Henry Schein Inc 2026 Global Healthcare Conference
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All right, good afternoon. Why don't we get started? My name is Jeff Johnson. I'm one of the Senior Medical Technology Analysts at Baird, and our next presentation this afternoon is from Henry Schein, the largest distributor of healthcare products and services to office-based practitioners in North America and Europe. With us today from Schein, we're happy to have CEO Fred M. Lowery and Chief Financial Officer Ron N. South. Fred, I'm going to give you opening remarks here if there's anything you want to say, or we can move right into Q&A.
Well, let me just start by saying thank you. Thanks for having us. We're excited to be here. I am six months into the role now, and I guess the good news is that I'm more excited about it six months in than I was coming in the door, and I'm more excited because I see more opportunity than I did coming in the door. I feel really great about that. I'm excited to talk to you about what's driving that. Very excited about where we are with value creation. I feel very committed and confident that we're going to deliver on our commitment there and excited about areas that we can grow the business faster. I want to talk a little bit about that today. Then the three priorities that I have, accelerating growth, simplifying the business, and driving more operating rigor in the business.
Looking forward to the conversation.
All right, great. Well, let's jump right in. I was thinking about it. I think this is my 23rd year at Baird, and that would mean about 22 conferences with your predecessor, with Stanley M. Bergman. Obviously a big change at the company. Stanley had been there for many, many years, has been well-loved throughout the entire industry. How have employees responded to the change and just what's going on inside the company at this point, a change for the first time in 30-some odd years?
Well, let me just say, nobody is Stanley. That's an impossible thing to be. No, I would tell you that the feedback from our Team Schein members, which is what we call our employees, has been very positive. People have really leaned in. I hear people say things like, "Hey, this has been really a refreshing change." I hear people say, "Hey, we know that we need to change in order to be better, and we're excited about the opportunities ahead of us." As you know, we have an amazing culture inside Henry Schein, where our Team Schein members are very focused on supporting our customers. They're mission-driven, and they're focused on supporting each other. They're excited for us to continue to improve in the future. So I feel good about so far how people have really leaned into the focus areas.
All right, great. I saw one of your channel partners in the room. I don't know if he stuck around or not, but there's also been a change, obviously, or you've had to go out and meet all of your customers and your channel partners and manufacturing partners. Again, a change for the first time in a long time. How have those relationships begun to grow? We've always heard dental is kind of a special area, and it takes time to build relationships there. Where are we in that relationship building?
Yeah, I've certainly been out with lots of customers and lots of our suppliers and other partners, and working on building those relationships. But the good news is, that's one of the things that really makes Henry Schein special is the deep trust that we've earned over the years with our customers. They really do trust us, and they absolutely want us to help them make their businesses better. I'd say the same for our suppliers. I think we have deep trust with our suppliers, and as I think about it, people are excited about the access that we provide to customers. As we continue to grow and take share in the market, our suppliers want to be a big part of that. So, so far so good. I feel good about those relationships, and I'll continue to personally work on those relationships.
But it's really our 26,000 Team Schein members who have developed those relationships over the years that matters.
All right, great. I think when you came on board, Henry Schein was in the early stages, and you've kind of moved those efforts nicely along on an operating income improvement plan.
$200 million of operating improvement expected, operating income improvement expected over the next 2-3 years. One, your thought process on how you let some of that drop through to the bottom line versus how much you reinvest in the business. Obviously in the past, there's a lot of discussion that through some of these plans, it didn't really drop through the bottom line, but your commitment to letting it drop through, number one. Number two, how does that help you, though, on the core side of the business, reinvest and really drive this continual process improvement?
Yeah, so I think it's really important. I love the way you phrased it. It's operating income improvement of a couple of hundred million dollars over a few years. We see that as net improvement, so dropping to the bottom line. What's important as you look at it's not a one and done thing for us. These are areas where we're building new capabilities into the company that we're going to benefit from beyond just the $200 million. I'll give you a couple examples. On the gross profit side, one of the areas we're focused on is improving our pricing process. So we've added capabilities from pricing standpoint, both in people, in process, in tools and systems. So we're going to benefit from that, and we are benefiting from that now.
We're going to benefit from that in the future, both so that we can raise price in a more targeted and proactive way, but also lower price where it makes sense, where we want to gain share. So that's an example of a capability that we've built. On the cost side, as I've mentioned earlier, we're outsourcing one of the activities. We're outsourcing some of our back office functions, and we're in the middle of doing that now. We've started with two functions, finance and customer service, and we're working our way through that. Over time, we'll add other functions to it. We've started with a lift and shift where we are gaining the labor arbitrage. Over time, we're going to standardize those multiple processes. Then after we standardize, we'll build technology on top of that to streamline and lower the cost.
We're going to continue to see the benefit from that beyond this $200 million. Think of us as really building the company to be able to scale without adding a whole lot of extra cost. That's really the opportunity set there.
I think on your last quarterly call, it might even have been the last two quarterly calls, you've kind of alluded to, it's not necessarily in guidance, and obviously you haven't guided to 2027, but to double-digit EPS growth. Is that a commitment that you feel comfortable making to your investors and to the street over the next year or two? Am I overreading some of your comments?
No, I think you're reading it exactly right. I think what we said is that we're going to deliver this $200 million. We're going to accelerate the growth in our business, and we're going to grow double digits. That's EPS. Yes. That's exactly right.
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