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.

Costs of Sales

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 2024 when compared to 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 2023 when compared to 2022. Material and labor inflation, partially offset by benefits from both price and logistics costs, drove an increase of 0.7%. The material and labor inflation was primarily driven by a 1.4% impact from a higher cost of inventory produced in 2022 but sold in 2023.

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 costs 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 in 2024 as compared to 2023. This increase was driven by higher compensation costs.

Costs of software and rentals, measured as a percent of sales of software and rentals, decreased in 2023 as compared to 2022 due to product mix from higher software sales.

Operating Expenses

Selling, General and Administrative

SG&A, measured as a percent of total net sales, increased in 2024 when compared to 2023. The increase 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.

SG&A, measured as a percent of total net sales, decreased slightly in 2023 when compared to 2022. This decrease was driven by the impact of the gain related to the sale of the Company’s dental local anesthetic business of 0.7%, partially offset by higher expense due to restructuring charges of 0.5%.

Research and Development

R&D, measured as a percent of total net sales, increased slightly in 2024 when compared to 2023 due to initial stand-up costs. The Company continues to prioritize investment initiatives.

R&D, measured as a percent of total net sales, decreased slightly in 2023 when compared to 2022 as the Company prioritized investment initiatives.

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 2024 as compared to 2023 due to interest incurred on the February 2024 issuance of senior notes and March 2024 draw on the senior term loan credit facilities. Refer to Note 8 to the consolidated financial statements for more information. This increase was partially offset by interest earned from cash and marketable securities held during the period. There was no material activity in the years ended December 31, 2023 or 2022.

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 increased in 2024 as compared to 2023 resulting from charges associated with the substantial liquidation of foreign operations completed as part of our separation from 3M in addition to foreign currency impacts and investment losses.

Other expense (income), net increased in 2023 as compared to 2022 due to investment losses and higher foreign currency transaction losses.

Provision (benefit) for Income Taxes:

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