Q3 2024 Henry Schein Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Henry Shine's third quarter, 2024 earnings conference call.
At this time, all participants aren't a listen only mode. Later, we will conduct a question and answer session. Please press the star key, followed by one on your touch phone phone if you would like to add to the question at the end of the call.
If anyone should acquire assistance during the call, please press the star key followed by zero on your touch tone phone. And as a reminder, this call is being recorded.
Speaker Change: I would now introduce your host for today's call, Graham Stanley, Henry Shines, Vice President of Investor Relations and Strategic Financial Project Officer. Thank you, please go ahead Graham.
Graham Stanley: Thank you, operator, and thanks to each of you for joining us to discuss Henry Shine's financial results for the third quarter of 2024. With me on stage call, a Stanley Bergman, chairman of the board in Chief Executive Officer of Henry Shine, and Ron Sal, Senior Vice President and Chief Financial Officer.
Speaker Change: Before we begin, I'd like to state that certain comments may join this call would include information that's forward-looking. Rists and uncertainties involved in the company's business may affect the matter's referred to in forward-looking statements, and the companies perform its main materially differ from those expressed in or indicated by certain statements.
The East Forward Looking Statements are qualified to enter entirely by the cautionary statements contained in Henry Schreins' Farthings with the Securities and Exchange Commission, and included in the RIS Stack for Section of those Farthings.
In addition, all comments about the markets we serve, including end market growth rates and markets share, based upon the companies internal analysis and estimates.
Speaker Change: Today's remarks will include both Gap and NonGap Financial Results.
and allow for greater transparency with regard 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.
Reconciliations between GAAP and non-GAAP measures are included in Exhibit B of today's press release and could be found in the financials and filing section of our Investor Relations website under the Supplemental Information heading, and in our quarterly earnings presentation also posted on our Investor Relations website.
The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 5th, 2024.
Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Lastly, during today's Q&A session, please limit yourself to a single question and a follow-up. And with that, I'll turn the call over to Stanley Bergman.
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: Thank you, Graham. Good morning, everyone. Thank you for joining us.
Stanley Bergman: Our businesses performed well during the third quarter, driven by the successful implementation of our Bold Plus One strategic plan.
Stanley Bergman: that is resulting in growth and efficiency throughout Henry Schein and a strong contribution from high growth, high margin products and services.
Stanley Bergman: We believe we continue to steadily gain market share in our dental and medical distribution businesses following last year's cyber incident.
Stanley Bergman: Our dental equipment business is showing ongoing stability in North America and increased investment by customers across Europe, Australia and New Zealand.
Stanley Bergman: implant and endodontic products had good growth in Europe and Brazil
Stanley Bergman: as well as in North America following the successful launch of the BioHorizons tapered pro-clinical implant in the United States.
We're reporting another quarter exceeding our target of 40% of operating income generated by our high-growth, high-margin businesses, and we expect to exceed the target.
Stanley Bergman: This particular target of the 40% target for fiscal 2024
Stanley Bergman: Acquisitions made during 2022 to 2024.
During that strategic planning cycle, along with product launches, are delivering strong financial results, and a restructuring plan is on target.
Stanley Bergman: We also continue to return capital to shareholders through our share repurchase program.
We exceeded our financial expectations for the quarter, so today we are increasing our non-GAAP EPS guidance range to $474 to $482.
Stanley Bergman: We are
Stanley Bergman: Now, let me turn to a review of our business units and start with the dental distribution business.
Stanley Bergman: We believe the North American market for dental merchandise sales was consistent for the last year.
Stanley Bergman: with unit sales increasing low single digits.
Stanley Bergman: offset by PPE price declines and a shift in sales to lower-cost brands, an owned brand
Stanley Bergman: Products.
Stanley Bergman: We also believe that our North American dental merchandise market share grew sequentially last quarter compared to the second quarter, reflecting a similar trend from the beginning of the year as we continue to recover from last year's cyber incident.
Stanley Bergman: Our third quarter sales increased internationally in the dental merchandise arena and reflects solid growth in Germany, Austria, France, Brazil, Australia and New Zealand.
Stanley Bergman: So now let's turn to the equipment side.
Stanley Bergman: Sales of traditional equipment grew slightly, while digital equipment sales decreased.
Stanley Bergman: decreased. Parts and services sales continue to grow strongly.
Stanley Bergman: We believe our North American digital equipment sales were impacted in part by the timing of DS World. It was a successful show for us because it took place in the last week of September.
Stanley Bergman: Sales from the show will mostly be recognized in the fourth quarter this year.
Stanley Bergman: On the international equipment side, sales growth was quite good in parts of Europe, Australia and New Zealand, and that was across all categories.
Stanley Bergman: Let's turn to the dental specialties.
Stanley Bergman: with continued above-market growth in the United States and Europe.
Stanley Bergman: U.S. sales were fueled by the launch of BioHorizon's tapered pro-clinical implant, driving mid-single-digit sales growth in the third quarter, against the backdrop of a North American market that is trending flat to slightly negative.
Stanley Bergman: Stanley, Stanley Bergman, Ronald South
Stanley Bergman: Additionally, in the U.S., we launched the Smart Shape Healers Abutment product line at the end of the quarter in our implant business, which we expect to further attract new customers and drive implant sales.
Stanley Bergman: The product is being well received, specifically by none.
Stanley Bergman: We are confident practitioners will value the product's benefits, including less chair time, enhanced patient comfort, and improved clinical efficiency.
Stanley Bergman: Turning to our orthodontic business, we are in the midst of restructuring this business as well as transitioning to the Smilers brand clear aligner in the United States and in the European markets.
Stanley Bergman: This resulted in lower orthodontic sales for the quarter compared to the prior year.
Stanley Bergman: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: So now let's turn to the technology and value-added services part of the business.
Stanley Bergman: During the quarter, sales of our practice management software and revenue cycle management products posted mid-single-digit growth.
Stanley Bergman: with now approximately 8,600 installations worldwide at the Quarter Inn.
Stanley Bergman: Now, it's important to understand
Stanley Bergman: Our results are impacted by customers moving from on-prem to SaaS-based solutions. Revenue is recognized in a different way in a SaaS-based model versus an on-prem model.
Stanley Bergman: sales model.
Stanley Bergman: The number of claims processed by a revenue cycle management e-claims business also increased by mid-single-digit percentages compared to last year.
Stanley Bergman: In conclusion
Stanley Bergman: The dental... Uh... Uh... Our dental business...
Stanley Bergman: is an important proxy.
Stanley Bergman: It's an important priority for our bold plus one growth strategy.
Stanley Bergman: and it's in this area that the L in the B-O-L-D is important for leveraging our strong customer relationships across our product portfolio. We are providing integrated solutions.
Stanley Bergman: that strengthen customer relations.
Stanley Bergman: driving software
Stanley Bergman: driving distribution and driving specialty sales especially with our large customer segment.
Stanley Bergman: For example,
Stanley Bergman: and their technology to Dentrix Ascend and Jarvis Analytics.
Stanley Bergman: We have also had multiple successes with customers that have switched to Henry Schein for their merchandise and equipment purchases as a result of our differentiated offering and the excellent value-added services provided by Bio Horizons and Henry Schein One.
Stanley Bergman: Each of these successes has resulted...
Stanley Bergman: in...
Stanley Bergman: the coordination
Stanley Bergman: in our go-to-market strategy.
Stanley Bergman: and, accordingly, incremental sales.
Stanley Bergman: Let me conclude my remarks with a review of our medical group.
Stanley Bergman: During the third quarter, we believe we continue to increase market share sequentially compared to the second quarter, again reflecting a similar trend from the beginning of the year as we continue to recover from last year's cyber incident.
Stanley Bergman: reflected less demand for respiratory diagnostic products and flu and COVID vaccines this quarter and therefore along with related medical products.
Stanley Bergman: Sales were also impacted by the ongoing migration to generic alternatives for certain branded products.
Stanley Bergman: our 24 guidance. Ron, please.
Ron Sal: Thank you, Stanley, and good morning, everyone. Turning to our third quarter sales results, I will provide details on total sales, total sales growth, as well as LCI sales growth, which is internally generated sales in local currencies compared with the prior year and excludes acquisitions.
Stanley Bergman: This reflects 3.2% growth from acquisitions and a 0.2% decrease from foreign currency exchange rates.
Stanley Bergman: LCI sales for the quarter decreased 2.6% for the quarter, which includes a 0.4% decrease from lower PPE sales.
Speaker Change: As Stan noted, our underlying sales for the quarter reflect continued improving sales trends in our distribution businesses.
Stanley Bergman: Our gap operating margin for the third quarter of 2024 was 4.94%, a 140 basis point decline compared with the prior year gap operating margin.
Stanley Bergman: On a non-GAAP basis, operating margin for the third quarter was 7.64%, a 45 basis point decline compared with the prior year non-GAAP operating margin.
Stanley Bergman: We had good operating income growth in our dental specialties and technology and value-added services businesses offset by a decrease in our distribution businesses resulting from lower sales following last year's cyber incident.
Stanley Bergman: This business has performed well since we made our initial investment, and as a result of our decision to take majority ownership, we recognize a remeasurement gain of $19 million pre-tax, or 11 cents per diluted share in the quarter.
Stanley Bergman: This is similar to a remeasurement gain of $18 million pre-tax or $0.10 per diluted share that we recorded in the second quarter of 2023.
Stanley Bergman: We regularly make non-controlling investments in companies with high growth potential as part of our strategic plan. Leveraging our expertise, we have helped these businesses grow and become more profitable.
Stanley Bergman: The foreign currency exchange impact on our third quarter diluted EPS was unfavorable by approximately one cent versus the prior year.
Stanley Bergman: Adjusted EBITDA for the third quarter of 2024 was $268 million compared to the third quarter 2023 adjusted EBITDA of $278 million.
Stanley Bergman: Turning to our third quarter sales results.
Stanley Bergman: Global dental sales were 1.9 billion dollars with sales decreasing 1.6 percent.
Stanley Bergman: LCI sales decreased 1.6% or 1.0% when excluding PPE sales.
Stanley Bergman: Global Dental Merchandise LCI sales decreased 2.5 percent versus the prior year with an LCI decline in North America of 4.9 percent and international LCI sales growth of 0.9 percent.
Stanley Bergman: Note that when excluding PPE products, global dental merchandise LCI sales decreased 1.9%, North America merchandise LCI sales decreased 4.0%, and international merchandise LCI sales growth was 1.0%.
Stanley Bergman: We believe the overall dental market continues to be generally flat with a shift in sales to lower cost products and lower PPE pricing. We also believe we had a sequential improvement in market share in the third quarter compared to the second quarter.
Stanley Bergman: Our global dental equipment LCI sales increased 1.8% with flat sales in North America and 5.6% growth internationally.
Stanley Bergman: We expect modest overall equipment sales growth for the year in both North America and internationally.
Stanley Bergman: Dental specialty product sales were approximately $258 million and grew slightly compared to the prior year.
Speaker Change: As Stan mentioned earlier, this was driven by solid dental implant biomaterials and entodontic sales globally, offset by sales weakness in our orthodontic business.
Stanley Bergman: resulting from restructuring of the business and the transitioning of our clear aligner business from Reveal to Smilers, a product developed by Biotech Dental which we acquired last year.
Stanley Bergman: Note that our dental specialty acquisitions that we completed last year have now all annualized as of this quarter. So our total sales growth is equal to internal sales growth.
Stanley Bergman: Global technology and value-added services sales during the third quarter were 221 million dollars with total sales growth of 5.1 percent.
Stanley Bergman: The LCI sales decline of 1.1% included a 3.1% decline in North America and 13.4% growth internationally.
Stanley Bergman: Our value-added services revenue was bolstered by the LPS acquisition. This is a leading transaction advisory services business that we purchased in August of 2023.
Stanley Bergman: The timing of revenues recorded by LPS distorted internal sales growth numbers during the quarter and we believe that total sales growth of 5.1% for the technology and value-added services segment is most reflective of the growth of the business.
Stanley Bergman: Stanley, Stanley Bergman, Ronald South Stanley, Stanley Bergman, Ronald South
Stanley Bergman: For the third quarter, specialty products, technology, and value-added services businesses contributed over 40% of total non-GAAP operating income.
Stanley Bergman: Global medical sales during the third quarter were 1.1 billion dollars with sales growth of 2.9 percent and a decrease in LCI sales of 4.8 percent.
Speaker Change: Excluding sales of PPE products, LCI sales decreased 4.6%. As Stan noted, our sales reflected less demand for respiratory diagnostic products and flu and COVID vaccines, along with related products.
Stanley Bergman: Sales were also impacted by the ongoing migration to generic alternatives for certain branded pharmaceuticals.
Stanley Bergman: Our Home Solutions business had strong growth, which was driven by our strategic acquisitions.
Stanley Bergman: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: Restructuring expenses in the third quarter were $48 million, or $0.26 per diluted share.
Stanley Bergman: These expenses mainly relate to severance benefits and costs related to exiting certain facilities.
Stanley Bergman: Actions approved in the third quarter under the new initiative are estimated to provide over 50 million dollars in annual run rate savings and we believe this indicates strong progress towards our goal of 75 to 100 million dollars in annual run rate savings by the end of 2025.
Stanley Bergman: Our third quarter GAAP results include $10 million in pre-tax proceeds as part of our cyber insurance claim, which is excluded from our non-GAAP results.
Stanley Bergman: At the end of the quarter, we had already collected $20 million and anticipate collecting most of our $60 million claim by the end of this year.
Stanley Bergman: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: regarding share repurchases.
Stanley Bergman: We repurchased approximately 2 million shares of common stock in the open market during the third quarter at an average price of $69.09 per share for a total of $135 million.
Stanley Bergman: We had $455 million authorized and available for future stock repurchases at the end of the quarter. We expect to continue to repurchase shares in the fourth quarter.
Stanley Bergman: which compares with operating cash flow of $231 million last year.
Stanley Bergman: Year to date, operating cash flow was $644 million, which is $112 million more than last year.
Stanley Bergman: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: Turning to our updated 2024 financial guidance, at this time we are not able to provide, without unreasonable effort, an estimate of restructuring costs associated with the new restructuring plan for 2024, although we expect this to primarily include severance pay and facility-related costs.
Stanley Bergman: Therefore, we are not providing GAP guidance.
Stanley Bergman: Our 2024 guidance is for current continuing operations as well as acquisitions that have closed and does not include the impact of potential future acquisitions or future share repurchases.
Stanley Bergman: Guidance also assumes that foreign currency exchange rates are generally consistent with current levels and that end markets remain consistent with current market conditions.
Stanley Bergman: Our 2024 total sales growth is now expected to be 4-5% over 2023 compared to prior guidance of 4-6% growth.
Stanley Bergman: For 2024, we are increasing non-GAP diluted EPS attributable to Henry Schein Inc. to be in the range of $4.74 to $4.82 compared with prior guidance of $4.70 to $4.82.
Stanley Bergman: and reflects growth of 5% to 7% compared with 2023 non-gap diluted EPS of $4.50 as a result of better than expected results in the third quarter.
Graham Stanley: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: This guidance reflects an estimated non-GAAP effective tax rate of 25%.
Stanley Bergman: Consistent with prior guidance, we continue to expect our 2024 adjusted EBITDA to grow in the low double-digit percentages versus 2023 adjusted EBITDA of $984 million.
Stanley Bergman: We expect adjusted EBITDA to grow faster than non-gap diluted EPS because of higher interest expense, a higher effective tax rate, and higher depreciation as a result of the strategic investments we have made to execute on our strategic plan.
Stanley Bergman: I will conclude my remarks with some comments on 2025.
Stanley Bergman: We plan to issue 2025 guidance as usual on our Q4 earnings call this coming February.
Stanley Bergman: As you have heard today, we expect modest improvement in the dental and medical markets next year. And we expect to continue to grow faster than the markets, supported by some of our recent investments, new product launches, and focused execution and continued cyber recovery.
Stanley Bergman: We expect this e-commerce platform to accelerate growth once fully launched in the United States.
Stanley Bergman: With that, I'll now turn the call back to Stanley.
Stanley Bergman: thank you Ron
Speaker Change: Thank you, Stanley. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove a question from the queue.
Stanley Bergman: For any participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Stanley Bergman: One moment, please, while we poll for questions.
Stanley Bergman: And the first question comes from the line of Elizabeth Anderson with Evercore ISI. Please proceed with your question.
Elizabeth Anderson: Hi, guys. Thanks so much for the question.
Elizabeth Anderson: I have maybe a two-part question.
Elizabeth Anderson: One, can you sort of comment on the overall health of the dental and medical trends as where we kind of get through October and into November? And then two, it seems like you have a bunch of one-time items, I think, and you talked about sort of...
Speaker Change: Elizabeth, I'll give you a few thoughts on the current market.
Elizabeth Anderson: and Ronald talk about the guidance.
Elizabeth Anderson: He's been working on that with the team.
Elizabeth Anderson: So, the market is pretty stable, we think.
Elizabeth Anderson: There is a shift on the consumable side, at least in the United States.
Elizabeth Anderson: alternative brands and our own brands. This doesn't really impact our profitability but it may impact and does impact the sales.
Elizabeth Anderson: We also think the units have gone up in low single digits. So with lower single digits,
Stanley Bergman: movement of
Stanley Bergman: Merchandise units to lower-priced alternative brands including national brands and own brands you see a stable to slightly
Stanley Bergman: reduction in dollar sales in the dental market in the United States.
Stanley Bergman: Our October, having said that, our October merchandise sales trends...
Elizabeth Anderson: In our distribution businesses, we're generally consistent with September of 24, so it's pretty stable.
Elizabeth Anderson: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: Having said that, October cells growth in implants and biomaterials are strong.
Stanley Bergman: Driven by SIN
Stanley Bergman: Uh, I had to check dental.
Stanley Bergman: and in Europe, of course, our Camelot business.
Stanley Bergman: and we are seeing continuing good adoption.
Stanley Bergman: of the BioRisen's tapered pro-clinical implant in the U.S.
Elizabeth Anderson: So this is all taken into account by Ron as he works with the team on the guidance. And Ron can give you specifics, but I think we can report a pretty stable market and from our point of view, we are gaining back.
Elizabeth Anderson: market share that we lost during the cyber incident, albeit at a slowish rate.
Elizabeth Anderson: but the rate continues in a positive direction.
Elizabeth Anderson: really since the beginning of 24, and it's consecutively improving.
Elizabeth Anderson: Of course, you've got to take into account...
Elizabeth Anderson: for us, glove sales, where there has been a significant reduction in the price of units of gloves, and we think we may be seeing the bottom right now, but we will call that out separately because that's...
Elizabeth Anderson: a business where we don't really control the selling price at all. It's a commodity. So, Ron, maybe you want to give some input on...
Elizabeth Anderson: How are you?
Elizabeth Anderson: worked on the guidance. Certainly, Stanley. Elizabeth.
Ron Sal: We took into consideration a lot of the trends that, you know, that Stanley just articulated in terms of How did we see Q3 ending? How did we see October? You know, markets are relatively stable There is, you know, there is a market dynamic out there, perhaps a little bit of a shift to some lower cost products
Ron Sal: With reference to equipment, we did, as we mentioned in the prepared remarks, we do expect perhaps a little bit of a benefit from the timing of DS World in terms of how that will benefit Q4. Having said that, equipment tends to be, you know, Q4 tends to be the most important quarter for equipment.
Ron Sal: So all those things were taken into consideration, and then ongoing, you know, growth that we experienced on the implant side as well for the fourth quarter. So those are all, you know, specific factors. On the medical side...
Ron Sal: You know, we're really closely monitoring what's happening with the...
Elizabeth Anderson: The timing of the flu season, as we did see some softness in the sales of diagnostic kits in the third quarter. And so we've been monitoring some of the information that comes from the CDC and taking that into consideration in our guidance. So those are all things that could impact the fourth quarter as we go forward.
Speaker Change: Got it. Thank you.
Speaker Change: And the next question comes from the line of Jeff Johnson with Baird. Please proceed with your question.
Jeff Johnson: Thank you, good morning. Ron, maybe just one clarifying question on what you said about 2025 and then one question on EPS this quarter, but on 2025, you know, you talk about maybe some modest margin of market improvements and expect to gain a bit of share, things like that. The street's sitting at just over 4, almost 4.5% revenue growth next year and 11% EPS growth or nearly 11%.
Elizabeth Anderson: Relative to your comments, those both sound a little bit high and you don't usually comment I know on the third quarter call about 2025, but you did kind of bring it up and open the door a little bit. It just feels like to me maybe were your comments specifically kind of asking us to sharpen our pencils and maybe bring those to
Elizabeth Anderson: Set the numbers down a little bit for next year. Thanks
Speaker Change: Certainly, Jeff. Well, as you stated, we haven't provided 2025 guidance yet.
Speaker Change: We are looking at both what's happening in terms of market trends.
Speaker Change: as well as on on our own recovery of and gains in market share. And so those are factors that will be taken into consideration when we provide.
Speaker Change: that guy in February of next year.
Speaker Change: You know, beyond that, a lot of this is just what kind of momentum can we take from Q3 into Q4 and sustain from Q4 into 2025. So we just need to kind of see how the balance of the year plays out and all that will be taken into consideration in the 2025 guidance.
Speaker Change: All right, and then just on third quarter ETS itself, you had the 11 cent remeasurement gain in there. Obviously you had kind of a 10 cent remeasurement gain in 2Q last year. I think the net in 2Q last year was closer to a 5 cent benefit because you also had some of the syn and biotap kind of higher than normal acquisition costs you called out in that second quarter last year for kind of a netting that to a 5 cent benefit. But if I adjust for both those factors, both the the remeasurement this quarter, the net of those factors in 2Q last year, you know your first half EPS this year was down about 5% and with your core consumables in both medical and dental down 4 to 5% I think that makes sense. This quarter if I take the 11 cent out and there wasn't really any benefit, I think that's a good thing.
Speaker Change: really anything in 3Q last year. I don't believe your EPS would have been down closer to mid-teens year over year. So what, where was that extra 10 points, if you will, of adjusted basis fall off in earnings growth this quarter versus the first half of the year? That's the one hole I can't plug. Thanks.
Speaker Change: I think it's the ongoing recovery of market share
Speaker Change: We're pleased with the
Speaker Change: There's some pockets of very positive news in terms of what we're seeing on equipment.
Speaker Change: what we're seeing in implants, but I think the ongoing recovery and distribution would be the primary contributor to that gap that you've identified.
Speaker Change: Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South, Ronald
Speaker Change: And the next question comes from the line of Kevin Caliendo with UBS. Please proceed with your question.
Kevin Caliendo: Thanks. Thanks. I appreciate you getting me in.
Kevin Caliendo: Sort of a math question here, but how do we think about the restructure savings of 75 to 100 million by the end of 25?
Kevin Caliendo: relative in size and scope to the higher depreciation cost like do they what does one offset the other?
Speaker Change: Well, we would expect margins to improve. I mean, obviously, the increase in depreciation expense would put some pressure on that. But I do believe the benefits that we gain in lower OPEX from the restructuring actions we are taking
Speaker Change: That we've already taken in the third quarter, that we're taking now in the fourth quarter, and that we'll continue to take throughout 25 will more than offset the increase in depreciation expense.
Speaker Change: so we should see some benefit.
Speaker Change: to operating margin as a result of that. Key to that, obviously, is growth in revenues.
Speaker Change: especially in the distribution business, given the fixed cost nature of that operating base. So, if we can achieve, you know, ongoing market recovery and distribution...
Speaker Change: be successful in executing on our restructuring initiatives. We should be able to see some operating margin expansion in 2025, but we need to see what kind of momentum we have. We can we can complete this year before we can commit to that.
Speaker Change: And just a quick follow-up. So thinking about the share that was recaptured in 3Q, the magnitude of that, and how it's progressing in 4Q, if you can...
Speaker Change: Is it fair to assume that, based on where you are now, that you still expect to have a tailwind?
Speaker Change: in consumables or share from lapping lower share in the first half of next year? Like, are you at that point where you feel comfortable that at least for the first half, knowing where you are now, that there will be a benefit? Or is that still relatively insignificant?
Speaker Change: Well, you know, yes, by definition, you know, like we've said, we believe that sequentially this year, we have we have picked up some market share as we recover from the cyber incident from Q1 into Q2 into Q3. And so we do.
Speaker Change: We do expect that our existing market share, when we go into 2025, on the distribution side will be higher than when we went into 2024.
Speaker Change: on what we believe that incremental market share will be as we think through the 25 results. But yes, by definition, one would expect that market share to be slightly higher.
Speaker Change: . . . .
Speaker Change: And the next question comes from the line of John Block with Sieffel. Please proceed with your question.
John Block: Thanks, guys, and good morning.
John Block: Stanley, maybe I'll just start, you know, pretty big picture. I think in the comments you said next year you expect the dental and medical markets to get a bit better and then you think you'll take share off that improvement. You know, the improvement in the end markets I'd say has proven to be somewhat elusive over the past handful of quarters and so maybe you guys can just talk to
John Block: Your conviction there, what are the drivers? You know, is it a lower interest rate environment that leads to the improvement notably in equipment? Is it consumer confidence? Is it lower financing on
John Block: Higher ASP procedures, you know, what's really driving Your improvement outlook if you would and do you expect it to be more acute in either dental and or medical? Thanks
Speaker Change: Yeah, John, that's an extremely good question. So let's deal with the easier parts.
Speaker Change: And the easier parts are dental equipment sales in the United States. I think there is a deep interest.
Speaker Change: in practitioners investing in their practices.
Speaker Change: They're quite busy. In fact, Ron was telling me he's having a problem getting an appointment with his dentist locally.
Speaker Change: The dentists are busy.
Speaker Change: and they're feeling good about their practices and they do know that if they invest in digital technology, they will do better.
Speaker Change: Della Fortuna.
Della Fortuna: The whole area of the clinical workflow, digital,
Speaker Change: Devices
Speaker Change: tying that into the software, electronic medical record, all of that is moving in a very good direction. Obviously, it's lumpy.
Speaker Change: This quarter, we had the situation of one of our biggest suppliers of scanners having a show slightly different time to last year. So this is a good market, yes. If interest rates come down in a, you know...
Speaker Change: I think that could move the needle.
Speaker Change: 200 basis points, even better.
Speaker Change: but there's a conviction to invest
Speaker Change: In the units
Speaker Change: Shopping for lower priced
Speaker Change: Branded Products
Speaker Change: And if you can get the same product or similar product, you'll move to a lower price product. It does impact our margins a little bit, but that's...
Speaker Change: balanced by a movement towards our own brand products which sell at a higher price.
Speaker Change: I think the implant market has stabilized, at least from our point of view. The higher end is still challenged. But I think from the market that we participate in, which is the...
Speaker Change: value implant side, I think the market is reasonably stable to leaning positively.
Speaker Change: The outlook in Europe is a little bit better now than it was even a year or so ago.
Speaker Change: Maybe two years ago with the...
Speaker Change: instability with Ukraine, et cetera. I think that's sort of calmed down a little bit or at least bottomed out. So Europe is leaning towards a positive.
Speaker Change: The rest of the world, Australia, New Zealand, for us, Brazil, it went down quite a bit, but it's also relatively positive.
Speaker Change: Compared to the bottom, so I think you know it's hard to tell exactly particularly where the election ends up and how
Speaker Change: How people feel.
Speaker Change: But I think we've bottomed out
Speaker Change: to slightly positive on both the consumable side and on the equipment side with a leaning towards positive on the equipment side. And from our point of view, I think we will continue to do okay with implants, endodontics and a very small orthodontic business that will start, I think, soon.
Speaker Change: providing positive growth once we've moved our Smiler brand.
Speaker Change: globally.
Speaker Change: and so just as a small aside on the medical side at the margin we're doing okay but it's very much dependent on two factors one is flu seasons
Speaker Change: when they, you know, do they move from one way, one year, one way, another, another year? And, of course...
Speaker Change: Generics
Speaker Change: in the
Speaker Change: in the area of particularly injectables.
Speaker Change: and then you've got to take into account the price of gloves either way but factor that out and I think this will give you more or less a good view of our view of the market. Practitioners are investing in software, we are doing okay on the software side, pretty good but we've moved from
Speaker Change: from an on-prem sale to SAS subscription, and that has to be taken into account.
Speaker Change: So, that's sort of an overview of...
Speaker Change: The various markets that we participate in. Homecare is doing well from our point of view. I think in general it's doing well and the orthopedic business for us, the new one, is also leaning quite nicely because there is a reasonable amount of movement to ambulatory surgical centers, which is where we're doing well.
Speaker Change: okay great that was very helpful Stanley thanks for that and then maybe just a quicker follow-up you know implants
Speaker Change: Impressive North American performance, pretty clear taking share.
Speaker Change: But it's hard to believe that that would all be from the tapered pro conical alone, you know, recent introduction. So, any more details on the contributions from that offering? And maybe more importantly, is it the conical having, you know, call it sort of a halo effect on the overall implant portfolio? Thanks guys.
Speaker Change: Yes, I think it's also a good question. I think our sales people are feeling confident at the work they've done over the last two, three years.
Speaker Change: Talking to customers about our exciting offering now turns into a reality.
Speaker Change: And we are seeing customers that are interested in our product, which is a reasonably priced product, high quality, supported by very good KOLs, and now an expanded market.
Speaker Change: Market opportunity for us all of that adds up well, and we're talking about the United States
Speaker Change: As it relates to Europe, we continue to do very well, particularly in our big market Germany, likewise in Brazil and France. Then you can have a couple of hundred basis point movement one way or another due to export sales. But generally, the fundamental...
Speaker Change: that the appreciation of our product line by DSOs has also helped very nicely. And, you know, Europe, Germany in particular where we have the big market share, we tend to continue to pick up a little bit of market share each quarter.
Speaker Change: Germany, although we have a
Speaker Change: and sales for the very low end price wise high quality product but and then of course Brazil in France
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Speaker Change: And the next question comes from the line of Jason Dudnar with Piper Sandler. Please proceed with your question.
Jason Dudnar: Hey, good morning. Thanks for taking the questions.
Jason Dudnar: Maybe want to unpack a bit more on some of the prior questions, just some follow-ups here. Maybe if you wouldn't mind first bifurcating some of the assumptions around the growth performance expectations for 2025. If the market next year is showing modest growth,
Jason Dudnar: Is it right to think this is mostly volume and pricing is flat, or would you characterize the pricing environment as slightly positive or negative as you're seeing manufacturer schedules roll out here for 2025? And then if you also wouldn't mind just commenting on how you see specialty and non-specialty parts of the market fitting into your overarching comments on the dental market, that'd be great.
Speaker Change: So Jason, as a distributor...
Speaker Change: Um.
Speaker Change: If we move
Speaker Change: a little bit more aggressively and that tends to be the second tier manufacturers and there's a movement towards own brand.
Speaker Change: It could impact sales a little bit, all things being equal, but our profits are solid.
Speaker Change: We can't tell exactly on the consumable side, but I would imagine that, particularly with some of the larger accounts, our suppliers will want to be competitive. As it relates to equipment, specifically in Europe, there is a movement towards...
Speaker Change: that has resulted in
Speaker Change: Good sales for us.
Speaker Change: Margins are not bad.
Speaker Change: And I think the manufacturers will, all of them really, in the end will understand that there has been consumer resistance as a result of the increase in pricing.
Speaker Change: in the post COVID period. So I think, from our point of view, the profitability point of view, I think we're okay.
Speaker Change: Obviously, on the distribution side, regaining customers on the...
Speaker Change: As a result, the cyber incident is going to continue to be important, and we have repositioned our sales force accordingly. Our sales team was very much engaged until a few months ago in...
Speaker Change: making sure that the customers that were impacted by the cyber incident are okay and safely.
Speaker Change: embedded within Reshine. Now these smaller periodic customers, we do not spend a lot of time with those customers. Our sales people are focused on that, our telesales team has been reorganized.
Speaker Change: to focus on that more resource put into
Speaker Change: these small accounts that we seem to have had challenges with in the post-cyber incident.
Speaker Change: and that's the focus and then our website which was down had some challenges in regaining customers I think we've got a lot of very good e-commerce activity going on there social media type stuff and we are recovering so I think
Speaker Change: Those items are very much going to impact us.
Speaker Change: and we see more or less a continued stable market with us driving our sales in the areas that I've mentioned and of course focused on high-growth, high-margin businesses that now account for just over 40% of our operating income and another 10 or so percent from our corporate brand, private brand product offering.
Speaker Change: So it's about half the business, and we have to make sure that it continues to grow.
Speaker Change: Okay, thanks Ben. And then just as a follow-up, Ron,
Speaker Change: You mentioned in the prepared remarks to press release having already influenced cost savings of 50 million Can you give a maybe a bit more detail and just where you're seeing these cost savings? Maybe outside of the orthodontic business you referenced during your paired remarks You know some of the the consolidation or cost that cost efforts on I think the endodontic business that you get fully acquired Are there other revenue impacts or disruptions we need to think about as we look ahead to 2025 beyond just orthodontics?
Speaker Change: Stanley, Stanley Bergman, Ronald South, Stanley Bergman, Ronald South, Stanley Bergman, Ronald
Speaker Change: No, I would say that, you know, we obviously proceed carefully such that, you know, the reductions we make, you know, minimize or have, you know, very little effect, if any, on revenues.
Speaker Change: Given the decline in distribution revenues, some of the restructuring initiatives have been in the distribution businesses.
Speaker Change: We've also, we have not had quite the revenue growth as originally expected in some of the technology areas. We did do some costs, you know, cost reductions there, but I do think that we are able to continue to invest in new products.
Speaker Change: And we're bullish on 25 that we can, you know, go into 25 lean and with an opportunity to reinvest in those businesses as necessary. So that would be part of that. I think in terms of, you know, other things we're looking at for 25.
Speaker Change: You know as we said back in our investor day We expect dental markets to be growing on normal and it's a in a two to four percent range
Speaker Change: that, you know, that 2% next year is probably a closer barometer than 4. But there's a lot of things that can influence this. You know, Stanley mentioned earlier that lower interest rates could...
Speaker Change: could encourage more investment, we could see more DeNovo's. An expansion of the supply of dentistry would be very beneficial for us. So if we can see some increased investment in the build-out of practices, we think that would be something that would influence the number more than anything else in 2025.
Speaker Change: Great. Thanks for taking my question. I just want to get a sense of intra-quarter trends within medical, and beyond that, how you're seeing your different end markets, the ASBs, doctor's offices, and IDNs, how they're behaving both from customer and competitor perspective, what you're seeing just generally in the competitive balance for medical right now.
Speaker Change: yeah so if you look at
Speaker Change: The medical market for Henry Schein.
Speaker Change: You put aside the ups and downs of the flu season, whether it's
Speaker Change: vaccines
Speaker Change: Are people worried about that? Are they going to doctor more or less? You take that out.
Speaker Change: The business is pretty stable.
Speaker Change: We are recovering from the cyber incident. We did lose some customers, specifically lost some to drug wholesalers. And I think the customers in our sector understand that we provide a very different service, and they're coming back. So that's the...
Speaker Change: Core distribution business which I think will if you X out these
Speaker Change: It's a pretty stable business with us growing market share as a result of the recovery.
Speaker Change: Then you add to that, not material in terms of sales, the progress we're making on the orthopedic side, which is pretty good, that business is doing well, both the recent acquisition
Speaker Change: of the orthopedic of the extremities product offering and our saws and blades business.
Speaker Change: Not so much in sales, but in profits, it's very good.
Speaker Change: The home care business is doing well, you are seeing...
Speaker Change: We're not seeing local currency growth yet. I think that analyzes around the middle of the fourth quarter. The middle of the fourth quarter. So that's pretty good. And the movement to ASCs is pretty good. There was some encouraging news. We just got that reimbursement for foot and ankle.
Speaker Change: procedures undertaken in the ASC is going to be going up.
Speaker Change: and I think the medical business is a very efficient business.
Speaker Change: Dental, a great sales organization, extremely well managed was South Dental by the way, and I think you can expect.
Speaker Change: continued momentum and decent margin improvements. Can't give you the exact quarter where this is going to happen, but the trend is very good, and the business is quite stable. We still have to get back some of that pharmaceutical.
Speaker Change: the distribution that went to the drug wholesalers, but I think our team will get that back because our service is very unique.
Speaker Change: Great, and then just one quick one. On the technology business, or well, I guess value-added services in particular here, called out that the difference between LCI and reported revenue, it was more, I want to say, cosmetic in a way, but better to look at the reported revenue side. Can you just kind of walk through the dynamic that is playing out there and why the headwind from, I think, value-added services is causing a problem here?
Speaker Change: I'll try to give you as concise of an explanation on that as I can. The transaction we did last year of LPS was completed effectively the July 31st to August 1st. So we had one month of acquisition.
Speaker Change: activity or acquisition growth from LPS versus two months of internal growth from LPS and they had a very good July.
Speaker Change: so the revenues in that month are a factor in our acquisition growth as opposed to our internal growth.
Speaker Change: So if had we had we spread those revenues out over the course of the quarter We think that it would have did the total sales growth
Speaker Change: would be more reflective of what we expect.
Speaker Change: of that segment going forward.
Speaker Change: It can be very lumpy. It's it's not a it's not a recurring customer base. It's it's a
Speaker Change: It's a series of transactions, and the timing of those transactions can make for some unusual math. But now that that transaction has annualized, it will be part of our internal sales growth going forward.
Speaker Change: and Ron, thank you. And you need to also ensure that you've taken into account the movement from on-prem sales
Speaker Change: to the SAS model, where it's a monthly subscription.
Speaker Change: but the units are doing quite well and our
Speaker Change: cloud-based system.
Speaker Change: both in the United States, which is our big market, and our international business.
Speaker Change: It's quite good and it's growing.
Speaker Change: And the next question comes from the line of Brandon Vasquez with William Blair. Please proceed with your question.
Brandon Vasquez: Hey everyone, thanks for taking the question. Since we're bumping at the end here, I'll throw two up together. The first one is, Dan, you had made some comments about some dental manufacturers wanting to, I think the phrase you're using is, compete a little bit more. Maybe that trend has been impacting you guys going into 25. Just curious if you could elaborate on that. I'm not sure, you know, is that new or is that something that you guys have always dealt with? So just any comments around that. And the second follow-up question is just any color you can give us on specifically what's happening within the restructuring in that clear aligner business. That would be helpful to you. Thanks.
Brandon Vasquez: We've been mentioning in our calls now, I can't remember if it's three or four quarters now, that consumers are
Brandon Vasquez: of Dental Products, and I guess consumers in general, are looking at
Speaker Change: Quality of the product versus price, the value.
Speaker Change: ignoring this trend. Many are dealing with it, but there are some that took their prices up quite high and there's been price resistance. We've said this for a while.
Speaker Change: and not only in the consumables, but on the equipment side, specifically on the equipment side in Europe.
Speaker Change: So, I think this is going to adjust itself.
Speaker Change: We certainly have mentioned this to our manufacturing partners, their understanders.
Speaker Change: and remember, we are committed to national brands.
Speaker Change: I think this will adjust, I don't think this trend will go on for a long time.
Speaker Change: But it certainly...
Speaker Change: magnified this quarter and actually the last couple of quarters.
Speaker Change: Ron
Speaker Change: Structure.
Ron Structure: Yeah, certainly, with reference to the orthodontics question...
Speaker Change: Yeah, so we are you know, we are transitioning our clear liner products in the US and the European markets
Speaker Change: you know, from reveal.
Speaker Change: and so we're able to leverage our existing distribution infrastructure more so and reduce some costs, some operating costs within that business as we transition. And you know, at the end of the day, when you bump up, you know, reveal the Smilers, we saw Smilers as a better product and it, given the size of the business, it likely didn't make sense for us to have the two brands. And so we are transitioning to Smilers as a result.
Speaker Change: It will take a couple of quarters to smooth this out.
Speaker Change: But
Speaker Change: Smiler's brand has additional software with Anemotex backing it up and wherever we've tested it, it seems to have gone quite well. It has gone well.
Speaker Change: So, Operator, I think we're near the end. I want to thank everybody for being here.
Speaker Change: Court
Speaker Change: Oh, we have one more question. Sorry, sorry, sorry. No problem. We have time for one last question coming from the line of Mike Patuski with Barrington Research. Please proceed with your question.
Mike Patuski: Hey, good morning. Thanks for squeezing me in. Understanding this is not a hall where you're talking about 25 a lot, but I'm just curious if 25 in terms of capital allocation will, you know,
Mike Patuski: in terms of what you think now, I mean, is that going to...
Mike Patuski: look more like 24 in terms of M&A, share repurchase, internal investment, sort of the relative ways you guys sort of make decisions around those, or could that look more like the 22-23 timeframe where external investment was a little bit heavier? Thanks.
Speaker Change: typically share repurchases have been in that $300 to $400 million range. M&A was in that $300 to $400 million range.
Speaker Change: There also could be some opportunity, as we've been very pleased with the positive cash flow.
Speaker Change: you know, really the best accretion.
Speaker Change: you know, for that capital outlay, but I would expect it.
Speaker Change: is fundamental to our strategy and to growth of the business, it was something that we would not exclude, the notion of doing that transaction.
Speaker Change: Okay, great. And a quick, quick, quick follow-up just in terms of potential M&A, whether it's in 25 or beyond, you guys have made some positive comments about home solutions and obviously have built that business up, but I know you want to scale it further. Can you just talk about where assets in the home solutions space would sort of rank in terms of M&A priorities? Thanks.
Speaker Change: Yes, that is an area that we expect to continue investing in. I don't think we need to make huge investments, but we need to make investments that expand our offering nationally in the United States.
Speaker Change: But, I don't think this is a need to spend a huge amount of money, it's rather an opportunity to add to our platform and fill it out in areas where we don't necessarily have the delivery capabilities, although we are going to leverage the Henry Schein infrastructure for delivery in certain parts of the country.
Speaker Change: but also accessing certain insurance contracts.
Speaker Change: that may enable us to position a faster growth rate. We've put in place an outstanding team in this area through the acquisitions and through recruiting that we've undertaken in the last couple of years. And this business, both the demographics and the fundamentals, the operations of the business are very, very sound and we're very excited about.
Speaker Change: So...
Speaker Change: We thank you for calling. We're five minutes over. Sorry about that. As you can tell, we feel very good about the business. We're performing quite well throughout the business.
Speaker Change: We believe that we will continue to steadily gain back our market share in the distribution businesses, the ones that were challenged by the cyber incident. We believe that our...
Speaker Change: High Growth, High Margin Products and Services businesses are all going in the right direction. Of course, this is a small, pedantic business that we are restructuring, but if you take that out, the...
Speaker Change: implants in the bone regeneration endodontic businesses are positive. The ingredients in our valley-added service businesses are all
Speaker Change: working in a nice direction and should result in stickiness with our core customers and we are sunsetting our 2022 to 24 strategic plan.
Speaker Change: If you X out the cyber incident, I think we've done pretty good on delivering on our plans, ideas, tactics.
Speaker Change: and we will discuss on the next call our 25 to 27 strategic plan. We don't expect to change anything in a significant way, but to emphasize certain areas that we think are an opportunity and we'll articulate that to you. And capital deployment...
Speaker Change: is, as Ron said, expected to be very similar to this year. We never know. There may be an opportunity. And the cash flow we'll use, we'll invest, as in the historical past, in some acquisitions.
Speaker Change: Buying back strikes and minority interest in our current portfolio of investments.
Speaker Change: and of course buying back stock, we have over 300 million dollars still to spend in that area. So, with that in mind...
Speaker Change: I wish everybody a good and safe holiday season and we'll be back early next year and remain quite optimistic. The team is working extremely well, the restructuring has been
Speaker Change: That's it. Ray and Ryan. That's usually it.
Ray: Thank you.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Stanley, Stanley Bergman, Ronald South
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South, [inaudible]
Speaker Change: John Stansel, John Stansel, John Stansel, John John Stansel, John Stansel, John Stansel, John Stansel, John
Speaker Change: Good morning ladies and gentlemen and welcome to Henry Schein's third quarter 2024 earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. Please press the star key followed by one on your touchtone phone if you would like to ask the question at the end of the call.
Speaker Change: If anyone should require assistance during the call, please press the star key followed by zero on your touchtone phone. And as a reminder, this call is being recorded.
Speaker Change: I would now like to introduce your host for today's call, Graham Stanley, Henry Schein's Vice President of Investor Relations and Strategic Financial Project Officer.
Speaker Change: Thank you. Please go ahead, Graham.
Graham Stanley: Thank you, operator. And thanks to each of you for joining us to discuss Henry Schein's financial results for the third quarter of 2024. With me on today's call are Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein, and Ronald South, Senior Vice President and Chief Financial Officer.
Speaker Change: Before we begin, I'd like to state that certain comments made during this call will include information that's forward looking.
Speaker Change: risks and uncertainties involved in the company's business may affect the matters referred to in forward-looking statements and the company's performance may materially differ from those expressed in or indicated by such statements
Speaker Change: These forward-looking statements are qualified in their entirety by the cautionary statements contained in Henry Shrine's filings with the Securities and Exchange Commission and included in the risk factors section of those filings.
Speaker Change: In addition, all comments about the markets we serve, including end market growth rates and market share, are based upon the company's internal analyses and estimates.
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Speaker Change: Today's remarks will include both GAAP and non-GAAP financial results.
Speaker Change: We believe that 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 regard to key metrics used by management in operating our business.
Speaker Change: These Norman Gap financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding Gap measures.
Speaker Change: Reconciliations between GAAP and non-GAAP measures are included in Exhibit B of today's press release and can be found in the financials and filings section of our Investor Relations website under the Supplemental Information heading and in our quarterly earnings presentation also posted on our Investor Relations website.
Speaker Change: The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 5th, 2024.
Speaker Change: Henry Shannon takes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.
Speaker Change: Lastly, during today's Q&A session, please limit yourself to a single question and a follow-up. And with that, I'll turn the call over to Stanley Bergman.
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Stanley Bergman: Thank you, Graham. Good morning, everyone. Thank you for joining us.
Stanley Bergman: Our businesses performed well during the third quarter, driven by the successful implementation of our Bold Plus One strategic plan.
Speaker Change: that is resulting in growth and efficiency throughout Henry Schein and a strong contribution from high-growth, high-margin products and services.
Speaker Change: We believe we continue to steadily gain market share in our dental and medical distribution businesses following last year's cyber incident.
Speaker Change: Our dental equipment business is showing ongoing stability in North America and increased investment by customers across Europe, Australia and New Zealand.
Speaker Change: implant and endodontic products had good growth in Europe and Brazil
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Speaker Change: We're reporting another quarter exceeding our target of 40% of operating income generated by our high-growth, high-margin businesses, and we expect to exceed the target
Speaker Change: This particular target of the 40% target for fiscal 2024
Speaker Change: acquisitions made during 2022 to 2024
Speaker Change: During that strategic planning cycle, along with product launches, are delivering strong financial results, and a restructuring plan is on target.
Speaker Change: We also continue to return capital to shareholders through our share repurchase program.
Speaker Change: We exceeded our financial expectations for the quarter, so today we are increasing our non-GAAP EPS guidance range to $474 to $482.
Speaker Change: We are
Speaker Change: Now, let me turn to a review of our business units and start with the dental distribution business.
Speaker Change: Overall, third core results for our dental distribution businesses generally reflect continued stable patient traffic globally.
Speaker Change: with unit sales increasing low single digits.
Speaker Change: offset by PPE price declines and a shift in sales to lower-cost brands, an owned brand
Speaker Change: products.
Speaker Change: We also believe that our North American dental merchandise market share grew sequentially last quarter compared to the second quarter, reflecting a similar trend from the beginning of the year as we continue to recover from last year's cyber incident.
Speaker Change: Stanley, Stanley Bergman, Ronald South, Stanley Bergman, Ronald South, Stanley Bergman, Ronald
Speaker Change: Our third quarter sales increased internationally in the dental merchandise arena and reflects solid growth in Germany, Austria, France, Brazil, Australia and New Zealand.
Speaker Change: So now let's turn to the equipment side.
Speaker Change: Parts and services sales continue to grow strongly.
Speaker Change: We believe our North American digital equipment sales were impacted in part by the timing of DS World.
Speaker Change: It was a successful show for us because it took place in the last week, but it took place in the last week of September.
Speaker Change: Sales from the show will mostly be recognized in the fourth quarter this year.
Speaker Change: On the international equipment side, sales growth was quite good in parts of Europe, Australia and New Zealand, and that was across all categories.
Speaker Change: Let's turn to the dental specialties.
Speaker Change: with continued above-market growth in the United States and Europe.
Speaker Change: U.S. sales were fueled by the launch of BioHorizon's tapered pro-clinical implant, driving mid-single-digit sales growth in the third quarter, against the backdrop of a North American market that is trending flat to slightly negative.
Speaker Change: Additionally, in the U.S., we launched the Smart Shape Healers Abutment product line at the end of the quarter in our implant business, which we expect to further attract new customers and drive implant sales.
Speaker Change: The product is being well received specifically by none.
Speaker Change: We are confident practitioners will value the product's benefits, including less chair time, enhanced patient comfort, and improved clinical efficiency.
Speaker Change: Turning to our orthodontic business, we are in the midst of restructuring this business as well as transitioning to the Smilers brand clear aligner in the United States and in the European markets.
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Speaker Change: This resulted in lower orthodontic sales for the quarter compared to the prior year.
Speaker Change: So now let's turn to the technology and value added services part of the business.
Speaker Change: During the quarter, sales of our practice management software and revenue cycle management products posted mid-single-digit growth.
Speaker Change: This was driven by growth in the customer base of our Dentrix Ascend and Dentali cloud-based solutions, which was up more than 20% year over year.
Speaker Change: with now approximately 8,600 installations worldwide at the Quarter End.
Speaker Change: Now, it's important to understand.
Speaker Change: Our results are impacted by customers moving from on-prem to SaaS-based solutions. Revenue is recognized in a different way in a SaaS-based model versus an on-prem model.
Speaker Change: sales model.
Speaker Change: The number of claims processed by a revenue cycle management e-claims business also increased by mid-single-digit percentages compared to last year.
Speaker Change: Stanley, Stanley Bergman, Ronald South, Ronald South, Ronald South, Ronald South, Ronald South,
Speaker Change: In conclusion,
Speaker Change: The dental, uh, uh, uh, uh, uh, uh, uh, the, uh, dental business.
Speaker Change: is an important proxy.
Speaker Change: It's an important priority for our bold plus one growth strategy.
Speaker Change: and it's in this area that the L in the B-O-L-D is important for leveraging our strong customer relationships across our product portfolio. We are providing integrated solutions.
Speaker Change: that strengthen customer relations.
Speaker Change: driving softly
Speaker Change: driving distribution and driving specialty sales especially with our large customer segment. For example
Speaker Change: We had a number of Dental Distribution DSOs customers switch their implants to BioRisen.
Speaker Change: and their technology to Dentrix Ascend and Jarvis Analytics.