Solventum (SOLV) Q4 2025 Earnings Call Transcript

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DATE

Thursday, February 26, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Bryan C. Hanson
• Chief Financial Officer — Wayde D. McMillan
• Vice President, Investor Relations — Amy Wakeham

TAKEAWAYS

• Organic Sales Growth -- 3.5% organic growth for the quarter and 3.3% for the full year, ahead of the stated expectation of 2%-3%.
• Reported Sales -- $2.0 billion for the quarter, reflecting a 3.7% decrease on a reported basis due to the full-quarter impact of the Purification and Filtration (P&F) divestiture and the Acera acquisition.
• Segment Performance -- MedSurg delivered $1.2 billion in sales with 3.2% organic growth; Dental Solutions generated $343 million, up 5.9% organically; Health Information Systems (HIS) contributed $348 million, rising 3.2% organically.
• Gross Margin -- 53.5% of sales, representing a sequential 230 basis point decline driven by higher logistics costs and manufacturing timing, with normalization to approximately 55% excluding one-time effects.
• Adjusted Operating Income -- $397 million, equating to a 19.9% operating margin, which was below management’s expectations due to gross margin pressure, partially offset by reduced operating expenses.
• Net Debt -- $4.2 billion at quarter end, inclusive of funding for the $725 million Acera Surgical acquisition.
• Share Repurchase Program -- $1.0 billion program authorized and initiated in January, intended to offset stock-based compensation dilution and add capital allocation flexibility.
• Free Cash Flow -- Negative $10 million for the year, below guidance of $150 million to $250 million, attributed to separation expenses, portfolio move costs, and ERP implementation; on an adjusted basis excluding these items, free cash flow would have approximated $1.0 billion.
• 2026 Guidance -- Targeting 2%-3% organic sales growth (3%-4% ex-SKU rationalization), operating margins of 21%-21.5%, non-GAAP EPS of $6.40 to $6.60, and free cash flow of approximately $200 million, with cost headwinds from tariffs expected at $100 million to $120 million.
• P&F Divestiture Impact -- A net 890 basis point reduction in reported growth, while gross margin benefits partially offset other cost headwinds.
• Separation Progress -- Over 40% of transition service agreements exited, aiming for 90% completion by 2026; ERP system migrations ongoing with recent go-live in Asia Pacific and Europe, and supply chain independence advancing toward planned targets.
• Transform for the Future Program -- Announced $500 million multiyear cost takeout program targeting operating efficiencies and reinvestment for growth, with initial benefits in 2026 and majority realized after 2027.
• Portfolio Moves -- Recent Acera Surgical acquisition integrated into Advanced Wound Care; ongoing divestiture of the P&F segment slated for completion in 2027.
• Pricing Dynamics -- Remained within the plus or minus 1% range for both the quarter and anticipated 2026 performance; volume remains the main growth driver.

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RISKS

• Free cash flow was negative $10 million for the year, below expectations due to higher separation costs and unanticipated timing of the Acera acquisition and ERP system cutovers.
• Gross margins decreased by 230 basis points sequentially, attributed to higher logistics costs and manufacturing performance timing during the ERP and distribution center transition period.
• Tariffs are projected to result in $100 million to $120 million in annualized cost headwinds for 2026, approximately double the impact absorbed in 2025.
• A potential additional 100 basis point increase in raw material costs related to long-term supply agreements with 3M (NYSE:MMM) remains possible for 2027, subject to ongoing negotiations.

SUMMARY

Solventum Corporation (NYSE:SOLV) underscored accelerated progress on commercial and operational transformation, with clear forward strategies for portfolio optimization and operational independence post-separation from 3M. Management voiced increased confidence in achieving the long-term plan for 4%-5% sales growth and 23%-25% operating margins, emphasizing specialized sales teams, revitalized innovation processes, and a pipeline of nearly 20 new product launches over two years. The $500 million Transform for the Future program is positioned to deliver long-term efficiency gains beyond 2026, providing both margin support and reinvestment capacity. Contracted multi-year customer agreements and proprietary datasets in Health Information Systems substantiate management's outlook for defensible market leadership and ongoing AI-driven growth. Executives articulated a balanced capital allocation approach through share buybacks, tuck-in acquisitions, and continued debt reduction, supporting execution of financial objectives and flexibility for incremental M&A.

• CEO Hanson stated, "I think it is important to state right out of the gate, we actually see AI as an opportunity more than we do a threat. I think you could probably end a statement there, but I think that is a really important statement to make," regarding competitive dynamics in autonomous coding.
• HIS contract durations are "we have pretty long contracts, multiple-year contracts," with embedded customer switching costs, according to management.
• Acera Surgical, described as operating in a "billion-dollar market growing 10%," is expected to be a healthy double-digit grower for Advanced Wound Care.
• Pricing is not projected to be an outsized driver of the business again in 2026, as volume remains the primary growth lever.
• The majority of Transform for the Future program benefits are expected in 2027 and beyond, as detailed by CFO McMillan.
• Management clarified that intellectual property transferred from 3M is fully owned within the company’s field of use, reducing risk of supply disruption on separated product lines.
• Chief Commercial Officer Heather [last name not stated] is now leading all commercial operations, consolidating leadership previously split across the business segments.

INDUSTRY GLOSSARY

• P&F (Purification and Filtration): Segment specializing in purification and filtration technologies, in process of being divested by Solventum Corporation.
• TSAs (Transition Service Agreements): Short-term service and support arrangements between Solventum Corporation and 3M during the operational separation period.
• ERP (Enterprise Resource Planning): Integrated enterprise-level software systems replacing legacy processes to support operational separation and long-term scalability.
• SKU Rationalization Program: Strategic initiative to reduce product complexity and improve operational focus by eliminating selected stock-keeping units (SKUs).
• HIS (Health Information Systems): Solventum segment delivering healthcare IT solutions, including autonomous coding software and revenue cycle management platforms.

Full Conference Call Transcript

Amy Wakeham: Thank you. Good afternoon, and welcome to Solventum Corporation's fourth quarter fiscal year 2025 earnings call. Joining me on today's call are Chief Executive Officer, Bryan C. Hanson, and Chief Financial Officer, Wayde D. McMillan. A replay of today's earnings call will be available later today on the Investor Relations section of our corporate website. The earnings press release and presentation are both available there now. During today's call, our discussion and any comments we make will be on a non-GAAP basis unless they are specifically called out as GAAP. The non-GAAP information discussed is not intended to be considered in isolation or as a substitute for the reported GAAP financial information.

You are encouraged to review the supporting schedules in today's earnings press release to reconcile the non-GAAP measures with the GAAP reported numbers. Additionally, our discussion on today's call will include forward-looking statements, including, but not limited to, expectations about our future financial and operating performance. These statements are made based on reasonable assumptions; however, our actual results could differ. Please review our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ from any forward-looking statements made today. Following our prepared remarks, we will hold a Q&A session. For this portion of today's call, please limit yourself to one question and one related follow-up.

If you have additional questions, you are more than welcome to rejoin the queue. I would like to now hand the call over to Bryan.

Bryan C. Hanson: Alright. Thanks, Amy, and to all of our shareholders, and everyone else that is interested in the Solventum Corporation story. I want to say thanks for joining us today as we review our fourth quarter and our full year results along with our 2026 guidance. We closed 2025 with solid momentum, making significant progress in our first full year as a stand-alone public company. You know, looking back at the year, I am very proud of what we accomplished. You know, we formally launched our long-range plan and prioritized five growth drivers that are expected to now deliver more than 80% of our future growth.

We built an experienced leadership team with strong med tech experience, but also strong transformation experience. We solidified our mission and culture, revamped our innovation process, restructured our global sales organization, and through our SKU rationalization program, sale of our purification and filtration business, and acquisition of Acera, we rapidly advanced our portfolio strategy as well, all while managing the separation process from 3M. And inside of that, throughout the year, we consistently delivered on our strategic, operational, and financial commitments. We improved volume growth, outperformed expectations, and tripled our annual sales growth from a year ago.

I think it is clear that we are moving toward our long-range revenue targets faster than expected and have programs in place to overcome external headwinds and execute against our margin targets as well. This team's capacity to deliver results while navigating ongoing separation efforts, ERP implementations, and acquisitions and divestitures is a testament to the strong talent and culture we have already built. And building on the foundation of our Salesforce restructuring project, our revitalized innovation process has meaningfully increased our vitality index. And as a result, we now expect a solid cadence of new product launches in our growth driver areas to drive further momentum with this more optimized sales team.

And as our separation progresses, we are gaining full ownership of our IT systems and freeing up needed resources to drive greater overall savings and efficiencies. Our Transform for the Future program was built to capture this opportunity and its impact is reflected in our 2026 operating margin outlook.

Okay. Moving to our quarter results. Well, the fourth quarter reflects another quarter of progress and provides a solid foundation as we head into the new year. And during the quarter, we announced and closed our first tuck-in acquisition, Acera Surgical, which not only opens the door to the fast-growth synthetic tissue market, it also very well complements our existing technology categories and our call points. And as we move forward, portfolio optimization will remain a key lever for value creation here at Solventum Corporation. In other words, we will continue evaluating attractive assets to acquire and assessing our current assets for go-forward fit.

And our business performance and resulting healthy balance sheet now provide flexibility to return capital to shareholders. And during the quarter, we announced a $1.0 billion share repurchase program, which we began executing in January. We see this as a clear and important step in achieving a more balanced capital plan.

Okay. Moving to our business performance in the quarter. Overall, we delivered solid sales growth with Dental Solutions and MedSurg performing better than expected. Starting with MedSurg, we continue to leverage our existing brands, our new product innovation, and newly specialized sales teams and are seeing traction in each of our growth driver areas, which as you probably remember, are negative pressure wound therapy, IV site management, and sterilization assurance. In our Advanced Wound Care business, we saw continued growth in negative pressure wound therapy supported specifically by double-digit growth in Prevena and ongoing expansion of our innovative VAC Peel and Place dressing.

As mentioned earlier, we recently closed the Acera acquisition, which will now be a part of our Advanced Wound Care business. We are obviously very early in the integration process, but sales teams across our newly combined business will now have access to an expanded suite of technologies to offer our joint customers. And with our combined clinical differentiation, our robust DME and differentiated infrastructure, and proprietary technology, we have a meaningful runway for growth acceleration in this business.

In the Infection Prevention and Surgical Solutions business, we saw better-than-expected growth supported by our two growth driver areas, sterilization assurance and IV site management. Inside sterilization assurance, our strong brand equity continues to provide a solid foundation for our dedicated sales force. And early momentum from our 3M Attest sterilization product launches will continue to support the team's momentum to drive growth going forward. In IV site management, demand for Tegaderm CHG remains strong and our global launch continues to gain momentum. We have meaningful clinical differentiation, and our specialized sales teams are focused on converting customers from standard films to this high-value solution that reduces the risk of infection.

Tegaderm CHG is still significantly underpenetrated, providing a clear runway for continued growth.

And in our Dental Solutions business, our core restorative growth driver was again a key component of our performance in the quarter and was supported by our strong existing brands, recent new product launches, and the Salesforce specialization that we put into place in 2025. From a new product launch perspective, we continue to see strong demand for products like Tenpro Clear and Infiltrek EasyMatch, and overall new product sales are driving the majority of our underlying business growth. And building on last quarter's service improvements, the dental team once again significantly reduced backorders, which also contributed to growth in the quarter.

Our Health Information Systems business delivered another solid quarter, supported by its growth driver, revenue cycle management. And we continue to see adoption of 360 Encompass, progress against our international expansion efforts, and gains in autonomous coding. And relative to autonomous coding, our strong automation and acceptance rates are further positioning us as the largest and, importantly, most capable autonomous coding vendor. Over decades, we built deep rules and algorithms designed to ensure accurate and compliant reimbursement coding. This, combined with our vast datasets and proprietary workflows, uniquely positions us to leverage AI-driven autonomous coding our customers can trust.

In summary, we finished the year building on the success and the momentum we achieved in the first three quarters. And it is clear to me that we have the right team and strategy, and our momentum will continue into 2026 and beyond. And with that, I want to thank our global team for their hard work and ongoing commitment to our mission. It is you that are making a difference every single day by delivering for our patients, our customers, and our shareholders. And with that, I will turn the call over to Wayde to review our financial results and our 2026 guide. Wayde, I will just pass it to you.

Wayde D. McMillan: Thanks, Bryan. We reported another solid quarter as we completed our first full year as an independent public company. We made progress across both our transformation phases and turning around the business. Our commercial improvements yielded a significant increase in our organic sales growth, putting us on an accelerated path to reach our long-range plan sales growth target. During the year, we were able to absorb tariff headwinds and expand operating margins off of the Q4 2024 baseline while continuing to invest in commercial enhancements and innovation. We also moved quickly on portfolio optimization resulting in accelerated execution of our capital plan to pay down debt.

Our progress to date, combined with our planned strategies, positions us well to deliver our long-range plan margin and free cash flow targets.

I will start with an update on our separation activities, status of portfolio moves, and then transition to our quarterly and full year financial performance, concluding with a discussion of our 2026 full year guidance. Overall, our work to complete the separation from 3M is going very well thanks to the dedicated separation management teams at both 3M and at Solventum Corporation. We are progressing well on major milestones, as we have now exited over 40% of our transition service agreements from 3M and remain on track to exit approximately 90% by 2026. ERP deployments continue to roll out with a plan to be complete this year.

We have just gone live with our latest ERP deployment earlier this month across Asia Pacific, including China, and additional countries in Europe. We have also transitioned approximately half of the more than 1,000 systems to gain system independence from 3M, which is a significant step in our separation. Regarding supply chain, we have taken further steps to separate from 3M and have now reduced our distribution center network to 55 locations, progressing towards our goal of 45. The P&F divestiture activity continues to progress as planned with a target completion in 2027. There is close collaboration to ensure business continuity from Solventum Corporation to support the buyers' integration efforts across the nearly 200 transition service agreements.

Shifting to our recent Acera acquisition, our early integration efforts are off to a good start following the close in December. Our main focus is sustaining and accelerating the momentum that the team has generated in recent years.

Now turning to our Q4 results. Starting with top-line performance, sales of $2.0 billion increased 3.5% on an organic basis compared to prior year and declined 3.7% on a reported basis, which reflects the first full quarter impact of the P&F divestiture following the sale in September 2025. Foreign exchange was a 170 basis point benefit to reported growth, while the net impact of the P&F divestiture and Acera acquisition represented an 890 basis point net impact on our reported growth. Overall, we had stronger-than-expected sales growth driven by MedSurg and Dental. Volume remains the main driver of growth, and pricing remains within the expected range of plus or minus 1%.

Our SKU rationalization program also remains on track with a 70 basis point impact in the quarter, bringing the full year impact to 60 basis points.

Moving to the segments, MedSurg delivered $1.2 billion in sales, an increase of 3.2% on an organic basis. Within MedSurg, the Advanced Wound Care business grew 1.7%. Solid performance in our negative pressure wound therapy growth driver was partially offset by headwinds in the separate advanced wound dressings category, which was impacted by SKU exits and backorders. Infection Prevention and Surgical Solutions continues to outpace our expectations, delivering 4.2% growth that was driven by strong business performance, partially offset by the remaining reversal of first-half volume timing and the SKU rationalization program. Our Dental Solutions segment delivered higher-than-expected $343 million in sales, an increase of 5.9% on an organic basis.

Growth was driven by core restoratives, which benefited from further backorder improvement. During 2025, the supply chain team led multiple efforts that helped reduce backorders to historic lows. On a normalized basis, Dental grew closer to 3%. Our HIS segment also contributed to our performance with $348 million in sales, an increase of 3.2% on an organic basis, driven by revenue cycle management software solutions and performance management solutions. Together, this growth more than offset expected declines in clinician productivity solutions.

Looking down the P&L, gross margins were 53.5% of sales, a 230 basis point sequential reduction, which reflects higher logistics costs and timing of manufacturing performance. Higher logistics costs were mainly driven by ERP and distribution center cutover mitigation efforts in the quarter. These headwinds were partially offset by the benefit of the P&F divestiture. On a normalized basis, gross margins were closer to 55%. Sequentially, operating expenses reduced to $672 million from $739 million, which reflects the P&F divestiture, timing of project spend, and cost management. In total, we delivered adjusted operating income of $397 million, or an operating margin of 19.9%, below expectations due to gross margin headwinds, partially offset with lower operating expenses.

Moving down the P&L to non-operating items, our net interest expense and other non-operating spend improved versus Q3, driven by a $30 million reduction in interest expense and higher interest income. These improvements are due to the full-quarter benefit of the P&F divestiture, which resulted in a $2.7 billion debt paydown and a higher cash balance. Lastly, our effective tax rate of 16.6% was favorable due to an end-of-year release of tax reserves and a regional tax provision in combination with favorable geographic mix. We delivered earnings per share of $1.57 driven by sales outperformance, as headwinds in gross margin were partially offset with operating expense savings.

Shifting to our balance sheet, we ended the quarter with just under $900 million in cash and equivalents and net debt of $4.2 billion. This includes funding the $725 million Acera acquisition, which closed on December 23. We are in a healthy position to accelerate our capital allocation strategy as indicated by our recent $1.0 billion share repurchase authorization and maintain flexibility to pursue tuck-in M&A. We generated cash flow of $33 million, below our expectations due to higher divestiture costs, the earlier-than-expected close of the Acera acquisition, as well as higher costs to support the ERP and distribution center cutovers.

Now moving to full year 2025. We delivered 3.3% organic sales growth ahead of our expectations of 2% to 3%. When normalizing for SKU exit impact and mainly the benefit of backorder improvement in Dental, our growth was approximately 3.5%. Operating margins finished at 20.5%, within our assumptions of 20% to 21%, while absorbing 65 basis points of tariff impacts that were not contemplated at the beginning of the year. We also completed the Solventum Way restructuring program, exceeding expectations and delivering annualized savings of approximately $125 million at a lower total cost of $90 million. Our adjusted tax rate of 19.1% was also better than our assumption of 20% to 21%.

At the bottom line, we generated non-GAAP earnings per share of $6.11, also ahead of our expectations of $5.98 to $6.08. Free cash flow was negative $10 million, below our expectations of $150 million to $250 million, due to higher Q4 costs to support portfolio moves and ERP cutovers. Excluding these, we were in line with our expectations. When adjusting for the P&F divestiture and separation costs, during 2025 free cash flow would have been approximately $1.0 billion for the year.

Now turning to our 2026 guidance. Starting with our top line, we are guiding to an organic sales growth range of 2% to 3%. This translates to 3% to 4% excluding the continued estimate of 100 basis point impact of SKU exits for 2026. While not reflected in our organic sales growth outlook for 2026, we expect our recent Acera acquisition to contribute meaningfully to our reported growth going forward and will roll up as part of Advanced Wound Care sales. We also expect a modest 100 basis point tailwind for foreign exchange, mostly in the first half. Looking down the P&L, we estimate operating margins of 21% to 21.5% for the year, expanding from the 20.5% full year 2025.

Underlying the 50 to 100 basis points of margin expansion is a combination of sales leverage, programmatic savings for supply chain, and our Transform for the Future program. We expect portfolio optimization for divestiture and acquisition activity to be neutral to operating margins. Regarding tariffs in place before last week's Supreme Court ruling, we estimate full year impact of $100 million to $120 million. Given the evolving nature of the environment, at this time, we are assuming the impact under any new tariffs will be within a similar range. For earnings per share, we are guiding to a range of $6.40 to $6.60. For free cash flow, we are expecting approximately $200 million in 2026.

Excluding mainly the impact of costs to separate from 3M, as well as payments due to 3M and costs to support the recent divestiture, we would expect to be closer to $1.0 billion. As a reminder, separation costs reduce significantly in 2027 as we complete the separation from 3M. Other considerations for 2026 include capital expenditures of $400 million to $450 million, an effective tax rate between 19.5% to 20.5%, and non-operating expenses of $300 million, primarily due to net interest expense of around $270 million. To provide some additional color related to our first quarter 2026, remember, we had a tough comparison given the approximately 180 basis points of additional sales volume benefit in the prior year.

And our gross margins in Q1 will reflect the typical sequential seasonal pressure while year-over-year will reflect the additional tariff impact headwinds. All in, we anticipate operating margins will again be the lowest of the year.

In conclusion, we delivered another strong quarter to complete our first full year post separation. We are making great progress on our separation from 3M and on our portfolio moves to divest P&F and integrate Acera. And we are moving with urgency towards our long-range plan goals of accelerating sales growth to 4% to 5%, operating margins of 23% to 25%, growing earnings per share at a 10% CAGR, and free cash flow conversion rate above 80%. We want to extend our gratitude to all Solventum Corporation team members for their hard work and commitment to our values and mission, enabling better, smarter, safer health care to improve lives while consistently delivering or exceeding on our financial goals.

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

Operator: We will now open for questions. You would like to remove yourself from the queue, press 1 again. As a reminder, please limit yourself to one question and one follow-up. We will take our first question from Travis Steed at Bank of America.

Travis Steed: Hey, thanks for taking the question. I guess first on margins, Wayde, I do not know if there is anything one-time in Q4. It was a little light versus the Street in the quarter. And then on 2026, you can maybe elaborate a bit more on kind of what is assumed in that 50 to 100 basis points, how much of the $500 million cost savings is baked into that and anything else that you would kind of frame up for the margins in '26?

Wayde D. McMillan: Sure. Hey, Travis. So margins are obviously an important part of our story. As we think about Q4 first, approximately 150 basis points of the cost in our gross margins was one-time in nature. So you will see in our prepared remarks that we shared a more normalized gross margin of 55% is more what we would have expected. And we saw a lot of separation activity in Q4, so it ended up just costing us more. If we think about operating margins, certainly lower than we expected, but really just driven by that headwind in gross margins. We were able to offset it partially with some savings in our operating expenses.

And then as we think about 2026, first of all, I would just say we are committed to growing our sales as well as expanding operating margins each year. And so in that theme, we are now planning to expand operating margins 50 to 100 basis points in 2026, as you mentioned. A couple of things that are important here. Certainly, tariffs are a headwind for us again in 2026. People may recall that we have a very fast inventory turn, and so we had approximately two quarters of impact of tariffs in 2025, and so we will annualize that in 2026. You will see from our prepared remarks, it is about a doubling of the tariff headwinds for us.

And so with that in mind, it is a pretty significant margin expansion. The drivers of that are sales leverage as we continue to drive sales on an accelerated basis, as well as our programs within gross margin. We have talked about programmatic savings. We gave a lot of detail at our Investor Day. And we have got significant effort to drive favorable gross margins over time. And then as you mentioned, Travis, our more recently announced Transform for the Future restructuring project, which is a longer-range project that is targeting several areas of efficiency. And we will start to see some of that in 2026, but it will benefit us more over the long term.

So you put all that together, we do think we have got a nice operating margin expansion story again in '26, despite the tariff estimate that we have in the numbers at this time.

Travis Steed: Great. Thank you. And I guess, my follow-up question, since there has been more on the health care IT business and some of the AI stuff that is going on, just would kind of love to give you the opportunity to kind of maybe explain that and explain your business a bit more for investors.

Bryan C. Hanson: Yes. Thanks, Travis. I will probably answer that one. And I assume, seeing your note, that you might ask that question. So we are actually betting which question you would ask first, and you asked both questions. You know me well. I know you pretty well. So I would just say, first of all, I think it is important to state right out of the gate, we actually see AI as an opportunity more than we do a threat. I think you could probably end a statement there, but I think that is a really important statement to make. And then there is probably three vectors to look at it, which I think could be helpful to people.

Number one, I think we see artificial intelligence as a lever to drive autonomous coding. That is why we have been spending so much in that area, and that is what is, you know, driving us in autonomous coding. But we do not see it by itself as the answer to autonomous coding. I think that is important. By itself, it is not the answer. It is just a piece of the equation. And we really do not see AI, again, by itself as a competitive—we see it as a tool. We see it as a tool, a variable in the equation to solve for autonomous coding. Remember, autonomous reimbursement coding, not computer coding. Right?

And then three, and this is important, because AI will be available to anybody who wants to use it in autonomous coding or revenue cycle management. We truly do believe that we are differentially capable of using AI because, number one, we have been in the market for decades. And as a result of that, we have a vast number of proprietary— I am going to call it algorithms and rules that we have around reimbursement coding—actually close to a million plus of those rules and algorithms, which is substantial. And, of course, because we have been working at scale of hospitals, we have very vast data sets as well.

So we really believe that what we have available to us allows us to train AI in ways that others cannot. So we actually look at this as an opportunity more than we do a threat. But I appreciate you asking the question because there is a lot of folks that may not see it that way.

Travis Steed: Great. Thanks a lot.

Bryan C. Hanson: Yeah. No problem. Thanks, Travis.

Operator: We will move next to Jason Bednar at Piper Sandler.

Jason Bednar: Good afternoon, everyone. Thanks for taking the questions. Wayde, I wanted to come back to some of the guidance points you were making. I appreciate all the color around the first quarter. Maybe wanted to give you an opportunity to talk if there is any other sequential callouts. 2025 was lumpy. It was a good lumpy, but lumpy in that you had the ERP cutovers, the DC cutovers that, you know, just created some volatility in the volume. So anything else you would call out as we try to model throughout the year?

And then within that also in the first quarter, should we be considering any headwinds tied to just some of the weather dynamics that may or may not have impacted volumes for your businesses in the first quarter here?

Wayde D. McMillan: Got it. Hi, Jason. Yeah. I can certainly start that one for you. And I am glad you picked up on the Q1 comments that we had in our prepared remarks. It is the one quarter for us that is a little more challenging than the other quarters in the year. The other quarters look more stable. So maybe I will just summarize the information that we shared. And it is really in three areas—sales, gross margin, and OpEx. So for sales, we had the 180 basis points of tough comp, and that has put a lot of pressure on our Q1 sales here.

And so if you just take the full-year guide of 2% to 3%, and you take the midpoint, 2.5%, if you use the 180 basis points of headwind, you get just under 1%. And so that is how we would like people to think about the first quarter, and I think that would be a reasonable place to start. You move down the P&L, operating margin is setting up to be the lowest of the year in Q1, sequentially down from Q4 2025 to Q1 2026. But that is similar to what we experienced last year—2025. So very similar setup to last year.

And that is really driven by gross margins, which we would expect to see relative to the normalized 55% we gave for Q4, some normal sequential seasonal headwind moving from Q4 2025 to Q1 2026. So same setup again as last year. But, you know, keep in mind tariffs are a headwind in the first half as well before we annualize them. Then when you move down to operating expenses, kind of similar here. We will have higher OpEx in Q1 as we have some seasonally higher expenses than Q4 2025. And Q4 2025 was a little unnaturally low as we had some favorable project timing.

And then just given the gross margin pressures we were having in the quarter, we did some cost reduction initiatives that gave some favorable OpEx in Q4 as well. We do not have any weather-specific things to the specific question, Jason. Nothing that we would call out. And then, again, I would just say for the remainder of the year, the setup looks more consistent, other than I would just highlight—and it was really the driver of that volume in Q1—this first-half/second-half impact of IPSS. We had a lot of volume, mainly in the first half last year. These were mostly ERP timing-driven impacts. But the good news is they are all contained within the year.

So first-half/second-half dynamic: additional volume mostly in Q1, Q3 giveback. But the good news, the story actually gets quite simple at a full-year basis. But there is that trade-off, particularly in IPSS, between mainly Q1 and Q3.

Jason Bednar: Alright. Super helpful. Thank you for that. Bryan, I wanted to shift over to you. Bigger picture question. You mentioned product pipeline that has expanded within the core growth categories you identified at your Investor Day. Can you give us a sense as to some of the things you are more excited about or expected to be more impactful when we look out this year and also next year? Really to help bridge to that 4% to 5% growth target knowing that you are targeting 3% to 4% underlying growth this year. What helps accelerate you that last 100 basis points to get to the LRP targets you have out there?

Bryan C. Hanson: Yeah. Yeah. Appreciate the question. And I would say, you know, maybe first is taking a step back because I have a feeling some of our solvers are listening to this call as well. And I just want to say that I appreciate the work that they put into revamping and revitalizing our innovation process, and it has paid dividends, as we talked about in the prepared remarks. Vitality index has gone up and the cadence is more focused to products that we are going to see. I am not going to speak specifically about any individual product because, you know, competitive reasons, but maybe I will give you some color that I think could at least help.

We have got close to 20 new products that we are going to be launching now over the next two years, relatively evenly over those two years. So it is not back-end loaded. And those, as you would expect, just given the size of MedSurg, almost half of those are going to be in MedSurg, the other half is split between HIS and Dental. And as you would expect, a decent portion of those are going to be inside of the growth driver areas. But it is not just those. I kind of look at it as a three-legged stool. Right? You have got this opportunity for new products in that revitalization of innovation that I have been talking about.

We also have existing products and brands that are really strong in the marketplace. And I think some people underappreciate the fact that they are also underpenetrated. So with the new specialized sales organization, we can get after that underpenetration even with the existing brands. The third leg of the stool is just the, you know, the commercial enhancements we have made. And those really have three components to it. First is specialization, which is probably the most important. But we are also training those individuals now to be more clinically at depth, which is very important when you have clinically differentiated technology.

And the final one is just to make sure that we have a sales operations team that is best in class to focus the organization to make sure that they have the tools to be successful in the field. So it is all three of those really that is driving the growth.

Jason Bednar: Thank you.

Bryan C. Hanson: Yeah. Thank you.

Operator: We will go next to Kevin Caliendo at UBS.

Dylan Finlay: Thanks for the question. This is Dylan Finlay on for Kevin. Maybe for a minute, could you guys talk about the strong outperformance in Dental this quarter? Again, you grew organically nearly 6%. How much of that was volume expansion versus price capture, related to or not related to tariffs? And what do you think a normalized growth rate looks like in Dental, controlling for any sellouts or unusual comps?

Bryan C. Hanson: Okay. Yes. So, again, that was another one we thought we would probably get a question on because it was a pretty standout quarter, again, for Dental. So, again, because I know they were listening to the call, congratulations. Great quarter. And I would say that probably the—well, I know—the biggest underlying reason for growth is new product. They have done a nice job of revitalizing innovation, launching new products, and that is really what is driving our underlying business performance. Now, in the quarter, I think we said in the prepared remarks, that another factor was backorder recovery.

That is the second quarter in a row they have done a really good job of capturing backorder recovery, and that is boosting us. That is more of a one-time thing. I would not think about that as a go-forward opportunity, but it definitely helped us in the quarter. When we think about the market, because I know that is probably inside of your question as well—I am sure you are covering other companies in Dental—we kind of look at it the same as what you are hearing from others. It is a stable to maybe slightly improving market. But that is really the way we look at it—stable market, slightly improving.

We would expect that to go forward in 2026, but really, the momentum here is the new product development. They are just doing a great job with that specialized sales organization driving it right now.

Dylan Finlay: Appreciate it. Thanks for the question. And—oh, sorry. Yeah, thank you. Did you have another one? I did not want to cut you off there. Sorry about that. Oh, sorry. Yeah. If I had a moment. Looking at the $500 million, the Transform for the Future program, and apologies if this was hit on earlier, but, you know, what should we contemplate regarding the phasing of those, both the costs going into the restructuring and the timing of the benefits? You know, is that really a big growth driver discreetly as we look at the benefit for '26, or is the phasing more, you know, '27 and thereafter?

Wayde D. McMillan: That is why—Bryan can start that one if you want. So, obviously, very important program for us. It is a multiyear program from starting this year, 2026, into '29 and '30. Maybe just to highlight, you know, as you said, it is a $500 million cost takeout program. It is meant to support both margin expansion as well as opportunities to meaningfully invest for growth. We want to make sure that we are driving efficiencies that despite things like tariffs, we have got enough efficiencies going so we can continue to reinvest for growth, given the importance of us continuing to drive and accelerate that sales growth line. Maybe just a little bit more about the program itself.

It is targeted at transforming our cost structure—mentioned the operational efficiencies—and then repositioning us for that profitable growth. We will be looking at streamlining systems, increasing automation. It is a really comprehensive program. To your question on the phasing, we have not given details on that. We are still developing the program. As I said, it is a multiyear program. But I would say just generally, we will start to benefit from the program in '26, but the majority of the benefits will be in 2027 and beyond, as it just takes time to put the programs together and then execute on them.

Bryan C. Hanson: And one other thing maybe to add to that too, it is very important about this program. It is a cultural shift for our organization all around the concept of continuous improvement. We have got this mantra here that we can be happy, but we can never be satisfied. Right? So we can be happy and celebrate success, but we can always get better. And that is what this program is. It really is the concept of transforming for the future through continuous improvement. And it is not just at the senior level of the organization. This transcends the organization. We are asking everybody to get involved in the program.

So it really is a cultural event, not just a savings program. Thank you, and appreciate the questions.

Dylan Finlay: Yeah. Of course.

Operator: We will take our next question from Ryan Zimmerman at BTIG.

Ryan Zimmerman: Just following up on the HIS comments, and there has been a lot of investor focus on this late. I appreciate your answers earlier, Bryan. I have got to dig a little deeper, though, and just kind of ask is there any guardrails that, you know, you want to put around this— you know, if this is up for competitive, you know, bidding or competitive entrance and so forth, I mean, how should we think about maybe what is contractually obligated, you know, over a certain time period? Or any other additional details I think you can give that, you know, again, kind of, you know, isolates what impact there may or may not be around the HIS business.

Bryan C. Hanson: Yeah. So I would tell you two things here. Number one, we have pretty long contracts, multiple-year contracts. And so we feel comfortable. And I do not want to rest on that because I do believe we have significant differentiation here. We are a leader today. We absolutely expect to be a leader in this transformation in the future. There is no question in our minds. But we do have contractual obligations in our favor. And there is switching costs associated with this. It does not happen overnight. And I think very importantly for people to remember here is you make mistakes, even small ones, in your reimbursement model and in your coding.

Not only do you lose revenue, you have the risk of compliance concerns. And there is a trust factor that goes into that. As a matter of fact, we look at autonomous coding competitors as risking autonomous coding because we do not think they are going to do it the way we do it. Right? Again, using all those rules and all those algorithms that we have, proprietary to us. So we truly do believe we are going to win. We are going to transform. We are already leading. We feel like we are going to continue to lead. And we do believe—we really do believe—that is just the way it is going to be.

I do not see this at this point in time as a risk. I see it as an opportunity. And the contractual piece helps, but we are not going to rest on that.

Ryan Zimmerman: That is helpful. I appreciate the color there. And then, you know, maybe turning to Acera. What are you embedding for expectations on Acera, if you can provide any, you know, high-level commentary around it. I mean, you know, I think it was doing, call it, $90 million at the time of acquisition. And so, you know, where can that sustain once it turns organic? And, you know, from a contribution to growth standpoint?

Bryan C. Hanson: I will tell you, we would not have bought the asset if we did not believe that it had a real opportunity to help Advanced Wound Care, MedSurg, and the total business from a revenue growth standpoint. So we feel like it is a great starting point, but it is just a starting point. And to give you some perspective on it, if they are in a billion-dollar market growing 10% right now, and they are in a subcategory—synthetics—inside of that market that is more attractive, and they have got differentiation in that space, it is a healthy double-digit grower for us.

And I want to continue to remind people, it is in the space we already play and have commercial infrastructure. So we have a force multiplier effect given our two organizations coming together from a commercial standpoint, but also eventually from an innovation perspective. So I feel really good about this as a separate growth avenue for Advanced Wound Care, for the total business, and it is profitable. It has really nice profitability.

Ryan Zimmerman: Thank you. Thanks, Brent.

Bryan C. Hanson: Sure.

Operator: We will move next to David Roman at Goldman Sachs.

David Roman: Maybe I could just go into the Dental dynamic in a little bit more detail here. I think last quarter, there were some more set of dynamics at play here. But maybe, Bryan, if you kind of maybe template Dental as one of the businesses where you have new— I think you said on the follow-up last quarter that it is a good example of when you have new products, what can happen to the top line, but you are seeing kind of that impact in one of those slower growing categories that you serve.

So maybe you could just extrapolate the experience in Dental to when we could—when you think it is reasonable to expect that same dynamic to play through in MedSurg and HIS, and I just had a follow-up on the buyback.

Bryan C. Hanson: Yes. David, thanks for the question. And I agree. I think Dental laid out a roadmap that was pretty clear to people, but you are already seeing it in MedSurg. It is not just the commercial enhancements that we made. We are launching new products in both MedSurg and HIS. Just to recap, I will give you some of them—not a full list of them—but Peel and Place was a big one. Tegaderm CHG was launched in the U.S., but now it is on a global launch. So we are rolling that out around the world. We have had CHG and Ioban as well, which is a new product that we use in surgical procedures.

We have had 3M Attest sterilization products, the EVOE dip was also launched. So we have had a number of products launched in MedSurg. And in HIS, you have seen various applications in autonomous coding and a lot of applications for Encompass 360 when we look at outside-the-U.S. implementation. So they are not having product launches right now. The key thing that is driving those product launches is the commercial enhancements. We did not have those before, and as a result, those products were being launched into a void, if you will—a general sales organization.

So we are already beginning to see the momentum from those new products, and as I said before, we have got almost 20 new products coming over the next two years.

David Roman: Got it. And then maybe, Wayde, it looks like the share count still stepped up on both a year-over-year and sequential basis. You obviously announced the large buyback authorization in November. How are you thinking about deploying the buyback? I think that there was quite a bit of volatility in the stock over the past several months. Maybe what is sort of the strategy behind the buyback? And what are the factors that would drive you to deploy it either on a programmatic or more significant basis?

Wayde D. McMillan: Sure. Yeah. Hey, David. So I think directionally, it is reasonable to think about the authorization as offsetting the impact of our stock-based comp dilution and holding that share count relatively flat. I think that is one of the objectives that we have. As you said, without a repurchase in place over the previous year, our share count went up. And so one of the major goals here is to, number one, offset that stock-based comp. And then over time, you know, it is an opportunity for us—we have got room within the authorization if we see a need or a reason depending on performance of the share price to potentially purchase more shares.

Obviously, if we do something like that, we have to work it through with our Board and make those decisions as well. But I think just taking a step back, we are very happy with the accelerated capital plan over the last year with our ability to pay down debt. And, you know, if you remember back from our Investor Day, that was the primary objective. Most spins spin with a pretty significant amount of debt. One of our primary goals was to pay down that debt. We did that in an accelerated fashion, and now we are in a position to have more balance and returning capital to shareholders via this authorization.

So as Bryan said in his prepared remarks, we started that in January. This is our first quarter, and we are pretty excited to be moving in this direction as well.

David Roman: Great. Thanks so much.

Bryan C. Hanson: Thanks, David.

Operator: Our next question comes from Brett Fishbin at KeyBanc Capital Markets.

Brett Fishbin: Hey, guys. Thank you very much for taking the questions. First, just wanted to ask on the overall organic revenue guidance of 2% to 3%. And I was curious if you could just directionally provide any commentary on how you are thinking about that across the different segments, whether we should expect any material departure from what we have seen on a normalized basis in 2025. And then also, if the 100 basis point impact from SKUs would be more pronounced in any specific quarter.

Bryan C. Hanson: Brian, want me to start that one? No. Maybe that question on any specific quarter, you could maybe answer that, but also any specific business. Yeah. Yeah. That is the key. So, maybe we will start there.

Wayde D. McMillan: We do not see a significant difference across the quarters from the program at this time, and so nothing to share there. But as Bryan just highlighted, we do see a significantly more impact within MedSurg and particularly IPSS. From 60 basis points of impact in 2025 to 100 basis points of impact in 2026, we will see the majority of that 100 basis points hitting in the IPSS and MedSurg business. And then back to the front end of your discussion—and, you know, Bryan can start that one—you know, we obviously put a lot of thought into this guidance.

And I am glad you brought it up because it gives us an opportunity to talk a little bit about it. We did intentionally share that for 2025, our sales growth rate on a normalized basis was about 3.5%. And that is an important stake in the ground for us. It is really normalized for both the SKU program as well as mainly the Dental backorder. And so with that 3.5% in mind, the way we looked at our guide for 2026 is we put that at the midpoint of our ex-SKU guide. You know, we are 2% to 3% guide for '26. On a 100 basis point SKUs, we are guiding 3% to 4%.

So what that really means is if we continue to perform at an accelerated rate here in 2026—we had a big step-up in our growth in 2025—and if we continue that momentum, continue to perform at that level, we will be at the midpoint of our guidance for 2026. And, of course, at the high end, more 4% on an ex-SKU basis, we will be above last year's strong performance. And we are very focused on getting to that because then that would put us on an accelerated basis getting to the low end of our 4% to 5% target for our long-range plan.

And so, on an ex-SKU basis, the high end of our guidance is already touching the low end of our long-range plan guidance for 2028. So we do feel that 2025 was a very strong year where we really accelerated the sales growth rate. We shared some of that detail in our prepared remarks, so I will not repeat it here. But that is some color in behind the full year. You did call out segments as well. As you know, we do not guide at the segment level. We could provide a little bit of color here.

Overall, we expect all segments to improve their underlying growth year-over-year and, again, the momentum that we see in the business, if it continues, will be at the high end.

Bryan C. Hanson: Because it would be MedSurg. It is going to be impacted more by SKU, and, obviously, Dental is going to be impacted by the backorder recovery comp. But outside of that, no major impacts to the businesses.

Brett Fishbin: Alright. That was super helpful. And then just for my follow-up question, I wanted to ask—during the fourth quarter, you announced some changes to the management structure. And was hoping you could just touch on your decision to implement Chief Commercial Officer position and any thoughts on how that impacts the broader strategy for Solventum Corporation? Thank you.

Bryan C. Hanson: It is funny because that feels like old news already. I was looking at it and going, what is he talking about? So yeah. So as you know, we brought Heather into be the primary leader of our businesses. So she is the Chief Commercial Officer now. And I feel very fortunate to be able to bring Heather in. She and I have a history of working together. She has worked with me in the past. She is a very strong operator. So it was just serendipity that she became available the same time that Chris was going to be exiting the organization.

So very lucky to get her, but it was really just the continuation of the strategy, which would have been to combine the businesses under a leader. Chris, for his own reasons, could not do that, and Heather was available, and we were able to get her, which is fantastic for us. I would not read anything else into it other than the fact that we have got a great operator now looking at synergies across our businesses.

Brett Fishbin: Great. Thank you, Bryan.

Bryan C. Hanson: Yeah. Of course.

Operator: Our next question comes from Vic Chopra at Wells Fargo.

Ray (for Vikramjeet Chopra): Hi. It is Ray calling in for Vic. Thanks for taking questions. My first one is ERP. I think you have another ERP implementation coming this year. Last year, when you had that European one, there was some pull-forward buying in the first half. Is that something we should consider for 2026? And I have a follow-up.

Wayde D. McMillan: Yeah. Hi. So ERPs—obviously, we have got a lot of work going on in this area. We did share in our prepared remarks that we are planning to be done with the 3M separation ERPs in 2026. And so by definition, we have still got several ERPs to go. We have got a couple large ones both in the first half and the second half of this year. I did share in my prepared remarks that we have started another wave here in February. We have got about 16 countries involved in that wave, and that is off to a really good start.

And so we will have several more waves as we go along through the year, but planning again to be done by the end of the year. Regarding volume, we are not calling anything out at this time. It really is dependent upon at what point in the quarters it falls. Sometimes if it is early in the quarter, most of the inventory changes have washed out within the quarter. To the extent we see them and if we see additional volume, either buying ahead or being delayed as a result of the ERPs, we will call that out in our actuals. But very difficult to predict those, so we do not call them out.

Ray (for Vikramjeet Chopra): Got it. That is helpful. Then for my follow-up, you talked about pricing being plus/minus 1% in Q4. Anything we should think about as far as pricing for '26 either for the overall company or across segments? Thanks again for taking the question.

Wayde D. McMillan: Sure. Yeah. So as we have shared before, our focus for growing the sustainability of the business is all on volume. Our new products, our commercial efforts—focused on—I say all, almost all on volume. We certainly have pricing capability, and we have got people looking at price. We do have several areas in the business where we have the ability to raise price, and we do. But what we have shared is we expect price to be in a more normalized range of plus or minus 1%. We saw that again in Q4, and that is where we are expecting it to be again in 2026.

So we do not see price being an outsized driver of the business again in 2026, more in that normalized range, and our growth will really be on sustainable volume growth.

Operator: We will go next to Rick Wise at Stifel.

Rick Wise: Good afternoon to you both. Bryan, just maybe reflect a little bit more on your updated thinking on your M&A strategy. You know, is another deal possible? What are you prioritizing? With making so much progress toward—to quote Wayde—on an accelerated path to your long-term targets. Is it more likely we are going to see additional tuck-in, growth-enhancing, margin-enhancing deals sooner rather than later.

Bryan C. Hanson: I probably will not speak to the timing, but I was pretty intentional and have been for a while. It was in our prepared remarks. And every time I probably talk to you and others is it is definitely a lever we will continue to flex for value creation there.

Portfolio optimization, to me, the reason why I am leaning on it so much is I do not want people to think because we have done so much so fast that we are finished, that this will be a perpetual lever that we are going to continue to flex in the organization, which will include acquiring companies on a tuck-in basis in a serial fashion to be able to drive revenue growth and profitability. That is a requirement. It has got to be mission-centric, first and foremost. It has got to be in attractive markets with strong profitability—areas that we think we can win. We will continue to do that.

I will not speak to the timing of that, but we do have the financial flexibility to do them. So that is probably all I will say on that, but it clearly is a continued lever for us.

Rick Wise: And just reflecting—sort of stepping back and reflecting on the increasing probability that—or your increasing confidence in—the 2028 goals on sales and margins and EPS, etcetera. Maybe just I would be curious to hear—maybe, Wayde, for you—it is like, is it the SKU program being done? Is the debt coming down? Is it the exit of the TSA agreement? I mean, what is the relative importance over the next twelve months in terms of observing that progress and building confidence as you approach 2027–2028. Thank you.

Bryan C. Hanson: Maybe I will start on the revenue side—revenue growth side—and you could speak more to the margin. So I would say, you know, proof is kind of in the pudding, right? I mean at the end of the day, you look at our growth rates, and you know we normalize them at three and a half, as we said—as Wayde just referenced—that is pretty darn good. Right? Out of the gate, that is almost three times better than what we had in our base a couple of years before the spin. And that is great traction that we are seeing.

It is coming from the commercial enhancements that we have made, coming from the brands that we already have, and it is coming from those new products that we have talked about. But that is giving us confidence. It was only a short period of time ago in March 2025 that I had people questioning whether we could ever get to the LRP target that we were providing. I think it is pretty clear we will not only get there, but we might do it faster than expected. Hopefully, we do it this year. You know, that is the goal.

So I think it is really just all the things that we put into place are coming together, and the team is making it work even in the face of all of the challenges we continue to throw at them—acquisitions, divestitures, ERP cutovers, separations, you name it. This team has stayed focused and delivered. And, again, I will compliment the team I know is listening. Congratulations for that. On the margin side, we have had a lot of headwinds come our way as well since we put that LRP target out. But we still feel like we have got the programs in place to deliver on those margin targets.

I think it is important—when you think about us versus, you know, the organization before spin—we have got, like, 300 basis points of pressure that we are going to be feeling that we did not have before spin. Looking at raw material increases, looking at tariffs that we did not have before spin. And so that 23% to 25% is really like a 26% to 28% when you look at benchmarking where we were before the spin. So I am pretty proud of the team leaning in there as well. I probably just took everything you were going to say, Wayde. So I apologize again on the call.

Wayde D. McMillan: No. No. I think, yeah, you covered it really well, Bryan. Maybe just to the second part of your question, Rick, on what are the milestones or things that we need to clear along the way? You touched on a couple important ones. You know, in order to achieve those margin targets Bryan mentioned, we do need to clear our separation from 3M. We are very excited—as I shared in my prepared remarks—90% of the TSAs we plan to have done here in '26. We plan to be through the ERPs here in '26.

So '26 is a very important year for us, but we are pretty excited to get to 2027 and put most of that separation work behind us and move a lot of our resources—a lot of our best and brightest—focusing on the business versus on the separation. Then maybe, Bryan, I will just cover a couple of the other metrics we put out. Earnings per share at a 10% CAGR—we are very confident with the initiatives that we have in place that will be supporting that sales growth that Bryan touched on, achieving those operating margins, and then driving that 10% EPS CAGR. And then the last thing is the free cash flow conversion—over 80%.

And we have got these transient issues that we are dealing with today around the separation costs, divestiture costs. And we cannot wait to be complete—mostly complete—with the separation in '26 and shed a lot of these additional costs starting in '27. And so once we do get beyond those, we will have very strong—we are a very strong cash-operating company. Without, again, those special projects around separation and divestiture. You clear those out of the way, we are already at our free cash flow conversion targets. And so we are very confident in hitting all those metrics.

As Bryan said, sales growth with all the initiatives we have in place, operating margins with the initiatives we have there—including Transform for the Future—will lead us to that EPS 10% CAGR. And then we get beyond these transient projects, and we will be at our 80% plus free cash flow. So very confident on our path to hitting our long-range plan targets by 2028.

Rick Wise: Thank you so much, gents.

Bryan C. Hanson: Yeah. Thanks, Rick.

Operator: And next, we will move to Steven Valiquette at Mizuho Securities.

Steven Valiquette: Great. Good afternoon. Thanks for taking the question. I guess at this point, it is probably more of a follow-up question, but just to come back on that topic on the TSAs and exiting 90% by '26. For the 10% that is still going to be left, just remind us again, is that really more on the supply side? And then you talked about—you have those 2027 headwinds. It was like a $100 million step up in inventory costs from 3M’s, or it might have been quantified under basis points as well. But is that the piece that would still be kind of hanging out there, or does some of that dissipate with your progress?

Just want to tie—connect—the dots around all those components. Thanks.

Wayde D. McMillan: Yeah. Great question, Steven. And that will help us clarify because we do get this question quite a bit. I will just start on the 90% of TSAs—it is primarily around separating our systems and our ERPs as well as our distribution centers and the manufacturing that we do for 3M and that 3M does for us. And so we will have mostly rebranding work and some supply chain work to do in 2027—that remaining 10%.

But I do want to just specifically differentiate between the raw materials work that we do, and that is the additional step-up that you are talking about—that 3M gave themselves a contractual option to, again, step up our cost in 2027—and we have shared that is about a 100 basis point headwind for us if that, in fact, happens. We do not have any updates to share at this time, but we are working with 3M to see if there is a better solution for both companies, frankly, than going that road. So, you know, that will be an update down the road. So with that in mind, we have got most of the separation work done in 2026.

We do have some rebranding, some supply chain that will carry over into 2027.

Bryan C. Hanson: I mean, maybe the only other one—because sometimes there is confusion on the raw materials piece—I just want to make sure that it is clear that with those raw materials, most of that is including intellectual property that we have access to. Actually, we own. There was concern that we did not have that intellectual property. We have full ownership rights in our field of use. And it is transferable. We can continue to buy from 3M as a raw material supplier with that intellectual property, or we can go to another chemical manufacturer to use them as well.

So we just want to be clear that even though we have that long-term supply agreement with 3M, we do have the option—because we own the rights to the intellectual property—to go elsewhere.

Steven Valiquette: Okay. Got it. Thanks.

Operator: And that concludes the question and answer session. I will now turn the call back over to Amy for closing remarks.

Amy Wakeham: Awesome. Thank you, Audra, and thank you, everyone, for listening. We appreciate all your questions. If you do have any follow-ups or need to clarify anything, please do not hesitate to reach out to the Investor Relations team. Audrey, you can go ahead and close the call.

Operator: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.

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