Solventum Corp

Results of Operations

Net Sales

Refer to the preceding“—Overview” section and the“—Performance by Business Segment” section later in MD&A for discussion of sales change.

Operating Expenses

Costs of Product

Costs of product includes manufacturing, engineering and freight costs.

Costs of product, measured as a percent of sales of product, increased in the third quarter of 2024 when compared to the third quarter of 2023. The increase was driven by increased costs due to the impact of higher costs on inventory sourced under the master supply and transition manufacturing agreements with 3M and due to the cost of other transition support provided by 3M.

Costs of product, measured as a percent of sales of product, increased in the first nine months of 2024 when compared to the first nine months of 2023. The increase was driven by increased costs due to the impact of higher costs on inventory sourced under the master supply and transition manufacturing agreements with 3M and due to the cost of other transition support provided by 3M. These costs were partially offset by a sales price benefit.

Costs of Software and Rentals

Costs of software and rentals includes compensation-related costs associated with installation, training and maintenance for our software products, and depreciation, maintenance and refurbishment cost and freight costs related to our hardware rental units.

Costs of software and rentals, measured as a percent of sales of software and rentals, increased during the third quarter of 2024 as compared to the same period last year due to the impact of lower rental equipment revenue. Costs of software and rentals, measured as a percent of sales of software and rentals, were flat for the first nine months of 2024 as compared to the same period last year driven by higher software sales offset by higher compensation costs and lower rental revenue.

Selling, General and Administrative

SG&A, measured as a percent of total net sales, increased in both the third quarter and first nine months of 2024 when compared to the same periods last year. The increase in both periods was driven by higher compensation, including equity- based awards, and higher costs associated with both initial stand-up and ongoing operations to support a standalone company.

Research and Development

R&D, measured as a percent of total net sales, increased in both the third quarter and the first nine months of 2024 when compared to the same periods last year due to higher compensation costs.

Interest Expense, Net and Other Expense (Income), Net

Interest expense, net includes interest accrued on debt obligations, offset by interest income from cash and marketable securities. Interest expense, net increased in both the third quarter and first nine months of 2024 as compared to the same periods last year due to interest incurred on the February 2024 issuance of senior notes and March draw on the senior term loan credit facilities. Refer to Note 8 to the financial statements for more information. This increase was partially offset by interest earned from cash and marketable securities held during the period.

Other expense (income), net includes the non-service component of periodic pension cost, investment gains and losses, and currency-related impacts from foreign currency translation. Other expense (income), net decreased slightly for the third quarter of 2024 as compared to the same period last year. Other expense (income), net increased for the first nine months of 2024 as compared to the same period last year resulting from charges associated with the substantial liquidation of foreign operations completed as part of our separation from 3M.

Provision (benefit) for Income Taxes:

Refer to Note 7 to the financial statements for further discussion of income taxes.