Medline Inc. (MDLN)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand the financial condition, results of operations, and present business of Medline and Medline Holdings (f/k/a, Mozart Holdings, LP, the predecessor of Medline). This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes in Part I, “Item 1—Financial Statements” of this Quarterly Report and in Part II, “Item 8—Financial Statements and Supplemental Data” of our 2025 Form 10-K, as well as the corresponding MD&A contained in our 2025 Form 10-K. Some of the information included in this MD&A or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. Our future results and financial condition may differ materially from those we currently anticipate. You should review the “Cautionary Note Regarding Forward-Looking Statements” section in this Quarterly Report and Part I, “Item 1A—Risk Factors” of our 2025 Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For purposes of the MD&A, references to the “Company,” “Medline,” “we,” “us,” and “our” mean Medline Inc. and its consolidated subsidiaries.

Overview

Medline is the largest provider of med-surg products and supply chain solutions serving all points of care, based on total net sales of med-surg products. We deliver mission-critical products used daily across the full range of care settings, from hospitals and surgery centers to physician offices and post-acute facilities. We operate under two reportable segments, Medline Brand and Supply Chain Solutions. Both segments are supported by our Prime Vendor model, differentiated distribution network, and robust commercial platform. See Part I, “Item 1—Business” of our 2025 Form 10-K for a more detailed description of each of our segments, our Prime Vendor model, distribution network, and commercial platform.

For the three months ended June 27, 2026, our financial results were as follows:

•We generated net sales of $7.7 billion, net income of $0.1 billion, and Adjusted EBITDA of $1.1 billion, representing a net income margin of 1.8% and an Adjusted EBITDA Margin of 13.8%.

•During that period, Medline Brand segment net sales and Segment Adjusted EBITDA were $3.5 billion and $1.1 billion, respectively, which represented 46.1% of total net sales and 83.9% of Segment Adjusted EBITDA, respectively. Supply Chain Solutions segment net sales and Segment Adjusted EBITDA were $4.1 billion and $0.2 billion, respectively, which represented 53.9% of total net sales and 16.1% of Segment Adjusted EBITDA, respectively.

For the six months ended June 27, 2026, our financial results were as follows:

•We generated net sales of $15.0 billion, net income of $0.4 billion, and Adjusted EBITDA of $1.8 billion, representing a net income margin of 2.5% and an Adjusted EBITDA Margin of 12.2%.

•During that period, Medline Brand segment net sales and Segment Adjusted EBITDA were $7.0 billion and $1.8 billion, respectively, which represented 46.6% of total net sales and 82.4% of Segment Adjusted EBITDA, respectively. Supply Chain Solutions segment net sales and Segment Adjusted EBITDA were $8.0 billion and $0.4 billion, respectively, which represented 53.4% of total net sales and 17.6% of Segment Adjusted EBITDA, respectively.

For a reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial measures, information about why we consider Adjusted EBITDA and Adjusted EBITDA Margin useful, and a discussion of the material risks and limitations of these measures, see “—Non-GAAP Financial Information” below.

Key Factors and Trends

During the three and six months ended June 27, 2026 our results and operations were impacted by various factors and trends, including those discussed below. For additional information regarding factors and trends that may impact our results and operations, see Part II, “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2025 Form 10-K.

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Trade Relations, Impacts of Tariffs on our Business, and Geopolitical Risks

The current U.S. and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, has resulted in uncertainty surrounding the future state of the global economy. We continue to actively monitor developments in the global tariff environment and evaluate their potential impact on our business, financial condition, customers, and suppliers, as well as actions available to reduce our related financial exposure. While the global tariff environment remains unpredictable, as a global company with strategically located and owned manufacturing and a broadly diversified sourcing footprint, we believe we are well-positioned to address potential supply chain challenges. We have multiple levers at our disposal, including strategically reallocating production to other parts of the world, leveraging our new and existing supplier base, optimizing procurement and sourcing of key inputs and raw materials, optimizing our manufacturing footprint, engaging with relevant industry and policy partners, and, where needed, enacting price increases in a thoughtful and strategic way. Nevertheless, we may not be able to establish alternative sources of supply or fully mitigate the financial impact of tariffs across all products we source or manufacture. For the three and six months ended June 27, 2026, the net impact to income before taxes from tariffs and tariff developments was approximately $110 million and $230 million, respectively, before giving effect to the tariff refund recoveries and related customer repayments discussed below. The actual full year impact may vary based on the tariff rate changes, duration, scope, and effectiveness of our mitigation efforts.

We have pursued, and may continue to pursue, tariff mitigation measures, including exclusions, refunds, preferential trade agreements, and other duty recovery mechanisms. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to impose tariffs. Following that decision, U.S. Customs and Border Protection (“CBP”) established an expedited administrative process through its Consolidated Administration and Processing of Entries (“CAPE”) portal to refund IEEPA duties that had already been paid.

We expect total IEEPA refund claims, across all eligible mechanisms, to be approximately $507 million, including amounts already submitted via CAPE. As of June 27, 2026, CBP had accepted approximately $332 million in total refunds we have submitted, and actions to recover the remaining expected amounts are ongoing. We evaluate recoveries of IEEPA tariffs in accordance with applicable gain contingency guidance and recognize such recoveries when they are received or realizable. As of June 27, 2026, of the accepted claims, we had received approximately $53 million in refunds. Accordingly, we recorded a receivable of approximately $279 million within Other current assets related to the remaining accepted refund claims as of June 27, 2026. As of the date of this Quarterly Report, we received refunds for the majority of the receivable balance. Interest associated with refunded IEEPA tariffs is recognized in the period in which it is received or realizable. We expect to remit a portion of the tariff refunds to customers. As of June 27, 2026, we recorded approximately $89 million within Accrued expenses and other current liabilities for the total amount estimated to be remitted to customers in connection with total tariff refund claims expected.

During the three and six months ended June 27, 2026, we recognized approximately $332 million as a reduction of Cost of goods sold related to tariff refunds received or accepted, approximately $89 million as a reduction of Net sales related to accrued customer repayments associated with tariff refunds, and approximately $14 million of interest income in Interest expense, net. These amounts were recorded entirely within the Medline Brand segment.

The ultimate amount and timing of the IEEPA tariff refunds not yet received are subject to eligibility requirements, regulatory review, administrative processing, and other limitations.

In addition, ongoing geopolitical conflicts, including in the Middle East, have resulted in, and could continue to result in, significant disruption of energy supplies and increases in global energy prices, which have heightened and could continue to heighten inflationary pressures, disrupt global supply chains, and adversely impact consumer spending patterns. We will continue to evaluate the evolving macroeconomic environment and seek to take actions to mitigate the impact, if any, on our business and financial condition.

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Tracy, California Distribution Center

On June 11, 2026, a fire destroyed our distribution center in Tracy, California. All employees were safely evacuated. We have estimated incurred losses of $336 million, which consist of $204 million related to inventory losses, $116 million related to fixed asset losses, and $16 million other expenses, for the three and six months ended June 27, 2026. These losses were recorded in Other operating expenses. As of June 27, 2026, discussions with our insurers are ongoing, and, as such, no insurance recoveries have been recorded. Following the fire, we entered into lease agreements for two distribution centers in Northern California totaling more than 1.6 million square feet, including a facility in Tracy, California for near-term occupancy and a facility in Stockton, California expected to be available for use in January 2027. These facilities are expected to help support service to healthcare providers and customers in Northern California following the fire. We may incur additional losses and costs in future periods associated with the fire and its related impacts. We expect to recognize insurance recoveries in future periods as the applicable recognition criteria are met. The timing and amount of any additional losses, costs, or insurance recoveries remain uncertain. See Note 1—Nature of Business and Significant Accounting Policies to our unaudited condensed consolidated financial statements included under Part I, “Item 1—Financial Statements” of this Quarterly Report for additional information.

FDA Matters

As of June 27, 2026, we have received three warning letters from the FDA, which have not been resolved. These warning letters relate to compliance with the Quality Management System Regulation and the current Good Manufacturing Practice (cGMP) regulations and were sent following inspections of Medline’s Northfield, Illinois facility and our manufacturing facilities in Glens Falls, New York and Waukegan, Illinois. We are working with the FDA to resolve the observations in the warning letters and FDA Forms 483 the Company has received. We have committed to taking additional remediation actions and made investments in Medline’s Quality organization, which we expect to result in increased costs in the second half of fiscal year 2026. While we believe our remediation efforts appropriately address the FDA’s observations and strengthen our Quality practices, no assurances can be given regarding further action by the FDA or that the corrective actions we have proposed and taken will be adequate. Any failure to adequately address the observations made by the FDA may result in regulatory actions ini

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand the financial condition, results of operations, and present business of Medline and Medline Holdings (f/k/a, Mozart Holdings, LP, the predecessor of Medline). This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes in Part II, “Item 8—Financial Statements and Supplemental Data” of this Annual Report. Some of the information included in this MD&A or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. Our future results and financial condition may differ materially from those we currently anticipate. You should review the “Cautionary Note Regarding Forward-Looking Statements” and Part I,“Item 1A—Risk Factors” sections of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For purposes of the MD&A, references to the “Company,” “Medline,” “we,” “us,” and “our” mean Medline Inc. and its consolidated subsidiaries.

Overview

Medline is the largest provider of med-surg products and supply chain solutions serving all points of care, based on total net sales of med-surg products. We deliver mission-critical products used daily across the full range of care settings, from hospitals and surgery centers to physician offices and post-acute facilities. We operate under two reportable segments, Medline Brand and Supply Chain Solutions. Both segments are supported by our Prime Vendor model, differentiated distribution network, and robust commercial platform. See Part I, “Item 1—Business” for a more detailed description of each of our segments, our Prime Vendor model, distribution network, and commercial platform.

For the year ended December 31, 2025, our financial results were as follows:

•We generated net sales of $28.4 billion, net income of $1.2 billion, and Adjusted EBITDA of $3.5 billion, representing a net income margin of 4.1% and an Adjusted EBITDA Margin of 12.2%.

•During that period, Medline Brand segment net sales and Segment Adjusted EBITDA were $13.7 billion and $3.3 billion, respectively, which represented 48.3% of total net sales and 80.6% of Segment Adjusted EBITDA, respectively. Supply Chain Solutions segment net sales and Segment Adjusted EBITDA were $14.7 billion and $0.8 billion, respectively, which represented 51.7% of total net sales and 19.4% of Segment Adjusted EBITDA, respectively.

For a reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial measures, information about why we consider Adjusted EBITDA and Adjusted EBITDA Margin useful, and a discussion of the material risks and limitations of these measures, see “—Non-GAAP Financial Information” below.

Key Factors and Trends

Aging Population and Increased Healthcare Utilization

We continue to operate against a backdrop of stable demographic and healthcare utilization trends, including an aging population and the growing prevalence of chronic conditions, which are expected to drive elevated volumes, steady demand for med-surg products, and increased health expenditures over the long term. As our customers’ underlying patient volumes increase, we expect continued demand for our broad portfolio of products across the continuum of care.

End Market Dynamics Including Shifting Sites of Care and Consolidation

Our business is positively impacted by the ongoing shift of higher acuity procedures to lower-cost sites of care and consolidation of healthcare providers into IDNs. These factors have led to increased volumes across non-acute care delivery settings and drive customers to seek partners with reliable manufacturing and distribution capabilities who can serve their various end markets. Because of our comprehensive capabilities and offerings, we view these industry changes as advantageous and reflective of the broad strengths embedded in our business model. By continuing to enhance our product portfolio and tailor our service offerings, we aim to expand the value we provide to our customers across the entire continuum of care.

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Prime Vendor Growth

Our historical track record of earning new Prime Vendor customers has been a key driver of sustained growth and share gains for Medline. Our differentiated capabilities have enabled us to grow and scale our Prime Vendor model over time. As of December 31, 2025, we have over 1,600 Prime Vendor relationships, representing $18.0 billion of net sales for the year ended December 31, 2025. Our Prime Vendor relationships, combined with our strong customer retention, supports a highly recurring business model.

Non-Prime Vendor Growth

Our customer base includes those who purchase products through us but with whom we do not currently have a Prime Vendor relationship. We expect Medline Brand net sales to non-Prime Vendor customers to continue to grow as we deepen our relationships with these customers and expand our Medline Brand product portfolio. Furthermore, we believe as these customers recognize the value proposition of our Medline Brand and distribution network, we will have the opportunity to earn Prime Vendor agreements from them.

Medline Brand Growth

Our ability to sell Medline Brand products has impacted and will continue to impact our financial performance. These products represent approximately 50% of our net sales for the fiscal year ending December 31, 2025, or $13.7 billion. The product categories that comprise our Medline Brand offerings serve large and diversified med-surg markets, which provide meaningful long-term growth opportunities relative to our current net sales volume.

We sell these Medline Brand products to both our Prime Vendor and non-Prime Vendor customers. As of December 31, 2025, our Prime Vendor agreements have an approximate average mix of 65% Supply Chain Solutions and 35% Medline Brand, presenting a significant opportunity to drive customer savings through further Medline Brand adoption in the years ahead. A portion of Supply Chain Solutions products sold to existing Prime Vendor customers has like-for-like Medline Brand product equivalents, representing a potential gross profit uplift if such products were converted for Medline Brand products. While we historically have earned higher margins upon conversion from third-party national brand products to like-for-like Medline Brand products, because of the lower average prices for Medline Brand products, there is typically a negative impact on net sales upon the conversion of Supply Chain Solutions products to like-for-like Medline Brand products if volume is assumed to be constant.

Our product development relies on actively gathering and incorporating customer feedback to address their needs. By carefully examining customer pain points, our teams are encouraged to respond with well-informed product innovations that address these issues directly and effectively. Close collaboration across product teams, salesforce and regulatory experts supports our ability to introduce high-quality products that meet customers’ needs. Our scaled go-to-market strategy and entrepreneurial culture allows us to quickly introduce new products across our customer base and serve as a dependable partner and resource for our customers, increasing the likelihood of commercial success. This collaborative approach has been well received by customers and has facilitated the development of robust relationships with customers. It supports the customer retention and conversion to available like-for-like Medline Brand products.

Mergers and Acquisitions

Our disciplined, global mergers and acquisitions strategy is focused on pursuing adjacent products and services as well as expanding into new channels and new markets. During 2024, we acquired the global surgical solutions business of Ecolab, Inc., including industry-leading Microtek product lines (“Microtek”), and Sinclair Dental Co. Ltd (“Sinclair”), the largest independent distributor of dental supplies and equipment in Canada. The acquisition of the Microtek business provides us with innovative sterile drape solutions for surgeons, patients, and operating room equipment, as well as Ecolab’s fluid temperature management system. The acquisition of Sinclair helps diversify our dental products portfolio and expand our footprint in Canada.

As industry consolidation continues, we believe we are well-positioned to capitalize on this trend to continue to grow and gain share in this global market. See Part I, “Item 1A—Risk Factors—Risks Related to Our Business, Industry and Operations—We may be unable to derive fully the anticipated benefits from our existing or future acquisitions, joint ventures, investments, dispositions, or other strategic transactions.”

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Trade Relations and Impacts of Tariffs on our Business

The current U.S. and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. While the global tariff environment is unpredictable, as a global company with strategically located and owned manufacturing, combined with a broadly diversified sourcing footprint, we believe we are well-positioned to mitigate potential supply chain challenges. We have multiple mitigation levers at our disposal, which include strategically re-allocating production to other parts of the world, leveraging our new and existing supplier base, optimizing procurement and sourcing of key inputs and raw materials, driving efficiencies and optimizing our own manufacturing footprint, pursuing available tariff mitigation measures, such as qualified exclusions, engaging with relevant industry and policy partners, and lastly, enacting selective price increases in a thoughtful and strategic way where needed. For the year ended December 31, 2025, the net adverse impact to income before taxes from tariffs and tariff developments was approximately $290 million. For fiscal year 2026, we estimate an incremental net adverse impact to income before taxes from tariffs and tariff developments (based upon the latest published tariffs in effect and tariff-related developments as of December 31, 2025) of approximately $200 million. The actual impact may vary based on changes in tariff rates, duration of tariffs, scope of tariffs, and potential mitigation levers.

We are actively monitoring developments in the global tariff environment and will continue to evaluate the potential impact of the announced tariffs and related developments on our business and financial condition, as well as on our customers and suppliers, and the actions we may take to mitigate any impact. We have taken steps to establish alternative sources of supply and to otherwise mitigate the financial impact of tariffs. However, we may not be able to establish alternative sources of supply or fully mitigate the financial impact of tariffs across all of the products we source or manufacture.

Cost and Supply Chain Factors

Our business is impacted by supply chain disruptions, including but not limited to labor shortages, raw material shortages, and third-party supplier issues. Additionally, inflation has had, and may continue to have, a material impact on the cost to source materials or produce and distribute finished goods to customers. In these periods of disruption, our costs typically increase, and our operations may be constrained. While these factors can impact profitability, we have established the capabilities and infrastruct

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