10-Q: Henry Schein Reports Q1 2025 Results; Strategic Investment by KKR Highlighted

Henry Schein's Q1 2025 results show a slight decrease in net sales, but the company highlights a strategic investment by KKR and provides segment performance details.

Summary

• Henry Schein's Q1 2025 net sales were $3.168 billion, a slight decrease from $3.172 billion in Q1 2024.
• The company reported net income attributable to Henry Schein, Inc. of $110 million, compared to $93 million in the prior year.
• The effective tax rate was 24.9% compared to 25.6% in the prior year period.
• The company received $20 million in insurance proceeds related to the October 2023 cyber incident, completing the $60 million insurance recovery.
• A new restructuring plan (2024 Plan) was committed to on August 6, 2024, with $25 million in restructuring charges recorded in Q1 2025.
• The company revised its reportable segments to align with how the Chairman and Chief Executive Officer manages the business, assesses performance and allocates resources.
• KKR will make an additional $250 million investment in the Company's common stock.
• The company repurchased $5.3 billion, or 98,069,939 shares, under its common stock repurchase programs, with $718 million available as of March 29, 2025 for future common stock share repurchases.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While sales are slightly down, net income is up, and the KKR investment signals confidence in the company's future. The ongoing restructuring and cyber incident recovery are also factors.

Positives

• Net income attributable to Henry Schein, Inc. increased to $110 million from $93 million year-over-year.
• The company completed its insurance recovery related to the cyber incident, receiving the remaining $20 million.
• KKR's strategic investment will bring an additional $250 million into the company.
• The company has $718 million remaining for future common stock share repurchases under its existing program.

Negatives

• Q1 2025 net sales were $3.168 billion, slightly down from $3.172 billion in Q1 2024.
• Global Distribution and Value-Added Services net sales for the three months ended March 29, 2025 decreased 0.7%.

Risks

• The company is subject to risks related to the sale of corporate brand products.
• The company is subject to security risks associated with its information systems and technology products and services, such as cyberattacks or other privacy or data security breaches.
• The company is subject to effects of a highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating market.
• The company is subject to changes in the health care industry.
• The company is subject to risks from expansion of customer purchasing power and multi-tiered costing structures.
• The company is subject to increases in shipping costs for our products or other service issues with our third-party shippers, and increases in fuel and energy costs.
• The company is subject to changes in laws and policies governing manufacturing, development and investment in territories and countries where we do business.
• The company is subject to general global and domestic macro-economic and political conditions, including inflation, deflation, recession, unemployment (and corresponding increase in under-insured populations), consumer confidence, sovereign debt levels, ongoing wars, fluctuations in energy pricing and the value of the U.S. dollar as compared to foreign currencies, changes to other economic indicators and international trade agreements.
• The company is subject to the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in Ukraine, the Israel-Gaza war and other unrest and threats in the Middle East and the possibility of a wider European or global conflict).
• The company is subject to changes to laws and policies governing foreign trade, tariffs and sanctions, including the current imposition of additional new tariffs by the U.S. on numerous countries, retaliatory tariffs and potential for additional retaliatory tariffs.
• The company is subject to greater restrictions on imports and exports.
• The company is subject to supply chain disruption.
• The company is subject to geopolitical wars.
• The company is subject to failure to comply with existing and future regulatory requirements, including relating to health care.
• The company is subject to risks associated with the EU Medical Device Regulation.
• The company is subject to failure to comply with laws and regulations relating to health care fraud or other laws and regulations.
• The company is subject to failure to comply with laws and regulations relating to the collection, storage and processing of sensitive personal information or standards in electronic health records or transmissions.
• The company is subject to changes in tax legislation, changes in tax rates and availability of certain tax deductions.
• The company is subject to risks related to product liability, intellectual property and other claims.
• The company is subject to risks associated with customs policies or legislative import restrictions.
• The company is subject to risks associated with disease outbreaks, epidemics, pandemics (such as the COVID-19 pandemic), or similar wide-spread public health concerns and other natural or man-made disasters.
• The company is subject to risks associated with our global operations.
• The company is subject to litigation risks.
• The company is subject to new or unanticipated litigation developments and the status of litigation matters.
• The company is subject to our dependence on our senior management, employee hiring and retention, increases in labor costs or health care costs, and our relationships with customers, suppliers and manufacturers.
• The company is subject to disruptions in financial markets.

Future Outlook

The company expects to record restructuring charges associated with the 2024 Plan through the end of 2025, but an estimate of the amount of these charges has not yet been determined. The company plans to continue to accelerate its share repurchase activity, subject to market conditions and other factors.

Management Comments

• 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 we have a strong brand identity due to our more than 93 years of experience distributing health care products.

Industry Context

The health care industry is increasingly focused on cost containment, benefiting distributors with broad product arrays and low prices. This trend has accelerated the growth of DSOs, GPOs, and other group practices, which favor distributors capable of providing specialized management information support.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• To perform a comparison, we would need data from competitors like Patterson Companies, Benco Dental, or McKesson Medical-Surgical.
• Metrics such as sales growth, gross margin, and operating expense ratio would be compared against these competitors to assess Henry Schein's performance relative to industry benchmarks.

Corporate Governance

Legal Proceedings

• Henry Schein, Inc. has been named as a defendant in multiple opioid related lawsuits.
• On March 19, 2025, the court granted our motion to dismiss the purported class action filed by San Miguel Hospital Corporation d/b/a Alta Vista Regional Hospital, et al. in the United States District Court for the District of New Mexico and dismissed all claims against Henry Schein with prejudice.
• Twenty other cases filed by legal guardians of children who were allegedly exposed to opioids in utero have been voluntarily dismissed.
• At this time, the following case is set for trial: the action filed by Florida Health Sciences Center, Inc. (and 25other hospitals located throughout the State of Florida) in Florida state court, which is currently scheduled for a jury trial in September 2025.

Related Party Transactions

• Henry Schein, Inc. signed a Memorandum of Understanding with Internet Brands to extend the time-based trigger for the exercise of our call option to July 1, 2032 and to pause the exercise by Internet Brands of its put option for a period of four years, to January 29, 2029.
• During the three months ended March 29, 2025 and March 30, 2024, we recorded $8 million and $8 million, respectively, within selling, general and administrative in our condensed consolidated statements of income, in connection with costs related to this royalty agreement.
• In our normal course of business, during the three months ended March 29, 2025 and March 30, 2024, we recorded net sales of $13 million and $12 million respectively, to such entities.
• During the three months ended March 29, 2025 and March 30, 2024, we purchased $2 million and $3 million respectively, from such entities.
• Certain of our facilities related to our acquisitions are leased from employees and minority shareholders.

Stakeholder Impact

• Shareholders will be impacted by the KKR investment and the continued stock repurchase program.
• Employees may be impacted by the ongoing restructuring plan.
• Customers should see continued access to a broad range of products and services.
• Suppliers will continue to be important partners in the company's operations.

Next Steps

• The company will continue to integrate recent acquisitions.
• The company will continue to right-size operations and further increase efficiencies under the 2024 Plan.
• The company will continue to monitor and address any impacts from tariffs and related economic conditions.
• The company will continue to accelerate its share repurchase activity, subject to market conditions and other factors.
• The company will work to consummate the strategic investment by KKR, subject to customary closing conditions, including certain foreign regulatory approvals.

Key Dates

Keywords

Henry Schein, financial results, Q1 2025, KKR investment, net sales, restructuring, cyber incident, segments, stock repurchase, healthcare