10-K: Henry Schein: 2025 Growth Amid Cyber Recovery & CEO Transition

Henry Schein reports 4.0% net sales growth in 2025, navigating the residual impact of a 2023 cyber incident and preparing for a CEO transition while advancing its BOLD+1 strategic plan.

Summary

• Net sales increased 4.0% to $13,184 million in 2025, up from $12,673 million in 2024, driven by 2.6% internal growth, 0.9% acquisition growth, and 0.5% foreign exchange impact.
• Global Distribution and Value-Added Services net sales grew 3.5%, primarily from U.S. and international dental merchandise and equipment, and growth in Home Solutions, dialysis products, and pharmaceuticals.
• Global Specialty Products net sales increased 6.7%, mainly due to growth in implant, biomaterial, and orthopedics businesses, despite a decline in orthodontic sales.
• Global Technology net sales rose 7.1%, attributed to the adoption of core practice management solutions, especially cloud-based platforms, and an increase in revenue cycle management solutions.
• Gross profit increased to $4,105 million in 2025 from $4,016 million in 2024, but the gross margin percentage decreased to 31.1% from 31.7%.
• Operating income for 2025 was $653 million, an increase from $621 million in 2024.
• Net income attributable to Henry Schein, Inc. was $398 million in 2025, a slight increase from $390 million in 2024.
• The 2023 cyber incident had a residual impact on 2024 financial results; direct expenses related to the incident were $0 million in 2025 (down from $9 million in 2024 and $11 million in 2023), and $20 million in insurance proceeds were received in 2025 ($40 million in 2024).
• Stanley M. Bergman will retire as CEO on March 1, 2026, and Frederick M. Lowery will assume the CEO role on March 2, 2026.
• A 2024 restructuring plan, expected to be completed by the end of 2027, incurred $105 million in charges in 2025, including losses from business disposals.
• A strategic investment by KKR involved the issuance of 3,285,151 shares for $250 million in May 2025, and KKR's beneficial ownership limit was increased to 19.9%.
• The company executed an accelerated share repurchase program of $250 million in May/July 2025.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, reflecting solid sales growth and strategic execution despite ongoing challenges from the 2023 cyber incident and increasing operating costs. The leadership transition and KKR investment signal future strategic direction and capital support.

Positives

• Net sales increased by 4.0% to $13,184 million in 2025, demonstrating continued business expansion.
• Global Specialty Products achieved robust net sales growth of 6.7%, driven by strong performance in implant, biomaterial, and orthopedics businesses.
• Global Technology segment reported a significant 7.1% increase in net sales, fueled by the adoption of cloud-based practice management solutions and revenue cycle management.
• Operating income grew to $653 million in 2025 from $621 million in 2024, indicating improved operational efficiency.
• Net income attributable to Henry Schein, Inc. increased to $398 million in 2025, up from $390 million in 2024.
• The company received $20 million in insurance proceeds in 2025, partially recovering losses from the 2023 cyber incident.
• Progress was made on the BOLD+1 Strategic Plan, focusing on high-growth software, specialty, and services businesses.
• The company's competitive strengths, including 94 years of experience, customer-centric approach, direct sales expertise, and efficient distribution network, remain strong.
• Favorable long-term macro trends, such as an aging population and increased healthcare awareness, are expected to stimulate demand for products and services.
• Effective internal control over financial reporting was maintained as of December 27, 2025.

Negatives

• Gross margin decreased to 31.1% in 2025 from 31.7% in 2024, primarily due to targeted promotional programs and shifts in product mix.
• Operating expenses increased to $3,452 million in 2025, partly due to higher corporate investments in technology and compensation-related costs.
• Restructuring and related costs amounted to $105 million in 2025, including losses from business disposals.
• Interest expense increased to $150 million in 2025 from $131 million in 2024, mainly due to increased borrowings.
• Net cash provided by operating activities decreased to $712 million in 2025 from $848 million in 2024, partly due to the normalization of cash collections post-cyber incident.
• Value-added services sales experienced a 2.0% decrease in local currency, primarily due to lower sales in the practice transitions business.
• Orthodontic sales within the Global Specialty Products segment saw a decline.
• Inventory turns decreased to 4.8 in 2025 from 5.0 in 2024.
• The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is expected to reduce Medicaid enrollees and federal funding to state Medicaid programs, potentially impacting service utilization and product coverage.
• The company has experienced increased costs due to labor, sourcing, and tariffs in recent periods.

Risks

• Dependence on third parties for product manufacturing/supply and raw materials, with potential for supply interruptions, delays, product recalls, and damage to customer relationships.
• Failure to achieve strategic growth objectives, particularly for Global Technology and Global Specialty Products segments, could lead to lower returns on investments.
• Risks associated with developing or acquiring new products and services and utilizing new technologies like Artificial Intelligence (AI), including clinical risks from potential misdiagnosis, ethical/privacy issues, legal liability under new regulations, and reputational harm.
• Inherent risks in acquisitions, dispositions, and joint ventures, such as failure to achieve anticipated benefits, unforeseen additional costs, and challenges in integrating operations, systems, and personnel.
• Provisions in governing documents and other agreements that may discourage third-party acquisitions, potentially limiting stockholder premium opportunities.
• Adverse changes in supplier rebates or other purchasing incentives, or failure to meet growth goals, could negatively affect business and profit margins.
• Additional risks from sales of corporate brand products and manufactured products, including product liability, mandatory/voluntary recalls, supply chain disruptions, and intellectual property infringement.
• Competition from private label, generic, or low-cost products introduced by competitors or large customers could erode sales and margins.
• Potential negative impact from activist investors, leading to substantial costs, diversion of management attention, and volatility in stock price.
• Security risks associated with information systems and technology products and services, including cyberattacks, data breaches, and system failures, which have previously disrupted operations and financial results.
• Highly competitive and consolidating health care products distribution industry, including competition from third-party online commerce sites, affecting pricing and market share.
• Changes in the health care industry due to political, economic, and regulatory influences, such as managed care trends, collective purchasing arrangements, and changes in reimbursement rates.
• Expansion of Group Purchasing Organizations (GPOs), Dental Service Organizations (DSOs), Management Service Organizations (MSOs), or provider networks, and multi-tiered costing structures, may place the company at a competitive disadvantage.
• Increases in shipping costs or service issues with third-party shippers could harm business operations and delivery timelines.
• Uncertain global and domestic macro-economic and political conditions, including inflation, deflation, recession, unemployment, and currency fluctuations, could materially adversely affect financial results.
• Failure to comply with existing and future regulatory requirements (e.g., health care fraud, anti-kickback, Stark Law, EU Medical Device Regulation, data privacy laws like GDPR, PIPL, CCPA/CPRA, AI regulations) could result in penalties, operational changes, and reputational harm.
• Exposure to product liability, intellectual property infringement, and other claims in the ordinary course of business.
• Customs policies or legislative import restrictions, including those related to forced labor or human trafficking, could hinder the ability to import goods and result in penalties.
• Negative impacts from disease outbreaks, epidemics, pandemics, or other natural or man-made disasters.
• Risks associated with global operations, including staffing, distribution, currency fluctuations, trade agreements, and geopolitical turmoil.
• Dependence on senior management and the ability to attract and retain key personnel, as well as maintaining relationships with customers, suppliers, and manufacturers.
• Disruptions in the financial markets may materially adversely affect the availability and cost of credit.

Future Outlook

The company expects its historical seasonality of sales to continue in the foreseeable future. It anticipates recording additional restructuring and related charges associated with the 2024 Plan through the end of 2027. Uncertainty remains regarding the extent and duration of current tariffs on trade. The One Big Beautiful Bill Act (OBBBA) is expected to reduce Medicaid enrollees and federal funding, potentially adversely impacting healthcare service utilization and product coverage. Future tax reform, including Pillar Two rules, may impact the effective tax rate or result in higher cash tax liabilities. The company's future success is dependent on its ability to timely develop or acquire competitive and innovative products and services, and to effectively utilize new technologies, such as AI, while navigating evolving regulations in this area. Management believes that current cash, access to debt and equity markets, and existing credit facilities provide sufficient liquidity for foreseeable short-term and long-term capital needs.

Management Comments

• Our philosophy is grounded in our commitment to serve as trusted advisors and help customers operate a more efficient and successful business so the practitioner can provide better clinical care.
• We believe we are the worlds largest provider of health care products and services primarily to office-based dental and medical practitioners, as well as alternate sites of care.
• We believe that our relations with our employees are excellent.
• We know our business success is built on the engagement and commitment of our team, which is dedicated to meeting the needs of their fellow TSMs, our customers, supplier partners, stockholders, and society.
• We believe that a great employee experience also drives a great customer experience.
• We believe that demand for our products and services will grow while continuing to be impacted by current and future operating, economic and industry conditions.
• We believe that we are positioned to capitalize on the trend of industry consolidation, as we believe we have the ability to support increased sales through our existing infrastructure, although there can be no assurances that we will be able to successfully accomplish this.
• We believe that our historical tax positions are sound and consistent with applicable laws, regulations and existing precedent, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.
• We believe that it is more likely than not that future taxable income will be sufficient to allow us to recover substantially all of the value assigned to our deferred tax assets.

Industry Context

StockSavvy.ai notes that Henry Schein operates in a fragmented yet consolidating healthcare distribution industry, benefiting from long-term macro trends like an aging population and increased health awareness. The shift of procedures from acute care to alternate-care sites, along with a focus on cost containment, continues to drive demand for broad product offerings and technology solutions, aligning with Henry Schein's diversified segments and BOLD+1 strategy. The company's emphasis on value-added services and proprietary brands positions it to compete against larger distributors and manufacturers selling directly to end-users, while also navigating the increasing influence of DSOs and GPOs. The ongoing cyber threats and evolving regulatory landscape, particularly concerning AI and data privacy, are industry-wide challenges that Henry Schein is actively addressing through its cybersecurity risk management and compliance programs.

Comparison to Industry Standards

• The company believes it is the world's largest provider of healthcare products and services primarily to office-based dental and medical practitioners, as well as alternate sites of care.
• Outside of the U.S., the company believes it is the only global distributor of supplies and equipment to dental practices.
• Key competitors in U.S. dental distribution include Patterson Dental (Patterson Companies, Inc.) and Benco Dental Supply Company.
• Primary competitors in the U.S. medical distribution market include McKesson Corporation and Medline Industries, Inc.
• Global Specialty Products competes with Straumann, Envista, Zimvie, and Dentsply Sirona for dental implants, and with Geistlich Pharma AG and Botiss Biomaterials GmbH in biomaterials.
• Global Technology competes with numerous dental software providers, including Eaglesoft (Patterson Companies, Inc.), Carestream Dental LLC, Centaur Software Development Co Pty Ltd., Open Dental Software, Inc., PlanetDDS LLC, Good Methods Global Inc. (CareStack), Curve Dental, LLC, NextGen (Quality Systems, Inc.), and Epic Systems Corporation.
• StockSavvy.ai notes that Henry Schein's 4.0% net sales growth in 2025, while positive, is lower than the NASDAQ Composite Index's 5-year cumulative return of 191.20% and the Dow Jones U.S. Health Care Index's 144.40% over the same period, suggesting underperformance relative to broader market and sector benchmarks. The decline in gross margin from 31.7% to 31.1% also indicates potential pricing pressures or shifts in product mix compared to industry peers.

Management Changes

Corporate Governance

Legal Proceedings

• Henry Schein, Inc. is a defendant in multiple opioid-related lawsuits (currently less than ten), which have been consolidated within the MultiDistrict Litigation (MDL) proceeding In Re National Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804) and are currently stayed.
• The lawsuits generally allege that manufacturers engaged in false advertising for opioid drugs and that entities in the supply chain (including Henry Schein) failed to monitor and restrict improper distribution.
• Sales of opioids represented less than four-tenths of 1 percent of the company's 2025 net sales.
• The company intends to vigorously defend itself against these actions.
• No other pending legal matters are currently anticipated to have a material adverse effect on the company's consolidated financial position, liquidity, or results of operations.

Related Party Transactions

• The company has a joint venture with Internet Brands, forming Henry Schein One, LLC, in which Internet Brands holds a 33.6% noncontrolling interest.
• A royalty agreement with Internet Brands requires annual payments of approximately $31 million for the use of their intellectual property.
• A Memorandum of Understanding was signed on January 29, 2025, to extend the time-based trigger for Henry Schein's call option on Henry Schein One, LLC to July 1, 2032, and to pause Internet Brands' put option for four years, to January 29, 2029.
• As of December 27, 2025, Henry Schein One, LLC had a net payable balance to Internet Brands of $9 million.
• Net sales to equity affiliates amounted to $56 million in 2025.
• Purchases from equity affiliates totaled $19 million in 2025.
• As of December 27, 2025, the company had an aggregate of $39 million due from its equity affiliates and $6 million due to its equity affiliates.
• Certain facilities related to acquisitions are leased from employees and minority shareholders, with current operating lease liabilities of $5 million and non-current operating lease liabilities of $22 million as of December 27, 2025.

Stakeholder Impact

• Shareholders are impacted by the modest increase in net income and EPS, the ongoing share repurchase program, and the strategic investment by KKR, which could influence future stock performance and ownership structure.
• Employees (Team Schein Members) are affected by the company's restructuring plans, which include severance costs, but also benefit from continued investment in career development, an inclusive culture, and mental wellness initiatives. The CEO transition is a significant leadership change.
• Customers benefit from the company's expanded product and service offerings, including new technology solutions and efficient distribution, but may face impacts from broader regulatory changes like the OBBBA affecting Medicaid coverage.
• Suppliers may experience shifts in purchasing patterns as the company focuses on cost-effective sourcing and expands its corporate brand and manufactured product lines.
• Creditors are affected by the company's increased borrowings and interest expense, though the company asserts sufficient liquidity to meet its obligations.
• Regulatory bodies continue to oversee the company's compliance with evolving healthcare, data privacy, and trade regulations, which can impose additional costs and operational adjustments.

Next Steps

• Completion of the 2024 restructuring plan by the end of 2027.
• Frederick M. Lowery to assume the Chief Executive Officer role on March 2, 2026.
• Continued efforts to develop or acquire new products and services and utilize new technologies, including Artificial Intelligence (AI).
• Ongoing compliance with evolving regulatory requirements, including those related to AI, data privacy, and supply chain security.
• Potential future share repurchases, with $780 million available as of December 27, 2025.
• The Board will renominate KKR's designees, Max Lin and William K. Dan Daniel, for election at the 2026 annual meeting of stockholders for a term expiring at the 2027 annual meeting.

Key Dates

Recommendation

Henry Schein demonstrates resilience with positive sales and net income growth in 2025, despite navigating the residual impact of a significant cyber incident and undertaking a major restructuring. The strategic investment by KKR and the planned CEO transition introduce new dynamics and potential for future growth. However, the decline in gross margin, increased operating expenses, and a decrease in operating cash flow, coupled with ongoing regulatory uncertainties and intense industry competition, suggest a 'hold' position. Investors should monitor the successful integration of acquisitions, the effectiveness of the restructuring plan, and the impact of new leadership and strategic partnerships on profitability and market share.

Keywords

Healthcare distribution, Dental supplies, Medical supplies, Practice management software, Dental implants, Biomaterials, Orthopedics, Henry Schein, SEC filing, 10-K, Financial results, Cyber incident, CEO transition, KKR investment, Share repurchase, Restructuring, Regulatory compliance, AI in healthcare