Summary of Henry Schein (HSIC) 2025 Conference Call Industry Overview - The discussion primarily revolves around the dental and medical supply industry, focusing on trends in dental demand and the company's performance in these sectors [3][4][5][6][36]. Key Points on Dental Market Trends - **January Softness**: January was noted as a soft month for dental demand, attributed to weather impacts and other market conditions [4][5]. - **Improvement in Demand**: February and March showed improvement in patient traffic, with April continuing this positive trend [5][6]. - **Demand vs. Supply**: There is a noted demand for dental services in the U.S. that exceeds supply, leading to an increase in dental office build-outs [6][7][10]. - **De Novo Build-Outs**: The rate of new dental office openings is higher than in previous years, driven by larger Dental Service Organizations (DSOs) recognizing the demand-supply gap [7][10][11]. - **Retirement of Dentists**: An increase in dentist retirements during the pandemic has contributed to the supply shortage [12][13]. Financial Guidance and Performance - **2025 Guidance**: The company maintained its revenue growth guidance of 2% to 4%, primarily driven by internal growth, despite foreign exchange headwinds [14][15][16]. - **Cost Management**: The company aims to achieve $75 million to $100 million in cost savings through restructuring initiatives [23][24]. Product and Service Innovations - **New Product Launches**: The company is focusing on new products like the TAPR Pro conical implant and technology products from Henry Schein One, which enhance customer engagement [19][20]. - **Home Solutions Growth**: The home solutions segment is growing at a high single-digit rate, with a significant acquisition (Ascentis) contributing to this growth [37][38]. Market Dynamics in Implants - **Implant Market Trends**: The U.S. implant market is relatively flat, with growth shifting towards value implants as general practitioners increasingly perform straightforward procedures [28][29][30]. - **Market Share Gains**: The company has gained market share in Europe, particularly in the premium implant segment [26][27]. Integration of Medical and Dental Services - **Shared Infrastructure**: Henry Schein has integrated its medical and dental businesses, sharing distribution centers and management teams, with about 25% to 30% common SKUs [40][41][42]. - **Crossover Services**: There is an increasing trend of community health centers offering both medical and dental services, enhancing cross-selling opportunities [43][44]. Strategic Partnerships and Future Outlook - **Collaboration with KKR**: The partnership with KKR is expected to enhance operational efficiency and provide insights into cross-selling opportunities [45][46][48]. - **Technology Adoption**: The company is focusing on increasing the adoption of its cloud-based systems (Dentrix Ascend) among its customer base, currently at about 10% penetration [49][50]. Conclusion - The company expresses optimism about the future, driven by increased dental office build-outs, strategic partnerships, and a focus on innovative products and services [52][53].

Group 1 - The analyst reiterated a Strong Buy rating on McKesson Corporation (NYSE: MCK) in March 2025, identifying it as a top investment idea for the year [1] - The company is believed to be largely immune to tariff impacts, suggesting resilience in its business model [1]

Financial Data and Key Metrics Changes - The company's revenue for Q1 2025 was $2.6 billion, up just under 1% as reported, but up 2.3% on a same-day basis compared to the prior year [16] - Adjusted net income for the quarter was $18 million or $0.23 per share, representing about 20% growth compared to $15 million or $0.19 per share last year [21] - Adjusted EBITDA grew 5% to $122 million versus $116 million reported during Q1 2024 [21] Business Line Data and Key Metrics Changes - Patient Direct revenue was $674 million, growing by 6% compared to Q1 2024, with a same-day growth of 7.3% [16] - The Products and Healthcare Services segment reported a decline of 0.8%, while on a same sales day basis, it grew 0.7% compared to the first quarter last year [18] - Operating income in the Patient Direct segment grew by 31%, contributing to a total operating income of $61 million, an improvement of about 7% versus Q1 2024 [20] Market Data and Key Metrics Changes - The company experienced continued growth in oxygen therapy, which began in Q4 2024, and expects growth throughout 2025 [17] - The Medical Distribution division saw good same-store sales, but lower glove prices and international sales offset this growth [18] Company Strategy and Development Direction - The company is actively engaged in discussions regarding the potential sale of its Products and Healthcare Services segment while continuing to run this segment with commitment [10] - Investments in revenue cycle management have led to record collection rates in Q1, with plans to extend these learnings to other divisions [9] - The company is implementing price increases in response to tariffs, effective in early June, while ensuring high-quality product delivery [13][14] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed guidance for the year, expecting improving results in each subsequent quarter, with at least 70% of earnings and cash flow generated in the second half of the year [24] - The company remains bullish on the outlook for earnings and cash flow for the remainder of 2025 [25] Other Important Information - The anticipated annual exposure of current tariffs on products is estimated to be in the range of $100 million to $150 million [13] - The company has opened new state-of-the-art distribution centers to enhance efficiency and service [11] Q&A Session Summary Question: Can you discuss the discussions with customers regarding tariffs? - Management indicated that they are working with customers to identify alternatives and have increased inventory to mitigate tariff impacts [26][29] Question: What is the impact of foreign exchange on the business? - Management noted that while there was volatility in the dollar, they are comfortable with the guidance for the rest of the year regarding FX [31][33] Question: What is the split of tariff exposure between segments? - The majority of tariff exposure is in the Products and Healthcare Services segment, with very little exposure in the Patient Direct segment [40] Question: How is the RoTEK acquisition being accounted for in guidance? - The debt from the RoTEK acquisition will not appear on the balance sheet until the deal closes, and guidance will be updated accordingly [47][49] Question: What is the expected free cash flow for the year? - Management confirmed that they still expect to generate good free cash flow and use it to pay down debt [52]

Financial Data and Key Metrics Changes - The company's revenue for Q1 2025 was $2.6 billion, up just under 1% as reported, but up 2.3% on a same-day basis compared to the prior year [15] - Adjusted net income for the quarter was $18 million or $0.23 per share, representing about 20% growth compared to $15 million or $0.19 per share last year [19] - Adjusted EBITDA grew 5% to $122 million versus $116 million reported during Q1 2024 [19] Business Line Data and Key Metrics Changes - Patient Direct segment revenue was $674 million, growing by 6% compared to Q1 2024, with a same-day growth of 7.3% [15] - The Products and Healthcare Services segment reported a decline of 0.8%, while on a same sales day basis, it grew 0.7% compared to the first quarter last year [16] - Operating income for the Patient Direct segment grew by 31%, resulting in a 173 basis point expansion [6] Market Data and Key Metrics Changes - The Medical Distribution division saw continued growth in same-store sales, but lower glove prices and international sales offset this growth [16] - The company experienced a significant increase in proprietary product sales running through its distribution channel, a key strategic initiative [16] Company Strategy and Development Direction - The company is actively engaged in discussions regarding the potential sale of its Products and Healthcare Services segment while continuing to run this segment with commitment [9] - Investments in revenue cycle management have led to record collection rates in Q1, with plans to extend these learnings to other divisions [8] - The company is implementing price increases in response to tariffs, effective in early June, while ensuring high-quality product delivery [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's performance and reaffirmed guidance for the year, expecting improving results in each subsequent quarter [22] - The anticipated annual exposure of current tariffs on products is estimated to be between $100 million to $150 million, primarily affecting the Products and Healthcare Services segment [12][27] - Management noted that the first quarter typically marks the payment of incentive compensation, impacting cash flow, but expects significant improvement in cash flow for the remainder of the year [20] Other Important Information - The company opened new state-of-the-art distribution centers in Morgantown, West Virginia, and Sioux Falls, South Dakota, to enhance its distribution network [10] - The company is awaiting a final decision from regulators regarding the planned acquisition of RoTEK, expecting to close in the first half of 2025 [8] Q&A Session Summary Question: Can you discuss the discussions with customers regarding tariffs? - Management indicated that the tariff exposure is estimated between $100 million to $150 million, primarily from China and Thailand, and emphasized the need to work collaboratively with customers to address pricing adjustments [27][28] Question: How should we think about the FX impact progressing through the year? - Management noted that while there was volatility in the dollar, particularly in March, the situation has calmed, and they are comfortable with the guidance for the rest of the year regarding FX [31][32] Question: What is the split between the tariff exposure in the PNHS and PD segments? - Management clarified that virtually all tariff exposure is in the Products and Healthcare Services segment, with minimal exposure in the Patient Direct segment [40] Question: How is the RoTEK financing accounted for in guidance? - Management explained that none of the debt will appear on the balance sheet until the deal closes, and they will update guidance accordingly [47] Question: What happens if customers refuse price increases due to tariffs? - Management stated that they cannot sell products at a loss and will work with customers to find alternative products that are lower in cost [61][64]

Core Viewpoint - Henry Schein, Inc. (HSIC) reported adjusted earnings per share (EPS) of $1.15 for Q1 2025, reflecting a 4.5% increase year-over-year and exceeding the Zacks Consensus Estimate by 3.6% [1][12] Financial Performance - The company recorded a GAAP EPS of 88 cents, up from 72 cents in the same quarter last year [2] - Q1 revenues were $3.17 billion, a slight decline of 0.1% year-over-year, and fell short of the Zacks Consensus Estimate by 1.8% [3] - Constant currency total net sales increased by 1.4%, while excluding PPE and COVID-19 test kits, sales growth was 2% year-over-year [3] Segment Analysis - Global Distribution and Value-Added Services segment sales decreased by 0.7% to $2.68 billion, with a 0.8% increase in constant currencies [4] - Global Dental Distribution merchandise sales rose by 0.4% in constant currencies, while equipment sales fell by 2.4% due to sales deferrals [5] - Global Medical Distribution sales increased by 3% in constant currencies, driven by higher patient traffic and growth from acquisitions [5] - Global Specialty Products segment sales totaled $367 million, up 2% on a reported basis [6] - Global Technology segment sales reached $162 million, reflecting a 2.9% increase on a reported basis [7] Margin and Liquidity - Gross profit for the quarter was $1.00 billion, a 1.2% decrease year-over-year, with gross margin contracting to 31.6% [8] - SG&A expenses decreased by 6.7% to $738 million, while adjusted operating profit rose by 18.6% to $262 million [8] - The company ended Q1 2025 with cash and cash equivalents of $127 million, up from $122 million at the end of Q4 2024 [9] Share Repurchase and Guidance - HSIC repurchased approximately 2.3 million shares at an average price of $71.58, totaling around $161 million, with $718 million available for future repurchases [10] - The company maintained its adjusted EPS forecast for 2025 in the range of $4.80-$4.94, indicating 1-4% growth from 2024 [11] Strategic Outlook - HSIC is advancing its BOLD+1 Strategic Plan for 2025 to 2027, focusing on operational efficiency, enhancing customer experience, and expanding its digital solutions [13]

Financial Data and Key Metrics Changes - Global sales for the first quarter of 2025 were $3.2 billion, down 0.1% compared to the first quarter of 2024, with a 1.5% decrease attributed to foreign currency exchange and a 1.2% growth from acquisitions [27][28] - GAAP operating margin improved by 81 basis points to 5.53%, while non-GAAP operating margin increased by 14 basis points to 7.25% [28] - GAAP net income for the first quarter was $110 million or $0.88 per diluted share, compared to $93 million or $0.72 per diluted share in the prior year [28] - Non-GAAP net income was $143 million or $1.15 per diluted share, compared to $143 million or $1.10 per diluted share in the prior year [29] Business Line Data and Key Metrics Changes - U.S. Dental merchandise sales grew low single digits, while U.S. Dental equipment sales declined by 8.9% due to a deferral of approximately $20 million in sales from Q4 2023 to Q1 2024 [30][31] - U.S. Medical distribution sales grew by 4.7% after excluding PPE products and COVID test kits, with Home Solutions business experiencing a total sales growth of 23% [32] - Global Specialty Products Group saw constant currency sales growth of 4.3%, benefiting from acquisition growth primarily from TriMed [33] Market Data and Key Metrics Changes - International Dental merchandise constant currency sales grew by 1.1%, while international Dental equipment constant currency sales grew by 4.3%, driven by strong growth in Canada and Central Europe [32][33] - The U.S. implant market was slightly down in Q1 2025, with strong sales growth in the DACH region and Latin America [20][21] Company Strategy and Development Direction - The company is advancing its Bold Plus One strategic plan, focusing on growing the distribution business, enhancing customer experience, and developing digital solutions [10][11] - The establishment of two main business units: Global Distribution and Value Added Service Group, and Global Technology Group, is aimed at improving operational efficiency [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fundamentals of the business, noting good sales performance in February and March following a slow January due to weather-related events [8][10] - The company expects to achieve high single-digit to low double-digit earnings growth by executing its strategic plan [10] Other Important Information - The company repurchased approximately 2.3 million shares of common stock during the first quarter at an average price of $71.58 per share, totaling $161 million [35] - The company is maintaining its 2025 financial guidance, expecting non-GAAP diluted EPS to be in the range of $4.80 to $4.94 [38] Q&A Session All Questions and Answers Question: Can you talk about the dollar's impact on revenue guidance? - The company experienced a headwind of about 1.5% from foreign exchange in Q1, but expects foreign exchange to be largely neutral for the remainder of the year [44][45] Question: Can you provide clarity on the operating environment and April's performance? - April was a decent month, with stable traffic for Dental distribution businesses and increased patient traffic for medical sales [47][50] Question: Are there any adjustments to your guidance inputs? - The sales guidance remains consistent, with most growth expected to be internally generated [55] Question: Can you comment on the tariff impacts? - The company is confident in mitigating the financial impact of tariffs through various strategies, including sourcing from lower tariff countries [56][58] Question: How is the dental capital equipment environment? - There has been healthy demand for equipment orders, with no significant adverse reactions noted [108] Question: What is the current sentiment among DSOs? - DSOs are stable to leaning positively, with many adjusting to higher interest rates and continuing to invest in expansion [115]

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 ...

2025 Outlook - The company projects revenue between $10.85 billion and $11.15 billion [7] - The company anticipates a gross margin between 20.75% and 21.25% [7] - Interest expense is estimated to be between $138 million and $142 million [7] - Gross capital expenditures are projected to be between $250 million and $270 million [7] - The adjusted effective tax rate is expected to be between 29.0% and 30.0% [7] - Diluted weighted average shares outstanding are estimated to be approximately 80 million [7] - Adjusted EBITDA is projected to be between $560 million and $590 million [7] - Adjusted EPS is expected to be between $1.60 and $1.85 [7] Assumptions and Caveats - The outlook excludes any potential impacts from the Rotech acquisition, the potential sale of the Products & Healthcare Services segment, and any future share repurchase activity [7] - The company is unable to forecast the most directly comparable GAAP measures without unreasonable effort due to unpredictable elements such as restructuring and acquisition charges [9] - Commodity prices are assumed to be stable, and foreign currency rates are as of December 31, 2024 [7]