Henry Schein, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Cyber Incident Resolution: Sales growth accelerating across segments post-cyber incident, with market share gains in distribution.
• BOLD+1 Strategy: Focus on high-growth, high-margin businesses; aim for over 50% non-GAAP operating income from these by 2027, plus over 10% from corporate brands.
• Value Creation Initiatives: Progress on $200M+ operating income improvements over few years, focusing on support services centralization, indirect procurement, process automation, corporate brand sales.
• Share Repurchase: Board approved $750M increase in share repurchase program, continuing at similar pace.
• eCommerce Platform: Phased launch of HenrySchein.com Global eCommerce Platform in North America, European rollout in 2026.
• 30th Anniversary: Ringing NASDAQ opening bell to celebrate 30 years as public company, with significant growth since IPO.

Segment Performance

• Global Distribution and Value-Added Services Group: Sales grew 4.8%. U.S. dental merchandise: 3.3% growth; U.S. dental equipment: 1.2% growth (strong digital equipment). U.S. medical distribution: 4.7% growth. Home Solutions: over 20% as-reported growth, 6% excluding acquisitions. International dental merchandise: 6.0% total growth (2.5% constant currency). International dental equipment: 10.1% total growth (5.7% constant currency). Global value-added services: 3.3% growth.
• Global Specialty Products Group: Sales grew 5.9% (3.9% constant currency). Implant and biomaterial business: solid growth, double-digit in value implants, low single-digit in premium implants.
• Global Technology Group: Total sales growth 9.7% (9.0% constant currency). U.S. growth driven by practice management software (Dentrix Ascend double-digit) and revenue cycle management. International growth driven by Dentally cloud-based solutions.

Guidance

• 2025 Financials: Non-GAAP diluted EPS range $4.88-$4.96; sales growth 3%-4% over 2024; non-GAAP effective tax rate ~24%-25%; adjusted EBITDA mid-single digit growth vs 2024's $1.1B.
• Future Outlook: Confident in returning to high single-digit to low double-digit earnings growth, with value creation initiatives supporting this.

Risks

• Cyber Incident Impact: Previously affected business, but now behind us.
• Tariffs and Currency Fluctuations: Mitigation efforts in place, but potential impact on margins.
• Market Competition: Competitor changes could affect market share gains.

Question and Answer

Q: Jason Bednar on future earnings growth, restructuring, and $200M benefit A: Stanley and Ron discuss sales momentum, multiyear value creation plan, and 2026 guidance Q: John Block on EPS guidance and market improvement vs execution A: Ron explains remeasurement gain impact on guidance, Stanley talks about market stability and share gains Q: Elizabeth Anderson on gross margin stabilization A: Ron discusses U.S. dental gross margin stabilization and medical product mix impact Q: John Stansel on Specialty Products margin A: Ron talks about value vs premium implants and orthodontic operating changes Q: Jeff Johnson on $200M op income, remeasurement gain, and reinvestments A: Ron explains multiyear plan phasing and remeasurement gain expectations Q: Michael Cherny on share gains and market competition A: Stanley and Ron discuss ongoing share gains and promotional activity Q: Kevin Caliendo on Heartland relationship and tariffs A: Stanley discusses DSO relationships and tariff mitigation efforts Q: Brandon Vazquez on KKR partnership A: Stanley talks about KKR's increased stake and positive partnership