The paragraph introduces Henry Schein's Third Quarter 2024 Earnings Conference Call, hosted by Graham Stanley, Vice President of Investor Relations and Strategic Financial Project Officer. Participants are in listen-only mode, and a Q&A session will follow. The call features Stanley Bergman, CEO, and Ron South, CFO. Graham Stanley notes that the call will include forward-looking statements subject to risks and uncertainties, which may impact the company's performance. These statements are qualified by cautionary notes in SEC filings. The discussion will cover both GAAP and non-GAAP financial results.

The paragraph describes Henry Schein's use of non-GAAP financial measures to provide additional insight into their financial performance and facilitate period-to-period comparisons. These measures are detailed in Exhibit B of their press release and on their Investor Relations website. During a conference call, accurate as of November 5, 2024, the company emphasized their commitment to their BOLD+1 Strategic Plan that has led to growth and efficiency through high-margin products and services. They are seeing market share gains in their dental and medical distribution businesses post-cyber incident, with stability in North America and rising customer investment in Europe, Australia, and New Zealand. Stanley Bergman extended thanks to participants before discussing the company's performance.

The paragraph highlights strong growth in implant and endodontic products in Europe, Brazil, and North America, particularly after the successful launch of the BioHorizons Tapered Pro Conical implant in the U.S. The company exceeded its financial targets, with over 40% of operating income from high-growth, high-margin businesses, and expects to surpass this target for fiscal 2024. Recent acquisitions and product launches are boosting financial results, aligning with a successful restructuring plan. Capital is being returned to shareholders via a share repurchase program. The company's non-GAAP EPS guidance has been raised to $4.74 to $4.82. A global e-commerce platform was launched in the UK and Ireland, with a U.S. launch expected next year, and has been positively received. The dental distribution business shows stable global patient traffic, with North American dental merchandise sales growing slightly, despite PPE price declines and a shift to lower-cost and owned brands. The company gained North American market share in dental merchandise and saw international sales growth, especially in Germany, Austria, France, Brazil, Australia, and New Zealand, as it recovers from a previous cyber incident.

The paragraph discusses the sales performance and developments in the dental equipment and specialties markets. North American dental equipment sales remained steady year-over-year, with a slight growth in traditional equipment but a decline in digital equipment sales, partly due to timing issues. International equipment sales showed strong growth in parts of Europe, Australia, and New Zealand. In dental specialties, there was mid-single digit growth in implant and biomaterial sales, driven by new product launches like BioHorizons Tapered Pro Conical implant and SmartShape Healers abutment line, particularly in the U.S. The orthodontic business is undergoing restructuring and transitioning to the Smilers brand Clear Aligner in the U.S. and Europe.

The paragraph discusses the performance and strategic developments in the dental segment of the company's business. Despite a decline in orthodontic sales, the company reports mid-single-digit growth in its practice management software and revenue cycle management products, driven by a 20% increase in installations of cloud-based solutions like Dentrix Ascend and Dentally. The transition from on-prem to SaaS-based solutions has affected revenue recognition. New features like Reserve with Google and Eligibility Pro have been introduced, boosting customer business growth. The dental segment is emphasized as a priority in the company's BOLD+1 growth strategy, focusing on leveraging customer relationships and offering integrated solutions. Successful customer transitions to products like BioHorizons, Dentrix Ascend, and Henry Schein are highlighted as part of their differentiated offerings and value-added services.

The paragraph discusses the company's third-quarter sales results and financial performance. The company experienced incremental sales growth due to a coordinated go-to-market strategy, despite decreased demand for respiratory diagnostic products, flu and COVID vaccines, and the shift towards generic alternatives for some pharmaceuticals. Global sales reached $3.2 billion, with overall sales growth at 0.4%, driven by acquisitions, but negatively impacted by foreign currency exchange rates. Internally generated sales decreased by 2.6%, partly due to lower PPE sales. The company's GAAP operating margin for the quarter was 4.94%, a decline from the previous year, while the non-GAAP operating margin was 7.64%, also reflecting a slight decline.

In the third quarter of 2024, the company experienced growth in its dental specialties and technology and value-added services businesses, but faced reduced income in distribution due to lower sales following a cyber incident last year. GAAP net income for the quarter was $99 million, down from $137 million the previous year, while non-GAAP net income was $155 million, compared to $173 million last year. The quarter included a $19 million pre-tax remeasurement gain from a controlling interest acquisition, enhancing profitability. Foreign currency exchange negatively impacted EPS by $0.01. Adjusted EBITDA decreased to $268 million from $278 million in 2023. Global dental sales were $1.9 billion, marking a 1.6% decline. Local currency increments(LGI) sales fell by 1.6%, or 1.0% excluding PPE, with international LCI sales rising by 0.9% but falling by 4.9% in North America.

The paragraph discusses the sales performance of a dental company's various segments. Excluding PPE, there was a slight decline in global and North American dental merchandise sales, with slight growth internationally. Despite a generally flat dental market, the company improved its market share. Global dental equipment sales rose by 1.8%, remaining flat in North America but increasing internationally. Dental specialty product sales grew slightly, driven by strong implant, biomaterials, and endodontic sales. The company's orthodontic business faced challenges due to restructuring and transitioning to a new product. The sales growth now matches internal sales growth following the anniversary of their acquisitions. Technology and value-added services sales rose by 5.1%, supported by an acquisition, despite a small internal sales decline. The reported growth is considered the most accurate measure of the business's performance.

In the third quarter, specialty products, technology, and value-added services accounted for over 40% of the company's total non-GAAP operating income. Global medical sales reached $1.1 billion with a growth of 2.9%, though LCI sales decreased by 4.8%, primarily due to reduced demand for respiratory diagnostics, flu, and COVID vaccines, and a shift to generic pharmaceuticals. The Home Solutions business experienced strong growth driven by acquisitions. The quarter incurred $48 million in restructuring expenses, part of ongoing initiatives expected to save over $50 million annually. GAAP results included $10 million from a cyber insurance claim, with expectations of collecting a total of $60 million. Additionally, the company repurchased 2 million shares of common stock for $135 million, with $455 million remaining authorized for future repurchases.

In the fourth quarter, the company plans to continue share repurchases. The third-quarter operating cash flow was $151 million, compared to $231 million the previous year, with year-to-date operating cash flow at $644 million, up $112 million from last year. The company cannot provide a GAAP estimate for 2024 restructuring costs but mentions severance and facility-related expenses. The 2024 guidance excludes potential future acquisitions and share repurchases but includes current operations and completed acquisitions. The company expects a 4% to 5% sales growth in 2024 over 2023, slightly down from previous guidance of 4% to 6%. Non-GAAP diluted EPS is projected to be $4.74 to $4.82, up 5% to 7% from 2023’s $4.50, due to strong third-quarter results. The estimated non-GAAP effective tax rate is 25%. Adjusted EBITDA for 2024 is expected to grow in low double-digit percentages compared to 2023's $984 million, with adjusted EBITDA growing faster than non-GAAP diluted EPS due to higher interest, tax rates, and depreciation linked to strategic investments.

The paragraph summarizes a financial discussion during a company's earnings call. The speaker concludes their remarks by outlining expectations for 2025, including plans to provide guidance in February. They anticipate modest improvements in dental and medical markets and aim to outpace these markets through new investments and product launches. The company is progressing towards its restructuring goals, which will help mitigate increased depreciation expenses from new e-commerce and technology investments. The e-commerce platform, set to launch in the U.S., is expected to boost growth. After these remarks, the session transitions to a Q&A, with Elizabeth Anderson from Evercore ISI asking about current dental and medical market trends and one-time financial impacts, and how these factors influence the company's annual revenue guidance.

The paragraph discusses market trends in the dental industry for the fourth quarter. Stanley Bergman notes a shift towards lower-priced alternative and owned brands in the United States, which affects sales but not profitability. Merchandise units have increased slightly, leading to stable or slightly reduced dollar sales. October's sales trends were consistent with September 2024. Strong growth is noted in implant and biomaterial sales, driven by specific brands in the U.S. and Europe. The company is gradually regaining market share lost during a cyber incident, with improvement since early 2024. However, there has been a significant decrease in glove unit prices.

The paragraph discusses the company's outlook and considerations for upcoming financial performance. Ronald South notes that they've looked at market trends and stability leading into Q3 and October, with a slight shift towards lower-cost products. The company expects a potential boost in Q4 due to DS World, with equipment sales typically peaking in this quarter. They are also seeing growth on the implant side. On the medical side, there's close monitoring of the flu season's timing due to previous softness in diagnostic kit sales. All these factors influence their guidance for Q4. Jeffrey Johnson from Baird asks for clarification about expectations for 2025, noting anticipated modest margin improvement, potential market share gains, and projected revenue and EPS growth rates.

The paragraph discusses a financial analyst's comments regarding company guidance for 2025 and third-quarter earnings. The analyst, Jeffrey Johnson, suggests the company might be subtly indicating the need to lower expectations for next year's numbers. Ronald South, responding, clarifies that while the company hasn't provided 2025 guidance yet, they are considering market trends and their own market share gains before issuing it. South emphasizes the importance of momentum from Q3 into Q4 and 2025. Johnson then analyzes the third-quarter earnings per share (EPS), noting an $0.11 remeasurement gain and comparing it to gains and costs in previous periods. After adjustments, he observes a decline in EPS and core consumables for the first half of the year, estimating a mid-teens year-over-year decline in EPS for the third quarter.

The paragraph discusses the financial outlook and expectations for margin improvement in a business, focusing on two main factors: restructuring savings and rising depreciation costs. Stanley Bergman attributes a gap in adjusted earnings growth to the recovery in distribution market share. Kevin Caliendo inquires about whether the anticipated $75 million to $100 million in restructuring savings by the end of 2025 will offset higher depreciation expenses. Ronald South responds that despite the pressure from increased depreciation, the restructuring is expected to lower operating expenses sufficiently to improve margins, particularly if revenues grow, especially in the distribution sector.

The paragraph discusses a company's market recovery efforts and expectations for future performance. They anticipate operating margin expansion in 2025 if they successfully execute restructuring initiatives and assess the current year's momentum. Kevin Caliendo asks about recaptured market share in the third quarter and whether it will provide a tailwind in the first half of the next year. Ronald South acknowledges that their market share has increased following a cyber incident recovery and expects higher distribution market share in 2025 compared to 2024, though recovery has been slower than anticipated. Jonathan Block questions anticipated improvements in the dental and medical markets, with the company expecting to gain market share despite challenges over recent quarters.

The paragraph discusses the factors driving the improvement outlook in dental and medical equipment sales, particularly in the United States. It highlights a strong interest among dental practitioners to invest in digital technology, which enhances clinical workflow and ties into electronic medical records. This interest persists despite fluctuations in the market, such as changes in scanner availability from major suppliers. The role of interest rates is noted, with potential rate reductions possibly boosting demand even further. On the consumable side, there is a trend toward purchasing lower-priced branded products, which affects margins but is offset by the demand for higher-priced in-house brand products. Overall, the dental implant market appears to have stabilized from the company's perspective.

The paragraph discusses the current market conditions for a company involved in the value implant sector, noting stability and a positive trend in Europe and other regions, despite earlier challenges. The company expects growth in its implant, endodontic, and orthodontic businesses, with a global expansion of its Smilers brand. Market performance varies with factors like flu season impacts and the availability of generics. They acknowledge a transition from on-premise software sales to SaaS subscriptions. Overall, the company perceives a generally positive market outlook, with specific success in home care and software areas.

The paragraph discusses the positive performance of an orthopedic business, especially in ambulatory surgical centers, and the success of implant sales in North America. The Tapered Pro Conical implant is mentioned as a recent introduction, contributing to market share gains in the U.S., supported by effective sales efforts, competitive pricing, high quality, and endorsements from key opinion leaders. European markets, particularly Germany, as well as Brazil and France, are also performing well. The business continues to gain market share, with export sales causing minor fluctuations. Overall, the BioHorizons product line is appreciated by DSOs, contributing to momentum and growth, especially in the U.S. and Germany.

The paragraph discusses the potential impact of global market dynamics on sales and growth expectations for 2025. It highlights that while the rest of the world isn't significantly material, market share can be affected by exports and performance in key markets like Japan, Brazil, and France. There is minimal participation in Germany, focused on low-end, high-quality products. Jason Bednar from Piper Sandler inquires about growth assumptions, particularly concerning volume and pricing for 2025. Stanley Bergman explains that aggressive competition from second-tier manufacturers and a shift towards own-brand products might affect sales, but profits remain stable. In the European market, there's a demand for high-quality, lower-priced equipment, which has been beneficial for sales and margins.

The paragraph discusses the challenges faced by the company due to consumer resistance to post-COVID price increases and a previous cyber incident. Efforts have been made to regain affected customers by reorganizing the sales and telesales teams, focusing on smaller periodic clients, and enhancing e-commerce and social media activities. Despite some challenges, the company is seeing stable market conditions and is focusing on high-growth, high-margin businesses and its corporate brand products, which make up a significant portion of operating income. Additionally, they have achieved $50 million in cost savings, as mentioned by Jason Bednar.

In the paragraph, Ronald South discusses cost savings and revenue impacts related to their business operations. He mentions that cost reductions are being implemented carefully to minimize any negative effects on revenues, particularly in response to declining distribution revenues and slower-than-expected growth in certain technology areas. South is optimistic about their ability to invest in new products and maintain a lean approach heading into 2025. He also highlights expectations for dental market growth, predicting it to be in the 2% to 4% range, with a closer estimate of 2% for the next year. Factors like lower interest rates and expansion in dental supply could positively influence this growth. John Stansel from J.P. Morgan Chase then asks about trends within the medical sector.

In this paragraph, Stanley Bergman discusses the stability and growth of Henry Schein's medical market, noting that aside from the fluctuations due to respiratory illnesses and flu seasons, their core distribution business remains stable. Despite a cyber incident that led to some customer loss to drug wholesalers, they are regaining those customers due to their unique services. Additionally, they observe growth in their orthopedic and home care sectors, with recent acquisitions enhancing profitability. The movement towards Ambulatory Surgery Centers (ASC) is positive, with upcoming reimbursement increases for foot and ankle procedures. Overall, there's an optimistic outlook, particularly anticipated in the middle of the fourth quarter.

The paragraph discusses the performance and expectations for a medical business described as efficient and well-managed, with anticipated continued momentum and margin improvements, although specific timelines aren't provided. There is a need to reclaim pharmaceutical distribution from drug wholesalers, but confidence is expressed in achieving this due to unique services. Additionally, there is a discussion about the technology business, specifically around value-added services and the dynamics affecting reported revenue. The transaction of LPS, completed last year, impacted acquisition growth due to a strong July performance and lumpy transaction timings. However, now that the transaction has annualized, it will contribute to internal sales growth going forward.

The paragraph discusses the transition from on-premises sales to a SaaS model with a monthly subscription, noting success in the cloud-based system in both the U.S. and international markets, signaling business growth. Brandon Vazquez asks about increased competition among dental manufacturers and its potential impact in 2025, as well as updates on restructuring within the Clear Aligner business. Stanley Bergman responds by saying consumers are prioritizing value over brand, impacting national brands and driving growth in their own brands. He notes some manufacturers faced price resistance due to high pricing, particularly in Europe, but expects this situation to adjust over time.

The paragraph discusses the transition of a company's orthodontics product lineup from "Reveal" to "Smilers" in the U.S. and European markets. Ronald South explains that this transition aims to leverage existing distribution infrastructure to reduce costs, as the orthodontics business was not achieving sufficient scale. The Smilers brand is seen as a superior product, supported by additional software from Nemotec, making it preferable to maintain just one brand instead of two. Stanley Bergman notes that it will take a few quarters to complete this transition. The conversation wraps up with an operator announcing an additional question from Mike Petusky of Barrington Research.

The paragraph is a discussion about capital allocation expectations for 2025, comparing it to past years like 2022 and 2023. Ronald South anticipates that capital allocation will align more with historical trends, with share repurchases and M&A in the $300 to $400 million range. There's also a possibility to pay down debt faster due to positive cash flow. They remain open to opportunistic M&A if it aligns with their strategy and business growth. Michael Petusky inquires about the prioritization of M&A in the Home Solutions space, and Stanley Bergman confirms that it is an investment area they plan to continue focusing on.

The paragraph discusses the company's strategy to expand its offerings in the United States without making large investments. They plan to leverage existing infrastructure and access insurance contracts to facilitate growth. The company has built a strong team through acquisitions and recruiting, which positions them well for future growth. Despite a recent cyber incident impacting distribution, they are confident about regaining market share and progressing in high-growth, high-margin product areas. While there is a restructuring effort in a small endodontic segment, other parts of the business, such as implants and bone regeneration, are positive. Value-added services are expected to enhance customer retention. The company is concluding its 2022-2024 strategic plan and preparing to discuss the 2025-2027 plan. Overall, they feel optimistic about their business performance.

The paragraph outlines the company's plans for the upcoming period, emphasizing a focus on capital deployment similar to the previous year, with the possibility of pursuing acquisitions, buying back shares, and investing in minority interests within their portfolio. The speaker expresses optimism about the team's performance and the successful implementation of recent restructuring efforts. The company also has over $300 million available for stock repurchases. The paragraph concludes with well wishes for the holiday season and a note about returning early next year.

This summary was generated with AI and may contain some inaccuracies.