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| Statement |
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| Dental specialty product sales were approximately $281 million in the fourth quarter with growth of 17.2%, driven by acquisitions and solid organic growth in implants and biomaterials |
| So with that, and with our enthusiasm for our digital workflow taking hold, and the medical business continuing to have a great position in that market, including the homecare, I remain very enthusiastic about a strong 2024 |
| We are rather pleased with our performance in the fourth quarter and for the full year of 2023, which was in line with our expectations and reflects a solid recovery from last year’s cybersecurity incident |
| And we will be back with, I think some very positive growth on the endodontic side now that the equipment, the systems are fully restored |
| These distribution businesses recovered well in the second half of the quarter |
| In particular, we are very impressed with how quickly our team at Henry Schein One responded to the challenge of the major clearinghouse in claims, having gone down last Wednesday, and our ability to service claims through alternative methodologies so quickly |
| Overall, we feel good about the pace of our recovery, driven by our durable customer loyalty and strong relationships our field sales consultants, our telesales representatives and service technicians have with our customers around the world |
| And of course, coupled with our most effective direct marketing and customer care capabilities, which includes a very strong e-commerce presence, particularly on social media |
| The 2024 guidance we are introducing today reflects our continued confidence in the stability of the underlying markets we serve, our recovery efforts from the cybersecurity incident, and the execution of our strategic plan |
| For 2024, while we expect to have some short-term residual impact from the cybersecurity incident, we believe we will continue to strengthen our leading market position |
| And our software businesses are great |
| We believe we are well-positioned to grow the business in line with our financial goals of high-single digit to low-double digit operating income and earnings per share by continuing to execute on our BOLD+1 Strategic Plan |
| We remain confident in the business, quite enthusiastic with the relatively quick recovery in the latter part of the fourth quarter and into the first quarter |
| It’s doing quite well, particularly with DSOs where we provide very good value |
| And so I think our brand in the marketplace is very strong today, and we will recover |
| The impact of lower global equipment sales was partially offset by overall good growth in our global equipment technical services |
| Our technical services capability is a strategic advantage for us as we believe we provide excellent response times and high quality service for our customers |
| I have a tremendous confidence in our team that is involved in e-commerce, and I think that’s how we’ll get that business back again |
| You combine that with the 3D printing and the whole digital space is very, very exciting |
| We posted significant growth in the European, Latin American and Asian markets, mainly from the Biotech acquisition in France and the S.I.N |
| And so there’s a huge opportunity to expand the market, plus replacement business is also growing and systems that integrate with our software that is also growing space |
| At the same time, our equipment service business is doing very well |
| We remain highly optimistic about the growth in our dental specialty products in 2024, as we have a robust pipeline of product innovations plan across various geographies in the first half of the year and we expect sales growth to continue to outpace the market growth |
| Excellent sales growth was driven by Henry Schein One with most core products posting double-digit gains including our practice management software, revenue cycle management, analytics, and our AI solutions |
| I’m not sure it brings down the profits, but overall, we are quite bullish about our equipment business |
| The customer base of cloud solutions continued to grow well and increased by about 36% compared with the start of the year |
| So I think overall the digital side, we will continue, I think to gain market share in a rapidly growing market |
| I think all of that helps us advance our position on the digital side, where it’s already quite strong, both in the United States, Canada and internationally, particularly in the markets where we offer practice management software |
| So this is something very exciting |
| We continue to see strong interest and good growth in Dentrix Ascend from our DSO customers and we are recently announced two new large multi-site Dentrix Ascend accounts |
| Statement |
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| Global Medical sales during the fourth quarter were $1.0 billion and LCI sales decreased 17% as sales were also impacted by the cybersecurity incident |
| Turning to our fourth quarter results, global sales of $3.0 billion reflected an LCI sales decrease of 12%, with the cybersecurity incident impacting sales growth by an estimated 10% to 12% |
| Please note that our sales growth was adversely impacted by the cybersecurity incident and we estimate the reduction of fourth quarter sales was between $350 million to $400 million worldwide |
| As a result of the cyber incident, our endodontic sales growth slowed somewhat last quarter |
| There are a couple of international challenges, namely in parts of Western Europe where some of the national brands, because of pricing have lost some market share and we’re now selling more of the lower priced brands |
| Global Dental sales were $1.8 billion and LCI sales decreased by 10.9%, with underlying sales growth being offset by the impact of the cybersecurity incident |
| We estimate that the cybersecurity incident negatively impacted our operating income by approximately $120 million to $130 million in the fourth quarter |
| Regarding North America and international dental equipment, there was a decline in sales both in traditional and digital equipment |
| We had a significant challenge with the patent expiration of the Motion Pro, and for about three quarters our pricing collapsed |
| Global Dental merchandise LCI sales decreased by 11.3% versus the prior year |
| Today, our North American and international distribution businesses are experiencing merchandise sales that are running below pre-cybersecurity – below the pre-cybersecurity levels – pre-cybersecurity incident levels and we estimate that the incident is currently having a low-single digit percentage headwind to our merchandise sales growth, with some episodic customers not fully returned yet |
| On a non-GAAP basis, operating margin for the fourth quarter was 4.86%, a 279 basis point decline compared with the prior year non-GAAP operating margin, and was primarily a result of the cybersecurity incident and the sales recovery initiatives we introduced in the quarter |
| In addition, the late flu season also negatively impacted point of care diagnostic sales and patient visits, which were down versus the prior year |
| Of course, we had some challenges with the flu in the first quarter |
| As Stanley mentioned, there were delays in processing new equipment orders moving some sales into 2024 |
| Our Google ratings went down, obviously, because we were not – our customers were not going to Google to buy from us to do searching |
| Global Dental equipment LCI sales decreased 9.7% |
| With the North America backlog down mid-single-digits and the international backlog high-single-digits |
| As we discussed last quarter, the cyber incident primarily affected our dental and medical distribution businesses in North America and Europe |
| So there’s some headwinds year-over-year from PPE as well and other market conditions |
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