Henry Schein, Inc. Q2 FY2025 earnings call

• Global Distribution group had sales growth this quarter, with U.S. margin lower than prior year mainly due to glove pricing and time-limited targeted sales initiatives, but has returned to normal promotional activity and July merchandise sales were strong. Specialty Products and Technology groups delivered strong results driven by innovative products, solutions and cost efficiencies. Partnered with KKR's Capstone and engaged two global management consulting firms to enhance distribution gross margins, accelerate sales of owned products portfolio and increase efficiencies, expecting results to start in early 2026. Continuing to gain market share across the portfolio, with customers valuing the price value commercial model. U.S. Medical business showed strong results with Home Solutions platform stable.推进业务部门费用优化，预计年底运行率节省超100百万美元，2026年通过新价值创造举措进一步提升盈利能力。New global e-commerce platform henryschein.com launched in U.K. and Ireland and phased launch in North America. Stanley Bergman plans to retire as CEO at the end of the year, continuing as Chairman of the Board, with succession planning focused on developing next generation of leaders and company divided into three operating divisions with outstanding leadership.

Global Distribution & Value-Added Service group

• U.S. Dental Merchandise sales declined 1.2% due to increased volume offset by lower product pricing. U.S. Dental Equipment sales declined 4.7% due to economic uncertainty starting in May, but new office design activity rebounded in June and equipment sales are expected to improve in the second half. U.S. Medical Distribution business sales grew 6.3% reflecting increased patient traffic and strong Home Solutions business. International Dental Merchandise sales grew 1.9% or 0.5% in constant currency, impacted by the timing of Easter. International dental equipment sales grew 12.1% or 9.1% in constant currency, driven by strong sales in Canada, Germany, Australia and New Zealand. Global Value-Added Service sales grew 3.6%, but was impacted by lower sales in Practice Transitions business this quarter due to a tough prior year comparable.

Global Specialty Products Group

• Sales grew 4.2% or 3.3% in constant currency. Implant and Biomaterial business experienced solid growth with double-digit growth in value implants and low single-digit growth in premium implants. Orthodontic business sales declined year-over-year but at a slower pace than prior quarters.

Global Technology Group

• Total sales growth was 7.4% or 6.6% in constant currency. Driven by strong growth in Core Practice Management System Solutions business, including cloud-based platforms and revenue cycle management offerings. Practice Management Software growth was in the mid double digits driven by a 20% year-over-year increase of cloud-based customers.

• Maintain 2025 financial guidance. Non-GAAP diluted EPS attributable to Henry Schein, Inc. is expected to be in the range of $4.80 to $4.94. 2025 adjusted EBITDA is expected to grow in the mid-single digits versus 2024 adjusted EBITDA of $1.1 billion. 2025 total sales growth is expected to be 2% to 4% over 2024, and non-GAAP effective tax rate is approximately 25%. Guidance assumes foreign currency exchange rates will remain generally consistent with current levels, effects of tariffs can be mitigated and includes expected remeasurement gains related to purchase of controlling interest of previously held noncontrolling equity investments.

• Macro-economic uncertainty affecting equipment sales. Intense price competition in gloves. Price pressure on certain product categories affecting gross margins. Larger customers may issue RFPs bringing competitive pressure. Unstable factors due to tariff changes.

Q: Jason Bednar asked about the July performance of the dental business, patient traffic, spending in dental offices, confidence in the sustainability of better trends in July, and customer conversations around price increases from tariffs and navigating to retain share and protect margins.

A: Stanley Bergman detailed the positive July trends, patient traffic being relatively stable globally, U.S. dental market growth impacted by tariffs with customers moving towards owned brands and working with manufacturers to mitigate tariff impacts.

Q: Jason Bednar followed up on the current state of engagement and review with outside consulting firms.

A: Stanley Bergman mentioned two opportunities, restructuring with over $100 million in savings already, and work with KKR involving driving gross profit by looking at pricing and own brands, and restructuring corporate overhead with support from consulting firms.

Q: Elizabeth Anderson asked about EPS cadence in the back half of the year and the ortho turnaround.

A: Ronald N. South said EPS is expected to grow in the third quarter and possibly exceed in the fourth quarter, with momentum from targeted sales initiatives and growth in Specialty Products and Technology groups. Stanley Bergman noted ortho is a small business with traditional part doing better and aligners area being worked on to be more profitable.

Q: Allen Lutz asked about gross margins in the Distribution business in the second half and thoughts on DSOs.

A: Ronald N. South said gross margins in Distribution have some pressure from glove pricing but are stabilizing sequentially, and Stanley Bergman said DSOs are generally in a positive direction, well financed and expanding.

Q: John Stansel asked about the impact of targeted sales and customer RFP.

A: Stanley Bergman said targeted sales was an opportunity to reach customers who had left, and he thinks it's normal for larger customers to issue RFPs but they remain trusted suppliers.

Q: Jeff Johnson asked about gross margin breakdown and cost savings from initiatives.

A: Stanley Bergman said gloves attributed to about 1/3 of margin pressure year-over-year, and efforts with KKR will bring efficiencies over time, contributing to the upper single to low double-digit earnings growth path.