-up.

Bryan Hanson

our joining All for thanks in as in already our independent that you this be is new quarter transformation Thanks, the by business. and the I'd the to I'm to And reminder, for at but progress tell phased those ways. transform our to Solventum might company. that team we Kevin, And completed making a approach second today. everyone encouraged to against increasingly for just as two story, we've look an Great. believe, call right. Hard us

our maintaining date, the they efforts, the listening customers. on rate challenges. working a raising as the to is And is we to progress forward. really it both move our obviously greatly our being reflected that looking positive opportunity as always the It And importantly, continuity and all and provide for and we're challenging through the a in just to performance, standing of rating teams I raise you supply referenced, appreciated, performance; the team's full down second to the your to QX point onetime half in as guidance flat of progress year despite our quarter. We about, prioritizing thinking quarter, that incredibly their saw well. independent steady make this as This debt items say speaks disciplined quarter. full most these known that and continuity to our It investment-grade million the saw I know paydown. When our to continue our ability real and markups result, shareholder and from is for testament thank of just then is our clearly resolve to upper of guidance quarter I data in vectors our at should is business especially performance Solventum strategy, we year-over-year is our our our of growth separation-related value. continued comparison. focus the drive overall $XXX margins company. success I clearly which The activities I'm top committed the an take just cash your from for agreement the and ranges allocation first incremental as one clear work of second talk to a want delivering transformation increasing proud to Both the minute headwind a and business helped organic continued as yet line we about turnaround offset paid growth up XM to to consecutive guidance a that and in another operating EPS year are we're solvers there QX see sure the through that during debt out prior show separation, capital mission following and And benefiting of as improve our X%, adjusted business some sequentially, today. are flow we to free We maintaining the

Okay.

as finalize months new foundational leaders taking as X since Moving from believe, it's Phase [ QX. start portfolio. to team, again, learn separating I'd new and And the continue give the approach excitement for for It's assess X. world our energy strategy. remains business, stabilizing our but on tangible also high go-forward business phased to update and travel business around optimizing is a like our the I organization and to and the growth us across repositioning gel the our I'll an as profitable mission Solventum. the the with significant to well hard And Phase on X hold we've spin culture and as firmly been I talent, activities, and as culture critical taken just rapidly of driving actually would growth. mission, which for and our shape, all progress are ] as made really is separation say our structure with

on to also planning the headroom more a focused shift, us margins. Solventum culture restructuring for concentrating will way continue growth and creating project. to on advance invest flexible decentralized or create complement also on our We while is it to will for structure that allowing our This project focus ultimately

and going impacts. we're more to to obviously also the expected context plan, project the finalize some we includes As financial provide

progress on majority complete Given our of time within we are line. to activities current track XX- the to cadence, our project original largest XX-month our to X Phase date,

with challenges ability progress, keep and overall, Just impressed us through and on area, I'm this say I'd the by track. in team's to manage encouraged really the our I'm

Okay.

X. Phase to move Let's

we profitable take I, submarket February. coming guidance first as both plan line finalize of before enabling and drive and a market and markets we're primary have of potential remain that as progress, our Phase attractive attractive these shift to talent foremost, a mentioning. benefits scale on And key also we've acquisition absolutely quarter profitability share to will will a on is long-range the track even the able reminder, some go-forward elements in I Phase and versus intended and and our now the those focus submarkets been R&D accelerate this is referenced to to those during Phase which towards our variable we compress be, that product really and faster shifting And we've ability growth because that in driver be decisions in is in again, decisions do have our share that in in. we growth other said, we the launches continue that ensuring areas. the we in earnings play the the the growth. efforts call vitality end XXXX reminder, to would markets And and win the critical make long-range occurs, will focused the eventually this to some solid basis. commercial, as are plan because to index relative in that and of growth year. that worth businesses, were As improve fourth the our have a markets markets. Inside final areas of our of plan unlock a be these up has to markets would the have just initiatives I, here we X full on help recent just us and those before going us innovation you this able the accelerating will our That in an of disciplined our selecting expect, say And facilitate to of process resources overall M&A driver these we biased selection, where are concentrate time our of business, where will will past, selection this market markets growth advantage our we these markets, we And

back per the quarter, dressing dressing start is and procedure; is simplifying the second product officially Place Let's talking we The been reducing reducing Peel and advantages: the the procedure changes just the three In the is third with gives of week. This number launched we've about. us time; that first in MedSurg.

of of we're us the adoption. very from now these structure getting us capacity response to of focus this to the set out give increasing across combined say patients drive All a And has would multiple on opportunity early and our product positive gate, of care. reach broader commercial customers sites the of I orienting

Okay.

fluoride a our and Harvest finally, Filtration Moving RC introduced Dental our would Fluoride at prevent outcome. In family. risk. producing, would for and product with only quickly and I to on integrity this and but improving intended we boosting is early Clinpro patient our in to streamlining companies fluoride improving time, manufacturing of Clear during that tell get Purification payer you, we customers our Clinpro its reimbursement the making in we Sift bring the scaling latest would it's And cost the Revenue in the denials response application launched focused timely technology. together, accurate the journey, new indicate, the business, calling focused productivity to for business, Health simpler and pretty focuses reduce therapies payment deserve. All our reimbursement Solventum is step business intended with on by positive response not that process. And And and again, first treatment a leakage of product much is believe, This AI-driven and Solutions a our customer with our improving reimbursement then we and foremost, a risk Information experience ensure streamlining Healthcare, caregiver, By patients. recently new them we're launched potentially by process advancement the predicting helping right. market Treatment, recently all addition customers' system. on indicate and collaboration more they they meaningful every and customers' Integrity delivering helping overall customer really the that less Systems it the solution of that in goal is on clear early is which reducing

no are Now question. these recent encouraging. launches There's

time our deliver of the refocused they during selection earnest to spear the driver take and comes growth a again, they of aligning when little areas. may Now just begin a effort results, in but to that R&D measurable tip it with will are the XXXX,

Okay.

Phase on move portfolio optimization to let's our So phase. X,

our been shared in markets strategic work at previously, businesses. of the value and our underway This back I've we our X-phased March. has plan As and the since Investor well alignment been announcing assessing actively contribution Day have

we to this in more time, X the make And discuss Phase at against effort. continue We right progress will detail.

I are sequential. important reiterate They all not are these on phases to running it's concurrently. phases that think

are mode, may mode, be moving parts forward in at but all planning may parts So execution in one time. be

that us, to I'd below my solid on a while like close out, revenue are start, market. remains we say just growth not section it To is to off that clearly Okay. lost

As long investing rest we've moving will assured, turnaround we building also urgency but for time, performance being are term. with strategic the thoughtful said, and take and this while about

and creation. an incredible for right the we have focusing appropriate opportunity ahead significant growth of ultimately, acceleration value us by areas are and on with We setting foundation the investments, the

I'm it that, going Wayde. With turn Okay. to to over Wayde?

Wayde McMillan

and as a public Solventum extra us to thanks from the position Brian, for strong to at report company. and effort to quarter Thanks, XM a everyone separate second

Brian, as As our advance well focus from getting with you on to selection all up efforts. performance before manufacturing and financial wrapping then across site our continuing updates X strategy This for facilities we and separation are centers. includes separation to to three and our distribution new related our as tracking into stand-alone I'll execution transitioning QX our to heard manufacturing Phase phases. plans guidance. We're

also transitions. have licenses rebranding progress good and made We advance our product to

staff Shifting distribution XX all in We commercial over and have ahead schedule. to models hired created countries, of our changed IT. structure

and our globally and have early to manage in years. four these team's complex as We out over to new the ERP implemented systems XM. it's roll we couple resilience next Overall, countries through great this of will see continue from separation successes

Turning sales. results our now with QX to starting

ahead of U.S. For quarter an growth compared with the basis billion organic the some XX on increased the reported of third to expectations points basis, in timing points due prior XXXX, order to year XX increasing basis $X.X sales slightly of

slightly exchange tough quarter, was a Price was foreign QX recall volume approximately was From had the from perspective, as favorable. actions we have that During a now growth flat for the neutral. comparison. year-over-year normalized quarter XXXX and

segments. the to Moving

therapy. with antimicrobial delivered dressing. of $X.X sales, of solutions products. Within an in saw growth the Sales an wound management surgical and of Performance these partially offset by from also areas benefited growth we positive Tegaderm on OEM adoption IV organic pressure basis. Our largest continued prevention MedSurg, solutions, our in continued infection was of IV site X% negative increase segment, trends billion

toughest conditions segment this decline reflects among a segment market $XXX of and four fact Our revenue, This comparison segments. X.X%. faced challenging delivered the Dental million the of that decrease year-over-year all

revenue, Information Health by management Solutions increase declines headwinds contributed segment growth XXX in partially offset an productivity cycle X.X%, Our cycle continued management revenue from million of in our of Encompass. clinician in Systems and $XXX revenue which was Management Performance platform, Strength solutions. of benefited

and Purification and a impacted decline which filtration declines of sales, segment expanded X.X%, dialysis water $XXX in and the was industrial million filtration filtration. membranes, offset newly Finally, by in partially by strength better-than-expected bioprocessing Filtration delivered capacity in drinking of

will We Looking basis margins XX.X% down offset of benefit points On of basis, markup. anticipate the XXX prior This reverse ahead approximately in basis versus XM included of agreement were in points our points. gross some which increased onetime benefits, margins onetime down supply the and XXX P&L, partially the QX. sequential quarter, this gross impact basis XXX of the year. a expectations

versus prior also $XX of expected, operating of year. sequentially. discrete in When million increased the expenses As expenses XXXX, increased the operating QX impact in excluding QX approximately items

growth company we spend stand-up support costs and transformation. before, reflects have As our investments the business shared to added public

in gross increase We ahead QX expectations the to of seen similar delivered margin operating in sales million, normalized magnitude QX of to both and XX.X% in In $XXX what expect income to benefits of sequentially we be operating adjusted the given off QX. the translates which total, onetime margin. the of was

items. nonoperating to P&L the down Moving

cash Our a net higher sequentially from interest balance. expense benefited

XX.X% track per of for of of expectations. on tax puts rate to share we full in, of Lastly, All us ahead our XX%. tax expected rate effective year delivered our XX% earnings our $X.XX

the to in making $XXX equivalents payment, cash includes of $XX and interest facility. semiannual bringing $XXX to generated free on the cash Turning which balance year-to-date We in outstanding million million. with flow no cash borrowings our million total quarter with sheet. the We ended our QX, credit first free flow

maintaining strong earlier billion our than loans Importantly, $X.X $XXX we're flows, to cash and down paid committed year-to-date term our given investment-grade million of anticipated. rating prepayable

our credit continue to free addition remain fiscal maintained We priority position flow and expect in strong the to paydown unused generation cash with XXXX. into liquidity $X financial revolving debt facility. will continued We billion

our turning to Now XXXX outlook.

reflects flat performance improved of of to expect our range be in X%. up We full the and plans. sales half year-to-date guidance to organic upper of execution our This growth year our continued separation

we changing of full While we approximately QX. foreign our a expectation year XX be headwind are currency to given points impact unfavorable, do basis not rates, recent expect foreign in currency

off on of we separation year. In will business, given and and performance, company, entangled the earlier near-term on quarters, consecutive expectation million range toward both generation reflect provided we separation. guidance as share, gross start focusing this from outlook delivering a and per on QX highly of public stronger earnings to expenditures raising financial range executing We're delivering For to raising conclusion, better-than-expected a We're cash $X.XX $X.XX our lower turning our million solid the two cash encouraging while to continued raising top $XXX bottom million our guidance to the $XXX which and complex also $XXX the a strong flow that to our is and around ] sales capital activities line margins. a on come flow to year. new we in for $XXX the end are million guidance commitments, the free the improved [ are our

our use health, phased deliver in science on and approach Looking collective ahead, our business, to mission. to will continue we'll data material we and our our transform to execute expertise

the plan. I'll we're execute value encouraged the well for by to take While will call. we our it remain back time this progress the hand of Q&A and portion positioned creation and now focused know meaningful investment, turnaround to operator the

Operator

comes question Steed Travis first of Your line Instructions] the America. with of [Operator from Bank

Travis Steed

on wanted ask $X.XX first I EPS to QX to the of guidance $X.XX.

But to what out more really implies call XXXX. Street, a bit First, below about anything there? question is the the that little about

it's that ]. XXX annualize [ the you at midpoint, If around

to year, so just end at XXXX of the out, higher end be [ numbers the that to range, Looking closer the for to ] should any of right and place the get models we trying Street XXX next that be Just XXX color figure in would lower helpful. range, wide range? we

Wayde McMillan

the you Travis, is that Wayde. mentioned. We'll start EPS QX with

So you're decline really, what driving talking is the QX. about to QX what's here from

will a in we called partially QX, is nature, So and to in that they'll few timing which benefits some gross had here things those margin, have we onetime QX. reverse mind were that keep in and we benefit out in

had impact from So it as favorability be change we -- biggest prepared to from saw a our We said really QX will remarks, that's QX the ramp to QX. the biggest QX. QX and similar we as normalized in to

both the our at standup up time, a standing this well as So FX And called of investments. cost growth be out as company the expecting well we then headwind. to point in as

separation. revenue, we well. of moving the then happy EPS guiding for be and XXXX lot EPS resulting We're on you grow to the to not the those our raising expand growth very that Certainly, QX that a to was of some guidance year, the are that in of be have EPS share. full back And though our going contemplated all of even we're are QX raising in going year, per XXXX pieces We've onetime said also give yet. post time. new some to year are QX first in in our to QX, got we guidance. And having to for as it the are But given then that, over earnings mentioned nature. margins So as strength things lots here

of pressured post pretty think XXXX that well spin. will it's some by costs really annualization be understood the I

we reminder, XXXX. spun a of in As QX

that's that in have show margin this the up to annualization supply just And going markup COGS. QX in areas. few XXXX. impacts So We've got of in a natural operating XM we

the of we've year. then And investments. growth making first So we'll this got year. year. We're annualize We'll our next that are ramping standup next annualize in those half expenses, which functional

of then And next plants We've the we've extent interest be year, things and those that year. made below to expense a program two the we've as be to this of two and headwind rationalization made the line, year. And we're much got next Some be of well. there how consider Wave that continue also tax. for the some annualization in will contemplating, Wave have could then our we normalizing then SKU got

we that do to so lot designed annualize well have going to our report the as enhancement. programs that program, next for then XXXX. we some And next as our will be which And in as a margin that into us And both certainly of talked results, give we'll really give together be about And some on earnings restructuring Solventum our got additional investments year. when putting into business we prepared XXXX we'll our us fund are remarks, could all give into our way QX we year, calculus guidance. tailwind also

those said beyond that, per in and we platform XXXX, once to So all time. items share having here a for over move grow margins we've earnings got expand great which

Travis Steed

be the know on about is question if through. thoughts that. you're follow-up Any I how you're dilution around I portfolio helpful. the actually thinking and And portfolio management don't would on thinking managing have management updated

Wayde McMillan

we can't we really of how a one just be. on Sure. from communicated moves impact yet, management portfolio probably comment so dilution will haven't net that dilution at all any any the start in anything I standpoint, portfolio could or

you want in know, our there. around just I comment about management? X no really talk don't strategy So Phase to Bryan, if But portfolio

Bryan Hanson

as back shareholders. about think to we've if [indiscernible], optimization. I think that. X was Obviously, mean We've we decisions we portfolio those been front-footed I pretty being going it Phase on for make March. wouldn't talked didn't Yes. [indiscernible] good

point that looking contribution so those at any some offset standpoint, thinking at we're change. from that in our and about But there's value businesses solution we we'll for data us, to And a And when want we'll any financial certainly, it's of look changes at we're sure share the of good to just many the know looking that eventually we to we dilution. businesses make. strategic and at if going implications front have But right shareholders. the make would begin be we're

Operator

Wood The next the line Morgan comes Patrick Stanley. of question with from

Patrick Wood

I those on TSAs? guess do the about updated you off? curious, thinking thinking roll And those I'm reinvestment have the And about how line as begin how just first you one, we're rolling to any are time off?

Wayde McMillan

Patrick, it's Yes. Wayde.

the prepared months, on right our remarks. update that here, TSAs the end mentioned, But months spin at as we're X good think also almost we're post making we we're I in progress, this. in really is So the front of X

you'll the either out there the we at Investor look long X four we've we see range laid main XX March, got years, XX line years back did years. you that the that TSAs. in work up to of Day X to to four presentation If streams, time X X to the main of they're in And where continuity supply

lines. So updates those here the time don't we on year. sit in have We first any

once to think be when start mark, that's to off TSAs. X-year starting I X-year roll mark, of the getting different these we X-year we'll nearer marks,

jobs. folks the do And in work So a day-to-day A they're world, the around their of they to the just as while through all employees on of work their care within our the work Solventum of lot appreciate we the business really said jobs. prepared of Brian separation day-to-day trying doing going while taking women's separate really lot business. remarks, working

future. update in point, the done the in hadn't at to ] But So lot that [ this nothing remarks. we a prepared

Patrick Wood

from traditional market? else, they in it's or more disposables but that gaining that a sites a [indiscernible] right? are I but we but that is was the something mind was on disposable traditional Is softer, strong. disposable? and equipment negative know, like is transition traction switch little specific, pressure [ the So a don't that capital reusable -- out, are Or ], separate little to follow-up hydrocolloids market that What's seeing side. a your the completely foam And going

Bryan Hanson

that were negative speaking, I particular, answer to that, was going question wound separate. in pressure -- they couple that So your quarter. mid part with so One surge of to note of a one I that is generally a in And there the , comp in therapy hit would think the important had the tough in on we of that things are specifically, is was was one quarter, it. hardest say but

the well So therapy pressure beyond and that is product, there's opportunity QX, our remarks and unlock a negative which pretty growth. and is a Prevena to pretty traditional X line, of mechanisms as expect Place that is in The the do The market well. Peel and product growth kind wound with prepared do referenced is product it's doing I slower that market, is in the the like to of submarket historically of and We pressure exciting that about therapy, see happen very that team steadily. feel that in single-use negative to launch. as real excited wound we We're that it -- growing we well. continue to traction

Operator

line from comes of with question Vik next Chopra Your the Wells Fargo.

Vikramjeet Chopra

one hear follow-up, this program? me, a on please. And seeing you I know let would didn't Any And First project. to expect had rationalization there be start great. benefits if update then when an us update the can we I also SKU from for

Wayde McMillan

Sure. Vik, it's Wayde.

that that significant any get XXXX. that on. was towards I on working make we we may number also of of modeling working process on Teams the that. of line. team SKUs and over had X, year like So mentioned end the working just look this but quarter, we reviewing that don't X,XXX what Bryan Wave and through and recall the update SKUs we're will SKU will the out, bottom got and have And will it. we yet. you We're in X on is a launched executing through And are top they've have that rationalization as very impact little decision that, and year, in the Wave in last be here of working a upon

Vikramjeet Chopra

know out you out Dental you the called called follow-up on softness. I tough And question but was comps, my segment. market also

you're Just your market recovery what for expectations in dental thinking wondering how growth the are for XXXX? about and

Bryan Hanson

Yes.

crack So take a maybe that I'll one. at

impacting is business. predict our see in see the going softness it comps again can't the business, we're we less in that as to the in We the when but that that the bigger have for dental impact usually I portfolio impacting typically get in turn. we was our players in elective But So impacted business. us dental we softness don't as and nature, just But given market play that other the space. procedures probably are

pretty it is for and that And have a that business now. are don't know want in So the it's right players about for result treatment, see it's space, going when our a amazing pressure seeing The us. other news lot going we for of innovation focus much The don't we news of product I good fluoride that speak is talk amazing on dental. pretty negative what on it. sure, way. a about control. it that We're as not but sound got when but capacity It as doesn't that demand you maybe turnaround launch. to as in we I customers a team to our bad the we're keep is to to excited the Clinpro

capacity So we're working place demand. hard to in and get support that

Operator

of The Goldman with next question the comes Sachs. from David line Roman

David Roman

quarter, headwinds in gross And are was had is lot the bit some of hoping discrete unpack maybe parts. And a I you specifically, drivers OEM international where and last there aligned ], of could margin around [ Wayde, obviously, line. mix. moving the a you this little

had This there. agreement believe reflected some I tailwind quarter, supply in XM And the you dynamics. full recognition the of

how good making item, own investments a you're supply gross about change your number and a normalized potential baseline around think is we mix different independents, that to XX% as the margin, about that's chain expand whether et moving cetera? business think ] we line rationalization, So should point? this just SKU parts [ starting And

Wayde McMillan

it's glad there you care to Q&A, because took remarks, it information up. extra one. you talk pieces some this the a I'm glad I'm our but put asked that question always additional about we so lot year good to moving in And brought of little is a on prepared

results of mentioned, agreement summarize, to that QX, reverse in of XXX XM QX, in to unfavorable which supply just QX, in international we that some markup recall and what that as had and So benefit as we impacts and that here in in points reverse you QX. mentioned, saw basis is here margin, XM the margin of the offset approximately do QX, a of the in onetime you in part cost some in expect we We lower impact gross benefits also had then, higher quarter.

So together, somewhat in and in if also QX QX QX reversed we had that QX. headwinds you package that in be get all will a some we benefit headwind then a in that

So the I some way David, and the of be this, them use as and QX here. put think about to an and together QX assumption benefit then XM as to for would one take think well step-up

I what XX% do out think you'll that that you're just talking below come is about.

David Roman

us just And way an from organization. That's They're perspective. like Bryan, process. when side sort help continuously value of kind you you was helpful. super look through to one evolving about maybe, like to that's management the could of the pure I dilution think a it's appreciate but EPS on at But talk the portfolio

may strategically, The have or great not is business. [ development ] MedSurg other HIS fits the opportunities it to necessarily but for product where win? Like about a it in think fit how the you right market, it way is to with that's whether cross-divisional commercialization

us that using think the portfolio the about parameters assess you're to of kind So management decisions? help

Bryan Hanson

pretty them hit you mean, well. I Yes.

where But to areas and you've positive to think fastest in going where and going to you're the there, you mix areas. gives to the invest didn't you that's going that those I make foremost, We in If invest, important think revenue the because make invest to on, going growth where you're markets sure going from to a know from do anything got have. to then not first most we're standpoint. going not invest need we we're are decisions know invest, us contrate that about growth you're to what we're

as market sure referenced, We we right that you and areas do position in that I win pathway mix. a is that want concentrate well, where that's to space. And margin. investing two, make margins, good a going to third markets from don't businesses in have to about have So as mix right? be we really we we believe we're the number is favorable and in fast important where we make in in we're be to the have and profile it have grow where one. Number is we don't a believe going we're negative we to want as that going a But in attractive win, sure those to get to well. to we prepared the in perspective, and margin talked to remarks going that back or have then we margin just businesses, If

add nice areas. do that's but And the and Is are to point, a value our a doesn't to X those in X? primary So where a potentially there be be well. your work there, in that? plus as businesses have connect X It

Operator

Stifel. of Your next with [ Rick Wise line the ] question comes from

Unknown Analyst

you Bryan, in thought about it just is the new increasing team you're the product brought made. MedSurg going talking how or are these [ towards the the Solventum about. opening of business, your affecting just as your if piece MedSurg how in for Help over help to understand ]? you rethink -- us changes of that's business think -- of focusing concretely How year terms where you that, you in Maybe would, reorient leadership reflecting next that the business expect these early talk you going new two. days in that on sales been Peel how Place to the compensation the sales encouragement again. translate What's place and affect growth comments are and us some the and wound progress that better as of the through about

Bryan Hanson

makes entire a difference. similar because and Rick. big I plan proxy Thanks, businesses actually business, for it honest, across a And all functions. it's to think good a be Yes. But game the it's almost

If deficiency MedSurg growth significant think about just in in think some you we've about you made changes. the versus particular, market. And if revenue pretty

need the analysis. find cause those you is where I And today. attractive do they you that root a ] easy in that's place don't We're attractive have know already do pretty and that's [ can root fix. am But be analysis, be different Why could markets, areas. that we three in it you commercial in thing deficiencies markets do rigor you from First so a that when one. lie standpoint not to are underperforming cause to

compensation better the So are can people rigor, just to the commercial doing change as by we are drive but all we based. place, result rigor our to of in structure, bringing place. right MedSurg in a do to talent, Those that, which across in more mechanisms right that if the we then performance And we're out get talent getting board. in of you XXXX the right and things be get gate start doing that not

is just longer. gaps something takes MedSurg to businesses hire that into you've where expand commercial to people, be begin to we got that sales and structure. filled. in as our the the to bit changing you as it, that and specialize we're one little areas start longer But you got doing driver second will That productive. got the going again, other isolate on. The as That train that come moving the longer is want to we a innovation well, get the you've you've us areas, to forward we'll we'll them little a organization XXXX. the to because little The bit your as And and/or growth isolate areas pick that takes be got a getting people definitely take have you be well to to is and

approval, for focused areas going eventually fully that XXXX, the business SKUs going see regulatory develop, should the once in we look some Obviously, us that variable. because we're make just of in be then XXXX on, begin I deal will and But to SKU the to off caution expect, You've to those will change to that a pricing do you they're to all plans to we've compensation start a with Place. that's the our businesses. order look everybody, getting that no of that the exactly the performance to got [ and And tip new be just as focus upgrades as and to like I put the those. I company. on little up though, over to about of we've also team pressure our we you in that what commercial which businesses talked Peel are have out improvement say when capacity to had. other that think underperformance recovery. given And underlying get I spear got We've historical and some XXXX. made, know XXXX. launches, the that. offsets it and we at those benefit business better back got In their across have made comps then, you've said. I but one MedSurg, we've result, this gaps, changes [indiscernible], new the we're But launch. to that the mistake, we've have want to we MedSurg of take have just which at things ] if from we're from in We on rigor rationalization, have The we're going going that some you change talent get then and would underlying got obviously. But that you benefit in to

Unknown Analyst

and And how from about as process? driver focusing already encouraging we clear beyond? are and this, what means, maybe hear thoughts. I you're your we -- maybe talk in in positive what on that [indiscernible] be us just you've expecting Where think follow-up, it's X countries. that to a and implemented ERP And a The be shouldn't to about for 'XX those initial that efforts underpinning what transition, but it

Wayde McMillan

Wayde. can And one. And biggest one Rick, I one Bryan of backbone Yes, areas that operating mechanisms, the the the of involved the are of our the and We've areas take of through most it's all of biggest getting the highlighting ERPs some attention. that's The you're are and separation. organization. the project I got systems. teams, down

lot here, question. time a no And so we're spending of

continue them, the our to couple and any say, we've in with. design together, much went had smaller are close done. as the sure of of A And North our of first of and on of worked ERP execute program then but countries you the other move, after as through them We really we really try with pulled that's end. And of one, gaps and of we well. we're customers and all with course, moving some imagine, out we're the a would teams all because execution to and bugs in planning that encouraged to countries And got phases and now the hypercare them ] four pick had, we going start better place [ our these from to challenges, we them, a first different worked four focused of hard on the implementation U.S. X, teams America. we're couple I the get we implementation to want to on. by to biggest But can make to that

work important planning highlighting, for But it. be done. on got we've place, this a of in very lot a one being you're as of so focused an us. And And lot is

Bryan Hanson

consolidation because really where past, in too. the through have we brought I'll been comments, And just and that's when of functions, involved ERP people this And to maybe of those lived very look. particularly we by I in spins. been type off manufacturing even in, certain directly focused ERP and cutovers it, you've that burned in think you've it draft IT, were you others and if important know

it's should is going It effectively. challenges to get able it risk. We you I without through So them. team already have mean this But not think, definitely to risk. some great be the capable done manage very of that have had We're to as done team, a see managing. doesn't we get

Operator

Your next the Zimmerman BTIG. from comes question Ryan line with of

Unknown Analyst

both questions upfront. ask I'll So

about remind Wayde, could, revenue you I if China. Just have you think XX% in us, of

tariffs the about the your is into And way exposure a to right there? of that we're lot potentially administration. a new think and impact two there. days discussion First, There's look, about

saline those about then is there to in manufacturing think kind use solution considerations, in you shortages there second may that you're business, things how over potentially that don't the if that Just consideration to the and are question, going any the of the of filtration dialysis the IV now, what purification near or impact remind on lot right about term? of given mind. And a us nature

Bryan Hanson

you to Do the the one? take I'll [indiscernible] want take first and

Wayde McMillan

sure. Yes,

Bryan Hanson

just maybe me let view. So correct the on China

have of business in just little our X% a China. We over

I need referenced. If So first here. the it's not we think, see and that to just you just XX% as what tariffs, think significant foremost, as happens I about actually

I wait what number. of what I we in what being bring news actually of as tariffs small think result our see as The when I though, just don't everybody see is good that, it's a we And China, impact relatively business. from a happens. about and going a is, major think to to kind given know, really

obviously. But change. business, Now it anything I which today, a see major on see based as our don't I good thing, to can impact what a is

want that answer to one? you P&F, the On

Wayde McMillan

of for to any seen Yes, in sure. dialysis fall brought the up support purification demand we us. I not that the business teams have filtration mean have of off out

and value that are the centers chain in the that hard to and to continue any think that off. different companies point, we centers, all we all service fall haven't at the very seen So working this dialysis

Bryan Hanson

fact, as And Yes. are a capacity here. constraints we matter under of always

capacity to demand. add could we anything, if out help So the

Operator

Sandler. comes question of next from Jason the Piper Bednar with line The

Jason Bednar

wanted internal affected you last distributor had on probably cybersecurity issues year. to a Dental with start fourth I quarter with Bryan, follow-up demand that the a Solutions, in of

easy here in with dental noise how you're the in hear the third dynamics quarter. an some here just once But the here to got past we comps Obviously, in half and we that get we the just the you've market second lapped pricing in volume of So year. of comp love saw fourth comp that thinking about quarter. the I tougher a

Bryan Hanson

Yes.

about comps. You're actually you on. -- you're right When think

is just our to business, in very a was QX now. normalizing other QX I all, is in I dental easier pricing in price that comp an tough of think the you comp. businesses, dental of similar First about the what volume, referenced. When particular, because space, think

much saying we've what to don't I increase that dramatically volumes than on because normalizing, pricing ending and quarter. we the way is saw result And and that's pricing of in so we differently inflationary know a need think see been exactly the all is been depending now which period, we've I what as too along that

as see see a don't volume get like all got I other I pricing lever So the us for it dental. being of up. our businesses, big to in have we

Jason Bednar

Or I'm a management quick is divestiture, portfolio get parent that [ at one a some have let lever looking follow-up, Bryan, question. from clearance level, measure, being as question. dental? but there's at it's separate that of it and then maybe or But past separate follow-up you're a At correct metric neutral-ish wrong point are past looking XM if think I'm -- I comfortable, to pricing something and I'm going -- XX% what's a sure are, [indiscernible] legalities there. on clearance that. and if on a you me me such drafting in a -- And wrong if again, then and of correct the question. ]. assets But you forward? positive as still off in in more there's some And dental what of

Bryan Hanson

pricing standpoint, a normally, So the overall portfolio us, when company considerations talked maybe we the think have make our you're moves one. going specific I'm for move. think individual about about that considerations it on you wait you second, the pricing, going which past. When in I typical on thoughts can for the a pricing about to on in to from of whether portfolio not to you've going on a businesses, get hold but speak just We're to view just

of to considerations a fact control of we considerations the you're have complete that. those, of that multiple the XM. result as think there additional talking you've are close And that we're We result have right over. to as so that spin don't a In got from some about now about

that is same just way understanding want say so that then what proactively we them like saying if us that do them. transactions to for assessing not are considerations also transactions are don't through So we do feel going the we clearly I'm I managing some barrier be us. that businesses, those of the and them need that we're them barrier we're a to to. We do, would do we our committing is of and to there assessing for don't. What to some we a want we not we're

Of course, that just XM there's has two us to play there. involved in decision to that got well. not be as It's

Wayde McMillan

Jason, you on the good And the to had. you on [indiscernible] pricing pick call. up hear comment that

now, and QX did in we've of QX, as we neutral been to So the time some mentioned as communicating just it in normalization expecting for was our performance. we remarks, prepared summary, pricing,

by price. revenue the first volume good year news of the more are half over than all was and is growth as we starting driven so And see past to improve XXXX

good But with the we're the the been see the time. business all. [ price improve And business declines. few that's from start and the to ] and really we're start past now We're has for say turn starting volume volume to to results has and So satisfied over the improve. growth versus satisfied benefiting where see underperformance to to It's years yet. experiencing it at volumes been is some not the not

Operator

Research. The line with from comes Wolf next Chris question of the Senyek

Christopher Senyek

Two questions.

quarters. forward? in anomalous Systems, to wouldn't Was quarter Health past going recur the the Information the organic of relative a some in third little growth we was terms few there rate First, to expect that light of anything

Bryan Hanson

prepared quarter see on I solutions. just break That's investing say, somewhat It's any our see referenced that really kind where team but the see fully impacted continue I in did The short of confident invested as quarter, that really an term. Where significant in you What a just steady. in. to of I'll transparent. a market, where comfortable your continue was revenue So did. never business. we It would that you productivity that business don't but to handle if the we is, it. in The the on was it's feel of and was And that clinical some challenges behind, fully I was And and in some that expect that really business aggressively, in be think, [indiscernible] team down in of acquired anomaly is was fast-paced Wayde, I of improvement just to part continue. not expect remarks you're I don't in quarter. has pressure. kind steady the I that's if do business, in cycle working going good our the management particular to just I There not business. some pretty fall continue. our in performance business. that see solution, business we and maybe that a we're to an was bit management volumes annuity soft

the reimbursement But cycle of some I sure. pretty management, product data revenue have the around can On in got as that as to side, for we is It's early new out. referenced We've submit and one launches interesting. this leakage integrity from need prove our able positive get things you imagine, it get days a comes ensure customers to reimbursement to standpoint they we're be data solution integrity leakage. when worried to the are And they to always them about reimbursement. better information using

anomaly that thing to generally in concentrate to management quarter. on outside try repeat drive should the quarter, next standard. which performance not one going speaking, that's So was we're market. and But of the pretty the It in

Christopher Senyek

And of about Wayde, an for the translation of maybe quarter? of a question the you guidance revenue model to then talk is geographically the bit a foreign spot rate think be? little might ] trying then terms could and [ we on if cost based as amiable as And the of mix in that the currency, about task end what

Wayde McMillan

Yes. Sure.

were So when the rates FX set we date typically for guiding. we us, the near

our and past So week the so, guidance into we over discussions planning. factor or that

not has very we just the had and but QX headwind, line And here on We're impact the you're quite QX. then here of a question. the seen the we're our to both in And closer rates, few using do asking based bottom so FX earnings sure using over past call I'm volatility in date, something why again, little bit that's which we quarter. weeks. in expect top to recent summarize a

and other have it's business pretty the mix As geographically, the far cost businesses as well all good but understood in revenue think HIS U.S. exposure I U.S., the our the is almost outside that

And the well. and so outside we're U.S. running as manufacturing within

all it product of think at would So just mix outside don't as this provide think of a as details we And point good also amount as U.S. manufacturing have a the be generally, are like standpoint, given FX to throughout as then far good in translation inside, little company. diversification of goes. But that segments footprint be about the the going device business to well any med to a three China other our we and have Asia I from moves manufacturing less most we're that Europe, to Pacific. amount way our subject a

Operator

from question Sachs. our And comes of final for David the Goldman again with line today Roman

David Roman

into How to occurred want I demand? that ramp a capacity CapEx? a made flow around the what future And some and of the originally provided do we all you've CapEx just you that what we ability CapEx expect back, we of to kind that in times And of to think retrofitting mean a analyst comment of kind square that also not together? here Bryan, should year I with the does may come have do how put And you're And next headquarters. to compared meeting? couple to your your at this year. for meet

Bryan Hanson

CapEx. to I'm talking talk that just capacity that would about of in filtration. I'm and maybe So But pass there's of to to obviously, I'll Wade make sure vectors be clear, One couple a different it. when purification about over

the when to significant business, are a industrial business made. benefit comes doing We those that and that had we've the and to capacity. in it saw pretty in our same our it drive We're We are investing capital there membranes quarter. investments

to On in demand the intensity just Place next really with when plan demand. come the demand about we Clinpro, talk quarters. When bit planning. think the heavy purification to We fruition capital the filtration right not it. will a for couple it over little I don't capacity think place a commercialization of membranes launch have result, in the just capacity to have time we that's I it a and not of business, planning just with or did that's I capacity there, underestimated of knowing as And and Peel outside the about take fill that for and

in So cash We businesses. those spend capital pretty didn't CapEx? total get don't the talk maybe, or just they're two think requirements, about capital Wayde, the significant right. areas, low-intensity demand But you

Wayde McMillan

Yes.

them expenditures growth think make planful here there's start know strategy ] the doing end capacity [ QX, to we of the and of we're very David, million of doing that growth the updated And focused one and CapEx for in $XXX of since this Having thinking constrained And and making in we're business. advantages much we're products as be we investments we've well driver our areas of can So that, have $XXX Bryan very public is that couple quarter our investments. as blanketed to growth where will bring to by we've a company up that, kind both of just maybe trying we investing growing business. over million, million always separation the we're others. to that the to be guided know $XXX to to $XXX going where growing organic a said to versus low the going the to in and growing you're areas our the you're to areas And I catch the as said, a new in that business addition in approach the then million. of

intensity drivers. to capital and drivers the again, as of growth going include resources is we relative that. driver through the of expenditures. having mentioned said Bryan the know our part the we're of one byproduct get mentioned, growth Bryan investing. But of for the So be the is advantages capital And earlier, is we criteria shifting behind profitability, to that, that growth one thinking in But strategy

significant In moving addition to of also have to manufacturing business, the we investing growth distribution about the right our as moves, centers now, pretty talked and separate supporting we over also a is line time we're pretty faster ERPs, heavily business and logistics. earlier

got a of to spend one to the separate and have on businesses. CapEx of do that we're So going to things work is we've lot to the

Bryan Hanson

everyone no I'll day. I that much further has us, saying for Seeing call thank questions, Okay. the and a by hope wonderful just close joining you so

Operator

This concludes you. Thank today's conference call.

You may now disconnect.

Solventum (SOLV) 7 Nov 242024 Q3 Earnings call transcript