Henry Schein(HSIC) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Henry Schein reported 3.3% Q2 2025 net sales growth to $3.2 billion, but profitability declined, with GAAP diluted EPS at $0.70 and non-GAAP at $1.10 Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $3.2 billion | $3.1 billion | +3.3% | | GAAP Diluted EPS | $0.70 | $0.80 | -12.5% | | Non-GAAP Diluted EPS | $1.10 | $1.23 | -10.6% | - The CEO noted good sales growth in the Global Distribution Group, but lower U.S. margins primarily due to reduced glove pricing and targeted sales initiatives, while Specialty Products and Technology Groups delivered strong results[4] - The company is partnering with KKR Capstone and two global management consulting firms to enhance distribution gross margins and increase company-wide efficiencies, expanding on its BOLD+1 strategy[4] - Full-year 2025 guidance is maintained, with earnings expected to be weighted towards the second half of the year, viewing 2025 as a base year for future growth[4] Financial Performance Q2 and H1 2025 saw mixed financial results, with total net sales growth driven by medical distribution and technology, but overall profitability declined Second Quarter 2025 Results Q2 2025 net sales reached $3.2 billion, a 3.3% increase YoY, reflecting 1.9% internal growth, but profitability was challenged with diluted EPS declines Q2 2025 vs. Q2 2024 Financial Summary | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Net Sales | $3.2 billion | $3.1 billion | | GAAP Net Income | $86 million | $104 million | | Non-GAAP Net Income | $135 million | $158 million | | GAAP Diluted EPS | $0.70 | $0.80 | | Non-GAAP Diluted EPS | $1.10 | $1.23 | | Adjusted EBITDA | $256 million | $268 million | Year-to-Date 2025 Results For H1 2025, total net sales were $6.4 billion, up 1.6%, with GAAP net income flat at $196 million and non-GAAP net income decreasing to $278 million First Half 2025 vs. First Half 2024 Financial Summary | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Total Net Sales | $6.4 billion | $6.3 billion | | GAAP Net Income | $196 million | $197 million | | Non-GAAP Net Income | $278 million | $301 million | | GAAP Diluted EPS | $1.58 | $1.52 | | Non-GAAP Diluted EPS | $2.25 | $2.33 | | Adjusted EBITDA | $515 million | $523 million | Segment Performance Analysis (Q2 2025) Q2 saw strong sales growth in Global Medical Distribution (6.1%) and Global Technology (7.4%), while Global Dental Distribution faced U.S. pricing pressure Q2 2025 Sales Growth vs. Q2 2024 | Segment | As-Reported Growth | Constant Currency Growth | | :--- | :--- | :--- | | Global Distribution & Value-Added Services | +2.9% | +2.4% | | Global Specialty Products | +4.2% | +3.3% | | Global Technology | +7.4% | +6.6% | - Global Dental Distribution merchandise sales were impacted by lower average selling prices in the U.S. due to glove pricing and sales initiatives, while equipment sales saw strong international growth offset by lower U.S. sales[8] - Global Medical Distribution growth was driven by increased patient traffic, strong performance in the home solutions business, and contributions from acquisitions[8] - Global Technology sales growth was fueled by strong demand for practice management systems, including cloud-based solutions like Dentrix Ascend and Dentally[8] Corporate Developments & Strategy The company is pursuing a restructuring plan for over $100 million in annual savings by year-end 2025 and repurchased $259 million in shares Restructuring Plan In Q2 2025, $23 million in restructuring costs were recorded, with the plan expected to yield over $100 million in annual run-rate savings by year-end 2025 - The company recorded $23 million in restructuring costs during Q2 2025[9] - The current plan is expected to achieve annual run-rate savings of over $100 million by the end of 2025[9] Share Repurchases Henry Schein repurchased approximately 3.7 million shares for $259 million in Q2 2025, including an ASR plan, with $432 million remaining authorized Q2 2025 Share Repurchase Activity | Program | Shares Repurchased (approx.) | Average Price | Total Cost | | :--- | :--- | :--- | :--- | | ASR Plan | 3.1 million | $71.60 | $223 million | | Open Market | 0.5 million | $67.36 | $36 million | | Total | 3.7 million | $70.88 | $259 million | - At the end of Q2 2025, the company had $432 million authorized and available for future stock repurchases, plus an additional $27 million under the ASR plan[12] 2025 Financial Guidance Henry Schein maintained its full-year 2025 guidance, projecting non-GAAP diluted EPS between $4.80 and $4.94 (1% to 4% growth) and 2% to 4% total sales growth Full-Year 2025 Guidance | Metric | Guidance Range / Growth | | :--- | :--- | | Non-GAAP Diluted EPS | $4.80 to $4.94 (1% to 4% growth) | | Total Sales Growth | 2% to 4% over 2024 | | Adjusted EBITDA Growth | Mid-single digits vs. 2024 | - Guidance is for current continuing operations and closed acquisitions, and excludes the impact of restructuring expenses, amortization of acquired intangible assets, and other specified items[13] - The company is not providing a reconciliation of its 2025 non-GAAP guidance to projected GAAP results due to the uncertainty and difficulty of predicting certain excluded items, such as restructuring costs[16] Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 28, 2025, detailing financial position and performance Condensed Consolidated Statements of Income Q2 2025 net sales were $3.24 billion and net income $86 million, a decline from Q2 2024, driven by lower gross profit and increased restructuring costs Income Statement Highlights (Q2 2025 vs. Q2 2024) | Line Item (in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $3,240 | $3,136 | | Gross profit | $1,016 | $1,018 | | Operating income | $151 | $159 | | Net income attributable to Henry Schein, Inc. | $86 | $104 | | Diluted EPS | $0.70 | $0.80 | Condensed Consolidated Balance Sheets As of June 28, 2025, total assets were $10.91 billion and total liabilities $6.01 billion, reflecting increases in receivables, inventories, goodwill, and long-term debt Balance Sheet Highlights (in millions) | Line Item | June 28, 2025 | Dec 28, 2024 | | :--- | :--- | :--- | | Total current assets | $4,243 | $3,983 | | Total assets | $10,906 | $10,218 | | Total current liabilities | $3,007 | $2,803 | | Total liabilities | $6,007 | $5,381 | | Total stockholders' equity | $4,088 | $4,031 | Condensed Consolidated Statements of Cash Flows H1 2025 net cash from operations was $157 million, a significant decrease from $493 million in H1 2024, primarily due to working capital changes Cash Flow Highlights - Six Months Ended (in millions) | Line Item | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $157 | $493 | | Net cash used in investing activities | ($197) | ($281) | | Net cash provided by (used in) financing activities | $145 | ($265) | | Net change in cash and cash equivalents | $23 | ($33) | Supplemental Information & Reconciliations This section provides detailed supplemental schedules (Exhibits A, B, and C) that break down sales growth by segment and geography, and reconcile GAAP financial results to non-GAAP measures, offering greater clarity on the company's underlying performance Sales Summary (Exhibit A) Exhibit A details Q2 and H1 2025 sales, showing 3.3% total global growth in Q2, with strong International Dental Equipment and Global Medical, but U.S. Dental declined Q2 2025 Total Sales Growth vs. Q2 2024 | Segment | Total Sales Growth | | :--- | :--- | | Global Dental | 1.1% | | Global Medical | 6.1% | | Global Specialty Products | 4.2% | | Global Technology | 7.4% | | Total Global | 3.3% | YTD 2025 Total Sales Growth vs. YTD 2024 | Segment | Total Sales Growth | | :--- | :--- | | Global Dental | -0.9% | | Global Medical | 4.4% | | Global Specialty Products | 3.1% | | Global Technology | 5.1% | | Total Global | 1.6% | Reconciliation of GAAP to Non-GAAP Measures (Exhibit B) Exhibit B reconciles Q2 2025 GAAP net income of $86 million to non-GAAP net income of $135 million, adjusting for restructuring costs and intangible amortization Q2 2025 GAAP to Non-GAAP Reconciliation (in millions) | Line Item | Amount | | :--- | :--- | | GAAP Net Income | $86 | | Restructuring costs | $16 | | Acquisition intangible amortization | $27 | | Other adjustments | $6 | | Non-GAAP Net Income | $135 | - Major non-GAAP adjustments for Q2 2025 included restructuring costs, acquisition intangible amortization, costs associated with shareholder advisory matters, and litigation settlements[48][49][50] Reconciliation of GAAP Net Income to Adjusted EBITDA (Exhibit C) This exhibit reconciles Q2 2025 GAAP net income of $94 million to Adjusted EBITDA of $256 million, adjusting for interest, taxes, depreciation, and amortization Q2 2025 GAAP Net Income to Adjusted EBITDA Reconciliation (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $94 | $105 | | Definitional & Non-GAAP adjustments | $162 | $163 | | Adjusted EBITDA (non-GAAP) | $256 | $268 | Legal Disclosures This section includes a "Safe Harbor" statement on forward-looking statements and explains the use of non-GAAP financial measures for supplemental investor information - The report contains forward-looking statements subject to risks and uncertainties, which are not guarantees of future performance, identifiable by terms like "expect," "believe," "plan," etc[24][25] - Key risk factors that could cause actual results to differ include dependence on third-party suppliers, competitive market pressures, cyberattacks, economic conditions, and regulatory changes[26] - Non-GAAP financial measures are used to supplement GAAP results, enabling comparison between periods by excluding certain items that may vary independent of business performance[28][29]