All right. Good morning, everyone. Thanks for being here with us today. I'm Jason Bednar. I cover med tech here at Piper. Next fireside chat is with Henry Schein. They brought like half the team with them. So, we got—I joke—we got CEO Stanley Bergman to my immediate left. Next to him, CFO Ron South. Next to Ron, we have the CEO of International Distribution, Andrea Albertini. And on the end, we have CEO of North American Distribution, Brad Connett. I think you did this so I like didn't ask Ron as many questions on 2025.
No questions on 2025.
I'll get to them.
No, direct questions.
I've got four pages of questions. We'll get to it. Why don't we start with just some of the latest developments, maybe get those out of the way, Stan? You have an activist presence here. They're publicly advocating for a few things, separating dental from medical, some Board representation, cost cuts, a CEO succession plan. I don't wanna spend a whole lot of time here. There's a lot of other good things to talk about with the business, but, you know, maybe tell us, do you frequently evaluate strategic alternatives for medical or other business units you have? And then remind us how integrated dental and medical are together today.
Jason, I'm glad you're asking that question. Bottom bottom bottom line is we have an outstanding Board. I think you've known us for the 29 years we've been public. Great Board. A couple of our graduates from our Board. One became President of Harvard. One became FDA Commissioner. Another one, HHS leader. So these are quality people. They sit with us. They assess. They come from all aspects of business and from healthcare in particular. As it relates to the medical, so first of all, that's one. Two, we will take any advice from anyone that helps us drive shareholder value. We've done that all along. We have separated and spun off businesses and sold businesses. We exited the hospital business. We did not like that as a business. Not for us. We sold that a decade ago or so.
We spun off our veterinary business that didn't fit in with our strategy of alternate care sites in healthcare, in medical, dental healthcare. We—I think we created some good value. What happened after we spun it off was not. We didn't get involved. We were not running the business, but we think we did create a lot of good value there. As it relates to the medical business, I mean, we'll listen, but it has great value. It's a great business. Brad can tell you about it. He actually created much of that business. And it uses exactly the same infrastructure. For those that have visited us, our facilities, any serious investor, please feel free. We'll give you a tour. These are totally integrated, 30% or so of the same products, 28%, I think. The sunken costs would be massive.
The sunken costs were $25 million when we spun off the vet business. We started absorbing that, and it's now fully absorbed, but there's no real value in that. As it relates to the succession, we have, of course, a succession plan with our Board, an emergency program, a longer-term program. I think, if you're a follower of Henry Schein, you'll see that practically our entire senior management team turned over, retirements over the last five, six years. Succession was internal. So I think we got that covered. And yeah, we always wanna buy stock. We always wanna cut expenses, be more efficient.
Sure. Maybe I'll.
I don't know if you expected such a long answer.
From you?
But I—
No, that was short. Yeah. Brad, I'll bring you in.
The last question I'll get.
Talk about how integrated, how like the shared facilities, shared personnel. You oversee both those businesses. How integrated are these two assets?
Yeah, no, I appreciate the question. And you cut me off 'cause I've got a pretty big passion for our medical business. It was a $2 billion business pre-COVID. And like many of our peers, we had some tailwinds during COVID, of course, but it's a $4 billion distribution business and very healthy and growing. And that's even with the tailwinds of PPE, ASPs that inflated, COVID tests that were obviously very prevalent a couple of years ago that aren't as prevalent today. But our integration to the specific question is that we've integrated these businesses. I mean, we have five major distribution centers, a very effective and efficient distribution network across the United States, and they're totally integrated. Our SKUs, if you walk in, are highly automated.
So the SKUs for medical and dental, there's probably 25%-30% overlap, probably a little higher, but 25%-30% SKU overlap alone. But the products are immersed and sorted by the most frequently picked up front. So they're highly integrated in our distribution centers. On the back end, I would share with you, I think sort of you may have—you heard of our BOLD+1 strategy, but the O stands for operationalizing. We have consolidated back-end functions. So we don't have two distribution businesses. We don't have a dental distribution business and a medical distribution in the United States. We have one distribution business, and the back-end functions have been consolidated. They've been consolidated, whether they're contracts, sales support, our telesales channel, our digital revenue channel. They're all—it's an integrated function.
So all of our back-end functions have been consolidated and integrated. So it's one distribution business. And lastly, I would point to it'll happen. I don't know when, but the concept of integrated healthcare in this country, we need it. It is clear that overall oral healthcare, the quality of it, is directly a correlation to overall care. Sophisticated IDNs, the Mayos of the world and the Kaisers, are looking at that. DSOs that are forward-thinking are acquiring medical practices and medical clinics and entering the medical space as well as oral healthcare.
So as our country moves to a more integrated healthcare delivery model, which it needs to do 'cause it will help our overall cost in healthcare, which we simply can't afford with where it is today in the GDP, that will put us in a real driver's seat because no one else can do it, so.
Great.
Ron, on the topic of cost cuts, you know, you're, it's, it's kind of ironic. We have these discussions of like, you know, the, you know, pressure maybe for even more cost cuts or more savings, more, just being more efficient. And, again, the irony here is I think we're going through the biggest restructuring in the company's history, in the here and now. But I guess the question is, would there be a willingness from your side and the leadership team to evaluate even deeper cuts, you know, given some of the, again, the conversation with this activist?
I think conversation or no conversation, we're always looking for opportunities for deeper cuts, right? How can we run more efficiently? We really do have an environment of continuous improvement of always looking for, kind of at a grassroots level, how do we continue to operate more efficiently? I think what's a little different about this restructuring plan that we announced this past summer is it's a little more targeted, right? It's, it's a lot of it's being driven by opportunities that we see in the organization following the $1 billion + of acquisitions we did in 2023. If you look at some of the activities that are currently in place, we bought Biotech last year. They have a clear aligner business as part of that business that we're in the process of transitioning our Reveal brand to the Smiler brand that we acquired through Biotech.
We're reducing the amount of infrastructure we have in our orthodontic business and leveraging our existing distribution centers that we use for our U.S. dental business. We're gonna use a manufacturing facility in Savannah that we use for endodontics right now. We have assets out there that we can better leverage. And that's really an example of where we're trying to find kind of a greater, more targeted, cost-saving opportunities. We will, you know, we estimated $75 million-$100 million. If we can get greater than $100 million, then we'll obviously, we'll do that. But we, we're continuing to look for those opportunities regardless of what suggestions we get from people. We'll listen to those suggestions, and then we'll continue to pursue the cost-saving opportunities.
Okay. Maybe just on another recent development, it feels like it was, what, a couple of days ago we were together at the Greater New York Dental Meeting. Long has a reputation of being like an equipment selling show. I guess, do you think that still holds? And if so, you know, how was the reception at Greater New York? And Brad, feel free to weigh in.
Yeah, I would tell you the traffic was a little bit lower than the past, but we're not surprised. These buying shows, there's more transparency in the marketplace. So the shows were traditionally where a dentist would come to a show and the deals would be there, the new products would be launched there, innovation would be launched there. You know, we're in a world today where, and I, sorry to go back to my medical background, but, you know, all those shows became irrelevant. Whether it was the family practice show, the dermatology show, they all were buying shows. And physicians would come, and they'd bring their spouse or whatever and significant other, and they, they would buy. And those shows are diminishing in value. I'm not saying Greater New York is not a valuable show. Please don't take away that.
But it's less of a buying show. Now, that being said, we got a $1 million order for the first time ever on the floor yesterday. So, it is working. We do—we do very well on the floor. We have a great team on the floor. But, the show itself, I think, is just—is just gonna diminish from a buying perspective.
A lot of scanners you sold.
Yeah, a few other things.
All right. Where you wanna go with that? You know, maybe on the scanner piece and basic equipment piece, I guess, was there anything that stood out as being, you know, maybe slower than usual? Or do you attribute it to being maybe a lack of innovation that's out there in the market? Is, or is it just simply it's a, the show is not the venue it once was?
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Yeah.
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Is it specifically referring to the show?
Yeah, yeah, for Greater New York or and.
Yeah. I mean, equipment deals are still made quite often at the show.
Yeah.
Now, if you ask me, is because it's a way to sell or because people use the opportunity to do the final negotiation there? So quite often these deals start before, and then we invite the customers to close. I don't believe we saw big innovation at the Greater New York. We will see more probably at IDS next year.
Sure.
But still, these shows are good for equipment.
Yeah.
This is what our team did. Especially Sunday was a big day for that.
Yeah.
It'll be also tomorrow.
Andrea, I know one of the talking points too from the show was 3-Click Dentistry from Henry Schein. I know that's, that's you know kind of a favorite project of yours right now. Can you maybe talk a little bit more about that? Why is it, why should that matter for Henry Schein investors?
Oh, I love this topic, of course. It matters because it positions Henry Schein really in a unique place. We deliver to our customers the possibility to seamlessly go through the different steps of a typical clinical workflow and patient journey without the complication that technology have today. If you think about technology in your life and in the life of a dentist, you quite often have to use different systems with different login, different information that you have to input. What we wanna do is to make it all integrated. Even if we are not trying to be closed at all, we want to be open - an open platform, but we want to integrate the different technology to make it easy for the dentist.
A typical journey could be a dentist starts from the practice management software with the patient chart, takes a digital impression, and then this goes directly into the patient chart. From there, they can start the clinical workflow that could be sent to a lab, the images for a restoration done from the lab or do it by chairside. With all the diagnosis done before through AI and through the support that the technology offers. This is our vision. We call it 3-Click Dentistry because we mean it. We want to do it in three clicks.
When does that become a reality for?
We start to have workflows. Of course, we start with one workflow, and then we will add the second one, and then we have a night guard workflow we are doing in collaboration, of course, starting from our software, but integrating technology like 3D printer from 3Shape. But we will continuously add. It's not a big, big bang, but it's continuous innovation and new workflows that we add.
Yeah. Okay. Stan, you've been out there on the road, quite a bit over the past, seems like over the past couple of months, maybe even longer than that. But just talking more about this conversion to private label. This isn't a new conversion, right? Private label's been growing in importance, at least for the past decade. DSOs been driving a lot of that. But it seems like the rhetoric has picked up, at least that's what I've at least gathered. So is that true that it's picked up and you're seeing more conversion? And if so, what's driving that? Is it private practices or, you know, where's that shift or that inflection coming from?
Yeah, so, Jason, I'll be as short as it's practical.
Okay.
But it may not be.
Yeah. I expect that.
So he has the story. Pre-COVID, all of us were buying based on brand, and we were looking to see if we got the best price for a brand. What happened during COVID, people became more comfortable searching online. And now, specifically in the last couple of years, you can get a huge amount of information on every product. So people, because of inflation, our customers, like all of us, we look for value. Value means can we get functionally the right product, maybe not from a big brand, but from a secondary brand or, in our case, from our own brands. So there's been a shift. Units in dentistry, particularly in the U.S., have not been bad, Jason. They're growing.
But the price per item has come down because there are alternatives to national brands that took their prices up very high in 2022 and 2023 to cover the cost of labor and raw materials. But in my view, those brand prices can't stick because there are alternatives. So it's not as if Henry Schein has said, "We are just gonna push private brand." It's, "We're gonna push products that provide value." And that could be a national brand. It could be a secondary brand or our own products. In our own products, of course, the part that is growing the most rapid is the specialty products: implants, bone regeneration, endodontics in particular.
Okay. That was pretty, pretty short.
That was good.
That was good.
I was practicing that.
You've been practicing, yeah. I actually wanna pick up on the value prop point. I mean, we've all, you know, kinda long referred to Henry Schein and some of your direct peers as value-added distributors. Maybe, you know, Brad and Andrea, you know, Brad, you can start first. You know, has the value prop that Henry Schein brings to the table, has that changed at all over the last, you know, pick your time period, three years - five years? Is it becoming more transactional rather than relationship driven? Or is there or I guess, how would you, how do you feel about that topic?
Yeah, yeah. Number one, the value prop has changed, of course. The market's changed. Buying patterns have changed. Just, consumer behavior has changed. Now, our—I think our value proposition has just increased in value. It—running a dentistry practice or medical practice today is far more complex than it ever was. We often hear a dentist tell us that they had more visits. They were busier than they ever were. Then they go to their accountant at the end of the year and they go, "We don't know what happened. We made less money than I made the year before." Well, they're not running their practice efficiently. They're not running it effectively to generate enough revenue and more profits. It's just a complex environment. So we do have those services and solutions, and we'll get into all of them.
Many of you follow us, know what they are, to help a dentist and a private practice physician run a better, more profitable practice. But we have to be realistic too. And we have been investing heavily in a digital channel. We've been investing in digital revenue teams. And these are digital selling teams because we have five generations in the workforce today. Never have we had five generations. And the new generations, I just look around here. I'm sure we all know. I mean, my daughter's a dermatologist, and she's looking at her phone and doing things all the time via technology. Her value prop may not have any rep knock on the door every other week. Does she need to see a rep? Yes. Does dentists need to see a rep? 100%. They need to see an FSC. The relationship matters.
You know, that brand - that bonding to a company matters tremendously. But, but, but at the same time, it can be very transactional. And we have the means to also transact with dentists or physicians that wanna do it online, do it through a digital channel. We have a new global e-commerce platform that was launched in Europe, just a couple of months ago. There will be in the United States in the next three months, a very sophisticated e-commerce platform. So the value proposition has changed quite a bit. And it's a - and it's truly an omnichannel approach to the marketplace 'cause we have customers buying and behaving in very different ways.
What do you think, Andrea?
I mean, there is little to add. We strongly believe in our full-service approach because we believe we provide value to our customers. But the value is probably different from the past. We talk about helping the customers to become more digital, become more efficient in the way they manage the practice. That said, there are different customers. We have the solution also for customers that want to be more transactional through an online web. As Brad said, we launched the new, I would call it innovative, e-commerce platform, and digital marketing platform for Schein. We started in the U.K., very recently. We are very pleased with how this is developing. We will roll it out throughout the world because we have also customers that like to transact online.
Okay. Ron, I'm not gonna let you off the hook here, so when we look at 2025,
That will happen one day.
That will happen one day. So, look, Street numbers came down coming out of the fourth, sorry, the third quarter. You know, did they move low enough? You know, I think the Streets sit now at like 4% revenue, 9% EPS growth. Do you feel more comfortable on either one of those? And you've—and I understand you've got also the restructuring savings that should also be hitting on the bottom line as well.
Yeah. I mean, there's a number of variables that we're still assessing that we'll have to take into consideration when communicating our 2025 guidance. You know, right now, we plan to provide that guidance as part of our Q4 earnings release in February, and we'll provide, you know, some of those variables in terms of what's influencing that guidance.
But, you know, we're looking at what's the momentum of the business in the fourth quarter, what's the ongoing kinda sequential market share gains that we're recovering on the distribution side, what kinda momentum do we have with the Tapered Pro Conical implant launch that we had in the back half of 2024, how are some of the new products doing that we launched at Henry Schein One, the Eligibility Pro product, as well as the Reserve with Google product where we'll get a full year of revenue from them as opposed to one quarter. These are all things that we have to assess. You mentioned the restructuring.
To what extent, and what level of confidence do we have in terms of the execution of our some of our restructuring activities, many of which we've already been able to carry out before the end of this year, but some of which we'll have to continue to execute on over the course of 2025? Those will all be the variables that we'll take into consideration when providing our 2025 guidance.
You're going to let a good amount of those restructuring savings flow through. I know there's some offsets, but the intent is to.
Yeah. I mean, ordinary course of business, you're always gonna have something that you need to invest in, you know, whether it be cybersecurity, whether it be changes in the regulatory environment. But yeah, I mean, our, it's our intent for a significant piece of the restructuring savings to benefit us. Yes.
Okay. All right. And then, Stan and Ron, you know, if we zoom out, you know, and look at, you know, and I know we're talking about next year, so bear with me, Stan, you know, what macro assumptions do you think are appropriate for next year as investors start, you know, calibrating themselves for a new 2025?
So, Jason, the two things that go in parallel. One is inflation on the selling price of products leading to gross profit growth. That's gotta be looked. And then, of course, inflation at the bottom line relative to expenses that are going to be mitigated by, in our case, the restructuring. So there's an inflation factor here. Interest rates are important. Right now, we're doing okay with equipment. I think we're gaining market share in all the categories here and in Europe. But a lower interest rate could be very, very helpful for equipment. And I think for the upper end of dentistry, particularly implants, maybe some laboratory work. So it's not as if the units are bad, but you've gotta take into account, as we discussed a little bit, the inflation. But also, if interest rates are low, it is a relatively elastic market. It's not totally elastic.
Okay. All right. Maybe in the last 30 seconds here, and maybe anybody feel free to weigh in, but we're going into a new three-year plan that's gonna be a focus. I would assume in February. I think part of the plan is to really emphasize the L of that BOLD+1.
Correct.
The leverage piece. Maybe talk about how you think about leverage within that BOLD+1 'cause it can take on multiple.
Mm-hmm.
You know, interpretations.
The L that Jason's referring to, we have a strategy, B-O-L-D. B is to build high growth, high margin businesses. The O is to operationalize, optimize our distribution business. The L is the leveraging, and the D is digitalization, which is key. Andrea's world. On the L, there are probably very, very few dentists in the developed world, and maybe even in the developing world, that don't buy something from Henry Schein. But they may buy it from one part, the distribution. They may buy equipment. They may get the equipment serviced. They may buy an implant, an endo product, software. They may have bought their practice through our brokerage business. They may have had their practice financed through us. The dentists know us. They're buying from one part to the other. Even today, there are many dentists that don't know.
And last night, I was with one of the top DSOs, and we're still going through a list. I mean, they've been our customer for 20 years of companies that we're involved with, and they didn't know. And when Henry Schein's name is on a product, that brings comfort. Our brand is good. So we wanna leverage the one side or the other, with all these businesses that we're in, multiple businesses all focused on office-based dental practices and medical practices. So, that's a big concept that we wanna advance in the strat plan. I think we've done very, very well with DSOs. Now we wanna the national, the big ones, the 27 big ones, of which 25 buy the majority of products from us. Now we wanna go to the regionals, the mid-size, and the smaller customers.
That's gonna be the focus of the next three years.
All right. Excellent. That's great.
Thank you.
Great preview into that. And, with that, we are out of time, but.
Thank you.
Really appreciate all of you joining us today. Thanks so much.
Thank you.
Thanks to everyone in the room for joining us as well. Appreciate it.
Jason, I do wanna say how terrible the assassination that occurred a few streets over here, and I think all of us in healthcare are completely shocked. Our sympathy goes, of course, to the family and the company, but.
Yeah. Absolutely.
These are challenging times, guys.
It's tragic.
Be careful. Thank you.
Thanks, Stan.