Henry Schein, Inc.

on your touchstone phone if you'd like to ask a question at the end of the call. If anyone should require operator assistance during the call, please press the star key followed by zero on your touchstone phone. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Graham Stanley, Henry Schein's Vice President of Investor Relations and Strategic Financial Project Officer. Please go ahead, Graham.

Thank you, operator. And my thanks to each of you for joining us to discuss Henry Schein's financial results for the 2024 fourth quarter. With me on today's call is Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein, and Ron South, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to state that certain comments made during this call will include information that's forward-looking. Risks and uncertainties involved in the company's business may affect the matters referred to in forward-looking statements. and the company's performance may materially differ from those expressed in or indicated by such statements. These forward-looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein's filings with the Securities and Exchange Commission, and included in the risk factor section of those filings. In addition, all comments about the markets we serve, including end market growth rates and market share, are based upon the company's internal analyses and estimates. Today's remarks will include both GAAP and non-GAAP financial results. We believe the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of the business, enable the comparison of financial results between periods where certain items may vary independently of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in Exhibit B of today's press release and can be found in the financials and filing section of our investor relations website under the supplemental information heading and in our quarterly earnings presentation also posted on our investor relations website. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 25th, 2025. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Lastly, during today's Q&A session, please limit yourself to a single question and a follow-up. And with that, I'd like to turn the call over to Stanley Bergman.

Thank you, Graham. Good morning, everyone. Thank you for joining us this morning. I hope that the new time is appreciated by analysts and investors, and if not, and you'd like to go back to a later time, please be in touch with Graham, and we will take your thoughts into account. The financial results and guidance being provided today are consistent with the preliminary financial results and guidance provided on January 29th. Our fourth quarter financial results reflect relatively stable dental and medical end markets. We continue to make progress as we sunset our 2022 to 2024 Bull Plus One strategic plan, which is now completed. We've seeded our key goal of and the major target in the plan of 2024 by 2024 generating 40% of our worldwide operating income from high growth, high margin businesses. And let me remind our investors there's another 10% or so of our profits that are coming from our own brands. So well over half of our profits are today coming from our high growth, high margin and own brand products. We have confidence in the underlying fundamentals of our business and look forward to advancing the opportunities contained in our updated 25-27 Boe Plus One strategic plan. KKR announced its investment to become our largest non-index shareholder, as they recognize the potential of Henry Schein. 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 with the cyber incident now in the rear mirror. As part of the launch of the updated 25 plus one strategic plan, we have simplified our organizational structure and appointed Andrea and Albertini who have responsibility for our global distribution and value added services group as well as our global technology group. The global distribution and value added services group includes distribution to the global dental and medical markets of national brand and corporate brand merchandise as well as equipment and related technical services. This group also includes value-added services such as practice transitions, continuing education, consulting, financial, and other services. The global technology group includes development, marketing, and sales of practice management software, e-services, and other products and related services. We also appointed Tom Popek to lead our global specialty products group. which includes manufacturing, marketing, and sales of dental implant and biomaterial products, endodontic, orthodontic, and orthopedic products, and other healthcare-related products and services, as well as management of our corporate brand offering, which is essentially distributed through our distribution group. We expect that these complementary businesses will drive growth by leveraging our current product portfolio across our entire customer base, providing new products and services to our customers, and growing our e-commerce business. I think the relationship between each of our groups and the driving of synergies will, of course, grow sales and related profits. We are also today announcing a change to our reportable segments. This was also requested by investors during our investor survey some time ago, and we have now prepared financial statements in accordance with these reportable segments, and they align with our management reporting and provide more meaningful information to investors on the business performance. honorable detail the performance of each of these three groups in his prepared remarks. We will continue to provide information on our high-growth, high-margin products and services, but these are now included in each of our reportable segments. And of course, it's a key metric for us to drive high-growth, high-margin profits, sales and profits. Very important metric for our 2025 to 2027 strategic plan. We'll provide you with separate data on that. Now let's turn to a review of our key business units. Let me start by reporting on the global distribution and value-added services group. During the fourth quarter, we continue to see relatively stable patient traffic. Market growth for dental and medical products continued to be below the long-term guidance range we provided at our best today, partially as a result of customer migration to value-priced products. Now, if we look specifically at the U.S. dental merchandise growth, which was strong, excluding sales of PPE, personal protective equipment, and impacted by a lower prior year comparable offset by the midweek timing of Christmas. Ron again will give you specifics later in the call. On the U.S. dental equipment sales, which increased double digit and benefited from the deferral last year of some sales in the fourth quarter of 23 into the first quarter of 24 as a result of the cyber incident. We achieved strong growth in traditional equipment and parts and technical service. Digital equipment sales also increased with unit growth quite good, offsetting some price declines. On the U.S. medical business, results reflect a late start of the flu season and lower sales of vaccines, PPE, and COVID tests. Our home solutions business performed particularly well during the fourth quarter. In January, we strengthened the business as we completed the tuck-in acquisition of Accentus. This is adding to our offering of continuous glucose monitors, an area of the home care market, the home care buy market, that we're quite bullish about. Now, we've increased the annual run rate in this home care solutions business that we entered a couple years ago to approximately $400 million with significant amount of that $400 million coming from internal growth. Let's take a look now at our international dental merchandise sales which grew strongly with good growth in Canada and Canada now is included in the international group, dental group. Strong growth in Canada, Europe, Brazil, Slightly softer growth in Australia, New Zealand, and Asia. International equipment sales growth was solid. Stronger growth in traditional equipment compared to digital equipment, which gained good units, but digital was impacted by pricing, all similar to the U.S., a global trend. But overall, Our equipment business was quite good this quarter. Right, now let's turn to a review of the global specialty products group, which had solid growth in dental implants, biomaterials, and endodontics. Core businesses in this group did well. Our new entry into the orthopedics arena last year, well, we did have some orthopedic products before, but the significant investment we made last year also performed well. This growth was offset by a decrease in the orthodontic sales, and we're addressing that through restructuring, largely a result of a product, an important product going off patent. We have a new product coming. Actually, we have it in place now, and it's gaining some traction in the orthodontic field. Implant and biomaterial sales in Europe continue to be quite strong. especially in the DACH region, that's the German-speaking region, where our BiHorizons Camlock products continue to grow well. While the launch of BiHorizons tapered pro-conical implants in the U.S. is proceeding well, the initial sales are largely coming from product conversions with existing customers, resulting in modest incremental sales. But we expect the tapered proclonical implants to be a way to generate business from new customers in our implant business. Overall, our sales of dental implants in the value segment posted very strong quarterly growth. The SIN product line posted solid double-digit growth in Brazil, and we continue to roll out the brand across the U.S. to serve the value segment of the market Our endodontic sales growth was strong as a result of our expanded sales focus through our U.S. distribution sales channel of the Edge product offering, as well as some new product productions. A little bit more on the orthopedic business, which continues to perform well, including our TriMed acquisition, which is complementary to our medical focus on ASCs and specialty customers, new products in both upper and lower extremities, as well as good momentum with a new dedicated sales team in foot and ankle health drive sales growth. So this whole area of specialty is working well for us. We will deal with the orthodontic challenge. But overall, taking that out, the performance is quite good. Now, if you look at the technology group, while overall sales growth was low, we had strong operating growth in the business. Sales continued to perform well in cloud-based practice software. That's practice management software. And revenue cycle management also did quite well, partially offset by the sunsetting of certain brands. The whole idea here is to drive towards common brands of each type of application. We lose a little bit of business along the way, but we can provide better service and, of course, greater margins. We now have over 9,000 customers subscribed to Dentrix Ascend in Italy, with year-on-year growth of approximately 6.5%. It's very important to understand that this is a shift from an on-prem sale to a SaaS model which creates short-term headwinds on the revenue side, which is outweighed by longer-term benefits from higher recurring subscription revenues. This model is working quite well. Cost efficiencies in the business are there. They've been reaped more to go as we merge brands, and this is driving technology operating margin up. This trend we expect to continue. Now let me turn the call over to Ron to review our fourth quarter financial results and our 25 guidance. Ron, please.