3M - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 beat on both revenue and EPS with margin expansion: Adjusted EPS $2.16 vs $2.01* and revenue $6.34B vs $6.07B*, driven by broad-based execution and productivity; adjusted operating margin expanded 290 bps YoY to 24.5%.
• FY25 guidance raised: Adjusted EPS to $7.75–$8.00 (now includes tariffs), adjusted total sales growth ~2.5% with ~2.0% adjusted organic growth, adjusted operating cash flow $5.1–$5.5B; >100% adjusted FCF conversion.
• Operations: All three business groups grew organically; adjusted FCF $1.28B despite GAAP operating cash flow of $(0.95)B due to $2.2B after-tax litigation payments; company returned $1.3B via dividends and buybacks in Q2.
• Why the beat: ~$0.31 EPS tailwind from productivity, disciplined G&A, metered growth investments, and FX; partly offset by tariffs and below-the-line items; below-the-line included a $0.06 gain from an investment sale pulled forward to Q2.
• Catalyst watch: Guidance raise and sustainable margin trajectory vs. tariff headwinds; ongoing PFAS litigation settlements (e.g., New Jersey) and tariff mitigation actions remain key narrative drivers.

What Went Well and What Went Wrong

What Went Well

• Margin and EPS acceleration: Adjusted operating margin 24.5% (+290 bps YoY) and adjusted EPS $2.16 (+12% YoY) on productivity and cost controls.
• Broad-based organic growth: Adjusted organic growth +1.5% with all three business groups positive; CEO: “positive organic sales growth and double-digit EPS growth” and all groups “growing organically for the third quarter in a row”.
• Execution KPIs improving: OTIF reached 89.6% (June >90%); OEE ~59% with specific asset rationalization examples; “AI-enabled models to optimize machine settings” improving utilization and yields.

What Went Wrong

• Tariffs and 2H margin mix: Company embedding tariff impact in guidance; 2H margin implied lower than 1H due to ~120–130 bps tariff drag plus higher investments and stranded costs.
• Auto and consumer pockets of softness: Auto OEM down low single digits; auto aftermarket down mid-single digits; consumer flattish amid cautious sentiment.
• Cash from operations negative in Q2: $(0.95)B GAAP operating cash flow driven by $2.2B after-tax litigation payments; adjusted FCF $1.28B, but litigation continues to weigh on GAAP cash metrics.

Transcript

Speaker 7

Ladies and gentlemen, thank you for standing by. Welcome to the 3M Second Quarter Earnings Conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you do have a question, please press star one on your telephone keypad. As a reminder, this call is being recorded Friday, July 18th, 2025. 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.

Speaker 6

Thank you.

Speaker 1

Good morning, everyone, and welcome to our quarterly earnings conference call. With me today are Bill Brown, 3M's Chairman and Chief Executive Officer, and Anurag Maheshwari, our Chief Financial Officer. Bill 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. 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. 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 10Q lists some of the most important risk factors that could cause actual results to differ from our predictions.

Please note throughout today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in the attachments to today's press release. With that, please turn to slide three, and I will hand the call off to Bill. Bill.

Speaker 4

Thank you, Chinmay. Good morning, everyone. We had another quarter of strong performance with second-quarter adjusted earnings per share of $2.16, up 12% versus last year and above expectations. Organic sales growth was 1.5%, with all three business groups reporting positive growth for the third quarter in a row. Operating margins increased 290 basis points year-on-year through productivity and cost controls, while we continued to invest in growth initiatives. Free cash flow was solid at $1.3 billion for the quarter and 110% conversion. Our performance reflects the culture of excellence we're building inside the company as we continue to drive the rigor and opt-ampo necessary to deliver on our strategic priorities in this uncertain macro environment. As part of our commitment to innovation excellence, we're increasing the cadence of new product launches.

In Q2, we launched 64 new products, up about 70% versus last year, which puts us at 126 launches for the first half and on track to exceed our target of 215 for the year. The pipeline remains healthy, and there's more rigor and discipline in the process with better business cases and higher launch schedule attainment. Most importantly, five-year new product sales bottomed last year and was up 9% in the first half, accelerating from Q1 into Q2 and tracking well to be up more than 15% for the year. With 64 launches in the quarter, there are a lot of exciting new products to discuss, but let me take a moment to highlight just a few.

In our fire safety business, we launched a low-profile rugged air pack with updated electronics to enable telemetry and connectivity that has been well received by our largest firefighting customers, especially those who value compactness and maneuverability in small spaces. In our consumer business, we've been building around the Filtree platform with four new product launches in the last six months, including one with a reusable filter frame that can be refilled by a collapsible deep pleat filter, analogous to a razor-razor blade model. This innovative design reduces shipping costs and saves retailers storage and shelf space. At the same time, we're continuing our focus on commercial excellence as we drive increased Salesforce performance, capture higher cross-selling opportunities, improve price discipline, and reduce churn. You'll recall that our team in safety and industrial launched the program in the U.S.

late last year and has now expanded this effort into Europe and Asia. We've trained over 400 sales managers and see early results through higher closed-won opportunities and improved order rates. We now have 48 cross-selling pairs identified, about double since Q1, with a pipeline value of over $60 million and $10 million of new orders booked to date. We're tightening pricing controls by reducing price deviations and focusing on bigger deals with strategic customers. We're reducing customer churn by leveraging our predictive analytics model to identify and win back customers at risk. SIBG has been first out of the gate on the commercial excellence initiative, and we're seeing promising early results with average daily order rates up low single digits in Q2.

Our strategy is working, and we're now extending this 3M enterprise-wide commercial excellence model across the organization, with transportation electronics quickly leveraging the learnings and best practices from SIBG while adapting it to the unique nature of a more spec-in type business. Our second priority is operational excellence. In the second quarter, we made good progress on several fronts, including service, asset utilization, and quality. On service, our on-time and in-full metric reached 89.6%, the highest quarterly performance we've achieved in nearly six years, and we exited June at just over 90%. Consumer and TEBG remained consistently above 90%. SIBG was 83% for the quarter, improving more than 300 basis points year-on-year. Our overall equipment effectiveness metric was approximately 59%, showing continued improvement both year-on-year and sequentially, with a lot of runway ahead of us.

We're now at the point where OEE is improving on a consistent basis through better tracking and deeper root cause analysis, and it's highlighting potential capacity consolidation opportunities. For example, a core manufacturing process at 3M is adhesive coating, and we have about 250 different types of coaters throughout the network, some quite old and all expensive to replace. One of our larger coaters is in Knoxville, Iowa, making fiber adhesive tapes. Through an extensive effort to reduce changeovers, increase operating speed, and improve machine uptime, the team drove a 12-point improvement in OEE and freed up enough capacity to retire two 70-year-old coaters at another facility. This is just one example of the broader opportunity at 3M to use a rigorous, methodical approach to get more production out of our higher capacity assets and proactively decommission aging, less productive assets in the network.

This thinking can be extended to all of our core manufacturing processes, making, coating, slitting, packaging, and over time, more holistically, to the design of our future network. We're also making progress on quality. In the second quarter, our cost support quality was 6.1%, down 30 basis points sequentially and 90 basis points year-over-year. We're using AI-enabled models to optimize machine settings for more efficient changeovers, leading to better utilization and higher yield. Quality is a core element of our enterprise-wide 3M excellence operating model, and we're extending our efforts to improve quality in every function and everything that we do. Our third priority is effective capital deployment. In the first half of the year, we returned $3 billion to shareholders via dividends and share repurchases, and we'll continue to be opportunistic on buybacks in the second half of the year while preserving balance sheet flexibility.

In May, we announced a settlement with the state of New Jersey on PFAS claims, taking the opportunity to settle both site-specific and statewide claims with broad protections against future litigation and cash payments spread over 25 years. We continue to manage other state, federal, and international matters, all of which are extensively covered in our 10Q. On the back of the progress we're making on our priorities and the strong results in the first half, we're increasing our earnings guidance to a range of $7.75-$8.00. Now inclusive of the anticipated impact of tariffs. We expect organic growth to be approximately 2% for the year, reflecting the current macro environment as we see it today. Slide four highlights several of the key macro trends we're tracking and their impact on 3M.

All metrics on the left reflect a global economy that remains sluggish and moving laterally, not materially improving or worsening. Our safety and general industrial businesses were up low single digits in the first half and are both beginning to see a pickup due to our commercial excellence initiatives. Auto will be flattish in the second half, a step up from the decline in the first half due to share gains in new models, while consumer electronics is likely to soften a bit in the back half due to slower demand for premium devices. Auto aftermarket will remain challenged, and consumer will likely follow a similar pattern to the first half due to the subdued U.S. retail environment.

As we navigate these uncertain times, we're focused on what we control, solving customer problems through innovation excellence, delivering high-quality products on time to customers, and driving efficiency and waste elimination, all with a renewed sense of urgency that defines our new performance culture. With that, I'll turn it over to Anurag to share the details on the quarter. Anurag.

Speaker 8

Thank you, Bill. Turning to slide five, we reported another quarter of strong profitable growth and robust free cash flow generation. Starting with the top line, all three business groups delivered positive year-on-year growth despite the fluid macro environment, resulting in total company-adjusted organic growth of 1.5%. We saw continued momentum across electronics, general industrial, and safety end markets, which was partially offset by known softness in auto and automotive aftermarket. Consumer was flattish as sentiment remains cautious. By geography, our growth was led by China, up mid-single digits, with strength in industrial adhesives, films, and electronics bonding solutions driven by strong commercial execution that led to share gains. The U.S. was up low single digits, led by growth in electrical markets and personal safety, partially offset by weakness in auto, OEM, and aftermarket.

Europe was flat, with strength in electrical markets and personal safety, partially offset by weakness in transportation safety and auto. Q2 daily order trends were up modestly year-on-year, driven by our progress on commercial excellence in the industrials businesses, partially offset by weakness in consumer as retailers are watching to see how the season plays out. Our backlog continues to grow, providing 20-25% coverage of third-quarter sales. Q2 adjusted operating margins were 24.5%, up 290 basis points, and operating profit increased high teens or $225 million. In constant currency, driven by continued strong operational performance. This included a $300 million benefit from volume growth, broad-based productivity, lower restructuring cost, and equity calm timing, partially offset by $50 million of growth investments and $25 million from tariff impact and stranded cost headwind.

Collectively, this contributed $0.31 to earnings, which was partially offset by $0.02 from FX and $0.06 from non-operational below-the-line items. Our strong operational performance resulted in overall adjusted EPS of $2.16, an increase of 12%. Relative to our initial expectations of approximately $2. This outperformance was driven by four factors. First. Continued G&A efficiency as we make progress on IT optimization and lower indirect expenses. Second, metering of increase in year-over-year investments in response to a lower demand environment and evolving tariff landscape. Third, weakening of the U.S. dollar. Finally, we had a $0.06 benefit from the sale of an investment below the line, which was initially anticipated in the third quarter and offset the impact from tariffs and other below-the-line items.

Free cash flow was $1.3 billion, 10% higher than last year as we benefited from strong earnings, and we returned $400 million to shareholders via dividends and executed on a $1 billion in gross share buybacks. For the first half, our gross buybacks were $2.2 billion. I will provide a quick overview of our growth performance for each business group on slide six. Safety and industrial organic sales grew for the fifth consecutive quarter, up 2.6% in Q2. This was broad-based, with six out of seven divisions posting positive results. Similar to the first quarter, industrial adhesives and tapes and electrical markets continued to perform well on the back of new product innovation and commercial excellence. It was encouraging to see abrasives turn positive as we launched new products and executed a commercial strategy to increase sales effectiveness.

Auto aftermarket continued to see challenges, down mid-single digits amid industry pressure, with collision repair claim rates down double digits year-to-date. Transportation and electronics adjusted sales were up 1% organically in Q2. Growth was led by commercial graphics and auto personalization driven by demand for a new product, the premium fleet wrap and expanding sales coverage. Electronics and aerospace and defense showed strength while our auto OEM business was down low single digits, reflecting continued weakness in auto builds, particularly in Europe and the U.S., which were each down low single digits year-on-year. Finally, the consumer business was up 0.3% organically in Q2. Though consumer sentiment remained soft, we continued to execute on growth initiatives, including new product launches in Scotch-Brite kitchen scouring, Scotch-Blue Pro Shop painter's tape, and Command, and continued service improvements and increase in advertising and merchandising investment.

Along with organic growth, each business group expanded margins year-on-year, SIBG up 320 basis points, TBG up 230 basis points, and CBG up 370 basis points. Overall, our focus on delivering organic growth and improving operational excellence helped us deliver solid results in the first half, including growth of 1.5%, operating margin expansion of 250 basis points to 24%, and earnings growth of 11%. Before providing the details of our updated guidance, let me start with a reminder of how we framed it in April, which is the middle column on slide seven. On organic sales growth, due to the soft macro, we indicated that we were trending to the lower end of a 2-3% range. Our first-quarter productivity gains were very strong, but given the dynamic environment, we did not flow through this outperformance into our guidance and maintained the EPS range at $7.60-$7.90.

Given that the tariff situation was uncertain, we kept tariffs out of the guidance range at the time but estimated a gross impact of $0.60 or a net impact of $0.20-$0.40 after mitigating actions. We have now updated the guidance to reflect our strong first-half performance and have also incorporated the tariff impact. We are updating our organic revenue growth guidance to approximately 2% and expect all three business groups to grow low single digits for the year with a similar profile to the first half. On the back of a strong first-half performance, we now expect margin expansion of 150-200 basis points and are increasing both the lower and higher end of our EPS range, which is a $0.13 increase at the midpoint, $0.23 of that coming from operational performance, offset by $0.10 of FX and tariff impact.

We now expect a free cash flow conversion to be higher than 100%, building on strong first-half performance, efficient CapEx, and second-half improvement in working capital, providing us with further optionality on capital deployment. Let me walk you through the drivers of the EPS guidance updated on slide eight. First, we are flowing through $0.23 of operational improvements, which include actions to offset the tariff impacts. This is driven by $0.16 of productivity, which includes the G&A efficiency gains, and $0.07 metered investments. As we highlighted previously, we are investing in a metered manner while maintaining the critical growth investments to support our strategic priorities. Finally, as mentioned, we have now included tariffs in the guidance, which is a gross headwind of $0.20, partially offset by the foreign exchange headwind reduction from $0.15 to $0.05. On the other non-operational items, there is no change from the prior guidance.

Putting this all together, the EPS growth year-on-year is driven by strong operational improvement, and we now expect an operational benefit of $0.95-$1.20, partially offset by $0.50 of tariff, FX, and non-op headwinds for a total EPS growth of 6%-10%. Regarding the second half, we expect year-on-year earnings growth of $0.18 at the midpoint. Similar to the first half, this includes an approximately $0.50-$0.55 benefit from volume growth and continued productivity, net of stranded cost and growth investments, which is partially offset by $0.30-$0.35 of tariff impact and higher interest expense. Before we open the call for questions, I would like to acknowledge and thank the 3M team for their focus on operational excellence and controlling the controllable in a dynamic macro environment, which gives us confidence in meeting our increased guidance and delivering strong shareholder returns in 2025. With that, let's open the line for questions.

Speaker 7

Ladies and gentlemen, if you would like to register a question, please press Star 1 on your telephone keypad. If your question has been answered and you would like to withdraw, please press Star 2. If you are using a speakerphone, please lift up your handset before entering your request. Please limit your participation to one question and one follow-up. Our first question comes from the line of Scott Davis with Melius Research. Please proceed with your question.

Speaker 10

Hey, good morning, guys.

Speaker 4

Good morning, Scott.

Speaker 10

Bill, can you talk about the new product plan and, I guess, kind of more specifically teasing out the impact on kind of margin versus growth and how you think about that tipping point where you can really start to see growth above your end markets? I'll just leave it at that. I have a follow-on.

Speaker 4

Scott, I'm glad you asked about R&D and NPI because it's been a very important initiative. As I talked a year ago, this would take some time to materialize. We are starting to see some improvement on our five-year sales. We talked about 9% up in the first half and quite good for the year going to 15%. It's actually trending in the right way. I'm really excited about the fact that we're launching more products, up 70% in the quarter. We did more in the first half, or about as many in the first half as we did in 2023. The progress on that, I think, has been quite good. I think we should be expecting both improvements in growth from new product innovation as well as improving margin as you're bringing a product to market.

Certainly, as these things materialize and they stabilize in a factory, we're bringing better benefits to the customers. They should generate better pricing in the marketplace. I do expect that we should see better margin performance from them. What we're focused on is delivering against customer expectations, beating the competition, regaining share of wallet, and just getting back to that spirit of innovation at the company. As I said, I think the progress we've made so far has been fantastic. We're investing more in R&D. We're shifting dollars. We're shifting resources into new product development. As we talked a year ago, we're up about 150 people since Q4 of last year. It takes some effort. It takes focus. It takes following the metrics. We're making good progress, and we should see certainly growth and hopefully some margin benefit as well.

Speaker 10

Okay, Bill, that's helpful. I just want to follow on on that a little bit. I mean, historically, when you think about some of your customers have been tough to get price with, auto, big box guys, I mean, just brutally hard. Have you found that new products are really going to be your only avenue of getting price for those guys? Or because of the realities of inflation and tariffs and such, do you find it a little bit easier to capture a little bit of inflation impact from those guys also without new products?

Speaker 4

What we're seeing so far this year is pretty good progress on pricing, and it's mostly coming out of the industrial businesses. I think you're right for auto, where it's a spec-in business. As you win a spec, you tend to have some value built into that. It's hard to determine how much is price versus the value that's there. Consumer, the big box people, a little bit harder, as you just pointed out. It's a bit we're getting better price, certainly on the industrial side. As I've said before, we are covering our inflation typically with a little bit more because of the tariff impacts coming through. We're doing pretty well this year on pricing, again, mostly on the industrial side.

Speaker 10

Okay. Best of luck, guys. Thank you.

Speaker 4

Thank you.

Speaker 10

Appreciate it.

Speaker 7

Our next question comes from the line of Jeffrey Sprague with Vertical Research. Please proceed with your question.

Speaker 3

Hey, good morning, everyone.

Speaker 4

Hey, good morning, Jeff.

Speaker 3

Hey, Bill. Good morning. Maybe just pivot from the growth side to the cost side and what you're working on there. I'm wondering if you could just elaborate a little bit more on kind of the sources of operational upside. In the footprint versus kind of G&A and the like. I ask the question in the spirit, right? The adjusted margins are moving up pretty nicely. We don't get an adjusted gross margin, for example. How much of it's at the gross line? How much of it's kind of in G&A? How do you see that playing out moving forward?

Speaker 4

Okay, Jeff. It's a good question. I'll start, and maybe I'll ask Gunn or I'll jump in on part of this. For the year, it's about $500,000,000 of productivity. More or less about half is coming out of G&A, and about half is coming out of our factories, out of our supply chain, which, as we translated internally, is running about 2% net of inflation, which is about what we had expected. Inflation in the quarter, Q2 was a little bit higher than 2%, and Q1 was a little less than 2%. For the first half, it's around 2%. For the year, we're expecting about the same. Again, we're getting about 2% gross productivity, 2% net productivity on top of inflation. It's actually been pretty good on the supply chain side. It's the elements that we've been talking about. I alluded to in some of my prepared remarks.

$40,000,000-$50,000,000 coming out of reduced cost per quality, which has been a good trajectory that we've been on, a long journey, a lot more to do. Good movement on procurement savings, net of any inflationary pressures from our suppliers. Really good cost controls on the four-wall side within our factories, as well as in the logistics network as well. Overall, about $250,000,000. Really good progress on driving supply chain productivity. I'd say the same thing on the G&A side. I'll turn to Anurag to maybe say a couple of words of what's happening on the G&A side. Overall, about $500,000,000, half G&A, half in supply chain.

Speaker 1

Yeah. Thanks, Bill. Hey, Jeff, really encouraged by the performance and productivity just across both supply chain and on the G&A side. That gave us confidence to raise the EPS at the midpoint by about $0.13. Bill spoke through the pieces on supply chain, very consistent to what we communicated and invested across the four buckets. On the G&A, similarly, at the investor day, what we said is there are three areas where we would expect G&A savings to come out of: IT optimization, where we spend close to $1 billion; second is indirect expenses, where we spend more than $3 billion; and then shared services. Where we're seeing more of the opportunities coming is the first two buckets. I think on the IT, the team has done a really, really good job. We take our IT expenses, it's broken into three categories, which is protecting, maintaining, and investments.

Maintenance, which is about two-thirds of it. The team's done a good job in terms of cloud, mainframe, network optimization, also looking at staff augmentation, the number of applications we have. There's a whole bunch of tactical efforts that the team has gone through and done a good job. What's also shown is not only are these savings, which we can take in the quarter, but also long-term structural savings that we can see. We're well down on that path. On indirect, I mentioned in the last call as well, we have more visibility in terms of the data, where the spend is going. First, we look at whether it's aligned with our strategic priorities or not. If it's not aligned, then we don't need to spend. If it's aligned, what's the best way for us to procure and use the leverage of the enterprise?

I think it's moving quite well in that direction. Shared services will take a little bit more time as we go down that path. Overall, I would say very good performance and productivity.

Speaker 3

Bill, maybe just back to growth as my follow-up. Just maybe your philosophy on sort of metering the best investments. I get it, the macro is not great, and you're managing a complex P&L. It's 7 cents, right? I think we all would have been perfectly happy with the guide, 7 cents slower than what you put out today, and you telling us, "Hey, we're keeping our foot on the gas on the investment." Are these just kind of longer-term things that weren't going to bear fruit in the near term anyhow? Again, maybe just your philosophy on that.

Speaker 4

No, so Jeff, it's a good question. I mean, we look at this very, very carefully, and we are leaning in on making growth investments where we think there's a prudent payback in the near to medium term. If we see the macro not as strong as we had anticipated, we're pulling back a little bit. Still, we're significantly investing in growth investments this year. The number is about $175 million. When you parse that, there's significantly more in ad merch. There's more in the sales force. There's more going into R&D. As I mentioned, we're up 150 people there. We're pushing people from PFAS into R&D, into new product development as well. We're pushing up our R&D spend as a percentage of sales. All those pieces, I think, are going in the right direction.

There's some things that are happening on the IT side that are systems related to driving growth. All of those things we're trying to be smart and prudent and invest in to actually stimulate long-term growth by recognizing where the macro happens to be today. I think we're being balanced here, Jeff. We look at it very carefully. To the extent that things look a little bit better in the back half into 2026, then we'll let a little bit more out. We watch it very carefully.

Speaker 3

Great. Thanks for the perspective.

Speaker 4

Okay, Jeff.

Speaker 7

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

Speaker 5

Hi, good morning. Maybe just wanted to start with the slide four, where you run through some of those macro buckets. Just trying to understand within general industrial and safeties, the improvement there based on sort of self-help market share efforts at 3M. It sounded like that, but I wondered what you were assuming for the sort of core macro environment in the back half, and maybe just give us any understanding of how recent demand trends have evolved across different markets in the last couple of months.

Speaker 4

Okay, Julian, so I'll start here, and Anurag can jump in as well. I'm glad you pointed that chart out. We spent a lot of time putting it together to make it as clear for investors as we can on what's happening in the macro as we see it and the impacts on the company. Look, as I mentioned in my script, the macro, it's sluggish. It's moving laterally. I went through some of the numbers there on what's happening with IPI. It's around 2%. It's sort of flattish. GDP is about the same. It's in the mid-twos and about to be the same, maybe a little bit softer in the back half. PMI, I mentioned, is below 50. It's at 49, but it's still contracting, but not as much. Again, things are just moving laterally. Consumer means relatively sluggish.

What you see on that slide four is momentum building inside the company on self-help, on new product introductions, many of which will come out in the market. In the first half of the year, we'll start to impact sales in the back half and the benefits of commercial excellence, which is really starting to take hold inside the company. General industrial includes parts of both SIBG and TEBG, so parts of those two businesses. It has abrasives, industrial specialties, roof and granules, electrical markets, a piece of the tapes business that goes into industrial products. Then from TEBG includes advanced materials, aerospace, and defense, which actually we expect to grow pretty decently in the back half. Consumer branding, so it's got commercial branding and transportation safety. You've got all those pieces in there. It's about 38-40% of the company. It's a pretty big part of it.

Again, industrial IPI is moving somewhat laterally, but generally speaking, the opportunities we're seeing here are principally coming from self-help. There's some in the markets. We know A&D is going to be picking up for us in the back half. It wasn't as strong in the first half as we had expected, some internal, some external issues, but we see that picking up for us in the back half. Electrical markets remain very robust for us. Again, we expect that to be high single digits going into the back half. That's kind of a nutshell on the safety side or on the general industry side. On safety, we had a good start to the year. We see some acceleration in the back half. Part of it is from new product introduction, in-fire safety, SCBA. We've launched a new product. We've had some big wins with government customers.

We do see the back half on safety accelerating there as well because of both a couple of wins that we've had, but some new product introductions.

Speaker 5

That's great. Thanks very much. Focusing a little bit on the second half, guidance. Often your third quarter earnings are up a little bit sequentially, but I understand you had that $0.06 gain moving into the second quarter. Maybe help us understand how we should be thinking about third quarter versus fourth quarter dynamics. Anything to call out on sales or the margin progression?

Speaker 1

Yeah. Thanks, Julian. It's Anurag here. Listen, within the second half, let's just first start with the top line. Guidance for the full year is approximately 2% organic growth. In the first half, we grew 1.5%. That would imply a 2.5% growth in the back half. We're expecting probably Q3 and Q4 to grow at similar levels around there. In terms of EPS, Q3 is historically higher than Q4. That's mostly because seasonally, our revenue is higher in Q3 than in Q4. Also, on the margin side, it's higher. The ratio has been, if you look at the second half, 52% of the EPS of the second half is in Q3, about 48% is in Q4. We kind of expect the same trend this year as well.

Speaker 5

That's great. Thank you.

Speaker 4

Thank you.

Speaker 7

Our next question comes from the line of Ahmet Mayrotra with UBS. Please proceed with your question.

Speaker 11

Thanks. Morning, everybody. I guess maybe just a separate topic, talk about PFAS. I think there was obviously a nice settlement, or not a nice settlement, but a decent settlement size with the state of New Jersey. I think you have 30 more states still pending. There's obviously a personal injury suit still outstanding. Just given the development in New Jersey and kind of the structure of that. You're obviously year to date exceeding your full year share buyback target. Maybe, Bill, talk about your freshest, most updated thoughts on that because I still feel there's this overhang on the value of the company based on these pending liabilities. I think it would be great to hear your thoughts on maybe how you view the progress on these and when you expect to maybe gain a little bit more full clarity on it.

Speaker 4

Ahmed, yeah, thanks for the question. Yeah, we did have a settlement with the state of New Jersey, both for a specific site, which we did not own. It's a Chemours DuPont site. There was some liability there, as well as statewide claims. We believe it was the right decision for the company and the shareholders to take risk off the table. It spread cash payments out over the next 25 years through 2050. We thought that that was quite manageable. You're right. There are just over 30 other states' AG cases, both within the MDL and some outside of the MDL. We're taking them piece by piece. There are obviously lots of conversations going on with the AGs and the MDL in individual states. There's a lot of activity there. I just want to remind you, we're exiting PFAS manufacturing by the end of this year.

There will be no new molecules that the company has produced on PFAS going into the environment. These are all settling legacy issues, and we're going to deal with this as best that we can. Personal injury is on the horizon. It is scheduled for October. There's a bellwether case. It will be kidney cancer. There will be one, two, or three cases that will be tried around October 20. There's a lot of conversation that's happening there as well. There was a science day on other things last month. There's a lot of activity here. We're managing it as best that we can. It's important for us to make sure that we maintain the cash flexibility to handle these issues as they come, yet still invest in the growth of the company. That's what we're trying to do. Our balance sheet is very, very healthy.

We have a lot of optionality on things that we can do. We're dealing with this, and we communicate with investors with what we know as we know it, and you see a lot of it in the 10-Q.

Speaker 11

Okay. Helpful. Thanks. Maybe just one for Anurag, just circling back to the first half to second half cadence. If I just kind of unpack the implied margin, I mean, I think the company did 24% in the first half, guiding to 23, a little over 23% for the full year. Obviously, that implies a step down in second half versus first half. Obviously, revenue should be higher sequentially. I'm just trying to kind of square that circle a little bit and understand what are the puts and takes that actually take margin down 2H versus 1H when revenue is building sequentially?

Speaker 1

Yeah. Thanks, Ahmet. So yeah, our first half margin is 24%. We are guiding between 150-200 for the year. That would imply at the midpoint that the second half guidance would be around 22.5%. The delta between the two is you clearly see a pickup in volume. Productivity should do well. It's essentially the tariff impact that we are seeing in the second half, which is more than 120-130 basis points, and also a pickup in investments and stranded costs. That's a big delta between the first half and the second half, volume productivity better. If you take a step back and you look at it year over year, you're still seeing the second half margins go up by 110 basis points at the midpoint of our guidance. That's after absorbing tariff, after absorbing increase in stranded costs and higher investment.

It's pretty encouraging in terms of the performance of the second half, which is obviously as we go into next year, we mitigate more of the tariff impact. There's more productivity that will come through. Overall, the momentum in the second half operationally is similar to where we are in the first half.

Speaker 11

Great. Okay. Got it. Thank you very much. Appreciate it.

Speaker 7

Our next question comes from the line of Steve Tuso with J.P. Morgan. Please proceed with your question.

Speaker 4

Hi, good morning.

Speaker 10

Good morning, Steve.

Speaker 4

Morning.

Speaker 10

Just a quick one to start. What's the embedded assumption on Forex? I would have thought there was maybe a little bit more upside. Just given your exposure on the euro.

Speaker 1

Yeah. On Forex, our headwind on the EPS for the year is about $0.05. On revenue, we think it's about flattish. The reason there is a disconnect between the flattish on the revenue and the $0.05 headwind is just the impact of the year-on-year hedge benefit that we had last year. As you know, we hedge our non-dollar currencies, which create a hedge benefit or a loss which lags to the currency movements. Last year in Q2, it produced a significant hedge benefit because of the strength of the dollar. Now the dollar weakens in the second quarter, so the hedge benefit is modest. That is why you see all of our FX headwind in the first half of the year, which is about $0.05. As you go into the second half, you should see that kind of normalize. Fully, it'll be about $0.05 headwind on the FX side.

Speaker 10

Okay. And then just to follow up on the consumer electronics side, I think you guys are maybe a little bit more bearish, it seems like, on the trend there. Can you maybe talk about specifically where that weakness is on electronics?

Speaker 4

We see electronics, it's still up in the back half. It's just not as strong in the front half. When we look at the, across all things, TVs, tablets, phones, notebooks, everything is sort of softening towards the back end of the year. At least that's what's been expected. We had a very strong year last year. So part of it is year-over-year comps, but started pretty good in the first half, up mid-single digits. Still up in the back half, but softening in terms of a rate basis versus the first.

Speaker 10

Okay. Great. Thanks a lot.

Speaker 4

Thank you, Steve.

Speaker 7

Our next question comes from the line of Andrew Obin with Bank of America. Please proceed with your question.

Speaker 0

Hi, yes. Good morning.

Speaker 4

Hi. Good morning, Andrew.

Speaker 0

Just a question. Can we just sort of say in terms of on-time and in-full? I know that this was a big drag on top line in safety and industrial. What kind of impact to top line does it have as it's improving and you're sort of regaining traction with your medium and smaller customers? Can you quantify that? Are you seeing any discernible impact yet?

Speaker 4

We're not going to quantify it specifically because there's a lot of factors into why customers may not buy from us because of OTIF. Improving it, delivering on time in full to customers is quite important. We know from talking to our end customers, it is an element of churn, why customers leave us. That number across the company is pretty substantial. We're focused on this. We're trying to bring it down. One element is responsiveness and customer service. It's quality. Importantly, it's on time in full. Clearly, Andrew, as we get better on that, that's going to allow us to reduce churn, grow, and we're starting to see benefits of lower churn in the back half. I think part of it probably is related to OTIF. It's hard to say exactly what part of it is, though.

Speaker 0

Okay. Gotcha. Just sort of going back to the guidance. Just very simplistically, I think generally, right, seasonality is a little bit different, and it seems second half is weaker. Despite the normal seasonality, despite accelerating top line into the second half. Right? I would imagine, based on what we're hearing, actually, pricing dynamic all in is not that bad on the industrial side. Can you just highlight one-time items related to your footprint consolidation and changes in absorption? What are the headwinds in the second half that are sort of messing with the seasonality? Could you just quantify them for us again? I really appreciate it. Thank you.

Speaker 1

Thanks, Andrew. There is nothing on the footprint on any one-timers in the second half, which is doing it. Operationally, we grew the first half at $0.50-$0.55. And second half, we grew around the same rate as well. So volume and productivity, where we see the impact is more on the tariff. We have $0.20 for the year. We had a couple of pennies in second quarter. So $0.18 of that is in the second half. That is the major impact. On top of that, stranded cost is picking up in the second half versus the first half and a pickup in investments. I would say those are the big factors. There's not much of a one-timer over there.

The only thing on the EPS between first half and second half is obviously the sale of the investment that we had in Q2, which is below the line, which impacts the second half.

Speaker 0

What are the, can you quantify the stranded costs again? I apologize.

Speaker 1

Was it stranded cost? Yeah. So it's $100 million for the year. It's about $30 million in the first half and $70 million in the second half.

Speaker 0

Okay. So that hasn't changed?

Speaker 1

No.

Speaker 0

Okay. Thank you.

Speaker 7

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

Speaker 10

Thank you. Good morning, everyone.

Speaker 4

Morning, Dean.

Speaker 10

Hey, I was hoping you'd take us through the changes in your tariff assumptions, the benefit of the pause that was implemented. Did you make any specific mitigation actions in the quarter? What was the decision about including it in guidance on a go-forward basis?

Speaker 4

Last time we said it was $0.60 gross. Now it's $0.20. The biggest change is really going to be around China. Last quarter, it was about 80% of the tariff impact. At the time, the rate was 125, 145. So U.S. 145, China was 125%. They've come down dramatically to 10 and 30. That was the biggest source of change. Things are moving around still a little bit, but we included it in the guidance mainly because we're more than halfway through the year. Things have stabilized at least a little bit. Any changes from here, we'd only have a couple of months in the balance of the year that would impact 2025. The rest would roll into 2026. We feel we're pretty well calibrated. Of course, we're watching very carefully what happens in the EU. We've got to watch against any re-escalation in trade tensions with China.

That could be a change. From the way we see it today, I think we know enough about it in terms of the gross and net impact to roll it through into guidance, which I think is cleaner for investors. We're offsetting $0.20 of gross tariff with both cost and sourcing changes, which is about half of the offset, and the other half is coming through price. The gross amount is about $140 million. Net's around $70 million. About half of that, say, $35 million-$40 million is price. The other half, $35 million-ish, is going to be cost savings as well as sourcing. The pricing piece of it, that's one of the elements that's helping us push second-half growth a little bit because that's mostly a second-half item.

Speaker 10

Great. In your answer, you just put the spotlight on China. There might have been an expectation there'd be some fallout because of tariffs and maybe some pushback on your business there, but up single digits look pretty healthy. Just, have you seen much of a fallout? How much is embedded in the second half?

Speaker 4

Do you know? We actually had a very good first half, up mid-single digits. Frankly, it was better than we expected coming into the year. Early in the year, we were thinking it's low single digits. It's been mid-single digits in the front half. We do expect it will slow down in the back half. That's embedded in our numbers. For us, it's roughly half as domestic, half as export. Both were performing very well. It's some of the local stimulus happening in China for appliances, white goods, which we sell a lot of tape products into, as well as the export market, a lot of which was electronics. Again, that for us has been pretty healthy. Again, we do see it softening in the back half of the year. We're committed to China. It's a big part of the company and seven factories, 5,000 people there.

We have a great team, great business, really driving a great job on commercial excellence there in China. Again, it'll slow down, but still be up for the year.

Speaker 10

Great. Thank you.

Speaker 4

Sure.

Speaker 7

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

Speaker 6

Yeah, thanks. Good morning.

Speaker 4

Morning, Nicole.

Speaker 6

Maybe just starting with the demand trends through the quarter. I guess there's still been some concern out there that we've heard about whether there was any sign of tariff pre-buy. It seems like we're kind of on the verge of tabling that. Just wanted to hear your thoughts, Bill, and if what you've seen through July kind of gives conviction that pre-buy wasn't really a factor.

Speaker 4

It's hard to discern that. There's probably a little bit hanging out there, but it's not substantial. Anything that might happen from Q2 into Q1, we see Q3 coming into Q2. I don't think the pre-buy is an issue. For the quarter, our orders were up, low single digits, as we described in the materials. A little bit better in SIBG, about flattish in TEBG, down a little bit in consumer. Consumer accelerated over the course of the quarter. June was better than May. May was better than April. We saw some acceleration there. July, it's still very, very early. We saw some similar progress here in July, but again, it's only a couple of weeks. It's hard to discern a pattern over that. Q2 orders were up low single digit. Our backlog grew. It's about 1% sequentially, so about $2 billion.

As Anurag mentioned in his comments, we're not really a backlog-driven business. We're more book and ship. We saw some backlog growth sequentially in 20-25% of Q3's covered in backlog, which is a pretty good place to be. What I'm pleased about is orders are hanging in there, and backlog is hanging in, if not growing a little bit sequentially.

Speaker 6

Thanks, Bill. That's helpful. On Europe, I feel like there's definitely been a little bit of excitement building about the potential course of recovery there. I know you guys were flat in the quarter, but have you seen anything when you look at those orders and backlog that suggests green shoots in Europe?

Speaker 4

We're hopeful for Europe in the back half. It's an important marker for us. The watch item for us is going to be auto, Nicole, actually. What we've seen overall is IHS builds globally are sort of flattish. It moved from down a little bit to up a couple of tenths in the latest drop a couple of days ago. A lot of that's China, which is driving that growth. Europe and North America are both down, which adversely affects 3M. Europe is expected to be down in the back half on auto build, and that's the one that's important to us. Other parts of our business are showing some signs of growth. We saw SIBG up in the quarter in Europe. I think there's signs that there could be growth on that side. Auto is a watch area for us in Europe in the back half.

Speaker 6

Thank you. I'll pass it on.

Speaker 7

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

Speaker 0

Thank you. I wanted to ask about back half organic growth, the 2.5%, so up from the 1.5% in the first half. The comps do get a bit tougher. It sounds like you guys think the macro continues to go sideways. Is that lift really all just price that's coming through and maybe some help from the NPI? Is there any buffer in that guide for maybe some volume pressure should there have been first half channel build? Thank you.

Speaker 4

Chris, thanks for the question. Look, there is some price in there. It's probably 40 basis points, let's say, of price in that 2.5. If you look at just comparable to Q1, it's 1.5 to Q1. It's up in terms of growth rate sequentially, first half and the second half, but there is some pricing benefits. I went through some of the drivers on the general industrial side, the safety business. The one area, I talked a little bit about electronics, softening a little bit in the back half, but still up. There are some end markets that are up. We do see some larger orders that have come through on the government side, on the electrical product side. The one area that I didn't speak about was on the automotive side, even though automotive will remain weak.

We are working hard on repositioning our business there and driving growth with new models. We do expect us to be flattish in the back half from being down in the front half, even though the builds are still weak in the back half. Part of it is really aggressive commercial excellence efforts to go back and recapture opportunities in the tiers, particularly in bonding and joining and acoustics and other things. There are some model switchovers happening where we're specced in. We're hopeful that we can continue our position on those new models as they get into production later on this year. Auto is a watch area for us. We do expect that to be better in the back half and more flattish versus down in the front. That's an important driver of their second-half performance, Chris.

Speaker 0

Thank you. I appreciate that. If I could follow up on maybe competitive tailwinds that could support demand. I imagine, particularly in consumer, there's a lot of low-cost competitors from Asia. If we look at the online marketplaces, have you seen any impact here from tariff costs on those competitors that could maybe give you guys some pricing in consumer, which I know it's typically difficult, or even some share gain opportunity? Thank you.

Speaker 4

Hey, Chris, thank you. Some, but not going to be price. It's more volume. All of the U.S. retailers are looking very carefully at where their source of supply is. If it's coming from non-U.S. markets, it's important. Obviously, the tariff impacts make them a little less economic and make us a little more attractive. On the margin, yes, there are some opportunities there. The team in CBG are really pushing that. It's not going to come through necessarily in price. It's more likely to be in volume. Those are some of the opportunities that are embedded in the back half of the year for CBG.

Speaker 10

I appreciate that. Thank you.

Speaker 4

You bet.

Speaker 7

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

Speaker 12

Thanks. Good morning. Thanks for the question. Obviously, a lot of my questions have been answered already. Just want to make sure, Bill, I heard the price contribution in the second half. I think you said 40 basis points. Is that 40 basis points absolute price? So is that 40 basis points improvement versus the first half?

Speaker 4

No, it's 40 basis points of absolute year-over-year improvement. Look. Let me just step back on the whole thing just because for the year, we're getting about 70 basis points more or less of price. We typically would see about 50 basis points, which is what is required to offset 2% material cost inflation. So 2% on $6 billion of materials, $120 million. And if we pass it through in price, which we've done, that's 50 basis points. We're getting about 70 basis points. So it's a little bit of an extra lift. Part of that is coming because we're offsetting tariff headwind. A lot of that's going to happen in the back half of the year. Part of it is going to come from some of the pricing discipline that we're putting in place.

What we see, very different processes on price governance in SIBG and now moving to TEBG as well. In SIBG, we used to have about 60% or more of the deals were less than $20,000. Very small. Today, that's less than 20%. We're trying to be more strategic on where we give pricing discounts to larger customers and make sure we get the volume for it. That's showing an effect in some price as well. Long-winded way of saying, yes, it's 40 basis points year over year, and it's 70 basis points for the full year of price.

Speaker 12

Okay. That's helpful. I find it curious, or maybe a little bit ironic, that SIBG growth is actually superior despite the fact that OTIF is lagging the other two segments. Number one, are you still on track to get OTIF within SIBG to 90% by year-end? If you were to guess, if you can improve OTIF from 83% to 93%, what kind of growth uplift would you expect to see?

Speaker 4

Again, the question gets back to sort of trying to parse an OTIF to a revenue. It's very difficult to do that. But we do know that not delivering on time is a source of churn. And reducing churn implicitly drives growth. Look, at 83%, just over that was a good result, not what we had expected. We expect more from that. As we transition into July, we're a little north of 85. We expect to be in the high 80s now by the end of the year. The team tells me they want to exit the year at 90. I think that's a stretch goal. You may have noticed our inventories are running a little bit higher than last year. Part of it is we're making up for lower OTIF with higher inventory.

We've got to make sure that we both drive OTIF improvement in the back end, which we're really, really focused on, and at the same time, we bring down inventory. That's what we're trying to do. The team's focused on this. We're making progress. I would say I wish it would be faster. I think Chris would expect it to be faster. Good progress. We know that's going to drive growth in the back half.

Speaker 12

Okay. Thanks, Bill.

Speaker 7

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

Speaker 9

Good morning, everyone.

Speaker 4

Hey, good morning, Andy.

Speaker 9

I got a nice jump in margin after what seemed like a few quarters of pressure in TBG. Could you talk about what, if anything, changed? I know you talked about the metering of investments that you're making for the company. Does it hit that segment a bit more than others, or maybe you're getting closer to fully absorbing PFAS-stranded costs, or maybe it's just better mix? Any color would be helpful.

Speaker 8

Yeah, great. Hey, thanks for the question, Andy. It's driven by volume and productivity. It's not so much of the investment. I think all the three segments, the margin expansion was very, very good. Specifically in TBG, the volume was about a point higher than last year. Just the productivity, which we did both on the supply chain and on the G&A side, it spread across all the three business groups and also in TBG, which more than mitigated the stranded cost that they had. When we look at the past couple of quarters, TBG margins have been down, we see this pick up. As we go through the course of the year, in our current margin guide of 150-200 basis points, you should see all three business groups doing well. SIBG and CBG will definitely do better.

TBG a little bit lighter because of the stranded costs that you pointed out. The productivity is flowing through well there.

Speaker 9

Thank you for that. Bill, I think it might be helpful to hear about your thoughts on the fiscal environment here in the U.S. Maybe a little bit of color on how you're doing on this, thinking about the big beautiful bill. I think it does put money in industrial companies' pockets, given bonus depreciation, etc. It does not seem like you're reacting to it at all. Is it just too early? How do you think about it? How might companies react to it moving forward?

Speaker 4

It's a good question. It's a very broad question. I think specifically to the tax bill, it's favorable to us. It's favorable to other companies. In the sense it helps us with maintaining reasonable, FITI GILTI rates, which is important to us, helps us maintain our effective tax rate in the 20% range, which is what we had anticipated and hoped for. It maintains where we happen to be. It's good news because it could have gone the other way. Bonus depreciation and the R&D expense, it doesn't really work for us for the next couple of years because of some of the PWS costs and other things. That'll help us in the out years. Right now, FITI GILTI rates hovering around, maintaining around 14%, which I think they made permanent, is good news for the company, for sure.

I won't comment on anything relative to the fiscal environment, but that certainly, from a tax perspective, helped for the company.

Speaker 9

Appreciate the color.

Speaker 7

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

Speaker 2

Hi, good morning. Just wanted to make sure, just wanted to make sure I'm thinking about the back half organic construct across the segments where if there's roughly 100 basis points better year-over-year growth in 2H versus 1H, that we would see a stronger-than-average improvement in SIBG. TEBG, improving growth a little bit, and consumer, maybe that growth rate is more consistent with the first half. Is that a reasonable framework?

Speaker 4

Yeah, that's exactly what it is. Yeah. So both SIBG and TEBG should be a little bit better in the back half. And consumer, in line with that, maybe a tick or two up. Again, it depends on the consumer behavior. It's really going to, and it's a smaller business, but it hinges on the first two.

Speaker 2

Got it. I actually thought the consumer margin was the most impressive. I think organic was up 30 basis points year-over-year, and our profit was up north of 20%. Just any unpacking of the bridge there, the self-help side of things, absence of any items that were a drag last year, any color would be helpful.

Speaker 8

Yeah. Listen, we finished over 21% on CBG, on the consumer business group, which is very good. Last year, we ended around the 19% level. This was really good. I think where you'd see the benefit more is around the productivity side. In fact, the investments actually did go up in the consumer group relative to last year. The one compared from Q2 of last year was obviously the equity comp timing, which did impact consumer as well. I would say more of the outperformance on the margin is driven by the productivity that we're driving both on the supply chain side as well as the G&A side, which trickled through to the consumer business. Yeah.

Speaker 2

Great. Thank you.

Speaker 7

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

Speaker 0

Good morning. Just two, hopefully, very quick ones. One is, how do you think about the effect of your metering of investments on operating leverage if demand surprises on the upside, either back half of this year or next year? Secondly, on the PFAS question, I just want to follow up on kind of, if I understood one of your comments, how are you thinking about the property damage side of PFAS litigation? When do you think you'll have visibility around a legal strategy to ring-fence the liabilities there?

Speaker 8

Yeah. Maybe I'll just start off with the operating leverage first. On the operating leverage piece, we should see that flow through. Okay. Today, our operating leverage is about, I mean, increments is about 35%. That will probably be the same, if not go higher, if volume picks up on the upside. Because if you look at the metering of investments, I mean, we're spending $175 million of a step-up in investment this year relative to last year. The metering was more because of the demand calibration. If demand softens up a little bit, then you don't spend so much on advertising and merchandising. You look at a tariff landscape, then you look at different projects and you say, "Okay, let's prioritize them." When it comes to R&D, it comes to sales, we've added it.

For the second quarter, we had envisioned about $85 million of pickup in investment, we did more than $40 million. It's still quite a significant amount. That investment is probably going in the right stage. Second half, we're still maintaining the investment that we always had. If volume comes up, I think the operating leverage should be north of 35% in the second half or in time to come.

Speaker 4

On the PFAS question, a lot of the environmental, natural resources, property issues are encompassed in the AG cases, part of which was resolved in New Jersey. Vermont's coming up and moved out to November, and the rest are in the MDL. We'll handle them as they come forward. I won't circumscribe any particular number on that. There's plenty of disclosure in our 10-Q.

Speaker 0

Thank you.

Speaker 4

Okay, everybody. Thank you very much for joining the call, for all the questions. We got through every analyst, which was good. I also want to thank all the 3Mers for their continued drive toward excellence in the company, improving every single day and delivering value to customers and to our shareholders. We're laser-focused on our priorities and will be through the next number of quarters. I look forward to speaking with you at the end of our third quarter. Thank you so much. Have a good day.

Speaker 7

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