Q4 2019 Earnings Call

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Ladies and gentlemen, please stand by today's call will begin momentarily. Thank you.

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Good morning, ladies and gentlemen, and welcome to the Henry Schein fourth quarter and full year 2019 conference call.

At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance during the call. Please press the star keep followed by zero one your Touchtone phone as a reminder, this call is being recorded I would now like to introduce your host for.

Today's call Carolynne borders Henry Scheins, Vice President Investor Relations. Please go ahead Carolyn.

Thank you Holly and thanks to each of you for joining us to discuss Henry Scheins results for the 2019 fourth quarter and full year.

With me on the call today, our Stanley Bergman Chairman of the Board and Chief Executive Officer of Henry Schein, and Steven Paladino, Executive Vice President and Chief Financial Officer before we begin I would like to state that certain comments made during this call will include information that is forward looking as you know risks and uncertainties involved.

In the company's business may affect the matters referred to in forward looking statements.

As a result, the company's performance may materially differ from those expressed in <unk> indicated by such forward looking statements.

These forward looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein filings with the Securities and Exchange Commission.

Including the risk factor section of our annual report on form 10-K.

In addition, all comments about the markets, we serve including end market growth rates and market share are based upon the company's internal analysis and after that.

Our conference call remarks will include both GAAP and non-GAAP results, we believe the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business enable the comparison a financial results between periods, where certain items may vary independently of business performance.

And allow for greater transparency with respect to the 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.

These reconciliations can be found supplemental infill section of our Investor Relations website and in exhibit B of today's press release, which is available in the Investor Relations section of our website.

The content of this conference call contains time sensitive information that is accurate only as of the date as a live broadcast February Twentyth Twentytwenty, Henry Schein undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call. Please limit yourself to.

A single question and a follow up during Q1 day to allow as many listeners as possible to ask a question within the one hour that we have a lot of for this call.

With that said I would like to turn the call overt Stanley Bergman.

Thanks, very much Colin good morning, everyone and thank you for joining us.

Resolving them 19, what's the historic you have for Henry Schein with a spin off about global animal health business.

Well as the continued integration of Henry Schein one.

Which offers an extraordinary array of best in class dental software solutions to help Dennis optimize the management of their practices.

Or by better communications to patients and drive greater traffic to the practice.

Our global dental and medical businesses continued to demonstrate solid growth as our end markets evolve we are lining up business with the segments that we believe offer the best opportunities for a long term growth in sales and profits. We are excited about the future of Henry Schein and believe we have strategic position to our business.

For continued success in the healthcare markets we serve.

In the fourth quarter, we delivered internal sales growth from continuing operations at 4.9% in local currencies, which excludes sales of competitors or so that's good folks to commit.

This was highlighted by strong revenue growth in our medical and technology and value added services businesses, along with North American dental equipment and international consumable merchandise.

These sales results contributed to an increase in diluted EPS from continuing operations of 192.2% on a GAAP basis effected by net gain on the sales equity of sale of an equity investment.

EPS growth of 9% on a non-GAAP basis overall.

We believe our poor performance was an excellent conclusion to this transformative yeah.

Today, we are affirming our guidance range from four 2020, non-GAAP diluted EPS from continuing operations.

$3 from 65 cents to $3.75 Stephen will discuss this in greater detail in a moment.

So.

The overall conclusion to the quota to the space of the company is that we continue to make and I believe solid progress in growing our business organically, 4.9% growth.

Organically in the fourth quota.

With a focus on gaining market share.

Advancing sales of high margin products and driving efficiencies throughout the business what at the same time, making investments in <unk> investments in strategic businesses that advance the Henry Schein footprint.

Products and value added services.

We expect to continue to generate significant cash flow each year and plan to put this to work with strategic transactions investing in infrastructure R&D enough specialty and software businesses, while at the same time, returning cash to shareholders in the form of share repurchases. In addition, we're working very well with.

A number of strategic suppliers.

That's our goals and overall, we believe we are moving in a in the direction that well can you continue to advance.

Yes growth and so at cash flow and so shareholder value.

More information little bit further down the call at this time I'll hand, the call over to Stephen to review, our financial results and guidance and then provide some commentary on recent business performance and accomplishments. Thank you Steven.

Thank you Stanley and good morning to all as we begin I'd like to point out that I will be discussing our results from continuing operations as reported on a GAAP basis and also on a non-GAAP basis. Our Q4 2019, and Q4 2018 non-GAAP results exclude certain items that are detailed in exhibit b.

Todays press release and also in the supplement supplemental information section of our Investor Relations website. Please note as we mentioned on our last earnings call Q4, 2019, non-GAAP results also exclude a net gain on on the sale of an equity investments primarily related to you.

Extra dental instruments and infection prevention solutions. Please note that we have again included a corporate sales category for Q4 that represents sales to co batched this onto the transitional services agreements.

And we expect that to continue through August of 2020.

Turning now to our Q4 results net sales from continuing operations for the quarter ended December 28, 2019, with $2.7 billion, reflecting a 7.9% increase compared with the fourth quarter of 2018 with internally generated sales growth in local currencies of 5.8%.

When excluding the sales to co breakfast under the TSA agreements.

Internal sales growth in local currencies was 4.9% and I'll note that that was the highest quarterly growth rate that we've seen in the past a year and a half.

Details of our sales growth are contained in exhibit a about earnings press release that was issued earlier this morning.

On a GAAP basis operating margin for the fourth quarter of 2019 was 7.4% an increased 97 basis points compared with the fourth quarter of 2018 on a non-GAAP basis operating margin of 7.3% contracted by 47 basis points on a year over year basis. This margin contraction.

It was primarily due to certain increases in certain employee related costs.

For the full year 2019 on a non-GAAP basis, our operating margin of 7.3% was essentially flat compared with 2018.

Our long term annual operating margin growth 20.

Growth goal of 20 basis points per year.

The expansion of continues to remain intact. However in 2020, we expect to achieve less than that 20 basis points of expansion due to stranded cost associated with the animal health spinoff as well as certain additional.

Technology investments.

You will find a reconciliation of GAAP operating margin to non-GAAP operating margin also in the supplemental information page on our Investor page of our website turning to taxes, our reported GAAP effective tax rate for the fourth quarter of 29 team was 22.3%. This compares with 14.9% DAP effect.

Tax rate for the fourth quarter of last year on a non-GAAP basis, our effective tax rate was also similar at 22.2% and compares with the prior year non-GAAP effective tax rate of 21.2%.

Our full year 2019 effective tax rate was 23.4% on a GAAP basis.

Which compares with the full year 2018 effective tax rate on a GAAP basis of 20.0%.

Our non-GAAP based on a non-GAAP basis, our 2019 effective tax rate was 23.7% compared with 22.9% in 2018 for 2020, we estimate that our effective tax rate will continue to be in the 23% range on both a GAAP and non-GAAP basis.

Again look at the supplemental information page on our Investor Relations website for a reconciliation of GAAP taxes to non-GAAP actions.

Moving on net income from continuing operations attributable to Henry Schein for Q4, 2019 was $330.6 million or $2.25 per diluted share and this compares with the prior year GAAP net income from continuing operations.

$117.8 million was 70 cents 77 cents per diluted share.

Non-GAAP net income from continuing operations for the fourth quarter over 29 team was $143.0 million with 97 cents per diluted share and this compares with non-GAAP net income from continuing operations.

$136.2 million or 89 cents per diluted share fourth quarter of 28.

This represents growth of 5% and 9% respectively for the year over year base.

Providing some additional detail on our results on a continuing operation.

Continuing operations basis amortization from acquired intangible assets for Q4, 2019 was $26.9 million pretax or 14 cents per diluted share. This compares with $19.1 million pre tax or nine cents per diluted share for the same period last year for the full year 2019.

Amortization was $105.9 million pretax or 53 cents per diluted share and that compares to $75.3 million pretax or 37 cents per diluted share and 28.

I'll also note that for Q4 2019 foreign currency exchange negatively impacted our diluted EPS by approximately one cents per share.

Let me now.

Provide some detail on our sales results for the fourth quarter, our dental sales were $1.7 billion and increased 2.9% said with the point of view with internal growth in local currencies of 2.5%.

North American internal sales in local currencies grew 2.2% and included a decline of 0.1% and sales of dental consumable merchandise and thats really reflecting a soft end market demand primarily for independent dental practices.

Internal sales growth in local currencies in North America.

For North American dental equipment and services increased 7.2% year over year. This growth was primarily driven by double digit high tech equipment sales, which were bolstered by a key supply of sales event held early in October.

Sales in our CAD Cam business were particularly strong and Stanley we'll have more comments in this area later on in the call.

Our current dental equipment backlog in North America also suggest continued growth in Q1.

International dental internal sales growth in local currencies was 3.0%. This included 4.4% growth in sales of dental consumable merchandise.

And growth in international consumable merchandize, we've driven by really broad base gains across most of our international businesses.

Internal sales growth in local currencies and international dental equipment sales and services declined 8.8% as we faced a difficult year over year.

Comparison with internal sales growth in the prior year of 7.5%.

The sales. This decrease was also due in part of soft macroeconomic conditions in Australia.

Our current international dental equipment backlog also suggests a return to growth in Q1 2020.

We also reported mid to high single digit sales growth in our various dental specify the specialty businesses in North America and internationally and stand will discuss that in further detail also later in the call.

Our medical sales were $788.7 million in the fourth quarter, an increase of 15.2% with internally generated sales growth in local currencies of 10.2%.

The 10.2% internal growth in local currencies really consisted of 10.3% growth in North America, and 5.5% growth internationally.

Local sales growth results were again, driven by both solid organic growth and a strong contribution from North American rest skirt rescue and recent acquisition.

Technology and value added services sales from continuing operations were $137.1 million firm in the quarter, an increase of 20% with internally generated sales growth in local currencies growth of 9.4%.

In North America, the technology and value added services internal sales growth in local currencies was 8.7%. These sales benefited benefited from customers upgrading the Microsoft Windows operating system to remain software compliant as well as strong financial services revenue.

Internationally technology and value added services internal sales increased by 13.4% in local currencies. These sales will also fueled by strong financial services revenues.

During the quarter, we continue to repurchase common stock in the open market.

By buying approximately 2.9 million shares at an average price of $69.05 per share for a total of approximately $200 million of purchases. The impact of these repurchases of shares in the fourth quarter EPS was immaterial for the full year, we did spend $525 million to repurchase.

Approximately 8.2 million shares.

Also it's important to note that at year end, Henry Schein had approximately $275 million authorized for future repurchases of common stock.

If we take now a brief look at some of the highlights of our cash flow. We had very strong operating cash flow from continuing operations for the quarter at $295.3 million and thats compared to $181.6 million in the fourth quarter with last year.

For the year the operating cash flow from continuing operations was also very strong at $820.5 million and that compares to $450 million in 2018, our capex for the year was $76.2 million and that results in free cash flow from continuing operations of 744.

$4.3 million.

As we have previously discussed we plan on implementing a new restructuring initiative in 2020 to help mitigate stranded costs from expiring services under the TSA related to the animal health spinoff as well as to look for additional opportunities to reduce expenses and drive operating efficiencies. We will provide addition.

No details as we progress through.

The remainder of the fiscal year.

So I'll conclude my remarks by noting that we are reaffirming our 2020 non-GAAP diluted EPS at this time, we will not be providing GAAP diluted EPS guidance as we are unable to provide an accurate estimate of expenses related to the restructuring that I just mentioned.

2020, non-GAAP diluted EPS from continuing operations attributable to Henry Schein is expected to be $3.65 to $3.75, reflecting a growth of 4% to 7% compared with its 2019 non-GAAP diluted EPS from continuing operations, which was $3 50 once $3.51.

Yes.

I think it's important to note that our guidance assumes that there was no significant supply chain disruption related to the Nobel Corona virus for certain infection control products.

Our guidance for 2020, non-GAAP diluted EPS attributable to shine from continuing operations.

Also includes any completed or previously announced acquisitions, but does not include the impact of any potential future acquisitions as well as restructuring expenses.

Items also assumes foreign exchange rates that are generally consistent with current levels and this guidance guidance also assumes that the end markets remained stable and consistent with current market conditions.

Before I turn the call over to Stanley I would like to make a further comment about the current impact of the Nobel Corona virus outbreak, which then will also address our sales in China as a proportion of total total global dental sales are relatively small today that said we are monitoring the situation carefully as the spike in demand and corresponding limited supply.

Hi for personal protective equipment, such as mess and gallons as having a global impact a stand will describe we are closely working with our manufacturing and supply chain partners as well as be pandemic supply chain network. The World Health organization, the Chinese Ministry of health and the CDC to address product shortages as they may occur.

At this time, it's difficult if not impossible to estimate of potential impact to our business related to supply.

Related to potential supply constraints, so with that I'd like to turn the call back over the Stanley.

Thank you Stephen.

Before turning to the 2019 fourth quarter I'd like to review a few highlights for the year.

We achieved net sales from continuing operations of approximately $10 billion with internal sales up 4%.

From 2018 in local currencies.

Which excludes sales to Vectrus GAAP diluted EPS increased 60, 75% and non-GAAP diluted EPS growth was 10.7%.

Based on continuing operations basis.

We were pleased with very strong operating cash flow of $820 million, which increased by $369 million versus 2018.

In addition in 2019, we completed 10 major majority owned strategic transactions as we continue to expand our Julie geographic presence and enhance our product offerings. Together. These acquisitions had trailing 12 months revenue at the time of purchase of approximately 350 million.

Yes.

We also continued to commercialize.

We also continue to commercialization of Henry Schein won a significant development in support of our long term growth plans.

Our value added solutions, such as dental software.

Lead to stickiness in our base of business as our customers look to Henry Schein for much more than just merchandise and equipment.

Value added services.

He is a key part of our growth strategy, both as it relates to the stickiness of customers and actually driving earnings per share.

This often translates into recurring sales.

These value added services with a higher margin profiles and accordingly, as I just noted earnings accretion.

Some acquisition highlights for in 2019 included our entry into the Nordics dental markets and market, we had not to have presence up to now and the expansion of our dental business in China.

In the medical marketing, we broadened our solutions offerings, serving the defense and public safety markets and on the technology side, we enhanced our offerings with patient communication software and established a dental software presence in Italy as well as in Austria.

Going forward, we have significant opportunities to allocate capital in support of our 2018 to 2020 strategic that and beyond this actually into 2020 122 and 23 plans. These opportunities are focused on three main areas.

First in distribution with expansion of our core dental and medical businesses as we continue to both scale and expand our new GRP into new geographies as well as drive efficiencies in the businesses.

On the distribution side second we will continue to invest and value added services advancing our solutions services and support for customers and third partnering with a broad set of manufacturers as well as building the Henry Schein brand with the key goal of expanding gross margins.

This will of course advance business for manufacturers that we work closely with while at the same time advancing our owned brands specifically in the specialty markets.

So.

Fourth quarter 2019, some highlights.

On the dental side.

North American dental consumable merchandise internal sales in local currencies was essentially flat. This reflects soft end market demand from independent dental practices I would note that full the fiscal 2019, North American dental consumable merchandise internal sales growth.

Was 1.2% in local currencies.

North American dental equipment had a healthy increase in internal sales of approximately 7% in local currencies, primarily driven by high Tech.

Equipment sales across multiple manufacturers, but also as it relates to traditional the contribution of sales of traditional products.

Also our sales were positively impacted by our participation in a key supplier sales of into an early part of the quota, particularly for CAD Cam and dental laser products in the fourth quarter internal sales in local currencies for high tech equipment increased approximately 11%, including CAD Cam equipment growth.

A more than 50% and traditional equipment growth of nearly 5%.

Our current dental equipment backlog in North America suggest continued sales growth.

The first quarter of 2020, we believe we have a healthy backlog in the most north American equipment markets.

Internationally dental consumables internal sales growth in local currencies was solid with more than 4% increase driven by broad based strength across most of our businesses on the international side.

International dental equipment internal growth declined by approximately 1% in local currencies, reflecting a difficult prior year comparison as well as a slower economy and Australia, Although we believe that the backlog in Australia will also result in decent come back in that much.

Markets.

In the fourth quarter internal sales of global dental specialty products increased approximately approximately 6% in local currencies for Twentytwenty. We believe the run rate for sales of our differentiated dental specialty product portfolio will be in the range of $650 million then.

So specialty sales was approximately 12% of our total dental consumable merchandise sales in 2018, sorry, 2019, we believe our focus on these high growth and high margin specialty areas offer significant growth opportunities over the long term.

Our dental strategy is focused on promoting customer success through several key initiatives that help enable.

From a business efficiency and better clinical outcomes are keys to help our customers operates a more efficient practice, so customers can provide better clinical care.

This includes enhance mechanisms for collecting customer feedback and the launch of our common CRM platform, bringing us closer to our customers by helping to prove sales and support capabilities. The internal changes that we have introduced successfully will help us help our customers.

Succeed.

We are also focused on supporting lumped them gains in sales and profitability with additional key talent that we've added over the years last few years, bringing additional capabilities that our contemporary in nature as well as we have expanded our product and service offerings.

This is all this all we believe bodes well for our global dental business now, let's move to medical business, where we delivered strong internal sales growth of 4%.

In the fourth quarter of more than 10% in local currencies were the highest growth coming from a law of large enterprise customers. We also recorded solid sales increases from our mid market and our general practitioners customers so across the board regenerated decent.

And actually very good.

Internal growth from all the customer categories in the medical business. We believe we continue to gain market share in the medical business.

As we deliver on a robust segmentation strategy.

Inclusive of health systems ambulatory surgical centers large group practices and independent offices.

In 2019, we highlighted our focus on the University health and workplace safety will place help settings.

Both areas further.

Diversifying Henry Scheins footprint and reflect meaningful long term opportunity going forward, we will continue to cultivate our capabilities in each end market segment and offer I'll provide as relevant products and solutions to drive outcomes.

Procedures and K continue to migrate as procedures and care continue to migrate out of the hospital specialization.

Remains very important medical business strategy.

Gastroenterology, orthopedics and dermatology or just a few the areas of focus and Henry Schein has robust plans to deliver value. In these growth segments. We are also committed to supporting provide us with highly focused specialty solutions.

To help support clinical outcomes in the medical environment. One example is point of care diagnostics, which is undergoing a shift from lateral flow devices to molecular diagnostics, our dedicated point of care specialists can help providers navigate the shift.

Our credibility in fact has resulted in significant growth in business and diagnostic area and specifically the point of care diagnostic area.

During the quarter. Our team also continued to focus on delivering core services that brings exceptional value to our customers such as telemedicine. The tele medicine platform to help optimize healthcare delivery and maximize patient engagement. In addition, the digital marketing solutions, we offer our helping our customers customers.

As prospect and secure new patients.

Value added services in the medical sector are also a key part of our growth strategy from a customer stickiness point of view and from a profit generation point of view looking ahead. We plan to continue invest in expanding these solutions platforms to address customer clinical financial and operational needs with the in the.

General practitioner sub acute care or large enterprise settings.

Let's move to our technology and value added services businesses on a global basis technology and value added services internal growth grew in excess of 9% in local currencies in the fourth quarter.

2019 was an important here in the positioning of Henry Schein, one as we undertook important initiatives to further operationalize the integration of the two business units that came together to create Henry Schein one.

We see many opportunities to help customers across the spectrum with a general practitioners midmarket practitioners large scale dsos.

Helping them to adopt these innovative software solutions to help drive practice outreach.

Thats, new business and efficiency.

We have a significant domestic installed base the practice management solutions and a growing international base that represents prime customers for our practice engagement and demand generation tools.

Lots of opportunities to take out installed base and add additional software capabilities to that base. While also enhancing our cloud based software business with Dentrix as said, particularly with Dsos, but this also has significant benefit for midmarket practices that wish to central.

Lies patient data.

During the fourth quarter, we had several exciting new product introductions at Henry Schein, One we launched the beta version of our debt Gentex quick Bill East statements with online Bill pay the solution will help office, a streamlined collection processes and reduce made in cost and accelerate cash flow.

We launched Dentrix G 7.3, offering ledger improvements to help customers tracked and identify adjustments as well as improved insurance payment processing.

During the fourth quarter, we released a new chase side dashboard for Dentrix ascend can extend beyond cloud based system enhancing clinical patient data for the dentist also we completed development work on demand for data integration with Dentrix, a said along with two platforms to sink data and.

Function better together.

There is a lot of exciting development work going on at Henry Schein alone as we continue to evolve as a service provider and trusted resorts or a broad selection of products and services.

As we noted earlier on to the various sectors.

The dental market small mid size and very large practices.

Before I turn the call over to general questions I would like to add to Stephen's comments on that avail.

Corona virus, Henry Schein has a long history as a pioneer in our industry.

As a thought leader problem solver and catalyst public private partnerships to address pressing complex health issues, specifically in infection control area.

One example of this was our deep engagement in pandemic preparedness and disaster relief for more than 25 years as we saw from SaaS H, one N Y Mercy Bowl and now with the Nobel Corona Vitesse eight outbreak the risk of infectious disease outbreaks ever present and possess.

Presenting his critical risks to the global health supply chain.

Out of a desire to learn lessons the past and save lives in the future, we leveraged Henry Scheins expertise supply chain leadership and extensive network of relationships with our supplier partners health professionals and international organizations.

To catalyze public private collaboration cold Pandemics supply.

Chain network and that was in 2015, when we established this network that Pemex Pandemics supply chain network works to accelerate the delivery of clinical supplies to frontline health professionals, Robert by providing market visibility needs planning production capabilities.

And risk forecasting for healthcare supplies, Henry Schein serves as co founder and private sector lead for the Pandemics supply chain network, along with the World Health organization. The you and we'll food program. The World Bank UNICEF, you a center for disease control prevention and.

Before in this capacity Henry Schein serves as the main liaison between more than 40 members of the private sector, including you PS and JNJ within multilateral organizations in helping to advance work.

In addition, our innovative strategy of pre positioning donations of critical healthcare products with our strategic NGL partners to enable these organizations to specifically respond to emergencies has enabled us to donate needed supplies to frontline health workers, a pre position donation of mass that Henry Schein and made.

Back in September 2019, dementia International MLP International project Cope was quickly deployed in China via the appropriate channels working with local Chinese authorities to address to help address the outbreak the dose the nation at the time was valued at nearly $1 million we see.

Our leadership in developing innovative approaches to pandemic preparedness and response as an important pathway for us to most effectively serve our customers make a critical contribution to society and as a key differentiator of Henry Schein as a global area in this a global leader in this area all contribute.

Moving to the important value of Henry Schein as an entity.

So with that overview I'd like to open the call to questions. Operator. Please open the line. Thank you.

Thank you.

At this time, we'd like to remind everyone. If he would like to ask a question. Please press Star then one on your telephone keypad to withdraw question first pound key we ask that you limit yourself to one question plus one follow up question in order to allow all callers had chance to pose your question.

Our first question is going to come from the line of Jon Block Stifel.

Thanks, guys. Good morning, first once daily just.

Slide North American consumable number.

Local rail quarter to quarter, but just on you called out particular weakness what the independents and so just wondering if theres anything to elaborate on our there are pressures from this cohort from Dsos. It will look more color. Thanks.

Yes, I don't think.

It's.

Pressure from Dsos per se.

I think that the is an element of steady.

Demand for services I don't think is decreasing but also the is.

I would think.

A searching for products that are perhaps lower priced.

That achieved the same outcomes.

But overall, we believe the market is steady.

The and not to significantly growing.

It is very hard to define exactly what's an independent is and what a mid sized practices.

The mid sized practices of growing faster than the independence, but it's hard to tell exactly we try to provide general guidance, but there's no scientific methodology for terminating the one versus the other but we believe that.

The market from a procedure point is relatively stable.

With significant growth in some of the specialty areas you cannot sell that from our numbers because our specialty products as a percent of the totaled products are relatively small, but as a percent of the profits are a little bit greater so.

We try to give some sense, but there is no scientific way of delineating between small practices and mid size practices.

Okay got it.

The second one like a sort of users a clarification, so, especially consumable number certainly you mentioned again solid growth, 6% plus I think you mentioned the total bucket for the year around 650 million I might be mistaken, but.

That number was higher like 750 million, maybe even 800 million plus it obviously been growing so is that it will find number we're fine definition of specialty consumables and if so what were submitted tweets there I'll follow up offline with others. Thanks guys.

Sure Yeah, John there wasn't refinement of the number historically, we what we were looking at all specialty products, which include as a small portion of medical specialty products and we thought it was more appropriate really too.

To delineate just the dental specialty products or the total number still correct, but the dental piece of it is that 650 million dollar number.

Thank you. Our next question is going to come from the line of Steve Valiquette Barclays.

Hi, This is Johnson on for Steve Today, I'm, just going back to your comment the independents are looking for lower priced products. We couple that with procedures are essentially stable does that mean that the independents are shifting away from you guys and I'm just going to competitors somebody online discount.

Theres et cetera.

I don't believe that is with case per se.

I believe the alternate channels to the full service whether its.

Online.

Or short line discount.

Providers is relatively stable.

We know the strom.

Having us that have access to this market data.

Through some of our investments I don't think that is the case necessarily but I do believe they are shopping.

So lower priced.

Units.

Our product that are similar.

And so I think there is somewhat of a downward drift.

And the unit price per product.

Okay Fair enough and then just on the DSL market can you.

Tell us what you're seeing in the market. There is there is there are compared to be a little bit more aggressive in trying to.

Take market share et cetera, and I guess was there.

Any softness in my to what you saw an independent.

Mark or is it a relatively stable there. Thanks.

Think that market is relatively stable, we've always had significant competition in that market.

From time to time, one manifest one distributor on another may be super.

Aggressive.

Our posture is that we provide.

Significant value added services to Dsos.

In particular in the area of data and in the area of practice management software and we feel that for that our pricing needs to be fair. So that we can afford to pay for the resources, we provide including human capital and make a decent mark.

Good.

So I would say that is this market has always been competitive we win some accounts we lose some accounts.

We do not report every transaction that goes on in that market I think that b.

Too onerous, having said that I believe that market is relatively stable.

I would just add one other thing on the Dsos, it's more difficult to quantify what they'd be unit growth areas because dsos by their nature.

Not only do they acquire certain products, but our practices.

But even if they start up a new practice, it's difficult to determine what how much of that new practice revenues.

As cannibalizing other practices and how much of it is real market growth.

So thats why its harder to really quantify what's going on in the Dsos.

As far as market growth.

Perspective, yes, they're growing but some of it is really again cannibalization.

And it's cleanup on the independents and Thats why we cited the independence because you don't have that dynamic.

Our next question is going to come from the line of Jeff Johnson Baird.

Jeff how are you there.

Hi, Jeff go ahead with your question.

Hi, sorry, I was on yet there's a screen on for Josh.

I know China is a very small part.

Business, but especially with the lead the acquisition of a Chinese distribution distributorship located in lieu Han we'd love to hear your perspective in general about the recent and on demand in China and how widespread this slowdown in dental demand is across China.

Yes.

First of all our.

Percentage of sales in China versus our international sales in dental or even our global sale or our global sales is.

Immaterial, we do own an interest in.

One of the largest maybe it is the largest distributor of dental products and move on but the impact to both sales and bottom line is not material.

As it relates the dental sales in China, I think the best is to do a to do some research on your own relative to healthcare.

Services being provided in China.

By and large.

The only services that are being provided in big parts of China are essential health care services.

There are some parts of China with dental services continue to be provided by the huge part of China Dental services are not being provided so.

With.

This of course only kicked in in the third week of January or so maybe early February how we don't know when the government will restore.

General dental so general medical services and in fact dental services. This is what.

Great. Thanks, a question Mark in our mind I don't think Lee unique I believe this was the case in all healthcare, but we believe that the Chinese government will restore healthcare services in the near future because it is important to the population but of course, none of us no.

The exact dates when that is going to happen in any specific region.

Great. Thank you and.

One other question you know you don't really guide to revenue growth, but can you provide any high level thoughts on North America, dental consumables and equipment growth for 2020.

Yes, again, let me.

I just.

Just mentioned that.

Related to Corona virus it one of the issues separate from our Chinese business, which again, the Stanley said, a small and not material.

There is a question on.

Availability of product for manufacturers on certain products, specifically things like masks and gallons and disinfectants.

We saw a little bit of accelerated demand early in Q1, but we do have limited supply and we are really not sure when we will be able to get.

You know additional supply if it if there will be no disruption off there will be somewhat or significant destructions just impossible to tell right now.

No my answer really caveats that hole that whole area, because if we don't have supply.

That will negatively impact the demand in consumables.

So excluding any significant impact related to that we still think that.

The market while its soft.

You know really isn't dramatically change it is stable.

So we're expecting that to continue.

Where we continue to have stable.

Demand and products for consumables. The other thing that we're looking to do Stanley highlighted in his prepared remarks is again again continued to grow.

In faster subcategories of the market like dental specialties to help offset that.

The slower growth in.

In general consumable products, So I think we're really expecting.

Stability in the consumable market going forward in our guidance.

Our next question is when it comes from the line I've listened Sanderson Evercore ISI.

Hi, good morning.

I am sorry.

But could you.

Did you talk about the impact its flu and medical in the quarter.

[noise] sure, we didnt specifically mentioning.

Flow and this I guess, there's two components of influenza.

One is the actual flu vaccine that we sell.

To our customers.

That was.

That was strong but is not a big driver of the overall growth.

Really because it was a a more severe flu and virus.

Season, we saw patient traffic.

To the to the physician offices.

Accelerate a bit.

It's unfortunate that it's a severe season this year, but it is and that does drive overall patient traffic and overall demand in products other than influenza per se influenza vaccine per se.

Got it.

Just comment broadly where you are in terms of DSL renewals for the year.

Yeah. So you know.

We feel we don't like to talk about specific entities and specific situations, we think from a competitive point of view.

We're better off really not talking about that but I will say that we feel very good with our large DSL customers. We feel like we have very strong relationships of providing exceptional service and feel good about our ability to continue to.

Served that customer base and although there are some of our competitors who are looking to grow in that space.

It is a little bit different than non DBSO business in the requirements that these customers have is little bit different and we feel like we are uniquely positioned to be able to serve them really well so.

On average we feel good about this.

This customer base.

Thank you. Our next question is when it comes from the line of Nathan Rich Goldman Sachs.

Thanks. Thanks for the question I just wanted to follow up on your commentary about kind of silly purchasing pattern from the independent practices that leads you feel like this is the more permanent shift in how they think about purchasing supplies and I'd be curious it.

No that nature of the changes that you're seeing is that more lower priced brands more private label and you think that it ultimately has an impact on how they're thinking about purchasing equipment as well.

So there are two questions in there the one item is related to consumables.

I think that.

Small practices mid size and large practices.

I will spend more money per units of product. If there is some innovation in that product.

We feel quite comfortable that with many of our key suppliers they are innovative products coming out.

Come out and a coming out and that will drive product of system that will drive.

Pricing up I think of certain units.

I don't think this is a permanent.

The change unless there is no innovation, but we understand from our key suppliers that they are.

Current news.

Of the current products could products that will be launched.

Innovative products that will be launched and that the pipeline continues to have.

Thats going forward new products as it relates to equipment.

They have been competitive pricing challenges in certain imaging products I don't believe that as the case any longer and we know for sure at least amongst our customer base that there are investing in their practices, whether it's in CAD cam laser or for that matter quite frankly traditional.

Sales, we reported in the North America, 5% increase so I don't we believed that the equipment market is quite yet.

Robust.

We believe our backlog is solid and so we are optimistic about the.

Equipment market in general in North America, and for that matter globally.

And we believe that the consumable market is stable.

And I think should be judged over a few quarters and not necessarily one quarter.

That's helpful and Steve maybe just going back to a previous question as we think about the outlook for the the North America market.

Thank you guys typically.

Try to grow above the market each year.

It seems like you kind of expect a continuation of the end market trends that were you can see how should think about the loss of built the large deal so customer that you called out late last year.

Impacting the that growth in that business and kind of once we put it all together can you kind of help kind of frame, how you're thinking about growth in the north American market for 20.

Yeah, I think when we report, we'll probably give more detail on that because I think it would be difficult for us, although not impossible, but difficult to say, we're going to gain market share, including the loss of that one customer I think really our goal would be that may be too optimistic and.

The market share gains would be excluding the impact of that one that one particular customer.

Thank you. Our next question will come from the line of Sarah James Piper Sandler.

Thank you.

Steve I just talked about this being a big couple of years coming up for equipment innovation.

I think from multiple manufacturers can you provide anymore details on that and how you think about incorporating that into here.

Sales guidance. Thanks.

Sure so.

We're hopeful that as some upside.

Because of new products coming into the market, we don't specifically have that built into.

Our guidance because it's difficult to.

Estimate the timing of when those products come into the market and what traction how quickly they'll get traction.

But for example, you know one of the product categories that we saw some nice growth in Q4 him.

It was lasers lasers are still a relatively new technology, even though lasers have been out for a long time the adoption of places in the dental market is still relatively low so from that perspective, it's a newer products.

And it does have merit can can do certain procedures.

Quicker as well as less pain too.

The patient.

So thats one. Good example, but it does take time to dental market does tend to be slow in adopting new technologies and slowing adopting.

New equipment.

Our equipment sales growth was not just CAD Cam in Q4, yes. It was led by CAD Cam, but we also traditional equipment growth. We also had a laser growth we had some other high tech equipment growth. So you know the short answer again is we don't have anything specific built into our guidance.

Because it's difficult to do so.

Around timing.

That's helpful and just bigger picture question on the renewal cycle do you have so contracts can you give us an idea of pacing and you know it.

Many 20, a large or small year, how do you think about the big bringing all years coming up I guess that's interesting. Thanks.

Well one of the things that we made a concerted effort. We were successful in doing is rather than having as we had several years ago a lot of the renewals all coming up in one year we.

We really don't have that we were able to spread out some of the renewals so that.

Yes, they're not all bunched up in one particular year.

So we feel good that that that that's helpful. Because.

You know even to focus on the renewals and to provide responses.

Our piece if you have them all coming up at one time, it's more difficult and to focus on a few out.

A few at a time so it's also good because the impact of any one you know.

Or any one year is not as significant as it was using two or three years ago when that happens.

Thank you. Our next question is going to come from the line as Michael Cherny Bank of America.

Hi, thanks, much for taking the question.

Stan earlier, you talked about the 10 deals completed a in the course of the year. You also mentioned another part of the call your focus on the portfolio and continuing to utilize capital to deploy to add onto existing capabilities can you maybe give us a sense as you look out over the next one.

Three maybe even five years, how you think of that M&A strategy evolving in terms of.

Consistently adding new geographic territories on for distribution side versus other value added services versus other potential private label products that you can push that your channel.

Yes. Good question, we actually see opportunity in all of our businesses.

If you look at our annual distribution business. These direct geographic footprint expansion, but also there is opportunity to add to our portfolio.

In practically every market throughout the world. There are no massive dental distributions businesses really in our sites and say North America, but there are opportunities throughout the world on the consumable and equipment side.

And there are specific markets, we were relatively underprice upended underpenetrated.

Having said this.

We have a relatively small market share in specialty.

Areas.

Market is growing business is growing very nicely in the also.

Endo and.

Oral surgery implants, and bone regeneration businesses in many parts of the world, but there are many parts of the world Wheatley either are not present or have a very small presence. So there is significant opportunities to invest in the specialty areas.

Henry Schein, one has huge opportunities in many many areas for investment and our medical business has opportunity on the distribution side in North America, but globally. There is a lot of opportunity and on the medical side the is.

Terrific and opportunity and investing in specialty products and businesses, including some vertical integration specialty opportunities as we've seen on the dental side. So we see many opportunities across the board.

We're very comfortable doing these mid size deals that we've been doing for years and every now and again do something involving putting hundreds of millions of dollars to work.

But the 350 plus million dollars of acquisitions. Each year is something we're quite comfortable with we can integrate them well and again, we see lots of opportunity for that kind of investment and every now and again a significant investment above that number.

All of these adding to our geographic presence, our product offering and in certain areas improving on our margins.

Thanks, So much down and then just Steve you mentioned the initiation of a new restructuring program on the are coming up can you maybe give a little sense in terms of what are some of the areas you're targeting as you push for and the restructuring program and you know where some of the efficiencies that you think Henry Schein who's already <unk> always been pretty efficient can get more efficient.

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Well I would say that a lot of it comes from every year, we do 10 12 acquisitions.

And you know, sometimes you can't fully integrate without restructuring so it's not really.

It's there's also a lot of new technologies that are out there to help operating more efficiently that we want to implement them that that'll save money.

It will not be focused on any of the sales activities sales activities we feel.

There's no need to do anything in that area. So we really more on non sales activities that we will focus on.

Thank you we have time for one last question that question will come from Kevin Caliendo, what TBS.

Hey, guys just spread on for Kevin Kelly I know I. Appreciate squeeze me again, just want to go back to the do you still RFP strategy. I mean is there any any insight you can give around pricing and possibly bundling value added services going forward that may have shifted after the contract lost 2019, I'm just trying to get more clarity around there. Thanks.

Stephen to provide further.

Specific thoughts, but we have not changed our strategy per se.

In dealing with Dsos, it's always been a competitive markets.

As it relates to particular bundling opportunities with all these bundled in one way or another and to be specific I think would not be a good idea from a competitive point of view suffice to say is offering of general consumables is most competitors.

Whether its branded or own brand.

And our offering of.

Specialty products is quite unique amongst the distribution community and certainly we have a unique offering opportunity in the.

Practice management Henry Schein, one arena. So I think we remain highly competitive in the space and where we have had a very good market share in the United States as well as in Europe and by the way in Europe. This Dsos movement.

To some extent is growing.

In certain markets and we remain well position to capitalize on that business as we have in the United States. It has always been a competitive markets.

Yes, the other thing I would add to that is.

Our DSL customers are looking for not only very good supply chain pricing and logistics.

But also.

Helping them.

One more efficient practices, helping them with patient demand generation and really doing a lot more solutions for them than just supply chain solutions and I think that's where we excel through Henry Schein, one, especially on patient demand I think we have unparalleled expertise and.

That area.

And some of the other value added solutions that we have so I.

I think that that whole package really will be the winning the winning package for customers and again, we're uniquely positioned to be able to do them.

Yeah, that's helpful and if I could squeeze in one more just going to the a.

I feel a line or that was a line that was introduced today at Chicago Midwinter should we be thinking about any contribution not in 2020 and and any potential cannibalization of the exelis based on board.

I don't think you should draw any major conclusions first of all the two products have been introduced for about a year on mostly a beta site basis as we did mention less coal we have a number of dsos for the revealed product that have signed up.

I do believe that over time, we will generate a good business in this line of field, we have a good product we have good.

Offering we have some very good sales.

Based marketing sales capacity behind it but as we've said in the past. This was one additional product line to into shine and we should not draw specific conclusions on the overall impact as it relates to the business of Henry Schein in general, but we remain quite optimistic that we have a good product and a good offering and we will slow.

Only introduce them to ensure that our sales.

Match, the capacity to deliver but again, we believe we have a very good.

Product offering in both for both the specialists and the GP and position our GP customers to compete very well with the direct players in this market.

We have met a lot of positive comments.

We've gotten some sales, but I think it is too early to add too much to our earnings related to this product offering, especially like to the fact that we will it be investing in sales and marketing in this area.

Thank you I would now like to turn the call back over to Stanley for closing comments.

Thank you very much operator, as we close todays call I'd like to leave the investors with a thought about our business model and go to market strategy. We have spent decades, diversifying and differentiating our dental and medical business.

Businesses by adding new products and solutions, particularly for dental expanding our geographic footprint and specialty offering our subsys is not bound by the growth profile of any one particular market or customer segment, we really have.

A diverse.

Product offering we are confident that we will continue to grow our sales.

Our gross margin manage our expenses better.

And therefore increase.

Operating income.

Well the result, an increase in Es all the while turning these increased profits into crash growth rates will vary quarter to quarter in each category, but we view the fundamentals of each market we serve as solid.

And some as being.

Markets that were extremely optimistic about whether it's the specialty markets. The practice management solutions markets Henry Schein, one the medical markets or for that matter, the dental and medical equipment market and in certain sectors of the world the consumable market the dental care.

Assumable markets. It is our goal to provide continues growth in sales and profitability, resulting in an attractive long term return on investment for our shareholders. As we have done in the 25 years as a public company.

I remain extremely optimistic about the future of Henry Schein I could comfortably say that from a management point of view, we are better position today than ever before to take advantage of the opportunities that lie ahead of us.

It is still a first quarter and it is not the right time to be increasing guidance, but we do remain optimistic about Henry Scheins future, having said that there are a lot of variables in the world beyond any wants control.

Including the.

Chinese situation relative to the local market the gain not material to Henry Schein from sales and profit point of view and availability of infection control products.

We cannot be certain about that having said that I believe we're very well positioned and in fact, almost as good as anyone else.

Two.

Deal with the supply chain challenges, it's just that we cannot be 100% certain about anything.

We have been working on supply chain in the infection control arena for decades, and always in the past been able to supply customers with product.

As needed, but having said that.

It is would be foolhardy to make predictions in the first quarter 2020 about the full year, having said that we stick with our guidance and hopefully we'll be in a position to present better news as the year unfolds, we look forward to speaking to gain in May.

We when we report our next earnings and of course at one of the next conferences and in fact.

Well the meeting investors here in Chicago multiple meetings with very very pleased with the progress you're making in all of our business sectors and a very excited about the future of Henry Schein.

Our customers I believe appreciate what we're doing and as I said, we have an outstanding team.

In place with.

Each of the key areas of focus being well positioned for the future. So as we go into preparing for our 20 to 2020 120 to 23 strategic plan I remain extremely enthusiastic and excited about the future of Henry Schein. Thank you very much.

For listening to US today, we look forward again to future calls.

And meetings if you have any further questions. Please feel free to contact Carolynne borders and Investor Relations at Sixthree 139, 081 of 560 139 081 of five and thank you again for joining us today.

Thank you once again, we'd like to thank you for participating in today's Henry Schein fourth quarter and full year 2019 conference call you may now disconnect.

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Good morning, ladies and gentlemen, and welcome to the Henry Schein fourth quarter and full year 2019 conference call.

At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance during the call. Please press the star keep followed by zero Wonder Touchtone phone as a reminder to school is being recorded I would now like to introduce your host.

Today's call Carolynne borders Henry Schein, Vice President Investor Relations. Please go ahead Carolyn.

Thank you Holly and thanks to each of you for joining US today, Scott Henry Scheins results for the 2019 fourth quarter and full year.

With me on the call today or Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein, and Steven Paladino, Executive Vice President and Chief Financial Officer.

Before we begin I would like to state that certain comments made during this call will include information that is forward looking.

As you know risks and uncertainties involved in the company's business may affect the matters referred to in forward looking statement.

As a result, the company's performance may materially differ from those expressed in <unk> indicated by such forward looking statements.

These forward looking statements are qualified in their entirety by the cautionary statements contained in Henry Scheins filings with the Securities and Exchange Commission.

Including the risk factor section of our annual report on form 10-K.

In addition, all comments about the markets, we serve including end market growth rates and market share are based upon the company's internal analysis and after that.

Our conference call remarks will include both GAAP and non-GAAP results, we believe the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business enable the comparison a financial results between periods, where certain items may vary independently of business performance.

And allow for greater transparency with respect to the key metrics used by management and operating our business.

These non-GAAP financial measures up presented solely for informational and comparative purposes, and should not be regarded as the replacement for corresponding GAAP measure.

These reconciliations can be found supplemental imposed section of our Investor Relations website, and an exhibit b of today's press release, which is available in the Investor Relations section of our website.

The content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast February Twentyth Twentytwenty, Henry Schein undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call. Please limit yourself to a.

Single question and a follow up during today to allow as many listeners as possible to ask a question within the one hour that we have a lot of for this call.

With that said I would like to turn the call overt Stanley Bergman.

Thank you very much Colin good morning, everyone and thank you for joining us.

2000, or like feed what's the historic after Henry Schein with a spin off about global animal health business as well as the continued integration of Henry Schein one.

Which offers an extraordinary array of best in class Dental software solutions to help Dennis optimize the management to their practices provide better communications to patients and drive greater traffic to the practice.

Our global dental and medical businesses continued to demonstrate solid growth as our end markets evolve we are lining up business what the segments that we believe offer the best opportunities for our long term growth in sales and profits. We are excited about the future of Henry Schein and believe we have strategically positioned out business.

But continued success in the healthcare markets we serve.

In the fourth quarter, we delivered internal sales growth from continuing operations at 4.9% in local currencies, which excludes sales of vectrus well. So that's good folks to come interest. This was highlighted by strong revenue growth and our medical it technology and value added services businesses along with.

It can dental equipment and international consumable merchandise.

These sales results contributed to an increase in diluted EPS from continuing operations of 192.2% on a GAAP basis impacted by net gain on the sales of equity upside of an equity investment and EPS growth of 9% on a non-GAAP basis overall.

We believe our poor performance was an excellent conclusion to the transform itself the.

Today, we are affirming our guidance range.

For 2020, non-GAAP diluted EPS from continuing operations up $3 from 65 cents to $3.75 Stephen will discuss this in greater detail in a moment.

So.

The overall conclusion to the quota so the space or the company is that we continue to make and I believe solid progress in growing our business organically, 4.9% growth.

Oh got ugly in the full quota.

With a focus on gaining market share.

Advancing sales of high margin products.

And driving efficiencies throughout the business, while at the same time, making investments in certain investments in strategic businesses that advance the Henry Schein footprint.

Products and value added services.

We expect to continue to generate significant cash flow each year and plan to put this to work with just Dietrich transactions investing in infrastructure R&D and our specialty at software businesses, while at the same time, returning cash to shareholders in the form of share repurchases. In addition, we're working very well with.

A number of strategic suppliers.

That's our goals and overall, we believe we are moving in that in the direction that well can you continue to advance EPS growth and so at cash flow and so shareholder value.

More information little bit further down the call at this time I'll hand, the call over to Stephen to review, our financial results and guidance and then provide some commentary on recent business performance.

Accomplishments.

Thank you Steven Okay. Thank you Stanley and good morning to all as we begin I'd like to point out that I will be discussing our results from continuing operations as reported on a GAAP basis and also on a non-GAAP basis. Our Q4, 2019, and Q4 2018 non-GAAP results exclude certain items that.

Detailed in exhibit B of today's press release and also in the supplement supplemental information section of our Investor Relations website. Please note as we mentioned on our last earnings call Q4, 2019, non-GAAP results also exclude a net gain on on the sale of an equity investments primarily.

Related to you Fredy, a manufacturer of dental instruments and infection prevention solutions. Please note that we have again included a corporate sales category for Q4 that represents sales to co batched us under the transitional services agreements.

And we expect that to continue through August of 2020.

Turning now to our Q4 results net sales from continuing operations for the quarter ended December 28, 2019 were $2.7 billion, reflecting a 7.9% increase compared with the fourth quarter of 2018 with internally generated sales growth in local currencies of 5.8%.

When excluding the sales to call bachus under the TSA agreements internal sales growth in local currencies was 4.9% and I'll note that that was the highest quarterly growth rate that we've seen in the past a year and a half.

Details of our sales growth are contained in exhibit a about earnings press release that was issued earlier this morning.

On a GAAP basis operating margin for the fourth quarter of 2019 was 7.4% an increased 97 basis points compared with the fourth quarter of 2018 on a non-GAAP basis operating margin of 7.3% contracted by 47 basis points on a year over year basis. This margin contraction.

It was primarily due to certain increases in certain employee related costs.

For the full year 2019 on a non-GAAP basis, our operating margin of 7.3% was essentially flat compared with 2018.

Our long term annual operating margin growth of 20.

Growth goal of 20 basis points per year.

The expansion of continues to remain intact. However in 2020, we expect to achieve less than that 20 basis points of expansion due to stranded cost associated with the animal health spinoff as well as certain additional technology investments.

You will find a reconciliation of GAAP operating margin to non-GAAP operating margin also in the supplemental information page on our Investor page of our website turning to taxes, our reported GAAP effective tax rate for the fourth quarter were 29 team was 22.3%. This compares with 14.9% GAAP effective tax rate.

For the fourth quarter of last year on a non-GAAP basis, our effective tax rate was also a similar at 22.2% and compares with the prior year non-GAAP effective tax rate of 21.2%.

Our full year 2019 effective tax rate was 23.4% on a GAAP basis.

Which compares with the full year 2018 effective tax rate on a GAAP basis of 20.0%.

Our non-GAAP based on a non-GAAP basis, our 2019 effective tax rate was 23.7% compared with 22.9% in 2018.

For 2020, we estimate that our effective tax rate will continue to be in the 23% range on both the GAAP and non-GAAP basis.

Again look at the.

Supplemental information page on our Investor Relations website for a reconciliation of GAAP taxes to non-GAAP taxes.

Moving on net income from continuing operations attributable to Henry Schein for Q4, 2019 was $330.6 million or $2.25 per diluted share and this compares with the prior year GAAP net income from continuing operations.

$117.8 million for 70 cents 77 cents per diluted share.

Non-GAAP net income from continuing operations for the fourth quarter over 2019 was $143.0 million, what 97 cents per diluted share and this compares with non-GAAP net income from continuing operations.

$136.2 million or 89 cents per diluted share for the fourth quarter of 28.

This represents growth of 5% and 9% respectively the year over year base.

Providing some additional detail on our results on a continuing operation.

Continuing operations basis amortization from acquired intangible assets for Q4, 2019 was $26.9 million pretax or 14 cents per diluted share. This compares with $19.1 million pretax or nine cents per diluted share for the same period last year for the full year 2019.

Amortization was $105.9 million pre tax or 53 cents per diluted share and that compares to $75.3 million pre tax for 37 cents per diluted share and 28.

I'll also note that for Q4 2019 foreign currency exchange negatively impacted our diluted EPS by approximately one cents per share.

Let me now.

Provide some detail on our sales results for the fourth quarter, our dental sales were $1.7 billion, an increase 2.9% tied with the prior year with internal growth in local currencies of 2.5%.

North American internal sales in local currencies grew 2.2% and included a decline of 0.1% and sales of dental consumable merchandise and thats really reflecting a soft end market demand primarily for independent dental practices.

Internal sales growth in local currencies in North America.

For North American dental equipment and services increased 7.2% year over year. This growth was primarily driven by double digit high tech equipment sales, which were bolstered by a key supply of sales event held early in October.

Sales in our CAD Cam business were particularly strong and Stanley we'll have more comments in this area later on in the call.

Our current dental equipment backlog in North America also suggests continued growth in Q1.

International dental internal sales growth in local currencies was 3.0%. This included 4.4% growth in sales of dental consumable merchandise.

And growth in international consumable merchandize, we've driven by really broad base gains across most of our international businesses.

Internal sales growth in local currencies and international dental equipment sales and services declined 8.8% as we faced a difficult year over year.

Comparison with internal sales growth in the prior year up 7.5%.

The southeast decrease was also due in part of soft macroeconomic conditions in Australia.

Current international dental equipment backlog also suggests a return to growth in Q1 2020.

We also reported mid to high single digit sales growth in our various dental specialty specialty businesses in North America and internationally and stand will discuss that in further detail also later in the call.

Our medical sales were $788.7 million in the fourth quarter, an increase of 15.2% with internally generated sales growth in local currencies of 10.2%.

The 10.2% internal growth in local currencies really consisted of 10.3% growth in North America, and 5.5% growth internationally medical sales growth results were again, driven by both solid organic growth and a strong contribution from North American Rescope rescue and recent acquisition.

Technology and value added services sales from continuing operations were $137.1 million in the quarter, an increase of 20% with internally generated sales growth in local currencies growth of 9.4%.

In North America, the technology and value added services internal sales growth in local currencies was 8.7%.

These sales benefited benefited from customers upgrading that Microsoft Windows operating system to remain software compliance as well as strong financial services revenue.

Internationally technology and value added services internal sales increased by 13.4% in local currencies. These sales were also fueled by strong financial services revenues.

During the quarter, we continue to repurchase common stock in the open market by buying approximately 2.9 million shares at an average price of $69.05 per share for a total of approximately $200 million purchases. The impact of these repurchases of shares in the fourth quarter EPS was image.

Period for the full year, we did spend $525 million to repurchase approximately 8.2 million shares.

Also it's important to note that at year end, Henry Schein had approximately $275 million authorized for future repurchases of common stock.

We take now a brief look at some of the highlights of our cash flow. We had very strong operating cash flow from continuing operations for the quarter at $295.3 million and thats compared to $181.6 million in the fourth quarter with last year.

For the year the operating cash flow from continuing operations was also very strong at $820.5 million and that compares to $450 million in 2018, our capex for the year was $76.2 million and that results in free cash flow from continuing operations of 744.

<unk> point $3 million.

As we have previously discussed we plan on implementing a new restructuring initiative in 2020 to help mitigate stranded costs from expiring services under the TSA related to the animal health spinoff as well as to look for additional opportunities to reduce expenses and drive operating efficiencies we will provide additional.

Details as we progress through.

Remainder of the fiscal year.

So I'll conclude my remarks by noting that we are reaffirming our 2020 non-GAAP diluted EPS at this time, we will not be providing GAAP diluted EPS guidance as we are unable to provide an accurate estimate of expenses related to the restructuring that I just mentioned.

2020, non-GAAP diluted EPS from continuing operations attributable to Henry Schein is expected to be $3.65 to $3.75, reflecting a growth of 4% to 7% compared with the 2019 non-GAAP diluted EPS from continuing operations, which was $3 50 $1.51 cents.

Yes.

Think it's important to note that our guidance assumes that there was no significant supply chain disruption related to the Nobel Corona virus for certain infection control products.

Our guidance for 2020, non-GAAP diluted EPS attributable to shine from continuing operations.

Also includes any completed or previously announced acquisitions, but does not include the impact of any potential future acquisitions as well as restructuring expenses.

Guidance also assumes foreign exchange rates that are generally consistent with current levels and this guidance guidance also assumes that the end markets remained stable and consistent with current market conditions.

Before I turn the call over the Stanley I would like to make a further comment about the current impact of the Nobel Corona virus outbreak, which then will also address how sales in China as a proportion of total total global dental sales are relatively small today that said we are monitoring the situation carefully as the spike in demand and corresponding limited some.

Fly for personal protective equipment, such as mess and downs is having a global impact.

Stan will describe we are closely working with our manufacturing supply chain partners as well as would be pandemic supply chain network. The World Health organization, the Chinese Ministry of health and the CDC to address product shortages as they may occur at this time, it's difficult if not impossible to estimate of potential impact to our business.

Related to supply related to potential supply constraints, so with that I'd like to turn the call back over the Stanley.

Thank you Stephen.

Before turning to the 2019 full quota I'd like to review a few highlights for the.

We achieved net sales from continuing operations of approximately $10 billion with internal sales up 4%.

From 2018 in local currencies.

Which excludes sales took a vectrus GAAP diluted EPS increased 67% and non-GAAP diluted EPS growth was 10.7%.

Both on continuing operations basis.

We were pleased with very strong operating cash flow up $820 million, which increased by $369 million versus 2018.

In addition in 2000 that 19, we've completed 10 major majority owned strategic transactions as we continue to expand our jewelry to the geographic presence and enhance our product offerings. Together. These acquisitions had trailing 12 months revenue at the time of purchase of approximately 315.

In dollars.

We also continued to commercialize.

We also continue the commercialization of Henry Schein one.

A significant development in support of our long term growth plans.

Our value added solutions, such as dental software.

Lead to stickiness and our base.

Business as our customers look to Henry Schein for much more than just merchandise and equipment.

Value added services.

It is a key part of our growth strategy, both as it relates to the stickiness of customers and actually driving earnings per share.

This often translates into incurring sales.

Value added services with a higher margin profiles and accordingly, as I just noted earnings accretion.

Some acquisition highlights for 2019 concluded our entry into the Nordic dental market a market, we had not to have presence up to now and the expansion of our dental business in China.

In the medical market, we broadened our solutions operating serving the defense and public safety markets.

On the technology side, we enhanced our offerings patient communication software and established a dental software presence in Italy as well as in Austria.

Going forward, we have significant opportunities to allocate capital in support of our 2018 to 2020 strategic that and beyond this actually in 2020 122 and 23 plans. These opportunities are focused on three main areas.

First in distribution with expansion of our core dental and medical businesses as we continue to both scale and expand our new GR into new geographies as well as drive efficiencies in the businesses.

On the distribution side second we will continue to invest and value added services advancing our solutions services and support for customers.

And third partnering with a broad set of manufacturers as well as building the Henry Schein brand with the key goal of expanding gross margins.

This will of course advance business full manufacturers that we work closely with while at the same time advancing our owned brands specifically in the specialty.

Cuts.

So.

Fourth quarter 2019, some highlights.

On the dental side.

North American dental consumable merchandise internal sales in local currencies was essentially flat. This reflects soft end market demand from independent dental practices I would note that full the fiscal 2019, North American dental consumable merchandise internal sales growth.

Was 1.2% in local currencies.

North American dental equipment had a healthy increase in internal sales of approximately 7% in local currencies, primarily driven by high Tech.

Equipment sales across multiple manufacturers, but also as it relates to traditional the contribution of sales of traditional products.

All south sales were positively impacted by our participation in a key suppliers sales of into an early part of the quota, particularly for CAD Cam and dental laser products.

In the fourth quota internal sales in local currencies for high Tech equipment increased approximately 11%, including CAD cam equipment growth more than 50% and traditional equipment growth of nearly 5%.

Current dental equipment backlog in North America. So just continued sales growth in the first quarter of 2020, we believe we have a healthy backlog and the bulk both American equipment markets.

Internationally dental consumables internal sales growth in local currencies was solid with more than 4% increase driven by broad based strength across most of our businesses on the international side International dental equipment internal both declined by approximately 1% in local currencies refit.

During a difficult prior year comparison, as well as a slower economy and Australia. Although we believe that's the backlog in Australia will also result in decent come back in that market.

In the fourth quota internal sales of global dental specialty products increased approximately approximately 6% in local currencies for Twentytwenty. We believe the run rate for sales of our differentiated dental specialty product portfolio will be in the range of $650 million.

Infill specialty sales was approximately 12% of our total dental consumable merchandise sales in 2018 and started 2019, we believe our focus on these high growth and high margin specialty areas offer significant growth opportunities over the long term.

Our dental strategy is focused on promoting customer success through several key initiatives that help enable customer business sufficiency and better clinical outcomes are keys to help our customers operates a more efficient practice, so customers can provide better clinical care.

This includes enhance mechanisms for collecting customer feedback and the launch of our common CRM platform, bringing us closer to our customers by helping to prove sales and support capabilities. The internal changes that we have introduced successfully will help us help our customers.

Seed.

We are also focused on supporting Lumpsum gains in sales and profitability with additional key talent that we've added over the years last few years, bringing additional capabilities that are temporary in nature as well as we have expanded our product and service offerings.

This is all this all we believe bodes well for our global dental business now, let's move to medical business, where we delivered strong internal sales growth up 4%.

In the fourth quarter of more than 10% in local currencies with the highest growth coming from a law how large enterprise customers. We also recorded solid sales increases from our mid market and our general practitioners customers. So across the board we generates a decent.

And actually very good.

Internal growth from all the customer categories in the medical.

Listeners, we believe we continued to gain market share in the medical business.

As we deliver on a robust.

Segmentation strategy.

Inclusive of health systems ambulatory surgical centers large group practices and independent offices.

In 2019, we highlighted that focus on the University health and workplace safety well place help settings.

Both areas further.

Diversifying Henry Scheins footprint and reflect meaningful long term opportunity going forward, we will continue to cultivate our capabilities in each end market segment and offer I'll provide as relevant products and solutions to drive outcomes.

Procedures and K continue to migrate as procedures and continue to migrate out of the hospital specialization.

Remains very important medical business strategy.

Gastroenterology, orthopedics and dermatology or just a few the areas of focus at Henry Schein hedge our best plans to deliver value in these growth segments. We also committed to supporting provide us with highly focused specialty solutions.

To help support clinical outcomes.

Medical.

Environment. One example is point of care diagnostics, which is undergoing a shift from lateral flow devices to molecular diagnostic.

Dedicated point of care specialists can help provide us navigate the shift.

Our credibility in fact has resulted in significant growth in business and diagnostic area and specifically the point of kit diagnostic area.

During the quota out team also continued to focus on delivering cost services that brings exceptional value. It's our customers such as telemedicine. The telemedicine platform to help optimize healthcare delivery and maximize patient engagement. In addition, the digital marketing solutions, we offer a helping our customers customers.

As prospect and secure new patients.

The added services in the medical sector also a key part about growth strategy from a customer stickiness point of view and from a profit generation point of view looking ahead, we plan to continue invest and expanding these solutions platforms to address customer clinical financial and operational needs with the in the.

General practitioner sub acute care or large enterprise settings.

Let's move to how technology and value added services businesses on a global basis technology and value added services internal growth grew in excess of 9% in local currencies in the fourth quarter.

2019 wasn't importantly, yet in the positioning of Henry Schein, one as we undertook important initiatives to further operationalize the integration of the two business units that came together to create Henry Schein what.

We see many opportunities to help customers across the spectrum with a general practitioners midmarket practitioners large scale dsos.

Helping them to adopt these innovative software solutions to help drive practice outreach.

Thats, new business and efficiency.

We have a significant domestic installed base the practice management solutions and a growing international base that represents prime customers.

This engagement and demand generation tools.

Lots of opportunities to take out installed base and add additional software capabilities to that base. While also enhancing our cloud based software business with Dentrix or said, particularly with Dsos, but this also has significant benefit for mid market bet. The says that wish to central.

Lies patient data.

During the fourth quarter, we had several exciting new product introductions Henry Schein, one we launched the beta version about Dick Dentrix quick Bill East statements with online Bill pay the solution will help office, a streamline collection processes and reduced made it costs and accelerate cash flow.

We launched Dentrix G 7.3, offering ledger improvements to help customers tracked and identify adjustments as well as improved insurance payment processing.

During the fourth quarter, we released a new chairside dashboard for Dentrix ascend than a symbiotic cloud based system enhancing clinical patient data for the dentist also we completed development work on demand for data integration.

Dentrix as said, allowing the two platforms to sink data and function fit together.

There is a lot of exciting development work going on at Henry Schein, while as we continue to evolve as a service provider entrusted results for a broad selection of products and services.

As we noted earlier on to the various sectors of the dental market small midsize and very large practices.

Before I turn the call over to general questions I would like to add to Stephen's comments on that avail.

Corona virus, Henry Schein has a long history as a pioneer in our industry.

As a thought leader problem solve and catalyst public private partnerships to address pressing complex health issues, specifically in infection control area.

One example of this without deep engagement in pandemic preparedness and disaster relief for more than 25 years.

As we saw from SaaS H, one N Wyman, mostly bowl and now with the Nobel Corona Vitesse eight outbreak the risk of infectious disease outbreaks ever present and possess possesses critical risks to the global health supply chain.

Out of a desire to learn lessons of the past and save lives in the future, we leveraged Henry Scheins expertise supply chain leadership and extensive network of relationships with our supplier partners health professionals and international organizations.

To catalyze public private collaboration cold Pandemics supply.

Chain network and that was in 2015, when we established this network.

That Pemex pandemic supply chain network works to accelerate the delivery of clinical supplies to frontline health professionals, Robert by providing market visibility needs planning production capabilities and risk forecasting for healthcare supplies.

Henry Schein serves as co founder and private sector lead for the Pandemics supply chain network, along with the World Health organization Ewen will food program. The World Bank units shipped the you a center for disease control prevention and the World Economic Forum in this capacity Henry Schein serves as the main liaison.

Between more than 40 members of the private sector, including you PS and JNJ with 10 multilateral organizations in helping to advance which look.

In addition, our innovative strategy of Prepositioning donations of critical healthcare products with our strategic Ngs partners to enable these organizations to specifically respond to emergencies has enabled us to donate needed supplies to frontline health workers.

Repositioned, our nation up mess that Henry Schein and made back in September 2019, dementia International MLP International project Cope was quickly deployed in China via the appropriate channels working with local Chinese authorities debt to help address the outbreak the dose the nation at the time was van.

Hi, good at nearly $1 million, we see our leadership in developing innovative approaches to pandemic preparedness and response as an important pathway for us to most effectively serve our customers make a critical contribution to society and as a key differentiator of Henry Schein as a global area.

This global leader in this area all contributing to the important value of Henry Schein as an entity.

So with that overview I'd like to open the call to questions. Operator. Please open the line. Thank you.

Thank you.

At this time, we'd like to remind everyone. If he would like to ask a question. Please press Star then one on your telephone keypad to withdraw question first abound key we ask that you limit yourself to one question plus one follow up question in order to allow all callers that chance to pose your question.

Our first question is going to come from the line of Jon Block Stifel.

Thanks, guys. Good morning, first once daily just.

On Slide North America consumable number.

Mobile rail quarter to quarter, but just on you called out particular weakness will be independence, and so just wondering if theres anything to elaborate on are there. Some pressures from this cohort from Dsos. It will look more color there. Thanks.

Yes, I don't think.

It's that.

Pressure from Dsos per se.

I think that the is an element of steady.

Demand for services I don't think its decreasing but also the is.

I would think.

A searching for products that have perhaps lower priced.

That achieved the same outcomes.

But overall, we believe the market is steady.

The and up significantly growing.

It is very hard to define exactly what an independent is and what a mid sized practices.

The mid size practices of growing faster than the independence, but it's hard to tell exactly we tried to provide general guidance, but there's no scientific methodology for its among the one versus the other.

We believe that.

The market from a procedure point is relatively stable with significant growth in some of the specialty areas.

You cannot sell that from our numbers because our specialty products as a percent of the total products are relatively small, but as a percent of the profits off a little bit greater so.

We try to give some sense, but there is no scientific way of delineating between small practices and mid sized practices.

Okay got it Steven the second one like sort of users a clarification, so, especially consumable number certainly as you mentioned again solid growth, 6% plus I think you mentioned the total bucket for the year around 650 million I might be mistaken, but I thought in the past.

Number was higher like 750 million, maybe even 800 million cost and obviously been growing so is that we're following number we're fine definition of specialty consumables and if so what were submitted tweets there I'll follow up offline with others. Thanks guys.

Sure Yeah, John there wasn't refinement of the number historically, what we were looking at all specialty products, which include as a small portion of medical specialty products.

And we thought it was more appropriate rarely too.

To delineate just that dental specialty products. So the total number still correct, but the dental piece of it is that $650 million number.

Thank you. Our next question is going to come from the line of Steve Valiquette Barclays.

Hi, This is Johnson on for Steve Today, just going back to your comment that independent John looking for lower priced products. If we couple that with procedures are essentially stable does that mean that the independents are shifting away from you guys and.

Just going to competitors.

Some of the online discounters et cetera.

I don't believe that is the case per se I believe the alternate channels to the full service whether its.

Online.

Or short line discounts.

Providers is relatively stable.

We know the strong.

Having that have access to this market data.

Through some of divestments I don't think that is the case necessarily but I do believe they are shopping.

Lower price.

Units.

Our product.

Similar.

And so I think there is somewhat of a downward drift.

And the unit price per product.

Okay Fair enough and then just on the DSL market can you.

Tell us what you're seeing in the market. There is there is there.

Parents be a little bit more aggressive and trying to.

Take market share et cetera, and I guess was there any softness similar to what you saw an independent.

Mark or is it relatively stable there. Thanks.

I think that market is relatively stable, we've always had significant competition in that market.

From time to time, one manifests on distributes on another may be super.

Aggressive.

Our posture is that we provide.

Significant value added services to Dsos.

In particular in the area of data and in the area up practice management software.

And we feel that for that our pricing needs to be fair. So that we can afford to pay for the resources, we provide including human capital and make a decent margin.

So I would say that is this market has always been competitive we win some accounts we lose some accounts.

We do not report every transaction that goes on in that market I think that b.

Too onerous, having said that I believe that market is relatively stable.

I would just had one other thing on the Dsos.

It's more difficult to quantify what they see unit growth areas because dsos by their nature.

Not only do they acquire certain products, but our practices.

But even if they start up a new practice, it's difficult to determine what how much of that new practice revenues.

Is cannibalizing other practices and how much of it is real market growth.

So thats why its harder to really quantify what's going on in the Dsos.

As far as market growth.

Perspective, yes, they're growing but some of it is really again cannibalization.

And it's cleanup on the independence and Thats why we cited the independents because you don't have that dynamic.

Our next question is going to come from the line of Jeff Johnson Baird.

Jeff how are you there.

Hi, Jeff go ahead with your question.

Hi, sorry, I was on the screen on for Jeff.

I know China is a very small part of your business, but especially with the recent acquisition of a Chinese distribution distributorship located in Blue Hawaiian we'd love to hear your perspective in general about the recent dental demand in China, and how widespread this slowdown in dental demand across China.

Yes.

First of all our.

Percentage of sales in China versus out international sales in dental or even our global sale or our global sales is.

Immaterial, we do own an interest in.

One of the largest maybe is the largest distributor of dental products and move on but the impact of both sales and bottom line is not material.

As it relates the dental sales in China, I think the best is to do to do some research on your own relative to healthcare.

Services being provided in China.

By and large.

The only services that are being provided in big parts of China are essential health care services.

There are some parts of China with dental services continue to be provided by the huge part of China dental services on not being provided so.

We.

This of course only kicked in in the third week of January or so maybe early February how we don't know when the government will restore.

General.

Rentals General medical services and in fact dental services. This is what.

Great.

Question Mark in our mind I don't think Lee unique I believe this was the case in all healthcare, but we believe that the Chinese government will restore healthcare services in the near future because it is important to the population but of course, none of us know the.

Exact dates when that is going to happen in any specific region.

Great. Thank you and.

One other question.

You don't really guide to revenue growth, but can you provide any high level thoughts on North America, dental consumables and equipment growth for 2020.

Yes.

Let me.

[music].

Just mentioned that.

Related to Corona buyer us it one of the issues separate from our Chinese business, which again the Stanley said is small and not material.

There is a question on.

Availability of product for manufacturers on certain products, specifically things like masks and gallons and disinfectants.

We saw a little bit of an accelerated demand early in Q1, but we do have limited supply.

And we are really not sure when we will be able to get.

Additional supply if there'll be no disruption or if there will be somewhat overwatch significant disruption is impossible to tell right now.

No my answer really caveats that hole that whole area, because if we don't have supply.

That will negatively impact the demand and consumables.

So excluding any significant impact related to that we still think that.

The market while its soft.

Really isn't dramatically change it is stable.

So we're expecting that to continue.

We continue to have stable.

Demand and products for consumables. The other thing that we're looking to do Stanley highlighted in his prepared remarks is again again continue to grow.

Faster subcategories of the market like dental specialties to help offset that.

The slower growth in.

In general consumable products. So I think we're really expecting stability and the consumable market going forward in our guidance.

Our next question because when it comes from the line I've listened Sanderson Evercore ISI.

Hi, good morning, guys.

I am sorry.

If I missed it but could you.

But the impact of slew on medical in the quarter.

Sure we didn't specifically mentioned.

Flow and this I guess, there's two components of influenza.

One is the actual flu vaccine that we sell.

To our customers.

That was.

That was strong, but it's not a big driver of the overall growth.

Really because it was a a more severe flu and virus.

Season, we saw patient traffic.

To the to the physician offices.

Accelerated a bit.

It's unfortunate that that's a severe season this year, but it is and that does drive overall patient traffic and overall demand in products other than influenza per se influence of vaccine per se.

Got it.

Just comment broadly.

You are in terms of.

So renewals for the year.

Yes, so you know.

We feel we don't like to talk about specific entities in specific situations, we think from a competitive point of view.

We're better off really not talking about that but I will say that we feel very good with our large DSL customers, we feel like we.

A very strong relationships of providing exceptional service and feel good about our ability to continue to.

Served that customer base and although there are some of our competitors who are looking to grow in that space.

It is a little bit different than non DBSO business in the requirements that these customers have is little bit different and we feel like we are uniquely positioned to be able to serve them really well so.

On average we feel good about this.

This customer base.

Thank you. Our next question is going to come from the line of Nathan Rich Goldman Sachs.

Thanks, Thanks for the question.

I just wanted to follow up on your commentary about kind of Sydney purchasing pattern from the independent practices. I mean, you feel like this is the more permanent shift in how they think about.

Purchasing supplies and I'd be curious it kind of know that nature of the changes that you're seeing is that.

More lower priced brands more private label and you think that it ultimately has an impact on how they're thinking about purchasing equipment as well.

So there are two questions in the one that's an is related to consumables.

I think that.

Small practices mid size and large practices.

We'll spend more money per units of product. If there is some innovation in that product.

We feel quite comfortable that with many of our key suppliers.

Our innovative products coming out.

Come out and coming up and that will drive product.

That will drive.

Pricing up I think of certain units.

I don't think this is a permanent.

Change unless there is no innovation, but we understand from our key suppliers that they are.

New.

End of the current products could products that will be launched.

Innovative products that have been launched and that the pipeline continues to have products going forward new products as it relates to equipment.

That have been competitive pricing challenges in certain imaging products I don't believe that is the case any longer and we know for sure at least amongst our customer base that there are investing in their practices, whether it's in CAD cam relays or for that matter quite frankly traditional.

Sales, we reported in the North America, 5% increase so.

We believe that the equipment market is quite.

Robust.

We believe our backlog is solid and so we are optimistic about the.

Equipment market in general in North America, and for that matter globally, and we believe that the consumable markets. It is stable and I think should be judged over a few quarters and not necessarily one quarter.

That's helpful and Steve maybe it's going back to a previous question as you think about.

The outlook for the North America market I think that you guys typically.

Try to grow above the market each year.

Seems like you kind of expect a continuation of the end market trends that we've been seeing.

How should think about the loss of the large deals so customer that you called out late last year.

Impacting the growth in that business and kind of lumpy put it all together can you kind of help kind of frame, how you're thinking about growth in the north American market for 20.

Yes, I think when we report, we'll probably give more detail on that because I think it would be difficult for us, although not impossible, but difficult to say, we're going to gain market share, including the loss of that one customer I think really our goal would be that may be too optimistic and that.

The market share gains would be excluding the impact of that one that one particular customer.

Thank you. Our next question will come from the line of Sarah James Piper Sandler.

Thank you.

Steve I just talked about this being a big couple of years coming up for equipment innovation.

I think from multiple manufacturers can you provide anymore details on that and how you think about incorporating that into.

Sales guidance. Thanks.

Sure so.

[music].

You know we're hopeful that this upside.

Because of new products coming into the market, we don't specifically have that built into.

Our guidance because it's difficult to.

Estimate the timing of when those products come into the market and what traction how quickly they'll get traction.

But for example, you know one of the product categories that we saw some nice growth in Q4 and.

It was lasers lasers are still.

Relatively new technology, even though laces have been out for a long time the adoption of lasers in the dental market is still relatively low so from that perspective, it's a newer product.

And it does have merit can can do certain procedures.

Becca as well as less pain too.

The patient.

So thats one good example, but it does take time that the dental market does tend to be slow in adopting new technologies and slow and adopting.

New equipment.

Our equipment sales growth was not just CAD Cam and Q4, yes. It was led by CAD Cam, but we also traditional equipment growth. We also had a laser growth we had some other high tech equipment growth. So the short answer again is we don't have anything specific built into our guidance.

Because it's difficult to do so.

Around timing.

That's helpful and just bigger picture question on the renewal cycle DSL contracts can you give us an idea of pacing.

Got it.

2020, a large or small year, how do you think about the big renewal years coming up.

Thanks.

Well one of the things that we made a concerted effort. We were successful in doing is rather than having as we had several years ago a lot of the renewals all coming up in one year.

We really don't have that we were able to spread out some of the renewals so that.

Yes, they're not all bunched up in one particular year.

So we feel good that that's helpful because.

Even to focus on the renewals and to provide responses.

To RFP could have them all coming up at one time, it's more difficult than to focus on a few out.

A few at a time so it's also good because the impact of anyone.

Or any one year is not as significant as it was using two or three years ago when that happens.

Thank you. Our next question is going to come from the line as Michael Cherny Bank of America.

Thanks, so much for taking the question.

Stan earlier, you talked about.

The 10 deals completed in the course of the year. You also mentioned another part of the call your focus on the portfolio and continuing to utilize capital to deploy to add onto existing capabilities can you maybe give us a sense as you look out over the next one three maybe even five years, how you think of that.

M&A strategy evolving in terms of.

Consistently adding new geographic territories on for distribution side versus other value added services versus other potential private label products that you can push that your channel.

Yes. Good question, we actually see opportunity in all of our businesses.

If you look at our digital distribution business. These jet geographic footprint expansion, but also there is opportunity to add to our portfolio.

In practically every market throughout the world. There are no massive dental distribution businesses really in asphalt and say North America, but there are opportunities throughout the world on the consumable and equipment side.

And there are specific markets, we were relatively under pressure Upended underpenetrated.

Having said this.

We have a relatively small market share and specialty.

Areas.

Markets is growing business is growing very nicely in the also.

Endo and.

Oral surgery implants, and bone regeneration businesses in many parts of the world, but there are many parts of the world will be high that are not present or have a very small presence. So there is significant opportunities to invest in the specialty areas.

Henry Schein, one has huge opportunities and many many areas for investment and our medical business has opportunity on the distribution side in North America, but globally. There is a lots of opportunity and on the medical side. The is so.

Terrific and opportunity and investing in specialty products and businesses, including some vertical integration specialty opportunities as we've seen on the dental side. So we see many opportunities across the board.

We're very comfortable doing these mid sized deals that we've been doing for years and every now and again do something involving putting hundreds of millions of dollars to work.

But the 350 plus million dollars of acquisitions. Each year is something we're quite comfortable with that we can integrate them well and again, we see lots of opportunity for that kind of investment and every now and again a significant investment above that number.

All of these adding to our geographic presence, our product offering and in certain areas improving on our margins.

Thanks, So much stand and then just Steve you mentioned the initiation of a new restructuring program on the.

Coming up can you maybe give a little sense in terms of what are some of the areas you're targeting as you push forward that restructuring program and.

Where some of the efficiencies that you think Henry Schein, who has always been pretty efficient can get more efficient and.

Well I would say that a lot of it comes from every year, we do 10 12 acquisitions.

And.

Sometimes you can't fully integrate without restructuring so it's not really.

It's there's also a lot of new technologies that profit to help operating more efficiently that we want to implement and that'll save money.

It will not be focused on any of the sales activities sales activities we feel.

There's no need to do anything in that area. So we really more on non sales activities that we will focus on.

Thank you we have time for one last question next question will come from Kevin Caliendo with CBS.

Hey, guys. This is Brad on for Kevin Kelly and I. Appreciate squeeze me again, just want to go back to the DSL RFP strategy and then is there any any insight you can give around pricing and possibly bundling value added services going forward that may have shifted as to the contract last 2019, I'm just trying to get more clarity around that thanks.

Stephen to provide further.

Specific thoughts, but we have not changed our strategy per se in dealing with Dsos, it's always been a competitive markets.

As it relates to particular bundling opportunities with all these bundled in one way or another and to be specific I think would not be a good idea from a competitive point of view suffice to say is operating of general consumables is most.