As a reminder, this call is being recorded. I would now like to introduce you to your host for today's call, Graham Stanley, Henry Schein'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 Schein's financial results for the fourth quarter of 2025. With me on today's call is Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein, Fred Lowry, Chief Executive Officer Designate of Henry Schein, and Ron Salth, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to state that certain comments made during this call would 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 upon 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 our 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. The relations between GAAP and non-GAAP measures are included in Exhibit B of today's press release and can be found in the Financials and Filings section of our Investor Relations website under the Supplemental Information heading and in our Quarterly Earnings presentation also posted on our Investor Relations. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 24, 2026. Henry Schein undertakes 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.

Thank you for joining us. And next week, we'll continue to serve the chairman of the board, the company, and believe he is joining us from Thermo Fisher Scientific, where he spent 20 years scaling large, managing both national and Thermo Fisher, beyond Fred's extensive leadership principles that have long-defying Henry Schein. He understands the critical and medical practitioners, and he is very well connected with many of our leaders, leadership, many in our leadership team, to even greater...

Excited to be here today, and I'm looking forward to getting started next week and working with this high-performance team and leading this exceptional company into its next phase. I look forward to engaging with our five constituents, our Team Schein members, customers, suppliers, investors, and the communities, which I have an enormous amount of respect and Team Shine have built, and I'm committed to. I've gotten to know the Henry Shine team and the company over the past couple of months. I've been impressed with the significant growth of the company that is successfully managing So to you, Stan, thank you. And to the entire leadership team, thank you for warmly welcoming me. It's yet another indication. Henry Schein is a great company, and I look forward to leading the team as we accelerate the implementation of our strategy. ...to even greater success.

Now, for the fourth quarter results, resulting in the highest sales growth in 15 quarters. We are pleased with the sales results across all our businesses. Our global equipment, specialty products, and technology businesses. exceeded the increased 2025 financial guidance we provided in our achieve this 25 execution of our 2025 to 2027 bold plus one strategic plan and positions us well for the future let me highlight some of the initiatives our bold plus one strategic plan in this particular quarter Operating income for 50% exceed our goal of over by the end of our strategic planning cycle in 2027. This does not include income from our corporate brand. Implementation is underway across multiple value creators. We are pleased with the progress made to date. Third platform, now known as henryshine.com, and expect to complete the rollout to the U.S. dental and Canadian customers in the first quarter of this year and to the U.S. medical customers shortly thereafter. We will then continue with Globashine.com. We've also launched a number of innovative solution customers with the tools, including exclusive distribution in the U.S. and the U.K. of Avadas' Curadon product, a unique solution for detection and treatment. Early stage carries web services to both with Henry Schein 1. These are both key achievements and indicative of the marketplace's view of Henry Schein, our ability to help practitioners, and of course drive in the end shareholder value we recently completed a survey this is very important of the u.s. dental market to assess customers financial and operational needs and opportunities for us in this arena the survey indicated that practices focuses that practices focus includes driving revenue growth adding new customers and reducing appointment cancellations, late treatments, findings reinforce our confidence in our strategies which are contained in the Bold Plus One strategy to support our customers elevating clinical care or of course improve patient outcome. So this survey for generating and integrating workflows that we offer are also a strategic plan. We believe that customers recognize the value we bring and that these benefits are reflected in our sales result with the momentum on the sales side so turning now to review of our businesses let me start with a global distribution and value-added services group where we delivered solid fourth quarter sales results driven by continued momentum from the prior few quarters estimate approximately half of the US and medical distribution merchandise sales growth was driven by one e-claims activity also indicates growth in the U.S. We believe that in general patient traffic remains stable and probably leaning positively in the quarter and I think that is really the direction of where dentistry is heading in the U.S. for the short term maybe medium term. U.S. dental merchandise our sales growth reflected continued market share gains our january u.s dental reflected the good momentum going into the first quarter of 26 and we continue to see benefits from increased sales performance through our data driven marketing program marketing arena for the last and i think gaining momentum but i think it will gain even further is adopted in the marketplace as the key digital ordering and engagement platform for those interested in dental merchandise. Global dental equipment growth was the highest since the post-COVID recovery of 2021. We believe we are gaining market share in equipment, resulting from outstanding execution of our long-term investing in this area, both on the sales side, with our suppliers, of course, in that connection, but also on the equipment installation and service side through our global distribution network equipment side. We believe that we provide our customers with the broadest product offering of equipment and the largest and best trained technical support capabilities in the industry on a global basis as well. U.S. dental equipment sales were excellent, delivering double-digit growth. traditional equipment sales drove much of this growth bolstered by some exclusive supplier sponsored promotions and we are pleased that we are able to provide above market we are able to provide above market growth for those suppliers that are on our platform and work closely with us continues by the way into the first confident in investing in their practices your equipment sales increased We saw good unit growth imaging, mills, and intra-aural scanners. Intra-aural scanners continue to modestly decrease due to lower prices of new market entrants. That these new market entrants are also attracting new customers. The interest in the practitioner community continues. and technical service sales remain solid contributors with mid-single-digit sales growth in the U.S., dental equipment market, and in particular as it relates to customers viewing us as their supplier, and with speculative growth in 2026. Turning to our U.S. medical business and pharmaceuticals, along with continued strong performance in the home solutions portion of our medical business, This was partially or continued into the first week, the demand for tests gone down and launched an exclusive agreement with Cytochip Inc. flagships CytoCBC, their flagship system, CytoCBC, a unique cartridge-based complete blood count analyzer providing lab-quality results in approximately eight minutes. assist to lab quality hematology testing at the point of care. While revenue with this product overall medical strategy of bringing innovative products to our customers, suppliers that value the effectiveness of our distribution. International dental merchandise sales grew currencies and experienced solid growth across most markets in the U.S. dollar. International dental equipment sales in many years and also grew well in constant countries and across many countries and equipment categories, the major ones all doing quite well, international equipment sales growth was benefited from currency exchange rates too. On the value-added services side, sales growth was driven by our international business and by acquisitions. Also, the general consulting part of the business was doing well. To the global special continue to benefit in implants and biomaterials. And we believe we continue to gain share across most markets. And biotech implant sales reflect solid underlying patient demand, reliable brand, excellent products in the U.S. And biomaterials also was introduced into the U.S. market in the fourth quarter. And we expect this endodontics continues to benefit from expanded commercial reach. Also some of the side of the U.S. Orthodontics, of course, which remains a small part of our specialty products business, U.S. dental facility, and has stabilized that business. Orthopedic business by the sales results of the portfolio. The performance was driven, resulting from enhanced functionality, including electronic claims by more than 20% year over year, primarily from new accounts. and now we have more than 11,000 Dentali and Dentali subscribers, of course. We have also aligned to provide more comprehensive integrated solutions. And Dentrix now covers new cycle management, imaging, and patient exposure. It's both expanded through our new partnership with Amazon Web Services. As I noted, integrated into Dentrix's drive incremental revenue. Over to Ron to review everyone for calling in and listening. And Ron, now over to you.

Thank you Stanley and good morning everyone. Today I will review the financial highlights for the quarter and would like to remind investors that on our investor relations website we have also included a financial presentation containing additional detailed financial information including certain reportable segment information. Starting with our fourth quarter sales results global sales for 3.4 billion dollars with sales growth of 7.7 percent compared with the fourth quarter of 2024 reflecting constant currency sales growth of 5.8 percent and a 1.9 percent increase resulting from foreign currency exchange acquisitions contributed 0.9 percent sales growth to the quarter our gap operating margin for the fourth quarter of 2025 was 4.76 percent a decrease of 10 basis points compared to the prior year gap operating margin on a non-gap basis the operating margin for the fourth quarter was 7.42 percent relatively flat compared to the prior year despite lower gross margins primarily a result of products product mix within the global distribution and global specialty products groups during the taxes our effective tax rate for the fourth quarter of 2025 on a non-gap basis was 22.7% this compares with an effective tax rate of 22% for the fourth quarter of 2024 for the full year our non-GAAP effective tax rate was 23.7 percent fourth quarter 2025 gap net income was 101 million dollars or 85 cents per diluted share this compares with prior year gap net income of 94 million dollars or 74 cents per diluted share our fourth quarter 2025 non-GAAP net income was 160 million dollars or a dollar and 34 cents per diluted share this compares with prior year non-GAAP net income of $149 million or $1.19 per diluted share. Foreign currency exchange favorably impacted our fourth quarter diluted EPS by approximately two cents versus the prior year. Adjusted EBITDA for the fourth quarter of 2025 was $291 million compared with fourth quarter 2024 adjusted EBITDA of $270 million or 8.4% growth. Turning to our sales results, The components of sales growth for the fourth quarter are included in Exhibit A in this morning's earnings release. I'll now provide the primary highlights of the main sales drivers for each reporting segment, starting with global distribution and value-added services. The global distribution and value-added services group sales grew by 7.0%. Looking at the drivers of that growth, U.S. dental merchandise sales grew 3.6%, including good volume growth driven by the sales initiatives we introduced earlier in the year. U.S. dental equipment sales grew 10.6 percent, led by double-digit growth in traditional equipment. Overall demand for equipment remained strong. U.S. medical distribution sales grew 4.9 percent, reflecting good underlying growth in the business with strong growth in home solutions. international dental merchandise sales grew 9.2 percent or 3.8 percent in constant currencies driven by sales growth across southern and eastern europe germany brazil and canada international dental equipment sales grew 13.9 percent with constant currency growth of 7.5 with solid growth in both traditional and digital equipment equipment sales growth was especially good in Germany, Brazil, Canada, and Australia. Finally, global value-added services sales grew 9.6%, or 8.5% in constant currency, driven by international business solutions. Turning to the global specialty products group, sales grew 14.6%, or 11.1% in constant currency. Our implant and biomaterial business experienced solid growth in the fourth quarter, including double-digit growth in our value implants and mid-single-digit growth in our premium implants. That sales mix of premium and value implants resulted in a lower gross margin compared to the prior year. We also had strong results in the global technology group, with total sales growth of 8.4% or 7.6% in constant currency. In the U.S., sales growth was driven by practice management software with double-digit growth in Dentrix Ascend. Internationally, sales growth was driven by our Dentali cloud-based practice management software product from the restructuring program announced in August of 2024 the company recorded restructuring expenses of twenty three million dollars or twelve cents per diluted share during the fourth quarter of 2025 for the full year restructuring expenses were approximately 105 million dollars or 59 cents per diluted share regarding the value creation initiatives announced last quarter we continue to expect to deliver over 200 million dollars of operating income improvement over the next few years through both cost savings and capturing incremental gross margin opportunities these projects include gross profit optimizations optimization such as pricing and accelerating corporate brand sales as well as initiatives to lower our cost to serve while further enhancing customer satisfaction we plan to centralize certain support services implement process automation and ai tools and further leverage our scale to reduce indirect procurement costs. We expect these initiatives to achieve annual run rate operating income improvement of over $125 million by the end of 2026. During the fourth quarter of 2025, the company repurchased approximately 2.8 million shares of common stock at an average price of $71.10 per share for a total of $200 million. At fiscal year end, we had approximately $780 million authorized and available for future stock repurchases. Turning to our cash flow, we generated operating cash flow of $381 million in the fourth quarter of 2025. This compares with operating cash flow of $204 million in the fourth quarter of 2024 and was driven by working capital management. Turning to our 2026 financial guidance at this time we are not able to provide without unreasonable effort an estimate of restructuring costs related to ongoing value creation initiatives. Therefore, we are not providing gap guidance. Our 2026 guidance is for current continuing operations and does not include the impact of restructuring expenses and related costs and other items described in our press release. guidance assumes stable dental and medical end markets during the year and is supported by initiatives outlined in our strategic plan we expect these initiatives will support our long-term financial goals 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 2026 sales growth is expected to be three to five percent over 2025 for 2026 we expect non-gap diluted eps attributable to henry shining to be in the range of five dollars and 23 cents to five dollars and 37 cents reflecting growth of five to eight percent compared to 2025 non-GAAP diluted EPS of $4.97. Guidance assumes lower remeasurement gains in 2026 than in 2025. We are assuming an estimated non-GAAP effective tax rate of approximately 24 percent. Given the implementation schedule for the value creation initiatives, we expect earnings growth to be more heavily weighted towards the second half of the year. Our 2026 adjusted EBITDA is expected to grow in the mid-single digits versus 2025 adjusted EBITDA of $1.1 billion. With that, I'll now turn the call back to Stanley.

Thank you, Ron. We are from investors.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and the confirmation tone to indicate 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, when we poll for questions. The first question comes from the line of Jeff Johnson with Baird. Please proceed with your question.

Thank you. Good morning, guys. Stanley, I'm sure you're growing tired of the accolades, so I will just say congratulations on a fantastic career, and we'll miss hearing you on the calls every quarter. I was hoping I could maybe start, Ron, on guidance if possible, and sorry to start there, Stanley, as opposed to throwing it to you for a high-level question, but a couple things. Just on the operating income improvement plan, the $125 million run rate that you're talking about, Ron, exiting 2026, should we gate that, kind of build that in a sequential basis, this kind of on a steady state, growing it consistently throughout the year by quarter? And then from a year-over-year perspective in 27, how much of that do you think could flow through to the bottom line?

Sure, Jeff. I think that, as you can appreciate, these initiatives are somewhat in the early stages. And that's why we're, and I said on the guidance that we expect the earnings growth to be more heavily weighted to the back half of the year is is a reflection as well of of of the benefits that we ultimately get from value creation uh so i think it's it's it's by no means linear i do think that uh as we as we make investments in the first half of the year and continue to make some investments over the course of the year uh you know that'll be reflected in our results but but we've taken that into consideration with the guidance in terms of the 125 you know and what we will, how that impacts, you know, 2027, that remains to be seen at this point in time. We'll have to see, you know, just where we are on the initiatives, what else is happening with the business in terms of where we need to make investments and how much of that will fall through in 2027, we'll be able to address that.

The next question is from the line of Alan Lutz with Bank of America. Please receive your question.

Good morning, and thanks for taking the questions. One for Ron here on the really strong growth and specialty value implants, as you mentioned, up double digits, but also premium implants were up mid-single digits, which I think is an acceleration over the past couple quarters. Can you talk a little bit about what you're seeing there in terms of pricing, both on the value and the premium side? Is that evolving at all? And then how to think about price growth as a contribution or lever within this business in 2026?

Certainly. As we mentioned, we were especially pleased with the growth we saw in Europe. We had good growth at biotech. We had good growth in Germany. And the value implants are becoming a bigger part of the portfolio for us. From a pricing perspective, I don't think there's anything there that's unusual from a pricing perspective. I would say that we're very well priced within the market, and I don't believe there was anything that I would consider to be unusual in terms of price increases or price benefit within the category.

I think that's correct, is that there's been a movement, a mix within just identified. the in Germany for example largest market for that product has stable pricing yet we continue to gain market share so I don't think there's particular pressure on our main which do so a little bit less than some of the other major brand next questions from the line of Jason Bednar with

Piper Sandler please just hear their question thank you morning thanks for taking the question congrats on the close here to 25. I'm going to ask a multi-part question here, just a big picture in the dental market, Stan. It really seems like the market took a step forward in the fourth quarter. I think we're all seeing that. Results are looking better across the board for you and your partners. Can you speak to the durability of that performance? Sounds like it continued into January, but you're often a step closer to the customer. You're interacting with them on a more frequent regular basis than even your manufacturing partners are just do you sense the market's getting its foot back or footing back in terms of the patient traffic through offices consumer spending on the higher end categories dentist spending on equipment i guess what are you seeing your backlog um just as it was i guess the the genesis of the question is there anything unique in the fourth quarter that would suggest the better revenue growth wouldn't persist throughout 2026 here so thanks for that question Jason I would say the markets are stable certainly in the u.s. we have data from in the shine one claims

processing so essentially it is a stable market leading I would say there is amongst dentists investing in newer technology whether it's or simply upgrading their practice management systems and connecting those practice management systems chairs units lights imaging etc that whole trend is there and I think it's good the market is good international is mixed I think a lot of this is to do with Henry Schein as well you know we were hunkered down a little bit cyber focus customers and not going out aggressive being aggressive going out adding resources to our sales organization bringing online further digital I think it's combination of about their practices meaning slightly positively in the u.s. to go and explain investing in these various newer technologies is good for their practice so to some extent we are expanding the market within our own customer base but generally it's a positive feeling for For those that were in Chicago, if you walked on the floor, people were smiling, you went to the shine booth. So I think things are stabilized. I hope not to use the words, our team doesn't use that again, because that incident's way behind us. We are winning in the marketplace. In a marketplace that is, many of the markets abroad, Brazil for example, the German market's a lot more positive on the equipment side, Canada, market point of view, but I think most of our team's excitement in winning in the marketplace and being back to where we're...

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

Great. Thanks for taking my question. Just wanted to hone in on the cadence through the year, particularly around the $125 million run rate contribution from the value creation initiatives. On what I think I heard from you, Ron, was that there would be implementation costs in the first half of the year or early in the year is there really i think about this this is actually potentially a bit of a headwind early on and and if that's right is it still fair to say that it's a net benefit you know you don't you get some improvement in the back half netting all that out to still be kind of a benefit um for the full year yeah john i mean you know the the expectation for the full year is clearly that there will be a net benefit from the initiatives.

You know, within the quarters, you could get, you know, some lumpiness depending on the timing of some of the investment, but there will be, you know, we're confident and we'd be disappointed if we didn't have a net benefit, you know, over the course of the year, you know, from these, but that benefit will be more heavily weighted to the second half of Our next question comes in the line of Kevin Caliendo with UBS.

Please receive your question.

Thanks for taking my question guys. Good morning. Just two quick ones. The lower remeasurement in 26, you described it as lower. Is it materially lower? Like just from a modeling perspective, how should we think about versus the 23 cents? And then the second one is more about the equipment. You called out that there was a benefit from promotions. Obviously, traditional equipment was up double-digit and 4Q. Is that an assumed run rate now, or was that sort of a one-time benefit? Can you just talk about what happened, how meaningful it was, and how we should think about traditional equipment growth in 26? Thanks, guys.

Yeah, you know, I'll start with, you know, some commentary on the remeasurement gain, Kevin, and then Stanley can talk a little more about equipment. But, you know, as you're aware that, you know, the portfolio approach to growth has included taking a minority stake in certain companies and in some cases extending that investment to a controlling interest when we believe there is a strategic reason to do so and there are a couple of situations where we are contemplating transactions that that could result in a range of remeasurement gain outcomes in 2026 and and we've taken this range into consideration when when setting our guidance but you know what we said is the EPS guidance assumes remeasurement gains will be lower in 26 than it was in 25. As you can appreciate, it's difficult to gauge sometimes what the benefit of these will be, but we do expect, we're pretty confident it will be less than what we had in 2025. Stanley, if you want to address the equipment question.

Thank you, Ron. I think that's correct. Equipment side, I just want to be careful not to indicate that we had massive promotions. We did not. It was normal year-end are investing in the tax reasons so that the whole year they've been thinking about buying a piece of equipment or maybe dressing an expanded room or something operatory and you know of course our sales people encourage them to close on that and have it installed before the year-end because I will say that there are a few manner that excited our organization the features may be viewed by dentists as better products better to invest in those products and i would say we have promotions of that kind their field organization and our organization or category but these were not that pulled from one quarter to the other i think we mentioned in our last call that our backlog was good going out it remains good the momentum is good and again it goes back to equipment people that were back in the market attacking the market gaining market share in an environment where dentists are feeling pretty good. And so I think it's just the dynamics, and we're very pleased with the dynamics and view this as an ongoing opportunity for him.

Question in the line of John Block with Stiefel. Please receive your question.

Hey, everyone. Joe Federico on for John. Thanks for taking the questions. Maybe just to move back to the impressive specialties growth in the quarter, seemingly driven by global double-digit percent implant sales. How do you view the sustainability of that implant performance? I know it's likely not double-digit every quarter, but should we just view that segment, the specialty segment, as kind of a high single-digit growth profile going forward for the near future? And also any specific color on U.S. implant performance would be helpful as well.

So Ron can address the map because we gave a range to our investor day and I think the market is not growing as well as it was in our investor day a few years ago, but Ron will address the map. We had a very good quarter, our European, particularly our German business is doing well, it's been doing well for a long time, I think we're now the number one provider dental implants certainly by units in Germany and that market has very good momentum no one can say particular quarters but I think it's a solid business got a great product offering new introductions and a great team the various if you will or we want to view it of SIN the medentus and even within my horizon value line oh I think the implant market is stable leading positively more stable in the u.s. than it's been in a while Henry Schein does not really operate in the very expensive implant dealing with DSOs and so decrease that maybe some others did but generally it's a pretty stable market But the U.S. is not as robust as our new product introduction this year. And I think we'll be more aggressive next year, but I don't think we can give you the high end of growth in 26, but Ron will give you specifics on the range.

Certainly. So, Joe, I think you can kind of dissect the in-plant market a couple of different ways. If you look at the kind of outside U.S. versus inside U.S. market, we did see better growth outside the U.S. And we mentioned that in the prepared remarks that, you know, our subsidiary in France, Biotech and Camelot, both both had, you know, very good growth. And I, you know, I really attribute that to good management execution. You know, good, you know, just they're doing a very good job of getting some additional market share there. You know, our assumption has always been that, you know, specialty markets should grow in that five to eight percent market range. I don't think they are right now. Perhaps there are some pockets of the world where they are growing 5% to 8%, but inside the U.S., I don't think it's at 5% to 8%. We're seeing still something probably less than, you know, definitely less than 5% in terms of market growth in the U.S. And then if you also dissect it by looking at premium versus value, in the U.S., and we mentioned on the call that we did launch the SYN U.S. value implant in the U.S. in the fourth quarter, And we have, you know, a lot of optimism in terms of what, you know, the contribution we could get from that product in terms of, you know, improving our growth in the U.S. going forward in 26. So, like Stanley said, it's difficult to determine where that high end is, where this growth could be. But we do like the momentum we have coming out of 25 into 26 with the broader category.

Thank you, Ron. Also, the endo business is quite stable. not yet the market per se is growing but we are doing quite well gaining some market share the orthopedic business has also got certain momentum that is very nice and orthodontics very small not investing a huge amount in alternative of traditional orthodontic product and so we were losing money in that field a bit of a challenge with computers during the cyber incident, and overall the specialty business is doing. That business is growing. Of course, we work very well with certain national brand manufacturers, but there are many products that really are generic today, and in those cases where we can provide value to our customers, we are, and that's growing at a much faster rate.

Our next question is in the line of Elizabeth Anderson with Evercore ISI. Please proceed to your question.

Hi, guys. Congrats, Stanley. I'm looking forward to working with Fred going forward. Maybe it's a combo short-term, long-term question. Just to confirm, as per usual, none of the future repo with the authorization is included in the guidance range you just gave. And then secondarily, can you talk a little bit more on the gross margin? I think you guys called out pricing and private label as opportunities, I'm assuming, for 26 and going forward.

So how do you think about what those sort of 2026 opportunities are there versus longer term thank you very much you know regarding the repurchases Elizabeth you know we our guidance assumes a relatively stable stock count during the year but you know as you can appreciate well we'll be assessing the stock repurchase opportunities as the year progresses and and if it has a material impact you know we'll be sure to communicate that in terms of the margin and the contribution from private label private label continues to grow at a pace faster than than our branded merchandise so we are getting you know some contribution to you know favorable contribution to the to the margin from that there's still you know some you get you get some pricing pressure in certain categories we've talked about gloves in the past in other areas but but you know so it but broadly speaking you know the private label does provide us with some you know some margin expansion and and we do believe and in part of our value creation initiative is you know how do we how can we expand those margins potentially even through accelerating the growth of some of those private label categories but to be clear Elizabeth we are working very well today with many of our national brand

understand the value henry shine brings understand we did have some challenges because of the cyber incident market so they're working with us on the other hand there are many items all the commodities because some of them are more better than commodities being sensitive with the henry shine brand is simply another brand but it's a high quality brand customers but also because of the price the whole value proposition and that's doing very well it's a state and of course that carries a higher margin with absolute dollar addition.

The next question comes from the line of Michael Cherney with Laring Partners. Please receive your question.

Good morning. Thanks for taking the question. Maybe if we can dig in a little bit more on implied margins relative to what you recognized in the quarter, fully understand there's a lot of moving pieces, fully understand the operational improvements that you expect to ramp over the course of the year, but what What are you seeing relative to your underlying business on the margin side? I know there's been some questions on price, and there's obviously a dynamic on mix, but how are we thinking about the core underlying margins for the business before you layer on the remeasurement dynamics, the operational benefits, and other moving pieces to the P&L?

Hi, Michael. I think that a lot of moving parts when you're talking about our margins because when you you look at the business as a whole, we are experiencing some product mix dynamics, for example, within the specialty group. We mentioned earlier that value is growing faster. Value implants are going faster than premium implants, for example. They do get a slightly lower gross margin, and that will put a little bit of pressure in terms of gross margin percentage, but it does create gross profit dollar growth for us, which is very important for us. I think within the broader distribution, there's always going to be customer mix. I mean, we have a very strong portfolio of DSO customers. DSO customers do get a slightly better margin, but we can deliver to them more efficiently. So that's an important part of the portfolio and an important part of the business. And their growth, the growth in those DSOs benefits us as well. So while we want to stay focused on gross margin percentage improvements, and that's a very important value creation initiative for us, growing gross profit dollars is equally important. And so to the extent that we can expand sales and grow gross profit dollars as well is always going to be a priority for us. In terms of what then falls out for operating margin, you know, hence a lot of the G&A expense initiatives that we have in place to, you know, to deliver product more efficiently, to support the business more efficiently. And we believe that, you know, that'll show up and those benefits will begin to show up towards the back half of the year and ultimately, you know, should see some acceleration and improvements in operating margin.

It's a matter of mix, and at the end of the day, our bold plus one strategic plan is what drives us, and the idea is businesses, operating income, and the call that the direction of the business, the whole area of businesses, the specialty areas, the value added service nicely, as well as the price. It's hard to get the exact number, predict the exact number in a quarter, but directionally the business is moving towards higher growth, higher margin mix.

Thank you. We have time for one last question, which is coming from the line of Brandon Vasquez with William Blair. Please receive your question.

Everyone, thanks for taking the questions. I'll maybe ask two brief ones to close this out here, maybe a little macro. First, on the medical side, there's a lot of chattering in the medtech world, especially about volumes of procedure volumes through the first quarter and then through 2026 since uh you guys are kind of tied to the the end market volumes and just be curious on how are things progressing so far in early 2026 in terms of volumes people are a little worried about aca subsidies going away and that might lower procedure volumes there's some storms there's flu season things like that that's the first one and i'll just ask the second one here as well i think in the commentary or the prepared remarks you mentioned that you can mitigate tariffs, just give us any incremental details that you guys, how you see the tariff world right now, given the recent IEPA ruling, what you're kind of baking into guidance and how you can mitigate those tariffs. Thanks a lot.

Thank you for that question. On the medical side, you know, we participate primarily in the alternate care site for delivery will impact as it often does in the first quarter we haven't analyzed exactly how the number of procedures will be down this year versus last year but you know it's going to be down a little bit i don't think our customers are really impacted in any material way by any of this legislation or any particular other than, of course, people are not being diagnosed, going for diagnosis as much as they did in the COVID period. First of all, COVID is not rampant. And second, if people have colds, they're not worrying about it or strep throat or whatever as much as they were during the COVID period. So there's a lot less on the respiratory. Vaccinations are probably down, although it used to be material for Henry Schein at one point. It's not a material category, but it is a category that our medical people. So I think you can see some challenges on the medical side. I don't think it's going to impact the $13 billion Henry Schein enterprise in any material way. The home care business is doing well. I don't think that's impacted by any legislation or regulation at this particular time. So I would say our medical business is quite stable, also stabilized, and we're back to 2019 levels there, maybe a little bit of higher price. But the medical business is relatively stable with, as I said, some challenges from the respiratory side. On the tariffs, I think, in the prepared remarks we said we anticipate passing on any tariff that we need to make to our customers we have to pay more but on the other side we are doing a good job in alternative sourcing so from different countries now i don't know what this flat 15 mean but we should be able to deal with that at least in the short term if it's a long-term issue we'll let you know But I think, again, within the context of Henry Schein, as a $13 billion company, we should be able to deal with this as we've dealt with the tariff. Generally, one part of the business is paying more, another part of the business is mitigating it through other ways. But generally, I think we'll be okay. Okay, so thank you very much. I appreciate everyone calling in the question. I'd like to do 121 investor calls. but I bet it sitting here will be evidence that I will not be doing 122 of these calls. So thank you for your support. Thank you for your interest. Henry Schein as a company I think is in a great place. The momentum's good. The strategies are working. Of course, in any businesses there are challenges in one part of the business versus another. This team is well prepared, I think, to deal with the challenges that we know of today and that may even come our way in the future the team is well organized them are quite good and the markets are relatively stable food today's call team

shine members from customers and suppliers and of course I'm looking forward to meeting all of you and spending some time with you and learning getting your perspective perspectives on the business and then also I'm gonna dig in on the initiatives that are in place and validate the assumptions and driving more value creation for our shareholders. So thank you very much. Thank you for your interest in Henry Schein and I'm looking forward to working with all of you.

Thank you, Fred. Graham? So next call will be in May.

Thank you, everyone.

Thank you. This concludes today's teleconference. Let me disconnect your lines at this time. Thank you for your participation. Have a wonderful day.