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HSIC Henry Schein

Participants
Graham Stanley Vice President of Investor Relations and Strategic Financial Project Officer
Stanley Bergman Executive Chairman & CEO
Steven Paladino EVP, CFO & Executive Director
John Kreger William Blair
Jeffrey Johnson Robert W. Baird
Jonathan Block Stifel
Jason Bednar Piper Sandler
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to the Henry Schein Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this call is being recorded. to Schein's host Relations Vice Financial Officer. like Graham today's and now Project Henry Stanley, President would introduce for your call, Strategic I of Investor Please ahead, Graham. go

Graham Stanley

you President of Schein's results and of Vice the my Paladino, to Chief And the operator. me quarter. the Henry Chief for Officer. Steven us Stanley call Executive you, Henry each Board today XXXX Thank are of Schein; Financial discuss and to for and With thanks Officer on third Executive joining Chairman Bergman,

we I comments that that Before begin, state would that forward-looking. made incite like certain is to call on this information

risks know, in you may statements. affect in matters and As the forward-looking company's business uncertainties involved to referred the

or are Exchange As These in Henry forward-looking the Factors a may contained in cautionary the qualified materially Securities result, and Commission, performance by in forward-looking indicated statements. company's statements expressed entirety filings with in differ section statements filings. including by their Schein's of the those Risk such those the from

addition, the end and based market are we market other share, comments growth upon serve, including about In internal estimates. rates and fee the company's markets all

Reconciliations greater information Our Relations today's conference of non-GAAP not our the non-GAAP be press the of results. useful for is a in non-GAAP be independent non-GAAP business of comparative financials by management informational are and section B of and in business. corresponding between website should Investor section and certain website. supplemental measures with measures may both call operating but and replacement include financial Appendix to in items can solely transparency for the which for Investor of with as Relations GAAP in respect the release, found performance measures believe vary supplemental our of available and These enable will provide invested about financial the GAAP comparison GAAP measures. financial information presented key regarded purposes our and We metrics performance financial business, remarks our between used allow periods

yourselves this limit possible contains would only up as this that to XXXX. and of revise single to Q&A broadcast, after like or allow to the content no we a within hour to accurate November information forward-looking time-sensitive date conference the is undertakes call. Please the as any date the question events update Schein statements of over to Lastly, said, that the obligation Henry call circumstances question of their this during reflect With Bergman. or I of call the X, listeners allotted live as to a Stanley to X ask have to many follow turn call.

Stanley Bergman

over much, as of Graham, And congratulations last company years. Head you've course, on our done Investor the all for you and Thank the thank plus of dozen Relations. your for you very appointment

course, there have to everyone, the job for done quarter of a good by Really, report also you driven excellent by pattern excellent actually to And has the So results. and execution which this thank -- a during was since the very the quarter, and we record entire the And third momentum a joining financial March virus to of focus on morning us. keen team the patient in started across steady back good XXXX. today company. And remarkable really pandemic the traffic team. contributed happy results,

later. for the mentioned 'XX surgical see calls In not gone our changes previous me ambulatory the or our distribution you the worldwide business that sales parts and our X.X%. in the Henry was actually really X.X%. first small We So of this robust leadership United do year sales quarter a generally before material. That's we centers definitely will as performance and pattern COVID-XX-related traffic Steven believe results in customers, and products, important We for world, is sales increasing a had I to are Schein's well. currencies similar if internal business local third to and medical on I'll compared structure. in And exclude in growth to additional ago, But customers. sales senior improving for then again. important, different of quarter down definitely, changes globally, previous States results to groups adjustments physician each PP&E that offices internal but of that in the We if the up currencies. dental announced provide business traffic we as these compare let the in And what's that's local of that's comment patient increased mid-September, the review comments our

management pursuing a company. More tightly of strategy of as Distribution integrates businesses One distribution we have to which of an the more been improvement of as internally We as umbrella part operational the Distribution globally. One tightly our Henry refer continuous strategy Schein the

Medical really But of global we've expected been international. on about decades course, organization will notion we've months, and consolidating expectations to no part the it now COVID of seek just manner. tariff dentistry America, on processes, them. committed experience will fact our distribution to that the customer customer medicine We're functions, structure X benefits but and better see in also COVID that. sets. really the records. fact, ever will quite sides, X both new for world, to improved are question leverage connect harness fulfilling at of Henry continuum. between industry and than starting and which of those team efficiency the dental improve wellness. management believe that actually the structure, announced rest that's together, working in good the One importantly, businesses. us this and small, about servicing we are medical medicine. in enhance And a we're period, We're to this yes, across exceeding businesses medicine the These an both the and experience, this changes today, but see allow starting new and for talent, Furthermore, doing And structure systems customers' but by closer more position been designed and distribution, management our that Schein medical these -- Henry X newly are way regions, and And more to to been Our this dentistry I interoperable There's in efficiency. job changes well, for distribution the North has advance the of and a that Schein's are a management expectations; goal Dental nevertheless, of focused practices to our of a emerge aligned that the recognize XX as for much the an Schein dentistry in years in records on globally, pretty electronic operating efficiency, as increased to -- coming efficient accelerate Henry it's in talking have overlap to customer the schools prevention starting are with and geographies: period practices we increase and but amount

is price important this a or healthcare the this so-called is aligned integration and oral price which whole care providing so are advancing, lower at value notion to quality and So prevention, medicine better of chain. whole area care in more and competitive of wellness of of we a

reflective clinical are Services to Products Now customers efficient our support practices Schein's longstanding Software, Practice Specialty Henry businesses and also operate help commitment more of and care.

X management focus. already and We The on operating provide Specialty later teams, this activities, our and -- we add better some through year, whole Products to and to these markets X notion strategic at as growth, service up Software, interesting same will you'll business distribution through we hear different are strategy, sharpen organic that. idea acquisitions which time those just is different our whole that Practice continuing focus margins as The higher-margin faster-growing well. margins and align very our customer with while Service driving the areas our to made

upon continued world a with our a ready distribution and accomplished operating businesses and rely Practice digital of the the in is in side drive down experience, Services the costs much satisfy They're time, comprehensive both we offering the services, so in customers, place value. for income world, Products the XXXX. to Henry what and clearly we in leader businesses solutions create increasingly Specialty team innovative at in Schein's side. an than and distribution March into software on believe have increased customers their more same across needs provide success improve shareholder the We of our therefore, of along went our and network most Our

for XXXX current now some discuss remainder opening and providing to well. these our like I'll comments, business the Then over call to conditions markets. for on we guidance, and the quarterly hand the additional XXXX please? yes, of Steven, which our commentary With are Steven financial performance and provide as I'd

Steven Paladino

good Stanley, to you, Thank morning and Okay. everyone.

I'd As on I like as GAAP continuing point operations a results also reported that from we begin, on be and will non-GAAP discussing basis out to basis. a our

Investor included under concluded again, the we Exhibit well and release website. Supplemental items that for quarter Please prior sales XXXX. our as today's Our transition Relations which Covetrus year corporate represents for services XXXX the in of non-GAAP Information that a note XXXX agreement, category results certain of sales detailed are fourth quarter exclude have, B third of QX the to that section in the as press in

these ended, comparative are sales in has year results. still agreement reflected prior the While the

points Internally our last in X.XX% XXXX, decline XXXX, basis prior of of this GAAP due year-over-year pandemic. year in a mainly found a operating this can and Turning sales the year X.X% with compared billion, On website. the XX reconciliation with compared relatively year. year. represents quarter a of quarter. be of expenses basis, response the inventory reduction the the third XXXX, represents again adjustments period. QX higher that XXXX now with supplemental was The reflecting ended morning. in financial X.XX% of of sales for in XX, expansion the a Again, to sales in of expense the is gross you non-GAAP A performance with and operating that's $X.X margin for points currencies, on as was net can to with the margin the to our by COVID-XX lower decrease margin put margin that place operating to which of partially current of a QX our that This initiatives for our basis XX.X% operating the an page compared On result information non-GAAP increase compared quarter September earlier compared with see of the earnings offset was temporary prior we margin were reflected XXXX, release details quarter results. GAAP in Total prior press X flat local quarter up growth issued third basis, generated Exhibit

our taxes. to Turning

the tax year. quarter XX.X% by third reported U.S. This year this also GAAP third income tax $XX.X Again, XXXX of favorably was income quarter rate third our the with effective in tax was tax expenses XX.X% a diluted XX.X%. the XXXX taxes. GAAP effective is compared settlement, million quarter last was third per basis, On compares the Our impacted with lowered for prior rate of rate effective prior our which approximately non-GAAP XXXX. that XX.X% the or for tax $X.XX share. year quarter Remember, tax and for by of of rate a Federal

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diluted income gain per third the a for Moving and $XXX.X continuing equity income or on, million and or $X.XX the from attributable amortization non-GAAP diluted or third Amortization on of continuing pretax of pretax for assets $XX.X $X.XX year. for quarter was share diluted diluted that to GAAP period $X.XX $X.XX impact $X.XX by $X.XX for XXXX the $X.XX also acquired On year prior diluted $XX.X net share, share. -- Schein from third same per per operations share. continued share million the income compares last million QX currency QX to exchange last pretax $XX.X and share. was positively income a $XXX.X from And an XXXX. sale Henry net This million share our continuing compares intangible diluted GAAP I'll XXXX per basis, of net million, current intangible with foreign quarter year. quarter million of share per $XX.X per or the the or million this months, operations per operations income of assets approximately diluted investment XXXX of pretax operations acquired $XXX of per This was net diluted from $X.XX for was note EPS GAAP or that for our compares continuing share or $XXX.X share. or with of $X.XX the diluted per compares X included for $X.XX with net from per year million

me provide quarter. for detail some Let results additional now third our sales on the

if And products, Global currencies X.X% XX.X% period sales Dental exclude X.X% the local with we last increased by same internal in XXXX compared third Our in PPE of increased local same in local the to internal related Dental year, COVID-XX currencies. sales Global X.X%. increased growth were year. the sales billion last $X.X currencies growth sales by merchandise quarter of internal for and with of versus period

Our compared growth was North growth stable American in dental local and equipment QX which growth. with attributable internal primarily XXXX, merchandise is currencies solid sales X.X% to

was high-technology QX impacted traditional X.X% sales by equipment until sales American equipment by to growth the in helped held next orders construction XXXX strong and or of going we in traditional DS continue rather XXXX. for of strong, of more year of this which versus also products. when delays. office American issue was manufacturing QX than half regard modest DS QX into North year World and look than was X.X% event U.S. was XXXX. of The XXXX our in this sales growth dental the see orders North the COVID-related currencies second demand. equipment, this sales X.X% equipment virtual contributed equipment quarter. impactful sales World North of year's merchandise in at fourth If internal strong consumable a expect as the internal event equipment in pipeline reflecting manufacturers dental timing of installations high-tech local with equipment with and sales, decrease to to Our equipment our into has delays we remain remained growth local currencies delayed as any backlog PPE America, excluding and

is rather Just as we when a at time the for than equipment the reminder, equipment is and orders sales capital recognize equipment order installed the placed.

QX local internal versus growth dental currencies sales X.X% international Our in was of XXXX.

or merchandise sales increased and Our X% versus growth, COVID-related international local X.X% dental XXXX excluding products. PPE consumable currencies QX in

which We of currencies, this XX.X% QX issues growth also reported experiencing with compared are strong chain quarter local sales time. sales XXXX. not of XX.X% supply significance at in our increased international In any markets, any internal

Our local oral in America, QX local with businesses with each currencies. QX regeneration, $XXX currencies bone the currencies year. in also America growth that sales note our North the quarter at of approximately categories, specialty strong versus in in third namely growth XX.X% was in sales internal dental North a surgery, XXXX specialty and And products dental In internationally. I'll was in orthodontics, million endodontics, of Internal XX.X% over internal implants, X.X% was prior Growth specialty grew local these of of dental all well internationally, of grew sales products both quarter. doing and XXXX, strong

sales the and growth currencies. was period local increased $X.X Our with year. same last Global XX.X% billion in during XX.X% Medical QX Internal sales was compared

America business international quarter year, including equipment, North experienced and COVID-XX versus laboratory American declined across product in versus test XX.X% last growth while increased growth growth pharmaceuticals. sales third of sales in North of particularly sales medical the board our year, internal the sales strong Medical Our the year-over-year. prior X.X% kits,

local value-added expect of $XXX test were million this Medical the Delta The $XX was were tests. internal Value-Added with I'll and in and Technology by and also as primarily That Schein of the Software moderate the by in and sales internal currencies businesses. result One's increase in Global Value-Added and surge of COVID-XX million related exclude particular an revenue year Ascend kits local $XX Value-Added X% by quarter XXXX. X.X% quarters. driven levels in and and quarter Internationally, primarily prior XXXX. of second year, third growth sales Services in driven increased to kits of driven flu COVID-XX sales the sold our and Services in upcoming X.X% sales One QX in Excellence during test Henry in local Tech million, multi-assay test of currencies. growth as $XX.X in about Schein was $XXX.X growth the the support includes the in in COVID-related was QX combination XX.X% $XXX currencies from internal products, first we increased quarter America, Dentrix subscriptions we with note, demand local you in with sales the compared million In versus strength million with approximately Practice North This in the the these in variant, compared growth and million that technical PPE well and this by of increase kits to internal test business If to the prior Dentrix Services of XXXX. currencies Henry Services Technology year, includes kits compares reopening UK. in

the available had note, was million repurchases. the stock diluted of also third and approximately stock a total the an repurchase third market buying continue average the open during at at end common $XXX of these approximately We share $XX.XX EPS. to authorized quarter, expenditure per repurchases in quarter of future Schein quarter, impact price immaterial million. for The approximately XXX,XXX shares to of in $XX shares I'll of the for Henry

as also, we from well we and pretax million, a of $XXX.X quarter not access compared a disclosed in impact XXXX on a are unreasonable stability. material by EPS provide EPS. for third XXXX of you EPS initiative, unable diluted without have our and XXXX my non-GAAP diluted providing were take financial an GAAP time, to we well flow related XX% third non-GAAP estimated cash I'll diluted operations we significant small remarks $XXX.X to operations On liquidity, this non-GAAP introducing part for to XXXX conclude have and we from as that was guidance be sheet, as to flexibility flow, corresponding our diluted look guidance. reflecting Operating continuing quarter including million the costs I'll not XXXX a guidance balance had effort the cash $XXX,XXX, year. providing a If continuing the At last our to credit XXXX at EPS to as as continuing of XX% expect to from restructuring effect. previously as basis, note tax ongoing course, restructuring initiative the $X.XX growth $X.XX, did that EPS of operations. of QX for updating our

preliminary introducing next estimate for provide are to from same XXXX we costs Also reason an are impact. of XXXX as unable as GAAP providing tax well restructuring Turning unreasonable guidance EPS this we're without we time, non-GAAP for diluted the at corresponding for XXXX EPS year, to estimate continuing not diluted XXXX for as operations. guidance the and

diluted in the single-digits growth be continuing from continuing expect We over EPS from operations. diluted mid- to XXXX operations to XXXX high EPS non-GAAP non-GAAP in

conditions, if that current current market with does there previously exchange call no include XXXX Our are and EPS potential the Guidance any With let the rates current of impact adverse stable remain consistent announced future turn guidance also expenses. continuing are changes future assumes to markets material me currency as non-GAAP operations summary, that back or over the Stanley. any, restructuring for generally share as diluted with and end both and market consistent not but foreign completed well or COVID-XX. for with acquisitions associated acquisitions, that is XXXX, are levels repurchases,

Stanley Bergman

Thank Steven. you very much,

thoughts some on provide businesses. of let's our So each

solid international quarter focus key reflect gains sales and merchandise without revenue North in in of Team heard. consumable American And and recovery. Schein. markets is by believe growth which bolstered COVID-XX-related Third also dental currencies sales equipment third flow North continue growth as continuing Overall America PP&E dental Consumable as products local internal merchandise with improve, patient quarter. was with the traffic. by was solid, to coupled in and was consumable a the on this noted, and merchandise you we execution steady quite in

to pre-pandemic most and is at Here currently in claims American over. with Schein about little general pre-pandemic similar XXX% once U.S., dropping processing balance, a shows a Dental little One believe data to statistics levels, These traffic the XX% reported are, and we dental recent improvement. again, but market billings a of levels, around Similar world, countries kind the in of some the stable data of slightly sequentially some Henry are about Association through associated behind, patient and on on the be second those stable ahead, little are we quarter, the the side. pretty

in delays quarter by very delivery business the as demonstrated traditional of the quarter, were prior may in Overall, equipment are Australian weakness New lifted well the are equipment Zealand that the has U.S. quarter But lockdown the some time, recall some UK, of seen discussed have and I we lockdown. that third we lower Australia back with we normal cities business. and consumable we New than in for noted, a very on the posted main a time in better. And serve third growth right a market to been resulted quarter. many to slightly performing is sales, although third Zealand when back as are is But short normal, the -- it quarters. markets Most dental of modest merchandise had demand and to Last our period recover You we and reporting recorded sales installation we sales at the in now. and record dip international facing of today. sales. the in and equipment comparison year last is This quick strong in the largely markets

towards to year. manufacturing the of those next lead of delays We pronounced expect the returning be quarter second normal to fourth times with impact in half the

differences planning equipment quite primarily in our Manufacturers with times said, accurate as to delays As namely as and is workflow as advancements efficiency. of the delays office delivery bad bullish some well diagnosis to digitalization impacting construct extremely delays Canada, and of in even equipment on is dentistry traditional manufacturing America, quarters. solutions This about between longer from the such, treatment Again, Among digitalization seem prospects really with year us long-term the end along their timing we in in creating the future more of quarter. are that important. of do Dentists World, sales digital at installation focusing DS are dentistry. event each the traditional flow North remain the equipment in are We of Vegas, product, the Canada these believe XXXX. which reported although in continue U.S. the end stable. manufacturers' and Las was trends have This but the in virtual took at That provide right dental to dentists will invest the the in is U.S. as we in Dentsply adequate able installation place September be of not technology and highlights promote practices.

So with current and for person Schein be once site on to meeting in customers. exciting and it was again prospective Henry

technology our sales expect the the positive quarter, a of not discussed from high installation believe but We more at on the much challenges pleased show, features fourth the the the we of will supply and States. United impact DS have are and results the delivery we of very third an products impact generally modest did that with in in which do note these to here equipment, important chain in It's I quarter. somewhat

digital on the the So with from from in specifically who remaining by manufactured fourth chairs, which lights, other the the quarter traditional through manufacturers in to year. products other side, we one are slack flow challenge expect equipment market our of the States results last exiting good Dentsply large fill the and and manufacturers United a units largely the

merchandise look, about of dental, questions Now, received and written pricing we've have for on lots equipment. been comments and --

materials may customers as the higher increase some and that of as expect items through result in for in these higher prices manufacturers as Unfortunately, can typically costs. term our increases. a well transportation we for we raw So certain scarcity this labor work near pricing pass on as

important, to to with price However, we price alerting increases upcoming to what's limit very suppliers our is customers and and customers, improve our to communicating changes. Schein our chain working to as efficiencies best Henry we're supply this and can committed to these

can impact are resulting all this issues, We customers. doing higher we raw mitigate for inflationary material our mitigate shortages, to from that transportation

the year. now specialties. So dental local the this specialty the well performed have currencies growth dental sales products to turning internal in sales the year, did double-digit in quarter extremely of specialty our as during with Sales versus good prior Remember, prior category we well.

the pretty specialties oral the regeneration Approximately implants is our bone from compounding. good includes dental this tooth X/X products. revenues of So That are our surgery implant-based replacement and business. products

bone value premium prior the versus year. implants lines, our saw by Horizons largely and driven we and growth is regeneration Camlog also where share success strong Our

product surgery, key Our dental solutions solutions we pipeline given which time, penetrate endodontic any months implant leadership products XX new and XX us At for well number categories. further as to have underway, to orthodontics bring in of specialty was we market full launches both position a X proven commitment in delivering to exciting markets. a that's remains takes as rollout. as and the all to a we typically rich, an rich bone oral both continue and regeneration market includes and The new and

our Arch the during to value to market. quarter, North in we implants Progressive the with price third implant prosthetics And enhance launch our of implant CONELOG offering quarter, segment the America. full expect addressing solution the we multiunit the fourth During market of launched our Fusion

aligner into countries. our In update clear features reveal visualization our the X.X, we in process is which treatment the tools. Studio orthodontics planning to and Pro of in priority more Our than dozen global now launching an X U.S., are with software, advanced reach

We expect international in markets software the to certain year. launch next

So business. specialty we're businesses, medical Dental overall, now and globally, of very pleased about the talk our our performance our we'll distribution business with dental

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We increased the serve. of accounts also have we number

think a I good first of the know, accounts. job quarter, has COVID-XX-related noted. products done existing penetrating accounts pretty picking Sales third up lumpy, be Group lumpy, all quarter second quarter as the and year, very and expanding in Medical strength with in also in you the again the as should falling in off

Delta In and trends within upticks unpredictable addition, in a various the spread seen geographies. services cases declined These tests between with testing the sales volatile bit. being of also variant pricing for COVID quite reflect and quarters has

products, the these test diagnostic COVID-XX we year We of also quarter few volatility to sold sale This ago, continue. price whereas flu for included a year's continue third very to expect tests. of

to office-based noted, to practitioner particular in In per the price quite important sharp. the of help result are somewhat unit volatility symptoms. in test as the office, be differentiate overlapping although customers selling Tests viruses that in fact, we environment COVID-XX these the the X can flu office-based combination are physician our

scheduled. physician moving aside, is being now center, acute care ultimate ambulatory to setting, I this to the are is putting we process market that But from our think positioned setting care the office and well is the the particularly as settings, something business optimistic, in have shift well we would procedures medical of move are the as that that our positioned our with to Also, to are belief optimistic future We share. to months to about continue our medical market off continue care say, and that elective surgical even emerging. new extremely noted, grow group alternate structural put for XX coupled direction, the that I procedures patients are

regarding businesses. So closing distribution one remark our

personal normal believe practitioners. demand As a we entered have medical previously PP&E we both excuse by me, for envisage dental the of products and products, new discussed, for have protected We use we elevated expect levels. the the PPE We not an future demand to the demand health protocols. unit foreseeable by level at -- driven revert for continuing do pre-pandemic will usage for that care new

expect for price volatility continue. we However, products PP&E to

So Value-Added businesses once Services Schein high now this largest during revenue. sales the quarterly One, contributor record quarter, to in our Henry segment again and performance the the looking at Technology recorded of the

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And create We services patient stream, and in cloud-based these continue sale efficiency scalable book is full to the a of this growing. recurring percentage One on focus reoccurring total recurring the of sales we Schein good in that not stable the I the is business noted, to engagement sales and Henry practice of upfront, the drive revenue Short the part business. flexible, more but revenue for as do to field term our impact services. revenue and of very cloud the growingly our really migration solutions may software to

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Lastly, practices especially the driven incremental are value also that are businesses growth customers. businesses. provide investment in strong by our we added this we components Practice pleased And were Services quarter, key making the of their with our

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area an shared for businesses for all we've As as topic and social important for of investors. company, well an and quarterly calls, us society or our governance, as we discussed as ways innovative value focus Henry past important our new create and find of ESG environmental, our is during and to for Schein

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aware committed and we climate-related our will by set I towards more science-based targets. zero efficiently report as footprint next With reporting think as achieve and global specific accordance financial goal XXXX. our with on emissions respect our task carbon standards now We've this, in force to should year, to the XXXX. net environmental next reduce side, well of operate year we disclosures working and aim to GRI to to issuing initial our also SASB shareholders in be

and signed this the of we're part have and leadership in for centigrade We continue CEO towards will gradual and sector the do Climate time, visualizing that been X.X a date, participate now Of resilient healthier the healthy, a Alliance which the be campaign, carbon action catalyze gradual what zero the from we doing. cumulative. to X.X°C race campaign, committed and our Leaders planet. disclosing are to recovery will private Forum for zero seeks for and these course, Henry to zero tangible ambition Again, the a that business for long and World we're and has Economic to race Schein areas to but

members, work members Regarding asset. are our under of course, our, or social team shine our greatest Team Schein

committed meaningful of on to very We a during has are issue big and a which become providing resources, important related with wellness dialogues, connection mental hosting creating education a topics. culture our which open health, for including COVID, allow team

pay in us particular populations. is are as of culture, increasing diversity equity underrepresented inclusive to but ears that including and roles, providing is the women of to and encompasses for referred care important, internally we and approach what groups, as health a the society, important, inclusion, to more have holistic We part representation recognizing access service important, a focus very maybe talent, underrepresented marketplace D D&I, that leadership to area historically

been, for have this to a again, committed time. long We

The response played ready pandemic and We the and healthcare on build this help more lead with for and role being COVID sector and helping supply chain. information. And during important supply founding any have Happy pandemic a more to is to in to if a a preparedness. chain commitment was our to think, disaster stronger, to private preparedness investor resilient member manifested and PSCN an network. pandemic continue questions provide has that network, I longstanding

over to largely provide programs. starts our committee, Board independent and and corporate commitment governance diverse Our of governance ethical oversight nominating with and ESG who our Directors our

through business Team team In our and standards members of conduct. partners partnership drive shine addition, suppliers code Schein a and customers, and with of values, supplier global culture NGO our in compliance worldwide ethics

one a year to have this We've to over value and provided that the we for alignment with it's think doing why important is needs But company, lot. years as committed of decades I ESG the reasons XXX believe decades. to as a to increased ago. that that are society, understand been good, that's we, referred shareholder Benjamin been Franklin committed each for committed by doing of So to well have

have. and in to I Steven may that that with ready mind, answer particular So questions any investors are

Operator

[Operator Instructions].

Kreger Your first from with John question come Blair. William will

John Kreger

a to and a your bit the move footprint shared And you're going plan? is ask elaborate little across sort distribution my follow-up on One just Distribution I'll just be to mean you And Can global? more now that going of off. that get networks? to Does

is second The Steve, you. for question,

QX? the we lower? about because there equipment going a just on think bit I in in Or of earnings. sequential guidance implies basic else that Should think of as step something a little being down is

Stanley Bergman

address will part Steven the second question. -- the second

already. number areas So in of we a have shared services

been of service. parts end. Our particularly for has many shared there other management the a inventory service, distribution business, But our our customer telesales systems, example, are front

front services, order management equipment contracts, example, customer the end processing, service, of For order financial processing.

to dental interfacing our our global -- for throughout are because medical our We area and others and already it provide management, front common are need system to carefully. launch corporate-wide areas, next dental. the digital customers, better of Some big with I and medical. is out middle company These in and that specific we e-commerce is of towards The related costs preparing operating parts the drive out and that customer think, the management new under be we'll end, it U.K. common that is year will then geared platform of digital in rolled service.

a large experiences through long story customers our and very already of are and medical that through a midsized went customers ago. going to plus cut lot our decade undertook short, a So our team

provide lot our dental a these learnings team. team medical our there's are of So learning and that can

and with been broken us our we've are North as working who's manufacturing in businesses. for Specialty David experience who's significant So X, with distribution. closely also run Connett, Albertini, our has responsible medical and led up our for And together René by and Willi very business, decade who's with American business business decades; well into Andrea internationally, a about Brous, all Brad for our they

well our very, to XXXX works plan to -- strategic be that very will XXXX. So internally, advance unfolding in it for

Steven Paladino

question, tackle of second John. your the part I'll Okay.

QX So guidance.

I'll things guidance But $X.XX. Remember, our equipment wanted a the to $X.XX the year, and significantly. quite few floor we availability product. specific to enumerate. that at a up, $X.XXto QX, of year, and full for First, for we're North of I'll is note that American consider is now gave One we

bit XXXX. this for still a to estimates we'll product have get much We QX how and America. really as was But North there is product little the uncertainty equipment. exactly delayed volatility of in into being for And traditional

So conservative we're there. being

fair of on little test We we're a volatility One is seen items amount have trying be X a product COVID on. bit to also conservative kits. that

QX moderate test You in strong well as also kits moderate a in a sales can We see QX. QX. bit to it's do had a been very moderate jumping expect around. We to to PPE COVID PPE we expect But do as bit pricing -- pricing.

some you QX also the that year, been if fully the numbers. last per remember, of there's considered, guidance. XXXX are inflationary that tax Obviously, I'll notes EPS to and our last because nonrecurring. And any both share, and note some say that inflationary. we EPS $X.XX settlement year, compare obviously was price there's items in thought conservatism was So on that XXXX had finally, the built into and I'll

Operator

question Jeff Johnson is The next Baird. from with

Jeffrey Johnson

be following on your through times. your increases talked those fully hold increases mean check. pass there. not to price about couple from the I in manufacturers pass users? about know talk of may in your hear maybe those rates to end a point can here price But you've to and up last few ability increases you've you raised your to we or it Steve, to to your may I able the that dental these price efforts customers. last maybe through you in But end alluded weeks,

would those be So helpful. topics just both on

Steven Paladino

Sure, Jeff.

and on increases can we we those comment also were there specific we the to for and of for in It's competitive -- we're to specific prepared the like things. best baked a was on not Stanley guidance guidance, we in much that believe inflation. X%. on to the Generally, do at last reasonable to Right range. bit see is user, in inflation with probably little end that. remarks, a To of the is So we're coming other labor our maybe terms price all of week, how also do we little this for just again, pricing actually, a assumes reasons. it's earlier customer. X%, and feel pre-pandemic other time. single is into specific X% bit costs, customers. again, can inflation through it's in limit With But give our to X% detail, going this probably estimates his pricing manufacturers questions XXXX, conditions a things. to But low is -- pass And know on And respect said some higher, try product what I that, than in now, customers pricing bit digits, and not it's working higher on as to times, and

Jeffrey Johnson

That's just right. a All helpful. And quick follow-up.

high mid still on America here We're a talked -- dental you kind stable. October? fourth Just level X in globally kind seeing are about just into the at that quarter? color on of -- being stability month you fairly volumes And North any and of was How XQ. very

Steven Paladino

see I'd for I the continued very everyone market patterns line. continued it to of the Sure. and of strong be show on specific customers. for changes results. It's good October conditions But dental, sometimes, saw then of strong that common to because results, we say very ordering careful, month progression company. a though, would a definitely to October in the

Operator

Jon next with come from will The Stifel. question Block

Jonathan Block

a then more level. Maybe and just a near high term

on what roughly Steve, the estimates. only gross margins, was just line that line medical number do quarter broad pick solid fourth the it's our all a to big, from? the bps quarter, certainly talk term, it into Maybe So into it And XXX PPE. top to just was big on bounce expect sort that and be. the and below mix? can to back trajectory that, we sequentially 'XX? and thing Was you Was bottom and near down maybe if of

Steven Paladino

PPE all, significant gross would declines. the the The had profit, pricing in year-over-year to profit impacting driven primarily we gross bit continue I pricing would gross that to in adjustments. on second is point increase of products. of the thing by Yes. mix. was have a first say products little inventory And I and margin it's a PPE lower

So dollars mix. mix contributing well as margins, impact does much as not while not an it is impact the absolute to -- as on it's as because the big the it now

will shift. mix, They've And going us, lot be QX, is those be it's our go. goal to that during margin. Jon. a help forward, So we moderated technology And there -- positive to sales continue but higher-margin towards certainly in higher a goal the expect primarily a improve is seems PPE these carry which to products, the a little also bit in and QX. mix to do behind businesses, drive still margin And we pricing to specialty with think more issues

Jonathan Block

appetite industry M&A, your, going M&A. we've in look experienced or your in one. as What the the from that That's And versus seemingly the alter one the now so. environment just what just the has multiples COVID helpful. wants forward segue to the next XX like Probably all started industry? good just, do past months Stanley, Maybe hopefully COVID other a for into stabilize.

Stanley Bergman

maybe businesses to time, to be. our specialty to we're and distribution namely to our new there's create some area But the to Yes, not advancing our multiples as to services. products and to areas, namely software, would our on opportunity platform, as of value-added of products parts add where And we same, extent. to the increase synergies to us like lots services our be to bring same M&A Jon, continues base. specialty world strategy the -- the And for at customer strong

think our M&A pipeline said Having any remains a again, Obviously, until is quite remain not cannot optimistic the there's announced. we Steven's that guidance we there's And no full. that, particular from there's I for quarter. And numbers nothing deal commit area. quite to these deal. So you M&A heard that about in

Operator

Jason Sandler. do final question, have come for will Piper from with We and time Bednar question X that

Jason Bednar

you start with I'd related couple Steve, on like to items of to guidance. a

I'd about trying in your the real next business margin items of stock First, take and here curious for an those earnings today time the to expansion headwind then margins for currency in within year when also do estimate comes you're of level have impacting should things the comp. we into were in and on thinking in for growth kind be next guidance account that And discussion, how year? And mix 'XX? confidence that the guidance what you really respect with like a to operating and items step-up here quarter business be it to assuming

Steven Paladino

Sure.

lot You asked questions. of a

I to note growth, that when sales wanted I prepared $XX.X if I the just was in said XX.X% million inadvertently hit -- Let's can By I of them. see growth. the describing remarks, I the sales when I all way, technology growth when meant

foreign it off look have When of guidance normal the to overperformance because well as With is expense, higher full than correct was you compensation any exchange a the change preliminary year. things. stock of QX in to because major as preliminary of that budget, in not budget. QX based We We're at the assuming XXXX so of there's our that. just guidance, couple So do respect guidance. a

orders in will in those We'll on also, you on me uncertainty traditional some else to also that benefit to QX of a we're QX, of tailwind something that headwind of the some in questions? expense. normalized That the QX XXXX. installed or So said, in for a get be be the on timing, in cover, the bit it'll but will kits. see projection sub-questions I I you of installed on there XXXX. like Jason, a as Because your test lot based be Did get new we on that want answer? of caught trying be had compensation XXXX us, bulk up the equipment little a because conservative stock-based of can't And sometime XXXX timing

Jason Bednar

Yes.

just were procure extend I help ago. suppliers? product 'XX here Sorry, And on get like I resolved, bring into back making this I expansion was the guess, just think on where I level, proactively Steve, no, before what the challenges to to near is mean, it's be then to next coming your basic can confidence end year, in some a this but than from just into at anything you bit mitigate it dragging deeper fully you'd point on in there, months were you you did. one there. you -- challenge but high it trying on there other issue, I for to maybe international elsewhere, hitting really really deep guess think may few margin a just you from term, a do equipment also 'XX? it alluding did sounds look a point to

Steven Paladino

a to make and Maybe pass it Yes. comment then I'll Stanley.

from the we're hearing is this impacted So right what manufacturers now.

is fully what we the all insides normalized second be don't XXXX. half detail. it But remember, until of of So of telling won't see they're the us

little a and if But comment a Stanley give maybe possible. turn quickly that. doing are We another things demand fulfill product to bit get more I'll we to lot as to on more product as can see of bring it different to

Stanley Bergman

talking Jason, All United the available and units Steven. other equipment you, units, readily traditional in the available States, outside lights. about of chairs, are are United lights Thank equipment Yes. and States. chairs, we is the

market. significant share for is manufacturers investing with or capacity. with where equipment, in simultaneously units business happened practice. be manufacturer particular actually result up lights a practitioners demand exited a and practitioners Coincidentally, situation direct in and/or market This also dealing This increase delay we're chairs, whether not equipment, Other of a our ours scaled traditional in have their lost. So an the of a construction. their will there it's gaining

this think issue. economy general I is a

a several if practices, that there the So to few would them. would we be had quite even take ready equipment, be not

are talking significant issue we're experiencing et certainly to with chairs, general international these that away, but flow a us And product. where think with want products product. can't We're cetera. imaging, non-U.S. need I providing So right delays. very manufacturers doesn't like steady about products an us major equipment, units -- a this of our the don't manufacturers digital get not we're add it There, in not supply we with or mix. Perhaps impact happy additional here. is and to manufacturers everything the we It's lights

general, in do We private own have happy are not that So large to our with have we manufacturers equipment our line. brand We for equipment. of the equipment. don't intend

us are that we our the manufacturers happy we so major supply And need. equipment with will

it by this as will mid-next as we hearing been manufacturers year. moving expect, normal for increase with in product On are we're manufacturer around. If give what another information to be us a satisfied, even demand, can't we'll the there, consumable dislocation. overall, And given and the we us be manufacturer. But we've equipment some some side, there to is move we need, to back --

bit let went very than minutes the So for was minutes remarks, much to over, think scheduled. in. participants. few by X Steven, are we thank we prepared me you the apologize just saying you with end spending which But little calling I but on I a a more for with us Thank

As that arena, services medical, business, kinds momentum going well. board, it's the our great these whether we feel are the build from prepared we in extremely optimistic can about of all answers, the of is value-added our software you businesses, specialty our there tell remain the our from we remarks for that and across sell, services various dental,

issues. we're chain disruption an time. Of course, but This these it. is always no doubt And -- Supply not challenges. are there. easy is working about there through There's

were writings Our the lots it's or stability sales of questions There team is about force. lots as committed. our ever been. It's stable of as

other program line, been the -- received. But are the There's of bottom force people, which sales half slightly America Bottom, it's people around over the We dental the around are X,XXX the -- the our of more have sales rest for salespeople. -- dental North U.S. did implement not lots and -- that. world, -- in because lots we are a to We we featured well North rumors. consultants program and written, lots in new features, relatively generally, lose sales moving specialty did compensation X,XXX well in America, internationally. field representatives, of half almost sorry,

We area. stable organization this quite motivated. sales remains optimistic I'm our highly in And are pretty that

Stanley Bergman

thank call in So for today. this very much you participating

any to to we you. quarter have questions, please and forward Graham Thank out you everybody reach when to Investor in I look speaking Relations, report or fourth our If Steven to numbers.

Operator

conference today's call. thank gentlemen, and in you Ladies participating for

disconnect. now may You