On Tuesday, Henry Schein (NASDAQ:HSIC) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/812842108
Summary
Henry Schein reported strong first-quarter 2026 financial results with global sales reaching $3.4 billion, reflecting a 6.3% growth year-over-year.
The company continues to see market share gains in the U.S. dental and global technology sectors, offsetting softness in the medical business due to a light flu season.
Strategic initiatives include enhancing product and service offerings, particularly in AI solutions, and aligning commercial efforts to accelerate growth.
Henry Schein is committed to its bold plus one strategy, focusing on operational execution and a culture of continuous improvement.
The company aims for high single-digit to low double-digit earnings growth and an operating income improvement of over $200 million by the end of 2026.
Management expressed confidence in achieving their 2026 financial guidance despite potential macroeconomic uncertainties, emphasizing stable end markets.
Operational highlights include the rollout of their e-commerce platform in North America and strategic acquisitions to strengthen their implant product portfolio.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to Henry Schein first quarter 2026 earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a Q&A session. Please press the star key followed by one on your touch tone phone if you would like to ask a question at the end of the call. If anyone should require assistance during the call, please press the star key followed by zero on your touch tone 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 Vice President of Investor Relations and Strategic Financial Project Officer. Please go ahead Graham
Graham Stanley (Vice President of Investor Relations and Strategic Financial Project Officer)
thank you Operator and my thanks to each of you for joining us to discuss Henry Schein’s financial results for the first quarter of 2026. With me on today’s call, Fred Lowry, 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 Factors 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 our 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 they’re also in our quarterly earnings presentation posted on the 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, May 5, 2026. 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 and A session, please limit yourself to a single question so that we can accommodate questions from as many of you as possible. And with that, I’d like to turn the call over to Fred Lowry.
Fred Lowry (Chief Executive Officer)
Thank you Graham and good morning everyone and thank you for joining us today. I’m honored to lead Henry Schein as a CEO and I look forward to building on the strong foundation and proud heritage that define this company while at the same time taking a fresh look at people, process and technology to advance a culture of continuous improvement. I’m also pleased to report our strong financial results for the first quarter, but before we turn to these, I want to highlight some key observations that I’ve had as I progress through my 100 day plan. First, I am impressed by the strong competitive advantages Henry Schein has built over the years. Globally, we successfully serve hundreds of thousands of independent private practices with responsive, consistent overnight delivery. In the US we are the primary distributor for most national DSOs, a position that reflects years of being a trusted and reliable partner. Our reach provides us with supply chain flexibility and sourcing advantages as well as access to a broad global customer base for our suppliers. Secondly, pursuant to our bold plus one strategy, we deliver an extensive integrated offering which includes a broad portfolio of quality corporate brands and specialty products, software equipment products, technical services and business solutions. This differentiated offering makes us the platform of choice for office based practitioners. And third, our ability to deliver an excellent customer experience really sets us apart. Our field sales consultants, they really know their customers deeply and are genuinely invested in their success and they’re supported by our equipment service technicians and when you put that together, we provide a service that is difficult to replicate. When you put all these things together, our technology, our products, our value added services and our people, we create a significant competitive advantage which we will continue to enhance over time. So over the last two months I’ve immersed myself in the business and I’ve spoken with lots of customers and suppliers and employees and a few things that I’ve heard One theme is clear from customers the dental market remains healthy with demand continuing to outpace supply. Therefore, efficiency and workflow optimization are important for our customers to be able to see more patients. What’s encouraging is how well our strategy aligns with our customers needs through the development of open architecture integrated solutions that create a platform allowing our customers to deliver better care while running more productive and more profitable practices. Turning to the medical market procedures continue to shift to non acute care settings, which also aligns well with our unique capabilities to supply the right quantities to all non acute settings, including ambulatory surgical centers, community health centers, private practices and home solutions. I’ve also received feedback that our dental and medical supplier partnerships remain another source of competitive advantage differentiation and I’m committed to providing a broad product offering to our customers supported by strong national brands as well as through our own value added own brand products. Suppliers recognize that our deep customer access and trusted relationships make us the partner of choice for driving growth in their businesses. Through exclusive and targeted promotional programs, we create value for suppliers and customers alike. Now, while it’s still relatively early days for me, I intend to sharpen our operational execution, build a stronger performance culture and create a leaner, more agile Henry Schein, allowing us to respond faster to customer needs and translate our market strength into accelerated growth and improved financial results. As I continue to dive deeper into the business, I expect to identify opportunities to drive growth, to streamline processes and to enhance execution. I’d like to highlight a couple of examples for you today. The first is to enhance the cadence of new products and service offerings. This includes AI solutions which are transforming the industry rapidly and Henry Schein has a tremendous opportunity to develop further value enhancing solutions. I think you’re starting to see this with some of the recent product launches from Henry Schein. Secondly, to align our commercial efforts to accelerate overall growth across each of our businesses. This is contemplated in accelerating the leverage priority of our bold plus one strategy and we’ve already started. It’s clear that Henry Schein has great assets with a differentiated platform to serve as a trusted partner to healthcare practitioners worldwide. As we look ahead, I’m excited by the significant opportunities to accelerate growth through the use of technology, improved operational excellence and becoming a more agile company. Now let’s turn to the first quarter results. I’m pleased with our strong first quarter results that reflect continuing momentum from the second half of last year as we grow market share and expand gross margins, sales strengthened in the US Dental and global technology businesses overcame softness in the medical business. The dental markets remain stable and healthy and we are gaining market share while merchandise prices have increased, particularly in the US Procedure volumes are holding steady. We anticipate further merchandise price increases in the second quarter as a consequence of higher oil prices. Dental practices and in particular DSOs are continuing to invest in equipment and we are seeing DSOs that gaining market share in the overall dental market. The non acute care US Medical market remains strong and our home solutions business continues to grow well. Our medical business had good underlying growth. However the quarter was impacted by a decline in demand for point of care diagnostic test products related to respiratory illness resulting from a light flight. Our specialty products underlying markets remain healthy with European volumes ahead of the US Demand for premium implants is being driven by strong clinical engagement, most recently demonstrated at our Bio Horizons Global Symposium last month where over 40 internationally recognized speakers presented the latest innovations in tissue regeneration, digital workflows, implant based tooth replacement therapies to more than 1,100 clinicians from around the world. Growth in value implants driven by our SIN and biotech dental businesses continues to outpace premium implants. Our global technology business again posted really good growth reflecting continued demand for our cloud based software technology solutions. The development pipeline of AI solutions has increased, and these are mostly integrated into our global suite of practice management software solutions. Last week I had the opportunity to attend our Thrive Live event in Las Vegas which brings together dental professionals to get really hands on training and education and to showcase our range of equipment and software solutions. This year we had over 1,000 attendees and we launched our next generation AI clinical workflow at the event which generated significant excitement. The broad level of interest in our AI solutions was a clear signal that our customers are ready to embrace these tools and that Henry Schein is well positioned to lead that transition. Now let me give you a few highlights into the initiatives that advanced our strategic plan during the quarter. As I mentioned, our overall operating margin expanded and we stabilized margins compared to a year ago. Our high growth high margin businesses are now approaching 50% of our total operating income and we remain on track to exceed our goal of 50% by the end of our strategic planning cycle in 2027. We are just beginning to unlock value from our value creation initiatives. These not only provide a clear path to both cost efficiencies and margin expansion, but I expect them to fuel our growth and further support and enhance customer experience. Execution is really well underway. Let me give you a couple of examples. We’ve appointed an outsourced partner to centralize select back office functions and we expect to see benefits beginning later this year. We continue to strategically buy out minority partners to unlock integration opportunities across the specialty products business. We are starting to generate additional savings from our indirect procurement processes by leveraging our scale advantage and finally, we are implementing gross profit initiatives including value pricing and enhance growth of our corporate brands. Therefore, I am committing to achieving the company’s goal of achieving greater than 200 million of annual operating income improvement within the next few years with $$125 million run rate by the end of 2026. These initiatives along with continued execution of our strategic plan will contribute to us achieving high single high single-digit to low double-digit earnings growth in the coming years. We have also successfully rolled out our global e commerce platform henry schein.com to our Canadian and US laboratory customers. We are well advanced in implementation across the U.S. with over 80% of our U.S. dental e commerce sales now transacted over henry schein.com we expect to complete the U.S. rollout by the end of August and to extend the platform to new customers after we plan to shift our focus to the broader international deployment. Over the past several weeks I have worked through the details of our financial plan. Our growth outlook combined with the progress made on value creation initiatives and a strong start to the year reinforces my confidence and my commitment to that. We are committed to delivering on our 2026 financial guidance. Looking ahead, I plan to continue learning more about the business and identify opportunities to accelerate our momentum. I look forward to sharing updates in our next calls now. With that, I’ll turn the call over to Ron to review in more detail our first quarter results.
Ron South (Senior Vice President and Chief Financial Officer)
Ron thank you Fred and good morning everyone. Today I will review the financial highlights for the quarter, starting with our first quarter sales results. Global sales were $3.4 billion with sales growth of 6.3% compared to the first quarter of 2025. This reflects local currency internal sales growth of 2.5%, a 3.1% increase resulting from foreign currency exchange and 0.7% sales growth from acquisitions. Our GAAP operating margin for the first quarter of 2026 was 5.41%, a decrease of 12 basis points compared to the prior year GAAP operating margin on a non GAAP basis, the operating margin for the first quarter was 7.53%, up 28 basis points compared to the prior year, driven by gross margin expansion within the Global Distribution and Global Technology Project products groups as well as business mix. First quarter 2026 GAAP net income was $107 million or $0.92 per diluted share. This compares with prior year GAAP net income of $110 million or $0.88 per diluted share. Our first quarter 2026 non GAAP net income was $153 million, or $1.32 per diluted share. This compares to prior year non GAAP net income of $143 million, or $1.15 per diluted share. Foreign currency exchange favorably impacted our first quarter diluted EPS by approximately $0.03 versus the prior year. Adjusted EBITDA for the first quarter of 2026 was $289 million compared to first quarter 2025 adjusted EBITDA of $259 million or 11.6% growth. During the first quarter we successfully completed a transaction that provides us a controlling interest in SIN360, the US distributor of SIN Brazil’s value implant systems. We are excited about this transaction as it provides us with greater control over our U.S. implant product portfolio, especially in the faster growing value implant market and allows us to …
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