Q2 2021 Henry Schein Inc Earnings Call

August 3, 2021

[music].

Good morning, ladies and gentlemen, and welcome to the Henry Schein second quarter 2021conference call. At this time all participants are in a listen only mode. Later, we like your duct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the call. Please press the Starkey followed by zero on your Touchtone phone as a reminder, this call is being recorded I would now like to introduce your host for today's call Carolyn borders Henry Schein, Vice President of Investor Relations. Please go ahead Carolyn.

Thank you Regina and thanks to each of you for joining us to discuss Henry Schein results. What is 2021 second quarter with me on the call today are 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 or 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 in the risk factors section of those filings.

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 estimates.

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

Business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These.

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 rec.

Reconciliations between GAAP and non-GAAP measures can be found in the supplemental information 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 of the live broadcast August 3rd 2021, 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 Q&A to allow as many listeners as possible to ask a question within the 1 hour that we have allotted for the call.

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

Thank you Kevin good morning, everyone.

And of course, thank you very much for joining us today.

We are most pleased to report record second quarter financial results.

As we continue to execute on our key strategies.

Strengthening demand in the global dental and medical markets drove strong year over year increases in sales. This is the price when a significant number of dental and medical practices suspended activity because of the COVID-19 pandemic.

Notably compared with pre COVID-19.

Data.

Environment second quarter of 2019 to be specific Henry Schein worldwide internal sales in local currencies increased by 15, 2%. So.

If you go back to the second quarter of 2019, you'll see that Henry Schein.

Worldwide internal sales growth in local currencies increased by 15, 2% Inc.

2021 gain compared to 2019.

We are also pleased with the operating margin expansion debt reflects favorable product mix as well as operating expense leverage.

As we continue to invest in our business to supplement solid organic growth. We've completed several acquisitions during the second quarter of 2021 across your dental and technology and value added services businesses.

Good aggregate annual sales of approximately $60 million.

Our capital allocation strategy also includes share repurchases as a means to deliver value to our shareholders. Stephen will provide greater detail on the approximately $113 million spent in the second quarter as part of our board approved share.

Share repurchase authorization.

While the number of new Covid cases has risen in certain geographies.

To date, we have not seen a material impact on patient traffic rather practice visits have continued to improve as offices are generally open.

Data from the end markets, we serve points to continued global improvements as economies recover across the globe.

The most recent American Dental Association data shows current patient traffic at 88%.

Pre pandemic levels, which we believe may underrepresented volume in certain practices.

We've also seen other industry survey reports.

They chose practice volumes, EBIT, consistent with or slightly better than pre pandemic levels.

Also note that Henry Schein, 1 billings associated with dental claims processing currently above 100% pre pandemic levels in line with increased restorative and dental specialty priest procedures, which are driving greater practice purchases.

So the overall global market recovery and I improving financial results have continued we believe dental patient traffic in the U S, Australia, and New Zealand is close to or above to 2019 level and.

And we are also seeing improving patient traffic in Canada, Europe, Brazil and Asia.

With higher numbers.

And certain specific European countries.

That said in markets in certain geographies continues to face challenges due to the ongoing pandemic.

Patient traffic in the United States physician offices, and ambulatory surgical centers is improving as we approach more normalized practice operations.

With a solid distribution in the first half of 2021 and a favorable outlook for the remainder of the fiscal year. Today, we are raising our guidance for 2021, non-GAAP diluted EPS from continuing operations to be at or above 3.

$3.85.

Let me stress this is representing a flaw for the fiscal 2021 yeah.

So.

We continue to monitor any potential impact our business as a result of COVID-19, particularly as certain U S States from international geographies.

Experiencing an uptick in diagnosed cases.

Especially among those unvaccinated and we are of course optimistic that the vaccination rates will go up.

With these opening comments I'd like to hand, the call over to Steven to discuss our quarterly financial performance and provide more detail on our guidance then I'll be back to provide additional commentary on the current business conditions in our markets and our force.

Going forward so Steven please.

Okay. Thank you Stanley and good morning to everyone.

As we begin I'd like to point out that I will be discussing our results from continuing operations.

On an as reported GAAP basis, and on a non-GAAP basis, our second quarter non-GAAP results for 2021, and 2020 exclude certain items that are detailed in exhibit b of today's press release and in the supplemental information section of our Investor Relations website.

Please note that we have again included a corporate sales category for Q2 debt represents prior yourselves to co buttress under the transitional services agreement. This concluded in the fourth quarter will 2020.

While the agreement has ended.

Sales are still reflected in the prior year comparative results. In addition to these comparisons with the prior year.

Also be comparing some key metrics with Q2 of 2019, given the height of impact of the pandemic on our business occurred in Q2 of 2020.

So turning to our financial results total net sales for the quarter ended June 26, 2021, with $3 billion, reflecting growth of 76, 2% compared with the prior year period internally generated sales were up 65, 5% in local currencies.

And compared with the pre pandemic second quarter of 2019 internal sales in local currencies increased 15, 2%.

The details of our sales performance are contained in exhibit a of our earnings press release, which was issued earlier today.

Note that on exhibit a 1.

It also contains details of our sales.

Performance compared with 2019.

On a GAAP basis operating margin for the second quarter of 2021 was 7.9%, reflecting an increase of 753 basis points compared with the prior year and an increase of 46 basis points compared with 2019.

We are pleased with our operating margin performance in the second quarter.

And on a non-GAAP basis, our operating margin of 721% increased by 671 basis points compared to the prior year and an increase of 9 basis points versus 2019 you.

You can find a reconciliation of our GAAP operating margin to non-GAAP operating margin also in the supplemental information page of our Investor Relations website.

Turning to taxes.

Reported GAAP effective tax rate for the second quarter of 2021 was 23, 4% that compares with only a 5.9% GAAP effective tax rate for the second quarter of 2020.

On a non-GAAP basis, our effective tax rate was also 23, 4%.

Note that on the prior year, the non-GAAP effective tax rate was impacted by the pre tax loss.

A reconciliation of GAAP GAAP effective tax rate to non-GAAP effective tax rate is available in the supplemental page also on the Investor Relations page of our website.

We expect the effective tax rate to continue in approximately 25% range, both on a GAAP and non-GAAP basis for the remainder of the.

Of course that assumes no changes in tax legislation.

Moving on GAAP net income from continuing operations attributable to Henry Schein for the second quarter of 2021 was $155.7 million or $1.10 per diluted share. This compares with the prior year GAAP net loss from continuing operations of $11.4 million or a loss of <unk> <unk>.

Per diluted share.

On a non-GAAP basis net income from continuing operations for the second quarter with 2021.

Was $157.3 million or $1.11 per diluted share and this compares to non-GAAP net income from continuing operations of $6 million or.

Zero cents per diluted share for the second quarter of 2020.

Amortization from acquired intangible assets for Q2, 'twenty, 1 was $30.1 million pre tax or approximately <unk> 13 per diluted share.

This compares with $24.8 million pre tax or <unk> 11 per diluted share in the same period last year.

For the first half of 2021 amortization from acquired intangible assets was $59.8 million or 26%.

<unk> 26 cents per diluted share.

This compares with $51.6 million pretax or <unk> 23 per diluted share in the same period last year.

I'll also note that foreign currency exchange positively impacted our Q2.2021 diluted EPS by approximately <unk> 3 per share.

Let me now provide some detail on our sales results for the quarter, our global dental sales of $1.9 billion increased 102, 9% compared with the same period last year.

With internal sales growth of 87 per cent in local currencies compared with Q2.2019 internal sales growth in local currencies was 12, 1%.

Global dental consumable merchandise internal sales increased by 95% from the second quarter of 2021 versus the same period last year, and excluding PPE and Covid related products. The sales increase with 96 point too.

When comparing it to Q2 of 2019 internal sales growth in local currencies increased 13, 7% or 7.9%, excluding PPE and COVID-19 related products, we experienced broad based consumable merchandise sales growth in both North America and interest.

And in our international businesses, particularly in the U S, Canada, Europe, Australia, and New Zealand, Brazil, and Asia with solid overall sales growth compared to 2019.

In Europe, we saw particular strength in dental consumable merchandise sales in France, Germany, Austria, Belgium, the Netherlands, Italy, Poland and the UK.

North American dental internal sales growth in local currencies was 105 per cent compared with the prior year and 9% compared with Q2.2019.

Our north American dental consumable merchandise sales in local currencies increased 112%.

Compared to Q2, 2020, 119%, excluding PPE and Covid related products again, however, compared with Q2.2019. This growth was 11, 5% or 4.8% when excluding PPE and COVID-19 related costs.

Our north American dental equipment internal sales growth in local currencies was 82% per Q versus Q2, 2020, and <unk>, 4% versus Q2.2019.

Sales growth.

Was modest compared with the second quarter of 2019, primarily reflecting delays with certain U S manufacturers of chairs units and lights, resulting in longer lead times to our customers.

We also experienced soft the CAD cam sales growth compared to the same period in 2019 as we have seen more customers recently purchased scan only solution solutions versus full chair side solutions.

Longer term, we believe our Lord we believe a large number of these customers will ultimately buy a full chairside system.

At this time, we believe the potential impact from U S. Traditional equipment sales from your bulk resulting from the supply change supply chain challenges will also affect the second half of 2021 further we believe that the Q4 impact will be greater than the Q3 impact as we expect to satisfy equipment orders with existing inventories.

As well as Inc, Inc.

Coming inventory in the current quarter at this time, though it's important to note. We are not experiencing any meaningful lead time challenges in high tech equipment, including imaging hand pieces and Sterilising equipment.

Based on our view today, some traditional orders placed in Q4 for U S practices are more likely to be installed in the early part of 2022 due to the extended manufacturer lead times and construction delays at practices.

Just as a reminder, we recognized sales for capital equipment orders at the time the equipment is installed.

When the order is placed or other times.

International dental internal sales growth in local currencies was 64, 9% versus Q2, 2020, and 17% compared with Q2.2019.

The international dental consumable merchandise internal sales in local currencies increases increased 64% versus Q2, 'twenty was 70%, excluding PPE and COVID-19 related products comparing to Q2.2019 internal consumable merchandise sales growth in local currencies was <unk>.

<unk>, 2% or 12, 6%, excluding PPE and Covid related products.

We also reported strong equipment growth in our international markets.

Mainly because there were no significant manufacturer delays international dental equipment internal.

Sales growth in local currencies was 66% compared to Q2 'twenty.

16, 6% compared with Q2.2019.

We reported strong chemical equipment growth internationally with particular solid performance in France, Italy and Australia.

Our global dental specialties revenue in the second quarter was $235 million with internal growth of 91% in local currencies versus the prior year and growth of 14.0% versus 2019.

Growth in North America was 119%.

Year over year, and 15, 1% versus Q2.2019.

Internationally dental specialties internal sales growth in local currencies was also strong at 44, 8% versus Q2, 2020, and 11, 5% versus Q2.2019.

Growth was strong in each of our dental specialty categories, including implants oral surgery antibiotics and orthodontics with all 3 businesses doing well in both North America and internationally.

Turning to our global medical sales during Q2, they were at $904.8 million, an increase of 46, 5% compared with the same period last year, including an internal sales growth of 43, 5% compared with Q2.2019 internal sales growth in local.

Currencies increased 27, 2%.

The internal sales growth in local currencies increased 44% in North America, compared with Q2, 'twenty, 1 and 27, 1% compared to Q2.2019, while international sales increased 15, 9% versus 2020.

And 31, 2% versus 2019.

Our medical sales experienced broad based growth compared to 2019, including growth in medical surgical equipment and laboratory product sales, excluding PPE and Covid related product contribution global medical sales in local currencies increased 39% compared with 2020 and 7.8% compare.

With Q2.2019.

I'll also note that we sold approximately $75 million in COVID-19 tests in the second quarter of 2021 and that includes our multi.

Assay flu and COVID-19 combination tests.

This compares with a higher number of $180 million in test sales in the first quarter of 2021.

As we previously commented we expected COVID-19 test sales to continue to moderate.

And while our PPE sales in both our dental and medical businesses have declined since the onset of COVID-19, we expect demand to remain at elevated levels.

Technology and value added sales.

During Q2 were $152.1 million, an increase of 44, 5% compared with the prior year, including internal growth of 33% in local currencies internal sales growth in local currencies increased 10, 1% for the same period versus 2019.

In North America, the technology and value added services internal sales growth was 30% in local currencies from 10, 6% versus 2019.

Henry Schein, 1 business performed well in the second quarter as did our financial services businesses, which was driven primarily by practice transitions revenue.

Internationally, the tech and value added services internal sales increased 54% versus the prior year and 6.9% compared with 2019.

We continue to repurchase common stock in the open market during the second quarter buying approximately 1.5 million shares at an average price of $72.98 per share and that totaled approximately $113 million for the quarter.

The impact of the repurchase of a share of these shares on our second quarter diluted EPS was immaterial.

At the end of the second quarter, we had approximately $400 million authorized and available for future stock repurchases.

Turning to our balance sheet and cash flow, we have access to significant liquidity, providing flexibility and financial stability operating cash flow from continuing operations for the second quarter of 2021 was $158.4 million that compared to negative operating cash flow of 91.

$6 million for the second quarter of last year.

From the second quarter of last year.

This year over year increase was primarily due to increases in net income and lower investment in working capital.

As part of our previously disclosed restructuring initiative, we recorded a pretax charge of $604000 in Q2 'twenty 1.

And that did not have any significant impact on our earnings per share.

I will now conclude my remarks by updating our 2021 non-GAAP diluted EPS guidance at this time, we will not be providing GAAP diluted EPS guidance as we are unable to provide without unreasonable effort and estimate of costs related to the ongoing restructuring initiatives, including the corresponding tax effects.

Again.

We are raising our guidance for 2021, non-GAAP diluted EPS from continuing operations attributable to Henry Schein.

Which we now expect to be at or above $3.85.

Bear in mind. This represents a flow off of guidance. This compares with the previous guidance for non-GAAP diluted EPS, which was a floor of $3.75.

Our guidance for 2021, non-GAAP diluted EPS attributable to Henry Schein is from continuing operations as well as completed or previously announced acquisitions and does not include the impact of future share repurchases potential future acquisitions, if any for restructuring expenses.

Guidance also assumes that foreign exchange rates are generally consistent with current levels and that end markets remain stable and are consistent with current market conditions. The guidance also assumes there are no material adverse market changes associated with COVID-19 with.

With that summary, let me now turn the call back over to Stanley.

Thank you very much Steven.

We believe Henry Schein leadership positions in the global dental and medical distribution businesses serve as an excellent foundation.

To continue to expand our wide range of value added solutions and services as well as our specialty products for practitioners, including self manufactured products.

We are focused on gross profit growth outpacing operating expense growth over the long term as we expand our mix of high margin products and leverage efficiencies across our business in part through 1 schein.

And 1 distribution strategies. These strategies will discuss from last call and happy to discuss them further on this call.

We believe we remain on the path to achieving an increased long term profitability goals.

In fact, we are very pleased with the performance of the business all around.

We do expect to build on our track record of continued EPS growth compounded EPS growth.

With our 103rd quarter as a public company in fact looking.

Looking at results for 2020 are high margin businesses, which are comprised of technology and value added services and the dental specialties businesses.

<unk> represented approximately 12% of worldwide sales.

It's already contributed over 1 third of our GAAP and non-GAAP operating income.

We're looking at the components of our high margin businesses technology and value added services, including Henry Schein 1.

Apprised about 5% of worldwide sales in 2020, and approximately 15% of worldwide operating income.

On the dental specialty side, just comprised about 7% of worldwide sales in 2020.

Long with approximately 20% of worldwide operating income.

Let's go a little bit deeper into the dental distribution business.

We delivered excellent revenue growth during the second quarter drill.

Driven by sales of both consumable merchandise and equipment.

Most specifically consumer consumable merchandise sales in North America.

And our international markets experienced double digit growth.

Paired with 2019, so both in North America, and our international markets, we experienced double digit growth.

Internal growth during 2019.

Stephen discuss the state of supply challenges for the U S. Traditional dental equipment business, we expect lead times to eventually normalize and we'd like to stress that it is important to take a look at our equipment business over a few quarters and not 1 specific quarter. So for example.

In the North American market, our dental equipment local currency in the first quarter was 17, 4% growth. So.

It is important too.

Look at the dental equipment growth.

Over a couple of quarters and we remain very.

Optimistic and actually enthusiastic about our dental business equipment business in the United States in Canada, That's a north American business as well as globally.

Yes.

And we continue to hear from dentist is that practice revenues are improving.

Practitioners plant invest in technology solutions that promote more accurate diagnosis and treatment planning.

And of course.

Workflow efficiency.

As noted in both North America and to some extent internationally.

We are seeing stronger sales of Standalone digital scanners. This is the full chairside systems as dentist and dental laboratories are carefully managing capital equipment purchases, while still committing to investing in digital dentistry.

I encourage investors to remain focused on the long term prospects in fact, even the medium term prospects and trends that we believe will come from advancement of the Digitization of dentistry.

So let's take a brief look at our dental specialties businesses.

A category, which.

Now has sales annualized at over $900 million.

As Stephen noted.

Total global specialty dental specialties performed extremely well with double digit internal sales growth versus 2 sites in 2019 as we further penetrate these key.

Specialty markets, both domestically and internationally.

Also had a number of key strategic developments in each of our dental specialty product categories during the second quarter.

Our implant in oral surgery businesses, which of course include bone regeneration products implants, and bone regeneration products is the largest of our global dental specialty businesses.

And we continue to deliver new solutions as we seek to increase share in key dental markets.

Interest from the U S. We recently launched a progressive colog implants with multi unit prosthetics addressing the full auction markets.

We.

So I expect to introduce a fusion implant solution to enhance our offering for the valued.

The value price segment to the implant market. This complements our line of <unk> value implants, which had been very successful, particularly in the dark region.

Our implant strategy is focused on providing a broad set of solutions to address various customer pricing requirements, while providing high quality clinical solutions.

We believe we are in a unique spot of.

Providing value in other words with price quality equation looks well for debt and many parts of the world specifically in the U S and in Europe.

Particular focus from the dark region, but now also a gating.

In Asia as well.

Each of these enhancements is underpinned by our investment in differentiated technologies for high value high quality implant treatment by the end of the year. We also plan to launch a new line of next generation bone tissue augmentation material.

So let me just now turn to the endodontics business with growth in the second quarter was driven by a strong performance overall, but specifically with large accounts and sales in the international markets.

File at bio ceramic portfolio continues to be well received globally with particular strength in North America and Europe.

And the orthodontic market, we are pleased with our reveal clear aligner progress as we continue to enhance our platform and expand internationally today.

Today, we offer a line of solutions in 26 countries and continue to broaden our reach with the recent launches in France, Poland, Ireland, Italy and Spain.

We are providing customers with flexibility in the choice of integrated solutions.

<unk> integrates with.

With both 3 shape at kind of net good scanners and soon with the <unk> Sirona scanners.

Looking ahead to enhancements and a clearer line of development. We are prepared to launch an update to our studio approach software in the U S, which will bring advanced treatment planning and visualization tools that help Dennis.

Effectively scan and treat patients with a launch internationally in 2022.

We are currently expanding our DDS practice to lab workflow platform with integration between also too and I didn't expect this management software that will stream reveal clearer line of integration and enhance practice efficiency. We also expect this integration will be available.

For our <unk> cloud based software solution by the end of the year.

In addition, this summer we will begin supplementing our manufacturing line is with the new North American manufacturing facility to ensure even faster delivery times to dentist.

Added states.

And we are also working with our Henry Schein, 1 and dental plans dot com.

To expand promotion of reveal Carolinas to patients.

The dental plans direct to consumer platform is quite effective.

Our global dental specialties businesses are seeing continued strength in high acuity procedures across many of our key markets. In addition to traditional oral care procedures.

Let me now turn to the technology and value added.

Services business.

Sales continued to improve from early days of the pandemic with patient traffic was hardest hit.

During the quarter Henry Schein, 1 the largest contributor to sales in this business reported record high quarterly revenues in.

In particular, we saw solid growth across the board with the dentist and <unk> enterprise.

Shen <unk>.

Demand force.

Dental plans dot com.

Solutions.

We are focused on migration to the cloud and our cloud based solutions to create flexibility and scalable services.

In the second quarter.

2021, we recorded solid growth in the adoption of <unk>.

Cloud offering versus 2.

This is the second quarter of 2020.

And quite a bit compared to 2019 second quarter too.

In fact sales of ascend increased faster than traditional district sales when compared with both periods.

We continue to invest in analytics and patient marketing solutions to drive practice efficiency and patient engagement and we continue to enhance our revenue cycle management capabilities, a key priority for Henry Schein, 1 is to tightly integrate solutions so that practices have.

A unified solution suite.

Simplify customer relations with Henry Schein.

We are seeing that our customers have expanded their use of Henry Schein, 1 patient engagement.

Communication technologies.

Let me reflect on our recently announced acquisitions related to expanding our integrated value added services offering.

We are extremely excited about the prospects of <unk>.

He assist.

Jarvis analytics and entirely businesses, yes.

Dental solutions as a developer of key.

Leading virtual dental billing outsource services debt.

We'll advance our mission to offer best in breed solutions to help dental practices operating more efficiently and profitability.

Job, it's developed comprehensive business analytic tools to help dental practices.

Average data.

Diagnose problems.

Strength in decision, making and improve business performance.

It can be well received amongst dsos that also now growing the amongst the midsize and smaller practices.

And <unk> as a cloud based practice management company that offers an extensive suite of programs and services internationally.

Debt enabled dental professionals to be more efficient and to prove the ability to deliver high quality care to patients.

Turning now to the performance of our medical business. During the second quarter. We were pleased with the strong double digit internal sales growth in local currency trends and the physician ambulatory surgery Center alternate care and home care markets all continue to improve.

We believe our medical sales continue to outpace market growth.

Please take a look at the sales.

Excluding COVID-19 type products internal growth of almost 8%.

This is reflective of our growth in this market.

As expected sales of Covid test products have continued to decline although <unk> pointed.

Pointed out that in July we did see a boost in demand.

In the second quarter infection.

Rates.

I'm sure everyone on this call understand.

Generally subsided and pricing.

Also declined accordingly.

We are seeing somewhat of a reversal of that trend.

Our net reduction in sales of test Covid dish in particular, the other tests that we sell all doing quite well there.

It was partially off set by sales of PPA PP&E products as well as other consumable and merchandize equipment medical customers.

Generally this business is doing.

Well.

We continued to expand our medical business beyond core distribution with a differentiated with differentiated solution offerings.

This lowered the low acuity segments to the market.

Which of course is the most cost effective setting for delivery of healthcare.

Our outlook for PPE demand in both dental and medical businesses remains unchanged.

<unk> sales have moderated from levels in the height of the pandemic, we expect demand to remain at elevated levels.

Our pricing will continue to moderate really we believe unit sales will be driven by new healthcare protocols that we.

Do not expect will revert to lower pre pandemic levels, we remain.

Right.

Comfortable debt.

From a unit point of view.

<unk> sales will continue to remain at elevated levels.

Before we end this call I'd like to comment briefly on our progress with environmental social and governance initiatives that we're undertaking so called ESG.

Area of focus for Henry Schein now for decades actually just wasn't cold ESG. When we started with these kinds of initiatives initiatives with over 3 decades ago.

In May we issued our latest annual sustainability report.

Number of newly disclosed goals, we discussed our plans for compliance with the global reporting initiative.

With the <unk> and the sustainability accounting standard board in 2022.

Our next couple of years, we also plan to report in line with the task Force.

On climate related financial disclosure at the established a science based targets recent.

Recently, we hosted a panel with a number of ESG investors and analysts.

With the supply chain experts and we participated in a panel hosted by IR magazine discussing our work towards a diverse and inclusive workforce.

Can find videos of these events as well as our CSR report on our website.

Operator, we are ready to.

Investor questions. Please thank you.

This time, if you'd like to ask a question simply press Star then the number 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Our first question comes from the line of John Kreger with William Blair. Please go ahead.

Hi, Thanks very much.

Steve maybe Steve can you just talk a little bit about gross margins very nice improvement year over year, but I know, it's still down from.

Levels of a couple of years ago, what are your thoughts about how that metric trends in the second half and your ability to kind of get back to that.

Close to 31% level. Thanks.

Yes, John.

We do believe that there is opportunity for a little bit of gross margin expansion.

We did have some small inventory adjustments during the quarter and I think everyone knows that supplier rebates is also lower than norm. So I would see an opportunity for some some modest gross margin expansion for the balance of the year.

And that'll be driven by the elimination again of.

Inventory adjustments completely as well as a favorable mix.

As the higher gross margin businesses are growing faster than the others.

That's great. Thanks, and then can you just clarify.

The supply chain challenges you talked about in basic equipment. So that's hurting North America, but not Europe is that correct and why would that day.

Yeah, I'll start and then maybe Stanley will want to add some comments. So the manufacturers that were buying from in North America.

Generally difference with traditional equipment that internationally.

So.

The the delays that we're seeing from the traditional manufacturers of chez delivery units and lights.

Are impacted in North America, and not an internationally because of that.

Hard to tell Jon weather.

How long this will take 2.

To be rectified by the manufacturers, it's related to raw materials that they're buying.

We did say that we expect it to continue.

For the second half of this year, but.

It's really hard to tell.

Stanley do you want to add any more color to that.

Sure Stephen Thank you John a very important question, let me just be clear that this relates to 1 sector and from 8 to U S manufacturers.

3 in particular.

Manufacturers of units chairs aligns firstly, we are seeing strong demand.

[laughter] general equipment.

Our equipment in general and these particular manufacturers all of these chairs units and lights.

Uh huh.

I'm experiencing significant demand firstly because of the elevated demand, but also because our manufacturer in this particular sector lift the market.

We are not experiencing any <unk>.

Significant.

Shortages in terms of supply.

Imaging equipment in fact, we're doing okay in particular with <unk>.

<unk>.

There is no issue with delivery of CAD 10 equipment at all with it.

It's the scanners or the <unk>.

<unk>.

And.

There are no issues with <unk>.

Hand pieces for example, still.

Sterilizers.

Available may not every brand and every quantity, but generally that's fine again I do want to stress that when looking at equipment sales can you just take a couple of quarters into account and then look at 1 quarter in particular.

And as I pointed out this is a U S issue Canada.

It seems to be doing okay, and Europe is fine too.

Australia, New Zealand business, which was quite active and equipment is also has an adequate source of product.

Thank you.

Your next question comes from the line of Jeff Johnson with Baird.

Thank you good morning, guys maybe to qualify our 1 clarifying question..1 question on guidance, Steve just for clarification purposes. I think you gave a global medical organic growth versus <unk> 19, ex PPE and the same international dental consumables versus 2019 ex PPE did you give that for north.

<unk> dental consumables, just organic growth versus 2 years ago ex PPE that number would be helpful.

Yeah, Let me see if I have it handy I don't think I did give it on the call.

Yes.

I don't have the exact number Jeff, but it's the medical international business is very small.

So it's very similar to the global number to the North American number but.

But I don't have the specific.

Number handy, yes, I'm, sorry, I didn't see that it is asking north American dental consumables organic ex PPE.

Oh, North American dental consumables, I think we did say that I heard a 9% number I thought that was with PPE, though maybe I misheard.

Yeah, Let me check I thought you were referring to medical line.

Mistake sorry.

Oh gosh.

Yes so.

The North America.

North America.

Compared to Q2.2019, the total was 11, 5% and excluding PPE and Covid related products was 4.8%.

Or 8 that's all of North American dental or North American consumables.

Thats consumables only yeah. Okay. Thank you every share, yes, and just kind of understanding guidance. So Steve if I look at the first half of this year, you're up 40% or even more than 40% relative to the first half of 19. It sounds like structurally you expect PPE revenues this year to stay higher.

Even though they are coming down here, a little bit sequentially higher.

Higher than past years dental seems like its bounce back you've got organic growth versus 2 years ago, both dental and medical but your second half guidance I understand it the floor, but it implies kind of a 20% decline versus the second half of 19 and conceptually I can't.

Mind around how you could get anywhere close to it being down let alone down 20%. So understanding that the floor can you just kind of help us understand why you're setting the floor what seems to be a level that would suggest a pretty significant fall off versus the second half of <unk> 19.

Well.

We're not really projecting a significant fall off but you know there's a lot of uncertainties a lot of moving parts.

So what we did in Q1, we gave gave a floor that we increase.

We increase the 15th.

This quarter.

I think there is opportunity for us with the momentum of the business too.

To do much better than the floor, but right now again because of all the uncertainties. That's the way we're approaching it.

Jeff.

We see very good momentum in the business, but.

But there's still a fair amount of uncertainty. So that's why what we're preparing at the way we are and hopefully if things continue you'll see us continue to raise the floor if things continue well.

Fair enough. Thank you.

Your next question comes from the line of Jon Block with Stifel.

Thanks, guys. Good morning, I'm actually going to pick up where.

Jeff left off and maybe just take a different crack at it the 385 you mentioned.

Poor, but let me just sort of deconstruct that a little bit it implies a 2 H 'twenty 1 op margin.

Mid 5% or so you did high 7% and what ancient debt John Kreger. As question you mentioned, maybe stable gross margins are even higher so you sort of run through the math, Steve It implies opex of 24, 5% in the back half of 'twenty, 1 pre pandemic it wasn't even that high and thats off of.

Lower revenue base. So I know, it's a lot to throw at you and moving parts, but just in a direction can you elaborate on if the gms are flat to up in the back half why wont, we see sort of such a amount of deleverage in the Opex line, especially relative to to pre pandemic levels and then I promise my follow up will be shorter.

Okay, John Yeah. So.

I think youre looking at it the wrong way, we're not saying we're going to hit the floor.

Yeah.

We expect to be ahead of that so to do all your analytics at the floor I think it was the wrong approach. What we just haven't said is how much above the floor, we expect to be and we haven't done that because again of all the uncertainties that are out there.

So so again I would caution you not to do the analysis the way you're doing it just to take the floor as the balance of the year because.

Because we do expect to be above the floor.

But we just haven't quantified how much at this point.

Okay fair enough.

So maybe just to pivot Stanley and Steven inflationary costs anything that youre seeing on a labor perspective, and if so are you able to pass that through and your ability to pass that through.

Real time, if that is something that you are experiencing thanks for your time guys.

Yeah on the inflation side.

Have experienced.

Some in.

Inflation on branded supply of products of course due to.

Material raw material shortages and increased some labor.

We've seen some price increases in PP&E products.

Although those seem to be moderating now.

Our private label is seeing some.

Rice inflation.

We expect that.

This will moderate.

Companies are getting back into full swing have a lot of overtime, they're incurring to catch up.

So I.

I think.

There's going to be some inflation, but I think it's going to moderate.

Number 1 and number 2 is we are passing a lot of this onto our customers.

But where we see this as a short term issue, we're not doing that so we're not super worried but there is some pressure due.

Due to the supply chain.

Quite being back to where it was in 2019 contain our costs are up.

<unk>.

As I said over time is being incurred by manufacturers.

I don't think its alarming at this point.

And if it were sustained.

Pass it onto customers, but also work with manufacturers to contain this increase in costs.

Thanks Stanley.

Your next question comes from the line of Jason Bednar with Piper Sandler.

Hey, good morning, Thanks for taking the questions here.

Standard Steve you mentioned, a belief that the shifting demand to scan only options and the high tech equipment side of the catkin side.

And how you expect those units to upgrade to <unk> capabilities in the future is that an.

You are selling predominantly 1 manufacturer scanner over another or more a reflection of how you see the market evolving over time.

Do you sense the demand from Dennis has that all been influenced by product positioning and promotions being offered by those manufacturers.

That's a very good question.

There's clearly a shift to digital dentistry, we called this out for years now.

Hum.

I'm not saying it is standard of use to use a scanner, but close to it and I think in certain practices.

Value practices say in high value practices.

I think the public is expecting scan only net.

About scan only from friends and relatives.

So we are moving clearly in that direction, there's still a huge.

A number of dentists that don't have scanners, and then also number of scanners.

Dennis that have scanners that Evan all division.

So there is quite a movement towards scanners and I think dentists are investing in these scanners right now.

Uh huh.

We are comfortable debt.

These scanners will at some point turn into.

Full chair side.

Including cash can be treated in other words, adding a move.

Maybe a couple of quarters out.

But as Dennis has a lot to spend money on now.

But clearly the channel side, the Chile, the clearly the scanner is getting a lot of focus now and I think it's going to be the case for the foreseeable future and the full mill.

Program will also gained momentum.

Now we of course.

So a number of major brand scanners.

And growing.

Growing with all our major brands scanners.

2.1 in particular that has a significant to actually market share from our point of view, they're all doing well.

The there are a few of manufacturers of the machines Chase Schein mills.

And the.

The market share.

Relative between the 1 or the other of the 2 major ones or so is about stable.

The other area, where we're seeing quite a bit of.

<unk> is with dental labs, we are the largest provider of dental laboratory products from the world and labs are clearly digitally visualizing as well so.

Quite optimistic about this category.

And I wouldn't read anything into this particular quarter.

This particular quarter, we happen to have a very strong quarter in scanners, but I wouldn't view that as any.

Any kind of negative outlook on full chair side modes systems with Nos.

Alright, that's really great color Stanley I appreciate that.

And just maybe 1 quick follow up on the supply chain challenges you were referencing in the basic equipment side.

This really sounds as you framed it up like a market wide issue at the manufacturer level in terms of sourcing materials.

Which would suggest that business is simply just slipping into future quarters for you and others, but I guess just to clarifying to to make sure. I mean is there at all business, that's moving to competitive distributors.

No no no no no.

On the country.

Equipment business was very strong.

Backlog.

Both in.

In the United States with North America.

And internationally is very strong.

There is.

I noted there is 1 is a manufacturer of lift the market and chairs units and lights debt capacity has to be filled plus it is a demand and product.

Dentists are investing in their practices.

And so I see this is.

The demand increase coupled with avoid that had to get filled and particularly the chairs units in line, but I wouldn't read anything else beyond that and we are very very comfortable with our equipment business, which is doing quite well with small practices midsized practices and have close.

With the Dsos that are also investing heavily so.

I wouldn't read more into that than net.

Hum.

Referring to chairs units lights doing well.

The imaging doing well in particular the <unk>.

On CAD Cam.

At least for the.

Last quarter, the scanners goodwill compared to the full but I think overall the full will also pick up and in Europe, we are not.

Experiencing these supply chain issues and equipment business is quite strong again with backlog good backlogs in both.

The domestic and.

Global markets equipment business is doing quite well.

Okay, that's all kind of what I figured but I really appreciate it. Thanks.

Your next question comes from the line of Steven Valiquette with Barclays.

Great. Thanks, Good morning standard Steve Thanks for taking the question.

A couple of things I guess first is kind of hard to think back to Q2.2019 from the dental industry feels like eons ago.

But just regarding the international dental equipment growth of 16, 6% this quarter versus <unk> 19.

A pretty strong number given that <unk> 19 is luckily likely a tough comparison with the Ids trade show occurring in March of that year.

Europe was strong in the second quarter of 19, I think Brazil was a drag for some reason I was wanted to get your quick thoughts on that comparison and also related to Ibs and with the trade shows that the resume in September of this year are you assuming the normal bump in international dental equipment sales and <unk> 21 or could it be more watered down just given the potential impact of COVID-19.

On the trade show dynamic.

I don't have any specific projections in front of me I don't know Stephen does whether we disclose this kind of information, but generally.

2 things 1 is please understand that equipment sales can be lumpy.

The 1 but number 2 is dental equipment.

Purchases in demand in the markets. We're in is quite solid.

Do reference, Brazil, we did exit a part of the equipment market in Brazil, essentially we would.

Good day focused certain manufacturers and have added other manufacturers that are 1 or 2 quarter issue in Brazil equipment to notice, although not significant in the context of Henry Schein as a company.

Is doing quite well, but overall I would say our equipment market is doing well dentists investing in their practices. They want their practices to look at.

Feel.

Modern interest rates are helpful.

Close when you look at all these numbers you have to take into account the text.

Tax situations, who knows what exactly what is going to be the tax situation.

At the end of it.

For the fourth quarter of 2021 in the United States.

But generally.

I would look at the trend and the trend for equipment sales.

Domestically, Canada makes.

It makes sense in North America, and internationally is quite solid all.

All around and this particular supply chain issue will be dealt with and these are quality manufacturers.

We'll deal with the issue and I expect to continue to see solid equipment growth in all categories going forward.

Okay, alright, great. Thanks.

We have time for 1 last question from the line of Nathan Rich with Goldman Sachs.

Yes.

Hi, good morning, Thanks for the question.

Maybe Steve just start did M&A or FX have a significant impact on operating margins in the quarter and then bigger picture I mean, there has been.

Looking at the last few quarters a bit of volatility in the operating margin and just how are you thinking about that trend for the back half of the year.

Any thoughts you could kind of provide as we think about how to model that line would be helpful. And then Stanley.

Turning to you you highlighted the double digit growth in North America consumables as well as the international markets versus 2019 it.

It would be great to get your thoughts on what you think momentum will look like on the 2 year basis in the back half of the year and it sounds like there is still room for international markets 2 to improve I would wonder if you could comment just on how far below baseline and we still are in Europe and Asia. Thanks, a lot for the questions.

Yes, I'll answer the first question and then I'll turn it back to Stanley.

Nathan for the acquisition impact on Q2 negatively impacted our operating margin by 16 basis points.

And I think people know this but just to remind people.

The quarter, you do acquisitions, you had deal costs, which drags the earnings plus typically.

We don't get synergies immediately it takes us generally a few quarters to get synergies and to approve improve the profitability of the acquired companies, but the impact was negative 16 basis points for the quarter.

So Chris.

Question on our international business.

I think the international dental markets are quite strong.

Germany is.

Has been strong throughout this period, we did have a little bit.

Retraction that but overall, it's quite strong.

The biggest market in Europe.

Parallels and size and scope our Canadian business.

And it's quite solid.

Implants have done exceptionally well during this period of time, Inc.

Put us very profitable.

I believe so more implants in Germany that anyone else.

Price was a reasonable by the way.

And France has been solid.

Italy, and Spain recovered.

UK still in the process of recovering.

Other markets like the Netherlands.

Okay, we're not fully back in terms of visits 100% back to where we were in.

2019, I think.

There are certain markets we are.

But we're close.

That compared to the U S, where we think the markets patient visits.

On average a.

A little higher than 19.

Data from the 88 mm.

It doesn't contemplate exactly.

The right measurements for.

Practices.

Debt of over 100%.

Compared to 19 visits.

Brazil is.

Uh huh.

There's a high COVID-19 rates.

But we're particularly doing well in Australia, and New Zealand is pretty stable, but I would say in all these markets.

There's still room to go.

To get back to 19 outside of the U S and Henry Schein, clearly is gaining market share.

Been working very hard in Europe for a long time and believe we have an outstanding management team in Europe. So.

Nationally as well in Asia, we are growing.

In Australia, New Zealand and <unk>.

Brazil.

Very good management team, it's a very stable and dynamic and instrument management team, which is driving our consumables and equipment business as well as our technology businesses.

Medical business relatively slow small.

Outside of the U S. But is growing added to management of it is investing in the business.

Overall, we're quite optimistic about our international business.

Carolyn so is that it.

Yeah, John we're ready for closing remarks, okay.

Thank you Kevin. Thank you Stephen Thank you off but dissipating.

I think you've got the tone of the call and that is we feel very good with the progress we're making.

Our strategies.

Being implemented I wouldn't say every strategy is exactly the speed we want.

But there are parts of the business that are exceeding expectations.

And we're very optimistic.

About the future believe we have a very good management team in place the strategies are good.

We are putting the final touches to our 2022 to 2020 full strategic plan I would say more or less in line with Ah.

What we've been focused on it for the past few years of course, we had like everyone a bump in the road in 2020.

I would say largely recovered from that although I think it is important as Steven outlined.

Aware that we are in the midst of the pandemic so.

Once that.

Concern to <unk>.

<unk> I think.

We can be more optimistic but overall the business is doing well with performing.

On our strategies.

Management is highly motivated the team in general as motivated.

So in the dental markets have recovered.

Very large extent in the medical markets.

Almost day.

So we believe that.

The growth in the alternate care sites.

From our point of view is the right place to be and that's what we focused on and we're putting our capital to work I think in an intelligent way splitting it between invest.

Investments.

And stock repurchase.

Hum.

Business is throwing off a lot of cash.

So quite optimistic and thank you for your interest of course, Stephen Catlin would be happy to.

That's a specific questions.

Thank you our Investor website has more information as well so thank you and look forward to an update 3 months from now thank you.

Ladies and gentlemen that does conclude today's call. Thank you all for joining you may now disconnect.

[music].

Good morning, ladies and gentlemen, and welcome to the Henry Schein second quarter 2021conference call. At this time, all participants are in a listen only mode.

Later, we like adult day question and answer session and instructions will follow at that time.

Thank you Regina and thanks to each of you for joining us to discuss Henry Schein results for the <unk> 2021 second quarter with me on the call today are 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.

You know risks and uncertainties involved in the company's business may affect the matters referred to in forward looking statements as.

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

Forward looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein filings with the Securities and Exchange Commission, including in the risk factors section of those filings.

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 estimate our.

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

Business performance.

And allow for greater transparency with respect to 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.

The content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast August 3rd 'twenty 'twenty 1.

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 Q&A to allow as many listeners as possible to ask a question within the 1 hour that we have allotted for the call.

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

Thank you Carolyn and good morning, everyone.

Okay of course, thank you very much for joining us today we.

We are most pleased to report record second quarter financial results.

As we continue to execute on our key strategies.

Strengthening demand in the global dental and medical markets drove strong year over year increases in sales. This is the price yeah, when a significant number of dental and medical practices suspended activity because of the COVID-19 pandemic.

Notably compared with pre COVID-19.

Data.

The environment, the second quarter of 2019 to be specific Henry Schein worldwide internal sales in local currencies increased by 15, 2%. So.

If you go back to the second quarter of 2019, you'll see that Henry Schein.

Worldwide internal sales growth in local currencies increased by 15, 2% Inc.

2021 guidance compared to 2019.

We are also pleased with the operating margin expansion debt reflects favorable product mix as well as operating expense leverage.

As we continue to invest in our business to supplement solid organic growth. We completed several acquisitions during the second quarter of 2021 across your dental and technology and value added services businesses.

Good aggregate annual sales of approximately $60 million.

Share repurchase authorization.

While the number of new Covid cases has risen in certain geographies.

To date, we have not seen a material impact on patient traffic rather practice visits have continued to improve as offices are generally open.

Data from the end markets, we serve points to continued global improvements as economies recover across the globe.

The most recent American Dental Association data shows current patient traffic at <unk> 88 per cent.

Pre pandemic levels, which we believe may underrepresented volume in certain practices.

We've also seen other industry survey reports.

That show practice volumes, either consistent with or slightly better than pre pandemic levels.

So the overall global market recovery and I am proving financial results have continued we believe dental patient traffic in the U S. Australia, and New Zealand is close to or above to 2019 levels and we are also seeing improving patient traffic in Canada, Europe, and Brazil and Asia with.

High end numbers.

And certain specific European countries.

That said in markets in certain geographies continued to face challenges due to the ongoing pandemic.

Patient traffic in the United States physician offices, and ambulatory surgical centers is improving as we approach more normalized practice operations.

$3.85.

Let me stress this is representing a flaw for the fiscal 2021, yeah. So.

We continue to monitor any potential impact our business as a result of COVID-19, particularly as certain U S stage from international geographies are experiencing an uptick in diagnosed cases, especially among those unvaccinated and we are of course optimistic that the vaccination rates will go up.

Yeah.

Okay. Thank you Stanley and good morning to everyone.

As we begin I'd like to point out that I will be discussing our results from continuing operations.

Please note that we have again included a corporate sales category for Q2 that represents prior yourselves to co buttress under the transitional services agreement was concluded in the fourth quarter will 2020.

While the agreement has ended.

Sales are still reflected in the prior year comparative results. In addition to these comparisons with the prior year.

Also be comparing some key metrics with Q2 of 2019, given the height of impact of the pandemic on our business occurred in Q2 of 2020.

And compared with the pre pandemic second quarter of 2019 internal sales in local currencies increased 15, 2%.

The details of our sales performance are contained in exhibit a of our earnings press release, which was issued earlier today note that on exhibit a 1.

It also contains details of our sales performance.

Performance compared with 2019.

We are pleased with our operating margin performance in the second quarter.

And on a non-GAAP basis, our operating margin of 721% increased by 671 basis points compared to the prior year and an increase of 9 basis points versus 2019.

You can find a reconciliation of our GAAP operating margin to non-GAAP operating margin also in the supplemental information page of our Investor Relations website.

Turning to taxes.

Reported GAAP effective tax rate from the second quarter of 2021 was 23, 4% that compares well with only a 5.9% GAAP effective tax rate for the second quarter of 2020.

And on a non-GAAP basis, our effective tax rate was also 23, 4%.

Note that on the prior year, the non-GAAP effective tax rate was impacted by the pre tax loss.

A reconciliation of GAAP GAAP effective tax rate to non-GAAP effective tax rate is available in the supplemental page also on the Investor Relations page of our website.

We expect the effective tax rate to continue in approximately <unk> 25 per cent range, both on a GAAP and non-GAAP basis for the remainder of beer and of course that assumes no changes in tax legislation.

Per diluted share.

On a non-GAAP basis net income from continuing operations for the second quarter of 2021.

Was $157.3 million or $1.11 per diluted share and this compares to non-GAAP net income from continuing operations of <unk> 6 million or zero.

Zero cents per diluted share for the second quarter of 2020.

Amortization from acquired intangible assets for Q2, 'twenty, 1 was $30.1 million pre tax or approximately <unk> 13 per diluted share.

This compares with $24.8 million pretax or <unk> 11 per diluted share in the same period last year.

For the first half of 2021 amortization from acquired intangible assets was $59.8 million or 26%.

26 cents per diluted share.

This compares with $51.6 million pretax or <unk> 23 per diluted share in the same period last year.

I'll also note that foreign currency exchange positively impacted our Q2.2021 diluted EPS by approximately <unk> <unk> per share.

Let me now provide some detail on our sales results for the quarter, our global dental sales of $1.9 billion increased 102, 9% compared with the same period last year within.

With internal sales growth of 87 per cent in local currencies compared with Q2.2019 internal sales growth in local currencies was 12, 1%.

Global dental consumable merchandise internal sales increased by 95% in the second quarter of 2021 versus the same period last year, and excluding PPE and Covid related products. The sales increase with 96 point too.

When comparing it to Q2 of 2019 internal sales growth in local currencies increased 13, 7% or 7.9%, excluding PPE and COVID-19 related products we.

We experienced broad based consumable merchandise sales growth in both North America and in turn.

And in our international businesses, particularly in the U S, Canada, Europe, Australia, and New Zealand, Brazil, and Asia with solid overall sales growth compared to 2019.

In Europe, we saw particular strength in dental consumable merchandise sales in France, Germany, Austria, Belgium, the Netherlands, Italy, Poland and the U K.

North American dental internal sales growth in local currencies was 105 per cent compared with the prior year and 9% compared with Q2.2019.

North American dental consumable merchandise sales in local currencies increased 112%.

Compared to Q2, 2020, 119%, excluding PPE and Covid related products again, however, compared with Q2.2019. This growth was 11, 5% or 4.8% when excluding PPE and COVID-19 related costs.

Our north American dental equipment internal sales growth in local currencies was 82% per Q versus Q2, 2020, and <unk>, 4% versus Q2.2019.

Sales growth.

It was modest compared with the second quarter of 2019, primarily reflecting delays with certain U S manufacturers of chairs units and lights, resulting in longer lead times to our customers.

We also experienced soft the CAD Cam sales book compare from the same period in 2019 as we have seen more customers recently purchased scan only solution solutions versus full chair side solutions longer term, we believe our Lord we believe a large number of these customers will ultimately buy a full chassis.

<unk> system.

At this time, we believe the potential impact from U S traditional equipment sales, resulting from the supply change.

Light chain challenges will also affect the second half of 2021 further we believe that the Q4 impact will be greater than the Q3 impact as we expect to satisfy equipment orders with existing inventory as well as income Inc.

Based on our view today, some traditional orders placed in Q4 U S practices are more likely to be installed in the early part of 2022 due to the extended manufacturer lead times and construction delays at practices.

Just as a reminder, we recognized sales for capital equipment orders at the time the equipment is installed versus when the order is placed or other times.

International dental internal sales growth in local currencies was 64, 9% versus Q2, 2020, and 17% compared with Q2.2019.

17, 2% or 12, 6%, excluding PPE and Covid related products.

We also reported strong equipment growth in our international markets.

Mainly because there were no significant manufacturer delays international dental equipment internal.

Sales growth in local currencies was 66% compared to Q2 'twenty.

And 16, 6% compared with Q2.2019, we reported strong dental equipment growth internationally with particular solid performance in France, Italy and Australia.

Our global dental specialties revenue in the second quarter was $235 million with internal growth of 91% in local currencies versus the prior year and growth of 14.0% versus 2019.

Growth in North America was 190%.

Year over year, and 15, 1% versus Q2.2019.

Internationally dental specialties internal sales growth in local currencies was also strong at 44, 8% versus Q2, 2020, and 11, 5% versus Q2.2019.

Growth was strong in each of our dental specialty categories, including implants oral surgery, and the Doc fix and orthodontics with all 3 businesses doing well in both North America and internationally.

Turning to our global medical sales during Q2, they were at $904.8 million, an increase of 46.5.

Compared with the same period last year, including an internal sales growth of 43.5 per cent compared with Q2.2019 internal sales growth in local currencies increased 27, 2%.

The internal sales growth in local currencies increased 44% in North America, compared with Q2, 'twenty, 1 and 27, 1% compared to Q2.2019, while international sales increased 15, 9% versus 2020.

And 31, 2% versus 2019.

Our medical sales experienced broad based growth compared to 2019, including growth in medical surgical equipment and laboratory products sales, excluding PPE and Covid related product contribution global medical sales in local currencies increased 39% compared with 2020 and 7.8% compared with.

Q2.2019.

I'll also note that we sold approximately $75 million in COVID-19 tests in the second quarter of 2021 and that includes our multi.

Assay flu and COVID-19 combination tests.

This compares with a higher number of $180 million in test sales in the first quarter of 2021.

As we previously commented we expected COVID-19 test sales to continue to moderate.

And while our PPE sales in both our dental and medical businesses have declined since the onset of COVID-19, we expect demand to remain at elevated levels.

Technology and value added sales.

In North America, the technology and value added services internal sales growth was 30% in local currencies and 10, 6% versus 2019.

Henry Schein, 1 business performed well in the second quarter as did our financial services businesses, which was driven primarily by practice transitions revenue.

Internationally, the tech and value added services internal sales increased 54% versus the prior year and 6.9% compared with 2019.

The impact of the repurchase of a share of these shares on our second quarter diluted EPS was immaterial.

At the end of the second quarter, we had approximately $400 million authorized and available for future stock repurchases.

Turning to our balance sheet and cash flow, we have access to significant liquidity, providing flexibility and financial stability operating cash flow from continuing operations for the second quarter of 2021 was $158.4 million and that compared to negative operating cash flow of 91.

$6 million for the second quarter of last year.

For the second quarter of last year.

This year over year increase was primarily due to increases in net income and lower investment in working capital.

As part of our previously disclosed restructuring initiative, we recorded a pretax charge of $604000 in Q2 'twenty 1.

And that did not have any significant impact on our earnings per share.

Again.

We are raising our guidance for 2021, non-GAAP diluted EPS from continuing operations attributable to Henry Schein.

Which we now expect to be at or above $3.85.

Bear in mind. This represents a flow off of guidance. This compares with the previous guidance for non-GAAP diluted EPS, which was a floor of $3.75.

With that summary, let me now turn the call back over to Stanley.

Thank you very much Steven.

We believe Henry Schein has leadership positions in the global dental and medical distribution businesses serve as an excellent foundation.

To continue to expand our wide range of value added solutions and services as well as our specialty products for practitioners, including self manufactured products.

And 1 distribution strategies. These strategies were discussed in the last call and happy to discuss them further on this call.

We believe we remain on the path to achieving an increased long term profitability goals.

In fact, we are very pleased with the performance of the business all around.

We do expect to build on our track record of continued EPS growth compounded EPS growth.

With our 103rd quarter as a public company in fact.

Looking at results for 2020 are high margin businesses, which are comprised of technology and value added services.

The dental specialties businesses represented approximately 12% of worldwide sales. It's already contributed over 1 third of our GAAP and non-GAAP operating income.

We're looking at the components of our high margin businesses technology and value added services, including Henry Schein 1.

Apprised about 5% of worldwide sales in 2020, and approximately 15% of worldwide operating income.

On the dental specialty side, just comprised about 7% of worldwide sales in 2020.

Long with approximately 20% of worldwide operating income.

It's got a little bit deeper into the dental distribution business.

We delivered excellent dental revenue growth during the second quarter drill.

Driven by sales of both consumable merchandise and equipment.

Most specifically consumer consumable merchandise sales in North America.

And our international markets experienced double digit growth.

Paired with 2019, so both in North America, and our international markets, we experienced double digit growth.

Internal growth during 2019.

Stephen discuss the state of supply challenges for the U S. Traditional dental equipment business, we expect lead times to eventually normalize and we'd like to stress that interest important to take a look at our equipment business over a few quarters and not 1 specific quarter. So for example.

In the North American market, our dental equipment local currency in the first quarter was 17, 4% growth. So.

It is important too.

Look at the dental equipment growth.

Over a couple of quarters and we remain very.

Optimistic and actually enthusiastic about our dental business equipment business in the United States in Canada, That's a north American business as well as globally.

Yeah.

And we continue to hear from dentists practice revenues I'm per.

Moving.

Practitioners plant invest in technology solutions that promote more accurate diagnosis and treatment planning.

And of course.

Workflow efficiency.

As noted in both North America and to some extent internationally.

We are seeing stronger sales of Standalone digital scanners versus the full chairside systems as dental and dental laboratories are carefully managing capital equipment purchases, while still committing to investing in digital dentistry.

I encourage investors to remain focused on the long term prospects in fact, even the medium term prospects and trends that we believe will come from advancement of the Digitization of dentistry.

So let's take a brief look at our dental specialties businesses.

A category, which.

Now has sales annualized at over $900 million.

As Stephen noted.

Total global specialty dental specialties performed extremely well with double digit internal sales growth versus 2 sites in 2019 as we further penetrate these key.

Specialty markets, both domestically and internationally.

We also had a number of key strategic developments in each of our dental specialty product categories during the second quarter.

Our implant in oral surgery businesses, which of course include bone regeneration products implants, and bone regeneration products is the largest of our global dental specialty businesses and we continue to deliver new solutions as we seek to increase share in key dental markets for instruments from the U S. We recently launched.

Progressive co log implants, with multi unit prosthetics addressing the full arch markets.

We also expect to introduce a fusion implant solution to enhance our offering for the valued.

The value price segment to the implant market. This complements our line of magenta value implants, which had been very successful, particularly in the dark region.

Our implant strategy is focused on providing a broad set of solutions to address various customer pricing requirements, while providing high quality clinical solutions.

We believe we're in a unique spot all providing.

Providing value in other words with price quality equation looks well for debt and many parts of the world specifically in the U S and in Europe.

Particular focus from the dark region, but now also gaining a foothold in Asia as well.

File and bio ceramic portfolio continues to be well received globally with particular strength in North America and Europe.

And the orthodontic market, we are pleased with our reveal clear aligner progress as we continue to enhance our platform and expand internationally today.

Today, we offer a line of solutions in 26 countries and continue to broaden reach with the recent launches in France, Poland, Ireland, Italy and Spain.

We are providing customers with flexibility in the choice of integrated solutions.

<unk> integrates with.

With both 3 shaped implant maker scanners, and soon with the dead Splash Sirona scanners.

Effectively scan and treat patients with a launch internationally in 2022.

For our <unk> cloud based software solution by the end of the year.

In addition, this summer we will begin supplementing our manufacturing line is with the new North American manufacturing facility to ensure even faster delivery times to dentist in Yo.

Added states.

And we are also working with our Henry Schein, 1 and dental plans.

Tom.

To expand promotion of reveal Carolinas to patients.

Yes.

<unk> dental plans direct to consumer platform is quite effective.

Our global dental specialties businesses are seeing continued strength in high acuity procedures across many about P markets. In addition to traditional oral care procedures.

Let me now turn to the technology and value added.

Services business.

Sales continued to improve from early days of the pandemic with patient traffic was hardest hit.

During the quarter Henry Schein, 1 the largest contributor to sales in this business reported record high quarterly revenue in.

In particular, we saw solid growth across the board with the dentist and <unk> enterprise.

Vintage ascend day.

Demand force.

Dental implants dot com.

Solutions.

We are focused on migration to the cloud and our cloud based solutions to create flexibility and scalable services.

In the second quarter.

2020, 1 we recorded solid growth in the adoption of <unk>, our cloud offering versus 2.

This is the second quarter of 2020.

And quite a bit compared to 2019 second quarter too.

In fact sales of ascend increased faster than traditional district sales when compared with both periods.

We continue to invest in analytics and patient marketing solutions to drive practice efficiency and patient engagement and we continue to enhance our revenue cycle management capabilities are key priorities for Henry Schein, 1 is to tightly integrate solutions so that practices.

A unified solution suite, and simplify customer relations with Henry Schein.

We are seeing that our customers have expanded their use of Henry Schein, 1 patient engagement.

And communication technologies.

Let me reflect on our recently announced acquisitions related to expanding our integrated value added services offering.

We are extremely excited about the prospects of <unk>.

He assist.

<unk> analytics and entirely businesses, yes.

Dental solutions as a developer of key.

Leading virtual dental billing outsource services debt.

Advance our mission to offer best in breed solutions to help dental practices operating more efficiently and profitability.

Job, it's developed comprehensive business analytic tools to help dental practices.

Average data.

Diagnose problems.

Strength in decision, making and improve business performance, particularly well received amongst dsos that also now growing the amongst the midsize and smaller practices.

And <unk> is a cloud based practice management company that offers an extensive suite of programs and services internationally.

That enabled dental professionals to be more efficient and to prove the ability to deliver high quality care to patients.

Turning now to the performance of our medical business during the second quarter. We were pleased with the strong double digit in total sales growth in local currency trends and the physician ambulatory surgery Center alternate care and home care markets all continue to improve.

We believe our medical sales continue to outpace market growth.

Take a look at the sales.

Excluding COVID-19 type products internal growth of almost 8%.

It's reflective of our growth in this market.

As expected sales of Covid test products have continued to decline, although let me point out that in July we did see a boost in demand.

In the second quarter infection.

Rates.

I'm sure everyone on this call understand.

Generally subsided and pricing.

Also declined accordingly.

We are seeing somewhat of a reversal of that trend.

Our reduction in sales of test Covid dish in particular, the other tests that we sell all doing quite well.

It was partially off set by sales of PPA PP&E products as well as other consumable and merchandize equipment medical customers.

Generally this business is doing quite well.

We continue to expand our medical business beyond core distribution with a differentiated with differentiated solution offerings that service no acute the low acuity segments to the market.

Which of course is the most cost effective setting for delivery of healthcare.

Our outlook for PPE demand in both dental and medical businesses remains unchanged.

<unk> sales have moderated from levels in the height of the pandemic, yet we expect demand to remain at elevated levels, while pricing will continue to moderate really we believe unit sales will be driven by new healthcare protocols.

We do.

We do not expect will revert to lower pre pandemic levels will remain.

Right.

Comfortable debt.

From a unit point of view.

<unk> sales will continue to remain at elevated levels.

Before we end this call I'd like to comment briefly on our progress with environmental social and governance initiatives that we're undertaking.

So called ESG.

Area of focus for Henry Schein now for decades actually true.

Wasn't cold ESG, when we started with these kinds of initiatives initiatives with over 3 decades ago.

In May we issued our latest annual sustainability report.

Number of newly disclosed goals, we discussed our plans for compliance with the global reporting initiative.

With the <unk> and the sustainability accounting standard board in 2022.

Our next couple of years, we also plan to report in line with the task Force.

On climate related financial disclosure and to establish a science based targets recent.

Recently, we hosted a panel with a number of ESG investors and analysts.

Also supply chain experts and we participated in a panel hosted by IR magazine discussing our work towards a diverse and inclusive workforce.

Can find videos of these events as well as our CSR report on our website. So operator, we are ready to.

Investor questions. Please thank you.

At this time of day by Tabasco question simply Press Star then the number 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Our first question comes from the line of John Kreger with William Blair. Please go ahead.

Hi, Thanks very much.

Steve maybe Steve can you just talk a little bit about gross margins very nice improvement year over year, but I know, it's still down from the.

Levels of a couple of years ago, what are your thoughts about how that metric trends in the second half and your ability to kind of get back to that.

Close to 31% level. Thanks.

Yes, John.

We do believe that there is opportunity for a little bit of gross margin expansion.

We did have some small inventory adjustments during the quarter and I think everyone knows that our supplier rebates is also lower than norm. So I would see an opportunity for some some modest gross margin expansion for the balance of the year.

And that'll be driven by the elimination again of.

Inventory adjustments completely as well as a favorable mix.

As the higher gross margin businesses are growing faster than the others.

That's great. Thanks, and then can you just clarify the.

The supply chain challenges you talked about in basic equipment. So that's hurting North America, but not Europe is that correct and why would that day.

Yeah, I'll start and then maybe Stanley will want to add some comments. So the manufacturers that were buying from in North America.

Generally difference with traditional equipment that internationally.

So.

The the delays that we're seeing from the traditional manufacturers of chez delivery units and lights.

Are impacted in North America, and not an internationally because of that.

Hard to tell Jon weather.

How long this will take 2.

To be rectified by the manufacturers, it's related to raw materials that they're buying.

We did say that we expect it to continue.

For the second half of this year, but.

It's really hard to tell.

Stanley do you want to add any more color to that.

Sure Stephen Thank you John a very important question, let me just be clear that this relates to 1 sector and it relates to U S manufacturers.

3 in particular.

Manufacturers of units chairs and lengths Firstly, we are seeing strong demand.

[laughter] general equipment.

Equipment in general and these particular manufacturers all of these chairs units and lights.

Uh huh.

Are experiencing significant demand firstly because of the elevated demand, but also because of manufacturer in this particular sector lift the market.

We are not experiencing any sick.

Significant.

Shortages in terms of supply.

Imaging equipment in fact, we're doing okay in particular with <unk>.

<unk>.

There is no issue with delivery of cat can equipment at all.

It's the scanners or the <unk>.

<unk>.

And.

There are no issues with <unk>.

Hand pieces for example, still.

Sterilizers.

And as I pointed out this is a U S issue Canada.

It seems to be doing okay, and Europe is fine too.

Australia, New Zealand business, which was quite active and equipment is also has an adequate source of product.

Thank you.

Your next question comes from the line of Jeff Johnson with Baird.

<unk> dental consumables, just organic growth versus 2 years ago ex PPE that number would be helpful.

Yeah, Let me see if I have it handy I don't think I did give it on the call.

Yes.

I don't have the exact number Jeff, but it's the medical international business is very small.

So it's very similar to the global number to the North American number but.

But I don't have the specific.

Number handy yes.

Sorry, I think you'll see that it is asking north American dental consumables organic ex PPP.

Oh, North American dental consumables, Yeah, I think we did say that.

I heard a 9% number I thought that was with PPE, though maybe I misheard.

Yeah, let me check.

What you were referring to medical.

I misspoke sorry.

Hold on.

Yes so.

The North America.

North America.

<unk> Q2, 2019, the total was 11, 5% and excluding PPE and Covid related products was 4.8%.

Or 8 that's all of North American dental or North American consumables.

That's consumables on it yeah. Okay. Thank you and just kind of understanding guidance. So Steve if I look at the first half of this year, you are up 40% or even more than 40% relative to the first half of 19. It sounds like structurally you expect PPE revenues this year to stay higher.

Even though they are coming down here a little bit sequentially.

Higher than past years channel. It seems like it's bounced back you've got organic growth versus 2 years ago in both dental and medical.

Half guidance I understand it the floor, but it implies kind of a 20% decline versus the second half of 19 and conceptually I can't.

Well we're.

We're not really projecting a significant fall off but you know there's a lot of uncertainties a lot of moving parts similar to what we did in Q1, we gave GAAP.

Have a floor that we increase we increased the 15th.

This quarter.

I think there's opportunity for us with the momentum of the business too.

Do much better than the floor, but right now again because of all the uncertainties. That's the way we're approaching it.

Jeff.

See very good momentum in the business, but.

But there's still.

Out of uncertainties. So that's why what we're preparing at the way we are and hopefully if things continue.

See us continue to raise the floor things continue well.

Fair enough. Thank you.

Your next question comes from the line of Jon Block with Stifel.

Thanks, guys. Good morning, I'm actually going to pick up where Jeff.

Jeff left off and maybe just take a different crack at it the 385 you mentioned.

More but let me just sort of deconstruct that a little bit it applies to age 21 op margin.

Mid 5% or so you did high 7% on what ancient debt John Kreger. As question you mentioned, maybe stable gross margins are even higher so you sort of run through the math, Steve It implies opex of 24.5%.

In the back half of 'twenty, 1 pre pandemic it wasn't even that high and thats off of a lower revenue base. So I know, there's a lot to draw you in moving parts, but just directionally can you elaborate on if the gms are flat to up in the back half why wont, we see sort of such a amount of deleverage in the Opex line, especially relative to.

Due to pre pandemic levels, and then I promise my follow up will be shorter.

Okay, John Yeah. So.

I think youre looking at it the wrong way, we're not saying we're going to hit the floor.

Yeah.

So so again I would caution you not to do the analysis the way Youre doing it and just to take the floor as the balance of the year because.

Because we do expect to be above the floor.

But we just haven't quantified how much at this point.

Okay fair enough.

So maybe just to pivot Stanley and Steven inflationary costs anything that youre seeing on a labor perspective, and if so are you able to pass that through and your ability to pass that through.

Real time, if that is something that you are experiencing thanks for your time guys.

Yeah on the inflation side.

Have experienced.

Some inc.

Inflation on branded supply of products of course due to.

Material raw material shortages and increase in labor.

We've seen some price increases in PP&E products.

Those seem to be moderating now.

Our private label is seeing some <unk>.

Price inflation.

We expect debt.

This will moderate.

<unk> are getting back into full swing have a lot of overtime, they're incurring to catch up.

So I.

I think.

There's going to be some inflation, but I think it's going to moderate.

Number 1 number 2 is we are pushing a lot of this onto our customers.

But where we see this as a short term issue, we're not doing that so we're not super worried but there is some pressure due.

Due to the supply chain and not quite being back to where it was in 2019 contain our costs are up.

As we said over time is being incurred by manufacturers. So I don't think its alarming at this point and if it were sustained.

Pass it onto customers, but also work with manufacturers to contain this increase in costs.

Thanks Kelly.

Your next question comes from the line of Jason Bednar with Piper Sandler.

Hey, good morning, Thanks for taking the questions here.

Stan Steve you mentioned the belief that the shifting demand to scan only options and the high tech equipment side of the catkin side and.

And how you expect those units to upgrade to full cadcam capabilities in the future is that an indicator you are selling predominantly 1 manufacturer scanner over another or more a reflection of how you see the market evolving over time.

Did you sense the demand from Denis has that all been influenced by product positioning and promotions being offered by those manufacturers.

It's a very good question.

There's clearly a shift to digital dentistry, we called this out for years now.

Okay.

I'm not saying it is standard of use to use a scanner, but close to it and I think in certain practices.

Value practices say in higher value practices.

I think the public is expecting scan only net <unk> about.

About scan only from friends and relatives.

So we are moving clearly in that direction, there's still a huge.

Number of dentists that don't have scanners, and then also number of scanners.

Dennis that have scanners that Evan all division.

So there is quite some movement towards scanners, and I think dentists are investing in these scanners right now.

Uh huh.

We are comfortable debt.

<unk> will at some point turn into.

Full chair side.

Including cash can be treated in other words, adding a move.

Maybe a couple of quarters out.

There's been a save a lot to spend money on now.

But clearly the channel side, the Chile, the clearly the scanner is getting a lot of focus now and I think it's going to be the case for the foreseeable future and the full mill.

Graham will also gained momentum.

We of course.

So a number of major brand scanners.

And growing with all our major brands scanners. They don't want it to 1 in particular that has a significant to actually market share from our point of view, they're all doing well and.

The there are a few of manufacturers of the machines the chair side Mills.

And I think the market share.

Relative between the 1 and the other of the 2 major ones or so is about stable.

The other area, where we're seeing quite a bit of.

Activity is with dental labs, we are the largest provider of dental laboratory products from the World and labs are clearly digital is digitizing as well so we're quite optimistic about this category.

And I wouldn't read anything into this particular quarter.

This particular quarter, we happened to have a very strong quarter in scanners, but I wouldn't view that as any.

Any kind of negative outlook on full chair side modes systems with Nos.

Alright, that's really great color Stanley I appreciate that.

And just maybe 1 quick follow up on the supply chain challenges you were referencing in the basic equipment side.

This really sounds as you framed it up like a market wide issue at the manufacturer level in terms of sourcing materials.

Which would suggest that business is simply just slipping into future quarters for you and others, but I guess just to clarify to make sure I mean is there at all business, that's moving to competitive distributors.

No no no no no.

The country, our equipment business was very strong.

Backlog.

Both.

In the United States with North America and.

And internationally is very strong.

There is.

<unk> is a manufacturer of lift the market in chairs units and lights debt capacity had to be filled plus it is a demand and product.

Dentists are investing in their practices.

So I see this is.

The demand increase coupled with avoid that had to get filled and particularly the chairs units and lights.

But I wouldn't read anything else beyond debt and we are very very comfortable with our equipment business, which is doing quite well with small practices midsized practices and of course with the Dsos that are also investing heavily so.

Shouldn't read more into that than net.

And I'm, referring to chairs units slides doing well.

The imaging doing well in particular, the 2 D.

And on Cat.

At least for the.

Last quarter, the scanners goodwill compared to the full but I think overall the full will also pick up and in Europe. We are.

They're not experiencing these supply chain issues and equipment business is quite strong again.

Backlog good backlogs in both the.

The domestic and.

Global markets equipment business is doing quite well.

Okay, that's all kind of what I figured but I really appreciate it. Thanks.

Your next question comes from the line of Steven Valiquette with Barclays.

Great. Thanks, Good morning standard Steve Thanks for taking the question.

A couple of things I guess first is kind of hard to think back to Q2.2019 from the dental industry. It feels like a year ago.

But just regarding the international dental equipment growth of 16, 6% this quarter versus <unk> 19.

A pretty strong number given that <unk> 19 is luckily likely a tough comparison with the Ids trade show occurring in March of that year.

Europe was strong in the second quarter of 19, I think Brazil was a drag for some reason I was wanted to get your quick thoughts on that comparison and also related to Ibs and what the trade shows that the resume in September of this year are you assuming the normal bump in international dental equipment sales and <unk> 21 or could it be more watered down just given the potential impact of COVID-19.

On the trade show dynamic.

I don't have any specific projections in front of me I don't know Stephen does whether we disclose this kind of information, but generally.

2 things 1 is please understand that equipment sales can be lumpy from.

Number 1 but number 2 is dental equipment.

Purchases in demand.

In the market, Sweden is quite solid you do reference Brazil, we did exit a part of the equipment market in Brazil, essentially with <unk>.

Defocus certain manufacturers and have added other manufacturers that was 1 or 2 quarter issue in Brazil equipment to another although not significant in the context of Henry Schein as a company.

Is doing quite well, but overall I would say our equipment market is doing well dentists investing in their practices. They want their practices to look and feel.

Modern interest rates are helpful.

When you look at all these numbers you have to take into account.

Text situations, who knows what exactly what is going to be the tax situation at the end of this.

So the fourth quarter of 2020.

<unk> 21 in the United States.

But generally.

I would look at the trend and the trend for equipment sales.

Domestically, Canada makes.

It makes up North American internationally is quite solid all.

All around and this particular supply chain issue will be dealt with and these are quality manufacturers.

We'll deal with the issue and I expect to continue to see solid equipment growth in all categories going forward.

Okay, alright, great. Thanks.

We have time for 1 last question from the line of Nathan Rich with Goldman Sachs.

Hi, good morning, Thanks for the question.

Maybe Steve just start did M&A or FX to have a significant impact on operating margins in the quarter and then bigger picture I mean, there has been.

Looking at the last few quarters a bit of volatility in the operating margin and just how are you thinking about that trend for the back half of the year.

Any thoughts you could kind of provide as we think about how to model that line would be helpful. And then Stanley maybe turning to you.

Highlighted the double digit growth in North America consumables as well as the international markets versus 2019 it.

It would be great to get your thoughts on what you think momentum will look like on a 2 year basis in the back half of the year and it sounds like there is still room for international markets 2 to improve I would wonder if you could comment just on how far below baseline and we still are in Europe and Asia. Thanks, a lot further questions.

Yeah I'll answer the first question and then I'll turn it back to Stanley.

Nathan for the acquisition impact on Q2 negatively impacted our operating margin by 16 basis points.

And I think people, just but just to remind people.

The quarter, you do acquisitions, you had deal costs, which drags the earnings plus typically.

So Chris.

Question on our international business.

I think the international dental markets are quite strong.

Germany is.

Has been strong throughout this period did have a little bit of.

Retraction that but overall, it's quite strong.

So our biggest market in Europe.

Uh huh.

Parallels the size and scope our Canadian business.

And it's quite solid.

Implants have done exceptionally well during this period of time, Inc.

Very important to us very profitable.

I believe so more implants in Germany that anyone else.

Our price was a reasonable by the way.

And France has been solid.

Italy, and Spain recovered.

UK is still in the process of recovering.

Other markets like the Netherlands.

Okay.

Not fully back in terms of visits 100% back to where we were in 2019 I think there is.

Certain markets we are.

But we're close.

That compared to the U S, where we think the markets patient visits.

On average a.

A little higher than 19.

Data from the 88.

It doesn't contemplate exactly.

On the right measurements for.

Practices.

Over 100%.

Compared to 19 visits.

Brazil is.

There's a high COVID-19 rates.

But with particularly doing well in Australia, and New Zealand is pretty stable, but I would say in all of these markets.

There's still room to go.

To get back to 19 outside of the U S and Henry Schein clearly is gaining market share we've been working very hard in Europe for a long time and believe we have an outstanding management team in Europe, So and internationally as well in Asia, we are growing.

In Australia, New Zealand and of course, Brazil.

Very good management team has a very stable and dynamic and instrument management team, which is driving our consumables.

And equipment business as well as our technology businesses.

Medical business relatively slow small.

Outside of the U S that has grown added to management of it is investing in the business.

Overall, we're quite optimistic about our international business.

Carolyn so is that it.

Yeah, John we're ready for closing remarks, okay.

Thank you Kevin. Thank you Stephen Thank you off but dissipating.

I think you've got the tone of the call and that is we feel very good with the progress we're making.

Our strategies are.

Being implemented I wouldn't say every strategy is exactly the speed we want.

But there are parts of the business that are exceeding expectations.

And we're very optimistic.

About the future believe we have a very good management team in place the strategies are good.

We are putting the final touches to our 2022 to 2020 full strategic plan I would say more or less in line with Ah.

What we've been focused on for the past few years, plus we had like everyone a bump in the road in 2020.

I would say largely recovered from that although I think it is important as Steven outlined.

Be aware that we are in the midst of the pandemic. So.

Once that.

Right.

Soon.

Dissipates.

I think we can be more optimistic but overall the business is doing well with performing well.

On our strategies.

Management is.

Many motivated the team in general as motivated.

So in the dental markets have recovered.

A very large extent in the medical markets.

Almost day so.

So we believe that.

The growth in the alternate care sites.

From our point of view is the right place to be and that's what we're focused on and we're putting our capital to work I think in an intelligent way splitting it between invest.

Investments.

And stock repurchase.

Business is throwing off a lot of cash so quite optimistic and thank you for your interest.

Steven Carolyn we'd be happy to.

It's a specific questions.

He joined Vista website as more information as well so thank you and look forward to an update 3 months from now thank you.

Ladies and gentlemen that does conclude today's call. Thank you all for joining you may now disconnect.

Q2 2021 Henry Schein Inc Earnings Call

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