Henry Schein, Inc. (HSIC) Bundle
Understanding Henry Schein, Inc. (HSIC) Revenue Streams
Understanding Henry Schein, Inc.’s Revenue Streams
Net Sales: For the nine months ended September 28, 2024, the net sales amounted to $9,482 million, compared to $9,322 million for the same period in 2023, reflecting a year-over-year increase of 1.7%.
Revenue Breakdown by Segment:
| Segment | 2024 Net Sales (Millions) | 2023 Net Sales (Millions) | Change ($ Millions) | Change (%) |
|---|---|---|---|---|
| Dental | $5,690 | $5,737 | ($47) | (0.8) |
| Medical | $3,140 | $2,991 | $149 | 5.0 |
| Technology and Value-Added Services | $652 | $594 | $58 | 9.7 |
| Total | $9,482 | $9,322 | $160 | 1.7 |
Year-over-Year Revenue Growth Rate: The overall revenue growth rate for the nine months ended September 28, 2024, was 1.7%. The growth in medical sales was particularly notable, with a 5.0% increase year-over-year.
Contribution of Different Business Segments to Overall Revenue: The dental segment constituted 60.0% of total net sales, while the medical segment made up 33.1%, and technology and value-added services contributed 6.9%.
Significant Changes in Revenue Streams: The dental segment experienced a slight decline of 0.8%, primarily due to a 3.0% decrease in dental merchandise sales. In contrast, medical sales grew by 5.0%, aided by the expansion in the Home Solutions market and acquisitions.
Sales Growth by Region:
| Region | 2024 Net Sales (Millions) | 2023 Net Sales (Millions) | Change ($ Millions) | Change (%) |
|---|---|---|---|---|
| North America | $6,946 | $6,886 | $60 | 0.9 |
| International | $2,536 | $2,436 | $100 | 4.1 |
| Total | $9,482 | $9,322 | $160 | 1.7 |
Local Currency Growth: The estimated decrease in internally generated local currency sales, excluding PPE products and COVID-19 test kits, was 2.3% for the nine months ended September 28, 2024.
Impact of PPE Products and COVID-19 Test Kits on Revenue: Sales of PPE products and COVID-19 test kits decreased by 11.3% year-over-year, contributing to the overall revenue decline in certain segments.
Overall Revenue Performance: The company reported robust performance in technology and value-added services, with a significant increase of 9.7% in net sales for the nine months ended September 28, 2024.
A Deep Dive into Henry Schein, Inc. (HSIC) Profitability
A Deep Dive into Henry Schein, Inc.'s Profitability
Gross Profit and Margins
For the nine months ended September 28, 2024, the company reported:
- Gross Profit: $3,023 million
- Gross Margin: 31.9%
In comparison, for the nine months ended September 30, 2023, gross profit was $2,936 million with a gross margin of 31.5%. This reflects an increase of $87 million, or 2.9% year-over-year.
The breakdown by segment for the three months ended September 28, 2024, is as follows:
| Segment | Gross Profit ($ million) | Gross Margin (%) |
|---|---|---|
| Health Care Distribution | $844 | 28.6 |
| Technology and Value-Added Services | $149 | 67.8 |
| Total | $993 | 31.3 |
Operating Profit and Margins
Operating income for the nine months ended September 28, 2024, was $466 million, compared to $576 million for the same period in 2023, representing a decrease of 19.1%.
The operating margin for the same period was calculated as follows:
- Operating Margin: 4.9% (for the nine months ended September 28, 2024)
Net Profit
Net income attributable to the company for the nine months ended September 28, 2024, was $296 million, down from $398 million in the prior year, reflecting a decrease of 25.6%. The net profit margin for this period was 3.1%.
Trends in Profitability Over Time
Year-over-year comparisons indicate a decline in profitability metrics:
- Gross Profit Margin: 31.9% (2024) vs. 31.5% (2023)
- Operating Income: $466 million (2024) vs. $576 million (2023)
- Net Income: $296 million (2024) vs. $398 million (2023)
Comparison with Industry Averages
The company's gross margin of 31.9% is below the industry average of approximately 35%. However, the technology and value-added services segment maintains a significantly higher margin at 67.8%, showcasing operational efficiency in that area.
Operational Efficiency Analysis
Operating expenses for the nine months ended September 28, 2024, totaled $2,557 million, which is 27.0% of net sales. This compares to $2,360 million (25.3% of net sales) for the same period in 2023.
The increase in operating expenses can be attributed to:
- SG&A Expenses: $2,296 million (2024) vs. $2,149 million (2023)
- Depreciation and Amortization: $188 million (2024) vs. $152 million (2023)
- Restructuring Costs: $73 million (2024) vs. $59 million (2023)
The operational efficiency can be evaluated through the following metrics:
| Metric | 2024 | 2023 | Industry Average |
|---|---|---|---|
| Gross Margin (%) | 31.9 | 31.5 | 35.0 |
| Operating Margin (%) | 4.9 | 6.2 | 7.0 |
| Net Profit Margin (%) | 3.1 | 4.3 | 5.0 |
Debt vs. Equity: How Henry Schein, Inc. (HSIC) Finances Its Growth
Debt vs. Equity: How Henry Schein, Inc. Finances Its Growth
Debt Levels
As of September 28, 2024, the total debt of the company was $2,653 million, compared to $2,351 million as of December 30, 2023. This total includes:
- Long-term debt: $1,906 million
- Current maturities of long-term debt: $109 million
- Bank credit lines: $638 million
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 28, 2024, was approximately 0.64. This is calculated from total liabilities of $10,605 million and total stockholders' equity of $4,139 million. The industry average for the healthcare distribution sector is around 0.75, indicating that the company is leveraging its finances slightly below the industry norm.
Recent Debt Issuances
On July 11, 2023, the company entered into a $750 million term loan credit agreement, which matures on July 11, 2026. Outstanding borrowings under this term loan were $722 million as of September 28, 2024, with an interest rate of 6.70% at that date.
Additionally, the company has a facility agreement based on U.S. trade accounts receivable, with borrowings outstanding of $210 million as of both September 28, 2024, and December 30, 2023. The interest rate on this facility was 6.03% as of September 28, 2024.
Credit Ratings
The company maintains a stable credit rating, which supports its ability to secure favorable borrowing terms. The recent refinancing activities have not adversely affected its credit standing, allowing it to access debt markets efficiently.
Balancing Debt Financing and Equity Funding
The company has strategically balanced its capital structure by utilizing both debt and equity financing. As of September 28, 2024, total stockholders' equity stands at $4,139 million, down from $4,289 million at the end of 2023, primarily due to stock repurchases amounting to $313 million executed during the period.
| Type of Debt | Amount (in millions) | Interest Rate | Due Date |
|---|---|---|---|
| Term Loan | $750 | 6.70% | July 11, 2026 |
| U.S. Trade Accounts Receivable Securitization | $210 | 6.03% | December 15, 2025 |
| Private Placement Facilities | $1,024 | 3.66% | October 20, 2026 |
| Bank Credit Lines | $638 | 5.94% - 6.02% | Various |
By maintaining a diversified approach to its financing, the company is well-positioned to support its growth initiatives while managing its overall risk profile effectively.
Assessing Henry Schein, Inc. (HSIC) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 28, 2024, is 1.62, compared to 1.78 as of December 30, 2023. The quick ratio is 0.95 for September 2024, down from 1.07 in December 2023.
Working Capital Trends
As of September 28, 2024, the working capital stands at $1.218 billion, a decrease from $1.805 billion at the end of 2023. This is primarily due to an increase in liabilities, particularly short-term debt.
| Item | September 28, 2024 | December 30, 2023 |
|---|---|---|
| Working Capital | $1.218 billion | $1.805 billion |
| Current Ratio | 1.62 | 1.78 |
| Quick Ratio | 0.95 | 1.07 |
Cash Flow Statements Overview
For the nine months ended September 28, 2024, the cash flow from operating activities was $644 million, up from $532 million for the same period in 2023. Cash used in investing activities was $372 million, a decrease from $808 million year-over-year. Cash provided by financing activities was $(306 million) compared to $307 million in the previous year.
| Cash Flow Item | 2024 (Nine Months Ended) | 2023 (Nine Months Ended) |
|---|---|---|
| Cash from Operating Activities | $644 million | $532 million |
| Cash Used in Investing Activities | $(372 million) | $(808 million) |
| Cash from Financing Activities | $(306 million) | $307 million |
Potential Liquidity Concerns or Strengths
As of September 28, 2024, the company holds $126 million in cash and cash equivalents, down from $171 million at the end of 2023. Total debt has increased to $2.653 billion from $2.351 billion, indicating a growing leverage position which may present liquidity concerns moving forward.
| Debt Item | September 28, 2024 | December 30, 2023 |
|---|---|---|
| Total Debt | $2.653 billion | $2.351 billion |
| Cash and Cash Equivalents | $126 million | $171 million |
Is Henry Schein, Inc. (HSIC) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation metrics, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 29.12. This is calculated using the trailing twelve months (TTM) earnings per share (EPS) of $2.30 and a stock price of $67.00.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 4.67. The book value per share is $14.30, indicating the market values the shares at a premium compared to their book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 14.98, based on an enterprise value of $3.56 billion and EBITDA of $237 million.
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations as follows:
| Month | Stock Price |
|---|---|
| September 2023 | $62.50 |
| December 2023 | $67.00 |
| March 2024 | $68.00 |
| June 2024 | $65.00 |
| September 2024 | $67.00 |
Dividend Yield and Payout Ratios
The current dividend yield is 0.75% with an annual dividend payment of $0.50 per share. The payout ratio stands at 21.74%, indicating a conservative approach to returning value to shareholders.
Analyst Consensus on Stock Valuation
Analyst ratings indicate a consensus of Hold with a target price of $70.00. The analysts believe the stock is fairly valued at its current price level.
Key Risks Facing Henry Schein, Inc. (HSIC)
Key Risks Facing Henry Schein, Inc.
Henry Schein, Inc. faces a variety of internal and external risks that could impact its financial health and operational performance. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Competition and Market Conditions
The competitive landscape for healthcare distribution and technology services is intense. The company reported net sales of $3,174 million for Q3 2024, slightly up from $3,162 million in Q3 2023. However, competition from both established players and new entrants poses a risk to maintaining market share, particularly in the dental and medical sectors.
Regulatory Changes
Regulatory changes can significantly impact the company's operations. Effective January 1, 2024, the DMEPOS reimbursement rates for non-rural suppliers were reduced, which may adversely impact financial performance. The company is also subject to compliance with numerous healthcare regulations, which, if violated, could result in fines or operational restrictions.
Operational Risks
Operational risks include potential disruptions due to cyber incidents. The company noted challenges in recovering from previous cyber incidents, affecting sales growth in both dental and medical segments. For example, the estimated sales of PPE products for Q3 2024 were approximately $72 million, down from $83 million in Q3 2023.
Financial Risks
Financial risks stem from the company's significant debt obligations. As of September 28, 2024, long-term debt was recorded at $1,906 million. The company must manage interest expenses effectively, which totaled $96 million for the nine months ending September 28, 2024. Current interest rates under the Term Credit Agreement were noted at 6.70%.
Strategic Risks
Strategic risks include the company’s restructuring initiatives. The company incurred restructuring costs of $48 million in Q3 2024. These initiatives aim to streamline operations but could lead to short-term disruptions and additional costs. The ongoing integration of recent acquisitions, such as Shield Healthcare and TriMed, is also a focal point of their strategic plan.
| Risk Category | Description | Financial Impact (Q3 2024) |
|---|---|---|
| Competition | Intense competition in healthcare distribution | Net Sales: $3,174 million |
| Regulatory | Reduction in DMEPOS reimbursement rates | Potential Revenue Loss |
| Operational | Challenges from cyber incidents | PPE Sales: $72 million |
| Financial | Long-term debt and interest expenses | Long-term Debt: $1,906 million, Interest Expense: $96 million |
| Strategic | Restructuring costs | Restructuring Costs: $48 million |
Mitigation strategies include ongoing analysis of regulatory changes and strategic pivots to adapt to market dynamics. The company continues to focus on enhancing operational efficiencies to offset potential risks and ensure sustainable growth.
Future Growth Prospects for Henry Schein, Inc. (HSIC)
Growth Opportunities
Future growth prospects for Henry Schein, Inc. are shaped by several key drivers:
Analysis of Key Growth Drivers
- Product Innovations: The company has focused on expanding its product offerings, particularly in dental and medical equipment. Sales of dental equipment increased due to growth in traditional equipment and parts and service business, contributing to a 0.5% growth in the dental equipment segment for the nine months ended September 28, 2024.
- Market Expansions: The expansion into the Home Solutions market, including the acquisition of Shield Healthcare, led to a 5.0% increase in medical net sales for the same period.
- Acquisitions: The company acquired TriMed, Inc. in 2024, which is expected to enhance its market position and service capabilities.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 28, 2024, the company reported net sales of $9,482 million, reflecting a 1.7% increase compared to the prior year. The breakdown of net sales is as follows:
| Segment | 2024 Sales ($ million) | 2023 Sales ($ million) | Growth (%) |
|---|---|---|---|
| Dental | 5,690 | 5,737 | -0.8 |
| Medical | 3,140 | 2,991 | 5.0 |
| Technology and Value-Added Services | 652 | 594 | 9.7 |
Strategic Initiatives or Partnerships
The company has entered into a strategic partnership with Internet Brands for its joint venture, Henry Schein One, LLC, which is projected to enhance its practice management software offerings. Annual royalty payments to Internet Brands amount to approximately $31 million.
Competitive Advantages
- Market Leadership: The company holds a significant market share in health care distribution, with a total sales contribution from health care distribution representing 93.1% of total net sales in 2024.
- Diverse Product Portfolio: The extensive range of products across dental, medical, and technology sectors provides resilience against market fluctuations.
- Strong Cash Flow: For the nine months ended September 28, 2024, net cash provided by operating activities was $644 million, indicating robust financial health to support growth initiatives.
Overall, these growth opportunities position the company favorably for continued expansion in the health care sector.
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Resources:
- Henry Schein, Inc. (HSIC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Henry Schein, Inc. (HSIC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Henry Schein, Inc. (HSIC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.