Henry Schein (HSIC) Morgan Stanley 22nd Annual Global Healthcare Conference summary

Market trends and demand outlook

• North American dental market remains stable, with some softness in high-end procedures and implants, expected to recover if interest rates decline and economic sentiment improves.

• Equipment business is stable when compared to pre-pandemic levels, with 2020-2022 seen as an anomaly; pricing has stabilized after previous increases.

• Promotional activity and price competition have stabilized, with some categories like gloves seeing more price sensitivity.

• Share shifts among DSOs are stable, with some gains in smaller DSOs and episodic buyers; traditional full-service distribution is holding steady.

• Traditional equipment demand is stable, while CAD/CAM equipment is showing signs of stabilization and modest growth, aided by expected innovation.

Financial guidance and recovery

• Fourth quarter is expected to outperform the third, driven by market share recovery, new implant launches, and normalization in technology business.

• New technology products and restructuring actions are anticipated to benefit revenue and bottom line in the fourth quarter.

• Cyber incident recovery is ongoing, with monthly improvements and the gap narrowing, expected to be resolved by mid-October.

• Restructuring is addressing inflationary cost pressures, aiming for incremental EPS and cash flow growth.

Specialty, innovation, and business mix

• Specialty dental and technology businesses represent close to 20% of revenue but are expected to contribute about 40% of operating income by year-end.

• Own brands, including specialty products, account for about 10% of sales and are highly profitable.

• Recent acquisitions in endodontics and orthopedics are performing well, with robust product pipelines and growth.

• Implant business is positioned across premium and value segments, with new product launches and acquisitions in Europe and Brazil supporting growth.

• Orthodontics remains a small segment, but recent acquisitions are expected to enhance the clear aligner portfolio.