Solventum — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net sales for the quarter ended September 30, 2026, were $1.9 billion, a 7.0% decrease year-over-year; organic sales decreased 2.8%.
• GAAP diluted earnings per share (EPS) were $(0.07) for the quarter, compared to $7.22 in the prior year period; adjusted diluted EPS was $1.45, a 3.6% decrease year-over-year.
• For the nine months ended September 30, 2026, net sales were $6.165 billion, a 2.6% decrease year-over-year; organic sales increased 2.9%.
• GAAP diluted EPS for the nine months were $0.54, compared to $8.53 in the prior year period; adjusted diluted EPS was $5.48, a 20.9% increase year-over-year.
• Operating cash flow for the quarter was $177 million, up 136.0% year-over-year; free cash flow was $97 million, compared to $(22) million in the prior year.
• For the nine months, operating cash flow was $215 million (down 21.5% year-over-year) and free cash flow was $(32) million (up 23.8% year-over-year).
• Adjusted operating income margin was 19.9% for the quarter (down 70 basis points year-over-year) and 22.8% for the nine months (up 210 basis points year-over-year).
• GAAP operating income margin was 3.5% for the quarter (down 7,710 basis points) and 5.3% for the nine months (down 2,720 basis points).
• Selling, general and administrative expenses were $813 million for the quarter (up 4.2% year-over-year) and $2.567 billion for the nine months (up 10.6% year-over-year).

Guidance and Future Outlook:

• Raised full-year adjusted EPS guidance to $7.20 to $7.30, up from the previous range of $7.10 to $7.20.
• Expects full-year organic sales growth toward the high end of the +2.5% to +3.0% range.
• Expects full-year organic sales growth to be toward the high end of +3.5% to +4.0% excluding approximately 100 basis points of SKU exit impact.
• Affirmed free cash flow guidance in the range of $200 million to $300 million for the full year.
• Management expects to be near the top end of the full-year organic sales growth range and anticipates accelerating sales growth and expanding margins.

Business Segments and Product Lines:

• Advanced Wound Care segment net sales were $528 million for the quarter (8.9% reported growth, 7.2% organic growth) and $1.561 billion for the nine months (11.5% reported growth, 6.7% organic growth).
• Infection Prevention and Surgical Solutions segment net sales were $683 million for the quarter (5.3% reported decline, 5.7% organic decline) and $2.256 billion for the nine months (3.4% reported growth, 1.8% organic growth).
• MedSurg segment net sales were $1.211 billion for the quarter (0.4% reported growth, 2.9% organic decline) and $3.818 billion for the nine months (6.6% reported growth, 2.5% organic growth).
• Dental Solutions segment net sales were $317 million for the quarter (6.7% reported decline, 7.4% organic decline) and $1.067 billion for the nine months (6.0% reported growth, 3.7% organic growth).
• Health Information Systems segment net sales were $356 million for the quarter (3.3% reported growth, 4.4% organic growth) and $1.052 billion for the nine months (4.0% reported growth, 4.8% organic growth).
• Purification and Filtration business was sold in September 2025 and reported $0 in sales for the current periods.
• Received FDA 510(k) clearance for the combined use of Restrata and V.A.C. Therapy.
• Earned a 2026 Red Dot Award for Product Design for the Solventum Filtek™ Composite Warmer.
• The Bair Hugger™ warming system was named the 2026 Coolest Thing Made in Minnesota.

Market and Competitive Landscape:

• Organic sales decline in the quarter reflected the expected 630 basis point reversal of Q2 2026 advance orders placed ahead of the planned ERP system cutover during Q3 2026.
• GAAP and adjusted gross margins increased, driven by portfolio optimization, mix benefits, and savings programs, partially offset by inflation and tariffs.
• The company noted a significant opportunity to expand penetration of existing brands with customers already served.

Risks and Challenges:

• Operational execution risks related to the deployment of the new ERP system and potential business disruption.
• Risks associated with the separation from 3M and performance as a standalone company.
• Potential impacts from inflation, tariffs, and currency exchange rate fluctuations.
• Risks regarding the review of strategic alternatives for the Health Information Systems business, including the possibility of abandonment or different structures.
• Ongoing working relationships with key healthcare professionals and potential changes in reimbursement practices.
• Supply chain difficulties, interruptions, and disruptions in obtaining components or raw materials.
• Legal and regulatory proceedings, including risks related to PFAS, product liability, and compliance with various laws.
• Risks associated with the highly regulated healthcare environment and potential security breaches to IT infrastructure.

Management Commentary and Tone:

• Bryan Hanson, CEO, stated results were delivered ahead of expectations with every segment contributing despite the largest ERP cutover.
• Management expressed confidence that with separation more than 90% complete and growth drivers gaining momentum, the company is well-positioned to accelerate sales growth and expand margins.
• Management highlighted differentiated innovation, a strong pipeline of new products, and opportunities to expand brand penetration.

Other Key Points:

• Approximately 90% of 3M transition service agreements have been exited.
• ERP system cutovers were completed during the quarter.
• The company acquired Acera Surgical in December 2025, with integration costs included in acquisition-related expenses.
• The Purification and Filtration business was sold in September 2025, resulting in a gain on sale recognized in the prior year.
• Purchases of treasury stock totaled $403 million for the nine months ended September 30, 2026.
• Net cash provided by operating activities for the quarter was ahead of expectations, driven by an IEEPA tariff refund.
• The company is reviewing strategic alternatives for its Health Information Systems business.