Medline Inc. Class A common stock Morgan Stanley 24th Annual Global Healthcare Conference

Yeah, I would say, listen, we are a 60-year-old company. Not much about what we have done has changed. When you have 60 years of consecutive growth and you have a playbook that works, changing it is not the right thing to do. It is always evolving. Change is part of business, but adding additional levers for growth, adding additional arrows in our quiver as it relates to value props to our customers is just a core tenet of who we are. But investing in the business in advance of demand will continue to be something we do. Having a very relentless focus on our customer and listening to them to what their needs and challenges are so we can make sure we are meeting that expectation.

Right product, right place, right time as it relates to our distribution service offering at the best value will continue to be a leading indicator in maximizing the value we deliver to our customers, to our brand, and we will continue to do that. I think the biggest kind of change is our business is not sequential, right? It is lumpy. When we win new prime vendor business, it is different by quarter. How we grow as a lagging indicator, margin to revenue, is something I think the markets are going to have to learn. We will capture revenue and take share, and then the marginal pickup in the following kind of pathway as it relates to the Medline brand penetration and conversion curve. I think it is going to take a little while for the public markets to understand the cadence of our business and how it flows through.

But what we look at is a long-term sustainable growth. First and foremost, taking share, then maximizing the brand and delivering value over time. I think it's going to take a little bit of time for the public markets to know that. I will tell you it's easier being a private company than it is a public company because I have all of you asking 95 questions as opposed to the family asking a few questions. So I think it's more about getting familiar and consistent as it relates to what the right kind of macro factors communicate to you all is to make sure you understand kind of the long-term health of the business.

Yeah. So let's first start with the quarter. The quarter was really strong. Top line growth of about 11.6% on a reported basis. If you actually adjusted out the impact from the tariff refunds, customer repayments, we actually grew close to 13%. So really, really strong top-line growth, really strong top-line demand growth across both of our segments and all of our channels. So we're really proud of the great signings, sales growth that we're seeing in our business. It reflects the strong market share gains that we're taking. From an earnings perspective, you're right, we did take down earnings by about $200 million in totality for the full year, for our full year guidance. Our new guidance for EBITDA is $3.3 billion to $3.4 billion from $3.5 billion to $3.6 billion. So $200 million at the midpoint of the range.

Really made up of a couple of internal factors and a couple of external factors. On the external side of the house, the Middle East is impacting us, as you can imagine. We quantify that in totality for the year of about $70 million of impact. That $70 million impact is primarily made up of the cost of raw materials and finished goods, things like polyethylene, polystyrene, NBR that's used to manufacture and source certain products that we make. In addition to that, the cost of diesel is obviously up as well. Diesel fuel was at $3.89 heading into the before the conflict. Diesel fuel is now closer to $5.50, $6. So you're seeing that impact our cost of our transportation as we ship about 80% of our products on our own trucks here in the U.S. The other external impact was a fire.

We had a fire in our Tracy facility back in June, unplanned obviously, and very devastating. Lost 1 million square feet of space. The great thing about that is the team rose to the occasion, and within six weeks we were able to bring product back to our customers into similar levels of what they were receiving previously. Really proud of the work the team has done to really drive for a great outcome for our customers. The combination of those two are about 25% of that $200 million or $50 million. The remaining $150 million is primarily made up of what we will call internal factors, and they are about equal, with the third one being retail being slightly less. We are continuing to invest in our business on the operations side of the house.

As you all know, we signed $2.4 billion of new customer signings last year. That signings was a record year for us. Really, really strong signings in the year. That led to us implementing a lot of that in 2026. What we are seeing is, in certain cases, we are having to make investments in operations to support those new signings. For instance, in a facility like Romulus, Michigan, where we have pretty much the entire Detroit market that we have ultimately won through our signings, we are having to invest in people without automation at the current point in time to support that growth. As we put automation in those facilities and expand that facility, as an example, you will see those costs start to come down. But ultimately, right now, we are inefficient in our Romulus facility. That is the operational side of the house. We also are making investments in quality.

We have decided, and Jim has decided, the right thing to do for us is to further lean in on quality and to focus on a global action plan to drive quality across the organization. That is not to say our quality is not good. Our quality is good. However, we want to continue to invest in driving the improvements in our quality across the globe. We are taking action to invest in quality in that space as well. Lastly, the third impact to us was the retail business. On the retail business, that is about 2% of our sales, so a smaller piece of our overall business. The business is a little bit lumpy, as you can imagine. From day to day, it can bounce around. It is not like our typical prime vendor business where it is a five-year contract.

We saw a lost product in one of our customers in that space that has impacted us. That is all Medline brands, so the margin was more impactful than it would be if it was a prime vendor deal. But our objective is to go get that back over time here. It is just in the near term, it is going to be a loss for us. The combination of all that is about $150 million, those three external factors overall.

Yeah, I think what we were trying to signal to the market was roughly half of the cost that we believe that we are incurring is sort of permanent, will remain in our base. Things like some of these ops costs, some of these quality costs are investments in people, so those will remain in our base. Obviously, the retail business is sort of a loss. We will get it back over time, but that is in our base. Whereas we expect that over time, the Middle East will at some point hopefully subside. I would tell you that right now, as we sit here today, we expect the Middle East will continue, unfortunately, into 2027, will be a cost headwind for us into 2027. I think overall, we are not ready to guide for you yet what 2027 will look like.