Henry Schein Notes Slower Recovery from Cyberattack, Cuts Outlook

Healthcare products distributor to dental offices and medical consumers Henry Schein reported its second quarter financial results on Aug. 6, in which the company cited a slower-than-expected recovery from the cyberattack that happened last fall.

One of Henry Schein’s business units suffered a cyberattack this past October in which the same bad actor — a ransomware group known as BlackCat/ALPHV — twice encrypted a large volume of personal information. This forced the company to take specific systems offline and pause eCommerce sales. BlackCat claimed that it cost the company more than $500 million in operational losses.

Melville, NY-based Henry Schein reported total 2Q sales of $3.10 billion, up 1.1% year-over-year. Gross margin of 32.5% increased year-over-year.

Sales growth in 2Q24 reflected 4% sales growth from acquisition, a 0.5% sales decrease from foreign exchange rates, a 0.5% sales decrease from lower sales of personal protective equipment (PPE) and pace of recovery from the cyber incident late last year.

The company’s net profit of $105 million decreased from the $148 million of a year ealier. Adjusted EBITDA for 2Q was $268 million, decreased from $279 million of a year earlier.

“We delivered solid second quarter financial results, including strong operating cash flow, that reflected stable end markets,” Henry Schein Chairman and CEO Stanley Bergman said in the company’s financial release. “Gross margin continued to increase, driven by our strategies to expand our high-growth, high-margin products and services and by the successful performance of our recent acquisition … Given the challenging economic environment in certain markets, as well as this delay in recovery from the cyber incident, we are updating our 2024 full-year financial guidance.”

“We are experiencing improving sales trends in our distribution businesses, however, the pace of recovery in these businesses since the cyber incident late last year has been slower than anticipated,” Bergman added in the company’s 2Q earnings call.

2024 Outlook

In updating its full-year outlook, Henry Schein said it expects sales growth of approximately 4% to 6% over 2023 compared with the prior expectation of 8% to 10% of growth issued after 1Q24.

Adjusted EBITDA is now expected to grow in the low double-digit percentages versus 2023 adjusted EBITDA and compares to prior expectation of more than 15%.

The company said its previous outlook anticipated a stronger economy and a faster recovery from the cyberattack.

Henry Schein was No. 6 on MDM’s Top Distributor’s List for Pharmaceuticals & Healthcare.