Henry Schein (HSIC) Q1 2025 Earnings Call May 05, 2025 08:00 AM ET Speaker0 Good morning, ladies and gentlemen. Welcome to Henry Schein's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. Later, we'll conduct a question and answer session. Please press the star key followed by one on your touch tone phone if you'd like to ask a question at the end of the call. If anyone should require operator assistance during the call, please press the star ...

1 Cautionary Note Regarding Forward-Looking Statements and Use of Non-GAAP Financial Information Q1 2025 Earnings Conference Call In accordance with the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. Financial Results & Outlook All forward-lo ...

Financial Performance - First-quarter 2025 GAAP diluted EPS was $0.88, a growth of 22% compared to Q1 2024[6] - First-quarter 2025 non-GAAP diluted EPS was $1.15, reflecting a growth of 4.5% compared to Q1 2024[6] - Total net sales for Q1 2025 were $3.2 billion, with constant currency sales growth of 1.4% compared to Q1 2024[7] - Global Medical Distribution sales increased by 3.0% in constant currencies compared to Q1 2024, with as-reported sales up by 2.9%[12] - Global Specialty Products sales grew by 4.3% in constant currencies compared to Q1 2024, with as-reported sales increasing by 2.0%[12] - Net sales for Q1 2025 were $3,168 million, a slight decrease of 0.1% compared to $3,172 million in Q1 2024[32] - Gross profit for Q1 2025 was $1,000 million, down from $1,012 million in Q1 2024, reflecting a gross margin of 31.5%[32] - Operating income increased to $175 million in Q1 2025, compared to $150 million in Q1 2024, representing a growth of 16.7%[32] - Net income attributable to Henry Schein, Inc. rose to $110 million in Q1 2025, up from $93 million in Q1 2024, marking an increase of 18.3%[32] - Basic earnings per share increased to $0.89 in Q1 2025, compared to $0.72 in Q1 2024, reflecting a growth of 23.6%[32] - Net income attributable to Henry Schein, Inc. for Q1 2025 was $110 million, representing a 17.7% increase from $93 million in Q1 2024[42] - Diluted EPS attributable to Henry Schein, Inc. increased by 22.2% to $0.88 in Q1 2025, up from $0.72 in Q1 2024[42] - Non-GAAP net income attributable to Henry Schein, Inc. remained stable at $143 million, with a slight increase of 0.5% compared to Q1 2024[42] - Non-GAAP diluted EPS attributable to Henry Schein, Inc. rose by 4.5% to $1.15 in Q1 2025, compared to $1.10 in Q1 2024[42] Shareholder Actions - The company repurchased $161 million of common stock, approximately 2.3 million shares, during Q1 2025[10] Guidance and Strategic Plans - The company maintained its 2025 non-GAAP diluted EPS guidance of $4.80 to $4.94, reflecting growth of 1% to 4% compared to 2024[19] - The company is focused on enhancing operational efficiency and customer experience as part of its refreshed BOLD+1 Strategic Plan for 2025 to 2027[4] Restructuring and Costs - The company recorded $25 million in restructuring costs in Q1 2025, aiming for annual savings of $75 million to $100 million by the end of 2025[9] - Restructuring costs for Q1 2025 were reported at $25 million pre-tax, up from $10 million in Q1 2024, with net restructuring costs of $17 million[43] - Acquisition intangible amortization for Q1 2025 was $43 million pre-tax, slightly down from $46 million in Q1 2024, with net amortization of $27 million[44] - Costs associated with shareholder advisory matters amounted to $8 million in Q1 2025[45] Cash Flow and Assets - Total current assets increased to $4,037 million as of March 29, 2025, compared to $3,983 million at the end of 2024[34] - Total assets grew to $10,480 million as of March 29, 2025, up from $10,218 million at the end of 2024[34] - Cash and cash equivalents at the end of Q1 2025 were $127 million, a slight increase from $122 million at the beginning of the period[37] - The company reported a net cash provided by operating activities of $37 million in Q1 2025, down from $197 million in Q1 2024[37] Sales and Services - Total global distribution and value-added services sales decreased by 0.7% to $2,676 million in Q1 2025 compared to $2,693 million in Q1 2024[39] Other Financial Metrics - Adjusted EBITDA for Q1 2025 was $259 million, compared to $255 million in Q1 2024[12] - Adjusted EBITDA for Q1 2025 was reported at $259 million, an increase from $255 million in Q1 2024[47] - The change in contingent consideration was recorded at $2 million in Q1 2025, compared to $15 million in Q1 2024[45] - The company received $20 million in insurance proceeds related to a cyber incident, with $15 million net of taxes recognized in Q1 2025[44]

Wall Street expects a year-over-year increase in earnings on higher revenues when Henry Schein (HSIC) reports results for the quarter ended March 2025. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on May 5. On th ...

It has been about a month since the last earnings report for Henry Schein (HSIC) . Shares have lost about 3.9% in that time frame, outperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Henry Schein due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.How Have Estimates Been Moving Since Then?It ...

Group 1 - The health care distributor Henry Schein (NASDAQ: HSIC) is viewed positively at its current price level, indicating a bullish outlook for the stock [1] - The analysis employs a technical approach focusing on price action, momentum, volume, and relative strength to support the bullish thesis for HSIC [1] - The article reflects the author's intent to build financial assets for retirement, highlighting a strategy that includes both long and short trading opportunities [1] Group 2 - The author expresses a commitment to developing winning trades and aims to learn from feedback in the comments section [1]

Group 1 - Henry Schein is identified as a notable company for investors, operating as a solutions provider in the healthcare sector [1] - The company is involved in generating cash flow, which is essential for value and growth prospects [1] Group 2 - Crude Value Insights offers an investment service focused on oil and natural gas, emphasizing cash flow analysis [2] - Subscribers have access to a stock model account and in-depth analyses of exploration and production firms [2]

Financial Data and Key Metrics Changes - Global sales for Q4 2024 were $3.2 billion, reflecting a 5.8% increase compared to Q4 2023, with LCI sales growth of 5.5% [31][32] - GAAP operating margin improved to 4.86%, a 358 basis point increase year-over-year, while non-GAAP operating margin was 7.46%, a 260 basis point improvement [33][34] - Q4 2024 GAAP net income was $94 million ($0.74 per diluted share), compared to $18 million ($0.13 per diluted share) in the prior year [35] Business Line Data and Key Metrics Changes - Global Distribution and Value-Added Services Group sales were $2.7 billion, with a 5.9% growth, including LCI growth of 5.8% [38] - Global Specialty Products Group sales reached $368 million, reflecting a 7.2% growth, with LCI growth of 5.0% [42] - Global Technology Group sales were $160 million, with total sales growth of 2.4% and LCI sales growth of 2.1% [43] Market Data and Key Metrics Changes - U.S. dental distribution LCI sales grew 5.9%, with dental merchandise growth of 4.8% [39] - International dental distribution LCI sales grew 7.3%, with strong growth in Canada and Europe [20][41] - U.S. medical distribution LCI sales grew 4.5%, negatively impacted by the timing of the flu season [40] Company Strategy and Development Direction - The company completed its 2022 to 2024 BOLD+1 Strategic Plan, achieving over 40% of operating income from high-growth, high-margin businesses [9][10] - An updated '25 to '27 BOLD+1 Strategic Plan has been launched, focusing on simplifying organizational structure and driving synergies across business units [11][12] - The company aims for high single-digit to low double-digit earnings growth in the long term, supported by strategic initiatives and restructuring plans [11][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying fundamentals of the business, despite modest growth expectations in dental and medical markets [10][50] - The company anticipates a challenging environment in 2025, with investments in technology and a return to historical levels of incentive compensation impacting margins [49][102] - Management noted that the cyber incident is now behind them, allowing for a focus on growth and operational improvements [11] Other Important Information - The company repurchased approximately 1.1 million shares for $75 million in Q4 2024, with a total of $385 million spent on share repurchases for the full year [47] - Restructuring expenses in Q4 were $37 million, with expected annual run rate savings of $75 million to $100 million by the end of 2025 [44][45] - The company has authorized an additional $500 million for share repurchases, including a commitment to an accelerated share repurchase program [48] Q&A Session Summary Question: Revenue guidance and underlying assumptions - Management expects modest growth in dental and medical markets, with limited acquisition growth included in overall revenue growth [60][61] Question: Breakdown of new reporting structure - Management indicated that market growth is expected to be lower than previously anticipated, with specific segments facing challenges [62][65] Question: Fourth quarter revenue shortfall - The shortfall was attributed to flat patient traffic and a slow end to the quarter due to the timing of Christmas and the flu season [70][71] Question: Share dynamics in the fourth quarter - Management reported that market share stabilized in Q4, with confidence in regaining market share moving forward [75] Question: Specialty operating margins - Specialty margins are impacted by lower-margin businesses and management expects operating margin growth over time [81][83] Question: Dental implant growth and Medicare Advantage payer changes - Management noted healthy growth in Europe for dental implants, with no significant impact from changes in Medicare coverage observed so far [85][88] Question: KKR agreement and value creation plan - KKR is expected to provide strategic support, but their involvement is pending regulatory clearance [91][92] Question: Sales structure normalization - Management clarified that changes in sales commission structure are aimed at driving growth, with a return to normal incentive compensation expected [125] Question: Impact of tariffs on guidance - The company has shifted supply chains to mitigate tariff impacts and believes it is well-positioned to manage potential tariff-related challenges [126][129]

User Base and Market Presence - The company has an active user base of approximately 100,000 practices and 321,000 consumers utilizing various software solutions as of December 28, 2024[41]. - The company aims to increase penetration of its existing customer base, which currently exceeds one million customers worldwide[50]. - The company develops and distributes a broad portfolio of dental implants and digital solutions, serving customers in approximately 90 countries[39]. Financial Performance and Sales - In 2024, dental merchandise accounted for 37.3% of consolidated net sales, while total dental products represented 52.7% of sales[45]. - The medical segment saw a slight increase in sales to 32.2% in 2024, compared to 31.7% in 2023[45]. - Seasonal fluctuations in sales are expected to continue, with higher sales typically occurring in the third and fourth quarters due to seasonal product demand[55]. - The company has experienced increased costs and shortages of purchased components, negatively impacting profit margins and sales[146]. - The company is exposed to risks associated with product liability and potential recalls related to corporate brand products, which could impact supplier relationships[157]. Strategic Initiatives and Growth Plans - The company is committed to enhancing its product offerings through organic investment and acquisitions to better serve customer needs[33]. - The company plans to pursue strategic acquisitions to expand its geographic footprint and access new products and technologies[50]. - The company aims to grow its specialty brands and technology solutions both organically and inorganically under the BOLD+1 Strategic Plan[147]. - The company has a strategic focus on expanding its Global Technology and Global Specialty Products segments[150]. Regulatory Compliance and Legal Risks - The DSCSA requires wholesalers and 3PLs to submit annual reports to the FDA, including information on each state where they are licensed[68]. - The UDI regulations mandate that labelers include unique device identifiers on medical device labels and packages, with compliance phased in starting from high-risk devices[69]. - The EU MDR significantly modifies regulatory compliance requirements for medical devices, including stricter clinical evaluation and quality system requirements[78]. - Compliance with legal requirements may necessitate delays in product release or voluntary recalls, potentially leading to financial losses and reputational harm[82]. - The company is subject to heightened enforcement activity regarding the storage, sale, and distribution of controlled substances under the Controlled Substances Act[71]. Employee Relations and Workforce Development - The company employs approximately 25,000 people, with 49% based in the United States and 51% outside the United States[121]. - Approximately 13% of the company's employees are subject to collective bargaining agreements, and the company believes its relations with employees are excellent[121]. - The company has rolled out a continuous listening program to gather feedback from employees, indicating a commitment to improving employee experience[123]. - The company has seen an increase in participation in professional development training programs, with employees reporting high utilization of skills learned[127]. - The company launched its seventh Employee Resource Group (ERG) in 2024, focusing on inclusivity and support for employees with disabilities[125]. Market Competition and Industry Trends - The health care products distribution industry is highly competitive, with significant competition from major manufacturers and distributors, which could adversely affect the company's margins and product availability[167]. - The company competes primarily on price, product breadth, e-commerce capabilities, and customer service in the North American market[27]. - The dental industry is expected to see increased expenditures as the population segment aged 45 and older grows, alongside rising demand for new technologies[51]. Cybersecurity and Operational Risks - The company experienced a cybersecurity incident in October 2023 that disrupted key business operations and adversely impacted financial results for Q4 2023 and the full year 2023[166]. - The incident led to significant remediation costs and has residual impacts on financial results in 2024[166]. - The company relies on information systems for critical operations, and any disruption or cybersecurity breach could lead to significant financial and operational impacts[164]. Economic and Market Conditions - Uncertain global and domestic macro-economic conditions may adversely affect the company's financial condition and operating results[172]. - The company has experienced inflationary pressures, including higher freight costs and interest expenses, impacting operational results[172]. - The health care industry is undergoing significant changes due to political, economic, and regulatory influences, which could materially affect the company's profitability[169]. Compliance with Privacy and Data Protection Laws - The company is subject to numerous evolving privacy laws, including GDPR, CCPA, and China's PIPL, which could impose significant compliance costs and penalties[195][196][197]. - Noncompliance with GDPR can result in penalties of up to EUR 20 million or 4% of global revenues, while China's PIPL carries maximum penalties of CNY 50 million or 5% of annual revenue[196][197]. - The CCPA, effective January 1, 2020, establishes new data privacy rights and statutory damages for violations, with the CPRA enhancing these requirements from January 1, 2023[199]. Financial Management and Risk Mitigation - The company maintains a strong balance sheet and diversifies investments to manage credit risks[380]. - The company engages in hedging programs using primarily foreign currency forward contracts to limit the impact of foreign currency exchange rate fluctuations on earnings[381]. - Disruptions in financial markets may adversely affect the availability and cost of credit, impacting the company's ability to make scheduled payments or refinance obligations[214].

Core Insights - Henry Schein, Inc. (HSIC) reported adjusted earnings per share (EPS) of $1.19 for Q4 2024, reflecting an 80.3% increase from the previous year's EPS of 66 cents, aligning with Zacks Consensus Estimate [1] - The company’s full-year 2024 EPS was $4.74, a 5.3% increase year-over-year, but it missed the Zacks Consensus Estimate by 0.2% [2] - HSIC's stock experienced a 1.4% decline in pre-market trading following the earnings announcement [2] Revenue Performance - HSIC reported net sales of $3.19 billion for Q4 2024, a 5.6% year-over-year increase, but fell short of the Zacks Consensus Estimate by 2.4% [3] - Full-year 2024 net sales reached $12.67 billion, up 2.7% from the prior year, yet also missed the Zacks Consensus Estimate by 0.8% [4] - Sales in the U.S. amounted to $1.86 billion, up 5.3% year-over-year, while international sales totaled $845 million, reflecting a 7.4% increase [3] Segment Analysis - The company restructured its reportable segments into three categories: Distribution and Value-Added Services, Specialty Products, and Technology [5] - Global Distribution and Value-Added Services sales were $2.70 billion, up 5.9% year-over-year [5] - Global Specialty Products revenues increased by 7.2% to $368 million, while Global Technology revenues rose by 2.4% to $160 million [6] Margin and Expenses - Gross profit for the quarter was $993 million, a 7.5% increase year-over-year, with gross margin expanding by 49 basis points to 31.1% despite a 5% rise in cost of sales [7] - Selling, General and Administrative (SG&A) expenses decreased by 8.6% to $738 million, leading to an adjusted operating profit of $255 million compared to $117 million in the previous year [7] - The adjusted operating margin improved by 411 basis points year-over-year to 8% [7] Liquidity and Cash Flow - At the end of 2024, HSIC had cash and cash equivalents of $122 million, down from $171 million at the end of 2023 [8] - Cumulative net cash from operating activities was $848 million, up from $500 million year-over-year [9] - The company repurchased approximately 1.1 million shares at an average price of $71.35, totaling around $75 million, with $380 million available for future repurchases [9] Future Guidance - For 2025, HSIC expects adjusted EPS to range from $4.80 to $4.94, indicating a growth of 1-4% from 2024 [10] - The company anticipates sales growth of nearly 2-4% compared to the previous year, with the Zacks Consensus Estimate for revenues at $13.19 billion [11] Strategic Initiatives - The implementation of the BOLD+1 Strategic Plan has led to growth and efficiency improvements within the company [12] - Under a new restructuring plan, HSIC aims for annual run-rate savings exceeding $80 million, contributing to a target of $75-$100 million in savings by the end of 2025 [13]