Good morning, ladies and gentlemen, and welcome to Henry Schein's third quarter 2025 earnings conference call.

This time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session. Please press the star key followed by 1 on your touch-tone phone if you'd like to ask a question at the end of the call. If anyone should require operator assistance during the call, please press the star key followed by 0 on your touch-tone phone. As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Graham Stanley. henry shine's vice president of investor relations and strategic financial project officer please go ahead graham thank you operator and thanks to each of you for joining us today to discuss henry shine's financial results for the 2025 five third quarter with me on today's call stanley bergman chairman of the board and chief executive officer of henry shine and ron south senior vice president and chief financial officer before we begin i'd like to state that certain comments made during this call will include information that's forward-looking. Risks and uncertainties involved in the company's business may affect the matters referred to in forward-looking statements, and the company's performance may materially differ from those expressed in or indicated by such statements. These forward-looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein's filings with the Securities and Exchange Commission and included in the risk factors section of those filings. In addition, all comments about the markets we serve, including end market growth rates and market share, are based on the company's internal analyses and estimates. Today's remarks will include both GAAP and non-GAAP financial results. We believe the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable the comparison of financial results between periods where certain items may vary independently of business performance, and allow for greater transparency with respect to key metrics used by management in operating a business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in Exhibit B of today's press release and can be found in the Financials and Filing section of our Investor Relations website under the supplemental information heading, and in our quarterly earnings presentation also posted on our website. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 4th, 2025. Henry Scheinem takes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Lastly, during today's Q&A session, please limit yourself to a single question so that we can accommodate questions from as many of you as possible. And with that, I'd like to turn the call over to Stanley Bergman.

Good morning, everyone. Thank you, Graeme. Thank you for joining us. We are pleased with our financial results for the third quarter, with sales growth accelerating in each of our reportable segments, including solid market share grains in our distribution businesses, as we are once again focused on driving growth now that the cyber incident is fully behind us. The strong sales performance was a key driver of the underlying improvement in our operating income, our successful execution of the Bold Plus One strategy, including the financial performance of our investments in high-growth, high-margin businesses. The Foundation continued input from KKR We have made good progress on advancing the value creation initiatives we announced last year – last quarter, actually. Based on our first phase of work, we believe we have the opportunity to deliver over $200 million on improvements to operating income over the next few years. We have begun executing on these multi-year projects with key areas of focus that include centralization support services indirect procurement automating and simplifying processes and accelerating sales of corporate brand products to return to our long-term goal of high single-digit low double-digit earnings growth our board has approved an amendment to the strategic partnership agreement giving KKR the right to increase up to 19.9 percent open market touch on a few key highlights from the quarter that advanced our bold plus one strategy on track to achieve our goal of over 50 percent of non-GAAP operating income coming from high growth high margin businesses by the end of 2027 which is the current strategic planning cycle and that's in addition we expect more than 10% from our corporate brands. So that's in total about 60% of our non-GAAP operating income, these high-growth, high-margin businesses. While we have continued to strategically invest in our business, we have focused recent capital deployment on accelerating the repurchase of the company's shares. Our board recently approved a $750 million increase in this program and our current expectation is to continue to execute buyback at a similar pace. Building on the momentum from our successful launch of our new henryshine.com global e-commerce platform in the UK and Ireland, we are rolling out a phased launch in North America. We expect to start the European rollout in 2026. Turning now to review of our business units, I'll start with the global distribution and value-added services group. Here we delivered solid sales growth in the third quarter across our global distribution group in both merchandise and equipment sales. In general, patient traffic remains steady. Notably, sales growth accelerated in the U.S. merchandise area, which reflects strong corporate for brand sales growth, as well as the positive impact of targeted promotional programs we initiated during the second quarter, resulting in continued increase in our market share in the United States. We turn now to the U.S. dental equipment sales, which increased in the low single digits. Digital equipment delivering double-digit growth, average selling price in digital equipment, but this is offset by strong volume growth. Traditionally, equipment sales declined slightly. However, it's important to notice we believe this is a result of the timing of installations. We introduced a new online financing program, which we believe contributed. Our auto intake at DS World was good this year, and we expect this to help our equipment results in the fourth quarter. equipment growth. The U.S. medical business sales grew in the mid single digits and for medical products for pharmaceutical and the dialysis business along with continued strong performance in home solutions. This was partially offset by lower demand for respiratory diagnostic products and a decline in influenza vaccine sales. Are international dental merchandise our sales stable thing in the low single digits in constant current international equipment sales yeah we have strong growth value-added services sales grew modestly with sales growth driven by consulting services which includes our e-assist revenue cycle management to the global specialty products group as a reminder this group includes implants and biomaterials as well as endodontics, orthodontics, and orthopedic products. The third quarter sales reflected continued strength in implants and biomaterials as well as endodontics. We were particularly pleased with our implant performance, which built on last quarter seller trends. Sales growth was in the mid-single digits in constant currency, And we believe we continue to gain market share across most implant markets, in particular ones where we service the market resources on the ground. We believe we're doing quite well in those implant markets. Sales growth was led by our value segment. Both SIN and Biotech Dental Implant Systems performed exceptionally well. each posting double-digit gains, complemented by steady low single-digit growth in our premium brand, BiHorizon's Camelot, demonstrating the strength of our broad portfolio of offerings. In the U.S., implant and biomaterial sales grew in the low single digits against a challenging prior year comparison from our rollout pro-conical implant and ongoing growth we achieved in smart shape healer button to continue the tapered pro clinical product now represents approximately one-third of our u.s implant sales and it's important to understand that our customer feedback on this product offering is very very positive international implant sales increased high single digits once again driven by strong double digit growth across the duck region and latin america reflecting strong patient demand and execution by our regional team, which continues to be very good. Our endodontics business delivered mid-single-digit growth for the quarter, benefiting from expanded sales distribution team. Orthodontics, while still a small component of our specialty products, has stabilized and we remain focused on improving the profitability of the orthodontics business. And finally, our orthopedic specialty business posted solid double-digit sales growth. So looking ahead, we are encouraged by the momentum across our specialty business. Now, on the global technology group side, here we continue to accelerate the third quarter, driven by strong growth in the adoption of our core practice management solutions business, particularly our cloud-based platforms, including Centrix Ascent and Pentale, as well as strong growth in our revenue cycle management solutions, including eClaims, electronic billing. As a result, we are seeing growth in annual recurring SaaS subscription revenues, as well as in transactional services. Practice management software sales growth was again in the high, mid-double digits this quarter, driven by a 20% year-over-year increase in the number of cloud-based customers, primarily from new Henry Schein One accounts. The whole cloud-based strategy for us is doing very, very well. We now have over 10,500 Dentrix Ascend and Dentali subscribers. Revenue growth also benefited from recently launched revenue cycle management solutions are now being adopted by practitioners as they seek to drive revenue and improve operating. There are also some exciting new developments in AI in our technology group. Yesterday, we announced a partnership with Amazon Web Services to integrate its generative AI technology with Dentrix Ascend and Dentali. Among the benefits are a real-time documentation system that uses AI to capture and summarize patient interaction, voice-activator charting, scheduling, and communication tools to further personalize the patient experience. Intelligence that automates claims validation and facilitates dynamic pricing tools. We believe this will be Henry Schein 1 offering, and we expect these will help our customers drive incremental revenue and greater productivity in their practices. Let me now comment on the announcement we made earlier this year that I'll be retiring as CEO at the end of the year while continuing to serve as chairman of the board. As we discussed on our last conference call, the board started a formal search process supported by a nationally recognized executive research firm, considering internal and external candidates, and remains on track to announce my successor by the end of the year. Of course, I remain committed to ensuring a smooth and seamless transition. Now, let me turn over the call to Ron to review our third quarter financial results and discuss 2025 guidance. Ron, please.

Thank you, Stanley, and good morning, everyone. As usual, today I will review the financial highlights for the quarter and would like to remind investors that on our investor relations website, we also have included a financial presentation containing additional detailed financial information, including certain reportable segment information. Starting with our third quarter sales results, I will provide details on total sales, total sales growth, as well as constant currency sales growth compared with the prior year. global sales were 3.3 billion dollars with sales growth of 5.2 percent compared to the third quarter of 2024. Reflecting constant currency sales growth of 4.0 percent and a 1.2 percent increase resulting from foreign currency exchange. Acquisitions contributed 0.7 percent sales growth our gap operating margin for the third quarter of 2025 was 4.88 percent a decrease of six basis points compared to the prior year GAAP operating margin. On a non-GAAP basis, the operating margin for the third quarter was 7.83%, an increase of 19 basis points compared to the prior year non-GAAP operating margin. Operating margin improvement was driven by lower operating expenses as a percentage of sales partially offset by lower gross margin. We continue to drive improved operational efficiency by integrating acquisitions, restructuring, and executing our new value creation programs. Gross margin was down 56 basis points year over year, primarily related to product mix in our global distribution group and in our global specialty product segment. Sequentially, gross margins versus the second quarter declined primarily due to the seasonality of flu vaccine sales in our medical business. Of note, gross margins stabilized in the U.S. dental distribution business. Turning to taxes, our effective tax rate for the third quarter of 2025 on a non-GAAP basis was 22.9 percent. The lower effective tax rate reflects the non-taxable nature of the remeasurement gain recognized in the quarter. This compares with an effective tax rate of 24.9 percent for the third quarter of 2024. We expect the effective tax rate to be in the 24 to 25 percent range in the fourth quarter, which is more in line with recent historical rates. Third quarter 2025 GAAP net income was 101 million dollars or 84 cents per diluted share. This compares with prior year gap net income of 99 million dollars or 78 cents per diluted share. Our third quarter 2025 non-gap net income was 167 million dollars or a dollar 38 per diluted share. This compares with prior year non-gap net income of 155 million dollars or a dollar 22 per diluted share foreign currency exchange favorably impacted our third quarter diluted eps by approximately one cent versus the prior year our third quarter results include a remeasurement gain resulting from the purchase of a controlling interest of a previously held non-controlling equity investment that business has performed well since we made our initial investment and as a result we recognized a pre-tax remeasurement gain of 28 million dollars this quarter. This compares to a pre-tax remeasurement gain of 19 million in the third quarter of 2024. The remeasurement gain in the third quarter of 2025 and its related tax treatment contributed approximately 23 cents to EPS, which is approximately eight cents more than the remeasurement gain recognized in the third quarter of 2024. Adjusted EBITDA for the third quarter of 2025 was $295 million. Compared with third quarter 2024, adjusted EBITDA of $268 million, representing growth of 10%. Turning to our sales results, the components of sales growth for the third quarter are included in exhibit A in this morning's earnings release. So I will provide the primary highlights of the main sales drivers for each reporting segment, starting with our global distribution and value-added services group, whose sales grew by 4.8%. Within this segment, U.S. dental merchandise sales grew 3.3% and U.S. dental equipment sales grew 1.2% with strong growth in digital equipment. We enter the quarter with a good equipment order backlog for fourth quarter sales. U.S. medical distribution sales grew 4.7% despite lower demand for influenza vaccines and respiratory diagnostic products. Our home solutions business had another strong quarter, growing over 20% on an as-reported basis and 6% excluding acquisitions. International dental merchandise sales grew 6.0% or 2.5% in constant currency, driven by sales growth in Brazil, Canada, Italy, Spain, and Australia. International dental equipment sales were strong with 10.1% total growth with constant currency growth of 5.7% driven by sales in Germany, the UK, Canada, and Australia. And finally, global value added services sales grew 3.3% driven by consulting services. Turning to the global specialty products group, sales grew 5.9% or 3.9% in constant currency. Our implant and biomaterial business experienced solid growth in the third quarter, including double-digit growth in value implants and low single-digit growth in premium implants. We achieved modest implant sales growth in a stable U.S. market due to a high prior year comparable and high single-digit sales growth in Europe, including low double-digit growth in Germany. We also had strong results in the global technology group with total sales growth of 9.7% with 9.0% in constant currency. In the US, sales growth was driven by practice management software with double-digit growth in Dentrix Ascend, as well as solid growth in our revenue cycle management business. Internationally, sales growth was primarily driven by double-digit growth at our Dentale cloud-based practice management solutions product. Turning to our restructuring program, from the Our restructuring program announced in August of 2024, the company recorded restructuring expenses of $34 million or 20 cents per share during the third quarter of 2025. We expect to achieve annual run rate savings of more than $100 million from that restructuring Additionally, from the value creation initiatives announced last quarter, we believe the opportunity should deliver over $200 million of operating income improvement over the next few years. Therefore, we are extending our restructuring plan, and we will continue to record restructuring charges in 2026 and 2027. We expect these initiatives to support a return to our long-term goal of high single-digit, low double-digit earnings growth. Regarding share repurchases, during the third quarter of 2025, the company repurchased approximately 3.3 million shares of common stock at an average price of $68.62 per share for a total of $229 million. At the end of the quarter, Henry Schein had $980 million authorized and available for future share repurchases, which includes $750 million that the Board of Directors authorized in September. As Stan mentioned, our expectation is to continue to execute buybacks at a similar pace to this past quarter. Turning to our cash flow, we generated strong operating cash flow of $174 million in the third quarter of 2025, and continue to expect operating cash flow to exceed net income for the full year. This compares with operating cash flow of $151 million in the third quarter of 2024. Our accounts receivable increased slightly during the quarter in line with sales growth, as third quarter revenues were approximately $100 million higher than the second quarter revenues. Let me conclude my remarks with a discussion of our updated financial guidance. At this time, we are still not able to provide, without unreasonable effort, an estimate of restructuring costs associated with the restructuring plan for 2025. Therefore, we are not providing GAAP guidance. We are raising our 2025 financial guidance as follows. We now expect non-GAAP diluted EPS attributable to Henry Scheinney to be in the range of $4.88 per share to $4.96 per share. reflecting stable markets and good third quarter financial results as well as the remeasurement gain realized in the third quarter. 2025 sales growth is now expected to be three to four percent over 2024. We expect a full-year non-GAAP effective tax rate of approximately 24 to 25 percent and we are maintaining our 2025 adjusted EBITDA guidance which is expected to grow in the mid single digits versus 2024 adjusted EBITDA of 1.1 billion dollars. Our guidance also assumes that foreign currency exchange rates will remain generally consistent with current levels and that the effects of tariffs can be mitigated. Our 2025 guidance is for current continuing operations and acquisitions that have closed. With that, I'll now turn the call back to Stan.

Thank you, Ron. I'd like to give you, which is very unusual for our calls, a bit of a reflection on the past 30 years as a public company. Tomorrow we'll be ringing the opening bell at the NASDAQ Stock Exchange to celebrate our 30th anniversary since our IPO. That's 120 quarterly calls. The growth on the journey from IPO in 1995 to today has been quite significant. With sales growth over this period growing at over 11% compounded average growth rate, from a market capitalization of $280 million, the value of the company has grown at almost 12% compounded average growth rate, including the value of the animal health business we spun off in 2019. So this 12% compounded annual, like all rapidly growing businesses, there have been some significant ups and downs along the way. When we merged with Sullivan Dental and Mia Dental back in 1997, skeptics questioned whether we could integrate three distinct cultures and turn our business from a dental mail order company to a dental full service operation, including a field sales organization and equipment sales and service, while integrating these three cultures. That year, we also acquired Dentrix Dental Systems, creating what some call a three-legged chair, selling products, services, and technology. Shortly thereafter, we had a dental and aesthetic recall issue. When our stock price fell, we chose the difficult path of continuing the journey of creating the world's largest full-service dental software. In a period of time, our customers saw the value of our one-stop shop. Then came our bold expansion into Europe, which was accelerated in 2004 with the acquisition of the Metis, the recently spun-out distribution business of Sirona. This created a global platform which changed the level of discussion within the industry. New markets, new common values. When the 2008 financial crisis struck, we were forced to make difficult decisions while staying true to our values. We tightened our belt but kept investing in our people and our future. Fast forward to 2020, COVID temporarily closed down the dental market. There were empty offices, disrupted supply chains, and uncertainty everywhere. But Team Shine adapted and using our world-class supply chain network played a key role of governments in supplying personal protective equipment, mainly as masks, as well as COVID tests, healthcare professionals, healthcare practices throughout the world. When the world reopened, we bounced back. The business was growing well until October of 23, when the cyber event hit us. For a moment, it felt like everything we'd built was vulnerable to an invisible threat. But once again, our team rallied, restored our systems, and began the recovery. Some customers took a while to return, but appreciated our offering in the end. This is now behind us, not forgotten, but overcome by this incredible sunshine. which is once again focused on driving salesmen each challenge made us sharper more resilient and more united which brings us today's bold plus one strategy which accelerates us into product development innovation expanding our digital capabilities deepening customer partnership and our owned brands all of this enabled us enables us to provide our customers with solutions to operate in more efficient practice so that our customers can focus on providing better patient care. Our recent results demonstrate the success of the strategy. In addition to the outstanding growth over the past 30 years, I'm particularly satisfied with the work of the company and all Team Shine members who have undertaken this incredible journey to make an impact on the profession around the world. We have become a leader and a model with our work to create and strengthen public-private partnerships, whether it's in the profession or in the local markets that we serve or even on a global basis, that have expanded access to care around the world. We have made a difference in enhancing global health preparedness and reinforced the vital link between oral, including the goal of ours, and related profits. In closing, I have huge confidence in the management team who are talented, motivated, working diligently to execute our strategies, including our value creation programs, which we provide a further clarity today, and I'm quite sure this will go and how this will drive up operating income and therefore shareholder value. So, before we take questions, let me thank all 25,000 Team Shine members around the world, our incredible board, our suppliers, those investors that have confidence in us. I believe you will be well rewarded in the years to come. Thank you for supporting us for the past 30 years. I personally wish to thank those on this call that I've known for so many years, many analysts for decades, many investors since the beginning. It's been a true wonderful journey. It's been wonderful getting to know all those constituents, the office-based dental and medical practitioners. So with that in mind, let me turn over the call now to the operator to answer some questions. Thank you very much. And sorry for the words here, but I'll just make a couple of extra words. Thank you.

Thank you. We'll now be conducting a question and answer session. To allow as many as possible to ask questions, we ask you to please submit yourself to one question. If you'd like to ask a question, please press star 1 from your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from the line of Jason Bednart with Piper Sandler. Please receive your question.

Hey, morning, everyone. Nice quarter, and Stan, it's been a pleasure working with you. Congrats on everything. I'll try to stick with the single question request, but I may bend the rule here with the multi-part question. I wanted to focus on the comments you're making about future earnings growth. The third quarter performance might suggest you're back to posting better top-line growth. It also seems like you're picking up some benefit from the restructuring program that's been ongoing. And then you have the first phase of the value creation targeting $200 million in EBIT benefit. When you say that you're returning to your long-term goal of high, single, low, double-digit EPS growth, I guess my question is whether that's a comment that's applicable to 2026. and that $200 million benefit is pretty large. I think it's larger than a lot of us were expecting today. Shouldn't that program alone get you in that EPSK range before we even think about core revenue growth and capital allocation opportunities?

So, Jason, thank you. And I think you're one of the two analysts that have the longest experience in our space and really know it. So thank you for sticking with Dental. I think Dental will present good rates of return to investors over time. So I think it's a good place to focus from an analyst's point of view. But I'll deal with the sales momentum. I think we're very comfortable now that the cyber incident is behind us. Our salespeople are out aggressively going after business, not a matter anymore of explaining what happened in terms of the cyber incident. And I think it's quite clear now that many in health care, unfortunately, have been through It's kind of almost normalized. And I think a lot of our customers have tried alternative options to save a penny here or there, but realize that the service we provide from a supply chain and all the value-added services makes it really worthwhile. So I would say the organization, we've got great management throughout, in particular as it relates to sales and sales management. The marketing management is great throughout the world. And so the momentum is very good. We're attracting excellent representatives to join our sales representatives. So the momentum is there, and I think that's indicative of the fact that we upped our sales guidance. Now, Ron, as it relates to the financials, your thoughts?

Yeah, certainly, Jason. With reference to 2026, as you can appreciate, you know, this is a kind of a multi-year plan to deliver the $200 million in operating income improvements. Having said that, we do expect some operating improvements in 2026. So as we assess the plan and as we kind of work through the sequence that will be necessary to deliver that $200 million, we'll be able to determine the estimated impact and the estimated benefit that will be in 2026, and we'll reflect that in our 2026 guidance when we provide that in February.

Okay, very helpful. Congrats again, Stan. I'll step back for others to ask questions.

The next question comes from the line of John Block with Stiefel. Please refuse your questions.

Thanks, guys. Good morning. And Stanley, certainly echo everyone else's congratulations. A quick one for me, you know, Ron, the midpoint of 25 EPS guidance came up by five cents, if I've got that correct. The remeasurement was eight cents above last year. So maybe if you can talk about what was embedded in the original guidance and clarify that, And then just taking a step back and, you know, maybe this one's for you, Stanley, just the quarter, the third quarter was certainly better relative to 2Q. You mentioned some share gains, but I'm just curious, how much of that was market improving versus Henry Schein execution and maybe any early comments on October? Thanks, guys.

Okay, I'll start with the guidance, Stanley, if you would, and you can do the back half. But, you know, on the guide, John, you know, with the remeasurement gain, you know, there's a range of outcomes that we have to estimate there because until you actually complete the transaction, it's difficult to assess exactly how much will be there. So it was slightly higher perhaps than what we would have expected, but it was within the range of our expectations. So the $0.05 has a little bit of a benefit from that remeasurement gain, but it also reflects, I think, the momentum we feel like we have in sales growth. I mean, if you look at year over year for us and strip out the remeasurement gain, strip out the $28 million in the third quarter on a pre-tax basis this year, strip out the $19 million on a pre-tax basis last year, and take a look at our non-GAAP operating income, we did achieve about 4.5% operating income growth. And that's, you know, we think that's pointing us in the right direction. And so we're confident with the momentum we're seeing coming out of the third quarter, going into the fourth quarter, and that's reflected in the revised guide for this year. Stanley, you want to do that?

Thank you, John. And thank you also for following us in the dental industry for so long. The markets are, I would say, generally stable. Of course, there are some markets that are a little bit better, some that are not. But generally, the big markets are stable. I think units are pretty constant in the markets. It's most encouraging that this time now we don't see pricing going down too much. It's pretty stable, I would say. I don't think customers are moving significantly to lower-priced national brands. There was a movement in that area. Having said that, our own brands have increased now for the last few quarters. I think there's good momentum there. A little bit of tariff inflation, maybe 100 or so basis points in the United States, but not a lot. We've been able to talk to some manufacturers about absorbing the tariffs. Others, for some products, we've switched to U.S. manufacturing. perhaps a few items, more than a few, to markets with the tariffs a little bit less. So, generally, the market is stable with a tad of inflation, 100% or so. Glove pricing is stabilized. Units are a little bit up now for us. We are gaining that market share there. But generally, I would say, from a Henry Schein point of view, we believe we're gaining market share. and I'm talking about distribution now. Where it becomes a bit clearer is on the implants and related bone regeneration there. We believe we definitely are growing faster in the market. Maybe there's one manufacturer doing a bit better than us in certain markets that we are not focused on. But generally, I would say we are doing quite well in the implant field where the market is relatively stable. and endodontics, relatively stable. We're gaining market share. On the medical side, the medical side of Henry Schein has done well. I think it's stable. I don't think there's much in the generics to report this quarter. Medical equipment, med-search products, relatively stable. There has been a decrease in testing and respiratory products. It's just not been people have not been very sick this season. But overall, I think the four or five percent we're growing in medical in the U.S. is indicative of the market with not a significant amount of inflation. And I think we are picking up market share there. And of course, on the software side, it's quite clear we're doing extremely well. And that's driven by our cloud-based system, systems growth, our various value-added products that we've added to our electronic medical record system. And overall, I would say we're doing generally quite well. We've listed countries where we're doing a little bit better, and obviously those are countries where it's largely market share growth because the markets throughout the world are relatively stable.

Thanks, guys.

The next question is in the line of Elizabeth Anderson with Evercore ISI. Please see if there are questions.

Good morning. And Stanley, congrats. Very excited for you. And you've achieved so much in this company over the years, so appreciate all of your work there. Maybe just going – you talked about, I think, during the call some of the stabilization and the gross margin in the distribution business. Ron, I was wondering if you could expand on that a bit and sort of talk through the puts and takes of that and sort of how you see that developing maybe in the fourth quarter and as we think about going forward.

So, yes, on the U.S. specifically, I was making reference to the U.S. dental side. We did see, you know, stabilization in the margins there as glove pricing stabilized, so that definitely helped. and we returned to a more normal level of promotional activity in the quarter. So the Q3 gross margins in U.S. dental were consistent with what we saw in the second quarter. And I would expect that to continue into the fourth quarter, largely driven by continued stabilization in PPE, specifically clubs, because that is a very important product category. Within medical, we did have a little bit of product mix there as influenza vaccine sales tend to be very strong in the third quarter relative to the rest of the year, even though they were down year over year, and that is a lower margin product. Also, medical saw very good sales growth in their pharmaceutical products in the quarter, and those tend to be a little lower margin than the overall margin in medical, but very pleased with the sales growth we got in medical and believe we can continue to see that continue until the fourth quarter.

Firstly, thank you, Elizabeth, through your comment, but Ron, if you could answer, I forgot to answer John's question on October.

Yes, certainly, and with reference to October, you know, we continue to see, I think, the similar trends to what we saw in the third quarter. As we worked through October and looked at the results, we've seen a, you know, there may have been some forward buying a little bit as people were trying to get out in front of terrorists, but we didn't really see that impact October negatively for us. You know, medical will be, you know, often is driven by the timing of the respiratory season, so we're anticipating some, you know, some improvement in our diagnostic kit sales in the fourth quarter, depending on the timing of the respiratory season as well. And on the equipment side, while we had very good, in the third quarter, digital equipment revenues, our traditional equipment revenues were relatively flat, down a little bit in the U.S., mostly just due to the timing of some installations. And we're very comfortable with the equipment backlog we saw. We've been getting to see some of that benefit in October and kind of running into the fourth quarter as well.

Our next question comes from the line of John Stansel with J.P. Morgan. Please receive your question.

Great. Thanks for taking my question, and congratulations, Stanley, on all your accomplishments as CEO across the career. I just want to quickly talk about specialty products operating profit. I appreciate it was up significantly year over year, but with the $28 million remeasurement gain, it looks like it would be flat to down, stripping that out. And I think you've highlighted some solid top-line trends that you're seeing across implants. Can you just talk about what you're seeing on the margin side of the specialty products group and what might be driving that?

Certainly, John. I think a couple of things in the year-over-year on the specialty side. Yeah, you're right. You do have to look at it kind of X the $28 million re-measurement gain. Last year, we did have a relatively strong quarter on the U.S. implant business that did develop a little bit of a strong or difficult comparable for them. But also what we are seeing in the market is, and we mentioned this in the prepared remarks, that the value implant growth was in the low double digits, while premium implants were really kind of growing in the low single digits. And we do get better margins on those premium implants versus the value implants. So while it's great to see the growth in value, it does dilute that margin a little bit. and I think that the combination of the comp to the prior year and a little bit of a dilution in that gross margin is creating the dynamic that you're referring.

Our next question comes from the line of Alan Lutz with Bank of America. Please receive your question.

Good morning, and thanks for taking the questions. Dan, congrats again on the retirement. Appreciate all the time and insights over the years. A question for Ron, just to follow up on that last question around the specialty growth trajectory. As we think about the lower, I guess, gross profit dollar contribution from value implants relative to premium, can you talk about what you need to see in the model for EBIT dollars within that specialty business to go up in 2026?

Not looking for guidance on 2026, but how does the model have to behave in order for that part of the business to grow next year thanks well i mean i think you know alan the the obvious answer would be greater growth in the premium implants but i do think that uh continued growth in in value implants can give us gross profit dollar growth ultimately uh and then you know recovery a slight recovery of the market for premium would also benefit that um endodontic sales you know which is also within that specialty area continue to be steady and and should you know continue to provide some gross profit dollar growth and i would i would say that the uh the you know within the orthodontics uh we you know we have made some uh some significant operating changes there and i would expect that to begin being more of a contributor to some growth in 2026 as well albeit you know it's still a small part of that segment but i think it can it can provide some greater contribution to One other thing.

Thanks, Ron. There's a lot of work going on in that group on value creation, consolidating front office procedures, consolidating facilities, consolidating manufacturing. That has all been planned over the last couple of years, been executed, and I think we'll see some good results in 26 in particular also Ron mentioned orthodontics I don't think we can invest heavily in marketing of orthodontics it just doesn't give us using those dollars and investing in other parts of the specialty area so we have some orthodontic products they sell nicely through the Henry Schein Salesforce but with reducing reducing our focus on orthodontic field and Salesforce, and generally these various consolidation concepts I mentioned, this should all drive up operating income on the specialty product side.

Our next question is from the line of Jeff Johnson with Baird. Please just use your question.

Yeah, thank you. Good morning, everyone. Stanley, thank you for the walk down memory lane there and your prepared remarks. It's been a heck of a run, and obviously we all wish you nothing but the best. uh ron was hoping maybe or or stanley hoping i could maybe uh ask kind of a phasing question i know you're not really talking about 2026 at this point but in that 200 million dollars now in op income uh cost savings are you expecting that to be one a net number then uh inclusive of any kind of reinvestments back into the business number one and number two should we split that over the next three years, kind of, you know, 70-70-70, something in that ballpark. And on top of that phasing question, maybe just the remeasurement gain, that $28 million, can we expect something similar next year, or should we not have something like that in our model next year, just as we think about the year-over-year comparable there? Thank you.

Hi, Jeff. Yeah, thanks for the question. I think that I'll start with the $200 million. You know, as we said, this is a multi-year plan. I we're not in a position yet to uh you know kind of commit to the what we expect the phasing of that to be as as you've inferred it will be phased over a period of time and we are currently assessing what we believe the 2026 benefits may be from these value creation initiatives as as we get started on them uh as and many of them are actually kind of in process now those initiatives So we'll be able to have a more accurate assessment of what we think the 26 benefit will be, and we'll reflect that within our 2026 guidance. With reference to a remeasurement gain, what I can say is that they've been a regular part of our business, and they've popped up in the last few years in our results. There's always further opportunities to invest in these types of affiliates, but we're not expecting anything significant in the near future so to the extent that in 2026 if we believe uh there's not going to be something significant we will uh you know we will make sure that that is clear when we provide that guidance if we believe that there is something out there we will provide try to provide you know some color as to what what magnitude that could be but the uh i i would expect it to be a um uh you know it would have to be an integral part of our guidance when we provide that and then with reference to the to the 200 million dollars is it net i mean as we've said in the in the press release this is 200 million dollars of operating income improvements so yes it is net um there will be some uh you know additional investment that will be necessary that we think we can do with the cash we generate from these value creation initiatives so there will be some areas that we have to invest in that might create some costs. But over time, we think that this is a $200 million net opportunity for us to the operating income improvement.

Our next question is from the line of Michael Turney with Leoric Partners. Please just use your question.

Good morning. Thanks for taking the question. And yes, Stan, not a ton more to add there, but appreciate all the time over the years. Maybe if I could just think about the market a little bit again. You talked about the share gains. Obviously, your biggest competitor has had a change in structure change in management as you think about the pathway of getting back to your normalized growth rate what are the assumptions for share gains on the merchandise on the equipment side going forward so i don't know if we we haven't really given guidance on assumptions for 26 so i i i think um i mean and ron unless run has something specific uh i don't think that's no i mean the only thing i would add is we we've you know we're confident we've been taking some share over a period of time and

we're confident that some of the promotional activity that we've deployed earlier this year has assisted in some of the market share gains that we believe we had in the third and so it's So it's simply a matter of continuing with that type of activity in a thoughtful way such that we can't assume some level of market share gain. But at this point in time, if we think it's a relevant assumption when talking about our 2026 guidance, we can provide more color depth.

Thanks, Ron. Having said that, we did give guidance on sales growth for the balance of the year. I think it's implicit in there that we feel strength in the business. Really, you know, when you're in one of these cyber incidents, you don't realise systems are up and running, et cetera, but you don't realise what work has to get done to get the customers back in the door. because some of those customers tried alternate sources. Maybe they got a better deal. Maybe there was a program that was offered. Maybe Coke at the end of the aisle was at a lower price. I think a lot of that is behind us. Our sales organization is highly motivated right now, dental, medical, in the United States, abroad. They've got their systems back. There's a lot of tools they've gotten that were promised and worked on before the cyber incident that are there. They can see that the GEP, the henryshine.com system, is working in a number of parts of the world. There's huge enthusiasm with that. And generally, we're getting some salespeople that are knocking on our door from our competitors, just not one, but multiple competitors. And generally, and I'm talking about distribution now, the distribution part of Henry Schein has gained momentum. It's back in its stride. We're winning, we're fighting, our equipment business is solid, our consumable business is doing quite well, units, pricing, we've got a great offering, and generally the mood amongst our sales organization is great, both in the field, the telesales group, which was largely focused on customer service for at least a year and a half, is back aggressively our e-commerce services. Generally, that group is doing very well. The whole social media group is doing well. And I might add our relationship with our major suppliers is good. Our suppliers want to work with Henry Shire. And then if you add to that the L in the leveraging, leveraging relationships amongst our different businesses, I think you will see the programs are working. We have a great group that is just focused now on our owned brand products that we're selling through distribution. That group is doing very well. The Tindo part, the Choice part, the Boner Regeneration part. There just is a lot of good momentum in the business. And it sort of started getting better a couple quarters ago. We gave that push of the promotion last quarter. That's now stuck. And generally, I think the momentum is good. and that's reflected in the increase in sales guidance that we've given. And I can't see why that kind of momentum wouldn't go into 26, although I don't think we should be talking about specific numbers for 26.

Question to the line of Kevin Caliendo with UBS. Please refuse your question.

Thanks for taking my question. And, Stan, it's been a pleasure to get to know you over these past 20-plus years. I really appreciate everything. So my questions around the Heartland relationship, how where we stand with that, it was a sort of a key debate a couple of months ago and drew some worry from investors. I guess just want to say if there's any update on that relationship, if it's going to continue at the same same level. And I guess to that point, how how successful has the company been with been able to push through the higher costs related to tariffs and things? if you can maybe give us an update on that. Thanks.

Thanks, Kevin. Thanks for that question. Thanks for your good wishes. I don't think we have ever spoken about specific DSO or even IDN relationships. I don't think that's something we should talk about when we gain an account, when we lose an account. We never talk about that. Maybe we did 10 years ago, but we stopped doing that. Our relationships with our DSOs are generally quite good. In fact, I think there are DSOs, specifically the regional ones, that are moving over to And, you know, we definitely have something that others don't have. The supply chain is superb. Supply chain solutions are, I believe, and I'm sure many will tell you, the best in the industry, both in terms of dental and medical, the value-added services, the combination of software, the DSOs that get the consumables from us, their software from us, those that also have moved to our implant business. In fact, we've just gained another decent movement from a DSO into the implant arena. All of this, you put this all together, and we offer a very good Actually, I think the most compelling offering. So I don't think we will talk about any specific customer moving one way or the other. You know, as analysts, of course, your job is to try to find out what's going on. But I don't think it's going to come to us. It can't. It's not right. So go through the marketplace about any of these specific DSOs. But generally we feel very comfortable with our business. I can't imagine any DSO saying to Henry Schein, you know what, we're not going to test your pricing, we want better pricing. It's just standards, what they do for a living, and our job to go into the marketplace to get the best pricing we can for our customers. That's our job. As it relates to tariffs, generally we've been able to find a way in which we can move products locally, we can negotiate with the manufacturer, find alternative countries, And there's been somewhat of an increase, I think, a percent or so of inflation here. I would say a lot of that has to do with tariffs, not much to do with general pricing increases. So generally, it's sticking. And it's not that our customers think we're trying to take advantage of them. They know we're doing the best we can to get the best pricing, best pricing options, and moving to private brand if the national brands are insisting on increasing pricing. So I think overall it's working okay at this point being some reduction in tariffs in a couple of important countries, and I think it's hard to tell where this is going to go, but I think generally we're doing okay on the tariff side.

Thank you. We have time for one last question coming from the line of Brandon Vasquez with William Blair.

Hey, everyone. Thanks for sneaking me in here. And Stan, I'll echo everyone's congrats on a great career at Henry Schein. I wanted to ask on the update around KKR and the board's approval for KKR to take an even bigger stake in the company. Just curious if you could talk a little bit about the impetus of that decision, what kind of conversations are happening there? And should we think about as KKR continues to take bigger and bigger slugs of the equity ownership here, potentially, does the partnership become a little more, I don't know the right word for it, but maybe a little more intimate? Are you guys working a little bit closer to the strategies on a go-forward basis for Henry Schein, see more meaningful changes as they become a bigger and bigger shareholder of this company? Thank you, Brandon.

As it relates to KKR, we didn't approach them. They came to us. I think they've gained an appreciation of the company. They studied the dental space for, I don't know, for a long time, probably over a decade. They know a lot about the space, the consumables, the providers, the software and value-added service providers. I think they're like our company, so they came to us and asked our board had a discussion. The board was fully aware of all the factors involved in taking this number up to 19.9 and they made a decision. The decision was based on all of substance, not on any particular promises or anything from Henshine to KKR. It was a pure decision they made on the value they see within the company and the future and the potential. KKR's capstone group didn't work with us, the consulting firms have been involved in discussions with our management team, POPEC are running the value creation project, the project, us also with some of the indirect well expert on the supply chain methodology etc and they've been very helpful. So I would say it's been a good relationship and things have worked out quite quite well. That's why they're asked to increase their position in Emershine. And our board, as I said, discussed that and made the decision to approve that, their request to go up to 19.9%. We're done? We're done. Well, let me just end by saying I think you've heard through my voice, through my words, I think the company is in very good shape. We have a great team in place. The team is motivated he's winning each of the areas our responsibility the business units the functions good management all around I think the bold plus one plan with the addition of the value creation program which centers around simplicity a lot of businesses we've advanced a lot of businesses how do we make the business more simple how do we take out costs how do we manage our margins in the best way possible this is all a supplement to the bold plus one initiative or refinement as we're calling it internally so i think we've got a good plan we've got a good road map uh we've got the team obviously there'll be some ups and downs as they always are in any business but i think this team uh it is highly enthusiastic and ready to continue to plus one and the value creation program that we've added. So with that in mind, I thank everyone for the support over 30 years, getting to know the investors. There have been a lot of great strategic investors over the years. There's been those that have invested short term and then come back. These are all the components of Wall Street. I've enjoyed understanding how this works. I've learned a lot, the team has learned a lot, seeing people at conferences in the future, although not as Phineas Shine CEO, but as a keen follower of what goes on in healthcare. So thank you all for your interest and I appreciate everything. Tomorrow you can see us on, I think, on NASDAQ media for the opening of the Stock has changed or the NASDAQ. Appreciate everything. Thank you, thank you, thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.