SOLV - Earnings call transcript Q4 2024

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Operator

[Audio Gap]

Differ materially from any forward-looking statements made today.

Following our prepared remarks, we'll hold a Q&A session.

For the Q&A portion of today's call, please limit yourself to 1 question and 1 related follow-up.

If you have additional questions, you're welcome to rejoin the queue.

like hand I'd to call that, Bryan. with to the now over And

Bryan Hanson

Thanks, all for want And and right. and as Amy. All Great. fourth our to XXXX. for us in quarter company we review thanks year everyone our of year story, say I results to full joining today fiscal interested shareholders our

agreement purification earlier XXXX discuss the we'll filtration also We're this concerning Thermo And week guidance. Fisher. going our to talk clearly, to the to business definitive we and about made divest our announcement

the advanced performance how We've introduced we But first, quarters Day. to us year positions job take a XXXX. phases to X XXXX each and minute across team I'm progressing for opportunities team got a well the solid out our good even post the transformation excited the is has our we've And across I of about just closed businesses, first ahead. really more that X want our and acknowledge the to year we say at progress Investor given that which past separation, made, that our over I the fiscal last done of performing with

are that those of story, of quickly let me the to For you X transformation, looking new ways. at X our again, recap our pillars main transformation in

to activities where taken it committed we we establishing revenue results on fourth as quarter an the to The execute to we root separation our and profitable Both shareholder we're go that results And around and And performance significant focused point second that our our create should these foundation as as growth. as them. first continue is value demonstrate are pillars to forward. expect have we is that independent transformation improving company. our relates the of particularly turning business against

And QX improvement. performance growth, X not quarter, of quarter for marked expectations, year. volume delivered just quarters at end another high making teams but of global the for the business positive full Our the it of our consecutive

still is a significant of Now growth. our to XM negative of back volume there's company. lot quarters before be obviously spin, work X while a Healthcare milestone the looking saw And for done. This

solvers this to a in these talent fact this decline global all business is continuity cultural for achievement team a a this significant concurrently transformation that amid to and work team. major made process a complex which risk stopping separation it restructuring, reversing the And testament the pose especially and progress Now divestiture any of a world. real represents while around streams the of our strength that dedication managing and

is to the around It like the all a dedication, right work. actually I'm It now pretty to is thank ahead are plan. call. reason your members minute team hard I'd XX,XXX-plus why we're sure to listening earnings that world take this you're of just your

You've business as been for in absolutely we patients. continuity and most importantly, our customers crucial in our maintaining say, and delivering always

do our to single what I commitment and every you appreciate mission Your clear, day. truly is

going I'm where business to momentum. largest segment, our with business we segments, MedSurg. and are progress generate start to to beginning moving making positive first Now our

in changes in the Number it to market this reduces result first-to-market back Fluoride to QX strong expand as And predictable focus launch as customer to both to the procedure are these we solution Easy And us our launch and And our therapy, this as our business, very as manufacturing the reduces demand QX, product. I dressing and meet are Treatment time; case boost Peel strong practice mentioned meaningful a the Clinpro before, of Solutions to focuses it and and the X on will patients. the providers, is of and the advances been as attachment procedure; before, to this number of increasing shared QX this in ensuring designed that And where two, discussed launch driving on Filtek We with three, resonate us products for capacity continue increasing We positive. rapidly remain week. capacity efficiency. more focused Dental opportunity aligner serve Clear the are ultimately, our This and to early patients very we give in and it of clarity on Clinpro, response platform a then X per our Place Grip product the for Precision meet and is continuing the demand. customers recently another Match, strategy. launched All really V.A.C. I've XD-printed advantages. and the it it well. of has adoption gives of simplify simplifies procedure one,

our moving Okay, to Health business. Systems Information

potential our specific provide focus new team cases a revenue We to us regulatory time differentiated saw think is demand and at know, well they We coding, our of to thanks but this I to robust our And demands bioprocessing for saving most And customers, business management. money confidence revenue organizational when end strong the new automated. us also And coating owner to quarter technology want that another who the in state autonomous recurring purification us model. giving the guidance. solutions filtration models. value under coating local positioned our which shortly, can focused now its and for account is growth the complex of of and incredibly and to offers changes business. XX% cycle continue emerging with technology, for our but coding payment tie that of constant AI-driven to our strength emphasize, strategically. markets and obviously our Medical on; We'll the customers course, and business, is of more quality for details brings fit the technologies and the XX% for and of look computer-assisted I as on our be autonomous autonomous between really that's have believes one,

to that In we our really at and want I is to new a our laying and company do And spend shifting initial progress decentralized we've last focused have inspiring all this phase, X building minutes set Investor few foundation talent to Day talking in back X of transformation our many a about of the believe our one on values success. presented you of place. really separation that accountability. includes just been course, enhancing phases. year. foundation phases the have all decision-making I activities. speed driving about Phase and mission, it across the Okay, to culture, that

deeply with mindset, forward. and a our in globe helping I to Solventum met unified our critical it's I our performance. one directly looking globe tell and around instrumental us and improved sustained traveled mission On understands and is values. the believe team mission their the role it moving around you're in you front, the that can engage we've members share that and is at And positive, when mission driving teams it performance, everyone build reception absolutely incredibly the been which improved has particularly new

to the is This for talent, new enhancing we've deep at transformation leaders a external implemented our gaps and In we've aggressively capabilities terms just X-X address behaviors. of where shift bringing are XX%, our to few new selected this Solventum having transformation. experience a raising percent, XX%, to transformation. in capability of who meaningful for ensure leadership Of experience company, program the current supports our And I positions to our and embody level key team with XX% with what help down post-spin, many terms our and model global this X-X chosen are hires. by as well. excellence relevant sector talent, the moved structure were leaders happening a restructuring again of call performance them of And we by for quarters percent, that experience culture. we've values We've built Both Way bar within positions, and to these their culture, the spin specific every critical also organization of employees groups throughout company. progress also filled that our culture made through trickle

Okay, on the and finally, separation front.

more milestones with key happening those. the proud complex. a Solventum I'm to XM risk remains that But talk execute ahead and ability strategic making to separation and importantly not deliver progress, will is and have and about And of the we're date. be steady between team will our assembled very and complex clearly proud separation. 'XX. less we entanglement and and their performance to in financial make deep very does work there Our any It objectives on the Wayde unique 'XX of

Okay.

Day we pending we But the long-term of that a P&F part call, which And of the in strategic to discussion a York In on where particularly we'll with our City, our in the each as live. strategic to plan this Moving II. more establishing process. many to made sale and from on our have during analyzing the strategy. long-range light more value the our play. not unveil seeing focused the the also A speed we about be of it we result, this will you, shape us this at mentioned, you of feedback ready progress of long-term a plan to the we details from markets, XX we've been our key New has the realized brought and separate this And markets we've II, after to date. we said time accelerate new there in would allowed And provide earnings long-term businesses been capture Investor strategy to where receiving focusing we forward March only as Phase long-term unlock be we'd phase and business. better has attractive result, but profitable strategy, growth to talent, share as on to have And Phase outline submarkets I've the to look call. certainly segment

right. All

us thoroughly is This III our metrics, divestiture are will a III will to to and review. deliver focus, have Fisher. streamline I team and assessed your the is of and and a for In just And confident solutions key Thermo this and our we team optimizing have passion announced PNF and every Phase recently the our our thrive bring we about motivated and Filtration confident the alignment all getting thank I strategic to innovative value to of will decision want customers. portfolio. result businesses with confidence minute point, innovative to personally improve our segment continue reduce of your this leverage Purification to under that our PNF highly take direct work you its Finally, phase, Phase and

elements underperformed has made the value our transformation. excited are to creation progress why the closing, in-depth come at to And have external a Healthcare perspectives, improvements we've it, and reveal talent making very of come. preview the strategy its internal importantly our primary to a And and why you Day tell of discuss in through because what's story that in both as understanding markets I steady to and of But So the a the upcoming that be our focus on know XM just leveraging inflect financial as we're can business people share of key we we clear what's our to have preview analysis, findings hear incredible us. will but Investor plan. very changes ahead of I past. long-term an

ultimately that deliver already and strategy, forward-looking volume our we'll made, significant to accelerate sustainable confident value. continue are changes the combined we've shareholder growth with We

turn I'll financial and, separation to provide over us color on that, the also and XXXX. additional results give through with going and to guidance He's Okay, more course, the for of detail our in to it divestiture. walk the Wayde

Okay, Wayde?

Wayde McMillan

at thank year. a for everyone you first Solventum delivering and Thanks, to successful on

Bryan, then As and short separation financial progress focus my last move our wrapping a in comments March. we've you spin heard first our guidance. since from QX into made XXXX relatively a performance significant before on our I'll time with up update

we on the X are Overall, exited over financial To over service quarter roughly next track, all milestones transition have goals. we're of years. executing on delivering planning the X service agreements agreements, to separation and transition we exit while XXX our date, is and against separation

a operations implemented and contract We with where date, in European later recently distribution this partner new to as successfully have new contracted a of Brazil, ERP chain, into Europe plant construction have systems began including and recent America. we In we to center cutover in a entered and build new in countries supply year. X deployments South part a planned

in manufacturing significant along While separating, XXXX XXXX. with largest with distribution progress we've work transfers ERP the is regions, large of some made and implementations centers in shift in our hardest and upcoming to ahead

progress world team this people their global efforts to want to large-scale separation. is Our date encouraging, for and the dedicated in thank I our around of

quarter of an and Starting which $X.X easier our compared sales. Now positive X.X% on an billion XXXX Fourth results. QX increased organic reported on prior basis, with turning momentum X.X% basis and to a year-over-year year reflects to sales comparison. increased

XX During the favorable to point strengthened dollar considerably major performance a our was benefited with basis normalized exchange pricing foreign expectations. currencies. consistent range, headwind back quarter, the with volumes, against as from Sales most U.S. a

While there work our growth, initial by post remains elevate significant sustainably volume encouraged we to improvements are the spin.

segments. to Moving the

negative single-use Wound Our of therapy Within on sales, wound an OEM by Growth MedSurg, led and pressure wound billion consumables therapy. adoption pressure basis. and market of Advanced increase largest growth wound X.X% care. higher was continued segment, negative delivered $X.X organic of advanced driven by an was Care,

million organic of $XXX as increase dental the primary one comparison, year-over-year easier mentioned while an of an benefited earlier. was launches, And also from recent segment delivered on Our basis. revenue, of beneficiaries segment the an product X.X% of Dental

management Information by a solution. $XXX basis cycle was Health from revenue of which contributed in Our clinician benefited an offset for Strength our platform adoption an productivity million revenue decline on segment in of increase partially organic X.X% management solutions. Systems revenue, of

strength in & Purification in and an Filtrition on these an by organic of offset by partially fueled $XXX Finally, increase in areas the X.X% industrial segment declines continued membranes. million delivered Performance basis filtration. filtration bioprocessing was our sales, of

basis expectations prior the was Results part year. paid margins points decreased of down cost ahead basis points quarter, down approximately include P&L. Looking margin XXX versus expected. agreement. the to in our XXX and increased of supply Gross XM of XX.X% as slightly sequentially Gross as the

mitigated favorable benefits. partially were by mix they product However,

versus year prior and increased QX. expenses Operating sequentially from the

filtration to with our our also public As stand-up support spend we've included we expectations, costs. ahead touch costs expenses transformation. of excluding our XX.X%, as levels million, from of total, were delivered to future in We'll spend. QX divestiture-related XXXX operating to shared adjusted of of added and savings income of Altogether, spending slightly and benefit spend start margin which will announced our operating operating before, growth $XXX recently QX. translates line divestiture restructuring our on the more guidance. investments In we part company reflects Note, business purification in expectations.

to P&L items. nonoperating Moving down the

net expense remained interest Our consistent.

investments. of some onetime with absorbed We the associated also expenses write-down legacy XM

our low $X.XX tax we to end tax full effective our Lastly, delivered earnings full year rate our of rate of of guidance the of share XX.X% XX.X%, of toward of puts our expectations. year range XX% ahead in, XX%. per All

and challenges recap Before we growth We in as with eliminated providing drive X,XXX delivered business without guidance, company. continuity revenue volume our year XXXX a public fiscal separation, organic direction. as SKUs X.X% let's associated positive material to navigated the sales impact began our a first back

expectations. result, sales our initial a of As we generated ahead growth organic

share better guidance sales performance. earnings of the On we $X.XX, line, share earnings by bottom driven ahead per non-GAAP initial also of generated our per the

cash million made facility, $X.X Turning We $XXX This equivalents of on on $XXX balance sheet. credit pay million our ended cumulative $XXX loans. additional and with outstanding with to and our debt prepayable an we billion borrowings down includes repayments QX. in during no year the term the million

range guide cash the million, cash We also of our $XXX year-to-date just above free flow year. to for initial generated million free bringing flow in total $XX QX, the

pay milestone to expected end to deleverage growth sheet will to be achieving We XXXX. solid earnings and our When for closes, line the executing down proceeds impact our the our sales is and enables to expect portfolio margins to will and filtration time Regarding the it to divestiture, anticipate primarily positions debt XXXX. us the used with to and committed the begin by strategy we in share anticipate net ratings a transaction investment-grade strategy. P&F close are an purification balance it neutral improve, be to acquisitions. with us major augment transformation We per accelerate of

cash initial our per XXXX to our our to metrics. to for guidance flow approach XXXX organic to continue and outlook. earnings and sales free turning Similar Now share will growth, guidance provide

are the Keep is still of company, this we're also the considerations mind, in additional total some guidance company, purification and filtration new a outset Given year. the including business. providing the at we for

when U.S. sales closes. impacted point transaction an We guidance the impact updated will the strengthening dollar, by which will Reported provide estimate be basis the of will QX. create growth XXX recent headwind with we on expected biggest

basis an to of point XX related sales which expect X%, of We SKU X% impact to estimated net organic exits. growth is

across X.X% volume as against to Excluding the the impact, the segments for improvement growth. approach annual we business reflects XX expected X.X%. reposition basis This growth point phased for our is normalized outlook our underlying execute to

XX our program, exiting completes bringing X,XXX total basis we X% on in XXX Executing improves additional XXXX. point X, this initiative our supply and over Regarding program. metrics This basis are a a time. also impact and the operating a our over branding an will our SKU simplifies on SKUs dollars saves or XXXX to chain, have Wave rationalization exits X,XXX our and point impact

the down P&L. Looking

We expect first of operating XX% associated XX%. agreement the and in cost basis XXX includes point sales the roughly with half. This supply annualizing between the XM higher outlook the from margin headwind

we costs the offset investments will annualization more stand-up our restructuring expect than and Way from of in Additionally, Solventum program growth XXXX. savings

the of second We the expect the into of ramp will for operating resulting year, QX from the year. expected in increase restructuring net savings half through margins an the

share. per earnings to now Moving

This XXXX. range interest includes guiding an additional QX are expense to $X.XX. to quarter We of of a $X.XX in

we business of when purification neutral year. filtration share per earnings our divestiture As later expect closed the to to mentioned be earlier, this

regarding Before we move on, tariffs.

dynamic impact impact. inability the tariff to an predict this any environment assume current time, Our financial and guidance at not potential does given

million capital to cash separation providing in annualizing and which $XXX free the expense. and range $XXX between onetime $XXX million expenditures million, as interest also $XXX guidance contemplates as well are million of higher expense flow We

you Before quarter coupled increased will XXXX. anticipate and balance pace of of exchange the low expected the share be QX headwinds closing improvement most the earnings both out, with that results through through impacted for operating with remind QX I margins and also the savings want we both year. timing of foreign restructuring When spend. to per expected point by is the

X new highly incredibly better-than-expected as wrapped following of delivered our performance, year near-term completion on conclusion, encouraging are busy company, In public up particularly delivering the and an focusing a of on separation quarters eventful spin and we the consistently progressing given while inaugural on journey separation. our financial objectives, is entangled business. complex We've which and executing activities turnaround our the and consecutive on

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

our While investment value we creation remain early to positioned take I turnaround progress and time this focused are by know plan. execute encouraged will and the meaningful well

upcoming forward long-range look the We when to about Investor share to path our we financial ahead. more plan guidance. Day our including

to With for that, portion Q&A of the the I'll hand the it call. operator back now

Operator

Your Sandler. comes Piper from [Operator from Instructions] Jason Bednar question first

Jason Bednar

I buildup think organic Bryan a or by a or Wayde heard don't I segment. construction growth of the

we're MedSurg that as just would the can of color range? not business, very like below helpful. any you So just or kind the basis, on dental across Anything sequential be like various segments. Is but out the range, give there also about the at modeling above thinking a other

Wayde McMillan

Wayde. it's Jason,

initiatives the mentioned, have would But at you underway cuts what all level. segment that the As across say X is we segments. guidance providing we're we

the short-term the to those to our products efforts and know of looking our that commercial then, more in been we've pipeline and and and talent changes And accelerate within are at in business, nature. innovation you improvements We've as course, looking new well. structural in investing all improve is So that be to designed going made business.

all are in so those -- those both are And our X of of segments. taking root

And improve. guidance would the businesses giving so we specific to segment expect not of all on just level. our We're

Bryan Hanson

we're And add, of March you president that color on not by just going more Investor is businesses about will feel at the thinking. business, expect. in too, what get give but give would they business. of talk to opportunity coming better they're Day on Again, to get for I a their even thing -- that the the XXth, other each an some you'll would up, of have guidance what One

Jason Bednar

right. All

just a was were then Looking forward the flow guidance to we free lighter that. little on thinking. And cash bit than

ask there I think we're but or that Maybe there, things interest free onetime as modeling, wrong what relative that and mentioned cash payments of Is in at CapEx, least is explaining -- guide just it sorry, are around way, -- in some to how flow probably not that but else or lighter anything others there? just payments. I wrong a what's after you in interest a I guess, modeling well?

Wayde McMillan

Yes.

bit were cost separation. We an because there, time up the keeping that been X are building is we've on things that little of just eye we a one over total more here of consensus and

that's I So think that, probably Jason. what you're getting

given guidance we've earnings CapEx and of share the got course, per our So out we've piece, there.

to. XXXX. And or that the be run so point $XXX I I into you that non-GAAP our that exit can rate people look And over would And would separation think, to really way forecast just of of separation-related at is best rate million really, model costs. the QX that to piece

XXXX good from good we it most to going to there down little place stepping because be when a XXXX then down be. in we'll step complete separation-related the be is where Just work. up that's XXXX the have another And of spend in for our that it then step would is a biggest news and

good of we've to 'XX lot mentioned, year And that I 'XX as costs again down step our So and then transition the TSAs. of in then out separation size is 'XX. got a

Operator

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

Patrick Wood

and points ] just into it you said from that The the offset to there. XXXX there we kind the organic question the quick but I'm a I more, an of year will you're while XXXX those on that had efficiencies is that assume somewhat growth headwind of on as rationalization, below follow-up. XXX that running SKU some conceptually, on of fair see just have from get to sure kind financial efficiencies then one [ should P&L? Is something margin the the side, be through operating that going

Wayde McMillan

glad I'm one Patrick. that brought up, Yes, you

As well as really improvement, we revenue remarks, mentioned small. but we as in will see our it's margin prepared some

I think type basis XX, XX point of improvements.

really But the of is the we doing our be operating do about process. to able SKUs our for it's And in the that small and a run products. gross So rebranding at our growth business. of efforts up, the in and supply the the that time, to X% provided we get benefit we included That's front get simplification across all wanted big. of will sales that all it. why get of of the really long-range reason chain also and out and not have to we benefit coming it's but a small we main at same in Investor guide be Day margins, in do

Patrick Wood

has my comments on P&F dial And appreciate or I the the helpful. disruptive. that there's I on a you a quick that the side. as understand to If And you're place execute. just were running so do ago on being trying in back about adding business to I terms guess just the bolt with to because financially one to talking a new M&A. assets of mean, too about a we I are I'm timeline But group been organization guys you pulled sale ready to where way it how much chatting, really follow-up. not? That's in restructuring in forward or ahead mind work is how M&A. year thing of lot it's when originally internally be can then new about

Bryan Hanson

getting you the one it question. be in M&A transact P&F would the would we a We've it nicest make And of able be where couldn't sure that that we markets. change standpoint, capable time great here. really about moves but negotiation does perspective. We're We to anything do forward it. The it's capacity people do that. building It adding a our then pull deal picking large. I markets from to commercial that more from a talking anything are really this doesn't out at channel from we strategy, M&A. we've is We the a reason just tuck-in frame into have Yes, have to the we transactions risky. things been say name we're that is scouting don't with And time innovation, thing been up move don't smaller wouldn't in. transaction about that great we're area line. look why in an about to have up We in of integration, capacity driving the perspective, the for nice can want and definitely

ratio, because So it believe moving a I'd does frame period direction. -- make have a the and frame we move sure that our start we'll we in really for time early of time to there's do leverage then it. the to that nice we as capacity with time about and XXXX pay down debt, up. want I we're thinking be on of top that

Operator

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

David Roman

And XXXX? volume as have key you here you are you how together underlying But turnaround the course that, the has And as I factors and communicated. put maybe the outlook. top line to of us what kind just could the through think top you XXXX sort clear about those influencing right, improved as thought maybe exit pretty wanted the unpack drivers for pricing is line you unfolding with I performance just of on the driving side it's to XXXX. of as the we've gone you're performance start the that's that

Bryan Hanson

a start X I'll about improvement talking color. in to only it more right? what collect want are I'll David, Those X second. as I've that Wayde, almost ways on M&A, That's then businesses. any the little or that It's and fastest. to immediate, would really just I I There's and in defined It X been commercial with be talk we the Maybe either start organic then can you to science. rocket excellence, innovation one, that's need vectors. and a not about do you call that excellence. say growth want on add I bit commercial the that R&D the just in a vectors.

R&D, XX existing is that years improvement. pipeline your from And second attractive That's is The changes assets capacity on the we're we're on We in say We've balance a excellence. and focusing out that lot shifted that readiness in gate depends standpoint course, very leveraging and my We've talent. compensation longer, little that excellence. commercial then, be to usually a the upscaled in your available. space of just that much commercial we're a I months the But vector would of primary towards bit M&A significant of our I'd to what here, growth. X culture. takes talked very sheet, of launch. from remarks. now obviously, to then about need And of of accountability in R&D prepared focused made some the in on course, ideation the

important be You've the team of deliver not our teams That's be the right able acceptable. is give and this in operations. got increased to delivering point and results to specialization the We've of really to in them successful, the started to well. the as sophistication accountable and then to not tools we needed commercial be urgent organization our now, results direction

March we're a innovation taking term. and But seeds off you're the going to a in the be a to going to of So the bit big XXth, talk use push going be period gems going commercial now, here's the for then are as move digest [indiscernible], an we But that right in to the driven is so that building thing, it that to again, be But stronger of leveraging will on quicker some pipeline. of R&D we're of into about coming we're the well. found that's mainly short side we sale pipeline, focused out strategy far. It just of M&A anemic in those we P&F we those seeing just advantage traction after of things. and gate, the

Wayde McMillan

XXXX. and well. affirm got leads that work just I'll really So Bryan a throughout saw covered that, we of on comment good obviously, David, your XXXX, going We've around into what how there. lot

improve. to continued has volume right, you're So

So In the into all that the our of first of now the range, growth. of we and more pricing come see the and than second more in than half was our was growth we normalized saw year, year, reverse, volume all declining. we a half saw the volume price more

nice so are through improvement across XXXX. momentum And us our for gives as up momentum confidence to businesses. bill a we volume we're like that guide seeing a And in that QX, the

And this that to we've includes point but guide, XXXX, XX in so X% X% headwind. of basis the thinking, just that a got SKU of to vein highlight now in

on that's X.X% year X.X%, know half will that's you the not good of off X.X% price that And in coming think price was continue assuming we normalized of first So the a in for a XXXX, where size we're to year. range. of this

across Bryan really X.X% just that's in the And on that that for gives so what to mentioned, to things us on [indiscernible] the are a those we And normalized X.X% improvements business. XXXX. guide confidence basis

David Roman

meeting, finding rate as X%. I side, happening that look averages this end cover growth me you're Because your at a trouble public tell X% I'm able markets? that the what's having peers back And the next in analyst going we're then growing that helpful. is at are both on here, of a bit get to and which but I private hoping performance, your feel here to what I'm to little track peers That's your color to at just topic the to to

your these you happening little outlook. have us here, the So confidence as where on in than of thoughts, provide end you've just a maybe you? and And maybe what's market sort gone that color is on help in the could more separation is better through doing you bit us -- update the competition markets,

Bryan Hanson

market. more yes, it's so through the happening hate I kind we'll plan Day, rate in but it's And a standout quarter. talk with Investor for just the -- But to what growth in Day I sees dental the because fourth about will talk about the dental Maybe consume think Investor of in I sure.

an about just the a that PE, it important I quarter, no quarter to one. but good if easy as It's So talk was comment. fourth question,

happening comp about what's you're see right kind it way think it's if because the you to more the easy of that, which why probably of with so going dental market And flattish, performance best to that's to do in occur. indicative our is QX And is the blend now.

one of is other because difference. the good a on comp leader products that the we'll it most players one business, launching. mainly in As XXth. and the that out as said, And we it's of who other talk But are in dental, they're incongruent probably new some March market stands is the with performance Kareem, of in I about seeing that but quarter more performance that the

Operator

line America. question comes of from Travis Your Bank next Steed the from of

Travis Steed

margin on of there's XX% spin. to that know operating touch parts I looks It between guide, 'XX. already of XXXX. you're at wanted like XX.X% in been lot moving since a I and post the you've kind to XX% the

to to expansion a to your the 'XX if puts to puts a of year, on there? and course and op the think just that kind margin of performance of guidance, if underlying about So of of trying how and evaluate there's think about way way the and kind -- the takes over of there's margin kind takes the progression

Wayde McMillan

Sure. Yes. a journey. been has certainly And it

the Our first public investments you've look to had were And then quarter our made in investments before any our the as from went continued as when as changes we functions margins. operating business. is which growth make stand to there, to we in critical XX.X% we've year. QX, well seen up throughout really to company

mean into takes our those we But we're like the growth also compliance people and investments at layered I quarters, separation functions. we've we felt we to we really that our have it's that, needed Travis, areas legal teams, in is at made made across that public it critical controllership talk cybersecurity, puts We've We've business teams, this company. investments. model. when to spin. make the As settled investments our many And in way the up we accounting you so X stand about necessary look and the after way mentioned, would and looking it

XX.X%. we'll rate build the then that and at we year, QX now it. exit start upon will And so into carry as to We run think that XXXX, is the

And we annualize agreement also XX we've up costs have where to additional the XXXX of got separation-related point we would the step XX% XX%, basis I in XM a costs. people they as from so range that can the guidance remind headwind but

year. points next have And so XX year points basis basis we as XX we an We'll this had additional annualize it.

And margins the So operating on go to and you there. then improving will year for XXXX we're starting X be that of work XX% margin. XX% with quarters that's, we'll know, business, from operating all the as first to

Travis Steed

is Okay. and first to think divestiture. And ask, the of congrats But about on did of then the is is then that of business divestiture divestitures, to of other coming get us the Or P&F the this on be to little one? potentially the course neutral. kind I potential the P&L portfolio, the want divestiture of all, going models hard kind years? next to the P&F a you X to over the the when big EPS simplify for things few the the And

Just curious built the the how divestiture. impact thinking EPS conservatism into that about you're of

Bryan Hanson

the view then with question? specifically, neutral on I'll maybe start of about talk annualized part your XXXX, the you first. And don't about Why other the talk version

Wayde McMillan

how because I Sure. Travis, at a one out glad this Yes, of and this looking that's it's annualized to year. you up, lot see going obviously basis, an on I'm people brought not that play

would an accretive. I on it's basis, annualized So agree

to progress of end the However, year. the sometime this in close the second we're divestiture to planning we half as

of debt tender impact stranded in timing is dependent keep cost the the reductions. then upon of close, EPS the of and the obviously, so timing and cost And mind, the the the timing of

well. But don't we in the post we what can be It factored close. know will fast what and deal specifically be tender So close to month the cost has the second debt half. at how will as in

shorter savings. of there'll savings time of than period interest a So be EBITDA

just some simple not people as it's be thinking. XX-month may So math a

we're altogether, Hopefully, helps. be in for XXXX. neutral So the to that deal planning here

some are makes annualized given think on of he's obviously sensing, an and going basis, be to I the looking at it's just timing 'XX, people neutral. math creative. it that But

Bryan Hanson

you're I color. other answer of the not suppose, I you on would going get part I give that that to some but way your it question, maybe I'll these is Just answer the guess situations, Travis,

-- obvious pretty that it's ongoing think optimization is it's portfolio I process. an

to the invest in highly do I do value we connected we're think like tax and considering the Is at of going to strategic make for to we're business we beginning. to on teams a to have is benefit to determine need probably should at going optimization. valued assess going is tax at continue if normal Do anything from if consider. does, going not thoughtful we're we'll But best the just And But obviously, decisions to the that transaction, sense very for portfolio. consideration Then at we disrupt and a do never-ending could the always looking does the sure value to that company? perpetual to have stuff a their nature that do always and our another And consider shareholders? applications. we're variable business, story it which future TSA want some short we we we're is that. way to tax-free capacity. to we're appropriate transaction. the financial leadership of us, spin. portfolio the with the make a importantly of Do then that when this you in We're we're guess are sure so we we bridging it that where more that the I the said look organizational where going when process it's everybody that make elsewhere. a look I make point variables XM, determined is I do And underline we've all the whether And and

Operator

[Operator Instructions] Vik the Wells from of from line Your Fargo. comes next question Chopra

Vikramjeet Chopra

a from much how take I and Two how Mexico to elsewhere price any us But flexibility have follow-up, for to appreciate production me. you had manufacturing to can tariff of help understand I offset please. where coming you the is impact? much And then tariff situation dynamic. move is your

Wayde McMillan

could I certainly Sure. it Vik. that of take is the topic the one. And day,

said relatively, XX% had tariff All is really given China. that U.S. are other we lot. speculative our tariff not going too Having our But be dynamics manufacturing very really our it to do know has or others, that it's from seems we're guide know than because And potential we the changing that, small piece where given countries. imports guide, speculate, like on in the it's a believe point exposure is that this this likely China where it from implemented, we fluid but that's so small our certainly we're China. in large very footprint we don't And to we has less that's And there's at timing including monitoring less closely. and impact put global and impact why limited have this the and including obviously concerned we're early and land, very to really in

X We have Mexico Canada. in X there, plant and in X

speculate Maybe not of thing production. to tariffs. would last on add HIS, does an manufacturing to it relative said this But where so in is. not probably have do from this less have exposure. point, having at be think lands, But And others, I have on businesses plants there And these may impact the segments, we're going that, one do we our and what depending we is just we regions.

does exposure. it have So not any

addition within the in our to U.S. being of a manufacturing lot So

our of doesn't exposure all. at One any have segments

on of our Mexico, relative well. have specific China, countries, I question production others, A Canada, X in Mexico, probably plants So small small percentage to relatively to then exposure. our percentage X we're and mentioned sales there. is And going pretty your have those as less of to we

Vikramjeet Chopra

my is to or buy dividend are you've will repay majority any a and Purification debt. Filtration The of But to follow-up Great. stock? proceeds And initiate the the question sold back any there be plans business. used

Bryan Hanson

that. want probably answering You don't me

Wayde McMillan

take one. certainly could this I

primarily Vik, down all there, in go had our are paying debt. we've remarks to As prepared going to you the and mentioned, proceeds

dividend, are repurchase and not those. a Regarding we share planning

One to XM reasons the related of is agreements. our

strengths XM, agreement are asset to respect with sales. matters certain with there So in our tax

so we for on And use restrictions, repurchase. share based proceeds things like those can't

here, back first Investor I'll that first the what of communicating the as exactly plan us spin, our for since paying our debt. that's funding just we've here. and acquisitions, priority positions and And is a And everybody about that doing So down been changed. and couple operations capital up also mentioned we've we're and business Day remind where priorities the of tuck-in hasn't times then it

So sheet is offense and with now balance M&A. go to we're news in good on with position the delevered stronger the a

Operator

Your last from from question Stifel. the line Rick Wise comes of

Frederick Wise

the of guidance end you, go I'll the better? another more heard do the sure help at the there's right, products execution help and that line guidance question. EPS color look understand, new of top we you incremental Maybe this the is that commercial a but less or even would and counting outlook. And you the Bryan. do growth What ask guidance thoughtfully some would what than us that we've MedSurg. nothing around I things help expect I impacts, SKU from expect from you're we understand Maybe in maybe range I'm end? on balanced lot Wade, upper when of headwinds to even the you in us better exit in could top gets the to

things. upper help Just of us understand better the end

Bryan Hanson

is make to don't pretty they ones got mitigation ERP great sure a can get not not things be question. we've performance any got way look be fickle. most coming Yes. probably at up That's of over. is the can X plans commercially we can important the based, serious a ones is one and material necessarily they it place disruption. got covers, standpoint, If through this year those But have in from that ERP at we X I It's the least

first under one if helps that's to If with variable then survive it part range. plans, the our probably the end it the of things goes at even year top us the don't so we're one. contact That's at extent [indiscernible], the of it well, biggest the best doesn't that bottom that's go so the push -- the to of end to but get that some would looking control, And typically really well, that's that down could us range. of

talked really, we good is talent. one about, that second I piece that commercial really this The have hired some

growth in market. model have We those We're disciplined and going doubling new specializing completely areas. the to organization. to We our picked sales going in that the down be drivers, we're way a

do, to about we to can gems pick are the That of I the we not right No the top deliver much that end we find R&D mentioned. in get to the under right and process in we takes on areas, conservatism and them. to those what those more There's perfect and question if add we it. example, Clinpro, the the with try build the that and growth at drivers to we the could aggressive get But products X capacity we're ] don't sell a portfolio. now, we're around So because it. of model, capacity incremental felt to [ like while, do going a point. Peel range. ideation Place helps growth us great execution club we way of have this prediction going going to products, And

to to of X the 'XX help can in job So that those our end believe the do in X we've biggest just the I that over. up us things the night biggest job to that. one going to get to do things products -- got that a But are already [indiscernible] We is of that The at got keep queue. range. better got actually the for mitigate you top those

Frederick Wise

focused for great, That's on. And Bryan. me, just a you. last Got just more maybe

you much I And be HIS. about this in knowing much to cases autonomous just really. coating. can about just not better XX% wanted understand automated space to talk talked -- of haven't wanted the I We when XX% about to

are you for sale, a where a are business. assuming you piece to realizing Just you are and be of where piece bigger expecting? important now It's What we, and this going this in the are post more opportunity? year? What this

it update know too. more we'll help I just talk at the us. Day, Analyst about So

Bryan Hanson

Yes, Rick. absolutely,

will Gary typically lot hard coating do importance And I'll to It find, you find got presents her autonomous you've gets here's and when but revenue the coding. the up I that from stage a do about that justice never to same And give she know it's perspective. business, on of layman's things So will very what she the do you a the to what know labor-intensive is that people cycle process change. how management. of with a

So well, get to make do mistakes. people and pressed just area. It's you're on going to they able It's being to this make mistakes. always human

is FTE in out important. it what would side the we're We've out. we take significant. by phases prove the say trying the And of believe the to XX% of I autonomous That's could we're of doing do pressure to do XX% that's coding. so to to of apply this. equation cases, But the got the on that to early equation technology

about what that like we a efficiency a is the with This which it. got and the growth pretty challenge not able package data But AI it result also RCM. cost software people we've take can, to lever Now of But the potential is if you that's in mistakes because got you well that able it the system a an of than area mistakes hearing. out to review, and just area Encompass lightly that down for going got interesting do and you bring us because picture, next reduce it without XXth. to you've integrity, be better human to of highly another XXX, the I penetrated know better. as could validate autonomous It's be March the do would which our that prove code be as for works, we're We our to exciting idea out. got I'm as is you more proven so

Operator

turn call [indiscernible] to over now will the back I for closing remarks.

Unknown Executive

everyone your Thank We to appreciate you thank joined us. Solventum. and in interest questions. and Eli, listening you, for you your Thank who for

follow-up out. you have don't call, directly. This concludes now our fourth to or close anything can out you Eli, quarter please else, XXXX need earnings us If reach questions hesitate

Operator

This concludes conference call. today's

You may now disconnect.

Solventum (SOLV) 27 Feb 252024 Q4 Earnings call transcript