HSIC - Earnings call transcript Q4 2021

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Operator

Good morning, ladies and gentlemen and welcome to the Henry Schein Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s call, Graham Stanley, Henry Schein’s Vice President of Investor Relations and Strategic Financial Project Officer. Please go ahead, sir.

Graham Stanley

Thank you, operator and my thanks to each of you for joining us to discuss Henry Schein’s results for the 2021 fourth quarter and full year. Chief call Chief Stanley Schein; April. Finance Executive Executive Financial President the the the Chairman Steven at and on Ron Officer Steve’s Vice and and responsibilities and Board Officer and be Chief me Accounting today President, of who Bergman, are of Paladino, South, Officer With Vice Officer; will Corporate assuming Financial end of Chief Henry as

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

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

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

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

where certain business can are comparison financial press the between transparency which in presented our Exhibit between may key conference corresponding our be GAAP financial Reconciliations the financial section for Investor GAAP of both our business. Investor not B believe for management business, performance measures operating website. is results regarded We the provide and metrics vary purposes section and independently also measures in the These and found of to replacement financial website of Relations of of in be and allow respect Supplemental should non-GAAP Relations GAAP of items available periods Information and about performance remarks a in release, non-GAAP today’s call with solely the informational comparative as and measures. enable measures greater information results. with for non-GAAP will investors used our non-GAAP financial useful Our supplemental include by

the to of many only allow February content revise conference date to circumstances yourself this listeners to reflect information answer single date is time-sensitive said, as undertakes accurate live the broadcast, forward-looking to update limit Q&A XXXX. we or for With question Lastly, call the questions Stanley X and to no to I Bergman. Please XX, statements this that like follow-up Schein the of the that possible of during to the after this events over call. or as Henry would as contains have any allotted turn the call. hour call within of obligation

Stanley Bergman

you, Good us. you of morning, and thank everyone Thank Graham. course, for joining all

Let the me take the report effort full the COVID-XX Team pandemic, over impact this the past extraordinary an results, XXXX exceeded financial expectations. fourth outstanding X year pleased including thank to team’s that quarter of excellent global for Schein we are years. Despite our to opportunity

acquisition Our by in year well fourth excluding X.X%, or also under operating margin of quarter local transition reporting expansion the PPE equipment COVID-XX as strong internal sales and growth sales X.X%, sales XX as of results Covetrus growth were basis protection driven of products to points. prior and agreement personal related when of currencies while

So, are operating we we our margin with and our expansion. with results are pleased pleased sales

that latest view We businesses. provide topic XXXX on on financial have guidance updated based will a additional in our this details Steven of our moment.

board. generally increasing strategic years. the The reflects XXXX excited every strategic to a we XXXX and guidance present by strategic review of X plan update plan board. our updated recently updated plan an are We have XXXX The We received our our execution recently XXXX well also strategic was to businesses to completed very to and our the profit have sales Dental operating priorities strategic to and exceptional value-added growth improvement. our in complemented Specialty of improvement which contribution our technology businesses, distribution first, strategic key plan: customer higher overall in by the products, our higher operational and experience two of services leading margins. contained This and continuous businesses was

products businesses specifically, technology combined XXXX, and billion combined internal for income, businesses, currency together XXXX, So, our with our our products over $X.X specialties year Together, run-rate double-digits. of services about value-added in of full XX%. represented, a over and sales achieved global combined the these dental at operating XX% revenue low our full operating sales year and of and XX% local of of – services XX%, growth and with of growing margin sales with

Steven, turn made Before announcement I in like to to last call return over comment the call actually Steven on month. – I early would the before an we I over to that

remarkable alongside the as the retirement our needs April the period in in CFO stock early be IPO way, constituents effective pre-IPO we past leader IPO, in the for since Henry work IPO’s Steve Covetrus. the For price most the has years Henry leading in since. spin-off will balancing when Paladino. and credible department which the in was annual it million our and to and approximately Schein privilege period, been Steve XX. January, led consistent in the of as growth been of past $XXX served post has of a joined has the finance and years. business Steve’s resulting to from during In Steve XX announced a my revenue XX% Schein, planned Steve XX the XX XXXX years, the compound

the a who decades. down X.X Of farewell course, bid right to bittersweet colleague worked to has hall for it’s

to However, a and Henry of an remain Directors of Steve will our member Board will Schein. come adviser

in Steve wish still company. Schein to the But is of Henry part his well-deserved at us the be going retirement. he best of All

We across a Accounting in EY, technical a role are worked Olga has And when since the been Ron been Olga has will where who strength from assuming Officer management she Chief by with Officer. actually Advisory Timoshkina, Olga was XXXX. complemented partner Graham, Vice Olga knowledge. a Services EY. Henry and supported be was Steve’s Finance deep in mentioned, our and before at with Graham of has have Accounting businesses be Schein on the Ron accounting and for Chief she decades, finance the Corporate continue will rotated of provide services. will CFO. new two as company Accounting course, our business in as XXXX President since bench Financial assuming outstanding of almost by of company. Ron as finance And We Officer. joined of who Chief outstanding team the team Ron be the most having September side, our will our through rest our the our responsibility to deep

to call. With that, a joining for XXXX will us our financial today’s all discuss and results will our there for and to confident you’ve from Ron. and guidance. done company, turn our thank are on the is for for We our you. review team be you Please, again all Steven, smooth Ron call shareholders. to financial over I the Steve transition Thank Steve

Steven Paladino

Thank you kind very much, words those Thank Okay. you morning to Stanley. for everyone. and good

whom have here analysts. my deep financial the at so results, my you our than CFO, I investment review express more many with calls will this would of XXX years. closely I built to as team I acknowledge conference like I worked in last of over be I’d have with quarterly as other the to colleagues community, to Before relationships with finance the Henry appreciation like investors also the and Schein our and

I’m those you that most. your and I will looking for forward memories chapter, While relationships friendships. it’s those next I for life’s remember to thank

on as of Now, turning reported results discussing be our to continuing a like operations that review to from I’d out and point on basis financial a our results, also will basis. I non-GAAP GAAP

for XXXX Relations Exhibit well website. our results that as Information XXXX B today’s fourth detailed are and section non-GAAP as items certain press Investor Our quarter Supplemental exclude the of release of in in

Internally our X.X% total ended quarter currencies, growth local generated reflecting sales minus with were net the the X.X% of growth impacted compared foreign to XXXX, prior results, Turning financial sales growth up were X.X%. and acquisition exchange XX, X.X% by December in $X.X was for billion, sales year.

or our and in Covetrus was internal of prior transitional as COVID-XX-related currencies sales growth to the well local PPE, equipment, services personal Excluding under agreement, year as sales protective X.X%. products

to experienced. disruptions you supply may for XXXX, recall, increased and PPE some in increased we to chain specifically, due some gloves, As that prices products due

However, sales prices have is PPE since kits driving COVID-XX in year-over-year along products pricing declined, growth volatility the this negative test and with of and those COVID-related products.

an contained products Specialty GAAP adjustments expansion increased could sorry, a performance basis, at XX details was margin customer sales that prior also representing in increase of X.XX% basis You XX improved quarter the XXXX as with A profitability the X.XX%, points supplier lower of non-GAAP our the operating fourth On operating of basis quarter for and basis, was inventory of Operating a rebates. well press release prior Exhibit for On points technology XXXX fourth year. our look of by the driven margin – year. earlier our was today. expanded compared margin in businesses rebates as compared Dental with the supplier and improved of issued

of internationally. to rate rate was XXXX both of the U.S. non-GAAP GAAP the by This compares lower quarter tax The fourth a tax XX.X% tax resolution, compared was for quarter in effective effective for impacted of was quarter our XXXX last Turning favorably tax XX.X% basis, the quarter GAAP for fourth XXXX for reported fourth rate XX.X% year. year the quarter taxes, with last and tax effective rate for XX.X%. fourth our XXXX. with effective the income the in On

$X.XX This GAAP on, Henry of net attributable share. diluted and diluted $XXX.X for for or XXXX. for continuing of share. income with was year per $XXX.X of quarter the share, quarter net diluted income from Schein income share from $XXX.X per the operations the net compares or On $X.XX million continuing fourth from million or income fourth per or $X.XX fourth of to $X net Moving non-GAAP the quarter continuing XXXX non-GAAP million basis, with prior million the operations was operations GAAP XXXX $XXX.X operations from compares diluted per continuing this of a

QX This for acquired per asset or $XX.X the million. was $X.XX pretax charge from or pretax Our excluded million year, same period $X.XX last non-cash compares $XX.X that a that with share. $XX.X amortization for diluted and QX impairment ‘XX XXXX million – was intangible share assets per intangible diluted

that from the impairment the $XXX.X QX $XX.X year foreign QX $X.XX that XXXX, XXXX pretax the That was by and the combined million QX assets year, year was asset per share, compares million impacted our positively acquired exchange of diluted or note this and non-cash per currency I’ll with diluted approximately charges in prior or EPS prior intangible For $X.XX of also full $XXX.X $X.XXX. million. excluded amortization share. pretax diluted

internal period same the had with Global and look $X with starting quarter, the local year. year, our in X.X% now growth in at compared which of details consumable increased X.X% billion quarter internal of XXXX Dental, of merchandise Let’s last of fourth sales of the some local Global for results sales sales increased with the sales fourth X.X% in compared Dental currencies currencies. prior the with

sales and increased currencies Excluding products, of sales PPE internal growth in COVID-XX-related local X.X%.

was last year of Our our in as North growth compared and was both categories. merchandise solid internal American local our growth, consumable QX product X.X% in dental equipment sales well by with as currencies driven

the growth DS had currencies was in Our North products. the American X.X% dental our XX.X% XX.X%, internal PPE received which QX increased of high-tech COVID-related the when World offering, XXXX. XX.X% of well in Specialty at North currencies $XXX.X event, consumable and in growth U.S., quarter internal sales Again, We dental compared growth look Dental strong of compared at local local local currencies. again, sales CAD/CAM bit of boost million merchandise with XXXX X.X%. in Growth or in with a the was the product of products excluding sales products. specifically which orthodontic excluding in from sales in QX Dental growth internal growth with in as equipment American Dental growth local merchandise with were international equipment compared sales products, sales well reminder, strong regen with growth X QX quite construction surgery, in each with consumable currencies QX Specialty XX.X% XXXX. was remains impacted currencies of currencies of remains our year. year local was was growth in QX local really and or in of prior globally. X%, which and a and categories, of – fourth internal X.X% that in currencies. delays. sales with International currencies equipment implants traditional QX X.X% oral prior strong COVID-related manufacturing PPE International modest compared approximately performing growth comp our with products, XXXX, local office sales in also, of which saw was XX.X% categories internal period dental all dental also when a traditional against in impacted by Specialty local sales dental and we strong had International in sales internal the consumable difficult equipment including and products XXXX we prior compared merchandise growth endodontic is year If increased consists we of And sales as the XXXX dental a as X.X%, prior the the in bone

For the currencies and full over were XXXX, to income. products XX.X% our of in with our Specialty contributed million million year $XXX.X $XXX.X local year operating the Dental prior growth

currencies of compared million the QX $XXX with of QX X.X%. the billion international That sales period decline XXXX. that note in of test COVID QX Turning in to fourth during also Global same test sales X.X% in of XXXX. kits, with declined sales and Global growth internal was quarter COVID-related we and Medical compares internal local at primarily sales multi-assay of lower COVID PPE approximately of Global our of in PPE increased and test million COVID driven XXXX. mainly flu products, combination test sales $X.X sold in also currencies were was kits $XX approximately Medical includes sales about exclude and in this Medical, by kits, X.X% the Internal $XXX compared we our local the XXXX, sold sales America The growth a North with in kits of X.X% decline test growth year-over-year. I’ll in declined million kits. If and medical XX% and sales COVID-XX declined

upcoming continued in quarters. the expect volatility We test sales in of kits

Technology growth sales, and $XXX.X Technology growth prior cycle XX.X%. management with Services increased Services QX, million, and year’s internal revenue to Tech during benefited of growth and primarily currencies the growth the North strong in that internal by driven increase were was Service includes sales year And and compared Value-Added local which growth sales XX.X% revenue EMEA, including turning favorable was this year. primarily in and Internationally, year, comparison American Now prior of from in last products. sales internal prior an That our sales the the claims Value-Added UK, XX.X%. with due driven a Value-Added lockdown. was by compared to XX.X%

increase Services compared currencies of and was XXXX, XX.X% year full internal with $XXX.X million. sales XX% the in Technology the For year of and included prior and Value-Added an growth $XXX.X million, of income local had operating

We approximately market total continue per for to $XX.XX fourth this stock the EPS open of quarter, $XXX price average repurchase impact diluted common our shares during million. share immaterial. on the The million fourth X an of of repurchase was in buying quarter a at

repurchase approximately note Schein year, repurchases. of million full had to future stock million Henry our And spent the For I’ll available stock. we $XXX for the $XXX X.X year-end, shares million at

to continue providing and liquidity, flow, cash our access e to and we stability. flexibility financial sheet have Turning balance significant to

quarter the quarter flow increased in for That million. stock year. XXXX investment manufacturers. operating operations lead was and inventory $XXX.X million of compared this to times test the reserve inventory year-end due Our to cash And from for COVID flow attributable fourth kits, from of last decrease fourth was operating to primarily continuing delayed cash including $XXX.X

is and million $XXX.X I that cash noting sorry. guidance EPS by in For my updating XXXX guidance. was – flow only. conclude are million GAAP in XXXX XXXX, operations EPS that compares operating continuing the for $XXX.X we our our full remarks from year, to The will

financial in we future. using the not providing decision currently as guidance non-GAAP although not do the change this for for measures EPS could year, anticipating non-GAAP We are XXXX

Henry expect X% to and $X.XX. with be X% GAAP attributable will XXXX, $X.XX $X.XX in of diluted to XXXX For a XXXX XX% our Schein $X.XX, non-GAAP reflecting range when growth compared of X% we EPS diluted to with of growth our EPS to of of compared EPS

I’ll approximately XXrd to review be COVID growth from and This of key XXXX week extra XXXX. our sales X% in occurs range number a will includes That that quarter XX% approximately assumes XXXX. that of that has week X% XXXX levels one million. the XXXX with declining of XXXX over fourth year, of somewhere sales in those. of compared total for guidance assumptions. the Our that some also I’ll tests selling XXXX. includes were our $XXX note is approximately

we XXXX, For margin expansion. achieve are also operating expecting to

XX of Our guidance of XX XX GAAP operating operating non-GAAP operating points margin assumes of margin over margin a X.XX% to points expansion range of X.XX%. the over XXXX XX the basis basis to and XXXX

assumes tax range effective of expect in tax that no the Lastly, and, to in rate significant XX% stay course, the changes legislation. we

Our for or completed operations continuing not previously restructuring does announced as is future if repurchases, expenses, acquisitions impact XXXX include the of EPS well for diluted share or but guidance any. as future acquisitions

also assumes currency markets market note to remain are first quarter EPS end very that to our that rates associated with in will slightly to anticipate be we’re and Last, of with comparison with exchange to material really adverse compared like quarter prior Ron year XXXX and consistent guidance a difficult that Our the lower XXXX stable changes that, seeing QX. conditions This no foreign year there I’ll generally is prior we consistent are is market first with of COVID-XX. current EPS. first turn non-GAAP flat South. and With the current a that I’d strong really due call quarter levels, over

Ron South

smooth years, with Graham of transition Steve into To the coupled Olga, with to closely transparency, I’m forward expansion. I’m and Henry and legacy global of of be Stanley several steward Steve his a team. Schein have CFO. Steve, I position. I this and growth it’s with stepping to you I has dozen morning. more of forward you, the a Schein’s and to worked Henry been with role speaking my said, Thank during of than excited finance new into what responsibility. all Schein’s finances underscore be tremendous expect decades to impressive working Henry great and a entire for continuing look looking honored fiscal

You’ll be be meantime, today’s report hearing more great in joining results me But team the we early in from when call. the financial on it’s to QX May. our

the I’d Now Stanley. to back like to call turn

Stanley Bergman

Congratulations Ron. your promotion. you, Thank on well-deserved

management service. respected You truly you for Schein, team and our by entire at are thank Henry your

as Graham we team. and the thank we Of refer announced in course, with XXXX, September of Distribution. In entire what new and, role internally new for his his fact, structure I a well service One finance for to leadership as associated

One veteran Distribution XX-year leadership North Our contemplates Brad American a strategy distribution the of and of dental leadership Henry Schein. medical a Connett, under

Our joined healthcare X correspondingly our who Andrea ago. exceptional are businesses distribution international by being years executive led an Albertini, team

earlier, on to of improvement. continuous is noted customer distribution exceptional Schein’s experience in One operational building Henry our As improvement to leading profit commitment and, course, of Distribution experience our businesses, exceptional customer – part

large our strong recent products. in XXXX. me to internal of some Dental solid. start the the consumable growth was in revenue local sales distribution growth modest now In most increases without we contribution Turning growth and our two with North let of COVID-XX-related and merchandise with the reflects growth as pleased The especially in are price as quarter Dental. in with accomplishments dental awarded well contracts America, Fourth sales currencies businesses, from with DSO impact PPE

the pass in year. to to from which increases well traffic to be quite first made more the of on may suppliers having customers. be end price And the held our there throughout unfortunately, December. we’re additional Patient by expect We quarter,

as decline consider in traffic. there we for patient sales We patient January claims dental and was This cancellations to However, staff is U.S. resulting due with we average saw January And decline a Dentrix modest from appointment good January, a XXXX. a believe compared our insurance consistent in volumes. proxy our data shortages absenteeism. to higher

the postponed view, our view a is we canceled the impact Our to Any appointments be be that office be will stable. is Omicron be result there as in market expect most while temporary some rescheduled. may and likely to of variant, that visits

have guidance. the in shown financial in these factored the weeks that the is couple And United dental into our of first there movements have of We resiliency States. February market

course, North little with bit experienced Of a in the market the we’ve international but is America. trends quite varied consistent generally

we some like every not experienced chain all available. supply generally while our have substitutes We may merchandise always have in everyone. And to have we size business, brand every disruption for products,

for have we chain and supply stock some our are expedite our where increased safety shipments items, delays partners our and leveraging global to We mitigate possible.

partners logistics add. We I have good as might very well,

fourth we of suppliers are dental experience continued construction caused the had These shortages During by to we we which component and as business and in of to some this and the expected. delays component a continue delays, with equipment combination installation traditional delivery year. construction the U.S. quarter, our second shortages through half delays, expect

We some of as In also so. a bit that particularly delivery equipment the from Sales positive to believe imaging tailwind DS on units, experienced, intra-oral last remains the delays meeting, digital of support we for especially the time, of expect we from of the remain quarter, this World, We call. the as about or which market fourth under-penetrated. dentistry modest during was our last the bullish discussed future we digital market, in strong a the again we first quarter had quarter. scan equipment, a

international in part fourth the what strong accelerated strong business, new quarter, have year the sales digital good to in seen digital consolidation in the Europe believe we recovery Spain, the last ASPs some industry as expect growth dental including XD may in and, growth see from and Australia. Eastern printing, – good dental offset continue in by where had within we distribution the Italy, scanners as growth we products well We products. and driven good very new Brazil, very UK, in category, In for imaging, be to our with lower intraoral digital some by –

globally. have At global a order equipment we continue And well dental that as have is domestically we our as strong and book, expanded businesses and business underlying our equipment Brazilian throughout offices performing global very believe are equipment this we business Our well. businesses. to invest time, overall their in

achieving Yet Patient physician Now new Medical COVID-XX-related in fourth turning mentioned, among PP&E accounts. have continued X.X%. prior for against that is the while and we of to extremely a care to for to local a solid our quarter. existing and tough year currencies business, declined because penetration were fourth customers deeper gain was normalizing traffic quarter sales Steven comparison all strong as positive the offices of products, products. sales alternate these sites when growth Internal during

quarter, While patient was trending generally improving fourth temporary. some traffic early the deferring in we in will and elective procedures, the towards quarter, which more normalized believe late levels, patients saw be we

for We testing as will its variant be Omicron expect products COVID-XX-related to course. demand continue choppy runs the

a are testing. We seeing COVID-XX demand surge in currently for

challenges production also are some to some rationing. suppliers, suppliers some there – leading with However, and

However, demand product. we is have and good

COVID-XX pricing to as we addition, expect tests, volatile. noted, for Steven In remain

care products both current are PPE about of medical future, and to setting remain optimistic as the the modestly. the for glove decline of future, use financial continue guidance. factors say, These and alternate to the wave believe migrate continue to fact, to reflected in We to the group elevated for dental our I levels at pricing all are our We in foreseeable procedures as optimistic highly COVID with practitioners will decline. would about future medical the continues

we Value-Added these offerings. product product are and Now Technology turning Services offerings, really and various to Dental businesses about Specialties excited and our

previously of Group Chief Strategic Global surgery Under XXXX. Willi, oral Reconstruction our of As mentioned earlier, a leadership function as Executive specialty René extremely And seasoned Business M&A and other Officer Executive Officer services. endodontics, includes which David include Chief Oral and of businesses, our specialties as of and the well products; sales is during by in David domestically of way, our partner well Brous, Andrea to performed Groups. dental both David’s products our businesses also, internationally. distribution products the businesses. our had orthodontics number David Albertini and led a international

Our a our consisting well a implants regeneration is and We and in development. a and offering specialties. offering strong solid endodontics the in believe as products commitment oral of commitment customer on to a actually, built in in – research and bone orthodontics position it’s invest it’s as products deep surgery continued market

and by [indiscernible] growth product market solutions. the launches the dental Our fueled of new for is strengthening

Dental solutions traffic Turning products. driven has once And sales Schein have high demand to revenue as generates the to Henry largest adding team, patient Technology Henry Mike Services years deep Schein of Henry dental segment, again our offices, Henry new primarily continues to Baird business cycle to revenue. the posted for we One. Mike to also record management One, about Schein One which by ago in our plus in and including contributor joined new Schein X.X talent And recovery be quarterly been this Growth business, within lead the to in the us One who CEO a background technology. Value-Added

engagement welcome. SaaS scalable We revenue those the in of continue efficiency course, in more resulting to focus we’ve drive a and to model, flexible, streams create stable the to cloud on patient past, moving migration and practice to and the services to and recurring on discussed are, cloud-based as solutions

And and to expect cloud-based X,XXX which management the grow we Dentally to of good base more believe system, seeing are the dental the growth arena. Ascend We in globally. systems, continue installed both customers have which than largest now we have cloud-based the in we practice

Brooke install software, very We U.S. for exciting. also premier the to is commitment Dentrix and the the our XXX Henry allocation AI who treatment our to our Henry vision, workflows, imaging and practice strategy. to also years first and are combining Business technology of also will XX Software The Ascend, Vice applications Medical dental and is These our Officer Mlotek, of has M&A I’d medical remains plus. well a of and VP, Army diagnosing of important customers with draw appropriate computer executing strategy solutions, and part an our been – Systems. for with to valuable veteran, partnership powerful plans. President Vice program very, and the of pleased final that Henry one with AI M&A collaborate on to led Schein customers flagship FDA. Chief construction assist large our dental to and Center, leading Dentrix investors global like and, U.S. Scott is Army’s several [indiscernible] software, military This for Mark practice into strategy, professionals the dental Schein of into Development, our and led by to the our to recently, been centers. we’re topic (k) capital M&A our President working installation treatment Henry with Saunders, the a digital Dentrix growth time several software, Mark building uniquely management and long Global clinical is part M&A Executive next-generation filed applications is and automating and innovative create embed Schein’s of continuous attention is management has by in works insights Strategic This supported Schein of most

XXXX, During units, we million. technology business primarily expanding our strategy. sales over These $XXX million owned $XXX value-added market, supporting the of our acquisitions of solutions, representing market and presence on surgery in and brand ambulatory and our across our broadening – completed the annualized were deployment capital servicing several health acquisitions focused brand

services investment additional Of specialty product to we areas. the in continue seek and specialty course, – opportunities will

call our quarter and With to of financial these Operator, comments fourth year we’d full the and questions. open like results, to a your review please?

Operator

Instructions] Suisse. the line much. you Miksic Matt so of from comes question from [Operator Credit Thank Your first

open. line is Your

Matt Miksic

‘XX. really finish much so on the to Congrats strong thanks questions. for Hi, taking a

around one sequential that to clear. sequential So so you on the through movement of to seemed like also be be but commentary much. clarification January resilience consistent some in It historical those seeing talk with February, of QX? was questions, year? the relatively then points. if cadence Thanks little about run in that experience of QX the I bake of could perhaps sounds quantify QX how then for we comments you couple like guidance, impact, the your of on a QX as a the bit January, And the if to impact could, if you made could your a it like just you it in maybe just first in sort growth with pressure time, week extra the into Just may two sounded that more some were from

Stanley Bergman

those. ask And question. Sure. the you ask I thank Steven to to I’ll will – respond for

Before I pursuant this that’s dental in Brad what somehow I at veteran distribution script. North medical, say. I Connett, but XX-year reorganization. I where idea August I people a I missed over. do Henry no XXXX But and have runs on checking American that, don’t why that, Schein, know all I businesses, the glossed are our missed good

So Steven, please. Hello. Steven?

Steven Paladino

Yes.

on I to Sorry, and was back. mute – I’m want

so it’s of the holiday of it’s first see We and the last a that probably customers is even the generally week. year practices because our week So extra on lot of slowest week, a that week. week year the week one close extra weeks the of or slow

for slow a a it’s us. very week normal week. So not It’s

does new in And incorporated of, All not that to includes but acquisitions though, that, is guidance growth acquisitions X% have remember, it year of of include the do into full our sales impact sales occurred acquisitions, all XXXX XXXX year. of X% so any in that we over growth is that in you range XXXX. may the that it in, now

impacted pickup saw January. as But as closed again. were of and appointment slightly really it’s January, patient see, probably slow So, what more number. is accelerated that and X% of first Omicron a a said performance, of That see some sales yes, Stanley absenteeism. again, in QX, We impact said, did started On January continued variant rescheduling modest it’s we And just so what the week. have cancellations and we that, of into staff to our we by and even believe we see modestly impacting sales did dental practices some exited into because Omicron customers. baked patients we we the by X% to were

temporary believe canceled that So, we that they Similarly, primarily long-term a surgery but sales that, to in impact did – in impacting be we didn’t caused and impact reaccelerate have those elective ambulatory sales is cancellations some centers. It temporary. that is that to It’s we do rescheduled impact. do customers on our not also expecting we of but temporary procedures negative we believe of But in see are business, believe will impact. January. and our some a a significant Medical, payments, again, will be that be

best sales. be trying thing to on We are less

kits. trying to a test on are We bit little and PPE be conservative

for lower prepared have we built prices we approximately the on year. said on XX% we PPE kits in And As assuming also remarks, with assumptions are average the of test lower sales selling there.

helps the some sales hopefully, Matt. So, numbers, on of you that

Matt Miksic

That’s great. Thank you.

Operator

Your next question Johnson comes Baird. from of Jeff from the line

Your line is open.

Jeff Johnson

Thank the you. insight. to thanks say Good for guidance morning all and and want Steve, all just

missed known I been and on think that retirement. years the will congrats be and have other, I each it’s almost so XX you

ask guess margin. Let gross me question, two-part a on I

and for of going margin in any we of basis just what’s margin first than off Is points these XXXX points and more gross margin. hold levels? XX margin rather it the the part, operating operating thinking operating line year? kind you there to The gross provide? basis Just this improvement can algorithm expansion the XX forward? updates on Any expect gross leverage Can expense

Steven Paladino

and difficult kind thanks And enjoyed questions have the Sure. Jeff. I relationship you those all words, for typically building ask. with you that

expansion but products that the flat we shifting the and And will bit do our increase. margin, by modest impacting either on little modest Again, might we expect we towards see shift in higher-margin a primarily expansion again, but expect do driven that we as, to really come a gross change higher-margin as that’s XXXX. don’t in major expect primarily a leveraging slightly it margin over So, products, expenses gross from – some side. guidance margin well operating margin to

So, that’s our we budget the for built XXXX. way

Jeff Johnson

operating kind of that helpful. margin when margin on And one improvement That’s value-add, Alright. XX And that Can growth points like then comment. about for margin two out the specialty it maybe XX% year there. hold and think double-digit basis Yes. to basis throw those leverage of forward? right that seems XX each of businesses, should points going technology operating just follow-up can kind and I

hold margin that to that the hold of rest that the can of just the other business And is margin? to algorithm? shift again, those XX% and kind those mix benefit businesses way kind higher-margin Is the then algorithm margin the get of in products? Thanks. of So, think about the

Steven Paladino

dental the margin mix. and again, of that’s on in those could specialties. But the would haven’t hold technology core those say than some businesses, generally But the be business. But so acquisitions change we may should I would that generally I of grow either overall those the want as that Obviously, think specifics. hold remember, and I speaking, also businesses say there faster Yes. invest additional level did given in areas, if that investment. it to should – we the in we helping both margins generally

Jeff Johnson

Thank you.

Steven Paladino

Okay. Thanks Jeff.

Operator

question line Rich next from comes from the Your Sachs. of Nathan Goldman

Your line open. is

Nathan Rich

Thanks that quantify through And the just restructuring up to Good Hi. following price should to there line way margin morning. last savings for both that the the top Maybe the think went year. Is show the a you up of margins on this talked and questions. you guidance, and this are year? expecting to about impact year? we you how inflation then increases about

Steven Paladino

on increases because Sure. trying first I we what have part to impact of really, continue little take margins not the really the since that have with expect we are maintain last will easier. to The should inflation significant to is we question and margins, do price see. seen a your bit any it’s

profit margin if a higher a because is not opportunity the really to add is opportunity, that. selling per margin se same on although there gross there a will price slightly slight margin dollar So, –

second but what Nathan? it. that, of was dollars, I part So, It’s not driving margin. And think that’s not the your question, really driving

Nathan Rich

savings from the restructuring. the Just

Steven Paladino

trying that am that Remember, all a put number. XXXX we out completed the restructuring significant. I wasn’t to in really

that year, dollars to the us for But million. payback, Typically, also for is million. some continue was of has so growth. the restructuring to remember, to $X.X than less invest the impact, future to for For reasons it $X.X up a our the XX-month our XX-month something restructuring doing free

Nathan Rich

if Okay, follow-up. I sense. then ask could a just And makes

On scope referenced, any would Thank you you incremental annualize. of nice a the sort seems like contracts about for some we you. talk should I of renewal in could potential over are that quarter. are the that there just other up RFPs have or obviously, contribution year two fourth the But is contracts that the upcoming mind? And those those? in there saw you DSO it benefit maybe imagine before

Steven Paladino

Sure, yes.

So, on-boarded lot have modest, much annualized like always every feel seeing the one customers. two DSO have XXXX, those XXXX. larger We already we XXXX, still we because them a for that flowing those have in them years a We our did sales but have should serve probably customers, two were good many that our don’t contracts or numbers very in of now QX. in feel We through respect those sales are we impact with DSO We coming one renewal. during more so an year we in been With ago. with like contracts, have really well. year particular we stuffed is bunch up DSO all to awarded relationships

pricing very Our is sharp.

about good But year. the or two one there feel renewals. we So, is always every

Nathan Rich

Thank you.

Steven Paladino

Okay.

Operator

Kreger line of next comes William question Blair. from John the from Your

is open. line Your

John Kreger

that’s much. very Steve, Schein and about value-added Maybe anecdote, seems normal. that ask services. favorite of of to technology growth Thanks sort but would from probably I wanted instead, your really this shooting I what sort quarter lot And ask for you level to what what’s a for Can you is Hi. like the not call. higher is guys of growth appropriate the segment? you talk the It than the are like just about in drove that? for reported you sustainable

Steven Paladino

Yes. pre-COVID Again, return our that nice especially based traffic, services and was we from impacted technology, to on patient that. are impact a slower was are so seeing level, to

that of margin but We hopefully, would haven’t and really top to given that see line greater than specific slightly certainly, we because grower like double-digit opportunity. be guidance, segment

about So, we feel good that business.

you the non-SaaS so annuity, assumes an which we caution a is would everyone that you a if impact knows I in sales that overall it no for does material. Should am thing for to all growth. now, month, model, model that major only SaaS carve have it compare the think upfront, sure But can the it’s where to company. Now become sales would sales not right SaaS every out investors. double-digit But I that material, the good revenue model it’s where shift I record is that you

John Kreger

then… And you. Thank Great.

Stanley Bergman

little a bit to add just me that. more Let

story endo, the Schein One, Schein results, in whether am One products and seven too that’s a First or road the the the dental out are – Henry we all, investing talk So in areas Henry that product with these eight Steven.” “Stan, products, orthodontic, technology quarters just quarters. last who the or, we of R&D want Listen good Blair significant I to launches it’s on so in new looking at if much. when fact, to salesperson list surgery were two William many the favorite I Many, in said, have at my whole a is in specialty for heavily point and you or area.

are in still exactly materialize. So, in drive expect when higher We say these lot but margin as time on. for this the going future. R&D over to a new operating that driving can’t they even But grow are projects income, investment because businesses of to there development, we is going the

John Kreger

your an practices now? that you are really One within struggling Thanks your we are quick follow-up, help lessen that customers perspective, have facing right sort business technology themselves. strain offering to guys From Stan. that dentists’ maybe with broadly doctors’ and of do staffing the hear

Stanley Bergman

Yes.

by Your the is correct. way, observation,

particularly DSO the tunnel. can see in at the the acute think end I of light world. it’s I

train We this have staffing services, of helping area business. we a identifying areas to the are and etcetera. is we – in small, business, advance. One in And Henry Schein It’s are is relatively but value-added managers, our and do customers. etcetera, our One investing support does office for two that have office heavily with help we managers services to

Operator

comes Piper of Sandler. line the Jason Your next Bednar question from from

open. line Your is

Jason Bednar

Congrats on to finish year. I all here. its here, morning. you your Steve, And best the to retirement enjoy Hi. Good nice current hope fullest the a

and contemplated, quarter price those are have been have maybe that You already about this year. this others been coming increases citing that you later even still that to talked

increases some pushing or year are just multiple their manufacturers So, I you price if then your conversations seeing dental all response pushing are through just any the in back way? from customers the be guess substitution those price been the manufacturers Are response timing these And in different any And the to are I being are have would very increases? in what’s if implementing that How increases. down curious for handled? price at these community? trade or

Steven Paladino

I maybe will Yes, off. kick

possible in think – There price few be manufacturers of that is who but But already. there that awareness price It’s inflation prices, it’s it’s and we were that up, rate, But very always may this user. think have there prefer the of I have but have on. we be manageable, that we come expecting inflation little in – just a through end through people the one increase, could at done to bulk if than raising pushback, bit not I just there increases but have that perspective, going that price always we increases are the customers the come really to From to, though price the pass increases. think bulk So, we are guess helps Even have kind unfortunate, would of it not will through through. those more continues getting we so certainly but go more is that inflationary it’s I a come of is highly whenever forward. there always through that environment. And it’s prices look, think us a customer are understand a across board. going pushback, is a little I successful we passing

Stanley Bergman

the in in commodities, occurring deflation of bit little PP&E quite the obviously a also substantial. is There Steven. you, Thank some area, of

and would making dentist. will is commodities, of area. digital in other opportunity the affordable standard world has coming imaging it lead down ultimately, to whole think, come in general use. also of And XD to scanner pricing I pricing more in down it’s the which the on that behalf also, our – dentistry consolidate area. purchasing I are an Some on in power say of so there customers, to the getting And we is support

some many, suppliers not the to And more there have offerings out it, in to competitive of have are but including dentists there world. major scanner We are future. going are going up that we they more our I with units yet. advising practices today options, going in of general think is be don’t many A lot to come

bad you period as payroll management as of this that an but doing it’s constituents, I to So, newspapers, on in well. inflationary a have And investors. And believe sure, area. the all think in Henry Schein we to we for and are is our balance we job our as for not team ensure do right our this thing all the great I the in including read

Jason Bednar

for Henry are aligned a really Alright. quick a Very that question helpful. Ron. balance there tenure. views a with how on on historically Steve’s we just allocation financials in Schein gotten what lot of maybe during have seen operated his And the from very and conversations, the the Ron, is your I our sense how managed capital sheet. But follow-up have and then capacity has as more much

So, just leverage helpful hear and I to share repo your and would you how philosophy M&A see of the it guess moving be balance forward? regarding Thanks.

Ron South

every to going that CFO’s strong and give the a us just has Sure. forward. that inherit is Steve of I be challenge mean, me opportunistic to right It kind find flexibility sheet to M&A I try on some it’s to that very allocation. opportunity. think capital to allowing optimal balance But do be

we opportunistic historically we And up, that the some see continue be with a share to in have And want – we have on there. done the meantime, move reinvestment come we gives follow us to to sheet kind we but some what flexibility lot business, of buybacks, in the it. balance the will M&A able of a so as

Jason Bednar

Great. Thank you.

Operator

question for of the one Evercore from ISI. last time We line from Anderson coming Elizabeth have

is line Your open.

Elizabeth Anderson

question side, additional when on so little what’s or to thing congratulations in great, sort was Is of that? go sales into one terms there product it talking solutions suite? chairside lower Any Maybe average Thanks switching much. retirement. from obviously people that more would bit Thanks. from details equipment caught so obviously about your driving been helpful. complete of Is a just were guys. super could numbers sort of scanners? detail perspective, the about you Steve, the be it’s it new a And attention pricing Hi a sales you my control

Stanley Bergman

Yes.

XD the of has by advancing low penetrating dentistry of – as an machines a XD that more introduced, can and digital created imaging for affordable examination time, at side, in markets products saying, equipment the price, At have now on being those some not are had think same I are interesting upgrade a new the scanners. existing So, to the are lot that a relatively who suppliers that supplier demand sale are we ideas there unit.

more So, towards not drive to towards comes experienced right digital extent, you to add greater But what some becoming emerging standard XD please the and the when imaging might and to take in the may away, more dentistry now efficiency of all the fully, this, of is in affordable. PC world, and calculator movement similar of also is whole demand, have into printing or area scanners. I much XD take it care account, is you

for ties Henry Schein, dentistry. in and expect sales Schein and an that and we greater stuff the So, One. profits all And in greater Henry of with for this balance to demand in, interoperable digitalization of result way

to So, this dentists A strategic today. exciting to of – key just to a importance about the a very but that excitement more of lot plan, have don’t lot is and of period follow. movement, awakening all for us. all time a our in talk component dentistry, It’s of all of digitalization we are

Elizabeth Anderson

comment unique sort on announced follow-up as as for to new that implant just relative the A number levels sort I revamps future sort in That products demand of if wondering on quick competitive portfolio. are was sort of side. implant that’s you. revamped just there coming the their of pricing and of could well, or if you a that a opportunity major and providing environment of makes the sense. And manufacturers product maybe have or

Stanley Bergman

Yes.

a also On implants, and the lines, course, premier bone very have a of of premier particular, couple namely a we Camlog Products and and in we regenerations. implants Horizons. in nice have lines, business

We lower-priced. also but area, I the – and in have discount Medentis wouldn’t discount say

our significant area new to Fusion mean, Our of done has so premium quite the And Camlog lower-priced. and has biomaterials on lots comprehensive We Pro, had year well, should believe the on Likewise, on offering years, side, side. side, you in a specific orthodontics a line. more, another other products the the to you the have progressive value-added call line about reach we has want competitive the relatively now, product over line new details, excited we pretty we implant, very the and I think don’t NovaMetrix are Unfortunately, offerings and have Happy Henry the next endodontics have be I to oral we The but Camlog time or the out products last One Relations. services. Investor and surgery actually Schein for specialty time again, more happy tend well. our done but our developments.

Elizabeth Anderson

Thanks. That was helpful.

Stanley Bergman

hours, know Graham, I So hours, – talk information can not of share. I lots minutes, to for for even

are we the end, think right, at I Graham?

Graham Stanley

question last we our was can so That Yes. now. conclude

Stanley Bergman

Okay.

the come, with executives – be our so will but we involved and team. be mentor senior all a all So relationship. do views again, know our Steven, us value years best our Ron you our for guiding you officially, as to

and advice team. so the and And continue to your relationship to Schein’s we our management will Henry Board

for So, all Thank everything. to thank our you investors. you

has or If you please little put questions, a out with we today. Relations, Ron touch anybody Investor South. in reach can Sorry, any to went Steven Graham, over bit who

And So, will be coming investor participating thank May in seeing in. speaking calling you to up. a early forward to few you you We look conferences the meeting in we call. all – for to

of very, As excited perhaps you this call, we the company. from about are very can tone the understand

We our are plan about very strategic that. the execution excited and ‘XX-XX of

and you thank for all stay safe. calling So,

Operator

joining. today’s all Thank for This you call. conference concludes

now may You disconnect.

Henry Schein (HSIC) 15 Feb 222021 Q4 Earnings call transcript