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EVP & CFO Jon Leon acknowledged a diabetes headwind but pointed to strong growth in sleep, ostomy, and urology, expecting a similar profile in the second half. President & CEO Edward A. Pesicka noted the DME-to-pharmacy shift impacts top-line but not necessarily profitability. Leon confirmed that while lower stranded costs were a factor, the core legacy Patient Direct business still achieved mid-single-digit EBITDA growth.

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Executive Edward Pesicka outlined the tariff exposure at $100-$150 million, primarily from China and Thailand, and emphasized that due to low margins, these costs must be passed on. He noted the company is helping customers find alternative products. Executive Jonathan Leon added that while FX was volatile in March, it has since stabilized, and the company is comfortable with its current full-year guidance regarding currency impacts.

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Executive Edward Pesicka explained that any tariff-related cost increases would be passed on to customers due to the P&HS segment's tight margins. Executive Jonathan Leon quantified the exposure, stating that products from Mexican facilities represent only about 1.5% of the P&HS segment's total revenue. Regarding SG&A, Pesicka confirmed the focus is on continued cost optimization without compromising customer service.

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Executive Edward Pesicka noted that the Global Products business benefited from price stabilization in gloves and saw slow but steady growth from new product introductions. CFO Jonathan Leon explained the PHS operating margin decline from Q2 was due to unfavorable foreign exchange rates, increased transportation and storage costs, and the lower initial profitability of newly onboarded customers.

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CFO John Johnson noted that the exchange business, about 20% of revenue, is split between tech/services and Performance Suite. He stated that the business mix trends toward lower margins and that even before demographic shifts, the Performance Suite portion was projected to be slightly below the 10% target margin. He emphasized the focus is on downside protection through contract structures.

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Executive Chairman & CEO Stanley Bergman described the sales initiative as a successful, time-limited effort to win back specific customers with an affinity-like program. Senior VP & CFO Ronald South noted it was difficult to isolate the financial impact from glove pricing pressure. Regarding DSOs, Bergman stated that RFPs are a normal part of business and that Henry Schein maintains strong partnerships due to its comprehensive offering, including supply chain, own brands, equipment service, and software, which helps mitigate tariff impacts collaboratively.

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CEO Stanley Bergman detailed a multi-step strategy to manage tariff costs, including using existing inventory, offering alternate products, managing sourcing, and working with manufacturers, with direct price increases being a final step. CFO Ron South did not quantify the respiratory season's impact but confirmed it contributed to stronger medical sales in February and March and that the business has good momentum.

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CEO Stanley Bergman described KKR as a strong strategic partner but noted deep engagement is pending regulatory clearance, and he doesn't expect synergies with KKR's portfolio companies due to a 'Chinese wall'. CFO Ron South explained the H2 EPS weighting is due to the timing of restructuring savings, new product momentum, and a difficult Q1 equipment sales comparison.

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Stanley Bergman, CEO, stated the core medical distribution business is stable, excluding flu season and glove price volatility, and that the company is regaining share lost to drug wholesalers. Ron South, CFO, explained the technology segment's LCI growth was distorted by the timing of the LPS acquisition, as one month of strong performance was counted as acquisition growth rather than internal growth.

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CFO Jim Head explained that the first-half Part D favorability was partly due to prudent forecasting. The company is maintaining its full-year outlook, effectively shifting some of that favorability to the second half as a cushion against potential gross drug cost escalation and higher utilization in certain populations post-IRA. Head stated that the 2026 benchmarks were largely in line with industry expectations but declined to comment on their specific impact on bids.

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EVP & CFO Drew Asher expressed satisfaction with PDP performance, confirming that margins are running north of the 1% budgeted target. He attributed the confidence to having six months of data post-IRA changes, which has provided better visibility into specialty trends. He also noted that membership has been stable and that he suspects competitors are bidding for 2026 assuming the current demo program does not continue.

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EVP & CFO Drew Asher confirmed that the Part D business is performing well and is 'north of our 1% budget margin.' He attributed the confidence to having six months of performance data, which provides better visibility into the impact of the IRA on specialty drug trends. He also noted that membership has been stable and that they expect the Medicare segment HBR to slope upward through the year, influenced by PDP dynamics.

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EVP and CFO Andrew Asher did not comment on new member behavior but stated it would be 'foolish' for any competitor not to assume the protective demo risk corridor will be dialed back for 2026 bids, given the specialty trend pressure. He affirmed Centene will price prudently for 2026 and that the industry has historically been rational in adapting to PDP program changes.

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CEO Joseph Zubretsky affirmed that M&A remains a higher priority than share repurchases and that the current environment is creating more opportunities. He stated that opportunistic buybacks would not impede their ability to execute on M&A. CFO Mark Keim noted they have placeholders for potential Q4 induced demand in their forecasts but do not consider it a particularly meaningful item, with CEO Zubretsky adding that the elevated trend assumption likely covers it.

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CEO Joseph Zubretsky highlighted the long-term goal of leveraging scale to drive the G&A ratio into the mid-6% range. For the current year, CFO Mark Keim projected a relatively flat G&A trajectory, explaining that higher front-end implementation costs are balanced by back-end loaded marketing expenses for open enrollment.

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CFO Aaron Alt clarified that the guidance reflects a prudent outlook. He noted that the first half benefited from exceptionally strong utilization, which the company assumes will normalize in the second half. Additionally, costs for significant new customer onboardings are factored into the updated guidance, and the company will begin lapping the Specialty Networks acquisition in March.

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