Q1 2026 Medline Inc Earnings Call

May 6, 2026

Karen King: Our Chief Executive Officer, and Mike Drazin, our Chief Financial Officer. During today's call, we may make forward-looking statements regarding our expectations for the future, including our business plans, strategy and investments, and expected timing and impact. These statements are based on how we see things today, and actual results may differ materially due to risks and uncertainties. Please see the cautionary statement and risk factors contained in our earnings release which accompanies these remarks, as well as our most recent 10-K and other SEC filings for more information regarding these risks and uncertainties. We may also reference non-GAAP financial measures, which exclude certain items from our financial results calculated in accordance with GAAP.

Karen King: You can find a discussion of our non-GAAP financial measures and reconciliations to comparable GAAP measures in the earnings release and our disclosures and non-GAAP reconciliations that accompany these remarks, which are available on our website at ir.medline.com under Quarterly Results. I want to remind you that we close and report on a 4-4-5 week calendar, which can create differences in days per quarter. What this means is that certain quarters could have slightly more or less days than the same quarter in the previous year. For Q1 2026, we had 1 less day versus Q1 2025, which is a headwind. We have included the calendar of days in the supplemental disclosures available on the Medline Investor Relations website. With that, I will now turn the call over to our CEO, Jim Boyle.

Karen: Our Chief Executive Officer, and Mike Drazin, our Chief Financial Officer. During today's call, we may make forward-looking statements regarding our expectations for the future, including our business plans, strategy and investments, and expected timing and impact. These statements are based on how we see things today, and actual results may differ materially due to risks and uncertainties. Please see the cautionary statement and risk factors contained in our earnings release which accompanies these remarks, as well as our most recent 10-K and other SEC filings for more information regarding these risks and uncertainties. We may also reference non-GAAP financial measures, which exclude certain items from our financial results calculated in accordance with GAAP.

Jim Boyle: Thank you, Karen. Welcome to Medline's Q1 2026 earnings call. We appreciate you joining us. I'll begin with a brief performance update for the quarter. Mike will then review our financial results, and I'll close before we open the line for Q&A. Turning to our performance. We started the year with 11% top line growth in Q1, powered by one of our strongest quarters ever in supply chain solutions. That momentum is being fueled by implementation of the $2.4 billion in new customer signings we delivered in 2025 and existing customer growth. We also delivered another strong quarter of new customer signings. Several of our larger wins displaced long-tenured incumbents that have held those accounts for more than a decade, and most of the deals span multiple channels, highlighting Medline's differentiated model and unique ability to serve customers across the entire continuum of care.

Karen: You can find a discussion of our non-GAAP financial measures and reconciliations to comparable GAAP measures in the earnings release and our disclosures and non-GAAP reconciliations that accompany these remarks, which are available on our website at ir.medline.com under Quarterly Results. I want to remind you that we close and report on a 4-4-5 week calendar, which can create differences in days per quarter. What this means is that certain quarters could have slightly more or less days than the same quarter in the previous year. For Q1 2026, we had 1 less day versus Q1 2025, which is a headwind. We have included the calendar of days in the supplemental disclosures available on the Medline Investor Relations website. With that, I will now turn the call over to our CEO, Jim Boyle.

Jim Boyle: Adjusted EBITDA was $776 million, 11% decline versus prior year, reflecting robust sales that were more than offset by anticipated higher cost of goods sold, including incremental tariffs and continued operational investments to support our customers and long-term growth. I also want to highlight the progress we've made across several key initiatives during the quarter. First, we've been diligently working on signing our first Prime Vendor customer in Canada, and I'm excited to announce that we have partnered with MMC or Mohawk Medbuy Corporation. Mohawk Medbuy is a dominant player in Ontario, serving over 300 total healthcare organizations, and we have been selected to serve as their Prime Vendor for 9 acute member hospitals in Southwestern Ontario. We are looking forward to starting implementation in H2 2026.

Jim Boyle: We are encouraged by the opportunity this represents and believe this partnership can help demonstrate the strength of our Prime Vendor model and support future PV opportunities across Canada. Second, aligned with our investment thesis in next generation supply chain technology, we announced our partnership with Symbotic. The Symbotic system is an AI-powered robotic platform that automates picking, storage, and retrieval of bulk items for distribution. Medline is the first healthcare company to deploy Symbotic, and we expect to begin piloting this technology next year at our Ohio distribution center, with the goal of increasing throughput and scalability to provide even more efficiency for our customers. We also introduced PickPack Pro, a new automation fulfillment system in our Montgomery, New York distribution center.

That momentum is being fueled by implementation of the $2.4 billion in new customer signings we delivered in 2025 and existing customer growth.

Jim Boyle: PickPack Pro is an innovative combination of four separate advanced technologies that address the unique needs of our health plan customers by improving speed, accuracy, and reliability for a more efficient fulfillment solution. Finally, we continue to make strong progress rolling out Mpower, our AI-enabled digital supply chain control tower designed in partnership with Microsoft. In Q1, we added several customers to the pilot, reaching 10 in total, and we are receiving early feedback that customers are already realizing efficiency gains, improved inventory flow visibility, stronger supply and demand planning, and predictive insights to help stay ahead with disruptions. We aim to expand the rollout in Q2 and offer Mpower to most acute care customers by year end. Our goal has always been to operate the most broad and robust supply chain in the industry as a vertically integrated manufacturer and distributor.

We also delivered another strong order of new customer science.

Several of our larger women displays long, tenure to comments that have held those accounts for more than a decade. And most of the deals span multiple channels highlighting, medline's differentiated model and unique ability to serve customers across the entire in both care.

Adjusted ibido with 776 million 11% declined which is prior reflecting robust cells that were more than offset by anticipated. Higher cost of goods sold including incremental, tariffs and continued, operational Investments to support our customers in long-term growth.

I often highlight the progress. We've made across several key initiatives during quarter.

first, we've been diligently working on signing our first printed or customer in Canada and I'm excited to announce that we have partnered with MMC our Mohawk medbuy Corporation,

My name is a dominant player in Ontario serving or 300 Total Healthcare organizations.

Jim Boyle: To do so, we believe we must continue to evolve and invest accordingly. As the global operating environment becomes more complex amid tariffs, geopolitical uncertainty, and supply chain disruptions, we have further strengthened our manufacturing and distribution footprint and maintained robust inventory levels to support our customers. Our Medline brand includes approximately 190,000 products supported by an increasingly diversified global supplier network. Today, nearly 90% of our Medline brand products are multi-sourced, up 10 percentage points from 5 years ago. This scale and complexity require constant and rigorous supply chain, quality, and regulatory discipline. For us, patient safety and product quality come first. Our customer complaint rate is less than 1 complaint per million units sold, well below Six Sigma benchmarks.

And we have been selected to serve as their private owner for 9 acute member hospitals in Southwestern Ontario.

We are looking forward to starting implementation in the second half of 2026. We are encouraged by the opportunity. This represents. I believe this partnership can help demonstrate the strength of our Predator model to support future feed opportunities across Canada.

Second aligned with our investment thesis in Next Generation. Supply chain technology, we announced our partnership with the body.

The symbiotic system is an AI, our robotic platform that automates, picking, storage and retrieval. Bulk items for distribution.

Medline is the First Healthcare company to deploy symbotic and we expect to be in powering this technology next year at our Ohio Distribution Center.

But the goal of increasing throughput and scale ability to provide even more efficiency for our customers.

Jim Boyle: Any Medline recall is an action we believe is in the best interest of patients and our customers, made in close coordination with regulators and designed to minimize risk and disruption. Our recalls to date are immaterial to our financials. We remain committed to building the most broad and robust supply chain in the industry to enhance resiliency and regulatory compliance across our network and to better position Medline to navigate global complexities. With that, I'll turn the call over to Mike to do a deeper dive into the financials and update on our 2026 outlook.

We also introduced picpac Pro a new automation fulfillment system in our Montgomery, New York Distribution Center,

Take Pro is an innovative combination of four separate advanced technologies that address the unique needs of our health plan customers by improving speed, accuracy, and reliability for a more efficient fulfillment solution.

Finally, we continue to make strong progress, rolling out in power. Our AI enabled, digital. Supplying control Towers designed in partnership with the Microsoft.

Mike Drazin: Thank you, Jim. Good morning, everyone. We had a strong start to the year with Q1 net sales of $7.4 billion, up 11% versus prior year. The majority of our growth was organic, with minimal contribution from foreign currency changes. The 1 less business day in the quarter provided a headwind of approximately 2 percentage points. The Medline brand segment delivered $3.5 billion of net sales in Q1, up 6% versus prior year, or 8% adjusted for days. Looking at Medline brand sales by product category, starting with surgical solutions, net sales were $1.6 billion, up 7%, led by continued strong growth in surgical kitting as we discussed last quarter.

In q1, we added several customers to the pilot, reaching 10 and total and we are receiving early feedback that customers are already realizing efficiency, gains improved, inventory, low, visibility stronger, supply and demand planning and predictive insights to help. Stay ahead with disruption.

most, if you care to customers by your

our goal is always to operate the most Broad and robust supply chain in the industry as a vertically, integrated manufacturer

to do. So we believe we must continue to evolve and invest accordingly.

Mike Drazin: Frontline Care net sales reached $1.6 billion, up 6%, driven by robust demand across multiple product divisions, including exam gloves and personal care. Lab and Diagnostics generated net sales of $293 million, up 1%. Double-digit core lab growth was offset by seasonality related to softer respiratory virus testing. We remain confident in our growth expectations for the remainder of the year, due in part to the large number of lab signings in 2025 and expected new customer signings in 2026. Transitioning to Supply Chain Solutions, the segment delivered $3.9 billion in net sales in Q1, up 15%, or 17% adjusted for days. This was a great quarter for the segment, which benefited from new customer implementations and existing customer growth, further increasing our pipeline for future Medline brand conversion opportunities.

As mobile operating environment, becomes more complex, and the tariffs, geopolitical uncertainty. And supply chain disruptions, we have further, strengthen our manufacturing and distribution footprint, and maintain robust, inventory levels to support our customers. Our mine brand includes approximately 1 of 190,000 products fortified by an increasingly Diversified. Global supplier Network today, there will be 90% of our Medline brand products are multi-sourced of 10% points from 5 years ago.

This scale and complexity require a constant and rear supply chain quality and Regulatory discipline.

For us, patient, safety and product quality. Come first

Our customer complaint rate is less than 1 complaint per million units sold. Well, below the stigma of this part.

Any mine recall is an act. We believe it is in the best interests of patients and our customers, made in close coordination with regulators and designed to minimize risk and disruption.

Our recalls today are interior to our financials.

We remain committed to building those broad and robust supply lines in the industry to enhance resiliency and regulatory compliance across our network.

It's better positioned online to navigate global complexities.

Mike Drazin: Moving to sales by channel, US acute care grew 12% to $5.1 billion, driven by growth with new Prime Vendor customers and solid same-store sales growth. US non-acute grew 7% to $1.7 billion, supported by strong existing customer growth and new customer signings in post-acute, surgery centers, and physician offices. The latter of which was impacted by the softer respiratory season, as I mentioned earlier. International grew 10% to $495 million due to foreign currency and volume growth in Canada and Europe. Turning to adjusted EBITDA, Q1 came in at $776 million, down 11% versus prior year.

With that, I'll turn the call over to Mike to do a deeper dive into the financials and update on our 2026 Outlook.

Thank you, Jim, and good morning, everyone.

We had a strong start to the year with the first quarter, net sales of 7.4 million up 11% versus prior year.

The majority of our growth of organic with minimal contribution from board currency changes.

The 1 that business in the quarter provided a headwind or product 2 percentage points.

Medline brand segment, delivered 2.5 billion dollars of net sales in the first quarter up, 6% versus prior year or 8% adjusted for days.

Mike Drazin: Adjusted EBITDA margin declined 250 basis points to 11% due to higher costs, including an incremental $85 million related to tariffs or a $120 million net impact, and continued investment to support net sales growth, partially offset by higher net sales volumes. Medline brand adjusted EBITDA decreased $65 million to $765 million. Adjusted EBITDA margin declined 330 basis points, 22.1%, primarily as a result of higher import costs due to tariffs. Supply chain solutions adjusted EBITDA increased $5 million to $187 million. Adjusted EBITDA margin declined 60 basis points to 4.8%, primarily as a result of customer mix and operational costs to support customer demand.

Look at Medline brand sales by product categories. Starting with Surgical Solutions, net sales were 1.6 billion dollars up 7% and by continued strong growth of surgical kiting as we discussed black order. Frontline care, net sales reached 1.6 billion dollars up. 6% driven by robust demand across multiple product division, including the exam gloves, and personal care.

Lab and Diagnostics generated by sales of 493 million up 1%.

Double-digit core. Lab growth was offset by seasonality related to software, respiratory, virus, and testing.

You remain confident in a growth expectations for the remainder of the year. Do impart the large number of lab signings in 25 and expect a new customer signing from 26.

Mike Drazin: Moving to free cash flow in the balance sheet, we generated free cash flow of $316 million in Q1, driven by net income, excluding non-cash items, partially offset by increased trade accounts receivable related to sales growth, increased inventory, and investments in CapEx. CapEx for Q1 was $96 million, which included investments in enhancements and automation in our distribution centers and capacity expansion of our Mexico kitting manufacturing. Cash and cash equivalents were $2.2 billion and net leverage remained at 3.1x. Aligned with our disciplined capital allocation policy, we will continue to invest in the business and seek opportunities that are aligned with our strategic direction, optimize our balance sheet, and bring value to our customers. Let me now transition to 2026 annual guidance.

Transitioning to Supply Chain Solutions. The segment delivered 3.9 billion of net sales in the first square up, 50% or 70% adjusted for days.

This is a great quarter for the segment, which benefited from your customer implementation and existing customer growth.

Further increasing our pipeline for future and conversion opportunities.

Moving to sales by Channel. You as a good Care Group, 12% to 5.1 billion driven by growth with new primary customers and solid same store, sales growth

US 92% to $1.7 billion supports a strong existing customer growth, and your customers are responding in post-acute, surgery centers, and physician offices.

The latter of which was impacted by the soft respiratory season. As I mentioned earlier,

Mike Drazin: Based on our strong sales performance in Q1, we are now raising our full year 2026 organic sales growth guidance to a range of 8.5% to 9.5% from our previous range of 8% to 9%. This is reflective of the solid same-store sales growth in the quarter due to steady healthcare utilization and procedural volumes. Our full-year organic sales guidance still assumes some moderation of same-store sales growth on a sequential basis in H2 of the year, as previously communicated. We are maintaining our full-year adjusted EBITDA guidance, $3.5 billion to $3.6 billion. We expect to generate some favorability from the lower tariff rate, offset by continued investments in operations, sales, and IT, support customer demand, and headwinds from rising oil prices due to the Middle East conflict.

International grew 10% to $495 million due to foreign currency and volume growth in Canada and Europe.

Turning to a just even dock the first quarter came in at 776 million down, 11% versus prior year.

Adjusted ebita margin to find 250 basis points to 11%, due to the higher cost, including an incremental, 85 million related, tariffs, or $120 million, net impact.

And continued investment support net sales growth. Our shop set by higher net sales, volume Medline brand, adjusted even do decrease, 65 million to 765 million.

Adjusted even marketing declined 330 basis points to 22.1%, primarily as a result of higher income due to tariffs.

Supply Chain Solutions to 187 million.

Mike Drazin: We have assumed that the current 10% tariff rate will expire mid-year and then return to the higher rates we experienced prior to the Supreme Court IEEPA decision. Let me provide a brief overview of the situation in the Middle East. From a top-line perspective, our exposure remains limited as we generate de minimis sales in the region. From an input cost perspective, we spend approximately 50 basis points of our total cost of goods on fuel for domestic freight and fuel surcharges for inbound freight. We experienced minimal impact of the P&L in Q1, and we expect to see a bigger impact, albeit overall immaterial in Q2, with diesel above $5 a gallon.

Adjusted margin declined 60 basis points to 4.8%, primarily as a result of customer mix and operational costs to support customer demand.

What is sales? Growth increased inventory and investments in capex.

Capex for the first quarter was 96 million, which included investment and enhancements, and Automation in our distribution centers and capacity expansion of our Mexico, kidding Manufacturing.

Mike Drazin: We have begun to see cost increases from our suppliers tied to raw material spend for petroleum-based products, including nitrile exam gloves, resins, and plastics, and are working to mitigate these costs where possible. Given we carry a significant amount of inventory, we don't expect to see these inflationary costs hit our P&L till late Q2 or early Q3. Consistent with how we have historically managed inflationary matters, we do not intend to react immediately. We'll take a measured approach as we assess the situation. Should the conflict evolve, we will plan to execute our playbook to share updates on the impact to our business. As you consider the quarterly cadence of our results, we expect to see continued operational investments to support customer demand in Q2, as well as headwinds from the Middle East conflict, as I just indicated.

Cache to close for 2.2 billion dollars in net leverage remained at 3.1 times.

Aligned with our discipline Capital allocation policy, we will continue to invest in the business and seek opportunities that are aligned with our strategic Direction, optimize our balance sheet, and bring value to our customers.

Let me now transition this 2026 annual guidance.

Based on our strong sales performance in q1. We are now using our full year 2026 organic sales growth. Guidance to a range of 8 and a half to 9 and a half percent from our previous range of 8 to 9.

This is reflective of the solid state store, sales growth in the quarter to studying Healthcare utilization and procedural volumes.

Mike Drazin: As sales grow and the benefits from mitigation actions and tariffs transpire in the H2 of the year, we expect sequential adjusted EBITDA growth. In summary, we began 2026 with strong momentum, delivering double-digit sales growth and raising our full-year organic sales guidance. While operating in a dynamic environment, we remain focused on delivering value for our customers. Through continued investment in our operations and an agile approach, we believe we are positioned to navigate near-term challenges and capitalize on opportunities ahead. I'll now turn the call back over to Jim for closing remarks.

Our full year, organic sales guidance, still assumes. Some moderation of sales, for sales, grew up on a sequential basis in the second half of the year. It's previously communicated.

We are maintaining a full year, adjusted, Evita guides 3.5 to 3.6 billion.

We expect to generate some favorites from the lower Carefree continued investments in operations sales, and it support customer demand and has been running oil prices through the Middle East conflict.

We have assumed that the current 10% tariff rate will expire mid-year and then return to the higher rates we experienced prior to the Supreme Court Payday decision.

Let me provide a brief overview of the situation in the Middle East.

Jim Boyle: Thanks, Mike. To wrap up, we are pleased with the strong start to the year, driven by the implementation ramp of our $2.4 billion in 2025 total new customer signings and solid same-store sales growth. We also posted another strong quarter of new signings, most of which are multi-channel, reinforcing our differentiated ability to serve customers across the full continuum of care. We're investing to scale this growth while maintaining the high service levels our customers expect. We are energized by the opportunities ahead, including our first prime vendor deal in Canada, the expansion of Mpower, and continued automation across our distribution network, positioning Medline to create value for our customers, drive durable long-term growth, and enhance shareholder value. Thank you for joining us. We'll now turn the call over for questions.

From the Top Line perspective, our exposure remains limited as we generate the minimum sales in the region.

Input cost effective. We spend approximately 50 basis points of our total cost of goods on fuel for domestic Freedom. Fuels, for charges for inbound Freight, we experience minimal impact on the first order and we expect to see a bigger impact on the overall mix in material on Q2 with people about 5 dollars, a gallon.

We have begun to see cost increases from our suppliers tied to raw material spend for petroleum-based products, including nitrogens and plastics, and our work in mitigates. These costs, where possible,

Given we carry a significant amount of inventory, you don't expect to see these inflationary costs at everything now to, like, Q2 or, like, Q3.

Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit yourself to 1 question so we may accommodate as many participants as possible. You are welcome to queue up again if you have any follow-up questions. Please stand by while we compile the Q&A roster. Our first question is from Michael Cherny of Leerink Partners. Please proceed with your question.

Consistent with how we have historically managed inflationary matters, we do not intend to react immediately. We'll take a measured approach as we assess the situation.

So, the conflict evolved to a place to execute our Playbook to share updates on the impact of our business.

As you can see, the quarterly Cadence of our results. We expect to see continued operational Investments for customer demand and Q2 as well as headwinds from the Middle East conflict and that just indicated at sales grow. And the benefits for mitigation actions and terrorists transfer, the second half of the year. We expect potential not to be that growth.

In summary, we began 2026 with Dawn, momentum delivering, double-digit, sales, growth. And raising our full year. Organic sales, guys.

Michael Cherny: Good morning, and thanks for taking the question. Maybe if I can dive into the macro dynamics. Mike, I heard you talk about the moving pieces and how you tend to address it historically. As you're seeing the price increases, how much lead time are you planning to give, both to your clients and your manufacturer partners on changes that you want to make? How should we think through, maybe using tariffs as an example, the push and pull, in terms of what you're assuming that's embedded within your reiterated EBITDA guidance? Thank you.

While operating a dynamic environment, we remain focused on delivering value for our customers, through continued investment in our operations, and an agile approach. We believe We Are positioned to navigate near-term, challenges to capitalize on opportunities ahead.

I'm not for the call back over to Jim for closing remarks.

Thanks. Mike, Trapp up. We are pleased with the strong. Start to the year driven by implementation ramp over our 2.4 billion and 2025 total new customer signings and follow the same Source sales growth.

Mike Drazin: Yeah. Hey, Michael, thanks for the question. We have not made the determination yet that we're going to raise prices as it relates to the Middle East conflict. We still continue to evaluate the impact to our business, how long this may last, what costs are being impacted, and at what rates. We'll evaluate and run our playbook as we have run in the past. If you think about price increases in the past as related to tariffs, we typically have notified our customers about 45 to 60 days in advance of those price increases. If you recall back to the tariff impact we had earlier, last year, we took a time to absorb those cost increases to evaluate the situation. Ultimately, we then raised prices around August of last year.

We also posted another strong quarter of new signings, most of which are multi Channel reinforcing. Our differentiated ability to serve customers across the full Continuum of Care.

And we're investing to scale this growth, while maintaining the high service levels our customers expect.

We're energized by the opportunity to head, including our first-time visitor deal in. Canada, the expansion of the Empower and continued automation across our distribution Network, positioning Mountain, to create value for our customers Drive durable, long-term growth and enhance shareholder value. Thank you for joining us. We'll now turn the call over for questions.

Thank you.

Mike Drazin: We really did that on purpose in sort of to maintain our understanding of the situation. That led to share gains for us, as you see from the $2.4 billion of signings that we had last year.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Charles Rhyee of TD Cowen. Please proceed with your question.

At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1, 1 on your telephone and wait. Your name to be announced to withdraw your question. Please press star 1 1 again. We ask that you please limit yourselves to 1 question so we may accommodate as many participants as possible. You are. Welcome to queue up. Again, if you have any follow-up questions please stand by while we compile the Q&A roster,

Michael, Jenny of lyric Partners, please proceed with your question.

Charles Rhyee: Yeah, thanks for taking the question. You know, if we're walking through the sort of the guidance here, you know, obviously you're raising your organic revenue, you're maintaining adjusted EBITDA guide. It appears that maybe we saw faster-than-expected client implementations, which benefits revenue, but maybe drove higher OpEx. Is that the right way to think about it? Then maybe to follow up on Michael's question, any conservative conservatism around potential, your thoughts on the input costs related to the conflict?

Good morning, and thanks for taking the question. Maybe if I can dive into the macro dynamics—Mike, I heard you talk about the moving pieces and how you tend to address it historically. But as you're seeing the price increases, how much lead time are you planning to give both your clients and your manufacturer partners on changes that you want to make? And how should we think through, maybe using tariffs as an example, the push and pull in terms of what you're assuming that's embedded within your reiterated guidance? Thank you.

Mike Drazin: Yeah. On guidance, you got it right, Charles. We essentially believe that, given our strong performance in the first quarter as it relates to sales growth of almost 11% growth top line, 13% adjusted for days, we have raised our organic guide to 8.5% to 9.5% for the year. We feel very good about being able to achieve that goal. On the EBITDA side, we have held EBITDA at $3.5 to 3.6 billion in the face of both the Middle East conflict, additional investment in our business, offset by some favorability from tariffs. We feel good about it, and we expect to be able to deliver on our EBITDA guidance based upon all those factors.

Mike Drazin: As it relates to conservatism in our, in our Middle East guidance, what I would say to you is this: The situation is obviously very, very dynamic and uncertain. As we understand the situation, as the situation evolves, as oil prices continue to moderate from day to day, we aren't going to take a, you know, a reaction too quickly. As we have a better understanding of where we're going to settle as it relates to things like nitrile and gloves, resins and plastics will then take action accordingly to run our playbook and then take the mitigation actions we need, which could include price increases, we have not made that decision to do so today.

Yeah. Hey Michael. Thanks for the question. So we have we have not made a determination yet to raise prices. As it relates, to the Middle East conflict, still continue to evaluate the impact to our business. How long this may last? What costs are being impacted and what rates and we'll evaluate and run our Playbook as we have run in the past. If you think about price increases in the past as a related to tariffs we simply have notified our customers about 45 to 60 days in advance of those price increases. But if you recall back to the Tariff impact, we had earlier. Last year, we took a time to absorb Bill cost increases to evaluate the situation. Ultimately, we we then raise prices around August of last year, um, and we really did that on purpose to sort of maintain our maintain our understanding of the situation when that led to sort of share games for us as you see from the 2.4 billion dollars of findings that we had last year.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Charles Rhyee of TD Cowen. Please proceed with your question.

Thank you. 1 moment for our next question.

Charles Rhyee: Got it. Appreciate it. Thanks for the comments.

Thank you. Our next question comes from Charles Ray of TB Cohen. Please proceed with your question.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Patrick Donnelly of Citi. Please proceed with your question.

Patrick Donnelly: Hey, guys. Thank you for taking the questions. I was wondering just for a little more detail on the Prime Vendor signings in the quarter. You know, obviously coming off a really strong 2025 on that front. If you could just give a little more detail on what you saw in the quarter and the right way to think about expectations as we work our way forward on that front would be helpful.

Uh, yeah thanks uh for taking a question. Um, you know, if we're walking through the sort of the guidance here, you obviously you're you're raising your organic Revenue, you're maintaining adjusted. But that guy, it appears that. Maybe we saw that inspected client implementations, which benefits Revenue, but maybe drove higher Opex. Is that the right way to think about it? And, and then maybe to follow up on Michael's question, any conservative of conservatism.

um,

Around potential—your thoughts on the cost related to the conflict.

Jim Boyle: Morning, Patrick. We did see a strong start to the year in new Prime Vendor signings. We aren't giving quarterly, kind of actual numbers on that because as you know, they can be lumpy. You can extrapolate, you know, if we did $500 million this quarter, it doesn't mean we're gonna do $500 million every quarter. That's a made-up number, so I'm not giving what the actual number is. We are in line with our expectations and expect to achieve our goal of $1 billion in new Prime Vendor signings. We're headed in the right direction, and we feel very good about where we close here today.

Yeah, so um, I'm going to, you got it right? Charles we essentially believe that um, given our strong performance in the first quarter, as it relates to sales growth, almost 11% growth Topline 13% just a day. Um, we we have raised our organic guide to 8 and a half to 9.5% for the year. We feel very good about it. You know that she's that goal.

Patrick Donnelly: Okay.

Operator: Thank you.

Patrick Donnelly: That's helpful. Yeah.

Operator: Thank you. One moment for our next question. Our next question comes from Elizabeth Anderson of Evercore ISI. Please proceed with your question.

Elizabeth Anderson: Hi. Thank you so much for the question. Maybe one, could you help us understand the puts and takes in the supply chain business a little bit more, particularly on the profitability in the quarter? Two, could you just comment on whether you think last year's PV ramps are sort of on, ahead, you know, et cetera, of your schedule sort of on those ramps coming up on too? Thank you.

On the on the email that we've held IBA at 3.5, to 3.6 billion dollars in the face of the Middle East conflict additional investment in our business offset by some favorability from terrorists. And so, we put about, we expect them to deliver on our Economy based upon all those, those factors, as it relates to conservatism in our in our Middle East guidance, what I would say to you, is this, we the, the situation is obviously very, very Dynamic and uncertain and so as we understand the situation is the situation evolves as oil prices. Continue to moderate from day to day. We are going to take a, you know, a reaction to quickly. As we have a better understanding of what, where we're going to settle, as it relates to things like nitrogen levels, presence and Plastics will then take action or later, run our Playbook and then take the mitigation actions we need, which could include price increases but we've not made that decision to use. So today

Rick Wise: Got it. Appreciate it. Thanks for the comments.

Got it. I appreciate it. Thanks for coming.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Patrick Donnelly of Citi. Please proceed with your question.

Thank you. One moment for our next question.

Mike Drazin: Yeah, thanks, Elizabeth. I'll take the first question, then Jim will take the second question. On the supply chain solutions business this quarter, we saw really strong top line growth, over 15% growth. 17% if you adjust this for days. Really pleased with our results there. A little bit better than our expectations as we called out. Really that was driven by both same store sales growth, strong growth on the demand side from our existing customers, as well as we saw these new implementations that we talked about previously, the $2.4 billion of new implementations that occurred that we signed last year as we recognize them in the current quarter.

Thank you. Our next question comes from Patrick Donnelly of City. Please proceed with your question.

Mike Drazin: Morning, Patrick. We did see a strong start to the year in new Prime Vendor signings. We aren't giving quarterly, kind of actual numbers on that because as you know, they can be lumpy. You can extrapolate, you know, if we did $500 million this quarter, it doesn't mean we're gonna do $500 million every quarter. That's a made-up number, so I'm not giving what the actual number is. We are in line with our expectations and expect to achieve our goal of $1 billion in new Prime Vendor signings. We're headed in the right direction, and we feel very good about where we close here today.

Mike Drazin: From an EBITDA perspective, EBITDA came in a little bit behind our expectations, but really driven by the fact that we had both, you know, some mix as it relates to new customer signings and the margin on those new customer signings as given the size of those implementations, but also given the investments in our business. Let me just talk about the investments in our business for a second. We've always talked about the fact that we invest for the long term, we invest to sustain our growth. We made an effort to do that again in Q1. Also, if you think about those investments, those investments happened back in Q2, Q3, and Q4 of 2023 as well. It carried into Q1 of 2024.

Thank you for taking questions. Um, I was wondering just for a little more detail on the prime vendor signings in the quarter. You know, obviously coming off really strong, 25 on that front. If you could, just give a little bit more detail on when you saw on the quarter and the right way to think about expectations as we work. Our way forward on that. Front would be helpful more than Patrick. We did see a strong start to the year and you find their signings. We are giving quarterly um kind of actual numbers on that because as you know, they can be money.

You can't extrapolate like, you know, if we get $500 million in this quarter, it doesn't mean we're going to do $500 million every quarter. That's a made-up number—so I'm not giving what the actual number is—but we are in line with our expectations and expect to achieve our goal of the $1 billion in the parameters signing. So we're headed in the right direction, and we feel very good about what we closed here today.

Patrick Donnelly: Okay.

Operator: Thank you.

Patrick Donnelly: That's helpful. Yeah.

Operator: Thank you. One moment for our next question. Our next question comes from Elizabeth Anderson of Evercore ISI. Please proceed with your question.

Okay, thank you. 1 moment for our next question.

Mike Drazin: We're investing in our sales to continue to drive the growth on the top line. We're investing in operations to make sure we have the best service levels in the industry. We're investing in IT to make sure we have the best cyber, the best, the best AI capabilities, and to invest in things like warehouse management and other capabilities as well. We continue to invest in the business for the long term. Those two things, both the mix and the investments impacted our margin and supply chain solutions for the quarter.

Our next question comes from Elizabeth Anderson of evercore, isi, please proceed with your question.

Jim Boyle: Morning, Elizabeth. As we are on par with the ramp-up we talked about of the $2.4 billion in total new customer signings for 2025. As you remember, historically, it's normally been 10% in the first year, 70% in the second year, and then the rest in the third year. We had some large signings in 2025 implement earlier in the year that yielded 25% revenue realization in 2025. We'll get 65 in 2026, and the rest will be in 2027. It's in line with what we shared in the past.

Elizabeth Anderson: Great. Thanks.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Sean Dodge of BMO Capital Markets. Please proceed with your question.

Sean Dodge: Thanks, good morning. Maybe just going back to the tariffs, you all talked about before the various tools you have to mitigate some of the burden from those. Some of them can have a pretty immediate impact, like, Mike, you talked about the price increases. Others, like changing countries where you manufacture, who you partner with can take longer. Can you just frame for us, like, how much work is happening behind the scenes on some of these, like, longer term mitigation efforts, like changing countries, changing partners? Is it just anything on timelines when benefits from those should start to flow through? I guess are there likely mitigation benefits that continue to come through over the rest of this year and then maybe lag into next, too?

Hey, I thank you so much for the question. Um, maybe 1 could you help us? Um understand the question takes in the supply chain business, maybe a little bit more particularly on the profitability and the quarter, um, and then 2 could you just come in whether you think last year's TV Rams are sort of on head, you know Etc of your of schedule sort of on those ramps. Coming up on to thank you. Yeah. Thanks Elizabeth. I'll take the first question and I'll take some questions on the Supply Chain Solutions business. This quarter. We saw a really strong Topline growth of over 15% growth, uh, 70% if you adjusted for a day. So really, really, uh, pleased with the results there a little bit better than our expectations as you called out. Um, and really that was driven by both things for sales growth, strong growth, and on on the demand side for our existing customers, as well as we saw these new implementations that we talked about previously 2.4 billion dollars of implementation that occurred that we signed last year, as we recognize them in the current order from a team of our perspective. Even though that came in came in a little bit behind our expectations,

Jim Boyle: Hey, Sean. Good morning. Listen, what you're describing is in our DNA every day regardless of what's happening, and it's something we focus on with very, very intentional focus. That's part of having over 90% of our products from Medline brand have multiple sourcing options. That's up 10% as we talked about from five years ago. Our teams are always navigating kind of what's the best geography and location and sourcing platform to get the best outcome. They're doing it both during and in advance of the challenges, so we can actually move quickly with urgency based on what's happening.

Really driven by the fact that we had both. Um, you know, some, some mixed as it relates to the new customer signings and the margin on those customer signings as given the size of implementation. But also given the investments in our business and want me to talk about the investments in our business for a second, we've always talked about the fact that we have after the long term, we invest in our growth so we made it an effort to do that. Then in the first quarter also, if you think about those Investments, those Investments had back in the second quarter, third quarter and fourth quarter of last year as well, carried into the first quarter of this year. And so we're investing in our sales, continue to 5 the growth in the Top Line, we're investing in operations, to make sure we have the best service levels in the industry. We're investing in it to make sure we have the best cyber the best. Um, the best AI capabilities and to invest in things like warehouse management capabilities as well. So we can continue to invest in business, long term, those 2 things both the mix and the, and the Investments enacted our margins Supply Chain Solutions for the court.

Jim Boyle: As you know, part of the challenge right now with the Strait of Hormuz is access to oil, which actually is one of the number one things for nitrile and the ability to actually take, like, exam gloves, for example, that'll have a burden. We own our fleet of trucks. You have some challenges with fuel. We're doing everything we can to navigate that and making sure we're sourcing from the right location. We are buying in advance of the challenges to make sure that we get enough inventory on hand to kind of solve some of the things that are going on. We will continue, as Mike mentioned, we're gonna leverage our playbook and understand what's happening today, not react in terms of actually pushing price increases through until we fully understand the problem.

Morning, Elizabeth. And it's that we are on par with ramp up. We talked about $2.4 billion in total with the customer signings for 2025. And as you remember, historically, it's normally been 10% in the first year, 70% in the second year, and in the rest of the third year. We had some barge signings in 2025 implement earlier here. The yield is 25% revenue realization in 2025, we get 65% in 2026, and the rest will be in 2027. So it's in line with what we shared in the past.

Elizabeth Anderson: Great. Thanks.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Sean Dodge of BMO Capital Markets. Please proceed with your question.

Great.

Thank you. 1 more for our next question.

Thank you. Our next question comes from Sean Dodge of Bo Capital markets. Please proceed with your question.

Um,

maybe just go back to the tariffs.

Jim Boyle: As you, as Mike mentioned, the current situation is very, very dynamic, and it's changing every day. Who knows? It could change tomorrow. If you remember, tariffs last year went from 30% to 145% and then went back down to 30% in a very short timeframe. Had we reacted in that time, we would have looked silly. That's the way we view this situation. We're gonna continue to leverage our playbook to do as much as possible internally to mitigate any challenges before we pass anything on to our customers. That you'll feel that throughout the entire year, because we're gonna get some now, some later, and some long term.

Um, before the, the various tools, you have to mitigate, uh, some of the burden from those. Um, some of them can have a pretty immediate impact that like, you talked about the price increases others, uh, like changing countries and Manufacturing who you partner with can take longer. So you can just frame for us, like, how much work is happening behind the scenes on on some of these, like, longer term mitigation efforts like changing countries, Changing Partners, and then just the same thing on timelines, when benefits from those should start to flow through, I guess are there likely mitigation benefits that that continue to come through, oh, over the rest of this year and, and then maybe legs and next to you,

Sean Dodge: Okay, great. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Lisa Gill of JPMorgan. Please proceed with your question.

Lisa Gill: Great. Thanks very much, and good morning. Jim, I wonder if you could maybe just talk about new product launches and your expectation of what you found in the quarter and kind of what your expectations are going forward and where your new customers are most focused.

Jim Boyle: Well, from product launches, there were very few new products launched in Q1. We did launch the forced air warming we've talked about in the past, in a pretty more robust fashion in Q1. Our teams are focused on making sure we continue to add additional categories to our lines each and every year. We have more that will come throughout the rest of the year. Honestly, what we've been focused mainly on is making sure that we create stability around the current challenges and really layers of focus on mitigating any challenges for our customers on a go-forward basis. From a new customer perspective, we continue to sign new customers. We continue to advance the brand throughout the conversion profile with our existing customers.

Hey Sean, good morning. Listen, what you're describing is, is in our DNA every day, regardless of what's happening and it's something we focus on with very, very intentional Focus. That's part of having. Oh, 90% of our products from Melvin brand have multiple sourcing options and, and, and that's up to 10% as we talked about from 5 years ago. And so our, our teams are always navigating and what's the best geography and location and sourcing platform to get the best outcome and they're doing it both during an advance of the challenges. So we so we can actually move quickly uh, with urgency based on what happening and as you know, my part of the challenge right now.

Jim Boyle: Both of those new customer signings, as you know, the first year we normally double the Medline brand penetration, going from 10% to 20%. With our existing customers continue in that pipeline of 3% to 4% increase, consistently driving value for our customers. It's been a, first and foremost, focusing on the current situation to make sure we mitigate, and really create differentiation and really scalability and optionality around the current challenge state. Focusing in on making sure we continue to drive value to our customers through our existing categories. Finally expanding the brand through new categories from a product launch perspective.

In terms of actually putting pricing increases through in totally fully understand the problem. And as you as Mike mentioned, the current situation is very, very Dynamic and it's changing every day and and who knows. It could change tomorrow. If you remember tariffs last year went from 3% to 145% and then went back down to 30%, they're very short time frame and how do we react at that time? We were to facilitate. And that's the way we use this situation. We're going to continue to leverage our Playbook to do as much as possible, internally to mitigate any challenges before we pass anything on to our customers, um, and that you'll feel that throughout the entire year is going to get somehow some later, uh, in some long term.

Matthew Taylor: Okay, great. Thank you.

Okay, great. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Lisa Gill of J.P. Morgan. Please proceed with your question.

Thank you. 1 moment for our next question.

Operator: Thank you. One moment for our next question. Our next question comes from Matthew Taylor of Jefferies. Please proceed with your question.

Our next question comes from Lisa. Gill of JP Morgan please proceed with your question.

Matthew Taylor: Hi. Good morning. Thanks for taking the question. I guess you made a couple comments in the prepared remarks about a stable operating environment and utilization. I guess I was hoping just with your broad lens, you could comment more on that because there's been debate or concern about utilization softening with things like ACA expiries or just the macro uncertainty that we're seeing globally. I'd love any more color you can provide on the trends you're seeing with utilization and spending.

All right, thanks very much and good morning. Um, Jim, I I wonder if you could maybe just talk about new products launches and your expectations. Um, you know what you found in the quarter and and kind of what your expectations are going forward and where your customers most voted

Jim Boyle: Yeah, we can tell you in Q1, we didn't see much change in utilization. The acceleration in growth for us is share gains, but the actual utilization seemed pretty consistent or on par with what we expected. That being said, we do anticipate some softening in H2 of the year, just specifically due to cuts in reimbursement, due to the lack of access to insurance, the ACA. I mean, there is some conservatism and some concern around that in the marketplace, which may lead to some softening of really consumers or patients having a willingness to go get access to care.

Yep. Uh, both from a from a product line is we there were very few new products launched in the first quarter. Um, but we did launch, the forced air warming. We've talked about in the past in importing more robust action in the first quarter. Um, our teams are focused on, uh, making sure we continue to add additional categories, to our lines each and every year, we have more that will come throughout the rest of the year. Um, honestly, what we've been told.

Was mainly on is making sure that we, uh, create stability around the current challenges, and really layers are focused on mitigating any challenges for customers.

Jim Boyle: I will tell you the inverse of that is that consumer or that patient who is not going to get care for the flu, in many cases actually ends up in the hospital or in the emergency room with actually a more complex procedure, which end up increasing the cost of care. The net effect might actually end up being something very consistent from an overall total revenue or total impact perspective to the marketplace. It just might look different as opposed to patient volumes. It might be a higher acuity case that's coming into healthcare. Right now, the way we look at it is the Q1, we didn't see much impact from a reduction in patient volumes. However, I think the entire industry is indicating that there might be some softness coming in H2.

From a new customer perspective. We continue uh, to sign, new customers, continue to advance the brand throughout, uh, the conversion profile with our existing customers. Both those new customer signs. As, you know, the first year, we normally double in Milling brand penetration going from 10% to 20%. And then with our existing customer to continue that pipeline of 3 to 4% increase a consistently driving value for our customers. It's been a it's been wanting a person for almost focusing on the current situation to make sure we mitigate, uh, and really create differentiation and really scalability and optionality around our account State, uh, and then focusing on making sure we've seen these Drive value through our customers, through our existing categories and then finally expanding the brand through new categories, from product launch perspective.

Operator: Thank you. One moment for our next question. Our next question comes from Matthew Taylor of Jefferies. Please proceed with your question.

Thank you. 1 moment for our next question.

Our next question comes from Matthew Taylor of Jeffries. Please proceed with your question.

Matthew Taylor: Great. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from David Roman of Goldman Sachs. Please proceed with your question.

David Roman: Thank you. Good morning, everybody. I wanted to see if we could, you could go into a little bit more detail on some of the underlying drivers here on the Medline brand side of the business, both in Q1 and how you are thinking about the balance of the year, understanding that there was an impact here on lab and diagnostics consistent with what everyone has talked about on flu and related sales in that category. Maybe help us think about some of the key drivers in that franchise as you go through the balance of the year, and then how that factors into just the overall mix of performance Medline brand versus supply chain solutions in the updated outlook.

Hi, good morning, thanks for taking the question. Um I guess you made a couple comments in the prepared remarks about a stable operating environment and and utilization and I guess I was hoping just with your broad lens. You could comment more on that because we can debate and concern about utilization softening with things like APA areas or just just macro uncertainty that we're seeing globally. So I'd love any more

Call. You can provide on the trends seeing with utilization and and then

Mike Drazin: Yeah. Hey, David. Thanks for the question. Medline brand growth of about 6%, reported growth of 6% or 8% adjusted for days was very much in line with our expectations. Frontline care grew at about 6%, really sort of in line with expectations as well. Solid growth there given the market dynamics. Surgical solutions continues to be a strong category for us, up almost 8%, and almost 10% adjusted for days. As you called out, lab and diagnostics, really growing only 1%. If you really look at the two components, there's a core business there that actually grew high double digits, high teens. Then there's a seasonal business, respiratory virus testing business that basically was down year-over-year as you may recall, given the fact that the severity of the flu season was weaker this year relative to last year.

We can tell you in the first quarter, uh, we didn't see much change in utilization. Um, the the really the acceleration growth for us as are gains but but the actual utilization seem pretty consistent around our, with what we expected. That being said, we do, um, anticipate some softening in the back half of the year, um, just specifically due to reimbursement, due to lack of lack of access to Insurance the obba. I mean, there are some conservatism and some concern around that in the marketplace, which may lead to some softening of really consumers or patients, having a wellness to go get access to care. I will tell you the inverse of that is that consumer that patients? Who is not going to get the care of her? The flu in many cases is actually actually ends up being a hospital or in the emergency room with actually, a more complex procedure, uh, which ends up increasing the cost of care. So the net effect might actually end up being something very consistent from an overall total revenue or goal impact perspective to the marketplace. It just might look different as opposed to patient volume. It might be a higher Acuity case that's coming in to healthcare. But right now, the way we look at it is the first quarter we didn't see much impact uh, from a reduction.

Jim Boyle: However, I think the entire industry is indicating that there might be some softness coming in H2.

And patient volumes. However, I think the entire industry is indicating that the there might be some softness coming back after the year.

Matthew Taylor: Great. Thank you very much.

Mike Drazin: We still expect the lab and diagnostics business to be very strong this year, given sort of the continued core-based business growth, and that flu respiratory virus season really happened primarily in Q1. Really expecting continued strong growth getting out of Q1 here for that lab and diagnostics business overall. Medline brand continues to be a strong growth driver for us, as you know, given both the same-store sales growth as well as our continued focus on conversions with our existing customer base. From a supply chain solutions perspective, we already talked about this, but supply chain solutions grew at a very healthy rate in the top line, given both same-store sales and new customer signings. We expect that to continue throughout the year given that $2.4 billion of signings we had.

Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from David Roman of Goldman Sachs. Please proceed with your question.

Thank you. 1 moment for our next question.

Comment of Goldman Sachs, please proceed with your question.

Mike Drazin: Now, as we recalled out previously, and Jim just mentioned this, we do expect some moderation in our same-store sales growth on a sequential basis in H2, given the challenges we may face, given the uncertainty around ACA, those types of things. Overall, though, still expecting strong growth out of supply chain business.

Uh thank you. Good morning, everybody. Um I wanted to see if we could could go into a little bit more detail in some of the underlying drivers here on the Medline brand side of the business both in q1 and how you're thinking about the balance of the Year understanding that there was impact on lab and Diagnostics consistent, with what everyone has talked about on flu and and, and related sales in in that category. But maybe help us think about some of the key drivers in that franchise, as you go through the policy year, and then how that factors into just the overall mix of performance Medline Brands versus Supply Chain Solutions in the updated Outlook.

Jim Boyle: Yeah. Hey, David. Thanks for the question. Medline brand growth of about 6%, reported growth of 6% or 8% adjusted for days was very much in line with our expectations.

Mike Drazin: Frontline care grew at about 6%, really sort of in line with expectations as well. Solid growth there given the market dynamics. Surgical solutions continues to be a strong category for us, up almost 8%, and almost 10% adjusted for days. As you called out, lab and diagnostics, really growing only 1%. If you really look at the two components, there's a core business there that actually grew high double digits, high teens. Then there's a seasonal business, respiratory virus testing business that basically was down year-over-year as you may recall, given the fact that the severity of the flu season was weaker this year relative to last year.

Operator: Thank you. One moment for our next question. Our next question comes from Pito Chickering of Deutsche Bank. Please proceed with your question.

Pito Chickering: Hey, good morning, guys, and thanks for taking my questions. I guess, you know, how many days inventory do you typically run between your Medline brand versus your supply chain solutions? You know, you talked about the inflationary pressures sort of, you know, Q2 and Q3. Can you sort of break that out of how you think about the inflationary pressures in both segments or if it's just the Medline brand? Any way you can help quantify for us if these current plastic resin fuel costs remain stable at these levels for the rest of the year? Thank you.

Yeah, hey David, thanks for the question. So Medlin brand growth of about 6% reported growth 6% or 8% adjusted for days was very much in line with our expectations uh, Frontline care grew in about 6% release of Inland expectations as well. Solid growth there, given given the market dynamics, um, circular Solutions continues to be a strong category for us almost 8%, uh, and those 10% adjusted per day and then as you fall out, lab Diagnostics. But I'm really growing only 1%, but if you really look at the 2 components, there's a Core Business there, that actually grew High double digits a high teens. And then there's a, there's a um, signal business, respiratory virus, testing business. And basically what was down here over a year. As as you may recall, given the fact that the severity of the flu season was was weak through this year relative to last year. We still expect the lab Diagnostics of this, to be very strong this year, um, given sort of the continued score based business growth and that food respiratory. But

Mike Drazin: On an inventory basis, we carry about 80 days of inventory on hand overall. We carry more in the Medline brand side, less obviously in the supply chain solutions side. To the point about inflationary pressures, just let's talk about those for a second. If you think about the tariffs, let's start with the tariffs first and the quarterly cadence. As we called out last year, we were expecting about $200 million of incremental tariff headwind year-on-year, $490 million overall. We expected the majority of that to happen in the H1 of this year, and it's playing out just as we thought. We saw about $120 million of tariff and tariff impact in the Q1, $85 million incrementally.

Mike Drazin: Essentially, the remainder of that inventory that's at a higher tariff cost will be sold here in Q2. If you think about the fact that the tariffs are now at a 10% rate as of essentially late February, early March, we expect the favorability from that 10% rate to hit us in H2 of 2026. You'll see some favorability on the Medline brand margin side given that tariff favorability. The flip side of that is we expect to see the Middle East impact not really hitting us materially until H2 of the year, although we're starting to see some fuel cost impact.

Virus, um, season really happened primarily in the first quarter. So really expecting continued. Strong growth, getting out of the first quarter here, for the Evan diagnosis business overall, Frank. It seems to be a strong growth driver for us, as, you know, even both the same store sales growth as well as I can see, all kind converges with our existing customer base, from a Supply Chain Solutions perspective. We already talked about this, but Supply Chain Solutions grew and very healthy rate in the top line, given both the same store sales and new customer science. We expect that to continue uh, throughout the year given that 2.4 billion dollars of things. We had now as, as we recalled out previously, and Jim just mentioned this, we do expect some moderation and our same store sales growth sequential basis in the back. After you are given the, the challenge we Face given the the, the the uncertainty around the ACA.

Overall is still expecting strong growth out of supply chain business.

Operator: Thank you. One moment for our next question. Our next question comes from Pito Chickering of Deutsche Bank. Please proceed with your question.

Thank you. 1 moment for our next question.

Our next question comes from PTO Chittering of Deutsche Bank. Please proceed with your question.

Mike Drazin: Diesel costs as it relates to our trucks and our trailers to move our products around in domestically, we have started to see some impact from that, as diesel fuel is above $5 a gallon at the moment. We'll see some impact from that. The biggest impact on the inventory side from both nitrile exam gloves, resins, and plastics will really happen and starting to happen now as far as the cost increases, but those won't land in the US until sort of H2 of the year and show up in our P&L at that point in time. The last component of our quarterly cadence would be the operating investments in our business. Obviously, we made those investments last year. Some are continuing into this year, and so those are gonna show up throughout the next couple quarters as well.

Yeah, good morning guys. And thanks for taking my questions. I guess, you know how many days inventory do you typically run between your Medline brand versus your Supply Chain Solutions? And, you know, uh, you talked about the inflationary pressures for sort of, you know, the queue and 3 Q, do you use for break it out of how you think about the inflationary pressures in Bose segments, or is just a Medline brand? And any way you help quantify for us

It, it’d be current—uh—plastic resin and fuel costs remain stable, or at these levels, for the rest of the year. Thank you.

Pito Chickering: Great. Thanks so much.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Steven Valiquette of Mizuho Securities. You may please proceed with your question.

Yeah, so, on the inventory basis. We carry about 80 Days inventory on hand overall. Um, we carry more in the meantime brand side. The last topic that's the touching solution side.

Steven Valiquette: Yeah, thanks. Good morning. My question was maybe somewhat similar to that last one, but I guess I was just trying to figure out, you know, across all the manufacturing inputs for, you know, exam gloves, you know, and the resins, plastics, et cetera, you know, what percent of your overall Medline brand product portfolio may be impacted by, you know, the rising commodity inputs? If we're talking about, you know, 10% to 20% of the total MB book of business or maybe something greater. Is it safe to say that, you know, exam gloves is the biggest product category that may be impacted by this, or is that not necessarily the case? Just trying to get more, you know, context around all that. Thanks.

So to the point about inflationary pressures is to talk about those for studying. Um, if you think about the tariffs, let's start with the tariffs first and the quarterly data. Uh, as we call out last year, we we we, uh, we're expecting about 200 million dollars of incremental Terror and wins a year on year um 490 million dollars. Overall, we expected the majority of that to happen in the first half of this year and it's playing up just as we thought we saw about 120 million dollars of tariffs uh in tariff impacts in the first quarter of 85 million incrementally. The essentially, the remainder of that inventory. That's at higher tariff costs will be sold here in the second quarter. And then, if you think about the fact that the texture now is 10% rate as a percentage by late February early, March we expect the favor of ability from that 10% rate. It is in the back half of 2020.

Mike Drazin: Yeah. We're not gonna quantify for you that impact right now, Steven Valiquette. The reason for that is because only a percentage of our overall cost of those goods are actually impacted by the oil. If you think about that, the reality is that if you think about exam gloves, as an example, a portion of the exam glove is impacted by oil prices. If nitrile exam gloves is our biggest category, plastics and resins, we buy some resins for purposes of manufacturing plastics. We buy plastics as well. Those are the three major categories that are impacted. What we can tell you now is that the Middle East impact that we expect in H2 of this year is offset by the tariff favorability.

Steven Valiquette: Okay, got it. Thanks.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Jailendra Singh of Truist Securities. Please proceed with your question.

And so, we'll see some impact from that. The biggest impact on the inventory side, in both nitrogen gloves, resins, and Plastics will really happen starting to have now as far as the cost increases, but those won't land in the US until the second half of the year. Show up already. You know, if you know exactly time then the last component of our quarterly Cadence would be the operations operating investments in the business. Obviously, we made those Investments last year, some are continuing to this year. And so, those are going to show up throughout the next couple quarters as well.

Pito Chickering: Great. Thanks so much.

Great. Thanks so much.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Steven Valiquette of Mizuho Securities. You may please proceed with your question.

Thank you. 1 moment for our next question.

Jailendra Singh: Thank you, and thanks for taking my questions. I want to ask about your first prime vendor partnership in Canada. Congrats on that. I know it's still pretty early here, but has anything changed from your expectations or how you think about that market and opportunities there? As it relates to your annual goal of $1 billion in new customer signings, did this already include signings from the Canadian market, or could we see some upside to keep signing more customers there?

Thank you. Our next question comes from Stephen falette of 0 security. You may receive with your question.

Jim Boyle: Good morning, Jailendra. The 100 billion, the $1 billion of prime vendor signings is US only. That new prime vendor closing in Canada is in addition to. We're really excited about it because it's a way to potentially change the dynamics of the market, of how products are delivered, and could lead to an acceleration of the Medline brand convergence in that space as well. It is the first prime vendor in the Canadian market. As we talked about, it's a 9-hospital system that we're working with Mohawk Medbuy Corporation on. We're in the beginning stages of it, and this is something that we will learn. I think it's too immature for me to give guidance around or any kind of anticipation around what we expect.

Yeah, thanks again, good morning. So yeah, my question was maybe somewhat similar to that last one, but I guess I was just trying to figure out, you know, across all the manufacturing inputs for human exam gloves, you know, and the resins, plastic, etc., you know, what percent of your overall Medline brand product portfolio may be impacted by, you know, the rising commodity inputs. And we're talking about, you know, 10%, 20% of the total MB book of business or maybe something greater? And then also, is it safe to say that, you know, exam gloves is the biggest product category that's maybe impacted by this, or is that not necessarily the case? Just trying to get more, uh, you know, context on all that. Thanks.

Jim Boyle: What I can tell you is we will leverage the playbook we have in the US to drive significant value to the Canadian customers who are in this partnership. I can tell you, we already have customers asking, could we be next? We wanna actually build really the playbook and really the design with Mohawk Medbuy with this group of customers to make sure we deliver the right value and really the right supply chain mechanisms to create the right product at the right place at the right time for the best value. It is in addition to and we think it's really an opportunity to change the dynamics in really healthcare distribution in the Canadian space.

Yes, we're not going to quantify for you that impact right now. It's even and the reason for that is because only a percentage of overall cost of those goods are actually impacted by the oil. If you think about that, the reality is that, if you think about a example of an example, a portion of the exam love is impacted by oil prices. But natural dangles is our biggest category.

Um, plastic resins, the vice resins for purposes of manufacturing Plastics by Plastics as well. Those are the 3 main categories that are impacted. What we tell you now. Is that the Middle East impact? We expect in the back half of this year is offset by the Tariff.

Capability.

Steven Valiquette: Okay, got it. Thanks.

Okay, got it.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Jailendra Singh of Truist Securities. Please proceed with your question.

Thank you. 1 moment for our next question.

Jailendra Singh: Great. Thanks a lot.

Operator: Thank you. One moment for our next question. Our next question comes from Mike Polark of Wolfe Research. Please proceed with your question.

Our next question comes from Galena Singh of truist security. Please receive with your question.

Mike Polark: Hi, good morning. I have a big picture long-term question on your lab and diagnostics franchise. I perceive most of those products to serve hospital labs, doctor office labs, and maybe high-volume clinical labs. My question is, what is the ambition for building that portfolio to serve research laboratories, education settings, maybe pharma or industrial manufacturing? Where does that stack rank on your priority list of long-term business expansion? Thank you.

Thank you, and thanks for taking my questions. Um, I will talk about your first Prime when the partnership in Canada. Congrats on that, I know it's still pretty early here but has anything changed from the expectations or how you think about that market and opportunities there, and as it relates to your actual goal of 1 billion customer signing. Did this already include signings from Canadian Market or could we see some upside if you keep signing more customers there,

Jim Boyle: You hit the nail on the head. We are in physician office and acute care in some educational labs. That's what we're focused on right now. Candidly, it's a USD 25 billion TAM that we do USD 1 billion in. There's so much opportunity in what we have in perfecting how we go after that business and capitalizing on the opportunity in front of us is really first and foremost before we think about research labs and other things. One of the things we always do is try not to really eat the pizza all at once. We're gonna eat a piece at a time. And the way I look at this is this is something we're focused on and it's just a tremendous opportunity.

Jim Boyle: As Mike mentioned earlier, the core lab growth, taken apart from really what happened with flu, is up double digits, right? It's growing significantly. It's something we're pretty excited about. Really within that framework between lab and diagnostics, 30% of that is a Medline brand convertible opportunity. Right now, candidly, we're focused on the opportunity in front of us before we think about expansion.

Good morning to and the 100s. In addition to um, and we're really excited about it because it's a way to potentially change the Dynamics of markets and how prices delivered um, and could lead to an acceleration in the mountain range conversion in that space as well. Um, it is the first Prime Minister in the Canadian Market as we talked about this at 9 hospital system that we're working with mooc that my corporation on, we're in the beginning stages of it. And this is something that we will learn. Um, I think it's too mature for me to give guidance for our income of anticipation around. What we expect, what I can tell you is, we will Leverage The Playbook, we have in the US to drive significant value to the Canadian customers who are in this partnership. Um, and I can tell you, we already have customers asking, uh, can we be next? But we want to actually build, uh, really The Playbook really the design with Blockhead by with this group of customers to make sure we deliver the right value and really the right Supply team mechanisms to create the right products directly to the right time with best value. But it is in addition to um and we think it's really an opportunity.

Opportunity to change the dynamic and really help our distribution in the Canadian space.

Operator: Thank you. One moment for our next question. Our next question comes from Eric Coldwell of Baird. Please proceed with your question.

Jailendra Singh: Great. Thanks a lot.

Great. Thanks a lot.

Operator: Thank you. One moment for our next question. Our next question comes from Mike Polark of Wolfe Research. Please proceed with your question.

Thank you. One moment for our next question.

Eric Coldwell: Thanks very much, and good morning. I guess I'll stick with my buddy Mike's line of questioning on market expansion since most of the main topics have been covered. I'm curious on an update on your initiatives, progress, next steps in dental and animal health. If you could provide us some updates in those categories would be fantastic. Thank you very much.

Our next question comes from Michael hark of wolf research, please proceed with your question.

Mike Polark [Senior Equity Research Analyst: Hi, good morning. I have a big picture long-term question on your lab and diagnostics franchise. I perceive most of those products to serve hospital labs, doctor office labs, and maybe high-volume clinical labs. My question is, what is the ambition for building that portfolio to serve research laboratories, education settings, maybe pharma or industrial manufacturing? Where does that stack rank on your priority list of long-term business expansion? Thank you.

Hi, good morning. Uh I have a big picture long-term question on your lab and Diagnostics franchise. I perceive

Most of those products to serve Hospital Labs, Docker office Labs, uh, and maybe high volume clinical Labs. My question is, what is the ambition for?

Jim Boyle: Thanks, Eric. As you know, we bought Sinclair in the Canadian market. Really that's a way for us to really understand the dental space. What our teams have been focused specifically on is creating the Medline brand convertible opportunities within that segment to make sure that we could actually build a model that mimics how we do it in the US both in the acute and physician office and surgery center space, so we could drive value for our customers from a Medline brand perspective and to create a margin lift to our brand. I can tell you we're ahead of the curve, and we already have 30% convertible opportunities. Our Medline brand divisions are doing a stellar job at creating Medline brand equivalent to that market.

Building that portfolio deserve Research, Laboratories education, settings, maybe Farm out, or industrial manufacturing. What does that stack rank on your property list of long-term? Uh, business expansion. Thank you.

We are in position, office in Acute Care, in some, um, educational lab that we're focused on right now. And, candidly, it's the 25th—what we have.

In perfecting how we go after business and capitalizing. The opportunity in front of us is really first and foremost before we think about research labs and other things. And 1 of the things we always do is is try not to uh really eat the pizza all at once or any piece of time. And and the way I look at this is

Jim Boyle: What we're also learning is really that service model and making sure we have those service techs that can service the business, because if you don't service the business, you don't get the opportunity for the distribution. We're building that out. I'm very optimistic in where we're headed, and I do think it's a potential for the US, but we wanna get really the full playbook built in advance of doing that. I can tell you we're ahead of the curve in terms of where we planned, and I think there's an opportunity to make it look and feel not much different than the rest of the business in the US, which would be very, very positive. Second, from an animal health perspective, that is a market today that's a $4 billion TAM.

On and and it's just tremendous opportunity. And as Mike mentioned earlier, the core lab both taking it apart from really, what happened with flu is is up double this, right? It's growing significantly. Um, and it's something we're pretty excited about. And, and really within that framework. We cannot 6% of this in the deadline rank.

Right now, candidly, we focus on the opportunity in front of us. But when we think of expansion—

Operator: Thank you. One moment for our next question. Our next question comes from Eric Coldwell of Baird. Please proceed with your question.

Thank you, 1 moment.

Jim Boyle: We continue to expand that TAM as we add new Medline categories. That is a brand business. That is not a distribution business. We're not looking to be a distributor of dog food and flea collars, but we wanna be as a manufacturer of medical supplies in that space. We're leveraging partnerships with Covetrus, Vetcove, MWI from a distribution platform. It's growing nicely, and we think it's a tremendous opportunity for growth as we go forward.

My next question comes from Eric Coldwell of bears, please, proceed with your question.

Operator: Thank you. One moment for our next question. Our next question comes from David Larsen of BTIG. Please proceed with your question.

Thanks very much, and good morning. Uh, I guess I'll stick with my buddy Mike's, uh, line of questioning on market expansion, since most of the main topics have been covered. Um, uh, I'm sure you saw in an update on your, uh, initiatives' progress. Uh, next steps in Dental and Animal Health—if you could, uh, provide us, uh, some updates in those categories, that would be fantastic. Thank you very much.

David Larsen: Hey, can you talk a little bit more about your AI efforts, Mpower, the digital supply chain control tower? Any color you can put around, you know, how that improves your clients' performance or perhaps improves your cogs. Also any more color around the robotics in the warehouse would be very helpful. Thanks a lot.

Jim Boyle: We're really excited about Mpower because we think it's gonna change the dynamics of how customers look at their overall supply chain and give them advanced analytics so they can be prepared in advance of any challenges. We're already seeing a 50% improvement of throughput and engagement as it relates to disruptions in the market. One of the biggest challenges in healthcare is how do we get in front of hurricanes? How do we get in front of supply chain disruptions to give our customers supplies in advance of the need so they didn't end up with back orders? I mean, if you remember, last year we had the challenge with IV fluids, right?

Jim Boyle: If we would've been in front of that, we could have given our customers advance notice to really stockpile some inventory in advance of the challenges that were coming ahead. I can tell you Mpower is helping drive that. I mean, the AI and the analytics and understanding our customer's business, giving them visibility to their entire supply chain, giving them predictive analytics and really the ability to ask it questions. Copilot is the brain. It has access to their entire kind of data set, both from a fulfillment throughput and item master perspective. It's creating standardization across their platform, and recognizing where there's redundancy and duplication across their supply chain. It is creating a hub-and-spoke model to their supply room in the facility all the way to our distribution center.

Eric um you know, we bought declare and Canadian markets and and really that's a way for us to really understand the digital space and what our teams have been focused specifically on is creating the mine brand convertible opportunities within that segment to make sure that we could actually build a a model that mimics how we do it in the us both in the acute position office in the surgery center space. We can drive value for our customers from a Medline brand perspective and create a merchant list through our brand. And I tell you, we're ahead of the curve. And we already have 30% of opportunities. Like, brand division are doing that a stellar job at creating Medline brand quilts to the market. Uh, what we're also learning is really that service model and make sure that their service text and service the business because if you don't service business you don't get the opportunity for the distribution. So we're building that out. Um, I'm very optimistic and where we're headed and I do think the potential for the us but we want to get really the full Playbook built in advance doing that. But I can tell you we're ahead of the curve in terms of where where we planned um and I think there's an opportunity to make it look still not much different than the rest of this in the US which would be

Very positive.

Uh, second man will help protect. That is the market today. It's a 4 billion dollar Tam. Um, we continue to expand that Tam. As we add new Medline categories, that is a brand business, that is not a distribution business. We're not looking to see distributor of Doctor Who dollars, but we want to be a manufacturer of medical supplies in that space. Uh, we're learning Partnerships with Co that code MWI from a distribution platform. Um, it's it's growing nicely and we think it's a tremendous opportunity for growth. I go for bases.

Operator: Thank you. One moment for our next question. Our next question comes from David Larsen of BTIG. Please proceed with your question.

Thank you. 1 moment for our next question.

Jim Boyle: We have the ability to actually reduce inventory on hand, eliminate reduction and really items that are candidly not being used from an obsolescence perspective and from an expiration perspective. We're really excited about it, and I can tell you early innings it's delivering more than what we expected. We have a pretty robust roadmap from a future perspective to where essentially we'll put a camera in the room, decrementing the inventory, creating demand and replenishment signals, and giving customers real-time data on what's in their inventory. That is headed in the right direction, and we are launching it to more customers.

Our next question comes from David Larsen of btig. Please proceed with your question.

Hey, can you talk a little bit more about your AI efforts? Um empower the digital supply chain control tower, just any color you can put around you know how that improves your client's performance or perhaps improves your cogs. And then also any more color around the robotics in the in the warehouse would be, would be very helpful. Thanks a lot.

Jim Boyle: Internally in the distribution centers, when you think about efficiency and throughput and leveraging our existing assets and infrastructure, the way you actually do more with what you have is you get better throughput. When you think about AutoStore, we have 2,100 robots across our network. We're adding 2 more installations across our distribution centers. That increases the throughput by 250% and reduces labor burden by 50%. It's a very meaningful input, both from a labor reduction and a quality and service perspective for our customers. We're launching the first installation of Symbotic to navigate the bulk side of the house. The bulk side of the house is really what owns most of the real estate in the distribution center.

Yeah, we're we're really excited about Empower because we think it's going to change the Dynamics of how customers look at their own supplies and give them Advanced analytics. Uh, so they can be prepared in advance and challenges. So we're already seeing 50% Improvement of throughput and engagement, as it relates to disruption to markets, uh, 1 of the big jumps in healthcare. Is how do we get in front of Hurricane? How do we get the front Supply to disruption, to give our customers supplies, and then make the need? So they end up with back orders. And if you remember, uh, last year we had to challenge with a IV fluids, right? If we would have been in front of that, we could to give our customers Advanced, but it's still really stopped out of the challenge.

Jim Boyle: If we can create efficiency and throughput on that side through AI and robotics, it gives us the ability to leverage our existing asset infrastructure and minimizes the need to expand buildings 'cause we can pick, pack, and ship in a much more robust fashion. You think about AutoStore manages less than case volume. 70% of our lines are less than case. When you think about bulk storage, because we keep so much inventory on hand, Symbotic will help us manage that on the right-hand side of the distribution center, and we're really excited about it.

David Larsen: Excellent. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Brandon Vazquez of William Blair. Please proceed with your question.

Brandon Vazquez: Hi, everyone. Thanks for taking the question. Mike, just a question of clarification on tariffs. I think in the prepared remarks, did I hear correctly, you said that in H2, you're assuming that tariff rates go back to the pre-SCOTUS decision? One, wanted to clarify that, and then if you could, you know, talk about why you would assume they'd go back up, 'cause I think your blended rate pre-SCOTUS was higher than the 10%. And if you can give any quantification at all of what the difference between the two might be, that'd be helpful as well. Thank you.

To ask you questions on how it is the brain. Um, and it has access to their entire kind of data set both from a filament throughput and I M perspective. Um, and so creating standard system across the platform and recognizing whether we're done seeing a duplication across the supply chain. Um, it is creating Hub and spoke model to their supply room in facility all the way to our distribution center. Uh, so we have the ability to actually reduce inventory on hand eliminate, uh, reduction and really items that are basically not being used from an opto lessons perspective, and for an expiration perspective, um, we're really excited about it and I can tell you early Innings, it's it's, it's delivering more than what we expected. And we have a pretty robust road map from a teacher perspective. It's very potentially what the camera in the room? Decrementing inventory, creating demand and replenishment signals and giving customers real time data, I don't know what's in their inventory. So that is, um, head in the right direction and we want to get some more customers internally in the distribution centers. When you think about efficiency and throughput and leveraging our existing assets infrastructure, the way you actually do more,

Mike Drazin: Thanks, Brandon. Yes, that is correct. We did say that we expect that the rates will go back to pre-SCOTUS ruling in the August timeframe. Sometime this summer, essentially. The reason for that is, you know, we're taking an approach to try to be realistic about what might happen. We know that the Section 122s run out after 150 days in late July. What we are hearing is that they're looking at using their Section 232s or Section 301s to recreate what they had previously. We're taking a realistic or a conservative view of what might happen in our business, how we're gonna navigate and attack that accordingly.

With what you have, you get better throughput. When you think about AutoStore, we have 2,100 robots, uh, across our network. We can see we're adding 2 more installations to cross, uh, our distribution centers. That increases throughput by 280% and reduces labor hours by 50%. So we see very meaningful impact, both from a labor reduction and a quality and source perspective for our customers, and we're launching the first installation of Symbotic to navigate the bulk side of the house. The bulk side of the house is really what owns most of the real estate in the distribution centers. So if we create the

Jim Boyle: That being said, we did submit a robust public comment statement, just educating them on kind of what this actually could mean for the industry. If you remember back during the pandemic, in the public comment period, we did get some exceptions. I mean, we'll see what happens.

Again, throughput on that side through Ai and Robotics, it gives us the ability to leverage our existing asset infrastructure, and minimizes the need to expand buildings because we can take back and ship in a much more robust fashion. So you think about or auto store managers less than case volume. 70% of our lines are less the case. Um, and then, when you think about book storage, because we keep so much inventory in the antibiotic will help us manage that on the right hand side of the distribution center and we're really excited about it.

David Larsen: Excellent. Thank you.

Excellent, thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Brandon Vazquez of William Blair. Please proceed with your question.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Andrew Obin of Bank of America. Please proceed with your question.

Thank you. One moment for our next question.

Our next question comes from Brandon Vasquez of William. Blair please receive your question.

David Ridley-Lane: Morning. This is David Ridley-Lane on for Andrew Obin. The 50 basis points higher overall revenue growth in the guidance equates to about $140 million of revenue or maybe $40 million or so of gross profit dollars. Is it, you know, fair to say that that year-over-year change in the tariff assumption, basically having the 10% rate through August offsets all the other inflationary impact on your cost of goods in 2026?

Jim Boyle: Thanks, Brandon. Yes, that is correct. We did say that we expect that the rates will go back to pre-SCOTUS ruling in the August timeframe. Sometime this summer, essentially. The reason for that is, you know, we're taking an approach to try to be realistic about what might happen. We know that the Section 122s run out after 150 days in late July. What we are hearing is that they're looking at using their Section 232s or Section 301s to recreate what they had previously. We're taking a realistic or a conservative view of what might happen in our business, how we're gonna navigate and attack that accordingly.

Hi everyone, thanks for taking the question. Mike, just a question of clarification on tarot. So I think in the paired remarks, I hear correctly. You said that in the back half of the year you're assuming that tariff rates. Go back to the pre. So this decision, um, 1 wanted to clarify that and then, if you could, you know, talk about why you would assume that go back up, because I think your Blended rate pre scotus was higher than the 10%. Uh, and if you can give any quantification at all of of what the difference between, the 2 might be be that that'd be helpful as well. Thank you.

Mike Drazin: Yeah, as we've called out before, we're holding our guidance to $3.5, $3.6 billion. We are seeing, we expect to see favorability from the tariffs at the 10% rate through the end of July, offset by higher investments in our business, as well as the impacts from the Middle East as we know of them today. Those three things combined are gonna offset, leading to our guidance remaining at $3.5, $3.6 billion.

Thanks, Brandon. That's, uh, that is correct. We, we did say that we expect that the, uh, the race will go back to, um, pre-voters ruling, um, in, uh, in obvious time. But sometime this number is essentially—the reason for that is, you know, we're taking it into motion to try to be realistic about what might happen. We know that the 122s, um, run out after 150 days in late July.

David Ridley-Lane: Thank you very much.

Mike Drazin: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Ryan Halsted of RBC Capital Markets. Please proceed with your question.

And so um what we are hearing is that they're, you know, they're 232s or 3 to 1 to to recreate what they had previously. And so taking a realistic or conservative view of what might happen in our business, how we're going to navigate and and attack that accordingly.

Ryan Halsted: Good morning. Thanks for taking the question. Maybe just wanted to dig a little deeper in the strong sales performance, ask a question about your sales channels, specifically the US non-acute segment. Just curious to hear how you feel you're tracking versus expectations in that segment and, you know, if you still feel strongly about the market opportunity and the like-for-like conversion opportunity there.

So we said, we did submit a robust public comment statement and just educating them on kind of what's actually could mean for the industry. If you remember back during pandemic in the public comment, period, we did get some sections. So, I mean, we'll see what happens.

Operator: Thank you. One moment for our next question. Thank you. Our next question comes from Andrew Obin of Bank of America. Please proceed with your question.

Thank you. 1 moment for our next question.

Thank you. Our next question, comes from Andrew oen of Bank of America. Please proceed with your question.

Mike Drazin: We still feel very good about our US non-acute business. The US non-acute business grew 7% on a reported basis, 9% adjusted for days, in the quarter, really driven by both our post-acute, which is nursing home health, and hospice, our surgery centers, and our physician offices. Really solid growth in all of those channels in the non-acute space. We do expect the market to grow at a faster rate in the non-acute space. We do expect in 2026 our US acute care business will grow faster than the US non-acute because of the new customer signings that we had last year, the $2.4 billion that we signed overall. We still feel very good about the non-acute space. We continue to take share in that space and grow at a greater rate than the market.

Good morning. This is David Ridley Lane on for Andrew, um, the 50 basis points, higher overall Revenue growth, uh, in the guidance equates to about 140 million revenue or maybe 40 million or so of gross profit dollars.

Is it um you know fair to say that that year-over-year change in the Tariff. Assumption. Basically, I'm the 10% rate through, August offsets, all the other inflationary impacts on your cost of goods.

In 2026.

Ryan Halsted: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Erin Wright of Morgan Stanley. Please proceed with your question.

For the we're holding our guidance 3.536 billion. Um, we we are seeing we expect to see favorability from the terrorists at 10% rate through through the end of July. Um offset by a higher investments in our business as well as the impacts in the Middle East as we know them today. Uh and so those 3 things combined are going to offset leading to our guidance remaining at 3.56 million.

David Ridley-Lane: Thank you very much.

Mike Drazin: Thank you.

Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from Ryan Halsted of RBC Capital Markets. Please proceed with your question.

Thank you.

Erin Wright: Great. Thanks. I have kind of a broader question just on the landscape for new customer wins and the longer term pipeline there. Are you seeing any changes in the competitive landscape on the distribution side? For instance, just with changes from a corporate structure perspective or otherwise. Maybe how, or even how others are responding from a fuel cost perspective or otherwise there. I guess, I know you say you're on track with kind of new wins, but, you know, is the pipeline building on that front? Like, what's your line of sight into that, either by, also by channel as well? Thanks.

Thank you. One moment for our next question.

Our next question.

Heltah of RBC Capital markets, please proceed with your question.

Good morning. Thanks for taking the question. Um,

Jim Boyle: Thanks, Erin. The pipeline is very robust. Modern Healthcare just reported the top 100 health systems in America, we have about 50% of them, which means there's 50% we don't have. There's a tremendous amount of opportunity in front of us. From a competitive landscape, we have good competitors, they're running their same playbook that they have in the past, which historically we've had really a significant differentiation both through our Medline brand and the ability to serve the entire continuum of care. We just have a different value prop and a different supply chain vehicle that delivers best-in-class service. We don't see much change in the market dynamics as it relates to the opportunity set in front of us.

Maybe just wanted to dig a little deeper in the um, strong sales performance. And uh, ask a question about your sales channels, specifically the US on acute segment. Just curious to hear how you feel, you're tracking versus expectations and that segment. And and you know, if you still feel strongly about Market opportunity and like for like conversion opportunity there,

Yeah we still feel very good about our us non and keep business. So us not to be a business grew 7% on a reported basis 9% for days. Um in the quarter really driven by both our post Q which is nursing home home health, and hospice our service centers and our physician offices are really solid growth in all those channels and the non acute space. Uh, we we we do expect the market to grow investor.

Jim Boyle: Healthcare continues to consolidate, and as they consolidate, we tend to do better because customers are looking for a partner that can serve all classes of trade that they own, both from the acute care to the physician office to the home health to the hospice. Medline is the only Prime Vendor in healthcare that can do that. Pair that with our ability to drive significant value through our brand, it just creates a different value prop as compared to the competitors in the marketplace. That is both true in the acute care space and in the non-acute space, both where they're affiliated with an acute care system or an integrated delivery network or an independent provider. We feel optimistic about the future.

Would you expect in 2026? Are you as acute care business? Because of the new customer side. We had last year that you put $4 billion. We signed overall, we still feel very good about the non-acute space. We continue to take share in that space and grow in a great market.

Ryan Halsted: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Erin Wright of Morgan Stanley. Please proceed with your question.

Thank you.

Thank you. 1 moment for our next question.

The next question comes from Aaron Wright of Morgan Stanley. Please proceed with your question.

Jim Boyle: The market opportunity in front of us is vast, and we have clear visibility to what's available and what we think we can actually earn.

Operator: Thank you. One moment for our next question. Our next question comes from Navann Ty of BNP Paribas. Please proceed with your question.

Navann Ty: Hi. Good morning. Thanks for taking my questions. wanted to hear if you had any updated expectations for the Section 232 tariffs on PPE and medical consumables and equipment. Also a second question is on your leverage target and how high on the priority list M&A is for Medline in the current environment. Thank you.

Great thanks. Um I have a kind of a broader question just on a landscape for a new customer wins into the longer term pipeline. There are are you seeing any changes in the the competitive landscape on the distribution side? For instance, just with with changes from corporate structure perspective, or otherwise maybe how or even how others are responding from a fuel cost perspective or otherwise there. Yes. I believe they're on track with kind of new wins but it it was the pipeline building on that front. Like what's your line of sight into that either, by by also, by Channel as well? Thanks.

Mike Drazin: Thanks, Erin. The pipeline is very robust. Modern Healthcare just reported the top 100 health systems in America, we have about 50% of them, which means there's 50% we don't have. There's a tremendous amount of opportunity in front of us. From a competitive landscape, we have good competitors, they're running their same playbook that they have in the past, which historically we've had really a significant differentiation both through our Medline brand and the ability to serve the entire continuum of care. We just have a different value prop and a different supply chain vehicle that delivers best-in-class service. We don't see much change in the market dynamics as it relates to the opportunity set in front of us.

Thanks Aaron. Um, the pipeline is very robust. Um, I want to help her just reported a top learning health system in America. And we have about 50% of them, which means there's 50%, we don't have. So there's a tremendous amount of opportunity in front of us from a competitive landscape to the. We have a good founders with their run in the same Playbook that they have in the past.

Mike Drazin: Thanks for that question. you know, as we called out previously, we do expect, we do anticipate that the 122s will run out in the end of July, and the administration intends to put new in place. They may use either 232s or 301s. The 232 investigation happened many months ago. We responded with our response and shared really good information about the market and the situation, and we'll continue to work with the administration as necessary to help them inform them of the market dynamics. I can't call out when that's gonna occur or what could happen, but we'll monitor the situation and be ready to act as we have in the past.

Mike Drazin: Healthcare continues to consolidate, and as they consolidate, we tend to do better because customers are looking for a partner that can serve all classes of trade that they own, both from the acute care to the physician office to the home health to the hospice. Medline is the only Prime Vendor in healthcare that can do that. Pair that with our ability to drive significant value through our brand, it just creates a different value prop as compared to the competitors in the marketplace. That is both true in the acute care space and in the non-acute space, both where they're affiliated with an acute care system or an integrated delivery network or an independent provider. We feel optimistic about the future.

Mike Drazin: As it relates to leverage, we ended the quarter with 3.1 times leverage. We carry about $2 billion, $2.2 billion of cash on hand, and our intention is first and foremost to invest in the business. With that excess cash we have on hand, we're gonna lean in on M&A when we see the right opportunity to do so. Over time, over the long term, if we don't see M&A opportunities, we will use that capital to reduce our leverage even further. Ultimately, our goal right now is to identify and grow organically first and look for M&A opportunities that would drive strategic growth in our business for the long term.

Mike Drazin: The market opportunity in front of us is vast, and we have clear visibility to what's available and what we think we can actually earn.

Uh, which historically we've, um, had really a significant differentiation both through our brand and the ability to serve the entire Continuum of Care. We just had a different value from in a different, uh, supply chain vehicle that deliver specialist service. So, um, we don't see much change in the market dynamics, as it relates to the opportunity set front of us, um, Healthcare continues to consolidate. And as a consolidate, we tend to do better because customers are looking for a part to conserve all classes of trade, that they own both from the position, offices Home Health hospice. Uh, and and Medline is the only clip provider in healthcare that can do that. I'll share that with our ability to drive significant value from Brand. It just can create the different value products compared to the competitors of the marketplace and that is both true and acute care space. And in the non space, both where their affiliated with the system or the greatest delivery Network and then provide. So we feel optimistic about the future uh the market opportunity in front of us is fast and we have their visibility to be available and what we think can actually earn.

Operator: Thank you. One moment for our next question. Our next question comes from Navann Ty of BNP Paribas. Please proceed with your question.

Thank you. 1 moment for our next question.

Navann Ty: Thank you.

Operator: Thank you. One moment for our final question. Thank you. Our final question comes from Rick Wise of Stifel. Please proceed with your question.

Our next question comes from nanti of CNP paribus. Please, proceed with your questions.

Rick Wise: Thanks so much. Good morning, Jim. Hi, Mike. I just was reflecting on some of your comments, particularly about some of the challenges in the current environment and reflecting that obviously it's having impacts on your competitors, who I would personally imagine are less able or to optimally deal with it. I was wondering. My question is, maybe talk to us a little about the competitive environment or displacement you're seeing. Just when you reflect back in years past at moments like this, are there unique opportunities for you to sort of press more aggressively on the offense as other competitors, perhaps less well-positioned or distracted or pressured? Just any incremental color or thoughts there as we end the call. Thank you so much.

And also a second question is on your leverage Target and how high on the priority list m&a is for Medline in the current environment. Thank you.

Jim Boyle: Yeah. Thanks, Rick. Listen, you hit the nail on the head. We tend to perform better in times of crisis or challenge because our value prop is just differentiated. When you think about the cuts in reimbursements, customers are looking for speed to value. We have the best value story in the marketplace 'cause we can drive value through our brand, and we can drive value through the cost of distribution. We're in a position to take advantage of what's in front of us. And when I say take advantage, it means deliver value to our customers in a meaningful way that's differentiated as compared to the competition. I do think we're in a position to create additional opportunity. That happened during the pandemic.

Jim Boyle: As it relates to leverage, we ended the quarter with 3.1 times leverage. We carry about $2 billion, $2.2 billion of cash on hand, and our intention is first and foremost to invest in the business. With that excess cash we have on hand, we're gonna lean in on M&A when we see the right opportunity to do so. Over time, over the long term, if we don't see M&A opportunities, we will use that capital to reduce our leverage even further. Ultimately, our goal right now is to identify and grow organically first and look for M&A opportunities that would drive strategic growth in our business for the long term.

Thanks a question. So um, you know, as we called out previously, um, we do expect, we do anticipate that the 122 will run out and be end of July and the administration intend to put new uh in place. They may use either 232 or 301. Um, 232 investigation, having many months ago, we responded with with our response and shared really good information about the market and the situation. And we'll continue to work with Administration necessary to them. In the mode of market dynamics, I can call out 1 that it occur. What's going to happen, we'll monitor the situation to be ready to to act as we have in the past as a relates to leverage. Um, we ended the quarter over 3.1 times leverage. We carry about 2 billion, 2.2 billion dollars of cash on hand and our tension is first and foremost, the investment business with that excess cash we have on my hand. We're we're going to lean on m&a and what we see that opportunities use. So then over time over the long term, we don't see m&a opportunities. We all we will use that Capital to reduce our Leverage

Jim Boyle: It happened last year during the tariff situation, which is why we had $2.4 billion in prime vendor closings. The market dynamics from a consolidation perspective, from a cuts in reimbursement perspective, from a really unique environment with what's happening with some of our competitors, really divesting or selling off resources, it just creates an opportunity and really a segment for us to do really outsized growth as compared to what may be out there. That doesn't mean we don't have good competitors. It just means we have a different value prop. I do think we're in the right position. I do think we have the ability to help our customers in this time of need, and we will continue to do so in a differentiated fashion going forward.

Further, but I opened our goal right now is to identify and grow organically first and and deliver m&a opportunities that would drive strategic growth in our business, for the long term.

Navann Ty: Thank you.

Operator: Thank you. One moment for our final question. Thank you. Our final question comes from Rick Wise of Stifel. Please proceed with your question.

Thank you.

Thank you. 1 moment for our final question.

Thank you. Our final question comes from Brooke wise of stifel please proceed with your question.

Rick Wise: Thanks.

Operator: Thank you. We have reached the end of the question and answer session. I would now like to turn it back to Jim Boyle for closing remarks.

Jim Boyle: Thank you for joining us on our Q1 earnings call. We are pleased with the performance and excited that we're able to expand really our revenue projections and hold our earnings guidance. We are optimistic about the future and looking forward to what's to come. We hope you have a great week.

Operator: This does conclude today's conference call. Thank you for participating. You may now disconnect.

Thanks so much. Good morning, Jim. I'm I just, I just was reflecting on some of your comments that particular about for the challenges, in the current environment and reflecting that. Obviously it's having impact on your competitors, or I would personally imagine are less, uh, able or, uh, to optimally deal with it, and it was wondering. So my question is, maybe talk to us a little about the competitive environment for displacements, you're seeing, and just when you reflect Back and You're tested Moment, Like This are there unique opportunities for you to sort of, press, uh, more aggressively on the offense as other competitors. Perhaps less well, positioned, or distracted, or pressured. And just in any incremental color, thoughts there, as we end the call, thank you so much.

Yeah, thanks. Listen. You hit the line ahead. We, we tend to perform better in times of price or challenge because our value prop is a differentiated. What do you think about the customer reimbursements? Customers are looking for Speed to Value? Uh, we have the best value story in the marketplace because we try to value our brand and we can try value to the cost.

Distribution. Uh and so we're in a position to take advantage of what's in front of us. And when I say take advantage it needs to deliver value to our customers.

Differentiated as compared to.

So I do think we're in a position to create additional opportunity that happened in the pandemic. It happened last year during the terror situation which is why we had 2 4 billion dollars in 5 million closings. Um, and so the market dynamics, from a consolidation perspective, from a customer reimbursement, perspective from a, um, like a, a unique environment with what's happening. So with some of our competitors really identifying or selling our resources, it just creates an opportunity and and really a a segment for us to really outsize growth as compared to what? Maybe that doesn't mean we don't have good competitors. It just means we have a value prop. So I do think we're in the right position. I think we have the ability to help our customers at the time and we need to be able to continue to do so.

so and differentiated question going forward,

Rick Wise: Thanks.

thanks.

Operator: Thank you. We have reached the end of the question and answer session. I would now like to turn it back to Jim Boyle for closing remarks.

Thank you. We have reached the end of the questions and answered questions. I would now like to turn it back to Jim Oil for closing remarks.

Thank you for joining us on our first quarter earnings call. We are pleased with the performance and excited that we're able to expand, uh, really our revenue projections and hold our earnings guidance. We are optimistic about the future and look forward to what's to come. We hope you have a great week.

Operator: This does conclude today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating. You may now disconnect.