Good afternoon, everyone. My name is Erin Wright. I am the lead healthcare services analyst at Morgan Stanley, and welcome to the 24th Annual Global Morgan Stanley Healthcare Conference. We are happy to have Medline with us today, a recent IPO in this space. CEO, Jim Boyle, thank you so much for joining us, as well as CFO, Mike Drazin. Appreciate the time today. We will kick it off with a bigger picture question. There is a lot on people's minds, obviously, but we have always thought of Medline as this sort of critical solutions provider across the broader healthcare system.
The supply chain sits underneath this bigger health system, and you do everything from the Medline brand to the services component. Some of that framing gets compressed into an organic growth number or an EBITDA number on a quarter-to-quarter basis every 90 days. Medline has an extensive history of a private business, right? A private company, and you are three months into being a public company. What has changed? What has preserved from your private company days? What has changed or what has surprised you since December?
Yeah, I would say, listen, we are a 60-year-old company. Not much about what we have done has changed. When you have 60 years of consecutive growth and you have a playbook that works, changing it is not the right thing to do. It is always evolving. Change is part of business, but adding additional levers for growth, adding additional arrows in our quiver as it relates to value props to our customers is just a core tenet of who we are. But investing in the business in advance of demand will continue to be something we do. Having a very relentless focus on our customer and listening to them to what their needs and challenges are so we can make sure we are meeting that expectation.
Right product, right place, right time as it relates to our distribution service offering at the best value will continue to be a leading indicator in maximizing the value we deliver to our customers, to our brand, and we will continue to do that. I think the biggest kind of change is our business is not sequential, right? It is lumpy. When we win new prime vendor business, it is different by quarter. How we grow as a lagging indicator, margin to revenue, is something I think the markets are going to have to learn. We will capture revenue and take share, and then the marginal pickup in the following kind of pathway as it relates to the Medline brand penetration and conversion curve. I think it is going to take a little while for the public markets to understand the cadence of our business and how it flows through.
But what we look at is a long-term sustainable growth. First and foremost, taking share, then maximizing the brand and delivering value over time. I think it's going to take a little bit of time for the public markets to know that. I will tell you it's easier being a private company than it is a public company because I have all of you asking 95 questions as opposed to the family asking a few questions. So I think it's more about getting familiar and consistent as it relates to what the right kind of macro factors communicate to you all is to make sure you understand kind of the long-term health of the business.
Yeah. Okay. Speaking of some of those macro factors, let's talk about the most recent quarter, and the guide. So organic sales guidance was increased in the second quarter, but adjusted EBITDA guidance moved a little bit lower here. Can you walk us through the bridge from the original EBITDA guide to the new guide range? And how much of that is attributable to the Middle East inflation, the Tracy fire, operational investments, as well as some of the quality remediation and retail softness as well?
Yeah. So let's first start with the quarter. The quarter was really strong. Top line growth of about 11.6% on a reported basis. If you actually adjusted out the impact from the tariff refunds, customer repayments, we actually grew close to 13%. So really, really strong top-line growth, really strong top-line demand growth across both of our segments and all of our channels. So we're really proud of the great signings, sales growth that we're seeing in our business. It reflects the strong market share gains that we're taking. From an earnings perspective, you're right, we did take down earnings by about $200 million in totality for the full year, for our full year guidance. Our new guidance for EBITDA is $3.3 billion- $3.4 billion from $3.5 billion- $3.6 billion. So $200 million at the midpoint of the range.
Really made up of a couple of internal factors and a couple of external factors. On the external side of the house, the Middle East is impacting us, as you can imagine. We quantify that in totality for the year of about $70 million of impact. That $70 million impact is primarily made up of the cost of raw materials and finished goods, things like polyethylene, polystyrene, NBR that's used to manufacture and source certain products that we make. In addition to that, the cost of diesel is obviously up as well. Diesel fuel was at $3.89 heading into the before the conflict. Diesel fuel is now closer to $5.50, $6. So you're seeing that impact our cost of our transportation as we ship about 80% of our products on our own trucks here in the U.S. The other external impact was a fire.
We had a fire in our Tracy facility back in June, unplanned obviously, and very devastating. Lost 1 million square feet of space. The great thing about that is the team rose to the occasion, and within six weeks we were able to bring product back to our customers into similar levels of what they were receiving previously. Really proud of the work the team has done to really drive for a great outcome for our customers. The combination of those two are about 25% of that $200 million or $50 million. The remaining $150 million is primarily made up of what we will call internal factors, and they are about equal, with the third one being retail being slightly less. We are continuing to invest in our business on the operations side of the house.
As you all know, we signed $2.4 billion of new customer signings last year. That signings was a record year for us. Really, really strong signings in the year. That led to us implementing a lot of that in 2026. What we are seeing is, in certain cases, we are having to make investments in operations to support those new signings.
For instance, in a facility like Romulus, Michigan, where we have pretty much the entire Detroit market that we have ultimately won through our signings, we are having to invest in people without automation at the current point in time to support that growth. As we put automation in those facilities and expand that facility, as an example, you will see those costs start to come down. But ultimately, right now, we are inefficient in our Romulus facility. That is the operational side of the house. We also are making investments in quality.
We have decided, and Jim has decided, the right thing to do for us is to further lean in on quality and to focus on a global action plan to drive quality across the organization. That is not to say our quality is not good. Our quality is good. However, we want to continue to invest in driving the improvements in our quality across the globe. We are taking action to invest in quality in that space as well. Lastly, the third impact to us was the retail business. On the retail business, that is about 2% of our sales, so a smaller piece of our overall business.
The business is a little bit lumpy, as you can imagine. From day to day, it can bounce around. It is not like our typical prime vendor business where it is a five-year contract. We saw a lost product in one of our customers in that space that has impacted us. That is all Medline brands, so the margin was more impactful than it would be if it was a prime vendor deal. But our objective is to go get that back over time here. It is just in the near term, it is going to be a loss for us. The combination of all that is about $150 million, those three external factors overall.
Okay, you characterized roughly half of the $340 million impact as transitory and half as permanent. I guess as we think about the launch pad for 2027, what do we think about as the right baseline? I think consensus is at $3.7 billion for 2027 EBITDA. Is that the right framework to think about as we kind of normalize for some of these impacts, whether it is permanent or temporary?
Yeah, I think what we were trying to signal to the market was roughly half of the cost that we believe that we are incurring is sort of permanent, will remain in our base. Things like some of these ops costs, some of these quality costs are investments in people, so those will remain in our base. Obviously, the retail business is sort of a loss. We will get it back over time, but that is in our base. Whereas we expect that over time, the Middle East will at some point hopefully subside. I would tell you that right now, as we sit here today, we expect the Middle East will continue, unfortunately, into 2027, will be a cost headwind for us into 2027. I think overall, we are not ready to guide for you yet what 2027 will look like.
We will give you some better view of what that might look like in the future. I think the best way for us to tell you this is our landing spot for 2026 is $3.35 billion, and we will grow off of that. That is the midpoint of our range. We will grow off of that. The components of the 2027, just to make it simple, are sales volume, Medline brand conversion. Middle East should be a headwind for us, unfortunately, if costs remain. Tariffs right now, if tariffs do not change, will be a tailwind for us. Then quality and ops investments will continue to some extent, as they are actually annualized into 2027 as well. More to come in the future on that.
Okay. You are annualizing some of the outsized business wins or prime vendor wins from last year with you have $650 million in new customer signings through the first half of this year. Can you speak to the nature of a lot of those relationships, and how does the quality and composition of the pipeline, what does it look like now, and how do you think about that playing forward in terms of those?
Yeah, as I talked about, each market, we commit to $1 billion of new prime vendor signings. That is what we believe we can control, and we have complete visibility to. That is what we get tied to every year. Last year, $2.4 billion in signings. We did that because we took advantage of market conditions. We took advantage of some competitors struggling in the marketplace or getting out of the business. We took advantage of how we handled the tariffs in terms of price increases. We delayed price increases until August 1st, which is different than the competition did, which opened up doors. Customers are looking for sustainable, resilient supply team partners that can support them in times of crisis or need 29 million square feet , $5 billion of inventory, completely different than what you might think our competitor set is.
Customers are looking for folks that actually want to be in the business we are in. Those are all tailwinds that were hitting last year that are still hitting this year. Last year, we had the good fortune of signing some very large home run deals. This year, the 650 is made of singles, doubles, and triples t here is not a giant deal in there. We are continuing to take share at the pace we expected to take it at. I feel optimistic about what is in front of us. I think the market looks very similar as it relates to what we believe we can control, and we will continue to take advantage of those market conditions that actually are favorable for us.
I just think we are sitting in a position with a different playbook to offer value to our customers as compared to the competition, and that is what customers are looking for. Then finally, they are looking for speed to value. They are concerned about what is happening with OBBA. They are concerned about cuts in Medicare, Medicaid, and we are the value player in the marketplace. Whenever inflation happens and the ability to actually increase their margin profile, they look to us as the value player in the marketplace to actually drive significant savings to them.
Okay. I think that is a good segue into my next question, which is just on broader utilization trends, and what have you incorporated, I guess, into guidance from an underlying utilization trend standpoint in terms of volume that you are seeing from the acute side as well as kind of other markets? How would you characterize that?
Yeah, we haven't seen softness. We talked about softness in our guidance because we're listening to our customers. It's important to say this out loud. I just had lunch with a large hospital CEO on Friday, and her comment to me was, "You're continuing to see outsized growth, even though we're starting to feel the pain of indigent care." I don't actually think you're going to see a slowness of patient volume. What you're going to see is an increase of indigent care in folks that actually can't pay their bills, because guess what? Whether you have insurance or not, you need access to healthcare. You're still going to go in the hospital, and you're still going to need access to care. As it relates to us, we're still selling those supplies. It actually burdens, unfortunately, the healthcare ecosystem from a provider perspective.
Second, when you think about folks that don't have access to insurance, what they do is they wait until they're sicker before they actually go to get care. So they have the cold, they have the flu, they don't go to the primary care doctor. They end up in the emergency room with pneumonia. They end up in the ICU. For us, that's a higher acuity of product, and they get higher utilization of supplies. So in an odd way, it can actually be more supplies rather than less.
When I look at what's happening in healthcare, I'm less worried about. Because we don't measure patient volume, we measure flow of goods. I can tell you that the first half of the year, we've had fantastic same-store sales. That's maybe different than you're hearing in the marketplace, but what I believe is happening is we're going to see an elevation in folks that don't have access to insurance that creates kind of negative income for the healthcare ecosystem.
In reality, how do you think about your even sensitivity to hospital volumes or elective procedures? What did you see in prior macro cycles on that front?
Very similar. We are consistent as it relates to kind of growth from that perspective, from same-store sales. We are heading in the right direction. I think there is some talk about potential softness in surgical volume. We have not seen that. Our supply chain, excuse me, our surgical solutions business was up 9% for the first half of the year, and that is including custom trays that go into open hearts and total hips and total knees. So we have not seen softness.
Okay, great. Once the current macro and some of the idiosyncratic kind of dynamics play out and normalize, what would a typical Medline year look like from an organic growth, EBITDA growth, and margin progression standpoint, as we think about the long-term growth algo?
Yeah, our long-term targets are very simply, $1 billion of new customer signings every year, which we are on track to achieve this year. Organic sales growth at high single digits and earnings growth at or greater than sales. Then ultimately, the last one would be for that leverage target would be less than 3x. So the combination of those four things are what we think will continue to drive over the long term in our business.
Okay. Switching gears to Medline brand, you have discussed about $5 billion of Medline brand conversion opportunity within that existing prime vendor base. How should we think about the piece of that conversion?
Yeah. It is important to frame that out. When we talk about the $5 billion in prime vendor, the definition of prime vendor, our definition of prime vendor is acute and acute affiliated. It is specific to that channel. Take the non-acute out of it. That is an $18 billion segment of our total sales, $5 billion of that within that existing $18 billion has a Medline brand equivalent that we can convert to for our customers. When you think about the conversion curve of the brand, we sell about $1.8 billion of our brand through competitive distributors, through Owens, through Cardinal, through Henry Schein, and our brand stands on its own. When we sign a new prime vendor deal, about 10% of that business is already in our brand. We sign a new prime vendor deal, 90% is third-party products, 10% is in our brand.
In the first year, we normally double the penetration rate going from 10% to 20%. That is a lot of the commodities. Think about gauze, think about underpads, think about tongue depressors, things that are very easy from a clinical acuity perspective to convert. Every year thereafter, we see a 3%- 4% penetration rate of our brand. That is intentional by design through many years of trials and tribulation. If you go too fast, you can create pain for the clinical team because they can only handle so much change at a given time, and if you go too slow, you do not deliver enough value for the CFO from a savings perspective. 3%- 4% is what we do. We literally have a roadmap with every single customer. This quarter, we are going to do incontinence and surgical drapes and gowns.
This quarter, we are going to do DME and capital equipment. This quarter, we are going to do exam gloves. We have a very consistent roadmap to value and savings for our customers, so we never get to that, what have you done for me lately? The maximum penetration rate is about 60% of the total spend. Medline brand, if you have a $100 million med-surg customer, 60% of that can convert to our brand.
If you take the entire book of business right now, we have about 35% of it in our brand, which is why we still have $5 billion in convertible opportunity. That is a focus for our sales force. That is what our sales force is paid on. They are paid on the brand alone, and their job is to communicate the value to the customer to ultimately deliver incremental savings for them and accretive margin growth for us.
As you expand your own brand into more categories, how do you evaluate some of those potential new categories and new opportunities? When is an acquisition preferable relative to internal investment?
Yeah. If you think about the history of the company, 90% of our growth has been internal and organic accretive. We built it ourselves, so you buy or build. We have a tremendous muscle to actually leverage our internal resources to build something, research, duplicate, and improve upon at a better value. We do that very, very well. That doesn't mean we don't buy things, and we have bought things, and we've integrated them very well, but we look for things that we think we can create incremental value and something that actually might be.
I'll give you an example. We tried to get into respiratory many years ago, competing with Hudson RCI. That is a very broad-based set of SKUs, and it takes a while to actually get 100% of the SKU mix. We were about 60%- 70% of it, and it's hard to compete with the competition when you don't have the entire SKU mix. Hudson came up for sale.
That was an example of better to buy it than it is to build it, folded that into our ecosystem, and all of a sudden, we had 100% of the line, and we were actually able to produce their products in our factories at a lower cost. We got some leverage and some synergies there. When I think about a go-forward basis, when I started in 1996, about 20% of what a hospital buys had a Medline brand equivalent. Today, it's 60%. A nursing home today, 80% of what they buy has a Medline brand equivalent.
Over the next several years, my aspiration is to get somewhere between 70%- 75% convertible opportunity because every year, we add new Medline brands to our category. A recent example is a forced air warming system. If you know much about it, Solventum sells a product called Bair Hugger. They were the only product on the market. It's an SMS material that you blow hot air in, and you increase the core temperature of the body in surgery. There was no competition. We went out, actually created a product, competed with it, and we just launched it.
So now all of a sudden, we have a $400 million TAM that we didn't have access to yesterday. Every year, we're adding line extensions to the existing categories, and we're looking for new categories to get into to expand the brand. We normally look first, can we build it ourselves? Because I would rather take the business for free, and if we cannot, then we will go out and see what the acquisition profile looks like.
Can you talk a little bit about the lab and diagnostics space? It is now a $1 billion business, estimated, I think, $25 billion market, which is what you have quantified in the past. I think you have mentioned about 30% of that can be converted to Medline brand. Is that still the case? Do you still see a significant opportunity there? Have your thoughts changed on that market? How do you think about your deeper push into that channel and the competitive landscape as well?
Yeah. That is probably the most exciting new market that we are in. We started getting into about 10 years ago, and I think we had the fully baked solutions started about three years ago. So we really started competing about three years ago in this space. And for us, when we look at new market entry, we look at how can we leverage our existing playbook to maximize the value and actually leverage some of our existing infrastructure to create incremental gains. What I mean by that is lab and hospitals and lab and physician offices, we are able to leverage the same wheels on the truck to deliver the med-surg supplies to deliver the lab supply. So the incremental cost of distribution is almost zero.
We get some tremendous synergies and value for us as it relates to adding to our existing infrastructure ecosystem, and it actually drives value for the customer. So for lab and diagnostics, it looks and feels very much like med-surg distribution. It just happens to be microscope slides, pipettes, and things like that, as opposed to gauze and underpads. So what our job was, first and foremost, to see could we create Medline brand equivalents to actually create that incremental value for savings for our customers and an incremental gain in margin for Medline. And the answer is yes. To your point, we have 30% convertible opportunity, and every year we are adding new categories to that line. We are in acute care and physician office lab. We are not in reference labs and things like that. But for us, those are markets we are already in.
Our supply chain is way more robust and offers way more optionality than the competitive landscape in lab and diagnostic distribution today. We can do unique, differentiated things for our customers as it relates to the modality of delivery coming into their ecosystem. And we can give them a differentiated experience from a cost to serve because we are adding it to a truck that is already backing up to the dock. To your point, it is a $25 billion market. It is about $1 billion. Through second quarter, I think we were up 11%. First quarter, it was one, but it was burdened by the lack of flu. The base business was up 9%, so the business is growing very well. It is outpacing the growth of the overall organization, which I expect to happen on a go-forward basis.
Okay. What about other areas like dental? You did a transaction, Sinclair Dental, in the past, as somewhat of a test case for going into this market. What have you learned so far from that experience? What is the opportunity for you there, and is there a playbook in dental or animal health or other verticals as you think about your business?
Yeah. I do not want to be what the current dental landscapes from a supplier look like today. I want to be who we are in med-surg distribution and dental, and I need to prove that out before we can do it, because I want to make sure the margin profile is not diluted to who we are. What I mean by that, when we bought Sinclair, the base case was, can we serve this market from a supply chain and a brand perspective and create Medline brand alternatives? Today, we are already up to 30% convertible Medline brand in the dental space in the Canadian market. And really, the dental space is two halves of a whole. First and foremost, can you be the supply chain provider? And second, can you be the service provider, which is something that we have never done before.
It is something we got with the acquisition of Sinclair in Canada, so we had both halves of the whole, and we are learning and understanding that. The question we have to ask ourselves before we deploy outside of Canada is the service model we think is something we can build and do it extremely well because it is critical to the importance of the overall dental office that you do that extremely well. So we are assessing, is that something we want to be on, and if it is, do we buy or build that expertise? Because the left-hand side, we have in spades. We have the distribution. We do not have to build a new distribution center. We own the trucks. We have the products. That part is easy. The question is, can we build the service model?
I can tell you that the Sinclair acquisition is outperforming the deal model and doing extremely well. I am optimistic about the business, but we are currently assessing the overall landscape as it relates to how we would potentially deploy in the U.S. From an animal health perspective, as a brand business, I have no interest in being a flea and tick collar distributor or a dog food distributor. It is more of gauze, exam gloves. Think about the things that you use in a doctor's office. They are using the same thing in a veterinary office, and we are leveraging partnerships with Vetco, MWI, and Covetrus for access to those markets. It is a $4 billion market just in our brand today that we continue to expand as we add new categories.
Yeah. As we see consolidation across that space, too, you could see some of these consolidators like DSOs or vet clinics kind of then go for a hybrid approach and procure kind of consumables from a Medline brand perspective and maybe equipment and some of the high-touch stuff or brand therapeutics elsewhere. Is that kind of the right way to think about it?
It is. We think we can reach that market through an e-commerce platform, to your point, to create almost a double-edged sword, because we have the ability to get the products to them if they are willing to buy it direct. We think we can actually give them some access in a different way that will create differentiation.
Yep. Okay. I want to shift gears a little bit to some of the macro. I know we talked about it before, but underlying fuel cost dynamics, again, you embed about $70 million in terms of medicine-related inflationary impact in your 2026 guide, but remind us of what you have pegged oil price to. I think you mentioned your diesel price, but what about the input cost component of it, too, as well? Could you comment on that?
Yeah. When we gave our guidance back in, I think it was July or August, at the time, diesel was around $5. Today, it is obviously higher than that. The reality of the fuel impact, the Middle East impact to us is the vast majority impact is not really diesel related, it is more the raw materials and the finished goods. There are a number of raw materials and finished goods that we purchase for either our own finished goods purposes or we source for manufacturing our finished good product that are impacted. I would tell you that as of the time we gave our guidance back in August, the costs have bounced around but are somewhat
similar to what they were back at that point in time. Right now, as you sit here in 2026, I cannot tell you what is going to happen as far as guidance, but ultimately, we do not expect anything impactful as far as 2026 related to the fuel or the raw materials or finished goods on the Middle East impact. If you think about going into 2027, I think we are not ready to give you that obviously yet. Everyone wants to know that. Not ready to share that with you yet.
Obviously, as we sit here right now, we do expect it to continue, and I ultimately would tell you that will be a headwind to our overall 2027 numbers. That being said, we are looking at ways in which to mitigate the impact to our business, one of which would be obviously a possible price increase, and so more to come on that as we get further out in the year.
That was my second part of the question is when do you start to reassess that? How much, and I think you give your customers usually a little bit of time ahead of those price increases. Have you given them that window yet? How do you think about when you pull the trigger from a pricing perspective?
We have an annual pricing cycle every January and every July we push price increases through. It is not something that is unexpected. We normally give our customers 60 days notice. November 1st, we will tell our customers what the burden will be. To Mike's point, we will assess our normal pricing model, and then we will bolt on what we think the actual long-term impact of what is going on right now from a COGS perspective is.
Think about the Strait of Hormuz, think about what is happening. I think this is here. The reason we have not raised it through the rest of the year, very similar to what we did last year with tariffs, is we wanted to get to what was happening, why was it happening, and how are we mitigating it before we explain that to our customers. I think we are at a point now where we can have that conversation.
Okay. I want to move to technology, automation, AI. I think one of the more impressive things when you visit one of your facilities is really how integrated it is on that front, and you introduced Mpower, an AI-enabled digital supply chain control tower built in collaboration with Microsoft. You are expanding the pilot to the broader acute care rollout. Can you talk a little bit about some of the KPIs that you are tracking to measure Mpower's impact across the inventory landscape and what you are excited about there?
Yeah, I think Mpower is something me personally, I am very excited about because when I came into healthcare in 1996, my degree is in supply chain. I managed a frozen foods distributor, H-E-B, a grocery store chain. I managed their frozen food distribution center for my first job, and I can tell you, grocery store supply chain in 1994 is better than healthcare hospital supply chain is in 2026. It just has not evolved. When I first came in, I could not understand why it was so broken. If you think about what happens today, a tech goes to a supply room in every department, we will call it labor and delivery. They do cycle counts. They do not actually count it. They are like, "I need 10 of these, four of these, five of these." They push an order in, and it goes to a buyer a buyer places a PO.
They end up with obsolescence. They end up with expiration. They have no clue what their inventory on hand is. They end up with wasted space, and it's a very antiquated old model that doesn't get you what you need. Our aspiration was how do we displace that and actually do it in a way that leverages AI, automation, and infrastructure and creates a hub and spoke model all the way from that supply room to our distribution center, where we could actually take ownership and management of the flow of goods. So, future state, not too far from now, there'll be a camera in that room. We actually have five betas going on from a camera perspective. The control tower's already built, and I'll explain that to you. But future state, there'll be a camera in that room. The camera will decrement the inventory.
It'll create both demand and replenishment signals. It'll tell you, "These 14 bins are about to expire in the next 60 days. You better do something about it before you have to throw it away." It'll tell you, "These 10 bins are obsolete. You need to remove them from the room because you're wasting real estate." It'll tell you your caregiver's walking 47 steps to the high velocity items. You need to move those items closer to the door. That supply room can become a spoke to our distribution center and actually place the orders directly with us, and we will replenish those. So you don't need the human to do cycle counts anymore. You don't need the buyer to place POs anymore. You can reallocate those resources as a healthcare system to higher value functions.
80% of the physical movement of goods is only represented by 20% of the spend. That's where we live. Tongue depressors, gauze, underpads. 80% of the spend is in 20% of the physical movement of goods. So if they could take those assets and redeploy them to stents, to total hips, to total knees, the higher value expense items, they can get more value out of those resources, and we could manage the supply chain in a much more efficient fashion. It also gives you visibility across the entire landscape. So you can say, "Hey, did you know across your physician offices, your surgery centers, and your hospitals, you're buying 19 different exam gloves?
If you consolidate to these three that make up 90% of your aggregate volume, you'll save 7%, and you'll actually get better service over time." It's going to have complete visibility, give suggestive kind of improvements in the business, and the buyers in the healthcare ecosystem will be able to treat it like ChatGPT and ask questions of it, and it'll give answers based on their real data and their real throughput. It also is going to have visibility from raw materials to that supply room. So one of the big asks healthcare wants, especially over the last several years, is, "Tell me that there's going to be a problem before there's a problem so I can get ready before it happens." This system will say, "Hey, there's a hurricane about to hit Puerto Rico. Here's the five vendors that currently have a plant in Puerto Rico.
Here's the three things that you've authorized as a sub. I suggest you order these today in advance of the disruption that's coming tomorrow. It's going to create a major differentiation in how the overall connectivity between us and them, and candidly, the overall environment understands predictive analytics, and it's something we're very excited about. It's been launched.
There are 20 customers currently using it. It's about to be launched more robustly from a supply chain control tower perspective. We've taken five camera systems, narrowed it down to two, and I'm very optimistic that'll happen in, call it six, seven months, because I want to make sure we're proving it out. It's something that we think will create a major differentiation between us and the competition and create much more continuity for the healthcare ecosystem from a supply chain perspective and evolve them from 1994 to 2026.
One of the advantages as well, that we see in terms of Medline, is how much you've invested in your own facilities and own infrastructure in things like AutoStore, Pick Pack Pro, Symbotic. Robotics is a big theme at Morgan Stanley, if you haven't heard. Can you talk a little bit about where you are at in that evolution, how much you've implemented that across your distribution centers, and what opportunity that brings?
Yeah. AutoStore, we were the first installation in the U.S. for AutoStore, and we're the largest installation of AutoStore. AutoStore is a less-than-case, goods-to-person pick system. Anything out of the case, whether that's box or each that fits in the tote, will go into the system. Takes half the labor it takes in the manual pick, and it's about 250% more efficient. Think about it, you get 2.5 more throughput for half the labor burden. It's a fantastic ROI, and it does a phenomenal job. It also shrinks the internal footprint of the building by about a third of the space. You get a third of your asset infrastructure you've utilized for something different. We have about 2,100 robots and AutoStore deployed across our network. We're adding another couple hundred in the next couple years.
We'll continue to invest in that as we see needs. You have to have a market that actually has less than case volume to justify the expense. We just had another market pop up last year with Romulus, Michigan. We won almost all the business in the Detroit Medical Center market. We didn't have AutoStore in there before. We're going to have AutoStore in it tomorrow because we have such a robust installation. The biggest owner of real estate in a warehouse is bulk distribution. You think about our distribution centers are built in a way that serves every care setting and the modality they need to be served from a supply chain perspective. Physician office is different than surgery center, is different than hospital. 53-foot truck, box van, parcel delivery. You have to be able to do all those things.
When you think about production in a distribution center, the production in our distribution center is about 25%-30% of the space, and the rest of it is storage of bulk goods. The best way to actually create throughput automation and maximization is figure out how do we actually automate and shrink the internal footprint of the bulk side of the house, and that's what Symbotic's going to do. It's going to do something very similar to what AutoStore did for less than case to the bulk side of the house and shrink the internal footprint, decrease the labor burden, and increase the throughput, which we're pretty excited about. We have our first installation going in in Columbus, Ohio. I'm telling you what I believe will happen. I'll tell you what actually happens once we get it installed and actually justify the why.
Pick Pack Pro creates an automation for our healthcare and our health plans business. If you know much about that is a very high volume in a very given month. At the end of a quarter, you get so many lines that no human can pick it. Without automation, you can't actually meet the demands of the customer. So we've built an automated system that'll actually lift in those high spike environments, across multiple branches. We will continue to invest in that infrastructure. We will continue to invest in automation and differentiation because it allows us to create leverage for our customers, increase the throughput, and the quality of the delivery we'll get going to them.
Lastly, just capital deployment. You've talked about willingness in terms of bolt-on M&A. What about larger scale transactions? What does the M&A pipeline look like now? What size of deal is your sweet spot? What are some of that primary criteria that you're looking for?
Yeah, listen, the nice thing is we have plenty of cash. There needs to be assets to buy for us to buy something. There needs to be an attractive asset on the market that we think we are interested in. I do think some of the med tech competitors are going to start dumping some of their non-core assets that don't fit within what they are trying to become. We will be ready for that. That hasn't happened yet, but I see it's on the horizon. I think there is some distribution assets in the marketplace that are attractive that we can buy. Internationally, I think there are some opportunities for us to buy some things as well. The key is for us to find an asset that is available, that is able for us to purchase. Reality is, are we ambitious and willing? Yes.
There needs to be something that's interesting first. If we don't get to a point where there is something on the market and we continue to build our cash basis, we will do things like share repurchase. We will buy down debt further. We are already below 3x right now. We will do the right things with money at the given time. Right now, we are assessing a few potential acquisitions, and so we are not looking for things that are going to change or transformational. We want things that look within the framework of who we are.
Would you be biased in terms of distribution versus products right now?
No, we buy in distribution assets. There are a couple different places. First and foremost, we are looking at products. What are products that can expand our brand? Second, markets or channels. About 10 years ago, we bought a physician office distributor to get into that space. Last year, we bought dental in Sinclair. So markets or channels. Distribution assets or some kind of service offering that will create differentiation for us. I will give you an example.
About three years ago, we bought a system called PrefConnect that ties out the doctor preference cards in the surgical environment with Epic or Cerner. So they have connectivity, so we can always update the preference card, so it's right when the doctor is actually doing the procedure every single time. That ties out with our kitting facility, so we are always picking and building the right system. Those are the four areas we buy in.
Perfect. Okay, great. Thank you so much for your time.
Yeah, thank you.
We appreciate it.
Appreciate it.