Henry Schein (HSIC) FY 2025 Conference September 04, 2025 11:00 AM ET Company ParticipantsRonald South - Senior VP & CFOConference Call ParticipantsVik Chopra - Equity Research AnalystVik ChopraOkay. Good morning, everyone. My name is Sid Chopra. I am one of the medical device analysts at Wells Fargo. I'm take the time for discussion the Ron, thanks for being here.Ronald SouthCertainly. Thank you, Vic.Vik ChopraLet's just get into the second quarter reported Q2 results about a month ago. Just curious what i ...

Financial Data and Key Metrics Changes - The company's Q2 results were slightly below expectations, leading to initial stock pressure, but the stock price has since recovered to pre-release levels, indicating improved investor understanding of the company's guidance for the year [3][4] - EPS guidance suggests significant increases in Q3 and Q4 compared to Q2, driven by improvements in equipment sales and technology business performance, with over 30% operating income growth in the technology segment [9][10] Business Line Data and Key Metrics Changes - Equipment sales faced pressure in the first half of the year due to macroeconomic uncertainties, but there is confidence in equipment growth in the second half, supported by a healthy backlog and customer ordering patterns [6][8] - The technology segment showed strong momentum, with targeted investments leading to significant operating income growth [9] Market Data and Key Metrics Changes - The U.S. dental market has been relatively flat, with low single-digit growth, influenced by factors such as retirements and patient churn during the pandemic [11][12] - There is optimism for future growth in the dental market as interest rates potentially decline, which could accelerate the opening of new dental practices and increase demand for equipment [13][15] Company Strategy and Development Direction - The company is focusing on value creation projects aimed at optimizing gross profits and G&A costs, with expectations to provide updates on these initiatives in the upcoming Q3 earnings release [22][25] - M&A activity is primarily focused on the medical side, with successful integration of home solutions businesses and potential acquisitions in technology to enhance service offerings [35][38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the need to understand market growth opportunities and the impact of tariffs on pricing and negotiations [21][22] - There is a belief that the dental market will see increased investment as economic conditions improve, particularly with declining interest rates [14][15] Other Important Information - The company is in the assessment phase for value creation projects, with expectations for both short-term and long-term benefits [26] - The new e-commerce platform has received positive feedback, enhancing customer experience and potentially increasing order sizes and margins [49][51] Q&A Session Summary Question: What are investors focused on post Q2? - Investors are focused on understanding initiatives to accelerate earnings and the company's guidance for the remainder of the year [3][4] Question: How do you see the rest of the year playing out from a revenue perspective? - Q4 is expected to be stronger than Q3 due to seasonal equipment buying and improved customer ordering patterns [6][8] Question: What are the potential headwinds and tailwinds for 2025? - The dental market has been flat, but potential interest rate declines could lead to growth in new practices and equipment demand [11][13] Question: Can you elaborate on the value creation projects? - The company is currently assessing opportunities for optimizing gross profits and G&A costs, with updates expected in the Q3 earnings release [22][25] Question: What is the status of the CEO search? - The board is leading the search for a new CEO, emphasizing the importance of finding an effective leader [43][44] Question: Are you seeing differences in capital demand between DSO and non-DSO customers? - DSOs show more appetite for equipment investment compared to private practices, influenced by their access to capital [45] Question: What feedback did you receive from the e-commerce platform launch in Europe? - Customers appreciated the smooth transition and improved functionality of the new platform, enhancing their overall experience [52][53]

Summary of Henry Schein Conference Call Company Overview - **Company**: Henry Schein - **Industry**: Medical Supplies and Devices - **Key Executives Present**: Stan Bergman (CEO), Ron South (CFO), Graham Stanley, Susan D'Onofrio (IR) Core Business Strategy - **BOLD Plus One Strategy**: - **B**: Build high growth, high margin businesses in specialty dental and medical products, targeting 50% of operating income from these by 2027 [4][5] - **O**: Optimize core distribution business for efficiency and customer satisfaction [5] - **L**: Leverage relationships with approximately 300 businesses to enhance sales across different product lines [6] - **D**: Digitalization of dentistry and medicine, including a new global e-commerce platform (GEP) [7][8] - **Plus One**: Advance relationships with suppliers, customers, and investors [9] Financial Performance - **Q1 Results**: Sales growth noted, with EPS growth excluding PPE impact [10][11] - **Earnings Growth Target**: High single digits to low double digits anticipated post-cyber incident recovery [11] Market Trends - **Dental Market**: Stable visit rates to dentists in the U.S., with a shift towards value in product selection [16][18] - **Equipment Stability**: Equipment sales stable, with some fluctuations; digital technology demand remains strong [18][21] - **International Markets**: Varying stability across Europe, with Brazil showing positive trends despite economic challenges [19][20] - **Software Demand**: Growth in software demand, transitioning to a SaaS model for recurring revenue [21][40] Long-term Financial Goals - **Earnings Growth**: Commitment to high single digit to low double digit growth, with 2026 guidance dependent on market momentum and restructuring initiatives [24][25] - **Cost Savings**: Expected $75 million to $100 million in cost savings from restructuring, leaning towards the higher end [25] Restructuring and Optimization - **Restructuring Focus**: Emphasis on optimizing endodontic business and leveraging synergies from acquisitions [28][29] - **Continuous Improvement**: Ongoing process to enhance efficiency and reduce costs, supported by KKR's investment [31] KKR Investment - **Strategic Partnership**: KKR holds approximately 15% stake, providing expertise in margin management and expense control [33][34] - **Negotiating Leverage**: KKR's portfolio may enhance negotiating power with suppliers [36] Capital Allocation Strategy - **M&A Activity**: Historical M&A spending of $300 million to $400 million annually, with a significant increase in 2023 [44] - **Share Repurchases**: $161 million in share repurchases in Q1, with a focus on maintaining a strong stock buyback strategy [46] Key Takeaways - **Misunderstood Aspects**: The effectiveness of the BOLD Plus strategy in driving growth and profitability through high-margin businesses and digital technology [48][49]