HS
HENRY SCHEIN INC (HSIC)·Q1 2025 Earnings Summary
Executive Summary
- Q1 2025 delivered non-GAAP EPS of $1.15, a beat vs Wall Street consensus of $1.11*, while revenue of $3.168B missed the $3.227B consensus*, amid a 1.5% FX headwind and softer dental equipment comps .
- GAAP operating margin expanded 81 bps YoY to 5.53% and non-GAAP operating margin rose 14 bps YoY to 7.25%, supported by restructuring savings; Adjusted EBITDA was $259M .
- Guidance reaffirmed: FY25 non-GAAP EPS $4.80–$4.94, sales +2–4%, Adjusted EBITDA mid-single-digit growth; management expects tariffs to be mitigated through sourcing and product alternatives .
- Cash flow was seasonally weak (CFO $37M) and Q1 revenue declined slightly (-0.1% reported) on FX; specialty and technology grew, medical remained solid; share repurchases of $161M signal capital return continuation .
What Went Well and What Went Wrong
What Went Well
- Specialty Products grew 4.3% in constant currency (as-reported +2.0%), led by implants/biomaterials and acquisitions; DACH region and Latin America strength noted .
- Technology posted sales +3.4% in constant currency (as-reported +2.9%), with strong cloud practice management (Dentrix Ascend/Dentally) and RCM; operating income grew 24% YoY as legacy products are sunset .
- Medical Distribution grew +3.0% in constant currency (+2.9% as-reported), aided by higher physician traffic, strong Home Solutions (+23% total, +9% internal) and acquisitions .
- Quote: “We are pleased with our first quarter financial results… and remain confident in the fundamentals of our business” — Stanley Bergman .
What Went Wrong
- Global Dental equipment declined 2.4% in constant currency (as-reported -4.5%); U.S. dental equipment down 8.9% (difficult comp due to Q4’23-to-Q1’24 deferrals) .
- FX headwind impacted reported sales (-1.5% YoY); FX exposure (primarily euro) expected to be neutral for the balance of year but was a drag in Q1 .
- Value-Added Services was pressured (practice transitions timing), and Q1 operating cash flow fell to $37M vs $197M in Q1 2024 .
Financial Results
Core P&L metrics (oldest → newest)
Margins
Segment Breakdown (Q1 2025 vs Q1 2024)
KPIs
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- Strategy: “We are advancing our BOLD+1 Strategic Plan… focused on operational efficiency, enhancing customer experience, growing specialty businesses and corporate brand products, and further developing our digital footprint” — Stanley Bergman .
- Mix: “Operating income from high-growth, high-margin businesses… over half of our total operating income by the end of 2027” .
- Technology: “Practice Management software growth was driven by a 20% increase in cloud-based customers… 9,500 customers subscribed to Dentrix Ascend and Dentally” .
- Tariffs: “We believe… actions with our suppliers and customers will be effective at mitigating this year’s impact on our financial results” .
Q&A Highlights
- FX: Q1 FX headwind ~1.5%; expect largely neutral FX vs prior year for balance of 2025 .
- Tariffs: Multiple mitigation levers (sourcing shifts, corporate brand alternatives); guidance maintained assuming manageable impact .
- Equipment: Demand healthy and aligned YoY; de novo practice build-outs increasing; DSOs stable to leaning positive .
- Home Solutions: Total sales +23% with +9% internal; annualized revenue base ~$360M, “approaching $400M soon” .
- Cost savings: Run-rate ~$60M entering year; tracking toward high end of $75–$100M by end of 2025 .
Estimates Context
Values retrieved from S&P Global*.
Key Takeaways for Investors
- Q1 delivered an EPS beat despite a slight revenue miss, driven by cost actions and mix shift toward specialty/technology; margins expanded YoY on GAAP and held on non-GAAP .
- Guidance intact (EPS $4.80–$4.94; sales +2–4%; Adjusted EBITDA mid-single-digit), with FX assumed neutral going forward and tariff impact mitigated — lowers near-term estimate risk .
- Dental equipment demand is healthy and build-outs are increasing; watch comps normalizing after last year’s deferral and potential pricing pressure on digital equipment .
- Medical remains a steady ballast with strong Home Solutions momentum; expanding referral sources and reimbursement execution underpin growth .
- Specialty Products continue to perform (implants/biomaterials strength in DACH/LatAm), offset by ongoing orthodontics restructuring; mix should support margins over time .
- Technology operating leverage is improving as legacy products sunset and cloud adoption scales (9,500 customers), supporting sustained margin progress .
- Capital return continues ($161M repurchases in Q1; $718M remaining authorization), providing downside support while restructuring savings trend to the high end by YE25 .