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HENRY SCHEIN INC (HSIC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered a clean beat: revenue $3.34B (+5.2% y/y; +4.0% cc) and non-GAAP EPS $1.38 versus consensus $1.28, aided by broad-based growth (Distribution +4.8%, Specialty +5.9%, Technology +9.7%) and a $28M pre-tax remeasurement gain (~$0.23 EPS) . S&P Global consensus: revenue $3.28B*, EPS $1.28*, EBITDA $284M*.
  • Guidance raised: FY25 non-GAAP EPS to $4.88–$4.96 (from $4.80–$4.94) and total sales growth to ~3–4% (from 2–4%); Adjusted EBITDA growth remains mid-single digits .
  • Value creation program expands: management now targets >$200M operating income improvement over the next few years; restructuring to continue into 2026–2027; effective tax rate guided to ~24–25% in Q4 and for FY25 .
  • Strategic catalysts: AWS partnership to embed generative AI across cloud practice platforms; KKR granted the right to increase ownership up to 19.9%; buybacks continued ($229M in Q3; $980M remaining authorization) .
  • Narrative turning: cyber incident “fully behind us,” U.S. dental gross margins stabilizing; sequential revenue up ~$100M vs Q2 supporting the guide raise and estimate revision potential .

What Went Well and What Went Wrong

What Went Well

  • Broad-based top-line acceleration: total net sales +5.2% y/y; Distribution +4.8%, Specialty +5.9%, Technology +9.7%; internal growth 3.3% with acquisitions +0.7% and FX +1.2% .
  • Margin execution ex-mix: non-GAAP operating margin expanded 19 bps y/y to 7.83% on lower opex ratio; Q3 EBITDA +10% y/y to $295M (vs $268M) .
  • Specialty momentum: implants led by value brands (SIN, Biotech Dental) with double-digit growth; endodontics mid-single-digit; orthopedics double-digit; international implants high single-digit .
  • Technology flywheel: cloud PMS subscribers >10,500; mid-double-digit PMS growth; newly announced AWS GenAI integration to drive documentation, voice charting, RCM automation and predictive tools .
  • Capital allocation: $229M repurchases at $68.62 average; intent to maintain similar pace; $980M authorization remaining .

What Went Wrong

  • Gross margin pressure: down 56 bps y/y from mix (distribution/specialty) and seasonal medical vaccine mix; sequential decline vs Q2 from flu seasonality; premium implants slower than value, diluting mix .
  • U.S. dental equipment: traditional equipment slightly down; digital pricing under pressure despite strong unit growth; timing of installs affected Q3 mix .
  • Medical respiratory/vaccines: lower influenza vaccine and respiratory diagnostic demand y/y; medical product mix (pharma) carries lower margins .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($B)$3.168 $3.240 $3.339
Revenue y/y (as-reported)-0.1% +3.3% +5.2%
GAAP Diluted EPS ($)$0.88 $0.70 $0.84
Non-GAAP Diluted EPS ($)$1.15 $1.10 $1.38
Operating Income ($M)$175 $151 $164
Adjusted EBITDA ($M)$259 $256 $295
Operating Cash Flow ($M)$37 $120 $174
Share Repurchases ($M)$161 $259 $229

Segment revenue mix – Q3 2025

SegmentRevenue ($B)y/y Growth
Global Distribution & Value-Added Services$2.840 +4.8%
- Global Dental (Merchandise + Equipment + VAS)$1.714 +4.8%
- Global Medical$1.126 +4.7%
Global Specialty Products$0.369 +5.9%
Global Technology$0.173 +9.7%
Eliminations-$0.043 n/a

KPIs and notable items – Q3 2025

KPIValue
Remeasurement gain (pre-tax)$28M; ~+$0.23 EPS; ~$0.08 higher than 3Q24
Non-GAAP effective tax rate (Q3)22.9%
Cloud PMS subscribers (Dentrix Ascend + Dentally)>10,500
Home Solutions growth>20% as-reported; ~6% ex-acquisitions
Buyback authorization remaining$980M

Estimates vs Actuals – Q3 2025 (S&P Global)

MetricConsensusActual
Revenue ($B)$3.276*$3.339
Non-GAAP EPS ($)$1.279*$1.38
EBITDA ($M)$284.3*$295

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-GAAP Diluted EPSFY 2025$4.80–$4.94 $4.88–$4.96 Raised
Total Sales Growth (as-reported)FY 2025~2–4% ~3–4% Raised
Adjusted EBITDA GrowthFY 2025Mid-single digits Mid-single digits Maintained
Non-GAAP Effective Tax RateFY 2025~25% (company commentary) ~24–25% Slightly lower midpoint

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
AI/TechnologyCloud PMS growth; 10k subscribers; RCM traction Mid double-digit PMS growth; +20% cloud customers AWS GenAI integration for documentation, voice charting, RCM analytics; >10.5k subs Accelerating
Supply chain & tariffsGuide assumed no new tariffs U.S. equipment pause on tariff uncertainty; glove pricing pressure Passing through ~100 bps tariff inflation; gloves stabilizing; mitigation via sourcing Stabilizing
Product performanceImplants/endodontics growth Implants mid-single-digit cc; value > premium Value implants double-digit; premium low single-digit; endo mid-single-digit Mixed mix; steady top-line
Regional trendsIntl dental equipment growth; FX headwinds Strength in Germany/Canada/Europe Germany-led equipment; Intl implants high single-digit Solid ex-U.S.
Regulatory/legal$20M cyber insurance proceeds —Remeasurement gains; litigation settlements modest Legacy abating
Value creation & restructuring$75–100M run-rate by YE25 >$100M run-rate; added gross margin/efficiency projects >$200M operating income opportunity over few years; charges to continue 2026–2027 Expanding
Leadership—CEO retirement announced; search underway Successor expected by year-end; transition plan intact In transition

Management Commentary

  • “Sales growth accelerating in each of our reportable segments… as we are once again focused on driving growth now that the cyber incident is fully behind us.” (Stan Bergman) .
  • “We believe we have the opportunity to deliver over $200 million of improvements to operating income over the next few years.” (Bergman) .
  • “On a non-GAAP basis, operating margin… 7.83%, +19 bps y/y; gross margin down 56 bps y/y, sequential decline due to flu vaccine seasonality.” (CFO Ron South) .
  • “Third-quarter results include a pre-tax remeasurement gain of $28 million… contributed approximately $0.23 to EPS.” (South) .
  • “Practice management software sales growth… driven by a 20% year-over-year increase in the number of cloud-based customers… now over 10,500 subscribers.” (Bergman) .
  • “Announced a partnership with AWS to integrate generative AI… real-time documentation, voice-activated charting, and predictive business intelligence.” (Bergman; HS One PR) .

Q&A Highlights

  • EPS algorithm and $200M value creation: Benefits will phase over multiple years; 2026 impact to be embedded in February guidance; $200M is net OI improvement after reinvestments .
  • Remeasurement gains: Regular part of the model but not expecting something significant near-term; magnitude will be addressed in guidance if applicable .
  • Gross margin cadence: U.S. dental margins stabilized as glove pricing stabilized; medical mix (vaccines, pharma) pressured GM; expectation for stability into Q4 .
  • Market share and demand: Distribution share gains in U.S. merch; equipment backlog supportive for Q4; implants outperforming markets (value > premium) .
  • Tariffs/DSO dynamics: Passing through modest tariff-driven inflation (~100 bps); mitigating via sourcing; DSOs stable with strong supply chain/value-added and software bundling .

Estimates Context

  • Q3 beats vs consensus: Revenue $3.339B vs $3.276B*; Non-GAAP EPS $1.38 vs $1.279*; EBITDA $295M vs $284M* . Values marked with * retrieved from S&P Global.
  • Forward look: Q4 consensus revenue $3.347B* and EPS $1.294* embed modest sequential growth; raised FY25 guide and sales momentum (+~$100M seq) suggest upward estimate bias if mix stabilizes and equipment backlog converts . Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise quarter with improving sequential momentum and clear catalysts (AWS GenAI, KKR partnership), positioning estimates to drift higher near-term .
  • Mix headwinds are manageable: U.S. dental GM stabilizing; premium implant mix a watch item, but value segment growth sustains Specialty top-line .
  • Structural EBITDA expansion roadmap: >$200M OI improvement targeted over a few years; restructuring savings >$100M run-rate; expect 2026 contributions embedded in February guide .
  • Capital returns supportive: $229M buybacks in Q3; intention to keep pace; $980M authorization remaining .
  • Macro/supply chain risks easing: tariff pass-throughs largely sticking; glove pricing stabilized; equipment backlog supports Q4 .
  • Leadership transition de-risked: CEO succession on track by year-end; BOLD+1 strategy sustained with emphasis on high-growth, high-margin businesses (>50% of non-GAAP OI by 2027) .
  • Trading lens: Focus on durability of double-digit Tech growth and Specialty value mix; watch GM trajectory and any incremental remeasurement items when calibrating near-term EPS quality .