All right, I think we're gonna get started. My name is Jeff Johnson. I'm the Senior Medical Technology Analyst at Baird. Our next presentation this morning is from Henry Schein, the largest distributor of healthcare products and services to office-based practitioners in North America and Europe. With us today, we're very happy to have, as we always are, Chairman and CEO, Stanley Bergman. I'll throw in the man, the myth, the legend. Stanley, thank you for joining us, and, Chief Financial Officer, Ron South, as well. Stanley, I'm gonna turn it over to you for a few minutes if you have, some comments to make, and then, we'll go into Q&A. Thank you, Jeff. Thank you for having us, and, as I noted earlier on, I believe you're the longest-serving analyst of any of the big firms- Yeah ... covering dentistry, and, you know every nook and cranny, so thank you for hosting us. We have some prepared slides which are on the website. I'm just gonna fly through them because I think it's more valuable to handle the Q&A. So, Ron, this is your part. I reference you to the cautionary note regarding forward-looking statements. Thank you very much. Thank you, Ron. That makes the attorneys happy. Right. So, what we have here are some key metrics. On sales, 2022 was $12.5 billion. We have 1 million customers, office-based practitioners. That's dentists, physicians in the alternate care setting, but also including dental laboratories, urgent centers, surgery centers, dialysis centers, et cetera. It's probably 1.5 million-1.8 million practitioners that we cover, 23,000 people, 90 years in business. We're servicing dentists throughout the world, on the ground in 33 countries. Been on the S&P index for 7 years. Been recognized as a Fortune Most Admired company for 22 years. Ethisphere has recognized us as one of the, I think, 150 most ethical companies in their index, and best place to work from LGBTQ point of view, also for sev... I think you get the picture. Henry Schein is committed to balancing the needs of our five constituents, our suppliers, our customers, our team, our investors, and society. We've been doing that for 50 years, well before the concept of ESG was ever conceived. It's a fragmented market still. Some parts of the world are more consolidated than others. All the basic statistics are there. We have had consistent growth in our EPS. Pick any period of time, 5 years, 10 years. The macro trends, we think, are quite favorable. I can cover those, Jeff, and I'm sure you have a question there on the, the, the specific trends in regions, dental, medical, et cetera. But overall, it's a good market to be in. We are not in the acute care area. Procedures are moving from the acute care environment to the physician office, ambulatory surgical center, et cetera, et cetera, and, including, of course, the home. Dentistry, there's a growing understanding on the importance of oral care, the connectivity between oral care and healthcare in general, and so we think, the businesses we're in are good places to be from a macro point of view. Our strategic plan has five major components. It's BOLD +1. The B is advancing or building our high-growth, high-margin businesses. That is in the area of services, specialty services, including the largest practice management and related practice solutions, digital company in the world, growing nicely, good margins. We have a growing business in the specialty dental arena, implants, bone regeneration products, endodontics, and a small, relatively small, orthodontic business that is gaining some traction in the aligner space. You add all of that up, it's around 25% of our sales, at the moment, just under 40% of our operating income. You add our private brand to that, and well over a third of our business is in the high-growth, high-margin, own brand arena, and within the next couple of years, it'll approach half of our profits. We are spending a lot of time driving efficiency amongst our portfolio of distribution businesses, operationalizing that. Lots of good things happening there, both growing our market share and our operating income in these businesses. A key strategy of ours is to leverage our relationship amongst our customers, very important in the DSO world. In the United States, most of the larger DSOs view us as their primary supplier, and we're moving our high-growth, high-margin products into that arena, both the software and the various specialty businesses. And digitalization is very important for us. Happy to cover that. And, of course, the social responsibility and ensuring that we provide our shareholders with a good return on investment, consistent growth, are all key components, and that's in the BOLD+1. So we have a leading position, lots and lots of opportunity to grow our top line, our bottom line, customer base can be leveraged. I think, we can-... In all modesty, say we have a very good track record for delivery on our commitments, and our team is quite experienced. So we'll recognize Andrea Albertini, who's in the room, who runs our international business, but is also responsible for our global laboratory business and is driving our clinical workflow initiative throughout the world. So Jeff, that's the story. That is the story. Thank you, Stanley. Sorry, Ron, I took me 6.5 minutes. Right. Let's- You gave me five. That, I had the over-under set at 15 minutes, Stanley. So... Well, I'm known to not speak in staccato. Yes. Well, thank you for that. And, so yeah, a few questions there, and, you know, you talked about the breadth of the team, and kind of your commitment to delivering to those goals and those plans. So let me maybe start both of those places. So I think, at your Analyst Day earlier this year, I think one of the things that stood out amongst many things, but was the breadth of that team and the depth of that team. You know, an impressive team you've assembled, obviously, over the years. So, where are you with that team in succession planning? How are we thinking? I know you've, what, signed up for another couple of years now? What, what's your latest contract? I think two years or three years. I have to check with the lawyers. Yeah. But where are you with, you know, the depth of the team and the comfort with the team in someday, a post-Stanley Bergman era for Henry Schein? Right. So we have a very, very good team across the board with, I think, very good succession plans, Jeff. On the business side, we have Brad Connett, who runs the distribution businesses in North America, a veteran of 25 years with Henry Schein Dental and Medical today. Andrea Albertini, who manages our international distribution businesses and the areas I mentioned, been with Henry Schein for over 10 years. Both Brad and Andrea are really experts in the field of dental products and distribution and marketing. And at the same time, we have great leadership at Henry Schein One. Chris King is managing that business today, but she has an exceptional bench. And so those are the business leaders. At the same time, we have a Chief Strategic Officer who handles strategy and acquisitions, Mark Mlotek, also a veteran of 30 years, and Michael Ettinger, who's our Chief Operating Officer, who manages all the infrastructure and related services. So this team is at the very top. There's many more I could mention. Yep. Of course, Ron took over in a smooth transition from Steven. Gerald Benjamin retired also, and Michael took over his function. But underneath those leaders, there's a very, very strong bench of many, many young leaders and talented leaders, and so the company has invested a lot in succession planning. Yep, fair enough. The other thing from the Analyst Day, you laid out, Ron, a long-term plan, talked about, you know, some higher growth in the specialty markets, kind of a little bit lower on the dental side, a little bit higher in medical overall. We could put numbers on all that, but, you know, is that LRP-- Are we in an era where that LRP we should be thinking about, you know, is current, is active, or do we need to get back to a more normalized economy, really, to be thinking about LRP-type goals? Yeah, you know, with reference to the Investor Day, we provided some assumed market growth rates, as you mentioned. So for example, on dental, we said kind of on a long-term basis, we expect the dental industry to be growing kind of 2%-4%. I would argue we're probably we could be pushing towards the higher end of that in recent days, just given some of the activity we're seeing on, for example, in standard equipment is that growth is helping provide a, you know, pushing that towards the higher end of that Yep Dental specialties, kind of 5%-8%, we think is the long-term growth opportunity, and we still think that's the long-term growth opportunity there. But, you know, specialty is gonna be a little more vulnerable to macroeconomic conditions. Sure. And so you do get a little more vulnerability there, but we're seeing very good growth in our endodontic business. Our implant business continues to grow kind of in the mid- to high single digits. So we feel pretty comfortable with that 5-8 range, you know, holding as well. You know, our medical business, when I talk about our medical business, is really the medical segment in which we operate. So really, you know, working with the ASCs, who are still experiencing very good growth as more and more procedures work their way from the hospital into the ambulatory surgical centers. Of course, our physician customers and now, you know, as you know, we're starting to branch a little more into providing product to home healthcare providers as well. So as we look at that, that growth is expected to be, you know, in the market about 4%-7%. We're trending more towards the bottom end of that this year, mostly due to last year, just a very difficult comp. Sure. Our medical business grew consistently greater than 10% last year, each quarter, when you take out kind of the effect of COVID test kits and PPE, and so very difficult comps, and last year, we had a very robust flu season, which really drove a lot of traffic to the physicians, so we sold a lot of flu diagnostic kits last year that's not really repeating itself this year. Nevertheless, they're squeezing out a little bit of low single-digit growth for us, which we're grateful for. And then beyond that, our technology business, where we're technology and value-added services, where we're assuming growth in that 8%-12% in the market, and I think we're solid more towards the middle of that right now. We feel, you know, as Stanley mentioned earlier, our Henry Schein One business, and we're very happy with, you know, some of the progress they've made this year and how that business is operating. So I think we're kind of solid in that range. Okay. So some puts and takes as there would be any- Yes Probably year of- Yes O f, when you go across multiple different verticals. I would assume then if, if tech and VA is, is healthy within that 8-12, maybe specialty a little softer to offset, but it sounds like that still gives you good kind of margin progression as well. I mean, and maybe talk about this environment as a distributor. Costs are going up. Obviously, you've got the BOLD+1 initiative, you know, that has some cost control efforts in it. Still comfortable as well with that 10 basis points plus of, of kind of annual margin expansion goal? Yeah, we are. I think that you can get year to year or period to period where it can fluctuate a little bit, and I think as we begin to shift more and more of the business to specialty and to tech, those are obviously very different profile businesses than a standard distribution business. Much higher gross margins, but also you have to make some investment in OpEx along the way, whether it be in R&D for the implant businesses or in software development costs for Henry Schein One. And sometimes those revenues don't match up with when you incur those costs. But nevertheless, we think that in the long term, we can consistently deliver 10, you know, 10 basis points of operating margin expansion going forward. Yeah. Fair enough. Stanley, I think, you know, there's many examples of Schein kind of leading the way over the last 20-some years that I've covered the company, whether it was the Demedis acquisition going into Europe and really starting to roll that business up, getting into the specialty side when you didn't have access to those products through some of the manufacturing partners. I think the other one was, you know, early on, being a good partner to the DSOs, especially here in North America. It's given you a good competitive advantage. Where are you in the DSOs in Europe? And, you know, it seems like DSOs in Asia are growing very fast, at least from our checks. So where are you in partnering with DSOs in Europe, but especially in Asia, which I think is a little bit newer of a process? So, Jeff, firstly, let me just go back. First question, I forgot to mention the leadership of our specialty business. We have tremendous leadership, I think probably the most stable leadership team in the implant oral surgery space of any of the companies. The endo leadership is incredible, and so is the orthodontic leadership. But to answer your question, from our point of view, we remain the largest provider of products and services to the DSOs in Australia and New Zealand. There's been quite a lot of activity in that space, perhaps in the last 5-7 years, so it is growing significantly in that part of the world. China's not a very big business for us. It's $hundreds of millions, and we do well with the DSOs in China from distributing branded products. We don't make much money from that, but where we do make our money is in the endodontic space and in the providing of implants to DSOs. Our focus in China is much more on the private sector. We do sell to the government area, but it's not that profitable, and it's a relatively small business. Japan is a joint venture, and I don't think DSOs are important there yet. Yeah. Okay. Fair enough. Maybe I didn't hear anything, just DSOs in Europe there, but just- Yeah, sorry ... more broadly. Yeah, no, but more broadly on Europe, you know, I think there's been some mixed macro signals, but also some mixed dental feedback, especially in Germany, but in a couple other European markets as well. Just kind of your lay of the land of Europe right now from a consumption standpoint as well. Yes. I, I, I should have mentioned in the DSO world, in Europe, I think we only we the only provider of products that has a Pan-European strategy in dentistry, and we cover a significant number of the emerging DSOs. I think the fastest-growing ones are customers of ours. There is some challenges in that area, a couple of bankruptcies, et cetera, but generally, there's good, solid management in several of these big DSO groups, and they're generally customers of ours. The market is mixed. I would not say it's as bad as some of the analysts have written. There are some challenges in some of these markets. There is definitely a movement around, Jeff, amongst manufacturers. I think a couple of the manufacturers took their prices up a little too high. Mm. Others have moved in to fill that vacuum. So I think one has to look at the macro market and not at one or two companies. So it is quite complex, and particularly the case in Germany. Yeah. And I guess following up there, you know, when I think of your product positioning, if there's a slowdown in Germany, you do have some of those other either branded product, maybe not, you know, the highest end equipment, so you can offer a more value proposition on the equipment that some of the manufacturers are stuck in the premium side only. And same thing with Camlog, obviously, a good price point there, but a good market share. So yeah. Just wanting to follow up on what you said about it's not necessarily an overall market thing. It seems to me like you're fairly well protected there and well cushioned in Europe. Is that a fair way to think about it relative to some who might be at the more premium- Yeah End of the scale? You have to break a little bit down by country. Yeah. I would say in Germany, on the specialty side, particularly on the implants, oral surgery side, implants and bone regeneration, we have an outstanding business. I would say, in all modesty, the best management team in that field, and we've done extremely well. We continue to grow. We've grown that business for the past 10 years. Really outstanding team. We're also. That's on the premium side, Camlog, or BioHorizons as Camlog today. Mm-hmm. We have Medentis, which has done extremely well in the low end. Yeah. High quality, but lower priced. On the equipment side, there has been movement. On the traditional equipment, some of the lesser-known brands have done very, very well with us. Yeah. Not because we're not supportive of the big brands, but they're much more attuned to pricing in the marketplace. There's been a lot of competition on the digital side. The units are doing well, especially the DI, but the players are a little bit different. I mean, there's one or two players that have continued with their market share, but there's a couple that have not done that well- Yeah A nd have ceded their market share to others. So and on the consumable side, you know, there's our private brand, and there are some of the second and third layers of manufacturers that have realized that some of the big guys have gone too high. Yeah. So, there's a lot of shifting going on there in Germany, but that shifting you can see throughout Europe. All right. That's helpful. And then, on that pricing point, I mean, I think last year we probably hit, what? +2, 2.5%, somewhere in that range, maybe even +2 to 3%, from a pricing standpoint across, kind of broadly across consumables, if we roll all the manufacturers up. Your consumables growth in the second quarter, if I look at kind of the 4Q and 1Q blend and compare that to second quarter, in North America, it slowed by a few points. How much of that was pricing coming back from that +2, 3, more to a normalized maybe 1 or sub-1, versus a change in, in maybe- Yeah P atient consumption or volume? I can't give you a perfect answer. Yeah, yeah. Having said that, my notes tell me, our gurus tell us it's 50/50. Okay. I actually think that in terms of profits, we've done quite well. In terms of price deflation, I think it's not price deflation with a particular manufacturer. It's movement to other manufacturers. Okay. It's, to some extent, movement to our corporate brand. What has happened is customers are more educated today than ever before. They're looking for value, and those that are prepared to meet the customer's needs and work with us are doing well, and we are doing well with them. So I expect that the market will recognize this in the months to come, and there will be adjustments. But a couple of manufacturers really priced themselves a little too high. Yeah. How much of that is driven by dentists coming to you saying, "We need an alternative here," versus you guys have been so good at putting formularies together and things like that. Do you make a proactive effort to say, "Hey, look at all these other options?" Or is it the dentist coming to you saying- Yeah W e need options? For the larger customers, and that's particularly in the U.S., these are educated people. They know what's going on, and they will come to us and say, "You know, we've got this particular product, a file. Who, who are the players in that?" They know who they are. "Who can you get us the best deal? Yeah. So they view us, I wouldn't say as a pure-play GPO, but they rely on us to go and get them the best pricing. That is the case with the DSOs, large and mid-sized. The smaller people, our job is to... We don't show a brand and a private brand next to each other like you'd find in a drugstore, but we show the options. Mm. The customers are doing their checking, and there's definitely an awareness, an educated consumer today, more than ever. It's not really driving our margins down. I mean, our absolute dollars on a unit is still pretty good. Yeah. But there is a shift, and it impacts the top line. Right. In the end, it doesn't matter because the operating profits for us will continue to grow. Yeah, fair enough. And then, Ron, maybe just for you on the equipment side, you know, we've seen, I think, that equipment on a probably trailing 12-month or maybe trailing 6 quarters or so, grown probably what? Mid- to upper single digits, 5-6, 5-7, somewhere in there, maybe even a little above that. How much of that is, and I'm talking mainly North America now. Mm-hmm. But how much of that has been price and, you know, I think to some of the A-dec price increases and that kind of went in last spring to summer kind of area. Do we anniversary through that now that TTM growth rate comes down, or is there a volume backfill that can kind of offset? Just how to think about kind of the moving pieces on the equipment side. There is some price favorability that we're getting this year still. Okay. I think that's... Part of that is from- Will it continue through the year? I think it will. You know, as we work the backlog down- Yeah I f we have the opportunity to work the backlog. The backlog really didn't move too much in the second quarter. Yeah. But as we work the backlog down, we will see some price benefit come through because we took delivery on that product, and we don't record the revenue on that product until we actually install it on behalf of the customer. So we'll see the effect of that price increase happen at that point in time. So you're right. In North America, and especially on standard equipment, and really talking about standard equipment versus high tech, we had essentially double-digit growth in standard equipment in the second quarter. Yeah. I would say perhaps a little less than half of that would be price-related. Okay. But nevertheless, we're very pleased with that, with that level of growth, especially in light of the backlog not coming down. In the environment where dentists are saying, "Look, you know, brand A and brand B have gotten too expensive, I'm gonna go to brand C," is that possible or even happening in basic equipment? Or is there going to be better price sustainability, pricing gains that can continue into 2024, 2025 in an inflationary environment? Can those companies continue to take price? There's fewer manufacturers, there's preferences that maybe are a little stronger in some of those. So how to think about sustainability and price and things like basic equipment- I'd say, Jeff, in North America, there are very strong brands on the equipment side. Mm-hmm. On the traditional side. I don't think that's gonna result in movement of share amongst manufacturers on the traditional side, at least with the top two of them. In Europe, it's a little bit of a different case. We've seen, Yeah Dennis Rebell, and, you know, Andreas Nodding, and they've just said to us, "It's enough," you know? Yeah. It's high. Great, these brands are great," but you know, it takes some place like Germany, where people are not looking for the most perfectly engineered product- Yeah T hat may have been great. You know, they may have looked at it that way ten years ago. They want to see the best value. Yeah. Fair enough. There are plenty of providers that are servicing that need. DSOs, just I think back to the North American equipment market. You know, it sounds like there's these strong brand reputations where, you know, and we're seeing it in areas outside of dental, where on the base or on the capital side, you can push a little bit bigger price increases than normal. But I also think there's this dynamic in the North American market with DSOs are the biggest consumers probably of basic equipment, and they're not going to necessarily continue absorbing those higher prices, I would think. No, they won't. No. So even in North America, you think these pricing, like- You have to be careful with the traditional- Yeah C hairs, units, and lights. There are some very strong brands. Yeah. But with the rest of the market, it's, they're looking at price, especially with the digital. Yeah, fair enough. You know, that. There are, you know, there's a couple of anchors in there- Right T hat, based on features and benefits, will keep their market share. But this is a fluid market, and, you know, we're being asked all the time, for alternatives. All right. Let me- Discussed that early on. Yeah, let me ask a question on 3D printing, and then I want to maybe just finish up in tech and value add. On 3D printing, I mean, you know, we hear a lot of excitement. I think the excitement's probably a little bit ahead of the true utilization or capabilities of what's possible in the dental office. What's the next kind of... Does it have to come on digital dentures? Does it have to come on clear aligners? What's the next step to really push 3D printing into the dental office and get the uptake there? Yeah, I think it's, you know, like with the scanners, there's the early adopters. We have the early adopters. I expect that within the next couple of years, it'll be standard of use or standard of purchase. I don't know if they'll buy them. I, I know they'll buy them. They're not that expensive. Will they be integrated into the practice? I think that very much depends on functionality and the availability of diverse materials, so that's maturing. I think the denture will come, the 3D denture. One- Yeah, and then, is that- We showed you one at our investor meeting. Right. Yeah, and- It will come. I mean, like with all products, it'll, I'm sure, have some challenges when it's launched, and... but it will come. Will that be ahead, you think, of true crown capabilities, or do you think we're close enough with crowns right now with some of the providers out there? Very hard to tell where this is gonna go. Yeah. A lot of it's- You can still do your crowns now. Yeah. That's there. Yeah. The front is not- Still seeing good customer reaction to that? I mean, obviously- Yeah ... there's some question on: Is it a temp? Is it a permanent? Mm-hmm. Things like that. It's good. The customers want it. I just saw in my email this morning, there's a seminar on using 3D printing for cosmetic purposes. Yeah. I would like to see that, and I asked some of our people to go tune into that seminar. This is gonna move. Yeah. The fact that the ADA has approved this so quickly as a product code, procedure code, is very exciting. Yeah. We're selling a lot of these things. I think we're, today, the number one provider of these 3D printers in most countries that we're in, and the lab is moving exceptionally fast into that area. Yeah. All right, well, 45 seconds, so, Ron, that means it's a question for you, not Stanley, if we have 45 seconds. So- 45 minutes. Yes. In tech and VA, just, you know, I think between tech and VA and specialty, when those, when we're back in good markets, those are all growing and all that. You know, the real story to Henry Schein here on both the revenue and the margin side from putting those two businesses together. But the tech and VA, you think going forward can sustain at that upper single to low double digits? Is that a long-term sustainable, and, and do you sustain upper teens margins in that business? Yeah, I mean, we expect it. Like I said before, we got 8% to 12% market growth assumption in our- Yeah I n our long-range models. We think we can operate within that market growth assumption and take some market along the way, as well as increasing size of wallet with our existing Henry Schein One customers, and that should give us, you know, some accelerated growth there. So no, we do—and we will—I think we can continue to get the margins we have. Margins. Like I said, you occasionally have to invest in some development costs that can create a little bit of lumpiness there, but, but I think over a long-term period of time, we can definitely maintain those, those margins. All right. Fair enough. Well, I think our time is up, so please join me in thanking Ron and Stanley for a wonderful overview here of Henry Schein. As a reminder, the next presentation is set to begin at 10:50 A.M. Eastern Time, include Exact Sciences, Ambrx Biopharma, and Vital Connect. Thank you. Thank you.