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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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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

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Good morning, ladies and gentlemen, welcome to Henry Schein's first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please press the star key followed by one on your touch tone phone if you would like to ask a question at the end of the call. If anyone should require assistance during the call, please press the star key followed by zero on your touch tone phone. 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. My thanks to each of you for joining us to discuss Henry Schein's financial results for the first quarter of 2026. With me on today's call, Fred Lowery, 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 our 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.

They're also in our quarterly earnings presentation posted on the 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, May 5th, 2026. 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&A session, please limit yourself to a single question so that we can accommodate questions from as many of you as possible. With that, I'd like to turn the call over to Fred Lowery.

Thank you, Graham. Good morning, everyone, and thank you for joining us today. I'm honored to lead Henry Schein as the CEO, and I look forward to building on the strong foundation and proud heritage that define this company, while at the same time taking a fresh look at people, process, and technology to advance a culture of continuous improvement. I'm also pleased to report our strong financial results for the first quarter. Before we turn to these, I wanna highlight some key observations that I've had as I progressed through my 100-day plan. First, I am impressed by the strong competitive advantages Henry Schein has built over the years. Globally, we successfully serve hundreds of thousands of independent private practices with responsive, consistent overnight delivery.

In the U.S., we are the primary distributor for most national DSOs, a position that reflects years of being a trusted and reliable partner. Our reach provides us with supply chain flexibility and sourcing advantages, as well as access to a broad global customer base for our suppliers. Secondly, pursuant to our Bold+1 strategy, we deliver an extensive integrated offering, which includes a broad portfolio of quality corporate brands and specialty products, software, equipment products, technical services, and business solutions. This differentiated offering makes us the platform of choice for office-based practitioners. Third, our ability to deliver an excellent customer experience really sets us apart. Our field sales consultants, they really know their customers deeply and are genuinely invested in their success, and they're supported by our equipment service technicians. When you put that together, we provide a service that is difficult to replicate.

When you put all these things together, our technology, our products, our value-added services, and our people, we create a significant competitive advantage which we will continue to enhance over time. Over the last two months, I've immersed myself in the business, and I've spoken with lots of customers and suppliers and employees, and a few things that I've heard. One thing that's clear from customers, the dental market remains healthy, with demand continuing to outpace supply. Therefore, efficiency and workflow optimization are important for our customers to be able to see more patients.

What's encouraging is how well our strategy aligns with our customers' needs through the development of open architecture integrated solutions that create a platform allowing our customers to deliver better care while running more productive and more profitable practices. Turning to the medical market, procedures continue to shift to non-acute care settings, which also aligns well with our unique capabilities to supply the right quantities to all non-acute settings, including ambulatory surgical centers, community health centers, private practices, and home solutions. You know, I've also received feedback that our dental and medical supplier partnerships remain another source of competitive differentiation, and I'm committed to providing a broad product offering to our customers, supported by strong national brands as well as through our own value-added own brand products. Suppliers recognize that our deep customer access and trusted relationships make us the partner of choice for driving growth in their businesses.

Through exclusive and targeted promotional programs, we create value for suppliers and customers alike. Now, while it's still pretty early days for me, I intend to sharpen our operational execution, build a stronger performance culture, and create a leaner, more agile Henry Schein, allowing us to respond faster to customer needs and translate our market strength into accelerated growth and improved financial results. As I continue to dive deeper into the business, I expect to identify opportunities to drive growth, to streamline processes, and to enhance execution. I'd like to highlight a couple of examples for you today. The first is to enhance the cadence of new products and service offerings. This includes AI solutions, which are transforming the industry rapidly, and Henry Schein has a tremendous opportunity to develop further value-enhancing solutions.

I think you're starting to see this with some of the recent product launches from Henry Schein One. The second is to align our commercial efforts to accelerate overall growth across each of our businesses. This is contemplated in accelerating the leverage priority of our Bold+1 strategy, and we've already started. It's clear that Henry Schein has great assets with a differentiated platform to serve as a trusted partner to healthcare practitioners worldwide. As we look ahead, I'm excited by the significant opportunities to accelerate growth through the use of technology, improved operational excellence, and becoming a more agile company. Let's turn to the first quarter results. I'm pleased with our strong first quarter results that reflect continuing momentum from the second half of last year as we grow market share and expand gross margins. Sales strengthened in the U.S. Dental and Global Technology businesses.

It overcame softness in the medical business. The dental markets remain stable and healthy, and we are gaining market share. While merchandise prices have increased, particularly in the U.S., procedure volumes are holding steady. We anticipate further merchandise price increases in the second quarter as a consequence of higher oil prices. Dental practices, and in particular DSOs, are continuing to invest in equipment, and we are seeing DSOs gaining market share in the overall dental market. The non-acute care U.S. medical market remains strong, and our home solutions business continues to grow well. Our medical business had good underlying growth. However, the quarter was impacted by a decline in demand for point-of-care diagnostic test products related to respiratory illness, resulting from a light flu season. Our specialty products underlying markets remain healthy, with European volumes ahead of the U.S.

Demand for premium implants is being driven by strong clinical engagement, most recently demonstrated at our BioHorizons Global Symposium last month, where over 40 internationally recognized speakers presented the latest innovations in tissue regeneration, digital workflows, and implant-based tooth replacement therapies to more than 1,100 clinicians from around the world. Growth in value implants, driven by our S.I.N. and Biotech Dental businesses, continues to outpace premium implants. Our Global Technology business again posted really good growth, reflecting continued demand for our cloud-based software technology solutions. The development pipeline of AI solutions has increased. These are mostly integrated into our global suite of practice management software solutions.

Last week, I had the opportunity to attend our THRIVELIVE event in Las Vegas, which brings together dental professionals to get really hands-on training and education and to showcase our range of equipment and software solutions. This year we had over 1,000 attendees, and we launched our next generation AI clinical workflow at the event, which generated significant excitement. The broad level of interest in our AI solutions was a clear signal that our customers are ready to embrace these tools and that Henry Schein is well-positioned to lead that transition. Now, let me give you a few highlights into the initiatives that advanced our strategic plan during the quarter. As I mentioned, our overall operating margin expanded, and we stabilized margins compared to a year ago.

Our high-growth, high-margin businesses are now approaching 50% of our total operating income. We remain on track to exceed our goal of 50% by the end of our strategic planning cycle in 2027. We are just beginning to unlock value from our value creation initiatives. These not only provide a clear path to both cost efficiencies and margin expansion. I expect them to fuel our growth and further support and enhance customer experience. Execution is really well underway. Let me give you a couple of examples. We've appointed an outsource partner to centralize select back-office functions. We expect to see benefits beginning later this year. We continue to strategically buy out minority partners to unlock integration opportunities across the Specialty Products business. We are starting to generate additional savings from our indirect procurement processes by leveraging our scale advantage.

Finally, we are implementing gross profit initiatives, including value pricing and enhanced growth of our corporate brand. Therefore, I am committing to the company's goal of achieving greater than $200 million of annual operating income improvement within the next few years, with a $125 million run rate by the end of 2026. These initiatives, along with continued execution of our strategic plan, will contribute to us achieving high single-digit to low double-digit earnings growth in the coming years. We have also successfully rolled out our global e-commerce platform, henryschein.com, to our Canadian and U.S. laboratory customers. We are well advanced in implementation across the U.S., with over 80% of our U.S. Dental e-commerce sales now transacted over henryschein.com.

We expect to complete the U.S. rollout by the end of August and to extend the platform to new customers after we plan to shift our focus to the broader international deployment. Over the past several weeks, I have worked through the details of our financial plan. Our growth outlook, combined with the progress made on value creation initiatives and a strong start to the year, reinforces my confidence and my commitment that we will deliver on our 2026 financial guidance. Looking ahead, I plan to continue learning more about the business and identify opportunities to accelerate our momentum. I look forward to sharing updates in our next calls. Now with that, I will turn the call over to Ron to review in more detail our first quarter results. Ron?

Thank you, Fred, and good morning, everyone. Today, I will review the financial highlights for the quarter. Starting with our first quarter sales results, global sales were $3.4 billion with sales growth of 6.3% compared to the first quarter of 2025. This reflects local currency internal sales growth of 2.5%, a 3.1% increase resulting from foreign currency exchange, and 0.7% sales growth from acquisitions. Our GAAP operating margin for the first quarter of 2026 was 5.41%, a decrease of 12 basis points compared to the prior year GAAP operating margin.

On a non-GAAP basis, the operating margin for the first quarter was 7.53%, up 28 basis points compared to the prior year, driven by gross margin expansion within the Global Distribution and Global Technology products groups, as well as business mix. First quarter 2026 GAAP net income was $107 million or $0.92 per diluted share. This compares with prior year GAAP net income of $110 million or $0.88 per diluted share. Our first quarter 2026 non-GAAP net income was $153 million or $1.32 per diluted share. This compares to prior year non-GAAP net income of $143 million or $1.15 per diluted share.

Foreign currency exchange favorably impacted our first quarter diluted EPS by approximately $0.03 versus the prior year. Adjusted EBITDA for the first quarter of 2026 was $289 million, compared to first quarter 2025 adjusted EBITDA of $259 million or 11.6% growth. During the first quarter, we successfully completed a transaction that provides us a controlling interest in S.I.N. 360, the U.S. distributor of S.I.N. Brazil's value implant systems. We are excited about this transaction as it provides us with greater control over our U.S. implant product portfolio, especially in the faster-growing value implant market, and allows us to unlock growth and back office integration efficiencies across these businesses.

As we had previously held a non-controlling interest in S.I.N. 360, the transaction did result in a remeasurement gain of $11 million this quarter, or approximately $0.07 of diluted earnings per share. We will continue to evaluate strategic opportunities to further integrate some of our joint ventures to unlock growth and efficiencies. Some of these opportunities may result in additional remeasurement gains. Further gains from such transactions, if any, are not expected to be recognized until the second half of 2026. Turning to our sales results. The components of sales growth for the first quarter are included in Exhibit A in this morning's earnings release. We will now walk through key sales drivers for each reporting segment. Starting with our Global Distribution and Value-Added Services group, whose sales grew by 6.1%, reflecting continuing strong momentum in the U.S.

Looking at the components of that growth, U.S. Dental merchandise sales grew 5.6% or 4.1% internal sales growth, reflecting ongoing acceleration of sales growth. Data from our Henry Schein One eClaims activity indicated signs of modest procedure growth in the U.S., and we believe that in general, patient traffic remains stable to leaning positively in the quarter. Our sales volume growth resulted in market share gains, and prices increased further with the introduction of some additional price increases in January. U.S. Dental equipment sales growth of 3.4% was driven by sales of traditional equipment as practitioners, particularly DSOs, remain confident in investing in their dental practices, and we expect this solid growth to continue. U.S. equipment growth was supported by some exclusive supplier-initiated opportunities as our suppliers continue to view Henry Schein as their best opportunity to expand market share.

This helped drive sales in the traditional and digital imaging categories. Overall digital equipment sales were essentially flat due to continued softness in sales of intraoral scanners and 3D printers. This was driven by lower average selling prices from new market entrants despite higher sales volume. U.S. Medical distribution sales grew 1.3% or 1.2% internal sales growth, with strong growth in home solutions and dialysis, partially offset by lower sales of point-of-care diagnostic test products related to respiratory illness as a result of a light flu season. This category represents roughly 15%-20% of our medical business. Excluding the impact of the diagnostic test products category, sales growth would have been in the mid-single digit range.

International dental merchandise sales grew 12.5% or 1.8% LCI sales growth, driven by sales growth in the U.K., Italy, and Brazil. International dental equipment sales grew 13.4% or 3.6% LCI sales growth, with solid growth in traditional equipment. The equipment sales growth was especially good in Germany, U.K., Canada, Australia, and New Zealand. Finally, Global Value-Added Services sales grew 10.6% or 7.8% LCI sales growth. Turning to the Global Specialty Products Group, sales grew 8.1% or 1.7% LCI sales growth. Our implant sales were driven by high single-digit growth in value implant systems. The sales mix of value to premium implants also resulted in a lower gross margin compared to the prior year.

We expect to achieve improved growth in the Global Specialty Products Group going forward this year. Our Global Technology Group continued to post solid results with total sales growth of 7.0% or 6.9% LCI sales growth. In the U.S., we had strong revenue growth in our Dentrix Ascend practice management software business. Internationally, sales growth was driven by our Dentally cloud-based practice management software product. The number of cloud-based customers increased by roughly 25% year-over-year, primarily from new accounts, and we now have more than 13,000 Dentrix Ascend and Dentally subscribers. Regarding our restructuring program, the company recorded restructuring expenses of $12 million, or $0.07 per diluted share, during the first quarter of 2026 as we advance our value creation initiatives.

With reference to capital deployment, during the first quarter of 2026, the company repurchased approximately 1.6 million shares of common stock at an average price of $77.64 per share for a total of $125 million. At the end of the quarter, we had approximately $655 million authorized and available for future stock repurchases. Turning to cash flow. Operating cash flow was -$97 million in the first quarter of 2026 due to a normal seasonal decrease in accounts payable and accrued expenses from the year-end. Cash flow is typically lower in the first quarter than the rest of the year, and we still expect operating cash flow to exceed net income for the full year. Turning to our 2026 financial guidance.

At this time, we are not able to provide, without unreasonable effort, an estimate of restructuring costs related to ongoing value creation initiatives. Therefore, we are not providing GAAP guidance. Our 2026 guidance is for current continuing operations and does not include the impact of restructuring expenses and related costs and other items described in our press release. Guidance assumes stable dental and medical end markets during the year, that foreign currency exchange rates will remain generally consistent with current levels, and that the effects of changes in tariffs and higher oil prices can be mitigated. We have implemented a number of measures designed to offset the potential financial impact of rising oil prices at this time, which affect both freight costs and product pricing. Our 2026 full year guidance remains unchanged. Total sales growth is expected to be approximately 3%-5% over 2025.

We expect non-GAAP diluted EPS attributable to Henry Schein, Inc. to be in the range of $5.23-$5.37. We are assuming an estimated non-GAAP effective tax rate of approximately 24%. We expect benefits from value creation programs to be weighted towards the second half of the year. Adjusted EBITDA is expected to grow in the mid-single digits versus 2025 adjusted EBITDA of $1.1 billion. We continue to expect remeasurement gains recognized in 2026 to be less than recognized in 2025. With that overview of our business and recent financial results, we're ready to take questions. Operator?

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Jason Bednar with Piper Sandler. Please proceed with your question.

Hey, good morning, everyone. Welcome, Fred. I got a couple, and I'll just ask them both up front. They're somewhat connected. When I look across first quarter performance, I guess what really stood out to me was that gross margin result, a really, really nice start to the year. Can you unpack maybe a bit some of the drivers there? Is that a function of value creation benefits that we can expect to persist through the year? Are you already seeing some of that? How do we think about this result in the context of these rising shipping costs that are, you know, just, you know, that are obviously happening just with where oil has moved?

Ron, just if you could, maybe unpack some of those comments you made near the end of your prepared remarks on mitigation actions. Any rules of thumb we should have in mind on what, you know, oil above $100 a barrel or $110 a barrel means for your margin profile? Just so we can have a little bit of an idea on sensitivity to this metric, you know, just in, like a last thing here too. If you can help us, what's included in guidance on around what you're assuming for oil? Thank you.

Sure, Jason. You know, I think with reference to the gross margin, you know, yes, we are pleased with the improvements that we were able to get in gross margin. You know, the year-over-year is about 25 basis points, and then the total gross margin improvement versus the fourth quarter is about 86 basis points. You are seeing a little bit some of the early benefits perhaps of the gross profit initiative from value creation. It's more, you know, we have a, I would say a slightly more dynamic pricing environment that's allowing us to react in a more timely basis.

It also reflects, I believe, the fact that our own brand products the growth of those products continues to outpace, you know, the rest of the portfolio, where we do get, you know, better margins with those products as well. We're seeing, you know, we're seeing some mixed benefit. We're seeing some strategic benefit, and just, I think, a greater consciousness of how well we can work with our suppliers to assure that we get competitive costs and improve our margins accordingly. You know, with reference to, you know, the price of crude oil and what's happening in terms of some of the disruption in the energy industry, I mean, it's an area where we're watching closely.

It does impact a little bit some of the freight costs coming in. We are working closely with our customers. We're not just defaulting to increasing prices or looking at fuel surcharges. There are some things that, you know, some measures we're trying to take to, you know, try to protect the, you know, the margins a little bit as we see those costs go up. Nothing that we're seeing out there yet that we believe is creating a, you know, a significant issue. We have some plans in place that we could initiate if we think we need to.

Right now, the, you know, like we're saying in our guidance, we feel like based on the current situation, we  are able to mitigate, you know, any related cost increases.

Okay. Sorry, just to clarify, your guidance assumes oil stays where it is, or you have some error bars around?

It assumes that we can mitigate rising. You know, obviously, there's a tipping point out there, right? It assumes that we can mitigate the, you know, the changes in the cost of oil.

Thank you. Our next question comes from the line of Elizabeth Anderson with Evercore ISI. Please proceed with your questions.

Hi, guys. Thanks so much for the question. I was wondering about how to think about the cadence of specialty growth over the course of the year, just in terms of anything to call out seasonality-wise or some of those pricing changes, Ron, that you mentioned. Fred, one for you maybe. Can you talk about some of the biggest sort of positives that confirmed your sort of expectations coming into Henry Schein, and then maybe, some of your biggest surprises? Thank you.

Certainly. Hi, Elizabeth. I'll start and then I'll have Fred answer your second question. I think that, you know, on the specialty side, the results in the quarter were in line with our expectations. There was some timing of some buys from customers that we knew would impact Q1 somewhat. We do expect improved growth in specialty going forward, in terms of what we saw in the first quarter. I think that, you know, the products there, like, we're still remain very positive on what we're seeing on the value implant side.

You know, the high single-digit growth we're seeing in the sales of value implants, I think, you know, gives us the confidence that we can continue to improve that growth going forward. Fred, I'll allow you to answer the second question.

Elizabeth, great to hear you. Thanks for the question. When I just take a step back and think about the positives, you know, the biggest positive to me, and I sort of said it in the script, has been the confirmation that the set of assets that Henry Schein's owns, or that we own, are incredibly important to customers. The ecosystem that we've built here through these assets really do help customers improve their practices, and that has been confirmed from the many customer visits that I've been on, and I think that's incredibly exciting. I would say it's also an opportunity because I don't think it's as has been exploited to the extent that we can.

I think we can do a better job of improving our customer value proposition so that our customers really understand what we can do for them, and that it's not just about us helping them save costs, but about helping them have more profitable practices by driving productivity and helping them with their own pricing and seeing more patients. That's quite exciting. I would say surprises, I don't know that I would characterize anything as a major surprise, but maybe things that I was quite encouraged by would be as it relates to our Team Schein members, it's been a very consistent feedback as I've talked to many, many different employees. The feedback's been three things. One, we love the company, we love the culture, the strong culture in the company.

Two, we love Stan and we hate to see Stan go, three, we know that we need to change in order to be better. That has been like a really great starting point to see people leaning in and excited about the future of the company. I would say from a customer standpoint, without a doubt, every customer visit I've been on, customers enjoy doing business with Henry Schein, and they wanna do more business with Henry Schein, and they think that we can help them more, and they're depending on us to help them more, which really plays into our opportunity set as we develop new products and services that support them managing and running more profitable and higher growth practices. Then the third will be with our suppliers.

Without a doubt, talked to all of our top suppliers, they all see Henry Schein as a great place for them to grow their business. Those would be the things that I would say I have been most encouraged by and excited. It gives me some confidence in the future, I'm excited about a bright future for the company.

Thank you. Our next question comes from the line of Jeff Johnson with Baird. Please proceed with your question.

Thank you. Good morning, guys. Welcome, Fred. Thanks for taking the question. I know it's only been a couple of months in the job now, and I'm sure you're gonna get a, you know, a lot of focus today on the three-year profitability improvement plan. Good to see that you're reiterating that $125 million run rate by the end of this year. I'd love to hear your thoughts on how Schein gets back maybe to delivering stronger earnings growth in the absence of these one-off kind of restructurings we've been seeing every couple few years out of the company.

How do you think about building and investing in the muscle memory of this company so we can get back to kind of that upper single, low double-digit EPS growth longer term without having to go through kind of these bigger programs every couple few years? Thank you.

Jeff, thank you for the question. You know, I'd first start with just characterizing the value creation not as just a one-off. We're building real capability that will stay with us over a long period of time. For example, our gross profit programs are on will be ongoing, so we will be better at value pricing in the future than we are today. We have new techniques and new capabilities there that will stay with us. I think you'll see that continue over time. We'll continue to benefit from that. The same with the programs that we're focused on driving our own brand products or our corporate brand products. Those things will continue over time. I would start with that.

Secondly, my focus is on developing a continuous improvement process here, where we don't have a episodic approach to taking cost out, but where we continue to streamline our processes really for the benefit of our customers, streamlining our process so we become easier to do business with, so we support our customers better, so we grow our business faster, and as we do that, we will actually take some cost out and become more productive. Those are the two ways that I think about the question, then as we do take cost out of the business, over time, we'll be able to reinvest into areas that are gonna drive greater growth.

Thinking about the Henry Schein One portfolio, where we're investing in AI capabilities that will help us grow over time. Finally, our high growth, high margin products are growing faster. As I said during the prepared remarks, we're approaching the 50% mark for operating income from those products, and we expect to reach that as expected by 2027, the end of our strategic planning period. I think those things will support us getting back to continuing to deliver margin expansion over a period of time.

Thank you. Our next question comes from the line of Michael Cherny with Leerink Partners. Please proceed with your question.

Good morning, thanks for taking the question. Maybe if I can just go into the mitigation efforts a little bit more. You've obviously had situations in the past on a macro basis, I'm thinking back to COVID, where price increases were a component to offset your business. I know you said, I think it was Ron, that you don't wanna just do price increases, but how much do you preview some of those dynamics? I can't imagine your customers would be surprised if there are price increases, short-term price increases, surcharges put in place.

How do you think about going through those conversations, the engagement, to make sure that if and when you do have to push price increases as an offset, that it's taken in a way that's not necessarily deleterious to the customer relationship? Thank you.

Listen, I'll take that one. Thank you for the question. Just to clarify, we're taking the appropriate pricing actions based on what's happening in the macro, whether that's fuel surcharges, whether it's increasing the price of a particular product that may be oil-based, like gloves, for example. We'll have those conversations with customers where it makes sense and give customers visibility as to what's driving the change. We also will offer customers alternatives.

That's part of what makes us, you know, a really great partner is to say, "Hey, listen, there's some other alternatives that can help you without receiving such a high price increase by looking at the entire portfolio that we have." We'll take the appropriate actions with our customers and have those direct conversations as we see things materialize in the market.

Thank you. Our next question comes from the line of Jonathan Block with Stifel. Please proceed with your question.

Hey, everyone. Joe Federico on for John. Thanks for taking the question. Maybe just to look at implants a little bit closer. I think the specialties internal growth was low single digits, and implants is the majority of that. I think you mentioned high single digit value implant growth to an earlier question. Does that mean that premium was more flat to down? Is that possibly a function of the consumer? I think premium's heavier weighted to the international business. Any color on some of those dynamics would be great.

Yeah, Joe. I think that, yes, but like we said, the value implants did experience, you know, higher growth. Keeping in mind that, you know, of the mix within implants, it's about a two to one mix premium to value for us, right? We did see some flatness in the premium implants. I would say more so in the U.S. versus Europe, both were in the, say, lower single digits to flat. I do think that there is a, you know, there is some, you know, whether it be a little consumer pressure there, whatever it might be. Like I said, there was also some timing on some transactions that, you know, where the quarter itself came in in line with our expectations within that segment.

We do believe that we'll see improved growth, within that segment as the year progresses.

Thank you. Our next question comes from the line of Daniel Grosslight with Citi. Please proceed with your question.

Daniel, you may be muted. We can't hear you.

Sorry about that. Hi, guys. Thanks for taking the question. Global dental growth was relatively strong across both merchandise and equipment. You mentioned a couple times that you're taking share here, but also the underlying market seems to have recovered somewhat. I'm curious how much of the dental strength is due to share gains versus just the overall market improving and what your visibility is into the sustainability of that momentum through the remainder of the year. Thanks.

Certainly. I think that, you know, most of our market commentary is really fairly U.S.-centric because it's difficult to kind of talk to the international markets as a whole. Within the U.S., we think there was, we said, you know, a slightly more positive tone to the market. Still relatively low market growth, but what we're seeing is that our data indicates that we are taking market share there. We got a little bit of volume growth. We got a little bit of pricing favorability within, you know, within the quarter, within merchandise. In the end, in the U.S., with a, you know, with a local internal growth of greater than 4%, is a number we're pretty happy with.

You know, outside the U.S., you do get a little bit of, you know, some pressure that has occurred in some countries. We had, you know, I would say, especially outside of Europe, when you look at the growth we had in Brazil and in Canada, we had, you know, very good, you know, merchandise growth there. There's a lot of pockets of positive, whether it be from the market or from us taking market share, and I think it's probably more from us taking market share in those countries, you know, where we're getting the, you know, seeing the growth in dental.

Thank you. Our next question comes from the line of Allen Lutz with Bank of America. Please proceed with your question.

Good morning. Thanks for taking the question. I want to follow up on that last question around the sources of share gains in dental. The U.S. merchandise sales were a little bit better than we expected and specialty was a little bit softer. Can you talk about where you're gaining share? Ron, I think you mentioned that you're gaining share in the merchandise sales. Have the pockets where you've been gaining market share in dental in the U.S. market, have they changed or evolved over the past year or the past couple quarters between merchandise and specialty? How do we think about what you expect for share gains or the sources of share gains for the remainder of 2026? Thanks.

Well, I mean, I don't know if there's any one. When you say pockets, I don't know if you mean product categories, but I don't think there's any, like, any specific product category I would point to. I think it's broader than that. I would say if you're looking for something specific, we are seeing better growth of our own brands than we are with the versus the balance of the portfolio. That is an area that has, I think, given us some opportunity to provide, you know, some growth that exceeds that of the market. We're also kind of continuing with, I think, some of the success of the promotional activity we did last year, and that has provided us with some momentum.

We've been able to retain a lot of those customers that we picked up and that increased that increased share of wallet that we picked up with some existing customers that, you know. Some of that growth you saw in Q3 and Q4 has continued into Q1.

Thank you. Our next question comes from the line of John Stansel with JPMorgan. Please proceed with your question.

Great. Thanks for taking my question. Just following up on that point around maybe DSOs in particular. I think you've said over the last couple of months that they're gaining share or growing faster than the market. Is there anything particularly driving their growth above market growth rates? Maybe just for Fred, as you've had discussions with them, particularly, you know, what are they looking for that you see as opportunities for Schein to provide to the DSOs? Thanks.

Yeah. I'll take maybe, I'll start, and Ron can add to this. Yeah, one thing to consider about even the last question on market share is that we're growing with DSOs. We have a strong position with all the national DSOs, most of the national DSOs, almost all of them. They're growing faster. We're seeing the benefit of that growth. When I've spoken with the DSO leaders, and I've spent quite a bit of time with them, you know, they appreciate the fact that we're able to support them nationally. They appreciate the fact that we're able to help them improve their efficiency. They appreciate the fact, in many cases, that they're leveraging our technology to improve their profitability.

We've got access to some of the best exclusives in the market that are helping to drive their growth. I think that total platform that we've built to support, particularly this case, dental, that DSOs are benefiting from that. Those are the kind of the feedback points that I've received from DSOs.

Thank you. Our next question comes from the line of Glen Santangelo with Barclays. Please proceed with your question.

Oh, yeah. Good morning, and thanks for taking my question. Hey, Fred. I wanna talk a little bit about the organic sales growth at a high level. I mean, as you sort of highlighted in your prepared remarks, the second half of the year was particularly strong. Looking at the fourth quarter, we exited, you know, at a pretty robust rate. Now 1Q obviously moderated a little bit from that trend, and you spoke about medical. I'm just kinda curious, can you give us some color about how the quarter maybe played out sequentially? You know, kind of thinking about the fact that, you know, other companies have sort of commented that weather may have impacted January.

We have the war now in March, and I'm kinda curious if you can give us any early view on sort of April and how things have played out? Thanks so much.

Yeah. Thanks for the question, Glen. Looking at the quarter sequentially, we saw a better performance sequentially through the quarter. March was stronger than February. Part of what you're seeing in Q1 is the softness related to our respiratory business or because of the light flu season, and maybe there was a little bit of weather. I would say it's more the flu season than weather for us. Sequentially, we saw that get better and even that continued in April. April continues to be strong.

Thank you. Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Please proceed with your question.

Thanks. Thanks for getting me in, guys. The remeasurement, excuse me, not the remeasurement. The cost savings program. Can you just give us a little bit of a cadence? I understand the exiting of the year at $125 million is great. Can you size what the costs were in 1Q? When do you think it's gonna be break even within the P&L? Just trying to understand the cadence. I know you don't like to give quarterly guidance, but just this part of the business would be really helpful to understand.

Yeah, Kevin. I think that, you know, the financial impact, at least with reference to the G&A portion of this, was relatively nominal in the first quarter because we incurred some costs associated with the programs. We saved some costs associated with the programs. We're gonna start seeing that savings begin to accelerate as we get into the second quarter and then even more so in the third and the fourth quarter. You know, that's the root of our comment when we say we expect to see better earnings in the back half of the year than the first half of the year 'cause it'll be largely driven by some of those G&A cost reductions.

I think equally with, you know, I don't wanna forget about the gross profit optimization as well because we do think that there was some benefits in Q1 from it. We think that those benefits can continue to grow as we get into the year and will continue to accumulate into the, you know, especially into the back half of the year. In terms of, you know, the quarterly cadence, it's really, you know, more to what's the back half versus first half and we still expect the back half of the year to have, you know, better earnings than the first half.

Got it. If I can ask a quick follow-up on just on the remeasurement stuff. There's $11 million this quarter and your guidance assumes that from an operational perspective it'll be less than last year, right? That would imply single digits the rest of the year. Am I thinking about that the right way?

No, in terms of dollars, in terms of EBIT impact or EPS, however you wanna describe it.

What's sort of embedded the rest of the year?

Yeah, I mean, we're, you know, like I said, we're contemplating a range and I think, I believe in the, in the prepared remarks, we said any remeasurement gains, if any. I mean, there's no guarantee we'll have any more remeasurement gains this year.

That's, you know, we look at the opportunities there. We look at the, you know, the strategic initiatives we're taking and which of these joint ventures would it make sense for us to, you know, to consolidate and that is contemplated in the overall guidance that we've provided.

Understood. That's helpful. Thanks. Thanks guys.

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

Hey, good morning, guys. It's Max on for Brandon. Just one quick one from me. On the medical supply side of the business, are you guys seeing any impacts from noise around ACA or Medicaid work requirements? Or do you have any concerns about this impacting procedural volumes going forward?

You know, I would say that, you know, clearly there's gonna be I'm sure there's some impact, but we, you know, we're not seeing it as having a material impact at all really on the business. I mean, I think that at the end of the day, the more people who have access to care, the better off we are on the medical side. This is really a, I think a relatively small part of a lot of our customers' business and we don't expect it to be that, you know, to have a significant impact.

Thank you. Now we have time for one last question coming from the line of Michael Sarcone from Jefferies. Please proceed with your question.

Good morning and thanks for taking the question. I was hoping you can just elaborate a bit more on what you're seeing on the equipment demand side, particularly for the digital equipment?

Henry Schein (HSIC) Q1 2026 Earnings Call Transcript

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