Thank you. Good afternoon, and welcome to Solventum's second quarter fiscal year 2026 earnings call.

Joining me on today's call are our Chief Executive Officer, Bryan Hanson, and Chief Financial Officer, Wayde 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 the 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. Please review the supporting schedules in today's earnings press release to reconcile the non-GAAP measures with the GAAP reported numbers.

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 based on reasonable assumptions.

However, our actual results could differ. Please review our SEC filings for complete discussion of the risk factors that could cause our actual results to differ materially from any forward-looking statements made today.

Following our prepared remarks, we'll hold a Q&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 can rejoin the call queue. I'd like to now hand the call over to Bryan.

All right, thanks, Amy, and thanks to everyone joining us today. Before we get into the quarter, I want to talk directly to our team for just a minute.

I know the work right now isn't easy. With the transformation work, the ERP cutovers, and everything else we have in flight, it's a lot.

Through all of it, you keep showing up, you stay focused, and you deliver for our customers. Honestly, that's everything.

Thank you. Thank you for making it happen.

Speaking of making it happen, let's get into the quarter. The quarter came in ahead of plan, top and bottom line.

Organic growth and EPS were both ahead of expectations, and that comes down to the strong execution and the momentum this team keeps building. We saw healthy performance across every segment, led by our specialized commercial teams and new product innovation, and operating margins also came in better than expected.

That's the discipline we built into how we run this business showing up in the numbers. Just as we communicated last quarter, these results include the advanced orders we planned for the North America ERP cutover.

We also put the balance sheet to work. During the quarter, we accelerated our billion-dollar share repurchase program, right in line with our balanced capital allocation strategy.

Here's the bottom line on the quarter: we delivered across the board, we're clearly on track to achieving our long-range plan earlier than expected, and importantly, we did what we said, again. That say-do equation really matters to us.

As strong as the quarter was, I'm just as encouraged by the progress on our transformation. As a quick reminder, our transformation has three phases: stabilize and separate the business, reposition it for profitable growth, and optimize the portfolio.

Importantly, as we've said from the beginning, these phases are not sequential. They're running concurrently.

Different initiatives are progressing at different speeds, but all three phases continue to move forward and increasingly reinforce one another. Let me start with the separation from 3M because we're now in the final steps.

The final phases of our ERP cutover are already in motion, and getting to the other side of this, it's a big deal. It removes a significant amount of complexity from the business.

It frees up talent and resources for innovation and margin expansion, and it meaningfully improves free cash flow. Just put simply, we're very close to moving from an environment with separation distraction to full operating mode.

Now let's talk portfolio optimization, because we took another major step today. As we just announced, we're advancing the separation of our Health Information Systems business with a clear objective: pursuing the path that maximizes value.

Let me walk you through the thinking, because we obviously didn't arrive here casually. First, strategic fit: we believe HIS can create greater value outside of Solventum, either as an independent company or combined with a scale player in the space.

It's a differentiated, trusted business with a highly resilient financial profile, and in a rapidly changing environment, this will better position it to capitalize on the fast-moving advances in AI. The second is value.

We're confident a separation can unlock shareholder value, and our intent is to leverage both the separation method and the use of proceeds to maximize that value. Third is focus: for Solventum, this will make us a more dedicated medtech company, and it will sharpen our focus on MedSurg and Dental.

Timing here matters. In April, as you probably remember, we passed the second anniversary of our spin.

That gives us additional flexibility to evaluate and pursue more significant portfolio actions just like this one. To support this next chapter, we're planning to host our third annual investor day in Q1 next year.

That's where we're going to lay out the post-HIS long-range plan and provide updates on our RemainCo strategy and innovation pipeline. Just two commitments before I move on.

To our HIS team: you should be incredibly proud of what you've built over decades. To be clear, you are part of the Solventum family until a transaction is finalized.

You have my commitment and this leadership team's commitment that we will fully support you through this process. To our HIS customers: nothing changes.

We'll maintain our investment strategy in this business, we'll keep supporting your operations, and we will absolutely keep executing the innovation roadmap. Okay.

Now moving to the M&A side of portfolio optimization, Sientra, which as you probably remember is our first acquisition, continues to perform extremely well, with year-over-year revenue growth above 40% and gross margin above 80%. That's the M&A playbook: a differentiated technology in a space we know, accelerated through customer relationships we already have.

We intend to keep running that tuck-in acquisition playbook in a disciplined way. Portfolio moves are only part of the story.

The engine here is organic growth, and that's why we chose our five growth drivers with intention: durable markets, attractive growth and margin profiles, and in spaces where we lead with differentiated solutions. As a result, we see a multi-billion-dollar growth opportunity in front of us, and a big portion of it sits inside customers we already serve, where our preferred and differentiated solutions are still underpenetrated.

That's what gives us confidence that over time, we can sustainably deliver growth at or above our long-range plan. What makes this opportunity especially meaningful is that it goes beyond just market growth.

In many cases, growth comes from helping to address challenges that healthcare systems and patients face every day. Basically, as adoption of our solutions expands, we create shareholder value for sure, but we're also helping improve outcomes for the patients that we serve.

Let me just make that real with one example of our growth drivers: IV site management. IV-related infections impact an estimated 2 to 3 million patients every year.

They can increase mortality risk by 50%—that's 5-0 percent—and they create roughly $10 billion in healthcare costs in the US alone. For cancer patients with central lines, the stakes are even higher: roughly 20% of those bloodstream infections are fatal.

For patients already fighting cancer, preventable infections should never be the thing that takes their life, and that's where our products can help. Tegaderm CHG is the only transparent dressing cleared by the FDA to reduce catheter-related bloodstream infections.

Studies show nearly 60% lower infection rates versus non-CHG solutions, and yet, it's used less than 20% of the time. Think about that: a clinically differentiated solution, a potentially life-or-death problem, and over 80% of the opportunity is still in front of us.

That's just one example of the kind of upgrade opportunities that exist across the majority of our growth driver markets. Of course, attractive markets aren't enough.

You need innovation and commercial focus, and that's where we've made real progress. Our innovation and commercial teams are now aligned around these growth drivers, and our new products are showing up in the results.

As an example, in MedSurg, innovation is focused on three of our five growth drivers: IV site management, which I just talked about, negative pressure wound therapy, and sterilization assurance. Recent launches, including our V.A.C.

Peel and Place Dressing, three new Attest sterilization products, and our global expansion of Tegaderm CHG, are driving conversions to these higher-value solutions. In Dental, innovation is focused on our core restoratives growth driver and a shift towards higher-growth esthetics.

Products like Clinpro Clear, Filtek Easy Match and Easy Match Flowable, our composite warmer, and our Clarity aligner attachments are all gaining momentum with our customers. In HIS, innovation remains focused on revenue cycle management, including new AI-driven autonomous coding and our international expansion efforts.

Across all three segments, our specialized sales teams are accelerating adoption in these markets. Looking ahead, our vitality index improvements are working.

The pipeline is strong. We're expecting to launch almost 20 new products through the first quarter of 2028.

That includes meaningful MedSurg launches in the first half of 2027, particularly in advanced wound care. We also have some exciting dental innovations in esthetics starting later this year, and a continual stream of market-leading autonomous coding applications in HIS.

When I take a step back, I see the transformation doing exactly what we designed it to do: the separation is nearly complete, the portfolio is getting more focused, the growth driver strategy is gaining traction, and our commercial structure and innovation is translating into performance. Okay.

I've thrown a lot at you, I just want to give you four key takeaways. First one: we delivered another quarter exceeding our expectations, including executing the ERP advanced order plan that we laid out in May.

The key takeaway here is, even in a complex environment, the say-do equation continues. Number two: we're nearing the end of the 3M separation journey.

That takes risk off the table, improves free cash flow, and lets us put our full energy into growth and margin expansion. Three: we're continuing to advance portfolio optimization through the separation of HIS, creating a greater focus for both HIS and Solventum, and we're confident this will unlock shareholder value, with a full commitment to our HIS team and customers along the way.

Four: our five growth driver catalysts represent a multi-billion-dollar opportunity, much of it inside customers we already serve, and our commercial structure and innovation engine are increasingly converting that opportunity into results. Said simply: we're building a more focused, a more disciplined company, one that is well positioned to deliver sustainable growth, margin expansion, and shareholder value.

With that, I'm going to turn it over to Wayde. Wayde, go ahead.

Thanks, Bryan. We delivered another solid quarter in Q2, with continued momentum across the business.

Our commercial and operational performance continues to improve, and we made additional progress across our separation and portfolio activities, all while navigating our largest ERP cutover to date. Collectively, this increases our confidence in our 2026 outlook and acceleration towards achieving our long-range plan earlier than expected.

As usual, I' ll begin with an update on our 3M separation progress and portfolio actions, then walk through our second quarter financial performance, and conclude with our outlook for the remainder of 2026. Our separation from 3M remains on track, and we're nearing completion of full separation.

Inclusive of the ERP cutover activities since June, we have now exited nearly 70% of our approximately 200 transition service agreements, keeping us on pace to exit 90% by the end of 2026. We have migrated approximately 950 of 1,200 systems, including the majority of our ERP implementations and all of the Solventum site conversions.

Our supply chain footprint remained consistent in the quarter, with the majority of work focused on settling prior changes and planning for the ERP implementations. Global supply chain remains a critical workstream to establish a more efficient operating model while positioning us to capture the benefits of our longer-term transformation plans.

Regarding portfolio actions, purification and filtration divestiture activities continued to progress according to plan, including the transition-related workstreams supporting separation of the business. Our integration activities related to the Sientra acquisition remain on track, with several key system conversions already complete.

The business continues to accelerate sales and exceed our expectations. As Bryan discussed earlier, we are moving forward with separating our Health Information Systems business.

We expect the greater focus on MedSurg and Dental will unlock shareholder value as a pure-play medtech company. We'll provide updates at a future date as appropriate.

Now turning to our second quarter results. Starting with top-line performance, sales of $2.2 billion increased 9.5% on an organic basis compared to the prior year, and 2.2% on a reported basis.

Foreign currency was a 100 basis point benefit to reported growth, while the net impact of acquisitions and divestitures was an 830 basis point headwind, primarily driven by the sale of purification and filtration and partially offset by the Sientra acquisition. Growth in the quarter was driven primarily by volume, including ERP advanced orders of approximately $125 million, while pricing remained within the expected range of plus or minus 1%.

As we shared last quarter, we are managing through planned, temporary advanced ordering as a mitigation to the ERP cutovers, which will mostly reverse in Q3. Q2 organic growth on a normalized basis was approximately 4%, when taking into consideration approximately 630 basis points of ERP advanced orders, partially offset by approximately 100 basis points of our SKU rationalization plan headwinds and the partial separation timing benefit shared in Q1, mostly impacting the MedSurg business.

Sientra growth contribution is not yet included in our organic growth, and would have added approximately 40 basis points to total growth and 70 basis points to MedSurg. MedSurg delivered $1.4 billion in sales, an increase of 8.9% on an organic basis.

ERP advanced orders represented approximately 700 basis points contribution in the quarter, with the majority in the infection prevention and surgical solutions business. Within MedSurg, advanced wound care grew 7.1% organically, with continued benefit from performance in negative pressure wound therapy and a benefit from advanced orders.

Sientra contributed $32 million to reported sales. The business grew 48%, driven by its innovative synthetic tissue matrix technology, and continues to outpace this attractive double-digit growth market.

Infection prevention and surgical solutions delivered organic growth of 10.1%, driven primarily by advanced orders and expanding adoption of antimicrobial solutions within our IV site management growth driver. Our Dental Solutions segment delivered $396 million in sales, representing organic growth of 15.2%.

ERP advanced orders contributed approximately 10 percentage points in the quarter. Underlying performance continued to benefit from innovative new product launches.

Health Information Systems delivered $354 million in sales, representing organic growth of 5.4%. Growth was driven by continued strength in revenue cycle management solutions, supported by healthy customer retention and ongoing commercial execution.

gross margins were 60.1%, an increase of 410 basis points compared with 56% in the prior year. The performance includes a one-time tariff refund benefit of $100 million.

Excluding the refund, our gross margins were approximately 55.6%, consistent with our expectations, and 40 basis points lower compared to prior year, driven by tariff impact of 150 basis points and inflation headwinds, partially offset by programmatic savings and portfolio optimization. Operating expenses were $701 million.

The $35 million reduction versus the prior year reflects portfolio moves along with benefits from cost discipline and our savings initiatives outpacing ongoing investments to support our growth initiatives in the business. In total, we delivered operating income of $627 million, or an operating margin of 28.4%.

Removing the approximate 670 basis point benefit of advanced order sales timing and tariff refund, operating margins would have been approximately 21.7%, just above the high end of our initial full-year outlook. This compares to 21.9% in the prior year, with a year-over-year 20 basis points decline driven by 150 basis points of tariff headwinds, mostly offset by ramping Transform for the Future savings.

Below operating income, non-operating expense was $73 million, and our effective tax rate was 20.2%, both consistent with our full-year expectations. All together, we delivered earnings per share of $2.55.

This includes a 34 cent contribution from the advanced orders and 48 cent benefit of expected tariff refunds. Excluding both, we estimate earnings per share would have been $1.73, ahead of our expectations.

Of note, we've recorded certain litigation costs of $157 million related to $204 million of estimated legal charges net of $55 million related to insurance proceeds received to date, that is included in our GAAP to non-GAAP supplemental schedule in the press release, and excluded from our non-GAAP operating income and earnings per share. Turning to the balance sheet, we ended the quarter with $403 million in cash and equivalents, and net debt of $4.7 billion.

From a free cash flow perspective, we generated $144 million in the quarter, which was above our expectations due primarily to timing of tax payments and insurance proceeds. As we've discussed on prior calls, separation-related activities continue to create temporary demands on cash flow during 2026.

Despite these headwinds, underlying cash generation year to date is ahead of our expectations, and we continue to expect meaningful improvement as separation-related costs decline beginning in Q4. During the quarter, we repurchased nearly 4 million shares for total consideration of $288 million under our authorized share repurchase program.

This brings combined repurchases in the first two quarters to 4.8 million shares for total purchase of $350 million. Our balance sheet remains well positioned to support our balanced capital allocation strategy, including tuck-in acquisitions and share repurchases.

we are tightening our organic sales growth range to the upper half of our initial 2% to 3% guidance range, raising our organic sales growth range to 2.5% to 3%. Excluding the expected 100 basis points impact of SKU exits this year, this now represents 3.5% to 4% growth.

We continue to estimate currency will have a favorable impact of approximately 100 basis points on sales growth for the full year. Our outlook for operating margin is increasing to a range of 22.2% to 22.7%, an increase versus our prior 21% to 21.5%, which reflects the entire expected tariff refund benefit of approximately 120 basis points.

Our expectation for annual non-operating expenses of approximately $300 million and a tax rate in the range of 19.5% to 20.5% are both unchanged. Tariffs are now expected to have a neutral impact versus our prior estimate of $100 million to $120 million, given the tariff refund we recognized in Q2.

Given our continued solid performance through the first half of the year and confidence in executing for the remainder of the year along with the tariff refund, we are raising our earnings per share guide to $7.10 to $7.20 versus our prior range of $6.40 to $6.60. We now estimate free cash flow will be in a range of $200 million to $300 million versus our prior estimate of approximately $200 million, with the change reflecting the expected benefit of tariff refunds at the high end.

The large majority of our free cash flow is still expected in Q4, consistent with timing of winding down separation charges. Regarding the third quarter, we expect the Q2 $125 million advanced order sales timing benefit and 34 cent contribution to earnings per share will mostly reverse in Q3.

As a quick reminder, our full-year 2026 outlook includes the Health Information Systems segment. We'll update you on the financial impact of the expected separation at a future date.

In summary, we delivered another quarter of solid business execution as we manage through very complex separation, transformation, and several portfolio initiatives. As we shared previously, we are accelerating towards achieving our long-range plan targets earlier than expected, with the high end of our new ex-SKU sales growth and operating margin guidance already at or near the LRP ranges.

Our execution to date on key priorities reinforces our confidence in our full-year objectives and our longer-term financial commitments. We are making great progress on our three-phase transformation and plans for shareholder value creation while serving our mission: to enable better, smarter, safer healthcare to improve lives.

With that, we'll turn it back to the operator for the Q&A portion of the call.

Thanks. Afternoon, and congrats on all the progress here, team.

I wanted to start with the HIS announcement this afternoon. Have a few questions, I'm just going to pack them all in here.

Had you received any outside interest in the asset that helped spur this decision? Maybe talk about how far along you are just in this process, in the kind of the separation decision?

Then, I'm interested just in the release, you're framing the decision as transitioning to a stronger growth profile, but maybe elaborate on that since HIS has been growing above the corporate average over the last several years?

Great. I just want to make sure on that last question, Jason, and it's funny, Wayde and I are kind of laughing across the desk because we were questioning whether HIS would be the first one or not, and then we were trying to say what would the sub-questions be.

You hit most of them. On that last question, though, can you just provide context?

Just want to make sure I get that right.

Sure, yeah. Sorry, I don't have it up in front of me, but in the release, there was a reference to transitioning the business to a stronger growth profile, positioning it for a stronger growth profile, and I'm trying to understand that just in the context of HIS running at a growth rate that's been above the corporate average over the last several years that we have the financial data for.

I got you. That makes sense.

I appreciate it. I was thinking about where you saw that.

That's really one of the primary reasons why we're looking at this as being able to unlock value. We do have a really strong performing business, and particularly now.

The performance of the business has gone up since we took charge of it, for sure. We see significant opportunity.

Just think about it, we think about autonomous coding as a revolution, if you will, inside of revenue cycle management. It is just beginning, there's no question about that.

To be able to truly maximize it, we're going to have to see a different investment level, we're going to have to see a different pace of innovation, and we truly do believe that this asset on its own or with a scale player that's in the HIT space will be able to get after that faster than we will. We love the performance of the business, and it's doing a great job inside of our organization: growing fast, great margins, but we know that there's more value to unlock here if it was on its own, again, or with a HIT player.

For us, we see it as a benefit to be a dedicated medtech company that's going to be focusing on the businesses that we have that are medtech related. Not an easy decision, as you can imagine, because it's an attractive asset, but we definitely see more opportunity with it being separate from us.

Relative to how long we are in the process, we're earlier in the process. We've gone through the analysis to determine whether we should keep or not.

We're obviously looking to separate. There are a number of reasons why we're early in the process, but one of the big ones is just that, from a timing standpoint, we really couldn't look at this as an asset to remove because we had some barriers associated with where we were in the spin process.

When those are out of the way and we're seeing the market change in the way that it is, and we see this opportunity, we want to lean in to moving this forward. Relative to are we getting any inbound offers or any inbound approaches, we've been getting that for a while.

That's not new. Certainly now, I think it's going to increase as a result of making this public.

There's no question in our mind that there's going to be a pretty large field of interested parties in this asset. Again, it's an attractive asset.

Yep, totally agree. Appreciate all that, Bryan.

Maybe just to follow up a little bit. I know you're super early, but are you agnostic as far as the transaction form, assuming one occurs, how that takes place, and maybe walk through some of the considerations that you have with respect to speed of transaction and the value considerations when we think about tax leakage or just overall value on a spin versus a sale?

Maybe the final thing of just remind us how integrated HIS is into Solventum. I don't think it's highly integrated, but maybe refresh us there.

Again, all great questions. I'll start maybe with the second one and then go back to the first one.

It's not highly integrated, and it's intentional and it's purposeful. It is a very different business from a business model standpoint than the rest of our businesses, and to try to integrate it just wouldn't make sense.

There's not a lot of synergies that you could grab between the businesses. We have left it very separate.

Remember, it's not a manufacturing footprint, from an ease of separation, this is about as easy as you're going to get. Now, no separation is easy.

I don't want to diminish the work that's going to be in front of us. On a relative basis, because it's not a manufacturing footprint and we don't have those synergies through all those connection points, it will be easier than most.

When I think about how agnostic we are to the separation process, that was what I was trying to get across in the prepared remarks: we are open to the separation process or method as well as if there are proceeds that are involved, which certainly if there was a certain separation method, there would be proceeds. We would look to use both of those to be able to maximize shareholder value.

We want to leave our options open. As I said before, I think we're going to have a lot of interested parties to buy this asset, but we also see a spin as being a very reasonable path to move down.

We believe both of those potential methods could drive shareholder value. Our goal is just to maximize that value.

Makes sense. Thank you.

Thanks.

Thank you. Congrats on all the progress as well.

When you back out the advanced orders, we saw a nice acceleration in the underlying businesses in MedSurg and Dental. Bryan, I wonder if you could kind of speak to the health of the market, what you're seeing, again, ex the advanced orders, because I think again, if you look at the reports thus far this season, there's been obviously questions about utilization, and so forth.

I think you can shed some light on that just based on your performance.

We appreciate it. Hey, we're paying a lot of attention to what we're hearing out there.

There's no question that there's been a lot of noise, and there's been conflicting information. Some people are saying that they're seeing that demand wane and others are saying they're not seeing it at all.

We're in that camp. We're not actually seeing right now, at least at this point, any softness in the procedures or the momentum of our business.

We feel pretty good about the environment. I'm not just talking about MedSurg or Dental, I'm talking about HIS as well.

Right now, it feels pretty good. We're clearly not discounting what we're hearing, but we're not feeling it right now.

Understood. The other question, the cash flow's picking up, you've obviously got a share buyback going on.

Let's say the HIS business gets done in some fashion. You're going to have certainly more cash proceeds or cash on the balance sheet.

Wayde, I'm curious kind of how you think about putting that to work. Whether that's more rapid debt paydown, whether that opens up the aperture in terms of M&A size, just help us understand kind of the capital strategy.

Maybe I'm getting a little ahead of myself, for this Q1 investor day in next year, but wanted to get your thoughts on it today.

I'm just curious, you don't think I can answer that question? So...

Sorry, Bryan. Feel free to take a swing at it, too.

Let me take a shot, and then Wayde will correct me when I say it wrong. What I would say, first of all, the assumption that you're making is that there's proceeds, so that's an assumption of a certain separation process, and then obviously if it was that direction, it would be significant proceeds.

I would almost kind of bifurcate that. If you look at typical capital allocation, we're going to be looking at a very balanced plan.

I think you're seeing that with the acquisition of Sientra, you saw that with the billion-dollar repurchase signal that we gave, and now we're acting on it. In this particular situation, with these proceeds coming in, we would be more biased to applying those dollars to more direct shareholder return applications.

Here's the good news: from a separation standpoint in HIS, we're in a very different place than we were when we were separated from purification and filtration, right? We had a very different leverage ratio back then.

Any proceeds that would come in now, obviously some portion of those will have to go down to buy down debt so we don't hurt our leverage ratio, but the majority of proceeds can again be applied to those things that can drive shareholder value, and that's what we're going to be concentrating on.

Bryan, that was perfect. I think the only thing I would round off there is just to highlight that we're very happy with our solid investment grade ratings today.

I think however we transact HIS and move forward in the future, we're looking at solid investment grade ratings. Then the only other thing I'd add is on the organic side of your question, like Bryan covered really well, the HIS side of it is in this balanced plan that we're in, we're not looking to change our acquisition strategy.

It would still be a tuck-in acquisition strategy. Obviously, we're very happy with the Sientra acquisition to date.

Our teams are focused on building a queue of future opportunities for us and building a pretty exciting pipeline for us, actually. We're looking forward to additional tuck-in acquisitions in the future, but we would not be looking to do anything larger scale than that.

We've got a playbook here. We're excited about building momentum in the business.

You mentioned generating free cash flow in the future, something else we can't wait to get to. This is a very strong cash-generating business.

We just have to get through all the separation, divestiture costs that we're dealing with right now. We're pretty excited on all those fronts.

What's good, we have a combo there, because that was one of the key messages we wanted to get out, and I forgot it. That we're not going to be shifting to a large transaction as a result of proceeds when they come or if they come.

Thank you, Wayde, for catching that.

Yeah.

Hey, maybe a little bit of a follow-up to the last one. I guess first, the healthcare IT business is a pretty high-margin business, and so how are you thinking about managing the EPS dilution if that is sold?

Is there a willingness to buy back stock so you can kind of protect earnings there? Then, I don't know if you'd comment on why announce the intent to separate versus just announcing once something's done, and how you think about the business kind of post-separation, MedSurg, Dental, both medtech, but they're two completely different call points.

Just curious what happens in that situation over time.

Okay. I just want to make sure that third one's around Dental and MedSurg, right?

Let me start with the EPS dilution question that you referenced. I would just reiterate, it is a very profitable business, there's no question.

The EPS dilution is, as you obviously know, pretty dependent on the method of separation, and also as we just talked about before, the use of proceeds as they come in. We're going to be looking, as I said in prepared remarks, at both of those to be able to minimize dilution, obviously, and also maximize shareholder value.

That's the reason why we're keeping the aperture open. We want to make sure that we're looking at both those levers to be able to do just that.

From an HIS timing standpoint, why say this? I would tell you, normally we probably wouldn't be talking about it until it was done.

Two factors that drove us to do it. The first one is we've made the decision, obviously.

We made the decision, we know we're going to do it. There's just a lot of external noise already on the topic, and as a result of all that external noise, we need to control the internal and external questions that we're getting.

We have to be able to respond to these. It's just put us in a position where we have to communicate it and make sure that we can control that messaging.

When it comes to the medtech business, MedSurg, Dental, you're right. They're different call points and not a lot of synergies there.

There are a lot of synergies when it comes to the intellectual property that we both use, both the tech businesses use in their products, and also the capability in R&D. We have great overlap in material science and data science.

Those are the reasons why they connect. As you would imagine, as most of most of you actually follow both subsectors, where most of you don't always follow things like HIT.

When we think about medtech, there's a fit for that reason, and clearly it's a cleaner story for you as well. Anything else, Wayde, that I missed?

Thanks, Travis.

No, that sounds good. Thanks.

Thanks. Good afternoon.

Thanks for the question. Just to follow up on the question earlier on the overall market utilization trends, from our view, it seemed like there was maybe not a major change in patient volumes overall, but maybe just an acceleration in the shift of patients from inpatient to outpatient setting.

I guess in light of that, I'm curious if you would maybe endorse that same sort of view or maybe saw something different, and maybe just remind us of your general mix of MedSurg revenues or volume tied to inpatient versus outpatient, and whether that's drastically different than the market one way or the other. Thanks.

Just want to clarify, when you say outpatient, are you thinking like surgery centers or are you thinking care that would occur in the alternate market?

Probably more ASCs, more than the latter.

Yeah. My sense is I haven't seen, and I can't report back that that has accelerated, but it's been a pretty good movement that's been going on for a while.

That movement from the hospital to the surgery center has been happening for a long time. I didn't personally see, and I can't report that it accelerated in the short term here, but we do business in both.

We have products that are used across almost every procedure used across multiple MedSurg needs, and as a result of that, we're used in the hospital, we're used in the ASC. It doesn't have as much of an impact on us as maybe somebody in orthopedics or other areas.

Clearly there has been a movement, as we all know, to the ASC for some time now.

That's helpful. Thank you.

Thanks.

All right, hey guys. Thanks for taking the questions.

Obviously a lot of noise here, but one metric that stood out was just the very high level of growth from Sientra. Maybe just expand a little bit on what drove the performance this quarter and thoughts on durability over the first year of ownership as you benefit from this integration?

By the way, thanks for asking that question because that was one that I was hoping somebody would ask. It's a great profile of what exactly Wayde said before our acquisition strategy looks like.

This is a very interesting asset in a space that we know, with customer relationships we already have, where we can leverage their relationships on the Sientra side and our team's relationships, and it's playing out. This is already in a very attractive billion-dollar market and a much larger multi-billion-dollar market, and that synthetic tissue that Sientra brought to the table that we call Restrata has a lot of differentiated qualities.

It's not only in an attractive space, but it is a highly differentiated technology versus what's being used in that space. We're benefiting from all those things right now, and it feels pretty good.

We feel, just to say, I'm not going to give specific guidance on it, but we absolutely feel that this will continue to be a double-digit grower for us, and the longer it goes at that pace, as obvious straight math, it's going to become a bigger element of our overall portfolio and have a bigger impact on our overall growth. We're pretty excited about it and really happy with the integration so far.

All right, great. Then I'll just ask one more follow-up on the revenue trend.

Just given the noise, the buy-in ahead of the ERP, guidance came up by 50 bips on an underlying basis. Maybe just removing some of the moving pieces around timing, what got better versus the last time you guided that's driving the increase?

All right, thank you.

You want that, Dan?

Sure. Obviously we've had a really strong first half to the year, normalized 4%, which would be at the high end of our previous annual guide, and so performing at the high end of our guidance and certainly accelerating over prior year is what gave us the confidence to raise and tighten our range that 3.5% to 4% on an ex-SKU basis.

Let me just add a little bit more color there for you. Obviously we want to continue to perform at this level.

If you just think about the business before normalized, because I think a lot of people are focused on that, the first half of the year was 5.8%, and clearly that was elevated by the advanced orders. Just on a pure reported basis, 5.8%.

If you're looking at that guidance that you mentioned, 3.5% to 4% for the year, that squeeze math puts you at flat for the second half of the year. That's obviously driven in large part by the advanced orders that we talked about, our mitigation strategy for ERP.

With those advanced orders reversing mostly in Q3, we're going to expect that Q3 to be in that -3% to -4% range. I just want to make sure everybody understands that as those advanced orders clear in Q3, we're expecting sales growth to be in that -3% to -4% range.

Then to complete the squeeze math, that puts our Q4 in that same 3% to 4% range, but on a positive side, it's the second half the flat growth. We certainly have some noise in our numbers here across the quarters, but if you just take that step back and look at it on a full-year basis, it clears out all that normalized advanced orders between Q2 and Q3.

We're certainly dealing with more variability given an ERP cutover, and this is our last large cutover that we're working through. It creates some noise amongst the quarters.

On a full-year basis, we're very happy to be raising our guide again to that 3.5% to 4% on an ex-SKU basis.

The nice thing to add to that, and you will have to see how it actually lands, but again, on an ex-SKU basis, wherever we finish this year, our full expectation is we will do better than that next year. As Wayde referenced, at the top end of that range, we're already at the bottom of the LRP that was supposed to be in 2028.

We're certainly not going to stop there, we're going to keep moving.

All right, thank you. That was really helpful on the cadence, and thanks for clarifying on the midpoint magnitude.

All right, thank you so much.

Hi Bryan, hi Wayde. Help us understand a little more about the advanced orders.

I get the concept, $125 million, just in case it's disruption, but just as I reflect on it, I was just wondering is this a quarter's worth of orders? Does it all get used up by the end of this year, and so it won't have any impact on next year?

Is it going to be used quickly? Given all the orders this quarter, how do we think about the second half P&L and the potential impact ex all the moving pieces on sales, margins, and EPS?

Maybe I'll start with that, and then Wayde, you can provide the last bit of color there. I would say the 125 is not a full quarter, we didn't put a full quarter of inventory in, and it will absolutely be used in Q3.

It's going to be used in Q3. The big question becomes, can we then fill the inventory levels back up?

When you have ERP cutovers, the reason why you build inventory is because you can have challenges, and certainly in every one of these, you have challenges. We have to fight through those challenges, build the coffers back up, if you will, from an inventory standpoint, and get back to where we would normally be from an inventory standpoint in Q3.

Make no mistake, that 125 is going to get burned through really quickly because it's not a full quarter. Outside of that, any other comments you would want to make on the implications to either revenue growth or margin normalization?

I think we could just add, we included in our prepared remarks the exact basis point impact of advanced orders, 34 cents in earnings per share, and you should just assume as a mirror image that it would be -34 cents as we get the $125 million advanced order sales back. That 34 cents comes off of earnings per share as well.

Then of course, we included the expectation for tariff refunds, and we booked that in Q2. That added 48 cents to the first half as well.

If you're looking at that first half, the second half cadence of earnings per share, obviously it's the headwind from advanced orders, and then we're not expecting the tariff benefit to repeat again in the second half. If you normalize it for those two things, you will see earnings per share acceleration from the first half to the second half, and that's based on the confidence that we have in the business and the momentum that we have here.

Thanks for that, Wayde. Just as a follow-up question, Bryan, you and Wayde both, you talked about it from various perspectives, the sort of the end of this long, very difficult-to-achieve, faster-than-expected process through implementing these ERP cutovers and transitions.

Bryan, you repeatedly talked about the language like it will free up people, there'll be cost savings, etc. etc., I assume it lowers costs.

Maybe help us think once it's all done, from your perspective, what are you going to be able to do? Where do you take off your foot, maybe where do you put your foot on the gas pedal and redeploy people, spend the cost savings, and how do we think about the potential accelerant impacts once it's all done?

Thank you.

Again, appreciate the question. I'll just give you an example.

We're actually at the last phases now of ERP cutover. We're pretty good at it at this point, as you can imagine.

We've seen a lot of challenges, and we've managed them. Even when things are going well in an ERP cutover, there are a lot of meetings at all levels in the organization where our brain power is being used on solving problems because no matter how good you are, things happen and you've got to respond to those things, and that's happening right now.

The team's doing a great job, but it is extremely distracting at all levels in the organization. It is going to feel very good to put this behind us.

The places that we're going to focus on will be pretty obvious for us. Think about it, it's going to be the growth driver areas, that gets a disproportionate level of our investment.

It's going to be our multiple savings programs, including programmatic savings and TFF, or Transform for the Future program. Those are the areas where some of our best of the best right now are spending time on ERP cutovers and not on that.

Once we move past this, we'll be able to redeploy those, again, really sharp minds on those areas.

Thank you.

Of course.

Hi, this is Nathan Treybeck on for Larry. Thanks for taking the question.

Bryan, I appreciate your earlier comments on 2027, but any finer point you can give on what parts of the portfolio would drive the acceleration relative to '26? Then when you say acceleration, would that be relative to the 3.5 to 4 that you're guiding when adjusting for the SKU exits?

The right way to think about it is adjusting for SKU because we will not have a SKU impact in 2027. Even if we're looking at reducing SKUs, we're not going to talk about it.

It'll be at a much more manageable rate, and we wouldn't talk about it. Any numbers that we're talking about would be the ex-SKU that Wayde is talking about.

The 3.5 to 4 is the ex-SKU number. The assumption would be that we would accelerate past that next year.

I'm not going to speak to specifics on how much past that, but we would be better than that. We expect it from every one of our businesses.

Every one of our businesses needs to accelerate year over year, that's the plan. It's MedSurg, it's Dental, and it's HIS.

All three businesses are expected to accelerate, and the areas of concentration for that acceleration will be in our growth drivers. Remember, it's not just the growth drivers, it's the focus there, but it's the research and development that we're launching, the innovative products that we're launching in that area, and the specialization in sales organization.

Those are the way that we'd look at it: across the board, every business needs to get better year

over year. Thanks for that.

Heading into '27, I guess how should we think about the P&L and I guess the level of noise from stranded costs or any remaining dis-synergies? Is that all cleared away as we head into '27?

Sure. If you're speaking to the HIS transaction, we'll be providing future updates on that and providing information similar to what we did with the purification and filtration transaction.

It's just too early to provide any detail on that at this time, but you should expect us to follow a similar path where we provide a good amount of information there. Outside

of course, HIS could be the new variable. To your point, a lot of the other stuff is going to be washed out in 2027.

Unfortunately, we're going to add to it the HIS separation, we'll continue to keep you updated, though.

Hey, thanks for taking the questions, and congrats on a nice quarter. Two for me.

Bryan, with this HIS separation, does this transaction mark the final major portfolio action under the transformation plan, or are there other businesses that could be candidates for divestiture or strategic review? I had a quick follow-up, please.

The straight answer on that, easiest answer, is that we're always looking at portfolio optimization. Now, whether it's segment level, business level, product level, it can vary across those things, but we'll always be looking at active portfolio management.

That said, and I want to be very clear, we see this now, post-P&F and eventually post-HIS, as being a true medtech company. We feel pretty good about having both the MedSurg business and the Dental business.

I just don't ever want to take off the table the potential for portfolio optimization in the future.

Thank you. Then a quick follow-up.

You talked about 20 product launches by early 2028, including some significant advanced wound care launches next year. I'm just curious which launches have the greatest potential to move the WAMGR, or is this more of a portfolio effect story?

Thanks.

Yeah. I'll tell you, I'm not going to get into specifics on the actual products, but you're right.

It's almost 20 new products by the first quarter of 2028, and that's just a follow-on to what we've referenced I think previous quarter, maybe the quarter before that as well. We will, because of the proximity to launch, at our investor day in the first quarter, we're going to talk a lot more about these products, and so I'm excited about that from a timing standpoint.

I want to make sure, we see the opportunity to be able to drive performance in the market not necessarily specific to these individual products, but because of the growth driver opportunities that I talked about in the prepared remarks. We have technologies today, forget for a minute what we're going to launch, that's going to help us, but we already have technologies in the market today that are underpenetrated.

They're advanced technologies that solve real patient problems that can reduce cost, and it's underpenetrated. I gave you the IV site management example, but four of our five growth drivers have that exact same model, a very similar model.

That's the opportunity that we have to be able to grow the WAMGR and obviously also grow our overall revenue growth.

Great, thank you, Mark. Thank you everyone for listening, and to our analysts for your questions.

If anyone does have follow-up questions or needs anything else, please don't hesitate to contact the Investor Relations team directly. This concludes our second quarter fiscal year 2026 conference call.

Mark, you can now go ahead and close out the call.