HSIC - Earnings call transcript Q2 2019

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Operator

Good morning ladies and gentlemen and welcome to the Henry Schein Second Quarter 2019 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Carolynne Borders, Henry Schein's Vice President of Investor Relations. Carolynne. ahead go Please

Carolynne Borders

Stanley and Steven discuss each the Henry me Chief of today quarter. Holly, and Officer. the joining Executive Financial Executive Chief XXXX you Vice us With Officer are call the to Schein's Schein; on Chairman thanks you, of of Board and to Henry for second Bergman, Paladino, Thank results and for President

is will forward-looking. that begin, certain to comments include I information this during we that Before state call would made like

As and matters company’s to risks you may in business the know, in involved uncertainties statements. affect referred the forward-looking

a materially in statements. expressed As company’s the such result, performance differ from forward-looking by indicated may those or

forward-looking of contained including on Exchange These the Commission, in Schein’s our by Form the XX-K. Securities entirety cautionary in Factors Risk Annual and are in statements Report section statements filings qualified their Henry with the

markets about the based including all analysis the growth addition, internal are company’s we In share, and upon rates serve, market estimates. comments end-market and

GAAP the We for of our items remarks the with transparency about performance will results financial Our measures non-GAAP of the comparison and useful supplemental non-GAAP investors periods believe performance, independently and with include management allow our business, conference used provide financial metrics financial of our between respect business vary may business. by certain where to the in information call key both of results. enable greater operating

Relations not and in GAAP of financial for regarded website. Investor measures measures. purposes found can and should a be reconciliations info the be non-GAAP replacement These are section solely the These presented as our comparative supplemental for corresponding informational

circumstances the Schein broadcast, of the information obligation date this any call revise undertakes the or statements events August that of X, The date is accurate contains Henry or this reflect only to time-sensitive content forward-looking update after to call. no XXXX. as live of of

one follow-up with to hour many a question and to listeners a the yourself during question within ask allotted this have a limit for Please possible as to call. Q&A that single we allow us

to Stanley that like With I would said, Bergman. the call over to turn

Stanley Bergman

Carolynne. today. I'd like second and growth for Good on you we earnings operations Thank highlighting and for EPS performance morning, continuing thank the GAAP from you, in a everyone, year-over-year basis. X.X% diluted to delivered by solid our quarter XX.X% start joining non-GAAP growth as us

Now complete, providing continuing that for from restructuring GAAP EPS operations costs. XXXX our including restructuring those initiative we're is guidance diluted XXXX

continuing We which also from greater prior guidance for diluted are Steven discuss range detail. our operations XXXX of affirming non-GAAP will in all EPS

North dental While offset second region, quarter the American topline medical sales. was dental in sales, sales by sales in solid this growth dental results softness in DACH reflect some specialty and the

and in difficult U.S. vary Dental particular Although, had second in market quarter in the growth may was prior quarters, we comparable we slower note quarter believe grow in the than any that end rates the market a year. recent we

markets to remain market other quarter In we in share the presence confident belief come. into growing of serve we and the that record markets Dental our the sure to markets we and are take and We've in positioned we're the in continue share a generally track reaffirm to words, our the the serve. continue make XXXX our can end understood. important to we market grow We Medical and is grow for that to well that account versus had the that that I the for XXXX growth is quarter think global it that stable growth years

the aimed This long-term initiatives company at As underway at growth. products and for positioning you includes we Schein, higher-margin know, Henry promoting have services. multiple

others internally through product our developed and to the We with progress portfolio, solutions good continue new make of acquisitions. expansion with

Medical focused on optimizing and markets. in Henry the Schein position we for We continued global growth Dental our are well as infrastructure,

So we remain optimistic about future. the

over call on Steven accomplishments. the and Steven? time, financial to recent and additional then our some review this commentary performance and I'll our I'll business to hand guidance provide results At

Steven Paladino

good and Stanley, all. you, Thank morning to Okay.

as begin, and results on point a we operations our I'd GAAP on As like to basis. reported also out be a will non-GAAP I basis continuing from that discussing

exclude XXXX also that and XXXX in QX are release, press Relations of Investor our Exhibit the Our QX website. of B non-GAAP in which certain results costs today's is detailed available section

entered quarter, as Please connection in the Health completed represents with Covetrus note the a sales that services to into product for last sales corporate included that QX Animal transitional spin-off we did we was February that XXXX. have agreements under category in of

XXXX. operating to income. of These continue first are into We negligible the that Covetrus impact expect sales a sales low-margin half have these to our on

XXXX, expect million. sales total to corporate these we For approximately $XXX

continuing our growth in our June today. sales growth to local of in in sales details of sales from earnings ended are X.X%. XXXX, second TSA, a was were now the release X.X% the compared of XX, operations with generated $X.X X.X%. those issued under with QX When results. of sales currencies billion, the was excluding quarter currencies sales that Net to product increase contained for Exhibit internal internally A quarter The our reflecting Covetrus XXXX, growth news Turning local

On which On XXXX. essentially quarter income operating a a info points Relations supplemental costs, GAAP the Investor our a excludes basis, and XXXX non-GAAP second our with was find restructuring Again X.X% on page of our basis declined for second compared basis. basis, operating flat and operating about a website. in year-over-year non-GAAP can X.X% to of quarter margin XX was the page of you GAAP the margin of income reconciliation the on operating

taxes. to Turning

our taxes rate compares second non-GAAP to second XX.X% This quarter rate be to range Relations year. tax tax GAAP full prior with GAAP supplemental will of non-GAAP page and XX.X%. the information in page refer both our basis. basis, tax the of effective non-GAAP rate quarter effective for tax the rate a We XX% last Again of higher XX.X% and rate. GAAP please of that's for a the effective on website estimate On taxes. a reported GAAP slightly quarter tax non-GAAP effective the continue for year the reconciliation with XXXX on was our to year consistent the Investor the was for Our at

Moving and to and diluted this $XXX.X XXXX of of second and on Henry million $XXX.X -- compares $X.XX income XXXX. income share. continuing compares $X.XX million of respectively year net per QX $XXX.X income per this net share for share $X.XX quarter attributable Schein was of the or income non-GAAP per for $X.XX for it quarter X.X% per for XXXX, net of with EPS. to operations represents from net growth million was with second the or GAAP prior the or million $XXX diluted This income net diluted share and or XX% XX.X%, of Non-GAAP

additional for of some results note amortization diluted that to the the our operations from I'd quarter period detail on $X.XX $X.XX that compares like in per from same intangible current million assets acquired diluted or last and year. share pre-tax to continuing QX million share per was provide $XX.X $XX or and pre-tax

year, share. also $XX.X For $XX.X $X.XX exchange year a negatively note currency or EPS half the per same to this period impacted year. QX I'll our diluted by or $X.XX the last of per the and was first diluted compares share foreign that in in of that's share same $X.XX pre-tax million per diluted million number prêt-ax

for second the of at look quarter. details some results our of sales now the Let's

billion X.X% growth with positive of with prior Our in dental currencies sales compared decreased local were the $X.X X.X%. year and internal

also growth growth internal and again is merchandise. consumable growth growth that local in prior X.X% comparison growth American X.X% Note X.X% internal in was -- sales there's North X.X% currencies local year where tough from reported in a currencies. included of we dental a

same sales due in America. equipment to local Our dental internal on sales a decreased digital and current was mainly sales service, related in last declined currencies primarily the X.X% by decline also in equipment currencies America the in local North year-over-year a And sales versus category. to CAD/CAM This by internal center period in basis North in quarter. X.X% equipment year, high-tech sensor our

year-over-year a equipment faced the we traditional of to essentially was price X.X decline to inventory comparison And to tough sales due sales Internal during in bolstered local year. QX average system QX, had that promotional in in we the flat Omnicam We the out Omnicam currencies last units saw year-over-year. sales in XXXX. sell a activity promotion due that

international dental consumable at in growth, X.X% in which to negatively look the merchandise Thursday holidays. dental we sales currencies, If local by growth included This approximately it Holy timing impacted and X.X%. points Friday was due was Good of basis XXX

quarter from timing this may the seeing first XXXX we're saw in of that. As the and recall, reversal now of benefit you we

our Netherlands sales, sales expected you dental Brazil. the was and equipment as primarily related currency. Trade our March the a business versus internal dental exclude And was This of same declined decline in region, the DACH Show X.X% revenue in local a if And as IDS sales equipment change Brazil as in to growth X.X% the we period. The equipment boost in performance saw model Germany, from year. in service this Austria, International and our well international

local in of were growth The currencies million growth second with X.X% sales North $XXX X.X%. quarter, Medical sales at currencies internationally. at comprised internally growth internal in and growth the X.X% XX.X% X% America increase an generated local of

offices, with our and which organic very driven pleased overall Medical with our large strategic results, in with growth to very growth. solid our strong was with along are other ultimate again, practices, is believe sites independent care by contributing customer We group category sales each We well-positioned relationships physician Medical once acquisitions. of group

continuing an local Value-Added in and XX.X% in were operations second the of Technology down X.XX%. increase Services sales generated $XXX million with internally sales currencies quarter, from

Value-Added basis. currencies In in sales X.X% was as-reported and North on growth America, down the Technology internal local Services an

technology when growth cloud-based transition sales a platforms X.X%. North internal and sales for America in increased direct of our product agency from switches by However, ongoing to to SaaS model, normalizing

slower local services equipment Internationally, our sales increased equipment our lower note also and currencies. equipment dental sales. to sales internal Services led to in revenue financial less -- our as related lower I'll X.X% Technology sales dental by financed that we Value-Added

an in quarter market $XX.XX of repurchase approximately immaterial. shares for million. during the shares impact to of repurchase approximately continue total common price quarter The of on EPS the of We our open borrowing $XX was million X.X this diluted second stock second at average

of we flow the the million compares of second we operating repurchases continue brief cash highlights for $XXX.X $XXX from the look to cash $XXX.X at of for Schein was of flow, Henry At we'll strong have some operations believe had quarter, quarter approximately the and second year to the operating full quarter million our If which for a authorized close the million common cash for year. last continuing of stock. take future flow

facility and initiative, $X.XX of $XX.X restructuring disclosed share. severance XXXX of in restructuring closing primarily part recorded includes or our As costs. This of million pretax diluted QX pay we charge previously a per charge

concluded of now conclude financial the non-GAAP and remarks XXXX we XXXX. we also total -- $XX.X During We second are providing basis range. had any quarter additional do million. diluted EPS cost financial the not cost a by initiative a noting that second record guidance quarter, which GAAP this of my guidance in I'll restructuring to our XXXX/XXXX XXXX on affirming expect GAAP

basis which restructuring GAAP diluted operations, which cost XXXX a expected the XX% per of to continuing $X.XX GAAP $X.XX diluted of to includes Schein, XXXX the On to EPS from to $X.XX. $X.XX. growth is of range EPS attributable This Henry represents XX% be share, to was in compared diluted

the X% On to expected operations, $X.XX. was to $X.XX to attributable is Schein non-GAAP XX%, of EPS a diluted XXXX from with of reflecting to $X.XX basis be diluted compared EPS continuing which Henry growth XXXX non-GAAP

spin-off. our diluted for earnings press also tax $X.XX charge $X.XX to expense benefits, the diluted that XXXX per outlook release. $X.XX certain credit non-GAAP the netting EPS EPS a relates to expenses Our Health of from reflected from share in as XXXX excludes income Animal to continuing operations excluded operations and diluted continuing non-GAAP expenses restructuring and XXXX

are any not As any guidance attributable the and acquisitions, our operations, GAAP of as current acquisitions. consistent Schein continuing XXXX generally but for well for Henry guidance future impact assumes potential rates completed include our or levels. with exchange does always, to foreign Also non-GAAP announced as is previously

Stanley. markets Finally, that I'd remain guidance stable are and to like the current the turn end conditions. to With the now with market over call assumes that consistent back

Stanley Bergman

Steven. you, Thank

Let an grew on X.X% North sales business of from me It's second begin currency. America merchandise local quarter, a Dental. without acquisitions. with basis consumable highlights our with Dental by internal in review in starting

in believe and also Steven reflective year this As grew a end this growth we is prior the mentioned, Schein but tough slightly of market markets relatively low is that the than Henry end result U.S. comparable, faster U. in our a S.

global includes market highlight grow endodontic our specialty markets. these solutions American sales to we A our bone products products of consumables healthy to in merchandise which We than North continue as as implants, our which share business goal, to continue been line of believe remains that well Dental increase end with our products. dental at of rates. has Sales regeneration orthodontic, grow faster

In all on increased position the sales dental that X.X% and add businesses. Acquisitions to an without performances continues the with acquisitions. the internal our local pleased grow by areas specialty basis those global internal specialty are quarter, global we second nicely currencies, so in very, and to very of in

impacted As difficult dental as especially by American Steven was we North lower sales, high-tech comparable. sales CAD/CAM mentioned, equipment sales a equipment growth had

clearance had the of of our systems. second XXXX, we a quarter Omnicam quarter promotion. had inventory second successful In the we XXXX, During Omnicam most of promotion successful

point this in And Omnicam on focused prices. of clearance units were we lower view. failing inventory quarter from resulted an this So in

category dampening equipment. effect a our second it So of you take if XXXX significant that sales had into on quarter account

said, lot inventory not is done as dentists very we Primescan generating excitement That in will completed. had but Europe this Dentsply and Omnicam U.S. we only system on has the where well, new and of been more system, our Sirona's in focusing a actually more among start

of North for share Sirona's such with solutions market success. systems have CAD/CAM we grow of historically offer In the brands over time and share small we only other in had had great believe America, this to past a had CAD/CAM while along have the Dentsply other we we that sold relatively well-positioned are brands market we solutions, CAD/CAM

Let out in event IDS XXXX. equipment in two March, years. reflect growth also on traditional every although Germany, point occurs this the X.X% participated which In second sales quarter me that, of was we the in

we had with share the region While IDS the market DACH IDS regions. believe growing sales successful extremely and we and up had XX.X%, successful we specifically by in an in second quarter DACH the equipment currencies side picked a the on local

with local currencies X%. equipment Why? decline negative dental associated The to international in that discussed. due was Steven Brazil internal the in Our largely due, sales declined impact by fact sales

experience more a efficient dentistry better a extent Notably, practitioners driven community, to on and manufacturers, international of workflow, of that and agree by The continued innovation growth to published Primescan care in in CAD/CAM local dental is there's internal in this large sales Europe. quality equipment distributors lot currencies, double-digit therefore, digital key all improvement and and practices.

cost, practice, of but For for the yes benefit patient. also for the the

the advance increased adoption of a see that array of solutions of as to dental these we digital meaningfully dentistry expect time We broad profession. over educate benefits the practitioners solutions on

consumables dental We about remain only of dentistry field with are to of future in the not digital operatories in dental the to extremely but role respect we dental in that course optimistic our laboratory leader equipment also where particularly supply and the and laboratories.

through believe customers. array to dentistry we broad for CAD/CAM have moves digital to of for this sales increase full continue a as we is are opportunity of Today We access active solutions that global our a significant products our there all us markets the in in to platform.

So, of was in an repair our that Canada, Henry of. a XXXX or In strategic excellent yet made activities dental words, with in In June sales a U.K. provider our to Handpiece of services the Hayes and growing. dental Hayes expansive services support business couple investment of quarter for the another complement June products of customers -- opportunity themselves The is investments sales shall this million. Value-Add and approximately other business we $XX.X avail franchise, in Services the an Schein to are and leading U.S., the acquisition of handpiece and say.

Denmark, represents with which equipment. implants, and consumables, announced Norway Cliniclands the we and dental serves initial orthodontic solutions acquisition in Schein's dentists and This dental Henry prosthetic, in Sweden, Yesterday, of presence Scandinavia.

million. sales ended the March $X.X XX XXXX have for months XXst, Cliniclands approximately of

So, presence we markets. we goals Dental business advance progress we and -- with are very strategy our dental as are and laboratory optimistic, making with strategic comfortable operatory good the the dental believe our in in our

second the Now, solid delivered Medical X.X% business. growth local internal sales in let's currencies. review quarter in Medical We of the

including to well. comprise the integrated have delivery part push customers large practices largest unique as networks, well market, large of and as as that Our marketing the group Medical sales served

groups sophisticated approach we have a of are and of the independent these organizations high end both spectrum, to are model services touch that healthcare large well ultimately as large-scale IDNs Many require ends which service proven Henry Schein's as GPs customers.

in feel or centers the the physician, care, with good we So, centers, our surgery position to our strategy specialists. advance and both markets, with urgent with with GPs ambulatory

many our We healthcare the North than huge grow and areas are faster of as Rescue. specialty enabled also has sub-segments a the orthopedics, in American investments such as neurology, others as us growth. amount in this in All podiatry, investing end recent market to well

anniversary Value-Added a move deliver Now Henry practices operate solutions powerful Technology to July business. marked more platform awareness Services that the the build to and of for practice. One, let's efficiently and their dentists the help formation one-year Schein the dental software designed

their at day to that the efficient same help and the time, be end operate so at to the can practice, that we significantly of they goal positioned provide outstanding more the focused and clinical our So, identifying is our are to a practitioner care customers in demand -- potential importance on patients practitioners' the customers offices. oral our care fact attention the public traffic for to bringing of into practitioners creating the and the driving for

our year specifically Schein evolving for designed needs. are have customers have platforms services We offer practice listening to Henry we that best of and commercial to the practitioners' rather bundled solutions, than past our spent our the selection created meet a technology One

systems. as software expensive model In longer course, the or they this need no service to customers transition cost, and at upfront reduce model of practice. can part this their will application delivery Of includes our SaaS cloud-based our

those engine and automated deliver practitioners innovations This marketing websites, to Schein and will communications. advanced those online effectively Henry reputation and digital via upgrades innovate the cloud. tools, search One As management access solutions, results, includes improved continues

business of No business areas one else each functions is as field software services For have are base seek we in practice. these these has business installed dental between in we do and that these to related the offering has synergies services and the base have software as areas specific of offering. complete no focused to and we that advance an the that we value-added installed other

term, our higher-margin to near Henry impacted long growth to solutions are but for these sales of increase Schein a believe we in time this the have transitions positioning revenue These through rates that One we come. recurring model

We are about customers this model, fact are the into general our customers, but businesses, dental to and Henry to excited general a functions, really laboratory of has comfortable model and customers business in of community. progress unique business on into set that advancing software software opportunities our making and in dental take marketplace Schein the the

to efforts team. day. Henry and for opportunities rely distribution our We our on every Henry between consumable software to One products coordinate with The equipment goal Schein also solutions and who practitioners, significant see Henry merchandise used Dental is Schein cross-sell Schein increasingly

our launch many tools. this management software engagement these acquisition to new today, and forward patient significant customers practice these our in programs to of solutions later beginning While We year. upside use selling look that opportunity we believe a patient

announced of Elite in a final acquisition small dental Italia. strategic our entry Italian into important Computer practice management company software named July, but market we with a As a comment,

to dental a the in important offer had of regarded Although, we of of not in practitioners from software well now approximately material, highly strategic view. since Italy million OrisLine XXXX, are products. XXXX, point served Elite family positioned very sales but have $X we

portfolio integrated acquisition markets. a core and of and leading sales dental announced follows for our as believe dedicating the patient to of our a company million, stickiness systems Lighthouse, $XX with but dental solution million. the business create in Austria practice the These of of approximately easy-to-use will solutions Austrian Schein XXXX One expand well Kopfwerk, acquisitions in our continue through instances, that acquisitions it's plan the of management we amount provider one of of to sales management sale communication as end-to-end and delivering dental as well. to software course, being technology technology we This, are earlier – Italian international Henry US$X.X in practice earlier with marketing not management offerings the America practice. We solutions, software both that North these Again into

we strategies: our core expand in set very the we're continue our Huge area, strategic that and the of make all this corporate believe progress we implementing mark, reach fact with and scale we key is comfortable to distribution made because of a amount to XXXX of ups continue businesses XXXX But Medical to build understand side expansion Medical our plan progress geographies. we the in downs summary, it in always general as and around hard solid is complex centered in our making this in So dental which actually the and and halfway businesses. are being is and on distribution matrix. with to dental very, of progress three

and support initiatives The stickiness strategy solutions, shown advance advance also very, customers business so the services our second have provide our obviously, value-added These are customers. profitable here synergies be very base services, our to to that productive. for and to to is

building the product we a the the Schein advancing key Schein that under same Henry as sold products, brands. provide of our is that Schein set expanding our with so understood manufacturers customers ensure partnering while of clearly brand under that Henry our our And we time strategy, margin. commitment equity and broad goal at need services brand with value products is Henry Henry terms well to brand critical third in of Schein as understand our own It services

like operator, questions. you. that With call would the open Thank for we to

Operator

question from will first Glen the our Santangelo line Guggenheim. come of Operator with Instructions] And

Glen Santangelo

good expectations feels a side. of relative Steve, about side the to your like It equipment talk more just real business. and equipment Thanks the I wanted you to bit to morning. on Yeah. was little delta the

high-tech year. a basic about give half might saw bit how better what that the and anything you meaningful hoping was the unpack equipment number can A, you I we us and us Brazil? sense of versus modeling be Just a for on so maybe; little as helpful think maybe was And of that back

for follow-up Henry then it Schein you But appreciate platform. And this the in certainly with is services, growth place value-added comments. and think of segment to strategy the Stan the the in right One secondly first quarter respect seems as Technology the I this like was negative. a I And where with can have

And or be Thanks as so I stop curious this was was you one-off, of of I’ll of? kind do a as some there. just type there view quarter should inflection that aware we and

Stanley Bergman

Okay. American your the start question. roughly the and Thanks equipment If in is look American equipment question. our North with roughly at is Glen, sales of high-tech equipment. traditional equipment I'll North we first one-third dental for two-thirds side,

What XD mature year-over-year we average being And more the reason prices equipment the the growth. the the and digital down. down also of big -- was was as it's high-tech more digital both the product it. have flat in was on we was category a pieces category traditional more a which relatively XD of are it imaging year-over-year X-ray. selling really have basis we during There's and down and think quarter, or was there's saw in people really category imaging why access become this And weakness saw two and

CAD/CAM. is component of Separately, equipment the high-tech key other

of really think more of the we'll focus that earnest On the while we side, were Omnicam really out new on about quarter. spoke we again We that in blowing in year. Primescan, equipment will I the focus selling the the CAD/CAM the half second Stanley during old

were equipment, to that roughly So, X.X% categories in get those that for And X% with together down negative the two high-tech traditional quarter. equipment, or when it the call really you you X%. blend

negatively or international little segments at of look which you Brazil. equipment core you really B, the market to And dental then of dating or there impacted equipment a by very year a terms give detail, just require A, certain in significant was and are run Brazil which are more longer. sale could low-margin; If international equipment, bit

when not out it's conditions, really international those equipment. constant two to profitable those X.X% and in of that, at stop all because by sales equipment very back our segments And selling decided And dental grew of we currency. to you

really dental in excluding international the activity. equipment decent had growth So, we Brazil

So, provides the that you hopefully additional for. looking you were that color

Glen Santangelo

Tech we Yes, And can maybe if about that's great. Value-Added and Stan that talk Services?

Stanley Bergman

Yes sure.

let a Omnicam the promotion something over that had comparables X% really of we traditional the significant had And Just -- successful in like me are also X% important. U.S. In emphasize also equipment. and growth XXXX, our we of

So, we're business you as add side well highly, quite and storm. our those we But Canada, remain U.S., Dental equipment Europe. too a highly of and in about America, North the it's almost the on perfect doing sort well, enthusiastic in where

So, on Call what it… financials the Henry -- is Schein it?

Steven Paladino

Value-Add. and Technology

Stanley Bergman

Tech Remember there's point view, a quite Services from and relatively of into it's goes Value-Added sales that small a to a bit it. number compared the whole company.

lower our the ability fact in that the within comparable basis, in previous than North impacted that leasing services. provide was sales to America our services, equipment a financial that, So on year

The called great is is business, not a but computer second business service. within there hardware, TechCentral a business, which that a sells it's

prices less an the elsewhere. past bought not essentially just selling And certainly it's to as area brings in year. think past robust lower computer be because the can stuff are at the compared is We -- earnings. as than suppresses the I previous the that And hardware in that

has taken be into that lumpiness There's account. to

demand Brands at sold a generation pretty software careful but to as nowhere some Internet have Schein's the amount fine software, generation be solutions of of demand and very practice point. have sold. you lot businesses near Henry large We contracts former

are complete internal growth, So not we growth. reporting

If complete you think, look XX%. the growth, the at business I grew by something like

joint the up in deal growth not. What has end actually counts start the perfect is going up to exactly when is now or -- the It annualized. to quarter, or next whether end from been deal when really where is going year it is doesn't venture or a internal the matter where seeing this you'll this

demand So, a to Internet yes, a internal basis really on system, internal determine that's a hard it's of if couple the other, rate relevant to an hundred we systems, software whether, these what even, on the because that our exact negative customer generation switch it's it's not growth points and Brands very or or one way growth. is

either the this actually quarter very business So a you, in deal the sales it's of and be even can or think, hundred basis one next terms for misinterpret impact the the at I few the judged, profits. of small should reasons And given success annualizes, a base. of end day, points of because when I've beyond, this way,

Operator

Thank you.

will come Johnson, from question of Baird. line next the Your Jeff

Jeff Johnson

follow-up North morning, on Good you. Glen's on business of to wanted America the in I this guys. quarter. Thank Steve, side equipment question the

And mix versus CAD/CAM. getting I or next full make DI impression DI? about office just Omnicam an from maybe, to interest maybe in of counter in seeing total one. But in systems, us your over or demand that. think sense, think the Thank dentists talk the you Would be underlying do number on the rid you see interested of you're year that digital systems of the might your explanations inventory two What you. that thoughts there. full versus some

Steven Paladino

see well that would the both Sure. full standalone the as systems. Jeff. as we expect I continued in interest say to Thanks DI,

with pretty the stronger hopefully run, DI Does would customers I to over I they so kind growers. before But other. think be accuracy you? CAD/CAM hard like move time to that who both buy think predict full and system. that be which there good of they'll help they'll It's to really they then are the some walk will than great

Jeff Johnson

the be maybe side, would specialty I in up America, And little in dental as your business. down consumables the assume it X.X% global, in gave on you. the of somewhere North believe, was you follow-up, same a consumable even Thank was flat seem if just does. that a bit. But if on part maybe North business specialty I America general as ballpark, a It side

kind just two? questions on So rate point? DSOs, what's two on your of in any just, your general that. versus in Thank of practitioner any DSO difference with going at between One, to And going business or at this dentist on with your there those you. changes business? contractual kind is out any of least, Any private status call growth GP

Steven Paladino

one softer bit it of consumables why prior couple basis with issue the We a related the real was The of versus on last year-over-year little to quarters, No. quarter. during the Jeff. Thanks the quarter of and months over a as extremely was sure was exactly we was And not rebounded May We're why news an saw in April it as it very was, May and really the for strong was us. really understand June weak weak good stronger. April. but Okay.

I'll June the was as also that merchandise July, quite for also strong wasn't note solid while a in consumable month of month pretty as us. it

June extremely DSOs saying or us. to It wasn't it like we're And private that. our yeah was month why July. scratching in that But between was for month really was really May, April DSO's of So rebounded related just and mix kind heads so weak again it anything and practice that weak?

reason. was the that key So

Stanley Bergman

contribution. And doing operating the although that, Jeff I from comments add it's small. Steven's specialties we think very what's But profit a is are total important well important of is to -- operating and percentage of with margin to it as sales an consumables,

that when externally numbers. see it's think I hard reported to you at sometimes look So the

Jeff Johnson

Thank Understood. you.

Operator

our come of And the Block, going Jonathan question to is Stifel. from next line

Jonathan Block

Good Great. two Maybe me. Thanks just guys. for morning.

think clarification I more one, Stanley a and one. of The but important first it's Steven, it’s

for a to So approach Brazil just seems like different it market.

And any I second of a And back continuing should half that the you Is then got to XQ we into correct question. about think XXXX. headwind XXXX before lap and that so I approach even and believe market? change

Stanley Bergman

a with very certain particularly compete to them got providers. is resulted saying in I'm annualize have that We and equipment that you've entered addressed And that out. worth think and we -- ago will did a to early An through not equipment It's Brazil that unusual we or areas just in alliance for that in different it's in has into it. I to decade we in this strong to Italy for a strategic couple traditional phenomenon tell. Italy, allow do in not of us maybe situation Brazil a not. similar too

high. so just equipment don't idea market is so and But low a good we of margins when is and are in operate the think gating receivables risks long the to it's this the bad debt in Brazil traditional

areas business. this been very So core into well. Brazil an as it's well doing read other our as particularly the business, said doing for is anything which well that specialty a we're our us. market business Don't getting is high-tech having focus extremely unprofitable equipment But consumable said has on intention as in the and good I Brazil and to than out of

Jonathan Block

let's helpful. Got with deployment, capital you. On finished stick -- through shift then it. And you I'll Stan now. Very gears, you've gone the restructuring

the deals possibly something some rearview now appetite better pipeline You've a small guys. Schein's deals. a got transformative next the mirror, your can XX to maybe talk Covetrus. done Thanks months looks balance the you with and and to restructuring for or perspective? sheet six more know deals how from in big over cash you've But larger, I check from

Stanley Bergman

sure. Yeah,

Obviously solid. they’re done. no pipeline deals Our remains until

sense. of appetite size strict has business it, not much the for like business what Schein on once Henry it There the we going something or so it very have of the are paid the We into make the for looks criteria or investment to but larger the but profit portfolio. into what business integrated

Medical. in interest have We

our We in have globally on expanding core interest business.

appetite businesses We Medical. have for dental and specialty in

to And adding software so continues. platform the

put think work to year and to expect of already quite bit we capital come. in continue to I this years a we

well our first to we at actually if not -- good, at be which of loaded quarter has stood you we has an for But day, but a more and so end years. I conservative we are amortization. the as performance fully future to which will the of basis, XX -- the view past the this much But be are us cash And only, return prefer the reporting approach the we accounting the six conservative months acquisition on cash better. over with we and depreciation but go this think with know,

Operator

is of come And Blair. our Kreger, next question the William to John from line going

John Kreger

much. Stan go full just -- see closer -- digital do the imaging digital five very penetration you classic and where thanks over the sort to is remaining of next kind Hi, could down opportunities of can various It you penetration. for Thanks. dental? let's categories like sounds say or about the has a you within list, But expansion runway if getting you biggest years? see talk the the that

Stanley Bergman

Yes.

that very actually question. a good is So,

runaway is some the our country not the lot coming but imaging, themselves, and of in unit machines U.S. saying has think be down, would average per in in the area coming this particularly do the there's profit I abroad price down. although a deflation say, unit think On I to per is I this I'm there I think

could imaging But what dentists digital their expect. could are that's in think I use many, practice. still there So, said that, many that having you

but seen. thing second hoping centers on out in the regard, with two manufacturers one There commoditized, some technology. The or that's promises we're that more we haven't unique that come are

replacement at and equipment. So, are may extent, it's Having a be sensors to that the world it's products area. technology time large the a the that Having our opportunity is over said product an in said there that, digital lot cloud digitalized so of -- classified as actually a mature moment business. in versus

is there very area. invested that So, We're opportunity we've in there. excited

going smaller larger advance that We're to world continues labs to few it prosthetic labs. see side, area. relates the much to in less think lab the a more As and I

and believe we're this labs larger I they're in we'll these investing consolidate, well. leader space, the space the heavily do As in

in full expansion it will As see to systems, we that think I area. continue to relates

continue most advanced. the the We is in Germany where market

to with system. We full well-positioned continue are the

the We for system decades Sirona and have have there sold the expertise.

and America time expand in in you expertise I will think our regard we do North better. see will over this

relatively expanding. full are system a the CAD/CAM big This we're sales new and forward. opportunity us going our for to is Sirona capabilities But

to relates will it there opportunity I here. DI, be think As

I technology that is, think the in do well. manufacturers well coming up with will those new down. We But did Primescan with as prices Primescan Europe. are come

a place was where had to the product. the think region show we DACH I in IDS the great and that

to products show shows, we And focus got you've at the think, the conventions traction. really on at Omnicam. in I these U.S. get to will

I here. there's Primescan a think opportunity

I is also thing one the other the in third quarter. year Sirona that to want point this out fourth not will quarter,

one downs any before So judging these look a the company's to performance has one all quarter. I on at think take and ups

able will in to we done do will be you think also a the and continue equipment market in in remain this we given have to that well see quite optimistic period, that I equipment XX-month share. well consumables global world,

not and on do each decisions quarter business. is watch one a please quarter But lumpy another. versus This make

As like you'll ago I had growth XX% four the equipment. think, in recall, we something quarters

The their high-tech practices dental particular very definitely are just as in careful judge And we quarter one to any relative one is equipment Dentists category. and is on any have business decisions and area the so, good. an to we be growth. of make company investing based particular

John Kreger

you still aligner also to one offering How your or it There's are Great. clear too Is Stan. ortho? just traction, follow-up. about Thanks Thanks. within tell? quick soon any it's feeling gaining

Stanley Bergman

question. a also that’s Well, good

So good includes this for as on I our We we early would say believe which the of solutions, strategy. SLX we've that, to the numerous specialists said the very you into the on markets and educating we're for have aligner the solution. calls, We're clear benefits GP. Reveal aligner a the

attractive. get all believe we a conclusions. The come to too point early growth us excited much share and of sales from of and We the opportunity a whole to that profit this of about we're both a is in view. market point believe any but long-term market that it's for we participating, that, is for attractive view And

We And we're product. voted force from specialists be number the quite KOLs, know June was our Sales excited some getting so sales It side Henry good the Reveal long the very ago. one KOLs. is product Schein have on our selling Meeting. at That's traction the we National not good to

to in Schein Henry for customers force our We by Dental understood the sales specialty and to allow be by our business. have our products

yet. We're not abroad

take it We expect in to sometime XXXX. abroad -- bring it

SLX. area. our adds and to Reveal of business It's in the share combination our event, a orthodontic in think a meaningful any specialty overall But small. is and growth business I market

small very short, in bigger orthodontics. we're long regeneration. story particular in We're So implants, in quite and of bone kind in this We're small endodontics space. in

position. the small. add specialty this aligners relatively think our it's I clear to So But point, will at

John Kreger

helpful. Thank Very you.

Operator

will come line from question of Our next Ellich, the Kevin Craig-Hallum.

Kevin Ellich

mobile dental for Thanks Stan, the about I we of question. some quarter, like talked think, models the last taking dental. innovative

dental like other and growth? where businesses that scheme time how the thoughts in wanted bar New you I the things? think I this concierge York that in to could of do on get where market grand guess, disruptors. to your do dental you -- So add overall much and see your And

Stanley Bergman

I I comment on is occur. going don't What provider. said think do to Having should is that, Yeah. innovation any specific

going involved grow. will innovative DSO it's a not ideas I practices continue to the to that not go. I'm can going the imagine I'm there's appropriate only quite retail involved, to to think it's is to dentistry a grow. sure clinical think in there's not mid-sized but They're be not that be to dentist I going where dentist with dentists going are challenges. involved in not bringing In if not the is marketplace. providing is continue clinician this particular going sure -- close I'm I well-received. this care of a Where be to quality care. to

products. are over said very whitening did shelf. Having doing time that, time, the And in at drug products well store dentists same go with our the lighting

the this of to attract Uber I there that of some and transportation. particular, a be believe because And these will the population dentist. younger do I model, see of that doesn't in to go equivalents think advantageous models the I generation millennials to in additions believe will half So American be will this can dentist. only And

have that very said very, well. I retail on ground Street's be DSOs that, dental Having Main tend to that doing have say to floor space,

out the correlation government health care in oral about only the I as federal governments oral the So better of to because care. importance care, good so payers dentistry and and future I and of there even think remain local showing of get the understand care continuum the this going is the good studies that at is coming foundation optimistic the between are direct are quite that a

Kevin Ellich

what see follow-up into? geographies would then you any details Appreciate Steve. that. if like are on to the with a could how have expand Scandinavian you dental just then wanted give growing. us And And are acquisition, the I for to fast Cliniclands And the markets

Stanley Bergman

Yeah.

First of business electronic it's a equipment. million, salespeople, doesn't It's million. small of business all some huge amount a essentially a please very $XX with $X.X sell remember

It to not would this that. The but We big vehicle, I will it share growing helps will generate advance market market. digital expand It with a particular a our gain expect fast platform. is is sales. business. significant market

and But platform field sales married other be software at and sales service we that the will of as believe digital as kinds management with representation. equipment practice well time to have

We're to Denmark. in Norway. We a business implant German area in and some business advance from has market. this we in businesses help the us is also will general. to that market business sale our some to in some this business by products continue products that's And that way We're already -- expect small grow. the share sale are hopeful Norway’s business Swedish Denmark our and the essentially very in These our �� specialty

Kevin Ellich

out you but us Great. And that a pace then said you you help if number can with. how going? fast wondering do you the want market to you I just is know think it, U.S. end had

Stanley Bergman

they very, Again hard Yeah. are tell. going category. are stable; markets the very minus definitely believe to the to We

suppliers. there's the asked May question is But in stable and that I more leading believe be we in had pointed you market out, from that a and in traction our If July, June we're in to hearing direction. concerned. definitely the markets would as April, much But positive and Steven

I I'm going the event, could backwards. in be but do not sure of is there's much inflation. not with any believe There DSO's some deflation, the market

specialty for obviously in but grow Canada, opportunity if Schein in our grow But not core and we lies One share us course, market growing continue our the faster with of U.S. gaining us, to For globally. businesses, want only market to the businesses the faster. our is business Henry which

but markets and into the growth, more a Schein the by these the I to also, position and direction, Henry not services think services. and as products more of enter our products future become areas but of efficient these only are to providers driven prospects market course, in the are of So, advance positive strategies other all and to much higher-margin

Operator

Rich, come from one Sachs. have We for Goldman That question. Nathan of will line time the last

Nathan Rich

taking for thanks Hi, the questions.

know I of margins just higher-margin you're rolling businesses. of for comment I in what was ones up still expansion. quick rolling could the tech quarter. some are kind on two -- the Steve. the Gross in you nicely drove Just wondering if

the So, you Dental kind just to you're seeing performance quarter. the curious could Medical of trends those the margin if And how in much on businesses? margin and for contributed comment the of

Steven Paladino

Sure.

the for Nathan. question thanks So,

at improvement with were gross virtually One. Technology or Henry If completely the margins, venture you joint gross percentage look of margins driven acquisition driven -- was a Schein the and greater the overall Technology by including

note incremental to also important expenses. that came it's that think I with

expansion is margin So, not expansion, margin the when the from you at business. business operating Technology exclusively look The came opposite Healthcare a Distribution operating true.

a operating by Technology, but little margin margins by gross So, complicated driven bit is it's there, Healthcare but driven Distribution.

Nathan Rich

relative seeing quick of about helpful. of you you what's And delta we about the being to as Steve. that kind talking of be June talked Okay, that's you're very a that's -- magnitude you're thinking When should and of April July kind strong just area kind the about follow-up the volatility? month-to-month

Steven Paladino

Yes. magnitude. It was the quite significant

consumables, If to were April you look June May down grew and June. was May at and North actually and positive from slightly American

So weakness turnaround and April, that big a between June. that versus really we May saw

after to isolate bit it's of a three why a but just in we that's pretty that we that have saw hopeful where decent consumable sales. hard one we're April again weak, because months was growth again an was. And so So, it anomaly

Carolynne Borders

questions. take to ready we're Holly,

Operator

questions. there for call the further you this turn At you. to Thank time, I'll comments. no are closing over

Stanley Bergman

operator. Thank you much very

in are call, many about of I most today's the serve. close Dental like would Schein we and opportunities excited Medical As global we we and that reiterate to ahead future markets Henry

and are XXXX our plan. halfway through We XXXX strategic XXXX,

only we position in the footprint our markets, our and the Medical both as pleased to made quite global We're we've and grow share share whole our and nicely. and quite key progress advance moving value-added as with market market the of initiatives, connections not and services of value-added important core terms profitability, marketing That's Schein business. strategy to services, in our along growth second the area Dental

our own. suppliers, brand our Henry of the we advance and same differentiate make provide brands, Schein, Dental specifically from Medical customers of that how value time commitment understand clearly that our is the market areas, do, our in we we to sure what course, specialty And the then, position what our at to the and ourselves we competition,

So future. very, very excited the about

Of our course, earnings next please or Relations when you XXX-XXX-XXXX. we to have if Baird further look speaking report to any And September forward again you in Borders Conference Carolynne questions, November. the at contact in Investor in early Healthcare

a summer. you. have very of So Thank the rest good

Operator

Thank you your appreciate We XXXX quarter for joining today's second Schein conference Henry participation. call.

You now may disconnect.

Henry Schein (HSIC) 6 Aug 192019 Q2 Earnings call transcript