Henry Schein(US:HSIC)2022-08-02 15:48Financial Data and Key Metrics Changes - Total net sales for Q2 2022 were $3.0 billion, reflecting a growth of 2.1% compared to the prior year period. Internally generated sales in local currencies increased by 2.4%, and when excluding sales of PPE and COVID-19 related products, LCI growth was 6.7% [59][60] - GAAP net income for Q2 2022 was $160 million or $1.16 per diluted share, compared to $156 million or $1.10 per diluted share in the prior year [63] - Operating margin for Q2 2022 was 7.27%, representing an 18 basis point improvement compared to the prior year GAAP operating margin [61] Business Line Data and Key Metrics Changes - Global Dental sales were $1.9 billion, a decline of 3.1% compared to the same period last year, with LCI sales down 0.3%. Excluding PPE and COVID-19 related products, LCI sales growth was 3.5% [65] - Technology and Value-Added Services sales during Q2 were $181 million, an increase of 18.1% compared to the prior year, including LCI growth of 10.8% [71] - Global Medical sales during Q2 were $1.0 billion, growing 10.3% compared to the same period in 2021, with LCI sales growth of 6.7% [72] Market Data and Key Metrics Changes - Lower patient traffic due to higher COVID-19 infection rates impacted consumable merchandise sales in parts of Europe and Australia, while Brazil experienced double-digit sales growth [69] - North America dental equipment LCI sales increased by 8.1% compared to Q2 2021, with strong performance in both traditional and digital restoration categories [67] Company Strategy and Development Direction - The company is focused on executing its BOLD+1 2022 to 2024 strategic plan, aiming to provide exceptional customer experiences and deliver differentiated solutions [12] - A restructuring plan was announced to streamline operations and increase efficiency, with expected charges primarily related to severance pay and facility costs [76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a recovery of patient traffic as COVID-19 infection rates moderate, with expectations for improved performance in the second half of the year [10][90] - The company anticipates higher EPS growth in Q4 compared to Q3, revising full-year sales growth expectations to approximately 3% to 6% over 2021 [78] Other Important Information - The company repurchased approximately 1.3 million shares at an average price of $81.42 per share during Q2, totaling $110 million [74] - The effective tax rate for Q2 2022 was 23.8%, slightly higher than the previous year's rate [63] Q&A Session Summary Question: Impact of patient staff absenteeism on dental patient volumes - Management noted that it is difficult to quantify the impact but observed improvements in patient volumes towards the end of July, with expectations for recovery in the third quarter [88][90] Question: Margin visibility and cost controls - Management indicated that gross margin expansion is driven by product mix, particularly in Dental Specialty products and Technology, while careful management of operating expenses is crucial for margin expansion [94][96] Question: Customer pushback on pricing increases - Management acknowledged that while some customers are seeking alternatives due to pricing pressures, they have options to maintain margins and provide value-added services [99][101] Question: Long-term opportunities from staffing dynamics - Management expects dental staffing to recover closer to pre-COVID levels and highlighted investments in technology and value-added services to enhance practice efficiency [103][106] Question: Outlook for dental equipment - Management remains optimistic about the dental equipment outlook, citing strong orders and a solid backlog, with demand for traditional and digital restoration equipment continuing to grow [112][117]