Q3 2025 3M Co Earnings Call

Thank you for standing by.

Welcome to the <unk> third quarter earnings Conference call.

During the presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question and answer session.

At that time, if you do have a question.

Press Star one on your telephone keypad.

As a reminder, this call is being recorded.

<unk> 2025.

I would now like to turn the call over to Jim <unk> Senior Vice President of Investor Relations and financial planning and analysis at three a M.

Thank you good morning, everyone and welcome to our quarterly earnings Conference call.

With me today are Bill Brown, Chairman and Chief Executive Officer.

Raj Maheshwari Chief Financial Officer.

And then Rod will make some formal comments then we will take your questions.

Please note that today's earnings release and slide presentation accompanying this call.

Posted on the homepage of our Investor Relations website at <unk> Dot com.

Please turn to slide two and take a moment to read the forward looking statements.

During today's conference call, we'll be making certain predictive statements that reflect our current views about <unk> future performance and financial results.

These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties.

Item one of our most recent Form 10-Q lists some of the most important risk factors that could cause actual results to differ from our predictions.

Please note throughout today's presentation, we'll be making references to certain non-GAAP financial measures.

Reconciliations of the non-GAAP measures can be found in the attachments with today's press release.

With that please turn to slide three and I will hand, the call off to Bill Bill.

Thank you chip and good morning, everyone.

The <unk> team delivered another strong quarter in Q3 with organic sales growth of three 2% the fourth consecutive quarter of positive organic growth across all three business groups against the macro backdrop that is largely unchanged and generally soft.

These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties.

Item 1, a of our most recent form 10q lists. Some of the most important risk factors that could cause actual results to differ from our predictions.

Our three <unk> excellence operating model helped drive operating margins up 170 basis point, earning.

To certain non-gaap Financial measures.

Earnings per share of 10% to $2 19.

And free cash flow of $1 3 billion.

Reconciliations of the non-GAAP measures can be found in the attachments to today's press release.

A conversion of 111%.

With that, please turn to slide 3, and I will hand the call off to Bill. Bill.

Thank you.

Our strong performance through the first three quarters of the year enables us to increase our earnings per share guidance to $7 95 to $8 five.

And on the back of a strong Q3, we now expect full year organic sales growth to be greater than 2% with adjusted free cash flow conversion remaining above 100%.

The 3M team put another strong quarter in Q3 with organic sales growth of 3.2%. This marks the fourth consecutive quarter of positive organic growth across all three business groups against the macro backdrop, which is largely unchanged and generally soft.

Our strategy is working and our efforts to advance our top three priorities are yielding results.

our 3 and Excellence operating model helped Drive operating margins up 170 basis points, earnings per share up 10% to $2.19

Most notable this quarter as our work on commercial excellence.

And free cash flow of 1.3 billion dollars. A conversion of 111%.

The rigor associated with turning customer opportunities into wins faster is clear.

And we are squarely focused on accounts with the highest potential while limiting special pricing actions.

Our strong performance to the first 3 quarters of the Year enables us to increase our earnings per share guidance to $7.95 to $8 a cents.

Our cross selling program continues to outperform our expectations and we have nearly doubled the pipeline since last quarter and closed on nearly $30 million of new business.

And on the back of a strong Q3 we now, expect full year, organic sales growth to be greater than 2% with adjusted free cash flow. Conversion remaining above 100%

To reduce churn we are leveraging predictive analytics to win back business lost or at risk.

Our strategy is working and our efforts to advance our top 3 priorities are yielding results.

And the sales organization is stepping up its performance embracing the up tempo operating rigor and leveraging new tools and processes to win at the customer interface.

Most notable. This quarter is our work on commercial excellence.

We launched 70, new products in the quarter and 196 year to date, both up about 70% versus last year and we now expect to launch over 250, new products. This year exceeding our goal of 215 pacing ahead of our Investor day targets, a thousand new products through 2027.

The rigor associated with turning customer opportunities into wins. Faster is clear and we are squarely focused on accounts with the highest potential while limiting special pricing actions.

Our cross-selling program continues to outperform our expectations and we have nearly doubled the pipeline since last quarter, and closed, a nearly $30 million of new business.

Yeah.

We continue to shift resources towards new product development.

To reduce churn, we are leveraging Predictive Analytics to win back business lost or at risk.

Line investment to our priority verticals and drive accountability for on time launch attainment.

And most importantly, we're beginning to bend the curve on revenue from new products with sales from products launched in the last five years up 30% in Q3 and 16% year to date.

In the sales organization, we are stepping up our performance, embracing the uptempo, operating rigor, and leveraging new tools and processes to win at the customer interface.

Tracking to be up high teens for the full year.

I wanted to highlight a few specific product launches this year.

That contributed to our performance this quarter.

We launched 70 new products in the quarter and 196 year-to-date, both up about 70% versus last year. We now expect to launch over 250 new products this year, exceeding our goal of 215 and pacing ahead of our investor day target of a thousand new products through 2027.

Earlier this year, we launched Scotch Blue Pro sharp painters tape a great example of a class III product in our consumer business that replaces an existing offering in this space, but with a better performance and cost profile.

We continue to shift resources towards new product development, a line investment to our priority verticals and drive, accountability for on-time, launch attainment.

We're now regaining share growing high single digits and outperforming in the category.

I know the launch in the consumer business expanded our size offering and our fill treat business, giving us broader coverage of the market and leading to high single digit growth in the category in Q3.

And most importantly, we're beginning to bend the curve on revenue from new products with sales from products launched in The Last 5 Years up, 30% in Q3 and 16% year to date.

Tracking to be up High Teens for the full year.

Last quarter, we launched a new lightweight wire frame self contained breathing apparatus, which contributed to our high teens growth this quarter in our CBA business in <unk>.

I wanted to highlight a few specific product launches this year that contributed to our performance this quarter.

These are just a few examples that individually are not material at the company level, but collectively are beginning to have a positive impact on revenue growth and customer perception that innovation is back at three a M.

Earlier this year, we launched Scotch blue, prosharp painters tape a great example of a class 3 product in our consumer business that replaces an existing offering in this space but with a better performance and cost profile.

We're now, regaining share growing High, single digits and outperforming in the category.

Our second priority to driving operational excellence across the enterprise.

Our efforts here are driving margin expansion, improving customer service, increasing asset utilization and reducing cost of poor quality.

Another launch in the consumer business expanded our size offering in our filtrate business, giving us broader coverage of the market and leading to high single-digit growth in the category in Q3.

Our on time in full metric was 91, 6% in the quarter, improving 200 basis points sequentially and 300 basis points over last year, achieving the highest on time performance, we've had in any quarter going back 20 plus years.

Last quarter, we launched a new lightweight wireframe self-contained breathing apparatus which contributed to our High Teens growth. This quarter and our SCBA business and sib

We've now been consistently over 90% for four months in a row.

These are just a few examples that individually are not Material the company. Level, but collectively are beginning to have a positive impact on Revenue growth and customer perception that Innovation is back at 3M.

Improved <unk> shows up tangibly and our fans from financial results as lower service fines, but also intangibly through a better customer experience, leading to winning more shelf space and enhancing customer loyalty.

Our efforts here are driving margin expansion, improving customer service, increasing asset utilization, and reducing the cost of poor quality.

Our intention now is a shift to the next stage of operational excellence sustain or improve Otis while simultaneously tightening delivery lead times and lowering inventory.

We continue to rollout our operating equipment effectiveness metric, which is now being systematically track on 229 of our most important assets representing about 60% of our production volume an increase of 32 assets since last quarter.

Our on-time and full metric was 91.6% in the quarter, improving 200 basis points sequentially and 300 basis points over last year, achieving the highest on-time performance we've had in any quarter going back 20 plus years.

We've now been consistently over 90% for 4 months in a row.

Year to date OE is it's about 63% up 300 basis points versus last year.

Oh, Tiff shows up tangibly in our financial results as a lower service fee, but also intangibly through a better customer experience, leading to winning more shelf space and enhancing customer loyalty.

This focus on better asset utilization as both reducing changeover time, and unplanned downtime and increasing run length and run rate unlocking incremental volume opportunities.

Our intention now is a shift to the next stage of operational. Excellence sustained or improve otif while simultaneously tightening delivery lead times and lowering inventory.

For example, in our optical adhesives line at our <unk> plant in China, we were able to increase utilization from 63% to 81% by optimizing visual defect controls and reducing curing system downtime freeing up enough capacity to double our share of an electronics customers business.

We continue to roll out our operating equipment Effectiveness metric, which is now being systematically tracked on 229 of our most important assets representing about 60% of our production, volume an increase of 32 assets since last quarter.

Quality is another critical aspect of operational excellence and as a company wide priority.

Year to date, oee is is about 63% up, 300 basis points versus last year.

Our cost of poor quality in the quarter was five 7% down 40 basis points sequentially and 150 basis points year over year.

This focus on better asset. Utilization is both reducing change over time and unplanned, downtime, and increasing, run length and run rate. Unlocking incremental volume opportunities.

Our focus on quality has driven yield loss reductions across all three business groups as we leverage kaizen events and AI tools to optimize changeovers use automation to replace manual visual inspection and deploy design for manufacturing in our new product development efforts to reduce scrap during scale up.

For example, in our Optical adhesive line at our gin Champs plant. In China, we were able to increase utilization from 63 to 81% by optimizing visual defect controls and reducing curing system downtime.

Freeing up enough capacity to double our share of an Electronics customer's business.

While we're making progress we have a long runway for improvement toward our target of achieving less than 4% cost of quality as a percentage of cost of goods sold.

Quality, is another critical aspect of operational excellence and is a company-wide priority.

Our third priority is capital deployment, we returned $900 million to shareholders in Q3 $400 million in dividends and $500 million of share repurchases.

Our cost of poor quality in the quarter was 5.7%, down 40 basis points sequentially and 150 basis points year-over-year.

Year to date, we've returned $3 $9 billion to shareholders.

Consistent with what we said at Investor Day, and since then we continue to evaluate our portfolio at a profit center level to shift our business toward higher growth higher profit potential markets.

On quality is driven yield loss reductions across all 3 business groups as we leverage Kaizen events, and AI tools to optimize changeovers use automation to replace manual visual inspection and deploy design for manufacturing in our new product development efforts to reduce scrap during scale up.

Addressing this portfolio will not only be accretive to earnings over time, but importantly will free up management time to focus on higher value opportunities.

While we're making progress, we have a long runway for improvement toward our target of achieving less than 4% cost of quality as a percentage of cost of goods sold.

Our third priority is capital deployment.

We previously communicated that 2% to 3% of revenue was under review being divested and in the quarter. We made progress with an agreement to sell our precision grinding and finishing business within our SAP BG abrasive division.

We returned $900 million to shareholders in Q3: $400 million in dividends and $500 million in share repurchases.

Year to date. We return 3.9 billion dollars to shareholders.

While this business is small at less than 1% of company sales, it's been a drag on results with over a decade of sales declines and seven dedicated underutilized factories across the U S Europe and China.

consistent with what we said investor day in since then we continue to evaluate our portfolio at a profit Center level to shift our businesses towards higher growth, higher profit, potential markets,

As such we do not expect this divestiture to be dilutive to earnings.

Addressing this portfolio will not only be accretive to earnings over time, but importantly, will free up management. Time to focus on higher value opportunities.

This is a good outcome for shareholders and it's indicative of the portfolio shaping we spoke about at Investor day that enables us to be a more focused and higher performing enterprise.

On slide four macro trends remained soft and largely unchanged from Q2, but due to our strong execution we are outperforming.

We previously communicated that 2% to 3% of revenue was under review for being divested. In the quarter, we may progress with an agreement to sell our Precision Grinding and Finishing business within our SABG Abrasive Division.

Looking at our end markets in Q2, we said general industrial and safety will improve off its low single digit growth in the first half and that is what happened despite a surprisingly weak roofing granules market.

While this business is small at less than 1% of company sales, it's been a drag on results with over a decade of sales declines, and 7, dedicated underutilized factories across the US, Europe and China.

As such we do not expect this to vast aure, to be dilutive to earnings.

Electronics was up mid single digits and flat to the first half and was a bit better than expected.

Consumer was flat as expected at auto and auto aftermarket were down mid single digits with performance improving modestly in auto OE and weakening in commercial vehicles.

This is a good outcome for shareholders and it's indicative of the portfolio shaping. We spoke about at investor day that enables us to be a more focused and higher-performing Enterprise.

Slide five pulls it all together and puts a spotlight on our three of them excellent framework inaction and S. P. G.

On slide 4 macro Trends, remain soft and largely unchanged from Q2. But due to our strong execution, we are outperforming.

On the right shows 11 quarters of organic growth at <unk> from minus 6% in early 2023 to the most recent quarter at four 1%.

Looking at our end markets in Q2, we said General industrial and safety will improve off its low single digit growth in the first half and that's is what happened. Despite a surprisingly weak Roofing, granules Market,

Aligned with the key factors driving this improvement.

Over this period, new product launches more than doubled.

Electronics was up mid-single digits and flat to the first half, and was a bit better than expected.

It improved by 12 percentage points, aged backlog declined by 13 points cross selling has accelerated and more rigor and management focus was implemented across the sales force.

Consumer was flat as expected. It auto and auto aftermarket were down mid single digits with performance improving modestly in Auto OE and weakening in commercial vehicles.

While progress is evident we're still in the early innings as we execute on the fundamentals and extend the three excellent framework to other parts of the company.

Wi-Fi, pulls it all together and puts a spotlight. On our 3M, Excellence framework in action in sipg,

I'm really proud of the team our third quarter performance gives us confidence we're on the right track and reflects the culture of excellence. We're building inside the company as we continue to drive the rigor and op tempo necessary to deliver on our strategic priorities.

On the right shows 11 quarters of organic growth at sibghatullah.

Over this period, new product launch is more than doubled.

As we navigate these uncertain times, we're focused on what we control.

Waiting for our customers and that in commercial excellence across our businesses, improving service optimizing capacity, reducing waste and effectively deploying capital all with a renewed sense of urgency that defines our new performance culture.

OTF improved by 12 percentage points. Age backlog decline by 13 points, cross-selling has accelerated and more rigor and management Focus was implemented. Across the sales force.

But while progress is evident, we're still in the early innings as we execute on the fundamentals and extend the 3M Excellence framework to other parts of the company.

And with that I'll turn it over to <unk> to share the details of the quarter.

On Iraq.

Thank you Bill turning to slide six we had a strong quarter across all financial metrics.

I'm really proud of the team. Our third quarter performance, gives us confidence, we're on the right track and reflects the culture of Excellence. We're building inside the company as we continue to drive the rigor and op Tempo necessary to deliver on our strategic priorities.

We delivered sales growth acceleration continued solid margin expansion double digit earnings growth and strong cash flow.

As we navigate these uncertain times, we're focused on what we control.

Starting with the top line.

Consistently muted macro environment, we accelerated organic revenue growth from one 5% in the first half to three 2% in Q3, driven by successful execution of our commercial excellence initiatives and contribution from NPI underpinned by a strong operating temple, which resulted in growth of above <unk>.

Innovating for our customers, embedding commercial excellence across our businesses, improving service, optimizing capacity, reducing waste, and effectively deploying capital—all with a renewed sense of urgency that defines our new performance culture.

And with that, I'll turn it over to hro to share the details of the quarter honor.

Thank you, Bill.

Grow.

By geography, our growth was led by China, which was up high single digits with strength in industrial adhesives films and electronics bonding solutions driven by strong commercial execution that led to share gains.

turning to slide 6, we add a strong quarter across all Financial metrics

We delivered sales growth acceleration, continued, solid mileage and expansion, double-digit earnings growth and strong cash flow.

Starting with the Top Line.

The U S, where we first focused on commercial excellence initiatives grew nearly 4% in the quarter compared to 1% growth in the first half with strength in general industrial safety and demand for <unk> filters, partially offset by market driven weakness in auto after market and roofing granules.

It was encouraging to see Europe returned to growth in the third quarter up low single digits due to strength in both the safety communication solutions, which more than offset the weakness in auto.

In a consistently muted macro environment, we accelerated organic Revenue. Growth from 1.5% in the first half to 3.2% in Q3 driven by successful. Execution of our commercial Excellence initiatives and contribution from NPI underpinned by a strong operating Temple, which resulted in growth above macro.

Q3 daily order trends were up 3% year on year with growth across all business groups.

By geography, our growth was led by China, which was up in the single digits, with strength in industrial, adhesives, films, and electronics. Bonding Solutions, driven by strong commercial execution, led to share gains.

Our sales came in better than expected and aged backlog continues to decline the strength in orders resulted in a year over year increase in backlog, providing 20% to 25% coverage of fourth quarter sales.

The us where we first focused, our commercial Excellence, initiatives grew, nearly 4% in the quarter compared to 1% growth in the first half, which strength in general industrial safety and demand for filter rate filters. Partially offset by market-driven, weakness and auto aftermarket and Roofing granules.

Q3, adjusted operating margins were 24, 7% up 170 basis points year on year, driven by continued strong operational performance.

Operating income grew by approximately $175 million in constant currency, including an approximately $325 million benefit from volume growth broad based productivity across supply chain and G&A and lower restructuring cost.

It was encouraging to see Europe return to growth. In the third quarter up low single digits, due to strength in personal safety, communication Solutions, which more than offset the weakness in auto.

Q3 daily order trends were up 3% year on year, with growth across all business groups.

Partially offset by about $50 million of growth investments as planned and $100 million from tariff impact and stranded costs.

Though our sales came in better than expected, the aged backlog continues to decline. The strength in orders resulted in a year-over-year increase in backlog, providing 20% to 25% coverage of fourth quarter sales.

Collectively this contributed 25 cents to earnings which was partially offset by <unk> from FX and non operational below the line items.

Q3 adjusted operating margins were 24.7% up, 170 basis points here on year driven by continued strong operational performance.

Our strong operating performance resulted in adjusted EPS of $2 19 and.

<unk> of 10%.

Relative to expectations, our operation of the outperformance was driven by higher volume and productivity and as the team continued to execute our strategic priorities.

operating income grew by approximately 175 million in constant currency including an approximately 325 million benefit from volume, growth broad-based productivity across supply chain and GNA and lower restructuring costs,

I also want to mention two items highlighted in our press release issued this morning that are excluded from adjusted results.

Partially offset by about 15 million dollars of growth Investments as planned and 100 million dollars from tariff impact and Stranded costs.

First we recorded a pre tax charges of $161 million related to the agreement to sell our precision grinding and finishing business.

Collectively, this contributed 25 cents to earnings which was partially offset by 4 cents from FX and non-operational below the line items.

Second we took a $40 million charge as we begin to invest in the long term transformation efforts to redesign our manufacturing distribution and business process services and locations.

Our strong operating performance. Resulted in adjusted EPS of $2.19 and increase of 10%.

This initiative is different from the traditional restructuring programs. We have previously undertaken like the recently concluded enterprise program, which focused on short term actions for quicker paybacks.

Relative to expectations, our operational. Outperformance was driven by higher volume and productivity as a team continued to execute our strategic priorities.

I also want to mention two items highlighted in a press release issued this morning that are excluded from adjusted results.

Accordingly, the charges related to these actions will be excluded from adjusted results going forward.

First, we recorded a pre-tax charge of $161 million related to the agreement to sell our Precision Grinding and Finishing business.

Adjusted free cash flow in the quarter was $1 3 billion with conversion of 111% as we benefited from strong earnings and capital expenditure efficiency.

I will provide a quick overview of our growth performance for each business group on slide seven.

Transformation efforts to redesign our manufacturing, distribution, and business process services and locations.

We started the commercial excellence initiatives and safety and industrial and as a result, we are seeing early gains with organic sales up four 1% in Q3, and three 1% year to date.

Initiative is different from the traditional restructuring programs we have previously undertaken.

like the recently concluded Enterprise program which focused on short-term actions for quicker, paybacks,

Accordingly.

Growth in <unk> was led by electrical markets up low teens, as we prioritized service performance and capitalize on growth in construction of data centers.

These actions will be excluded from adjusted results going forward.

Industrial adhesives, and tapes and another quarter of mid single digit growth as they continue to win share in bonding solutions for electronics auto and appliances from new product introduction and better order conversion.

Adjusted free cash flow in the quarter was 1.3 billion with conversion of 111% as we benefited from strong earnings and capital expenditure efficiency.

I will provide a quick overview of our growth performance for each business group on slide 7.

Both personal safety embraces accelerated to mid single digit growth up from low single digits in the first half driven by increased sales effectiveness and new product introductions.

We started commercial excellence initiatives in safety and industrial. As a result, we are seeing early gains, with organic sales up 4.1% in Q3 and 3.1% year-to-date.

Collectively this strong growth more than offset known weakness in automotive after market and emerging weakness in roofing granules from the slow housing market and weak consumer sentiment.

Growth in SIB was led by Electrical Markets upload teams as we prioritize service performance and capitalized on growth in construction of data centers.

Overall, our focus on commercial innovation excellence helps SVG grew four 1% fourth quarter, the highest growth since 2018 ex COVID-19.

Industrial adhesives and tapes, add another quarter of mid single digit growth as they continue to win, share in bonding solutions for electronics Auto and appliances from new product introduction and better order conversion.

Transportation and electronics adjusted sales accelerated from 1% in the first half to three 6% in Q3, bringing year to date organic growth to one 9%.

Both personal safety and abrasives accelerated to mid single-digit growth, up from low single digits in the first half, driven by increased sales effectiveness and new product introductions.

While there was some discrete timing between Q3, and Q4 and our transportation safety business due to a large pavement, marking project. The main drivers of growth with double digit growth in aerospace continued momentum in the electronics business and automotive being flattish after a down first half.

Collectively this strong growth more than offset known weakness in automotive aftermarket and emerging weakness in Roofing grin from the slow housing market and weak consumer sentiment.

In electronics, we expanding from the premium segment into the mainstream with new product introductions and better sales coverage.

Overall, our focus on Commercial and Innovation, Excellence helped SBG grow 4.1% for the quarter, the highest growth since 2018, xco it.

This quarter, we went content with a major mainstream player to supply optically clear adhesives for smartphones and lowest buccal film for notebooks.

Transportation and electronics. Adjusted sales accelerated from 1% in the first half to 3.6% in Q3, bringing year-to-date organic growth to 1.9%.

Auto business the weak commercial vehicle sales were offset by growth due to spec in wins and increased penetration with Chinese Oems.

Finally in a relatively weak consumer market, our consumer business has demonstrated the ability to grow four quarters in a row, including 0.3% organic growth in each of the last three quarters.

While there was some discrete timing between Q3 and Q4 in our Transportation, safety business due to a large pavement marking project. The main drivers of growth were double-digit growth in Aerospace continued. Momentum in the electronics business and Automotive being flattish after a down first half,

Well consumer sentiment remained soft we experienced strong demand for <unk> filters, Scotts tape and Mcguire products supported by new product introductions continued service improvements and increased advertising and merchandising investment.

In electronics, we are expanding from the premium segment into the mainstream with new product introductions and better sales coverage.

Quarter. We run content with a major mainstream player to supply optically clear adhesives for smartphones and low Sparkle film for notebooks.

Overall, we are delivering on our commitments with strong year to date results, including organic growth of two 1% operating margin expansion of 220 basis points to 24, 2%.

In our auto business, the weak commercial vehicle sales were offset by growth due to spec wins and increased penetration with Chinese OEMs.

finally, in a relatively weak consumer Market, our consumer business as demonstrated the ability to grow 4 quarters in a row

Earnings growth of 11% and free cash flow generation of $3 1 billion.

Including 0.3% organic growth in each of the last 3 quarters.

We also returned $3 9 billion to shareholders, including $1 2 billion in dividends and $2 7 billion in share repurchases.

Please turn to slide eight for an update on 25 guidance.

Though consumer sentiment remained soft, we experienced strong demand for filter rate filters, Scotch Tape, and Maguire's products, supported by new product introductions, continued service improvements, and increased advertising and merchandising investment.

Our year to date sales growth of two 1% gives us confidence we will deliver growth of over 2% for the year.

Overall, we are delivering on our commitments, with strong year-to-date results, including organic growth of 2.1%.

Our focus on productivity has enabled us to deliver strong margins every quarter and on the back of this performance. We are updating our margin expansion expectations to $1 80 to 200 basis points for the year.

Or printing margin expansion of 220 basis points to 24.2%.

Earnings growth of 11% and free cash flow generation of 3.1 billion.

As a result, we are raising our earnings per share guidance for the year from a range of $7 75 to $8 to a range of.

We also returned 3.9 billion to shareholders, including 1.2 billion dollars in dividends and 2.7 billion dollars in share repurchases.

Five two.

<unk> represented approximately 12% increase at the midpoint, our 10% growth for the year.

Please turn to slide 8 for an update on the 25 guidelines.

We continue to expect free cash flow conversion of greater than 100%, but absolute free cash flow dollars being higher.

Our year-to-date sales, growth of 2.1% gives us confidence. We will deliver growth of over 2% for the year.

Reflecting the increase in earnings.

Please turn to slide nine.

This updated 2025 guidance is ahead of the initial guidance set at the beginning of the year and positions us well to achieve the financial commitments, we made at our Investor day earlier this year.

Our focus on productivity as enabled us to deliver strong margins. Every quarter. And on the back of this performance, we are updating our margin expansion, expectations to 180 to 200 basis points for the year.

For 2026, we will provide formal guidance on our Q4 earnings call in January but our framework remains consistent with what we communicated at our Investor day in February.

As a result, we are raising a range of $7.75 to $8 to a range of $7.95 to $85 representing an approximately 12 cent increase at the midpoint or 10% growth for the year.

Growth above macro.

Cash flow dollar is being higher.

Margin expansion and earnings growth and strong free cash flow generation.

Reflecting the increase in earnings.

Please turn to slide 9.

While the macroeconomic outlook is uncertain.

Outperformed by scaling commercial excellence across all business units and leveraging new product launches.

Alongside growth, we will improve productivity in our supply chain and G&A to more than offset investments stranded cost and anticipated tariff impacts resulting in margin expansion in 2026.

This updated, 2025 guidance is ahead of the initial guidance, set at the beginning of the year and positions us well to achieve the financial commitments we made at our investor day earlier this year.

For 2026, we will provide formal guidance on a Q4 earnings call in January.

But our framework remains consistent with what we communicated at our investor Day in February.

For EPS, we expect operational performance to be the primary driver of earnings growth similar to this year.

Growth above macro continued, margin expansion, in earnings growth and strong, free cash flow generation.

Non operational performance will be influenced by changes in interest rates and FX.

While the tax rates should remain stable and share buybacks will continue to be accretive.

While the macroeconomic Outlook is uncertain, we will outperform by scaling commercial Excellence, across all business units and leveraging new product launches.

Finally, we continue to expect to deliver cash flow conversion to exceed 100%.

Alongside growth, we will improve productivity in our supply chain and GNA to more than offset Investments.

Yes.

Before we open the call for questions I would like to acknowledge and thank the <unk> team for their strong commitment to operational and commercial excellence and focus on delivering improvement day after day.

Stranded costs and anticipated tariff. Impacts resulting in margin expansion in 2026.

For EPS, we expect operational performance to be the primary driver of earnings growth, similar to this year.

Our performance to date and opportunities ahead of US provides us with increased confidence in delivering on our updated 2025 guidance and commitments, we laid out at the Investor day.

Non-operational performance will be influenced by changes in interest rates and ethics.

While tax rates should remain stable and share buybacks will continue to be a creative strategy.

With that let's open the line for questions.

Ladies and gentlemen, thank you I would like to register a question. Please press star one on your telephone keypad.

Finally, we continue to expect to deliver cash flow conversion that exceeds 100%.

If your question has been answered and you would like to withdraw please press star two.

If you are using a speaker phone please lift up your handset before entering your request.

before we open the call for questions, I would like to acknowledge and thank the 3M team for the strong commitment to operational and Commercial excellence and focus on delivering Improvement day after day.

Please limit your participation to one question and one follow up.

Our first question comes from the line of Scott Davis with Melius Research. Please proceed with your question.

Our performance to date and opportunities ahead of us provides us with increased confidence in delivering on our updated 2025 guidance and commitments. We laid out at the invest today.

Hey, good good morning, Bill on our Arlington May good morning.

With that, let's open the line for questions.

You started kind of the prepared remarks around new products. So I wanted to lean in on that a little bit because.

ladies and gentlemen, if you would like to register a question, please press star 1 on your telephone keypad,

Every CEO at <unk> has talked about new products, but you seem to be delivering.

If your question has been answered and you would like to withdraw, please press *2.

And actually getting results, what without spending a whole heck of a lot more really.

If you are using a speaker-phone, please lift up your handset before entering your request.

Please limit your participation to 1 question and 1 follow-up.

What do you think what do you attribute it to is it is it have you changed kind of the culture of compensation.

Our first question comes from the line of Scott Davis with Melia's Research. Please proceed with your question.

I don't know it just open ended question so I'll leave it there.

So good question, Scott So I'm really pleased with the progress, we're making on new product introductions, and I think what I've seen over the last.

Hey, good morning Bill and honor Chinmay. Good morning, Scott.

18 months or so is much greater pace and rigor urgency than I think we've seen in some time, we're tapping into a lot of latent ideas urgency desire from the team's product developers application engineers business leaders to get back to what's important at <unk>.

Um, you started, uh, kind of the prepared remarks around new products. So I wanted to lean in on that a little bit because.

every CEO at 3M is talked about new products, but you seem to be delivering

<unk> and that's innovating.

And we're really trying to support that investment is coming up a little bit where we're putting some different metrics in place.

Uh, and actually getting results. What, uh, without spending a whole heck of a lot more, really? Um, what do you think? What do you attribute it to? Is it, is it? Have you changed kind of the culture, compensation? You know, I mean, I don't know, just open-ended questions, so I'll leave it there.

Certainly, we're watching new product introductions and turnaround relatively quickly you know keep in mind a lot of these 80% of these are sort of incremental line extensions, what we call class III, but that'll that'll build over time and become more important and I'm really pleased to see the funnel you remain relatively healthy so while.

We launched seven new products, we had 130 products coming into the front end of the funnel. So it's actually very very positive and a number of ideas that the teams are coming up with our now close with thousands so.

We're tapping into this desire to innovate bring new solutions to customers and the whole team is really really responding very well to this we're increasing our speed eliminating non value added type activities. We are moving up a little bit on spend I think in the quarter was up by 30 basis points, but it's not not substantial we are shifting.

So, so, so good question, Scott. So I'm really pleased with the the progress we're making on new product. Introductions and I think what I've seen over the last uh, 18 months or so is much greater pace and rigor urgency, you know, than I think we've seen some time. We're tapping into a a lot of latent ideas, urgency desire from the the teams product developers application Engineers, Business Leaders to get back to what's important at 3M and that's innovating, you know. And we're, we're really trying to support that, you know, Investments coming up a little bit. You know, we're, we're putting some different metrics in place, you know, certainly, um, you know, we're watching new product, introductions, and they're turning around relatively.

More of our R&D dollars towards new product development, a couple years ago, we dip below 30% now its running 35, 36% that should grow a little bit over time, but overall the team is responding very very well, we're starting to bend the curve on revenue you'd see some of the numbers coming in Q3, you will see more in Q4, but this is something thats going to.

Sort of accelerate as we get into 'twenty six 'twenty seven keep in mind, we said, we'd grow $1 billion over the macro half of that will be in new product introductions. You have a lot of that is going to come in 'twenty six 'twenty seven because it takes time to move the needle on that what are the growth early on will it come from commercial excellence. So Scott Great question. The team is doing a fabulous.

This job and we're just getting started.

That makes sense and then the natural follow up really is that historically.

New products have been used.

Hey class III Thats first time, I've heard that referenced on a <unk> call but.

Clearly.

More focused on maintaining or driving margin and the new product flow versus kind of.

What I would call kind of new product categories, which was more of the legacy to go back to the Eighty's in the nineties that was more of the three mm wire was create new categories.

A little bit over time, you know, but overall I think the team is responding very, very well. We're starting to bend the curve on Revenue. You'd see some of the numbers coming in Q3? We'll see more in Q4 but this is something that's going to sort of accelerate as we get into 26 and 27. Keep in mind, we said we grow a billion dollars over the macro half of that will be in, uh, new product introductions, you know, but a lot of that's going to come in 26 and 27 because it takes time to move the needle on that lot, or the growth early on will come from commercial Excellence. So,

Do you have a.

Again, it may be hard to tease this out but do you have a sense of what kind of an upside that we have three of them actually be.

Scott: The team is doing as we started.

A above.

Historically, it's been kind of two 3% growth company cannot be a 456.

Percent, because youre actually back to creating new categories again in driving that top line above kind of that traditional class III as you call. It <unk>.

New product innovation, so Skype so about 80% of the launches are a class III <unk>, 20% are in class for classified which are adjacent markets or bringing new products into new markets and we've seen a couple of this year that are quite interesting, particularly in our electrical market. You know it was a cable prep system, which is was a class four classify.

That that makes sense and that the natural follow-up really. Is that historically? New products have been you know you you say class 3 that's the first time. I've heard that reference on a on a 3M call but but clearly uh more focused on maintaining or driving margin in the new product flow versus kind of, you know, what I would call kind of new product categories which was more of the Legacy. You know, if you go back to the 80s and the 90s that was more of the, the 3M way it was create new categories.

That's good that's really growing very nicely because the team really pushes on this I do think theres incremental ideas. They are working on <unk>.

Clearly, we're seeing a bit better growth in the macro here in the quarter. The macro is running in the 1% to 2% range. So posting three two in the quarters is pretty good.

Do you have a, you know? Again, it it may be hard to tease this out, but do you have a, a sense of what kind of an upside do we have, can can 3M actually be a above, you know, historically has been kind of 2, 3%, Growth Company. Can it be a 4 or 5 6% because you're actually back to creating new categories again, and driving that top line above kind of that traditional class 3, as you call it. Um, new product invoice,

It will grow over time and again, we're not going to be at 50, 50 class III versus fours advise but youll see more fours and fives come in into the pipeline into next year and into 2027.

Very helpful. Best of luck guys. Thanks. Thank you Scott Thank you.

Yeah.

Our next question comes from the line of Jeff Sprague with vertical research. Please proceed with your question.

Hey, Thanks, good morning, everyone.

One I wanted to touch on kind of the beginning of this maybe new restructuring journey that you're on Bill I know even from the day you started maybe before you started you had sort of a vision of what should happen with just footprint and now you've had a lot of time to be inside and really kick the tires.

Sister sky. So, about 80% of the launches are in class. 3 means, 20% in class 4, class 5 which are adjacent markets or bringing new products into new markets. And we've seen a couple of this year, you know, that are quite interesting particularly in our electrical market, you know, as a cable prep system, which is, which is a class 4 class 5 product. That's that's really growing. Very nicely, look, as a team really pushes on this. I do think there's incremental ideas, they're working on. Um, clearly we're seeing a bit better growth in the macro here in the quarter, the macros running in the 1 to 2% range. So, posting 3.2 in the quarter is, is is pretty good. Um, this will, this will grow over time. And again, it's, you know, we're not going to be at 5050 class 3 versus fours and fives. But you'll see more fours and fives come in into the pipeline into, uh, next year and into 2027,

Wondering if you could give us a sense of.

It was just the beginning.

All right, helpful. Best of luck, guys. Thank you. Thank you, Scott. Thank you.

Two or three year, a very large project have you even really map this out yet and sort of like what should we expect as we get into maybe 2026 as it relates to these new restructuring actions.

Our next question comes from the line of Jeffrey with vertical research, please proceed with your question.

Thanks, Thanks, Jeff look at Andre talked about in his remarks that it's unlike the prior restructuring effort. This enterprise wide restructuring effort that was more focused on short term actions quick payback. This what we're embarking on now is it more longer term more thoughtful redesign of our manufacturing network our distribution.

Network, our business process services as we've embarked on our operational excellence journey as we've seen over the course of this year, we're seeing more opportunities in G&A than I would've guessed early in the year and if we didn't really say much about this in February at the Investor day, because we've learned a lot since then.

Hey, thanks. Good morning, everyone. Hey, I want, I want to touch on uh, kind of the beginning of this, uh, maybe new restructuring uh, Journey that you're on Bill. I know. Even from the day you started maybe before you started, you had sort of a vision of what you know should happen with this footprint and now you've had, you know, a lot of time to be inside and really kick the tires. Uh I just wonder if you could give us a sense of you know, is this the beginning of a 2 or 3 year very large project.

This will be a structured improvement program over time, it won't be it won't be a big Bang it it'll be maybe more of a series of actions that I think will happen overtime more aligned to the long term growth agenda of the company more aligned to what the team can can go and do.

We will evolve this.

Full way so we don't disrupt the business disrupt the momentum we're building on new product introductions and driving operational efficiency. So so this is something that we're going to continue to work on.

We don't size. It today, we will give updates to investors over time.

It will not be a big Bang will shape more next quarter. This quarter of 14 million next quarter it'll be in that same range about $15 million as we get to early next year, we'll sort of frame. It up for 2026, but this is something that will happen over time will provide some updates on what we wanted to do but this is all about how do you <unk>.

Have you even really mapped this out yet? Um, and sort of like, what, what should we expect? As we get into, maybe 2026 as it relates to these new restructuring actions. So, so thanks. Thanks Jeff. Look at honor, I talked about in his remarks that it's it's unlike the prior restructuring effort, this Enterprise wide restructuring effort. That was more focused on short-term actions quick payback. This what we're embarking on now is a more longer term more thoughtful redesign of our manufacturing Network. Our distribution Network, our business process Services, as we've embarked on our operational excellence, Journey as we've seen over the course of this year, we're seeing more opportunities in GNA than I would have guessed earlier in the year, and we didn't really say much about this in February the investor day because we've learned a lot, uh, since then, you know, so this will be, you know, a a structured Improvement program over time, you know, it won't be, it won't be a big bang it, it'll be, you know, maybe more of a series of actions that

ROE and accelerate.

Our margin expansion journey beyond 25% by 27% that's not what we're going to stop a lot of the ideas we're seeing here today.

Or are we going to be important ways of both returning earnings to owners as well as reinvesting back into the business and if anything I'm seeing more opportunities today than we saw six to eight months ago. When we had the investor day.

I think will happen over time more aligned to the long term growth agenda of the company, more aligned to what the team can can go. And do, you know, we will evolve this in a in a, in a thoughtful way so we don't disrupt the business disrupt. The momentum we're building on new product, introductions and driving operational efficiency. So so this is something that, um, you know, we're going to continue to work on, you know, we don't we don't size it today. We'll we'll give you know, updates to investors over time, you know, it will

Great and then maybe just back on the growth real quick so it sounds like the upside to the topline view here I know you can't probably perfectly parse that apart, but really isn't a better macro outlook, there's a bunch of pluses and minuses in the macro but you would point to just more traction on the on the new product related <unk>.

Actions and maybe just as part of answering that Bill you made a comment about special pricing actions limiting them did you get the price in Q3, you were talking about are you decided you didnt need it because the volumes are better I don't quite understand what you were going towards.

27, you know, that's not what we're going to stop. A lot of the ideas we're seeing here today. You know, are are going to be important, you know, ways of both returning earnings to owners as well as reinvesting back in the business. And, you know, if anything, I'm seeing more opportunities today than we saw 6, 8 months ago, and we had the investor day.

Towards with that question.

Great.

Yes, let me kind of two pieces one on just the growth in the quarter. We're really pleased at three 2%. We had guided if you will to two 5% in the back half. We said it would be similar in Q3, and Q4, and obviously, we did quite a bit better than two 5%. So that 70 basis point improvement at least 50 basis points is what.

We would consider to be self help it's both commercial excellence and NPI. The other 20 basis points is sort of net discrete items that shifted from Q4 into Q3 is unrivaled talked about in his script, but relative to the macro look ipi is running around 2%, we see our blended macro around one so in that 1% to two.

Percent.

We're seeing.

150 basis points more or less of outperformance versus the macro and I think at least 100 basis points of that is commercial excellence and new product introduction. So so I think it's very good performance on the team's doing what we said we would do over the last year year and a half now and pricing just to be clear. We are we are.

On the growth real quick. So it, it sounds like the upside to the, the Top Line view here. I know you can't probably perfectly parse it apart but really isn't a better macro, uh, Outlook. There's a bunch of pluses and minuses in the macro, but you would point to just more traction on the, on the new product related, uh actions. And maybe just as part of answering that bill, you made a comment about special pricing actions. Limiting them. Did you get the price in? Q3 you were talking about or you decided you didn't need it because the volumes were better, I didn't quite understand what you were going uh towards with that question. So so the yeah, let me come out to 2 2nd in the quarter. We're really pleased at 3.2%, you know, we had guided if you will to 2 and a half percent in the back half, we said it would be similar in Q3 and Q4 and obviously, we did quite a bit better than, than 2.5%. So of that 70 basis, point Improvement, you know, at least 50 basis points, is what we would consider to be self-help. It's both commercial excellence and NPI the other 20.

<unk>, what we said we would do on pricing, which was generate 70 basis points of price for the year.

50 basis points in the first half about 19 in the back half. So 74 for the year, we typically get about 50 basis points of price to offset material cost inflation that it's been running around 2%, maybe a tick above that the incremental 20 basis points is the cover a piece of the tariffs you know keep.

Basis points are sort of net discrete items that shifted from Q4 into Q3, as HRO talked about in the script. Relative to the macro look, IPI is running around 2%. We see our blended macro around 1%. So in that 1% to 2%, you know, we're seeing, you know, 150 basis points more or less of outperformance versus the macro, and I think at least.

And mind you the net tariff impact for the company is around 10 cents gross is 'twenty. So at Tencent Delta split 50, 50 between price actions and cost so hopefully that answered the question that ensured it were.

Getting price almost exactly as we said we would do at the at the Q2 earnings release.

Got it. Thank you very clear appreciate it thank you.

Our next.

Question comes from the line of Amit Mehrotra with UBS. Please proceed with your question.

Thanks, operator, good morning, good morning, everybody.

On the rock on the 2026 for I mean, I really appreciate you kind of look.

Gauging with US this early at least on 2026.

You have this long term margin target, maybe not so long term anymore in terms of 25% by 2027, it feels like if I just take the moving parts, 3% grow 35% Incrementals, you've obviously got a net productivity piece.

100 basis points of that is commercial excellence and new product introduction. So so I think it's very good performance on the team, doing what we said we would do over the last, you know, year year and a half. Now, when pricing, um, just to be clear, we are, we are achieving. What we said we would do on pricing which was generate 70 basis points of price for the year. Um 50 basis points in the first half about 90 in the back half. So 74 for the year, we typically get about 50 basis points of priced offset material cost inflation that you know, has been running around 2%. Maybe a tick above that. You know, the incremental 20 basis points is the cover, a piece of the tariffs. You know, keep in mind the net, tariff impact for the company is around 10 cents, gross is 20 cents. So that 10 cent Delta is split 50/50 between price actions and costs. So hopefully that answered the question that in short, you know. It's we're getting price. Almost exactly. As we said we would do

At the Q2 earnings release.

Thank you very clear. Appreciate it. Thank you.

Yeah pretty close to that number in 2021.

Our next question comes from the line of Ahmed met rotrou with UBS, please. Proceed with your question.

Unless there's something wrong with my math, maybe you can just help us think about those.

Thanks operator. Um, morning morning everybody. Um,

Those moving pieces and maybe if you can kind of pull forward that target for margins.

On the 2026 framing, I really appreciate you kind of.

Thanks for the question Amit So the internal that page was two folds one was obviously too.

Oh, we are performing versus the Investor day targets that we laid out in February of this year and the spirit of transparency and how we are performing and second was to give a little bit more of a framework for 2026 with a formal guidance will come out in January. So first as you noted if you look at the first nine months of our performance has been really good across margin expansion.

And EPS and free cash flow conversion.

Thought we are going to be 100% free cash flow conversion at the beginning of the Investor day, but now we're going to be over 100%. So what we laid out in Investor day was that we'll get to 25% by 2027 and <unk>.

engaging with us this early at least um on 2026. Um you have this long-term margin Target, maybe not so long term anymore. In terms of 25% by 2027 it it feels like if I just take the moving Parts, 3% growth 35% incremental, you've obviously got a net productivity piece. You get pretty close to that number in in 2026, almost unless there's something wrong with my math. Maybe you can just help us, think about, um, those moving pieces and and maybe if you can kind of pull forward that that Target, um, for margins,

Sure, I uh, thanks for the question. Uh, I mean, so the intent of that page was twofold. It's 1 was obvious.

Last year, we finished at 21, 4% so that means 360 basis points over three years.

Looking at our guidance this year.

It's up 180 to 200 basis points. It really really good work that we've done in terms of our margin expansion clearly productivity across supply chain across G&A has really been good through the first nine months of the year, So where we sit today, we actually feel very good about the 25% target that we sell for 27, we're moving absolutely in the right direction around there.

And you know come in January we'll probably provide a refresh on where we stand on our three year targets. So as we get into 'twenty six.

I think what we are going to see us continue.

Performance versus the macro what we laid out in Investor day was $1 billion with three years of $100 million. This year 300 next year and 600 the year after accumulative of $1 billion.

Just at a second half performance, you'll see that we have about $100 million for this year and next year, we see a line of sight because of commercial excellence and be able to get there on the margin side.

Supply chain, we've done some good work this year in a couple of times, but there's still other areas in terms of the factory spend rather if you see more opportunities, we kind of drive that harder and G&A will continue. So I think overall you will see next year, we're going to be a strong operating performance here and from where we sit today, we feel pretty good about where we lead.

At the Investor day targets and provide more of a refresh in January.

Okay, great. Thanks.

And then Bill I just wanted to ask a question on the divestitures.

I know you talked about the two 3%, but if I remember correctly that two 3% with kind of part of this 10% of the 120 profit centers umbrella that that you thought maybe it would be in the hands.

Better in the hands of other people or are you.

Feel like you can execute more towards that that 10% or are we still in that 2% to 3% kind of envelope and how do you kind of I know this most recent divestiture is not dilutive to earnings as you talk about but just curious about how you balance the divestitures of the magnitude of divestitures with maybe the.

The EPS impact to the company. So look let me be really clear about this the process is ongoing we are going to remain disciplined you referenced appropriately the comments, we made back at the Investor day.

In several forums since then about how we're thinking about the portfolio. We have 120 profit centers, we analyze them to identify those businesses, which we believe have high growth high margin potential or technology, driven businesses that are consistent with the three M sort of heritage.

<unk> and DNA, we have a strong right to win versus others that that arent and we concluded that about 10% of that of that portfolio are in more commodity areas, where they meet a longer be a strong fit for the company, where we don't have a clear right to win in this material science technology driven.

We're only going to be selling businesses, where there is clear value to shareowners above what it would be as value to selling it to somebody else as opposed to what we would have by running it on our own.

I have 120.

Certainly were taking into account as we think through that the lost earnings the stranded cost dilution that the management time and effort and focus that happens on small businesses that don't perform well we did one in the quarter here and it was important to get that over the line I'll just take you back to my comments in the script were less than 1% of the revenue.

<unk> and seven factories.

You can imagine what the profitability of the business happens to be and there's other opportunities like that we will analyze them individually will be very smart and we'll be very disciplined about this and this will be a process that will unfold over time.

William Brown: When you think through that, the lost earnings, the stranded costs, dilution, the management time and effort and focus that happens on small businesses that don't perform well, we did one in the quarter here, and it was important to get that over the line. I'll just take you back to my comments in the script. We're less than 1% of the revenue and seven factories, so you can imagine what the profitability of the business happens to be. There are other opportunities like that. We'll analyze them individually. We'll be very smart and be very disciplined about this. This will be a process that will unfold over time. That's the process we're embarking on to build a 3M that's a higher performance, higher growth, higher margin potential overall entity. Not every business we're in today will be part of that journey going forward on it.

That's the process, where we are embarking on to build a three M. That's a higher performance higher growth higher margin potential overall entity and not every business. We're in today will be part of that journey going forward on it.

Right. Okay makes sense. Thank you very much.

Yeah.

Our next question comes from the line of Steve Tusa with Jpmorgan. Please proceed with your question.

Hey, good morning, good morning.

Just on this fourth quarter I mean, you did the $2 19, I think your implied is is like less than 180 in the fourth quarter I mean, I don't I know, there's some seasonality there, but I don't recall that kind of drop.

Drop I think you mentioned there were some discrete item pull forward into the third but then you mentioned that backlog provides actually some pretty good coverage for the fourth I think the 25% covered was a positive comment comment maybe it wasn't.

We think through that the Lost earnings, the stranded costs dilution that the management time and effort and focus, that happens on small businesses that don't perform. Well, we did 1 in the quarter here and it was important to get that over the line. I'll just take you back to my comments in the script. We're less than 1% of the revenue and 7 factories you know. So so you can imagine what the the the profitability of the business happens to be and there's other opportunities like that will analyze them. Individually will be very smart and will be very disciplined about this. And this will this will be so a process that will unfold over time, you know. And that's the that's the process where we're embarking on to build a3m. That's a higher performance, higher growth, higher margin potential, overall entity and not every business we're in today will be part of that Journey going forward on it.

Anurag Maheshwari: Right. OK, makes sense. Thank you very much. Appreciate it.

Right. Okay, makes sense. Thank you very much. I appreciate it. Sure.

Operator: Our next question comes from the line of Steve Tusa with JP Morgan. Please proceed with your question.

Could you maybe just provide a little more color on why the why the more than seasonal drop off.

[Analyst]: Hey, good morning.

Question comes from the line of Steve Tuso with JP Morgan. Please proceed with your question.

William Brown: Morning, Steve.

Hey, good morning. Good morning, Steve.

[Analyst]: Just on this fourth quarter, I mean, you did the $219. I think your implied is like less than $180 in the fourth quarter. I mean, I know there's some seasonality there, but I don't recall that kind of drop. I think you mentioned there was some discrete item pull forward into the third. You mentioned that backlog provides actually some pretty good coverage for the fourth. I think the 25% coverage was a positive comment. Maybe it wasn't. Can you maybe just provide a little more color on why the more than seasonal drop-off from Q3 to Q4?

<unk> three <unk>.

Sure Steve Thanks for the question.

It's actually quite typical between Q3 and Q4 from a volume and a margin perspective volume is typically $250 million lower between the quarter because of many of the consumer back to school in the third quarter and in the industrial side.

Uh just on this fourth quarter. I mean uh you did the 219. I think you're implied is is like less than 180 uh in in the fourth quarter. I mean, I I I don't, I know there's some seasonality there but I don't recall, that kind of drop, uh, you know, drop, I think you mentioned, there was some discrete item, pull forward into the third, but then you mentioned that, you know, backlog, uh, provide

So that's pretty typical wheelchair factory shutdowns in the fourth quarter. So.

So there is a impact from absorption. So I would say that's pretty typical step down between Q3 and Q4. This year clearly there was a little bit of a step up in investments and in tariffs between the third and the fourth quarter.

Ides, actually, some pretty good coverage for the fourth. I think the 25% coverage was a positive comment, comment, maybe it wasn't. Um, could you maybe just provide a little more color on? You know, why? The why the more than seasonal drop off? Yeah. Hey. Um, 32 to 4K.

Anurag Maheshwari: Sure, Steve. Thanks for the question. It's actually quite typical between the Q3 and Q4 from a volume and a margin perspective. Volume is typically $250 million lower between the quarter because of mainly the consumer back to school in the third quarter and in the industrial side. That's pretty typical. We also have factory shutdowns in the fourth quarter, so there's an impact on absorption. I would say that's a pretty typical step down between Q3 and Q4. This year, clearly, there is a little bit of a step up in investments and in tariffs between the third and the fourth quarter. The investments we thought were going to be $175 million for the year. We're stepping it up to $185 million, most of it in the fourth quarter, pretty encouraged by what we're seeing on the revenue side.

The investments we thought we were going to be $175 million for the year, we stepping it up to $185 million most of it in the fourth quarter are pretty encouraged by what we've seen in the revenue side and where the investment is coming through is definitely more sales force training as we are scaling up the commercial excellence hiring more salespeople for coverage in other parts of the world.

Hiring engineers as Bill noted earlier, so definitely there is a little bit of step up on the investment side and tariff a little bit more in the fourth quarter. So I think it's quite typical if you look year over year, which is the more appropriate comparison, we do believe that we will grow above macro again in the fourth quarter, it's going to be if you look at the first 20 days of the month.

And from a backlog coverage you look at auto as you look at revenue I think we are pretty good.

Anurag Maheshwari: Where the investment is coming through is definitely more salesforce training as we are scaling up the commercial excellence, hiring more salespeople for coverage in other parts of the world, hiring engineers, as Bill noted earlier. Definitely a little bit of a step up on the investment side and tariff a little bit more in the fourth quarter. I think it's quite typical. If you look year over year, which is the more appropriate comparison, we do believe that we will grow above macro again in the fourth quarter. It's going to be, if you look at the first 20 days of the month and from the backlog coverage, you look at orders, you look at revenue, I think we are on a pretty good trend over year. The revenue growth will pick up, and you get good incrementals from them.

Trend over here and you know that.

Our growth will pick up and you've got good incrementals from them will continue to drive on the productivity side as well over there clearly.

Clearly driven quite a bit in the nine months of the year, we will do more on productivity and G&A.

Sure. Steve, uh, thanks for the question. Uh, it's actually quite typical if between the Q3 and Q4 from a volume and a margin perspective. Volume is typically 250 million dollars lower between the quarter because of, mainly, the consumer back to school in the third quarter and in the industrial site. Uh, so so that's pretty typical. We also have Factory shutdowns in the fourth quarter. Um, so there's an impact on absorption, so I would say that's pretty typical step down between Q3 and Q4 this year. Clearly, there is a little bit of a step up in Investments and in tariffs between the third and the fourth quarter. Uh, you know, the Investments we thought were going to be 175 million for the year, we stepping it up to 185 million. Most of them in the fourth quarter, uh, pretty encouraged by what we're seeing in the revenue side and where the investment is coming through, is definitely more Salesforce training. As we are. Uh, scaling up, the commercial Excellence hiring more salespeople for coverage and other parts of the world are hiring, you know, Engineers as Bill noted earlier. So definitely there's a little bit of a step up on the investment side.

All of this will more than offset the pickup in investment in tariffs in stranded costs and at the midpoint of the guidance it would be 100 basis points of margin expansion.

We need to perform the way we have in terms of either higher volume like in the third quarter or more on the margin side, we could be at the higher end of the guidance range, which would imply a margin expansion of 150 basis points in the fourth quarter for us.

Anurag Maheshwari: We'll continue to drive on the productivity side as well. Over there, we are clearly driven quite well in the nine months of the year. We'll do more on productivity and G&A. All of this will more than offset the pickup in investment, in tariffs, in stranded costs. At the midpoint of the guidance, we would be 100 basis points of margin expansion. If we continue to perform the way we have in terms of either higher volume like in the third quarter or more on the margin side, we could be at the higher end of the guidance range, which would imply a margin expansion of 150 basis points in the fourth quarter for us.

Okay and then just lastly on this on the $1 billion of revenue.

Revenue.

How much did you book this year of the 1 billion do you think.

About Oh, you mean the growth above macro.

Yes.

It would be close to a $100 million by the time, we finished the year.

Alright, so that should be like substantially more next year from a.

Over macro perspective for the for the for the full year in 'twenty six absolutely I mean I'll go back to what we said at Investor day, It would be about $300 million, so $200 million incremental step up next year.

And tell her for a little bit more on the fourth quarter. So I think it's quite typical. If you look year over year which is the more appropriate comparison. Uh, we do believe that we will grow above macro. Again, in the fourth quarter, it's going to be if you look at the first 20 days of the month, uh, and from the backlog coverage, you look at Autos, you look at Revenue. I think we are on a pretty good um, uh, Trend over here. And, you know, the revenue growth will pick up and you got to go to incremental from them, we'll continue to drive on the productivity side as well. Uh, over there. Uh, we clearly driven quite well in the 9 months of the year, we'll do more on productivity and GNA. And all of this will more than offset, the pickup and investment in tariffs in stratic costs. And at the midpoint of the guidance, we would be 100 basis points of margin expansion. Now, if we continue to perform the way we have, in terms of either higher volume like in the third quarter or more on the margin side, we could be at the higher end of the guidance range, which would imply, a margin expansion of 150 basis points in the fourth quarter for us.

[Analyst]: OK. Lastly, on this billion dollars of revenue, how much did you book this year of the billion, do you think?

Yeah, Yeah, but you said next year is a bigger here right for that billion, yes, it's going to take a higher share. Okay. Now that's great. Thanks.

Okay, and then just lastly on this, uh, on this billion dollars of revenue. Um, how much did you book this year of the billion, do you think?

Anurag Maheshwari: You mean the growth above macro, $1 billion?

Yeah.

[Analyst]: Yes.

Anurag Maheshwari: It would be close to $100 million by the time we finish the year.

Our next question comes from the line of Nicole <unk> with Deutsche Bank.

Uh about a you you mean the growth above macro? Uh a billion dollars. Yeah, so yeah, so it would be close to a hundred million dollars. By the time you finish the year,

[Analyst]: Right. That should be substantially more next year from an overall macro perspective for the full year in 2026.

Please proceed with your question.

Yeah. Thanks, Good morning, guys good morning, Nicole.

Maybe just a few questions on some of the business trends you saw this quarter. So I think electronics came in ahead of expectations can you talk a little bit about the drivers of that and maybe if there was any sort of timing differential between three and four Q versus what you expected and thoughts on Park Hill.

Anurag Maheshwari: Absolutely. I mean, I'll go back to what we said in Invest Today. It would be about $300 million, so a $200 million incremental step up next year.

Right. So that should be like substantially more next year from a over macro perspective for the for the for the full year in 26. Absolutely. I mean, I'll go back to what we said and invest today, it would be about $300 million. So a 200 million incremental step up next year.

[Analyst]: Yeah, you said next year is a bigger year, right, for that billion?

Anurag Maheshwari: Yes.

[Analyst]: Like it's going to take a higher share? OK.

Anurag Maheshwari: That is correct.

[Analyst]: Great. Thanks.

Anurag Maheshwari: Thank you.

So just on the macro we laid out a chart in the webcast about what's happening in the macro remains relatively soft pretty unchanged from what we had seen a 90 days ago or so we did see a little bit softening in roofing granules.

Here's a bigger year right? For for that billion. Yes. Like it's, it's going to take a higher share. Okay, great, thanks. Thank you.

Operator: Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Please proceed with your question.

Our next question comes from the line of Nicole Delos with Deutsche Bank.

Please proceed with your question.

[Analyst]: Yeah, thanks. Good morning, guys.

Anurag Maheshwari: Good morning, Nicole.

Yeah, thanks. Good morning guys. Good morning, Nicole.

[Analyst]: Maybe just a few questions on some of the business trends you saw this quarter. I think electronics came in ahead of expectations. Can you talk a little bit about the drivers of that and maybe if there was any sort of timing differential between Q3 and Q4 versus what you expected and thoughts on Q4?

And Rob mentioned that in his prepared remarks really the housing market is a little bit soft.

Consumer spending is a little bit softer than replacing roofs as much which you know.

It's definitely softened in the last in the last 90 days commercial vehicles is down is down I think it could be able to sort of north of 20% here in the back half of the year and that has weakened and class five to eight in North America from admissions trends and tariffs and some other things that are happening. There. We are seeing some some better trends I mean auto looks just a slightly bit better.

Um, can you talk a little bit about the drivers of that and maybe if there was any sort of timing differential between 3 q and 4 q versus what you expected and felt on 4 q.

William Brown: Just on the macro, we laid out a chart in the webcast about what's happening in the macro. It remains relatively soft, pretty unchanged from what we had seen 90 days ago or so. We did see a little bit of softening in mineral granules. Anurag mentioned that in his prepared remarks. Really, the housing market is a little bit soft. Consumer spending is a little bit soft. They're not replacing roofs as much, which has definitely softened in the last 90 days. Commercial vehicles is down. I think it's going to be down to the north of 20% here in the back half of the year. That has weakened in class 5 to 8 in North America from emissions trends and tariffs and some other things that are happening there. We are seeing some better trends. Auto looks just a slightly bit better.

We do we actually were flattish in the quarter in a market that was up a little bit auto builds come up just a little bit year over year. So that's OK on electronics were up mid single digits in the front half of the year at mid single digits in Q3 trends there are pretty pretty good for us.

It's about 10% of our sales it looks looks pretty good last year was low double digits. So we're doing we're doing pretty well in the electronics segment.

As you know, we provide adhesives and films polarizer, some other things into notebooks tablets Pcs cellphones, we we've seen good penetration of the mainstream market, where typically a premium provider and we're starting to see good penetration into mainstream which is probably 80.

William Brown: We actually were flattish in the quarter in a market that was up a little bit. Auto builds come up just a little bit year over year. That's OK. On electronics, we were up mid-single digits in the front half of the year, mid-single digits in Q3. Trends are pretty good for us. It's about 10% of our sales. It looks pretty good. Last year was low double digits. We're doing pretty well in the electronics segment. As you know, we provide adhesives and films, polarizers, some other things into notebooks, tablets, PCs, cell phones. We've seen good penetration of the mainstream market. We're typically a premium provider. We're starting to see good penetration into mainstream, which is probably 80% of the market. A lot of good NPI going into that business. We're pretty pleased with the trends on electronics.

So just on the macro, we laid out a chart in the in the webcast uh about what's happening in the macro, it remains relatively soft a pretty unchanged from what we had seen, uh, 90 days ago or so, you know we did see a little bit softening in Roofing granules. Um uh onro mentioned that in his prepared. Remarks, you know, really the housing market is a little bit soft that, you know, consumer spending is, is a little bit soft, so they're not replacing roofs as much, which, you know, has definitely softened in the last, uh, in the last 90 days. Commercial vehicles is down, is down. I think it's going to be down to the middle of the 20th here in the back half of the Year and that is weakened in class 5 to 8 in North America from admissions, Trends and tariffs and some other things that are happening there. You know we are seeing some, some better Trends, I mean Auto looks just a slightly bit better, you know. We we do we actually we're flattish in the quarter in a market that was up a little bit. You know, Auto bills come up just a little bit year-over-year. So that that's okay. On electronics. We are up mid single digits, in the front half of the Year mid single.

Percent of the market a lot of good NPI going into that in that business. So we're pretty pleased with the trends on on electronics, and it's just a little bit better than we had thought 90 days ago frankly.

Got it that's really helpful. Thanks, Bill and then.

From a geographic perspective, encouraging to see the acceleration in China in Europe, any key standouts there in either region that really drove that improvement.

Digits in in Q3 Trends are are pretty pretty good for us. Um, it's about 10% of our sales, you know, looks looks pretty good. Last year was low double digits. So we're doing we're doing pretty well in the electronics segment, you know, as you know, we provide adhesives and films polarized or some other things into notebooks tablets pieces,

So U S. U S was encouraging it coming up from the first half of the first half was up 1% Q3 was up $3 seven almost 4% which is pretty good.

We're encouraged that Europe has is accelerated a little bit it was down in the first half about a point, it's up about two points in the quarter, which is good.

William Brown: It's just a little bit better than we had thought 90 days ago, frankly.

Sees, you know, cell phones. You know, we, you know, we've seen, you know, good penetration of the mainstream market, you know, we're typically a premium provider and we're starting to see good penetration into mainstream, which is probably 80% of the market. A lot of good NPI going into that in that business. So we're pretty pleased with the Trends on on electronics and it's just a little bit better than we thought 90 days ago, frankly.

[Analyst]: Got it. That's really helpful. Thanks, Bill. Just from a geographic perspective, encouraging to see the acceleration in China and Europe. Any key standouts there in either region that really drove that improvement?

China is quite interesting you might recall, we grew about low I think around double digits low double digits last year.

In the first half of the year were up mid single digits Q3 was up high single digits around 8%. So it's it was better than we had expected we had expected a softening in the back half and in fact, it accelerated a little bit in Q3 now it might weaken a little bit in Q4, but still be up and so we're very encouraged with the trends here you'll remember it's.

William Brown: The U.S. was encouraging coming up from the first half. I think the first half was up 1%. Q3 was up 3.7%, almost 4%, which was pretty good. We're encouraged that Europe has accelerated a little bit. It was down in the first half about a point. It's up about two points in the quarter, which is good. China is quite interesting. You might recall we grew about, I think, around double digits, low double digits last year. In the first half of the year, we're up mid-single digits. Q3 was up high single digits, around 8%. It was better than we had expected. We had expected a softening in the back half. In fact, it accelerated a little bit in Q3. It might weaken a little bit in Q4, but still be up. We're very encouraged with the trends here.

Got it. That's really helpful. Thanks Bill. And then um, just from a geographic perspective, encouraging to see the acceleration in China and Europe. Any key standouts there in either region that, you know, really drove that Improvement.

First is about 10% to 12% of the company is about 50, 50, domestic and export and China exports in September were up about 8%.

So China continues to be to be pretty resilient in lots of ways, but we've got a great team there theres a lot of self help that's going on we changed our organizational model in China as well as in India, and we're seeing just better performance because we're driving operational excellence driving commercial effectiveness, a whole lot better than we might have done in the past so.

So part of the growth that we're seeing in China is just I would say self help along with the market I think a lot of self help.

William Brown: Remember, for us, it's about 10%, 12% of the company. It's about 50/50 domestic and export. China exports in September were up about 8%. China continues to be pretty resilient in lots of ways. We've got a great team there. There's a lot of self-help that's going on. We changed our organizational model in China as well as in India. We're seeing just better performance because we're driving operational excellence, driving commercial effectiveness a whole lot better than we might have done in the past. Part of the growth that we're seeing in China is just, I would say, self-help along with the market. I think a lot of self-help.

So you you asked us was was encouraging at coming up from the first half. I think, first half was a 1%. Q3 was up 3.7 almost 4%, which is pretty good. You know, we're encouraged that Europe has, um, has accelerated a little bit. It was down in the first half about a point. It's up about 2 points in in the quarter, which is good, you know, China is, is quite interesting. You might have recall, we we grew about low, I think around double digits, low, double digits last year. Um, in the first half of the Year, we're up mid single digits, you know, Q3 was up high single digits around 8%, so it's, it was better than we had expected. We had expected a softening in the back half. And in fact, it, it accelerated a little bit in the in, in Q3. Now it might weaken a little bit in Q4 but but still be up and so so we're very encouraged with the trends here, you know, remember it's for us, it's about little 10. 12% of the company is about 50.

Thank you I'll pass it on.

Our next question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your question.

Thanks, Good morning, everyone.

I just want to go back to sort of the point that Jeff with.

Get into on the NPI.

I think you mentioned, 16% growth year to date from new products fell 19% in the quarter I might have got those numbers wrong, but it does suggest that's pretty much all of your growth is coming from new product.

50 domestic and Export and the China exports in September were up about 8%, you know. So so China continues to be to be pretty resilient in lots of ways but we've got a great team. There there's a lot of self-help that's going on. We changed our organizational model in China as well as in India. And we're seeing just better performance because we're driving operational action, which is driving commercial Effectiveness, a whole lot better than we might have done in the past. So so part of the growth that we're seeing in China is just, um, I would say self-help along with the market. I think a lot of self-help.

Number one is that is that correct and then secondly is it too early to judge how the margin contribution is tracking for this MPI.

[Analyst]: Thank you. I'll pass it on.

Thank you. I'll pass it on.

Operator: Our next question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your question.

So Nigel look just to be clear the numbers, we track what I, what I talked about was new product sales on a five year basis, So going back everything launched in the last five years. So some rolls on in the quarter and five years ago that Q3 would have would have rolled off and what we're seeing.

[Analyst]: Thanks. Good morning, everyone. I just want to go back to the point that Jeff was getting into on the NPI. I think you mentioned 16% growth year to date from new products, Bill, and 19% in the quarter. I might have got those numbers wrong. It does suggest that pretty much all your growth is coming from new product. Number one, is that correct? Secondly, is it too early to judge how the margin contribution is tracking for this NPI?

Our next question comes from the line of Nigel. Co. with wolf research. Please proceed with your question.

As a measure for vitality. So we measure the five year, new product revenue as a percentage of the total revenue at points in time, we are in the high twenty's, 30% vitality, maybe even a bit above that we started the year at about 10% will end at 12 will go to 20% by 2007, that's what we.

William Brown: Nigel, just to be clear, the numbers we track, what I talked about was new product sales on a five-year basis. Going back, everything launched in the last five years. Some rolls on in the quarter, and five years ago, the Q3 would have rolled off. What we're seeing is because that's what we use as a measure for vitality. We measure the five-year new product revenue as a percentage of the total revenue. At points in time, we are in the high 20s, 30% vitality, maybe even a bit above that. We started the year at about 10%. We'll end at 12%. We'll go to 20% by 2027. That's what we watch, and that will convert into revenue each quarter that starts to build. In the first quarter, that five-year new product sales was up 3%. In Q2, it was up 15%.

What shall we want that will convert into revenue each quarter as that starts to build so in the first quarter that five year, new product sales was up 3% in Q2 is up 15%. So for the first half was up nine in Q3. It was up 30%, which now takes a year to date up to 16 for the <unk> will be up high teens and then.

Thanks. Good morning, everyone. Um, I just want to go back to, um, sort of the point that Jeff was, uh, was was, was, was was, um, getting into on the NPI. Um, I think you, you mentioned 16% growth year to date, uh, from new products, Bill and 19% in the quarter. I might have got those numbers wrong, but it does suggest that pretty much all your growth is coming from new product. Uh, number 1. Is that, is that correct? And then, secondly, is it too early to judge how the margin contribution is tracking for this MPI? So, so Nigel. Look, you know, just to be clear. The numbers we tracked. What I, what I talked about was new product sales on a 5-year basis. So going back, everything launched in The Last 5 Years. So some rolls on in the quarter and 5 years ago, the Q3 would have would have rolled off and what we're seeing is

That's going to continue to build that that's on a five year basis. Some of that revenue is converting here in the quarter I would say most of the outsized growth above macro in the quarter came out of a commercial effectiveness commercial efficiency not so much NPI, but again as our August pointed out before that will build over it.

Time, so early on we'll see more commercial excellence and then eventually you'll start to see NPI rolling in but the reality is as we launch more products. It's very clear that is changing the discussion with our customers.

William Brown: For the first half, it was up 9%. In Q3, it was up 30%, which now takes year to date up to 16%. For the year, we'll be up high teens, and that's going to continue to build. That's on a five-year basis. Some of that revenue is converting here in the quarter. I would say most of the outsized growth above macro in the quarter came out of commercial effectiveness, commercial efficiency, not so much NPI. As Anurag has pointed out before, that will build over time. Early on, we'll see more commercial excellence, and eventually, we'll start to see NPI rolling in. The reality is, as we launch more products, it's very clear that it's changing the discussion with our customers. Even if it's a typical replacement or there's some cannibalization, it's allowing a different conversation with the customer.

Even if it's a typical replacement or theres, some cannibalization, it's allowing a different conversation with a customer we're gaining shelf space and that's really encouraging to our customers and we're winning business simply because we're launching more products.

Okay. That's frankly, thanks, Bill Thanks, Tim I'm sure and then.

Maybe on <unk> six can you, maybe just give us a bit more definition on some of the margin puts and takes.

As it relates to the tariff row forward trying to costs and then some of the.

Productivity savings.

Then maybe a cheeky one on the EPS.

High single digits.

Growth for your planning for 2020 seven I'm just wondering if you have confidence that that's a decent pesos 26, okay.

William Brown: We're gaining shelf space, and that's really encouraging to our customers. We're winning business simply because we're launching more and more products.

To build, in the first quarter, that 5-year new product sales was up 3%. In Q2, it was up 15%. So for the first half, it was up 9%. In Q3, it was up 30%, which now takes year-to-date up to 16%. For the year, it will be up in the high teens, and that's going to continue to build. That's on a 5-year basis. Some of that revenue is converting here in the quarter. I would say most of the outside growth above macro in the quarter came out of commercial effectiveness and commercial efficiency, not so much NPI. But again, as Anurag Maheshwari pointed out before, you know, that will build over time. So, you know, early on, we'll see more commercial excellence, and then eventually we'll start to see NPI rolling in. But the reality is, as we launch more products, it's very clear that it's changing the discussion with our customers. You know, even if it's a typical replacement or there's some cannibalization, it's allowing a different conversation with a customer. We're gaining shelf space.

Thanks Nigel.

Just on the on the margin.

And that's really encouraging to our customers. We're winning business simply because we're launching more products.

[Analyst]: OK, that's very clear. Thanks, Bill. Thanks for clearing that up.

Headwinds <unk> for next year, it's going to be no different from what it is this year or in fact on the volume side as we just at a discussion the outperformance versus macro should accelerate next year. So you should see higher volume growth more incrementals coming flowing through from that next year versus this year on the supply chain side, we said that we will do $1 billion of production.

William Brown: Sure.

[Analyst]: Anurag, maybe on 2026, can you maybe just give us a bit more definition on some of the margin puts and takes as it relates to the tariff roll forward, stranded costs, and then some of the productivity savings? Maybe a cheeky one on the EPS. You talk about high single-digit growth per year planning for 2026 and 2027. I'm just wondering if you have confidence that that's a decent place order for 2026.

Okay, that's correct. Yeah. Thanks Bill. Thanks for clearing that up. Sure. And then uh, anorak, maybe on 2026. Um, can you maybe just give us a bit more definition on some of the margin puts and takes.

With you over the next three years.

As it relates to, you know, the Tariff row forwards. I was trying to cost and and then some of the uh, productivity savings. Um and then maybe a cheeky 1 on the EPS uh you talk about high single digit. Uh,

Good this year, but it would be also finding more opportunities, which I mentioned earlier. If you look at the factory spend that we have which is close to $6 billion and logistics, so youre going to see a little bit more on the productivity side next year G&A, we off the blocks really well.

Anurag Maheshwari: OK. Thanks, Nigel. Just on the margin edgement and tailwinds for next year, it's going to be no different from what it is this year. In fact, on the volume side, as we just had a discussion, the outperformance versus macro should accelerate next year. You should see higher volume growth, more incrementals coming, flowing through from that next year versus this year. On the supply chain side, we said that we'll do $1 billion of productivity over the next three years. We did good this year. We're also finding more opportunities, which I mentioned earlier. If you look at the factory spend that we have, which is close to $6 billion, and logistics, you're going to see a little bit more on the productivity side next year. G&A, we're off the blocks really well this year. We're, in fact, finding more opportunities.

Well this year, we in fact, finding more opportunities we did some good work on <unk> side on the indirect expense and as we move into next year and the Euro off too. We also going to look at what is the strategy for ITI mean for us and for.

Shared services as well as on the indirect theres more that we can do facility management in MRO and so on so you're going to see a good tailwind from that next year as well, so I would say higher on the volume side.

<unk>, continuing and G&A continuing the way it is.

On the EPS side, we will give you more color next year, what as I said the intent of that page was when we started the year 425, we said we will be mid to high single digit EPS right now in our guidance, we're going to be higher.

Anurag Maheshwari: We did some good work on the IT side, on the indirect expense. As we move into next year and the year after, we're also going to look at what does the strategy for IT mean for us and for shared services, as well as on the indirect, there's more that we can do, facility management and MRO and so on. You're going to see good tailwinds on that next year as well. I would say higher on the volume side, supply chain continuing, and G&A continuing the way it is. On the EPS side, we will give you more color next year. As I said, the intent of that page was when we started the year for 2025, we said we will be mid to high single-digit EPS.

Growth per year, plan, and for 26 and 27. I'm just wondering if you have confidence that that's a decent place order for 26, okay, uh, it's, uh, thanks Nigel, just on the, on the margin, uh, Edgmont and Tails for the next year, it's going to be no different from what it is this year. In fact, on the volumes side as we just add a discussion. The hard performance versus macro should accelerate next year, so you should see higher volume growth. More incremental is coming flowing through from that next year, versus this year on the supply chain side. You know, we said that we'll do a billion dollars of productivity over the next 3 years, uh, we did, um, good this year, but we also finding more opportunities, which I mentioned earlier. If you look at the factory, spend that we have, which is close to 6 billion dollars and Logistics. So you're going to see a little bit more on the productivity side. Next year GNA, we we off the blocks really. Uh, well this year we in fact finding more opportunities. Uh, we did some good work on it side on the indirect expense and as we move into next year and the year after

Close to double digit EPS, 10% at the midpoint of our guidance for this year, So we definitely off.

At a very strong start right now, but we'd probably give you more color on what the EPS for 'twenty six 'twenty seven looks like next year.

Okay. Thanks.

Our next question comes from the line of Julian Mitchell with Barclays. Please proceed with your question.

Hi, good morning.

Maybe just wanted to try and understand on the margin front.

Anurag Maheshwari: Right now, at our guidance, we're going to be close to double-digit EPS, 10% at the midpoint of our guidance for this year. We're definitely off at a very strong start right now. We'll probably give you more color on what the EPS for 2026, 2027 looks like next year.

In the sort of T E business group.

Margins were fairly sort of.

Down slightly in the third quarter I think despite a lot of the productivity measures underway, so maybe sort of help us understand.

We also going to look at, you know, what does the strategy for it mean for us and, and for shared services as well. As on the indirect, there's more that we can do facility management and mro and so on. So you're going to see uh, good good Tailwind on that, uh, next year as well. So I would say higher, on the volume side, uh, supply chain continuing and GNA continuing the way it is. Uh, on the EPS side, we will give you more color next year. What what as I said, the intent of that page was when we started the year for 25, we said we will be mid to high single-digit EPS right now the guidance, we're going to be high uh, close to double digit EPS 10% of the midpoint of a guidance for this year. So we definitely offer um at a very strong uh uh start right now. But we'll probably give you more color on, what the EPS for 2627 looks like next year.

[Analyst]: OK. Thanks.

Okay, thanks.

Any sort of drivers within that and then when we're looking out over the next 12 months.

Operator: Our next question comes from the line of Julian Mitchell with Barclays. Please proceed with your question.

Is the assumption that most of the segments should see sort of similar margin expansion into next year or is there anything, particularly moving around on mix or a calibration of investment spend.

Our next question comes from the line of Julian Mitchell with Barclays. Please proceed with your question.

[Analyst]: Hi. Good morning. Maybe just wanted to try and understand on the margin front. I think in the sort of TEBG, you know, margins were fairly sort of, you know, they were down slightly in the third quarter, I think, despite a lot of the productivity sort of measures underway. Maybe help us understand, you know, any drivers within that. When we're looking out over the next 12 months, is the assumption that most of the segments should see similar margin expansion into next year? Is there anything particularly moving around on mix or a calibration of investment spend?

I'll hit it really quickly or Julien look at both <unk> and CPG margins were up about 200 basis points in the quarter <unk> was down about 20.

It's a large portfolio of businesses mix really matters in that area, but also that's the business that's going to be most impacted by by P. Fast stranded costs. So that was the biggest part of the headwind and we'll talk more as we go forward as to the margin trajectory in each of the businesses, but that's that's really what went on here in the quarter.

Hi, good morning. Um, maybe. Um, just wanted to try and understand on the margin front. Um, I think in the sort of TE, uh, business group, um, you know, margins were fairly sort of, you know, down slightly in the third quarter, I think, um, despite a lot of the productivity sort of measures underway. Um, so maybe sort of help us understand, um, you know, any sort of drivers within that.

Thanks, a lot and then more broadly I suppose we'll see.

William Brown: I'll hit it really quickly here, Julian. Look, both SIBG and CBG margins were up about 200 basis points in the quarter. TEBG was down about 20. It's a large portfolio of businesses. Mix really matters in that area. Also, you know, that's the business that's going to be most impacted by PFAS stranded costs. That was the biggest part of the headwind. You know, we'll talk more as we go forward as to the margin trajectory in each of the businesses. That's really what went on here in the quarter.

10-Q out in a day or two to sort of updates on the litigation or legal front, but we've had some questions from investors around.

The movement in claims recently on personal injury in the last couple of months just wondered if you could sort of flesh out.

Anything that you've seen that on your own tracking of that type of thing and then what the next steps saw him on that personal injury from.

And then when we're looking out over the next 12 months, um, is the assumption that most of the segments should see, sort of similar margin expansion into next year, or is there anything particularly moving around on mix or calibration of Investments spend. So, so I, I had it really quickly here. Julian, look, both tibg and CBG. Margins were up about 200 basis points. In the quarter, teb was down about 20. Um, it's a, it's a large portfolio of businesses. Mix really matters in that area but also, you know, that's the business that's going to be most impacted by by pfas drained, it costs. So that was the biggest part of the headwind and you know we we'll talk more as we go forward as to the margin trajectory you need to the businesses but that's that's really what went on here in the quarter.

[Analyst]: Thanks a lot. More broadly, I suppose we'll see in the 10Q out in a day or two the sort of updates on the litigation or legal front. We've had some questions from investors around the movement in claims recently on personal injury in the last couple of months. Just wondered if you could sort of flesh out anything that you have seen there in your own tracking of that type of thing and what the next steps are on that personal injury front.

Yes, so exactly so julien you're mentioning that the injury claims on the personal injury claims on personal injury Theres really three broad areas that we're focusing as we try to manage risk here and we're doing we're working with relative to mitigate risk and manage risk as we go forward certainly the public water supplier pieces is we settled out a couple.

Of years ago, 12, and a $1 billion very few opt outs. We've we've talked before about some of the AG cases state of New Jersey was last quarter.

Vermont will happen over time, we will see Illinois sort of in September of next year some of within some outside of the MTL. So we continue to drive that and you specifically mentioned about the third one which is personal injury. There wasn't October trial date for the bellwether the judge decided to remove that date to allow.

William Brown: Yeah. Exactly. Julian, you're mentioning the injury claims on personal injury, the claims on personal injury. There are really three broad areas that we're focusing on as we try to manage risk here. We're working well to mitigate risk and manage risk as we go forward. Certainly, the public water supplier piece is we settled that a couple of years ago, $12.5 billion. Very few opt-outs. We've talked before about some of the AG cases. The state of New Jersey was last quarter. Vermont will happen over time. We'll see Illinois sort of in September of next year, some of it within and some outside of the MDL. We continue to drive that. You specifically mentioned the third one, which is personal injury. There was an October trial date for the bellwether. The judge decided to remove that date to allow unfiled cases to be filed.

Litigation or or legal front, but we've had some questions for investors around. You know, the movement in claims recently on personal injury in the last couple of months. Um, just wondered if you could sort of, you know, flesh out anything that you have seen their, um, in your own tracking of of that type of thing and and what the next steps are, um, on that personal injury front.

<unk> filed cases to be filed this is about how he wants to manage case.

Cases in the docket.

As we go.

Through this piece.

All about an hour at how we vet. Some of these filed cases is happening right now.

You'll note in the in the 10-Q that there had been more cases, it's just under 14000. Each each case has multiple claims and we're now in the process of vetting all of that and we'll talk to investors through SEC filings in these calls as we go forward and as we learn more.

William Brown: This is about how he wants to manage cases in the docket as we go through this piece. It's all about how we vet some of these filed cases, which is happening right now. You'll note in the 10Q that there have been more cases. It's just under 14,000. Each case has multiple claims. We're now in the process of vetting all of that. We'll talk to investors through SEC filings in these calls as we go forward and as we learn more.

Great. Thank you.

Our next question comes from the line of Andy Kaplowitz with Citigroup. Please proceed with your question.

Yes, so so exactly, you're so Julie, you're mentioning the the injury claims on personal injury, the the claims on personal injury, you know, there's really 3 broad areas that we're focusing as we try to manage risk here and we're doing we're working with well, to to to mitigate risk and manage risk as we go forward. You know certainly the public water supply piece is is uh we settled that a couple of years ago, 12 and a half billion dollars. Very few opt outs. You know, we've uh, we've talked before about some of the AG cases state of New Jersey was last quarter. You know, Vermont will happen over time. We'll see Illinois, sort of in September of next year, some of it within some outside of the mdl. So we, we continue to drive that and you specifically mentioned about the third 1, which is personal injury, uh, there was an October trial date for for the Bell. Whether the judge, you know, decided to to, to remove that date, to allow unfiled, cases to be filed. This is about how he wants to manage, uh, cases and and the docket, uh, as as we go through this piece, you know, it's all about an hour after

Morning, everyone money handy.

Bill as you continue to shape your portfolio I think you already talked about potential divestitures, but maybe can you talk about how youre thinking about getting three as exposed as you can to some of the megatrends that are out. There for instance, you said had strong demand in your electrical markets within safety <unk> industrial, which I think is leverage the data centers. So how are you thinking about the overall.

How how we vet some of these filed cases is happening right now. Um, you'll note in the in the 10q that, that there have been more cases, it's just under 14,000 each each case has multiple claims, and we're now in the process of vetting, all of that, and we'll talk to investors through SEC filings in these calls, you know, as we go forward as we learn more.

[Analyst]: Great. Thank you.

Portfolio in that sense, that's exactly how we are identifying the priority verticals that we're focused on and you know a good part of the company is is aligned to the priority verticals. You specifically mentioned data centers were exposed to data centers, both inside a data center as well as outside that business for us is.

Great. Thank you.

Operator: Our next question comes from the line of Andy Kaplowitz with Citigroup. Please proceed with your question.

[Analyst]: Good morning, everyone.

Our next question comes from the line of Andy kowitz with Citi group. Please proceed with your question.

William Brown: Morning, Andy.

Good morning everyone morning Andy.

[Analyst]: Bill, as you continue to shape your portfolio, I think you already talked about potential divestitures. Maybe can you talk about how you're thinking about getting 3M as exposed as you can to some of the megatrends that are out there? For instance, you cited strong demand in your electrical markets within Safety and Industrial, which I think is leveraged at data centers. How are you thinking about the overall portfolio in that sense?

On the order of about $600 million of hundred inside the datacenter and half a billion outside which is connecting power to the datacenters through terminations.

Terminations through splices are a variety of other things so.

So that business is growing pretty well, it's probably mid teens. So we've got really good exposure that not as much as we would like but but certainly it's growing over time, but that's how we that's how we came up with the thinking around the priority vertical we are light, we aligned our technologies versus mega trends in the marketplace.

William Brown: Andy, that's exactly how we're identifying the priority verticals that we're focused on. You know, a good part of the company is aligned to the priority verticals. You specifically mentioned data centers. We're exposed to data centers both inside a data center as well as outside. That business for us is on the order of about $600 million, $100 million inside the data center and half a billion outside, which is connecting power to the data centers through terminations, through splices, a variety of other things. That business is growing pretty well. It's probably mid-teens. We've got really good exposure there, not as much as we would like. It's growing over time. That's how we came up with the thinking around the priority verticals. We aligned our technologies versus megatrends in the marketplace and capabilities of the company.

The capabilities of the company and that's how we came up with the strategy, we laid out back at the Investor day in in in February.

Helpful. And then I think margin was the highest we've seen in quite a while in consumer can you talk about the puts and takes in that segment. I know you said it might be harder to get price within consumer but are you actually getting any price versus cost in consumer or was it just good execution.

Bill, as you continue to shape your portfolio, I think you already talked about potential Devastators, but maybe can you talk about how you're thinking about getting three of them as exposed as you can to some of the mega trends that are out there? For instance, you set a strong demand on your electrical markets within safety and industrial, which I think is levered to data centers. So, how are you thinking about the overall portfolio in that sense? Well, it is. It's exactly how we're identifying the priority verticals that we're focused on, and you know a good part of the company is aligned to the priority verticals. You specifically mentioned data centers. We're exposed to data centers, both inside a data center, as well as outside. That business for us is, you know, on the order of about $600 million, $100 million inside the data center and half a billion outside, which is connecting, you know, power to the data centers through terminations through splice.

Driving Q3 margin is really good execution, its really its really not pricing. It's the strategy that the CPG team is laid out to focus on four priority brands or through beyond the portfolio SKU rationalization their focus.

William Brown: That's how we came up with the strategy we laid out back at the investor day in February.

This is a variety of other things, you know? So that business is growing pretty well. It's probably mid teens, you know. So we've got really good exposure that not as much as we would like, but but certainly it's growing over time, you know, but that's how we, that's how we came up with, you know, the thinking around the the priority verticals was we we a lot we aligned our our Technologies versus, you know, Mega Trends in the marketplace and, you know, capabilities of the company. And that's how we came up with a strategy. We laid out back at the investor day in, um, in in February.

They're they're launching a lot of new products I mean, they are up more than double year to date and in the quarter. So theyre NPI is really good the commercial excellence is really good we're pushing more add merchant to that space. So the team is performing exceptionally well as pure execution and I would say <unk>, 3% in the quarter they've thrown positively in the last four quarter.

[Analyst]: Helpful. I think margin was the highest we've seen in quite a while in consumer. Can you talk about the puts and takes in that segment? I know you said it might be harder to get price within consumer. Are you actually getting any price versus cost in consumer, or was it just good execution that you saw driving Q3 margin?

Helpful. And then I

William Brown: It's really good execution. It's really not pricing. It's the strategy that the CBG team has laid out to focus on for priority brands. They're beyond the portfolio SKU rationalization. They're focused. They're launching a lot of new products. I mean, they're up more than double year to date in the quarter. Their NPI is really good. Their commercial excellence is really good. We're pushing more ad merch into that space. The team is performing exceptionally well. It's pure execution. I would say 0.3% in the quarter. They've grown positively in the last four quarters. It's 0.3% in Q1, Q2. It's a pretty consistent story in what I would say is a relatively weak consumer market. Purely execution, they're doing a great job.

At this 0.3 in Q1 Q2, so it's pretty consistent story and what I would say, it's a relatively weak consumer market. So purely execution theyre doing a great job.

Helpful. Thank you.

Our next question comes from the line of Chris Snyder with Morgan Stanley. Please proceed with your question.

Thank you.

Squeezing me in maybe only one just because we're running up on time I wanted to ask about China.

First half mid singles Q3 high single, so accelerating I think it is a real disconnect versus what we're seeing elsewhere from others around China.

emerging was the highest we've seen in quite a while and consumer, can you talk about the puts and takes in that segment? I know you said it might be harder to get price within consumer. But are you actually getting any price versus cost and consumer? Or was it just good execution that you saw a driving Q3 margin it? It's really good execution. It's really, it's really not pricing. It's uh, the strategy that the CBG team has laid out to focus on for priority Brands. They're they're beyond the portfolio, SKU rationalization, they're focused. Um, they're they're launching a lot of new products, I mean, they're up more than double, you know, year to date and then the quarter. So their NPI is really good. Their commercial Excellence is really good. We're pushing more, add merch into that space. So the team is performing exceptionally, well is pure execution. And I would say 0.3% in the quarter they've thrown positively in the last 4, quarters is 0.3 in q1 Q2. So, it's pretty consistent story. And what I would say is a relatively weak consumer

I guess my question is what do you see for China into Q4, and next year and do you think there's any risk that maybe that business is running a little bit hot to the extent, there's maybe been overproduction in China ahead of some of the tariff negotiation deadline windows.

The market. So, purely execution, they're doing a great job.

[Analyst]: Helpful. Thank you.

Helpful. Thank you.

Operator: Our next question comes from the line of Chris Snyder with Morgan Stanley. Please proceed with your question.

With Morgan Stanley. Please proceed with your question.

Anurag Maheshwari: Thank you. I appreciate you squeezing me in. Maybe only one, just because we're running up on time. I wanted to ask about China. You know, first half mid-singles, Q3 high singles, so accelerating. I think it's a real disconnect versus what we're seeing elsewhere from others around China. I guess my question is, you know, what do you see for China into Q4 and next year? Do you think there's any risk that maybe that business is running a little bit hot to the extent there's maybe an overproduction in China ahead of some of the tariff negotiation deadline windows? Thank you.

Thanks for the question, Chris look at you know I'm really really pleased with what the team is doing in China. It doesn't feel to me like it's overheating at least from our perspective I think what we're seeing is is a more resilient economy, but I think much more importantly is is just the execution by the team and as I mentioned earlier in the call.

About half the business is going after the domestic market. There is some stimulus going into the market, but the execution of our local China team to go after and attack new opportunities is is quite substantial and half the market is on the export side and we continue to perform really well in that in that space as well one of the key growth.

Verse what we're seeing elsewhere um from others around China. Um so I guess, you know, my question is, you know, what, what do you see for China into Q4 and next year and do you think there's any risk that maybe that business is running a little bit hot? Um, you know, to the extent there's maybe an over production in China ahead of some of the Tariff negotiation deadline windows.

William Brown: Thanks for the question, Chris. Look, I'm really, really pleased with what the team is doing in China. It doesn't feel to me like it's overheating, at least from our perspective. I think what we're seeing is a more resilient economy. I think much more importantly is just the execution by the team. As I mentioned earlier in the call, about half the businesses is going after the domestic market. There's some stimulus going into the market. The execution of our local China team to go after and attack new opportunities is quite substantial. Half the market is on the export side, and we continue to perform really well in that space as well. One of the key growth themes for our TEBG business in China is going after China OEMs.

Themes for our <unk> business in China is going after China Oems.

To capture those opportunities you have to innovate you have to innovate at a pace that's consistent with the pace at which these Oems are launching vehicles a.

In a year or 18 months or even less than that and in the quarter. We saw our ability to launch a new product offering into China to capture share with a China OEM and 10 months. So we're seeing a lot more hustle a lot more speed more eagerness. So so I'm really pleased with what's happening in China.

We thought it would soften it did not it actually accelerated we think might soften a little bit in Q4, I don't know whats actually going to happen because the team is pushing pretty hard, but I am encouraged by the trends our position there the footprint the team the leadership and I think we're doing a great job.

William Brown: To capture those opportunities, you have to innovate, and you have to innovate at a pace that's consistent with the pace at which these OEMs are launching vehicles in a year or in 18 months or even less than that. In the quarter, we saw our ability to launch a new product offering into China to capture share with a China OEM in 10 months. We're seeing a lot more hustle, a lot more speed, more eagerness. I'm really pleased with what's happening in China. We thought it would soften. It did not. It actually accelerated. We think it might soften a little bit in Q4. I don't know what's actually going to happen because the team is pushing pretty hard. I'm encouraged by the trends, our position there, the footprint, the team, the leadership. I think we're doing a great job.

Thank you. So, thanks for the question. Chris look. You know, I'm really really pleased with what uh, what the team is doing in China. Um, it doesn't feel to me, like it's overheating, you know, at least from our perspective. I think what we're seeing is is a more resilient economy, but I think much more importantly is is just the execution by the team. You know, as I mentioned earlier, in the call, you know, about about half the businesses going. After the domestic Market, you know, there's some stimulus going into the market but the the execution of our local China team to go after an attack. New Opportunities is is quite substantial and half the market is on the export side and we continue to perform really well in that in that space as well. 1 of the key growth themes for our teb business in China is going after China oems. And to, to capture those opportunities, you have to innovate, you have to innovate at a pace. You know, that's consistent with the pace at which, you know, these oems are launching vehicles. Um, in in a year or in 18 months or even less than that.

Thank you Bill I really appreciate that I'll sure Chris Thank you.

Our next question comes from the line of Deane Dray with RBC capital. Please proceed with your question.

Thank you and good morning, everyone. Thanks for fitting me in and I'll also keep it to one question just.

Coming back on the divestiture and the review of a potential noncore businesses. So can you talk about the timing.

This is it front loaded you want to try to get it done in the next couple of quarters or will it be an annual review and then related are you restricted in any way by the courts on potentially larger accepts spinoffs or is that just for spin offs. So in the second one there is no restriction.

And in the quarter, we saw our ability to launch a new product offering into China to capture share with a kind of OEM in 10 months. So, we're seeing a lot more hustle, a lot more speed, you know, more eagerness. So, I'm really pleased with what's happening in China. Um, we thought it would soften; it did not. It actually accelerated. You know, we think it might soften a little bit in Q4. I don't know what's actually going to happen because the team is pushing pretty hard, but I'm encouraged by the trends, our position there, the footprint, the team, the leadership. And I think we're doing a great job.

Anurag Maheshwari: Thank you, Bill. Really appreciate that.

William Brown: Sure, Chris. Thank you.

Sure, Chris. Thank you.

Operator: Our next question comes from the line of Dean Dre with RBC Capital. Please proceed with your question.

Our next question comes from the line of Dean Dre with RBC Capital. Please proceed with your question.

Anurag Maheshwari: Thank you. Good morning, everyone. Thanks for fitting me in. I'll also keep it to one question. Just circling back on the divestiture and the review of potential non-core businesses, Bill, can you talk about the timing? Is it front-loaded? You want to try to get it done in the next couple of quarters? Will it be an annual review? Related, are you restricted in any way by the courts on potentially larger exits, spin-offs? Is that it for spin-offs?

And on the former one look we're going to be very thoughtful very methodical, we're going to execute transactions as we're able to do it effectively driving value for owners.

It's a portfolio management is not something that you think about once a year or once in the strategic plan, but it's an ongoing effort. We clearly identified a piece of the company that doesn't appear to fit and we're executing against that while also and really importantly building the module inside the company on how we execute.

Thank you. Good morning everyone. Uh, thanks for fitting me in. I'll also keep it to 1 question just, you know, circling back on the deveste and the review of uh, potential, non-core businesses. So, can you talk about the timing, you know, is this, is it front loaded? You want to try to get it done the next couple of quarters or will it be an annual review?

William Brown: In the second one, there's no restriction. On the former one, look, we're going to be very thoughtful, very methodical. We're going to execute transactions as we're able to do it effectively, driving value for owners. Portfolio management is not something that you think about once a year or once in a strategic plan. It's an ongoing effort. We clearly identified a piece of the company that doesn't appear to fit, and we're executing against that while also, and really importantly, building the muscle inside the company on how we execute through the basics, the fundamentals, which is the strategy we laid out in the middle of last year. It's a focus on fundamentals, operational excellence, commercial excellence, innovation excellence.

Through the basics the fundamentals, which is the strategy we laid out in the middle of last year to focus on fundamentals operational excellence commercial excellence innovation excellence, and that's really where we're spending a lot of our time on as we think about how the portfolio should move as we pivot the business into these higher growth verticals align to the quest.

And then, related, are you restricted in any way by the courts on potentially larger exits, spin-offs, or is that it for spin-offs? So, in the second one, there's no restriction. You know? And on the former one, you know, look, we're going to be very thoughtful, very methodical. We're going to execute transactions as we're able to.

<unk> came up early around Mega trends in our priority vertical. So this is this is the path we're on and again, we'll be thoughtful and very methodical.

Thank you sure.

Our next question comes from the line of Joe O'dea with Wells Fargo. Please proceed with your question.

Hi, good morning, all.

William Brown: That's really what we're spending a lot of our time on as we think about how the portfolio should move as we pivot the business into these higher growth verticals aligned to the question that came up earlier around megatrends in our priority verticals. This is the path we're on, and again, we'll be thoughtful and very methodical.

I'll keep it to one as well, but just wanted to circle back on commercial excellence and clearly some traction that youre seeing there, but trying to understand.

The timeline and if you could put it in the perspective of kind of what inning, you're in and safety and industrial and then talk about how long it's taken to get to that $100 million pipeline, because really what I'm trying to understand is I think your earlier days on TNT and don't know where you are on consumer but trying to think about how repeatable.

To do it. Effectively driving value for owners. You know, we it's a portfolio management is not something that you think about once a year or once in a strategic plan, but it's an ongoing effort, you know, we we clearly identified, you know, a piece of the company that that doesn't appear to fit, you know, and you know, we're executing against that while. Also in really importantly, you know, building the muscle inside the company on how we execute through the basics. The fundamentals, which is the strategy we laid out in the middle of last year. It's a focus on fundamentals. Operational excellence commercial Excellence, Innovation Excellence. So that's really what we're spending a lot of our time on. As we think about how the portfolio should move as we pivot the business into these higher growth. Verticals aligning to the question came up earlier around, Mega Trends in our our priority vertical. So this is this is the path we're on and again we'll be thoughtful and very methodical

Anurag Maheshwari: Thank you.

William Brown: Sure.

Thank you, sure.

Operator: Our next question comes from the line of Joe O’Day with Wells Fargo. Please proceed with your question.

Our next question.

On the line of Joe O'D with Wells Fargo, please proceed with your question.

All what youre doing in safety and industrial is in these other segments and the timeline to see traction there a Joe. Thank you for that question, it's a great one.

[Analyst]: Hi. Good morning. I'll keep it to one as well. Just wanted to circle back on commercial excellence and clearly some traction that you're seeing there. Trying to understand the timeline and if you could put it in the perspective of kind of what ending you're in in Safety and Industrial. Then talk about how long it's taken to get to that $100 million pipeline. What I'm trying to understand is I think your earlier days on T&E and don't know where you are on Consumer. Trying to think about how repeatable what you're doing in Safety and Industrial is in these other segments and the timeline to see traction there.

We're really proud of what the team is doing in commercial excellence.

We have great great momentum here and we did start mostly in <unk> and within SAP D. G was starting in U S. They don't went to Europe, and Asia rest of the world and in Wendy in the TPG team is as fast followers learning from those lessons are drafting right behind them against starting in the U S. Then going internationally karina.

Hi, good morning. Um, I'll, I'll keep it to 1 as well, uh, but just wanted to Circle back on Commercial excellence, and clearly, uh, some traction that you're seeing there, but trying to understand the, the timeline. And if you could put it in the perspective of kind of what ending you're in, in safety and Industrial, and then you talk about how long it's taken to get to that hundred million dollar pipeline because really, what

Hazard effort going on in CPG.

Actually building I think terrific momentum it's in three areas.

William Brown: Hey, Joe, thank you for that question. It's a great one. I'm really proud of what the team is doing in commercial excellence. We have great, great momentum here. We did start mostly in SIBG, and within SIBG, it was starting in the U.S. It went to Europe and Asia and the rest of the world. Wendy and the TEBG team are fast followers, learning from those lessons or drafting right behind them, again starting in the U.S., then going internationally. Karina has an effort going on in CBG. It's actually building, I think, terrific momentum. It's in three areas, the pillars we call them. One is commercial management. It's how we improve our processes and capacity at the front end. It's standard tools. It's improving our salesforce. It's basic execution between our sales rep, sales manager, and how they execute at the customer interface.

Pillars, we call them, one is commercial management as how we improve our processes and capacity at the front end is standard tools, it's improving our sales force at its basic execution between our sales reps sales manager and how they execute at the customer interface part of it is a second which is channel effectiveness is all about.

We engage with our customers' joint business planning and that's what gave rise to these great ideas on cross selling and the pipeline that we have it's over $100 million of of cross sell opportunities, which we've now captured $30 million on an annualized basis.

That number is going to be bigger than what Chris laid out at the beginning of this year at Investor day, and we're actually seeing even opportunities cross sell between <unk> and consumer so it's actually quite good and then third is how we improve loyalty to reduce churn. This is a great opportunity the best way to grow is to not lose we are reducing our attrition that.

William Brown: Part of it is a second, which is channel effectiveness. It's all about how we engage with the customers, joint business planning. That's what gave rise to these great ideas on cross-selling in the pipeline that we have that's over $100 million of cross-sell opportunities, which we now have captured $30 million on an annualized basis. That number is going to be bigger than what Chris laid out at the beginning of this year at investor day. We're actually seeing even opportunities cross-sell between TEBG and SIBG and consumer. It's actually quite good. The third is how we improve loyalty to reduce churn. This is a great opportunity. The best way to grow is to not lose. We are reducing our attrition that comes through better quality and better on-time and full performance. This is gaining traction. We're clearly in our early innings. This will build over time for sure.

It comes through better.

Quality and better on time in full performance. So this is this is gaining traction.

Clearly in the early innings and this will build over time for sure. So I'm really pleased with the progress of foreign on our commercial effectiveness work.

I appreciate the color. Thanks.

Okay, well I think we think that brings us to the end of the call I wanted to thank again all of the three <unk> for their continued drive towards excellence, improving everyday executing against our priorities in delivering value to shareowners into customers and thank you very much and thank you all for joining the call today.

Learning from those lessons are drafting right behind them again. Starting in the US, then going internationally Karina has her effort going on in in CBG, you know, it's actually building, I think terrific momentum. It's in 3 areas. You know, the pillars. We we call them 1 is Commercial Management. It's how we improve our processes and capacity, the front end a standard tools. It's improving our sales force. It's it's basic execution between our sales rep, sales manager, and how they execute at the customer interface. Part of it is a second, which is channel Effectiveness. This is all about how we engage with the customers joint business planning and that's what gave rise to these. Great ideas on cross-selling in the pipeline that we have. That's over a hundred million dollars of of crosselle opportunities. We which we've now captured 30 million dollars on an annualized basis. That number is going to be bigger than what Chris laid out at the beginning of this year at investor day. And, you know, we're actually seeing even opportunities across between teeb gns IBG and consumer. So it's actually

Ladies and gentlemen that does conclude today's conference call.

William Brown: I'm really pleased with the progress so far on our commercial effectiveness work.

We thank you for your participation and ask that you. Please disconnect your lines.

quite good. And the third is how we we improve loyalty to reduce churn. This is a great opportunity. The best way to grow is to not lose, you know, we are reducing our attrition that comes through better, uh, uh, quality and better on-time in full performance. So this is this is gaining traction. You know, we are clearly in an early Innings, you know, in this will build over time for sure. So, I'm really pleased with the progress of foreign on our commercial Effectiveness work.

Anurag Maheshwari: Appreciate the color. Thanks.

Appreciate color. Thanks.

William Brown: OK. I think that brings us to the end of the call. I wanted to thank again all the 3Mers for their continued drive towards excellence, improving every day, executing against our priorities, and delivering value to shareholders and to customers. Thank you very much. Thank you all for joining the call today.

Okay, I think we uh, I think that brings us to the end of the call. I wanted to thank again. All the 3, em for their continued drive towards Excellence, improving every day, executing against our priorities, in delivering value to shareholders and to customers. And thank you very much and thank you all for joining the call today.

Operator: Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you please disconnect your line.

Hey, this is gentlemen, that does conclude today's conference call.

We thank you for your participation and ask that you please disconnect your line.