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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)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$3.174 $3.191 $3.168
GAAP Diluted EPS ($)$0.78 $0.74 $0.88
Non-GAAP Diluted EPS ($)$1.22 $1.19 $1.15
Adjusted EBITDA ($USD Millions)$268 $270 $259

Margins

MarginQ4 2024Q1 2025
GAAP Operating Margin (%)4.86% 5.53% (+81 bps YoY)
Non-GAAP Operating Margin (%)7.46% 7.25% (+14 bps YoY)

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentQ1 2025 Sales ($USD Millions)Q1 2024 Sales ($USD Millions)Constant Currency Growth (%)Total Sales Growth (%)
Global Distribution & Value-Added Services$2,676 $2,693 +0.8% (incl. acquisition +0.9%) -0.7%
Global Specialty Products$367 $360 +4.3% +2.0%
Global Technology$162 $157 +3.4% +2.9%
Total Global$3,168 $3,172 +1.4% -0.1%

KPIs

KPIQ1 2025Prior Period/Context
Net Cash from Operating Activities ($USD Millions)$37 $197 (Q1 2024)
Share Repurchases ($USD Millions)$161; ~2.3M shares at $71.58 avg $75 in Q4 2024
Remaining Buyback Authorization ($USD Millions)$718 $380 at FY24 end; +$500 authorized 1/27/25
Cloud PM subscribers (Dentrix Ascend/Dentally)9,500 customers ~9,000+ in Q4 (year-on-year +6.5%)
Adjusted EBITDA ($USD Millions)$259 $255 (Q1 2024)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 25, 2025)Current Guidance (May 5, 2025)Change
Non-GAAP Diluted EPSFY 2025$4.80–$4.94 $4.80–$4.94 Maintained
Total Sales GrowthFY 2025~2%–4% YoY ~2%–4% YoY Maintained
Adjusted EBITDA GrowthFY 2025Mid-single digits vs 2024 Mid-single digits vs 2024 Maintained
Non-GAAP Effective Tax RateFY 2025~25% ~25% Maintained
FX & Tariffs AssumptionsFY 2025FX broadly consistent; mitigate tariffs FX broadly consistent; mitigate tariffs Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
AI/Technology initiativesSaaS transition headwind but longer-term subscription benefits; consolidation of brands; ~9,000 cloud customers Cloud PM growth +20% in customers YoY to 9,500; RCM strong; sunsetting legacy products; operating income +24% Improving mix and profitability
Supply chain & tariffsPlanning/mitigation; sourcing shifts (gloves to SE Asia), FX neutral assumption Mitigation plans with suppliers/customers; minimal direct impact expected; detailed sourcing flexibility; FX headwind 1.5% in Q1, neutral expected thereafter Manageable risk; preparedness
Equipment demandQ4 saw healthy traditional + digital demand; lumpy around holiday timing Demand healthy; orders aligned YoY; not “super robust” but healthy; de novo build-outs increasing Stable-to-positive
Regional trendsCanada strong; Europe solid; Brazil strong; U.S merchandise mixed; medical influenced by flu timing U.S dental/medical stable; Canada, Central Europe, Brazil strong; France soft; Australia cautious Broad stability with pockets of strength
Regulatory/legal & cyberInsurance recoveries in 2024; cyber incident largely behind; litigation settlements Final insurance proceeds received ($20M pretax in Q1); total ~$60M; incident behind Resolved; tail benefits
Restructuring & cost savingsNew plan targeting $75–$100M annual run rate by end 2025; >$80M run rate exiting Q4 $25M Q1 restructuring; tracking to high end of $75–$100M by YE25; run-rate ~$60M entering year Acceleration toward upper end

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

MetricQ1 2025 ConsensusQ1 2025 ActualResult
Revenue ($USD Billions)$3.227*$3.168 Miss
Non-GAAP EPS ($)$1.11*$1.15 Beat

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 .