Henry Schein (HSIC) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered solid results with strong operating cash flow and expanding gross margin, supported by high-growth, high-margin products and recent acquisitions, despite ongoing recovery from the October 2023 cyber incident and challenging economic conditions.

• Sales trends improved modestly, but recovery from the cyber incident was slower than anticipated, leading to a downward revision of full-year 2024 guidance.

• Strategic acquisitions, including TriMed and Shield Healthcare, expanded product offerings and geographic reach, with further synergies expected.

• Announced a new restructuring plan targeting $75M–$100M in annual savings and increased share repurchase authorization by $500M.

• Continued execution of digital transformation and efficiency initiatives to support long-term growth.

Financial highlights

• Q2 2024 global sales reached $3.14B, up 1.1% year-over-year, with acquisitions contributing 4.0% to growth; net income was $104M ($0.80/share), down from $140M ($1.06/share) YoY.

• Non-GAAP net income was $158M ($1.23/share), down from $173M ($1.31/share); adjusted EBITDA was $268M, compared to $279M in Q2 2023.

• Gross margin expanded by 101 bps YoY to 32.5%, driven by high-margin products and services.

• Operating cash flow for Q2 was $296M, exceeding last year’s $274M; YTD operating cash flow was $493M, up $192M YoY.

• Operating margin for Q2 was 5.1%, down from 6.5% in Q2 2023.

Outlook and guidance

• 2024 total sales growth now expected at 4%-6% (previously 8%-10%), reflecting slower economic recovery and cyber incident impact.

• 2024 non-GAAP diluted EPS guidance lowered to $4.70–$4.82 (from $5.00–$5.16), representing 4%-7% growth over 2023.

• Adjusted EBITDA for 2024 expected to grow in low double digits vs. 2023, but below prior guidance of 15%+ growth.

• New restructuring plan targets $75M–$100M in annual run-rate savings, with charges expected in H2 2024 and 2025.

• Expect higher EPS growth in Q4 than Q3 due to restructuring timing.