Henry Schein(US:HSIC)2023-05-09 21:14Financial Data and Key Metrics Changes - First quarter global sales were $3.1 billion, reflecting an LCI sales decrease of 3.7%. However, excluding PPE products and COVID-19 test kits, LCI sales grew by 6.3% [26][12] - GAAP net income for Q1 2023 was $121 million or $0.91 per diluted share, compared to $181 million or $1.30 per diluted share in the prior year. Non-GAAP net income was $161 million or $1.21 per diluted share, down from $200 million or $1.44 per diluted share [28][12] - GAAP operating margin for Q1 2023 was 5.7%, a decline of 196 basis points year-over-year. Non-GAAP operating margin was 7.7%, a decline of 102 basis points [27][12] Business Line Data and Key Metrics Changes - Global Dental sales were $1.9 billion, with LCI sales increasing by 4%. Excluding PPE products, LCI sales growth was 7.4% [29] - Global Medical sales during Q1 were $971 million, with LCI sales decreasing by 17.1% due to lower sales of PPE products and COVID-19 test kits. Excluding these categories, LCI sales grew by 4.2% [32][12] - Global technology and value-added services sales were $191 million, with LCI growth of 6.5% [31] Market Data and Key Metrics Changes - North America dental merchandise sales increased by 1.3% and by 6.6% when excluding sales of PPE products. International dental merchandise LCI sales increased by 8.1% or 11% when excluding PPE products [62] - The international dental equipment market showed strong sales growth, particularly in Central Europe, Australia, and Brazil [62][12] - The backlog for traditional equipment remains robust and is up year-over-year, indicating continued demand [117] Company Strategy and Development Direction - The company announced the acquisition of a majority stake in Biotech Dental and plans to enter the Brazilian implant market with the acquisition of S.I.N. Implant System, aligning with its BOLD+1 strategy focused on high-growth, high-margin opportunities [6][51] - The company is committed to advancing high-growth, high-margin businesses through organic growth and acquisitions, with a focus on innovative products and services [134] Management's Comments on Operating Environment and Future Outlook - Management noted that patient traffic to dental offices has recovered and is nearing pre-pandemic levels, with expectations for steady growth trends in both dental and medical markets [45][35] - The company anticipates headwinds from PPE and COVID-19 test kits in the second quarter but expects good income growth in the second half of the year as year-over-year comparisons normalize [35][12] Other Important Information - The company expects non-GAAP diluted EPS for 2023 to be in the range of $5.18 to $5.35 per share, reflecting a decline of 4% to 1% compared to 2022 [33] - Operating cash flow for Q1 was $27 million, down from $93 million in the previous year, primarily due to lower income from PPE and COVID-19 test kits [65] Q&A Session Summary Question: Impact of holiday week on sales - Management indicated that the absence of a holiday week in Q1 2023 likely contributed a couple of points to growth in the dental merchandise number [76] Question: Trends in specialty business growth - Management noted that while the specialty business grew by 4%, the growth was uneven across categories, with implants showing lower growth in the U.S. compared to Europe [84][86] Question: Stability of the equipment market - Management confirmed that the equipment market in Europe is stable, with traditional equipment showing good growth rates [80][106] Question: Future guidance on EPS and sales - Management provided guidance for total sales growth of approximately 1% to 3% over 2022, with a significant decline expected in COVID-19 test kit sales [93]