Solventum Corporation · NYSE:SOLV
Solventum — Investor Day (March 2024)
59 slides from Solventum's investor day presentation, Mar 19, 2024
Slide 1: Inaugural Investor Day
Inaugural Investor Day March 19, 2024 © Solventum 2024. All rights reserved.
Slide 2: Welcome and Overview
Welcome and Overview Kevin Moran | SVP, Investor Relations © Solventum 2024. All rights reserved. 2
Slide 3: Disclaimers
Disclaimers Forward-looking statements This communication contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact inc
Slide 4: Agenda & speakers
Agenda & speakers 9:10 AM Business Overviews Bryan Hanson | Chief Executive Officer Foundation & Building Blocks Value Creation Value-Creation Playbook Wayde McMillan | Chief Financial Officer 10:30 AM Break 10:45 AM Q&A Bryan Hanson | Chief Executive Officer Wayde McMillan | Chief Financial Officer
Slide 5: Bryan Hanson | Chief Executive Officer
Bryan Hanson | Chief Executive Officer © Solventum 2024. All rights reserved. 5
Slide 6: Key messages
Key messages Starting from a solid foundation with the right building blocks Address historical underperformance and spin-related topics Unlock significant value creation over time © Solventum 2024. All rights reserved. 6 © Solventum 2024. All rights reserved. Solventum Confidential.
Slide 7: Agenda
Agenda Business Overview Foundation & Value-Creation Building Blocks Opportunity © Solventum © Solventum 2024. All rights reserved.2024. All rights Solventum reserved. Confidential. 7
Slide 8: Solventum at-a-glance
Solventum at-a-glance year history 70+ of innovation patents 7,300+ issued 22,000+ employees A leading global healthcare company with Market- Trusted a broad portfolio of solutions & recognized leading brands $8.2B 25% 7% >$1.4B positions 2023 revenue 2023 adjusted of 2023 sales free cash flow for e
Slide 9: Our four operating segments
Our four operating segments Dental Solutions $1.3B Health Information 16% Systems MedSurg $1.3B 16% $8.2B 56% $4.6B 2023 Revenue 12% International Purification & Filtration $1.0B 44% Revenue by Geography 56% Strong geographic, customer & product diversification • Revenue diversification across our s
Slide 10: Segment overview: MedSurg
Segment overview: MedSurg Advanced Wound Care $4.6B 2023 Revenue Infection Prevention 56% ~$26B 3-5% addressable market of total company 2022 addressable & Surgical Solutions revenue market size annual growth rate (2024-2026) Note: IP&SS incudes Medical Source: Market size defined as the sum from re
Slide 11: Segment overview: MedSurg
Segment overview: MedSurg MedSurg is a provider of a broad range of innovative advanced wound care and surgical solutions that are intended to accelerate healing, prevent complications and lower the total cost of care globally Category-leading positions Go-to-market model and customers • Leader in a
Slide 12: Portfolio overview: Infection Prevention & Surgical Solutions
Portfolio overview: Infection Prevention & Surgical Solutions Surgical Solutions I.V. Site Management Hospital Consumables Promotes reduced risk of surgical site Secure I.V. catheters from insertion to Medical tapes and wraps, medical electrodes, infections and complications, including removal while
Slide 13: Portfolio overview: Advanced Wound Care
Portfolio overview: Advanced Wound Care Negative Pressure Wound Therapy Advanced Wound Dressings Advanced Skin Care Combines wound dressings with a vacuum Provide effective treatment of infection, manage Highly durable and ultra-thin skin protectants that pump device to promote healing in acute, chr
Slide 14: Segment overview: Dental Solutions
Segment overview: Dental Solutions Orthodontic Solutions $1.3B 2023 Revenue Restorative & 16% ~$17B 4-6% Prevention of total company 2022 addressable addressable market Solutions revenue market size annual growth rate (2024-2026) © Solventum 2024. All rights reserved. Source: Market size defined as
Slide 15: Segment overview: Dental Solutions
Segment overview: Dental Solutions Dental Solutions is a provider of a comprehensive suite of restorative, prevention and orthodontic solutions Category-leading positions Go-to-market model and customers • Leader in dental and orthodontic bonding solutions • Direct sales organization calling on: • F
Slide 16: Portfolio overview: Dental Solutions
Portfolio overview: Dental Solutions Restorative and Prevention Solutions Orthodontic Solutions Restorative Solutions including composites, cements, adhesives or bonding Portfolio of brackets, bonding agents, clear tray aligners and agents, impressioning materials, and prosthetics to help repair the
Slide 17: Segment overview: Health Information Systems (HIS)
Segment overview: Health Information Systems (HIS) Clinician Productivity Products $1.3B 2023 Revenue Performance Management 16% ~$9B 6-8% addressable market Revenue Cycle of total company 2022 addressable Solutions Management revenue market size annual growth rate (2024-2026) Source: Market size de
Slide 18: Segment overview: Health Information Systems
Segment overview: Health Information Systems Health Information Systems is a provider of software solutions powered by clinical intelligence that create time for clinicians to care for patients and improve accuracy in healthcare reimbursement Category-leading positions Go-to-market model and custome
Slide 19: Portfolio overview: Health Information Systems
Portfolio overview: Health Information Systems Clinician Productivity Solutions Revenue Cycle Management Performance Management Solutions Solutions designed to improve medical Solutions that help eliminate unnecessary Solutions to help payers and providers access transcription processes using AI-pow
Slide 20: Segment overview: Purification & Filtration (P&F)
Segment overview: Purification & Filtration (P&F) Bioprocessing Membranes OEM Filtration $1.0B 2023 Revenue Industrial 12% ~$41B 4-6% Drinking Water of total company 2022 addressable addressable market Filtration Filtration revenue market size annual growth rate (2024-2026) Source: Market size defin
Slide 21: Segment overview: Purification & Filtration
Segment overview: Purification & Filtration Purification & Filtration is a provider of filters and membranes for use in the manufacturing of biopharmaceutical and medical technologies, microelectronics and food and beverage products, as well as filtration for cleaner drinking water Category-leading
Slide 22: Portfolio overview: Purification & Filtration
Portfolio overview: Purification & Filtration Bioprocessing Filtration Drinking Water Filtration Industrial Filtration Membranes OEM High-value purification products that High-efficiency filtration products High-performance solutions enabled Critical membrane media for medical enable the harvest, cl
Slide 23: Agenda
Agenda Business Overview Foundation & Value-Creation Building Blocks Opportunity © Solventum © Solventum 2024. All rights reserved.2024. All rights Solventum reserved. Confidential. 23
Slide 24: Solid foundation with opportunities ahead
Solid foundation with opportunities ahead A leader with scale in attractive markets… A proven global leader in large, diverse and growing markets Diverse portfolio of strong, reputable brands and long-standing customer relationships And strong existing capabilities and investments… Technology platfo
Slide 25: Proven global leader in large, diverse and growing markets
Proven global leader in large, diverse and growing markets Serving a ~$93B global addressable market… …with favorable trends underpinning long-term sustainable market growth 2022 Expected Market Market Size 1 Growth Rate Changing demographics MedSurg ~$26B 3-5% Optimizing workflows Dental Solutions
Slide 26: Reputable brands and long-standing customer relationships
Reputable brands and long-standing customer relationships Legacy of innovation with recognized and trusted brands Strong customer relationships Industry recognized and awarded Top brands globally Customer-focused operating model 100,000+ 2,000+ channel partners and customers worldwide Peer-reviewed
Slide 27: Powering innovation with technology platforms expertise
Powering innovation with technology platforms expertise 70+ year history of discovering and innovating advanced solutions to solve our customers’ toughest challenges 7,300+ 7% 2,100+ patents issued of 2023 sales R&D employees globally invested in R&D globally (ex-amortization) © Solventum 2024. All
Slide 28: Leading digital / data science capabilities and business models
Leading digital / data science capabilities and business models 35+ years of building leading digital capabilities in our HIS segment AI and Natural Language Processing (NLP) & automation Natural Language Understanding (NLU) Technology Data classification, Clinical terminology Software analytics and
Slide 29: Global commercial scale and reach supported by strong manufacturing expertise
Global commercial scale and reach supported by strong manufacturing expertise Meeting customer needs with global commercial scale Multi-model commercial approach for broad coverage and tailored regional execution 100,000+ channel partners and customers 3,800+ global sales force with strong clinical
Slide 30: Historically attractive margins and strong cash flow generation
Historically attractive margins and strong cash flow generation >25% >$1.6B >$1.4B Adjusted operating Cash from operating Free cash flow income margin for each activities generated for generation for each of the last three years1 each of last three years of last three years Ability to reduce leverag
Slide 31: Agenda
Agenda Business Overview Foundation & Value-Creation Building Blocks Opportunity © Solventum © Solventum 2024. All rights reserved.2024. All rights Solventum reserved. Confidential. 31
Slide 32: Strong markets, brands, spend and global scale, but historical underperformance
Strong markets, brands, spend and global scale, but historical underperformance vs. overall markets Industrial performance metrics, limited decision rights and control over capital Future state: WAMGR below overall market growth Improve revenue growth Growth rate below WAMGR • Opportunity to optimiz
Slide 33: Strong markets, brands, spend and global scale, but discrete spin-related impacts
Strong markets, brands, spend and global scale, but discrete spin-related impacts Typical spin topics Initial debt level limits strategic flexibility Entanglements unique to this spin High-value IP requires significant Future state: sole-source supply arrangements Increase strategic • Added cost and
Slide 34: Spin-off unlocks…
Spin-off unlocks… Enable each business to effectively recruit, retain, Talent and develop industry-leading talent Operational Design and implement corporate strategies aligned agility with industry-specific focus Enhanced Establish distinct board and management team focus with relevant expertise Cap
Slide 35: Experienced leadership team focused on value creation
Experienced leadership team focused on value creation Bryan Hanson Wayde McMillan Christopher Barry Tammy Gomez Raymond Chiu Marcela Kirberger Paul Harrington Chief Executive Chief Financial EVP & Group Chief Human Chief Technology Chief Legal Affairs Chief Supply Chain Officer Officer President, Me
Slide 36: Origin and meaning of our name
Origin and meaning of our name Problem solving + Momentum We never stop solving for you © Solventum 2024. All rights reserved. 36
Slide 37: © Solventum 2024. All rights reserved.
© Solventum 2024. All rights reserved. 37
Slide 38: Taking phased approach to execute our roadmap
Taking phased approach to execute our roadmap Phase 1 | Capture hearts & minds and stabilize the business Phase 2 | Enhance strategic focus Phase 3 | Transform for the future • Enhance talent and harmonize new • Establish clear strategic plan to drive • Optimize portfolio executive team revenue grow
Slide 39: Strong markets, brands, spend and global scale, but historical underperformance
Strong markets, brands, spend and global scale, but historical underperformance vs. overall markets Industrial performance metrics, limited decision rights and control over capital Spin unlocks future state WAMGR below overall market growth • Better alignment of metrics, increased decision rights an
Slide 40: Strong markets, brands, spend and global scale, but discrete spin-related impacts
Strong markets, brands, spend and global scale, but discrete spin-related impacts Typical spin topics Initial debt level limits strategic flexibility Entanglements unique to this spin High-value IP requires significant Spin unlocks future state sole-source supply arrangements • Leverage strong cash
Slide 41: Key messages
Key messages Starting from a solid foundation with the right building blocks Address historical underperformance and spin-related topics Unlock significant value creation over time © Solventum 2024. All rights reserved. 41 © Solventum 2024. All rights reserved. Solventum Confidential.
Slide 42: Value-Creation Playbook
Value-Creation Playbook Wayde McMillan | Chief Financial Officer © Solventum 2024. All rights reserved. 42
Slide 43: Value-creation playbook
Value-creation playbook Our actions: Drive key financial metrics: Build on strong foundation Execute separation Accelerate Drive Improve Optimize Shareholder revenue margin FCF capital Reposition growth expansion allocation value for growth creation Optimize to fuel growth © Solventum 2024. All righ
Slide 44: Building on a strong foundation
Building on a strong foundation Diverse and durable revenue A leader with scale in attractive markets… 2023 revenue breakdown A proven global leader in large, diverse and Dental MedSurg growing markets Solutions $4.6B Diverse portfolio of strong, reputable brands and long- $1.3B standing customer re
Slide 45: Spin results in new base for key financial metrics
Spin results in new base for key financial metrics Revenue Adjusted operating margin Free cash flow Historically consistent low single Historically solid margins impacted Historically strong free cash flows digit grower, with short-term impacts by separation costs impacted by separation to growth Sp
Slide 46: Execute separation: Exit TSAs & stand-up public company
Execute separation: Exit TSAs & stand-up public company TSA timeline Year 1 2 3 4 5 6 7 8 9 10 11 12 Public company stand-up costs Near term: Manufacturing Initial term add’l • Invest in stand-alone functions • Separate and stand up global commercial infrastructure Distribution Initial term add’l •
Slide 47: Reposition for growth
Reposition for growth Accelerate revenue growth 1 Disciplined portfolio management • Strategic market selection focused on improving WAMGR 2 Strengthen commercial model and execution • Evolve commercial model to meet local expectations Capitalize • Align culture, structure, and incentives on spin-of
Slide 48: Optimize to fuel growth
Optimize to fuel growth Expanding margins and increasing cash flow Stabilize and expand margins Improve free cash flow • Reposition to accelerate revenue growth • Accelerate revenue and expand margins • Operational efficiencies: • Pay down debt over time (reduced interest expense) – Manufacturing an
Slide 49: Optimize to fuel growth
Optimize to fuel growth Focused on strategic and disciplined capital allocation Pay down debt Consistent with maintaining investment grade ratings Priority for first ~24 months • Maintain strong liquidity position with existing cash and revolving credit facility post transaction close • Builds finan
Slide 50: Introducing FY24 guidance
Introducing FY24 guidance Organic revenue growth Organic revenue o Spin-related disruption & SKU rationalization -2% to 0% growth o Normalized pricing environment o Neutral FX impact Adjusted EPS o 3M-supply agreement mark-ups & stand-up functional expenses Adjusted EPS $6.10 to $6.40 o Adjusted ope
Slide 51: Value-creation playbook
Value-creation playbook Our actions: Drive key metrics: Build on solid foundation Execute separation Accelerate Drive Improve Optimize Shareholder revenue margin FCF capital Reposition growth expansion allocation value for growth creation Optimize to fuel growth © Solventum 2024. All rights reserved
Slide 52: Q&A
Q&A © Solventum 2024. All rights reserved. 52
Slide 53: Closing Remarks
Closing Remarks Bryan Hanson | Chief Executive Officer © Solventum 2024. All rights reserved. 53
Slide 54: Key messages
Key messages Starting from a solid foundation with the right building blocks Address historical underperformance and spin-related topics Unlock significant value creation over time © Solventum 2024. All rights reserved. 54 © Solventum 2024. All rights reserved. Solventum Confidential.
Slide 55: Appendix
Appendix © Solventum 2024. All rights reserved. 55
Slide 56: Definitions
Definitions COGS Cost of Goods Sold EPS Earnings Per Share FCF Free Cash Flow FY Fiscal Year HIS Health Information Systems IP Intellectual Property M&A Mergers and Acquisitions NPWT Negative Pressure Wound Therapy R&D Research and Development SAM Serviceable Available Market TSA Transition Services
Slide 57: Non-GAAP financial measures
Non-GAAP financial measures In addition to reporting financial results in accordance with U.S. GAAP, Solventum also provides non-GAAP measures that we use, and plan to continue using, when monitoring and evaluating operating performance and measuring cash available to invest in our business. The adj
Slide 58: Historical annual financial measures
Historical annual financial measures Historical Years ended December 31, ($ in millions) 2023 2022 2021 Net sales Sales of product $ 6,296 $ 6,300 $ 6,398 Sales of software and rentals 1,901 1,830 1,773 Total net sales 8,197 8,130 8,171 Operating expenses Cost of product 3,023 2,953 2,773 Cost of so
Slide 59: Historical annual non-GAAP reconciliation
Historical annual non-GAAP reconciliation Historical Years ended December 31, ($ in millions) 2023 2022 2021 Operating income 1,692 1,693 1,879 Non-GAAP adjustments: Add: Amortization of acquisition-related intangible assets 365 373 381 Add: Restructuring costs1 51 6 13 Add: Spin-off and separation-