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Health care product distributor Henry Schein has redoubled its effort to provide in-kind donations and grants to disaster-stricken areas, as well as to work with NGOs to proactively supply vulnerable areas with medical and dental supplies—so supplies are there even if roads or airports become unusable. Its Global Product Donation Program has donated over $75 million in health care supplies to health centers and clinics since its 1998 inception. Henry Schein also provides $10,000 in cash grants and $25,000 in products through its Prepare to Care Program to each of five nonprofit partners committed to disaster-relief preparedness and immediate assistance in natural disaster-prone areas.

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Industries included in the sector are insurance and managed care, medical products and facilities, pharmacy services, and pharmaceutical companies.

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CTW.1122.Henry Schein

As with many aspects of daily living, the standard dentist visit was not designed with much consideration for the needs of those with disabilities. For some, the experience may be physically inaccessible; for others, like those with developmental disabilities such as autism, the environment and experience—with its bright lights, buzzing noises, and close contact—can be terrifying and traumatic. Meanwhile, in part due to those challenges, people with disabilities suffer higher rates and more severe cases of periodontal disease, gum disease, and untreated cavities—all conditions that can lead to other health problems. Henry Schein, the dental and medical supply company, began work to address this disparity more than a decade ago, forging partnerships—like Project Accessible Oral Health—to increase training and adapt dental practices to better serve disabled people. The efforts have resulted in provision of specialized services to hundreds of thousands of children as well as a new dental school curriculum, developed with stakeholders like the American Dental Education Association.

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Founded by its namesake as a Queens, N.Y., pharmacy in 1932, the company is now one of the world's largest distributors of dental supplies and other medical goods, operating in more than 30 countries. An ever-present on Fortune's list of the <a href="https://fortune.com/worlds-most-admired-companies/">World's Most Admired Companies</a>, it is considered by many in its sector as a leader in social responsibility. With $10.1 billion in sales last year, Henry Schein moved up six spots on this year's Fortune 500 list.

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F500-2020_304_Henry-Schein

Long Island's largest public company by revenue, Melville, N.Y.-based Henry Schein globally distributes medical and dental supplies including vaccines, pharmaceuticals, financial services, and equipment. The company kicked off 2019 by spinning out its animal health unit in an attempt to focus on its core medical and dental businesses; it ended the year with the novel coronavirus pandemic eroding its business.

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19.CTW20.21.Henry-Schein

Five years ago, well before COVID-19 entered the lexicon, Henry Schein CEO Stan Bergman called on his peers at the World Economic Forum to think collectively about pandemic preparedness. It worried him that there was no organized emergency product list, and no directory of where to get such products when emergency struck. Soon after, Bergman’s dental and medical supply company became a founder and the private-sector lead of the Pandemic Supply Chain Network, a public-private partnership whose members include the World Health Organization, the World Bank, UPS, and more than five dozen health care manufacturers. 
 
The group created a platform to convene responders and exchange information. Says Bergman: “You can’t do it in the middle of a pandemic. You’ve got to exchange business cards well before.” The network functioned well in recent Ebola outbreaks, and in response to COVID-19, it has sourced more than $200 million worth of critical supplies, like masks, gowns, and swabs, so far.

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Henry Schein is a global health care services distributor of dental and medical supplies, business and supply-chain solutions, and tech-forward integrated care solutions. The nearly century-old company operates in over 30 countries and has developed more than 300,000 products, from diagnostics to surgical and orthopedics, including whitening strips, dental implants, patient communication services, and a dual-cuff blood pressure monitor. In early 2025 the company acquired Acentus, a national medical supplier of continuous glucose monitors, to expand its portfolio. Henry Schein has been named among the World’s Most Ethical Companies by Ethisphere for 13 consecutive years.

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Henry Schein (HSIC): Company Profile, Stock Price, News, Rankings

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Henry Schein

henry schein

Good morning, ladies and gentlemen, and welcome to Henry Schein's Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we'll conduct a question and answer session.

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, Graham.

Thank you, operator, and my thanks to each of you for joining us to discuss Henry Schein's financial results for the twenty twenty four fourth quarter. With me on today's call is Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein and Ron South, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to state that certain comments made during this call will include information that's forward looking. Risks and uncertainties involved in the company's business may affect the matters referred to in forward looking statements, and the company's performance may materially differ from those expressed in or indicated by such statements. These forward looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein's filings with the Securities and Exchange Commission and included in the Risk Factors section of those filings.

In addition, all comments about the markets we serve, including end market growth rates and market share are based upon the company's internal analyses and estimates. Today's remarks will include both GAAP and non GAAP financial results. We believe the non GAAP financial measures provide investors with useful supplemental information about the financial performance of the business, enable the comparison of financial results between periods where certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding GAAP measures. Reconciliations between GAAP and non GAAP measures are included in Exhibit B of today's press release and can be found in the Financials and Filings section of our Investor Relations website under the Supplemental Information heading and and in our quarterly earnings presentation also posted on our Investor Relations website.

The content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, 02/25/2025. Henry Schein undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances after the date of this call. Lastly, during today's Q and A session, we'll limit please limit yourself to a single question and a follow-up. And with that, I'd like to turn the call over to Stanley Bergman.

Thank you, Graham. Good morning, everyone. Thank you for joining us this morning. I hope that the new time is appreciated by analysts and investors. And if not, and you would like to go back to a later time, please be in touch with Graham and we will take your thoughts into account.

The financial results and guidance being provided today are consistent with the preliminary financial results and guidance provided on January 29. Our fourth quarter financial results reflect relatively stable dental and medical end markets. We continue to make progress as we sunset our 2022 to 2024 Bold plus one strategic plan, which is now completed. We see that our key goal of and the major target in the plan of 2024 by 2024 generating 40% of our worldwide operating income from high growth, high margin businesses. And let me remind our investors, there's another 10% or so of our profits that are coming from our own brands.

So well over half of our profits are today coming from our high growth, high margin and own brand products. We have confidence in the underlying fundamentals of our business and look forward to advancing the opportunities contained in our updated twenty five to twenty seven bol plus one strategic plan. KKR announced its investment to become our largest non index shareholder recognized as they recognize the potential of Henry Schein. We expect 2025 to be the base year from which to grow and achieve our previously provided long term goal of high single digit to low double digit earnings growth with the cyber incident now in the Rio Mirror. As part of the launch of the updated 25% to '27 plus one strategic plan, we have simplified our organizational structure and appointed Andrea Albatini to have responsibility for our Global Distribution and Value Added Services Group as well as our Global Technology Group.

The Global Distribution and Value Added Services Group includes distribution to the global dental and medical markets of national brand and corporate brand merchandise as well as equipment and related technical services. This group also includes value added services such as practice transitions, continuing education, consulting, financial and other services. The Global Technology Group includes development, marketing and sales of practice management software, e services and other products and related services. We also appointed Tom Popak to lead our global Specialty Products Group, which includes manufacturing, marketing and sales of dental implant and biomaterial products, endodontic, orthodontic and orthopedic products and other health care related products and services as well as management of our corporate brand offering, which is essentially distributed through our distribution group. We expect that these complementary businesses will drive growth by leveraging our current product portfolio across our entire customer base, providing new products and services to our customers and growing our e commerce business.

I think the relationship between each of our groups and the driving of synergies will of course grow sales and related profits. We are also today announcing a change to our reportable segments. This was also requested by investors during our investor survey some time ago and we have now prepared financial statements in accordance with these reports of segments and they align with our management reporting and provide more meaningful information to investors on the business performance. Ron will detail the performance of each of these three groups in his prepared remarks. We will continue to provide information on our high growth, high margin products and services, but these are now included in each of our reportable segments and which and of course it's a key metric for us to drive high growth, high margin profits, sales and profits, very important metric for our twenty twenty five to '20 '20 '7 strategic plan.

We'll provide you with separate data on that. Now let's turn to review of our key business units. Let me start by reporting on the global distribution and value added services group. During the fourth quarter, we continue to see relatively stable patient traffic. Market growth for Dental and Medical products continued to be below the long term guidance range we provided at our Investor Day, partially as a result of customer migration to value priced products.

Now if we look specifically at The U. S. Dental merchandise growth, which was strong, excluding sales of PPE, personal protective equipment and impacted by a low prior year comparable offset by the mid week timing of Christmas. Ron again will give you specifics later in the call. On The U.

S. Dental Equipment sales, which increased double digit and benefited from the deferral last year of some sales in the fourth quarter of twenty twenty three into the first quarter of twenty twenty four as a result of the cyber incident. We achieved strong growth in traditional equipment and parts and technical service. Digital equipment sales also increased with unit growth quite good offsetting some price declines. On The U.

S. Medical business results reflect a late start of the flu season and lower sales of vaccines, PPE and COVID tests. Our home solutions business performed particularly well during the fourth quarter. In January, we strengthened the business as we completed the tuck in acquisition of Excentis. This is adding to our offering of continuous glucose monitors in an area of the home care market buy market that we're quite bullish about.

Now we've increased the annual run rate in this Home Care Solutions business that we entered a couple of years ago to approximately $400,000,000 with significant amount of that $400,000,000 coming from internal growth. Let's take a look now at our international Dental merchandise sales, which grew strongly with good growth in Canada and Canada now is included in the international group, Dental group, strong growth in Canada, Europe, Brazil, slightly softer growth in Australia, New Zealand and Asia. International equipment sales growth was solid, stronger growth in traditional equipment compared to digital equipment, which was again good units, but digital was impacted by pricing, all similar to The U. S, a global trend. But overall, our equipment business was quite good this quarter.

Right now, let's turn to review of the Global Specialty Products Group, which had solid growth in dental implants, biomaterials and endodontics. Core businesses in this group did well. Our new entry into the Orthopaedics arena last year, special well, we did have some Orthopaedic products before, but the significant investment we made last year also performed well. This offset this growth was offset by a decrease in the orthodontic sales and we're addressing that through restructuring largely a result of a product, an important product going or patent. We have a new product coming.

Actually, we have it in place now and it's gaining some traction in the orthodontic field. Implant and biomaterial sales in Europe continue to be quite strong, especially in the DACH region, that's the German speaking region, where our BioHorizons CAMLOG products continue to grow well. While the launch of BioHorizons tapered pro conical implants in The U. S. Is proceeding well.

The initial sales are largely coming from product conversions with existing customers, resulting in modest incremental sales. But we expect the tapered Pro conical implants to be a way to generate business from new customers in our implant business. Overall, our sales of dental implants in the value segment posted very strong quarterly growth. The SIN product line posted solid double digit growth in Brazil. And we continue to roll out the brand across The U.

S. To serve the value segment in the market. Our endodontic sales growth was strong as a result of our expanded sales focus through our U. S. Distribution sales channel of the Edge product offering, as well as some new product introductions.

A little bit more on the orthopedic business, which continues to perform well, including our TriMed acquisition, which is complementary to our medical focus on ASCs and specialty customers, new products in both upper and lower extremities as well as good momentum with a new dedicated sales team in foot and ankle help drive sales growth. So this whole area of specialty is working well for us. We will deal with the orthodontic challenge. But overall, taking that out, the performance is quite good. Now if you look at the technology group, while overall sales growth was low, we had strong operating growth in the business.

Sales continued to perform well in cloud based practice software, that's a management practice management software and revenue cycle management also did quite well, partially offset by the sunsetting of certain brands. The whole idea here is to drive towards common brands for each type of application. We lose a little bit of business along the way, but we can provide better service and of course greater margins. And we now have over 9,000 customers subscribed to Dentrix Ascent and entirely with year on year growth of approximately 6.5%. It's very important to understand that this is a shift from an on prem sales to a SaaS model, which creates short term headwinds on the revenue side, which is outweighed by longer term benefits from higher recurring subscription revenues.

This model is working quite well. Cost efficiencies in the business are there, they've been reaped more to go as we merge brands. And this is driving technology operating margin up. This trend we expect to continue. Now let me turn the call over to Ron to review our fourth quarter financial results and our 2025 guidance.

Thank you, Stanley, and good morning, everyone. As Stanley mentioned, we are also today announcing a change to our reportable segments to align with management reporting and provide more meaningful information for investors on the business. The results being reported today reflect this change in a recast of prior comparative segment information has been provided in Exhibit D of today's press release. Turning to our fourth quarter sales results, I will provide detail on total sales growth as well as LCI sales growth, which has internally generated sales in local currencies compared with the prior year and excludes acquisitions. Global sales were $3,200,000,000 with sales growth of 5.8% compared to the fourth quarter of twenty twenty three.

This includes 0.7% growth from acquisitions and a 0.4% decrease attributable to foreign currency exchange. Please note that sales in the fourth quarter of twenty twenty three were negatively impacted by the cybersecurity incident. LCI sales increased 5.5% for the quarter or 6.6% when excluding lower PPE sales and COVID test kits. Our GAAP operating margin for the fourth quarter of twenty twenty four was 4.86%, a three fifty eight basis point improvement compared with the prior year GAAP operating margin. On a non GAAP basis, operating margin for the fourth quarter was 7.46%, a two sixty basis point improvement compared to the prior year non GAAP operating margin.

In the prior year, both the GAAP and non GAAP operating margins were negatively impacted by the cybersecurity incident. In the fourth quarter of twenty twenty four, our operating margin benefited from lower operating expenses year over year as we are starting to realize cost savings from our restructuring initiatives. We also continue to experience year over year gross margin expansion in the fourth quarter, primarily as a result of acquisitions we have made to advance our Bold plus one strategy. For the full year, we achieved 41% of our total operating income from high growth, high margin businesses. Fourth quarter twenty twenty four GAAP net income was $94,000,000 or $0.74 per diluted share.

This compares with prior year GAAP net income of $18,000,000 or $0.13 per diluted share. Fourth quarter twenty twenty four non GAAP net income was $149,000,000 or $1.19 per diluted share. This compares with prior year non GAAP net income of $86,000,000 or $0.66 per diluted share. The foreign currency exchange impact on our fourth quarter diluted EPS was unfavorable by approximately $0.01 versus the prior year. Adjusted EBITDA for the fourth quarter of twenty twenty four was two seventy million dollars compared to fourth quarter of twenty twenty three adjusted EBITDA of $172,000,000 Turning to our fourth quarter sales results.

We are updating the breakdown of sales as detailed in Exhibit A of today's press release to reflect the updated reportable segments as well as other internal management responsibilities. Of note, we are now reporting U. S. Distribution sales instead of North America distribution sales. This means Canada is now being reported as part of international.

As a point of reference, Canada has approximately $400,000,000 of annual revenues. Approximately two thirds of those revenues are merchandise sales with the remaining one third as equipment sales. Global distribution and value added services group sales were $2,700,000,000 with sales growth of 5.9% including LCI growth of 5.8%. Sales were positively impacted by a soft comparison to the prior year. Excluding PPE and COVID test kits, LCI sales growth was 7.3%.

Our U. S. Dental distribution LCI sales grew 5.9% versus the prior year with LCI growth in Dental Merchandise of 4.8% or 6.5% growth when excluding PPE products and equipment LCI's growth sales growth of 10%. U. S.

Equipment sales growth was driven by both traditional and digital equipment with digital equipment unit growth offsetting some pricing declines. U. S. Medical distribution LCI sales grew 4.5 compared to Q4 of twenty twenty three. Excluding sales of PPE products and COVID test kits, LCI sales grew 7.3%.

Sales of point of care diagnostics and vaccines were negatively impacted by the timing of the flu season. Our Home Solutions business had another strong quarter growing 8% year over year. Our international dental distribution LCI sales grew 7.3% versus the prior year with LCI growth in Dental Merchandise of 7.9% or 8% growth when excluding PPE products and equipment LCI sales growth was 6%. Finally, global value added services sales grew 8.1% versus the prior year with an LCI sales decrease of 0.7%. We achieved strong sales growth in eAssist and Financial Services, offset by lower sales at large practice sales as a result of the timing of closing of some practice transition services sales.

Turning to the global Specialty Products group, which includes our Dental Specialty Products, Orthopedic and Other Products. Sales were $368,000,000 with sales growth of 7.2%, including LCI growth of five point zero percent. This segment includes the orthodontic business, which is being reorganized for future profitable growth. It also includes certain expenses relating to managing our own brands that support sales in the distribution businesses and provide a headwind the segment's operating margin. Global Technology Group sales during the fourth quarter were $160,000,000 with total sales growth of 2.4% and LCI sales growth of 2.1%.

This was driven by revenue cycle management and practice management software with double digit growth in Ascend and internationally led by our Dentale cloud based practice management solution, offset by lower revenues of certain patient experience modules. And as Stan mentioned, a headwind to revenue growth as a result of the movement to a SaaS model. Restructuring expenses in the fourth quarter were $37,000,000 or $0.23 per diluted share. These expenses mainly relate to severance benefits and costs related to exiting certain facilities. Our restructuring activities in the third and fourth quarters are estimated to provide over $80,000,000 in annual run rate savings.

We continue to expect savings from this plan to be $75,000,000 to $100,000,000 of aggregate annual run rate savings by the end of twenty twenty five. Our fourth quarter GAAP results include $20,000,000 in pre tax proceeds as part of our cyber insurance claim, which are excluded from our non GAAP results. As of the end of the year, we collected approximately $40,000,000 All items excluded from our fourth quarter non GAAP financial results for 2024 and 2023 are detailed in Exhibit B of today's press release. A reconciliation of GAAP to non GAAP results is also available in our quarterly earnings presentation on our website. Regarding share repurchases, we repurchased approximately 1,100,000.0 shares of common stock in the open market during the fourth quarter at an average price of $71.35 per share for a total of $75,000,000 For the full year, we invested $385,000,000 to repurchase 5,400,000.0 shares.

At fiscal year end, we had approximately $380,000,000 authorized and available for future stock repurchases. An additional $500,000,000 of share repurchases was authorized by our Board of Directors on 01/27/2025, including a commitment to repurchase $250,000,000 in shares under an authorized accelerated share repurchase program. Turning to our cash flow. We have strong operating cash flow of $2.00 $4,000,000 for the fourth quarter, which compares with operating cash flow of negative 30 2 million dollars last year. Operating cash flow for the full year in 2024 was $848,000,000 which is $348,000,000 more than in 2023.

Our strong operating cash flow for the quarter and the year was driven by lower working capital, particularly lower customer receivables, which we've been focused on throughout the year. Turning to our 2025 financial guidance. At this time, we are not able to provide without reasonable effort an estimate of restructuring costs associated with the new restructuring plan for 2025. Although we expect this to primarily include severance pay and facility related costs. Therefore, we are not providing GAAP guidance.

Our 2025 guidance is for continuing our current continuing operations as well as acquisitions that have closed and does not include the impact of restructuring and integration expenses and other items described in our press release. Guidance assumed modest improvement in the dental and medical markets during the year and is supported by strategic initiatives outlined in our strategic plan and recent acquisitions, as well as a positive contribution from our restructuring plan. This is partially offset by investments in technology and a return to historical levels of incentive compensation. We also assume that foreign currency exchange rates remain generally consistent with 2024 levels. Our 2025 total sales growth is expected to be 2% to 4% over 2024.

For 2025, we expect non GAAP diluted EPS attributable to Henry Schein Inc. To be in the range of $4.8 to $4.94 which reflects growth of 1% to 4% compared with 2024 non GAAP diluted EPS of $4.74 per share. 2025 non GAAP diluted EPS is expected to be more heavily weighted to the second half of the year. This guidance assumes there is no net impact from the issuance of new shares to KKR, which is expected to be offset by an accelerated share repurchase program. It also assumes an estimated non GAAP effective tax rate of 25%.

Our 2025 adjusted EBITDA is expected to grow in the mid single digits versus 2024 adjusted EBITDA of $1,100,000,000 We expect adjusted EBITDA to grow faster than non GAAP diluted EPS due to higher depreciation expense, primarily related to the global e commerce platform. With that, I'll now turn the call back to Stanley.

Thank you, Ron. Operator, we're ready to respond to questions.

Thank you. We'll now be conducting a question and answer session. Our first question today comes from the line of Jason Bednar with Piper Sandler. Please proceed with your question.

Thanks for all the detail here in the recast financials. Appreciate that's not an easy undertaking. I want to start with, if I could, revenue guidance and just some of the underlying assumptions you have there. You're calling for 2% to 4% reported revenue growth. It's based in part upon improvement in both dental and medical end markets versus last year.

I understand why your business can continue to outperform the broader market with your investments, the initiatives you have in motion, but it does seem like your market view is slightly more optimistic

than what we've heard from some of your peers.

So is there something you're seeing today that gives you kind of call it better relative comfort on the market outlook? And then if you're able, can you give us a sense of how you're forecasting organic growth for each of your new reporting segments really just in the context of that company wide guide?

Yes, sure, Jason. I think that the we do see modest growth in the markets, right? If you think back to the Investor Day two years ago, we said then we thought Core Dental could grow 2% to 4%. I think we're still looking at market well, but there's market growth. We think the 2% could be challenging.

So it's probably somewhere in that 0% to 2%, but we do expect some modest growth in there. Price appreciation is also limited. So there's not a lot of price appreciation in our revenue guidance. And you mentioned too kind of inorganic versus organic. Our M and A activity was a little lower than most years in 2024.

So we're not getting there's a very limited amount of acquisition growth included in that overall revenue growth as well.

Okay. Ron, I guess, in the second part of that, any breakdown on or how you're how you want us thinking about under your new reporting structure, the global distribution, U. S. Versus international thoughts within there, global specialty, global tech? And then maybe just as a follow-up, on the bottom line, you seem pretty confident just in the outlook of getting back to high single digit growth once we get past '25.

Is that a function of 25 investments tapering in '26? Or is it a belief we're going to see better natural leverage coming through the P and L?

I think it's a combination of the latter part of your question, it's a combination of that, right? It's the ongoing benefits we would get from some of the restructuring we're doing. At some point, some recovery in markets and perhaps some better price appreciation going forward as well. In terms of going back to your question on the reportable segments, I think that within the within each of those, we are looking at kind of market growth that continues to be lower than we would normally anticipate and lower than what we communicated on Investor Day two years ago. So, for example, I think we said that medical growth rates were in the 4% to 7%.

We think that right now, we expect that market growth to still be slightly below that 4%. Dental specialties were in that 5% to 8% range. So the there are pockets of dental specialties that could be in that range, but there's also especially on the, what I'll call kind of the sub premium side, it's we still think it's lower than 5%. So there are some aspects of the market that are going to be lower than what those market growth rates were that we assumed a couple of years ago.

Our next questions are from the line of Jeff Johnson with Baird. Please proceed with your questions.

Thank you. Good morning, guys. I know we're two months into 2025, but I just want to go back to the fourth quarter for one second here, if I could. I mean, when you pre released last month, the $3,200,000,000 in revenue for 4Q, we frankly had hoped that was a rounded down number. It ends up in today's release that was a rounded up number.

And when I look at just kind of relative to your third quarter updated guidance that you provided on the third quarter, sorry, for 2024, you fell short in the fourth quarter by 500 basis points in the fourth quarter on a revenue basis at the low end of the guidance, 700 plus basis points at the midpoint. So what happened in fourth quarter, I guess, that drove those revenues 500 basis points below the low end of the guidance, 700 basis points below the midpoint of the guidance, just relative to a guidance that was issued a month into the fourth quarter? Thank you.

Sure, Jeff. I'll address your rounding question first. I mean, we did say $3,200,000 I think revenues of $3,191,000 So you're right, we rounded up $9,000,000 So but we did round that to $3,200,000 In terms of the lower revenues than expected, As we mentioned, we did have it was relatively flat patient traffic in the quarter and also a really kind of a slow end of the quarter given the timing of Christmas, which we underestimated the impact of that. So the quarter did end much more slowly than what we may have anticipated. And on the medical side, the timing of the flu season resulted in much lower medical revenues than we had anticipated as well.

Okay. And if I look at the dental numbers and a little bit hard to compare to our old models, obviously, but you gave us some historical restatements to help. But that U. S. Number up mid single digits on consumables, I think somewhere in the neighborhood of on a negative 8% to 10% comp depending on how we cut the numbers.

So on a stack basis still negative. We talked about the market being pretty flat and you guys have recovered a decent amount of your cyber share loss. I mean, talk to me maybe just about share dynamics in the fourth quarter and share dynamics expected in 2025. Do you feel like you're holding your own? Do you feel like you're maintaining that share?

Are you losing share at this point? Just help me understand kind of that stack comp still negative on the consumable side in the fourth quarter. Thank you.

Yes. In the fourth quarter, we did see share stabilize. We had been getting a little bit of additional market share quarter to quarter sequentially over the course of 2024. Our Q4 share was relatively flat to our Q3 share. There's a there could be a number of reasons for that, but we're so confident we can continue to get some market share as we get into '25 as well.

Jeff, let me just add that moving to the segment reporting and changing the way we've reported in the past is just not easy to comprehend. We provided a lot of data in the exhibits. There's no way these changes could be understood in an hour and a half. So I'm not sure if there was a better way to do this. This is the best way we thought of providing this information.

But I think if analysts yourself have a few more hours to look at the schedules that we provided, it will make a lot more sense. But this is a one time move in twenty nine years that we've moved as a public company from one way of describing our business to another. The description follows reporting, internal management reporting, which was acquired by the SEC. And there's a lot of information that is contained in these attachments and we'd be happy to clarify. We do understand specifically for yourself and for others that have covered us for many, many years that this is a significant change and it's very difficult to comprehend all the nuances in an hour and a half.

Perfect storm, 8AM reporting and new segment reporting all thrown together. But we're available to provide more information. But I think the attachments will be helpful, but you will need time to analyze them.

The next question is from the line of Alan Lutz with Bank of America. Please proceed with your questions.

Good morning. Thanks for taking the questions and thank you, Paul, for all the updates so far. I want to go to Slide eight in the presentation. Specialty operating margins are up pretty nicely year over year, but they're maybe a little bit below where we thought they would be. Can you talk a little bit about the

specialty margins, this is the reporting segment as it relates to reporting of management. So within that segment, there are some lower margin businesses. For example, our ProRepair handpiece business, it's good, but it's about half maybe more maybe less of the margin compared to our implant business and our endodontic business. We had a challenge with the orthodontic Dottek business, which we are addressing. And that segment also includes expenses for management of our corporate brand products which are essentially distributed through our distribution business.

So it's not a pure margin for the implants and the endo, it includes other components as well. But it does follow the requirement of all the businesses and all the functions reporting to Tom Popeck. So we can provide further information. We will over time, but this is the reporting as relates to management reporting rather than products that are in implants, bone regeneration and endodontics. Yes, we do expect the gross the operating margin in this segment to grow over time.

That is a key focus, but it's not a pure number relating to implants, bone regeneration and endodontics and effect orthopedics, which have higher margins.

Thanks, Stanley. And then one for Ron. Is there any way to frame how fast dental implants grew in 4Q? And then as we look to 2025, a large Medicare Advantage payer stopped covering implants in 2025. Wondering if there's any change to growth you're seeing through the first two months of the year and what's embedded in the guide for North American implant growth?

Yes. With reference to implant growth, we're still seeing relatively healthy growth in Europe more so than in The U. S. In The U. S, we're still getting some value implant growth more so than perhaps on the premium side.

And U. S. Is a slightly tougher market right now with implants. But in Europe, our CAMLOG subsidiary that focuses primarily in Germany, Austria, Switzerland region are really in that kind of low to mid single digit growth range, which we're pleased with because it's a difficult market.

of your question, Alan. I'm sorry, it was

just around 2025, a large MA payer stopped covering implants. Wondering if that had any impact through the first couple months of the year?

No. I mean, it's not a, what I would call, a significant part of the kind of end market for us. So we haven't seen anything that we would point to that would we would be able to directly attribute that to an impact on the business at this point.

The next question is from the line of John Stancill with JPMorgan. Please proceed with your questions.

Great. Thanks for taking my question. I want to go back to the KKR agreement. I think in the agreement there's commentary around a value creation plan, using KKR Capstone.

what areas they'll be looking at? Is this purely in an advisory capacity? And then maybe a little bit more broadly, are there things that KKR's pretty extensive dental portfolio can do to work together maybe that haven't happened previously? Thanks.

Yes. So as it relates to KKR, they're not on the board yet. We'll have to clear the hotspot tribunal before they can get deeply involved. We will of course engage with their team. There are a number of areas that they feel they can help us with that we really believe they can.

But our focus and the areas our focus through our strategic plan and the areas that KKR has capabilities aligned very nicely, but we can't really get to work in any significant or meaningful way until the filing is cleared. We're still in the preliminary stage of the filing. We haven't received any further commentary. So we're hopeful that we'll clear the hotspot soon and then we can get to work with KKR. But they're not on the board yet and they cannot really get engaged.

I don't expect much benefit from the relationship with one of our large customers. It is definitely a Chinese wall between the two sides and different people involved.

Great. And then just one maybe for Ron. We talked about that share gain versus kind of the beginning of twenty twenty four exiting 2024. I think about that and potentially the flu season pushing into the first quarter, it seems like you would think that growth might be weighted more to the first half of twenty twenty five versus the back half at the top line. Can you help me just balance that versus the back half weighting of just EPS?

What the factors are that kind of might create that dichotomy?

Well, it does assume kind of ongoing, regaining some market share over the course of the year. And also, as we get some greater momentum on the implant side, for example, with the Taper Pro Conical and some of the newer products that launched in the back half of twenty twenty four that would give us momentum into 2025. And then that's Webster's reference to the top line. And then bottom line is this ongoing reduction in expenses as we execute on the restructuring plan that would get us to some to more I would expect more earnings growth in the back half of the year than in the first half of the year. Keep in mind too, one other thing John is that, and we referenced this on the call, we will have a difficult equipment comp in the first quarter of twenty twenty four I'm sorry, 2025.

As last year, the first quarter benefited from some deferral of equipment installations coming off the cybersecurity incident. So when we report Q1 and talk about equipment, we'll also be looking at it as we're looking at it internally, we kind of look at that as a six month period Q4 to Q1, how is that business doing versus last year given that disruption to the timing last year on the equipment installation as well.

Our next question is from the line of John Block with Stifel. Please proceed with your questions.

Hey, guys. Good morning. Ron, I think this one is probably for you. Just the 2025 EPS growth at a high level basically in line with revenue growth. I just think about like mix shift, debt pay downs, stock repo, ongoing restructuring, maybe some past accretion targets from those deals that were done in prior quarters.

Can you talk to why we're not seeing some slightly higher leverage on the bottom line versus the top, even in a year where there's a lot of moving parts or what you seem to be alluding to as like a rebasing type

of year? There's a couple of things and we've kind of touched on some of the challenges on the revenue side. I would say two things that are specific, we have talked about some ongoing investment in IT, specifically in our global e commerce platform, which we'll be launching in The U. S. In this summer, but we have begun depreciating that system because we did launch it on a test basis in Europe late in 2024.

So we are going to get a full year of depreciation on that. And then also as we referenced in the call, kind of a return to what we'll call hopefully more normal incentive compensation expense as we the last couple of years between cyber and the softer markets have not had what I consider to be a normal expense level there. So there are some internal headwinds related to this. Some of this is offset by some of the cost savings we're achieving, but there are some top line challenges out there still that I touched on when referencing the revenue guidance.

Henry Schein (HSIC) Q4 2024 Earnings Call Transcript

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