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HENRY SCHEIN INC (HSIC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue grew 5.8% YoY to $3.19B; GAAP EPS was $0.74 and non‑GAAP EPS was $1.19, with non‑GAAP operating margin expanding 260 bps YoY; adjusted EBITDA rose to $270M .
  • Management issued 2025 guidance: non‑GAAP EPS $4.80–$4.94 (+1%–4% YoY), total sales +2%–4%, and adjusted EBITDA growth mid‑single digits; guidance was consistent with the Jan 29 preliminary outlook .
  • Segment reorganization (three new reportable segments) launched alongside the 2025–2027 BOLD+1 plan; Q4 segment growth was led by Global Distribution & Value‑Added Services (+5.9%) and Global Specialty Products (+7.2%) .
  • Call commentary flagged a slower end to December (Christmas timing) and late flu season pressuring U.S. medical, while U.S. equipment and international dental merchandise were solid; 2025 viewed as a “base year” ahead of returning to high‑single to low‑double digit EPS growth longer term .

What Went Well and What Went Wrong

  • What Went Well
    • U.S. dental equipment strength (double‑digit growth) and solid international dental merchandise; digital equipment units up despite pricing pressure .
    • Specialty growth in implants, biomaterials, endodontics; strong value implant momentum (S.I.N.) in Brazil; orthopedic (TriMed, ASC focus) performing well .
    • Technology operating margin improved as the business shifts to SaaS; cloud PMS (Dentrix Ascend/Dentally) surpassed 9,000 customers, ~6.5% YoY growth .
  • What Went Wrong
    • December ended slower than expected (Christmas timing) and late flu season hurt point‑of‑care diagnostics/vaccines, contributing to lower‑than‑guided revenue into Q4 .
    • Orthodontics faced patent expiry and losses in 2024; restructuring underway with profitability targeted by late 2025 .
    • Mix headwinds: movement to value‑priced merchandise and pricing pressure in digital equipment; U.S. implant market “slightly tougher” vs Europe .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$3,136 $3,174 $3,191
GAAP Diluted EPS ($)$0.80 $0.78 $0.74
Non‑GAAP Diluted EPS ($)$1.23 $1.22 $1.19
Operating Income ($M)$159 $157 $155
Adjusted EBITDA ($M)$268 $268 $270

Additional context:

  • Q4 2024 revenue YoY growth: +5.8% .
  • Q4 2024 GAAP operating margin: 4.86% (up 358 bps YoY); non‑GAAP operating margin 7.46% (up 260 bps YoY) .

Segment breakdown – Q4 2024

Segment/CategorySales ($B)YoY Growth
Global Dental Merchandise$1.1 6.2%
Global Dental Equipment$0.5 8.1%
Global Value‑Added Services$0.1 8.1%
Global Medical Distribution$1.0 4.5%
Global Distribution & Value‑Added Services (Total)$2.7 5.9%
Global Specialty Products$0.4 7.2%
Global Technology$0.2 2.4%

KPIs and cash/returns

KPIQ4 2024Notes
Operating Cash Flow ($M)$204 Driven by lower receivables
Adjusted EBITDA ($M)$270 +$98M YoY
Share Repurchases1.1M shares; $75M Avg price $71.35
High‑growth, high‑margin share of operating income (FY)41% Target metric in BOLD+1

Non‑GAAP adjustments (Q4 2024)

  • Net non‑GAAP add‑backs of $55M: restructuring $28M, acquisition intangible amortization $27M, cyber insurance proceeds (net) $(15)M, impairment of capitalized assets $6M, change in contingent consideration $7M, shareholder advisory costs $2M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non‑GAAP Diluted EPSFY 2025Preliminary 2025 guidance (Jan 29, 2025) – reiterated ranges $4.80–$4.94 (YoY +1%–4%) Maintained
Total Sales GrowthFY 2025Preliminary 2025 guidance reiterated +2%–4% vs 2024 Maintained
Adjusted EBITDA GrowthFY 2025Preliminary 2025 guidance reiterated Mid‑single digit growth Maintained
Effective Tax Rate (non‑GAAP assumption)FY 2025n/a~25% —

Notes: 2025 guidance excludes restructuring/integration, intangible amortization, any further cyber insurance recoveries, and shareholder advisory costs; assumes FX roughly flat and modest dental/medical market improvement .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Market recovery & guidanceQ2: Stable markets but slower‑than‑expected post‑cyber recovery; guidance cut; restructuring plan announced . Q3: Exceeded expectations; raised 2024 non‑GAAP EPS to $4.74–$4.82 .2025 “base year” with modest market growth; guidance consistent with Jan prelim .Stabilizing; cautious into 2025
Equipment & digitalQ2: Equipment stabilizing; digital mixed . Q3: Equipment up; continued stability .U.S. equipment up double‑digit; digital units up but pricing pressure persists .Improving units; pricing headwinds
Specialty (implants/ortho/ortho)Q2/Q3: Good implant growth; launch of Tapered Pro Conical in U.S. .Strong value implant (S.I.N.) and endo; ortho headwinds (patent loss) being restructured .Mixed: strength in implants/endo; ortho repair
Technology/SaaSQ2/Q3: Tech & VAS up high single to low double digits; SaaS transition ongoing .Cloud PMS and RCM strength; SaaS shift boosts operating margin; >9,000 cloud subs .Positive margin trajectory
Macro/tariffs/supply chainQ2/Q3: End‑market softness; FX modest .Late flu season, Christmas timing; tariff mitigation (shift gloves sourcing; limited Mexico exposure; Canada anesthetic industry‑wide risk) .Managed risks; watch Canada anesthetics

Management Commentary

  • “We exceeded our key goal… generating 40% of our worldwide operating income from high‑growth, high‑margin businesses… We expect 2025 to be the base year from which to grow and achieve our previously provided long‑term goal of high single‑digit to low double‑digit earnings growth.” – Stanley M. Bergman, CEO .
  • “Our GAAP operating margin for the fourth quarter of 2024 was 4.86%… non‑GAAP… 7.46%… benefiting from lower operating expenses… and year‑over‑year gross margin expansion primarily as a result of acquisitions.” – Ron South, CFO .
  • “Technology… is driving towards common brands and SaaS… we now have over 9,000 customers subscribed to Dentrix Ascend and Dentally with year‑on‑year growth of ~6.5%.” – CEO .

Q&A Highlights

  • Q4 revenue shortfall vs company’s updated Q4 outlook: CFO cited flat patient traffic, underestimated Christmas impact, and late flu season impacting medical .
  • Market share: share stabilized Q4 vs Q3 after sequential gains through 2024; management remains confident in regaining share .
  • Specialty margin: mix includes lower‑margin businesses and corporate brand management costs; ortho a drag but targeted to improve; margins expected to rise over time .
  • Implants: Europe (DACH) low‑ to mid‑single digit growth; U.S. value segment better than premium; MA payer changes not material so far .
  • 2025 margin bridge: savings from restructuring offset by higher IT depreciation (global e‑commerce platform) and normalization of incentive comp; top‑line mix pressures noted .
  • Tariffs: gloves sourcing shifted to SE Asia; minimal Mexico exposure; Canada anesthetics, if tariffed, would be industry‑wide; bottom line impact expected to be manageable .
  • KKR partnership: strategic support via KKR Capstone once HSR clears; board additions planned; long‑term oriented partnership .

Estimates Context

  • Wall Street consensus from S&P Global (revenue/EPS) was unavailable at this time due to data access limits, so we cannot definitively classify Q4 beat/miss vs consensus (Values from S&P Global were unavailable).
  • Analysts flagged a shortfall vs the company’s own updated Q4 revenue expectations, attributed to December timing and a late flu season .

Key Takeaways for Investors

  • 2025 setup: modest top‑line growth and mid‑single digit EBITDA growth with heavier 2H earnings weighting; 2025 is a reset year ahead of returning to high single‑digit/low double‑digit EPS growth longer term .
  • Mix matters: value‑priced shift supports gross margin via own brand/specialty, but operating leverage depends on executing restructuring and tech depreciation normalization .
  • Equipment solid; implants mixed: equipment momentum (esp. U.S.) and value implants are offsets to pricing pressure in digital and ortho headwinds .
  • Technology margin expansion continues as SaaS mix rises; cloud PMS base >9k provides recurring revenue durability .
  • Cash generation improved (Q4 OCF $204M; FY $848M), supporting buybacks and strategic investments; KKR partnership a potential catalyst for value‑creation initiatives once regulatory approvals clear .
  • Watch near‑term risks: flu season timing, tariff policies (esp. Canada anesthetics), and pricing pressure in digital equipment; management sees mitigants in sourcing and portfolio breadth .

Appendix: Prior Two Quarters (for trend analysis)

  • Q3 2024: Revenue $3.17B (+0.4% YoY), GAAP EPS $0.78, non‑GAAP EPS $1.22; adjusted EBITDA $268M; raised 2024 non‑GAAP EPS to $4.74–$4.82 .
  • Q2 2024: Revenue $3.14B (+1.1% YoY), GAAP EPS $0.80, non‑GAAP EPS $1.23; adjusted EBITDA $268M; introduced new restructuring plan and cut 2024 guidance to $4.70–$4.82 .