Q1 2026 3M Co Earnings Call

April 21, 2026

We're standing by.

Welcome to the <unk> first quarter earnings conference call.

Speaker #1: During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct the question-and-answer session. At that time, if you have a question, please press star one on your telephone keypad.

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. Please press star one on your telephone keypad.

Speaker #1: As a reminder, this call is being recorded to say April 21st, 2026. I would now like to turn the call over to Chinmay Trivedi, Senior Vice President of Investor Relations and Financial Planning and Analysis at 3M.

As a reminder, this call is being recorded Tuesday April 21 2026.

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 P. M.

Speaker #2: Thank you. Good morning, everyone, and welcome to our first-quarter earnings conference call. With me today are William Brown, 3M's Chairman and Chief Executive Officer, and Anurag Maheshwari, our Chief Financial Officer.

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

With me today are Bill Brown, <unk>, Chairman and Chief Executive Officer, and Roger <unk>, Chief Financial Officer.

Speaker #2: William and Anurag will make some formal comments, then we will take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our Investor Relations website at 3M.com.

Building on the Rod will make some formal comments and we will take your questions.

Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our Investor Relations website at <unk> Dot com.

Speaker #2: 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 3M's future performance and financial results.

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

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

Speaker #2: These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions.

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

Item <unk> of our most recent Form 10-K lists some of these most important risk factors that could cause actual results to differ from our predictions.

Speaker #2: Please note, through our today's presentation, we'll be making references to certain non-GAAP financial measures. The considerations of the non-GAAP measures can be found in the attachments to today's press release.

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

Speaker #2: With that, please turn to slide three, and I will hand the call over to Bill. Bill?

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

Speaker #3: Thank you, Chinmay. And good morning, everyone. We delivered solid operating performance in Q1, with earnings per share of $2.14, up Operating margin increased 30 basis points to 23.8%, and free cash flow was over $500 million.

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

Bill.

Thank you chip and good morning, everyone.

We delivered solid operating performance in Q1 with earnings per share of $2 14.

Speaker #3: Up double digits. During the quarter, we returned $2.4 billion to shareholders, including $400 million in dividends and $2 billion in share repurchases. We had a light start to the year on the top line with organic growth of 1.2%, driven by pockets of macro pressure, but we saw encouraging order trends that supported our outlook for acceleration in the balance of the year.

Up mid teens versus last year.

Operating margin increased 30 basis points to 23, 8% and free cash flow was over $500 million up double digits.

During the quarter, we returned $2 $4 billion to shareholders, including $400 million in dividends and $2 billion of share repurchases.

We had a late start to the year on the top line with organic growth of one 2% driven by pockets of macro pressure, but we saw encouraging order trends that support our outlook for acceleration in the balance of the year.

Speaker #3: Looking forward, we remain confident in achieving our full year 2026 guidance, despite the volatile environment. Our performance reflects strong execution on productivity, cost discipline, and commercial rigor.

Looking forward, we remain confident in achieving our full year 2026 guidance, despite the volatile environment.

Speaker #3: We're building a strong foundation based on commercial, innovation, and operational excellence, underpinned by a relentless focus on strengthening our performance culture. In commercial excellence, we're seeing benefits from improved sales effectiveness and lower customer attrition, and we continue to make progress on cross-selling opportunities.

Our performance reflects strong execution on productivity cost discipline and commercial rigor.

We're building a stronger foundation based on commercial innovation and operational excellence underpinned by a relentless focus on strengthening our performance culture.

Speaker #3: To date, we've closed on approximately $80 million of new business against a three-year, $100 million target we laid out at Investor Day, with a pipeline of $85 million of additional cross-sell opportunities.

In commercial excellence, we're seeing benefits from improved sales effectiveness and lower customer attrition and we continue to make progress on cross selling opportunities.

Speaker #3: We've introduced AI tools to drive growth, reduce churn, and automate manual work, including an agent that analyzes our sales and opportunity pipeline data to develop customized coaching plans for sales managers to help reps meet their targets.

To date, we've closed on approximately $80 million of new business against the three year $100 million target, we laid out at Investor day, with a pipeline of $85 million of additional cross sell opportunities.

Speaker #3: And we believe digital tools like Ask 3M, the new AI-powered digital assistant that helps customers find solutions to design challenges using 3M products, will allow us to reach a broader population of customers.

We've introduced AI tools to drive growth reduce churn and automate manual work, including an agent that analyzes our sales and opportunity pipeline data to develop customized coaching plans for sales managers to help reps meet their targets.

Speaker #3: Our pace of new product introductions is accelerating, with better on-time performance, recycle times, and clear governance and accountability across R&D. We launched 84 new products in Q1, up 35% versus last year, and we're on pace to launch 350 in 2026.

And we believe digital tools like ask three M. A new AI powered digital assistant that helps customers find solutions to design challenges using <unk> products will allow us to reach a broader population of customers.

Our pace of new product introductions is accelerating with better on time performance reduce cycle times, and clear governance and accountability across R&D.

Speaker #3: This would put us ahead of our Investor Day target to launch 1,000 new products through 2027. We've maintained OTA service levels above 90%, while at the same time reduced inventory by three days and delivery lead time by 25%, improving our competitiveness with customers.

We launched 84, new products in Q1 up 35% versus last year, and we're on pace to launch $350 in 2026.

Speaker #3: OEE improved over 100 basis points year-on-year, as we optimize asset run length, runtime, and changeovers, creating a stronger foundation for sustained productivity and fixed cost leverage.

This will put US ahead of our Investor day target to launch 1000, new products through 2027.

We've maintained Otis service levels above 90%, while at the same time reduce inventory by three days and delivery lead time by 25% improving our competitiveness with customers.

Speaker #3: Cost-to-per-quality decreased by approximately 100 basis points versus Q1 last year, driven by more structured root cause analysis, significantly decreased Kaizen activity, and tighter process controls.

OE improved over 100 basis points year on year, as we optimize asset run lengths run time, and changeovers, creating a stronger foundation for sustained productivity and fixed cost leverage.

Speaker #3: What matters is that these are not isolated wins; they collectively reflect greater execution discipline and constancy of purpose. And that consistency and momentum gives us confidence that we can meet or exceed the medium-term goals we outlined at our Investor Day last year, even in an uncertain macro environment.

And cost of poor quality decreased by approximately 100 basis points versus Q1 last year driven by more structured root cause analysis significantly increased <unk> activity and tighter process controls.

Speaker #3: While we continue to strengthen our foundation and shift from a holding company to an operating company model, we're beginning a broad-based transformation of the company: simplifying and standardizing processes, reducing complexity, reshaping our portfolio, and improving resilience and predictability.

What matters is that these are not isolated wins, they collectively reflect greater execution discipline and constancy of purpose.

And that consistency and momentum gives us confidence that we can meet or exceed the medium term goals, we outlined at our Investor day last year.

Speaker #3: We see substantial opportunities to streamline operations and consolidate facilities. The transformation includes both deliberate footprint actions as well as targeted investments in manufacturing and process technology, for example, transitioning from solvent to solvent-free coating, which brings cost, capital, and environmental benefits.

Even in an uncertain macro environment.

While we continue to strengthen our foundation and shift from a holding company to an operating company model. We're beginning a broad based transformation of the company simplifying and standardizing processes, reducing complexity reshaping our portfolio improving resilience and predictability.

Speaker #3: Earlier this month, we closed on the previously announced sale of our Precision Grinding and Finishing business with an SIBG, which reduced our footprint by seven factories. We closed one factory and announced three other full or partial closures, bringing our total projected manufacturing site count to below 100.

We see substantial opportunities to streamline operations and consolidate facilities.

The transformation includes both deliberate footprint actions as well as targeted investments in manufacturing and process technology. For example, transitioning from solvent to solvent free coating, which brings cost capital and environmental benefits.

Speaker #3: At the same time, we're investing more than $250 million over the next three years in standard, easy-to-replicate automation across our plants and distribution centers.

Earlier this month, we closed on the previously announced sale of our precision grinding and finishing business within <unk>, which reduced our footprint by seven factories, and we closed one factory and announced three.

Speaker #3: By automating material handling, our warehouses, replacing manual slitters with automated systems, and automating our current manual visual inspection processes, we are improving safety, reducing labor costs, increasing yield, and putting ourselves in a better position to support demand as volume recovers.

Closures, bringing our total projected manufacturing site count to below 100.

At the same time, we're investing more than $250 million over the next three years in standard easy to replicate automation across our plants and distribution centers.

Speaker #3: To illustrate the opportunity, we have 7,000 material handlers in over 600 operators performing manual visual inspections across our network, and about 500 manual slitters.

By automating material handling in our warehouses, replacing manual splitters with automated systems and automating our current manual visual inspection processes, we're improving safety, reducing labor costs, increasing yield and putting ourselves in a better position to support demand as volumes recover.

Speaker #3: When we automated the slitting operation at our data facility late last year, we achieved a 30% increase in square yards per hour productivity. Over time, this transformation will allow us to accelerate towards a structurally higher-growth, higher-margin potential portfolio of priority verticals.

<unk>.

To illustrate the opportunity we have 7000 material handlers and over 600 operators performing manual visual inspections across our network and about 500 manual splitters.

Speaker #3: Slide 4 provides more detailed view of growth and orders by end market. When you look across our portfolio, roughly 60% of our business has showed relative strength in Q1, including general industrial and safety.

When we automated the slitting operation at our Nevada facility late last year, we achieved a 30% increase in square yards per hour productivity.

Speaker #3: Importantly, we also saw strong orders in these markets, which gives us visibility and reinforces that the demand environment in these verticals remains healthy. At the same time, we experienced macro- and industry-driven softness in about 40% of the portfolio that we've been highlighting as watch areas.

Over time, this transformation will allow us to accelerate towards a structurally higher growth higher margin potential portfolio of priority verticals.

Speaker #3: In electronics, we delivered flat year-over-year growth in Q1, versus mid-single digits last year. Our performance in semiconductor and data centers was very strong, while consumer electronics was soft due to industry-wide memory chip issues, which is impacting demand.

Slide four provides a more detailed view of growth and orders by end market.

When you look across our portfolio roughly 60% of our businesses showed relative strength in Q1, including general industrial and safety.

Importantly, we also saw strong orders in these markets, which gives us visibility and reinforces that the demand environment in these verticals remains healthy.

Speaker #3: Electronics orders were up double digits due to significant activity in semis and data centers, which will convert to revenue in Q2 and the second half.

At the same time, we experienced macro and industry, driven softness and about 40% of the portfolio that we've been highlighting as watch areas.

Speaker #3: In automotive, the market was soft as expected in the first quarter. Global IHS build rates were down about 3% overall and 10% in China, which pressured volumes.

Electronics, we delivered flat year over year growth in Q1 versus mid single digits last year.

Speaker #3: In consumer, we continue to see soft US consumer discretionary spending, with the Pew pockets of strength in categories with recent new product introductions. POS trend in the US improved over the course of the quarter, and we're positive in seven of the last eight weeks, providing some encouragement heading into Q2.

Our performance in semiconductor and data centers was very strong while consumer electronics was soft due to industry wide memory chip issues, which is impacting demand.

Electronics orders were up double digits due to significant activity in <unk> and data centers, which will convert to revenue in Q2 and the second half.

Speaker #3: Overall, orders were up slightly over 10% in Q1 and backlog grew double digits both sequentially and year-over-year, giving us momentum into Q2. This strength reflects the combined impact of our new product introductions, continued progress in commercial excellence, and orders for longer lead time products, with some additional benefit from pre-buying ahead of recent price actions.

In automotive the market was soft as expected in the first quarter.

Global IHS build rates were down about 3% overall and 10% in China, which pressured volumes.

And in consumer we continue to see soft U S consumer discretionary spending with a few pockets of strength in categories with recent new product introductions.

Speaker #3: It's encouraging to see order strength continue into the first few weeks of April. Turning to Slide 5, as part of our ongoing focus on portfolio shaping, last month we announced the acquisition of Madison, our SAT safety business, to create a leading global fire and safety business.

Pos trends in the U S improved over the course of the quarter and were positive in seven of the last eight weeks, providing some encouragement heading into Q2.

Overall orders were up slightly over 10% in Q1 and backlog grew double digits, both sequentially and year over year, giving us momentum into Q2.

Speaker #3: The combination of SCOT Safety's premium, self-contained breathing apparatus with Madison Fire and Rescue's premier portfolio in rescue technology and fire suppression creates an $800 million revenue business, growing at a high single-digit growth rate.

This strength reflects the combined impact of our new product introductions continued progress in commercial excellence and orders for longer lead time products with some additional benefit from pre buying ahead of recent price actions.

Speaker #3: This strategic transaction broadens our safety portfolio—one of our priority verticals. By expanding our market reach and building scale for future growth, it positions us to maintain above-market growth, enhance margins, and drive strong free cash flow generation.

It's encouraging to see order strength continue into the first few weeks of April.

Turning to slide five as part of our ongoing focus on portfolio shaping last month, we announced the acquisition of Madison fire and rescue which will be combined with our Scott safety business to create a leading global fire and safety business.

Speaker #3: I also want to highlight our growing data center and associated power utility business, with current revenue of approximately $600 million—$100 million inside the data center, and about $500 million bringing power to the facility.

The combination of Scott safety as premium self contained breathing apparatus with Madison fire and rescue as Premier portfolio in rescue technology fire suppression creates an $800 million revenue business growing at high single digit growth rate.

Speaker #3: This is a priority vertical space, but we are introducing new products like EBL, or expanded beam optics—a high-performance optical connector engineered to improve installation speed, reliability, and operational efficiency within data centers.

This strategic transaction broadens, our safety portfolio, one of our priority verticals by expanding our market reach and building scale for future growth.

Speaker #3: EBL builds on our existing TwinAx copper connector for high-speed data transmission and positions us well for the copper-to-fiber transition underway. With hyperscaler validation, a significant order in hand, and a billion-dollar-plus addressable market, we're investing to more than double our capacity to support growing AI demand.

It positions us to maintain above market growth enhanced margins and drive strong free cash flow generation.

I also want to highlight our growing data center and associated power utility business with current revenue of approximately $600 million.

Speaker #3: We see additional opportunities here as demand expands to ceramics, silicon photonics, and on-chip optical connectors. We have strong IP to support this evolving market and a clear roadmap to develop new products that further drive growth.

$100 million inside the data center and about $500 million, bringing power to the facility.

This is a priority vertical space, but we are introducing new products like <unk> or expand it beam optics are high performance optical connector engineered to improve installation speed reliability and operational efficiency within data centers.

Speaker #3: Overall, I'm pleased with our progress this quarter and encouraged by the tempo and executional rigor of the 3M team. We're on a multi-year journey, and progress won't be linear, but we're building the capability to execute consistently, to innovate with purpose, and to allocate resources toward the parts of the portfolio that deliver the most value.

<unk> builds on our existing twin <unk> copper connector for high speed data transmission and positions us well for the copper to fiber transition underway.

With hyperscale or validation, a significant order in hand, and $1 billion plus addressable market, we're investing to more than double our capacity to support growing AI demand.

We see additional opportunities here as demand expands to ceramics.

Silicon photonics and on ship optical connectors.

We have strong IP to support this evolving market and a clear roadmap to develop new products that further drive growth.

Overall, I'm pleased with our progress this quarter and encouraged by the pace op tempo and execution rigor of the <unk> team.

We're on a multiyear journey and progress won't be linear, but we're building the capability to execute consistently to innovate with purpose and to allocate resources towards the parts of the portfolio that deliver the most value.

I am grateful to the <unk> team for their commitment hard work and focus as we deliver progress everyday.

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

<unk>.

Thank you Bill turning to slide six we had a good start to the year performing ahead of expectations on auto's margins earnings and cash.

Starting with top line, we delivered organic sales growth of one 2%.

<unk> showed continued momentum and grew over 3% slightly better than expectations.

T B G was flat lighter than expectations due to ongoing weakness in certain end markets like consumer electronics and auto as well as late timing of order intake within the quarter.

And CPG with the North sea the expected recovery in the U S consumer market, resulting in organic sales down 1%.

Notably we saw a significant strength in orders this quarter driven by progress on commercial excellence in NPI.

Overall orders grew slightly more than 10% with <unk> growing mid teens, driven by industrials safety data center semiconductor and aerospace.

The auto momentum accelerated through the quarter, resulting in backlog growth of 20% over last year, and 35% sequentially positioning us well for the second quarter.

First quarter adjusted operating margins were 23, 8% up 30 basis points year on year, driven by strong volume and broad based productivity, which more than offset approximately $145 million of tariff impact stranded costs and investments.

Operating income from the three business groups was up $85 million with 60 basis points of margin expansion driven by supply chain productivity, including improvements in cost of quality and procurement and logistics and continued focus on structural G&A reduction.

Corporate was a 30 basis point headwind from planned wind down of <unk> transition services agreements.

Our sustained operational performance of driving growth and productivity led to EPS improvement of 26.

Our 14% to $2 14.

In addition, we benefited from lower share count timing of tax benefit and FX offsetting tariffs stranded costs and investments.

Adjusted free cash flow was $540 million in the quarter are up 10% from strong earnings growth and improvement in inventory.

A decrease of three days, while maintaining service levels of greater than 19%.

In addition, we returned $2 4 billion to shareholders in the first quarter, including approximately $400 million in dividends, reflecting a 7% increase per share.

And $2 billion through opportunistic share repurchases.

Adjusted free cash flow was 540 million, a quarter or up 10% from strong earnings growth and Improvement in inventory.

Adjusted free cash flow was $540 million in the quarter, or up 10%, from strong earnings growth and improvement in inventory.

Turning to slide seven I will provide an overview of our business group performance for the first quarter.

A decrease of 3 days while maintaining service levels of greater than 90%.

A decrease of three days while maintaining service levels of greater than 90%.

First safety and industrial adds another quarter of 3% plus growth as we continue to gain traction on commercial excellence initiatives and realized benefits from new product launches.

We delivered mid single digit growth across industrial adhesives, and tapes safety electrical markets and abrasive systems, driven by continued share gains from new product introductions and targeted commercial initiatives to reduce customer churn and strengthen sales coverage and increased cross sell.

In addition, we returned 2.4 billion dollars to shareholders in the first quarter, including approximately 400 million individuals, reflecting a 7%, increase per share and 2 billion dollars through opportunistic, share repurchases.

In addition, we returned $2.4 billion to shareholders in the first quarter, including approximately $400 million in dividends reflecting a 7% increase per share, and $2 billion through opportunistic share repurchases.

Turning to cite 7. I will provide an overview of our business group performance for the first quarter.

Turning to slide 7, I will provide an overview of our business group performance for the first quarter.

<unk>.

First, Safety and Industrial, and another quarter of 3% plus growth. As we continue to gain traction on Commercial Excellence initiatives and realize benefits from new product launches.

And relies benefits from new product launches.

Collectively this growth more than offset continued weakness in roofing granules as the housing market and consumer sentiment remains soft.

Even though auto repair claims were down mid single digits. It was encouraging to see our auto after market business be flat to slightly up after a couple of years of decline from good execution of the key account strategy.

We deliver mid-single-digit growth across industrial, decent tapes, safety, electrical markets, and abrasive systems, driven by continued share gains from new product introductions and targeted commercial initiatives to reduce customer churn, strengthen sales coverage, and increase cross-selling.

We delivered mid single-digit growth across industrial, adhesives, and tapes. Safety, electrical markets, and abrasive systems were driven by continued share gains from new product introductions and targeted commercial initiatives to reduce customer churn, strengthen sales coverage, and increase cross-selling.

Turning to transportation and electronics.

While growth was flat orders were up low teens accelerating through the quarter, resulting in backlog up about 30%.

Collectively, this growth more than offset continued weakness in Roofing Granules, as the housing market and consumer sentiment remain soft.

Collectively, this growth more than offset continued weakness in Roofing Grants, as the housing market and consumer sentiment remain soft.

Yeah.

Approximately half the business delivered mid single digits growth, including double digit growth in semiconductor and data center driven by continued market demand and ramp up of <unk> that bill referenced earlier.

Even though auto repair claims were down mid-single digits, it was encouraging to see our auto aftermarket business be flat to slightly up after a couple of years of decline, from good execution of the key account strategy.

Even though Auto Repair claims were down mid-single digits, it was encouraging to see our Auto Aftermarket business be flat to slightly up after a couple of years of decline from good execution of the key account strategy.

Turning to transportation and electronics.

In addition, we saw growth in aerospace and commercial branding from better sales effectiveness.

While growth was flat alls were up low, teens accelerated through the quarter resulting in backlog of about 30%.

While growth was flat, orders were up low teens, accelerating through the quarter, resulting in backlog up about 30%.

This was offset by the other half of the business, which is exposed to consumer electronics and also where the market was down.

Finally, consumer first quarter organic sales were down 1% driven by weakness in USEC as we did not see the expected pickup in retail traffic and the early part of the quarter.

Approximately half the business delivered mid-single digits growth, including double-digit growth in semiconductor and data center driven by continued market demand and ramp-up of EBO that Bill referenced earlier.

In addition we saw growth in Aerospace and Commercial branding from better sales, effectiveness

in addition we saw growth in Aerospace and Commercial branding from better sales, effectiveness

We did see pockets of strength.

Scott's Brian grew approximately 10% on the back of new product launches.

We also saw good traction in international markets, especially in China, and Asia, but it was not enough to offset the impact of USEC, which makes up the majority of the CPG revenue.

This was offset by the other half of the business, which is exposed to consumer electronics and auto, where the market was down.

This was offset by the other half of the business which is exposed to consumer electronics and auto where the market was down.

Finally, Consumer was first. Core organic sales were down 1%, driven by weakness in USYC, as we did not see the expected pickup in retail traffic in the early part of the quarter.

By geography in China, We again grew mid single digits, despite soft auto and consumer electronics end market.

Finally, Consumer first quarter organic sales were down 1%, driven by weakness in USyc, as we did not see the expected pickup in retail traffic in the early part of the quarter.

With that c pockets of rent.

With it, we see pockets of strength.

As we executed on our key account strategy and launched local NPI and a relatively strong industrial market.

<unk> was up slightly with mid single digit growth in industrials being offset by softness in electronics and consumer.

Scotch-Brite grew approximately 10% on the back of new product. Launches, we also saw a good Traction in international markets especially in China and Asia but it was not enough to offset the impact of USAC which makes up majority of the CBG Revenue.

Scotch-Brite grew, approximately 10% on the back of new product launches. We also saw good Traction in international markets, especially in China and Asia but it was not enough to offset the impact of USAC which makes up majority of the CBG Revenue.

Asia had another quarter of good growth with India in the high teens as we drove higher sales coverage across the country.

By geography in China, we gained growth in the mid-single digits, despite soft auto and consumer electronics and market.

By geography, in China, we again grew midsingle digits, despite soft auto and consumer electronics end markets.

EMEA was down about 1% due to market weakness in auto.

As we executed on our key account strategy and launched local NPI in a relatively strong industrial market.

Moving to slide eight.

Though the macro remains uncertain given our good performance in the first quarter, we are reiterating our guidance for the year.

Usyc was up slightly with mid-single-digit growth in Industrials, being offset by softness in Electronics and Consumer.

Organic sales growth of approximately 3%.

Earnings per share ranging from $8 50 to $8 70.

Asia added another quarter of good growth, with India in the high teens, as we drove higher sales coverage across the country.

Asia added another quarter of good growth, with India in the high teens as we drove higher sales coverage across the country.

And free cash flow conversion of greater than 100%.

EMA was down about a percent due to market weakness in auto.

EMA was down about a percent due to Market weakness in auto.

For sales the strong backlog combined with continued strength in orders in the first three weeks of April gives us confidence that all three business groups with accelerated growth in the second quarter and through the balance of the year.

Moving to slide 8.

Though, the macro remains uncertain, given a good performance in the first quarter, we are reiterating our guidance for the year.

Though the macro remains uncertain, given our good performance in the first quarter, we are reiterating our guidance for the year.

Organic sales growth of approximately 3%.

On margins, we had a solid start with the three business groups growing 60 basis points. Despite a 100 basis points year on year tariff impact.

earnings per share, ranging from 8.50 to 8.70 and free cash flow conversion grid and 100%

Earnings per share, ranging from $8.50 to $8.70, and free cash flow conversion of greater than 100%.

For sales.

As we lapped tariff pressure in the second half the continued momentum and productivity and volume acceleration gives us confidence in our expectation of approximately 100 basis points margin expansion for our business groups. This year.

The strong backlog combined with continued strength and orders. In the first 3 weeks of April, gives us confidence that all 3 business groups will accelerate growth in the SEC and through the balance of the year.

The strong backlog combined with continued strength and orders. In the first 3 weeks of April, gives us confidence that all 3 business groups will accelerate growth in the second quarter and through the balance of the year.

Our non operational we expect positive trends driven by a $2 billion share repurchase in the first quarter and lower net interest expense.

On margins, we are off to a solid start with the three business groups, growing 60 basis points, despite a 100 basis points year-on-year tariff impact.

On margins, we had a solid start with the three business groups, growing 60 basis points, despite a 100 basis point year-on-year tariff impact.

Overall, we are maintaining our EPS guidance, which includes a contingency and we will go through the components of the earnings bridge on the next slide.

as we have pressure in the second half the continued momentum on productivity and volume acceleration gives us confidence in our expectation of a approximately 100 basis points margin expansion for business groups this year

Given the strong earnings growth and good progress on working capital, particularly inventory and continued capex efficiency. We believe our free cash flow will be more than $4 5 billion for the year and greater than 100% conversion.

As we lap tariff pressure in the second half, the continued momentum on productivity and volume acceleration gives us confidence in our expectation of approximately 100 basis points margin expansion for business groups this year.

A non-operational. We expect positive trends driven by a $2 billion share repurchase in the first quarter and lower net interest expense.

And non-operational, we expect positive trends driven by a $2 billion share repurchase in the first quarter and lower net interest expense.

Slide nine shows the trend of key earning elements and the current guidance.

Overall, we are maintaining our EPS guidance which includes a contingency and we will go through the components of the earnings bridge on the next slide.

We are trending five to 15 cents higher on <unk> for a momentum on productivity and lower share count and interest expense.

We are facing higher input costs due to the recent increase in oil price, but have implemented targeted price increases to mitigate the impact at the current levels.

Given the strong earnings growth and good progress on working capital, particularly inventory, and continued capex efficiency, we believe our free cash flow will be more than $4.5 billion for the year and greater than 100% conversion.

Given the strong earnings growth and good progress on working capital, particularly inventory and continued capex efficiency. We believe our free cash flow will be more than 4.5 billion dollars for the year and greater than 100% conversion.

Given that we're early in the year and we are operating in a volatile macro environment. We think it is prudent to keep a contingency till we have more clarity about the rest of the year.

Slide 9 shows the trend of key earning elements and the current guidance.

We are trending 5 to 15 cents higher on earnings from momentum on productivity and lower share count and interest expense.

We are trending 5 to 15 cents, higher on earnings from momentum on productivity and lower share count and interest expense.

Overall, we are moving with determined pace and will continue to calibrate as the year progresses.

Regarding cadence, we expect sales growth to accelerate in Q2 and the back half of the year.

We are facing higher input costs due to the recent increase in oil prices, but have implemented targeted price increases to mitigate the impact at the current levels.

Implemented targeted price increases to mitigate the impact at the current levels.

Backlog conversion and continued order strength is expected to support growth momentum in both <unk> and <unk> in the second quarter.

Given that we are early in the year and we are operating in a volatile macro environment. We think it is prudent to keep a contingency till we have more clarity about the rest of the year.

We anticipate consumer to improve as point of sale is on an upward trend, resulting in normalized inventory levels.

Overall, we are moving with determined pace and will continue to calibrate as the year progresses.

On EPS given the contingencies for the second half, we expect our first half EPS to be higher than the second half.

Regarding Cadence, we expect sale growth accelerate in Q2, and the back half of the year.

Regarding Cadence, we expect sales growth to accelerate in Q2 and in the back half of the year.

Our 2026 financial outlook puts us on pace to exceed our medium term financial commitments that we laid out during investor day around growth margin and cash.

Backlog, conversion and continued other strength is expected to support growth, momentum in both sibghatullah.

Backlog conversion and continued other strength is expected to support growth. Momentum in both sib and tbg in the second quarter.

And on capital allocation, we have already returned over $7 billion of the $10 billion of shareholder returns that we have committed to.

We anticipate consumer to improve as point-of-sale is on an upward trend, resulting in normalized inventory levels.

We anticipate consumer to improve as point of sale is on an upward trend, resulting in normalizing inventory levels.

On EPS given the contingency for the second half. We expect, the first half EPS to be higher than the second half.

On EPS, given the contingencies for the second half, we expect the first half EPS to be higher than the second half.

Before we open the call for questions.

I want to take a minute to thank the team for a strong start to the year and being proactive in this environment to mitigate risks and control the controllable and for their commitment to strengthen the foundation and drive profitable growth.

Our 2026 financial outlook puts us on pace to exceed our medium-term financial commitments that we laid out during rest today around growth, margin, and cash.

Our 2026 financial outlook puts us on pace to exceed our medium-term financial commitments that we laid out during Investor Day around growth, margin, and cash.

With that let's open the call for questions.

And on capital allocation, we have already returned over $7 billion of the $10 billion shareholder returns that we had committed to.

And on capital allocation, we have already returned over $7 billion of the $10 billion in shareholder returns that we had committed to.

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

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And for the commitment to strengthen the foundation and drive profitable growth.

Before we open the call for questions, I want to take a minute to thank the team for a strong start to the year and being proactive in this environment to mitigate risks and control the controllable. And for the commitment to strengthen the foundation and drive profitable growth

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

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

And our first question comes from the line of Jeff Sprague with vertical research. Please proceed with your question.

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

Thank you and good morning, everyone.

Hey, bill or on or I'm, just trying to dig into the order commentary a little bit more.

if your question has been answered and you would like to withdraw, please press star 2

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

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Maybe you could give us a little more perspective on the pre buy the size of that if you could I guess pre buy wood.

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

Ply getting ahead of price increases and the like so maybe a little bit of color on how much additional price is now embedded in your organic growth forecast in.

And our first question comes from the line of Jeff Sprague with Vertical Research. Please proceed with your question.

Just also on these backlog numbers, obviously, the delta sound, great, but it's not really a backlog business. So kind of the question is it.

Small numbers on those deltas or.

There are actually significant visibility that you can anchor too as you look into Q2.

Hey, Jeff Good morning. Thank you for the question I'll start and maybe pass on Diana on wrong on the on the backlog point as we said we had very good orders in in the first quarter up double digits, which was very good and Youre right were not really a backlog driven business, but backlog was very strong coming out of Q1 and continues to build in into Q2.

Thank you, good morning everyone. Um, hey Bill or on a rock, just try to dig into the order commentary, a little bit more. Um, maybe you could give us a little more perspective on the pre-b, buy the size of it. If you could and I guess the pre-b buy would uh imply getting ahead of price increases and the like uh, so maybe a little bit of color on how much additional price is now embedded in your organic.

Over the over the course of the quarter. We saw good order growth in January and February kind of up mid single digits, but it accelerated quite a bit in the month of March so it would be well over the double digit number that we ascribed for the whole quarter and it continues into April which I think is very encouraging how much is price I mean, the reality is we.

And our first question comes from the line of Jeffrey with vertical research, please proceed with your question. Thank you. Good morning everyone. Um, hey Bill or on a rug, just try to dig into the order commentary, a little bit more. Um maybe you could give us a little more perspective on pre by the size of it, if you could and I guess a pre buy would uh imply getting ahead of price increases and the like uh, so maybe a little bit of color on how much additional price is now embedded in your organic growth forecasts and um just also on the these backlog numbers, obviously the Delta sound great. Um that's not really a backlog business, but kind of the question, is it, you know, laws small numbers on those Deltas? Or uh is there actually significant visibility that you can anchor to as you look into Q2?

Growth forecasts, and just also on these backlog numbers—obviously, the delta sounds great, but it's not really a backlog business. So the question is, you know, is it just law of small numbers on those deltas, or is there actually significant visibility that you can anchor to as you look into Q2?

We do a price increase every year on April one.

So it's hard to discern how much was a pre buy we think there is some of it.

We've signaled to investors to customers rather that we are going ahead with a price increase on top of it we went out with the April one associated.

Associated with the price of oil coming up so that could cause a little bit of pre buy if you will but again, it's hard to discern exactly how much would that be.

You asked about price for the year for the year, we we had guided before about 80 basis points, who came in a little bit below that in Q1, and we still see outside of oil base increases around 80 basis points, but when you add in oil in the <unk>.

<unk> price increase from oil it could be around an extra 50 basis points is what we're thinking at the moment so price for the year around 1.3 points and I'll, let Andre maybe share a little bit about the backlog.

Hey Jeff. Good morning. Thank you for the question. I'll start. And maybe, uh, pass on the, on the backlog point, you know? As we said, we we had very good orders in in the first quarter up up double digits, which was very good and, and you're right, we're not really a backlog driven business, but backlog was very strong, coming out of q1 and continues to build in into Q2, you know, over the over the course of the quarter. You know, we saw good order growth in January and February kind of about this single digits, but it accelerated quite a bit in the month of March. So, it'll be well over the double digit number that we ascribe for the whole quarter and it continues into April, which I think, is very encouraging, how much is price. I mean, the reality is we do a price increase every year on April 1st. So it's hard to discern how much was a pre-b buy. We think there's some of it, you know, we've signaled to investors to customers rather that we're going ahead with a a price increase on top of what we went out with April 1st, you know, associated with the price of oil coming up. So, so that

Hey Jeff. Good morning. Thank you for the question. I'll start and maybe uh pass on on, on the, on the backlog point you, we we had very good to orders in in the first quarter up up double digits, which was very good and you're right, we're not really a backlog driven business, but backlog was very strong, coming out of q1 and continues to build in into Q2, you know, over the over the course of the quarter. You know, we saw good order growth in January and February kind of up this single digits, but accelerated, quite a bit in the month of March. So, to be well, over the double digit number that we ascribe for the whole quarter and it continues into April, which I think is very encouraging. How much price mean? The reality is we do a price increase every year on April 1st. So, it's hard to discern how much was a pre buy? We think there's some of it, you know, we've signaled to investors to customers around that. We're going ahead with a a price increase on top. We went out to April 1st, you know, associated with the price of oil coming up. So, so that could cause a little bit of prey if you will. But again, it's hard to discern. Exactly.

Thanks Bill.

You are right that we are largely a book and ship business, we're about 75% of our revenue in a quarter comes from book and ship, but we do get backlog coverage as we enter the quarter with the numbers that we.

Mentioned, which was about 35% up sequentially, 20% year over year provides us about 400 500 basis points of additional coverage as we enter into the quarter, which is not insignificant given the growth acceleration that we expect from Q1 and Q2. So I think it's really good to kind of see that we are studying <unk>.

How much would that be? Um, you asked about price for the year for the year. We, we had guided before about 80 basis points. We came in a little bit below that in in q1, you know, we still see, you know, outside of oil-based increases around 8 basis points, you know? But but when you add in oil, in the in the expected price, increase from oil, it could be around an extra 50 basis points is what we're thinking at the moment. So price for the year or around 1.3 points, I don't like maybe share a little bit about the backlog. Yeah, uh thanks Bill. You are right. That we are largely a

With a very good backlog coverage for the quarter combined with the auto momentum that bill spoke about in the first three weeks of April that gives us really confidence for acceleration of growth through them through second quarter and typically we do not talk about.

Orders and sales because of the book and ship because they converge together, but this time you could see the big Spike in as Bill mentioned part of it could be the pre buy but a lot of it is a commercial excellence NPI and other initiatives that we're driving which resulted an audit acceleration.

Great and then maybe just a quick follow up then just to comment about that accelerating into the remainder of the year or by that do you mean, each quarter will be a faster growth quarter than the one that preceded it even though the comps are getting tougher in the back half of the year.

We see we see Q2 being better than Q1, and we see the second half being better than the first half is the way. We're currently looking at it Jeff.

Booking ship business. We're about 75% of our revenue in a quarter comes from booking ship, but we do get backlog coverage as we enter the quarter. The numbers that we mentioned, which was about 35% off sequential or 20% year over year, provides about 400 to 500 basis points of additional coverage as we enter into the quarter, which is not insignificant given the growth acceleration that we expect from Q1 and Q2. So, I think it's really good to kind of see that we are starting with a very good backlog coverage for the quarter, combined with the auto momentum that both spoke about in the first three weeks of April. It gives us really confidence for acceleration of growth through the second quarter. And typically, you know, we do not talk about orders and sales because of the booking ship, because it converts together. But this time, you could see the big spike in, as Bill mentioned, part of it could be the 3 buy, but a lot of it is commercial excellence, NPI, and other initiatives that we're driving, which resulted in auto acceleration.

Enter into the quarter, which is not insignificant, given the growth acceleration that we expect from q1 and Q2. So, I think it's really good to kind of see that we are starting a with a very good backlog coverage for the quarter, combined with the Autumn momentum that bill spoke about in the first 3 weeks of April, it gives us really confidence for acceleration of growth uh, through the through second quarter. And typically, you know, we do not talk about um uh orders and sales because of the booking ship, because it converts together. But this time you could see the big spike in his bill mentioned part of it could be the pre-b buy but a lot of it is a commercial Excellence, NPR and other initiatives that we are driving which resulted in Auto acceleration.

Great. Thank you very much you bet.

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

Good morning, everybody good morning, Scott.

Great. And then maybe just a quick follow-up, then. Uh, just to comment about then accelerating, uh, and the remainder of the year—by that, do you mean each quarter will be a faster growth quarter than the one that preceded it, even though the comps are getting tougher in the back half of the year?

Just to follow up on Jeff's question.

Our customer inventories low and theres, a little bit of a restock occurring or are they balanced how do you guys kind of see.

Great. And then maybe just a quick follow-up then, uh, just to comment about that. And accelerating, uh, in in the remainder of the year are, uh, by that, do you mean each quarter will be a faster growth order than the 1 that preceded? It, even though the comps are getting offer in the back half of the year. Yeah, we we see Q2 being better than q1 and we see the second half being better than the first half is is the way we're currently looking at it, Jeff.

Yeah, we see Q2 being better than Q1, and we see the second half being better than the first half. That is the way we're currently looking at it, Jeff.

Great, thank you very much.

See that element right now so we track it pretty carefully on the safety industrial business group that the distribution inventory.

Next question comes from the line of Scott Davis with Milius Research.

Proceed with your question.

Our next question comes from the line of Scott Davis with Melius research, please proceed with your question.

Is relatively normalized say, maybe a tick below what we typically would see we would typically see 65 70 days and it's a bit below below that now on the consumer side, it's about normalized from where we were last year around 13 weeks of supply.

Good morning, everybody. Good morning, Scott.

Into the year was a bit higher maybe 13 and a half right now of around 13, so on the consumer side up fairly normal on the safety industrial side, I'd say normal to maybe a bit a bit light in the channel.

Okay helpful.

Hey, I think you mentioned in your factory footprint is down like 10% is is there another 10% I mean, how do you guys kind of think of.

Where the endpoint on that journey is.

So so.

We keep talking about this with investors that when you go forward I mean at the end of last year with 108, we sold and closed on PG and <unk> precision grinding business, which was seven factories scattered across Europe. One in Asia, a couple in the U S. So it was not a large business, but a big factory footprint, so that brought down by 7% we claw.

Carefully on the safety industrial business group, The, the distribution inventory, you know, is relatively normal. I say, maybe a tick below what we typically would see, you know, we would typically see, you know, 6,570 days, and it's a bit below below that on the consumer side. Um, it's about normalized from where we were last year around 13, weeks of Supply. Coming into the year was a bit higher, maybe, 13 and a half but right now around 13. So, on the consumer side, uh, fairly normal on the safety, industrial side. I I I'd say normal to maybe a bit a bit light in the channel.

Just to follow up on, uh, Jeff's question. Um, are customer inventories low and is there a little bit of a restock occurring, or are they balanced? How do you guys kind of see that element right now? So we track it pretty carefully on the Safety & Industrial Business Group. The distribution inventory, you know, is relatively normal. I'd say maybe a tick below what we typically would see—you know, we would typically see, you know, 65 to 70 days, and it's a bit below that. On the consumer side, um, it's about normalized from where we were last year around 13 weeks of supply. Coming into the year, it was a bit higher, maybe 13 and a half, but right now it's around 13. So, on the consumer side, uh, fairly normal. On the Safety & Industrial side, I'd say normal to maybe a bit light in the channel.

Helpful.

Free footprint is down, like, 10%. Is there another 10%? I mean, how do you guys kind of think of where the end point on that journey is?

<unk> one in the first quarter, we announced a couple of others.

I will close over the course of this year into next year, so that puts us below a 100, the number will be below where we happen to be today will continue to look at that in size. It for investors as we go but clearly the footprint or just under 100 is is bigger than we really need today.

Makes sense, okay. Thanks, a lot guys I appreciate it you bet.

Um, hey, I think you mentioned your factory footprint is down—like 10%. Is there another 10%? I mean, how do you guys kind of think of where the endpoint on that journey is? So, you know, we're going to keep talking about this with investors as we go forward. I mean, at the end of last year, we were at 108. You know, we sold and closed on PG and have the Precision Grinding business, which was 7 factories scattered across Europe, 1 in Asia, and a couple in the US. So it was not a large business with a big factory footprint, so that brought it down by 7.

Yeah.

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

Hi, good morning.

Just wanted to start maybe if you could give any color around the second quarter dynamics in a bit more detail understand the organic sales growth accelerate year on year from the one performed in Q1.

So so so, you know, it's, you know, we're going to keep talking about this with investors that we go forward. I mean, at the end of last year at 108, you know, we sold and closed on PG and have the Precision grinding business, which was 7 factories scattered across Europe. 1 in age, a couple in the US so it was not a large business but a big Factory put the print so that brought down by 7. We closed 1 in the first quarter we announced a couple of others so that'll close over the course of this year into next year so that puts us below 100, you know, the number will be below where we happen to be today. We'll, we'll continue to look at that in size for investors as we go. But, but clearly the footprint that are just under 100 is is is bigger than we really need to.

We closed one in the first quarter. We announced a couple of others, so those will close over the course of this year into next year. So that puts us below 100—you know, the number will be below where we happen to be today. We'll continue to look at that and size it for investors as we go. But clearly, the footprint at just under 100 is bigger than we really need today.

Makes sense. Okay, best of luck, guys. Thank you, appreciate it. You bet.

Makes sense, okay, best of luck guys, thank you, appreciate it. You bet.

Our next question.

Also I think <unk>, some first half EPS more than second half because of the contingency.

Our next question comes from the line of Julian Mitchell with Barkley.

Mitchell with Barkley, please proceed with your question.

Please proceed with your question.

So I just want to gauge sort of how much sequentially or year on year ECS should grow in Q2.

Hi, good morning. Um, just wanted to start, maybe, if you could give any color around the second,

Quarter Dynamics.

And what sort of margin embedded in that guidance.

Sure.

Sure Julien.

Let me answer those questions. So first just on the revenue growth.

As we mentioned because of the good backlog in the auto momentum, we expect organic growth in the second quarter to be higher than 3%, but all of the three <unk> accelerating.

<unk>, which was a three 2%, obviously going higher than that TPG low single digit in CPG flat to positive. So thats the expectation of the revenue growth acceleration, obviously, that's going to come with high flow throughs were going to continue with the productivity that we did in the first quarter will continue through the second quarter and between volume and productivity.

A bit more detail, um, understand the organic sales growth, you know, accelerates year on year, uh, from the 1% in q1. Um, also at the Anarchy. So first off EPS more than second half because of the contingency. Um, so just want to gauge sort of how much sequentially or year on year EPS should grow in Q2. Um, and and what the sort of margin uh, embedded in that guide would be

Hi, good morning. Um, just wanted to start—maybe, uh, if you could give any color around the second quarter dynamics in a bit more detail. Um, I understand the organic sales growth, you know, accelerates year-on-year, uh, from the 1% in Q1. Um, also, the first half EPS is more than the second half because of the contingency. Um, so I just want to gauge sort of how much sequentially or year-on-year EPS should grow in Q2, um, and what the sort of margin, uh, embedded in that guide would be.

<unk>.

We offset all the the last quarter of the tariff so year over year impact for us a pick up in stranded costs and investments. So you will see operationally for us it's going to be a solid margin about 24, 5% and good EPS flow through coming from that on below the line, we will see a couple of pennies of <unk>.

Relative to last year last year in the second quarter, we had a divestment of an investment that we had in India, which was about eight to 10 cents.

So should I join in a little? Let me answer this question. So first, just on the revenue growth, you know, as we mentioned, because of the good backlog in the auto momentum, we expect organic growth in the second quarter to be higher than 3%. But all the 3 Bs accelerating—SABG, which was at 3.2%, obviously going higher than that; TBG, low single digit; and CBG, flat to positive. So that's the expectation on the revenue growth acceleration. Obviously, that's going to come with high flow-throughs. We're going to continue with the productivity that we did in the first quarter. We'll continue to do that in the second quarter, and between volume and productivity.

When you see a little bit of tax which was favorable in Q1 coming back in Q2. So those are two headwinds of course, there will be offset by the share buyback, which we did in the first quarter, which is going to help us in the second quarter.

Plus.

Little bit on the non op pension site. So you put all of that together, we should grow up more than a nickel in the second quarter, which for the first half would put us at about 30, plus cents of EPS growth, which is more than half.

You include a contingency for the full year now the contingency is as I mentioned, we kept it for the second half of the year, depending on how things evolve.

We continue performing the way we do our revenue grows over 3% in the second quarter, which is a good exit rate as we enter into the second half and if it continues at that a little bit better.

Volume flow through no tariff headwind.

The margins in the second half could be much higher than the first half.

We offset all the, uh, the last quarter of the Tariff year-over-year impact for us. I pick up in straight costs and investments. So you will see operationally for us, it's going to be a solid margin, about 24 and a half percent, and, uh, good EPS flow-through coming from that. On below the line, we will see a couple of pennies of headwind relative to last year. Last year, in the second quarter, we had a divest of an investment that we had in India, which was about $0.08 to $0.10. And then you see a little bit of tax, which was favorable in Q1, coming back in Q2. So those are two headwinds. Of course, there will be offset by the share buyback which we did in the first quarter, which is going to help us in the second quarter, uh, plus a little bit on the non-op pension side. So we put all of that together, and we should grow more than a nickel in the second quarter, which, for the first half, would put us at a pace and EPS growth which is more than half if you, uh, if you include the contingency, uh, for the full year now.

Appreciate all the color just one very quick follow up.

That was very thorough maybe on the pre buy dynamics.

Good EPS flow through coming from that on below the line, we will see a couple of pennies of headwind relative to last year. Last year. In the second quarter, we add a divestment of an investment that we had in India, which was about 8 to 10 cents. Uh, then you see a little bit of tax, which was favorable in q1, coming back in Q2. So those are 2, headwinds. Of course, there'll be offset by the share buyback. Which we did in the first quarter which is going to help us in the second quarter. Uh plus uh a little bit on the non-art pension site. So you put all of that together, we should grow more than a nickel in the second quarter. Which for the first half would put us at about 30 plus cents of eps growth, which is more than half. If you uh if you include the contingency uh for the full year. Now the contingency. As, as I mentioned, we kept it for the second half of the Year depending on how things evolved. If uh we continue performing the way we do Revenue, grows over 3%

Credit for calling that out but trying to understand what you're assuming for how much that sort of bridge losses, because you've got organic sales growth accelerated in Q2.

Now, the contingency. As I mentioned, we kept it for the second half of the year depending on how things evolved. If we continue performing the way we do, revenue goes over 3% in the second quarter with a good rate, and we enter into the second half, and if it continues at that or a little bit better, we've got volume flow-through, no tariff headwind, and the margins in the second half could be much higher than the first.

With maybe some sort of I don't know if a pre buy it is helping that or the unwind that maybe flesh out that pre buy sort of dynamic of the balance of the year. So Julien.

In the second quarter, and which is a good exit rate as we enter into the second half. And if it continues at that, a little bit better, we're good. Volume, uh, flow through—no tariff headwind—is, the margins in the second half could be much higher than the first half.

Yeah.

It's hard to discern exactly how much is pre buy I mean, we get orders coming in is quite strong but.

We are seeing much better traction on new product introductions, a lot of momentum building on commercial excellence and keep in mind part of what was driving Q1 growth including into early April or some longer lead.

Products that will go into semi more importantly in datacenters delivery in Q2, and the back end of the year. So you have all these factors in there I think when I step back and look at the full year as we said we will see acceleration into Q2, and then in the back half and all of these pieces to come together in any pre buy that's happened will wash out and in Q2, but.

We do see acceleration in the back half on the back of you'll really core operating fundamentals around NPI and commercial excellence.

I appreciate all the color, just 1 very quick, follow up. Um that was very thorough. Um maybe on the pre- by Dynamics, um, you know, credit for calling that out but trying to understand what you're assuming for how much that sort of reverses because you've got organic sales growth accelerating in Q2 um with maybe some sort of I don't know if a Prebiotic is helping that or the unwind hurts that maybe flesh out that pre by sort of dynamic over the balance of the year. So, so Julie, I mean, we it's hard. It's hard to discern exactly how much is Prebiotic. I mean, we had orders coming in, it's quite strong but, you know, we, we are seeing much better traction on new product. Introductions, you know, a lot of momentum building on Commercial excellence and keep in mind, part of what was driving, q1 growth, including into early, April are some longer lead, um, uh, products that will go into semi more importantly, in data centers, delivering a Q2 in the back, end of the

Great. Thank you you bet.

Yeah.

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

Hi, good morning.

On the on the 5% to 15 cents of contingency tied to oil macro uncertainty can you just outline kind of roughly how you think about the split on the demand side versus the cost side of that in your planning assumptions and then.

Operating in Q2, um, we have maybe some sort of, I don't know... For prebiotic, is helping that or the unwind hurts that? Maybe flesh out that prebiotic sort of dynamic over the balance of the year. So, so Julie. I mean, it's hard to discern exactly how much is prebiotic. The orders coming in are quite strong, but, you know, we are seeing much better traction on new product introductions, you know, a lot of momentum building on commercial excellence, and keep in mind, part of what was driving Q1 growth, including into early April, are some longer lead, um, uh, products that will go into semi, more importantly in data centers, delivering in the back end of the year. So if all these factors are in there, I think when I step back and look at the full year, as we said, we'll see acceleration in Q2 and then in the back half, and all these pieces come together, and any prebiotics happening will wash out in Q2. But we do see acceleration in the back half on the back of, you know, really core operating fundamentals around NPI and commercial excellence.

Year. See if all these factors are in there. I think, when I step back and look at the full year, as we said, we'll see acceleration in Q2 and then in the back half, and all these pieces come together. And any prebiotics that happen will wash out in Q2. But we do see acceleration in the back half on the back of, you know, really core operating fundamentals around NPI and commercial excellence.

Great. Thank you. You bet.

We're really looking for any color on the oil exposure sort of across the business.

With Wells Fargo.

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

Your question.

And where you are thinking about that contingency could flow through it if you need to use it.

Okay, Let me start with the contingency in there.

And then bill you can add from there on.

5% to 15 cents of contingency that we kept is actually across the two buckets as you mentioned around year.

As I mentioned in our second quarter will be above 3%, we expect which is a good exit rate as we go into the second half. So if there is a little bit of an impact on the volume piece because of macro which we are not currently seeing right now are a little bit of the input cost that goes up so I guess it gets spread between the two joe to be honest.

Our objective right now is to continue driving what we control and the NPI commercial excellence continue to outperform the macro and drive more productivity. So that we don't have to use a contingency in the second half.

And Joe on the on the oil price the way we look at it as really two pieces. One is on the supply side. The other is demand and on supply side.

Hi, good morning. Um, on the on the 5 to 15 cents of contingency tied to oil macro uncertainty. Can can you just outline kind of roughly how you think about the, the split on the the demand side versus the cost side of of that and your planning assumptions and then you know really looking for any color on the the oil exposure sort of across the business um and and where you're thinking about that, contingency could flow through if if you need to use it. Okay, let me stop with a contingency and then I'll uh and then Bill you can add from there on, on the 5 to 15 cents of contingency that we kept is actually across the 2 buckets, that you mentioned around the year. Uh, you know, as I mentioned, you know, second quarter will be about 3%, be expected, which is a good exit rate as we go into the second half. So, if there is a little bit of an impact on the volume piece because of macro, which we are not currently seeing right now, are a little bit of the input cost that goes up. So I guess it gets spread between the 2.

We have about 45% of our cost of goods is raw materials and about a third of that so it's about $6 billion of raw materials spend and about a third of that as is basis and polycom. So its ethylene propylene esters acrylate all those various things and we are seeing some upward cost pressure on that what we've seen so far and expect is about 125 million.

Hi, good morning. Um, on the, on the 5 to 15 cents of contingency tied to oil macro uncertainty. Can can you just outline kind of roughly how you think about the, the split on the the demand side versus the cost side of of that and your planning assumptions and then you know really looking for any color on kind of the the oil exposure sort of across the business um and and where you're thinking about that, contingency could flow through if if it needs to use it, okay? Uh, let me stop with a contingency and then I'll, uh, and then build that from there on, on the 5 to 15 cents of contingency, that we kept is actually across the 2 buckets, that you mentioned around the year. Uh, you know, as I mentioned, you know, second quarter will be above 3%. We expect which is the exit rate as we go into the second half. So if there is a little bit of an impact on the volume piece because of macro, which we are not currently seeing right now, are a little bit of the input cost that goes up. So I guess it gets read between 2. Joe to, to be honest, our objective right now is to continue driving.

What we control on the NPI commercial, so then continue to outperform the macro and drive more productivity, so then we don't have to use a contingency in the second half.

To be honest, our objective right now is to continue driving what we control on the NPI, Commercial Excellence. Continue to outperform the macro and drive more productivity so that we don't have to use a contingency in the second half.

A cost increase there which are offsetting into pricing as I mentioned earlier on that we expect about a 50 basis point uplift on price coming from that oil based exposure.

How that affects the overall macro economy, what's going to happen with consumer spending autoimmune thats still all unfolding as we speak and depending upon what happens.

You know and and to show on the uh on the oil price. You know, the way we look at it is really 2 pieces, 1 of them supply side, the other is demand. And on a supply side you know, we have about 45% of our cost of goods is raw materials and about a third of that. So it's about 6 billion, dollars of raw material spend and about a third of that is, is basis in polyam. So it's ethylene propylene, Esters acrylic.

In the in the Middle East, but that's our current assumption as we speak today.

Got it.

And then just on the transportation Electronics commercial Excellence program can you talk about where you are on that trajectory. I think you started to see traction in <unk> last year and that continues but just the efforts that are underway and as we think about the growth acceleration.

Just any quantification of how youre thinking about commercial excellence contributing to better <unk> growth as you move through the year. So it's a good question I mean, they are doing a great job on this are there following right behind what we've done in <unk>, which has been.

Ates all those various things, and we are seeing some upward cost pressure on that. You know, what we've seen so far and expect is about a $125 million cost increase there, which we are offsetting into pricing. You know, that's why I mentioned earlier on that we expect about a 50 basis point uplift on price coming from that oil-based exposure. You know, how that affects the overall macro economy, what can happen with consumer spending, auto—I mean, it's still all unfolding as we speak and depending upon what happens, you know, in the, uh, in the Middle East. But that's our current assumption as we speak today.

As we speak, and depending upon what happens, you know, in the, uh, in the Middle East, but that's our current, current assumption as we speak today.

Very very successful I'm very pleased with the traction on the sales force on pricing discipline on cross selling.

On churn reduction and looking very hard at attrition with the predictive AI model is that we have in place and the team at <unk> is doing the same sorts of things I think the cross sell opportunity is not going to be as robust, but they move very aggressively on improving on the sales force and better incentives better targeting work close one targets they're tracking.

Attrition rates, which I think is very good they have the same predictive models tailored for <unk> into that business. So they're making good progress it's going to rollout over the balance of the year one of the key things. We're focused on is making sure we have the right.

Mix and focus of our sales reps versus application engineers are they do have the right mix between the two enter the calling at the right level and the customer for example in automotive at the OE versus the tiers. So it's a little bit different than what we see in <unk>, but.

Got it. Um, and then, just on the, the Transportation and Electronics Commercial Excellence program, can you talk about where you are on that trajectory? I think when you started to see traction in, Sibghatullah,

Got it. Um, and then, just on the, the transportation, Electronics commercial Excellence program, can can you talk about where you are on that trajectory? I think you started to see Traction in sib last year and that continues, but just the efforts that are underway. And as we think about the the growth acceleration, um, just just any quantification of how you're thinking about commercial Excellence contributing to better. Tanny growth is moved through the year. Yeah. So it's a good question. I mean, they're doing a great job on this or they're, they're, they're following right behind what we've done in SBG, which has been, you know, very, very successful. You know, I'm very pleased with the traction, on the sales force on pricing, discipline on cross-selling, you know, on churn reduction and looking very hard at attrition with the predictive AI model that we have in place, you know, in the team at at to EBG is doing the same sorts of things. I think the cross sell opportunity is not going to be as robust, you know? But they move very aggressively on improving on the sales force and better incentives better targeting. What clothes 1 targets they're

Working it pretty hard and I think youre going to see in the back end of the year certainly improvements in <unk> coming from a lot of that commercial excellence work.

They're tracking attrition rates, which I think is very good. They have the same predictive models tailored for TEB into that business, so they're making good progress. You know, it's going to roll out over the balance of the year. One of the key things they're focused on is making sure we have the right mix and focus of our sales.

Thank you.

Our next question comes from the line of Andrew <unk> with Bank of America. Please go ahead. Good morning question.

Good morning, Andrew Good morning, good morning.

So on the transportation <unk> electronics or just to dig in a little bit further also double digit quarters.

Calling at the right level and the customer—for example, in automotive, at the OE versus the dealer—it's a little bit different than what we see in SABG. But, you know, they're working it pretty hard. And I think you're going to see, in the back end of the year, certainly improvements in TG come from a lot of that commercial excellence work.

Reps versus application engineers. Are they? Do we have the right mix between the two? And are they calling at the right level? And the customer, for example, in automotive at the OE versus the tiers. So it's a little bit different than what we see in SABG. But, you know, they're working it pretty hard. And I think you're going to see, in the back end of the year, certainly improvements in TBG coming from a lot of that commercial excellence work.

Thank you.

So it seems like we have lot of questions on to the quarter.

Thank you.

Weakness in consumer electronics, so does that mean that we are offsetting consumer electronics into the second half.

Our next question comes from the line of Andrew Oen with Bank of America. Please, go ahead. Good morning, question.

Good morning, Andrew. Good morning. Good morning.

Our next question comes from the line of Andrew Oen with Bank of America. Please press— Good morning. Good morning, Andrew. Good morning. Good morning.

Yes, Andrew it's exactly what's happened and will happen and in fact when you.

uh, so on the

expectation of electronics.

Again, when you discern with TPG just in Q1, I mean, they were flattish, but half the business was up mid single digits and half the business was down mid single digits and you can really isolate that in the two areas, which is auto auto OE and commercial vehicles and consumer electronics show, we show in our slides that electronics as a whole is flattish what you.

Going to live further. Also, double-digit orders.

Uh, so on the Transportation Electronics, just to dig in a little bit further, also double-digit orders.

Uh, so it seems like we, you know, got a lot of questions in the order about weakness in consumer electronics.

Uh, so it seems like we, you know, got a lot of questions into the quarter about weakness in consumer electronics.

So does that mean that we are offsetting consumer electronics into the second half?

So, does that mean that we are offsetting consumer electronics into the second half?

See there is you see very strong semiconductor datacenter business offsetting a weaker consumer electronics business as we look at the balance of the year, we see electronics starting to get modestly positive again, I think CE consumer electronics may soften a little bit, but we are seeing.

<unk> trajectory and growth in the data center in our semiconductor business.

Yeah, yes, Andrew. It's exactly what's happened. Uh, and will happen. In fact, when you again, when you discern with teb, just in q1, I mean they were flattish but half the business was up mid single digits and half the business was down mid single digits and you can really isolate that in the 2 areas, which is Auto auto who we in commercial vehicles, you know, and consumer electronics. So we show in our slides that Electronics as a whole is flattish, what you see there is, you see very strong.

Bill just a follow up on that.

You showcased.

Some pivot in strategy on consumer electronics.

Yeah, yes, Andrew. It's exactly what's happened. Uh, it will happen. In fact, when you again, when you discern with teb, this in q1, I mean they were fattish, but half the business was up mid single digits and half the business was down this single digits, and you could really isolate that in the 2 areas which is Auto auto who we in commercial vehicles, you know, and consumer electronics. So we show on our slides, that Electronics as a whole is flattish, what you see there is, you see, very strong semiconductor Data Center business, offsetting 8 week of consumer electronics business, as we look at the balance of the year, we see Electronics starting to get modestly positive

You have also talked at your analyst your first analyst day about the need.

To rebuild the R&D pipeline I'll take on the electronics side.

Can you just talk about how these two internal initiatives impacting your growth the growth trajectory over the next 12 months, let's say thank you for that that's a great question I mean, we're putting in a lot of time and effort into making sure. We have good new product introductions in consumer electronics, both for the premium segment as well as for the main.

Again, you know, I think CE or consumer products may soften a little bit, but we are seeing, you know, better trajectory and growth in the data center and the semiconductor business.

Semiconductor Data Center business offsetting eight weeks of consumer electronics business. As we look at the balance of the year, we see electronics starting to get modestly positive again. You know, I think CE, or consumer electronics, may soften a little bit, but we are seeing, you know, a better trajectory and growth in the Data Center and the Semiconductor business.

And Bill, uh, just to follow up on that, you know, at CES, you showcased, uh,

at CES, you showcased, uh,

Stream segment when he has been talking about this quite a bit we are seeing good traction year. Unfortunately, the market isn't cooperating with us we do see greater downturn in an LCD, which is where our strength happens to be but but we do see a lot of innovation in this space.

We are gaining some share modestly in the mainstream side.

Look at content per device.

Three or four China Oems have increased our content per device in the first quarter and the fourth one we saw pretty good order for so I think we're making some progress here and this comes on the back of a lot of the NPI work that's happened in TPG and Theres more to come.

Fair enough.

Yeah.

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

Some pivot in strategy on consumer electronics. Uh, you've also talked with your analyst. Your first analyst day about the need uh, to rebuild. Uh the R&D pipeline particular on the electronic side. Uh can you just talk about how these 2 internal initiatives impacting your growth and the growth trajectory over the next 12 months? Let's say thank you. Yeah. For that that that's a great question. I mean we're putting in a lot of time and effort into making sure we have a a good new product, introductions and consumer electronics. Both for the premium segment as well as for the mainstream segment, when he's been talking about this quite a bit. You know, we are seeing good traction here. Unfortunately, the market, you know, isn't cooperating with us. We do see, you know, a greater downturn in in LCD which is where our strengths happens to be, but, but we do see a lot of innovation in the space. You know, we are gaining some sheer modesty in the mainstream side and we look at at the content per device, you know, 3 or 4 China.

Good morning, everyone, Hey, good morning, Andy.

Some pivot in strategy on consumer electronics. Uh, you've also talked to analysts your first analyst day about the need uh, to rebuild. Uh, the R&D pipeline particular on the electronic side. Uh, can you just talk about how these 2 internal initiatives impacting your growth and the growth project trajectory over the next 12 months? Let's say thank you. Yeah. For that that that's a great question. I mean we're putting a lot of time and effort into making sure we have a a good new product, introductions and consumer electronics. Both for the premium segment as well as for the mainstream segment. Wendy's been talking about this quite a bit. You know, we are seeing good traction here. Unfortunately, the market, you know, isn't cooperating with us. We do see, you know, a greater downturn in in LCD which is where our strengths happens to be, but, but we do see a lot of innovation in the space. You know, we are getting some sheer modesty in the mainstream side and we look at at the content per device, you know, 3 or 4, trying to oems have increased their content, or device in the first quarter and and the fourth

So can you give us more color onto what we're seeing consumer I know you've talked about share gain auctions and consumers. So maybe you can elaborate on what youre doing there and how much discounting do you have to do to get there and some consumer contribute to your margin performance this year or it could consume margin continued the pattern of that over the year.

We saw a pretty good order for it, so I think we're making some progress here. This comes on the back of a lot of the NPI work that's happened in TBG, and there's more to come.

OEMs have increased their content per device in the first quarter, and in the fourth one, we saw a pretty good order for it. So I think we're making some progress here, and this comes on the back of a lot of the NPI work that's happened in TBG, and there's more to come.

Very much.

So look.

Next question comes from Andy Kowitz with Citigroup. Please proceed with your question.

Our next question comes from Andy Kapitz with Croup. Please proceed with your question.

I'm pleased with what's happening at the consumer the market for US you know, we're 70% U S. So it's really focused on the U S. Consumer we sell a discretionary product as Dara mentioned, we had a couple of pockets of strength in the year from new product introductions I think the team is really getting back to basics focusing on priority <unk>.

Good morning, everyone. Good morning, Andy.

Everyone. Hey, good morning. Andy.

Brands and started to innovate again. The reality is we went for a lot of years without a lot of new product introductions, a lot of class III. So their incrementals somewhere class, four, but but really starting to kind of be more aggressive.

So, can you give us more color into what you're seeing in consumer? I know you talked about share gain actions and consumers, so maybe you can elaborate on what you're doing there, and how much discounting you have to do to get there? And should consumer contribute to your margin performance this year, or could consumer lag and continue to be pressured a bit over the year? So, look, you know, I'm pleased with what's happening at consumer. The market for us, you know,

70% us.

On on new product introductions, and I think we're holding our own and in fact, starting to gain back shelf space, because we have new product coming into the marketplace, yes, it's not a <unk>.

Segment that we see upward movement on pricing if it were trying to contain the discounting that happens to happy here given the market's a little bit soft for the year, we expect to see some growth it'll be positive it won't be a meaningful driver of the overall <unk> growth in the year, but but again, we're down 1.3 and in Q.

One down a little bit more than that in Q4, we were up modestly for the first nine months of last year at <unk> three points. So I mean, they're hanging right around flat to up a little bit.

So, can you give us more color into what you’re seeing with the consumer? I know you talked about charity in actions consumers, so maybe you can elaborate on what you’re doing there, and how much discounting you have to do to get there, and did consumer contribute to your marginal performance this year, or could consumer largely continue to be pressured as we build over the year? So, look, you know, the market for us, you know, 7% U.S., so it’s really focused on the U.S. consumer. You know, we sell a discretionary product. As Anurag mentioned, we had a couple of pockets of strength in Europe from new product introductions. I think the team has really gotten back to basics, focusing on priority brands and starting to innovate, and the reality is, we went for a lot of years without a lot of new product introductions, you know, a lot of class 3. So they’re incremental, some of the class 4, but really starting to kind of be aggressive, you know, on—on new product introductions, and I think we’re holding our own and, in fact, starting to gain back shelf space because we have new product coming into the marketplace. Yeah, it’s—it’s not a segment that we see upward movement on pricing in. We’re trying to contain the discounting.

When the consumer starts to spend more we'll have the right products with good innovation, great commercial excellence efforts, there and we will see that business to return to growth.

Helpful. And then bill maybe just some more thoughts about portfolio management, you, obviously opted for a JV structure with purchase of masks and seemingly.

So it's a, it's really focused on the US consumer. You know, we sell a discretionary product as as honor. Rob mentioned, we had a couple of pockets of strength in the air from new product. Introductions, I think the team has really gotten back to basics focusing on priority Brands and started the innovate. Again, the reality is we went for a lot of years without a lot of new product, introductions, you know, a lot of class 3. So they're incremental some are class 4, but, but really starting to kind of be more aggressive, you know, on on new product. Introductions and I think we're holding our own and in fact, starting to gain back shelf space, because we have new products coming into the marketplace. Yeah, it's it's not a segment that we see upward movement on pricing. If, if we're trying to contain the discounting that happens to happy here, getting the markets a little bit soft for for the year. You know, we expect to see some growth, you know, it'll be positive. It won't be a meaningful driver of the overall 3 and growth in the year. But, but again, you know, we're down 1.3 in, in q1 down all the

Seemingly leaning into safety is one of your priority. So maybe a little more color on why you chose the JV structure. There and then stepping back you can give us an update on how you're thinking about overall three on portfolio I think you've said in the past two or 3% of your portfolio is actionable in terms of divestitures, 10% as commodity like that's still the right numbers. The company, yes, So look I mean I'm really.

They're hanging right around flat, up a little bit, you know. And when the consumer starts to spend more, we'll have the right products with good innovation, you know, great commercial excellence efforts there, and we see that business return to growth.

But more than that, in Q4, we were up sort of modestly for the first nine months of last year—3 points. So, I mean, they're hanging right around flat, up a little bit, you know? And when the consumer starts to spend more, we'll have the right products with good innovation, you know, great commercial excellence efforts there, and we'll see that business return to growth.

Helpful, then Bill, maybe just a...

Pleased with with the structure and the conclusion of this Madison Scott CBA joint venture were 51% owner is going to be consolidated.

It's a it's a strategic bolt on acquisition with what you just referred to as a priority vertical. It is it does strengthen our CBA business. It's a great brand we have been innovating in this space, we talked last year about some new innovations coming onto the marketplace. This will also create some scale by putting this business together for future.

For organic and inorganic opportunities Madison.

All of its fire and rescue products have been performing very well they bring a terrific management team. They are growing double digits. The margins are coming up so I think it's a great combination and in a space that we like quite a bit Bain capital's our partner on this or 49%, we know them well. They are very good at post merger integration they bring a.

A lot of operating rigor.

Little more thoughts about portfolio management. You obviously opted for a JV structure with Bridges of Madison, despite seemingly leaning into safety as 1 of your priorities. So maybe a little more color on why you chose the JV structure there. And then stepping back you can give us an update on how you're thinking about, you know, overall, 3M portfolio. I think you've sent the past 2 to 3% of your portfolio with actionable, in terms of the vestures, 10% is commodity like, but still the right numbers for the company. Yeah. So so look, I'm I'm really pleased with uh, with the structure and the conclusion of this Madison, uh, Sky to CBA joint venture where 51% owner is going to be Consolidated. Um, it's a it's a strategic, bolt-on acquisition in in what you just referred to as a priority vertical it is, it does, strengthen our SCBA business, it's a great brand. You know, we have been innovating in the space. We talked last year about some new Innovations, coming onto the marketplace. You know, this also creates some scale by putting this business together for future organic inorganic opportunities, m

And good expertise on driving incremental M&A, while we focus on other areas around the company. So when you put all that together I think it is a strategic opportunity for us it gives them optionality for do we pull it back or do we see something else over time, but the reality is it's a it's a terrific deal is going to be accrete.

Helpful. Then they'll maybe just a little more thoughts about portfolio management. You obviously opted for a JV structure with British Madison, despite seemingly leaning into safety is 1 of your priorities. So maybe a little more color on why you chose JV structure there and then stepping back, you can give us an update on how you're thinking about, you know, overall 3 number portfolio. I think you said in the past to 3% of your portfolio is actionable in terms of investors. 10% is commodity like, let's tell the right numbers of company. Yeah, so so look. I'm I'm really pleased with, uh, with the structure and conclusion of this Madison, uh, Sky SBA joint, venture where 51% owner is going to be Consolidated. Um, it's a it's a strategic bolt-on acquisition and what you just refer to as a priority vertical. Is it does, strengthen our SCBA business? It's a great brand. You know, we have been innovating in the space. We talked last year about some new Innovations, coming onto the marketplace, you know, this also creates some scale by putting this business together for future organic inorganic opportunity, Madison, you know, and all of its fire and rescue products have been

Hit to our gross margins earnings over time, so I feel pretty good about that particular deal that we closed on on PG and after precision grinding business on April one it wasn't very big but businesses that don't perform sometimes can be difficult to transact on but I'm very very pleased that that one got over the line. We continue to look at the rest.

The portfolio, yes, or about 10% of our businesses more commodity like well, we don't have a clear right to win a lot of technology differentiation, we said, 2% to 3% was in flight PG NEF was part of that we continue to evaluate this and we'll talk to investors as we go on what that shaping happens to be but that's it.

Addison, you know, and all of its fire and rescue products have been performing very well. They bring a terrific management team, they're growing double digits, the margins are coming up, so it's I think it's a great combination in, in a space that, you know, we like quite a bit, you know, Bank capitals are partner on this. They're 49%, you know, we know them. Well, they, they are very good at post merger integration. They bring a lot of operating rigor, um, and and good expertise on driving incremental m&a while we focus on other areas around the company. So, you know, when you put all that together, I think it's a strategic opportunity for us to give some optionality for. Do we pull it back or do we suit suit something else over time but the reality is it's a, you know, it's a terrific deal that is going to be accredited to our growth margins earnings over time. So I feel pretty good about that particular deal. So we closed on on PG and after Precision grinding business on April 1st, it wasn't very big but, you know, businesses that don't perform sometimes can be difficult to transact.

Investors should see the transaction on Madison with Sky is an important strategic signal for for investors around the things that we want to do to reshape our portfolio to be higher structurally higher growth and higher margin potential.

Performing very well to bring a terrific management team to Growing double digits, the margins are coming up, so I think it's a great combination in a space that, you know, we like quite a bit, you know, Bank capitals are partner on this. They're 49%, you know, we know them. Well, they, they are very good at post merger integration. They bring a lot of operating rigor, um, and and good expertise on driving incremental m&a while we focus on other areas around the company. So, you know, when you put all that together, I think it's a strategic opportunity for us to give some optionality. Or do we pull it back or you sued something else over time? But the reality is, it's a, you know, it's a terrific deal. It's going to be accreted to our growth margins earnings over time. So I feel pretty good about that particular deal. Do we close on on PG and after Precision grinding business on April 1st, it wasn't very big but the businesses that don't perform sometimes can be difficult to transact on, but I'm very very pleased. That that 1 over the line, we continue to look at the rest of the portfolio. You know you asked about 10% of our businesses more

Because you had all the color sure.

Our next question comes from the line of Chicken <unk> with J P. Morgan. Please proceed with your question.

On. But I'm very very pleased that that 1 got over the line, we continue to look at the rest of the portfolio. You know you asked about 10% of our businesses more commodity like, you know, where we don't have a clear right to win. Not a lot of Technology differentiation, you know, we said, 2 to 3% was in flight pgf was part of that. We continue to evaluate this and we'll talk to investors as we go on what that shaping happens to be. But but the reality of the investor should see the the transaction on Madison with Scott as a as an

Hi, good morning, Thanks for taking my question.

First.

Can you maybe recalibrate us on that outlook for U S IP and electronics are embedding.

Commodity like, you know, we don't have a clear right to win. Not a lot of Technology differentiation, you know, we said, 2 to 3% was in flight pgf was part of that. We continue to evaluate this and we'll talk to investors as we go on what that shaping happens to be. But but the value of the investor should see the the transaction on Madison with Scott as a as an important strategic signal for for investors around. The the thing that we want to do to reshape our portfolio, to be a higher structurally, higher growth, and higher margin potential.

Important strategic signal for investors around the things that we want to do to reshape our portfolio, to be structurally higher growth and higher margin potential.

Appreciate all the color, sure.

For the full year I think it was flat in electronics.

That last quarter.

Question comes from the line of Chosa.

Our next question comes from the line of Chosa.

Sorry, if you guys are you talking about ipi the macro.

Yeah. Thank you Ross.

Okay. So so well thanks for the question and I guess, congratulations and the role welcome to the call.

So just in terms of the macro as we came into Q1, we saw some of the similar trends. We saw in 25 continue so maybe a couple of comments relative to where we were in in January the global Ipi is still around 2%, it's not moved around very much.

Hi, good morning. Thanks for taking my question. First, can you maybe recalibrate us on the outlook for USIP and electronics you are embedding in your assumptions for the full year? I think it was that USIP would be flat and electronics up mid-single digit last quarter.

In your assumptions for the full year, I think it was us that had Electronics up—mid single digits last quarter, flat.

Yes. Sorry, as you can see, you're talking about IPI, the macro,

Sorry, Chougi, you're talking about API, not the macro.

Yep. The USI, okay. So, so well.

<unk> is up a little bit better EMEA is down a little bit China is still mid single digits and interestingly those trends are exactly what we saw in our business into Q1, So U S up a little bit Europe down a little bit China mid single digits. So it's pretty much aligned with that GDP is still.

And that seemed to 5% range auto builds are still floating around between flat to down one.

Really early in the year I think that tends to be more of a backward looking indicator, but right now it's sort of flat to down a little bit U S. Retail flattish the place that we're watching a little bit as consumer electronics, where the outlook is for a little bit more softness as we get into the back end of the year, but but overall the macro is trending about where we thought saw it in <unk>.

January and through last year.

Okay, great. Thanks, and then on the contingency.

And I guess congratulations enroll, welcome to the to the call. Um, so, so just in terms of the macro as we came into, you know, q1, we saw some of the similar Trends we saw in 25 continue so so maybe a couple of comments relative to where we were in in January, the global API is still, you know, around 2%. It's not moved around very much, uh, you Sack or us is is up a little bit better. You know, EMA is down a little bit trying to still a single digits. And interestingly, those Trends are exactly what we saw in our business in through through, q1. So us up a little bit Europe, down a little bit, China is single digit, so it's, it's pretty much aligned with that, you know, GDP is still sort of in that same 2 and a half percent range, you know Auto builds you know are still floating around between flat to down 1. It it's really early in the year I think that tends to be more of a the backward-looking indicator.

Yep, the US IPI. Okay, so so well, thanks for the question, and, and I guess congratulations in the role. Welcome to the, to the call. Um, so, so just in terms of the macro, as we came into, you know, q1, we saw some of the similar Trends we saw in 25 continue. So so maybe a couple of comments relative to where we were is in, in January, the global API is still, you know, around 2%. It's not moved around very much, uh, you Sack or us is is up a little bit better. You know, EMA is down a little bit trying to still mid single digits. And interestingly, those Trends are exactly what we saw in our business in through through q1. So us up a little bit Europe down a little bit China, mid single digits so it's it's pretty much aligned with that. You know GDP is still sort of in that same 2 and a half percent range you know Auto builds you know are still floating around between flat to down 1. You know it's really early in the year I think that tends to be more of a the backward-looking in.

Just wondering what it would take for you to remove this I think it's prudent that youre, including in guidance by <unk> <unk>.

And thank God order trends are operationally rating raising guidance by about.

So what happened.

And without this contingency it would've been at times that rate, so kind of what would it take for desktop it removed.

But right now it's sort of flapped it down a little bit. U.S. retail is flattish. You know, the place that we're watching a little bit is consumer electronics, where the outlook is for a little bit more softness as we get into the back end of the year. But overall, the macro's trending about where we saw it in January and through last year.

Indicator. But right now, it's sort of flat to down a little bit. U.S. retail, flattish. You know, the place that we're watching a little bit is consumer electronics, where the outlook is for a little bit more softness as we get into the back end of the year. But overall, the macro's trending about where we saw it in January and through last year.

Thank you for the question <unk>.

We will probably give you an update in our next earnings call on that.

As we go through the next couple of months, we are pretty confident with the backlog and order momentum on your Q2 revenue, we'll see how that plays out as well as you know we have executed we have a very good playbook on which we adopted from the tariffs last year in terms of working with our customers and pushing out the price increases over there. So that's.

In the area, we will kind of monitor on the yield over there over the next couple of months, plus let's see where oils. Our enbridge levels. They are after a few months and if we continue performing the way we did in Q1, both on the productivity as well as an operational excellence then come July we will give you an update on where we stand for the full year.

Anurag Maheshwari: Which we adopted from the tariffs last year in terms of working with our customers and pushing out the price increases over there. That's an area we will kind of monitor on the yield over there over the next couple of months. Plus, see where yields are, at which levels they are after a few months. If we continue performing the way we did in Q1, both on the productivity as well as on operational excellence, then come July, we will give you an update on where we stand for the full year.

Okay great.

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

Hi, Thanks, good morning.

Yes.

The topics I just wanted to a couple of quick follow on just going back to the pre buy common.

Nigel Coe: Okay, great. Thank you.

[Analyst]: Okay, great. Thank you.

Just trying to understand.

Why do you think there may have been a pre buy because you're trying to rationalize the strong order book.

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

Over the coming out or are you hearing from customers to just maybe come about and then on the <unk>.

Nigel Coe: Thanks. Good morning. Thanks for the question. We've covered most of the major topics. A couple of quick follow-ons. Just going back to the pre-buy comments. Just trying to understand why you think there may have been a pre-buy. Is it because you're trying to rationalize the strong orders, or is it something else that you're hearing from customers? Just maybe cover that. On the 50 basis points of additional price, is that in the form of a surcharge? It certainly seems like a surcharge, so that rolls back if oil comes down. Would that hit in Q2 or is that more in the back half of the year? Thanks.

50 basis points of additional price.

That in the form of surcharges, but it seems like things surcharge, so that rolls package all come down.

And would that hit in <unk> or was that more in the back half of the year.

So really it Nigel thanks for thanks for the questions look.

It's hard to avoid the fact that we're.

We're pushing pricing a little bit more aggressively we know there is an inflationary environment. We know price of oil is going to go up we know the impact on our company.

No.

What we did four or five years ago, maybe not moved as quickly on pricing widow came up which were correcting for that I think we're being a lot more attuned to what's going on in the macro.

William M. Brown: Really, Nigel, thanks for the questions. Look, it's hard to avoid the fact that we're pushing pricing a little bit more aggressively. We know there's an inflationary environment. We know the price of oil is gonna go up. We know the impact on our company. We know perhaps what we did four or five years ago, maybe not moved as quickly on pricing when oil came up, which we're correcting for that. I think we're being a lot more attuned to what's going on in the macro, and we're enforcing it better. If a shipment goes out beyond a date, that shipment will have a price increase associated with it. I think the customers have seen that and heard that. Maybe when you put all that together, it gives a sense that perhaps there's some advanced buying from these price increases that are going out.

We're enforcing it better.

If a shipment goes out beyond a date that shipment will have a price increase associated with it I think our customers have seen that and heard that and even when you put all that together. It gives a sense that perhaps are some advantage of buying from from these price increases that are going out. So again, we'll know more in the next month to six weeks.

How much of that might be pre buy simply because we will watch the orders through the balance of the year into the balance of the quarter.

To me so that's kind of a basically how we're thinking about about the pre buy here at the moment on on pricing, Yes, we do see right now about $125 million worth of cost impact, which would then relate into pricing and that would translate to about 50 basis points. So some of that.

William M. Brown: Again, we'll know more in the next month, six weeks, how much of that might be pre-buy, simply because we'll watch the orders through the balance of the quarter into May. That's kind of basically how we're thinking about the pre-buy here at the moment. On pricing, yeah, we do see right now about $125 million worth of cost impact, which would then relate into pricing, and that would translate to about 50 basis points. That's factored into the guidance of about 3% organic for the year. That's kind of what we're thinking at the moment on pricing.

That's factored into the guidance of about 3% organic for the year.

But that's kind of what we're thinking at the moment on pricing.

Okay.

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

Thank you I wanted to also follow up on pricing and I guess, a little bit on price cost.

Do these surcharges take effect I would imagine some point in Q2, but any color on when they take effect would be helpful and it just seems like with the $120 million of cost inflation that you rapidly build a 50 bps of price.

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

The plan here is to be I guess be neutral on price cost and I ask because if I remember a year ago, you guys were actually EPS negative on the tariff inflation I just want to make sure I have that neutral view right. Thank you. So Chris I think we but we've learned a little bit yes, we were moving a lot faster than we did last year on tariffs tariffs came on and I think maybe maybe we were a little tentative.

Anurag Maheshwari: Thank you. I wanted to also follow up on pricing and I guess a little bit on price cost. When do these surcharges take effect? I would imagine some point in Q2, but any color on when they take effect would be helpful. It just seems like with the $120 million of cost inflation that you referenced, Bill, and the 50 bps of price, the plan here is to, I guess, be neutral on price cost. I ask because if I remember a year ago, you guys were actually EPS negative on the tariff inflation. Just want to make sure I have that neutral view right. Thank you.

Chris Snyder: Thank you. I wanted to also follow up on pricing and I guess a little bit on price cost. When do these surcharges take effect? I would imagine some point in Q2, but any color on when they take effect would be helpful. It just seems like with the $120 million of cost inflation that you referenced, Bill, and the 50 bps of price, the plan here is to, I guess, be neutral on price cost. I ask because if I remember a year ago, you guys were actually EPS negative on the tariff inflation. Just want to make sure I have that neutral view right. Thank you.

Front, but I think we ended up offsetting a good part of the tariffs one cost and price we're trying to be careful on that so yeah, you're exactly we will offset cost increases associated with oil through price increases and that's that's the assumption that we're making here I mean, you're right historically, we have covered.

William M. Brown: Chris, I think we've learned a little bit. Yeah, we're moving a lot faster than we did last year on tariffs. Tariffs came on and I think maybe we're a little tentative up front, but I think we ended up offsetting a good part of the tariffs with cost and price. We're trying to be careful on that. Yeah, exactly. We will offset cost increases associated with oil through price increases. That's the assumption that we're making here. I mean, you're right. Historically, we have covered material cost inflation with pricing. Historically, with a 2% material inflation, that would translate into roughly 50 basis points of price. For the year, we are guiding to about 80 basis points. Again, a little bit lighter in Q1, but inflation in Q1 came in a little bit lighter as well. For the year, 80 basis points.

Material cost inflation with pricing historically with a 2% material inflation that would translate into roughly 50 basis points of price for the year. We are guiding to about 80 basis points again, a little bit lighter in Q1, but inflation in Q1 came in a little bit lighter as well so for the year 80 basis.

Points with oil coming in that's driving an incremental 50 basis points of price with total of about 1.3 points roughly four for the year on pricing and that's that that's our current expectation is.

It's not a surcharge the prices going out embedded into the into the pricing of our products and that's kind of it depending on the product and the geography, but generally speaking it was less of a surcharge more being built into the underlying price and.

William M. Brown: With oil coming in, that's driving an incremental 50 basis points of price. Total of about 1.3 points roughly for the year on pricing. That's our current expectation. It's not a surcharge. The price is going out embedded into the pricing of our products. It's dependent on the product and the geography, but generally speaking, it was less of a surcharge, more being built into the underlying price.

In terms of the rollout and the timeline we've already started in April in a couple of countries in Asia and then in the United States that starts in May 1st in Europe as well. So it is imminent right now with all the letters going out to the customers doing when the surcharge is going to impact them oil price increase going to impact them.

Because if I remember a year ago, you guys were actually EPS negative on the Tariff inflation. Just want to make sure I have that neutral of you write. Thank you. So Chris, I think we've, we've learned a little bit. Yeah, we, we're moving a lot faster we did last year on tariffs, tariffs came on. And, and I think maybe maybe we're a little tentative front, but but I think we ended up offsetting good part of the tariffs on cost and price, you know, we're trying to be careful on that. So, yeah, exactly. We will offset cost increases associated with with oil, you know, through price increases. And that that's the assumption that we're we're making here. And you're right, historically, we have covered material costs inflation, you know, with pricing. So, historically with a 2% material inflation, that would translate into roughly 50 basis points of price. You know, for the year, we are guiding to about 80 basis points. So again, a little bit lighter in q1, but inflation in q1 came in a little bit lighter as well. So for the year, 80 basis points with oil coming in that's driving, an incremental, 50 basis points of price. So, a total of 1.3 points

Thank you I appreciate that and then maybe.

Anurag Maheshwari: Yeah, and in terms of the rollout and the timeline, we've already started in April in a couple of countries in Asia, and then in the United States it starts on 1 May and Europe as well. It is imminent right now with all the letters going out to the customers knowing when the surcharge is going to impact them or the price increase is going to impact them.

Maybe if I could follow up just any color you could provide on how firm or how much flexibility is there on these delivery dates for these orders or what's in the backlog.

And then I guess ask because I remember a year ago there were elong.

William M. Brown: Yeah.

Elongation on those orders I think tied to some of the pre ordering ahead of tariffs and it seems like there could be some of that again now so just kind of wondering I'm trying to gauge that as a potential risk into Q2. Thank you Christy.

Out to the customs, knowing when the search charge is going back to them, all the price increase is going to impact them.

Anurag Maheshwari: Thank you. I appreciate that. Maybe if I could follow up, just any color you could provide on how firm, or how much flexibility, is there on these delivery dates for these orders or what's in the backlog. I guess ask, because I remember a year ago, there was elongation on those orders, I think, tied to some of the pre-ordering ahead of tariffs, and it seems like there could be some of that again now. Just kind of wondering, trying to gauge that as a potential risk into Q2. Thank you.

Chris Snyder: Thank you. I appreciate that. Maybe if I could follow up, just any color you could provide on how firm, or how much flexibility, is there on these delivery dates for these orders or what's in the backlog. I guess ask, because I remember a year ago, there was elongation on those orders, I think, tied to some of the pre-ordering ahead of tariffs, and it seems like there could be some of that again now. Just kind of wondering, trying to gauge that as a potential risk into Q2. Thank you.

Thank you, I appreciate that. And then, may I follow up?

Chris the delivery is limited to the lead times that we have so it's not like an order can be placed for six or 12 months of delivery. So it's definitely within the timeframe that as we always described.

Thank you.

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

William M. Brown: Yeah. Chris, the delivery is limited to the lead times that we have. It's not like an order can be placed for 6 or 12 months of delivery. It's definitely within the time frame that is, we always prescribe. Yeah.

Anurag Maheshwari: Yeah. Chris, the delivery is limited to the lead times that we have. It's not like an order can be placed for 6 or 12 months of delivery. It's definitely within the time frame that is, we always prescribe. Yeah.

Good morning, this is Neil on for Amit.

So I know, we just got the first quarter results, if I could ask about the growth algorithm.

Into 2027, because the outlook suggests a meaningful improvement in trends exiting this year.

You could provide on, you know, how firm or how much flexibility is there on these delivery dates for these orders or what's in the backlog. Um, and then, I guess ask, because I remember a year ago, um, you know, there was elongation on those orders. I think tied to some of the pre-ordering—I had tariffs—and it seems like there could be some of that again now. So just kind of wondering, um, trying to gauge that as a potential risk into Q2. Thank you. Yeah. Uh, Chris, the delivery is limited to the lead times that we have. So it's not like an order can be placed for 6 or 12 months of delivery. So it's definitely within the time frame that is, we always prescribed.

Anurag Maheshwari: Thank you.

Chris Snyder: Thank you.

Thank you.

Operator: Our next question comes from the line of Amit Mehrotra with UBS. Please proceed with your question.

If I just look at new product introduction for example.

I mean these are accelerating.

Amit Mehrotra: Good morning. This is Amit Mehrotra from UBS. I know we just got Q1 results, but if I could ask about the growth algorithm into 2027, because the outlook suggests some meaningful improvement in trends exiting this year. If I just look at new product introductions, for example, these are accelerating, and if we add maybe 2 points of macro growth to new product introduction, would that math imply that 3M is growing around 4.5% organically next year?

[Analyst] (UBS): Good morning. This is Amit Mehrotra from UBS. I know we just got Q1 results, but if I could ask about the growth algorithm into 2027, because the outlook suggests some meaningful improvement in trends exiting this year. If I just look at new product introductions, for example, these are accelerating, and if we add maybe 2 points of macro growth to new product introduction, would that math imply that 3M is growing around 4.5% organically next year?

Our next question comes from the line of commentary with UBS. Please proceed to your questions.

And if we add maybe two points of macro growth to new product introduction, where that math implied at three am and throwing around four 5% organically next year.

Yes.

So thanks for the question I'll start and Bill.

Can it from there.

Your line from it.

I'm sorry for them so.

Good morning. This is Neil Armstrong met. Um, I know we just got first quarter results but if I could ask about the growth algorithm into, uh, 2027 because the yellow suggests some meaningful Improvement in Trends exiting this year. Um, if I just look at new product, introductions, for example, um, I mean these are accelerating

Okay.

We said this year that we will grow above $333 million above macro and as we get into the second half of the year.

William M. Brown: Yeah. Thanks for the question, Amit. I'll start and Bill can add from there, Neil, yeah.

Anurag Maheshwari: Yeah. Thanks for the question, Amit. I'll start and Bill can add from there, Neil, yeah.

The exit rate you are right, we will be north of three 5%, which would imply that we would be above where we are in the first half and above where before you would be so we do feel very good as we enter into next year.

Amit Mehrotra: Amit Mehrotra.

William M. Brown: Amit Mehrotra.

Amit Mehrotra: Yeah.

Anurag Maheshwari: Yeah.

And you know, if we add, you know, maybe 2 points of macro growth to new product introduction with that math, implied at 3M is throwing around 4.5% organically next year. Yeah. Uh, hey, um, so thanks for the question, but I'll start and build, uh, looking at it from there, you know? Yeah.

Amit Mehrotra: Neil from

William M. Brown: Neil from

William M. Brown: I'm sorry, Neil. Yeah. We said this year that we will grow about $330 million above macro. As we get into H2 of the year, from the exit rates, you're right, we will be north of 3.5%, which would imply that we would be above where we are in H1 and above where the full year would be. We do feel very good as we enter into next year, with what we are doing on the NPI as well as what we are doing on commercial excellence and how that is translating. First is obviously we've got to grow in Q2 about 3%. If we do grow above the 3.5% in H2 of the year, I think it'll give us good momentum to kind of accelerate the growth into 2027.

Anurag Maheshwari: I'm sorry, Neil. Yeah. We said this year that we will grow about $330 million above macro. As we get into H2 of the year, from the exit rates, you're right, we will be north of 3.5%, which would imply that we would be above where we are in H1 and above where the full year would be. We do feel very good as we enter into next year, with what we are doing on the NPI as well as what we are doing on commercial excellence and how that is translating. First is obviously we've got to grow in Q2 about 3%. If we do grow above the 3.5% in H2 of the year, I think it'll give us good momentum to kind of accelerate the growth into 2027.

With what we are doing on the NPI as well as what we are doing on commercial excellence in all that is translating. So first is obviously, we are going to grow in the second quarter of about 3% and if you do grow above the three 5% in the second half of the year I think will give us good momentum to kind of explore the growth into 2027, but it's a little bit too early to kind of talk about that and we.

I'd more color as we go through the course of the year.

Yeah.

Great. Thank you.

Okay.

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

William M. Brown: It's a little bit too early to kind of talk about that, and we'll provide more color as we go through the course of the year.

Anurag Maheshwari: It's a little bit too early to kind of talk about that, and we'll provide more color as we go through the course of the year.

Thank you good morning, everyone. Good morning Deane.

Was hoping you can address the point of sale momentum I mean, thats, a surprising number seven up 7% in the last eight weeks given the pockets of macro pressure. So yes, just your your impression here is this consumer driven more on the commercial side at all just.

Yeah, sorry. So um, uh, you know, I I we said this here that we will grow about 303 million dollars above macro and as we get into the second half of the year, you know, from the exit rates, you're right, we will be not of 3 and a half percent which would imply that we would be above where we are in the first half and above where the 4 year would be. So we do feel very good as we enter into next year. You know with what we are doing on the NPI as well as what we are doing on Commercial elections. So now that is translating. So first is obviously we got to grow in the second quarter about 3% and if we do grow above the 3.5% in the second half of the year, I think it was good momentum to kind of actually grow into 2027, but it's a little bit too early to kind of talk about that and we we provide more color as as we go through the course of the year.

Amit Mehrotra: Great. Thank you.

[Analyst] (UBS): Great. Thank you.

Great. Thank you.

Operator: Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Deane Dray: Thank you. Good morning, everyone.

William M. Brown: Good morning, Dean.

Deane Dray: I was hoping we can address the point of sale momentum. That's a surprising number, up 7 out of the last 8 weeks given the pockets of macro pressure. Just your impression here, is this consumer driven? Is it more on the commercial side at all? Just some context and the momentum into April.

Some contacts and the momentum into April.

Dean so it is consumer driven because in our consumer business group.

We think it's very encouraging for us to see Pos up that's a sell out of.

Seven of eight weeks, which I think is really good you know it does kind of make us feel a little bit better going into Q2.

That business consumer business stabilizing, perhaps growing a little bit in Q2, and the balance of the year. So that's those are those are good trends I think it reflects the team's very aggressive efforts on driving promotions getting shelf space driving NPI being really aggressive at hustling at the customer interface. Good on.

William M. Brown: Dean, it is consumer driven because in the Consumer Business Group, I think it's very encouraging for us to see POS up. That's a sellout, seven of eight weeks, which I think is really good. It does kind of make us feel a little bit better going into Q2 and that consumer business stabilizing, perhaps growing a little bit in Q2 and the balance of the year. Those are good trends. I think it reflects the team's very aggressive efforts on driving promotions, getting shelf space, driving NPI, being really aggressive at hustling at the customer interface, good on-time performance still in that 95%, 94.5% range. Just really good work. Anurag talked a little bit about a couple of pockets that are growing a bit better, but it's pretty broad-based.

<unk> performance still in at $95 94, 5% range. So so just really good work.

Andre will talk a little bit about a couple of pockets that are growing a bit better, but but it's pretty broad based we see really good.

Trajectory here and there.

Our next question comes from the line of Dean Dre with RBC Capital markets. Please proceed with your question. Thank you. Good morning everyone. Good morning Dean. I was hoping we can address the the point of sale momentum. I mean it's a surprising number 7 Up 7 on the last 8 weeks given the pockets of macro pressure. So you know, just your your impression here is this consumer-driven is it more on the commercial side at all just um some contacts in the momentum into April so Dean so so it is consumer-driven because in the consumer business group, you know, it's um, you know we we at this very encouraging for us to see posos up, that's a cloud uh 7 of 8 weeks, which I think is really good. You know. It does kind of make us feel a little bit better going into Q2 and you know that business consumer business stabilizing perhaps growing a little bit into 2 in the balance of the year. So that's those are those are a good Trends. I think it reflects, you know, the teams very aggressive efforts on driving promotions. Getting shelf space driving

Through the first quarter going into Q2, one on the clubs, which which is not surprising given where.

<unk> happens to be today, but we feel good about the trends and good about the outlook for Q2, so far.

Good to hear and love to hear a bit more about the <unk>.

William M. Brown: We see really good trajectory here through Q1 now going into Q2 on the clubs, which is not surprising, given where consumers happen to be today. We feel good about the trends and good about the outlook for Q2 so far.

Spanned at beam optics opportunity, there's a lot of focus on this.

Now, let's address the data transfer of bottlenecks and AI.

Processing so just.

Where do you stand competitively how quickly can you ramp on this is there any question of manufacturing capacity because the take rate on this is is one of the fastest growing right now and datacenter as well.

NPI, you know, being really aggressive and hustling at the customer interface, you know, good on time performance, still in the 95, 94 half percent range so so just really good work. Um, you know on Rock put a little bit about a couple of pockets that are growing a bit better, but but it it's pretty broad base. We see really good. You know, trajectory here in the F through the first quarter now, going in into Q2 on on the clubs which you, which is not surprising, you know, given we're, you know, consumers have to beat today. But, you know, we've got about

Deane Dray: Good to hear. I'd love to hear a bit more about the Expanded Beam Optical opportunity. There's a lot of focus on this. It's addressing the data transfer bottlenecks in AI processing. Just where do you stand competitively? How quickly can you ramp on this? Is there any question of manufacturing capacity because the take rate on this is one of the fastest growing right now in data centers.

The trends and, you know, go to the outlook for Q2 so far.

Exactly that's why we were so optimistic about it and why we're talking more about it and in fact that we had some really good robust IP protection around the technology.

Good to hear. And I'd love to hear a bit more about the expanded beam optics opportunity. There's a lot of focus on this. You know, it's addressing the data transfer bottlenecks in AI processing. So,

His expanded beams. So it's not a point to point fiber connection as datacenter, it's sort of like an easy click between two pieces of multi fiber devices barrels that come together and we can we can put that together at 80% less time with less less extreme technician.

William M. Brown: Well, Deane, exactly. That's why we're so optimistic about it and why we're talking more about it, and the fact that we've had some really good, robust IP protection around the technology. It is expanded beam, so it's not a point-to-point fiber connection at the data center. It's sort of like an easy click between two pieces of multi-fiber device ferrules that come together, and we can put that together at 80% less time with a less trained technician, better reliability, can operate in a dusty environment, which is why it's gotten some good take rate. We've had at least a validation by at least one hyperscaler. A second one's in testing. I expect that will be positive as well. We had a fairly large order come in in Q1 relating to the hyperscaler that has certified it. We are in a ramp-up mode.

Better reliability can operate in a dusty environment.

Why is guidance some some good take rate we've had at least.

A validation by at least one hyperscale or a second ones in testing I expect that will be positive as well we had a fairly large order come in in Q1 relating to the hyperscale or that is certified at <unk>.

We are in a ramp up mode, we will double capacity towards the back end of the year, we're investing quite significantly to expand capacity relying on other partners. In this space Hyperscale is won't go with a single source of supply. So we've got to make sure we have.

Some dual source either couple of factories or us with a contract manufacturer. So all of this is working will work in the ecosystem.

William M. Brown: We will double capacity towards the back end of the year. We're investing quite significantly to expand capacity. We're relying on other partners in the space. Hyperscalers won't go with a single source of supply, so we've got to make sure we have some dual source, either a couple of factories or us with a contract manufacturer. All of this is working. We're working the ecosystem. The pace at which this has happened is very encouraging, and the team is pushing hard. I'm really optimistic about where it's going to go from here. This is a polymer EBO. As it moves to ceramics, which is more EBO or fiber to the chip, I think it opens up a lot more opportunities with a lot of other players in the space. Look, it's encouraging, which is why we wanted to share it today with investors.

The pace at which this has happened is very encouraging and the team is pushing hard I'm really optimistic about where it's going to go from here. It is a polymer <unk> moves to ceramics, which is more <unk> or fiber to the chip I think opens up a lot more opportunities with a lot of other players in this space. So to look at it as encouraging which is why we win.

1 of the fastest growing right now in data center. Well, Dean, exactly. That's why we were so optimistic about it and why we're talking more about it and the fact that we've had some really good robust IP protection around the technology, you know, is expanded beam. So it it it's not a point-to-point fiber connection data center. It's it's sort of like an easy click between 2 pieces of multi-, fiber devices ferals that, you know, come together. And we can, we can put that together, you know, at 80% less time with less less, it's trained technician, you know, um, better reliability can operate in a in a Dusty environment, you know, which is why it's gotten some, some good take rate. You know, we've had at least, you know, a validation by at least 1, hyperscale or a second 1 is in testing. I expect that will be positive as well. We had a fairly large, uh, order coming in in q1, you know, relating to the hyperscaler that is certified. It you know we are a ramp up mode. We will double capacity towards the back end of the year. You know, we're investing quite significantly to

To share today with investors.

Great. Thank you sure.

Okay.

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

Yes. Thanks, good morning, guys and thanks for fitting me in here and I'm just going to ask one since we're near the top of the hour and we've gotten through a lot of the questions on my list I mean, just on some of the margin puts and takes so have you guys made any changes to your full year productivity assumption or stranded costs or growth investments and I guess it was any of that kind of front loaded into the first quarter.

Expand capacity, relying on, um, other partners in space. You know, hyperscalers will go with a single source of supply, so we've got to make sure we have, you know, some dual source here—couple of factories, or us with a contract manufacturer. So all of this is working; we're working in the ecosystem. You know, the pace at which this is happening is very encouraging, and the team is pushing hard. I'm really optimistic about where it's going to go here. This is a polymer EO. As it moves to ceramics—which is more, you know, EBO or fiber to the ship—I think the ODO ends up with a lot more opportunity.

Deane Dray: Great. Thank you.

Opportunities with a lot of other players in the space. So, so look, it's encouraging, which is why we want to share it today with investors.

William M. Brown: Sure.

Great. Thank you. Sure.

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

Nicole DeBlase: Yeah, thanks. Good morning, guys, and thanks for fitting me in here. I'm just going to ask one since we're near the top of the hour, and we've gotten through a lot of the questions on my list. Just on some of the margin puts and takes. Have you guys made any changes to your full year productivity assumption or stranded costs?

How are we thinking about phasing throughout the year of those three items.

Our next question comes from the line of Nicole Delos with Zoya Bank. Please proceed with your question.

Alright, thanks for the question equal so we said well we have a contingency of $5.15. So let's say the midpoint. It's 10 cents about half of that is because of productivity and most of that was in the first quarter. So I would say there were two changes.

Nicole DeBlase: growth investments. I guess, was any of that kind of front-loaded into Q1? How are we thinking about phasing throughout the year of those three items? Thank you.

We made from our previous guidance of <unk> of that was very good productivity both on the supply chain side as well as the G&A and a lot of it we saw in the first quarter and obviously, we can try to continue with the momentum that we have the second phase of the midpoint I would say is because of our active capital deployment wherever you bought back $2 billion of shares in the first.

Anurag Maheshwari: Right. Thanks for the question, Nicole. Oh, yeah. We said we have a contingency of $0.05 to $0.15. Let's say at the midpoint, it's $0.10. About half of that is because of productivity, and most of that was in Q1. I would say the only two changes that we made from our previous guidance, but $0.05 of that was very good productivity, both on the supply chain side as well as the G&A, and a lot of it we saw in Q1. Obviously, we can try to continue with the momentum that we have.

Quarter, $2 5 billion, which obviously gives us the accretion through the course of the year and active cash management with the cash balance that we have.

Those are the big change so we're not changing our productivity guidance stranded cost guidance of 150 tariffs I mean thats all stays the same as it was back in January.

Anurag Maheshwari: The second $0.05 at the midpoint, I would say, is because of our active capital deployment, where we bought back $2 billion of shares in Q1 of a $2.5 billion, which obviously gives us accretion through the course of the year and active cash management with the cash balance that we have. Those are the big changes.

Got it thanks, guys I'll pass it on clinical.

Our final question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.

Thanks, good morning guys. And thanks for getting me in here. Um, I'm just going to ask 1 since we're at the top of the hour and we've gotten through a lot of questions on the list. Um just on some of the margin puts and takes. So have you guys made any changes to your full year productivity assumption or stranded costs or growth Investments? And I guess was any of that kind of front-loaded into the first quarter. How do, how are we thinking about phasing throughout the year of those 3 items? Thank you. Alright, uh thanks for the question. Oh yeah. So you know, we said that we have a contingency of 5 to 15 cents. So let's say at the midpoints 10 cents about half of that, is because of productivity and most of that was in the first quarter. So the I would say the only 2 changes that from we made from a previous guidance or 5 cents of that was very good productivity, both on the supply chain side as well as the G and a lot of it. We saw in the first quarter and obviously we can try to continue with the momentum that we have the second 5 cents, a midpoint, I would say is because of our active Capital deployment, where we brought back, 2 billion dollars of shares. In the first quarter of a 2 and a half billion, which obviously gives us secretion through the course of the

William M. Brown: We're not changing our productivity guidance, stranded cost guidance at $150 million. That all stays the same as it was back in January.

Good morning. Thanks, Raj just very quickly can you just address what your customers are saying about potential supply chain bottlenecks.

Anurag Maheshwari: Yep.

Nicole DeBlase: Got it. Thanks, guys. I'll pass it on.

You're in active cash management. The cash balance that we have—those are the big changes. What are changing? You know, our productivity, guidance, stranded cost? Guidance at 150 tariffs, and it all stays the same as it was back in January.

I guess, particularly so in a kind of a sofa helium.

Anurag Maheshwari: Thank you, Nicole.

William M. Brown: Thank you, Nicole.

Got it. Thanks, guys. See you, Nicole.

No derivatives trains.

Operator: Our final question comes from the line of Laurence Alexander with Jefferies. Please proceed with your question.

And does that are those factored into your contingency that you kind of see ways to work around those shortages if they develop in the back half of the year.

Laurence Alexander: Good morning, Anna. Thanks. Really excited. Just very quickly, can you just address what your customers are saying about potential supply chain bottlenecks? I guess particularly in the kind of sulfur, helium, methanol derivatives chains. Are those factored into your contingency that you kind of see ways to work around those shortages if they develop in the back half of the year?

Our final question comes from the line of Lawrence Alexander with Jefferies. Please proceed to your question.

It's a good question I mean, thats, probably affecting some of the pre buy activity, perhaps look I think we're all working through this we're in direct contact with all of our suppliers trying to manage all of our sources of supply making sure we've got.

A variety of players that we can go to so.

It's on our mind, so I know, it's <unk> and it's going to affect behavior. As we go through the next several months and we watch what's happening in the middle East and through the Strait of Hormuz. So so we'll keep you updated on that but it is certainly a factor that's on everyone's mind today for sure. So thank you.

William M. Brown: Laurence, it's a good question. That's probably affecting some of the pre-buy activity, perhaps. Look, I think we're all working through this. We're in direct contact with all of our suppliers, trying to manage all of our sources of supply, making sure we've got a variety of players that we can go to. It's on our minds, so I know it's on theirs, and it's going to affect behavior as we go through the next several months, and we watch what's happening in the Middle East and through the Strait of Hormuz. We'll keep you updated on that, but it's certainly a factor that's on everyone's mind today for sure. Thank you.

Yeah.

This concludes the question and answer portion of our conference call I will now turn the call back over to Bill Brown for some closing comments. So I know, we're we're a couple of minutes late but thank you all for joining today and I want to thank again all of the three members for their efforts for their dedication.

Good morning, Anna. Thanks for always, just very quickly. Can you just address? Um, what your customers are saying about potential supply, chain bottlenecks, um, I guess, particularly so in the kind of sulfur city of meth methyl, derivatives change and does that fact, are those factored into your contingency? That you kind of see ways to work around those shortages if they develop in the back half of the year. So, so law. It's a good question. I mean, that's probably affecting some of the rebbe activity. Perhaps no. Uh, I think we're all working through this, you know, we're in direct contact with all of our suppliers trying to manage all of our sources of Supply. Making sure we've got, you know, variety of players that we can go to. So, you know, it's uh, it's on our minds. So I know it's on theirs and it's going to affect Behavior as we go through the next several months. And we want to what's happening in the Middle East into the straight or move. So, so we'll keep you updated on that. But it's certainly a, a factor that's on everyone's mind today, for sure. So thank you.

Patient and executing against our priorities strengthening the foundation is arent rugs say controlling the controllable delivering value to our customers and shareholders will. Thank you. Thank you all for joining today have a good day.

Operator: This concludes the question and answer portion of our conference call. I will now turn the call back over to Bill Brown for some closing comments.

William M. Brown: I know we're a couple of minutes late, but thank you all for joining today. I want to thank again all of the 3Mers for their efforts, for their dedication in executing against our priorities, strengthening the foundation, as Anurag said, controlling the controllables, delivering value to our customers and shareholders. Thank you. Thank you all for joining today. Have a good day.

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

Thank you for your participation and ask that you. Please disconnect your line.

Older. So thank you. Thank you all for joining today. Have a good day.

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.

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

We thank you for your part.

And ask that you please disconnect your line.

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