HSIC - Earnings call transcript Q3 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the Henry Schein Third Quarter 2020 Conference Call. At this time all participants are in a 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. to Schein's host Relations. Vice like Carolynne today's now Henry Borders, President would introduce for your call, I of Investor go ahead, Please Carolynne.

Carolynne Borders

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

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

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

such their may Schein's are company's of result, As Exchange those filings. forward-looking differ entirety a Risk These by performance in materially qualified the section cautionary with forward-looking Commission, Henry by statements in those including statements contained the expressed the in from and the Securities statements. filings in indicated or Factors

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

limit respect found the website business, corresponding of Our supplemental comparative Reconciliations the well. are section Exhibit the of after performance, with as regarded Henry the or no Investor a this this and the our any GAAP financial during We be events call used allow Please GAAP supplemental Relations solely Q&A performance provide of non-GAAP metrics to a The this single listeners question November is should of measures said, a XXXX. key date call the operating today's many I business in and the like in broadcast, yourself where in vary and contains obligation for GAAP remarks to one B conference Bergman. possible can for Stanley information investors allow hour as have of include Investor with non-GAAP business. measures website between a results enable financial live section by management purposes measures. that our press we replacement for certain to to financial call. time-sensitive Relations follow-up the be of and that question revise about date as periods circumstances and to non-GAAP our call. is over comparison to the believe the of as financial presented non-GAAP and available between in our for within reflect statements undertakes to financial forward-looking turn informational as information allotted information These with measures And of will conference update or would and that content release, Schein greater may ask independently call results. to which useful both of transparency XX, of items only accurate not

Stanley M. Bergman

domestically were and and of of and many chain in supply the of Good XXXX customers products, customers. as I demand thank experienced PPE morning the to of and call. materials much say, shall -- we challenging internationally of reacted year offer. we for other to course, shortages for in suppliers you raw the say support today's and to and Carolynne, for Team suppliers. an throughout disruption caused Needless that increased our to and calling for for particular well, our both work unpredictable extraordinarily thank you Schein has business sacrifice and for pandemic to products continuity the The been marketplace, everyone, team, commend

economy they then continues and long-term uncertainties to of customers. COVID-XX to of have a and to the the many in place, emergencies, in offices access returned to the medical XX.X% challenges year products. that supported reduce EPS that rebound whom that into and present COVID-XX quarter solid on our global crisis, growth we remain expenses, work a with to strong the This care. strategy resulted the customers our and second late team in as throughout operating liquidity. ready hard to restrictions for pandemic safe, strong the The quality COVID-XX and clinical in challenges were X.X% and provide of we actions Clearly, growth dental to deal We basis. non-GAAP earlier result severe by a we the sales dedication the their confident faced related were while third As subject and grew a sales sheet on by GAAP coupled driven basis PPE with balance prior the of continued with began and in significant the various over took quarter diluted year assist a

to expenses. EPS our the strategy to in in have of Most reduction manage helping the as efficiently initiatives temporary our practices, noted these as the we profitable growth As We committed various earlier reflected remain long-term of for Schein well-being also growth and disciplined practitioners now -- is success providing operating on while the year focused our our noted of customers, driver of ended. QX the the took Team care company. expense reduce that actions quality

as of strategic a significant believe capital in longstanding pandemic our started acquisitions. time. environment flow to We increase balance have we activities. our the the maintaining this program of Given operating over strategic conditions goal strong sheet business have we and continuing we to that with macro allocate opportunities posed a plan cash onset now early with have the Yet global resumed of of improved, these year, challenging support

of with plan will plan will XXXX in well we our having As having -- I prepare -- plan through our for of redefine mean, strategic we refine with XXXX, XXXX. strategic place our exit goal the refine strategic to we goal the

the dental developing focus on patient customer world, into of including initiatives, penetration advancing key centered number including continue globally communications, business medical organically expanding to include technology geographic prosthetics, will all interoperability to digitization acquisition, globally solutions and and offering We as including through devices on expansion the which and a well. specialty our software of increasing our offices our and and segment leading dental solutions advancing while medical business

maintain, including team, PPE wise extraordinary distribution have remained job price. centers during customer are on Our will for financial believe period to of the and We some the PPE At time then to the of strive a processing as had this throughout in the operational I'll hand relatively SKUs telesales, over of customers. fully general certain markets our and to stabilized performance and business and discuss are and view this ensuring throughout ship of tight fair high our to crisis additional COVID-XX and we quickly pricing we somewhat Those the done customers. orders commanding our Steven higher call current open, this we an has supply received our service conditions ongoing still provide commentary volume of they our market serve. crisis, I'll recent

please. Steven So,

Steven Paladino

Stanley you good to thank morning all. Okay, and

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

Relations for items have that QX Services Please under the non-GAAP to Our B QX QX today's of Investor included website. we and XXXX represents a supplemental Covetrus Agreement. in note sales of detailed in our Exhibit XXXX results the release that excludes that sales certain are category Transitional again section press information and corporate

our our intention from last work As remaining furlough we call that [indiscernible] stated and TSMs reduced earnings have all on essentially from returned hours.

necessary. measures to will if remain additional and continue to closely prepared of the take cost health We monitor saving our business

an Turning of financial the COVID-XX of XX.X% billion product increase the sales XX, to for our results, all prior XX.X% September in $X.X sales to PPE compared related accounted the for in nearly currencies. internally year sales with reflecting quarter net this ended our local quarter. generated sales of growth XXXX were and growth

products. also and primarily Although positively margin product we and overall to This found compared cost are sales consumable of quarter. future, sales inventory COVID-XX PPE COVID-XX to the Details in moderate by with the the associated these our expect information of PPE in our and release performance have dental on place. on can the a that was are page response earlier we contained related issued COVID non-GAAP our Exhibit reductions press sales that and mentioned our impacted the negatively also growth work merchandise third QX medical A sales no Investor expect of earnings and margin be reduction hours, related was the from operating X.X% previously was were in offset margins in our impact representing put a on driven GAAP reduced measures XX reconciliation by year-over-year by points a was a A non-GAAP third hours, basis. in basis initiatives of GAAP significant points of will reduced margin On basis, On operating supplemental reduction quarter website. pandemic. Operating decrease contracted such operating adjustments by expenses in the initiatives year year. impact significant of not in earlier a operating as basis basis to results, to as our today. X.X%, longer furloughs, These of most temporary margin XX cost for salary XXXX Relations place prior

effective per tax XX.X%. rate non-GAAP reported for or non-GAAP a lowered effective approximately rate of $X.XX was the XXXX On and rate our tax The third This a federal favorably effective which the for GAAP lower $XX.X settlement, of tax rate XX.X%. quarter compares GAAP to in income impacted the this Turning prior with XX.X% effective third U.S. was rate our with by taxes, of expense quarter by tax year third tax quarter tax compares share. XX.X% XXXX. tax the million diluted was basis, income

been GAAP range the and a impact non-GAAP have this a both basis. XX% Excluding in on the would rate

income quarter quarter last non-GAAP $XXX.X compares continuing net was attributable acquired $X.XX million of or share, and diluted per $X.XX intangible diluted for from per a share. third in from of period XXXX share of year basis, net million Moving million third operations or $X.XX share from assets the prior from to compares the same for diluted per for income QX XXXX of net pretax $XX.X income quarter. million million GAAP per continuing to or with diluted was non-GAAP compares on per operations was the $XXX.X continuing operations the operations income $X.XX $X.XX and The amortization that diluted operation or million $XXX.X Schein $XX.X or share of On GAAP and this $X.XX share for $XXX.X this with continuing net a year. Henry XXXX continuing per or diluted

or $XX For same and $XX.X the intangible million diluted last that to was or million per compares the the per year. amortization first pre-tax nine period $X.XX year, assets months share from of $X.XX diluted acquired share for

did for exchange the impact currency have material not Foreign EPS any diluted QX quarter. our on

the for results me details provide sales Let now some quarter. our on

X.X% with Our grew sales same internal period growth of sales of X.X% dental last $X.X currencies. billion year to compared local the in

equipment product provided sales. Last America a and and consumable X.X% and quarter internal by to North internal merchandise in of growth in sale. X.X% of PPE growth as was local XX.X% dental growth consumable international and X.X%, sales dental merchandise driven sales sales in our growth in in quarter Our American was sales. X.X% dental and growth global was we growth equipment. North PPE Again related that strong dental currencies dental in currencies X.X% Internationally, growth year-over-year dental PPE included as this with merchandise local well contribution decline COVID-XX dental

to well. had other products that For include category expanded we COVID-XX QX as related

thermometers. Solutions Test nearly product On year COVID XX% to year-over-year growth COVID-XX includes was as QX well XXX% purposes, also comparison now that in increased compared heat by basis in and QX. as related and dental prior the category for sales this PPE So

sales North with of solid Turning potential to over higher margin dental specialty products local the growth increased in America currencies, category internal at We specialty long-term. strong believe had by dental product QX in growth XX.X%. global X.X% products, in this growth very

medical year North XX.X% XX.X%. $X billion the of period currencies. in XX.X% in internationally sales local America to or a Our XX.X% and That growth last XX.X% compared grew same included

by prior related COVID-XX were related the by year. continued strong driven sales COVID-XX results increased XXX% for sales and compared to approximately products, medical medical Our demand products and also PPE

purposes, QX was year-over-year For the comparison growth XXX%. for

Turning patient was and increase in technology than internationally, generated added compared now same year, technology American impacted X.X% and total currencies currencies Schein by currencies local lower to services local services sales flow, segment, The declined were lower technology decline the Henry which in by X.X% slight sales declined transactional sales X.X% last $XXX.X added currencies North period added prior the services services to decline technology an of sales compared local value year. reflects and revenue. added million historical our to a in in internal third in which quarter, in in of value one resulted local value and of internally X.X%. and value by the

lower Additionally, our financial by impacted revenue sales volume. services was equipment negatively

discussed first financial the call our our impact a we we in covenants. response to business to As means earnings share on repurchase suspended and restrictions temporarily program May, of to operations in our to preserve also on due COVID related early as QX certain cash

As today million authorized environment. has for in have repurchases significant common of liquidity Currently, this financial of Henry future providing flexibility and Schein also $XXX.X we challenging stability access stock. to

in the primarily Our million working prior the operating and to due quarter third third cash increase both $XXX.X net quarter The capital. for that of $XXX.X the to higher flow million improvements from continuing was income operations year-over-year was year. and compares for

million a pre-tax primarily includes in closing opportunities reduce $X.XX costs. costs, diluted per facility expenses, reflects severance and QX, $X share. paid, As drive previously This mitigate recorded and of disclosed charge part of XXXX restructuring we initiative, efficiencies, charge operating or stranded restructuring to our

We surrounding year. continue my are guidance. to I uncertainty and to Again continued impact pandemic initiatives we guidance business conclude of financial COVID-XX expect of its time. continue to on topic this to our our due through the financial remarks the the restructuring the providing not at operations, end

from reduction also growth As product third merchandise future, expect ended sales PPE although and consumable moderate sales now expense to COVID-XX in a dental medical positively we impact quarter. reminder, and sales have the about overall initiatives to most we temporary the expect other related and

that, I'd call over like the turn with to back So to Stanley.

Stanley M. Bergman

you, Steven. Thank

the pandemic The patient -- on levels. from markets throughout the to pre-pandemic the France U.S., from The Europe in October, the COVID-XX the with in pandemic impact quite business In recent from third actually home Italy. consumable traffic. Let's with Australia, China, the to particular to starting Canada -- New and continued the we -- recovered slower almost in quarter, nicely end review actually was quarter where pre-pandemic and performance the pandemic growth our and also has weeks strength dental. Zealand, merchandise UK led third of the Brazil returning in levels and exception the saw to

driven COVID-XX related merchandise PPE respectively. During the XX.X sales in in of percentage quarter, third quarter product strong second approximately The related growth the global and percentages XX%. currencies COVID quarter America local and COVID-XX our as consumable markets internal sales and international of contribution sales the both approximately for growth prior mid-single-digits to were in and third at the North were sales was grew PPE by range X.X a dental in dental which and to was this the XX% products. in in

continue high practitioners control environments control, portion implants, safe expect handling specialty well, available our in comprised there protocols very by is our control and product to sales double-digit small -- sales were in essentially segment to internal third traditional third local quarter. equipment in for growth during extremely Sales the actually base flat. high categories, adequate the experienced third technology some albeit quarter sales in meaningful deferred We Within the and for mid-single-digit products, equipment particularly that both whereas by XD a growth orthodontics of equipment imaging sales. States dental and declined that general a good sales On experienced an traditional necessity recover. approximately of safety dentists constitute and quarter in strong North third led continue internal increased for and sales well, are as both as and forward in the America, XX%. percentage provide Also these we these in In with sales that in endodontics, offices year, Dental implant infection quite those of sepsis quarter to in local in the laser going growth last Europe sales quarter and during in currencies abroad offices. where sales CAD/CAM which performed technology versus and businesses actually our in both a International practices to continued PPE we declined endodontic this a remain a and amount currencies the equipment was strong decisions. PPE North is infection dental sales United patients the equipment during dental will feel investment XD and America, decline.

As The Vanaman and air they relationships to seeing solutions efficiency there degree from at with protocols. of the we clearly practice in we I clear where we safe particularly environment. category play. Isolite, but mentioned increased in that quarter, patients seeing other new exclusive safety addition [ph], also are continued protocols have interest in solutions efficient including important enhance be more It's from are time, believe getting customers adjust In heightened the air. at Dry last this will productivity, more that is in practices to surgically as patients of RadicX the interest is hard to the and manufacturing determine in we particular, specific efficiency a equipment partners, look offer are which driving clean practices And and the both Shield. purification as see

markets with quarter PPE relative of by progress merchandise strengthened summary, in to second sales, a in products. month of all improvements third serve as the demand COVID we driven the So quarter substantially month through and we obviously consumable dental to related the

This to we might Switzerland in the Europe, are And as of pre-pandemic Belgium, Brazil. continue at countries, also North Australia, China and in their Netherlands, patients returning and and different rising in patients to I latest April very it the April. visiting practice. is to very Dental encouraging, part The for consumables this and open what very, Very open European dental back for are growing remains. survey are well the the was completely Austria, and U.S. are Association the Poland both and degradation These of dental dentist. Germany, for equipment America, New any is practices different patients COVID-XX approximately approximately are not Czech point? the where demand including products, material the volume. practices France, to visit but patient patient by This down is Zealand volume. Republic is Brazil, survey, add, pre-COVID-XX Dental shows Despite UK, X% most number versus Italy, levels. in ADA of the So Spain, America published for and practices North XX% are essentially a again prior in diagnosed American care. cases data showing that clearly,

I the careful reading continue in providers. of couple that think patients is clear being It as a for viewed of public not States, United be and to we swing in have e-claims we percentage view we dentistry have Europe information as broad can Europe, health Schein’s also are into finite of points. set Henry important that return dentists the important data anything that as detailed do procedures. although to the show see in a care

exception course, the Europe essentially actually, regulations in. dentistry, is the visits open older is the to were been But markets have such that with been UK have of Of the rest restricted. dentist the for

current in stabilize continuing in would overall, So the we're others. to seeing. markets is improving dental what moment, we exactly characterize this as areas At this some and end

W. a more open. whether of a this rise, any geographies quite watch reason are shaped and this should stage, practices at we utilization recovery stable recovery COVID-XX the whether seems But not becomes we into all The go particularly cases patient continue course, dental as Of W. to we do impacts as why see V

Schein. shipping, dental only TDSC priced by announcement will benefit Association online members. the Henry medical organized course, on was focus option on let faster from service comment pricing TDSC’s on the enhanced by full delivering and customer State seek Supply dental our Henry for course, products will choosing requisite two Schein’s The a the which Before These launched Company and of maintain TDSC and had will, service experienced aimed complementary with to model, for for and dentistry distribution build the to core wide telesales providing supplies equipment, sales Henry performance, improved only TDSC field business, they are when offer varying on Dental highly and customers approximately practices. consistent teams. Association joined price originally coupled we members with marketing TDSC offer of strategy obtaining has XXXX or full a level Schein. and of distribution supplies association model, product options to Henry equipment of California has delivery recent service to offering move Dental our consumable Dental in that will including maintain members me of competitively segments. customers their channels performance of and software the small low backed at Schein merchandise, its competitive the portfolio, of order coupled expanded online dental range services our $XX million. purchase are technology

high an much an Schein, is touch advantage offering those to model wish we're take customers that service we but very a of the a to pure online such So at subscribe of offering. to that alternative model Henry

quarter quarter COVID-XX Now building and pleased let's team sales sales business. medical medical in growth also marked strong move This track during this achieved PPE record third $X products. in medical The and we the the first related which extremely was for teams with business. are demand the our in to by billion driven medical our

to We for government are distribution. were beginning allocated to see being that improved the solutions COVID first access tests initial to

As continue expect markets availability we the approved for as private occur line more are sector capacity to and tests testing we with as allocations into in move manufacturing increases. practitioners to improve XXXX further solution to

XX% in as quarter. sales to and global approximately of sales PPE in the and tests. for In very point other COVID-XX office second to medical related the specifically as view percentage the Rapid quarter COVID products it important practitioners the approximately conduct tests words, much care in offices. XX% tests pre-COVID-XX increased from We allocation third are, a based receiving percentage noted, greater as of of who their mid-single-digit

to a and to We that continue both practices related a including create for environment. office staff COVID be as in testing our of will medical undertake and products tests the patients and based seek portion setting PPE meaningful sales sales environment more expect safe

Schein in and the supply specialized to partnerships like readiness that I'd The developed Regarding us into challenges. to COVID-XX history has years out chain a vaccines, with response. chain had potential point outbreaks long supply we insight strategic leadership distribute over of many provide the Henry and have

well We working close also have, these we we relationships products distribution number with with vaccines with to our the manufacturers place our commercial enter contact partnerships as credibility effectively administer these based with manufacturers a recognized on excellent and channel our public well have as of be as of excuse when a be working me, practitioner these also will also believe private and in that I'll office stay as vaccines. We that history will recognized pharmaceutical well the manufacturers. as

business. So and value on services let's our to added move technology

was and third reopen quarter, revenue, Schein’s As one is is e-claims dental and down slightly. card transaction software processing to including the up going it throughout it Henry credit continued practices -- slightly

work, such including by growth managing as through We desire clinical practices. Ascend by that a cloud access This growth Ascend of cloud business plans provided based especially their based practices Dentrix attractive was and conduct requirement of the to Remote are the of I to solutions visits to to was solutions. remote dental solid dental XXXX. practice. or aspects to are Dentrix our software is offset sales have previous the it following This solid in year trends comparing and and offset

One features and Ascend capabilities, the solutions product and a Dentrix a of products. new we accounting solutions quarter, of Henry Schein sophisticated our capabilities, imaging the During enhancements, third including number e-prescribing DSO enhancements number processing centric payment launched in for new

insurance our and processing key payment New online in enhancements to solution. Dentrix bill and management enhancements successful very payment

quarter, time. deliver by the but invest actually continue in PPE summary, automates said the and of performance are full increase a be early the this COVID in driven year board, practice still this of it's products. to little in at indicative more prior our of be is and simplifies growth productivity. is cautious see a while having In very That necessarily the across solutions related unpredictable that We we to said, software time dental that, looking to platform tests very current performance workflow medical digital business, at fourth our encouraged integrated the of sales technologies not may over continuing dental but what this are other and October we with course that, must code in to

move in So an named questions, aimed Magazine's Forum at Fortune recognized global activities we general to in chain care was strengthening part in your the business by lives would in were be the impact pleased which ranking epidemics companies World Schein partnership our a create Henry pandemics. before private List, like the I chain to Change we annual strategy. to and to health positive for to to are role resilience of September the supply the of public Economic saving World through a that in is had supply of XXXX, helping social note the core pandemic response how network at have that

serve grown included years with pleased to Over We that Nasdaq a which value are navigated designed non-financial to sector Nasdaq in and TSCA’s as largest years most among to the is as shareholders. measure focused on our those at we these companies successfully companies of very also special through lead week market were Schein public as to on and and capital, we have XXX dynamics to We in performance respect those important Nasdaq by index initiatives. many Henry a This week the top capitalization. the market XXX Nasdaq named XXX XX by index exchange. ranked changing private generation the be are celebrate business innovation, are after our the the delivering company on listed pleased next companies growth

the of of time since the to pleased are sales XX% and through non-GAAP have XXXX. end of our fact, growth delivered EPS in IPO, annual In we XX% compounded continuing in operations from

to answer I we'd may any those have. you. comments be Thank very and So in questions Steven with that investors mind, pleased

Operator

[Operator Instructions].

come will the with Rich ahead. question Nathan go first Please Sachs. line of Our Goldman from

Nathan Rich

with on and about give for October questions. us thanks for any morning growth Good that to and or starting how respect when PPE you growth well? relative could for the and the of solely think quarter, COVID what expecting outlook, Maybe medical to is due your as detail you're we performed dental and on Stan the your underlying sort with the Steve expectation quarter to third to comments you relative third and the segments rate also products moderation the to in seeing related moderate are

Stanley M. Bergman

So The question. fact, October of in different the at seems dental for with have COVID in September, the the we markets diagnosed concern seeing thank impact abroad. to even April, has very number said potential most practices and a higher. again, the are little patients like both of maybe rising that, the moment Having patients. it is you continued domestically trend of

at markets COVID much rate Some a and before others than down. even increased greater

pretty across So we right business seeing said for now cautious in the a the seems patients. Steven. just on place Having the of want in to same latest board diagnosed with good And the medical be practitioners. dentists data context that, the patients.

Steven Paladino

additional backlog caught us forward. of some a that -- may points, during a couple got QX there demand of continue that continued -- we bit add QX a maybe patient think not of was I think bit I Yeah, during going that of up would

of there order initial a to related sales taking may that same to at practices think and restart continue not start related practices up lot COVID rate. the was to also PPE and We that

contribute also the us So being cautious bit more to a those reasons outlook forward. on going little really

Nathan Rich

two that Steve, maybe adding in secondly, we should of your then the uncertainty topline we you cited, of or impact in forward in quick beyond? And fourth expectations outlook? about volumes COVID kind pricing expect as That's that through talk could have respect counts an on clarifications, is the to impact PPE helpful margin to rising the and case and weeks your seen in the just recent quarter just just you going and the that think you magnitude with the

Stanley M. Bergman

that, September. in patients down in Having significant percent. Practitioners whether consistent sure a said see I'm that to in that, a significant diagnosed be the to Europe in don't volume to both is time, data in we the United and is practitioners. not. States increase caution couple what anecdotally, of relates but with Steven. in don't reduction ADA the we this or We said saw change the at moment. meaningful a visits seem Having see not seeing patients at our same

Steven Paladino

supply. than we Yeah, that pricing QX that continue assume products certain cost really the and significantly was significantly primarily really think shortage what of QX our was PPE I for was. and to typical would and as moderate. in on facemasks elevated was will there products, Back And was early higher related a pricing costs

There As supply. one to to short is supply pricing category, product continues in though, most beginning moderate products. improve, of is is those on that that now

tell would this hard short how nitrile it now But to be are has So impacted. examination very in supply gloves globally.

would end So I say we would will cost in pricing those which increase spike our the that products COVID PPE on would have for our and users. I a products, part, see pricing But for somewhat related. moderate to of think turn most us may in

Nathan Rich

questions. thanks for the That's helpful,

Operator

come Steven question the of ahead. with Barclays. will line Valiquette Please next Your from go

Steven Valiquette

morning, Great, questions. thanks. thanks taking and Steve, the Good Stan for

asking flat few was here fairly gross mix. likely down So the due It on year-over-year, questions just to sequentially. margins. was It a

So XQ greater if higher color lower I margin simply was guess much any margin gross versus by just impacted curious in mix medical sales how I'm on margin of dental there's sales? the

Stanley M. Bergman

Steven.

Steven Paladino

release we even at there high was driver that most access for suppliers to related we the mix, was did to we remember cost. product press inventory and product and products prepaid main And important related you that selling no was our the because it's prices a such PPE on time the it's that in product customers main our outlined that, pricing. critical because as not in access then, And negotiate absolutely back The a for required difficult increases product, because Steve. were our quarter. a to time decision was made it saw Sure, unless to we product have way during significant early where that buying category. driver not to buy in product some At adjustments of

that of as although on because well at contributor volatile a was go the that supplier margins the margin, of hopeful of lot other is smaller the pricing side. on some also that market also side predict lower one to. a impact also a the purchase the quarter sale I'm And away, rebates, both that still that as volume also smaller less some difficult were to related they we'll selling So see quarter. were for it's were because was really biggest prices inventory very PPE impacts, was -- adjustments the the There in on contributor. that

of that. we and have just wait to kind see So for

Steven Valiquette

appreciate color. Thanks. the I Okay,

Operator

of Please Your come from with next the question line go will Block ahead. Jon Stifel.

Jonathan Block

just Great, Stanley, thanks consumable you, if morning and of that you start dental dental some compare figures the maybe think I and can with ex-PPE COVID and gave, contrast you guys. to good but even number consumables thought North were that dental a up XX%. in flat, strong implants I up basic very you consumables was it XX% caught I specialty think mentioned like the America,

the So that between then consumables? talk can I've within a And just maybe you to follow-up. two just if got dichotomy

Stanley M. Bergman

it's question. good very a Yes,

So the products, flat. take COVID take out But you PPE and that look you because out medical, is related it's the sales dental testing. sales related if if or at actually and the core for within all consumables that category about our and both you PPE sales,

looks that's we So, third October for quarter as it's where and we've in where like well. been that's like -- the looked are it

are with Patients visiting situation. the same that's basic really physicians. So, dentists,

-- But diagnosed that, no So the we're said Having tests. as comfortable busy. given clarity and increase there is course, December in there's of they November to that in could will what remain very quite happen another situation everywhere Very, UK, to have to question? different in of clearly and you see an Did the part open the is patients practitioners than other are May. April in early which anomaly. the really no

Jonathan Block

and Well, XXXX steadily, basis been I and steadily, about you Steve's pretty had points one, do on gross follows margin, so you. XX% or pivot, Steven running XXX to thank you down up question. it the change and another have XX XXXX. throughout on will I to XX%

most sales, Is margin off about put think guess certain that but trough not of pronged PPE term the XX.X, importantly, this you'll improving extent not COVID recapturing always PPE do in maybe two question. gross I the XX% and/or part longer call that somewhat forward, we have bucket consumable lower because there nature to So, margins gross looking margin on to it, in sort and just sales? if permanent to a XX% a Thanks, a guys.

Steven Paladino

commented earlier and products, Jon. consumable relatively COVID That the of merchandise PPE includes Yeah Stanley when just were on benefit sales, flat. excluding the touch Jon, positive let me that sales question specialty

So that's it's consumables. all that in embedded because included in

next will PPE through. going there's still margins on volatility to in nitrile for pass lot and limit gloves current in -- I said, related costs as a it's your show increase that a related the So, a significant and question, of to COVID us one we there's still what could probably and is

So sales positives I'm drives that give margin people buy has buying gross too on the it's yet growth, really and much and side just not it sell to PPE and because all volatility additional and really guidance drives there's on related. ready products on side products. it COVID the

huge also have don't entire has in margin. it may lose the If the sale, you you volatility products, but

with positive positive. to got you've take So the not so the

Jonathan Block

color. Thanks Understood. the for

Stanley M. Bergman

And specialty $XX business high business. Jon, the the margin more just side, done it But the and compared fourth going terms little add well, in those bit certainly total is that to But of billion of in to business of terms material. a important. quite light sales, specialty quarter. the on in third into course, profits, a not is approximately the businesses it's have quarter very

of material of of terms it's a in contributor. the it's profit, materiality, not in decent terms terms overall in So sales,

Jonathan Block

Perfect, the color. thanks for

Operator

go line Please Your ahead. Johnson next question comes with from Baird. the Jeff of

Jeffrey Johnson

up of on could. Thank Jon's you, good I if afternoon or questions, good morning, both guys. Maybe just following

little the -- put so. that mentioned, was where general here consumables been was or down we kind between there well. get the to nicely X% if as are is a general Is consumables that volume quarter, bit low of or surveys of XX% at have with know side, that's about that you that as Steve, when ADA consistent positive those of from you showing? talk here we survey you between of a dental going where on falloff been in maybe quarter, surveys the So slightly little kind have our from Yet down the kind in of normalization what would showing of positive maybe some mid-single-digits at specialty that somewhere kind and for down

Steven Paladino

that me just on the let estimated Well, survey traffic, are talking traffic. XX% or they ADA let patient patient minus clarify, plus is me Jeff, -- about

are in on bit better procedures So that a the reason, seems than PPE basis, sales being we doesn't it think some a higher that bit of a factor really little based for procedure volume also because historically. actual sales is volume done It are additional that than currently products.

XX% traffic volume. is is higher XX% So sales XX in volume sales -- patient sorry, than in the higher

second you make there Jeff, could so repeat clarifies you I if question to And it. hopefully just just want that had sure and a

Jeffrey Johnson

I like that the I intensity things over the and about No, are than XX start a side talk performance surveys drive a a a it said, volume revenues here if higher question contributor dental in XX little because the I lot and we showing least that like getting wouldn't quarter? normalize that. mix of higher is points at to are as of my falloff time the think the of kind so I dentistry be bit to was been forward, of as down little can back just positive volumes, it bit going of in you and it's last towards or But such understand -- that a know revenues

Steven Paladino

It bit COVID. products in increases things demand may pricing think moderating that's PPE a on some a continue. for up should other positive I that’s pent correct. fall of Yeah, off little also, test again, little this It's It's that of is that bit. results few a

one it's things that. thoughts just item. It's a think particular few on impacting don't our I So that are

Jeffrey Johnson

the side, last trough and then if side. Fair gross margin at just were enough, margin the on Jon question we margin on asked

from local You side. PPE the did talk also in cost more talk these away markets I you've about But temporary some about sourcing local that's savings for think and markets. the past, going think I some of OPEX on

up trend up about the two see XX these we in levels the do months, So over down levels, or call down from margin at it near-term pick XX next side? staying these just levers, as they there we can the think back those a is on to margins

Stanley M. Bergman

volatility margin there's a many think know to nitrile on pricing guidance to just means shortage worldwide too we and I really and this. give much that what ahead I is specific want Again, us don't we that us, gloves, but happen speculate too don't on do to with still -- for Yeah, to know going that. there's what's of exactly

at really can't those along time. So, this lines guidance we just give specific I think

So better QX hopefully insight. will we have in

Jeffrey Johnson

understood. you. Thank Yeah,

Operator

from Research. line comes Please Steve next question of Your Beuchaw Wolfe with go the ahead.

Steve Beuchaw

here. Hi, thanks for the time

piece that and than a might flat So of be beyond, of lot XXXX getting there's the you floor PPE progression then asked line. we XXXX, even excluding from the we lower about you've parts a have we set business, that's if about very is middle it's a say, of and for been some. if of What in parts, pandemic together and about model. what philosophical. when I into revenues elevated is just related sort even got all the tailwind to an a But benefit you would base think can important way the lot try questions take a COVID and talk there as the probably it XXXX to think just of for planning hey, to here? you isolate items When let's a top get But

Stanley M. Bergman

People how increase. the June, and recovery in safe. occurred there's fact starting business, that quite will the specifically in quite return that optimistic to dentists the see with were dentists are that of in strength and dental fast We remain to offices given continue in the surprised huge the the dentistry want remain optimistic that we trust a business,

many I rate test of high COVID data but offices can't up you the we for fill quarters how sure for down, to to comes will the XXXX. continue say expect as dentists think the data So can

XX% back will available as normalcy get is effectiveness was the of when But number with how time. dealing from it like where XX% think getting because that. vaccine to the But of to and I depends, and this the good that a on the XXXX looks based inefficiency there, they It of to can at seems are office think -- dentists control, the the much middle into, we are it think on I all we course, of of it in better I effective in availability. expect be. number XXXX. the And up go vaccine be more we'll will for build actually testing say,

very is for that example, return China, our and in are comfort We and there well. where markets in extremely Australia, dentist to comfortable New People Zealand. rates to seen have going normal such specialty those are businesses, the as markets doing

efficient. rates the relatively timing it the very that or to more next in But all it's middle vaccine you in will But assuming return less year, that. kicks is we that are a hit again, hard precise of give the floor. enthusiastic more and like normal to seems So of on we've we sometime

Steve Beuchaw

wondered the transaction. Stan, a TDSC one Okay, after I calling very that about it acquiring minute follow-ups, perhaps a a here? talk one I significant that I've on business could bit could just a wonder that discovery. little a what spend Steve. bit spend a savings if TDSC more, that minute you Steve, And as pretty it's the more with of you're the not of that for market for effectively that's just after segment Two you market realize segment you be Stanley, go on if part going could of fair. cost then, more of the quick but been customer might you huge little I you're acutely, can the here, definition portfolio

dollar cost permanent that to money what have effort? might be a certain spending a going, you discovery a basis into has How We've here been might things Thank amount progression and had maybe on points us COVID close you. window travel. there. So, is given on where we that spending or are like putting how to obviously money stop savings from

Stanley M. Bergman

Thank you.

percentage it market Schein non-high-touch, see way, that market there's So, was a the a that being TDSC. the now has of went question to on non-full-service, transacted And been the telesales Henry is ago. for let’s put couple the that XXXX. relatively We decades very been good constant business again defined and of order was e-commerce to mail in as this end what of always through up was originally

businesses, relationship increased. businesses, increased market would the online own a had increased. only. online dentistry digitally of were only where digitally only, e-commerce always business COVID that Both with like the transact the part of and website business We've is e-commerce and there it like the strong transacted period that organized During just to a volumes all our only

marketplace. we made alongside to the Dentists the an investment And Association so only California online enter

this think us the through part options abroad of way service we significantly other investments provide end States elsewhere. United by particularly channels, as it although faster invested and growth and the rates in do alternate and the until not and we have that than for are full dentists is exhibited part both in the the We to to these United States, important Europe service channels market in to the of in XXXX,

from service So models and same the keep we'll we the both by them will side two distribution network. side

Steven Paladino

expenses focusing we able So think save and Steve, saving be on will cost areas evaluating on, there's still two items, primary and we're so we that to on.

even travel. just not also includes broader meetings like than but It first conventions, it's The really travel, investor things sure.

and conferences, call I similarly conventions virtual is with that knows everyone more think investor items. on now virtual this meetings

believe So we for Things video there's to travel, certainly work. conferencing there opportunity travel. reduce like significantly certainly

people skeptical in that I many realized think cases as really to I it's were and think in previous the as not this good bit who good a person, it's flights. little cancel while

what And But costs, person on recognize a will real longer footprint us. certainly opportunity the little by detailed that's that will amount bit estate to second longer both We or one Team permanently home permanent that real reduce that is our that final those lower cost on fair But one a needs is. estate of some take So from have that we review there's evaluating. some will the of the opportunity members who And think still area do that answers we're we doing savings a that, forward. be evaluation. But for area either either or believe on footprint, but that the work benefit Schein still don't we they going those be. we're drive person hybrid basis. believe to a determine over do can certainly under just will a whatever it are term

We yet have quantified not the specific amount.

Steve Beuchaw

the you Okay, thank for all there. help

Operator

Our Santangelo Please final from question of go ahead. will with line come Glen Guggenheim. the

Glen Santangelo

Stan, question. around something my about on the taking last just for I thanks opportunity. quarter vaccine talked to we follow want up Hi,

I like. early think, little look was channel? at on sit potential given Schein get will bit there would that Henry you speculate you and Henry ago XX here role any for what the to too it successful that a you maybe what days to could if Have launch thought a could more play thought where supply a closer as maybe we given to vaccine hopefully the and of Schein be

Stanley M. Bergman

view for in administered Yes, the of at that there Since our is once that it Glen, some role is it's offices Schein think the point outside expected, a be distribution. will I Henry and least, vaccine will be in vaccines physician workplace. at government

We very care health have a nice business. workplace

think logistics have to of will administering a And the initial that we these or become vaccines And commercial testing extent, government greater the operations, Schein we're party general. the provider expect a in as as role as we've Schein have when and through of of manage greater Henry third takes tests to government sector a role of that that with once tests allows a testing receive had to the available well. through allocation return and we that normal distribution in play vaccines will so private vaccines for using Henry decades. period less these we Likewise,

Glen Santangelo

follow-up than different in the just the trends can more, all you're and I kind DSOs stepping practices the to customer of mix two one impact from questions in any discernible any utilization, if longer classes? between different current environment was the very this independent is around the performance forward, maybe going just term of environment if seeing back near-term I curious Maybe

Stanley M. Bergman

in basically I base that's very to the a a The three extent dentists. think midsized or XX same quite of practitioners DSO we're private practice one The practice or trajectory. But is that practitioners. two view, a five greater long, will still but there growing they on to solid last has of secure runway. doubt four extent. I can growing to practitioners going the or is lot maybe the survive my in

practiced. don't think upstream I in difference marked a that there's any the over be But moderately trend it a years seen continue movement where is in way, and to will and the continue likely the we've So dentistry in grow moderate to will way. has moderate as

So dislocation although I the of will don't continue will upstream. significant trend where place, any dentistry see take

Glen Santangelo

thank Okay, you.

Operator

closing the back turn conference comments. now I'll for any over

Stanley M. Bergman

Thank operator. very comfortable much, our with everyone We feel strategy. you very do

customers, them testing will practice both we in is our needs as can markets, and provide the a and will be more model are forward to that necessary believe better they to more going That in that comfortable control medical through important helping our comfortable important so physician offices certain service needed are the provide become very that We model. globe hybrid the we our only strategy efficient dental we added that We offices this serve digital that provide in can continue good more operate services across infection will the and a is offices we clinical PPE value that and dental full going forward. and care.

dental very overall, we DSO equipment backlogs the solid equipment a We compared back numbers in United also our in is throughout. as in on fourth as last DSO previous had comfortable footing perhaps the solid business market to Europe going that U.S. a dental in businesses footing. are may strong we're States But slight the decent with There on dental year. the quarter believe and a year that our be

any on towards business Henry of So just value, we is as software comment Schein and very moving great to questions believe excited but that and well providing are comfortable more with One this, with opportunity. cloud based

to Team I So extend globe across thanks has again let team's to of once the been me customers, efforts and started of nothing for behalf Henry their the members Schein short remarkable. their commitment where our on Schein unrelenting today passion, end

well due is products, solid noted, for Again, to remain as emerge the pandemic. care acute there to optimistic As and to setting. clear our we we it build are a physician believe our shareholder breadth COVID-XX positioned, future as for from And the value it ultimate I is we Henry and relates to the that businesses, procedures more based from of Schein. of as momentum we quite support services, dentistry about practice move demand care with setting of the the

So to to speaking next on Thank you. our call. you thank joining forward you today look us for and

Operator

Thank and all gentlemen, that you call and Ladies today. you disconnect. for will conclude your may participating for now

Henry Schein (HSIC) 2 Nov 202020 Q3 Earnings call transcript