Henry Schein(HSIC)2024-05-08 01:36Financial Data and Key Metrics - Global sales for Q1 2024 were 143 million or 161 million or 197 million, compared to 255 million, consistent with Q1 2023 [88] - Gross margin improved by 32 basis points, primarily due to contributions from businesses acquired in 2023 [61] Business Line Performance - Global Dental sales were 284 million, with growth of 21.6% driven by acquisitions and low single-digit organic growth in implants and endodontics [34] - Global Medical sales were 217 million, with total sales growth of 13.8% [38] Market Performance - North American Dental equipment LCI sales grew 2.9%, while international equipment sales decreased by 3.8% [48] - CAD/CAM equipment grew nicely globally, with pricing on intraoral scanners stabilizing [34] - Germany showed positive trends in equipment sales, driven by technical service [48] - The U.S. THRIVE Signature program added 2,000 new members in Q1, bringing the total to approximately 5,000 [18] Strategic Direction and Industry Competition - The company is focusing on high-growth, high-margin businesses, with 40.9% of non-GAAP operating income coming from these areas in Q1 [49] - New product launches, such as the Easy 2.0 implant system in Germany and the upcoming BioHorizons implant system in the U.S., are expected to expand market share [37] - The company is integrating recent acquisitions, including Biotech and S.I.N, which will contribute to internal growth starting in Q2 [8] - The BOLD+1 strategic plan is driving growth, with a focus on innovation in dental implants, endodontics, and orthodontics [54] Management Commentary on Operating Environment and Future Outlook - The company expects sales growth to be more significant in the back half of 2024, driven by recovery from the cyber incident and new product launches [91] - Management remains optimistic about the dental and medical markets, with stable patient traffic and a shift of procedures from acute care to alternate care settings [32] - The company is confident in its ability to regain market share and improve growth in Q3 and Q4 [30] Other Important Information - The cyber incident reduced sales growth by approximately 300 to 400 basis points in Q1 [24] - The company repurchased approximately 1 million shares of common stock in Q1 at an average price of 60 million claim limit and a 5 million retention [51] Q&A Session Summary Question: Gross margin drivers and sustainability [96] - The gross margin improvement was driven by a mix of high-growth, high-margin businesses and recovery in distribution margins [104][71] - The company expects gross margins to remain strong, supported by ongoing recovery in distribution businesses and contributions from recent acquisitions [103] Question: Dental equipment growth and market trends [72] - Dental equipment sales were impacted by a pause in Q4 due to the cyber incident, but the market has stabilized, with traditional equipment sales consistent with last year [73] - CAD/CAM equipment is performing well, with pricing stabilized and no significant discounting [73] Question: Implant market growth and market share [76] - The company is not significantly impacted by price sensitivity in the implant market, as it is positioned as a discounter of premium products [77] - New product launches, such as the Easy 2.0 in Germany and the upcoming BioHorizons implant in the U.S., are expected to expand market share [78][79] Question: Revenue growth cadence and expectations [91] - The company expects stronger growth in the back half of 2024, driven by recovery from the cyber incident and new product launches [91] Question: Impact of the Change Healthcare cyber incident on technology sales [113] - The Change Healthcare cyber incident caused a stagnation in technology sales in March, but the company expects growth to normalize in Q2 [114] - The company successfully processed claims through an alternative provider within 48 hours, which was well-received by customers [116] Question: Medical distribution competitive landscape [118] - The company is not significantly impacted by competitive pressures in the medical distribution market, with strong performance in alternate care settings [118] Question: North American dental consumables performance [119] - North American dental consumables sales were down 5%, with a 300-400 basis point impact from the cyber incident [119] - Pricing in the dental market is relatively stable, with some movement towards corporate brands [120] Question: SG&A cadence and cost restructuring [127] - SG&A was higher in Q1 due to the integration of higher-margin businesses, with expectations for continued consistency in future quarters [128] Question: Home health growth opportunities [130] - The company is optimistic about its Home Solutions business, which is approaching 350 million annually and expected to grow organically [131] Question: Dental market skepticism and challenges [133] - The dental market is stable, with seasonal impacts in Q1, but overall leaning towards growth [134] - The company is well-positioned to navigate challenges, with a focus on innovation and customer support [137]