Stanley Bergman: I thought we mentioned, but maybe we were not clear. I think we will see a little bit more in the beginning part of the year and I think we will stabilize. Having said that, there is a possibility of additional less feature friendly, feature full systems being introduced into the United States, but I think that will only expand the market. What we’re – I don’t know what are we 40% of dentists – half the dentists using one of these scanners. I think every dentist should use one. I think the patients want that. 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. You combine that with the 3D printing and the whole digital space is very, very exciting.
And I think we’ve probably gotten to the bottom on the price erosion side or close to it, maybe a little bit more, as I said, first three, four months of the year. And if a lower price product is introduced less features, I think that will only expand the market.
Operator: And our next question comes from the line of Nathan Rich with Goldman Sachs. Please proceed with your question.
Nathan Rich: Great. Good morning, and thanks very much for taking the question. I wanted to ask about the, I think you described it as a low-single digit kind of gap in merchandise sales that you’re still seeing related to the cybersecurity incident. What type of customer or purchase have you not seen come back yet? And how should we think about the company’s plans to close that gap? And it sounds like you don’t expect a residual impact to extend beyond 1Q. So do you, I guess expect to recover those kind of order volumes this quarter and sort of be back to pre-incident levels kind of going into the second quarter.
Stanley Bergman: Yes. So that’s awesome. These are good questions. So what happened during the cyber incident? For about a month or so, our website didn’t work, a little bit longer internationally, which resulted in customers who are impulse shoppers, customers that look for pricing when they buy, and customers where we have particular data on what business they are not giving us particular products or particular timing. We didn’t have access to all of that data and we couldn’t really market through our website and through our social media. Of course, that’s back again, and we’re quite active in that area. And I think we’re starting to bring that business back again. These are the customers that are not necessarily called upon by a field sales representative or for some of the products they go shopping or where a telesales representative doesn’t have a deep relationship, or even if the telesales representative had a deep relationship, they were busy taking orders, not calling out.
That whole area is the area that we have to reinvigorate. Our Google ratings went down, obviously, because we were not – our customers were not going to Google to buy from us to do searching. All of that is being worked on. 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. And we’re already starting to see that. As it relates to the more, the larger customers, I think they’re more or less all back again. I mean, a couple of them may have gotten support from our competition during that period and feel they need to give them a little bit more business. But I think largely that business is back again. We had to satisfy the CISOs [ph] of many of our larger customers that everything’s okay, and by and large, those systems are turned on again.
So I mean, it’s going to take at least a quarter, maybe four months, two to four months to get back to normal. I don’t think we’ve lost many customers. Our services are great, whether it’s the services that we offer for equipment installation or for claims processing. There was an incident recently where a big part of the claims processing in our industry was impact by cybersecurity incident through one of the providers didn’t impact us. We came up with alternative procedures very quickly. And so I think people will understand, just like in COVID, when they didn’t have mass, they knew who to call. And so I think our brand in the marketplace is very strong today, and we will recover. I think this business just can’t tell you exactly what day.
It’s not going to be long.
Nathan Rich: Okay. Great. And maybe just a quick follow-up on, I think it was Jon’s question on first quarter expectations. Could you maybe just talk about how significant the weather and flu impacts that you mentioned seeing in kind of January, maybe in February were to the business? And just as we put that together, what the kind of residual impact of the cybersecurity incident on consumables, is the right way to think about what you’ll see in the first quarter, sort of like a mid-single digit type decline in that part of the business.
Ron South: Yes. Hi, Nathan. I think that January was a, there was some disruption to patient traffic in January related that we believe was somewhat related to weather, somewhat related to illness. As we – the flip side of that is we did see some increases on the – in the medical business in, for example, flu diagnostic kits, which is usually a precursor to us seeing increased cancellations in the dental offices. So there was some illness impact in January as well as weather. We have seen improvements in February, which leads us to believe that we’re approaching a more – what I would consider to be a more normal traffic pattern as we come out of February into March. I think that there have been – there are other factors we have to take into consideration, obviously, and sometimes there’s a lot of judgment involved in terms of how much of this is residual effect from cyber as we look at our activity versus weather versus illness.
So it’s difficult to kind of specify the exact impact of each of those, but we’re reaching our – we believe we are going to reach our Q1 goals. There’s also going to be while we’ve said that PPE is not as going to be as pronounced, the effects of that in 2024 versus 2023. Q1 will have the most significant impact year-over-year for us because of the difference in the price point in Q1 last year versus Q1 this year. So there’s some headwinds year-over-year from PPE as well and other market conditions. So – but we do think that we can reach our first quarter goals in line with our overall guidance for the year.
Operator: We have time for one last question coming from the line of Justin Lin with William Blair. Please proceed with your question.
Justin Lin: Hi, good morning. Thanks for squeezing me in here. Can you remind us what investments you need to make on the commercial execution front to fully realize your acquisitions? I think one example you’ve talked about was kind of bringing S.I.N. Implant to U.S., but any additional color and perhaps Shield and other acquisitions would be great.
Stanley Bergman: Hey Justin, I don’t think there are any major investments to bring S.I.N. to the United States. They already had approval at the time we acquired or invested in the actually acquired the business. Of course, there’s educating about salesforce in the United States. They already have a specialty salesforce. I don’t – S.I.N. has a specialty salesforce. I don’t think that they’re going to have to invest much more than the income that they generate from expanding their sales in the United States, expect that actually to be accretive. So I don’t think that will be an issue. There is some work going on that’s costing us money in the alignment of the aligners between Biotech and Henry Schein orthodontics.
We’re going to be merging facilities. We’re going to be moving around the world, different sites for the manufacture of the aligners and going to be operating under one brand. So there’s some investment in that. There’s quite a bit of investment in the recovery of the systems from an operational point of view. But I mean that’s all baked into our numbers and not material in the context of the entire Henry Schein business.
Justin Lin: Got it. That’s very helpful. And just one follow-up…
Stanley Bergman: By the way, Shield, I think will just be – its totally accretive, that whole healthcare – home healthcare business is a very nice business for us and certainly not a drain on earnings. Sorry.
Justin Lin: That’s super helpful. Thank you. And how is the underlying demand for your specialty dental business versus maybe your expectations, right? You’ve touched on implants and endodontics a little bit, but also curious to hear about how clearliners is doing. I know that, that, that business is relatively small still. But I guess like what needs to happen outside of macro getting better to maybe see some accelerated growth in your specialty business overall?
Stanley Bergman: Yes. Our – yes, first of all, it’s less than 10% of our specialty business. It’s doing quite well, particularly with DSOs where we provide very good value. I think it’s doing quite well in France, a number of European countries, but again, it’s relatively small and I wouldn’t expect this to move the numbers much from a corporate point of view, other than enables us to go into a customer and offer all the products and related services that the customer may need. So it’s a good product offering. But again, as I said specifically for DSOs, several large ones are quite happy with our software business and that’s with our aligner business and with the software in that field. And it’s growing quite nicely, but it’s really an adjunct to our specialty business.
Okay. So let me thank everyone for calling in. I know these numbers are complex. Graham and Ron, stand by to clarify any of the questions you may have, answer the questions. 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. Of course, we had some challenges with the flu in the first quarter. I think you heard that from a number of analysts, read the newspapers. You can see that dental visits were canceled in January, but it’s recovered in February. And our medical doctors did okay with additional flu visits so far in the quarter. I think the recovery is going well. We have to remember that our team was entirely focused on servicing customers and not on sales for most of the fourth quarter, and that our equipment team was really servicing customers but not really going out and selling much in the fourth quarter.
I don’t think we missed a lot of business, but we now have to get back into the business of selling, which we are installing. And I think we’ll do fine in the equipment area as well both here and internationally. European business is stable. Australia, New Zealand is stable. Brazil, slightly challenged because of the economy, but we’re still growing. And our software businesses are great. 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. I think our customers will appreciate that and I would expect us to garner some new customers in that process.
And these specialty businesses are doing well. We believe we continue to grow market share, particularly the implant side, in a market that is relatively stable to slightly growing. 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. And, yes, the orthodontic side will grow. 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. And again, Ron and Graham are ready to clarify questions you may have. So thank you very much for calling in. And we’ll be back, I guess, in two months. But I think we’ll be going to some investor conferences as well.
And there are some calls that you can call into that some of the analysts have set up. So thank you very much.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
