Henry Schein Aktie

Jon Block with Stifel, and we're moving forward and sticking with the dental track, and really pleased to have Henry Schein with us this afternoon. And joining us on stage is Fred Lowery, CEO; and Ron South, Senior Vice President and Chief Financial Officer. Fred took over the role as CEO in March. So really appreciate you coming, joining Jaws and Paws. And hopefully, it's the first of many. So thanks for being on stage with us.

I think I'll just start. It's what, roughly 90 days on the job for you, Fred?

Yes.

I remember you talked a little bit about building the foundation at Henry Schein, but also the need for continuous improvement, right? Things were run maybe in a similar way for a prolonged period of time. I'm going to ask you to sort of break those apart for us. What are you looking -- let's start with what you're looking to build upon at Henry Schein.

Yes. So first off, thanks for having me, and I'm excited to be here. And it's been a great start in the role. And I'm starting to, I would say, get my sea legs, but I still have lots to learn. I spent the first 100 days kind of listening and learning and seeking to understand, tour.

And as I'm kind of getting close to the end of that 100 days, I really kind of frame things in 3 different buckets. I mean, the first bucket of work is really to deliver on our commitments. And we've talked a lot about what those commitments are, delivering on our guidance for 2026, but also delivering on our value creation initiatives that we've outlined before. And I'm excited to say that we're on track in both areas.

The second bit of work or bucket of work for me is around simplifying the business. And when I think about the business as being somewhat decentralized and siloed, in many cases, we have a lot of joint ventures that some of those that we could further simplify. And even maybe our commercial approach in some ways can be simplified and maybe aligned better so that we can continue to support our customers better and expand from a share of wallet standpoint and provide even more services to our customers and help them help really define the value proposition that allows them to see us as real partners and not just suppliers to them. So that's the second area.

And then the last area is really scaling for growth. And that's really -- and as to your real question of what do we want to build on, it's really our exciting technology business and our owned brands businesses and really continuing to take share in the market from a distribution standpoint. So I'm very excited about building on those capabilities that we have already in the business to continue to drive -- to continue to accelerate growth.

Okay. That was a really thorough answer. Does that sort of tackle things that you'd be looking to accelerate as well? I mean, anything else stand out on where you could run faster or improve upon? Or does it sort of fall under those 3 things that you just laid out?

Well, I think they fall under those things, but I mean maybe more specifically in our technology business, boy, we're bringing out new capabilities much faster. And I think that's going to continue to accelerate as we leverage AI and as we partner with others in the industry to bring out different capabilities to our clinical workflow, our open architecture clinical workflow and our PMS system. I think that's going to be really exciting.

Okay. That's a great place to start. I'll pivot on to the business a little bit. And you guys had a solid first quarter. On the earnings call, you called out the U.S. dental market remaining healthy into April. And clearly, investors are worried about the consumer confidence. I mean, you can use a couple of different metrics, but per Michigan, hit an all-time low last Friday. So maybe just talk about the dental market. You alluded to April. How have we seen things trend so far to May?

Yes. I'll start with that, and I'll let Ron maybe talk a little bit about May. But when I think about the dental market and as I've talked to lots and lots of customers and as people have framed it for me, you've got a couple of different types of customers. I mean, you have customers who go to the dentist every 6 months, and they are the good citizens of the world. And typically, they are insured by their employer. So as long as they're employed, they go every 6 months, and nothing changes based on consumer sentiment as it relates to that group of people.

And then you have the other -- another set of patients that sort of wait too long. As a matter of fact, they wait too long to go to the dentist. And they have some challenge or some discomfort or pain or some visual problem that forces them to say, hey, I have to go and get this fixed. And that, as long as -- and their insurance covers that typically. But as long as they're employed, they actually go and do it. And then there's probably a smaller portion of the market that maybe is more in the cosmetic space, but that's tied to more discretionary income.

So I think in the context of that, our business is pretty steady. It's not -- it doesn't fluctuate so much as it relates to consumer confidence, but it has a lot to do with unemployment rates. And as long as people are working at a reasonable rate and unemployment rates have been pretty steady, I think that means, that bodes well for the market overall. But I mean, Ron, I don't know if you want to mention how we're seeing May shape up?

No, you're right, Jon. What we said in the prepared remarks with our Q1 earnings release was that we saw good momentum during the quarter. We saw a February that was better than January, a March that was better than February. And then we saw that momentum continue into April.

And I can say a couple of weeks ago, we said in some public remarks that at the first part of May, we were pleased with the ongoing momentum of the dental business, and I think that's really continued for us within this particular month. It's like Fred said, we do believe that the dental business isn't linked specifically to a lot of discretionary income. There is a discretionary piece to it, but it is limited within the industry. So while you did cite a couple of economic -- whether they're surveys or studies that are out there, I can say that we're not seeing a direct correlation yet within our business.

And what do you guys attribute to the improvements in the business to sort of the March building on February, April versus March, et cetera? I mean, are these some early green shoots, Fred, of what maybe you're sort of implementing with the organization? Ron, is it a little bit of -- there was some chatter that you were maybe hiring some competitive sales reps 6 or 9 months ago, and that's helping from a market share perspective. Are you alluding to the market building month-over-month, Henry Schein building month-over-month or maybe a combination of the two?

I think within Schein, it's been the ongoing momentum that we really began to get in the third quarter of last year. And I'm speaking more specific to the dental market right now. We had some promotional activity in the middle of the year last year that helped us gain some market share in the second half of '25.

We have perhaps gone a little more on offense, I would say, versus being on defense as we got kind of caught on defense for a while there. But I think we have -- we're a little more on offense, and we're starting to see that in the share gains, and we see that continue into the first part of '26 as well. Whether that be our success in hiring some experienced reps who know how to deal with our customers, who can bring value to our customers, those are all things that are what we're really emphasizing, and that's really the value proposition to our customers, being solutions providers and not just product providers to our customers, and we're really starting to gain more and more traction with that as the year goes.

It's funny. If I remember it correctly, in 2Q '25, you had a little bit of a tough quarter for Schein. You mentioned promotions. Everyone freaked out on the promotions word. But in retrospect, you're saying it might have been a good thing. Maybe it helped you gain some traction, get a foothold in some new practices and then gain share thereafter?

It definitely seemed to have been a pivotal point for us, yes.

Okay. Very helpful. I'm going to continue on the business. So medical had a little bit of a light 1Q '26, but it seems like you have to peel it apart. It's, call it, the underlying medical business versus point-of-care testing headwinds that you cited on the 1Q call. How do you feel about medical's underlying trends? And if you've seen that improve coming out of 1Q as well?

Yes. I think the -- as we said in Q1, we did see some challenges in kind of the diagnostic test kits around respiratory, primarily driven by flu, but also overall, respiratory. And if you back that out, the underlying business was mid-single-digit growth. So we're seeing that continue here in Q2. And there are other parts of the business that are growing incredibly well, though. We feel really great about our Home Solutions business and the growth that we're seeing in that, and we expect that to continue as well.

Okay. And just maybe one or two more on trends, and then I'll zoom out. But international, I have to sort of ask a broad question. Any geographies worth calling out? I mean, you guys are very global in nature. Where do you see you have increasing momentum or maybe even some hotspots that have shown some challenges, if that's the case?

Well, I think that Germany has always been a steady market for us, not just in core dental, but as well as on the specialty side. And I think that we've been pleased this year with the activity we're seeing there. And we continue to see just a really strong business in Canada that has been really key for us. It's a very well-managed business. It has dealt with some competitive challenges very, very well, and very, very pleased with how the business is doing in Canada.

Okay. And maybe just to wrap. Your 1Q '26, I mean, if there were maybe a couple of blemishes, I believe the internal revenue growth number was 2.5%, Ron. It's a reported revenue growth number that you give for guide, but that's north of what you did in 1Q. Do we think about that number as trough for the year and that, that will improve for the remaining quarters of 2026?

You're referencing specifically to the internal growth number of 2.5% or just the overall number?

Yes. I mean, I'd say maybe just talk about the overall revenue growth number and how that might play out for the remaining quarters.

Yes. Well, the overall revenue number in Q1 did benefit about 3 percentage points from the -- or 3 points of growth from foreign exchange. Just the math of the foreign exchange rates that we expect as the year goes on, we'll see that benefit diminish as the year progresses.

We do think we can improve on that internal growth number, though. I mean, Q1 did have really two things that created a bit of a headwind on the internal growth. One was the medical situation with point-of-care diagnostic kits, what we just discussed, and also just some timing around the specialty business. And as we said in the prepared remarks, we would expect internal growth in the specialty business to improve as the year goes on.

Okay. So those two headwinds are behind you.

That's right.

Fair enough. Fred, I'll pivot. And on the conference call, you discussed new products. And it's funny. For Henry Schein, in the past, I always thought when Henry Schein talked new products, it was almost like making a call out to their manufacturing partners and saying, where is it? Invest in R&D, we want some new products, and we'll sell it. But you guys go ahead and develop it and spend on it.

You seem to be taking a different approach, saying what Henry Schein could do. So if you don't mind maybe elaborate on that? You said earlier, the software business, maybe AI, But what do those products look like? And from a timing perspective, when can they come to fruition?

Yes. So I mean, first off, let's don't walk away from working with our supplier partners and expecting them to introduce new products. We're excited about all of our suppliers investing in new products.

And actually, we do see ourselves as a great place to launch new products, and many of our suppliers do as well. The one that comes to mind that's incredibly exciting is [ Curodont ], the launch of the [ Curodont ] product exclusively through the Henry Schein distribution network, which is making a huge difference for our customers. And so we're very excited about that. So that is a real important part of our portfolio.

But yes, we're -- when I think about the technology business, the new products, they don't always look the same way. They're the new capabilities. And we have launched quite a few new capabilities in the recent past. And what I'm excited about is really accelerating that, leveraging our own AI development internally, which allows us to bring things to market faster, but then also working with partners who we want to plug in or who want to plug in to our clinical workflow there.

So I think you'll see a steady drumbeat of new products and new capabilities coming to market in our technology business. And then finally, in our Specialty Products business, new products is an important part of where we are investing, and you'll see us continue to launch new products in that business as well.

Okay. Maybe across all the platforms. I mean, I'm used to some of that innovation we've seen come through in implants. Are there opportunities in endo? And it might be a little bit early to ask you, but thoughts on ortho and if you want to be there longer term?

Yes. I think it's a little early to ask me that question, so I'm not going to answer it, but -- today, at least. But at some point, maybe we'll come back and talk about portfolio.

I will say we're very excited about our implant business. In Q1, we became the majority owner of S.I.N. U.S. distribution business, which is a value implant business, which is really the place where you're seeing a lot of growth in the U.S. And by adding that business, really allowing ourselves to align the portfolios there, we think we're going to see a lot of growth, and we're very excited about that.

Okay. A few more, maybe I'll stick on the new products and accelerating growth. On that earnings call, you seem confident about the company's ability to accelerate growth across the different businesses, maybe distribution and specialty and technology, 90 or 100 days on the job. But as you sit here today, are there certain businesses where you feel more comfortable or more bullish on the prospects to accelerate that rate of growth?

I think we have -- I mean, each business has an opportunity to grow faster than it is today. And I mean, I think it's important to note that we are taking share today. So if you look at our growth versus the market, we're growing faster than market. So I think that's a positive place to start.

But as we think about -- and I talked about this on the call -- as we think about aligning our go-to-market and aligning our commercial teams in a way to expand the number of offerings that customers buy from us, then you would have to believe that we're going to grow faster. And that means where customers are leveraging us from a distribution standpoint, that we continue to add in our value-added services so that we can help them from a solution standpoint. Or we also want to, of course, continue to increase the growth of our own brands with our customers, which will, of course, drive growth.

And then again, from a technology standpoint, continuing to add capabilities where we can do two things to increase recurring revenue. One is adding more of our cloud-based Ascend platform placements. So that's actually growing rapidly for us. And then secondly, as we add capabilities to our current placements, increasing that share of wallet and allowing customers to continue to upgrade to add more capabilities to their practices.

Okay. I just want to survey the landscape, I'm going to see if I'm missing any questions. Sometimes I always have my head down. Guys, if you have questions, throw your hand up, please.

I want to go back to how you sort of led off with some of your comments. You said three things, and one of them was delivering on the guidance and also the value creation. And you said you sort of feel good on both of those, and you shared some comments about the business in the past 10 or 15 minutes. Let's shift to the value creation. So after those 90 days on the job, what else, Fred, can you share on value creation initiatives that give you increased confidence on that $125 million run rate net number exiting the year?

Yes. When I think about the value creation initiatives, it's important to understand that they're not -- there's maybe two things. One, they're not just cost initiatives, which you didn't say. But they're broad value creation initiatives, and they're split in two areas. One, we'll be driving more gross profit.

And when I think about that area, we're focused on adding analytics, adding tools, adding people to allow us to have better visibility in the pricing so that when it makes sense, we have the opportunity to raise price, we can do that. Where we have the opportunity to lower price and drive more volume, we can do that. And that's a real capability. That's a new capability for the company or an enhanced capability for the company that will well outlast the value creation period of time. We'll continue to see improvements or benefits from that over a period of time. We also are focused on, of course, growing our own brands and tactics and strategies to do that. That's a part of increasing our gross profits as well.

But on the cost side, we're also building capabilities also. So if you think about the fact that we did not have a shared service for our back office, we're very decentralized. We didn't have a shared service. And we are truly building with an outsourced partner, a shared service for the business, which, again, initially would be a lift and shift, and we'll see some benefit from that. But over time, we'll standardize those processes and continue to drive improvement because of that.

And then finally, from a leveraging our scale standpoint in sourcing, we were not leveraging our scale from an indirect sourcing standpoint. So we've built capabilities to do that as a company, and we'll continue to see the benefit from that over time. And that is both in systems, in process and in people.

So for me, the value creation, delivering $125 million, I'm excited about that. We have line of sight to do it, and we'll have $125 million run rate by the end of this year net. And then we'll deliver up to $200 million over the next few years net. But for me, the thing that I'm most excited about is we're building capabilities that we will continue to benefit from over a period of time.

That was great. That was really helpful color. Ron, feel free to push back if I make a statement that's off. But in my view, price realization for Henry Schein seems somewhat evasive in the past. And Fred, you're talking about maybe being able to lean in and take price in select cases.

So what allows you to do it? So it's better information, it's better systems in place that allow you to identify select situations where you can take price? And do you feel comfortable you'll be able to do that even with a customer base that is still somewhat price sensitive?

I actually think -- when you think about us as a business, we have a very broad portfolio. And the fact that certain SKUs, the price goes up, it doesn't mean there are alternatives for customers. And it gives us a chance to have that conversation and say, well, if you're looking for a lower price point, we've got another opportunity for you. And then oftentimes, those opportunities are our own brands. Not all the time, and sometimes they are our private labels. So for customers that are price sensitive, there's a solution. In places where we can raise price, we certainly will consider and take those opportunities.

And I think about it in value pricing because it's not just that we're going to go out and raise a bunch of prices. In places where we need to lower our prices to be more competitive, we'll take those actions as well. So I don't think of it as a one size fits all. It's not just raising price. It's actually getting to the right price to optimize the business.

Okay. I want to sort of lay out an area where I struggle, but it's a good place to struggle. And Ron, maybe I'll push you a little bit here. So I struggle with the numbers of the value creation of $200 million net and tying that figure back to high single-digit to low double-digit EPS growth. And struggle in a good way where even if the business is doing okay on an underlying business perspective and you layer in $200 million in net cost savings over a few years, I have your EPS growth probably a heck of a lot closer to mid-teens than high single digit to low double digit. So is it a little bit of conservatism built in there? Does it allow for maybe a base business that decelerates a little bit? How can we reconcile those two items?

Well, I mean, just to kind of step back from it a little bit and repeat back out what we've committed to. We've committed to, as you said, $200 million of operating income improvements. Not all in the form of cost savings, but it is operating income improvements over the next few years. Some of that will be in the form of gross profit improvement. Some of that will be in the form of lower G&A.

We have also committed to a net $125 million savings by the end of 2026. I think I said the word savings, what I mean is operating income improvements because some of that will also be in the form of gross profit improvements. That $125 million, as we then enter '27, clearly, those -- the benefits that we're committing to there do support the notion that we could get to double-digit earnings growth in 2027.

Having said that, there are other variables we'll be taking into consideration when we provide '27 guidance. It's clearly way too early for us to be providing '27 guidance. But when we do provide '27 guidance, which typically would be in February of '27 if we follow the timing pattern of the last several years, it will be an important variable when we determine what that guidance will be.

Okay. Just looking at the audience. I'm going to hit on a couple of more topics. And Ron, you and I usually do a little bit of like a cadence dance up here every now and then for Jaws and Paws. So we'll keep that tradition intact as long as you don't mind.

You mentioned the back half should be -- should have better earnings than the first half. And I just want to make sure that's just an absolute earnings comment, 1H versus 2H? That's not a growth rate thing?

I expect to earnings be -- we expect earnings to be greater in the second half of the year than the first half.

Okay. So I think Street is there. I think Street is right around 52% of your earnings in the back part of the year. The 2Q EPS cadence, you're usually up 1Q to 2Q. You weren't last year. We mentioned that rough 2Q from promotions, but you're usually up 1Q to 2Q. You were $1.32 in the first quarter, but it had $0.07 from the remeasurement. So if I strip the $0.07 from $1.32, think about $1.25 underlying. And then cadence-wise, you usually are up Q-over-Q. Is that fair?

Well, I mean, I think as you're aware, Jon, we haven't typically provided quarterly guidance, right? So we did affirm the full year guidance. And we did say, as you mentioned, that we would expect earnings to be greater in the second half of the year than in the first half of the year. When we get to the end of Q2 and we provide the earnings release in early August, we'll address what we believe the balance of the year will be at that point in time.

Okay. Okay. And then, Fred, what do you want to do with this remeasurement gain, longer term? And it came up when we all had the opportunity to meet with you the first time. And it just creates a lot of noise, sort of noise I'm doing right now with you guys up here.

So is it like, hey, let's just strip this and make the business a little bit easier and take out some of the lumpiness? Or is this, hey, as you mentioned earlier, you have a lot of JVs and you've invested in these businesses and it gives you the opportunity to bring them in-house, and it's just part of the business as we move forward?

Yes. So I think the first thing is it's important that we talk about our strategy and what we're doing. And as in Q1, we were very clear that we took a majority stake in our S.I.N. joint venture because we wanted to be the majority owner because it's part of our strategy to grow the implant business. And value implants are growing, and we really needed this in-house. So I think the first thing to know is that we'll be very clear about what we're doing and why we're doing it. So I think that's important.

And then as a result of that, there was a remeasurement gain. We're pretty -- we're as transparent as we could be about what that meant from an EPS standpoint. So I think we'll do that and follow that for the rest of the year. And we'll take it under consideration as we bring out our guidance in 2027 and make a decision at that point.

Okay. And Fred, have you been running the business long enough? I think what preceded you was some investors who may have thought, look, there's the opportunity to spin this medical business and it could unlock shareholder value. I thought on the conference call, you guys cited a little bit of the competitive advantage from having those businesses together. Ron, in the past, I think you talked about or alluded to the overlapping SKUs. I'm just curious, when you look at the company and sort of the playbook in front of you, is that off the table and it's really just about execution, accelerating growth, unlocking value creation? Or could we see more dramatic steps taken?

Yes. I mean at this point, we're comfortable with the perimeter of the business. I mean, those businesses are quite integrated from a supply chain standpoint.

And just remember, one of the things that is unique about our company, one of the things that really drives a lot of value for our customers is that we have a supply chain that is purpose-built to support the right level of product or the right size of products to small office practitioners. And that's the same whether it's dental or whether it's physician or non-acute. We don't supply in the acute world. We're not positioned to do that, and we don't aspire to do that.

So there is quite a bit of overlap. 30% of our SKUs are overlapping between medical and dental. And for now, we're happy with the perimeter. If that changes, we'll let you know.

Okay. A couple more questions, and then I want to end with capital allocation and go back to you, Fred, but maybe just a couple of small ones. Ron, it seems pretty straightforward why medical would improve off those 1Q levels. You mentioned the point-of-care testing. But you alluded to Specialty strengthening going forward as well. What held it back in 1Q? And was it a comp thing? Or what was sort of transitory within the Specialty division and the confidence we see that number improve?

Well, I think within that particular segment, you can have some -- different than distribution, you can have the occasional larger sale, whether it be in the form of an export or -- that's just one example of where you can have a larger sale. So we did have some difference in timing associated with that quarter. That quarter, actually, the results were in line with our expectations. It was what we were expecting with it. And we do expect the internal growth within that segment to be better, to improve as the year progresses.

Okay. And then just a couple of quick ones on equipment, and then we'll conclude with capital allocation. Where are you guys now on this U.S. split between traditional versus digital? And I ask because you used to provide that. But now for so many quarters in a row, traditional seemingly outgrown digital. So is there sort of a new split when we think about those two divisions?

No, it's still roughly a 2:1 split. It's about a 2/3, 1/3 split, 2/3 being traditional equipment, 1/3 being digital equipment.

And any line of sight -- I feel like one of the underappreciated things in dental or one of the, I don't know, misconceptions is that consumption has been under pressure with the dentists. And I don't really think that's the case. I think they've bought intraoral scanners. They've purchased 3D printers. Maybe there's certain equipment that they've been more reticent to buy because of structural headwinds.

It's just really this pricing that we've seen. I mean, I remember intraoral scanners when they were $40,000. Now maybe they're $9,000 or $11,000. Any line of sight where we might be coming up against bottoming in price on a couple of these key equipment items where the growth rate would be more reflective of volumes per se going forward?

I would say that it's becoming a dangerous game trying to predict when the -- we're going to find the -- where that ASP is going to land. I think that more and more entries are coming into the market at very competitive prices. We're getting good volume increases in intraoral scanner sales, but it is at lower ASPs as the lower-price items tend to be taking more and more of that market.

It's not necessarily a hugely negative thing for us. I've always said when a practice has bought its first scanner -- and maybe this is -- we're down to the point where this is a very attractive price point for practices to invest in an intraoral scanner. They really kind of crossed that threshold from being an analog practice to being a digital practice. And now -- they now open themselves up to being a customer for additional digital equipment. And so I think as more and more offices buy scanners and begin to adopt digital technology, it does create more opportunity for us down the road.

Last one quickly, and we're running a little bit over. But Fred, over to you. I think from a capital allocation standpoint, that free cash flow has been used predominantly for share repurchases. Any thoughts on tweaking that? M&A, in short? Where -- what's the best approach in terms of deploying your capital?

Yes. I think we remain committed to a balanced and a disciplined capital allocation strategy. In recent past, we've prioritized share buybacks. We did in Q1. I think you'll see that continue to be a priority. I mean, the stock is clearly undervalued, at least in my opinion. And so we think that will continue to be a priority. We do want to maintain enough flexibility for strategic investments.

But as I think about M&A, I think you should expect us to be a very disciplined acquirer, and we'll certainly look at opportunities. But I think we'll be -- we'll look at opportunities in a very disciplined way, focused on -- what does that mean -- focused on assets that are strategic. And I mean strategic in the context of they continue to help us build out this platform to really support our customers better, assets that are going to drive organic growth in the future. And of course, that will drive expansion in margin and the appropriate returns for our shareholders.

So I think you'll see a balanced approach from us. But in the short term, we're very focused on share buybacks given where the stock is.

Okay. Fair enough. We're going to have to conclude there. Guys, thanks very much.

I run the health care tech and distribution sector here at Bank of America. We are very excited to have the Henry Schein management team here with us. We have CEO, Fred Lowery, and CFO, Ron South. Thank you both for joining us. Really appreciate the time.

Thanks for having us.

Thank you, Allen.

Before we kick off, Fred, I would love to get a sense. Do you have any prepared comments or would you love to make any comments about your first quarter as a public company CEO.

Excellent. Thank you very much. No, it's 2 months in, and things just finished a month 2, and things are off to a good start. We had a good Q1. Really healthy growth in our dental market. Overall, growth was strong in our technology business. Growth was strong in our distribution business. We did see some softness in medical. But when you back out for flu, the underlying performance was actually -- was pretty good, mid-single digits in medical as well. So good start to the year. Margins were good in the quarter. So a nice expansion in margins.

We recommitted to our value creation delivery of $125 million run rate net by the end of the year and $200 million over the next several years -- next couple of years on a net basis. And we reconfirmed our guidance for 2026. So off to a good start. Very excited about the opportunities ahead, and I'm sure we'll talk about that during the discussion today.

Yes, absolutely. So Fred, you mentioned you've been in the seat about 2 months. You talked on the call about your 100-day plan. Would love to get a sense from you during your first 60 days or so, as you think about the first 100 days, where are you spending the majority of your time? How should we think about what you're prioritizing during your first 100 days with the company?

Well, first of all, it's really just me learning. It's just me trying to get out and spend time with our customers, spend time with our suppliers, spend time with our employees, our Team Schein members and just suck up as much as I can as a sponge and really evaluate what's going on in the business, assess what's going on in the business, understand the current projects that we have in place which I've gone through that assessment to the point that I'm very happy to commit to our value creation opportunities. And then I think the other part is I'm not just assessing, it's also determining where do we want to invest in the future. Where are the big opportunities, where are the unlocks. And one of those areas is leveraging AI and accelerating our new product development process, accelerating some of the capabilities that we're bringing to market, particularly on the technology business.

And so I'm really excited about that. Another opportunity that we're working on is really aligning our commercial processes so that we show up with a customer value proposition that encourages the customer to buy from more than just one part of our company so that we grow together as an overall company and really changing the narrative from focusing on helping customers save money to actually helping customers make more money, helping them grow faster and grow more productively.

And Fred, you mentioned Henry Schein's value creation initiatives. That's a big part of the BOLD+1 strategy to get Henry Schein back to consistent high single-digit to low double-digit EPS growth. On the call last week or 2 weeks ago, you talked about a lot of different ways to improve the operating performance of the company, dynamic pricing, shift to owned brands, specialty growth, centralizing back-office functions. You also mentioned just now AI and aligning some commercial opportunities. Would love to get a sense for you, your first 100 days, as you think about all these different places where Henry Schein could look to create value, are you looking at maybe 1 or 2 and saying, these are the ones that I'm prioritizing? Or are there all these different opportunities going on at the same time? Trying to get a sense of what's prioritized and how you think about the different areas of focus here.

Yes. I mean we're absolutely going to deliver on the value creation items that you listed there. And I think of them more than just an episodic event. I mean we're going to absolutely deliver what we committed to, but the pricing tools that we've put in place now, they will continue to -- we'll continue to benefit from them over time. Our focus on growing our corporate brands. We will continue to do that over a period of time. And the benefit from us creating an outsourced shared service, we'll continue to see that benefit over a period of time as well. And ultimately, my expectation is we'll develop a continuous improvement process where we'll continue to drive productivity for the enterprise, and we'll continue to be able to leverage that productivity to drive growth in the future.

And then for Ron, as we think about the $125 million exit rate in 2026 for operational improvements, can you unpack that a little bit as we think about -- are there specific parts of that where you have very, very high degree of line of sight, maybe you have more confidence in? And then which of those drivers might require a little bit more execution as we think about the confidence level of getting to that $125 million by the end of the year?

Sure, Allen. So as we've mentioned before, the -- that $125 million run rate at the end of the year is the expected net run rate operating income improvement that we would have as we enter 2027. We do expect some benefits in 2026 from these activities, obviously, but those benefits are a little more backloaded to the second half of the year. But that's mostly due to the G&A portion of this because the G&A does require some time, some planning, some transitional planning because there are some structural changes that we're going through in terms of how we support the business from a G&A perspective. And we want those changes to be sustainable. As Fred said, this isn't episodic. We want it to be something that is established so that going forward, as the company grows, we're able to scale this in a way that is able to serve the company without having to add a lot of additional costs as the company grows itself.

So there are some structural things we're working through right now, but we'll begin to see a lot of benefit from that in the second half of the year. As opposed to gross profit optimization, that's more of a process that we're going through where we should -- we're beginning to see some benefits from that now. We got a little bit of that in Q1. We're seeing -- I expect we'll continue to see some gross profit improvements in Q2 and as we progress through the year because those are more systematic and anticipatory changes to how can we be pricing products in a more dynamic way. That doesn't necessarily mean just increasing price, but also decreasing price where we can be more competitive and not outliers in certain product categories.

So that's -- I think those are areas that require less planning, execution and can provide us with a more immediate benefit. It's the execution that's necessary on the G&A side that begins to give us that savings in the back half of the year. But we feel like we have really a clean line of sight into how we're going to execute on that. And that's what gives us the confidence to commit to that $125 million.

And then taking a look at your businesses, both medical and dental. On the call, you talked about as the quarter went on, it seemed to improve from a demand perspective there. I think you said that March was better than February and April was strong. Would love to get a sense of what you're seeing so far in April and maybe early May as it relates to your guidance. Is there anything surprising you in April or May as it relates to the Dental business specifically, and then I'll follow up on the medical side. But in the Dental business, can you talk about what you're seeing so far in April and May and how it relates to your guide?

No, I would say the momentum we saw in April has continued into May. It is a -- to get the growth that we want to have in dental, it requires us to take market share. It requires us to have -- and taking market share is also a component of that is also maintaining the customers you have, reducing the churn of customers you have, and we've done a very good job of customer retention, and we've been able to continue to take market share. So we're quite happy with the continued momentum we're seeing into the second quarter on the dental side.

And then as we think about the medical business, you called out a weak flu season. And I think the guide assumes that your organic growth in the medical business will accelerate after 1Q. Can you talk about what underpins the confidence or maybe back out what would the growth have been in 1Q ex flu and what you're seeing in the medical business that gives you confidence for the rest of the year?

Certainly. So as we said on the call last week, we estimated that when you take out the impact of point-of-care diagnostic kit sales, which is really those -- the demand for those products is largely driven by the respiratory illness season, whether it be flu or RSV or otherwise. Excluding that product category, our medical business grew in the mid-single digits. And I would -- my expectations for medical, as we progress in the year, there'll be less of an impact of that product category because it does tend to be heavier in Q4, Q1, midyear, not as -- there's typically not as much demand in that product category.

So we do expect medical on a reported basis, on an as-reported basis to continue to see that growth that we saw in Q1 ex those diagnostic kits. Some of that is driven not just by core medical, but also by our Home Solutions business, which has been growing quite well for us. We now are getting probably greater than 10% of our medical revenues from our Home Solutions business. It's about a $400 million plus run rate. And it does get better margins. It does grow faster, and it's been a great area of growth for us.

And then last question here really on the end market or macro. There's been some discussion around the derivative impact of oil prices on other -- on input costs, things like resin. Can you remind us what your exposure is to oil-linked inputs and maybe give a little bit of historical context around how rising commodity prices could impact your business?

Yes. It's hard to say. When you have the breadth of products that we sell and the number of SKUs that we sell, and certain product categories may be impacted by -- ultimately from the cost of oil, and they may have some petroleum-based commodity to them in terms of the material that's used in them. But the approach we can take with those types of products is that as we see cost increase to the extent we have to increase prices, we'll have to consider that. The beauty of the broader portfolio is that if we see other products that are not experiencing as much of a cost increase that are similar SKUs, we can redirect customers to those products or to our private label if we have a competing private label product.

So we feel like we can work with customers to get them to the products they want and still be at competitive prices. It's very much a very similar approach to what we took during the volatile tariff environment last year. And we were able to mitigate the effect of that over the course of 2025. And we think we can do something similar in 2026 with as it relates to the cost of oil.

One other thing I'll add to that is that it does impact to a certain extent, freight prices. The freight prices that we're paying and to the extent we have to increase our freight charges going out, we're working with customers to make sure they understand that if we've had to include some fuel surcharges. But we feel like what we're doing there is still in line with market as we go forward.

Okay. Great. And then I think that one of the highlights of the quarter for us was the gross margin expansion in the distribution part of the business with margins up 35 basis points. Can you unpack the primary drivers of that gross margin improvement? It was really nice to see. And as we think about the durability of those margins, how should we think about the sustainability of gross margin expansion or stability within that distribution part of the business?

Certainly. And I would say that you do see, first of all, some of the beginnings of some benefits from our gross profit optimization initiative that we have in place there. But that would include -- we're seeing some stability in glove prices. I mean, for several years now, we've seen glove pricing coming down, eating into margins a little bit. We do see some stability in glove prices, and that's helping those margins. I would also say that we saw growth in our company-owned brands or private label as being -- exceeding the growth of the overall portfolio. And that group of products does get a better gross margin, and that's also helping us in that area as well. And I do believe these margins can be sustainable going forward, yes.

Okay. Great to hear. And then one for Fred. As we think about your conversations with customers, Henry Schein is the leader in -- with their relationships in DSOs. Would love to get a sense of your initial conversations with those DSO customers. They're obviously utilizing Henry Schein in a variety of ways. What are some of the things that you took away from those conversations where Henry Schein can do more for some of those large and growing customers?

Yes. I've had an opportunity to meet with most of our largest DSOs and some smaller ones as well. And the good news is that they see a lot of value in Henry Schein. And they, to a customer know that there's more that we can do together. And I think the areas of opportunity would be one around our corporate brands and leveraging more of our corporate brands with DSOs. And they have a really great way to drive compliance in those -- in that customer set.

The other is around our technology, around our PMS software and the way we're building out the clinical workflows, many DSOs see a lot of value in that and understand that it can help them from a productivity standpoint and actually from a profitability standpoint. So those will be 2 areas where I think there are more opportunities with DSOs for us to work closer together.

I appreciate all of that color there. As we think about the merchandise growth within the dental business, it was a little bit better than we expected in 1Q. It seemed like dynamic pricing was part of that. Good demand was also part of it. Ron, about a year ago, you did some promotional activities that seemed to improve your growth rate in the back half of last year. Can you talk a little bit about the performance of those promotions relative to your expectations, what retention rate has looked like and how that's contributing to growth here in 2026?

No, I would say the promotional activity that we had, and it was largely concentrated in the second quarter last year has really led to those market growth -- I'm sorry, market share expansion that we've been able to have in the second half of '25 and that continued into the first quarter of '26. So we've had great success in working with customers. A lot of these customers were people who were already buying from Henry Schein, but were buying at low volumes. And we really focused on how could we increase share of wallet with those customers and also develop a stronger relationship with them so that they didn't just view us as someone who they could buy merchandise from but also how could we help them drive a more profitable practice. And it has -- I think those promotions have really paid off, and that was clearly a contributor to the market share growth that we had in the first quarter of '26.

Great. And then moving on to specialty. I think both value implants and premium implant growth slowed quarter-over-quarter in the U.S. You spoke a little bit about some timing impacting the softness there. But would love to get a sense of what you're seeing broadly in terms of U.S. growth rates, both in premium and value implants. And you've made some acquisitions there. Would love to get your confidence on growth rates over the remainder of the year and how things like M&A are contributing to that growth.

Sure. So on the specialty side, the segment as a whole had growth of about 8%, but the local internal growth there was 1.7%, which is a number that we feel like will improve as the year progresses. And we did have some timing issues within the quarter that we felt like impacted that growth rate. I can say from an internal perspective, our results in that segment were in line with our expectations. And that's why we made a point to say we do expect that growth rate to improve as the year progresses. In terms of value versus premium, in the U.S., we continue to see better growth in value, both in the market as well as within our product portfolio, better growth in value than in premium. I believe what we're seeing there is more -- any market expansion that is happening in implant tends to be highly concentrated in value.

It tends to be coming from GPs who are expanding into doing implant procedures and are doing so using a value implant. So we're excited about the transaction we were able to complete with our SIN U.S. distributor that we now own that distributor in the U.S., and it gives us greater control over that product portfolio. And we expect to be able to continue to drive growth with the value implants going forward. I believe in premium, our BioHorizons brand still competes very well. They are at an attractive price point for a premium implant. And we still feel confident that we can get better growth out of -- on the premium side as the year progresses. Outside of the U.S. and Europe, what we've seen there is that it's been relatively steady growth. Camlog continues to be a very good performer for us in Europe, and we think that can continue.

DSOs have obviously been a big driver of growth in recent years and obviously very important to Henry Schein. As we think about their growth in 2025 and moving into 2026, interest rates have -- they went lower, now they're moving higher. How would you think about the growth rates and the growth outlook for that large customer cohort in '26 versus 2025? Is there any change there? Any moderation, any acceleration? Anything to call out?

I think the DSOs have historically been growing faster than the balance of the market. And I think that the DSOs that we work with, and we have a heavy concentration of the largest DSOs use us as their primary distributor. And we have -- working with a lot of them on not just on what merchandise and equipment are you buying, but also what expansion can you do into, whether it be in specialty, what are some of the tools you can be using in technology. And I think that is why you're seeing greater growth in DSOs than in the balance of the market. And so I think they will continue to -- if they can follow their business plans as they have and they continue to find innovative ways of growing their practices, I think we'll continue to see the DSOs do well beyond 2026.

And then going back to the DSOs again, Fred, you mentioned that some of the opportunities to expand wallet share are corporate brands, and PMS software. Can you talk about your conversations with those DSOs? Where specifically is the opportunity around corporate brands? Are there specific ones where you have 2 DSOs, one that has a larger adoption and so you're kind of comparing the 2 and you see an opportunity with the second one? Would love to get a sense of how you think about this opportunity. And then on the timeline of exploiting that type of opportunity, do you think this is something that could be done relatively quickly? Or is this something that is more iterative and something that you could expand share in over a period of multiple years?

Yes, I'll start with the back part of it. I think it's somewhere -- something that we will expand share over multiple years. It's not something that we're going to see episodic or flip a switch, and we'll get there. I think -- over time, we will continue to grow our relationship with DSOs. And as we do that, we'll see our share position grow in our corporate brands. I don't know that I would want to point to 1 or 2 categories and say, hey, these are the exact places because I think it actually does depend on the specifics of what that DSO is looking for, and there are opportunities in many different categories. But I do -- I will tell you that there is a clear view from DSOs that they absolutely do want to use more of our corporate brands, and they see opportunities to grow as well as we do.

Moving on to digital equipment. In the quarter, sales were flat, and you called out lower ASPs from new entrants, something we've seen for a long period of time. It sounded like toward the end of 2025 that maybe some of the ASPs were stabilizing a little bit, but it sounds like that sort of reversed in 1Q. Would love to get a sense of how quickly is volume growing for digital equipment? And is the -- how material are these lower ASPs? And I guess maybe an update on your thought on when that moderates, if you see any time period where that would be likely?

Yes. I mean you're referencing the intraoral scanners, and we did see volume growth there. I believe it's in kind of the mid-single digits that we saw in volume growth. But a lot of that growth came from a greater demand for some of the lower-priced entrants. So that's the math of that ASP as they get a greater mix of that volume, that's what's bringing that ASP down. But it's a very attractive price point for a lot of practices to -- who are currently not using an intraoral scanner, and there's still a lot of practices out there who have not adopted digital technology who are making these investments for the first time.

And so I think that it could still be a little while on that. But think about it as these practices acquire a scanner and begin using a scanner and understanding the benefits they're getting from that digital technology, they also become candidates to buy additional digital equipment that interacts with that scanner. So while there is some pricing pressure and what it might create when you look at overall revenues on digital products, it does provide us with some growth opportunities down the road as these practices begin to become more of a digital practice as opposed to an analog practice.

And then with a few minutes left here, moving on to capital deployment and capital allocation. You've been very acquisitive over a period of many years across a lot of different areas, specialty, medical and things like geographic expansion. As you think about your portfolio today, where is the most attractive areas where you're focusing on for M&A?

Well, any M&A we do will continue to get a lot of scrutiny. We want to maintain a very disciplined approach on M&A. Our focus will likely continue to be more in what we have coined as the high-growth, high-margin areas of the business, specialty products, technology, value-added services. I would say, in addition to that, we've done a fair amount of acquisitions in the Home Solutions area over the last couple of years. We still like the opportunities there. We still believe we can do some fold-ins in Home Solutions. That is an area that while it might not qualify under our definition of high growth, high margin, it is higher growth and higher margin than our core medical business. So it is accretive to that piece of the business. And so we do see some opportunities within medical in that area as well.

And then your organic growth in the first quarter was about 2.5%. It's a little bit below the Street. I think the expectation from the Street now is that growth -- organic growth reaccelerates to maybe 3.5% for the last 3 quarters of the year. You talked about some of the growth drivers in the business that should improve. But can you speak to your degree of confidence that growth can reaccelerate for the remainder of the year?

Yes, because I don't think we're going to see the same headwinds in medical and in specialty that we saw in Q1. I think those were items that really kind of brought down that internal growth number. We expect that internal growth number to be better as the year progresses.

And then one follow-up here on the SIN business. You bought that business in 2023. And then you bought SIN 360 very recently. Was that always part of the internal plan? Or did something evolve there where that became more attractive? Would love to just get a sense of -- is this sort of the future road map, but any thoughts you have there would be helpful.

Yes. I would say it was clearly an opportunity that we saw as part of the acquisition of SIN in Brazil. We knew that they had the SIN U.S. distributor. It was a relatively new business. We had to work out, quite frankly, how well we could integrate it with our BioHorizons business, how would we go to market with those 2 businesses together once we kind of formulated that plan and began to see the opportunity in value implants and made the investment decision quite easy.

And then with the last 90 to 100 seconds here, Fred, you've been in the role for 2 months. As you think about your goals for the next year, what are the signposts -- or how are you going to be grading yourself a year from now to make Henry Schein or your tenure at Henry Schein a success after that 1-year point?

Well, I think it starts with us delivering on our guidance for our commitments for 2026. That will be clearly one thing and also delivering on the value creation items. But aside from that, it's really about us having a clear view of the actions that we can take to accelerate growth and do it more profitably. And as we develop that strategy, which will be an extension of our BOLD+1 strategy, I'm sure, if we -- if I can look back and say we've got a clear line of sight to doing that, I'd say it would have been a successful year.

Sounds good. I think we'll leave it there. Fred, Ron, thank you very much for the time. Really appreciate it, and thank you to everyone in the audience for joining us.

Great. Thank you very much.

Good morning, ladies and gentlemen, and welcome to Henry Schein's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Graham Stanley, Henry Schein's Vice President of Investor Relations and Strategic Financial Project Officer. Please go ahead, Graham.

Thank you, operator, and 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 are 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 is 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 analysis 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 and 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 5, 2026. And 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.

And with that, I'd like to turn the call over to Fred Lowery.

Thank you, Graham, and good morning, everyone, and thank you for joining us today. I'm honored to lead Henry Schein as a 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 the culture of continuous improvement.

I'm also pleased to report our strong financial results for the first quarter. But before we turn to these I want to 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.

And 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 and invested in their success, and they're supported by our equipment service technicians. And 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.

So over the last 2 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 is 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 nonacute care settings, which also aligns well with our unique capabilities to supply the right quantities to all nonacute settings, including ambulatory surgical centers, community health centers, private practices and home solutions. I 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 owned 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 improve 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 health care 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.

Now 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 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 nonacute 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, and these are mostly integrated into our global suite of practice management software solutions.

Last week, I had the opportunity to attend our Thrive Live 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, and 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, but I expect them to fuel our growth and further support an enhanced customer experience.

Execution is really well underway. Let me give you a couple of examples. We've appointed an outsourced partner to centralize, select back-office functions and 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.

And finally, we are implementing gross profit initiatives, including value pricing and enhanced growth of our corporate brands. 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 $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'll 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 noncontrolling interest at 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 reregimen gains. However, 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 remained 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 Interroll scanners and treat 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 the light flu season. This category represents roughly 15% to 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. 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 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 Dentale 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 negative $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 about unreasonable effort and 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 cost pricing.

Our 2026 full year guidance remains unchanged. Total sales growth is expected to be approximately 3% to 5% over 2025. We expect non-GAAP diluted EPS attributable to Henry Schein, Inc. to be in the range of $5.23 to $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. and we continue to expect remeasurement gains recognized in 2026 to be less than recognized in 2025.

So with that overview of our business and recent financial results, we're ready to take questions. Operator?

[Operator Instructions] And our first question comes from the line of Jason Bednar with Piper Sandler.

I've got a couple, and I'll just ask them both upfront or somewhat connected. When I look across first quarter performance, I guess, what really stood out to me was that gross margin result, a 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? You're already seeing some of that?

And then how do we think about this result in the context of these rising shipping costs that are just better obviously happening just with where oil has moved. And 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 oil above $100 a barrel or a one kind of barrel means for your margin profile, just so we can have a little bit of an idea on sensitivity to this metric just in, I guess, last thing here, too. Just what's -- if you can help us what's included in guidance around what you're assuming for oil.

Sure, Jason. I think on the -- with reference to the gross margin, yes, we are pleased with the improvements that we were able to get in gross margin the year-over-year is about 25 basis points and then the gross -- the total gross margin improvement versus the fourth quarter is about 86 basis points.

So you are seeing a little bit -- some of the early benefits perhaps of the gross profit initiative from value creation to more -- we have, I would say, a slightly more dynamic pricing environment that's allowing us to react in a more timely basis. But it also reflects, I believe, the fact that our own brand products continue to -- the growth of those products continues to outpace the rest of the portfolio. where we do get better margins with those products as well. So we're seeing some mix 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.

With reference to 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 but there are some things that -- some measures we're trying to take to try to protect the margins a little bit as our -- as we see those costs go up.

Nothing that we're seeing out there yet that we believe is creating a significant issue. We have some plans in place that we could initiate if we think we need to. But right now, like we're seeing in our guidance, we feel like based on the current situation, we are able to mitigate any related cost increases.

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

It assumes that we can mitigate rising. Obviously, there's a tipping point out there, right? But it assumes that we can mitigate the changes in the cost of oil.

Our next question comes from the line of Elizabeth Anderson with Evercore ISI.

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?

And then, 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?

Certainly. Elizabeth, I'll start, and then I'll have Fred answer your second question. I think that -- 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. But we do expect improved growth in specialty going forward in terms of what the -- what we saw in the first quarter.

I think that the products there, like we still remain very positive on what we're seeing on the value implant side and the high single-digit growth we're seeing in the sales of value implants. I think gives us the confidence that we can continue to improve that growth going forward.

Fred, I'll let you to answer the second one.

Yes. Elizabeth, great to hear you. Thanks for the question. When I just take a step back and think about the positives, 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 owns that we own are incredibly important to customers. And 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 custom business 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 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. So 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 has been 3 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. But three, we know that we need to change in order to be better. And 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 want to 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.

And then the third will be with our suppliers. Without a doubt, I talk to all of our top suppliers and they all see Henry Schein as a great place for them to grow their business. So those will be the things that I would say I was -- I've been most encouraged by and excited. It gives me some confidence in the future. I'm excited about a bright future for the company.

Our next question comes from the line of Jeff Johnson with Baird.

Welcome, Fred. So I know it's only been a couple of months in the job now, and I'm sure you're going to get a lot of focus today on the 3-year profitability improvement plan, good to see that you're reiterating that $125 million run rate by the end of this year. But 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 of 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.

Jeff, thank you for the question. And 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 -- 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. So 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. So those things will continue over time. So I would start with that.

Secondly, my focus is on developing a continuous improvement process here where we don't have an 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. So those are the 2 ways that I think about the question. And then as we do take costs out of the business, over time, we'll be able to reinvest into areas that are going to drive greater growth and thinking about the Henry Schein One portfolio where we're investing in AI capabilities that will help us grow over time.

And then 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 at the end of our strategic plan period. So I think those things will support us getting back to continuing to deliver margin expansion over a period of time.

Our next question comes from the line of Michael Cherny with Leerink Partners.

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 want to 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. But 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?

Listen, I'll take that one, and thank you for the question. So just to clarify, listen, 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. And so 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 a really great partner and 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. So we'll take the appropriate actions with our customers and have those direct conversations as we see things materialize in the market.

Our next question comes from the line of Jonathan Block with Stifel.

Joe Federico on for John. Maybe just to look at implants a little bit closer. I think that 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. So does that mean that premium was more flat to down? And is that possibly a function of the consumer? I think premiums heavier weighted to the international business. So any color on some of those dynamics would be great.

Yes, Joe. So I think that -- yes, like we said, the value implants did experience higher growth, keeping in mind that of the mix within implants is about a 2:1 mix premium to value for us, right? We did see some flatness in the premium implants. And I would say more so in the U.S. versus Europe, but both were in the, say, lower single digits to flat.

And so I do think that there is a -- there is some -- whether it be a little consumer pressure there or whatever it might be. But like I said, there was also some timing on some transactions that where the quarter itself came in, in line with our expectations within that segment. And we do believe that we'll see improved growth within that segment as the year progresses.

Our next question comes from the line of Daniel Grosslight with Citi.

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

Sorry about that. Global Dental growth was relatively strong across both merchandise and equipment. You mentioned a couple of times that you're taking share here, but also the underlying market seems to have recovered somewhat. So 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?

Certainly. I think that 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 a slightly more positive tone to the market, still relatively low market growth. But what we're seeing is that we -- our data indicates that we are taking market share there. So we got a little bit of volume growth. We got a little bit of pricing favorability within the quarter within merchandise. And in the end, in the U.S., with a local internal growth of greater than 4% is a number we're pretty happy with.

Outside the U.S., you do get a little bit of some pressure that has occurred in some countries, but we had I would say, especially outside of Europe, when you look at the growth we had in Brazil and in Canada, we had very good merchandise growth there. So 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 where we're getting this, seeing the growth in dental.

Our next question comes from the line of Allen Lutz with Bank of America.

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. But have the pockets where you've been gaining market share in general? Have they -- in the U.S. market, have they changed or evolved over the past year or the past couple of quarters between merchandise and specialty? And then how do we think about what you expect for share gains or the sources of share gains for the remainder of 2026?

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 anything 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. So that is an area that has I think, given us some opportunity to provide 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, and we've been able to retain a lot of those customers that we picked up and that increased share of wallet that we picked up with some existing customers that -- so some of that growth you saw in Q3 and Q4 has continued into Q1.

Our next question comes from the line of John Stansel with JPMorgan.

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?

And then maybe just for Fred, as you've had discussions with them, particularly, what are they looking for that you see as opportunities for Schein to provide to the DSOs.

Yes. I'll take maybe -- I'll start, and Ron, you can add to this. But 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, the most of the national DSOs, almost all of them and they're growing faster. And so we're seeing the benefit of that growth.

But when I've spoken with the DSO leaders and I've spent quite a bit of time with them. 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. And we've got access to some of the best exclusives in the market that are helping to drive their growth.

So I think that total platform that we've built to support, particularly in this case, dental, that DSOs are benefiting from that. And so those are the kind of the feedback points that I've received from DSOs.

Our next question comes from the line of Glen Santangelo with Barclays.

Fred, I want to 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. And looking at the fourth quarter, we exited at a pretty robust rate. Now you obviously moderated a little bit from that trend and you spoke about medical.

And I'm just kind of curious, can you give us some color about how the quarter maybe played out sequentially kind of thinking about the fact that other companies have sort of commented that weather may have impacted January we have the war now in March. And I'm kind of curious if you could give us any early view on sort of April and how things have played out.

Yes. Thanks for the question, Glenn. Looking at the quarter sequentially, we saw better performance sequentially through the quarter. So 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 and flu season. And maybe there's a little bit of weather, I would say it's more of the flu season than weather for us. But sequentially, we saw that get better and even that continued in April. So April continues to be strong.

Our next question comes from the line of Kevin Caliendo with UBS.

The remeasurement -- excuse me, not the remeasurement, the cost savings program, what -- 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 going to be breakeven 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 of the business would be really helpful to understand.

Yes, Kevin, I think that the financial impact, at least with reference to the G&A portion of this was, I would say, was relatively nominal in the first quarter because we incurred some costs associated with the programs. We saved some costs associated with the program. we're going to 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. So that's the root of our 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 because it will be largely driven by some of those G&A cost reductions.

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

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

Single digits in terms of EPS?

No, in terms of dollars, in terms of EBIT impact or EPS, however you want to describe it. I'm just trying to understand what's sort of embedded for the rest of the year.

Yes. I mean we're -- like I said, we're contemplating a range. And I believe in the prepared remarks, we said any remeasurement gains, if any, I mean there's no guarantee we will have any more remeasurement gains this year, but that's the -- we look at the opportunities there. We look at the strategic initiatives we're taking and which of these joint ventures would it make sense for us to consolidate, and that is contemplated in the overall guidance that we've provided.

Our next question comes from the line of Brandon Vazquez with William Blair.

It's Max on for Brandon. Just one quick one for 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?

I would say that clearly, there's going to be -- I'm sure there's some impact, but we -- 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. But 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 -- have a significant impact.

And now we have time for one last question coming from the line of Michael Sarcone from Jefferies.

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?

Yes. On the digital side, we're still seeing very good demand for intraoral scanners. That's really the -- to me, that's the key product in digital. But we continue to see lower-priced entrants to the market, which is actually helping drive demand of intraoral scanners. And the beauty of intra-oral scanners, and I've said this before, is once a practice is investing in intraoral scanners, they become a digital practice, and then they are now they become a customer to buy other digital equipment. So while those prices have depressed a little bit and do hurt a little bit of that top line growth, it does give you an opportunity to sell additional digital equipment to those customers going forward.

Traditional equipment still had very good growth in the quarter, and that's a very good indicator of the confidence and practices who are investing in their practices, either adding a chair or renovating a chair. And we continue to feel like the backlog on our traditional side is healthy and will help gives us the confidence that we can continue to see growth in equipment as the equipment sales as the year goes on.

Well, thank you, again, for joining us today. And I'd like to maybe just give a few concluding remarks. First, we delivered a strong first quarter. Sales momentum continues and the U.S. Dental and Global Technology businesses delivered strong sales growth, more than offsetting the softness in medical. Margins are also expanding, driven by favorable business mix and some early impact from value creation.

Secondly, I'm encouraged by the progress we've made on our value creation initiatives. I do remain very realistic about the work that's ahead but we are committed to achieving the $200 million target and the $125 million run rate by the end of the year. The early progress gives me confidence that these initiatives will be a meaningful driver of operating margin expansion over the next several years and will contribute to achieving future high single-digit to low double-digit earnings growth.

And third, I believe the full year 2026 financial guidance is appropriate. It assumes stable end markets and takes into account potential macro uncertainty. While our fundamentals are strong, I see meaningful opportunities to enhance our operational execution and performance culture. This will take time, but the work is actively underway, and I'm confident it will drive sustained value creation.

I'm optimistic about what lies ahead, and I look forward to updating you on our progress throughout the year. Thank you for your interest in Henry Schein, and enjoy the rest of your day.

Thank you. And this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Excited for our next presentation. We're excited to be hosting Henry Schein and the CFO from the company, Ron South. For those of you who don't know me, I'm Glen Santangelo. I'm the analyst at Barclays that covers Henry Schein. A lot of transition, a lot of things going on at Henry Schein. So we're excited to be hosting the presentation today.

So with that, Ron, welcome.

Thank you, Glen.

Why don't we get started? Obviously, you're fresh off your 4Q results and providing sort of 2026 guidance. So maybe just to level set the conversation, that might be a good place to start, just sort of giving everybody a quick overview of some of the highlights from 4Q and 2025 and maybe set the stage for 2026 as you did with your guidance and some of the bigger picture items.

Certainly. So thank you, Glen, and good morning, everybody. Yes, we released earnings, I think it was 2 weeks ago today. And we were quite pleased with the results that we were able to deliver for the fourth quarter. Several highlights, quite frankly. I think that -- starting with the dental business, we saw improving growth in the distribution -- dental distribution, both in the U.S. and outside the U.S. That is clearly an indicator that we're taking some market share. We did see some -- if you look at how distribution grew over the course of the year, we actually had negative growth in the second quarter. But as we successfully executed on some promotion programs and really aggressively pursued some new customers, we were able to get growth in both the third quarter and the fourth quarter that exceeded market growth.

And then the real highlight on the dental side was in equipment in the fourth quarter. Our equipment sales in the fourth quarter in the U.S. exceeded 10%. And we know that is much greater than what's happening in the market. And it's clearly an indicator -- probably, the best news out of that is it's an indicator of the confidence that our customers have in their practices going forward. A significant amount of that growth was generated through what we refer to as standard equipment. That's the chair that you are being treated in. That's the unit that you're being treated in, the lights and all the auxiliary equipment around you.

And that is an indicator that practices are willing to invest. They have confidence to the extent that those are new chairs or expanding out their practices. Or in the case of some of our DSO customers, building new practices and installing these chairs is an indication of, I think, a greater expansion of that end supply of dentistry, which is a good long-term proposition for us. It means more patients getting access to care. It means a greater churn of dental merchandise going forward. These are all things that we think are clearly positive indicators for us going forward.

Outside of dental, if you look at dental -- going on to dental specialty, I should say, the Specialty segment had a very good quarter. We saw very steady implant growth in Europe, where we think we're also taking share. And then within the U.S., we think we're holding share and really positioning ourselves well with the launch of a value implant that we are excited about that really kind of rounds out the portfolio in the U.S. and will help us with, I think, greater implant growth in 2026 versus 2025.

And then on the Technology side, Henry Schein One continues to be a very strong player. We've got about a 50% market share with practice management systems in dental. They launched a couple of new products that are really exciting that really address some administrative headaches that our customers have and will make things much more efficient for them, allow them to run a more efficient practice. We saw good growth there, and we continue to have high expectations for that segment in 2026.

You mentioned the guide, Glen. We did guide to EPS growth of $5.23 to $5.37 next year. That's about 5% to 8% growth on EPS. We are expecting some benefits from some value creation initiatives we have in place, but we're going to be incurring a little bit of costs associated with those in the first half of the year. So we do expect the earnings growth to be a little more heavily weighted to the second half of the year versus the first half of the year. But we feel very good about how we've positioned the company going into '26.

That's great. Thank you for that overview. And before we dive into the individual segments, maybe just one more quick follow-up question on 4Q. When we look at that quarter being much stronger than expected, like how do you break that down between what you saw in terms of the improving volumes versus maybe some of a price benefit?

Within the U.S., the U.S. distribution business had growth, again, about 3.6%, I think, was the number. I'm not -- I can't recall exactly, but it's about 50-50 benefit from price versus volume. So the follow-on question typically on that is well, how much of that is tariff-related, very difficult to assess that. Some of those price increases are in the ordinary course of business. Some are in reaction to tariffs. But not every product that we deal with that was subject to tariff, were we able to take a price increase on. So you do have puts and takes on that. But at the end of the day, it was about 50-50 price and volume.

Okay. All right. Let's jump into dental equipment. I mean, you started with dental equipment. I think it stole the show relative to expectations, maybe in 4Q. And when you think about -- when you look at the improvement sequentially throughout 2025 from where you started the first half of the year versus kind of how you finished very strongly, how much of that do you think is really coming from maybe just overall market acceleration versus maybe Henry Schein taking some share? And I think in your opening comments, you talked about some of the promotional programs you might have been running. Break that down for us a little bit more and help us understand what drove that strength so we can maybe try to assess the durability of that trend.

Yes. I think that -- as I said earlier, clearly, the equipment market is not growing at 10%. So we're very confident we took some meaningful market share with those equipment sales we had in the fourth quarter. The promotions I'm referring to is we did a lot of co-promotions with our manufacturing partners, where we share in some of those promotion costs. And -- but our manufacturing partners, they want to increase market share as well. They see us as the best avenue, the most efficient avenue for them to go through given the reach that we have into the dental practices versus our competitors.

And so these were exclusive promotions they did with us. And we feel like we both came away with a win-win on this, right? And it's not -- it was more than one partner as well, more than one supplier partner. And in all cases, we felt like it was a very, very effective promotion. So that really helped drive this.

I think what's important on the equipment is there's always going to be a backlog of equipment orders, the timing of when the customer is placing the order and we have the equipment versus when we actually install the equipment. We don't recognize that revenue until we install the equipment. That backlog stayed very steady, very healthy going into 2026. We didn't accomplish this growth by working down backlog. It was really demand-driven growth.

Were there any special sort of tax incentives that played a role in this 4Q that we should think about maybe this year versus last year versus '26 coming up?

To a certain extent, but I wouldn't say they were any different than that would have been in place last year. So it is an apples-to-apples number versus the prior year. Different jurisdictions will have different tax incentives. Tax incentives used to be more common in the past. I think what we're seeing now is just that you do have this habit of practices making their purchases in the fourth quarter. Fourth quarter is -- has always historically been the strongest quarter for us for equipment sales.

Just one more on equipment. One of the concerns that I think investors have is that the pace of innovation in terms of dental equipment has, I'll call it, slowed in the past kind of couple of years versus maybe what we saw in the 2010 to sort of 2020 time frame. I mean, could you maybe comment on where you think we are in that innovation cycle, just sort of given that most dentist offices in the United States have made a lot of these purchases? And I don't know if you would say it's a similar situation internationally versus the U.S., but talk about that innovation cycle and sort of where we are today, maybe versus in the U.S. and international.

No, it is a fair point. But I think that while you do see a lot of digital innovation -- digital products coming out, there's still a lot of practices out there who have not yet kind of embraced that digital environment. So there's still a long runway. A lot of practices still have not purchased an intraoral scanner. And so there's still a long runway in terms of what I say, converting these offices from being an analog office to a digital office, right?

And so -- but what we have seen with intraoral scanners is that the price points really come down. On one hand, that puts a little bit of revenue pressure on us and others who sell scanners. But we do see really good demand at the volume level for scanners. And I've always said, once a practice buys their first scanner, they have now crossed that threshold from being an analog office to a digital office. And now you can sell them additional digital equipment, whether it be a chairside mill or a 3D printer. Or it's just you can -- now you can start working with them to teach them that there is an ROI on this investment, that they can run a more efficient practice with this type of digital equipment.

So while the innovation -- and that has kind of brought down the price on the scanners. The scanners used to sell $25,000 to $30,000. You've got a lot of entries coming into the market now that are selling for around $15,000. But that's a very attractive price point and starting to draw more of these practices in that previously were not investing in scanners. And that then gives you the opportunity to sell more equipment going forward.

Could we segue over to merchandise? Again, another great quarter in the 3% to 4% range. I think you would probably also say that the market is not growing at 3% to 4%. So maybe there's -- maybe you can unpack that so we can think about that in terms of price and volumes and maybe the share gains that maybe Henry Schein experienced in that fourth quarter?

Yes. And we really think this is a direct result of some of the promotional activity we did in the second quarter this year. We did some discounting in the second quarter. We identified some customers who are low-volume customers from us. We offered them promotions that will commit them to purchasing from us over a period of time, offering them a rebate on the tail end of that. But it also gives us an opportunity during that period to work with those customers in terms of understanding their practices, educating them on some of the other services we can provide them so that they can run a more profitable practice. And during that time, to the extent we're successful with them, that then becomes really a Henry Schein customer, as opposed to a practice that occasionally buys products from Henry Schein, which I think there's a big difference there. And we began seeing the benefits of that immediately in the third quarter and the fourth quarter.

So the second half of the year had much better growth on merchandise than we saw in the first half of the year. I think we've also benefited from successfully recruiting some experienced sales reps that have been able to come over and immediately provide some benefit to us, and then they can continue to grow their book as well. And so that has been an area of focus for us in this environment and one that we think can continue to help us grow that market share even greater.

All right. Maybe let's shift over to specialty. When we look at implants, I mean, a really strong quarter in terms of implants growth globally with maybe a little bit of a different story, international versus U.S., maybe a little bit of a different story in value versus premium implants. Maybe you can just give us an assessment of that market and how we should think about the trends within specialty or within implants?

Yes. I think the best strength we saw in implants was in Europe and specifically both in the DACH region, Germany, Austria, Switzerland, as well as in France. So the German market is primarily a premium market for us, while the French market is more of a value market. Both did well, both saw growth in the high single digits, and we were very pleased with that. And we think that's an indication of taking market share.

In the U.S., we saw a more positive trend with our value implants than we did with our premium. And we really -- like I mentioned earlier, we have a value implant that is now available to us through the acquisition we did in Brazil a couple of years ago. We've been able to get some traction with that, and we think that we can get better growth on value going forward in the U.S. than what we're seeing in premium. But that's really coming off a lower base, right? That's going to contribute to that.

But we do see that a lot of the expansion of the implant market is in value. The established premium brands that you are selling to oral surgeons, that's a very solid market, very steady. Those customers tend to not convert, though. This is not a situation where you've got a lot of oral surgeons trading down to a value implant. This is really a case of the expansion in the market, which includes general practitioners who are doing more and more implants working with a value implant as opposed to a premium implant in the U.S.

And the endodontic side of the business is stable?

Endodontics is a nice, steady business because it's not necessarily elective and it's not something that you defer if you require an endodontic procedure. So that has been a steady grower. It is typically in the mid-single digits for us. And I think that we benefit a little bit from the changing demographic, the aging of America, typically means that there's a few more endodontic procedures happening each year. So that has been a steady grower for us.

Okay. And in your prepared remarks, you talked about the Henry Schein One initiative. And maybe it's worth just spending 20 seconds and reminding people about your initiative there and some of the benefits that you're seeing there. And I think you have a partnership with AWS for generative and agentic AI integration. I mean, if you could just sort of talk about sort of some of those strategic benefits you have of that integration effort with your clients and how that's driving value for you and your customers? I think that would be...

Yes. Just -- thank you for the question because this is, I think, a real exciting part of the business right now and one that is really getting a lot of kind of positive energy with our customers. So in November, we reached an agreement with Amazon that through AWS, we would be able to utilize their AI capabilities and build some of this within Dentrix Ascend and Dentrix. And since then, we've been able to launch -- we've completed the launch of a couple of different products that we can build into our practice management system so they become part of the practice management system, as opposed to just clearly a separate module that we have to try to sell separately. We can build it into the practice management system and increase the price accordingly, if necessary.

So it includes, for example, a product called Voice Notes. And it's as simple as a product that allows the practitioner to talk out loud while they are treating the patient, and it will pick up the practitioner's voice and update the patient's records accordingly. And it's not just dictation. It is taking the information and sorting it within the patient records. It's also highlighting for the practitioner, areas that they may have not covered that they wanted to make sure they put in. A typical dentist might be spending 2 to 3 hours a day at the end of the day updating all their patient records, and this takes that burden away from them and allows them to see more patients as a result. So it's very, very well received in the early returns that we're seeing from our customers.

We've also moved to a product called Image Verify. Image Verify uses AI to monitor the quality of X-rays that a practitioner is taking, and it will immediately alert the practitioner that an X-ray they've taken is of poor quality and is of a quality that an insurance payer will reject. So that way, they know. Right now, they issue that X-ray in with the claim. If it gets rejected and comes back, now they got to try to get the patient back into the practice, they got to take the X-ray again. With Image Verify, they're getting immediate notification. They see it. They're like, wait a second, we got to take that X-ray again. You still got the patient in the chair, you take care of it. Your claim goes through, you get paid, everybody is happy.

These are very, very significant pain points for a lot of our customers. Just today, we put a press release out from Henry Schein One announcing that within Dentrix Ascend, these modules are now kind of built into that. We have 3 different levels. We have an Essentials level, we have a Pro level and we have an Accelerate level within Dentrix Ascend now that people can subscribe to, and each level will have varying -- different modules available to them. So we're bundling these in. And it's -- like I said, as opposed to trying to have a basic package with all these 20 alternatives that you can add in, by creating these bundles, our customer can look at which one they think meets their needs, they can subscribe to it. And it's a cloud-based system, and we get on with serving the customer.

We only got 4 or 5 minutes left. I got a number that I want to get through, so we're going to do some rapid fire. I want to talk about the leadership changes at the company, right? I mean, end of an era, Stan retiring over 30 years, and now you have a new CEO in Fred Lowery. But also the KKR investment in the company. Now there's new Board members at the company.

So for the 30 years that this -- I've been hanging around this company, it's been Stan and Steve Paladino, and now there's new leadership. So talk to me about these changes and what the KKR influence is having within the company. And talk to me about why Fred Lowery is the right guy to sort of succeed Stan given his entrenched dominance within the dental industry.

Yes. I think that you're right. This is -- there's not a single person who works at Henry Schein today who worked for a CEO who wasn't named Stanley Bergman until last week, right? Fred came on last Monday, so he's on day 7 right now. He came on last Monday, and that made him the -- in the 94-year history of Henry Schein, it made him our fourth CEO, right, which is a pretty fascinating statistic.

I think that the experience Fred brings from Thermo Fisher obviously runs very parallel to how we run the business. And I think that was very attractive to the Board for him. I think that he's got a solid track record. He spent 20 years at Thermo Fisher growing a significant part of their business. And I got to say, we don't lose Stanley completely. Stanley is still Chairman of the Board. We still have his legacy knowledge we're privileged to tap into.

But Fred brings a fresh perspective. And I think that we're all excited to kind of hear his view. What is it that he's expecting of us? What -- it's a new voice that we're going to be listening to. He's going to be going through his -- he's literally going through a 100-day plan right now. He's in the early stages of that. I think as he comes out of that plan, we'll kind of see if we're going to pivot on a few things. But I think for the most part, our strategy is in place. We're driving forward. We're going to -- we plan to execute on the numbers that we provided with our guidance. And I think that it's -- Fred will play a big part in that, and we're looking forward to leadership.

And what about KKR?

KKR. So KKR -- our agreement with KKR provides them now with ownership up to 19.9% of the company. They have 2 Board members, Max Lin and Dan Daniel, who have been, I think, instrumental in providing us with a fresh perspective, just as I talk about a fresh perspective of Fred coming on. When you get new Board members, you hear a fresh perspective, and that's been very, very healthy for us.

So -- and we've been able to use KKR's Capstone arm to help us really function like almost like a general contractor as we work with different consultants to develop our value creation initiatives that we have in place now. So we've been able to leverage their expertise. I will say KKR's culture is very collaborative, and they've been great to work with and very constructive as we work with them.

Do you anticipate any changes to the capital deployment initiatives of the company? Because when I look back and I think about Henry Schein, it was tons of acquisitions, right? Maybe the pace of that has slowed. And when you look at 2025, I mean, the company bought back $850 million worth of stock, which is almost 10% of the company, which was very interesting given I think the company did a great job taking advantage of a depressed stock price and accelerating that buyback. But how much of that is a KKR influence versus what Stan wanted to do? And should we think about the pace of acquisitions or share buyback changing from what we've seen historically from Henry Schein?

Yes. The share repurchase activity was -- you mentioned $850 million. You're right. We did buy back $850 million. We also issued $250 million as part of the KKR agreement early in the year. So that $850 million included an accelerated share repurchase program that we had in place to bring it back. So net, I would say net, it was $600 million. But at the same time, a much larger number than we typically have.

That's also an indication that we thought -- we really believe the stock was underpriced, undervalued, and we were taking advantage of that. And our M&A activity was a little lower in the year. So we had the capital available to us to do that. And I think we'll continue to try to be relatively aggressive on share repurchases. We still believe that the stock price is undervalued. We generate a lot of positive cash. And as long as we have that cash available to us, we can continue to prioritize share repurchases as a use of capital.

Okay. Well, listen, we're about out of time, and there's a couple of things I just wanted to wrap with. We got the tax code changes in the U.S. that maybe is benefiting the consumer a little bit. You have a cost savings program that's designed to achieve $125 million in savings by the end of 2026. You're under new leadership. It feels like the market is sort of moving in your direction. And Henry Schein is taking share at the same time, the market is seeing a little bit of acceleration.

I want to give you a minute to sort of close out, tie everything together. If there's anything else that you think is important that we have not talked about or anything that you want to leave the audience with, now is your chance. But it feels like to me that we kind of ended the year on an upswing and you got some green shoots of optimism for 2026, but let me give you the last word.

No, Glen, you touched on a lot of important points, and I think you touched on a lot of things that give us a lot of optimism going into -- as we enter 2026. We have seen, I think, a slightly more positive tone coming from other dental companies. We've seen some of the others -- of our peers kind of turn the corner on some difficulties they've had. I think even like at Chicago Midwinter this -- just a couple of weeks ago, the vibe there was a little more positive coming from people. So it's a good sign.

We feel very good about where we're positioned in this market. Just to keep dwelling on those equipment results really shows that we have a confident customer base that wants to make investments. And then finally, the value creation initiatives that we think will make us function much more efficiently, much more profitably, really positions us for good growth going forward. I think if anybody wants to be in the dental space in terms of an investment, we cover the spectrum of it, and we're the place to be to invest.

Okay. Ron South, the CFO of Henry Schein. Thank you very much. Really appreciate the time.

Thank you.

Thank you.

Awesome. Good morning, everyone. Welcome to the latest session for the Leerink Global Healthcare Conference. I'm Mike Cherny, the healthcare tech and distribution analyst. It's my pleasure to have with us Henry Schein, CFO, Ron South. In the back, we have Graham Stanley and Susan Donofrio from the IR team. I'm happy to say that Ron brought no slides. So we're just going to jump right into questions.

And I might as well start with a little bit of a joke since we were just joking about this. You have your first new CEO since the first Bush administration. I know it's been a week, so I'm not asking for strategy but what about Fred, Fred's role, Fred's leadership brought him to Henry Schein? And what gets you excited about his skill set to bring to the next evolution of the company?

Yes. Thank you, Michael, and good morning, everybody. Yes, we were chatting beforehand and said, this is -- last week was an unusual week for us. I think everybody who works at Henry Schein has had one CEO. right, everybody who is currently there. And last week, we had a new CEO. Henry Schein has been in existence for 94 years, and Fred Lowery is now our fourth CEO in 94 years. So it says a lot about the culture of the company. It says a lot about the values and how we expect that to continue.

But Fred brings a very fresh perspective for us that I think will be very beneficial. He brings a lot of operational excellence. I think his track record in terms of what he was able to accomplish while at Thermo Fisher speaks for itself. And I think we'll benefit from a fresh perspective. I think all of us know in any kind of role, it doesn't have to be a CEO, it can be multiple different kinds of roles. When a new voice comes in, when someone brings a fresh perspective, it does -- it can be energizing and it can be something that you can turn something that goes from uncertainty to really being a positive. In the meantime, we very much benefit from Stanley staying on as Chairman. We're not losing that legacy knowledge. We still get his insights. And I think that we can find the best of both worlds there.

Fred is a -- by trade is a mechanical engineer, mechanical engineers are adept at solving problems. They dig into problems. They find the one thing, they dig into that detail. They find that one thing that makes something that work well. And you can see that in his style already, just the way he -- we spent a lot of time with him last week, as you can imagine. And you can just see it in the way that he asked questions, a very curious mind, and I think we're all looking forward to it.

We'll give you until next week for the new strategic plan. So maybe level set on the business. 4Q, if you think back from your peers seem to show signs of, call it, stable to improving trends across the market. Where do you see the markets as you see them right now? And where do you think for Schein as a whole, your -- at least maybe talking on the equipment and consumable side, I'll touch on specialty after, you're outgrowing versus potentially undergrowing the market.

Yes. I think that there is, what I'll call, at least a slightly more positive tone to the market. You see it in some of the earnings releases that have come out from others in the dental space. And we're watching things carefully. [indiscernible] traffic is a bit of a barometer in terms of what's happening and opportunity on the merchandise side. And that's stable and perhaps getting a little more positive. Three years ago, when we did our Investor Day, we said then that our assumed market growth on core dental, to your point, when you're just talking about kind of core merchandise, core equipment was in that 2% to 4% range. I think we're probably still a little light of that 2% range, but we're above where we were, right? I think we're above where we were the last few years.

In the meantime, I think that as opposed to sitting around waiting for the market to grow, we're doing everything we can to take market share. We were pretty aggressive last year in creating some customer relationships. Through some discounting we did in the middle of the year that began to show up in our sales growth in the third and the fourth quarter. And then in the fourth quarter, especially on the equipment side, we saw very good growth. And we're very confident that those growth numbers exceed what's happening in the market.

And so it's really, in some respects, show that we're trying to put ourselves back on offense here, right? We caught ourselves playing a lot of defense following the cyberattack in 2023, and we really have shifted gears to be more on offense now and be more aggressive in terms of picking up market share in terms of hiring some experienced reps to help us accomplish that. So that has really helped.

In the fourth quarter on the equipment side, we partnered with some of the manufacturers, had exclusive promotions with them where we shared in some of the cost of the promotions with them. And in the end, really saw great success from that. And so those are the things that in the absence of more aggressive market growth. And while to your point, I think there is a slightly more positive tone in the absence of getting back to the kind of those historical growth levels, we have to take -- be more of the catalyst to drive more growth internally.

And the equipment side, I think, was the particularly pleasant surprise, not because of anything Henry Schein has done wrong, just the market has felt heavy on equipment. So as you thought about the partnership promotional strategies, how do you make sure you were picking the right partners so that as you went into the market to push even using promotions but you were pushing products that your customers felt like they needed?

Yes. Well, it's just really more from a feel for where are we seeing the most popularity of some of these products with our customers, getting feedback from customers. So I think that was really the driver of how we partnered up. But to your point, [indiscernible] we really felt like it -- that growth we saw in the fourth quarter in equipment is a bit of a bellwether for us in terms of the confidence that practitioners have in investing in their practices. Most of that growth was driven by standard equipment. By standard equipment, we mean the chair you're sitting in when you're being treated by the dentist.

So that often means they're adding a chair to their practice or new practices are being built and putting in chairs. That's a sign we see as an opportunity for slightly more expansion to the supply of dental services. That expansion of dental services grows that end market, which is an opportunity for growth for us going forward.

I might be bad for the duct tape market in terms of chair replacement. But as you had those discussions because clearly, like you said, you're seeing some signs of stabilization but you still have a practitioner group maybe outside the DSOs that have varying degrees of financial uncertainty, still elevated interest rates on funding equipment. How informed are the discussions that your sales force is having with your clients on the macro? And what are the push and pulls on whether they buy or don't buy, your clients are telling you about where their macro concerns most lie.

I think from a macro perspective, interest rates have some influence but I don't think it's not a real strong direct correlation that you see. Obviously, if interest rates have a fairly healthy drop in rates, you could see some positivity to equipment sales coming from that. But it tends to not move as much as one might expect based on that change in rates. What we see as being -- we've always said a typical barometer of what is good for us and good for our customers is access to care. The more people who have access to care, the more traffic you get going through not just dental offices but also physician offices.

And so one of the macro factors we look at closely is unemployment rates. If unemployment rates are staying relatively modest, which they have, that means there's more people with dental insurance. There's more people with access to care and that will at least maintain a consistent level of foot traffic into the practices. So I think that's the macro we look at most closely.

In terms of what are our sales reps and the discussions they have with their customers, I don't know how much they get into that type of indicator. I think it's -- our -- their discussions with the practices really focuses on how can you see more patients at a day? How can you develop greater administrative efficiency and operating efficiency in your practice? And that's where we've really been focused is what are the pain points? What are the things that burden your office in terms of getting work done and how can we provide you with the tools to drive that efficiency. And I think that's probably the primary discussion that you see with our customers.

And as you think about your growth relative to the 2% to 4% target in a market that maybe doesn't support as much and talking about going the offensive, how much is your breadth with DSOs played into your scale advantage in order to try and outgrow the market? And how important is the role of the DSOs on the merchandise equipment side in terms of that equation?

Well it's very important in both, but I think especially on the equipment side because I think some of the equipment growth we saw in the fourth quarter was a direct result of a little greater de novo expansion from some of the DSOs. And so we did see some sales into some new practices related to that. But the DSOs do -- are growing marginally faster and they have consistently every year for quite some time now than, say, the rest of the market. We do have of the 27 largest DSOs in the U.S., 25 of them consider us to be their primary distributor. So if they're growing a little bit faster, we're going to be continuing to take market share as well.

Got it. And I know historically, there's been a push and pull with the DSOs in particular, on your ability to add value by third-party manufactured products. typical with any customer base of any industry, larger client, typically, the more pricing that they might try to push on. But your trade-off has always been, well, we can sell you lower-priced products where we make a better margin. Like how much does that continue to play into your role of the DSOs and your ability to add value?

No, it's very important. You have to emphasize that added value because if you don't, it becomes a transactional relationship. A transactional relationship of who can sell me gloves and cotton balls cheaper than somebody else. And that's -- I don't think that's a business any of us want to be in, right? It has to be more how can we help you drive profitability in your practices. Sure, we'll try to give you competitive pricing on the merchandise. We'll try to get you competitive pricing on the equipment. By the way, we also have the most robust and sophisticated approach to servicing equipment that anybody else has out there. So when your chair goes down and you are a Henry Schein customer, you're going to be prioritized and your chair is going to be fairly quickly and the lost revenue is going to be minimized.

But then beyond that, you go to Specialty Products. Here are some things you can be doing to increase revenues in your practice if your GPs are willing to expand into specialty areas, such as implants or endodontic procedures. So those are all areas that we can address as one with our DSO customers. And we really try to drive that strategic alignment with them as opposed to the transactional relationship that comes with just selling goods to a practice.

So maybe if we can shift to the Specialty segment business for a bit. It's grown fast. It's kind of -- I don't want to say come out of nowhere because that's not the case. I know at the last Investor Day, it was a key highlight of the strategy going forward. If you could break apart the businesses, where do you think you sit across ortho, endo implants right now from a strategic positioning? And where do you see the biggest value add from your product portfolio relative to what was missing in the market?

Certainly. So I'll start with implants because that's the largest of our specialty products. We have -- our estimates are we're #2 in the world -- I'm sorry, #3 in the world on implants now ex China because we do not have a big presence in China with implants. But we've got a strong presence in Europe, where we are seeing good kind of mid- to high single-digit growth on implant revenues. In the U.S., the growth has been a little lower than that but we still feel like we're being competitive in the U.S. I think with the -- what has been interesting to see when you look at the implant markets is, I think, a greater shift to value implants. And by value implants, I think something that can be sometimes misunderstood there is that a value implant is going to look the same as a premium implant for the most part, but it is often the services, the surgical services you get associated with that, whether it be surgical planning or otherwise. And value implants have become very appealing to more and more general practitioners who are interested in doing that straightforward single implant.

And so that helps us, we talked about in working with our DSO customers. Our DSO customers like having access to that value implant. When we bought S.I.N. in Brazil in 2023, they had an FDA-approved value implant that we've now launched in the U.S., and we expect to get some growth -- some better growth in the U.S. as a result of that launch. So it is a -- when you look at implants, you really have to break it between kind of outside the U.S., in our case, Europe versus North America and then also premium versus value.

On the endodontic side, we believe we're #2 in the world on endodontics, very steady business, tends to not have a lot of, what I'll call, economic elasticity to it. When people need a root canal, you get a root canal. It's not something you typically defer an implant, you can defer. So it is a very steady business. So it really comes down to creating products that the practitioner can use easily, can provide them with some efficiency. So we're very happy there. That's been kind of a nice steady kind of mid-single-digit grower for us over the last couple of years.

And then the last one you mentioned was orthodontics, which has been a pretty small play for us. We're still less than $100 million of revenue there. I would argue there might be only one company out there that's making money on clear aligners. But that's a discussion for another day. But I think that we have really cut down. We now are leveraging existing infrastructure to market and sell our orthodontic products, and we think -- it's working out to be a very good plan for us as opposed to trying to expand it into a much larger business. We do have some DSO customers who like our offerings on orthodontics, and we primarily serve them.

And so maybe just to dive in specifically on implants because it's a big market share. You talked about the product launch in the U.S. As you think forward, like what is the scale that you're trying to achieve on the implant business within the broader Henry Schein how strategic should this asset be over -- the business be over time, not necessarily just to growth but also to your position in the market, to your position with customers? Are you trying to displace a couple of the leading vendors? Or is this just an alternative? Like again, just trying to think about where this business should sit going forward.

Yes. I mean I think that it's probably best to look at it more holistically than that. And we've talked about our high-growth, high-margin businesses, which are really kind of the 3 specialty dental businesses that I just listed, plus our technology business, Henry Schein One as well as some of the value-added services that we offer through our distribution segment. Those products and services collectively account for -- I'll use round numbers, about 20% of our revenue. But last year provided around -- I think it was around 45% to 47% of our operating income of our non-GAAP operating income. So -- and we have a goal of exceeding 50% by the end of '27 with that.

So I think where do implants fit into that? They're going to be leading that. They're one of the biggest product categories, if not the biggest product category within that segment. I don't think it's a question of, well, we're going to really try to go change the value implant market. We're really -- but I think it's -- we're looking for ways to actually expand that market. And we think value implants helps expand the implant market. And if we can compete in that area, then I think it's an area that will just help kind of drive that continued growth of those high-growth, high-margin products, which the significance of those products is that we own all of those products. We own those brands. We own those products. That's not a situation where we are distributing on behalf of somebody else. Those are all brands we control, including the -- on all the implants.

So I think they'll help drive some of that for us. But I wouldn't say that it's necessarily -- well, we're going to go after one very specific piece of it. It is what can we do to help expand the market itself.

Shifting a bit to the technology side, Henry Schein. I don't think it's going to be a fireside chat at this conference without asking something about AI. You've had some interesting work you've done on the digital imaging side in partnership with AWS. Can you maybe just encapsulate your vision, your strategy or your -- at least minimum touch points on AI-oriented functions right now?

Certainly. So yes, the agreement we have and the partnership we have with Amazon, specifically AWS is really exciting for us. It allows us to take some of AWS generative AI capabilities and work it into our -- the Henry Schein One platform, specifically Dentrix Ascend and outside the U.S., Dentally. And this really allows us to, I think, provide some add-on services to our customers that really address some of the pain points they have and do it in a very efficient manner. So even just recently, we launched both Voice Notes -- 2 products, one called Voice Notes and one called Image Verify. Voice Notes allows the practitioner to simply talk out loud while seeing the patient. And it goes beyond just dictation, it wouldn't be intelligent. It really takes what the practitioner is saying and updating the patient records and sorting it and making it a more efficient process so that when the day is over, the practitioner is sitting down and trying to update all the files for what they did that day, it takes about a 2-hour task out of their hands.

Equally, with Image Verify, we just -- is a product that we recently launched. That is a product that will -- using AI will assess the quality of an X-ray and alert the practitioner if they believe the quality of that x-ray will not be accepted by the payer, by the insurance payer. And the problem with that is if you send in that X-ray and it's a little blurry or whatever reason, it gets rejected, the patient is out of the chair at that point. Now you got to bring the patient back, you got to get the x-ray. So if they get that immediate warning, this is -- this particular image will likely be rejected. They can do the x-ray again right there while the patient is in the chair. Again, it takes away a lot of the administrative burden and a lot of the inefficiencies from the practice. Those are just examples of that.

In the meantime, a lot of our product development is being done with the use of AI in mind as we do this, right? What can we do? What are the other pain points that the practices have and how do we build that in?

And along those lines, how is the development process developing? Is it push versus pull? Are you thinking about things that you see? Or is this customers coming to you? I mean, you have such a strong market penetration of Dentrix as a whole. I mean it's the operating system for the vast majority of dentists in the U.S., especially. So how does that interplay move relative to the R&D that you're putting in through the platform?

I would say it's both, actually. I mean we're constantly trying to understand what are the pain points in our customers' practices. And then when we see those, it's like what can we do to make -- to take that pain point away from them. Something like Eligibility Pro. Eligibility, there's -- in the U.S., there's about 2,000 different dental plans. And if you're sitting in the chair and a dentist identifies a problem and says to you, look, there's an issue here, we can treat it right now. 99% of the time, if you ask that dentist, well, how much -- what's my out-of-pocket going to be on that? They don't know. And you're going to get patients to say, well, until I know how much I got to pay, how much my insurance is not going to cover and I got to pay, I can't do the treatment. Eligibility Pro, they have an answer. They will have an immediate answer for that patient under those circumstances. You keep the patient in the chair, you get the treatment done, you get the revenue stream from it.

That was always -- that was -- you talk to any dentist in terms of having to go call the insurance company, try to get the information, try to explain what the procedure is, very, very time consuming. So that's just one example. But there are other things where we see, like you said, in terms of what can we kind of push to them to say, have you thought about this? Here is something that will help your practice become more of a digital practice, less of an analog, more of a digital practice. Here are some tools that are available to you to do so.

Maybe turning operationally and the value creation plan. I feel like this time last year, it was very much in discovery process. Now we're in realization process. You've been very vocal and transparent about how to think through the transition and the dynamics over the course of 2026, investments versus realization, like how are you marking yourself on the checkpoints? And as you think about opportunities versus cost to invest, like where do you see like you have the most visibility into making sure that you hit your success metrics?

Yes. No, it's a great question. And obviously, it's a high priority for us right now, right? This is really going to be a driver of operating income improvement for us going forward. The projects that we have in place and the project plan we have in place really is starting to formulate as we speak. And as we look at the phasing of this plan, what we indicated was that by the end of 2026, we think that the work we will have completed at that point will deliver $125 million of operating income improvement going into 2027. So it's going to be an annualized run rate of those projects going into 2027.

Sure, there's some investments we're making over the course of this year. We're contemplating that -- that was contemplated in our guidance this year, and it's contemplated in that net $125 million benefit as well, right? So it does impact our earnings to the extent that we may be making a little bit of investment and adding some costs on in the first half of the year but we're confident we're going to see net benefits on that in the back half of the year. And you'll see greater -- we mentioned on the call a couple of weeks ago that we expect the earnings growth to be a little more heavily weighted to the back half of the year than the first half of the year.

But these are all -- the whole -- I mean, the whole organization is part of this. There's 2 work streams. There's one around G&A. There's one around gross profit optimization but they're all going to kind of come together and we feel like can drive the growth to the goals that we have.

And this seems like a very offensive move that you're making versus -- for a company that historically has looked for optimization efforts at times, multiple restructuring programs. So obviously, you have partners here but how is the tenor different in terms of the internal processes being put in place to realization versus potentially past restructuring programs?

I think this one is much more structural in its design. Historically, we have addressed restructuring needs more at a grassroots level. You go to each individual business, you try to determine where can we take out costs, where can we combine some departments, where can we do things where we might have 12 people, can we do it with 10? What are some things we can do. This is much more top down. This is much more across our businesses, how can we share resources more efficiently, what tools are available to us, technological tools that we're not perhaps optimizing right now and how do we deploy those tools. So it's much more structural and in my opinion, will be much more permanent and more difficult for the cost to kind of creep back in like perhaps we've experienced a little bit of in the last several years.

I don't want to run out of time for discussing the medical business. heard the last couple of quarters, a lot more discussion on the at-home dynamic and patient direct use your term. How do you think about the strategic positioning of medical now? And as you think about the at-home opportunity, what's the most exciting and appealing part of why you're expanding there?

I think our medical strategy has consistently been follow the patient. So I think it was probably about 20 years ago that we kind of got out of the hospital business, right, where we saw more and more patient procedures leaving hospitals being done more in the ambulatory surgical centers, being done in physician offices. So -- and quite frankly, our logistic abilities were much better geared towards that smaller order that could be delivered to a smaller office. So we've really focused on our strength and followed where the patient procedures were going. Those procedures have since also begun to include more and more care that people are getting at home.

And so we began partnering with more home health providers, like we're not in the home health care business but we are providing -- we're supplying those home health providers, right? And we made a couple of, I think, timely acquisitions and have created a holdco for -- we call it our home solutions business and created a holdco for our home solutions business that allows us to start folding in additional businesses there. That's now got a run rate that's in excess of $400 million a year top line. It grows faster than our core medical business. It's more profitable. It has better margins than our core medical business. So we really see that as an opportunity for us going forward.

Beyond that, we still see a shift of more and more procedures into the ambulatory surgical centers, and that's good for us. That just kind of increases the traffic there as well.

And along those lines, how do you feel that you're positioned from product availability at this point in time? I mean it should be fairly straightforward, I think, but is there any push or pull on expanding on maybe equipment in any of those areas? Or is it these going to be primarily still heavily consumables merchandise-oriented businesses?

I think there's -- it's going to be more of the latter. I think we're going to continue to focus more on the consumable merchandise piece. And once you get into DME, it can be a little more complicated. That's not to say we don't always monitor what the opportunities are there. But I think the closest to the DME we've gotten to is kind of the continuous glucose monitors, right? But in the meantime, it synergizes fairly well with some of the products, some of the wound care products, some of the other products that we sell through our medical -- our core medical business, and we can also have similar products available in the home solutions side as well.

Okay. Well, I think we're just about out of time, if I can see that number flaring. Ron, as you embark on your -- the new leadership team, obviously, thanks so much for keeping us up to speed and look forward to seeing what comes next.

Very good. Thank you, Michael.

Good morning, ladies and gentlemen, and welcome to Henry Schein's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce you to 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 thanks to each of you for joining us today to discuss Henry Schein's financial results for the fourth quarter of 2025. With me on today's call are Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein; Fred Lowery, Chief Executive Officer Designate 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 is 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 analysis 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 the corresponding GAAP measures.

Reconciliations between GAAP and non-GAAP measures 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 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, February 24, 2026. Henry Schein undertakes no legation 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 as you as possible.

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

Thank you, Graham. Good morning, everyone, and thank you for joining us. I want to particularly welcome Fred Lowery to our call today. Fred will officially join Henry Schein next week as our new CEO. I will continue to serve as Chairman of the Board.

We are very pleased Fred will be leading the company and believe he is exceptionally well suited for the role. He is joining us from Thermo Fisher Scientific, where he spent 20 years scaling large businesses through acquisitions and organic growth, managing both national and owned brand products sold through Thermo Fisher's distribution channels and advancing value-added services. Fred also brings a strong customer focus. Beyond Fred's extensive leadership experience, Fred has a philosophy that aligns with the principles that have long defined Henry Schein. He understands the critical role we have in supporting dental and medical practitioners and he is very well equipped to lead Henry Schein into its next phase of growth.

Fred has already connected with many of our leaders -- leadership -- many and our leadership team, and I'm highly confident that the transition to Fred's leadership will be smooth, and that he will drive Henry Schein to even greater success. Fred, could you please make a few remarks? Thank you.

Thank you, Stan. I'm excited to be here today, and I'm looking forward to getting started next week and working with this high-performance team and leading this exceptional company into its next phase of growth. I also look forward to engaging with our 5 constituents, our Team Schein members, customers, suppliers, investors and the communities which we serve. I have an enormous amount of respect for what Stan and Team Schein have built, and I'm committed to building upon these achievements going forward.

As I've got to know the Henry Schein team and the company over the past couple of months, I've been impressed with the values, the culture and the significant growth opportunities for the future. The fourth quarter results demonstrate that I'm joining a company that is successfully managing through transformation, which is exactly the kind of experience I've led effectively in prior roles.

So to you, Stan, thank you. Thanks to the entire leadership team. Thank you for warmly welcoming me over the past few months. It's yet another indication of the company's unique culture. Henry Schein is a great company, and I look forward to leading the team as we accelerate the implementation of our strategies.

Thank you, Fred, for your thoughtful comments, which, in my mind, reiterates why we have great confidence that you will lead Henry Schein to even greater success.

Now to the fourth quarter results. Our fourth quarter sales reflect continuing momentum resulting in the higher sales growth in 15 quarters. We are pleased with sales results across all our businesses particularly our global equipment, specialty products, our technology businesses. This drove our strong fourth quarter earnings which exceeded the increased 2025 financial guidance we provided in our third quarter earnings release. The growth we have achieved, especially over the second half of 2025 demonstrates the effective execution of our 2025 to 2027 BOLD+1 strategic plan and positions us well for the future.

Let me highlight some of the initiatives that have advanced our BOLD+1 strategic plan in this particular quarter. First, 2025 non-GAAP operating income from high-growth, high-margin businesses is approaching 50% of our total operating income. We are on track to exceed our goal of over 50% by the end of our strategic planning cycle in 2027. This does not include income from our corporate brands which we estimate to be more than 10% of our total operating income.

Second, implementation is underway across multiple value creation projects and we are pleased with the progress made to date. Third, we have made substantial progress rolling out our global e-commerce platform, now known as henryschein.com and expect to complete the rollout to the U.S. dental and Canadian customers in the first quarter of this year and to the U.S. medical customers shortly thereafter. We will then continue with global implementation of henryschein.com.

We have also launched a number of innovative solutions that provide our customers with the tools to enhance patient care and to operate a more efficient practice, including exclusive distribution in the U.S. and the U.K. of Vvardis'’

Curodont product, a unique solution for detection and treatment of early-stage caries.

And we also have now a very strong partnership with Amazon Web Services to both -- for both generative and agentic AI integration with Henry Schein One. These are both key achievements indicative of the marketplace's view of Henry Schein, our ability to help practitioners and, of course, drive in the end shareholder value.

We recently completed a survey. This is very important of the U.S. dental market to assess customers' financial and operational needs, and opportunities for us to add value in this arena. The survey indicated that practice focuses -- that practices focus includes driving revenue growth and improving operational efficiency by adding new customers and reducing appointment cancellations, rescheduling or delayed treatments. These fines reinforce our confidence in our strategies, which are contained in the BOLD+1 strategy to support our customers' elevating clinical care, or, of course, improve patient outcome, generated higher practice performance and integrating efficient propriety workflows. So this survey is very clear.

Of course, patient outcomes are critical to our customers, but generating high practice performance and integrating efficient proprietary workflows that we offer are also critical to the future of the practice as viewed by dentists and as I said, contained in our BOLD+1 strategic plan. We believe that customers recognize the value we bring and that these benefits are reflected in our sales results as we continue with the momentum on the sales side.

So turning now to review of our businesses. Let me start with the global distribution and value-added services group, where we delivered solid fourth quarter sales results, good growth driven by continued momentum from the prior few quarters. We estimate approximately half of the U.S. and medical distribution netted is sales growth was driven by higher volume.

Data derived from our Henry Schein One e-claims activity also indicates signs of modest procedure growth in the U.S. We believe that in general, patient traffic remains stable and probably leaning positively in the quarter, and I think that is really the direction of where the industry is heading in the U.S. for the short term, maybe medium term.

U.S. dental mentioned our sales growth reflected continued market share gains versus last year. Our January U.S. dental merchandise sales this January reflected the good momentum going into the first quarter of '26, and we continue to see benefits from increased sales performance through our data-driven marketing programs. We've invested heavily in this data-driven marketing arena for the last couple of years. And I think -- of course, this is gaining momentum, but I think it will gain even further momentum as Henry Schein One is adopted in the marketplace as the key digital ordering and engagement platform for those interested in dental merchandise.

Our global dental equipment sales hit a record this quarter, and sales growth was the highest since the post-COVID recovery of 2021. We believe we are gaining market share in equipment resulting from outstanding execution of our long-term strategy of investing in this area, both on the sales side, with our suppliers, of course, in that connection, but also on the equipment installation and service side through our global distribution network on the equipment side. We believe that we provide our customers with the broadest product offering of equipment and the largest and best trained technical support capabilities in the industry on a global basis as well.

U.S. dental equipment sales were excellent, delivering double-digit growth. Traditional equipment sales drove much of this growth, bolstered by some exclusive supplier sponsored promotions, and we are pleased that we are able to provide above market -- we are able to provide above market growth for those suppliers that are on our platform and work closely with us. We had good order intake, which continues by the way, into the first quarter as our customers remain confident in investing in their practices and investing in their practices through Henry Schein.

Digital equipment sales increased in the low single digits. We saw good unit growth across 2D, 3D imaging, milks, 3D printers and intraoral scanners. Intraoral scanners average selling prices continued to modestly decrease due to lower prices of new market entrants. But I'm [ hesitant ] to add that these new market entrants are also attracting new customers into the space, advancing the interest in the practitioner community to advance from manual impressions to digital impressions. This movement continues, although I might also add that there's still lots of room for converting Dentrix from manual impressions to digital impressions. [indiscernible] and technical service sales remains solid contributors with mid-single-digit sales growth during the quarter, we are encouraged by the underlying demand trends in the U.S. dental equipment market and in particular, as it relates to customers viewing us as their supplier, and we expect to growth in 2026.

Turning to our U.S. Medical business. Sales growth reflected steady demand for medical products and pharmaceuticals, along with continued strong performance in the Home Solutions portion of our medical business. This was partially offset by lower comparative demand for respiratory product -- in the respiratory product category, which we see continue into the first quarter. The demand for tests and general respiratory visits has gone down, but the rest of the business has great momentum.

During the fourth quarter, our U.S. medical business signed and launched an exclusive agreement with CytoChip Inc. to distribute the flat -- the its flagships, CitoCBC, the flagship system, CitoCBC, a unique cartridge-based complete blood count analyzer providing lab quality results in approximately 8 minutes. We expect the system to expand access to lab quality hematology testing at the point of care.

While revenue with this product is not expected to be material to the overall medical distribution business, this agreement reflects our strategy of being innovative products to our customers in partnership with suppliers that value the effectiveness of our distribution system. International dental merchandise sales grew well in constant currencies and experienced solid growth across most markets. Overall sales growth benefited from a weaker U.S. dollar. International dental equipped sales growth was the strongest in many years and also grew well in constant currencies.

Growth was broad-based and across many countries and across equipment categories. Those was pretty broad-based globally, and in the general equipment categories, the major ones are doing quite well on an international basis. International equipment sales growth was benefited from currency exchange rates, too.

On the value-added services side, sales growth was driven by our international business and by acquisitions to some extent. Also the general consulting part of the business is doing well.

Now to the Global Specialty Products Group. Fourth quarter sales continued to benefit from strong performance in implants and biomaterials. And we believe we continue to gain share across most markets. Growth was driven primarily by BioHorizons Camlog in Germany, S.I.N. in Brazil and Biotech Dental in France, which each delivered double-digit growth. Overall, international implanters reflect solid underlying patient demand, reliable brands and excellent product support and education programs.

In the U.S., BioHorizons Camlog implant and biomaterials also grew at a rate consistent with prior quarters, S.I.N. value implant the system from our Brazilian subsidiary was introduced into the U.S. market in the fourth quarter, and we expect this implant system to contribute to U.S. growth this year in 2026.

Endodontics continues to benefit from expanded commercial reach. We are distributing more of the endodontic products through our U.S. distribution team. Also some of the distribution channels outside of the U.S. So that is helping advance our endodontics business. Endodontics, of course, which remains a small part of our specialty products business, also started to recently sell through our U.S. dental distribution channel and has stabilized that business. The orthopedic business also performed well. Overall, we remain encouraged by the sales results across our specialty portfolio.

Now let's turn to the global technology sales performance and that group in general. The performance was driven by core practice management solution, various -- practice -- core practice solutions products. We also had growth in our revenue cycle management solutions resulting from enhanced functionality, including electronic claims and electronic billing, these are all quite good in the quarter. This quarter, our cloud-based customers increased by more than 20% year-over-year, primarily from new accounts. And now we have more than 11,000 dentists to send entirely -- and entirely subscribers, of course, the largest installed base in the world.

We have also aligned our subscription offerings to provide more comprehensive integrated solutions [indiscernible] Dentrix Ascend subscription now covers basic practice management, revenue cycle management, imaging and patient experience solutions. As a result of both the expanding customer base and product integration, we're driving growth in annual recurring SaaS subscription revenue as well as growing our transactional services business. This ecosystem is doing well for our smaller customers, our midsized customers and the very large DSOs and in turn, driving profitability for the business for the Henry Schein One business, and therefore, profitability for the company in general.

We made meaningful progress on AI initiatives through our new partnership with Amazon Web Services. As I noted, integrated its generative AI technology into Dentrix Ascend, Dentex and Dentally. This includes our real-time documentation assistant, voice notes, which uses AI to capture and summarize patient interactions as well as voice-activated charters, scheduled and communications tools. These are projects that have been worked on over the last year or so and actually are now functioning very well in our customers' offices.

In addition, we launched Image Verify at last week's Chicago Midwinter show. This is an AI-powered quality assessment tool that evaluates clinical images at the moment of capture, thereby helping reduce claims. Claims to miles as those that the dental profession is a real issue in the dental practice. This alone would attract customers to our system.

During the quarter, we launched a new forms workflow that captured insurance information from a simple photograph of the patient's card making patients record entry faster and more accurate. In addition, we continue to enhance eligibility pro through faster response times and expanded payer connections. We expect these ongoing developments to help customers drive incremental revenue, increased productivity across their practice, and therefore, allow the practitioner to focus on quality of care rather than administer the functions, which our system is increasingly taken care of in a very, very user-friendly way.

With that, I will now turn the call over to Ron to review our fourth quarter financial results and discuss our 2026 financial guidance. Thank you, everyone, for calling in and listening. And Ron now over to you.

Thank you, Stanley, and good morning, everyone. Today, I will review the financial highlights for the quarter, and would like to remind investors that on our Investor Relations website, we have also included a financial presentation containing additional detailed financial information, including certain reportable segment information.

Starting with our fourth quarter sales results. Global sales were $3.4 billion, with sales growth of 7.7% compared with the fourth quarter of 2024, reflecting constant currency sales growth of 5.8% and a 1.9% increase resulting from foreign currency exchange. Acquisitions contributed 0.9% sales growth to the quarter.

Our GAAP operating margin for the fourth quarter of 2025 was 4.76%, a decrease of 10 basis points compared to the prior year GAAP operating margin. On a non-GAAP basis, the operating margin for the fourth quarter was 7.42%, relatively flat compared to the prior year despite lower gross margins, primarily a result of product mix within the Global Distribution and Global Specialty Products groups.

Turning to taxes. Our effective tax rate for the fourth quarter of 2025 on a non-GAAP basis was 22.7%. This compares with an effective tax rate of 22% for the fourth quarter of 2024. For the full year, our non-GAAP effective tax rate was 23.7%. Fourth quarter 2025 GAAP net income was $101 million or $0.85 per diluted share. This compares with prior year GAAP net income of $94 million or $0.74 per diluted share. Our fourth quarter 2025 non-GAAP net income was $160 million or $1.34 per diluted share. This compares with prior year non-GAAP net income of $149 million or $1.19 per diluted share. Foreign currency exchange favorably impacted our fourth quarter diluted EPS by approximately $0.02 versus the prior year. Adjusted EBITDA for the fourth quarter of 2025 was $291 million compared with fourth quarter 2024 adjusted EBITDA of $270 million or 8.4% growth.

Turning to our sales results. The components of sales growth for the fourth quarter are included in Exhibit A in this morning's earnings release. I'll now provide the primary highlights of the main sales drivers for each reporting segment, starting with global distribution and value-added services. The global distribution and value-added services group sales grew by 7.0%. Looking at the drivers of that growth. U.S. dental merchandise sales grew 3.6%, including good volume growth driven by the sales initiatives we introduced earlier in the year. U.S. dental equipment sales grew 10.6%, led by double-digit growth in traditional equipment. Overall demand for equipment remains strong.

U.S. medical distribution sales grew 4.9%, reflecting good underlying growth in the business with strong growth in Home Solutions. International dental merchandise sales grew 9.2% or 3.8% in constant currencies, driven by sales growth across Southern and Eastern Europe, Germany, Brazil and Canada. International dental equipment sales grew 13.9% with constant currency growth of 7.5%, with solid growth in both traditional and digital equipment. Equipment sales growth was especially good in Germany, Brazil, Canada and Australia. Finally, global value-added services sales grew 9.6% or 8.5% in constant currency, driven by international business solutions.

Turning to the Global Specialty Products group. Sales grew 14.6% or 11.1% in constant currency. Our implant and biomaterials business experienced solid growth in the fourth quarter, including double-digit growth in our value implants and mid-single-digit growth in our premium implants. That sales mix of premium and value implants resulted in a lower gross margin compared to the prior year. We also had strong results in the Global Technology group with total sales growth of 8.4% or 7.6% in constant currency. In the U.S., sales growth was driven by practice management software with double-digit growth in Dentrix Ascend. Internationally, sales growth was driven by our Dentally cloud-based practice management software product.

From the restructuring program announced in August of 2024, the company recorded restructuring expenses of $23 million or $0.12 per diluted share during the fourth quarter of 2025. For the full year, restructuring expenses were approximately $105 million or $0.59 per diluted share.

Regarding the value creation initiatives announced last quarter, we continue to expect to deliver over $200 million of operating income improvement over the next few years through both cost savings and capturing incremental gross margin opportunities. These projects include gross profit optimization such as pricing and accelerating corporate brand sales as well as initiatives to lower our cost to serve while further enhancing customer satisfaction. We plan to centralize certain support services, implement process automation and AI tools and further leverage our scale to reduce indirect procurement costs. We expect these initiatives to achieve annual run rate operating income improvement of over $125 million by the end of 2026.

During the fourth quarter of 2025, the company repurchased approximately 2.8 million shares of common stock at an average price of $71.10 per share for a total of $200 million. At fiscal year-end, we had approximately $780 million authorized and available for future stock repurchases.

Turning to our cash flow. We generated operating cash flow of $381 million in the fourth quarter of 2025. This compares with operating cash flow of $204 million in the fourth quarter of 2024 and was driven by working capital management.

Turning to our 2026 financial guidance. At this time, we are not able to provide without unreasonable effort and 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 and is supported by initiatives outlined in our strategic plan. We expect these initiatives will support our long-term financial goals. Our guidance also assumes that foreign currency exchange rates will remain generally consistent with current levels and that the effects of tariffs can be mitigated.

Our 2026 sales growth is expected to be 3% to 5% over 2025. For 2026, we expect non-GAAP diluted EPS attributable to Henry Schein to be in the range of $5.23 to $5.37 reflecting growth of 5% to 8% compared to 2025 non-GAAP diluted EPS of $4.97. Guidance assumes lower remeasurement gains in 2026 than in 2025. We are assuming an estimated non-GAAP effective tax rate of approximately 24%. Given the implementation schedule for the value creation initiatives, we expect earnings growth to be more heavily weighted towards the second half of the year. Our 2026 adjusted EBITDA is expected to grow in the mid-single digits versus 2025 adjusted EBITDA of $1.1 billion.

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

Thank you, Ron. We are, of course, ready operator to answer questions from investors. So please go ahead. Operator? .

[Operator Instructions] The first question comes from the line of Jeff Johnson with Baird.

Stanley, I'm sure you're growing tired of the accolade. So I will just say congratulations on a fantastic career and we'll miss hearing you on the calls every quarter. Was hoping I can maybe start, Ron, on guidance, if possible. And sorry, you start there Stanley as opposed to throwing it to you for a high-level question. But a couple of things. Just on the operating income improvement plan, the $125 million run rate that you're talking about, Ron, exiting 2026, should we get that kind of build that in a sequential basis kind of on a steady state, growing it consistently throughout the year by quarter? And then from a year-over-year perspective, in '27, how much of that do you think could flow through to the bottom line?

Sure, Jeff. I think that the -- as you can appreciate, these initiatives are in somewhat in the early stages, and that's why we're -- as I said on the guidance that we expect the earnings growth to be more heavily weighted to the back half of the year is a reflection as well of the benefits that we ultimately get from value creation. So I think it's by no means linear. I do think that as we make investments in the first half of the year, we continue to make some investments over the course of the year, that will be reflected in our results. But we've taken that into consideration with the guidance.

In terms of the $125 million and what we will -- how that impacts 2027, that remains to be seen at this point in time. We'll have to see just where we are on the initiatives, what else is happening with the business in terms of where we need to make investments and how much of that will fall through in 2027, we'll be able to address that.

The next question is from the line of Allen Lutz with Bank of America.

One for Ron here on the really strong growth in specialty value implants, as you mentioned, up double digits, but also premium implants were up mid-single digits, which I think is an acceleration over the past couple of quarters. Can you talk a little bit about what you're seeing there in terms of pricing both on the value and the premium side. Is that evolving at all? And then how to think about price growth as a contribution or lever within this business in 2026?

Certainly. The -- as we mentioned, we were especially pleased with the growth we saw in Europe. We had good growth at Biotech. We have good growth in Germany and the value implants are becoming a bigger part of the portfolio for us.

From a pricing perspective, I don't think there's anything there that's unusual from a pricing perspective. I would say that we're very well priced within the market. And I don't believe there was anything that would be -- I would consider to be unusual in terms of price increases or price benefit within the category.

I think that's correct. The issue is that there's been a movement -- a mix within our portfolio towards the brands that Ron just identified. The Camlog brand in Germany, for example, which is our largest market for that product, has stable pricing, yes, we continue to gain market share. So I don't think there's a particular pressure on our main premium brands, which do sell a little bit less than some of the other major brands and that this is all a mix shift towards faster growth by these companies we've invested in the last couple of years that are all doing well.

Our next question is from the line of Jason Bednar with Piper Sandler.

Congrats on the close here to '25. Going to ask a multipart question here, just a big picture in the dental market, Stan. I just really seems like the market took a step forward in the fourth quarter, I think we're all seeing that results you're looking better across the board for you and your partners. Can you speak to the durability of that performance? It sounds like it continued in January, but you're often a step closer to the customer, you're interacting with them on a more frequent regular basis than even your manufacturing partners are. Just do you sense the market is getting its foot back or putting back in terms of the patient traffic through offices, consumer spending on the higher-end categories, dentists spending on equipment, I guess where are you seeing your backlog -- just I guess the genesis of the question, is there anything unique in the quarter that would suggest the better revenue growth wouldn't persist throughout 2026 here?

So thanks for that question, Jason. It's a very important question. I would say the markets are stable. Certainly, in the U.S., we have data from our Henry Schein One claims processing. So essentially, it is a stable market leading, I would say, positively. There is good feeling amongst dentists that investing in newer technology, whether it's scanners or AI or simply upgrading their practice management systems and connecting those practice management systems through hardware, chairs, units, lights, imaging, et cetera, that whole trend is there. And I think it's good. The market is good in the U.S. Of course, international is mixed.

But I think a lot of this has to do with Henry Schein as well. We were hunkered down a little bit a lot actually on the cyber recovery. Our people were internally focused with customers and not going out aggressively. In the second quarter, we felt very good that we dealt with the past, and we started being aggressive going up, adding resources to our sales organization, bringing online further digital offerings. So I think it's a combination of dentists feeling good about their practices, patient traffic being okay, leaning slightly positively in the U.S. And our sales organization, having the ability to go and explain to dentists why investing in these various newer technologies is good for their practice.

So to some extent, we are expanding the market within our own customer base. But generally, it's a positive feeling for those that were in [indiscernible] if you go walked on the floor, people were smiling, went to the [indiscernible] but particularly smiling. So I think it's things are stabilized, I hope not to use the word cybersecurity. I hope our team doesn't use that again, because that is way behind us. And the team is very positive, very excited. We are winning in the marketplace in a marketplace that is stable to leading positively.

And many of the markets abroad are also similar. You look at Brazil, for example, the German market is a lot more positive on the equipment side, Canada. So -- but it's a positive environment from a market point of view, but I think most of our success is from our team's excitement in winning the marketplace, and being back to where we were before October of '23 when we had the cyber incident.

Next question comes from the line of John Stansel with JPMorgan.

Just wanted to hone in on the cadence through the year, particularly around the $125 million run rate contribution from the value creation initiatives. On -- what I think I heard you, Ron was that there would be implementation costs in the first half of the year or early in the year. Is the early I think of this, this is actually potentially a bit of a headwind early on. And that's right. Is it still fair to say that it's a net benefit, do you get some improvement in the back half netting all that out to still be kind of a benefit for the full year?

Yes, John. I mean the expectation for the full year is clearly that there will be a net benefit from the initiatives. Within the quarters, you could get some lumpiness depending on the timing of some of the investment. But there will be -- we're confident, and we'd be disappointed if we didn't have a net benefit over the course of the year from these, but that benefit will be more heavily weighted to the second half of the year.

Our next question comes from the line of Kevin Caliendo with UBS.

Just 2 quick ones. The lower remeasurement in '26, you described it as lower. Is it materially lower? Like just from a modeling perspective, how should we think about versus the $0.23? And then the second one is more about the equipment. You called out that there was a benefit from promotions. Obviously, traditional equipment was up double digit in 4Q. Is that an assumed run rate now? Or was that sort of a onetime benefit? Can you just talk about what happened, how meaningful it was and how we should think about traditional equipment growth in '26?

Yes. I'll start with some commentary on the remeasurement gain, Kevin, and then Stanley can talk a little more about equipment. But as you're aware, the portfolio approach to growth has included taking a minority stake in certain companies, and in some cases, extending that investment to a controlling interest when we believe there is a strategic reason to do so. And there are a couple of situations we are contemplating transactions that could result in a range of remeasurement gain outcomes in 2026. And we've taken this range into consideration when setting our guidance.

But what we said is the EPS guidance assumes remeasurement gains will be lower in '26 than it was in '25. As you can appreciate, it's difficult to gauge sometimes what the benefit of these will be, but we do expect -- we're pretty confident it will be less than what we had in 2025. Stanley, if you want to address the equipment question?

Thank you, Ron. I think that's great. On the equipment side, I just want to be careful not to indicate that we had massive promotions. We did not. It was a normal year-end. Of course, the fourth quarter is a quarter where dentists are investing in their practice for X reason. So that the whole year, they've been thinking about buying a piece of equipment or maybe addressing an expanded room or something arbitrary. And of course, our salespeople encourage them to close on that and have it installed before the year-end, but it's perhaps beneficial.

I will say that there are a few manufacturers of equipment that excited our organization. A couple of them maybe had higher priced products per unit and was, of course, an extra features may be viewed by dentists as better products, better to invest in those products. And I would say we have promotions of that kind, where manufacturers, their field organization and our organization worked very well together on promotions specific to product or category after manufacturer. But these were not product -- these were not promotions that pulls from one quarter to the other. Going into the first quarter, I think we mentioned in our last call that our backlog was good, going out. It remains the momentum is good. And again, it goes back to our salespeople, both the generalists, the specialists, the equipment people just feeling good that we're back in the market, attacking the market, gaining market share in an environment where dentists are feeling pretty good. And so I think it's just the dynamics, and we're very pleased with the dynamics and view this as an ongoing opportunity for Henry Schein.

Our next question comes from the line of John Block with Stifel.

Joe Federico on for John. Maybe just to move back to the impressive specialties growth in the quarter. seemingly driven by global double-digit percent implant sales. How do you view the sustainability of that implant performance? I know it's likely not double-digit every quarter, but should we just view that segment, the specialty segment as kind of a high single-digit growth profile going forward for the near future? And also any specific color on U.S. implant performance would be helpful as well.

So Ron can address the math because we have -- we gave a range at our Investor Day, and I think the market is not growing as well as we thought -- as it was in our Investor Day a few years ago, but Ron will address the math.

Yes, we had a very good quarter. Our European, particularly our German business is doing well. It's been doing well for a long time. I think we're now the #1 provider of dental implants, certainly by units in Germany. And that market has very good momentum. No one can say that will have great particular quarters. But I think it's a solid business. We've got a great product offering, new introductions, our products and a great team.

The various discount lines, if you will, or value lines, depending on how you want to view it of S.I.N. of biotech German product, Medentis and even within BioHorizons, the value line are all doing very well. I think the implant market is stable, leaning positively, more stable in the U.S. than it's been in a while. Henry Schein does not really operate in the very expensive implant category in the U.S. Of course, BioHorizons has a product offering, but we're more focused on the practice that is dealing with middle income DSOs. And so we didn't have the significant decrease that maybe some others did. But Germany, it's a pretty stable market. The U.S. is not as robust as other parts of the world. We were focused on our new product introduction this year. And I think we'll be more aggressive next year. But I don't think we can give you specific thoughts on the high end of growth in '26, but Ron will give you specifics on the range that we're talking about.

Certainly. So Joe, I think you can kind of dissect the implant market in a couple of different ways. If you look at the kind of outside U.S. versus inside U.S. market, we did see better growth outside the U.S. then we mentioned that in the prepared remarks that our subsidiary in France, Biotech and Camlog both had very good growth. And I really attribute that to good management executing. They're doing a very good job of getting some additional market share there.

Our assumption has always been that specialty markets should grow in that 5% to 8% market range. I don't think they are right now. Perhaps there are some pockets of the world where they are growing 5% to 8%, but inside the U.S., I don't think it's at 5% to 8%. We're seeing still something probably less than -- definitely less than 5% in terms of market growth in the U.S.

And then if you also dissect it by looking at premium versus value in the U.S., and we mentioned on the call that we did launch the S.I.N. U.S. value implant in the U.S. in the fourth quarter, and we have a lot of optimism in terms of what the contribution we could get from that product in terms of improving our growth in the U.S. going forward in '26. So like Stanley said, it's difficult to determine where that that high end is what this growth could be, but we do like the momentum we have coming out of '25 into '26 with the broader category.

Thank you, Ron. So the endo business is quite stable. Not sure if the market per se is growing, but we are doing quite well, gaining some market share. The orthopedic business has also got certain momentum that is very nice. And orthodontic is very small, but we're moving that product through our distribution channel, not invest in a huge amount in specialty salespeople but offering an alternative of traditional orthodontic products at a reasonable price value product. And so we were losing money in that field. We had a sort of a challenge of computers doing the cyber incident.

And overall, the specialty business is doing well. And also, that's on our owned brands Specialty Products, but also on our private brand, our corporate brand products with the par products OEM manufactured for us. That business is growing at a more rapid rate to our -- the core national brand business. Of course, we work very well with certain national brand manufacturers, but there are many products where the product line is really a generic today. And in those cases where we can provide value to our customers, we are and that's growing at a much faster rate.

Our next question is from the line of Elizabeth Anderson with Evercore ISI.

Congrats, Stanley, I'm looking forward to working with Fred going forward. Maybe combo, short-term, long-term question. Just to confirm, as per usual, none of the future repo with the authorization and included in the guidance range you just gave? And then secondarily, can you talk a little bit more on the gross margin? I think you guys called out pricing and private label as opportunities, assuming for '26 and going forward. So how do you think about what the sort of 2026 opportunities are there versus longer term?

Regarding the repurchases, Elizabeth, our guidance assumes a relatively stable stock count during the year. But as you can appreciate, we'll be assessing the stock repurchase opportunities as the year progresses and if it has a material impact, we'll be sure to communicate that.

In terms of the margin, and the contribution from private label. Private label continues to grow at a pace faster than our branded merchandise. So we are getting some contribution to -- favorable contribution to the margin from that. There's still some -- you get some pricing pressure in certain categories. We've talked about gloves in the past and other areas. But -- so -- but broadly speaking, the private label does provide us with some margin expansion and -- and we do believe -- and part of our value creation initiative is how do we -- how can we expand those margins potentially even through accelerating the growth of some of those private label categories.

But to be clear, Elizabeth, we are working very well today with many of our national brand suppliers who understand the value Henry Schein brings, understand we did have some challenges because of cyber incident and we're back in the market. So they're working with us.

On the other hand, there are many items. I wouldn't call them commodities because some of them are better than commodities and even in sensitive, with the Henry Schein brand is simply another brand, but is a high-quality brand and attracts customers because of the quality, but also because of the price, the whole value proposition. And that's doing very well. It's a state goal of ours, and we're doing quite well in that regard. And of course, that carries a higher margin, a lower price, but a higher margin with absolute dollar addition to the bottom line.

The next question comes from the line of Michael Cherny with Leerink Partners.

Maybe if we can dig in a little bit more on implied margins relative to what you recognized in the quarter. Fully understand there's a lot of moving pieces, fully understand the operational improvements that you expect to ramp over the course of the year. But what are you seeing relative to your underlying business on the margin side, I know there's been some questions on price, and there's obviously a dynamic on mix. But how are we thinking about the core underlying margins for the business before you layer on the remeasurement dynamics, the operational benefits and other moving pieces to the P&L?

Michael, I think that a lot of moving parts, you're talking about our margins because of the -- when you look at the business as a whole, we are experiencing some product mix dynamics, for example, within the Specialty group. We mentioned earlier that value is growing faster -- value inputs are going faster than premium implants, for example, they do get a slightly lower gross margin, and that will put a little bit of pressure in terms of gross margin percentage, but it does create gross profit dollar growth for us, which is very important for us.

I think within the broader distribution there's always going to be customer mix. I mean we have a very strong portfolio of DSO customers. DSO customers do get a slightly better margin, but we can deliver to them more efficiently. So that's an important part of the portfolio and an important part of the business. And the growth -- the growth in those DSOs benefits us as well.

So while we were -- we want to stay focused on gross margin percentage improvements, and that's a very important value creation initiative for us, growing gross profit dollars is equally important. And so to the extent that we can expand sales and grow gross profit dollars as well is always going to be a priority for us.

In terms of what then falls out and for operating margin, hence the -- a lot of the G&A expense initiatives that we have in place to deliver product more efficiently to support the business more efficiently. And we believe that, that will show up in -- those benefits will begin to show up towards the back half of the year, and ultimately should see some acceleration and improvements in operating margin.

It's a matter of mix. And at the end of the day, our BOLD+1 strategic plan is what drives us. And the idea is to move towards high-growth, high-margin businesses, higher gross profit, higher operating income. And we stated early on in the call that the direction of the business, the whole area of high-growth, high-margin businesses, the specialty areas, the value-added services are growing quite nicely as well as the private brands. So it's hard to get the exact number -- to predict the exact number in the quarter, but directionally, the business is moving towards higher, higher margin mix businesses. .

We have time for 1 last question, which is coming from the line of Brandon Vazquez with William Blair.

Maybe ask 2 brief ones to close this out here, maybe a little macro. First, on the medical side, there's a lot of chattering in the med tech world, especially about volumes of procedure volumes through the first quarter and then through 2026 since you guys are kind of tied to the market volumes, I'd just be curious on how are things progressing so far in early 2026 in terms of volumes. People are a little worried about ACA subsidies going away and that might lower feature volumes or some storms, there's flu season, things like that. That's the first one.

And I'll just ask the second one here as well. I think in the commentary on the prepared remarks, you mentioned that you can mitigate tariffs, just give us any incremental details that you guys -- how you see the tariff world right now given the recent [ EPA ] ruling? What you're kind of baking into guidance and how you can mitigate those tariffs.

Thank you for that question. On the medical side, we participate primarily in the alternate care site for delivery -- where delivery of care takes place. Of course, the weather will impact as it often does in the first quarter. We haven't analyzed exactly how the number of procedures will be down this year versus last year, but it's going to be down a little bit.

I don't think our customers are really impacted in any material way by any of this legislation or any particular trend going on other than, of course, people are not being diagnosed going for diagnosis as much as they did in the COVID period. First of all, COVID is not rampant. And second, people are hold, they're not worried about it or strep throat or whatever as much as they were during the COVID period. So there's a lot less on the respiratory side.

Vaccinations are probably down those used to be material for Henry Schein at one point, it's not a material category, but it is a category that our medical people are active in. So I think you can see some challenges on the medical side, I don't think it's going to impact the $13 billion Henry Schein enterprise in any material way. The home care business is doing well. I don't think that's impacted by any -- to any legislation or regulation at this particular time.

So I would say our medical business is quite stable. And the decreasing price of gloves is not what it was. It's also stabilized and we're back to 2019 levels there, maybe a little bit of higher price, but the medical business is relatively stable with, as I said, some challenges from the respiratory side.

On the tariffs, I think, in the prepared remarks, we said we anticipate passing on any tariff increases if there are any that we need to make to our customers, we have to pay more. But on the other side, we are doing a good job in alternative sourcing. So from different countries now. I don't know what this flat 15% means. But we should be able to deal with that at least in the short term, if it's a long-term issue, we'll let you know, but I think, again, within the context of Henry Schein as a $13 billion company, we should be able to deal with this as we've dealt with the tariffs generally, one part of the business is paying more, another part of the business is mitigating it through other ways. But generally, I think we'll be okay. Graham --

Okay. So thank you very much. I appreciate everyone calling in the questions. I didn't anticipate to do 121 investor calls. But I think the fact that Fred is sitting here will be evident evidence that I will not be doing 122 of these. So -- thank you for your support. Thank you for your interest. Henry Schein as a company, I think, is in a great place. The momentum is good. The strategies are working. Of course, in any businesses, there are challenges in one part of the business versus another. This team is well prepared, I think, to deal with the challenges that we know of today, and that may even come our way in the future.

The team is well organized. The morale, I think, in the company is quite good. And the markets are relatively stable. So to conclude today's call, firstly, thank you again for all the support over the years. Thank you to the analysts that are covering the space, I know the space has been a bit rough over the last few years. But I think it's a good place for investors to invest the whole health care, the dental space and the alternate care space are all good areas, and I appreciate those analysts that stuck with the ups and downs and those that have done the detailed work. So thank you very much. So in conclusion, the business is in good shape and maybe Fred, we'll end the call. Thank you.

Stan, no, thank you very much, and I'm looking forward to digging in next week. I've got a 100-day plan that includes a listening tour. So I'm going to get out and meet some Team Schein members from customers and suppliers. And of course, I'm looking forward to meeting all of you and spending some time with you in learning -- getting your perspectives on the business.

And then also, I'm going to dig in on the initiatives that are in place and validate the assumptions, and I'm looking forward to accelerating and driving more value creation for our shareholders. So thank you very much. Thank you for your interest in Henry Schein, and I'm looking forward to working with all of you.

Thank you, Fred.Graham?

So next call will be in May.

Okay. Thank you, everyone.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Hello. I'm John Stansel, and I'm a member of the health care services team here at JPMorgan. I've been joined by a large cohort of the Henry Schein management team, including CEO, Stan Bergman; CFO, Ron South; Andrea Albertini, the CEO of the Global Distribution and Technology Group; and Tom Popeck, the CEO of the Global Products Group. So we're going to start with a bit of a presentation from the guys, and then we will go into a Q&A afterwards.

Very good. Thank you, John.

Thank you, John. We must have seen practically everyone at this conference in one-on-one. So those that are here, thank you for coming. I'm going to go through this, John, if that's okay, very quickly so that there's more time for Q&A. But this is going to be posted on the website.

So we're very pleased that yesterday morning, we announced Fred Lowery as the Henry Schein new CEO effective March 2 of this year. In July, I announced my plans to retire and the plan contemplated a recruiting process, a succession recruiting process, a review of internal candidates and external candidates by our Nominating and Governance Committee. The process actually went quite well. There was tremendous interest from external candidates. And of course, we had internal candidates. And although we had planned to announce the new candidate by -- the new successor, the candidate by the end of this year -- end of last year, we delayed it a couple of weeks just to make sure that there was an orderly transition with both companies.

Fred is a unique individual and really has the domain expertise to lead Henry Schein to the next level. He comes out of Thermo Fisher, which is a company that has a distribution business, Fisher Scientific is the origin to that business. And that model is almost identical to the Henry Schein model. Consolidated U.S. distribution, went global, added OEM owned brand products, vertically integrated in specialty products, added value-added services and balanced these own brands we're continuing to be a key provider or distributor of products that are national brands.

Fred has been with Fisher for 2 decades, has great experience in manufacturing, in distribution, in managing brands, and at the same time, work closely on creating value because when you make a lot of acquisitions, you want to figure out the optimal way of integrating those acquisitions. You want to find the optimal way to advance gross profit. And Fred had done a lot of that work, a huge amount of that work in his prior roles. He will add significantly to the strategy to advance our BOLD+1 strategy and the value creation initiatives. I don't think we could have found a better candidate with that kind of experience.

But what I think is really very important is that Fred's values are identical to Henry Schein's, a system, a philosophy, if you will, where people are #1 and with people -- it's understood that people drive the business because essentially, what we sell is available from many others. The reason we're #1 or #2 in each of the markets that we serve is because of our values. And those values over time drive the culture and the culture has to adapt to the marketplace needs at the time. This is precisely the kind of work that Fred has been involved with.

Our executive management team has met Fred in the last month or so. I'm very, very excited. The team are highly motivated. The business is doing well. There's great momentum as we discussed in our third quarter call. The cyber incident is behind us. We're not defending our market share anymore. We're actually growing our market share in a very aggressive way. The 2 leaders of our business units; Andrea, who leads our distribution business and our tech business -- our technology business, primarily the joint venture of Henry Schein One; and Tom, who leads our owned brands product offering are very excited with where the business is going together with the rest of the senior management. And in fact, the whole company and the momentum is great.

So I'm not going to read what's on the screen, but you'll see -- you can read it later on the website. that this is an ideal fit. Fred is an ideal fit. It's like a hand in a glove for Henry Schein, and the team are very, very excited to be working with Fred. The Henry Schein overview, again, this is available on the website. We're the #1 provider of products and related services to office-based practitioners. Whatever these practitioners need, dental, medical, we have. The business is growing nicely. Yes, we had a sort of a challenge with our cyber incident, but things are moving along very, very nicely. We're market leader. We've a huge customer base, over 1 million customers, excellent relationships with our larger customers, diversified portfolio and these integrated solutions is what's driving the business.

The '25 highlights are here. The market -- dental market is stable. Units are pretty stable, probably in the U.S. leaning to the positive. There's some pricing pressure in the context of products moving. When you say pressure, the average ASP of some products are going down. This is a movement from national brands to corporate brands. But overall, the market is doing well on the dental side, the medical side, and Henry Schein is gaining market share. The sales in all of our businesses have accelerated in the last few quarters. The specialty technology businesses are doing well. And the growth in the distribution from a market share point of view globally is also growing.

The value creation activity is going well. We announced over $200 million of value creation, primarily in the areas of driving efficiency, as I noted earlier on, and gross margin enhancement. We have a very good balance sheet. We turn our profits into cash. We deploy our cash in some acquisitions, but also buying back stock. And our strategic plan of BOLD+1 with a key component of driving high-growth, high-margin businesses and our own brands doing well, where we have a goal of 60% of our operating income coming from these high-growth, high-margin and own brand products. We're well on the way towards that goal for '27. The long-term growth strategy is on the screen. I just don't want to spend too much time on this. It's all clear. It's here. I'd rather handle a Q&A. I think that's a better use of our time, John.

Financial overview, Ron, if you just want to give it to the very top highlights, that would be very helpful.

Yes. You can see the trends here. If you go back to '17, you can see the positive trend lines we had in operating income. We get to 2020. I think we all know what happened in 2020. You see the reduction. In 2020, we had EPS -- in the second quarter of 2020, we had EPS of 0 as an absolute breakeven quarter for us. So you see that the decline in 2020. And then we had -- we got quite the benefit from the demand for PPE, the demand for COVID test kits. You look at a year like 2022 when we had $1.75 billion combined revenues in PPE and COVID test kits. Those revenues are expected to be in '25, something much more closer to, say, $500 million. So you see the benefit we got from that, the pullback a little bit.

We had some disruption in 2023, as Stanley mentioned, from the cyberattack. The numbers you see on the screen are actually normalized to show what we believe that our earnings would have been without the cyberattack. And then you see the growth -- that we returned to growth in 2024, and we expect to continue to -- as we communicated at our most recent guidance that in 2025, we will continue to see that growth. So we've kind of returned to the growth. One thing I do want to point out, you see the operating income CAGR of 3.6% versus the EPS CAGR of 6.2%, indicative of some -- slightly more aggressive share repurchase activity that we've done in the last several years, indicating our confidence in the business as we continue to reinvest and provide a, I would say, a more tax-efficient way of getting a return to our shareholders as well.

Thanks, Ron.

So I think, Stan, you've been coming here much longer than I have. Just wanted to start with a bit of retrospective. Where do you see as we enter '26 -- I know you're not providing guidance, so I won't try too much. But talk about how you've seen the dental markets evolve and where you think we're going over the next, call it, 18 months?

It's true. I remember coming to this hotel when it was easier to get into the elevator. I would say JPMorgan has done a great job at making this the health care conference. Where we're heading is, yes, supply chain is important, very important, making sure that customers get the right products at the right time rapidly. The quality is good. Equipment sales and service, very important. But at the end of the day, what practitioners are looking for is to operate a more efficient practice so that they can focus on clinical care. And that's what's driving the Henry Schein business. Andrea and Tom can talk more about that.

The markets are okay. In units, it's stable, leaning positive, maybe a little bit more than positive. I'm quite optimistic about where the consumable business is heading. Equipment, the traditional business is stable, but there's significant opportunity in the digital space. The area of integration of various digital functions is where the real opportunity exists. It starts with the practice management system, goes to electronic medical record, ties in various AI apps, ties in various equipment, digital equipment, integrated, and that's the exciting part of dentistry. So yes, all of the consumables and equipment, that's all exciting. There's lots of opportunity. But John, where dentistry is heading, driving efficiency in the practice, enabling better clinical outcomes with the technology that is now being made available and integrating that technology is where the exciting part of dentistry is, and that's what we are focused on.

Makes sense. And I'm sure I'm not the first person to ask for a little bit more details about Fred to get to know him. And I think the feedback on our end has been it makes sense for someone from Thermo coming over kind of a distribution owned brand business. Can you talk about as you went through the hiring process and got to know Fred better, anecdotally, where are the areas you see him having like a natural overlap, really strong understandings? Are there areas where you think this is going to be kind of his learning curve? What do you thought as you think about that as you go through the hiring process?

Yes. John, I think the models are very similar. But I'm sure that Thermo does things differently, and it's always good to have a second pair of eyes look at what we're doing. We've got a very enthusiastic Board. We've added to our Board in the last couple of years. People are bringing a lot of great experience. So I think there is a significant buy-in to BOLD+1. No question, the high-growth, high-margin businesses are important as we diversify our income stream. Fred, I think, will look at that. He's got a tremendous experience in that area. But I think he'll be also of great value in driving efficiency and driving value-added services in our distribution business.

So I do think that the combination of the high growth, high margin and the traditional distribution business benefiting from Fred's experience will be important. But Fred has also led my understanding, high-powered teams. And we have a very good team. The team is raring to go on advancing our BOLD+1 initiative and working closely with him on that. So -- and of course, yes, there's the value creation opportunity. We bought a lot of businesses. There's technology available. There are certain functions that can be centralized. These are all areas that Fred has had experience in and will complement our team. But it's not as if our team doesn't have also good experience in this area. Andrea and Tom have experience with other companies as well. It's going to be a great team, I think.

And of course, then there's all the corporate functions where a lot of great succession has taken place over the last 5 or 6 years where we've -- people are bit tired and new people have come in -- or been promoted from the financial side to the legal side, to the supply chain side to the human resources in this and, of course, great succession plan and the whole world of computers and IT. So yes, I think there's a lot he's going to add -- and there's a lot of excitement. Of course, it's always helpful when the business is doing well. That's what drives momentum and gets morale up.

And I think you mentioned the value creation plan, and I think I'd be remiss if I didn't ask about the $200 million of net operating profit improvement. I know you haven't given detailed buckets, and I'm sure that's something that everyone is going to be waiting for in a few weeks to hear about. But can you just talk a little bit about the analysis that was performed, kind of what gave you the confidence to step out with a $200 million number? And kind of when you talk to your consultants, what they were showing you that kind of gave you conviction?

Why doesn't Ron give you the math and the 2 people responsible for having put the plan together can add a little bit to it.

Yes, certainly, John. I think that the -- in terms of the $200 million, we're really focused on the aggregate number as a management team. So whether we deliver the operating income improvement at the gross profit level or at the operating expense level through savings, we'll be agnostic to that in terms of -- the focus is really the aggregate number. Over the -- when we provide guidance at the end of February, we'll talk a little more to what our expectations are and the impact on 2026. '26 will be a year that we'll have to make certain investments in order to achieve these savings, but I do clearly expect a net benefit in '26 from these initiatives and with some good momentum coming out of '26 going into '27.

As we said, we expect the $200 million plus to come over the next few years, but we feel very good about our ability to do this. We have the whole organization behind this. This isn't just a few people working to achieve this. It's the whole organization. I'll also -- I'll defer it to both Tom and Andrea. As Stanley said, they've kind of led some of the -- a big piece of these initiatives. So I also want to get them involved in this.

Yes, sure. So I've been leading the G&A project and my peer here, Andrea has been leading the gross profit improvement project. And on the G&A side, it's -- Henry Schein has been made up of a lot of different acquisitions over the years. And the ability to take these acquisitions and look at the back-office functions and start to look enterprise-wide at some of the shared services, start to maximize those shared services and also look to offshore some of those shared services, to reduce costs as well as looking across the enterprise and looking to maximize indirect procurement. So things like travel, facilities, all the things that don't go into the products. But across all these different acquisitions, we're independently doing a lot of their own things. So we are doing a good bottoms-up approach, which we did. We built this from the bottoms up. All of our teams were involved, came up with our projections, and we're off and running. So Andrea?

Yes. The other bucket is the GP improvement value creation project. We are looking at how we do pricing. We are looking at our assortment. We are looking at how we can leverage the right price to increase share of wallet or to push our own brands where appropriate. It's not a new initiative. To be fair, we were working on this pricing project before. But with this value creation initiative and with the support of an external consultant, we scaled up the level of tools, technology applied to the analysis, a lot of analytical skills that we brought into the organization to be able really to take strong and informative decisions on our pricing. And we already executed the first wave of initiative in 2025, and we have a program to continue during 2026 and 2027. And these initiatives are part of the evaluation that brought us to the $200 million plus.

Great. And maybe just a quick clarification for Ron. So when you say a net benefit in '26, this is not a run rate. This is -- in the totality of the year, there should be some uplift in '26. Is that the right way to think about it?

Yes. I would expect that while we will have to make some investment in '26 that we will achieve some savings in '26 that will exceed that investment. So we'll get some net benefit out of that. When we talk about the $200 million, it's going to take us over a period of multiple years to do that. It's not going to be a linear benefit, right? I think that we're trying to position ourselves that we really can ramp up some benefits of this as we get into the back half of '26 and into '27.

And then just on the -- maybe for Andrea, on the gross profit side, how much of this is tied to things that are within your own control on pricing? Or if we just think about kind of the current macro backdrop for dental, is that sufficient? Or do you need like an improvement in the overall backdrop to kind of hit your targets?

No. Of course, we are not immune from what is going on around us, but the project is based on what we can control and how we price more smartly, how we use data to really drive pricing and portfolio positioning based on customer behaviors, all this kind of sophistication, and this is in our control.

Okay. Then just as we think about just the general dental market trends, I think we kind of heard volumes skewing somewhat positively with some maybe top pricing ASP pressures is kind of the framing. When I think about the balance of '25, really a tale of 2 halves, especially on dental consumables, where first half was pretty muted on a revenue line and then you kind of picked up into kind of like, call it, high-low single digits, if that's a thing, to maybe mid-single digits. How do I think about -- is that -- you can grow, call it, mid-low 3%, 4% in a slightly positive volume backdrop with eventually some ASP pressure. Is that kind of the right way to think about how that translates given that -- I think as you said, you're gaining share?

I got to ply on what we are doing that give us the confidence to, let's say, continue to grow. I mean we already commented that the dental market is overall slightly positive, let's say. And of course, there are exceptions in the specialty that are growing faster or there are segments of the market that are growing faster like DSOs. But overall, slightly positive.

Where we get the growth is in gaining share. And we are gaining share. We started -- after the cyber incident -- I hate to speak about the cyber incident because it's behind us. But we have to admit that for roughly 18 months, our focus was mainly on recovering and defending our position. Q2 last year, we started again really aggressively to go out and execute on our strategy more than recovery. And the results are clear. I mean, we announced in Q3 a strong momentum on sales. We gained market share. Going into Q4, this momentum continue, and we believe we are in a very good moment where we are gaining market share.

And this is a result of our commercial plans, our broad portfolio of products and solutions. We have the broadest portfolio in the industry, especially in the dental segment with our own corporate brands, with our own business solutions. And when you -- and we are investing also in our sales force. We have more people in the field. We have more people on the phone. We are investing in digital channel. So when you combine the portfolio with our omnichannel strategy, we are gaining market share, and we see the results.

Is there a particular area? I think you mentioned DSOs being kind of a positive point. Is that where you see kind of the above-trend growth coming from? Or is it something particular else that you'd highlight? Or is it broad based?

I mean if we look at the different segments in the market, independent practice, mid-market or mid-DSOs and big DSOs, we believe the growth is more on the mid-market/big DSOs, yes. They are growing a little bit faster.

And thinking about that, has there been a change in dentist purchasing habits? I think that -- I think back to '24 and there's a whole topic of trade down and move to national private label for national brands. Like is that a sustained trend? Is that a moment in time? Like how do you see kind of purchasing habits changing or not changing?

If we talk about dentists and probably customers in general, they are more ROI focused. So they look at investment. If we talk about equipment, they look at investment that bring efficiency or productivity and this is why we see more investment in digital equipment because it allows them to automate processes or to perform in a more efficient way, complex procedures. If we talk about merchandise, similarly, I mean, we don't talk about ROI, but we talk about being cautious on price quality ratio. And where there is no innovation, the focus go to the private brands because they can get the same quality at a lower price.

And then we talk about, again, this ASP pressure somewhat. And I know it's like you can't generalize to every single category being similar. But one of the things that we've talked about in the past is this idea of like innovation is something that drives ASP inflation and is a big part of kind of maybe a return to growth I think about things like Curodont, for example, which you guys have to work a lot with Novartis on. Do you see a pipeline where we maybe go from kind of a, I'll call it, more tepid innovation backdrop to kind of something where there is a path for more new products to come to market?

We would love to have more and more innovation. And you mentioned that. Curodont is a very good example. End of last year, we announced that we are the exclusive distribution partner for Curodont in the U.S. and the U.K. And when you have innovation, you don't have the same price pressure. And -- I mean, we always -- in the conversation with our partner -- manufacturer partner, we encourage them to come out with innovation because this is where the market doesn't get commoditized and we can get pricing advantages.

And I think there's always a question, and this is kind of maybe both a DSO and equipment question, but the benefit of potentially lower interest rates. I think this has been kind of for a bit now. But like do you see some level of upward performance tied to lower interest rates in the near term, medium term?

I mean, I can reply Ron and jump in, but I don't believe it's huge. But yes, of course, when you do an investment and you borrow capital, interest rates have an impact, but the interest rates have an impact also on DSOs buying practices. So yes, there is a correlation, not huge because when customers see an ROI, they will invest and they continue to invest in equipment.

And John, just to add to that, I think that I always think of the interest rates and how they impact us as kind of a short-term versus long-term impact. The short-term impact of lower interest rates, you can see an immediate bump in demand for equipment. I don't think it's completely linear. I do think dentists are able to kind of work around some of the higher interest rates when they are present in the economy. But we do see -- I think it would be fair to say you would expect a small bump in equipment sales with a decline in interest rates.

In the long term, Andrea mentioned DSOs who acquire practices, but also a lot of DSOs will build out de novo practices. And at lower interest rates, just the math in terms of the ROI and what the hurdle rate is on building out those practices gets easier if you have lower interest rates, lower cost of capital. And that's important to us because that expands the supply of dentistry services. Net larger supply of dentistry services gives us more opportunity to sell more products, too.

Great. And I want to bring Tom in here a little bit because I'll be hammering under the entire time. Implants, a little bit of some moving parts in the third quarter. We had -- I think you had kind of a bolus of growth in your value book, which kind of made a bit of a, I think, mix shift, if I remember correctly. Can you just talk us through like how you're seeing the different buckets of implants performing right now and kind of where your customer base is interested in spending more or less.

Yes. I think it's dependent on the geography. In the U.S., there's been a big move over the years more towards the value, and we're positioned well with our acquisition we did 2 years ago with our SIN implants. And in other areas like parts of Germany -- parts of Europe, like Germany, South America, Brazil, those markets are growing faster. Germany, in particular, is more of a premium brand. So it's all specific on which country, which area and which product category we're in. So...

And thinking about -- you kind of pivoted your implant book over the last, I'll call it, 3 years, right? The SIN acquisition, you're launching the new products kind of more upstream. Do you feel that there are any kind of -- not to use for lack of a better word, a hole in your implant book?

No. I think our implant portfolio is very well positioned across the different brands we have. I think the opportunity for us is to unify them a little bit more and come to market more as one company versus 4 or 5 independent companies. And that's part of our strategic plan. It's what we've been working on and looking forward to us getting that in place over the next year or 2.

Great. Maybe to move to medical quickly. Some moving parts right now, I would imagine, between kind of, I would say, cough, cold and flu ran a little bit soft in the fourth quarter, has picked up in the last 2 weeks, I can anecdotally say that I was really sick, but then the other question is your business does distribute vaccines as well. And so how do we think about kind of the seasonality of that business? Again, I know you're not providing updated guidance, but just thinking about kind of the things that matter as we think about kind of the tail end of the year.

Let me say that the things that matter in our opinion is the overall trend that continue to see a shift of activities performed in alternative care setting instead of urgent care settings. And this trend is much more important than the seasonality. Take the ICs, more and more procedures are shifting from inpatient to outpatient. And this is a big engine of growth.

And even if you take the IDNs and the independent physicians, yes, they can have some seasonality, but there are more and more activities done on chronic health or chronic diseases and preventive health. So overall, I would say that, yes, you can have inside the quarter some seasonality because of the cold and the flu season, but we remain bullish on our idea that the market for us is growing mid-single digit in these segments.

And maybe to quickly touch on technology because I want to keep us kind of cognizant of time here. Incremental margins have been incredibly strong. I would imagine some of that is your SaaS transition that has been going on. How much of what we've seen kind of from the operating profit line is conversion versus addition, right, like adding new platforms, new people versus just flipping people over to kind of more like asset...

First of all, SaaS for us is still -- we are still at the beginning of the journey. We have roughly 10% of our customer base on the cloud and on subscription models. So we have a huge opportunity in front of us. Normally, the SaaS customers are new customers. Of course, there is a component of conversion, but normally are new customers.

Am I right to think that the DSOs and kind of your multisites are much more interested in kind of your cloud offering than...

Yes, absolutely. We are working with a couple of big DSOs on a cloud project. Not all, some are on the on-prem, but yes, they are interested. Of course, they understand the value of having a cloud solution. And this is an area of focus, of course.

Of course. And then maybe just generally, with the DSOs, competitive intensity, bids, RFP cycle, is there anything changing with what they're looking for as you maybe discuss with them, renew contracts, I'm not asking for contract updates, but just generally, like the things that they're interested in adding or having, has that changed or evolved over time? Or is it kind of the same competitive intensity that you've seen the past few years.

I mean they always negotiate that for sure. They are good in this. But no, we see -- especially the good DSOs, they are more and more interested to find solutions or opportunities to increase their revenue. I mean when we started to present the AI solution, there were a lot of interest from DSOs, and there are -- there is a lot of interest from DSOs because of the opportunity to increase the customer experience, but also increase the efficiency of their practices. Product like Curodont is a product that found a lot of interest on the DSOs. So when we have innovation, we have solutions, and this is an area where, yes, we see more and more conversation with the DSOs.

And on the technology side, when I think about additive offerings, I think I was at the New York meetings and you're demonstrating kind of new tools that have been added. What more do you think -- do you have a full suite at this point? Are there new things that you're looking to add to your technology offering? What is the other holes there?

This is an area we love, I love. And we accelerated the pace of innovation in our technology company, and there is much more that will come. The area -- first of all, we focus on what we call one platform, so more and more integrated solution that help the workflow in the clinic, both on the clinical side and on the management side. The main area of focus are revenue cycle management that is a huge topic for our customers. The clinical workflow with the AI, efficiency of the practitioner with a solution like Scribe. We announced at the New York meeting our partnership with Amazon Web Services to develop some AI solution that are voice-based. So we will have a lot of new solution coming also this year.

And maybe it's a perfect time to pivot to Ron and think about build versus buy. And you guys have had a bit of a bias towards share repurchase over the last couple of quarters. How are you thinking about capital deployment right now and kind of the attractiveness of either tuck-in M&A, maybe some NCI buydowns that you've done in the past versus going out and inorganically adding something to one of your offerings?

Yes. In terms of M&A, we're always -- there's always something in the pipeline that we're evaluating. where our focus has been more in the high-growth, high-margin areas of the business. Tom mentioned a couple of the implant acquisitions we've done within the last several years. But we've also been investing more on the home solutions side in medical. We do find that to be an area of accelerated growth versus, say, core medical, and it's also an area of our business that gets better margins in our core medical. And so we find that to be a very attractive area for M&A investment for us.

And it's not restricted just to that. We are looking at on the technology side. If we can -- if we see an opportunity to buy something, we just recently kind of folded in an imaging system process that was somebody who we had a very close relationship with, but now we've kind of captured that and it's an integral part of the offering. And along the way, we just have to make that decision. In some cases, the solution is not available out there. It's something we may have to build ourselves on the technology side.

And then there's other areas where if we feel like we can strengthen ourselves in a certain geography or within -- by getting access to a product like we've done in some of Tom's areas to broaden the product portfolio like we've done with our implant business, that's really going to be the focus. Outside of that, we still think that we've been pretty aggressive in terms of what we've done with share repurchases. We think it brings -- it's very accretive for us right now. We think it does provide a good return to our shareholders. And as long as we can generate the positive cash flow that we've been able to do, we'll continue to be aggressive there as well.

That's great. And then maybe just one last one before I have my traditional ending question. You've hired from other dental distributors recently, kind of added sales force. You've also launched your e-commerce platform. So I think that there are 2 factors there, adding headcount, improving efficiency via the e-commerce platform. Entering '26, thinking about your sales force, is it where you need it to be? Is it something that you can just scale pretty easily because you have all these new tools? Like how do we think about the dental sales force and like how that translates to incremental growth going forward?

So we will continue to add sales force as we have done in 2025 in a very focused way based on territories where we may benefit from more coverage or based on quality of people. But you're right, in 2025, we were able to attract a lot of salespeople from competition. We added salespeople on the field. We added salespeople on the phone, and we invested in our digital platform. So all this is part of our strategy, and all this will support our growth. I'm not talking about percentage because I don't believe we provided guidance yet, but all this is what make us positive for our growth.

And our team generally ends all of these firesides with the same question, which is, what do you think investors are going to appreciate about Henry Schein in about 12 months when you're sitting here again that they don't appreciate right now?

It's on the screen. We're waiting for that question. Look, we have a clear strategy. We're not going to go through it now. BOLD+1 is very clear. We're making progress in each of those areas. When we say we're going to do something, we do it. We have a pretty good track record. Cyber in between, of course, distracted us a bit. The dental market is a good market. It's a steady market. It's growing. We need some more dentists in the developed world. We're helping grow dental school, admissions, graduations. But if we can drive efficiency, will be more outcome. The platform is endless in dental and in medical. There's so much we can add. We want more share of our customers' wallet, the L in the BOLD+1 leveraging. And we have a pretty experienced management team, which I went through. The team is very, very enthusiastic. I can tell you that. So John, thank you for hosting us. It's been great to be part of this journey you've been on.

Well, thank you all for coming. We are just exactly on time.

Why don't we get started here? So I'm Jason Bednar. I cover med tech here at Piper. Next fireside chat is with Henry Schein. Very happy to have with us today a pretty large group. We've got Schein's Chairman and CEO, Stanley Bergman; CFO, Ron South at the end; as well as CEO of Global Distribution and Technology, Andrea Albertini, and then also CEO of Henry Schein Products Group, Tom Popeck. So thanks a lot for being here all of you. Always it feels spoiled just having the 4 of you here with me.

But why don't we get straight into Q&A. Stan, I've got to start with you. You are one of a kind. It's really uncommon to have such consistent leadership of a public company with a commitment to a long-term strategy like we've seen from for your time at Henry Schein. It doesn't seem real that this might be your last investor conference. It's maybe not a fair question. But as you look back on your career or even the last 5 to 10 years, what can you say you're most proud of that you and the organization have accomplished?

First of all, Jason, it's good to be here. The unusual part is that related to the fact that I take a lot of words to respond to a question.

You have 30 seconds.

I would say, if you ask me the 5 years, because I think that's important. The 5 years began with COVID, right, in February of 2020. So that was really a roller coaster. First, the dental business was down, shut, medical business, then it opened up, and we had huge amounts of PPE sales and test sales. Then that stabilized. People stopped going to the dentist, and they came back, then there was a backlog.

And then we had about 3 normal quarters in '22 -- '23, sorry. And then in October '23, we had the cyber incident. The good news is we had all of our backups. We did everything right. We didn't have to pay to get data back or you ran some stuff, but it took a while to get everything working. And we have competitors that, of course, you would expect went into our accounts since we can trust Henry Schein, blah, blah, blah. And it took us a period of time to recover from that until maybe the last 3 quarters or so when things stabilize now and our sales organization, Andrea can talk about that went out and started being aggressive and getting business back. So that was the 5-year story.

But in that 5-year story, we advanced our BOLD+1 initiative with significant success in diversifying the income of the business towards what we call high-growth, high-margin products and services, which is now about half of the profits of the business. And there's another 10% or so, which is our own brands, OEM products. So now we've gone from about 30-ish to almost double that in terms of profits, products and services that have Henry Schein control with our own brand.

In that period of time, we reorganized the business such that Andrea took responsibility for global distribution and our software businesses and value-added services and Tom for Henry Schein owned products, which are products that we manufacture ourselves and sell under our own brands, plus our Henry Schein OEM branded products. This is quite significant. And in this period of time, of course, we've taken up our EBITDA very nicely.

All right. It's been a great run to watch from the sidelines but also being involved in knowing you. Kind of a nice segue here, too, as we think about who's going to be the next CEO of Henry Schein. I know the Board is conducting a very deliberate search. You're part of that search process, the interview process. One thing I feel like I've picked up just in all of our conversations is that it seems very likely a new leader is going to be announced before year-end. Is it safe to say then that we're down to the last few candidates for that position?

I can't really comment on the succession process. That's something that as a public company, we have to, of course, we have to respect that. But I think the Board has taken this very, very seriously, internal candidates, external candidates. I will say that if it's internal, we've got great candidates. Our succession plan has been a good one, I think. And then if it's external, we have a great management team that is committed to advancing the strategic plan and the business. So I think we've got -- the company is in good shape financially, strategically and from a management point of view.

All right. All right. Fair enough. Other recent topic here from the most recent quarter and Stan around, feel free to respond. KKR, it started with a 12% stake, I think they took it to 15%. They now can go to 20% ownership. Maybe can you tell -- talk to us about the most recent development, how this came about? Who approached who? Why is 20% the right new ownership level for KKR?

Who approached who? I have to go back to 3 or 4 years, 3 years ago when KKR visited us. They are very interested in the dental space. They have assets in the dental space. They know the dental space. And they're very optimistic about the future of the dental space. So they realized the stock price was pretty good and they invested up 10%, I think, the first time around.

And then they came and they said to us, we'd like to invest more. And we reached an understanding that they would be able to purchase about 2.5% in the open market, and we would sell them 2.5% at the price on the day we closed when it goes into the arrangement with them, which was January of last year -- I believe. January of this year. It's been a great arrangement that we've got added 2 people to our Board.

One, Max is somebody that understands health care. He's been with KKR understands their culture, is committed to our culture. He's been with them for a long time and runs the health care practice and in North America. And Dan, who was with Danaher during a period when Danaher's dental business was a bit rocky. We had some tension at that time, and he came in and resolved that he became great partners to the point that when Larry Culp left, Dan took over the dental portfolio, did a great job with us. They spun the business.

He understands the dental business and he understands distribution and manufacturing. So that's been a great -- that added a lot to our Board. Our Board I think is quite good in any event, quite a lot of experienced people, from different walks of life. And they've added, as I said, a lot to the Henry Schein's story, and they're very committed. Obviously, they must think the price of the stock is pretty good. Otherwise, they wouldn't be invested.

It's very fair.

I'm not telling you anything now because an FD issue, but they don't buy. I don't think they buy assets that are overvalued.

Sure. Andrea, I want to maybe pivot over to kind of the current state of the dental market. We also talk about the medical market, too, but I know a lot of investors focus on your dental business. So if we look at the current state of the market, we were all walking around the Greater New York Dental meeting yesterday. It felt like the general buy and feel was market is still fairly stable, not really inflecting higher or lower. Is that a fair characterization? And the follow-up to that would be, what's it going -- if stable. We think it's stable. What's it going to take to be stable plus or be on that positive trajectory higher?

I think the saying that the market is stable is a fair assessment. We call it stable plus. But yes, the patient traffic is stable, and this is one of the characteristics of our market. We see some pockets of growth in specialties, in other areas. But in general, we see an opportunity for Henry Schein to grow and grab market share. We did it in Q3. We showed a good growth, the highest we had in many, many quarters.

And we believe this is something we will continue to sustain because one of the main topic is that after the cyber incident, we had to focus on recovering and discussing with our customers what happened and asking them to come back that we were okay. And this is behind us now. All the focus of our team now is supporting our customers, developing a better business, being more efficient, finding solution to the problem they have. And this is what brought us development in the past and is what is bringing us development now. So we had a good quarter, and we are in a good trajectory that we believe will be sustained.

Right. That's fair.

Andrea and Tom, I'd love to hear your thoughts as well. We look across the dental industry here just from the most recent third quarter, and it sure seems like there's some benefit that's materializing from better pricing. And it seems largely tied to pass-through from tariffs. It seems like also like that right now, that's going to be durable. So feel free to disagree with me on that. But is that -- where do you think we stand on pricing within the industry? How are you seeing your business evolve both with respect to branded and private label products?

You want me to start? So tariffs are there, we believe are there to stay. Finally, we don't talk any more about tariffs, but it's good. We don't believe they had a crazy impact on the pricing. But yes, there was some prices -- some price inflation was there. What does it mean? Is it stable? Yes, we believe it is stable. And it clearly generated also some dynamic shift from product that became too expensive to alternative products. And we have the opportunity to support our customers we have a broad portfolio of branded, but also our private brands that quite often represent a good alternative at the same quality at a lower price. So it helps to mitigate the tariff impact on our customers. So we see this dynamic, nothing exaggerate, but we see this dynamic, and we believe it's going to stay.

What do you think Tom?

Yes. I mean we -- tariffs have been a challenge, obviously, for our own products, but we've been doing a lot of different things to mitigate the risks, right, moving manufacturing, changing suppliers, going to different countries, working with consultants on how to best mitigate all of that. And some of it includes price increases. Like Andrea said, we don't see it going away. As long as the government stable and not changing them too often, I think our plan in place and going to continue the way it is.

All right. Ron, I've got to bring you in, even though you tried to sit as far away from me as possible. Take us through some of the moving parts. I know we're not getting guidance here. That's not what I'm asking. But how are you thinking about just the structure of like what influences your view on 2026? I think you've been clear there are, again, a lot of moving parts to consider. You've got a commitment to getting the business back to high single, low double-digit earnings growth in the future. The Street isn't fully there for next year. So what do you think are missing? Or are they not anything right now?

Well, I think when -- as we look at '26 and as we begin to prepare guidance for '26, there's the -- what I'll call the external issues or the macro issues that we're analyzing, whether it be market growth in the dental industry, what's happening in the pocket of medical in which we operate, what kind of momentum are we seeing both in the market as well as in our own business as we get through Q3 and Q4. In Q3, we felt like we had a lot of success taking some market share. How well are we making that stick? How much momentum are we getting as a business with those market share gains. So that's kind of -- that's going to be a key part, obviously, of our '26 guidance. You layer in some of the other company-specific things, for example, what kind of net benefit do we think we can get in 2026 from the value creation initiatives.

There's going to be -- we've talked about this in the prepared remarks last month that over the next few years, we expect about $200 million plus in operating income improvements coming from these initiatives. But in 2026, it's going to require perhaps some investment as we work towards that, but we do think we'll have a net benefit in '26. So how much will that net benefit be or what will be the right range for us to consider in our guidance. And that's something that between now and the end of February, when we provide that guidance, we'll be trying to determine.

One follow-up on that, just on the last thing you said. So net benefit -- we should all be thinking of net benefit from that $200 million in value creation. $200 million is not for 2026, but still a net benefit for the year. And that comes on top of net benefit that you're also picking up a little bit from the restructuring activities taking place in this calendar year.

That's right. So we initiated a restructuring plan in the summer of '24. We've largely executed on a lot of the original thoughts coming from that plan. But there's some overlap with what we're seeing with the value creation initiatives. So what we disclosed in the -- in our filings for the third quarter was that of our intent to extend these restructuring plans so that we can capture some of the restructuring costs and report those out accordingly that come from these value creation initiatives. So yes, it is incremental to the savings that we have achieved through the restructuring plan that we initiated in the summer of '24.

Okay. Perfect. Tom and Andrea, I'll come back to you. As we think about some of Henry Schein specialty franchises, the higher-margin categories, I think the goal is now to get over half of EBIT from these -- or we think maybe now we're even pushing like 60% if we push them both together, the own brand and also the specialty and technology. So is this something that you think you can do organically? Is that the intent? Do you have to do anything inorganically to get there? Tom has got this one.

Yes, for sure.

You've got anyways the point.

Yes. It changed my life. But we're doing a lot. So between new products and sales initiatives and growing the business, I think the business grew mid-single digits in Q3. We're -- we also have value creation, and there's a lot going on there. We've been doing this before we start officially started the project. So as you know, our businesses have been made up of a lot of smaller acquisitions. And we've been consolidating and integrating and making those businesses more efficient, making them run more like one business versus all multiple businesses all over the place. I think overall, with technology, we're somewhere around 45%. And there's no reason in the next couple of years that even could be approaching 50%.

Okay. Is your response where you started with the value creation initiatives, is that -- should we interpret that as you have a disproportionate amount of those value creation initiatives targeted at?

I wouldn't say that. I would say because we've already done a lot of them. So I think it's pretty equal.

Okay. Okay. Fair enough. All right. Shifting gears. Another item that's been pretty relevant here of late, and Stan, I know you probably have some opinions. You have relationships, both with manufacturers and then also DSOs, a lot of discussion. It might be a leading question, but are things healthy and constructive right now in the industry?

I would say with the manufacturers, it seems to be quite stable right now. There's one that's just going through significant leadership change. But I would say our relationships generally are very good with the large manufacturers. The smaller ones have always been good. But the larger ones that had a lot of change. I think they've settled down.

Yesterday, we met a whole bunch of them together with Stephanie, who head up our relationships with our suppliers. And the room seem pretty good. I mean everybody is anxious to get business. They all understand that Henry Schein is the way to bring their products to market because we're not just buying products and selling, but their products are part of a general solution to helping practitioners operate the business more efficiently so that they can provide better clinical care. So they understand all of that.

The one that's going through transition, not terrible. It's a good relationship, but they're feeling their way through. And I would say that's good. With the DSOs, it's generally good, I would say. I don't remember since the DSO movement started in the early '90s with any DSO saying, wow, thanks for the good pricing. They add us every single one guy singe minute. So one guy got a box of gloves at a better price, they all come. So that's the way it is.

And then we have to go and explain to them the best solutions for them, more to our own brands and look at this anesthetic, look at that, look at this gloved, look at that. And oh, by the way, isn't our software helping you? And aren't we helping you with all of our own brand products that we manufacture, the specialty products. We have better training than anyone else that's focused on DSO.

So we have a team that works necessarily as constant wins. And of course, you're going to have occasional losses. But I think overall, it's not worse than it's ever been. And we will only do business with DSOs and we can make good profit.

One in particular that I know is on a lot of investors' mind is Heartland just because it is the largest. You've had a long relationship with Heartland. I want to ask you prognosticate on how that RFP process is going to play out. But when do you think we hear a finalization of that process?

You won't hear it from us. You may hear it from them. We don't announce renewals. We stopped doing that about 8, 9, 10 years ago. So if they want to issue a press release either way, that's fine. But we generally don't comment on our customers' particular renewals where all part of the business has been lost. But I will say that we are comfortable with our profitability in the business, and that's key.

We're not going to compromise our profitability. We have to make a living. We've got better assets in this space than anyone else. There's no one, I believe that could come anywhere close to national equipment sales and service with the turnaround that we have. And I'm not talking about the U.S. only. I'm talking about all the markets. We just came back from Germany.

And yes, there's dealers in every little part distributors in Germany, but there's no one you can call and say, "I have a DSO in Stuttgart and one have one in Frankfurt" [indiscernible] this afternoon. Our services are credible, and we're doing very good work on driving the profitability of that. So Henry Schein is not consumables, not equipment, it's not software. It's a complete solution. The solutions are advancing, and I believe the DSOs generally understand a lot of it. And Andrea, if you want to add to that business this is your world.

You covered it. I mean it doesn't mean they don't beat us on prices every day because it's their job. But they also recognize that we have a full portfolio of solutions, and we are a reliable partner, and this allow us to have the majority of the DSO. That said, every single dealer is own in store.

Yes. I want to touch on dental equipment as well. We talked about it here yesterday. There was a lot of confidence. I thought from the most recent conference call that equipment is going to grow in the fourth quarter, felt pretty good yesterday, just the overall commentary around the equipment market at the trade show. So I guess what's driving that? It's almost counterintuitive with the macro is still a little choppy. Interest rates are fine. But I mean, what's driving that better equipment or call it, just overall equipment growth when we have the backdrop that we do?

Okay. So the overall economy, if there is an impact is more on the traditional equipment. I mean similarly to all of us, if you have to change your car, it's not a good moment, you postpone it 1 year. This can happen. But still, new practices are opening and they need equipment. And then for the existing practices, the focus is more on what helps to drive efficiency. There are a lot of solutions today that help running a better practice. Think about digital workflow, digital imaging, intraoral scanning, 3D printing. And this is where we see the majority of the growth. And we expect this to continue because a lot of dentists still don't have these digital solutions.

And they will need it because you cannot be efficient today without going into the digital world. So we expect the digital trend to continue. Yes, there will be some, let's say price decline, average selling price decline as with all the technology that tend to mature. But the volume growth will compensate for it and give us growth.

Okay. Perfect. Well, we have 30 seconds, Stan, I'm to give you the last one. So we really only have 30 seconds this time. So when we think about -- you're going to be in the Chairman's seat presumably for 2026 in the years ahead. What has you most excited? What should we keep people be focused on most for 2026?

I think it's the clinical solution to operating a more efficient practice for the practitioner can provide better clinical care. There are so many APIs and devices out there. We are the ones bringing them together with our Henry Schein One solutions at the center of that. It is -- so every day, I mean, what AWS came to us, we didn't go to them, they came to us. Google come to us. We are the address in dentistry to bring all this stuff together. It is very, very exciting. And it actually connects...

Excellent. I did...

And go everywhere else, and you'll see people selling devices. But devices without connecting is like the railroad without the tracks working.

Great analogy. Well, with that, we are out of time. Gentlemen, thanks so much for joining us today. I really appreciate having you here. Thank you.

Thank you, Jason.

Hi, everyone. My name is Mike Sarcone. I'm an analyst on the U.S. Medical Supplies and Devices team. This is the session for Henry Schein. And with us from the company, we've got Stan Bergman, CEO; we've got Andrea Albertini, who is the CEO of Global Distribution and Technology; and we've also got Graham Stanley, who's IR and the Strategic Financial Project Officer. So gentlemen, thank you for joining us today.

I guess just to kick it off, Stan, you announced your intention to step down from the CEO role towards the end of this year. It's been a long-storied career. You've built up Henry Schein. Just wanted to get your take on how you view Schein's strategic positioning today.

Thank you, Michael. It's great to be with you. I think I've been to many of these conferences of yours, Jefferies conference, and I have to say you guys do a lot of due diligence on our space.

So Henry Schein is in a pretty good position today. I announced my retirement in July of this year. I wanted to ensure that there will be no rumors while we were going through the succession process. It's a succession process conducted by the Nominating and Governance Committee of Henry Schein, looking at internal candidates, external candidates, as you would expect in a public company. We're using a national firm to do that. And we expect to -- it's a global firm, and we expect to announce my successor before the year-end. The successor will be in place in January, and there will be an orderly transition.

And from a business point of view, we did have a cyber incident in October of 2023, that destabilized us for a period of time, but that's behind us, and the business is back to gaining market share, growing each of our businesses. I think our distribution business, global, and Andrea leads, is the leader in dental consumable distribution and equipment sales and service, probably very few dentists in the developed world that don't do business with us in one way or another in that area, and the business is doing quite well.

The markets are relatively stable, leaning positively in the developed world, and that's where we operate. The business is doing well on the distribution side. On the high-growth, high-margin side, we have 2 major business areas. One is in the software area, dental software. Andrea leads that, too. We're the leading provider of dental software. Of course, moving from on-prem to SaaS model is a big opportunity for us. But the big area of opportunity is providing various apps, various value-added services, electronic medical records, claims processing, revenue cycle management, credit card processing, patient financing, all of that tied into the portal. That business is doing quite well.

And, of course, AI is very important. We're selling various AI applications, the integration into the electronic medical record of scanning, digital scanning, imaging, et cetera. That's a great business, doing well.

And then we have our Specialty Products business, which today focuses on dental implants and bone regeneration products. We're #3 in the world. Endodontics, we're #2 in the world. These are own brands, innovative products, self-made. We also -- so that all accounts for the practice management software and related systems. The Specialty Products each account for about 25% of our operating income. And then, if you add on top of that the own brands, private brand, you may call it that. But today, it's really -- it's a private brand, a Henry Schein brand. It's the largest brand in dentistry, highly regarded in dentistry. That's another 10% of our profits or so. So you got close to 60% of our profits, they're coming from brands that we control and different Henry Schein brand or other kinds of brands.

And overall, our business is in pretty good shape. Each one of our business is headed up: on the business side of Andrea, distribution and tech; and then, Tom Popeck, who leads the owned brand businesses. Each one of our businesses today has very good in-depth management. All of our functions have very good management. Lots of succession has occurred over the last few years. And I would say, I'm leaving the business in good shape.

Great. Appreciate the walk-through. And I did want to ask about the state of the dental markets. You mentioned stable...

To leaning positive.

To leaning positive.

And I've said that...

Consistently.

For 35 years -- 30 years as a public company. There's all sorts of dynamics going in the dental business. Some companies are having a problem here. Others, their stocks were too highly valued, stocks went down, but generally, the dental market is a stable market. And the part of the healthcare market that we focus on, the office-based practitioner, moving from procedures from the hospital acute care area to the office, dental office to the ambulatory surgical center to the home, these are all growing areas of the medical markets. And it's not sexy, it's no cure for cancer, but it's all stable markets growing a little bit each year.

All right. Sexy is in the eye of the beholder though. All right.

It's boring.

Okay. But I did want to ask you to dig deeper because I sat in one of your meetings before, and we had some lunch. And you talked about some of the moving pieces that Schein has experienced. So I guess, can you kind of go through the spiel again and talk about Schein's growth when you exclude some of the more volatile components since 2019?

Andrea, that's you.

Yes. So you heard that in Q3, we announced a stable margin, and this is a change mainly driven by the improvement of 2 headwinds we had in earlier quarters. One is the glove prices. For quarters, we saw -- after the rollercoaster of post-COVID, we saw glove pricing -- average selling price declining. And in Q3, finally, we believe went to a stable place and that improved, of course, our margin.

The other point is, yes, the -- I would say the -- not only the glove pricing, but in general, the prices were stable, and we believe it will stay like this. We have opportunities to grow prices. We are working on value creation initiative, GP optimization, so we see opportunities to increase our average selling price and our margin. So without giving any future guidance, but we believe stable and with opportunities to improve for the future.

Got it. And without asking for guidance, I guess, what are -- can you delve into a little bit more some of the moving pieces on the distribution side, around the margin drivers?

I mean, there are always short-term fluctuation. You can go from currency exchange to tariff. Of course, it has been some -- we had some turbulence in the last few months. But these are short-term topics. I mentioned, it already in the commodities, like PPE in general, prices that are now more stable. But in general, we believe that we will see a little bit of price gain going forward. But it's also true that when you have commodities, and we -- you don't have any innovation, prices tend to go down. And we use this as an opportunity to shift customers to our own products that, yes, maybe the price is a little bit lower, but we have much better margins. So you shouldn't only look at the price trend, but also the margin because the shift that we are doing on commodities, to our own brands, may determine a small decline in average selling price, but definitely at a better margin.

On the equipment, similarly, technology, when there is no innovation, technology tend to have a lower average selling price, and we are seeing this on digital technology. While the adoption of this technology become wider and wider, the price -- the average selling price tends to go down.

Okay. And I did want to ask just -- you've talked about 2025 being a foundational year for achieving your long-term goal of high single, low double EPS growth, and you've made progress on some of the restructuring initiatives, and I guess, when you think about your ability to achieve that EPS growth goal, how important is a normalization in the dental market? I know you've said it's stable, but it is subdued versus kind of growth we've seen in the past. So do you think you can achieve that target just on restructuring and value creation initiatives alone? Or do we need some normalization and dental market growth?

So I think, Michael, I mean, a, yes, so we'll be planning to provide 2026 guidance on our fourth quarter conference call in February. Yes, the markets are maybe a little bit lower at the moment, the dental market, than is the long-term sort of trends in that market. But we are gaining market share. As you saw in our Q3 results, we had strong momentum in most of our businesses, which we expect to continue. So that's a positive for us.

To the extent that market growth is a little bit lower, we announced a $200 million net benefit through value creation projects. So that should help fill the gap. And offsetting that to some extent next year, we haven't -- we're still doing the work, yes, but we had a remeasurement gain in the third quarter. We're assessing whether there will be a remeasurement gain next year as well. So again, when we issue our guidance, we'll make it clear what the assumptions are around that. But so overall markets continuing the way they are, steady, but airing to positive. And what's most important for us is us gaining market share within those markets across our portfolio.

But high level, as Graham, Andrea spoke now, the distribution business, it's stable to somewhat leaning positive. We continue to gain market share. We'll move more and more to our own brands, and that will drive up operating income. The software businesses are doing extremely well. The value-added services businesses are doing well. That's going to be a big contributor to profits going forward. And then our own brands in the implants, bone regeneration, endo area, plus our OEM products are all growing nicely with high profits.

I did want to dig into some of the specialty products, and I guess, we could start with implants. You did have a nice quarter there. And I think you've talked about being the #1 share player in Germany. So I guess, how do you think about where the implant portfolio sits today and you're right to gain share in that market?

Yes. So we have 2 levels of implants. Firstly, the premium section, which is the Camlog, BioHorizons lines, very active in Germany and in the U.S., Japan. We're not really in China, so the volatility of China, which is today, a very rapidly growing implant market that's -- we're there, but very small. So on the -- and then, we have the lower end of the pricing. All of these are good implants.

We did not have the lower-priced implants available in the U.S. We acquired a company by the name of S.I.N. about 18 months ago, 15 months ago. And now that product offering is available in the U.S. We were in a significant disadvantage working with DSOs, in particular. They were looking for a low-priced product. Our major competitors all had low-priced products. And so now, we have the complete line in the U.S. and can go into our DSO customers that are doing implants, providing implant services and offer them the high end and then the low-priced product. They're all good, by the way. And so that's been key.

And in the lower-priced implants, we've not only made the investment in Brazil, but also in France, we're also #1 today. And so we have a complete offering, the premium, the lower price, and that provides real growth opportunity. Also, we rounded out our line in the U.S. on the implant side, and now, can provide a very competitive offering on the premium side to service all needs of implant dentists in the United States. The implant business has a great sales organization, great education, but also leans on the Henry Schein's sales force that has a relationship with dentists, especially those that want to think about doing oral surgery in their practice.

That is helpful. It sounds like from a product portfolio standpoint, you are where you need to be to compete effectively. Are there any particular geographic markets where you feel like you're better positioned for share gain versus not? .

I think we're well positioned throughout the world. There's really no geographic gap per se, other than in the developing world. I mean, we're not really in India in any way. We are very small business in China. But in the developed countries, I think we are well positioned. Are there geographies? It's always. I mean, like in the U.S., we invested in a Midwest distributor 2.5 years ago. Our market share was not as good, but they're all fill-in opportunities throughout. Having said that, I think we can gain the market share we need in all these markets through advancing our sales force organically.

You also talked about the software business. I do want to touch on that. But I do want to ask first, the global e-commerce platform, you've started to roll that out in select markets in Europe. Maybe you can talk about how that initial rollout has progressed in your key learnings? And what we should be looking for, for kind of rollout beyond that?

Sure. The new henryschein.com is a state-of-the-art e-commerce platform, maybe a little bit more than an e-commerce platform because it's what we use to deliver content also to our customer and generate in general, a better customer experience when the customer interact with Henry Schein online.

As you correctly said, we rolled it out in U.K. and Ireland, beginning of this year. This is a global project, but we wanted to start in a smaller market than U.S. to have a controlled first launch. And we are now 10 months into the rollout in U.K. and Ireland, and it started to really show great potential.

We see improvement on -- both on the revenue side because we are able to generate better revenue, more revenue, but also on the efficiency side because you deal with the customer online, generate a good customer experience, provide all the information the customer needs to do the right choice. So we see more efficiency in our internal processes, including lower return on products. That is, of course, a source of efficiency for us.

So yes, we are very positive on the results we are seeing. We started the rollout in the summer in U.S. and Canada. We are doing it intentionally slow because we want to make sure we have enough resources to support our customer during the rollout. Every time you change something for the customer, it's somehow traumatic. You need to help them to understand the new platform. But as soon as they learn how to use it, they are very happy. So the feedback we get is positive.

Got it. I mean, are there opportunities to -- as those customers are interacting online, incorporate like recommendations for additional products, are you seeing benefits from increased sales that way?

Absolutely. You are touching a very good point because one of the more sophisticated tool that we have available with this platform is the ability -- I mean, as a consumer, you are all used to get -- when you buy something to get the suggestion or customers that buy this also buy those or you may want to consider this as an alternative. These are tools that will help us in the dialogue with our customer, but digitally. So it's very helpful.

And you talked about efficiency from a Schein standpoint as well. Is this something that over time could be pretty meaningful in terms of a margin driver?

It definitely help margin twofold. One is when you interact with an online commerce, you don't ask for a discount. When you have a field partner that you know since 20 years, it's easier to ask for an additional discount. This can help. But it's also what we were saying before, the ability to suggest alternative products and maybe replacing or suggesting the customer to buy another product that has better quality, maybe a better margin profile for us. So yes, it will impact margin.

Okay. Great. And I did want to ask about Global Technology. I think you saw some nice growth acceleration there, 9% in 3Q. I guess, what are the drivers of the acceleration? And how should we be thinking about what a sustainable or normalized growth rate is for that business?

I love our technology business because it's -- first of all, it's part of our high growth, high margin profile businesses that we are building more and more. But we also deliver a lot of solutions for our customers. So these are stickier solutions, are solutions that create loyalty because help the practitioner to run a more efficient practice. So we have a core part of the business that is our practice management software. This is growing very well. We are shifting from on-prem to cloud, so more SaaS kind of a business.

In the last quarter, we grew very fast on practice management software sales in general, and of course, driven mainly by cloud. But we are also growing on value-added solutions around the practice manager, so we can call it additional app that you put on your platform. And these are really creating value, both for the customer and for us. Just to mention some, Detect AI that help making the diagnosis better when you get an image. It's immediately. When you get an image with a sensor or with a camera, immediately you have AI telling suggesting some of the findings.

Forms, we recently launched Forms to digitally do all the process of taking patient information. We have revenue cycle management solutions, including eligibility prod, means having the possibility chairside to inform the patient about what is covered and what is not covered on the treatment plan. We have Reserve with Google, that is a service that allow practitioners to find customers and customer to book online through Google the dental appointment.

And we announced recently an interesting partnership with AWS, the Amazon Web Services, to leverage their agentic AI capabilities. They have a very powerful engine on agentic AI that we want to integrate in our practice management software to deliver solutions to our customers, voice solution, like transcribe the dialogue between the practitioner and the patient to create immediately notes, but also a treatment plan and so on. I mean, there are a lot of opportunities, so sustainable opportunity to grow this business high single digits.

Great. And I think with that, we are basically out of time. But, Stan, I wanted to let you close with any kind of comments you'd like, what's underappreciated about the business.

I think everyone -- thank you all. Thanks for being here. Thanks for all the years of interviewing. It's been great. I will say only one thing, the business is very stable. The dental markets are stable. The business has huge opportunity to grow on the distribution side, the value-added side, adding margin. And our BOLD+1 plan, which you can see on the website, is working extremely well. So I'm very optimistic about the business, which has a great management team, and the morale is great.

Great. Well, with that, thank you, everybody, for joining. And gentlemen, thanks for participating today.

Thank you, Michael.

Thank you.

I'm happy to introduce the team from Henry Schein. We have Ron South, CFO; Andrea Albertini, CEO of Global Distribution and Technology; and Tom Popeck, CEO of the Henry Schein Products Group. Thanks guys for coming out and good to have you again with us this morning.

I've got a long list of questions, audience, if you've got stuff, throw up your hand. But I want to sort of start off high level and ask about dental trends. And this might be for Andrea or Tom, but coming out of 3Q earnings, we really saw, call it, stronger traction across the international markets relative to the U.S., not only for you guys, but I would say across a handful of different dental companies. And what I'm asking are going after is, has that trend of stronger international versus U.S. Has that remained intact here as we think about kicking off 4Q? Have you seen that reverse? Any signs of change or maybe the U.S. picking up would be helpful to level set and start off there?

Can I start?

The floor is yours.

Thank you, Jon. So Q3, we announced a good quarter both in the U.S. and internationally in dental. The merchandise growth was -- in local currency was similar, but it's true that some international market show a very strong growth. We had strong growth in Canada and Brazil in some European countries, especially South Europe or Australia. We also said during the earnings call that October was on a similar trend, both in U.S. and international. We didn't disclose any further information on Q4, but we have reason to believe that the trend is stable.

When you talk about equipment, this is where international was stronger than U.S. Again, very strong growth in some markets. Germany is one of those, Canada again, Australia again. But we expect to continue growth also in U.S. in Q4. The driver of the growth in this year in U.S. is mainly the digital equipment, but Q4 is also a good quarter in terms of seasonality. So we expect overall to see the entire category growing.

Okay. Helpful. And maybe just to push you a little bit. So to your point, it seems like more of the same so far in the fourth quarter. When we think about international versus the U.S. How about if we think about, call it, the distribution business versus more of the specialty products? And has that changed? And really what I'm trying to drill down on is in the U.S., it seemingly has lagged. But when we think about clear aligners and maybe implants? Are there any signs of life in the specialty business, right, that we're seeing in the U.S. specific to some of those products?

Yes, I could speak to that.

To Tom.

Very similar trend with Andrea, Europe is strong, Brazil is strong. And in the U.S., it's better on specialty, it's better for sure. And I think that momentum will continue.

Okay. And it's just a factor of what they're -- just the consumer getting a little bit on better footing, little bit more confidence? Is it some of the rates coming down?

I think that in general, the market is stable. It's not. We're taking some market share with some new products that we have out in the marketplace. But I think general overall, you're seeing the market just continue at the same momentum it's -- I don't really see any meaningful changes.

And this is a good point also for distribution. In a stable market, we said that in Q3, we gained market share, and we believe we are in a good momentum to continue to capital market share.

Okay. Very helpful. I'm going to bounce around Ronald. I'll jump over to the savings initiative and really coming off the call, this is probably where I got most of the questions around the $200 million of net improvements -- net cost improvements over the next few years. How do we think about those savings? And I guess a couple of questions, does it call something upfront in order to get the $200 million net? And then the other question that I'll bolt on is the cadence of the pacing, is it linear? Is it back-end weighted? Any color there?

Thanks, Jon. I think there would definitely be some costs we incur. I mean is it linear? Is it consistent with the pace of the cost savings? Unfortunately, the answer to that is it depends. One of the things we're looking at now is we've identified a lot of what we believe are value creation projects coming out of these initiatives and it's a matter of phasing them in a thoughtful way now that if we try to do them all on day one, where we're not going to get them all done. We have to phase them out because just for resources, if anything else, and so we'll take that into consideration when looking at our '26 guidance when we provide '26 guidance in February.

But I do expect some net benefit in '26 from these, I would expect that we would be able to grow on that benefit as we go beyond 2026. But that's part of the -- we've completed the assessment phase, and that's really the phasing that we're starting to go through right now and the planning we're going through right now to assure that we can execute on this in an optimal way.

Okay. So when I hear that in my words, not yours, it seems like it's got to be a little bit back-end weighted, right? I mean, if you're saying you're going to see something in year one and it's $200 million over the next few years, it would just seem as a byproduct of that one?

Yes, we will get benefit -- we will definitely get benefit in year one, but we should be able to grow on that as we go.

Okay. And they want me to ask some tough questions, so I'll preface the next one with respectfully in front of it. What was KKR able to go in there and find where if you do the math on $200 million over the next few years, and I'll make it linear, $60 million, $70 million a year on a $13 billion top line, it's like 50 bps of OM expansion per annum, and you guys have had a hard time expanding OMs but were they able to uncover that Henry Schein wasn't able to really identify and pinpoint on their own?

I would argue that these were areas that we had identified, but it was really working with KKR, specifically with Capstone, sharing with them what we saw as the possible and then working with them to identify a couple of different consulting firms that really -- we kind of split the consulting firms up between one working on gross profit optimization, the other one on G&A optimization. And I would say the fundamental thing and the thing that we -- I don't want to say was counterculture to us. But historically, we have looked at the business as now you have two guys up here who all -- everything in the business rolls up between the two of them, right? Historically, it was broader than that. And it was, you have a piece of business, you go drive to this goal, you have a piece of business, you go drive to this goal. If everybody executes on that, we get really good growth.

What we haven't done -- and a lot of our restructuring was within your business, what restructuring can you do. What we're doing now is we're looking more, I would say, across the businesses. What assets what infrastructure can we share across these businesses that historically, that was not our approach to running the business. That's something that's always been -- we've had out there, and we needed someone to kind of help us pull the trigger on that. And I think working with KKR, working with some of the specific consultants that we have spent a lot of time with over the last three to four months, we've now gotten to the point where we feel confident we can execute on these things and deliver the savings that we talked about in the call a couple of weeks ago.

That was great color. Maybe one more, Ron, to tack on and then I'll pivot and go to implants and specialty. But just you might answer this in your comments. It seems like it's going to be both a COGS and OpEx thing, right? I mean some procurement in COGS, I'm guessing a little bit more heavily weighted to OpEx just as we try to think through $200 million?

Yes. We haven't really specified but we're really focused on the aggregate amount. But you're right, within COGS, there's a number of initiatives ranging from how do we drive a more dynamic pricing environment. And that doesn't necessarily mean price increases, that means perhaps even price decreases that can drive even greater volumes for us. It also means how do we drive brent more business towards owned brands, private label that don't necessarily grow revenues but we could grow gross profits for us. And then how do we work smarter with our suppliers. So it's a greater win-win for us, but we still drive a better gross margin percentage there. And then to your point, too, there's also some G&A savings, some significant G&A savings that we think we can drive. But there is -- we haven't given the numbers around those two separately. We're really focusing on the aggregate amount because in some cases, there's a bit of an overlap on that as well.

Understood. Let me pivot and then I'll come back to some P&L stuff. But over to implants, you guys had really good results in the quarter, mid-single-digit growth. Value was up low double digits. Premium was up low single digits. I think we all want to ask, "Hey, when does premium come back?" But is there a structural thing in the background here where GPs are doing more implants. They're doing like single tooth implants, simpler procedures. They have a greater propensity to maybe use a value. But it's not a bad thing, right? I mean it's aiding market growth. But just to level set for everyone, is this more structural in nature, and we should see that divergence between value and premium maybe persists for coming quarters and years.

Yes. So there's no doubt the value segments growing faster. And we've made some meaningful investments in the value segment over the last couple of years with acquisition, Biotech in France and our S.I.N. business in Brazil. I see those trends continuing, value is good for those GPs that are looking to save some money, but also for the DSOs, they're shopping price and looking for the best value. And I think it's a trend that's going to stay.

Okay. Tapered Pro Conical, I think you guys gave some specific numbers around it, 1/3 of U.S. implant revenue if I've got that correct. Where can that go over time? Where do we start to see some resistance? Is that half? Is it 2/3?

Yes. Keep in mind that prior to Tapered Pro Conical, we didn't have an implant in the U.S. that played in that market, and that market is 50% of the market. So we're 1/3. A lot of that was just the turn of customers from our older design to the new design. There is no reason that over time, that shouldn't be 50% of our revenue.

Okay. So ongoing tailwind there. One more for me. Do you guys get a different Tapered Pro Conical approved in the S.I.N. division earlier this week. I mean we're trying to track what we can through the FDA. Sometimes it's a little noisy, but did that come through earlier this week? And if so, maybe talk to how this is additive to the portfolio.

Yes, we did. The new product line called Versalis and it's out of our S.I.N. business in Brazil. really meant to broaden our portfolio here in the U.S. to make sure we could offer our customer base, all the options they need. We're really excited about it. It's launching Q4 and we really think that the combination of that new product and our current product line really positions us well.

All right. Let me continue to go down this road, and I'll round out specialty. It's not that I don't want to give Endo a lot of time, but Endo is sort of Endo, right? I mean it's resilient. It's not very discretionary. Do we think about that in terms of ongoing mid-single-digit growth. And let me just tack on ortho while I'm there, how do you guys view that business today, right? I think, Ron, your comments maybe nine months ago was we've got to do -- we've got to make some changes. We've got to at least lose less money, how do we think about that business going forward? Is it essential to Schein specialty? And really do we think about you retaining the ortho business?

Yes. So let's talk about Endo first.

Okay. Endo it is.

So we've done well in the Endo market over the last couple of years. We're positioned -- we went from a trailing position a couple of years ago to a solid #2 position in Endo, mid-single-digit growth, as you mentioned. And we've done some unique things, very similar to implants. We have a premium line. We have a value line. we're selling through our distribution team over the last 18 months or so, which has been received very well. So this omni sales channel approach we have, we've taken a product, putting different brands on it, different pricing, different value propositions. Endo is a great example. We see no reason why that shouldn't continue to be low, mid-single-digit growth going forward.

On Ortho, Clarify orthodontics because we also have an orthopedic. But in orthodontics that's a much smaller part of our business. And that business has now stabilized from where we were before. And there's really two parts of it. There's the core bracket business, which is a good business, profitable business. And then the aligner business. And the aligner business is tough unless you have some real scale. You see that with many of the many of the players that talk about aligners, I don't see orthodontics as really being the major driver of our focus. I think that implants endodontics, orthopedics is probably our focus.

Okay. Very good color. Let me pivot, I'm going to touch on the global e-commerce platform. And then Ron, I want to go back to some numbers. But help us out with the e-commerce platform. I think you rolled it out in the U.K. and Ireland, it's undergoing sort of a phase launch in North America. Just any more details you can provide on this initiative? And help us with the results to date that you've seen.

Sure. So you are correct, Jon, we started the rollout in U.K. and Ireland. And obviously, because it is a more controlled market to launch a new platform, but the goal is to have a global platform. The reason why we are launching a completely new e-commerce environment is to create a better customer experience, and it's not only to capture the independent shoppers with e-commerce like features, but it's also in the normal interaction with our loyal customers. Driving content, driving better tools for them to place orders and to find products in our portfolio. So it's a better customer experience, and it's not only dedicated to pure e-commerce kind of, yes, customers.

The results, U.K. went live at the beginning of the year. So it's the only market where we have a few months of stability and data and learning both on the customer side, but also from our team because this is a new tool, very advanced. And the results are very encouraging. We see -- first of all, we did a survey on customer experience, on customer satisfaction, and it went very well. But also, we look at KPIs, of course, that help us to understand how much customers are spending time on this, how do they find products, what is the average size of the order, the GP. So the results are very encouraging. We are running it out now in U.S. and Canada with a staged approach to make sure that we have the resources to take care of our customers when they transition. And we will continue steadily across the next few months in U.S. and Canada and then go to Europe, the rest of Europe next year.

What does this mean for numbers? And Ron, I don't know if this goes back to you. But if dollars were to shift to the global e-commerce platform, I guess there's something like an incremental argument there, right? You said just buying behavior and some shoppers. So maybe they weren't Schein and now they are. But if someone were to take a portion of their Henry Schein business and bring it over to the e-commerce platform, what does that mean for you guys in terms of margins? Is it retaining that business but a slightly lower margin? I'm just trying to think through that from a P&L perspective.

So I don't believe we ever gave numbers related to this, but think about the platform, as I said, as a tool to capture new sales because it's more sophisticated. And this is one goal. But it's also a tool to deal with our normal customers, give them a better customer experience, have more opportunities to drive incremental sales with tools like suggested product or customer that normally buy this also buy that. Or you may want to consider this alternative that allow us to push product that we believe in the segment in the category are more profitable. So it can be a good tool to increase the size of the basket but also the profitability of the basket. Plus it's more efficient because you have the workflow of the order that is digital. So less people that touch the order, less errors and more efficiency.

So if you're giving back something in price, you might be able to make it back a little bit in other areas in terms of when we get to like a net margin of it?

Yes. And also the margin is not worst online. It's not.

It's not edited...

it's not. There are areas where we may want to promote, but there are areas where we are able to do more margins.

And do you have a rough -- when you look out a number of years, is this 5% of the business? Is it 40% of the business? Just any thoughts on how this ramps in coming years?

We are -- with the legacy product, with today e-commerce platform, we are already at a very high percentage in U.S. so electronically, we get -- I don't want to give a percentage without checking the numbers, but very high percentage of all that are already coming in electronically so it's just an improvement on...

It's just an improvement in next gen or in iteration. Okay. Ron, I'm going to pivot and I'm going to go to implied 4Q '25, and I know you love it when I'm up here and I start doing implied numbers, which is so much fun. But the math for 4Q '25 revenue, it really is interesting. You look at the midpoint of the new revenue guidance, which you increased on the call. And I land at 4Q '25 revenue implied at around 5.5% to 6% year-over-year, you can always cut me off if I'm off there. But that shows ongoing momentum. I think clearly, we saw the business gain traction 2Q to 3Q, but this would again imply a further improvement into 4Q. What's behind that? Earlier these guys referred to ongoing share gains. Let me pause there, and then I'll tack on one more question there.

I think it's truly a reflection of the momentum we saw in the third quarter. When you look at the third quarter, just as reported consolidated revenue versus the second quarter revenue was $100 million higher. So we have a good sequential growth as we go from Q2 into Q3, and we believe we can continue to grow into Q4. And this momentum we're seeing some recovery, some good recovery we had in dental merchandise, both in the U.S. as well as outside the U.S. Q4 is typically a heavy quarter for us. On the equipment side, we think we can continue with that. We're comfortable with what we're seeing in terms of the backlog on standard equipment and what we can monetize in the fourth quarter there.

Technology has had -- Henry Schein one has had a series of very good growing quarters for us, and we think that continues as well. So when we modified the revenue guidance for the full year, we took all that into consideration in terms of how we thought we could get to that number by the end of the year. So I think it's really the momentum that we see going from Q2 into Q3 and continuing into Q4.

The tack-on question would be the momentum to your point, 2Q to 3Q to 4Q is that mid-single-digit figures sort of the right jump-off trajectory to think about as we go into 2026.

Well, I mean, we'll have to take that in consideration when we do our '26 guidance, right? We'll provide 2026 guidance at the end of February. That will clearly be something that will influence that guidance. What kind of momentum are we seeing through Q4, not just in Q4 in aggregate, but like during the quarter, what kind of increases are we seeing month-to-month as well? And does that translate to ongoing perhaps accelerated growth in 2026. So that will be a key factor when determining our '26 guidance.

Okay. Helpful and again, guys, if you have any questions, throw up your hand. You mentioned, Ron, in answering that last question, the momentum in technology, really good segue. That's my next topic. Maybe talk to some of the tailwinds in the business, the internal growth accelerated the past two quarters to high single digits. What's been the driver behind that and the sustainability of that high single-digit growth profile?

It's really in the core practice management systems. We're seeing some revenue growth in both -- especially on the -- in the cloud-based systems, both in the U.S., which is the Dentrix Ascend product and outside the U.S. in Dentally. And I think that as we continue to see transition in some cases, existing customers who are transitioning from the on-prem system to a cloud-based system, but also just ongoing new customers who are signing up to that cloud-based system is driving a lot of that growth. We're seeing double-digit growth in practice management systems, driving that high single-digit growth, for example, the 9% growth you saw in the third quarter.

So there are other modules not growing as quickly, but the core practice management systems are what's driving that growth. And we think that in spite of the fact that it gets tougher when you have -- in the U.S., we have greater than a 50% market share in practice management systems. So a lot of this comes down to how do you increase share of wallet? How do you add components to your standard system that customers like and allow you to increase that price going forward as well. So how do you increase that share of wallet while also driving efficiency in your customers' practices is really the key approach to making sure that we can continue with that revenue growth.

And I feel like for a little while in this division, you were trying to prune and clean up maybe the margin profile a little bit. Now you got the revenue growth at your back. So do we think about sort of two tailwinds here. Revenue growth is performing better and also the accompanying margin profile is favorable?

Yes. Do you want to take that Andrea?

I'd like to add something on what Ron said before because the strategy is around growing our core practice management business, especially the cloud version. And we are -- as Ron said, we are growing double digit since a couple of quarters. But also to start to add subscription-based solution around an integrated in the practice management system. And we announced many solutions this year or -- yes, early this year, Reserve with Google, Detect AI, more recently, revenue cycle management solutions. These are all solutions that help our customers to improve efficiency, but also running in general, better practice and are profitable because they are subscription-based solutions. We announced last week an agreement with Amazon Web Services for generative AI. And this is a unique partnership that will allow us to release in the next few months new solution in this direction, like voice script like the period chart enhanced by AI, these are all solutions that will increase the penetration of our ecosystem around the practice management software into the practice.

These are incremental opportunities...

Yes. I mean it will be part of this sustained growth in the high single-digit plus that Henry Schein One is having. And efficiency, yes, we drove efficiency that made the bottom line growing faster than top line, but we are also investing in continuous development.

Fair enough. Let me do the long-term EPS growth and then hopefully round out the discussion with medical. But I think there was a prevailing thought in the earnings call, it -- look, you got this $200 million over three years, hey, if nothing else, and I do the math on the $200 million, you've got to land at a high single-digit plus earnings per annum. And I think that math does hold, but when I normalize, Ron, for the remeasurement gain this year and last, the figures you provided, your year-to-date EBIT is basically flat year-over-year and you've got the benefits of, call it, the Schein restructuring. That's been ongoing. So help us out, like can you grow EBIT from core ops and if so, what's the rate of revenue growth needed because it does look like in your guidance, you do have EBIT growth coming back in, in 4Q '25 versus 4Q '24.

Yes, a lot of moving parts. Let me digest that a little. But what I will say and just repeating back something that we said in the prepared remarks last week was that we believe that the benefits that we can derive from the value creation initiatives will get us back to our long-term goal of high single digit, low double-digit EPS growth, right? When you look at our markets, they have been relatively flat. We've been talking about that throughout the day today with some investors. But we feel like to get -- so we feel like to get to our growth goals, we have to take a lot of initiatives internally, things that are company specific to get there. But we think we're taking -- we're making those moves to get there.

So as we get to '26, and you mentioned the remeasurement gain, when we look at the '26 guidance, we'll take into consideration that revenue momentum that we were just talking about earlier. We'll take into consideration what our best estimates are in terms of the net benefit we can get from value creation in 2026. We'll call out whatever our assumption is around remeasurement gains. And to the extent that, that remeasurement gain differs from what we recorded in 2025. We'll make sure that we normalize for that and provide some kind of pro forma growth number associated with it.

So those are all areas that we can take a hard look at going forward. But you're right. I mean the revenue growth will be driven by the ongoing momentum we see, what's our assumption around market growth in '26. Right now, it's a relatively low assumption on market growth. There are pockets of good growth out there. We've talked about European implant growth. We've talked about some other areas where we know we're taking market share, but perhaps those markets are growing slightly better as an example. But those are all areas we'll be taking into consideration.

And one more, Ron, just the year-to-date flat EBIT normalized for remeasurement but growth coming back in EBIT 4Q '25 versus 4Q '24. I know we don't have numbers in front of us, but what's driving that? What's behind it? Is it the better revenue environment? Is it...

Yes. I mean you look at -- just using the third quarter as an example, strip out the remeasurement gains from '25 and from '24. Non-GAAP operating income grew about 4.5% versus the prior year. And that -- I think we're starting to see some of the benefits from the restructuring we've done. We're seeing some margin improvements, our margin stabilization, I'd say are on the gross margin side, but we're seeing some of that operating margin improvement start to come back a little bit. So that's really the key drivers. So how do we leverage the infrastructure that much better going forward to drive greater operating margin expansion.

That's a great point. I guess -- that's a great point. Like I was giving you flat nine months, but to your point, if we actually isolate the first six months, it would be down, it would be up 4.5% in 3Q and then you have more of that continuation in the 4Q.

That's the run rate kind of going forward, right now, we hope, right.

I always -- I never allow enough time for medical, but let me hit on it. You're selling stable products like point-of-care diagnostic tests and injectables in the physician office and vaccines like flu, it did have some turbulence coming out of COVID. And now it seems like it's stabilizing. I don't want to overthink this segment. Is that the right way to approach it? And maybe we're back to that more stable underlying mid-single-digit trend specific to medical?

Yes, I believe so. I mean we have a 4.7% growth in Q3. So we are in the range that you mentioned the mid-single-digit range. We see more stability still on the -- of course, we have these flu-related products seasonality that in Q3 was a little bit of headwind because of point of test and flu vaccine. But we have also very good momentum in a segment like OM solution that is growing very fast and pharma that in Q3 was strong. But to your point, yes, we see more stability, and we believe this is in the range that we said in the past that was mid-single digit plus.

And anything changing in the competitive landscape within Medical?

I mean there are a lot of announcements from our competitors, but -- I mean, we benefit from a trend. And the trend is the acute setting procedure are shifting more to alternative care and non-acute setting, and this is where we play. So in our space, we see stability. We see a tailwind. Again, home solution is really a high-growth business that we are -- we continue to invest in. So far, not a big change, but let's see what the future brings.

Last one for me, guys, and I'll make sure the audience is okay. But Well, let me go to capital allocation and M&A. On the cost savings, you talked a little bit about it being a function of streamlining past deals, better integration, leveraging back-office functionality. As you go through that process, does that mean like M&A might pause for a little bit? You were very active a year and change ago as you want to clean that up, and you can still go after share repo, et cetera, or can you still be acquisitive throughout that process?

No, I believe we can still be acquisitive. I mean it has to be consistent with the strategy. I think that -- but we're still going to be opportunistic. If we see an acquisition opportunity that can provide us -- I've always said, I want acquisitions to make the rest of the company better. And if it's something that drives strategy, whether it makes us even better integrated vertically or it gives us a meaningful expansion in a specific product category that can drive more revenue growth, then that's an area that we will still be interested in doing. But I think we have to be mindful that as we go through the process, we're going to go through in the next couple of years, that we also do it in a way that makes us even more efficient integrating some of these acquisitions more so than what we've done historically.

Okay. Fair enough. Gentlemen, thank you very much for your time. Great to see you.

Thank you, Jon.

Thank you.

Good morning, ladies and gentlemen, and welcome to Henry Schein's Third Quarter 2025 Earnings Conference Call [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Graham Stanley, Henry Schein's Vice President of Investor Relations and Strategic Financial Project Officer. Please go ahead, Graham.

Thank you, operator, and thanks to each of you for joining us today to discuss Henry Schein's financial results for the 2025 third quarter. With me on today's call are 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 on the company's internal analysis 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, and in our quarterly earnings presentation also posted on our website. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 4, 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&A session, please limit yourself to a single question so that we can accommodate questions from as many of you as possible. And with that, I'd like to turn the call over to Stanley Bergman.

Good morning, everyone. Thank you, Graham. Thank you for joining us. We are pleased with our financial results for the third quarter with sales growth accelerating in each of our reportable segments, including solid market share gains in our distribution businesses as we are once again focused on driving growth. Now that the cyber incident is fully behind us. The strong sales performance was a key driver of the underlying improvement in our operating income, our successful execution of the BOLD+1 strategy, including the financial performance of our investments in high-growth, high-margin businesses also sets the foundation for strong future growth.

With the continued input from KKR, we have made good progress on advancing the value creation initiatives we announced last year -- last quarter actually. Based on our first phase of work, we believe we have the opportunity to deliver over $200 million of improvements to operating income over the next few years. We have begun executing on these multiyear projects with key areas of focus that include centralization of support services, indirect procurement, automating and simplifying processes and accelerating sales of corporate brand products. These initiatives support a return to our long-term goal of high single-digit low double-digit earnings growth. In addition, our Board has approved an amendment to the strategic partnership agreement, giving KKR the right to increase its stock ownership up to 19.9% through the purchases in the open market.

Next, let me touch on a few key highlights from the quarter that advance our BOLD+1 strategy. We remain on track to achieve our goal of over 50% of non-GAAP operating income coming from high-growth, high-margin businesses by the end of 2027, which is the current [prestigic] planning cycle. And that's -- in addition, we expect more than 10% coming from our corporate brands. So that's in total, about 60% of our non-GAAP operating income coming from these high-growth, high-margin businesses and corporate brands. While we have continued to strategically invest in our business, we have focused recent capital deployment on accelerating the repurchase of the company's shares. Our Board recently approved a $750 million increase in this program, and our current expectation is to continue to execute buybacks at a similar pace to the past quarter.

Building on the momentum from our successful launch of our new henryschein.com global e-commerce platform in the U.K. and Ireland. We are rolling out a phased launch in North America. We expect to start the European rollout in 2026. Turning now to a review of our business units. I'll start with the global distribution and value-add services group.

Here, we delivered solid sales growth in the third quarter across our global distribution group in both merchandise and equipment sales. In general, patient traffic remains steady throughout the quarter. Notably, sales growth accelerated in the U.S. merchandise area, which reflects strong corporate brand sales growth as well as the positive impact of targeted promotional programs we initiated during the second quarter, resulting in a continued increase in our market share in the United States.

If we turn now to the U.S. dental equipment sales, which increased in the low single digits with digital equipment delivering double-digit growth. We continue to experience a lower average sale price in digital equipment, but this was offset by strong volume growth. Traditional equipment sales declined slightly However, support de novos, we believe this is a result of the timing of installations. We introduced a new online financing program, which we believe contributed to the good growth in the U.S. equipment arena. Our order intake at DS World was good this year, and we expect this to help our equipment results in the fourth quarter. We expect to maintain overall U.S. equipment growth in the fourth quarter.

Turning to the U.S. medical business, sales grew in the mid-single digits for the quarter. The growth reflects strong demand for medical products and for pharmaceuticals and particularly in the dialysis business, along with continued strong performance in Home Solutions. This was partially offset by lower demand for respiratory diagnostic products and a decline in influenza vaccine sales. Our international merchandise sales stable increasing in the low single digit in constant currencies. We look at the international equipment sales, yes, we had strong growth. Value-added services sales grew modestly with sales growth driven by consulting services, which includes our eAssist revenue cycle management business.

Now let's turn to the Global Specialty Products Group. As a reminder, this group includes implants and biomaterials as well as endodontic orthodontics and orthopedic products. The third quarter sales reflected continued strength in implants and biomaterials as well as endodontics. We were particularly pleased with our implant performance which built on last quarter's solid trends. Sales growth was in the mid-single digits in constant currency, and we believe we continue to gain market share across most implant markets the particular ones where we have our stream. So where we service the market -- where we service the market, we have resources on the ground, we believe we're doing quite well in those implant markets. Sales growth was led by our value segment -- both SIN and biotech dental implant systems performed exceptionally well, each posting double-digit gains.

This was complemented by steady low single-digit growth in our premium brand by Horizons Camlog, demonstrating the strength of our broad portfolio of offerings. In the U.S. implant and biomaterial sales grew in the low single digits against a challenging prior year comparison. This growth, of course, reflects increased traction from our rollout of our BioHorizons Stepin propone implant and ongoing growth we achieved in the smart shape Helabuttons. We expect growth in these products to continue. The [indiscernible] Pro clinical product now represents approximately 1/3 of our U.S. implant sales, and it's important to understand that our customer feedback on this product offering is very, very positive.

International implant sales increased high single digits once again driven by strong double-digit growth across the DACH region and Latin America, reflecting strong patient demand and execution by our regional team, which continues to be very good. Our andontic business delivered mid-single-digit growth for the quarter, benefiting from expanded sales reach through our U.S. distribution team. Orthodontics while still a small component of our specialty products has stabilized, and we remain focused on improving the profitability of the orthodontic business. And finally, our orthopedic specialty business posted solid double-digit sales growth.

So looking ahead, we are encouraged by the momentum across our specialty business. Now on the Global Technology Group side, here, we continue to accelerate our growth during the third quarter. driven by strong growth in the adoption of our core practice management solutions business, particularly our cloud-based platforms, including Centrix Sesen and Penta, as well as strong growth in our revenue cycle management solutions, including eClaims electronic billing and patient messaging. As a result, we are seeing growth in annual recurring SaaS subscription revenues as well as in transactional services. Practice Management software sales growth was again in the high mid-double digits this quarter, driven by a 20% year-over-year increase in the number of cloud-based customers, primarily from new Henry Schein One accounts.

The cloud-based strategy for us is doing very, very well. We now have over 10,500 Dentrix [indiscernible] subscribers. Revenue growth also benefited from recently launched revenue cycle management solutions now being adopted by practitioners as they seek to drive revenue and improve operating efficiencies. There are also some exciting new developments in AI in our technology group. Yesterday, we announced a partnership with Amazon Web Services to integrate its generative AI technology with [indiscernible] and Dentale. Among the benefits are a real-time duction system that uses AI to capture and summarize patient interaction, voice-activated charting, scheduling and communication tools to further personalize the patient experience and predictive business intelligence that automates claims validation and facilitates dynamic pricing tools.

We believe this will be a significant addition to the Henry Schein One uprate. And we expect these will help our customers drive incremental revenue and greater productivity in their practices. Let me now comment on the announcement we made earlier this year that I will be retiring as CEO at the end of the year while continuing to serve as Chairman of the Board. As we discussed on our last conference call, the Board started a formal search process supported by a nationally recognized executive search firm considering internal and external candidates and remains on track to announce my successor by the end of the year. Of course, I remain committed to ensuring a smooth and seamless transition. With that, now let me turn over the call to Ron to review our third quarter financial results and discuss 2025 guidance. Ron, please.

Thank you, Stanley, and good morning, everyone. As usual, today, I will review the financial highlights for the quarter. and would like to remind investors that on our Investor Relations website, we also have included a financial presentation containing additional detailed financial information, including certain reportable segment information. Starting with our third quarter sales results, I will provide details on total sales, total sales growth as well as constant currency sales growth compared with the prior year. .

Global sales were $3.3 billion, with sales growth of 5.2% compared to the third quarter of 2024, reflecting constant currency sales growth of 4.0% and a 1.2% increase resulting from foreign currency exchange. Acquisitions contributed 0.7% sales growth for the quarter. Our GAAP operating margin for the third quarter of 2025 was 4.88%, a decrease of 6 basis points compared to the prior year GAAP operating margin. On a non-GAAP basis, the operating margin for the third quarter was 7.83% and an increase of 19 basis points compared with the prior year non-GAAP operating margin. Operating margin improvement was driven by lower operating expenses as a percentage of sales, partially offset by lower gross margin.

We continue to drive improved operational efficiency by integrating acquisitions, restructuring and executing our new value creation programs. Gross margin was down 56 basis points year-over-year, primarily related to product mix and our global distribution group and in our Global Specialty Products segment, sequentially, gross margins versus the second quarter declined primarily due to the seasonality of flu vaccine sales in our medical business. Of note, gross margin stabilized in the U.S. dental distribution business. Turning to taxes. Our effective tax rate for the third quarter of 2025 on a non-GAAP basis was 22.9%. The lower effective tax rate reflects the nontaxable nature of the remeasurement gain recognized in the quarter. This compares with an effective tax rate of 24.9% for the third quarter of 2024. We expect the effective tax rate to be in the 24% to 25% range in the fourth quarter, which is more in line with recent historical rates.

Third quarter 2025 GAAP net income was $101 million or $0.84 per diluted share. This compares with prior year GAAP net income of $99 million or $0.78 per diluted share. Our third quarter 2025 non-GAAP net income was $167 million or $1.38 per diluted share. This compares with prior year non-GAAP net income of $155 million or $1.22 per diluted share. Foreign currency exchange favorably impacted our third quarter diluted EPS by approximately $0.01 versus the prior year. Our third quarter results include a remeasurement gain resulting from the purchase of a controlling interest of our previously held noncontrolling equity investment. That business has performed well since we made our initial investment. And as a result, we recognized a pretax remeasurement gain of $28 million this quarter.

This compares to a pretax remeasurement gain of $19 million in the third quarter of 2024. The remeasurement gain in the third quarter of 2025 and its related tax treatment contributed approximately $0.23 to EPS, which is approximately $0.08 more than the remeasurement gain recognized in the third quarter of 2024. Adjusted EBITDA for the third quarter of 2025 was $295 million compared with third quarter 2024 adjusted EBITDA of $268 million, representing growth of 10%. Turning to our sales results. The components of sales growth for the third quarter are included in Exhibit A in this morning's earnings release. So I will provide the primary highlights of the main sales drivers in each reporting segment. Starting with our global distribution and value-added services group, whose sales grew by 4.8%.

Within this segment, U.S. dental merchandise sales grew 3.3%, and U.S. dental equipment sales grew 1.2% and with strong growth in digital equipment. We ended the quarter with a good equipment order backlog for fourth quarter sales. U.S. medical distribution sales grew 4.7% despite lower demand for influenza vaccines and respiratory diagnostic products. Our Home Solutions business had another strong quarter, growing over 20% on an as-reported basis and 6% excluding acquisitions. International dental merchandise sales grew 6.0% or 2.5% in constant currency, driven by sales growth in Brazil, Canada, Italy, Spain and Australia.

International dental equipment sales were strong with 10.1% total growth with constant currency growth of 5.7%, driven by sales in Germany, the U.K., Canada and Australia. And finally, global value-added services sales grew 3.3%, driven by consulting services. Turning to the Global Specialty Products Group. Sales grew 5.9% or 3.9% in constant currency. Our implant and biomaterials business experienced solid growth in the third quarter including double-digit growth in value implants and low single-digit growth in premium implants. We achieved modest implant sales growth in a stable U.S. market due to a high prior year comparable, and high single-digit sales growth in Europe, including low double-digit growth in Germany.

We also had strong results in the Global Technology Group with total sales growth of 9.7% and with 9.0% in constant currency. In the U.S., sales growth was driven by practice management software with double-digit growth in Dentrix Ascend as well as solid growth in our revenue cycle management business. Internationally, sales growth was primarily driven by double-digit growth at our Dentale cloud-based practice management solutions products. Turning to our restructuring program. From the restructuring program announced in August of 2024, the company recorded restructuring expenses of $34 million or $0.20 per share during the third quarter of 2025.

We expect to achieve annual run rate savings of more than $100 million from that restructuring program. Additionally, from the value creation initiatives announced last quarter, we believe the opportunity should deliver over $200 million of operating income improvement over the next few years. Therefore, we are extending our restructuring plan, and we will continue to record restructuring charges in 2026 and 2027. We expect these initiatives to support a return to our long-term goal of high single-digit, low double-digit earnings growth. Regarding share repurchases. During the third quarter of 2025, the company repurchased approximately 3.3 million shares of common stock at an average price of $68.62 per share for a total of $229 million.

At the end of the quarter, Henry Schein had $980 million authorized and available for future share repurchases, which includes $750 million that the Board of Directors authorized in September. As Stan mentioned, our expectation is to continue to execute buybacks at a similar pace to this past quarter. Turning to our cash flow. We generated strong operating cash flow of $174 million in the third quarter of 2025. And and continue to expect operating cash flow to exceed net income for the full year. This compares with operating cash flow of $151 million in the third quarter of 2024. Our accounts receivable increased slightly during the quarter, in line with sales growth as third quarter revenues were approximately $100 million higher than the second quarter revenue.

Let me conclude my remarks with a discussion of our updated financial guidance. At this time, we are still not able to provide without unreasonable effort an estimate of restructuring costs associated with the restructuring plan for 2025. Therefore, we are not providing GAAP guidance. We are raising our 2025 financial guidance as follows: we now expect non-GAAP diluted EPS attributable to Henry Schein to be in the range of $4.88 per share to $4.96 per share, reflecting stable markets and good third quarter financial results as well as the remeasurement gain realized in the third quarter. 2025 sales growth is now expected to be 3% to 4% over 2024.

We expect a full year non-GAAP effective tax rate of approximately 24% to 25%, and we are maintaining our 2025 adjusted EBITDA guidance, which is expected to grow in the mid-single digits versus 2024 adjusted EBITDA of $1.1 billion. Our guidance also assumes that foreign currency exchange rates will remain generally consistent with current levels and that the effects of tariffs can be mitigated. Our 2025 guidance is for current continuing operations and acquisitions that have closed. With that, I'll now turn the call back to Stanley.

Thank you, Ron. I'd like to give you -- this is very unusual for our calls -- a bit of a reflection on the past 30 years as a public company. Tomorrow, we will be ringing the opening bell at the NASDAQ Stock Exchange to celebrate our 30th anniversary since our IPO. That's 120 quarterly calls. The growth on the journey from IPO in '95 to today has been quite significant. With sales growth over this period growing at over 11% compounded average growth rate from a market capitalization of $280 million, the value of the company has grown at almost 12% compound average growth rate, including the value of the Animal Health business we spun off in 2019. So this 12% compounded annual average growth rate over this 30 years as a public company.

Like all rapidly growing businesses, there have been some significant ups and downs along the way. When we merged some of the Dental and [indiscernible] back in 1997, skeptics questioned whether we could integrate 3 distinct cultures and turn our business from a [dental mail] holder company to a dental full service operation including a field sales organization, equipment sales and service, while integrating these 3 cultures. That year, we also acquired Dentrix Dental Systems creating what some call a 3-legged share. selling products, services and technology. Shortly thereafter, we had a dental and aesthetic recall issue. When our stock price fell, we chose the difficult path of continuing the journey of creating world's largest full-service dental distribution and dental practice management software businesses.

Within a short period of time, our customers saw the value of our one-stop shop of products and related services. Then came or build expansion into Europe, which was accelerated in 2004 with the acquisition of the Midas recently spun out distribution business of Sirona. This created a global platform which changed the level of discussion within the industry to global new markets, new regulations, new cultures, new common values. When the 2008 financial prices struck, we were forced to make difficult decisions or strength true to our values. We tightened our belt but kept investing in our people and our future. Fast forward to 2020, COVID temporarily closed down the dental market. There were empty offices, disrupted supply chains and uncertainty everywhere. But team Schein adapted and using our world-class supply chain network played a key role of governments and supplying personal protective equipment, mainly as masks as well as COVID [indiscernible] of course, health care professionals, health care practices throughout the world.

When the world reopened, we bounced back. The business was growing well until October '23 when the cyber event hit us for a moment, it felt like everything we built was vulnerable to an invisible threat. But once again, our team rallied, stored our systems and began the recovery. Some customers took a while to return but appreciated our offering in the end. This is now behind us, not forgotten that overcome by this incredible [indiscernible], which is once again focused on driving sales. Each challenge made us sharper, more resilient and more united, which brings us to today's BOLD+1 strategy, which accelerates us into product development, innovation, expanding our digital capabilities, deepening customer partnership and our owned brands.

All of this enables us to provide our customers with solutions to operate a more efficient practice so that our customers can focus on providing better patient care. Our recent results demonstrate the success of the strategy. In addition to the outstanding growth over the past 30 years, I'm particularly satisfied with the work of the company and all team Schein members who have undertaken this incredible journey to make an impact on the profession and the communities we serve around the world. We have become a leader and a model with our work to create and strengthen public private partnerships, whether it's in the profession or in the local markets that we serve or even on a global basis that have expanded access to care around the world.

We have made a difference in enhancing global health preparedness and reinforce the vital link between oral and overall health, including as I said, access to care. This has been a big goal of ours and has driven our brand and driven our sales and related profits. In closing, I have huge confidence in the management team who are talented, motivated, working diligently to execute our strategies, including our value creation programs which we provide further clarity today, and I'm quite very optimistic about where this will go and how this will drive up operating income, and therefore shareholder value. So before we take questions, let me thank all 25,000 Team Schein members around the world, our incredible Board, our suppliers, those investors that have confidence in us. I believe you will be well rewarded in the years to come.

Thank you for supporting us for the past 30 years. I personally wish to thank those on this call that I've known for so many years, many analysts for decades, many investors since the beginning. It's been a true wonderful journey. It's been wonderful getting to know all those constituents that are active in supporting the office space, dental and medical practitioners. So with that in mind, let me turn over the call now to the operator to answer some questions.

Thank you very much. And sorry for [indiscernible] words here, but I just -- 120 calls later I think I should make a couple of extra words Thank you.

[Operator Instructions] Our first question is from the line of Jason Bednar with Piper Sandler.

Good morning, everyone. A nice quarter, and Stan, it's been a pleasure working with you. Congrats on everything. I'll try to stick with the single question request, but I may bend the rule here with a multipart question. I wanted to focus on the comments you're making about future earnings growth. The third quarter performance might suggest you're back to posting better top line growth. It also seems like you're picking up some benefit from the restructuring program that's been ongoing. And then you had the first phase of the value creation targeting $200 million in EBIT benefit.

When you say that you're returning to your long-term goal of high single to low double-digit EPS growth, I guess my question is whether that's a comment that's applicable to 2026, and that $200 million benefit is pretty large. I think it's larger than a lot of us were expecting today. Shouldn't that program alone gets you in that EPS CAGR range before we even think about core revenue growth and capital allocation opportunities?

So Jason, thank you. And I think you're 1 of the 2 analysts that have the longest experience in our space and really know it. So thank you for sticking with Dental. I think Dental will present good rates of return to investors over time. So I think it's a good place to focus from an analyst point of view. But just I'll deal with the sales momentum. I think we're very comfortable now that the cyber incident is behind us. Our salespeople are out aggressively going after business. It's not a matter of anymore of explaining what happened in terms of cyber incident. I think it's quite clear now that many in health care, unfortunately been to this is kind of almost normalized. And I think a lot of our customers have tried alternative options to save a penny here or there, but realize that the service we provide from a supply chain and all the value-added services makes it really worthwhile.

So I'd say the organization, we've got great management throughout in particular as it relates to sales or sales management, the marketing management is great throughout the world. And so the momentum is very good. We're attracting excellent representatives join our sales representatives. So the momentum is there, and I think that's indicative of the fact that we upped our sales guidance. Now Ron, as it relates to the financials, your thoughts.

Yes. Certainly, Jason. With reference to 2026, as you can appreciate, this is a kind of a multiyear plan to deliver the $200 million in operating income improvements, having said that, we do expect some operating improvements in 2026. So as we assess the plan and as we kind of work through the sequence that will be necessary to deliver that $200 million, we'll be able to determine the estimated impact and the estimated benefit that will be in 2026, and we'll reflect that in our 2026 guidance when we provide that in February.

The next question comes from the line of John Block with Stifel.

Stanley certainly echo everyone else's congratulations. A quick 1 for me. Ron, the mid-con '25 EPS guidance came up by $0.05, if I've got that correct, the remeasurement was $0.08 above last year. So maybe if you can talk about what was embedded in the original guidance and clarify that. And then just taking a step back, and maybe this 1 is for you, Stanley, just the quarter -- the third quarter was certainly better relative to 2Q. You mentioned some share gains. But I'm just curious how much of that was market improving versus Henry Schein execution? And maybe any early comments on October?

Okay. I'll start with the guide and Stanley, if you would you can do in the back half. On the guidance John, with the remeasurement gain, there's a range of outcomes that we have to estimate there because until you actually complete the transaction, it's difficult to assess exactly how much will be there. So it was slightly higher perhaps than what we would have expected, but it was within the range of our expectation. So the $0.05 has a little bit of a benefit from that remeasurement gain, but it also reflects, I think, the momentum we feel like we have in sales growth.

I mean, if you look at year-over-year for us and strip out the remeasurement gain, strip out the $28 million in the third quarter on a pretax basis this year, strip out the $19 million on a pretax basis last year. And take a look at our non-GAAP operating income. We did achieve about 4.5% operating income growth. And that's we think that's pointing us in the right direction. And so we're confident with the momentum we're seeing coming out of the third quarter going into the fourth quarter, and that's reflected in the revised guide for this year. Stanley, do you want to take...

Yes. Thank you, Ron. John, and thank you also for following us in the Dental industry for so long. The markets are, I would say, generally stable. Of course, there are some markets that are a little bit better, some of them are not. But generally, the big markets are stable. I think units are pretty constant in the markets, it's most encouraging that this time now, we don't see pricing going down too much. It's pretty stable, I would say. I don't think customers are moving significantly to lower-priced national brands.

There was a movement in that area. Having said that, our own brands have increased -- continue to increase now for the last few quarters. I think there's good momentum there. There is a little bit of tariff inflation may be 100 or so basis points in the United States, but not a lot. We've been able to talk to some manufacturers about absorbing the tariffs, others for some products, we've switched to U.S. manufacturing, perhaps a few items and more than a few markets with the tariffs a little bit less. So generally, the market is stable with a tad of inflation, 100% or so, glove pricing has stabilized. Units are a little bit up now for us.

We are gaining market share there. But generally, I would say, from a Henry Schein point of view, we believe we're gaining market share. And I'm talking about distribution now. And where it becomes a bit clearer, is on the implants and related bone regeneration there. We believe we definitely are growing faster than the market. Maybe there's 1 manufacturer doing a bit better than us in certain markets that we are not focused on. But generally, I would say we are doing quite well in the implant field, where the market is relatively stable. And in the Dontics, relatively stable. We're gaining market share. On the medical side, generally, pharmaceutical side at Henry Schein has done well.

I think it's stable. I don't think as much in the generics to report this quarter, a medical equipment mid search product is relatively stable. There has been a decrease in testing and respiratory products. It's just not been -- people have not been very sick this season. But overall, I think -- the 45% we're growing in medical and the U.S. is indicative of the market with not a significant amount of inflation. And I think we are picking up market share there. And of course, on the software side, it's quite clear we're doing extremely well. And that's driven by our cloud-based system. Systems growth or various value-added products that we've added to electronic medical record system.

And overall, I would say, we're doing generally quite well. listed countries where we're doing a little bit better. And obviously, those are countries where it's largely market share growth because the markets throughout the world are relatively stable.

Next question is from the line of Elizabeth Anderson with Evercore ISI.

Stanley, congrats. It's very excited for you and you've achieved so much in this company over the years. So I appreciate all of your work there. Maybe just going -- as you talked about, I think, during the call some of the stabilization in the gross margin and the distribution business. Ron, I was wondering if you could expand on that a bit and sort of talk through the puts and takes of that and sort of how you see that developing maybe in the fourth quarter and as we think about going forward?

Certainly. So yes, in the U.S., specifically, I was making reference to the U.S. dental side, we did see stabilization of the margins there as glove pricing stabilize. So that definitely helped, and we return to a more normal level of promotional activity in the quarter. So Q3 gross margins in U.S. dental were consistent with what we saw in the second quarter. And I would expect that to continue into the fourth quarter as well as largely driven by continued stabilization in PPE, specifically clubs because that is a very important product category.

Within Medical, we did have a little bit of product mix there as influenza vaccine sales tend to be very strong in the third quarter. relative to the rest of the year, even though they were down year-over-year, and that is a lower margin product. Also, medical saw very good sales growth in their pharmaceutical products in the quarter, and those tend to be a little lower margin than the overall margin in medical. But very pleased with the sales growth we got in medical and believe we can continue to see -- see that continue into the fourth quarter.

Firstly, thank you, Elizabeth for your comment. But Ron, if you could answer, I forgot to answer John's question on October.

Yes, certainly. And with reference to October, we continue to see, I think, the similar trends to what we saw in the third quarter. As we work through October and looked at the results, we've seen a there may have been some forward buying a little bit as people are trying to get out in front of tariffs, but we didn't really see that impact October negatively for us. Medical will be often is driven by the timing of the respiratory season. So we're anticipating some improvement in our diagnostic kit sales in the fourth quarter, depending on the timing of the respiratory season as well.

And on the equipment side, while we had very good in the third quarter, digital equipment revenues, our traditional equipment revenues were relatively flat or down a little bit in the U.S., mostly just due to the timing of some installations, and we're very comfortable with the equipment backlog we saw, we were getting to see some of that benefit in October and kind of running into the fourth quarter as well.

Our next question comes from the line of John Stansell with JPMorgan.

Congratulations standing on all your accomplishments as CEO across the career. Just want to quickly talk about Specialty Products operating profit. I appreciate. It was up significantly year-over-year, but with the $28 million remeasurement gain, it looks like it would be flat, call it, flat to down stripping that out. And I think you've highlighted some solid top line trends that you're seeing across implants. Can you just talk about what you're seeing on the margin side of the Specialty Products Group and what might be driving that?

Certainly, John. I think a couple of things in the year-over-year on the specialty side, yes, you're right. You do have to look at it kind of ex the $28 million remeasurement gain. Last year, we did have a relatively strong quarter on the U.S. implant business that did develop a little bit of a strong -- or a difficult comparable for them. But also what we are seeing in the market is -- we mentioned this in the prepared remarks that the value implant growth was in the low double digits, while premium implants were really kind of growing in the low single digits, and we do get better margins on those premium implants versus the value of plant.

So while it's great to see the growth in value, it does dilute that margin a little bit. And I think that the combination of the of the comp to the prior year and a little bit of a dilution in that gross margin is creating the dynamic that you're referring to there.

Our next question comes from the line of Allen Lutz with Bank of America.

Dan, congrats again on the retirement. I appreciate all the time and insights over the years. A question for Ron. Just a follow-up on that last question around the specialty growth trajectory. As we think about the lower, I guess, gross profit dollar contribution from value implants relative to premium, can you talk about what you need to see in the model for EBIT dollars within that specialty business to go up in 2026. Not looking for guidance on 2026, but how does the model have to behave in order for that part of the business to grow next year?

Well, I mean, I think, Allen, the obvious answer would be greater growth in the premium implants. But I do think that continued growth in value implants can give us gross profit dollar growth ultimately and then recovery -- a slight recovery in the market for premium would also benefit that. Endodontic sales, which is also within that specialty area continue to be steady and should continue to provide some gross profit dollar growth. And I would say that the -- within the orthodontics, we have made some significant operating changes there. And I would expect that to begin being more of a contributor to some growth in 2026 as well, albeit it's still a small part of that segment, but I think it can provide some greater contribution to gross profit growth.

And one other thing. Thanks, Ron. There's a lot of work going on in that group on value creation, consolidating front office procedures, consolidating facilities, consolidating manufacturing. That has all been planned over the last couple of years being executed, and I think we'll see some good results in '26 in particular, also, Ron mentioned the orthodontics. I don't think we're going to invest heavily in marketing of orthodontics, it just doesn't give us the traction that I think we can get by using those dollars and investing in other parts of the specialty area.

So we have some orthodontic products. They sell nicely through the Henry Schein sales force but we're reducing our focus on orthodonitic field sales force. And generally, these various consolidation concepts I mentioned, this should all drive up operating income on the specialty products side.

Our next question is from the line of Jeff Johnson with Baird.

Yes. Stanley, thank you for the walk down memory lane there in your prepared remarks. It's been a heck of a run, and obviously, we all wish you nothing but the best. Ron, was hoping maybe or Stanley, hoping I could maybe ask kind of a phasing question. I know you're not really talking about 2026 at this point. But in that $200 million now in op income cost savings, are you expecting that to be, one, a net number then inclusive of any kind of reinvestments back into the business, number one? And number two, should we split that over the next 3 years, kind of 70-70-70, something in that ballpark. And on top of that phasing question, maybe just the remeasurement gain that $28 million. Can we expect something similar next year? Or should we not have something like that in our model next year just as we think about the year-over-year comparable there.

Jeff, yes, thanks for the question. I think that I'll start with the $200 million as we said, this is a multiyear plan. I don't -- we're not in a position yet to kind of commit to what we expect the phasing of that to be. As you've inferred, it will be phased over a period of time. and we are currently assessing what we believe the 2026 benefits may be from these value creation initiatives as we get started on the as -- and many of them are actually kind of in process now of those initiatives, right? So we'll be able to have a more accurate assessment of what we think the 26% benefit will be, and we'll reflect that within our 2026 guidance.

With reference to a remeasurement gain, what I can say is that they've been a regular part of our business, and they've popped up in the last few years in our results. there's always further opportunities to invest in these types of affiliates, but we're not expecting anything significant in the near future. So to the extent that in 2026 that we believe there's not going to be something significant. We will make sure that, that is clear when we provide that guidance. If we believe that there is something out there we will try to provide some color as to what the magnitude that could be -- but the -- I would expect it to be -- have to be an integral part of our guidance when we provide that.

And then with reference to the $200 million, is it net? I mean as we've said in the press release, this is $200 million of operating income improvement. So yes, it is net. There will be some additional investment that will be necessary that we think we can do with the cash we generate from these value creation initiatives. So there will be some areas that we have to invest in that might create some cost -- but over time, we think that this is a $200 million net opportunity for us to the operating income improvement.

Our next question is from the line of Michael Cherny with Leerink Partners.

Yes, Stan, not a ton more to add there, but I appreciate all the time over the years. Maybe if I could just think about the market a little bit again. You talked about the share gains. Obviously, your biggest competitor has had a change in structure change in management. As you think about the pathway of getting back to your normalized growth rate, what are the assumptions for share gains on the merchandise on the equipment side going forward?

So I don't know if -- we haven't really given guidance on assumptions for '26. So I think -- I mean -- on this Ron has something specific. I don't think that's... .

No. I mean the 1 thing I would add is we've -- we're confident we've been taking some share over a period of time, and we're confident that some of the promotional activity that we deployed earlier this year has assisted in some of the market share gains that we believe we had in the third quarter. And so it's simply a matter of continuing with that type of activity in a thoughtful way such that we can assume some level of market share gain. But at this point in time, if we think it's a relevant assumption when talking about our 2026 guidance, we can provide more color on that.

Thanks, Ron. Having said that, we did give guidance on sales growth for the balance of the year. I think it's implicit in there that we feel strength in the business. Really, when you're in 1 of these cyber incidents, you don't realize how systems were up and running, et cetera. But you don't realize what work has to get done to get the customers back in the door. Because some of those customers tried alternate sources. They've got a better deal, maybe there was a program that was offered. Maybe coke at the end of the aisle was at a lower price.

I think a lot of that is behind us. Our sales organization is highly motivated right now. Dental, medical in the United States abroad that cut their systems back. There's a lot of tools they've gotten that we promised them worked on before the cyber incident that are there that could see that the [indiscernible] the henryschein.comsystem is working in a number of parts of the world. There's huge enthusiasm with that. And generally, we're getting some salespeople that are knocking on our door from our competitors, just not one, but multiple competitors. And generally, and I'm talking about distribution now, the distribution part of Henry Schein has gained momentum. It's back in its stride. We're winning, we're fighting. equipment business is solid. Our consumable business is doing quite well, units, pricing.

We've got a great offering, and generally, the mood amongst our sales organization is great, both in the field, the telesales group, which was largely focused on customer services for at least 1.5 years is back aggressively selling, our e-commerce services. Generally, that group is doing very well. The whole social media group is doing well. And I might add, our relationship with our major suppliers is good. Our suppliers want to work Henry Schein. And then if you put -- you add to that, the L in the leveraging, leveraging relationships amongst our different businesses I think you'll see the programs are working.

We have a great group that is just focused now on our owned brands, products, specialty products that we're selling through distribution. That group is doing very well. The Dental part, the Clinicians Choice part, the bone regeneration part. There just is a lot of good momentum in the business. And it's sort of started getting better a couple of quarters ago. We gave that push of the promotion last quarter. That's now stuck. And generally, I think the momentum is good. And -- that's reflected in the increase in sales guidance that we've given. And I can't see why that kind of momentum wouldn't go into '26 though I don't think we should be talking about specific numbers for '26 on this call.

Our next question is from the line of Kevin Caliendo with UBS.

And Stan, it's been a pleasure to get to know you over these past 20-plus years. I really appreciate everything. My question is around Heartland relationship, how -- where we stand with that? It was sort of a key debate a couple of months ago and drew some worry from investors. I guess just wanted if there's any update on that relationship if it's going to continue at the same level? And I guess to that point, how successful has the company been able to push through the higher costs related to tariffs and if you can maybe give us an update on that? .

Thanks, Kevin. Thanks for the question. Thanks for your good wishes. I don't think we have ever spoken about specific DSO or even IDN relationships. I don't think that's something we should talk about. When we gain account when we lose an account, we never talk about that maybe we did 10 years ago, but we stopped doing that. Our relationships with our DSOs are generally quite good. In fact, I think there are DSOs, specifically the regional ones that are moving over to us. And we definitely have something that others don't have. The supply chain is superb. Supply chain solutions are -- I believe, and I'm sure -- many will tell you the best in the industry, both in terms of dental and medical, value-added services, the combination of software, the DSOs that get the consumables from us, they're software from us. those that also have moved to our implant business.

In fact, we've just gained another decent movement from a DSO into the implant arena. All of this, you put this all together, and we offer a very good offering. And actually, I think the most compelling offering. So I don't think we will talk about any specific customer moving 1 way or the other. As analysts, of course, your job is to try to find out what's going on. But I don't think it's going to come to us, it can't. It's not right. So I'm sure you'll hear through the marketplace about any specific DSOs. But generally, we feel very comfortable with our business. I can't imagine any DSO saying to Henry Schein, you know what? We're not going to test your pricing. We want better pricing [indiscernible] which stands what they do for living and our job to go into the marketplace to get the best pricing we can for our customers. That's our job.

As it relates to the tariffs, Generally, we've been able to find a way in which we can move products locally, we can negotiate with the manufacturer find alternative countries. And there's been some -- lot of an increase. I think 1% or so of inflation here. I would say a lot of that has to do with tariffs. Not much to do with general pricing increases. So generally, it's sticking, and it's not that our customers think we're trying to take advantage of them. The know we're doing the best we can to get the best pricing breast pricing options and moving to private brand, the national brands are insisting on increasing pricing. So I think overall, it's working okay at this point. I think there's been some reduction in tariffs and a couple of important countries. And I think, I mean, it's hard to tell whether it's going to go. But I think, generally, we're doing okay on the tariff side at the moment.

We have time for 1 last question coming from the line of Brandon Vazquez with William Blair.

Thanks for sneaking me in here and Stan. I'll echo everyone's congrats on a great career at Henry Schein. I wanted to ask on the update around KKR and the Board's approval for KKR to take an even bigger stake in the company. Just curious if you could talk a little bit about the impetus of that decision, what kind of conversations are happening there? And should we think about as KKR continues to think bigger and bigger slugs of the equity ownership here potentially.

Does the partnership become a little more -- I don't know the right word for it, but maybe a little more intimate. Are you guys working a little bit closer to the strategies on a go-forward basis for Henry Schein see more meaningful changes as they become a bigger and bigger shareholder of this company.

Thank you, Bran. Thank you. You guys have followed us since the day we went public, in fact took us public. So thank you. As it relates to KKR, we didn't approach them, they came to us. I think they've gained an appreciation of the company. They study the dental space for, I don't know, for a long time. arguably over a decade. They know a lot about the space, the consumables, the providers, the software and value-added service providers.

I think they like our company. So they came to us and they estimate could go up. Our Board had a discussion, our Board sure -- that the Board was fully aware of all the factors involved in taking this number up to 19.9%. And they made a decision. I think decision was based on all of substance, not on any particular promises or anything from Henry Schein to KKR. It was a pure decision they made on the value they see within the company and the future and the potential. KKR's Capstone Group didn't work with us on selecting the 2 consulting firms they use they've been involved in discussions with our management team.

Andrea Albertini and Tom Popeck are running the early creation project. KKR is aware of the project. They've given us some input on best practices that helped us also with some of the indirect spending. They have some good relationships with providers of services that has helped us. So I'd say it's a very good relationship. The 2 members on the board are very active. One is experts in health care. The other 1 understands the dental market very well, expert on various kinds of supply chain methodology, et cetera.

And they've been very helpful. So I would say it's been a good relationship and things have worked out quite well. That's why there has to increase their position in Henry Schein. And our board, as I said, discussed that and make the decision to approve that their requests to go up to 19.9%. So Bran -- so let me just end by saying, I think you've heard to my voice, for my words, I think the company is in very good shape. We have a great team in place that the team is motivated, team winning, management team in each of the areas, our responsibility, the business units, the functions, good management around. And I think the BOLD+1 plan with the addition of the value creation program, which centers around simplicity for a lot of businesses.

We've advanced in a lot of businesses, how do we make the business more simple, how do we take out costs, how do we manage our margins in the best way possible. This is all to supplement to the BOLD+1 initiative or refinement as we're calling it internally. So I think we've got a good plan. We've got a good road map. We've got the team to execute on this. Obviously, there will be some ups and downs as they always are in any business. But I think this team is highly enthusiastic and really to continue to advance the business in accordance with the plans, BOLD+1 and this value creation program that we've added. So with that in mind, I thank everyone for the support over 30 years. It's been a great experience. I've enjoyed him to know the Wall Street analysts the community, the investors.

There have been a lot of great strategic investors over the years. There's been those that have invested short term and [indiscernible] come back. these are all the components of Wall Street have enjoyed understanding how this works. I've learned a lot. The team has learned a lot, and I look forward to seeing people at conferences in the future, although not as Henry Schein CEO, but as a keen follower of what goes on in health care. So thank you all for your interest and appreciate everything. Tomorrow, you can see us on -- I think, on the NASDAQ media for the opening of the stock exchange of the NASDAQ. And I appreciate everything. Thank you. Thank you. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

We have CFO, Ron South; and Head of Investor Relations and Strategic Financial Products Officer, Graham Stanley.

Thank you, Allen.

Thank you both for joining us. Really appreciate it. Ron, would love to get your latest thoughts on the macro environment across your different regions. The U.S. is cutting interest rates. It feels like things are maybe evolving a little bit. But how has the macro environment evolved at all since the beginning of calendar 2025?

Certainly. So I think that -- I'll kind of address first -- within the macro environment in dental, what we're seeing is -- and people can see the same patient traffic data that's out there that we see. I mean patient traffic has remained relatively stable, I think, over the course of the year. Patient traffic is often the best barometer for what you're going to see in terms of merchandise sales and what kind of churn do you get in merchandise. You mentioned the lowering of interest rates in the U.S.

We view that as an important macroeconomic factor in 2 regards. One is kind of in the more short-term micro perspective, it does provide perhaps opportunity for a little more lift in equipment sales. Some of the larger dollar equipment sales are typically financed either through leasing or through some form of financing. So you could see a little bit of a lift in equipment revenues if, in fact, interest rates continue to come down. I think -- and the longer-term kind of macro effect of lowering interest rates could also result in an acceleration of the build-out of new dental practices.

Frequently, it's the DSOs that kind of lead the way with those -- with that new construction. And the DSOs themselves are often owned by private equity. And as those interest rates come down, the hurdle rate in terms of that rate of return -- that required rate of return on that investment for them becomes a little easier to achieve, and you could see an increase in those de novo practices being built. That helps us obviously with the build-out of those practices and the equipment sales that would be associated with it.

But even after that, the DSOs are confident that they can fill those practices with new patients and that churn of new patients going through actually kind of expands the market, gives us greater opportunity in merchandise sales. And I think that's an expansion of market that has been missing -- a meaningful expansion of the market that has been missing over the last couple of years.

I'd also that, I mean, internationally, I say that we are seeing maybe some pickup a little bit internationally, particularly in Mainland Europe. If you remember, 18 to 24 months ago, there was sort of the whole energy price increases that were impacting the overall economies. That's now annualized out. So I think the international business is on a slight tick up in trajectory.

And then, Ron, around your comments around DSOs. If we look at BofA's economists, we're expecting at least one more rate cut in December. As I think about -- or I try to qualify the comments you just made, are you seeing more de novo builds, more DSOs looking to build things out versus maybe 3 months ago or 6 months ago? And is that informing your commentary around the outlook for digital equipment or your thoughts around digital equipment? Or are you just saying illustratively, if interest rates go down, that could be a driver of those things?

I think at this point, it's a little more in terms of what we are forecasting. But I will say we do track what we call -- we have a service that helps our customers redesign their practices typically in a sense that they can add a chair or do something and make a meaningful change to the layout of their practice. That particular service that we are providing has seen double-digit growth year-over-year in every month through July, every month that we had -- where we track this with the one exception being May, which was the month where I think there was probably the greatest uncertainty around what was happening with tariffs, right? We saw a return to that double-digit growth in June. That's also an indicator, I think a similar indicator because that's also typically a cost, a reconstruction cost that perhaps the practice will be financing. And if they're seeing that they think they can get that done at lower financing costs, they're going to do so.

Okay. That's helpful. And then you did some promotional activity in the second quarter. And then on the 2Q call, you talked about some positive trends in July. Can you talk about how things are going relative to your expectations into the second half of the year around that new cohort of customers that you've added? And how is retention of those customers into the back half of the year relative to your expectations?

Certainly. So yes, I mean, what we said on the second quarter call was that the promotional activity that we did in the second quarter, we believe when we look at our July results, was beginning to pay dividends in terms of getting some sales growth in July. These programs are established to -- we identified existing customers or by customers, I mean, at least practices who are buying some merchandise from us, but at very low volumes. And we're looking for opportunities to get greater share of wallet with those customers through this promotional activity.

But we were doing it in a way such that we're getting them to commit to purchasing from us for a period of time, whether it be a 6-month period up to a 12-month period, and they could earn a rebate on the tail end of that if, in fact, they fulfill their commitment. We also have had some success in adding experienced field sales consultants to our sales force. And what you can do is during that commitment period, you can work with these customers to really kind of get them to better understand what are some of these services that Henry Schein can provide them that can help them run more profitable practices.

And I've used this phrase often where you look at the -- these are so-called episodic customers usually. They buy something from us, then they might buy something from one of our competitors and then something from an online discount or they kind of work their way around looking for best price on various merchandise. But it's our job to educate them that we can really help them run a more profitable practice as opposed to simply trying to sell them product at the lowest price. That's not really what our mission is.

And so by having them engage with a field sales consultant, we can begin to understand, okay, what are the areas of your practice that you would like to improve? What are the pain points? And it's not going to necessarily be the fact that they would like to buy certain gloves or cotton balls for a slightly lower price. Their bigger pain points are going to be what's the reimbursement rate they're getting from the insurance carrier? How frequently are they getting paid? What's the rate of their recovery of their receivables? Are they fully staffed with dental technicians and hygienists.

Those are all things we can help them with. And we can get the opportunity to engage with them and get them to understand that these are areas where we can help them run a more profitable practice, we feel like we can make those customers stick. But you need that period of time of that commitment where you can engage with them and you got to have the resources to engage with them, and we feel like we're well positioned to do that right now.

We're not going to hit on 100% of these to stick. We know that. But we think we can be successful with it in a meaningful way that we can get a meaningful increase in market share.

That's very helpful. And I want to double-click on something you mentioned around ramping of new field sales force personnel. Can you talk about the timing of when you started to add new employees there? And then how long does it take to ramp them maybe back to their peak sales? Or just how do you think about how long it takes when you're adding those new hires to get back to the sales they had before?

Well, I think a good point of reference on this is when we hire an experienced sales rep, the expectation is that there's -- they can probably bring -- in the short term, they can bring probably -- and I'm just giving you my personal estimate here, say, 50% to 60% of the business that they have. We do offer these reps a guaranteed minimum commission typically for about the first 12 months that they're with us. And so that's -- our expectation is over that 12-month period, they can get back to a full book of business, whether it be the customers -- previous customers they had or new customers that they're able to engage in the territories they're at.

And then the first part of that question was around like the timing of additions? Or is it just consistent?

It's been relatively consistent over the course. So there wasn't like a period of time where we got a big chunk of reps came in at the same time. It's just that our recruiting efforts have been more successful. There's been disruption in the industry. I think everybody knows that. So there -- it wasn't unusual at all for us to gain experienced reps from competitors, but we also occasionally lose experienced reps to competitors. That was a monthly report that we manage. We could see what the net number was. That's been a little more of a one-way street most recently.

Okay. I want to switch gears and talk about 2026 a little bit. Now you've been at a lot of other competitor conferences, and I feel like every analyst has asked this question in a different way. And so I'll try yet another different way to ask it. 2025, you talked about being this base year, and you hope to grow at least high single-digit EPS against that number in '26 or into the future. For 2026, the Street is at 8%. I'm not asking for guidance, but what does the model need to look like in order to achieve 8% or higher EPS growth? What are the biggest swing factors as we think about the model that would be required to get us to at least 8%?

Yes. There's a number of factors that we have to take into consideration when we establish guidance for '26. And we'll look at a variety of things that are both macro driven as well as what's happening specifically within the company, right? So obviously, the foundation that we start with will be what do we think those market growth rates are. Are we seeing any kind of lift in core dental coming from the lowering of interest rates or we'll have to monitor what's happening with unemployment rates in the U.S. because that's often the best barometer in terms of access to care. Most people are getting their health and dental insurance through their employer. And so we'll monitor what's happening with unemployment rates as well.

But at the end of the day, what are we seeing in terms of both the run rate and market growth in dental, medical, specialty technology. And then what should we be expecting in terms of how that then goes into '26. We'll then also take a look at what do we believe is in the forecast on interest rates and what's going to happen with interest rates and what impact might that have for us that could be beneficial into 2026. So the macro factors, interest rates, unemployment and then those market growth -- and then the things that are specific to Henry Schein, we mentioned the value creation projects in our prepared remarks last month. So how is that assessment -- and we're in that assessment phase right now around gross profit optimization and G&A optimization.

First of all, to what extent are we -- do we have some level of comfort in the estimates that we can get out of that, that we think we can deliver. But what's the timing of that delivery? How much of that will benefit '26? As we said last month, we expect some benefits to begin in 2026 from these projects, but they will continue into '27. So the full number that we expect to achieve will be achieved over a period of time. So how much of that will benefit 2026. So those will be the principal things that we'll have to take into consideration when establishing 2026 guidance.

Okay. That's helpful. And then you just touched on some of the direct cost and SG&A optimization projects. A question on KKR Capstone. At a recent conference, Tom Popeck said that -- and I'm quoting here, there's a lot of opportunity to consolidate back office functions and do some offshoring. And so Ron, as we think about the comments that you and other executives at Henry Schein have made over the past couple of quarters, and you and I have talked about this for a while, but I'm curious, has your thinking about the relative size of the opportunities to cut costs evolved at all over the past couple of quarters? And then related to that, what should we expect to hear on the 3Q call around that project?

Well, I just talked about the last couple of quarters. I want to make it clear that the value creation projects that we're assessing right now are incremental to the restructuring that we announced last year, where we said we could take out $75 million to $100 million of costs. And we've identified the activities we have in place right now, we're confident will get us to an annual run rate of approximately $100 million or more of savings by the end of this year. These value creation projects are incremental to that.

The restructuring we've done historically has been within each business unit. You look at a business unit and you say, okay, we've done some acquisitions in your area. There's some redundant costs, let's rationalize some costs or some things we can do. And we do that in pockets. So it's more of a grassroots effort of restructuring, and it's been effective in terms of reducing costs and Tom made the perfect reference to this.

This value creation project is now making us to kind of step back and say, okay, how can -- as opposed to me addressing you and your business, how can we -- let's all sit at the table, how can we share resources across all these businesses more effectively. And that might be internal, it might be offshoring. There's a number of things that -- we have to explore all those opportunities. It's been an area that a lot of companies have done successfully. And so we don't have to necessarily reinvent the wheel here. We just have to figure out what makes most sense for us in terms of how we can establish some sustainable savings going forward.

Makes sense. And then as far as the third quarter call, what type of incremental commentary, if any, should we expect on the 3Q call? Or is this something that may be at a later date?

I can't promise you right now what we'll say exactly. It will come down to what's our confidence level and what's coming out of this assessment phase. But I think that we'll try to address some range of savings that we think can be achieved in the long term.

Okay. That's great. And then talking about -- there's been a little bit of chatter in the channel about select price increases, the impact of tariffs. I think the ADA survey was saying that certain manufacturers were -- or certain suppliers were raising prices. Can you talk about how widespread that has been? And then are there opportunities to shift customers? Does this give you an opportunity to engage with customers around shifting to private label? We would love to hear how it has done that and kind of what those conversations have been like?

To kind of step back from it a little bit, tariffs affect us in 2 ways. In some cases, we are the importer of record, and that is principally impacting our private label. So there's cases where we have a contract with an OEM who's manufacturing our private label products. We are the importer. We're responsible for the tariff. We have found some ways that we can defer those effects, mitigate those effects somewhat.

But in some cases, it does require us to consider price increases. We can only do those price increases if we think the product remains competitive and what's happening with the branded products and what's happening with the tariff situation with those products, right? So there's kind of a multifaceted dynamic there that you have to manage in order to determine when is it appropriate to increase prices or not. Then there's a situation where our suppliers are the importer of record, they're incurring that additional cost and then they're determining how much of that cost they're going to pass on to us. And in turn, we have to determine how much of that cost we can pass on to our customers.

You put that together and what you were talking about, to what extent, given the breadth of product offerings that we have, can we redirect, if necessary, customers from products that are seeing a significant price increase to one that they might find the pricing to be more attractive. And we'll have that alternative available for them. So that's part of the strategy of this. It's a -- we've always tried to maintain as broad of a portfolio as we can. We really have kind of avoided exclusive arrangements or exclusive type of commitments so that our customers can buy an alternative in fact, that's better for them. And so it's up to us to try to leverage that relationship as well as we can with our customers.

Switching gears to the specialty business. Implants have been relatively robust, especially on the value side. Can you talk about how -- remind us how quickly are you growing your implant business? How fast do you think the market is growing? And then if there's a delta between the 2, can you talk about where you think that incremental share is coming from?

Yes. Implants, you really have to -- there's a couple of different ways of looking at this. I think we're seeing slightly different dynamics in the premium implant market versus the value implant market, and we're seeing slightly different dynamics in the North American market versus the European market. I'm not intentionally -- I am intentionally even not the Asian market because we're a very small player in the Asian market. But I'll start with the U.S., where we're seeing better growth in value implants than we are in premium implants. We've had a pretty good success in selling some of the new value implants that we've been able to add to BioHorizons' portfolio through the SIN Brazil transaction. They had an FDA-approved value implant, and we're selling that in the U.S. now. Our DSO customers who are looking to expand into doing more and more specialty type of procedures, we've been able to work with them to train and certify their GPs so that they can do implant procedures. And if they're going to do that, they're quite happy doing it with a value implant.

They're typically going to do a single implant, relatively straightforward procedure that they can use a value implant. You go up -- and you mentioned market. I think the premium market in the U.S. has been relatively flat. And I think that the -- would you agree, Graham, that the value -- what we're seeing on the value side from a market perspective is probably also growing a little bit.

Yes.

So in Europe, we're seeing, I would say, a slightly steadier growth. And I do think in Europe, we're actually taking some market share there. I think we're seeing Camlog doing well on the premium side and then Medentis, which is a smaller player for us on the value side, also doing well. But I think that in Europe, there's a little less of an out-of-pocket responsibility to the patient versus in the U.S. So it has been a more consistent growth product for us in Europe as opposed to in the U.S. where you can get some volatility coming from any kind of macroeconomic conditions because of the responsibility on the patient for a lot of the out-of-pocket cost there.

I've asked this question a couple of times to you and your peers, and it doesn't seem like there's a lot of good data on it. But a large Medicare Advantage plan was paying for dental implants and now they're no longer paying for them. And that was a relatively material growth driver, I think, for the industry in 2024. Have you seen any impact in 2025? Is that something that you could even observe within the data? Curious if there's anything to call out there.

It's hard to sort of like parse out who's paying for what in terms of the data we have in the overall market data. I'm sure it's having a slight headwind. But as Ron said, the U.S. market is probably flat to slightly down. But one single payer I don't think is going to impact the overall market.

Got it. And then, Ron...

I'm sorry, remember as well with an implant, the insurer is not covering the full cost typically of the implant. So the out-of-pocket spend for an implant in the U.S. -- even if you do have insurance, it's fairly small. The out-of-pocket part is quite significant compared to what's been insured.

Got it. That's helpful. And then Ron, around the DSO growth in implants, you talked about getting more GPs involved in doing implants. Can you talk about, as you think about the addressable market and your DSO customers, how quickly has the addressable market of certified GPs increased? Give me whatever time line, if you have any information or any data on it. Like how big of a driver is that to growth within your value implants?

Well, I mean, I don't have any hard data in terms of market data there, but I do -- when we look at our customer segmentation in terms of who are we selling implants to, and mind you, coming off a relatively low base from a couple of years ago because DSOs weren't buying a lot of implants then, but it's been very good growth. And it's the root of a lot of the growth that we're seeing, specifically in the value implant side. Most oral surgeons out there are likely going to work with a premium implant. They're doing more complex surgery.

And the thing to remember with a value implant versus a premium implant is that it isn't so much that the premium is made with much better material and that's what makes it premium. The premium really comes from assistance with surgical planning, some of the follow-on service that might be necessary that an oral surgeon would want when they're taking on a more complex procedure versus if a GP is going to take on a more straightforward single implant in a healthy patient. They can do that with a value implant because they don't need -- they don't require all of that follow-on service.

If they have a patient that has complicated jaw structure or certain health issues and it's going to be a complex implant procedure, there's a very good chance they're still going to refer that procedure to an oral surgeon, but they're going to take on the more straightforward one. So what we're seeing is that the expansion in the market -- expansion and growth in that market tends to be more disproportionate to the value implant versus the premium.

[indiscernible] just quickly ask one question regarding markets. Obviously [Technical Difficulty] dynamics as [indiscernible] maybe offer physician optimal value [indiscernible] out there. Do you see any targets [indiscernible] that you see right now?

No. I mean I don't want to kind of get into the competitive environment just yet at this point in the quarter. I think we'll get a chance to see how companies come out with their results in the quarter, and we'll get a better feel for what are the trends within the various categories of implants as well as in the geographies.

And then shifting gears a little bit again around gross margins. I think we talked a lot about this on our follow-up call after the quarter. There's a lot of moving pieces on the gross margin side. There's glove pricing, the sales initiatives and then the shift from premium to value implants. And it's a lot easier to see sort of how those things are impacting the business with the new segmentation. Can you talk about the major drivers of gross margin in the second half versus the first half and how we should think about in broad strokes, where that gross margin level is in the back half of the year versus the first half?

Sure. I mean what we mentioned in the prepared remarks is that we were expecting some stabilization in distribution gross margins going forward. That requires some stabilization in glove pricing. We did talk about the -- we have continued to see declines in the market price of gloves, even though the costs have stabilized. But we do expect some gross margin stabilization there. We also won't be doing -- we're returning to a more normal level of promotion activity as we get into the second half of the year. So in terms of our own specific initiatives, that will have less of an impact on gross margin as well. And then you get back to mix. We had a softer quarter, the second quarter, this year than the prior year, for example, some of the value-added services that can be a little lumpier in the revenue base, specifically our practice transitions business, which is very much like a brokerage business and is driven by volume of transactions. And if they had fewer transactions helping sell group practices to DSOs in one quarter versus another, that's going to show up a little bit. And that's a very high-margin type of business. So product mix is also part of the equation.

Going back to the high-level comments at the start of the conversation around interest rates, would lower interest rates potentially be a notable accelerant for the practice transitions business in your view?

Potentially, yes, potentially.

And if there was, is there any way to kind of quantify sort of the revenue of that specific business, the margin and how quickly that could grow if things maybe return to some type of prior time when rates were lower?

I think it's difficult to specifically quantify it. But I think directionally, it would be fair to expect that a meaningful decrease in interest rates could help accelerate some of the sales of practices to larger practices or to DSOs. Because one is assuming that they are financing those transactions.

Right. Okay. And then I want to talk about the medical business for a little bit. One of the biggest questions we get, and it seems to be a very moving target type of topic is vaccine demand, both for COVID vaccine, flu. What are you seeing in the third quarter? What's embedded in the guide? And can you just talk about -- are you noticing the evolving consumer views? Obviously, the administration has their view on vaccines. How is that impacting your business? And what are your expectations that are embedded in the guide for vaccine demand?

So by far, the most important vaccine we sell is flu. We sell -- actually, we don't sell a lot of COVID vaccine. There's not a lot of margin in it. It's actually a relatively difficult product to store properly and ship properly. So there's not a lot of -- we don't sell a lot of COVID vaccine. But flu vaccine, we do. I think we're probably the largest seller of flu vaccine to the physicians than anybody out there. My expectations are we will see a relatively normal demand for flu vaccine, given that we are distributing flu vaccine through physicians, not through retail sites. And physicians are the ones who are providing advice to their patients as to if they need a vaccine or not. And so I think our expectations are we'll see a relatively normal vaccine season. We'll see.

Having said that, there could always be some impact. But early indications that I have heard is that demand will be fairly normal with the physicians. Keeping in mind, while vaccines are an important product category for us, it is now a relatively small part of the business versus, say, 10, 20 years ago when it was a greater percentage of the business, but our medical business has grown so much that it has actually become a product category for us as opposed to what's really driving sales there.

It's also a relatively low-margin product as well, almost COVID and flu margin.

Flu is also lower margin, yes.

Got it. And as we think about just broader utilization trends in the Medical segment, pricing trends. Can you talk about the trajectory of those pieces? What's embedded in the guide and whether or not you're seeing any change in utilization over the course of the year within that segment?

Within Medical itself.

Yes.

I would say no. I mean I think when you break down what are some of the more important product categories in our medical business, vaccines being one, pharmaceuticals being another. And those are pharmaceuticals that are being -- we sell pharmaceuticals that are administered in the physician office, right? They tend to be restricted to injectables. So something you have to go in, you've got some kind of inflammatory issue, and they can deal with it with a type of injectable. The physician is buying that from us and is applying it to their patients in the physician office. So it's pharmaceuticals, it's point-of-care diagnostic kits. So point-of-care diagnostic kits, someone feels ill, they go to a doctor, they're going to get tested for flu. They're going to get tested for COVID. They're going to get tested for strep throat. Those are all diagnostic kits that we sell to the physician.

I'm not expecting a significant change in the utilization of those products outside of the ordinary course of is it a heavy flu season? Is it a lighter flu season? What's happening with respiratory illnesses over the winter? Those are all things that we track in anticipating demand for those products, and I think we'll continue to track it the same way.

I think in the last couple of years, the medical business has been impacted by a couple of sort of like normalization type of situations, whether it be pricing, some shift from branded pharmaceutical products to generic pharmaceutical products, whether it's a strong flu season or a weak flu season. And I think probably Q2 was one of the first quarters we've had in a while where you can see the underlying growth in the business. I think our medical business grew about like 6%, something like that. It also includes -- that also includes a significant home health business, which is now about a $400 million business, and that business is growing at a faster pace than the rest of the business. So the shift from the acute care setting into the alternate care setting is still taking place, albeit quarter-to-quarter, you can get some distortions depending on sort of like what sort of the patient traffic is. But long term, we see this as a very, very good market.

With the last few minutes here, I want to pivot to the technology business. Now at your last Investor Day, you talked about a long-term goal of 8% to 12% growth for the technology business. It's been growing slower than that in the near term. Can you talk about what is required to get that business to grow closer to those growth rates? Is it -- could it be solved with investment with product? Or is it a market thing? From our perspective, it seems like you have this really significant captive audience that you can go after. But what is the disconnect between that growth rate and kind of the recent growth rate that you guys have?

I think an important thing to look at when looking at our technology business is that its core product is the practice management system that we've been selling for years to the dentist now, right? And so the original product, which is still a very popular product is Dentrix, which is an on-prem practice management system. And we've evolved and developed a product called Dentrix Ascend, which is a cloud-based system that is also kind of a back-office management process for the dentist. Those products are both growing easily within that 8% to 12% range that we talked about.

Where we're seeing a bit of a drag on revenue growth comes from some, I'll say, kind of peripheral products around patient experience modules where we've had kind of multiple brands, and we've been looking at consolidating and we are consolidating some of those brands. We also have a product called Dental Plans, which is a product that essentially you can -- if you don't have dental insurance, you can buy into this dental plan and participating dentists will provide you with certain services. We're seeing some kind of stunted growth in some of those areas. So that's kind of bringing down the growth of that segment.

But the core product itself is within that 8% to 12% and in some cases, exceeding that 8% to 12%. So that gives us a great deal of confidence there. One of the things that our Henry Schein One team has done a very good job of in the last 12 months is identifying costs that were supporting some of the products that were not growing as much and pulling back on some of those support costs that has not resulted in significant revenue changes of those products that has increased the profitability of that segment.

So you look at the second quarter results as an example, Henry Schein One had 6.6% growth in revenue, but it had over 30% growth in operating income. So they've learned to run a little leaner with these products that aren't growing as fast and putting a little bit of pressure on that top line, but still delivering very good bottom line growth. I believe that as we complete some of the things that we need to do in order to consolidate some of these other brands and other areas, we'll begin to see the opportunity for the overall growth to get back to those expected growth rates.

That's great. And then we have, I think, 3 minutes left. Here's maybe more of a media question around capital deployment. You recently announced a $750 million share repurchase program. And if we look at just the comments you've made over the past few earnings calls and investor conferences, it seems like there is an opportunity to consolidate maybe some of the acquisitions you've done over the past few years, some of the back office functions, things like technology, things like that. As we think about capital deployment for the next couple of years here, is it reasonable to assume a less of an emphasis on M&A given the focus of cost optimization and maybe more on things like share repurchases? Or is that not the right way to think about how you're approaching capital deployment?

Well, I don't think we've changed our approach at all. But I do think that our M&A approach has typically been opportunistic, right? We've always got dealers out with owner operators where -- in situations where we believe they have a product or service that is complementary to what we do and would make Henry Schein a better company. And we'll continue to do that. We'll continue to be opportunistic. We also see opportunities with the share repurchase in that we believe we have a depressed share price right now. And so we have been a little more aggressive in share repurchases in the first half of this year.

So getting the authorization from the Board for an additional $750 million of share repurchases really gives us that option, right? If we are in a period where we don't see as many M&A opportunities, we have the opportunity to deploy more capital to share repurchases, especially where the shares are trading, we see that as an opportunity. And so that was the discussion with the Board was we wanted to have -- we want to make sure we maintain the option of doing that with capital, and the Board was very supportive of that.

That's great. So I think we're out of time. Ron, Graham, thank you so much for the time, and thank you, everyone, in the audience for joining us today. Thank you.

Thank you.

Thanks for hosting us.