Henry Schein (HSIC) Tops Q4 EPS by 1c, Revenues Beat; Offers FY21 EPS Guidance

Henry Schein (NASDAQ: HSIC) reported Q4 EPS of $1.00, $0.01 better than the analyst estimate of $0.99. Revenue for the quarter came in at $3.2 billion versus the consensus estimate of $2.88 billion.

• Total net sales growth of 18.6% in fourth quarter 2020 versus prior-year
• Record total net sales growth for second half of 2020
• GAAP diluted EPS from continuing operations of $0.99 versus prior-year GAAP diluted EPS from continuing operations of $2.25, which included a net gain on sale of equity investments of $1.27
• Non-GAAP diluted EPS from continuing operations of $1.00 versus prior-year non-GAAP diluted EPS from continuing operations of $0.97
• Introduces guidance for 2021 non-GAAP diluted EPS from continuing operations

“Against the backdrop of a most challenging year in our history due to the COVID-19 pandemic, with an unprecedented human toll and economic impact worldwide, Henry Schein’s unwavering focus on our customers, along with our resilience and agility, enabled us to deliver fourth quarter total net sales growth of 18.6%. In addition, we delivered record total net sales growth for the second half of 2020 as our end markets have rebounded, and we recognize the commitment and sacrifice of our Team Schein Members globally,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “We were successful in supporting practices that were initially open for emergency services and also assisting customers preparing to restore practices to increased operating capacity as restrictions eased. Over time, we expect that patient traffic will improve to pre-COVID-19 levels.”

“I remain confident that Henry Schein is well-positioned for future continued success given the breadth of our products, services and support across the global dental and medical markets,” Mr. Bergman continued.

Dental sales for the fourth quarter of 2020 of $1.8 billion increased 7.2% versus the prior-year. In local currencies, internally generated sales increased 5.1% with 0.4% growth from acquisitions and 1.7% growth related to foreign currency exchange. The 5.1% internal growth in local currencies included a decline of 0.7% in North America and an increase of 14.2% internationally.

Global dental consumable merchandise internal sales increased by 10.0% in local currencies. Excluding PPE and COVID-19 related products, sales increased by 5.0%. In North America, dental consumable merchandise internal sales in local currencies increased 5.3%, or 0.4% excluding PPE and COVID-19 related products, and dental equipment internal sales in local currencies decreased 13.2%. Dental equipment sales performance was impacted by a difficult prior-year comparison. In addition, we believe some practices potentially held off on year-end equipment purchases as U.S. tax incentives may be more favorable in 2021. Internationally, dental consumable merchandise internal sales in local currencies increased 16.7%, or 11.4% excluding PPE and COVID-19 related products, and dental equipment internal sales in local currencies increased 6.8%.

“We reported strong overall global dental sales growth in the fourth quarter. High-acuity procedures, including dental specialties and restorative procedures, also contributed to year-over-year sales growth. The 5.0% quarterly growth rate for global dental consumable sales is among the highest recorded by Henry Schein since 2017. International sales results for both consumable merchandise and equipment were strong. Dental patient traffic has remained at stable levels compared to the third quarter of 2020, even in countries experiencing more stringent lockdown rules, with the exception of the U.K.,” noted Mr. Bergman.

Medical sales for the fourth quarter of 2020 of $1.2 billion increased 48.5% compared with the same period last year, consisting of 48.2% growth in local currencies with 0.3% growth related to foreign currency exchange. There was no acquisition growth in the quarter.

“Our Medical business experienced strong year-over-year sales growth in the fourth quarter driven by continued demand for PPE and COVID-19 related products, most specifically for COVID-19 test sales. For the second quarter in a row, our global Medical business has achieved over $1 billion in quarterly sales,” remarked Mr. Bergman. “Excluding sales of PPE and COVID-19 related products, sales increased by approximately 3.6%. We believe solid COVID-19 test sales growth is likely to continue while COVID-19 cases remain at relatively high levels.”

Technology and Value-Added Services sales of $138.7 million increased 1.2% versus the prior-year. The 1.2% increase included a decline of 0.7% in internal local currency sales, offset by 1.2% growth from acquisitions and 0.7% growth related to foreign currency exchange.

“Technology and Value-Added Services sales in the quarter were impacted by lower transactional revenue associated with a lower number of patient visits compared to pre-COVID-19 practice volume. We also experienced a difficult prior-year comparison that benefited from hardware upgrades as we helped transition customers to address new operating system requirements. In addition, lower dental equipment sales volume in North America impacted our hardware revenue,” said Mr. Bergman. “We were pleased with solid growth in our Dentrix Ascend cloud-based software and North America financial services sales. We continue to invest in our technology solutions, including Henry Schein One, which is a key resource to help drive business success for dental practices.”

GUIDANCE:

Henry Schein sees FY2021 EPS of $3.51, versus the consensus of $3.80.

• Henry Schein today introduced guidance for 2021 non-GAAP diluted EPS from continuing operations. At this time, the Company is not providing guidance for 2021 GAAP diluted EPS from continuing operations as it is unable to provide an accurate estimate of expenses related to an ongoing restructuring initiative in 2021. Financial guidance is as follows:
• 2021 non-GAAP diluted EPS from continuing operations attributable to Henry Schein, Inc. is expected to be at or above 2019 non-GAAP diluted EPS from continuing operations of $3.51. The Company believes the comparison to 2019 non-GAAP diluted EPS from continuing operations is most appropriate given the impact of COVID-19 on 2020 results of operations.
• Guidance for 2021 non-GAAP diluted EPS attributable to Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any, restructuring expenses or share repurchases. Guidance also assumes foreign exchange rates that are generally consistent with current levels, and that end markets remain stable and are consistent with current market conditions. Guidance does not assume any material market changes associated with COVID-19.

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