Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen. And welcome to Henry Schein’s Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]

call this reminder, a is recorded. As would today’s call, I Investor and Officer. now Vice like for host Relations Project Financial your introduce Strategic Graham of to President And Stanley, Schein’s Henry you. Thank Please go ahead, Graham.

Graham Stanley

and thanks my discuss and Bergman, of South, Chairman are Financial to financial Ron XXXX. And Operator. me Schein’s Henry Executive you, to of Officer the joining Henry second you the Officer. for President Board Stanley on Vice of Chief and each of results With the us for quarter Schein; Senior today Thank call Chief

we that contain during Before begin, that’s comments I’d include will state like forward-looking. will certain call to this information made --

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

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

statements statements cautionary Securities in These those section by in with contained Exchange of in qualified the Commission forward-looking entirety the Schein’s and included filings Factors and their the are Risk Henry filings.

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

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

measures. be the Investor a press heading. are Relations B our included the non-GAAP not Information and release replacement measures in and Filings of today’s Exhibit corresponding for Financial purposes GAAP and measures should between GAAP non-GAAP section and regarded presented informational in under can solely Reconciliations website are financial Supplemental found and as comparative of for be These

refer website. to earnings information, our Investor Relations presentation financial on posted For our quarterly additional please also

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

Lastly, session, yourself a to and follow-up. single Q&A a question during please limit the

I’d Bergman. to with turn the to call And over like that, Stanley

Stanley Bergman

Thank and you, morning, Good you today. everyone, joining Graham. for us thank

the products. We are results and strong today and equipment implants, businesses and driven sales our technology our general our sales, reporting in dental merchandise solid North quarter, for American value-added by second continuing services, and endodontic steady strength of biomaterials with with

market the practices. their for customers course, fundamentals the our investments customer remains dental demand by -- The improve and strong ongoing dental to underlying and U.S. making are our of in services continues by confidence evidenced as, in

integrated are addition, well products, our growth better and which we experience a are to demand strong for and endodontic as In and our solutions, delivering customers. as by generating services systems seeing implant growing software efficiency our greater

physician to down care In to offices medical were last the flu and to higher year’s levels, close that’s alternate season result market, care of while market, care are physicians a reflecting electric visits the second quarter year-over-year, procedures last as visits urgent centers year. extended the primary normal

decline. PPE to test As continue COVID sales and expected, kits of

seeing second currency local to be sales However, half impact lower are are sales these sequentially categories, now product year-on-year internal and the the for growth company sales was excluding we off we X.X%. When seeing of we -- off XXXX. level now expect level much the sequentially in

discussed at than better facing American we of earlier medical In year, our by general, performed dental our expected business offset the headwinds start as some incremental the North COVID-related on. business,

in serve, our non-GAAP guidance affirming the our financial diluted overall confidence and accordingly, in business XXXX. reflects EPS are Our and we for we markets outlook

advancement continued of strength the earlier and demonstrate BOLD+X Plan. guidance Strategic and results XXXX-XXXX financial business discussed of Our our the as

We portfolio, including services transformation. businesses, plan and our expanding are initiatives specialty leveraging value-added distribution our successfully key key products the digital and the optimizing driving in -- actually, key initiatives executing customer relationships

to strategic margin over products the Year-to-date, leadership clear shareholder plan, positioned that implementation $X to growth, we Henry to long-term With of enhance high focus, markets that our believe value. high acquisitions we billion adding and offering. sustainable the further and accelerate our serve we to in are have deliver well committed this services Schein’s we

closed acquisition quarter. larger closed in S.I.N. the strategic we Sales, Biotech expect of close Practice System, partnership in of and transactions Among Shield we the Implant Healthcare July, the in with which Dental, are Large we and announced which to acquisitions our which April, third recently the

we capabilities, presence transactions, product arena value-added workflow in expanded to directly implant, regeneration digital bone the these have aligner in our homecare portfolio, and significantly patient clear With products services. the distributing and

than distributes our that services our we offering announced expect across $XXX the will annual in of it’s the Continuing United their to following Shield strategy to recently provide to more patients medical patient home. States create an healthcare revenue delivered, million being where acquire directly supplies with agreement in

be President, Homecare this Adam and has Products Medical joined Manager business Henry Hughes, experience significant General who led On this Schein of will of this completion in acquisition, by area. as Vice

is aging of demographic excited in We to the chronic patient, the their beyond moving overall to more which trend care added the fundamentals home are efficiency to provide a healthcare of the expected experiencing this about system. convenience supports market, disease growing

have our service. And most important, many the asked of to us provide customers

into now, to now arena position in providing moderate way who been requested We care. this up continuum the support as our advancing of to market in have are homecare customers, but it committed to our a to us we move a have

ostomy, expertise medical grow Our noted plan we as products, will leverage this physician wound our distribution further enteral, assortment relationships, corporate product care and to incontinence, on, area. now include and earlier product offering brand homecare to diabetes and

our the a our service advisory capability most business advise of have for we smaller DSO enthus transition transitions, successful about acquisition on to practices. which had Larger group being Practice am well. Also to dental customers expands transitions enthusiastic existing Sales, dental to and as practice a I services dedicated course, many practices years, Large Practice midsized And -- of leading of

We are -- create software practitioners. to digital also digital with unique our software for of the our integration workflow digital dental dental of a practice solution our management advancing

Albertini, our customers. our and asked connection, In Group cross-company what International have this software we solution integrated CEO to out Distribution Andrea Schein called accelerate of we for lead solution have the internally One our three-click

lab. image open practice architecture help to from artificial management of capture with application of XD/XD This connection intelligence direct either through the XD intraoral to digitally design by the direct the through and followed mill, prosthetic simplified -- transmission solutions Imaging with an embedded of to with our begins fabricate diagnosis, unit case the any acceptance, Digital the or planning and [inaudible] scanner a file process the or in software, ending the dental printer

from beginning Let quarter were quarterly dental with PPE In distribution. the business our excluding sales busy me products. dental of now generally offices unit, course, merchandise of turn dental North and to highlights each the second growth, of a review America, helped this

care. the meet broad in driver our was, practice, solutions was needing -- drive clinical up efficiency course, A of offering, productivity our sales the increase course, equipment to customers a and and of equipment of better demand, to equipment of enabled which broad course,

growth pleased flat held traditional is up equipment double equipment North the be relatively sales that to equipment returned North pre-pandemic of to quarter. The and our to prior American sales continued returning this digital of America digits, levels. we equipment international sales strong were year. backlog sales backlog dental has International were are in to equipment steady and equipment

endodontics Sales specialties. dental dental complemented of by were our to the turning in Now businesses. and implants clear key and aligner drivers second quarter, biomaterials

are first for premium implant good. systems delivering quarter, America internationally, improvement demand with We implant in remains BioHorizons mid-single-digit our very the demand implant a of growth, seeing versus sequential North increasing sales Camlog

well Generally, and demand to positioned. continues Camlog dental Camlog demand by for provider the product our products. generation our reflected our implants of growth that moving bone offering favor for value-priced products. in But value-priced We of is also -- BioHorizons Medentis achieved implants products believe double-digit our is

clear Systems into transaction and large implant to Brazilian dental dental market-leading Looking the our us and consumables at digital other aligners entree equipment brings recent Implant market provides hand, on software. complements Schein successful the Dental Henry workflow deals, business. S.I.N. Brazilian general our portfolio of implants Similarly, and Biotech a an that at with

S.I.N. high cost-competitive the these quality expanding and implants to a geographies, of bone more products enabling and even implant attractive opportunities competitive exciting Biotech have at in the Both more offer we United an and regeneration comprehensive including us price of be other course, and to space. offering providing, States,

driven quarter, business in endodontic and growth continued by North our and in This to internationally. America brands our Edge both be Brasseler

a relatively is making although steady this business, revenues. progress business of with orthodontic our our component global small still Our aligner is

products market specialty we have and our market -- and we from pretty a DSO our seeing We procedures from and demand continued for are specialty growing customers, in share DSOs that’s practitioners. decent DSO among of dental the adoption from recall, see specifically

grown have our and specialty basis. on and aggregate to products approaching related revenue million regeneration over in into services billion implant an and $X.X our global We the products bone in revenue $XXX annualized in

a We broad alternatives value to North now and international American offer of practitioners. range premium and

to the to due in comparisons half second to year-over-year year the these growth of specialty accelerate also dental acquisitions, expect but We easing. due

being growth cloud-based largest to and driven patient One Henry Ascend the cycle from in ongoing practice management business software revenue Dentrix turn management a course, increased Dentally, let’s of the volume higher to Global of our business, where One. and Schein component, e-claims. services our value-added is Now in is by migration driving technology traffic by Schein growth Henry resulting and solutions,

software and about is XX% believe growth. partially best-in-class. to Dentally prospective customers approximately enthusiastic Customers intelligence our artificial incorporating management Dentrix their and -- this embedded into We Ascend approximately customers solution practice grew solution and today X,XXX certainly our are represents year-over-year product. particularly

technology We an businesses million services on have annualized portfolio an $XXX basis. our and revenue grown almost into value-added

provides value-added solutions, remote with Schein including offer office-based a and as Henry range which revenue services such other providing transitions, and advice our services to patient PPO along services, with education financial addition through Unitas dental medical In monitoring businesses broad practitioners. management, for insurance eAssist, One’s staffing on providers of we and technology practice agreements cycle services, now

We growth value-added of services year. will technology expect half the sales during and the the accelerate second

business. Turning now the medical to

year. achieved mid-double-digit the quarter, products, second This last of business PPE single-digit growth, low medical course, with growth test compares COVID-XX kits. our and During excluding

some had really results from flu excuse us sales a result, of important we benefited typical products. me, at This multi-assay tests. to flu then, point-of-care COVID-XX and a and season sales and season, lower diagnostic related as diagnostics more It’s much year, was late when flu

also to This margin. profit place and is certain pharmaceuticals products of was growth taking affected by lower brands, trend higher conversion a throughout and other corporate priced is gross a generics course, healthcare. Sales the of with that

market The market. Sales of relatively the medical a to were equipment temporary future demand. pause likely took in soft assess

interest However, subsequently in we seen return have investment July.

our our the executing in So, team in summary, fundamentals and Strategic Plan. well fact, of XXXX-XXXX BOLD+X remains solid, on is very core the good, business

will turn With relative the quarterly financial that, to you. Thank call Ron over full I please. specifics to to year guidance. our results Ron, and provide discuss

Ron South

will reported morning, our and and good also a GAAP Stanley, a results you, everyone. basis. Thank basis on I be non-GAAP as discussing on

costs will for non-GAAP second acquisitions. internally of currencies results focus and exclude in sales year growth, restructuring generated sales sales in assets. LCI to expense and is amortization intangible to excludes which financial respect release. compared the acquired and growth, Our XXXX With of prior I today’s XXXX local is detailed Exhibit B press quarter on integration This and

or Second quarter of were sales an $X.X billion X.X%. LCI global sales decrease

year-over-year excluding $XX X.X%. the decrease and this of million products We year, sold However, in a LCI kits, of sold approximately we PPE kits, year-over-year. when XX% a grew quarter million our sales and of in $XXX test second in test XX% COVID-XX of COVID-XX products approximately sales PPE decrease

the margin margin. operating the a was GAAP X.X%, operating operating an On basis, operating non-GAAP prior X.X%, margin. non-GAAP decline compared of with decline prior compared margin for a the XXXX quarter GAAP XX-basis-point second Our was the quarter year XX-basis-point second year for with

COVID-XX test XX kit we non-GAAP from expanded and operating that the margin basis PPE points. Excluding estimate impact sales, lower

was income of GAAP million diluted net million net share. Second share. This $X.XX compares income per quarter GAAP year with per $X.XX prior or $XXX XXXX diluted or $XXX

year These share. This Our quarter diluted XXXX prior per diluted per with share. non-GAAP income results impacted second was income our were and test on year non-GAAP or million decreased estimated be exchange $X.XX diluted contribution PPE by net net the second COVID-XX EPS $XXX $XXX from prior to relative compares lower million of per foreign kit quarter a or currency $X.XX $X.XX share The sales, was to period. immaterial. impact

far so year $XXX $X signed over billion we agreements subsequently have year, invested this in business we committed this acquisitions acquisitions the committing investments As quarter in in of have and we Stanley the second equity with mentioned, announced million. have million $XXX and another

than The increased for previous impacted financial in acquisitions has quarterly capital years. results more deployment

a financial were re-measurement share, purchase of diluted quarter, offset related in Exhibit quarter from our a acquisition or fair This resulted interest to expenses a a The acquisition including related results illustrated $X.XX that million net of held in of per $X.XX second XXXX GAAP $X.XX C $XX million share, of gain and release. controlling which favorable impact as of resulting $X high or investment. the equity the per non-GAAP by diluted adjustments included million value resulted previously diluted per share acquisition $XX net activity for or in press

related value of net favorable from of purchase the a including the these investment of adjustments, On was a resulting acquisition fair previously equity gain $X.XX share. re-measurement a expenses only per and controlling diluted acquisition basis, held interest year-to-date related the impact

investments that our creation enhanced Strategic and XXXX-XXXX We over BOLD+X are confident Plan. these drive will growth long-term strategic implementation the of we value accelerate as the

our $X.X and were by sales billion to second Global X.X%. sales increased sales dental Turning results. quarter LCI

but growth Excluding PPE X.X%. increased excluding sales products, dental X.X%, Global LCI when merchandise was LCI sales by of sales products. X.X% by PPE increased

and when sales International underlying of dental prior growth grew orthodontics and LCI lab digitalization compared business. our PPE of in the dental year by traditional business with merchandise our growth merchandise products. result by when and dental lower X.X% sales excluding X.X% America sales were excluding North a PPE in offset by increased to as flat products sales of good X.X%

Global dental equipment LCI growth was X.X%.

America to by North equipment growth increased X.X% sales of LCI strong equipment as to International for equipment sales and returned dental growth. equipment America Our increased sales we sales continue in traditional digital see X.X%. LCI North

XX.X% Sales endodontic quarter, and and were leading acquisitions sales have with specialty regeneration products. and where in particularly and good implant America materials, implants, million Germany, Switzerland in products driven Austria, these bone of growth include $XXX Dental position. orthodontic products approximately products market of second we the in North both a by internationally, in

of impacted technology growth third adjusting the $XXX was growth government million, LCI with this and services X.X% LCI value-added X.X%. were second negatively sales expired were in a the quarter during quarter Global when contract. for contract by Sales XXXX. early sales which again of

management was primarily our driven In North by America, sales growth cycle cloud-based solution. revenue was management driven Dentally by internationally businesses. practice Dentrix our Growth Ascend, and

COVID-XX this PPE XXXX. LCI sales. year, lower in and the very Global decreased quarter resulted flu second cases medical by grew sales $XXX and were mind, of and diagnostic impacted which versus lower during to product a the related prior due point-of-care of comparison quarter second sales products tests test test Keep in X.X% America, in million excluding sales of as PPE difficult grew COVID-XX and was XX.X% test the products against LCI kits growth, were and North X.X% kits. kits, lower COVID-XX PPE sales sales and products In LCI excluding

repurchases, $XX.XX common in XXX,XXX market an $XX during quarter approximately open of stock share repurchased repurchases. and of for for we average at stock stock per a end, price we future approximately buying quarter million. shares second At had available the authorized million the $XXX of total Regarding

cash flow. to sheet and our Turning balance

stability while capital and providing organic We flexibility continuing to liquidity, strategic financial the to our continue our with benefit to significant growth businesses from initiatives stockholders. and acquisitions, return on execute to

of closed by our date to XXXX credit further credit on and our billion million recently of $XXX We facility a extending the strengthened balance maturity also facility. $X revolving new sheet July

of a quarter last year, for million, result was with flow $XXX compared million levels. inventory the $XXX second as primarily lowering cash Operating

the per $XX severance were costs incurred These activities expenses or expect to We were as quarter expenses part facilities. initiative. and share restructuring million second Restructuring in our through XXXX. diluted disclosed benefits extend $X.XX of to restructuring exiting related previously and now to relate mainly

financial therefore, with costs estimates guidance. remarks guidance. unable XXXX, and my are GAAP providing for not this conclude we integration we are XXXX restructuring associated with provide time, to me Let our still At for

Henry $X.XX which previously announced to of with XXXX results diluted consistent guidance been the to is that has non-GAAP $X.XX prior far. with our from and guidance EPS $X.XX of diluted which been include dilution impact our attributable non-GAAP $X.XX share share, for updated includes We XXXX down second Inc. so and XXXX is are quarter $X.XX of to acquisitions, EPS the our all acquisitions to affirming X% per announced per compared to Schein, X% and have

re-measurement The related of held expected net in XXXX a equity and fair be has interest insignificant is of a purchase for impact adjustments, and acquisition value to of from the controlling investment including guidance. included resulting acquisition gain the expenses previously related been

these XXXX. to We acquisitions beginning in growth expect to contribute earnings

is year-over-year to third to expect year. we quarter diluted in It in quarter that higher recognize be than EPS growth important the fourth the of this in

XXXX Our assumes growth total over to X% X% of guidance for XXXX. approximately sales

XXXX. one in As a reflects guidance less selling week XXXX our than reminder,

sales reflects test XX% of decrease XX% kits, a to decrease. from decline now approximately XX% versus which XX% by in growth to a XXXX our previous to Our guidance larger COVID-XX sales expect we of

to guidance to product about expected versus our Additionally, previous of PPE of a XX% sales XX% are XX%. to decrease decrease XX%

and margins to be $X.XX expected and test on XXXX gross on diluted impact relative our COVID-XX original guidance. to is the lower kit due sales to products COVID-XX sales, PPE EPS share per estimated the non-GAAP per still Despite test $X.XX from PPE kits share PPE to higher-than-anticipated

PPE products we businesses will expect low momentum sales. non-GAAP contribution income and excluding range earnings kit single-digit from to COVID-XX strong in test driving are operating high the We double-digit in core underlying grow still our the and when

to and operating of the this lower COVID-XX expect and products We result a XX test basis XX of and of XXXX margin was margin points non-GAAP contraction profits. X.X% sales operating largely from continue basis kit points to PPE non-GAAP

margin reflects kit when and guidance Our test operating excluding products sales. non-GAAP PPE from COVID-XX expansion income

expense includes XXXX guidance interest in of a higher higher than interest result levels. XXXX Our and rates and as borrowing

We in legislation. in tax for range, the effective also changes year an the tax XX% rate no assuming expect

potential guidance exchange conditions. with and end remain repurchases have generally is announced impact future consistent with Guidance consistent Our operations and also foreign for the been that well market that of acquisitions. continuing include currency as and are current does share not current rates that as assumes acquisitions levels current markets future

With that, the to back I will now turn Stanley. call

Stanley Bergman

Ron. you, Thank

any may We are here investors have. which answer questions to

So, Operator?

Operator

[Operator the from Please proceed with question And Anderson Instructions] your of you. comes Thank line Evercore first ISI. the question. Elizabeth with

Elizabeth Anderson

so for the long-term have Hi, one question. guys. Thanks I maybe term much question. and question shorter one

fair sort And ability of of the States? broadly capabilities about, similarly, Thank -- ex medical, so you longer I terms think that? you plans the your in in of the this wanted when am do across understood, shorter much. moved that sure those adjustment bringing sort like, guidance S.I.N. sort those and obviously In terms implants something are then we whether of quarter then portfolio? guidance push question, your knew to of like the to for or that And interesting example, with last into for across or very products these was and might for take obviously, new And more of updated your sort understand in. trying new quarter. it’s down How I question, you adding new geographies United you make I this the just because just value the my term term terms long what to how all the was of

Ron South

question. your take respond will the question to and will Certainly, Stanley first Elizabeth, I second

much guidance. weren’t to So our it, either. costs didn’t have something how the We like going be acquisition re-measurement for definite was contemplated our in sure were a gain just we amount we

have amounts a exhibit as offset -- those of realized largely year-to-date ultimately, basis. higher realized kind once demonstrated that also those re-measurement we net the press on the and to gain So, we in we have the release, expenses

effect the take want guidance the does to those if question. contemplate Stanley, of So, items. yes, our second And you

Stanley Bergman

portfolio some Thank S.I.N. is Implants, part approved received pretty week extent by to Implant System. important fact, land DSO whole in and the in the are already interested last we, where are S.I.N. in well not U.S. but the were selling particularly of the decent being that able our to DSO you. by a the customers Elizabeth, line, coincidents significantly

and now, puts some lower the United more piece markets, the on puts we a positioned economic in side some transaction also other well extent, see we in whole although a very It S.I.N. next to will product the were now or Camlog not in I very at competitive now -- and year in think because Biotech us able market believe position the them, some BioHorizons us U.S. still implants we of than position actually brands, in and are selling are slightly the Camlog States. some sales. I a I if launch portfolio premium but we in competitive line to S.I.N. Different of all segments, starting definitely with be of believe so, to maybe missing a our are the major price a is and

Elizabeth Anderson

helpful. more that And is should of portfolio Shield a more for that that that’s and can later line sort about across XXXX similar year we broader type as of -- as or well, occurrence? a of this push time your you sort think of of then a Very

Stanley Bergman

No.

the ago Shield about with or West And offering East I Coast think mostly Prism business was limited which we that portfolio. a year ago, or Coast puts with care two acquired the us was years had. a a into Prism broader portfolio. missing an so Shield relatively wound

one-time costs. quickly. course, taken in nice should believe to create able costs, way. our start adding XXXX, There guidance, in I synergies relatively we So But think accretion on be are account we of which we the we integration, in into mostly have a will

big that didn’t an been perform we have and This services. has us customers wanted to our area IDN our customers, undertake these really of kinds

small offering have and didn’t two homecare the between IDN these products to one we area, good in business. area great we soon, New physician service have -- our care announce we have in a and in home full pretty will to really we another DSN a extension the hope acquisitions for We but be will the urgi York one capabilities that which and

Operator

And Vazquez Blair. with Brandon comes of your from Please with question next the proceed the William question. line

Brandon Vazquez

everyone. one on macro level and Can you in high Hi, about for pretty equipment today? just U.S., think on low consumables but the question maybe of taking kind the Thanks digits. guys backdrop. a globally are the stable Maybe strengths and in environment you first maybe then strong weaknesses some question. talk the I where seeing looked little single weaker international looked

the these playing are how macro curious all side? out So segments side on dental from the

Stanley Bergman

Yes. for Thanks that question.

side what perfect. the returning I believe team to That’s dental office data there general. in are not Consumables, the patients on dental is stability On are in people side. believes the if macro -- North our is America,

after so you throughout if the in look quarter traffic of some steady patient of survey and and we up studies, quarter the volatility -- at latest recent in second But and first the the volumes ADA had course, XXXX, some we and quarter suggested first analyst that picked also the -- reports of it XXXX. we

that was And a from good point is of so good. it appears our month. view, July, flow patient

that, One. up also from described by suggests Our Schein what I again is e-claims e-claims just have data data backed Henry

at further, continue to in well view, implant for on a endodontics. least in sales of point grow our bit you North America, from little If same peel

trends. of times similar showing is business aligner small Our

Europe because summer -- slightly in look when the to closed. now is international. are at in that month we It’s largely tepid it’s the international, summer hard If more months you tell, when

suffer strong because trade XXXX from strikes in Having XXXX. comp the we the in of said okay. the point would in quarter in had We in a second that, had quarter pretty view, because France. say the of of did second numbers Germany we I is

our tell. pretty in seems August of to the somewhat in But from vacation Patient traffic be don’t Germany, steady. We month steady. now, is it’s outside is U.S., staff much a to of at all. it’s our But checks, This is There to deterioration again, tell which what Europe, really shortage. very market the see biggest is of July, hard exactly a Germany. it’s and happening hard

be side. it could fact, In the positive on

more. are okay. a and did generally, XX% bit have year, last a dental So, little growth. medical We medical side high almost the comps on

is pharmaceutical dollar medical time, we to side more going the the some to doesn’t going impact profits. products, There forward. did is at specifically the absolute as growth -- that generic caution not present the kind So of on trading

I business is think is medical out the the COVID. least you of at as of visits was But take we to And I medical think ASC flu, last first where if in with half it think, is back because that year I the experienced before unusual stable well.

I on think the market growing. share I is other our believe hand

to units’ specialty lower from covered from again, view. specifically products, DSO the is point I least side, our It products in from of On call, at customers. our we have trading our view, and priced the see point think, this we don’t of any major impact

markets think moment. in comfortable I But stable quite we are and this are our general, at

level. backlog again building quarter was in the to at where it similar and equipment on year-on-year North America pre-COVID international is to pleasing, on the last side Our up is of end

would view So this you. at around be would Thank our moment. stability say that I all

Brandon Vazquez

one you quick much. maybe Thank very Perfect. for one and Ron. One other --

we We you guidance to we make ex is of are stabilize some are growth and Can you. trying where of given at can and kind in be maybe can to looking the more that as on dynamics underlying understand the of I just may COVID -- EPS return COVID already clear. clarify, our part Thank sure you we normalized are to call, am kind and what PP&E is but and XXXX about talk rates? kind asking what XXXX why of models growth just sales can have PP&E this based you to on

Ron South

Yeah.

to $X.XX PPE headwind $X.XX year sales. still of impact and contributions is $X.XX versus full year $X.XX on expected prior COVID-XX includes EPS from from Our kit an the guidance and to that sales test

-- standpoint. from a those So remains unchanged that guidance

we expected adjusted margins the haven’t had the into products PPE $X.XX on $X.XX assumptions have we to because the sales, original built our of of better-than-expected that was on revenue those our guidance. headwind While adjust some to the

Operator

Johnson question question. line with proceed next from comes the And your Jeff of Please the with Baird.

Jeff Johnson

stuff I Thank on little basis as down lot morning, The number, the bridging Consumables, consumables to with was that that really year last any survey first think your a this quarter come kind you. just inflate X.X% the other a Omicron though, fits change did X.X% in guys. dynamics? would think, X.X% X.X%. our the from Good like that Stanley, quarter quarter, helped fairly of quarter Thanks. dig organic first last on was the to I you that’s comps market consumables stable, there as that an from data maybe first well. deeper this the it Do to ex-PPE American factors Any described North in you comments. the of quarter? pricing quarter number,

Stanley Bergman

question, Very good Jeff. for Thanks asking.

fourth XXXX I the out bit think cut-offs. was the quarter because of XXXX average in certainly of first little of less the take and X.X% leans it growth higher but quarter and a a you quarter, need the or more first to apples-to-apples. of It

have we past. in I covered the that think

necessarily gone Maybe certain in in consumable up. products some the has from pass-through. the individually They of would not I sticky brands the also suggest world, are manufacturer dental muted. have that inflation arena

necessarily not able are not these all are manufacturers -- increases. price hold We the to consumable

keep well, there prepared those are of are time, same or some prices. corporate the doing of movement prices towards brand/generics, and smaller some the to even brands At where reduce manufacturers is a

quarter perfect hard of mix. you the a to give measurement basis very one it’s So on

in there’s I for into account the educated quarter coming take DSOs the particularly past. account the midsized this say deflation been is larger a lot DSOs would fact from than prices. the I more and the for to-date fourth and are take I But would XXXX that merchandise And who the into would generally cut-offs in some consumers

not is our per This general of margin DSOs. margin our impacting to really the mix se,

there’s nuance in of just what So a said. lot I

is much. happens my described quarter going fourth trend I what change see Let’s that the third sense in is not quarter. But and just the to

Jeff Johnson

to was All right. That going Stanley. my follow-up, be

just steady a of more follow-up X% And you was there? the is am kind dilution well, it or on we line, on gain. is a taken actually I amount. unchanged we that the line non-recurring this I on and the Ron, quarter -- So of your gross -- one-time that $X.XX, step the deflation to on below can above think, there hold is have think XX% sorry, then, to The from down come

You been this impact are about a close being talking acquisition year. activity from net to flat

been year? or understand you So, Thank If had would to essentially, have for acquisition that guidance changing gross quarter, provided flat? your also guidance net that? your are last Just the net you you. not wanted that

Stanley Bergman

clear, of impact on the for wasn’t tell, -- specific branded Jeff, it’s whether kinds deflation, or to going other generic products. price what exactly or be I reduction it’s is maybe hard to switch specific of manufacturers as I products to

Yeah, than sure am much different I not in but are swing, it’s XXX-basis-point, more we to I that. doubt, XXX-basis-point XXX-basis-point, maybe

I to don’t So think inflation be the going significant consumable in is dental business.

to or may but I in Units holding are slightly more we think go less that steady. down it deflation, range. are

in context so our because dental positive be specialty growing material of growing, point of margin brands view, a doesn’t that, consumables impact we our in products our way sales a manufacturers. way that have on of the some and the are from corporate of business, our Of said the whole may the business really it’s and consumable smaller material are total not in Having our although impacting specialty an course, offering.

Ron South

the all first to year during second -- expected answer far we amended referred to $X.XX the to guidance that this the we from your is so effect The question, acquisitions biotech. but announced of dilutive Jeff, year. we for that $X.XX, we to the have And now holding when the it that $X.XX quarter reference was to after $X.XX part the specific are

we largely re-measurement that, we quarter second the by well. expenses, offset from that higher-than-expected acquisition recorded have which are gain Apart in the as

it So captures and of of holding of the set aside all purpose we acquisitions the kind of components $X.XX people today. and of are now that to could C that to that have dilution, to press so release, have $X.XX see the but we was the announced those Exhibit we the

Operator

with And Piper line proceed question. Jason the your of from next comes Sandler. question with Please Bednar the

Jason Bednar

step-up from Hey. transaction. gross Jeff down. just multiyear first around the I highs -- on margins. taking still inventory maybe of are some Good starting mean, But maybe hanging morning. track actually Biotech so, costs kind Thanks follow-up was are the the that on what maybe Ron think despite there Dental I for question. those going will I

deal So have much guidance to few in even reaffirmed helpful. are that terms can that a numbers, there hitting a step-up transaction about what how Anything be And S.I.N then of quarter is rough earnings? you from that and us may and some would today, is the nickel, inventory pennies, you could on the absorbing, quantify the you how in hit it a give gross dilution dime? think margin with your absorbing detail dilutive

Ron South

The will one the well, we have I be the the and charge as in will in XX-Q first. Biotech for $X it that was million. start quarter disclosed second quantifiable step-up with

real gross not So a significant margin. effect on

as going of a $X.XX is their but There’s turn that S.I.N, S.I.N, step-up absorbed it to In $X.XX. quickly. within also be on they inventory to terms don’t

So we of effect. don’t expect it to quarter-to-quarter an have dramatic as

I without modeled that kind dilution S.I.N tell to within that can disclosing it the that, $X.XX. So you on absorbed is $X.XX of

Jason Bednar

XQ then on about I does go for follow-up need there, $X And steady XQ as next we a and or how guess, just just for that quarter two forward that model move we or Okay. million, gross quick $X to think million to the as higher the is margins…

Ron South

Biotech…

Jason Bednar

the … year half for the back of and...

Ron South

twice year. you sorry, quickly, just inventory our am churns about Biotech a -- answer Biotech I to

quarter So we up have that about another left. step inventory of

be $X another move from So QX will in that. be we it to able and will million then on

Jason Bednar

iOS. you maybe into you of high-tech Could towards holding sounds mentioned like Got it’s we backlog, it. the starting back about but I printing on seeing But today? digital some your on assume better that’s you anything the or see that side recovery to milling of mostly it’s results in or imaging the influencing leading? would steady, to equipment high-tech just shift the And comments XD you down wondering it of areas Perfect. maybe drill are what equipment. are think starting that’s composition then if as any

Ron South

Yeah.

our pleased equipment traditional growth on equipment remains North LCI the We with this -- an high at of of are basis America had. I very environment growth especially the was the backlog. high-tech the we was equipment XX.X% movement and growth the traditional the beginning end of LCI that to from quarter of in North in quarter. with identical virtually America some on It’s equipment X.X%, the in of no mean, almost very on

indicative demand So of ongoing strong for equipment. it’s traditional very

On have the we some still high-tech it’s headwinds on scanners, side, price related. but

scanners. that’s they We the have do us but I is year-over-year down down XX% down, XX.X% on are pricing a revenues on good and matter. values We really XX.X%, think on, for am -- the scanners, are I restoration some getting well, scanner digital the revenue are down were but sales sorry, still

we little Having we some pleased did It’s a across on single-digit said high-tech of growth. some are achieve of from which kind with low did growth, really equipment, -- we bit that’s that, but Board. high-tech coming and growth get single-digit, the very growth,

are mentioned that’s some a categories, low in growth growth and in off helping category. coming all providing nevertheless You us printing. of some they with lot relatively basis, Those some the are growth mills, the XD but

Operator

comes Stifel. the Jon question. your question And Please of proceed with the from next with Block line

Jon Block

first just dental Thanks, morning. specialties. on question Great. the Maybe guys. Good

maybe you on that share of overall shorter your investments I internal XX.X%. pardon shook have the Was above I a got those to reported the number ask number that will but me, within for that the it think gains share down how you little road, division? missed Thanks. below internal I ongoing then going have work robust it, whatever gains, internal just was? was I follow-up. precise do don’t now out thoughts know further bit with more go a And implant or in portfolio a if then up growth some And to implant forward? and implant just

Ron South

we our order Investor elected Certainly, growth. our had with specialties to reference to be sales around specialty message of growth kind to I the consistent mean have total I think, Day. to in stick we in with

We are more reflective we sales products. -- total opposed to of of on for growth as that So really portfolio focusing growth. we LCI sales our it’s strategy are think

We bullish remain on sales. very implant

very had I think internationally in as the specialty North wanted systems. gotten on strong as side us, add you side? outside specialty the on -- Stanley, we implant anything America, remain inside for both to that U.S. we growth the have and Endodontic sales on well

Stanley Bergman

was that you Jon, -- Yeah. for question. that thank

mid-single-digit it’s a and lower premium quarter. growth of than, that versus look America, you that’s in premium perhaps, at premium just at -- price If slightly our a BioHorizons first implant North implants, sequential delivered our Camlog the remember sales a competitors the improvement area,

implants, Remember, low remains we implant good. dental part. favored business the demand China. in a very Internationally, demand Generally, small for have price again,

Camlog, on we very But well Switzerland. Germany, Austria biggest BioHorizons well for very Medentis which lower end. in say, must and the our is I in is Although did also which Germany, did market,

very tell doing So, growth from overall, the to to quite data that our compared we excited how are actually, in business. we about comfortable, implant you are Hard the association The others. terms of available is quarter. we and euros, sales gained But yet of in in the have my premium market share, units is dollars. second implant reports for terms sense both not

missing specifically with midsized North question our to it believe ones. the S.I.N enable be the mix Elizabeth will competitiveness end America. we of line, competitive a as area, in asked and piece earlier of this were ones a product in highly large So to relates on, the in lower us DSOs, I

on. I to to go the ID, just back want earlier sensor the DI question

time are relative priced our I reported think that are a particular on DSO brands. some The relative they deflation so DI amount. more this lower a year equipment out. if take And that really sale substantial to last side, returning that that brand, selling more of but less it’s you not sales there were or brands still deflation, DI to to and include is of to there larger we the and but a not the significant we large where units are

Jon Block

to helpful. question. second a That was Thank And ask try maybe will I tight you.

to a Just was maybe a for division, Day. And You Thanks. about XXXX, ex-PPE see a just that the that’s couple shy know I a with the balance about the But the standing that and know but you long-term expectations. on our versus the still more unfolding us But medical, of Analyst way should X%. in the on ex-PPE, that of -- maybe I flu just of there of think you comps is are COVID. come ex-PP&E maybe, thoughts how at talked year-over-year term, we XXXX? little again balance up talk headwind. quarters, was up intermediate couple COVID for past

Stanley Bergman

Yeah. you It’s to very specifics. give hard

are well doing think we I of in existing our units with customers. terms

the the or because relative the urgi of and to We visits is type centers products, we that bit customers. with of whole sell flu-related be hard of area to visits to quite steady the test. and unrelated the products related test it gauge, a gaining of impact seasonality But go normal flu are visits of the medical

wrong It’s At -- I it want but really, a wouldn’t this little bit. the you I this, steady. seems in moment, want is the pretty to way, say COVID to wouldn’t view growing

more going So people things check to the to out. offices are physician

vaccine But injectable July. a give on tablets don’t a a of not So bit number. was lull July can’t conclusions. not We quite to There our better. had and pharmaceuticals of impact you the was generic side. many side, lot capsules, equipment business. lot hard good But a sell you a sales. We inquiries specific is draw in The the in it’s

meaningful medical medical way. business. basis a whether good good business There it’s believe a to share. continue overall, or about puts business the our don’t I overall and it’s we think a many X% on or takes are X%, in market feel and But growing impacts we are very in our and X% So unit so profitability that that

Operator

proceed We question of is with line live. A.J. Credit question. line from have A.J. time for the Please Rice one with Suisse. your your coming Hello, last

Sachs. will question question. your Nathan Please the final Our proceed come with of Goldman Rich line with from

Nathan Rich

I for Thanks fitting will end. upfront. in ask the me at Great. both

think, you. cycle margin outlook remodels quarters? through the we a I in? with some are outlook you and balance to acquisition go timing over you in about current between and of to back that on been equipment the backlog we kind I to clarification curious practice wanted expenses respect that be It XQ, the has the year the relates I constraints. of the the commentary stabilizing. especially demand, are equipment are what of coming and around supply America environment down, as traditional and thinking for just First, two how those the it to on I’d of And North maybe any though, guess, formation Thank and just seeing potential as margins, in XQ Ron, commentary between obviously then,

Stanley Bergman

equipment, the I that good quite is and believe demand Nathan, So, on steady.

ago Some when to some of leveraged, to been or invest determine months a pause have whether they of the we really perhaps, larger DSOs should continue looking bit There not. these a invest. a may are few of highly DSOs,

are which midsize But I the smaller I about much. there for is investing. DSOs largely well, growing, and say, would had overall, and not bigger I is of there. that a are some equipment as think size the our largest I am I growing demand But, for that dental so operational demand believe or they them talking issues, the one practitioners care believe But traditional two behind are them. are

year, particular in important DI call. last -- movement to The unit that growing to the area just switch this had as look area more way, very people area, we the realize there’s are DI not Yes, in we disclosed one our at material in comp to the but of a lower of high discounting on the any extent, some terms units, priced the side, -- in scanners digital on to units.

And a back not was, of steady. a as that demand. a the it sort little XD And say, trade-up, tick is helped as mills, quite bit. It’s I printing up hot hot, bit. There’s a would are

the in away lab at big look is movement side. numbers, general, into dental player from are a digitalization. our There a on we you If consumables

is to of equipment. some extent, that and impacting, increase an So in in also the consumables sales resulting movement

provide practices is to which their indicative of But the and the what end States, of overall, in to invest I desire more the equipment I similar United digital of our dentists at in think, backlog to quarter, better is last think, pretty efficient the make practices, outcomes. was it

to at at way AI. another look nice is that is look way to A -- in even the investment

have I solution, and practice. our there. growing units believe in are relates those all in AI the embedded to Henry -- we it practitioners most -- integrated the software desire invest primarily to This their One where invest to and is our software Schein tied have We the of of

shortage growing although support issues large of I a complex stable, Day. is there But Labor So sort market and hopefully, the will different after view, quite where think out France from stable in international countries. is our like different it’s is is itself to dentists, and Germany, point of countries in the and there government

in The stable, is overall, the a bit of are Australia this of quarter. is Canada markets There’s of stable. Brazil for some and little incentives pretty ups stable. because rest

markets are would solid I So the say, stable, pretty overall. dental

Ron South

in to just backlog. the course saw the has I constant add very Nathan, before, one backlog And -- North stayed a on our of we over thing America the pretty like The quarter good sales and mentioned growth.

to it I quite the better Yeah, I get just as revenue end backlog like reduce they equipment frankly, of timing just increases backlog to that would it’s but so where would our that come would -- that is quite down opposed those business backlog for the -- the some, equipment the replacement. market, that situations for capacity give not for us, frankly, their lift for in more new to in and is quickly it customers

are still experiencing for But fairly we backlog North America, down. backlog. to right in So a we that we come now, would like consistent up

can a at levels QX, margin on question we I do continue margins, especially your of the that, level, terms at. gross QX In are think we at

it’s I that think year. growing in products can continue our of business get back indicative half of importance portfolio, as overall the of I technology our into specialty well with we dental the in the and growth as the we that the as think

that. Of There things course, can there’s that always broad a are portfolio. it’s -- impact

example, than margin quarters slightly what a quarter equipment for overall QX be tend to at margins tends lower and heavier is than our For now. other sales to be sales those right

little the we margins can bit, clearly additional but bring that. a sales, that in down So take exchange for will

margins is have into -- seen that continue in the So to the of second be able will year year. that’s the we that expectation -- the we of with I don’t half half first think my the I know general

Stanley Bergman

in So, thank you. I you have know are everyone outs, gone making of time. The are the X we businesses, calling Again, business, software ins specialty our core a and markets business, in. our the subtle for very lots steady, progress pleased businesses. over, the both minutes of we points. with over lot Thank we are

we where are generally, are comfortable we today. with But

guidance. reaffirmed have We

and and Sorry acquisitions, about the expenses complexity generated income on test that the costs area. PPE and related and in

for But make be try next see this our clearer is year. clean -- as will But business hopefully, relatively simple will remainder confidence we I year, it and to the as the I justified. the think, a you make we will think our possible should year to it investors that of for in

for We the tremendous calling are our and team calling that thank out So our and course, been team. in confident available other COVID has investors you as and of days Ron work next for plan. you in, come speak all implement you to of the side the Graham over the of with strategic we thank for Thank to in. undertaken remain

thank your So summer. have you you a remainder all very of great much. and Thank

Operator

does that and today’s ladies gentlemen, teleconference. conclude And

your lines You and day. at participation may a time. Thank disconnect you this for have great your

Henry Schein (HSIC) 7 Aug 232023 Q2 Earnings call transcript